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Gas storage operators to pay fees to PHMSA based on working gas, for now

Despite concerns about the methodology, underground gas storage operators should expect to be charged fees in 2017 that are based on gas capacity, not well count, to fund new federal storage oversight.

The U.S. Pipeline and Hazardous Materials Safety Administration in November 2016 proposed a 10-tier fee system, with larger operators paying more than smaller ones to cover the costs of the agency's new regulatory program. Operator size would be based on how much working gas capacity a company has. Some commenters during the rulemaking process contended that it would be more appropriate to base the fees on the number of storage facility wells a company has. Much of what is being regulated under the new rules involves inspections and maintenance at wellheads.

Although PHMSA agreed that the well count would be a better way of deciding how much each operator had to pay, the agency said too little is known at the federal level about how many wells each operator has. PHMSA left the door open, however, to using well count in the future.

"In the absence of available, reliable data for another suitable metric, PHMSA's only viable option for an equitable allocation of fees among facility operators in the first year is working-gas capacity," the agency said in an April 6 notice in the Federal Register. "After PHMSA's annual reporting is in place and PHMSA collects information regarding the number of wells, well count is likely to become the basis of the user-fee rate structure for these facilities in future fiscal years."

PHMSA in 2016 for the first time exercised its authority to enact regulations for underground natural gas storage facilities. The agency was responding to congressional mandates and public concern after a multimonth leak at Aliso Canyon, a California storage field operated by the utility Southern California Gas Co. Congress told PHMSA to collect $8 million annually from storage operators to fund the new regulatory program.

Under the tier structure PHMSA published April 6, operators with more than 91.5 Bcf of working gas capacity would have to pay $147,493, while operators with less than 930 MMcf would pay $11,799.

PHMSA still needs Congress to formally appropriate the $8 million to the agency's underground natural gas storage facility safety account in the pipeline safety fund.