CDX Gas — Pipeline Safety Interpretation

Page 1U.S. Department of Transportation Pipeline and Hazardous Materiais Safety Administration 1200 New Jersey Avenue, SE Washington, D.C. 20590 JUL 1 42009 Mr. Greg Schrab HSE Coordinator CDXGas 14800 Landmark Blvd, Suite 400 Dallas, TX 75254 Dear Mr. Schrab: In a letter to the Pipeline and Hazardous Materials Safety Administration (PHMSA) dated September 19,2008, you requested an interpretation of the applicability of the Federal pipeline safety regulations in 49 CFR Part 192 to your Slaytonville natural gas pipeline. You stated that the Slaytonville line is an eight-mile line connecting Central Station, a gas processing and compression facility, to the CenterPoint gas transmission pipeline. You explained that, contrary to a recent determination by the Arkansas Oil and Gas Commission that the Slayton ville line is a transmission line, you believe that the Slaytonville line is an "incidental gathering" line under section 2.2(a)(l)(E) of API RP 80 as incorporated in Part 192 and, therefore, unregulated since it is located entirely within a Class 1 area. You requested a final determination from PHMSA as to whether the Slaytonville line is a regulated gas transmission line or a non-regulated incidental gathering line. Pursuant to 49 U.S.C. 60101 et seq., PHMSA prescribes and enforces standards and regulations that apply to the gathering, transmission, and distribution of gas by pipeline. A gathering line is defined in 49 CFR § 192.3 as "a pipeline that transports gas from a current production facility to a transmission line or main." That same section defines a transmission line as "a pipeline, other than a gathering line, that: (1) Transports gas from a gathering line or storage facility to a distribution center, storage facility, or large volume customer that is not downstream from a distribution center; (2) operates at a hoop stress of 20 percent or more of SMYS; or (3) transports gas within a storage field." On March 15, 2006, PHMSA issued a Final Rule that defined a "regulated gathering line" and set forth the requirements that apply to regulated gathering lines (71 FR 13289). The rule adopted API RP 80 with certain limitations. Section 192.8 now provides as follows: § 192.8 determined? How are onshore gathering lines and regulated onshore gathering lines (a) An operator must use API RP 80 (incorporated by reference, see § 192.7), to determine if an onshore pipeline (or part of a connected series of pipelines) is an onshore gathering line. The determination is subject to the limitations listed The Pipeline and Hazardous Materials Safety Administration, Office of Pipeline Safety. provides written clarification of the Regulations (49 CFR Parts 190-199) in the form of interpretation letters. These letters reflect the agency's current application of the regulations to the specific facts presented by the person requesting the clarification. Interpretations do not create legally-enforceable rights or obligations and are provided to help the public understand how to comply with the regulations.#

Page 22 below. After making this determination, an operator must determine if the onshore gathering line is a regulated onshore gathering line under paragraph (b) of this section. (1) The beginning of gathering, under section 2.2(a)(l) of API RP 80, may not extend beyond the furthermost downstream point in a production operation as defined in section 2.3 of API RP 80. This furthermost downstream point does not include equipment that can be used in either production or transportation, such as separators or dehydrators, unless that equipment is involved in the processes of "production and preparation for transportation or delivery of hydrocarbon gas" within the meaning of "production operation." (2) The endpoint of gathering, under section 2.2(a)(I)(A) of API RP 80, may not extend beyond the first downstream natural gas processing plant, unless the operator can demonstrate, using sound engineering principles, that gathering extends to a further downstream plant. (3) If the endpoint of gathering, under section 2.2(a)(l)(C) of API RP 80, is determined by the commingling of gas from separate production fields, the fields may not be more than 50 miles from each other, unless the Administrator finds a longer separation distance is justified in a particular case (see 49 CFR § 190.9). (4) The endpoint of gathering, under section 2.2(a)(l)(D) of API RP 80, may not extend beyond the furthermost downstream compressor used to increase gathering line pressure for delivery to another pipeline. While you correctly point out that the rule did not expressly adopt a limitation on the fifth possible endpoint of gathering in section 2.2(a)(1 )(E) of API RP 80, PHMSA considers this to be a drafting error that does not reflect PHMSA's intent. In the Supplemental Notice of Proposed Rulemaking issued on October 3,2005, PHMSA expressed its intent to "assure gathering line determinations do not stray significantly from PHMSA' s historic interpretations of gathering or do not abuse the "furthermost downstream" concept." (70 FR 57540) Historically PHMSA has not accepted the incidental gathering designation. Based on the pressures at which these lines typically operate and the fact that they share maintenance and inspection needs with high pressure transmission lines, PHMSA has historically treated these lines as regulated transmission lines and did not intend to make any change in the rule. Indeed, the intent of Congress in mandating the rulemaking was to bring additional pipeline mileage into the regulations, not to deregulate lines. In our experience, the majority of operators treat these lines as regulated transmission lines and PHMSA believes they will continue to do so. Although incidental gathering designations are currently permissible due to the drafting error and would apply to the Slaytonville line based on the description you provided, PHMSA is currently considering whether a rule amendment should The Pipeline and Hazardous Materials Safety Administration, Office of Pipeline Safety, provides written clarification of the Regulations (49 CFR Parts 190-199) in the form of interpretation letters. These letters reflect the agency's current application of the regulations to the specific facts presented by the person requesting the clarification. Interpretations do not create legaIIy-enforceable rights or obligations and are provided to help the public understand how to comply with the regulations.#

Page 33 be undertaken to correct the rule and propose adding a fifth limitation on API RP 80 which would mean incidental gathering determinations are no longer permissible. Because PHMSA may undertake such a rule amendment in the near future, operators should strongly consider keeping incidental gathering designations to an absolute minimum and treating these lines as regulated transmission lines. In addition, be advised that because an incidental gathering line is a single connecting line and not a system oflines, by definition it is limited to the first tie-in downstream of the processing or compression facility even if that connection does not extend all the way to the large diameter interstate line. Finally, with respect to the beginning of gathering, the system maps you submitted as supporting documentation incorrectly depict CDX's production operations as extending to the Central Station. The relevant API RP 80 diagram (Fig. 2-6) clearly shows that gathering begins at the terminus of production and transports gas to the processing, compression location depicted by the schematic. Proper application of the definition for production in API RP 80, section 2.3 and the supplemental definitions in section 2.4 indicate that the production operations in the CDX system cease much further upstream, at least as far upstream as the facilities identified on the map as "PODS". Further review of the equipment and processes would be necessary to make a determination of the exact endpoint of production and beginning of gathering. I hope that this information is helpful to you. If I can further assist you with this or any other pipeline safety regulatory matter, please contact me at (202) 366-4046. Sincerely, ·.4~2Y sr~A.Gale I Director, Office of Regulations The Pipeline and Hazardous Materials Safety Administration, Office of Pipeline Safety, provides written clarification of the Regulations (49 CFR Parts 190-199) in the form of interpretation letters. These letters reflect the agency's current application of the regulations to the specific facts presented by the person requesting the clarification. Interpretations do not create legally-enforceable rights or obligations and are provided to help the public understand how to comply with the regulations.#

