## COMMONWEALTH OF KENTUCKY

Divi sion of Oil and Gas

Program Description

Application for Primary Enforcement Responsibility for

Class II Injection Wells

Under Section 1425, Safe Drinking Water Act



# March , 2015Table of Contents

PAGE

SECTION I. Introduction 1

SECTION II

. Program Scope, Structure, and Coverage 2

SECTION III. Class II Permitting Process 3

A. Permit Application 4

B. Permit Conditions of Class II Wells 7

C

. Inspection

- Compliance Schedules 8

D

. Transfer of Class II Permits 8

E

. Termination of Class II Permits 8

F

. Types of Class II Permits 9

G

. Procedures f

or Modifications of Permits 9

H. Emergency Class II Permits 9

I. Variance on Class II Permits 9

SECTION IV. Transitional Requirements 9

SECTION V. Operation of State Regulations for Class II Wells 10

SECTION V I. Technical Requireme nts Applied to Operators 10

A. Casing an d Cementing Requirements 11

B. Mechan i cal Integrity Requirements 11

C. Plugging and Abando nment Requirements 12

D

. Corrective Action Plans 13

E. Hydraulic Fract uring (Use of Diesel Fuel) 14

SEC TION VI I

. Inspec tions 14

SECTION VIII. Reporting Require ments 15

SECTION IX

. Penalties/ Enforcement 15

SECTION X

. Financial Responsibility 17

SECTION X I. Staffing and Resources 19

Work Plan Component 20

SECTION X I I

. Add itional Agencies 21

SECTION X II I

. Class II Well Inventory 21SECTION X I V

. Exempt Aquifers 21

SECTION X V

. Public Participation in Permit Issuance 22

SECTION X V I

. Public Complaints 23

APPENDIX A Class II Permit Checklist 24

APP ENDIX B Class II Well Inventory/DOG District and County 28

APPENDIX C DOG Public Notice Example 29

APPENDIX D DOG Regulations and Statutes 31

APPENDIX E Class II Forms 32

Letter from Governor Steve Beshear1

I. INTRODUCTION

One of the Common wealth of Kentucky’s most precio us resources is groundwater, approximately 900,000 Kentuckians depend on groundwater for domestic water supplies and use

205 mil lion gallons of groundwater da il y . Protection of underground sour ces of drinking water (USDW) h as been a primary goal of the Kentucky Department for Natural Resources ; Division

of Oil and Gas

. A major concern of potent ial groundwater contamination sources are orphan or

abandoned oil and gas wells and Class II injection wells in the Commonwealth. T o that end, t he Commonwealth of Kentucky

, Department for Natural Resources (DNR) Divi sion of Oil and Gas (DOG) is applying for primary enforcement authority of the Underground Injection Control (UI C) p rogram pursuant to Section 1425 of the Safe Drinking Wa ter Act (SDWA) for Class II injection wells in the Commonwealth. The Safe Drinking Water Act (SDWA), passed by Congress in 1974, and amended in 1977, 1980, 1986, and 1996 requires Underground Injection Control (UIC) activities to be regulated in all state s. Statutory authority for the Division to

administer the UIC

- Class II program is provided under Kentucky Revised Statute Chapter 353, specific statutory authority is addressed in statutes: 353.590(2), 353.591, 353.592 and 353.593.

These statutes state th e Division of Oil and Gas “is authorized but not obligated to develop and promulgate a regulatory program for the purpose of accepting primary responsibility for administration of the Underground Injection Control Program under Section 1425 of the Safe

Dri nking Water Act (Public Law 93

- 523 as amended)." The administrative regulations were promulgated and adopted by the DOG, effective on April 4, 2008 and can be found under Kentucky Administrative Regulation (KAR) 805 KAR 1:110. The regulation further provid es the Division regulatory oversight for the drilling, casing, operation, plugging, construction,

conversion and maintenance of Class II wells.

The Commonwealth of Kentucky is requesting primary responsibility for administration of the

Class II

- Undergroun d Injection Control Program in Kentucky. The following information shall

show that the Commonwealth has the regulatory authority, personnel and resources to effectively administer this program.2

II. PROGRAM SCOPE, STRUCTURE, AND COVERAGE

The Commonwealth of Kentucky ratified the Interstate Oil C ompact in 1942, the compact was later repealed, amended and re

- enacted by joint resolution of the General Assembly in 1948. The Department of Mines and Minerals (now the Office of Mine Safety and Licensing) began permitting oil and gas wells in coal producing regions that same year. The Division of Oil &

Gas was created as a division of Department of Mines and Minerals by the General Assembly in 1960 and began permitting all oil and gas wells in the Commonwealth, additional regulatory authority was provided to include the following: foster conservation of crude oil and natural gas resources, encourage crude oil and natural gas exploration and development, and protection of correlative rights.

The Division of Oil & Gas (DOG) is granted authority under KRS Chapter 353.520 to regulate wells on all lands located in the Commonwealth including any lands owned or administered by any government, including Federal lands.

In 1961, the Division of oil & Gas enacted regulat ion for the proper plugging and abandonment procedures for wells drilled in both coal

- bearing and non coal

- bearing strata. The Division established well bonding requirements in 1966, additional bonding requirements and penalty provisions were in establish ed in 1990. In 2006, the Kentucky General Assembly established a new tiered blanket bonding structure and is described in further detail in the program description

.

In 1978 , Kentucky D epartment for Natural Resources (D NR ) enacted administrative regulati on 805 KAR 1:020 establishing requirements to protect fresh water zones from contamination associated with the production of oil and gas. For purposes of nomenclature clarification, “fresh water zones” are synonymous with “underground sources of drinking water” which is defined in KRS Chapter 353.510 (20) and in 805 KAR 1:110 (1) (18) and (28). R egulation 805 KAR 1:020 requires all oil and gas wells be cased and cemented in such a manner to p rotect fresh water

zones during drilling and plugging operations ; 805 KAR 1:020 (4

- 6 ) addresses protection of

fresh water zones associated with wells used for injection of fluids. Kentucky DNR enacted 805

KAR 1:110 in 2008, which required additional protection of fresh water zones (or USDW’s) by requiring all proposed Class II well construction include s a freshwater casing string extending fifty (50) feet below the deepest freshwater depth referenced in 805 KAR 1:110 (5)(1)(c)(1)

. If the fresh water is not protected by a separate casing string, the lo ng casing string s hall be

install ed with cement circulated to surface as directed by 805 KAR 1:110 (5)(1)(c)(5)

. As a

result of the se additional freshwater protection measures required in proposed Class II wells, 805 KAR 1:110 (17) exempted 805 KAR 1:020 (4

- 6). The langua ge in 805 KAR 1:110 (17) states “The provisions of 805 KAR 1:110 shall become effective upon the date of primacy, on or after which a Class II well shall be subject to the requirements of 805 KAR 1:110 and shall be exempt from 805 KAR 1:020 (4

- 6)

. ”

Kentu cky DNR was given authority to develop a regulatory program for the purpose of accepting primary responsibility for administration of the UIC program for Class II wells by KRS 353.592, created in 1986 and amended in 2006. The statute authorizes the departm ent to promulgate administrative regulations to establish a program for regulating the permitting, drilling, casing, operation, plugging, construction, conversion, maintenance, plugging and abandonment of Class II wells to protect underground sources of dr inking water and to prevent their endangerment.3

Kentucky DNR promulgated 805 KA R 1:110 authorizing DNR to accept primary responsibility for the administration of the UIC Program and established requirements for the permitting, drilling, casing, operation, plugging, construction, conversion and maintenance of Class II wells and the protecti on of underground sources of drinking water (USDW’s). The regulation further provides DNR (specifically DOG) the ability to address any contamination associated with

in jection activity.

With the adoption of 805 KAR 1:110 effective April 4, 2008, the Kentucky Department for

Natural Resources

- Division of Oil and Gas (DOG) has shown a commitment to the protection of underground sources of drinking water in the Commonwealth and is positioned to assume primacy of the UIC Class II program pending approval by USEPA.

III. CLASS II P ERMITTING P ROCESS Any person who desires to drill a Class II well in Kentucky , or inject approved Class II fluids (produced fluids or fresh water ) for enhanced oil recovery into a C las s II injection well must obtain a permit from DOG pursuant to KRS 353.570, 353.590, 353.592 and 805 KAR 1:110 (2) (1

- 2)

. All Class II well permit applications must co mply with well construction, operation, monitoring and reporting requirements prescribed in 805 KAR 1:110. Class II (EOR) wells in operation prior to the effect ive date of primacy approval will be designated as “rule authorized

wells” and deemed permitted by DOG and will be operated under the current DOG and EPA permit numbers assigned. USEPA currently has approximately forty (40) Class II disposal wells permitted in Kentucky , these wells will be required to be permitted by DOG upon primacy approval. Owner/operators of disposal wells will be directed to submit a Class II permit application for those wells within ninety (90) days following the effective date of primacy.

