Critical Natural Gas Facilities Designation

If you operate any of the natural gas facilities listed below, you may be considered a “critical gas supplier” that may be subject to new regulatory requirements adopted by the Railroad Commission (RRC), effective December 20, 2021.

• gas wells producing gas in excess of 15 Mcf/day*
• oil leases producing casinghead gas in excess of 50 Mcf/day*
• gas processing plants
• natural gas pipelines and pipeline facilities including associated compressor stations and control centers
• local distribution company pipelines and pipeline facilities including associated compressor stations and control centers
• underground natural gas storage facilities
• natural gas liquids transportation and storage facilities
• saltwater disposal facilities including saltwater disposal pipelines

* Mcf/day is based on the average daily production from the well’s six most recently filed monthly productions reports

In response to Winter Storm Uri, the Texas Legislature enacted Senate Bill 3 and House Bill 3648, which required the RRC to establish a process to designate certain natural gas facilities and entities associated with providing natural gas in this state as critical customers or critical gas suppliers during energy emergencies.  In collaboration with the RRC, the Public Utility Commission (PUC) was required to adopt rules to prioritize the natural gas facilities and entities designated as critical in the event that firm load shed is required to maintain the functional integrity of the Texas electric grid.

In response to this legislation, the RRC has adopted a new rule, 16 Texas Administrative Code (TAC) § 3.65, and the PUC has amended 16 TAC § 25.52.  Both the new and amended rule took effect on December 20, 2021.  The RRC’s new rule identifies the eight types of facilities that the RRC has designated as “critical gas suppliers” and defines a “critical customer” as a critical gas supplier with operations that depend on the delivery of electricity.  In conjunction with the new rule, the RRC has created two new forms:  Form CI-D, Acknowledgement of Critical Customer/Critical Gas Supplier Designation and Form CI-X, Critical Designation Exception Application. On January 11, 2022, the RRC released an FAQ regarding Forms CI-D and CI-X.

SDM is available to assist with these new regulations, including:

• Determining whether your natural gas facility is a “critical gas supplier” or “critical customer” under 16 TAC § 3.65(b)
• Preparation and submission of Form CI-D, Acknowledgement of Critical Customer/Critical Gas Supplier Designation (this filing must be made twice a year—the initial filing is due January 15, 2022)
• Submission of critical customer information to the electric utility serving a critical customer, and to ERCOT if applicable, using Form CI-D or responding to a notice from the utility that the critical customer information is incomplete
• Applying for a critical designation under 16 TAC § 3.65(c) because
  • the operation of your facility is required for the operation of a natural gas facility designated as critical to operate; or
  • your facility is included on the “electricity supply chain map” that is being created by the newly-established Texas Electricity Supply Chain Security and Mapping Committee (due to be released on or before September 1, 2022) but was not deemed critical using the criteria established by the RRC
• Determining whether your natural gas facility may be eligible for a critical designation exception under 16 TAC § 3.65(f)
• Preparation and submission of Form CI-X, Critical Designation Exception Application, requesting a critical designation exception under 16 TAC § 3.65(f) (this filing must be made twice a year—the initial filing is due January 15, 2022)
• Requesting a hearing to challenge the denial of a critical designation exception
• Contacting the Attorney General’s Office if information filed with the RRC to comply with 16 TAC § 3.65 is responsive to a request under the Public Information Act
• Representation in an enforcement action for failure to comply with 16 TAC § 3.65

Prepared by:

Davin McGinnis, dmcginnis@scottdoug.com, (512) 495-6308

Cathy Webking, cwebking@scottdoug.com, (512) 495-6337

Eleanor D’Ambrosio, edambrosio@scottdoug.com, (512) 495-6315