OIL AND GAS:

Pipeline disasters fail to spur bill bolstering oversight

The Obama administration's bid to strengthen federal pipeline oversight is raising questions from environmental groups as well as industry, suggesting that safety reforms could fail to reach a legislative fast track despite three recent high-profile ruptures along the 2.3 million miles of U.S. oil and gas lines.

The White House proposal unveiled last week would reauthorize the Pipeline and Hazardous Materials Safety Administration (PHMSA) while hiking the maximum fine for companies involved in serious pipeline incidents to $2.5 million and empowering the agency to hire 40 new inspectors. But the rest of the measure largely focuses on new data collection and reviews, remaining silent on several high-priority issues for green advocates and pipeline operators.

Richard Kuprewicz, a veteran pipeline engineer and member of PHMSA's safety advisory panel, said the extra enforcement muscle in the new legislation "isn't going to hurt" -- but it may not go far enough to rein in companies that flout inspection and integrity standards.

"The reality is that PHMSA announces this massive fine, then there's this appeal process" that often results in operators settling with the agency on a much smaller penalty, said Kuprewicz, president of the consulting firm AccuFacts.

"In the overall economics of running a pipeline, is a $2.5 million fine really going to prevent them from doing something stupid?" Kuprewicz added. "Many pipeline operators say, 'We're not even going to go there.' There are others saying ... 'In the risk calculation, this is a small number.'"

PHMSA slapped $2.4 million in penalties last month on Enbridge Energy Partners LP, the operator of two Midwestern pipelines that ruptured during a seven-week period this summer and released an estimated 800,000-plus gallons of oil, in response to a 2007 accident on the same system that killed two workers. The new White House plan would allow the agency to rein in companies deemed frequent safety violators by denying them "special permits" for exemptions from federal rules.

Industry groups, however, are far from convinced that larger penalties are the right response to the Enbridge pipeline breaks in Michigan and Illinois and a Sept. 9 natural gas line rupture that killed seven residents of San Bruno, Calif.

"There has really not been any analysis presented that shows an increase in penalties is justified or needed," American Petroleum Institute (API) pipeline director Peter Lidiak said. Companies view the prospect of high legal bills, increased regulatory scrutiny and shareholder worry as more effective motivations to comply with safety rules, he added.

Association of Oil Pipe Lines President Andy Black echoed that sentiment, challenging the need for the new proposal's extra hiring provisions given that PHMSA has not staffed up to existing maximums. On the three recent oil and gas pipeline breaks, he urged caution: "It's too early to try to legislate on those, and we're not sure you have to legislate on those."

Meanwhile, the same section of the new draft bill that links "special permits" to operators' safety history also contains language that environmentalists fear could limit the public's ability to weigh in on the sometimes controversial exemptions. The proposal allows the Department of Transportation (DOT), which supervises PHMSA, to grant a pipeline waiver after public consultation that "may consist of" a Federal Register notice and a period for open comment.

Attorney Paul Blackburn, whose advocacy group Plains Justice has long pushed for stricter pipeline safety rules, said the use of that optional "may" could allow regulators and private companies to decide on waivers behind closed doors. "There is no other opportunity in federal pipeline law for citizens to be part of the process," he noted.

Even the emergency response plans that companies are required to prepare in case of an incident -- which sparked controversy this summer after BP PLC's version falsely claimed that a Gulf Mexico oil spill would endanger walruses -- are not subject to a public review (Greenwire, June 9).

PHMSA has told homeowners they must file a Freedom of Information Act request to obtain operators' response plans for nearby pipelines, according to Friends of the Earth fuels campaigner Alex Moore.

"This is not an administration that we thought we'd be told to file a FOIA request on," Moore said, decrying what he described as a gap between the White House's promises of transparency and the reality of still-secret pipeline data.

In the case of Enbridge's larger summertime oil pipeline rupture, for which PHMSA has ordered a new repair plan by Sunday, "we still don't know what [the company] had told the government the worst-case scenario was," Moore noted.

MMS redux?

The rash of lapses in pipeline safety, a joint responsibility of federal and state regulators, has prompted green groups to cast a critical eye on PHMSA chief Cynthia Quarterman, who represented Enbridge during a stint in the private sector and led the beleaguered Minerals Management Service (MMS) during the 1990s (Greenwire, Sept. 17).

Yet the biggest potential parallel between PHMSA and MMS appears to predate Quarterman's service: a pattern of looking to pipeline operators for advice.

Rick Kessler, vice president of the advocacy group Pipeline Safety Trust, estimated in July that PHMSA had adopted 85 industry-drafted safety standards as part of its regulations, a practice that drew scrutiny at MMS.

"Clearly, the pipeline industry ... must be tapped to draft standards that are technically correct and can be implemented efficiently," Kessler told House members. "But when a regulatory agency needs to adopt industry-developed standards 85 times, it's kind of a red flag that the agency lacks the resources and expertise to develop these standards on its own."

Kuprewicz, the pipeline expert and outside adviser to PHMSA, acknowledged that the agency "tend[s] to rely on industry for a lot of things."

"That opens them up to criticism, like the MMS, but I don't think they're anywhere near the MMS," he said, adding a warning that even if "the regulation is right," there may still be "operators not following it."

That focus on industry compliance was shared by Environmental Law and Policy Center Executive Director Howard Learner, who dismissed comparisons with MMS and sought to steer the debate back to companies that fail to properly maintain their pipelines.

"There is no question, in light of the Enbridge problems, that PHMSA needs to step up and be more rigorous in its enforcement," Learner said. "That having been said, let's put more focus on safety where it belongs. The government is not running pipes here."

PHMSA did not return requests for comment on the proposed draft legislation.

Industry's missing piece

Enbridge and fellow pipeline operators defend their safety record as subject to multiple layers of internal controls and external government oversight. Among the major gaps they see in the new White House plan is a failure to address third-party excavation damage, which PHMSA records list as the No. 1 cause of significant pipeline incidents last year.

Excavation damage occurs when homeowners, local governments or other parties inadvertently open a tear in a pipeline during construction work. "It doesn't matter who's doing the digging," said API's Lidiak. "If you hit a pipeline, you're going to have problems."

State agencies and the industry have collaborated on a "one call" program that requires two days' advance notice of planned excavations through the phone number 811, but more than three dozen states provide some level of exemptions from that rule. After two accidents killed three Texans in June, pipeline companies began calling for a stronger federal hand on the issue.

"Congress can tell DOT to consider inadequate any state's damage prevention laws that have exemptions from 'one call' requirements," said Black, of the pipelines association. "That's something we hope we see [in a final PHMSA bill]."

Despite the official Sept. 30 expiration of the agency's 2006 authorizing measure, lawmakers can keep PHMSA running through appropriations until a replacement law is passed. That new bill is unlikely to come to a vote this year, thanks to a calendar crunched by the midterm elections, but both House Transportation and Infrastructure Chairman Jim Oberstar (D-Minn.) and California's Democratic senators, Dianne Feinstein and Barbara Boxer, have vowed to lay down legislative markers on pipeline safety in the coming weeks.

"We are going over the legislation" offered by the Obama administration, Feinstein said in a statement last week, and "will retain the best parts" for a new proposal.