September 2014, Vol. 241, No. 9


FERC Commissioner Concerned About Pipeline Adequacy In Face Of Utility Carbon Restrictions

There is at least one raised eyebrow at the Federal Energy Regulatory Commission (FERC) over the EPA’s proposed Clean Power Plan, the subject of a proposed rule issued on June 2. The plan would force electric utilities to reduce carbon emissions to advance President Obama’s Climate Action Plan, which seeks to lower air emissions of the six greenhouse gases, of which carbon dioxide is the major member. The plan foresees individual states devising separate, and perhaps different, plans for reducing carbon emissions from electric utilities.

FERC Commissioner Philip Moeller, who appeared with the four other commissioners at the House Energy and Commerce Committee on July 29, criticized both the EPA’s state-based reduction strategy and the expectation there will be enough pipeline capacity for power plants that switch from coal to natural gas. “The biggest challenge in implementing the proposed rule is that electricity markets are interstate in nature. Thus the proposal’s state-by-state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive.”

In an interview, Moeller questioned EPA’s ability to accurately estimate the results of its policies. He pointed to the agency’s mercury and air toxics rule where the agency estimated that coal-using electric utilities that would be forced to shut down would account for in the neighborhood of 13 gigawatts of electricity.

“We are now up to 65 gigawatts of power that has been lost as a result of that rule,” he added. “Their estimate was ridiculous. I am very concerned they don’t understand how any Clean Power Plan will affect system reliability, which is what I have to be concerned with. We have to ask the tough questions.”

EPA’s proposal allows for states to comply through four compliance “building blocks”: 1) Heat Rate Improvements averaging 6% for coal generation units; 2) Re-dispatch of natural gas generation units of up to 70%; 3) Low- and Zero-Carbon Generation intended to encourage renewable generation and encourage the continued operation of nuclear units that are economically challenged, and 4) Demand-Side Efficiency intended to decrease demand and improve energy efficiency.

“Most concerning is the assumption of increased re-dispatch of natural gas units of up to
70%,” Moeller told the committee. “Related to this concern is if there will be sufficient pipeline capacity to support this increase in natural gas generation.” In the interview, he suggested pipelines are going to be less interested in building new infrastructure to areas where they cannot sign long-term contracts, which are less likely where environmental dispatch leads to day to day uncertainty about the need for natural gas supplies.

Tepid EPA IG Report On Methane Leaks From Distribution Pipelines

Normally it is not a good sign when the Inspector General (IG) at a federal agency issues a critical report. However, the report on methane leaks from distribution pipelines issued in late July by the IG at the EPA doesn’t appear at first blush, and despite some press reports to the contrary, to have much bite.

The report only covers the distribution sector, which accounts for approximately 10% of all methane emissions from stationary sources in the U.S. Methane itself represents only 10% of U.S. greenhouse gas emissions. So the contribution of distribution leaks of methane to the U.S.’s GHG inventory is tiny. The report says nothing about methane leaks from the gas transmission industry.

The report makes five recommendations, which could lead to both EPA and Pipeline and Hazardous Materials Safety Administration (PHMSA) regulatory action. That seems unlikely since the IG’s main recommendation is an anodyne, one suggesting that the EPA work with the PHMSA to “address” methane emissions. That is not exactly a clarion call.

Although the EPA has embarked on a controversial rulemaking to restrict GHG emissions form utilities using coal as fuel, it has shown no inclination to regulate methane emissions from any pipeline sector. It did issue some White Papers in April asking for comments on what the agency might do with regard to methane leaks from five sources: compressors, emissions from fracked wells, leaks, liquids unloading and pneumatic devices. The agency was responding in part to the release on March 28 of the Obama administration’s Climate Action Plan: a Strategy to Reduce Methane Emissions.

The White Paper on leaks does mention the transmission infrastructure as well as leak emissions from natural gas well pads, oil wells that co-produce natural gas, gathering and boosting stations, gas processing plants. The EPA says it will use the White Papers to decide on any regulatory action.

It is hard to believe that either the EPA or PHMSA would countenance any kind of additional regulatory restrictions on distribution or transmission pipelines with regard to methane leaks given their minor contribution to GHG emissions. PHMSA submitted a report on leak detection systems to Congress in January 2013, It was required by the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. That report was supposed to serve as the basis for additional congressional legislation, if Congress felt that was needed. Subsequently, Rep. Ed Markey (D-MA) introduced a bill (S. 1767) which would require companies to “accelerate the repair, rehabilitation, and replacement of gas piping or equipment that is leaking or may pose high risk of leaking.” The bill has not been the subject of congressional hearings, much less a vote, and is unlikely to see the light of day.

In the wake of the report, INGAA President and CEO Don Santa said, “The natural gas transmission pipeline industry reduced the number of leaks by 94%, preventing 122 million metric tons of CO-2 equivalent emissions over the past three decades, as a result of pipeline integrity and maintenance programs and continued investment in new pipeline facilities.” INGAA will develop industry guidelines for Directed Inspection and Maintenance (DI&M) of natural gas pipeline facilities. DI&M is a well-established and EPA-recognized tool for detecting and mitigating leaks in a cost-effective manner. While most INGAA member pipeline companies use DI&M, the guidelines will improve consistency and uniformity, which should result in further emissions reductions.

DOT Wants To Require Safer Bakken-Carrying Rail Cars

The American Petroleum Institute (API) isn’t too happy with the Department of Transportation’s just-published proposed rule aimed at upgrading the railroad cars carrying Bakken crude oil to the rest of the country. The premise for the proposed rule issued by the DOT’s Federal Railroad Administration is that crude oil from the Bakken region in North Dakota tends to be more volatile and flammable than other crude oils.
In a statement, API President and CEO Jack Gerard countered: “The best science and data do not support recent speculation that crude oil from the Bakken presents greater than normal transportation risks. Multiple studies have shown that Bakken crude is similar to other crudes. DOT needs to get this right and make sure that its regulations are grounded in facts and sound science, not speculation.”

The data on Bakken crude was collected as part of Operation Classification, a joint Pipeline and Hazardous Materials Safety Administration and FRA effort. The data were initially gathered to verify that crude oil was being properly classified in accordance with federal regulations, and evolved to include more robust testing to better understand the characteristics of the product.

The FRA’s proposed rule would outlaw DOT 111 railroad cars after two years for the shipment of packing group I flammable liquids, including most Bakken crude oil, unless the tank cars are retrofitted to comply with new tank car design standards. Those cars predominate today. But they have been damaged while carrying hazardous substances, leading to loss of life and environmental damage. The proposed rule includes new operational requirements for high-hazard flammable trains (HHFT) that include braking controls and speed restrictions. HHFTs would be defined as trains carrying 20 or more tank carloads of flammable liquids (including crude oil and ethanol).

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