Current through Register Vol. 51, No. 3, September 1, 2024
RELATES TO: KRS 349.035, 353.500, 353.520, 353.540, 353.550,
353.560
NECESSITY, FUNCTION, AND CONFORMITY: KRS 349.115 and 353.540
authorize the Department for Natural Resources to promulgate administrative
regulations to implement the Commonwealth's oil, gas, and coalbed methane
programs. This administrative regulation establishes requirements for the
protection of the integrity of gas storage reservoirs by requiring certain
techniques of drilling, casing, operating, and plugging be applied while
operating in the vicinity of gas storage reservoirs.
Section 1. Purpose. This administrative
regulation is designed for the protection of gas storage reservoirs, which are
natural resources of the state, and a person, firm, or corporation shall not
cause physical damage to, or create a hazardous condition threatening the
existence of, a reservoir in any manner as to make any reservoir less
susceptible for use for gas storage.
(1) Any
well penetrating, drilled to a geologic stratum overlying, or drilled in the
vicinity of an underground gas storage reservoir shall be maintained at all
times in a manner that shall both:
(a) Exclude
the encroachment of oil, gas, or water into a reservoir; and
(b) Protect the reservoir from a blowout or
waste of gas during the drilling of and after completion or plugging of the
well.
(2) In addition,
this administrative regulation has as its purpose the equitable adjustment of
correlative rights of gas storage owners and oil and gas operators.
Section 2. Establishment of a Gas
Storage Reservoir.
(1) Before an area may be
declared to contain one (1) or more gas storage reservoirs for the purpose of
this administrative regulation the gas storage operator shall file with the
Director of the Division of Oil and Gas for each reservoir, a:
(a) Certificate of convenience, issued by the
Federal Power Commission or its successor, if issued;
(b) Certificate of convenience issued by the
Kentucky Public Service Commission or its successor, if issued; or
(c) Bona fide declaration of intent prepared
by the gas storage operator to develop a gas storage facility.
(2)
(a) The filing, established in subsection (1)
of this section, shall be accompanied by a map, prepared on the scale of one
(1) inch equals 2,000 feet and using the appropriate seven and one-half (7 1/2)
minute topographic map as the base.
(b) The map shall include in detail the
properties on which storage rights have been or are being obtained, whether by
purchase or condemnation and of the storage reservoir protection zone as
suggested by the storage operator.
(c) This protection zone shall not be wider
than 2,000 feet from the nearest property on which gas storage rights have been
or are being obtained. The width shall be subject to the approval of the
division based on the characteristics of the reservoir and the maximum
anticipated storage pressure.
(3) The required map shall be refiled at any
time that storage rights on additional acreage are acquired or at any time that
acreage on which storage rights have been acquired is eliminated.
(4) Gas shall not be moved and stored until
the above cited filing is made with the director. This shall not include moved
and stored gas that is to be used to determine whether or not underground gas
storage is feasible.
Section
3. Application for Permit to Drill, Deepen or Reopen a Well on
Property for Which Gas Storage Rights are Acquired.
(1) Before drilling, deepening, or reopening
a well on a property for which gas storage rights have been acquired, the well
operator shall, at the time of filing with the division, also forward to the
gas storage operator by registered or certified mail, or by personal service a
copy of the application and plat.
(2) On a property for which there is an
outstanding oil and gas lease or on a property on which producing wells are
located, it shall be the responsibility of the gas storage operator to notify
the well operator at the time storage rights are acquired of the acquisition
and that a copy of all future applications to drill, deepen, or reopen wells by
the well operator shall be provided to the gas storage operator.
Section 4. Application for Permit
to Drill, Deepen, or Reopen a Well on Property for Which Gas Storage Rights are
Not Acquired but That Lies Within the Storage Reservoir Protection Zone. Upon
an application for permit to drill, deepen, or reopen a well being received by
the division in which the location of the proposed well will fall within the
storage reservoir protection zone, the division shall notify the well operator
and the gas storage operator of the receipt of the application by first class
mail, postage prepaid.
Section 5.
Objection and Hearing.
(1) Applications to
drill, deepen, or reopen a well on a property on which gas storage rights have
been or are being acquired or upon any property that lies within the storage
reservoir protection zone shall be held for five (5) days after
receipt.
(2)
(a) During the time established in subsection
(1) of this section, the gas storage operator may file with the division
specific objections to the proposed well. If objections are filed, the gas
storage operator shall notify the well operator by registered certified mail or
by personal service.
(b) The
department, in accordance with KRS 353.700, shall set a time and place for the
hearing. The hearing time shall be no more than ten (10) days after the end of
the five (5) day period.
