{"operation":"document","citation":"090000648242be17","title":"U.S. DOT/PHMSA - Regulatory Impact Analysis","source_type":"rulemaking","agency":"Pipeline and Hazardous Materials Safety Administration","status":"current","official":true,"published_on":null,"effective_on":null,"summary":"Pipeline and Hazardous Materials Safety Administration U.S. Department of Transportation Regulatory Impact Analysis Underground Natural Gas Storage Interim Final Rule December 7, 2016 Regulatory Impact Analysis: Underground Natural Gas Storage Executive Summary Federal government data show a total of 390 active underground natural gas storage fields in the United States as of 2015 (EIA, 2016e). The fields encompass an estimated 16,991 injection/withdrawal or pressure control/observation wells (AGA,...","machine_formats":{"json":"https://regulus.evalyn.ai/document/regulations-gov-attachment-090000648242be17.json","markdown":"https://regulus.evalyn.ai/document/regulations-gov-attachment-090000648242be17.md"},"app_url":"https://regulus.evalyn.ai/document/regulations-gov-attachment-090000648242be17","source_url":"https://downloads.regulations.gov/PHMSA-2016-0016-0005/attachment_1.pdf","body":"<<<PAGE 1>>>\n\nPipeline and Hazardous Materials Safety Administration\nU.S. Department of Transportation\nRegulatory Impact Analysis\nUnderground Natural Gas Storage\nInterim Final Rule\nDecember 7, 2016\n\n<<<PAGE 2>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Front Matter\nPrepared with support by\nAbt Associates Inc.\n55 Wheeler Street, Cambridge, MA 02138\nunder Delivery Order #DTPH5616F00006\nii\n\n<<<PAGE 3>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Table of Contents\nTable of Contents\nExecutive Summary ................................................................................................................ 1\n1 Introduction .................................................................................................................... 1-1\n1.1 Purpose ................................................................................................................................ 1-1\n1.2 Need for Action ................................................................................................................... 1-1\n1.3 Report Organization ............................................................................................................ 1-2\n2 Overview of the Natural Gas Storage Industry .......................................................... 2-1\n2.1 Storage Fields ...................................................................................................................... 2-1\n2.2 Number of Wells ................................................................................................................. 2-2\n2.3 Operators ............................................................................................................................. 2-4\n2.4 Regulation of Underground Natural Gas Storage Facilities ................................................ 2-5\n3 Summary of IFR Requirements ................................................................................... 3-1\n3.1 API Recommended Practices .............................................................................................. 3-1\n3.2 Regulatory Alternatives Considered by PHMSA ................................................................ 3-3\n4 Analysis Framework ...................................................................................................... 4-1\n4.1 Analysis Baseline ................................................................................................................ 4-1\n4.1.1 Federal and State Regulations ................................................................................. 4-1\n4.1.2 Existing Industry Practices and Implementation ..................................................... 4-1\n4.1.3 Baseline Scenarios ................................................................................................... 4-4\n4.2 Other Analysis Elements ..................................................................................................... 4-4\n4.2.1 Timeframe for the Analysis ..................................................................................... 4-5\n4.2.2 Regulatory Alternatives ........................................................................................... 4-5\n4.2.3 Discounting of Future Costs and Benefits ............................................................... 4-5\n4.2.4 Industry Growth Rate .............................................................................................. 4-5\n5 Costs ................................................................................................................................ 5-1\n5.1 Costing Methodology .......................................................................................................... 5-1\n5.1.1 Mechanical Integrity Testing Costs ......................................................................... 5-1\n5.1.2 Costs of Addressing Integrity Issues Identified through Testing ............................. 