BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF A DENIAL OF A UNDERGROUND INJECTION CONTROL WELL PERMIT APPLICATION BY TC OPERATING, LLC, MESA COUNTY, COLORADO

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CAUSE NO. 1

 

ORDER NO. 1-177

 

REPORT OF THE COMMISSION

 

The Commission heard this matter de novo on August 20, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, as a result of a denied application for an underground injection control permit pursuant to Rule 525, requested by TC Operating, LLC (“TC Operating”) for its proposed Deer Creek Disposal Facility and its Deer Creek SWD 1 Well, a Class II UIC Well, located in NE ¼  NE ¼,  Section 2, Township 14 South, Range 98 West, 6th P.M., in Mesa County, Colorado.

 

FINDINGS OF FACT

 

Jurisdictional Findings

 

1.         TC Operating, LLC (“TC Operating” or “Applicant”), as applicant for the requested underground injection control permit, is an interested party in the subject matter of the above-referenced hearing.

 

2.         Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

 

3.         The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

Burden of Proof

 

4.         During the Prehearing Conference dated June 7, 2012, TC Operating and Staff agreed to the following stipulation with regard to the burden of proof in this matter:

 

The Parties agree that Staff has the initial burden to produce evidence which, if believed, would show the Director had reasonable cause to believe that the proposed disposal well could result in a significant adverse impact on the environment or public health, safety and welfare. Once Staff meets its burden of production, TC Operating shall have the burden of proof to persuade the Commission that it is entitled to the relief requested in its application.

 

This same language was incorporated into the Prehearing Stipulation and Order, and is what the Commission applied in rendering its decision in the matter.

 

Stipulated Facts

 

5.         The following statement of stipulated facts was presented as a result of the Prehearing Conference Report and Stipulation dated June 15, 2012.

 

A.         Application History

 

i.          On April 30, 2010, TC Operating submitted to the Commission Form 2 (Application for Permit to Drill), Form 2A (Oil and Gas Location Assessment), Form 31 Underground Injection Formation Permit Application), and Form 33 (Injection Well Permit Application) for the Deer Creek SWD #1 Well (“Deer Creek Well”) (API # 05-077-10096). The Form 2 and Form 2A were approved by the Commission on June 11, 2010. (See Exhibits 4, 5, 6, 7, and 8.)

 

ii.          In May 2010, TC Operating met with Commission staff to discuss injection into the Entrada Formation. The meeting resulted in a verbal denial of the request to inject into the Entrada Formation and the application was subsequently changed to exclude the Entrada Formation.

 

iii.         On June 29, 2010, TC Operating submitted a Form 4 - Sundry Notice to request a change a drilling plans. (Exhibit 9.) The request was approved by Commission staff on July 7, 2010.

 

iv.        On July 26, 2010, TC Operating submitted a Form 4 - Sundry Notice to request a change in drilling plans. (Exhibit 10.) The request was approved by Commission staff on July 27, 2010.

 

v.         On October 12, 2010, TC Operating submitted a Form 4 - Sundry Notice requesting a 90-day extension to the UIC application. (Exhibit 11.) The request was approved by Commission staff the same day.

 

vi.        On January 24, 2011, (Received January 26, 2011) TC Operating resubmitted Form 31 and Form 33 (collectively, “Injection Well Permit Application”) after the original application to drill expired. (Exhibit 12.)  These applications were denied by Commission on June 13, 2011. (Exhibit 1.)

           

vii.        On February 15, 2011, the Deer Creek Well was spud, total depth of 1970 feet was reached March 7, 2011 (based on Logger’s TD), and casing was set March 9, 2011.

 

viii.       On March 17, 2011, TC Operating submitted Form 5 (Drilling Completion Report). The matter is currently on hold. (Exhibit 45.)

 

iv.        On June 13, 2011, Commission staff sent a letter to TC Operating denying the UIC application submittal.  (Exhibit 1.)

 

x.         On July 19, 2011 TC Operating proposed a pressure transient test.

 

xi.        On July 28, 2011 Staff met with TC Operating and shared a PowerPoint presentation explaining its position.

 

xii.        On August 11, 2011, TC Operating met with Commission staff presenting additional modeling results and requested authorization for additional testing.

 

xiii.       On August 18, 2011, staff responded to the August 11, 2011 TC Operating proposals by denying the request. (Exhibit 22.)

