US expected to phase in natural gas storage rules

OREANDA-NEWS. October 07, 2016. The US Pipeline and Hazardous Materials Safety Administration (PHMSA) is likely to develop first-time safety standards for underground gas storage facilities through a two-stage rulemaking process, industry officials say.

The first phase of those rules would likely be based on industry consensus standards and should be in place by January 2017, according to agency documents. PHMSA plans to issue these rules through what is known as an interim final rule, which that does not require public input, allowing the agency to quickly meet a congressional mandate to issue minimum natural gas storage safety standards by June 2018.

PHMSA is then likely to start a more time-consuming process of drafting regulations that would go through a public comment process, according to two industry officials tracking the regulatory process. This second phase of regulations could incorporate lessons from the recent major natural gas leak from the 86 Bcf (2.4bn m3) Aliso Canyon storage field in California.

PHMSA did not respond for comment.

SoCal Gas is still investigating the root cause of that incident, which released nearly 5 Bcf of gas into the atmosphere before the leak was stopped earlier this year. The company plans to publish a full investigation of the leak in the first half of 2017. That report could produce information that regulators would want to develop more rigorous safety standards, industry officials say.

California regulators in response to that leak have written draft rules that would mandate changes at gas storage fields. Those facilities often flow gas through the large steel casing and smaller inner tubing of wells drilled into underground storage fields. California's new rules would require operators to reconfigure wells to only flow gas through inner tubing, out of concern the larger steel casing may be more prone to leaks.

Gas industry officials are starting to raise concerns about what might happen if California's rules are replicated in other states or partially become the basis for PHMSA's national standards. They say the problem with this change is it can cut in half the withdrawal rate of underground storage facilities, presenting problems to serving peak gas demand on cold winter days.

Kinder Morgan vice president of storage Anders Johnson said limiting gas flows through tubing can cut the flow area of a gas well by up to 60pc. This limit can be particularly problematic at the end of winter, when underground storage facilities are running low on gas and pressures have fallen.

"I am really concerned about the peak, I am worried about that critical day" he said today at a conference held by the Energy Bar Association in Washington. "California got lucky."

PHMSA and other state regulators have yet to decide whether to make their storage regulations similar to the ones being developed in California. But industry officials are already taking close notice of the regulations.

"They may very well be a prototype," Mogel and Sweet attorney Philip Bennett said today at the conference.