Advanced Pipeline Safety Regulation

1. Charlene B. Wright Partner Shook, Hardy & Bacon LLP 600 Travis Street, Suite 3400 Houston, TX 77002-2926 713.546.5651 Darren Hunter Partner Rooney Rippie & Ratnaswamy LLP 350 W. Hubbard Street, Suite 600 Chicago, Illinois 60654 312.447.2818 Advanced Pipeline Safety Regulation DOT Enforcement Trends & Guidance

2. Introduction Instructor Introductions Course Overview What do you hope to learn? Any burning questions?

3. Background & Key Principles

4. Over Two Million Miles of Pipeline in the U.S. • Interstate Gas Transmission and Gathering • Intrastate Gas Transmission, Gathering and Distribution • Interstate Liquids (crude oil, petroleum products and hazardous liquids) • Intrastate liquids, including gathering lines

5. Federal Regulatory Authority • U.S. DOT regulates pipeline safety and sets national safety standards • U.S. DOT administers pipeline safety through the Office of Pipeline Safety (OPS) • OPS operates within the Pipeline and Hazardous Materials Safety Administration (PHMSA) • OPS Offices • Washington, D.C. • Atlanta • Kansas City • Houston • Denver

6. State Regulatory Authority • States can assume regulatory authority over intrastate pipelines and sometimes act as interstate inspection agents • State standards must be at least as stringent as Federal standards but may be more stringent • States generally operate through their State Public Utility Commission (PUC)

7. Other Federal Agencies with Pipeline Safety Oversight • Federal Energy Regulatory Commission (FERC) • Department of Energy (DOE) • Siting, abandonment, etc. • Transportation Security Administration (TSA) • Department of Homeland Security (DHS) • Physical security, cyber security, terrorist threats, etc.

8. National Transportation Safety Board (NTSB) • Independent governmental agency • Charged with determining the probable cause of transportation accidents and promoting transportation safety, and assisting victims of transportation accidents and their families • Recommendations include broader industry and governmental recommendations

9. National Energy Board (NEB) • The NEB is an independent federal agency established in 1959 by the Parliament of Canada to regulate international and interprovincial aspects of the oil, gas and electric utility industries • The purpose of the NEB is to regulate pipelines, energy development and trade in Canada The NEB is accountable to Parliament through the Minister of Natural Resources Canada. Responsibilities: • The construction and operation of pipelines and power lines • The export and import of energy • Frontier oil and gas • Northern pipeline agency • Energy studies and advisory function

10. FEDERAL PIPELINE SAFETY STATUTES & REGULATIONS

11. Federal Pipeline Safety Statutes • Natural Gas Pipeline Safety Act of 1968 • Pipeline Safety Improvement Act of 2002 • Integrity Management Programs for Transmission • Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act) • Integrity Management Programs for Distribution • Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011 • 49 USC §§ 60101 et seq.

12. Other Applicable Federal Statutes Statutory authority: • Natural Gas Act of 1938 • Federal Water Pollution Control Act (Clean Water Act) • Coastal Zone Management Act • National Environmental Policy Act of 1969 • Endangered Species Act • Clean Air Act • National Historic Preservation Act

13. Federal Regulations • Part 190: Pipeline Safety Programs and Rulemaking Procedures • Enforcement mechanisms • NOPVs and Warnings • Compliance Orders and Notices of Amendment • Corrective Action Orders • Safety Orders • Hearings • Civil penalties • The old maximum: $100,000 per violation daily, max of $1,000,000 per violation • The new maximum: $200,000 per violation daily, max of $2,000,000 per violation

14. Federal Regulations (cont.) • Part 191: Transportation of Natural and Other Gas To Pipelines; Reporting • Procedures for reporting by natural gas pipelines • Incident Reports • Safety-Related Condition Reports • Annual Reports

15. Federal Regulations (cont.) • Part 192: Minimum Federal Safety Standards (Natural Gas) • Subpart A: General Provisions Keys: Scope, class locations (1 through 4), company procedures • Subpart B: Materials Keys: Strength of steel and plastic pipes, marking of materials • Subpart C: Pipe Design Keys: Design formula for pipe (i.e., thickness of pipeline wall) • Subpart D: Design of Pipeline Components Keys: Design of fittings, valves, vaults, compressor stations, etc. • Subpart E: Welding of Steel in Pipelines Keys: Welding procedures, inspection and testing • Subpart F: Joining of Materials Other Than by Welding Keys: Design of mechanical fittings to withstand force

16. Federal Regulations (cont.) • Subpart G: General Construction Requirements For Transmission Lines and Mains Keys: Standards, materials, inspection, etc. • Subpart H: Customer Meters, Service Regulators, and Service Lines Keys: Meter installations, service installations, valves, connections to mains, etc. • Subpart I: Requirements for Corrosion Control Keys: External corrosion control (i.e., protective coating, cathodic protection), internal corrosion control, atmospheric corrosion control • Subpart J: Test Requirements Keys: Pressure testing to establish MAOP, mains, service lines, plastic • Subpart K: Uprating Keys: Pressure testing to increase MAOP

