BEFORE THE CORPORATION OCC OF THE STATE OF OKLAHOMA DIRECTOR OIL AND GAS CONSERVATION DIVISION OKLAHOMA CORPORATION OCC

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1 APPLICANT : RELIEF SOUGHT : BEFORE THE CORPORATION OCC OF THE STATE OF OKLAHOMA LORI WROTENBERY, DIRECTOR OIL AND GAS CONSERVATION DIVISION OKLAHOMA CORPORATION OCC AMEND, CLARIFY OR VACATE ORDER NO FILE D MAR 17 mti COURT CLERK'S I FFiCE - lkc CORrORAtION COMMtSS10N OF OKUItIbMA CAUSE PD NO LEGAL DESCRIPTION : W/2 OF SECTION 16, AND THE E/2 OF SECTION 17, AND THE NE/4 OF THE NE/4 OF SECTION 20, AND THE N/2 OF THE N/2 OF THE NW/4 OF SECTION 21, ALL IN TOWNSHIP 8 NORTH, RANGE 24 EAST LEFLORE COUNTY, OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE This Cause came on for hearing before Michael Porter, Administrative Law Judge for the Oklahoma Corporation Commission (Commission) for the State of Oklahoma, on the 17`h and 18th days of November, and the 22"d day of December 2010, at 8 :30 a.m. in the Oklahoma Corporation Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Oklahoma Corporation Commission, for the purpose of taking testimony and reporting to the Oklahoma Corporation Commission. CASE SUMMARY : This cause involves the use of produced water from oil and gas operations being used by MMHF LLC (MMHF) to make a fly-ash slurry. The slurry is used to fill in an open pit mine in order to restore the surface to its original contours. This activity by MMHF involves the Oklahoma Department of Mines (ODM) and the Oklahoma Corporation Commission. Order No authorized MMHF to accept produced water that contained in excess of 5000 pa rts per

2 Page 2 million (ppm) of Total Dissolved Solids (TDS) as long as it w as blended with fresh water to bring the TDS to below SOOOppm p rior to placing it in the fly-ash disposal pit. Applicant filed this cause seeking an amendment, clarification or vacation of Commission Order -No : RECOMMENDATIONS : Vacate Commission Order No HEARING DATES: November 17, 18, and D ecember 22, APPEARANCES : Keith Thomas, Attorney at Law, appeared for Applicant. Richard Grimes, Attorney at Law appeared for MMHF, LLC. Harlan Hentges, Attorney at Law appeared for Interveners the Trustees of the Town of Bokoshe and Herman Tolbert. Findings FINDINGS AND SUMMARY OF EVIDENCE. 1. Cause PD is the application of Oil and Gas Conservation Division of the Oklahoma Corporation Commission in the W/2 of Section 16, the E/2 of Section 17, the NE/4 of the NE/4 of Section 20, and the N/2 of the N/2 of the NW/4 of Section 21, all in Township 8 North, Range 24 East, Leflore County, Oklahoma as shown above. Applicant sought to amend, clarify or vacate Order No The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission. 3. That the Commission has issued Commission Order Nos , , , , and allowing MMHF to use produced water from oil and gas operations with various restrictions to combine the produced water with fly-ash to create a fly-ash slurry. The slurry is to be used to fill a non-operational open pit coal mine. Order No amended Order Nos , , , only insofar as to allow receipt of produced water in excess of 5000ppm.

3 Cause PD No Page 3 4. The following numbered exhibits were accepted into evidence in this causel* : 1) Letter from Tim Baker to MMHF allowing the installation of 150' X 150' lined mixing pit in the SW/4 Section 16, Township 8 North, Range 24 East, LeFlore County, Oklahoma. 2) Two water quality reports dated November 30, 2009 showing Total Soluble Salts (TSS)2 to be 3,696 parts per million from the blending pit and 3,520 parts per million in total soluble salts in the lagoon. 3) Letter from Enercon describing the results from soil samples taken from a location above the blending pit and a location under the liner for the blending pit. Results indicate the total soluble salts under the pit liner were lower than the background sample. The letter indicates there were no leaks or releases from the blending pit. 4) Letter from Tim Baker to Enercon indicating the blending pit is no longer under the jurisdiction of the Commission through Order No Mr. Baker also indicates the pit shall not receive or contain oil field waste of any kind. Mr. Baker further indicated the Commission had no objection to the pit being used to water livestock. 5) Aerial View of MMHF facility in Bokoshe, Oklahom a 16) Commission Form 1012A Annual Fluid Injection Report 19) Lease Agreement between Robert A. and Betty Ann Entzminger and MMHF 20) Photograph of Ash Disposal Cell (ADC ) 21) Photograph showing water flowing under a road through a culvert pipe 22) Photograph of water flowing at base of AD C 23) Close up photograph of water flowing at base of AD C 24) Closer Photograph of water flowing near AD C 25) Photograph of water flowing near AD C 26) Photograph of water on Mr. Tolbert's land (other side of road from Ex. 21 ) 28) Photograph of water on Mr. Tolbert's land (showing same road as in Ex 21 ) 32) Amended permit of Non-coal mining issued by ODM to MMHF. 1 Gaps in numbering occur due to pre-marking of exhibits prior to hearing but not presented or admitted during the hearing. 2 TDS and TSS are interchangeable terms for the purpose of this report.

4 Page 4 36) Appendix C, report of Enercon containing chemical data for solvents and chemical data for groundwater wells in the vicinity. 37) Appendix D, drill logs for GWMP wells and multipurpose completion reports for monitoring wells used by Oklahoma Water Resources Board 43) Plan View of Final Surface Configuration 44) Plan View of Mining/DisposaU Reclamation Plan 45) Cross Sections Map Summary of Evidence Testimony of Mr. Timothy Baker : Mr. Tim Baker testified for the Applicant. Mr. Baker said he was the manager of pollution abatement for the Commission. He testified his duties include oversight of injection wells, remediation of well sites and oversight of disposal facilities. Mr. Baker then testified about several Commission orders. Beginning with Order No he said that the order allowed MMHF to use produced water in their slurry operations. He indicated the order limited it to produced water from surrounding wells. These were oil and gas wells in the area that produce from coal seams. He said a study was done that showed the total dissolved solids (TDS) was low (5000 parts per million) in the produced water and the wells were in close proximity to the facility. He said the Commission rule cited in the order was OCC 165 : He said that OCC 165: was designed for commercial mud disposal. Mr. Baker then testified Commission Order No granted exceptions to OCC 165: since MMHF's operation was not a commercial mud disposal facility. He said that OCC 165 : was the best fit for the operation of the facility. He continued that the Commission did not have a rule that would address how an operator would apply for the use of produced water for mine reclamation. He said the Commission took the rule with the most stringent requirements and had the operator follow the permitting process under that rule. He indicated the rule had stringent security, monitoring, reporting, and oversight requirements. He also said this order contained exceptions to rules. He testified the exceptions had to do with an area that ODM already regulated on the facility and that the Commission felt it did not deem it appropriate to mandate those requirements in its order. He said the exceptions dealt with pits and the management, storage and disposal of drilling mud which the facility did not do. He also testified one of the exceptions dealt with monitoring wells. He said there were existing monitoring wells on the facility and the Commission agreed to use the existing monitor wells which were under the control of the ODM. He further testified the Commission accepted the

