UNDERGROUND STORAGE WELLS OF LIQUEFIED COMPRESSED

UNDERGROUND STORAGE WELLS OF LIQUEFIED COMPRESSED GASES, CRUDE OILS, REFINED HYDROCARBONS, COMPRESSED AIR AND NATURAL GASES IN RESERVOIRS DISSOLVED IN SALT BEDS. Permits 1. The permit for the drilling, development and continued operation of artificially formed underground liquefied compressed gas, crude oils, refined hydrocarbons, compressed air or natural gas storage space, where such cavity is dissolved in salt beds, may be issued only after notice and hearing by the State Oil and Gas Board, in the form and manner required by statutes and rules of this Board. Storage of lubricating oils, hazardous materials, nuclear, and/or radioactive materials shall not be permitted. Oil and Gas Board Form 2 and 2A shall accompany each permit application. General Design and Construction of Underground Storage Cavern 2. Prior to the design and construction of an underground storage cavern, an engineer and/or geologist experienced in the development and/or operation of a salt cavern storage facility shall perform an investigation to determine the feasibility of such a storage system at a particular site. The data obtained during the feasibility investigation shall be considered in the design of a solution mined underground storage system and such data filed with the Board. 3. Design shall be performed by or under the supervision of an engineer or geologist, as defined in paragraph 2, and shall include such factors, among others, as: type of storage use, location of the cavern(s), number of caverns, cavern capacity, and maximum development diameter of the cavern(s). The design shall assure that project development can be conducted in a reasonable, prudent and systematic manner; and shall stress physical and environmental safety and the prevention of waste. The design and solutioning shall be continually reviewed throughout the construction phase to take into consideration pertinent additional detailed subsurface information, and shall include provisions for protection from damage caused by hydraulic shock. The Board shall be advised of any test or surveys conducted during the construction phase and copies made available to the Board as soon as practicable. 4. Each solution mined storage cavern developed after the adoption of these rules shall be washed with a blanket material in place in order to prevent uncontrolled leaching of the cavern roof. Blanket material is defined as any non-corrosive material which is immiscible with water, and lighter than water, e.g. propane, diesel oil. 5. Storage operations utilizing fresh water to displace product shall be conducted in such a manner that the washing of the cavern will not result in uncontrolled increase of the cavern diameter or capacity, or washing the cavern roof. Cavern Operating Pressures 6. The maximum and minimum operating pressure of a storage cavern shall be determined by an engineer, as defined in paragraph 2, after considering the geological characteristics of the dome. The maximum allowable operating pressure (gauge) at the production casing seat or cavern roof, whichever is the shallowest, shall not exceed 0.9 psi per foot of overburden. 7. The storage cavern shall not be subjected to pressures in excess of this maximum operating pressure even for short periods of time (including pressure pulsation peaks, abnormal operating condition, etc.). Volume Verification 8. Each salt dome solution mined cavern developed after the adoption of these rules shall be washed to its initial design capacity, as approved by the Board. Such capacity shall be verified by a method approved by the Board, and such information shall be filed with the Board prior to the utilization of the cavern for storage of product. The cavern may be enlarged to a capacity equal to the maximum size approved by the Board and verified by a method approved by the Board and such information shall be filed with the Board within 30 days for continued operation. 9. All solution mined storage caverns in use at the time these rules are adopted shall have the capacity verified within one year from the effective date of these rules. In any event, each solution cavern shall have the capacity verified at least once every five (5) years. A copy of any and all surveys or tests run to verify capacity shall be filed with the Board within 30 days. Location of Underground Storage Cavern 10. Each solution mined cavern developed after the adoption of these rules shall be located as follows: (a) The wellhead and borehole shall be located so that the walls of the storage cavern at maximum development diameter shall be no less than 100 feet from the property boundary of the lands included in the storage project on which the caverns are located, and no less than 300 feet in any direction from the edge of the salt mass. (b) The minimum separation of adjacent walls of storage caverns as measured in any direction shall be established by an engineer, as defined in paragraph 2, considering (1) the salt properties, (2) the elevation of the top and bottom of the adjacent caverns, (3) their maximum development diameter relative to the spacing of the caverns, and (4) other considerations deemed appropriate for the specific site; but, in no case shall such separation at any time be less than 200 feet. In the event the separation of the adjacent walls of storage caverns becomes less than 200 feet, the Board will be advised and a variance requested. Proof that the caverns can be safely operated with less than a 200-foot minimum separation between caverns must be presented to justify the variance. 