For at least the past 35 years, federal courts have generally allowed an administrative agency’s interpretation of a regulation or statute that it administers to prevail when challenged by a member of the regulated community or any other interested party. The ‘agency deference’ doctrine has been questioned in recent years, however, and a new case pending review before the Supreme Court may reverse or revise the doctrine as it relates to an agency’s interpretation of its own regulation. Whether a court defers to an agency’s interpretation of a statute or regulation defines the standard of review with which it will review the Agency’s decision. For that reason, whether agency deference remains in place or not, regulated entities should focus on the importance of creating a record for judicial review of agency action. Continue Reading The Importance of Creating A Record for Judicial Review of Agency Action

DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Final Rule titled “Oil Spill Response Plans and Information Sharing for High Hazard Flammable Trains.” Among other requirements, certain rail trains carrying petroleum oil will be required to prepare comprehensive oil spill response plans to address a worst case discharge.  Modifications to the existing rules become effective 180 days after publication in the Federal Register (including development of new spill response plans), but incorporation of certain publications by reference is approved within 30 days.  The rule is promulgated in coordination with the Federal Railroad Administration (FRA) and is intended to implement directives in the Fixing America’s Surface Transportation Act of 2015 (FAST Act) and other mandates.

Under the rule, Comprehensive Oil Spill Response Plans (COSRPs) must address a ‘worst case discharge’ (WCD) and will be required for any train that has more than 20 continuous cars carrying petroleum oil, or 35 cars spread throughout any one train.  A WCD is defined as an incident with potential to release 300,000 gallons or more of petroleum oil, or 15% of the amount of oil on the largest train consist carrying oil in a given response zone.  The COSRP requirement expands upon oil spill response requirements already established in both the Clean Water Act of 1972 and the Oil Pollution Act of 1990.  Since 1996, COSRPs have been applicable to railroads transporting oil greater than 1,000 barrels or 42,000 gallons per package, but because the typical rail tank car has a capacity around 30,000 gallons, no rail carriers currently transport petroleum oil subject to the 42,000 gallon packaging threshold.  In addition to expanding the COSRP requirement, the final rule also “modernizes” the COSRP requirements by requiring that plans establish geographic response zones and ensure that personnel and equipment are prepared to respond to an accident.  In addition, the Final Rule requires “high hazard flammable trains” (also called HHFTs and defined as more than 20 continuous cars carrying Class 3 Flammable liquids or 35 cars spread throughout any one train) to share COSRPs and related information with State Emergency Response Commissions, Tribal Emergency Response Commissions, or other appropriate State designated entities.

This rule was first proposed in a Notice of Proposed Rulemaking (NPRM) issued on July 29, 2016, proposing both additions and revisions to 49 CFR Part 130.  The NPRM was prompted both by the 2015 FAST Act and National Transportation Safety Board (NTSB) Recommendation R-14-005 following the Lac Megantic train derailment in Quebec.  Both the proposed and final rules cite to 13 derailment accidents involving trains carrying crude oil, between 2013 and 2016 (the most recent incident occurred on June 2016 in Mosier, Oregon).  Following the July 2013 multiple fatality crude oil train derailment and explosion in Lac Megantic, the NTSB and DOT issued Advisories.  The NTSB then issued its 2014 recommendation, with DOT issuing an Emergency Order on May 7, 2014, requiring trains carrying more than one million gallons of Bakken crude to notify local emergency planning entities along their route.  Then on August 1, 2014, PHMSA issued a NPRM (HM-251) to explicate and define the Emergency Rule, which was finalized in 2015 and added new design, speed restrictions, braking systems and routing requirements to HHFTs. Congress followed in 2015 with oil train response plan mandates in the FAST Act.  In addition, in March of 2018 (in the Consolidated Appropriations Act), Congress directed DOT to “issue a final rule to expand the applicability of comprehensive oil spill response plans.”

