[Federal Register Volume 67, Number 66 (Friday, April 5, 2002)]
[Proposed Rules]
[Pages 16355-16358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6825]


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DEPARTMENT OF TRANSPORTATION

Research and Special Programs Administration

49 CFR Parts 191, 192, and 195

[Docket Number RSPA-99-6132]
RIN 2137-AD42


Pipeline Safety: Producer-Operated Outer Continental Shelf 
Natural Gas and Hazardous Liquid Pipelines That Cross Directly Into 
State Waters

AGENCY: Research and Special Programs Administration (RSPA), DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to implement a provision of the 
December 10, 1996, Memorandum of Understanding (MOU) between the 
Department of the Interior (DOI) and the Department of Transportation 
(DOT) regarding safety regulations of Outer Continental Shelf (OCS) 
natural gas and hazardous liquid pipelines. This rule addresses 
producer-operated natural gas and hazardous liquid pipelines that cross 
into State waters without first connecting to a transporting operator's 
facility on the OCS. This proposed rule would also address the 
procedures by which producer operators could petition for approval to 
operate under RSPA regulations governing pipeline design, construction, 
operation, and maintenance.

DATES: Comments on the subject of this proposed rule must be received 
on or before June 4, 2002.

ADDRESSES: Comments should identify the docket number of this proposed 
rule, RSPA-99-6132, and be mailed to the Dockets Facility, U.S. 
Department of Transportation, 400 Seventh Street, SW., Plaza 401, 
Washington, DC 20590-0001. You should submit the original and one copy. 
Anyone who wants confirmation of receipt of their comments must include 
a stamped, self-addressed postcard. The Dockets facility is open from 
10:00 a.m. to 5:00 p.m., Monday through Friday, except on Federal 
holidays. Alternatively, you may submit written comments to the docket 
electronically. To do so, log on to the Internet Web address http://dms.dot.gov and click on ``Help'' for instructions on electronic filing 
of comments. All written comments should identify the docket and notice 
numbers which appear in the heading of this notice.

FOR FURTHER INFORMATION CONTACT: You may contact L.E. Herrick by 
telephone at (202) 366-5523, by fax at (202) 366-4566, by mail at U.S. 
Department of Transportation, RSPA, DPS-10, room 7128, 400 Seventh 
Street, SW., Washington, DC 20590, or via e-mail to 
[email protected] regarding the subject matter of this notice. 
For copies of this notice or other material that is referenced herein 
you may contact the Dockets Facility by telephone at (202) 366-5046 or 
at the addresses listed above.

SUPPLEMENTARY INFORMATION: This rule is complementary to the RSPA 
Direct Final Rule (DFR) that addressed OCS natural gas or hazardous 
liquid pipeline facilities located upstream of the points at which 
operating responsibility for the pipeline facility transfers from a 
producing operator to a transporting operator (November 19, 1997; 62 FR 
61692 and March 16, 1998; 63 FR 12659) and to the DOI Minerals 
Management Service (MMS) rule, ``Producer Operated Pipelines that Cross 
Directly into State Waters,'' which was published in the Federal 
Register on July 27, 2000 (65 FR 46092).

