gas pipeline safety under heightened state and federal

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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Dewey & LeBoeuf LLP dl.com

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]

Dewey & LeBoeuf LLP | 6

I-A OVERVIEW OF STRUCTURE: STATE AND FEDERAL GAS PIPELINE SAFETY


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


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


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.


Other Federal Agencies with Pipeline Safety Oversight

● FERC (siting, abandonment) ● Transportation Security

Administration (security, terrorist threats)


I-B FEDERAL PIPELINE SAFETY ACTS & REGULATIONS


Acts & Regulations

A. Background: Prior Pipeline Safety Acts


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.


Acts & Regulations

B. Key Regulations Implementing Pipeline Safety Acts


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 >


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 >


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 >


● 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 >


● 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 >


● 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 >


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

[email protected]

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


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


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


Acts & Regulations

III. PIPELINE SAFETY ACT OF 2011


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 >



● 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 >



● 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 >



● 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 >




– 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 >




– 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 >



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 >


Acts & Regulations

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 >



● (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 >



• 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 >



● (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 >



• 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).


IV. POTENTIAL FUTURE DEVELOPMENTS

gas pipeline safety under heightened state and federal

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