I can't ever recall Sephiroth ever meeting Lucrecia...so everything about him is out the window.

MOVING ALONG! I shall venture a guess that it is the cave where you get HP <> MP as it is close...ish to the place where he THINKS he meets his mother (what a screwed up man) and it is surrounded by earth while it takes an incredible ammount of MAKO to make those special materias.