September 2012, Vol. 239 No. 9

Features

Pipeline Records Verification Compliance Questions For Operators

More than 2.5 million miles of pipelines, including 300,000 miles of gas transmission lines, criss-cross the U.S., carrying natural gas and a host of hazardous liquids that fuel the nation’s economy.

Most pipelines are located underground, unseen by operators, regulators and the public, making accurate records about a pipeline’s physical characteristics and operating conditions essential to ensuring safe pipeline operations over its decades-long life cycle.

Safety implications of not having accurate records emerged as a key concern in the aftermath of the September 2010 San Bruno, CA, pipeline rupture and explosion when it became apparent that some of the operator’s information about the physical attributes of the ruptured high-pressure gas transmission line were incorrect.

Since the San Bruno incident, the accuracy of records, particularly those used to establish a gas pipeline’s maximum allowable operating pressure (MAOP), has received unprecedented attention by operators, legislators and regulators who all, understandably, seek to ensure the public that the nation’s vast unseen pipeline network is safe. The National Transportation Safety Board (NTSB) released safety recommendations; Congress has passed legislation; and the Pipeline and Hazardous Materials Safety Administration (PHMSA) has issued guidance and proposed new reporting requirements.

Two recent actions by PHMSA respond to the NTSB’s recommendations and Congress’s directives. First, PHMSA issued an Advisory Bulletin (Advisory) providing guidance to operators of interstate and intrastate gas transmission lines regarding how to verify records used to establish MAOP. PHMSA also issued a Notice and Request for Comments (Notice) on proposed revisions to its annual report form for gas transmission and gathering lines to, among other things, require that operators quantify the amount of transmission pipe mileage for which they have records to verify MAOP. This article identifies some of the compliance questions posed by the Advisory and Notice for operators of both gas transmission and hazardous liquid lines.

NTSB Recommendations
Early in the investigation of the San Bruno incident, the NTSB revealed that the operator’s records for the ruptured pipe incorrectly described its physical attributes. Records indicated this section of the line was seamless, when, in fact, the line had a longitudinal welded seam and was constructed of multiple, short pieces of pipe welded together. Ultimately, the NTSB found that the rupture occurred at a faulty weld on the longitudinal seam. The NTSB also found that if the operator had performed a hydrostatic pressure test on the line at some point during its 56-year life span, the defective weld likely would have been detected.

Like more than one-half of the nation’s gas pipeline infrastructure, the San Bruno line was constructed before 1970 when federal pipeline safety regulations, including records retention and pressure testing requirements, were adopted. Before 1970, pipelines often were constructed and tested pursuant to then-existing industry consensus standards and, where applicable, state requirements.

The 1970 federal regulations exempted certain lines already in existence from some safety requirements, including the requirement that MAOP be established using a post-construction hydrostatic pressure test. Under the resulting “grandfather clause” exemption, operators of certain pre-1970 pipe are permitted to establish MAOP based on highest actual operating pressure to which the line was subjected during the five years preceding July 1, 1970.

The NTSB’s investigation raised uneasy questions about the accuracy of records for other pre-1970 pipe and whether MAOP and operating conditions for such pipe are safe. To address this concern, the NTSB’s report on San Bruno recommended that PHMSA remove the grandfather clause from its regulations and require that all gas transmission lines constructed before 1970 be subjected to a hydrostatic pressure test that incorporates a spike test. The NTSB also recommended that operators be permitted to consider the risk of pipeline manufacturing and construction defects as stable only if the pipeline were subject to a post-construction hydrostatic test of at least 1.25 times MAOP. While PHMSA is not required to implement the NTSB’s safety recommendations, PHMSA must respond to them.

2011 Amendments
Congress also addressed concerns about inaccurate pipeline records and how these may affect pipeline operations and the determination of MAOP. Section 23 of the Pipeline Safety, Regulatory Certainty and Job Creation Act (“2011 Act”), requires, among other things, that PHMSA direct owners or operators of intrastate and interstate gas transmission lines to verify (pursuant to elements determined by PHMSA) that records for certain gas transmission pipe confirm the established MAOP and accurately reflect the physical and operational characteristics of the pipeline.

Gas pipeline operators must perform the required records verification for all transmission pipe in Class 3 and Class 4 locations and in what are determined to be high consequence areas (HCA) in Class 1 and Class 2 locations under the pipeline’s integrity management program. Unlike the NTSB’s safety recommendations which focused on pre-1970 pipe regardless of proximity to populated areas, Section 23’s records verification provision applies to all transmission lines located near populated areas.

