California Adopts Stringent Underground Natural Gas Storage Safety Rules

In late June 2018, the California Conservation Commission adopted new regulations addressing the safety of underground natural gas storage facilities.  The rulemaking was initiated in mid-2016 in response to the 2015-16 leak at Southern California Gas Company’s Aliso Canyon storage facility.  The new rules take effect on October 1, 2018 and are to be administered by the Division of Oil, Gas, & Geothermal Resources (known as “DOGGR” and referred to in the rules as the “Division”).  The rules establish a comprehensive program and prescribe highly detailed data collection requirements intended to support the evaluation and monitoring of the safety of underground natural gas storage facilities located in California.  A summary of the rules is provided below:

• Approval of Underground Gas Storage Projects.  A Project Approval Letter is to be obtained from the Division before any underground gas storage project commences injection or withdrawal activity.  The Division will review underground gas storage projects periodically, but not less than once every three years.  Although not expressly stated in the rules, it appears that operators of existing storage projects will be subject to the tri-annual review.
• Risk Management Plans.  The operator of an underground gas storage project is required to submit a project-specific Risk Management Plan for Division review and approval.  The operator of an existing underground gas storage project must submit a Risk Management Plan within six months of the effective date of the rules.  The Division will review a company’s Risk Management Plan periodically, but not less than once every three years.
• Emergency Response Plan.  The operator of an underground gas storage project must have an emergency response plan approved by the Division and ready for immediate implementation.  The emergency response plan must specify a schedule for carrying out drills to validate the plan.
• Underground Gas Storage Project Data Requirements.  The operator of an underground gas storage project will be required to provide the Division with highly detailed data, analysis, and interpretation that demonstrate that stored gas will be confined to the approved zone(s) of injection and that the underground gas storage project will not cause damage to life, health, property, the environment, or natural resources.  Operators of existing underground gas storage projects must submit revised and updated project data within 180 days of the effective date of the rules.
• Evaluation of Wells Within the Area of Review.  The rule specifies minimum requirements, which the Division may augment on a project-specific basis, that are intended to ensure that wells within the area of review will not be a potential conduit for migration outside the approved gas storage zone.
• Records Management.  The operator of an underground gas storage project must prepare and submit to the Division a Records Management Program designed to ensure that essential information is created, maintained, protected, and retrievable when needed.  Certain records are to be maintained for the lifetime of the project.
• Well Construction Requirements.  Underground natural gas storage facility operators will be required to design, construct, modify, and maintain gas storage wells and every other well that penetrates the gas storage reservoir so that mechanical integrity is effectively ensured under anticipated operating conditions.  The operator must ensure that a single point of failure does not pose an immediate threat of loss of control of natural gas and other fluids.
• Mechanical Integrity Testing.  Each gas storage well and every other well that penetrates the gas storage reservoir must be tested in multiple ways: 
• A temperature and noise log shall be conducted at least annually. 
• A casing wall thickness inspection to estimate internal and external corrosion shall be performed at least once every 24 months.
• Pressure testing of the production casing shall be conducted at a minimum frequency determined on a well-by-well basis.  If the Division has not approved a well-specific minimum pressure testing frequency for a well, the operator shall pressure test the well at least once every 24 months. 

The Division must be notified before performing mechanical integrity testing so that Staff may have an opportunity to witness the test. Copies of all mechanical integrity testing results shall be submitted to the Division.  

• Monitoring Requirements.  The underground gas storage facility operator will be required to monitor for the presence of gas in all well annuli by measuring and recording annular and tubing pressure at least once a day.  This requirement may be met by employment of a real-time data gathering system, such as a Supervisory Control and Data Acquisition (SCADA) system.  The operator shall monitor the material balance of an underground gas storage project and shall submit material balance support data to the Division at least once a year.  The operator of an underground gas storage project will be required to employ a real-time data gathering system, such as SCADA, by January 1, 2020.
• Inspection, Testing, and Maintenance of Wellheads and Valves.  The operator of an underground gas storage project will be required test all surface safety valves on the wellhead and all subsurface safety valve systems at least every six months, and test all valves on the wellhead at least annually for proper functioning and to verify the valves’ ability to isolate the well.
• Well Leak Reporting.  A storage project operator must immediately inform the Division of any Reportable Leak.  “Reportable leak” means: (1) a leak from a gas storage well that is above 50,000 parts per million by volume total hydrocarbons, (2) a leak from a gas storage well for more than five days that is above 10,000 parts per million by volume total hydrocarbons, or (3) any leak that poses a significant present or potential hazard to public health and safety, property, or to the environment.
• Requirements for Decommissioning.  If an operator intends to discontinue an underground gas storage project, then the operator shall submit a Decommissioning Plan to the Division.

California’s new underground natural gas storage regulations are likely to impose significant incremental responsibilities on underground natural gas storage project operators in the state.  Certain of the new regulations require operators to prepare and submit compliance documents within six months of the rules’ effective date (i.e., by the end of March 2019).  Compliance with the rules’ highly detailed data requirements may be a daunting process.  Notable requirements that may directly affect storage project operations and costs are the “no single point of failure” requirement and the mandated implementation of SCADA (or equivalent) by January 1, 2020. 

The new California underground natural gas storage safety rules are unmistakably intended to prevent a repeat of the Aliso Canyon gas leak.  Other states and the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration will likely pay close attention to these regulations in analyzing the effectiveness of their own safety programs.

The new California regulations may be found on the DOGGR website at: http://www.conservation.ca.gov/index/Documents/Final Text of Regulations.pdf.