[Federal Register Volume 64, Number 238 (Monday, December 13, 1999)]
[Notices]
[Pages 69590-69594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32203]


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DEPARTMENT OF TRANSPORTATION

Research and Special Programs Administration
[Docket No. RSPA-99-4523; Notice 2]


Pipeline Safety: Candidates for System Integrity Inspection Pilot 
Program

AGENCY: Office of Pipeline Safety, DOT.

ACTION: Notice.

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SUMMARY: The Office of Pipeline Safety (OPS) has completed an initial 
screening of three candidate companies for the System Integrity 
Inspection (SII) Pilot Program. They are Conoco Pipe Line Company, El 
Paso Natural Gas Company, and Portland Pipe Line Corporation. OPS 
believes these companies' SII project proposals satisfy the established 
eligibility and screening criteria, based on a review of each company's 
Application Letter and safety and compliance record. OPS is beginning 
discussions with these companies to explore their proposed SII projects 
in more detail. Before making its final selection of SII Pilot Program 
participants, OPS invites public comment on any aspect of a candidate 
company's participation in the SII Pilot Program. OPS will consider 
this feedback in the final selection of SII Pilot Program companies. 
OPS may later screen additional candidate companies, and will publish 
summaries of their proposals in subsequent Federal Register Notices.
    The appendix to this notice provides information on how OPS will 
examine the management processes each company employs for conducting 
and documenting internal audits for regulatory compliance.

DATES: OPS requests that comments to this Notice be submitted on or 
before February 11, 2000, so that public input can be fully considered 
before OPS selects qualified SII Pilot Program participants.

ADDRESSES: You may submit written comments to the Dockets Facility, 
U.S. Department of Transportation, Plaza 401, 400 Seventh Street, SW., 
Washington, DC 20590-0001. Comments should identify the docket number 
RSPA-99-4523. Submit the original comment document and one (1) copy. If 
you wish to receive confirmation of receipt of your comments, you must 
include a self-addressed stamped postcard. The Dockets Facility is 
located on the plaza level of the Nassif Building in Room 401, 400 
Seventh Street, SW., Washington, DC. The Dockets Facility is open from 
10 a.m. to 5 p.m., Monday

[[Page 69591]]

through Friday, except on Federal holidays. You may also submit 
comments to the docket electronically. To do so, log on to the Dockets 
Management System web site at http://dms.dot.gov. Click on Help & 
Information to obtain instructions for filing a document 
electronically.

