UNDERGROUND STORAGE OF NATURAL GAS AND AIR IN

UNDERGROUND STORAGE OF NATURAL GAS AND AIR IN RESERVOIRS. 1. Definitions As used herein, unless the context clearly indicates otherwise: A."Underground Storage" shall mean storage in an underground reservoir, stratum or formation of the earth; B. "Reservoir" shall mean a porous stratum of the earth or porous zone of a general structure which is completely separated from any other porous zone and is capable of being used for underground storage of natural gas and/or air; C. "Natural Gas" shall mean gas of a sufficient purity to be capable of use for residential purposes; D."Native Gas" shall mean gas which has not been withdrawn from the earth, or which, having been withdrawn, is injected into a reservoir for purposes other than underground storage; E. "Air" shall mean any non-hydrocarbon gas; F. "Underground Storage Facility" or "Facility" shall mean the underground storage reservoir, the well bore tubular goods and the wellhead and related equipment to the last positive shut-off valve before the gathering line or flowline; G. "Gathering Line" or "Flowline" shall mean the line between the last positive shut- off valve at the wellhead to the pipeline or header where two or more such lines converge; H. "State Oil and Gas Board" or "Board" shall mean the State Oil and Gas Board of Mississippi; I. "Supervisor" shall mean the duly appointed State Oil and Gas Supervisor; J. "Cushion Gas" shall mean the volume of gas required as permanent storage inventory to maintain adequate reservoir pressure for meeting minimum gas deliverability demands throughout the withdrawal season (also called "base gas"); K. "Storage Area" shall mean the total surface area of the storage reservoir plus any buffer zone approved by the board as necessary to insure reservoir integrity; and L. "Working gas" shall mean the portion of the storage volume that can be removed from a storage reservoir for deliveries and still maintain pressure sufficient to meet design deliverability. 2. Permits A. The permit for the drilling, development and continued operation of a facility for underground storage of natural gas or air may be issued only after notice and hearing by the State Oil and Gas Board, in the form and manner required by the statutes and rules of this Board. Storage of hazardous, nuclear and/or radioactive materials shall not be permitted. Oil and Gas Board Form 2 shall accompany each permit application. 3. General Design and Construction of Underground Storage Facility. A. Prior to the design and construction of an underground storage facility, an engineer and/or geologist experienced in the development and/or operation of an underground storage facility shall perform an investigation to determine the feasibility of such a facility at a particular site and in a particular reservoir. The data obtained during the feasibility investigation shall be considered in the design of the storage facility and such data filed with the Board as a part of the permit application. B. Design shall be performed by or under the supervision of an engineer or geologist as defined in paragraph A, above and shall include such factors, among others, as: Type of storage use, location of storage wells, number of storage wells, number and location of observation wells, if any, number and location of plugged and abandoned wells penetrating the storage reservoir, capacity of the storage reservoir, and the geological name of the storage reservoir. 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 construction shall be continually reviewed throughout the construction phase to take into consideration pertinent additional subsurface data. The Board shall be advised of any tests or surveys conducted during the construction phase and copies made available to the Board as soon as practicable. 4. Underground Storage Operating Pressures A.The maximum and minimum operating pressures of an underground storage facility shall be determined by an engineer as defined in Paragraph 3-A, after consideration of the geologic characteristics of the formation. The maximum allowable stabilized reservoir pressure (gauge) shall be no greater than 75% of the fracture pressure of the formation as determined by a step rate test or as calculated by a qualified engineer, by a method acceptable to the Board. B. The storage reservoir shall not be subjected to pressures in excess of the calculated fracture pressure even for short periods of time. 5. Volume Verification A. Each underground storage facility developed after adoption of this rule shall have the storage volume calculated using acceptable reservoir engineering methods and such information shall be filed with the Board as a part of the permit application. Storage volume shall include working gas, native gas, cushion gas and/or air. B. Refinement of actual reservoir volumes determined after continued operation shall be filed with the Board. 6. Casing Program A. All wells drilled for the purpose of storage after the adoption of this rule shall comply with the following casing program: 1) 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) Surface casing shall be cemented with 150% of the calculated volume to circulate cement to the surface; b) If the surface casing setting depth is below the lowermost Underground Source of Drinking Water, the final (production) casing shall be cemented with sufficient volume to fill the annular space to a point 500 feet above the top of the storage reservoir, otherwise the casing string shall be cemented to the surface; c) All casing used in storage wells shall be casing of appropriate API Standards for the pressures to be encountered and shall be new casing or reconditioned casing of new quality; and d) Emplacement of cement in the production casing shall be verified by Cement Bond Log, Cement Evaluation Log or other logs approved by the Supervisor. 2) All casing strings shall be tested, after sufficient cement setting time (usually 24 hours) to a pressure equal to 1 psi per foot of casing set with a maximum test pressure of 1000 psi gauge measured at the surface. 3) All tests and logs required by this section shall be prepared and supervised by a qualified Engineer and a report of test results and copies of logs filed with the Board within thirty (30) days of date the log is run or the test conducted. B. The requirements of Paragraph 6A shall not apply to existing or newly converted wells if: 1) The wells were cased and cemented in compliance with existing rules of the Oil and Gas Board in existence at the time the well was originally drilled; and 2) Injection will not result in the movement of fluids into an Underground Source of Drinking Water as defined in Rule 63, Part 1(B)(2). C. Storage Well Mechanical Integrity Test: 1) Storage wells existing at the time this rule is adopted shall have mechanical integrity verified by a method approved by the Supervisor within two (2) years from the effective date of this rule and at least every five (5) years thereafter. Each new storage well shall be tested for mechanical integrity prior to storing gas or air and verified at least every five (5) years thereafter. 