Molly: Good morning everyone.
Thank you for your patience while we work
through these technical difficulties.
Thank you for attending this webinar this morning.
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by clicking the Q&A button
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Okay, let's go ahead and get started.
Our presenter this morning is Sean Avitt,
the manager of the Injection Storage Permits Department
in the technical permitting section
of the oil and gas division.
Sean, we're ready when you are.
Sean: Hello.
As Molly said,
I'm the Injection Storage Departments Unit Manager,
Sean Avitt,
and I have been I'm working for the Railroad Commission
about eight years.
I've been in this particular role for two years,
and I'm a geoscientist.
And we're going to talk about
oil storage in the state of Texas today.
Here's a broad outline for the talk today.
I'm going to discuss
the state of hydrocarbon storage generally.
Then we'll discuss how to apply for a permit
to store oil in salt,
and how to apply for a permit to store oil
in a non-salt formation pursuant to the Commission's
May 5th, 2020 Order.
One last thing before we get started.
This presentation is about underground storage of oil,
but it is also generally applicable
to storage of any liquid hydrocarbon
under the Commission's jurisdiction.
Over the next couple slides,
we'll discuss why we're talking about storage.
This is the first storage only presentation
that we've given in recent history and possibly ever.
I'll talk briefly about the history of oil storage
and its regulation,
then I'll show you the distribution of storage facilities
in Texas.
And lastly, by now I would normally have told you
where you can find all this information on our website,
but currently there is no storage manual on the web sadly.
I plan to rectify that situation however,
and update our online UIC manual
and add more detailed storage information to it
in the coming year.
If you attended the presentation prior to this one
with Rob Castillo,
he probably showed you all of our UIC manual information
on our website.
So, why are we here?
Well, it starts with the Texas miracle.
Up at the top, you can see Texas oil production has gone
from a million barrels a day in 2010,
1.1 million barrels around January 2010,
to over three and a half million barrels a day in 2015
to nearly five and a half million barrels each day today.
There's much more capacity to produce oil in Texas
than there has ever been before.
And as you have undoubtedly heard,
oil prices have slumped since the beginning of this year,
from nearly $150 oil in 2008,
to $50 oil over the last couple years,
to nearly having gone to a negative price
which is dramatically shown in the graph on the bottom left.
Now, that last financial phenomenon
is just sort of sensational, but the overall trend is real.
And it correlates with an increase in oil supply and storage
that you can see in the bottom right hand graph.
I don't claim to fully understand
these complex economic systems.
And that's not necessarily what we're here to talk about,
but that's why the Commission has taken action,
and why we need to talk about oil storage.
So this is not the first time that Texas in the country
has seen an economic or energy crisis.
In 1973, the Oil Embargo decreased U.S. oil supply
and hiked oil and fuel prices.
As a result, there were long lines of gas stations,
gas rationing, oil price control,
and the search for energy independence.
Shortly thereafter,
the Energy Policy and Conservation Act was passed
which authorized among other things,
the creation of the Strategic Petroleum Reserve or SPR.
The SPR is the largest reserves of crude oil in the world.
It's a system of pipelines and underground storage
for crude oil, including Bryan Mound and Big Hill domes
in Texas, and two other salt domes in Louisiana.
The SPR currently has a 797 million barrel capacity
with a current inventory of 635 million as of April 17th,
at an average price paid of about $28 per barrel.
During my career, short as it is,
I'd normally say $28 a barrel is a pretty good deal
unless of course it's April 2020.
Now under federal regulations.
In our earlier presentation
on Injection Disposal Well Permitting,
you would have heard about the Safe Drinking Water Act,
and specifically about Underground Injection Control
part of that act.
Well, UIC covers underground and storage of liquids,
but does not cover the underground storage of gas.
And the Commission does not have
Federal Delegation of Authority
for underground storage of gas
from the federal agency that handles that,
the Pipeline and Hazardous Materials Safety Administration
or PHMSA.
However, we still have state authority for gas storage.
