The Interagency Task force on Natural Gas Storage Safety formed last April in response to the massive prolonged Aliso Canyon gas leak, recently issued its report on the safety and reliability of underground natural gas storage. The report responds to a Congressional mandate in the recent reauthorization of the Pipeline Safety Act. It includes numerous (44) recommendations to industry to reduce the likelihood of leaks at underground natural gas storage facilities and minimize the impacts of leaks when they occur. These recommendations are not binding, but PHMSA is required to consider them in issuing final rules pursuant to 2016 Pipeline Safety Act amendments. The report recommendations primarily address well integrity, risk management, and data gathering and recordkeeping, which are likely to be incorporated in PHMSA’s forthcoming interim final rule to establish minimum federal standards. The Agency plans to issue an interim final rule before the end of this year. As this will be a new area of regulation for the Agency, industry should be mindful of the various legal issues regarding jurisdiction, state regulation and preemption, and dual jurisdiction, among others.
PHMSA recently issued pre-publication copies of several rules and notices, which have now been formally published in the Federal Register, triggering various deadlines. On Friday, October 14, 2015, the Agency published (1) interim final emergency order rules authorizing the issuance of emergency orders to the entire industry in response to imminent hazards under certain conditions (effective immediately) and requesting industry comments within sixty days and (2) a final gas distribution excess flow valve rule, expanding requirements for excess flow valves in distribution service lines effective in six months. On Monday, October 17, 2016, the Agency for the first time published its civil penalty policy, noting that operators in enforcement proceedings may request a proposed civil penalty calculation in PHMSA enforcement actions.
A group referring to itself as “Climate Direct Action” claimed to have shut down five major cross-border oil pipelines in various states on Tuesday October 11, 2016: Minnesota (Enbridge Lines 4 and 67 near Leonard), Montana (Spectra Energy’s Express Pipeline near Coal Banks Landing), North Dakota (TransCanada’s Keystone Pipeline near Walhalla) and Washington State (Kinder Morgan’s Trans Mountain Pipeline near Anacortes). Enbridge confirmed that activists with bolt cutters broke into a valve station in Minnesota prompting them to shut down two pipelines as a precautionary measure. In total, four of the pipelines were temporarily closed and the fifth (Kinder Morgan’s Trans Mountain pipeline) was not in service when activists attempted to turn it off.
On October 11, 2016, PHMSA released a Policy Statement notifying owners and operators of oil and gas pipelines that it is finally making its civil penalty framework publicly accessible, and that respondents may now request proposed civil penalty calculations in enforcement actions. The Agency is already projected to issue the highest amount of proposed civil penalties in a single year in 2016, and this notice signals that it will “as appropriate, issue higher penalties in order to apply stronger deterrence and drive down incident risk.” PHMSA also confirms the increased penalty amounts as adjusted for inflation for violations occurring on or after August 1, 2016, as a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (with maximum civil penalty per day now capped at $205,638 and $2,056,380 for a related series of violations).
PHMSA released a pre-publication copy of its final rule expanding requirements for excess flow valves in natural gas distribution service pipelines. Excess flow valves automatically close and stop the flow of gas when there is a significant increase in gas flow (e.g., due to a damaged pipeline), thereby decreasing the risk of subsequent fire and rupture. These devices are currently required in new and replaced service pipelines that supply single-family residences. The recent rule, which will be effective six months after publication in the Federal Register, expands existing valve requirements to require: (1) installation of excess flow valves in new or replaced service lines to certain multi-family facilities, small commercial facilities, and branch service lines serving single family residences; (2) installation of manually operated curb valves or excess flow valves in new or replaced large capacity service lines; and (3) that operators notify customers of their ability to request installation of excess flow valves on existing service lines to serve multi-family and commercial customers and that operators perform installations as requested.
