The state of Texas and the Texas Railroad Commission have petitioned the Fifth Circuit Court of Appeals to review PHMSA’s interim final rule regulating underground natural gas storage facilities. As required by the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, PHMSA published an interim final rule last December establishing minimum federal safety standards for underground natural gas storage facilities, which became effective in January. Such facilities have come under increased scrutiny since the 2015 Aliso Canyon storage field leak that lasted almost four months.
The petition requests that the Court set aside the PHMSA rulemaking because it is arbitrary, capricious, an abuse of agency discretion, or is otherwise not in accordance with law. In a statement, Texas Attorney General Ken Paxton explained that this rulemaking “effectively stripped the states of authority over their own natural gas facilities and completely disregarded traditional state regulatory roles.” The Texas Railroad Commission regulates intrastate hazardous liquid and natural gas pipeline safety in Texas and it has, in the absence of federal regulations, regulated underground gas storage sites in the State since the 1950s. TRRC’s comments on the PHMSA interim final rule were critical of the Agency noting that “[t]he lack of planning in the rushed implementation of this rule is alarming.” In particular, the comments raise concerns with respect to: (1) the wholesale adoption of industry recommended practices as mandatory requirements; (2) noting that PHMSA lacks the necessary experience to safely and fully implement the final rule and for “embarking on a path of regulating an industry with which it has little familiarity;” (3) issuing a rule without an established procedure for a state to obtain delegated authority; and (4) the rule’s inaccurate conclusion that permitting of interstate facilities falls to FERC, noting that the Commission regulates the downhole portion of these facilities whether intra or interstate.
As issued, the PHMSA interim final rule imposes significant new requirements in a short timeframe for “downhole facilities,” including wells, wellbore tubing and casings at underground natural gas storage facilities. It addresses construction, maintenance, risk management and integrity management procedures for these facilities and incorporates the requirements of recent API industry recommended practices 1170 for salt caverns storing natural gas and 1171 for storage in depleted hydrocarbon reservoirs and aquifer reservoirs. Those recommended practices were only finalized in late 2015, one month before the Aliso Canyon leak. In addition, the rules require underground gas storage operators to prepare and file annual reports, incident reports, safety-related condition repairs and register their facilities in the PHMSA operator registry. Under the rule, all intrastate transportation-related underground gas storage facilities will become subject to minimum federal safety standards and be inspected either by PHMSA or by a state entity that has expanded its authority to regulate these facilities under a certification filed with PHMSA pursuant to 49 U.S.C. 60105.
There are an estimated 400 underground natural gas facilities across more than 30 states, 80% of which store gas in depleted oil and gas fields, while the remaining 20% store gas in aquifers and salt caverns. Each storage facility typically has dozens, if not hundreds, of injection/storage wells. According to the Energy Information Administration, Texas has the third largest inventory of underground natural gas storage in the U.S. PHMSA received 27 comments from operators and industry trade groups, among others, on the interim final rule. The timeframe for issuance of final rule, which may include modifications to the IFR regulations, is unclear. Further, issuance of an amended rule may be impacted by the current Presidential Administration’s preferences for states to take the lead with regulations and emphasis on reducing duplicative administrative regulations.