Responding to the pleas of interstate natural gas pipelines, FERC on Wednesday issued a final rule that significantly narrowed the scope of its proposed regulation governing the reporting of damages to pipe systems.

The Federal Energy Regulatory Commission agreed to revise its proposed rulemaking, which was issued in June, to exclude the reporting of routine pipeline damage, such as accidental backhoe damage, compressor engine faults, maintenance repairs or corrosion damage. Instead, regulated companies will be required to report damage to pipeline or storage facilities that results from a “natural disaster or terrorist activity if such damage reduces pipeline throughput or storage deliverability,” the final rule said [RM06-18].

FERC drafted the new rule in response to the infrastructure devastation caused by Hurricanes Katrina and Rita in Louisiana and the Gulf of Mexico last August. It hopes the stricter reporting requirements will help it to assess more quickly facility damage caused by future hurricane events or potential terrorist attacks. “The rule fills a regulatory gap identified by the Commission last year after Hurricanes Katrina and Rita. The Commission lacked vital information on the physical condition of facilities that affected the operation of the pipeline grid. This rule will enhance our ability to mitigate critical gas service issues more quickly,” said Chairman Joseph Kelliher.

The rule also recognizes that there may be situations — other than natural disasters and terrorist attacks — in which damage to pipeline and storage facilities creates the potential for destabilization of the natural gas infrastructure. As a result, FERC included in the final rule “a provision…to encourage pipeline companies to report any other damage which the pipeline companies, in their judgment, think creates the potential for serious delivery problems on their own system or the pipeline grid.”

FERC rejected a pipeline proposal to “limit reporting…to damage to facilities only used for firm service or only in instances where throughput or capacity is reduced by more than a certain amount or the pipeline expects the facilities to be compromised for more than a few days.” Following a natural disaster or terrorist event, “the Commission needs information on the status of all affected facilities, including facilities experiencing minimal damage, to facilitate the identification of possible paths for rerouting gas around more seriously damage facilities,” the final rule said.

“We…agree with Paiute [Pipeline Co.’s] position that existing reporting requirements applicable to LNG [liquefied natural gas] storage operators are adequate, and that it is therefore appropriate to exclude damage to such facilities from the new reporting requirements,” it noted. In approving LNG projects under Sections 3 and 7 of the Natural Gas Act (NGA), FERC already requires LNG storage operators to report to agency staff within 48 hours any significant nonscheduled event.

“In the event an abnormality is of significant magnitude to threaten public or employee safety, cause significant property damage or interrupt service, notification [by LNG storage operators] is required to be made immediately, provided making such notification shall not unduly interfere with any necessary or appropriate emergency repair, alarm or other emergency procedure,” the final rule said.

Paiute’s comments revealed a “significant gap” in FERC’s reporting requirements with respect to border-crossing facilities that import or export gas between the United States and Canada or Mexico, it said. Noting that such facilities are of “national security interest,” the Commission revised its regulations to require that non-LNG, border-crossing facilities are subject to the same reporting requirements.

FERC’s existing regulations are not as strict as those in the final rule, requiring a natural gas company to report only “serious service interruption,” but not damage on a jurisdictional gas pipeline or storage facility. As a result, Commission staff had to scramble last fall to gather information through phone calls and other means to assess the infrastructure damage in the wake of the twin hurricanes.

The new rule would require companies to quickly report damage caused by hurricane or other natural disaster (earthquake) or terrorist activity, along with when pipeline throughput or storage deliverability will be restored, by e-mail or FAX to FERC. It gives companies 20 days (not the initially proposed 30 days) to furnish the Commission with a copy of any incident report that is required to be filed with the Department of Transportation. Companies must send copies of damage reports to state regulators as well.

The final rule also requires the affected company to make a follow-up report stating when pipeline throughput or storage deliverability has been restored.

In reporting damage or interruptions, pipelines are required to cite:

The new regulations will take effect not less than 30 days after publication in the Federal Register.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.