Under section 23 of the 2011 Act, if records for an affected pipeline segment are insufficient to confirm the established MAOP, the pipeline operator must report to PHMSA and provide documentation on the segment. For these lines, PHMSA must (1) require that the owner or operator reconfirm MAOP as expeditiously and economically feasible; and (2) determine appropriate interim actions for the pipeline owner or operator to take until MAOP is confirmed. In addition, the 2011 Act requires that PHMSA issue regulations for conducting material strength tests of previously untested gas transmission lines located in HCAs and operating above 30% SMYS.

Congress established aggressive timeframes for satisfying these requirements. PHMSA must require that pipelines conduct records verification by July 3, 2012 and pipelines must submit documentation on lines with insufficient information no later than July 3, 2013. PHMSA must issue regulations on material strength testing by July 3, 2013.

PHMSA’s Response
PHMSA’s response to the NTSB’s safety recommendations and 2011 Act has been twofold. On May 7, 2012, PHMSA issued an Advisory Bulletin requiring that operators of interstate and intrastate gas pipelines verify, as directed by section 23 of the 2011 Act, that their records confirm MAOP of their transmission lines located in Class 3 and 4 locations and Class 1 and 2 HCAs.

In particular, PHMSA stated that operators must ensure that such records are traceable, verifiable and complete. The Advisory provides guidance on how to determine if records satisfy this standard. The Advisory further recommends that operators consider applying the guidance to records for all pipeline system mileage, regardless of age and location, in order to determine whether such records are traceable, verifiable and complete. The Advisory also recommends that operators of hazardous liquid pipelines perform similar records reviews to confirm maximum operating pressure (MOP) of their lines.

The Advisory states that gas pipeline operators should provide information about the amount of transmission pipeline mileage for which the operator does and does not have verifiable records in the annual reporting cycle for 2013. Pipelines will be required to provide this information in their 2013 Annual Reports for Gas Transmission and Gathering Pipelines, which reflects data gathered during calendar year 2012. On lines for which an operator does not have verifiable records, PHMSA has indicated that it will provide direction at a later time for bringing such lines into compliance.

In addition to the Advisory, PHMSA issued a Notice seeking comment on proposed revisions to the annual report form for gas transmission and gathering lines. If the revisions are adopted as proposed, operators would be required to report the amount of pipeline mileage across their systems for which they do and do not have traceable, verifiable and complete records confirming MAOP, regardless of the location of the pipe.

Gas transmission line operators also would be required to report miles of pipe that have not been subject to a post-construction hydrostatic pressure to at least 125% of MAOP. In requiring that operators report the status of records for all pipe, regardless of whether it is located in a Class 3 or Class 4 location or a Class 1 or Class 2 HCA, the Notice reflects an approach broader than the 2011 Act and the Advisory.

Data that operators would be required to report includes (1) the method used to determine the MAOP of all gas transmission lines, broken down by class location and whether in an HCA; (2) the number of transmission pipelines miles for which the operator has verifiable MAOP records; and (3) total mileage of transmission lines that have not had a post-construction hydrostatic pressure test to at least 125% of MAOP.PHMSA intends to use the annual report form as the vehicle for collecting information from operators regarding pipe for which MAOP on gas transmission lines cannot be verified, as required by the 2011 Act.

Compliance Questions
The Notice and the Advisory raise several questions regarding the deadline and scope of PHMSA’s compliance expectations for transmission pipeline operators. First, the traceable, verifiable and complete “standard” for pipeline records is not required by the 2011 Act or PHMSA regulations. While existing law is reasonably interpreted to require that operators make an effort to have accurate records, the traceable, verifiable and complete language suggests that the standard for records has changed dramatically.

The Advisory provides guidance on how operators should interpret each of these words, but it leaves many questions unanswered. Thus, an awkward situation has arisen in which operators may expend significant resources to verify records, on the basis of a new and uncertain records quality standard that is not set forth in any law or regulation.

Next, the Advisory’s suggestion that hazardous liquid pipeline operators also should apply the traceable, verifiable and complete standard to verify MOP of their transmission pipeline is not required in the 2011 Act. In this regard, the Advisory provides little guidance on how hazardous liquid pipeline operators should proceed.

In addition, the Notice and Advisory raise other compliance questions that gas transmission pipeline operators undoubtedly will raise in comments on the proposed changes to the annual report form for gas transmission operators. A few of those issues are discussed below.