5 Page 5 ODM's approved closure plan for the facility and the Commission did not need to keep control over the closure requirements of the facility. He also said regarding surety the ODM required a surety and the Commission was not regulating any structure on the facility that the Commission agreed to accept the ODM's surety. Next he testified that Order No amended Order No to allow produced water from other geologic formations as long as it did not change the water quality. The order required the water to meet the same chemical characterization established in paragraph 4(N) in Order No It also amended the facility closure requirements as amended by the ODM regarding overburden in the reclamation area. He testified Order No amended Order No to allow produced water from other geologic formations as long as it did not change the water quality. The order required the water to meet the same chemical characterization established in paragraph 4(N) in Order No It also amended the facility closure requirements as amended by the ODM regarding overburden in the reclamation area. He then testified that Order No allowed MMHF to create a mixing cell to bring in higher TDS water to mix with fresh water to use in the slurry operation. He said it did not change the requirement to only allow SOOOppm TDS in the slurry operation. It allowed a blending area to mix the water. He indicated the pit for mixing was on a portion of land that was not regulated by the ODM. Mr. Baker then discussed why the Commission chose to use rule 165 : He said the Commission's rules are designed around the management and re-use of waste streams. He said there are rules that allow the re-use of produced water. He said the most common re-use of produced water was the heavy brine water for re-working a well. He said the Commission has no specific rule that governed how to use produced water for slurry operations in a mine closing. He also testified they looked at what rules seemed to be the best fit for this situation. He said the rule that seemed the best fit was the rule for commercial disposal facilities. He said it had the most stringent requirements for notice and oversight. He indicated the rule requires testing of the loads and the Commission has oversight of the produced water delivered to the facility. He said the Commission does not monitor the fly-ash that comes into the facility nor the slurry produced at the facility. He further testified that produced water was not being disposed of at the facility and that the Commission has never viewed MMHF's operations, with the produced water, as a commercial disposal facility. He said the facility is allowed to use produced water in the disposal of fly-ash. He said it was being used to close a mining operation. He then testified regarding Exhibits 1 through 4. Exhibit 1 is a letter dated March 14, 2008 to Doug Schooley, at the ODM, advising ODM that MMHF was authorized to build a blending pit at a specific location. Exhibit 2 has multiple pages and contains two water quality reports of samples taken by a Commission employee at locations shown on the attached map. One result showed a sample taken from the blending pit was 3609ppm TSS. The other result shows 3520ppm TSS from a sample taken from the fly-ash disposal cell. Mr. Baker said both of these samples were within the range required by the Commission's order. He testified the Commission does not regulate the fly-ash disposal cell and that the Commission had received

6 Page 6 permission from MMHF to draw a sample from the cell. He further indicated the water in the cell was water that accumulated after slurry operations. He agreed that any excess slurry water would ultimately drain into that cell. Exhibit 3 is a letter from Joe Foster at Enercon. Mr. Baker explained Eneron was an environmental consulting firm and Joe Foster was the project manager. The project was the closing of the blending pit. Mr. Baker testified the Commission had requested samples to be taken from under the liner for the blending pit to ensure the liner had not leaked during its operation. He confirmed the blending pit was the one authorized under Order No He said it was the only pit regulated by the Commission. He also testified the pit was allowed to remain open because it was a double lined pit and MMHF wanted to leave it open for other purposes in MMHF's operations. He said as long as the pit was properly secured, had not leaked, and not used in further operations, the Commission did not object to MMHF using the pit for some other purpose. Exhibit 4 is a letter sent by Mr. Baker to Mr. Foster closing out the pit. He testified the letter says MMHF is allowed to keep the pit for other purposes, but MMHF is no longer allowed to use the pit in any way related to blending high TDS water to bring it down to the limit required under their order. Mr. Baker then testified regarding what was meant by the term "freshwater with TDS of 5000 milligrams or less" found in Order No He testified the water was considered a deleterious substance. He explained anything generated from a wellbore in the oil and gas industry, regardless of the TDS of the water is considered a deleterious substance. He said the Commission regulates those substances. He agreed that since it was produced water from a wellbore it is considered a deleterious substance even though at times it is referred to as fresh water. Mr. Baker then testified about the relationship between the ODM and the Commission. He said the relationship only dealt with the allowing of produced water to be used in assisting in water supply for creating the slurry in the mine reclamation project. He indicated the Commission did not have any control over the ODM. He agreed it would be correct to say it was a cooperative effort between the Commission and ODM. He testified the Commission does not regulate the lagoons, pits, or mounds of fly-ash. He also testified there were no commercial pits on the ODM facility regulated by the Commission. Mr. Baker then testified as to which rule would best fit and accurately state how the Commission sees the use of produced water by MMHF. He said Rule 165 : was more accurately reflected the recycling, re-use or source reduction of the produced water brought into a facility. He also said that rule accurately reflected the intent of the operation. He said it was not a disposal pit and that by using Rule 165 : it implied the Commission was authorizing a disposal pit. He further said that Rule 165 : was saying that disposal options for produced water included reclaiming and recycling. He testified this would be a beneficial use of produced water as determined by the Commission. Mr. Baker testified the Commission thought it would be in its and the State of Oklahoma's best interests if an order was issued that it would state any Cease and Desist Order issued by the Environmental Protection Agency (EPA) would stop the use of produced water. He also testified the Commission wanted an order that directs the use of Rule 165 : for this facility with provisions of Rule 165 : that actually apply and have been agreed upon by

7 Page 7 MMHF to remain in effect. He also testified the order should direct MMHF to file a Form 1014 or receive a Commission order if MMHF desires to build another blending pit. Mr. Baker was asked if there had been any compliance issues with the MMHF facility. Mr. Baker testified initially the Commission was not satisfied with the way MMHF was monitoring the loads coming into the facility. He said MMHF was tracking the information about loads but not in a way that made it easy to see where the trucks were coming from. He also said the rules required a log so MMHF modified their operations to correct the problem. He testified there had been no other compliance issues with MMHF and the Commission had not taken any corrective actions against MMHF. Mr. Baker admitted that the Commission was struggling in 2002 to figure out which regulatory scheme would be most suitable for MMHF's operations. He admitted that after discussions, that considering the options available, that MMHF should apply for a commercial disposal permit under Rule 165 : He also admitted during that time frame Commission staff was conducting rulemaking meetings. He further admitted that during that same time frame, Rule 165 : was amended to add the disposal option of reclaim and/or recycle produced water. He agreed the amendment was effective July 1, He also agreed MMHF applied for a commercial disposal permit rather than a recycling permit in September of He also admitted the Commission issued MMHF a commercial disposal facility permit about the same time the Commission created a new rule regarding recycling produced water in early Mr. Baker also admitted the Commission met with MMHF in a series of technical meetings to discuss the need for MMHF to take water from geologic zones that would contain oil or petroleum products, but he did not recall those meetings. He also admitted the application filed May 17, 2004 did not say there was need for additional water, only that MMHF desired to take the water. He did recall the Commission rejected a portion of the request as it concerned taking drilling mud. He said taking the drilling mud would not be a beneficial use to use in the slurry operations. He admitted MMHF did not need to take the drilling mud. He also testified the Commission had no objection to the request to take water from other formations. He also admitted the Commission did not do a study to determine if MMHF actually needed the water. He said if the ODM had said that MMHF did not need the water, then the Commission would have objected to the request. He admitted MMHF told the Commission that MMHF needed the water. He also said ODM did not object to the request. He admitted it was a violation of the permit for MMHF to receive excess water. He testified he would consider MMHF receiving too much water if ODM informed the Commission that MMHF had no further need for any more water. He continued that if there was no beneficial use for the water, then there is no need for MMHF to take water. He further testified there has never been a concern the volume of water would exceed any capacity the facility was able to hold. In 2006, Mr. Baker said he knew there was a drought in progress and that MMHF needed the water. He admitted that no study had been done to show exactly how much water is actually needed by MMHF. He agreed the purpose of the water is to slurry fly-ash to fill in a strip pit. He also agreed when the pit is filled, there would be no additional use for the water. He said he had not done any investigation in 2004 to determine if the pit was full or not. Mr. Baker further testified that at the hearing on December 4, 2002 it was an important consideration that water did

