ORDER / CASE NO: ORDER NO. 9-2014

ORDER / NOTICE OF

UIC

HARDING

T. 22N., R. 2E1 NW1/4NE1/4 SEC. 1

OPERATOR: ZENERGY OPERATING COMPANY, LLC

DATE ORDER ISSUED:

DATE ORDER CLOSED:

AMENDS:

AMENDED BY:

APPROVAL STATUS: WITHDRAWN

FIELD NAME: BORDER FIELD

UNIT NAME:

RECOMMENDATION TYPE:

COUNTY:

LOCATION(S):

Zenergy Operating

RECEIVED ROBERT M. ZINKE

Company, LLC AUG 2 2 2014 PRESIDENT

August 21, 2014

Dept. of Environment & Natural Resources

GROUND WATER QUALITY

PMB2020 SD Department of Environment and Natural Resources

Groundwater Quality Program 523 East Capital Ave. - Joe Foss Building

Pierre, SD 57501

RE: Tecton Federal #2-1H

API #: 40-063-20637

Sec. 1, T22N-R2E

Harding Co., SD

Dear Mr. Walsh:

Zenergy Operating Company, LLC is respectfully requesting to withdrawal the Permit to

Inject Application we submitted to your office on July 23, 2014 due to lack of response

and interest from the Bureau of Land Management. Without their approval we will not be

able to complete this project. Zenergy would like to thank you for all of the time and

effort you have put into this.

If you have any questions or need additional information, please let us know. Sean LiSooey

can be reached at 918-488-6482.

Thank you for your consideration.

Sincerely,

Belinda M. Brock Regulatory/Engineering Assistant

Zanergy Operating Company, One Warren Place, 6100 South Yale Avenue, Suite 1700 Tulsa, Oklahoma 74136 Phone: (918) 488-6400, Fax: (918) 488-6570

OIL AND GAS EXPLORATION AND PRODUCTION

RECEIVED

AUG 19 201k

DEPT OF ENVIRONMENT & NATURAL RESOURCES - RAPID CITY

Affidavit of Publication STATE OF SOUTH DAKOTA: COUNTY OF HARDING: Letitia Lister of said County and State being first duly sworn, on her oath says: That the NATION'S CENTER NEWS is a legal week newspaper of general circulation, printed and published in the City of Buffalo, in said County and State by Letitia Lister, and has been such a newspaper during the times hereinafter mentioned; and that said newspaper has a bonafide circulation of at least 200 copies weekly, and has been published within said County in the English lan-guage for at least one year prior to the first publication of the notice herein mentioned, and is printed in whole or in part in an office main-tained at the place of publication; and that I, Letitia Lister, the undersigned, am the Publisher of said newspaper and have personal knowledge of all the facts stated in this affidavit; and that the adver-tisement headed:

K)c_ - Qoily

a printed copy of which is hereto attached, was printed and published in said newspaper for j successive nd consecutive weeks, the first publication being made on the iLfri=day of A-1,9 ,Q.C1 y, any the last publication on the day of , that the fu amount of fees charged for publishing same, to-wit: The sum of $ LC). / 1-1 , insures solely to the benefit of the publisher of the NATI( CENTER NEWS, that no agreement or understanding for a division thereof has been made with any person and that no part thereof has been agreed to be paid to any other person whomsoever.

STATE OF SOUTH DAKOTA

SECRETARY OF THE DEPARTMENT OF

ENVIRONMENT AND NATURAL

RESOURCES

NOTICE OF

RECOMMENDATION FOR A PERMIT TO

INJECT

OIL AND GAS CASE NO. 9-2014

IN THE MATTER OF THE APPLICATION OF ZENERGY OPERAT-ING COMPANY, LLC, TULSA, OKLAHOMA, FOR APPROVAL OF A PERMIT TO INJECT PRODUCTION WATER INTO THE EXISTING TECTON FEDERAL 2-1H WELL LOCATED IN THE NW1/4 NE1/4 SECTION 1, TOWNSHIP 22 NORTH, RANGE 2 EAST, IN THE BOR-DER FIELD, HARD-ING COUNTY, ABOUT TWENTY SIX MILES NORTHWEST OF BUF-FALO, SOUTH DAKO-TA.

Notice is hereby giv-en to the public and to all interested persons that pursuant to South Dakota Codified Laws (SDCL) Chapter 1-26 and Chapter 45-9 and further pursu-ant to the Administrative Rules of South Dakota (ARSD) 74:12:07 and 74:12:09, the following matter has come to the attention of the Secretary of the Department of En-vironment and Natural Re-sources, hereinafter ?Sec-retary.?

