APGA Weekly Update June 9, 2016

06-09-2016 13:06

Pipeline Safety Advisory Committee Meets

On June 1 and 2, the Technical Pipeline Safety Standards Committee (TPSSC) met in Arlington, Va., to
review several proposed regulations from the Pipeline and Hazardous Materials Safety Administration
(PHMSA). The TPSSC is a congressionally-mandated peer review committee composed of industry,
government and public pipeline safety experts that advises whether PHMSA’s rules are reasonable,
practicable, technically feasible and cost-effective. Rich Worsinger of Rocky Mount, N.C., represents
public natural gas on this committee.

On June 1, the TPSSC voted to approve multiple changes to pipeline safety regulations related to plastic
pipe. APGA had filed written comments on these proposed changes in August 2015 and is pleased that
the TPSSC recommended that PHMSA incorporate most of the changes that APGA had advocated in its
comments. Among the significant changes from the proposed rule are:

1. Socket fusion will continue to be allowed for all sizes of plastic pipe;
2. PHMSA will clarify that changes such as prohibiting the use of leak clams for permanent repair
will not be applied retroactively;
3. Proposed requirements for compaction will be deleted; and,
4. Requirements for tracking and traceability will be limited to the items that are included in the
bar code required by ASTM F2897 and will not take effect for five years after the effective date
of the rule.

On June 2, the TPSSC reviewed proposed changes to incident notification regulations and agreed with
APGA’s comments that operators should not be required to provide an estimate of gas released in the initial telephonic notice to the National Response Center.

The committee also recommended extensive changes to the proposed operator qualification rule
amendments. PHMSA was urged to keep the four-part test for covered tasks, but add emergency
response, construction and integrity management-related tasks as covered tasks, if the tasks are
performed on a pipeline facility, performed as a requirement of Part 192 and could affect the safety or
integrity of the pipeline. The committee also recommended that PHMSA clarify that the requirement to
have a record of an individual’s training only applies if an individual requires training after the effective
date of the rule and will not require records of training that may have occurred before that date.
PHMSA is expected to issue final rules covering operator qualification, incident notification and plastic
pipe later this year. For questions on this article, please contact John Erickson of APGA staff by phone at
202-464-2742 or by email at jerickson@apga.org.

APGA Invited to Participate in Performance-Based Regulation Study

APGA has been invited to participate in a study by the National Academy of Sciences (NAS) to compare
the advantages and disadvantages of prescriptive- and performance-based forms of safety regulations.
The term “performance-based” is often used to refer to: standards that mandate outcomes and give
operators flexibility in how to meet them; or requirements for operators to use management systems
consisting of internal plans and practices for promoting safety and reducing risk. The Distribution
Integrity Management Programs rule is an example of a performance-based rule, requiring operators to
evaluate risks and take appropriate actions. Performance-based regulation is usually contrasted with
“prescriptive” regulation—sometimes called specification, design, or technology standards—that
requires operators to adopt specific means to promote safety and reduce risks. The Pipeline and
Hazardous Materials Safety Administration’s (PHMSA) corrosion control regulation that requires
operators to take pipe-to-soil readings annually is an example of a prescriptive rule.

This study will compare the advantages and disadvantages of prescriptive- and performance-based
forms of safety regulation and identify possible opportunities for, and constraints on, making greater
use of the latter. Large operators with in-house engineering staff typically prefer performance-based
rules as it allows the operator to tailor compliance to its own unique system. Smaller operators without
in-house technical support often prefer prescriptive rules that spell out precisely what needs to be done
to be in compliance, as long as those prescriptive rules are not overly burdensome. The study was
commissioned by PHMSA and the final report is expected to carry great weight in determining whether
PHMSA adopts performance-based or prescriptive rules in the future.

The NAS committee will meet July 12 in Washington, D.C., to begin its work. Jim Crowley of Easton
Utilities will speak at the meeting on behalf of APGA. For questions on this article, please contact John
Erickson of APGA staff by phone at 202-464-0834 or by email at jerickson@apga.org.

