[Federal Register Volume 59, Number 67 (Thursday, April 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8304]
[[Page Unknown]]
[Federal Register: April 7, 1994]
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DEPARTMENT OF ENERGY
[Docket No. GP94-5-000]
Railroad Commission of Texas, Tight Formation Determination--
Texas 156, Spraberry (Trend Area) Formation, FERC No. JD94-02876T;
Preliminary Finding
Issued April 1, 1994.
The Railroad Commission of Texas (Texas) determined that the
Spraberry (Trend Area) Formation (Spraberry Formation), underlying the
Preston and Shackelford Units in portions of Midland County, Texas,
qualifies as a tight formation under section 107(c)(5) of the Natural
Gas Policy Act of 1978.
For the reasons discussed below, the Commission issues this Notice
of Preliminary Finding that the determination is not supported by
substantial evidence.
Background
1. Texas' Determination
On February 15, 1994, the Commission received Texas' notice
determining that the Spraberry Formation underlying the Preston and
Shackelford Units in Midland County, Texas, qualifies as a tight
formation. Parker & Parsley Development Company (Parker & Parsley) is
the applicant before Texas. The recommended area is approximately
52,000 acres in size.
The record shows that the Spraberry Formation consists of three
distinct productive intervals--the Upper Spraberry, Lower Spraberry,
and Dean formations--and that these reservoirs have been producing oil
and/or gas for more than 40 years. The record further shows that there
are approximately 182 currently active wells in the Spraberry Formation
within the recommended area and that at least 100 additional wells have
been produced to abandonment. The record also indicates that natural
fractures enhance the permeability of the formation.
Texas concluded that the Spraberry Formation meets the Commission's
permeability guideline based on:
(1) Pre-stimulation pressure buildup test data from one well
drilled in the recommended area, the Preston Unit Well No. 3414-A
(#3414-A well);
(2) Type curve data from 22 stimulated Spraberry wells, 17 of which
are located outside of the recommended area;
(3) Core tests from three wells within the recommended area; and
(4) A table from the ``Atlas of Major Texas Oil Reservoirs'' (1983)
showing that the average permeability to oil in the Spraberry (Trend
Area) formation is zero.
Texas' finding that the formation meets the Commission's oil and
gas flow rate guidelines is based on pre-stimulation flow test rates
from the #3414-A well, which was drilled late in 1992.
2. Regulations/Commission Precedents
To qualify a formation as a tight formation,
Sec. 271.703(c)(2)(i)(A) of the Commission's regulations requires the
jurisdictional agency to determine that the expected in situ (matrix
and natural fracture) gas permeability throughout the pay section is
0.1 millidarcy (md) or less.1 Sec. 271.703(c)(2)(i)(B) of the
regulations requires the jurisdictional agency to show that the
expected pre-stimulation stabilized natural gas flow rate, against
atmospheric pressure, for wells completed for production in the
formation is not expected to exceed the applicable maximum flow rate
specified in the table in that section (290 Mcf per day in this
case).2 Finally, Sec. 271.703(c)(2)(i)(C) of the regulations
requires the jurisdictional agency to show that wells completed for
production in the formation are not expected to produce more than five
barrels of crude oil per day, prior to stimulation.3 According to
Texas, the Spraberry Formation meets these guidelines.
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\1\18 CFR 271.703(c)(2)(i)(A) (1993).
\2\18 CFR 271.703(c)(2)(i)(B) (1993).
\3\18 CFR 271.703(c)(2)(i)(C) (1993).
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However, in Order No. 99, the Commission defined a tight formation
as ``a sedimentary layer of rock cemented together in a manner that
greatly hinders the flow of gas through the rock.''4 The
Commission held in a prior preliminary finding that:
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\4\Order No. 99, FERC Statutes & Regulations, Regulations
Preambles (1977-1981) 30,183 at 31,261.
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The Commission established guidelines on permeability and flow
rates to be used to evaluate the physical characteristics of the rock
in the formation in order to show that the formation is tight, which
should have been the case prior to the onset of sustained production
from the formation. (emphasis added) Accordingly, the Commission
further clarified [in Order No. 99] that the objective of the rule was
to ``provide incentives to develop tight formations, not to provide
incentives to develop all formations with low pre-stimulation
production rates.''5 As a result, the Commission did not intend to
permit a formation that does not actually meet the definition of a
``tight formation'' to qualify based on currently low permeability and
flow rate values that are merely a side effect of prior conventional
levels of production.''6
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\5\FERC Statutes & Regulations, Regulations Preambles (1977-
1981) 30,183 at 31,276. See also Interim Rule, FERC Statutes &
Regulations, Regulations Preambles (1977-1981) 30,130 at 30,906.