11. Storage caverns in use at the time these rules are adopted are subject to the following: (a) The surface location measured from the wellhead of a solution cavern well shall be no less than 100 feet from the nearest property line. (b) Caverns' extremities shall be no less than 50 feet from the property of others who have not consented to subsurface storage under their land nor from the side wall of any other cavern. Casing Program 12. All casing strings shall be centralized throughout the interval to be cemented. Casing and cementing programs shall comply with appropriate provisions of Statewide Rules 10, 11 and 12, except as specifically provided below. (a) Each new storage well shall be completed with a double string of casing into the salt, one casing string being an intermediate string, the other being the final (production) cemented string. (b) The intermediate cemented casing string shall have adequate tensile and collapse strengths for the setting depth. This string shall be cemented from casing seat (bottom of casing) set into the salt, to ground surface or 150% of calculated cement volume to fill the annular space; however, in every case it shall be cemented a sufficient distance to prevent migration of the stored products into zones of porosity or permeability in the overburden. Cement slurries shall be compatible with the salt formation and cementing shall be placed by the plug and displacement method. The casing cement job shall be documented by an affidavit from the cementing company showing the amount and type of cementing materials and the method of placement. If the casing string is to be installed by welding, it shall be of a weldable grade such as API 5L Grade B or an ASTM weldable grade. (c) The final (production) cemented casing string shall have adequate tensile and collapse strengths for the setting depth. This string shall be cemented from casing seat (bottom of string) to ground surface and shall be set a minimum of 300 feet into the salt. A variance may be requested on cementing, but in every case sufficient cement shall be used to bring cement up into the intermediate casing. Cement slurries shall be compatible with the salt formation and cementing shall be placed by the plug and displacement method. The casing cement job shall be documented by an affidavit from the cementing company showing the amount and type of cementing materials and method of placement. All cementing and service reports shall be filed with the Board within 30 days. If the casing string is to be installed by welding, it shall be of a weldable grade such as API 5 L Grade B or an ASTM weldable grade. Casing string welders shall be qualified under either Section 3 of API 1104 specification or Section IX of the ASTM Boiler and Pressure Vessel Code for the thickness to be welded. In addition to a visual inspection of the completed weld a x-ray or ultrasonic inspection shall be run on at least 10% of the string. The record of the inspection shall be available for review by the State Oil and Gas Board. Defective welds shall be ground, re-welded and re-inspected. (d) The final (production) cemented casing string shall be hydrostatically pressure tested before drilling out the plug (shoe). The test pressure applied at the surface shall be a minimum of 200 psi. However, the test pressure when measured at the surface shall not cause pressure at the casing seat to exceed 0.9 psi per foot of depth. The test pressure shall be maintained for a minimum of one hour to verify casing integrity and absence of leaks. (e) The casing seat and cement of final cemented casing string shall be hydrostatically tested after drilling out. At least 10 feet of salt below the casing shall be penetrated prior to this test. The test pressure calculated at the casing seat shall equal the maximum operating pressure at that point. However, the test pressure shall not exceed 0.9 psi per foot of depth. The test pressure shall be maintained for a minimum of one hour. (f) All tests required by this section shall be prepared and supervised by an engineer, as defined in paragraph 2, and a report of these test results attested to and filed with the Board within 30 days. Cavern Mechanical Integrity Test 13. Storage Caverns in use at the time these rules are adopted shall be tested for mechanical integrity within one year from the effective date of these rules, and at least every five years thereafter. Each new storage cavern shall be tested for mechanical integrity prior to storing product and at least every five (5) years thereafter. 