Upon receipt of a Class II permit application DOG shall perform a review of the application for accuracy and completeness. If any perm it application is incomplete, the well owner/operator will receive an “administratively incomplete” notification via email or letter. In addition, t he applicant ’s compliance history wi ll be reviewed for unabated violations , no Class II permit will be appr oved if the owner/operator has unabated violations . DOG will not process the permit until the outstanding violati ons are brought into compliance. A Permit Checklist (Included in Appendix A) will be used by DOG to perform a review of the Class II applicat ion and the Area of Review (AOR). DOG will perform a compr ehensive review of well records, geophysical logs, cement bond/cased

- hole logs and plugging affidavits of all active, abandoned or plugged wells penetrating the injection zone within the AOR. If a ny well within the AOR is d eemed an endangerment to a USDW du e to insufficient casing , improper cementing and/ or lack of well data, DOG will notify the owner/operator via a technical deficiency letter to address those

technical deficiencie s to ensure prote ction of USDW ’s

. DOG will also review the well

construction plan of the proposed well to ensure casing strings will be set at sufficient depths and cemented properly to prevent injected fluids from escaping into a USDW. Corrective action plans to address deficiencies in a Class II permit application is discussed in further detail in Section VI (D).4

DOG will review applicant’s submitted maximum injection pressure and verify the pressure is

accurate based on the formula referenced in 805 KAR 1:110 (11) ( 2)(g)(5):

Pmax=(. 733 psi/ft

– (.433 psi/ft (Sg))( d)

Whereas

, .733 psi/ft. is the default fracture closure pressure gradient, .433 psi/ft. is the density of fresh water, (Sg) is the specific gravity of the injected fluid and (d) is the depth to the top of the injection zone. Should the applicant’s submitted pressure exceed the calculated pressure and in the opinion of DOG could initiate new fractures or propagate existing fractures into the con fining zone adjacent to a USDW; DOG will direct the applicant to make appropriate changes on the permit application. DOG will also review formation breakdown pressure data in the form of

step

- rate tests, or historical fracturing/stimulation field data in the injection zone from adjacent

wells or instan tan eous shut

- in pressure (ISIP)

.

DOG will verify financial assurance in the form of proper bonding is established to properly plug and abandon the proposed Class II well. Applicant’s projected plugging and abandonment costs will be compared to actual costs DOG has in curred from operation of DOG’s “state

- bid” plugging program to verify financial assurance will adequately plug the injection well.

Upon application approval, DOG shall assign a sequential permit numbe r for the proposed injection w ell ; the number sequenc e will be consistent with current DOG permitting criteria for

all wells. I n addition to the sequential permit number assigned

, DOG will also assign a UIC permit number (KY

- UIC No. ) designated specifically for tracking Class II permits. The permit to inje ct for all Class II wells shall remain valid for the duration of the injection operation

. After a Class II permit is issued and well drilled, the permit cannot expire or be terminated until the well has been plugged and abandoned under the direction of a DOG inspector.

Class II permit applications will be reviewed by a registered professional geologist in the Commonwealth of Kentucky currently employed by DOG

. DOG anticipates the review process for Class II permits will be approximately two (2) weeks for complete and accurate applications, DOG also anticipates issuing approximately twenty (20) Class II permits annually, fluctuations in permitting activity will depend on crude oil market conditions. DOG currently processes conventional oil and gas permit application s within seven ( 7 ) to ten ( 10 ) days assuming information on the permit application is cor rect and complete. DOG issued 920 perm its in 2012

, 895 permits in 2013 and 936 in 2014

.

A. Permit Application Pursuant to 805 KAR 1:110, Form ED

- 14 has been incorporated as “CLASS II WELL PERMIT

APPLICATION FOR UNDERGROUND INJECTION CONTROL”. Attached in Appendix A is a Class II Permit Checklist that will be used in the permit review process. The application shall

include:

 Statement by the owner/operat or as to whether the well will be used for enhanced oil

recov ery, hydrocarbon storage or brine disposal

.5

 Designation for drilling (new well) , deepening or conversion of an existing well to a

class II injection well.

o For conversion of an existing well, a co py of the completion report and any

geophysical logs of the well bore shall be included with the permit application

.

 The approximate depth of the deepest freshwater zone (USDW).

 Well owner/operator.

 Permanent address of applicant.

 Continuation of applicant address/email.

 Mineral tract owner (l essor) and well number.

 Addr ess of l essor.

 Carter c oordinate location of Class II wellhead.

 Name of oil f

ield (designated by Ky. Geological Survey).

 Injection f

ormation (perforation/open

- hole interval depth).

 Proposed t otal d epth, or plug

- back depth.

 Injection method ( through perforations or open

- hole).

 Depth of packer.

 Estimated formation breakdown pressure (step

- rate tests or historical field data)

.

 Identification of material injected with additives.

 Surface owner (if different from mineral owner).

 7.5’ USGS topographic q uadrangle with date of map.

 Area of Review Map encompassing one

- quarter (1/4) mile radius circle around the

proposed Class II well prepared on a 7.5” topographic quadrangle map including:

o Location and c ompletion or plugging records of all wells penetrating a

USDW , whether producing or plugged.

o Location of all known fresh water wells.

o Location of hazardous waste treatment or disposal facilities.

o Location of rivers and streams.

o Location of quarries, surfac e and subsurface mines.

o Location of geologic faults.

o Location of permanent residences.6

 Wellbore schematic of the Class II injection well that shall contain the following:

o Total depth of the well (or plug

- back depth of existing well).

o Depth of the injection or disposal interval.

o Geologic name of the injection or disposal zone.

o Geologic name, thickness, and description of the confining zone.

o The vertical distance separating the uppermost extremity of the injection

zone from the base of the lowest USDW.

o Depth of the top and bottom of the casing and cement displaced (in sacks).

o Size of the casing and tubing and depth of the packer.

o Depth to the base of the lowermost USDW.

 A standard laboratory analysis of a representative sampl e of the injected fluid identifying

the parameters i dentified in 805 KAR 1:110 (11) (2) (g) (2) and contained in 40 CFR 136.3

and 40 CFR Part 261 Appendix III

.

 An MSDS (material safety data sheet) for inhibitors added to injection fluids to control

scaling, corrosion, or bacterial growth.

 Prop osed maximum injection rate and pressure.

 Description of current or proposed casing program included on Form ED

- 25 “CASING

AND CEMENTING PLAN FOR UIC WELLS”.

 Location and description of USDW through which the proposed well would penetrate.

 C orrective actio n plan for all abandoned , completed or improperly sealed wells within the

AOR to i nsure USDW’s are properly isolated from the injection zone shall be included with the permit application

. See Section on Technical Requirements

- Corrective Action Plans (Sect ion VI

- D).

 Applicant state of incorporation.

 Notarized signature of well owner /operator or authorized agent.

 In accordance with 805 KAR 1:030, a well location plat of the proposed Class II well.

 Proof of notification (personally or via certified mail) is required to owners of surface or subsurface property that the well penetrates, providing the property owners thirty (30) days to submit written comments or request a hearing. See Section on Public Participation in Permit Issuance (Section XV). In additi on, owner /operator s of producing oil/gas wells and permittees of underground mines under KRS Chapter 350

within the AOR shall be notified personally or by certified mail pursuant to 805 KAR 1:110 (11)(4)

.7

B. Permit Conditions of Class II W ells

Well owners /operators must comply with all p ermit conditions authorizing injection of fluids through Class II wells referenced in 805 KAR 1:110 including the following requirements:

 Well owner/operator shall notify DOG in writing of any modification in the manner in which the injection operation is conducted or of any mechanical failure or down

- hole problem enc ountered in the operation of a Class II well or upon recognition of a failure in an injection system , failure to notify DOG within twenty

- four (24) hours will r esult is suspension of the Class II permit and issuance of a notice of violation

.

 Well owner/operator must maintain and properly operate all production and injection facilities to achieve and maintain compliance with permit conditions.

 Well owner/operator shall take all prudent steps to minimize or correct adverse impacts on the environment resulting from noncompliance with permit conditions.

 Any class II well which appears to be leaking shall be shut down immediately and corrective action procedures shall be initiated within fifteen (15) days, or the permit may be revoked under appropriate conditions.

 Well owner/operator s shall provide DOG authorized personnel unlimited access to all Class II wells and associated production facilities for the purpose of con ducting inspections, witnessing mechanical integrity tests, corrective action operations, plugging supervision, and testing samples of injected fluids at any time during the injection operation pursuant to 805 KAR 1:110 (4)(2)

.