8 Page 8 not leave the facility. He admitted when MMHF was applying for authority to take more water in 2004 that the Commission did not look for any evidence of whether that facility was a closed facility. He testified the Commission looks at monitor well data, as it would be a part of the Commission's regulatory responsibility to monitor what goes on at the facility. He agreed the Commission was monitoring the potential movement of water from the pits to the monitoring wells. He did not agree the Commission exercising its jurisdiction over the facility. Mr. Baker testified that the discussions between the Commission and ODM were generally over whether MMHF could use the produced water and not about whether MMHF needed the water. He also said any time the ODM believes there is no beneficial use for this water in their slurry operations ODM can inform the Commission. He admitted ODM was not obligated to inform the Commission, but since it was ODM's facility, he assumes ODM would tell the Commission there is no longer a need for the water. He said ODM would inform the Commission because the Commission has jurisdiction over the water coming into the facility. He admitted there was no Memorandum of Understanding, or provision in the order, Commission rules or ODM rules that required ODM to inform the Commission of excessive water. Mr. Baker said there was a verbal understanding with ODM that if it had any problems with the Commission's jurisdiction over water, that ODM could notify us of the problem and the Commission will act accordingly. He said there is no specific agreement as to excess water. He said it was an understanding of cooperation between the two agencies on oversight of the facility. Mr. Baker said he had met with Doug Schooley and Senator Kenneth Corn about problems at the facility. He said most of discussion was concerning dust and the fly-ash of the facility. He said the parties did not discuss the water running off the site. He said there has never been a complaint from anyone about excess water at the facility. He said if there were a complaint, the Commission would act accordingly. He said that the Commission would to consult with ODM to see if ODM thought there was no longer a need for any more water to come into the facility. Mr. Baker testified that an investigation by the Commission has not begun on assertions made by interveners in an Intervener's Application for Relief filed in August He said the ODM did a study on how much water was needed to mix with the fly-ash. He said the ODM report came up with a formula on how much water was needed per weight of fly-ash that comes into the facility. He said it did not conclude whether any water was needed at the facility. He admitted MMHF has not provided the Commission with any evidence that MMHF needed the oil and gas water. He also admitted if the application for clarification is recommended, the Commission would not know if the water received would be needed or not or whether it would be excess. Mr. Baker was questioned at length about a series of inspection reports and notices given to MMHF by ODM and/or Commission personnel. Mr. Baker had not seen these reports prior to the hearing. Reports are in chronological order rather than the order presented during the hearing. Intervener did not seek to admit these documents as evidence. Discussion of the contents of the reports was not objected to by any party at the time of hearing. ODM inspection report dated March 8, Mr. Baker indicated he recalled a complaint that MMHF was receiving drilling mud for disposal and that it was placed in a pit. Mr. Baker said he thought the Commission investigated something similar to that but did not recall anything further. He indicated there was nothing

9 Page 9 in the Commission written records about it. He said it could be because records over 5 years old are not kept or because an inspector noted something wrong and directed them to correct the situation. ODM inspection report dated April 20, This report again reports the discovery of water based drilling mud dumped directly into the pit on the east of the Hall road turn-around, west of ADC-1 in March of Mr. Baker agreed that if somebody did not know what water-based drilling mud looked like and saw indications of oil or petroleum, they might think it was an oil or petroleum base d product. He did not recall if MMHF did anything in response to the report. Two months later MMHF applied for a permit to take drilling waste and water fro m geologic zones that would contain oil or petroleum products. ODM inspection report dated June 22, Mr. Baker said "The elevation of the fly-ash nearing the benchmark of 550 feet above sea level" had no particular meaning to him. ODM inspection report dated January 26, Report notes "water is seeping through the berm on southeast end of ADC 1. Mr. Baker testified he was not aware of that problem. ODM inspection report dated July 25, Item five notes "there is a small impoundment directly south of ADC 1 within the permit area." Mr. Baker testified he believed there was a small pond to the south of the cell. ODM inspection report January 18, Report states "There appears to be ash water seeping through the dam road on the southeast end of ADC 1 and running into the impoundment east of bonded area". Mr. Baker testified he had not seen this report. ODM Notice of Violation dated February 22, Notice of Violation issued because water continuing to seep through the dam road. ODM inspection report dated March 14, Report indicates water continues to seep through dam road and no progress has been made to stop seepage. Seepage to be corrected by April 1, 2006 or other action would be taken. Mr. Baker agreed this is what the record showed. ODM Cessation Order dated April 12, Mr. Baker agreed it appeared the problem with seepage noted in February continued until at least April 12, He did not agree it was produced water leaving the site. He testified once the water was mixed with the fly-ash and made into slurry, the Commission did not consider it produced water. Mr. Baker said it was an ODM issue if water is leaving the site. Mr. Baker said the Commission's jurisdiction ended once th e water was placed in a beneficial use.

10 Page 10 OCC 1085 Report prepared by Daniel Miller, dated December 15, Mr. Miller reported it appeared MMHF was operating an old strip pit as a disposa l facility with little or no supervision of what type of fluids are being allowed to b e dumped into pits. Field inspector tested the water dumped and found it contained 48,000ppm chlorides. Mr. Baker testified he went to the site on or about December 28, 2006 and conducted his own investigation. He said he personall y tested a truck and found the water contained 48,985ppm chlorides. He said h e verbally noted the violations and explained to MMHF the corrections they needed to make and followed it up with a violation letter on March 12, He indicated he also notified ODM. OCC Form 1012A (2006) Annual Fluid Injection Report showing MMHF received 1,182,550 barrels of water. Mr. Baker agreed this water was received during the time ODM inspectors reported ash water seeping through the fly-ash and a Commission inspector reports unsupervised dumping of high chloride water occurred. OCC Form 1012A (2007) Annual Fluid Injection Reports showing MMHF received 776,200 barrels of water. ODM inspection report dated January 30, The report stated "The water level in the impoundment to the east of ADC 1 is almost at the bottom of the dik e on the southeast end of ADC 1. Water level in this impoundment should b e reduced before it comes in contact with the dike and ash infiltrates th e impoundment." Mr. Baker said he did not interpret this to mean there was excess water on the site but rather there was a concern over a water level in a impoundment area. He said if there was excess water on the site, ODM woul d have contacted the Commission to talk about it. He said ODM never did discuss excess water with the Commission. ODM inspection report dated February 21, The report stated "The water level in the impoundment to the east of ADC 1 is unchanged from the previous inspection January 30, 2007 due to the recent precipitation. Water level in this impoundment should be reduced before it comes in contact with the dike and ash infiltrates the impoundment." Mr. Baker agreed whatever the problem is, it persisted until at least February 21, ODM inspection report dated March 26, The report stated "The water level in the impoundment to the east of ADC 1 is unchanged from the previou s inspection February 21, 2007 due to the recent precipitation. Since this water has been at this level for a couple of months, the operator is required to pull a water sample from this impoundment and have it analyzed for the full range of annua l parameters, and submit it to ODM before April 15, Mr. Baker agreed whatever the problem is, it persists until at least March 26, Mr. Baker agreed the ODM's Notice of Violation, of the Commission rules, was containe d as a part of this report. He also agreed ODM's response was a response to the

11 Page 11 Commission's Notice of Violation sent to MMHF concerning the excessive chlorides found during December ODM inspection report dated April 10, The report stated "The water level in the impoundment to the east of ADC 1 is unchanged from the previous inspection March 26, 2007 due to the recent precipitation. The ph was tested at the point where the impoundment crosses the fence just east of the dike and found it to be 9.6. As stated last month the operator is required to pull a water sample from this impoundment and have it analyzed with a full range of annual parameters and submitted to ODM before April 15, 2007." Mr. Baker agreed he would interpret this to mean the problem that existed on January 30, 2007 was still present at the facility. ODM inspection reports dated May 21, 2007, June 5, 2007, July 10, Mr. Baker agreed all these reports indicate the water level problem that existed on January 30, 2007 was still present at the facility. The July 2007 report also contained ODM concerns with water levels in ADC 2-3 was up substantially. Mr. Baker said he did not know why ODM was concerned about the water levels in ADC 2-3 or the impoundment to the east of ADC 1. Mr. Baker admitted during the first half of 2007 MMHF received 345,200 barrels of water and in the second half of 2007, MMHF received another 422,000 barrels of water. Mr. Baker admitted he did not know if this was excess water or not. Mr. Baker admitted that from January to July 2007, at a time when ODM is reporting high water levels in two different locations, MMHF is receiving off site water at the facility. He also admitted that MMHF had filed an application to receive an additional source of water. This was water that was higher than 5000ppm. The water was to be placed in a blending pit and have its TDS lowered to SOOOppm or less. Then is could be used in the slurry proces s ODM inspection report April 9, 2008.The report stated "Total dissolved solids and sulfate levels are high, above the accepted limit for secondary drinking water regulations. In most ground and surface water monitoring points on the permit, this needs to be carefully monitored to ensure levels do not continue rising. If this continues, the release of anything other than ash into the site may have to be evaluated." Mr. Baker said he was not aware of this report and no one from ODM had advised him of the report. Mr. Baker said his review of the monitoring was that the TDS levels fluctuate probably due to rainfall. He said he did not review data from surface monitoring points. He said surface water monitoring was done by ODM and the Commission has not been asked to be involved in surface water runoff. He said water runoff is ODM's jurisdiction and not an issue of the Commission. He said water runoff could be a basis for the Commission to vacate the permit granted to MMHF if the water leaving the site is what is being brought to the site. He testified if ODM brought it to the Commission's attention the produced water coming in was not needed, then the Commission would take action at that point. He said the water leaving the site could be coming from a completely different source, possibly rainfall or underground mine seepage. He

