December 2017, Vol. 244, No. 12
Features
Common Sense Regulations for the Common Good
Love him, hate him or be indifferent, President Trump is good for the oil and gas industry. By far and away, he is vastly different from any in recent history as most notably demonstrated by his use of social media. But what many may not realize is that he launched an energy revolution while so many in the media were obsessing on his tweets.
At the “Unleashing American Energy Event” held in late June, Trump said he was ushering in a new energy policy that marked an end to decades (going back at least to the Nixon administration) of fretting about an alleged “energy crisis.” Not satisfied with being “energy independent,” the president boldly claimed the U.S. would be “energy dominant” and that his goal was to “usher in a new American energy policy that unlocks millions of jobs and trillions of dollars in wealth.”
With the developments in drilling technology, most notably hydro-fracturing (fracking), vast domestic supplies of oil and natural gas have become available for production. And while it’s true that production of fossil fuels took off during the Obama administration, this was despite efforts to thwart production. mostly because the gains in production were on private lands.
The difference between this and the previous administration is significant. Trump’s predecessor called oil the “energy of the past,” canceled the Keystone XL pipeline, put vast tracts of land and offshore areas off-limits to oil and gas development, denied permits for LNG export terminals and endlessly pushed for huge tax hikes on energy companies. In fact, the only energy he supported was the unreliable and heavily subsidized wind and solar energy alternatives.
In Trump’s first week in office, he approved the Keystone XL project and accelerated the opening of the Dakota Access Pipeline. This was followed by opening drilling in the Arctic, creating new offshore leasing programs, building more energy pipelines – including one to Mexico – and increasing the sale of natural gas to both Asia and Eastern Europe, with the latter region able to buy energy from more trustworthy partners. But perhaps equally important, he is committed to ending intrusive regulations that kill jobs and raise the price of energy quickly and substantially.
Almost immediately following Trump’s remarks in Washington, the Plastics Pipe Institute, Inc. (PPI), reached out to him to express our concerns relating to federal regulations affecting the use of plastic pipe in the energy sector.
The PPI is the leading North American trade association representing more than 150 manufacturing companies and affiliated associates involved in the production and use of plastic pipe in our nation’s infrastructure. Our members produce plastic pipe, composite pipe, fittings and components used in America’s natural gas distribution network, and for a wide range of oil and gas gathering applications. Today, polyethylene (PE) and polyamide (PA) pipe represent more than 95% of all newly installed gas distribution piping, while high-density polyethylene (HDPE) and advanced spoolable composite piping represent a large portion of the oil and gas gathering market in North America.
PPI supports a policy that authorizes the Federal Energy Regulatory Commission (FERC) as the lead entity to establish the scope and schedule of pipeline permit application reviews and requires FERC to approve or deny a pipeline permit no later than 12 months after receiving an application. Moreover, concurrent reviews should be required so that other federal and state entities can identify issues of concern early during the review process. Expediting the permit process for critical pipeline projects is sorely needed, and PPI strongly supports such provisions in an infrastructure package or a new comprehensive energy bill in the 115th Congress.
With the opening of federally owned lands to exploration and production of oil and gas, PPI supports policy that allows for energy development and pipeline transportation on federal and tribal lands, and accelerates permitting and right-of-way (ROW) approvals needed to do so.
The continuing debate over unnecessary “flaring” or “venting” of natural gas underscores the need to expand the capacity of our gathering pipeline systems. Expediting the permit and ROW approvals to allow for expansion of our gas gathering systems will increase the effective use of domestic energy by delivering it safely through pipelines to market and reduce wasteful flaring and venting of natural gas into the atmosphere.
PPI supports the efforts of the Pipeline and Hazardous Materials Safety Administration (PHMSA) in applying common-sense regulations that further the use of plastic piping in gas distribution and oil and gas gathering systems. Incorporating the latest industry standards helps to ensure the best technologies are available for safe and reliable gas systems.
However, while many of the regulations provide necessary safety measures and are fully supported by PPI members, a few prove to be burdensome and unnecessarily restrictive to U.S. manufacturers without providing any level of increased safety. These regulations were enacted with little consideration of published research and contrary to well-developed industry consensus standards and practices.
Related to this are two regulations that we view as particularly onerous:
PHMSA final rule 2014-30336 eliminates the use of rework materials in regulated PE gas pipe production. This rulemaking has resulted in a significant cost burden to the polyethylene gas piping industry. Based on current use, this regulation could cost U.S. local distribution companies (LDCs) and PE pipe manufacturers more than $55 million over 10 years. But perhaps the most telling aspect of this rule is that it was based upon regulator “opinion,” not science, that prohibiting the use of rework material is the only way to ensure the materials used by operators are not contaminated during the manufacturing process. The use of rework materials has not been identified as the cause of any field failures.
With the advent of fracking, the use of plastic pipe has played a large role in making the U.S. energy-independent and, as Trump envisions, eventually dominant. Unfortunately, advancements in polymer technology have gone unnoticed by regulatory institutions. To wit, PHMSA is proposing the extension of existing regulatory requirements for Type B gathering lines to Type A, Area 2 gathering lines in Class 1 locations, if the nominal diameter of the line is 8 inches or greater for non-metallic materials. This proposed extension of the regulation is arbitrary, conflicts with other portions of 49 CFR, Part 192, and creates burdensome requirements for gas gathering operators.
This rule would effectively limit the use of PE of over 8 inches in diameter to gas gathering applications with a maximum operating pressure of less than 125 psig or require the use of larger diameter pipe to provide the same gas flow at the lower pressures. Many (50% of the total HDPE oil and gas gathering market) large-dimension PE gas gathering systems now in operation work successfully at pressures above 125 psig. PPI research estimates the design pressure limitation annual compliance cost to the industry to be $140 million. Furthermore, with the restriction of not using rework material, another $37 million will be added to the cost.
Overall, over 1,000 miles of 8-inch and larger PE pipe is installed for gas gathering applications annually. We estimate the total annual compliance costs for the industry to be over $177 million. This is well above the $100 million threshold that requires further regulatory review by the Office of Management and Budget (OMB).
In his concluding remarks, the president stated, “The golden era of American energy is now underway,” and “when it comes to the future of America’s energy needs, we will find it, we will dream it, and we will build it.” With reasonable, well-thought-out and scientifically based regulations, we believe it will happen.
Author: Tony Radoszewski, CAE, is president of the Plastics Pipe Institute, Inc., the North American trade association representing all segments of the plastic pipe industry. He is a veteran of the plastics industry, with over 35 years of experience including leadership positions in sales, marketing and business development at Phillips 66 Company/Phillips Driscopipe. Radoszewski earned a bachelor’s degree in chemistry from St. Mary’s University in San Antonio, TX.
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