# U.S. DOT/PHMSA - Regulatory Impact Analysis (RIA)

- **operation:** document
- **citation:** 0900006481ca7cda
- **title:** U.S. DOT/PHMSA - Regulatory Impact Analysis (RIA)
- **source type:** rulemaking
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** current
- **official:** true
- **published on:** Not available
- **effective on:** Not available
- **summary:** Preliminary Regulatory Impact Analysis Regulatory Development Support Services Pipeline Safety: Safety of Hazardous Liquid Pipelines Notice of Proposed Rulemaking (NPRM) Contract No.: DPTH56-09-F-000012 Order No.: DTPH56-09-F-000012TTD002 Project No.: 1027-002 Submitted To: Pipeline and Hazardous Materials Safety Administration U.S. Department of Transportation Attn.: Cheryl... Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012 Proposed Requirement Area Entities Affected Pipeline Segments Affected Estimate of Possible Number of Operators6 Estimate of Possible Total Number of Pipeline Miles Affected by the Proposed Rule7 Onshore Offshore 4. Require assessments...
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Preliminary Regulatory Impact Analysis
Regulatory Development Support Services
Pipeline Safety: Safety of Hazardous
Liquid Pipelines Notice of Proposed Rulemaking (NPRM)
Contract No.:
DPTH56-09-F-000012
Order No.:
DTPH56-09-F-000012TTD002
Project No.:
1027-002
Submitted To:
Pipeline and Hazardous Materials Safety Administration
U.S. Department of Transportation
Attn.: Cheryl Whetsel, COR
1200 New Jersey Avenue, SE
Washington, DC 20590-0001
Submitted By:
Econometrica, Inc.
7475 Wisconsin Avenue, Suite 1000
Bethesda, MD 20814
October 1, 2015

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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
Table of Contents
TABLE OF CONTENTS ............................................................................................................... II
EXECUTIVE SUMMARY ............................................................................................................. 1
1. INTRODUCTION ..................................................................................................................... 4
1.1. BACKGROUND ............................................................................................................... 4
1.2. NOTICE OF PROPOSED RULEMAKING ............................................................................. 4
1.3. EFFECTIVENESS OF THE RULE ....................................................................................... 5
1.4. HL PIPELINE SEGMENTS AND OPERATORS POTENTIALLY AFFECTED ............................ 7
1.5. FACTORS THAT MAY AFFECT THE COSTS AND BENEFITS ............................................. 9
2. REGULATORY ANALYSIS .................................................................................................... 11
2.1. INTRODUCTION............................................................................................................ 11
2.2. NEED FOR THE REGULATORY ACTION ......................................................................... 11
2.2.1. Economic – Market Failure .............................................................................. 11
2.2.2. Legislative – Safety Updates to the Nation’s Pipeline Safety Laws ................. 13
2.2.3. Strategic – PHMSA’s Goals ............................................................................. 14
2.3. BASELINE .................................................................................................................... 15
2.3.1. Factors Contributing to Pipeline Failures ......................................................... 17
2.3.2. HL Pipeline Incidents ....................................................................................... 17
2.3.3. Current Regulatory Requirements .................................................................... 21
2.4. TIMEFRAME FOR THE ANALYSIS .................................................................................. 29
2.5. IDENTIFICATION OF AVAILABLE ALTERNATIVE APPROACHES AND THE CONSEQUENCES
OF THE ALTERNATIVES ...................................................................................................... 29
2.6. OVERVIEW OF THE COSTS AND BENEFITS ASSOCIATED WITH THE PROPOSED RULE
REQUIREMENTS.................................................................................................................. 29
2.6.1. Costs .................................................................................................................. 29
2.6.2. Benefits ............................................................................................................. 30
2.7. CONSIDERATION OF THE LOSS OF ENERGY SUPPLIED .................................................. 33
3. REGULATORY IMPACT ANALYSIS OF THE PROPOSED REQUIREMENTS ........................... 34
REQUIREMENT AREA #1 – EXTEND REPORTING REQUIREMENTS TO ALL HL GRAVITY
LINES ................................................................................................................................. 34
Alternatives Considered .............................................................................................. 34
Analysis of Costs and Benefits of the Proposed Action ............................................. 35
