FERC Issues Order to Leaf River Energy Center LLC on Cavern Integrity Monitoring Program

(Targeted News Service Via Acquire Media NewsEdge) WASHINGTON, March 1 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the text of the following delegated order: In Reply Refer To: OEP/DPC/CB-1 Leaf River Energy Center LLC Docket No. CP08-8-000 section 375.308(w)(4) James F. Bowe, Jr.

Counsel for Leaf River Energy Center LLC King & Spalding LLP 1700 Pennsylvania Ave, NW, Suite 200 Washington, DC 20006-4707 Re: Cavern Integrity Monitoring Program Dear Mr. Bowe, On September 25, 2012, Leaf River filed, in compliance with Engineering Condition No. 4 of its certificate order issued 2008 in Docket CP08-8-000, a request that the Commission or its designee authorize Leaf River to implement a cavern integrity monitoring program as an alternative to conducting sonar surveys of its caverns at five year intervals. Leaf River has also requested the Commission waive the "30 days before placing the cavern in service" part of Engineering Condition No. 4.

Leaf River Energy Center is a high-deliverability salt cavern natural gas storage facility consisting of four salt caverns, Cavern No. 1, Cavern No. 2, Cavern No 3A, and Cavern No. 4. Cavern No. 1 has been in service since April 2011, and Cavern No. 2 has been in service since April 2012. Cavern No. 4 is under construction, and Cavern No. 3A has not been started. Leaf River's certificate order imposes the following condition on Leaf River: Leaf River shall conduct sonar surveys of the caverns every five years to: (a) monitor their dimensions and shape, including the cavern roof, (b) estimate pillar thickness between caverns throughout the storage operations, and (c) file the results with the Commission. In the alternative, no less than 30 days before placing the caverns into service, Leaf River may file with the Commission, for prior approval of the methodology, a detailed cavern integrity monitoring plan that is consistent with the intent of the sonar survey.

The Commission generally requires sonar surveys to monitor cavern integrity, as opposed to other technologies, because it is widely used, effective, and does not require special instrumentation to be permanently installed in the storage caverns. The Commission has previously stated that "the purpose of the sonar survey is to monitor the cavern's size to ensure that salt creep does not damage the integrity of the cavern. Cavern integrity is necessary to ensure the safety and reliability of the facility and to avoid the loss of gas and reductions in storage capacity." However, the Commission has previously approved alternatives to sonar surveys provided that the alternative is consistent with the intent of the requirement.

Leaf River states it has been evaluating the use of a cavern integrity monitoring program as an alternative to the sonar survey and has gained enough experience in the use of cavern modeling software and related monitoring protocols to be comfortable that it can implement a cavern integrity monitoring program that will be an adequate alternative to the sonar survey. Leaf River's program addresses the concerns of cavern integrity, safety, and reliability. Its primary features include (1) conducting mechanical integrity tests (MITs) on each cavern at least every five years, (2) continuously monitoring the pressure in the casing annulus between the production casing and the first outer casing of each cavern well, (3) continuously monitoring the flow of natural gas into and out of each cavern, (4) continuously monitoring wellhead pressures and temperatures, (5) conducting annual inventory verification studies, and (6) performing regular down hole pressure and temperature surveys of each cavern. Leaf River will use the data obtained from these studies and surveys in two cavern modeling software programs (one on cavern growth prediction, and the other on gas inventory and debrining). Comparison of real time values to simulation results will allow Leaf River to monitor potential salt creep and ensure the caverns' integrity, as well as detect any losses in gas inventory on a real-time basis. In total, Leaf River's program is consistent with the intent of Engineering Condition No. 4 and is appropriately designed to ensure the caverns' integrity, safety and reliability.

Since Leaf River's proposed program is consistent with the intent of Engineering Condition No. 4 and will effectively monitor the cavern's integrity to ensure the safe and reliable operation of the facility, I grant Leaf River's request. Leaf River is required to follow the cavern integrity monitoring program described above and in its compliance filing of September 25, 2012. Should Leaf River discover any integrity issues as a result of its monitoring, Leaf River is required to file those results with the Commission along with its proposed solution within 30 days of the discovery. Leaf River is directed to continue to comply with all other engineering conditions of its certificate orders and all applicable monitoring conditions required by the State of Mississippi.

Regarding Leaf River's timing waiver request, Engineering Condition No. 4 is clear that, because of their sequential development, the five year timing requirement for the sonar survey starts at the in-service of each cavern.

Likewise, the request to waive that requirement and propose an alternative was due thirty days prior to the in-service of each cavern. This timing is important because Leaf River's alternative includes certain continuous actions that should have started on day one of operations in each cavern, assuming Leaf River's plan had been proposed and approved 30 days prior to in-service. While Leaf River states that much of the monitoring and computer modeling described in its monitoring program is already in place and operational, it is unclear if their efforts have been in use since Cavern No. 1 went into service in April 2011. Therefore, there is a potential gap in the information necessary to evaluate the integrity of each cavern already in service.

Notwithstanding the above, Leaf River's request for a waiver of the "30 day" requirement as to Cavern Nos. 1 and 2 is granted. Additionally, within 30 days of this letter, Leaf River shall provide an account of what actions it took in 2011 and 2012 with respect to monitoring Cavern Nos. 1 and 2, and note any significant results it has discovered as if it has been operating under this alternative plan. Likewise, the MIT five year timing requirement under this alternative plan will be considered to have started on the date each cavern was or will be placed into service.

Michael J. McGehee Director Division of Pipeline Certificates Office of Energy Projects TNS CT21CT-130302-4225021 61ChengTacorda (c) 2013 Targeted News Service

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