c.bogc.dnrc.mt.gov/Hearings/_Temporary/1990/1990-03-29... · 1990. 3. 29. · BOARD OF OIL AND GAS CONSERVATION MEETING March 29, 1990 A regular meeting of the Board of Oil and Gas

STATE OF MONTANA

DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION

MINUTES OF THE

BOARD OF OIL AND GAS CONSERVATION MEETING

March 29, 1990

A regular meeting of the Board of Oil and Gas Conservation was called to order by Chairman James c. Nelson at 8:00 a.m., on Thursday, March 29, 1990, in the Frontier Room, Radisson Northern Hotel, Billings, Montana.

Board members present were James C. Nelson, Chairman; Dean A. Swanson, Vice Chairman; Warren H. Ross; Stanley Lund; Robert B. Rhodes, Jr,; and David Schaenen.

Staff members present were Thomas P. Richmond, Administrator/Petroleum Engineer; Jim W. Halvorson, Petroleum Geologist; Dee Rickman, Executive Secretary; Donald A. Garrity, Attorney; Steven Sasaki, Northern District Field Supervisor; and Alan Olson, Field Inspector.

Reading of the minutes of the February 1 and February 13, 1990 meetings were dispensed with inasmuch as a copy of the minutes was sent to each board member prior to this meeting. Mr. Lund requested that the minutes for the February first meeting be corrected to reflect that the reclamation project for Stanley Powell's well was in Powder River County, not Richland County,

MOTION: A motion was made by Mr. Swanson, seconded by Mr. Rhodes and unanimously passed that the minutes of the February 1 and February 13, 1990 meetings be approved as corrected.

Financial Report and Budget Mrs. Rickman presented copies of the financial report for the period ending February 28, 1990, She also reported that the initial budget preparations for the next biennium are in progress at this time and due in the Governor's Budget Office by April 20. Guidelines at this time permit adjustments to the current level base only. Requests for increases over current level are being reviewed by the Governor's staff, who will advise which, if any, may be inc 1 uded in the budget requests submitted in August. We have identified the need for an increase of approximately 20% of our operating budget to implement an environmental program for MEPA compliance,

Mr. Richmond reported that a budget amendment request is currently pending approval by the Budget Office to increase the building expansion appropriation by $50,000 to replace the existing roof on the south side of the Billings office building. The architect recommended that the old roof be replaced upon inspecting it to select a roof for the addition that would visually match. He said that the original metal roof was not appropriate for the shallow pitch, and that improper installation and the lack of a vapor barrier have

) further contributed to the problem. Given the considerable damage that has

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already occurred to the interior of the b11i]ding and the fact that the plywood decking is rot ting, he said that further repairs were not the answer to the problem and would ultimately cost more than replacement of the roof. The budget amendment request has been delayed in the Budget Office over legal technicalities for a couple weeks, but word came by phone during today's meeting that it had been approved.

Bonds Mrs. Rickman provided copies of the bond report covering the period of February 1 through March 28. Six new bonds were approved, seven cancelled and three suspended. Copies of the pending bond demands and bond forfeitures summary were also distributed. Current activities were summarized as follows:

Trio Petro Inc. - Intents to abandon the 3 outstanding wells have been received and approved; work has been contracted and will begin as soon as ground conditions permit.

Frontier Exploration Company - Efforts to get the landowner to take over the Habets 17-32 well in Toole County have so far been unsuccessful. Andy Pierce of Frontier confirmed by fax transmittal that they will plug the well as soon as the weather permits.

Petq, Inc. - Surety has contracted Gale Butterfield to plug the single well outstanding against the bond; work is to be completed by June 30, 1990,

Investestate - The initial demand against the bond was sent 12-14-89, requiring plugging of the 2 outstanding wells; recent correspondence from the surety indicated that the successor company, Incorp, would contact the Board and make arrangements to correct the problem. A status report for today's meeting was requested, but no response was received.

Struthers Oil & Gas Corp. - A status report was requested for today's meeting to determine Struthers intention in complying with the plugging and restoration requirement for their Butcher Creek wells by June 1, 1990. No report was received and the Board directed Mrs. Rickman to request that the report be submitted within 10 days, and, if not received, to schedule Struthers to show cause at the next meeting why they should not be subject to the statutory penalties for violation of board rules.

