# Pipeline Safety: Cost Recovery for Siting Reviews for LNG Facilities

- **operation:** document
- **citation:** 89 FR 67040
- **title:** Pipeline Safety: Cost Recovery for Siting Reviews for LNG Facilities
- **source type:** rulemaking
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** proposed
- **official:** true
- **published on:** 2024-08-19
- **effective on:** Not available
- **summary:** PHMSA is proposing a new fee for cost recovery for siting reviews of liquefied natural gas (LNG) facility project applications where the design and construction costs total $2.5 billion or more. This proposed rule is necessary to implement section 103 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (PIPES Act of 2020), and to help provide adequate resources for siting reviews to promote the public safety and environmental protection objectives of the Office of Pipeline Safety (OPS). This proposed rule also revises current regulations authorizing PHMSA's cost recovery for design safety reviews of gas, hazardous liquid, and carbon dioxide pipeline facilities to improve the clarity of the regulations and reduce unnecessary administrative burdens.
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Federal Register, Volume 89 Issue 160 (Monday, August 19, 2024) [Federal Register Volume 89, Number 160 (Monday, August 19, 2024)] [Proposed Rules] [Pages 67040-67056] From the Federal Register Online via the Government Publishing Office [ www.gpo.gov ] [FR Doc No: 2024-18138] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Pipeline and Hazardous Materials Safety Administration 49 CFR Part 190 [Docket No. PHMSA-2022-0118] RIN 2137-AF61 Pipeline Safety: Cost Recovery for Siting Reviews for LNG Facilities AGENCY: Pipeline and Hazardous Materials Safety Administration [[Page 67041]] (PHMSA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). ----------------------------------------------------------------------- SUMMARY: PHMSA is proposing a new fee for cost recovery for siting reviews of liquefied natural gas (LNG) facility project applications where the design and construction costs total $2.5 billion or more. This proposed rule is necessary to implement section 103 of the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (PIPES Act of 2020), and to help provide adequate resources for siting reviews to promote the public safety and environmental protection objectives of the Office of Pipeline Safety (OPS). This proposed rule also revises current regulations authorizing PHMSA's cost recovery for design safety reviews of gas, hazardous liquid, and carbon dioxide pipeline facilities to improve the clarity of the regulations and reduce unnecessary administrative burdens. DATES: Individuals interested in submitting written comments on this NPRM must do so by October 18, 2024. ADDRESSES: Comments should reference Docket No. PHMSA-2022-0118 and may be submitted in any of the following ways: E-Gov Web: http://www.regulations.gov . This site allows the public to enter comments on any Federal Register notice issued by any agency. Follow the online instructions for submitting comments. Mail: Docket Management System: U.S. Department of Transportation, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590-0001. Hand Delivery: DOT Docket Management System: West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, between 9:00 a.m. and 5:00 p.m. EST, Monday through Friday, except federal holidays. Fax: 202-493-2251. Instructions: Include the agency name and identify Docket No. PHMSA-2022-0118 at the beginning of your comments. Note that all comments received will be posted without change to https://www.regulations.gov including any personal information provided. If you submit your comments by mail, submit two copies. If you wish to receive confirmation that PHMSA received your comments, include a self- addressed stamped postcard. Confidential Business Information: Confidential Business Information (CBI) is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments in response to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Pursuant to 49 Code of Federal Regulations (CFR) 190.343, you may ask PHMSA to provide confidential treatment to the information you give to the agency by taking the following steps: (1) mark each page of the original document submission containing CBI as ``Confidential;'' (2) send PHMSA a copy of the original document with the CBI deleted along with the original, unaltered document; and (3) explain why the information you are submitting is CBI. Submissions containing CBI should be sent to Alyssa Imam, 1200 New Jersey Avenue SE, DOT: PHMSA-PHP-30, Washington, DC 20590-0001. Any comment PHMSA receives that is not explicitly designated as CBI will be placed in the public docket. Privacy Act Statement In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to www.regulations.gov , as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy . Docket: To access the docket, which contains background documents and any comments that PHMSA has received, go to