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
REQUIREMENT AREA #2 – EXTEND CERTAIN REPORTING REQUIREMENTS TO ALL HL
GATHERING LINES ............................................................................................................. 39
Alternatives Considered .............................................................................................. 39
Analysis of Costs and Benefits of the Proposed Action ............................................. 40
REQUIREMENT AREA #3 – REQUIRE INSPECTIONS OF PIPELINES IN AREAS AFFECTED BY
EXTREME WEATHER, NATURAL DISASTERS, AND OTHER SIMILAR EVENTS ...................... 44
Baseline Inspection Requirements for HL Pipelines .................................................. 44
Alternatives Considered .............................................................................................. 45
Analysis of Costs and Benefits of the Proposed Action ............................................. 46
Interaction With Other Proposed Requirements ......................................................... 51
Request for Comments ................................................................................................ 51
REQUIREMENT AREA #4 – REQUIRE HL PIPELINE IN NON-HCAS BE ASSESSED AT LEAST
ONCE EVERY 10 YEARS USING ILI TOOLS ........................................................................ 52
Alternatives Considered .............................................................................................. 52
Analysis of Costs and Potential Benefits of the Proposed Action .............................. 53
Interaction With Other Proposed Requirements ......................................................... 64
Request for Comments ................................................................................................ 65
REQUIREMENT AREA #5 – REQUIRE LDSS FOR ALL HL PIPELINES ................................... 66
The Target Problem and Need for the Proposed Action ............................................. 66
Alternatives Considered .............................................................................................. 66
REQUIREMENT AREA #6 – MODIFY THE REPAIR REQUIREMENTS FOR HCA AND NON-HCA
PIPELINE ............................................................................................................................ 69
Alternatives Considered .............................................................................................. 70
Analysis of Costs and Benefits of the Proposed Action ............................................. 70
Interaction With Other Proposed Requirements ......................................................... 71
Request for Comments ................................................................................................ 71
REQUIREMENT AREA #7 – INCREASE THE USE OF ILI TOOLS IN HCAS ............................. 72
Alternatives Considered .............................................................................................. 75
Analysis of Costs and Benefits of the Proposed Requirement ................................... 76
Interaction With Other Proposed Requirements ......................................................... 80
REQUIREMENT AREA #8 – CLARIFY IM REQUIREMENTS ................................................... 81
Alternatives Considered .............................................................................................. 82
Analysis of Costs and Benefits of the Proposed Action ............................................. 83
APPENDIX A. POTENTIALLY ASSESSMENT-PREVENTABLE INCIDENTS, 2010 TO 2014 ...... A-1
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
Executive Summary
The Pipeline and Hazardous Materials Safety Administration (PHMSA) is proposing to make
certain changes to the hazardous liquid (HL) pipeline safety regulations.1 The proposed changes
include the following: (1) extend reporting requirements to gravity lines; (2) extend certain
reporting requirements to HL gathering lines located outside of high consequence areas (HCAs);2
(3) require inspections of pipelines in areas affected by extreme weather, natural disasters, and
other similar events within 72 hours and appropriate remedial action to ensure the safe operation
of a pipeline; (4) require assessments of pipelines located in non-HCAs every 10 years using in-
line inspection (ILI) tools; (5) expand the use of leak detection systems (LDSs) to HL pipelines
located in non-HCAs to mitigate the effects of failures that occur outside of HCAs; (6) modify
the Integrity Management (IM) repair criteria and apply those same criteria to pipelines that are
not subject to the IM requirements; (7) increase the use of ILI tools by requiring that any pipeline
that could affect an HCA be capable of accommodating these devices within 20 years, unless its
basic construction will not permit that accommodation; and (8) resolve inconsistent deadlines,
clarify requirements for information integration, clarify definition of covered pipeline facilities,
and specify timeframe for rechecking HCA status for the IM Plan.
Different requirements in this Notice of Proposed Rulemaking (NPRM) affect different sets of
operators, and different mileage segments are also affected by different parts of the proposal.
