Hunton Andrews Kurth LLP
  September 20, 2006 - Virginia

Continuing Impact of Prudhoe Bay: New Rules for Low Stress Lines & Gathering Lines

The federal Pipeline and Hazardous Material Safety Administration (PHMSA) has proposed new regulations for rural onshore low stress pipelines and rural onshore gathering lines. Although PHMSA has been anticipating further regulation of these types of lines for the past few years, the Agency acknowledges that the proposed rule is a direct response to legislative and media scrutiny of recent incidents that occurred in the Alaska Prudhoe Bay field. The new rule would apply design, construction and inspection requirements — including internal inspection — to rural lines within 1/4 mile of “unusually sensitive areas” (USAs). The proposed rule was published in the September 6, 2006, Federal Register, and it will be open for public comment for 60 days (until November 6, 2006). There are a number of areas where comments are invited in the September 6 proposal, including the timeframes for implementation, and the possibility of revising the MOP definitions in Part 195.406. The comment period will run while four separate congressional committees are reviewing these and other issues in the context of reauthorization of the Pipeline Safety Act. In a Hearing before the House Transportation & Infrastructure Committee on September 13, 2006, Vice Admiral Barrett, USCG (ret.), PHMSA’s new Administrator, responded to questions from the Committee suggesting that the Agency regulate a larger number of low stress lines than proposed in PHMSA’s September 6 rule. In light of continuing scrutiny of the industry post-Prudhoe Bay, operators should follow both the legislative and rulemaking processes closely, as new issues are likely to arise. Lines Subject to the New Rules Gathering lines typically run from production fields to downstream refineries or processing facilities. The gathering lines subject to the rule as proposed by PHMSA on September 6, 2006, are those that are: (1) rural (non-rural gathering lines are already regulated), (2) between 6 5/8” and 8 5/8” nominal diameter, (3) located within 1/4 mile of any USA, and (4) operate at a maximum operating pressure (MOP) that is greater than 20 percent of the sustained maximum yield strength (SMYS) of the pipe (or a pressure of more than 125 psi, if the MOP is not known). Once the rule is finalized, these lines will be referred to as “regulated rural onshore gathering lines” (see proposed new rule at 49 CFR Part 195.11). Low stress lines typically run to and from refineries and terminals. The low stress lines subject to the rule as proposed by PHMSA on September 6, 2006, are those that are: (1) rural (as with gathering lines, non-rural low stress lines are already regulated), (2) greater than 8 5/8” nominal diameter, (3) located within 1/4 mile of any USA, and (4) have a MOP less than or equal to 20% of SMYS (or less than 125 psi). Once the rule is finalized, these lines will be referred to as “regulated rural onshore low stress lines” (see proposed new rule at 49 CFR Part 195.12). PHMSA estimates that approximately 600 miles of gathering lines will become subject to this new rule (out of an estimated 2,722 miles of total gathering lines in the country). Similarly, PHMSA estimates that approximately 684 miles of low stress lines will become subject to the new rule (out of approximately 5,000 miles of total low stress lines in the country). In lieu of including all “rural” areas, or limiting the rule by population density in rural areas, PHMSA proposes to use “Unusually Sensitive Areas” (USAs) as the basis for applicability of the new rules. Specifically, PHSMA proposes to use a “defined buffer” of 1/4 mile of a USA, instead of requiring a potentially burdensome “could affect” analysis for proximity to a USA similar to that used in the system integrity rules. PHMSA believes the proposed buffer represents the distance beyond a defined USA where a rural gathering or low stress line presumably could not affect the area. USAs are already defined at 49 CFR Part 195.2 and Part 195.6. USAs are drinking water sources or other ecological resource areas that are sensitive to environmental damage from a pipeline leak. Operators must extend application of the rule to any newly identified USA that affects their system, within six months to one year of the new designation. In creating these new definitions, PHMSA has modified Part 195.1, concerning “applicability” of the Agency’s regulations. New Requirements The new “regulated rural low stress lines” and “regulated rural gathering lines” will be subject to a number of requirements, intended primarily to reduce the threat of corrosion and third party incidents. The new requirements include the following: Identification of Line Segments Each operator must identify any affected segments subject to the new rule within