(c) At the
hearing, the division, well operator, and the gas storage operator shall
consider the objections and agree to the drilling proposal as submitted or
agree to changes in the drilling proposal that meets the approval of the
division consistent with 805 KAR Chapter 1. Any agreed upon amendments to the
drilling proposal shall be included on an amended drilling application and
filed with the division.
(d) The
division, upon receipt of the amended application, shall issue to the well
operator a drilling permit approving the drilling of the well.
(e) If the gas storage operator and the well
operator are unable to agree at the hearing, the division shall issue to the
well operator a permit to drill the well either as originally proposed or with
the amendments to the proposal as the division determines appropriate to
protect the underground gas storage reservoir and prevent the loss of gas
without unnecessarily restricting drilling operations.
(3) If the gas storage operator and the well
operator cannot agree on the proposal under which the well is to be drilled,
completed, and plugged, then the division shall in its order specify what
costs, if any, in excess of costs normally expended in the drilling,
completion, and plugging of the well shall be borne by the gas storage operator
and shall specify when and in what manner payment shall be made.
(4)
(a) The
gas storage operator may waive the ability to object established in subsection
(2)(a) of this section by letter, telegram, or telephone, if the telephone
notice of waiver is followed by a written waiver, to the division on:
1. Any one (1) well;
2. Group of wells;
3. All wells to be drilled by a well
operator; or
4. All wells to be
drilled in a specific area or on a specific lease.
(b) If the waiver or waivers are filed with
the division, and if the public interest is being served, then the division
shall issue the permit.
Section 6. Notice to Well Operator. The gas
storage operator shall give the well operator a notice of intention to drill,
deepen, or reopen a well in the manner established in Section 3 of this
administrative regulation. Notice shall be required only to the well operator
in possession at the time rights of storage are acquired or a successor in
interest if the latter notifies the gas storage operator in writing of the
acquisition. The well operator shall have the same rights and obligations as
the gas storage operator with respect to objections and hearing as detailed in
Section 5 of this administrative regulation.
Section 7. Notice of Intention to Plug Wells.
(1)
(a)
Prior to plugging a well, a well operator shall notify the gas storage operator
and the division of the intention to properly plug and abandon the well if the
well is drilled through or penetrates:
1. An
underground gas storage reservoir; or
2. The same stratigraphic horizon as the gas
storage reservoir in the storage reservoir protection zone.
(b) The notice shall be given in
time for the representatives of the gas storage operator and the division to
have the opportunity to be present at the plugging and filling of the well. If
representatives do not appear, the well operator may proceed, at the time fixed
in the notice, to plug and fill the well.
(2)
(a) Upon
receipt of notice of intention to properly plug and abandon the gas well, the
gas storage operator may, after determining from the well operator the physical
condition of the well, elect to allow the operator to only properly plug and
abandon the well or bear the entire cost of proper plugging and
abandonment.
(b) If the gas storage
operator elects to properly plug and abandon the well or bear the entire cost
of proper plugging and abandonment, the gas storage operator shall provide
notice in writing to the gas well operator and the division.
(c) Upon receipt of the notice from the gas
storage operator, the gas well operator shall advise in writing both the gas
storage operator and the division of the condition of the well, of any
equipment or pipe that may be in the well and the existence and type of any
equipment or materials that have been lost in the hole.
(d) Upon receipt by the division of the
notice required of the gas storage operator established in paragraph (a) of
this subsection and the advice required of the well operator in paragraph (c)
of this subsection, the division shall cause the well operator's bond to be
released and the well shall be placed under the bond of the gas storage
operator.
(3) Once the
plugging and filling have been completed by either the gas well operator or the
gas storage operator, an affidavit establishing the time and manner in which
the well was plugged shall be made by the operator as established in paragraphs
(a) and (b) of this subsection.
(a) The
affidavit shall be made on the Affidavit to Time and Manner of Plugging and
Filling Well, Form OG-38, incorporated by reference in 805 KAR 1:060.
(b) One (1) copy of the affidavit shall be
retained by the person that caused the well to be properly plugged and
abandoned, one (1) mailed to the gas storage operator or the well operator, and
one (1) to the division.
Section 8. Drilling Against High Reservoir
Pressures. If possible, the drilling into or through storage reservoirs shall
be conducted when the reservoir pressure is equal to or less than the original
formation pressure and the original formation pressure shall be provided by the
gas storage operator.
Section 9.
Nothing in this administrative regulation shall be construed to prohibit a well
operator or a gas storage operator from drilling a well that they would
otherwise have the right to drill.
STATUTORY AUTHORITY: KRS 349.115, 353.540,
353.670
