The changing U.S. energy market continues to have a dramatic effect on the construction and operation of oil and gas pipeline infrastructure. One of the largest new pipeline construction projects in the past several decades – the nearly 1,700 mile Rockies Express gas pipeline between Wyoming and Ohio (REX) – began operation in 2009, with a west to east direction of flow. The rapid development of Marcellus and Utica shale plays changed the market demands quickly, however, and on November 26, 2013, FERC approved REX’s request to reverse flow (east to west) for part of its system. A large number of existing pipelines (both gas and oil) have been undertaking reversal of flow and conversion of service for market reasons, following the rapid production of tight oil and gas around the U.S. At present, there are no express federal regulations that address reversal of flow, beyond FERC rate issues. Reversals and conversions may trigger other PHMSA regulatory obligations, however, such as IMP risk and impact assessments. Environmental considerations (such as permitting and NEPA) may also be triggered. Pipelines that are converted to transport a new product such as natural gas to liquid or vice versa must comply with PHMSA regulatory requirements at 49 CFR Parts 195.5 or 192.14, including review of construction and operational records and performing appropriate tests where records are unavailable, in addition to environmental considerations.
Additional proposed revisions to natural gas reporting forms signal that PHMSA continues to rely on this data to analyze operator performance metrics and inform future rulemakings. By notice issued on November 27, 2013, the Agency responded to comments on revisions to several natural gas reporting forms that it proposed in June (see prior posting) and to extend the comment period an additional thirty days. 78 FR 71033 (Nov. 27, 2013) . Specifically, the Agency responded to comments from the Interstate Natural Gas Association of America (INGAA), the Pipeline Safety Trust (PST), and a manufacturer of distribution pipeline parts. Among minor additional revisions to the natural gas incident, annual, and mechanical failure reporting forms, the Agency reinstated the section of the annual report form that collects the volume of product transported on transmission pipelines (PHMSA Form 7100.2-1, Part C). Second, the Agency further revised sections of the natural gas annual report form that collects information on MAOP determination methods and MAOP verification (PHMSA Form 7100.2-1, Parts R and Q). The Agency declined to remove the phrase “traceable, verifiable, and complete” from the instructions, as requested by INGAA, explaining the phrase is intended to provide guidance for operators to meet the statutory MAOP verification requirement at 49 USC 60139. The Agency also explained that information gathered in these sections will inform future rulemakings, presumably regarding MAOP determination under the grandfather clause and MAOP verification. The comment period on these revisions has been extended to December 27, 2013.
Two bills aimed at expediting pipeline construction permitting and, in turn, U.S. energy production are moving through the House of Representatives, but face opposition in the Senate and the White House. The Natural Gas Pipeline Permitting Reform Act (subject of May 9, 2013 alert) passed the House of Representatives by a large majority on Thursday, November 21, 2013. The bill, HR 1900, was introduced by Mike Pompeo (R-Kan.) to impose more stringent deadlines for agencies to issue licenses, permits or approvals for natural gas pipeline projects and to require FERC to approve or deny a certificate of public convenience or necessity no later than 12 months after providing public notice of the application. Despite its passage in the House, there is slim support for the bill in the Senate, with opponents citing the potential risks to public safety and the environment caused by insufficient review time. The White House has already threatened to veto the bill.
Federal law allows administrative agencies to adopt industry consensus standards into rules, giving such standards the force and effect of law. PHMSA incorporates numerous technical standards into its regulations (there are 64 standards presently incorporated into 49 C.F.R. Parts 192, 193 and 195). The Pipeline Safety Act amendments of 2012 directed the Agency to limit its adoption of technical standards, beginning in 2014, to those standards that are available to the public without cost. (For additional background information, see August 1, 2013 and August 12, 2013 alerts.) That directive has proven challenging for the Agency, as many standards committees fund their activities through sale of final standards. In addition to the ‘publicly available’ challenge, PHMSA often picks and chooses among various editions and updates of technical standards, making it critical that operators pay close attention to which version of a standard is incorporated into the rules.
In a growing trend, PHMSA has recently awarded substantive grants for pipeline safety research to numerous universities, consultants, and local pipeline safety groups. Collectively, these grants highlight the Agency’s increased focus on improved technologies for detecting pipeline defects, pipeline construction quality assurance and quality control, and public awareness education and training.