The Tecton Federal 2-1H well was complet-ed with 2,000 feet of 9 5/8?inch steel surface cas-ing, cemented to protect underground sources of drinking water, and 8,712 feet of 7-inch steel pro-duction casing, cemented to protect underground sources of drinking water. The injection zone will be in the Inyan Kara Forma-tion. Injection water will be produced water from the Pronghorn 32P-29-20H and Gunderson 31P-30-19H wells pro-ducing from the Red Riv-er Formation (?B? zone). All wells within the one-half mile area of review, and maximum calculated radius of influence, are constructed such that the injection into this well will not affect any underground sources of drinking water.

Water from the Inyan Kara Formation, near the proposed injection well, has a total dissolved sol-id content of less than 10,000 milligrams pei li-ter; therefore, an aquifer exemption is required to conduct injection oper-ations at this well. The Secretary recommends granting a 1,300-foot ra-dius aquifer exemption in the Inyan Kara Formation around the proposed injec-tion well. The Secretary has made this recommen-dation because the Inyan Kara Formation, near the proposed injection well, does not currently serve as a source of drinking water, is not expected to supply a public water system, and will not serve as a source of drinking water in the future because its location and depth make recovery of water for drinking wa-ter purposes economically impractical.

The requested maxi-mum injection pressure is 1,415 pounds per square inch and the requested du-ration of this application is 20 years or the time re-quired to inject 29,200,000 cumulative barrels of wa-ter, whichever comes first.

The Secretary recom-mends approval of the ap-plication with the follow-ing conditions:

1) Injection operations authorized under the permit to inject must be conducted in accordance with SDCL Chapter 45-9, ARSD 74:12 and any applicable orders or rules promulgated by the board;

2) The total number of barrels injected during the life of this permit may not exceed 29,200,000 barrels of water;

3) The maximum injec-tion rate must not exceed 4,000 barrels of water per day;

4) The life of the permit may not exceed 20 years;

5) The maximum pres-sure must not exceed 1,415 pounds per square inch surface pressure during in-jection operations;

6) Prior to the com-mencement of injection, a water compatibility anal-ysis of the water to be injected and water from the injection formation at the Tecton Federal 2-1H well must be completed and submitted to the de-partment for review. If the analysis indicates the waters are incompatible, action must be taken to prevent potential damage to the injection well or the injection formation;

Subscribed and sworn to before me this J-9' day o

Notary Public, Lawrence County, South Dakota My commission expires: 10-24-2016

7) Prior to the com-mencement of injection, the Secretary's recom-mended Aquifer Exemp-tion for this operation must be approved by the United States Environmental Pro-tection Agency;

8) A mechanical integ-rity test must be success-fully conducted prior to the commencement of in-jection activity. The well must pass the mechani-cal integrity test at 1,000 pounds per square inch surface pressure. The op-erator is required to notify the Secretary a minimum of 72 hours prior to run-ning a mechanical integ-rity test;

9) Once mechanical in-tegrity is established, the well must be retested at least once every five years to ensure that mechanical integrity is maintained, unless the department in-dicates differently;

10) If an unsuccessful pressure test occurs, the operator must cease oper-ations immediately if it is determined the injection will threaten any under-ground source of drink-ing water. If the failure is not threatening ground water, the operator must cease operations within 48 hours after receipt of the department secretary's notice, and take corrective action on the well as soon as feasible. Corrective action options include re-pairing the well so that a successful test result can be obtained, plugging and abandoning the well, or any other action approved by the department.

Authority for the Sec-retary to approve this application is contained in ARSD 74:12:07 and 74:12:09. Unless a person files a petition requesting a hearing on the above appli-cation pursuant to the pro-visions of ARSD 74:09:01 on or before September 3, 2014, the Secretary's recommendation will be considered final and the Secretary will approve the application in accordance with that recommendation.

The application and notice of recommenda-tion are also posted on the department's website at: http://denr.sd.gov/des/og/ p.:bhearing.aspx. Addi- tional information about this application is avail-

able from Brian Walsh, Environmental Scientist III, Ground Water Quality Program, Department of Environment and Natural Resources, 523 East Cap-itol Avenue, Pierre, SD 57501, telephone (605) 773-3296, email brian. walsh@state.sd.us.

August 14, 2014

Steven M. Pirner Secretary

Published once at the total approximate cost of $59.69.

