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.
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.
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:
- 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.
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.
- 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.
- 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.
- 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.
- 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.
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.
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 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:
- Increases the design factor of polyethylene (PE) pipe (and adding small diameter pipe to the rule);
- 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);
- 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);
- Establishes new and expanded plastic pipe installation requirements aimed to mitigate contact with other underground utilities and structures;
- 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.
EPA’s proposed replacement for the Clean Power Plan, dubbed the “Affordable Clean Energy” rule, or “ACE,” is now open for comment. In short, the rule requires states to develop efficiency standards for fossil fuel-fired power plants with the intent of reducing greenhouse gas emissions. Coal-fired power plants, and those involved in the production of coal, have a keen interest in the rule for obvious reasons—ACE targets them directly and could require capital projects costing millions.
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.
The Congressional Review Act (CRA) has been in the news of late, yet few people know its history, purpose or challenges. Although used only once in its first 20 years, the Act was resurrected at the outset of the Trump Administration. In the first four months of 2017, the new Administration used the CRA to withdraw 14 rules promulgated late in the Obama Administration. There is an effort now to try to use the CRA to nullify even older rules, promulgated over the past 20 years, which could threaten to create more uncertainty for the regulated community.
The Gas Pipeline Advisory Committee (GPAC) convened in Washington D.C. at the end of March, 2018, to continue discussions from May and December 2017 regarding PHMSA’s proposed gas and gathering pipeline mega rule (“Safety of Gas Transmission and Gathering Pipelines” [PHMSA-1011-0023]. The meetings included discussion and voting on a number of provisions concerning maximum allowable operating pressure (MAOP), integrity management, definitions and repair criteria. Most notably, PHMSA announced its intention to divide the original Notice of Proposed Rulemaking (NPRM) into three parts and issue three separate final rulemakings in 2019 [PHMAS PowerPoint]. PHMSA is currently projecting that these three rulemakings will be issued over the course of next year, with the first one focusing on outstanding congressional mandates, as follows::
Part I (expected issuance in March 2019) to address the expansion of risk assessment and MAOP requirements, including:
- 6-month grace period for 7-calendar year reassessment intervals;
- Consideration of seismicity for integrity management assessments (fort both threats and preventative and maintenance measures)
- MAOP exceedance reporting
- Material verification, MAOP reconfirmation (for those with unknown MAOPs or incomplete records)
- Expansion of the risk assessment obligation to include areas in non-high consequence areas (HCAs) and moderate consequence areas (MCAs)
- Related records provisions
Part II (expected issuance in June 2019) to focus on the expansion of integrity management program regulations, including:
- Adjustments to repair criteria for pipelines in HCAs and non-HCAs
- Inspections following extreme weather and other events
- Safety features on in-line inspection launchers and receivers
- Management of change
- Corrosion control
- Other integrity management clarifications and increased assessment requirements
Part III (expected issuance in August 2019) to focus on expanding the regulation of gas gathering lines, including:
- Reporting requirements
- Safety regulations for gas gathering lines in Class I locations
The next GPAC meeting is scheduled for June 12-14, 2018, and it is expected to focus on the NPRM provisions concerning gas gathering pipelines. As noted in our prior post , the advisory committee meetings are particularly informative to industry and other interested parties concerning the direction PHMSA will take with these final rules.
Building off of President Trump’s “Made in America” campaign commitment, the Trump Administration issued a tariff on steel imports on March 8, 2018. The proclamation finds that the imposition of duties on steel articles is necessary to ensure that steel imports will not threaten national security and, effective March 23, 2018, steel imports will be subject to a twenty-five (25) percent ad valorem tariff, except for imports from Canada and Mexico. The proclamation also authorizes the Commerce Department to grant exclusions from the tariffs of affected parties (1) if the steel at issue is determined not to be produced in the U.S. in a sufficient and reasonably available amount or of a satisfactory quality; or (2) based upon specific national security considerations. The President directed the Commerce Department to promulgate regulations as necessary to set forth the procedures for an exclusion process.
Prior to the effective date of the tariff, the Department of Commerce issued an interim final rule (IFR) to outline exclusions and the exclusion application process (set forth as a supplement to 15 C.F.R. Part 705). The IFR was issued without notice and comment and became immediately effective when published on March 19, 2018. While the IFR tracks the limited exclusions in the proclamation, much remains unclear with regard to the process and the likelihood of success for industry applicants. An exclusion will only be granted on a case by case basis where an article is not produced in the U.S. in a “sufficient and reasonably available amount,” is not produced in the U.S. in a “satisfactory quality,” or for a “specific national security consideration.” The IFR does not clarify the meaning of these terms or provide the industry with illustrative examples. The form for filing an exclusion request requires information such as the average annual consumption of the product at issue for the past two years, time involved in delivery, manufacture, and shipment of the product from a foreign suppliers, specifics about the physical properties of the product, and detailed U.S. product availability information (including attempts to qualify a US steel manufacturer or procure the steel from a US manufacturer).
The rule also establishes limits on who can request an exclusion and the scope of any exclusion. Exclusions are limited to individuals or organizations using steel articles in business activities (e.g., construction, manufacturing, or supplying steel to users). Approvals of exclusions will be specific to the individual or entity who submitted the request, unless Commerce approves a broader application of the exclusion to apply to other importers. Objections may be filed by any individual or organization, but Commerce will only consider information directly related to the submitted exclusion request.
The IFR states that “follow-on” requesters to exclusions that are approved will be taken into consideration, but signals that approval will depend on the strength of a requester’s application which may potentially set the stage for inconsistent results. Exclusion requests, objections and comments on the IFR will be public and located in the federal register docket. The rule establishes a 30 day period for individuals or organizations to file objections (from posting of the exclusion request) and a 90 day period for the Department to review and adjudicate any objections to an exclusion request. Responses approving exclusion requests will be effective within 5 days and will generally be approved for one year. Commerce estimates that it will receive tariff exclusion requests from 4,500 applicants. To date, no requests have been posted to the federal docket associated with steel import exclusions.
The Administration’s January 2017 Executive Memorandum requiring that all new and repaired pipe be made in the U.S. and the issue of steel tariffs have been the subject of much comment by the pipeline industry. Industry operators and trade groups have argued that such requirements will result in construction delays, project cancellations, higher costs and consumer impacts if they are implemented. There are major constraints on the procurement of adequate quantities of line pipe materials and equipment in the U.S., due to the unavailability of U.S. made pipe at necessary technical specifications and in time to meet market demands and/or regulatory requirements. It remains uncertain whether the Commerce Department’s IFR will resolve any of these concerns, if it will be subject to judicial challenge or whether the exclusion process will prove to be workable for industry.