Summary

On March 17, 2016, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued a Notice of Proposed Rulemaking (“NOPR” or the “Proposed Rule”) updating safety requirements for natural gas transmission pipelines, including those governing the risk-based integrity assessment, repair, and validation program that transmission pipelines must develop under PHMSA’s regulations, referred to as “integrity management” or “IM.” The NOPR addresses four congressional mandates established by the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 and six recommendations by the National Transportation Safety Board.

Implications

The highly-anticipated NOPR could potentially impose significant regulatory requirements under PHMSA’s regulations upon many additional miles of pipeline, including pipelines constructed prior to 1970 and previously exempt from PHMSA’s regulations, additional natural gas gathering lines, and pipelines located in moderately populated areas. The Proposed Rule also would impose additional requirements associated with IM repair criteria, direct assessment methods, and internal and external erosion control. Industry participants have already expressed concern over the costs and potential service disruptions associated with the implementation of these new requirements. Notably, costs of compliance with the Proposed Rule, if adopted, could potentially affect shippers on pipelines as well as pipeline operators, as the Federal Energy Regulatory Commission has allowed many interstate transmission pipelines to pass on costs attributable to safety measures directly to shippers, sometimes through tracking mechanisms that allow pipelines to collect separate safety-related costs from shippers without exposing the pipeline’s full rates to regulatory review.

Scope of Rulemaking

The NOPR would significantly expand pipeline safety regulations by proposing new assessment and repair criteria for gas transmission pipelines, and by expanding those requirements to include pipelines located in areas of medium population density, or Moderate Consequence Areas (“MCAs”). Specifically, the NOPR proposes changes to IM and non-IM requirements that establish how pipeline operators must evaluate and repair the integrity of transmission pipelines that could affect High Consequence Areas (“HCAs”) and would increase requirements for monitoring and inspection of pipeline segments located outside of HCAs. The NOPR also proposes to expand the regulation of onshore gas gathering lines by repealing currently effective exemptions from reporting obligations.

Preventive and Mitigative Measures for Pipeline Segments in HCAs

The NOPR proposes to clarify the guidance for risk analyses that operators use to evaluate and select additional preventive and mitigative measures. Additionally, the Proposed Rule expands the preventive and mitigative measures that operators must consider, requires that seismicity be analyzed to mitigate the threat of outside force damage, and adds specific enhanced measures for managing external corrosion and internal corrosion inside HCAs.

With respect to internal and external corrosion control, operators would be required to conduct periodic close-interval surveys, coating surveys, interference surveys, and gas-quality monitoring inside HCAs. PHMSA intends to address preventive and mitigative measures regarding leak detection and automatic valve upgrades in subsequent rulemakings.

Modifying Repair Criteria

The NOPR proposes to revise the repair criteria for pipelines in HCAs, including repair criteria for cracks and crack-like defects, corrosion metal loss, and mechanical damage defects. The NOPR also proposes to establish repair criteria for pipelines that are outside of HCAs.

Improving Requirements for Collecting, Validating, and Integrating Pipeline Data

The NOPR proposes to clarify the requirements for collecting, validating and integrating pipeline data and would establish attributes that must be included in pipeline data. Specifically, the NOPR would explicitly require that operators analyze and integrate pipeline data into IM risk assessment and other analyses of pipeline integrity. Further, the NOPR proposes that data be verified and validated and would impose new requirements to ensure that records used to establish the Maximum Allowable Operating Pressure (“MAOP”) of pipeline facilities are reliable, traceable, verifiable, and complete.

Increasing Requirements on the Selection and Use of Assessment Methods

After HCAs are identified, operators are required to use one or more assessment methods to measure for corrosion, deformations, cracking, or other hazards that could reduce integrity to a point where protection against leakage or rupture cannot be assured. Pipeline operators must perform assessments and prioritize necessary repairs. The NOPR proposes to strengthen requirements for the selection and use of assessment methods by adding more specific requirements for internal inspection tools, and by requiring operators to explicitly consider uncertainties in reported results, including those due to uncertainties in the model and the data used in the risk assessment (i.e., tool tolerance, detection threshold, probability of detection, probability of identification, sizing accuracy, conservative anomaly interaction criteria, location accuracy, anomaly findings, and unity chart plots or equivalent for determining uncertainties and verifying actual tool performance). The Proposed Rule would require that direct assessment (i.e., an integrity assessment method limited to evaluating external corrosion, internal corrosion, and stress corrosion cracking) only be allowed when the pipeline cannot be assessed using in-line inspection tools.

Expansion of Regulations to Moderate Consequence Areas

The NOPR proposes to expand certain IM requirements to MCAs. MCAs would be used to define the subset of non-HCA pipeline locations where periodic integrity assessments are required, where material documentation verification is required, and where MAOP verification is required. The Proposed Rule would apply three IM program elements (assessment, periodic assessment, and remediation of discovered defects) to MCAs, but would not apply to MCAs all of the other IM requirements applicable to HCAs. PHMSA is seeking comments on the costs and benefits attributable to shorter and longer initial assessment periods and re-assessment intervals.

Regulation of Previously Exempt Facilities

The NOPR proposes requirements for verification of MAOP for certain onshore, steel gas transmission pipelines, including establishing and documenting MAOP for the life of the pipeline and confirming and recording the physical and operational characteristics of pipelines for which adequate records are not available. Further, the NOPR proposes to require that all gas transmission pipelines constructed before 1970 be subject to a hydrostatic pressure test that incorporates a “spike” test.

Increased Regulation of Gas Gathering Lines

Currently, onshore gas gathering pipelines are exempt from reporting of incidents, safety-related conditions, and annual pipeline summary data. The Proposed Rule would repeal the exemption for reporting requirements for operators of unregulated onshore gas gathering lines.

Additional Information

The NOPR is available for review here. Comments to the NOPR must be submitted within 60 days of publication in the Federal Register.