APGA Weekly Update December 15, 2016

12-15-2016 11:15

APGA Weekly Update, December 15, 2016
Former Texas Governor Rick Perry Nominated to be DOE Secretary
On the morning of December 13, news broke that former Texas Governor Rick Perry will be nominated by President-elect Trump to become the next Secretary of Energy and run the Department of Energy (DOE).
DOE’s primary functions are to manage the country’s nuclear arsenal, handle the nation’s nuclear waste, form and implement U.S. energy policy, and direct energy research. To accomplish these goals, DOE has a wide range of departments focusing on everything from international energy programs to appliance standards to counterintelligence, making it perhaps the most critical energy agency in the country.
Perry was governor of the State of Texas from 2000 to 2015 and ran for President in 2012 but was defeated in the primaries. He is known as a strong advocate of oil and gas and has promoted both fuels consistently throughout his tenure. Texas is the number one oil producer in the U.S. with nearly 98,000 barrels of oil produced per month and with the largest proven oil reserves estimated at 10.5 billion barrels. Texas is also a major producer of natural gas and was the largest producer of dry gas in 2015 with just over 7 Tcf.
However, under Perry, Texas also became the country’s largest producer of electricity from wind. In 2000, Texas had just 116 MW of wind power installed. Yet, by the time he left office in 2015, Texas was close to 12,000 MW of wind power installed. Today, Texas has 18,000 MW installed and another 5,000 MW under construction. Moreover, just over 24,000 people are employed in the wind industry in Texas, making it a small, but growing workforce for the state as well.
Given Perry’s background in oil and gas, it seemed that the Department of Interior (DOI) would be the more natural fit as DOI is responsible for the country’s oil, gas, and mineral resources. However, it seems reasonable to assume that under Perry, perhaps DOE’s research priorities could shift from the Obama Administration’s focus on renewable energy to oil and gas, especially given President-elect Trump’s campaign pledge to promote domestic production of fossil fuels by “unshackling” the industry from burdensome regulations.
Significant reactions to the news have not yet broken but it seems reasonable to assume the oil and gas industry will be pleased, while environmental groups will decry the nomination. APGA will keep members informed of any developments with this impending nomination.
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.
PHMSA Advisory on Safeguarding and Securing Pipelines from Unauthorized Access
On December 9, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an Advisory Bulletin in coordination with the Transportation Safety Administration (TSA) to remind all pipeline owners and operators of the importance of safeguarding and securing their pipeline facilities
and monitoring their SCADA systems for abnormal operations and/or indications of unauthorized access
or interference with safe pipeline operations. Additionally, the Advisory Bulletin is to remind the public
of the dangers associated with tampering with pipeline system facilities.
On October 11, individuals contacted four pipeline operators informing them they would shut down the
pipelines used to transport crude oil from Canada to the United States. The operators (Enbridge, Kinder
Morgan, Spectra Energy, and TransCanada) took steps to prevent damage to the pipelines and
contacted local and federal law enforcement. The individuals cut the chains and padlocks at valve sites
near Leonard, Minn., Burlington, Wash., Eagle Butte, Mont., and Wahalla, N.D. The individuals then
closed valves on Enbridge’s Lines 4 and 67, Spectra Energy’s Express Pipeline, and TransCanada’s
Keystone Pipeline. The Kinder Morgan Trans Mountain’s Puget Sound Pipeline was not operating at the
time. Several individuals were arrested by local law enforcement. Had the pipeline operators not shut
down their lines in response to the threats, a pipeline rupture could have occurred. A pipeline rupture
due to tampering with valves can have significant consequences such as death, injury, and economic and
environmental harm.
The advisory bulletin can be found here. 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 Holds Government Relations Webinar
On December 13, APGA held a webinar for its members to provide an overview of APGA’s legislative and
regulatory activities in 2016. The webinar was presented by Dave Schryver, APGA’s Executive Vice
President, and Scott Morrison and Dan Lapato, Directors of Government Affairs. During the webinar,
they discussed APGA advocacy efforts in response the Department of Energy (DOE) Supplemental Notice
of Proposed Rulemaking (SNOPR), released in September, which would establish a residential furnace
nationwide mandate of 92 annual fuel utilization efficiency (AFUE) with a small furnace exemption for
furnaces of 55,000 Btu or less.
APGA staff also provided an update on congressional efforts to pass comprehensive energy legislation as
well as an overview of issues that APGA anticipates focusing on in the upcoming 115th congressional
session. They also discussed APGA’s efforts to oppose an Internal Revenue Service 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 tax-exempt bonds and
many public gas systems have utilized tax-exempt financing for investments in infrastructure as well as
for natural gas prepays, which are the long-term purchase of natural gas.
