Oil and Gas Undergrond Storage Keystone Project.

07-340 Buchanan Dome, LLC
Revised for oil. Can be reduced to one cavern and 2 disposal wells.
BUCHANAN DOME, LLC
Feasibility Study of Oil Storage
at the Batson Salt Dome Hardin
County, Texas
Phase II – Regulatory Requirements, Exploratory Test Well,
Solution Mining Infrastructure, Gas Handling Facilities, Land,
Pipelines, and Project Timeline and Budget
Additional Work – Securing Rig, Test Well Drilling / Coring,
Core Analysis, RRC Permit Application, FERC Application
Presentation to Buchanan Dome, LLC
March 5, 2015 (rev. 1)

Revised for oil. Can be reduced to one cavern and 2 disposal wells.
Gulf Coast Salt Dome Map
TEXAS LOUISIANA
Houston
Batson
Salt
Dome
.Source: Salt Domes-Gulf Region, United States andMexico
– M.T.Halbouty

Location Map
TEXAS

Phase I:
Task 1 – Geologic Review
Task 2 – Cavern and Well Engineering
Summary
Phase II:
Task 3 – Regulatory Requirements
Task 4 – Exploratory Test Well Engineering, Permitting and Cost Estimate
Task 5 – Solution Mining Infrastructure
Task 6 – Land
Task 7 – Pipelines
Task 8 – Project Timeline and Budget

Salt Geology and Cavern
Layout

Phase I Conclusions
Phase I confirmed:
23

Phase I Conclusions
• Adequacy of the Milhome survey to store 20 MBO in two caverns
• SE quarter of Milhome survey is in a good position for the development of storage
caverns
• Sufficient distance from the edge of salt
• Adequate depth of salt
• No apparent geological hazards or artificial penetrations present in the salt inthe
area of the proposed caverns
• Existence of adequate brine disposal (off dome)
• Existence of water supply sources (aquifers) – on and off dome

Task 3 – Regulatory
Requirements
In Texas, underground storage of natural gas in salt formations is regulated by the Railroad Commission Texas,
under Statewide Rule #97.
Final revisions to Rule #97 were adopted by the Commission on January 10, 2007 and became effective on
January 20, 2007.
Permit Duration Life of well
Well Record Retention Life of facility
Surface Casing Depth Below USDW defined by TCEQ
Electric Log of USDW Not specified but recommended as evidence forTCEQ
Cement To surface or Sufficient cement shall be used to fill the annular space outside the
casing from the casing shoe to the ground surface, or from the casing shoe to a
point at least 200 feet above the shoe of the previous casing string.
Minimum Cement Quality Not specified
MIT New, 5 years, and post work over
SONAR Before storage begins and every 10years
Casing Inspection Single Casing Domal -Every 15 years or after every physical change to the
casing.
Wellhead Inspection Every 10 years

Requirements (cont’d)
The specific requirements for gas storage caverns in Texas are:
All new storage wells into domal salt must have two (2) casing strings cemented into the salt
The maximum operating pressure (gauge) at the casing seat or chamber ceiling, whichever is the shallowest,
shall not exceed 0.85 psi per foot ofoverburden.
There are no definitive requirements for offset from the edge of the salt dome.
The Texas Railroad Commission has adopted the following new safety and construction requirements
pertaining to gas storage caverns:
All injection and withdrawal operations must be observed and monitored by experienced / trained personnel whom
will be trained tested as to the operational safety commensurate with that employee’s duties and responsibilities.
Each operator shall hole safety meetings with each contractor prior to commencing any work at that facility.
A plan to implement fire suppression for each individual storage wellhead designed to protect and personnel and
equipment during an evacuation of the facility shall be in place with in three years, or within one year an exception
can be requested.
Barriers shall be constructed to prevent unintended impact by vehicles operating around the above grade
equipment, process, equipment, piping, and surface storage vessels. Additionally, these barriers will present where
normal operation of vehicles will travel within 100 feet of a Public road.
Cavern capacity / configuration for caverns in domal salt will be verified by SONAR every 10 years.
All movement into and out of caverns, shall be metered at each individual well head.

