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Industry secures key changes to new US gas storage facility rule

The natural gas industry prevailed in its push to modify minimum standards for underground gas storage facilities, securing a rule that will give operators more flexibility in meeting safety regulations at 400 sites across the country.

The final rule, published in the Federal Register on Feb. 12, adopts industry-developed best practices for designing, operating, maintaining and monitoring critical parts of gas storage facilities.

The Pipeline and Hazardous Materials Safety Administration, or PHMSA, is using American Petroleum Institute, or API, recommended practices, specifically, the API's recommended practices 1170 and 1171, which included both mandatory minimum standards and voluntary processes and procedures for salt caverns and depleted oil and gas wells and aquifers, respectively.

Originally, PHMSA had proposed making all of the practices mandatory by modifying the industry's language from "should" to "shall." The agency said the change would make the rules enforceable and outlined a process for operators to file for narrow exemptions. PHMSA also gave storage facility operators one year to implement the rules.

But API, along with the Interstate Natural Gas Association of America, the American Gas Association and the American Public Gas Association, petitioned PHMSA to reconsider the rule. They said the timeline was not practical, and making every provision mandatory was not necessary to enforce the rule and would make the regulation unreasonable.

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PHMSA ultimately decided to allow operators to implement the rule in phases over seven years and adopt the recommended practices as written by the API. The decision marks a victory for the pipeline companies, gas utilities and other enterprises that store gas in depleted oil and gas wells and aquifers throughout the U.S. and in salt domes primarily along the Gulf Coast. Trade groups that represent storage facility operators said the earlier rule was unworkable.

In explaining its decision, the agency said many of the nonmandatory provisions provided acceptable options and guidance for achieving compliance with the mandatory standards. That means the nonmandatory provisions are enforceable since operators need to follow them to achieve mandatory standards.

"After additional review, PHMSA has determined that adopting the [recommended practices] as originally published by API would still provide significant benefits for safety, the environment, and public health but would be much easier for the regulated industry and the public to understand and for PHMSA to interpret and enforce," the agency said.

The decision provides clarity for storage operators and acknowledges that operating conditions at U.S. facilities vary widely, according to Brianne Kurdock, an attorney at Babst Calland who previously worked for PHMSA and the Interstate Natural Gas Association of America.

"The drafters of the [recommended practices] purposely distinguished between provisions styled as a 'shall' and those written as a 'should' to accommodate the differences in operating conditions," Calland said in an email. "PHMSA's decision to accept these distinctions will avoid unnecessary confusion where an operator may not be able to apply the non-mandatory provision on account of site-specific conditions."

The regulation is aimed at addressing safety shortfalls that contributed to a massive gas leak at Southern California Gas Co.'s Aliso Canyon storage facility near Los Angeles. It places the first federal standards on so-called downhole facilities, such as the wellbores that connect underground wells and caverns to surface operations at storage sites.

Congress ordered PHMSA to regulate downhole facilities after investigators traced the Aliso Canyon leak to a blowout caused by well casing corrosion.

However, Adam Peltz, a senior attorney at the Environmental Defense Fund who submitted comments on the proposed rule, said the final rule is only slightly better than the system of self-regulation it would replace. Peltz said it maintains an "unacceptable status quo," failing to require appropriate risk reduction requirements or bolster state regulatory authority.

"In opting for a weak rule, the probability of another Aliso Canyon-like disaster increases," Peltz said in an email. "This is a bad direction for the federal government and industry to be going at a time when the public is beginning to question whether gas is a good energy choice and municipalities are taking steps to reduce or end gas use."

For its part, the Interstate Natural Gas Association of America "has been a strong proponent of PHMSA's efforts to establish federal regulations for underground natural gas storage facilities," the group said in a statement. "Although we are still reviewing the final rule, we are pleased to see this rulemaking come to completion."