 

xiv.      On December 19, 2011, TC Operating, through counsel proposed a permit for limited injection for purpose of obtaining more data to address issues raised by staff at the July 28, 2011 meeting. This included a request for authorization to inject up to 210,000 barrels of Class II wastewater. (Exhibit 18.)

 

xv.       On January 5, 2012, staff responded to the December 19, 2012 TC Operating request with a denial letter. (Exhibit 24.)

 

xvi.      On May 9, 2012, TC Operating sent a letter to the Commission requesting to inject eight hundred eighty thousand barrels of Class II wastewater. (Exhibit 19.)

 

xvii.      On May 18, 2012, Commission staff denied the TC Operating request made May 18, 2012.  (Exhibit 25.)

 

B.         Geologic and Hydrologic Environment

 

xviii.     The geologic section in the area of the Deer Creek Well, from deepest to shallowest, includes the Chinle Formation, the Wingate-Entrada aquifer, the Summerville-Wanakah-Curtis Formation, the Tidwell Formation, the Salt Wash aquifer, the Brushy Basin Formation, the Burro Canyon Formation, the Dakota aquifer and the Mancos Formation.

 

xix.      The Wingate Formation is the proposed injection zone.  Absence of the Kayenta Formation beneath the J-2 regional unconformity indicates the Wingate and Entrada may be in hydraulic contact and form a single water-bearing zone.  Because the Wingate Formation and Entrada Formation may be connected, this zone is referred to as the Entrada-Wingate aquifer.  Water in the Wingate Formation at the location of the Deer Creek Well has a total dissolved solids (“TDS”) concentration of 62,800 mg/L.

 

xx.       The Entrada-Wingate and Dakota aquifers are considered to be confined aquifers (as opposed to unconfined aquifers) in the area of the Deer Creek Well, based on water level measurements.

 

xxi.      The Salt Wash Member of the Morrison Formation overlies the Tidwell Member which contains sandstone channels which form a regionally connected aquifer.  Petrophysical log analysis indicates that water in the Morrison sandstone at a depth of 1220 feet at the Deer Creek SWD-1 well location has a TDS concentration in the general range of 20,000 to 32,000 mg/L.  However, no water samples have actually been collected and analyzed for TDS from this Morrison sandstone in the Deer Creek Well. 

 

xxii.      The total net thickness of rock between the Dakota Formation and the Entrada-Wingate aquifer is 691 feet.

 

xxiii.     The TDS value for water from the Entrada-Wingate aquifer at the Cheney MK Ferguson TW-1 well site was calculated to be 6,432 mg/L, based on a measured specific conductance value of 9600 micromhos per centimeter.

 

xxiv.    The TDS value for water taken from the Dakota Formation in the Deer Creek Well indicated a value of 7,560 mg/L.  However, this water sample was collected using non-standard protocols and therefore, the TDS result may have been affected by the sampling method.

 

xxv.     Analysis of samples of water from the Dakota Formation taken from three monitor wells (MW977, MW971, and MW978) at the Uranium Mill Tailings Remedial Action (“UMTRA”) site, located 2.6 miles northwest of the Deer Creek well, yielded the following results:

 

MW977                       12,108 mg/L and 10,500 mg/L

MW971                       15,300 mg/L and 18,300 mg/L

MW978                       15,400 mg/L and 15,500 mg/L

 

These three monitoring wells were located along an approximate 700-foot-long, southwest to northeast line in Section 14, Township 3 South, Range 2 East, Ute Meridian.  The lowest TDS concentrations were observed from the furthest southwest monitor well MW977.

 

xxvi.    The nearest Dakota gas field is the Whitewater field, located approximately 5 miles due north of the Deer Creek SWD-1 well due north and further from the Gunnison River.  Wells in this field have produced gas from the Dakota intermittently, at relatively low volumes. The nearest Dakota Formation domestic well is the Coutu well, 1.4 miles from the Deer Creek Well, up dip and closer to the Gunnison River.

 

xxvii.    Five domestic water wells located within four miles of the Deer Creek Well produce water from the Dakota Formation.

 

xxviii.   The geologic region southwest of the Deer Creek Well is known as the Uncompahgre Uplift.  Several faults have been mapped along the flanks of this large geologic feature.  One fault, called the Bridgeport Fault, is located approximately 3 miles southwest of the Deer Creek SWD-1 well.  Detailed mapping of the Bridgeport Fault by Livaccari and Hodge (2005) indicates that the fault extends vertically from the crystalline basement rock up through the Wingate Formation and Dakota Formation. 

