As the Pipeline Safety Act (PSA) reauthorization deadline approaches, the Democrats on the House Energy and Commerce Committee recently released draft discussion legislation titled, The Safer Pipelines Act of 2019.  The “discussion draft” was released in advance of a Committee hearing held on June 19, 2019.  At the hearing, it became clear that the recent legislation was drafted behind closed doors and that it was not well received by the minority Republicans on the Committee or industry representatives.

With this most recent draft legislation, several noteworthy legislative changes are likely to be considered by the Committee, although two Committee Republicans questioned whether marking up the draft was worth the effort.  Notably, PHMSA declined to participate in the hearing because it did not have sufficient time to review the draft.  Industry trade group representatives provided testimony as well as a representative from the Pipeline Safety Trust.  The more significant proposals are summarized below and relate to:  (1) lowering the criminal liability standard; (2) expanding the definition of regulated gathering pipelines; (3) clarifying and expanding citizen suits; (4) substantially increasing the amount of operator information made available to local responders and to the public; and (5) other integrity management requirements regarding phasing out direct assessment and requiring automatic shut off valves for liquid pipelines.  Continue Reading Pipeline Safety Draft Legislation Adds New Proposals to Reauthorization Debate

The Department of Transportation (DOT) released a legislative proposal to Congress on June 3, 2019, to reauthorize the federal Pipeline Safety Act (PSA or the Act) and continue funding the federal agency charged with implementing it, the Pipeline and Hazardous Materials Safety Administration (PHMSA).  DOT’s press release states that the proposal, Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2019, will embrace innovation, clarify certain regulatory requirements to prevent incidents, “modernize” certain data collection, and enhance support for new liquefied natural gas (LNG) facilities.  Proposals target a broad array of topics including pipeline construction review, permitting, and reporting, criminal penalties, updating certain reporting thresholds, industry collaboration, and the scope of federal and state pipeline partnerships.  Continue Reading DOT Issues Pipeline Safety Act Reauthorization Proposal

The Pipeline and Hazardous Materials Safety Administration (PHMSA) is close to finalizing a rule applicable to the safety of natural gas transmission pipelines that has been nearly eight years in the making. Both Congress and the industry have urged PHMSA to issue a final rule and PHMSA has now signaled that the rule is currently awaiting final approval by the Office of Management and Budget (OMB). With a final rule that could be published in the coming weeks or months, pipeline operators should be prepared to review and modify their compliance programs as appropriate.

Gas Mega Rule

PHMSA’s proposed rule was initiated in the aftermath of the 2010 San Bruno pipeline incident and relates to numerous National Transportation Safety Board (NTSB) recommendations associated with that incident. The rule is also intended to address Congressional mandates from prior reauthorizations of the Pipeline Safety Act, in 2011 and in 2016. These actions culminated in a sweeping proposed rulemaking in 2016 – which many refer to as the “gas mega rule.” If finalized as proposed, the rule would nearly double the length of the existing 49 C.F.R. Part 192 regulations, proposing numerous expansive revisions across the natural gas industry.

The proposed rule did result in an unprecedented number of comments from industry and stakeholder groups across a variety of issues, with a number of commenters asserting that the rule was issued hastily and without careful review. While it was initially focused on gas transmission pipelines, the proposed rulemaking was broadened to address gas gathering pipelines as well as distribution pipelines. The Agency explained the broader scope by saying that the rule was intended to address outstanding statutory mandates from the 2011 Pipeline Safety Act. One of the criticisms of the proposed rule that if it was intended to address issues beyond transmission lines, the proposal did not include sufficient supporting cost benefit analysis.

