# Pipeline Safety: Safety of Underground Natural Gas Storage Facilities

- **operation:** document
- **citation:** 81 FR 91860
- **title:** Pipeline Safety: Safety of Underground Natural Gas Storage Facilities
- **source type:** rulemaking
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** historical
- **official:** true
- **published on:** 2016-12-19
- **effective on:** 2017-01-18
- **summary:** This interim final rule (IFR) revises the Federal pipeline safety regulations to address critical safety issues related to downhole facilities, including wells, wellbore tubing, and casing, at underground natural gas storage facilities. This IFR responds to Section 12 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, which was enacted following the serious natural gas leak at the Aliso Canyon facility in California on October 23, 2015. This IFR incorporates by reference two American Petroleum Institute (API) Recommended Practices (RP): API RP 1170, "Design and Operation of Solution-mined Salt Caverns used for Natural Gas Storage," issued in July 2015; and API RP 1171, "Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs," issued in September 2015.
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- **app url:** https://regulus.evalyn.ai/document/federal-register-2016-30045
- **source url:** https://www.federalregister.gov/documents/2016/12/19/2016-30045/pipeline-safety-safety-of-underground-natural-gas-storage-facilities
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Federal Register, Volume 81 Issue 243 (Monday, December 19, 2016) [Federal Register Volume 81, Number 243 (Monday, December 19, 2016)] [Rules and Regulations] [Pages 91860-91873] From the Federal Register Online via the Government Publishing Office [ www.gpo.gov ] [FR Doc No: 2016-30045] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Pipeline and Hazardous Materials Safety Administration 49 CFR Parts 191 and 192 [Docket No. PHMSA-2016-0016; Amdt. Nos. 191-24; 192-122] RIN 2137-AF22 Pipeline Safety: Safety of Underground Natural Gas Storage Facilities AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Transportation (DOT). ACTION: Interim final rule. ----------------------------------------------------------------------- SUMMARY: This interim final rule (IFR) revises the Federal pipeline safety regulations to address critical safety issues related to downhole facilities, including wells, wellbore tubing, and casing, at underground natural gas storage facilities. This IFR responds to Section 12 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, which was enacted following the serious [[Page 91861]] natural gas leak at the Aliso Canyon facility in California on October 23, 2015. This IFR incorporates by reference two American Petroleum Institute (API) Recommended Practices (RP): API RP 1170, ``Design and Operation of Solution-mined Salt Caverns used for Natural Gas Storage,'' issued in July 2015; and API RP 1171, ``Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs,'' issued in September 2015. DATES: Effective Date: This IFR is effective January 18, 2017. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of January 18, 2017. Comments Date: Comments must be received by February 17, 2017. ADDRESSES: You may submit comments identified by the docket number PHMSA-2016-0016 by any of the following methods: Federal eRulemaking Portal: http://www.regulations.gov . Follow the online instructions for submitting comments. Fax: 1-202-493-2251. Mail: Send comments to Docket Operations, M-30; U.S. Department of Transportation, 1200 New Jersey Avenue SE., Room W12-140, West Building Ground Floor, Washington, DC 20590-0001. Hand Delivery or Courier: Bring comments to Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Instructions: If you submit your comments by mail, submit two copies. To receive confirmation that PHMSA received your comments, include a self-addressed stamped postcard. Note: Comments are posted without changes or edits to http://www.regulations.gov , including any personal information provided. There is a privacy statement published on http://www.regulations.gov . FOR FURTHER INFORMATION CONTACT: Kenneth Lee, by telephone at 202-366- 2694, by fax at 202-366-4566, or by mail at U.S. DOT, PHMSA, 1200 New Jersey Avenue SE., PHP-80, Washington, DC 20590-0001. SUPPLEMENTARY INFORMATION: I. Background A. Underground Natural Gas Storage Facilities According to the Energy Information Administration,\1\ there are approximately 400 interstate and intrastate underground natural gas storage facilities currently in operation in the United States, with more than four trillion cubic feet of natural gas working capacity. Three hundred twenty-six (326) of those facilities store natural gas in depleted hydrocarbon reservoirs, while the remainder store natural gas in salt caverns (31) and depleted aquifers (43). The recent failure of Well SS25 at the Aliso Canyon facility, an intrastate regulated facility located in Southern California, and its aftermath have revealed the need for minimum federal standards for the wells and downhole facilities located