Pipeline Safety: Intent To Approve Project and Environmental Assessment for the Natural Gas Pipe Line Company of America Pipeline Risk Management Demonstration Program

Federal RegisterSep 1, 1998

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DEPARTMENT OF TRANSPORTATION

Research and Special Programs Administration

[Docket No. RSPA-98-4034; Notice 14]

Pipeline Safety: Intent To Approve Project and Environmental

Assessment for the Natural Gas Pipe Line Company of America Pipeline

Risk Management Demonstration Program

AGENCY: Office of Pipeline Safety, Research and Special Programs

Administration, DOT.

ACTION: Notice of intent to approve project and environmental

assessment.

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SUMMARY: As part of its Congressional mandate to conduct a Risk

Management Demonstration Program, the Office of Pipeline Safety (OPS)

has been authorized to conduct demonstration projects with pipeline

operators to determine how risk management might be used to complement

and improve the existing Federal pipeline safety regulatory process.

This is a notice that OPS intends to approve Natural Gas Pipe Line

Company of America (NGPL) as a participant in the Pipeline Risk

Management Demonstration Program. This also provides an environmental

assessment of NGPL's demonstration project. Based on this environmental

assessment, OPS has preliminarily concluded that this proposed project

will not have significant environmental impacts.

This notice explains OPS's rationale for approving this project,

and summarizes the demonstration project provisions that would go into

effect once OPS issues an order approving NGPL as a Demonstration

Program participant. OPS seeks public comment on the proposed

demonstration project so that it may consider and address these

comments before approving the project. The NGPL demonstration project

is one of several projects OPS plans to approve and monitor in

assessing risk management as a component of the Federal pipeline safety

regulatory program.

ADDRESSES: OPS requests that comments to this notice or about this

environmental assessment be submitted on or before October 1, 1998 so

they can be considered before project approval. However, comments on

this or any other demonstration project will be accepted in the Docket

throughout the 4-year demonstration period. Comments should be sent to

the Dockets Facility, U.S. Department of Transportation, Plaza 401, 400

Seventh Street, SW, Washington, DC 20590-0001, or you can E-Mail your

comments to [email protected]. Comments should identify the

docket number RSPA-98-4034. Persons should submit the original comment

document and one (1) copy. Persons wishing to receive confirmation of

receipt of their comments must include a self-addressed stamped

postcard. The Dockets Facility is located on the plaza level of the

Nassif Building in Room 401, 400 Seventh Street, SW, Washington, DC.

The Dockets Facility is open from 10:00 a.m. to 5:00 p.m., Monday

through Friday, except on Federal holidays.

FOR FURTHER INFORMATION CONTACT: Elizabeth Callsen, OPS, (202) 366-

4572, regarding the subject matter of this notice. Contact the Dockets

Unit, (202) 366-5046, for docket material. Comments may also be

reviewed online at the DOT Docket Management System website at http://

dms.dot.gov/.

[[Page 46498]]

SUPPLEMENTARY INFORMATION:

1. Background

The Office of Pipeline Safety (OPS) is the federal regulatory body

overseeing pipeline safety. As a critical component of its federal

mandate, OPS administers and enforces a broad range of regulations

governing safety and environmental protection of pipelines. These

regulations have contributed to a good pipeline industry safety record

by assuring that risks associated with pipeline design, construction,

operations, and maintenance are understood, managed, and reduced.

Preserving and improving this safety record is OPS's top priority. On

the basis of extensive research, and the experience of both government

and industry, OPS believes that a risk management approach, properly

implemented and monitored, offers opportunities to achieve:

(1) Superior safety, environmental protection, and service

reliability;

(2) Increased efficiency and reliability of pipeline operations;

and

(3) Improved communication and dialogue among industry, the

government, and other stakeholders.

A key benefit of this approach is the opportunity for greater

levels of public participation.

As authorized by Congress, OPS is conducting a structured

Demonstration Program to evaluate the use of a comprehensive risk

management approach in the operations and regulation of interstate

pipeline facilities. This evaluation will be performed under strictly

controlled conditions through a set of Demonstration Projects to be

conducted with interstate pipeline operators. A Presidential Directive

to the Secretary of Transportation (October 16, 1996) stated that in

implementing the Pipeline Risk Management Demonstration Program: ``The

Secretary shall require each project to achieve superior levels of

public safety and environmental protection when compared with

regulatory requirements that otherwise would apply.'' Thus, the process

to select operators for this Demonstration Program involves a

comprehensive review to ensure that the proposed project will provide

the superior safety and environmental protection required by this

Directive. OPS may exempt a participating operator from particular

regulations if the operator needs such flexibility in implementing a

comprehensive risk management program; however, regulatory exemption is

neither a goal nor requirement of the Demonstration Program. This

document summarizes the key points of this review for NGPL's

demonstration project, and evaluates the safety and environmental

impacts of this proposed project.

2. OPS Evaluation of NGPL's Demonstration Project Proposal

Using the consultative process described in Appendix A of the

Requests for Application for the Pipeline Risk Management Demonstration

Program (62 FR 14719), published on March 27, 1997, OPS has reached

agreement with NGPL on the provisions for a demonstration project

covering NGPL's entire transmission pipeline system.

