Geothermal Temperature Gradient Well Permitting and Operating Requirements

UNITED STATES DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENTWASHINGTON, D.C. 20240http://www.blm.gov/March 24, 2016 In Reply Refer To:  3200 (301) P          EMS TRANSMISSION 04/05/2016Instruction Memorandum No. 2016-071Expires:  09/30/2019 To:                   All Field Office Officials From:               Assistant Director, Energy, Minerals, and Realty Management Subject:           Geothermal Temperature Gradient Well Permitting and Operating Requirements             Program Area:  Geothermal Operations. Purpose:  This Instruction Memorandum (IM) clarifies policy and guidance for the permitting of temperature gradient wells (TGW) through approval of a Notice of Intent (NOI) to Conduct Geothermal Resource Exploration Operations under the regulations covering Geothermal Exploration in 43 CFR subparts 3250 through 3256 and Geothermal Resource Operational Order No. 1 (GRO 1), including conditions under which the Bureau of Land Management (BLM) may, in its discretion, approve TGWs greater than 500 feet in depth.  This IM provides updated protocols for drilling TGWs to recognize and prevent direct contact with the geothermal resource and clarifies existing guidance related to defining the limits of geothermal exploration activities.  Exploration operations do not include resource assessment or confirmation activities such as direct testing of the geothermal resource (see 43 CFR §§3200.1 and 252.12).  Policy/Action:  TGWs permitted under the 43 CFR  3250 regulations cannot be used as resource observation wells or for any purpose other than collection of information about the change in temperature over the depth of the well, and therefore conversion to such uses should not be viewed as an allowable outcome of the Notice of Intent (NOI) permit process.  To avoid confusion, this IM refers to completion of an exploration well as a “temperature gradient well” as used in the regulations at 43 CFR §3200.1 and subpart 3252, instead of the term “observation well” that is used in GRO 1 (without sufficient context to indicate whether “complete as an observation well” was intended to imply the prerequisite of a Geothermal Drilling Permit (GDP) under subpart 3260, as is the more common usage of that term today).   The BLM recommends that field offices refrain from referring to post-leasing drilling operations into the geothermal resource (approved via a GDP under 43 CFR Subpart 3260) as “exploration” to avoid confusion and possible permitting delays that result when the BLM needs to clarify the intent of an application.  The term “exploration” should only be used to refer to activities permitted under the 43 CFR 3250 regulations.  Adopting more consistent terminology helps to distinguish the operations allowable under each application process, and also aids in emphasizing that, even for lessees, wells that contact and test for direct evidence of the geothermal resource are outside the scope of exploration operations under the regulations.   Wells permitted and drilled under the 43 CFR 3250 regulations can only be completed as a TGW; they cannot be converted to another purpose, and must be properly plugged and abandoned when the permit granted under the NOI expires.  However, in certain cases, holders of Federal geothermal leases who inadvertently encounter a geothermal resource in the course of exploration operations on their lease may opt to shut in the TGW temporarily and apply for a GDP. The regulations in 43 CFR subparts 3260 through 3267 require an approval of an operations plan, if the operator desires to resume drilling into the resource or to complete the well as an observation well, so that resource confirmation testing can be permitted.   Federal geothermal lessees also have the alternative of applying for a GDP under 43 CFR subpart 3260 at the outset for approval to drill a well (on its own lease) in stages with an operations plan (see 43 CFR subpart 3261.12) as a single project.  For example, the lessees could drill a TGW into the geothermal resource, conduct core drilling, and then expand and convert that well to another purpose for direct testing and confirmation of the geothermal resource.   Since deep exploratory TGWs permitted under the 43 CFR 3250 regulations may approach the geothermal resource or encounter other geologic hazards, the BLM may determine that the operator should follow guidance intended for wells that are intended to enter the geothermal resource.  This means that the terms of BLM’s Conditions of Approvals (COA) to an NOI for a TGW may also require operators to adhere to some or all of the safety procedures, equipment and operating standards required in the 43 CFR 3260 drilling regulations and BLM’s GRO 2.   Application and Operational Protocols:  NOI permits for conducting exploration operations under the regulations in 43 CFR Subpart 3250 that include the drilling of deeper TGWs may be approved at the discretion of the BLM, but with potential monitoring protocols or other COAs to ensure safety, compliance with well integrity standards and environmental requirements, and that drilling is stopped when indirect evidence of the geothermal resource is encountered.  The regulation at 43 CFR 3252.12(b) provides authority for the BLM to require measurement and reporting of any relevant data including the presumed temperature of the bottom of the hole and/or the circulating fluids during the drilling activity.  Drilling must stop when a threshold temperature is reached to prevent direct contact with geothermal resources, and the well must be completed according to 43 CFR 3252.14 as a TGW, or abandoned in accordance with 43 CFR 3252.16, GRO 1, the terms of the approved NOI, or other applicable guidance.  Drilling into the geothermal resource requires a geothermal lease, and can only be permitted by approval of a GDP under 43 CFR subpart 3260. The NOI for a TGW must contain sufficient geologic, geophysical and other data to demonstrate the expected depth to the top of the geothermal resource.  