The federal Pipeline Safety Act (PSA or the Act) mandates minimum safety standards for pipelines and certain associated storage and facilities (including LNG and other terminals). Congress should take up legislation to reauthorize the Act this year. Since the last reauthorization in 2016, there have been several noteworthy developments that have affected the industry, the relevant politics and the public. These include a new Administration, new leadership in relevant administrative agencies (e.g., DOT, PHMSA, FERC), policy changes, continued opposition to new pipeline construction, a high-profile distribution incident in Merrimack Valley, Massachusetts, and, most recently, Democratic control of the House of Representatives. It remains to be seen whether Congress will impose new substantive amendments to the PSA, but it is likely that some significant changes will be proposed. While the reauthorization proposals could vary, we expect to see discussion related to distribution pipelines (aging infrastructure, replacement projects, overpressure protection); construction issues; valves, emergency response and pressure protection; outstanding rulemakings; and updates to PHMSA procedural rules. Other issues that could be part of the discussion include cybersecurity, state oversight of pipeline safety, and older proposals from prior reauthorizations.

Status of Outstanding Mandates

The 116th Congress, which convened in January, will be responsible for reauthorizing the PSA and PHMSA, the agency responsible for oversight of pipeline safety. The current reauthorization expires on September 30, 2019. Historically, pipeline safety has largely been a bipartisan issue.  The most recent substantive changes to the PSA occurred in the 2012 reauthorization in response to the San Bruno, California and Marshall, Michigan incidents. Following that, PHMSA initiated the process for several expansive rulemakings, some of which still remain incomplete. In the 2016 reauthorization, Congress mandated updates for the Agency’s outstanding rulemakings and made other changes to require minimum federal standards for underground natural gas storage (in response to the Aliso Canyon incident). Sixty-one (61) legislative mandates were issued in the 2012 and 2016 reauthorizations, including rulemaking changes, studies, or other regulatory reviews. As of this summer, PHMSA had implemented only forty-seven (47) of these to date. Of the roughly fourteen (14) mandates that remain to be addressed, the issues include rules intended to address records and inspections issues highlighted by both the San Bruno and Marshall, Michigan incidents.

Political Backdrop   

There are three committees that oversee PSA reauthorization and will be influential in drafting and finalizing reauthorization. These include: (1) House Transportation and Infrastructure (T&I) Committee; (2) House Energy and Commerce Committee; and (3) Senate Committee on Commerce, Science and Transportation. Of these three committees, thirteen (13) members have either retired or lost their primaries, thus the industry will be dealing with many new lawmakers and their unique perspectives. While the exact composition of the House committees is not yet known, Representative DeFazio (D-OR) has been elected as chairman of the T&I Committee and Senators Ed Markey (D-MA) and Jon Tester (D-MT) are members of the Senate Commerce, Science and Transportation Committee; all three have in the past been critical of PHMSA and existing pipeline safety protections. Meanwhile, Senator Manchin (D-WV), who has been sympathetic to pipeline infrastructure and industry issues in the past, is the ranking member of the Senate Energy and Natural Resources Committee, which has some oversight of pipelines and pipeline issues. In addition, Senators Warren (D-MA) and Booker (D-NJ), both of whom are expected to be candidates for President in 2020, have been active of late in demanding increased government control of pipeline safety issues.

In recent years, Congress has been critical of PHMSA in oversight hearings due to its delayed response to statutory mandates from prior reauthorizations, and delayed response to NTSB, GAO and DOT OIG recommendations. This year’s reauthorization will be no different, as evidenced by a June, 2018 hearing convened by the House T&I Committee, where representatives from both parties expressed sharp concern over PHMSA’s delay in addressing past legislative mandates. The House will certainly also raise the other as yet unaddressed mandates and recommendations from the NTSB and GAO.  More recently, there was a November 2018 field hearing on the Merrimack Valley incident, that signaled open season on PSA reauthorization.