After addressing any public comment on this notice, OPS will

consider issuing an order approving NGPL as a Demonstration Program

participant. Although NGPL expects to request regulatory exemption as

its demonstration project matures, the focus in the first year would be

working with OPS to fully develop and document a formal risk management

program and set of implementing procedures that correspond to the Risk

Management Program Standard. Putting NGPL under a risk management order

at this time would give OPS the best opportunity to influence the

comprehensive development and uses of risk management in the company

and to better understand and address system unique risk issues. Working

closely with NGPL, OPS can observe quantitative risk assessment models

unique to this project, and review and expedite technical

justifications for risk control measures related to improved internal

inspection, repair procedures, and damage prevention. Once the Project

Review Team (PRT) is assured of the validity of NGPL's analyses, OPS

would consider approving activities likely to result in superior

safety. Section 5 of this notice describes some specific risk control

actions which NGPL is considering as regulatory alternatives and the

locations where they would be applied.

Company History and Record: NGPL is a subsidiary of MidCon

Corporation. It serves natural gas customers located primarily in the

Midwest. The company transports natural gas through about 13,000 miles

of pipeline and pipeline facilities, and provides approximately 68% of

the natural gas in the Northern Illinois, Chicago, Eastern Iowa and

Northwest Indiana market from supply regions in and around Texas,

Louisiana and Wyoming. NGPL also has pipelines in Arkansas, Kansas,

Nebraska, New Mexico, Oklahoma, Missouri, Colorado, and Wisconsin.

In January 1998, KN Energy, Inc. acquired MidCon Corporation.

Before the acquisition of MidCon, KN Energy operated over 4000 miles of

pipeline. It now controls the additional 13,000 miles of NGPL

pipelines. However, only the NGPL pipelines would comprise the

demonstration project.

Before entering into consultations with NGPL, OPS determined that

NGPL was a good demonstration program candidate based on an examination

of the company's safety and environmental compliance record, its

accident history, and its commitment to working with OPS to develop a

project meeting the Demonstration Program goals. KN Energy has

expressed the same management support for the project as demonstrated

by NGPL in the past, and realizes continued participation in the

Program depends on continued management commitment.

OPS records show that since 1984, NGPL has filed 49 reportable

incidents, which is typical for a company of its size. Causes include

corrosion (24), construction or material defects (8), outside forces

(8), and other miscellaneous or unknown causes (9). The most

significant accident, causing eleven deaths and three injuries,

occurred October 3, 1989, when a fishing boat in the Gulf of Mexico

near High Island, Texas, struck a sixteen inch diameter line about one

half mile offshore at a water depth of approximately ten feet. OPS

determined that NGPL violated no regulations in connection with this

incident, and no enforcement actions resulted. Following the incident,

OPS promulgated regulations to protect against future incidents

involving submerged pipelines. NGPL complied by instituting a regular

inspection program to assess the integrity of the pipelines in Gulf of

Mexico shallow waters, exceeding the inspection frequency required by

the regulations. The NGPL offshore damage protection program determines

the available soil backfill protection, identifies potential or actual

damage to the facilities, and makes repairs where needed. In addition,

NGPL co-chaired a task force that has resulted in several offshore

damage prevention/public awareness aids and initiatives, such as an

educational video, an annual luncheon and program for mariners,

development and installation of pictograph warning signs, and a

developing offshore one-call system.

On March 29, 1998, NGPL experienced a corrosion failure of a

thirty-six inch diameter pipeline approximately five miles south of

Corrigan, Texas, in a forested and relatively isolated part of Polk

County,

[[Page 46499]]

Texas. This failure resulted in some fire damage, but no harm to

people. In September 1998, NGPL will pressure test approximately 40

miles of pipeline in the area where the failure occurred to

specifically address the cause of this incident. Also in September,

NGPL will perform in-line inspections to provide integrity information

on pipe sections 55 miles upstream and 27 miles downstream from the

rupture site. Finally, NGPL will examine approximately 600 miles of

pipeline in the area to determine if the coatings and cathodic

protection are providing adequate protection to reduce the future

chance of this type of failure. OPS is monitoring NGPL's response to

this incident and is presently conducting an accident investigation in

conjunction with a standard audit of the affected pipeline.

At this time, OPS believes that the actions NGPL will take to

address the specific causes of the incident, together with the system-

wide application of NGPL's proposed Risk Management Program, are an

adequate response to the incident and demonstrate a continued

commitment to safety.

NGPL will incorporate information from all incidents into its

proposed Risk Management Program to further reduce the likelihood of

future incidents. NGPL's Program will also include frequent feedback

from field personnel on the condition of the pipeline, risk modeling of

the pipeline to provide faster and more thorough assessment of threats

to pipeline integrity, and application of new technology from recent

research to further reduce risk.

Consultative Evaluation: During the consultations, a Project Review

Team (PRT) consisting of representatives from OPS headquarters, Central

Region, Southwest Region, and Southern Region; pipeline safety

officials from Illinois and Ohio; and risk management experts met with

NGPL to discuss NGPL's existing Risk Management Program and the

expected development of this program during the course of the

demonstration project. These discussions included the current risk

assessment and risk control processes NGPL uses, planned expansion,

improvement, and integration of these processes during the

demonstration program, potential regulatory alternatives that will be

examined during the demonstration project, and proposed performance

measures to ensure superior performance is being achieved. The

discussions addressed the adequacy of NGPL's management systems and

technical processes, communications with outside stakeholders, and the

effect of NGPL's recent merger with KN Energy. The consultation process

also included an environmental assessment, which is described in

Appendix B of this notice.

