[Federal Register Volume 68, Number 150 (Tuesday, August 5, 2003)]
[Rules and Regulations]
[Pages 46109-46112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19752]


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DEPARTMENT OF TRANSPORTATION

Research and Special Programs Administration

49 CFR Parts 191, 192, and 195

[Docket Number RSPA-99-6132; Amdt. Nos. 191-15, 192-92, 195-72]
RIN 2137-AD42


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

AGENCY: U.S. Department of Transportation (DOT), Research and Special 
Programs Administration (RSPA).

ACTION: Final rule.

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SUMMARY: This final rule addresses the safety regulation responsibility 
for producer-operated natural gas and hazardous liquid pipelines that 
cross into State waters without first connecting to a transporting 
operator's facility on the Outer Continental Shelf (OCS). This rule 
specifies the procedures by which producer operators can petition for 
approval to operate under safety regulations governing pipeline design, 
construction, operation, and maintenance issued by either the Research 
and Special Programs Administration (RSPA) or the Department of the 
Interior (DOI), Minerals Management Service (MMS).

DATES: This rule is effective September 4, 2003.

FOR FURTHER INFORMATION: 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. The public may also review 
material in the docket by accessing the Docket Management System's home 
page at http://dms.dot.gov.

SUPPLEMENTARY INFORMATION: 

1. Background

Notice of Proposed Rulemaking

    On April 5, 2002, RSPA's Office of Pipeline Safety (OPS) published 
a notice of proposed rulemaking (67 FR 16355) that addressed safety 
regulation responsibility for producer-operated natural gas and 
hazardous liquid pipelines that cross into State waters without first 
connecting to a transporting operator's facility on the Outer 
Continental Shelf (OCS). This final rule implements that proposal.
    In May 1996, MMS and RSPA met with a joint industry workgroup, 
which was led by the American Petroleum Institute (API). The workgroup 
suggested 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. 
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). The MOU placed, to the greatest practical 
extent, OCS production pipelines under MMS safety regulation and OCS 
transportation pipelines under RSPA safety regulation.
    The MOU established a regulatory boundary on the OCS at the point 
operating responsibility for the pipeline transfers from a producing 
operator to a transporting operator. The MOU did not address regulatory 
responsibility for producer-operated pipelines that cross the Federal/
State boundary without a transfer on the OCS or producer-operated 
pipelines that flow from wells located in State waters to production 
platforms located on the OCS.
    The purpose of this final rule is to address the regulatory 
question for 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 
operators may petition to have their pipelines regulated by either RSPA 
or MMS. This rule amends 49 CFR 191.1(b)(1), 192.1(b)(1), and 
195.1(b)(5).
    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. A 
regulatory boundary point is better defined in terms of a specific 
valve 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, the pipeline segments located upstream (generally 
seaward) of the last valve on the last production facility are exempted 
from compliance with 49 CFR Parts 190-199. Safety equipment protecting 
RSPA regulated pipeline segments are not excluded.
    Under this arrangement, producer-operated pipeline facilities 
upstream (generally seaward) of the last valve on the last production 
facility on the OCS are regulated under MMS regulations. RSPA/OPS will 
continue to inspect all upstream safety equipment (including valves, 
overpressure protective devices, cathodic protection equipment, and 
pigging devices) that protect the integrity of the RSPA/OPS-regulated 
pipeline segments. This arrangement is consistent with the general 
intent of the MOU.
    However, an important principle of the industry agreement leading 
to the MOU is to allow the pipeline operators to decide the regulatory 
boundaries on or near their facilities. Therefore, producer pipeline 
operators may petition RSPA/OPS under 49 CFR 190.9 for approval to 
operate under RSPA/OPS regulations governing pipeline design, 
construction, operation, and maintenance. In considering such 
petitions, RSPA/OPS will consult with MMS and affected parties.
    This rule affects about 215 producer-operated pipelines that are 
regulated according to a now-superseded 1976 MOU between DOI and DOT. 
By exempting the producer-operated pipelines from RSPA/OPS regulation, 
this rule will reduce overlapping regulation in accordance with the MOU 
of December 10, 1996. The rulemaking