https://www.regulations.gov . Follow the online instructions for accessing the docket. Alternatively, you may review the documents in person at DOT's Docket Management Office at the address listed above. FOR FURTHER INFORMATION CONTACT: Alyssa Imam by telephone at 202-738- 4203 or via email at [email protected] . SUPPLEMENTARY INFORMATION: I. Summary II. Background and Justification III. Proposed Amendments IV. Section-by-Section Analysis V. Regulatory Analyses and Notices I. Summary This proposed rulemaking would implement a mandate in the PIPES Act of 2020 (Pub. L. 116-260, Division R) to amend the pipeline safety regulations (49 CFR parts 190-199) to prescribe a fee assessment methodology for PHMSA to recover its costs in performing 49 CFR part 193, subpart B, siting reviews of applications for new or expanded LNG facilities with project design and construction costs totaling $2.5 billion or more. PHMSA expects that the cost recovery mechanisms proposed in this NPRM will help ensure that PHMSA maintains adequate resources to perform those siting reviews without diverting its limited resources from other critical dimensions of its regulatory oversight of jurisdictional gas (including LNG), hazardous liquid, and carbon dioxide pipeline facilities, while ensuring the costs associated with the review are borne by the project applicant rather than by all pipeline operators through the expenditure of operator user fees. The proposed rule would also revise current regulations authorizing PHMSA's cost recovery for design safety reviews of gas, hazardous liquid, and carbon dioxide pipeline facilities to improve the clarity of the regulations and reduce unnecessary administrative burdens. II. Background and Justification PHMSA conducts both a facility design safety review and siting review of LNG facilities under part 193. PHMSA conducts facility design safety reviews in connection with applications to the Federal Energy Regulatory Commission (FERC) or state regulators (as applicable) to construct, expand, or operate gas (including LNG) and hazardous liquid (as well as carbon dioxide \1\) pipeline facilities; those reviews include reviews of application materials and inspections verifying construction in accordance with the application and pipeline safety regulations. --------------------------------------------------------------------------- \1\ PHMSA in a parallel rulemaking (under RIN2137-AF64) will consider expanding the carbon dioxide pipelines subject to PHMSA regulation--and by extension, the pipelines subject to cost recovery under part 190 for PHMSA's design safety reviews. --------------------------------------------------------------------------- Prior to the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (2011 Act, Pub. L. 112-90), PHMSA did not recover costs incurred for conducting facility design safety reviews for LNG facilities or any other pipelines. Section 13 of the 2011 Act, 49 U.S.C. 60117(o), authorized PHMSA to recover costs for facility design safety reviews if the project application either involved design and construction costs totaling at least $2.5 billion, or involved new or novel technologies, designs (such as LNG facilities, whose design, construction, and employed technology will often materially change from one project to the next), or new materials. While the 2011 Act allowed PHMSA to [[Page 67042]] recover fees for its costs incurred in performing facility design safety reviews, the 2011 Act did not allow PHMSA to expend any collected fees absent specific appropriation by Congress. In 2017, PHMSA exercised the authority granted in section 13(a) of the 2011 Act by prescribing a fee structure and assessment methodology based on the costs of providing design safety reviews of applications for gas (including LNG) or hazardous liquid (including carbon dioxide) pipeline facilities.\2\ In that final rule, PHMSA amended the pipeline safety regulations at part 190, subpart E, to prescribe a fee structure and assessment methodology for recovering costs associated with design safety reviews of applications for new projects for gas, hazardous liquid, LNG, and carbon dioxide pipeline facilities (each with design and construction costs totaling at least $2.5 billion, or that contain new and novel technologies). --------------------------------------------------------------------------- \2\ PHMSA, ``Final Rule--Pipeline Safety: Operator Qualification, Cost Recovery, Accident and Incident Notification, and Other Pipeline Safety Changes,'' 82 FR 7972 (Jan. 23, 2017). --------------------------------------------------------------------------- PHMSA is also responsible for the review of LNG facility siting; that review is an input to FERC's evaluation of applications for authorization to construct and operate a new LNG facility (or an expansion of an existing LNG facility). During the LNG facility siting review, PHMSA assesses the siting packages prepared by the applicants for new or expanded LNG facility projects for compliance with siting regulations at part 193, subpart B. PHMSA had historically not been authorized by statute to assess fees recovering its costs associated with those reviews.