Some of the requirements are directed only to pipelines in HCAs, and others are directed only to
pipelines outside of HCAs. Some requirements incorporate only onshore pipelines, and others
refer to offshore also. Throughout the analysis, the cost estimates are based on assumptions
regarding how operators will choose to comply with many of the proposed requirements. The
resulting cost estimates are based on information available at the time of the analysis. Similarly,
the benefits of the requirements will be affected by how effective the rule will be in reducing or
mitigating the costs associated with incidents. Some of the requirements provide a period of time
before operators must comply and the timing of when mandatory compliance will affect both the
cost and benefit estimates.
In this regulatory analysis, we discuss PHMSA’s alternatives to the proposed requirements and,
where possible, provide estimates of the costs and benefits for specific regulatory requirements
in the eight areas. The regulatory analysis provides PHMSA’s best estimate of the impact of the
separate proposed requirements and throughout invites comment on the assumptions and
methodologies employed. For some of the provisions, the costs and benefits are not readily
1 PHMSA, U.S. Department of Transportation (DOT), 49CFR Part 195. Docket No. PHMSA-2010-0229 RIN 2137-
AE66. The proposed action is in response to the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011
(P.L. 112-90), National Transportation Safety Board (NTSB) recommendations to update HL pipeline regulations,
lessons learned, and public input.
2 For HL pipelines, HCAs include populated areas, drinking water sources, and unusually sensitive ecological areas.
FR §195.452 requires HL pipeline operators to conduct an initial risk assessment to determine if an accidental
release from any segment of their pipeline could reach an HCA. Operators are required to meet more stringent
regulatory requirements known as IM for segments of their pipeline from which a release could reach an HCA. Any
pipeline from which a release “could affect” an HCA is subject to the IM Rule. In this document, we use HCA and
“could affect HCA” interchangeably. For more information, please see PHMSA’s “Fact Sheet: High Consequence
Areas” at http://primis.phmsa.dot.gov/comm/FactSheets/FSHCA.htm. Accessed December 15, 2014.
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Regulatory Impact Analysis: Hazardous Liquid Pipelines
1027-002/DTPH56-09-F-000012
quantified or possible to monetize. Estimates of the annual costs and potential benefits that are
quantified are discounted at both 3 percent and 7 percent and presented in the analysis of the
requirements to arrive at the present values for purposes of comparison. The present values of
costs and potential benefits are calculated over different time periods, depending on the nature of
the requirements. Table ES-1 presents a summary of the present value of the annualized costs
and benefits for the eight requirement areas in the proposed rule discounted at 7 percent.
Table ES-1. Annualized Costs and Benefits by Requirement Area Discounted at 7
Percent
Requirement Area
Costs
Benefits
Net Benefits
1. Extend certain reporting
requirements to all HL
$900
quantified but
Benefits not
Expected to be
gravity lines.
expected to justify
positive.
costs.
Extend certain reporting
requirements to all HL
$23,300
Benefits not
Expected to be
gathering lines.
quantified but
expected to justify
positive.
the costs.
3.
Require inspections of
$1.5 million
$3.5 to 10.4 million
pipelines in areas affected
$2.0 to 8.9 million
by extreme weather, natural
disasters, and other similar
if a condition that could
appropriate remedial action
adversely affect the safe
operation of a pipeline is
discovered
4. Require periodic
$16.7 million
$17.7 million
$1 million
that are not already covered
assessments of pipelines
under the IM program
Range:
$9.4 to $26.0 million
-$7.3 to $9.3 million
Range:
tool (or demonstrate to the
requirements using an ILI
satisfaction of PHSA that
Expected to be
positive even at the
sina this tool)
the pipeline is not capable of
benefit range if
unquantified benefits
5. Require use of LDSs on HL
Not quantified.
Not quantified but
Not quantified, but
HAs to mitigate the effects
pipelines located in non-
of failures that occur outside
that the cost of
expected to be
expanding LDSs to
minimal and justify
benefits.
positive qualitative
the costs.
of HCAs.
additional repairs to
performing any
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
Requirement Area Costs Benefits Net Benefits
6. Modify the IM repair criteria,
both by expanding the list of
conditions that require
immediate remediation,
consolidating the timeframes
for remediating all other
conditions, and making
explicit deadlines for repairs
on non-IM pipeline.
Not quantified but
expected to be
minimal.
Not quantified but
expected to justify
the minimal costs.