17. Federal Regulations (cont.) • Subpart L: Operations Keys: Procedural manual for operations, maintenance and emergencies, surveillance, damage prevention program, emergency plans, investigation of failures, odorization, purging, etc. • Subpart M: Maintenance Keys: Leak surveys, repairs, inspections, abandonment, etc. • Subpart N: Qualification of Pipeline Personnel Keys: OQ, pipeline personnel must be qualified to perform specific tasks, recordkeeping • Subpart O: Gas Transmission Pipeline Integrity Management Keys: Identify high consequence areas, develop and follow program that addressees risks in each pipeline segment, consensus standard ANSI B31.8S, baseline assessments, identify threats, continuing evaluation, address anomalous conditions, reporting, etc. • Subpart P: Gas Distribution Pipeline Integrity Management Keys: Identify risk factors, rank risks, leak management, address risks, reporting, etc.

18. Federal Regulations (cont.) • Part 193 • Liquefied Natural Gas Facilities: Federal Safety Standards • Part 194 • Response Plans for Onshore Oil Pipelines • Part 196 – 197 • Reserved • Part 198 • Regulations for Grants to Aid State Pipeline Safety Programs • Damage prevention programs • Part 199 • Drug and Alcohol Testing • Post accident drug tests within 32 hours of incident • Post accident alcohol tests within 2 hours of incident (but not more than 8 hours)

19. Federal Regulations (cont.) • Part 195: Transportation of Hazardous Liquids by Pipeline • Subpart A: General • Subpart B: Annual, Accident, and Safety Related Condition Reporting • Subpart C: Design Requirements • Subpart D: Construction

20. Federal Regulations (cont.) • Subpart E: Pressure Testing • Subpart F: Operation and Maintenance • Subpart G: Qualification of Pipeline Personnel • Subpart H: Corrosion Control

21. Key Principles • Key pipeline safety principles • HCA • PIRs • Class locations

22. HCA: High Consequence Area HCAs for natural gas transmission pipelines focus solely on populated areas. (Environmental and ecological consequences are usually minimal for releases involving natural gas) Identification of HCAs for hazardous liquid pipelines focus on populated areas, drinking water sources, and unusually sensitive ecological resources Populatedareas include both high population areas (called “urbanized areas” by the US Census Bureau) and other populated areas (areas referred to by the Census Bureau as a “designated place”) Drinking water sources include those supplied by surface water or wells and where a secondary source of water supply is not available. The land area in which spilled hazardous liquid could affect the water supply is also treated as an HCA Unusually sensitive ecological areas include locations where critically imperiled species can be found, areas where multiple examples of federally listed threatened and endangered species are found, and areas where migratory water birds concentrate

23. PIRs for Natural Gas Transmission Pipelines An equation has been developed based on research and experience that estimates the distance from a potential explosion at which death, injury or significant property damage could occur. This distance is known as the “potential impact radius” (or PIR), and is used to depict potential impact circles Operators must calculate the potential impact radius for all points along their pipelines and evaluate corresponding impact circles to identify what population is contained within each circle Potential impact circles that contain 20 or more structures intended for human occupancy; building housing populations of limited mobility; buildings that would be hard to evacuate (e.g., nursing homes, schools); or buildings and outside areas occupied by more than 20 persons on a specified minimum number of days each year, are defined as HCAs

24. Class Locations Class locations are used to establish design factors (safety margins). They are based on population density Class locations are defined in 49 CFR 192 Section 192.5 The class location unit is an onshore area that extends 220 yards on either side of the centerline of any continuous 1-mile length of pipeline The class location is determined by the buildings in the class location unit

25. Class Locations: Class 1 An offshore area Class location unit has 10 or fewer buildings intended for human occupancy Each separate dwelling unit in a multiple dwelling building is counted as a separate building intended for human occupancy. Thus, a four-family apartment would be considered as four buildings intended for human occupancy

26. Class Locations: Class 2 Class location unit has more than 10 but fewer than 46 buildings intended for human occupancy

27. Class Locations: Class 3 Class location unit has 46 or more buildings intended for human occupancy; or Pipeline lies within 100 yards of either a building or place of public assembly that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period

28. Class Locations: Class 4 A class location unit where buildings with four or more stories above ground are prevalent

29. Recent Amendments to Pipeline Safety Act • Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011: Reauthorization of the Natural Gas Pipeline Safety Act • Rulemakings, Reports, Advisory Bulletins, Directives and Studies

