BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

APPLICANT:

RELIEF SOUGHT:

LEGAL DESCRIPTION:

BOSQUE DISPOSAL SYSTEMS, LLC

SALTWATER DISPOSAL WELL

SECTION 22, TOWNSHIP 6 SOUTH, RANGE 4 EAST, MARSHALL COUNTY, OKLAHOMA

F J!L~~D CPURT CLERK'S OFFICE - OKC gORPORA TION COMMISSION ) OF OKLAHOMA

) CAUSE PD NO. ) 201200149 ) ) ) ) )

REPORT OF THE ADMINISTRATIVE LAW JUDGE

This Cause came on for hearing before Michael Norris, Administrative Law Judge for the Corporation Commission of the State of Oklahoma, in the Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Commission for the purpose of taking testimony and reporting to the Commission.

CASE SUMMARY:

1. This application was filed by Bosque Disposal Systems, LLC for authorization to complete a commercial saltwater disposal well at the captioned legal description. The injection zone was listed on the application as the Arbuckle with the top of the zone at 5,700 feet and the bottom at 10,000 feet. Prior to approval of this application an Entry of Appearance, Objection and Protest was filed in this matter by Mr. James M. Peters, attorney for the protesting individuals. Those individuals were listed as: Dick R. Griffin, Charles Maxie Griffin, John W. Griffin, Randall K. Griffin, Tommy K. Sandefur, Ruben Lee Griffin, John D. Griffin, Wendyl Wayland Griffin, Billie Jean Blair, Gary E. Griffin, Timothy Sandefur and Judy Harrison. Pro Se appearances were entered by Representative Tommy Hardin, Richard and Terri Rushing, Terry Eldridge, County Commissioner Don Melton, Dick Griffin, Cecil Roper, Sam and Charlotte Goodwin, Freda Moore, Dink Williford, Rosalie Eldridge and Mark Tickel.

PO 201200149 - Bosque

2. Evidence was presented to demonstrate the compliance of the application for approval with the rules of the Oklahoma Corporation Commission and the statutes of the State of Oklahoma. However, certain alternative scenarios were presented concerning the depth of the Arbuckle and the schematic of the well based upon that depth. The applicant stated that the required actions and materials will be utilized to ensure that the well will be properly completed, protect the fresh water, the environment and comply with all Commission rules. The applicant's well design will be modified to provide appropriate protection if the Arbuckle is at a deeper location.

3. The protestants argue that it is difficult to approve the application without knowing the depth of the Arbuckle. They believe the application should not be allowed until the depth of the Arbuckle is established and the proper well bore schematic and protective measures can be calculated.

4. The protestants also raised objections based on jurisdiction because the applicant does not have the right to conduct the operation as they have no interest in and or no oil and gas lease covering this area. That request was denied and it was ruled that the Commission had the proper jurisdiction in this cause. Further, the protestants argued that certain actions for logs in this well would condemn their mineral rights. It was argued that this operation constitutes a mining operation and the applicant does not have the right to drill this well. It was demonstrated that the rules do not require the ownership of minerals to drill a commercial disposal well. The applicant completed a permit to drill and has an agreement with the surface owner.

5. Disclosure was made that an action for trespass and other forms of relief has been filed on behalf of certain protestants in the District Court. It was discussed that the Commission would not have jurisdiction and was not a matter that would be heard or included in this cause.

6. Statements were also made by the protestants of their concern for the other factors involving the operation of the applicant. These include the transportation issues involving truck traffic, road maintenance, traffic safety and noise pollution as well as environmental pollution from truck traffic. The neighboring parties also expressed their concern about protection of their water

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sources, noise from the facility and dust pollution from truck traffic. These parties understood that the Commission has no authority or jurisdiction over transportation issues and certain pollution concerns. The protestants also expressed their opinion that locations for disposal wells should be in more remote and less populated areas.

RECOMMENDATIONS:

1. The application of Bosque should be approved based upon certain conditions.

2. The schematic should be reviewed for proper configuration based upon the actual depth of the Arbuckle.

3. The applicant should affirm that it will not use Cox Road for ingress and egress.

4. The applicant should expedite the implementation of the pipeline system.

5. The applicant should give consideration to develop a feasible plan of traffic control.

HEARING DATE(S):

APPEARANCES:

October 24,2012 and December 14, 2012

David E. Pepper, attorney, appeared on behalf of applicant, Bosque Disposal Systems, LLC ("Bosque")

James M. Peters, attorney, appeared on behalf of protestants, Dick R. Griffin, Charles Maxie Griffin, John W. Griffin, Randall K. Griffin, Tommy K. Sandefur, Ruben Lee Griffin, Joe D. Griffin, Wendyl Wayland Griffin, Billie Jean Blair and Gary E. Griffin

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Keith Thomas, Assistant General Counsel, appeared on behalf UIC Department of the Oklahoma Corporation Commission

Pro Se Appearances were entered by: Representative Tommy Hardin, Richard and Terri Rushing, Terry Eldridge, County Commissioner Don Melton, Dick Griffin, Cecil Roper, Sam and Charlotte Goodwin, Freda Moore, Dink Williford, Rosalie Eldridge and Mark Tickel.