Not quantified but
expected to be
minimal.
7. Increase the use of ILI tools
by requiring that any pipeline
that could affect an HCA be
capable of accommodating
these devices within 20
years, unless its basic
construction will not permit
that accommodation.
$1.0 million $12.2 million $11.2 million
8. Clarify and resolve
inconsistencies regarding
deadlines and information
analyses for IM plans.
$3.2 million $10.0 million $6.8 million
The proposed rule is a significant regulatory action under DOT’s regulatory policies and
procedures (44 FR 11034; February 26, 1979) but is not economically significant under EO
12866 and EO 13563 because the estimated annual impact is less than $100 million.
Looking at the individual provisions of the proposed rule, the quantified benefits justify the costs
except for in the case of Requirement 4. Factors such as an increase in public confidence that all
pipelines are being regulated and better risk management procedures on the part of operators are
expected to yield qualitative and quantitative benefits that are in further excess of the costs.
Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess
anticipated costs and benefits before issuing any rule whose mandates would require spending
$151 million in any one year. This proposed rule does not impose enforceable duties on State,
local, or tribal governments or on the private sector of $155 million in any one year.
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
1. Introduction
1.1. Background
PHMSA (or “the Agency”) is the agency within DOT (or “the Department”) that administers the
Pipeline Safety Laws. On October 18, 2010 (75 FR 63774), PHMSA published an ANPRM
asking the public to comment on several proposed changes to Part 195.3 The ANPRM sought
comments on the following:
1. Scope of Part 195 and Existing Regulatory Exceptions.
2. Criteria for Designation of HCAs.
3. Leak Detection and Emergency Flow Restricting Devices.
4. Valve Spacing.
5. Repair Criteria Outside of HCAs.
6. Stress Corrosion Cracking.
Twenty-one organizations and individuals submitted comments in response to the ANPRM. The
analysis of comments appears in “Notice of Proposed Rulemaking Safety of Onshore HL
Pipelines Docket Number PHMSA 2010-0229.”
1.2. Notice of Proposed Rulemaking
In response to mandates, recommendations, lessons learned, and public input, PHMSA is
proposing to make certain changes to the Hazardous Liquid Pipeline Safety Regulations.
 The first proposal is to extend reporting requirements to gravity lines. Other pipelines that
operate at relatively low pressures (such as gathering lines), and for short distances, are
subject to reporting requirements. Gravity lines can operate at pressures that exceed low
pressure pipelines or gathering lines due to significant elevation differences needed to
provide the motive force for liquid flow and thus can represent as much or more risk than
low pressure lines or gathering lines. The collection of information about these lines is
authorized under the Pipeline Safety Laws, and the resulting data would assist in
determining whether the existing Federal and State regulations for these lines are
adequate.
 The second proposal is to extend reporting requirements to all HL gathering lines. The
collection of information about these lines is also authorized under the Pipeline Safety
Laws, and the resulting data would assist in determining whether the existing Federal and
State regulations for these lines are adequate.
 The third proposal is to require inspections within 72 hours of pipelines in areas affected
by extreme weather, natural disasters, and other similar events. Such inspections would
ensure that pipelines are still capable of being safely operated after these events. PHMSA
is also proposing to require operators to take remedial action if a condition that could
adversely affect the safe operation of a pipeline is discovered.
3 The ANPRM may be viewed at http://www.regulations.gov/#!docketDetail;D=PHMSA-2010-0229 (accessed
August 15, 2012).
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
 The fourth proposal is to require assessments of HL pipelines that are located outside of
HCAs using ILI tools at least once every 10 years. Pipelines that could affect HCAs are
already required under the IM program requirements to be assessed using ILI, hydrostatic
testing, or direct assessment. This proposed requirement would provide critical
information about the condition of pipelines located in non-HCAs, including the
existence of internal and external corrosion and deformation anomalies.
 The fifth proposal is to require the use of LDSs on HL pipelines located in non-HCAs.
LDSs are already required for segments of pipeline that could reach an HCA. The use of
such systems would help mitigate the effects of HL pipeline failures that occur outside of
HCAs.