\6\Railroad Commission of Texas, 63 FERC 61,067 (1993). A final
order affirming the tight formation determination was issued by the
Commission (64 FERC 61,225) after the applicant supplemented the
record with data showing that original reservoir conditions also met
the Commission's guidelines.
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Similarly, the Commission held in another preliminary finding that
the formation did not qualify as a tight formation because current-day
qualifying values were the result of water influx due to sustained
production, not the result of the way the rock was cemented
together.7
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\7\Mississippi Oil and Gas Board, 57 FERC 61,129 (1991). The
Commission did not issue a final order because the applicant
withdrew the application.
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Discussion
Based on a review of the current record, the records in another
proceeding involving the Spraberry Formation,8 and a study by the
Texas Bureau of Economic Geology addressing the Spraberry Formation
underlying the recommended area,9 the Commission believes that the
determination is not supported by substantial evidence, as explained
below.
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\8\See 64 FERC 61,004 (1993) where the Commission preliminarily
found that the Spraberry Formation in the Midkiff Unit did not meet
the tight formation guidelines because the record did not:
(1) Reflect natural fracture permeability;
(2) Contain gas flow rate data that was representative of
initial conditions in the reservoir; and
(3) Contain substantial evidence that the formation met the oil
flow rate guideline. The Commission did not issue a final order
because the applicant withdrew its application. The acreage covered
by the current recommendation is contiguous to the Midkiff Unit.
\9\``Heterogeneous Deep-Sea Fan Reservoirs, Shackelford and
Preston Waterflood Units, Spraberry Trend, West Texas,'' 1988, Texas
Bureau of Economic Geology.
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Commission review shows that the record does not reflect initial
conditions (i.e., before sustained production, pressure decline, and
filling of rock pore spaces with water) because virtually all of the
data wells were completed in the Spraberry Formation from 1980 to 1993,
long after production from the formation commenced.10 In addition,
the record does not contain substantial evidence supporting the use of
oil production type curve analysis as a method to calculate effective
gas permeability. First, all 22 type curve wells were analyzed with
equations where current gas-oil rations were used, as well as a single
current reservoir pressure of 1,000 psia and the corresponding fluid
properties at that pressure.11 Second, the oil permeabilities used
in the calculations were derived by the analysis of the 22 wells'
historical oil production. It is unclear how the oil permeabilities
thus calculated can apply to the calculation of gas permeability prior
to sustained production.
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\1\0The one exception is a 1966 core permeability data well.
\1\1The Commission also notes that the record does not show how
current pressures in wells first produced from 1980 to 1988 would be
the same.
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Moreover, the Commission believes that the record does not show
initial conditions since waterflooding projects initiated in 1964 have
affected most of the recommended area. Specifically, Commission records
show that the Upper Spraberry formation in the Preston and Shackelford
Units, the most productive interval of the three productive intervals,
has undergone unitized waterflooding since 1964.12 These records
also show that by 1980, the waterflood front had expanded over most of
the Preston and Shackelford Units and as a result, most wells were
producing more than 75% water.13
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\1\2The records show that unitized waterflooding also began in
the Lower Spraberry in 1964, but was discontinued in 1968 when it
was determined that 80% of producing capacity was attributable to
the Upper Spraberry and that water injection did not cause
additional oil to be produced from the Lower Spraberry. None of the
records reviewed shows any waterflooding operations in the Dean
formation.
\1\3The Commission's records do not show whether the Lower
Spraberry interval also produces 75% water. However, the record
contains no evidence showing that hydraulically fractured Lower
Spraberry wells would not be in communication with the Upper
Spraberry interval as a result of the extensive system of
interconnected natural fractures throughout the Spraberry Formation,
thereby allowing water encroachment.