A recording of the webinar is available on the APGA website at www.apga.org/webinars. 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.
EPA Releases Final Hydraulic Fracturing Safety Assessment Study
The Environmental Protection Agency (EPA) has released its final assessment of the impact of hydraulic
fracturing on U.S. drinking water titled, “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic
Fracturing Water Cycle on Drinking Water Resources in the United States.”
Congress directed the EPA to conduct a study on the impacts of hydraulic fracturing on drinking water
quality and quantity. To that end, the EPA conducted its own research, reached out to stakeholder
groups, consulted independent experts, and utilized its independent Science Advisory Board to guide
and inform the process.
In June 2015, the EPA released a draft version of this report seeking public comments and peer review.
In that report, the primary conclusion was, “We did not find evidence that these mechanisms have led
to widespread, systemic impacts on drinking water resources in the United States. Of the potential
mechanisms identified in this report, we found specific instances where one or more mechanisms led to
impacts on drinking water resources, including contamination of drinking water wells. The number of
identified cases, however, was small compared to the number of hydraulically fractured wells.”
From the executive summary of the final report released on December 13, the conclusion removed the
“widespread, systemic impacts” portion at the request of the Science Advisory Board and instead said
that hydraulic fracturing can and has impacted drinking water in certain instances throughout all phases
of the fracturing water cycle from water collection, use and disposal. The report noted that the severity
of the impacts can range from “temporary changes in water quality to contamination that made private
drinking water wells unusable.” It also went on to note that, “The following combinations of activities
and factors are more likely than others to result in more frequent or more severe impacts:
 Water withdrawals for hydraulic fracturing in times or areas of low water availability,
particularly in areas with limited or declining groundwater resources;
 Spills during the management of hydraulic fracturing fluids and chemicals or produced water
that result in large volumes or high concentrations of chemicals reaching groundwater resources;
 Injection of hydraulic fracturing fluids into wells with inadequate mechanical integrity, allowing
gases or liquids to move to groundwater resources;
 Injection of hydraulic fracturing fluids directly into groundwater resources;
 Discharge of inadequately treated hydraulic fracturing wastewater to surface water resources;
and
 Disposal or storage of hydraulic fracturing waste water in unlined pits, resulting in
contamination of groundwater resources.”
Moreover and perhaps most critically, the report said that national conclusions about the impact of
hydraulic fracturing could not be supported with available data and that further research should be
done on many aspects of the problem. In response to the study, API claimed that EPA distorted the
science to change the conclusion from the draft assessment and other industry groups expressed
similarly strong negative feelings. In contrast, environmental groups hailed the change from the draft.
It seems likely that the impact from the federal government’s perspective will be inherently limited as
President-elect Trump’s administration is very strongly supportive of oil and gas production. However, it
seems likely that environmental groups will attempt to use the study perhaps at the state or local level
to try and persuade officials to block production. APGA will host David Holt of the Consumer Energy
Alliance and Randy Randolph of the Southern Gas Association at the Gas Supply Conference in
Clearwater, Fla., in 2017. They will both discuss the anti-production movement and responses to it.
APGA will keep members apprised of any further developments with the EPA studies of hydraulic
fracturing. 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.
CGA Selects Sarah Magruder Lyle as New CGA President
The Common Ground Alliance (CGA) announced on December 14 the selection of Sarah K. Magruder
Lyle as the second president in the 16-year history of the association, effective January 23, 2017.
Magruder Lyle will replace Bob Kipp, who has served as CGA's president since the organization's
inception in 2000. Kipp's term as president will officially end in late April, creating a three-month
transition period for the change in leadership.
The CGA is an association of 1,700 individuals, organizations and sponsors in every facet of the
underground utility industry. Established in 2000, CGA is committed to saving lives and preventing
damage to underground infrastructure by promoting effective damage prevention practices. CGA has
established itself as the leading organization in an effort to reduce damages to underground facilities in
North America through shared responsibility among all stakeholders. APGA is a bronze-level sponsor of
CGA and strongly supports CGA’s efforts to reduce excavation damage, the leading cause of gas
distribution incidents.
Magruder Lyle most recently served as vice president of strategic initiatives for the American Fuel &
Petrochemical Manufacturers (AFPM), a Washington, D.C., trade association. At AFPM, she was
responsible for leading a team that executed strategies to educate consumers, key stakeholders and
elected officials about the implications of national energy policy decisions on their communities.
