board of oil and gas conservation — montana dnrc

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' EXHIBIT 1

MONT ANA BOARD OF OIL & GAS CONSERVATION BOND ACTIVITY SUMMARY

May 14, 1997 through July 8, 1997

APPROVED BONDS

Amoco Production Co. Seaboard Surety Co. Amount: Chicago, IL Surety No. 321102 Bond Type:

· Effective:

ANR Production Co. United Pacific Insurance Co. Amount: Houston, TX Surety No. U276 57 10 Bond Type:

Effective:

Bloomfield Oil & Gas, Inc. Community First Bank - Glendive Amount: Glendive, MT CD No. 16801020 Bond Type:

Effective:

-qristol Resources Corp. Underwriters Indemnity co·. Amount: Tulsa, OK Surety No. B06587 Bond Type:

Effective:

Cam West Limited Partnership American Casualty Company Amount": Denver, CO Surety No. 158577859 Bond Type:

Effective:

Choctaw II Oil & Gas, Ltd. Underwriters Indemnity Co. Amount: Houston, TX Surety No. B6690 Bond Type:

Effective:

Citation Oil & Gas Corp. Underwriters Indemnity Co. Amount: Houston, TX Surety No. B6688 Bond Type:

Effective:

Columbus Energy Corp. American Casualty Company Amount: Denver, CO Surety No. 158577831 Bond Type:

Effective:

iorcenergy, Inc. Underwriters Indemnity Co. Amount: Miami, FL Surety No. B06621 Bond Type:

Effective:

·. . · - ·--··- -··

. ... $10,000

. . UIC Single

. May 6, 1997

.... $30,000

. UIC Limited

. June 6, 1997

.... $20,000

.... Limited June 18, 1997

. ... $25,000

.. Multi-well April 8, 1997

. ... $60,000

. UIC Limited June 17, 1997

.... $38,000

. UIC Limited

. June 2, 1997

... $105,000

. UIC Limited May 30, 1997 ·

.... $16,000

. UIC Limited May 16, 1997

.... $28,000

. UIC Limited April 22, 1997

- • - ... _ . .. - • -·. • ... • • ... · - · ·· ........ _ ._ . .. # .... . . . -·-··--

Hallwood Petroleum, Inc. Reliance Insurance Co. Amount: .... $20,000 )enver, CO Surety No. B2772088 Bond Type: . UIC Limited

Effective: May 30, 1997

Wm Herbert Hunt Trust Estate United Pacific Insurance Co. Amount: .... $30,500 Dallas, TX Surety No. U2720833 Bond Type: . UIC Limited

Effective: . June 9, 1997

Intoil, Inc. First Bank - Helena Amount: .... $10,000 Englewood, CO CD No. 350020280201 Bond Type: .. UIC Single


KeeSun Corporation First Citizens Bank - Billings Amount: .... $3,500 Billings, MT Letter of Credit No. 1997-05 Bond Type: .. UIC Single


Neilco, Inc. First Citizens Bank - Billings Amount: . ... $4,000 Billings, MT CD No. 31664 Bond Type: .. UIC Single

Effective; June 16, 1997

~eilco, Inc. First Citizens Bank - Billings Amount: . ... $4,000 Billings, MT CD No. 31665 Bumi Type: .. UIC Single

Effective: June 16, 1997

Panterra Petroleum MGP First Interstate Bank - Billings Amount: .... $17,100 Billings, MT Letter of Credit No. 1109600041 Bond Type: .. UIC Single


Phoenix Production Co. First Interstate Bank - Billings Amount: .... $20,000 Cody, WY Letter of Credit No. 1109600038 Bond Type: . UIC Limited

Effective: . May 6, 1997

Samedan Oil Corporation Safeco Insurance Company Amount: .... $10,000 Ardmore, OK Surety No. 5895035 Bond Type: .. UIC Single


Somont Oil Company, Inc. First State Bank - Shelby Amount: .. $16,860.25 Spring, TX CD No. 2184 Bond.Type: . UIC Limited

Effective: April 21, 1997

) omahawk Oil Company, Inc. First Security Bank - Roundup Amount: . ... $30,000 Roundup, MT Letter of Credit No. 002 Bond Type: . UIC Limited

Effective: June 10, 1997 . /

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... : ..... -·-· .. ·-- ·-.

Tomahawk Oil Company, Inc. First Security Bank - Roundup Roundup, MT CD No. 115004

Wheless Industries, Inc. Fidelity & Deposit Company Shreveport, LA Surety No. 08014693

CANCELLED BONDS

Discovery GeoServices Corp/Lyco Underwriters Indemnity Co. Dallas, TX Surety No. B05067

E Doyle Huckabay Underwriters Indemnity Co. Tyler, TX Surety No. B4861

E Doyle Huckabay Home Indemnity Co.