So we still permit storage of gas,
but you may have to talk to PHMSA as well.
We're considering applying for federal delegation
to simple regulation of gas storage in Texas.
Here, we have a map of all the injection wells
in the state of Texas.
The black and gray dots are injection disposal wells,
the red or light red are storage wells,
and the blue are brine mining wells.
I put this together so that you can get
a sense of the distribution of injection wells in the state,
the oil and gas basins and the proportion of those wells
that are for storage.
You can tell there aren't very many
storage wells proportionally.
On the next slide, we'll show you just the storage wells
so you can actually see them.
So again, we can see there aren't a whole lot
of storage facilities in the state
compared to the total number of injection wells.
The storage in the Permian and Panhandle
is in bedded salt formations like the Castillo,
Clearfork and Salado formations.
The Gulf Coast and East Texas storage
is mostly in salt domes.
Then we can see in Central Texas
where there are not substantial salt formations,
the wells are bright red,
which represents depleted gas storage.
It's important for me to note two things about this map.
One, that at this scale,
you're not really seeing individual wells
so much as very small blobs
typically representing many wells,
and two, that these wells may not be active.
They might just be storage permits,
not drilled or completed,
or they could have been plugged already.
We'll get to specific numbers after the next slide.
Give everybody a moment just to
take in the image.
And now to zoom in a little closer,
here we can see the counties in the Houston area,
and we can start to see individual storage wells.
You may notice too that there can be many caverns
and storage wells associated with one salt dome
or storage facility.
The cluster of bright red wells in the center,
just north of the Harris County label,
here,
is not actually a salt dome but the Bammel gas reservoir.
Then, I'll point out the dark red blob to the right
or east of the map under the Chambers County label, here,
which are the storage wells in the Barbers Hill salt dome
underneath the City of Bellevue.
This is one of the most active storage salt domes in Texas,
and has the most or highest density of storage vaults
in the state.
To save you from counting all those dots like I promised,
here are a few basic counts for oil and gas storage
in Texas.
We have nearly 100 storage facilities.
Of those there are 751 liquid storage wells
permitted in salt,
331 of which are active.
We have 113 gas storage wells permitted in salt
with about half of those active.
And lastly, we have 453 gas storage wells
in a depleted reservoir,
and over /4 of those are active.
First, we're gonna discuss storage permitting in salt
since that is the norm for Statewide Rule 95.
This presentation assumes
that you have a basic understanding
of injection while permitting and build on that knowledge.
So we're going to draw contrast
to the typical injection disposal permit application process
and draw contrast to what you would have heard
in the presentation this morning if you attended it.
We'll discuss the standard for permit issuance,
some typical salt storage terms,
what salt storage and storage wells look like,
have notice and hearing, area of review,
and freshwater protection could be different
from the usual process,
usual application permitting process,
and we will discuss the structure and geology,
cavern integrity, and Rule 95 safety section.
Underground storage of oil must do four things.
It must not waste oil or otherwise allowed to escape,
it must not pollute freshwater,
and it must not endanger lives or property.
This is the standard that we will look for
when we decide whether or not an application for permit
should be approved.
We have some common terms we use
when referring to the process of removing salt
by dissolution from a salt structure.
Some terms are generally understood,
and don't need to be defined by a statute or rule.
The term "solution mining" and "leaching a cavern"
are like this.
When we tend to say leaching for storage and mining
for brine mining to try to distinguish
between the two different purposes and rules,
but they're both solution mining.
The term brine mining injection well
does have a specific rule definition however,
and it's important to understand
how that impacts our regulation.
This Venn diagram illustrates the relationship
between different purposes of solution mining
and how they're regulated.
To grow a storage cavern, you have to solution mine
to make the void space.
This is the physical operation and solution mining of salt
is just one kind of solution mining.
We have a couple Commission rules for solution mining.
So which rule do we fill under?
Is it brine mining under Statewide Rule 81?
Or is it leaching for storage under Rule 95.