at both intrastate and interstate underground storage facilities. The promulgation of minimum federal standards would, for the first time, establish safety standards under the Pipeline Safety Regulations at title 49, CFR parts 191 and 192, for the currently unregulated downhole facilities at 197 interstate underground gas storage facilities and provide consistent, minimum standards for the remaining 203 intrastate facilities. --------------------------------------------------------------------------- \1\ The Energy Information Administration is part of the U.S. Department of Energy. See http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/undrgrnd_storage.html . --------------------------------------------------------------------------- While there are DOT safety regulations in part 192 that apply to the surface piping at these facilities, there are no regulations in part 192 covering downhole facilities--such as wells, wellbore tubing, and casing--or the operations, maintenance, integrity management, public awareness, and emergency response activities associated with these downhole facilities. Therefore, even if all states had effective regulations for their intrastate facilities, 197 interstate facilities (that cumulatively have several thousand individual wells) would not be subject to any safety regulatory requirements with respect to their downhole facilities in the absence of federal action. In the event of a well failure, the interstate underground storage facilities could have consequences of a similar or even greater magnitude as the Aliso Canyon intrastate facility. The pipe at these facilities is threaded, rather than welded like a pipeline, making the pipe more susceptible to breaks. A broken pipe at any facility would allow gas to escape at a much higher rate and would be more likely to catch fire, leading to a greater risk to life and property. However, these underground storage facilities are currently not required to meet any part 192 design, operations, or maintenance standards to ensure the integrity and safety of these wells and downhole facilities. Most of the states that regulate underground gas storage have agencies separate and apart from the PHMSA-certified agency that regulates intrastate pipeline safety. Under the interim final 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 chosen to expand its authority to regulate these facilities under a certification filed with PHMSA pursuant to 49 U.S.C. 60105. Because state regulation of intrastate facilities is done through an annual certification under 49 U.S.C. 60105 and involves state adoption of the minimum federal standards, federal regulations are needed as the basis for effective state regulation as well. While many states have underground storage regulations with material integrity testing components to ascertain a well's condition, most states do not have specific and consistent regulations that include operating procedures and remediation for operations, maintenance, integrity demonstration and verification, monitoring, threat and hazard identification, assessment, remediation, site security, emergency response and preparedness, and recordkeeping requirements. The minimum federal standards will set baseline fitness for service requirements for all interstate and intrastate facilities and will allow state regulators to go above and beyond the minimum federal standards to require additional or more stringent safety safeguards at intrastate facilities. In other words, the regulation of intrastate underground gas storage facilities operates in the same manner as the existing federal-state regulatory scheme for gas and hazardous liquid pipelines. After issuance of the IFR, PHMSA will further evaluate the need for any additional regulatory requirements for underground storage facilities. PHMSA encourages persons to participate in this rulemaking by submitting comments containing relevant information, data, or views. We will consider all comments received on or before the closing date for comments in finalizing this rule. We will consider late filed comments to the extent practicable. [[Page 91862]] B. Aliso Canyon and Other Incidents On October 23, 2015, Southern California Gas Company's (SoCal Gas) Aliso Canyon Well SS25 developed a natural gas leak near an area known as Porter Ranch in Los Angeles, CA. The well leak is believed to have originated from the subsurface (downhole) well casing. The well was drilled in 1953 and converted to natural gas storage in 1972. On January 6, California Governor Jerry Brown issued a proclamation declaring the Aliso Canyon incident a state emergency. Before the leak was finally stopped (cement plugged), approximately 5.7 billion cubic feet (BCF) of natural gas had been released into the atmosphere, a volume equivalent to the yearly greenhouse gas emissions of approximately a half-million cars. PHMSA estimates the social costs of the climate-related impacts from these emissions at approximately $123 million (with a range of $55 million to $344 million, depending on the discount rate). Additional operator-reported