APGA Weekly Update July 14, 2016

07-14-2016 12:46

APGA Speaks at National Academy of Sciences Meeting

On July 12, Jim Crowley, Gas, Meter, and Corporate Safety Manger for Easton Utilities Commission,
spoke on behalf of APGA at a meeting of a National Academy of Sciences’ committee that studies
performance-based safety regulation. The term “performance-based” refers to standards that mandate
outcomes and give firms flexibility in how to meet them, or requirements for firms to use management
systems consisting of internal plans and practices for promoting safety and reducing risk. Performancebased
regulation is usually contrasted with “prescriptive” regulation, sometimes called specification,
design, or technology standards, that requires firms to adopt specific means to promote safety and
reduce risks. The committee is studying the advantages and disadvantages of prescriptive and
performance-based forms of safety regulation and will identify possible opportunities for, and
constraints on, making greater use of the latter.

Jim participated in a panel with representatives of AGA and the National Association of Pipeline Safety
Representatives. In his presentation, Jim pointed out that the Pipeline and Hazardous Materials Safety
Administration (PHMSA) regulates operators with vast differences in size and safety issues. While larger
operators may favor performance based rules that allow them to tailor compliance programs for their
specific circumstances, many of the smaller operators that don’t have large technical staffs to develop
customized compliance programs may prefer prescriptive rules that spell out what a utility needs to do
to be in compliance. He cited the Distribution Integrity Management Programs (DIMP) rule as a good
example of how PHMSA can issue a performance-based rule, then work with the APGA Security and
Integrity Foundation (SIF) to develop SHRIMP to assist smaller operators to comply. He also cited the
construction inspection rule as an example of how not to write regulations. PHMSA essentially ignored
APGA’s warnings that prohibiting operator personnel from inspecting new mains constructed by utility
crew would adversely affect many APGA members.

The committee also heard from the National Transportation Safety Board, Federal Aviation
Administration, Federal Railroad Administration and the Coast Guard on how those agencies have used
performance-based regulations.

The committee’s report, which should be released in 2017, is expected to provide PHMSA with guidance
on how to use performance-based rules in future regulatory activities. 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.

Southern Gas Association and Arkansas Gas Association Host CNG/NGV Summit

The Southern Gas Association (SGA) and the Arkansas Gas Association (AGA) are hosting a Compressed
Natural Gas (CNG)/ Natural Gas Vehicle (NGV) Summit on July 19 and 20 in Tulsa, Okla.
SGA is a 501 (c)(6) organization with offices in Dallas. Founded in 1908, the organization’s purpose is to
serve its 109 (with 96 subsidiaries) members, which conduct business in distribution, transmission, and
gas supply marketing. Their members have assets in 33 states.
AGA is a statewide organization with membership consisting of the state’s natural gas distribution
companies: CenterPoint Entergy, Source Gas, Arkansas Oklahoma Gas Company, and over 100 other
members, including natural gas production companies, product and supply vendors.

SGA and AGA have partnered to put together the one and one-half day summit to learn about the latest
happenings and products in the market but also to engage in open discussion focused on best practices,
successes and challenges in the CNG/NGV market.

The event begins at 8:00 a.m. on July 19 local time and will be held at:

ONE Gas Building
15 E. 5th St.
Tulsa, OK 74103

APGA members are encouraged to attend this important event. 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.

APGA Holds Government Relations Webinar

On July 12, 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 Furnace Notice of Proposed Rulemaking (NOPR)
that the Department of Energy released in March 2015. The NOPR would establish a 92 percent
efficiency standard for natural gas furnaces nationwide. APGA has maintained that the high installation
costs associated with requirements for condensing furnaces, which are the only furnaces capable of
meeting the 92 percent standard, would push many residential customers—particularly those in warmer
climates—to switch from natural gas to less efficient home heating alternatives. Given that the directuse
of natural gas is over 90 percent efficient on a primary energy basis, the NOPR seems to run counter
to its stated goal of increasing efficiency. By contrast, electricity loses more than 70 percent of its usable
energy in its journey from the mine, solar panel, wellhead or wind turbine to its final destination at the
electric outlet.

During the webinar, APGA staff also provided an update on other rulemakings, such as dryers, boilers,
and potential definitions of net-zero energy. There was also passage of legislation reauthorizing the
Pipeline Safety Act as well as congressional efforts to pass comprehensive energy legislation. Lastly,
they 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 is 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.

