DANA MURPHY COMMISSIONER

OKLAHOMA CORPORATION COMMISSION

Environmental Federation of Oklahoma 2016 Regulatory Newsreel

June 24, 2016

www.occeweb.com

Changing Dynamics of Oklahoma Energy Development

06/24/2016

OKLAHOMA CORPORATION COMMISSION

• The Agency was established by the Oklahoma Constitution at statehood (1907)

• 3 Commissioners, elected statewide, head the agency

• About 450 employees, 2 main offices, 4 field offices

• The Oklahoma Corporation Commission (OCC) has regulatory powers over:

– Transportation – Oil and gas – Petroleum storage tanks – Public utilities

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OKLAHOMA CORPORATION COMMISSIONJurisdiction

• 8 Electric utility companies ● Wind power companies • 8 Gas utility companies ● Transportation network • 367 Telephone companies companies • 10 Water companies • 25 Cotton gins • 3,000 Oil and gas well operators • 231 Natural gas pipeline operators and 21 hazardous liquid

pipeline operators operating over 40,000 miles of pipeline • 24 Railroads with over 4,100 public at-grade crossings • 7,473 For-hire and private motor carriers authorized to

operate in intrastate commerce • 12,150 Petroleum storage tanks currently in use • 1,743 Owners of 2,925 active retail fueling stations 3

06/24/2016

OIL AND GAS CONSERVATION DIVISION

Tim Baker, Director

POLLUTION ABATEMENT DEPARTMENT

Underground Injection Control

Hydrology

Brownfields

Seismic

TECHNICAL DEPARTMENT

Virginia Hullinger

Engineering/ Geology

Compliance/ Proration/ Production

Document Handling

FIELD OPERATIONS DEPARTMENT

Tony CuppDistrict 1

District 2

District 3

District 44

06/24/2016

Oil and Gas Division District Offices

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06/24/2016

OKLAHOMA OIL AND GAS INDUSTRY

• Active wells: 65,000 Natural gas 116,000 Oil 11,278 Injection/disposal 192,278 Total active wells • ~350,000 plugged and abandoned wells • ~500,000 wells drilled in Oklahoma history • ~3,075 active operators of oil and gas wells (6/2016) • ~41,000 miles of gathering/transmission pipelines • ~257 pipeline operators

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0

150,000,000

300,000,000

450,000,000

600,000,000

Calendar Year1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

OIL PRODUCTION (BBLS)

GAS PRODUCTION (BOE)*

Oklahoma Oil and Gas Production (1900 - 2011)

*BOE = BBLS OF OIL EQUIVALENT

Cumulative Production (1900 – 2011)

Oil (BBLS): 14,982,947,921 Gas (BOE): 18,525,957,200 Total: 33,508,905,121

Barrels

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* Data for 1961-1966 is Estimated

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Approved Intent to Drill Applications (1945 - 2015)

Inte

nts

0

7,500

15,000

22,500

30,000

1945

1950

1955

1960

*1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

Calendar Year

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Intents to Drill: 2008 – 2016 Comparison

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Inte

nts

0

200

400

600

800

1 2 3 4 5 6 7 8 9 10 11 12 13

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Completions by Drill TypeC

ompl

etio

ns

0

63

125

188

250

2015 2016

14

1022

202819

252117

2526

1

31

215

21

50821008381

103849494113136

HorizontalDirectionalVertical

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Completions by Well TypeC

ompl

etio

ns

0

63

125

188

250

2015 2016

2

1

215

11

12

5

3

1830

352729

2817281632

35

456486777994919193103

125 OilGasDry

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Statewide OCC Well Completions All OCC/IHS Wells 01/01/11-01/31/16

Updated to include May 2013

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Oklahoma Corporation Commission Horizontal Wells 01/01/11-01/31/16

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Well Completions

0

1000

2000

3000

4000

2007 2008 2009 2010 2011 2012 2013 2014 2015

343

736746

1,515

1,901

2,2372,046

3,938

3,654

1,334

1,9471,917

1,648

1,266

770588

929

644

HorizontalNon-Horizontal

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0

40

80

120

160

2011 2012 2013 2014 2015 2016

Oil Gas

Horizontal Completions

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Multiunit Horizontal Well

4,500 feet 4,000 feet

8,500 feet Total Completion Interval

Section 6Section 7

Shal

e R

eser

voir

100,000 mcf produced from Example 6-1H 52,941 mcf from Example 6-1H(7) – 100,000 mcf X 4,500/8,500 = 52,941 mcf 47,059 mcf from Example 6-1H(6) – 100,000 mcf X 4,000/8,500 = 47,059 mcf

The Act treats the lateral in each section as a separate well.