FOR FURTHER INFORMATION CONTACT: Donald Moore (816) 426-2654 or any of 
the five OPS Regional Directors: William Gute (202) 366-4580, Frederick 
Joyner (404) 562-3530, Ivan Huntoon (816) 426-2654, Rodrick Seeley 
(713) 718-3746, or Christopher Hoidal (303) 231-5701. Contact the 
Dockets Unit, (202) 366-5046, for docket material.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Pipeline Safety (OPS) is in the process of improving 
its regulatory programs to assure greater levels of safety, 
environmental protection, and service reliability. An important part of 
this effort is re-examining the approach OPS uses to inspect interstate 
pipeline operators and searching for more effective processes. 
Traditionally, OPS inspections have focused on ensuring compliance with 
applicable pipeline safety regulations. While this focused approach 
assures that operators are complying with all regulatory requirements, 
it may not be the most effective approach to improving safety.
    The System Integrity Inspection (SII) Pilot Program is designed to 
test whether a more broad-based examination of an operator's safety and 
pipeline integrity programs, including many areas not currently 
considered during a typical inspection, will improve performance. 
Although OPS will continue to require an operator's compliance with the 
pipeline safety regulations, under the SII approach, an SII Team 
(composed of OPS and interstate agency personnel) will work 
cooperatively with the operator to address pipeline system integrity 
issues, including areas that the regulations may not address. To ensure 
continued pipeline safety regulatory compliance, a participating 
operator must conduct comprehensive internal audits for compliance that 
will be subject to external verification by OPS. To be accepted into 
the program, the candidate company must demonstrate that:
     A formal internal audit process is in place;
     Internal audits are regularly conducted;
     Audit findings are documented and communicated;
     Corrective actions to address audit findings are defined 
and implemented; and
     Corrective action status is tracked and communicated.
    After a company is accepted into the SII Pilot Program, the SII 
Team will verify internal audit records and field performance to ensure 
that the company is effectively implementing its internal audit 
process. The Appendix to the notice describes the approach OPS will use 
for conducting this verification.
    This enhancement of current inspection practices will improve 
communication and information sharing between operators and the 
government, and focus management attention and resources on the most 
important risks to pipeline safety. After reasonable experience with 
the pilot, OPS will determine whether and in what form the SII approach 
should be incorporated into the Federal pipeline safety program on a 
permanent basis.
    The Notice ``Pipeline Safety: Request for System Integrity 
Inspection Pilot Program Applications'' (63 FR 68819) published on 
December 14, 1998, announced the initiation of the SII Pilot Program, 
and requested that operators interested in participating in this 
program submit Application Letters to OPS. The Notice also described 
the SII Pilot Program, and the process to select operators for this 
program.
    OPS has completed an initial screening of three candidate companies 
for the SII Pilot Program: Conoco Pipe Line Company, El Paso Natural 
Gas Company, and Portland Pipe Line Corporation. OPS believes these 
companies' SII project proposals satisfy the eligibility and screening 
criteria delineated in the December Federal Register Notice, based on a 
review of each company's Application Letter and safety and compliance 
record. OPS has begun discussion with these companies to better 
understand their proposed SII projects. These discussions will focus 
on:
     Operating history and a more detailed description of the 
pipeline system proposed for the SII Pilot Program.
     Internal audit program and processes the operator uses to 
ensure regulatory compliance.
     System integrity activities, processes, and programs the 
operator uses to monitor, maintain, and improve pipeline integrity, 
including programs that exceed regulatory requirements in addressing 
potential safety and environmental threats from system operation.
     Management processes used to identify and prioritize the 
most significant threats to pipeline integrity, and how maintenance and 
capital projects are identified, prioritized, and implemented to 
address these threats.
     New technologies, or innovative applications of existing 
technologies, to improve operation and enhance safety and environmental 
performance.
     Performance measures to assure that a company's integrity 
management program is effective, including indicators of the company's 
understanding of pipeline system-wide condition, familiarity with and 
implementation of risk assessment and risk control approaches, 
integration and communication of system integrity-related information, 
effectiveness of its internal audit program and processes, performance 
assessment, feedback and results orientation, and visibility of company 
management commitment to safety.
    Before making its final selection of SII Pilot Program 
participants, OPS invites public comment on any aspect of a candidate 
company's participation in the SII Pilot Program. Each company's 
Application Letter is available via an internet-accessible information 
system that can be reached through the OPS web site at http://
ops.dot.gov. OPS will also consult with eligible state pipeline safety 
agencies from the states affected 1 by a proposed SII 
project. This feedback will be considered in the final selection of SII 
Pilot Program companies.
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    \1\ ``Affected states'' means states through which the pipeline 
system proposed for the SII Pilot Program passes. An eligible state 
pipeline safety agency is one that has active Interstate Agent 
status.
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    OPS may screen additional SII Pilot Program candidates in the near 
future. Summaries of their application letters will be published in 
subsequent Federal Register Notices.

II. Application Letter Summaries

    Each of three pipeline operators identified in this notice 
submitted an Application Letter to the SII Pilot Program. In these 
letters, senior management committed to improving the safety and 
environmental performance of its operations, and to the SII approach as 
a means of furthering that objective. These companies have committed to 
work with OPS, openly discussing and sharing information on integrity 
issues that might not be fully addressed through the traditional 
inspection process. The letters also summarized each company's internal 
audit process for assuring compliance, and its system integrity program 
that goes beyond the minimum regulatory requirements to address 
potential risks to its pipeline system. In discussions

