Texas Railroad Commission Chairman on Effect of Export Ban on Jobs

July 8, 2015 § Leave a comment

Texas Railroad Commission Chairman David Porter @DavidPorterRRC testified before the U.S. Agriculture Committee on July 8, 2015 on the urgency of lifting the federal ban on crude oil exports. His testimony stressed the link between lifting the ban on crude exports and economic growth.  Chairman Porter spoke passionately about the economic impacts of the recent downturn in oil prices in Texas; resulting in mass layoffs and losses in state revenues that support key infrastructure.

Chairman Porter also stated that the crude oil export ban is responsible for the disparity between West Texas Intermediate (WTI), the U.S. pricing benchmark for crude – and the international benchmark, Brent.

For more information, read his full testimony.

Congressional Hearing on Pipeline Safety

July 8, 2015 § Leave a comment

In the wake of the recent Plains All American Pipeline (“Plains”) release, the U.S. House subcommittee on Energy & Power has issued a lengthy information request to Plains, and announced an upcoming hearing on Pipeline Safety Issues. The hearing will cover the progress of the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, with focus on seventeen Congressional mandates that have not yet been implemented by PHMSA. The hearing will be held on Tuesday, July 14, 2015, at 10:15 a.m. in 2123 Rayburn House Office Building. The hearing webcast will be available at http://energycommerce.house.gov.

On May 19,  crude oil was released from Plains’ 24-inch pipeline from Las Flores to Gaviota, located in Santa Barbara County, California. The company’s substantial cleanup efforts began quickly and the company reports that more than 95 percent of shoreline cleanup is complete, and all beaches, except Refugio State Beach, are open to the public.

PHMSA Advances Significant Changes in Notice of Proposed Rulemaking

July 3, 2015 § Leave a comment

On June 26, 2015 PHMSA issued a Notice of Proposed Rulemaking, which includes increased regulation in several key pipeline safety areas. The notice includes significant changes to the Operator Qualification rule, new required Control Room training, faster accident reporting, new renewal requirements for Special Permit holders, and new reporting on flow reversal and product changes. The NPRM includes new over-pressure protection inspection requirements for Transmission pipelines delivering to farm taps. In addition, the notice proposes PHMSA’s cost recovery fee structure for major project design review.

Key changes advanced include:

Proposed Changes Impacting Special Permits

PHMSA is proposing to add a renewal procedure to the pipeline safety regulations for those Special Permits that have been issued with expiration dates. This procedure will offer PHMSA another bite at the apple to potentially pull a special permit or require additional safety measures deemed to maintain safety and the environment. This proposed change would add an element of uncertainty to special permits and potentially additional significant costs to operators.

Proposed Requirements to inspect Farm Taps

PHMSA is proposing to amend Part 192, Subpart M – Maintenance by adding a new section that prescribes inspection activities under the existing States and Federal pipeline safety inspection programs for pressure regulators and overpressurization protection equipment on service lines that originate from transmission, gathering, or production pipelines. Currently, Federal pipeline safety requirements do not include overpressurization protection for farm taps. This new requirement would include inspection of farm-tap pressure regulating/limiting device, relief device, and automatic shutoff device every 3-years to make sure these safety equipment are in good working conditions.

While adding new requirements for transmission pipelines, PHMSA proposes to exclude farm taps from the requirements of the Distribution Integrity Management Program (DIMP).

Proposed Changes to Significantly Expand Operator Qualification (OQ)

PHMSA is proposing to expand the existing OQ rule scope to cover new construction and other currently uncovered tasks by redefining a “covered task.”  PHMSA is proposing to eliminate the 4 part test for determining a covered task and proposed to define a covered task as any maintenance, construction or emergency response task the operator identifies as affecting the safety or integrity of the pipeline facility. Other proposed changes to OQ include:

  • a new requirement for evaluators of individuals performing covered tasks, including training requirements for new construction tasks as the current OQ requirements do not include new construction tasks;
  • a “Program Effectiveness” requirement at §§ 192.807 and 195.507 to ensure that operators complete a review of the effectiveness of their OQ program;
  • additional record requirements in §§ 192.809 and 195.509 that are normally reviewed during the inspection of OQ programs and are necessary to provide a thorough overview of an OQ program. The additional records would include records that document evaluators’ performance and program effectiveness;
  • a new paragraph (b)(5) to §§ 192.631 and 195.446 to require each operator to define the roles and responsibilities and qualifications of others who have the authority to direct or supersede the specific technical actions of controllers;
  • clarification of requirements addressing management of change and the communication of those changes; and
  • adding gathering lines to the OQ rule through modification of §§ 192.9 and 195.11 to require operators to establish and administer an OQ program covering personnel who perform work on Type A gas gathering lines in Class 2 locations, regulated Type B onshore gas gathering lines and regulated hazardous liquids gathering lines in rural locations.

Proposed Additional Notification Requirements

The NPRM proposes a 60 day advance notice to PHMSA of the reversal of flow of product or change in product in a mainline pipeline. This notification is not required for pipeline systems already designed for bi-directional flow. The proposed rule would require operators to notify PHMSA electronically no later than 60 days before there is a reversal of the flow of product through a pipeline and also when there is a change in the product flowing through a pipeline.  In addition, a modification is proposed to  reflect the 60-day notification to PHMSA when over 10 miles of pipeline is replaced.