\Yler, TX Surety No. NB 674891

River Gas Corporation Gulf Insurance Company Northport, AL Surety No. 56 15 12

CHANGES TO EXISTING BONDS

BC JAM, Inc. Fireman's Fund Insurance Shelby, MT Surety No. SLR 0642 0754

(Bond suspended at the request of the surety company. This bond is secured by the $l0,000 surety and a $15,000 CD)

WC Kirkwood 1st Interstate Bank West - Billings Casper, WY CD No. 1300013924

(Replaces 2 $10,000 single well bonds)

)mdtech Corporation Aetna Casualty and Surety Co. Sidney, MT Surety No. 81S8108161BCA

(Existing blanket bond reclassified as UIC Limited bond)

Amount: .... $45,000 Bond Type: . UIC Limited


Amount: .... $5,000 Bond Type: .. UIC Single


Amount: .... $10,000 Bond Type: . . Single well


Amount: . ... $25,000 Bond Type: .. Multi-well


Amount: . ... $10,000 Bond Type: .... Blanket

Effective: June ~o, 1997

Amount: .... $5,000 Bond Type: . . Single well


Amount: . . . . $25,000 Bond Type: .. Multi-well

Effective: . July 1, 1997

Amount: .... $25,000 Bond Type: . . Multi-well


Amount: .... $10,000 Bond Type: . UIC Limited

Effective: . July 2, 1997

'~acum Energy, Inc. 1st Interstate Banlc Billings Heights Billings, MT CD Nos. 8109, 8110, 8111

(CD's 4528, 7074, & 7339 replaced in equal amounts)

Montana Power Company Reliance Insurance Company Butte, MT Surety No. B2733881

{Replaces Safeco policy# 5875638 in equal amounts)

North American Resource Co. Reliance Insurance Company Butte, MT Surety No. B2733884

(Replaces Safeco policy# 5877668 in equal amounts)

FORFEITED BONDS

J.B. Appling National Surety Corporation Midland, TX Surety no. SLR 5147459

(Forfeiture deadline extended by Board action to July 13, 1997) -----

Page4

. ·, ..

Amount: .... $25,000 Bond Type: . . Multi-well


Amount: .... $25,000 Bond Type: . . . Multi-well

Effective: _<- J.uly 1? 1997

Amount: . ~ .- . $25,000 Bond Type: · .. Multi-well · Effective: July 14, 1997

Amount: .... $10,000 Bond Type: . . . . Blanket

BOARD OF OIL & GAS CONSERVATION FINANCIAL REPORT FOR REGULATORY & FEDERAL ACCOUNTS

Period Ending June 30, 1997* Percent of FY97 Time Elapsed: 100%

REGULATORY PROGRAM EXPENDITURES:

Salaries Other Compensation Employee Benefits Other Services Supplies & Materials Communications Travel Rent Utilities Repair & Maintenance Other Expenses Equipment Total

Outstanding Bills (est)

Approp. $516,831

4,900 139,856

77,488 17,669 27,569 21,045 10,439 8,210

10,661 9,471

25.721 $869,860

FY97 Total Spent to Date (est) Appropriation Balance FY97 Percent of App4opriation Spent

OTHER APPROPRIATIONS: DNRC DOR TOTAL OTHER APPROP/EXP

REVENUE: Oil Production Tax Gas Production Tax Penalty and Interest Drilling Permit Fees UIC Permit Fees Interest on Investments Copies of Documents Database Services Other TOTALS

BALANCES: (6-27-97) Regulatory Accounts Damage Mitigation

$ 60,998 31.060

S 92.058

$466,988 $145,234

*Does not include fiscal year-end updates.

Expended $349,420

4,025 88,547 66,760 14,308 28,281 13,720 10,502 8,893

12,750 5,668

22.417 $625,29J.

37.795 5663. 086 . 5206, 774

76\

$ 0 30,751'.

S 30.751

TOTAL FY96 $ 793,087

184,996 3,028

17,935 0

4,803 8,211 1,165 £.«. 3_7 6_

SL 01s. 601

UIC PROGRAM[STATE Approp. $

22_5, 000

$225,000

Expended $ 16,364

297 4,105

-2,047 423

2, 592 . 927

78 1,289 1,282

$ 25,310

s. 611 S 30,921 $194,079

YTD FY 97 $792,310

119,486 1,599

31,250 194,295

8,567 8,411 1,308

241 $1,157,467

14%

UIC PROGRAMLFED Approp. Exuended $ $ 5,202

153 1,304

98,083 4,370 208

1,173 430

21 656

6,617 661 5104.700 $14,178 -

2.543 516. 721 $87,979

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EXHIBIT 3

36.22.1303 WELL PLUGGING REQUIRfilvffiNT The owner shall not permit any well drilled for oil, gas, salt water disposc14 or any other purpose to remain tmplugged after such well is no longer used for the pmpose for which it was chilled or converted. ex-~t tAat as kmg as the oi..VBeF has etaef predtteing weDs Oil tee lease he may kold idle a v.rell ea the same lease fer posMble :mtm'c use, tmlcss the board sha:1:1: find that Stteh idle well or wd:1:3 mre eattSing damage to oil or gas i=eservoifs or fresli v1mer 9af)f)Hes. When -the--.well on a lease is no longer capable of production because the lIDderlying reservoir or reservoirs are , depleted and there is no possible future- use for the wells on the lease in supplemental recovery operations or for disposal facilities, the operator shall