The consultation process focused on three major review criteria:

1. Whether NGPL's proposed risk management demonstration program is

consistent with the Risk Management Program Standard and compatible

with the Guiding Principles set forth in that Standard;

2. Whether any risk control activities that will be examined under

NGPL's proposed risk management program are expected to produce

superior safety, environmental protection, and reliability of service

compared to that achieved from compliance with the current regulations;

3. Whether NGPL's proposed risk management demonstration program

includes a company work plan and a performance monitoring plan that

will provide adequate assurance that the expectations for superior

safety, environmental protection, and service reliability are actually

being achieved during implementation.

The demonstration project provisions described in this notice

evolved from these consultations, as well as any public comments

received to date. Once OPS and NGPL consider comments received on this

notice, OPS may issue an order approving the NGPL demonstration

project.

3. Statement of Project Goals

The NGPL System transports pressurized natural gas which, if

released in sufficient quantities in the presence of an ignition

source, can cause fires and explosions resulting in property damage,

injuries, and fatalities. Therefore, ensuring that pipeline leaks and

ruptures do not occur is the highest priority for OPS, state agencies,

and NGPL. Through risk management, NGPL intends to continuously improve

the level of safety associated with operating this line.

NGPL is in the early stages of integrating specific risk assessment

and prioritization processes required by the Risk Management Program

Standard with a variety of existing company programs and procedures to

identify the sources and causes of pipeline risks, to identify

effective risk control activities to address these risks, and to

monitor the effectiveness of these activities on system performance.

OPS believes that accepting NGPL into the risk management

demonstration program at this time gives OPS the best opportunity to

influence the continued comprehensive development and uses of risk

management in the company and to better understand and address system

unique risk issues. Through assessing the pipeline-specific risks and

determining the risk reduction potential of risk control alternatives

at specific locations, NGPL, OPS, and state agencies will improve their

understanding of the risks affecting pipeline safety and have a better

opportunity to evaluate the most effective risk control activities to

manage these risks.

A distinctive feature of the NGPL proposal is NGPL's commitment to

using quantitative models, where appropriate, to examine the relative

risks associated with alternative risk control practices. NGPL is also

willing to provide OPS access to company risk information, audit

findings, and project scheduling. NGPL will provide a means of sharing

company risk information directly with OPS and allowing immediate

performance monitoring of the project. All of these milestones and

commitments will be included in the OPS order authorizing the project.

NGPL has also identified several situations where it believes

certain alternatives to current regulation may allow a reallocation of

resources that would result in superior safety. (See Section 5 of this

notice.) OPS will not be allowing these alternatives in the initial

order. Once NGPL performs the necessary risk analyses to identify and

justify the superiority of these risk control alternatives, as

enhancing safety and environmental protection, OPS will consider

amending the order to allow them. Although NGPL plans to present OPS

with the final results of analyses supporting these alternatives in the

fourth quarter of 1999, OPS and affected states will be working with

NGPL to complete the risk analyses and begin implementing the

alternatives at the earliest possible time.

NGPL will not be exempted from any current pipeline safety

regulation until the company demonstrates to OPS and the affected

states that the proposed alternatives provide superior protection than

the current regulatory requirements. OPS will provide public notice of

any proposed exemptions and opportunity to comment.

4. Demonstration Project Locations

NGPL will include its entire gas transmission pipeline system in

the risk management demonstration project. However, later risk control

alternatives will focus on specific locations.

While the project is underway, NGPL will investigate the relative

risk-reduction of specific alternatives to the current regulations that

require the operator to make certain changes to the

[[Page 46500]]

design or operation of the pipeline when the population increases

around the pipeline. NGPL will investigate whether these proposed

alternatives can provide superior risk reduction at four specific

locations in which population around the pipeline is increasing. Two of

the locations are in Liberty County, Texas; one location is in Lamar

County, Texas; and one location is in Will County, Illinois.

As experience is gained from the initial set of population class

change locations, and as risks are assessed for other portions of the

NGPL gas transmission system, additional class change locations may be

included in the demonstration project. OPS and NGPL will work together

to establish criteria and a process for demonstrating when regulatory

alternatives can provide superior protection at additional class change

locations. (See Section 6 of this notice for a description of how OPS

will oversee this project.)

5. Project Description

NGPL is in the early stages of integrating specific components of

the OPS Demonstration Program with a variety of company programs,

practices, and procedures to identify the sources and causes of

pipeline risks, to identify effective risk control activities to

address these risks, and to monitor the effectiveness of these

activities on system performance. Senior level managers are responsible

for administering and refining the processes that form the foundation

of NGPL's risk assessment, risk control and decision-making, and

performance monitoring functions. Appendix A is the company's work plan

describing tasks to more fully develop its Risk Management Program.

Current risk control activities build on full compliance with

current pipeline safety regulations and company and industry knowledge,

experience, and research. Since 1990, NGPL has made extensive

improvements to its risk management processes to better manage risks.