[[Page 46110]]

will have minimal economic impact on any of the affected operators.
Comments
    We received one comment on the NPRM. The commenter was concerned 
that the phrase ``[p]ipeline on the Outer Continental Shelf'' could 
cause confusion because it could imply that only the portion of the 
pipeline on the Outer Continental Shelf was affected, when in fact the 
paragraph applies to both the pipeline section on the OCS and the 
section in State waters. In order to clarify that the rule applies to 
either direction of flow, we have made minor modifications to the 
language proposed in the NPRM.
Technical Advisory Committees
    On February 6, 2001, the proposed rule was discussed at a joint 
meeting of the Technical Hazardous Liquid Pipeline Safety Standards 
Committee (THPLSSC) and the Technical Pipeline Safety Standards 
Committee (TPSSC). These statutorily mandated committees include up to 
fifteen members each from government, industry, and the general public. 
Each member is qualified to consider the technical feasibility, 
reasonableness, cost-effectiveness, and practicability of proposed 
pipeline safety standards.
    The committees voted on the proposal through a mail ballot. 
Thirteen of fifteen members of the TPSSC and seven out of twelve 
members of the THLPSSC returned ballots. All ballots returned indicated 
member agreement that the proposed rule is technically feasible, 
reasonable, cost effective, and practicable. Copies of the returned 
ballots are available in the docket for this rulemaking on the Dockets 
Management System at: http://dms.dot.gov.
Privacy Act Statement
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register of April 11, 
2000 (Volume 65, Number 70; Pages 19477-78) or you may visit the docket 
for this rulemaking in our Dockets Management System at: http://dms.dot.gov.
Regulatory Analyses and Notices

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

    The Department of Transportation (DOT) does not consider this final 
rule 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 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 this rule, the pipeline operations of a 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 the Gulf of Mexico OCS 
waters and 10 producers operating in California OCS waters. This would 
be contrary to the intent of the MOU to regulate producer-operated 
pipelines under DOI and transporter-operated pipelines under DOT.
    By implementing the rule, RSPA will bring these pipelines into 
compliance with the 1996 MOU. This should minimize confusion among 
operators concerning which regulations they are expected to follow. We 
estimate that each OCS producer operator spends on average one-half of 
a 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 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/OPS 
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/OPS will 
be about 40 hours. Based on 10 requests at 40 hours each, the total 
one-time burden of requesting to remain under RSPA/OPS 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/OPS 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 rule.
    The rule does not have a significant economic effect (more than 
$100 million). Therefore, RSPA/OPS 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 rule. 
Any indirect effects on costs or prices are anticipated to be 
negligible.
    This 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 minor economic effects of the rule will not have any impact on 
competition, employment, investment, productivity, innovation, or on 
the ability of U.S. based enterprises to compete with foreign based 
enterprises in other markets. Therefore, a Regulatory Impact Analysis 
is not required under E.O. 12866.

B. Federalism Assessment

    The 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/
OPS must consider whether a rulemaking would have a significant impact 
on a substantial number of small entities.
    MMS 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 for all operators on the OCS. Using the criterion that a 
small company is one that employs less than 500 employees, 60 operators 
are medium-to-large-size

[[Page 46111]]

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 
rule.
    Of the 150 production operators in the Gulf of Mexico, only 35 
would be directly affected by the 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 rule, and four 
of these are considered to be small. Of the small operators affected by 
the rule, almost all are represented by Standard Industrial 
Classification (SIC) Code 1311, which represents crude petroleum and 
natural gas producers.
    The larger operators affected by the rule mostly fall into either 
SIC Code 1311 (crude petroleum and natural gas producers) or SIC Code 
2911, (petroleum refining). Companies operating on the OCS and that 
fall into SIC Code 2911 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 SIC Code 4922 (natural gas 
transmission) and by SIC Code 4924 (natural gas distribution). These 
classifications mean that the operators in question normally operate as 
pipeline companies, and we anticipate that these two operators will 
choose to remain under RSPA/OPS 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 SIC 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 that 
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 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 changes in their 
business practices.
    We conclude that the 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 final rule will not have a significant economic impact 
on a substantial number of small entities.