5-2\n5.1.3 Costs of Other RP Elements .................................................................................... 5-3\n5.1.4 Reporting Costs ....................................................................................................... 5-4\n5.2 Industry Compliance Costs ................................................................................................. 5-5\n5.2.1 Full Industry Compliance Baseline.......................................................................... 5-5\n5.2.2 Partial Industry Compliance Baseline ...................................................................... 5-5\n5.2.3 Regulatory Compliance Only Baseline .................................................................... 5-8\n5.3 Economic Impacts ............................................................................................................. 5-10\niii\n\n<<<PAGE 4>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Table of Contents\n6 Benefits ............................................................................................................................ 6-1\n6.1 Natural Gas Releases from Underground Storage .............................................................. 6-1\n6.1.1 Catastrophic Releases .............................................................................................. 6-1\n6.1.2 Operational Releases ............................................................................................... 6-3\n6.2 Benefits of the IFR .............................................................................................................. 6-3\n7 Uncertainty and Limitations ......................................................................................... 7-1\n7.1 Affected Facilities and Operators ........................................................................................ 7-1\n7.2 Baseline Degree of Compliance .......................................................................................... 7-2\n7.3 Mechanical Integrity Testing Costs .................................................................................... 7-2\n7.4 Timing of Compliance Activities ........................................................................................ 7-3\n7.5 Effectiveness of RPs to Prevent Future Incidents ............................................................... 7-3\n8 Analyses Required under Applicable Statutes or Executive Orders ........................ 8-1\n8.1 Executive Orders 12866 and 13563: Analysis of Costs and Benefits ................................. 8-1\n8.2 Regulatory Flexibility Act (RFA) ....................................................................................... 8-2\n8.2.1 Identifying Small Entities ........................................................................................ 8-2\n8.2.2 Small Businesses Affected by the Final Rule .......................................................... 8-3\n8.2.3 Impacts of the IFR on Small Entities ....................................................................... 8-4\n8.3 Unfunded Mandates Reform Act (UMRA) Analysis .......................................................... 8-5\n8.4 Executive Order 13132: Federalism .................................................................................... 8-5\n8.5 Executive Order 13211: Actions Concerning Regulations That Significantly Affect\nEnergy Supply, Distribution, or Use ................................................................................... 8-6\n8.6 Paperwork Reduction Act of 1995 ...................................................................................... 8-7\n9 References ....................................................................................................................... 9-1\nAppendix A – Summary of API Recommended Practices .................................................. 1\nAppendix B – Operator-level Costs ....................................................................................... 1\niv\n\n<<<PAGE 5>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage List of Exhibits\nList of Exhibits\nExhibit 2-1: Underground Natural Gas Storage by State in 2015. ............................................................. 2-2\nExhibit 2-2: Top 10 Underground Natural Gas Storage Facility Operators by Working Capacity in\n2015; in Alphabetical Order. ............................................................................................... 2-4\nExhibit 2-3: Summary of State Mechanical Integrity Requirements for Natural Gas Storage .................. 2-6\nExhibit 4-1: Operators with Existing Commitments to Conducting Integrity Testing .............................. 4-4\nExhibit 5-1: Well Testing Costs by Depth Category (CD). ........................................................................ 5-1\nExhibit 5-2: Recordkeeping and Reporting Costs (2015$) ........................................................................ 