Global Traditional Energy Resources

Overview

Oklahoma contains extensive natural gas reserves across its Anadarko, Arkoma, and Ardmore basins.^[1]  The Woodford Shale, the state’s largest shale formation, straddles the Ardmore Basin and the Arkoma Basin.^[2]  In 2011, the U.S. Energy Information Administration estimated that the Woodford Shale contained up to 22.2 trillion cubic feet of technically recoverable natural gas.^[3]

Statutory and Regulatory Framework

The state’s primary oil and gas regulator is the Oklahoma Corporation Commission’s (OCC) Oil and Gas Conservation Division (OGCD).^[4]  The OCC promulgates regulations regarding drilling, operation, maintenance, and abandonment of hydraulic fracturing wells, among other things.^[5]  OGCD regulations intersect with those of the Oklahoma Water Resources Board (OWRB),^[6] which regulates the beneficial use of groundwater and surface water,^[7] and the Oklahoma Department of Environmental Quality.^[8]

Because oil and gas production is considered a beneficial use of water, hydraulic fracturing operations usually proceed under a temporary use permit from the OWRB.^[9]  Applicants must renew such permits annually.^[10]  Temporary use permits do not require a hydrologic survey to determine the maximum annual yield for a basin,^[11] but regular use permits do.^[12]  Applicants that seek to use fresh groundwater for enhanced recovery of oil and gas must provide additional information to the OWRB, including the amount of fresh water the applicant expects to use in the recovery process each year, a copy of the easements or leases from surface right owners giving the applicant the right to develop and use the fresh groundwater, and information about the water’s reuse and recycling.^[13]  Similar requirements apply to the use of surface water.^[14]

Oklahoma has addressed fracking by promulgating regulations through the OCC.  Over time, these regulations have formed a comprehensive regulatory system.  The OGCD regulations require an operator to file a Notice of Intention to Drill and obtain an OGCD-approved Permit to Drill before spudding a well for the exploration and production of oil and gas, as well as re-entering a plugged well.^[15]  An operator must give the OGCD District Manager or Field Inspector at least 24 hours’ notice prior to cementing a well.^[16]  This allows state representatives to witness the activity and ensure it meets the state’s minimum well casing and cementing standards.^[17]  Furthermore, operators must give notice to OGCD at least 48 hours before hydraulic fracturing operations begin.^[18]  Likewise, an operator must give five days’ notice to operators of nearby producing wells before fracking begins.^[19]  An operator must take immediate action to repair surface or production casing that fails and notify the OGCD District Office or the Manager of Pollution Abatement within 24 hours of the failure’s discovery.^[20]  An operator must also verbally, or in writing, report any non-permitted surface discharge of deleterious substances of more than 10 bbls, and any discharge of deleterious substances to the waters of the state.^[21]  Special construction and operating requirements may apply in sensitive areas, such as those near municipal water supplies.^[22]  The OCC  requires an operator to procure a permit before using reclaimed municipal wastewater in oil and gas operations.^[23]

Oklahoma regulations impose a variety of reporting requirements on operators.  For example, after a well has been completed, the operator must file a Well Completion Report, known as Form 1002A, within 60 days.^[24]  Form 1002A solicits information including the volume of hydraulic fracturing fluid and proppant used.^[25]  The operator must attach a Cementing Report^[26] to Form 1002A describing all cementing operations on casing strings.^[27]  In addition, within 60 days after the conclusion of hydraulic fracturing operations the operator must submit information on the chemicals it used to FracFocus or the OCC.^[28]  If the operator submits the information to the OCC, then the OCC will post the information on FracFocus.^[29]  The disclosure must include the type and total volume of base fluid used; the trade name, supplier, and general purpose of any chemical additives; and the identity, CAS number, and maximum concentration of each ingredient in each chemical additive.^[30]  An operator may claim trade secret protection for the information it submits to FracFocus.^[31]  But to do so it must provide substitute information, including the name of the person asserting the protection and the chemical family name.^[32]

Seismicity

Seismic activity in Oklahoma has recently increased, a trend the OCC described as “extremely unusual.”^[33]  Some connect the seismic activity to hydraulic fracking operations—specifically, disposal wells used by the oil and gas industry.^[34]  Out of an abundance of caution, the OCC responded in September 2014 by issuing rules regarding injection wells used for wastewater disposal.^[35]  Specifically, these rules increased the frequency of disposal well pressure and volume recording^[36] and require all disposal wells permitted for 20,000 barrels/day to conduct Mechanical Integrity Tests.^[37]