12 Page 12 testified he was aware there were underground mines in the area but he was unaware of any beneath the ODM facility. He admitted the Commission had not investigated whether or not there were any underground mines beneath the facility. He testified a disposal facility should not be placed over an underground mine because there could be hydrogeologic connection and could begin to leak. He said he saw no connection between using water for slurry operations and dumping water on the underground mine. He agreed the Commission has a rule that a disposal facility should not be located on top of an underground mine, but since the operation the Commission permits is not a disposal facility, the rule does not apply. The report also stated "the water level in ADC 2 and 3 is almost cresting the embankment on the north end of these cells. Special care must be taken to ensure that water is not discharged off-site.". Mr. Baker would not admit this was an indication of excess water on the site. Mr. Baker said it could be the result of a simple management operation, that the water needs to be moved from one place to another. ODM inspection reports dated May 27, 2008 and June 25, Both reports indicate the water levels in ADC 2 and 3 is still very high and special care must be taken to ensure that water is not discharged off-site. Mr. Baker was not asked to comment on those reports. Commercial Mud Disposal Annual Report (2008). Mr. Baker testified MMHF used the wrong reporting form instead of the fluid injection report. He said it appeared that 1,062,200 barrels of water was received. ODM inspection report dated April 21, The report contained a Notice of Violation directed to MMHF. The violation was being issued for not submittin g the required documentation to ODM and keeping ODM up-to-date in regard to th e acceptance of coal seam gas water and the orders received from the Commission. Apparently ODM was aware of Order Nos and , but not aware o f Order Nos , and Mr. Baker testified that the discussions between the Commission and ODM were generally over whether or not MMHF could make use of the produced water and not about whether or not MMHF needed the water. Mr. Baker was asked about the Commission protocol for the facility. He testified inspectors would examine the log books to see if MMHF was keeping records of where the loads were coming from and the inspector would take his TDS meter to see if the TDS levels were acceptable. He indicated inspections were not on a set schedule but were done once a month. He also testified the examination of groundwater data is a separate reporting element that MMHF provides when they file their reports. He said the Commission reviews the reports and puts them in a file. He testified the Commission is looking for changes in the TDS levels in the groundwater. He said they do not review the data about surface water. He said the operation is constantly changing its operations, the direction its pumping the ash, and the elevations in the cells so the Commission defers to ODM on surface flow of water since its their jurisdiction. He testified if ODM requested the Commission's input,

13 Page 1 3 the Commission would review the data. He said the Commission does not have jurisdiction over water leaving the site. He indicated that the Commission could stop MMHF from receiving produced water at the site. When asked if stopping the produced water from coming onto the site would stop produced water from coming out of the site, Mr. Baker responded that it was not produced water leaving the site, but rather slurry water mixed with a slurry mix. He said it is no longer considered produced water and its was no longer under the jurisdiction of the Commission. Mr. Baker then gave an explanation of his understanding of the process of mine reclamation. He testified he could only speak to his involvement with the reclamation at this facility. He said they were using fly-ash to close out the facility. He said they were using water and fly-ash, mixing it together to make a slurry and using it to bring the elevation to a certain level before finally covering it with topsoil. He testified he did not know if the land was being restored to its original contours. Mr. Baker then testified he was aware ODM had prohibited MMHF from receiving blended water as allowed by Order No He said it was brought to his attention after the notice was issued in April He admitted it appeared ODM did not receive copies of all the orders. He also admitted one of the bases for granting the original permit was that the water was to be stored in 210 barrel tanks until needed. He testified that the facility was receiving water as permitted under the original order. He said the conditions had changed since the oder had been issued but the beneficial use had not changed. He was then asked about ODM Permit , a CCB Permit revision. He said he did not know if he had seen that document before. He agreed the revision made it no longer permissible for MMHF to receive water from [sic] the blending pond regulated by the Commission. He also said if MMHF were receiving water at the blending pond he would have to investigate to see if it would be a violation of the order issued by the Commission. He testified after meetings with ODM about the blending operation, MMHF voluntarily shut down the blending pit. He agreed it would be a violation of the order for MMHF to receive water at the blending site since it could not be used for a beneficial use. He admitted it was no longer appropriate for MMHF to receive water from [sic] the blending pit. Mr. Baker then discussed CD which was MMHF's application to receive flow back water from oil and gas wells as long as the flow-back water was compliant with existing restrictions for produced water. Mr. Baker explained what flow-back water was and that the Commission considered it to be the same as produced water. He admitted that MMHF had been receiving flow-back water for some period of time. He said he had heard about MMHF receiving flow-back water by word of mouth from trucking companies, well operators and MMHF. He again stated the Commission does not view flow-back water as different from produced water. He then stated the rules do not regulate hours of operation and so MMHF could operate twenty-four hours a day, every day. He also stated MMHF could receive any amount of produced water, whether or not they needed it. He said the Commission does not determine whether or not it was excess water. He testified the original permit did not contain a volume limit. He admitted the permit allowed produced water and flowback water may be placed in the pits regardless of whether the MMHF was receiving fly-ash or not. He again agreed MMHF could receive as much water as they wanted. He further testified the intent was to allow the water to be used for a beneficial use other than disposal. He said fly-ash

14 Page 1 4 was not received twenty-four hours a day, every day but the Commission did not want to clarify that MMHF could receive water even if fly-ash was not coming into the facility. He said his interpretation was MMHF could take in water even if slurry operations were not going on at the time of receipt of the water. He did not agree that MMHF could take water if the ODM did not permit slurry operations. After some discussion it was revealed the application in CD was dismissed. Mr. Baker then discussed why the Commission has asked for a clarification or amendment to the original orders. He said there was an implication that MMHF was operating a disposal pit under Rule 165 : He said the Commission has viewed the operation as a disposal pit. He said that rule had the most stringent oversight requirements for monitoring the operation of taking produced water, making a slurry and using for mine reclamation. The intent was to provide a vehicle for MMHF to be able to do that. He said a newly created rule allows for recycling of flow-back water. He said the Commission decided the order did not articulate the intent of the Commission for the water. He said the intent was for the water to be used for a beneficial use and not disposal. He said the Commission wanted to combine all the orders into one order. He said at this time the proposed order had not been written. He testified what the Commission wanted was that produced water be received at the facility and used in the making of a slurry to assist in the reclamation of the old mine site. He added the Commission wants the oversight requirements in the existing rules for commercial disposal pits to be included in the order. He said the oversight requirements are not found in Rule 165 : He said not all the requirements are specifically found in the existing orders. Mr. Baker then described various provision the Commission would like to see in the final order on this matter. Mr. Baker testified the Commission wants to ensure the importance of the operation is placing the water to beneficial use. He made it clear the water would not be left in a pit forever. He said the water would be mixed with fly-ash and used in the slurry operation. He indicated the water would not remain in the pit but would be in the fly-ash. He said any water left over would be re-used until it was all gone. He admitted there was a huge amount of evaporation going on at the site. He agreed it could raise the salinity of the water that was left over. He did not think there was any beneficial use for the salt. He agreed using the water in the pit was beneficial but the salt had no beneficial use. He did not know how much salt was deposited in the pit. He agreed the salt was either in the structure that forms the pit, the old strip mine, or its in the water in the pit. He agreed the original order contained a finding the storage of the produced water slurry mix would not be harmful to ground water, surface water, soils, plants or animals. He said the Commission was not trying to demonstrate or change that finding today. He testified the Commission had not done any subsequent geologic or hydrologic studies since the order was issued. Mr. Baker agreed MMHF was not granted an exception to a Commission rule that prevents the existence of this facility within three miles of an incorporated municipality with less than a population of 20,000. There were many questions concerning what the Commission wanted in the order. A document was produced and furnished to all parties that outlined the changes sought by the Commission. Many questions were asked and answered by Mr. Baker concerning the requested

