The ongoing leak of methane from Southern California Natural Gas Company’s Aliso Canyon/Porter Ranch underground storage field near Los Angeles has drawn national attention to underground natural gas storage, triggering regulatory and legislative efforts to regulate these facilities at federal and state levels. On the regulatory front, President Obama recently committed to direct PHMSA to promulgate new storage regulations. Just this week, PHMSA announced a new Advisory Bulletin on managing the integrity of underground natural gas storage facilities.
Barring any near catastrophic, unanticipated global event, the U.S. oil and gas industry should see a bottom to the market in 2016, and the beginning of a return to a more balanced and profitable recovery. But that economic recovery will be set against a new global backdrop. The well-documented expansion of oil and gas shale resources over the past 5 to 8 years increased U.S. production markedly. By 2015, the U.S. had become the world’s largest producer of oil and gas. That occurred as the U.S. was recovering from a severe recession, and while global demand for oil and gas held steady. OPEC, Russia, Venezuela and other producing countries all chose not to cut back in production, for fear of losing market share to the new U.S. source of supply. Those facts led to oversupply, and a significant reduction in price for U.S. oil and gas products. The predicted drop in price of crude to $30/bbl occurred in 2015, then dropped below $30 in early 2016. And while the global price of oil and gas remained suppressed, the U.S. supply of stored oil and gas inventory hit record highs by the end of 2015.
The question of whether Presidential Permit authority is constitutional and/or subject to judicial review has been and continues to be an unsettled issue. A little more than a month after the State Department’s November 2015 denial of TransCanada’s application for a Presidential Permit to construct its Keystone XL pipeline project, the United States District Court for the District of Minnesota ruled in White Earth Nation et al. v. Kerry et al. that State Department Presidential Permitting decisions are Presidential in nature and are therefore not subject to judicial review. Approximately one month later, in January 2016, TransCanada filed two separate actions to challenge the Obama administration’s rejection of its application for a Presidential Permit for the Keystone XL pipeline. The first action was filed in federal district court in Texas to challenge the denial of the Keystone Presidential Permit, and the second is a Notice of Intent to submit a claim to arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA).
Consistent with President Obama’s “Climate Action Plan,” the Bureau of Land Management (BLM) recently released proposed rules intended to significantly curb emissions from new and existing oil and gas production wells on federal and tribal lands. In total, BLM proposes to cut natural gas emissions (from both intentional and unintentional releases) associated with oil and gas wells on all federal public lands by 50%. This will be accomplished through modernizing the current regulations (which are over 30 years old) by requiring operators to adopt best practices and updated technologies.
PHMSA has again released an advisory to pipeline operators on the potential for damage to pipeline facilities caused by severe flooding, as well as actions operators should consider taking to ensure the integrity of pipelines in the event of flooding, river scour, and river channel migration. The advisory is essentially identical to advisories PHMSA has issued on the same topic in July 2013 and April 2015 (see previous posts on these advisories from 2013 and 2015), reflecting a tendency of the Agency to issue such guidance cyclically.
Congress passed a $1.1 trillion spending bill (H.R. 2029) that contains a provision to end the United States’ ban on crude oil exports and earmarks for funding the federal pipeline safety program. The measure passed in the House (316-113) and the Senate (64-33) on Friday, December 18, and was signed by President Obama later that day.
FERC recently published a revised draft Guidance Manual for Environmental Report Preparation for review and public comment. The revised Guidance Manual updates FERC’s 2002 guidance manual on environmental report preparation for projects seeking FERC authorization under the Natural Gas Act (NGA), supplementing the previous guidance as well as adding new sections explaining requirements for environmental report preparation. This substantial enhancement of the Commission’s 2002 guidance likely reflects increased scrutiny by environmental groups and others of FERC’s compliance with its NEPA obligations in authorizing natural gas and LNG projects.
At an emergency press conference held today by the United States Department of Transportation (DOT), Secretary of Transportation Anthony Foxx announced that DOT has issued a one-time approval for special operating authority to engage in air transportation to specified markets. The approval will be limited in duration, valid only from the evening of December 24 until early morning on December 25, 2015. In granting this authority, DOT has approved one-time use of a specially powered aircraft, which the Federal Aviation Administration (FAA) has approved for nighttime operations.
The full press conference is worth viewing, with a link here.
Further Regulation of Underground Natural Gas Storage is under consideration by several state and federal agencies. Gas storage helps moderate supply and demand. As a result, natural gas and related gas products have been stored underground for many years, either in depleted oil or gas field formations, aquifers or salt caverns. Above ground aspects of this storage are regulated by a variety of federal and state agencies, but to date there has not been significant regulation of underground storage facility siting, construction or operation. Several states have been considering new regulations over underground gas storage (e.g., Texas and Kansas), and a recent leak from SoCal’s Aliso Canyon gas storage facility near Los Angeles has drawn national attention to the issue generally.
A bipartisan group of Senators who serve on the Senate Committee on Commerce, Science and Transportation introduced a Pipeline Safety Act reauthorization bill in November, the Securing America’s Future Energy: Protecting Infrastructure of Pipelines and Enhancing Safety (SAFE PIPES) Act, Senate Bill 2276. That bill was approved by the Committee on December 9, 2015 with five amendments. Key provisions of the bill as amended include: (1) regulation of underground natural gas storage facilities; (2) temporary allowances for certified states who are not interstate agents to participate in inspection and oversight of interstate pipelines; (3) PHMSA/State post-inspection briefings, issuance of a final report or enforcement within 30 days of inspection, and (4) regulation of “small scale liquefied natural gas facilities.” The bill would reauthorize the Pipeline Safety Act, and PHMSA, through 2019 and significantly increase authorized funds for pipeline safety programs and grants.