{"operation":"document","citation":"09000064823104a4","title":"U.S. DOT/PHMSA - Regulatory Flexibility Analysis","source_type":"rulemaking","agency":"Pipeline and Hazardous Materials Safety Administration","status":"current","official":true,"published_on":null,"effective_on":null,"summary":"Regulatory Flexibility Analysis Pipeline Safety: Expanding the Use of Excess Flow Valves in Gas Distribution Systems to Applications Other Than Single-Family Residences PHMSA-2011-0009 Prepared by Economic Analysis Division Volpe National Transportation Systems Center Research and Innovative Technology Administration U.S. Department of Transportation For: Office of Pipeline... 1 Reasons for Agency Action Executive Order 12866 states that \"Federal agencies should promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by compelling need, such as material failures of private markets to protect or improve the health and safety of the...","machine_formats":{"json":"https://regulus.evalyn.ai/document/regulations-gov-attachment-09000064823104a4.json","markdown":"https://regulus.evalyn.ai/document/regulations-gov-attachment-09000064823104a4.md"},"app_url":"https://regulus.evalyn.ai/document/regulations-gov-attachment-09000064823104a4","source_url":"https://downloads.regulations.gov/PHMSA-2011-0009-0050/attachment_1.pdf","body":"<<<PAGE 1>>>\n\nRegulatory Flexibility Analysis\nPipeline Safety: Expanding the Use of Excess Flow Valves in Gas Distribution Systems to\nApplications Other Than Single-Family Residences\nPHMSA-2011-0009\nPrepared by\nEconomic Analysis Division\nVolpe National Transportation Systems Center\nResearch and Innovative Technology Administration\nU.S. Department of Transportation\nFor:\nOffice of Pipeline Safety\nPipeline and Hazardous Materials Safety Administration (PHMSA)\nU.S. Department of Transportation\nOctober 2016\n1\n\n<<<PAGE 2>>>\n\n1 Reasons for Agency Action\nExecutive Order 12866 states that \"Federal agencies should promulgate only such regulations as are\nrequired by law, are necessary to interpret the law, or are made necessary by compelling need, such as\nmaterial failures of private markets to protect or improve the health and safety of the public, the\nenvironment, or the well-being of the American people.\" Part of the mission of the Pipeline and\nHazardous Materials Safety Administration (PHMSA) is to ensure the safety of the natural gas system.\nGovernment regulation of pipeline safety standards addresses the market failure of negative\nexternalities, namely the costs that pipeline incidents impose on other parties for which there is no\nmarket compensation. Recognizing the safety benefits of excess flow valve (EFV) installation in natural\ngas distribution systems, Section 22 of the Pipeline Safety, Regulatory Certainty, and Job Creation Act of\n2011 directed PHMSA to require the installation of EFVs on multi-family residential and small\ncommercial entities. In addition, PHMSA is responding to the National Transportation Safety Board’s\n(NTSB) recommendation P-01-2, which recommends that PHMSA “require that excess flow valves be\ninstalled in all new and renewed gas service lines, regardless of a customer’s classification, when the\noperating conditions are compatible with readily available valves.” The final rule requires operators of\ngas distribution pipelines to install EFVs on all new or entirely replaced residential and commercial\nservice lines where the known load does not exceed 1,000 Standard Cubic Feet per Hour (SCFH), and to\ninstall manual shutoff valves (or large EFVs, if they are shown through engineering analysis to be\nfeasible) on new or entirely replaced lines with known loads exceeding 1,000 SCFH.\n2 Objectives of, and legal basis for, the final rule\nThis final rule implements the statutory mandate of Section 22 of the Pipeline Safety, Regulatory\nCertainty, and Job Creation Act of 2011 by requiring the installation of EFVs on new and entirely\nreplaced service lines serving branched single-family residences, multi-family residences, and small\ncommercial entities with known loads not exceeding 1,000 SCFH. The final rule also addresses NTSB\nrecommendation P-01-2, which calls for EFVs to be installed in all new and replaced lines regardless of\ncustomer classification where operating conditions are compatible with readily available valves.\nRecognizing that the broader expansion of EFVs, particularly where known loads exceed 1,000 SCFH,\npresents challenges, PHMSA is requiring the use of curb valves (manual service line shut-off valves) or\nEFVs, if appropriate, for facilities with known loads exceeding 1,000 SCFH. PHMSA believes the\nproposed rule will satisfy NTSB Recommendation P-01-2 by ensuring all service lines have adequate\nprotection through the installation of either EFVs or curb valves according to operational conditions.\n2\n\n<<<PAGE 3>>>\n\n3 Description and estimate of the number of small entities to which the\nfinal rule will apply\nThis rule applies to all operators of gas distribution systems. This includes gas distribution operators\nwho file annual reports with PHMSA, as well as master meter and small LPG operators who do not file\nannual reports. No data on revenues or headcounts are available for master meter and small LPG\noperators, but most of the 6,327 operators in these categories1 can be presumed to be small entities\ndue to the nature of their operations.