15 Page 1 5 changes. Later questioning related to testimony given during the hearings for the various orders in existence at this time. Mr. Baker admitted he had seen a limited number of ODM documents. He further testified the documents were not in the Commission files. He testified he did know if the documents were copied from the files of Enercon Services Inc. or MMHF. He agreed the facility was controlled by ODM. He testified the Commission controls the produced water trucked into the facility. He testified the Commission has no control over the internal operations or maintenance of the facility. He agreed based on the documents he had seen in court that ODM was exercising its jurisdiction over the facility. He testified there were meetings between ODM and the Commission where it was mutually decided MMHF would no longer be allowed to use the blending pit. He said MMHF was made aware of the decision and agreed to that decision. Further he said, MMHF submitted an application to close the pit. He testified MMHF wanted to know what the closure requirements were for the pit. MMHF then asked for permission to close the pit. The Commission asked and received testing data from the pit. the Commission wanted the liner pulled back to test under the liner to see if there had been any seepage. He again testified the pit was to be used for the mixing of water that exceeded 5000 ppm. He said the data presented indicated the liner was not breached and no evidence was found of leakage or seepage. He agreed the Commission never intended the operation at the facility as a commercial pit to be regulated by the Commission. He agreed the Commission only wants it to be clear this is not a commercial pit. He agreed the Commission wanted to use stricter regulation of the site and continue the regulations already in place. He testified as to methods of disposal produced water in disposal wells. He agreed heavy brine water may have some limited value under certain circumstances but generally had no particular use. He also testified that some produced water was used for irrigation purposes. He said water for that use had to meet certain conditions and the operator had to follow guidelines and rules. He said salinity was one of those criteria. He testified if the salinity level was too high, vegetation would not grow. He agreed that produced water can be useful. He made some suggested changes to the method of delivery, testing and processing of the loads coming into the facility. He said he observed some problems and violations at the facility. He further testified he discussed the issues with MMHF and they said they would make corrections right away. He said he also sent a violation letter after the meeting. He said MMHF addressed his concerns by setting up a separate office, a place to test the loads prior to entering the off load area, a better lab to test the loads, and maintaining a log book with showing where every load came in from. He was then asked a series of questions regarding Tile 11, Oklahoma Statutes and whether or not the Town of Bokoshe was an incorporated entity. Mr. Baker did not have any knowledge of the Town of Bokoshe's legal status. Mr. Baker was asked about the various inspection reports from ODM. Mr. Baker indicated he had not seen those reports prior to giving his testimony on November 17, He testified the communications he had with ODM were over the telephone and face to face meetings to look at maps. He stated the meetings were general conversation as well as technical meetings. He said during the discussions ODM did not ask the Commission to shut down the facility or force MMHF to stop receiving produced water during any of these meetings. He also said ODM did not make notify him of violations at the facility. He testified that if the ODM had notified him of seepage from a dike, berm, or ADC the Commission would not have jurisdiction over that issue. He said he had not received any complaints of produced water being spilled

16 Page 16 from the trucks or on the site before being delivered to MMHF. He testified he received complaints from citizens regarding the facility. He said those complaints were about the trucks coming in twenty-four hours a day and seven days a week. He indicated the Commission does not regulate truck traffic. He explained why there was a gap between the date of the Commission Form 1085, December 16, 2006 and his letter of March 12, 2007 regarding the violation in OCC Form He testified the Commission waiting on lab results and matter was being investigated. He said no contempt citation was requested or filed as a result of the Commission Form He said MMHF satisfied the concerns of the Commission and corrected the violations. Mr. Baker was asked if there were any restrictions on the volume of water that could be taken in at the facility. He agreed none of the orders had any limitations on the volume of water. He testified he was aware an order had been issued directing MMHF to cease to receiving and using produced water. He said he had had meetings with ODM and they had never asked the Commission to stop MMHF from receiving produced water. He also agreed if there was a mine of the ODM facility, the Commission would not regulate it. He also agreed the Commission would not regulate surface water at the facility or water in the ADCs. He further agreed this was a fly-ash disposal facility and not a produced water facility. He testified evaporation would increase the content of the total dissolved solids in the remaining water. He agreed the TDS of the pit off the ODM facility regulated by the Commission did not have elevated levels of salinity or chlorides above what is allowed. He agreed that during the course of proceedings at the Commission, no representatives from the ODM ever protested the issuance of orders by the Commission. He also indicated Rule 165 : does not have distance requirements applicable to this situation. Testimony of Mr. John Berton Fisher: Mr. Fisher was qualified as an expert in the fields of hydrology, hydrogeology, geology and geochemistry. He testified he had conducted an investigation of the MMHF facility located in Bokoshe, Oklahoma. He said his investigation consisted of reviewing a large corpus of documents and materials from the files of MMHF, the Commission transcripts, ODM information and a set of filed information describing the construction, operation and permitting activities of the MMHF facility. He indicated he had not been on the actual site, but had driven around the site and viewed aerial photographs of the facility. He also reviewed available information on the chemical nature of the water on the surface and subsurface area around Bokoshe. He testified he retrieved information from the national geochemical database. He said the information was from a program called National Uranium Resource Evaluation (NURE), Hydrogeochemical and Stream Sediment Reconnaissance. He said it was a nationwide data set gathered by federal authorities in the late 1970's in August and September. He said the data was within 7 miles of the MMHF facility. He said the samples were relatively evenly distributed as to the ground water samples. He said a total of 54 samples were recovered and analyzed for their chemistry. He said he could use this background information because the samples were taken before the MMHF facility went into operation.

17 Page 17 He then testified about issues that were discussed at the original hearing in He said they looked at how much material would be placed on the site, the nature of the material, and how the material might get off the site. He said information was presented to show that saltwater was to be used for a beneficial use. He stated the use of the water was to make a slurry fly-ash. He said when water is added to the fly-ash it hydrates the calcium oxide to form cement. He said some of the water bonds with the fly-ash by the chemical reaction. He agreed it becomes part of the substance after the chemical reaction. He said some water would remain and that any water left over would be associated with the residual porosity. He said fly-ash expands when it is hydrated and can hold water in its pores. He gave an example of a bucket of wet sand has water in the pores between the grains, but if there were a hole in the bottom of bucket, the water would drain out. He added some of the water would stay with the fly-ash as its chemically bonded, some would stay in the pores for a long time and some would not stay long at all. He then discussed what was involved in reclamation of a strip mine. He stated the point was to fill in the hole left in the ground after the material of interest has been removed. The reason to fill the hole was to limit or eliminate acid rock drainage and to restore the contours of the land. He also said this is what was presented at the original hearing. He testified the contours of the structure in Bokoshe resemble a landfill. He said there was a beneficial use of the water, in part, but not of the salt. He said there was no beneficial use of the salt at this location. He also testified ODM inspection reports state that reclamation was not taking place. He testified under the circumstances of how the water is being placed would create a likelihood of water leaving the site. He said it would leave by exfiltrating through the ground water in the fractures in the rock in the area. He testified it could also run off the site by the movement of fluids through the vadose joining with the surface drainage. He agreed any of that water would not have been part of the use of the water at the facility. He said during the original hearing there was discussion that MMHF would not receive excess water. He said the testimony was that if there was no use for the water, then it would be excess. He said the testimony was that MMHF would install several large storage tanks which would give them the ability to do gravity separation to avoid residual oil in the water. This water was to be reserve water for when they need it. He said the testimony went on to describe the water in the tanks would be gravity fed to use in the slurry process. He testified if this were the process used, then the water would not be excess water. He said based on his observations of the site, this is not the way MMHF is operating. He said trucks are brought into the site, and the trucks discharge their water onto a weir of rocks at the top of the fly-ash facility. He said the amount of water being brought in was not consistent with the amount of water that could be held in tanks. He said while observing the site, he had difficulties getting back on the mine road due to the constant stream of water trucks going to the site. He said the number of trucks coming to the site was inconsistent with the amount of water kept in the tanks and the method of delivery methods. He said he had seen calculations of how much water was needed that were prepared in He said he had done his own calculations on the back of an envelope. He then showed on Exhibit 43 where water was impounded on the site. He said there were five impoundments on the facility. He agreed there was not a period of time when the impoundments did not have water in them. He agreed he had reviewed the regulatory records and had not found the ODM had ever said there was a lack of water at the facility. He stated his inspection did not reveal there was any lack of water at this facility. He then discussed the structural geology of the area. He testified the shale in this area was fractured because of the anticline in the area bowed and bent the rock. He also said there