14. Liquified Compressed Gas, Crude Oils or Refined Hydrocarbons Storage Cavern – (a) prior to the test the cavern must approach stability with regard to cavern temperature and salt dissolution. For test purposes, the cavern can be considered stable and the test commenced when the shut-in brine pressure changes less than 10 psig in 24 hours. (b) A natural gas or compressed air storage cavern shall be considered stable when the well head pressure variations can reasonably be shown to closely correlate to ambient temperature changes. Recording temperature gauges shall be used for both wellhead and ambient temperatures and shall be calibrated prior to use. 15. Prior to testing a cavern a detailed testing procedure shall be submitted to the Board for approval. The testing procedure used must be at least as stringent as the following: The wellhead, cased borehole, and storage cavern shall be pressure tested as a unit using product, or a material with equivalent or lesser viscosity and density injected to a depth below the production casing seat. Test pressure at the wellhead shall be equal to: (a) such pressure as will produce the expected maximum operating pressure at the production casing seat. Calculation of the expected maximum operating pressure shall consider the maximum depth to the product-brine interface and maximum flowing conditions; or, (b) caverns used for storage of natural gas or compressed air under pressure shall demonstrate mechanical integrity of the cavern and casing by monitoring shut-in pressure at the surface for a minimum period of 24 hours after stabilization. Beginning and ending pressures shall vary no more than three (3%) percent, with adjustment made for temperature changes. In no case shall the test pressure cause the pressure at the production casing seat to exceed the maximum allowable pressure of 0.9 psi/foot of overburden. 16. All cavern mechanical integrity tests shall be prepared and supervised by an engineer, as defined in paragraph 2, and reports filed with the Board within 30 days. 17. The operator shall give sufficient notice prior to conducting cavern integrity tests so that a Board representative may be present. Wellhead and Flowlines 18. All wellhead components (casinghead, tubinghead, etc.), valves, and fittings shall be of steel having primary service pressure ratings sufficient to exceed maximum operating pressure conditions computed at the wellhead. Wellhead, flowlines, valves, and all related connections shall have a test pressure rating at least equivalent to 150% of the maximum operating pressure. All valves shall be periodically inspected and maintained in good working order. 19. Each flowline connected to the wellhead shall be equipped with a manually operated positive shut-off valve located on the wellhead. The water and brine side of the wellhead shall have the same pressure rating as the product side. 20. Each flowline connected to the wellhead shall be equipped with an automatic shut-in safety valve located within ten (10) feet of the positive shut-off manual wellhead valve. These automatic valves shall be configured for Fail-Safe Closed operation, i.e. valve will close automatically upon any of the following conditions: (1) loss of control signal, (2) loss of valve operator supply pressure, (3) thermal (fire) activation (when fusible elements are used they should have a melting point not exceeding 250F), (4) signal from safety control sensing device, or (5) manual activation of emergency shutdown system. 21. (a) Liquified Compressed Gas, Crude oils and Refined Hydrocarbons - One or more safety control sensing device(s) shall be installed in the product flowline to prevent exceeding the maximum cavern operating pressure, and to prevent the escape of product due to flowline rupture. One or more safety control sensing devices(s) shall be installed in the brine flowline to prevent exceeding the maximum cavern operating pressure, and to prevent the escape of product. (b) Natural Gas and Compressed Air - One or more safety control sensing device(s) shall be installed in the product flowline to prevent exceeding the maximum cavern operating pressure, and to prevent the escape of product. 22. Flowlines connected to the wellhead which are used exclusively for water or brine injection for product displacement may be equipped with a check valve of adequate pressure rating in lieu of the automatic shut-in safety valve. 23. An alarm shall be installed to alert on-sight personnel whenever an automatic shut-in on any well occurs. Such a system shall be maintained in operable condition at all times. 24. For a liquified compressed gas or refined hydrocarbons storage cavern, a product/brine separation system and a continuous flare system shall be installed at or near each brine pit or any other location on the brine system where the uncontrollable escape of product may occur. 