Example 6-1H(6) WellExample 6-1H(7) Well

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CROSS UNIT APPLICATIONS (CUA) (Through June 7, 2016)

• SRDA (HB1909) April 13, 2011 • First CUA filed May 31, 2011 • Total CUA 1057 • Operators with filed CUA 42 • Counties with CUA

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Grady 186 Coal 30 Johnston 13Kingfisher 175 Hughes 30 Grant 4Blaine 141 Love 24 Noble 4Canadian 100 McClain 24 Beaver 3Stephens 99 Multi-county 23 Dewey 3Garvin 59 Logan 18 Marshall 3Payne 41 Custer 17 Atoka 2Pittsburgh 32 Garfield 16 Okfuskee 2

Carter 15 Bryan 1

06/24/2016

PUBLIC UTILITY DIVISION – ENERGY RATE CAUSES FINAL AND PENDING

As of June 21, 2016 ● Thirty-seven (37) Energy Causes filed and/or being processed

• Oklahoma Gas & Electric on December 18, 2015, filed its base rate case requesting a revenue increase amount of $92.5 million. This amount includes, $11.4 million for environmental compliance projects and $30.6 million in new investment. The ALJ is preparing a report to submit to the Commissioners.

• Public Service Company of Oklahoma on July 1, 2015, under PUD Cause No. 201500208, filed its base rate case requesting a $137 million increase in rates. This amount includes $61 million to recover the costs of environmental control investments and expenses directly related to PSO’s Environmental Compliance Plan. The ALJ issued a report and parties filed Exceptions to the report, which are to be heard En Banc on August 24, 2016.

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06/24/2016

Oklahoma Gas and Electric Company’s (OG&E) Cause No. – PUD201600059 Installation of Dry Scrubbers

• On February 12, 2016 Cause No. PUD 201600059, OG&E filed an expedited cause requesting the Commission approve a plan to install two circulating dry scrubbers at its Sooner Plant to comply with the Regional Haze rule under the federal Clean Air Act for sulfur dioxide (“SO2”) emissions. OG&E did not request pre-approval of the cost for the scrubbers in this cause and will return to the Commission to seek cost recovery once the scrubbers are placed in service.

• On April 28, 2016, in Final Order No. 652208, the Commission granted approval.

• This matter has been appealed to the Oklahoma Supreme Court by certain intervenors.

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06/24/2016

WIND – NOTICE OF PROPOSED RULEMAKING Cause No. – PUD 201500004

On May 19, 2014, Senate President Pro Tem Brian Bingman requested the OCC open a Notice of Inquiry (NOI)

Cause No. PUD 2014000232 on the following:

• SITING—an examination of whether there is a need to place the siting of new facilities under the oversight of the OCC or some other agency

• DECOMMISSIONING — development of guidelines for proper decommissioning of wind energy facilities, along with the possible costs and enforcement mechanisms

• NOTIFICATION—whether procedures required for notification to landowners

• UPDATE — NOI initiated by the OCC concluded and a Notice of Proposed Rulemaking (NOPR) filed on January 29, 2015. The NOPR addressed development of wind energy facilities, decommissioning of wind energy facilities, and will establish procedures for informational submissions related to such wind energy facilities. Rules sent to legislature on April 1, 2016. Effective August 25, 2016.

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06/24/2016

DISTRIBUTED GENERATION (DG) Senate Bill 1456

Amending Section 156 of Title 17

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Governor Fallin signed into law, April 21, 2014, and issued Executive Order 2014-07:

• Corporation Commission to conduct transparent evaluation of distributed generation consistent with the Oklahoma First Energy Plan; to protect all Oklahoma customers and encourage all forms of Oklahoma energy use

• Evaluation mandates inclusion of all stakeholders, including representatives of the solar and distributed wind industries and utilities

• Prior to implementation of any fixed charge, allows Commission to consider use of all available alternatives, including other rate reforms such as increased use of time-of-use rates, minimum bills, and other demand charges

06/24/2016

DISTRIBUTED GENERATION (DG) Senate Bill 1456

Amending Section 156 of Title 17 (Cont.)

• The OCC held three public meetings and requested from stakeholders a list of suggestions for required data and/or information that should be included in all tariff applications filed at the OCC. The final technical conference was on June 16, 2015.

• On July 31, 2015, OG&E filed Cause No. 201500274, its Distributed Generation tariff application. On January 28, 2016, the Commission heard exceptions to the ALJ’s Report and the application was denied and the proposed tariffs were to be examined in the pending rate case for OG&E, Cause No. PUD 201500273. PSO filed its tariff application on December 31, 2015. This application is still pending. The utilities were required to have tariffs implemented by December 31, 2015, in accordance with Senate Bill 1456.

