# U.S. DOT/PHMSA - Regulatory Impact Analysis

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- **citation:** 090000648242be17
- **title:** U.S. DOT/PHMSA - Regulatory Impact Analysis
- **source type:** rulemaking
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** current
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- **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,...
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Pipeline and Hazardous Materials Safety Administration
U.S. Department of Transportation
Regulatory Impact Analysis
Underground Natural Gas Storage
Interim Final Rule
December 7, 2016

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Regulatory Impact Analysis: Underground Natural Gas Storage Front Matter
Prepared with support by
Abt Associates Inc.
55 Wheeler Street, Cambridge, MA 02138
under Delivery Order #DTPH5616F00006
ii

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Regulatory Impact Analysis: Underground Natural Gas Storage Table of Contents
Table of Contents
Executive Summary ................................................................................................................ 1
1 Introduction .................................................................................................................... 1-1
1.1 Purpose ................................................................................................................................ 1-1
1.2 Need for Action ................................................................................................................... 1-1
1.3 Report Organization ............................................................................................................ 1-2
2 Overview of the Natural Gas Storage Industry .......................................................... 2-1
2.1 Storage Fields ...................................................................................................................... 2-1
2.2 Number of Wells ................................................................................................................. 2-2
2.3 Operators ............................................................................................................................. 2-4
2.4 Regulation of Underground Natural Gas Storage Facilities ................................................ 2-5
3 Summary of IFR Requirements ................................................................................... 3-1
3.1 API Recommended Practices .............................................................................................. 3-1
3.2 Regulatory Alternatives Considered by PHMSA ................................................................ 3-3
4 Analysis Framework ...................................................................................................... 4-1
4.1 Analysis Baseline ................................................................................................................ 4-1
4.1.1 Federal and State Regulations ................................................................................. 4-1
4.1.2 Existing Industry Practices and Implementation ..................................................... 4-1
4.1.3 Baseline Scenarios ................................................................................................... 4-4
4.2 Other Analysis Elements ..................................................................................................... 4-4
4.2.1 Timeframe for the Analysis ..................................................................................... 4-5
4.2.2 Regulatory Alternatives ........................................................................................... 4-5
4.2.3 Discounting of Future Costs and Benefits ............................................................... 4-5
4.2.4 Industry Growth Rate .............................................................................................. 4-5
5 Costs ................................................................................................................................ 5-1
5.1 Costing Methodology .......................................................................................................... 5-1
5.1.1 Mechanical Integrity Testing Costs ......................................................................... 5-1
5.1.2 Costs of Addressing Integrity Issues Identified through Testing ............................. 5-2
5.1.3 Costs of Other RP Elements .................................................................................... 5-3
5.1.4 Reporting Costs ....................................................................................................... 5-4
5.2 Industry Compliance Costs ................................................................................................. 5-5
5.2.1 Full Industry Compliance Baseline.......................................................................... 5-5
5.2.2 Partial Industry Compliance Baseline ...................................................................... 5-5
5.2.3 Regulatory Compliance Only Baseline .................................................................... 5-8
5.3 Economic Impacts ............................................................................................................. 5-10
iii

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Regulatory Impact Analysis: Underground Natural Gas Storage Table of Contents
6 Benefits ............................................................................................................................ 6-1
6.1 Natural Gas Releases from Underground Storage .............................................................. 6-1
6.1.1 Catastrophic Releases .............................................................................................. 6-1
6.1.2 Operational Releases ............................................................................................... 6-3
6.2 Benefits of the IFR .............................................................................................................. 6-3
7 Uncertainty and Limitations ......................................................................................... 7-1
7.1 Affected Facilities and Operators ........................................................................................ 7-1
7.2 Baseline Degree of Compliance .......................................................................................... 7-2
7.3 Mechanical Integrity Testing Costs .................................................................................... 7-2
7.4 Timing of Compliance Activities ........................................................................................ 7-3
7.5 Effectiveness of RPs to Prevent Future Incidents ............................................................... 7-3
8 Analyses Required under Applicable Statutes or Executive Orders ........................ 8-1
8.1 Executive Orders 12866 and 13563: Analysis of Costs and Benefits ................................. 8-1
8.2 Regulatory Flexibility Act (RFA) ....................................................................................... 8-2
8.2.1 Identifying Small Entities ........................................................................................ 8-2
8.2.2 Small Businesses Affected by the Final Rule .......................................................... 8-3
8.2.3 Impacts of the IFR on Small Entities ....................................................................... 8-4
8.3 Unfunded Mandates Reform Act (UMRA) Analysis .......................................................... 8-5
8.4 Executive Order 13132: Federalism .................................................................................... 8-5
8.5 Executive Order 13211: Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use ................................................................................... 8-6
8.6 Paperwork Reduction Act of 1995 ...................................................................................... 8-7
9 References ....................................................................................................................... 9-1
Appendix A – Summary of API Recommended Practices .................................................. 1
Appendix B – Operator-level Costs ....................................................................................... 1
iv

