Gas Pipeline Safety Under Heightened State and Federal Scrutiny Navigating the New Regulatory Landscape and Preparing for Increased Testing and Penalties
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THURSDAY, MARCH 15, 2012
Presenting a live 90-minute webinar with interactive Q&A
Darren J. Hunter, Counsel, Dewey & LeBoeuf, Chicago
Ahren S. Tryon, Associate, Dewey & LeBoeuf, Washington, D.C.
Vidhya Prabhakaran, Associate, Davis Wright Tremaine, San Francisco
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Natural Gas Pipeline Safety Under Heightened State and Federal Scrutiny
Stafford Webinars and Publications March 15, 2012
Darren J. Hunter 312.794.8018 [email protected]
Ahren S. Tryon 202.346.8059 [email protected]
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I-A OVERVIEW OF STRUCTURE: STATE AND FEDERAL GAS PIPELINE SAFETY
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Over a Million Miles of Pipeline in the US
● Interstate Gas Transmission ● Intrastate Gas Transmission and Distribution ● Interstate Liquids (crude oil, petroleum products and hazardous liquids) ● Intrastate liquids, including gathering lines
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Federal Regulatory Authority
● U.S. DOT regulates pipeline safety and sets national safety standards
● U.S. DOT administers pipeline
safety through the Office of Pipeline Safety (OPS)
● OPS operates within the Pipeline
and Hazardous Materials Safety Administration (PHMSA)
● OPS Offices – Washington, D.C. – Atlanta – Kansas City – Houston – Denver
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State Regulatory Authority
● States: Can assume regulatory authority over intrastate pipelines and sometimes act as interstate inspection agents.
● State standards must be at least as stringent as Federal standards,
but may be more stringent.
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Other Federal Agencies with Pipeline Safety Oversight
● FERC (siting, abandonment) ● Transportation Security
Administration (security, terrorist threats)
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I-B FEDERAL PIPELINE SAFETY ACTS & REGULATIONS
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Acts & Regulations
A. Background: Prior Pipeline Safety Acts
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Federal Statutes
● Natural Gas Pipeline Safety Act of 1968
● Pipeline Safety Improvement Act of 2002
– Integrity Management Programs for Transmission
● Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act)
– Integrity Management Programs for Distribution
● Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011
● 49 USC §§ 60101 et seq.
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Acts & Regulations
B. Key Regulations Implementing Pipeline Safety Acts
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Part 190: Pipeline Safety Programs and Rulemaking Procedures ● Enforcement mechanisms
– NOPVs and Warnings – Compliance Orders and Notices of Amendment – Corrective Action Orders – Safety Orders
● Hearings
– Former combined prosecutorial and adjudicatory functions
● Civil penalties – The old maximum: $100,000 per violation daily, max of $1,000,000 per
violation
Federal Regulations
continued >
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Part 191: Transportation of Natural and Other Gas To Pipelines; Reporting
● Procedures for reporting by natural gas pipelines ● Incident Reports ● Safety-Related Conditions Reports ● Annual Reports
Federal Regulations
continued >
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Federal Regulations
Part 192: Minimum Federal Safety Standards (Natural Gas) ● Subpart A: General Provisions Keys: Scope, class locations (1 through 4), company procedures
● Subpart B: Materials Keys: Strength of steel and plastic pipes, marking of materials
● Subpart C: Pipe Design Keys: Design formula for pipe (i.e., thickness of pipeline wall)
● Subpart D: Design of Pipeline Components Keys: Design of fittings, valves, vaults, compressor stations, etc.
● Subpart E: Welding of Steel in Pipelines Keys: Welding procedures, inspection and testing
continued >
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● Subpart F: Joining of Materials Other Than by Welding Keys: Design of mechanical fittings to withstand force
● Subpart G: General Construction Requirements For Transmission Lines and Mains
Keys: Standards, materials, inspection, etc.
● Subpart H: Customer Meters, Service Regulators, and Service Lines Keys: Meter installations, service installations, valves, connections to
mains, etc.
● Subpart I: Requirements for Corrosion Control Keys: External corrosion control (i.e., protective coating, cathodic
protection), internal corrosion control, atmospheric corrosion control
● Subpart J: Test Requirements Keys: Pressure testing to establish MAOP, mains, service lines, plastic
Federal Regulations
continued >
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● Subpart K: Uprating Keys: Pressure testing to increase MAOP
● Subpart L: Operations Keys: Procedural manual for operations, maintenance and
emergencies, surveillance, damage prevention program, emergency plans, investigation of failures, odorization, purging, etc.
● Subpart M: Maintenance Keys: Leak surveys, repairs, inspections, abandonment, etc.
● Subpart N: Qualification of Pipeline Personnel Keys: OQ, pipeline personnel must be qualified to perform
specific tasks, recordkeeping
Federal Regulations
continued >
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● Subpart O: Gas Transmission Pipeline Integrity Management Keys: Identify high consequence areas, develop and follow
program that addresses risks in each pipeline segment, consensus standard ANSI B31.8S, baseline assessments, identify threats, continuing evaluation, address anomalous conditions, reporting, etc.