costs were approximately $763 million as of November 2, 2016. Over 5,790 households (families) were relocated due to the co-release of natural gas odorant (mercaptans), according to the Aliso Canyon Incident Command briefing report issued on February 16, 2016. The Aliso Canyon facility has 115 storage wells, and is the second- largest storage facility of its kind in the United States. It is an intrastate facility that is subject to the authority of the California Public Utility Commission (CPUC), which is certified by PHMSA to regulate the intrastate gas pipeline facilities in California in accordance with 49 U.S.C. 60105. While the root cause of the failure of Well SS25 is the subject of ongoing investigations and assessments, the serious nature of the harm suffered by the public is widely recognized. The initial investigations by the CPUC and its partner agencies indicate that the risk of potential harm to the public could be addressed, at least in part, through the incorporation by reference of API RPs 1170 and 1171 into the pipeline safety regulations and requiring that underground gas storage facilities adopt minimum procedures for operations, maintenance, integrity demonstration and verification, monitoring, threat and hazard identification, assessment, and anomalies that affect safety. The Aliso Canyon incident is not the only high-profile underground gas storage incident to occur in recent years. On January 17 and 18, 2001, a wellbore failure at an underground storage facility near Hutchinson, Kansas, caused a natural gas leak from a gas storage field. The gas traveled approximately nine miles underground and exploded under some buildings, killing two people in a mobile home park and destroying two businesses in downtown Hutchinson. Approximately 143 million cubic feet of natural gas escaped from the storage field.\2\ --------------------------------------------------------------------------- \2\ Allison, M. Lee, 2001, The Hutchinson Gas Explosions: Unraveling a Geologic Mystery, Kansas Bar Association, 26th Annual KBA/KIOGA Oil and Gas Law Conference, V1, pg 3-1 to 3-29. http://www.kgs.ku.edu/Hydro/Hutch/Refs/Hutch_KBA_final.pdf . --------------------------------------------------------------------------- Similarly, in 2004, a well at an underground storage facility in Liberty County, TX, malfunctioned, resulting in a fire that burned for six and one half days and released approximately 6 BCF of natural gas.\3\ These incidents have also resulted in heightened awareness from governmental officials and the general public about the safety of these facilities, including the potential for explosions and uncontrolled burns, and the potentially immense environmental damage associated with the uncontrolled release of natural gas into the atmosphere from the failure of even a single one of the thousands of wells at the underground gas storage facilities across the country. --------------------------------------------------------------------------- \3\ October 7, 2004 news release by Duke Energy Partners, owner of the facility in 2004. https://www.duke-energy.com/news/releases/2004/Oct/2004100702.asp . --------------------------------------------------------------------------- In addition to threatening public safety and causing disruptive evacuations of large areas, when a natural gas storage well such as Well SS25 fails, the very process of attempting a ``well kill,'' which is intended to stop the flow of natural gas from the well by pumping a weighted fluid down the wellbore, puts company workers and first responders directly in life-threatening situations.\4\ Fortunately, an errant spark did not ignite the gas at Aliso Canyon, but well failures often involve such ignition, which can result in flame jets that can be seen from many miles away and take weeks to extinguish. --------------------------------------------------------------------------- \4\ PHMSA maintains ``Underground Natural Gas Storage'' informational Web pages, which explain underground storage operations. These pages are available to the public at http://primis.phmsa.dot.gov/ung/index.htm . --------------------------------------------------------------------------- Based on its field experience and knowledge of the industry, PHMSA is aware that many of the existing underground natural gas storage facilities across the country have wells with characteristics similar to Well SS25. Many wells, like Well SS25, are over 50 years old and were originally designed for petroleum production, where the flow of crude oil from underground depths actually reduced the pressure on the casing pipe as it flowed toward the ground surface. Natural gas storage, in contrast, often has a much lower pressure drop when flowing to the ground surface. These converted facilities also were originally constructed using certain techniques that are different from typical pipeline industry construction, such as having pipe sections joined by threaded coupling, not welds.