Transwestern Pipeline Company v. Corinne Grace
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Transwestern Pipeline Company v. Corinne Grace was a hearing before the Federal Energy Regulatory Commission (FERC) on May 25, 1990. Transwestern Pipeline (a subsidiary of Enron at that time)[1][2] claimed that Grace, an independent oil and gas operator, had a well that was misclassified by the New Mexico Oil Conservation Division (NM OCD) as what is called a stripper well under §108 (Ceiling Price for Stripper Well Natural Gas) of the Natural Gas Policy Act of 1978 (NGPA).[3] A stripper well is a well that is marginally productive.[4] The underlying issue was the geology of the Morrow Formation in New Mexico and the reliability of the information the oil and gas commission of one state had based its decision on based on this type of geological formation and its characteristics. Around this same time, Corinne Grace was also in the 1990 FERC hearing for Corinne B. Grace v. El Paso Natural Gas Company.
The hearing had a significant effect on U.S. oil and gas supply because of the number of stripper wells and their ability to supply natural gas for the U.S. economy. In recent history, stripper well production makes up about 8.2% of United States natural gas production,[5] and the stripper well classification is the classification of a large majority of the number of U.S. onshore wells.[6][4]
Enhanced recovery legislation
The NGPA defined a stripper well as essentially a well that produces less than 60 Mcf (60,000 cubic feet) per day during any 90-day interval. However, there was an exclusion or exemption for wells that had the application of what is defined as enhanced recovery in the NPGA.
The following defined enhanced recovery as legislated by the NGPA:
Nonassociated natural gas (gas from different geological zones) which is produced from a stripper well that actually exceeds 60 Mcf during any 90-day production period may continue to qualify as stripper well natural gas if the increase in this well production was the result of the application of recognized enhanced recovery techniques.[3]
This encouraged oil and gas operators to try to increase production from marginally productive wells by producing from new zones in the well. This in turn helped with U.S. natural gas supply.