Potential Reauthorization Issues

Industry trade groups have already been preparing for and working on proposals associated with the PSA reauthorization, which are not likely to contain significant changes, but more minor proposed changes such as amendments to PHMSA procedural rules. PHMSA has likely prepared or is in the process of preparing its own list of issues. In light of the above, some issues that we anticipate could to be raised during the PSA reauthorization process include the following:

  1. Distribution Pipelines

If not more generally, we expect Congress to discuss the following issues specific to gas distribution pipelines:

Aging Infrastructure/Pipe Replacement

Aging infrastructure is an issue that has been raised for some time, but the recent Merrimack Valley incident, where the pipeline distribution operator was in the process of upgrading and retiring older infrastructure, has brought it back into focus particularly for distribution pipelines. Relevant proposals, which could apply more broadly, may relate to pipe replacement (which is currently voluntary for cast iron pipe although many states provide incentives), requirements specific to pipeline modernization projects and work packages, records, safety management systems, etc.

Overpressure Protection

The NTSB investigation into the Merrimack Valley incident is ongoing, but among the preliminary issues identified by the NTSB is detection of abnormal system pressure. As a result, we expect discussion and debate regarding the sufficiency of overpressure protection for distribution pipeline systems as well as emergency response and monitoring of overpressure protection.

  1. Construction Issues

While PHMSA does not have express siting authority for the construction of new pipelines, it maintains construction and design regulations that would apply to those pipelines. Further, the industry has recently experienced some challenges associated with pipeline construction or infrastructure updates, and as a result there may be specific proposals along those lines. These may relate to work plans, subsidence, directional drills, oversight of contractors, management of change procedures, etc.

  1. Emergency Shutdown Valves, Communications and Overpressure Protection

PHMSA has been working on proposing an automatic shut-off or remote-controlled valve (ACV/RCV) rule regarding rupture detection since 2013 and expects to issue the proposal in 2019.  If the proposed rule does not issue prior to PSA reauthorization legislation, we expect the topic to be included in legislation drafts. The Merrimack Valley incident also brought to light issues associated with the operator’s incident response and communications, which may be a topic of the discussions. Further, in light of the preliminary findings of the Merrimack Valley NTSB investigation, it is possible that pressure detection, monitoring, and overpressure protection will be discussed as they apply more broadly to pipeline systems.

  1. Outstanding Rules tied to Statutory Mandates

As noted above, numerous key mandates remain unaddressed from prior PSA reauthorizations, a number of which were intended to focus on records and inspection issues arising from high profile incidents. Most notably, these include finalizing the hazardous liquid rule (which was expected before the end of 2018) and the ‘gas mega rule;’ the latter has been split into three rulemakings and is still working its way through the pipeline advisory committee process under the PSA (now on hold because of the government shutdown). Because PHMSA has already failed to meet relevant deadlines, Congress may impose new deadlines with updates to Congress. Further, reauthorization discussion may analyze what some critics have cited as challenges under the PSA to PHMSA rulemaking, including balancing safety risks against the economic benefits.

  1. State Involvement

When certified by PHMSA (and at times even where they are not certified by PHMSA), states are increasingly active in pipeline safety through construction inspections, general oversight and enforcement authority, and incident response. Some states have broadly interpreted their jurisdiction under the PSA and authority under state statutes.  Past reauthorization changes touched upon and expanded in part the ability of a state to participate in pipeline safety.  In addition, a 2018 Government Accountability Office (GAO) report recommended that PHMSA develop an inspection workforce plan to ensure that it maintains an adequate mix of federal and state resources for interstate pipelines.  Legislative proposals may be drafted in light of GAO’s recommendations and to ensure that state pipeline safety programs include adequate training and other measures to ensure consistency in application of PHMSA rules and enforcement.

  1. Cybersecurity

There has been some debate recently regarding whether the pipeline industry has sufficient protections in place to ensure reliability. Targeting of pipeline infrastructure technology and operational monitoring programs (such as SCADA) by foreign nation states and other bad actors is not new, although intrusions continue. In addition, the GAO issued a report that determined that the Transportation Safety Administration charged with pipeline security oversight (in part and in coordination with PHMSA), is not doing enough to face future challenges. House Energy and Commerce Committee members reintroduced legislation intended to increase federal protections protecting pipelines from cyber threats that could disrupt operations and some have called for changes at the Department of Homeland Security (DHS). Ranking Senate Committee members Cantwell (D-WA) and Manchin (D-WV) with oversight of pipelines have called for a response from DHS.  It is also possible that associated changes could be proposed since PHMSA participates in oversight of pipeline security, primarily as it relates to physical security (as opposed to cybersecurity), and since the subject of the cyber intrusions are operational programs required by PHMSA rules.