Requirements (cont’d)
Verification of a caverns capacities will be done by direct metering of the brine into or out of the cavern.
All new gas storage wells into domal salt shall have 2 cemented strings into the salt.
Each hydrocarbon storage well shall be tested by integrity tests every 5 years.
The results of each integrity test shall be filed in duplicate with the TRRC within 30 days.
A Warning alarm system that is integrated with the gas, leak and fire detectors and manually activated, must be
installed within 2 years.
A written Emergency Response Plan must be submitted.
Storage wellhead and casing shall be inspected every 15 years.
A Piping Integrity Plan must be submitted for approval within one year, and within 3 years the applicable piping
must be maintained by said approvedplan.
ESV’s will be installed on all wells within two years.
Gas Detectors will be installed in brine / solution mining piping within 2 years.
Leak Detectors will be installed around each well head, compressor building,

Task 4 – Test Well Eng.,
Permitting & Cost Est.

Permitting & Cost Est. (cont’d)

Letter “Depth of Usable-
Quality Ground Water to
be Protected (Form
TNRCC-0051, Rev. 09-
17-96) was submitted to
the TNRCC on June 20,
2007 together with a
copy of the Survey Plat
and log of a nearby well
(DH-91) and location
map.

Phase
Cost
Code Description
Cost Estimate
($)
01 LABOR
01 Labor - Office $ 59,000
02 Labor - Field $ 83,000
03 Expenses $ 10,000
04 Miscellaneous
TOTAL LABOR &EXP. $ 152,000
02 SUBCONTRACTORS, SERVICES, AND RENTALS
01 Location $ 198,000
02 Rig Mobilization/DeMobilization $ 297,000
03 Drilling Rig (33 days total) $ 790,000
04 Fuel $ 150,000
05 Water $ 26,000
06 Drilling Fluids $ 258,000
07 Bits $ 82,000
08 Rental (LQ, BOP's,DC, HWDP, HO, stab, UR) & Fishing Tools $ 180,000
09 DirectionalDrilling $ -
10 Cement, Cement Services & Hardware -- P&A $ 190,000
11 Logging & Wireline Services & Testing/nitrogen $ 117,000
12 4, 4" Cores, Rotary SW Cores & Core Analysis $ 389,000
13 Workover Rig
14 Perforating
15 Stimulation, Nitrogen, Pump Units
16 Casing Crews &Tools $ 30,000
17 Welding & X-ray $ 12,000
18 Testing, Inspection & Repair Services
19 Hauling, Transportation & Disposal $ 134,000
20 Miscellaneous Materials & Supplies $ 27,000
21 Mud Logging & Misc. Services $ 17,000
22 Site Communications $ 18,000
SUBTOTAL - 02 SUBCONTRCTORS, SERVICES & RENTALS $ 2,915,000
03 MATERIALS
01 Tubulars: $ 118,000
02 Wellhead Equipment, 3Mrental $ 15,000
03 Downhole WellEquipment $ -
SUBTOTAL - 03Materials $ 133,000
Grand Total $ 3,200,000

Task 5 – Solution Mining
Infrastructure

Refinery
Crude distillation unit

Refinery
(ADU/VDU)
Crude distillation unit –
Atmospheric and vacuum preheating train
The heat exchangers on crude distillation units need to deliver high heat transfer efficiency and operational reliability.
Proper material selection is mandatory in order to minimize corrosion risks. For revamp projects there are often space constraints, creating a physical limit to the addition of new heat exchangers
and increasing refinery capacity.
Solutions for increased energy recovery and reduced CO2
Alfa Laval’s compact and fully welded heat exchangers can provide solutions for increased energy recovery and reduced CO2 emissions. With short payback times and the elimination of corrosion
risks through the use of higher alloy grades, Alfa Laval heat exchangers have a much lower CAPEX and OPEX compared with traditional shell-and-tube solutions.
The inherent capabilities of the Compabloc and spiral heat exchangers to deliver high heat transfers and handle tough fluids, make these compact heat exchangers an excellent solution for both
atmospheric and vacuum distillation units.
Can save 1.9 MEUR per year
For a 100 kbpd refinery approximately 120 MW is needed to preheat the crude oil up to 350°C. Obviously, the more efficient the heat recovery is, the greater the savings. One single Compabloc in
a crude preheating train can save 1.9 MEUR per year with a large reduction of fuel consumption and CO2 emissions.
The compact design of the Compabloc means a smaller footprint, and/or higher capacity in the same space. In demanding processes where corrosion resistance is a priority, a Compabloc costs
considerably less than a shell-and-tube unit because it contains significantly less material.

Refinery
The compact design of the Compabloc means a smaller footprint, and/or higher capacity in the same space. In demanding processes where corrosion resistance is a priority, a
Compabloc costs considerably less than a shell-and-tube unit because it contains significantly less material. This leads directly to a reduction in fuel consumption and
CO2 emissions.