Background

    In May 1996, MMS and RSPA met with a joint industry workgroup, 
which was led by the American Petroleum Institute. The workgroup 
proposed that the agencies rely upon individual operators of natural 
gas and hazardous liquid production and transportation pipeline 
facilities to identify the boundaries of their respective facilities. 
The MMS and RSPA agreed with the industry proposal and entered into an 
interagency Memorandum of Understanding (MOU) on December 10, 1996. The 
MOU was published in a joint MMS-RSPA Federal Register Notice (February 
14, 1997; 62 FR 7037-7039).
    The MOU placed, to the greatest practical extent, OCS production 
pipelines under DOI responsibility and OCS transportation pipelines 
under DOT responsibility. Therefore, RSPA has primary regulatory 
responsibility for transporter-operated pipelines and associated 
pumping or compressor facilities on the OCS, while MMS has primary 
regulatory responsibility for producer-operated facilities and 
pipelines. Producing operators are companies which are engaged in the 
extraction and processing of hydrocarbons on the OCS. Transporting 
operators are companies which are engaged in the transportation of 
those hydrocarbons from the OCS. There are approximately 150 operators 
of producer pipelines and 75 operators of transportation pipelines on 
the OCS.
    The MOU established a regulatory boundary on the OCS at the point 
where operating responsibility for the pipeline transfers from a 
producing operator to a transporting operator. The MOU did not address 
the producer-operated pipelines that cross the Federal/State boundary 
without a transfer on the OCS. However, the MOU provided the agencies 
with the flexibility to address situations that do not correspond to 
the general definition of the regulatory boundary.
    The purpose of this proposed rule is to address regulatory 
questions regarding producer-operated pipeline facilities that cross 
the Federal/State boundary without first connecting to a transporting 
operator's facility on the OCS and to establish a procedure whereby OCS 
producing operators may petition to have their pipelines regulated by 
RSPA. The rule would amend 49 CFR parts 191.1(b)(1), 192.1(b)(1) and 
195.1(b)(5).
    When we published the DFR to implement the December 1996 MOU on 
November 19, 1997 (62 FR 61692), we received comments from Chevron 
U.S.A. Production Company and Chevron Pipe Line Company in which they 
observed that the proposed regulation did not appear to allow OCS 
producer-operated pipelines to remain under DOT regulatory authority. 
The commenters requested that provision be made to allow producers to 
continue to operate under DOT regulations if approval is obtained from 
DOI.
    This arose because the regulatory boundaries in the MOU and the DFR 
were described in terms of specific points on OCS pipelines where 
operating responsibility transfers from a producing operator to a 
connecting transporting operator. The producer-operated pipelines that 
cross the Federal/State boundary into State waters without first 
connecting to a transporter-operated facility were not affected. Nor 
were the producer lines that flow from State waters to production 
platforms located on the OCS.
    Regardless of the direction of flow, producer pipelines that cross 
the Federal/State boundary are always subject to RSPA regulation on the 
portions of the lines located in State waters. However, it does not 
make operational sense to have a pipeline segment crossing the Federal/
State boundary subject to MMS regulations on the OCS side of the 
boundary and RSPA regulations on the State side of the boundary. We 
believe that a regulatory

[[Page 16356]]

boundary point is better defined in terms of a specific point that 
isolates one segment of a pipeline from another. By contrast, the 
Federal/State geographic boundary does not allow the isolation of 
facilities on each side of the boundary.
    Therefore, for producer-operated pipeline facilities that cross 
into State waters without first connecting to a transporting operator's 
facility on the OCS, we propose that pipeline segments located upstream 
(generally seaward) of the last valve on the last production facility 
(excluding pipeline risers and associated safety equipment) be exempted 
from compliance with 49 CFR parts 190-199.
    Under this arrangement, producer-operated pipeline facilities 
upstream (generally seaward) of the last valve on the last production 
facility on the OCS would be regulated under MMS regulations. RSPA 
would continue to inspect all upstream safety equipment (including 
valves, over-pressure protection devices, cathodic protection 
equipment, and pigging devices) that serve to protect the integrity of 
the RSPA-regulated pipeline segments. This arrangement is consistent 
with the general intent of the MOU. However, producer-operators whose 
lines do not transfer operating responsibility on the OCS may petition 
RSPA for a different regulatory boundary.
    An important principle of the industry agreement leading to the MOU 
is to allow the operators to agree to the regulatory boundaries on 
their facilities. Therefore, producer pipeline operators may petition 
RSPA's Office of Pipeline Safety under 49 CFR 190.9 for approval to 
operate under RSPA regulations governing pipeline design, construction, 
operation, and maintenance. In considering such petitions, the RSPA 
Administrator, or designee, will consult with the MMS and the affected 
parties.
    This proposed rule would affect about 215 producer-operated 
pipelines that are being regulated according to a now-superseded 1976 
MOU between DOI and DOT. By exempting the producer-operated pipelines 
from RSPA regulation, this rule would reduce the overlapping 
regulations in accordance with the MOU of December 10, 1996. The 
rulemaking would have minimal economic impact on any of the affected 
operators.