We're solution mining under both rules
doing basically the same physical operation.
So then it's about the purpose for the solution mining.
If the applicant states that the solution mining
is for the purpose of making a void space
for storage or disposal,
then it is not brine mining by definition.
Otherwise, we say that the operation is brine mining.
The applicant is responsible of course
for applying for the correct permit
for their solution mining purpose.
If the business purpose of the solution mining changes,
for example, you begin for the purposes of brine mining
but didn't want to use the cavern for storage or disposal,
then the applicable rule changes
and you have to apply for a new permit
under the applicable rule.
This illustration shows the salt dome in light blue,
which is a salt structure that has pushed its way up
through more dense geologic strata,
and stopped at some depth when it reached buoyancy.
Salt domes often have a shape like a lava lamp,
lava lamp makes, where they have a bulbous head at the top
and a slightly narrower stalk.
There's cap rock immediately above that is often altered
and very porous.
Salt is essentially impermeable,
but can be easily dissolved with unsaturated water.
We can hollow out a void in salt with injected water.
Then we can use that void to store other fluids,
and we use storage wells to transmit fluids
in and out of the cavern.
Finally, I think it's always important
to get a sense of scale when we talk about storage
because storage caverns and salt domes
are just unbelievably big.
So here we can see that this particular salt cavern
is about 1000 feet tall,
which is big enough to fit the Eiffel Tower.
Of course, the salt dome is even bigger than that.
So we may have many Eiffel Tower sized caverns
inside one dome,
and 1000 feet tall wouldn't even be the tallest
of our storage caverns.
They're really, really big.
Storage wells are typically more complicated
than your standard injection disposal well,
or oil or gas well.
There are two basic reasons for this.
They're bigger,
and they're designed to get fluids in and out.
The wells have to be bigger to address demand
and operate safely.
Therefore, the diameter of a storage well
maybe 36 inches wide
compared to a typical injection disposal well
or an oil gas well,
which are more often around nine or 13 inches wide
at its largest casing.
Storage wells typically have a casing string
and a hanging string,
so that they can inject brine through the hanging string
and produce oil from the casing string.
This diagram to the right is even a little more complicated
than that.
It has a casing string that is open to the oil pad,
you can see that in black,
and then it has to hanging strings.
Unfortunately, you can't see the bottom of the casing string
on this diagram since the oil pad is also colored black,
but it's about even with the oil pad label on the diagram.
The strings for injection and production
are reversed in this case.
The injection is occurring above the production
because the well is leaching the cavern,
not storing hydrocarbons.
You can see the second hanging string
extends down into the brine and the brine shown in green
to produce the brine, while freshwater shown in blue
is injected above the second hanging string
through the first hanging string to solution mine the salt.
Some caverns may not have a single well performing injection
and production, but instead use two wells to perform
both operations.
It's important to be able to inject and produce
at the same time so that the operator can displace fluids
in the storage cavern.
This way, the operator won't under pressure as the cavern
is keeping a balance
Notice and hearing requirements for storage
are a bit more rigorous
than for a typical injection disposal well.
You must notify a surface and adjacent tract owners
like you would with a commercial disposal well,
but also all oil, gas, and salt leaseholders on the surface
and adjacent tracks.
Then, instead of one publication,
you have to run the published notice once a week
for three consecutive weeks.
Finally, all new storage facilities
are required to have a hearing by rule.
However, the May 5th, 2020 Order
suspended that hearing requirement for one year
How is the area of review or AOR different
from a typical injection disposal well application?
Well, it's based on the extent of the storage
instead of treating the well like a point location.
And in addition to the typical well list,
you have to identify all storage facilities
within a quarter mile also.
Buffering a quarter mile from the storage limits
can be a little bit of a complicated task,
so often the AOR we get is like this image here.
Facility is outlined in a dusty highlighter, yellow,
and they've shown every storage facility
and well in the vicinity,
and the boundaries of all the storage on the salt dome
for good measure.