APGA Testifies at IRS Public Hearing on Definition of Political Subdivision

On June 6, Dave Schryver, APGA’s Executive Vice President, testified at an Internal Revenue Service (IRS)
public hearing addressing the definition of a “political subdivision.” The IRS has released a proposed
regulation that would establish a new definition of the term political subdivision for tax-exempt
purposes. This regulation is significant as an entity that is not a political subdivision cannot issue taxexempt
bonds and many public natural gas systems have utilized tax-exempt financing for investments
in infrastructure as well as for natural gas prepays, which is the long-term purchase of natural gas. The
current political subdivision test requires that an entity possess at least one of the three “sovereign
powers,” which are the power of eminent domain, the power to tax, or the power to regulate. The
proposed regulation would add two new tests in the determination of whether an entity is a political
subdivision and all three tests (the two new tests and the original one) must be met for an entity to
qualify as a political subdivision. The two new tests are a governmental or public purpose test and a
governmental control test.

Under the governmental or public purpose test, an entity must be set up for a public purpose and
continually operate “in a manner that provides a significant public benefit with no more than an
incidental private benefit.” The term “incidental private benefit” is not defined in the regulation. If the
IRS makes a determination that he entity provides more than an incidental private benefit, the entity is
no longer considered a political subdivision and its bonds become taxable. The second new test is
governmental control and under this test “control” must be exercised either by a state or local
governmental unit or by an electorate. In addition, to meet this test a state or local governmental unit
must have all three of the sovereign powers identified above and act either through its governing body
or through its duly authorized elected or appointed officials.

On May 23, APGA filed comments with the IRS in response to the proposed regulation. In its comments,
APGA expressed opposition to the proposed rule and urges the IRS to withdraw it. The comments also
communicated that, “APGA members depend on access to tax-exempt funding for the construction of
necessary infrastructure to ensure their ability to continue to provide safe and reliable natural gas
service in their communities and to acquire long-term gas supplies at reasonable and competitive prices
for the benefit of the consumers they serve.” The comments further state that while some APGA
members have all three of the sovereign powers and therefore meet the governmental control test,
others do not and this proposed rule would deny many public natural gas systems and joint action
agencies the ability to issue tax-exempt bonds despite those entities meeting every reasonable standard
of providing a public benefit under powers expressly granted by the people of the states through their
elected representatives. The testimony that APGA provided at the public hearing echoed many of these
same sentiments.

A copy of the comments filed with the IRS is available on the APGA website. In addition, the statement
that APGA made at the hearing is also available on the website. For questions on this article, please
contact Dave Schryver of APGA staff by phone at 202-464-2742 or by email at dschryver@apga.org.

LIHEAP Funds Appropriated by Senate Subcommittee

On June 7, the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education,
and Related Agencies marked up their fiscal year (FY) 2017 budget bill. The subcommittee appropriated
$3.39 billion for the Low Income Home Energy Assistance Program (LIHEAP), which is level with 2016
funding. This subcommittee appropriation bill will now go to the full Senate for a vote.

The House of Representatives has yet to start the FY 2017 Health and Human Services (HHS) budget
markup but will be following a similar process. After the full Senate and House of Representatives pass
their respective budget bills, a conference committee will reconcile the two versions so it can go to the
administration for final passage. It is possible that the House HHS budget bill will be passed within a
larger omnibus budget bill.

APGA has signed an open letter from the National Energy and Utility Affordability Coalition (NEAUC) to
congressional appropriations committees asking them to increase the amount of LIHEAP funding for FY
2017 to $4.7 billion. At the same time, APGA continues to push for full funding at the authorized $5.1
billion level.

Earlier this year, the Obama administration recommended reducing spending on LIHEAP to $3 billion in
FY 2017, a $390 million decrease. While FY 2017 doesn’t start until October 1, the budgets will face
many election year obstacles. For questions on this article, please contact Todd Brady of APGA staff by
phone at 202-464-2742 or by email at tbrady@agpa.org.

APGA and AGA Submit Letter to DOE on Direct Heat Equipment Determination

On April 11, the Department of Energy (DOE) published a determination that more stringent Direct Heat
Equipment (DHE) standards would not be economically justified.