The final rule in large part tracks the NPRM, but adds some clarifications and increased flexibility to railroads that must submit COSRPs.  PHMSA rejected comments suggesting that COSRPs should be required for lower quantities of oil or fewer numbers of cars in trains, citing to a prior conclusion in a related rulemaking that at lower thresholds “relatively few tank cars would be breached on average in the event of an incident.’  The definition of ‘petroleum oil’ does not change from its current definition at 49 CFR Part 130.5, and the burden remains on the offeror of oil for transport to make that determination.  Under the current rule, ‘petroleum oil’ includes mixtures of at least 10% (so diluted wastewater would not meet the test, nor would E95 ethanol, although E85 ethanol would meet the test and require a COSRP if sufficient numbers of cars are in a train).

In terms of increased flexibility, the rule allows railroads to submit plans that meet State requirements under certain circumstances and implements a 12 hour response time in all areas (as opposed to a smaller timeframe).  Further, CORSP plans will be approved by PHMSA (not the FRA) and response and mitigation requirements align with PHMSA’s pipeline Facility Response Plan requirements under 49 C.F.R. Part 194.  A railroad must also certify in its plan that it has conducted training and that the plan includes requirements for equipment testing and exercises, with recordkeeping required for both (Parts 130.135 and 130.140).  Railroads must update and resubmit their plans every 5 years (Part 130.145), or within 90 days of implementing any significant changes or new routes.  Finally, the new Final Rule also provides for an alternative hazardous liquid classification testing method based on initial boiling point (per industry best practice ASTM D79000).

PHMSA estimates that the new rule will apply to 73 railroad operators at time of issuance, and that it should take roughly 180 hours to prepare an initial plan.  Although not noted in the Final Rule, the number of crude by rail incidents has declined significantly since 2016 (the last incident cited in the Final Rule).  The reason for that is that the amount of crude shipped by rail has also declined significantly since 2016.  When new sources of shale oil were developed a decade ago, pipeline proximity and capacity was limited, thus increasing amounts of crude were shipped by rail.  From 2012 to 2013, the amount of crude oil shipped by rail more than doubled, then continued to increase in 2014 and 2015.  In 2016, however, the amount of crude shipped by rail began to drop, and it has now fallen below the levels shipped in 2012.

Although the market need for use of transporting oil by rail has declined overall, to the extent an increase arises as a result of the Permian Basin activity and/or additional high profile rail incidents occur in the future, there may be an increased focus on rail shipments.

Earlier this month, the U.S. Department of Transportation (DOT) issued a notice seeking input from the public on existing guidance documents within DOT and its modal operating administrations, including PHMSA.  In particular, DOT seeks input on guidance documents that are no longer necessary, are cost-inducing, inconsistent or unclear, not conducive to consistent enforcement, or that need to be updated.  The more specific the comments about the documents and the concerns with them, the better, along with suggested alternatives.  The comment period remains open until April 8, 2019.

The notice relates back to a prior DOT notice requesting comments on regulatory review in October 2017, where DOT sought public comment on existing rules as well as guidance documents.  Both this notice and the prior 2017 notice stem from the Trump Administration’s Executive Orders regarding deregulation (E.O. 13771) and regulatory reform regulatory reform (E.O. 13777).   In addition, this most recent notice was issued on the heels of DOT’s posting of a new guidance directive from DOT’s General Counsel outlining a more detailed clearance process for guidance that became effective in December 2018.

Regardless of the basis, the regulated community has a unique opportunity to recommend that particular guidance documents be repealed or revised.  A wide array of PHMSA documents constitute guidance potentially subject to the notice, such as Agency Inspection Protocols, Staff Manuals and Instructions, Reporting Form Instructions (such as 7000.1 or 7100.2 incident and annual reports), Advisory Bulletins, Frequently Asked Questions, and even interpretations and policy statements.  Other documents such as the Pipeline Civil Penalty Summary are also within the scope of the Notice.

Certain of PHMSA guidance materials are inconsistent, out of date, and unclear, and could benefit from revision at a minimum.  Further, PHMSA at times relies on guidance documents which do not have the force of law to inform agency enforcement or corrective actions. Coupled with DOT’s new focus on streamlining agency guidance, we encourage operators to consider submitting comments.  To that end, we are particularly well positioned to assist clients in preparing comments to this Notice, given the breadth and depth of our national practice and experience.