\3\ However, in section 103 of the PIPES Act of 2020, Congress added a new statutory mandate at 49 U.S.C. 60303 allowing PHMSA to collect fees directly from operators of LNG facilities to recover the necessary expenses PHMSA incurs to perform subpart B siting reviews in connection with applications for new or expanded, large ($2.5 billion or more project design and construction cost). But Congress did not make that new statutory authority self-executing; rather, in 49 U.S.C. 60303(b)(1), Congress directed PHMSA to ``prescribe procedures'' for collection of those fees. And although Congress omitted from the statutory language at 49 U.S.C. 60303 explicit authorization to use fees collected from operators without subsequent congressional appropriations, in the Consolidated Appropriations Act of 2023 (2023 Act, Pub. L. 117-328), Congress appropriated $400,000 to the Liquefied Natural Gas Siting Account for use of any monies collected from cost recovery for LNG facility subpart B siting reviews.\4\ --------------------------------------------------------------------------- \3\ PHMSA notes that for a period of time it worked around this legislative gap by entering into a Memorandum of Understanding and related Interagency Agreement with FERC by which FERC reimbursed PHMSA for the latter's part 193, subpart B, siting reviews. Memorandum of Understanding (MOU) https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/docs/news/64706/ferc-phmsa-mou.pdf . The Interagency Agreement was extended several times before expiring in September 2022. \4\ Absent action by Congress, the funds appropriated by the 2023 Act will expire at the end of FY2025 (Oct. 1, 2025). --------------------------------------------------------------------------- Therefore, PHMSA proposes in this NPRM to implement the section 103 mandate in the PIPES Act of 2020 by amending its existing cost recovery regulations at part 190, subpart E, to establish procedures for assessment and recovery of its necessary expenses in performing part 193, subpart B, siting reviews for applications for large ($2.5 billion or more) projects for new or expanded LNG facilities. PHMSA understands that codification of those procedures within its regulations is a prerequisite for PHMSA accessing funds appropriated by Congress for such reviews in the 2023 Act and any future appropriations legislation. Cost recovery of LNG facility siting reviews also ensures the beneficiaries of those reviews (some of whom may not pay PHMSA any user fees pursuant to 49 U.S.C. 60301) bear the costs, rather than other pipeline operators via their own annual user fee obligations. PHMSA also notes that its access to funds recovering the costs of its part 193, subpart B, siting reviews is critically important given the increasing strain placed on its limited resources by such reviews. Many of the same PHMSA personnel performing part 193, subpart B, siting reviews are also responsible for other regulatory oversight activities (e.g., design safety reviews, inspections, enforcement, and guidance and regulation development) related to LNG facilities and other jurisdictional pipeline facilities. This challenge has become increasingly pressing in recent years, as PHMSA has performed part 193, subpart B, siting reviews in connection with dozens of new or expanded LNG facilities of different sizes and project costs. OPS reports that among those facilities, large projects (in particular, those projects with design and construction costs of $2.5 billion or more) have proven the most challenging. OPS estimates that PHMSA engineers and support personnel have historically spent an aggregate of around 550 person- hours--roughly equivalent to a quarter of the total working hours a single PHMSA engineer works in a year--on each part 193, subpart B, siting review conducted for those projects.\5\ Lastly, the demands on PHMSA personnel resources in performing LNG facility siting reviews comes at the same moment as PHMSA's jurisdictional responsibilities have increased. PHMSA has recently expanded the scope of pipeline facilities for which it provides regulatory oversight to include Type C gas gathering pipelines, and in a forthcoming rulemaking consider expanding the scope of its part 195 regulations to address increased interest in expansion of pipeline infrastructure supporting carbon capture, use, and sequestration applications.