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APPENDIX B Federal Pipeline Safety Regulatory Framework ORIGINS OF HAZARDOUS LIQUIDS PIPELINE SAFETY REGULATION The Hazardous Liquid Pipeline Safety Act (HLPSA) of 1979, as amended, provides the statutory authority for the U.S. Department of Transporta­ tion (DOT) to establish regulatory standards for the transportation of hazardous liquid by pipelines, including those transporting crude oil.1 Within the department, authority to carry out the act is delegated to the Pipeline and Hazardous Materials Safety Administration (PHMSA), which implements its authority through the Office of Pipeline Safety (OPS). OPS promulgates rules governing the design, construction, testing, inspection, maintenance, and operations of hazardous liquid pipelines. The regulations are intended to establish minimum safety standards applicable to all hazardous liquid pipeline facilities, thereby setting a safety floor that all operators must meet across the spectrum of pipeline systems. The regulations cover pipelines that transport crude as well as refined products. A review of past OPS rulemaking notices reveals that as the regula­ tory program evolved and matured, the U.S. DOT and Congress began to question whether the regulatory program was having sufficient effect in reducing the risk of transporting hazardous liquid by pipeline. A central concern was that individual pipeline operators could be complying with each of the actions prescribed in the federal rules in a procedural, or “checklist,” manner without really knowing whether these actions were  Rulemaking to begin implementation of HLPSA began in 1981 (Federal Register, Vol. 46, No. 143, 1 July 27, 1981) and can be found at http://phmsa.dot.gov/staticfiles/PHMSA/hrmpdfs/1981%20 hist%20rulemakings/46%20FR%2038357.pdf. 115

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116 Effects of Diluted Bitumen on Crude Oil Transmission Pipelines collectively producing the desired safety assurance. Because pipeline facilities vary in their designs, construction, environments, and operat­ ing histories, specific safety assurance methods—including those not prescribed in federal rules—might be more suitable for one facility than for another. Moreover, OPS had long been concerned that it could not identify all facility-specific risks, which made a strictly prescrip­ tive approach to safety regulation impractical. The changes made in response to these concerns have led to changes in the role of OPS and to new expectations for safety assurance by the pipeline industry. PRESCRIPTIVE AND PERFORMANCE-BASED STANDARDS After several major pipeline releases during the late 1980s and early 1990s, OPS started experimenting with other regulatory approaches to accompany its rules, which prescribed such specific actions as main­ taining operating pressure at levels not to exceed 72 percent of speci­ fied minimum yield strength (SMYS).2 The agency sponsored a series of demonstration projects that gave operators the incentive and flexibility to tailor their safety assurance methods to their specific circumstances. OPS reasoned that because pipeline operators have the most compre­ hensive and detailed knowledge of their systems, they are in the best position to devise their safety assurance programs, as long as they are given the motivation, tools, and regulatory flexibility to make effective choices.3 In 2000, OPS issued a landmark rulemaking titled Pipeline Integ­ rity Management in High Consequence Areas.4 Rather than prescrib­ ing specific operations and maintenance procedures, new rules laid out the key steps to be followed in developing and implementing a rationalized integrity management program based on principles of risk management. The regulations defined the core elements of the required program, such as the development of a written plan explain­ ing how risks are to be identified; the logic used in choosing the tools, methods, and schedules employed for detecting and assessing risks; 2  §195.406. 3  See Federal Register, Vol. 65, No. 237, Dec. 8, 2000. 4  See Federal Register, Vol. 65, No. 237, Dec. 8, 2000.

