PHMSA Proposes Regulations to Permit Certain Gas Transmission

On March 12, 2008, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a notice of proposed rulemaking (NOPR) that would amend existing federal pipeline safety regulations to enable operators of gas transmission pipelines to obtain approval to calculate higher maximum allowable operating pressures (MAOP) for certain lines by using higher design factors.  The NOPR would codify, as standards of general applicability, the supplemental safety criteria that PHMSA previously has included as conditions to pipeline-specific Special Permits authorizing higher design pressures for certain qualifying pipelines.  Under the proposed regulations, pipelines would no longer require Special Permits to operate at higher pressures.  Comments on the NOPR are due by May 12, 2008.

Background

The NOPR explains that the current regulations governing the calculation of MAOP for gas transmission pipelines were adopted in 1970 as part of the original federal pipeline safety regulations.  These regulations were based on engineering standards developed in the 1950s when knowledge of the material properties of pipe and the ability to evaluate pipeline integrity over an operating lifetime was limited.  Since 1970, there have been significant improvements in steel pipe manufacturing and metallurgy testing, and in assessment tools and standards.  These technological advances have reduced the risk of defects in materials that can lead to failure over time.  In fact, the B31.8 Code for pressure piping, developed by the American Society of Engineers (ASME), permits operating pressures to be calculated based on design factors higher than those allowed in Part 192 of PHMSA’s regulations.  In addition, modern maintenance practices, including integrity management requirements, have reduced the risk of corrosion and other defects that affect pipeline integrity and have enhanced operators’ understanding of pipe condition and other factors affecting risk.

Although PHMSA’s regulations do not incorporate the higher design factors allowed by the ASME B31.8 Code, since 2005, PHMSA has issued several Special Permits authorizing pipelines meeting certain criteria to design pipeline systems based on these higher design factors to permit higher MAOP levels than allowed by the existing regulations.  Each permit requires the operator to comply with supplemental safety criteria that include pipeline safety standards and requirements that exceed PHMSA’s existing Part 192 requirements.  These supplemental conditions are designed to address the additional risks associated with operating the pipeline at higher stress levels.  For example, for pipe covered by a Special Permit, an operator must comply with rigorous design and construction standards and implement additional operational and maintenance measures that address the potential for corrosion and mechanical damage and ensure that defects are detected before they lead to failure.  In addition, PHMSA examines the design, construction, and operation and maintenance plans of each pipeline with a Special Permit before allowing operation at the higher pressure to commence. 

Proposed Regulations to Permit Higher Design Factors in Calculating MAOP

PHMSA is proposing to adopt non-mandatory, regulatory standards that would allow pipelines meeting rigorous design, construction, inspection, operation, and maintenance standards to calculate MAOP for certain qualifying pipeline based on a higher stress level.  The proposed standards are based on the supplemental criteria that have been approved in several Special Permits and reflect a comprehensive life-cycle management approach to ensuring safety.  The proposed rule would eliminate the need for pipelines to request Special Permits and for PHMSA to develop conditions based on pipeline-specific evaluations.  Like the Special Permit process, the regulations would allow an operator to qualify both new and existing pipeline segments for operation at a higher MAOP.  

The proposed regulations establish the design, construction, operation and maintenance requirements that an operator would have to satisfy to operate at an alternative MAOP based on higher stress levels.  Rigorous design requirements address steel chemistry and manufacturing practices and standards, with a particular focus on pipe toughness and the quality of seams, coating and fittings.  Enhanced construction requirements would include heightened quality control and inspections, more extensive testing requirements, deeper burial of segments operated at higher stress levels, and implementation of a quality assurance plan.  In addition, pipelines operating at higher pressures would be subject to stringent operation and maintenance requirements addressing threat assessments, public awareness, damage prevention, emergency response, external and internal corrosion control, integrity assessments, repair criteria and overpressure protection. 

An operator seeking to operate an existing or proposed pipeline under the new regulations would be required to notify PHMSA at least 180 days prior to commencing operations at the new MAOP.  The notification consists of a certification, executed by a senior executive, that the pipeline satisfies the applicable design and construction regulations and that the operator has adopted the proposed rule’s additional operation and maintenance requirements.  In addition, the senior executive must certify that the pipeline’s damage prevention program meets or exceeds the industry consensus standards or practices.  Following the submission of the certification, the PHMSA will conduct appropriate inspections, which may include verification of the manufacturing process, visits to the pipeline site, analysis of the existing pipeline’s operational history, and a review of test records, plans, and procedures.

Not all pipelines will qualify to operate under the proposed regulations.  Pipelines that will not be permitted to operate under the new regulations include: 1) segments located in densely populated Class 4 locations; 2) grandfathered pipeline already operating at a higher stress level, but not constructed in accordance with modern standards; 3) bare pipe; 4) pipe with wrinkle bends; 5) pipe experiencing failures indicative of a systemic problem; 6) pipe manufactured by certain processes, such as low frequency electric welding; and 7) segments that cannot accommodate internal inspection devices.  In addition, there will be some variation in the way the proposed rule will apply to pipelines already in operation compared to new pipelines.  

With respect to existing Special Permits, PHMSA suggests that they may need to be reviewed after the proposed regulations are adopted to determine the need for changes to conform to the new requirements.  In particular, PHMSA states that the proposed regulations would require an operator to patrol facilities more frequently than required under existing Special Permits.  Because increased patrolling represents most of the incremental costs associated with the proposed regulations, PHMSA seeks comments on whether the requirement optimally balances the potential risk reduction and increased burden.  PHMSA also requests comments on whether existing Special Permits should be modified.  

PHMSA also is considering how to address pending requests for Special Permits and whether to consider new requests during the course of the rulemaking.  Under one option, PHMSA would continue evaluating requests pursuant to the proposed terms and conditions, and then limit the duration of any Special Permit to allow for review after completing the rulemaking.  Alternatively, PHMSA would defer action on pending requests until the rulemaking is completed.

PHMSA states that the new regulations will not prevent pipelines from requesting Special Permits.  For example, an operator may seek a Special Permit for a pipeline that does not meet all the new terms and conditions.  Further, PHMSA anticipates that the proposed trans-Alaskan gas pipeline will require an alternative design approach based on the unique operating environment of the Arctic.

Implications of the Proposed Regulations

PHMSA’s proposed regulations are the culmination of a lengthy data-gathering and assessment process.  The proposal reflects an attempt to establish standardized requirements and a procedure designed to enable pipelines to obtain the benefits of improved technologies, materials, and processes without compromising public safety.  PHMSA states that the proposed regulations will enable pipelines to increase capacity and improve efficiency while facilitating investment in improved pipeline technology and rigorous life-cycle maintenance.  Given projections for increased demand for natural gas and the need for additional infrastructure to meet that demand, the impact of the rule could be significant.  PHMSA itself estimates that the proposed regulations will result in the uprating of approximately 3,500 miles of existing pipelines and the annual addition of 700 miles of pipeline operating under an alternative MAOP.