 The sixth proposal is to modify the provisions for making pipeline repairs. Additional
conservatism would be incorporated into the existing repair criteria and an adjusted
schedule will be established to provide greater uniformity. These criteria would also be
made applicable to all HL pipelines, with an extended timeframe for making repairs
outside of HCAs.
 The seventh proposal is to require that all pipelines subject to the IM requirements be
capable of accommodating ILI tools within 20 years, unless the basic construction of a
pipeline cannot be modified to permit that accommodation. ILI tools are an effective
means of assessing the integrity of a pipeline. Broadening their use would improve the
detection of anomalies and prevent or mitigate future accidents in high-risk areas.
 Finally, PHMSA is proposing clarification changes to other regulations to improve
certainty and compliance.
1.3. Effectiveness of the Rule
PHMSA expects that the proposed changes will protect the public, property, and the environment
by increasing the detection and remediation of unsafe conditions and mitigating the adverse
effects of pipeline failures.
In the past 10 years, PHMSA has issued the following final rules that affect HL pipelines.
A. Protecting Unusually Sensitive Areas From Rural Onshore Hazardous Liquid
Gathering Lines and Low-Stress Lines, June 3, 2008 (Docket No. PHMSA-2003-15864)
Operators of rural gathering lines meeting certain criteria must comply with pipeline safety
requirements that address corrosion and third-party damage. In particular, operators of these lines
must establish maximum operating pressure, install and maintain line markers, establish
continuing public education and damage prevention programs, comply with corrosion control
requirements, implement programs for continuously identifying operating conditions that could
contribute to internal corrosion (including measures to prevent and mitigate internal corrosion),
and comply with operator qualification programs. In addition, operators of regulated rural
gathering lines must comply with Subpart B’s reporting requirements.
The regulations require that larger-diameter rural low-stress pipelines comply with all Part 195
safety requirements and shutdown ability, to determine if a pipeline could affect an unusually
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
sensitive area (USA). New steel gathering lines constructed, replaced, relocated, or otherwise
changed after July 3, 2009, must comply with Part 195’s installation, construction, initial
inspection, and initial testing requirements. For pipelines that become regulated because of the
identification of a new USA, an operator must implement the regulatory requirements (except for
Subpart H corrosion control requirements) within 6 months of identifying the USA for gathering
lines and within 12 months of identifying low-stress pipelines.
B. Pipeline Safety: Control Room Management/Human Factors, February 3, 2010
PHMSA amended the Federal pipeline safety regulations to address human factors and other
aspects of control room management for pipelines where controllers use supervisory control and
data acquisition (SCADA) systems. Under the final rule, affected pipeline operators must define
the roles and responsibilities of controllers and provide controllers with the necessary
information, training, and processes to fulfill these responsibilities. Operators must also
implement methods to prevent controller fatigue. The final rule further requires operators to
manage SCADA alarms, ensure that control room considerations are taken into account when
changing pipeline equipment or configurations, and review reportable incidents or accidents to
determine whether control room actions contributed to the event.
HL and gas pipelines are often monitored in a control room by controllers using computer-based
equipment, such as a SCADA system, that records and displays operational information about
the pipeline system, such as pressures, flow rates, and valve positions. Some SCADA systems
are used by controllers to operate pipeline equipment, while in other cases, controllers may
dispatch other personnel to operate equipment in the field. These monitoring and control actions,
whether via SCADA system commands or direction to field personnel, are a principal means of
managing pipeline operation.
This rule improves opportunities to reduce risk through more effective control of pipelines. It
further requires the statutorily mandated human factors management. These regulations will
enhance pipeline safety by coupling strengthened control room management with improved
controller training and fatigue management.
C. Application of Safety Regulation to Rural Onshore Hazardous Liquid Low-Stress
Pipelines (Phase II), May 5, 2011
PHMSA amended its pipeline safety regulations to apply safety regulation to rural low-stress HL
pipelines that were not covered previously by safety regulations. This change complies with a
mandate in the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES
Act).
Some rules may overlap and thus would not result in mutually exclusive benefits. PHMSA
estimates that the group of previously published rules has resulted in some reduction in incidents,
most of which is accounted for in the data presented in the area requirement analyses. PHMSA
sees the following regulatory effects, which affect the benefits and the effectiveness of the rule:
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
Area Effect
1. Extend reporting requirements to all HL gravity
lines.