a defined timeframe (not yet specified, but likely between six months and 12 months of the effective date of the rule). Design and Construction Any steel pipeline constructed, replaced, relocated or changed after a specified time following the effective date of the rule (likely one to two years) must meet Part 195 requirements. Any non-steel line subject to the new regulation must be reported to PHMSA within a specified time (likely one year). Reporting Requirements Lines subject to the new rule must comply with Part 195 reporting requirements within a specified timeframe (likely six months). MOP New lines subject to the rule must establish MOP consistent with Part 195.406 before transportation begins. Existing lines will have a specified timeframe to establish MOP (likely 12 to 18 months). PHMSA does not want operators to reduce MOP unnecessarily on any existing line with a history of satisfactory operation in response to this proposed rule, however, and revision of Part 195.406 may be necessary. Line Markers Line markers for new lines subject to this rule must comply with Part 195.410 before construction begins. Existing lines will likely have 12 to 18 months to comply. Public Education/Damage Prevention Public education and damage prevention programs must exist for newly constructed lines subject to this rule before transportation begins, consistent with Part 195.440 and Part 195.442. Existing lines will likely have 12 to 18 months to comply. Operator Qualification OQ programs must be applied to existing lines subject to this rule, although PHMSA is likely to allow a one- to two-year timeframe for this requirement. Newly constructed lines must have OQ programs at the outset. Corrosion Control Corrosion control programs must be extended to lines newly regulated by this rule, although PHMSA may allow up to three years before that requirement becomes enforceable. New lines must have corrosion control at the outset. Significantly, PHMSA is requiring continuous monitoring of corrosion control on these newly regulated lines, in the hope that operators will identify and remediate problems that could cause corrosion. Integrity Assessment For low stress lines (greater than 8 5/8” nominal diameter), the rule also requires internal line inspection or hydrotests for all affected segments. Inspections must be prioritized, and at least 50 percent of all newly affected segments must have an integrity assessment within three to four years of the effective date of the rule. All segments must be assessed within five to seven years (schedules not yet finalized). Reassessment intervals must also be established. An operator may petition for longer assessment periods based on engineering justifications. Leak Detection Also applicable solely to low stress lines, an operator must establish a leak detection system, consistent with API 1130 or other appropriate method. Field inspection and observation will not suffice as an “appropriate method.” Although not addressed in the new rule, PHMSA notes in the preamble to this regulation that the existing drug and alcohol testing requirements set forth in 49 CFR Part 199 will apply to these newly regulated lines. Schedule for Implementation PHMSA proposes a “phased approach” for implementation of this rule. As noted above, the Agency invites comments on the length of time to allow for implementation of the various new requirements, and this is a significant opportunity for input. Summary As initially published on September 6, 2006, PHMSA’s new proposed rule on low stress lines and gathering lines would only affect about 1,300 miles of additional pipeline segments nationally. Even that proposal would require operators to substantially expand their system integrity programs. Another release from a low stress line occurred in California just after the new rule was proposed, however, and Congress is now likely to press for broader regulation than encompassed by the September 6 proposal. Whether the rule as proposed is further revised or not, however, it is expected to be a continuation of the risk-based approach to pipeline system integrity regulation that began in 2000. Operators should review the September 6, 2006, proposal carefully and provide comments, especially on the scope of low stress lines to be regulated, the implementation schedule issues and potential revision of Part 195.406. Operators should also monitor legislative activity affecting these issues closely, as more changes and new issues are likely to arise. Hunton & Williams’ attorneys have extensive knowledge and experience with the oil and gas pipeline industry. We are following these issues closely and are available to answer your questions and concerns, and to assist you in preparing public comments on PHMSA’s proposed regulations regarding low stress lines and gathering lines.


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