The National Transportation Safety Board (NTSB or the Board) recently released a Safety Study on the need for safety improvements to the natural gas Integrity Management Program (IMP). The Board concluded that there is no evidence that the occurrence of gas transmission pipeline incidents in highly populated areas have declined since implementation of IMP rules, and that incidents attributed to causes other than corrosion and material defects have increased from 2010 to 2013. The NTSB also found that the intrastate incident rate in these highly populated areas, called high consequence areas or HCAs, from 2010 to 2013 was significantly higher as compared to interstate transmission lines (27% higher per every 1,000 miles). Further, despite the emphasis in the IMP regulations on time dependent threats such as corrosion, gas transmission incidents associated with corrosion continue to disproportionately occur on pre-1970 pipelines.
Two recent PHMSA-sponsored publications emphasize stakeholder advance planning as key to reducing the likelihood and consequences of pipeline incidents. The first, a Guide for Communicating Emergency Response Information for Natural Gas and Hazardous Liquids Pipelines, was published in 2014 by the Transportation Research Board (TRB) under contract with PHMSA as a resource on pre-incident information sharing between pipeline operators and emergency response planners. The second, Hazard Mitigation Planning: Practices for Land Use Planning and Development Near Pipelines, was prepared in 2015 by the Pipeline and Informed Planning Alliance (PIPA) and sponsored by PHMSA and the Federal Emergency Management Agency (FEMA) as a guide for State and local governments in considering hazard mitigation strategies for proposed land development near existing gas and hazardous liquid transmission pipelines. Both guidance documents emphasize the importance of stakeholders using available resources to understand the potential impacts of a pipeline incident and working collaboratively to minimize those impacts.
The US oil and gas industry has been transformed over the past few years by development of new shale resources. The US is now the world’s largest producer of natural gas and on track to be the world’s largest producer of oil. These changes have affected America’s energy future, as well as global markets. With so much new production on the market, and continuing economic stagnation in Europe and China reducing demand, the global price of oil dropped dramatically in the last half of 2014. As Pulitzer Prize-winning analyst Daniel Yergin observed recently, America has now unexpectedly replaced OPEC as the world’s “swing producer” of oil and gas. As a result, US oil and gas producers must now make new decisions about investment, production and rate of return ratios. Against this backdrop, there are, as always, many other issues that will affect decisions and the market landscape.
EPA has proposed to revise requirements under the National Oil and Hazardous Substance Contingency Plan (NCP) to address concerns raised during the Deepwater Horizon oil spill pertaining to the use of dispersants and other spill mitigating products. Specifically, the proposed revisions address concerns relating to NCP standards for the efficacy, toxicity, and environmental monitoring of dispersants.
As a stark reminder of the availability of criminal sanctions for violations of federal pipeline safety regulations, a pipeline corrosion monitor has pleaded guilty to charges brought under the federal Pipeline Safety Act (49 U.S.C. 60101 et seq.) and faces up to 15 years in prison and $750,000 in fines.
The North Dakota Industrial Commission (NDIC) issued an order last month requiring Bakken producers to condition crude oil prior to transport in order to make it safer for shipment by rail (the Order). The Order follows a series of federal regulatory and legislative efforts intended to improve the safety of transportation of crude by rail. [See prior posts on PHMSA crude by rail safety alert and proposed crude by rail safety rules]. State legislative and regulatory efforts to impose requirements in areas already regulated by federal law may raise constitutional concerns under the doctrine of preemption. The Order is potentially vulnerable to a preemption challenge if it can be shown that it mandates practices inconsistent with applicable federal regulations occupying the field, including in particular interstate rail transportation of hazardous materials, and that it unreasonably burdens interstate commerce.
PHMSA published a final rule to amend the federal pipeline safety regulations to incorporate by reference new and updated editions of industry standards, among other non-substantive editorial corrections and clarifications. The Agency incorporates various technical industry standards and design specifications into its regulations that, as a result, effectively will have the force of law as if they were published in the federal regulations. These standards have not been updated in the regulations since 2010.
In light of anticipated increases in operator compliance costs associated with PHMSA safety initiatives, FERC is issuing a Proposed Policy Statement for public comment that would allow interstate natural gas pipelines to use cost recovery mechanisms, such as surcharges or cost trackers, to recoup expenditures related to improved safety, reliability, and regulatory compliance. Comments on this proposed change will be due within 30 days of the proposal’s publication in the Federal Register, with reply comments due 20 days later (thus initial comments will be due after January 3, 2015).
The development of new oil and gas in various shale plays around the U.S. has led to a rise in the number of transfers and acquisitions of pipeline assets. Prudent operators have always requested and reviewed documentation as part of their due diligence in making acquisitions, but it is becoming increasingly important that certain records be located during due diligence or factored into the transaction if such records are lacking and must be recreated. Decision makers involved in pipeline acquisitions may only involve pipeline safety managers or counsel late in the process, without sufficient time to include the issue of records as part of the transaction. That can be a costly mistake.
PHMSA regulations require operators to perform random drug testing on a certain percentage of their “covered employees” (i.e. employees, contractors, and contractor employees who perform regulated operations, maintenance, or emergency response functions on a pipeline or LNG facility, 49 C.F.R. Part 199.3). 49 C.F.R. Part 199.105(c). The Agency publishes the minimum percentage of covered employees subject to random drug testing each year, with the percentage to become applicable on January 1 of the calendar year following publication. Id. According to a recent Federal Register Notice, PHMSA has determined that the minimum random drug testing rate for covered employees will remain at the current rate, 25 percent, during calendar year 2015.