Warren R. True
Chief Technology Editor—Pipelines/Gas Processing
US petroleum liquids pipelines committed to greater safety and system integrity as long ago as 1998, according to David L. Lemmon, president and CEO of Colonial Pipeline Co., Atlanta.
Leaders of the liquids pipeline industry—the major integrated companies as well as the major independent pipeline companies—concluded that "we needed to track our spill history and . . . improve upon it," said Lemmon, in an exclusive interview with Oil & Gas Journal.
That commitment preceded catastrophic pipeline accidents in 1999 and 2000 in Washington and New Mexico states, major federal pipeline safety legislation that followed, and Colonial's own large monetary settlement in 2003 as a result of several spills in the early 1990s.
Lemmon believes that, although the industry in general and Colonial in particular have made great strides in improving safety and integrity, public expectations for reliability continue to motivate industry's efforts.
Moreover, Lemmon believes that consolidation in the midstream industry—made up of pipelines, terminals, and tank farms—has improved that industry's progress rather than undermined it.
Finally, after the need to maintain system integrity, Lemmon believes government mandates regarding fuels, specifically sulfur regulations in distillates, pose the most pressing threats to systems' logistical abilities.
Wake-up call
Colonial is the nation's largest petroleum liquids pipeline.
In common-carrier interstate service, the system in 2002 consisted of more than 5,500 miles of pipeline moving gasolines, kerosines, home heating oils, diesel fuels, and "national defense" fuels from Texas, Louisiana, Mississippi, and Alabama to 267 terminals in 12 states and the District of Columbia, according to the company's web site and its annual report filed with the US Federal Energy Regulatory Commission.
Last year, it moved more than 806 million bbl and logged nearly 704 billion bbl-miles of throughput. The company had almost $126 million in net income on more than $645 million in operating revenues.
Well before Colonial agreed in March 2003 to pay $34 million in one of the largest civil penalties ever levied in a lawsuit on behalf of the US Environmental Protection Agency (OGJ, Apr. 7, 2003, p. 9), Lemmon said, the industry had been steadily improving its spill record and record-keeping.
That agreement settled an action brought as a result of seven events. The most notable occurred in 1996 along the Reedy River in South Carolina where a spill of more than 22,000 bbl of diesel fuel killed thousands of fish and other wildlife.
The Reedy River incident was a "wake-up call" for Colonial, said Lemmon, and prompted the company within 2 years to overhaul its management to improve operations. Colonial's goal became being "leak-free and spill-free," he said.
Company data indicate Colonial's improvement has been dramatic: The company reduced its spill volume to only 16 bbl in 2002 from the level represented by the 1996 spill. Over the 5 years since 1998, its spills have averaged 694 bbl/year.
Lemmon said that as onerous as the civil penalty was, the other part of the settlement—a commitment of $30 million to upgrade environmental protections along Colonial's system—actually represents "specific actions that we're already taking . . . (in) our 10-year plan and (money) already in our budget.
Colonial's "operational excellence and system integrity program covered about 95% of what that settlement contained," he said. The company has already been spending "about $45-50 million/year on internal inspections of our pipelines, repairing anomalies," and improving rights-of-way.
Another major part of the agreement requires Colonial to treat its entire system—all 5,500 miles of it—as operating in federally defined "high-consequence areas."
These HCAs are populated areas, areas unusually sensitive to environmental damage, and commercially navigable waterways (OGJ, Mar. 24, 2003, p. 74). Operating in HCAs requires more frequent pipeline inspections and more prompt reporting of inspection results, among other potentially expensive implications.
But Lemmon said that, under the Office of Pipeline Safety's Integrity Management Plan rule, Colonial had already designated "about 75%" of its system as being in HCAs. Raising the bar to 100%, he said, accelerated inspections and spending on repairs that were already part of the company's 10-year plan.
Lemmon said that the burdens of considering its entire system as being in an HCA accelerated "about $1.6 million/year from the seventh, eight, and ninth years to the first, second, and third" years. It's an "acceleration of costs to get this work done earlier," he said.
Industry turnaround
But as significant as Colonial's 2003 settlement was, it was "not a watershed" for the industry, said Lemmon.
Back in 1998, long before OPS "demanded it of us," liquids pipelines had already begun tracking "every one of our spills down to 5 gal and self-reporting them."
Companies began that tracking in 1999, and "we've done that 4 years in a row, . . . reporting that information, . . . measuring ourselves to make that improvement."
Lemmon believes that in the 1990s, public expectations for pipelines' performance were "improving faster than we were improving our performance. (Companies) weren't grasping the significance of (these expectations for) our safety and environmental performance."
Industry leaders reached their new commitment through the mechanisms of companies' trade organizations—the American Petroleum Institute and the Association of Oil Pipelines.
Through these associations, said Lemmon, companies began several formal initiatives that "focused on our performance as an industry in safety, in personnel and public safety, in environmental accountability."
One was to work with OPS, the independent National Transportation Safety Board, and Congress to pass reauthorization of the Pipeline Safety Act of 2002 with "greater emphasis on internal inspection of our pipeline, greater emphasis on our facilities, and on communications (and) local involvement . . .."
Another initiative, said Lemmon, supported a more concentrated industry research and development effort, focusing on safety and system integrity and coordinated by the 50-year-old Pipeline Research Council International Inc., Washington.
This initiative came to fruition earlier this year with announcement from the AOPL and the Interstate Natural Gas Association of America of a formal association among AOPL, eight major petroleum liquids companies (including Colonial), and PRCI and its existing members, which includes natural gas pipeline companies and the Gas Technology Institute (OGJ, June 30, 2003, p. 17).