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Regulatory Impact Analysis: Underground Natural Gas Storage List of Exhibits
List of Exhibits
Exhibit 2-1: Underground Natural Gas Storage by State in 2015. ............................................................. 2-2
Exhibit 2-2: Top 10 Underground Natural Gas Storage Facility Operators by Working Capacity in
2015; in Alphabetical Order. ............................................................................................... 2-4
Exhibit 2-3: Summary of State Mechanical Integrity Requirements for Natural Gas Storage .................. 2-6
Exhibit 4-1: Operators with Existing Commitments to Conducting Integrity Testing .............................. 4-4
Exhibit 5-1: Well Testing Costs by Depth Category (CD). ........................................................................ 5-1
Exhibit 5-2: Recordkeeping and Reporting Costs (2015$) ........................................................................ 5-5
Exhibit 5-3: Annualized Compliance Costs Relative to the Full Industry Compliance Baseline
Scenario (2015$) ................................................................................................................. 5-5
Exhibit 5-4: Incremental Integrity Testing Costs Relative to the Partial Industry Compliance
Baseline Scenario, by State. ................................................................................................ 5-6
Exhibit 5-5: Annualized Integrity Testing Costs Relative to the Partial Industry Compliance
Baseline Scenario (Million 2015$)1
.................................................................................... 5-7
Exhibit 5-6: Annualized Compliance Costs Relative to the Partial Industry Compliance Baseline
Scenario (Million 2015$)1
................................................................................................... 5-7
Exhibit 5-7: Incremental Integrity Testing Costs Relative to the Regulatory Compliance Only
Baseline Scenario, by State. ................................................................................................ 5-8
Exhibit 5-8: Annualized Integrity Testing Costs Relative to the Regulatory Compliance Only
Baseline Scenario (Million 2015$)1
.................................................................................... 5-9
Exhibit 5-9: Annualized Compliance Costs Relative to the Regulatory Compliance Only Baseline
Scenario (Million 2015$)1
................................................................................................. 5-10
Exhibit 6-1: Social Cost of Methane1,2
....................................................................................................... 6-5
Exhibit 6-2: Climate Change-related Impacts of Methane Emissions from Natural Gas Storage
Wells ................................................................................................................................... 6-5
Exhibit 8-1: Small Business Size Standards: Subsector 486 – Pipeline Transportation ............................ 8-3
Exhibit 8-2: Size of Natural Gas Underground Storage Operating Entities Affected by the IFR ............. 8-4
Exhibit 8-3: Summary of Economic Impact Screening Analysis .............................................................. 8-5
v