5-5\nExhibit 5-3: Annualized Compliance Costs Relative to the Full Industry Compliance Baseline\nScenario (2015$) ................................................................................................................. 5-5\nExhibit 5-4: Incremental Integrity Testing Costs Relative to the Partial Industry Compliance\nBaseline Scenario, by State. ................................................................................................ 5-6\nExhibit 5-5: Annualized Integrity Testing Costs Relative to the Partial Industry Compliance\nBaseline Scenario (Million 2015$)1\n.................................................................................... 5-7\nExhibit 5-6: Annualized Compliance Costs Relative to the Partial Industry Compliance Baseline\nScenario (Million 2015$)1\n................................................................................................... 5-7\nExhibit 5-7: Incremental Integrity Testing Costs Relative to the Regulatory Compliance Only\nBaseline Scenario, by State. ................................................................................................ 5-8\nExhibit 5-8: Annualized Integrity Testing Costs Relative to the Regulatory Compliance Only\nBaseline Scenario (Million 2015$)1\n.................................................................................... 5-9\nExhibit 5-9: Annualized Compliance Costs Relative to the Regulatory Compliance Only Baseline\nScenario (Million 2015$)1\n................................................................................................. 5-10\nExhibit 6-1: Social Cost of Methane1,2\n....................................................................................................... 6-5\nExhibit 6-2: Climate Change-related Impacts of Methane Emissions from Natural Gas Storage\nWells ................................................................................................................................... 6-5\nExhibit 8-1: Small Business Size Standards: Subsector 486 – Pipeline Transportation ............................ 8-3\nExhibit 8-2: Size of Natural Gas Underground Storage Operating Entities Affected by the IFR ............. 8-4\nExhibit 8-3: Summary of Economic Impact Screening Analysis .............................................................. 8-5\nv\n\n<<<PAGE 6>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Executive Summary\nExecutive Summary\nThe Pipeline and Hazardous Materials Safety Administration (PHMSA) is promulgating an interim\nfinal rule (IFR) that revises the Pipeline Safety Regulations applicable to underground natural gas\nstorage facilities. The IFR incorporates by reference American Petroleum Institute (API)\nRecommended Practices (RP): API RP 1170, “Design and Operation of Solution-mined Salt Caverns\nused for Natural Gas Storage” (July 2015), and API RP 1171, “Functional Integrity of Natural Gas\nStorage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs” (September 2015).\nThe RPs provide consensus safety measures for design, construction, maintenance, risk-management,\nand integrity-management procedures for natural gas storage. By adopting the API RPs by\nreferences, the IFR takes an urgent first step to establishing uniform safety standards across the\nUnited States and addressing the Congressional mandate contained in the PIPES Act of 2016 for\nPHMSA to promulgate minimum safety standards for underground natural gas storage facilities.\nNatural gas storage facility operators and industry trade groups have highlighted their existing\ncommitment to implementing the API RPs. While intrastate storage facilities in certain states with\nexisting regulations are currently required to implement certain safety measures such as\nassessing the integrity of their wells, for other facilities compliance with the API RPs is currently\nvoluntary.\n1 The IFR will set regulatory requirements for operators to assess the operational safety of\ntheir underground natural gas storage facilities and document the implementation of identified safety\nsolutions. To the extent that some operators may not have implemented the practices contained in the\nAPI RPs in the absence of regulation, the IFR would impose incremental costs on the industry. Based\non a review of existing practices, PHMSA estimates that incremental costs will mostly result from\nthe requirement to test the mechanical integrity of natural gas storage wells and to submit\ndocumentation to PHMSA.\nThis report details PHMSA’s analysis of the costs and benefits of the IFR. This regulatory analysis\nmeets PHMSA’s statutory requirement for risk analysis for new rules as required by 49 USC 60102.\nIt also provides information to support the review of the costs and benefits of the regulation in\naccordance with Executive Orders 12866 and 13563.2\n1 On February 5, 2016, PHMSA issued Advisory Bulletin ADB–2016–02 (81 FR 6334). The advisory bulletin recommended that\noperators of underground natural gas storage facilities review their operating, maintenance, and emergency response activities to\nensure that the integrity of underground natural gas storage facilities is properly maintained. This bulletin informed operators\nabout recommended practices and urged operators to take all necessary actions to prevent and mitigate breach of integrity, leaks,\nor failures at their underground natural gas storage facilities and to ensure the safety of the public and operating personnel and to\nprotect the environment.