PHMSA Issues Notice of Underground Natural Gas Storage Facility User Fees

Pipeline Safety Alert

On April 6, 2017, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a notice of agency action (Notice) announcing the rate structure for the underground natural gas storage facility user fee. In section 12 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act of 2016), Congress directed PHMSA to prescribe procedures to collect user fees for underground natural gas storage facilities. The fees will fund an $8 million Underground Natural Gas Storage Facility Safety Account.

In November 2016, PHMSA proposed a rate structure for these user fees and agreed to accept comments on the proposal until January 6, 2017. As discussed below, PHMSA responded to the comments filed in response to the Notice and made certain revisions to its user fee calculations.

Working Gas Capacity

PHMSA confirmed that working gas capacity, as defined by the Energy Information Administration (EIA) and used in the EIA Monthly Underground Natural Gas Storage Report, will be used as the basis for the user fee rate structure. PHMSA acknowledged that the number of wells is an appropriate basis for the rate structure, but stated that the agency currently lacks the data needed to support such a calculation. After the agency collects information on the number of wells, the user fee structure will likely be changed in the future. PHMSA also stated that it will combine the working gas capacity for all fields operated by each holder of a PHMSA-issued operator identification number (OPID). The agency stated that it is in the process of contacting storage operators to determine the correct OPID for each storage facility. If PHMSA is unable to determine the OPID, it will sum the working gas capacities by company name.

Inclusion of Inactive Wells

PHMSA noted that since EIA’s Monthly Storage Report includes inactive wells, which can possibly be returned to service, the agency will include inactive storage fields in its user fee calculations.

Revised Calculation

PHMSA revised the previously published user fee calculations. The agency had used the 2015 EIA data to support its proposed assessments. PHMSA used more current data in the Notice, resulting in an updated assessment table:

Tier      Assessment Per Operator           Working-Gas Capacity (Mcf) Range
1           $11,799                                          Less than 930,000.
2          $23,599                                        More than 930,000 and less than 3,000,000.
3          $29,499                                        More than 3,000,000 and less than 5,800,000.
4          $35,398                                        More than 5,800,000 and less than 11,000,000.
5          $47,198                                          11,000,000 or more and less than 13,700,000.
6          $58,997                                        More than 13,700,000 and less than 21,000,000.
7          $70,796                                        More than 21,000,000 and less than 32,100,000.
8          $76,696                                        More than 32,100,000 and less than 48,000,000.
9          $88,496                                        More than 47,000,000 and less than 91,500,000.
10         $147,493                                       More than 91,500,000.

In conjunction with the Notice, PHMSA also published a spreadsheet to provide a more detailed breakdown of the data supporting its user fee calculations.

If Congress appropriates funds to the Pipeline Safety Fund’s Underground Natural Gas Storage Facility Safety Account (Storage Fund), PHMSA will begin collecting these user fees this year. If Congress appropriates less than $8 million to the Storage Fund, PHMSA will have to reduce the assessment for each tier proportionally to collect only the appropriated amount.

In March, the State of Texas, the American Gas Association, and the Interstate Natural Gas Association of America filed separate lawsuits seeking review of PHMSA’s Underground Natural Gas Storage Interim Final Rule. This rule introduced federal regulations of underground natural gas storage facilities. It is not clear how these lawsuits will affect PHMSA’s ability to collect the user fees.

Please contact one of the members of our Pipeline and Hazmat Safety Team to obtain more information regarding underground natural gas storage facility user fees.

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