# U.S. DOT/PHMSA - Regulatory Evaluation 

- **operation:** document
- **citation:** 0900006480e85092
- **title:** U.S. DOT/PHMSA - Regulatory Evaluation 
- **source type:** rulemaking
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** current
- **official:** true
- **published on:** Not available
- **effective on:** Not available
- **summary:** m. O f impomm -..-, „,, U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration ' ^ " " Regulatory Evaluation September 2007 Pipeline Safety: Protecting Unusually Sensitive Areas from Rural Onshore Hazardous Liquid Gathering Lines and Low-Stress Pipelines Docket No. PHSMA-2003-158f i - ^- 1- ! Regulatory Analysis For Final Rule I. INTRODUCTION... 104-304), Congress amended the requirement to define "regulated gathering lines" by adding the words "if appropriate." Congress also gave DOT the authority to collect information from gathering line operators related to deciding whether and to what extent to regulate rural gathering lines. Congress recognized that some...
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<<<PAGE 1>>>

m. O f impomm
-..-, „,,
U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration ' ^ " "
Regulatory Evaluation
September 2007
Pipeline Safety:
Protecting Unusually Sensitive Areas from Rural Onshore Hazardous Liquid
Gathering Lines and Low-Stress Pipelines
Docket No. PHSMA-2003-158f
i - ^-
1- !
Regulatory Analysis
For Final Rule
I. INTRODUCTION
Currently, rural onshore hazardous liquid gathering lines and rural onshore hazardous
liquid low-stress pipelines are exempt from most of the Pipeline and Hazardous Materials
Safety Administration's (PHMSA's) safety rules for transportation of hazardous liquids
by pipeline. A spill from one of these could cause substantial harm to an unusually
sensitive environmental area.
1.1 Rural Onshore Hazardous Liquid Gathering Lines
PHMSA is applying limited operation and maintenance requirements, along with
reporting requirements for accidents and safety related conditions, and requiring the use
of line markers to certain currently unregulated rural onshore hazardous liquid gathering
lines. Specifically, the gathering lines impacted by this regulatory change are those
located in or within 1/4 mile of an unusually sensitive area (USA) as defined in 49 CFR §
195.6' that
• Have a nominal diameter fi-om 6 5/8 to 8 5/8 inches, and
• Operate at a stress level of more than 20% of SMYS during normal operation or,
if the stress level is unknown or the pipeline is not constructed using steel pipe, at
a pressure of more than 125 psig.
For these rural onshore hazardous liquid gathering lines, PHMSA is making the
following changes to 49 CFR Part 195:
' A USA is defined in 49 CFR § 195.6 as "drinking water or ecological resource area that is unusually
sensitive to environmental damage from a hazardous liquid pipeline release."

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Including the gathering lines in a new definition of "regulated rural onshore
gathering lines;" ^
Requiring operators of "regulated rural onshore gathering lines" to follow safety
rules for design, construction, testing, and maximum operating pressure;
Requiring operators of "regulated rural onshore gathering lines" to protect those
pipelines from corrosion and excavation damage;
Requiring operators of "regulated rural onshore gathering lines" to install and
maintain line markers;
Requiring operators of "regulated rural onshore gathering lines" to undertake
public education programs;
Requiring operators of "regulated rural onshore gathering lines" to demonstrate
Operator Qualification (OQ) compliance; and
Requiring operators of "regulated rural onshore gathering lines" to report
accidents and safety-related conditions and to make annual reports.
Develop a program to monitor and mitigate operating conditions that could lead to
internal corrosion.
1.2 Rural Onshore Hazardous Liquid Low-Stress Pipelines
PHMSA is extending the safety rules for the transportation of hazardous liquids by
pipeline contained in 49 CFR Part 195 to certain rural onshore low-stress pipelines.
Specifically, the low-stress pipelines impacted by this regulatory change are those located
in or within 1/2 mile of a USA as defined in 49 CFR § 195.6 that
• Have a nominal diameter of 8 5/8 inches or more, and
• Operate at a stress level of 20% or less of SMYS during normal operation or, if
the stress level is unknown or the pipeline is not constructed using steel pipe, at a
pressure of 125 psig or less.
Additionally, PHMSA is requiring operators of all unregulated rural low-stress lines to
file annual, accident, and safety-related condition reports.
1.3 Intent of PHMSA's Regulatory Changes
The changes summarized above are to improve the safety of rural onshore hazardous
liquid pipelines and to help protect USAs. Furthermore, they are intended to be
responsive to the requirements relating to hazardous liquid pipelines included in the
Pipeline Inspection, Protection, Enforcement, and Safety (PIPES) Act of 2006 (Pub. L.
No. 109-468) and other laws.
^ Certain gathering lines are currently regulated. Those gathermg lines are sometimes collectively referred
to as "regulated gathering lines" (see, for example, PHMSA's file on the Internet containing the 2004
annual reports for hazardous liquid pipelines at http://ops.dot.gov/stats/DT98.htm). This, however, is a
term of art and is not currently defined in the Federal pipeline safety regulations pertaining to hazardous
liquid pipelines.