Page 414800 Landmark Blvd, Suite 400, Dallas, TX 75254 Phone: 972-392-1880 Fax: 972-392-1881 September 19, 2008 Office of Pipeline Safety (PHP-30) PHMSA u.S. Department of Transportation 1200 New Jersey Avenue, SE Washington, D.C. 20590-0001 RE: CDX Gas, LLC Request for Written Regulatory Interpretation CDX Gas, LLC is requesting a written regulatory interpretation on one of its pipelines (the "Slaytonville line") relative to 49 CFR Part 192 Gas Gathering Line Definition; Alternative Definition for Onshore Lines and New Safety Standards, Final Rule, Federal Register, Vol. 71, No. 50, March 15, 2006. CDX Gas' determination, in accordance with the above-referenced regulation, is that the Slaytonville line is a non-regulated Type A gathering line (see attached CDX Gas Arkoma Project determination document, submitted to the Arkansas Oil and Gas Commission [AOGC] and PHMSA Southwest Region during a meeting on August 7, 2008). CDX is making this request as a result of the determination made by the AOGC- that the Slaytonville line is a transmission line (see attached September 4, 2008 letter). Before summarizing CDX Gas' determination as a basis for requesting PHMSA's written regulatory interpretation, CDX Gas would like to call out several points in the September 4, 2008 AOGC letter: • AOGC General Rule 0-17 and 49 CFR Part 192 regulations (paragraph #1): the AOGC State regulation D-17 has no bearing on the determination (it simply references 49 CFR 192), other than D-17 does give AOGC jurisdiction over all "pipeline operator" lines from the wellhead to the custody transfer meter (which effectively focuses on exploration and production company production and gathering lines), previously, the Arkansas Public Service Commission was the only Arkansas State agency enforcing PHMSA regulations; the complete 3115/06 Federal Register Final Rule, 49 CFR 192, and API RP-80 incorporated by reference are codified and do have a bearing on the actual determination • Onshore Gas Gathering F AQs (paragraph #2): F AQs, referenced by AOGC, are examples to be used as guidance in interpreting an actual rule or regulation-they are not part of or referenced in the Federal Register Final Rule, 49 CFR 192, or API RP-80 as incorporated by reference, therefore these F AQs are not codified and do not have the force of regulations; specifically, F AQ no. 5 referenced by the AOGC, was written and is apparently being interpreted in a way that contradicts the Federal Register Final Rule (specifically, definition of the fifth possible endpoint of gathering and "incidental gathering") • Incidental Gathering (paragraph #5): it has not "been determined that while incidental gathering MAY NOT be limited"; PHMSA DID NOT propose a limitation on the fifth possible endpoint of gathering in 49 CFR 192, therefore incidental gathering under section 2.2( a)( 1 )(E) of API RP-80 IS NOT limited by PHMSA as discussed in the 3/15/06 Federal Register Final Rule (p. 13292, #5) and incidental gathering IS NOT being used to "circumvent a stated limitation"#

Page 5Please refer to the attached detennination document for the detailed basis for CDX Gas' detennination that the Slaytonville line is a non-regulated Type A gathering line, not a transmission line. CDX Gas' detennination, and this request for a written interpretation, is based primarily on p. 13292, #5 of the 3/15/06 Federal Register Final Rule (p. 7 of the attached detennination document) and the referenced section 2.2.1.2.6 in API RP-80 (p. 5 of the attached detennination document): • p. 13292, #5, Federal Register Final Rule: "We did not propose a limitation on the fifth possible endpoint under section 2.2(a}(I)(E). This endpoint is the connection to another pipeline downstream of the furthermost downstream endpoint under sections 2.2(a)(l)(A) through (D), or in the absence of such an endpoint, the furthermost downstream production operation." "The endpoint applies to connecting lines described as 'incidental gathering' under section 2.2.1.2.6 of API RP-80. An example of a connecting line is a pipeline that runs from the outlet of a natural gas processing plant to a transmission line. PHMSA considers 'incidental gathering' to include only lines that directly connect a transmission line to one of the endpoints (A) through (D), as limited by this fmal rule. Lines that connect a transmission line to one of these endpoints by way of another facility are not considered 'incidental' gathering." (emphasis added) • Section 2.2.1.2.6, API RP-80: "The pipeline moving the gas from the plant to another pipeline is termed 'incidental gathering'. The 'incidental gathering' resumes at the plant outlet and continues to the other pipeline connection. Incidental gathering may also occur when a compressor is a potential endpoint". From a functional standpoint, this section of incidental gathering line is no different from the rest of the gathering system. The definition, therefore, includes recognition that gathering may continue downstream of the last endpoint identified by processing, treatment, commingling, or compression activities to the connection with another pipeline. (emphasis added) As illustrated in Figure 2-6 of section 2.2.1.2.6 of API RP-80, as referenced in the 3/15/06 Federal Register Final Rule, CDX Gas' production operation ends at the outlet of the Central Station. The Slaytonville line then directly connects the Centerpoint transmission line to the Central Station, which contains two possible endpoints of gathering (gas treatment and compression). Therefore, the Slaytonville line is a "connecting" "incidental gathering" line, with the endpoint of gathering being its connection with the downstream Centerpoint transmission line. CDX Gas respectfully requests a written regulatory interpretation of its detennination that the Slaytonville line is a non-regulated, Type A gathering line, in response to the AOGC detennination that it is a transmission line. Please call me at (214) 242-1147 with any questions regarding this request. Sincerely, HSE Coordinator cc: Thomas B. Deal/Attorney, CDX Gas, LLC, 14800 Landmark Blvd., Suite 400, Dallas, TX 75254 Gary Looney/Assistant Director, Arkansas Oil and Gas Commission, EI Dorado Regional Office, 2215 West Hillsboro, EI Dorado, AR 71730 Patrick Gaume/Staff Engineer, Office of Pipeline Safety Southwest Region, 8701 South Gessner, Suite 1110, Houston, TX 77074#

Page 6ARKANSAS OIL AND GAS COMMISSION Direetor's 0fIke: 301 Natural Resourees Drive Suite 102 Little Rode. AR 72205 Phone: (SOl) 683-5814 Fax: (SOl) 683-5818 http://www.aogc.atate.ar.us Mlke8eebe Governor Lawrence Bengal Director £I Don4o ReaJoaal Oftke: 1115 W .. HIIIIbero £I DeraIl., All 11730 PIootIe: (170) ~H5 FAX: (1'70) I62-IIt3 Fon SmiO JtecjouI 0fIIu; ;uo, PIIocaiI Avuae ,"" s.tG, All 7%903 no.e: (479) 646-6611 FAX: (m) ..... 7656 September 4, 2008 Mr. Greg Schrab COX Gas, LLC 5485 Beltline Road, Ste 190 Dallas, TX 75254-7672 Re: Determination of Pipeline Status Siaytonville Pipeline Sebastian County, AR Dear Mr. Schrab, Commission staff conducted a review of the Hartford Pipeline System operated by COX GAS, LLC on May 12,2008 in an effort to affirm regulatory compliance with AOGC General Rule 0-17 and the applicable regulations contained within 49CFR Part 192. DUring that review, I concluded that a portion of the pipeline system named as the Siaytonville pipeline may be a transmission line and verbally communicated same to you. My conclusion was based upon the limitations set forth under Part 192.8 (a) (4). The Siaytonville pipeline is identified as the portion of your system downstream of the final compressor station, which boost pressure and transports natural gas to another pipeline at the custody transfer meter and is approximately eight (8) miles in length. In further discussion, you indicated that the other pipeline is a transmission line operated by Centerpoint Energy. Upon final review which included confirmation that the other pipeline was indeed a transmission line and the Onshore Gas Gathering FAQs published by PHMSA (specifically FAa no. 5), it was determined that the Siaytonville line should be regulated as a Transmission Pipeline. Subsequent emails and phone conversation ensued in which you expressed your opinion that the Siaytonville line was not a transmission line and at your request I agreed to discuss this matter with Mr. Patrick Gaume, PHMSA Liaison to AOGC. Those discussions ended with the same decision that the Siaytonville line should be regulated as a transmission line. COMMISSION MEMBERS Chad While. Chairman, Magnolia W. Frank Morledge, Vice-Chairman, Forrest City Charles Wohlford, Fort Smith • Bill Poynter. Texarkana Mike Davis., Maanolia • Kenneth Williams. Jersey Carolyn Pollan, Fort Smith· William L Dawkins. Jr., Fort Smith Jerry Ungley. Smackover An cqll1l opportunity employer#

