CHAPTER 7 WHAT PRODUCERS NEED TO KNOW ABOUT THE PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION AND THE FEDERAL ENERGY REGULATORY COMMISSION - JURISDICTION AND CHANGES AHEAD
| Jurisdiction | United States |
(Apr 2018)
WHAT PRODUCERS NEED TO KNOW ABOUT THE PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION AND THE FEDERAL ENERGY REGULATORY COMMISSION - JURISDICTION AND CHANGES AHEAD
Managing Shareholder
Babst Calland
Washington, DC
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JAMES CURRY is Managing Shareholder with Babst Calland, in Washington, DC, and a member of the Energy and Natural Resources, Environmental and Transportation Safety groups. He focuses his practice primarily in Pipeline and HazMat Safety and Motor Vehicle Safety, Regulatory and Compliance. Mr. Curry represents clients in a variety of transportation safety and energy matters, including matters at the Pipeline and Hazardous Materials Safety Administration (PHMSA), state commissions, and federal courts. His nationwide practice covers compliance and strategic counseling, policy, inspection preparation, internal audits, due diligence, enforcement, and litigation. Mr. Curry has experience in all sectors of the pipeline industry, including gas transmission, gathering and distribution, oil, NGL and products pipelines, LNG facilities, and products and chemicals terminals. He also counsels clients on motor vehicle safety issues arising under the National Highway Traffic Safety Administration's (NHTSA) regulatory programs, and PHMSA and Federal Railroad Administration (FRA) hazardous materials and rail safety matters. As a former PHMSA attorney, Mr. Curry represented the agency in pipeline safety enforcement matters arising in the Western Region, collaborating with agency engineers to pursue dozens of cases. He was also involved in the development of rulemakings, interpretations, special permits, and congressional testimony. In his enforcement role, Mr. Curry worked closely with the U.S. Department of Justice and the U.S. Environmental Protection Agency on complex pipeline litigation involving claims under the Pipeline Safety Act, Clean Water Act, and Clean Air Act. These efforts led to a significant civil Consent Decree addressing crude oil pipelines on Alaska's North Slope. Mr. Curry also served as a presiding official at agency hearings, and prepared final orders and decisions on petitions for reconsideration. Today, Mr. Curry relies on this experience to build comprehensive strategies to help clients achieve their safety regulatory objectives. Mr. Curry earned his B.S. from Boston University is 2001, and his J.D. from Seton Hall University School of Law in 2005. During law school he was law clerk for the U.S. Department of Justice's Environment and Natural Resources Division, Environmental Enforcement Section and a judicial intern for The Honorable Peter F. Boggia in the Superior Court of Bergen County, New Jersey. Prior to joining Babst Calland, he worked for a prominent Washington, D.C.-based energy, environmental and natural resources law firm.
Table of Contents
I. Introduction
II. Historical Perspective on Federal Regulation of Gathering Lines
A. Pipeline and Hazardous Materials Safety Administration
i. Natural Gas
ii. Hazardous Liquids
B. Federal Energy Regulatory Commission
i. Natural Gas
ii. Hazardous Liquids
III. Proposed Changes to PHMSA Regulations
A. Proposed Gas Gathering Changes
i. New Definitions for Gathering Lines
iii. Proposed Regulation of Class 1 Gathering Lines
ii. Safety Standards
iii. PHMSA's Cost-Benefit Analysis
B. Proposed Hazardous Liquid Gathering Changes
IV. Implications: How Could PHMSA's Proposed Rules Affect Producers?
V. Next Steps
I. Introduction
Natural gas and hazardous liquid pipelines are regulated by, among other federal agencies, the Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA)1 and the Federal Energy Regulatory Commission (FERC). PHMSA administers a national regulatory program for natural gas and hazardous liquid pipeline safety.
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FERC issues certificates to build and operate interstate gas pipelines and has economic regulatory authority over the interstate transportation and sale of natural gas and oil.
This article reviews PHMSA and FERC regulation of pipelines used in the gathering of natural gas and hazardous liquids. It provides historical background on the agencies' regulation of gathering lines, and explains how PHMSA's proposed changes to its gas regulations could result in regulation of currently exempt rural gathering pipelines, as well as certain pipelines farther upstream into previously unregulated production areas. It also reviews PHMSA's proposed reporting requirements for otherwise unregulated hazardous liquid gathering lines. This article concludes with a discussion of the implications of PHMSA's proposed changes on producers.