Inactive Operators - Devils Basin & Laurel Fields Mr. Richmond presented a report prepared by Chief Field Inspector Floyd Podoll concerning several operators in Devils Basin & Laurel Fields who are no longer active in Montana, and have left numerous problems with wells drilled between 1979 to 1981. Following is a summary of the operators and problems associated with each:

Ca lburn E12ergy Corp . - Last production July, 1981; 24 wells against bond; 8 flowing water, oil or gas to the surface; all remain unplugged.

Aberdeen Resources Corporation - Last production reported November, 1983; 28 wells under bond; 1 well flowing water to surface; remaining 24 are unplugged; 3 locations are not restored, even though wells were never drilled; delinquent reports are required for 15 wells.

Moore Operating Company - Two wells under bond; delinquent report required for one well.

Longstring Energy Corporation - 7 wells under bond; one is leaking fluid to surface and will require replugging and location restoration; 2 undrilled

) locations require surface restoration; 1 well requires a dry hole maker and site

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restoration; 3 wells remain unplugged and also require site restoration; 5 wells require delinquent reports.

Bonanza Vega Corporation - Last reported production November, 1987; 6 wells under bond; 3 wells require delinquent reports. The lease has a water problem and the operator is unable to obtain permission from landowner to build a pit large enough to dispose of production water by evaporation,

Each of the listed operators has a $10,000 bond, but, according to the Secretary of State's Office, the only corporation in good standing is Bonanza Vega Corporation. Mr. Podoll was able to contact representatives for Calburn Energy Corp., Aberdeen Resources and Moore Operating Co,, but each indicated that they had sold the company or lease and did not consider themselves responsible even though no change of operator or change in organization was ever provided to the Board. Mr. Podoll was unable to contact either Longstring Energy Corporation or Black Mountain Oil Corporation, Following discussion, the Board directed Mrs. Rickman to request forfeiture of the Longstring Energy and Black Mountain bonds, The monies collected are to be used to plug the wells covered by those bonds which are either leaking or otherwise pose the greatest environmental threat. The Board also directed that show cause hearings be scheduled for Calburn Energy, Aberdeen Resources and Moore Operating Company,

Reclamation Projects Mr. Richmond reported that Materi Exploration, Inc, completed the plugging of the Stanley Powell well in Powder River County on February 27, 1990. The reserve pit has been fenced and $1,000 of the $44,940 contract total has been retained for surface restoration this spring. Mr. Richmond also reported that Stanley Powell ~alled htm and requested the State to reimburse him for damages caused by the leaking well, Tom advised him that the grant monies used for this project can be used only for reclamation and not for reimbursement of damages.

As a follow-up to the discussion of priority plugging projects at last month's meeting, Mr. Richmond reported that cost estimates for plugging and surface reclamation of the two Frazee wells in Yellowstone County are about $5,000 each, He plans to prepare a request for bids for each of the wells separately.

Mr. Richmond reported that Floyd Podoll has developed a list of proposed wells which may be eligible for Resource Development Grants. He said that the list will be divided into several groups of wells for the purpose of requesting grant funds. The maximum of each grant cannot exceed $300,000 and the filing deadline is May 15, 1990.

Mr. Richmond also reported that the Water Development Bureau has released the $65,600 grant funds for the Broadview well and that he intends to prepare a bid request proposal for that project. Originally we were told that the Broadview grant monies would probably not be available until the Spring of 1991.

Songsteng Disposal Well Facility Justice Water Service appeared before the Board through its attorney, Kemp Wilson, in response to Administrative Order No. 3-A-90 issued February 1, 1990, which required Justice Water Service to: 1) pump the pit associated with the Sonsteng #1-19 salt water disposal well

) entirely dry and determine the extent of leakage to the underlying aquifer; 2)

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install adequate security measures to prevent unauthorized usage of the disposal facility tanks and well and to prevent any dumping into the pit; and, 3) to present a plan for proper abandonment or reconstruction and repair of the settling pit to the Board on March 29, 1990. Mr. Wilson reported that, because of extremely wet weather, Justice Water Service has been unable to formulate its plans for pit reconstruction or abandonment with proper back-filling and surface restoration. He requested an extension of time to the next board meeting on May 3, 1990. Mr. Wilson also reported that adequate security measures have been taken to prevent unauthorized usage of the disposal facility tanks and well and to prevent any dumping into the plastic-lined settling pit. In response to a letter from Robert Hurly contending that dumping has continued at the disposal facility at night since the Board issued its Order 3-A-90, Mr. Wilson said that the order did not require Justice Water Service to cease dumping of fluids in the disposal well itself, and the Board concurred in that interpretation of its order. Field inspector J, D. Hodges reported no indication of dumping in the settling pit at anytime of the day or night.

