Gas Pipeline Safety Under Heightened State and Federal Scrutiny

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Gas Pipeline Safety Under Heightened State and Federal Scrutiny Navigating the New Regulatory Landscape and Preparing for Increased Testing and Penalties THURSDAY, MARCH 15, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Darren J. Hunter, Counsel, Dewey & LeBoeuf, Chicago Ahren S. Tryon, Associate, Dewey & LeBoeuf, Washington, D.C. Vidhya Prabhakaran, Associate, Davis Wright Tremaine, San Francisco The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Natural Gas Pipeline Safety Under Heightened State and Federal Scrutiny Stafford Webinars and Publications March 15, 2012 Dewey & LeBoeuf LLP dl.com Ahren S. Tryon Darren J. Hunter

6 I-A OVERVIEW OF STRUCTURE: STATE AND FEDERAL GAS PIPELINE SAFETY Dewey & LeBoeuf LLP 6

7 Over a Million Miles of Pipeline in the US Interstate Gas Transmission Intrastate Gas Transmission and Distribution Interstate Liquids (crude oil, petroleum products and hazardous liquids) Intrastate liquids, including gathering lines Dewey & LeBoeuf LLP 7

8 Dewey & LeBoeuf LLP 8

9 Federal Regulatory Authority U.S. DOT regulates pipeline safety and sets national safety standards U.S. DOT administers pipeline safety through the Office of Pipeline Safety (OPS) OPS operates within the Pipeline and Hazardous Materials Safety Administration (PHMSA) OPS Offices Washington, D.C. Atlanta Kansas City Houston Denver Dewey & LeBoeuf LLP 9

10 State Regulatory Authority States: Can assume regulatory authority over intrastate pipelines and sometimes act as interstate inspection agents. State standards must be at least as stringent as Federal standards, but may be more stringent. Dewey & LeBoeuf LLP 10

11 Other Federal Agencies with Pipeline Safety Oversight FERC (siting, abandonment) Transportation Security Administration (security, terrorist threats) Dewey & LeBoeuf LLP 11

12 I-B FEDERAL PIPELINE SAFETY ACTS & REGULATIONS Dewey & LeBoeuf LLP 12

13 Acts & Regulations A. Background: Prior Pipeline Safety Acts Dewey & LeBoeuf LLP 13

14 Federal Statutes Natural Gas Pipeline Safety Act of 1968 Pipeline Safety Improvement Act of 2002 Integrity Management Programs for Transmission Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act) Integrity Management Programs for Distribution Pipeline Safety, Regulatory Certainty and Job Creation Act of USC et seq. Dewey & LeBoeuf LLP 14

15 Acts & Regulations B. Key Regulations Implementing Pipeline Safety Acts Dewey & LeBoeuf LLP 15

16 Federal Regulations Part 190: Pipeline Safety Programs and Rulemaking Procedures Enforcement mechanisms NOPVs and Warnings Compliance Orders and Notices of Amendment Corrective Action Orders Safety Orders Hearings Former combined prosecutorial and adjudicatory functions Civil penalties The old maximum: $100,000 per violation daily, max of $1,000,000 per violation Dewey & LeBoeuf LLP 16 continued >

17 Federal Regulations Part 191: Transportation of Natural and Other Gas To Pipelines; Reporting Procedures for reporting by natural gas pipelines Incident Reports Safety-Related Conditions Reports Annual Reports Dewey & LeBoeuf LLP 17 continued >

18 Federal Regulations Part 192: Minimum Federal Safety Standards (Natural Gas) Subpart A: General Provisions Keys: Scope, class locations (1 through 4), company procedures Subpart B: Materials Keys: Strength of steel and plastic pipes, marking of materials Subpart C: Pipe Design Keys: Design formula for pipe (i.e., thickness of pipeline wall) Subpart D: Design of Pipeline Components Keys: Design of fittings, valves, vaults, compressor stations, etc. Subpart E: Welding of Steel in Pipelines Keys: Welding procedures, inspection and testing Dewey & LeBoeuf LLP 18 continued >