FINDINGS AND SUMMARY OF EVIDENCE

1. The following numbered exhibits were accepted into evidence:

1. Bosque literature and well bore schematic

2. Aerial photograph around the Roman 1 SWD

3. Additional aerial photograph of Roman 1 SWD

4. Location plat

5. Geological survey map showing the viola

6. Wellbore schematic

7. Facility diagram

8. Photographs of highway to location site

2. At the commencement of this cause Mr. Peters objected to the jurisdiction of the Commission. He claimed the Commission did not have authority to hear this cause because the applicant does not have the authority to drill. He

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proposed that the applicant does not have an oil and gas lease and could not drill this well without one. He stated that this operation will constitute a mining operation. Mr. Pepper and Mr. Thomas argued that the applicant must not own a mineral interest to drill a commercial disposal well. The applicant just has to have an agreement with the surface owner.

3. Mr. Peters further argued that because there is a question as to the depth of the proposed formation the applicant has no right to drill. Mr. Peters objection was overruled. It was determined that the Commission clearly has jurisdiction over commercial disposal well activities.

4. The applicant's first witness was Mr. Chris Kapcsos. He is the company representative and was presented as a fact witness. He stated that Bosque has been in operation for approximately 5 years. They are operational in Texas, Oklahoma, North Dakota and Arkansas. Their primary source of business is saltwater disposal wells, gathering systems and water treatment. They have disposal wells and water treatment operations in the states listed.

5. When Mr. Kapcsos refers to water treatment he means Bosque's proprietary technology to take bacteria out of water to keep it clean for reuse in fracturing operations. This has increased their business and helping with the water handling for XTO Energy. XTO Energy has potential wells to the south of the proposed location of this commercial disposal well.

6. XTO Energy currently has a capacity of 25,000 barrels of water with 12 rigs in the area. They plan to add additional rigs and would bump the capacity to 50,000 barrels of water per day that would require disposal.

7. He stated that Bosque has a good record in terms of safety and environmental concerns. They have never had a complaint from the EPA, any State environmental agency or spills. This is in the last 5 years.

8. Mr. Kapcsos stated that Bosque has a contractual arrangement with an individual to buy a 10 acre tract of land. They have signed the contract and paid a down payment. They will make monthly payments until they get a permit. When they get a permit they are obligated to pay the balance due on this land. This 10 acre tract will take the equipment and the well. This facility

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is just going to be a disposal well. They will have personnel on site 24 hours a day, 7 days a week, 365 days a year. There will not be a pit. The location does not have to be fenced since there is not a rule requiring one. Bosque does not engage in oil and gas exploration according to Mr. Kapcsos. The well that the applicant intends to drill will not be an oil and gas well.

9. The 10 acre location is relatively remote. It iIs approximately 7 miles outside of Madill in a farm and ranch style landscape. Mr. Kapcsos also testified that there are no homes in the immediate vicinity of this location.

10. He testified that when the operation initially begins the disposal water will be trucked into the location. After that Bosque intends to install a gathering system to transport the water to the facility via pipeline. This will take the trucks off the road. They would run the lines to XTO's and other's fields so the water can be transported to the facility. However, initially the trucks will utilize highway 99C.

11. Mr. Kapcsos is the Director of Real Estate and Project Management for Bosque. He procures the sites for the disposal wells. It is his understanding that the Technical Department of the Commission approved this application but protests were lodged. They do not conduct any mining operations. This is a commercial disposal well pursuant to the rules of the Corporation Commission. This site also has video surveillance capability. The corporation is in good standing as a foreign corporation within the State of Oklahoma. Bosque operates another disposal well for XTO outside of McAlester. It is an XTO well and they manage it for them. They have never had any trouble with that facility.

12. Upon cross-examination by Mr. Thomas, Mr. Kapcsos said the surface storage will be by tanks. He affirmed that Bosque has surety posted with the Corporation Commission but he is not familiar with the amount or what type. The facility will not be gated.

13. On cross-examination by Mr. Peters, Mr. Kapcsos confirmed that he had telephone conversations with either Mr. or Mrs. Richard Rushing. They were the first ones that filed an objection to the application. Mr. Kapcsos stated that

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he told Mr. Rushing that Bosque hires locally and he was welcome to put in his application if he would like to work for them.