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1.4 Purpose of this Report
In this report, the benefits and costs of the regulatory changes included in the final rule
are examined. The report also includes other mandatory analyses, including the analysis
required by the Regulatory Flexibility Act.
2. BACKGROUND
2.1 Hazardous Liquid Gathering Lines
Hazardous liquid gathering lines are primarily pipelines transporting crude oil fi"om wells
to downstream locations, such as refineries. These pipelines can be found in rural and
non-rural areas as well as onshore and offshore. It is estimated by the Association of Oil
Pipelines (AOPL) that between 30,000 and 40,000 miles of crude oil gathering lines are
currently in operation in oil producing states.^
The Federal safety regulation found in 49 CFR Part 195 defines a "gathering line" as a
pipeline with a nominal outside diameter of 8 5/8 inches or less that transports petroleum
from a production facility. "Petroleum," as defined in Part 195, means crude oil,
condensate, natural gasoline, natiaral gas liquids, and liquefied natural gas. A "rural area"
is defined as a location outside the limits of any incorporated or unincorporated city,
town, village, or any other designated residential or commercial area, such as a
subdivision, a business or shopping center, or community development.
Federal safety regulations covering the transportation of hazardous liquids by pipeline
found at 49 CFR Part 195 apply to both offshore and onshore hazardous liquid gathering
lines. Onshore gathering lines in rural areas, however, are currently exempt fi-om all Part
195 regulations, except those relating to inspection and burial in Gulf of Mexico inlets
(i.e., 49 § CFR 195.1(b)(4)).
It should be noted that, because of their higher operating pressures, PHMSA expects that
major pipeline firms operate the rural onshore gathering lines impacted by the final rule.
2.2 Low-Stress Pipelines
Low-stress pipelines are hazardous liquid pipelines operating at 20% or less of the
specified minimum yield strength (SMYS) of the line pipe. Most pipelines moving large
volumes of petroleum or petroleum product do so at high pressures (i.e., over 20% of
SMYS). The economics of pipeline operation, and the physical characteristics and
condition of a pipeline may result, however, in a pipeline operating at 20% or less of
SMYS. For instance, the lifetimes of pipelines that are in poor condition may be
extended by operation at lowered pressures. Furthermore, low-pressure operation may
result fi-om market conditions or reduced volumes of pipeline throughput. Safety
^ See "How Many Pipelines are There?" at http://www.pipeline 101 .com/Overview/energv-pl.html. This
estimate is for oil producing states. Consequently, it might not include mileage in Outer Continental Shelf
(OCS) waters outside of state control.

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regulations for hazardous liquid pipelines, contained in 49 CFR Part 195, had not
previously been applicable to pipelines operating at low-stress outside populated areas,
except for those that cross navigable waterways (49 CFR § 195.1(b)(3)).''
On September 6, 2006, PHMSA published a Notice of Proposed Rulemaking (NPRM)
proposing to apply limited, threat-focused pipeline safety requirement to larger-diameter
rural onshore low-stress hazardous liquid pipelines within a defined buffer of USAs (71
FR 52504). USAs are non-populated areas requiring extra protection because of the
presence of sole-source drinking water resources, endangered species, or other ecological
resources that could be adversely affected by accidents or leaks occurring on hazardous
liquid pipelines. The proposed requirements were limited to those that would address the
most common threats to these rural low-stress pipelines.
After PHMSA had issued the NPRM, the PIPES Act was signed into law on December
29,2006. Section 4 of the PIPES Act requires PHMSA to "issue regulations subjecting
low-stress hazardous liquid pipelines to the same standards and regulations as other
hazardous liquid pipelines" with some limited exceptions. The Act allows the new
regulations to be phased in.
In response to the PIPES Act requirement, on May 18,2007, PHMSA published a
Supplemental Notice of Proposed Rulemaking (SNPRM) to apply all of Part 195 to the
low-stress pipelines proposed for coverage in the NPRM, except that the buffer was
extended fi-oml/4 mile to 1/2 mile (72 FR 28008).
On October 31,1990, an Advance Notice of Proposed Rulemaking (ANPRM) entitled
"Transportation of a Hazardous Liquid in Pipelines Operating at 20 Percent or Less of
Specified Minimum Yield Strength" was published in the Federal Register. The
ANPRM included a questionnaire designed to elicit information about the existence of
pipelines operating at 20% of SMYS or less including their age, condition, length, and
use, as well as their failure records fi-om 1986 through 1990. The questionnaire also
requested information about whether the pipelines were currently being operated in
compliance with Part 195, and, if not, what the one-time and continuing costs of bringing
them into compliance would be. The responses by industry to the ANPRM questionnaire
can be found in the docket.
3. STATEMENT OF THE PROBLEM
3.1 Gathering Lines
With the Pipeline Safety Act of 1992 (Pub. L. 102-508), Congress granted the U.S.
Department of Transportation (DOT) the authority to regulate a class of rural gathering
lines called "regulated gathering lines." Congress left the definitions of "gathering lines"
and "regulated gathering lines" to DOT to develop (see 49 U.S.C. 60101(b)(1)(A) and 49
U.S.C. 60101(b)(2)(A)). In the Accountable Pipeline Safety and Partnership Act (Pub. L.
" * For a full discussion of the background concerning historical treatment of low-stress rural pipelines and
the decision to apply safety regulations at this time, see the September 6, 2006, notice.