\5\ They also generally do not have a corrosion-resistant internal or external protective coating, which is required for all new pipelines. --------------------------------------------------------------------------- \5\ Threaded casing pipe connections have less strength than a welded connection and are more prone to corrode during the life of the casing pipe. --------------------------------------------------------------------------- The combined effects of a lack of corrosion-resistant coating, no effective cathodic protection, and a corrosive flow product that includes a mixture of water and other corrosive components presents a serious risk of leakage at some point in the life span of these wells. These risks can be significantly mitigated by an effective operations and maintenance program that includes reassessments and preventive and mitigation measures based upon unique conditions and threats to the well casing, tubing, and wellhead. Most underground natural gas storage wells operate at pressures ranging from 200 pounds per square inch (psi) to about 4500 psi. By comparison, the maximum U.S. interstate transmission pipeline pressures are about 2000 psi, with most below 1000 psi. Underground storage wells also lack consistent standards for design safety factors to contain the well pressure, which provides a margin of yield strength. If a given grade of steel would deform or yield at 1.00 of its specified minimum yield strength, a safety margin of 25% would equate to a 0.80 design factor. For example, a pipeline generally has a design factor of 0.72 or less (safety margin of 39%), whereas a well casing may not have any safety factor. This means that corrosion of well casing pipe used with no safety factor would need the maximum operating pressure of the casing pipe to be reduced in order to ``maintain safety'' whenever a loss of wall thickness was found in the casing pipe. Preventing well-failure incidents is not only a matter of public safety and protecting the environment from methane leaks and catastrophic failures, such as those that have occurred at Aliso Canyon, CA; Liberty County, TX; and Hutchinson, KS, but is also a key part of ensuring the reliable transportation of the nation's energy [[Page 91863]] supplies. If storage facility operators need to rapidly draw down their supplies of gas to reduce the leak rate at a failed well or experience complete interruptions of operations, the public may suffer serious natural gas supply outages. When large underground natural gas storage facilities such as Aliso Canyon fail, the interruption in supply can have a major impact on the availability of heating fuel in colder climates and electricity in hot summer months. Businesses, hospitals, and governmental facilities also rely on the supply and distribution of gas as well as the energy produced by gas turbine electric power plants to keep the economy moving. C. PHMSA Actions Recently, PHMSA, along with the Federal Energy Regulatory Commission (FERC), five state regulatory agencies, and numerous industry representatives, participated in the development of two American Petroleum Institute (API) Recommended Practices (RP): API RP 1170, ``Design and Operation of Solution-mined Salt Caverns used for Natural Gas Storage'' (July 2015), and API RP 1171, ``Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs'' (September 2015).\6\ Both API RPs 1170 and 1171 recommend that operators of underground natural gas storage facilities implement a wide range of current recommended practices, including construction, maintenance, risk-management, and integrity-management procedures. --------------------------------------------------------------------------- \6\ Available at: http://publications.api.org/IBR-Documents-Under-Consideration.aspx . --------------------------------------------------------------------------- On February 5, 2016, PHMSA issued Advisory Bulletin ADB-2016-02 (81 FR 6334).\7\ The advisory bulletin recommended that operators of underground natural gas storage facilities review their operating, maintenance, and emergency response activities to ensure that the integrity of underground natural gas storage facilities is properly maintained. This bulletin informed operators about certain recommended practices and urged operators to take all necessary actions to prevent and mitigate breaches of integrity, leaks, or failures at their underground natural gas storage facilities, to ensure the safety of the public and operating personnel, and to protect the environment. Operators were advised to: --------------------------------------------------------------------------- \7\ http://phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Advisory%20Notices/2016-02228.pdf . --------------------------------------------------------------------------- (1) Verify that the pressure required to inject intended natural gas volumes does not exceed the design pressure limits of the reservoir, wells, wellheads, piping, casing, tubing, or associated facilities; (2) monitor all wells for the presence of annular gas or liquids on a periodic basis; (3) inspect the wellhead assembly and attached pipelines for each of the wells used; (4) conduct periodic functional