The Impact of EPA Regulations Under the Safe Drinking Water Act on Underground Natural Gas Storage Operations
Authors: Brady Hugh S. 
Published: December 2007

Underground storage of natural gas is an essential part of the nation’s gas delivery capability and is a vital component of individual system supply necessary to meet the peak day demands of gas customers during the winter heating season. The peak day sendout from storage may represent for many companies as much as 50% or more of total market requirements. From the national standpoint, the peak day sendout from underground storage during the 1977-78 winter was 39.4 Bcf or the equivalent in volume of a heating demand load of 6.6 million barrels of oil per day.

The Environmental Protection Agency (EPA) has proposed regulations1 which would impose burdensome and unnecessary requirements upon underground gas storage operations. Imposition of such constraints on new and existing natural gas storage facilities will, in all likelihood, result in the loss or abandonment of considerable numbers of existing storage wells and fields; and, will inhibit the development of new storage reservoirs. More importantly, the underground injection of natural gas for storage does not endanger drinking water sources, insofar as en-dangerment is defined in Section 1421(d)(2) of the Safe Drinking Water Act. That section provides: "Underground injection endangers drinking water sources if such injection may result in the presence in underground water which supplies or can reasonably be expected to supply any public water system of any contaminant and if the presence of such contaminant may result in such system’s not complying with any national primary drinking water regulation or may otherwise adversely affect the health of persons." (emphasis added) 1+2 U.S.C. 300h(d)(2)

Based on this definition, EPA’s proposed regulations are inapplicable to gas storage; and, EPA’s attempt to subject gas storage to regulation exceeds statutory authority and represents an unnecessary and costly regulatory intrusion.

Certain fundamental points concerning natural gas storage demonstrate that the well injection of gas for storage presents no danger to drinking water sources. First, considerable amounts of money are expended by industry to ensure that the injected and stored natural gas is contained within the well. Second, natural gas stored underground is essentially insoluble in water and does not form any permanent association with water. Third, there exists no national primary drinking water standard applicable to injected natural gas; and, there is no evidence that natural gas in existence with drinking water poses a threat to human consumption. Quite the contrary, natural gas can and does co-exist and is compatible with underground drinking water sources. These facts are supported by a quote from EPA’s heavily relied upon Draft Environmental Impact Statement: "to the best of our (EPA’s) knowledge, all of these (natural gas storage) wells are well engineered and well operated, and pose no threat to ground water" (DEIS - Costs and Economic Impacts - p. 11).

Indeed, the cost of compliance would have a very significant impact on the natural gas industry and its customers according to industry estimates. EPA’s figures, however, are in sharp contrast to those prepared by the industry and appear to be based upon an over-simplification and misreading of the proposed regulations.2COMPLIANCE ACTIONGAS INDUSTRY ESTIMATED COSTEPA ESTIMATED COSTMonitoring, logging and reporting$20,400,000 per year$760,000 per yearCasing and cementing of existing wells290,000,000no estimateEnclosing open annuli177,000,00016,000,000ALTERNATIVEWell abandonment120,000 per well20,000 per well

Moreover, despite its cost estimates, the EPA failed to adequately analyze the economic consequences of the proposed regulations, consider alternative approaches, and release a detailed accounting of the cost impact. This is contra to the President’s directive in Executive Order 12044 which requires such assessment. Overall industry incremental capital costs of compliance with the regulations are estimated to he, at minimum, in excess of $607,000,000 with operational costs of over $102,000,000 for a total cost of at least $709,000,000 (1979 dollars) during the five year term of compliance. Amortization of this total cost would amount to a total of $1,383,960,000.3 Of course, the burden of such a capital investment would he horne by gas customers who would experience a tremendous and adverse rate impact with no resulting benefit or improvement to the protection of ground water sources. This dollar impact on consumers coupled with the sharp and immediate reduction in available storage capability would adversely affect the economic viability of the natural gas industry and render an obvious disservice to the gas consumer.

Prepared: May 1979