APPLICANT: BEFORE THE CORPORATION COMMIS 1 LIILE OF THE STATE OF OKLAHOMA EB 0$ 2012 COURT CLERKI OFP NEWFIELD EXPLORATION MID-CONTINENT, INC. * TULSA CoRPOA11N COMMINION OF OKLAHOMA RELIEF SOUGHT DRILLING AND SPACING UNIT LEGAL DESCRIPTION: SECTION 23, TOWNSHIP 11 NORTH, RANGE 6 WEST, CANADIAN COUNTY, OKLAHOMA CAUSE CD NO. 201106582-1 RELIEF SOUGHT: NEWFIELD EXPLORATION MID-CONTINENT, INC. WELL LOCATION EXCEPTION FOR THE GRANT 1H-23 WELL CAUSE CD NO. 201106639-T LEGAL DESCRIPTION: SECTION 23, TOWNSHIP 11 NORTH, RANGE 6 WEST, CANADIAN COUNTY, OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE The causes came on for hearing before Kathleen M. McKeown, Administrative Law Judge (AU, in the Oklahoma Corporation Commission's courtroom, Kerr Building, Tulsa, Oklahoma, pursuant to notice given as required by law and the rules of the Oklahoma Corporation Commission for the purpose of taking testimony and reporting to the Commissioners. CASE SUMMARY (Newfield seeks to establish a 640-acre horizontal spacing unit for the subject lands and then drill a horizontal well targeting the Woodford formation at a location closer to the unit boundaries than that prescribed by the horizontal unit. Dawn Schramm (appearing for her brother, Timothy Schramm, who has given her his power of attorney and Janet Schramm (Schramms protested the applications voicing their primary concerns (among others regarding potential contamination of the fresh water formations underlying Section 23; potential for earthquakes resulting from the fracturing associated with the drilling; noise from the drilling; ramifications of increased truck traffic on the roads and bridges; and the
treatment they had received from Newfield representatives when they questioned leasing documents and/or the subject applications. RECOMMENDATIONS 1. The Newfield applications should be granted. Newfield met the requirements of the Commission as to testimony and evidence regarding the zones underlying the subject unit, the need for horizontal drilling to economically produce reserves in the formations and the need for a horizontal well at the proposed location to effectively and efficiently produce reserves that would otherwise go to waste. 2. The Schramm's concerns about potential pollution of the water underlying their property were not substantiated by any direct evidence of ongoing or imminent contamination. The abatement of the drilling noise and ramifications of increased traffic are issues outside of the jurisdiction of the Commission as is the behavior of the Newfield representatives toward the Schramms. HEARING DATE February 1, 2012 APPEARANCES Ron M. Barnes appeared for Newfield; Dawn Schramm (having power of attorney appeared for Timothy J. Schramm pro Se; Janet L. Schramm appeared pro se. SUMMARY OF EVIDENCE 1. CD 201106582-T seeks to establish a 640-acre horizontal drilling and spacing unit for the Hoxbar, Deese, Mississippian, Woodford and Hunton common sources of supply underlying Section 23, Township 11 North, Range 6 West, Canadian County, Oklahoma. CD 201106639-T seeks authority to drill and produce a horizontal well in the Mississippian, Woodford and Hunton common sources of supply underlying the subject lands at a location closer to the unit boundaries than that set forth in the Commission rules for a 640-acre horizontal drilling and spacing unit. 2. Exhibits were numbered and accepted into evidence as follows (exhibit sponsor in parentheses: 1. Updated Exhibit A in CD 201106582-T (Newfield 2. 9-Section Production Plat (Newfield 3. Section 23 Topography Plat (Newfield 4. Well Schematic for Grant 1H-23 (Newfield 5. OKC Board of Adjustment Order (Newfield 6. Bound Copy of Exhibits allowed into evidence for probative value over the objection of Newfield (Schramms 2
3. On behalf of Newfield expert testimony was presented through Jesse Payne, petroleum landman; and Bob McNulty, petroleum engineer. A. Orders 110585 and 189474 spaced the Bartlesville, Prue, Skinner, Misener-Hunton, Red Fork, Woodford, Oswego and Mississippi Lime common sources of supply on 80-acre standup units. Newfield is requesting those orders be vacated and that a 640-acre horizontal unit be established for the Hoxbar at 6347'; Deese at 8340' (including the Oswego, Bartlesville, Prue, Skinner and Red Fork; Mississippian at 8856' (including the Mississippi Lime; Woodford at 8904'; and Hunton at 9005' (more common name for the Misener-Hunton. There is currently no production in Section 23; Newfield anticipates gas production from the subject formations. The prescribed location for the conventional formations will be no closer than 660' to the unit boundaries; for the unconventional formation (Woodford the prescribed location will be no closer than 330' to the east and west unit boundaries and no closer than 165' to the north and south unit boundaries. Newfield plans to drill a cased and cemented hole at the following location: SURFACE No closer than 200' from the south line and no closer than 1320' from the east line of Section 23; FIRST PERFORATION 165' from the south line and 1320' from the east line of Section 23; LAST PERFORATION 165' from the north line and 1320' from the east line of Section 23; TOLERANCE 80' along the lateral to correct for deviation during drilling. B. This will be a