Regulatory Analyses and Notices

A. E.O. 12866 and DOT Regulatory Policies and Procedures

    DOT does not consider this action to be a significant regulatory 
action under section 3(f) of Executive Order 12866 (58 FR 51735; 
October 4,1993). Therefore, it was not forwarded to the Office of 
Management and Budget. This proposed rule is not significant under 
DOT's regulatory policies and procedures (44 FR 11034; February 26, 
1979). A regulatory evaluation of this proposal was prepared and placed 
in the docket of this action.
Benefits
    Without the proposed rule, the pipeline operations of a large 
number of producers with pipelines crossing directly into State waters 
could remain subject to overlapping regulations for design, 
construction, operation, and maintenance. This includes about 35 
producers in Gulf of Mexico OCS waters and 10 producers operating in 
California OCS waters. This would be contrary to the intent of the 
American Petroleum Institute and industry agreement and the MOU to 
regulate producer-operated pipelines under DOI and transporter-operated 
pipelines under DOT.
    By implementing the proposed rule, RSPA will bring these pipelines 
under the provisions of the 1996 MOU. This should serve to minimize 
confusion among operators concerning which regulations they are 
expected to follow. We estimate that each OCS producer operator spends 
on average one-half person year annually per OCS pipeline to comply 
with RSPA regulations. Assuming that a loaded wage for a person year in 
the pipeline industry is $50,000, each company could realize a savings 
of $25,000 annually ($50,000  x  0.5 person-years = $25,000). The 
annual savings to the entire industry could be as high as $1,125,000 
($25,000  x  45 operators = $1,125,000).
Costs
    The administrative costs of the proposed rule are minimal. 
Paperwork costs would arise only in cases when a producer pipeline 
operator decided to request that its pipeline continue to be regulated 
as a RSPA facility. We estimate that less than 10 producer pipeline 
operators will request to remain under RSPA regulation. We estimate 
that the time for developing each request and submitting it to MMS and 
RSPA will be about 40 hours. Based on 10 requests at 40 hours each, the 
total one-time burden of requesting to remain under RSPA regulation 
will be less than 400 hours. Based on $35 per hour, we estimate that 
the total administrative cost to respondents is less than $14,000 
($1,400 per request) during the first year that the rule is 
implemented. In the first year, nearly all producer pipeline operators 
would have decided whether to automatically convert to MMS regulation 
or apply to remain under RSPA regulation. We anticipate that in 
following years, not more than two operators a year would submit a 
request to change their regulatory status at a total cost of $2,800. 
However, for most following years it is highly unlikely that any 
request would be made as a result of the proposed rule.
    The proposed rule does not have a significant economic effect (less 
than $100 million); therefore, RSPA does not consider it to be a major 
rule. We do not expect there to be any increases in costs or prices for 
consumers, individual industries, Federal, State, or local governments, 
agencies, or geographic regions to result from implementing the 
proposed rule. Any indirect effects on costs or prices are anticipated 
to be negligible.
    This proposed rule will not create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
materially alter the budgetary impact of entitlement, grants, user 
fees, or loan programs; or raise novel legal or policy issues.
    The proposed rule will not have any effect on competition, 
employment, investment, productivity, innovation, or on the ability of 
U.S. based enterprises to compete with foreign based enterprises in 
other markets because the economic effects are minor. Therefore, a 
Regulatory Impact Analysis is not required under E.O. 12866.

B. Federalism Assessment

    The proposed rule would not have substantial direct effects on 
States, on the relationship between the Federal Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 12612 (October 30, 1987; 52 FR 41685), we have determined that 
this notice does not have sufficient Federalism implications to warrant 
preparation of a Federalism Assessment.

C. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) RSPA 
must consider whether a rulemaking would have a significant impact on a 
substantial number of small entities.
    MMS recently conducted an analysis of 150 operators on the Gulf of 
Mexico OCS. For publicly-traded operators, numbers of employees and 
annual sales are readily available on the Internet. MMS was not able to 
get information on all operators on the OCS. Using the criterion that a 
small company is one

[[Page 16357]]

that employs less than 500 employees, 60 operators are medium-to-large-
size entities. Of the remaining operators, 36 are small, based on 
available data, and 44 others were presumed to be small because no 
information about them was available on the Internet. In sum, 80 
operators on the Gulf of Mexico OCS may be considered to be small.
    The above breakdown describes the OCS sector of the natural gas and 
hazardous liquid industry as a whole and provides the wider context in 
which to examine the actual community that would be affected by the 
proposed rule.
    Of the 150 production operators in the Gulf of Mexico, only 35 
would be directly affected by the proposed rule. Of these 35 operators, 
11 are considered to be ``small.'' There are about ten producer 
pipeline operators on the Pacific OCS that may be affected by the 
proposed rule, and four of these are considered to be small. Of the 
small operators to be affected by the proposed rule, almost all are 
represented by the North American Industry Classification System 
(NAICS) code 211111, which represents crude petroleum and natural gas 
producers.
    A pipeline company (non-producer) is a ``small entity'' if it is a 
liquid pipeline company with fewer than 1,500 employees, or a natural 
gas pipeline company with gross annual receipts of $25 million or less. 
There are about 18 entities operating on the OCS that can be 
interpreted as ``small independent pipeline companies.'' These small 
pipeline companies provide transportation services for several non-
major oil or gas producers with which they have an ``arms-length'' but 
symbiotic business relationship. These companies are represented 
primarily by NAICS codes 486210 (crude petroleum pipelines) and 486210 
(natural gas transmission pipelines).
    The larger operators to be affected by the rule mostly fall into 
either NAICS Code 211111 (crude petroleum and natural gas producers), 
or NAICS Code 324110, which represents petroleum refining. Companies 
operating on the OCS and that fall into NAICS Code 324110 tend to be 
the very large integrated natural gas and hazardous liquid companies.
    Two of the larger operators in the Gulf of Mexico that have 
production pipelines are represented under NAICS Code 486210 (natural 
gas transmission), and by NAICS Code 221210 (natural gas distribution). 
These classifications mean that the operators in question normally 
operate as pipeline companies, and we anticipate that these two 
operators may choose to remain under RSPA regulation. Pipeline 
companies are considered ``small'' if they have fewer than 1,500 
employees, but both of these operators would be considered ``large'' 
under the 1,500-employee criterion.
    Natural gas and hazardous liquid production and transportation 
companies are classified under NAICS Codes by the Census Bureau. The 
Small Business Administration further classifies ``small businesses'' 
in the various offshore sectors as follows: (1) Oil and gas producers 
that have fewer than 500 employees; (2) liquid pipeline companies than 
have fewer than 1,500 employees; (3) natural gas pipeline companies 
that have gross annual receipts of $25 million or less; and (4) 
offshore oil and gas field exploration service or production service 
companies that have gross annual receipts of $5 million or less. There 
are many companies on the OCS that are ``small businesses'' by these 
definitions.
    However, the technology necessary for conducting offshore oil and 
gas exploration and development activities is very complex and costly, 
and most entities that engage in offshore activities have financial 
resources disproportionate to their numbers of employees and well 
beyond what would normally be considered ``small business.'' These 
entities customarily conduct their operations by contracting with 
offshore drilling or service companies, and therefore tend to have few 
employees in relation to their financial resources.
    There are up to 150 designated operators of leases and 75 operators 
of transmission pipelines on the OCS (both large and small operators), 
and the economic impacts on the oil and gas production and transmission 
companies directly affected would be minor. All costs imposed by the 
rule would be small compared to the normal operating and maintenance 
expenses experienced by offshore pipeline operators. Direct costs to 
industry for the entire proposed rule total less than $14,000 for the 
first year. This rule would not impose any new restrictions on small 
pipeline service companies or manufacturers, nor will it cause their 
business practices to change.
    We conclude that the proposed rule would not have a significant 
economic impact on a substantial number of small entities. Therefore, I 
certify, pursuant to section 605 of the Regulatory Flexibility Act (5 
U.S.C. 605), that this proposal will not, if implemented, have a 
significant economic impact on a substantial number of small entities. 
However, we are particularly interested in receiving comments from any 
small business operators believing otherwise. This certification is 
subject to modification as a result of a review of the comments 
received in response to this proposal.