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Regulatory Impact Analysis: Underground Natural Gas Storage Executive Summary
Executive Summary
The Pipeline and Hazardous Materials Safety Administration (PHMSA) is promulgating an interim
final rule (IFR) that revises the Pipeline Safety Regulations applicable to underground natural gas
storage facilities. The IFR incorporates by reference 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).
The RPs provide consensus safety measures for design, construction, maintenance, risk-management,
and integrity-management procedures for natural gas storage. By adopting the API RPs by
references, the IFR takes an urgent first step to establishing uniform safety standards across the
United States and addressing the Congressional mandate contained in the PIPES Act of 2016 for
PHMSA to promulgate minimum safety standards for underground natural gas storage facilities.
Natural gas storage facility operators and industry trade groups have highlighted their existing
commitment to implementing the API RPs. While intrastate storage facilities in certain states with
existing regulations are currently required to implement certain safety measures such as
assessing the integrity of their wells, for other facilities compliance with the API RPs is currently
voluntary.
1 The IFR will set regulatory requirements for operators to assess the operational safety of
their underground natural gas storage facilities and document the implementation of identified safety
solutions. To the extent that some operators may not have implemented the practices contained in the
API RPs in the absence of regulation, the IFR would impose incremental costs on the industry. Based
on a review of existing practices, PHMSA estimates that incremental costs will mostly result from
the requirement to test the mechanical integrity of natural gas storage wells and to submit
documentation to PHMSA.
This report details PHMSA’s analysis of the costs and benefits of the IFR. This regulatory analysis
meets PHMSA’s statutory requirement for risk analysis for new rules as required by 49 USC 60102.
It also provides information to support the review of the costs and benefits of the regulation in
accordance with Executive Orders 12866 and 13563.2
1 On February 5, 2016, PHMSA issued Advisory Bulletin ADB–2016–02 (81 FR 6334). 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 recommended practices and urged operators to take all necessary actions to prevent and mitigate breach of integrity, leaks,
or failures at their underground natural gas storage facilities and to ensure the safety of the public and operating personnel and to
protect the environment.
2 Executive Order 13563 (Improving Regulation and Regulatory Review; January 18, 2011), reaffirms the principles enunciated
in Executive Order 12866 (Regulatory Planning and Review; September 30, 1993) by stating that “to the extent permitted by law,
each agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits
justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor its regulations to impose the least
burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent
practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those
approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the
behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct
regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits,
or providing information upon which choices can be made by the public.
ES-1

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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, 2014). Approximately 60 percent
of the aggregate storage capacity is associated with the interstate transportation of natural gas (FERC,
2016), with the remaining 40 percent involved in intrastate transportation.3
This regulatory analysis considers impacts relative to a baseline that includes the practices currently
implemented by operators to comply with state regulations where applicable, operator integrity
management programs, and industry commitments, including by Interstate Natural Gas Association
of America (INGAA) members to implement API RP 1170 and 1171 within the next decade
(INGAA, 2016). INGAA members operate approximately half of active natural gas storage fields
(210 fields out of the total 390 fields) and 70 percent of wells.
Exhibit ES-1 summarizes the estimated annualized costs of the IFR relative to three baseline
scenarios that reflect the assumed level of implementation of the API RPs in the absence of a federal
regulation. The first scenario is full compliance in the baseline (full compliance); the second scenario
is baseline compliance by operators of facilities covered by state regulations or that have made
commitments to implement the RPs individually or through their trade association (partial
compliance); the third scenario is only wells in intrastate facilities subject to state regulations would
be tested in the baseline (regulatory compliance only). The cost impacts of the IFR range from
increased reporting burden only for the full compliance baseline to the costs of conducting
mechanical integrity tests on zero, 2,408 and 13,862 active wells, respectively, for the full
compliance, partial compliance, and regulatory compliance only baselines. These estimates reflect
PHMSA’s assumptions regarding the timing of mechanical integrity tests over a 10-year phase-in
period and 10-year interval between tests. Section 5 of this report details the analysis.
As described in Section 5, the analysis focuses specifically on costs to comply with the requirements
to conduct mechanical integrity tests. This focus is reasonable given the potential significance and
magnitude of costs to underground natural gas storage facility operators, but it is important to note
that operators must also comply with all other applicable measures described in the API RPs. For this
analysis, PHMSA determined that the costs for these other measures will be small because operators
already implement the measures in the baseline or compliance will require only de minimis changes
in existing practices.
PHMSA seeks comment and data on which of these baseline scenarios best characterizes the current
compliance in the industry.
3 The 192 interstate fields account for the 60 percent of working gas capacity (2,884 billion cubic feet) and 65 percent of the
wells (11,065 wells), whereas 198 intrastate fields account for 40 percent of the working gas capacity (1,872 billion cubic feet)
and 35 percent of the wells (5,926 wells).
ES-2