19 Federal Regulations Subpart F: Joining of Materials Other Than by Welding Keys: Design of mechanical fittings to withstand force Subpart G: General Construction Requirements For Transmission Lines and Mains Keys: Standards, materials, inspection, etc. Subpart H: Customer Meters, Service Regulators, and Service Lines Keys: Meter installations, service installations, valves, connections to mains, etc. Subpart I: Requirements for Corrosion Control Keys: External corrosion control (i.e., protective coating, cathodic protection), internal corrosion control, atmospheric corrosion control Subpart J: Test Requirements Keys: Pressure testing to establish MAOP, mains, service lines, plastic Dewey & LeBoeuf LLP 19 continued >

20 Federal Regulations Subpart K: Uprating Keys: Pressure testing to increase MAOP Subpart L: Operations Keys: Procedural manual for operations, maintenance and emergencies, surveillance, damage prevention program, emergency plans, investigation of failures, odorization, purging, etc. Subpart M: Maintenance Keys: Leak surveys, repairs, inspections, abandonment, etc. Subpart N: Qualification of Pipeline Personnel Keys: OQ, pipeline personnel must be qualified to perform specific tasks, recordkeeping Dewey & LeBoeuf LLP 20 continued >

21 Federal Regulations Subpart O: Gas Transmission Pipeline Integrity Management Keys: Identify high consequence areas, develop and follow program that addresses risks in each pipeline segment, consensus standard ANSI B31.8S, baseline assessments, identify threats, continuing evaluation, address anomalous conditions, reporting, etc. Subpart P: Gas Distribution Pipeline Integrity Management Keys: Identify risk factors, tank risks, leak management, address risks, reporting, etc. Dewey & LeBoeuf LLP 21 continued >

22 Federal Regulations Where is the regulatory focus now? Integrity Management Maximum Allowable Operating Pressure Records Control Room Management Dewey & LeBoeuf LLP 22

23 Ensuring Gas Pipeline Safety The State s Response to the San Bruno and Rancho Cordova tragedies Vidhya Prabhakaran vidhyaprabhakaran@dwt.com 23

24 Background on The Tragedies Rancho Cordova Dec 24, 2008 San Bruno Sep 9,

25 Immediate Aftermath of Rancho Cordova Explosion 1 dead, 2 seriously injured, 3 others injured Spark for the explosion was a lighter 1 house completely destroyed, 2 adjacent houses with severe damage, and other houses with minor damage NTSB and CPSD immediately investigated the gas explosion and fire 25

26 Consequences for PG&E Launched OII of PG&E on Nov 19, 2010 to determine if violations occurred and levy a fine, following CPSD and NTSB investigation reports $38 million fine Previous fine of $26 million was rejected Payment of the costs of the investigation by CPSD 26

27 Commission Findings 2006 repair was improper Failed to pressure test repaired pipe Later determination of improper pipe did not result in review of previous installations No drug and alcohol tests after the fact to its employees that responded Response to outdoor gas leak was unreasonably delayed and not effective 27

28 Immediate Aftermath of San Bruno Explosion 8 dead, 58 injured Destruction of 38 homes, damage to 70 others CPSD and NTSB investigated the explosion Reduction in operating pressure of the pipeline 28

29 Initial Investigations NTSB Jan 3 Safety Recommendations to CPUC Hearings March 1-3 More later Independent Review Panel Chartered on Sept 23 Empaneled on Oct 14 Issues report June 9 29

30 NTSB/IRP Findings PG&E s Pipeline Integrity Management Program had numerous shortcomings PG&E s Emergency Response Needs Improvement Poor company safety culture Lack of resources for CPUC regulation of safety Lack of emphasis on safety programs in ratemaking Poor culture at the regulator 30

31 NTSB/IRP Recommendations Many technical and specific Specific recommendations for PG&E Others that flow into CPUC Rulemaking to improve pipeline safety 31

