April 2016, Vol. 71 No. 4
Washington Watch
Flint Crisis Stirring Possible Congressional Action
The efforts in the Senate to address water infrastructure funding needs in the wake of the Flint crisis appear to have born their first fruits. At the end of February, Sen. James Inhofe (R-OK), chairman of the Environment and Public Works Committee, announced an agreement with Sen. Debbie Stabenow (D-MI) which would provide two streams of funding that would have been impossible to foresee at the start of the year. What is anticipated as an amendment to the delayed energy bill (S. 2012) would:
Provide $100 million for Drinking Water State Revolving Funds (SRFs) accessible by any state with a drinking water emergency; and
Provide $70 million in funding to back secured loans made under the new Water Infrastructure Finance and Innovation Act (WIFIA). That sum would support secured loans of up to $4.2 billion.
The Senate proposal could also pass Congress by being amended to an already passed House bill (H.R. 4470) which contains no additional funding. That bill is called the Safe Drinking Water Act Improved Compliance Awareness Act.
The additional funds for the DWSRF and the first-time funding at $70 million for the WIFIA are badly needed. Congressional appropriations for the DWSRF and Clean Water SRF have declined over the years, as have the funding requests for them from the Obama administration. That continued this year when Obama announced his proposed federal budget for fiscal 2017, which begins next Oct. 1. The White House has proposed cutting the SRFs by a total of $257 million from their FY 2016 levels. The budget provides $1,020.5 million for the DWSRF and $979.5 million for the CWSRF. The DWSRF received $863.2 million in fiscal 2016.
The WIFIA was not funded in fiscal 2016. President Obama proposed $20 million this year. Enacted in 2014 as part of the Water Resources and Reform Development Act, WIFIA will provide low-interest federal loans for up to 49 percent of the costs for large drinking water, wastewater, storm water and water reuse projects.
Two questions arise regarding what will happen if Congress passes the Inhofe proposal. First, the House and Senate appropriations committees would have to make funding available. That is not a certainty. If they do make funding available, would that money be on top of what they would have otherwise appropriated for the DWSRF? Spokespersons for neither of the two sponsoring senators responded to e-mails, nor did the press secretary to Sen. Mark Kirk (R-IL), the only Appropriations Committee member signing on to the Inhofe/Stabenow proposal.
Democrats Seek To Toughen Pipeline Safety Bill
Key Republicans and Democrats in the House said they were determined to pass a pipeline safety bill this year, although it may have some differences with the bill now on the Senate floor. That bill is called the Securing America’s Future Energy: Protecting Infrastructure of Pipelines and Enhancing Safety (SAFE PIPES) Act (S. 2276) and was passed by the Senate on March 3. The House pipeline subcommittee held hearings on potential legislation on Feb. 25, 2016, and the Energy & Commerce Committee followed with its own hearings a week later.
The Senate bill includes one new mandate for the Pipeline and Hazardous Materials Safety Administration (PHMSA) in the area of underground gas storage facilities, but was otherwise an unambitious bill which essentially tells the PHMSA to complete the numerous unfinished rulemakings the agency was charged with in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. The Interstate Natural Gas Association of America generally supports the Senate bill but hopes for a few further tweaks if and when the bill goes to a House-Senate conference committee.
The House may well go beyond the gas storage provision in the Senate bill, based on comments made at hearings in the House Transportation and Infrastructure Committee on Feb. 25. Democrats cited some weaknesses in the Senate bill, including its underground storage provision. Rep. Brad Sherman (D-CA), who lives near the site of the October 2015 Alison underground gas release just north of Los Angeles, has introduced a bill called the Underground Gas Storage Safety Act (H.R. 4578). It would require PHMSA to prescribe strong minimum safety standards for underground gas storage facilities within 180 days of passage of the bill. Those standards would have to echo the recommendations made by the PHMSA in Advisory Bulletin ADB–2016–02, issued Feb. 2, except to the extent that the Secretary establishes by clear and convincing evidence that it is not in the public interest. Until that final rule was actually published, storage operators would have to comply with two API Recommended Practices, 1170 and 1171.
Rep. Steve Knight (R-CA) has introduced H.R. 4429, the Natural Gas Leak Prevention Act (H.R. 4429). It essentially reiterates the provision in the Senate bill which gives the PHMSA two years to finalize a regulation making API 1170/1171 federally enforceable, instead of voluntary industry standards.
