[Federal Register Volume 59, Number 237 (Monday, December 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30425]


[[Page Unknown]]

[Federal Register: December 12, 1994]


-----------------------------------------------------------------------

DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. GP95-3-000; FERC No. JD92-02505T; Texas-15 Addition 3]

 

Railroad Commission of Texas; Tight Formation Area Determination; 
Notice of Preliminary Finding

December 5, 1994.
    On December 23, 1991, the Railroad Commission of Texas (Texas) 
submitted its determination that the J through Y Sands portion of the 
Vicksburg Formation (also known as the Lower Vicksburg), underlying 
parts of the McAllen Ranch Field in Hidalgo County qualifies as a tight 
formation under Section 107(c)(5) of the Natural Gas Policy Act of 1978 
(NGPA).\1\
---------------------------------------------------------------------------

    \1\The designated area, which is the same for each Lower 
Vicksburg sand, encompasses approximately 15,100 acres in portions 
of ``San Ramon'' Juan Farias Grant (A-62) and the ``Santa Anita'' 
Manuel Gomez Grant (A-63), in Hidalgo County.
---------------------------------------------------------------------------

    For the reasons discussed below, the Commission issues this Notice 
of Preliminary Finding that Texas' determination for the J-Y Sands 
(Texas-15 Addition 3) is not supported by substantial evidence.

Background

    After staff sent two tolling letters requesting Texas to provide a 
statement explaining its determination and requesting additional data 
to support the determination, an informal conference was held at the 
request of Shell Western E & P, Inc. (SWEPI), the applicant before 
Texas. Following that conference, Texas, at SWEPI's request, issued 
separate tight formation area determinations for portions of the M, R, 
S, and T Lower Vicksburg Sands that are also included in the Texas-15 
Addition 3 determination, and deferred answering staff's tolling 
letter.\2\ By order issued September 30, 1994, the Commission affirmed 
Texas' separate determinations for the M, R, S, and T Sands.
---------------------------------------------------------------------------

    \2\The M Sand determination (Texas-112, FERC No. JD93-04541T) 
covers 3,010 acres. The R Sand determination (Texas-113, FERC No. 
JD93-04589T) covers 1,440 acres. The S Sand determination (Texas-
114, FERC No. JD93-04590T) covers 11,700 acres. The T Sand 
determination (Texas-115, FERC No. JD93-04591T) covers 7,320 acres.
---------------------------------------------------------------------------

    On October 27, 1994, Texas responded to staff's second tolling 
letter in the Texas-15 Addition 3 proceeding by submitting SWEPI's 
commentsand stating that those comments should satisfy the concerns 
raised in the tolling letter. The comments provide additional 
explanations for why SWEPI believes that the recommended formation 
meets the guidelines but contain no additional data on permeability or 
flow rate characteristics.

Discussion

Permeability Guideline

    Section 271.703(c)(2)(i)(A) of the Commission's regulations 
requires the jurisdictional agency to show that the in situ 
permeability to gas, throughout the pay section in the formation, is 
expected to be 0.1 millidarcy (md) or less.\3\
---------------------------------------------------------------------------

    \3\Order No. 567, issued on July 28, 1994, rescinded the 
Commission's NGPA's regulations, including Section 275 as of that 
date (68 FERC 61,135). The Commission stated, however, that 
rescission of Part 275 is prospective only and that timely filed 
applications for well determination proceedings still pending before 
the Commission will continue to be subject to the requirements of 
Part 275 as that section existed before July 28, 1994.
---------------------------------------------------------------------------

    Each recommended sand (J, K, L, M, * * * etc.) is actually a sand 
package, consisting of multiple sands; the recommended area for each 
Lower Vicksburg sand package is the same, whether the sand package is 
present throughout all of the approximately 15,100-acre recommended 
area or not. The record contains permeability data for only 17 of the 
97 wells drilled within the recommended area. In addition, as shown 
below, permeability data was not provided for each sand package.

------------------------------------------------------------------------
                                                 Average    Permeability
                 Sand package                     depth      data wells 
------------------------------------------------------------------------
J............................................        8,116             0
K............................................        8,765             1
L............................................        9,468             0
M............................................        9,922             1
N............................................       10,176             1
O............................................       10,297             0
P............................................       10,782             4
Q............................................       10,992             2
R............................................       11,181             1
S............................................       11,838             5
T............................................       12,283             2
U............................................       12,689             0
V............................................       12,708             0
Y............................................       13,877             0
------------------------------------------------------------------------

