The Texas Railroad Commission (the Commission) will hold a public hearing on Monday, September 22, 2014 regarding its proposed amendments to Texas Administrative Code Title 16, Section 3.70, prescribing the procedures for obtaining a T-4 permit, which is necessary for the operation of a pipeline in Texas. The proposed changes could lengthen the time needed to secure a T-4 permit and would require applicants to provide substantially more information and documentation than the current rules.

The Proposed Amendments

The Commission proposes the amendments “in order to clarify and more specifically prescribe the procedure by which a pipeline operator may identify itself as a common carrier, gas utility, or private line operator when applying for a new T-4 permit to operate a pipeline or when renewing, amending, or cancelling an existing T-4 permit.” 39 Tex. Reg. 5705 (2014) (July 25, 2014) (Tex. Railroad Comm’n). The following is a summary of some of the more significant changes.

Annual Renewal Application

The proposed amendments make a key change to 16 TAC § 3.70(a) that would require pipeline operators to seek annual renewal of their T-4 permits. This is a significant departure from current Commission practice, which does not require operators to renew their T-4 permits.

Additional Substantive Information

The contemplated changes to § 3.70(b) would require operators to provide additional substantive information accompanying new permit applications or permit amendments including (1) contact information for a company representative who can respond to questions concerning the pipeline’s construction, operation, or maintenance; (2) a statement regarding the requested classification and purpose of the pipeline as a common carrier, a gas utility, or a private line; and (3) documentation providing support for the classification and purpose sought. Perhaps most troubling for an applicant is a fourth additional requirement: a sworn statement from the applicant providing the operator’s factual basis supporting the classification and purpose being sought.

Longer Timetable

The proposed subsections (d) through (e) would establish a timetable for Commission review and consideration of an operator’s application. Under these provisions, the Commission would have 15 calendar days to determine whether an operator’s application is “complete” and must provide notice to the applicant as to its status. If the Commission sends notice that an application is incomplete, the Commission must specify the additional information required. Once the application is complete, the Commission would have 45 calendar days to decide whether to issue a T-4.

Thumbs-Up/Thumbs-Down Approval 

An interesting feature of the proposed amendments is that the Commission would be required to determine whether to the grant the permit or “deny the pipeline permit as filed.” Thus, if an applicant seeks classification as a common carrier but the Commission determines that the pipeline is, in fact, a private line, the Commission will flatly deny the permit application rather than issuing a T-4 for a private pipeline. If the Commission adopts these proposed amendments, operators should take into account the possible need to submit successive applications if the Commission disagrees with the applicant’s characterization of the proposed pipeline project.

Potential Impact and Practical Considerations

The 15- and 45-day deadlines for Commission determinations will increase the amount of time and energy that an operator must devote to the T-4 application process. This potentially affects the operator’s own project management timetables. Applicants should also expect the additional information requirements and the annual renewal process to require significant attention from the operator’s legal and regulatory departments. This could be particularly significant for common carriers. Under current Commission practice, an operator can apply for a T-4 while attending to other commercial and regulatory details; however, under the proposed amendments, a common carrier runs the risk of permit denial if it submits its application without documentation supporting its assertion that it intends to operate its system for public hire. Delaying an application to include tariffs or customer contracts could put additional pressure on project management timetables.

Operators will also need to consider that the sworn statements and documents supporting permit applications will receive close scrutiny from landowners and their attorneys during negotiations for right-of-way acquisition and in any necessary condemnation proceedings. If the Commission adopts the amendments as presently drafted, an operator must give careful consideration to whom it designates as the point of contact with the Commission and to whom it designates to provide the sworn statement. The person appointed must not only be fully conversant with the details of the project, but also be fully prepared to testify in deposition or in any required condemnation proceeding.

The Commission will accept oral comments to the proposed amendment at the September 22 public hearing. We stand ready to assist with preparation of any comments you may wish to present to the Commission for consideration.