18 Page 1 8 was a fault in the area that showed some left lateral movement, but was basically a thrust fault. He testified he had examined shale found in stream bed nearby and found it was a brittle shale. He said this showed fracture permeability and said the type of aquifer here would be produce water through the fractures. He testified he did not agree with Mr. Foster's conclusion that there was no ground water aquifer. He further testified he disagreed because of the fracture permeability of the shale and because of the ground water wells that exist in the area. He also said the behavior of the monitoring wells drilled on the site formed the basis for his conclusion. He then discussed the well logs for the ground water monitoring point (GWMP) wells. He testified each well penetrated an overburden of spoils or topsoil at the top of the well. He said it next passed through shaly clay or a clay shale. He said it was a weathered clay. He added weathering in shales can penetrate pretty deeply from the surface. He said the word tan in the description of the shale would indicate oxidized material. He testified the wells bottom out in a firm gray shale with sandstone stringers. He testified in the GWMP #1, water was reached at thirty five feet below the surface. He testified after twenty four hours, the water level had risen to sixteen feet below the surface. He said that meant water had flowed into the drilled hole. He testified that was an indication of permeability. He further testified he had the conclusions about the other two GWMP wells. He said all of them show permeability. He agreed he has seen no information that would cause him to think the shale layer is impermeable in this area. He said the wells would be low yield, about one half gallon. He testified that while shale was not permeable, the fractures in it would be as permeable as a water pipe. He testified that upon examination of records he found a series of wells nearby were low yield, but good enough for domestic use. He said it was a fractured aquifer since it was permeable and contains ground water. He said based on how the water levels rose in the three ground water monitoring wells, that it is an unconfined aquifer. He also testified water can hit the surface, get into the aquifer and be carried off the site. He then testified the Commission granted an exception to its rule that required an impermeable layer. He said this was based on ODM's conclusions about an impermeable barrier. He testified there was no impermeable barrier present at the facility. He said the building water levels in the GWMP wells and the same relative water levels over time show it is not impermeable. He said the requirement for an impermeable barrier was important because it would protect the underlying aquifer. He disagreed with Mr. Foster's conclusion that there were no ground water aquifers. He testified it was his opinion that with respect to natural geology, there was nothing between the surface of the ground and the ground water to protect the ground water from substances placed on the surface of the ground. He opined that with respect to the fly-ash it was possible for the fly-ash to protect the ground water from surface substances, but it would not be uniform. He said fly-ash can be impermeable, if it is done by controlled engineering. He said the rate of hydration and how salty the water is would influence how the substance would set up. He said it could be like bad concrete, that is friable and little strength. He said he saw reports from ODM that water was seeping through the fly-ash berms at the facility. He said the report indicates under some circumstances the facilities' fly-ash can be permeable to water. He said the ODM reports from testing the water indicated a very high field ph. He said the high ph was not a normal ph for natural waters and would be water mixed with fly-ash. He agreed water that interacted with fly-ash and seeped through the berm could include produced water in the pit at that time.

19 Page 19 He then testified that he had examined documents submitted to ODM by MMHF during its application for the facility. He said there were two abandoned underground mines beneath ADC #1. He also testified the underground mines may influence some ground water movement, but not its direction. He discussed the geology of the abandoned mines, specifically the abandoned mines were located on an anticline that was plunging to the southwest. He also said he had examined the maps prepared by the underground mine operator that showed where the galleries, shafts and pillars were located. He testified the environmental danger was a structural danger. He said the abandoned mines could collapse because of the additional mass being placed on top of the abandoned underground mines. He said if the mines collapse or shift slightly, it would break/fracture and provide conduits for movement of material off surface. He said the subsidence could be significant. Mr. Fisher then discussed the impact high TDS water had on the ground water and environment. He testified his studies involved reviewing the monitoring data for GWMP wells one, two, and three over time. He also stated he had reviewed the data for the surface water monitoring wells (SWMP) #1, #2, #3, #4, and #5. He indicated SWMP well #5 was off the exhibits and located on the next county road, about 4,100 feet east, 1,700 feet north of SWMP well #1 He testified he examined the chemical information over time from those well and compared it to the data from the NURE. He said the data from the GWMP and SWMP was information found in Mr. Foster's report prepared for MMHF. He discussed the method he employed in making the comparisons. He stated GWMP #1 was an interesting well. He stated the GWMP #1 well was down gradient from GWMP #2 and #3 and had wild oscillations in data. He testified the data started out about the same as the data for GWMP #2, just under 1000ppm, then becomes much saltier than GWMP #2 and #3. He said it showed an early rise in salinity by about one third. He said it rose to 2,000ppm and then oscillates at that level. He said it became more salty after produced water was put in the ash disposal cell. He said the first data point for GWMP #1 well was in He said at that time the data showed the water in the well was at 900ppm and began to rise after that. He testified it leveled off in January 2004 at 2,000ppm. He testified the GWMP #2 well started off at 800ppm in the year 2002 and been stable at 1,000ppm ever since produced water was permitted to enter the ash disposal cell in He testified GWMP #3 was in the mid range of the data i.e. normal background water for the Bokoshe area. He said it was the same from the time it was drilled until the time of his study in early He stated the data showed it had a level of 580ppm. He also testified he expected the water movement to be from GWMP #3 towards GWMP #2 and GWMP #1. He stated the data shows that GWMP #3 is has remained at the background levels noted in the 1970's. He said GWMP #2 started at ppm and nearly doubled in the time frame of the years 2001 to He said GWMP #1 showed a different set of characteristics. He testified at end of March 2002 it is at two times the background level. He said it then increased to four times background levels by late He said it has remained steady at that level since then. He testified GWMP #1 is the most diagnostic well of the three. He said it shows the water in the pit, which is high in TDS, is moving from the pit into GWMP #1. He said it also appears the water is moving towards GWMP #2, but not towards GWMP #3. He indicated there was nothing in the surface geology to