\6\ --------------------------------------------------------------------------- \5\ PHMSA also notes that many of the large LNG facility projects in fact involve two part 193, subpart B, siting reviews, each consisting of nearly identical work efforts--one in advance of issuance of a FERC certificate authorizing construction and operation of a facility, and another in response to material changes in the design of the facility during the construction phase. \6\ PHMSA, ``Final Rule--Safety of Gas Gathering Pipelines: Extension of Reporting Requirements, Regulation of Large, High- Pressure Lines, and Other Related Amendments,'' 86 FR 63266 (Nov. 15, 2021); see also n.1 above. --------------------------------------------------------------------------- III. Proposed Amendments The existing regulations in 49 CFR part 190, subpart E, prescribe a fee structure and assessment methodology for recovering costs from design safety reviews of applications to FERC for new or expanded gas, LNG, hazardous liquid, and carbon dioxide pipeline facility projects with either project design and construction costs totaling at least $2.5 billion, or that contain new or novel technologies and designs. PHMSA proposes to revise part 190, subpart E, to also prescribe a fee structure and assessment methodology for recovering costs associated with its 49 CFR part 193, subpart B, siting reviews of applications for new or expanded LNG facility projects with design and construction costs totaling at least $2.5 billion. This proposal will execute PHMSA's authority granted in section 103 of the PIPES Act of 2020; PHMSA expects the commercial, public safety, and environmental benefits of this NPRM's proposed regulatory amendments described herein will outweigh any associated costs and support PHMSA's proposed rule compared to alternatives. PHMSA's proposed regulatory amendments are expected to improve public safety and reduce threats to the environment by ensuring that PHMSA has adequate funding to perform high-quality part 193, subpart B, LNG facility siting reviews without diverting resources from other critical regulatory [[Page 67043]] oversight functions over jurisdictional gas (including LNG), hazardous liquid, and carbon dioxide pipeline facilities. The proposed amendments also ensure that the costs of performing siting reviews are borne by the project applicants rather than through annual user fees paid by all pipeline facility operators. PHMSA also expects its proposed amendments would be technically feasible, reasonable, cost-effective, and practicable for affected entities seeking FERC authorization for large ($2.5 billion or more) LNG facility project applications. PHMSA's proposed requirement that applicants provide notice and supporting documentation to PHMSA in parallel with submission of their certificate application to FERC is an incremental addition on existing FERC procedural requirements. And although PHMSA's proposed fees for LNG facility part 193, subpart B, siting reviews would be a new line item cost for such applicants, PHMSA's projections for those fees for each review (found in section V.B below) would be trivial (roughly 0.0024 percent) compared to the $2.5 billion minimum design and construction costs of pertinent project applications. Further, PHMSA has designed its proposed approach to imposing fees in a way that maximizes regulatory certainty for affected entities. Specifically, PHMSA is proposing each part 193, subpart B, siting review fee to consist of (1) an up-front fee for estimated costs calculated from historical personnel costs involved in performing siting reviews for LNG facility project applications with design and construction costs of $2.5 billion or more; and (2) a true-up payment to PHMSA at conclusion of that review should PHMSA's costs exceed the fee paid up-front based on PHMSA's estimated historical personnel costs. PHMSA's timely access to adequate financial resources to perform part 193, subpart B, siting reviews as those reviews initiate also benefits project applicants by facilitating timely completion of such reviews, while ensuring that PHMSA complies with the applicable legal requirements under appropriations law and 49 U.S.C. 60303. Viewed against those considerations and the compliance costs estimated in section V.A of this NPRM, PHMSA expects its proposed amendments will be a cost- effective approach to achieving the commercial, public safety, and environmental benefits discussed herein. Lastly, PHMSA believes that its proposed compliance timelines--based on an effective date of the proposed requirement of 120 days after publication of a final rule in this proceeding (which would be in addition to the time since issuance of this NPRM)--would provide affected project applicants ample time to manage any related compliance costs. A. Expand the Scope of and Criteria for Cost Recovery To Include LNG Facility Siting Reviews (Sec. Sec. 190.401 and 190.403) Section 190.401 describes the scope of the part 190, subpart E, cost recovery requirements, which currently do not allow for cost recovery for part 193, subpart B, siting reviews for LNG facility project applications. PHMSA proposes to amend the scope of its cost recovery regulation at Sec. 190.401 to add a new paragraph (b) extending that provision's scope to include siting reviews for large ($2.5 billion or more design and construction costs) LNG facility project applications, and require the applicant proposing a project to pay fees for the costs incurred by PHMSA relating to such reviews. This