These processes consist of four major components: a Pipeline Integrity

Process, Management of Change Process, Modification of Standards

Procedure, and Compliance Assessment Procedures. Currently, the NGPL

Risk Management Program is reflected in operating and maintenance

procedures; environment, safety, and health practices; engineering and

design standards; and internal and external communications. During the

demonstration project, the company will refine, enhance, further

integrate, and document these processes in a Risk Management Program

Manual. NGPL is committed to building on its current risk management

system, and will continue to improve the ways in which the company:

Actively investigates potential sources of risk in its

operations;

Integrates information from the various components of its

system to produce a comprehensive understanding of the risk associated

with NGPL operations;

Identifies and allocates resources to effectively and

efficiently manage these risks;

Institutionalizes the Risk Management Program company-

wide, with explicit identification of roles, responsibilities, and

accountabilities; and

Seeks input from and provides information to company

employees, OPS, and other stakeholders.

NGPL's work plan, submitted as part of its application, includes

these activities as specific milestones. These activities will be

included in the Order authorizing the project. OPS and the states who

participated in the consultative evaluation of the NGPL project will

closely observe and interact with NGPL throughout these program

development activities.

NGPL has also identified several situations where it believes

certain alternatives to current regulations may allow a reallocation of

resources that would result in superior performance. OPS will not be

allowing these alternatives in the initial order. However, once NGPL

performs the necessary risk analyses to identify and justify the

superiority of these risk control alternatives, as enhancing safety and

environmental protection, OPS will consider amending the order to allow

them. Although the work plan in Appendix A shows that NGPL will present

OPS with the final results of analyses supporting these alternatives in

the fourth quarter of 1999, OPS and the affected states will be working

with NGPL to complete the risk analyses and begin implementing the

alternatives at the earliest possible time.

Alternatives to Regulations Covering Class Location Changes (192.609/

611)

OPS categorizes all locations along the pipeline according to the

size of the population near the pipeline. Locations with the smallest

population (fewer than 10 buildings intended for human occupancy within

220 yards on either side of the pipeline) are designated Class 1. As

the population along the pipeline increases, the class location

changes. For example, Class 2 locations have more than 10, but fewer

than 46 buildings intended for human occupancy; Class 3 locations have

46 or more buildings. The highest class, Class 4, involves locations in

which buildings with four or more stories above ground (e.g., large

apartment buildings) are prevalent. Ninety-two percent of NGPL's system

is Class 1; three percent is Class 2; five percent is Class 3. NGPL

does not operate any facilities within Class 4 areas.

When the population surrounding the pipeline increases

sufficiently, the class location of the pipeline may change. When the

class location of a pipeline segment changes, the current regulations

require an operator to confirm or revise the maximum allowable

operating pressure. This could require such actions as replacing the

pipe, lowering the operating pressure, or performing additional

pressure tests of the line. NGPL will examine the potential risk

reduction of an alternative set of risk control activities when a

pipeline segment changes class. NGPL recognizes that a population

increase along the pipeline increases risk due to the potentially

larger consequences associated with a pipeline leak or rupture, and the

possible increase in third-party excavations. NGPL will examine a set

of risk control activities that includes but is not limited to:

Internally inspecting class change segments which they

would not otherwise be required to perform under current regulations;

Internally inspecting an extended length of pipe on either

side of each class change segment will further extend the benefits of

better integrity analysis;

Repairing anomalies in accordance with an NGPL-specified

procedure;

Performing enhanced third party damage prevention

activities along the extended segment of pipeline;

Performing enhanced third party damage prevention

activities at other locations identified by NGPL to be the most

susceptible to third party damage due to increasing population or

construction; and

Performing in-line inspections and repair of other

pipeline segments identified by NGPL as having high relative risk,

beyond those where population has increased.

NGPL will determine if performing these alternative risk control

activities will reduce risk and produce superior performance than

complying with the regulations. NGPL will design the internal

inspection and associated repair activities to verify the condition of

the pipe, and reduce the likelihood of pipe failure due to loss of wall

thickness resulting from corrosion or other damage to the pipe. It will

design the

[[Page 46501]]

enhanced third-party damage prevention activities to directly address

the source of increased risk due to the population expansion, and to

address one of the largest contributors to risk on the pipeline. NGPL

believes that pipe replacement alternatives may reduce risks to the

public, to workers removing and replacing pipe, and to the environment.

Other relatively higher risk segments of the pipeline could benefit

from resources that would otherwise be allocated to pipe replacement.

NGPL will consider the risks and risk reduction associated with all

possible approaches before proposing the best approach at any given

location.

NGPL will work with OPS, the states, and other stakeholders during

the demonstration project to confirm that these alternative activities

will achieve superior protection beyond what is achievable through

compliance with the current regulations.

Alternatives to Currently Allowed Options for In-Service Repair of

Pipes (192.711/713/715/717/719)

The current regulations define a set of acceptable ways of

repairing defects in pipelines. Considerable research has been

performed over the last decade to investigate, test, and demonstrate

other means of repair.