● Subpart P: Gas Distribution Pipeline Integrity Management Keys: Identify risk factors, tank risks, leak management, address
risks, reporting, etc.
Federal Regulations
continued >
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Federal Regulations
Where is the regulatory focus now?
● Integrity Management
● Maximum Allowable Operating Pressure – Records
● Control Room Management
Ensuring Gas Pipeline Safety The State’s Response to the San Bruno and
Rancho Cordova tragedies
23
Vidhya Prabhakaran 415.276.6568
Background on The Tragedies
24
• Rancho Cordova – Dec 24, 2008 • San Bruno – Sep 9, 2010
Immediate Aftermath of Rancho Cordova Explosion
1 dead, 2 seriously injured, 3 others injured Spark for the explosion was a lighter 1 house completely destroyed, 2 adjacent
houses with severe damage, and other houses with minor damage
NTSB and CPSD immediately investigated the gas explosion and fire
25
Consequences for PG&E
Launched OII of PG&E on Nov 19, 2010 to determine if violations occurred and levy a fine, following CPSD and NTSB investigation reports
$38 million fine Previous fine of $26 million was rejected Payment of the costs of the investigation by
CPSD
26
Commission Findings
2006 repair was improper Failed to pressure test repaired pipe Later determination of improper pipe did not
result in review of previous installations No drug and alcohol tests after the fact to its
employees that responded Response to outdoor gas leak was
unreasonably delayed and not effective
27
Immediate Aftermath of San Bruno Explosion
8 dead, 58 injured Destruction of 38 homes, damage to 70 others CPSD and NTSB investigated the explosion Reduction in operating pressure of the pipeline
28
Initial Investigations
NTSB – Jan 3 Safety Recommendations to CPUC – Hearings March 1-3 – More later
Independent Review Panel – Chartered on Sept 23 – Empaneled on Oct 14 – Issues report June 9
29
NTSB/IRP Findings
PG&E’s Pipeline Integrity Management Program had numerous shortcomings
PG&E’s Emergency Response Needs Improvement Poor company safety culture Lack of resources for CPUC regulation of safety Lack of emphasis on safety programs in ratemaking Poor culture at the regulator
30
NTSB/IRP Recommendations
Many technical and specific Specific recommendations for PG&E Others that flow into CPUC Rulemaking to
improve pipeline safety
31
NTSB/IRP Recommendations for PG&E
Provide records for pipeline system components to determine appropriate operating pressure
(Re)Test segments where records cannot be produced
Full audit of PG&E’s operations (both internal and CPUC)
32
NTSB/IRP Recommendations for CPUC
Acquire necessary resources, training and skills to achieve appropriate oversight
Increased staffing (CPUC doubled gas safety staff)
Restructuring of CPSD Internal audit of CPSD Allow staff to issue citations (and fines!) in the
field
33
Subsequent Proceedings
I. 11-02-016 – investigation to determine penalties associated with safety-related record keeping
I. 11-11-009 – penalties associated with operations in high-density population locations
I. 12-01-007 – penalties associated with San Bruno explosion
R. 11-02-019 – new rules for regulating natural gas pipelines
34
Investigation No. 11-02-016
Did PG&E violate the law in its safety-related recordkeeping?
Not just San Bruno, but generally Based on statements regarding adequacy of
PG&E records by NTSB as part of its investigation Ongoing
35
Investigation No. 11-11-009
Did PG&E violate the law in its operations of its natural gas pipeline system in or near locations of higher population density?
Replacing pipeline segments with stronger pipe material
Reducing maximum allowable operating pressure
36
Investigation No. 12-01-007
Did PG&E violate the law, and did those violations result in the San Bruno explosion?
Result of CPSD report alleging specific violations of law
Not just events specific to San Bruno, but also past operations and practices
Determination of fine PG&E expecting at least $200 million in fines
37
Rulemaking No. 11-02-019
Prospective rulemaking to make changes as needed
Changes based on data requests sent to all utilities
Ratemaking directives for future capital expenditures and safety-justified expenditures
38
Consequences to PG&E
Split gas and electric operations Replaced senior management, including CEO $3 million fine for failure to comply with CPUC
order to submit pipeline records by March 15 $16 million fine for failure to conduct pipeline
leak surveys $1 billion in gas system upgrades and safety
tests not recovered in customer bills
39
Consequences More Generally
Heightened focus on safety (weekly safety reports at Commission meetings)
Focus on issues with degrading undergrounded facilities
Increased spending on infrastructure?
40
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Acts & Regulations
III. PIPELINE SAFETY ACT OF 2011
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Pipeline Safety Act of 2011
● Section 2. Civil Penalties
– Penalties doubled – Anti-obstruction provisions
● Section 3. Pipeline Damage Prevention
– State programs must be broadly inclusive to get grants
● Section 4. Automatic and Remote-Controlled Shut-Off Valves. – New transmission construction or entire line replacements – “Economically, technically, and operationally feasible””
continued >
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Pipeline Safety Act of 2011
● Section 5. Integrity Management
– Should PHMSA expand the Integrity Management program beyond High Consequence Areas?
