The PIPES Act of 2020: What Regulated Entities Need to Know
Congress recently passed legislation with a reauthorization of the pipeline safety programs through 2023 as a part of the Consolidated Appropriations Act. The Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (“PIPES Act of 2020”) directs the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) to promulgate regulations addressing a variety of pipeline safety issues. Despite these mandates, the PIPES Act of 2020 overall imposes far fewer new burdens on the pipeline industry than prior legislation. President Trump signed this legislation into law on December 27, 2020. As a result, PHMSA is now tasked to, among other things, adopt some significant requirements for liquefied natural gas (“LNG”) facilities, provide for the monitoring of methane leaks by natural gas pipelines and transmission systems, adopt requirements for gathering line systems to manage safety considerations, and strengthen requirements for gas distribution systems.
The PIPES Act of 2020 calls upon PHMSA to update and modernize its regulations governing LNG pipeline facilities. Within three years of enactment, PHMSA must review the operation and maintenance standards applicable to LNG facilities and update those applicable to large-scale facilities to incorporate “risk-based regulatory” approaches and provide for a “risk-based” regulatory approach that is “equivalent to, or greater than, the level of safety required” as of the date of enactment. Congress requires that the process include a hazard analysis that includes consultations with “employees and representatives of employees,” and that the operator’s employees have access to the records. All standards adopted by PHMSA must be incorporated into written plans by LNG-facility operators and those plans must be submitted to the Secretary for approval. Congress also provided for a “National Center of Excellence” for LNG facilities to enhance the United States’ position as the leader and foremost expert in LNG operations.
Methane Leak Detection and Repair
PHMSA utilizes class locations to differentiate areas and risks along pipelines based on the potential consequences of a hypothetical pipeline failure based on residential density, with Class 1 indicating the lowest population density and Class 4 indicating the highest population density. The PIPES Act of 2020 addresses operators of regulated gas gathering lines in class 2, 3, or 4 locations. These operators, and operators of new and existing gas transmission and distribution lines will be required to “conduct leak detection and repair programs” by regulations that PHMSA must promulgate within a year of the statute’s enactment. These programs must (1) meet minimum performance standards that reflect the capabilities of commercially available advanced technologies, and (2) be able to “identify, locate and categorize all leaks” that are “hazardous to human safety or the environment,” or “have the potential to become explosive or otherwise hazardous to human safety.” The “have the potential”-standard sets the bar quite low and it seems unlikely that many facilities will be able to avoid this requirement on the grounds that no such hazards are present. The advanced leak detection technologies and practices include either continuous monitoring or periodic surveys with handheld equipment, equipment on “mobile platforms,” or other means. Congress stipulated that these monitoring requirements are additive to other monitoring obligations, which may not be relaxed, and further provides that PHMSA may not relax existing timelines for repair or remediation of leaks. The statute does direct PHMSA to “identify any scenarios where operations may use leak detection practices that depend on human senses.” Importantly, the regulations must contain a “schedule for repairing or replacing each leaking pipe, except a pipe so small that it poses no potential hazard.”
The PIPES Act of 2020 also requires that these operators update their inspection and maintenance plans within a year of enactment to incorporate these leak detection requirements in a manner that contributes to public safety, eliminates hazardous leaks, minimizes releases of natural gas, and protects the environment. The plan must also provide for the replacement or remediation of pipelines that are known to leak for reasons such as the type of material from which the pipeline was constructed, or the past operating and maintenance history of the pipeline. Where prior versions of the statute formerly permitted PHMSA to request and review the plans, the PIPES Act of 2020 mandates that they be reviewed within two years of enactment and then every five years thereafter. A deficient plan, or the deficient implementation of a plan may be the basis for “enforcement proceedings.” The Act further directs the Comptroller General to conduct a study to evaluate the effectiveness of procedures used to review these plans and to report to Congress on its evaluation, and to provide recommendations for how to further minimize releases without compromising pipeline safety.
Rulemaking – Gas Gathering Lines
PHMSA revised its regulations on gas gathering pipelines in 2006, and incorporated an industry standard, American Petroleum Institute Recommended Practice 80 (“API RP 80”), to more clearly define which portions of the pipeline network are considered gathering pipelines. This revision also changed how a pipeline operator must determine which of its gathering pipelines are subject to regulation. 81 Fed. Reg. 13289 (March 15, 2006). In 2016, PHMSA issued a Notice of Proposed Rulemaking (“NOPR”) titled “Pipeline Safety: Safety of Gas Transmission and Gathering Pipelines.” 81 Fed. Reg. 20721 (Apr. 8, 2016). The NOPR proposed, among other topics, (1) repealing the exemption for reporting requirements for gas gathering line operators, (2) repealing the use of the API RP 80 for determining regulated onshore gathering lines, (3) adding a revised definition for gathering lines, and (4) extending certain regulatory requirements to specific types of gas gathering lines that have a diameter of at least 8 inches. The comments on the NOPR indicated an industry split on whether the definition of gathering lines should be changed. 81 Fed. Reg. 20721, 20802-04 (Apr. 8, 2016).
PHMSA issued a Final Rule based on the NOPR in 2019 that did not address these proposals for gathering pipelines. 84 Fed. Reg. 52180 (Oct. 1, 2019). The rulemaking process for gas gathering pipelines ground to a halt in 2019. The PIPES Act of 2020 requires PHMSA to issue a final rule on the gathering pipeline issues from the NOPR within 90 days of the enactment of the Act, which would be before the end of March 2021.