Oklahoma also uses a “traffic light” system pursuant to which OCC staff review disposal well permits for proximity to faults, seismicity in the area, and other factors related to induced seismicity.^[38]  The system was originally put into place in 2013, and, in March 2015, the OGCD issued new directives which required approximately 347 wells in “Areas Of Interest” that inject into the Arbuckle formation “to prove to the OGCD that the disposal well is not injecting below the Arbuckle formation.”^[39]  Pursuant to the new directives, operators unable to make this showing and without an approved plugging plan will be required to reduce their disposal volume by 50 percent.^[40]

The March 2015 directives generally signaled a new approach to induced seismicity pursuant to which the OCC will move from an individual well-based approach to assessing seismicity risks to one that is able to account for all wells in particularly seismically active areas.^[41]  In February and March 2016, the OCC asked well operators in large portions of central, northern, and western Oklahoma to reduce by 40% the amount of oil and gas waste they inject into disposal wells.^[42]  The actions covers more than 10,000 square miles and more than 600 disposal wells.^[43]  The OCC phrased these directives as requests because its legal authority to order such cutbacks was unclear.^[44]

In April 2015, the Oklahoma Secretary of Energy and Environment launched a website entitled “Earthquakes in Oklahoma. ”^[45] The website summarizes seismic data, state agencies’ responses to increased seismicity, and provides up-to-date information on earthquakes.

In April 2016, Oklahoma Governor Mary Fallin signed into law H.B. 3158,^[46] which gives the OCC exclusive jurisdiction to “take whatever action is necessary” to respond to oil-field emergencies, such as earthquakes.^[47]  The OCC, at times in conjunction with the U.S. Environmental Protection Agency, has since issued certain emergency directives to disposal wells following seismic events, directing wells in the area of the activity to shut in or reduce their volume.^[48]  In addition, in February 2017 the agency issued a new directive for the Earthquake Area of Interest (AOI) that limited the growth in future disposal rates for certain potentially high-volume disposal wells in the Arbuckle formation.^[49]

In February 2018, the OCC issued a seismicity protocol for oil and gas operators in the South Central Oklahoma Oil Province (SCOOP) and the Sooner Trend Anadarko Basin Canadian and Kingfisher counties (STACK) plays.^[50]  The February 2018 protocol modified a December 2016 protocol regarding the same areas.  The 2018 protocol requires all operators in a certain defined area to have access to a seismic array giving real-time seismicity readings; lowers the minimum level at which operators must take response actions from 2.5 magnitude to a 2.0 magnitude; and requires some operators to pause their operations for 6 hours when readings exceed 2.5 magnitude, rather than 3.0 magnitude under the previous protocol.  Readings from the seismic array are necessary because tremors of less than 2.5 generally cannot be felt by humans on the ground surface.  This protocol is separate from existing rules addressing wastewater injection in the Arbuckle formation, in the northern area of Oklahoma. The OCC first acted on earthquakes in the Arbuckle formation in 2013 and, in 2015, issued two directives regarding the depth of disposal wells in the Arbuckle.^[51]  The 2015 directives have resulted in over 220 wells plugging back (i.e., reducing depth).^[52] Litigation regarding earthquakes is ongoing.^[53]

Oklahoma is generally receptive to oil and gas development; there have been no attempts by any cities in Oklahoma to ban fracking.^[54]  Nonetheless, in May 2015, Governor Fallin signed into law S.B. 809, which prohibits local governments from regulating fracking and reserves that power for state regulators.^[55]  The law specifies that local governments may still place “reasonable” restrictions on traffic issues, noise, fencing, and setbacks.^[56] 

Recent News and Developments

Frac Hits

Frac hits—or interference with existing producing wells as a result of new hydraulic fracturing in neighboring wells—are a concern for both horizontal and vertical well owners in Oklahoma.  Vertical well operators often refer to the phenomenon as “well bashing,” because a frac hit from a nearby horizontal well can diminish or completely eliminate existing production from the vertical well.  Horizontal well operators face the threat of lawsuits for negligence and trespass, and vertical well owners have successfully tried such cases in Oklahoma.^[57]  The vertical versus horizontal frac hit battle is particularly important in Oklahoma, as horizontal drillers in the state often seek to exploit formations previously explored and produced via older, vertical wells.  This is a unique dynamic for the moment; elsewhere in the country, operators are also concerned about frac hits, but these concerns exist as between horizontal wells in deeper shale formations not previously successfully produced through vertical drilling.

