PHMSA’s new natural gas rule adds significant costs with limited safety benefits

WASHINGTON, July 7, 2016 – API Midstream Director Robin Rorick criticized PHMSA’s Notice of Proposed Rulemaking (NPRM) on natural gas transmission and gathering lines as grossly underestimating costs of a rule that would do little to advance safety.

“Natural gas pipelines are 99.999 percent safe,” said Rorick. “This is not by chance, but achieved through an industry-wide, comprehensive approach to ensure safe operations. The new NPRM does little to enhance safety and weakens America’s energy renaissance, which has helped consumers save on energy bills and reduce emissions to near 20-year lows.

“Our industry continues to lead on creating new standards to enhance pipeline safety. Operators spend billions each year and countless man hours to evaluate, inspect, and maintain pipelines. We have a better path forward that is safer for the public and the environment. We support regulations that efficiently and, most importantly, effectively further pipeline safety, but these additional proposals are not based on sound calculations.”

PHMSA estimated that it would cost $597 million over 15 years to implement the new rules, but according to a new ICF International study the cost would be $33.4 billion. The costs would fall particularly hard on small gathering companies, whose estimated annual compliance costs nearly equal estimated annual revenues from gathering fees, according to the study. Notably, ICF International found that instead of generating benefits of $3.5 billion over 15 years (midpoint estimate), the proposal would yield only a fraction of those benefits.

“PHMSA’s flawed study grossly underestimates the cost of implementing these regulations, which will provide little improvement in safety outcomes,” said Rorick. “We encourage PHMSA to reassess this proposal, conduct the appropriate data collections and studies that apply sound science, and then, re-issue proposals that successfully benefit the environment and the public.”

The oil and natural gas industry works with expert stakeholders in federal and state agencies, academia and the public to develop standards and recommended practices for safe operations. API currently has over 650 standards and technical publications. Over 200 of them have been incorporated into U.S. regulations, and they are the most widely cited industry standards by international regulators. All of these activities create a robust program while sustaining a commitment to prevent incidents, as well as efficiently mitigating and responding in the rare event of an incident.

API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 650 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 30 million Americans.