TULSA, Okla. -- Hart Energy’s recent DUG Midcontinent conference reflected the excitement surrounding this part of the U.S., which has been producing for 100 years and is having yet another resurgence of exploration and development activity. But lest one think that operators are running around Oklahoma willy-nilly drilling and fracing wells with abandon, that’s not quite the case. Any plans involving exploration, drilling, production, transportation, pipelines, etc., go through one organization – the Oklahoma Corporation Commission (OCC).

Dana Murphy, one of the commissioners, was on hand to discuss her commission’s involvement in this frantic uptick in activity. “We might actually be the tail that wags the dog,” Murphy told the audience. “It’s going to be interesting over the next five to 10 years just to see if what we call unconventional today might be called conventional tomorrow.”

One of the commission’s major issues is that most of its regulations were created for vertical wells. It is scrambling to keep up with the changes as the state has ramped up oil production from 58 MMbbl in 2010 to 77 MMbbl produced in 2011. Figures for 2012 are not yet available, but she expects this rise to continue to be reflected. Not surprisingly, gas production has remained flat over this period.

While the commission is struggling to stay abreast of changes in the industry, this is not the first time in history that it has been inundated with intents to drill. Back in 1981, the commission received 22,500 intents to drill. “I’m so glad I wasn’t working there then because I can’t imagine how you would deal with that,” Murphy said. Calling out the years 2008 to 2012, Murphy noted that intents to drill in 2012 exceeded all of the prior years, though so far the intents to drill in 2013 have dropped somewhat.

The hot Mississippi Lime play was the topic of many discussions during the conference, and Murphy’s slide presentation showed the play extending west into the panhandle as well as south in to the central part of the state. She noted that in some of these counties operators are dropping single vertical wells and drilling laterals north into the Woodford and south into the Mississippi Lime.

In fact, horizontal drilling is revolutionizing the industry in Oklahoma. In 2007, there were 644 horizontal wells completed vs. 3,600 vertical wells. This year there are 1,650 horizontal completions permitted and only 1,500 vertical completions.

Along with increased horizontal drilling comes increased water usage concerns. “The ability to deal with produced water is one of the most significant issues,” she said. Already in areas of Mississippi Lime development it is common for operators to drill four laterals and one disposal well.

“Being able to dispose of the water has become one of the more limiting critical factors,” she said, adding that the commission is receiving more permit applications for disposal wells than at any time in the past.

Electric infrastructure also is a key issue. Local co-ops are tied to utilities that in turn are members of regional transmission organizations, independent system operators that are responsible for how transmission is developed across the U.S. Oklahoma is a member of the Southwest Power Pool, and Murphy represents the OCC in this organization.

“Any transmission that is built in these areas has to go through the Southwest Power Pool,” she said.

The organization is complex. When a utility wants to build a transmission line, for instance, it has to make a request to the power pool, and the request goes through a study that might take 30 to 60 days. The approval process might take another two years.

“This is why you should care,” she told the audience. “Tick, tick, tick – your three-year-old gas lease is done. How are you going to make that fit into this?

“When I gave this presentation to the Southwest Power Pool, do you know what they asked me? ‘Why don’t these producers just take out 15-year oil and gas leases?’ There is a different level of communication and understanding between producers and those who deal with transmission lines.”

To respond to these issues, Oklahoma State University has teamed with an electric cooperative in Stillwater and an engineering firm to develop a capacity and infrastructure model. “It gives every producer the ability to sign into a portal, input their data on where they’re going to drill wells and their horsepower requirements, and then they get access to any utility or to the Southwest Power Pool,” Murphy said.

The data are kept independent and private but are available to utilities considering an expansion.

“I think this is the wave of the future,” Murphy said. “I think Oklahoma is in the lead trying to work this out.”

Her final note was for producers and regulators to try to work together. “The regulators need to understand the producers, and the producers have to understand what goes on with transmission.”

They also have to understand the communities in which they work. “We are judged by the worse of our kind,” she said. “My challenge to you today is to make excellence something you strive for every day, and be a good neighbor.”