Page 7Your further disagreement in this matter resulted in a meeting at AOGC office in Little Rock on August 7, 2008 to discuss this issue. Present were Mr. Bowen and you representing CDX, Mr. Gaume and myself. You presented your opinion of the regulation and submitted both verbal and written arguments that were taken under submission for review by representatives of PHMSA. It has been determined that while incidental gathering may not be limited. It is clear that in 192.8 (a) (4) a limitation has been placed on the endpoint of gathering and that incidental gathering can not be used to circumvent a stated limitation. Therefore the fact that the pipetine in question is downstream of the last compressor becomes the main determinate and it is therefore a Transmission Line and shall be regulated accordingly. Any appeal of this determination should be filed in accordance with 49 CFR Part 190.11. Should you desire to file an appeal, please submit a copy of any appeal request and aU supporting documentation to my attention at the EI Dorado Regional Office. Sincerely, z1 jJ ~L i) ,<(}G,,\/ G"a,.J D. Loon/y Assistant Director EI Dorado Regional Office#

Page 8cox Gas. LLC Arkoma Project: Determination of Jurisdictional Status of Pipelines Production (CtnSrJl StatIon 1114 YpttrMn) Based on a site visit on May 12 and foIow-up communic:atiOns, the AOGC has agreed with COX Gas' determination that the system of COX Gas, LlC wells through the screw compressors -PODS- and the Central Station (Which includes separation, dehydration. and compression) in the Arkoma Project all meet the definition of production per 192.8 (1) and Sections 2.3 and 3.1.4 of APt RP 80. Therefore, production does not end until the outtet of the Central Station. Per AOGC Rule 0-17, COX Gas has submitted a map of these production facilities (as well as the SIaytonviIIe pipeline they deliver into) to AOGC per Rule 0-17. SlaytonyUtt Type A Gatbtrina Un! (Downttr!am of C!ntrJI Station) COX Gas, LlC's $laytonville line (approximately 8 miles in length) transports gas from the end of production at the Central Station to the connection with, and custody transfer to, the Centerpoint transmission line. Therefore, the Staytonvilte line functions as a gathering line. because it transports gas from a current production facility to a transmission line. Based on their May 12 site visit and fo8ow-up communications, AOGC notified COX Gas that AOGC has determined that the $laytonville line is a transmission fine and wiD be under the jurisdiction of the AOOC. During a follow-up meeting with Gary LooneylAOGC on July 17. Mr. Looney again stated he has forwarded all communications to his PHMSA liaison, whose stance continues to be that Slaytonville is a transmission line. COX Gas' determination remains that the Siaytonville line is a gathering line. The Staytonvllfe line operates at a hoop stress of >20% SMYS. so per 192.8 it is a Type A gathering line. It is not a regulated gathering pipeline per 192.8 (b), because It does not lie within a Class 2, 3 or 4 location. The $laytonville line lies within a Class 1 location. because there are 10 or fewer buildings Intended for human occupancy within 220 yards on either side of the centerline of any continuous 1-mile length of the pipeline (see details on class location below). COX Gas' determination remains the SlaytonvHle line does not meet the definition of a transmission line in 192.3: "TransmIssion line means a pipeline. other than a gathering line. that (1) Transports gas from a gathermg Ime or storage facility to 8 distribution center. storage faCility, or itffge volume customer that IS not down-stream from a distrIbution center; (2} operates at hoop stress of 20 pen;enl or more of SMVS: or (3) transports gas Wlthm a storage field • As defined and described above. the SJaytonvilte line functions as a gathering. not a transmission line, because it transports gas from a production facility (Centrat Station) to a transmission line (Centerpoint). it does not transport gas from a gathering line or storage facility to a distribution center, storage facitity, large votume customer, or within a storage field. The endpoint of gathering. and therefore the determInation of the Slaytonville line as a gathering. not transmission. line. can pethap$ best be illustrated using Figure 8--2 from API RP SO. In accordance with API RP 80 2.2 (a) as incorporated with limitations in 192.8 (a). the gathering function. including the end of gathering. of the Arkoma Project can best be represented by the decision tree Figure B-2 (attached). As described above. the Central Station is the furthermost downstream point in the Production Operation [2.2 (a) (1)J. and is also the location of the furthermost downstream Gas Treatment Facility [2.2 (a) (1) (B)} and Gas Compression [2.2 (a) (1) (O)J. the outlet of which would be the possible end of gathering. except. the compressor delivers dlrect1y into the SlaytonviJle line. The SiaytonviIte line transports and connects to the Centerpoint transmission line, not a distribution center, storage facility, large volume customer. or within a storage fietd as described above. Therefore, the gathering function extends downstream to the point of connection with another pipeline [2.2(a)(1)(E)). and the furthermost downstream point and end of gathering is the custody transfer connection with the Centerpoint transmission line. The Slaytonville line may best be identifted as an -incidental gathering-line, as descrtbed in 49 CFR 192 Gas Gathering line Definition; Alternative Definition for Onshore Unes and New Safety Standards, Final Rule (Federal Register Vol. 71. No. 50, March 15. 2006; see attached pages): 'Under section 2.2(e}(1}(DJ, the fourth possible endpoint IS the outlet of the furthermost downstream compressor station used to lower gathering nne operating pressure to facilitate deliveries into the pipe/me from prodUCtion operations or to increase gatheting lme pressure for delivery mto another pipeline For conSIstency with our past Inteq::,retations and current enforcement policy. we proposed to limit thiS endpoint to the outlet of a compressor used to deliver gas to another pIpe/me. ~ (/I A 5. page 13292J. I#

