API: Proposed PHMSA Rules Overpromise Benefits, Underestimate Costs

Regulations proposed earlier this year by the Pipeline and Hazardous Materials Safety Administration (PHMSA) to update safety requirements for natural gas pipelines are overreaching and fail to appropriately address the intent of National Transportation Safety Board (NTSB) regulations, an official with the American Petroleum Institute (API) said Thursday during a conference call with reporters.

PHMSA unveiled the proposed regulations in March. The regulations would address four congressional mandates from the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, one recommendation from the U.S. General Accounting Office and six recommendations from the National Transportation and Safety Board.

These include the recommendation that pipelines built before 1970 be tested; this recommendation follows the 2010 San Bruno, Calif., gas pipeline explosion. Pipelines built prior to 1970 are exempt from certain pipeline safety regulations because they were built and placed into operation before pipeline safety regulations were developed, PHMSA said in a March 17, 2016 press statement. However, the National Transportation and Safety Board concluded that hydrostatic testing of grandfathered pipelines would have likely exposed the defective pipeline that led to the failure and explosion of PG&E’s pipeline in San Bruno.

“The significant growth in the nation’s production, usage and commercialization of natural gas is placing unprecedented demands on the nation’s pipeline system,” said U.S. Transportation Secretary Anthony Foxx in a press release. “This proposal includes a number of commonsense measures that will better ensure the safety of communities living alongside pipeline infrastructure and protect our environment.”

Not only would the proposed regulations weaken American’s energy renaissance, but are contrary to PHMSA’s own statutory directives because they are not driven by a risk-based approach, Robin Rorick, API midstream group director, said.

Rorick explained the regulations significantly underestimate the costs of implementing regulations, while overstating the benefits of these rules. While PHMSA has estimated it would cost $597 million over a 15-year period to implement the new rules, a study conducted by ICF International on API’s behalf estimates the cost to be $33.4 billion. ICF also found that, instead of generating benefits of $3.5 billion, the proposal would yield only a fraction of those benefits.

API does not have any issue with regulations furthering pipeline safety – and is always willing to work with the NTSB – but the proposed regulations would provide little improvement in safety outcomes, Rorick commented.

API also takes issue with the technical merits of the proposals. For example, the new regulations would replacer Recommended Practice 80 with oversimplistic and expansive definitions that don’t provide additional safety benefits. They also extend PHMSA’s jurisdiction over production assets, an area in which PHMSA has not expertise. Rorick also noted that PHMSA’s proposed pipeline repair criteria doesn’t allow for proper engineering analysis, which will force operators to dig up pipe. The repair criteria and integrity management regulations proposed are too prescriptive, leaving operators no freedom to use tools that can be less invasive.

Rorick said API has picked up anecdotal evidence that the compliance costs will make it hard financially for some companies to continue operating gathering lines. Noting that pipelines are one of the safest means for transporting natural gas, Rorick said API believes that a more comprehensive study is needed.

Rorick noted that PHMSA had never made such an expansive proposal to increase regulation; API also is not aware of any other federal agency that has proposed to double the length of existing regulations or take on so many additional regulatory requirements in a single rulemaking, particularly one with only 90 days to comment. Further, the additional proposals are addressing unsubstantiated concerns and are not supported by established research. API believes that PHMSA did not substantially complete its mission of studying and collecting data on gathering lines, and that more research is needed.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

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