25. The safety control system, separation system, and flare system utilized shall be approved by the Supervisor of the State Oil and Gas Board (hereinafter referred to as the "Supervisor"). Metal Tanks and Impervious Containers 26. Metal tanks and impervious containers other than earthen pits used for storage or holding of brine water solutions shall be completely surrounded by a dike (or firewall) or retaining wall of sufficient height and size so that the volume enclosed shall be equal to 150% of the capacity of the largest tank or container inside the firewall; provided, however, that in areas where such dikes (or firewalls) or retaining walls would be impractical or impossible to construct and the operator has devised a plan which serves the same purposes, the Supervisor may, upon proper written application, waive in whole or in part the requirement of the construction of such walls. Rework (Well Work) 27. An Application to Rework, Form No. 2, stating thereon the exact workover procedure, shall be filed with and approved by the Supervisor prior to the commencement of such work. A Completion Report, Form No. 3, shall be filed within thirty (30) days following completion of the well work. 28. No downhole or wellhead work shall be done prior to notifying the Board. Such notification shall allow sufficient time for the Supervisor, at his discretion, to have his representative present to observe the work. Verbal authorization from the Field Inspector of the area, Field Director, UIC Coordinator or the Supervisor, may be issued for work conducted under atmospheric or controlled pressure conditions. Safety Practices 29. Personnel experienced and/or trained in the operation of salt cavern storage shall be present at the facility or other control site to monitor the operation when product is being injected or withdrawn from the storage cavern. In the event that crude oil, containing in excess of 5 ppm of Hydrogen Sulfide, is stored in underground storage caverns, the site location will be adequately marked denoting the presence of Hydrogen Sulfide. Directional wind socks will be installed at all locations where the product has access to the atmosphere. When injecting crude oil containing more than 5 ppm Hydrogen Sulfide into the underground storage cavern all applicable portions of Statewide Rule 66 shall apply, and the brine displaced will be discharged to brine storage through a flare system. 30. Appropriate safety precaution signs shall be displayed and unauthorized personnel kept out of the storage area. Each storage wellhead shall be visibly marked with an appropriate identifying sign. 31. The wellhead shall be protected from trespassers and accidental physical damage by a method approved by the Supervisor. 32. Each company operating a solution cavern storage well shall conduct a semi-annual safety inspection of such facility and file with the Board a written report consisting of the inspection procedure and results within thirty (30) days following the inspection. Such inspections shall be conducted during the months of January and July of each year. The operator shall notify the Board at least five (5) days prior to such inspections so that a representative of the Supervisor may be present to witness the inspections. Inspections shall include, but not be limited to, the following: (a) Operation of all manual valves (b) Operation of all automatic shut-in safety valves including sounding or alarm devices (c) Flare system installation (liquified compressed gas, crude oils, and refined hydrocarbons) (d) Earthen brine pits, tanks, firewalls, and related equipment (e) Flowlines, manifolds, and related equipment (f) Warning signs, safety fences, etc. 33. Additional inspections may be made by the Supervisor or his representatives. All local operators' logs called for by this rule shall be subject to inspection at this time. Financial Responsibility, Plugging and Abandonment. 34. Prior to commencement of plugging operations a Notice of Intention to Plug and Abandon, Form No. 6, shall be filed with and approved by the Supervisor. The Notice of Intention to Plug and Abandon shall state the exact method proposed to plug the well, and shall also provide the depth to the top of the cavern. If the proposed method to plug does not meet requirements at the discretion of the Supervisor, then the Supervisor shall specify the method in which the well shall be plugged. After properly plugging and securing the well the Plugging Record, Form 7, shall be filed with the Board within 30 days. 35. In addition to the requirements of Statewide Rule 28B the plugging procedure shall include the following: (a) Cavern shall be filled with water to remove product from the cavern. (b) All suspended casing shall be removed from the well. (c) Place a plug in the cemented casing string so that it is within the salt section near the cavern roof isolating the well from the cavern. (d) Cement from the plug to a distance of fifty (50) feet above the top of the caprock. Allow the cement to set. Tag the top of the cement to determine the location of the top of the cement. Test casing to 1000 PSI (minimum) for a period of 30 minutes. Any leaks detected shall be repaired prior to continuing plugging operation. The Supervisor may grant an exception to the testing of the casing and allow the entire casing string to be cemented to the surface with the appropriate grade of cement. (e) Cement from fifty (50) feet below the lowermost USDW to the surface. (f) Cut all casing strings off at