32 NTSB/IRP Recommendations for PG&E Provide records for pipeline system components to determine appropriate operating pressure (Re)Test segments where records cannot be produced Full audit of PG&E s operations (both internal and CPUC) 32

33 NTSB/IRP Recommendations for CPUC Acquire necessary resources, training and skills to achieve appropriate oversight Increased staffing (CPUC doubled gas safety staff) Restructuring of CPSD Internal audit of CPSD Allow staff to issue citations (and fines!) in the field 33

34 Subsequent Proceedings I investigation to determine penalties associated with safety-related record keeping I penalties associated with operations in high-density population locations I penalties associated with San Bruno explosion R new rules for regulating natural gas pipelines 34

35 Investigation No Did PG&E violate the law in its safety-related recordkeeping? Not just San Bruno, but generally Based on statements regarding adequacy of PG&E records by NTSB as part of its investigation Ongoing 35

36 Investigation No Did PG&E violate the law in its operations of its natural gas pipeline system in or near locations of higher population density? Replacing pipeline segments with stronger pipe material Reducing maximum allowable operating pressure 36

37 Investigation No Did PG&E violate the law, and did those violations result in the San Bruno explosion? Result of CPSD report alleging specific violations of law Not just events specific to San Bruno, but also past operations and practices Determination of fine PG&E expecting at least $200 million in fines 37

38 Rulemaking No Prospective rulemaking to make changes as needed Changes based on data requests sent to all utilities Ratemaking directives for future capital expenditures and safety-justified expenditures 38

39 Consequences to PG&E Split gas and electric operations Replaced senior management, including CEO $3 million fine for failure to comply with CPUC order to submit pipeline records by March 15 $16 million fine for failure to conduct pipeline leak surveys $1 billion in gas system upgrades and safety tests not recovered in customer bills 39

40 Consequences More Generally Heightened focus on safety (weekly safety reports at Commission meetings) Focus on issues with degrading undergrounded facilities Increased spending on infrastructure? 40

41 Acts & Regulations III. PIPELINE SAFETY ACT OF 2011 Dewey & LeBoeuf LLP 41

42 Pipeline Safety Act of 2011 Section 2. Civil Penalties Penalties doubled Anti-obstruction provisions Section 3. Pipeline Damage Prevention State programs must be broadly inclusive to get grants Section 4. Automatic and Remote-Controlled Shut-Off Valves. New transmission construction or entire line replacements Economically, technically, and operationally feasible Dewey & LeBoeuf LLP 42 continued >

43 Pipeline Safety Act of 2011 Section 5. Integrity Management Should PHMSA expand the Integrity Management program beyond High Consequence Areas? Section 6. Public Education and Awareness Accurate mapping = better emergency response Section 9. Accident and Incident Notification PHMSA to mandate incident notification within 1 hour of discovery Fixes a longstanding regulatory issue regarding earliest practicable moment Dewey & LeBoeuf LLP 43 continued >

44 Pipeline Safety Act of 2011 Section 13. Cost Recovery for Design Reviews You pay PHMSA for design reviews, but only for the most massive projects Section 20. Administrative Enforcement Process. Separation of functions Section 21. Gas and Hazardous Liquid Gathering Lines No immediate change to regulations. Review, study, report Section 22. Excess Flow Valves For distribution lines other than service lines to single family residences, must consider the need for EFVs Dewey & LeBoeuf LLP 44 continued >

45 Pipeline Safety Act of 2011 Section 23. Maximum Allowable Operating Pressure The guts of the Act and the response to San Bruno Within 6 months of the Act operators to verify records for interstate and intrastate transmission in class 3 and class 4 locations and class 1 and class 2 HCAs, using elements considered appropriate by PHMSA Virtually impossible timeframe for PHMSA to issue a rulemaking Within 18 months of the Act, identify and submit documentation related to segments for which the records are insufficient to confirm the established MAOP Dewey & LeBoeuf LLP 45 continued >

