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Witness Testimony
Mr. R. Earl Fischer
Pipeline Safety Good morning, Mr. Chairman and members of the Committee. I am pleased to appear before you today and wish to thank the Committee for calling this hearing on the important topic of pipeline safety. My name is Earl Fischer. I am Senior Vice President, Utility Operations of Atmos Energy Corporation. Atmos Energy is one of the largest pure natural gas distributors in the United States, delivering natural gas to about 1.7 million residential, commercial, and industrial and public-authority customers. Our regulated utility services are provided to more than 1,000 small and medium-size communities in 12 states. I am here testifying today on behalf of the American Gas Association (AGA) and the American Public Gas Association (APGA). The American Gas Association represents 192 local energy utility companies that deliver natural gas to more than 53 million homes, businesses and industries throughout the United States. AGA member companies account for roughly 83 percent of all natural gas delivered by the nation's local natural gas distribution companies. AGA is an advocate for local natural gas utility companies and provides a broad range of programs and services for member natural gas pipelines, marketers, gatherers, international gas companies and industry associates. The American Public Gas Association is the national, non-profit association of publicly owned natural gas distribution systems. APGA was formed in 1961, as a non-profit and non-partisan organization, and currently has 606 members in 36 states. Overall, there are 949 municipally owned systems in the U.S. serving nearly five million customers. Publicly owned gas systems are not-for-profit retail distribution entities that are owned by, and accountable to, the citizens they serve. They include municipal gas distribution systems, public utility districts, county districts, and other public agencies that have natural gas distribution facilities. Natural gas meets one-fourth of the United States' energy needs. I am pleased to appear here today and hope that my testimony will provide you with a better understanding of how distribution systems work and how the implementation of the Pipeline Safety Improvement Act of 2002 affects us. AGA, APGA and its members commend Congress for ensuring that the safety bill passed in 2002. The legislation that was finally passed in the final days of the 104th Congress was a balanced, fair bill and will bring yet further safety improvements. This Committee had a significant role seeing that the bill went through and I and the industry thank you for your commitment and leadership. We would also like to commend the U.S. Department of Transportation Office of Pipeline Safety (OPS) for diligently working to lay to rest numerous criticisms that arose during the debate on the 2002 bill. OPS was criticized by Congress, the National Transportation Safety Board, DOT's Inspector General and members of the public for failing to expeditiously address numerous congressional mandates and safety recommendations. To its credit, OPS has dealt with the vast majority of this backlog and is moving efficiently and effectively, and often in consultation with all affected stakeholders, to address the mandates in the Pipeline Safety Improvement Act of 2002. Gas Distribution Utilities Serve The Customer Gas distribution utilities, also known as local distribution companies (LDCs) are the last, critical link in the natural gas delivery chain. To most customers, utilities are the "face of the industry". Our customers see our name on their bills, our trucks in the streets and our company sponsorship of many civic initiatives. We live in the communities we serve and interact daily with our customers. Consequently, we take very seriously the responsibility of continuing to deliver natural gas to our communities safely, reliably and affordably. Natural Gas Utilities Are Committed to Safety Safety is a top priority, a source of pride and a matter of corporate policy for every company. These policies are carried out in specific and unique ways. Each company employs safety professionals, provides on-going employee evaluation and safety training, conducts rigorous system inspections, testing, and maintenance, repair and replacement programs, distributes public safety information, and complies with a wide range of federal and state safety regulations and requirements. Individual company efforts are supplemented by collaborative activities in the safety committees of regional and national trade organizations. Our industry's commitment to safety is borne out each year through the National Transportation Safety Board's annual statistics. Delivery of energy by pipeline is consistently the safest mode of energy transportation. Natural gas utilities are dedicated to seeing this continue. Over the last 17 years, the amount of natural gas traveling through distribution pipelines has increased by almost a third and more than 650,000 miles of pipeline have been added to the system -- yet the number of reportable incidents on distribution pipelines has decreased by 25 percent. This is a remarkable achievement, one