amendment would execute the mandate in section 103 of the PIPES Act of 2020 that PHMSA collect costs incurred for performing those LNG facility siting reviews of applications for new or expanded LNG facility projects with project design and construction costs totaling at least $2.5 billion. This change would also clarify that cost recovery for those LNG facility siting reviews must meet the criteria for applicability specified in Sec. 190.403. PHMSA also proposes a clerical amendment to existing language listing pipeline facilities subject to cost recovery to better align the existing text of Sec. 190.401 (relocated within a new paragraph (a)) with the applicability requirements in Sec. 190.403. Section 190.403 specifies which applications \7\ for pipeline facility projects are subject to cost recovery requirements. PHMSA has reviewed the current regulatory language in paragraph (a) of that provision and has concluded that much of that language is expansive enough that it does not need amendment to allow for cost recovery of PHMSA's part 193, subpart B, siting reviews. The language in paragraph (a) refers broadly to ``applications'' for ``projects'' without explicitly limiting those projects in terms of the type of review (e.g., those governing design safety reviews or LNG facility siting reviews) PHMSA conducts. Paragraph (a) also employs a monetary threshold for each project application subject to PHMSA cost recovery (project design and construction costs of least $2.5 billion) that is identical to the threshold identified in the statutory authorization for part 193, subpart B, siting review cost recovery in section 103 of the PIPES Act of 2020. However, because PHMSA understands that applications to FERC for LNG facilities do not always contain estimated design and construction costs for those facilities,\8\ PHMSA proposes amendment of existing paragraph (a)(ii) to provide for forwarding to PHMSA of a good faith estimate of design and construction costs for those projects that do not include such estimated costs in their FERC application. PHMSA has also revised and relocated within a new paragraph (a)(1)(iii) other language within existing paragraph (a)(1)(ii) describing the cost elements informing development of such good faith estimates. PHMSA also proposes a conforming revision to paragraph (c) clarifying that the estimated costs of design and construction of a pipeline facility is among the ``related materials'' applicants should submit to PHMSA pursuant to Sec. 190.403. --------------------------------------------------------------------------- \7\ PHMSA does not expect that entities engaging in mandatory or discretionary pre-filing processes with FERC or those other authorities need to notify PHMSA until formal submission of their project application. \8\ PHMSA also understands that applicants for FERC certificates for LNG facility projects will often submit with their application for the LNG facility an application for the gas supply pipeline connecting the LNG facility to the interstate gas transmission system. Because PHMSA understands its $2.5 billion monetary threshold applies only to the design and construction costs for the LNG facility itself (and not its natural gas supply pipeline), PHMSA expects that applicants will distinguish between the costs of those facilities when submitting notifications to PHMSA as proposed in this NPRM. --------------------------------------------------------------------------- Paragraph (b) of Sec. 190.403 also currently contains language codifying in regulation the statutory language at 49 U.S.C. 60117(o)(1)(A) barring PHMSA from ``double-dipping'' to recover costs for the same design/construction reviews via both its cost recovery authority pursuant to 49 U.S.C. 60117(o) and its authority to impose user fees pursuant to 49 U.S.C. 60301. Specifically, paragraph (b) states that ``[t]he Associate Administrator may not collect design safety review fees under this section [implementing 49 U.S.C. 60117(o)] and 49 U.S.C. 60301 for the same design safety review.'' The PIPES Act of 2020 codified at 49 U.S.C. 60303(a)(2) an analogous prohibition preventing PHMSA from ``double-dipping'' to recover costs associated with its part 193, subpart B, siting reviews for LNG facilities pursuant to both 49 U.S.C. 60303 and either of its 49 U.S.C. 60117(o) design/construction cost recovery authority or its 49 U.S.C. [[Page 67044]] 60301 user fee authority.