tests of all surface and subsurface safety valve systems and wellhead pipeline isolation valve(s) for proper function and ability to shut-off or isolate the well and remediate improperly functioning valves; (5) perform risk assessments in a manner that reviews, at a minimum, the API RP 1171 criteria to evaluate the need for subsurface safety valves on new, removed, or replaced tubing strings or production casing; (6) conduct ongoing assessments for the verification and demonstration of the mechanical integrity of each well and related piping and equipment; (7) develop and implement a corrosion monitoring and integrity evaluation program for piping, wellhead, casing, and tubing including the usage of appropriate well log evaluations; (8) develop and implement procedures for the evaluation of well and attendant storage facilities that include analysis of facility flow erosion, hydrate potential, individual facility component capacity and fluid disposal capability at intended gas flow rates and pressures, and analysis of the specific impacts that the intended operating pressure range could have on the corrosive potential of fluids in the system; (9) identify potential threats and hazards associated with operation of the underground storage facility; (10) perform ongoing verification and demonstration of the integrity of the underground storage reservoir or cavern using appropriate monitoring techniques for integrity changes, such as the monitoring of pressure and periodic pressure surveys, inventory (injection and withdrawal of all products), product levels, cavern subsidence, and the findings from adjacent production and water wells, and observation wells; (11) ensure that emergency procedures are reviewed, conducted, and updated at least annually; and (12) ensure that records of the processes, procedures, assessments, reassessments, and mitigation measures are maintained for the life of the storage well. On July 14, 2016, PHMSA held a public meeting on the topic of potentially extending federal pipeline safety regulations to include transportation-related underground gas storage facilities. The discussion covered both interstate and intrastate storage facilities, including wells and wellbore tubing. PHMSA heard from a diverse group of stakeholders, including state and federal regulators, emergency responders, and residents of the Aliso Canyon area who were directly impacted by the 2015 incident. PHMSA also heard from facility operators and technology experts. Based on its knowledge of storage well facilities across the country, available information concerning the Aliso Canyon accident, and other aspects of the record developed at this public meeting, PHMSA has concluded that the two recently adopted industry recommended practices, developed through the API consensus process, should be incorporated into part 192 of the federal pipeline safety regulations as an urgent first step in preventing similar incidents in the future. If an operator fails to take any measures recommended by API RP 1170 or 1171, then it would need to justify in its written procedures why the measure is impracticable and unnecessary. Rapid incorporation of API RP 1170 and 1171 into PHMSA's regulations will require operators to assess the operational safety of their underground natural gas storage facilities and document the implementation of identified safety solutions. PHMSA and its state partners will monitor operators' implementation of the requirements in the interim, and once the requirements become effective PHMSA will begin inspecting facilities to enforce the requirements. Based upon facility inspections by PHMSA and its state partners and input from the public, PHMSA plans to continue to monitor and evaluate the safety of underground storage facilities and plans to incrementally build on the framework of the IFR as necessary in order to ensure that operators fully address the safety issues presented by underground natural gas storage. II. Justification A. PHMSA Authority and Regulatory History Under 49 U.S.C. 60101 and 60102, PHMSA sets minimum safety standards for the transportation of natural gas, which includes underground natural gas storage facilities incidental to transportation. While PHMSA's existing part 192 regulations cover much of the surface piping up to the wellhead at underground natural gas storage facilities served by pipeline, PHMSA [[Page 91864]] has not previously issued regulations for the ``downhole'' portion of these facilities. Accordingly, the only specific regulatory requirements for operators to inspect the safety of their underground natural gas storage facility wellheads, casings, and tubing strings are state standards that apply to intrastate facilities. Not all states have adopted safety standards for underground storage facilities, and while in some cases states that are certified by PHMSA to regulate their intrastate gas pipeline facilities can and have issued state standards for these wells and wellbores, the absence of a minimum federal standard has led to a regulatory gap for the wells and downhole pipe and