NGPL will investigate an alternative in-service repair technique

based on the most recent research in this area. This technique,

referred to as direct weld deposition repair, directly deposits weld

metal on the pipeline damage or corrosion. This technique can be used

on sections of the pipe (e.g. bends in the pipe) and on pipeline

components (e.g. pipe fittings), where other current in-service repair

techniques cannot be used. NGPL will work with OPS, the states, and

other stakeholders to define the specific conditions and procedures

under which this alternative repair technique can produce superior

performance.

Monitoring Demonstration Project Effectiveness

The NGPL Demonstration Project includes a comprehensive approach to

performance monitoring that OPS believes will provide superior

protection of public safety and the environment, and achieve other

project objectives. A key element of this monitoring plan is a set of

programmatic performance measures to track the growth and

institutionalization of risk management within the company, measure the

effectiveness of the NGPL Risk Management Program and Process in

achieving stated expectations, and measure the effectiveness of

specific risk control activities. NGPL will report performance

measurement data and project progress regularly to OPS throughout the

demonstration period. This information, as well as periodic OPS audits,

will assure accountability for improved performance.

NGPL has provided a work plan for completing the steps of this

project. This work plan includes scheduled interaction between NGPL and

OPS, such as NGPL's sharing with OPS appropriate project information

through Intranet/Internet access on its risk management program, and

OPS and affected states observing internal company assessment

activities. OPS will audit NGPL's progress throughout the project to

verify that key milestones are completed.

OPS believes this interaction will help confirm the continuing

improvement in NGPL's Risk Management Program, and help OPS review and

confirm NGPL's analysis of the expected risk-reduction from the

proposed risk control alternatives. OPS will also be able to verify the

technical basis for concluding that these alternatives will provide

superior safety.

6. Regulatory Perspective

Why is OPS Considering This Project?

OPS has carefully and extensively reviewed NGPL's proposed Risk

Management Demonstration Project. OPS believes that NGPL is committed

to building on its current risk management system to develop and

document a formal risk management program and set of implementing

procedures corresponding to the requirements of the Risk Management

Program Standard. NGPL senior management has demonstrated its

commitment to improved safety and environmental protection through risk

management. OPS believes that the technical and managerial processes

included in the NGPL Risk Management Program will allow risk control

alternatives to be defined that can provide superior performance.

OPS also believes that the NGPL demonstration project will help OPS

achieve the overall goals of the Risk Management Demonstration Program.

In particular, this project will provide OPS with increased and better

quality data about potential pipeline risks and activities to address

those risks. These previously unavailable data will increase OPS's

knowledge and awareness about potential pipeline threats, provide

earlier opportunity to consider appropriate risk control options, and

thereby support a more effective regulatory role in improving safety

and environmental protection. Further, OPS believes that NGPL's

proposal indicates the potential of developing and demonstrating

systematic processes to both quantitatively and qualitatively determine

the relative risk-reduction benefits of alternative safety practices so

that the effect of one set of risk control activities can be compared

with another.

NGPL has demonstrated a strong commitment to the use of

quantitative models, where appropriate, to examine the relative risks

associated with alternative risk control practices. Including NGPL in

the risk management demonstration program will allow OPS to gain

further insights on using such models in developing the technical

justification for risk control alternatives that achieve superior risk

reduction. Use of these models will help to evaluate the results of

other company risk management projects and solidify the demonstration

of superior safety results from company risk management programs.

NGPL will develop and use company Intranet-based systems to promote

communication within the company about its risk management program and

the results of its risk analysis and risk-based decision making. NGPL

is willing to provide OPS access to a company-operated intranet site

containing risk information, audit findings, and project scheduling.

This provides a means of sharing NGPL risk information directly with

OPS and allowing immediate performance monitoring of the project. This

is an innovative feature of the NGPL risk management project that may

contribute to the success of the entire pipeline risk management

program through developing enhanced systems and methods to report and

share risk information and monitor performance.

NGPL has also included in its work plan, development of an External

Communications Plan that defines planned information exchange with

contractors, land owners, local safety officials, local emergency

planning groups, and other stakeholders.

How Will OPS Oversee This Project?

After NGPL's Risk Management Demonstration Project is approved, the

PRT consisting of OPS headquarters and regional staff and state

pipeline safety officials who have been reviewing the proposal, will

monitor the project. The PRT is designed to be a more comprehensive

oversight process that draws maximum technical experience and

perspective from all affected OPS regional and headquarters offices,

and from any affected state agencies that

[[Page 46502]]

would not normally provide oversight on interstate transmission

projects.

The PRT will conduct periodic risk management audits to observe

company performance of the specific terms and conditions of the OPS

Order authorizing this Demonstration Project. OPS is developing a

detailed audit plan, tailored to the unique requirements of the NGPL

Demonstration Project. This plan will describe the audit process (e.g.,

types of inspections, methods, observation of company review of risks

and risk control options, frequency of audit), as well as the specific

requirements for reporting information and performance measurement data

to OPS.

OPS retains its full authority to administer and enforce all

regulations governing pipeline safety. As previously discussed, NGPL

may later be exempted from particular regulations if it demonstrates

that specific risk control alternatives provide superior levels of

safety to regulatory compliance. (Such alternatives would become part

of the Order and would be monitored.) Should Demonstration Project

performance or other subsequent information indicate that superior

levels of safety have not been achieved or are unlikely to continue to

be achieved, then OPS may require NGPL to modify the alternative or

return to complying with the previously exempted regulation.

