CHICKASHA – Continental Resources will compensate the City of Chickasha when it drills oil/gas wells at Lake Chickasha, builds any access road to a drill site, lays any pipelines, and pumps any water from Lake Chickasha for drilling operations.
Terms of the arrangement were spelled out in an agreement the City Council approved Nov. 4.
Continental, owned by billionaire Harold Hamm, agreed to pay the city:
• $60,000 for each drill site “and all operations on” that location, including all necessary pits; all lines, including pipelines and electrical lines, whether above-ground or buried; and all other production equipment.
• $10,000 for any access road constructed on city land. An access road cannot exceed a driving surface wider than 50 feet “except in locations where topography and/or corners require” something wider.
• $16.50 per rod for aboveground electrical lines. Rights-of-way for electrical lines shall not exceed 50 feet in width during construction and up to 40 feet in permanent width.
• $300 per rod for a single below-ground pipeline installed on the city’s land “during the initial construction period.”
• $125 per day for water if the city has “sufficient quality and quantity” of water from the lake “for drilling operations.”
The agreement “shall remain in effect for an initial term of five years” and continue beyond that until Continental Resources notifies the City of Chickasha that it has “permanently ceased operations” at Lake Chickasha.
The city owns 4,000 acres northwest of Verden, former mayor Chris Mosley told Southwest Ledger; that land includes the lake, which encompasses 1,370 surface acres. At normal pool elevation the reservoir contains 15,000 acre-feet (4.88 billion gallons) of water, according to a report prepared by the Water Quality Section of the Oklahoma Conservation Commission.
Councilman Oscar Nelson noted that hydraulic fracturing, commonly known as “fracking,” is not mentioned in the agreement.
The City Council endorsed the agreement, 7-0. Councilman Charlie Burruss, whose profession is oil and gas mineral management, left the dais briefly just prior to the vote and returned immediately afterward.
By Burruss not voting, he cannot be accused of having a conflict of interest in the decision.
Furthermore, “I don’t think $125 a day would cover the value of water for a fracture stimulation,” he later told Southwest Ledger.
In the United States, the average water consumption to frack an oil or gas well “can run between 1.5 million and 9.7 million gallons,” according to the U.S. Geological Survey. Of course, the amount depends on factors such as the type of well and the rock formation that a drilling rig is penetrating.
“We had no information about what Continental’s water usage will be,” Burruss said. The agreement provides for a flat daily rate rather than payment based on gallons or barrels of water consumed. In the energy industry, the standard measurement for oil is a 42-gallon barrel.
“I thought we should have negotiated further on that,” Burruss said.
The council indicated that city officials will delve into the fracking issue.