that AGA and APGA attribute to the industry's overarching commitment to safety. To help to put the safety record of different categories of pipelines into perspective, it's important in the first place to compare the accident data on a common basis. For example, calculations of vehicular transportation accidents use vehicle-miles or passenger-miles traveled to make valid comparisons. For natural gas pipelines, calculations should be done using total miles of installed pipeline for a given category, such as transmission or distribution lines. When measured by total installed miles per pipeline category using DOT statistics over the last 10 years (1994-2003), it is clear that gas distribution systems have fewer fatalities and injuries per mile than all other pipeline categories combined. In fact, natural gas distribution lines have 46 deaths and injuries per 100,000 miles for distribution compared to 49 deaths and injuries for all the other pipeline categories combined. Every distribution system operator can attest that natural gas distribution pipelines are thoroughly regulated -- by state and federal safety authorities. State pipeline safety authorities have primary responsibility to regulate natural gas utilities and intrastate pipeline companies, as part of an agreement with the federal government. State governments then must adopt as their minimum standards the federal safety standards promulgated by the DOT. In exchange, DOT reimburses the state for up to 50 percent of its pipeline safety enforcement costs. Clearly, Congress's actions make a strong impact on state regulations and our companies. In addition, some states choose to impose more stringent requirements than the federal code, thus addressing specific concerns or conditions in their territory. The role of state commissions in setting pipeline safety requirements and verifying an enforcing compliance of distribution operators cannot be overemphasized. Under individual authorizations by the state, most companies have been addressing the integrity of distribution systems on a risk-based prioritization schedule. This includes leak management programs and repair-replace decisions and processes that allow the operator to ensure distribution pipelines remain safe and reliable, while using ratepayer funds in the most efficient manner. This has been taking place for at least two decades and is further improving as technology and materials developments allow more sophisticated decision-making processes as well as longer life, stronger materials. Maps of all pipelines are already available from the operator upon request by the jurisdictional state authority. Gas utilities typically provide their maps on request to key constituencies, such as emergency responders, city planners, law enforcement officials, one-call centers and residents. This is an effective system that works well for all concerned. Individual states are best positioned to determine if any additional maps or utility records should be publicly provided, but certainly a centralized database for hundreds of thousands of distribution system maps kept by federal Office of Pipeline Safety would do little to improve state oversight of an operator's system. The Difference in "Pipelines" While many may unintentionally link all "pipelines" together, there are indeed significant differences between the liquid transmission systems, natural gas transmission systems and natural gas distribution systems. Each industry faces different challenges, operating conditions and consequences of incidents. Interstate transmission systems are typically made up of long runs of generally straight pipelines occasionally crossing high-density population areas. These systems feature large diameter pipe and are operated at high volumes and high pressures. Distribution systems, in contrast, are constructed in configurations that look like a network or web, and use smaller diameter pipe. Because distribution systems are usually located in more populated areas, they are required to operate at much lower volumes and pressures, often feature thicker-walled pipe and always carry odorized gas that can be readily smelled even if a small leak occurs. It should be noted that many distribution companies also own and operate transmission pipeline segments within their systems. Federal regulations recognize the differences between these three types of pipelines, and different sets of rules have been created for each. 49 CFR Part 192 sets out the regulations for natural gas transmission and distribution and the rules discriminate between the two, while 49 CFR Part 195 sets out the regulations for liquid transmission lines. Status of Implementing the Pipeline Safety Improvement Act of 2002 Since the Pipeline Safety Improvement Act of 2002 was signed into law on December 17, 2002, many programs have been launched to specifically address implementation of the law's mandates and further safety enhancements of gas transmission and distribution systems. For gas transmission systems, integrity management for gas transmission pipelines has been the most notable of the 2002 legislative mandates. However, the law has resulted in a substantial number of significant regulatory mandates, initiatives and voluntary programs for distribution systems. A. Federal Regulatory Mandates The 2002 regulatory mandates affecting distribution systems include:
-- Direct assessment standards development 1. Integrity Management Rule for Natural Gas Transmission OPS issued the integrity management rule for natural gas transmission lines on December 12, 2003. The rule requires natural gas transmission pipeline operators to conduct periodic inspections in "high consequence areas", which for natural gas pipelines are generally high-density population areas. The nature of utility-owned transmission requires that over 50 percent of the lines under the integrity management rule be inspected using direct assessment methods. Direct assessment is an alternative to internal inspection (smart pigging) or pressure testing. It comprises a variety of screening and examination techniques to locate and identify potential problems in the pipeline. The anomalies located by direct assessment usually involve corrosion of the pipeline. Corrosion is the second leading cause of gas pipeline failures. The direct assessment process entails performing two non-invasive complementary indirect exams of the section of the pipeline targeted by engineering analysis and predictions on that section. Typical indirect exams involve different approaches in measuring electrical values, so that any variations along the pipeline can give an indication of the locations where possible anomalies might be present. They may also involve checking for corrosion inside the pipe at preset sampling locations. The pipeline is then excavated at the previously identified locations, examined and repaired if necessary. The results are compared with predictions, becoming part of a learning curve about the condition of the pipeline and facilitating future direct assessments of similar sections of pipeline. Direct assessment is estimated to cost between $7,000 and $15,000 per mile of pipeline examined, not including any necessary excavations. The latter can cost from $2,500 to $250,000 per excavation, depending on location. Many gas pipeline operators have already begun implementing the integrity rule and many more will be ready to begin assessments by the deadline on June 17, 2004. Approximately 30,000 miles of gas transmission operated by gas distribution utilities will have to be assessed under this rule. In the aggregate, for gas distribution utilities, estimated costs of compliance with this rule will exceed $3 billion in 20 years, not including integrity management pass-through costs from their gas transmission suppliers upstream, repairs, modifications, and changes in operations that may be necessary to maintain the reliability of gas supply in the face of large scale pipeline inspections and testing. 2. Direct Assessment Standards Development The 2002 pipeline safety legislation also required that the DOT issue regulations prescribing standards for inspection of a pipeline facility by direct assessment. Such standards have been prescribed for external corrosion and are now being developed for internal corrosion and for stress corrosion cracking. The standards body leading this effort is the National Association of Corrosion Engineers (NACE). These standards will also be applicable to distribution pipelines. 3. Expedite Permit Streamlining: Timely Repairs vs. Permit Delays In the Pipeline Safety Improvement Act of 2002, Congress wisely recognized that it would be poor government for one agency to prohibit or prevent a citizen from taking an action that is specifically required by another agency -- and even worse government to then penalize that citizen. And yet, this is what could happen if a federal environmental agency fails to take timely action on a permit application for a pipeline safety repair, so that work cannot begin and end by the deadline set by the natural gas IMP rule. Under that rule, integrity repairs must be completed either (1) immediately, or (2) within one year after the discovery of an anomaly, depending on the type of defect involved. If a repair is not completed by the applicable deadline, the operator is required to reduce pressure and throughput on the affected pipeline by 20% until the repair can be completed. Utilities are justifiably concerned that widespread, long-term pressure reductions would restrict supply and drive prices up. Our members estimate they must perform about 110,000 integrity inspections requiring excavation on intra-state pipelines (5 inspections per mile on average) over the next 7 years. That means there will be about 15,000 inspections per year requiring a test hole. Although we have made our best estimates, we do not yet know what percentage of these will require further excavation to repair the line. The vast majority of them will not result in repairs or replacement of pipe but most will require permits. The bottom line is that there are too many of these projects to use the traditional, time consuming process for obtaining individual permits for each and every site. Congress wisely recognized the importance of this public safety work and therefore directed federal agencies to develop a streamlined process to ensure that permits are given in time to allow timely