tubing for the interstate facilities and a lack of adequate, consistent standards for all intrastate facilities. PHMSA considered regulating the wells and downhole pipe and tubing at underground storage facilities more than 20 years before the Aliso Canyon incident. In 1994, PHMSA's predecessor agency, the Research and Special Programs Administration (RSPA) held a public meeting (Docket PS-137; 59 FR 30567; June 14, 1994) on underground storage of gas and hazardous liquids, in order to gather information on the extent of then-current regulation and to determine what action RSPA should take on underground storage regulation. At the meeting, representatives of industry, state governments, and the public presented statements on safety issues, industry practices, the status of state underground storage regulations, and the need for additional federal regulations. While different views were expressed on whether RSPA should begin to regulate the wells and downhole pipe and tubing, RSPA's regulation of the surface piping at these facilities appeared sufficient and further federal regulatory action on the wells was not seen as an immediate need. At that time, however, no widely accepted industry standards existed for the underground storage of natural gas. In addition, much of the underground storage well piping and components, which do not have external coatings and cathodic protection, have aged another 22 years since RSPA conducted the 1994 review. Finally, there have been three significant accidents in the last 15 years, including Aliso Canyon. Taken together, these are compelling factors warranting regulatory action by PHMSA, as discussed more fully in Section D below. On June 22, 2016, the ``Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016'' (the Act), became law (Pub. L. 114- 183). Section 12 of the Act mandates that PHMSA issue regulations for underground gas storage facilities within two years from the date of enactment and that PHMSA ``shall, to the extent practicable-- (1) Consider consensus standards for the operation, environmental protection, and integrity management of underground natural gas storage facilities; (2) Consider the economic impacts of the regulations on individual gas customers; (3) Ensure that the regulations do not have a significant economic impact on end users; and (4) Consider the recommendations of the Aliso Canyon natural gas leak task force established under section 31'' of the Act. The Act further provides that PHMSA may allow state authorities to continue exercising their traditional role in the oversight of intrastate gas pipeline facilities and gas transportation, including underground gas storage facilities, in the same manner through an annual certification process under 49 U.S.C. 60105 and the interstate agent provisions of 49 U.S.C. 60106. This mandate reflects the seriousness with which Congress has focused on underground storage facility safety following the Aliso Canyon accident. It also reflects Congress' desire for states to maintain their role as strong federal partners in protecting the safety of underground gas storage facilities. While the RPs do include material that is relevant to determining whether a given geologic formation or depleted reservoir is suitable for gas storage use, permitting is not a PHMSA function. PHMSA is not authorized to prescribe the location of an underground gas storage facility or to require the Secretary of Transportation's permission to construct such a facility. Therefore, Congress has preserved the traditional permitting role of the states in the case of intrastate facilities and the Federal Energy Regulatory Commission in the case of interstate facilities. This latest accident has made PHMSA and other stakeholders, including the public, acutely aware of both the safety and environmental hazards of underground gas storage. Moreover, there is generally a greater awareness on the part of the public of greenhouse gas emissions. The external cost of not regulating such emissions must now be considered by agencies, including PHMSA, as part of executive branch policy governing agency regulatory actions. Section 31 of the PIPES Act also created the Aliso Canyon Natural Gas Leak Task Force (Task Force), co-chaired by the U.S. Departments of Energy (DOE) and DOT. The Task Force has provided a mechanism for interagency consultations that has included the U.S. Departments of Health and Human Services, Interior, Commerce, the Environmental Protection Agency, and the Federal Energy Regulatory Commission. The Task Force Report, entitled ``Ensuring Safe and Reliable Underground Natural Gas Storage,'' was issued by DOT and DOE on October 18, 2016 (Report). PHMSA worked closely with DOE in preparing the Report, which has informed PHMSA's development of the IFR. Widely accepted industry standards now exist with the recent development of API RPs 1170 and 1171, both of which were finalized about one year ago. API RPs 1170 and 1171, developed over the course of more than 4 years, are suitable for mandatory incorporation-by- reference into the operating procedures