As an industry, said Lemmon, "we were quite fractured" in R&D efforts. These efforts were "company by company . . . so it was hard for us to muster enough research dollars to make a significant difference."
The liquids pipeline members in PRCI have "put people on the executive committee, the board of directors, and now the project committees to (drive) an agenda to improve the safety of pipelines primarily through the technology and research process."
The public and the bottom line
And yet, as liquids pipelines were turning a corner in improving their commitment to make systems safer and—no slight goal—to convince the public of the seriousness of its new commitment, along came two catastrophic pipeline events that grabbed headlines and prompted yet more public cynicism about pipeline companies specifically and the petroleum industry generally.
On June 10, 1999, a 16-in. gasoline pipeline in Bellingham, Wash., owned by Olympic Pipe Line Co., ruptured. The flood of product into nearby streams ignited in less than 90 min, killing two 10-year-old boys and an 18-year-old man.
On Sat., Aug. 19, 2000, a 30-in. natural gas pipeline operated by El Paso Natural Gas Co. ruptured next to the Pecos River near Carlsbad, NM. The ensuing fire killed 12 people who had been camping nearby under a concrete-decked steel bridge that supported the pipeline across the river.
Lemmon acknowledged the effect: "What happens when you have a Bellingham incident on the liquids side or El Paso incident on the gas side is . . . that it just ratchets up the (public's) expectation and . . . the urgency to get more of your lines inspected, to get them repaired, to them in tip-top shape."
And that is why he thinks the Reedy River spill was Colonial's wake-up call.
Along with the price in public esteem are the financial penalties that "are so onerous and so negative from a public perception standpoint you can't afford to have those" incidents.
And what if the public concludes that those financial penalties are all that industry understands? The only way to get industry to operate more safely?
That's "not the way it is," said Lemmon. "The industry believes, as I do, that integrity and leadership are the only way to run a pipeline. (Yet it's) hard to convince the public that you're trying to do the right thing when you continue to have spills.
"That's why the emphasis is shifting so clearly to safer, spill-free operations. I credit the public for helping drive us there faster than we might have gone ourselves."
But changing "the public view of the pipeline industry is always going to be a challenge because we are in the business of transporting a hazardous product. We move millions and millions a day."
At the same time, Lemmon acknowledged the importance of communication with all parties: The "more we communicate with the public, the better (it understands) that we are trying to spend the money to get our systems" spill-free.
Industry is "putting initiatives and commitments and people" in place "to make this a viable industry not only for today and tomorrow but for 30 years from now . . . ."
Colonial has in fact bucked the trend toward a leaner organization, said Lemmon, adding people since the late 1990s "mostly to improve our process of safety and system integrity and the way we manage the company to take more accountability and ownership as managers.
"We are constantly looking towards structure, process, and technology to improve our efficiency in order to bring more dollars to the bottom line. But will we take any more risks in safety, system integrity, and operational excellence? The answer is no."
In fact, Lemmon believes that the consolidation among midstream companies that has driven them to reduce personnel and merge functions not only does not threaten the progress pipeline companies have made but has actually supported it.
The midstream sector is "gravitating more towards being an independent sector of the petroleum industry" in which companies view transportation and storage as their core businesses. With that "transition, I see a stronger commitment by almost every player to be safer" than in years past.
New fuels
The pipeline industry faces new logistical challenges, Lemmon said, in accommodating new regulations from EPA regarding ultralow-sulfur diesel (OGJ, Dec. 23, 2002, p. 58).
In gasoline desulfurization, which is taking place now, followed by distillate desulfurization, and followed at some point by phaseout of methyl tertiary butyl ether (MTBE), he said, products pipelines face a challenge "to handle the multigrades that will be demanded of it.
"We are committed to meeting our customer's needs in low-sulfur diesel both onroad and off and also (to) meeting whatever Congress decides to do on MTBE phaseout and replacement, whether it's replacement with ethanol or some other hydrocarbon," said Lemmon.
Industry can do it safely, he said, but "we've got about a 5-8 year window. Once you get to about 2010, most of the federal regs have kicked in, and then you're down to essentially no sulfur in any of these products."
David L. Lemmon is president and CEO of Colonial Pipeline Co., Atlanta. After his arrival at Colonial in November 1997, the company in 2000 and 2001 received the top five industry awards given by the American Petroleum Institute, including the Distinguished Environmental and Safety Award.
Employment
Before joining Colonial, Lemmon served on the company's board of directors in his capacity as president of Amoco Pipeline Co. He joined Amoco's marketing team in Salt Lake City in 1965 and rose through positions of increasing responsibility in transportation, product supply, crude oil supply, and refining before becoming vice-president and general manager of operations in 1987. Lemmon served 2 years as manager for corporate planning at Amoco Corp. before being selected president of Amoco Pipeline in 1990.
Organizations
Lemmon serves as a member of the API's board of directors and the API Public Policy Committee and is past-chairman of its Pipeline Segment Executive Committee. In April 2002, he was named to the board of directors of Pacific Energy Group Inc. and is a member of its Board Audit Committee. Lemmon has been a board member of the National Council of Economic Education since 1995 and a member of the Battelle Energy Advisory Committee since 1996.
He is also a member of the Northwestern University Business Advisory Committee and a guest faculty member at Northwestern's Kellogg Graduate School of Management.
Education
A native of Afton, Wyo., Lemmon earned a bachelor's degree in accounting from the University of Utah and conducted postgraduate studies at Governors State University and Northwestern, both in Illinois, and completed executive studies in transportation at the Kellogg Graduate School.