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Regulatory Impact Analysis: Underground Natural Gas Storage
Executive Summary
Exhibit ES-1: Incremental Annualized Costs of the FR (Million 20155)'
Full Compliance
Incremental Costs Relative to API RPs Implementation Baseline
Baseline
Partial Compliance
Regulatory Compliance
Cost Component
3%
7%
3%
Baseline
7%
3%
Only Baseline
Discount
7%
Rate
Discount
Rate
Discount Discount
Rate
Rate
Discount
Rate
Discount
Rate
Mechanical integrity testing?
$0.0
$0.0
$27.2
$31.7
$170.6
$193.6
Other RP elements
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
Reporting
<$0.1
<$0.1
<$0.1
<$0.1
<$0.1
<$0.1
TOTAL'
<$0.1
<$0.1
$27.2
$31.7
$170.6
TRange reflects the assumed baseline level of compliance with API RPs in absence of regulatory requirements.
$193.6
2 Based on 10-year phase-in of integrity tests and a 10-year interval between tests. See Section 4 for details.
Based on information provided by the industry, PHMSA assesses the most likely baseline conditions
as lying between full compliance and partial compliance. This means that the estimated annual costs
of the rule range from $0.1 million (under the full compliance baseline) to $27.2 million (under the
partial compliance baseline) using a 3 percent discount rate. Estimated annual costs are $0.1 million
(under the full compliance baseline) to $31.7 million (under the partial compliance baseline) using a
7 percent discount rate. PHMSA judges the regulatory compliance only baseline as highly unlikely
given information provided by the major trade association representing underground natural gas
storage facility operators regarding baseline implementation of API RPs. Accordingly, the estimated
costs under that scenario represent a less likely outcome from an incremental cost perspective. As
such, PHMSA determined that the final rule is not economically significant under Executive Orders
12866 and 13563 because the estimated annual impact is less than $100 million.
The FR rule will provide benefits by setting uniform and enforceable PHMSA minimum safety
standards for all natural gas storage facilities across the United States. The standards are designed to
enable natural gas storage facility operators to detect and address well integrity issues and thereby
prevent accidental releases of natural gas and the resulting damages and environmental impacts.
PHMSA does not have data to quantify the change in risk due to required integrity tests and other
measures provided by the API RPs, and the resulting benefits. As noted in Section 6 of this report,
however, past accidents involving natural gas storage facilities have resulted in significant damages,
evacuations, injuries, fatalities, and environmental impacts. Sempra Energy, the parent company of
Southern California Gas Company (SoCalGas) which operates the Aliso Canyon facility, has
estimated the private financial costs of the Aliso Canyon incident at $763 million (Sempra Energy,
2016).4, 5 These costs do not include additional costs to society resulting from the release, such as
4 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
value of lost gas, the costs to mitigate the actual natural gas released and other costs. Cost estimate excludes any potential
the estimated cost of the root cause investigation. The remaining amount includes legal costs incurred to defend litigation, the
damage awards, restitution and any civil, administrative or criminal fines and other penalties that may be imposed, as well as any
estimate what amounts, if any, will be incurred for such matter." (Sempra Energy, 2016)
additional costs to clean homes and future legal costs necessary to defend litigation, among other potential costs, as we cannot
5 Private financial costs include a mix of remediation, repair, ex gratia payments to persons and public agencies affected by the
incident, anticipated or actual penalties, as well as litigation costs and settlements. Firms vary in the extent of their public
ES-3

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Regulatory Impact Analysis: Underground Natural Gas Storage Executive Summary
an estimated $55.3 million to $344.2 million in climate-related impacts from the approximately
5.7 BCF of gas released into the atmosphere, which PHMSA estimated based on the social cost
of methane (see Section 6.2 for details).
As part of the regulatory impact analysis for this final rule, PHMSA also evaluated the impacts of the
rule with respect to various administrative requirements. PHMSA determined that the rule:
 Would not have “a significant impact on a substantial number of small entities” (no
SISNOSE) under the Regulatory Flexibility Act (RFA). Section 8.2 details the analysis of
small entity impacts.
 Does not impose enforceable duties on State, local, or tribal governments or on the private
sector of $151 million in any one year and therefore does not have implications under Section
202 of the Unfunded Mandates Reform Act (UMRA) of 1995.
 Does not have federalism implications because it does not impose substantial direct
compliance costs on State or local governments.
 Will increase the cost of transporting natural gas only slightly and by much less than the
1 percent threshold suggestive of potential significant adverse impacts on energy supply,
distribution, or use. Therefore no Statement of Energy Effects is needed under Executive
Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use.
 Will change the information collection requirements associated with certain natural gas
storage facilities. PHMSA estimated changes in reporting and recordkeeping burden and is
submitting a revised Information Collection Request (ICR) to the Office of Management and
Budget (OMB) for approval under the Paperwork Reduction Act.
disclosure of the details of costs incurred. In this case, it is unclear from Sempra’s disclosure whether the reported costs include
estimates of business losses from the unavailability of the Aliso Canyon facility.
ES-4

