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Permanent Shut-In of Fayetteville Disposal Wells Recommended

Staff of the Arkansas Oil and Gas Commission (AOGC) has recommended the permanent shut-in of saltwater disposal wells in an area north of Conway, AR, in the Fayetteville Shale where a recent earthquake swarm is thought to have resulted from waste injection activities.

The operators of the injection wells -- Oklahoma City-based Chesapeake Operating Inc. (which has since sold the asset to BHP Billiton Petroleum LLC) and Little Rock, AR-based Clarita Operating LLC -- agreed to stop injections into the wells while their relationship to the earthquakes was studied (see Shale Daily, March 8). Following cessation of injections, seismic activity was seen to have declined (see Shale Daily, March 17).

The initial investigation by the Arkansas Geological Survey and the Center for Earthquake Research and Information during the moratorium found "no evidence or indication that the seismic activity is related to the drilling or completion (including fracture stimulation) of Fayetteville Shale production wells in the Guy-Greenbrier, AR, area," AOGC staff said.

The seismic activity has prompted at least one lawsuit seeking class action status against the well operators (see Shale Daily, May 25).

At the AOGC's July 26 hearing the commission's director is to recommend that a permanent moratorium area be established. No new disposal wells would be allowed in the area and existing disposal wells would have to be plugged and the sites restored.

For Mickey Thompson, a partner in Clarita Operating, the proposed decision is a foregone conclusion as the AOGC rarely votes down a staff recommendation on a major issue, he said. For Clarita, which is a service company with one disposal well in the Fayetteville, a final vote affirming the recommendation would be "the death penalty," he told NGI's Shale Daily.

Thompson expressed dismay that Clarita, in his view, will not get a chance to present its side of the case, relying on expert witnesses and its own study of the circumstances. "It's a tough call," he said. "It's lawyers and experts. We have class action lawsuits to deal with, which is lawyers and experts. We don't have any revenue source over there so we don't know what we're going to do."

AOGC Director Larry Bengal was not immediately available for comment.

Thompson and Clarita had been counting on the company's one disposal well to be a moneymaker. "We had thought that this well under ordinary circumstances was going to pay for itself in less than a year," he said. "We had expected the big natural gas producers over there would buy the well because it is such an outstanding asset. Conceivably, that value could have been 30% of our entire company. So what's happened to us is not insignificant."

Producers that have used the disposal wells that would be permanently shut in will have to truck water to other sites -- in eastern Oklahoma or southern Arkansas -- for injection, Thompson said. He estimated that this could end up costing them about $5 more per barrel of water. "I think that's what's going to happen in the near term," he said. "In the medium term the operators over there...I think they'll all move more toward serious [water] recycling."

The permanent moratorium area would extend about five miles on either side of two centerlines extending northeast to southwest through the Guy-Greenbrier earthquake swarm and the historic Enola earthquake swarm, from north of Greers Ferry Lake to the Arkansas River, AOGC staff said.

The area would cover about 1,150 square miles and include the cities and towns of Conway, Damascus, Enola, Greenbrier, Greers Ferry, Guy, Heber Springs, Higden, Holland, Mt. Vernon, Quitman, Rose Bud, Twin Groves, Vilonia and Wooster and portions of Greers Ferry Lake.

Arkansas Gov. Mike Beebe has said he approves of the proposed action.

BHP said it has made arrangements to comply with the proposed order prior to its enactment. "...[W]e have been pursuing alternatives that will allow us to comply with such recommendations in advance of the July 26 hearing," a spokesperson said.

In the rest of the Fayetteville outside the moratorium area the AOGC director is to propose additional requirements for new disposal wells. "These requirements may include the submission of detailed seismic data to identify fault zones, the creation of setbacks from fault zones, the establishment of spacing between disposal wells and the requirement to install seismic instruments in close proximity to each new or existing disposal well in the Fayetteville Shale development area," AOGC said.

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