 Well owner/operator shall re gulate the injection pressure in a manner so that the pressure in the injection zone does not initiate new fractures or propagate existing fractures in the confining zone that would cause movement of injected fluids into a USDW. DOG will approve maximum i njection pressure and use formula stipulated in 805 KAR 1:110 (11) (2)(g)(5) to establish maximum pressure. Well owner/operators will be required provide formation breakdown pressure test derived from the following: step

- rate test ing (preferably several steps and breakdown pressure)

, historical fracturing/stimulation data from adjacent wells completed in the injection zone

, instantaneous shut

- in pressure ( ISIP )

data or other approved testing methods

.

 Well owner/operator shall provide for the internal and external mechanical integrity of the well by operating without leaks in the casing/tubing/packer assembly and without fluid movement into a USDW through vertical channels adjacent to the wellbore.

 Each Class II well shall be tested for mechanical integrit y at least every five (5) year s pursuant to 805 KAR 1:110 (6) (6).

 Well owner/operator shall monitor and record injection pressure rates and volumes at least monthly and shall submit the Form ED

- 18 “ANNUAL DISPOSAL OR INJECTION

WELL MONITORING REPORT” and s hall retain these records on file for a period of five (5) years.

 DOG must establish limitations on the wellhead pressure at which a Class II well may be operated using formula referenced in 805 KAR 1:110 (11) or historical field data . Any

limitations sha ll be included as a permit condition or through an order after notice and opportunity of hearing.

 Well owner/operators of i n

- active or “shut

- in” Class II wells (not injecting) must obtain a “TEMPORARY ABANDONMENT PERMIT” (Form ED

- 12) with DOG. During the temporary abandonment period, the well owner/operator must describe procedures to ensure the inactive well will not endanger a USDW. If the well is abandoned for a8

period of two (2) or more years, the well owner/operator shall plug the well in accordance 805 KAR 1:110 (10) under the direction of a DOG inspector. Prior to placing an in

active well back into injection operation, DOG may require an MIT to insure USDW protection.

 Any well owner/operator may re

- apply for a Class II permit after deficiencies o r DOG

directed corrective action plan have been completed and the applicant demonstrates the Class II well will not endanger a USDW and mechanical integrity has been demonstrated.

 DOG may modify, halt, suspend or revoke a Class II permit if the injection o peration is altered in a way that does not protect a USDW or down

- hole failure comprises the injection system.

C. Inspection

- Compliance Schedules

Class II well owner/ operators shall provide DOG inspectors , or representatives of the DOG

director unlimited access to Class II wells, related facilities and well data for the purpose of performing inspections, witnessing mechanical integ rity tests, corrective action plans , supervise plugging operations and for testing injection fluids. DOG is granted authority in KRS 353.592

and 805 KAR 1:110 to require Class II well owner s /operator s to maintain compliance with all UIC regulations relating to schedule of compliance and reporting as required in 40 CFR §

144.53.

D. Transfer of Class II P ermits

Transfer of Class II permits to a successor may occur a fter notice is given to DOG on F orm ED

26 “WELL TRANSFER FOR UIC WELLS”. Information required for the transfer includes:

 Original operator’s company name and address.

 Successor company’s name and address.

 Permit number of the well.

 Carter Coordinate location of the well(s).

 Farm (lease) name and well number.

 Signatures of the original operator and the successor or that of their authorized representative.

 A statement that the successor assumes all responsibility for the w ell and provides financial respo nsibility pursuant to 805 KAR 1:110 (8)

.

A Class II well with an outstanding non

- compliance shall not be transferred, unl ess the successor owner/operator correct s the deficiencies or submit s a corrective action plan approve d by DOG prior to transferring and commencing injection operations

.

E. Termination of Class II P ermits Inj ection permits may be terminated or suspended by DOG for failure to comply wi th any portion of 805 KAR 1:110, alteration of an injection system or fa ilure to comply with a corrective action plan that may endanger or compromise a USDW. Termination of a Class II permit requires the owner/operator to notify DOG in writing thirty (30) days prior to termination of operations pursuant to 805 KAR 1:110 (12)( 3). Termination of injection operations will require plugging and abandonment, a Class II well permit cannot expire until the well has been properly plugged and abandoned under the direction of a DOG inspector.9

F. Typ es of Class II P ermits

Class II i nj ection permit types include enhanced oil recovery (EOR) , brine disposal, and hydrocarbon storage which are liquid at standard temperature and pressure (does not include injection or withdrawal of natural gas in storage fields)

. Class II permits will be li mited to

individual well permits, not area permits.

G. Procedures for Modification of Class II P ermits Modification of injection permits s hall be done pursuant to KRS 353.592 and 805 KAR 1:110

and under the direction and supervision of DOG and may require testing of mechanical integrity

to insure the underground injection of fluid will not endanger underground sources of drinking

water

. These include minor permit modifications as prescribed in 40 CFR § 144.41 such as correction of typographical errors, cha nge in permittee reporting schedule, change in the nature or sampling of injection fluid, minor modifications of well construction requirements (modifications must provide protecti on of USDW), amend a plugging & abandonment plan and

well transfer.

H. Emer gency Class II Permits Class II permits will normally be processed in a sufficient amount of time to avoid the necessity of an operator having to request an emergency permit, although DOG may consider such a request if the applicant made a request in writi ng with adequate supporting documentation. An emergency order would only be issued for short duration and be applicable to situations that would prevent waste of natural resource or contamination of a USDW.

I . Variance of Class II Permits DOG may grant a variance by author ity of 805 KAR 1:110 (2) (10) (b) if application is made and after notice of hearing, and demonstrating to the satisfaction of DOG that alternate prudent engineering practices will prevent fluid movement into a USDW. Permitting requireme nts do not provide a variance from protection of a USDW. No Class II permits will be issued if

variance causes endangerment of a USDW.

IV. TRANSITIONAL REQUIREMENTS DOG shall accept a Class II well permit, including rule authorized wells, issued under the authority of USEPA. Rule authorized wells are defined as a Class II well in operation prior to the effective date of primacy and shall be deemed permitted by DOG provided the owner or operator satisfies requirements of 805 KAR 1:110 (9). DOG will acc ept records from USEPA on

all authorized Class II wells. Copies of all documentation showing USEPA approval of Class II well’s mechanical integrity and a copy of all forms, test data and logs submitted to USEPA shall be submitted to DOG within ninety (90) days of the effective date of primacy. The owner/operator with a pending application submitted for Class II wells under the USEPA program may transfer a pending application to DOG and shall satisfy the permitting requirements of 805 KAR 1:110 (11) upon e ffective date of primacy.10

DOG will create an inventory of existing Class II wells and implement a comprehensive review

of all injection wells within the first five (5) years of the effective date of primacy approval with active injection wells receiving t op priority. Active injection wells are defined as wells currentl y injecting at the time of well site inspection or as do cumented by documentation provided by

USEPA at the effective date of primacy approval. The comprehensive review will include a field

i nspection of the injection well to capture a global positioning system (GPS) wellhead location,

review of well construction records to insure USDW protection, incorporate existing mechanical integrity test (MIT) schedule into DOG

- RBDMS database (MIT schedu le will be based on data provided by EPA) , verifying EPA

- Class II identification number, and documentation of related production facilities at the wellsite. DOG will perform a minimum of seven hundred

- fifty (750)

Class II wellsite inspections annually dur ing the first five (5) years of the effective date of primacy approval. Abandoned or “shut

- in” i n jection well s identi fied as a result of the DOG inspection and review process , will result in the well owner/ope rator being cited for improper abandonment pur suant to KRS 353.550 and a notice of violation will be issued and further defined in Sec. III(B)

.

DOG will comply with all oversight requirement s and adhere to reporting requirements in the

administration of the UIC

- Class II program to USEPA Region 4

. Specifics regarding annual reporting are addressed in the attached Memorandum of Agreement.

V. O PERATION OF S TATE R EGULATIONS FOR CLASS II W ELLS The state statutes that govern the UIC program are KRS 353.570, 353.590 and 353.592. KRS

353.592 authorize s the department to develop an underground injection control program. This authorization includes the development of administrative regulations to establish a permitting program, protect underground water resources, develop financial responsibility to cove r the costs

of plugging and abandonment , establish a public notification process for the application for permits, and establish fees for the mechanical integrity testing and periodic registra tion of C lass II wells to cover the costs of the program.

Admi nistrative regulation 805 KAR 1:110 was promulgated and became effective April 4, 2008

in order to introduce the statutory items and pro vide the necessary detail to implement the Class

II

- UIC program.