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Regulatory Impact Analysis: Underground Natural Gas Storage 1. Introduction
1 Introduction
This report provides the estimated costs and benefits of the Interim Final Rule (IFR) to incorporate
consensus standards for underground natural gas storage facilities. PHMSA is promulgating the IFR
to address critical safety gaps and protect the public and the environment from natural gas releases
from underground storage facilities. The analyses described in this report fulfill the requirements of
Executive Orders 12866 and 13563 to prepare an assessment of the benefits and costs of the rule as
well as reasonably feasible alternatives. They also meet PHMSA’s statutory requirement for risk
analysis for new rules (49 USC 60102 et. seq.).
1.1 Purpose
In this IFR, PHMSA is adopting two American Petroleum Institute (API) Recommended Practices
(RP):6 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) (API, 2015a; API, 2015b). The
RPs describe a range of measures that operators of underground natural gas storage facilities should
implement to ensure the safety of their operations, including construction, maintenance, risk-
management, and integrity-management procedures. The IFR makes these provisions mandatory
unless operators provide justification in their program or procedural manuals as to why compliance
with a provision of the RP is not practicable and necessary for the safety of a particular facility.
PHMSA is issuing this IFR as an urgent first step7 in reducing the likelihood of incidents such as the
2015 Aliso Canyon natural gas leak in the future. 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.
After this IFR incorporating API RP 1170 and 1171 becomes effective, PHMSA and its state partners
will monitor and enforce operators’ implementation of the requirements. After issuance of this IFR,
as a second phase, PHMSA will further investigate the need for additional regulatory requirements
for underground natural gas storage incidental to transportation. PHMSA intends to hold a public
meeting, and may pursue an additional rulemaking to address remaining safety concerns.
1.2 Need for Action
Following the accident at Aliso Canyon in 2015, the U.S. Congress recognized the need and urgency
to address safety gaps at underground natural gas facilities in enacting the PIPES Act of 2016 (Public
6 PHMSA participated, along with the Federal Energy Regulatory Commission (FERC), several state regulatory agencies, and
numerous industry representatives, in the development of the two API RPs.
7 These measures complement Advisory Bulletin ADB–2016–02 PHMSA issued on February 5, 2016 (81 FR 6334). 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 recommended practices and urged operators to take all necessary actions to prevent and
mitigate breach 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.
1-1

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Regulatory Impact Analysis: Underground Natural Gas Storage 1. Introduction
Law 114-183).
8 The PIPES Act requires PHMSA, not later than 2 years after the date of enactment of
the PIPES Act of 2016 and in consultation with the heads of other relevant Federal agencies, to issue
minimum safety standards for underground natural gas storage facilities. In issuing minimum safety
standards for underground storage facilities, PHMSA must: “(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 PIPES Act of 2016.”
Lapses in operation and maintenance at underground natural gas storage facilities can and has
resulted in accidents. Industry standards and recommended practices such as API RP 1170 and RP
1171 describe measures that industry representatives have agreed on as representing good operating
practices. Although these recommended practices may be widely followed and implemented, they are
not enforceable regulations until incorporated into 49 CFR Part 192 by the IFR. In the absence of
regulations mandating the implementation of safety measures for the operation of underground
natural gas storage facilities, including the discovery and repair of hazardous conditions, operators
may not always implement those safety measures, thereby increasing the potential harm to the public
and environment. The absence of explicit regulatory requirements also limits PHMSA’s ability to
pursue enforcement against operators that fail to implement safe practices.
1.3 Report Organization
The remainder of this report is organized as follow:
 Section 2 provides an overview of the natural gas storage industry and the facilities and operators
expected to be subject to the IFR requirements, described in Section 3.
 Section 4 describes the analysis framework, including the baseline which reflects the practices
currently implemented by facility operators or expected to be implemented by the time the IFR
would be effective, absent the regulatory action.
 Sections 5 and 6 discuss the incremental costs and benefits, respectively, expected to arise from
implementation of the IFR relative to the baseline described in Section 4.
 Section 7 discusses uncertainties and limitations of the analysis and indicates the direction of any
known bias.
 Section 8 provides information on analyses and evaluations that fulfill requirements in other
Statutes and Executive Orders to evaluate the costs, benefits, or economic impacts of new
regulations.
Additional sections and appendices provide cited references and supporting data.
8 Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, signed into law on June 22, 2016.
1-2