Page 9"Base<1on this clanficaJion. we believe the term 'another plp(l/ine' in section 2 2(a)(1J(D} 01 API RP 80 does nor mean delivering to another gathenng line" (IV 5 b .. page 13296) 'We did not propose a limitation on the fifth pasS/bht endpoint under Section 2.2(aJ(1)(£:}. This endpoint is the connection to another pIpeline downstream of the furthermost downstream endpoint under sectIOns 2. 2(a)(1 }(A) through (0), or In the absence of such an endpomt the furthermost downsnam production operation The endpoint applies to the connecting lines described as 'Incidental gathering. under SI1CtiOn 2.2. 1.2,6 of API RP 80 An example of a connecting line is a pipeline that rullS from the outlet of a natural gfJS processing plant to a transmission fine. PHMSA c.onsk/fIrs 'incident" fPlfheriltfl' to Include only lines tJutt directly connect 1* transmission line to one of the endpoints (A) through (OJ. as limited by this final rule' (/I.A 5., page r 3292) Please refer to Figure 2-6-tncidental Gathering Downstream of an Identified Endpoint in section 2.2.1.2.6 of APt RP 80 as referenoec:t in FlOat Rule 49 CFR 192. As described also using decision tree Figure B--2. the Central Station represents two possible endpoints of gathering Identified in Figure 2-6: the furthermost downstream gas treatment facility [2.2 (a) (1) (8» and gas oompressor [2.2 (a) (1) (0»). The SlaytonviUe line directly connects the Centerpoint transmission line to !he Central Station. which contains these two possible endpoints of gathering. Therefore. the Siaytonvilie line can be identified as a ~connecting· -incidental gathering" Ilne. with the endpoint of gathering being its connection with the downstream Centerpoint transmission line. However. as stated in API RP 80. from a functional standpoint. there is no difference between incidental gathering and other gathering. so there is no impact on COX Gas' determination that the SIaytonviUe line is a non-regulated Type A gathering line. Frequently Asked Questions (FAas) are examples to be used as guidance in interpreting an actual rule or regulation-they are not part of the actual rule or regulation and therefore have no legal standing. Nonetheless, because AOGC initially referenced FAa #5 during their May 12 site visit and used it as the basis for their determination. FAa #5 (attached) is also used to further illustrate the COX Gas Siaytonville line case as described above. Additionally. per API RP-80 (2.6.2.1 Physical Parameters) line length and pressure are not factors that can be used to determine the actual function and therefore the designation of a pipeline; the Federal Register Final Rule and 49 CFR 192 clearly describe that both Type A gathering and transmission lines operate at pressures resulting in a hoop stress of >20% SMYS. and line length is not used as a determining factor in the Final Rule or 49 CFR 192. As another point of reference. the COX Gas Slaytonvifte line is not a FERC-regulated interstate or intrastate transmission pipeline (see attached narrative). c .... LocatIon of §laytonville Type A Gathtrina Uo.. As documented on our system map. and reviewed and discussed with Gary Looney/AOGC during our July 17 meeting. there are a total of fourteen houses within 220 yards on either side of the centerline of the SlaytonviUe pipeline, along the approximately 8 mile line length from the Central Station to the custody transfer point at the Centerpoint Interconnect: • There are six houses within any continuous 1 mile of the Slaytonville line near its termination at the CentervDle Interconnect; • There are fIVe houses within any continuous 1 mile of the SlaytonvUIe line in the area where it crosses State Highway 252; • There are three houses within any continuous 1 mile going farther south of State Highway 252 along the Slaytonville pipeline (and including the southernmost house of the aforementioned group of fIVe houses). • Finally. there is one house within any continuous 1 mile of the Slaytonville line in the area on the west side of Gap Road, across from the T -interse<:tion of Gap Road with Diamondback Lane. Therefore, the SlaytonviJie Type A gathering line lies entirely in a Class 1 location [per 1925 (a) and (b){ 1}' ::10 bulldlflgs Intended for human occupancy wlthm 220 yardS of its centerline atong any continUOUS 1-mlle lengthL SO it is a non-regulated Type A gathering line. Per 192.9 <e, (3). if a Change in class location causes the Sfaytonvil!e line to become a regulated gathering tine, COX wi" have 2 years to comply with the requirements of a regulated Type A Gathering line.#

Page 10FERC Status of $laytonville Type A Gathering Un. API RP 80 (Section 2.2.2.4), as incorporated into 192. states: "It was recognlzed that FERC or other agency pipeline designations were not developed with pipeline safety as the regulatory purpose and as such may represent and include concepts and assumptions that are not relevant to Pipeline Safety Act objectives". However. the review of 49 U.S.C 60101.15 U.S.C. 717, and AQ8..08-01 befow show the inter.relationshlp between the definition of pipelines from a pipeline safety perspective-based on their functionaf and operational characteristics-and from a FERC or State PUC regulatory perspective. The federal pipeline safety laws (49 U.S.C. 60101 et seq.) can for the definition of gathering lines as follows: 60101 (b) Gathering LlIles.-{1 HAY Not later than October 24. 1994, the Secretary shall prescnbe standards defIning the term .. gathering lineM • (8) In defining "gathering line" for gas. the Secretary-- (I) Shall consider functional and operatiOnal characteristics of the hnes to be Included In the definition; and (Ii j IS nol bound by a ctasslflCabon the CommIssion establishes under the Natural Gas Act (15 USC 71 7 at seq ) The Natural Gas Act (15 U.S.C. 717 et seq.) defines the transportation and sale of natural gas to be regulated underFERC: 15 USC 717 (b) TransactIOns 10 whICh provIsions of chapter 3ppttCable The provisions of this chapter shall apply to the transportation of natural gas .n mterstate commerce. 10 the sale In Interstate commerce of natural gas for resale for ultImate publIC consumption for domestic, commercial, Industrial, or any other use, and to natural...gas companies engaged In sucn transportatlon or sale and to the ImportatIOn or exportation ot natural gas m foretgn commerce and (0 persons engaged 10 such Importahon Of exportation but shalt not apply to any other transportation or sale of natural gas or to the local drstnbuhon of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas. PHMSA has issued an Advisory Bulletin (A0B-08-01 - Direct Sales Pipelines Jurisdiction) stating that the Pipeline Inspection, Protection. Enforcement, and Safety Act of 2006 (PIPES Act) eliminated the former exception of direct sales natural gas pipelines from the definition of an interstate gas pipeUne facility. The Federal pipeline safety laws (49 U.S.C. 60101 et seq.) define an "interstate gas pipeline facility" as a facility subject to the jurisdictiOn of the FERC under the Natural Gas Act (15 U.S.C. 717 et seq.). Section 7 of the PIPES Act changed this by eliminating the exception of direct sales pipelines. As a result. direct sales gas transmission pipelines subject to FERC jurisdiction formerly considered to be intrastate pipelines for purposes of the pipeline safety laws are now considered to be interstate pipelines. If the line has a State certification from the State Public Utility Commission (PUC) SUCh that the State PUC has regulatory jurisdictiOn over the rates and service of the line and is exercising it (i.e. the Stale PUC is exercising economic regulatory jurisdiction, not FERC). that would be grounds for concluding that the line is not subject to FERC jurisdiction and therefore can be regulated as an intrastate pipeline by a State having a certlfication for gas under 49 U.S.C. 60105. In the case of the Siaytonville pipeline. it functions and operates as a gathering line from a safety perspective as called for in 49 U.S.C 60101 and regulated in 192 (including the incorporated APt RP SO)-it transports gas from a production facility (Central Station) to a transmission line (Centerpoint transmission line). Uk.wlse, under1S U.S.C. 111, the SIaytonville fine is not n.guJat.d by FERC or the State PUC (APSe), because it Is the gathering of natural gas-it'. function ctoe. not include transporUdion In intetstate commerce; reset. for ultimate public consumption for domestic, commerdal. industrial, or any other use; transportatfon or sale for local distribution, or as a c:fnct ..... interstate or Intrastate pipeline.#