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with each company, OPS intends to explore these programs in more detail 
to be sure they will support a meaningful demonstration of the SII 
approach. The remainder of this section describes the pipeline systems 
proposed for the SII Pilot Program.
    1. Conoco Pipeline Company (Conoco): Conoco is proposing a total of 
2,610 pipeline miles in nine different pipeline systems for the SII 
Pilot Program. A summary description of each system follows.
    Glacier Pipeline System: The Glacier System transports crude oil 
from the U.S.-Canadian border near Carway, Alberta, to several 
locations in Montana. The system is composed of 8-inch, 10-inch, and 
12-inch diameter mainlines, and several lateral lines that deliver oil 
to refineries in Billings and Laurel, Montana, and tank storage areas. 
The Glacier system also consists of an 8-inch diameter line that 
transports crude oil from Byron, Wyoming, to Laurel and Billings, 
Montana. The total pipeline system mileage is approximately 775 miles, 
located in Montana and Wyoming.
    Yellowstone Pipe Line Company: The Yellowstone system delivers 
refined petroleum products through a 10-inch diameter mainline and two 
6-inch diameter spurs. The mainline provides products from the 
refineries in Billings, Montana, to terminals in Bozeman, Helena, and 
Missoula, Montana, and Spokane, Washington. The Moses Lake spur 
connects Moses Lake, Washington, and Spokane. This spur includes 
delivery stations at Fairchild Air Force Base and Geiger International 
Airport. The Great Falls spur extends from Helena to Great Falls, 
Montana. The total pipeline system mileage is approximately 742 miles, 
located in Montana, Idaho, and Washington.
    Seminoe Pipeline System: The Seminoe system is located in Montana 
and Wyoming. The Seminoe system consists of an 8-inch diameter refined 
products line extending 335 miles from Billings, Montana, to Sinclair, 
Wyoming. The system passes through Casper, Wyoming, where interim 
storage tanks are located.
    Pioneer Pipe Line Company: The Pioneer system is located in Wyoming 
and Utah. The Pioneer system consists of an 8-inch diameter refined 
products pipeline, which extends 291 miles from Sinclair, Wyoming, to 
Salt Lake City, Utah. Refined products are delivered to Conoco's Rock 
Springs, Wyoming, product terminal and to Salt Lake Terminal Company's 
North Salt Lake tank storage facility.
    Rocky Mountain Pipeline System: The Rocky Mountain system is a 
crude oil system located in Wyoming and Colorado. This 288-mile system 
originates at Lance Creek, Wyoming, where it receives crude oil from 
various other pipeline companies and gathering systems. The system 
passes through Guernsey, Wyoming, and on to Cheyenne, Wyoming, 
transporting oil in 8-inch and 10-inch diameter lines. At Cheyenne, the 
oil is delivered to a refinery or to breakout tanks, where it is 
subsequently transported to Denver, Colorado, via a 10-inch diameter 
line.
    Centennial Pipeline System: The Centennial system transports crude 
oil via a 12-inch diameter pipeline from Guernsey to Cheyenne. This 82-
mile system is located entirely in Wyoming.
    Cheyenne Products Pipeline System: The Cheyenne system is a 6-inch 
diameter refined products line that extends 105 miles from Cheyenne, 
Wyoming, to Sidney, Nebraska.
    DIA Jet Fuel Pipeline System: This system transports commercial jet 
fuel from Conoco's Denver refinery to the Chase Pipe Line terminal that 
services Denver International Airport. The system consists of 8-inch, 
6-inch, and 4-inch diameter lines totaling approximately 7.5 miles.
    Denver Diesel Pipeline System: This system is a 4-inch, 2.75-mile 
pipeline that transports diesel fuel from Conoco's Denver refinery to 
the Union Pacific Railroad tank farm.
    2. El Paso Natural Gas Company (El Paso): El Paso is proposing to 
include two interstate natural gas pipelines in the SII Pilot Program. 
These systems collectively comprise over 10,000 miles of pipeline and 
are powered by 58 compressor stations.
    El Paso Natural Gas System: The El Paso system provides interstate 
gas transmission services from the major producing regions in West 
Texas, New Mexico, Colorado, and Oklahoma to industrial end-user 
customers and to local natural gas distribution companies in 
California, Nevada, Arizona, New Mexico, Texas, and northern Mexico. 
The approximately 9,870-mile system is located in Arizona, Colorado, 
New Mexico, Oklahoma, and Texas.
    Mojave Pipeline Operating Company: The Mojave system connects the 
Bakersfield, California, area with northwest Arizona, providing natural 
gas to industrial users and distribution companies in California. This 
362-mile system is located almost entirely in California with a 
compressor station just east of the Colorado River in Arizona.
    1. Portland Pipe Line Corporation (Portland): Portland Pipe Line 
Corporation, along with Montreal Pipe Line Limited, comprise the 
Portland-Montreal Pipe Line System. This system transports crude oil 
from South Portland, Maine, to Montreal East, Quebec. Portland owns the 
portion of this system that is located in the United States, and is 
proposing these facilities for the SII Pilot Program. The Portland 
portion of the system has 18-inch and 24-inch diameter pipelines laid 
side-by-side in the same right-of-way. Together these lines comprise 
332 pipeline miles traversing the states of Maine, New Hampshire, and 
Vermont. The systems enters Canada near Highwater, Quebec. The Portland 
system has a tanker unloading terminal and tank farm at South Portland, 
Maine.