V I . TECHNICAL REQUIREMENTS APPLIED TO OPERATORS

Cl ass II injection wells proposed to be constructed after the effective date of primacy will be

con s tructed in accordance with 805 KAR 1:020 and 805 KAR 1:110 ( 5 ) which prevents injected fluids from escaping in to a USD W

. Wellbore con s truction of “rule

- autho rized” wells , as determined by USEPA are exempt from construction requirements for Class II wells unless DOG determines that corrective action is necessary to prevent injected fluids from escaping to a

USDW. The owner/operator shall provide DOG with all re quired geophysical logs and results of tests conducted during the drilling and completion of a Class II well that relate to the USDW, the adjacent confining zone , injection zone and adjacent formations. The logs and test data shall include a geophysical lo g marked to indicate all fresh water zones, the confining zone and the injection interval. Submittal of logs and tests data must be submitted to DOG within ninety (90)11

days following completion of testing. A geologic description of the co nfining and inje ction zone shall include the lithologic description, geologic name and thickness and a report describing the nature of fluids and formation pressure in the injection zone shall also be provided to DOG

.

DOG will review all the geophysical logs, test data a nd reports to verify the USDW will be protected prior to giving authorization to inject.

A. Casing and Cementing Requirements

All Class II wells shall be constructed in such a manner to prevent migration of injected

fluids into USD W’s. If the well construct ion is determined to be inadequate and movement

of flui d endangers a USDW, DOG shall require the well operator to take necessary corrective

action and be completed within ninety (90) days o f notification

. A freshwater casing string shall extend fifty (50) feet below the freshwater depth stated on the permit or the depth of the deepest USDW. All freshwater casing strings shall have cement circulated to fill the annular space, to surface using approved engineering methods . The production casing (long) stri ng must extend from the surface to immediately above the injection interval and must have a minimum of three

- hundred (300) feet of ce ment behind the lowermost three

- hundred (300) feet of casing. If the fresh water is not protected by a separate casing str ing, then the long string shall be cemented with circulation of cement back to surface. Tubing shall be installed in the casing with a packer set at a de pth not to exceed fifty (50) feet above the injection

zone.

The well owner/ operator shall provide a d etailed description of the casing plan on Form ED

25 “CASING AND CEMENTING PLAN FOR UIC WELLS “ , and submitted with the Class

II Well Permit Application for UIC

. If the casing and cementing plan is inadequate and movement of fluids causes the endangerment of a USDW, DOG shall require the owner/operator to take corrective action within ninety (90) days of notification. Injection will not be authorized until the corrective action has been completed to the satisfaction of DOG and mechanical integrity has bee n demonstrated. Failure of well owner/operator to comply with DOG corrective action plans will result in citation of violation and potentially bond forfeiture. Additional civil penalties m ay also apply as referenced in Sec. IX.

B

. Mechanical Integrity R equirements

Owners/o perators of Class II wells shall demonstrate mechanical integrity of new and existing injection wells pursuant to 805 KAR 1:110 (6)

. The well owner/operator shall verbally notify the appropriate DOG inspector five (5) days prior to pe rforming any mechanical integrity test. The well owner/ operator shall submit a plan to demonstrate mechanical integrity with the application for permit to inject and file F orm ED

- 22

“CERTIFICATION OF MECHANICAL INTEGRITY” with DOG within fifteen ( 15 ) days upon successful completion of the test. Demonstration of both internal and external mechanical integrity is required and described below :

Internal Mechanical Integrity

The internal mechanical integrity pressure test (MIT) shall be performed on the tubing /casing/packer assembly using pressurized , corrosion

- inhibiting liquid (water) and/ or12

gas (nitrogen) on the tubing and casing annul ar space and monitored over a given interval of at least thirty (30) minutes. A minimum pressure of three

- hundred (300) psi shall be applied

to the annular space between the tubing and casing

. The well is considered to have internal mechanical integrity if, at the end of thirty (30) minutes, there is no more than a plus or

minu s of three (3) percent change in the pressure. DOG may require higher test pressures be used when the anticipated injection pressure will be high. In some cases, injection wells in Kentucky inject via gravity, DOG will require a minimum test pressure of three

- hundred (300) psi be applied on tubing annulus on those wells and pressure monitored as described

above.

Calibrated DOG

- owned p ressure gauges and rate sensitive devices will be used to e nsure there are no significant changes in pressure or vol ume o f liquid/gas injected. An injection well is determi ned to have mechanical integrity if:

 There are no leaks in the casing, tubing, or packer assembly.

 There is no fluid movement into a USDW through vertical channels adjacent to

the wellbore.

External Mechanical I ntegrity

A cceptable methods to demonstra te the absence of fluid movement into a USDW through vertical channels adjacent to the wellbore in 805 KAR 1:110 (6)(4) include:

 T emperature, noise, radioactive trace r or cement bond logs.

 Cementing records and c asing strings set at sufficient depths and s ufficient c ement slurries displaced to prevent migration of injected fluid s into a USDW.

DOG insp ectors will witness all mechanical integrity tests performed on any Class II well in Kentucky upon primacy approval

. DOG inspectors have routinely witness ed and approve d

MIT’s on Class II wells as a cour tesy to USEPA Re gion 4 . I n addition, ins pectors have

witnessed MIT’s on Class V wells ( including CO 2 sequestration test w ell in Boone Co., KY

permitted as a Class V experimental technology well).

DOG will rev iew existing Class II w ells with US EPA

- approved integrity tests and maintain the five (5) year MIT testing cycle or require a test in the event of any down

- hole equipment

failure s
, modification s such as unseating of a packer or if the injection well is nea r a domestic water well for which a USDW contamination complaint has been received.

C. Plugging and Abandonment Requirements After cessation of operations for two (2) years, the owner/operator shall plug and abandon

the well unless a notice is sent to DOG describing actions or procedures that the owner/operator shall take to ensure that the well will not cause the endangerment of a USDW during the period of temporary abandonment. The well owner/operator will be required to secure a Temporary Abandonm ent Permit (Form ED

- 12) for the well approved by a DOG inspecto r for the period of non

- injection . A mechanical integrity test will be required should the well owner/operator elect to place the abandoned well back in operation.

All Class II wells shall be plugged under the direction and su pervision of a DOG inspector in

ac cordance with 805 KAR 1:060, 805 KAR 1 :070 and 805 KAR 1:110

. Class II w ells will13

be plugged in such a manner which will not allow the movement of fluids into or between

USDW’s by disp lacing cement slurry through tubing using approved engineering methods

for cement calculations. Cement slurry plugs will be placed across the injection zone extending from at least fifty (50) feet above and fifty (50) feet below the injection zone

, cement plug extending at least fifty (50) feet above and fifty (50) feet below all USDW ’s

, cement plugs shall also be placed across coal seams and any additional intervals deemed appropriate by the DOG inspector.

Pursuant to 805 KAR 1:110 (10) , the owner or op erator shall notify DOG in writing within thirty (30) days prior to plugging the well and schedule the time and date of the plug ging procedure with the DOG field inspector. Upon successful completion of pl ugging the operator shall file F orm ED

- 38 “PLUGGIN G AFFIDAVIT”

. The performance bond shall not be released until the well is plugged according to instruct ions given by the inspector and all records have been submitted and approved by DOG

.

For point of clarification, Form ED

- 38 (Plugging Affidavit) requ ires the signature of an authorized agent of the well owner/operator as that person being the responsible party should the plugging procedure be determined to be insufficient to isolate all zones in the wellbore. The optional signature is for the plugging contractor employed the well owner/operator and typicall y performs the plugging operation as directed by the well owner/operator.

D

. Corrective Action Plans

Corrective action plans shall be completed within ninety (90) days of notification from DOG to the owner/operator. This may include corrective plans on existing wells within the area of review which are improperly sealed, completed, or plugged and abandoned

. DOG shall consider the following criteria and factors during evaluation of a correctiv e action plan:

 Nature and volume of injected fluids.

 Nature of native fluids or by

- products of injection.

 Potentially affected population (landowners within AOR that depend on domestic water wells for primary source of fresh water )

.

 Geology.

 Hydrology.

 His tory of injection operations.

 Completion and plugging records.

 Plugging and abandonment procedure.

 Hydraulic connections with USDW’s.

I f DOG establishes a Class II well casing program to be inadequate and providing fluid movement into a USDW, the owner/op erator will be required to take necessary corrective action before any injection can occur pursuant to 805 KAR 1:110 (9)(b)(c).

Class II wells with outstanding violations shall not be transferred, unless the successor is willing to submit a corrective act ion plan approved by DOG prior to transferring and injecting.14

E. Hydraulic Fracturing (Use of Diesel Fuel )

The use of diesel fuel as an additive in fracturing fluids shall be regulated under the UIC

program pursuant to the Safe Drinking Water Act

. Any w ell owner/operator that contracts

with a well service company to use diesel fuel as a fracturing fluid or an additive must first

obtain a Class II permit from DOG prior to performing the fracturing treatment

. Currently in Kentucky , th e re are no documented uses of diesel fuel being used as a fracturing flu id

additive . Fracturing treatments usin g sand as a proppant employ water

- based fluids as a transporting agent. Hydraulic fracturing/stimulation in Kentucky vary from using nitrogen (N 2 ) used in amounts av eraging one

- million (1,000,000) sft 3 in multiple stage tr eatments in

the Devonian Shale to o ther types of fracturing treatments including “slick” water

- fracs,

cross

- link, gelled or foam

- frac treatments. A cidi zing treatments are used in carbonate

reservoi r s throughout Kentucky, treatments are at different volumes using hydrochloric and hydrofluoric acid in concentr ations of fifteen percent (15%) to twenty

- eight percent (28%)

.