\n2 Executive Order 13563 (Improving Regulation and Regulatory Review; January 18, 2011), reaffirms the principles enunciated\nin Executive Order 12866 (Regulatory Planning and Review; September 30, 1993) by stating that “to the extent permitted by law,\neach agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits\njustify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor its regulations to impose the least\nburden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent\npracticable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those\napproaches that maximize net benefits (including potential economic, environmental, public health and safety, and other\nadvantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the\nbehavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct\nregulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits,\nor providing information upon which choices can be made by the public.\nES-1\n\n<<<PAGE 7>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Executive Summary\nFederal government data show a total of 390 active underground natural gas storage fields in the\nUnited States as of 2015 (EIA, 2016e). The fields encompass an estimated 16,991\ninjection/withdrawal or pressure control/observation wells (AGA, 2014). Approximately 60 percent\nof the aggregate storage capacity is associated with the interstate transportation of natural gas (FERC,\n2016), with the remaining 40 percent involved in intrastate transportation.3\nThis regulatory analysis considers impacts relative to a baseline that includes the practices currently\nimplemented by operators to comply with state regulations where applicable, operator integrity\nmanagement programs, and industry commitments, including by Interstate Natural Gas Association\nof America (INGAA) members to implement API RP 1170 and 1171 within the next decade\n(INGAA, 2016). INGAA members operate approximately half of active natural gas storage fields\n(210 fields out of the total 390 fields) and 70 percent of wells.\nExhibit ES-1 summarizes the estimated annualized costs of the IFR relative to three baseline\nscenarios that reflect the assumed level of implementation of the API RPs in the absence of a federal\nregulation. The first scenario is full compliance in the baseline (full compliance); the second scenario\nis baseline compliance by operators of facilities covered by state regulations or that have made\ncommitments to implement the RPs individually or through their trade association (partial\ncompliance); the third scenario is only wells in intrastate facilities subject to state regulations would\nbe tested in the baseline (regulatory compliance only). The cost impacts of the IFR range from\nincreased reporting burden only for the full compliance baseline to the costs of conducting\nmechanical integrity tests on zero, 2,408 and 13,862 active wells, respectively, for the full\ncompliance, partial compliance, and regulatory compliance only baselines. These estimates reflect\nPHMSA’s assumptions regarding the timing of mechanical integrity tests over a 10-year phase-in\nperiod and 10-year interval between tests. Section 5 of this report details the analysis.\nAs described in Section 5, the analysis focuses specifically on costs to comply with the requirements\nto conduct mechanical integrity tests. This focus is reasonable given the potential significance and\nmagnitude of costs to underground natural gas storage facility operators, but it is important to note\nthat operators must also comply with all other applicable measures described in the API RPs. For this\nanalysis, PHMSA determined that the costs for these other measures will be small because operators\nalready implement the measures in the baseline or compliance will require only de minimis changes\nin existing practices.\nPHMSA seeks comment and data on which of these baseline scenarios best characterizes the current\ncompliance in the industry.\n3 The 192 interstate fields account for the 60 percent of working gas capacity (2,884 billion cubic feet) and 65 percent of the\nwells (11,065 wells), whereas 198 intrastate fields account for 40 percent of the working gas capacity (1,872 billion cubic feet)\nand 35 percent of the wells (5,926 wells).\nES-2\n\n<<<PAGE 8>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage\nExecutive Summary\nExhibit ES-1: Incremental Annualized Costs of the FR (Million 20155)'\nFull Compliance\nIncremental Costs Relative to API RPs Implementation Baseline\nBaseline\nPartial Compliance\nRegulatory Compliance\nCost Component\n3%\n7%\n3%\nBaseline\n7%\n3%\nOnly Baseline\nDiscount\n7%\nRate\nDiscount\nRate\nDiscount Discount\nRate\nRate\nDiscount\nRate\nDiscount\nRate\nMechanical integrity testing?