The data must detail the geologic information and provide an interpretation of that data that supports the operator’s estimation of the depth to the top of the geothermal resource.  The BLM may require temperature monitoring and reporting, possibly combined with pressure monitoring, so that the BLM can determine when the drilling activity nears direct contact with the geothermal resource, and will require that drilling operations cease when contact with the geothermal resource is imminent.  The BLM may also impose other COAs or monitoring requirements that reflect local drilling practices and expected characteristics of the geothermal resources that may be present in the area described in the operator’s NOI.  Other restrictions may include increasing the technical capabilities of the proposed drilling equipment to control pressures and the disclosure of temperature, pressure, and other data that may indicate that the geothermal resource is near. The temperature criteria listed below provide for a maximum cut-off for the bottom-hole temperature (BHT) threshold of 212° F as a general rule of thumb to determine when contact with a commercial geothermal resource is imminent.  The BLM recognizes that technological advances can also be expected to progressively reduce the temperature at which geothermal resources may be considered economic for generating energy on a commercial scale, and that absolute temperature is not the only factor in determining discovery of an economic geothermal resource.  Therefore, the temperatures and monitoring specified in this IM are considered as guidelines and are not absolute.  The BLM will determine the actual temperature triggers, and will set appropriate monitoring intervals for deep TGWs and each specific NOI, based on its knowledge of the local geothermal resources, the technologies available for producing electricity from geothermal resources, and the operator’s proposal.  The BLM will also determine if pressure control methods are necessary for each proposal. The BLM may set project-specific thresholds with monitoring and reporting intervals to determine when contact with a commercial geothermal resource is imminent and exploration drilling of a TGW under the 43 CFR 3250 regulations must halt.   The protocol procedures to guide development of COAs that may be imposed through  NOIs (see also GRO 1, as appropriate) for drilling TGWs are as follows: A. During mud drilling operations, inlet and outlet temperatures (or other determinative parameters designated on a case-by-case basis) must be recorded either hourly or at 30-foot intervals, whichever occurs first.  GRO 1 requires mud cooling equipment when the flow line temperature reaches 125° F to maintain mud return temperatures below 125° F.  See GRO 1 (Attachment 1 at page 2). B. The operator must submit a plan for how it intends to estimate the BHT from flowing mud temperatures or other means while drilling.  If the circulating flow line temperature or other monitoring methods indicate that the BHT of 212° F or BLM-determined threshold temperature (adjusted for bottom-hole elevation) has been reached, further drilling must stop immediately and the operator must notify the BLM.  The hole will be:1.  Completed as a TGW;2.  Abandoned in accordance with 43 CFR 3252.16; 3.  Drilled further, if the BLM determines that contact with the geothermal resource is not yet imminent.  Monitoring from this point will include flow line temperature measurements every 15 feet until the flow line temperatures reach a BLM-determined temperature threshold, at which point the well will be completed according to 43 CFR 3252.14 as a TGW, or will be abandoned according to 43 CFR 3252.16; or 4.  Shut in pending application and approval of a GDP and operations plan (only applies to a lessee drilling on its Federal lease, who may shut in the well and submit a GDP application and operations plan in compliance with the 43 CFR 3260 regulations if it wishes to continue drilling into the resource or complete the well as an observation well for resource evaluation and testing, or for other purposes acceptable under the 43 CFR 3260 regulations). C. When drilling without the return of drilling fluids to the surface, the operator must submit a plan for how it intends to estimate and monitor the BHT, or other designated indicators, while drilling.  If the unstabilized BHT reaches 212° F or BLM-determined threshold temperature; if flowing fluid is encountered that indicates a 212° F BHT or BLM-determined threshold temperature; or where other approved monitoring methods indicate that contact with a geothermal resource is imminent the operator must immediately stop drilling and the hole will be:1.  Completed as a TGW; 2.  Abandoned in accordance with 43 CFR 3252.16; or3.  Shut in pending application and approval of a GDP and operations plan (only applies to a lessee drilling TGWs on its own Federal lease, who may shut in the well and submit a GDP application and an operations plan under 43 CFR subpart 3260 if it wishes to complete the well for resource confirmation testing as an observation well, or for other purposes acceptable under the 43 CFR 3260 regulations). D. If the BLM determines that the TGW was inadvertently drilled into the geothermal resource:1.  In the case of exploration operations permitted on unleased lands, or on Federal lands leased to another entity where the operator has no operating rights or rights to enter (“drill for”) the geothermal resource on the leased lands, the BLM (or appropriate surface management agency) will require the operator to abandon that part of the well that penetrated the resource with a cement plug before completing the well as a TGW or otherwise abandoning the well.2.  