20 Page 20 prevent water from moving from GWMP #2 towards GWMP #1. He said the water would move because the area is fractured shale and the fractures provide a pathway for the water to move. He then discussed the data from the surface water monitoring points (SWMP). He testified as to the locations of each of the points. Four of the points are located on Exhibit #44. A fifth point is located to the north and east, off the exhibit. He gave the location of SWMP #1 as along the northern boundary of the facility at an elevation was at 510 feet. He said it receives water from the north pond to the west and down from SWMP #4 He said S WMP #2 on the east side of the facility at an elevation of 525 feet and receives runoff water from the facility. He testified SWMP #3 was the southernmost well, at an elevation of 530 feet and receives its water from discharge pits south and east of the ash disposal pit. He testified SWMP #4 elevation was 550 feet and water from it flowed into the north pond that then flowed to SWMP #1. He gave the location of SWMP #5 as being on Doe Creek downstream of SWMP #1 with an elevation of less than 510 feet. He then testified using the NURE data to compare it to the data from the SWMPs. He said he considered any data above background would be in the seventy-fifth percentile. He testified he found 91.7% of the samples at SWMP #1 exceeded the seventy-fifth percentile. At SWMP #2, 94.7% of the samples exceeded the seventy-fifth percentile. At SWMP #3 and SWMP #4 40.9% of the samples exceeded the seventy-fifth percentile. Finally, at SWMP #5 85.7% of the samples exceeded the seventy-fifth percentile. He said the data indicated that SWMP #1 was clearly influenced by discharge from the pit. He added that SWMP #4 may have influence in the pit as it receives waters from west of the pit. He testified this would indicate the salt was coming from the pit. He testified he saw data that showed during wet periods the elevations in ground water went up and could make its way to the surface and influence surface waters. He also testified it was possible for SWMP #1 to be influenced. Further, he said he had observed ground water coming up at SWMP #1. He testified the facility was not a full containment facility. He agreed there was nothing in the design, of the facility, to suggest it was intended to be a full containment facility. He then testified he had calculated the amount of salt brought into the facility. He said based on the permitted concentration of SOOOppm, it would be about 1.7 million pounds of salt per year. He stated he also calculated the amount of salt using an alternative method. He said he used the log sheets from May 19, 2009 to September 23, From those log sheets, he took the recorded volume or assumed volume in the truck and the concentration of total dissolved solids present in the load and took it out to a year. He testified it worked out to 673,000 pounds of salt. He said it was lower because the average concentration was 2000ppm. He also testified 93% of the volume came from Arkansas, based on what was recorded as to place of origin. Mr. Fisher stated he had been to the facility two times. He admitted he did not take any water or soil samples at the facility. He stated he had taken ground water samples from Mr. Doug Tolbert's home, but they were not for his purposes. He testified the produced water was being offloaded onto a rock weir and allowed to drain into the blending pit. He said it was also at one time offloaded into a blending pit then transferred to the facility. He also testified the facility was originally designed to have two tanks of approximately 400 gallons capacity for the water, which was to be used to mix with the fly-ash. He testified the water offloaded at the facility was

21 Page 2 1 offloaded at the head waters of the facility. He said it was being discharged into the pit and then flowing off the facility. He stated a million barrels of water would handle about 333,000 tons of ash. He said water was leaving the facility, but not like a Niagara Falls cascade. He also testified the large lagoon had a volume of about 20 acre feet. He said he had seen the data on the chemical makeup of the water in the lagoon. He said the chloride content was very low, less than SOppm. He said the lagoon was holding water prior to the receipt of produced water. He said by the use of modeling one could determine how much water was leaving the facility through the ground water prior to the introduction of produced water. He also said the amount leaving the facility would be about the same before and after the introduction of produced water. He admitted the data from the samples was broken down by constituents, but was not a complete analysis. He agreed it did not give specifics as to chlorides, but rather the total salt content. He said when produced water is placed in the ash disposal pit, it dissolves salts out of the ash and mixes with them. They become indistinguishable one from the other and will travel together in water. He testified that if produced water is put in the pit and it contains salt and water leaves the pit, it will contain the salts from the produced water. He admitted produced water would not have a ph of 10.2 and that it would be rare for the ph to be that high. He testified he had seen water sample data, from ADC #1 and ADC #2 that showed TDS of 5138ppm from ADC #1 and 2945ppm from ADC #2. He said the data also showed the ph in ADC #1 was as.26 and ph in ADC #2 was He agreed the data was from samples taken in December 2001 and he admitted this was before MMHF began placing produced water on the facility. He later explained he discounted the results from the December 2001 sample because the sulfates at 1277ppm was almost all of the total dissolved solids. He said negatively and positively charged ions need to be in balance and on that sample, they are not. He said he considered the March 29, 2002 results of 948ppm and the June 24, 2003 results of 1648ppm. He testified the number went up prior to the placement of produced water because the fly-ash has salts in it that also shed off. However; he admitted the total dissolved solids rose before any produced water was added to the facility. He also discounted the June 16, 2009 sample of 584ppm because sulfate was only 7ppm which was not consistent with the specific conductance. He admitted the December 10, 2009 level around 800ppm was a good number He also admitted produced water was still going into the facility as the TDS was dropping. He then discussed wells to the north of facility had better water quality than wells to the south and east. He placed them in three groups. First, the north wells which had the best quality because of low concentrations of TDS. He testified those wells were also north of the backbone anticline that trends northeast to southwest just north of the reclamation pit. He said the wells to the south of the of the fault and nearer the reclamation pit have poor water quality with higher TDS and sulfate values. The third group of wells are the furthest east of the facility and most down gradient from the site. He said those wells show good water quality. He testified it included the well on Doug Tolbert's property. He said the samples were taken in 2000 before there was much ash disposal. He testified there were no recent samples from that well. Testimony of Mr. Herman Tolbert : Mr. Tolbert testified on behalf of the Interveners. He said he leased his land from his cousin, Betty Entzminger. He indicated his property was east of the facility. He said he had been

22 Cause PD No Page 22 leasing it for 30 years. He also testified his cousin leased some land to MMHF. He said the land was in section 21. He then testified about a water well drilled on his property. He said the well was drilled in He testified it was in use for household purposes until recently. He stated he stopped using for household domestic use because he had concerns about the water quality. He said it had been tested five or six years ago. He said he didn't stop using it at that point. He said he stopped using it because he was concerned about the operations at the facility. He said he still uses the well to water his livestock. Testimony of Mr. Bennett Lynn Tinsley: Mr. Tinsley testified on behalf of the Interveners. He indicated he lived about one and a half miles west of the facility. He spoke about a series of photographs he had taken of the facility. A majority of the photographs show streams of water running alongside a berm like structure. Mr. Tinsley did not take water samples from any of the streams. He described seeing water flow through the berm material. He testified at times it was coming through in small streams. He further testified at other times he had seen it cascading over the top of the berm and that it looked like a little Niagara Fall. When asked when this event occurred, he could not remember the date or whether or not it had rained or was raining when he observed it, nor did he know if it was before or after he took the photographs. He said he did not report what he had seen to ODM. He testified some water appeared to be stationary and other waters were moving. He said he saw water seeping through the berm and moving into a pool of water. He said his observation was the water comes from the area at the head of the fly-ash pit, goes to a ditch and then ends up on Mr. Tolbert's property. He clarified the head of the pit meant where the water was dumped. He admitted he had not seen any water truck dumping prior to entering the property. He also admitted he had not seen any water dumped directly into the stream s He seemed unclear as to the dates of the photographs. When asked about when he took photographs, his answers were couched in terms of "I believe". When asked if he took a particular photograph, his answer was "yes, sir, I believe I did". On another photograph when asked when he took it, he replied "It would have been late spring or early summer of probably late spring or early summer 2009, I believe.". In another photograph when asked if it was taken at the same time he answered "Probably at the same time the other photograph was taken". He also admitted the photographs were taken from his video camera to be placed on a website. He said the purpose of the website was inform people about what is going on at the fly-ash disposal site. Testimony of Mr. Joe Foster Mr. Foster was qualified as an expert in the fields of geology and surface/groundwater sampling. He testified he had worked as a consultant to MMHF periodically since He said over the years he had helped MMHF with its application to the Commission to use produced water in the fly-ash process. He said they were also helping with ODM compliance and the