\9\ PHMSA therefore proposes to amend Sec. 190.403(b) to incorporate that new statutory prohibition into regulation. PHMSA has also made clerical amendments to the existing Sec. 190.403(b) to accommodate the addition of that new statutory prohibition. --------------------------------------------------------------------------- \9\ Should an applicant for an LNG facility project voluntarily request PHMSA consider design and construction elements within PHMSA's part 193, subpart B, siting review, PHMSA reserves discretion to recover costs for review of those elements during one or both of its part 193, subparts B (siting) or C and D (design & construction) safety reviews. --------------------------------------------------------------------------- Lastly, PHMSA's proposal would make changes in Sec. 190.403 to identify materials it reviews when performing a part 193, subpart B, LNG facility siting review. Specifically, PHMSA proposes a new paragraph (d)--modeled on existing paragraph (c) identifying materials PHMSA reviews in connection with its design safety reviews for gas (including LNG), hazardous liquid, and carbon dioxide pipelines--for part 193, subpart B, LNG facility siting reviews. From those materials, the Associate Administrator shall develop and provide, as soon as practicable after notification of an application pursuant to Sec. 190.405, an estimated cost for performing that review. PHMSA has chosen this approach for cost recovery for LNG facility siting reviews to ensure it has adequate resources in place to perform such reviews on initiation, thereby avoiding the need for protracted negotiation of a Master Agreement as provided by existing part 190, subpart E, cost recovery for design safety reviews. B. Expand Notification Requirements To Include Applications for LNG Facility Projects With Design and Construction Costs Totaling or Exceeding $2.5 Billion (Sec. 190.405) Section 190.405 requires the applicant for any new pipeline facility project in which PHMSA will conduct a design safety review to notify PHMSA and provide with that notification specific materials that (including the design specifications and construction plans and procedures) PHMSA will typically examine during such reviews. Section 190.405 also identifies a 90-day target for PHMSA to provide the applicant its written feedback on those materials. PHMSA now proposes a handful of amendments of Sec. 190.405 for improved cost recovery procedural mechanics and to accommodate extension of that provision's notification requirements to part 193, subpart B, siting reviews for LNG facility project applications. Specifically, PHMSA proposes redesignating the existing text in Sec. 190.405 as a new paragraph (a), and amending that language to explicitly address part 193, subpart B, LNG facility siting reviews. Consistent with its proposed expansion of the Sec. 193.405 notification requirement, PHMSA also proposes adding examples of additional siting-related activities (e.g., site preparation) that are important milestones related to siting of an LNG facility within the list of existing design/construction-focused activities triggering the Sec. 193.405 documentation requirement. PHMSA also proposes a new paragraph (b) stating that it reserves discretion to delay initiation of its part 193, subpart B, LNG facility siting reviews until receipt of payment in full of the estimated review costs provided for a project application pursuant to proposed Sec. 190.403(d). PHMSA also proposes a new paragraph (c) stating explicitly that LNG facility project applicants seeking part 193, subpart B, LNG facility siting reviews must provide PHMSA timely notification of both material changes to an application (i.e., changes to project applications resulting in significant changes to the materials submitted to PHMSA pursuant to Sec. 190.405(a)) and any change in the estimated design and construction costs for the project (e.g., as a result of those changes to the design and construction of the facilities, or increased labor, material, or financing costs) that would result in the project meeting or exceeding the monetary threshold in Sec. 190.403(a)(1).\10\ LNG facilities are time, capital, labor, and material-intensive projects--changes in the cost of one or more of those factors may result in design and construction costs rising significantly between submission of a FERC application and completion of construction. PHMSA's proposed change would ensure that PHMSA will be able to recover its costs in conducting part 193, subpart B, LNG facility siting reviews as project costs increase above the $2.5 billion monetary threshold for cost recovery. Similarly, design changes during the construction phase of an LNG facility project (i.e., after issuance of the FERC certificate) may materially affect assumptions supporting the analysis within PHMSA's part 193, subpart B, siting review, necessitating PHMSA perform that review again. Notification of those design changes will facilitate PHMSA's recovery of its costs in performing any additional part 193, subpart B, siting reviews required by material changes to facility design during construction. --------------------------------------------------------------------------- \10\ PHMSA expects that cost recovery for part 193, subpart B, siting reviews proposed herein will attach to any notification-- whether an initial notification per proposed paragraph (a), or a later notification per proposed paragraph (c)--submitted to PHMSA after the effective date of a final rule in this proceeding. --------------------------------------------------------------------------- C. Conform