The federal agency tasked with pipeline safety, PHMSA, has issued a long-awaited rule regarding plastic pipe.  Plastic pipe is primarily used in distribution gas pipeline systems, as a corrosion resistant and cost effective alternative to steel pipelines.  This rule provides some significant updates to existing 49 C.F.R. Part 192 rules applicable to plastic pipe and to expand its use in light of technological advances.  The rule will be effective January 22, 2019, and has limited application to new, repaired, and replaced plastic pipelines.

Plastic pipe has been used in distribution pipeline systems and to a lesser extent in transmission and gathering pipelines since the 1970s.  In particular, plastic pipe is frequently used by operators in replacing aging distribution infrastructure.  While there have been some issues related to brittle fracture of plastic pipe manufactured in the 1960s-1980s, technological advances in the current design and manufacture of plastic pipe support its reliability and integrity.  Since 2010 PHMSA has received numerous petitions for rulemaking to update its 49 C.F.R. Part 192 rules applicable to plastic piping from industry groups such as the American Gas Association and the Gas Piping Technology Committee.  In particular, industry requested that PHMSA increase the design factor associated with plastic pipe and allowances for the use of certain nylon (polyamide) pipe and at higher pressures (which have been the subject of certain Special Permits).  In addition, federal and state pipeline safety inspectors have observed compliance issues with plastic pipe, such as issues with the permanency of markings on plastic pipelines and fittings.  In 2015, PHMSA issued a Notice of Proposed Rulemaking intended to address these issues.

In the Final Rule, PHMSA responds to the substantive comments and issues from industry stakeholders, state regulators, trade associations, and public citizens.  Of the more significant changes, this rule does the following:

  1. Increases the design factor of polyethylene (PE) pipe (and adding small diameter pipe to the rule);
  2. Increases the use, maximum pressure, and diameter for Polyamide (PA)-11 pipe and PA-12 pipe as well as associated components (and adding small diameter pipe to the rule);
  3. Establishes new design and construction standards for risers and more stringent standards for plastic fittings and joints and mechanical fittings (including qualification of procedures and personnel for joining plastic pipe);
  4. Establishes new and expanded plastic pipe installation requirements aimed to mitigate contact with other underground utilities and structures;
  5. Incorporates by reference new or updated industry standards for pipe, fittings and components.

PHMSA tabled certain proposed changes to “a later date” for further evaluation of costs and benefits in a subsequent action or new rulemaking.  These include, among others, proposed revisions regarding the traceability and tracking information applicable to plastic pipe and components (while flagging certain marking and DIMP requirements under existing rules) and the benefits of certain trenchless installation technology.

This is just one of numerous rulemakings that have been pending at PHMSA for years and one that has generally been supported by the gas industry.  In announcing the final rule, PHMSA Administrator Skip Elliott declared that “these regulatory updates will significantly contribute to advancing public safety,” and the agency’s press release highlights the annual material cost savings to the industry.  Along those lines, PHMSA explains in the preamble that the rule will result in net economic benefits to the public and it is considered a Department of Transportation “deregulatory action” under President Trump’s 2 for 1 Executive Order (EO) 13,771 which mandates that for every 1 new rule issued (a “regulatory action” in EO guidance), an agency must withdraw 2 rules (called a “deregulatory action”).  As such, this rule potentially paves the way in part for the Department of Transportation to issue a regulatory action.  In 2019, a new Congress will take up reauthorization of the Pipeline Safety Act and PHMSA and its remaining backlog of rulemaking mandates.

The Department of Transportation’s Office of Inspector General within the (DOT OIG) announced recently that it will audit oversight of liquefied natural gas (LNG) facilities by the Pipeline and Hazardous Materials Safety Administration (PHMSA).  DOT OIG notes that the “self-initiated” audit will assess PHMSA’s oversight of LNG facility compliance with federal regulations.  The OIG noted that it planned to begin the audit this month and that it will schedule an initial conference with PHMSA.  The audit will be conducted at PHMSA headquarters, field offices and select LNG facilities.