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104-304), Congress amended the requirement to define "regulated gathering lines" by
adding the words "if appropriate." Congress also gave DOT the authority to collect
information from gathering line operators related to deciding whether and to what extent
to regulate rural gathering lines.
Congress recognized that some rural gathering lines might pose risks warranting Federal
safety regulation. As a consequence, it gave DOT authority to regulate a class of rural
gathering lines called "regulated gathering lines" based on risk-related physical
characteristics, such as diameter, pressure, location, and length of line. In its report on
H.R. 1489, a bill that led to the Pipeline Safety Act of 1992, the House Committee on
Energy and Commerce stated that:
DOT should find out whether any gathering lines present a risk to people
or the environment, and if so how large a risk and what measures should
be taken to mitigate the risk.^
PHMSA believes that this instruction shows that Congress wanted DOT to limit
"regulated gathering lines" to lines posing a significant risk and to limit regulation of
those lines to suitable risk-reduction measures.
Seeking more information specifically about rural gathering lines, DOT asked the public
about whether these pipelines pose a risk warranting Federal safety regulation and, if so,
what those regulations should be. Most commenters recognized the need for Federal
safety regulation, and most felt that the regulations should address knovm risks of a
significant scale.
In association v^th its comments, the AOPL provided incident data showing that
corrosion and excavation damage are the leading causes of spills on gathering lines
overall (i.e., for both rural and non-rural gathering lines). It should also be noted that
there is no reason to expect that rural gathering lines are any less vulnerable to corrosion,
excavation damage, or other integrity threats than non-rural gathering lines.
Consequently, PHMSA believes that it is reasonable to assume that AOPL's incident data
are representative of the safety situation with respect to rural gathering lines. This belief
is strengthened by the findings of a 1997 report by California's Office of the State Fire
Marshal entitled, "An Assessment of Low-Pressure Crude Oil Pipelines and Gathering
Lines," which found that the leading causes of pipeline incidents from 1993 to 1995 on
rural gathering lines and other pipelines exempt from Part 195 were corrosion and
excavation damage.^
As a consequence of Congress' safety concerns, comments received from stakeholders,
and accident data, PHMSA believes that the potential for fiiture harm to people and the
environment from rural gathering lines is clear. Furthermore, based on the foregoing,
PHMSA believes that the present exemption of rural gathering lines from nearly all
safety regulations in 49 CFR Part 195 is no longer appropriate. The final rule aims to
H.R. Report No. 102-247, Part 1, 102"" Congress, T' Session, 23 (1991).
6
This report is available on the Internet at http://osfin.fire.ca.gov/lowpressrpt.html.