A previously abandoned natural gas pipeline exploded in Seattle, Washington on March 9, 2016, injuring nine firefighters, destroyed two buildings, and damaged multiple nearby structures. The entity responsible for regulating intrastate and interstate gas pipelines in the state, the Washington Utilities and Transportation Commission, recently released a report from its investigation of the incident, concluding that it was caused by (1) external damage to the above-ground portion of the service line; and (2) improper abandonment of the line, which had not been cut and capped when it was taken out of service in 2004. The report highlights the importance of adhering to federal regulatory requirements concerning proper pipeline abandonment, which was also the subject of a recent PHMSA Advisory Bulletin issued in response to a Congressional directive in the 2016 PIPES Act.
Taking the first step to implement its new emergency order authority, PHMSA has issued an interim final rule which will be effective immediately upon publication in the Federal Register. Final rules must be issued by March 19, 2017, but PHMSA will accept and consider comments filed within 60 days of publication. Congress conferred pipeline emergency order authority to PHMSA in the Protecting our Infrastructure of Pipeline and Enhancing Safety (PIPES) Act of 2016 . Under the Act, PHMSA can issue emergency orders to a group of operators or the entire industry based upon a written finding that an unsafe condition or practice constitutes or is causing “an imminent hazard” which must be corrected immediately. An entity subject to the order would be able to petition PHMSA for administrative review of the order, requesting a formal or informal hearing, and subsequent expedited judicial review in federal District Court. While the interim final rule largely tracks the relevant provisions of the PIPES Act and existing hazardous materials regulations, there are several important aspects of the rule that may require clarification and industry comment, particularly with respect to the basis for issuance, effective notice and time to appeal and the fact that the Agency retains unilateral authority to extend the effectiveness of an order during any proceedings.
The recent shut-down of Colonial Pipeline Company’s Line 1 in Alabama should remind the public and the government just how critical oil and gas pipelines are to America’s energy supply needs. As in most of the country, energy and food supplies are generally replaced on a short time frame, with three days being a typical limit on storage. Any disruption in service thus creates a shortage in essential services, in very short order. Gas prices in six Eastern states jumped quickly after the Colonial incident, due to increased costs and limits on product volume shipped by truck. Colonial is working diligently with PHMSA to investigate, repair and remediate the incident site, and, even as that work is ongoing, Colonial is constructing a temporary bypass line to restore service as quickly as possible. But Colonial’s Line 1 supplies upwards of 40% of all refined gasoline needs along the East Coast, and until pipeline service is restored, the effects will be noticed by a large percentage of the U.S. population.
Since the Administration denied a Presidential (border crossing) Permit to the Keystone XL Project in 2015, a number of regional, state or local objections to new pipeline construction projects have emerged around the U.S. Most of the protests have continued themes relied on by opposition to Keystone, including the claim that fossil fuels should remain in the ground in order to limit the impacts of climate change. Groups such as the Sierra Club and Earth Justice have acknowledged that they selected Keystone as a tangible subject to carry their climate change message, which is otherwise rather abstract. Ironically, the Keystone and subsequent protests seem to focus on oil and gas as more emblematic of fossil fuels than coal, and they ignore the significant safety advantages in transporting energy by pipeline as compared to any other method. In addition, they ignore economic and safety factors that counsel in favor of new pipeline construction, and avoid discussion about the realistic availability of alternative energy resources provide a majority of U.S. demand in the near future.
PHMSA issued an advisory to operators regarding the applicability of its safety regulations to idled, inactive and abandoned pipe. Congress directed PHMSA to issue such an advisory in the recent PIPES Act of 2016, in response to several high profile incidents involving idled pipe. While operators frequently refer to idled, decommissioned, mothballed and/or inactive pipe, PHMSA does not recognize those terms. In its advisory, the Agency explains that it considers pipelines to be either active and subject to all relevant safety regulations or abandoned (i.e. permanently removed from service). With respect to a pipeline that is “purged” of all combustibles but not yet formally abandoned, PHMSA confirms its current practice of accepting deferral of certain activities, including inline inspection, as long as deferred activities are completed prior to or as part of returning a pipeline to service. This is consistent with prior PHMSA guidance.