Pipeline Proposal Would Expand Reporting and Testing, Cost $22.4M Annually

HIGHLIGHTS:

• In response to this year’s high-profile pipeline incidents, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is expected to finalize numerous proposed rulemaking measures regulating pipeline safety in the coming year.
• The latest, and most expansive, of these proposed changes is found in the Regulatory Impact Analysis and Notice of Proposed Rulemaking released on Oct. 1. The comment period for the PHMSA proposed rule runs through Jan. 8, 2016.
• The proposed rule significantly expands the reach of many requirements that currently pertain only to pipelines in High Consequence Areas (HCAs) by expanding the requirements to all pipelines. Gathering line reporting and the use of in-line integrity inspection tools also would be expanded.

This year has been marked by a series of high-profile pipeline incidents in Montana, West Virginia and California, among others. In response to these incidents, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is expected to finalize numerous proposed rulemaking measures regulating pipeline safety in the coming year.

The latest, and most expansive, of these proposed changes is found in the PHMSA Regulatory Impact Analysis and Notice of Proposed Rulemaking released on Oct. 1. PHMSA estimates that compliance with this rule alone will cost the 421 hazardous liquid pipeline operators a combined $22.4 million per year, but PHMSA believes that the annual monetized benefits will outweigh the cost. Chiefly, the rule:

1. Expands reporting requirements to apply to all gravity lines.
2. Expands reporting requirements to apply to all hazardous liquid (HL) gathering lines, not just those located in High Consequence Areas (HCAs).
3. Requires the inspection of all pipelines in areas affected by extreme weather, natural disasters, and other similar events within 72 hours and requires immediate remedial action to ensure the pipeline's safe operation.
4. Expands assessment requirements to all HCA and non-HCA pipelines; assessment to be every 10 years using inline inspection (ILI) tools.
5. Requires the use of leak detection systems (LDS) on all HL pipelines – including on non-HCA pipelines.
6. Modifies the Integrity Management (IM) repair criteria and applies those same criteria to pipelines not subject to the IM requirements.
7. Requires that all pipelines that could affect an HCA use ILI tools within 20 years, unless the pipeline's basic construction will not permit that accommodation.
8. Resolves inconsistent deadlines, clarifies requirements for information integration and the definition of covered pipeline facilities, and specifies a timeframe for rechecking HCA status.

Expanded Reach, More Inspections

The proposed rule significantly expands the reach of many requirements that currently pertain only to pipelines in HCAs ­– those near high-population areas, commercially navigable waterways, and in areas containing unusually sensitive drinking water or ecological resources – by expanding the requirements to all pipelines.

For example, the rule would require annual safety-related condition and incident reports for all gathering lines, not just some. PHMSA currently regulates only 3,644 miles of the 30,000 to 40,000 miles of gathering lines in the U.S. – the rule would make this application universal. Reporting would also be required for all hazardous liquid gravity lines. These proposed changes may be the harbinger of more regulation in this area in future, as Holland & Knight Senior Policy Advisor Michael Friedberg recently told Bloomberg BNA's Daily Environment Report in an article on the proposed changes.

Additionally, all pipelines – including non-HCA located pipelines – will be subject to mandatory integrity testing by ILI tools at least once every 10 years. Alternatives to ILI testing will be permitted initially to allow pipeline operators time to accommodate such tools. Operators of new and replacement hazardous liquid pipelines have used ILI tools by mandate for more than 20 years.

The comment period for the PHMSA proposed rule runs through Jan. 8, 2016. Holland & Knight can provide further information regarding the proposed rule and opportunities to file comments in response.
   

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