14. He testified that this is a farming and ranching community. The Rushing's residence is within 1/2 mile of this 10 acre site. He also understands that others run cattle in the area. When asked about fencing this facility Mr. Kapcsos responded that Bosque could absolutely install a fence. The facility will be lighted and remote cameras will be installed. There is a building on the site. Bosque has entered into a contract for the purchase of the 10 acre tract. This contract excluded any minerals. Bosque can terminate this contract within a one-year period and not consummate the agreement.

15. Bosque is currently negotiating with XTO on a contract for this disposal site. The number of barrels of water per day to be handled has not been determined. The terms of the contract will control that.

16. Mr. Kapcsos was not aware that XTO, within the last 3 weeks, opposed an application for a commercial saltwater disposal well in Johnston County. He was also not aware that XTO refused to dispose of water in a permitted commercial saltwater disposal well in Love County.

17. This witness indicated that the blue lines on Exhibit 2 indicate proposed pipelines from some existing wells and potential wells to be drilled by XTO to this disposal facility. Bosque has not initiated any effort to acquire any right­of-way to lay a saltwater gathering pipeline. They have not determined how many miles of line will be needed to complete this project. They have determined that these lines are economically feasible. They based this determination upon the 50,000 barrels of water per day projected for this commercial saltwater disposal well. Bosque has not conducted a study to determine if the pipeline can be laid in this area because of the underlying rock formations. Mr. Kapcsos admitted that Bosque does not have any existing pipeline saltwater gathering system in Oklahoma. They have an estimated cost for this proposed pipeline based upon previous pipelines in Texas. This cost is based upon water volumes from the wells.

18. He stated that if Bosque initially uses trucks to carry the saltwater and they receive 50,000 barrels per day, that would require approximately 400

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trucks per day. Bosque has previously implemented pipeline systems within 6 months or less. Therefore, trucks might be utilized for the first 6 months. The pipeline that was implemented within 6 months was attached to 25 wells.

19. Mr. Kapcsos further testified that Bosque intends to have a berm to prevent runoff at this facility, some sort of retaining wall around the facility and they intend to utilize trucks to haul their water until the proposed pipeline is completed. These trucks will operate on a 24/7 basis. They propose having 2 employees on each shift. He does not consider the drilling of this well to be mining. They intend to have a geologist on site during the drilling of this well. The geologist will attempt to determine the location of the Arbuckle injection zone. He has been told by the experts that they do not know exactly where the Arbuckle is located in this vicinity. He is familiar with this application and he understands that they seek to inject 50,000 barrels of water per day and seek approval for pressure of 2,500 PSI. He understands that Bosque must maintain daily drilling reports during the drilling of this well. There is no agreement between Bosque and XTO to provide that data to XTO. If Bosque is unsuccessful in acquiring the proposed right-of-way's they will explore alternate routes.

20. Upon redirect examination Mr. Kapcsos testified that the applicant has not bought right-of-way because they are awaiting permit approval. They must have this first. It doesn't do any good to buy right-of-way if you don't have a permit.

21. He stated that XTO does not intend to drill to the Woodford in the area of the proposed disposal well. They believe the Woodford is too deep at that location. He testified that if their consultant tells them they need to fence this property, they will put a fence around it. The design of this facility is not under his purview.

22. Mr. Kapcsos believes that the surety posted was in the amount of $25,000. There are wells in the general vicinity of the proposed pipelines. Bosque a has not done a traffic study to determine the traffic rate or maximum traffic. He believes they have adequate turnaround for truck traffic and adequate unloading facilities. They have not considered any plan of action for traffic congestion along the highway caused by trucks waiting to unload. Bosque

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believes they have addressed all of the issues involved with a commercial disposal well. If there are any others raised Bosque will address them and satisfy them. He stated that Bosque has additional insurance that provides a $2 million general aggregate policy as well as a $5 million umbrella policy. The general aggregate policy is a per incident coverage.

23. Ms. Carroll Kinney was called as the next witness for the applicant. Upon direct examination she stated that she is a consulting petroleum geologist. Her qualifications were accepted without objection. She was asked by the applicant to try to determine the depth of the Arbuckle. She believes it is a good and recognized injection zone in Oklahoma. It is a thick relatively homogenous lime that accepts a lot of water. There are no producing Arbuckle wells in this township. That is the entire 36 section area and section 22 is almost centrally located within the township. She believes the Arbuckle exists in this area. There are 5 sections in this township where the Arbuckle has been penetrated. The Arbuckle is a blanket lime and is generally present everywhere in this area.

