Robin Rorick's remarks at press teleconference on PHMSA safety of gas transmission line proposal

As prepared for delivery

Press teleconference on PHMSA safety of gas transmission line proposal
Robin Rorick
July 7, 2016

Opening statement:

Good afternoon, everyone. Thank you for joining the call today.

Operators spend billions of dollars each year to evaluate, inspect, and maintain pipelines. Through API’s standards development process, industry also works collectively to develop standards to, most importantly, prevent pipeline incidents, as well as efficiently mitigate and respond in the event of an incident. Some of API’s most recent documents published provide guidance on assessing and managing the integrity of pipelines, including pipeline cracking, applying appropriate leak detection techniques, and developing and employing safety management systems. In each of these documents, there is an emphasis on continuous operational excellence and safety improvements – which have led the way to a 99.99% safety rate. Yet the industry is constantly working toward achieving an industry-wide goal of zero incidents.

API supports regulations that improve the safety of the industry and we are always willing to work with the National Transportation Safety Board’s (NTSB) as they develop recommendations. However, we believe the Notice of Proposed Rulemaking (NPRM) on natural gas transmission and gathering lines does not appropriately address the intent of the NTSB recommendations or appreciably advance pipeline safety, and is overreaching. 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.

PHMSA’s proposal is contrary to PHMSA’s own statutory directives and existing regulatory framework. Specifically, it is not driven by a risk-informed approach, targeted at eliminating the most significant risks posed to public safety and the environment. For example, current rules prescribe safety requirements for pipeline facilities and the transportation of gas to ensure that sensitive, high consequence locations are protected. PHMSA’s proposed changes will fundamentally undermine the current risk-based philosophy necessary for a successful integrity management program to protect these high consequence areas.

Never has PHMSA made such an expansive proposal to increase regulation. Moreover, we are not aware of any other federal agency that has proposed to double the length of existing regulations or take on so many additional regulatory requirements in a single rulemaking, especially one with only 90 days to comment.

In addition to the expansiveness of the NPRM, the regulatory impact assessment completed with the proposal significantly underestimates the cost that would be required to implement these proposed regulations. The benefits provided are also grossly inaccurate.

To clarify, the proposal itself suggests that implementation costs would be surprisingly low, $597 million, and greatly outweighed by an equally surprising high estimate of benefit, between roughly $3.2 billion and $3.7 billion. By PHMSA’s own accounting though, roughly $3 billion of the benefits are supposed cost savings to industry, not safety or environmental benefits. Recognizing the impact this regulation could have, API sought an external party to further evaluate PHMSA’s work. ICF International evaluated the benefits and cost impacts of the proposed rule and found that when properly accounted for, the total cost of the proposed rule increases by almost two orders of magnitude from $597 million to $33.4 billion to achieve safety and environmental benefits of approximately $437 million.

Finally, as mentioned earlier, API has no issue with regulations that further pipeline safety, but the additional proposals are addressing unsubstantiated concerns and are not supported by established research. Through the 2011 Pipeline Safety Act, Congress asked PHMSA to study and collect data on gathering lines to determine and propose necessary regulations. It is API’s opinion that this effort was not substantially completed, thus the justification for the vast number of proposed requirements on gas gathering line operators is unwarranted.

In addition to the lack of sufficiently completing the Congressional mandates, API finds issue with the technical merits of the proposals. For instance, PHMSA abandons Recommended Practice (RP) 80, a comprehensive, multi-stakeholder, expert guidance developed in accordance with ANSI-approved processes – the same body that accredits national labs. RP80 provides a comprehensive approach to managing and defining the complex process of producing, gathering, and transmitting natural gas.

PHMSA replaces RP 80 with over-simplistic and expansive definitions that do not provide any additional safety benefits and extends PHMSA’s jurisdiction over production assets, an area where they have no expertise. Production assets are already effectively regulated by other agencies, like State oil and gas offices.

Additionally, PHMSA proposes repair criteria for certain pipeline conditions, but does not allow an operator to conduct proper the engineering analysis to determine the actual threats to the pipeline, thus potentially forcing the operators to unnecessarily dig up piping.

Both of these proposals point to PHMSA’s apparent lack of considering all consequences that could occur with such drastic changes to the regulations.

For all of these reasons, API firmly believes taken together, that the proposed changes are arbitrary and capricious and contrary to the law.

Pipelines are one of the safest modes of transporting oil and natural gas. The U. S. has approximately 320,000 miles of natural gas pipelines transporting natural gas at a safety rate of 99.999 percent. As domestic production grows, pipelines will be the vital link to connect our abundant natural gas resources to manufacturing plants, businesses, and consumers, supporting vital infrastructure, economic growth, and a high quality of life for all Americans.

We encourage PHMSA to conduct the appropriate data collections and studies necessary to issue sound pipeline safety regulations, and then, re-issue proposals that successfully benefit the environment and the public. In this effort, PHMSA should ensure alignment with constitutional, congressional or Administrative Procedure Act standards.

Now I’ll be happy to take your questions.