United States: Senate Passes Reauthorization Bill For PHMSA

Michael Friedberg,Senior Policy Advisor and David Whitestone, Partner are based in Holland & Knight's Washington D.C. office

Bill Puts Pressure on the Agency to Complete Delayed Congressional Pipeline Safety Mandates

HIGHLIGHTS:

• The U.S. Senate has passed the Securing America's Future Energy: Protecting our Infrastructure of Pipelines and Enhancing Safety Act (SAFE PIPES Act), reauthorizing the Pipeline and Hazardous Materials Safety Administration (PHMSA) from Fiscal Year (FY) 2016 through FY 2019.
• The House Energy and Commerce (E&C) Committee has recently introduced similar legislation to reauthorize the PHMSA, which has faced resistance from industry members.
• The PHMSA said it intends to issue natural gas pipeline safety rules in the next few weeks.

The U.S. Senate passed S. 2276, the Securing America's Future Energy: Protecting our Infrastructure of Pipelines and Enhancing Safety Act (SAFE PIPES Act) on March 3, 2016.

The SAFE PIPES Act would reauthorize the Pipeline and Hazardous Materials Safety Administration (PHMSA) from FY 2016 through FY 2019. The bill focuses on completing outstanding mandates from the 2011 reauthorization bill (the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011). Stakeholders have advocated for a limited bill because PHMSA has been so delayed in promulgating the 42 congressional mandates included in the 2011 pipeline safety bill. To date, PHMSA has completed only 26 of the 42 mandates. The Senate bill requires PHMSA to issue many other important rulemakings required by the 2011 Act, including a major natural gas rulemaking.

A Closer Look at Key Incomplete 2011 Mandates

Important outstanding mandates in the 2011 Act include:

Automatic and Remote-Controlled Shut-Off Valves for New Transmission Pipelines: Section 4 of the 2011 Act directs the Secretary of Transportation, if appropriate, to require by regulation the use of automatic or remote-controlled shut-off valves, or equivalent technology, where economically, technically and operationally feasible on transmission pipeline facilities constructed or entirely replaced after the date on which the Secretary issues the final rule. This would likely have huge costs with very few safety benefits to the industry.

Maximum Allowable Operating Pressure (MAOP): Section 23 of the 2011 Act directs the Secretary to require each pipeline owner or operator of an interstate and intrastate gas transmission pipeline in high consequence areas (HCA) – including those with populations of 50,000 or more, environmentally sensitive areas and commercially navigable waterways, or within close proximity of homes, buildings or an area that is frequently occupied – to: 1) verify the physical and operational standards of each pipeline segment; 2) identify and submit documentation to the Secretary on the MAOP of each pipeline segment; and 3) report any exceedances of MAOP within five days of when the exceedance occurs. The 2011 Act also requires the Secretary to issue regulations for testing the material strength of previously untested gas transmission pipelines in HCAs. PHMSA has issued three advisory bulletins to industry on the establishing and reporting of MAOP and verification of records. A rulemaking is still under consideration.

Integrity Management: Currently, owners or operators of gas and hazardous liquid pipelines are required to develop and implement written integrity management programs to ensure the integrity of their pipelines in HCAs and to reduce risk of injuries and property damage from pipeline failures. These programs must include procedures and three processes to identify HCAs, determine likely threats to a pipeline within a HCA, evaluate the physical integrity of a pipe within a HCA, and repair or remediate any pipeline defects found.

Section 5 of the 2011 Act requires the Secretary to transmit a report to Congress evaluating: 1) whether gas and hazardous liquid pipeline integrity management programs should be expanded beyond HCAs, and 2) whether applying integrity management program requirements to additional areas would mitigate the need for class location requirements (with respect to gas transmission pipeline facilities). Additionally, the 2011 Act directs the Secretary to issue final regulations, if the Secretary finds, in the report, that integrity management requirements should be expanded beyond HCAs. Though the congressionally mandated deadline for the report was Jan. 3, 2014, the report has not been completed.

Leak Detection: Section 8 of the 2011 Act required the Secretary to study and transmit a report to Congress on leak-detection systems utilized by operators of hazardous liquid pipelines and transportation-related flow lines to detect ruptures and small leaks. In conducting the study, the Secretary must analyze the technical limitations of current leak-detection systems and consider the practicability of requiring technical, operational and economically feasible leak-detection standards for operators.

The Secretary completed the study, submitted the report and found that it was practicable to establish such standards, and therefore the Obama Administration plans to issue final regulations to require operators to use leak-detection systems where practicable and establish standards for the capability of such systems to detect leaks. PHMSA says that a rule is currently under agency review.

House Legislation

Meanwhile, House Energy and Commerce (E&C) Committee Chairman Fred Upton (R-Mich.) is circulating a discussion draft of legislation that would reauthorize PHMSA. The bill is not specific on the length of the authorization. It is similar to the Senate's, with the exception of the House bill's Section 15 (Actions by Private Persons).

Section 15, which some call a "sue and settle" provision, would allow the public to take PHMSA to court over alleged regulatory inaction. It is opposed by most industry groups, including the Association of Oil Pipe Lines, The American Gas Association and the Interstate Natural Gas Association of America.

E&C Committee members have stated that they are working closely with the House Transportation and Infrastructure Committee (T&I) and expect committee votes this spring. T&I staff members have indicated that they will have their own draft and are currently sharing relevant portions with stakeholders.

Further, the PHMSA expects to issue natural gas pipeline safety rules in the next few weeks now that its proposals have been reviewed by the White House Office of Management and Budget (OMB), PHMSA Administrator Marie Therese Dominguez told an E&C subcommittee. This rule should encompass many of the mandates above and may create more regulatory burdens forced on industry.

Industry Considerations

A chart detailing PHMSA's progress in meeting the mandates of the 2011 Act is available from the PHMSA. Many of these rules are delayed because the costs are greater than the benefits which is needed by law. Thus, industry should analyze these regulations carefully to determine future legal requirements and whether they are overly burdensome.

As Congress finalizes legislation on these issues, they are seeking industry comments on the effects of these rules, especially the ones that will be issued this spring. Past experiences have shown that Congress will respond to overly burdensome regulations, but only if industry properly explains why the executive branch has gone too far.

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