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April 7, 2017

PHMSA Issues Notice of Underground Natural Gas Storage Facility User Fees

Pipeline Safety Alert On April 6, 2017, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a notice of agency action (Notice) announcing the rate structure for the underground natural gas storage facility user fee. In section 12 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act of 2016), Congress directed PHMSA to prescribe procedures to collect user fees for underground natural gas storage facilities. The fees will fund an $8 million Underground Natural Gas Storage Facility Safety Account. In November 2016, PHMSA proposed a rate structure for these user fees and agreed to accept comments on the proposal until January 6, 2017. As discussed below, PHMSA responded to the comments filed in response to the Notice and made certain revisions to its user fee calculations. Working Gas Capacity PHMSA confirmed that working gas capacity, as defined by the Energy Information Administration (EIA) and used in the EIA Monthly Underground Natural Gas Storage Report, will be used as the basis for the user fee rate structure. PHMSA acknowledged that the number of wells is an appropriate basis for the rate structure, but stated that the agency currently lacks the data needed to support such a calculation. After the agency collects information on the number of wells, the user fee structure will likely be changed in the future. PHMSA also stated that it will combine the working gas capacity for all fields operated by each holder of a PHMSA-issued operator identification number (OPID). The agency stated that it is in the process of contacting storage operators to determine the correct OPID for each storage facility. If PHMSA is unable to determine the OPID, it will sum the working gas capacities by company name. Inclusion of Inactive Wells PHMSA noted that since EIA’s Monthly Storage Report includes inactive wells,…

January 18, 2017

As Obama Administration Draws to a Close, PHMSA Releases Final Rule for Hazardous Liquid Pipelines

Pipeline Safety Alert On January 13, 2017, one week before the end of the Obama administration, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a final rule amending the federal safety standards for hazardous liquid pipelines in 49 C.F.R. Part 195 (Final Rule). The Final Rule is the latest step in a lengthy rulemaking process that began with the issuance of a wide-ranging request for public comment in October 2010, followed by the publication of a rulemaking proposal in October 2015 that contained a number of changes and additions to the Part 195 regulations. While still a significant regulatory action, PHMSA narrowed the Final Rule to address public comments, the recommendations of the Liquid Pipeline Advisory Committee (LPAC), and concerns raised by the Office of Management and Budget (OMB). PHMSA established a general effective date of six months from publication in the Federal Register, and various effective dates for specific changes to Part 195. If previous transfers of presidential power serve as a guide, PHMSA’s decision to release the Final Rule in the last days of the Obama administration may not mark the end of the rulemaking process. To avoid the possibility of being returned to PHMSA for further review by the Trump administration, the Final Rule must be published in the Federal Register by January 20, 2017. Even if that deadline is met, the Trump administration could extend the effective date of the Final Rule, reopen the public comment period, or take other actions. What’s Changing (For Now)? In the Final Rule, PHMSA adopts the following changes to Part 195: • Reporting Requirements for Gravity and Unregulated Gathering Lines. Operators of certain gravity lines and unregulated gathering lines must submit annual, accident, and safety-related condition reports to PHMSA. The accident and safety-related condition reporting requirements go into effect six months after…

December 15, 2016

PHMSA Issues Interim Final Rule on Underground Natural Gas Storage

Pipeline Safety Alert On December 14, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a pre-publication version of an interim final rule (IFR) establishing minimum federal safety standards for underground natural gas storage facilities. The IFR takes effect 30 days from publication in the Federal Register. Since this rule is styled as an IFR, PHMSA will not be providing a public comment period before the rule takes effect. Comments on the IFR are due 60 days from the date of publication. PHMSA may consider making changes to the rule based on the comments filed. Comments on the new PHMSA information collection request contained in the IFR (related to new reporting requirements for storage) are on a shorter timeframe and are due 30 days from publication. What’s Changing?Downhole Regulation:  PHMSA will regulate the downhole portions (wells and reservoirs) of underground gas storage facilities for the first time. Although PHMSA has had statutory authority to regulate storage since 1968, the agency declined to use that authority for policy reasons. The 2015 Aliso Canyon natural gas storage leak prompted changes to the Pipeline Safety Laws earlier this year, and those changes require PHMSA to regulate storage. • Incorporation of API Recommended Practices (API RP):  PHMSA will incorporate by reference the API recommended practices for underground natural gas storage (RP 1170 for salt caverns and RP 1171 for depleted reservoirs) covering reservoir and well design, integrity and monitoring, risk management, recordkeeping, integrity verification, site security and safety, emergencies, procedures, training and other subjects. Notably, the IFR mandates compliance with the “should” statements and other permissively worded provisions in the API RPs. • Reporting:  PHMSA will require storage operators to file annual, incident and safety-related condition reports, and file 60-day notices for certain construction activities (new storage facilities,…