46 Pipeline Safety Act of 2011 Section 23. Maximum Allowable Operating Pressure Now must report MAOP exceedances beyond pressure-limiting device capacity within 5 days of occurrence If a pipeline has insufficient MAOP records, PHMSA must: Require reconfirmation of MAOP as expeditiously as economically feasible; and Determine what actions are appropriate until a MAOP is confirmed, considering potential consequence to public safety and the environment, impacts on pipeline system reliability and deliverability, etc. Dewey & LeBoeuf LLP 46 continued >

47 Pipeline Safety Act of 2011 Section 23. Maximum Allowable Operating Pressure PHMSA must issue regulations within 18 months for tests to confirm the material strength of previously untested gas transmission lines in HCAs that operate at a pressure > 30 % SMYS. Must consider safety testing methodologies like pressure testing and ILIs PHMSA to consult with FERC and states to establish timeframes for the testing, so as to account for potential consequences to public safety and the environment and minimize costs and service disruptions Dewey & LeBoeuf LLP 47 continued >

48 Pipeline Safety Act of 2011 A plethora of studies and reports: A study on excavation damage. A study on transmission pipeline operator response capabilities in HCAs. A study on expanding IMP requirements outside of HCAs. A report to Congress on using Risk Based Assessment Intervals for IMP. Surveys and reports on cast iron pipe management and replacement. A report to Congress on liquid pipeline leak detection systems. A study and report to Congress on the transportation of diluted bitumen. Allows DOT to study transportation of nonpetroleum hazardous liquids (i.e. chemicals). A report to Congress on existing gathering line regulations. A report evaluating NTSB s recommendation on excess flow valves. A report to Congress on minority, women, and disadvantaged business participation in the pipeline industry. A study and report to Congress on pipeline construction permitting issues. A study and report to Congress on depth of cover for liquid pipeline navigable water crossings. A report to Congress on PHMSA staffing. continued > Dewey & LeBoeuf LLP 48

49 Acts & Regulations PHMSA Rulemaking Initiatives Dewey & LeBoeuf LLP 49

50 PHMSA Rulemaking Initiatives Anticipating legislation, PHMSA issued an Advance Notice of Proposed Rulemaking last August. Certain issues in the ANPRM overlap with the new Act (e.g., gathering lines, EFVs, HCA expansion, etc.) Focus on 14 topics in two broad categories: (1) Strengthening Integrity Management Program (2) Strengthening Non-IM Regulations that Affect Pipeline Integrity Dewey & LeBoeuf LLP 50 continued >

51 PHMSA Rulemaking Initiatives (1) Integrity Management Regulation Possibilities: Modify High Consequence Area definition? Tighten existing Part 192 IM requirements? Modify repair criteria? Revise requirements for collecting, validating, and integrating pipeline data? Dewey & LeBoeuf LLP 51 continued >

52 PHMSA Rulemaking Initiatives Make IM requirements for risk models more prescriptive? Strengthen requirements for applying knowledge gained through the IM program? Strengthen requirements for assessment methods? E.g., specify techniques to allowed to identify manufacturing and construction defects, stress corrosion cracking, etc.? Dewey & LeBoeuf LLP 52 continued >

53 PHMSA Rulemaking Initiatives (2) Considerations to strengthen or expand non-im regulations to improve pipeline integrity: Valve spacing and remotely- or automatically-controlled valves. Corrosion control. Pipe with longitudinal weld seams with systemic integrity issues. Establishing requirements applicable to underground gas storage. Dewey & LeBoeuf LLP 53 continued >

54 PHMSA Rulemaking Initiatives Management of Change. Quality Management Systems (QMS). Exemptions applicable to facilities installed prior to the regulations. Gathering lines (i.e., expanded regulation of large diameter, high pressure Marcellus Shale lines). Dewey & LeBoeuf LLP 54

55 IV. POTENTIAL FUTURE DEVELOPMENTS Dewey & LeBoeuf LLP 55