Just like injection disposal wells
and all oil and gas operations generally,
you must protect fresh water.
Statewide Rule 13, which sets standards
for well construction applies to storage wells
just like all other wells under our jurisdiction.
Additionally, Rule 95 requires all outer casing strings
to be submitted to surface.
This adds an additional layer of protection for freshwater
for many fluids that could potentially come up
or around the wellbore.
Finally, geologic isolation
is not a common permit application deficiency
since the storage is occurring in salt,
and salt as essentially impermeable.
Plus adequate storage you can find fluids in all directions,
so there is substantial financial incentive
to ensure no loss of product.
However, there are substantial geologic concerns
for cavern storage in salt.
A cavern is of course at its most basic definition,
just a hole.
It can serve as storage
if its boundaries aren't compromised,
or unfortunately, it can serve as a conveyance
if it loses integrity.
Therefore, you must submit information
to demonstrate the thickness, continuity,
and structure of the salt to ensure that
the cavern can be safely created without operated,
can be safely created and operated
without intersecting the edge of the salt,
and to demonstrate that there are no faults, fractures,
or other features that could compromise the cavern.
This leads us to the concept of cavern integrity
or stability.
Caverns can be compromised several ways.
The cavern can close up through precipitation of the brine
back into solid salt.
The cavern can be compromised
so that it can no longer hold fluids and pressure.
Two caverns that are too close together can coalesce
to become one large cavern.
The roof can become structurally unstable
and cause collapse,
the casing shoe bond could become compromised.
And lastly, we can use surface collapse
and the example on the right.
And lastly, we can cause surface collapse.
Excuse me.
In the example on the right, we see a storage well
that might have seemed to be a safe distance
from the edge of the salt dome at the top.
But at depth, the salt dome is narrower,
and the cavern intersected the salt dome's edge
while it was leaching.
This obviously compromised the cavern,
but it also allowed sediments to enter the void space
causing a geologic collapse and sinkhole at the surface.
This is why rigorous review and testing of cavern walls
is needed.
Mechanical integrity testing
that is performed every five years on storage wells
is a nitrogen-brine interface test.
Although the test is very different
from a standard well pressure test,
the concept is very similar.
Instead of pressuring up the tubing casing annulus
to ensure the well has integrity,
you have to pressure up the entire storage cavern.
Casing shoe bond test is required as part of the MIT
and sonar surveys are performed to ensure that
the shape of the cavern is understood over time.
This is a picture of the sinkhole
that resulted from that diagram.
From this far away, it kind of looks like a mud pit
or land farm, or maybe just barren land,
but actually all the trees and anything else that were there
were essentially swallowed up by this sinkhole.
The sinkhole at this stage covered about an acre.
So it was about 100 feet across,
but it grew to encompass 37 acres.
I'm not gonna discuss each and every one
of these bullet points.
Each one is a subtitle and subsection
under Statewide Rule 95H, which is all about safety.
These facilities can be dangerous
if not regulated, and properly operated.
They're storing flammable liquids at pressure
and are huge engineering feats
with serious consequences if something goes wrong.
So the rule takes safety very seriously.
I encourage you to read the rule to make sure that
each one of these safety subsections is addressed.
It's also important to note that
most of these safety features must be in place
before storage operations can begin.
We don't have published amendment guidance
to reduce application requirements like we do
for injection disposal permit applications.
For injection disposal permit applications,
we have a web page that says,
"Under this sort of amendment,
"you only need to submit these things
"or these things are really important."
We will be working on broad storage guidance
in the next year and publishing that to the web.
Typically, we get permit amendment applications
that are essentially a full new application for storage.
The two main reasons people Want to amend their permits
is to add a new cavern, increase carrying capacity,
or change the injection pressure rate.
Additionally, you can expect that
we will do a compliance check
just like we do for injection disposal permits.
Unlike injection disposal permits, you are not as restricted
to what you can inject by the permit.
You can inject any liquid hydrocarbon
under the Commission's jurisdiction.