24. Ms. Kinney and another geologist that works for Bosque have been unable to agree or exactly determine the depth of the Arbuckle. The other geologist stated it was at a depth of 11,000 feet and Ms. Kinney believes it is deeper. She cannot tell exactly where it is. There is faulting in the area and very few Arbuckle penetrations. Therefore a map would be very risky. Bosque intends to drill the well until they reach the Arbuckle or abandon the prospect. She understands that a log will be run in this well. She understands the Commission wants that requirement in the order. Bosque will run a mud log to initially determine the top of the Arbuckle.

25. Upon cross-examination by Mr. Peters, Ms. Kinney testified that a well drilled to the Arbuckle will drill through all of the producing formations essentially in Oklahoma. The Arbuckle does produce in some limited areas in Oklahoma. In order to delineate the existence of the Arbuckle in this cause there will be a mud logger on site. She testified that she believes that the Arbuckle is deeper than 11,000 to 13,000 feet. She believes that there will be some fracturing within the Arbuckle in this area. There is not a lot of well control in the area. She stated that there has been no development of the Arbuckle since 1923 in this area. It has been tested and no productive hydrocarbons have been found. She testified that the Cobb-Tipperary well,

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approximately 5 miles to the west, is significant because the Arbuckle was encountered in that well at an approximate depth of 22,100 feet. It was completed in 1979. The Mattie Lynn well in this area encountered the Arbuckle at around 19,840 feet and was completed in 1973. In 1984 the Little well encountered the Arbuckle at 12,286 feet. The Albert Purser well in section 18 encountered the Arbuckle at 17,636 feet. Ms. Kinney stated that these wells demonstrate the variance of the depth of the Arbuckle in this area.

26. Ms. Kinney obtained her data from a survey publication by George Huffman. The publication contained a map that was a structure map on top of the Viola. This map had 2 major parallel faults that bounded an area which included the Cobb-Tipperary well and section 22. Therefore, she believes that the Arbuckle that underlies section 22 would be approximately the same depth as in the Cobb-Tipperary well which is in the 22,000 feet range. That is her opinion from the scarce amount of data that is in this area. Also there are well logs showing that in at least 4 wells that are in this fault block they all encountered the Arbuckle at 19,000 feet or deeper. She believes this fault is to the South and runs through the lower tier of sections in township 6 south range 4 east. That would be sections 31, 32 and 33. It runs from the north of section 31 to the southeast of section 35. There is a fault to the north that enters this township in the southwest of section 6 and exits approximately in the center of section 25. It parallels this other fault. They continue into the next section and include the Cobb-Tipperary well where the depth of the Arbuckle was below the 20,000 feet range. The fault that is in the southern half of the township is up dip to the south.

27. Ms. Kinney was asked to look at the well bore schematic. It shows the perforations to be at 11,000 feet to 13,000 feet. Based upon her data these perforations would not be in the Arbuckle but would be in the Atoka-Morrow. The Atoka-Morrow has not been perforated or tested by anyone in this township.

28. Upon redirect examination Ms. Kinney stated that the Commission wants a log run so everybody will know the Arbuckle's depth. She understands that Bosque does not own any minerals in this site. They do not have any right to extract any oil and gas. She stated the Arbuckle has been penetrated once in this area on the fault block with no success. She does not believe anyone

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would drill a well for the Arbuckle in this township. She also believes that having a log to 22,000 feet that would cover the entire section of stratigraphy in Oklahoma in the middle of this township would be an asset. She does not believe that any of the minerals in this area are going to be condemned by drilling this disposal well. Disposal wells are drilled all the time through other zones. The Arbuckle is a very good disposal zone.

29. Upon cross-examination by Mr. Thomas, Ms. Kinney testified she was aware that any logs submitted to the Commission would become public information. She understands that if the logs are not sequestered they will become public information.

30. The applicant called Mr. Jon Stromberg, consulting petroleum engineer as the next witness. His qualifications were admitted without objection. He has performed an analysis of the proposed operations by Bosque and offered suggestions and designs concerning the surface location and the well. He stated that it is possible to drill a 20,000 feet well for the Arbuckle disposal. He testified that it is a management decision concerning the economics of a well that deep. If it is determined to be economical it is a viable disposal project. A well this deep does not cause any problems in terms of environmental impact. It does not pose a problem of damage to other wells in the area. The injection zone would be below any other production and would not have any effect on the production.

31. Mr. Stromberg indicated that they don't know exactly where the Arbuckle is located in this area. However, the applicant proposes to drill to whatever depth the Arbuckle is located. The well bore schematic was prepared based upon the 12,000 feet provided by the Bosque geologist. If the Arbuckle is as deep as 22,000 feet they will have to make modifications. His first concern is protecting the treatable water. The applicant intends to run 9 5/8 casing to 100 feet below the base of the treatable water. In this area that would be to 880 feet as the base of the treatable water is at 780 feet. He is recommending a cement bond log on the surface pipe to ensure they have a good cement job behind the surface pipe. This is additional protection to create a solid cement sheath from the bottom of the zone to the surface. He testified from the

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schematic that they would also use casing, circulate cement, use a packer with a special lining or made of noncorrosive material. The packer would be set 50 feet above the perforations in the disposal zone. This process would all be done according to the rules and requirements of the Commission and would be adjusted for the actual depth of the Arbuckle. Then the well is ready for the Mechanical Integrity Test. This tests the annulus between the tubing in the casing to ensure they did not have any leaks.

