Fidelity Exploration and Production is moving ahead with plans to conduct a new and experimental “fracking” test for the first time at one of its Big Flat-area wells near Dead Horse Point, parent company MDU Resources announced this month.
Company spokesman Tim Rasmussen said the well-stimulating technique on state-administered lands is much smaller in size and scope than traditional fracking, or hydraulic fracturing, activities.
Under the conventional process, a high-pressure fluid mixture — usually consisting of water, chemicals and sand — is injected into a well to create cracks in the rock through which oil and natural gas can flow more freely. While traditional fracking activities at shale formations use large amounts of water, Rasmussen said the company will be working with small amounts of oil. No water will be used during the experimental process, he said.
Generally speaking, most fracking activities at shale wells use about 55,000-plus barrels of fluids; in comparison, Fidelity’s test will use 2,200 barrels of oil, according to Rasmussen.
Conventional fracking is controversial: Proponents tout economic benefits from increased oil recovery, while opponents raise concerns over groundwater contamination, depletion of fresh water, degradation of air quality and the potential for increased earthquake activity.
Local environmentalists are raising similar concerns about Fidelity’s latest plans.
Moab resident Bill Love said that the U.S. Bureau of Land Management (BLM) did not include the dangers of fracking in its environmental analysis for Fidelity’s development of the Big Flat area. He has concerns that fracking chemicals will affect the recharge area for springs, many of which are located in Canyonlands National Park. He also said that the chemicals could eventually find their way into the Green River, which is part of a river system that provides drinking water to more than 30 million people.
“Neither the BLM nor the National Park Service is prepared for the consequences of fracking in Big Flats,” Love said.
Rasmussen noted that the well site in question is located on state-administered land, so BLM permitting is not required. However, the company worked with the Utah Division of Oil, Gas & Mining (DOGM) for permitting and approval, he said.
He emphasized that the process is purely a trial run at this point.
“We need to try methods to improve production on some of the poorer-producing wells,” he said. “Our plan is to first try this on one well. The specific test well is poorer than average due to not having many natural fractures. If this test on a single well is somewhat successful, we will likely try on another well within a few months.”
As Fidelity moves forward with its plans, MDU Resources is putting its exploration and production arm on the market.
In the company’s third-quarter earnings report, MDU Resources President and CEO David L. Goodin said that MDU continues to see attractive investment opportunities at Fidelity. However, the capital required to effectively grow the business “would compromise our ability to fund the substantial opportunities we are seeing at our other lines of business,” he said.
Rasmussen said that the decision to sell Fidelity was the result of “a comprehensive review of the business and strategic priorities at MDU.”
He did not expect the sale to affect operations in the area.
“We will continue with our drilling and production operation in Grand County during the marketing period so from an activity perspective, not much is going to change,” Rasmussen said. “We feel that significant upside remains in the area and hope the new operator will continue what has been started.”
Fidelity has been developing the Big Flat oil field since 20** In 2012, its Cane Creek 12-1 was the largest production on-shore oil well in the contiguous 48 states, producing nearly 500,000 barrels of oil that free-flowed to the surface without a pumping unit.
Production on Cane Creek 12-1 has since slowed significantly, down from a peak of 47,000 barrels per month in December 2012, to 8000 barrels this past September. A pumping unit was recently installed to bring the oil to the surface.
Rasmussen said that the sale was not due to under-performance, although recently-drilled wells in the area have yielded lower-than-expected results due to the presence of tighter rock than what was found in higher flow wells.
“Fidelity has a strong outlook and we believe it will generate robust interest from potential acquirers given its significant current production and cash flow as well as high growth potential,” he said. “We have publicly discussed the recent operational challenges in Utah’s Paradox Basin and we have a plan in place with respect to ongoing development and we remain excited about its significant upside.”
The Big Flat oil field has faced close scrutiny from environmental groups due to its proximity to Canyonlands and Dead Horse Point. They have also raised concerns about the construction of an above-ground natural gas pipeline. Among other things, they allege that it doesn’t meet required safety standards, which they say the BLM has not enforced.
Rasmussen said that environmental activism in the area didn’t have any influence on MDU’s decision to sell Fidelity.
“Unfortunately, this is something that the energy industry deals with in most areas of operation,” he said.
Fidelity’s plans near Dead Horse Point come as company is being put up for sale
“Neither the BLM nor the National Park Service is prepared for the consequences of fracking in Big Flats.”
“We need to try methods to improve production on some of the poorer-producing wells. Our plan is to first try this on one well. The specific test well is poorer than average due to not having many natural fractures. If this test on a single well is somewhat successful, we will likely try on another well within a few months.”