● Section 6. Public Education and Awareness
– Accurate mapping = better emergency response
● Section 9. Accident and Incident Notification – PHMSA to mandate incident notification within 1 hour of
discovery – Fixes a longstanding regulatory issue regarding “earliest
practicable moment”
continued >
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Pipeline Safety Act of 2011
● Section 13. Cost Recovery for Design Reviews – You pay PHMSA for design reviews, but only for the most
massive projects
● Section 20. Administrative Enforcement Process. – Separation of functions
● Section 21. Gas and Hazardous Liquid Gathering Lines
– No immediate change to regulations. Review, study, report ● Section 22. Excess Flow Valves
– For distribution lines other than service lines to single family residences, must consider the need for EFVs
continued >
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Pipeline Safety Act of 2011
● Section 23. Maximum Allowable Operating Pressure
– The guts of the Act and the response to San Bruno – Within 6 months of the Act operators to verify records for
interstate and intrastate transmission in class 3 and class 4 locations and class 1 and class 2 HCAs, using elements considered appropriate by PHMSA ♦ Virtually impossible timeframe for PHMSA to issue a
rulemaking
– Within 18 months of the Act, identify and submit documentation related to segments for which the records are insufficient to confirm the established MAOP
continued >
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Pipeline Safety Act of 2011
● Section 23. Maximum Allowable Operating Pressure
– Now must report MAOP exceedances beyond pressure-limiting
device capacity within 5 days of occurrence – If a pipeline has insufficient MAOP records, PHMSA must:
♦ Require reconfirmation of MAOP as expeditiously as economically feasible; and
♦ Determine what actions are appropriate until a MAOP is confirmed, considering potential consequence to public safety and the environment, impacts on pipeline system reliability and deliverability, etc.
continued >
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Pipeline Safety Act of 2011
● Section 23. Maximum Allowable Operating Pressure
– PHMSA must issue regulations within 18 months for tests to
confirm the material strength of previously untested gas transmission lines in HCAs that operate at a pressure > 30 % SMYS. Must consider safety testing methodologies like pressure testing and ILIs
– PHMSA to consult with FERC and states to establish
timeframes for the testing, so as to account for potential consequences to public safety and the environment and minimize costs and service disruptions
continued >
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Pipeline Safety Act of 2011
A plethora of studies and reports: ● A study on excavation damage. ● A study on transmission pipeline operator response capabilities in HCAs. ● A study on expanding IMP requirements outside of HCAs. ● A report to Congress on using Risk Based Assessment Intervals for IMP. ● Surveys and reports on cast iron pipe management and replacement . ● A report to Congress on liquid pipeline leak detection systems. ● A study and report to Congress on the transportation of diluted bitumen. ● Allows DOT to study transportation of nonpetroleum hazardous liquids (i.e.
chemicals). ● A report to Congress on existing gathering line regulations. ● A report evaluating NTSB’s recommendation on excess flow valves. ● A report to Congress on minority, women, and disadvantaged business participation
in the pipeline industry. ● A study and report to Congress on pipeline construction permitting issues. ● A study and report to Congress on depth of cover for liquid pipeline navigable water
crossings. ● A report to Congress on PHMSA staffing.
continued >
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Acts & Regulations
PHMSA Rulemaking Initiatives
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PHMSA Rulemaking Initiatives
● Anticipating legislation, PHMSA issued an Advance Notice of
Proposed Rulemaking last August.
● Certain issues in the ANPRM overlap with the new Act (e.g., gathering lines, EFVs, HCA expansion, etc.)
● Focus on 14 topics in two broad categories:
– (1) Strengthening Integrity Management Program
– (2) Strengthening Non-IM Regulations that Affect Pipeline Integrity
continued >
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PHMSA Rulemaking Initiatives
● (1) Integrity Management Regulation Possibilities:
• Modify High Consequence Area definition? • Tighten existing Part 192 IM requirements?
• Modify repair criteria? • Revise requirements for collecting, validating, and
integrating pipeline data?
continued >
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PHMSA Rulemaking Initiatives
• Make IM requirements for risk models more prescriptive?
• Strengthen requirements for applying “knowledge gained”
through the IM program?
• Strengthen requirements for assessment methods?
• E.g., specify techniques to allowed to identify manufacturing and construction defects, stress corrosion cracking, etc.?
continued >
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PHMSA Rulemaking Initiatives
● (2) Considerations to strengthen or expand non-IM regulations to improve pipeline integrity:
• Valve spacing and remotely- or automatically-controlled valves.
• Corrosion control. • Pipe with longitudinal weld seams with systemic integrity
issues.
• Establishing requirements applicable to underground gas storage.
continued >
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PHMSA Rulemaking Initiatives
• Management of Change. • Quality Management Systems (QMS). • Exemptions applicable to facilities installed prior to the
regulations. • Gathering lines (i.e., expanded regulation of large diameter,
high pressure Marcellus Shale lines).
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IV. POTENTIAL FUTURE DEVELOPMENTS
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