Reevaluated and Divided into Three Separate Rules

As the rule made its way through the statutory technical advisory committee process and through oversight of a Republican presidential administration focused on deregulation, what was once a hastily-issued mammoth proposed rulemaking became subject to a protracted review and revaluation process focused on adherence to new Executive Orders and that included splitting the rule into three smaller rules. These include (1) a rulemaking focused primarily on satisfying outstanding statutory mandates titled “Safety of Gas Transmission Pipelines, MAOP Reconfirmation, Expansion of Assessment Requirements and Other Related Amendments”; (2) a rulemaking focused on “Safety of Gas Transmission Pipelines, Repair Criteria, Integrity Management Improvements, Cathodic Protection, Management of Change, and Other Related Amendments;” and (3) a rulemaking focused on gathering pipelines titled “Safety of Gas Gathering Pipelines.”

The Agency’s timeliness in addressing statutory mandates, including in particular rulemaking mandates, has come under criticism recently as the Pipeline Safety Act (PSA) is currently being considered for reauthorization by Congress. In several hearings earlier this year, PHMSA faced pointed questions from Congressional representatives on the status of incomplete Congressional mandates and the status of these rulemakings. In addition, industry recently requested that PHMSA expedite the gas transmission pipeline safety rule in order to provide increased regulatory certainty and consistency.

First Rule Cleared DOT and Now Under OMB Review

Most recently, PHMSA has indicated that the first of these three rules is currently awaiting final approval by the OMB. As this initial rule is pending its final hurdle, operators should review new or revised regulatory obligations. Among expected changes are new requirements to confirm MAOP for certain transmission pipelines that have not been tested or that have inadequate records (with detailed options for doing so), and the expansion of integrity assessment requirements to a new category of “moderate consequences areas.” Other provisions include incorporating seismicity into data integration and risk analyses, a six month extension of the 7 year reassessment interval and regulations regarding MAOP exceedance reporting (although the latter was intended to be self-implementing in the 2011 statutory amendments).

Some Operators More Prepared for Final Rule than Others

While the rule has been eight years in the making, some operators have already proactively reviewed and reconfirmed the MAOP of their pipelines and undertaken additional risk analyses and testing of their gas transmission pipelines. Other operators have waited to better understand the new regulatory requirements and testing methods as finalized. Once final, the rulemaking will not go into effect for immediately (60 days) and even then, PHMSA has indicated that there will be a phased compliance period for operators to confirm the MAOP of their pipelines and perform required testing or replacement. Operators should have one year from the effective date of the rule to come up with a plan for MAOP reconfirmation and the rule is expected to require operators to reconfirmed MAOP for 50% of applicable mileage within 8 years and 100% within 15 years. Operators should have already reviewed records and identified gaps for certain gas transmission pipelines and reported that mileage in PHMSA annual reports, so they should have a sense of the pipeline mileage that may require additional pressure testing and/or material testing. For those that have not, it would be prudent to proceed with a thorough review in anticipation of the final rule.

Projected August 2019 Issuance to Pave Way for Other Outstanding Rulemakings

In the Department of Transportation’s (DOT) Significant Rulemaking Report in April 2019, DOT projected that a final rule would be published by August 20, 2019 and become effective by October 2019. DOT anticipates finalizing the other two rulemakings that were originally part of the gas mega rule, with the gas transmission integrity management rule to be issued by late 2019, and the gas gathering pipeline safety rule by the middle of 2020.

If PHMSA finalizes this rule and the pending liquid pipeline safety rule before this fall, it may pave the way for a more smooth PSA reauthorization process. It may also keep the focus of new Congressional mandates on gas distribution pipelines (as opposed to all pipelines) which have been at issue in numerous recent pipeline incidents as well as Congressional reauthorization testimony and questioning.

With an increased interest in the resolving disputes efficiently and avoiding litigation where possible, the time may be right for the Pipeline and Hazardous Materials Safety Administration (PHMSA) to clarify the process for settlement of pipeline safety compliance issues, whether through new rules or a written settlement policy. On the hazardous materials regulatory front, PHMSA has historically engaged in settlements that are guided by an express allowance for settlement under the regulations. The Agency has also engaged in settlements in at least some pipeline safety cases over the years and more so in the last year. Without specific rules or a written settlement policy in place, however, settlements of pipeline safety matters in practice may not be consistently implemented.

