With Congress having passed a pipeline safety bill last December, you’d think the Pipeline and Hazardous Materials Safety Administration (PHMSA) has plenty to do implementing that law during 2012.
And that is true. But if you thought that meant that PHMSA has stopped considering any additional, pipeline safety changes it can make administratively, without congressional approval, you’d be wrong. The agency says it has every intention of moving forward with some of the pipeline safety changes it broached in an advanced notice of proposed rulemaking (ANPR) the agency published last August. The comment period closed on January 20, 2012.
Paul J. Metro, chief, Gas Safety Division, Pennsylvania Public Utility Commission, says, “I believe that PHMSA will move forward with the ANPRM once they review the numerous comments that they received. Many of the issues addressed in the ANPRM are issues that have arisen from incidents across the nation that have been identified and require PHMSA action.” Metro is chairman of The National Association of Pipeline Safety Representatives (NAPSR).
In a statement to P&GJ, PHMSA says it “will also continue moving forward” with the ANPRM which is “complementary” to the new pipeline safety bill, called the Pipeline Safety, Regulatory Certainty and Job Creation Act. “PHMSA is currently reviewing comments received in response to the ANPRM to determine next actions,” the agency states.
The PHMSA ANPR raised 120 questions, most with multiple sub-parts, spanning a wide array of topics related to natural gas pipeline safety. Those questions suggest the agency is considering administrative changes which would go beyond the changes Congress authorized in the Pipeline Safety, Regulatory Certainty and Job Creation Act, which was an incremental piece of legislation. For example, the bill will allow PHMSA to require integrity management processes outside of High Consequence Areas (HCAs). The ANPR, on the other hand, asked whether PHMSA should revise the existing criteria for identifying HCAs to expand the miles of pipeline included in HCAs, or make all Class 3 and 4 locations subject to the IM requirements. Class 3 and 4 locations have 46 or more residences or buildings with at least four stories, respectively. Class 1 and 2 are more lightly populated. Transmission lines currently can chose between two HCA determination methods. One puts all Class 3 and 4 locations within HCAs, the other requires designating “potential impact radius” in which the failure of a pipeline could have significant impact on people or property.
Most transmission pipelines use the potential impact radius method for calculating HCAs. “The existing HCA identification criteria are adequate and appropriate to their primary focus, the protection of life and property, and they should be retained,” states Terry Boss, senior vice president of Environment, Safety and Operations, Interstate Natural Gas Association of America. It is, according to Boss, a” well-reasoned and vetted identification criteria that properly focus additional critical integrity management activities on the areas of highest potential consequence.”
The NAPSR wants PHMSA to require all transmission pipelines, new and current, to follow the same stringent safety requirements. “Any pipeline failure, whether in Class 1, 2, 3, or 4 is a risk to the public’s safety and the pipeline’s reliability,” says Metro. “NAPSR believes that all transmission pipelines should be operated under the same federal safety standards and not be dependent on class location. NAPSR believes that the increased cost of design, operations, and maintenance will be offset by a safer transmission pipeline network and a more reliable transmission system.”
Numerous other groups also support a tightening of the HCA definition and the requirements applying to pipelines inside and outside HCAs. Kaye Laughlin, environmental coordinator , the Alaska Natural Gas Development Authority, says, “PHMSA requirements should include prescriptive language in areas of human safety. System integrity requirements should be strengthened and expanded. The definition of a high-consequence area (HCA) should be revised and restrictions should be placed on the use of specific pipeline assessment methods for future pipelines.”
Gulf South And Shippers Battling At FERC
Gulf South, a major transmission line in the South, is battling the likes of Devon, BP America Production Company and intrastate provider Atmos, to mention a few of its opponents, in an effort to convince FERC to let it go to a daily allocation system. Whatever decision FERC makes probably won’t set a precedent with regard to pipeline rates, especially because these kinds of requests from pipelines have been made in the past. But one never knows.
Suffice it to say that tempers are high, and there are a lot of dollars at issue. Gulf South says it wants to go to a daily allocation systems, which is used by its sister companies Gulf Crossing Pipeline Company LLC and Texas Gas Transmission, LLC, to more accurately accommodate the current marketplace, in which gas transmission is normally conducted on a daily or intra-day basis.
When Gulf South restructured under Order No. 636, it implemented monthly allocations and monthly balancing. Monthly allocations were appropriate at that time because of the large number of meters on the system that were not capable of providing daily measurement information and different market needs. Through the use of electronic flow measurement technology, Gulf South now can easily provide customers with daily information necessary to manage daily allocations.
Gulf South says daily allocations will force shippers to pay for the gas they use. “The tariff does not contain any daily overrun penalties, and Gulf South is not proposing any here. For monthly balancing, the sum of the daily allocations under each service agreement will establish the net imbalance position for each customer for the month,” says J. Kyle Stephens, vice president, Regulatory Affairs and Rates, Gulf South. “This proposal is consistent with the industry standard for daily allocations, as well as the Commission’s finding that daily allocations will more accurately accommodate the current marketplace.”
If FERC grants Gulf South’s request, shippers such as Devon, BP and Atmos run the risk of having to pay the existing overrun rate for the use of capacity in excess of its firm capacity rights on any day.
Understandably, Gulf South customers are unhappy about suddenly having to pay overrun rates, which are more likely to affect utilities like Atmos which have to be able to buy more than their daily allocation when weather on a given day takes a sudden turn for the worse, be it extra hot or extra cold.
Mary E. Nelson, manager, Regulatory Affairs, Devon Energy Corporation, said, “There is simply no way to manage deliveries to avoid daily overrun charges when the delivery point goes directly to the user. Gulf South’s proposal not only removes the ability to arbitrage the system—it adds to the costs of shippers who are trying to work within the system. This is particularly true of producer shippers.” Devon is particularly concerned about overcharges which would be dictated by usage patterns in the chemical and refinery industries.
House To Pass Oil And Gas Bills
Two House committees passed a jumbo infrastructure bill in February and a third was likely to follow suit, meaning the American Energy and Infrastructure Jobs Act will probably pass the House quickly. How quickly the Senate will follow suit, well that is unclear.
The bill covers lots of ground. It reauthorizes federal transportation funding for highways and the like and also eliminates some federal restrictions on oil and gas development. The oil and gas provisions passed by the Natural Resources Committee were divided up into three separate bills, all of which passed with unanimous Republican support and one or two Democratic votes. Those three energy bills require 1) President Obama to move forward with new offshore energy production in areas containing the most oil and natural gas resources that he placed off limits for drilling after taking office, 2) open less than 3% of the Arctic National Wildlife Refuge (ANWR) in Alaska to responsible energy development by directing the Interior Secretary to establish lease sales in the North Slope, 3) clear rules for the development of U.S. oil shale resources and promoting shale development of U.S. oil shale resources and promoting shale technology research and development.