Page 1122 API REX OMMENDED PRACTICE 80 CanitralStat.on Decicion. Tree d NOTE: stors such as "(a)(THA) subpamgraphs in ga. acks refer to correspond sing we Predation 3 is there a downstruam ins Protesting Pie •You downstream Gas Process CHOOSE met outer No • Contral station ing Treatment Far 14 1000° MOOSE INTACH downstream commeging CHOOSE Furing mos: 20:0: 1. intral Statio sease pressure cuct on anatner pooine _ Canapar Transmis lind to une dine rasporting gea Producãon Operations exclusivety back io andior Gathering Facilties Yes CHOOSE turthernost downstrear art of gas delivery to a Produca FURTHERMOST OOWNSTREAM CHOSEN lor tuel, gas let, or Operabion or Gathering Facilty POINT IS THE END OF GATHERING pas injection HIS TRANSPORTATION E IOT GATHERING COMMENT Su Process Parts an da pes transp De 300 stat Lahon processing Figure B-2-Alternative 1 Decision Tree for Figure B-1 (Scenario A) 4#

Page 122.2.1.2.1 incidental GaIMrIng _ In die ClIP A{ gat proceasiIIa or •• "".",. die CODIIIIC- tIOD to a lJ'WISIDiSJion liDc is poenI1y a""irwl widlin the boundariea of die facility. 1bia is DOt always tbe cae. bow· 8'tU The $IIbIIriDI tiae operab may bawl 10 IIIOWI !be 1M through a pipeline some aaditiOliiI distance from the p!aql19 anoi&f mpeli!ie: Ttle pipeline movie,§ the gas from m.; Il'&tIl t~ another e!pelioc is termed "inc;idenW gatb!;ring." 'J:M -Incidental ga1herin( resumes ;u the e outlet and 1.UIQn- ues to the other pIpeline connection. lncidental satheriDI!!!!Y ----------- - -- "' ----.' - -- , Furthetmo8t Downatraam Point in Production r----.... /7.:::fn{wft!;G;, Production ~ ....... p 'l)ct!ssar.9 Plan!. Gas 7' fllil\fnafl t Operation >= ~IY, Gas COmO rEl,;iiJon, ?( :'lOll'!: t ol l ast Comm7rqiJr':i (~fQ'''"'''' , r,..r~s..........;:~, ; M _ , \ ';'"" It .----' \ -- ----- --- ~:==(=:x---::::--::..-:::.-::.-=--=-...J- -) .... --~:;,..e---'Jq; ~~I~ -------. cox P":.av";'-''''''' Figure 2-6-(nddental Gathering Downstream of an Identified Endpoint 5#

Page 13DEPAR11tBfT OF TRANSPORTA1lON PiptfkJe and tta_ .. foua ........ w.ty AcfmifHttation 4t CFR hrt 1t2 {OodIlIt No. PtW8A-1t18 •• ; AmcIt. 192- 102) FIN 2137-A81. a.~UM~ AIterrIatiYe 0eflnifI0n for Onshore Unea and New SafatyStandatds AOINCY: Pipeline and Hazardous Materials Safety Administration (PHMSA). DOT 4CTtO\II: finat nd<J ._------- SIJMMAllV: l'hlli dClion adopts a COlUeOSUll standard to distinguiJlh OIIJIho1'll gathering Hoas from other gas pipeUnes and production operations. 10 addition. it establishes safety rules for certain onshore gathering tines in rural areas and revises cutre'ut rules for certain onshore gathering lines in nonrural areas. Operators will U$tI a new risk-based. approach to determine which onshore gathering lines are subject to PHMSA's gas pipeline safety rules and which of these rules the lines mUliI meet. PHMSA intends this action to reduce disagreements over classifications of onshore gathering lines, increase public confidence in the safety of onshore gathering lines. and provide safety rules comistent with the risks of ombore pthering lines. OATU: This final rule takes effect April 14. ZOO6. The Dltector of the Federal Rtgister approves the incorporation by ref'etence of API RP 80 in thill rule as of April 14. 2006. POll FlMTHIR 1NIORIIA11OH CONI'ACT: DeWitt Butdeeux by phone at 405-954- 72%0 or bye-mail at dewitt.burdeawcOcrot.gov. SUH\.lllllrfAAY IMIOIIMATtON: L8~ A. Current RejulatiOR of Onshore Gathering Unes; Definition Problem Gas gathering lines are pipelines used to collect natural gas from production facilities and transport it to transmission or distribution lines. which then tranaports it to the consumer. PHMSA's pipelille safety ruJes in 49 CFR part 192 apply to tlut transportation o( natural gas and other gas by pipeline, However. onshore gathering lines in nual areas (areas outside cities. towns. villages. or designated tellidential or commercial areas) are subject only to S 192.612. which prescribes ilUpaction and burial requirements for lines within Gulf of Mexico inlett (f5192.1(b)(<I) and (b)(5)). (Note: Lines in these inlets 81'11 nat covered by this final rule.) Under S 192.9. Ptherins lines in nonrural areas must meet the tame safety standards for deIip. construc:tion. testing. operation. and maintenance as p5 transmisaiDn lines, except the requirements of § 192.150 on passage of an intenIaJ inspection device (also known as smart pigs) and subpart o on integrity management. In addition, PHMSA's drug and alcohol testing regulatiOlU in 49 CFR part 199 apply to nonrural gas ptbering lin •. Section 192.3 currently defines the terms "gathering line." "trammission line," and "distribution line": "Gathering liM" IlIMfU 8 pipeline thaI transports sa. from a cummt production facUity to a tranJlmiuion line or main. ''Trall$mUsloo liM" m-.s a pipeline. other than a gathering Itne, tbat I_potU &as from a pthering line or 5tDlIp I'acllity to a gas distribution center or storage faciUly: OpetatllS at a hoop stress of 20 percent or more of a Spadlled Minimum Yield Strength (SMYS). or IrarulpGrtS gas wilhin 8 storage field. "Distribution line" _, a piptlliae other than 8 gathering or transmasion line. Beeatl4e these definitions are circular and part 19Z does not dafine "production CacUity," operators and government inspectors have had djfficulty distinguishing regulated gathering lines from untegulated production £acillties and unregulated gathering lines from regulated transmission and distribution lines. Also. tbe complexity of many gathering systems bu increased the difficulty of distinguishing gathering lines. B. Past Attempts To Resolve the Definition Problem and Dtttermine the ,\Ieed To RBsuJate Rural Gathering UnftS In 1974. DOT tried to correct the problem of distinguishing gathering lines by proposing to revise the gathering line definition (39 FR 34569; Sept. 26. 1914 •. However, the proposal was later withdrawn becaUS8 comments indicated many terms and phrases wen! unclear (43 FR 42773: Sept. 21. 19781. Afterward. the problem lingered until 1986. when the National Association of Pipeline Safety Representatives (NAPSRI. a nonprofit association of State pipeline safety officials. svrveyed its members and reported numerous and continuing disagreements with oparaton over ptberioa lines. Driven by the NAPSR survey. in 1991 DOT apin propoHd to revise the gathering line definition (56 PR48SOS; Sept. 25. 1991). However. the public response was generally unfavorable. so DOT delayed any furthet action until it collected and considered mote information. 13289 Part 192 does not regulate the safety of most rural ptbering lines because. untill991. the pipeline safety law (49 U.S.c. Chapter 6(1) restricted OOT's authority over onshore gathering lines to linea in IlOIltW'&llocatiOlU. 1 In 1992. Consresa save DOT specific authority to define gas pthering lines foe purposes of safety regulation. and to regulate a class of twal pthering lines called "regulated gathering lines" (49 U.S.C. 60101(a}(Zl) and 60101{b)). The new authority directed DOT to consider functional and operational cbaracteri$tics in defining gathering lines. Further direction was to consider such factors as locetion. length of line, operating pressure, throughput. and gas composition in deciding which rural lines warrant regulation. This authority also expressly allows PHMSA to depart from the concepts of gathering under Ihe Natura] Gas Act (15 U.S.C. 717 et seq.! [n 1999. in furtherance of the still open 1991 pthering line proceeding and Congress' action on gathering lines. DOT opened B Web site for public discussion of the definition problem and the need to regulate rural gathering lines (Docket No. PHMSA-l998-4868; 64 FR lZ147; Mar. t 1. 1999). The comments mainly focused on the comprehensive work by the American Petroleum lrutltute (API). later published i1$ API Recommended Practice 80. "Guidelines for the Definition of Onshore Gas Gathering Lines" (API RP 801. API RP 80 defines onshore gas gathering lines through II series of definitions. descriptions. and diagrams intended to represent the varied and complex nature of production and gathering in the U.S. Althoush industry commentl!fl'S spoke favorably about the API RP 80 gathering line definition. NAPSR objected to the I.LSe of certain "furthermost downstream~ endpoints to mark the beginning and and of gathering. NAPSR's concem was if tmr definition W81'll included in part 192. operators would have an incentive to establish or move the endpoints further downstream to reduce the amount of regulated pipelines. While comidering its next 'itep. DOT published an Advisory Bulletin to ~mind operators it was still resulating gathering lines according to court precedents and its prior interpretatiOllJ (57 FR 644<17; October 18.ZO(2). Then in 2003. DOT held public meetings in Austin. Texas (63 FR 625$5; November 5. z003) and Ancllorap. Alaaka (63 FR 87129; December 1. 2003)#