So, if you have a storage well
storing other liquid hydrocarbons,
you can enter your cavern and start storing oil
as soon as you're ready.
That being said, you should of course make sure that
you don't have any outstanding regulatory requirements
like reports, testing or safety equipment
before commencing or changing storage operations.
Now we're going to begin discussing oil storage
and geologic formations other than salt.
First things, the May 5th, 2020 Order
allowed applications to be submitted for this purpose
for one year, and that permitted facility can store oil
for up to five years.
The order also suspended the requirement for hearing
on new storage permits.
Storage of liquids, including crude oil
into formations other than salt is not common.
We do not have rules in Texas that explicitly allow for it.
That's why the May 5th order was issued.
The good news is, our existing rules especially Rule 95
gives us a good start on how to think
about permitting this kind of storage.
We created a web page with application guidelines
for oil storage not into salt to fill in the gaps.
So the rest of the slides today will be clarifications
to our standard salt storage permitting process
for oil storage not in salt
Here's a screenshot of the top of the web page
that we created where you can find this guidance.
At the top of the PowerPoint slide, there is the URL
in case this presentation gets distributed in a format
where you're not able to click the link.
On the Application Guidelines page in the first sentence,
there's also a link to the May 5th Order
if you want to read that text yourself.
This is the basic outline
of the Application Guidelines webpage.
You can see the items that we're gonna discuss
over the next slides in bold.
We're discussing these specifically
because they may be substantially different
from the typical injection permit or storage permit process.
The first thing we're going to do is address inconsistencies
in the form H-4,
which assumes that the storage medium is salt.
First you need to submit a form H-4 to store oil
regardless of what geologic formations it's in salt or not.
However, the terms on the H-4 assume a salt cavern.
We can successfully use the form H-4
for storage and formations other than salt
with a few tweaks in our understanding
of what the terms mean for storage, not in salt.
You don't need to fill out Item 12 on the form.
For Items 13 through 16,
you need to identify the storage reservoir
or geologic formation,
and provide the top and bottom of the storage reservoir
or geologic formation.
For Items 17 and 18, you can assume that "Cavity"
instead means storage well.
Please submit a well table as an attachment
if you're applying for more than one storage well.
For Item 19, assume that "Cavity" means
the top and bottom of the injection interval
and capacity is not applicable.
Feasibility.
Can you put the oil in and can you get it back?
Some of these items are already clearly required
by Statewide Rule 95 or the form H-4.
However, at the risk of duplication,
we need to highlight or clarify a few items
for storage of oil and geologic formations other than salt.
Then, there are some items here that must be addressed
because Rule 95 or the form H-4
assumes that the storage will be in salt.
Generally, these items are highlighted
because we anticipate that the responsive information
could be substantially different
than from typical storage permit applications.
Fluid data.
Storing and injecting fluid into a salt void
versus storing these fluids in geologic pore space
is very different.
So we need to know how the fluids will act in the pore space
you're proposing for storage.
Engineering, this is not my specialty since I'm geologists.
However, our storage lead an engineer Scott Rosenquist
has put this list together
to ensure that injection into geologic pore space
and retrieval from it is feasible and safe.
Also, that we understand how much oil
this reservoir is capable of storing,
and how much oil will ultimately be lost to the reservoir
since physical forces keep some oil ultimately trapped
on grains of sediment forever.
Confinement, a storage reservoir
must be bounded on all sides.
Geology, this is really no different
than the requirement for salt storage,
but because the storage reservoir
is not a void space being created
in an essentially impermeable geologic formation,
the geologic analysis to demonstrate
that the reservoir is bounded on all sides
will be very different.
For example, reservoir gas storage has been permitted
in depleted reservoirs
and in an igneous intrusion creating a geologic boundary
between the reservoir and adjacent sedimentary formations
similar in some ways to a salt dome,
and it has been permitted into depleted reservoirs
bounded by faults.
The reservoir traps were sufficient
to collect gas over geologic time.