#752 Aug. 14

STATE OF SOUTH DAKOTA SECRETARY OF THE

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

IN THE MATTER OF THE APPLICATION OF ZENERGY OPERATING COMPANY, LLC, TULSA, NOTICE OKLAHOMA, FOR APPROVAL OF A PERMIT TO

OF

INJECT PRODUCTION WATER INTO THE EXISTING

RECOMMENDATION TECTON FEDERAL 2-1H WELL LOCATED IN THE

FOR A PERMIT TO INJECT

NW% NEY4 SECTION 1, TOWNSHIP 22 NORTH, RANGE 2 EAST, IN THE BORDER FIELD, HARDING COUNTY, ABOUT TWENTY SIX MILES

OIL AND GAS

NORTHWEST OF BUFFALO, SOUTH DAKOTA. CASE NO. 9-2014

Notice is hereby given to the public and to all interested persons that pursuant to South Dakota Codified Laws (SDCL) Chapter 1-26 and Chapter 45-9 and further pursuant to the Administrative Rules of South Dakota (ARSD) 74:12:07 and 74:12:09, the following matter has come to the attention of the Secretary of the Department of Environment and Natural Resources, hereinafter "Secretary."

The Tecton Federal 2-1H well was completed with 2,000 feet of 9 5/8—inch steel surface casing, cemented to protect underground sources of drinking water, and 8,712 feet of 7-inch steel production casing, cemented to protect underground sources of drinking water. The injection zone will be in the Inyan Kara Formation. Injection water will be produced water from the Pronghorn 32P-29-20H and Gunderson 31P-30-19H wells producing from the Red River Formation ("B" zone). All wells within the one-half mile area of review, and maximum calculated radius of influence, are constructed such that the injection into this well will not affect any underground sources of drinking water.

Water from the Inyan Kara Formation, near the proposed injection well, has a total dissolved solid content of less than 10,000 milligrams per liter; therefore, an aquifer exemption is required to conduct injection operations at this well. The Secretary recommends granting a 1,300-foot radius aquifer exemption in the Inyan Kara Formation around the proposed injection well. The Secretary has made this recommendation because the Inyan Kara Formation, near the proposed injection well, does not currently serve as a source of drinking water, is not expected to supply a public water system, and will not serve as a source of drinking water in the future because its location and depth make recovery of water for drinking water purposes economically impractical.

The requested maximum injection pressure is 1,415 pounds per square inch and the requested duration of this application is 20 years or the time required to inject 29,200,000 cumulative barrels of water, whichever comes first.

The Secretary recommends approval of the application with the following conditions:

1) Injection operations authorized under the permit to inject must be conducted in accordance with SDCL Chapter 45-9, ARSD 74:12 and any applicable orders or rules promulgated by the board;

2) The total number of barrels injected during the life of this permit may not exceed 29,200,000 barrels of water;

3) The maximum injection rate must not exceed 4,000 barrels of water per day;

4) The life of the permit may not exceed 20 years;

5) The maximum pressure must not exceed 1,415 pounds per square inch surface pressure during injection operations;

6) Prior to the commencement of injection, a water compatibility analysis of the water to be injected and water from the injection formation at the Tecton Federal 2-11-1 well must be completed and submitted to the department for review. If the analysis indicates the waters are incompatible, action must be taken to prevent potential damage to the injection well or the injection formation;

7) Prior to the commencement of injection, the Secretary's recommended Aquifer Exemption for this operation must be approved by the United States Environmental Protection Agency;

8) A mechanical integrity test must be successfully conducted prior to the commencement of injection activity. The well must pass the mechanical integrity test at 1,000 pounds per square inch surface pressure. The operator is required to notify the Secretary a minimum of 72 hours prior to running a mechanical integrity test;

9) Once mechanical integrity is established, the well must be retested at least once every five years to ensure that mechanical integrity is maintained, unless the department indicates differently;

10) If an unsuccessful pressure test occurs, the operator must cease operations immediately if it is determined the injection will threaten any underground source of drinking water. If the failure is not threatening ground water, the operator must cease operations within 48 hours after receipt of the department secretary's notice, and take corrective action on the well as soon as feasible. Corrective action options include repairing the well so that a successful test result can be obtained, plugging and abandoning the well, or any other action approved by the department.

Authority for the Secretary to approve this application is contained in ARSD 74:12:07 and 74:12:09. Unless a person files a petition requesting a hearing on the above application pursuant to the provisions of ARSD 74:09:01 on or before September 3, 2014, the Secretary's recommendation will be considered final and the Secretary will approve the application in accordance with that recommendation.

The application and notice of recommendation are also posted on the department's website at: http://denr.sd.govides/og/pubhearing.aspx. Additional information about this application is available from Brian Walsh, Environmental Scientist III, Ground Water Quality Program, Department of Environment and Natural Resources, 523 East Capitol Avenue, Pierre, SD 57501, telephone (605) 773-3296, email brian.walsh@state.sd.us.

August 14, 2014

Steven M. Pirner Secretary

Published once at the total approximate cost of

2