\n$0.0\n$0.0\n$27.2\n$31.7\n$170.6\n$193.6\nOther RP elements\n$0.0\n$0.0\n$0.0\n$0.0\n$0.0\n$0.0\nReporting\n<$0.1\n<$0.1\n<$0.1\n<$0.1\n<$0.1\n<$0.1\nTOTAL'\n<$0.1\n<$0.1\n$27.2\n$31.7\n$170.6\nTRange reflects the assumed baseline level of compliance with API RPs in absence of regulatory requirements.\n$193.6\n2 Based on 10-year phase-in of integrity tests and a 10-year interval between tests. See Section 4 for details.\nBased on information provided by the industry, PHMSA assesses the most likely baseline conditions\nas lying between full compliance and partial compliance. This means that the estimated annual costs\nof the rule range from $0.1 million (under the full compliance baseline) to $27.2 million (under the\npartial compliance baseline) using a 3 percent discount rate. Estimated annual costs are $0.1 million\n(under the full compliance baseline) to $31.7 million (under the partial compliance baseline) using a\n7 percent discount rate. PHMSA judges the regulatory compliance only baseline as highly unlikely\ngiven information provided by the major trade association representing underground natural gas\nstorage facility operators regarding baseline implementation of API RPs. Accordingly, the estimated\ncosts under that scenario represent a less likely outcome from an incremental cost perspective. As\nsuch, PHMSA determined that the final rule is not economically significant under Executive Orders\n12866 and 13563 because the estimated annual impact is less than $100 million.\nThe FR rule will provide benefits by setting uniform and enforceable PHMSA minimum safety\nstandards for all natural gas storage facilities across the United States. The standards are designed to\nenable natural gas storage facility operators to detect and address well integrity issues and thereby\nprevent accidental releases of natural gas and the resulting damages and environmental impacts.\nPHMSA does not have data to quantify the change in risk due to required integrity tests and other\nmeasures provided by the API RPs, and the resulting benefits. As noted in Section 6 of this report,\nhowever, past accidents involving natural gas storage facilities have resulted in significant damages,\nevacuations, injuries, fatalities, and environmental impacts. Sempra Energy, the parent company of\nSouthern California Gas Company (SoCalGas) which operates the Aliso Canyon facility, has\nestimated the private financial costs of the Aliso Canyon incident at $763 million (Sempra Energy,\n2016).4, 5 These costs do not include additional costs to society resulting from the release, such as\n4 Of the $763 million, Sempra Energy notes \"approximately 70% is for the temporary relocation program (including cleaning\ncosts and certain labor costs) and approximately 20% is for efforts to control the well, stop the leak, stop or reduce emissions, and\nvalue of lost gas, the costs to mitigate the actual natural gas released and other costs. Cost estimate excludes any potential\nthe estimated cost of the root cause investigation. The remaining amount includes legal costs incurred to defend litigation, the\ndamage awards, restitution and any civil, administrative or criminal fines and other penalties that may be imposed, as well as any\nestimate what amounts, if any, will be incurred for such matter.\" (Sempra Energy, 2016)\nadditional costs to clean homes and future legal costs necessary to defend litigation, among other potential costs, as we cannot\n5 Private financial costs include a mix of remediation, repair, ex gratia payments to persons and public agencies affected by the\nincident, anticipated or actual penalties, as well as litigation costs and settlements. Firms vary in the extent of their public\nES-3\n\n<<<PAGE 9>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage Executive Summary\nan estimated $55.3 million to $344.2 million in climate-related impacts from the approximately\n5.7 BCF of gas released into the atmosphere, which PHMSA estimated based on the social cost\nof methane (see Section 6.2 for details).\nAs part of the regulatory impact analysis for this final rule, PHMSA also evaluated the impacts of the\nrule with respect to various administrative requirements. PHMSA determined that the rule:\n Would not have “a significant impact on a substantial number of small entities” (no\nSISNOSE) under the Regulatory Flexibility Act (RFA). Section 8.2 details the analysis of\nsmall entity impacts.\n Does not impose enforceable duties on State, local, or tribal governments or on the private\nsector of $151 million in any one year and therefore does not have implications under Section\n202 of the Unfunded Mandates Reform Act (UMRA) of 1995.\n Does not have federalism implications because it does not impose substantial direct\ncompliance costs on State or local governments.\n Will increase the cost of transporting natural gas only slightly and by much less than the\n1 percent threshold suggestive of potential significant adverse impacts on energy supply,\ndistribution, or use. Therefore no Statement of Energy Effects is needed under Executive\nOrder 13211: Actions Concerning Regulations That Significantly Affect Energy Supply,\nDistribution, or Use.