30. Civil Penalties (Sec. 2) • Raises the maximum per day violation to 200,000 and the maximum penalty for a related series of violations to 2,000,000 • Strikes “ability to pay” penalty factor • Adds penalty for obstruction of inspections and investigations, and defines obstruction • Provides that penalty caps do not apply in judicial context • Places judicial review of enforcement orders and other final agency actions in Court of Appeals

31. Pipeline Damage Prevention (Sec. 3) • Prohibits one-call exemptions for municipalities and state agencies and their contractors, as a condition of PHMSA grants to states • Requires DOT to conduct a study on impact of excavation damage on pipeline safety and submit report to Congress • Amendment effective in 2 years • Publication of Final Rule is expected in October, 2013

32. Automatic and Remote-Controlled Shut-Off Valves (Sec. 4) • Requires, if appropriate, DOT to issue regulations requiring use of remote or automatic shut off valves, or equivalent technology, on new or replaced gas or hazardous liquid transmission lines where economically, technically and operationally feasible • Requires Comptroller General to perform study on ability of transmission facility operators to respond to releases occurring in high consequences areas (HCAs) and submit Report to Congress • If appropriate, regulations required within 2 years

33. Integrity Management (Secs. 5 and 29) • Requires DOT to evaluate: • whether transmission and hazardous liquid integrity management requirements, or elements of them, should be expanded beyond HCAs • whether such expansion would mitigate the need for class location requirements for gas pipelines • DOT’s study must consider: • (1) enhancing protections for public safety; • (2) reducing risk in HCAs; • (3) costs of applying IM to pipelines outside of HCAs where operators are already performing assessments; • (4) the need to undertake IM assessments and repairs in a achievable and sustain manner without disrupting pipeline service; • (5) options for phasing in IM requirements beyond HCAs including options for redoing risk to an increasing number of people living and working near pipelines; and • (6) whether repair criteria should be expanded beyond HCAs.

34. Integrity Management (Secs. 5 and 29) (Cont.) • Requires gas and liquid pipeline operators to consider seismicity in identifying and evaluating potential threats to their pipelines • Evaluation must be completed and submitted to Congress within 18 months. DOT shall not issue final regulations before 1 year after completing report or 3 years after the date of enactment, unless Secretary determines there is a risk to public safety, property or the environment or there is an imminent hazard • Proposed Rule expected in January, 2014

35. Public Education and Awareness and Response Plans (Sec. 6) • Requires DOT to reflect HCAs on National Pipeline Mapping System (NPMS), except for proprietary or sensitive security information and to update map biennially • Requires DOT to implement new program to promote awareness of NPMS • In consultation with operators, requires DOT to issue guidance to pipelines on providing system- specific pipeline facility information to emergency response agencies of the communities and jurisdictions where facilities are located

36. Public Education and Awareness and Response Plans (Sec. 6) (Cont.) • Requires DOT to maintain a copy of the most recent oil pipeline spill response plans prepares by pipelines and to provide copies (excluding proprietary or security sensitive information, information on response resources and deployment plans, and information on amount and location of worst case discharges) to persons who submit a written request. • Program implemented within 1 year

37. Cast Iron Gas Pipelines (Sec. 7) • Requires DOT to conduct a follow-up biannual survey on whether operators have adopted plans to manage and replace cast iron pipe, and the status of those plans • Requires DOT to submit reports to Congress on the total mileage of cast iron gas pipeline in the US and operators’ progress in implementing plans • PHMSA issued an Advisory Bulletin in March, 2012 • 1st follow-up survey was required by 12/31/12

38. Leak Detection – Liquid Pipelines (Sec. 8) • Requires DOT to submit report to Congress on leak detection systems use by operators of hazardous liquid pipeline facilities and transportation-related flow lines • If DOT determines that it is practicable to establish technically, operationally, and economically feasible standards for the capability of leak detection systems to detect leaks, the DOT must issue regulations requiring hazardous liquid pipeline facilities to use leak detection systems where practicable and such standards • Report due within 1 year • Proposed Rule expected in October, 2013

39. Accident and Incident Notification (Sec. 9) • Requires DOT to issue regulations establishing time limit for notifications to DOT and the National Response Center of pipeline facility accidents and incidents • In revising regulations, DOT shall: • (1) require notification no later than 1 hour after confirmed discovery of accident or incident; • (2) review and revise (as appropriate) procedures for NRC notification to state and local emergency responders; and • (3) require revision of NRC report to include an estimate of release volumes and fatalities and injuries within 48 hours of event, as practicable • Revised regulations required within 18 months

40. Pipeline Infrastructure Data Collection (Sec. 11) • Expands the information transmission operators must submit to NMPS to include any other geospatial or technical data, including design and material specifications, that DOT determines is necessary • Provision does not include earlier proposals that would have eliminated the NPMS data exemption for gathering lines and specifying pipeline burial depth information • Implementation Date/Deadline: None • Proposed Rule expected in Summer, 2013

