October 2017 Vol. 72 No. 10

Washington Watch

Pipeline Construction Projects Move Forward With Full FERC

The Federal Energy Regulatory Commission (FERC) is off and running now that it has three commissioners to form a quorum, with two more likely to fill out the five total chairs once confirmed by the Senate, maybe as early as September. The commission started to work through the backlog of pipeline construction projects waiting for a quorum by approving the Nexus pipeline on August 28, 2017. Neil Chatterjee, the new temporary chairman; Cheryl A. LaFleur, the one holdover commissioner and Robert F. Powelson, the second new commissioner, said NEXUS “…has taken sufficient steps to minimize adverse impacts on landowners and surrounding communities.”

The Senate Energy Commission met on Sept. 7 to consider nominations of Richard Glick and Kevin McIntyre, who would be the new chairman, to FERC.
The $2 billion, 255-mile pipeline will bring shale gas from Appalachia into Michigan and Ontario, Canada. NEXUS is jointly owned by Spectra Energy Partners LP and DTE Energy Company. Spectra is a subsidiary of Enbridge.

NEXUS obtained easements for over 93 percent of the project route without the use of eminent domain. The FERC approval statement said the fact that such a large portion of the project route has been acquired without use of eminent domain strongly supports a finding that the applicants’ efforts have minimized the potential for adverse impacts on landowners and surrounding communities.

Among the next projects seemingly on track for approval is Dominion Energy’s Atlantic Coast Project (ACP), the huge, nearly 600-mile pipeline which the FERC staff blessed in a final environmental impact statement in July. Gas would come from Pennsylvania and be sent to West Virginia, Virginia and North Carolina. The staff environmental impact statement (EIS) said the project would result in limited adverse environmental impacts, with some exceptions. One concern is that numerous segments of pipeline would be constructed on steep slopes and in areas of high landslide potential. Building on slopes adjacent to water bodies can also adversely impact water quality and stream channel geometry, and therefore, downstream aquatic biota.

“We’ve made more than 300 route adjustments to avoid environmentally sensitive areas and protect important features of individual properties,” said  Leslie Hartz, Dominion Energy’s vice president, engineering and construction. “We’ve adjusted the route to avoid wetlands, public and private drinking water sources, wildlife habitats, sensitive karst terrain, and many other environmental resources. In many areas of the project, we’ve adopted some of the most protective construction methods that have ever been used by the industry.”

But environmental groups are working hard to short-circuit FERC’s expected approval. “Despite all its rhetoric, FERC continues to prove it’s nothing more than a rubber stamp for fracked gas pipelines that threaten our communities and our climate,” said Deb Self, a Sierra Club Beyond Dirty Fuels Campaign representative. Sierra and others are hoping to convince the states of West Virginia, Virginia and North Carolina to reject water quality permits, and persuade the Forest Service and Bureau of Land Management to nix the pipeline’s crossing of land in its jurisdictions.

“We fully expect to receive all state and federal approvals this fall, including the Forest Service permit and the state water quality certifications, “ said Aaron Ruby, spokesman for Dominion. He calls press releases issued by the Sierra Club “just typical bluster,” and points out that on the day the FERC issued its final EIS, the Forest Service issued a draft Record of Decision recommending approval of Atlantic’s special use permit to cross Forest Service lands.

The 303-mile Mountain Valley Pipeline, which has raised hackles from some in Appalachia who are also protesting the Atlantic Coast Pipeline, is also in front of the commissioners given the final EIS issued in late June. This pipeline runs from northwestern West Virginia to southern Virginia and will be constructed and owned by Mountain Valley Pipeline LLC, a joint venture with EQT Midstream Partners.

Rounding out the list of large, Marcellus shale-originating pipelines queued up for FERC approval is the 120-mile PennEast Pipeline which will originate in Dallas, Luzerne County, in northeastern Pennsylvania, and terminate at Transco’s pipeline interconnection near Pennington, NJ. NJR Pipeline Company, PSEG Power, SJI Midstream, Southern Company Gas, Spectra Energy Partners and UGI Energy Services are the member companies that form PennEast Pipeline Company LLC (PennEast).

Here, too, environmentalists hope to convince state agencies to block permits, in this case the New Jersey Department of Environmental Protection, which in June deemed the company’s application for a freshwater wetlands individual permit and a water quality certificate “administratively closed.”

ExxonMobil Earns Significant Legal Victory Over PHMSA

ExxonMobil Pipeline won a significant decision against the Pipeline and Hazardous Materials Safety Administration (PHMSA), when a federal appeals court threw out most of a PHMSA enforcement action and penalty related to a 2013 oil spill in Arkansas. At issue in the action was whether ExxonMobil should have known that a segment of low-frequency electric resistance welded (LF-ERW) pipe was susceptible to longitudinal seam failure under federal pipeline safety regulations, more specifically, oil pipeline integrity rules.

The Pegasus Pipeline is a 20-inch diameter pipeline approximately 850 miles in length that transports crude oil from Patoka, IL, to Nederland, TX. The failure site was in a High Consequence Area. The released product entered the community’s storm drainage system.

Susan Olenchuk, partner, Van Ness Feldman LLP, said the Fifth Circuit decision is significant because it is rare for a pipeline operator to challenge a PHMSA enforcement decision, let alone succeed. “The case also is important because, even though agencies are usually given a high degree of deference in how they interpret their own regulations, the court of appeals refused to defer to PHMSA’s interpretation of its own safety regulations in a case that arose out of high-profile and damaging rupture of a crude oil pipeline,” she explained.

Integrity rules dictate that a company determine prior to using LF-ERW whether the pipe is susceptible to longitudinal seam failure by methods “capable of assessing seam integrity….” The law neither mandates how operators should determine longitudinal seam failure, nor does the law dictate a process for operators to follow, according to a legal brief ExxonMobil filed in 2015 disputing the $2.6 million penalty PHMSA assessed.
The Fifth Circuit court, headquartered in Atlanta, wrote: “The record demonstrates that ExxonMobil satisfied its obligation to ‘consider’ various risk factors when it conducted a lengthy, repeated and in-depth analysis of those risk factors by utilizing the available industry-commissioned guidance of the Baker Report decision tree.”

The court went on to essentially chastise PHMSA by saying nothing in the regulations compels an operator to conclude that a pipeline constructed of LF-ERW pipe is susceptible to longitudinal seam failure when the pipeline has experienced seam failures. “If the agency wished to enforce outcome-based requirements instead of the process-based requirements that are currently in place with regards to seam failure susceptibility, the agency could have promulgated regulations to that effect,” stated the decision released on Aug. 14, 2017.

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