Information Provided to the Public

OPS has previously provided information to the public about the

NGPL project, and has requested public comment, using many different

sources.

1. OPS aired several electronic ``town meetings'' enabling viewers

of the two-way live broadcasts to pose questions and voice concerns

about candidate companies (including NGPL).

2. An earlier Federal Register notice (62 FR 53052; October 10,

1997) informed the public that NGPL was interested in participating in

the Demonstration Program, provided general information about technical

issues and risk control alternatives to be explored, and identified the

geographic areas the demonstration project would traverse.

3. Since August 1997, OPS has used an Internet-accessible data

system called the Pipeline Risk Management Information System (PRIMIS),

available via the OPS Home Page at http://ops.dot.gov, to collect,

update, and exchange information about all demonstration candidates,

including NGPL.

4. At a November 19, 1997, public meeting OPS hosted in Houston,

TX, NGPL officials presented a summary of the proposed demonstration

project and answered questions from meeting attendees. (Portions of

this meeting were broadcast on December 4, 1997, and March 26, 1998.)

5. OPS will provide a prospectus, which includes a map of the

demonstration sites, to State officials and community representatives

who may be interested in reviewing project information, providing

input, or monitoring the progress of the project.

At this point, OPS has received no public comment on NGPL's

proposal. This notice is OPS's final request for public comment before

OPS intends to approve NGPL's participation in the Demonstration

Program under the terms of the work plan.

Issued in Washington, DC on August 26, 1998.

Richard B. Felder,

Associate Administrator, Office of Pipeline Safety.

Appendix A: NGPL Work Plan

Implementation Schedule with Key Milestones

------------------------------------------------------------------------

# Milestone description Date

------------------------------------------------------------------------

1............ Program Development..

1.1.......... Complete development 4th Quarter 1998.

and description of

investigative risk

identification and

assessment processes.

1.2.......... Complete development 4th Quarter 1998.

and description of

processes for

integrating risk

information from

various sources into

linked risk database.

1.3.......... Complete development 4th Quarter 1998.

and description of

processes for

identifying and

selecting risk

control activities.

1.4.......... Complete development 1st Quarter 1999.

of NGPL Risk

Management Program

Manual which

describes processes

and assigns

responsibilities.

2............ Assurance of Superior

Performance for

Phase 1 Projects.

2.1.......... Describe the 4th Quarter 1998.

technical approach

(including a

description of the

models, algorithms,

data sources, and

expert processes)

that will be used to

assess and compare

the risk reduction

expected from the

proposed class

location change

alternatives and

compliance with

current regulations.

2.2.......... Describe the 4th Quarter 1998.

technical approach

(including a

description of the

models, algorithms,

data sources, and

expert processes)

that will be used to

assess and compare

the risk reduction

expected from the

proposed welding

repair alternatives

and compliance with

current regulations.

2.3.......... Present the 2nd Quarter 1999.

preliminary results

of the analyses that

lead to the

conclusion that

superior performance

will result from the

proposed class

location risk

control alternatives.

2.4.......... Present the 2nd Quarter 1999.

preliminary results

of the analyses that

lead to the

conclusion that

superior performance

will result from the

proposed welding

repair alternatives.

2.5.......... Complete initial 2nd Quarter 1999.

enhancements to Risk

and Environmental

Management (REM)

database.

2.6.......... Present the final 4th Quarter 1999.

results of the

analyses that lead

to the conclusion

that superior

performance will

result from the

proposed class

location risk

control alternatives.

2.7.......... Present the final 4th Quarter 1999.

results of the

analyses that lead

to the conclusion

that superior

performance will

result from the

proposed welding

repair alternatives.

3............ Performance Measures.

3.1.......... Develop performance 4th Quarter 1998.

measures to monitor

the effectiveness of

the overall NGPL

Risk Management

Program.

3.2.......... Develop performance 4th Quarter 1998.

measures to monitor

the effectiveness of

proposed risk

control activities

to produce superior

performance

(including baseline

levels, and expected

levels).

3.3.......... Produce a Performance 1st quarter 1999.

Monitoring Plan that

incorporates the

selected performance

measures, and

defines the

processes and

responsibilities for

collecting,

analyzing, and

reporting

performance data.

3.4.......... Produce and provide 1st Quarter 2000 and as needed

OPS and other thereafter, but not to exceed 18

stakeholders a months through demo phase.

Performance

Monitoring report

that documents the

status and progress

of the program.

4............ Communication &

Information Exchange.

[[Page 46503]]

4.1.......... Complete External 4th Quarter 1998.

Communications Plan

that defines planned

information exchange

with contractors,

land owners, the

public, local safety

officials, local

emergency planning

groups, and other

stakeholders.

4.2.......... Conduct Risk 1st Quarter 1999 and as needed

Management thereafter, but not to exceed 18

information meetings months through demo phase.

with affected local

emergency planning

committees, local

officials, and land

owners.

4.3.......... Meet with OPS to 1st Quarter 1999 and as needed

discuss program thereafter, but not to exceed 18

progress and status. months through demo phase.