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06/24/2016

DEMAND PROGRAM PORTFOLIO FILINGS

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• Per Commission Rules (OAC 165:45-23 Demand Program Rules) Gas Utilities shall propose a new Demand Portfolio every three years.

• Both CenterPoint (Cause No. PUD 201600263) and ONG (Cause No. PUD 201600132) filed for consideration of a new portfolio of Demand Programs and for approval of a cost recovery mechanism to recover the cost of the programs and incentives based on performance of those programs.

• Programs for both utilities cover residential and commercial customers and represent improved and expanded offerings for their customers.

• The Demand Portfolio, once approved, will cover programs to be delivered in 2017-2019.

06/24/2016

2015 OIL AND GAS RULE CHANGES (Effective August 27, 2015)

• Notice of hydraulic fracturing operations given at least 5 business days prior to the commencement of hydraulic fracturing operations to operators of producing wells within 1/2 mile of completion interval of subject well which are completed in the same common source of supply.  165:10-3-10(b)(1)

• Notice of initial commencement of injection and disposal operations in the Arbuckle formation.  165:10-5-7(b) (Daily volume/pressures – 2014)

• Concurrent development - clarifying each unit shall be independently operated and developed, and that the future participation or non-participation of owners in one of the units shall not impact the owner’s rights in the other unit being concurrently developed. 165:5-7-6(j)

• Well location exception – Well location and exception to the 300/600 foot distance between wells can be in one application.  165:5-7-9. 

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06/24/2016

2016 OIL & GAS RULE CHANGES (Effective August 25, 2016)

• Fee proposals: OAC 165:5-3-1(b)(1) – Transfer of well operatorship (N) – $25 single well – Transfer of well operatorship (O) – $250 multiple wells – Notification of intent to plug (P) – $100

• Permit to Drill: OAC 165:10-3-1(a)(4) For a horizontal well, a plat showing location and total depth of each abandoned, plugged, producing or drilling well and dryhole within ¼ mile of the completion interval of the proposed horizontal well

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2016 OIL & GAS RULE CHANGES (cont.) (Effective August 25, 2016)

• Monitoring and reporting requirements (Underground Injection Control): OAC 165:10-5-7(4)(c)

– Daily monitoring of volumes and pressures for wells in designated areas – Shutdown or other action (g) Process for objection to shutdown or other action includes request for technical conference and resolution of disputes

• Duration of underground injection well orders or permits OAC 165:10-5-9(c)

Suspension or temporary modification based on statute or rule

06/24/2016

2015 & 2016 LEGISLATION

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2015 HB 2234 Gas seep response fund SB 808 Wind power generation facilities SB 809 Political subdivisions cannot regulate oil and gas

production in a manner inconsistent with OCC regulations

HB 2177 Extended lateral horizontal well development act (dormant)

2016 HB 2303 Extends well plugging fund to July 1, 2021 HB 2444 Pipeline Safety violations to match PHMSA ($100,000

per day/$1M per series) HB 3158 Clarifies the emergency authority of the OCC to respond

to potentially critical environmental or public safety situations

06/24/2016

Petroleum Storage Tank Division Rules CHAPTER 25 UNDERGROUND STORAGE TANKS

EMERGENCY RULEMAKING

• Two rules to be addressed based on revised federal regulations

– Expanded definition of underground storage tank – Addition of specific requirements to statistical inventory Reconciliation (SIR) release detection

• Dates for Emergency Rulemaking – July 12, 2016 Notice of Emergency Rulemaking – July 28, 2016 Technical Conference – September 1, 2016 En Banc Hearing

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2013 FAULT MAP

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06/24/2016

UIC Program

• In Oklahoma there are: 4,391 Disposal Wells 6,890 EOR Wells • Of the 4,391 disposal wells there are

1045 wells that are authorized for disposal into the Arbuckle formation.

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3506/24/2016

3606/24/2016

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SEISMICITY ISSUES –LOGAN COUNTY TREND AREA

(Update 6/22/16)

4106/24/2016

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FAIRVIEW TREND AREA

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Jan 1- June 14 2015 and 2016

0

75

150

225

300

Jan Feb Mar Apr May Jun

37

99

121

105

170

203

99

150

181

213

116

1722015 2016

Statewide EQ/day - First 164 days

2015: 5.68 EQ/day 2016: 4.48 EQ/day

Jan 1- June 14 2015 and 2016

0

75

150

225

300

Jan Feb Mar Apr May Jun

2015 2016

Statewide EQ/day - First 164 days

2015: 5.68 2016: 4.48

06/24/2016 56

DANA MURPHY COMMISSIONER

OKLAHOMA CORPORATION COMMISSION

Environmental Federation of Oklahoma 2016 Regulatory Newsreel

June 24, 2016

www.occeweb.com

Changing Dynamics of Oklahoma Energy Development