“Idled” Pipeline Status
A series of releases involving liquids and natural gas pipelines that had not been properly abandoned, in part because of a mistaken understanding by some in the regulated community that these pipelines could be idled and would be outside the regulatory system, led Congress in 2016 to direct PHMSA to “issue an advisory bulletin . . . regarding procedures . . . required to change the status of a pipeline facility from active to abandoned . . . .” Section 23, PIPES Act of 2016. PHMSA complied with this mandate and issued an advisory bulletin that explicitly informed the regulated community that “PHMSA regulations do not recognize an ‘idle’ status for a hazardous liquid or gas pipeline[s].” 81 Fed. Reg. 54512, 54513 (Aug. 16, 2016). The bulletin went on to explain that pipelines are either active or abandoned. If an active line is not operating, it still must comply with all requirements of the program. PHMSA recently reiterated this view in a 2019 rulemaking explaining that pipelines, whether in use or not, must meet all requirements unless they have been formally abandoned. 84 Fed. Reg. 52282.
Congress has now altered this policy by providing an option for the idling of pipelines and establishing requirements for idling and restarting pipelines. According to the Act, in order to be eligible for treatment as an idled pipeline, the line must (1) cease normal operations for a period of 180 days or more, (2) be isolated and, (3) either be purged or contain only those amounts to be allowed by PHMSA regulations that are to be drafted. Section 109(a). Guidance on which regulations will apply to these idled pipelines must be promulgated by PHMSA within two years but the statute requires any resumption of operations to be preceded by either a hydrostatic test or in-line inspection and that the pipeline meet any regulations that took effect while the pipeline was idled. Moreover, the idled lines must be inspected to ensure that they met the requirements for idling and then again during the idling period. Whether this concept proves useful to industry depends on what requirements idled pipelines must meet during their period of idleness, which PHMSA will decide in its rulemaking. At a minimum, however it provides an option for pipeline operations that may be useful.
Expanded Safety Requirements for Gas Distribution Pipeline Systems
The PIPES Act of 2020 imposes a myriad of requirements on the operators of natural gas distribution pipeline systems. These mandates include evaluating the risks of cast iron pipes and mains, from the operation of a low-pressure distribution system that makes the operations of a connected and properly adjusted low-pressure gas burning system unsafe, and, within two years of enactment, provide an Integrity Management Plan, Emergency Response Plan, and Operations and Management Plan for review by PHMSA. PHMSA must review all such plans within two years and then perform follow-up reviews at no longer than five-year intervals. The statute also requires the Emergency Response Plan to provide for communication with all “relevant public officials” with respect to certain emergencies and the Operations and Maintenance Plan to contain written procedures for responding to overpressure indications and for managing the Memorandum of Change process. PHMSA must also provide a report to Congress on the effectiveness of safety management systems that have been implemented pursuant to API 1173.
Enforcement Transparency and Fairness Procedures
Section 108 of the Act introduces certain due process requirements that PHMSA must follow during the course of an enforcement action. These requirements broadly favor pipeline operators and afford additional protections to operators facing an enforcement action at PHMSA. Most notably, notice of any hearings conducted must be posted publicly on the PHMSA website and any formal hearings must be open to the public. PHMSA must also make publicly available on its website any charging documents, written responses, as well as any consent agreement, consent order, order, or judgment resulting from a hearing. Companies pursuing administrative proceedings to challenge enforcement actions will need to think through how to protect information that they consider to be protected from disclosure as confidential business information or on any other grounds. Furthermore, should PHMSA undertake any enforcement proceedings against a pipeline operator, the operator is entitled to request certain procedural protections, including the use of a consent agreement, the imposition of the burden of proof upon the agency, and the timely issuance of a decision.
Expanded Employee Protections
Section 116 of the Act expands whistleblower protections for employees of pipeline operators, both current and former. Section 116 prohibits the waiver of these rights and remedies, including by a pre-dispute arbitration agreement. Furthermore, the Act provides that provisions of a pre-dispute arbitration agreement will be invalidated if the provisions require arbitration of a dispute due to an unfavorable personnel action against a whistleblower. An employee may file for de novo judicial review in federal district court if the Secretary of Labor does not issue a final decision within 210 days after a retaliation complaint, the employee is authorized to request a jury trial and the statute provides specific burdens of proof for the employee who must only make a prima facie showing that their whistleblowing was a contributing factor in the pipeline operator’s unfavorable personnel action. The pipeline operator then has the burden of proof to show by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the whistleblowing.
Congress included provisions in the PIPES Act of 2020 allowing the Federal Energy Regulatory Commission (“FERC”) to recover a portion of its necessary expenses for review of an application to construct a large scale LNG facility (construction costs in excess of $2.5 billion). Congress also tasked PHMSA with onerous update requirements for rulemaking mandates under pipeline legislation adopted in 2011 and 2016 that remain unfulfilled. In addition, PHMSA must make a decision about whether to pursue a rulemaking to change the class location requirements within one year of enactment of the Act. That decision must consider the 2016 Report that PHMSA submitted to Congress on this topic. Also, the Secretary must retain the National Academy of Sciences to conduct a study of potential methodologies or standard for installing automatic or remote-controlled shutoff valves on existing pipelines. This report must be provided within two years of enactment of the PIPES Act of 2020. Congress also tweaked the five-day requirement for notifications of the discovery of safety-related conditions – changing the obligation from working days to business days. The new law also requires that the notice of discovery of safety-related conditions be provided to PHMSA and the appropriate state regulator of pipelines or, if the state does not have one, the governor, or the appropriate Native American tribe if the pipeline is on the tribe’s property. Any relevant emergency response or planning entity may obtain a copy including local-, tribal- and state-level entities.
President Trump signed this legislation into law on December 27, 2020, but the Department of Transportation to be headed by Secretary Buttigieg will move forward with the required rulemakings. Some of these rulemakings could have significant outcomes for the pipeline community and it will be important to monitor and comment on the rulemakings.
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.