4.4.......... Provide OPS summary 4th Quarter 1999.

of consolidated risk

information

indicating the major

sources of risk on

the NGPL pipelines

and actions being

taken or planned by

NGPL to address

these risks.

4.5.......... Develop internal 4th Quarter 1999.

electronic

information and

communication system

that will provide

all employees easy

access to key risk

management

information

(including

information in

NGPL's Computer

Action Tracking and

Trending System, the

Risk and

Environmental

Management database,

and other risk-

related databases).

4.6.......... Provide OPS 1st Quarter 2000.

controlled Internet

access to relevant

portions of the NGPL

electronic

information system

to facilitate

reporting and

information exchange.

5............ Selection of Phase 2

Projects.

5.1.......... Develop and present 2nd Quarter 1999.

to OPS an analysis/

review/approval

process for

expanding Phase 1

projects to other

portions of the NGPL

system.

5.2.......... Submit list of 3rd Quarter 1999.

additional Phase 2

projects to OPS,

including the

anticipated

technical approach

for establishing

superior performance.

6............ Assurance of Superior

Performance for

Phase 2 Projects.

6.1.......... Present results of 3rd Quarter 1999.

analyses to expand

Phase 1 alternatives

to other portions of

the NGPL system.

6.2.......... Present results of 1st Quarter 2000.

analyses

demonstrating

superior performance

for other selected

Phase 2 alternatives.

------------------------------------------------------------------------

Appendix B: Environmental Assessment

A. Background and Purpose

A Presidential Directive to the Secretary of Transportation

(October 16, 1996) stated that in implementing the Pipeline Risk

Management Demonstration Program: ``The Secretary shall require each

project to achieve superior levels of public safety and environmental

protection when compared with regulatory requirements that otherwise

would apply.'' Thus, the process to select operators for this

Demonstration Program involves a comprehensive review to ensure that

the proposed project will provide the superior safety and environmental

protection required by this Directive. This document summarizes the key

points of this review for Natural Gas Pipe Line Company's (NGPL)

demonstration project, and evaluates the safety and environmental

impacts of this proposed project.

This document was prepared in accordance with section 102(2)(c) of

the National Environmental Policy Act (42 U.S.C. Section 4332), the

Council on Environmental Quality regulations (40 CFR Sections 1500-

1508), and Department of Transportation Order 5610.1c, Procedures for

Considering Environmental Impacts.

B. Description of Proposed Action

NGPL will conduct a demonstration project encompassing its entire

pipeline system. Specific risk control activities will be investigated

for four locations in the NGPL system: two locations in Liberty County,

Texas; one location in Lamar County, Texas; and one location in Will

County, Illinois. NGPL has adopted a Risk Management Program and

Process to institutionalize risk management throughout the company. The

proposed project's primary objective is to demonstrate that

implementation of NGPL's Risk Management Program and Process will lead

to superior performance, improved safety and environmental protection.

NGPL's Risk Management Program integrates four major components:

the company Pipeline Integrity Process, Management of Change Process,

Modification of Standards Procedure, and Compliance Assessment

Procedures. The formalized NGPL Risk Management Program will be

documented in the course of the demonstration project and will fully

conform to the Risk Management Program Standard. During the

demonstration project, NGPL will continue to:

actively investigate potential risk sources in pipeline

operations;

integrate information from the four components listed

above to form a comprehensive understanding of risk associated with

operation of the NGPL system and allocate resources to determine

effective and efficient risk control alternatives;

institutionalize NGPL's Risk Management Program company-

wide with specific roles, responsibilities, accountabilities, and

effective documentation; and

seek input from and provide information to company

employees, OPS, and stakeholders to continually improve NGPL's Risk

Management Program and the understanding of the risk management/

engineering process.

As a result of a comprehensive review of NGPL's risk management

demonstration project, the Office of Pipeline Safety (OPS) proposes to

approve this project for participation in the Demonstration Program.

The activities below would be included in an Order formally

approving the NGPL demonstration project:

Share information with OPS concerning the specific risks

identified for NGPL pipeline segments;

Share information with OPS concerning the preventive and

risk control activities NGPL has identified and analyzed to address

these risks and their relative priority;

Share information with OPS concerning the technical basis

for establishing alternative risk control

[[Page 46504]]

activities that achieve superior safety and environmental protection;

Share information with OPS concerning the lessons learned

on institutionalizing risk management programs to help OPS in

evaluating the effectiveness of risk management programs, including

information on the use of quantitative risk assessment and

prioritization models where appropriate;

Track, monitor, and report performance measures selected

to determine the effectiveness of the NGPL risk management program; and

Provide OPS access to risk management information through

the NGPL company intranet-based information systems.

Monitoring Demonstration Project Effectiveness

The NGPL Demonstration Project includes a comprehensive approach to

performance monitoring that assures the superior protection of public

safety and the environment, and achieves other project objectives. A

key element of this monitoring plan is a set of programmatic

performance measures to track the growth and institutionalization of

risk management within the company, and measure the effectiveness of

the NGPL Risk Management Program and Process in achieving stated

expectations.

NGPL will report performance measurement data and project progress

regularly to OPS throughout the demonstration period. This information,

as well as periodic OPS audits, will assure accountability for improved

performance. More detailed descriptions of all aspects of the NGPL

proposal and OPS rationale for approving the project are provided in

the Internet-accessible data system called the Pipeline Risk Management

Information System (PRIMIS), available to the public via the OPS Home

Page, at http://ops.dot.gov.

