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Kan. regulator seeks FERC's help in dispute over gas storage leak


According to Market Intelligence, December 2022


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Kan. regulator seeks FERC's help in dispute over gas storage leak

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The Kansas Corporation Commission hired a well control company to stop a leak at the Cunningham gas storage field.
Source: Kansas Corporation Commission

After being unable to get anyone to take responsibility for a leaking well at an underground gas storage field, the Kansas Corporation Commission has asked federal regulators to help prevent more gas loss from wells in similar circumstances.

A shut-in well in Northern Natural Gas Co.'s Cunningham storage field in Pratt County started leaking in April when farming equipment hit above-ground well components. Northern had never been the well's operator, and the company said it was not responsible for the infrastructure. Nash Oil & Gas Inc., the well's initial operator, also refused to take responsibility for the blowout, citing a court order that prevented the company from interfering with Northern's storage.

When the Kansas Corporation Commission, or KCC, could not get Northern or Nash to address the blowout, the state ended up paying $166,000 to respond to the emergency and isolate the wellbore from the gas formations beneath.

KCC experts estimated the well was leaking 6,000 Mcf/d to 10,000 Mcf/d when the commission learned the infrastructure had been damaged. The commission staff hired a well control company and was able to get the site under control in about two days.

The KCC has asked the Federal Energy Regulatory Commission to make Northern explain why the company should not have to take steps to prevent more storage gas loss from five potentially similarly situated wells in the Cunningham storage field. The KCC said it would like to see certain kinds of wells isolated from the storage facility and better marked to avoid damage, among other improvements.

In a response filing, Northern argued that it was the KCC's failure to enforce well abandonment safety standards that could have prevented the issues that led to the leak. The KCC has jurisdiction over production in the state and should have required the companies who drilled and operated the wells to seal them off from the storage field. Northern also noted that the wellbores are their operators' private property, and Northern does not have the right to alter the infrastructure.

The KCC said in its motion that it found two wellheads leaking gas during a recent field inspection, but Northern in its response filing said that the KCC "never informed Northern and never required the owners of the wells to take any action."

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Farm equipment damaged above-ground gas storage well components, causing a leak.
Source: Kansas Corporation Commission

Northern has owned the Cunningham field since 1977, but production of gas and water in the surrounding area starting in 1995 compromised the field's integrity, which resulted in gas beginning to migrate outside the storage facility's original boundaries. The storage gas seepage allowed producers operating outside the field's bounds to tap into gas that Northern had been trying to hold in its facility. Nash was among the companies producing in the area.

FERC, which has jurisdiction over the storage facility, in 2008 allowed Northern to extend its acreage to protect the gas storage, but ongoing production in the area remained a problem for the company, and FERC in 2010 allowed Northern to expand its territory again. At that point, FERC said it would not keep allowing expansions and Northern had to do more to shore up the integrity of its facility to prevent the gas from getting farther afield.

Northern, whose expanded acreage did not include the wellbores on the property connected to the field, got an injunction against local producers to prevent any more storage gas from being produced in the expansion area. Nash used this injunction to deflect responsibility for the leaking well.

Northern said it contacted the KCC in May to ask that the agency require Nash and one other operator to isolate their wells from the storage field, noting that these two operators were not the only ones to have had wells in the field but were the only ones who had not sealed all their wells off from the formation.

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Gas and liquids spewed out of the Mabel 2 well at Northern Natural Gas Co.'s storage field.
Source: Kansas Corporation Commission

"The KCC's indifference to their responsibilities is shocking," Northern spokesman Michael Loeffler said Oct. 11. "Northern has been telling the KCC that the leaking third-party wells should be addressed by the KCC. Northern has repeatedly written to the KCC asking them to exercise their responsibility to shut in the wells. Northern received no response."

"Northern believes it is unconscionable that the state agency entrusted to protect the public from the risk of unplugged wells has completely ignored its obligations to act," Loeffler said.

The company in its response filing questioned why the agency has contacted FERC, contending that the KCC "has the exclusive jurisdiction over the very matter that it is complaining about to FERC ... [I]t is not readily apparent why the KCC is abdicating its responsibility and burdening FERC and this docket with a matter that FERC has no jurisdiction over."

The KCC has taken a different view about who is responsible.

"Northern had an affirmative duty to act to ensure the protection of public health, life and physical property related to the escape of storage gas owned by Northern," the KCC wrote in a recent motion. "Whether Northern has assumed ownership of the wellbore does not matter because Northern's responsibility under the Natural Gas Act and [FERC's] Cunningham Field certificate amendment to prevent the loss of jurisdictional storage gas from the well applies, regardless of whether Northern owns the wellbore."

The KCC said it hopes FERC will clarify that Northern has a responsibility to prevent the gas from seeping, whether horizontally from field integrity problems or vertically through wellbores.