Corporation Commission adopts oil storage measure

Jack Money The Oklahoman
Oil wells in southwest Oklahoma City. The Oklahoma Corporation Commission on Thursday approved an emergency rule that will allow crude to be stored at off-site locations. The Oklahoman file

OKLAHOMA CITY — The Oklahoma Corporation Commission has adopted an emergency rule that aims to regulate how and where crude is stored at off-lease locations.

Two out of three of the agency’s elected members approved the measure on Thursday, providing rules to entrepreneurs and oil and gas operators looking for ways to store low-cost surplus crude at off-lease locations until prices improve.

The rule, which must be signed by Gov. Kevin Stitt before it takes effect, was proposed by the agency’s Oil and Gas Conservation Division.

Brad Ice, the division’s field operations manager, told commissioners in an earlier meeting he and the director of the agency’s Pollution Abatement Department had been getting contacted regularly in recent weeks by people interested in setting up temporary crude storage to take advantage of remarkably low-priced crude (thanks to a COVID-19 related demand drop and other global factors).

The rule, officials said, will apply to locations proposed to be used for that purpose that aren’t already permitted by the commission or other state and federal agencies.

Ice said the agency’s concern is that it needs to track what is coming, noting that otherwise, “they could more or less put these wherever they wanted with no regulations.

The rule does not loosen restrictions on what types of tanks can hold crude oil, as above-ground tanks designed for that purpose are required, as are surrounding dikes and retaining walls to prevent pollution if a tank fails.

It also bars temporary storage locations within the boundaries of certain floodplains or anywhere else that already is prohibited by law.

A permit to build and operate such facilities will be needed, as will a $100,000 surety in the form of a bond, cashier’s check, certificate of deposit or irrevocable letter of credit.

Remote storage operators also will be required to surround the location with a fence to keep livestock and people away and to post a sign at its entrance identifying the site’s legal description, its operator, a 24-hour emergency telephone number and a warning for unauthorized people to stay off the location.

Plus, operators will be required to take appropriate steps to report, stop or otherwise control any leaks under state supervision.

Violators caught without a permit to store the oil at an off-lease location will be hit with fines of up to $5,000 per day, the rule states.

Commissioners on Thursday asked additional questions about the rule, its effective date, and whether specific language needed to be included in the measure dealing with moving oil from the location where it is produced to a remote storage tank.

Ultimately, they agreed to remove that language after Commissioner Dana Murphy told colleagues that operators’ actions in that regard are typically handled by agreements between well operators, investors and mineral rights owners.

They also spent a considerable amount of time Thursday discussing the rule’s effective date (it will become effective when it is signed by the governor) and added language that requires adjacent landowners to a remote storage site to be notified of permit seeker’s request for authorization to undertake that activity.