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Congressional passage of pipeline safety amendments questionable.

With perhaps 15 actual work days left in the congressional session when Congress returned from its August recess, chances were not good that the House and Senate would complete work on a new pipeline safety bill. The need for a new bill isn't critical; current Pipeline and Hazardous Materials Safety Administration (PHMSA) programs will continue regardless of whether the 2002 pipeline law, which expires on Sept. 30, is renewed. But both the transmission and distribution lines want a new bill this year in order to make some changes in existing programs, specifically enhancing damage prevention at the state level and giving PHMSA authority to make some changes in the interstate pipeline integrity management program.

The Bush administration sent a bill to Capitol Hill, which was competing with two bills, one each from the House Energy & Commerce and Transportation & Infrastructure Committees, the latter of which passed its version in July. All three bills have similar elements, though they are by no means identical. The Senate had not taken up a pipeline bill by the time it recessed in early August. A Senate source says no pipeline safety legislation is stirring on that side of the Hill. "I don't see anything coming up soon," he observed.

The three bills disagree somewhat, but importantly, on INGAA's key objective: getting Congress to lengthen the seven-year time frame for reinspection of a pipeline segment subject to the integrity rule. The Bush administration bill, which INGAA supports, allows the secretary of transportation to initiate a rulemaking proposing changes to the seven-year interval based upon "technical data, risk factors and engineering analyses." The Energy & Commerce bill would require the secretary to wait to receive an upcoming report from the Governmental Accounting Office (GAO), and then report to Congress on what changes are needed. Congress would have to pass legislation endorsing those changes.

Jeryl Mohn, senior vice president at Panhandle Energy, told the E&C committee on behalf of INGAA at hearings in late July that what he referred to as the placeholder provision in that committee's discussion draft--it had not germinated into an actual bill at that point--would not allow the Secretary to initiate any change in the seven-year requirement without further action by Congress--action that would be unlikely to occur again for the next four years.

Thomas J. Barrett, administrator Pipeline and Hazardous Materials Administration, who was also at the hearing, gave the INGAA position strong support. "Reliance on stipulated retesting intervals as established in current law seems a disincentive to the continuous evaluation and readjustment of a dynamic systems approach," he said.

The distribution lines were particularly pleased with language in the draft outlining the required nine elements of an effective state damage prevention program, and providing more federal funding for those programs. Ronald W. Jibson, vice president of operations, Questar Gas Company, who represented American Gas Association and the American Public Gas Association, told the Energy & Commerce Committee, "Data from the last five years demonstrates that states that have stringent enforcement programs experienced a much lower rate of excavation damage to pipeline facilities than states that do not have stringent enforcement powers."

Industry seeks improvements to FERC blanket certificate changes

The Federal Energy Regulatory Commission (FERC) proposed making it easier for interstate pipelines to add some types of shorter segments to their networks. Responding to a joint November 2005 petition from the Interstate Natural Gas Association of America and Natural Gas Supply Association, FERC says it will expand the kind of "add-on" projects which can be built automatically based on a previously-issued blanket certificate and those which can be initiated with prior authorization.

But the commission wants to raise the dollar limits on both categories only slightly. The size of automatic authorization projects would be increased to $9.6 million from the current $8.2 million. Limits on prior notice projects would go to $27.4 million from $22.7 million. Martin Edwards, an INGAA official, says his group thinks the proposal is great although INGAA is apt to push the commission to raise the proposed new ceilings considerably above what FERC proposed.

Otherwise, INGAA and the NGSA, who embarked on one of their few regulatory collaborations with their November petition, got much of what they asked for. FERC is willing to expand blanket certificate authority to include mainline facilities, certain LNG and synthetic gas facilities, and certain storage facilities. In addition, the Commission will clarify that a natural gas company is not necessarily engaged in an unduly discriminatory practice if it charges different customers different rates for the same service based on the date that customers commit to service.

The American Gas Association and American Public Gas Association have expressed reservations about some aspects of FERC's proposal. "We will be looking at how any increased costs for expansions under the blanket certificate are treated and how thresholds should increase over the years," says Daphne Magnuson, director of communications for the AGA. "We're also reviewing FERC's proposal for the treatment of facilities that interconnect with LNG terminals."

FERC itself had some qualms about including mainlines in the expanded blanket authority, mostly because it felt it would encourage interstates to break up large projects with significant rate hike potential. To prevent that, FERC says it intends to continue to closely monitor blanket certificate projects, and in cases when a project sponsor relies on blanket certificate authority for multiple projects, to review blanket activities to verify that individual projects are not piecemeal portions of a larger integrated undertaking. If the Commission determines segmentation has occurred, it may impose sanctions, which can preclude a natural gas company from acting under blanket certificate authority and penalties of up to $1,000,000 per day per violation.

But Kinder Morgan's situation reflects why the FERC changes are needed. The company is knee deep in various expansions to serve ethanol plants which are quickly being built in the Mountain West. It already serves 16 plants, signed contracts recently to serve five more and is watching plans to build another 25 plants requiring up to 206,175 Dth/d of gas. "Under the Commission's current regulations, KMIGT would be required to file as many as 30 separate applications, plus amendments, for a series of relatively minor system expansions, which would not have a significant effect on the environment or on existing customers, because of the environmental and rate protections applicable to blanket certificated facilities," explained Bentley W. Breland Vice President, Certificates and Rates, Kinder Morgan Interstate Gas Transmission LLC, in comments he sent to FERC. "Yet, because all of these facilities would be considered reconfigurations of main line facilities, these facilities cannot currently be constructed under blanket certificate authority, but instead must be individually certificated. In our experience, certification can take up to eight months for projects that do not require an environmental impact statement."
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Title Annotation:Washington watch
Author:Barlas, Stephen
Publication:Underground Construction
Date:Sep 1, 2006
Words:1134
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