Amendments to Master Agreement Requirements for Facility Design Safety Reviews (Sec. 190.407) Section 190.407 describes the content of Master Agreements entered into between PHMSA and applicants for those projects the Associate Administrator has determined recovery of PHMSA's costs in performing facility design safety reviews is necessary. PHMSA proposes clarifying revisions to the prefatory language of this provision to reflect the expansion of part 190, subpart E, cost recovery procedures to allow for cost recovery for part 193, subpart B, LNG facility siting reviews. D. Expand Fee Structure To Include LNG Siting Reviews (Sec. 190.409) Section 190.409 describes the cost recovery fee structure for design reviews of gas (including LNG), hazardous liquid, and carbon dioxide pipeline facilities with overall design and construction costs totaling at least $2.5 billion, or that contain new or novel technologies and designs. PHMSA proposes adding LNG siting reviews to Sec. 190.409 with no change to the species of qualifying costs identified in this provision. PHMSA proposes revising the introductory text to codify that the basis of the fees that PHMSA will charge is to recover the costs for LNG facility siting reviews. Applicable to all facilities, PHMSA is also proposing to remove the definition of ``necessary for'' in Sec. 190.409. In the context of the fee structure, Sec. 190.409 currently states that the costs will be based only on costs ``necessary for'' conducting the facility design safety review. Section 190.409 goes on to state that ``necessary for'' means ``that but for the facility design safety review, the costs would not have been incurred and that the costs cover only those activities and items without which the facility design safety review cannot be completed.'' PHMSA is proposing to remove this definition from this section to improve the readability of Sec. 190.409, and to avoid confusion regarding what is or is not a cost that would not have been incurred ``but for'' a design safety or LNG facility siting review. PHMSA notes that some of the same PHMSA personnel may continue to perform regulatory oversight of compliance with pipeline safety regulations before and after reviews subject to part 190, subpart E, cost recovery are completed such that attribution of personnel costs exclusively to that review will prove impracticable in practice. That said, [[Page 67045]] PHMSA notes that other existing or proposed procedural mechanics in part 190, subpart E, will serve the same purpose as the deleted reference to ``necessary'' costs by addressing the double-dipping concern that had motivated introduction of that language in Sec. 190.409. First, the language at Sec. 190.409(b) would codify in regulation the statutory prohibitions against double-dipping at 49 U.S.C. 60117(o)(1)(A) and 49 U.S.C. 60303(a)(2). Second, the negotiation of Master Agreements (to include audit rights) for design safety reviews pursuant to Sec. 190.407(a)(3) would provide opportunities for applicants to ensure PHMSA's cost recovery is focused on its bona fide costs in performing those reviews. Third, and lastly, PHMSA has designed the fee structure for LNG facility siting reviews proposed herein based on historical personnel costs in performing those reviews. E. Modify Billing and Payment Procedures To Require Payment Upon Receipt (Sec. 190.411) Section 190.411 describes the procedural mechanics for billing and payment of facility design safety reviews for which the Associate Administrator has determined that cost recovery is necessary. PHMSA proposes several amendments to this provision to introduce procedures specific to billing and payment of fees for PHMSA's costs in performing part 193, subpart B, LNG facility siting reviews. First, PHMSA proposes to redesignate the current prefatory text governing billing and payment of fees for design safety reviews as a new paragraph (a); current paragraphs (a) through (d) will be redesignated as paragraphs (a)(1) through (4). Second, PHMSA proposes redesignating as a new paragraph (c) current language at paragraph (e) asserting its discretion to exercise regulatory oversight notwithstanding any receipt of fees for recovery of its costs for facility design safety reviews. PHMSA also proposes amendments to newly designated paragraph (c) for clarity, and to reflect the proposed amendment of part 190, subpart E, cost recovery procedures to include cost recovery for LNG facility siting reviews. Third, PHMSA proposes a new paragraph (b) establishing billing and payment procedures for each part 193, subpart B, LNG facility siting review. Specifically, before initiation of each review, PHMSA will provide applicants a bill for its estimated costs and will not begin its review until payment of the fee for those estimated costs.