horizontal well with a true vertical depth anticipated at 8950'; the base of the treatable water is located at 460' according to the Commission technical staff. A long lateral is necessary to provide an economic and efficient recovery of reserves underlying the unit. The proposed location will also allow recovery of reserves close to the unit boundaries that would otherwise go unrecovered; if the well is drilled in compliance with the location exception application, there will be no adverse effect on any offsetting production and a full allowable should be granted. Newfield requested that it be named operator of the well under an interim order in the location exception application with a reopening date of July 23, 2012 for the submission of a bottom hole survey. The Oklahoma City Board of Adjustment granted a variance to the existing surface zoning for the subject well on January 5, 2012; further administrative review will take place when a Commission location exception order is submitted per the applicable requirements of the Oklahoma City Municipal Code. 4. On behalf of the Schramms the following statements were presented for the record. 3
A. On January 6, 2012 the Schramms filed a written protest in CD 201106582-T setting forth their concerns over the subject Newfield applications. These concerns were further defined at the hearing with the submission of Exhibit #6. There has been alleged trespass on the Schramm property by Newfield representatives as well as alleged "attempts to harass, bully or otherwise coerce" the Schramms when they have raised questions regarding the subject applications to Newfield in person or over the telephone. The primary issues from the Schramm's viewpoint are the potential for contamination of the local water aquifer; potential for earthquakes caused by the drilling in an area which is near the location of the recent Prague earthquakes; and the real estate devaluation in the areas attributable to the proximity of the Newfield drilling. Additional concerns were voiced regarding the amount of dust and diesel smoke directly caused by the increase in trucks utilizing the area roads and bridges; it was noted that the same trucks are often speeding and disregarding posted stop signs as well as creating ruts in the easements along the roads and destroying culverts created for water runoff. B. At one point during the presentation by the Schramms, the AU directed the Newfield consulting petroleum engineer and the Schramms to enter into a 15- minute off the record discussion to allow the Schranims time to ask questions regarding the impact of horizontal drilling under the surface and how it relates to the water aquifers and other formations. After the record reopened, some of the Schramm's fears had been put at ease particularly regarding their concern that the water aquifer fluids would be used for actual drilling operations. The rest of the Schramm' s protest, however, remained as stated. RECOMMENDATIONS After taking into consideration all of the facts, circumstances, evidence and testimony presented in the causes, it is the recommendation of the ALJ that the Newfield applications in be granted. 2. Newfield presented unrefuted expert testimony and evidence as to the necessity for establishment of 640-acre spacing for the named formations and as to the need for a horizontal well at the proposed location. The well schematic presented at the hearing defines the cementing and casing that will occur in the weilbore specifically to protect the treatable water aquifer as well as to prevent migration of reserves/fluids from other formations into the borehole- At the time of the hearing Newfield had also met the initial requirements for a surface location variance to the Oklahoma City zoning currently in place at the surface. 3. The concerns and questions raised by the Schramms are reasonable and valid particularly in light of the recent earthquake activity in the area as well as the ongoing national debate regarding fracturing of formations involved in oil and gas exploration. Unfortunately, there was no evidence presented to show the imminent danger of pollution or earthquake that would result from the granting of these applications. The speeding truck traffic, 4
diesel smoke, dust, noise, wear on the area roads and bridges, trucks driving on the easements and culverts next to the roads are outside of the Commission jurisdiction and these concerns should be addressed to the appropriate city or county law enforcement agencies. 4. On behalf of the Commission the ALJ would like to thank the Schranuns for appearing and raising their concerns at the hearing in a timely, professional and courteous manner. It is the Commission's hope that the result in these causes will not discourage future participation in other hearings in which they may find themselves involved. Their presence in the courtroom emphasized the interest owners' perspective with which the Commission is always concerned. Thus, in light of the aforementioned conclusions, it is the recommendation of the ALJ that the applications in be granted. Any orders issuing out of these causes should contain the recommendations set forth above. Respectfully submitted this 8 th day of February 2012,,- 0 &"Iq. -Mc KATHLEEN M. MCKEOWN Administrative Law Judge LI