Any subsequent changes to requirements on hydraulic fracturing additives will be incorporated upon final action by USEPA.

V I I. INSPEC TIONS

The Division of Oil and Gas (DOG) currently has seventeen (17) field inspectors strategically located throughout the Commonwealth reporting to four (4) regional offices in Pikeville,

Barbour ville, Glasgow and Madisonville.

Inspector s report to regional supervisor s to coordinate daily inspection schedules and review inspector activities and reports. Division inspectors perform electronic inspections using

Microsoft XP

- Xplore IX104

- PC tablet s wit h mounted global positioning system ( GPS ) units,

these tablets contain geographic information system (GIS) software including topograph ic maps of the inspector’s assigned counties. The tablets also include Risk

- Based Data Management System ( RBDMS ) so ftware containing DOG well data

. DOG inspectors also use hand

- held, Garmin 76S GPS units to capture wellhead locations. This process has increased inspecto r efficiency and productivity. I n 2012 DOG inspectors performed 11,550 well

- site inspections

. DOG inspectors conducted 13,606 well

- site inspections and 1,167 gathering line inspections in 2013, in 2014 11,477 well

- site inspec tions were performed along 700 gathering line inspections

. Inspectors create inspection databases of recently completed inspecti ons and submit to the supervisor for review

. Upon approval by the supervisor , the inspection database is forwarded to

the Frankfort, KY central office to be incorporated into the RBDMS database.

DOG Inspectors perform inspections as directed by the Divis ion’s “Oil & Gas Inspector’s

Manual”

, the man ual will be updated to include Class II inspector responsibilities, procedures and guidelines . This includes prioritizing of daily work schedules based on drilling/workover/plugging activity, and complaints rec eived, with public complaints receiving the highest priority. The frequency of individual well inspections will be determined by operator compliance or as deemed necessary by the inspector’s supervisor or assistant director.15

Class II well inspections w ill include ins pection of injection facilities and wells to insure compliance

, investigation of wells within AOR’s , verifying and witnessing mechanical integrity

tes ts, supervising corrective active plans and supervising plugging/abandonment operations.

D OG wil l prioritize Class II well inspections to include:

a. Receipt of complaints of USDW contamination, degradation or adverse impact (USDW complaints will receive top priority).

b. Location with respect to wellhead protection area, existing USDW’s and

active d omestic water supply wells

.

c. Compliance history of the well operator.

d. Mechanical Integrity Testing Schedule.

DOG currently has a schedule to inspect every active oil and gas well in the Commonwealth on a five (5) year cycle. The inspection frequency on ac tive Class II wells will be every two (2)

years , the term “active injection well ” has previously been defined as in Sec. IV. Changes in Class II well status will be determined at the time of wellsite inspection

.

VIII. REPORTING REQUIREMENTS

The well ow ner/operator shall promptly notify DOG in writing within twenty

- four (24) hours of any modification in the manner in which the injection operation is conducted or of any

mechanical failure , injection system failure or down

- hole problem encountered in the o peration

of a Class II well as required in 805 KAR 1:110 (4)(1)(a)

. Leaking wells will be shut down immediately and corrective action shall be initiated with fifteen (15) days or the permit to inject may be revoked.

The owner/operator shall upon complet ion of construction of a Class II wells file with DOG

Form ED

- 23 “CERTIFICATION OF COMPLETION FOR AN INJECTION WELL” within ninety (90) days of final construction.

The owner or operator shall notify DOG within ninety (90) days of a well workover, loggin g or testing that may reveal down

- hole conditions and file Form ED

- 4 “WELL RE

- WORK

REPORT” within thirty (30) days following the completion of the rework activity

.

Well owner/operator shall monitor and file an annual report of monthly monitoring of inject ion fluid volumes, injection pressure, and casing annulus pressure rat es and shall submit data on

Form ED

- 18 “ANNUAL DISPOSAL OR INJECTION WELL MONITORING REPORT” . The report shall be filed on or before the twenty

- eighth (28 th ) day of January for the prev ious twelve (12) months. The owner/operator shall retain all records on file for a period of five (5) years, DOG will permanently retain microfilm copies of all reports submitted by Class II well owner/operators and will be readily accessible in DOG’s dat abase management system

.

I X

. PENALTIES/ ENFORCEMENT DOG is granted statutory enforcement authority to admini ster the Class II

- UIC program under KRS 353.592. As stipulated in KRS 353.992, any well owner/operator who violates any class II permit, rule or regulation shall be subject to a civil penalty of not more than five

- thousand16

dollars ($5,000) for each day of such violation. If the violation is deemed to be willful or negligent by DOG, the civil penalty may not exceed more than ten

- thousand dollars ( $10,000) for each day of such violation. The civil penalties shall be assessed by the Circuit Court of the county in which the violation occurred. DOG and DNR

- Legal Services work with local county attorneys to issue arrest warrants for owner/operators in negligent cases or habitual non

compliance issues for conventional oil and gas wells and will use the same procedure for any

violation which would endanger a USDW or violation of KRS Chapter 353. DOG may also suspend a Class II permit if the injection op eration is altered in a way that may endanger a USDW pursuant to 805 KAR 1:110 (2)(11).

Enforcement actions taken by DOG which will require semi

- annual reporting to EPA

- Region 4

shall include:

 Notice of violations identified by DOG inspection staff citing the appropriate violation, the inspection report will be forward to central office for notice of violation issuance. The owner/operator will receive a notice of violation via certified mail citing the violation, corresponding statute and directing the op erator to contact the inspector or the UIC Manager to bring the well into compliance. If the violation is not corrected within forty

- five (45) days, DOG may proceed with forfeiture of the operator’s bond and may recover plugging and abandonment costs of t he injection well pursuant to 805 KAR 1:110 (8). The well owner/operator may be subject to additional penalties as prescribed in KRS 353.991 and 353.992 including imprisonment for a term not exceeding one hundred and eighty (180) days.

 Consent a greement s and administrative orders shall be established b y DOG and the Class

II owner /operator to bring the well into compliance after completion of corrective action plans as defined in Sec. VI (D).

 Civil refer rals from the general public or local, state or fed eral agencies shall be given top priority as described in Sec. VII.

 Criminal referrals will occur in the event DOG identifies illegal Class II injection activity or gross negligence leading to USDW endangerment which will subject the owner/operator to pen alties prescribed in KRS 353.991 and 353.992.

 Class II wells identified as in

- active or “shut

- in” by DOG will be cited for improper abandonment pursuant to KRS 353.550 and require the well to be placed back into operation, plugged or the well owner/operat or must obtain a temporary abandonment permit previously described in Sec. III (B).

 Pipeline severance may be done by DOG in conjunction with additional measures which include directing the well owner/operator to close or shut

- in the well by placing a “ red

tag” on the wellhead thereby suspending the Class II permit until the well is brought into compliance. If the well owner/operator continues operation despite the “red

- tag” order, DOG would seek injunctive relief in the local circuit court. Initially, the court could grant a temporary restraining order. That would be effective for a limited period of time.17

An evidentiary hearing would then be necessary for a temporary injunction to be issued, which would provide a court ordered “shut

- in” of the injec tion well until a trial is held.

DOG proposes to implement violations listed below that deal specifically with Class II injection

wells:

 Injection without a Class II permit/failure to obtain a Class II permit.

 Failure to protect the Underground Source of Drinking Water (USDW).

 Failure to run a Mechanical Integrity Test.

 Mechanical Integrity Failure.

 Injection with a higher pressure than assigned to well.

 Injection at a higher rate than assigned to permitted well.

 Injection of a non

- authorized substance.

 F ailure to confine injected fluid to the permitted zone.

 Failure to Maintain Class II Financial Responsibility.

 Failure to file well records. Note: The above referenced list of violations are some; but not all of the violations that are applicable to Class II wells.

X . FINANCIAL RESPONSIBILITY The owner or operator of all Class II wells shall demonstrate financial responsibility to plug and abandon a well to DOG requi rements. If DOG issues a notice of violation, forfeits the bond, and subsequently plugs the well, the owner or operator shall be responsible for any additional plugging and abandonment costs which exceed s the bond amount. These costs, if not paid shall be recovered by civil suit pursuant to KRS 353.180 (3). In addition to recovery costs, th e owner or operator shall be subject to penalties as prescribed in KRS 353.992.

