[Federal Register Volume 59, Number 151 (Monday, August 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19248]


[[Page Unknown]]

[Federal Register: August 8, 1994]


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DEPARTMENT OF ENERGY
[Docket No. GP94-16-000]

 

State of Louisiana Office of Conservation--Geopressured Brine Gas 
Well Determinations (FERC Nos. JD94-04615, et al.); Notice of 
Preliminary Finding

August 2, 1994.
    The Office of Conservation for the State of Louisiana (Louisiana) 
determined that the natural gas produced from five wells qualifies as 
natural gas produced from geopressured brine under Section 107(c)(2) of 
the Natural Gas Policy Act of 1978 (NGPA).
    For the reasons discussed below, the Commission issues this Notice 
of Preliminary Finding that the determinations are not supported by 
substantial evidence.

Background

    The Definition of ``Natural Gas Produced from Geopressured Brine''
    Section 272.103(c) of the Commission's regulations defines 
``natural gas produced from geopressured brine'' as natural gas 
dissolved before initial production of the natural gas in subsurface 
brine aquifers with at least 10,000 parts of dissolved solids per 
million parts of water (ppm) and with an initial reservoir geopressure 
gradient in excess of 0.465 per square inch (psi) for each vertical 
foot of depth. This definition was adopted to implement NGPA Section 
107(c)(2), which provides that ``natural gas produced from geopressured 
brine'' is ``high-cost natural gas.''
    In the Interim Rule and Final Rule adopting the definition of 
``natural gas produced from geopressured brine,'' the Commission held 
that free gas (i.e., gas which is freed from solution in the brine) 
cannot qualify as production from geopressured brine.1 The 
Commission based its decision on the language of NGPA Section 
107(c)(2), which required that the gas be produced from the brine, and 
the fact that gas that was not dissolved in brine could be economically 
produced through less expensive conventional production techniques. 
Accordingly, the Commission stated that if the gas has broken free from 
the brine before initial production (before any fluids are withdrawn 
from the reservoir), such gas would not qualify under the definition 
the Commission adopted to implement NGPA Section 107(c)(2).
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    \1\Interim Rules Defining and Deregulating Certain High-Cost 
Natural Gas, FERC Stats. and Regs., Regulations Preambles, 1977-
1981, 30,094; Final Rule Defining and Deregulating Certain 
High-Cost Gas, FERC Stats. and Regs., Regulations Preambles, 1977-
1981, 30,147.
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Louisiana's Determinations

    Louisiana notified the Commission that gas produced from the Edna 
Delcambre #1 Well (FERC No. JD94-04615), the Exxon Fee #13 Well (FERC 
No. JD94-06209), the Exxon Fee #16-Alt Well (FERC No. JD94-06208), the 
Exxon Fee #18-Alt Well (FERC No. JD94-06207), and the Exxon Fee #24 
Well (FERC No. JD94-06206) qualifies as natural gas produced from 
geopressured brine under NGPA Section 107(c)(2).2 The wells are 
currently owned and operated by WRT Energy Corporation (WRT).
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    \2\The Commission received the determination for the Edna 
Delcambre #1 well on April 7, 1994; the other determinations were 
received on May 3, 1994.
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Staff's Tolling Letter

    Staff's May 20, 1994 letter to Louisiana noted that each record 
showed that each well produced predominantly free gas before the well 
began to produce significant amounts of fluids. Since the Commission 
had stated that gas that had broken free from the brine before any 
fluids are withdrawn from the reservoir could not qualify under its 
definition, staff requested Louisiana to explain why it believes the 
gas qualifies under the Commission's definition and to provide 
additional information to support each determination.3
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    \3\Staff requested: (1) shut-in bottomhole pressure histories 
and complete production histories for all of the wells that 
produced, or are producing, from one of these reservoirs; (2) 
subsurface structure maps, isopach maps, and cross-sections, 
detailing the initial and current-day geographical and vertical 
limits of each free gas reservoir, and the location of gas/water 
contacts; (3) a complete set of the well history records and 
Louisiana potential test reports for the 5 wells; and (4) a 
published reference detailing the solubility of natural gas in 
formation waters.
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Response to Tolling Letter

