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Regulation of Rural Pipelines is “Gathering” Steam in Texas

V&E Shale Update, July 26, 2019

The Railroad Commission of Texas (the “Commission”) recently published draft rules foreshadowing regulation of rural crude oil and gas gathering pipelines that have historically been largely unregulated. The draft rules, which are currently posted only for informal comment, are garnering significant industry attention, with trade groups questioning whether potential compliance costs accord with identified safety risks.

Context

Most rural gathering pipelines are exempt from the safety standards applicable to transmission pipelines due to the perception that their remote location and lower throughput lessens safety risks. That began to change in Texas with the Legislature’s 2013 passage of House Bill 2982, which authorizes the Commission to set safety standards for rural gathering pipelines based on identified safety risks. Thereafter and to that end, the Commission surveyed pipeline operators to determine how Texas’s rural gathering pipelines are being managed and began inspecting rural gathering pipelines in certain circumstances. The draft rules are the Commission’s continuing response to House Bill 2982.

New Safety Requirements

Proponents of additional pipeline safety regulation have claimed in recent years that the longstanding regulatory exemption for rural gathering pipelines is outdated, when the size and operating pressures of some unregulated rural gathering pipelines exceed those of regulated transmission pipelines. The Commission’s federal counterpart, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), has proposed (and is close to finalizing) rules to regulate some of the larger and higher pressure-gathering pipelines. The Commission’s draft rules take a similar approach, specifying that larger, higher pressure rural gas gathering lines (greater than 12.75 inches in diameter with a maximum allowable operating pressure that produces hoop stress of 20% or more of specified minimum yield strength) will, for the most part, be regulated as transmission lines. But the Commission’s draft rules go further, portending that all rural gathering pipelines could—for the first time—become subject to the following five requirements:

  • Control corrosion (cathodic protection); 
  • Establish and maintain a damage prevention program;
  • Establish and maintain a public education program;
  • Install and maintain line markers; and,
  • Conduct leak surveys.

In response to concerns raised regarding the possible conflict in the scope of state and federal pipeline safety rules applicable to rural gathering pipelines, Commission Staff confirmed at its July 24 rulemaking workshop that PHMSA Staff reviewed and blessed the Commission’s draft rules.

Implementation Issues

Of interest is how the Commission intends to apply the draft rules to existing rural gathering pipelines. The Commission clarified at its July 24 rulemaking workshop that operators of these pipelines would likely be required to comply within 1 – 2 years of the rules becoming effective. As written, and just as one example, the draft rules would impose a leak survey requirement compelling operators of existing rural crude oil gathering pipelines to, for the first time, conduct 26 right-of-way inspections each calendar year. Although existing rules give the Commission flexibility on a case-by-case basis to waive applicability of certain safety requirements, cost of compliance is generally not a valid basis for an operator to seek a waiver. Thus, pipeline operators should consider weighing in on the inspection challenges and applicability timeline during the stakeholder process.

Path Forward

Commission Staff will be posting an updated version of the draft rules by close of business on Friday, July 26, and is accepting informal comments until close of business on Wednesday, July 31. Commission Staff expects the Commission to formally propose rules as early as September 2019, at which time it will solicit formal comments. Stay tuned for further updates.

Visit our website to learn more about V&E’s Shale & Hydraulic Fracturing Disputes practice. For more information, please contact Vinson & Elkins lawyers Larry Nettles, George Wilkinson, or Taylor Holcomb.


Key Contacts

+1.713.758.4586
lnettles@velaw.com
+1.713.758.4834
gwilkinson@velaw.com
+1.512.542.8508
tholcomb@velaw.com

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.