Summary

It is likely that some potentially significant changes to the pipeline safety rules could be proposed in the upcoming Pipeline Safety Act reauthorization (or other legislation coming out of the 116th Congress). This is particularly true considering the recent Merrimack Valley distribution pipeline incident, the newly divided Congress, and the country’s increased reliance on natural gas and oil over coal. While the PSA reauthorization proposals could vary, we expect discussion specific to distribution pipelines and issues highlighted by the Merrimack Valley incident, construction issues, valves/overpressure protection, outstanding rulemakings, as well as updates to PHMSA procedural rules. Other issues could include cybersecurity, state oversight of pipeline safety, and older proposals from prior reauthorizations. If not in the PSA reauthorization, some of these more general issues such pipeline construction and cybersecurity may get traction in an energy bill which is likely to include some form of infrastructure package.

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.

On September 7, 2018, a jury in a California state court found Plains All American Pipeline guilty on 9 criminal counts, stemming from a release of 140,000 gallons of crude oil from a Plains pipeline near Santa Barbara in 2015. Media across America reported on the criminal verdict in the Plains case, and certain commenters predict that the verdict could further energize pipeline opposition groups around the country. The case may be viewed best, however, as somewhat of an anomaly: a broadside of state legal requirements brought after an oil spill to a sensitive environment in California.

Continue Reading Industry Impact from Criminal Verdict in Pipeline Oil Spill

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

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.

A recent Report to Congress mandated by the most recent amendments to the Pipeline Safety Act was released by the Government Accountability Office (GAO), reviewing federal and state responsibilities and resources for inspection of pipelines that transport product across state lines.  Increases in funding have allowed the federal agency charged with regulating pipeline safety, the Pipeline and Hazardous Material Safety Administration (PHMSA or the Agency), to expand its own inspection workforce and reduce its reliance on state agents.  The Report to Congress finds that the Agency has not assessed future workforce needs, however, to determine the appropriate level of state participation.

Continue Reading State Participation in Interstate Pipeline Inspections: GAO Recommendations

Since 9/11, no new rules or regulations have been promulgated to address pipeline or LNG facility security or cybersecurity. Although the Transportation Security Administration (TSA) recently released an updated version of its “Pipeline Security Guidelines” (Guidelines) that were last issued in 2011, those Guidelines remain advisory.  And both the Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI) have made only informal outreach to pipeline and LNG industry as issues have arisen.  As the threat of both cyber and physical attacks on critical energy infrastructure continues, however, some question whether minimal standards for prevention of threats should be in place.  In particular, there has been recent attention by the U.S. Government Accountability Office (GAO), members of Congress, and at least one Federal Energy Regulatory Commission (FERC) commissioner. (See E&E News Article of May 29, 2018).  These discussions, along with recent proposed legislation in the House and the fact that the Pipeline Safety Act is up for reauthorization later this year, are likely to bring these issues into sharper focus.

Continue Reading Pipeline Security and Cybersecurity: Are Guidelines Enough to Protect Critical Infrastructure?


Opposition to new pipeline construction has grown in recent years, moving from public comment to litigation to physical protest and vandalism.  In 2016 alone, several coordinated actions led to trespass and vandalism of pipelines and pipeline facilities in multiple states, some of which were prosecuted as felony criminal acts.  The defendants in several of these cases have raised a “necessity defense” to their actions, and two courts have now allowed that defense to proceed.

Continue Reading Invoking the ‘Necessity Defense’ in Pipeline Sabotage Prosecutions

In a surprising turn of events this week, PHMSA approved a request from the media to attend a hearing in the Agency’s Southwest Region offices in Houston yesterday.  An environmental reporting service (E&E News) submitted a request to PHMSA last week to attend a hearing requested by Cheniere, in response to an enforcement action related to an incident at that company’s LNG export facility, and threatened legal action after receiving no response to their request.  [See E&E News March 16, 2018 article E&E News seeks open PHMSA hearing on Cheniere leaks and E&E News March 21, 2018 article Pipeline regulators open Sabine Pass safety hearing.]  In agreeing to the request just days before the Hearing, PHMSA’s Associate Administrator for Pipeline Safety Alan Mayberry was quoted by E&E News as stating that “PHMSA has decided for purposes of this hearing to open the hearing to the press and to members of the public.”  Although the hearing yesterday was open to the public at the outset, it was later closed following a break.  To date, PHMSA administrative enforcement hearings have been closed to the public.  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.

Continue Reading PHMSA Opens Enforcement Hearing to the Public