I y,•r- within 90 ~ thereof commence operations to-plug and abandon~wells (§n the !-~ ? ~ leasi) as set forth in this sub-chapter, unless otherwise authorized by the

petroleum engineer or his authorized agent. (Histmy: 82-11-111, MCA; IlviP, 82-11-123 and 82-11-124, MCA; Eff. 12/31/72.)

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·' EXHIBIT 4

Chairman:

P.O. Box 53127, Oklahoma City, OK 73152-3127 • 900 N.E. 23rd Street, Oklahoma City, OK 73105

Phone: 405/525-3556 • Fax: 405/525-3592 • E-Mail: [email protected]

World Wide Web http://www.iogcc.oklaosf.state.ok.us

Vice Chairman: Second Vice ChalrmlUI: Execudwl Dlractor: Governor Frank Keating, Oklahoma James A. Slutz, Indiana James W. Carter, Utah Christine Hansen

The Honorable Marc Racicot Governor State of Montana State Capitol Helena, MT 59~

Dear Gove~acic~;: -~<(

July 3, 1997

Please contact your Congressional delegation to urge their active support of the attached proposed line item appropriation in the FY98 Environmental Protection Agency (EPA) budget.

The recent study of the Interstate Oil and Gas Compact Commissiuµ (IOOCC) ''Produce or Plug" (copy sent to your office in March) quantifies the scope of the national environmental dilemma of abandoned oil and gas wells. The study also catalogues the state plugging programs and finds that we have adequate programs, though some are underfunded. In addition, the number of abandoned wells will only grow, as the U.S. oil fields age. An infusion of funds is needed so that states can get ahead of this problem. Existing programs are funded by a variety of methods from the oil and gas industry. Increasing these industry assessments is practical in only a limited number of states.

However, no new programs are needed. Some modest matching funds from the federal government could assist states in moving ahead of this problem - and would be federal dollars which would involve no new spending in administration at the state or federal level. The appropriate source of these funds would be the Environmental Protection Agency, and we will discuss a special line item within this budget with the members of the House and Senate Appropriations Committees, as well as with EPA Administrator Carol Browner.

Governors Ben Nelson and Ed Schafer raised this issue with Administrator Browner last year and their suggestion was favorably received, pending results of this study. To accomplish this goal, we will also need your assistance in communicating with your Congressional delegation so that they are informed and supportive of this plan.

MEMBER STATES Alabama· Alaska· Arizona• Arkansas • California ·Colorado· Illinois • Indiana• Kansas• Kentucky• Louisiana• Maryland• Michigan

Mississippi · Montana • Nebraska • Nevada • New Mexico· New York • North Dakota ·Ohio• Oklahoma • Pennsylvania • South Dakota • Texas • Utah • Virginia

West Virginia • Wyoming ASSOCIATES Georgia • Idaho • Missouri • North Carolina • Oregon • South Carolina • Washington INTERNATIONAL AFFILIATE Alberta

Governor Racicot July 3, 1997 Page 2

This proposal will provide for some additional environmental clean up funds coming directly to the states with a minimum of bureaucracy -- a real ''win win" situation.

Thanking you in advance for your assistance and with best regards.

FAK./cdp

Enclosure

cc: Kemp J. Wilson Thomas P. Richmond

DISCUSSION ON LINE ITEM APPROPRIATION FOR WELL PLUGGING AND CLEAN UP OF OIL AND GAS WELLS BY THE STATES

There are approximately 285,000 idle oil and gas wells in the nation, most of these idle wells are not producing with the authority of the state regulatory agency responsible and have adequate financial assurance to cover all plugging and cleanup costs. However, there are 37,000 wells waiting to be plugged with state funds because they have become "orphaned" with no financially responsible party- available and pre-date states' extensive bonding requirements. The producing states have established plugging funds and with these funds undertake the proper plugging and abandoning of these orphan wells. The scope of the challenge in many states is ahead of the available fund coverage. Matching federal money of thirty (30) percent, would enable the states to nearly double the number of wells plugged and properly abandoned, as the administrative mechanism for the process already exists in each state and the funds would go directly to plugging these wells and protecting the groundwater of the United States.