Senate Names Energy Bill Conference Committee

On July 12, the Senate overwhelmingly voted to proceed to a conference committee with the House of
Representatives to resolve differences between the House and Senate passed comprehensive energy
bills. The Senate has named Senators Murkowski (R-Alaska), Barrasso (R-Wyo.), Risch (R-Idaho), Cornyn
(R-Texas), Cantwell (D-Wash.), Wyden (D-Ore.) and Sanders (D-Vt.) to the conference committee. The
House named its conferees on May 26. With Congress breaking at the end of this week for a seven-week
recess, this will allow staff to begin discussions and negotiations towards resolving some of the conflicts
between the House and Senate versions of comprehensive energy legislation. APGA will be sending a
letter to House and Senate conferees highlighting our priorities in the legislation.

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.

APGA Comments on DOE’s Procedure for Commercial Water Heating Equipment

On July 8, APGA along with AGA submitted joint comments on the Department of Energy’s (DOE)
proposed test procedure for commercial water heating equipment. Like the comments on commercial
boilers, these recent comments focused on the need to finalize any potential changes to the test
procedures prior to addressing an energy efficiency standard. If stakeholders do not know the exact
procedure for testing equipment to determine compliance with the proposed efficiency standards, they
cannot meaningfully analyze and comment on the impact of the proposed standards.

The second comment strongly recommends that DOE incorporate additional testing requirements to
measure electrical consumption. The current test procedures only measure fossil fuel consumption and
efficiency without consideration of electrical usage. If the equipment's electrical consumption could be
accounted for, we could encourage conservation in those components as a way to achieve energy
reduction as opposed to only looking at the combustion rate.

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.

APGA Comments on DOE’s Request for Information on the Regulatory Burden

On July 11, APGA along with AGA submitted joint comments on the Department of Energy’s (DOE)
request for information (RFI) on the regulatory burden. The comments highlight the many issues APGA
has raised in past comment letters. We highlight the fact that the current modeling and decision
process has undergone significant revisions and has not been peer-reviewed in over 10 years. The
second major issue addressed in the comments is the lack of transparency in the rulemaking process.
We highlight the numerous challenges encountered in reviewing the residential furnace notice of
proposed rulemaking as examples as to how the process is incredibly burdensome and costly.

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 and Mineral Resources Subcommittee Holds Hearing on Mancos Shale

On July 12, the House Natural Resources Subcommittee on Energy and Mineral Resources held a hearing
titled Opportunities and Challenges of Developing the Mancos Shale Resource.
The Mancos Shale is located in Colorado and the impetus for the hearing was the June 8 release by the
United States Geological Service (USGS) of an update on the assessment of oil and gas resources in
Mancos. The original 2003 USGS assessment, done pre-hydraulic fracturing and other innovations, found
few resources in the region. Periodically, USGS revisits regions based upon technology updates or other
developments that warrant a reassessment. According to the June 8 USGS press release, the Mancos,
“contains an estimated mean of 66 trillion cubic feet of shale natural gas, 74 million barrels of shale oil
and 45 million barrels of natural gas liquids,” making it the second largest shale gas assessment ever
done by the agency.

To determine the opportunities and challenges, the subcommittee heard from the following witnesses:
 Mr. Robert Downey, Gunnison Energy, LLC
 Mr. Bill Fales, Rancher
 Mr. Walter Guidroz, United States Geological Survey
 Mr. Robbie Guinn, SG Interests
 Ms. Rose Pugliese, Mesa County

All of the witnesses except for Mr. Guidroz, who as an agency representative cannot state policy
preferences, and Mr. Fales were supportive of oil and gas development in the region. Mr. Fales
expressed fears that oil and gas development would harm cattle ranching, tourism, and agriculture in
the region. Ms. Pugliese, Mr. Guinn, and Mr. Downey all strongly urged Congress to cut back on what
they characterized as “burdensome” federal regulations that impede production and the concomitant
job growth and tax revenue. Republicans on the committee echoed these sentiments and suggested
that oil and gas development could coexist with tourism, agriculture, and ranching. In contrast,
Democrats largely sought to portray production as incompatible with those other activities and
suggested that oil and gas production subjects local economies to boom and bust, whereas other
alternatives such as tourism do not.

The hearing went as expected and served as an educational opportunity for members about the
Mancos, as well as a messaging opportunity for both parties. 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.

Congress Passes FAA Extension with APGA Supported Drone Provision

On July 13, the Senate passed a short-term Federal Aviation Administration (FAA) extension bill on an 89
to four vote that reauthorizes FAA programs through September 2017.

