May 2015, Vol. 70, No.5

Washington Watch

Senators Criticize Proposed Water Infrastructure Budgets

There is $5 million in President Obama’s proposed fiscal 2016 budget for the Water Infrastructure Finance and Innovation Act (WIFIA), the new program Congress established in 2014 to supplement lagging funding for the sewer and drinking water state revolving funds (SRFs).

But one EPA staffer working on the program says the agency has not developed any plans for how that money will be spent, nor does he have any idea when those plans will become public.

The WIFIA will be what is called a “federal credit support” program making low-interest loans to cities and counties for up to 49 percent of large drinking water, wastewater and water reuse projects. The fund will be similar to one that has existed for nearly 20 years for highway projects, and is centered at the Department of Transportation.

The proposed 2016 funding level aside, the 2014 congressional law’s language may inhibit whatever money becomes available. That is because the authorizing legislation prohibits tax-exempt bonds from funding the remaining 51 percent of the cost of the project. “The prohibition on the use of tax-exempt bonds is an unnecessary barrier that impairs WIFIA’s effectiveness,” says David LaFrance, CEO of the American Water Works Association.

The $5 million for WIFIA, however, will not fill much of the gap created by essentially flat-line funding for the SRFs and spiraling construction needs across the country. The fiscal 2016 budget would provide $1.116 billion for Clean Water and $1.186 for Drinking SRFs. That is $53 million less than in 2015.

At hearings in the Senate Environment and Public Works Committee in early March, Sen. James Inhofe (R-OK), chairman of the committee, pointed out that the EPA was proposing to cut $333 million from the Clean Water SRF as compared to its 2015 funding. Gina McCarthy, the EPA Administrator, explained that funds were shifted to the Drinking Water SRF because of “immediate needs we identified.”

PHMSA Wants To Extend Integrity Verification Program To Hazardous Liquid Pipelines

Hazardous liquid pipelines are unhappy with how the Pipeline and Hazardous Materials Safety Administration (PHMSA) wants to implement a provision of the 2011 pipeline safety law requiring companies to go back and test old steel pipelines for integrity. Section 23 of the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 requires DOT to issue regulations for testing of previously untested natural gas transmission lines located in high consequence areas and operating at a pressure greater than 30 percent of specified minimum yield strength.

The Act set a deadline of July 3, 2013, by which DOT was to issue rules. PHMSA is supposed to publish a final rule sometime this year for natural gas pipelines; but has recently been talking with oil pipelines about extending any new MAOP requirements to their facilities, even though the 2011 pipeline law makes no mention of hazardous liquid pipelines. PHMSA conducted a briefing for the oil pipelines in December, according to Andrew Black, president of the Association of Oil Pipe Lines (AOPL), and asked for comments on a draft document it presented at that time.

PHMSA is much further along on creating what it calls an “Integrity Verification Process” for natural gas pipelines, who have had their own criticisms. The IVP rule, if and when it is finalized and applied to gas and liquid pipeline operations, is meant to prevent accidents such as the explosion in San Bruno, CA, in 2010 which was caused by the rupture of an old pipe which was put in the ground in 1956.

In their comments, the American Petroleum Institute and AOPL argue that the 2011 law doesn’t give PHMSA the authority to enact a hazardous liquids (HL) IVP for oil pipelines, and even if it did, hazardous liquids pipelines are already doing most of what the PHMSA wants them to do.

PHMSA Relents On Odorization And Inspection Definitions

The Pipeline and Hazardous Materials Safety Administration (PHMSA) backed away from a couple of pipeline regulatory changes it had proposed in 2011 which pipeline companies had opposed. Other changes will be made. PHMSA made the announcement of the changes on March 11, 2015, when it published the final rule called Pipeline Safety: Miscellaneous Changes to Pipeline Safety Regulations.

That final rule was noteworthy partly because of what was not in it: a proposal to clarify when a pipeline has to odorize a lateral line whose length is 50 percent in a Class 1 or Class 2 location. The PHMSA regulations require operators to odorize combustible gas in a transmission line in Class 3 or Class 4 locations “so that at a concentration in air of one-fifth of the lower explosive limit, the gas is readily detectable by a person with a normal sense of smell.” Laterals in Class 1 and 2 are exempt if they meet the 50 percent of length or less test. There has been some confusion as to how that measurement needs to be made in Class 1 and 2 locations. PHMSA proposed the lateral be measured between the distribution center and the first upstream connection to the transmission line.

The Interstate Natural Gas Association of America (INGAA) complained after the proposed rule surfaced that “for common pipeline configurations, the proposed amendment’s apparent distinction between lateral lines and transmission lines would cause parts of lines to become subject to additional safety requirements, i.e., odorization, not because they changed function; not because of changes in the risk to public safety; but solely because branch lines are tapped into them.

At a meeting in 2012, PHMSA’s Technical Pipeline Safety Standards Committee agreed with the definitional confusion expressed by INGAA, the Texas Oil and Gas Association, API, TransCanada and others. It recommended the agency not go forward with the new lateral definition to be used in deciding on whether to odorize. PHMSA was swayed, and dropped the proposal from the final rule, while reserving its right to re-evaluate the proposal and consider it again in a future rulemaking action.

PHMSA also backed off some potential changes which would have restricted the types of personnel who could inspect pipeline construction. Originally, PHMSA wanted to prohibit inspection by anyone who participated in the pipeline’s construction. The proposal was based, in part, on a petition from the National Association of Pipeline Safety Representatives (NAPSR). This was the most controversial proposal of the 17 initially proposed by the agency. Many companies argued this could be interpreted to prohibit anyone at a construction company from inspecting a pipeline, whether they handled the pipe or not.

INGAA wanted the language of the provision to be changed so that an employee of the pipeline who was qualified to do so could inspect the construction work as long as he or she was not involved in the construction itself. It opposed having to hire an independent, outside inspector, in part because there was no evidence presented that intra-company inspection had led to construction problems.

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