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Federal Pipeline Safety Regulatory Framework 117 and the timetable for completing risk assessments and correcting defi­ ciencies. The rules were written in performance-based language that does not tell operators exactly how they must conduct the risk assess­ ments or precisely how they must act to mitigate identified risks. For example, if internal corrosion is identified as a threat in a particular pipeline segment, the operator is held responsible for selecting the best means to mitigate it—by using corrosion inhibitors, increasing the frequency of line cleaning, shortening inspection intervals, or selecting other defensible options. Although performance-based rules have the advantage of allowing customized responses to specific circumstances, they can at times lack the clarity of a specific measure prescribed in rules applicable to all.5 Accordingly, OPS has retained many of its prescriptive rules and contin­ ues to adopt new ones, depending on the safety concern. Box B-1 outlines the basic set of rules governing the transportation of hazardous liquids by pipeline, as contained in the Code of Federal Regulations, Title 49, Part 195. Examples of prescriptive rules, in addition to the aforemen­ tioned standard for maximum operating pressure, are those concerning pipeline design and construction features, such as the requirement for shutoff valves located at each side of a water crossing.6 Nevertheless, in instances where alternatives to prescribed measures have safety merit, the operator can seek a waiver, or special permit, from OPS by demon­ strating that the alternative measures will yield the same or higher levels of safety than the prescribed ones.7 An example of a special permit application is the original plan of TransCanada Corporation to construct the Keystone XL pipeline. When the pipeline was first proposed in 2008, the company petitioned OPS to allow for maximum operating pressures of 80 percent of SMYS. OPS agreed to the special permit conditioned on TransCanada Corporation 5  For example, the National Transportation Safety Board recently urged PHMSA to revise the integrity management–high consequence area rule to better define when an assessment of environmental cracks must be performed, acceptable engineering methods for such assessments, and specific treatments that must be applied when cracks are found. http://www.ecfr.gov/cgi-bin/ text-idx?c=ecfr&SID=4c83a26cf5fcbaf90e350dddcff30166&rgn=div8&view=text&node=49:3.1.1.1 .11.6.22.28&idno=49. 6  §195.260. 7  These are general regulations also pertaining to natural gas pipelines and are thus contained in 49 CFR Part 190.

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118 Effects of Diluted Bitumen on Crude Oil Transmission Pipelines box b-1 Summary of Coverage of Federal Hazardous Liquid Pipeline Safety Regulations Title 49, Part 195—Transportation of Hazardous Liquids by Pipeline Subpart A—General §195.0 to §195.12 Regulation coverage, definitions, incorporations by reference of consensus standards, and compli­ ance responsibility. Subpart B—Reporting §195.48 to §195.64 Includes reporting requirements for accidents and safety-related conditions as well as require­ ments for operators to provide assistance during investigations. Subpart C—Design §195.100 to §195.134 Includes pipe and component design require­ ments governing design temperature, internal design pressure, external pressure and loads, valves and fittings, closures and connections, and station pipe and breakout tanks. Subpart D—Construction §195.200 to §195.266 Includes construction-related requirements gov­ erning material inspection, transportation of pipe, location of pipe, installation and coverage of pipe, welding procedures and welder qualifications, weld testing and inspection, valve location, pumping sta­ tions, and crossings of railroads and highways. Subpart E—Pressure Testing §195.300 to §195.310 Includes requirements governing pressure test­ ing of pipe, components, tie-ins, and breakout tanks. Also contains requirements for risk-based alternatives to pressure testing of older pipelines. (continued)

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Federal Pipeline Safety Regulatory Framework 119 box b-1 (continued) Subpart F—Operations and Maintenance §195.400 to §195.452 Includes requirements for an operations, main­ tenance, and emergency response manual; maxi­ mum operating pressure; inspections of breakout tanks and rights-of-way; valve maintenance; pipe repairs; line markers and signs; public awareness and damage prevention programs; leak detection and control room management; and integrity management in high-consequence areas. Subpart G—Qualification of Pipeline Personnel §195.501 to §195.509 Requirements for qualification programs and record keeping. Subpart H—Corrosion Control §195.551 to §195.589 Includes regulations on coatings for external cor­ rosion control, coating inspection, cathodic pro­ tection and test leads, inspection of exposed pipe, protections from internal corrosion, protections against atmospheric corrosion, and assessment of corroded pipe. Appendix A Delineates federal and state jurisdiction. Appendix B Risk-based alternative to pressure testing older pipelines. Appendix C Guidance for integrity management program implementation. implementing 57 measures not currently delineated in the regulations and on adding a degree of rigor not currently required. The conditions covered include, among other things, quality control checks during the manufacture and coating of the pipe, tighter valve spacing, remote control valves, monitoring and control of operating temperatures, more frequent pig cleaning, and specific limits on the levels of water and sediment contained in the products transported. Although Trans­ Canada Corporation eventually withdrew the special permit applica­ tion, it agreed to comply with the 57 conditions as part of its separate