Refinery

Task 6 – Land
50 acres will be required for the storage caverns, water wells, solution mining plant and gas
storage compression facilities.
ROW required during construction: 75 to 100 feet wide
Permanent ROW: 25 to 50 feet wide.
For interstate natural gas transmission pipelines, there is a federally granted power of eminent
domain to establish ROWs.
The FERC delegates its power of eminent domain to the pipeline operator to acquire necessary
ROWs.
FERC requires a permanent ROW of 50 feet for inspection and maintenance.

Task 7 – Pipeline
TransCanada Keystone XL Cushing, OK 36” 700,000 Bbl/day
3.5 miles Pipe size, cost and interconnect to be determined.
TransCanada Keystone XL Pipeline to Baker Montana (Bakken) in
development.
Kinder Morgan Double H Pipeline (Dore, ND) to Tall Grass Energy
Pony Express Pipeline (Guernsey, WY) to Cushing, OK.
Enbridge Flanagan South Pipeline to Cushing. (Bakken & WCSB)

Located in Hardin County, TX will consist of 2 high deliverability salt caverns totaling 2,000' in
height, 200' wide with 20 MBO storage capacity. 20,000 Bbl/d diesel refinery.
Batson Salt Dome, three miles east of TransCanada Keystone XL, four miles west of West Texas
Gulf Pipelines with numerous gas, crude pipelines and railroad in 8 mile radius. Batson Corridor,
LLC 3.5 mile gas pipeline to Trunkline.
The cost of large underground storage facilities in salt domes is substantially less expensive than
additional above ground storage capacity.
The rental cost of that storage per barrel is considerably less than the same per barrel cost in
above ground storage.
Additionally it is more secure and safe regarding terrorist and other risk both weather and man-
made.
Transporting crude oil by pipeline is generally cheaper than by rail, at a cost of about $5 a barrel
compared with $10 to $15 a barrel, according to a February report by the Congressional Research
Service.

Refinery Economics &
Profitability
07-340
Minimum two years permit and build: 150M Storage
300M Refinery
The underground storage facility should lower the cost of the refinery as per
cost of the Dakota Prairie Refinery, which is the desired operation.
www.ndoil.org/image/cache/John_Stumph.pdf

Profitability
07-340
Batson Dome Storage Project is located three miles east of the TransCanada Keystone XL
Pipeline.
Located in Hardin County, TX will consist of 2 high deliverability salt caverns totaling 2,000 feet
in height, 200 feet wide, and can hold 20MBO.
The Project can have interconnections with the following:
Keystone XL Oil Pipeline (TransCanada) 3 miles west
West Texas Gulf Pipeline (SUNOCO) 4 miles east
Union Pacific Railroad 8 miles south
20,000 Bbl/day refinery diesel/jet fuel/naptha
10,000 Bbl/day diesel
1 Bbl = 42 gallons
Net profit $0.50/gal. from wholesale to retail
$210,000/day net profit
Cost of storage facility(1 time cost) $150,000,000
Cost of Ventech refinery(1 time cost) $300,000.000
$0.50/gal profit a two year payout or less.
$0.50/Bbl saved on storage fees (Cushing fees)

Profitability
07-340
Reconnect 3.5 mile 3" pipeline to Trunkline for use by refinery after you use it for water supply
from Pine Island Bayou for leaching saving on drilling new water wells. Also, we will only need
two disposal wells and there is one plugged disposal well that can be re-permitted and
reentered. Know the company that plugged for TxRRC in 2007 has 8" casing all the way to
6500'.
Hardin County (Batson,Tx) very rural. Low tax rate. Benefits both county and community of
Batson. They need the jobs!
Local SMSA Houston/Beaumont
I/59, I/10 & I45
Jet Fuel: IAH, Hobby & Jack Brooks Regional.