Page 1413292 Federal Resister/Vol. 71. No. so/Wednesday. March 15. 2006/Rules and Regulations proposed definitions and safety rules follows. A. Proposed De/inition of "Onshont Gatharing L.ine" We wanted to define "onshore gatharina line" in a way that not only reuooably matched cummt classifications but also addresaed NAPSR's concerns. So we propoeed to allow operators to use API RP 80 to determine "OlUftore gathering lines." But use of API RP 80 would be subject to the following five limitations on th,. beginning of gathering and the pO$SiLl,' endpoints of gathering under section 2.2(a) oC API RP 80: 1. Under section Z.Z(a)(11. the beginning of an onshore gathering line is the furthermost dowMtl'l!!llm point in a production operation. We proposed t • . • tftStrict this point to piping or t!quipment used solely in the process () r ' '\.t r .. l ct in~ rhthi t .tl ;.tfl S frn Ol t!H ? (o.nth fc.!' (he fust time and preparing it for lransportntion or delivery. The purpos,' of the limitation was to ensuro cenain dual-use equipment. r.apabllt of USI! in either production or transportation. would be part of gathering wh~n nol IlSed solely in tho process of extracting and prej)8ring gas for transportation. 2. Unoer section Z.2(aIU)(A). the flTS l possible endpoint is the inlet of the rurthermost downstream natura! gas processing plant. other than a nalural gas processing plant located on a Inlnmlwion line. We proposed this endpoint may not be a natural gas processing plant located further downstream than the first downstream natural au processing plant unless the operator can demonstrate. baaed on sound engineering reuoDl. gathering should extend beyond the fU'St plant. Past DOT interpretations and Stale agency enforcement actiOIU have recognizad the first downstream natural gas processing plant as the customary end of gathering. (See PHMSA', Web site for intetpnttations and enforcement actiOlU: http://www.phtma.dot.govl.) 3. Under section 2.2(a)(1)(8). the second possibla endpoint is the outlet of the furthennost downstream gathering line gas treatment facility. We proposed this endpoint would apply only if no other endpoint under sections 2.2(a)(1) (AI. (C). (OJ or (E) existed. 4. Under section 2.2{a){1)(CI. the third possible endpoint is the furthermost downstream point whate gas produced in the same production field or separate production fields are commingled. This endpoint recognizes a gathering line may receive gas from several production fields. But because it does not restrict the distance between fields. gatherinS could potentially continue endlessly. causing reclassifications from lnIIUmWion to gathering along the way. To set a reasonable limit. we proposed lha1 ~ala pcoductioA fivlda from which ps is comminaJed must be within 50 mila of each other. We specifically invited comments on w hether it maxI ilium d.i$l;l.nco: i.s n <l"d",1 5. Under ,'W(~ !ion 2.2{a,){ t )(O), l hl! fuurth 1 tho (lutl'!l IIi filii ei)mpro~ sil r ..tllttOO Il.Sc ·,j It) lower gathecing line " p'lromng pressure to facilitate deliveries into the pipeline from production operatioM or to increase gatberiog line pressure for delivery to another pipeline. For colUistency with : lH r r 'd ;"; 'l tJl tjO rt1 r~ r nti('l n; .tnd ( Hr; ~ ' i 't r l " nfo - !l- ( ~f n t ~ n ! i ' } IiLL V~ t.~ ~ ~ ' ! p nf pr;: ~;' f ' !f i ; inj: H thi:" H llr i.pHtn t to- th t. !: 'J ut h ,~ !-~,' .oj Cq))\ ' ;'f ~ r., , $ o r u ,Sg rj ~-Q d·,t ' ~ ' ·i~ , t nt prn p:( " ~ ':l t ~l ~ - {HI {H i ~ h iJ fHr'f' po , ;;::tjb 1 1 ~ {;n d f_ n· :.~ n ! i HHh"f ·· ;} : ~J i U H '.!. .Z{;1 j{ 1 ifEj -rh b j f~JH : i - lh t ~ 'on {~ H . ,U~\ ' '' 'f - d.:~ jlljn ·,: D n f!! n! A, iH tlltJ4h-rrfl . " t ,(\ ' h ' ~ d ,....:. ·!1,·, .. . jf ... :. ;, ~ h · t tl·'"~:di h~ !;. ;t . !:; .. ·j"'wrhUh Hn ; -r " d ~!, _ . I !( i f: :!,ef<l 'l:: f j . rh, ~ ': Ii l :}f : .u ~~ '\ tl~ ;~ •. ~ ;;' ~ - ; t ! ~ ' t~' }_ f~hh f , . \C ) " .1 , tf1i'i Pf t12;~ tip ", ~'''' J. ~ i q}\'ii;i" l.~ : :; , .~ f n HH !hn n uti!.'{ ,I :! rl J:! (iLl: i ~ •. L '" :. rr .ln ''i\l,;1s.''. :{.ltt , I ... :; ; :(itHF 'rf ,i t : ;H I: S:ll t..;;S : U O : i n· ~ fd Unt~ ;,t t h ! ~ s~ ~ f ~ nd p "- J i nh tH' \ .. ;,1\ ilf ,. Hh~ (r H ~ r t;lulih .1\'" illj { ul!l." d " n.ci " H Ud,jfH.!1 il "th . ~ r i nj,\ " B. Proposed ~linition o/ "Reguloted Onshore Gathering Line" We proposed to amend S 192.3 to define "regulated oruIhore gathering lines" by either of two risk categories. Type A and Type B. ba5lId on operating stress and location. Type 1\ would include lines whose maximum allowable operating pressure (MAOPI results in a hoop strtw of 20 percent or more of SMYS. and nOll-metallic lines whose MAOP is more than 1 Z5 per square inch gauge (psis). The location would be Clus 3 and 4 locations. as defined in § 192.5. and other areas the operator determines using potential impact circles with five or more dwellings or a sliding corridor 440 yards by 1000 feet with eitber 5 or more dwellings per 1000 feet or 25 or more dwellings per mile. whichever results in more regulated lines. Type A lines in a Clau 1 or Clua Z location would also include additionallengtha of line u~m and downstream to serve as a sbield apinst potential harm to neatby dwellings. Type B lines would include metallic lina whoae MAOP produces a boop stress of lUI than 20 percent of SMYS. and non-metallic lines whose MAOP is 125 psiS or less. The location would be Cla.u 3 and 4 locations and other areal detennined by a sliding corridOt' 300 feet by 1000 feet with 5 or more dwellings per 1000 feet. Lines within 8 Clasa 1 or Class 2 location would include additional lengths of line u a shield agaillJt potltntial harm to nearby dwellings. C. Proposed Safety Requirements We proposed to revise § \92.9 to incJude safety requirements for all 88thering lines subject to part 192. Paragraph (b) would simply restate the present part 192 requirements applicable to offshore gathering lines. Under paragraph (el. Type A regulawd onshore gathering lines would have to meet part 192 requirements applicable to transmiuion !intIS, eX(:l!pt requirements concerning the passage of smart pigs (§ 192.150) and inte&rity management (subpart 01. Because of the higher stress at which Type A IinO$ operate and their ability to harm more of the public. we considered Type A lines to warrant safety requirements equivalent to transmission line requirements. Currently regulated gathering lines are subject to these requirements. PIltagnpb (dl contains the proposed requirements for Type B regulated onsnore gathering lines. These lines. although located near the public and housing. operate at a lower stress than Type A linea and pD!18 a lower-risk. So for Type B lines. we proposed safety requirements focused just on the main threats to these linM-COrrosion and excevation damage. First. new lines and existins Itnes replaced. relocated. or otherwise chanpd would have to be designed. installed. constructed. initially inspected. and Initially tested according to part 192 requirements. Second. operatOtt of Type B lines would have to control CQITOSion according to applicable subpart I requirements: carry out a damage prevention program under S 192.614: establish MAOP under S 192.619; install and maintain line markets under § 192.707 according to transmission line requirements; and establilh a public education program as required by § 192.616. To allow time for line identification and preparation for compliance. we 1#