On October 22, 2013, House Representatives Upton (R-MI) and Green (D-TX) introduced the North American Energy Infrastructure Act, H.R. 3301. The bill is intended to streamline the permitting process for cross-border pipelines and electric transmission facilities by eliminating the Presidential permitting process, requiring that all requests for approval of cross-border oil pipelines be administered directly by the Secretary of Commerce and all requests for natural gas pipeline crossings be administered directly by FERC. The bill provides that requests “must be approved” within 120 days of being submitted, unless the request is found not to be in the national security interests. Notably, approvals issued under the Act would not constitute major federal action for purposes of NEPA.
Posted here are materials prepared by Hunton & Williams in addressing several legal issues at the 2013 AOPL Business Conference in Newport Beach, California, including:
- Briefing Papers Presented at the Strategy Roundtable Session
- Evolving Use of Corrective Action Orders (CAOs)
- PHMSA Penalty Policy
- Restart Plans
- State of Judicial Challenges to Agency Action (or inaction)
- Release Reporting Issues
Legal Committee Session Presentation
The City of San Francisco is currently appealing the Northern District of California’s dismissal of its claims brought under the citizen suit provision of the Pipeline Safety Act (PSA), including a claim that the Pipeline and Hazardous Materials Safety Administration (PHMSA) is required to ensure that pipeline safety standards are enforced by certified States and should limit the disbursement of federal funds accordingly. Appeal, City and County of San Francisco v. U.S. Dep’t. of Transp., No. 13-15855 (9th Cir. Apr. 26, 2013). On October 11, 2013, the Pipeline Safety Trust filed an amicus brief in support of the City of San Francisco’s appeal before the Ninth Circuit, marking the first time that the Trust has ever participated in litigation. The Trust is participating in the appeal based on its belief that the case could determine whether the Trust or others will be able to avail themselves of the citizen suit provision of the PSA, 49 U.S.C. 60121(a). The outcome of the City of San Francisco’s Ninth Circuit appeal should clarify how courts will interpret the PSA citizen suit provision, and may influence judicial review of PHMSA’s actions in the coming years.
PHMSA published an Information Collection Renewal Notice in June regarding the renewal of existing data that the Agency collects through the National Pipeline Mapping System (NPMS). 78 Fed. Reg. 36016 (June 14, 2013). Since that time, the Agency received one comment from the Pipeline Safety Trust (PST) requesting the following improvements to the data collected by the NPMS: (1) increase the accuracy of HCA data to assist local community emergency-planning efforts; (2) require that operators update NPMS information annually; and (3) require that operators provide system-specific information through the NPMS, such as pipe diameter, operating pressure, product transported, and potential impact radius. On September 18, 2013, PHMSA responded to the comment noting that it will consider these suggestions when evaluating further changes to the NPMS data requirements and by extending the comment period an additional thirty days to October 18, 2013. 78 Fed. Reg. 57455 (September 19, 2013). As discussed in a prior Pipelinelaw practice pointer on increased FOIA requests, PST’s comments touch upon issues related to sensitive infrastructure data, such as detailed information regarding pipeline location and characteristics, that may be protected from disclosure to third parties for security reasons under FOIA. The industry should be mindful of the risks inherent in making this information publicly available on the internet and possible options for limiting access to sensitive pipeline infrastructure information.
The Energy Information Administration (EIA) and other sources predict that the U.S. will exceed Russia in oil and natural gas production this year, for the first time in decades. See e.g., EIA, http://www.eia.gov/todayinenergy/detail.cfm?id=13251. Over the past 5 years, rapid development of oil and gas shale reserves in the U.S. has decreased oil and gas imports by 15% and 32%. In the past year, the U.S. has become the top producing nation for natural gas, with U.S. production almost equaling U.S. consumption (24.06 BCF/25.60 BCF). EIA, http://www.eia.gov/naturalgas/. At the same time, U.S. oil production is rising, although more slowly. While the U.S. remains the top oil consuming country in the world (18.6 TBD), U.S. oil production ranks third (11.1 TBD). EIA, http://www.eia.gov/petroleum/. Increasing trends toward U.S. energy independence underscore the importance of U.S. oil and gas transportation systems.