Profitability
07-340
VENTECH MOBILE DIESEL REFINERY North Dakota Replicate for Buchanan Dome Project
Quantum Energy Inc. (QEI), Tempe, Ariz., said it has secured land for the construction of a
20,000-b/d grassroots hydroskimming refinery in North Dakota’s Williston basin Bakken shale
region.
QEI signed a purchase and sale agreement with Northstar Transloading LLC to purchase 80
acres of land adjacent to Northstar’s transloading terminal in East Fairview, ND, for the
plant’s construction, the company reported.
The planned Fairview plant, which is to be called the Mondak plant, will process crude oil
from the Bakken shale region and will operate as a topping plant to produce about 7,000 b/d
of diesel for local use, QEI said.
“We anticipate further announcements soon on funding for the expected $250 million
investment,” said QEI Pres. Stan Wilson.
According to project documents, the Mondak plant will include a crude distillation unit,
naphtha stabilizer, mid-distillate hydrotreater, sour water stripper, amine unit, LO-CAT
sulfur recovery unit, and hydrogen generator unit.
When constructed, the Mondak plant would become North Dakota’s second topping plant for
Bakken crude oil after Dakota Prairie Refining LLC’s new 20,000-b/d plant (OGJ Online, Feb.
7, 2013).
A joint venture of Calumet Specialty Products Partners LP, Indianapolis, and MDU Resources
Group Inc., Bismarck, ND, the $300-milllion, 20,000-b/d Dakota Prairie plant also will
produce mostly diesel for regional use (OGJ Online, Dec. 11, 2013; Mar. 27, 2013).
“The Dakota Prairie refinery in Dickinson has served as the model for our proposed Fairview

Profitability
07-340
https://www.youtube.com/watch?v=q0fW4pbxFbM&feature=youtube_gdata_player
refinery and helped demonstrate to our funding sources the feasibility for our project as
well,” said Wilson.
While Calumet recently said it expects the Dakota Prairie plant to be commissioned during
this year’s fourth quarter (OGJ Online, Feb. 21, 2014), QEI has yet to issue a firm
timeline for its Mondak plant.
MDU Resources Group and Calumet Specialty Product Partners are designing a refinery that
will be built by Ventech, a company that specializes in building refineries in remote
areas.

Profitability
07-340
Futures traders beginning to see upside of oil prices
Posted on December 23, 2014 at 12:39 pm by Robert Grattan in General, Markets
(AP Photo/Charles Rex Arbogast, File)
HOUSTON — While the news has been somber for oil markets recently, professional futures traders have
begun to bet on a somewhat brighter future.
In the U.S. crude market, futures contracts only recently outpaced the price of present-day physical oil,
said Francisco Blanch at the Bank of America Merrill Lynch Global Research. U.S. oil storage — mostly at the
crude pricing hub in Cushing, Oklahoma, have begun filling, he said.
“As inventories build across the country around the world, ultimately it’s feeding back into Cushing,” he
said. “Anyone that has access to storage is going to benefit. If you have storage capacity and you can lock in
these prices through the market you’re being paid a handsome premium to store oil over the next few months.”

Profitability
07-340
Refinery Economics
Oil refineries produce value-added petroleum products from crude oil. Profitability is thus determined by
several different variables:
 Feedstock costs (primarily crude oil)
 Fuel costs and other operational costs for the refinery itself
 Costs of complying with emissions regulations (particularly NOx)
 Market prices for the products produced.
Determining profitability for a specific refinery is very difficult since data on operational and environmental
compliance costs are generally not available. A rough measure could be obtained by calculating the cost of
crude-oil feedstock (though to do this with precision would require knowledge of the crude blends used in a
specific refinery) and comparing that cost with the market value of the suite of products produced at the
refinery. This still requires more information than might be publicly available for a typical refinery, and is
subject to market conditions for the various products produced.
A useful but simplified measure of refinery profitability is the “crack spread.” The crack spread is the
difference in the sales price of the refined product (gasoline and fuel oil distillates) and the price of crude oil.
An average refinery would follow what is known as the 3-2-1 crack spread, meaning for every three barrels

Profitability
07-340
of oil the refinery produces an equivalent two barrels of gasoline and one barrel of distillate fuels (diesel and
heating oil). This ratio of refined product output closely mirrors the composition in Figure 2.4, but remember
that the crack spread is only a first-order approximation of how profitable a refinery would be at the margin!
The higher the crack spread the more money the refinery will make, so it will be utilizing as much capacity it
has available. Inversely, at some lower crack spread prices, it actually may be in the refinery’s best interest,
due to costs for the plant, to scale back the amount of capacity utilized.
Calculating the 3-2-1 crack spread typically uses published prices for crude oil, gasoline and distillates.
These prices are typically taken from the New York Mercantile Exchange. The NYMEX has traded contracts
for crude oil and gasoline but no contract for diesel fuel (the most-produced of the distillate fuel oils). In
calculating the 3-2-1 crack spread, prices for heating oil futures are typically used instead. Below is an
example of how to calculate the crack spread, using data from 2012.
 Oil Price: $84.54/barrel
 Gasoline Price: $2.57/gallon
 Heating Oil Price: $2.79/gallon
 (remember that 42 gallons = 1 barrel)
 (2 barrels * 42 gallons/barrel * $2.57/gal of gas) + (1 barrel * 42 gallons/barrel * $2.79/gal of heating oil)
- (3 barrels * $84.54/barrel of oil) = $79.44 profit / 3 barrels of oil.
 The crack spread would thus be $79.44 / 3 = $26.48/barrel of oil
The crack spread, of course, is not a perfect measure of refinery profitability. What it really measures is
whether the refinery will make money at the margin – i.e., whether an additional barrel of crude oil
purchased upstream will yield sufficient revenues from saleable products downstream. In reality, existing

