Enactment of new federal pipeline safety legislation was a good start, but state pipeline regulators will need to address ongoing challenges to keep systems efficient and economic as well, officials attending the National Association of Regulatory Utility Commissioners were told during its 2012 winter meeting.
Regulators face a conflict between keeping operating costs down and making pipelines safer, said Rick Kessler, a vice-president of the Pipeline Safety Trust. “Investments to replace cast-iron pipes, bare steel, and other aging structures should not be put on the back burner,” he said during a Feb. 7 session of NARUC’s Gas Committee. “Our challenge is to find a fair answer to the question of who pays.”
Public confidence will be required to permit pipelines to expand, noted Interstate Natural Gas Association of America Pres. Donald F. Santa.
Compliance expenses and consumer cost recovery need to be addressed, Santa said.
Paul Metro, a member of Pennsylvania Public Utility Commission and chairman of the National Association of Pipeline Safety Representatives, said replacing aging pipe in Pennsylvania could cost $13 billion, creating rate shocks even if the expenses are spread over 20 years.
Rate-based approaches will not be sufficient to pay for costly new tests, and new ideas will be needed, he said.
He urged state pipeline commissioners to keep in close touch with their legislators to ensure safety staffs are adequately funded and qualified.
“Pipeline safety comes at a cost to both utilities and regulators,” Metro said, adding that safety must emphasize reasonable costs for adequate enforcement while allowing high-enough returns to attract investors.
One object is to keep risks low, but economically achievable, said Eddie Johnston, infrastructure sector managing director at the Gas Technology Institute.
Not all pipes were created equal, and no single inspection technology or assessment method addresses all threats, he said.
Economist Bruce R. Oliver, president of Revilo Hill Associates, said that balancing safety with reasonable rates requires recognizing pipelines’ depreciations, making safety investments part of normal business operations, and recognition that asset replacements can be good investments when they keep systems operating safely, efficiently, and without interruptions. Pipelines should be prepared to pass savings through to their customers if the customers helped pay for the improvements, he added.
Safety investments also benefit pipeline investors because they make operations more efficient by preventing system interruptions, Kessler said.
Other panelists addressed different issues. Linda Daugherty, deputy associate administrator for policy and programs at the US Pipeline and Hazardous Materials Safety Administration, said that the US Department of Transportation agency is working with the US Coast Guard, the US Bureau of Safety and Environmental Enforcement, and other federal agencies to implement a strong safety culture.
Nick Stavropolous, executive vice president for gas operations at PG&E Corp., said that the California gas and electric utility is trying to move “from worst to first” with reforms following the Sept. 9, 2010, explosion of one of its gas lines in San Bruno, Calif.
That explosion killed 8 people and heavily damaged the area nearby. “We’re all humbled,” he said. “It’s still war-like and devastating in its consequence, and it inspires us to try to make sure it doesn’t happen again.”
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