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Regulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile
2 Overview of the Natural Gas Storage Industry
Underground storage of natural gas offers important benefits to the U.S. energy supply infrastructure,
notably the ability to manage seasonal variations in natural gas demand and to provide a buffer for
changing production levels. Significant growth in domestic natural gas production from shale gas in
the last decade has prompted renewed interest and investment in storage capacity. Between 1995 and
2014, total natural gas storage capacity increased by nearly 16 percent to a total of 9,233 BCF (EIA,
2016b).
The Energy Information Administration (EIA) reports that 3,600 BCF of natural gas was injected
into underground storage facilities in 2015 (EIA, 2016a) – a volume of natural gas valued at over
$15 billion.9 For comparison, total natural gas consumption in the United States in 2015 was
27,473 BCF (EIA, 2016d).
There are three primary types of natural gas storage facilities (fields) in the United States (EIA,
2015):
 Depleted oil and gas reservoirs are the most common type of storage, representing approximately
81 percent of the total working gas capacity and 77 percent of the total design capacity in the
United States. As the name implies, these facilities are reservoirs that were previously used to
produce oil and/or gas and have been converted for storage by repurposing the production wells
and aboveground equipment to inject and withdraw gas as needed to build up storage or meet
demand.
 Salt caverns (salt dome) are geological formations that have been leached or mined out of their
salt deposits. These facilities represent about 11 percent of the total working gas capacity and
8 percent of the total design capacity.
 Aquifers are natural water-bearing formations that have been converted to store gas. They
represent the remaining 9 percent of the total working gas capacity and 15 percent of the total
design capacity.
2.1 Storage Fields
PHMSA estimates that there were 390 active natural gas storage fields10 in the United States in 2015,
distributed across 31 states (EIA, 2016e; Federal Energy Regulatory Commission (FERC), 2016; and
PHMSA, 2016b). These fields had an aggregate storage capacity11 of 9,155 billion cubic feet (BCF)
and a working capacity12 of 4,756 BCF (EIA, 2016e). Facilities used for interstate commerce
9 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
measuring station at which a distributing gas utility receives gas from a natural gas pipeline company or transmission system
(EIA, 2015).
10 PHMSA used EIA-191 for 2015 as primary data to determine the number of active fields. The definition of a field is based on
the number of records for which EIA indicates the status as “Active” (EIA, 2016e). Note that other available data (FERC, 2016;
PHMSA, 2016b) may subdivide or group fields, resulting in different counts of natural gas storage facilities.
11 Total natural gas storage capacity is the maximum volume of natural gas that can be stored in an underground storage facility
in accordance with its design, which comprises the physical characteristics of the reservoir, installed equipment, and operating
procedures particular to the site (EIA, 2015).
12 Working gas is the volume of gas in the reservoir above the level of base gas. Working gas is available to the marketplace
(EIA, 2015).
2-1

