February 2022 Vol. 77 No. 2
Washington Watch
FERC Ignores Environmentalist Pleas to Penalize Spire STL
By Stephen Barlas, Washington, D.C. Editor
In a setback for environmentalists, the Federal Energy Regulatory Commission (FERC) refused to financially penalize the Spire STL pipeline, whose future was thrown into question by a decision from a DC Federal Appeals Court this past summer. The Court said FERC was wrong to approve the pipeline because Spire STL made the case for its need based only on its contract with its affiliate, Spire Missouri, the local distribution company serving St. Louis. Spire STL went into operation in 2018.
The Appeals Court “remanded” the case back to FERC meaning the commission was supposed to determine whether its 2018 approval should be modified. The commission has failed to do that and instead gave the pipeline a temporary certificate for 90 days on Sept. 14, 2021, and then renewed it indefinitely on Dec. 4, 2021.
In renewing the temporary certificate a second time, FERC ignored pleas from the Environmental Defense Fund (EDF) to penalize the pipeline as it continued to operate during what could be a harsh, St. Louis winter. The commission also set aside demands from landowners to stop the pipeline from seizing property under eminent domain. In both instances, FERC supplied detailed reasoning why neither demand held water.
Perhaps more notably, in terms of potential longer-range impacts, the demands of environmental groups and St. Louis politicians, such as Rep. Cori Bush (D-MO), that FERC keep the pipeline in business over the winter seemed to fly in the face of Spire opponents’ current and previous arguments that the Pipeline was not needed. That was the argument the EDF made in bringing the case to the Appeals Court.
Now the Public Service Commission of Missouri is begging FERC to keep the Spire Pipeline in operation. So is the EDF and environmental groups. In a November letter to FERC Chairman Richard Glick, Rep. Bush wrote: “If Spire Inc. is deliberately provoking widespread fear instead of directing all efforts to preventing service interruptions, that would be tantamount to corporate malpractice. St. Louis Spire customers have been forced to pay for a pipeline they do not need and will not benefit from, all built to prioritize corporate profits over the Black, B?rown and Indigenous communities that live in the pipeline’s path.”
In November letters, radio spots and on its web site, Spire acknowledged that if FERC withdrew its approval and the pipeline was forced out of operation, that hundreds of thousands of St. Louis residents would lose service if temperatures dropped to certain points. Rep. Bush called those communications “scare” tactics.
But in its decision extending the temporary certificate indefinitely, FERC stated, “… the record indicates that alternative firm interstate transportation for Spire Missouri to replace the Spire STL Pipeline is not available. Additionally, the record reflects that Spire Missouri cannot construct replacements for the facilities that it removed from service or decommissioned in time to meet its obligations for this winter heating season.”
FERC did not address whether Spire Missouri could reconfigure supply in the future so that its Spire STL gas would not be needed during future winters.
Meanwhile, FERC dispatched the EDF’s arguments that Spire STL should be financially penalized during the 2021-2022 winter season. The EDF, which filed the court case resulting in the DC Appeals Court decision this past summer, asked FERC to impose a new rate design on the Spire Pipeline, in which 50 percent of return and income taxes would be moved from the reservation to the usage charge. FERC said that would not be consistent with Order No. 636.
FERC also ignored a separate NRDC and Sierra Club joint demand that FERC levy economic penalties on Spire. The commission answered, “We find that such an action would not be appropriate under these circumstances, particularly as no entity alleges that Spire violated the NGA, the Commission’s regulations, or the terms of its certificate when it was effective.”
PHMSA Announces Long Awaited, New Regulation of Gathering Lines
After a decade of consideration, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a final rule that creates two new classes of onshore gathering lines – R and C – and imposes a series of regulations and compliance deadlines, which the GPA Midstream Association (GPA) and American Petroleum Institute (API) say will be very difficult – and expensive – to meet. Those groups have asked PHMSA to reconsider provisions in the rule and delay some of its deadlines.
Matt Hite, vice president of government affairs, GPA, said “Our major issue is the extremely short deadlines that are in the rules,” he stated. “So, we support the rule, just not the deadlines and we are pushing PHMSA to reconsider.”
Those Type R and C gathering lines compose about 90 percent of the 400,000-plus miles of essentially unregulated Class 1 lines found in mostly deserted, rural areas in the U.S. About 91,000 miles will qualify as Type C lines. The final rule requires operators of Type R and Type C lines to comply with the incident reporting requirements, effective as of May 16, 2022, and to submit annual reports by March 15, 2023.
PHMSA said: “The information in the reports will help determine the need for future regulatory changes to address the risks to the public, property, and the environment posed by all types of pipeline systems engaged in the transportation of gas.”
In terms of new safety requirements for Type C gathering lines, those with an outside diameter greater than 16 inches and certain others that could directly affect homes and other structures are required to comply with existing requirements for Type B gas gathering lines, and requirements to develop and implement emergency plans.
Type B gathering lines are lower-stress pipelines in Class 3, Class 4 and certain Class 2 locations, which must abide by corrosion control, MAOP establishment, leak surveys and repair requirements, all similar to requirements for transmission pipelines.
Type C gathering lines with smaller diameters (above 8.265 inches) that could not directly affect homes and other structures have fewer requirements that are limited to damage prevention, emergency plans and public awareness. These requirements address known causes of pipeline failures including excavation damage, corrosion, and inadequate design and construction standards.
The final rule also requires Type C operators to submit safety-related condition reports starting on May 16, 2022, and further provides that operators of existing, but previously unregulated, pipelines must determine whether these lines are Type R or Type C by Nov. 16, 2022. Finally, the rule requires operators to treat new, replaced, relocated or otherwise changed incidental gathering lines that extend 10 or more miles in length as regulated transmission lines, effective as of May 16, 2022.
PHMSA’s rationale for these new requirements is twofold. The agency argues that gathering lines, particularly in more recent shale areas, have dramatically grown in size to 24, 30 and 36 inches and are operating at high pressures, as much as 1480 psig in Pennsylvania, for example. Second, the agency wants to work hand in glove with other Biden administration agencies to reduce methane emissions from pipelines.
The GPA/API petition for a delay in implementation deadlines states the incident and safety related condition reporting requirements that go into effect on May 16, 2022, create significant compliance obligations. Its separate request that PHMSA reconsider the rule rests on its belief that gathering lines at 12.75 inches or less in diameter do not present a significant risk to public safety. The two groups also state the agency “ignored substantial cost information in concluding that the benefits of applying certain requirements to these pipelines justified the costs.” The 2021 final rule estimates annual costs at $13.7 million per year.
George Wilkinson, Jr., an attorney with Vinson & Elkins in Houston, said, “We anticipate that the costs will be higher.”
In their petition for a “stay,” the GPA and API argued: “…the unnecessarily short compliance deadlines that the Agency chose to adopt in the Final Rule (in the midst of historic inflation and a global supply chain crisis resulting from the COVID-19 pandemic) will escalate the costs involved dramatically.”
They are particularly concerned with the requirement that operators of existing but previously unregulated incidental gas gathering lines that extend 10 or more miles in length will need to convert those pipelines to transmission service if any portion is repaired, replaced or otherwise changed, on or after May 16, 2022.
The two associations are arguing a reasonable compliance deadline for pipelines greater than 12.75 inches in outside diameter is May 16, 2023, and a reasonable compliance deadline for pipelines 12.75 inches or less in outside diameter is May 16, 2026.
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