Niobrara oil search brings seismic surveys

The search for oil in southeast Wyoming has set off a massive seismic survey effort. Last fall, three seismic surveys alone blanketed 1,500 square miles in Laramie and Converse counties. That’s an area almost half the size of Yellowstone, or 50 percent larger than the state of Rhode Island.

These are some of the largest surveys ever seen in Wyoming, according to state officials. Initial drilling hasn’t struck upon another bonanza field like the Bakken oil field in North Dakota or the Jonah natural gas field in western Wyoming. But with a comprehensive mapping of the area’s geology, oil developers hope to improve their ratio of success.

“They are looking for another Silo Field — an area where they can drill a few dozen wells and produce oil, not drill 40 wells and only have 10 producers,” said Tom Doll, Wyoming Oil and Gas Conservation Commission supervisor.

In April 2010, EOG Resources announced its “Jake” oil well in Weld County, Colo. produced 50,000 barrels over a 90-day period. That news ignited interest in the Niobrara Formation of the Denver-Julesberg Basin, setting off a rush of oil and gas exploration that swept like wildfire across the state line into southeast Wyoming.

Last summer and fall brought a frenzy of oil drilling in Laramie, Platte, and Goshen counties in Wyoming. All told, companies drilled 57 wells in the Niobrara Formation across the three counties, according to the oil and gas commission.

But by late December, only eleven of those wells had been completed, and companies had not made any major discoveries. Since the beginning of this year drilling activity has slowed almost to a halt. By early March the rig count in the three southeast Wyoming counties had dropped to zero, according to Doll.

This drilling hiatus does not indicate an end to the exploration boom, said Doll, but a shift in corporate strategy

“We haven’t had a well completed that was like the Jake well that got everybody excited,” he said. “People are waiting to see if there is some additional data out there so they don’t have to drill wells that may not be commercial.”

MAJOR SEISMIC PLAYERS

Two geophysical companies are responsible for most of the seismic work going on in southeast Wyoming.

In Laramie County, Global Geophysical Services is working on a seismic survey grid of 828 square miles. The project started in January and sprawls over one-third of the county. It stretches from the outskirts of Cheyenne north to the Platte/Goshen County line and east nearly to Nebraska.

Global Geophysical spokesman Lance Moreland would not name the clients of the survey, but said at least eight different companies have subscribed to the project.

Global Geophysical has surveyed parts of Laramie County without the backing of a specific client or leaseholder. Moreland said mixing speculative surveying with sponsored acreage is a common industry practice.

“The hope is that at some point additional clients will join the program or license the data after it is acquired,” Moreland said. But that does not mean surveyors do entire projects on speculation.

“Nobody shoots the data without initial underwriting in hopes that it will be purchased.” That would be too great a financial risk, Moreland said.

Global Geophysical crews have completed about 730 square miles of the survey.

“We want to wrap things up for the winter season at the end of (March). In all likelihood we’ll come back and finish next winter,” Moreland said. “We don’t want to interfere with people’s farming, and we want to work when the ground is frozen so we have as little surface damage as possible.”

The Global Geophysical survey requires a crew of 250 workers, plus 30 land agents to secure surface use agreements with private landowners. In terms of land area and crew size, Doll said, “That’s probably the largest (seismic) project that’s been done in the state.”

In Converse County, Dawson Geophysical has one permit for a 317 square mile seismic survey and another for 364 square miles. Spokesman Bret Schafer said he has, “Anywhere from 40 to 80 people in the field.” The company has subcontracted land agent work to MacDonald Land Services.

But the target formation in Converse County is not the Niobrara shale, Doll said. Instead the surveys and drilling are aimed at the Frontier, Carter, Sussex, and Parkman formations of the southern Powder River Basin that have long been known to contain oil.

Dawson Geophysical’s two Converse County surveys cover leases controlled by Chesapeake Energy, one of the country’s largest oil and gas producers.

Several other seismic surveys are also underway. Last fall, Geokinetics and All State Land Services conducted a 60-square mile survey in Converse and Goshen counties for Samson Oil and Gas. It was a small project for Geokinetics, which recently completed a 1,000 square mile survey in Colorado.

SEISMIC TECHNOLOGY AND ECONOMICS

When geophysical surveys first came into use, seismic waves were created by exploding dynamite buried 20 to 30 feet underground. Dynamite is still used in some cases, but the current surveys in Wyoming rely on a portable non-explosive seismic wave source called Vibroseis, commonly known as “thumper” trucks.

The trucks weigh 20 tons and roll on broad tires similar to those used by farm tractors. Attached to the bottom of the truck is a 3-foot square plate that is lowered to ground by hydraulics and lifts the vehicle up into the air, explained Tony Barr of Samson Oil and Gas.

In this position, the truck becomes a 20-ton jackhammer that hops up and down on the earth in roughly 10-second bursts, sending seismic waves down into the ground.