Many federal agencies have settlement policies that encourage parties in enforcement actions to discuss issues before progressing to full administrative hearings. Such policies offer the possibility of narrowing, if not resolving, legal disputes, which can benefit all parties by realizing efficiencies and avoiding the cost of protracted disputes. These efforts are analogous to pre-trial conferences in federal courts, where a court may ask the parties to discuss whether issues can be narrowed or resolved without full adjudication, in order to ‘expedite disposition of the action’ and ‘facilitate settlement’ (see Fed.R.Civ.Proc. 16(a)).

PHMSA is charged with the implementation of two primary statutes: the Pipeline Safety Act (PSA) and the Hazardous Materials Transportation Act (HMTA). PHMSA is comprised of two sections: the Office of Pipeline Safety (OPS) and the Office of Hazardous Materials (HAZMAT). The Agency’s Chief Counsel is responsible for both the OPS and HAZMAT sections. Neither OPS nor HAZMAT currently have published settlement policies, but the HAZMAT regulations do address settlement in some detail. Since the 1980s, there has been a provision in the HAZMAT regulations titled “Compromise and Settlement” (see 49 C.F.R. Part 107.327). That provision allows either the Agency or a respondent to propose settlement of either or both a proposed penalty or a proposed compliance order. The Agency made clear in issuing the Final Rule containing this provision that a party could settle claims without admission. The provision was further defined by subsequent regulatory amendment to clarify its intent “to expedite and facilitate compromise and settlement of HMTA enforcement cases…”. Significantly, that amendment clarified that under Part 107.327 (“Settlement and Compromise”) either PHMSA or a respondent can seek to settle an enforcement case, without the approval of the Administrative Law Judge (ALJ), noting that option exists “even when the case is pending before an ALJ.

As noted in the preambles to the HAZMAT settlement and compromise regulations, the Agency has settled cases over the years through Consent Agreements or modifications of claims, without express reliance on settlement authority. That has also occurred in the OPS section of PHMSA. Without express provisions regarding settlement, however, either in regulations or in a written settlement policy, the availability of settlement negotiations has been unclear and not consistently applied on the OPS side of the Agency. This issue was presented to PHMSA over the past year, and the Chief Counsel welcomed the opportunity to have parties voluntarily engage in meetings that could narrow or resolve OPS issues as efficiently as possible. Among other things, settlements can result in much more effective and efficient resolution of enforcement matters, including the correction of facts, more efficiently than through administrative hearings; more contemporaneous exchanges of views on new or novel legal claims or defenses; more tailored proposed compliance orders aligned with the facts and issues; and offers of compromise on penalty amounts.

With the experience of the HAZMAT express allowance for settlement, and the benefit of years of OPS precedent in finding ground for settlement in at least some cases, the time may be ripe for PHMSA to either amend its Part 190 (OPS procedural) regulations, or issue a written settlement policy that could apply to both the OPS and HAZMAT sections. In either approach, the Agency should clarify a few issues that have arisen in recent years in the course of settlement discussions with OPS.

The first issue questions the procedural steps required if a settlement is reached after a Hearing Request has been filed. Can the Respondent simply withdraw its Hearing Request and enter into a Consent Agreement with the Region, or must the parties present their settlement agreement to the Hearing Officer, who will then prepare and recommend a Final Order to the Associate Administrator?  The second issue concerns civil administrative penalties. If the Region agrees through negotiation to withdraw some (but not all) allegations in a given claim, how is the proposed penalty adjusted?  In various instances it has been suggested that the Region could make such modifications, while in other cases the Agency representatives have preferred to let the Hearing Officer make adjustments in issuing a recommended Final Order. Further, the settlement process in different Regions and before different presiding officials has not been consistent due to the lack of a clear path towards settlement and specific procedural steps.