least three (3) feet below ground level. Weld a steel plate of at least three eighths (3/8) inch thickness over the top of the casing strings. (g) Cover casing with soil and restore the location. (h) The operator shall demonstrate Financial Responsibility acceptable to the Board in the amount of one hundred thousand dollars ($100,000) for each storage cavern. Refer to Oil and Gas Board, Rule 63 1E 3 for proofs of Financial Responsibility acceptable to the Board. This Financial Responsibility shall be provided to the Board at the time of permit application and/or change of operator. (i) The operator shall within ninety (90) days of the adoption of this rule by the Board demonstrate Financial Responsibility acceptable to the Board in the amount of four hundred thousand dollars ($400,000) for each pit (brine or other) associated in any way with the operations of their storage cavern facilities. Refer to Oil and Gas Board Rule 63 1E 3 for Proof of Financial Responsibility acceptable to the Board. Any pit not properly permitted and/or used in the operation of the facility shall be properly closed within one hundred eighty (180) days of adoption of this rule by the Board. 36. All operators shall immediately notify the Supervisor by telephone and follow up with a letter giving full details concerning fires, leaks and blowouts that are directly related to the storage cavern. 37. In addition to the above, the following Statewide Rules with amendments or special requirements noted shall be in force and effect: (a) Statewide Rule 4 Application to Drill (b) Statewide Rule 5 Transfer of Permit (c) Statewide Rule 6 Identification of Well (d) Statewide Rule 24 Well logs (e) Statewide Rule 45 Waste by Pollution of Air, Fresh Waters and Soils Prohibited. (f) Statewide Rule 47 Fluid Injection Reports. Form No. 14A shall be filed each month stating thereon the following information for each individual well: 1. Saltwater Disposal Wells: a. Amount of saltwater (brine) injected during the month. b. Injection pressure, reservoir and depth data. 2. Liquefied Compressed Gas, Crude Oils, Refined Hydrocarbons, Compressed Air and Natural Gas Storage Cavern: a. Kind or type of product stored. b. Amount (barrels or MCF) of product injected into the well during the month. c. Amount (barrels or MCF) of product removed from the well during the month. d. Total amount (barrels or MCF) of product stored in the well at the end of the month. e. The estimated cavern capacity (barrels or cubic feet). (g) Statewide Rule 54. Organization Report (h) Statewide Rule 55. Identification of Facilities (i) Statewide Rule 56. Records (j) Statewide Rule 63. Underground Injection Control (k) Statewide Rule 66. Operations Involving Hydrogen Sulfide Suspension of Operations 38. Should the Supervisor of the State Oil and Gas Board determine that the continued operation of liquefied compressed gas, crude oils, refined hydrocarbons, compressed air or natural gas storage caverns or associated wellhead facilities (wellhead, valves, brine tanks or pits and flares) would cause unsafe operating conditions, waste, pollution or contamination to air, fresh water or soil, he may immediately prohibit further operation of the well or associated wellhead facilities until such time as it is determined by the Supervisor that the operator is in compliance with all rules and regulations of the Board. Board Filings 39. All tests, surveys, and reports required by these rules shall be filed with the Board within 30 days after such tests and surveys are conducted. Penalty 40. Any person, firm or corporation violating any of these rules and regulations shall be punished as provided by law. Exceptions 41. The Board expressly reserves the right, after notice and hearing, to alter, amend, repeal, or grant exceptions to any or all of the foregoing rules and regulations. Annual Facility Fees 42. For each facility an annual fee will be assessed in the amount of one hundred ($100) dollars plus fifty ($50) dollars per unplugged storage cavern and fifty ($50) dollars per unplugged bringing well associated with storage caverns. These fees shall be due each January beginning January 1991. Validity 43. Should any section, subsection or other provision of this rule be declared by a court of competent jurisdiction to be invalid, that decision shall not affect the validity of the rule as a whole or any part thereof, other than the part so declared to be invalid, this Board hereby declaring that it would have adopted those parts of this rule which are valid and omitted any parts which may be invalid, if it had known that such part or parts were invalid at the time of the adoption of this rule. Effective Date 44. These rules and regulations shall take effect and be in force from and after February 19, 1992, except where otherwise provided. The Board expressly reserves the right, after notice and hearing, to alter, amend, or repeal said Rule 64 - Underground Storage Wells of Liquefied Compressed Gases, Crude Oils, Refined Hydrocarbons, Compressed Air, or Natural Gases in Reservoirs Dissolved in Salt Beds - of the Statewide Rules and Regulations as amended.