American Oil and Gas Reporter - September 2015 - 141

Walker said. "EnerVest is working on its
own reservoir model to refine the SMU
study, partly to refute this claim, but also
to help refine the process. Obviously, if
there is a situation where industry operations are inducing earthquakes, we need
to be proactive and work with regulators
to find a solution."

Jud Walker, executive vice president and
chief operating office for EnerVest Operating LLC, tells the Texas Independent
Producers & Royalty Owners Association
his company has almost six years of
working in the Barnett Shale, but its operational challenges increased sharply
when it began drilling operations in the
urban environment of Arlington, Tx.

EnerVest was drawn into the public
debate over induced seismicity after a
magnitude 3.6 earthquake was recorded
near the Texas town of Azle, outside Fort
Worth, in December 2013, Walker said.
The company operates a number of producing wells as well as one injection well.
According to Walker, Southern
Methodist University researchers studied
the Azle seismic events and published a
paper in a nonindustry publication, Nature
Communications. In response, he reported
the RRC held technical hearings in which
EnerVest participated and the company
was served with a show-cause order on
its injection well.
Walker said among EnerVest's several
concerns about the SMU study were:
* According to the researchers' model,
a one to five psi change in downhole
pressure was responsible for fault slip
and failure. He pointed out that was a 0.1
percent change in the formation pressure.
* Other cases of induced seismicity
demonstrated a clear link between injection
volumes and pressures and the earthquake
sequence. EnerVest's injection well near
Azle was injecting the same volumes
and pressures before, during and after
the 2013 sequence.
* Records from five years ago-before
the company began injection operations-
showed bottom-hole pressures had not
changed.
* The study's reservoir model was
not an industry standard, but rather a
groundwater flow model that made several
generalized assumptions about the Ellenberger formation, which he described
as a very complex and fractured rock.
"It is incumbent on us as an industry
to help universities and researchers,"

Global Energy
Saudi Arabia's oil policy, which is
flooding world markets and pushing down
prices, represents that nation's best chance
at maximizing its resources, Citibank's
Kleinman asserted. He credited new resource
development-including U.S. shale, Canadian
oil sands and Brazilian presalt fields-as
reasons behind the Saudi decision.
Global demand for energy is changing,
energy efficiency is rising and energy
substitution accelerating, he offered. "Instead of worrying about peak oil supply,
you start talking about peak oil demand.
That transforms Saudi Arabia's oil in
place from an appreciating resource to a
depreciating resource, and changes the
strategy from 'produce some now and
more in 10 years,' to 'produce it all now.'"
The Saudis did not think oil prices
would fall quite so far, he said, pointing
to a 2014 conference at which a Saudi
adviser stated the kingdom saw a stable
floor at $90 a barrel, based on the belief
that U.S. shale producers needed $100 a
barrel. "I said either these folks do not
know what they are doing, in which case
they are going to tank this market, or
they are bluffing, in which case they will
tank this market," Kleinman said.
Kleinman said that push to secure immediate revenues explained the Saudi rig

Seth Kleinman, managing director and
global head of energy strategy for Citibank,
tells the Texas Independent Producers &
Royalty Owners Association that energy
prices might follow a range of paths in
response to political outcomes. Kleinman
was one of the speakers at TIPRO's summer conference, held Aug. 6-8.

count's record high. The kingdom's output
is expected to hit 11 million barrels a
day by the end of the year.
Some of that new oil output will stay
in Saudi Arabia as the country continues
to burn large amounts of crude in power
generation to satisfy air conditioning demand, and to supply the kingdom's refineries, including a new 400,000 barrel
a day facility, he said.
"For U.S. oil production, the latest authoritative monthly data point showed a
40,000 bbl/d drop in U.S. onshore production,
except now the rig count is going up," he
said. "Most companies still are talking
about raising production. You will not see
a bottom in this market until you see inventories going down, rig count going
down and production rolling over."
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FROM PAGE 135

Federal Issues
Because of its size, InOGA does more
monitoring than acting on federal issues,
but Hoy says the association remains involved with larger industry groups such
as the Independent Petroleum Association
of America, and works with a lobbyist
on legislative issues. "There are not (as
many) rumblings from Washington as
there were last year, but those issues are
still there," he assesses.
InOGA remains concerned about the
possibility an overhaul of the federal tax
code could include eliminating deductions
for intangible drilling costs or percentage
depletion, he says.
Like other states within the habitat
range of the northern long-eared bat, Indiana continues to wait for the impacts

from the U.S. Fish & Wildlife Service
listing the bat as threatened, Hoy says.
According to the agency, the bat population is declining because of white-nose
syndrome, which has a 99 percent mortality rate in some Northeast states. USFWS is considering an incidental take
rule to control human activities, including
oil and gas work, in the bat's habitat
range. Comments on that rule closed July
1. Hoy says the USFWS requirements
have not yet affected Indiana operators.
InOGA continues to monitor a range
of other federal issues, including the Environmental Protection Agency's revised
emissions standards for volatile organic
compounds in its Quad O regulations,
and the waters of the United States definition, Hoy says.
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SEPTEMBER 2015 141

American Oil and Gas Reporter - September 2015

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