41. Cost Recovery for Design Reviews(Sec. 13) • Authorizes DOT to recover costs associated with design safety reviews of new or expanded pipeline facilities costing $2.5BN or more, or using new technologies or designs. If DOT exercises authority, DOT must prescribe a fee structure, and assessment methodology based on costs of performing review, and procedures for collecting fees • Requires project proponent to provide design specifications, construction plans and procedures, and related materials at least 120 days before beginning construction, if DOT conducts design review. DOT must provide written comments, feedback, and guidance within 90 days

42. Cost Recovery for Design Reviews (Sec. 13) (Cont.) • States that provision does not give DOT any new permitting authority • Requires that DOT issue guidance on the meaning of “new or novel technologies or design” • Implementation Date/Deadline: Guidance required within1 year • Proposed Rule expected in Summer, 2013

43. Carbon Dioxide Pipelines (Sec. 15) • Requires DOT to prescribe minimum safety standards for the pipeline transportation of carbon dioxide in gaseous state. In establishing such standards, DOT shall consider whether it is appropriate to apply existing liquid regulations to gas-phase CO2 transport • Implementation Date/Deadline: None

44. Clarifications (Sec. 18) • Clarifies that: • (1) the requirement to maintain written inspection and maintenance plans applies to all pipelines and is not limited to intrastate pipelines; and • (2) minimum safety standards apply to any or all owners or operators • Implementation Date/Deadline: None

45. Administration of Enforcement Process (Sec. 20) • Requires DOT to issue regulations that provide for hearings before a presiding official, hearing transcripts, expedited review of corrective action orders, separation of functions for presiding officials, and prohibition on ex parte communications • Requires DOT to define “expedited review” • Specifies that agency actions shall be subject to judicial review under 5 USC 706 • Implementation Date/Deadline: Regulations required within 2 years

46. Gathering Lines (Sec. 21) • Requires DOT to review existing Federal and State regulations for offshore and onshore gas and hazardous liquid gathering lines, provide a report to Congress, and make recommendations on: • 1) the sufficiency of existing federal and state laws and regulations to ensure the safety of gas and hazardous liquid gathering lines; • (2) the economic impacts, technical practicability, and challenges of applying existing federal regulations to gathering lines not currently not subject to federal regulation when compared to the public safety benefits; and • (3) subject to a risk-based assessment, the need to modify or revoke existing exemptions from Federal regulation for gas and hazardous liquid gathering lines • Implementation Date/Deadline: Report required within 2 years

47. Excess Flow Valves (Sec. 22) • If appropriate, DOT shall issue regulations requiring the use of excess flow valves (EFV), or equivalent technology, where economically, technically, and operationally feasible on new or entirely replaced distribution branch services, multifamily facilities, and small commercial facilities • Implementation Date/Deadline: Regulations required within2 years after DOT issues a final report responding to NTSB’s recommendation on EFVs • Proposed Rule expected in October, 2013

48. Maximum Allowable Operating Pressure (MAOP) (Sec. 23) • DOT shall require pipeline owners or operators to conduct a verification of the records of the owner or operator for intra-and interstate gas transmission pipes in Class 3 and 4 locations and Class 1 and 2 HCAs, to: • (1) ensure records accurately reflect pipeline physical and operational characteristics and • (2) confirm established Maximum Allowable Operating Pressure (MAOP) • Verification shall include such elements as DOT considers appropriate • Pipeline owners and operators shall identify and submit to DOT documentation for each pipeline segment in the locations listed above, for which records are insufficient to confirm the established MAOP of the segment

49. Maximum Allowable Operating Pressure (MAOP) (Sec. 23) (Cont.) • Pipeline owners and operators shall report to DOT and appropriate state authorities any exceedance of MAOP that exceeds the buildup allowed for operation of pressure-limiting or control devices, within 5 days of such exceedance • On lines for which records are insufficient to confirm the established MAOP, DOT shall: • (1) require the owner or operator to reconfirm MAOP as expeditiously and economically feasible; and • (2) determine what interim actions are appropriate for the pipeline owner or operator to take until MAOP is confirmed • In determining the interim actions for an owner or operator, DOT shall take into account potential consequences to public safety and the environment, potential impacts on pipeline system reliability and deliverability, and other factors, as appropriate

50. Maximum Allowable Operating Pressure (MAOP) (Sec. 23) (Cont.) • DOT shall issue regulations for conducting tests to confirm the material strength of previously untested gas transmission lines in HCAs and operating above 30% SMYS. In developing the regulations, DOT shall consider pressure testing and other alternative methods, including in-line inspection, determined by DOT to be of equal or greater effectiveness • DOT, in consultation with FERC, shall establish timeframes for the completion of such testing that accounts for potential consequences to public safety and the environment and that minimize costs and service disruptions