32. If this well is as deep as 22,000 feet, the applicant would have to do some additional casing design. Larger pipe would be needed partway down and they would need to run a liner in a couple of instances. He stated that this is typical well drilling for deep wells were you have high pressures. The Arbuckle is usually not a high pressure reservoir. This is because even a low pressure reservoir will be at 10,000 pounds and the weight of the tubing and casing will require a different design. Under commission rules at 22,000 feet they would have a surface injection pressure allowable of 11,000 pounds.

33. This cause was then continued for additional notice requirements. Upon reopening, the further direct examination of Mr. Stromberg continued. He testified that he updated the saltwater disposal well bore schematic to indicate a drilling depth of approximately 25,500 feet. This is the deeper scenario. He testified that for the deeper wellbore the applicant would run conductor pipe to about 45 feet. This would allow a blowout preventer to be set and commence drilling. Mr. Stromberg stated that he indicated drilled production casing to about 1000 feet. In the deeper scenario the well would be drilled down to about 13,000 feet and an intermediate string of casing would be set. In the event the Arbuckle is not located at the 13,000 feet depth an intermediate string would be run and they would continue drilling. The well would be drilled to 18,000 feet and a 2nd intermediate string would be set. This intermediate string which would be run as a liner would protect the well bore from the Springer and Morrow zones which occasionally are over pressured. Drilling would be resumed to 25,000 feet and the 7 inch string would be run from the surface to the 25,000 feet and would be cemented in place. The 7 inch string would be perforated for the production. Because of the large rate Mr. Stromberg proposed running 5 inch casing as tubing. This gives them the flexibility to drill the well safely depending on where you encounter the Arbuckle.

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34. Mr. Stromberg also testified that there is no Morrow or Springer production in the 9 township area around this location. There is also no evidence of any Morrow or Springer over pressurization in this area. He stated in southern Oklahoma the geology is really wild and they just want to make sure they are protected.

35. He believes the design will protect the ground water. He knows that the water in the Arbuckle, if it is at 12,000 feet or at 25,000 feet, cannot permeate through the rock itself. It would have to have a conduit of some type. This well is deeper than any well in the immediate area. You would have to have another well that was drilled to 25,000 feet which had been improperly plugged, pressure up the Arbuckle enough to get the water up to the surface and then have a leak into the freshwater. There are no wells anywhere in the area that were drilled this deep. Mr. Stromberg believes that this deeper well bore schematic as well as the entire application is sufficient for all the requirements of the Oklahoma Corporation Commission. He believes the surface facility complies with all of the Corporation Commission rules and the EPA's spill prevention plan requirements.

36. After the well is completed the applicant must file a 1002A and the logs that are run for this well. He stated that the applicant is not an oil and gas operator and is not interested in exploring for oil and gas. The applicant has complied with the rules of the Commission to drill and inject into a commercial disposal well.

37. Upon cross-examination by Mr. Peters, Mr. Stromberg testified that this well would be drilled according to his plan or a couple of alternatives. They all are similar. They just use different size liners and casing. He estimated that the cost to drill this well is approximately $8 million. If any modifications are accepted it would be approximately another one half million dollars.

38. Mr. Stromberg estimated the friction pressure at 12,500 pounds which is the pressure that would be required at the surface. If you overcome the friction pressure, then the pressure in the reservoir would be the weight of the water in the well bore which is approximately 11,000 pounds.

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39. Mr. Stromberg did not participate in the selection of this site and he has never been to the site. He is aware of the shape of the 10 acre tract. He would select a corner of the tract to locate the well. Mr. Stromberg then described the unloading facilities, the pipelines, water tanks and the type of pit.

40. If the facility accepts 50,000 barrels a day, Mr. Stromberg stated it would take about 357 trucks per day to haul the 50,000 barrels. It takes approximately 30 to 40 min. to unload a truck. Mr. Stromberg stated you could get 300 trucks a day unloaded if you put pipes all the way around the tank and handle 30 or 40 trucks at a time. If they build a pipeline as planned they hope to have not over 10 or 15 trucks a day. No one has considered whether these trucks would be lined up. They are hoping to get the water in from the pipeline. Mr. Stromberg is aware that Bosque has not done anything with regard to acquiring a right-of-way for the pipeline. The facility is designed to handle truck and pipeline volume.