repairs. We need a more efficient process. Please note that we do not advocate changing underlying environmental standards or requirements. Our concerns are purely with the process. We only ask that the agencies work together in a seamless, efficient and coordinated way so that this important public safety work can start and finish on time. Interstate natural gas pipelines get their permits through an integrated Federal Energy Regulatory Commission (FERC) certification process and environmental review under the National Environmental Policy Act (NEPA). In December 2002, FERC and other federal agencies entered into a Memorandum of Understanding (MOU) to coordinate and accelerate the way in which they process permits for the construction of new interstate natural gas pipelines. The 2002 MOU also covers permits for maintenance and repairs of interstate pipelines, so it has been interpreted to help streamline permits for repairs under the IMP Rule. Although AGA is pleased because some AGA members operate interstate pipelines, the 2002 FERC MOU does not cover integrity repairs on intra-state pipelines because they are not certificated by FERC. The final Pipeline Repair Streamlining MOU specifically addresses the need to expedite integrity repairs that must be done "immediately" under the IMP Rule. We are pleased that the MOU sets out the general framework for authorizing other repairs to proceed without site-specific permits, provided certain conditions are met. As I testified last month, we were concerned that the MOU contains no details regarding how this will work. Instead, the MOU delegates this difficult and essential task to a work group within the White House Interagency Taskforce. This group has little time remaining to develop a working process to streamline repair permits. Our members are on a tight schedule for beginning their integrity testing and first phase of repairs, and they will need timely authorization to begin this important public safety work. We are pleased that in the last three weeks, the interagency work group has made significant progress toward streamlining the permit process. The group has sought broad input from experts in the field to solicit ideas for creative "outside the box" solutions. They are considering some good options for ensuring environmental protection in a way that is less process-intense, acting within the authority the agencies have under existing environmental laws. The work group now plans to have a workable process in place by October 1, 2004 to ensure that timely permits can be obtained for the integrity testing and repairs that must be done in the next 18 months. AGA applauds this goal and the work group's energy, creativity and determination to protect both the environment and public safety. 4. Digit Number for One-Call Systems Congress has required the Federal Communications Commission to issue a rule that provides a toll-free 3-digit number that excavators and the public can use to easily connect to the appropriate one call center. One-call centers are designed to have personnel dispatched to the excavation site to have underground facilities -- natural gas lines, petroleum and product lines, fiber optics, telephone, electricity, water and sewer lines -- to avoid them being damaged. An easily remembered, easily advertised 3 digit number will increase the use of these vital services and therefore help avoid unnecessary accidents. The Federal Communications Commission just issued a proposed rule mandating the establishment of the 3-digit number. The leading cause of accidents on distribution pipelines comes from excavators unintentionally striking our lines. It is known as excavation damage, also commonly called "third-party damage". Year after year, these strikes cause over 60 percent of the total ruptures on utilities and the vast majority of injuries and fatalities. Preventing third-party damage is the single greatest safety goal of the natural gas distribution industry. For a single cause to be the source of almost 60 percent of all incidents is simply unacceptable. As we have done numerous times in the past, and continue to do so, we strongly urge Congress to focus attention on excavation damage prevention. A generation ago, gas, water and sewer lines were the primary underground facilities in our nation's communities. Today, with the addition of telecommunications, electric and other facilities located underground, our gas distribution pipelines are more at risk than before. Annual distribution incident statistics for the past 10 years show a clear and distinct correlation between trends in the level of construction activity and the number of incidents. If construction-related damage incidents are removed from the statistics, leaving only non-excavation damage incidents, it's clear that excavation damage incidents are on the increase, while the number of other incidents has remained relatively stable. Integrity programs such as the natural gas transmission pipeline integrity rule are better designed to address static and time-dependent factors affecting pipelines, rather than to prevent random factors such excavation damage. The latter can be due to a number of causes, many of which cannot be mitigated