And so the assumption is
that they can also store injected gas.
However, conditions for storage
of hydrocarbon injecting under pressure
a natural phenomenon that occur over geologic time
can be very different.
Therefore, confinement must be demonstrated.
Operations, again the engineering of storage
could compromise the storage reservoir itself.
If injection of the fluid exceeds the fracture gradient,
fractures will be created that could compromise
the confining boundaries of the storage reservoir
or the fluid itself,
which may not be native to the formation
could have physical interactions with the reservoir
like dissolution that could compromise confinement.
So, we need to know the physical parameters of the operation
to ensure confinement will continue
under the proposed storage operations.
Testing, if there are going to be multiple wells
and some will be designated for injection
and some for production,
then it's likely that a standard pressure test
would suffice.
However, we will need to understand
exactly how MITs will be performed
if the wells are going to be more complicated.
Finally, we wanna make it clear that
review of a permit application for oil storage
into non salt formations is new
and may require additional information
and further review following initial application.
We like to pretend but we don't know everything.
The area of review or AOR for non-salt formations
is likely to be more complicated
than four an injection disposal well
or even for salt storage
although the standard is really the same
as it is for salt storage.
Since the boundaries of the storage
may be determined by sedimentary boundaries
or structural elements like faulting,
the area of the AOR is likely to be more complex.
In this particular example,
you can see that the boundary of the reservoir
is defined by ISO pack,
showing zero feet of thickness of reservoir at the boundary,
essentially a pinch out.
So this very odd and unique shape
would then have to be buffered by a quarter mile.
And all wells within that shape would have to be identified
and analyzed to ensure that
they don't compromise the storage.
As a geologist, I could just stare at this map forever,
but alas, we must move on.
The notice and hearing requirements for non-salt storage
of oil are generally the same as those for salt storage.
However, we wanted to make it clear
that if for some reason the extend to the storage reservoir
goes beyond the surface track
that you notify all applicable persons.
We've included this in our online guidance.
Also included in our online guidance
is a section called Publication Guides.
This walks you through the,
it walks you through how to prepare your publication
to make sure it meets our standards for review.
Finally, well, the de facto hearing requirement for storage
was suspended by the May 5th Order,
it is important to remember that a hearing
still may be required if the application is protested
or is administratively denied.
Thanks for participating today.
I'd like to thank Scott, our storage lead
and Rick Rosso, who is my permit tech manager.
If you have any permitting questions after today,
I know we always,
maybe our minds are kind of blank
as things are kind of being spoken to us
but oftentimes I'm the other person
you know 15 minutes after I lose the opportunity,
I've got a question.
You can send those to
our UIC email inbox.
It's uic@rrc.texas.gov.
And we've actually got a new email address
specific for permit information.
We're accepting electronic applications
in the UIC_Permits@rrc.texas.gov email address.
And if you've got read letters
or deficiency letters, any correspondence,
you wanna protest an application,
all of that can be sent to UIC_Permits@rrc.texas.gov.
And I'm happy to answer any more questions in the Q&A chat.
There haven't been any
unanswered questions yet.
I will add two things,
questions that you may have on your mind.
The permitting timeframe for storage wells
is longer than it is for typical injection disposal wells.
It's 90 days total.
And so,
storage operations being a little more complicated,
it is expected that the review may take longer
and so the rule allows us a total of 90 days.
And the other thing I neglected to mention
in the presentation is the cost although currently,
all storage wells
fees are suspended by the May 5th Order.
The
cost normally is $200 per well,
or 500 if you include the 130% surcharge that we add on.
And so basically the same
as a H-1 Rule 46 well.
And we have a question about whether or not
we can use the UIC permits email for H-1s and W14s,
and the answer is yes.
So any permit information for injection disposal or storage,
you can send to that email applications,
correspondence, protests, like I said,
all of that works.
Molly: Okay, so since there are no other questions,
and that concludes our webinar.
Thank you, Sean,
and thank you everyone so much for participating.
Sean: Thank you.