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Regulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile
represented approximately 60 percent of the working capacity while intrastate facilities represented
the remaining 40 percent. Exhibit 2-1 summarizes the data by state. For this analysis, a natural gas
storage facility is equivalent to a unique gas field record in EIA-191 data (EIA, 2016e).
Exhibit 2-1: Underground Natural Gas Storage by State in 2015.
State Number of
Active Fields1
Design Capacity (BCF)3 Working Capacity (BCF)3
Interstate2 Intrastate2 Total Interstate2 Intrastate2 Total
Alaska 5 0.0 83.6 83.6 0.0 67.9 67.9
Alabama 2 0.0 43.6 43.6 0.0 33.2 33.2
Arkansas 2 0.0 21.9 21.9 0.0 12.2 12.2
California 14 0.0 601.8 601.8 0.0 375.5 375.5
Colorado 10 100.8 29.4 130.2 52.1 11.7 63.8
Illinois 27 135.9 851.4 987.3 46.5 255.6 302.1
Indiana 20 12.2 99.1 111.3 5.0 28.4 33.4
Iowa 4 288.2 0.0 288.2 90.3 0.0 90.3
Kansas 16 271.8 10.5 282.3 116.7 5.9 122.6
Kentucky 22 168.2 52.1 220.3 79.3 28.3 107.6
Louisiana 17 669.5 55.0 724.4 406.5 39.2 445.7
Maryland 1 64.0 0.0 64.0 18.3 0.0 18.3
Michigan Minnesota 44 435.7 644.9 1,080.6 282.5 403.2 685.7
1 0.0 7.0 7.0 0.0 2.0 2.0
Mississippi 12 287.8 44.0 331.8 169.2 32.2 201.4
Missouri 1 0.0 13.8 13.8 0.0 6.0 6.0
Montana 4 287.2 89.0 376.2 164.4 33.1 197.5
Nebraska 1 34.9 0.0 34.9 14.8 0.0 14.8
New Mexico 2 68.6 20.5 89.1 44.0 15.7 59.7
New York 26 229.3 11.3 240.6 122.5 3.5 126.0
Ohio 22 402.9 171.8 574.8 167.5 63.3 230.7
Oklahoma 12 196.8 179.2 376.0 104.7 87.7 192.4
Oregon 7 0.0 29.6 29.6 0.0 15.9 15.9
Pennsylvania 47 737.6 28.5 766.1 411.8 15.5 427.3
Texas 32 326.3 515.9 842.2 210.0 322.6 532.6
Utah 3 124.5 0.0 124.5 54.9 0.0 54.9
Virginia 2 0.0 9.5 9.5 0.0 5.4 5.4
Washington 1 46.9 0.0 46.9 24.6 0.0 24.6
West Virginia 26 488.6 8.7 497.3 229.9 3.3 233.1
Wyoming 7 131.0 24.1 155.0 68.2 4.9 73.2
U.S. Total 390 5,508.5 3,646.3 9,154.8 2,883.7 1,872.0 4,755.7
1. Number of fields based on Form EIA-191 through 2015 (EIA, 2016e).
2. Interstate fields identified from the FERC (2016) list of jurisdictional fields and PHMSA (2016b) data. All other fields
are intrastate fields.
3. Capacity data based on EIA (2016e).
2.2 Number of Wells
The American Gas Association (AGA) publishes a report periodically on the natural gas storage
fields in the lower-48 states and Canada (AGA, 2014). The report provides field-level data on total
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Regulatory Impact Analysis: Underground Natural Gas Storage 2. Industry Profile
number of injection/withdrawal wells, the number of horizontal injection/withdrawal wells, and the
number of pressure control/observation wells. PHMSA used the AGA data to determine the number
of wells in each active field potentially subject to the regulation. The AGA report also provides the
minimum and maximum depth to the formation, among other information about the geological
characteristics of each field. PHMSA used this information to classify the wells in three depth
categories: 3,500 feet or less; 3,501 feet to 7,000 feet; and greater than 7,000 feet.
Specifically, PHMSA matched the fields identified in the EIA data described in Section 2.1 to the
corresponding information in the AGA report for each field and transferred data on the number of
injection/withdrawal wells, the number of horizontal injection/withdrawal wells, and the number of
pressure control/observation wells.
The AGA report does not include data for fields in Alaska. PHMSA estimated the number of wells in
these fields based on their storage capacity and the ratio of wells to total storage capacity for active
fields in the lower-48 states (0.51 well per BCF of storage capacity). PHMSA further assumed that
wells in Alaska are 3,500 feet or less in depth, as this is the most common depth category for fields in
the lower-48 states.
Fields reported in the AGA survey but not in EIA data were left out of the analysis. In some cases,
AGA provides information for combined fields (e.g., Fink and Kennedy together) that are listed
separately in the EIA data (Fink and Kennedy as two fields). In that case, PHMSA assigned the wells
to one of the EIA listed fields.
Based on these data, PHMSA estimated that there are a total of 16,991 injection/withdrawal wells
and pressure control/observation wells within the 390 active fields.13 PHMSA seeks comment,
supported by data, on this estimate of the number of wells.
Many of these wells are decades old. For example, the well involved in the October 2015 Aliso
Canyon accident (see Section 6.1) was drilled in 1953 and was repurposed for natural gas storage in
1972. This age is not exceptional: according to AGA data, approximately 60 percent of activ
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