If PHMSA decides to promulgate ‘settlement and compromise’ regulations for OPS under Part 190, similar to the Part 107 regulations for HAZMAT, such procedural action would arguably not require prior notice, pursuant to 5 U.S.C. Section 553. Further, any rules could be deemed deregulatory since they are intended for the purpose of resolving disputes and increasing efficiencies. Settlements are subject to public inspection, however, whether accomplished through consent agreements or final orders.

Providing the regulated community with clear guidelines on the opportunities for settlement of enforcement actions would benefit all parties.

Congress recently convened its third Committee Hearing on reauthorization of the Pipeline Safety Act, before the House Energy and Commerce Committee.  Much of the discussion of focused on pipeline security, among other issues that have been discussed in prior hearings. Adding to the focus was the absence of an invited representative from the Transportation Security Administration (TSA), the agency who is tasked with sharing oversight of pipeline security with PHMSA. The TSA has come under criticism in light of a recent Government Accountability Office report that was critical of the agency’s Pipeline Security Division and its ability to ensure the safety and reliability of pipeline energy network from both cyber and physical security saboteurs. That report cited “significant weaknesses” in TSA’s program and pointed to, among other challenges, a shortage of qualified inspectors to address cyberattacks and other physical intrusions facing pipelines.

Days before the Hearing, several trade groups sent the House Committee on Appropriations Homeland Security Subcommittee a letter requesting additional appropriations for the Transportation Security Administration to carry out its responsibilities. Noted in that letter and at the Hearing was the fact that the TSA has only six full time employees tasked with its pipeline security oversight, which includes roughly 2.7 million miles of pipelines and associated facilities. Since the GAO report issued, the number of staff charged with oversight of pipelines has dropped to four.  Industry argued that adding resources within TSA to support the pipeline program would allow the agency to better succeed in its mission, by referencing a 2013 staff that was twice the current size as well as recent appropriation bills for TSA that do not provide for an increased focus on pipeline cybersecurity oversight.

Some representatives at the Hearing questioned whether TSA was the right agency for the job, particularly in the light of the fact that it did not send a representative to the hearing. In response to critiques of TSA, industry is quick to point to voluntary efforts and public-private partnerships to ensure the security and reliability of their pipeline assets. While both PHMSA and TSA (and DOE) share authority over different aspects of pipeline security, TSA standards specific to cybersecurity have been voluntary to date.

Other pipeline safety issues of discussion touched upon leak detection, new technology, state participation in pipeline safety, possible revisions to clarify the citizen suit provision of the statute, cost-benefit analysis, and outstanding rulemakings. While Congress has now convened three reauthorization Committee hearings on the PSA, there has been only one bill introduced in the Senate (S. 1097) and one in the House (HR 2139) both by DemocratsThe bills are identical and focus almost exclusively on distribution pipelines to address issues identified in the Merrimack Valley incident (with the exception of a proposal to increase civil penalty authority for all operators by a factor of 100). Ultimate reauthorization legislation, however, is sure to focus more broadly on other aspects of pipeline safety as indicated by the oral and written testimony submitted in conjunction with the hearings. In addition, several Senators and Representatives indicated they would be submitting follow up questions to the record to PHMSA, NTSB, and TSA, among others.

The White House issued a new Executive Order (EO) on April 10, 2019 intended to ‘revise the process for the development and issuance of Presidential Permits’ for certain cross border energy infrastructure.   The EO limits the opportunity and timeframe for federal agencies, states or Indian tribes to comment on Presidential Permit applications for oil, water or sewage pipelines and other border crossing infrastructure such as bridges, rail and surface roads.  The new EO clarifies that the ultimate decision to grant or deny such permits remains with the President (that authority was previously delegated to the State Department).