The U.S. has become the world’s largest producer of natural gas, and natural gas has now surpassed coal as the primary fuel used to generate electricity.  LNG is processed natural gas that has been condensed to a liquid form (through a process known as liquefaction).  It takes up roughly 1/600th of the volume of natural gas and for that reason, it can be economically stored and transported in specialized equipment.  LNG facilities provide a variety of natural gas services:  (1) to the interstate gas pipeline system or local distribution systems (for vehicular fuel or industrial use); (2) storage for periods of increased (“peak”) demand; and (3) export of natural gas outside the U.S.  Exports of natural gas in the form of LNG have quadrupled since 2016, and the U.S. is on track to become the largest natural gas exporter by 2020.  The Energy Information Agency estimates that LNG exports by 2030 will be five times what they are in 2018 (and the DOT OIG’s audit announcement notes that the Agency’s oversight responsibilities for LNG facilities may increase accordingly).  This is a dramatic contrast to a few years ago when the U.S. imported both gas and LNG.

LNG facilities in the U.S. may be regulated by several federal agencies, including the Federal Energy Regulatory Commission, the U.S. Coast Guard, and PHMSA (among others).  PHMSA is responsible for oversight of the siting, design, construction, operation and security of LNG facilities.  According to the Agency’s website, it currently regulates over 150 LNG plants across 38 states and territories and provides regulatory oversight along with associated state pipeline safety partners.  PHMSA has been responsible for oversight of LNG transportation and storage since Congress passed the Natural Gas Pipeline Safety Act in 1968.  PHMSA has not substantively updated its LNG regulations at 49 C.F.R. Part 193 since the dramatic shift in energy markets, and LNG in particular, brought on by the shale revolution.  From the late 1960s to the mid-2000s, LNG facilities were focused on the import of natural gas and peak shaving.  With the changes in energy markets, these import facilities are being converted to export and new facilities are planned for export, transportation fuel, and transport, including a focus on “small-scale” facilities.  Small-scale LNG generally includes marine fuel (called bunkering), fuel for heavy road transport, and some power generation.  With respect to LNG exports, the refrigeration process presents new technical and safety concerns as compared to the import of LNG (which requires regasification).   For these reasons, among others, some have posited that PHMSA’s LNG rules may be out of date.

U.S. LNG, and export in particular, is slated to be an important piece of the world’s energy portfolio and the industry is working to commission facilities to get those supplies to market.  Given FERC’s role in siting and certificating LNG facilities under Section 7 of the Natural Gas Act, PHMSA is coordinating with FERC to expedite the siting and design review of those facilities for permitting through a new memorandum of agreement.  Once those permitted facilities are constructed and in operation, it will fall to PHMSA and states to oversee safety.  In the 2016 reauthorization of the Pipeline Safety Act, Congress required PHMSA to update minimum safety standards for permanent small-scale LNG pipeline facilities (which is not defined).  That review is ongoing and the Agency has various research and development projects in the works regarding LNG facilities.  Further, PHMSA anticipates issuing a proposed rulemaking with the Federal Railroad Administration on the bulk transport of LNG in rail tank cars in early 2019.  It is unclear, however, whether PHMSA has any further plans at present for purposes of updating its LNG regulations.

With its audit, we expect the DOT OIG to review and comment on the sufficiency of existing 49 C.F.R. Part 193 LNG regulations and agency safety inspections, with a focus on the current uses of LNG such as export, transportation fuel, and transport which were not anticipated when PHMSA’s predecessor agency began regulating these facilities.  The inspections of select existing facilities could further include large-scale export facilities in operation, of which there are currently three.

Hurricane season is upon us, with Hurricane Florence making its way towards landfall in the Carolinas, currently expected to reach the coast by early Friday morning, September 14, 2018.  Tropical storm force winds and heavy rain will reach the coastal areas even before that, and the storm is forecast to bring high winds, torrential rain, power outages and flooding over a multi-state area in the mid-Atlantic and Southeastern regions for several days.  Many of these areas have experienced unseasonable amounts of rain this year, and that has already contributed to several pipeline incidents caused by earth movement.  As pipeline operators prepare for potential impacts of this “monster storm,” operators should look to their own emergency response preparedness plans, known or suspected risks to their systems, as well as to PHMSA’s prior Advisories that provide guidance to the industry under these circumstances.

