Well flap pits oil vs. agriculture in case of Broomfield company

BROOMFIELD — T-Rex Oil Inc. (OTCQB: TRXO) in Broomfield is facing the wrath of ranchers and activists as it seeks to inject oil and natural-gas wastewater into a well in an agricultural region in northwest Nebraska.

T-Rex, which employs six people, has requested that the Nebraska Oil and Gas Conservation Commission approve its well north of Mitchell, Neb. The giant well can accept as much as 40,000 barrels of wastewater daily. The request has prompted a fierce debate, pitting agricultural and environmental advocates against oil and gas interests.

The proposal involves trucking produced water from oil fields in Colorado and Wyoming to Nebraska to be injected and stored approximately 7,100 feet underground. Produced water is liquid that flows from oil and gas wells and is separated at the surface for storage in tanks. Oil companies typically haul the wastewater to the wells for disposal.

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Some of the water comes from hydraulic fracturing, which involves pumping water, sand and chemicals into a drilled hole to extract oil and gas. Other water that needs to be disposed of comes from the same formation as oil and gas reservoirs. Produced water typically contains small amounts of dissolved hydrocarbons.

A partner in the company who lives in Kimball, Neb., owns the Nebraska well. It originally was drilled as an oil well but failed to produce, said Don Walford, chief executive of T-Rex. Instead of plugging the well and abandoning it, the partner recognized that the well had a large capacity for wastewater. T-Rex, formed about a year ago, plans to invest about $3.5 million in the well, including tanks and other infrastructure.

“You can put a lot of water down there,” Walford said. “It’s a great water well and we thought we could make it commercial.”

The well has raised concerns, however, among residents of the rural region.

Ken Winston, policy advocate for the Nebraska chapter of the Sierra Club, said dozens of people spoke against the well at a Nebraska Oil and Gas Conservation Commission meeting in March. Only a few speakers supported the well.

Residents have concerns about increased truck traffic and potential environmental and public health hazards, particularly to the region’s agricultural production, as well as earthquakes.

Quakes tied to such wells have occurred in Oklahoma and Colorado, including in Weld County, where the state last year linked tremors to a wastewater well operated by NGL Water Solutions DJ LLC.

“We’d rather not activate those fault lines by injecting fracking material in the ground,” Winston said.

Walford said the company plans to install two layers of cement and two layers of steel to keep produced water from polluting groundwater.

“It’s pretty unlikely that it will get into the water table,” he said. “The people who are objecting to this are not very well informed.”

Some Nebraskans have raised concerns about produced water leaking from the well and contaminating nearby aquifers, including the Ogallala Aquifer, the nation’s most heavily used groundwater resource.

“Considerably more dangerous to the Ogallala Aquifer are the farmers in Nebraska” whose herbicide and pesticide contaminate groundwater,” Walford said.

Bill Sydow, director of the Nebraska Oil and Gas Conservation Commission, agreed that the well would not endanger drinking water. “Excellent cement” in the well would prevent any leaks, he said.

The nearest irrigated farm also is miles from the well, and the well would pose little risk for earthquakes, he said.

“We’re basically in a stable area,” he said.

The three-member state oil commission has not approved the well, he said. Additional hearings to discuss the well will occur later this month.

The well could help western Nebraska develop its oil and gas resources because some oil producers in the region must truck water dozens of miles from well sites to dispose of their produced water, according to Walford and Sydow. Nebraska has 120 such wastewater wells statewide.

However, along with opposition to the wastewater well, low oil prices will pose additional challenges. Oil producers have cut capital budgets and planned to drill fewer wells, likely resulting in the production of fewer barrels of wastewater.

“It’s not a particularly good time,” Walford said.

Regardless, environmental organizations such as the Sierra Club plan to challenge the well, including involving the Nebraska Legislature, Winston said.

“We’re asking the Legislature to step in and put a halt to this,” he said, “at least until some rules can be put in place.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.

Correction: A previous version of this article misspelled Don Walford’s last name.