41. During the remainder of cross-examination Mr. Stromberg testified that anyone interested in exploring this vicinity would love to have a well log in the area. There is no production in this township and a log to this depth would allow anyone to determine the potential productivity of any reservoir within this area. He stated that the applicant needs to be within the confines of their tract in the injection interval and a directional survey team can do this. It is an expensive process and he does not think it is necessary from a technical standpoint for this well. The applicant can run a directional log at the completion of the well to ensure they are within the confines of their tract and are in the injection interval. He stated there are different ways that the applicant may set casing depending upon the depth of this well. He has different schematics going to 22,000 feet to address changes in depth. He has not done traffic surveys and did not consider the traffic issue. They are hoping to use the pipeline and minimize the number of trucks.

42. Cross-examination by Mr. Thomas was first directed at the revised schematic. Mr. Stromberg testified that the revised schematic still protects the base of treatable water. He further testified that he believes the applicant will adhere to the one half pound of pressure per foot requirement of the Underground Injection Control Department. He stated the monitor wells would detect any leaks that could cause pollution to groundwater. It is his

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understanding that the Corporation Commission does not regulate truck traffic, the number of trucks on the facility, ingress and egress into the facility and the use of state or county roads by these trucks.

43. Upon redirect examination Mr. Stromberg stated that he would not attempt to buy the right-of-ways for the pipeline system before he had permission to drill the well. The pipeline system is what really makes this project work. The pipeline is what the operators and the applicant want and is better for everyone.

44. Mr. Stromberg believes that a rig to drill to 22,000 feet can't fit on this location. If it cannot fit then this is all a moot point. The applicant cannot drill the well if they can't get the rig on the site. He would not expect any deviation of this well bore to go in only one direction. The driller's obligation will be to stay within this tract. The driller can control the deviation of the well to some extent. It is in everyone's interest to have a straight hole. He testified that it is a requirement of the Commission to have a log. They would not file the log if it was not a requirement. The applicant has no objection if anyone requests that the log be confidential for some period of time.

45. Upon recross examination Mr. Stromberg said that he has no idea where the source of water will be to drill this well. He testified that if they are able to drill the well at this site they would likely use steel pits for the water from drilling the well and then haul it off. There were no more questions of Mr. Stromberg and the applicant did rest.

46. The protestant called Mr. Robert Campbell a consulting petroleum engineer. His qualifications were accepted without objection. Upon direct examination Mr. Campbell stated he was retained by the protestants to review this application for a saltwater disposal facility. He testified that this is a very unusual application for a saltwater disposal facility. It is unusual in the sense that everything is uncertain. The disposal zone might be 5,000 feet deep or might be 25,000 feet. This disposal zone may be 300 feet thick or might be 1,000 feet thick. This makes it almost impossible to calculate areas of endangerment because the reservoir properties for that calculation are unknown. He believes it is difficult to come up with numbers for the Commission that they can rely on with reasonable certainty.

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47. Mr. Campbell stated that in a normal situation they would know the depth, the grades and types of casing used and the size and structural property, such as collapse and burst and yield and could be fairly definitive about the different strings. He stated that he knows the application applied for a .5 PSI per foot which is the maximum allowed by the Commission. If that is allowed and the well is 25,000 feet it will burst every casing he knows of. It is his opinion that there would have to be a conditional approval subject to knowing what depth we are dealing with. He suggested a limit of the surface pressure to .6 percent of API burst standard. A 12,500 pound surface pressure will blow up virtually every casing he is aware of. He does not think that a final order should be issued until the well bore construction is known. He would recommend that an interim order be allowed until the well is drilled and the depth and construction are known.

48. He stated that the only sure way to have the well stay within this tract is to use steering tools. If it is required that the applicant stay within the boundaries of the property the steering tools should be recommended. He believes the size of the tract is also a consideration. With everything that must be included in this tract, this well is going to be crowding at least one of the property boundaries. Conceptually there is nothing wrong with the facility construction as projected. However, the placement of the well, how does it fit on the tract and will it allow room to handle 30 trucks an hour is the question for the total system. He also discussed the Spill Prevention and Control and Countermeasure Plan. He does not think a pad this small will pass EPA scrutiny. He expressed concern that the well would be drilled using oil-based mud. He stated he thought it could potentially cause damage to the groundwater.

49. Mr. Campbell stated that there is a commercial ice making plant within 500 yards of this facility. This plant utilizes groundwater for their operation. Because of this and the other property owners in the area he believes it would be appropriate to require that all water used in drilling the well should be either surface sources or be trucked in. He agreed that without the pipeline there would be a problem with the truck traffic.

