Power & Pipes

FERC, CFTC, and State Energy Law Developments

The Pipeline and Hazardous Materials Safety Administration’s (PHMSA’s) long-awaited final rule on the minimum safety standards for underground natural gas storage facilities (UNGSFs) was published in the February 12 Federal Register. The final rule amends the pipeline safety regulations applicable to depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. These pipeline safety regulations were established in an interim final rule that PHMSA issued in December 2016 in response to a recent significant gas leak and the mandate in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the PIPES Act). The PIPES Act directed PHMSA to establish minimum safety standards for depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. The final rule becomes effective March 13, 2020.

One of the most significant changes that PHMSA implemented in the final rule was to incorporate by reference two American Petroleum Institute (API) recommended practices (RPs) as the basis of the minimum safety standards in 49 CFR Part 192, without modification to the nonmandatory terms.

  • API RP 1170 provides recommended practices for solution-mined salt caverns used for natural gas storage and covers facility geomechanical assessments, cavern well design and drilling, and solution mining techniques and operations, including monitoring and maintenance practices.
  • API RP 1171 provides recommended practices for natural gas storage in depleted oil and gas reservoirs and aquifers and focuses on storage well, reservoir, and fluid management for functional integrity in design, construction, operation, monitoring, maintenance, and documentation practices.

In the interim final rule, PHMSA adopted these RPs but modified the nonmandatory provisions as mandatory requirements. Operators could deviate from the modified statements by providing justifications in their procedure manuals on why a provision was not practicable or necessary for safety at the operator’s specific facility. The final rule eliminates this modification and adopts the nonmandatory provisions and mandatory requirements set forth in the RPs as originally written. As a result, operators are no longer required to provide written justifications as to why they would not have performed a nonmandatory provision.

PHMSA determined that incorporating the API RPs as is would still provide significant benefits for safety, the environment, and public health because they require operators to develop policies and procedures to ensure the functional integrity of UNGSFs and to inspect and verify the operational integrity of the facilities. The nonmandatory provisions are closely tied to the mandatory provisions, and PHMSA believes that treating the nonmandatory provisions as written in the RPs adds clarity to the provisions.

The final rule also formalized requirements and deadlines for operators to develop and implement their integrity management programs and to conduct their baseline risk assessments for UNGSFs. The interim final rule required operators with facilities constructed on or before July 18, 2017, to establish and put into service procedures for operations, maintenance, and emergency preparedness and to establish an integrity management framework by January 18, 2018. All other operators were required to have their procedures and frameworks in place prior to commencing operations. The final rule imposes the following deadlines:

  • Within one year of the effective date of the final rule (by March 13, 2021), operators must implement a full integrity management program.
  • By four years after the effective date of the final rule (by March 13, 2024), operators must have completed the baseline risk assessments for 40% of their wellbores, wellheads, and associated components.
  • By seven years after the effective date of the final rule (by March 13, 2027), operators must have completed baseline risk assessments for all remaining wellbores, wellheads, and associated components.

PHMSA made four other key modifications to its pipeline safety regulations.

  • Within one year of the effective date of the final rule (by March 13, 2021), solution-mined salt caverns must comply with the same risk management practices set forth in Section 8 of API RP 1171, to which depleted-hydrocarbon reservoirs and aquifers are required to adhere. PHMSA explained that Section 8 of API RP 1171 provides more prescriptive practices than API RP 1170 for how an operator must develop, implement, and document a program to manage risks that could affect the functional integrity of the storage operation.
  • An operator must provide a 60-day notification to PHMSA of (1) any new facility construction, (2) maintenance work that requires a workover rig and costs $200,000 or more, and (3) any plugging or abandonment activities, regardless of costs. However, if emergency maintenance or repairs are needed, the operator should proceed with the work, notify PHMSA as soon as practicable, and document the emergency and delay in notification. The final rule also clarifies that operators are not required to notify PHMSA of routine maintenance activities.
  • The definition of “underground natural gas storage facility” now excludes other components of a gas pipeline or gas pipeline facility covered elsewhere in 49 CFR Part 192 to eliminate potential overlap with other gas pipeline facilities covered elsewhere in Part 192.
  • PHMSA’s reporting portal is now the National Registry of Operators.