In addition to lawsuits aimed at protecting their economic interests and business models, vertical well owners also challenge horizontal drillers in front of the Oklahoma Corporation Commission, though with limited success.  In a rare dissent, one of the three Commissioners considering an exemption request to Oklahoma’s set-back rules recently challenged the granting of the exemption, a nod to the existing well owners in the area.^[58]  A coalition of vertical well owners has also asked its members to gather data on production losses to present to state legislators, however, no report has been provided to the state legislature.^[59]

Jurisdiction over Tribal Lands

In 2020, the United States Supreme Court ruled that approximately half of the land in Oklahoma is within a Native American reservation.^[60]  The decision poses significant potential consequences to Oklahoma’s legal system, particularly in Eastern Oklahoma where the tribal land in question is located.  However, on October 5, 2020, the U.S. Environmental Protection Agency notified the State of Oklahoma that it maintains jurisdiction over environmental issues, such as fracking and hazardous waste, on tribal land in Oklahoma.^[61]

Last updated October 2020

^[1] See Geography: Maps: Oil and Gas Related Exploration, Resources, and Production: Shale Gas and Oil Play, Lower 48 States, U.S. Energy Info. Admin. [“USEIA”] (June 30, 2016), https://www.eia.gov/maps/images/shale_gas_lower48.pdf.

^[2] Id.

^[3] USEIA, Review of Emerging Resources:  U.S. Shale Gas and Shale Oil Plays 41 (July 2011), available at http://www.eia.gov/analysis/studies/usshalegas/pdf/usshaleplays.pdf.

^[4] See Oklahoma Corporation Commission Oil and Gas Division website, http://www.occeweb.com/og/oghome.htm.

^[5] See generally Okla. Admin. Code § 165:10.

^[6] See Oklahoma Water Resources Board website, http://www.owrb.ok.gov/.

^[7] See Oklahoma Water Resources Board: Water Use Permitting webpage, http://www.owrb.ok.gov/supply/watuse/permitting.php.

^[8] See Oklahoma Department of Environmental Quality website, http://www.deq.state.ok.us/.

^[9] Okla. Admin. Code § 785:30-5-2; State Review of Oil and Natural Gas Environmental Regulations, Inc., Oklahoma Hydraulic Fracturing State Review 16 (Jan. 2011) [“State Review”], available at http://www.occeweb.com/STRONGER%20REVIEW-OK-201-19-2011.pdf.

^[10] Okla. Admin. Code § 785:30-5-2(c).

^[11] Id. at § 785:30-5-2(a).

^[12] Id.

^[13] Id. at § 785:30-3-2.

^[14] Id. at § 785:20-3-4.

^[15] Id. at §§ 165:10-1-7, 165:10-3-1.

^[16] Id. at § 165:10-3-4(c).

^[17] State Review at 11.

^[18] Id.; Okla. Admin. Code § 165:10-3-4(e).

^[19] Id. at § 165:10-3-10(b).

^[20] Id. at § 165:10-3-3(b)

^[21] Id. at § 165-10-7-5(c).

^[22] Id. at § 165:10-7-6.

^[23] Id. at § 165:10-7-34.

^[24] Id. at § 165:10-3-25.

^[25] See Oklahoma Corporation Commission, Oil and Gas Conservation Division, Completion Report, Form 1002A Rev. 2009, http://www.occeweb.com/og/OGforms/form%201002A.pdf.

^[26] See Oklahoma Corporation Commission, Oil and Gas Conservation Division, Cementing Report, Form 1002C Rev. 2012, http://www.occeweb.com/og/OGforms/form%201002C.pdf.

^[27] Id.; Okla. Admin. Code § 165:10-3-4(j).

^[28] Id. at § 165:10-3-10(c).

^[29] Id.

^[30] Id. at § 165:10-3-10(c)(1).

^[31] Id.

^[32] Id.

^[33] OCC Response to Issue of Induced Seismicity/Earthquakes (2014), available at http://www.occeweb.com/SeismicStatementB.pdf.

^[34] Joe Wertz, Hearing on Disposal Well Rules Exposes Gaps in State’s Earthquake Response, StateImpact: Okla., Oct. 30, 2014, http://stateimpact.npr.org/oklahoma/2014/10/30/hearing-on-disposal-well-rules-exposes-gaps-in-states-earthquake-response.

^[35] See Earthquakes in Oklahoma: Oklahoma Corporation Commission, Okla. Sec’y of Energy & Env’t, https://earthquakes.ok.gov/what-we-are-doing/oklahoma-corporation-commission/.

^[36] Okla. Admin. Code § 165:10-5-7(c)(5).

^[37] Okla. Admin. Code § 165:10-5-6(d).