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Our review also shows that at original conditions, the Spraberry
Formation was a crude oil reservoir with a solution gas drive. Such
reservoirs initially have zero effective gas permeability by virtue of
the fact that all the gas is dissolved in oil until reservoir pressure
declines sufficiently, through sustained production, to allow free gas
to form (known as the ``bubble point''). Thus, it appears that gas
could not flow at initial conditions because the pores of the rock were
filled only with oil and water, not because of the way the rock was
cemented together.
Finally, we conclude that one oil and gas flow rate data well
(#3414-A), regardless of its completion date, does not constitute
substantial evidence showing that the Spraberry Formation meets the
flow rate guidelines in the recommended area because of the geological
characteristics of the Spraberry Formation in the recommended area.
Commission records show that Spraberry sediments in this area were
deposited along two depositional axes running roughly north-south. The
records further show that, at initial conditions, wells located along
the eastern axis produced two to six times as much oil as wells located
between the two axes, and that wells located along the western axis are
characterized by high water production. The records also show that
Spraberry reservoirs in the recommended area are highly
compartmentalized due to extensive natural fracturing and complex
depositional boundaries. Accordingly, we conclude that data from the
#3414-A well does not provide sufficient evidence to support Texas'
determination that the formation meets the oil and gas flow rate
guidelines.
Our review also shows that the record does not reflect the natural
fracture permeability in the formation.14 The Commission's records
clearly show that the original permeability of the formation (before
sustained production and water injection) substantially exceeded 0.1 md
due to the existence of interconnected, well-developed natural
fractures that extend throughout the Spraberry Formation within the
recommended area. The Commission's records also show that wells located
parallel to the northeast trend of the fractures have substantially
better reservoir permeability and flow rates than those located
perpendicular to the trend. Therefore, wells draining sands that do not
intersect the fracture system would be expected to reflect matrix
permeability only, the pressure regime of a closed system, and low flow
rates.
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\1\4The Interim Rule issued February 20, 1980, in Docket No.
RM79-76, states that matrix permeability alone ``will not be
sufficient to qualify a formation, because formations with very low
matrix permeabilities may be economic to develop if fractures have
developed naturally. Therefore, to fulfill the guideline containing
the specific permeability limit, the formation's average effective
or in situ permeability throughout the pay section must be expected
to be 0.1 millidarcy, or less.'' FERC Statutes & Regulations,
Regulations Preambles (1977-1981) 30,130 at 30,906-07.
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When a well has been cored, natural fracture permeability can only
be analyzed if the core has intersected a fracture, and the well
operator requests that vertical permeability be measured. Of the three
core analyses in the record, only one (the Shackelford No. 138-A well)
shows both horizontal (matrix) and vertical (fracture) permeability
values. However, only the horizontal permeability was used by the
applicant. Although the reported vertical permeabilities in the well
are lower than the horizontal permeabilities in the majority of the
core, the vertical permeability is listed as 55.27 md from one zone and
as ``TBFA'' (too broken for analysis) in another zone. In addition, the
record contains no evidence showing that the cored intervals in the
three wells are pay zones that were completed for production.
Finally, the record includes one data well (#3414-A) where pressure
buildup calculations found that each of the three producing intervals'
permeability was less than 0.1 md. We acknowledge that pressure buildup
test analyses usually reflect total (i.e., matrix and fracture)
permeability found in a well's drainage area, and that, despite its
1992 drilling date, initial reservoir pressures in the #3414-A well
appear to be as high as those found in the Spraberry Formation at
original conditions. However, the record also shows that the Upper and
Lower Spraberry intervals produced high volumes of water during the
tests, and the record contains no evidence that any of the tested
intervals was actually completed for production. Therefore, we conclude
that the #3414-A well's high initial pressures and low permeability
values may be the result of its location in an area of lower reservoir
quality, and that the well's permeability does not reflect the
formation's original permeability throughout the recommended area.
In light of the above, the Commission is issuing this preliminary
finding since the record:
(1) Contains only gas permeability and hydrocarbon flow rate data
that do not represent initial conditions found in the reservoir prior
to sustained production, pressure decline, and water injection; and
(2) Does not reflect natural fracture permeability.
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 foregoing facts, the Commission hereby makes a preliminary
finding that Texas' determination is not supported by substantial
evidence in the record upon which it was made. 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.
By direction of the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 94-8304 Filed 4-6-94; 8:45 am]
BILLING CODE 6717-01-P