Gas driller applies for three new wells in North Fork as county mulls changes

Proposal faces new scrutiny

SG Interests I Ltd. has applied for county permits to drill three new natural gas wells in the North Fork Valley, two of which would share a well pad with existing wells. It’s something the Houston-based company has done dozens of times.

But at a meeting Friday, April 15, the applications faced a new, higher level of scrutiny, even before the county’s revisions to the Regulations for Oil and Gas Development have been adopted. Such is the new paradigm of gas development in Gunnison County. Previous applications have been reviewed administratively, not by the planning commission.
The three permits could be some of the last ones applied for under the old Regulations for Oil and Gas Development in Gunnison County. Last June, the county Planning Commission initiated a process of revising the regulations, in many ways making them more restrictive and, in places, more costly for the gas producers to comply with.
The goal has been to find added protections for the county’s water resources and roads while letting producers have access to the resource.
The regulations, however, have ruffled the feathers of some in the gas industry as they fight to keep the revisions within the limits of federal and state regulations already in place. For the parts of the county regulations that go further than the others, court could be in the cards. Representatives of SG Interests have said repeatedly that they think the revisions go too far.
On Friday, the Planning Commission put the finishing touches on those revisions, directing staff to write a recommendation to approve the amendments for the county commissioners.
After the hearing, the revised regulations will have to go to the Board of County Commissioners for final approval. In the meantime, new applications will be held to the standard of the current regulations.
That didn’t stop the Planning Commission from asking some hard questions of SG Interests’ representatives, who have become practiced at explaining the process of gas development to a skeptical audience.
Of the three drilling permits being applied for by SG Interests, one will require a new 1.4-acre well pad and two would be collocated on well pads that are already in place on private property. In the cases of the collocated wells, Sanford explained that the new wells would be vertically drilled into subterranean rock formations different from their neighbors deeper in the ground.
For the two existing pads, commissioner Ramon Reed asked, “When were the permits issued and when were they drilled?”
Hearing that the permits had been issued in 2009, before so many questions had been raised about the safety of some drilling practices, and that the wells were drilled last year, Reed asked for the county documents approving the wells.
“The existing wells are drilled and ‘shut in’ [encased in concrete] waiting completion,” Sanford said, explaining that the term “completed” means fractured and producing gas. “We’re hoping to complete them this year and put them on line.”
The company isn’t in any rush to get the wells to produce gas because it has some logistical hurdles to overcome before the gas could get to market. Sanford said SG doesn’t have capacity to hold all of the gas it currently has.
The commissioners’ lesson in logistics was followed by one in federal gas leasing.
Sanford told the commissioners that the Bureau of Land Management, which manages the mineral rights being exploited in the North Fork, forces gas producers to drill wells, even if the wells are plugged with concrete immediately afterward.
“We have an obligation to the BLM to drill a certain number of wells every year. So we’re constantly in a Catch 22: if we drill these wells and then shut them in we’re essentially wasting money. If we don’t have a place to put the gas we can’t frack them and turn them on,” Sanford said. “That’s why we’re drilling two more wells this year, to meet our BLM obligations, even before we complete wells that are already drilled.”
When SG is ready to get the gas from the new wells to market, they’ll likely need to be fractured, and Reed wanted to know “on these three wells specifically, how much water will be required for the fracking process?”
Sanford said, “On these three coal bed wells, and this is an estimate, you’re looking at probably 500,000 to one million gallons apiece.”
Reed responded with a report he had heard from industry advocate David Ludlum that as much 10 million gallons of water would be needed for a single fracture and a well could be fractured several times during its life.
Then Sanford had to explain the process of acquiring water from public sources and, if necessary, having the state water engineer release water from SG’s private reservoir into public waterways. At times, he said, the company has purchased water use rights from landowners in the areas where the drilling takes place.
Using so much local water for fracturing, which mixes the water with a slurry of sometimes nasty components, in addition to the water that comes to the surface (known as produced water) with the gas led to questions about the disposal of waste water. Sanford said SG had a 10,000-foot-deep water disposal well where it pumped produced water back underground.
While a picture of the three proposed wells was coming together, the commissioners weren’t smitten with the idea and asked to find a time when both SG and the planning commissioners could schedule a visit to the sites.
The County had opted out of a site visit with industry representatives in March.