Oil association report points to hundreds of damaged wells

At least 450 older vertical wells in Kingfisher County alone have been damaged economically because of bigger horizontal wells in the area, according to an interim report by vertical producers.

The Oklahoma Energy Producers Alliance released the interim study last week, saying it indicates that the older wells have experienced widespread well bashing and that damage has cost producers and royalty owners throughout the state.

“I believe nearly every vertical well in Kingfisher County will be negatively impacted by horizontal frack jobs at some point,” OEPA founder Mike Cantrell said. “We’re just trying to get people to get fair value for their property up front before the damage is done.”

The study shows that 80 percent of the affected vertical wells are outside the well unit boundaries, meaning royalty owners from the damaged wells do not benefit from the new horizontal wells.

Horizontal well operators, however, say the number of effected wells appears to be overstated and that royalty owners, producers and state and local coffers benefit from the much more prolific horizontal wells.

“The question the study does not answer is how many wells have had resolution,” said Chad Warmington, president of the Oklahoma Oil and Gas Association. “My companies say there obviously is well-to-well interference, but most of those are handled company to company. The affected wells are either bought out or fixed.”

In some cases, horizontal well operators try to address potential damage to vertical wells before operations begin, but vertical operators are unwilling to negotiate, said A.J. Ferate, vice president of regulatory affairs at the Oklahoma Independent Petroleum Association.

“Particularly in Kingfisher County, larger companies drilling horizontal wells are offering ahead of time that if they bash a well, they’ll give concessions or pay damages or give them a part of the well,” he said. “Many times they try to buy the well ahead of time, but in many instances they have been told ‘no.’”

Oklahoma is dotted with thousands of vertical wells, many of which are older wells considered to be marginal or stripper wells because they produce only a few barrels of oil equivalent per day. Modern techniques including horizontal drilling and hydraulic fracturing have allowed operators to drill new wells in the state’s oldest oil basins, restarting interest in the areas with wells that initially produce hundreds or thousands equivalent barrels of oil and natural gas per day.

Hydraulic fracturing

— or fracking — involves pumping large amounts of water and sand into the horizontal well to shatter the dense rock, allowing oil and natural gas to flow more easily to the wellhead. When a horizontal well is fracked near an existing vertical well, the process can send water and sand into the older wells, causing them to produce more water and less oil and natural gas.

In some cases, pressure from the fracking operation can cause physical damage to the pipe or other parts of the vertical well, causing spills or other environmental problems.

“We have a well-established vertical world, and we have a new horizontal world. The issue is how can these two worlds live together,” Oklahoma Corporation Commission spokesman Matt Skinner said. “Wells are obviously being damaged. We know this is happening. It is a problem that needs to be addressed, and to address it we need more data.”

Operators are required to notify the Corporation Commission if their wells are structurally damaged or otherwise cause environmental problems. But the commission also is asking for operators to report economic damage associated with nearby horizontal wells.

“We need specifics,” Skinner said. “We need to know the conditions of what might have happened. We’re looking at common threads, common problems so we can determine how it can be best addressed.”

So far, the commission has investigated and verified 20 cases of damage to vertical wells because of nearby horizontal wells. Most of those wells had environmental damage, Skinner said.

The commission also has another 55 wells pending or undergoing review. The commission has created a form for operators to report environmental or economic damage from nearby horizontal wells. The form is available online at http:// bit.ly/2xhSEQp.

The commission hopes to use the data to determine whether new rules or processes should be put in place, Skinner said.

“We’re not at a stage to say we need new rules or here are the new rules, but certainly this issue could be part of that process,” he said.

The Corporation Commission is responsible for approving planned wells and spacing units for the wells before they are drilled. If the wells experience economic damage but not environmental damage, the vertical well operators can seek recovery through district court. A federal jury last month awarded H&S Equipment Inc. and Mark Holloway Inc. $220,000 in damages for vertical wells that were affected by horizontal wells drilled by Felix Energy LLC and later sold to Devon Energy Corp.