In 1966, DOG began requiring well operators to post performance bonds on wells operated in Kentucky. Conventional oil and gas w ells drilled prior to 1966 being produced by th e original operator do not require bonding [those wells fall under “grandfather status”]. This designation of “grandfather status” for older wells will not apply to Class II injection wells, all injection wells must demonstrate financial responsibility pur suant to 805 KAR 1:110 (8)(1).

Blanket bonds in the amount of $10,000.00 cover all wells operated by a company and shall be on file with the DOG prior to permitting or acquiring wells. A violation against a blanket bond may prevent the operator from permi tting or acquiring additional wells.

Individual Bonds must accompany the permit application when it is submitted to the DOG or be

on file before wells are transferred. Individual bonds are available on wells based on the wells’ depth as follows:

DEPTH (FT ) BOND AMOUNT ($)

0

- 500’ $500.00

501’

- 1,000’ $1,000.00 1,001’

- 1,500’ $1,500.00

1.501’

- 2,000’ $2,000.00 2,001’

- 2,500’ $2,500.0018

2,501’

- 3,000’ $3,000.00 3,001’

- 3,500’ $3,500.00 3,501’

- 4,000’ $4,000.00 4,001’ or Deeper $5, 000.00 or an amount set by the

Oil and Gas Conservation Commission Types of bonds are listed below : CASH

- Certified Bank Check, Money Order or CASH.

SURETY

- Obtained from an insurance company. Division assigned “Power of Attorney” from insurance company.

LE TTER OF CREDIT

- Obtained from bank or other financial institution.

CERTIFICATE OF DEPOSIT

- Operator must have $5,000.00 bonding on file with Division in another form. The Division cannot accept a $10,000.00 Certificate of Deposit. Original must be

on file with Division along with verification form.

BONDING AMENDMENT KRS 353.590 was amended due to legislative action to include a Blanket Bond Tier Schedule Effective July 15, 2006 based on the well operator being classified as “Qualified” or “Non

Qualified” a s described below: Qualified

 Operator must have a blanket bond on file prior to July 15, 2006 and have no outstanding,

unabated violations.

 Operator must have a record on compliance with all DOG statutes and regulations for a period of thirty

- six (36) mont hs.

 Provide proof of financial ability to plug and abandon wells covered by the blanket bond.

Qualified Blanket

- Bond Tier Schedule

No. of Wells Bond Amount

1

- 25 Wells $10,000

26

- 100 Wells $25,000

101

- 500 Wells $50,000

501+ Wells $100,000 Operators op erating more than twenty

- five ( 25 ) wells under an existing blanket bond prior to this amendment will continue to operate under the $10,000 bond; if new acquisitions or permitting places the operator in a new tier the bonding guidelines for that tier will a pply.

Non

- Qualified

 Operator has more than ten (10) violation s of KRS chapter 353 within a thirty

- six (36)

consecutive month period.

 Operator has outstanding, unabated violations which have not been appealed.

 Operator has had a forfeiture of an individual bond or partial forfeiture of a blanket bond. And has no agreement with DOG for plugging of the well(s).

 Operator has a permit or permits upon which a portion , or all of the bond has been forfeited and the proceeds have been spent by DOG to plug the well(s ).19

Non

- Qualified Blanket

- Bond Tier Schedule

No. of Wells Bond Amount

1

- 100 Wells $50,000

101 + Wells $100,000

X I . STAFFING AND RESOURCES

Current DOG staff will manage the Class II UIC program; the DOG Assistant Director will

assume the role as UI C Manager and initially administer the UIC program and process Class II permit applications, inspection duties will be assumed by existing field staff

. Administration and coordination of the UIC program will include , but is not limited to, permit review, coordination of field inspection activity, reporting to US EPA, and UIC enforceme nt and compliance matters. Existing administrative specialists will provid e assistance as needed on permit issuance, processing Class II inspections and enforcement actions. DOG’s IT

- Programmer has incorporated changes in the database system to accommodate UIC data tables, forms and reports to implement Class II primacy that is compatible with current DOG well permitting, financial responsibility, inspection capability and vio lation data. The chang es will also provide for EPA

Class II form 7520 reporting. Changes in DOG’s database system are currently used by other Class II primacy states including Utah, North Dakota and Nebraska. Along with Kentucky, these

states use Microso ft Access connected to a Microsoft SQL Server using Ground Water Protection Risk Based Data Management System (RBDMS)

.

DOG proposes to hire an additional environmental inspector to accommodate the additional

duties upon USEPA primacy approval. DOG insp ectors are tra ined to conduct UIC inspections, types of inspections will include, but are not limited to, mechanical integrity tests (MIT), cementing of casing, supervising corrective action plans and pl ugging of Class II wells. DOG inspectors currently r eview proposed plugging and abandonment of Class II wells to ensure USDW’s and minable coal seams are isolated with placement of cement plugs , and in some cases witnesses the plugging and abandonment of Class II wells in Kentucky

. Upon request from
USEPA, DOG inspectors have sent inspection reports for plugging operations to Region 4 or

delivered to USEPA contractors. In addition, Division inspectors have witnessed and ap proved mechanical integrity tes ts in the past as a courtesy to USEPA

. DOG anticipate s the hiring of one (1) additional field inspector within the first year of primacy approval.

Funding for administration of the Class II program will be provided by the Class II F ederal grant allotment from USEPA anticipated to be approximately $175,000 and the Commonwealth of Kentucky General and Restricted Fund s required match of twenty

- five (25%) of approximately $59,000

. A work

- plan component (program element budget) template is included on the following page showing the estimated a nnual costs (feder al and state), and a breakdown of DOG employee position s and time allocated for each phase required for implementation of the Class II

program . Estimated costs include the initial year and second year associated with Class II implementation

.20 WORK PLAN COMPONENTS (PROGRAM ELEMENT BUDGET)

WORK PLAN

COMPONENT FEDERAL

FUNDS STATE

FUNDS COMBINED

FEDERAL

& STATE

FUNDS DOG

EMPLOYEE

POSITION

TITLE TIME

ALLOCA T ED (%)

ADMINISTRATION $ 11,653.65 $ 3,884.55 $ 15,538.20 (1) ADMIN SP.

UIC MGR. 15%

10%

PERMITTING $ 40,333.04 $ 13,444.34 $ 53,777.38 UIC MGR. 72 %

SURVEILLANCE, INSPECTIONS, & QUALITY

ASSURANCE $ 59,631.55 $ 19,543.70 $ 79,175.25 (5) INSPECTORS 30%

ENFORCEMENT $ 8,301.02 $ 2,700.68 $ 11,001.70 (1) ADMIN SP.

UIC MGR. 12%

8%

AQUIFER IDENTIFICATION

AND EXEMPTION $ 5,266.51 $ 2,188.67 $ 7,455.18 UIC MGR. 10 %

CLASS V ASSESSMENT N/A N/A N/A N/A N/A

DATA MANAGEMENT $ 27,092.25 $9,030.75 $ 36,123.00 IT

– DATABASE

PROGRAMMER 60%

PUBLIC INFORMATION,

T RAINING, AND

TECHNICAL ASSISTANCE $ 3,377.07 $ 1,092.35 $ 4,469.42 ADMIN. SP. 5%

OTHER * $ 20,824.77 $ 6,941.59 $ 27,766.36

.

TOTALS $ 176,479.86 $ 58,826.63 $ 235,306.49

FIRST 2 YEARS CLASS

II PROGRAM

IMPLEMENTATION

COSTS $ 352 ,959.72 $ 117,653.26 $ 470,612.98

*Other costs included vehicle usage/maintenance, inspector purchases (gauges, wrenches, etc.).

Inspector Equipment Requirements

1. 4

- wheel drive vehicle

2. 500 p.s.i. Wika, fluid filled pressure gauge

3. C rescent wrench

4. 24

- inch pipe wrench

5. PC Tablet computer with Risk Based Data Management System (RBDMS)

6. S teel

- toed boots

7. H ardhat21 8. S afety glasses

9. H earing protection

10. Uniforms

11. Digital camera

12. First

- aid kit

X I I . ADDITIONAL AGENCIES Administration of the Class II program will not involve other Kentucky state regulatory agencies.

X I I I . CLASS II WELL INVENTORY An inventory of Class II wells in the Commonwealth has been provided by USEPA Region IV (see below)

. A review of active and abandoned Class II wells will be completed by DOG and inspections will be performed to e n sure the wells are in compliance with DOG regulations and statutes and injection operations can be done without endangering USDW’s

. Injection wells that have been granted a temporary abandonment permit may req uire an MIT prior to injecting if there has been any remedial work involving pulling the tubing or ”un

- seating” the packer during

the shut

- in period. If the well is abandoned for a period of two (2) or more years, the well owner/operator shall plug the we ll in accordance 805 KAR 1:110 (10) under the direction of a DOG inspector.

