PHMSA Issues Interim Final Rule Establishing Procedures for Safety Orders and Special Permits

On March 28, 2008, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an interim final rule that establishes procedures for issuing Safety Orders and handling requests for emergency and non-emergency Special Permits.  The interim rule conforms PHMSA’s procedures to the requirements of the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act).  The interim final rule is effective April 28, 2008; comments on the interim final rule are due April 28, 2008.

The PIPES Act

The PIPES Act requires that PHMSA issue regulations governing the issuance of a Safety Order when PHMSA determines, after notice and opportunity for a hearing, that a particular pipeline facility has a condition posing a pipeline integrity risk to public safety, property, or the environment.  Under the PIPES Act, PHMSA has authority to issue a Safety Order requiring a pipeline to take a range of corrective actions to remedy the condition, including physical inspection, testing, repair, and other appropriate actions.  The statute also sets forth the factors PHMSA must consider when determining whether a condition presents an integrity risk.

The PIPES Act further clarifies PHMSA’s authority to waive compliance with a pipeline safety regulation.  PHMSA may grant a non-emergency waiver of a pipeline safety regulation, after notice and an opportunity for a hearing, upon a determination that the waiver is not inconsistent with the public interest.  Emergency waivers may be granted without prior notice and comment if PHMSA determines that the waiver is in the public interest, is not inconsistent with pipeline safety, and is necessary to address an actual or impending emergency involving pipeline transportation, including an emergency caused by a natural or manmade disaster.  Waivers of pipeline safety regulations are referred to as Special Permits.

Safety Orders

The interim final rule sets forth procedures that will apply to PHMSA’s consideration of whether to issue a Safety Order.  The final rule provides that PHMSA may initiate a Safety Order proceeding to address pipeline integrity risks that may not require immediate corrective action, but that should be addressed over time to protect life, property, or the environment, or to prevent failures or conditions that could disrupt energy supplies.  In determining whether a pipeline facility poses an integrity risk, PHMSA considers all relevant information, including nine factors set forth in the PIPES Act.  These include: the pipe’s characteristics; the nature of the materials transported; the geographic area where the facility is located; for hazardous liquids pipelines, the proximity to unusually sensitive areas; population density and growth patterns; National Transportation Safety Board recommendations; the likelihood that the condition will impair the serviceability of the pipeline or worsen over time; and the likelihood that the condition is present or could develop on other areas of the pipeline.

The interim final rule identifies a broad range of remedial measures that PHMSA may include in a Safety Order, including those identified in the PIPES Act, such as physical inspection, testing, integrity assessment, and repair.  In addition, PHMSA states that it will consider requiring an operator to develop procedures for continuous monitoring of pipeline conditions; enhance its data integration process; and improve information management systems.  PHMSA believes that this approach is consistent with the statute’s purpose of addressing problems before they become immediate hazards.

According to the interim final rule, PHMSA will use longstanding administrative enforcement procedures in Safety Order proceedings.  PHMSA will initiate a proceeding by issuing a Notice of Proposed Safety Order (NPSO) to the pipeline operator that: alleges the existence of the condition that poses a pipeline integrity risk; states facts in support of the allegation; proposes corrective action; and invites the operator to submit a work plan and schedule to address the conditions identified in the notice within 30 days of its issuance.  The operator may request an informal consultation in advance of a hearing, during which the parties may agree upon a proposed corrective action in a written consent agreement.  If the operator does not request an informal consultation, or if consultation does not result in a consent agreement, the operator may contest the NPSO and request an informal hearing.  Following the hearing, the Associate Administrator may issue a Safety Order or withdraw the NPSO based on the considerations set forth in the PIPES Act.  A Safety Order must be lifted after PHMSA determines that all remedial actions set forth in the Safety Order and any associated work plans have been completed.  PHMSA must also suspend or terminate a Safety Order upon finding that the pipeline facility no longer poses an integrity risk.

Non-Emergency and Emergency Special Permits

The interim final rule also adds a new section to PHMSA’s regulations setting forth the process for requesting Special Permits.  New section 192.341 outlines the procedures a pipeline operator must follow and the information it must provide when requesting a waiver from any part of the agency’s pipeline safety regulations.  Applications for Special Permits requesting non-emergency waivers will be publicly noticed in the Federal Register and appropriate state authorities will be notified.  PHSMA cautions that, for proposed pipelines, applications for Special Permits should be submitted well in advance of final site selection because the Special Permit may affect orders for materials and investment decisions, and because pipeline routes can change.  PHMSA will continue to work closely with, and provide technical assistance to, the public and appropriate authorities, including the Federal Energy Regulatory Commission on safety issues.  In addition, PHMSA will continue its practice of inspecting new pipelines during construction to verify compliance with a Special Permit, require mitigation of imminent hazards, or issue a Safety Order addressing integrity risks.

The interim final rule sets forth procedures and standards governing revocation, suspension or modification of a Special Permit, as necessary to address safety concerns, and clarifies the relationship between Special Permits and other administrative orders.  The rule provides that PHMSA will revoke, suspend, or modify a Special Permit upon discovery of a material error in the agency’s evaluation of the special permit application, an intentional misrepresentation or omission in the application, or a material change in the circumstances underlying the agency’s decision.  PHMSA may also revoke or suspend a Special Permit if the operator fails to comply with any of its terms or conditions.  The interim final rule provides, however, that unless warranted by an emergency, PHMSA will not take such action without providing the operator an opportunity to show cause why the special permit should not be revoked, suspended, or modified. 

The interim final rule also sets forth procedures for emergency Special Permits, which are available without prior notice and hearing if necessary to address an emergency involving pipeline transportation.  In accordance with the PIPES Act, the rule limits the duration of an emergency Special Permit to 60 days, with renewal of an emergency permit subject to notice and hearing procedures. 

The interim final rule also states that the new procedures do not affect the current requirement that a state pipeline authority give PHMSA 60-days notice of a waiver applicable to intrastate pipelines.  PHMSA will expedite its review of such waivers if the state indicates that the waiver is necessary to respond to an emergency involving an intrastate pipeline subject to state regulation.

Other Provisions of the Final Rule

The interim final rule also amends PHMSA’s regulations to reflect the recent relocation of DOT headquarters and to update Web site addresses, telephone numbers, and routing symbols.  The final rule also clarifies the time period for processing requests for written interpretations of the regulations.  In addition, the interim final rule notifies pipeline operators that all materials submitted in response to enforcement actions may be placed on publicly accessible Web sites, unless the operator seeks confidential treatment. 

Implications

The interim final rule provides certainty and clarity by explaining the procedures PHMSA will follow when determining whether to issue a Safety Order and by identifying the factors PHMSA will consider in Safety Order proceedings.  The rule also provides examples of the corrective actions PHMSA may impose on pipeline operators to mitigate pipeline integrity risks.  In addition, the rule will create a more transparent process for Special Permit applications.  The interim final rule is useful to pipeline operators as they continue to construct new pipeline infrastructure to meet growing demand and endeavor to maintain the safety of existing pipelines in areas experiencing increased development and population growth.