\n Will change the information collection requirements associated with certain natural gas\nstorage facilities. PHMSA estimated changes in reporting and recordkeeping burden and is\nsubmitting a revised Information Collection Request (ICR) to the Office of Management and\nBudget (OMB) for approval under the Paperwork Reduction Act.\ndisclosure of the details of costs incurred. In this case, it is unclear from Sempra’s disclosure whether the reported costs include\nestimates of business losses from the unavailability of the Aliso Canyon facility.\nES-4\n\n<<<PAGE 10>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage 1. Introduction\n1 Introduction\nThis report provides the estimated costs and benefits of the Interim Final Rule (IFR) to incorporate\nconsensus standards for underground natural gas storage facilities. PHMSA is promulgating the IFR\nto address critical safety gaps and protect the public and the environment from natural gas releases\nfrom underground storage facilities. The analyses described in this report fulfill the requirements of\nExecutive Orders 12866 and 13563 to prepare an assessment of the benefits and costs of the rule as\nwell as reasonably feasible alternatives. They also meet PHMSA’s statutory requirement for risk\nanalysis for new rules (49 USC 60102 et. seq.).\n1.1 Purpose\nIn this IFR, PHMSA is adopting two American Petroleum Institute (API) Recommended Practices\n(RP):6 API RP 1170, “Design and Operation of Solution-mined Salt Caverns used for Natural Gas\nStorage” (July 2015), and API RP 1171, “Functional Integrity of Natural Gas Storage in Depleted\nHydrocarbon Reservoirs and Aquifer Reservoirs” (September 2015) (API, 2015a; API, 2015b). The\nRPs describe a range of measures that operators of underground natural gas storage facilities should\nimplement to ensure the safety of their operations, including construction, maintenance, risk-\nmanagement, and integrity-management procedures. The IFR makes these provisions mandatory\nunless operators provide justification in their program or procedural manuals as to why compliance\nwith a provision of the RP is not practicable and necessary for the safety of a particular facility.\nPHMSA is issuing this IFR as an urgent first step7 in reducing the likelihood of incidents such as the\n2015 Aliso Canyon natural gas leak in the future. Rapid incorporation of API RP 1170 and 1171 into\nPHMSA’s regulations will require operators to assess the operational safety of their underground\nnatural gas storage facilities and document the implementation of identified safety solutions.\nAfter this IFR incorporating API RP 1170 and 1171 becomes effective, PHMSA and its state partners\nwill monitor and enforce operators’ implementation of the requirements. After issuance of this IFR,\nas a second phase, PHMSA will further investigate the need for additional regulatory requirements\nfor underground natural gas storage incidental to transportation. PHMSA intends to hold a public\nmeeting, and may pursue an additional rulemaking to address remaining safety concerns.\n1.2 Need for Action\nFollowing the accident at Aliso Canyon in 2015, the U.S. Congress recognized the need and urgency\nto address safety gaps at underground natural gas facilities in enacting the PIPES Act of 2016 (Public\n6 PHMSA participated, along with the Federal Energy Regulatory Commission (FERC), several state regulatory agencies, and\nnumerous industry representatives, in the development of the two API RPs.\n7 These measures complement Advisory Bulletin ADB–2016–02 PHMSA issued on February 5, 2016 (81 FR 6334). The\nadvisory bulletin recommended that operators of underground natural gas storage facilities review their operating, maintenance,\nand emergency response activities to ensure that the integrity of underground natural gas storage facilities is properly maintained.\nThis bulletin informed operators about recommended practices and urged operators to take all necessary actions to prevent and\nmitigate breach of integrity, leaks, or failures at their underground natural gas storage facilities to ensure the safety of the public\nand operating personnel and to protect the environment.\n1-1\n\n<<<PAGE 11>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage 1. Introduction\nLaw 114-183).\n8 The PIPES Act requires PHMSA, not later than 2 years after the date of enactment of\nthe PIPES Act of 2016 and in consultation with the heads of other relevant Federal agencies, to issue\nminimum safety standards for underground natural gas storage facilities. In issuing minimum safety\nstandards for underground storage facilities, PHMSA must: “(1) consider consensus standards for the\noperation, environmental protection, and integrity management of underground natural gas storage\nfacilities; (2) consider the economic impacts of the regulations on individual gas customers; (3)\nensure that the regulations do not have a significant economic impact on end users; and (4) consider\nthe recommendations of the Aliso Canyon natural gas leak task force established under section 31 of\nthe PIPES Act of 2016.”