A summary of Class II wells broken down by DOG district s and county is included

in Appendix B

.

CLASS II WELL INVENTORY

STATUS NUMBER OF PERMITS
Active, abandoned, shut

- in or

t emporarily abandoned 2, 850

Proposed, under const. or converted 521 Converted injection to production 277 Plugged and Abandoned 2, 901

TOTAL 6, 549

XI V . EXEMPT AQUIFERS

If an owner/ operator desires an exempted aquifer statu s, he must submit adequate d ata to DOG using the crite ria established in 805 KAR 1:110 (3) which defines an exempted aquifer as:

1. It does not currently serve as a source of drinking water; and

2. It cannot now and will not in the future serve as a source of drinking water because:

a . It is a mineral, hydrocarbon, or geothermal energy producing, or may be demonstrated to contain minerals or hydrocarbons that, considering their quantity and location, are expected to be commercially producible.

b . It is situated at a depth or location which makes recovery of water for drinking water purposes economically or technologically impractical.

c . It is so contaminated that it would be economically or technologically22 impractical to render that water fit for human consumpti on. d . The total dissolved solids content of the groundwater is more than 3,000 mg/l, and less than 10,000 mg/l and it is not reasonably expected to supply a public water system.

I f an aquifer exemption is required after technical review of the permit application

, it will be

submitted to EPA for exemption approval

. Upon approval by the EPA Regional Administrator; the well owner/operator will receive written notification of the exempted aquifer designated the geologic formation and the subsur face interval that is exempted as an underground source of drinking water. Based on documentation provi ded by EPA, there have been eight (8) exempted aquifers in Kentucky. In addition, a public notice is required for a “Proposed Aquifer Exemption in Conj unction with the Proposed Issuance of Underground Injection Control Permit”. Attached to the public notice will be a fact sheet explaining the aquifer exemption and is part of the Class II permit issuance process and is subject to public comment and/or ob jection.

XV . PUBLIC PARTICIPATION IN PERMIT ISSUANCE Pursuant to 805 KAR 1:110, a notice of Class II permit application will be served on all surface

property and subsurface property owners with in the one

- quarter (1/4) mile area of review of the

propose d injection well. Notification shall be personal or via certified mail. DOG will require owner/operators of any Class II permit application place a notice in a newspaper of general circulation in the county where the proposed well is located. The notice shall include the name and address of applicant, location of the proposed well, geologic name and depth of injection zone, maximum injection pressure and maximum rate of barrels each day. The notice shall also provide a period of thirty (30) days for wri tten comments or request for a hearing. The notification shall include the address to which the written comments or hearing requests shall be forwarded, how a person may receive written notice of the proceedings and where additional information concerning the proposed permit may be obtained. Proof of service of the notification shall be delivered to DOG before a permit for a Class II well is issued.

DOG conducts hearings under the Administrative Procedures Act KRS Chapter 13B , Class II

well permit hearing s will be conducted by the Kentucky Energy and Environment Cabinet

- Office of Administrative Hearings.

Section 14 of 805 KAR 1:110 provides for published notice of at least thirty (30) days for public comment of any enforcement action beyond bond forfeitur e of a Class II well. A bond may be forfeited by the Division of Oil & Gas for any violation of oil and gas statutes and regulations. To initiate bond forfeiture, DOG sends a notice of violation via certified mail to the well owner/operator. If the viol ation isn’t corrected within forty

- five (45) days, bond forfeiture proceedings may begin pursuant to KRS 353.590 (7). An order of forfeiture letter will be mailed to the well owner/operator and the surety company, should the owner or surety company disagr ee with the order of forfeiture, both parties have the right to bring an action for review in the local circuit court or the Franklin County Circuit Court within thirty (30) days from the date the order of forfeiture was issued. Failure to file a request for review shall result in the order of forfeiture becoming final and non

- appealable. Once the thirty (30) days have lapsed, DOG will23

take the necessary steps to obtain the bond money from the appropriate bond surety company,

bank or other financial insti tution.

DOG will also prepare a Notice of Proposed Issuance of Underground injection Control (Class II) Permit and send the notice to all landowners within the AOR and all concerned parti es that have contacted DOG to receive copies of all public notices. An example of the notice is attache d in Appendix C.

X V I . PUBLIC COMPLAINTS

As standard operating procedure, all complaints received by the general public are designated as high

- priority and imme diately investigated by DOG field inspection staff. Insp ectors follow complaint response and documentation procedure as outlined in the “ Inspector’s Manual ”. A report of the investigation is filed with the Inspector Supervisor and forwarded to the Frankfort

office. Corrective measures are identified or violat ions cited if appropriate. Should the complaint involve another state or federal agency, the inspector wil l contact the appropriate state or federal agency . Pursuant to s ection 805 KAR 1:110 (14) , DOG will investigate and provide written response to all citizen s filing complaints regarding any concerns for the endangerment of an underground source of drinking water from a Class II well

. As referenced in previously in Sec. VII, a complaint regarding a USDW contamination or degradation suspected of being impacted by a Class II injection operation will receive top priority and will be inspected immediately by DOG inspectors.24 

### APPENDIX A

KENTUCKY DIVISION OF OIL & GAS

CLASS II PERMIT APPLICATION CHECKLIST
OPERATOR: ___________________

__________________________________________ WELL NAME: ___________________________________ WELL NUMBER: ____

_ _ ___ __ NEW WELL  EXISTING WELL (PROPOSED CONVERSION) 
DATE APPLICATION RECEIVED: _______________ DOG FILE NO. : _______

_______ ___

 DOG Class II permit application (F orm ED

- 14) completed and properly filled out and signed by an authorized agent of the applicant. 805 KAR 1:110 (2), KRS 353.570 (1) and
(2).

 A well location plat map included with the permit application in accordance with 80 5

KAR 1:030.

Area of Review (AOR ) ( 805 KAR 1:110 (7)

 A 7.5’ topographic map with the Area of Review (AOR) clearly marked and

circumscribing a distance of 1⁄4 mile around the proposed injecti on well.

The map shall also show:

 The number or name and location o f e xisting producing wells, injection wells,

abandoned wells, dry holes , plugged wells and domestic wate r wells.

 Surface and subsurface mines, quarries and other pertinent surface features including
permanent residences and all primary/secondary roads

.
 K nown or suspected faults (identified on USGS 7.5’ quads).

 Location of hazardous waste treatment or disposal facilities.

 Location of a ll surfac e and subsurface mines, quarries , residences, roads, and known or

suspected faults with in the AOR. Only inform ation of public record and pertinent

information known to the applicant is required.

 Location of distribution manifold applying injection fluid to wells in the AOR including all

system monitoring points.

 Location of all rivers and streams.

 Location, name s and mailing addresses of all permanent residences.

Additional supplemental information required for AOR:

 Tabulation of well data including a description of well type, wellbore construction, date

drilled, location, total depth, producing horizon(s), reco rd of plugging or well

completion.25

 Record of completion and plugging for each well which penetrates the injection zone,

and any other wells within the AOR which would be affected by proposed increase in

pressure if the injection well is operated over the f racture pressure of the injection

formation.

 For wells in the AOR which are improperly sealed, completed, or abandoned, a

corrective action plan which consists of steps or modifications to prevent movement of

fluid into a USDW is required.

Wellbore Schemat ic of the Proposed Class II Well (805 KAR 1:110 (11)(d) ( e)

 Total Depth (or plug

- back depth) of well

.
 Depth of injection or disposal interval

.
 Geologic name of the injection zone or disposal zone.

 Vertical distance separating the top of the injection z one f rom the base of the USDW.

 Depth of the top and the bottom of all casing strings and cement displaced.

 Size of the production casing and tubing and the depth of the packer.

 Depth to the base of the deepest USDW.

Laboratory Sample Analysis of Parameters in I njected Fluid (805 KAR 1:110 (11)(2)(e)(2)

 Barium (If Sulfate is less than 500 mg/l)  Calcium  Total Iron

 Magnesium  Sodium  Bicarbonate  pH

 Specific Gravity  Carbon Dioxide  TDS  H 2 S

Operating Data (805 KAR 1:110 (11)(2)(g)(5)

 Estimated maximum injection pressure.

 Estimated average injection pressure.

 Estimated maximum daily injection rate and volume.

 Estimated average daily injection rate and volume.

 Material Safety Data Sheet (MSDS) for all inhibitors added to injection fluid

.
 Nature of the annulus fluid between the tubing and casing.

 Amount of inhibitor.

 Pressure at which the annulus will be maintained

.

Geologic Data on the Injection and Confining Zones (805 KAR 1:110 (5)(4)

 A description of the injection zone including: lith ologic description, geologic name, thickness, & depth.

