May 25, 2010

Pipeline Safety: Integrity Management Program for Gas Distribution Pipelines

Proposed Rule
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Additional details
Agency
Department of Transportation
Regulatory Identification Number
2137-AE15
Agency Name
Department of Transportation
Rule Publication Date
06/25/2008
Comment Closing Date
09/23/2008

RULE SUMMARY

PHMSA proposes to amend the Federal Pipeline Safety Regulations to require operators of gas distribution pipelines to develop and implement integrity management (IM) programs. The purpose of these programs is to enhance safety by identifying and reducing pipeline integrity risks. The IM programs required by the proposed rule would be similar to those currently required for gas transmission pipelines, but tailored to reflect the differences in and among distribution systems.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
A link to the NPRM is available three intuitive clicks from the DOT home page. However, the RIA does not appear to be available on the DOT website; the NPRM says it is in the docket, which requires looking it up on regulations.gov. On regulations.gov, we could not find it directly using RIN and instead had to use docket number found within rule. The cumbersomeness of this process deserves a 1 rather than a 2.
1/5
2. How verifiable are the data used in the analysis?
Data sources are provided. But many key data are simply described as "reported to PHMSA" or from "industry sources." Other data are sourced to EIA or other government or private consultants' reports.
2/5
3. How verifiable are the models and assumptions used in the analysis?
The RIA assumes the baseline is average 2001–2004 deaths, injuries, and property damage. The analysis simply assumes the regulation will reduce deaths, injuries, and property damage by 50 percent, with no supporting argument or evidence. Some other key assumptions are simply stated with little explanation as to why they're reasonable.
1/5
4. Was the analysis comprehensible to an informed layperson?
The analysis is relatively well-written in understandable language. However, it provides little justification for many key assumptions, which makes it hard for the reader to understand fully the rationale for the results.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The analysis identifies reduction in accidents that take lives, create serious injuries, or destroy property.
5/5
Does the analysis identify how these outcomes are to be measured?
Outcomes can be measured in the number of accidents, injuries, and property damage, expressed as numbers and monetized.
5/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
It presumes regulation will lead to compliance and positive outcomes with no unintended consequences. Some links between specific actions and safety are explained.
2/5
Does the analysis present credible empirical support for the theory?
A GAO report showed that a similar regulation prompted some gas transmission operators to assess their pipelines for the first time. A DOT IG report revealed "unfavorable" safety trends for distribution pipelines. The preamble (not the RIA) says that a similar regulation applied to transmission pipelines led to thousands of repairs.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
The RIA notes that 75–90 percent of accidents with serious consequences occur on distribution pipelines, so there is some evidence that this regulation affects part of the industry where problems are most likely. The analysis arbitrarily assumes that the regulation will reduce risk of catastrophic event by 75%. Sensitivity analysis consists of recalculating net benefits excluding some categories of benefits.
2/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
The analysis asserts that gas distribution is usually a monopoly, therefore operators have inadequate incentives to consider safety. It also claims that many have inadequate information because they do not have first-hand experience with accidents. It ignores the possibility that preventing death and property damage and liability rules are incentives for safe operation.
1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The market failures listed above are merely asserted without a coherent underlying theory.
1/5
Does the analysis present credible empirical support for the theory?
A GAO report showed that a similar regulation prompted some gas transmission operators to assess their pipelines for the first time. A DOT IG report revealed "unfavorable" safety trends for distribution pipelines. It is not clear why this necessarily demonstrates sub-optimal concern for safety.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
Analysis based largely on five years of data on number and costs of incidents. It assumes future will largely mimic past frequency of incidents, with no explanation why. One strong point is that the RIA uses international data to assess likelihood and size of a catastrophic event.
2/5
7. How well does the analysis assess the effectiveness of alternative approaches?
4/5
Does the analysis enumerate other alternatives to address the problem?
The analysis provides five reasonable alternatives plus the baseline.
5/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The range of alternatives include no action, apply regulations identical to those imposed on transmission pipelines, model state legislation applying to excavators, guidance documents for states, detailed prescriptive federal regulation, performance-based federal regulation. The analysis claims that states do not implement federal standards if they are voluntary. However, there is no explanation why, so it's not clear if this really means states are not accomplishing the goals.
5/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
The analysis asserts that options other than performance-based regulation would have zero or low net benefits. For this reason, none of the other regulatory options were analyzed further.
2/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The analysis assumes "no action" baseline will lead to no new costs or benefits, even though "some pipeline operators are already implementing some elements of integrity management into their systems." This is a contradiction that ignores how voluntary action will affect baseline in the future.
2/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
It quickly dismisses other alternatives as not feasible and never quantifies costs/benefits for them. It talks about their costs/benefits in qualitative terms.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
It thoroughly identifies and breaks down costs of developing the program, data acquisition and analysis, mitigation, reporting, recordkeeping, management. The list sounds pretty thorough, but given the quality of the documentation it would be hard to check on this for sure.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The analysis does not address this topic.
0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The analysis does not address this topic.
0/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Section 8 addresses uncertainty and identifies break even point. The many assumptions throughout analysis are not subject to sensitivity analysis.
3/5
Does the analysis identify the alternative that maximizes net benefits?
The chosen option appears to maximize net benefits, but most other options were dismissed without detailed analysis.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
For the chosen option, the analysis estimates the minimal level of effectiveness necessary to justify the costs. For other options, the RIA quickly dismisses other alternatives as not feasible and never quantifies costs/benefits for them.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Costs are estimated for large, small, and very small operators, but incidence is not carried through to consumers.
3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
There is no discussion of distribution of benefits.
0/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The analysis was used in the sense that alternatives were acknowledged, but most alternatives were dismissed with perfunctory statements that they would not produce net benefits. So, the agency acknowledged the existence of regulatory analysis but did not appear to use it.
2/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
The agency dismisses most other options on the grounds that they would produce low net benefits, but analysis was minimal. So it is not clear that the agency really identified the option that would produce the greatest net benefits. The principal driver behind the decision appears to be the consensus of stakeholders, not the findings of the regulatory analysis.
2/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The NPRM does not explicitly offer measures or goals, but p. 36026 indicates that performance data will be gathered, and the RIA shows how it could be used.
2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
A relatively sophisticated discussion explains performance information operators are expected to report: "The number of deaths and injuries and the amount of damage are thus lagging indicators of performance that cannot reliably capture safety trends other than over long periods of time. Other interim measures are needed to provide information in a shorter period to evaluate the effectiveness of any new integrity management requirements implemented for distribution pipeline systems. This proposed rule requires that distribution pipeline operators submit to PHMSA annually the number of leaks repaired (by cause), the number of excavation damages and the number of ‘‘tickets’’ (representative of the amount of excavation activity), and the number of EFVs installed. PHMSA will use these data to evaluate the effectiveness of new distribution integrity management requirements until sufficient time has passed that trends in the overall number of incidents, deaths, serious injuries, and property damage should be apparent" (36026).
4/5
Total 28 / 60