Over the last few decades, PHMSA and FERC have addressed the scope of their jurisdiction over gas gathering lines. FERC's "primary function test" for gas gathering is generally well established.2 PHMSA continues to grapple with how to define and regulate gas gathering, especially in light of increased development in the nation's shale plays.3
The Federal Pipeline Safety Laws direct PHMSA to establish minimum federal safety standards for natural gas and hazardous liquids pipelines and liquefied natural gas facilities used in transportation in, or affecting, interstate commerce.4 Through a combination of Federal regulation and state partnerships, PHMSA's safety standards apply to most gas and liquid pipelines in the United States, and are the only safety requirements that apply to interstate pipelines.5
While PHMSA's safety standards apply to most gas and liquid pipelines, Congress has limited PHMSA's jurisdiction over certain facilities. PHMSA's hazardous liquid regulations do not apply to onshore production, refining, and manufacturing facilities6 and certain rural gathering lines.7 PHMSA's natural gas safety regulations similarly do not apply to production facilities and certain rural gathering lines.8 The statutory exemptions for rural gathering lines have been narrowed over time, and PHMSA has struggled since the early 1970s to define the scope of regulated gathering.
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The Natural Gas Act limits FERC's jurisdiction to the economic regulation of interstate transportation and sale of natural gas.9 Congress expressly restricted FERC's jurisdiction over local gas distribution, and facilities used for the production and gathering of gas.10 The Interstate Commerce Act provides FERC with jurisdiction over the interstate transportation of oil by pipeline, which includes certain gathering lines.11 Over time, FERC has established analytical frameworks for determining if a gas or oil pipeline is involved in interstate transportation.
II. Historical Perspective on Federal Regulation of Gathering Lines
A. Pipeline and Hazardous Materials Safety Administration
i. Natural Gas
(1) Statutory and Regulatory Definitions of Gathering
In the Natural Gas Pipeline Safety Act of 1968, Congress directed the Secretary of Transportation to "establish minimum federal safety standards for pipeline facilities and the transportation of gas. . . ."12 The 1968 Act excluded from the definition of "transportation of gas" the
gathering of gas in those rural locations which lie outside the limits of any incorporated or unincorporated city, town, village, or any other designated residential or commercial area such as a subdivision, a business or shopping center, a community development, or any similar populated area which the Secretary may define as a nonrural area. 13
Congress excluded rural gas gathering lines from PHMSA's jurisdiction because the "impressive" safety record of these lines at the time did not support the need for federal regulation.14
In 1970, PHMSA established a definition of a "gathering line" in the 49 C.F.R. Part 192 gas regulations.15 PHMSA defined a "gathering line" as "a pipeline that transports gas from a current production facility to a transmission line or main," and this definition remains codified in today's regulations.16 PHMSA exempted rural gathering lines that were either (1) outside of any
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"incorporated or unincorporated city, town, or village" or (2) outside of "any designated residential or commercial area."17
PHMSA did not define "production facility," thus leaving it uncertain where the production function ended and where gathering began. PHMSA defined the term "transmission line" as a "pipeline, other than a gathering line, that (1) Transports gas from a gathering line or storage facility to a distribution center or storage facility; (2) Operates at a hoop stress of 20 percent or more of SMYS [specified minimum yield strength]; or (3) Transports gas within a storage field."18 PHMSA defined the term "main" as a "distribution line that serves as a common source of supply for more than one service line."19
(2) PHMSA's Early Attempts to Clarify the Gathering Definition
In 1974, PHMSA initiated a rulemaking to clarify its gathering line definition. PHMSA attempted to address confusion in the industry in using the Part 192 definitions to determine "where a gathering line ends and a transmission line beings."20 PHMSA stated that "a clear definition of the term 'gathering line' [wa]s necessary to identify pipelines used in the gathering of gas and to determine applicability of the Federal safety standards to pipelines in rural locations."21
PHMSA explained that existing definitions are circular, making it difficult to distinguish between gathering and transmission.22 PHMSA acknowledged that there was also an issue "distinguishing the beginning of a gathering line under the existing definition," because the "the term 'production facility' is not defined, and its limits are not generally recognized."23 In other words, PHMSA explained, "the point where pipelines in a production facility end and gathering lines begin is unclear."24
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