 

xxix.    The USGS National Earthquake Information Center (“NEIC”) mapped two earthquake epicenters at locations 2.5 to 3 miles north of the Deer Creek SWD-1 well.  These earthquakes occurred in 1990 and 1995 with magnitudes of 2.5 and 2.7, respectively.

 

xxx.     In March 2012 a 1000 foot water well was drilled for Jacob Wortman near Kannah Creek, 5.7 miles northwest of the proposed injection well.  Analysis of water in the Entrada found 1,044 ppm TDS.  A later email indicated this should have been 944 ppm TDS.  The overlying Salt Wash member of the Morrison formation sandstone layers contained water with 18,904 ppm TDS.  The well was completed with casing cemented to 900 feet to isolate the overlying brine.  The static fluid level from the Entrada-Wingate aquifer there was at 79 feet and head elevation of +4,821 feet.

 

Additional Procedural History

 

6.         This matter was set for hearing at the Commission’s July 9, 2012 meeting.  At the commencement of that hearing, TC Operating’s counsel claimed to have not had adequate time to review the groundwater computer model employed by DWR and Staff.  The Commission continued the hearing to its August 20, 2012 on its own motion.

 

7.         On July 3, 2012, TC Operating submitted an additional Proposed Plan of Development.  (Unlabled TC Operating Exhibit distributed in Commission August 2012 prehearing package.)

 

8.         In response to TC Operating requests to perform injection tests with Class II wastewater, staff had offered to allow TC Operating to perform injection tests using native water from the target formation. Staff’s primary concern with the proposed injection tests was with the use of Class II wastewater and the potential for contaminating the drinking water aquifer.  TC Operating rejected this offer.

 

Other Agency Positions

 

9.         In a letter dated August 24, 2011, the Division of Water Resources (“DWR”) expressed concern that injecting Class II waste into the Deer Creek Well potentially could adversely impact both surface and groundwater resources.  DWR concluded the presence of fracture zones and unmapped faults could provide conduits for transmission of high total dissolved solids brines from the target formation into the overlying aquifers, including the Dakota Formation.

 

10.       After reviewing the file in this matter, the U.S. Environmental Protection Agency (“EPA”) concluded rejecting the Injection Well Permit Application “appears reasonable”.  (Exhibit 30.)

 

11.       The Colorado Water Quality Control Division (“WQCD”) agreed with COGCC staff’s denial of the Injection Well Permit Application, and with staff’s conclusions regarding the shallow depth of the injection zone, the potential of the Wingate Formation for future use as an underground source of drinking water (“USDW”), and the risk injected fluids could migrate upwards toward other USDW aquifers.  (Exhibit 32.)

12.       The US Department of Energy (“DOE”) expressed concern that injecting deep well waste into the Deer Creek Well could induce seismicity and significant increase monitoring costs at its Grand Junction Disposal Site (radioactive uranium mill tailings disposal site) approximately 2.5 miles from the Deer Creek Well.  (Exhibit 35.)

 

13.       The Mesa County Board of County Commissioners, State Representative Ray Scott, and State Representative Don Coram submitted letters in support of TC Operating’s Injection Well Permit Application.  (Exhibit VV.)  These parties did not review the full administrative record in this matter.

 

General Findings

 

            Based on the testimony and exhibits presented and accepted into evidence at the hearing, and the totality of the administrative record, the Commission makes the following findings:

 

14.       The Dakota, and Entrada-Wingate Sandstones are fresh water aquifers near the Deer Creek Well and are actual or potential USDWs.  (See Exhibit 2 and 3).

 

15.       The Deer Creek Well is located in an area that has undergone significant tectonic activity in the geologic past, and the rock formations in the area have numerous faults, fractures and joints.  Faults, fractures, and joints could allow E&P waste to migrate into existing or potential USDWs.  (Exhibits 2, 3 and 34.)

 

16.       TC Operating used an uncalibrated computer model to simulate groundwater flow at the Deer Creek Well.  This model is not sufficiently reliable to accurately calculate whether USDWs will be adversely impacted by injection of E&P waste at the Deer Creek Well.  (See Exhibit 3A.)

