June 2017, Vol. 244, No. 6

Government

Government

Republicans Ready Regulatory Relief for Pipelines

Based on two hearings it appears House GOP members are focused on providing the pipeline industry with regulatory relief as part of any upcoming infrastructure bill. One House committee held hearings in May on a discussion draft of legislation containing changes to the Federal Energy Regulatory Commission’s (FERC) Section 7 pipeline approval process. The other committee heard testimony from industry leaders on needed changes to the pipeline safety laws administered by the Pipeline and Hazardous Materials Safety Administration (PHMSA).

Don Santa, CEO at the Interstate Natural Gas Association of America (INGAA), testified at both hearings, one held by the Energy and Commerce Committee, the other by the Transportation and Infrastructure Committee in late April. At the latter’s subcommittee on railroads, pipelines, and hazardous materials, Committee Chairman Bill Shuster (R-PA) said no federal funding will go to pipeline projects because they and railroads are already spending “billions of their own money and they don’t require federal dollars.”

In fact, he said, billions cannot be spent on pipelines because of regulatory delays at FERC and the Corps of Engineers, which Shuster said cannot agree on two major proposed Pennsylvania pipeline projects, one worth $3 billion, the other $1 billion. He called the apparent disagreements between the two agencies “ridiculous.” FERC published an environmental impact statement on the PennEast project on April 7.

The discussion draft which was the subject of hearings in the Energy and Commerce’s energy subcommittee contained many provisions introduced in previous Congresses but never passed. They generally center on allowing FERC to move ahead with approval if another federal or state agency drags its feet performing the environmental impact study required by federal or state law.

Democrats on the energy subcommittee repeatedly referred to the discussion draft as “a solution in search of a problem.” They showed statistics showing that FERC approves 90% of projects within one year. Rep. Frank Pallone (D-NJ) and others said the bigger problem bedeviling pipeline approval was the lack of a quorum at FERC which has only two of five commissioners in seats with the term of one – Colette Honorable – expiring June 30. On May 9 President Trump nominated Neil Chatterjee and Robert Powelson as FERC commissioners.

Terry Turpin, director, Office of Energy Projects, FERC, speaking in a personal capacity, panned the discussion draft. “Some of the proposed INGAA modifications would alter the Commission’s role from one of collaboration with its fellow agencies to an oversight role, monitoring other agency execution of their congressionally mandated duties,” he stated. “I am concerned that this will require the use of Commission resources that could be better spent analyzing the proposed projects and could lead to unproductive tension between the agencies involved in the review process.”

Trying to make the case for inordinate delays at FERC, Santa pointed to one project that has fallen victim to federal agency foot-dragging, that being the gas transmission pipeline that would intersect the Blue Ridge Parkway and Appalachian National Scenic Trail in Virginia. Santa did not identify the pipeline but was probably referring to the Atlantic Coast Pipeline. “The Park Service took 14 months to review the 22-page application to survey the area,” Santa explained. “Once permission was granted, the survey work was completed within a single afternoon. The survey, however, is only an initial step. The Park Service has yet to complete its extensive review of the pipeline operator’s application for a permit to cross the parkway and trail using horizontal directional drilling.”

PHMSA has its own problems though they are different than FERC’s since PHMSA is run by an administrator, not a commission. It has been musical chairs at the top of PHMSA for years. Rep. Peter DeFazio (D-OR), the top Democrat on the committee, described PHMSA as a “pretty much dysfunctional agency.”

Santa was critical of PHMSA and saved his most pointed criticism for the transmission and gathering line proposed rule and the underground storage interim final rule. The proposed rule was issued in July 2016 and covered numerous provisions in the 2011 pipeline reauthorization. Its finalization is long overdue. The underground storage rule implements the 2016 pipeline bill.

Santa said the practical consequence of the five-year-and-counting delay in implementation of what is called the transmission “mega rule” is that operators may be reluctant to dedicate the enormous resources needed to implement voluntary pipeline safety commitments. “This hesitancy is rooted in the risk that the final rules ultimately adopted by PHMSA might compel a repeat of certain steps in an operator’s pipeline safety action plan,” he stated. “This ‘do-over risk’ is not insignificant. For example, testing pipelines for material strength is both costly and disruptive to service because pipelines are removed from operation to complete the testing. Operators would not want to conduct this testing twice.”

EPA Omits Compressor Stations from TRI Proposed Rule

The Environmental Protection Agency (EPA) leaves pipeline compressor stations off the list of facilities that would have to comply with new chemical release reports which natural gas processing (NGP) facilities would be subject to. The EPA had some latitude deciding which sectors within the oil and gas industry would have to make reports to the EPA’s toxic release inventory (TRI). That choice was pressed upon the agency because of a petition filed by environmental groups in 2012 demanding the agency add oil and gas sectors to those which have been subject to TRI reporting for years.

Facilities subject to TRI reporting are required to report releases of certain chemicals they use above certain thresholds. These facilities must also report pollution prevention and recycling data for such chemicals. NGP facilities are stationary surface facilities that receive gas from a gathering system that supplies raw natural gas from many nearby wells. These facilities prepare natural gas to industrial or pipeline specifications and extract heavier liquid hydrocarbons from the raw or field natural gas.

The American Petroleum Institute (API), which represents NGP facilities, wants the EPA to withdraw the proposed rule because the agency overestimates its benefits and underestimates the financial burden. Uni Blake, Scientific Advisor, API, explains, “Due to the varying and overlapping temporal and spatial nature of activities, operations, and businesses in the oil and natural gas exploration and production sector, collecting the economic data for each multi-establishment facility to determine if the primary NAICS/SIC code is covered under TRI, would be costly and impose a significant financial burden.”

The Environmental Integrity Project (EIP), which has led the effort to force the EPA to extend TRI reporting to oil and gas sectors, argues that Energy Information Agency statistics show a continual growth in natural gas processing facilities in the lower-48 states, with 493 facilities in 2009, 525 facilities in 2012, and 551 facilities in 2014 – or a 12% increase in five years.

In this same period of time, the amount of natural gas processed increased 24%. As an example, it points to Marathon Petroleum’s June 2016 shareholder presentation which states that it processed a record amount of natural gas in its Marcellus and Utica operations – 4.3 Bcf/d the first quarter of 2016 – representing a 9% increase over the prior quarter, and expects to increase processing in its Marcellus/Utica and Southwest operations by 15% over the prior year.