\11\ The up-front fee for PHMSA's estimated costs has been calculated as $65,000 for calendar year 2024. That value is derived from the personnel costs associated with historical work efforts (measured in hours and set forth in the table below) by PHMSA personnel involved in performing siting reviews for LNG facility project applications with design and construction costs of $2.5 billion or more. --------------------------------------------------------------------------- \11\ As explained in sections II and III.B above, over the course of its lifecycle from initial application to completion of construction, an LNG facility project may require PHMSA to perform more than one part 193, subpart B, siting review. Therefore, PHMSA notes that each time it has to perform this review (largely identical in terms of work effort), it will impose a separate up- front fee pursuant to Sec. 190.411(b). Table 1--Hours Associated With Historical Work Efforts ------------------------------------------------------------------------ Estimated number of hours contributing to Title Pay grade complete part 193 siting review for $2.5 billion project ------------------------------------------------------------------------ Deputy Associate Administrator....... SES 5 Director............................. GS-15 10 Supervisory General Engineer......... GS-14 68 General Engineer (Lead).............. GS-14 420 General Engineer (Support)........... GS-9 40 Technical Writer..................... GS-9 1 Attorney Advisor Manager............. GS-15 1 Staff Attorney Advisor............... GS-14 8 ------------------------------------------------------------------------ PHMSA then multiplied those historical work efforts by hourly rates derived from annual salaries for Senior Executive Service (SES) and General Schedule (GS) employees in the Baltimore/Washington area (the location of PHMSA's headquarters) published within salary tables on the Office of Personnel Management's (OPM) website.\12\ PHMSA used these calculated wages to estimate total personnel costs, including miscellaneous benefits (e.g., FICA, FERS contribution, health insurance, etc.) not accounted for in OPM salary tables.\13\ PHMSA's up-front fee for its estimated costs billed to project applicants will automatically change in future calendar years to reflect OPM's adjustments to those salary tables. --------------------------------------------------------------------------- \12\ OPM, ``Salaries and Wages--2024,'' https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/ (last visited Mar. 4, 2024). PHMSA further notes that in using those salary tables it has--to yield more conservative numbers regarding the compliance costs for this rulemaking--employed in its calculations salaries corresponding to (1) the fifth step for each grade on the GS scale, and (2) the high end of the range for SES salaries. \13\ Bureau of Labor Statistics, Press Release No. USDL-23-2567, ``Employer Costs for Employee Compensation'' (Dec. 15, 2023), https://www.bls.gov/news.release/pdf/ecec.pdf (noting that non- salary employee compensation for state and local government employees--which PHMSA believes is a reasonable proxy for federal government employee compensation--makes up 38 percent of total compensation). --------------------------------------------------------------------------- At the conclusion of each part 193, subpart B, LNG facility siting review--but before it issues a finding on compliance--PHMSA will calculate the difference between the fee paid for estimated costs and its actual costs for those costs identified in Sec. 190.409, and then bill the applicant for the balance. PHMSA also proposes that it would be able to withhold its finding of compliance with part 193, subpart B, requirements until the applicant has paid any outstanding fees. PHMSA does not contemplate that an applicant would be entitled to refund of fees for LNG facility siting reviews paid pursuant to part 190, subpart E, should PHMSA's actual costs either not meet the up-front fee for estimated costs, or the applicant withdraws or amends an [[Page 67046]] application for its project such that it no longer meets the monetary threshold at Sec. 190.403(a). PHMSA expects the two-stage approach proposed in the new paragraph (b) will ensure it has timely access to funds needed to verify compliance with part 193, subpart B, LNG facility siting requirements. PHMSA notes that those reviews are inputs to decision-making by another agency (FERC); by avoiding potentially protracted negotiation of a Master Agreement as contemplated by current part 190, subpart E, procedures, PHMSA can ensure that, at the initiation of its review, it will have adequate resources to begin and complete those reviews without introducing significant delay in FERC's review of certificate applications for LNG facility projects. And should those estimated costs ultimately prove lower than PHMSA's actual costs, PHMSA proposes a ``true-up'' mechanism employed at the conclusion of each review to ensure that PHMSA is made whole, thereby reducing the risk of diversion of its limited personnel resources from other jurisdictional oversight activities. Additionally, PHMSA's propo
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