Profitability
07-340
refineries must consider their refining costs in addition to just the cost of crude oil. These costs include labor
(though that is generally a small part of refinery operations); chemical catalysts; utilities; and any short-term
financial costs such as borrowing money to maintain refinery operations. These variable costs of refining
may amount to perhaps $20 per barrel (depending on conditions in utility pricing and financial markets). In
the example above, the true margin on refining would be $6.58 per barrel of crude oil – much lower than the
simple crack spread would suggest.
The crack spread tends to be sensitive to the slate of products produced from the refinery. In the example
above, we used gasoline and distillate fuel oil (heating oil) because those are two typically high-valued
products, and U.S. refineries are generally engineered to maximize production of gasoline and fuel oil.
The crack spread is also sensitive to the selection of the oil price used. In the example above, we used the
NYMEX futures price for crude oil, which recall is based on the West Texas Intermediate blend - a fairly light
crude oil. Many U.S. refineries, however, are engineered to accept heavier crude oils as feedstocks. If there
are systematic differences in the prices of heavy crude oils versus West Texas Intermediate, then the crack
spread calculation (while illustrative) may not be sensible for a particular refinery.

07-340
RRC Permit Application
TOC
ADDITIONAL WORK
Rig Identification, Inspection and Contracting Test Well Drilling / Coring
Core Analysis
RRC Permit Application (see TOC in following slides) FERC Application
(see discussion in the following slides)

07-340
TOC
OVERVIEW AND EXECUTIVE SUMMARY
Permitting History
The Proposed New Wells
REFERENCES
RR Commission References
American Petroleum Institute (API) References
APPLICABLE RAILROAD COMMISSION STATEWIDE RULES (SWR’S)
Statewide Rule 97
RULES 1 AND 97 SUBMISSIONS
Forms P-5 and H-4
Notice Letters and Newspaper Public Notice
Supporting Technical Information

07-340
TOC
Geological and Hydrological Information
Geology of Batson Salt Dome
Structure top of Caprock / Salt
Cross Section AA’
Cross Section BB’

07-340
TOC (Cont’d)
Groundwater Hydrology
TCEQ Determination of Depth of Usable – Quality Groundwater To BeProtected
Engineering Information
Process and Flow Diagrams
Complete Process & Instrumentation Diagrams
Wellbore and Wellhead Schematic Diagrams
Wellhead Specifications
Workover/Drilling Programs
Cavern Development Program
Tubular Specifications
Logging Program
Cementing Program
Centralizer Program
Coring Program
Stored Product Composition
Abandonment Procedures
Plugging and Abandonment Schematics

07-340
TOC (Cont’d)
DOCUMENTATION TO DEMONSTRATE COMPLIANCE WITH SAFETY RULES
Standard Operating Procedures
Emergency Response Manual
Area of Review (AOR)
Well Records
GENERAL INFORMATION
Administrative Information
Maps and Figures
AOR, Storage Well Locations, Property Owners, Mineral Lease Holders / Operators
Aerial Photograph Illustrating the Storage Facility’s Layout and AOR
Surrounding Communities, Nearest Residences, USGS Topographic Map7.5
Minute Quadrangle Where the Facility is Located
APPENDIX A – ELECTRIC LOGS
APPENDIX B – STRATIGRAPHIC AND HYDROGEOLOGICAL DATA …

Permitting Responsibility
FERC Pre-Filing Procedures, including Open Season
FERC 7(c) Application (environmental & commercial)
Other Regulatory
Land and ROW acquisition & condemnation
Storage
Items within dashed border =
SSO scope

Oil and Gas Undergrond Storage Keystone Project.

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