A sweeping pipeline safety bill backed by industry and safety advocates alike passed both houses of Congress last week and will be sent to President Obama, who is expected to sign the bill into law before the end of the year.
“We commend both chambers of Congress for working in a bipartisan manner to complete work [in] this session on this important legislation, which updates and improves policies in several areas of pipeline safety, including integrity management, incident notification, public education and awareness, damage prevention and pipeline safety research and development,” said Don Santa, CEO of the Interstate Natural Gas Association of America (INGAA). “We are confident that President Obama will sign this bill into law.”
American Gas Association (AGA) President David McCurdy concurred. “The passage of this bill by both chambers of Congress brings us one step closer to reaching our ultimate goal, which is getting a bill to the president’s desk for signature this year,” he said.
HR 2845, officially known as the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, empowers the secretary of the Department of Transportation (DOT) to impose a civil penalty on operators who obstruct or prevent safety inspections or investigations. The secretary will also be authorized to require the use of automatic or remote controlled shutoff valves — or their technological equivalent — on new or entirely replaced transmission lines. Safety proponents are critical of the bill because it would grandfather older pipelines from requirements to install the valves.
Also, states seeking federal grant funding for one-call notification and damage prevention programs will no longer be allowed to give exemptions to municipal governments, state agencies or their contractors from one-call notification system requirements.
Other key provisions of HR 2845 include:
The increased penalties and tougher standards come in the wake of several high profile accidents, including explosions in San Bruno, CA, and Allentown, PA (see NGI, Feb. 14; Sept. 13, 2010).
The ramifications of California’s gas transmission pipeline rupture and explosion last year are still largely unknown until federal and state efforts to address stepped up safety measures are fully fleshed out, two gas industry analysts at Standard & Poor’s Ratings Services (S&P) recently told NGI.
“What we don’t know is exactly what the new rules [from Congress or state regulators] are going to be; how much spending and what time frame will be involved,” said David Lundberg, senior director for S&P’s integrated gas group. “That is all still to be worked out.”
Lundberg and San Francisco-based S&P gas industry analyst Anne Selting spent some time deconstructing Pacific Gas and Electric Co. (PG&E) and its continuing response to the San Bruno transmission pipe explosion. Their synopsis following the S&P downgrade of PG&E’s credit ratings is that the San Francisco-based combination utility is in the beginning of a long, costly process to regain its standing in the industry. However, to a broader extent, the entire gas industry also will be impacted.
“Obviously San Bruno, as well as some oil spills, have certainly gained a lot of attention [for the U.S. pipeline industry],” Lundberg said. “We do think there will be some significant capital expenditures that the industry will have to make, particularly for older pipe that is not ‘pig-able,’ and particularly in high [population] consequence areas there will be a lot of spending, a lot of replacing of pipe over time. Generally, pipeline industry safety records are pretty good, but nonetheless when you have such high-profile events, [Congress and regulators in] Washington [DC] is definitely going to respond with various safety proposals.”
Selting said the San Bruno pipeline explosion and the subsequent investigation and report by the National Transportation Safety Board that was highly critical of PG&E and to a lesser extent the California Public Utilities Commission underscored two industrywide issues: aging infrastructure generally, and belated state regulation of intrastate transmission pipelines in which there was no hydrostatic testing required and a lot of grandfathering of old lines with little or no safety testing.
For an industry now focused on making sure everyone understands the rules, until the rules are clearly known, how much will have to be spent is still “a guessing game” at this point, Lundberg said. But he is sure that the efforts to bolster safety throughout the pipeline industry will carry advantages for some of the regulated utilities having to make the increased investment in infrastructure, or rate base.
So is this a potential financial opportunity for some of these pipeline operators?
“Yes, there is,” said Lundberg. “That is entirely true. It does impact some nonregulated pipes as well. For example, a lot of [natural gas] gathering lines are not regulated” by the Federal Energy Regulatory Commission. “As far as the regulated space, this is absolutely right.”
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