Provides information to improve the effectiveness
of regulatory policies.
2. Extend reporting requirements to all HL
gathering lines.
Provides information to improve the effectiveness
of regulatory policies.
3. Require inspections of pipelines in areas
affected by extreme weather, natural disasters,
and other similar events.
PHMSA believes that most operators already
perform these inspections. To the extent
operators do not currently perform them within 72
hours following an event, this proposal lowers the
likelihood of an accident.
4. Require assessments for corrosion and
deformation anomalies of HL pipelines that are
located outside of HCAs at least once every 10
years.
Lowers the likelihood of an accident.
5. Require the use of LDSs on HL pipelines
located in non-HCA.
Minimal because most all operators already use
LDSs on their non-HCA pipe. For the very few that
do not, this proposal would mitigate the effects of
an accident by lowering the quantity of product
spilled.
6. Modify the provisions for making pipeline
repairs.
Mitigates the effects of an accident by lowering
the quantity of product spilled.
7. Require that all pipelines subject to the IM
requirements be capable of accommodating ILI
tools within 20 years, unless the basic
construction of a pipeline cannot be modified to
permit that accommodation.
Mitigates the effects of an accident by lowering
the quantity of product spilled.
8. Clarify regulations. Improves compliance.
PHMSA believes that the effectiveness of the rule would range from 10 percent to 50 percent,
depending on the proposed requirement. The effectiveness will be addressed separately in the
individual analysis. The risks addressed by each of the different proposed requirements may not
all be mutually exclusive, but that does not necessarily lead to assigning benefits more than once.
For example, although three of the requirements—inspections following natural events,
clarifications, and repair criteria modification—might apply to all pipelines, they would not
apply to gravity lines or operators who are not required to report without those separate
requirements. In addition, when operators are not required to report because of exemptions,
exceptions, or exclusions, the total extent of incidents and associated societal costs and potential
benefits cannot be known.
1.4. HL Pipeline Segments and Operators Potentially Affected
In general, it is difficult to estimate pipeline mileage for each requirement in this NPRM. The
pipeline segments impacted depend on many factors such as the location of the pipeline (inside
HCAs or outside HCAs); the product transported (in this case a petroleum or a petroleum
product); the length, diameter, and type of pipeline; and the reconfiguration of pipelines that
occurs following changes made to the pipeline by either installing new pipelines or abandoning
old pipelines.
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Based on PHMSA and publicly available data, we estimated that currently, there are 421 HL
pipeline operators.4 Two hundred and twenty of the operators have pipelines less than 50 miles
long, 96 operators have pipelines between 50 and 250 miles long, and 105 operators have
pipelines greater than 250 miles in length.
5 Table 1 describes the entities and the pipelines
affected by this NPRM.
Table 1. Estimated Entities and Pipeline Segments Affected by the NPRM by
Proposed Requirement Area
Proposed Requirement Area Entities
Affected Pipeline Segments Affected
Estimate of
Possible
Number of
Operators6
Estimate of
Possible Total
Number of
Pipeline Miles
Affected by the
Proposed Rule7
Onshore Offshore
1. Extend reporting requirements to HCA
and non-HCA HL gravity lines.
3 to 58 179 to 2810 
2. Extend reporting requirements to HL
gathering lines located in non-HCAs.
2311 26,000 to
36,00012 
3. Require inspections of pipelines in areas
affected by extreme weather, natural
disasters, and other similar events, and
remedial action.
421 191,478  
4 See https://www.federalregister.gov/articles/2010/01/26/2010-1497/pipeline-safety-leak-detection-on-hazardous-
liquid-pipelines#h-6 (accessed August 9, 2014).
5 Derived from PHMSA Annual Report data, available at
http://www.phmsa.dot.gov/portal/site/PHMSA/menuitem.6f23687cf7b00b0f22e4c6962d9c8789/?vgnextoid=a872df
a122a1d110VgnVCM1000009ed07898RCRD&vgnextchannel=3430fb649a2dc110VgnVCM1000009ed07898RCR
D&vgnextfmt=print (accessed January 2, 2015).