<<<PAGE 6>>>

fiilfill Congress' statutory mandate as it relates to rural onshore gathering lines by
amending 49 CFR Part 195.
3.2 Low Stress Lines
Beginning in 1991, Congress paid greater attention to the risks that hazardous liquid and
natural gas pipelines pose to the environment. In the Pipeline Safety Act of 1992 (Pub.
L. 102-508), Congress gave DOT greater authority to protect the environment from the
risks that pipelines pose. Congress continued to emphasize the need to better protect the
environment from pipeline risks in the Accountable Pipeline Safety and Partnership Act
of 1996 (Pub. L. 104-304). With the PIPES Act of 2006, Congress went ftirther and
instructed DOT to subject low-stress hazardous liquid pipelines to the same regulatory
standards as other hazardous liquid pipelines regulated under Part 195.
Recent accidents have demonstrated the need to regulate the safety of low-stress
pipelines, particularly those near USAs. For instance, on March 2, 2006, a spill from
HP's 34-inch unregulated low-stress pipeline in North Slope Borough, Alaska, released
5,000 barrels of crude oil, impacting the artic tundra and covering approximately 2 acres
of permafrost. On March 23, 2006, a spill from BP's 36-inch low-stress pipeline in
Toledo, Ohio, released 200 barrels of unleaded gasoline, some of which found its way
into Shantee Creek, which flows to Lake Erie, On August 6, 2006, BP found corrosion
and leaks in its unregulated low-stress pipeline in North Slope Borough, Alaska. The
discovery of severe corrosion and the lesJcs caused BP to shut the pipeline down.
Because of this, production from part of the massive Prudhoe Bay oilfield also had to be
shutdovm.
PHMSA sees no reason to expect unregulated low-stress pipelines to be less vulnerable to
corrosion, excavation damage, and other integrity threats than higher pressure regulated
lines. Low-stress pipelines may be even more vulnerable because they have not been
subject to Federal safety regulation to ensure their continued integrity.
Based on Congress' and PHMSA's safety concerns, public comments, and available
accident data, PHMSA believes the potential for future harm to people and the
environment from unregulated rural low-stress pipelines is clear. These pipelines have
the same leading causes of accidents as the hazardous liquid pipelines that PHMSA
regulates. Therefore, PHMSA believes it is no longer appropriate to exempt these lines
from Part 195 coverage. This is sfrengthened by Congress's recent mandate.
4. RATIONALE FOR REGULATORY ASSESSMENT
Executive Order (EO) 12866 directs Federal agencies to develop both preliminary and
final regulatory analyses if their new or revised regulations are likely to be "significant
regulatory actions" tihat may have an annual impact on the economy of $100 million. EO
12866 also requires a determination about whether a new or revised rule could adversely
affect the economy or a section of the economy in terms of productivity, employment, the
environment, public health, safety, or State, local or tribal governments. Under the

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regulatory philosophy and principles provided in sections 1(a) and (b) and section
6(a)(3)(C) of EO 12866, an economic analysis of the new or revised rule must be
conducted. Furthermore, the Regulatory Flexibility Act of 1980, as amended, requires
Federal agencies to conduct a separate analysis of the economic impact of new or revised
rules on small entities, and the Unfimded Mandates Act also requires economic impact
analysis.
Under the above directives, PHMSA has performed an evaluation of the potential
compliance costs of the regulatory change and feasible regulatory options and identified
those benefits that can be expressed in monetary terms. To the extent possible, this is
based on the available data and information from several sources including PHMSA's
Incident Reporting Database and comments from stakeholders. PHMSA estimates the
impact of implementing the regulatory changes would not be greater than $100 million
annually, nor would the regulatory changes adversely affect the economy or a section of
the economy in terms of productivity, employment, the environment, public health,
safety, or State, local or tribal governments. PHMSA has also determined, as required by
the Regulatory Flexibility Act, that the regulatory changes would not have a significant
economic impact on a substantial number of small entities in the United States.
Additionally, the regulatory changes would not impose annual expenditures of $120.7
million or more on State, local, or tribal governments or the private sector (and thus
would not require an Unfunded Mandates Act analysis).
5. ALTERNATIVES CONSIDERED
5.1 Gathering Lines
PHMSA considered several alternatives to assure the necessary protection from potential
incidents on rural onshore gathering lines. These alternatives were:
• No action.
• Collect more information about the potential hazards of the rural onshore
gathering lines before proposing any specific safety regulations;
• Apply all Part 195 regulations to the rural onshore gathering lines;
• Implement limited operation and maintenance regulations, along with
implementing reporting regulations for accidents and safety-related conditions, to
the rural onshore gathering lines;
• Develop a completely new set of safety regulations for rural onshore gathering
lines; and
• Implement limited operation and maintenance regulations, along with
implementing reporting regulations for accidents and safety-related conditions
and requiring the use of line markers. In this alternative, include regulations for
design, construction, and testing of new, relocated, replaced, or otherwise
changed lines.
The evaluations for the alternatives considered by PHMSA are presented below.