C. Purpose and Need for Action

As authorized by Congress, OPS is conducting a structured

Demonstration Program to evaluate the use of a comprehensive risk

management approach in the operations and regulation of interstate

pipeline facilities. This evaluation is being performed under strictly

controlled conditions through a set of demonstration projects being

conducted with interstate pipeline operators. Through the Demonstration

Program, OPS will determine whether a risk management approach,

properly implemented and monitored through a formal risk management

regulatory framework, achieves:

(1) Superior safety and environmental protection; and

(2) Increased efficiency and service reliability of pipeline

operations.

In June, 1997, NGPL submitted a Letter of Intent to OPS, asking to

be considered as a Demonstration Program candidate. Using the

consultative process described in Appendix A of the Requests for

Application for the Pipeline Risk Management Demonstration Program (62

FR 14719), published on March 27, 1997, OPS is satisfied that NGPL's

proposal will provide superior safety and environmental protection, and

is prepared to finalize the agreement with NGPL on the provisions for

the demonstration project.

D. Alternatives Considered

OPS has considered three alternatives: approval of the NGPL risk

management demonstration project as proposed in NGPL's application;

denial of the NGPL demonstration project; or approval of the project

with certain modifications to NGPL's application.

OPS's preferred alternative is to approve the NGPL demonstration

project. OPS is satisfied that the proposal will not significantly

affect the surrounding environment. By approving the NGPL demonstration

program, OPS is not approving the implementation of any risk control

alternatives or exemptions from regulations at this time. However,

later during the demonstration project, NGPL may propose, and OPS may

approve, alternatives to the current regulations. NGPL will need to

demonstrate that any alternatives provide superior safety and

environmental protection to the current regulations. We will amend this

environmental assessment to consider the impact of any such

alternatives on the environment.

With approval of this project, NGPL will provide OPS with risk

assessment information on the pipeline system exceeding that available

through the current regulatory process. OPS's access to NGPL's company

Intranet-based risk information system provides a high level of

information sharing and provides OPS an opportunity to investigate new,

efficient tools for obtaining information and communicating with

pipeline companies.

The project is expected to lead to superior levels of safety and

environmental protection than provided under current regulatory

requirements, because of the identification and analysis of effective

risk control alternatives that may be approved for future

implementation. In the meantime, increased sharing between OPS and NGPL

about potential pipeline risks will increase OPS's knowledge and

awareness about potential pipeline threats, provide earlier opportunity

to consider appropriate risk control options, and thereby support a

more effective regulatory role in improving safety and environmental

protection.

NGPL's use of quantitative models in its analysis of alternatives

will also provide OPS practical insights concerning the usefulness of

quantitative tools and methods that are applicable to the entire risk

management demonstration program.

OPS and NGPL will carefully monitor and, if necessary, improve the

effectiveness of the risk control program and processes throughout the

demonstration period.

If OPS denied the project, it would lose valuable information

concerning the sources of risks to NGPL's pipeline system and the most

effective means of managing these risks. Denial would also

significantly diminish OPS's ability to evaluate the effectiveness of

an institutionalized, integrated, and comprehensive risk management

program in producing superior performance, and would hinder OPS's

ability to satisfy the objectives of the Risk Management Demonstration

Program, and the requirements of the previously mentioned Presidential

Directive. Denial would also result in the loss of insights regarding

the use of quantitative models and the loss of opportunities to

investigate new methods of obtaining information from pipeline

companies through Intranet-based information systems.

All of the issues raised by OPS, state regulators, and other

stakeholders about NGPL's proposed project have been discussed within

the consultative process, resolved to OPS's satisfaction, and reflected

in NGPL's application. Thus, we do not see any need to modify NGPL's

proposal.

E. Affected Environment and Environmental Consequences

The NGPL gas transmission pipeline system covers approximately

13,000 miles in 14 states. The product transported in the NGPL system

is pressurized natural gas, a flammable gas. If a pipeline leaks or

ruptures, the product could be released to the surrounding area and, in

the presence of an ignition source, could be ignited, causing fire or

explosion. The likelihood of such occurrences leading to environmental

damage is currently very low, as evidenced by NGPL-specific and

industry-wide operating history.

[[Page 46505]]

OPS, at this time, is not approving any exemptions to the current

regulations. During the course of the project, NGPL will examine the

risk-reduction benefits of specific risk control activities that may

improve safety and environmental protection. NGPL is focusing on two

locations in Liberty County, Texas; one location in Lamar County,

Texas; and one location in Will County, Illinois. If and when NGPL

demonstrates to OPS's satisfaction that such activities can be expected

to result in improved safety and environmental protection compared to

the current regulations, then OPS will amend the risk management Order

to allow NGPL to implement these alternatives. OPS will also make an

environmental assessment of any proposed alternatives, to determine

their environmental impact.

Before entering into consultations with NGPL, OPS determined that

NGPL was a good demonstration program candidate based on an examination

of the company's safety and environmental compliance record, its

accident history, and its commitment to working with OPS to develop a

project meeting the Demonstration Program goals.