    Louisiana's response, which was received on July 5, 1994, forwards 
a June 22, 1994 letter (plus supporting data) from WRT that responds to 
the tolling letter. Louisiana states that WRT's letter addresses the 
deficiencies in question.
    WRT's June 22, 1994 letter provides the additional data requested 
in the tolling letter and explains why WRT believes that gas from the 
subject wells qualifies under Section 107(c)(2).4 WRT asserts that 
geological processes in the Gulf of Mexico cause continual compaction 
of source rocks and that this compaction generally results in the 
expulsion of salt water (or brine) which contains minute quantities of 
hydrocarbons dissolved in the brine. The brines generally migrate 
vertically, which results in lower pressures, and eventually free gas 
is evolved from the brine. This free gas, WRT continues, remains 
immobile until it has reached a critical gas saturation, at which point 
this free gas begins to flow along with the brine. Thus, WRT concludes, 
the natural evolution of geopressured brine involves not only gas in 
solution but also free gas that can be either mobil or immobile.
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    \4\The Commission received WRT's response on June 23, 1994. 
However, under Section 275.202, staff's letter tolled the 
Commission's 45-day review period until a response from Louisiana is 
received. Since Louisiana's response was received on July 5, 1994, 
the 45-day review period ends August 19, 1994.
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    WRT contends that the phrase ``broken free'' is ambiguous and that 
the Commission's statement in the Interim Rule was clearly intended to 
disqualify gas that pre-existed as mobile free accumulations of gas. 
WRT further contends that immobile free gas is an entirely different 
situation since it is not able to be produced through conventional 
means and is necessary to recover gas from a geopressured brine well. 
WRT concludes, therefore, that the Commission's statement that free gas 
could not qualify as gas produced from geopressured brine was not 
intended to include naturally occurring free gas within the reservoir 
below the critical saturation point (i.e., the Commission did not mean 
to exclude immobile free gas that cannot be produced by conventional 
means from the definition).

Discussion

    The Edna Delcambre #1 well produces from the Planulina 8 Sand, 
Reservoir A, in the Tigre Lagoon Field, which was discovered in 1947. 
The other four wells (Exxon Fee #13, #16, #18, and #24 wells) all 
produce from the 14,600' Sand, in the Lac Blanc Field, which was 
discovered in 1957.5 The records also indicate that the Edna 
Delcambre #1 well began producing from the Planulina 8 Sand in 1982; 
and the Exxon Fee #13, #16, #18, and #24 wells began producing from the 
14,600' Sand between 1982 and 1989. Thus, the 14,600' Sand, Reservoir 
C, and Planulina 8 Sand, Reservoir A, had been producing free gas for 
many years before WRT took over the operation of these wells.6
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    \5\The Exxon Fee #13, #16, and #18 wells produce from the 
14,600' Sand, Reservoir C, while the #24 well produces from an 
adjacent fault block--Reservoir A.
    \6\WRT acquired its interest in the Delcambre #1 well in 1988 
and became the operator of the Lac Blanc Field in 1993. The previous 
operators qualified the subject wells under Section 102 or 103.
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    After it acquired the wells, WRT applied secondary/enhanced 
recovery techniques and equipment, thereby extending the economic limit 
of both the wells and the subject reservoirs. Therefore, due to the 
expense of such techniques and equipment, WRT interprets the 
Commission's reference to gas that has ``broken free'' to refer to free 
gas, like a gas cap type reservoir accumulation, that can be produced 
by conventional means only--not to ``immobile'' free gas that cannot be 
produced without some production enhancement techniques.
    We disagree with WRT's interpretation, which would allow certain 
free gas in the subject reservoirs to qualify as geopressured brine gas 
simply because the geopressure gradient in the reservoirs exceeds 0.465 
psi/foot and the concentration of total dissolved solids exceeds 10,000 
ppm. Our regulations and intent are clear. The Commission explicitly 
stated that gas not dissolved in brine (i.e., free gas) cannot qualify 
as a high-cost gas under NGPA Section 107(c)(2). Similarly, when the 
Commission stated that any gas that has ``broken free'' of the brine 
prior to the onset of fluids production does not qualify as natural gas 
produced from geopressured brine, there is nothing to indicate that the 
mobility of the gas that had broken free mattered.
    The decision to exclude free gas reflects the Commission's belief 
that Congress deregulated gas produced from geopressured brine to 
provide an incentive for drilling wells into previously unproduced 
geopressured brine aquifers to tap gas dissolved in brine, not for 
producing gas from partially depleted or nearly depleted gas 
reservoirs.7 The Commission notes that incentives for gas 
production from depleted or nearly depleted gas reservoirs such as 
WRT's were provided by the statute (under the Section 108 enhanced 
recovery stripper gas well category) and by the Commission under the 
Section 107(c)(5) production enhancement gas category, pursuant to the 
authority conferred upon the Commission to establish an incentive rate 
for other gas produced under high costs or high risks.
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    \7\NGPA Section 121 provides that the high-cost gas described in 
Sections 107(c)(1) to (c)(4) will be deregulated on the effective 
date of the incremental pricing rule.
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    Under Section 275.202(a) of the regulations, the Commission may 
make a preliminary finding, before any determination becomes final, 
that the determination is not supported by substantial evidence in the 
record. The record for each well clearly shows that the well: (1) was 
not completed in a previously unproduced geopressured brine aquifer; 
(2) produced free gas from the reservoir before the onset of 
significant fluids production; and (3) is still producing varying 
quantities of free gas. Therefore, based on the above discussion, the 
Commission hereby makes a preliminary finding that Louisiana's 
determinations for the subject wells are not supported by substantial 
evidence in the records upon which they were made. Louisiana or the 
applicant may, within 30 days from the date of this preliminary 
finding, submit written comments and request an informal conference 
with the Commission, pursuant to Sec. 275.202(f) of the regulations. A 
final Commission order will be issued within 120 days after the 
issuance of this preliminary finding.

    By direction of the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 94-19248 Filed 8-5-94; 8:45 am]
BILLING CODE 6717-01-P