This short-term extension was passed due to disagreements in both the House and Senate over reform
of the FAA and the inclusion of renewable energy tax credits respectively. Given that no agreement to
these issues could be found and that FAA funding is set to expire on July 15, Congress moved a shortterm,
compromise bill, which first passed the House on July 12 and then moved to the Senate where it
passed.

Beyond merely continuing funding of existing FAA programs, the legislation also expands aviation safety
and security by strengthening mental health screening for pilots, requiring comprehensive security
assessments for foreign airports serving the U.S., as well as an important passenger provision that forces
airlines to refund passengers their checked bag fees if their luggage is lost or unreasonably delayed,
among many other items.

Included among these important provisions is an APGA-supported provision that would allow critical
infrastructure operators, including municipal local distribution companies, to utilize unmanned aerial
vehicles, such as drones, to comply with federal requirements. Previously, only manned aircraft could be
used for such purposes. However, thanks to Senator James Inhofe (R-Okla.), who developed this
legislation, critical infrastructure operators can save time and money using drones for compliance
purposes.

Moving forward, the bill is expected to be signed by President Obama in the coming days. 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.

Congress Makes Measured Progress before Recess

Congress will begin an extended seven week recess on July 15 due to the presidential conventions and
the need to spend time at home campaigning for those up for reelection.

Before Congress left town, it made some progress on energy issues of importance to APGA members.
On July 12, following easy House passage of a motion to go to conference, the Senate voted 84-3 to go
to conference on the differing energy bills passed by both chambers. The Senate passed its legislation
titled the Energy Policy Modernization Act, and the House passed the North American Energy Security
and Infrastructure Act. The two bills differ in significant ways with the House package’s inclusion of
provisions adamantly opposed by Democrats and earning the overall bill a veto threat from President
Obama. This has made and will make conferencing the two bills difficult as House Republicans want
provisions to block the Clean Power Plan, restrain the Environmental Protection Agency, and many other
controversial issues included in the bill, which is a non-starter in the Senate. These provisions threaten
the bipartisan support in the Senate, while the Senate bill itself appears to be a non-starter in the House.
One item of importance that was included in both versions of the legislation that APGA strongly
supported and will continue to support throughout the conference is the delay of the Department of
Energy’s furnace rule. The House bill included a delay through July of this year, rendering it ineffective as
of today, while the Senate bill included language that would delay the rule until a representative group
of stakeholders came to a negotiated agreement. Given that some Democratic conferees will likely
oppose an outright delay, APGA will be working closely with Republican Conferees and allied Democratic
conferees to try to ensure inclusion of delay language. It is expected that the conference committee will
not have a compromise bill before the lame duck session after the November elections.

In similar fashion, Congress also managed to pass a short-term Federal Aviation Administration (FAA)
extension on July 13, on an 89-4 vote in the Senate after earlier passage by the House.

The extension continues funding of existing FAA programs while also expanding aviation safety and
security measures. These enhancements include strengthening mental health screening for pilots,
requiring comprehensive security assessments for foreign airports serving the U.S., as well as an
important passenger provision that forces airlines to refund passengers their checked bag fees if their
luggage is lost or unreasonably delayed, among other items.

One key provision for APGA members is an APGA-supported provision that would allow critical
infrastructure operators, including municipal local distribution companies, to utilize unmanned aerial
vehicles, such as drones, to comply with federal requirements. Previously, only manned aircraft could be
used for such purposes. However, thanks to Senator James Inhofe (R-Okla.), who developed this
legislation, critical infrastructure operators can save time and money using drones for compliance
purposes.

With deadlock on a host of issues from gun control to police reform and many others, Congress is
expected to return in September from the extended recess with little productivity beyond
appropriations. Both chambers began the year with high hopes of returning to regular order on
appropriations meaning each chamber would pass 12 appropriations bills. However, policy and political
disagreements have led to few bills being passed out of one chamber, let alone signed into law, and with
government funding scheduled to run out at the end of September, time is short and Congress is already
split on how to keep the government running. Some members prefer a short-term extension to get the
government through the elections and then put together a larger package after the elections. Others
prefer a longer-term package that would fund the government through March 2017 to ensure that the
new administration can focus on 2018 appropriations rather than old business. Thus far, no path
forward has emerged, but it seems likely Congress will have to pass a short-term extension to get
beyond September at least given the dynamics of the issue. APGA will keep members informed of any
development with these or any other issues of importance.

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.

