Shallow Oil Producers Fight Back

From the Derrick — written by Judith Etzel:  A coalition of shallow oil and gas producers is taking on state government in an effort its members insist is focused on saving the stripper well industry in Pennsylvania.

The Pennsylvania Independent Petroleum Producers (PIPP) is demanding that the state address “misguided regulations” on the conventional oil and gas industry that could mean its demise.

PIPP is a trade group of more than 200 independent producers who organized in 1984 in Oil City in vigorous opposition to that year’s controversial Act 223, the Oil and Gas Act. The legislation laid out strict, comprehensive and, in some cases, onerous regulations for the state’s oil and gas industry. The organization’s efforts led to several easements and modifications of the legislation.

The organization is revving up to do battle again in order to preserve drilling, production and refining jobs that depend on the extraction of Penn Grade crude oil and natural gas from shallow wells.

Water disposal problem

The key issue is a new proposal that would severely curb ways the industry handles the disposal of brine water, a drilling and production wastewater.

PIPP has scheduled a press conference to outline its opposition to a new disposal plan, one it describes as having the potential to devastate the shallow oil and gas industry, for 1 p.m. Tuesday, Oct. 30, at Drake Well Museum near Titusville.

“Now we know the full brunt of what may happen,” said Gary Hovis, a Kennerdell oil producer and president of PIPP. “The new law was passed and a lot of things in that law really come down on the shallow producers. That means anybody producing in the shallow formations, which is what Pennsylvania is historically was known for.

“They just lumped that right in with the deep (oil and gas shale) regulations and it doesn’t apply in a lot of cases. It is really damaging.”

Thousands of wells

Pennsylvania, birthplace of the petroleum industry, has 19,000-plus stripper, or shallow, oil wells in production. Last year, those wells plugged nearly 4 million barrels of crude oil into the marketplace.

They are classified as stripper wells that are marginal producers and eke out 10 barrels or less of crude a day. Most of Pennsylvania’s crude comes from McKean, Warren, Forest and Venango counties.

There are more than 55,000 shallow natural gas wells that produce enough to satisfy 25 percent of the state’s annual demand. Those wells, too, are shallow and marginal producers.

In contrast, the wells drilled over the past decade into the Marcellus and Utica shales are deeper, more prolific and more problematic since they require millions of gallons of water for fracking. The flowback fluids, or brine, contain drilling chemicals and are substantially more copious than what flows from shallow wells.

‘One size doesn’t fit all’

Despite the differences, the state regulations on the oil and gas industry make little distinction between shallow and deep operations, said Hovis. That is creating an onerous situation for marginal well operations that have less volume and create less production water.

A delegation of PIPP members met with state energy officials in Harrisburg earlier this year to argue their case that “one size doesn’t fit all,” Hovis said. The visit didn’t yield any solution, he added.

This past summer, Gov. Tom Corbett also dodged the question of whether new drilling and production regulations were unduly hard on and not applicable to shallow oil and gas production. He told an audience he would have “to find out exactly what’s going on there.”

The new regulation, one that would sharply restrict discharge limits for chloride, would upend the usual treatment methods provided by brine disposal plants such as the Franklin brine plant, a facility Hovis said is “essential for the survival” of shallow oil and gas production but will have to close if the new chloride-reduction regulation is approved.

The alternative of injecting brine into disposal wells is not realistic because Pennsylvania’s geology does not meet injection well specifications, Hovis said.

The new restrictions will spell the end of shallow production because the industry will have no acceptable method of brine disposal, he insisted.

Refineries at risk

If production is curbed, that will dramatically impact operations at the two principle buyers of Penn Grade crude, Ergon Oil Purchasing of Newell, W.Va., and American Refining Group (ARG) of Bradford, Hovis said. Combined, the two refiners employ more than 750 people and purchase millions of gallons of crude oil from some 1,800 producers.

“The two refineries pump a lot of money into the economy of Pennsylvania. It is hard to imagine our representatives, our senators, our governor are burying their heads in the sand. The ramifications are huge to our area,” Hovis said.

In Pennsylvania’s 150-plus years of producing oil and natural gas, brine water disposal has occurred “with no significant adverse effect on the environment as evidenced by the world class woodlands and beautiful streams in our operating areas,” Hovis said. The proposed water discharge change is “not necessary and (does) not serve to solve any existing problem.

“We see in our newspaper the layoffs at Joy and that the coal industry, a sister industry, is having a hard time. The solution to energy in this country so we are not energy dependent and don’t have to send men and women to the Mideast is to not ignore the resources we have like natural gas, oil, clean coal, windmills. The answer has to be a combination of all those resources. This new rule, though, means we’re just going to stab ourselves in the foot.”

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