Regulation of Pipelines

1. Regulation of Pipelines Pipeline Safety Trust Conference Denise Hamsher November 2006

2. UNREGULATED Forget the Term “Unregulated” • Environmental Protection Agency • Federal Energy Regulatory Commission • Mineral Management Service • Occupational Safety and Health Administration • Department of Transportation, Pipeline and Hazardous Materials Administration • State Utility Commissions • State Pipeline Safety Offices • State Department of Natural Resources • State Environmental Agencies • U.S. Fish and Wildlife • U.S. Forest Service • U.S. Army Corps of Engineers the list goes on…..

3. Natural Gas Legislation: Natural Gas Act of 1938, Natural Gas Policy Act of 1978 and Energy Policy Act of 2005 FERC oversight clarified in case history Import and export Rates and terms of service for pipelines in interstate commerce Construction and abandonment of service System of accounts and records Code of conduct for affiliates Liquid Petroleum Legislation: Hepburn Act made oil^ pipelines subject to Interstate Commerce Act Energy Policy Act of 1992 oil pipeline rates now indexed, unless rate case, negotiated or market-based rates filed Rates and terms of service for common carrier oil pipelines in interstate commerce FERC Regulation of Onshore*Pipelines *Note: offshore pipelines may differ ^Oil pipelines include crude oil, refined products, etc.

4. Pipeline and Hazardous Materials Safety Administration—Onshore • Pipeline Safety Act as amended through periodic “reauthorization” of Act • Regulations issued in 49 CFR Part 190-199 • Scope regulation depends on function • Incident reporting • Operator qualification • Design and abandonment • Operation, maintenance and testing • Integrity management programs • Drug and alcohol prevention program • Some differences between natural gas and liquid petroleum pipeline regulations

5. Gathering Pipelines:How FERC and PHMSA regulate FERC’s “primary function test” • Natural Gas Act exempts gathering but does not define it • Defined in extensive case history • Numerous factors considered: • Length, diameter and operating pressure • Extension beyond central point in the field • Geographic configuration • Location of wells, compressors and processing • Gas quality • The entity involved • Crude oil not exempted under Interstate Commerce Act • Short distance typically exempted, otherwise case specific • Also subject to state regulation and oversight

6. Gathering Pipelines:How FERC and PHMSA regulate PHSMA • Gas Gathering (49 CFR Part 192) • Defined in new regulations, adopts API 80 • Clarifies producer exemption • Refocuses on populated areas (HCA) versus government municipal boundaries • Liquid Gathering (49 CFR Part 195) • Existing definitions ≤ 8⅝ inches • Proposed rulemaking re-focuses on HCA rather than municipal boundaries • New rules focus on highest risks (damage and corrosion) • Also subject to state regulation and oversight

7. Who Regulates What? Local distribution company lines Natural gas transmission or main line Underground storage Underground & steel storage Gas plant Industrial users LPG distribution Oil and gas gathering lines Oil products line Gathering stations Products terminals Crude oil trunk or main line Refining center Courtesy of Meisner and Leffer

8. Commerce:FERC and State Utility Commissions FERC regulates oil or gas pipelines in interstate commerce States regulate intrastate transmission pipelines, LDC service, rates and some oversight of gathering (varies)

9. Safety:Federal Pipeline Safety States can and do expand regulation of intrastate pipeline and local distribution Gathering: Was municipal boundaries (now HCAs) Production facilities exempt from federal pipeline safety legislation; where production ends is the issue

10. Environmental Regulation • Building new pipelines • Host of federal and state environmental requirements/permits to protect waterways, wetlands, agriculture, threatened and endangered species, cultural resources • Examples: U.S. Army Corps of Engineers, State Public Utility Commission, State DNR, U.S. Forest Service, Tribal Councils • FERC is lead role in EIS or EA for interstate gas pipelines • Lead role for liquid pipelines or intrastate gas vary • U.S. State Department if crossing international border • Operations • Various facility emission permits • Spills: reporting and remediation • Disposal of hazardous waste such as solvents used to clean

11. Incident Reporting:Federal and State Requirements • Federal • Notification to National Response Center of major incidents • “Notification” and alert system: not reporting system • Reporting to PHMSA • State • In addition to federal requirements • Varies depending on state • Requires reporting of incidents and environmental spills • Local • All first responders • Alert to local and regional supply interruptions

12. Worker Safety and Training • Occupational Health and Safety Administration • Worker and contractor safety • Construction and work practices • E.g. trenching, exposure to hazardous vapors, working in confined spaces, etc. • Worker and emergency responder training for hazardous material and petroleum spills • PHMSA • Operator qualification rules

13. Security • Department of Homeland Security oversight • Regulations for pipelines and storage pending • Meanwhile, various local, state and federal agencies have worked with companies to develop and test plans • DHS consultation with PHMSA

14. Whether commercial, pipeline, worker safety or environmental regulation, there is extensive federal and state oversight Thank you