DHE is not a large market and therefore has low energy savings potential. APGA believes any increase in
efficiency standards for DHE, because it is such a small market, would result in a manufacturer having to
make significant investments and in many cases that investment would not be justified. This would be
due to the large investment needed to upgrade product lines and the declining shipments through
which DHE manufacturers would need to recoup their expenditures. This would lead to less products or
manufacturers simply leaving the market entirely.

On June 10, APGA and the American Gas Association (AGA) will submit a joint letter supporting this
determination and the justifications that DOE used to make the determination.

For questions on this article, please contact Dan Lapato of APGA staff by phone at 202-464-2742 or by
email at dlapato@apga.org.

House Energy Subcommittee to Hold Hearing on DOE Efficiency Program

On June 10, the House Energy and Commerce Committee’s Subcommittee on Energy and Power will
hold a hearing to discuss the Department of Energy’s (DOE) energy efficiency standards program. The
hearing is titled Home Appliance Energy Efficiency Standards under the Department of Energy–
Stakeholder Perspectives.

APGA’s has submitted written testimony for the record that focuses on the larger rulemaking process.
Over the last several years, there have been an alarming number of poorly constructed, unsupported
energy efficiency regulations published for the sake of meeting misguided policies. Because of the
hastily thrown together rules, APGA is forced to spend enormous amounts of resources trying to defend
the direct-use of natural gas against poor research and incomplete science.

For questions on this article, please contact Dan Lapato of APGA staff by phone at 202-464-2742 or by
email at dlapato@apga.org.

House Passes Pipeline Safety Legislation

On June 8, the House of Representatives passed its amendment to the Senate pipeline safety bill, the
SAFE PIPES Act.

After successful negotiations between the two committees of jurisdiction in the House—the Energy and
Commerce Committee and the Transportation and Infrastructure Committee—and intra-cameral
negotiations between the House and Senate, the non-controversial compromise legislation was passed
by voice vote.

The bill is consistent with previous iterations, in its primary focus on pushing the Pipeline and Hazardous
Materials Safety Administration (PHMSA) to expedite the numerous rulemakings outstanding from the
2011 pipeline safety bill, establishing safety standards for underground storage of natural gas, and
includes targeted emergency order authority which allows PHMSA to stop operations at pipeline
facilities if there is a “imminent hazard.”

However, there is one noteworthy change that jeopardizes the swift passage of the House bill by the
Senate: the removal of a provision related to the BP oil spill that was supported by Senator Markey (DMass.).
Senator Markey’s provision would have required oil companies to file their oil spill response
plans with Congress. The House removed this language in its amendment to the Senate bill and Senator
Markey has blasted the change arguing that oil companies’ response plans are outdated and
inadequate. Senator Markey is expected to speak out against the House bill when it comes up for
consideration in the Senate. If Senator Markey not only speaks against the bill but also objects to the
bill’s passage, the Senate would be precluded from passing the bill by unanimous consent, forcing the
chamber via a regular vote. It appears that the bill would have sufficient support to garner 60 votes, but
that remains unclear at this time.

For questions on this article, please contact Scott Morrison of APGA staff by phone at 202-464-2742 or
by email at smorrison@apga.org.

Architects and Net Zero Study Now Available

One June 8, APGA hosted a webinar on a recent study commissioned by APGA and the APGA RF on what
architects understand about net zero buildings. Sparks Research conducted the study and reported on
their findings during this webinar. A report of the study is now available on the website here and you
can access a recording of the webinar at www.apga.org/webinars. We are proud to offer these
educational materials as APGA member benefits and hope you take advantage of them.

EIA Reports Storage Increase of 65 Bcf to Put Working Gas Storage at 2,972 Bcf

Here is the weekly EIA Summary Report issued on Thursday, June 9, 2016, which reports the week’s
storage report highlights for Friday, June 3, 2016. A 65 Bcf increase has been reported.
Working gas in storage was 2,972 Bcf as of Friday, June 3, 2016, according to EIA estimates. This
represents a net increase of 65 Bcf from the previous week. Stocks were 660 Bcf higher than last year at
this time and 722 Bcf above the five-year average of 2,250 Bcf. At 2,972 Bcf, total working gas is above
the five-year historical range.

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