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50. He is concerned with the many uncertainties involved in this well. There is no exact depth for this well, the zones that will be penetrated are not known and the dip angle will be steep. If this well is drilled to the deeper footage it will penetrate every common source of supply in Oklahoma. He believes if the well is logged it will be of benefit to Bosque and XTO. They will have information that has a value to oil and gas companies.

51. Upon cross-examination by Mr. Pepper, Mr. Campbell testified that the uncertainty starts with where is the Arbuckle. The other issues concerning casing and injection pressure may be resolved after the well is drilled. You will not know the answer until the well is drilled.

52. Mr. Campbell agreed that Bosque stated that it desires this be a pipeline driven operation. He is not aware of any information that would indicate this is incorrect. He testified that he had not conducted any study in the area for freshwater wells. He understands that the Commission requires protection of the fresh water. He accepted that the Commission has approved the applicants design to protect the treatable water. He further agreed that Mr. Thomas stated that the Commission is not involved in the jurisdiction of all the trucking traffic. He admitted that you might provide an electric log to confirm the location of the Arbuckle. He does not understand the need for any additional logs. He understands that Bosque is obligated to inject into the Arbuckle in the tract that they own. He has not conducted a study to demonstrate to the Commission that how this well is drilled will impact the treatable water at all. Mr. Campbell testified that if the bottom hole temperature is around 3500

, you can drill this well with water-based mud. He disagrees that it would require oil-based mud.

53. During cross-examination by Mr. Thomas, Mr. Campbell stated that if they lose integrity in this well the applicant will not be able to dispose of any kind of water in the well. He believes this kind of injection pressure is excessive. He understands that if the applicant uses oil-based mud, they are required to have lined pits. He does not believe there is a rule that the Corporation Commission has the regulatory power to determine where an applicant gets the water for drilling. He understands that the Commission will regulate the matters that come within their jurisdiction.

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54. Mr. Campbell testified on redirect examination that he disagrees with Mr. Stromberg on the oil-based mud issue. He is concerned with the trucking from the safety and traffic aspects and room for the 30 trucking bays. He does not believe the facility will fit this tract. He admitted on recross examination that if everything does not fit the applicant cannot complete the well. There were no further questions of Mr. Campbell.

55. Public comment from the individuals that requested to make statements were heard. Mr. William Kent Freeman was the initial person. His father lives in Madill, Oklahoma and they have an ice company located in the immediate vicinity of this disposal well. The ice company is their life blood and the whole operation depends on their water well. The estimated depth of this well is 300 feet. His grave concern is that this disposal well could somehow contaminate their water well and thereby contaminate their product. The well is their primary source of water. They have had to use rural water in the past when they have had pump problems. A couple of negative things come from that. Obviously the water bill and the temperature of the inlet water from the rural water supply is much warmer than the well water. This warmer water decreases the production from 20,000 pounds a day to 12,000 pounds a day. Mr. Freeman's father estimates that their business is approximately 500 yards north of this proposed facility.

56. County Commissioner Don Melton, Marshall County District 1, stated that he had about three different concerns. His son, daughter-in-law and 3 grandchildren live approximately 1/2 mile from this disposal well. They are on well water and he has concern about that. This disposal well is less than two miles from Lake Texhoma and the Red River. He heard the testimony that this water could not come back up and would take everyone's word for that. However, he does have concern about the close proximity to the lake and river.

57. He understands that the Commission does not regulate the truck traffic but the applicant stated they are going to take water from a 20 mile radius. Most of it would be from Marshall, Johnston and Carter Counties. All the roads that lead to this disposal well are nearly all county roads. 99C is a state highway. To get to the disposal facility the trucks would have to come through Madill, Oklahoma. He stated they are not going to do that because the trucking companies will go the shortest route. The shortest routes are going to

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be his county roads. His county roads are chip and seal roads. They are not made to hold up to truck traffic. One of the primary routes from the north will be McMillan Road which is approximately nine miles of chip and seal. This road is in good shape now because it has little or no truck traffic. Another county road is Cattle Drive which the county just did the chipping and sealing this year at a cost of a little more than $100,000. That is a large amount for the littlest county in the State of Oklahoma.

58. Commissioner Melton has a further concern about the highway. It is a small two-lane highway and has no shoulders on it. There is a very dangerous hill just a few hundred feet south of the proposed location and he can see some real issues with the traffic problem. He believes that some good common sense should be used in locations and there are better places to put this facility than where it is proposed.

59. State Representative Tommy Hardin from Madill Oklahoma offered his statement. He is the State Representative for this district and a property owner less than four miles from the proposed site. He is worried about his safety and the safety of his constituents. His number one concern is the only highway access to this facility is a two-lane road with no shoulders as was testified. He foresees this highway being stopped with truck traffic because of the number of trucks per day and the off load time that was elicited in testimony. If the traffic comes from the north, there is reduced visibility for drivers because of a curve before the proposed site. He also expressed concern about the dangerous hill to the south. Representative Hardin noted that ODOT has declared two bridges to the south as structurally deficient bridges. The extra truck traffic crossing those bridges will rapidly increase the rate at which they deteriorate.

