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Cost-benefit analysis obligations blamed for long delay in pipeline safety rules

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Cost-benefit analysis obligations blamed for long delay in pipeline safety rules

Some federal pipeline safety rules mandated by Congress have been under development for over seven years, and some lawmakers and pipeline safety experts say a particular statutory requirement may be to blame. The pipe industry, however, is not so sure.

Directed by legislation passed in 2011 to tighten requirements for both gas transmission and hazardous liquids pipelines, the U.S. Pipeline and Hazardous Materials Safety Administration, or PHMSA, has not yet finalized critical rule updates, to the collective dismay of industry, safety advocates and federal lawmakers.

"It remains unacceptable that critical rules … have not been implemented," Rep. Daniel Lipinski, D-Ill. said at an April 2 U.S. House of Representatives Committee on Transportation and Infrastructure subcommittee hearing.

SNL Image

Congress in 2011 and 2016 told the U.S. Pipeline and Hazardous Materials Safety Administration to tighten pipeline safety rules, often inspired by disastrous incidents that have claimed lives and destroyed property.
Source: Audrain County Sheriff's Department

"PHMSA's and U.S. DOT's inaction continue to place lives at risk," said Lipinski, who chairs the Subcommittee on Railroads, Pipelines, and Hazardous Materials. "Given the delay in completing these important rulemakings, we need to examine PHMSA's rulemaking process to determine if there are obstacles to more swift promulgation to regulations, including the unique benefit-cost analysis that PHMSA's required to undertake as part of a rulemaking."

All major federal rules have to go through an economic analysis at the Office of Management and Budget to make sure the regulations are cost effective at achieving their goals. PHMSA rules are no exception. But PHMSA also has an extra statutory cost-benefit analysis obligation in a law stating that the agency can only issue a standard after making "a reasoned determination that the benefits of the intended standard justify its costs," among other similar statements.

"With a large pipeline system where the probability of a failure is low, but the consequence can be huge, it is nearly impossible to pass regulations under the current cost benefit rules," Carl Weimer, executive director at safety advocacy group the Pipeline Safety Trust, said during the hearing. "If you are really interested in long-standing issues … then the cost-benefit language in the statute needs to be fixed."

Weimer's comments echo those from former PHMSA administrator, Cynthia Quarterman, who after her tenure said the cost-benefit analysis process was "biggest problem with and probably the biggest cause for delay" in pipeline safety rule making, in part because of a misalignment between legislative and regulatory directives.

The agency currently has 12 incomplete congressional mandates from 2011 and 2016 laws reauthorizing PHMSA as the federal pipeline safety regulator. Congress will soon decide whether to reauthorize the agency again and whether to make any additions to or subtractions from the agency's federal mandates.

PHMSA Administrator Howard Elliott in testimony before the subcommittee said that since being sworn in in late 2017, he has identified and rectified a number of inefficiencies in the agency's rulemaking process and has increased technical and regulation development staff. Elliott said that the only thing Congress could do to speed up PHMSA's rulemaking process was "constant assistance in helping us understand the absolute urgency in moving these safety rules to conclusion."

Asked by Rep. Peter DeFazio, D-Ore., the House Transportation and Infrastructure Committee chair, about some of the details of the cost-benefit analysis process, however, Elliott said he would have to circle back.

Industry representatives have been as adamant as pipeline safety advocates in recent years that PHMSA should get its outstanding rules done. Not knowing what the exact regulatory requirements will look like complicates infrastructure investment and ongoing pipeline safety efforts for pipeline operators.

But pipeline industry groups were hesitant to jump on board with the idea that eliminating PHMSA's internal cost-benefit requirement would address the concerns they have seen. Robin Rorick, the American Petroleum Institute's vice president of midstream and industry operations, said on the sidelines of the hearing that he does not blame the cost-benefit analysis for the long delays.

"I think the cost benefit analysis contributed to the delays, probably. I think there are a lot of other things that contributed to the delays as well," Rorick said, pointing to staffing changes, the presidential election and technical committee reviews. "I think it's a little bit of an overstatement to say that cost-benefit is the thing causing a delay."

PHMSA's cost-benefit analyses can be a valuable part of the public comment part of a rule's overall review process and can help inform which of a variety of options is the best and most effective route for achieving a particular safety goal, the Interstate Natural Gas Association of America, or INGAA, said in an emailed statement. The association also disputed assertions that the cost-benefit requirement for PHMSA is substantially dissimilar from other agencies' obligations.

"Performing a reasoned analysis before making significant regulatory changes just makes sense. Preparing the cost-benefit analysis is one small step in PHMSA's comprehensive rulemaking process," INGAA said.