\nAmong distribution operators, PHMSA’s annual report data from 2015 indicate there are 1,329 unique\nentities that are affected. These include private natural gas distributors, private companies of other\ntypes that operate service lines, and municipalities.\nPHMSA defined small entities by using the definition of \"small business\" found in the Small Business Act\n(5 U.S.C. section 601(3)). The Small Business Act authorizes the Small Business Administration (SBA) to\ndefine \"small business\" by issuing regulations. The SBA periodically reviews and reissues these\ndefinitions. SBA (2014) has established size standards for various types of economic activities, or\nindustries, under the North American Industry Classification System (NAICS). These size standards\ngenerally define small businesses based on the number of employees or annual receipts.\nUnder the Regulatory Flexibility Act, a \"small governmental jurisdiction\" is the government of a city,\ncounty, town, township, village, school district, or special district with a population of less than 50,000 (5\nU.S.C. section 601(5)). States and tribal governments are not considered small governments.\nOperators’ annual reports to PHMSA provide information about the scope of their operations but do not\nformally identify their small entity status. Thus, to estimate the number of gas distribution operators\naffected by the rule that are small businesses or small governmental jurisdictions, PHMSA combined\nannual report data with information provided by Dun and Bradstreet. Dun and Bradstreet provides\nPHMSA with estimates of small business classifications based on SBA size standards for operators that\nfile an annual report, along with a flag for public sector entities that is based on information such as\nentity name and NAICS code. These data indicate that approximately 820 affected operators (about 60\npercent) are public entities; a number of these are likely to be small governmental jurisdictions. Among\nthe private sector entities, approximately 160 are small entities according to the SBA size definition for\ntheir NAICS code. The most common of these is NAICS 221210, natural gas distribution, for which the\nstandard is 1,000 employees. Overall, while the number of small entities is not known with precision, it\nappears to be substantial when considering gas distribution operators that are small businesses or small\ngovernmental jurisdictions, as well as the master meter and small LPG operators that are presumed to\nbe small entities.\n1 According to PHMSA’s Operator Management System, there are 5,324 master meter and 913 small LPG\noperators, for a total of 6,327 operators, as of May 2016.\n3\n\n<<<PAGE 4>>>\n\n4 Description of the projected reporting, recordkeeping and other\ncompliance requirements of the final rule and their impact on small\nentities\n4.1 Excess Flow Valves\n4.1.1 Requirements\nPHMSA is adding four new categories of service for which an EFV must be installed on all new or\nreplaced lines. The four new categories being added to the existing requirement (49 CFR § 192.383) are:\n- Branched service lines to a single family residence (SFR) installed concurrently with the primary\nSFR service line (a single EFV may be installed to protect both lines);\n- Branched service lines to an SFR installed off a previously installed SFR service line that does not\ncontain an EFV;\n- Multi-family installations, including duplexes, triplexes, and fourplexes with known customer\nloads at time of service installation, based on installed meter capacity, that do not exceed 1,000\nstandard cubic feet per hour (SCFH) per service; and\n- A single, small commercial customer, served by a single service line, with known customer load\nat time of service installation, based on installed meter capacity, that do not exceed 1,000 SCFH\nper service.\nThe section will continue to include exceptions for cases where installation would not be feasible. These\nexceptions, currently listed in 192.383(b)(1)-(4) of the section, are:\n- When the service line does not operate at a pressure of 10 psig or greater throughout the year;\n- When the operator has prior experience with contaminants in the gas stream that could\ninterfere with the EFV’s operation or cause loss of service to the customer;\n- When an EFV could interfere with necessary operations or maintenance activities, such as\nblowing liquids from the line; and\n- When an EFV meeting performance standards in 192.381 is not commercially available to the\noperator.\nThe exceptions will reduce the potential cost of the regulation. As there is no data available to estimate\nthe proportion of lines that are excepted, the analysis will assume conservatively that all lines have\noperating conditions suitable for an EFV.\n4\n\n<<<PAGE 5>>>\n\nThe rule also requires the installation of EFVs, if operating conditions allow, when requested by a\ncustomer. Because that component deals only with voluntary actions for which the gas operator is\ntypically reimbursed for all relevant costs, it will not be considered in the regulatory flexibility analysis.\nHowever, the analysis does include the associated notification and recordkeeping costs for informing\ncustomers of this option.