The 5th Circuit issued a lengthy opinion on August 14, 2017, reversing most of the violations of a PHMSA enforcement action that began in November 2013 in conjunction with investigation of a failure on the Pegasus Pipeline. In that matter, PHMSA alleged that the ExxonMobil Pipeline Company (EMPCo) failed to properly consider the risk of failure on a segment of pre-1970 low frequency electric resistance welded (LF-ERW) pipe. The Agency assessed a penalty of nearly $2.7 million for the various alleged violations. In a rare judicial decision regarding a PHMSA Final Order and Decision on Petition for Reconsideration, the Court reversed all but one of the items on appeal, and vacated the penalty associated with those alleged violations (dismissing over $1.6M of the total penalty). The Court remanded the one remaining item back to PHMSA for recalculation of the associated penalty.
The Government Accountability Office (GAO) issued a report on August 4, 2017, titled “Pipeline Safety – Additional Actions Could Improve Federal Use of Data on Pipeline Materials and Corrosion.” The 55 page Report, prepared in response to a Congressional mandate in the 2016 Pipeline Safety Act reauthorization, summarizes pipeline materials, training and corrosion prevention technologies for gas and liquid pipeline facilities and analyzes PHMSA use of corrosion and material data to inform its inspection priorities. The Report recommends that PHMSA review, document and validate the way in which it identifies the highest risk pipelines for inspection, but makes no significant new findings, and the recommendations are largely consistent with initiatives that PHMSA already has begun.
The Report notes initially that pipelines carrying hazardous liquids or gas have the lowest incident rate of other transportation modes. For oil and gas pipelines from 2010 to 2015, GAO’s assessment of PHMSA incident data attaches the highest single cause as corrosion (22%), followed by “equipment failure” (21%), “natural or outside force” (16%) and “excavation damage” (14%). PHMSA tracks causal data somewhat differently, however, grouping “equipment failure” and “material/weld failures” together in a single category, which is reported by operators to be the largest cause of significant incidents in the past 5 years. By comparison, the GAO Report links corrosion (22%) with “material, pipe or weld failure” (12%), although it is a very different failure mechanism from corrosion, to be the estimated cause of nearly one-third of all oil and gas significant incidents.
On August 3, 2017, the Senate confirmed both Neil Chatterjee (R) and Robert Powelson (R) as FERC Commissioners, returning FERC to a quorum after six months. FERC has been unable to issue major decisions without a quorum, although staff work has continued to work on a variety of fronts, including issuing environmental reviews for various pipeline construction and other energy projects. The Senate confirmations should be a relief for the energy industry, which has been subject to prolonged uncertainty as major project approvals have been at a standstill since February.
The quorum will be restored as soon as Chatterjee and Powelson are sworn in, which historically has taken from one to three weeks. The confirmation of the nominations of Chatterjee, a former aide to Senate Majority Leader McConnell and Powelson, a Pennsylvania regulator, brings the Commission to 3 members of what is typically a 5 member Commission. Trump previously announced nominations of Kevin McIntyre (R), an energy lawyer in private practice, and Richard Glick (D), a Senate aide, for the two remaining vacancies weeks ago, but only nominated them formally this week. The Senate Energy and Natural Resources Committee has scheduled a hearing on those nominations for September 7, 2017.
On July 19, 2017, the U.S. House voted to give lead authority for authorizing cross border oil and gas pipelines to FERC, and to the Secretary of Energy for cross border electric transmission lines. HR 2883, entitled Promoting Cross-Border Energy Infrastructure Act, removes the requirement for such cross border energy infrastructure to obtain Presidential Permits and instead establishes a 120 day review process under the National Environmental Policy Act (NEPA) and the Natural Gas Act to obtain a “Certificate of Crossing.”
The DC Circuit issued a decision on July 3, 2017, vacating the 90-day stay of the Oil & Gas Industry NSPS rules – the first rules to regulate methane from that sector. In a June 5 Federal Register notice, the new Trump EPA stayed the rules pending reconsideration under Section 307(d) of the Clean Air Act. Environmental Groups filed an emergency challenge to the stay, asking for either a stay of that decision or summary vacatur of it. Issuing its decision less than a month later, the court vacated EPA’s stay of the rules.
President Trump plans to nominate Kevin McIntyre to serve as chair of the Federal Energy Regulatory Commission (FERC). McIntyre currently works in private practice in the energy regulatory sector and has for 30 years. With McIntyre’s nomination, there will be four commissioner candidates in various stages of the nomination and confirmation process.
EPA and the Army Corps of Engineers (the Corps) issued a prepublication version of a proposed rule that will rescind prior 2015 revisions to the definition of “waters of the U.S.” under the Clean Water Act (CWA), pending the issuance of a more substantive rulemaking that reevaluates the definition. The prior revisions expanded federal jurisdiction over certain waters and prompted numerous judicial challenges and a subsequent nationwide stay of the rule.
The U.S. Department of Transportation (DOT) recently published a notice inviting public comment to identify statutes, rules, regulations, and interpretations in policy statements or guidance that “unjustifiably delay or prevent completion of surface, maritime, and aviation transportation infrastructure projects.” As stated in the notice [attached], in keeping with President Trump’s regulatory reform agenda, DOT and other federal agencies are in the process of reviewing existing policy statements, guidance documents, and regulations that might pose impediments to transportation infrastructure projects. The upcoming deadline to provide input on that review is July 24, 2017. We encourage industry to consider submitting comments, particularly given DOT’s statement that comments are not restricted to burdensome regulations, but also extend to policy statements, interpretations and guidance.
Oil and gas discoveries in various shale plays around the U.S. over the past decade have led to an increased rise in the number of transfers and acquisitions of pipeline assets, including pipelines serving processing plants, producers, storage facilities, and those associated with power plants and other industrial users. Changes in global and domestic energy markets have continued that trend. Prudent operators routinely request and review documentation as part of their due diligence in making acquisitions, but it is becoming increasingly important that certain records be located during due diligence or factored into the transaction if such records are lacking and must be recreated. Decision makers involved in pipeline acquisitions should involve pipeline safety managers or counsel early on in the process to allow sufficient time to include pipeline safety records review as part of the transaction; to do otherwise can be a costly mistake that carries significant liability risk.
A bill intended to streamline the siting of natural gas pipelines and increase transparency is advancing through the U.S. House. As approved by voice vote, H.R. 2910 , would facilitate concurrent federal and state agency reviews to help streamline the siting review process under the Natural Gas Act (NGA) which is led by the Federal Energy Regulatory Commission (FERC). This bill comes at a time when the permitting process for natural gas pipelines has become protracted, cumbersome, and subject to third party challenges and delays at the federal, state and local levels.