In response to questions from lawmakers on whether federal law adequately provides for the prosecution of “criminal activity against infrastructure,” the Department of Justice (DOJ) recently committed to “vigorously” prosecute those who damage “critical energy infrastructure in violation of federal law.” Historically, vandalism on oil or gas pipelines has been relatively uncommon, largely because most of the infrastructure is buried underground. Since 9/11 and in response to increased high profile pipeline construction projects, however, acts of vandalism—and more intentional attacks—have increased.
A year ago, the oil and natural gas industry was preparing comments and responses to several expansive proposed rules issued by the Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA). With the advent of the Trump Administration and its focus on deregulation, those pending rules have since been withdrawn and are being reevaluated (among hundreds of other administrative agency rules). In the first 100 days of this Administration, the White House issued 58 executive orders and memoranda, nearly a quarter of which affected the pipeline industry directly or indirectly. In the six months since, the President has continued to issue directives aimed at eliminating regulatory burdens and expediting energy infrastructure. While these directives were met with initial relief from the industry, they lack clear deadlines and details and it has fallen on the various administrative agencies to interpret and implement them. To complicate matters, the Administration has simultaneously issued budget cuts across the board and has been slow to appoint key leadership positions. For an industry that relies on regulatory certainty, much remains uncertain.
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.
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 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.
On December 19, 2016, PHMSA issued an interim final rule (IFR) to establish for the first time minimum federal safety standards for underground natural gas storage facilities. The rule was issued in response to the 2015 Aliso Canyon storage leak that lasted almost four months, and a subsequent Congressional mandate to issue federal standards for underground storage. Among other things, the IFR incorporated by reference (thereby making them mandatory) two American Petroleum Institute (API) Recommended Practices (RPs) regarding underground natural gas storage in salt caverns and reservoirs: (1) API RP 1170, “Design and Operation of Solution-mined Salt Caverns Used for Natural Gas Storage,” (July 2015); and (2) API RP 1171, “Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs,” (Sept. 2015). API finalized both of those RPs in response to the Aliso Canyon incident.
The Gas Pipeline Advisory Committee (GPAC) will meet [Notice of advisory committee meeting] in Washington, D.C. early next month to convene the second public meeting regarding PHMSA’s proposed gas rules, often referred to as the gas mega rule. The meetings will be focused on key proposed revisions to 49 C.F.R. Part 192 natural gas rules, including expanded integrity assessment requirements, revised integrity assessment and repair criteria, records, material documentation, corrosion control, and the integrity verification process (IVP) for segments that are currently grandfathered under the rules. The meetings are scheduled for Tuesday and Wednesday, June 6-7, 2017, from 8:30 a.m. to 5:00 p.m.
Industry trade groups anticipate construction delays and cancelations, higher costs, and consumer impacts if the Trump administration’s January 24, 2017 Executive Memorandum, requiring that all new and repaired pipe be made in the U.S., is implemented. In comments filed to the Department of Commence by oil and natural gas industry trade associations, INGAA, AGA, GPA, API, and AOPL, the associations point out numerous challenges presented by the directive and various exclusions and exceptions that would need to be carved out. At the same time, the trade groups committed to engaging with the executive branch, regulators, and steel manufacturers to promote job growth and affordable energy in the U.S. Continue Reading Industry Responds to U.S. Made Pipe Directive