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.

There are roughly 400 such storage areas in the continental U.S. at present, and about half of those facilities are associated with interstate pipelines (the remainder are intrastate or local). The vast majority (+75%) of underground gas storage occurs in depleted oil or gas fields, primarily in the Gulf states. Aquifers are typically used in the Midwest, and salt caverns in the Southwest, Northeast or Gulf states. In early December, the Energy Information Administration (EIA) announced that the amount of natural gas stored at underground facilities hit a record high, at nearly four trillion cubic feet. This development is a result of increased gas shale production.

At present, the operation and maintenance of above-ground components and equipment associated with underground storage is regulated by OSHA. If the underground storage serves interstate commerce, then it is also regulated by FERC for access and rates. Since 1992, with issuance of FERC Order 636, underground gas storage is now “open” to shippers who desire to use storage facilities (not just the storage owner). Piping leading to or from underground storage facilities is currently regulated by PHMSA after the first or last “pressure control device” on related pipelines. See previous alert on Midstream Facility FAQ Guidance Regarding PHMSA/OSHA Regulatory Oversight.

The recent leak from SoCal’s Aliso Canyon gas storage facility near Los Angeles is reportedly releasing large quantities of methane (estimated at 58K kg/hour), with no immediate fix in sight. With a national focus on underground storage as a result, coupled with the fact that several states have already been contemplating underground gas storage regulation, the issue is garnering more attention.

It may take statutory amendments, however, at both the federal and state levels, to authorize such new oversight. Toward that end, the Senate has proposed legislation in its recent Pipeline Safety Act reauthorization bill, the SAFE PIPES Act, that would require PHMSA to establish minimum safety standards for underground natural gas storage within 2 years of the bill’s enactment. The bill was approved by the Senate Commerce Committee, and awaits consideration by the full Senate, likely in 2016.