MOTION: A motion was made by Mr. Schaenen, seconded by Mr. Swanson and unanimously passed granting Justice Water Service's request for an extension of time to May 3, 1990, to provide a plan for approval by the Board for either reconstruction or abandonment of the pit with proper safeguards to insure that leakage of deleterious substance does not occur.

UIC Program Update Mr, Richmond reported that Debbie Schmidt of the Environmental Quality Council has requested the Board to have a representative attend their next meeting on April 27, 1990, in Missoula to provide a progress report on the negotiation status with the Environmental Protection Agency for the UIC Program. Tom said that it would be difficult for him to attend a meeting in Missoula on that date and Mr. Nelson said that he also would not be available on that date. Paul Osborne of the Denver EPA office has also been requested to attend the EQC meeting and cannot because of a conflict in his schedule. The Board asked Tom to see if the matter could be postponed to the next EQC meeting when perhaps both Tom and Jim can attend. Tom also said that the negotiation status has not changed much since the last report to the EQC, and that he thinks it is very unlikely that EPA will approve our program until they have completed their mid-course review for other primacy states.

Programmatic EIS Reprinting of the Programmatic EIS was discussed again at this meeting, along with requesting release of the remaining funds in the EIS account. The consensus was that rather than reprinting the complete EIS as previously decided, printing of a users guide would be more appropriate in terms of cost and benefit to the industry and other users. The Board also directed the staff to request release of the remaining funds in the EIS account to purchase topographic maps, soil surveys, aerial photos and other environmental information needed to compile a database that will facilitate permit review and processing,

Rules When the Board adopted the Programmatic EIS in December 1989, several rule changes were anticipated as a part of the implementation process. Construction and reclamation of reserve pits has been identified as a priority for rulemaking, Board member Stanley Lund said that ground water protection is of great concern to the people in his area of the state and that he believes

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the Board should draft rules concerning pits as soon as possible. Mr. Richmond said that he has been looking at other states' rules concerning pits, and is waiting for the results of a review by several race committees that have been reviewing this matter for the purpose of proposing model rules. The Board requested Tom to prepare a list of regulations that need to be amended or updated as a result of adoption of the EIS and to present it to them for review at the next meeting.

Reserve Pit Complaint Mr. Lund reported that he has received a letter regarding a pit that allegedly is being used as a dumping pit for produced water. He requested that the complaint be investigated. Tom said that he thinks the pit in question is one that J, D. Hodges has condemned, Stan suggested that the staff take whatever measures necessary to get the site reclaimed. Tom said that he would look into the matter, but that any resolution to the problem would probably require involvement by the Water Quality Bureau.

race Meeting The midyear meeting of the Interstate Oil Compact Commission is scheduled to be held in Bismarck, North Dakota, June 17--20, 1990. Since it will be in our neighbor state this year, the Board wishes to have a large group representing Montana at the meeting. The IOCC meetings are generally attended by the governors of many of the member states, but it has been a number of years since the governor of Montana has attended one of the meetings. Governor Stephens has advised that he will not be able to attend the meeting, but the Board decided to contact him again to encourage him to try to at least make a brief appearance at the meeting.

Environmental Coordinator Position Mr. Swanson reported that Tom Richmond did the initial screening of the 84 applications for the Environmental Coordinator position and narrowed the group to 18 for consideration by the selection committee. They hope to choose 3 to 5 candidates from that group and to schedule interviews in about one week.

Public Hearing At 10:00 a.m. Chairman Jim Nelson announced that the Board would hear the applications scheduled for the March 29, 1990 public hearing, As a result of the discussion, study, testimony and technical data placed before the Board the following action was taken.

Dockets No. 5-90, upon the application of The Montana Power Company, and No. 13-90 and 14-90, upon the applications of Northland Royalty Operating Company, were continued to May 3, 1990 at the request of the respective applicants.

