PHMSA Regulates Rural Onshore Gathering Lines & Large-Diameter Low-Stress Pipelines

On June 3, 2008, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a final rule requiring operators of previously unregulated rural onshore hazardous liquid lines and rural large-diameter low-stress hazardous liquid pipelines to comply with a host of new safety requirements.  The new regulations become effective on July 3, 2008, and establish various timeframes for pipeline operators to comply with the new regulatory requirements. 

Background

In September 2006, PHMSA issued a notice of proposed rulemaking to extend certain “threat-based” hazardous liquid pipeline safety regulations to those portions of rural onshore gathering lines and rural onshore low-stress pipelines located in areas where leaks can cause the most significant damage.  This proposal would have required operators of such lines to comply with safety regulations addressing the principal risks posed to rural lines: corrosion and third party damage. 

While the 2006 notice was pending, the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act) was enacted, requiring PHMSA to issue regulations subjecting low-stress hazardous liquid pipelines to the same standards and regulations as other hazardous liquid pipelines, with a few limited exceptions.  For more information on the PIPES Act, see the Issue Alert "Congress Reauthorizes Pipeline Safety Programs and Increases Department of Transportation’s Enforcement Authority" (12/11/2006).  Because PHMSA’s 2006 notice would not have satisfied the broad mandate of the PIPES Act, PHMSA issued a supplemental notice of proposed rulemaking in May 2007.  The Supplemental Notice proposed a two-phased approach to implementing the PIPES Act’s requirements.  Phase I would extend all the safety requirements of Part 195 of PHMSA’s regulations to higher-risk, larger-diameter rural low-stress pipelines.  With respect to smaller-diameter rural low-stress pipelines, PHMSA would collect infrastructure data and risk information by requiring such pipelines to comply with existing reporting requirements.  Based on the data gathered, PHMSA would initiate a Phase II rulemaking proceeding at a later time. For more information on PHMSA's supplemental notice of proposed rulemaking, see the Issue Alert "PHMSA Proposes to Extend Safety Regulations to Rural Large-Diameter Low-Stress Hazardous Liquid Pipelines" (5/22/2007).

New Regulations Applicable to Rural Onshore Hazardous Liquid Gathering Lines and Low Stress Pipelines

PHMSA’s final rule largely adopts the regulations proposed in the 2006 notice of proposed rulemaking, as modified by the Supplemental Notice. 

Rural onshore hazardous liquid gathering lines.  The new regulations define a “regulated rural gathering line” as a line (1) between 6⁵/₈ and 8⁵/₈ inches in diameter, (2) operating at more than 20% of SMYS (or, if stress level is unknown or the pipeline is not constructed with steel pipe, at a pressure of more than 125 psi gage), and (3) located in or within a quarter mile of a “unusually sensitive area” (USA) (i.e., an area that contains sole-source drinking water, endangered species, or other ecological resources that could be adversely affected by a hazardous liquid pipeline accident or leak).  Operators of rural gathering lines meeting these criteria must comply with pipeline safety requirements that address corrosion and third-party damage.  In particular, operators of these lines must establish maximum operating pressure, install and maintain line markers, establish continuing public education and damage prevention programs, comply with corrosion control requirements, implement programs for continuously identifying operating conditions that could contribute to internal corrosion (including measures to prevent and mitigate internal corrosion), and comply with operator qualification programs.  In addition, operators of regulated rural gathering lines must comply with Subpart B’s reporting requirements.  Depending on the nature of the specific regulatory requirement, the compliance deadlines range from January 2009 to July 2011. 

Rural onshore low-stress hazardous liquid pipelines.  Reflecting the phased approach proposed in the Supplemental Notice, the new regulations require that larger-diameter rural low-stress pipelines (i.e., pipelines 8⅝ inches or greater in diameter operating at or below 20% SMYS and located within a one-half mile buffer zone of a USA) comply with all Part 195 safety requirements.  For integrity management purposes PHMSA will permit pipeline operators to use a “could affect” analysis in lieu of the half-mile buffer in determining which portions of their pipelines could affect a USA.  Under a “could affect” analysis, an operator evaluates various risk factors, such as local topography and shutdown ability, to determine if a pipeline could affect a USA. 

In response to concerns that the costs of conducting integrity management assessments could cause operators of some low-stress pipelines associated with marginal and “stripper” wells to either stop operating (resulting in a loss of oil supply), or to use more expensive and riskier transportation options, the new regulations permit operators meeting certain criteria to notify PHMSA that they will abandon or shut down a pipeline because of the economic burden of complying with assessment requirements.  Upon receiving such notification, PHMSA will postpone compliance with the integrity management assessment requirements while it analyzes the notification and consults with the Department of Energy, if appropriate.  Based on that analysis, PHMSA may grant the operator a special permit to allow continued operation of the pipeline subject to alternative safety requirements.  Operators eligible to submit a notification under this provision are those that carry oil from a production facility at a rate equal to or lower than 14,000 barrels per day.

Operators of smaller diameter rural low-stress pipelines are not subject to Part 195’s safety regulations at this time, except that these pipeline operators must comply with Subpart B’s requirements for periodic reports and the reporting of accidents and safety-related conditions.  PHMSA will address the application of safety regulations to smaller-diameter low-stress pipelines in a future Phase II rulemaking.

Timeframes for Compliance

The final rule establishes the following compliance timeframes.

New steel gathering lines constructed, replaced, relocated, or otherwise changed after July 3, 2009, must comply with Part 195’s installation, construction, initial inspection and initial testing requirements.  For pipelines that become regulated because of the identification of a new USA, an operator must implement the regulatory requirements (except for Subpart H corrosion control requirements) within 6 months of identifying the USA for gathering lines and within 12 months of identifying low-stress pipelines. 

Implications of the New Regulations

The final rule requires that operators of previously unregulated classes of hazardous liquid gathering lines and low-stress pipelines comply with a host of new safety requirements.  PHMSA estimates that about 1,400 miles of rural gathering and large-diameter low-stress pipelines will become subject to some or all of the Part 195 pipeline safety regulations.  Operators of almost 4,000 miles of small diameter, low-stress pipelines now must comply with reporting requirements.  PHMSA states that the primary quantifiable benefits from the final rule will be improved safety performance and reliability of these pipelines, as the number of incidents and their consequences are expected to drop.  PHMSA also states that the new rule may prevent supply disruptions caused by pipeline failures.  PHMSA estimates that the present value of the benefits of the final rule will be between $41 million and $58 million over 20 years, while the estimated cost of compliance will be between $29 million and  $39 million, resulting in net benefits of approximately $13 million to $20 million.