Page 15Federal Resfster/Vol. 71, No. sO/Wednesday. March 15. 2006/Rulea and Regulations 13295 thought the government should have the burden of proving further downstream procusing is not nuded. In addition. West thousht we should allow economic tebODlJ as plOOf. b. PHMSA Responae We have not experienced a situation in which the closiDfJ of a au proawing plant affected a Dthering line classification. Although clo$ings of a few weeks for maintenance reasons would not trigger a classification change, longer closings could occur for Ii variety of reasons .nd the duration could be uncertain. So we decided not to make a general statement on how temporazy plant closures would affect the end of gathering. [nstead. when requested. we will detennine the impact of closings on an individual btiis 8$ the need to do so arises. We expect certified State agencies with safety Jurisdiction over gathering lines under 49 U.s.C. 60105 will do IikewiM. Regarding West's burden of proof issue, it is not unusual for part 192 safety rules to include exceptions applicable only if operators can demonstrate certain conditions exist. For example. under S 192.479(c}. operators do not have to protect. aboveground pipelines from atmospheric corrosion if tbey demofl$trate the corrosion will have certain characteristics. We require operators to demonstrate grounds for exceptions when they are the best sourcs of information on which tbe exception is based. In the case of gathering lines. we think operators are the best source of information to demonstrate wby t'urtber downstream processing is necessary to complete the gathering process. As fortlie proof required in the demonstration. no doubt economics would be a factor in any decision involviBi further downstream proceasing. However, many of our prior interpretations have based the end of gathering on the first downmeam processing plant. Maintaining COfl$istency with this policy as f'ar as possible is desirable for botb ~~tandindusuy.Forthis reason. we think any future variation should be baed on the fundamental qualities of gas ptOCU$ing. which is best determined by engineering analyses rather than economic conditions. which are transitory. Therefore. tlut proposed limitation is unchanged in the final rule. 3. Umitation on Furthermost Treatment Facility Endpoint Under section 2.2(a)(1)(8) of API RP 80. gathering end. at the outlet of the furthermost downstream gathering line gas treatment facility. We proposed the following limitation: The.u.lpoblt 1JBd.t..:tion U(a)(l)(B} of API RP 80 iIp'plles oaIy if no other enc:f;Ioint ideDt!fi«I UDder section U{a}(l}(A} I~. (a)(t)(C) Icomminalin8l. or (a)(1)(D) (comprestioaJ exi.Its. We intended this limitation to elude manipulation of the transition gatherins to tranamission by installing equlpment used in gas treatment. a.Comments CoaJition. supported by Duke. said the proposed limitation would make the furthermost treatment endpoint unusable. becau$e processing. commingling. or compression is almost always upstream or a treatment facility. These commenters insisted gathering should continue downstream to a gas treatment facility 8Ildpoint no matter if compression. commingling. or processing occurs upstream. Coalition offered an alternative approach to preclude treatment manipulation: (11 Use the following wording: "The end of a gathering line' • • mall nol be defined by !.he installatiol1 of one or _ pieces of gas t~lin8 equipment at an extremo downstream location that is not justified by sound englnllllring and economic princlpi," indepenmml of the pipeline's rngulatory classification," (21 e:xplain in the final rule preamble that lhis endpoint refers to a "gas treating plant" or similat facility and is not intend8d' to b.t Ii simple piece of equipment like a separator or dehydrator lother than as can be shown. usilla sound engineerill8 and economic principles. to be needed at that location to meet transmiuioa pipeline specifications •. b. PHMSA Response Section 2.2.1.2.2 of API RP 80 explains the meaning of a IJU treatment fiK:ility under section 2.2(a){t){B). Tbis provision describes gathering gas treatment (other than treatment in gas processing or compression) as involving significant stand-alone fiK:ilities (e.g .• a sulfur recovery or large dehydration facility). We think this explanation is sufficient to preclude possible manipulation of tbe treatment endpoint by installing a simple piece of treatment-related equipment. such as I separator or dehydrator. Tbta, Coalition's alternative is not nac9SS8ty aDd the proposed limitation is withdrawn. 4. Umitation on Furtberm.ost C'Ammingling Endpoint Under section 2.Z(a}{1)(C} of API RP 80. gathering ends at the furthermost downstream point where gas produced in the samo production field or separate production fields Is cornmil181ed. We proposed the following limitation: It the endpoizIt is determined by the COmmins/11II 01., from aepantte production fielda, tIM fielda may not be more than 50 miIas from each 0Ihet. With no limit on the distance between separate production fields, a gathering line could continue endlessly, causing reclassification of pipelines from transmission to gathering. I. Comments Coalition. Duke. and west said the proposed limitation was not flexible enough to aCCOWlt for future acquisitions and use of maturing fields. Duke said its existing commingled fields were less than SO miles apart. Althougb Coalition thought some commingled fields were 125 miles apart. it did not cite an actual example. Coalition and [luke ~Ilmm'md.-d allowin~ case-by· case regulatmy approvals of longer distanc81J bated on sound engineering and economic reasons. h. PHMSA Response Because. Duke. the largest gas gathering line operator in the U.S .. said the proposed 5O-mile limit would be adequate for its current systems. the proposed SO-mile limit is unchanged in the final rule. We did not adopt Coalition's request to change the limit to 125 miles because it did not provide any examples of an existing system where the 50-mile limit would he too restrictive. However. to provide flexibility. the final rule allows operators to petition PHMSA, under the procedures in 49 CFR § 190.9. to find a longer limit Is justified in Ii particular case. '}. UuutathHl Ijil F!Hitl'~rm"'il nl!Ufll"'~lf Rw.l!P'.;int Under.section 2.2(a){l)(O} of APt RP BO, gatherina ends at the outlet of the furthetmost downstraam compressor 'italion used to lower gathering line "perating pressure to facilitate deliveries into the pipeline from production operations or to increase K,ltbering line pnlSSur& for delivery to mother pipeline. We proposed the following limitation: The endpoint llay not extend beyond the ttlttlwmost dotrIIstram compr..- used to incre.e ~ line presatJ.l1! for delivery t .. another pipeliDe.. This limitation is consistent with our past interpretations. a.Comment CoaJition agreed with the proposed limitation. but asked us to clarify deUvery to "Itnothm- pipo!linfl" d_ nol nutltn <idl~lIrv!u ,mother jt",t!Wf1Il~ I ill"#