States of emergency have been declared for North Carolina, South Carolina and Virginia, with mass evacuations ordered on the coast.  The wide swath and strength of the storm, however, will be of most concern as the storm comes inland and drops very large amounts of rain over the Southeast and Mid-Atlantic regions, which encompass considerable pipeline mileage.  In anticipation of the impacts, PHMSA has already announced that it is “prepared to provide any necessary regulatory relief from the Hazardous Material regulations and waive certain pipeline Operator Qualifications/and pre-employment requirements in support of hurricane response and/or recovery.”  And it is likely that the Agency will issue or reissue a version of its prior Advisories regarding potential impacts of hurricanes to oil and gas pipelines, as it did in the aftermaths of Harvey and Irma in 2017.

In advance of the storm’s arrival, PHMSA’s prior Advisories provide some interim guidance to pipeline operators.  Past Advisories have addressed the potential for damage to pipeline facilities caused by hurricanes, warning of adverse effects on operations such as increased risks of earth movement (including landslides), exposed pipe, loss of electricity and access, disruption in service, etc.  The Advisories remind operators that any of these developments may trigger obligations to take appropriate corrective measures, such as increased surveillance or repairs (49 C.F.R. Parts 192.613, 195.401(b)) and underwater inspections (49 C.F.R. Parts 192.613, 195.413).  Further, while the most recently issued Advisories in 2017 largely focused on areas in the Gulf Coast, they also included guidance more generally applicable to pipelines on the East Coast, by encouraging pipeline operators to:

  • Bring offshore and inland transmission facilities back online after a disruption, and check for structural damage to piping, valves, emergency shutdown systems, risers, and supporting systems.
  • Aerial inspections of pipeline routes should also be conducted to check for leaks in transmission systems.
  • Take action to minimize and mitigate damages caused by flooding to gas distribution systems, including the prevention of overpressure of low and high-pressure distribution systems.

Although Agency guidance such as this is not legally binding or enforceable, the Agency refers to the ‘general duty’ provisions in its regulations (such as 192.613 and 195.401).  PHMSA could rely on those general provisions in future enforcement actions if operators fail to take the actions recommended in the Advisory.  There have been instances in the past where the Agency has cited its general duty regulations as the basis for enforcement where operators failed to discover or correct conditions caused by natural forces that could potentially affect safe operations on their pipeline systems.  See, e.g.,  In re Natural Gas Pipeline Company of America, CPF No. 3-2005-1011 (failure to address exposed pipeline at a river crossing); In re ANR Pipeline Company, CPF No. 2-2008-1005W (failure to address undercutting of concrete matting over a pipeline).

As pipeline operators prepare for the hurricane season, and Hurricane Florence in particular, operators should look to their emergency response plans, relevant system characteristics, and consider the recommendations in prior PHMSA Advisories.

As part of its integrity management regulatory scheme, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is requesting comments on a draft risk modeling report.  In certain densely populated or environmentally sensitive areas, PHMSA integrity management rules require the continual evaluation of ways to reduce pipeline threats to minimize the likelihood and consequences of an incident.  Because these rules are performance based, the methodology for analyzing and assessing risk is not prescribed and the industry employs a variety of approaches.  PHMSA’s draft report similarly does not dictate a particular methodology but clearly favors probabilistic and quantitative risk models that may not be practical or effective for many operators.  Operators should take the opportunity to review and comment on the draft report to ensure that their experiences and insights with risk modeling are reflected prior to finalizing the document.  Based on a request from industry trade groups, PHMSA recently extended the comment period an additional 30 days until October 17, 2018.

Continue Reading Draft Pipeline Risk Modeling Report Issued for Public Comment

The liquified natural gas (LNG) export boom has strained the resources and technical expertise of the two federal agencies that oversee LNG facility siting, design, construction, and operation: FERC, (the Federal Energy Regulatory Commission) and PHMSA (the Pipeline and Hazardous Materials Safety Administration). Fifteen LNG export terminal applications are currently pending before FERC.  In July, FERC Chairman Kevin McIntyre announced that FERC and PHMSA agreed to a revised process for review of LNG export terminal applications that better leverages each agency’s expertise and avoids duplication.  A month later, the agencies still have not disclosed whether there is a formal agreement in place.  Some project developers nevertheless recently received letters from PHMSA technical experts advising that it would be evaluating a project’s compliance with siting requirements.  A more streamlined process that eliminates duplicative reviews will go a long way towards expediting review of LNG export terminal applications.  While PHMSA has long participated in LNG design review and oversight, without a simultaneous increase in its budget and staff, an increased role for PHMSA may further hamper an agency with limited resources.