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5.1.1 No Action
Congress has mandated that action be taken concerning gathering lines. Not taking
action would be unresponsive to the Congressional mandate. For that reason, this
alternative is not considered any further in this analysis.
5.1.2 Collect more information about the potential hazards of the rural onshore
lines before proposing any specific safety regulations
This alternative received some support from industry, and Congress did grant DOT
specific authority to collect more information about hazards before proposing any safety
regulations. This alternative was rejected, however, because PHMSA feels that there is
currently a demonstrated need for safety regulation. Also, based on PHMSA experience
with hazardous liquid pipelines, collecting more information about the rural onshore
gathering lines would be unlikely to change the current understanding concerning the
potential risks these lines pose. For these reasons, collecting more information about the
potential hazards of the rural onshore lines was evaluated no ftirther.
5.1.3 Apply all Part 195 regulations to the rural onshore lines
This alternative would impose significant costs on the industry for little safety benefit.
Also, the costs could have a significant effect on U.S. oil supplies by causing production
to cease at marginal wells connected to the lines. For these reasons, applying the
regulations from Part 195 to rural onshore lines was not evaluated ftirther.
5.1.4 Implement limited operation and maintenance rules, along with
implementing reporting rules for accidents and safety-related conditions
AOPL recommended the approach covered by this aUemative for gathering lines.
With respect to gathering lines, the operation and maintenance rules to be implemented
would be the public education rules in 49 CFR § 195.440, the excavation damage
prevention rules in 49 CFR § 195.442, and the corrosion control rules in subpart H of Part
195. The reporting rules would be provisions of subpart B of Part 195 relating to
accidents and safety-related conditions. The benefit of this ahemative would be that it
would avoid excessive safety regulation by focusing on the leading threats to rural
gathering lines - corrosion and excavation damage. Also, the information collected
through application of the reporting rules would enable PHMSA to recognize safety
problems and evaluate the effectiveness of adopting only limited safety rules.
One disadvantage of this alternative is that it does not include the installation and
maintenance of line markers, OQ program requirements, or drug and alcohol
requirements. The use of line markers to warn excavators of the presence of hazardous
liquid pipelines is a well-established safety practice within the hazardous liquid pipeline
industry. Regarding OQ, Congress mandated that PHMSA establish regulations for OQ
on pipelines. Congress also directed pipeline operators to develop and adopt a

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qualification program should DOT fail to prescribe standards and criteria. Finally,
requirements on testing for the presence of prohibited drugs and alcohol apply to
operators of a pipeline facility subject to Part 195.
Because of the gaps noted by PHMSA, this alternative was not considered any ftirther.
5.1.5 Develop a completely new set of safety rules for the rural onshore gathering
lines
PHMSA rejected this alternative because there is no reason to believe that the Part 195
safety regulations now in effect for non-rural gathering lines would not be as effective if
applied to rural gathering lines. PHMSA's experience indicates that Part 195 regulations
can be expected to work well for rural gathering lines because the integrity threats
involved are similar for all the lines. Consequently, the alternative of developing a new
set of safety regulations applicable to the rural onshore gathering lines was not evaluated
fiarther.
5.1.6 Implement limited operation and maintenance rules, along with
implementing reporting rules for accidents and safety-related conditions and
requiring the use of line markers
Finally, PHMSA considered a modified version of the alternative discussed above in
Section 5.1.4. The modified version of that alternative would add the line marker rules in
49 CFR § 195.410, the qualification requirements in subpart G for operator personnel,
and drug testing and alcohol misuse prevention requirements in Part 199 to the other
regulations. Line markers are a traditional way of alerting excavators to the presence of a
hazardous liquid pipeline. Under 49 U.S.C. 60131, DOT must require pipeline operators
to develop and adopt qualification programs complying with the standards DOT
develops. Furthermore, any operator subject to 49 CFR Part 195 is required under 49
CFR Part 199 to test covered employees for the presence of prohibited drugs and alcohol.
In addition, this modified alternative would require operators to establish a maximum
operating pressure for each steel line according to 49 CFR § 195.406, and to design and
construct new lines according to applicable Part 195 regulations. A maximum operating
pressure with accompanying pressure control would guard against the danger of
accidental overpressure. The design and construction regulations in 49 CFR Part 195
would ensure a minimum standard of integrity for all new, replaced, and relocated rural
onshore gathering lines designated as "regulated rural onshore gathering lines" PHMSA
proposed similar rules on markers, operating pressure, and design and construction for
rural gas gathering lines in a final rule published March 15, 2006 (see 71 FR 13289).
These additions to the approach suggested by AOPL should not be too burdensome,
because similar safety requirements are included in (American Society of Mechanical
Engineers) ASME B31.4, a consensus standard followed widely throughout the
hazardous liquid pipeline industry.
For the reasons outlined above, this alternative was selected for gathering lines.