In the case of leased land drilled by the lessee or operator of that lease, a TGW that directly penetrates the resource must be shut in and then may be approved for resource confirmation testing purposes as an observation well or for other acceptable purposes under the 43 CFR subpart 3260 regulations, if the lessee submits and the BLM approves a GDP application and operations plan in compliance with 43 CFR Subparts 3260-3267 and GRO 2. An operator may request a variance for its exploration operations from certain COAs, safety and drilling protocols, or other requirements that are listed in 43 CFR 3200.4.  Variances may be granted by the BLM where the operator can adequately demonstrate that the factors in 43 CFR 3256.10 apply on a site- or project-specific basis, or that some alternative method will satisfy the intent to protect life, property, and the environment. Timeframe:  This policy is effective immediately. Budget Impact:  None.  Background:  This IM is not intended to be a comprehensive description of the NOI process but is limited to the protocols to be incorporated in geothermal exploration activities through COAs attached to NOIs.  This is to ensure that TGWs are drilled, completed and abandoned in accordance with 43 CFR subpart 3250 and GRO 1 (to the extent that its provisions remain consistent with the current geothermal regulations in 43 CFR Part 3200) and that these exploration activities do not make direct contact with or penetrate the geothermal resource.  Specifically, this IM provides guidance to the BLM about setting project-specific temperature thresholds or other criteria to determine when contact with a commercial geothermal resource is imminent.  If the threshold conditions in the approved NOI are encountered, exploration drilling must halt.  However, the BHT threshold of 212° F will continue as a general rule of thumb. This IM does not (and can not) replace or supersede GRO 1, but is intended to expand its scope to further interpret and apply both the current regulations and the spirit and purpose of the GRO.  The provisions of GRO 1 will continue in force and effect until they are fully incorporated into the geothermal regulations, and should be considered superseded only to the extent that they are inconsistent with applicable regulations (e.g., 43 CFR §3252.12 (finalized at 63 Fed. Reg. 52356 at 52358/3; 52380/3 (9/30/1998)) allowing an operator to propose a TGW to any depth (subject to BLM approval), whereas GRO 1 had set a 500-ft depth limit. GRO 1 also included discretion to authorize deeper TG drilling in response to specific requests).   In 1975, GRO 1 established a maximum depth of 500 feet for TGWs unless otherwise authorized (Attachment 1).  In 1986, the BLM California State Office issued a “Notice to Lessees and Operators of Federal Geothermal Leases in California (NTL-CA-86-01)” to provide requirements and limitations for the drilling of deeper TGWs (Attachment 2).  NTL-CA-86-01 established a BHT cutoff of 212° F rather than depth, whereupon drilling under an NOI must stop and the well must be plugged and abandoned in most circumstances. The current geothermal regulation at 43 CFR § 3252.12(a), which removes the depth constraints  under which GRO 1 was conceived, does not specify a maximum depth for TGWs and gives the BLM discretion to approve drilling “to any depth that we approve.”  This IM, consistent with the regulations, provides guidance based on current science and available technology rather than well depth to measure temperature thresholds and limitations (as outlined in GRO 1 and NTL-CA-86-01), together with other localized factors as needed, in order to prevent direct contact with or entry into the geothermal resource during the drilling of deeper TGWs. Different understandings of terminology have resulted in confusion since the geothermal industry often describe any drilling activity that does not result in production as an “exploration” activity.  However, the 43 CFR 3250 regulations cannot be used to permit geothermal drilling activities that are intended to reach or test the geothermal resource even if the operator considers the well to be an exploration activity.  Section 3250.14 of the regulations allows the operator to conduct “exploration operations” as defined by 43 CFR § 3200.1.  The scope of exploration operations does not include the direct testing of geothermal resources (e.g., flow tests or injection tests) or the production or utilization of geothermal resources (see also 43 CFR §3252.12).  The definition of exploration operations excludes any well that makes contact with or penetrates the geothermal resource. Please note that citations phrased as “the 43 CFR 3250 regulations” are intended to reference the entirety of the subparts related to exploration operations—i.e. subparts 3250-3256.  Similar shorthand has been adopted to refer to “the 43 CFR 3260 regulations” (subparts 3260—3267 inclusive, related to drilling operations). Manual/Handbook Sections Affected:  The revised Geothermal manual and handbook will incorporate the interim policy transmitted in this IM.  This IM does not replace GRO 1.  The provisions of GRO 1 continue in force and effect, and should be considered superseded only to the extent that they are inconsistent with LRT applicable regulations. Coordination:  The National Renewable Energy Coordination Office coordinated preparation of this IM with BLM field offices and the Solicitor’s Office. Contact:  If you have any questions concerning the content of this IM, please contact me at 202-208-4201, or your staff may contact Lucas Lucero, Acting Chief, National Renewable Energy Coordination Office, at 202-912-7342 or by email at llucero@blm.gov.    Signed by:                                                                 Authenticated by:Michael D. Nedd                                                        Robert M. WilliamsAssistant Director                                                     Division of IT Policy and Planning,WO-870Energy, Minerals, and Realty Management 2 Attachments     1 – GRO 1 (1975) (4 pp)     2 – Notice to Lessees (NTL-CA-86-01) (4 pp)