Page 1613Z98 Fedet-ai &egister'/Vol. 71. No. SO/Wednesday. March 15. 2006/Rules and Regulations b PHMSA Rc~ "POO !W SeCliun 3,:: .!\ of ;\ PI RP ao S<i'is, '! h'.! d.,finiHon of ¥ thfl ri nq iine did 0\.)1 dlrnc!i .. ad dress IhH iss t'" ·.If ( )IJ( , " pemtor's gathering lin(' tmgi n ni ng or ."oding with a conne( ItOn !o alloth.,! op eralor's galhering HOI1, " Balieij on flii" cbtifl(ation. "' .. b!!)iev0 ilw t f.!ml " in :'>Id,oll :!.zta 0 R? 00 W~S nolllll3an dl)I ... ·I)dng to at),;nhffl' ItH lhr:r ~ns nne 8. [)eluting . Rtlgulated Onshom Gothsring Line" We proposed to citanp how part 192 applies to onshore gathering lines outside lnlets of the Gutr of Mexico by ITIllIdng the rules fit the level of risk gathering lines pre5ent. The proposal would restrict rules to two categories of lines, Type A and Type B, and define these lines as "regulated onshore gathering lines:' A description of the proposed definition is in section U of this preamble. 1. Approach To Defining Regulated Lines a. Comments Columbia sU880sted we adopt a simpler definition of "regulated onshore ~thering line" limited to lines in Class :I and Class 4 locations and lines in Class \ and Class 2 locations where a potential impact circle includes 20 or more dwellings. It said the alternative would be easier to understand and apply, and consistent with the scientific-based definition of "high consequence area" in § 192.903. PST also sugested II more straightforward approai:h under which gatherina ~d trarurmission linea of similar pressures and operating conditioM would be regulated alike. and other gathering linea would be regulated the same as distribution lin8$. b. PHMSA £Wporue We did not adopt Columbia's alternative because it would apply 1M same ciaaification method (potential impact circles with 20 or more dwellings) to high-pressure and Iow- pressure lines in Class 1 and 2 locations. If impact circles were applied to low- pressure lines in Class 1 end 2 locations. the circles would most likely be too small to include 20 Ol" more dwellings. So the risk of low·preuure lin .. to fewer than 20 nearby dwellings would not be addressed. PST's alternative parallels our proposal to resulate higher-risk gathering lines the same as transmission lines. but most transmission Iina rules are more stringent than appear to be necessary for lower-risk gathering lines. Also, satheringlioes are not sufficiently similar to distribution lines to apply the same rules to both types of lines. 2. Identifying Regulated Unes by Potentiallmpact Cltcles .. Comments AGA and Dominion supported using potential impact circles to identify higher-risk resufated gathering. but said the population criteria (proposed 5 or more dwellings} should not be more stringent than the criteria applied to gas transmission lines (20 or more dwellings under S 192.903). Dominion also suggested allowing use of impllt.'t circles as an optional identification method for Type B lines. not just Type A lines as proposed. NAPSR spotted an irregularity in using potential impact circles to identify Type A iines. Some smaller Type B lines (10 inches nominal diameter or less) uprated to operate above 20 perc~nt of SMYS would lose their regulated status if operators use impact circles to identify Type A lines and the circles do not contain the minimum number of dwellings (5) found in the rectangles (300 It x 1000 ft) previously used to identify the lines as Type B. Likewise. the use of im~ct circles could cause some currently regulated nonrurallines operating above 20% of SMYS to lose their regulated status. !Wen though Similarly situated Type B lines would remain regulated. Consequently, NAPSR suggested we adopt the proposed Type B rectangles and safety rules as the minimum standard of :safety for all regulated lines. b. PHMSA Response The decision diBcuued below (in response to NAPSR's comment) to withdraw the proposal on using potantial impact circles to identify Type A lines makes the ACA and Dominion comments moot. Nevertheless, we offer the following: Section 192.903 requires 20 or more dwellings in potential impact circles used to identify transmission line segments subject to integrity management rules. These rules apply to the identified segments in addition to other applicable traJumi&sion rules. In contrast, we did not propose to apply integrity management rules to Type A lines identified by circles with just 5 dwellings or more. So we do not consider the proposed S-per.citele method to be more stringent than the 2o-per-circle method used for integrity management. We did not propose potential impact circles to identify Type 8 lines because for low-pressure lines the circles would most lik&ly be too ,mall to contain 8t least 5 dwellings. For this reason. they would not equate to the proposed method aU or more dwellings per 1000 Feet. As further explained under subbeedina 4 of this section of the preamble. we did not edopt potential impact circles as a method to identify Type 8 lines. We believe NAPSR recognized 8 serious equivalency problem in allOwing use of the proposed impact circles to Identify Type A lines. The outcome could easily be an unregulated gathering line operating above 20 percent of SMYS next to a regulated Typo B line. with both lines exposing tho same dwellings to risk. To avoid th is situation. we are withdrawing the proposal to use potential impact circles to identify Type A IinM. We did not ildopt NAPSR's suggested remedy because the compliance cost of detecting 5 dwellings per 1000 feet would likely be disproportionate to the rnmefits. as discussed below uodllr :iubheading 4 ofthis ~tion of the preamble. J, Identifying Regulated Lines by Operating Stress 0\. Comment COillition said 20 percent of SMYS is too low to di$tinguish high.stress Type A lines from low·stress Type B lines. It recommended using 30 percent of SMYS as in SS t92.935. 192.931, and 192.941 for integrity management and in §§ 192.505 and \92.501 for pr8l$ure testing because lines operating 8t less tban 30 percent of SMYS may leak but not rupture. b. PHMSA RespoMe To regulate the safety of rural gas gathering lines. PHMSA mu.st consider various physical characteristics. including operating presaure. to decide which lines warrant safety regulation (49 U.s.C. 60101(a)(21}(B) and (b}(2)(AI). We proposed 20 percent of SMYS M indicative of onshore gathering lines whose operating pntsSute presents a significant enough risk in certain circumstances to wammt the same amount of reauiation as transmission lines, except rules on integrity management and smart pig passage. The basis for this 2O-percent threshold is the part 192 definition of "transmission line." wh ich incJude& pipelines other than gathering lines operatina at 20 percent of SMYS or more. These pipelines must meet all applicable part 192 safety rules. Because Type A lines can pose risks Jimi lar to transmission lines. we do not think 30 percent of q#

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