<<<PAGE 10>>>

5.2 Low-Stress Pipelines
PHMSA considered three alternatives to assure the necessary protection from potential
incidents on rural onshore low-stress pipelines. These alternatives were:
• No action.
• Complete the currently outstanding rulemaking relating to low-stress pipelines
and then apply Part 195 to all rural onshore low-stress pipelines at the same time.
• Apply Part 195 to rural onshore low-stress pipelines in two phases, with the initial
phase covering those lines posing the greatest risk to the environment.
Evaluations of these alternatives are presented below.
5.2.1 No Action
Section 4 of the PIPES Act of 2006 requires Part 195 to apply to all low-stress pipelines,
with certain limited exceptions. Not taking action would be unresponsive to the
Congressional mandate. For that reason, this alternative is not considered any ftirther in
this analysis.
5.2.2 time
Complete the currently outstanding rulemaking relating to low-stress
pipelines and then apply Part 195 to all rural onshore low-stress lines at the same
As mentioned above, on September 6, 2006, PHMSA published an NPRM proposing
extending limited threat-focused requirements to larger-diameter rural onshore low-stress
hazardous liquid pipelines within a defined buffer of USAs. Those limited threat-focused
requirements are less than "the same standards and regulations as [apply to] other
hazardous liquid pipelines" required by the PIPES Act. Finalizing that proposal without
change would impose some requirements on affected pipelines, only to be followed by
additional regulations imposing ftirther requirements. PHMSA considers such sequential
application of requirements to be inefficient and to pose an unnecessary additional burden
on pipeline operators. Therefore, this alternative is not considered any ftirther in this
analysis.
5.2.3 Apply Part 195 to the rural onshore low-stress pipelines in two phases, with
the initial phase covering those lines posing the greatest risk to the
environment
The September 2006 NPRM proposed limited threat-focused requirements for certain
rural onshore low-stress hazardous liquid pipelines within a defined buffer of USAs. The
low-stress pipelines covered by the rule are those where additional safety regulation is
most important - larger-diameter pipelines that can have adverse impacts on USAs.
PHMSA believes the most appropriate and expeditious means of implementing the
PIPES Act mandate is to act in phases.
10

<<<PAGE 11>>>

In phase 1, PHMSA undertook to modify the NPRM via a SNPRM to add to the
requirements to be applied to the low-stress pipelines covered by the NPRM. Pipelines
affected by the phase 1 rulemaking are those low-stress pipelines 8 5/8 inches and greater
in diameter. PHMSA believes that most operators of these larger low-stress pipelines
also operate pipeline at higher stresses or operate regulated low-stress pipe within
populated areas. PHMSA thus has a regulatory relationship with those operators.
In phase 2, PHMSA will initiate a separate rulemaking to apply Part 195 to all remaining
unregulated rural low-stress pipelines.
For the reasons mentioned above, this alternative was selected for low-stress pipelines.
6. ECONOMIC ANALYSIS
The benefits and costs of the regulatory changes included in the final rule are addressed
in this section of this report. The analysis of benefits and costs takes the following
approach: (1) the mileage impacted by the regulatory changes is identified and estimated,
(2) the potential benefits of the regulatory changes are examined, (3) the potential costs
of the regulatory changes are examined, and (4) a discussion of the expected benefits
versus the expected costs are presented. Unless otherwise specified, all dollar amounts in
section 6 of this report are given in constant 2005 dollars.^
Because PHMSA has not regulated the pipelines covered by the final rule, PHMSA has
only limited information about the pipelines, their location, operating characteristics, and
safety performance. Consequently, a number of assumptions have been made in this
economic analysis.
6.1 Impacted Mileage
Both rural onshore gathering lines and rural onshore low-stress pipelines will be impacted
by the regulatory changes included in the final rule. The impacted mileages for each of
these two types of pipeline are estimated below.
6.1.1 Gathering Lines
The rural onshore gathering line mileage that will be impacted by the regulatory changes
is unknown and must be estimated. The impacted mileage would be operated as
regulated rural onshore gathering lines. Such regulated rural onshore gathering lines
^ Where necessary, dollars are converted fi-om nominal values to real 2005 values using the Implicit Price
Deflators for Gross Domestic Product. The source of these deflators is the annual data version of Table
1.1.9 Implicit Price Deflators for Gross Domestic Product, which is located on the Bureau of Economic
Analysis website at http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Selected=N.
11