Barr said the surfaces of buried geological formations act like mirrors, reflecting the waves back to “geophone” listening devices placed at various locations on the surface. The geophones can be wireless, but often they are connected by long networks of cables.

Modeling software then takes the resulting data and creates maps of geologic structures, which geologists interpret to locate potential reservoirs for trapped oil and gas.

Companies would rather learn as much as they can through seismic surveys before they go to the financial risk of drilling an exploratory well. In the Niobrara, drilling  a horizontal well and performing hydraulic fracturing to complete the well costs anywhere from $3 million to $9 million, Doll said.

Drilling 10 wells would cost at least $30 million and yield conclusive results about the presence of oil and gas over about 10 square miles. For a similar price, the Laramie County seismic survey will provide of rough sketch of 800 square miles to a depth of 20,000 feet.

Moreland said Global Geophysical’s Laramie County survey cost between $30,000 and $50,000 a square mile, and in total around $20 million or $40 million.

“We estimated that during the peak we were spending about $250,000 a week on food, lodging, fuel, services,” Moreland said.

Schafer said Dawson Geophysical spent, “Tens of thousands of dollars a day,” in Converse County last fall.

“Any time you bring in that many people, that’s a big impact that’s seen on (local) sales and use taxes,” said Doll.

SPLIT-ESTATE HEADACHES

As seismic companies shake up the ground to discover reservoirs of oil and gas, they are also raising the hackles of some private landowners.

Since January the Laramie County Sheriff’s Department has received about 10 complaints a month from landowners who have taken issue with the seismic surveyors.

Most of the conflicts arise out of split-estate laws that allow the mineral rights under a certain tract of land to be severed from the surface ownership. In many cases, the federal government has retained ownership of (and subsequently leased out) mineral rights under surface land that has passed on to private ownership. In other cases, private landowners have split their own estates, dividing ownership of surface and mineral rights. An entity with mineral rights, or a contractor working on behalf of the mineral owner, may enter private surface to perform seismic surveys and develop the minerals. But typically mineral developers strike a “surface use” agreement that results in a payment to the surface owner. If the two parties can’t come to an agreement, the lease holder can post a nominal $2,000 damage bond with the state and enter the private property.

Seismic survey companies work as contractors for those companies that hold title to the mineral estate, and sometimes communication between all the various stakeholders fails.

In one incident earlier this year, a Laramie County landowner allegedly brandished a gun in an effort to keep surveyors off his land, according to Sheriff’s department spokesman Jerry Luce.

“The landowner saw the crew members as trespassers. (Our) deputy explained that there is a right and wrong way to approach situations,” Luce said. “The deputy explained that if the landowner persisted in displaying firearms it could be seen as anything from reckless endangerment to aggravated assault.”

Luce could not provide the name of the landowner or the company involved. The situation resolved peacefully, and no charges were filed.

Split-estate conflicts are a constant sore spot for landowners, even those who have seen past booms come and go. Each new negotiation between a mineral interest and a property owner can lead to cut fences, loose cows, disturbed water wells and rutted pastures, not to mention flaring tempers and lawsuits.

“It boils down to (survey) crews not knowing landowner rights and landowners not knowing crews’ access rights. It is a sensitive issue with landowners,” Luce said.

Sheriff Clint Becker in Converse County said he’s seen similar tensions over access play out in his county.

Becker said property rights are very important to people. When landowners learn that developers cannot be stopped from entering their property, “Then people blow up a little bit. They take offense to that — in this country, anyways.”

But while tensions run high, Becker said conflicts rarely require the attention of law enforcement in Converse County.

“Overall, the complaints were minimal for the number of people’s property they crossed,” said Becker.

DEVELOPMENT ON COMPANY TERMS

Occasionally, seismic companies and landowners wind up in court when they can’t agree on the terms of a temporary surface use agreement. That’s what happened to Scott Barber, who runs the 20,000-acre Green Valley Ranch between Glenrock and Douglas.

Last summer, Michaeli Land Services contacted Barber on behalf of Dawson Geophysical, who wanted to access his property to perform seismic surveys.

Several years ago Barber’s parents issued the mineral leases to T.S. Dudley Land Co., which in turn transferred the leases to Chesapeake Energy. Since Barber’s ranch corporation Green Valley Inc. owned surface rights but not all the mineral rights, it created a split estate. Barber had questions about impacts the survey might have on his land.

“My parents had low regard for seismic crews in the ‘40s and ‘60s. They damaged a lot of property. They killed two water wells on our place. That was 2D seismic, with dynamite,” said Barber.

Given that history, Barber was cautious and didn’t immediately agree to the terms offered by Dawson Geophysical’s surface use agreement. He thought the contract was company-friendly and didn’t give him enough protection from potential damages.

