Gas Pipeline Regulatory Reform Rule Finalized

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On January 11, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA) finalized its June 2020 proposed rulemaking intended to reduce regulatory burdens and offer greater flexibility to gas pipeline operators, previously discussed in our post here. Pipeline operators may voluntarily comply with the rule starting on the effective date of March 12, 2021, but mandatory compliance is not required until October 1, 2021. Although the rule implements moderate changes to the pipeline safety regulations, given the timing of the final rule’s release, it is at least possible that the new administration could withdraw the rule.

Below is a summary of the most noteworthy changes that will result from the final rule, including a significant increase to the incident reporting property damage threshold, allowances for remote monitoring of rectifier changes, and various changes applicable to distribution pipeline operators.

Incident Reporting Threshold

PHMSA raised the property damage threshold associated with a reportable “incident” in 49 C.F.R. § 191.3 from the existing $50,000 threshold first set in the 1980s to $122,000. This amount is subject to further adjustments for inflation to be calculated according to a newly established formula. Starting in 2022, PHMSA will publish annual updates to this property damage threshold on its website. As a result of this rule change, pipeline operators would no longer have to report smaller incidents that cause property damage below $122,000.

Remote Monitoring of Rectifier Stations

With minor changes, PHMSA finalized its proposal allowing regulated gas pipelines to inspect rectifier stations remotely. Operators who chose to remotely monitor their rectifiers under 49 C.F.R. § 192.465(b), as opposed to more traditional, direct on-site monitoring, would have to physically inspect the rectifiers at least annually, but with intervals not exceeding 15 months. This frequency requirement applies after January 1, 2022 and is a change from the proposed rule, which PHMSA adopted in response to public comments. The proposal originally required physical inspection when a cathodic protection survey is performed under § 192.456(a).

Relief for Distribution Pipelines

PHMSA finalized the proposed rule to allow farm tap operators to conduct pressure regulator inspections under either their distribution integrity management plan (DIMP) or the existing 49 C.F.R. § 192.740 rule. That provision requires inspections and testing at least once every three calendar years. PHMSA explained that this new requirement would provide greater flexibility to farm tap operators, while still protecting the public and the environment.

Significantly, the preamble to the final rule includes extensive discussion regarding when a farm tap starts and ends and the related boundaries of PHMSA jurisdiction, a topic that has historically been the subject of varying interpretations. The issue was raised by public comments on the proposal. In response, PHMSA noted that the rule was not intended to define the jurisdictional boundaries of farm taps and that it would address the issue in its guidance and/or other rulemaking. In the final rule, PHMSA nevertheless (1) made certain changes to avoid ambiguity identified in the proposed language on this issue and (2) withdrew its March 29, 2019 rule “Exercise of Enforcement Discretion Regarding Farm Taps” effective on March 12, 2021.

PHMSA also finalized changes that would relieve distribution operators from the requirement to submit mechanical fittings failure (MFF) reports through DOT Form PHMSA F-7100.1-2. PHMSA will instead require operators to provide this information by submitting other forms. These other forms include (1) the Gas Distribution Annual Report, to which PHMSA added a count of MFFs and (2) the Gas Distribution Incident Report, which PHMSA revised to include information from the MFF report for incidents involving a failure of a mechanical joint.

Lastly, PHMSA finalized an extended interval for gas distribution service lines to perform atmospheric corrosion reassessment. Under the new rule, operators must conduct inspections once every five calendar years instead of once every three years. The five-year inspection interval is available to operators with records of the two most recent three-year atmospheric corrosion inspections. The final rule provides, however, that if an operator identifies atmospheric corrosion during an inspection, the requirement reverts back to once every three years, until no corrosion is identified.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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