D. Executive Order 13084

    This proposed rule has been analyzed in accordance with the 
principles and criteria contained in Executive Order 13084 
(``Consultation and Coordination with Indian Tribal Governments''). 
Because this proposed rule effects the Federally managed OCS and does 
not affect the communities of the Indian tribal governments and nor 
impose any direct compliance costs, the funding and consultation 
requirements of Executive Order 13084 do not apply.

E. Executive Order 13132

    This proposed rule has been analyzed in accordance with the 
principles and criteria contained in Executive Order 13132 
(``Federalism''). This proposed rule does not propose any regulation 
that:
    (1) Has substantial direct effects on the States, the relationship 
between the national government and the States, or the distribution of 
power and responsibilities among the various levels of government;
    (2) Imposes substantial direct compliance costs on States and local 
governments; or
    (3) Preempts state law.
    Therefore, the consultation and funding requirements of Executive 
Order 13132 (64 FR 43255; August 10, 1999) do not apply.

F. Unfunded Mandates

    This proposed rule would not impose unfunded mandates under the 
Unfunded Mandates Reform Act of 1995. It would not result in costs of 
over $100 million or more to either State, local, or tribal 
governments, in the aggregate, or to the private sector, and is the 
least burdensome alternative that achieves the objectives.

G. Paperwork Reduction Act

    This proposed rule does not contain information collection 
requirements estimated to effect more than ten respondents per year.

H. National Environmental Policy Act

    We have analyzed this action for purposes of the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.) and have determined 
that this proposed rule would not significantly affect the quality of 
the human environment. The Environmental Assessment of this proposal is 
available for review in the docket.

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I. Executive Order 13211 (Energy)

    We have reviewed this proposed rule in accordance with Executive 
Order 13211 regarding the energy of Federal regulations and have 
determined that this proposed rule does not have any adverse effects on 
energy supply, distribution, or use. Therefore, no reasonable 
alternatives to this action are necessary.

List of Subjects

49 CFR 191

    Gas, Pipeline safety. Reporting and recordkeeping requirements.

49 CFR Part 192

    Hazardous liquid, Natural gas, Pipeline safety, Pipelines, 
Reporting and recordkeeping requirements.

49 CFR Part 195

    Ammonia, Carbon dioxide, Petroleum, Pipeline safety, Reporting and 
recordkeeping requirements.

    For the reasons set out in the preamble, 49 CFR Parts 191, 192 and 
195 is proposed to be amended as follows.

PART 191--[AMENDED]

    1. The authority citation for part 191 would continue to read as 
follows:

    Authority: 49 U.S.C. 5121, 60102, 60103, 60104, 60108, 60117, 
60118, 60124; and 49 CFR 1.53.
    2. Section 191.1 would be amended by revising paragraph (b) to read 
as follows:


Sec. 191.1  Scope.

* * * * *
    (b) * * *
    (1) Offshore gathering of gas in State waters upstream from the 
outlet flange of each facility where hydrocarbons are produced or where 
produced hydrocarbons are first separated, dehydrated, or otherwise 
processed, whichever facility is farther downstream;
    (2) Pipelines on the Outer Continental Shelf that are producer-
operated and cross into State waters without first connecting to a 
transporting operator's facility, upstream (generally seaward) of the 
last valve on the last production facility (excluding pipeline risers 
and associated safety equipment). Producing operators may petition the 
Administrator, or designee, for approval to operate under RSPA 
regulations governing pipeline design, construction, operation, and 
maintenance under 49 CFR 190.9;
    (3) Pipelines on the Outer Continental Shelf upstream of the point 
at which operating responsibility transfers from a producing operator 
to a transporting operator; or
    (4) Onshore gathering of gas outside of the following areas:
    (i) An area within the limits of any incorporated or unincorporated 
city, town, or village.
    (ii) Any designated residential or commercial area such as a 
subdivision, business or shopping center, or community development.