Underground Sources of Drinking Water (USDW) (805 KAR 1:110 (11)(2)(h)

 All USDW’s within the AOR shall be described through which the well would penetrate:

o Geologic Description and Name.

o Depth to bot tom of USDW.26

Construction Procedures (805 KAR 1:110(11)(2)(i) Description of the current or proposed casing program on the Casing and Cementing Plan for UIC Wells (Form ED

- 25) and shall include the following:

 Casing size, weight, and type.

 Cement volume ( sacks, bbls, or ft 3 ) and type.

 Packer type.

Stimulation Program (805 KAR 1:110 (11)(2)(j)

 Proposed stimulation (fracturing or acidizing) program, if no program is proposed, then

state so.

Plan for Shut

- ins and Well Failures (805 KAR 1:110 (11)(2)(k)

 Descri ption of proposed contingency plans to cope with all shut

- ins or well failures so as

to prevent migration of fluids into USDWs.

Injection Procedures (805 KAR 1:110 (11)(2)(l)

 If a manifold monitoring program is utilized, a description of the program and a

demonstration equivalence to individual well monitoring.

Plugging and Abandonment Plan (805 KAR 1:110 (10) (805 KAR 1:060 or 805 KAR 1:070)

 Proposed plugging and abandonment plan

 Current Cost needed to properly, close, plug and abandon the well(s).

Financi al Responsibility (805 KAR 1:110 (8) Demonstration of financial responsibility is required to properly plug and abandon the well to the

satisfaction of DOG

.

Aquifer Exemption (805 KAR 1:110 (3) If an aquifer exemption is requested, necessary data must be submitted to verify the exemption meets the following criteria:

 It does not currently serve as a source of drinking water.

 It cannot now and will not in the future serve as a source of drinking water:

o It is a mineral, hydrocarbon, or geo

- thermal energy pr oducing, or may be

demonstrated to contain minerals or hydrocarbons that, considering

their quantity and location, are expected to be commercially producible.

o It is situated as a depth or location which makes recovery of water for

drinking water purposes e conomically or technologically impractical.

o It is so contaminated that it would be economically or technologically

impractical to render the water fit for human consumption.27 o The TDS (total dissolved solids) content of the groundwater is more than
3,000 mg/ l, and less than 10,000 mg/l and it is not reasonably expected

to supply a public water system.

Corrective Action Plans for Wells in the AOR (805 KAR 1:110 (7)(4)(a)(b) Wells in the AOR which are improperly sealed, completed or abandoned require a correct ive action plan which will include proce dures to prevent vertical migra tion of fluid into USDW ’ s. DOG will review the well type, well construction, date drilled, carter coordinate location, depth, record of completion and/or plugging affidavits for each w ell in the AOR that penetrates the injection zone. DOG will consider following factors during evaluation of corrective action plan:

 Nature and volume of injected fluids.

 Nature of native fluids or by

- products of injection.

 Potentially affected population.

 Geology

 Hydrology.

 History of injection operations.

 Well Log and Completion Reports.

 Plugging Affidavits and plugging records upon abandonment.

 Hydraulic connections with USDW’s.

Notification Process (805 KAR 1:110 (11)(4) Applicant shall personally or by certified mail, submit written notification to:

 Each owner of rights to the surface or subsurface property that the well penetrates.

 Owner of any property within the AOR.

 Owner/operator of any oil/gas well (producing or shut

- in) within AOR.

 Permittee of a n y underground mine within AOR

.

In addition, applicant shall place a “Notice of Permit Application” in a newspaper of general circulation in the county the proposed well is located. Individual and publication notices shall

include:

 Name and address of app licant.

 Location of proposed well.

 Geological name and depth of the injection zone.

 Maximum injection pressure.

 Maximum rate of barrels each day.

The notice shall specify that a person who wishes to object to the issuance of a Class II permit may submit wr itten comments or request a hearing.28 

### APPENDIX

– B Kentucky Cla ss II Well Inventory by County

COUNTY NUMBER OF COUNTY NUMBER OF

Barbourville District CLASS II WELLS Madisonville District CLASS II WELLS

Bell 1 Caldwell 1

Breathitt 1 Ch ristian 138 Clay 1 Daviess 402

Harlan 1 Henderson 578

Laurel 1 Hopkins 158

Lee 1363 McLean 205

Leslie 32 Muhlenberg 216
Perry 3 Todd 2 Whitley 2 Union 258

Total 1405 Webster 169

Total 2127

Frankfort District

Estill 115 Pikeville District
McCreary 4 Boyd 3

Powell 330 Carter 1

Total 449 Elliott 18
Greenup 3 Glasgow District Johnson 617

Adair 45 Lawrence 328

Allen 12 Magoffin 286

Barren 8 Meni fee 30 Breckinridge 8 Pike 1

Butler 120 Wolfe 102
Casey 1 Total 1389

Clinton 12

Cumberland 21 CLASS II SUMMARY WELLS

Edmonson 4 Barbourville 1405

Green 56 Frankfort 449

Hancock 243 Glasgow 1179

Hart 17 Ma disonville 2127
Logan 2 Pikeville 1389

Meade 7 TOTAL 6549

Metcalfe 15

Monroe 10

Ohio 519

Russell 1
Simpson 4 Taylor 12

Warren 60
Wayne 2

Total 1179

Inventory obtained from EPA Region 429 

### APPENDIX C

PUBLIC NOTICE

KENTUCKY DIVISION OF OIL & GAS

P.O. BOX 2244
FRANKFORT, KY 40602

502

- 573

- 0157

Contact: marvin.combs@ky.gov

Public Notice No. Date

NOTICE OF PROP OSED I SSUANCE OF UNDERGROUND IN JECTION CONTROL (CLASS II) PERMIT

The Kentucky Division of Oil & Gas intends to issue a Underground Injection Control (Class II) permit under authority of 805 KAR 1:110 to:

Company Name and Address

The proposed Class II per mit will authorize the drilling, conversion, operation, injection, plugging and abandonment of the (well name & number) enhanced recovery well in the (oil field) located in (county), Carter Coordinate location.

The permitted well will be used to inje ct (water/N 2 / CO2 ) in the (formation) in (depths) below

the surface. The proposed UIC permit was drafted in accordance with t he provisions of the Safe Drinking

Water Act, Kentucky Administrative Regulation 805 KAR 1:110 and other lawful standards and

r egulations. The permit limitations and conditions are tentative and open to comment from the public. Persons wishing to comment upon or object to any aspects of the permit issuance are invited to submit same in writing within thirty (30) days of this not ice to : Kentucky Division of

O il & Gas, P.O. Box 2244 Frankfort, KY 40602 (502) 573

- 0147, ATTENTION: Marvin Combs ( marvin.combs@ky.gov ). The public notice number and the UIC permit number should be

included in th e first page of comments. All comments received during the public notice period will be made a part of the administrative record of this permit and will be available for public

review. All comments received within the thirty (30) day period will be c onsidered in the formulation of the final determination regarding the permit issuance. Any interested person may, within the thirty (30) day period, request a public hearing. Where there is a significant degree of public interest in the proposed permit i ssuance, the Division of Oil & Gas will hold a public hearing. Any request for a hearing must be in writing to the address given above and must state the nature of the issues proposed to be raised in the hearing. After consideration of all timely co mments, the requirements and policies in the Safe Drinking Water Act and appropriate regulations, and, if a hearing is held, after consideration of30

all comments, statements and data presented at the hearing, the Division of Oil & Gas will make

final determ inations regarding the permit issuance. If the final determinations are substantially unchanged from the tentative determinations outlined above, the Division of Oil & Gas will so notify all persons who submitted written comments or participated in the he aring, if any is held.

If the final determination s are substantially changed, the Division of Oil & Gas will issue a public notice indicating the revised determinations. Within thirty (30) days after the Division of Oil & Gas serves notice of the abo ve final permit decision, any person who filed comments or participated in the public hearing, if any, may petition the Division of Oil & Gas to review the permit decision or any condition therein. Any person, who failed to file comments or failed to part icipate in the public hearing, if any, may petition for administrative review only to the extent of the changes from the draft to the final permit decision. Additional information regarding administrative review is available by contacting Larry Moscoe of the Department for Natural Resources

- Office of Legal Services at (502) 564

- 6940. Technical information regarding the permit review is available by contacting Marvin Combs of the Division of Oil & Gas at (502) 573

- 0147. The administrative record, incl uding application, statement of basis, draft permit, comments received and additional information on hearing procedures is available by writing the Division of

Oil & G as at the above address or for review and copying at 1025 Capital Complex East,

Frankfort , KY 40602 between the hours of 8:00 am and 4:30 pm, Monday through Friday. Copies will be provided at a cost of __ per page.31



# APPENDIX D

DIVISION OF OIL & GAS

REGULATIONS (KAR Chapter 805)

and

STATUTES (KRS Chapter 353)32



# APPENDIX E

CLASS II FORMS