On October 19, 2017, the Pipeline and Hazardous Materials Safety Administration (PHMSA) announced an additional comment period on its December 19, 2016 interim final rule (IFR) which established minimum federal safety standards for underground natural gas storage facilities. PHMSA will accept comments until November 20, 2017. This notice comes amidst the current administration’s executive orders on deregulation and a recent DOT request for comment on regulatory reform.
In October 2017, the National Academy of Sciences (NAS) issued a pre-publication report on “Designing Safety Standards for High Hazard Industries.” Sponsored by PHMSA (and many years in the making), the Report focuses on oil and gas pipelines and the regulatory scheme used by the Pipeline and Hazardous Materials Safety Administration (PHMSA). Noting the differences between prescriptive and performance based rulemakings, the Report observes that while most federal agencies use a combination of both, PHMSA is one of the few federal agencies that primarily relies on performance based standards. The rationale used by PHMSA, the Report notes, is that pipeline integrity management is best maintained by placing responsibility on individual operators to identify and manage risks that may not be known to the regulators or common to the industry. (Report, p. viii).
The Department of Transportation formally requested public comment on existing rules and “other agency actions,” including but not limited to guidance documents and policy statements, that are good candidates for repeal, replacement, suspension, or modification without compromising safety. This request covers all DOT modal agencies, including PHMSA, the FAA, the FRA, NHTSA, among others. In addition to requesting comments, DOT indicated that it may hold a public meeting on these issues. Comments are due November 1, 2017.
The 5th Circuit U.S. Court of Appeals reversed several key aspects of a PHMSA Final Order in a recent opinion issued on August 14, 2017. That decision is significant for the fact that few final actions by this agency have been presented for judicial review, and, of those, even fewer have been successful. The decision is based on a complex set of facts and legal issues that went through several years of administrative appeals before the agency. As with most complex cases, many of the factual issues were unique, and are not likely to be repeated. There are a few larger, procedural themes to be gleaned from the decision that apply more broadly, however, both to this agency and administrative law generally.
Donald Trump formally announced Friday that he will nominate Skip Elliott as PHMSA Administrator. Once confirmed by the Senate, Elliott will serve as PHMSA’s chief executive charged with administering federal regulation of natural gas, oil, and other hazardous materials transportation by pipeline and the regulation of multimodal (truck, rail, etc.) transportation of hazardous materials. As PHMSA Administrator, Elliott will have oversight of over 600 employees within the Agency’s headquarters in Washington, DC and five regional offices across the U.S.
As the waters begin to recede from our nation’s energy capital following Hurricane Harvey’s unprecedented rainfall in the state of Texas, the full impacts of Hurricane Harvey are beginning to become more apparent. Beyond the incredible toll on the residents of the state, the daily damage estimates continue to rise. Significantly, nearly one-third of the U.S. refining capacity in the U.S. has been affected. The nation’s two largest refineries have closed, and many others are shut down or operating on a limited basis. One chemical plant suffered from several explosions, while another reported a release from a pipeline, and at least one of the country’s largest liquid transmission pipelines is shut down. While the full extent of damage to the energy industry is not yet known, the importance of good planning, preparedness and response is central to minimizing damage. These efforts, by both emergency responders and the private sector, can substantially limit the amount of damage to both the public and the environment.
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.”
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.
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.