Regulation of oil and natural gas pipelines: a legal primer for the layman

Pipeline & Gas Journal, March, 2008 by Catherine Little

Oil and natural gas pipelines traverse the United States through a network of underground pipelines that transport product throughout the lower 48 states and Alaska.

Despite so many miles of pipeline carrying so much product, U.S. Department of Transportation (DOT) reports that pipelines are the safest mode of transportation for these products, safer than movement by rail, barge or truck. In large part, that safety is due to the very laws that govern pipelines. So, just how are these pipelines regulated?

Federal Statutory And Regulatory Framework

DOT is the primary regulator of the operation of both oil and natural gas pipelines pursuant to two statutes: the Hazardous Liquid Pipeline Safety Act of 1979 and the Natural Gas Pipeline Safety Act of 1978 (both codified at 49 U.S.C. Chapter 601). Within DOT, the Pipeline and Hazardous Materials Safety Administration (PHMSA), through the Office of Pipeline Safety (OPS), is responsible for establishing and enforcing proper design, construction, operation, maintenance, testing and inspection standards for both oil and natural gas pipelines. These regulations are published in the Code of Federal Regulations at 49 C.ER. Parts 190-199.

In general, the operating regulations for hazardous liquid pipelines, which transport oil, petroleum products, anhydrous ammonia and liquid carbon dioxide, are set forth at 49 C.ER. Part 195. Natural gas pipeline operating regulations, which cover flammable, toxic or corrosive gas, and liquefied natural gas (LNG), are at 49 C.ER. Parts 192 and 193.

For hazardous liquid pipelines, the safety regulations for operating pipelines are divided into several broad categories: accident reporting, design requirements, construction, pressure testing, operation and maintenance (including inspection, emergency preparedness and damage prevention), integrity management, operator qualification and corrosion control.

For natural gas, the categories differ slightly: pipe materials and design, welding, general construction requirements, customer meter, service regulators and service lines, corrosion control requirements, test requirements, uprating, operations, maintenance, operator qualification and integrity management.

In contrast to specific command-and-control regulations governing industries in other sectors (such as those regulated by the U.S. Environmental Protection Agency (EPA)), PHMSA's regulations are performance-based. The regulations set minimum standards that operators are required to meet, but allow operators the flexibility to satisfy the regulations in a manner that suits both the dynamic nature of pipeline systems as well as the unique attributes of a particular pipeline system (e.g., type(s) of product moved, diameter of pipe, operating pressures, terrain, throughput, etc.).

One recent example of PHMSA's performance-based regulations is its Integrity Management Program or "IMP" IMP is an inspection-and-repair program designed to provide heightened attention to pipelines that pass through "high consequence areas" (areas of dense population, environmentally sensitive features, and the like) that could be affected in the event of a leak or failure.

The regulations set the minimum standards for inspection, evaluation and repair timeframes, but essentially require each operator to develop their own IMP that takes into account the various risks and features of their pipelines, and to conduct a comprehensive analysis of the integrity of a pipeline.

Many of PHMSA's regulations incorporate by reference and/or rely on technical or "national consensus" standards that are developed on a national level by a committee of engineers and technical experts. These standards set nationally accepted practices for a range of pipeline safety issues, such as tank operation and construction, damage prevention and corrosion protection. The standards are published by a number of trade organizations, including the American Petroleum Institute (API), the American Society of Mechanical Engineers (ASME) and the National Association of Corrosion Engineers (NACE).

Coordination With States

The federal government has primary responsibility for the pipeline safety regulations for both interstate (pipelines that cross state boundaries) and intrastate pipelines (pipelines that are contained within the borders of a state), and has exclusive authority over interstate lines. Although OPS can designate a state to act as its agent in the inspection of interstate lines, OPS remains solely responsible for enforcement. That said, most states (primarily through their fire marshals) work with OPS in the oversight of the pipelines that run through their state in what OPS commonly refers to as the "federal/state partnership."

The federal statutes specifically allow states to assume responsibility for enforcing the regulations of intrastate pipelines through an annual certification. To do so, states are required to adopt the federal regulations. States may have additional and more stringent requirements in place as well, as long as they are not inconsistent with the federal minimum standards.