Acceleration of the Statutory Deadline. PHMSA’s Notice and Advisory would accelerate the 2011 Act’s reporting deadline. PHMSA’s regulations require that operators submit their annual reports on March 15 of each year, providing system information as of Dec. 31 for the previous year. While the statute requires that PHMSA mandate that pipelines “conduct” their records verification by July 3, 2012, the 2011 Act gives operators until July 1, 2013, to submit information on pipe lacking verified records to PHMSA, creating uncertainty whether operators are expected to complete or merely begin their records verification by July 2012.

The Notice’s proposal to require that operators specify in their 2013 annual reports the amount of transmission pipe for which the operator has records arguably has the effect of accelerating the statute’s reporting timeframe by six months and highlights the tension in the statute regarding compliance deadlines for completion of operators’ records reviews.

Expansion of the 2011 Act’s Scope. The Notice and the Advisory contemplate a records verification requirement that is broader than that required in the 2011 Act. The proposed report form would require that operators provide information regarding MAOP records with respect to all gas transmission lines. This expectation is also reflected in the Advisory’s recommendation that operators review records for all gas transmission pipeline mileage to determine if they are traceable, verifiable and complete.

The proposed scope of the records verification requirement exceeds that contemplated in section 23 of the 2011 Act, which limited the records verification requirement to pipeline located in Class 3 and Class 4 locations and Class 1 and Class 2 HCAs. Combined with the Notice’s proposed accelerated reporting timeframe, operators would be required to report on more mileage of pipe and within a shorter period of time. This would particularly affect pipeline operators with relatively little transmission pipe located in Class 3 or Class 4 locations or in Class 1 or Class 2 HCAs.

Exclusive Focus on Hydrostatic Pressure Tests to 125% of MAOP. The Notice focuses on whether transmission lines have been hydrostatically tested to 125% of MAOP without acknowledging other permissible test mediums and pressure test %MAOP levels. In an apparent attempt to respond to the NTSB’s safety recommendation, the Notice would require that operators report the amount of transmission pipe mileage that has been hydrostatically tested to 125% of MAOP since construction.

As proposed, PHMSA would require that operators provide data by class location and by whether the pipe is located within an HCA. In focusing solely on whether lines have been hydrostatically tested to 125% of MAOP, however, the Notice does not seek data on other acceptable pressure test mediums that are allowed under Subpart J of PHMSA’s regulations, such as air, inert gas and natural gas. In addition, the Notice does not seek data on pipeline not required to be pressure tested to 125% of MAOP, such as pipe located in Class 1 areas. Consequently, the data collected under the revised form would not reflect information regarding other valid pressure tests.

These are a few of the compliance questions that PHMSA will likely face as it evaluates comments on the Notice and applies its Advisory Bulletin guidance.

References

1. Pipeline Safety: Verification of Records, Advisory Bulletin, 77 Fed. Reg. 26,822 (May 7, 2012).
2. Pipeline Safety: Information Collection Activities, Revision to Gas Transmission and Gathering Pipeline Systems Annual Report, Gas Transmission and Gathering Pipeline Systems Incident Report and Hazardous Liquid Pipeline Systems Accident Report, Notice and Request for Comments, 77 Fed. Reg. 22,387 (Apr. 13, 2012).
3. National Transportation Safety Board, “PG&E Natural Gas Transmission Pipeline Rupture and Fire, San Bruno, California, September 9, 2010,” at 129 (adopted Aug. 20, 2011).
4. H.R. 2845, Public Law 112-90, 125 Stat. 1904.
5. This was the second Advisory PHMSA has issued on verifying records used to establish MAOP. In a January 2011 Advisory, PHMSA advised that, for pipelines whose MAOP is based on a review of design, construction, inspection, testing and other related data, operators must ensure that such records are traceable, verifiable and complete. If an operator could not perform such verification, it could not use this method to establish MAOP. The advisory bulletin also required that operators examine pipeline infrastructure records to ensure that they accurately reflect the pipeline’s physical and operational characteristics and that they are traceable, verifiable and complete. Pipeline Safety: Advisory Bulletin on Establishing MAOP or Maximum Operating Pressure Using Record Evidence and Integrity Management Risk Identification, Assessment, Prevention and Mitigation, 76 Fed. Ret. 1504 (Jan. 10, 2011). An Advisory is not the product of a notice and comment process under the Administrative Procedure Act and therefore, does not have the same force and effect of law as a regulation.
6. See 49 C.F.R. § 192.503 (2011)
7. See 49 C.F.R. § 192.619 (2011) (specifying that pipeline located in Class 1 locations may be pressure tested to 110% of MAOP).

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