2) All storage well mechanical integrity tests and/or verifications shall be prepared and supervised by a qualified Engineer and reports filed with the Board within thirty (30) days. 3) The operator shall give sufficient notice prior to conducting a mechanical integrity test so a Board representative may be present. D. All wells drilled through the storage reservoir within a storage area for any purpose other than storage after the adoption of this rule shall comply with the following casing program: 1) All surface and intermediate casing strings shall be centralized through 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 or otherwise approved by the Supervisor. a) Surface casing shall be cemented with 150% excess over calculated volume needed to circulate cement to the surface. b) If the surface casing setting depth is below the lowermost Underground Source of Drinking Water, an intermediate casing string shall be set approximately 100 feet below the base of the storage reservoir and cemented with sufficient volume of cement to fill the annular space to a point 500 feet above the top of the storage reservoir, otherwise the casing string shall be cemented to the surface. c) All surface and intermediate casing shall be of appropriate API Standards for the pressures to be encountered and shall be new casing or reconditioned casing of new quality. d) Emplacement of cement in the intermediate string shall be verified by Cement Bond Log, Cement Evaluation Log or other logs approved by the Supervisor. 2) All surface and intermediate casing strings shall be tested, after sufficient cement setting time (usually 24 hours), to a pressure equal to 1 psi per foot of casing set with a maximum test pressure of 1000 psi gauge measured at the surface. 3) All tests and logs required by this section shall be prepared and supervised by a qualified Engineer and a report of test results and copies of logs shall be filed with the Board within thirty (30) days of date of test or log. 4) No well shall be drilled through a storage reservoir or its stratigraphic equivalent within a storage area except upon notice and hearing before the Oil and Gas Board. 7. Wellhead and Flowlines A. All wellhead components (casing head, tubing head, etc.) valves and fittings shall be of steel having primary service pressure ratings sufficient to exceed the maximum operating pressures computed at the wellhead. Wellhead, 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. B. Each flowline connected to the wellhead shall be equipped with a manually operated positive shut-off valve located on the wellhead. C. Each flowline or gathering line shall be constructed in conformance with the provisions of CFR Title 49, part 192 - Transportation of Natural and Other Gas by Pipeline. 8. Rework (Well Work) A. An application for workover, Form No. 2, stating thereon the exact workover procedure for any down-hole work on tubular goods or the reservoir, shall be filed 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. B. No downhole 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. 9. Safety Practices A. Personnel experienced and/or trained in the operation of Underground Storage Facilities shall monitor the facility or control site when natural gas or air is being injected or withdrawn from any storage well. B. The wellheads and related equipment and controls shall be protected from trespassers and accidental physical damage by a method approved by the Supervisor. C. Each company operating an underground storage facility 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: 1) operation of all manual valves, 2) operation of all automatic shut-in safety valves, if applicable, 3) wellheads and related equipment, and 4) warning signs, safety fences, etc., if applicable. D. Additional inspections may be made by the Supervisor or his representatives. All operators logs called for by this rule shall be subject to inspection at this time. E. All operators shall immediately notify the Supervisor by telephone and follow-up with a letter giving full details concerning fires, leaks and blowouts directly related to the storage facility. 10. 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, Workover, or Change Operator. 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. 14B shall be filed each month stating thereon the following information for each facility: 1) Monthly maximum injection pressure. 2) Amount (MMCF at 15.025 psia & 60oF) of gas or air injected during the month. 3) Amount (MMCF at 15.025 psia & 60oF) of gas or air withdrawn during the month. 4) Total amount (MMCF at 15.025 psia & 60oF) of gas or air in storage at end of month. 5) Estimated maximum reservoir storage capacity (MMCF at 15.025 psia and 60oF). 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 if facility contains a Saltwater Disposal Well. 11. Suspension of Operations Should the Supervisor of the State Oil and Gas Board determine that the continued operation of an Underground Storage Facility would cause unsafe operating conditions, waste or pollution of air, fresh water or soil, he may immediately prohibit further operation of a well or associated 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. 12. Board Filings All tests, surveys and reports required by these rules shall be filed with the Board within thirty (30) days after such tests and surveys are conducted. 13. Proof of Financial Responsibility Proof of Financial Responsibility for each well in a storage facility shall be provided in the form and manner prescribed in Statewide rule 63, E, (3). Financial Responsibility for Storage Wells existing at the time this rule is adopted shall be provided to the Board within one hundred eighty (180) days of adoption of this rule. 14. Penalty Any person, firm or corporation violating any of these rules and regulations shall be punished as provided by law. 15. Exceptions 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. 16. Annual Facility Fees For each facility an annual fee will be assessed in the amount of one hundred ($100) dollars plus fifty ($50) dollars per unplugged storage well and fifty ($50) dollars for each unplugged salt water disposal well. These fees shall be due each July beginning July 1993. 17. Validity Should any section, sub-section or other provision of this rule be declared by a court of competent jurisdiction to be invalid, that decision will 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 the rule which are valid and omitted any parts which may be invalid, if it had known such part or parts were invalid at the time of adoption of this rule. 18. Effective Date These rules and regulations shall take effect and be in force from and after March 17, 1993, except where otherwise provided. The Board expressly reserves the right, after notice and hearing, to alter, amend or repeal said Rule 67 - Underground Storage of Natural Gas and Air in Reservoirs - of the Statewide Rules and Regulations, as amended.