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PHMSA Issues Interim Final Rule For NatGas Storage

The Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an interim final rule (IFR) revising safety regulations for underground natural gas storage facilities, meeting a key requirement from a sweeping pipeline safety bill signed into law last summer.

But despite support for PHMSA to regulate natural gas storage using consensus standards, groups representing the oil and gas industry called the 12-month timeline for compliance "unrealistic."

The IFR [Docket 2016-0016], issued Wednesday, addresses safety issues related to downhole facilities, including well integrity, wellbore tubing, and casing. Release of the rule satisfies a key requirement of the SAFE PIPES Act, which President Obama signed into law last June. Two months ago, PHMSA and Department of Transportation officials said the IFR would be released before the end of the year.

"This IFR addresses aging infrastructure and is the first step in a multiphase process to enhance the safety of underground natural gas storage," said PHMSA Administrator Marie Therese Dominguez. "These minimum federal standards will help to prevent incidents like the one at Aliso Canyon from happening in other communities around the country."

The IFR will take effect 30 days after publication in the Federal Register, and PHMSA will accept public comments on the rule up to 60 days after publication.

According to the Energy Information Administration (EIA), there are approximately 400 interstate and intrastate underground natural gas storage facilities currently in operation in the United States, which collectively have more than 4 Tcf of natural gas working capacity. Of the 400 storage facilities, 326 are depleted hydrocarbon reservoirs, 31 are salt caverns and 43 are depleted aquifers. The EIA said 197 are interstate facilities, while the remaining 203 are intrastate facilities.

In 2015, PHMSA and the American Petroleum Institute (API), which sets standards for the oil and gas industry, collaborated to develop a pair of recommended practices (RP): 1170 and 1171.

Specifically, the API RP 1170 outlines several functional recommendations for salt cavern facilities used for natural gas storage -- including geomechanical assessments, cavern well design and drilling, and solution mining techniques and operations. Meanwhile, API RP 1171 focuses on the depleted hydrocarbon and aquifer reservoirs being used for storage -- addressing storage well, reservoir and fluid management for functional integrity in the design, construction, operation, monitoring, maintenance, and documentation practices.

Both RPs also include operations and maintenance procedures and practices for newly constructed and existing underground facilities. PHMSA said the procedures address operations, maintenance, threat identification, monitoring, assessment, site security, emergency response and preparedness, training and recordkeeping.

According to a regulatory impact analysis prepared by PHMSA, incremental annualized costs to implement the RPs would range from less than $100,000 to $193.6 million, depending upon whether full, partial or regulatory compliance is enacted, and whether a 3% or 7% discount rate is applied. The high end of the cost spectrum assumes regulatory compliance only at a 7% discount rate.

"To the degree that the IFR promotes implementation of safer practices by making them mandatory and enforceable, PHMSA expects the benefits of the IFR in general, and of the mechanical integrity testing requirements in particular, to derive from preventing catastrophic natural gas releases due to the failure of storage wells or of fugitive and vented emissions ancillary to the operation of storage facilities," PHMSA said.

One such catastrophe began in October 2015, when workers with Southern California Gas Co. (SoCalGas) discovered a natural gas leak from its Aliso Canyon underground storage facility in southern California, prompting the evacuation of thousands of nearby households. The leak was permanently plugged four months later. Last month, SoCalGas asked California regulators for permission to reopen the facility.

Industry Calls Deadline 'Unrealistic'

In separate statements Wednesday, officials with the Interstate Natural Gas Association of America (INGAA) and API were critical of the 12-month deadline for compliance.

"We are concerned that a rushed 12-month implementation of the entirety of the RPs would impose a substantial burden on operators and could undermine the effectiveness of these risk-based integrity management programs," said INGAA CEO Don Santa. "In contrast, the implementation period for the gas transmission pipeline integrity management program requirements was ten years.

"We are reviewing this IFR, and hope PHMSA will take our concerns into consideration."

API Midstream Group Director Robin Rorick concurred. "While we are encouraged that the new rule adopts API's rigorous safety management practices, we fear that the new rule's unrealistic compliance timeline will prevent operators from effectively implementing the requirements of the rule and could potentially undermine the very safety efforts the rule is trying to promote," Rorick said.

"While we will continue to review the impacts of this rule, we hope that PHMSA will work with our industry to ensure that the rule can be implemented in a fashion that both improves safety and ensures that clean and reliable supplies of natural gas from the U.S. energy renaissance are consistently available to the country."

The SAFE PIPES Act passed both chambers of Congress with broad bipartisan support last June. The bill included a provision creating the Aliso Canyon Natural Gas Leak Task Force -- led by the secretary of the Department of Energy -- to determine the cause and contributing factors for the leak, and to make recommendations to prevent future leaks.

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