February 2014, Vol. 241 No. 2


FERC Gas-Electric Information Sharing Order Draws Complaints

Two separate challenges have been made to FERC’s Order 787 issued in November. It allowed interstate pipelines and electric utilities to share non-public operational information to promote reliable service or operational planning on either the public utility’s or pipeline’s system.

That order was an acknowledgement of the growing dependence of electric generators on natural gas as coal-fired plants are retired. There was strong support for the rule from interstate natural gas and electric companies.
The only somewhat controversial aspect of the final rule was its No-Conduit Rule which prohibits interstate pipeline operational employees from being shared with affiliated non-jurisdictional entities, such as gatherers and intrastate pipelines, who are interconnected with the interstate pipeline.

“The implementation of this new No-Conduit Rule exposes such employees and companies to significant compliance risks for no gain,” says William E. Wolf, assistant general counsel, Enable Midstream Partners which filed a request for rehearing. Enable is the new name for CenterPoint Energy Gas Transmission Co., LLC. “It is entirely likely that the Commission’s new, overly broad No-Conduit Rule will impede rather than promote the Commission’s policy goals of encouraging sharing of information helpful to system reliability.”

A second request for amending the rule comes from the Natural Gas Supply Association (NGSA), the Process Gas Consumers Group (PGC), and the Northwest Industrial Gas Users (NWIGU). They want the FERC to agree to hold a technical conference one year after the regulation takes effect in order to assess Order No. 787’s effectiveness as well as a review of the scope of information being shared pursuant to the order. The regulation took effect Dec. 23.

After the regulation was proposed in June 2013, the NGSA expressed concern that the new regulations would allow transmission operators to share commercially sensitive information that could harm producers and marketers by revealing their positions in the market to outside parties. NGSA’s concerns were not alleviated by the final rule which was identical to the proposed version issued last June.

OSHA Renews Effort To Include Oil And Gas In Process Safety Standard

The Occupational Safety and Health Administration wants some changes to its Process Safety Management (PSM) standard which, if finalized, could have a significant impact on energy companies. Changes are being proposed in conjunction with separate changes to the agency’s Explosives and Blasting Agents standard which would impact underground construction firms.

OSHA announced the potential changes in a request for information, which is the first step in a rulemaking process. That means any changes won’t happen for at least a few years. The agency is moving forward because of an Executive Order President Obama signed on Aug. 1, 2013 which charged OSHA with identifying issues related to modernization of its PSM standard and related standards necessary to prevent major chemical accidents.

OSHA decided on the menu of potential upgrades to the PSM and blasting standards based on after action reports conducted by the U.S. Chemical Safety and Hazard Investigation Board (CSB) in the wake of chemical and refinery industry explosions over the past half decade or so. The enhancements to the PSM being considered include applying it for the first time to oil- and gas-well drilling and servicing and oil- and gas-production facilities. The blasting standard would be expanded to cover dismantling and disposal of explosives, blasting agents, and pyrotechnics.

OSHA had considered including oil and gas sectors in the PSM when it was originally finalized in 1992. But it exempted them with the intention of developing a separate PSM, which it never got around to, in part because of opposition from the American Petroleum Institute. One incident OSHA cites as a rational for considering adding oil and gas production to the current PSM relates to a fire in 1998 at a production facility near Pitkin, LA

In that instance, Sonat Exploration Co. was using well fluid to purge air from a 2-mile pipeline that connected a separation facility to a production well when the separation vessel failed. In its investigation report, the CSB stated that “[t]wo elements of the PSM standard, process hazard analyses and written operating procedures, are particularly relevant to the Sonat incident.” The CSB further concluded that “[t]he incident would likely have been prevented if process safety management principles or good engineering practice had been followed more effectively at the facility.”

API’s opposition to an oil and gas component in the original PSM was because the agency did not do an economic analysis of how application of the standard would affect the oil and gas production business. OSHA conceded the point and dropped production facilities from the standard. OSHA says it is ready to do that analysis and resume enforcement of the standard on the industry.

Environmental Group Presses For Methane Emission Controls For Pipelines

A leading environmental group wants the Environmental Protection Agency to regulate methane leaks from gas pipeline pneumatic controllers and compressors. The EPA New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants for the oil and gas industry issued in June 2012 apply mostly to oil and gas production facilities. These standards target volatile organics emissions, but they do result in some methane emission reductions, almost exclusively in upstream production and processing.

“While they are a good first step in the right direction, they leave significantly more work to be done regarding methane,” states Vignesh Gowrishankar, staff scientist at the Natural Resources Defense Council (NRDC). The standards require the use of green completions by 2015 and flaring of emissions in the interim. “These standards cover only new or modified equipment in limited parts of the supply chain,” adds Gowrishankar. “They do not cover most leaking equipment further downstream from where natural gas is produced and processed, such as in the storage, long-distance transportation and local distribution portions of the natural gas supply chain.” He says the 2012 standard will reduce 10-15% of the industry’s total annual emissions.

It doesn’t appear the EPA has any plans to institute a new methane emissions rulemaking, much less one devoted to gas pipelines. Sarah Dunham, director, Office of Atmospheric Programs, EPA, states, “The EPA is working with other agencies to assess emissions data, address data gaps, and identify opportunities to further reduce methane emissions through incentive-based programs and existing authorities.”

Methane leaks from pipeline equipment could become a bigger issue because of a study being conducted at the University of Texas at Austin’s Cockrell School of Engineering. Nine natural gas producers and the Environmental Defense Fund are cooperating with David Allen, director of the UT Center for Energy and Environmental Resources. The first phase of that study focused on methane emissions from fracking.

It concluded that methane emissions from venting are substantially less than what the EPA has estimated, but that emissions from pneumatic controllers are substantially higher. However, the conclusion that methane leaks from pneumatic controller are substantial poses significant implications for pipelines, since its pneumatic controllers are not covered under the 2012 New Source Performance Standards, which only apply to new and modified equipment, not to existing stock.

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