Continue Reading New Executive Order Attempts to Streamline Presidential Permits

The Executive Order (EO) “Promoting Energy Infrastructure and Economic Growth,” issued by the White House on April 10, 2019 has primarily been heralded as an effort to prevent states from blocking pipelines under their Clean Water Act Section 401 certification authority. President Trump addressed a number of other energy issues in the same Executive Order, however, all attempting to remove barriers to energy projects in the U.S. As summarized below, these include a call for updating regulations governing LNG facility safety regulations, addressing sunset provisions in agreements for energy infrastructure on federal lands, and requesting reports assessing impediments to fuel supply in New England and export efforts in West Coast, and ways to promote economic growth in Appalachia.

Continue Reading Recent Executive Order Extends Beyond Section 401 Water Quality Certifications

President Trump recently issued two much anticipated Executive Orders aimed to streamline the permitting of U.S. energy infrastructure. One Executive Order (EO) focuses primarily on Clean Water Act (CWA) state issued water quality certifications and associated EPA guidance and regulations. In “Executive Order on Promoting Energy Infrastructure and Economic Growth,” the Administration takes aim at “outdated Federal guidance and regulations” under Section 401 of the CWA that are “causing confusion and uncertainty and are hindering the development of energy infrastructure.” While states and environmental organizations are concerned that the EO will limit a state’s authority under the CWA, the impact of the EO at least initially appears to be limited, as the statute and the case law on point already establish certain limits regardless of the EO. What remains to be seen is the import of any proposed rulemakings issued as a result of this EO, or whether these issues prompt any legislation that proposes to amend Section 401 of the CWA.

Continue Reading Executive Order Impact on 401 Water Quality Certification Appears Limited

In advance of a Senate Commerce Committee Hearing on reauthorization of the Pipeline Safety Act, Senators Markey, Warren, and Blumenthal announced legislation to address distribution pipelines and risks associated with the September 2018 Merrimack Valley incident.  The Leonel Rondon Pipeline Safety Act of 2019, named after a man who died in the incident, would impact various aspects of distribution pipelines, including emergency response, integrity management, operation and maintenance, safety management systems, and recordkeeping.  Further, for all pipeline operators the bill would increase civil penalties under the statute by a factor of 100, from $200,000 per day to $2 million per day and for a maximum of $2 million to $200 million for a related series of events.  Even though the majority of the bill’s provisions are limited to distribution pipelines, certain of these proposals could be expanded more broadly during the reauthorization process to apply to gathering and transmission pipelines.

Continue Reading Distribution Pipelines and Increased Penalties Feature in Senate Pipeline Safety Bill

The first Congressional Hearing on Pipeline Safety Act Reauthorization for 2019 was held this week before the House Transportation and Infrastructure Committee.  The Hearing did not have as much drama as last summer’s Hearing before the same Committee, where PHMSA Administrator Skip Elliott was asked sharply to explain why the Agency had failed to fulfill so many Congressional mandates and National Transportation Safety Board (NTSB) Recommendations.  In his written testimony at this week’s Hearing, Administrator Elliott stated that “When I spoke [here] last year, I heard clearly from [Committee] members that finalizing outstanding Congressional mandates must be a top priority.”   The Committee staff report issued for the Hearing listed 12 “unmet mandates,” and Administrator Elliott’s written testimony conceded that PHMSA yet to address 8 mandates from the 2011 Pipeline Safety Act (PSA) reauthorization, and another 4 from the 2016 PSA reauthorization.  Of that dozen outstanding mandates, 4 relate to reports and 8 involve rulemaking.  Jennifer Homendy, a member of the NTSB, testified that the NTSB has 24 “open” recommendations to PHMSA, several on the Board’s “most wanted” list for completion.  Homendy previously served as the Democratic Staff Director of the Subcommittee on Railroads, Pipelines, and Hazardous Materials for the House Transportation and Infrastructure Committee.

Continue Reading Congress Turns its Attention to Pipeline Safety Act Reauthorization