 

17.       The proposed injection zone is in the Entrada-Wingate aquifer.  Two domestic water wells are completed in the Entrada-Wingate aquifer near the Deer Creek Well.  Injecting E&P waste into the Entrada-Wingate aquifer could: 1) induce salt water movement from the vicinity of Deer Creek Well to fresh water areas; and 2) allow E&P waste contaminants to migrate from the Deer Creek Well to fresh water areas. In either case, future domestic and/or public water well owners’ use of the aquifer would be impaired (Exhibits 2 and 3).

 

18.       The Commission rejects TC Operating’s conclusion that geological and hydrological data indicate injection is unlikely to influence an area beyond the 40-acre tract upon which the Deer Creek Well is located due to the large storage capacity of the Entrada-Wingate reservoir.  The distance of E&P waste injected into the Deer Creek Well will migrate is uncertain.

 

19.       The Dakota aquifer is presently used as an USDW between the Deer Creek Well and the Gunnison River.  There are 5 domestic water wells completed in this aquifer.  The Dakota aquifer occurs 691 feet above the injection zone at the Deer Creek Well.  This relatively thin separation is an inadequate buffer against possible vertical migration of E&P waste or existing saline formation water into the Dakota aquifer under the proposed injection pressures.  (Exhibits 2 and 3.)

 

20.       The positions taken by DWR, EPA, WQCD, and DOE referred to in paragraphs 9 through 12 above are credible and reliable, and support the staff’s denial of the Injection Well Permit Application.

 

Commission Deliberation Comments

 

21.       Commissioner Spielman clarified the Commission's responsibility is to decide whether the Director’s determination that injecting E&P waste into the Deer Creek Well could result in a significant adverse impact to the environment or public health, safety and welfare was reasonable.  He concluded the Director’s decision was reasonable, citing the public comment letters from the Colorado Division of Water Resources, the Colorado Geological Survey, the Water Quality Division of the Colorado Department of Public Health and Environment, U.S. Environmental Protection Agency, and U.S. Department of Energy as persuasive evidence.  He noted the letters unanimously support the Director's denial of the Injection Well Permit Application.  He also found COGCC technical staff’s testimony to be persuasive.

 

22.       Commissioner Pearce commented that the Staff denial of injection well tests proposed by TC Operating (Exhibits 17, 18, 19, and in an unlabeled TC Operating Exhibit distributed with the Commissioners’ August prehearing package) was based on the same rationale staff had applied in denying the original application.  He stated that the Commission should apply the same rationale in making its decision, and substantively the same conclusion would be reached whether the Commission was deciding the original application or the subsequent proposals for more limited injection for testing purposes.  Other Commissioners agreed with this analysis.

 

23.       Commissioners Benton and Craig commented positively on TC Operating's efforts to mathematically model the results of waste injection on the underlying aquifers.  However, Commissioner Craig, and later Commissioner Alward, characterized TC Operating’s alternative proposals to limit the volume of E&P waste injected as a "field experiment" or "pilot project".  However, all three Commissioners expressed concern that the modeling results were not reliable enough considering the risk of contaminating USDW if the model was not correct.

 

24.       Commissioner Benton noted TC Operating's assurance the company would stop injecting if pressure increases were detected.  However, this ultimately was not enough to convince him that the groundwater resource would be adequately protected in light of the fact that once the E&P waste is injected, it cannot be retrieved and the aquifer would be permanently damaged.

 

25.       Commissioner Alward relied upon evidence there was drinking quality water in the Entrada-Wingate aquifer in reaching his conclusion that injecting E&P waste into that formation could not be permitted. 

 

26.       Commissioner Pearce also noted that TC Operating had been told in May 2010 that Staff would not authorize E&P waste injection into the Entrada aquifer because it was too shallow.  TC Operating nonetheless elected to drill the well, but was not able to complete the well to the originally proposed depth.  TC Operating elected to proceed with completing the well at its own risk, knowing the Injection Well Permit Application could ultimately be denied. 

 

27.       Commissioner King commented that the Commission needs to consider the big picture as to how its decision in this matter will be viewed across the state, particularly in terms of the need to protect water resources.  He characterized any waste injection as an unacceptable field experiment.  He found the opinions expressed in the letters from other state agencies dispositive, and indicated he had heard nothing to persuade him the Commission should go in a direction different than the Staff denial as supported by the other agencies’ opinions.

