FERC on Thursday issued guidance on how jurisdictional natural gas pipelines should account for costs stemming from the implementation of new pipeline integrity management requirements of the Department of Transportation’s Office of Pipeline Safety (OPS).
The integrity management rules require gas and hazardous liquids pipelines to conduct assessments and repairs of their facilities in high-consequence areas to better protect the public and the environment from potential hazards. The OPS estimates the cost of compliance with the integrity management rules for jurisdictional and non-jurisdictional entities will be $4.7 billion over 20 years, according to FERC.
The Federal Energy Regulatory Commission said that costs to prepare a plan to implement the program, identify high-consequence areas, develop and maintain a record-keeping system, and inspect affected pipeline segments should be expensed. It further noted that costs of modifying pipelines to permit in-line inspections, such as installing pig launchers and receivers, should be capitalized consistent with the Commission’s existing rules for plant additions. Similarly, certain costs associated with developing or enhancing computer software or costs incurred to add or replace other items of plant should be capitalized as well.
But FERC said minor items of property that are replaced as part of a remedial action should continue to be expensed. The agency guidance will be effective Jan. 1, 2006, and will be prospective in application [AI05-1]. Amounts capitalized in periods prior to Jan.1, 2006 will be permitted to remain as recorded.
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