Congratulations APGA Safety Contest Winners

Congratulations to all 46 winners of the 2016 APGA Safety Contest! These gas systems highlight the
dedication of APGA members to maintaining the highest safety standards within their system, their
communities, and in the natural gas industry. Out of the 46 winning systems, two systems will be
receiving an award for meeting the criteria to win the safety contest five years in a row. They are the
City of Martinsville, Ill., and the City of Fort Morgan, Colo. These accomplishments are impressive and
serve the entire industry by setting and maintaining high performance standards. Again, we would like
to congratulate all of our winners for continuing to achieve the highest safety records in the natural gas
industry year after year. We look forward to working with all of you for the remainder of 2016 and being
able to honor your hard work and dedication to safety again next year.

For the entire list of this year’s winners, please visit the APGA website at www.apga.org/safetycontest.

APGA Speaks At Mississippi Natural Gas Association Annual Meeting

On July 14, APGA’s Vice President of Operations, John Erickson, discussed current issues being
monitored by APGA affecting public natural gas system operations and safety at the Annual Meeting of
the Mississippi Natural Gas Association (MNGA) in Orange Beach, Ala. John discussed both APGA and
Security and Integrity Foundation (SIF) programs. He began by recognizing the recipients of the APGA
System Operational Achievement Recognition (SOAR) program that began in 2014. A Mississippi utility,
Corinth Gas and Water, achieved SOAR recognition in 2015. SOAR recognizes those APGA members that
demonstrate excellence in utility operations.

John’s talk focused on four recent proposed and final pipeline safety regulations. The Pipeline and
Hazardous Materials Safety Administration (PHMSA) recently issued a final rule that has resulted in
much confusion over who can inspect newly constructed mains and transmission lines. The rule is meant
to prohibit the individual who performed a task during construction from self-inspecting his/her own
work; however, many construction tasks like lowering the pipe into the ditch may involve all the
personnel, so it is unclear if any of those people may perform the final inspection for depth of cover and
proper backfill. APGA filed a petition for clarification and/or reconsideration leading to PHMSA agreeing
to indefinitely stay the enforcement of the rule. PHMSA formed a working group to advise it how to fix
the regulation, but the task group has yet to meet in 2016. It is unknown when the rule will be finalized.
Last year, PHMSA proposed new requirements to install excess flow valves (EFV) and curb valves on
certain new and replaced service lines to multifamily residential and small commercial customers. The
EFV installation requirements appear reasonable, but the curb valve requirement is troubling in that it
suggests curb valves be operable by first responders other than utility personnel, such as fire fighters
who arrive on the scene of a gas accident. Most utility policies and firefighter training for responding to
a pipeline accident discourage firefighters from operating underground valves. The EFV proposed rule
would also require utilities to notify all customers of the availability of EFVs and install an EFV at the
customer’s request. John noted that PHMSA’s Technical Advisory Group met on June 1 and
recommended that PHMSA modify the rule as suggested by APGA.

John also talked about the proposed plastic pipe changes, many of which APGA supports. APGA believes
that it is a laudable goal for the tracking and traceability provisions that would enable utilities to quickly
identify where any pipe or components subject to a recall or advisory be located on a utility’s system.
The reality of the capability of many operators, both large and small, to implement such a program at a
reasonable cost, however, is questionable. He mentioned that APGA is looking into low cost bar code
scanning and data storage that could make tracking and traceability easy and inexpensive for members.
He discussed the proposed changes to the operator qualification (OQ) rule, which would expand
covered tasks to include tasks related to construction and emergency response. The proposal would also
require operators to write into their OQ plans provisions for annual effectiveness assessment of the OQ
program and a management of change policy. Finally, John briefly described the reauthorization of the
Natural Gas Pipeline Act, where APGA was pleased that it included no new requirements for regulations.
Over 100 operators and exhibitors attended this year’s MNGA conference. 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.

EIA Reports Storage Increase of 64 Bcf to Put Working Gas Storage at 3,243 Bcf

Here is the weekly EIA Summary Report issued on Thursday, July 14, 2016, which reports the week’s
storage report highlights for Friday, July 8, 2016. A 64 Bcf increase has been reported.
Working gas in storage was 3,243 Bcf as of Friday, July 8, 2016, according to EIA estimates. This
represents a net increase of 64 Bcf from the previous week. Stocks were 507 Bcf higher than last year at
this time and 586 Bcf above the five-year average of 2,657 Bcf. At 3,243 Bcf, total working gas is above
the five-year historical range.

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