The Interstate Oil and Gas Compact Commission (IOGCC) is a Compact of 29 oil and gas producing states, approved by Congress in 1935, whose mission is to promote the conservation and efficient recovery of domestic oil and natural gas resources, while protecting health, safety and the environment.

DRAFr LANGUAGE FOR EPA FY98 APPROPRIATION $5,300,000 for matching funds to states for plugging and cleanup of oil and gas E&P sites with administration by the Interstate Oil and Gas Compact Commis&ion of matching funds and a peer review program to ensure states' programs meet acceptable national standards.

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Draft letter for Members of Congress

Dear ----I urge your endorsement of a small EPA line item appropriation which would directly benefit the environment in our state (draft language attached). This would permit (name of your state here) to substantially increase plugging of oil and natural gas wells for which there is no responsible party.

Nationally, there are 37,000 wells waiting to be plugged with state funds because they have become "orphaned" with no financially responsible part available and pre-date states' extensive bonding requirements. In (name of your state) there are (number of orphan wells) awaiting plugging, a term used to describe the permanent sealing of a well to protect the ground water and prevent any future oil seepage at the surface.

Every state has an exte.nsive program in place regulating the standards for such plugging, so no new program is required. This proposal would not require development of any administrative oversight by EPA, and would not increase the administrative costs in the states, as those are already fixed costs. It would permit the proper plugging of substantially more orphaned wells, the biggest environmental problem faced by the nation in dealing with our large domestic oil and gas industry.

In (name of state) we plugged (number of wells plugged) wells last year, and spent ($ amount spent, including administrative and related costs, if available) from funds designated for that purpose. While the states each have an excellent program, they do lack proper funding, in most cases. The modest appropriation, in light of the total EPA budget, for this item would enable these funds to be used directly for the plugging and cleanup of abandoned sites, creating an immediate environmental benefit.

The extent of the existing state programs with their high standards, and the scope of the national problem has been documented by the Interstate Oil and Gas Compact Commission. Your staff may obtain a copy of this study by calling them at 405/525-3556.

Thank you for your consideration of this request.

Sincerely,

EXHIBIT 5

(303) 534-1533

Mr. Tom Richmond Montana Oil & Gas Billings, Montana Via Fax and Certified Mail

Re: Cartmell 14-14H

Dear Sir,

Section 14 T17N R53E Dawson County, Montana

SAMEDAN OIL CORPORATION DENVER REGION

1050 Seventeenth Street, Suite 1100 Denver, Colorado 80265

p:\wordproc\cartN2.doc

Fax (303) 534-1103

The Cartmell l 4- l 4H encountered an uncontrolled flow of Nitrogen in the course of drilling operations in March 1997. The well was subsequently plugged and-made ready for abandonment. The casing head has been left in place and due to the presence of a slight amount of nitrogen gas at surface we have elected to pursue a monitoring period rather than cut-off the wellhead and bury the surface casing stub. This monitoring period will enable Samedan Oil representatives to ascertain the severity and possibly the source of the nitrogen.

A replacement well was drilled 500 feet away which encounterecl nitror,cn gi,s as shallow as 1000 feet from surface. This would !ndicate that an underground breach of the surface clll!ing h11d occurred on the oliginal well. Siguificaul tlrilling prubh:ms were encounleretl while drilling the replacement well but we were able to eventually install and cement surface, intermediate, and production casing in place. As originally planned the pay zone(s) were horizontally drilled and co".1pletion operations are in progress.

Several possible scenarios are possible which would explain the prescence of nitrogen at the wellhead of the plugged well. They are: 1) The source of nitrogen may have been in the Tyler sand at a depth of 6670'. During the blowout nitrogen may have super

charged shallower formations and this gas may be now influxing back into the original wellbore and migrating up the cement plugs and sheath by way of a micro-annulus to the surface. This could be a minor problem and the best scenario would be to continue venting nitrogen at surface to keep relieving pressure. If feasible we would then cut-off casing and properly finish the abandonment program on this well.

2) Our cement plugging operations in the original wellbore may have failed to effectively seal off the main source of nitrogen and we are communicated to that original zone at 6670'. If the flow is communicating large volumes of nitrogen to shallower formations then we may need to conduct venting operations via the offset relief/producing well.

Action Taken To Date

1. Vent and monitor wellhead conditions on the Cartmell 14-14H "blow-out" well. On June 12th and 13th 1997 the well was shut in for two consecutive days and pressure increased to 40 psi and leveled off.

2. Drill , install casing, and cement the relief/ producing well.

3. Open hole logs were not run due to the nitrogen hazard which was exasperated by lost circulation and pressure control problems encountered while drilling the offset well.

4. Cased hole pulsed neutron and sonic logs were run on June 11, 1997 as part of completion operations . Processing is in progress and we hope to begin interpretation June 18, 1997. It is our hope that we can identify the nitrogen source formation behind casing.