United States: PHMSA Sets Standards to Enhance Safety of Underground Natural Gas Storage Facilities

On December 14, 2016, the Pipeline and Hazardous Materials Safety Administration (PHMSA), a division of the Department of Transportation (DOT), issued an Interim Final Rule (the "IFR") to implement safety standards for the design and operation of underground storage facilities used in the interstate and intrastate transportation of natural gas.  81 Fed. Reg. 91860 (Dec. 19, 2016).  The IFR incorporates industry-recommended practices into mandatory federal regulations in furtherance of the agency's statutory obligations under the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 ("PIPES Act").  This alert describes the IFR and identifies some important implications for natural gas storage facility operators and market participants.

Wholesale storage facilities are a critical component of the natural gas transportation system serving the United States.  One hundred ninety-seven underground storage facilities are part of the pipeline network transporting gas in interstate commerce subject to federal regulation, while another 203 facilities are part of intrastate pipeline networks primarily regulated by the states.  Storage facilities have recently come under heightened public scrutiny in response to an enormous leak from the Aliso Canyon facility in California in October 2015.

The new standards take effect on January 18, 2017, although PHMSA is accepting comments on the IFR until February 17, 2017. 

Requirements of the IFR

PHMSA issued the IFR as part of a statutory mandate in Section 12 of the PIPES Act, which directed PHMSA to issue minimum safety standards for underground natural gas storage facilities and, in doing so, to consider consensus standards for the operation, environmental protection, and integrity management of underground natural gas storage facilities.

The IFR establishes for the first time mandatory technical standards for subsurface facilities at storage sites (including wells, wellbore tubing, and casing) by incorporating into the Pipeline Safety Regulations at Title 49 of the Code of Federal Regulations two sets of Recommended Practices published in 2015 by the trade association American Petroleum Institute (API).  The Recommended Practices will become mandatory standards directly governing gas storage on the interstate transportation network subject to federal jurisdiction.  The Recommended Practices will also provide a baseline for gas storage safety standards on intrastate transportation networks, whether those storage facilities are inspected by PHMSA or by state regulators annually certified by PHMSA to oversee storage safety.

PHMSA's new storage safety standards amend 49 C.F.R. §§ 191-192.   Facilities constructed after July 18, 2017, must comply with the new standards immediately upon being constructed, while existing facilities have until January 18, 2018 (12 months after the IFR becomes effective), to comply.    

Surface piping at underground storage facilities has long been subject to PHMSA's Pipeline Safety Regulations but facilities below the surface − known as "downhole facilities" − have been largely unregulated.  This regulatory gap was brought to the fore by several recent major leaks of natural gas, most notably the failure of a subsurface well casing at Southern California Gas Company's Aliso Canyon facility in the Los Angeles area, which allowed an estimated 4.62 billion cubic feet (Bcf) of natural gas to escape.  PHMSA notes in the IFR that the failure of an underground gas storage facility can lead to explosions and uncontrolled burns, threats to the lives and safety of facility employees and neighboring residents, significant environmental damage associated with large-scale releases of methane, and disruptions to the reliable transportation of the nation's energy supplies.

To address these serious threats, PHMSA has incorporated by reference existing industry storage safety practices into mandatory federal regulations.  This approach was recommended as an urgent first step by the Interagency Task Force on Natural Gas Storage Safety in its Final Report issued October 2016.  The Task Force − led by the Department of Energy and PHMSA − was convened in the aftermath of Aliso Canyon, comprised of numerous federal agencies, and held workshops to solicit input from industry representatives, environmental organizations, state officials, and other stakeholders.  The Final Report specifically recommended immediate adoption of two Recommended Practice documents developed in 2015 by API in a stakeholder consensus-building process.

API's Recommended Practice 1170 is an 85-page manual that sets forth detailed technical engineering requirements for the design and operation of solution-mined salt caverns used for natural gas storage.  There are approximately 31 such facilities in the United States.   Recommended Practice 1171 is a 50-page manual that similarly sets forth detailed technical engineering requirements for the design, construction, and operation of facilities that use depleted hydrocarbon reservoirs and depleted aquifers to store natural gas.  Depleted hydrocarbon reservoirs constitute more than 80 percent of the nation's underground gas storage facilities; many are decades old and use equipment that is increasingly unable to withstand the high pressures at which natural gas is stored.

The IFR builds on prior PHMSA guidance on monitoring, verification, and assessments to ensure storage safety, most recently in an Advisory Bulletin issued in February 2016.  In issuing the IFR, PHMSA concluded that the API Recommended Practices should be the minimum mandatory standards for a wide range of construction, maintenance, risk-management, and integrity-management procedures at underground storage facilities.  In the IFR, PHMSA states that if an operator fails to take any measure recommended by the API Recommended Practices, it should have subject-matter experts justify in its written procedures why the measure is impracticable or unnecessary. 

In addition to adopting API Recommended Practices, the IFR revises PHMSA's existing reporting requirements.  Underground storage facilities must: report findings of certain conditions that could compromise structural integrity or reliability; report safety-related incidents (involving a release of gas, death, or serious personal injury or property damage) as soon as practicable but not more than 30 days after detection of each incident using DOT Form PHMSA F7100.2; obtain an Operator Identification Number through the National Registry of Pipeline and Liquefied Natural Gas (LNG) Operators; and submit annual reports using DOT Form PHMSA F7100.4-1 (beginning on July 18, 2017).

Implications of the IFR

The IFR is evidence that federal regulators are serious about quickly implementing stringent safety regulations to prevent further failures of underground natural gas storage facilities.  PHMSA has adopted a consensus-driven approach whereby regulated entities work with industry trade associations and other stakeholders to develop best practices.  Pipeline and storage safety regulation will continue to be an exercise in cooperative federalism whereby state authorities exercise their traditional roles in the oversight of intrastate facilities against a backstop of a minimum uniform set of federal standards which directly apply to interstate facilities under federal jurisdiction.  

The IFR sets forth an ambitious implementation timeline that we expect many market participants will find challenging.  PHMSA indicates that it and its state partners will inspect facilities to enforce the requirements incorporated by the IFR.  To avoid enforcement actions, owners and operators of underground natural gas storage facilities − both on interstate and intrastate pipeline systems − should review carefully API's Recommended Practices 1170 and 1171 and immediately either take steps to ensure they satisfy the design, construction, and operational criteria therein or revise their compliance programs to document where those practices are impracticable or unnecessary.  Both sets of Recommended Practices require, among other things, the lifetime maintenance of certain records. 

Owners and operators of storage facilities should also review carefully the Final Report of the Interagency Task Force on Natural Gas Storage Safety and should be prepared for stringent oversight by federal and state regulators to continue in this area.

PHMSA encourages stakeholders to actively participate in the continuing development of its natural gas storage safety program by submitting comments containing relevant information, data, or views.  Comments are due on February 17, 2017.  Any entities potentially affected by the IFR should consider submitting comments, including suggesting reforms or addressing the technical feasibility of the API Recommended Practices, the expected compliance burden, and expected economic impact.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kathryn B. Thomson
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.