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120 Effects of Diluted Bitumen on Crude Oil Transmission Pipelines presidential application to build and operate a pipeline that crosses a national border.8 Finally, in addition to having special permit authority, OPS has broad authority in the name of public safety to demand that pipeline operators take certain actions not specifically called for in regulations. For example, if the agency discovers a hazardous condition, it can issue orders requir­ ing operators to take certain responsive or precautionary measures.9 On discovering a condition that may be of concern to multiple pipelines, OPS can issue advisory bulletins that notify operators about the condition and how it should be corrected. SUPPORTIVE PROGRAMS The emphasis on risk- and performance-based standards has not only affected OPS rulemaking activity but also changed other aspects of its safety oversight program. Where it does not prescribe specific safety actions or practices, OPS seeks to ensure that operators are in compli­ ance with the performance-oriented demands outlined in the regula­ tions. Aided by its inspection and enforcement capabilities, OPS will verify that pipeline operators are developing and implementing risk management programs that have a rigorous and technically sound basis. A checklist compliance inspection approach is not considered ade­ quate. Inspecting for compliance under these circumstances requires an approach more akin to a quality assurance audit to ensure that opera­ tors are following a well-defined set of actions. In addition, the advent of performance-based regulations has meant that OPS safety researchers now have responsibility for providing technical guidance to aid opera­ tors in developing rigorous risk management programs, including devel­ opment of the requisite analytic tools. 8  In 2008, TransCanada Corporation proposed the addition of a new hazardous liquid transmission pipeline, called the Keystone XL, which would originate in Alberta and terminate in Steele City, Nebraska. Because the pipeline crossed the U.S. border, it required presidential approval. Public Law 112-78 required the president to act on the application within 60 days of the law’s enactment on December 23, 2011. In early 2012, President Barack Obama denied the application, citing a review by the U.S. Department of State that expressed the need for more information to consider relevant environmental issues and the consequences of the project on energy security, the economy, and foreign policy (Federal Register, Vol. 77, No. 23, Feb. 3, 2012, p. 5614). 9  49 CFR §190.

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Federal Pipeline Safety Regulatory Framework 121 About half of the 200-person OPS staff is responsible for inspecting pipeline facilities, with assistance from more than 300 state inspec­ tors. Inspectors are authorized to review the manual for operations and maintenance required of each operator. Inspectors also review records documenting the evaluations that have been performed to identify and prioritize risk factors, devise integrity management strategies, and prior­ itize the preventive and mitigative measures. If OPS has reason to believe that a specific risk factor is escaping the scrutiny of a pipeline operator, it can review company records to determine whether and how the risk is being treated. As described in Chapter 4, PHMSA also requires operators to report incidents involving releases from pipelines. The agency uses the reports to guide its regulatory, inspection, and enforcement priorities. Through its research and engineering capacity, OPS can assist pipe­ line operators in complying with both prescriptive and performance- based rules. In 2012, the agency funded about $7 million in research, with most projects conducted in collaboration with industry through cooperative programs such as the Pipeline Research Council Inter­ national, Inc. Much of the research is designed to help operators comply with regulatory demands; for example, by developing tools and meth­ odologies to detect and map pipeline leaks, locate and diagnose faults in cathodic protection systems, inspect lines that cannot be pigged, and conduct risk analyses. Research projects are also designed to provide technical support for industry standard-setting activities—for example, by evaluating new test methods being considered by standards develop­ ment committees.