\nLapses in operation and maintenance at underground natural gas storage facilities can and has\nresulted in accidents. Industry standards and recommended practices such as API RP 1170 and RP\n1171 describe measures that industry representatives have agreed on as representing good operating\npractices. Although these recommended practices may be widely followed and implemented, they are\nnot enforceable regulations until incorporated into 49 CFR Part 192 by the IFR. In the absence of\nregulations mandating the implementation of safety measures for the operation of underground\nnatural gas storage facilities, including the discovery and repair of hazardous conditions, operators\nmay not always implement those safety measures, thereby increasing the potential harm to the public\nand environment. The absence of explicit regulatory requirements also limits PHMSA’s ability to\npursue enforcement against operators that fail to implement safe practices.\n1.3 Report Organization\nThe remainder of this report is organized as follow:\n Section 2 provides an overview of the natural gas storage industry and the facilities and operators\nexpected to be subject to the IFR requirements, described in Section 3.\n Section 4 describes the analysis framework, including the baseline which reflects the practices\ncurrently implemented by facility operators or expected to be implemented by the time the IFR\nwould be effective, absent the regulatory action.\n Sections 5 and 6 discuss the incremental costs and benefits, respectively, expected to arise from\nimplementation of the IFR relative to the baseline described in Section 4.\n Section 7 discusses uncertainties and limitations of the analysis and indicates the direction of any\nknown bias.\n Section 8 provides information on analyses and evaluations that fulfill requirements in other\nStatutes and Executive Orders to evaluate the costs, benefits, or economic impacts of new\nregulations.\nAdditional sections and appendices provide cited references and supporting data.\n8 Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, signed into law on June 22, 2016.\n1-2\n\n<<<PAGE 12>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile\n2 Overview of the Natural Gas Storage Industry\nUnderground storage of natural gas offers important benefits to the U.S. energy supply infrastructure,\nnotably the ability to manage seasonal variations in natural gas demand and to provide a buffer for\nchanging production levels. Significant growth in domestic natural gas production from shale gas in\nthe last decade has prompted renewed interest and investment in storage capacity. Between 1995 and\n2014, total natural gas storage capacity increased by nearly 16 percent to a total of 9,233 BCF (EIA,\n2016b).\nThe Energy Information Administration (EIA) reports that 3,600 BCF of natural gas was injected\ninto underground storage facilities in 2015 (EIA, 2016a) – a volume of natural gas valued at over\n$15 billion.9 For comparison, total natural gas consumption in the United States in 2015 was\n27,473 BCF (EIA, 2016d).\nThere are three primary types of natural gas storage facilities (fields) in the United States (EIA,\n2015):\n Depleted oil and gas reservoirs are the most common type of storage, representing approximately\n81 percent of the total working gas capacity and 77 percent of the total design capacity in the\nUnited States. As the name implies, these facilities are reservoirs that were previously used to\nproduce oil and/or gas and have been converted for storage by repurposing the production wells\nand aboveground equipment to inject and withdraw gas as needed to build up storage or meet\ndemand.\n Salt caverns (salt dome) are geological formations that have been leached or mined out of their\nsalt deposits. These facilities represent about 11 percent of the total working gas capacity and\n8 percent of the total design capacity.\n Aquifers are natural water-bearing formations that have been converted to store gas. They\nrepresent the remaining 9 percent of the total working gas capacity and 15 percent of the total\ndesign capacity.\n2.1 Storage Fields\nPHMSA estimates that there were 390 active natural gas storage fields10 in the United States in 2015,\ndistributed across 31 states (EIA, 2016e; Federal Energy Regulatory Commission (FERC), 2016; and\nPHMSA, 2016b). These fields had an aggregate storage capacity11 of 9,155 billion cubic feet (BCF)\nand a working capacity12 of 4,756 BCF (EIA, 2016e). Facilities used for interstate commerce\n9 Value is based on the citygate price of natural gas of $4.25 per thousand cubic foot in 2015. Citygate refers to a point or\nmeasuring station at which a distributing gas utility receives gas from a natural gas pipeline company or transmission system\n(EIA, 2015).\n10 PHMSA used EIA-191 for 2015 as primary data to determine the number of active fields. The definition of a field is based on\nthe number of records for which EIA indicates the status as “Active” (EIA, 2016e). Note that other available data (FERC, 2016;\nPHMSA, 2016b) may subdivide or group fields, resulting in different counts of natural gas storage facilities.