III. Information Available to the Public

    The Federal Register Notice, ``Pipeline Safety: Request for System 
Integrity Inspection Pilot Program Applications'' describes the SII 
approach that will be evaluated during the Pilot Program. In addition, 
OPS provides current information on the SII Pilot Program through a web 
site that can be reached via the OPS home page at http://ops.dot.gov. 
This web site contains descriptive information about the SII Pilot 
Program, frequently asked questions and answers, and access to program-
related documents. OPS will announce its selections of SII Pilot 
Program participants through the web site. After selection, information 
on a company's performance will be available through this site. The SII 
web site also supports OPS's on-going communication and outreach 
efforts by providing an opportunity for the public to communicate 
directly to OPS using the ``Feedback'' feature on the web site. OPS 
welcomes comments and input throughout the SII Pilot Program.

    Issued in Washington, DC, on December 7, 1999.
Stacey L. Gerard,
Director, Policy, Regulations and Training.

Appendix A--Internal Audit Program Review

    An essential element of the SII Pilot Program approach is the 
operator's internal program for conducting assessments to ensure 
compliance with pipeline safety regulations. During the SII Pilot 
Program, standard inspections for compliance with the Federal 
pipeline safety regulations will not be conducted on the operator's 
system. Instead, the operator must conduct regular internal audits 
on its system to ensure compliance with applicable regulatory 
requirements. OPS will then verify the operator's internal audits 
during the annual SII Team reviews.
    For this approach to be successful, it is imperative that the 
operator have a formal, comprehensive, and effective internal audit 
program. After an operator is accepted into the SII Pilot Program, 
the SII Team will

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review its internal audit program to confirm that it ensures 
compliance with the pipeline safety regulations. During this review, 
the SII Team will examine the company's management processes for 
conducting and documenting internal audits, and will check records 
and facilities to confirm that the program is effective.
    This appendix describes the key elements of the SII Team's 
internal audit program review. It is divided into three sections. 
The first section deals with review of the internal audit program 
and processes; the second part discusses field verification of 
performance; and the final section describes the summary report 
documenting the internal audit program review.

A.1  Internal Audit Program Review

    Prior to conducting the on-site internal audit review, the SII 
Team members will review the operator's safety and environmental 
performance history, its compliance record, and the key facility and 
pipeline system design features. This will assure that the Team 
members are well-informed when they arrive at the company's offices 
so the review can quickly focus on the internal audit program and 
its documentation. This advance preparation will include:
     Reviewing recent compliance history as documented in 
Safety-Related Condition Reports, Annual Reports (for gas 
operators), compliance actions, documentation and findings from 
recent OPS or interstate agent inspections, and any accident/
incident documentation.
     Reviewing the Federal Emergency Management Agency 
(FEMA) hazard index and other information sources to identify 
geographic or environmental areas of special concern.
     Reviewing the results of the joint Operations and 
Maintenance Manual Review, and how the company has addressed any 
findings from this review.
     Obtaining information from OPS inspectors, interstate 
agents from affected states, Regional Directors, and OPS 
Headquarters Program Directors on:
     Company program strengths and innovative approaches 
to internal evaluation;
     Use of technology to support internal evaluation;
     Recurring areas of concern identified during 
inspections and receptiveness to OPS/interstate agent 
recommendations to address these issues;
     Lessons learned and actions taken following leaks, 
incidents, or other abnormal operational events; and
     State, local, or regional issues, and any public 
complaints.
    The on-site review of the operator's internal audit program will 
involve an examination of the company's internal audit program 
documentation and records, as well as interviews with key management 
personnel responsible for implementation of the process. While the 
specific SII Team review activities will be tailored for the 
company's management system and tools, the major activities are 
expected to include:
     Reviewing formal documentation of the operator's 
internal audit program. This includes the policies, procedures, 
guidelines, and manuals that describe how the company conducts its 
program. In examining this documentation, the SII Team will look for 
the following elements:
     A description of a comprehensive process assuring 
the company critically examines the operations for compliance with 
Federal pipeline safety regulations. This process should also 
include:
     Conducting internal audits,
     Documenting and communicating internal audit findings,
     Defining corrective actions to address audit findings,
     Reviewing, approving, and authorizing corrective 
actions to address findings,
     Tracking and communicating the status of corrective 
actions,
     Ensuring timely and successful completion of corrective 
actions, and closing out original audit findings,
     Documenting and communicating internal audit results to 
appropriate company management and personnel,
     Establishing the schedule by which systems or portions 
of systems are to be audited (based on risk, past performance, and 
previous audit results),
     Obtaining regulatory interpretation on potential 
compliance issues,
     Ensuring that new regulatory requirements are 
implemented appropriately and consistently, and
     Developing and updating the company's internal audit 
program documentation and procedures.
     A delineation of the roles, responsibilities, and 
authority for each of these internal audit activities.
     Training for the company's audit personnel.
     A schedule identifying which systems (or portions of 
systems) will be audited in the near-term, and the frequency at 
which all systems are evaluated for regulatory compliance.
     A description of the internal audit records and 
documentation that are prepared, and their management review and 
retention requirements.
     A management review process that periodically 
evaluates the suitability, adequacy, and effectiveness of the 
company's internal auditing process, and the need for improvements 
to the internal auditing policies, process, or procedures.
     Performance measures used by the company to 
understand, evaluate, and communicate their regulatory compliance 
status, and the effectiveness of their internal audit program.
     Interviewing key personnel involved in implementing the 
operator's internal audit process, including the managers 
responsible for the internal audit program as well as personnel who 
actually perform internal audits. The purpose of these discussions 
is to understand how the operator actually implements the internal 
audit process described in the company's program documentation.
     Meeting with company management to understand the level 
of management support and awareness of the internal audit process. 
These discussions will also address how the results of the audits 
are communicated and used in the company.
     Reviewing representative records documenting the 
internal audit process, such as:
     Completed checklists,
     Compliance tracking software output,
     Internal audit reports,
     Management summary reports,
     Corrective action tracking database output,
     Corrective action status reports,
     Transmittal letters communicating findings and 
action items to appropriate personnel, and
     Company reports documenting management review of the 
internal audit process and recommended improvements.
     Reviewing the results of internal company evaluations 
of the effectiveness of its internal audit process. This will help 
the SII Team understand how the company has evolved and improved its 
internal audit program.
    Exhibit A of the Federal Register Notice announcing the SII 
Pilot Program (63 FR 68819) delineates some key internal audit 
process features that the SII Team will be considering in conducting 
the activities listed above.