 Proposed Changes to Integrity Management: Pipeline Assessment Tools

PHMSA proposes to incorporate by reference the following consensus standards into 49 CFR Part 195: API STD 1163, “In-Line Inspection Systems Qualification Standard” (August 2005); NACE Standard Practice SP0102-2010 “Inline Inspection of Pipelines” NACE SP0204-2008 “Stress Corrosion Cracking Direct Assessment;” and ANSI/ASNT ILI-PQ-2010, “In-line Inspection Personnel Qualification and Certification” (2010). Also, PHMSA proposes to allow pipeline operators to conduct assessments using tethered or remote control tools not explicitly discussed in NACE SP0102-2010, provided the operators comply with applicable sections of NACE SP0102-2010.

While this proposed rulemaking action addresses only Part 195, PHMSA is considering a similar proposed requirement in 49 CFR Part 192 for gas pipelines.

 Control Room Team Training Requirement

PHMSA is proposing explicit control room team training requirement for all individuals who would be reasonably expected to interface with controllers during normal, abnormal or emergency situations in §§ 192.631(h) and 195.446(h) to include supervisors or others intervening in control room operations.

 Accident and Incident Notification

PHMSA proposes to faster reporting; requiring operators to provide telephonic or electronic notification of an accident or incident at the “earliest practicable moment,” including the amount of product loss, following the confirmed discovery of an accident or incident, but not later than one hour following the time of such confirmed discovery. Further, PHMSA is proposing to require operators to revise or confirm that initial notification within 48 hours of confirmed discovery of the accident or incident.

 PHMSA Cost Recovery

PHMSA proses a prescribed fee structure and assessment methodology for recovering costs associated with design reviews of new gas and hazardous liquid pipelines with either overall design and construction costs totaling at least $2,500,000,000 or that contain new and novel technologies.

PHMSA has developed a sample master cost recovery agreement that would be used between PHMSA and the applicant for a project proposal meeting the criteria of proposed 49 CFR Part 190, Subpart D requirements. The sample master cost recovery agreement will be posted on PHMSA’s website and in Docket No. PHMSA- 2013-0163. A master cost recovery agreement would include at a minimum:

(1) Itemized list of direct costs to be recovered by PHMSA;

(2) Scope of work for conducting the facility design safety review and an estimated total cost;

(3) Description of the method of periodic billing, payment, and auditing of cost recovery fees;

(4) Minimum account balance which the applicant must maintain with PHMSA at all times;

(5) Provisions for reconciling differences between total amount billed and the final cost of the design review, including provisions for returning any excess payments to the applicant at the conclusion of the project;

(6) A principal point of contact for both PHMSA and the applicant;

(7) Provisions for terminating the agreement; and

(8) A project reimbursement cost schedule based upon the project timing and scope.

Taking Discretion out of Drug and Alcohol Testing 

PHMSA proposes to require drug testing of employees after an accident and allowing exemption from drug testing only when there is sufficient information that establishes the employee(s) had no role in the accident. The change would require operators to document specific reasons justifying when testing was not administered and to keep such documentation for at least three years.

 In-Service Welding

Currently, PHMSA does not allow in service welding, but this proposal would allow the operators to follow Appendix B of API 1104 for in service welding. Therefore, PHMSA proposes to revise 49 CFR 192.225, 192.227, 195.214, and 195.222 to add reference to API 1104, Appendix B.

The full 110 page text outlining the proposed changes to 49 CFR Parts 190, 191, 192, 195, and 199 can be found here on PHMSA’s website.  Comments are due 60 days from the date of publication in the Federal Register.

New Pipeline Safety Act Passed in Canada, Expect New Broad Regulations from the NEB

June 30, 2015 § Leave a comment

On June 18, 2015, the new Federal Pipeline Safety Act (Bill C-46) received Royal Assent. The Pipeline Safety Act includes amendments to the National Energy Board Act and the Canada Oil and Gas Operations Act.The amendments are effective June 18, 2016.

Key amendments include codification of the “polluter pays” principle, which will make any party whose fault or negligence causes an unintended or uncontrolled release of oil or gas responsible for the resulting costs, with no limit or ceiling on liability. The costs that can be recovered include actual damages from the release, as well as the costs of a Government, Aboriginal governing body or other party that takes action in response to the release.

The amendments to the NEB Act will also impose liability on a pipeline operators and constructors for a release, even where no fault or negligence is shown. In the case of a pipeline with the capacity to transport at least 250,000 barrels of oil per day, the limit of this strict liability is $1 billion. For other pipelines, the limit  will be set through new regulations. The statute of limitations to initiate these claims is three years after damages occur but no later than  six years after the date of the release.  Liability for these claims is joint and several.  Accordingly, a plaintiff may recover all the damages from any of the defendants regardless of their individual share of the liability. Companies that construct and operate pipelines will be required to maintain financial resources necessary to pay the amount of their strict liability exposure. The NEB may consider the company’s financial statements, letters of credit and insurance in determining whether this requirement is met. Pipeline companies may be allowed to participate in a “pooled fund” to cover their exposure. Stay tuned for the details to come through new NEB regulations.