PART 192--[AMENDED]

    1. The authority citation for Part 192 would continue to read as 
follows:

    Authority: 49 U.S.C. 5103, 60102, 60104, 60108, 60109, 60110, 
60113, 60118; and 49 CFR 1.53.

    2. Section 192.1 would be amended by revising paragraphs (b)(1) 
through (5) and adding paragraph (b)(6) to read as follows:


Sec. 192.1  Scope of part.

* * * * *
    (b) * * *
    (1) Offshore gathering of gas in State waters upstream from the 
outlet flange of each facility where hydrocarbons are produced or where 
produced hydrocarbons are first separated, dehydrated, or otherwise 
processed, whichever facility is farther downstream;
    (2) Pipelines on the Outer Continental Shelf that are producer-
operated and cross into State waters without first connecting to a 
transporting operator's facility, upstream (generally seaward) of the 
last valve on the last production facility (excluding pipeline risers 
and associated safety equipment). Producing operators may petition the 
Administrator, or designee, for approval to operate under RSPA 
regulations governing pipeline design, construction, operation, and 
maintenance under 49 CFR 190.9;
    (3) Pipelines on the Outer Continental Shelf upstream of the point 
at which operating responsibility transfers from a producing operator 
to a transporting operator;
    (4) Onshore gathering of gas outside of the following areas:
    (i) An area within the limits of any incorporated or unincorporated 
city, town, or village.
    (ii) Any designated residential or commercial area such as a 
subdivision, business or shopping center, or community development.
    (5) Onshore gathering of gas within inlets of the Gulf of Mexico 
except as provided in Sec. 192.612; or
    (6) Any pipeline system that transports only petroleum gas or 
petroleum gas/air mixtures to--
    (i) Fewer than 10 customers, if no portion of the system is located 
in a public place; or
    (ii) A single customer, if the system is located entirely on the 
customer's premises (no matter if a portion of the system is located in 
a public place).

PART 195--[AMENDED]

    1. The authority citation for Part 195 would continue to read as 
follows:

    Authority: 49 U.S.C. 5103, 60102, 60104, 60108, 60109, 60118; 
and 49 CFR 1.53.

    2. Section 195.1 would be amended by redesignating paragraphs 
(b)(7), (8) and (9) as paragraphs (b)(8), (9) and (10), respectively; 
revising paragraphs (b)(5) and (6); and adding a new paragraph (b)(7) 
to read as follows:


Sec. 195.1  Applicability.

* * * * *
    (b) * * *
    (5) Transportation of hazardous liquid or carbon dioxide in 
offshore pipelines in State waters which are located upstream from the 
outlet flange of each facility where hydrocarbons or carbon dioxide are 
produced or where produced hydrocarbons or carbon dioxide are first 
separated, dehydrated, or otherwise processed, whichever facility is 
farther downstream;
    (6) Transportation of hazardous liquid or carbon dioxide in Outer 
Continental Shelf pipelines which are located upstream of the point at 
which operating responsibility transfers from a producing operator to a 
transporting operator;
    (7) Pipelines on the Outer Continental Shelf that are producer-
operated and cross into State waters without first connecting to a 
transporting operator's facility, upstream (generally seaward) of the 
last valve on the last production facility (excluding pipeline risers 
and associated safety equipment). Producing operators may petition the 
Administrator or designee for approval to operate under RSPA 
regulations governing pipeline design, construction, operation, and 
maintenance under 49 CFR 190.9;
* * * * *

    Issued in Washington, DC on March 15, 2002.
Stacey L. Gerard,
Associate Administrator for Pipeline Safety.
[FR Doc. 02-6825 Filed 4-4-02; 8:45 am]
BILLING CODE 4910-60-P