D. Executive Order 13084

    This 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 rule 
affects the Federally managed OCS and does not affect the communities 
of the Indian tribal governments or impose any direct compliance costs, 
the funding and consultation requirements of Executive Order 13084 do 
not apply.

E. Executive Order 13132

    This rule has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 (``Federalism''). This 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 rule would not impose unfunded mandates under the Unfunded 
Mandates Reform Act of 1995. It would not result in costs of over $100 
million 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 rule does not contain information collection requirements 
estimated to affect 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 determined that 
this rule would not significantly affect the quality of the human 
environment. The Environmental Assessment of this proposal is available 
for review in the docket.

List of Subjects

49 CFR Part 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.


0
For the reasons described in this final rule, RSPA/OPS is amending 
Title 49, Parts 191, 192 and 195, Code of Federal Regulations, as 
follow:

PART 191--TRANSPORTATION OF NATURAL AND OTHER GAS BY PIPELINE; 
ANNUAL REPORTS, INCIDENT REPORTS, AND SAFETY-RELATED CONDITION 
REPORTS

0
1. The authority citation for part 191 continues to read as follows:

    Authority: 49 U.S.C. 5121, 60102, 60103, 60104, 60108, 60117, 
60118, 60124; and 49 CFR 1.53.


0
2. Amend Sec.  191.1 by revising paragraph (b) to read as follows:

[[Page 46112]]

Sec.  191.1  Scope.

* * * * *
    (b) This part does not apply to--
    (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 (OCS) that are 
producer-operated and cross into State waters without first connecting 
to a transporting operator's facility on the OCS, upstream (generally 
seaward) of the last valve on the last production facility on the OCS. 
Safety equipment protecting RSPA-regulated pipeline segments is not 
excluded. Producing operators for those pipeline segments upstream of 
the last valve of the last production facility on the OCS 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--TRANSPORTATION OF NATURAL AND OTHER GAS BY PIPELINE; 
MINIMUM FEDERAL SAFETY STANDARDS

0
1. The authority citation for Part 192 continues to read as follows:

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

0
2. Amend Sec.  192.1 by revising paragraph (b) to read as follows:


Sec.  192.1  Scope of part.

* * * * *
    (b) This part does not appy to--
    (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 (OCS) that are 
producer-operated and cross into State waters without first connecting 
to a transporting operator's facility on the OCS, upstream (generally 
seaward) of the last valve on the last production facility on the OCS. 
Safety equipment protecting RSPA-regulated pipeline segments is not 
excluded. Producing operators for those pipeline segments upstream of 
the last valve of the last production facility on the OCS 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--TRANSPORTATION OF HAZARDOUS LIQUIDS BY PIPELINE

0
1. The authority citation for Part 195 continues to read as follows:

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

0
2. Amend Sec.  195.1 by revising paragraph (b), by removing paragraphs 
(b)(5) and (b)(6) and by adding new paragraphs (b)(5), (b)(6), and 
(b)(7) to read as follows:


Sec.  195.1  Applicability.

* * * * *
    (b) This part does not apply to --
    (1) * * *
    (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 (OCS) that are 
producer-operated and cross into State waters without first connecting 
to a transporting operator's facility on the OCS, upstream (generally 
seaward) of the last valve on the last production facility on the OCS. 
Safety equipment protecting RSPA-regulated pipeline segments is not 
excluded. Producing operators for those pipeline segments upstream of 
the last valve of the last production facility on the OCS 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 July 29, 2003.
Samuel G. Bonasso,
Acting Administrator.
[FR Doc. 03-19752 Filed 8-4-03; 8:45 am]
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