October 24, 2016

Higher Penalties, Greater Transparency: PHMSA Increases Civil Penalties and Commits to Providing Detailed Calculations in Individual Cases

Pipeline Safety Alert On October 17, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a General Policy Statement on Civil Penalties (Policy Statement) in the Federal Register. Representing the most recent step in the evolution of PHMSA’s enforcement process, the Policy Statement is significant for several reasons. First, PHMSA is making a public commitment to release its proposed civil penalty calculation for individual enforcement cases. While standard practice for many other federal agencies, PHMSA has not historically provided the regulated community with its methodology for calculating proposed civil penalty amounts. Second, PHMSA is acknowledging the adoption of a Civil Penalty Framework as the agency’s policy for calculating proposed penalties, and will publish that Civil Penalty Framework on its website. Under PHMSA’s previous policy, operators only received that document upon request. Finally, and perhaps most significantly, the Policy Statement confirms that PHMSA will be assessing higher civil penalties (within the statutory maximums) in future enforcement cases, and that greater weight will be afforded to certain factors in determining penalty amounts. The Statutory Framework The pipeline safety laws require PHMSA to consider several factors in determining the amount of any civil penalty assessed for a particular violation. Three mandatory factors must be considered in all cases, i.e., (1) the nature, circumstances, and gravity of the violation, including adverse impact on the environment; (2) the degree of the violator’s culpability, any history of prior violations, and any effect on ability to continue doing business; and (3) the violator’s good faith in attempting to comply. Two other factors may be considered as a matter of discretion, i.e., (1) the economic benefit gained from the violation without any reduction because of subsequent damages, and (2) any other matters that justice requires. As recently adjusted for inflation under the Federal Civil Penalties Inflation Adjustment Act of 2015, PHMSA’s administrative civil penalties are capped at $205,638 per violation per day, not to exceed $2,056,380 million for any related series of violations. PHMSA…

October 11, 2016

PHMSA Releases a Final Rule Expanding the Required Use of Excess Flow Valves

Pipeline Safety Alert On October 7, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a pre-publication version of its Final Rule entitled “Expanding the Use of Excess Flow Valves in Gas Distribution Systems to Applications Other Than Single-Family Residences” (EFV Final Rule).  In response to statutory changes and a National Transportation Safety Board recommendation, PHMSA is expanding the existing requirement that operators install an excess flow valve (EFV) on certain natural gas distribution pipelines to additional types of new or replaced service lines.  The agency is also requiring curb valves or other manual shut-off valves on new or replaced service lines with meter capacities above 1,000 standard cubic feet per hour (SCFH) and requiring operators to notify customers of their right to request the installation of an EFV on certain types of service lines.  The EFV Final Rule will become effective six months after the date of publication in the Federal Register, which is expected within 7—10 days. An EFV is a safety device installed inside a distribution service line between the main and the meter which can reduce the risk of an incident in the event of damage to the line by shutting off excessive gas flows.  Since 2010, PHMSA has required operators to install EFVs on new or replaced gas service lines servicing single-family residences (SFRs) unless the service line meets certain exceptions. EFVs must now be installed on the following service lines: 

  • Branched service lines to a SFR installed concurrently with the primary SFR service line (a single EFV may be installed to protect both lines);
  • Branched service lines to a SFR installed off a previously installed SFR service line that does not contain an EFV;
  • Multi-family installations, including duplexes, triplexes, fourplexes, and other small multifamily buildings (e.g., apartments, condominiums) with known customer loads at time of service installation,…