The Pipeline Safety Act also clears the way for new rigorous regulation of pipeline abandonment.  Extensive new powers are established that allow NEB to oversee pipeline abandonment, including requiring financial assurance from owner/operators to cover the costs related to abandoned pipelines.  The Pipeline Safety Act establishes a new as-required tribunal to adjudicate claims for damages from pipeline releases and authorizes NEB to designate a third-party to oversee repairs and remediation if the operator fails to comply with NEB direction.

New Regulations Coming for Gathering Lines

June 16, 2015 § Leave a comment

Every time I speak at industry conferences, I am asked “what’s on the horizon for new regulation?” For the last five years, I’ve been predicting more rigorous regulation of gathering lines.

Anyone paying attention to the heightened scrutiny and increased regulation of pipelines recognizes the influence of the National Transportation Safety Board (NTSB).  Although NTSB has no jurisdiction to regulate pipelines, the safety concerns raised by NTSB are always eventually acted on in subsequent rulemaking by PHMSA.  Former NTSB Chairman Deborah Hersman gave testimony in  2010 before the Subcommittee on Railroads, Pipelines, and Hazardous Materials, Committee on Transportation and Infrastructure, Hearing on The Safety of Hazardous Liquid Pipelines–Regulated versus Unregulated Pipelines detailed NTSB’s continuing concerns about the regulation of low-stress pipeline systems including gathering lines.  Ms. Hersman’s testimony included details from two fatal incidents occurring on two unregulated pipelines in Texas. Both incidents resulted from excavation damage when third parties hit unmarked pipelines.

PHMSA responded with two Advanced Notices of Proposed Rulemaking (ANPRMs); Pipeline Safety: Safety of On-Shore Hazardous Liquid Pipelines,” published in the Federal Register in October of 2010 and “Pipeline Safety: Safety of Gas Transmission Pipelines” published in August of 2011 on safety issues and data collection needs.

Congress also responded to NTSB’s concerns by requiring PHMSA to conduct a review of existing state and federal regulations for gas and hazardous liquid gathering lines.  This was one of many studies required under The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011.  PHMSA was required to submit a report of the review and recommendations to the Committee on Transportation and Infrastructure, and the Committee on Energy and Commerce of the House of Representatives, and the Committee on Commerce, Science, and Transportation of the Senate.

PHMSA released its study to Congress on May 8, 2015. It should come as no surprise that based on the study, PHMSA reports considering the need to propose new regulations of natural gas and hazardous liquid gathering lines and consider eliminating existing exemptions from Federal regulations using risk-based assessment and prioritization. Stay tuned.

Vote Expected This Week on Minnesota Pipeline

June 4, 2015 § Leave a comment

The Minnesota Public Utilities Commission is hearing testimony June 3, 2015 on whether the Sandpiper pipeline proposed by Enbridge Energy is needed to transport North Dakota crude to refineries in the Midwest. A vote is expected on Friday. The new line would help relieve the bottleneck of oil coming out of the Bakken region. minnesota

Pipeline Safety Act Moving Through Canadian Parliament

March 21, 2015 § Leave a comment

Coined the Polluter-Pays enactment, Bill C-46  would amend the statutory liability regime for federally regulated pipelines in Canada. The bill imposes unlimited liability of pipeline operators  if an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline that they operate arising from their fault or negligence,  and requires financial assurance for the life of assets including post abandonment.  The bill:

  • establishes the limit of strict liability (without proof of fault or negligence) at no less than one billion dollars for companies that operate pipelines that have the capacity to transport at least 250,000 barrels of oil per day and at an amount prescribed by regulation for companies that operate any other pipelines;
  • requires that companies that operate pipelines maintain the financial resources necessary to pay the amount of the limit of liability that applies to them;
  • authorizes the National Energy Board (NEB) to order any operator of a pipeline with an unintended or uncontrolled release of oil, gas or any other commodity occurs to reimburse any government institution the costs it incurred in taking any action or measure in relation to that release;
  • requires that operators remain responsible for their abandoned pipelines;
  • authorizes the NEB to order operators to maintain funds to pay for the abandonment of their pipelines or for their abandoned pipelines;
  • allows the Governor in Council to authorize the NEB to take, in certain circumstances, any action or measure that the NEB considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
  • allows the Governor in Council to establish, in certain circumstances, a pipeline claims tribunal whose purpose is to examine and adjudicate the claims for compensation for compensable damage caused by an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
  • authorizes, in certain circumstances, that funds may be paid out of the Consolidated Revenue Fund to pay the costs of taking the actions or measures that the NEB considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline, to pay the costs related to establishing a pipeline claims tribunal and to pay any amount of compensation that such a tribunal awards; and
  • authorizes the NEB to recover those funds from the company that operates the pipeline from which the release occurred and from companies that operate pipelines that transport a commodity of the same class as the one that was released.

As of March 9, 2015, Bill C-46 was referred to the Standing Committee on Natural Resources.  For more details, read the full bill text.

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