“The timing of their survey was not ideal. It came right during the middle of hunting season, and I had hunters on my property,” Barber said.

Barber said he ran into a brick wall when he tried to voice his concerns with various representatives of Chesapeake Energy, Dawson Geophysical and Michaeli Land Services.

“To me, negotiation isn’t putting an agreement in front of my face and saying, ‘Sign it,’” Barber said. “The message they were sending was, ‘We’ll get what we want when we want it. Get out of the way or we’ll see you in court.’”

Barber received multiple drafts of land use agreements in the mail. He intended to review the proposals and make an informed response.

But before he could do that he received notice that his ranch corporation had been named in an 8th District Court case titled Chesapeake et. al. vs. Green Valley Inc.

Dawson Geophysical was running up on its deadline for the fall seismic survey. The company wanted to speed things up by getting a judge’s ruling to define the terms of access onto Barber’s land.

“The top law firm in Casper represented them. I was like an insect that could be flicked away. Instead they ground me into the ground. The legal tactics were appalling,” said Barber.

Under Wyoming’s split-estate act, the companies could be released from making a land use agreement with Barber by instead posting a $2,000 damage bond with the Wyoming Oil and Gas Conservation Commission. Some landowners suspect that the bond option is attractive to companies because it is less expensive than negotiating land use agreements and paying landowners directly for access. Land use fees can run between $5 and $10 per acre.

Companies rarely have to pay out the bonds because making a claim is costly for landowners. Barber said if he wanted to claim the damage bond, “Making the claim would be more expensive than the money I would get out of it,” he said.

Barber said the $2,000 bond would be insufficient to cover potential impacts to his 20,000-acre property. “That can’t begin to repair damage to roads and fences. It’s a pittance. It’s like donating your pocket change to the Salvation Army,” Barber said.

That conflicts with Doll’s assessment that, “for surface damage on the grass or cutting of a fence, typically $2,000 is a reasonable price, and that’s what the split-estate act set as being reasonable across the state.”

Barber said he would have supported a recent bill to increase the minimum damage bond to $10,000 per landowner. The bill was proposed by state Sen. John Schiffer, R-Kaycee, in this year’s legislative session, but it died in committee.

At the end of Barber’s case the judge ruled in favor of Chesapeake and granted them access to Barber’s land for nothing more than the $2,000 bond. Barber was legally bound to provide access and, according to Barber, he had no say over when or where the company did their work. He received no compensation for use of his property, and he had to pay some of his own court costs.

“This is the downside of Wyoming being ‘open for business,’ Barber said. “Companies can come in here and walk all over us, and the law allows you to do that.”

Dawson Geophysical came onto Barber’s ranch sometime in the fall, but he never saw them doing the work. Barber said he doesn’t know yet if there was any damage to his land. But, he said, “It will be interesting to see what the grass looks like in the spring.”

Barber objected less to the survey process than to the manner in which the companies conducted business.

“It’s not so much that they are not entitled to do what they want ethically, legally, or morally. It’s just that they are so obnoxious in the way they do it,” he said.

Barber said there are others in Converse County who share the perception that Dawson Geophysical’s land use agreement favors the company and does little to protect the landowner.

Dawson spokesman Bret Schafer responded to the criticism.

“I don’t think anyone’s trying to have advantage over anyone,” said Schafer. “What we do is just the initial stage (of exploration). If the oil companies come in there to drill and produce, then they have to go back in and work with the landowners. No one wants anyone to have a bad feeling about what happens. We’re just the first step.”

Barber said he agrees that a bad experience in the initial survey stage can make future negotiations difficult.

“The ironic thing is they were (fighting with me) in the exploration. They’ll have to come back and deal with me when its time to (drill oil wells and) produce. It’s not a good idea (to treat landowners poorly),” Barber said. “My whole perspective on this is respect for the land and the existing lifestyle, respecting what I use the land for.”

With the coming of spring and the muddy season, seismic surveys will wrap up for the year. Doll said drilling and hydraulic fracturing in Wyoming may pick up as weather improves and rigs get freed up from work in Colorado and the Bakken in North Dakota.

As of early April, the state had issued 121 permits to drill horizontal wells. The county breakdown for permits in southeast Wyoming is: Laramie, 47; Goshen, 2; Platte, 10; Niobrara, 0; and Converse, 62.

Back at Green Valley Ranch, Scott Barber said he recently received a request from MacDonald Land Services on behalf of Chesapeake, asking to lease minerals on another parcel of his land.

He declined the offer.

Greg Nickerson is a writer, historian and filmmaker from Big Horn. Contact him at greg@wyofile.com.

NOTE: This story was updated on April 19 to clarify how federal and private lands become split estates.

DOWNLOAD a memo from the Wyoming Oil and Gas Conservation Commission about seismic “thumper” trucks.