Recent legislative and regulatory developments at the federal and state levels signal lawmakers’ increased attention to issues related to the abandonment of oil and gas pipelines. The U.S. House of Representatives is currently considering a bill, proposed earlier this year in the wake of a release of crude oil in the streets of a Los Angeles suburb from an out-of-service pipeline. The bill would amend the federal Pipeline Safety Act to require inspections of pipelines to confirm their status each time they are listed as abandoned or transferred as part of a sale. Just after this bill was introduced in the House, the State of Louisiana passed a law requiring approval from the State Public Service Commission for the abandonment of portions of interstate natural gas pipelines entirely within the State, allowing the Commission to deny such approval if abandonment would cause gas supply inadequacies. Other states, such as North Dakota, have also recently passed legislation concerning proper procedures for pipeline abandonment. These developments reflect the range of issues associated with pipeline abandonment, from public safety to energy supply reliability.
Safety of Abandoned Pipelines
PHMSA regulations concern the safety of abandoned pipelines, which the Agency defines as lines that are “permanently removed from service.” 49 C.F.R. Part 192.3; 195.2. PHMSA regulations prescribe certain steps for formal abandonment of both oil and gas pipelines, including the disconnection, purging and sealing of abandoned pipelines left in place. Parts 192.727(b); 195.402(c)(1). In addition, operators are required to file an abandonment report for each abandoned facility that is offshore or crosses a navigable waterway, including certification that the facility was abandoned in accordance with all applicable laws. Parts 192.727(g); 195.59. Operators must also report the total number of actionable anomalies potentially affecting HCAs that were eliminated by pipe abandonment in the previous calendar year on their annual reports. PHMSA Forms 7000-1.1; 7100.2-1.
Despite the fact that PHMSA regulations concern only two types of pipelines—those that are either active or abandoned—the pipeline industry has long used various terms (‘temporarily idled,’ ‘out of service,’ ‘retired,’ etc.) to refer to a third category of pipelines, those that are not currently in use but have not been abandoned in accordance with the regulations. Significantly, this category of pipe, precisely because it has not yet been formally abandoned, is subject to pipeline safety regulations at 49 C.F.R. Parts 192 and 195. PHMSA Interpretation for Equistar Chemicals (April 6, 2009) (“Ceasing normal operation of a pipeline does not remove the pipeline from PHMSA’s jurisdiction.”). What that means in practice is that a line taken out of service but not formally abandoned must continue to comply with O&M and IMP inspection and maintenance obligations. PHMSA has acknowledged, however, that pipelines in this category pose varying levels of risk to public safety and has said in guidance that while “out-of-service” pipe purged of gas or hazardous liquid is still technically subject to Parts 192 and 195 (including requirements pertaining to inspection, maintenance, cathodic protection, and integrity management), it may be eligible for deferral of certain requirements, such as integrity management activities. PHMSA Gas Transmission Integrity Management FAQs, FAQ-7; PHMSA Hazardous Liquid Integrity Management FAQs, FAQ-2.3.
Energy Supply Issues
Abandonment of gas pipelines is more burdensome than oil lines. FERC regulates the interstate transportation of natural gas “in the public interest,” and its approval is required prior to the abandonment of natural gas facilities or service. 15 U.S.C. §§ 717(b); 717f(b). FERC approval is conditioned upon its finding that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that abandonment is consistent with the future public convenience or necessity. Id. FERC regulations place the burden upon applicants to demonstrate, among other things, that natural gas is available from other sources to customers whose service will be terminated by abandonment and they require applicants to state the economic effect of abandonment on their customers. 18 C.F.R Part 157.18.
Recent controversy surrounding abandonment of the Midla pipeline, which provides gas service to customers in southern Louisiana, illustrates the importance of energy supply availability to FERC’s “public convenience” determination. Midla’s application to FERC for approval to abandon the pipeline, which cited concerns for the line’s integrity and the safety of its continued operation, sparked public outcry over its projected impacts on Louisiana gas customers. U.S. Senator Mary Landrieu (along with several other politicians and the State’s municipal gas authority) objected strongly to the pipeline’s abandonment, estimating that it could “result in at least a doubling of an average home owner’s monthly utility bill.” The State legislature responded by proposing and passing the aforementioned bill giving State authorities more control over decisions related to pipeline abandonment. After FERC-sponsored settlement negotiations with affected stakeholders, Midla has preliminarily agreed to replace portions of the line to improve service rather than abandoning it altogether.
Common Law Liability Concerns
In addition to regulatory obligations, the owner of an abandoned pipeline continues to have potential liability under common law for any nuisance or hazard that may be created by leaving pipe in the ground. These issues vary by state and each fact situation, and become more acute when water crossings are included. Operators are encouraged to review potential liabilities in the course of making abandonment decisions.
In light of recent developments, pipeline abandonment will likely be subject to increased public attention and regulatory scrutiny in the future. Operators should ensure that they are aware of all potential issues associated with proposals to abandon facilities or service, and they should be prepared to demonstrate compliance with applicable laws and regulations.