Anyone working in the gas and oil pipeline sectors in Canada needs to be aware of the impending introduction of a new set of safety standards for those pipelines, and should consider both their own plans for complying with the new standards and how they will ensure that their outside engineers, suppliers and contractors comply with the new standards.
I. WHAT IS CSA Z662-11?
The Canadian Standards Association ("CSA") publishes a wide variety of safety standards for use in Canada. One of the most important standards used in the oil and gas industry is CSA Z662, entitled "Oil and Gas Pipeline Systems".
CSA Z662 provides comprehensive standards for the design, operation and maintenance of oil and gas pipeline systems in Canada. It covers diverse matters such as piping and equipment in offshore and onshore pipelines, tank farms, pump stations, pressure-regulating stations, measuring stations, pipeline terminals, piping and equipment in onshore pipelines, pressure-regulating stations, measuring stations, gas compressor stations, gas storage lines and gas storage vessels.
The current standard was published in 2007 and is known as CSA Z662-07. It is the fifth edition of the standard, and, with commentary, totals 808 pages.
The CSA has announced that the next version of CSA Z662, which will be known as CSA Z662-11, is going to be published in July, 2011. An exact date has not been announced. The new standard is now available for prepurchase on the CSA's website. The CSA will presumably also offer a variety of training courses on the new standard once it is published.
II. WHY DOES THIS MATTER?
For construction and procurement lawyers, the effect of the publication of CSA Z662-11 will be significant.
In most provinces, and federally, CSA Z662 has the force of law by virtue of being incorporated by reference in pipeline safety regulations. Additionally, federally and in several provinces, CSA Z662-11 will come into effect as soon as it is published by the CSA. This will happen without any transition period, and without requiring any action on the part of legislators or regulators.
For example, for federally regulated pipelines, the Onshore Pipeline Regulations provides (emphasis added):
1. The definitions in this section apply in these Regulations... "CSA Z662" means CSA Standard Z662 entitled Oil and Gas Pipeline Systems, as amended from time to time. ... 4. (1) When a company designs, constructs, operates or abandons a pipeline, or contracts for the provision of those services, the company shall ensure that the pipeline is designed, constructed, operated or abandoned in accordance with the applicable provisions of... (d) CSA Z662, if the pipeline transports liquid or gaseous hydrocarbons.1
In Alberta, the regulations which will bring CSA Z662-11 into force immediately are even clearer:
9(1) A reference in this Regulation to a code or standard is to the latest published edition of the code or standard issued by the Canadian Standards Association (CSA). ... 9(3) Except as otherwise specified by this Regulation, the minimum requirements for the design, construction, testing, operation, maintenance, repair and leak detection of pipelines are set out in CSA Z662.2
There are similar provisions in the regulations of British Columbia, Saskatchewan, Nova Scotia and New Brunswick3. Under Ontario law, CSA Z662-11 must be adopted by reference under the Technical Standards and Safety Act before it comes into force4.
III. WHAT DO YOU NEED TO DO?
Contracts for the procurement, design, construction, installation and operation of pipeline systems frequently contain specific references to the standards which must be met by the engineer, supplier or contractor.
Existing contracts for engineering, design, procurement, construction and construction management related to gas or oil pipelines should be reviewed to ensure that they will require the contractor to comply with CSA Z662-11 once it comes into force. A robust contract will contain an "ambulatory reference" clause, a provision to the effect that references to a particular standard include references to that standard as revised from time to time. Alternatively, the section which describes the standards to be complied with may simply refer to CSA Z662 "as it may be amended from time to time".
Other contracts may not be as robustly drafted. If a contract requires a contractor to comply with CSA Z662-07 (or perhaps even an earlier version) and does not automatically provide for revisions to that standard, then consideration should be given to amending those contracts or entering into side letters with the applicable contractor to ensure that the contractor is required to comply with the revised standards.
For contracts which have not yet been executed, best drafting practices would include an ambulatory reference clause that would ensure that references to any standards in the contract (not just CSA standards, but also API and ASTM) refer to the latest published standards at all times during the life of the contract.
Finally, performance under all contracts should be monitored and reviewed to ensure that all counterparties are aware of the transition to CSA Z662-11 and that plans are in place to comply with the new standard once it is published.