60. The treatable water is Representative Hardin's second concern. This site is approximately eight miles from an active fault line, the Ouachita Frontal Thrust. He does not know what size or number of earthquakes it would take to compromise this well due to the anticipated pressures to inject this saltwater. As recently as July of this year there have been two earthquakes approximately six miles north of this site. He is not aware of any ODOT studies for this area.

61. Ms. Terri Rushing was called as a witness by Mr. Peters. She testified that her residence is approximately 3,000 feet north and west of this disposal site.

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She and her husband farm and ranch and have resided there a little over 35 years. She first became aware of the application when they read about it in the paper. Because they have cattle and farm with their own water source they wrote a request to deny this application. Bosque contacted them and they went to Fort Worth to look at the site there. They walked over the whole facility and asked a lot of questions. One of the things she did not like was that it was very very loud. After they left the facility they talked to the neighboring property owner. The individual there did not like the facility.

62. Ms. Rushing took pictures of Highway 99C in this area(Exhibit 8) showing the facility and the hill and curve that was discussed. She demonstrated that there is no place for any trucks to get off the highway at the facility entrance. Cox Road, which is the entrance to their place, is just past the property line of this facility. Their house is 6/10 of a mile down Cox Road.

63. Their source of water is a well and they have stock ponds for their cattle. There are some springs in the area and they have had to use those in drought years. Their water is Ms. Rushing's number one concern. Any event could contaminate the ground water, their pond water or the springs.

64. As stated the traffic is of great concern. She believes that many trucks will be very dangerous on this two-lane highway. The traffic noise and the noise from the facility is another concern. They live in that area because it is quiet. They have a nice country life with all the natural sounds. She also believes this facility will lower the value of their property.

65. Upon cross-examination Ms. Rushing stated she did not know that they could bring a nuisance action in their county court if this operation was a nuisance to them. Ms. Rushing then identified their home and the location of the ice plant on an aerial photograph.

66. Mr. Richard Rushing testified on direct examination that he is in the ranch and farm business and their home is located approximately 6/ 10 of a mile west of where the proposed disposal well is located. He first became aware of this application when a guy from Bosque came and wanted a water sample. The individual told him they were going to do a disposal well and he needed a sample from their water tap.

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67. After they filed their petition here Bosque wanted to have a meeting. Mr. Rushing and his sister went to this meeting. He stated they listened to their spiel and also showed them diagrams on the well. They asked if he was satisfied and he said no. He stated he would like to see one of these sites in action and Bosque agreed to them going to Fort Worth and see one of their sites there. After this visit Bosque wanted them to sign off on the site. Mr. Rushing would not agree to do this.

68. The springs for water are located just west of the site and is called Griffin Mountain. It drops off about 75 to 100 feet and the springs will run certain times of the year. That is what fills a lot of their ponds.

69. Mr. Rushing is concerned that any contamination may make his cattle and horses sick. He asked Bosque to sample their water well during the negotiations. They told him they would have his water tested whenever he wanted but they have not been back to see him. The protection of his groundwater is his principal concern. Also the safety and noise are included. Additionally he would like to have a sound barrier from the facility.

70. During cross-examination there were several questions and discussion about groundwater contamination of Mr. Rushing by Mr. Pepper. After discussion about the monitoring well between his property and this facility, Mr. Rushing reluctantly agreed that it sounded like a reasonable thing to do. Mr. Rushing also expressed it was a problem if the applicant uses Cox Road for some ingress or egress to the facility. It was the applicant's position that they would not use Cox Road for anything and they agreed to further inquiry and to confirm that position. At this point the protestants did rest.

RECOMMENDATIONS AND CONCLUSIONS

1. After taking into consideration all the facts, circumstances, evidence and testimony presented in this cause, it is my recommendation that the application of Bosque be approved under the conditions stated above.

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2. The applicant has complied with the requirements of the Oklahoma Corporation Commission for approval of the application for a commercial disposal well.

3. Applicant should determine the actual depth of the Arbuckle and consult with their experts about the safest and most appropriate configuration.

4. All necessary steps should be taken to ensure the safety and protection of the groundwater and the rights of the individuals and businesses in the area that depend upon it.

RESPECTFULLY submitted this 17th day of July, 2013.

MN:sm

xc: James M. Peters David E. Pepper Michael L. Decker, OAP Director Oil Law Records Court Clerk - 1 Commission Files

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B'VtuV o ns

Administrative Law Judge