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.
PHMSA has issued an interim final rule (IFR) to establish – for the first time ever – minimum federal standards for underground natural gas storage facilities. The IFR imposes significant new requirements in a short timeframe for “downhole facilities,” including wells, wellbore tubing and casings at underground natural gas storage facilities. The IFR addresses construction, maintenance, risk management and integrity management procedures for these facilities and incorporates the requirements of recent API industry Recommended Practices (RPs) 1170 for salt caverns storing natural gas and 1171 for storage in depleted hydrocarbon reservoirs and aquifer reservoirs. In addition, the IFR requires 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.
The Interagency Task force on Natural Gas Storage Safety formed last April in response to the massive prolonged Aliso Canyon gas leak, recently issued its report on the safety and reliability of underground natural gas storage. The report responds to a Congressional mandate in the recent reauthorization of the Pipeline Safety Act. It includes numerous (44) recommendations to industry to reduce the likelihood of leaks at underground natural gas storage facilities and minimize the impacts of leaks when they occur. These recommendations are not binding, but PHMSA is required to consider them in issuing final rules pursuant to 2016 Pipeline Safety Act amendments. The report recommendations primarily address well integrity, risk management, and data gathering and recordkeeping, which are likely to be incorporated in PHMSA’s forthcoming interim final rule to establish minimum federal standards. The Agency plans to issue an interim final rule before the end of this year. As this will be a new area of regulation for the Agency, industry should be mindful of the various legal issues regarding jurisdiction, state regulation and preemption, and dual jurisdiction, among others.
In response to the Aliso Canyon leak from an underground natural gas storage well that lasted nearly four months, federal agencies with oversight of over such facilities announced workshops to gather information and solicit input on forthcoming minimum safety regulations. There are an estimated 400 interstate and intrastate underground natural gas storage facilities that operate with more than 4 trillion cubic feet of natural gas capacity. Some interstate pipeline operators rely on underground storage to facilitate load balancing and system supply on their transmission lines, while a large portion of this capacity is leased to other industry participants. In addition to serving customers, intrastate pipeline companies use storage capacity and inventories for similar purposes. Underground natural gas storage provides for flexibility in supply to accommodate daily and seasonal demand fluctuations.
The U.S. House of Representatives convened a Hearing last week regarding reauthorization of the Pipeline Safety Act (PSA) and is now considering draft legislation. In light of the recent methane leak in Aliso Canyon, California, House Subcommittee members echoed support for many of the provisions in the Senate reauthorization bill, S 2276, including federal safety standards for underground natural gas storage and requirements that PHMSA satisfy its remaining mandates from the prior 2011 reauthorization law. In addition, PHMSA and the Pipeline Safety Trust (PST) advocated for some additional provisions, including providing the Agency with “emergency order authority.” Overall, both the PST and industry recommended a straightforward reauthorization without numerous additional mandates.
In the Hearing, the House Subcommittee on Railroads, Pipelines and Hazardous Materials Chairman Jeff Denham (CA) described pipeline safety reauthorization as his “top legislative priority” for 2016. PHMSA Administrator Dominguez testified first and advocated for new emergency authority to provide for emergency industry-wide orders that could prohibit a dangerous practice or respond to unsafe conditions, practices or activities. Currently, PHMSA has emergency authority with respect to facilities that, in the Agency’s judgment, are or would be “hazardous” (referred to as a “corrective action order”) or pose an integrity risk (referred to as a “safety order”). 49 U.S.C. §§ 60112; 60117(l). In addition, PHMSA may, under certain circumstances (including emergencies), issue a final rule that is immediately effective. The Agency does not, however, have the authority to issue emergency orders that are immediately applicable to the entire industry (similar to that of the Federal Railroad Association). In addition, Dominguez laid out her agency’s plan in the next few months to address the remaining mandates from the prior (2011) reauthorization and discussed a reorganization of the agency referred to as “PHMSA 2021” with the purpose of making the agency more data-driven and transparent, and increasing emphasis on safety management systems (SMS).
Meanwhile, Representative Hahn (whose district includes the Wilmington, CA neighborhood affected by a 2014 oil spill) asked the Committee to work with her to include third party verification as part of the reforms, referencing her bill HR 4624, which she recently reintroduced. In addition, the PST asked Congress in drafting provisions on underground storage to look to Representative Sherman’s legislation HR 4578, the Underground Storage Safety Act. Another House bill referenced during the Hearing was HR 4429, the Natural Gas Leak Prevention Act, which would require minimum federal standards for underground natural gas storage. Industry representatives from AOPL, API, AGA and INGAA argued that reauthorization should contain no significant new safety mandates, in light of several new rulemakings already underway. INGAA and AGA confirmed their support for regulation of underground natural gas storage, but encouraged consideration of recent industry standards.
A subcommittee of the House Energy and Commerce Committee will consider draft legislation today, March 1, 2016. While it contains fewer requirements, the House draft legislation largely mirrors the major provisions under Senate bill 2276 and would add two new requirements. These include a (1) provision clarifying that the PSA citizen suit provision allows for an injunction against the U.S. for failure to perform a nondiscretionary duty under the PSA (in response to a recent 9th Circuit decision) and annual inline inspections of hazardous liquid pipelines facilities in high consequence areas that located underwater at depths greater than 150 feet (and that are not offshore). Meanwhile, the Senate tried to move its reauthorization bill last week, but adjourned without acting on it. Notably, emergency authority is not yet included in the draft legislation before the House or S 2276.
We recommend that operators monitor these developments closely and maintain contact with their trade organizations. To the extent that Congress adds a provision that would provide PHMSA with industry-wide emergency order authority, we note that the Agency’s current authority provides for individual emergency CAO orders, safety orders and industry-wide emergency final rules (under certain circumstances). Further, in light of PHMSA’s backlog of rulemaking mandates and tendency to use guidance to impose new regulatory requirements, it is hoped that any legislation that provides for industry-wide emergency order authority be carefully drafted to limit unnecessary and unauthorized imposition of injunctive relief on the pipeline industry.