MOTION: A motion was made by Mr. Schaenen, seconded by Mr. Ross and unanimously passed that the application of Branch Oil and Gas heard under Docket No. 2-90 be granted as amended and set forth by Board Order No. 4-90.

MOTION: A motion was made by Mr. Schaenen, seconded by Mr. Rhodes and unanimously passed that the application of Hondo Oil & Gas Company heard under Docket No. 3-90 be granted as amended and set forth by Board Order No. 5-90.

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MOTION: A motion was made by Mr. Swanson, seconded by Mr. Schaenen and unanimously passed that the application of Balcron Oil Company heard under Docket No. 7-90 be granted as set forth by Board Order NO. 6-90.

MOTION: A motion was made by Mr. Swanson, seconded by Mr. Rhodes and unanimously passed that the application of Sheffield Exploration Company, Inc. heard under Docket No. 8-90 be granted as set forth by Board Order No. 7-90,

MOTION: A motion was made by Mr. Rhodes, seconded by Mr. Ross and unanimously passed that the application of G. B. Coolidge, Inc. heard under Docket No. 9-90 be granted as set forth by Board Order No. 8-90,

At the outset of the hearing of Docket No. 10-90, upon the application of Norfolk Energy, Inc., Don R. Lee, an attorney representing J, Burns Brown, Lytm Oil Co., Inc., John 0, Brown et al, and Klabzuba Oil & Gas et al, moved to have the docket dismissed. The Board took the motion under advisement and proceeded with the hearing. Mr. Lee's motion was denied at the close of the hearing.

MOTION: A motion was made by Mr, Swanson and seconded by Mr. Lund to grant the application of Norfolk Energy, Inc, heard under Docket No, 10-90, The motion carried with Board members Swanson, Lund, Ross and Nelson voting in favor and Board members Schaenen and Rhodes opposed. The matter was set forth by Board Order No. 9-90.

MOTION: A motion was made by Mr. Swanson, seconded by Mr. Schaenen and unanimously passed that the application of Norfolk Energy, Inc, heard under Docket No. 11-90 be granted as set forth by Board Order No. 10-90.

During the hearing of Docket No. 12-90 upon the application of Conoco Inc. to confirm Board Order No. 49-89 (approval of the Ridgelawn Duperow Unit) and establish an effective date, Rod Samdahl, Minerals Manager for the Montana Dept. of State Lands, requested that State tract No. 19 be excluded from the unit on the basis that pursuant to Section 82-11-103, MCA, State Lands are not subject to the jurisdiction of the Montana Board of Oil and Gas Conservation. The Board did not agree with that interpretation of the law and suggested that the Dept. of State Lands request an opinion from the Attorney General as to that matter. Upon finding that Conoco Inc. had obtained the requisite 80% approval in writing of the working interest owners and 80% of the cost-free or royalty owners of the Ridgelawn Duperow Unit, the Board took the following action.

MOTION: A motion was made by Mr. Swanson, seconded Mr. Schaenen and unanimously passed that the application of Conoco, Inc. heard under Docket No, 12-90 be granted as set forth by Board Order No. 11-90.

MOTION: A motion was made by Mr. Rhodes, seconded by Mr. Swanson and unanimously passed that the application of Northland Royalty Operating Company heard under Docket No. 15-90 be granted as amended and set forth by Board Order No. 12-90.

MOTION: A motion was made by Mr. Swanson, seconded by Mr. Ross and unanimously passed that the application of The Montana Power Company heard under Docket No. 16-90 be granted as amended and set forth by Board Order No. 13-90.

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Docket No. 17-90, upon the application of The Montana Power Company, was withdrawn at the applicant's request.

The next meeting of the Board is scheduled to be held on May 3, 1990 in the Anselmo Room, Copper King Inn, Butte, Montana. The filing deadline for that hearing is April 5, 1990.

The meeting adjourned at 4:00 p.m., Thursday, March 29, 1990.

(SEAL)

ATTEST:

Dee Rickman, Executive Secretary

BOARD OF OIL AND GAS CONSERVATION STATE OF MONTANA

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wanson, Vice Chairman arren H. Ross, Board Member

Stanley Lund, Board Member Robert B. Rhodes, Jr., Board Member David Schaenen, Board Member

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