^[38] See Earthquakes in Oklahoma: Oklahoma Corporation Commission, supra at note 36.

^[39] See Press Release, Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Media Advisory – Ongoing OCC Earthquake Response (Mar. 25, 2015), http://www.occeweb.com/News/2015/03-25-15%20Media%20Advisory%20-%20TL%20and%20related%20documents.pdf.

^[40] Id.

^[41] Ziva Branstetter, State Adds New Earthquakes Zones, Requirements for Well Operators, Tulsa World, Mar. 26, 2015, http://www.tulsaworld.com/earthquakes/state-adds-new-earthquake-zones-requirements-for-well-operators/article_1a70dbde-0cc0-5d7a-8874-dd8061d23555.html; see also Earthquakes in Oklahoma: Oklahoma Corporation Commission, supra at note 36.

^[42] Press Release, Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Media Advisory – Regional Earthquake Response Plan for Central Oklahoma and Expansion of the Area of Interest (Mar. 7, 2016), http://www.occeweb.com/News/2016/03-07-16ADVISORY-AOI,%20VOLUME%20REDUCTION.pdf.

^[43] Id.

^[44] Michael Wines, Oklahoma Puts Limits on Oil and Gas Wells to Fight Quakes, N.Y. Times, Mar. 7, 2016, http://www.nytimes.com/2016/03/08/us/oklahoma-earthquakes-oil-gas-wells.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region&region=top-news&WT.nav=top-news&_r=0.

^[45] See Earthquakes in Oklahoma: Oklahoma Corporation Commission, supra at note 36.

^[46] See Bill Information for H.B. 3158, 55th Leg., 2nd Sess. (Okla. 2016), http://www.oklegislature.gov/BillInfo.aspx?Bill=HB%203158.

^[47] See H.B. 3158, 55th Leg., 2nd Sess. (Okla. 2016), http://webserver1.lsb.state.ok.us/cf_pdf/2015-16%20ENR/hB/HB3158%20ENR.PDF.

^[48] See, e.g., Press Release, Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Media Advisory – Latest Action Regarding Pawnee Area (Sept. 7, 2016), http://www.occeweb.com/News/2016/09-12-16Pawnee%20Advisory.pdf.

^[49] Press Release, Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Looking Ahead – New Earthquake Directive Takes Aim at Future Disposal Rates (Feb. 24, 2017), http://www.occeweb.com/News/2017/02-24-17%20FUTURE%20DISPOSAL.pdf.

^[50] Press Release, Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Moving Forward – New Protocol to Further Address Seismicity in State’s Largest Oil and Gas Play (Feb. 27, 2018), http://www.occeweb.com/News/2018/02-27-18PROTOCOL.pdf.

^[51] Okla. Corp. Comm’n, Oil & Gas Conserv. Div., Earthquake Response Summary (May 30, 2018)

^[52] Id.

^[53] See, e.g., Associated Press, Court upholds class-action status for earthquake lawsuit, The Journal Record (November 15, 2019), https://journalrecord.com/2019/11/15/court-upholds-class-action-status-for-earthquake-lawsuit/.

^[54] See Paul Monies, Gov. Mary Fallin signs bill preventing Oklahoma cities from enacting drilling bans, NewsOK (May 30, 2015 12:00 AM), http://newsok.com/article/5423712.

^[55] Dani Kass, Okla. Bill Blocking Local Fracking Bans Signed into Law, Law360 (June 2, 2015 4:11 PM), http://www.law360.com/energy/articles/662498?utm_source=rss&utm_medium=rss&utm_campaign=section.

^[56] See Monies, supra at note 57.

^[57] See, e.g., Paul Monies, Federal jury awards Oklahoma oil companies $220,000 in ‘well bashing’ case, NewsOK (August 18, 2017), https://newsok.com/article/5560590/federal-jury-awards-oklahoma-oil-companies-220000-in-well-bashing-case.

^[58] Mike Soraghan, Okla. commission splits in ‘frack hit’ case, EnergyWire (July 17, 2018), https://www.eenews.net/energywire/stories/1060089311/feed.

^[59] Adam Wilmoth, Vertical well operators seek options, NewsOK (June 2, 2018), https://newsok.com/article/5596713/vertical-well-operators-seek-options.

^[60] McGirt v. Oklahoma, 140 S. Ct. 2542 (2020).

^[61] Dillon Richards, EPA gives Oklahoma power over tribes’ environmental decisions, KOCO News 5 (Oct. 5, 2020), https://www.koco.com/article/epa-gives-oklahoma-power-over-tribes-environmental-decisions/34277721#.