6 Most estimates are based on available PHMSA data. Source of estimates not from PHMSA data are included in the
footnotes to the table. PHMSA data used for this table is available at
http://www.phmsa.dot.gov/portal/site/PHMSA/menuitem.6f23687cf7b00b0f22e4c6962d9c8789/?vgnextoid=a872df
a122a1d110VgnVCM1000009ed07898RCRD&vgnextchannel=3430fb649a2dc110VgnVCM1000009ed07898RCR
D&vgnextfmt=print (accessed January 2, 2015).
7 Most estimates are based on available PHMSA data. Source of estimates not from PHMSA data are included in the
footnotes to the table.
8 Estimate based on data provided by the PHMSA Data Manager. One known gravity line is the TESORO pipeline,
which runs to a refinery near Kenai, AK.
9 American Petroleum Institute and Association of Oil Pipelines Comment in response to ANPRM, Docket
PHMSA-2010-0229. The estimate is based on the 2009 Pipeline Performance Tracking System, a survey of HL
pipeline operators. Respondents reported on approximately 150,000 of total pipeline miles.
10 Estimate based on data provided by the PHMSA Data Manager.
11 American Petroleum Institute and Association of Oil Pipelines Comment in response to ANPRM, Docket
PHMSA-2010-0229. The estimate is based on the 2009 Pipeline Performance Tracking System, a survey of HL
pipeline operators. Respondents reported on approximately 150,000 of total pipeline miles.
12 See NPRM, page 18, response to comments on “Rural Gathering Lines.” The Association of Oil Pipelines
(AOPL) in its comments (see footnote 3 for source) notes that it estimates that there are 6,705 miles impacted;
however, PHMSA in the NPRM notes that “PHMSA only regulates 3,644 miles of the approximately 30,000 to
40,000 miles of onshore hazardous liquid gathering lines in the United States.” By PHMSA estimates, this leaves
approximately 26,000 to 36,000 miles of HL gathering lines unregulated.
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Regulatory Impact Analysis: Hazardous Liquid Pipelines 1027-002/DTPH56-09-F-000012
Proposed Requirement Area Entities
Affected Pipeline Segments Affected
Estimate of
Possible
Number of
Operators6
Estimate of
Possible Total
Number of
Pipeline Miles
Affected by the
Proposed Rule7
Onshore Offshore
4. Require assessments of non-HCA
pipeline using ILI tools every 10 years.
421 17,794  
5. Require LDSs on HL pipelines located
outside of HCAs to mitigate the effects of
failures that occur.
421 2,565  
6. Modify the IM repair criteria, both by
expanding the list of conditions that
require immediate remediation and
consolidating the timeframes for
remediating all other conditions, and
apply those same criteria to pipelines
that are not subject to the IM
requirements.
421 191,478  
7. Increase the use of ILI tools by requiring
that pipelines in areas that could affect
an HCA be capable of accommodating
these devices within 20 years, unless its
basic construction will not permit that
accommodation.
All operators
with pipelines
that could
affect HCAs
83,014  
8. Clarify other regulations to improve
compliance and enforcement.
421 191,478  
1.5. Factors That May Affect the Costs and Benefits
Estimates of impacts, costs, and benefits are calculated based on the action taken for each
requirement area. Regarding compliance cost, there is no specific general rule that can cover all
situations. The costs will depend on factors such as where the pipeline is located, how much of
the pipeline is affected, the type of pipeline, the size of the pipeline, and the method used to
address the requirements. For example:
 ILI tools are not 100 percent effective and may not detect all defects (proposed
requirement area number 4).13 Also, the results of inspections may not be accurately
assessed. For example, even after Enbridge inspected a 34-inch pipeline near Cohasset,
MN, with the Elastic Wave ILI, the pipeline ruptured. NTSB determined that the
probable cause of the July 4, 2002, incident “was inadequate loading of the pipe for
transportation that allowed a fatigue crack to initiate along the seam of the longitudinal
weld during transit. After the pipe was installed, the fatigue crack grew with pressure
13 For more information about smart pig technology, see presentations from the June 24, 2011, ILI symposium
hosted by the California Public Utilities Commission. http://www.cpuc.ca.gov/NR/rdonlyres/0DEA7BA4-5421-
4287-BD32-A22863A2BFE9/0/INLINEINSPECTIONSYMPOSIUMCONCATENATEDFINAL.pdf (accessed
January 7, 2015.)