<<<PAGE 12>>>

• Have a nominal diameter from 6 5/8 to 8 5/8 inches;
• Operate at a stress level of more than 20 %of SMYS (specified minimum yield
strength) during normal operation or, if the stress level is unknovm or the pipeline
is not constructed using a steel pipe, at a pressure of more than 125 psig; and
• Are within 1/4 mile of a USA as defined in 49 CFR § 195.6.
Information about the mileage of gathering lines in the U.S. is somewhat sketchy. AOPL
estimates that there are between 30,000 and 40,000 miles of crude oil gathering lines in
this country. ^ This estimated mileage includes both onshore and offshore gathering lines
as well as both rural and non-rural gathering lines. A mileage breakdovm between
onshore and offshore lines and rural and non-rural gathering lines is not available.
PHMSA does have information indicating that pipeline operators have 2,573 miles of
crude oil gathering lines that are currently regulated under Part 195. Some of this
mileage may be non-rural. Other mileage, however, may be rural mileage located in the
inlets of the Gulf of Mexico and subject to 49 CFR § 195.413.
It is also known that interstate common-carrier pipelines that are required to file Form 6
with the U.S. Federal Energy Regulatory Commission (FERC) operate approximately
15,000 miles of crude gathering lines.^ Common carrier pipelines are those that charge a
fee for their service. There is a filing threshold for Form 6 that is based on pipeline
operating revenues, and some common carrier pipelines may have revenues below that
threshold and consequently may not be reporting their gathering system mileage to
FERC.'°
For the purposes of this analysis, the gathering line mileage that would be impacted by
the regulatory changes included in the final rule was estimated as follows.
As mentioned before, AOPL, an industry group representing pipeline operators, estimates
that there are between 30,000 and 40,000 miles of gathering lines in the U.S." The
midpoint of AOPL's range, 35,000 miles, is used as the point estimate for the total
number of miles of gathering lines in the U.S.
Also as mentioned before, DOT currently regulates the safety of approximately 2,600
miles of gathering lines.'^ Those lines, which include all non-rural gathering lines.
* The Association of Oil Pipelines estimates that there are between 30,000 and 40,000 miles of gathering
lines in the U.S. This includes the mileage of onshore and offshore crude gathering lines (see "How Many
Pipelines are There?" at http://www.pipeline 101 .com/Overview/energv-pl.htmn.
' In Warren R. True and Jeannie Stell, "Special Report: Pipeline Economics," Oil & Gas Journal Data
Book, 2005 Edition, PennWell Corp., Tulsa, OK, 2005, p. 80, it is reported that these pipelines operated
14,187 miles of gathering lines in 2003, while the pipelines operated 16,214 miles of gathering lines in
2002.
'" True and Stell, p. 66.
" AOPL's estimate is for oil producing states. It might not include mileage in waters of the OCS outside of
state control. Consequently, the actual rural gathering line mileage might be higher than estimated here.
'^ This includes all crude oil gathering lines subject to Part 195, including those on the OCS.
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offshore gathering lines, and some rural onshore gathering lines, will continue to be
regulated, and furthermore, it is assumed that the regulatory changes included in the final
rule will not impact them. Consequently, an estimated 32,400 (= 35,000 - 2,600) miles
of rural gathering lines are currently unregulated.
The 32,400 mile estimate includes both onshore and offshore mileage. PHMSA assumes
that 50% of all rural gathering line mileage is onshore. Thus, an estimated 16,200 (= 0.5
X 32,400) miles of rural onshore gathering lines are currently unregulated.
Furthermore, based on comments by AOPL,''' PHMSA assumes that no more than 20%
of all onshore gathering line mileage that is currently unregulated meets the following
conditions: (1) has a nominal diameter of 6 5/8 inches or greater and (2) operates at
greater than 20% of SMYS (or alternatively at a pressure of 125 psig or greater). Thus,
PHMSA expects that no more than 3,240 (= 0.2 x 16,200) miles of rural onshore
gathering lines (1) have a nominal diameter of 6 5/8 inches or greater and (2) operate at
greater than 20% of SMYS (or at a pressure of 125 psig or greater).
Some the mileage will not be impacted because it already operates in compliance with
Part 195, even though that is not currently required. No information is readily available
for gathering lines, but information is available from the 1990 ANPRM questionnaire
mentioned earlier on the percentage of low-stress pipelines operating in compliance with
Part 195. Though this information is from 1990, it is still relevant, because the energy
sector has been predominately stable for the periods of 1990 through 2003 with limited
growth in infrastructure or changes in operation. Responses from this questionnaire
