The ramifications of California’s natural 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) told NGI Monday.

“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 and team lead 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. and its continuing response to the San Bruno transmission pipe explosion.

Their synopsis following the S&P downgrade of PG&E’s credit ratings (“BBB+” to “BBB” and “BBB” to “BBB-“) last Thursday is that the San Francisco-based combination utility is just in the very beginning of a long, costly process to regain its standing in the industry and among the general public, but to a broader extent, the whole 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 San Bruno and the subsequent investigation and report by the National Transportation Safety Board (NTSB) that was highly critical of PG&E and to a lesser extent the California Public Utilities Commission (CPUC) 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 FERC. As far as the regulated space, this is absolutely right.”

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