\n11 Total natural gas storage capacity is the maximum volume of natural gas that can be stored in an underground storage facility\nin accordance with its design, which comprises the physical characteristics of the reservoir, installed equipment, and operating\nprocedures particular to the site (EIA, 2015).\n12 Working gas is the volume of gas in the reservoir above the level of base gas. Working gas is available to the marketplace\n(EIA, 2015).\n2-1\n\n<<<PAGE 13>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile\nrepresented approximately 60 percent of the working capacity while intrastate facilities represented\nthe remaining 40 percent. Exhibit 2-1 summarizes the data by state. For this analysis, a natural gas\nstorage facility is equivalent to a unique gas field record in EIA-191 data (EIA, 2016e).\nExhibit 2-1: Underground Natural Gas Storage by State in 2015.\nState Number of\nActive Fields1\nDesign Capacity (BCF)3 Working Capacity (BCF)3\nInterstate2 Intrastate2 Total Interstate2 Intrastate2 Total\nAlaska 5 0.0 83.6 83.6 0.0 67.9 67.9\nAlabama 2 0.0 43.6 43.6 0.0 33.2 33.2\nArkansas 2 0.0 21.9 21.9 0.0 12.2 12.2\nCalifornia 14 0.0 601.8 601.8 0.0 375.5 375.5\nColorado 10 100.8 29.4 130.2 52.1 11.7 63.8\nIllinois 27 135.9 851.4 987.3 46.5 255.6 302.1\nIndiana 20 12.2 99.1 111.3 5.0 28.4 33.4\nIowa 4 288.2 0.0 288.2 90.3 0.0 90.3\nKansas 16 271.8 10.5 282.3 116.7 5.9 122.6\nKentucky 22 168.2 52.1 220.3 79.3 28.3 107.6\nLouisiana 17 669.5 55.0 724.4 406.5 39.2 445.7\nMaryland 1 64.0 0.0 64.0 18.3 0.0 18.3\nMichigan Minnesota 44 435.7 644.9 1,080.6 282.5 403.2 685.7\n1 0.0 7.0 7.0 0.0 2.0 2.0\nMississippi 12 287.8 44.0 331.8 169.2 32.2 201.4\nMissouri 1 0.0 13.8 13.8 0.0 6.0 6.0\nMontana 4 287.2 89.0 376.2 164.4 33.1 197.5\nNebraska 1 34.9 0.0 34.9 14.8 0.0 14.8\nNew Mexico 2 68.6 20.5 89.1 44.0 15.7 59.7\nNew York 26 229.3 11.3 240.6 122.5 3.5 126.0\nOhio 22 402.9 171.8 574.8 167.5 63.3 230.7\nOklahoma 12 196.8 179.2 376.0 104.7 87.7 192.4\nOregon 7 0.0 29.6 29.6 0.0 15.9 15.9\nPennsylvania 47 737.6 28.5 766.1 411.8 15.5 427.3\nTexas 32 326.3 515.9 842.2 210.0 322.6 532.6\nUtah 3 124.5 0.0 124.5 54.9 0.0 54.9\nVirginia 2 0.0 9.5 9.5 0.0 5.4 5.4\nWashington 1 46.9 0.0 46.9 24.6 0.0 24.6\nWest Virginia 26 488.6 8.7 497.3 229.9 3.3 233.1\nWyoming 7 131.0 24.1 155.0 68.2 4.9 73.2\nU.S. Total 390 5,508.5 3,646.3 9,154.8 2,883.7 1,872.0 4,755.7\n1. Number of fields based on Form EIA-191 through 2015 (EIA, 2016e).\n2. Interstate fields identified from the FERC (2016) list of jurisdictional fields and PHMSA (2016b) data. All other fields\nare intrastate fields.\n3. Capacity data based on EIA (2016e).\n2.2 Number of Wells\nThe American Gas Association (AGA) publishes a report periodically on the natural gas storage\nfields in the lower-48 states and Canada (AGA, 2014). The report provides field-level data on total\n2-2\n\n<<<PAGE 14>>>\n\nRegulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile\nnumber of injection/withdrawal wells, the number of horizontal injection/withdrawal wells, and the\nnumber of pressure control/observation wells. PHMSA used the AGA data to determine the number\nof wells in each active field potentially subject to the regulation. The AGA report also provides the\nminimum and maximum depth to the formation, among other information about the geological\ncharacteristics of each field. PHMSA used this information to classify the wells in three depth\ncategories: 3,500 feet or less; 3,501 feet to 7,000 feet; and greater than 7,000 feet.\nSpecifically, PHMSA matched the fields identified in the EIA data described in Section 2.1 to the\ncorresponding information in the AGA report for each field and transferred data on the number of\ninjection/withdrawal wells, the number of horizontal injection/withdrawal wells, and the number of\npressure control/observation wells.\nThe AGA report does not include data for fields in Alaska. PHMSA estimated the number of wells in\nthese fields based on their storage capacity and the ratio of wells to total storage capacity for active\nfields in the lower-48 states (0.51 well per BCF of storage capacity). PHMSA further assumed that\nwells in Alaska are 3,500 feet or less in depth, as this is the most common depth category for fields in\nthe lower-48 states.\nFields reported in the AGA survey but not in EIA data were left out of the analysis. In some cases,\nAGA provides information for combined fields (e.g., Fink and Kennedy together) that are listed\nseparately in the EIA data (Fink and Kennedy as two fields). In that case, PHMSA assigned the wells\nto one of the EIA listed fields.\nBased on these data, PHMSA estimated that there are a total of 16,991 injection/withdrawal wells\nand pressure control/observation wells within the 390 active fields.13 PHMSA seeks comment,\nsupported by data, on this estimate of the number of wells.\nMany of these wells are decades old. For example, the well involved in the October 2015 Aliso\nCanyon accident (see Section 6.1) was drilled in 1953 and was repurposed for natural gas storage in\n1972. This age is not exceptional: according to AGA data, approximately 60 percent of activ","truncated":true,"body_characters":208989}