23 Page 2 3 hearing today. He then sponsored Exhibit #5. He noted it had been annotated with a reference to a blending pit. He said the blending pit was for water that exceeded the SOOOppm salinity limit imposed by the Commission. He stated it was a lined pit and the liner was still in place. He testified the blending pit was not in use. He stated MMHF was required to make soil analysis around and under the blending pit area. He said the work involved pulling back the liner and collecting soil samples beneath the liner and outside the pit area. The samples were sent to the Commission for review. He indicated the review showed no leakage of the liner. He then described the process of making the slurry. He testified the trucks offload the flyash over an ash hopper where it is mixed with water from the lower portion of the cell to form a slurry. He stated the ash slurry then moves by gravity to the reclamation area. He also stated the water is pumped in from below the ash or slurry hopper. He said it was mixed with water at the rate of 4,000 gallons per minute. He testified the water and ash were mixed in the hopper, which after mixing flowed under the force of gravity. He also testified the ash arrived at the site at between 180 and 200 degrees. He said the slurry process reduces dust and it allowed MMHF to move the ash as a fluid rather than to push it around with a mechanized equipment. He admitted he did not know how much ash arrived on the site on a daily basis. He said he knew if the facility was receiving ash it would use 1,300,000 gallons of water to slurry the ash. He said MMHF did not receive ash on a daily basis. He stated the facility was receiving ash before it was allowed to accept produced water. He said it was his understanding the facility was using rainwater collected from the lower portion of the strip mine to mix and cool the fly-ash. He also said MMHF bought county water to place on the roads. He testified MMHF was not using water from ponds or impoundment. He said MMHF only used the water from the fly-ash cell. He said the Commission order allows them to use rainwater to the extent MMHF desires to do so. He said MMHF has the flexibility to collect the rain water into the pit when its available. He said it has been a challenge for MMHF to get an adequate volume of water. He agreed if it weren't for being able to use produced water, MMHF would have be dependent on water that drained on the property or fell as rain. He agreed it was not possible to say MMHF needed to have this many gallons of water available for this many pounds of fly-ash to be delivered on a daily basis. He also agreed there would be times when water would be accumulated that would be used in the ash disposal operation that wasn't going to be used immediately. He testified the reclamation cell acts as a holding body for the water that will be used in the slurry process. He also agreed there was no way to coordinate delivery of fly-ash and water. He said they just show up when they are received. He agreed there could be times when there was more fly-ash than water and vice versa. He then described the difference between produced water from oil and gas wells. He said the primary difference would be whether contained oil. He said Enercon had performed analyses of the water in the area. He said they primarily checked the salinity and ph of surface and ground waters. He also said this was based on parameters established by the ODM. He said they also tested for some metals. He testified it had been done as frequently as quarterly for ten years. He said he had reviewed that results and did not have a problem with the facility as it has been operated. He said the facility was in total retention. He said he saw no evidence the facility was leaking. He said using the produced water to make ash slurry was a beneficial use. He also said oil and gas operators have limited methods to deal with produced water. He testified produced

24 Page 24 water could be placed in an injection well where it could not escape. He said there was no use involved since it was disposed of in the injection well. He said another option would be to a land application of the produced water. He said land application is not specifically a beneficial use. It may have a beneficial use as irrigation water for crops. He agreed the produced water was used with the fly-ash to fill in a previously abandoned strip mine. He said the historic strip mine was closed mine under ODM standards. He also said his understanding of closure requires the sealing of the "high wall" or coal wall of the strip mine. He then express disagreement about discounting an earlier test result form GWMP #1. He said Enercon did not perform the test, but it was done in compliance for the ODM. He said he reviewed the data. He testified he thought it was valid point. He said the data could be relied on as it came from a certified lab. He said the sulfate concentration was less than the TDS. He said it was a valid piece of data to consider when establishing the background ground water and salinity conditions at the site. He said the background ground water meant the conditions that existed before MMHF began its operations. He testified if the data point were left in, then it would show groundwater conditions at this site can easily be 2000ppm as a normal condition. He said this was because of the geologic setting of shale, coal mining and the disturbance from the mining. He said looking at historical data you would find borings performed in the 1970s that had salinities between 2000 and 4000ppm along the backbone fault. He said there was a lot of data for the area because it was a coal mining site. He said the literature of the area shows Doe Creek was saline in the 1970s. This was attributed to the coal mining impact. He also said borings done by Colorado Fuel and Iron (CF&I) along the backbone fault showed groundwater salinity as high as 4000ppm. He said just because you observe saline water in the area that does not say the pit is leaking. He admitted he had found that water was seeping to the surface of the facility. He also admitted the sources of the seep water could include underground mine drainage, groundwater flow along a fault or the ADC. He said it was his opinion it was ash cell water. He admitted there was an EPA Cease and Desist Order in place. He said the EPA orders do not prohibit receiving produced water at the facility, only the discharge of water into United States (US) waters. He then discussed the material used in the berms. He testified it was not constructed of fly-ash but rather was constructed of native shales that has been reworked. He based this on his own observations and inquiries to MMHF. He also discussed the amount of water needed to conduct MMHF slurry operations. He said it was his understanding ODM derived a number of 1,200,000 barrels per year. He said ODM looks at it on a annualized basis. He also explained what he meant by there being no viable aquifer. He said it was not a viable aquifer because its not an aquifer that can provide water of sufficient quantity or quality for human consumption. He said both quality and quantity have to be considered. He testified suitable for residential use would include ten to twenty gallons a minute. He admitted he had not tested any of the wells in the area for flow rates. He also explained when he said there were no wells in the area, that he meant no wells registered with Oklahoma Water Resources Board (OWRB). As to the underground mine, he testified he was not concerned about whether they still exist. He stated there is only one coal bed in the area. He said two coals are separated by about ten feet of shale. He said he believed the zone that was the underground mine was subsequently a strip mine so whatever was leftover was excavated and removed. He said it was his

25 Page 25 understanding ODM verified the location of the strip mine, the location of the underground mines and the sealing of the high wall, all regulatory requirements to have in place before approving the reclamation project. CONCLUSIONS AND RECOMMEN DATIONS This unique cooperative effort between the Commission and ODM is a commendable activity. Several environmental issues are being resolved by this effort. A strip pit is being reclaimed, fly-ash is being disposed of, and produced water is being recycled to avoid using fresh drinkable water. This is not to say there have not been some problems. Some of the problems are beyond the jurisdiction of the Commission such as fly-ash dust, truck traffic and water running off the site. The Commission regulates produced water. The evidence shows for the most part, water has been delivered to the fly-ash facility that is within the parameters allowed by the initial permits, with the exception of waters authorized under Order No There have been instances where oversight of the handling of the produced water has been less than desirable and water allowed that was not within the permit guidelines. The interveners would like to have all the Commission orders vacated to stop produced water from coming into the reclamation site. The thrust of their request is a perception of excess water being brought to the site. While prohibiting produced water would stop the truck traffic bringing in produced water, it would not stop the trucks bringing in fly-ash. Nor would it prevent MMHF from bringing in other sources of water, be it fresh drinkable water, water out of lakes and rivers, water caught in rain barrels or other water brought in via trucks. Insofar as the Commission is concerned, the work would go on, the ash trucks and water trucks would continue to the site. Things would go on as they had when produced water was not used. This is an ODM facility and the Commission has no jurisdiction over the reclamation activities at this site. The evidence showed MMHF was bringing in an average of 1,000,000 barrels of produced water a year to the facility. One witness for MMHF indicated ODM estimated there was a need for at least 1,200,000 barrels of water annually. No evidence was submitted to show how much water is provided by rain or natural drainage to the site. There was no evidence to show the produced water brought to the facility was not used to mix with the fly-ash. Nor was there was no evidence showing the produced water was poured on the ground and allowed to run off the site. The interveners claim MMHF is using the facility as a disposal facility, but the evidence does not support that claim. The produced water is not being injected into underground formations, applied to the land, or kept in pits awaiting disposal. The evidence was clear it was mixed with fly-ash and converted to a slurry that was used to fill in a strip mine pit. A disposal facility would not be re-using the water for another purpose. It is more like a re-use of the water similar to using the produced water to rework a well. There was evidence shown implying that the produced water was polluting surface and groundwater monitoring wells because the numbers were higher than background data. The evidence showed that wells on one side of a fault were "sweet" while the wells on the other side were either "sour" before MMHF began operations. The historical data suggests ground water on one side of the fault had "high" saline content since the 1970s. The later data did not show their