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cycle stresses until the crack reached a critical size and the pipe ruptured. The Elastic
Wave ILI conducted before the accident recorded an indication at the point where the
pipe eventually failed; however, pre-accident and post-accident interpretations of the
recorded data found that the indication did not meet the feature selection criteria to
identify it as a crack.”14
 Regarding the requirement associated with the LDS (proposed requirement area number
5), there is no one system that would effectively detect all HL pipeline leaks, and few
systems can be programmed to detect small leaks without generating false positives or
false negatives. In general, the type of LDS selected depends on a variety of factors,
including pipeline characteristics, product characteristics, instrumentation,
communications capabilities, and economic factors.
14 See http://www.ntsb.gov/doclib/reports/2004/PAR0401.pdf (accessed August 12, 2014), page 33.
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2. Regulatory Analysis
2.1. Introduction
Executive Order 12866, “Regulatory Planning and Review,” directs all Federal agencies to
develop both preliminary and final regulatory analyses if their regulations are likely to be
“significant regulatory actions” that may have an annual impact on the economy of $100 million
or more.
The more recent Executive Order 13563, “Improving Regulation and Regulatory Review,”
January 18, 2011, emphasizes careful consideration of costs and benefits and directs agencies to
use the best available techniques to quantify anticipated present and future benefits and costs as
accurately as possible and to proceed only if the benefits justify the costs.
In accordance with the guidance provided by the Office of Management and Budget’s (OMB’s)
Circular A-4 on the development of regulatory analysis as required under Section 6(a)(3)(c) of
Executive Order 12866, the Regulatory Right-to-Know Act, and a variety of related authorities,
this regulatory analysis addresses the following:
 Describes the need for the regulatory action.
 Defines the baseline.
 Sets the timeframe of analysis.
 Identifies a range of regulatory alternatives.
 Identifies the consequences of regulatory alternatives.
 Quantifies and monetizes the benefits and costs or evaluates non-quantified costs and
benefits.
 Discounts future benefits and costs.
The proposed rule contains eight separate regulatory initiatives. Therefore, we chose to discuss
the overall implications in this chapter (following the OMB guidelines) and present the
individual (requirement area by requirement area) regulatory impact analysis (RIA) in
subsequent chapters. The remainder of this chapter presents an overview of the factors
considered for the analysis in accordance with OMB guidelines.
2.2. Need for the Regulatory Action
The need for PHMSA’s actions is based on three external and internal components—Economic,
Legislative, and Strategic Objectives.
2.2.1. Economic – Market Failure
HL pipelines, in most instances, meet the definition of a natural monopoly. A natural monopoly
is a distinct type of monopoly that may arise when there are extremely high fixed costs of
production and very long-term average costs in an industry. Such a situation exists when large-
scale infrastructure is required to ensure supply of the good. Common examples of natural
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monopolies include railroad, electricity grids, oil pipelines, and water supply.15 As such, HL
pipelines are regulated by the Federal Energy Regulatory Commission (FERC). FERC’s
oversight includes regulation of rates and practices of oil pipeline companies engaged in
interstate transportation, establishment of equal service conditions to provide shippers with equal
access to pipeline transportation, and establishment of reasonable rates for transporting
petroleum and petroleum products by pipeline. PHMSA oversees the development and
implementation of regulations concerning pipeline construction, maintenance, and operation, in
cooperation with State regulatory partners.
In addition, health, safety, and environmental-related regulations associated with HL pipelines
exist under the IM program and other requirements. This proposal is expected to enhance the IM
program and increases the coverage to other operators or pipelines for which there has been an
exception or they were otherwise exempt from IM program coverage. Aside from the reporting
requirement extensions to gathering lines and gravity lines, all of the other requirements are
aimed at HL spills—either preventing them, detecting them earlier, or mitigating the damages
when spills do occur.
The market failure that suggests a need for Federal regulations is that there are externalities
associated with spills for which there may be no economic incentive for operators to be
concerned. An externality is an uncompensated direct impact of an economic activity on parties
not involved
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