indicated that approximately 16% of the low-stress mileage of the respondents was
operated in compliance with Part 195, while approximately 84% were not.'''
Given the situation in 1990 with low stress pipelines, PHMSA assumes that 16% of the
rural onshore gathering lines currently operate in compliance with Part 195, while 84%
do not. That means an estimated 2,722 (= 0.84 x 3,240) miles of rural onshore gathering
lines do not operate in compliance with Part 195.
To complete the estimation of the gathering line mileage impacted by the rule,
information is needed on the proximity of gathering lines to USAs.
According to information contained in the National Pipeline Mapping System,
approximately 22% of all regulated hazardous liquid pipeline mileage is within 1/4 mile
of a USA.'^ PHMSA assumes for the purposes of this analysis that 22% of the 2,722
miles of onshore gathering lines are within 1/4 mile of a USA. That is, PHMSA assumes
that 599 (= 2,722 x 0.22) miles of onshore gathering lines are within 1/4 mile of a USA.
" According to AOPL, "gathering lines generally operate...at lo w pressure...." Lines operating at greater
than 20% of SMYS , as the NPR M notes, are not operating at lo w pressure.
'^ For more detail on this, see p. 8 of "Economic Evaluarion of Regulating Certain Hazardous Liquid
Pipelines Operating at 20% or Less of Specified Minimu m Yield Strength," July 21,1992, which can be
foun d in Docket PS-117.
'^ Communication fi-om Richard Hinton, PHMSA , June 19,2006.
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Since these lines operate at greater than 20% of SMYS, PHMSA assumes that major
pipeline firms operate all of these lines.
6.1.2 Low-Stress Pipelines
The rural onshore low-stress line mileage that will be affected by the regulatory changes
is unknown and must be estimated. Some of the affected low-stress mileage would be
brought under the safety regulations of Part 195 by the regulatory changes. That mileage
consists of low-stress pipeline with the following characteristics:
• Have a nominal diameter of 8 5/8 inches or more,
• Operate at a stress level of 20% or less of SMYS during normal operation or, if
the stress level is unknown or the pipeline is not constructed using steel pipe, at a
pressure of 125 psig or less and
• Are in or within 1/2 mile of a USA as defined in 49 CFR § 195.6.
Additionally, the operators of all unregulated low-stress pipelines would be required by
the rule to file annual, accident, and safety-related condition reports with PHMSA for
those pipelines.
Low-Stress Mileage Brought Under Part 195
PHMSA assumes that approximately 200,000 miles of hazardous liquid pipeline are
being used in the transport of petroleum and petroleum products in the U.S. '^ PHMSA
regulates approximately 160,000 miles of that pipeline. ' The difference between these
two numbers, 40,000 (= 200,000 - 160,000) miles, represents the total unregulated
hazardous liquid pipeline mileage currently in operation. This unregulated mileage is
made up primarily of low-stress pipelines and rural gathering lines.
The Association of Oil Pipelines (AOPL), an industry group representing pipeline
operators, estimates that there are between 30,000 and 40,000 miles of gathering lines in
the U.S.'^ The midpoint of AOPL's range, 35,000 miles, is used as the point estimate for
the total number of miles of gathering lines in the U.S. '^ DOT currently regulates the
safety of approximately 2,600 miles of gathering lines.^^ Consequently, an estimated
32,400 (=35,000 - 2,600) miles of rural gathering lines are currently unregulated.
Removing these from the 40,000-mile estimate of unregulated pipelines leaves 7,600
(=40,000 - 32,400) miles of pipeline as the estimate for unregulated low-stress lines.
'* Richard A. Rabinow, "The Liquid Pipeline Industry in the United States: Where It's Been, Where It's
Going," A report prepared for the Association of Oil Pipelines, April 2004, p. 4.
" PHMSA, "Liquid Pipeline Operator Total National Mileage," located at http://ops.dot.gov/stats/lpo.htm.
'* This includes the mileage of onshore and offshore crude gathering lines (see "How Many Pipelines are
There?" at http://www.pipelinel01.comyOverview/energv-pl.htmn.
" AOPL's estimate is for oil producing states. It might not include mileage in waters of the OCS outside of
state control. Consequently, the actual rural gathering line mileage might be higher than estimated here.
^ ° This includes all crude oil gathering lines subject to Part 195, including those on the OCS.
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Only part of the 7,600 miles of pipeline will be impacted by the changes in the final rule.
Some of low-stress pipelines will not be impacted because they are less than one mile
long and consequently not covered by the changes. Respondents to the 1990 ANPRM
questionnaire mentioned earlier in this report were asked about their lo
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