of these facilities, at least as a first step to address safety and environmental concerns with underground storage. This avenue would provide an immediate and reasonable means by which PHMSA would begin to regulate the downhole portions of underground storage of natural gas and respond to emerging risks in the area of underground gas storage, while at the same time implementing section 31 of the PIPES Act. B. Industry and Public Support for Rulemaking The recent history of serious underground storage incidents, including the Aliso Canyon incident, has made PHMSA and the public acutely aware of both the safety and environmental hazards of underground natural gas storage. Representatives of both industry and the public have recently requested that PHMSA promulgate minimum federal regulations. On January 20, 2016, the Interstate Natural Gas Association of America (INGAA), a major industry trade association representing the vast majority of interstate natural gas pipeline transmission companies in the United States and a participant in the development of API RPs 1170 and 1171, petitioned PHMSA to incorporate both API RPs by reference into 49 CFR part 192. In the petition, INGAA supported federal safety regulation and oversight of natural gas storage facilities over the current patchwork of state regulations. That petition, along with a February 11, 2016, letter from INGAA, urged PHMSA to adopt API RPs 1170 and 1171 as quickly as possible in order to [[Page 91865]] put into place a set of consensus standards for operators of underground storage facilities to follow in assessing their facilities and establishing procedures to ensure safety. INGAA, the American Petroleum Institute (API), and the American Gas Association (AGA) have all reached out to PHMSA in the aftermath of the Aliso Canyon incident and expressed support from their member companies for the rapid adoption of the API RPs. API recommended practices are frequently adopted by a majority of the industry, and PHMSA has previously adopted other industry consensus standards into the pipeline safety regulations. The National Technology Transfer and Advancement Act of 1995 (Pub. L. 104-113) directs federal agencies to use voluntary consensus standards in lieu of government-written standards whenever possible. Voluntary consensus standards are standards developed or adopted by voluntary bodies that develop, establish, or coordinate technical standards using agreed-upon procedures. In addition, Office of Management and Budget (OMB) issued OMB Circular A-119 to implement section 12(d) of Public Law 104-113 relative to the utilization of consensus technical standards by federal agencies. This circular provides guidance for agencies participating in voluntary consensus standards bodies and describes procedures for satisfying the reporting requirements in Public Law 104-113. API elected to issue RPs 1170 and 1171 in the form of ``recommended practices,'' as opposed to ``standards.'' This presented PHMSA with the challenge of dealing with concerns about the enforceability of these practices. Accordingly, as part of incorporating the API RPs by reference, PHMSA is adopting the non-mandatory provisions of API RPs 1170 and 1171 in a manner that would make them mandatory (i.e., API provisions containing the word ``should'' or other non-mandatory language will be considered mandatory), except that operators will be permitted to deviate from the API RPs if they provide a sufficient technical and safety justification in their program or procedural manuals as to why compliance with a provision of the recommended practice is not practicable and not necessary for the safety of a particular facility. PHMSA will evaluate these justifications as part of its compliance inspection process, taking into account whether the operator's procedures reflect sound engineering principles and achieved acceptable performance as demonstrated by annual reports and incident data. PHMSA will incorporate lessons learned from these compliance reviews of underground storage facility operations into inspection protocols and inspector training programs. State pipeline regulators also support the issuance of underground gas storage facility regulations by PHMSA. In 2010, the National Association of Pipeline State Representatives (NAPSR), which represents PHMSA's state pipeline regulatory partners, submitted a resolution to PHMSA supporting underground natural gas storage facility regulations.