Cheryl Campbell, senior vice president, gas, XCEL Energy, who testified at the House hearing on behalf of the American Gas Association, said the AGA supports adoption of the API standards as federal minimum standards and the ability of states to add additional standards as they deem necessary for their area. Asked by Railroads, Pipelines and Hazardous Materials Subcommittee Chairman Rep. Jeff Denham (R-CA) whether the APA supports the Knight bill, she answered, “I believe so.” Don Santa, CEO and president of INGAA, said much the same thing.
It appears however, that Democrats in the House will push to enhance the Senate bill, and not just with regard to its provisions on underground gas storage. Rep. Peter DeFazio (D-OR), the top Democrat on the full Transportation and Infrastructure Committee, criticized the Senate bill for barring the PHMSA from conducting any new rulemakings until those required by the 2011 act are completed. That could take years. The only exception would be if the Secretary of Trans-portation certified to Congress that there is “a significant need to move forward.”
“The Senate really went down the wrong path,” DeFazio said. “We shouldn’t be tying their hands.” He also advocated including an amendment which would give the PHMSA emergency order authority, which many other federal regulatory agencies have. It gives the agency the ability to address industry-wide situations, such as concerns about underground gas storage facilities. Currently, PHMSA only has authority to issue corrective action orders, which concern single incidents.
In fact, a “discussion draft” premiered at hearings in the House Energy & Commerce Committee on March 1 does go beyond the Senate bill, but it gives citizens, not PHMSA, new power to fight perceived pipeline problems. At those hearings, Santa said the INGAA would oppose a House bill if that provision remains in a bill, once an actual bill is introduced. The provision in the discussion draft would allow a private party to seek injunctive relief against PHMSA based on its alleged failure to perform “any nondiscretionary duty” under the federal pipeline safety law.
“For example, this provision would be another arrow in the quiver of those opposing new pipeline construction, as they could seek injunctive relief in connection with PHMSA’s review of the design of a proposed new natural gas pipeline,” Santa explains. “In addition, the provision could be used to seek injunctive relief compelling PHMSA to update existing rules or pursue other actions based on the allegation that the agency’s inaction was a failure to perform a nondiscretionary duty under the pipeline safety law. If allowed, this situation could rapidly deteriorate into a regime of ‘regulation by litigation.’ ”
Natural gas transportation issues took a back seat to underground storage and liquid pipeline issues at the earlier Transportation committee hearings. Marie Therese Dominguez, Administrator of PHMSA was repeatedly asked about the remaining unfinished mandates from the 2011 Act. The agency has completed 26 of the 42 mandates in that bill. One of the most significant remaining issues is a proposed rule on gas transmission safety. It has long been stuck at the White House Office of Management and Budget which is reviewing the PHMSA proposal. At the hearings, Dominguez said she hopes to publish that proposed rule within the next month.
BLM Proposal Would Stimulate Pipeline Construction
New proposed limits on flaring and venting of natural gas from wells on federal lands could be a boon to the pipeline construction industry. The Bureau of Land Management (BLM) proposed new limits in February meant to reduce atmospheric emissions of methane, the most potent greenhouse gas.
Kyle Danish, a partner at Van Ness Feldman, explains, “A significant amount of venting and flaring occurs when a resource is developed but there is no gathering or pipeline infrastructure available for the produced gas. Greater restrictions on flaring and venting could result in more incentives to get the infrastructure in place and get it there faster.” But he also notes that many types of infrastructure projects are running into various kinds of permitting and local access roadblocks. “Ideally, the federal government would see that streamlining permitting for such projects is another way to prevent flaring and venting of gas,” he explains.
But the BLN does allude to any permitting reforms in its proposed rule, formally called the Methane and Waste Control Rule.
The BLM proposed rule now takes its place besides a separate Environmental Protection Agency proposed rule issued last fall focusing on reducing oil and gas industry emissions of methane everywhere, not just on federal lands. That proposal is limited in the sense it focuses on “new” sources. That so-called Subpart OOOOa proposed rule would affect units that are modified, constructed, or reconstructed after the Sept. 18, 2015, proposal date. That proposal has already produced consternation among pipeline companies because of its provisions requiring an extensive leak detection and repair (LDAR) regime to decrease methane emissions from compressor stations.
The potential brake on the rule’s stimulation of pipeline construction is the fact that technologies for capturing and using gas without a pipeline are becoming increasingly available. They may include: separating out NGLs or liquefying the natural gas (LNG), allowing the resulting liquids to be trucked off location; converting the gas into compressed natural gas (CNG) for use on-site or to be trucked off location; and using the gas to run micro-turbines to generate power for use on-site or for sale back to the grid.
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