    Since Shell predicted permeability values for the sands with no 
data (i.e., untested sands), the tolling letter questioned why Texas 
believed the determination was supported by substantial evidence and 
requested additional permeability data.
    In its comments responding to the second tolling letter, SWEPI 
argues that the subject sands are of the same age, the same 
depositional environment, originated from the same source area, have 
very similar mineral composition, and have undergone the same post-
depositional structural and diagenetic processes. On this basis, SWEPI 
concludes that the factors controlling porosity and permeability in the 
sands lacking pressure build-up (PBU) test data are the same, or very 
similar, to the PBU tested sands.
    SWEPI also argues that the untested sands are adjacent to sands 
with sufficient test data to afford sufficient control to establish the 
basis for using the values that were calculated for untested sands. 
SWEPI further contends that the empirical PBU data from the tested 
sands can be used to predict permeabilities in the untested sands. For 
this purpose, SWEPI's Texas-15 Addition 3 application includes a graph 
which attempts to show that initial permeabilities may be predicted 
based on a correlation between initial permeability, porosity, and gas 
saturation (i.e., that the points on the graph demonstrate that there 
is a linear relationship between initial permeability and the other two 
factors). SWEPI also argues that the few sands which lack PBU test data 
are either immediately above or below a PBU tested sand, or (in most 
cases) between PBU tested sands.
    We find, however, that the Texas-15 Addition 3 record does not 
contain substantial evidence showing that all of the sands in the 
recommended interval (the J through Y Sands) meet the Commission's 0.1 
md guideline for tight formation designation over all of the 15,100-
acre area being recommended. Our review of SWEPI's Engineering Exhibit 
7 shows that initial permeability varies widely from one sand package 
to the next,\4\ and even from one well to the next.\5\ Thus, the record 
shows that the permeability evidence from tested sand packages does not 
demonstrate that the untested sands meet the 0.1 md guideline for tight 
formation designation. Moreover, the record does not show that initial 
permeability for untested sands can be predicted using the linear 
relationship that SWEPI drew. An examination of SWEPI's graph shows 
that the points on the graph are completely scattered; therefore, there 
is no linear relationship and no showing that initial permeability is a 
function of porosity and gas saturation.
---------------------------------------------------------------------------

    \4\For example, SWEPI's Engineering Exhibit 7 shows that the 
McAllen Ranch #22 well's initial R Sand permeability of 3.84 md is 
96 times the 0.04 md initial T Sand permeability in the McAllen 
Ranch # 77 well.
    \5\For example, SWEPI's Engineering Exhibit 7 shows that the 
Woods Christian #7 well's initial P Sand permeability is 4.64 md, 
while the initial permeability for the P Sand in the Woods Christian 
#13 well is only 0.13 md.
---------------------------------------------------------------------------

Natural Gas Flow Rate Guideline

    Section 271.703(c)(2)(i)(B) of the Commission's regulations 
requires the jurisdictional agency to show that the average pre-
stimulation stabilized natural gas flow rate (against atmospheric 
pressure) of wells completed for production in the formation does not 
exceed the applicable maximum allowable flow rate (based on the average 
depth to the top of the formation and the table of maximum flow rates 
in the regulations).
    Our review shows that the Texas-15 Addition 3 record does not 
contain individual pre-stimulation stabilized flow rates from each 
completion for production in a recommended sand and no additional 
supporting documentation (i.e., completion reports and/or copies of 
driller's reports) verifying which sand intervals were completed for 
production within each data well, and whether or not the PBU tested 
intervals correspond to those completion intervals. SWEPI's pre-
stimulation flow rate calculations for the J-Y interval rely on the 
predicted permeability values for untested sands. In view of the fact 
that these predicted values are flawed, we find that the Texas-15 
Addition 3 record does not contain substantial evidence that the 
stabilized production rate, against atmospheric pressure, of wells 
completed for production in the J-Y Sand interval, without stimulation, 
is not expected to exceed the applicable allowable found in the 
Commission's regulations. Moreover, we find that the additional pre-
stimulation stabilized flow rate data developed for the separate M, R, 
S, and T Sand determinations does not provide evidence as to the flow 
rate characteristics of completions for production in other sands, in 
other wells.

SWEPI's De Novo Review Argument

    SWEPI argues that the Commission has exceeded its substantial 
evidence review authority under Section 503 of the NGPA and conducted a 
de novo review of the Texas-15 Addition 3 application. SWEPI's argument 
is based in large part on the detailed data requests in staff's tolling 
letters.
    We find that SWEPI's argument is without merit. The Commission has 
consistently required that the in situ permeability and pre-stimulation 
natural gas and crude oil flow rate guidelines pertain to the initial 
permeability and flow rate characteristics of the formation, not to 
conditions resulting from years of sustained production.\6\ Since the 
record in the Texas-15 Addition 3 determination clearly indicates that 
initial well completions in natural gas pay sections within the J-Y 
Sand interval (within the recommended area) exceed the guidelines for 
tight formation designation, and that it is only as a result of 
sustained production that the producing well completions begin to 
exhibit permeability and flow rate values below the numerical limits in 
the regulations, the record does not support a determination that the 
recommended formation meets the permeability and flow rate guidelines 
established by the Commission. Therefore, staff's requests for data to 
provide additional evidence to support Texas' determination was 
appropriate. As discussed above, our review shows that the record does 
not contain sufficient data to support Texas' determination that the 
recommended area and the recommended interval meets each of the 
Commission's guidelines.
---------------------------------------------------------------------------

    \6\See Notices of Preliminary Finding issued in Docket No. GP93-
5-000 (64 FERC 61,004) and Docket No. GP94-7-000 (67 FERC 61,073).
---------------------------------------------------------------------------

    Under Sec. 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. 
Based on the above discussion, the Commission hereby makes a 
preliminary finding that Texas' determination is not supported by 
substantial evidence in the record upon which it was made.\7\ Texas 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.

    \7\This action does not affect the portion of the M, R, S, and T 
Sands that are covered by the determinations the Commission approved 
in its September 30, 1994 order in Docket No. GP94-10-000 (68 FERC 
61,394).
---------------------------------------------------------------------------

    By direction of the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 94-30425 Filed 12-9-94; 8:45 am]
BILLING CODE 6717-01-M