Depending on where you live, winter has not only arrived, but it's here to stay. With the bitter cold temperatures, there is one thing to do: Turn up the heat. Thankfully, with natural gas prices just off record lows, it's a lot easier to turn up that heat and not worry too much about the monthly heating bill.

Before that gas arrives by pipe to heat your home, it's typically been stored in vast underground storage facilities until it's used for peak winter demand. These storage facilities not only serve to keep the gas ready for winter usage but also provide us with enough gas to ensure we can get through any natural disaster or other supply disruption. Natural gas storage is a critical component in our energy infrastructure.

Types of storage
At last count, we had more than 3.5 Tcf of working gas in storage in the nearly 400 facilities around the country. Unlike oil and other liquid fuels, natural gas isn't stored in tanks. Instead it's typically stored in one of three underground facilities: depleted reservoir, salt cavern, and aquifer.


A depleted reservoir (D) is just as it sounds. It's a natural gas field that's produced all its economically recoverable gas. This is the most common way natural gas is stored, with nearly 75% of gas being stored in a depleted reservoir. These facilities are also the cheapest to develop and maintain.

Using a salt cavern (A) to store gas is growing in popularity, since 2001 salt cavern storage capacity has grown from 4% to 15% of overall capacity. These facilities are built by a process called solution mining where freshwater is pumped down into the salt formation. As some of the salt is dissolved the saline solution that's created is pumped out and the process repeated until the cavern reaches the desired size. While these facilities are typically the smallest of the storage facilities they are important for emergency gas storage.

Finally, an aquifer (C) is the most expensive and typically least desirable facility to develop. These natural water reservoirs must be developed for natural gas storage, which is an expensive process. It can take up to four years to develop an aquifer formation into a storage facility.

Who owns these things?
Several companies are actively engaged in the ownership of natural gas storage facilities, including utilities, pipeline operators, and dedicated storage owners. While utility storage is important, it's the midstream opportunities that offer investors the potential for profit.

With more than 947 Bcf of storage capacity Dominion operates the nation's largest natural gas storage system. A vast majority of that storage is part of Dominion's gas transmission business, which serves the growing Marcellus and Utica shale producers. Only 20% or 171 Bcf of the company's underground storage is allocated to the company's distribution business, which serves 1.3 million customers in Ohio and West Virginia.

With 275 Bfc of working gas storage capacity, the Natural Gas Pipeline Company of America is one of the largest owners of natural gas storage in the nation. The company, owned by Kinder Morgan , Brookfield Infrastructure Partners and private investors, controls more than 7% of our nation's storage capacity. It supports the high-demand needs of the Chicago market.

Kinder Morgan and its affiliate are no strangers to owning natural gas storage. Among its myriad assets are the Bear Creek Storage Company in Louisiana and Young Gas Storage in Colorado. Combined, these assets add another 64 Bcf of working gas storage capacity under Kinder Morgan's control.

Many other companies own a smaller storage business as part of larger natural gas operations. One such example is AGL Resources , which owns three storage facilities -- two salt storage facilities in the Gulf region and a depleted reservoir in California. The company owns a total of 30 Bcf of working gas capacity with another 16.6 Bcf of capacity projects pending approval.

A final option is PAA Natural Gas Storage  which is a pure-play natural gas storage company. Structured as an MLP, it owns three storage facilities -- salt dome facilities in Louisiana and Mississippi and a depleted reservoir in Michigan. All told, PAA Natural Gas Storage has 76 Bcf of working gas storage capacity with plans to nearly double that capacity.

Why is storage important to investors?
Each week, the U.S. Energy Information Administration releases its natural gas storage report. This report highlights the change in working gas storage. A dramatic drawdown of inventory can lead to a jump in the price of natural gas and, conversely, a buildup in storage is a bearish indicator. By tuning into the storage numbers, investors can see one of the driving forces behind natural gas prices.

Foolish bottom line
The natural gas storage market doesn't generate a lot of excitement in the marketplace. That being said, it is an important market in our country's overall energy picture. Not only is it an important indicator of future natural gas prices but there are opportunities on the horizon that investors can profit from.

The article Natural Gas Storage 101 originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners, Dominion Resources, and Kinder Morgan. The Motley Fool owns shares of Brookfield Infrastructure Partners and Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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