Shale Law in the Spotlight: PHMSA Publishes Final Rule on Operator Qualification, Cost Recovery, Accident and Incident Notification, and Other Pipeline Safety Changes

Written by Chloe Marie - Research Fellow

The Pipeline and Hazardous Materials Safety Administration (PHMSA) is a U.S. Department of Transportation agency with the responsibility to develop national policy and standards for improving the safe transportation of energy and other hazardous materials. In addition, PHMSA also provides research funding and education programs designed to reduce pipeline accidents and incidents along with their environmental consequences.

On January 19, 2017, PHMSA issued a final rule to enhance and strengthen existing laws and regulations relating to pipeline safety just a few days before President Donald Trump’s inauguration. The final rule was then officially published in the Federal Register on January 23, 2017, with a scheduled effective date of March 24, 2017. The issuance of the final rule follows the July 10, 2015, publication of proposed regulations on the same topic.  The final rule amends federal pipeline safety regulations by addressing sections 9 and 13 of the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. Among other things, PHMSA reviewed the scope of Operator Qualifications requirements as well as the renewal procedure for expiring special permits and the drug and alcohol testing regulations.

One important requirement addressed by the final rule is the imposition of time restrictions on reporting pipeline accidents and incidents in compliance with section 9 of the 2011 Act. More specifically, PHMSA now requires pipeline operators to report any accidents or incidents either through telephonic or electronic means no later than one hour after the accident or incident discovery. PHMSA explained that “[it] expects that quicker accident and incident reporting will lead to a safety benefit to the public, the environment, and limit property damage.” The final rule also imposes a cost recovery fee structure for design review of new pipeline projects costing up to $2.5 billion as stipulated in section 13 of the 2011 Act. On that point, the PHMSA declared that the recovery of the fee would have a significant impact in protecting the health and public safety.

Furthermore, PHMSA reviewed and extended the Operator Qualification requirements to control center staff and operators of Type A gathering lines in Class 2 locations and Type B onshore gas gathering lines. PHMSA also developed new procedures to follow for renewing special permits issued with expiration dates. Under the final rule, pipeline operators are required to apply for renewal no later than 180 days prior to expiration and must provide new information including, inter alia, the requirements of the original permit and the applicable usage of the new permit.

Other minor changes have been made to provide further regulatory clarity. They include new record keeping requirements for drug and alcohol testing, in-line inspection assessments, extreme weather event inspections, new reporting requirements for onshore gathering and gravity pipelines, and integrity management changes.

Though the final rule has a listed effective date of March 24, 2017, the deployment of these new regulations may be delayed owing to two recent Presidential actions. On January 20, 2017, President Donald Trump released a Memorandum to the attention of the Heads of Executive Departments and Agencies requesting them to delay implementation of any published but not yet effective regulations for a 60-day period. President Trump asks that new reviews be conducted and, if necessary, encourages Executive Departments and Agencies to “propos[e] for notice and comment a rule to delay the effective date for regulations beyond that 60-day period.”

In addition to this, on January 30, 2017, President Trump issued an Executive Order with the purpose of reducing regulation and controlling regulatory costs. In an effort to control direct expenditure of taxpayer dollars, the Executive Order states that “[t]oward that end, it is important that for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”