\n4.1.2 Cost to small entities\nEach additional valve imposes a small cost on the operator, as the cost of installation is estimated at $30\nper EFV. Industry comments have referred to the cost as “relatively minimal.”2 These costs may be\nslightly larger for smaller operators due to economies of scale in purchasing valves; however, the cost is\nminimal.\nPrior survey data3 and docket comments indicate that the cost of mandated EFV installations is typically\npassed through to gas utility rate-payers (customers). The cost of the EFV component of the rule on an\nannualized basis is estimated at $7.3 million per year. When compared against the total of roughly 70\nmillion natural gas customers, this suggests an incremental cost per customer of $0.10 per year. This is\na very small fraction of a typical household’s gas utility costs and an even smaller fraction of median\nhousehold income. Thus, the incremental cost can be considered de minimus.\n4.2 Curb Valve\n4.2.1 Requirements\nThe final rule adds a new § 192.385. This section requires operators to install a manual service line shut-\noff valve (curb valve) on any new or replaced service line for which an EFV is not installed in accordance\nwith § 192.383.\n4.2.2 Cost to small entities\nSimilar to costs related to EFVs, each additional curb valve imposes a small cost on the operator of\napproximately $55 per installation. These costs may be slightly larger for smaller operators due to\neconomies of scale in purchasing valves; however, the cost is minimal. The cost of mandated curb valve\ninstallation would also be passed through to gas utility rate-payers (customers). The annualized cost of\nthe curb valve component of the rule, $3.0 million per year, is equivalent to roughly $0.04 per gas\ncustomer annually, and is thus also de minimus.\n4.3 Recordkeeping Requirements and Cost to Small Entities\nThe final rule in part expands the scope of an existing rule that requires recordkeeping. Specifically,\noperators are required to report annually the number of EFVs installed that calendar year and the total\nnumber of EFVs in their system. This portion of the rule will increase the number of lines subject to the\nrequirement but does not itself add additional recordkeeping burden. The curb valve requirement,\nwhile new, also imposes no additional recordkeeping requirement. The notification and recordkeeping\n2 PHMSA-2012-0086-0003, Comment by the American Gas Association, submitted 7/17/2012, pg. 2\n3 National Regulatory Research Institute, Survey on Excess Flow Valves: Installations, Cost, Operating Performance,\nand Gas Operator Policy, March 2007.\n5\n\n<<<PAGE 6>>>\n\ncosts associated with the new notification requirement for EFV installation upon request are estimated\nat $0.3 million per year, which is a minute fraction of overall gas utility industry revenues, which are in\nthe tens of billions.4 This figure is also equivalent to $63 per operator annually, which is a minimal cost\neven for the smallest operators, or less than one cent per year per gas customer.\n4.4 Professional Skill Required\nNo additional professional skills are required. The final rule in part expands the scope of an existing rule\nto new service lines, so skills required by the previous rule already exist within the entity. The curb valve\nrequirement, while new, imposes no additional skill requirement, as curb valve installation is a common\npractice within the industry.\n5 Federal rules which may duplicate, overlap or conflict with the final\nrule\nTo the best of the knowledge of PHMSA, no other Federal rules duplicate, overlap, or conflict with the\nfinal rule.\n6 Alternatives Considered\nPHMSA considered the following alternatives to the final rule: no-action, the full implementation of\nNTSB’s Recommendation P-01-2 (requiring EFVs on service lines regardless of known load size), and the\nhybrid approach selected. The no-action alternative did not address the objectives of Section 22 of the\nPipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, and the full implementation of\nRecommendation P-01-2 would have increased the potential economic impact of the final rule. Because\nthe final rule is focused on ensuring safety and does not have a significant economic impact on small\nentities, PHMSA did not consider establishing different compliance or reporting requirements or\ntimetables for small entities.\n7 Effect on the Cost of Credit\nThe final rule is not projected to increase the cost of credit for small entities in any way.\n8 Summary and Conclusion\nOverall, the rule does not have a significant economic impact on a substantial number of small entities.\nWhile the natural gas distribution industry includes many small entities, including both small businesses\nand small governmental jurisdictions, the impacts of the rule are clearly de minimus, both in relation to\noperator revenues and to the utility rate-payers to whom the incremental costs would ultimately be\nallocated.\n4 In 2010, the most recent year for which industrywide figures are available through AGA’s Gas Facts publication,\nindustrywide revenues were approximately $73 billion. Natural gas prices have generally decreased since that\ntime.\n6\n\n<<<PAGE 7>>>","truncated":false,"body_characters":14405}