July 2010 Vol. 237 No. 7


BP Spill Produces Pressure For Pipeline Safety Revisions; House Committee Ups DWSRF Authorization Levels

While the impact of the BP oil spill on offshore oil and gas development is already obvious, its impact on pipeline safety is less so, despite what promise to be ramifications. That was clear from the hearings in the House Transportation and Infrastructure Committee on May 20 where both Democrats and Republicans peppered Cynthia Quarterman, the new administrator of the Pipeline and Hazardous Materials Safety Administration, with questions about the agency’s existing plans for oil and gas accidents.

Quarterman particularly came under fire for her agency’s failure to write regulations on low stress pipelines which were ordered by Congress in 2006 as a result of two BP hazardous liquid pipeline spills in 2006. (PHMSA did publish a final rule regulating large-diameter, low stress liquid lines; but 1,000 miles of low-stress remain unregulated).

Rep. Corrine Brown (D-FL), chairman of the railroads, pipelines and hazardous materials subcommittee, opened the hearings by referring to the BP Alaska pipeline spills in 2006, the failure of PHMSA to regulate some low stress pipelines and said, “We have to make sure all pipelines are putting safety before profit.”

That low-stress pipeline requirement was just one of the provisions in the latest of a long line of pipeline safety bills, the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, called the PIPES Act. It expires at the end of 2010 meaning Congress is under some pressure to “reauthorize” that law. Laws do not have to necessarily be reauthorized. Their programs can continue to be funded. But reauthorizations present an opportunity for Congress to make changes in laws. Given the BP Gulf spill and the fact that PHMSA has dragged its feet on the low-stress hazardous liquid pipeline rulemaking, it seems likely that Congress will at least make an attempt to pass a new pipeline safety bill by the end of the year.

A couple of factors beyond the BP disaster–but exacerbated by it– make this likely. First, the number of federal and state pipeline inspectors is deemed insufficient, and only getting more so. Quarterman acknowledged that her agency has less than 100 inspectors nationwide even though it has positions for 135. Quarterman committed to filling those vacancies by the end of the year. Even if she does, the many states who have responsibility for enforcing the federal pipeline safety laws have seen their pipeline enforcement budgets drop precipitously. PHMSA funds about 50% of the inspection budgets for states with federal enforcement responsibility. Recent statistics indicate that states are responsible for pipeline safety covering over 92% of 1.9 million miles of gas distribution piping in the nation, 29% of 300,000 miles of gas transmission and 32% of 166,000 miles of hazardous liquid pipelines.

The PIPES Act required PHMSA to fund 80% of the state programs. But that requirement has not been met because the 2006 law included a provision that states, to be eligible for the federal share, had to have spent more in their last fiscal year on pipeline safety than the average of the past three years. PHMSA can, and in some instances, has waived that “averaging” requirement. Paul Metro, gas safety supervisor, Pennsylvania Public Utility Commission and secretary of the National Association of Pipeline Safety Representatives (NAPSR) told the subcommittee that a reauthorization of the pipeline safety law should include a change to the 2006 “averaging” requirement so that the three-year comparison was based on fiscal 2004-2006. In FY 2010, PHMSA’s $40.5 million appropriation to support state programs will fund 54% of state pipeline safety programs.

INGAA also wants a reauthorization which would change the 2002 pipeline safety law provision which requires transmission lines to reinspect segments passing through high consequence areas (HCAs) every seven years. This is a requirement of the transmission integrity rule required by the Pipeline Safety Improvement Act of 2002 and implemented by PHMSA in February 2004.

Operators are required to complete a baseline assessment of 50 percent of their coveredsegments, beginning with the highest risk segments, by December 17, 2007 and 100% of their covered segments by December 17, 2012.

Gary Sypolt, chief executive officer at Dominion Energy, who testified on behalf of INGAA, noted that the association had presented considerable evidence supporting removal of the seven-year reinspection requirement and its replacement with a “risk-based” standard, a revision supported by the Bush administration and also independent federal watchdogs such as the Government Accountability Office. Both Democrats and Republicans on the subcommittee asked Quarterman about the Obama administration’s view of this proposed change. In her written testimony, she had said, “The bottom line is that we believe these decisions should be made on a case-by-case basis, one operator at a time, and segment by segment, so that relevant operating characteristics can be considered along with individual operator performance.”

But under repeated questioning, Quarterman first danced around the question, then retreated, finally stating that “the administration has no plans” to change the seven-year reinspection requirement.

Two other issues of interest came up during the hearings. Asked about PHMSA’s working relationship with the Federal Energy Regulatory Commission (FERC), Quarterman said it “could be improved.” She wasn’t quite clear about what the problems are, but she added, “We would like to be more involved in pipeline construction approvals.” She noted that she had so far been unsuccessful with getting a meeting with FERC Chairman Jon Wellinghoff.

There were also a number of questions of PHMSA’s granting of “special permits” from the pipeline safety laws for certain pipelines. Quarterman said 85 have been issued since 2009, when PHMSA finalized a rule with guidelines for applying and approving those special permits, and another 31 are pending. Rep. Betsy Markey (D-CO), was among those asking questions about a special permit granted TransCanada for its 2,000-mile Keystone hazardous liquids pipeline which starts in Alberta and travels south to the Gulf of Mexico. TransCanada has filed a request for a Special Permit from PHMSA seeking approval to design and operate portions of the proposed pipeline utilizing a .80 design factor.

House Committee Ups DWSRF Authorization Levels
If Congress finally passes a Drinking Water State Revolving Fund (DWSRF) reauthorization this year, it may be because of Dunkin’ Donuts. A store outside Boston was the scene of a near riot in May when it was unable to offer customers coffee because of a shortage of water caused by a breach in a seven-year old water pipe which affected over two million Boston residents. The Boston newspapers called the water disaster “Aquapocalypse.”

That incident was related by Rep. Ed Markey (D-Mass.), chairman of the House energy and environment subcommittee, who is the prime sponsor of the Assistance, Quality, and Affordability Act (AQUA) (HR 5320) which passed the full Energy and Commerce Committee by a vote of 45-1 on May 26. The legislation authorizes $14.7 billion in new funding for the DW SRF program over five years. The bill increases water project funding from $1.5 billion in 2011 to $6 billion in 2015.

Authorization levels provide ceilings up to which Congress can appropriate each year. Those authorization levels are often not reached by those appropriations, and that would certainly be the case here, if this bill passes Congress, given increasing concern in Congress and the public about the federal deficit.

Besides increasing the DWSRF authorization level, the bill also expands uses of the DWSRF to include replacement and rehabilitation of old pipes. Some states have revised their state laws to allow for such spending, but the federal program prohibits it. The AQUA also directs states to give greater weight to state and/or local DWSRF applications if the system improves its efficiency or reduces its environmental impact through measures like increased water efficiency or conservation, greater source water protections and actions to develop sustainable energy on site. Lastly, the bill includes a “Buy American” provision and a Davis-Bacon “prevailing wage” provision.

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