 

28.       Commissioner Pearce echoed he was not persuaded by anything in the record to dismiss the staff’s concerns.

 

29.       Commissioner Urbina likewise indicated he had not heard any evidence to persuade him to overturn staff’s denial of the Injection Well Permit Application, and indicated he did not find the mathematical model to be persuasive. 

 

CONCLUSIONS OF LAW

 

            The Commission finds and concludes:

 

            30.       A.         The Director had reasonable cause to believe injecting E&P waste into the Deer Creek Well could result in significant adverse impacts to the environment, or public health, safety and welfare;

 

B.         TC Operating failed to satisfy its burden of proof to persuade the Commission that it is entitled to the relief requested in its Injection Well Permit Application;

 

C.        TC Operating failed to show the Deer Creek Well will be adequately protective of Underground Sources of Drinking Water; and

 

D.        Denial of TC Operating’s Injection Well Permit Application is necessary to fulfill the Commission’s statutory mandate to foster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with the protection of public health, safety, and welfare, including protection of the environment and wildlife resources.

 

31.       The federal Safe Water Drinking Act at 42 USC § 300h (b)(1) requires that states with delegated Underground Injection Control Well programs require:

 

(i) in the case of a program which provides for authorization of underground injection by permit, that the applicant for the permit to inject must satisfy the State that the underground injection will not endanger drinking water sources, and

 

(ii) in the case of a program which provides for such an authorization by rule, that no rule may be promulgated which authorizes any underground injection which endangers drinking water sources;

 

The U.S. Environmental Protection Agency has delegated responsibility for administering the Colorado Class II underground injection control program to the Commission, pursuant to the Safe Drinking Water Act.  TC Operating’s evidence in this matter fails to satisfy the state that the proposed injection of E&P waste into the Deer Creek Well will not endanger Underground Sources of Drinking Water.  42 USC § 300h(b)(1).

 

32.      The Colorado Oil & Gas Conservation Act § 34-60-106 (9) states:

 

Notwithstanding the provisions of section 34-60-120 or any other provision of law, the commission, as to class II injection wells defined in 40 CFR section 144.6b, shall also have the power to perform all acts for the purpose of protecting underground sources of drinking water in accordance with state programs and authorized by 42 U.S.C. section 300f. et seq. and regulations thereunder in effect or as may be amended.

 

Injecting E&P waste into the Deer Creek Well will not adequately protect underground sources of drinking water and, therefore, pursuant § 34-60-106 (9) C.R.S., the Director’s denial of the TC Operating Injection Well Permit Application must be affirmed.

 

33.       Commission Rule 325 states:

 

b. Withholding approval of underground disposal of water.  The Director may withhold the issuance of a permit and the granting of approval of any Underground Injection Formation Permit Application, Form 31 and any Injection Well Permit Application, Form 33 for any proposed disposal well when the Director has reasonable cause to believe that the proposed disposal well could result in a significant adverse impact on the environment or public health, safety and welfare.

 

The Commission concludes that the Director had reasonable cause to believe injecting E&P waste into the Deer Creek Well could result in a significant adverse impact on the environment or public health, safety and welfare and affirms the Director’s denial of the Injection Well Permit Application.

 

34.       The Administrative Procedures Act (“APA”), § 24-4-105 (7) states: “Except as otherwise provided by statute, the proponent of an order shall have the burden of proof,...”  Pursuant to the APA, TC Operating as applicant for the Injection Well Permit Application has the ultimate burden of proof.  We hold it has failed to satisfy its burden of proof that it is entitled to the relief requested.

 

35.       Each of the conclusions stated in paragraphs 30 through 33 above serve as an independent basis for denying the Injection Well Permit Application.

 

ORDER

 

NOW THEREFORE IT IS ORDERED:

 

1)  The Director’s denial of TC Operating’s Injection Well Permit Application is affirmed;

 

2)  This Order is effective immediately;

 

3)  The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal this Order;

 

4)  This Order constitutes final agency action for purposes of judicial review under the State Administrative Procedure Act;

 

5)  An application for reconsideration is not required prior to the filing for judicial review.

 

ENTERED this 19th day of September, 2012, as of August 20, 2012.

           

 

                                    OIL AND GAS CONSERVATION COMMISSION

                                    OF THE STATE OF COLORADO

 

 

 

                                    By                                                                               

                                    Robert J. Frick, Secretary