Gas firms aim to comply with new regs

Federal rules meant to ensure safety in storage

SourceGas surface facilities are shown at the company’s Wolf Creek underground storage site on Thompson Divide. At the site run by Black Hills, “Current operations already meet a number of the components of the interim rule,” Black Hills spokesperson Carly West said.



Operators of two western Colorado underground natural gas storage operations say they’re well on their way to complying with newly instituted federal requirements arising from a 2015 disaster in California.

The federal Pipeline and Hazardous Materials Safety Administration, or PHMSA, in December announced interim final rules applying to such operations. While the Trump administration has moved to provide more time for compliance with some aspects, Black Hills Energy and Xcel Energy say they’ve already taken measures consistent with the new rules.

Black Hills runs the Wolf Creek storage field in the Thompson Divide area southwest of Glenwood Springs, while Xcel runs the Asbury and nearby Fruita storage fields in the Bookcliffs in Mesa County as a single operation that it calls Asbury. Both operations make use of old gas production formations that have been depleted by drilling. The companies inject gas into them so it can be retrieved during winter months to meet heating demands in the region.

In October 2015, a well at a large underground gas storage facility at Aliso Canyon in Los Angeles began leaking, ultimately emitting 5.7 billion cubic feet of gas, and forcing thousands of residents to be evacuated due to health effects of the mercaptan odorant additive in the gas.

Congress responded in June 2016 by passing a law requiring PHMSA to issue regulations for underground gas storage facilities within two years, taking into account things like consensus standards for their operation and environmental protection. The agency decided it should issue an interim rule sooner, saying in the rule that the lack of PHMSA regulations for the facilities “presents an immediate threat to safety, public health, and the environment because there is currently no effective means for the agency to ensure compliance with safety standards at underground natural gas storage facilities.”

THE INDUSTRY’S VIEW

Industry groups had supported new federal regulations, and the interim rule incorporates American Petroleum Institute recommended practices into the regulations. The recommended practices cover things such as design, construction, material, testing, reservoir monitoring, recordkeeping, operations, maintenance, and emergency response and preparedness.

But API and other industry groups have since petitioned for review of the interim rule to the degree that it modified the nonmandatory nature of many of the API regulations. The industry also said implementation periods were impractical and should be extended.

“I guess you have to be careful what you ask for,” Richard Schultz, a senior scientist in petroleum and geosystems engineering at the University of Texas at Austin, said in reference to the second thoughts that industry is having about the new regulations.

In June, PHMSA said it plans to address the issues raised by the petitioners in its final rule, which it expects to issue in January. In the interim, and for a year after the final rule’s release, it says it won’t issue any enforcement citations for failing to meet any provisions that aren’t identified by API as mandatory in its recommended practices.

Also, the agency said in April that companies will have three to eight years to complete storage field risk assessments, including preventive and mitigation measures for all wells, with the compliance time dependent “on the size and complexity of the facility and as warranted by the risk assessment.”

 

LOCAL WORK CONTINUES

At Black Hills’ Wolf Creek site, “Current operations already meet a number of the components of the interim rule,” Black Hills spokesperson Carly West said.

Work has been going on to modernize the seven-well storage field for years, dating back to before Black Hills recently acquired it from SourceGas. West said upgrades include the installation of communication equipment to enable 24-hour monitoring, and an emergency shutdown system.

Black Hills also engages in maintenance work such as well and pipeline valve replacement, removal of hazard trees, road repair, and pipeline inspections. It is bringing in a workover rig this summer for maintenance work on two of the wells.

The Wolf Creek storage field is on Forest Service land, and federal inspection records years ago pointed to problems such as fires, old spills and shoddy facility conditions at the facilities. SourceGas then made widespread upgrades to the facilities, including installing valves that close automatically when heat is sensed, and can be remotely monitored and operated.

Xcel spokesman Mark Stutz said the company “began examining its natural gas storage systems on the Western Slope almost immediately after the events in California, back in October 2015.”

“We have generally been following the lead of industry best practices, particularly those by the American Petroleum Institute,” he said, while noting that its Asbury operation is much smaller than Aliso Canyon. It has a working capacity of 1 billion cubic feet of storage, compared to 86 bcf at Aliso Canyon. Wolf Creek’s working storage capacity is about 2.36 bcf.

The new PHMSA rules require that by Jan. 18 of next year, procedures for each storage facility “must be completed that address operating, maintenance, emergency preparedness, and any physical site work activities that are being conducted” as of that date, the agency says.

Stutz said Xcel plans to meet the January compliance deadline.

“Some of the required activity we’ve had in place prior to the new rules,” he said.

An example is an integrity management plan it put in place in December.

Stutz added, “Though not specifically required by the rule, Xcel Energy also is in the process of installing subsurface safety valves as an additional means of shutting in the wells in the event of an emergency.”

He said it will be conducting an underground storage emergency exercise this month. Xcel also regularly checks the integrity of storage reservoirs and inspects well casing and tubing, sometimes resulting in replacing of equipment.

 

RULE SLOWED, NOT STOPPED

Schultz noted that the law passed by Congress last year was bipartisan, and he said that under the Trump administration, the resulting rule “is still in effect but being slowed down.”

Due to the petition for review, which the state of Texas also has filed, a judge will re-evaluate the rules, along with what kind of time frame for compliance is acceptable, he said.

Schultz said the Trump administration budget includes money for PHMSA’s gas-storage regulations.

“So it doesn’t cut the budget, it continues it, and that’s a recognition of the importance of maintaining safety in the gas storage facilities,” he said.

He said underground gas storage is safe now, but Aliso Canyon highlighted things that need to be done to make it safer. Among the interim rule’s requirements is that companies provide information on each storage well, including when it was drilled, how it was completed and whether it ever has leaked.

Regulators “need to understand the magnitude of the problem, basically, and once they understand the magnitude of the problem then they can better tailor how they should respond and how operating companies should respond,” Schultz said.

Companies will have to submit annual reports as part of new rules, Schultz said. And he said a requirement for an emergency plan helps address the problem demonstrated in California, where the company involved was overwhelmed by the disaster.

Schultz sees underground gas storage as becoming increasingly important as states like Colorado rely increasingly on renewable energy supplies. Storage fields can provide steady energy supply backup for intermittent electricity sources such as wind and solar.

While having adequate storage field regulations is important, they can’t be so burdensome that they become uneconomical for companies, Schultz said.

“Stretching out the (compliance) time frame I think is one way of PHMSA reacting to that,” he said.


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