October 4, 2016

PHMSA Releases Emergency Order Interim Final Rule

Pipeline Safety Alert On October 4, the Pipeline & Hazardous Materials Safety Administration (PHMSA) issued a pre-publication Interim Final Rule (IFR) implementing the new emergency order authority that PHMSA received in the PIPES Act of 2016.  The IFR will become effective on the date of its publication in the Federal Register, which is expected within days.  PHMSA has provided a 60-day public comment period. Federal agencies may issue IFRs without providing prior notice and comment under the good cause exception in the Administrative Procedure Act. The courts have emphasized that the good cause exception is to be narrowly construed, and that the existence of a statutory deadline does not, in and of itself, constitute good cause unless a delay would threaten real harm.  PHMSA’s justification for issuing the IFR is that the PIPES Act contains a 60-day deadline for establishing temporary emergency order regulations, making compliance with the notice and comment requirements in the APA impracticable and not in the public interest. As required by the PIPES Act, the IFR contains administrative procedures that PHMSA must follow in determining if an imminent hazard exists, the factors that must be considered by PHMSA before issuing an emergency order, and the content of those orders, including a description of the persons subject to the restrictions, prohibitions, or safety measures and the standards and procedures for obtaining relief. The IFR also creates a process for administrative review of an emergency order that is largely patterned on the statutory text in 49 U.S.C. § 60117(o), including the referenced procedural rules for HazMat emergency orders in 49 C.F.R. § 109.19. The process allows for the filing of a petition for review seeking a formal hearing before an Administrative Law Judge (ALJ), or an informal hearing before the Associate Administrator. In either scenario, the…

September 12, 2016

FAA Issues Performance-Based Standards for Applicants Seeking a Waiver of the Small Unmanned Aircraft Rules

Pipeline Safety Alert The Federal Aviation Administration (FAA) recently issued its Performance-Based Standards highlighting information that an applicant must include in order to seek a waiver of Part 107, the rules that apply to the operation of a small unmanned aircraft system (small UAS or drones). (See previous Babst Calland pipeline safety alerts for more information on the Small UAS Final Rule and the waiver process.) Applicants may seek a waiver from many of the Part 107 regulations. However, the line-of-sight restriction (14 C.F.R. § 107.31) is of particular interest to the energy industry who may want to use a small UAS to conduct inspections of linear infrastructure. Applicants seeking a waiver of the line-of-sight requirement must demonstrate the method or means by which it will be able to: • continuously know and determine the position, altitude, attitude, and movement of the small UAS to ensure the aircraft remains in the area of intended operation; • avoid other aircraft, people on the ground, and ground-based structures and obstacles at all times; • increase the visibility of the small UAS in order to be seen at a distance of three statute miles unless a system is in place that can avoid all non-participating aircraft; • be alerted of any malfunction affecting the operation of the small UAS; and • ensure that all persons participating in the operation have relevant knowledge of all aspects of operating a small UAS that is not within the visual line of sight of the remote pilot. Since the effective date of the small UAS Final Rule, the FAA has granted 76 waivers of various sections of Part 107. The majority of these applications sought a waiver of the daytime operation limitation but at least two waivers were focused on line of sight. The FAA granted an application from a railroad company allowing a waiver of the line-of- sight requirements as long as the company does…

August 31, 2016

FAA Releases Application and Instructions for Small Drone Waivers

Pipeline Safety Alert On August 29, 2016, the Federal Aviation Administration (FAA) released the form and instructions on how to apply for a waiver from certain requirements included in the “Operation and Certification of Small Unmanned Aircraft Systems” Final Rule.  This final rule went into effect on August 29, 2016, and permits the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. See Babst Calland’s previous Pipeline Safety Alert on small drones for more information.  This new waiver process will be of interest to the energy industry. The FAA will allow operators of small drones to apply for a waiver from the following requirements:

  • Operation from a moving vehicle or aircraft (§ 107.25)
  • Daylight operation (§ 107.29)
  • Visual line of sight aircraft operation (§ 107.31)
  • Visual observer (§ 107.33)
  • Operation of multiple small unmanned aircraft systems (§ 107.35)
  • Yielding the right of way (§ 107.37(a))
  • Operation over people (§ 107.39)
  • Operation in certain airspace (§ 107.41)
  • Operating limitations for small unmanned aircraft (§ 107.51)
The FAA will not consider waivers for the carriage of property of another by aircraft for compensation or hire.  An applicant must describe the risks of the waivered operation and identify appropriate risk-mitigation strategies to ensure that the proposed operation can be safely conducted. The ability to seek a waiver is particularly important to the energy industry which may choose to use small drones for inspections of infrastructure. For example, a waiver of the line-of-sight requirements may make the use of small drones for pipeline right-of-way patrols more practical. The FAA is encouraging applicants to submit waiver requests at least 90 days prior to the desired commencement of the drone operation.  The agency hopes to respond to each waiver request within 90 days but notes it could take longer depending on the complexity of the application or if…

July 15, 2016

Congress and the FAA Ease the Way for Use of Drones by the Energy Industry

Pipeline Safety Alert The Federal Aviation Administration (FAA) recently issued regulations permitting the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. On July 13, 2016, Congress passed several provisions specific to drone use by the energy industry as part of the reauthorization bill for the FAA. FAA Reauthorization On July 13, 2016, Congress passed the “FAA Extension, Safety, and Security Act of 2016 (the Bill)”. The Bill, which authorizes a short-term extension of the funding for the FAA, includes several provisions covering the operation of unmanned aircraft systems (i.e., drones). Of particular interest to the energy industry, Congress– • Amends section 331 of the FAA Modernization and Reform Act of 2012. This particular statute previously defined “small unmanned aircraft” as weighing less than 55 pounds. The Bill amends this definition to clarify that the 55-pound limit “includ everything that is on board or otherwise attached to the aircraft. ” • Requires the Secretary of Transportation to establish a process within 180 days to allow applicants to petition the FAA to prohibit or restrict the operation of an unmanned aircraft “in close proximity to a fixed site facility.” A “fixed site facility” includes energy production, transmission, and distribution facilities and equipment, oil refineries, and chemical facilities. • Requires the FAA to allow a person to apply to operate an unmanned aircraft system during the day or at night beyond the visual line of sight of the individual operating the aircraft as long as the operator is conducting the unmanned aircraft operation to ensure compliance with (1) federal or state regulatory requirements including surveys associated with permit applications for new pipelines; (2) the pipeline safety regulations (49 C.F.R. Parts 192 and 195); or (3) the requirement of any federal, state, or local regulatory body or industry standard related to…

June 23, 2016

The Aliso Canyon Effect: Underground Gas Storage Incident Influences Pipeline Safety Reauthorization

Pipeline Safety Alert

On June 22, 2016, President Obama signed into law the “Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016” (PIPES Act, S.2276). The PIPES Act reauthorizes the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) federal pipeline safety program through fiscal year 2019, provides PHMSA with significant new authority, and requires the agency to prioritize the completion of outstanding mandates from the previous reauthorization in 2011. Of note, the PIPES Act requires PHMSA to develop underground gas storage standards, provides PHMSA with significant new authority to issue industry-wide emergency orders, and requires PHMSA to update its regulations for Liquefied Natural Gas (LNG) facilities. Babst Calland’s Pipeline and HazMat Safety team provides the following observations on these key provisions.

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March 21, 2016

Five Questions About PHMSA’s Proposed Rules for Gas Transmission and Gathering Lines

Pipeline Safety Alert On March 17, 2016, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a pre-publication version of its long-awaited notice of proposed rulemaking (NPRM) for gas transmission and gathering lines. More than four years in the making and released against the backdrop of a dramatically changing domestic landscape for the natural gas pipeline industry, the NPRM responds to issues raised in National Transportation Safety Board (NTSB) recommendations, congressional mandates, and Government Accountability Office reports. PHMSA has provided a short, 60-day comment period, which will be a challenge to those developing comments on a proposed rule of this complexity and length. It is likely that a number of stakeholders will seek an extension of the comment period. While a comprehensive analysis of the 549-page proposal will take more time, Babst Calland’s Pipeline and HazMat Safety team has initially identified five questions that operators may wish to ask about the NPRM. (more…)