by the actions of the gas operator alone no matter how diligent, resourceful, or technically well equipped. We are continually urging states to require government agencies and their contractors to participate in One-Call programs. This would help eliminate some exemptions some state agencies currently have in several states from participation in One-Call. The Pipeline Safety Improvement Act of 2002 helped address this critical problem by clarifying that state departments of transportation should participate. However, there still is nothing to compel them to do so. Needless accidents continue to occur. Injuries, fatalities, property loss and disruption of services could be reduced with better use of One-Call centers and recommended practices for damage prevention. We are also continually urging gas companies to join the Common Ground Alliance damage prevention organization, which is working with a multitude of stakeholders in developing approaches to preventing and mitigating excavation damage. 5. Right-of-Way Encroachment Study The 2002 pipeline safety legislation directed DOT to work with the Federal Energy Regulatory Commission and other federal and state agencies to study the difficult problem of encroachment on pipeline rights-of-way and to report to Congress regarding proposed recommendations for improvements. DOT contracted with the National Academy of Sciences (NAS) Transportation Research Board (TRB) to study encroachment and prepare the report to Congress. Encroachment occurs where buildings and structures are placed on or very near the "no build zones" that a pipeline right-of-way represents. This is especially a problem where cities and towns expand and ultimately push up to a pipeline location that was rural when built. Last Monday, July 19, 2004, the NAS published a report concluding that OPS should work with a broad based stakeholder organization to develop risk-informed land use guidance for activities and construction near existing and future transmission pipelines. The report suggests using an entity similar to the Common Ground Alliance, which was formed to reach broad stakeholder consensus on best practices for preventing third party damage to pipelines and supported in part through federal appropriations. Of course, this new initiative will also require funding and resources through the appropriations process. We hope that the Committee will work with OPS and industry to make progress in addressing this encroachment problem. 6. Operator Qualification Standards In compliance with the 2002 legislative mandate, the OPS is leading development of a standard (ASME B31Q) for pipeline operations personnel qualification programs. This is another standard that has required significant AGA and APGA member involvement in handling both training and operational aspects. The standard is still being developed and its completion is slated for the end of this year. 7. Public Awareness Communication Effectiveness OPS is working with stakeholders from the liquids and gas industries to define what would be required to evaluate effectiveness of operator communication programs. OPS is also separately working with the states to define regulatory requirements that will cover gas utilities. AGA and APGA members have been involved via a task group to highlight the fact that flexibility is needed to avoid duplication of communication efforts already being carried out by gas utilities in their respective service territories at the local levels. 8. Infrastructure Research and Development Grants Congress significantly increased the authorization for OPS' pipeline safety research and development program to $10 million per year for four years. As OPS receives its funding primarily through user fees assessed on pipelines, these monies will likely be routinely provided. The Pipeline Safety Act of 2002 also sought to coordinate the efforts of OPS with those of the Department of Energy. Generally OPS focuses on those technologies that represent near-term development for field applications and the agency also provides matching dollars to the recipients. With the increase in inspections and repairs and the expanding use of natural gas, better ways to do the job need to be found. Industry typically cannot provide all that is needed for R&D due to the nature of the rate framework. The natural gas surcharge that the FERC allowed for many years ends this year on August 1st. FERC is considering an alternative proposal. AGA is also pursuing legislation that would establish a collaborative research program. AGA and APGA are hopeful that either the regulatory or legislative R&D funding proposal will become a reality. Either would solidify industry contributions to research. However, additional contributions for R&D are needed and AGA and APGA would welcome the opportunity to discuss with Committee members and staff the gas supply, transmission, distribution and utilization research that could be accomplished with increased public funding. B. Additional Federal Regulatory Initiatives Current federal regulatory initiatives for distribution systems include:
-- Operator qualification rule revision 1. Operator Qualification Rule Revision To comply with NTSB recommendations, OPS expects to revise the operator qualification rule to include greater specificity. This has required significant AGA and APGA member involvement to ensure our members' concerns are taken into account. AGA and APGA believe reasonable additional requirements are being developed to adequately address the NTSB concerns and will soon become part of the revised rule. 2. Public Communications Standard Development A public communications standard (API Recommended Practice 1162) designed to address a variety of audiences has been completed under the American Petroleum Institute (API) banner, with input from industry and the regulatory community. It will be referenced by OPS via rulemaking on public education and communications. 3. Better Crisis Communication OPS is working with stakeholders to define guidelines for operators to follow in issuing communications in the event of involvement in an accident involving pipelines. The most recent one occurred on a gasoline pipeline in Tucson, AZ and sparked high-profile public hearings. Distribution utilities are engaged in deliberations with the other stakeholders to ensure concerns for gas utility communications are addressed. 4. Excess Flow Valve Installation In response to an NTSB recommendation and more recently, public testimony, OPS is reconsidering whether to mandate the installation of excess flow valves on service lines. Cost-benefit studies performed to date by OPS do not adequately justify the nationwide installation of these devices on a mandatory basis unless some shaky, easily refutable assumptions are made. Mandated installation would pose a potential major added burden on AGA and APGA members that elect not to install such devices, but instead notify customers and install such devices upon request from the customer. 5. Operator Safety Performance Metrics OPS continues to look for ways to more clearly demonstrate the effectiveness of their safety programs. To this end, the agency is seeking to further improve and increase the gathering of safety performance data from operators. Federal regulators are contemplating further changes in operator reports to DOT that will also cover distribution systems. The distribution utilities remain committed to develop reasonable safety performance measurements with OPS and other stakeholders. C. Voluntary Industry Programs Voluntary industry programs involving distribution utilities include: -- 1. A government-industry group examining existing regulations and practices addressing distribution system integrity in an effort to identify needed enhancements. Along with APGA, many AGA member companies are participating in this study, which is supported by the American Gas Foundation. -- 2. In response to an NTSB recommendation, numerous gas distribution utilities have been collecting data on the performance of plastic pipe since January 2001. Government and industry stakeholders convene periodically to examine the data for areas of concern. -- 3. Continued participation in the Common Ground Alliance to promote infrastructure damage prevention through added best practices by all stakeholders, education of excavators, research and damage data collection. LDCs comply with a regulatory program that devotes stringent attention to design, construction, testing, maintenance, operation, replacement, inspection and monitoring practices. We continually refine our safety practices. Natural gas utilities spend an estimated $6.4 billion each year in safety-related activities and this figure will significantly increase once the legislative mandates adopted to date are implemented fully. Historically, approximately half of this amount is spent in compliance with federal and state regulations. The other half is spent, as part of our companies' voluntary commitment to ensure that our systems are safe and that the communities we serve are protected and products delivered. Summary In summary, many programs are under way to address implementation of the legislative mandates of 2002. They must be given sufficient time to allow verification of their effectiveness. We believe it would be premature to currently draw conclusions on the results or consequences of any of these programs. Furthermore, in view of the growing need for energy to support continued economic growth, legislative decisions on pipeline safety should support or be consistent with the needed growth in the energy delivery infrastructure. The natural gas utility industry is proud of its safety record. Natural gas has become the recognized fuel of choice by citizens, businesses and the federal government. Public safety is the top priority of natural gas utilities. We invite you to visit our facilities and observe for yourselves our employees' dedication to safety. We are committed to continue our efforts to operate safe and reliable systems and to strengthen One-Call laws and systems in every state. Thank you for providing the opportunity to present our views on the important matter of pipeline safety. We look forward to working with federal, state and local authorities and representatives, as well as within our industry, to achieve the highest possible level of public and employee safety. |
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