\8\ PHMSA's state partners are a vital element in helping to protect the integrity of the nation's gas transmission and distribution systems. PHMSA's expanded role in underground natural gas storage facilities will produce a safer and more environmentally sound system. --------------------------------------------------------------------------- \8\ NAPSR Resolution 2010-03 AC.2. The NAPSR resolution contained recommendation including the development of regulations to assess the integrity of existing wellbores used to store natural gas and the safety of operations for geologic formations used to store natural gas. http://www.napsr.org/SiteAssets/NAPSR-Resolutions-Open/201003%20Storage%20Field%20Wellbores%20Resolution.pdf . --------------------------------------------------------------------------- C. Good Cause Basis for an IFR Under the Administrative Procedure Act (APA) and the Federal Pipeline Safety Law, PHMSA may issue an IFR when there is ``good cause'' to find that the notice[hyphen]and[hyphen]comment process would be ``impracticable, unnecessary, or contrary to the public interest,'' and the agency incorporates that finding and a brief statement of the reasons supporting the finding in the rulemaking document. See 5 U.S.C. 553(b)(3)(B), and 49 U.S.C. 60102(b)(6)(C). PHMSA's pipeline safety regulations similarly recognize this exception at 49 CFR 190.311. However, PHMSA may modify aspects of the IFR issuing the final rule after receiving and reviewing public comments, as well as any other relevant documents. The good cause exception allows PHMSA to respond to safety risks quickly when delay would jeopardize the public interest through risks to public safety and the environment. PHMSA finds that good cause exists to proceed with this IFR. Normal notice and comment procedures are impracticable and not in the public interest because PHMSA knows, as evidenced by the release at Well SS25 in Aliso Canyon, that existing facilities operating without minimum federal PHMSA safety standards are prone to corrosion due to the combined risks of a lack of corrosion-resistant coating, no effective cathodic protection, and a corrosive flow product that includes a mixture of water and other corrosive components. The RP's have sections concerning integrity monitoring methods for safety threats from corrosion of the wellbore piping and wellhead. The other 114 wells at the Aliso Canyon facility are currently being evaluated for integrity deficiencies. However, the concerns about well integrity are not limited to Aliso Canyon. They are national in scope. The lack of applicable PHMSA federal regulations for the downhole facilities presents an immediate threat to safety, public health, and the environment because there is currently no effective means for the agency to ensure compliance with safety standards at underground natural gas storage facilities. Given the nature of the safety and environmental threat posed by the current lack of federal regulations for underground gas wells, any delay in adopting the API recommended practices would be impracticable and contrary to the public interest. The failure of a single well can cause substantial environmental harm and put populated areas at risk. The Aliso Canyon facility, for example, was located near a densely populated area and resulted in approximately 5,790 households being relocated due to the co-release of natural gas odorant (mercaptans), according to the Aliso Canyon Incident Command briefing report issued on February 17, 2016. Further, while the full extent of the damage caused by the Aliso Canyon incident will not be known until much later, as of June 30, 2016, SoCalGas had made provisions for expenses of nearly $763 million to control the release, monitor air emissions, relocate residents, and cover its legal and other expenses (Sempra, 2016).\9\ These costs are those incurred by Sempra and do not include additional costs to society as a result of the release.\10\ For example, [[Page 91866]] this figure does not include $123 million in estimated social costs (ranging from $55 million to $344 million) from the climate impacts of approximately 5.7 BCF of gas released into the atmosphere.\11\ --------------------------------------------------------------------------- \9\ Of the $763 million, Sempra Energy notes ``approximately 70% is for the temporary relocation program (including cleaning costs and certain labor costs) and approximately 20% is for efforts to control the well, stop the leak, stop or reduce emissions, and the estimated cost of the root cause investigation. The remaining amount includes legal costs incurred to defend litigation, the value of lost gas, the costs to mitigate the actual natural gas released and other costs. Cost estimate excludes any potential damage awards, restitution and any civil, administrative or criminal fines and other penalties that may be imposed, as well as any additional costs to clean homes and future legal costs necessary to defend litigation, among other potential costs, as we cannot estimate what amounts, if any, will be incurred for such matter.'' (Sempra Energy, 2016). \10\ On August 17, 2016, SoCal Gas provided PHMSA with a supplemental data response regarding Aliso Canyon remediation costs as of August 15, 2016. \11\ The range reflects different assumptions on the discount rate used in estimating the social cost of methane. See Section 6 in RIA for details. --------------------------------------------------------------------------- There is also a major public interest in preventing supply interruptions for hundreds of thousands of consumers who need gas to heat their homes. Potential interruptions in the supp
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