A weekly recap of SNL Energy'scoverage of major themes in the natural gas industry.
Withnew enforcement authority and a raft of rules on the way, the nation's pipelinesafety regulator is making long-awaited moves to smooth out a patchwork of mismatchedstate rules and close gaps in federal code.
The U.S. Pipeline and Hazardous Materials Safety Administrationrecently revealedits interim final ruleto put in place emergency-orderauthority that allows it to take industrywide action on immediatesafety concerns without going through the full rulemaking process.
Underthe interim final rule, which is expected to appear in the Federal Registersoon, PHMSA explains that the authority gives the agency an option thatexisting tools, such as corrective action orders and advisory bulletins, donot. A corrective action order is enforceable but applies only to individualoperators. An advisory bulletin applies to the industry at large but carries noregulatory weight.
Federallawmakers earlier in2016 decided to give PHMSA the emergency-order authority, in part because themultimonth Aliso Canyonunderground gas storage facility leak exposed notable gaps in federal code.Congress has criticized PHMSA for being slow to issue rules in other contexts,as well, and legislators said emergency-order authority could help the agencytackle issues more nimbly.
"Noenforcement vehicle existed, prior to adoption of the [Protecting ourInfrastructure of Pipelines and Enhancing Safety] Act, that would allow PHMSAto address immediate safety threats facing the wider industry," PHMSA saidin its interim final rule draft.
Thenew enforcement tool would allow the PHMSA administrator to issue orders toblock unsafe practices or require additional safety measures nationwide. Beforeissuing an emergency order, though, the administrator would have to considerhow it would affect public health and safety, the economy, national securityand service reliability on pipelines, and any relevant feedback from otheragencies.
PHMSAis also starting to evaluatehow well states are trying to prevent excavation damage by auditing statedamage-prevention programs as it starts to take advantage of over state programs. Through eight audits, only three states were found to beadequate, PHMSA Administrator Marie Therese Dominguez said.
Meanwhile,national underground gas storage regulations will in tiers, with thefirst phase, coming before the end of the year, focused on existing industrybest practices.
PHMSAsoon expects to adopt rules based on two American Petroleum Instituterecommended practicesthat deal with underground gas storage in depleted reservoirs and salt domes,Dominguez said.
Theindustry has already signaled its supportfor those two recommended sets of guidelines.
PHMSAplans to expand regulations beyond the contents of the recommended practices,though, adding additional guidance areas such as injection issues, aginginfrastructure and emergency response plans, Dominguez said in Indianapolis atthe National Association of Pipeline Safety Representatives' annual meeting.The agency has been working with the U.S. Department of Energy, and the twoagencies met with a host of subject matter experts earlier this year to assesswhat regulations are needed.
"Ido think it's going to be a phased process," Dominguez said of undergroundgas storage regulation. "There are a number of issues that were identifiedduring the course of the workshop we conducted in Colorado with the Departmentof Energy."
PHMSAhas had the authority to oversee underground gas storage, but Congress onlyrecently mandated that the agency put out rules on that part of the gasindustry.
AndersJohnson, vice president of storage at KinderMorgan Inc., saidhe is looking forward to PHMSA's storage rules. "The key is getting theengineering and design right up front and a regulatory environment thatprotects us against our stupidest competitor," Johnson said Oct. 6 at theEnergy Bar Association's Mid-Year Energy Forum in Washington, D.C. "Wehave this problem with economics where you keep driving the cost down: Somebodythat cuts corners is going to be able to offer a lower cost. I'm a big fan ofregulation for leveling the playing field."
Johnsonsaid he would favor regulations that are focused on outcomes rather thantechnologies, but he did not balk at prescriptive standards altogether, so longas the prescriptive rules are "well thought out." He chastisedlegislators and regulators for their response to Aliso Canyon, noting that someof the immediate answers could have major drawbacks.
Heexpressed particular concern about restrictions that may be placed on certainwell types. Some wells have tubing inside their casing. Many operators are ableto withdraw gas through the whole space within the casing, inside and out ofthe tubing. In light of the Aliso Canyon leak, there has been some regulatoryinterest in limiting gas withdrawals to the tubing channel only, which Johnsonsaid could reduce withdrawal capacity by as much as half.
Someindustry participants have expressed concern that the geographic diversity ofthe nation's underground storage facilities — which include depletedreservoirs, aquifers and salt domes — could hamper federal regulators' abilityto write standards that appropriately apply across the nation.
Whilestates are better versed in the particulars of their jurisdictions than thefederal government, their siloed knowledge may also limit theircomprehensiveness, and variability in state priorities has so far led todisparate and sometimes incompatible regulatory regimes, Johnson said.