December 26, 2011
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Pipeline Safety Bill Passed by Both Chambers

On December 13, 2011, the U.S. Congress completed its reauthorization of pipeline safety legislation with Senate passage of the Pipeline Safety and Regulatory Certainty Act of 2011(HR 2845). The legislation took nearly a year-long arduous process in each chamber before reaching the compromise final proposal. 

Background
Recommendations from the National Transportation Safety Board (NTSB) created momentum for the legislation, one of the few energy-related bills to actually make it out of Congress in 2011. While the NTSB recommendations were not adopted in their entirety, they set the tone and pace for the year-long negotiations on this key piece of legislation. The legislation began as several separate initiatives that had to be integrated and modified in each chamber.  

The Senate acted first on pipeline safety passing its version of legislation entitled the Pipeline Transportation Safety Improvement Act of 2011 (S. 275) out of the Senate Commerce Committee on a unanimous vote on July 7, 2011. On October 17, the full Senate passed S. 275 by unanimous consent. 

The House of Representatives’ lengthy process involved both the Transportation and Infrastructure and House Energy and Commerce Committees which share jurisdiction over these issues. The Transportation and Infrastructure Committee passed its bill out of committee entitled the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 on September 8. The Energy and Commerce Committee then passed its bill, the Pipeline Infrastructure and Community Protection Act of 2011 on September 21.

Tone and Content of the Legislation
The compromise bill embodies the priorities of all three relevant committees integrated through intense discussions and negotiation. The final bill, the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (H.R. 2845) was agreed upon and passed the House by unanimous consent on December 12. The next day, the Senate acted quickly to pass HR 2845 by unanimous consent, signifying the significant bi-partisan support for the measure. 

While the legislation included compromises to temper the impact to industry, the law will still result in increased costs to operators of interstate transmission companies and intrastate distribution companies. The legislation requires pipeline operators to verify records of pipe located in Class 3, Class 4 and High Consequence Areas (HCAs) to ensure records accurately reflect the physical and operational characteristics and confirm the maximum allowable operating pressure (MAOP) of the pipe. On lines where records are inadequate to confirm MAOP, the Pipeline and Hazardous Materials Safety Administration (PHMSA) will require the operator to re-confirm the MAOP, which can be a costly and time-consuming process with operational impacts for some of the older lines. The legislation foretells even more costly measures being considered, as it requires PHMSA to conduct a study every other year on the status of cast iron pipe replacement.

Consistent with each of the pre-compromise versions of the bill, the legislation has an emphasis on enforcement. The legislation raises the maximum penalty for violating pipeline safety rules to $200,000 per violation per day up to $2,000,000 for a related series of violations.  

One of the most important safety measures in the bill directly targets the leading cause of pipeline accidents – third-party damage. Pipelines are among the most highly regulated industries in the country. Yet, despite the diligent efforts of prudent operators, accidents still occur, largely because of third-party negligence. Third-party damage is still the highest cause of pipeline incidents in the United States. The one-call systems (sometimes referred to as “call-before-you dig”) are state-controlled entities. Each state has its own rules for applicability of entities covered, and its own varying levels of enforcement. Failure to use the one-call system leads to unnecessary damage to underground facilities that increase the cost to operators and their customers, and represent a significant public safety risk. In an effort to expand the impact of the bill beyond federal jurisdiction, the legislation controls federal purse strings to states with less rigorous safety requirements by removing one-call exemptions for public entities. The legislation prohibits PHMSA grants to states that exempt municipalities, state agencies or their contractors from one-call requirements.  

Other key measures in the final bill require PHMSA to conduct rulemakings on:

  • Installation of excess-flow valves on new and replaced branched, multifamily and small commercial services where economically, technically and operationally feasible,
  • Requiring use of automated or remotely-activated valves on new or replaced transmission pipelines,
  • Requiring testing to confirm the strength of previously untested transmission lines operating over 30% of specified minimum yield stress and located in HCAs,
  • Requiring operators to report incidents within one hour of confirmation that an incident has occurred,
  • Considering requiring expansion of integrity management requirements beyond HCAs.

What’s Next?
The bill is expected to be signed into law by President Obama soon, followed by regulations drafted by PHMSA and agency guidance that will provide more specificity for operators.

If you have any questions about this legislation and how it may affect your company, please contact your Lathrop & Gage attorney or the author listed at the top of this alert.