Continue Reading As LNG Permitting Delays Continue, PHMSA to Assist FERC

The Pipeline and Hazardous Materials Safety Administration (PHMSA) has published an Advanced Notice of Proposed Rulemaking (ANPRM) requesting comments on existing requirements for gas transmission pipelines following population growth.  This notice is the result of previous Agency requests for comment, Congressional mandates, Agency workshops, and industry comments dating back nearly a decade.  The proposed rulemaking could provide industry with additional options when population increases trigger class location changes, and thereby avoid costly pipe replacement or pressure testing.

Continue Reading Proposed Revision to Class Location Requirements When Population Increases

In a letter issued to the Reporters Committee for Freedom of the Press (RCFP) and E&E News last week, PHMSA’s new Chief Counsel Paul Roberti announced its intention to publicly post advance notice of hearings requested by operators.  As reported by E&E News and reflected in the letter, PHMSA will now post hearing scheduling letters to the enforcement activity page on its website.  To the extent the press (and presumably the public) is interested in attending, PHMSA asks that a request be submitted in advance for consideration.  This decision potentially brings the Agency and the industry one step closer to opening hearings to the public.

Just a few months ago, PHMSA approved a request from the media (E&E News) to attend a hearing in the Agency’s Southwest Region offices as reported in our prior post of March 22, 2018.  This marked the first time that a PHMSA administrative hearing was opened to the public, even if only partially (it was closed following a break).  As we noted at that time, “While this does not likely signal an official policy change on behalf of the Agency, it nonetheless suggests that PHMSA could make the decision to open administrative enforcement hearings to the public in the future, on a case by case basis.” The decision to post hearing scheduling letters is in keeping with that prior observation, and does not constitute a blanket grant of public access to all hearings.

Requests for hearings are filed in response to administrative enforcement actions issued by PHMSA to address issues of fact and law, including in response to Notices of Probable Violations, Corrective Action Orders, Emergency Orders and Proposed Safety Orders.  PHMSA hearings are, by regulation, “informal.” 49 C.F.R. Part 190.211(e). As a result, the rules of evidence do not apply and the hearings are, in effect, formal meetings (there is no express language in the Pipeline Safety Act or its implementing regulations that governs public participation in the enforcement context).  The purpose of that approach is to facilitate a frank discussion of the issues and to encourage the possibility of resolution, within the context of applicable law.  Consistent with that purpose, and following recent discussions with us, PHMSA’s Office of Chief Counsel recently confirmed its willingness to engage in pre-hearing discussions to explore settlement of some or all issues in advance of a hearing (in a letter issued the same day as the letter to RCFP and E&E).  That approach is similar to pre-trial conferences that are required by federal and most state laws in litigation.  Notably, pre-trial conferences are not open to the public.

Even if opened for public attendance, administrative enforcement hearings are not ‘public hearings.’  There is no allowance for public participation in the form of questions or statements.  The purpose of the hearing is for the parties to explain and argue their respective positions on questions of fact and law, as moderated by a Hearing Officer.   PHMSA enforcement hearings are held in Agency offices, with limited space.  A request by third parties to attend hearings could present logistical challenges and potentially interfere with PHMSA’s obligation to ensure public safety where hearings are addressing imminent safety issues.  Delays in scheduling of hearings due to the need to post hearing scheduling letters and handle requests for public attendance, and arrange logistics for hearing space, could affect the Agency’s ability to address safety issues in an efficient manner.

The public has a right to know what federal agencies do, and that right is given effect through the Freedom of Information Act (FOIA), which was relied upon as the basis to allow public attendance at the PHMSA hearing in March.  Information presented in advance of and during a hearing is frequently subject to protection from disclosure under FOIA, however, as enforcement or settlement confidential, security sensitive or protection of confidential commercial information.  That consideration could add further complexity to logistics planning for a hearing.

We will continue to monitor these developments closely.