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Pennsylvania Warns Pipeline Operators on Reporting

The Pennsylvania Public Utility Commission (PUC) is skeptical of information pipeline operators have submitted to comply with a new state registry, the chairman of the agency told a Pittsburgh audience Friday.

"I am deeply concerned, as we get through the implementation of Act 127 and as this pipeline data is being submitted to us, that there are some gaps in the reporting of that pipeline data to the Public Utility Commission," PUC Chairman Robert Powelson said at K&L Gates 5th Annual Appalachian Basin Oil and Gas Seminar.

Through Act 127, the PUC became the "state agent" for the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) in Pennsylvania (see Shale Daily, Dec. 19, 2011). While PHMSA does not inspect Class 1 gathering lines (those in remote areas), Act 127 requires the PUC to create a registry of all gathering lines in the state, including Class 1 gathering lines. When operators submitted their information in March, though, it didn't match PUC estimates, according to Powelson. "Either we miscalculated, or we had overambitious numbers, or there is a dire need for somebody to step up and start monitoring this Class 1," he said.

That monitoring is coming. "I'm going to put it to you this way: if you're a pipeline operator and you've under-reported your mileage to us, or misclassified it, we are going to be taking enforcement actions against you," he said. "In fact, to anyone -- and I heard this anecdotally -- who made the comment, 'Let them come out and find us': We will. We will have boots on the ground looking at what you've submitting to us in the next 90 days."

The Class 1 exemption is threatening to become contentious in Pennsylvania.

The PUC couldn't investigate a fire at the Lathrop natural gas compressor station in northeastern Pennsylvania earlier this month because the lines leading into the facility were Class 1. Class 1 areas are generally defined as having 10 or fewer buildings intended for human occupancy within 220 yards of either side of a pipeline.

Early versions of Act 127 extended PUC oversight to Class 1 lines, but the final bill replaced those provisions with the registry for the time being while lawmakers studied the issue. In its final report, the Marcellus Shale Advisory Commission recommended that the PUC be given jurisdiction over these Class 1 pipelines.

As the PUC implements Act 127 it is also implementing Act 13, an omnibus law on unconventional gas development. Under Act 13 the PUC is responsible for collecting and distributing revenues of a newly imposed impact fee on development, as well as adjudicating zoning disputes between companies and municipalities. "The Pennsylvania Public Utility Commission, in less than nine months, has become the modern day Texas Railroad Commission," Powelson said. "We went from regulating 8,000 public utilities to, now, the oil and gas industry."

Previously, eight PUC inspectors monitored 46,000 miles of utility distribution pipelines, Powelson said. By one count, Act 127 brings 40 new pipeline companies under PUC oversight. "We are going to basically have to ramp up in the tune of four to five inspectors. It's a three-year certification process...It is a daunting task," he said, noting that the PUC is also hiring land use lawyers to prepare for a rush of cases over municipal planning codes.

But, he added, the difficulty "is not for lack of resources." Act 13 sends $1 million each year to the PUC to help with implementation, and the fees associated with the Act 127 registry also bring revenue to the agency.

With all 37 counties in the Marcellus Shale fairway in Pennsylvania opting to collect an impact fee on unconventional drilling, the PUC is estimating that the invoices due this September will total $215 million.

While not required to distribute that revenue until mid-December, Powelson said the PUC "will probably have checks out the door to counties and municipalities no later than October of this year. That's remarkable."

Should the PUC miss its deadline, though, "I think we've set ourselves up for mission failure," he said.

The PUC on Thursday voted to postpone implementation of Act 13 due to questions surrounding the scope of an injunction issued by the state's Commonwealth Court, but does not expect any delay in the collection of impact fees (see related story).

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