Pipeline Safety and Investment

March 2014

In recent years, several high profile accidents (including Pacific Gas and Electric Co.’s 2010 California pipeline explosion and the recent Harlem explosion) have drawn national attention, putting pressure on regulators and operators to ensure public safety and on stakeholders to approach infrastructure safety more proactively. This is driving significant capital expenditures in infrastructure investment, which are expected to remain strong in 2014.

Background

  • There are currently 305,000 miles of natural gas pipeline in the United States, including interstate and intrastate pipelines; 60% of existing pipeline was installed before 1970
  • Pipeline construction costs average approximately $1.5 million per mile
  • Jurisdiction for pipeline safety for midstream facilities is shared between Pipeline and Hazardous Material Safety Administration (PHMSA) and OSHA. PHMSA is generally responsible for pipeline leading up to and away from midstream facilities while OSHA is responsible for safety inside of facilities when the working conditions of workers are not regulated by other federal agencies
  • In 2013, PHMSA doled out research-and-development grants for $7.8 million, higher than in any year since 2008, according to federal data. Almost 40% of the funds are earmarked for projects to improve companies’ ability to detect anomalies in their pipelines (WSJ, 2013-10-16)

Key Developments

  • In light of the recent gas explosion in Harlem, Senator Edward Markey (Mass.) renews a push for two pieces of legislation: the Pipeline Modernization and Consumer Protection Act of 2013 and the Pipeline Revolving Fund and Job Creation Act. The former intends to accelerate the repair and/or replacement of high-risk pipelines, and the latter is a request for a revolving loan fund for repair and replacement projects
  • PHMSA has, in various stages of development, several rules pertaining to issues such as gathering lines, system integrity verification, damage prevention, and record keeping
  • Due to increased volume, midstream operators are interested in ensuring there are no gaps or overlaps between PHMSA and OSHA in infrastructure safety oversight

Implications

Safety accidents over the past several years have alerted federal agencies and the public to potential problems with the existing gas pipeline infrastructure. Planning has become increasingly difficult in this environment. Utilities and other pipeline operators must consider required infrastructure investments, other spending priorities, regulatory lag/uncertainty, and pending federal rulemaking. Companies that must address safety-related work before regulation is finalized are worried about misjudging regulators’ priorities and inadvertently wasting money and effort. While one study published by the Interstate Natural Gas Association of America (INGAA) shows that only 15% of accidents are related to the age of existing pipeline, operators are still compelled to upgrade their current infrastructure in anticipation of coming regulation. It is important for regulators, operators, and other stakeholders to work together to improve pipeline safety while keeping costs in check.

More Information

INGAA: http://www.ingaa.org/

PHMSA: http://www.phmsa.dot.gov/

EIA: http://www.eia.gov/

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Contributing Authors

Jason Payton Manager

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