A.2  Internal Audit Field Validation

    After the review of the operator's internal audit program, 
processes, and documentation, the SII Team will conduct field 
validation checks. These validation checks will confirm that the 
operator is in compliance, and that the operator's internal audit 
program has been effective in identifying and correcting any 
noncompliance situations. These field validation checks will serve 
to further verify the effective implementation of the internal audit 
process.
    The selection of field inspection sites will consider the 
operator's internal audit findings and exceptions, system 
performance data, and accident/incident information. Where possible, 
the SII Team will perform an integrated review of information from a 
variety of sources (e.g., internal inspection results, close 
interval surveys, leak history, and other observed conditions) in 
selecting field validation check sites. Portions of the system that 
are crucial for public and environmental protection and operations 
reliability will be given special emphasis by OPS in selecting field 
validation sites. In addition, OPS has also identified several 
specific areas that will be given high priority in field validation 
site selection:
     Pipe in, across, or over bridges, streams, national 
parks, wild and scenic rivers, cultural areas, populated areas, 
wetlands, environmentally sensitive areas, large reservoirs and 
aquifers with water for human consumption, high hazard and high 
consequence areas (as identified in FEMA reports);
     Pipe at supports;
     Locations with marginal cathodic potential readings, 
including those identified during close interval surveys, or areas 
where disbonded coating is suspect;
     Right-of-way locations where there may be localized 
issues or areas of unique interest identified in patrolling records;

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     Locations with anomalous or unusual SCADA system 
output;
     Locations with ongoing operation/maintenance (e.g., re-
coating, lowering in-service lines, or pipe replacement activities);
     Rehabilitation projects, condition of rehabilitated 
pipe and coatings;
     Class location change sites; and
     Overpressure device settings.
    During the field validation checks, the SII Team will examine 
records, equipment used to transport and treat the product, and 
other evidence to confirm compliance. The Team will also interview 
selected field personnel to give the Team a practical perspective 
from which to review field records and other evidence. These 
discussions will also help the SII Team understand how well the 
company's internal audit process is institutionalized, and the 
operator's commitment to compliance.

A.3  Summary Report

    After the SII Team has completed the internal audit program 
review and the field validation checks, the Team will prepare a 
summary report. This summary report will contain the SII Team's 
observations on the operator's internal audit program and processes, 
as well as on the effectiveness of this program in achieving 
compliance. The report will document the positive features of the 
company's internal audit program and any areas that need 
improvement. If the SII Team and the operator have agreed upon 
specific internal audit programmatic improvements that must be made, 
these improvements will be articulated in the report, as well as a 
schedule for their completion. If any compliance issues are 
discovered during the review, the resolution of those issues will be 
included in this report.

[FR Doc. 99-32203 Filed 12-10-99; 8:45 am]
BILLING CODE 4910-60-P