APGA thanks Bob Kipp for his 16 years of service at CGA and looks forward to working with Ms.
Magruder Lyle to continue the good work of the CGA. 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.
PHMSA Issues Interim Rule on Underground Storage Safety
On December 14, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an
interim final rule (IFR) that revises the federal pipeline safety regulations to address safety issues related
to downhole facilities at natural gas underground storage facilities, including well integrity, wellbore
tubing, and casing. This first step is in response to Section 12 of the Protecting our Infrastructure of
Pipelines and Enhancing Safety (PIPES) Act, which required PHMSA to enact minimum federal safety
standards for underground natural gas storage facilities and addresses the concerns of the public
highlighted by the Aliso Canyon natural gas leak incident of 2015. The Aliso Canyon incident resulted in
the estimated release of 4.62 billion cubic feet of natural gas.
The interim rules come less than one year after the formation of the Department of Transportation
(DOT) and Department of Energy (DOE) Interagency Task Force on Natural Gas Storage Safety. The
Interagency Task Force report can be found here.
The IFR incorporates the American Petroleum Institute’s recommended practices (RP) 1170 and 1171 by
reference into the pipeline safety regulations (49 C.F.R. Part 192). Recommended practices 1170 and
1171 outline standards for the design and operation of solution-mined salt caverns used for natural gas
storage, and functional integrity of natural gas storage in depleted hydrocarbon reservoirs and aquifer
reservoirs. The incorporation of these RPs will provide PHMSA and the states with a minimum federal
standard for inspection, enforcement, and training through a federal/state partnership and certification
process modeled after the current pipeline safety program. The standards will directly apply to
approximately 200 interstate facilities, and serve as the minimum federal standard for approximately
200 intrastate facilities.
This IFR is effective 30 days after the date of publication in the federal register. Comments must be
received 60 days after publishing to the federal register. Comments may be submitted to docket number
PHMSA-2016-0016 beginning on the date of publishing in the federal register.
You may view the full text of the IFR here.
No APGA members operate underground storage that would be required to comply with this interim
rule, however many APGA members contract for storage service, so any cost impacts would be felt by
APGA members. Furthermore, the interim rule makes portions of the RPs that were optional into
mandatory, which sets a bad precedent for future PHMSA adoption of RPs such as the RP 1173 on
Pipeline Safety Management System. The APGA Operations and Safety Committee is reviewing the
interim rule and will determine what actions APGA takes on this rule. 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.
Alan Mayberry Appointed Associate Administrator for Pipeline Safety
This week, the Pipeline and Hazardous Materials Safety Administration (PHMSA) announced that Alan
Mayberry has been appointed Associate Administrator for Pipeline Safety. Alan has been serving as
PHMSA’s Acting Associate Administrator since the spring when Jeff Weise left PHMSA. Alan previously
worked for Washington Gas so he is familiar with natural gas distribution operations. He participated in
a meeting between APGA’s leadership and PHMSA held at PHMSA’s offices in December 2015 where
APGA focused on communicating the significant differences between large multi-state operators like
Washington Gas and the typical U.S. gas distribution system, which is municipally-owned and typically
does not have SCADA systems, compressors or in-house engineering and compliance staff.
Alan has led efforts addressing some of PHMSA’s most significant challenges this past year, including the
successful reauthorization of the pipeline safety program with the passage of the Protecting our
Infrastructure of Pipelines and Enhancing Safety (PIPES) Act last June. He also helped lead the
Department of Energy and PHMSA Interagency Task Force on Underground Natural Gas Storage and has
coordinated and driven many important mandate completions. As a senior leader, he was a key player
in developing PHMSA's new strategic framework and improving its business processes. APGA
congratulates Alan and looks forward to working closely with him in his new duties as Associate
Administrator.
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.
EIA Reports Storage Decrease of 147 Bcf to Put Working Gas Storage at 3,806 Bcf
Here is the weekly EIA Summary Report issued on Thursday, December 15, 2016, which reports the
week’s storage report highlights for Friday, December 9, 2016. A 147 Bcf decrease has been reported.
Working gas in storage was 3,806 Bcf as of Friday, December 9, 2016, according to EIA estimates. This
represents a net decline of 147 Bcf from the previous week. Stocks were 50 Bcf less than last year at this
time and 186 Bcf above the five-year average of 3,620 Bcf. At 3,806 Bcf, total working gas is within the
five-year historical range.

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