Pipeline Safety: Candidates for System Integrity Inspection Pilot Program

DEPARTMENT OF TRANSPORTATION

Research and Special Programs Administration

[Docket No. RSPA-99-4523; Notice 2]

Pipeline Safety: Candidates for System Integrity Inspection Pilot

Program

AGENCY: Office of Pipeline Safety, DOT.

ACTION: Notice.

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SUMMARY: The Office of Pipeline Safety (OPS) has completed an initial

screening of three candidate companies for the System Integrity

Inspection (SII) Pilot Program. They are Conoco Pipe Line Company, El

Paso Natural Gas Company, and Portland Pipe Line Corporation. OPS

believes these companies' SII project proposals satisfy the established

eligibility and screening criteria, based on a review of each company's

Application Letter and safety and compliance record. OPS is beginning

discussions with these companies to explore their proposed SII projects

in more detail. Before making its final selection of SII Pilot Program

participants, OPS invites public comment on any aspect of a candidate

company's participation in the SII Pilot Program. OPS will consider

this feedback in the final selection of SII Pilot Program companies.

OPS may later screen additional candidate companies, and will publish

summaries of their proposals in subsequent Federal Register Notices.

The appendix to this notice provides information on how OPS will

examine the management processes each company employs for conducting

and documenting internal audits for regulatory compliance.

DATES: OPS requests that comments to this Notice be submitted on or

before February 11, 2000, so that public input can be fully considered

before OPS selects qualified SII Pilot Program participants.

ADDRESSES: You may submit written comments to the Dockets Facility,

U.S. Department of Transportation, Plaza 401, 400 Seventh Street, SW.,

Washington, DC 20590-0001. Comments should identify the docket number

RSPA-99-4523. Submit the original comment document and one (1) copy. If

you wish to receive confirmation of receipt of your comments, you 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 a.m. to 5 p.m., Monday

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through Friday, except on Federal holidays. You may also submit

comments to the docket electronically. To do so, log on to the Dockets

Management System web site at http://dms.dot.gov. Click on Help &

Information to obtain instructions for filing a document

electronically.

FOR FURTHER INFORMATION CONTACT: Donald Moore (816) 426-2654 or any of

the five OPS Regional Directors: William Gute (202) 366-4580, Frederick

Joyner (404) 562-3530, Ivan Huntoon (816) 426-2654, Rodrick Seeley

(713) 718-3746, or Christopher Hoidal (303) 231-5701. Contact the

Dockets Unit, (202) 366-5046, for docket material.

SUPPLEMENTARY INFORMATION:

I. Background

The Office of Pipeline Safety (OPS) is in the process of improving

its regulatory programs to assure greater levels of safety,

environmental protection, and service reliability. An important part of

this effort is re-examining the approach OPS uses to inspect interstate

pipeline operators and searching for more effective processes.

Traditionally, OPS inspections have focused on ensuring compliance with

applicable pipeline safety regulations. While this focused approach

assures that operators are complying with all regulatory requirements,

it may not be the most effective approach to improving safety.

The System Integrity Inspection (SII) Pilot Program is designed to

test whether a more broad-based examination of an operator's safety and

pipeline integrity programs, including many areas not currently

considered during a typical inspection, will improve performance.

Although OPS will continue to require an operator's compliance with the

pipeline safety regulations, under the SII approach, an SII Team

(composed of OPS and interstate agency personnel) will work

cooperatively with the operator to address pipeline system integrity

issues, including areas that the regulations may not address. To ensure

continued pipeline safety regulatory compliance, a participating

operator must conduct comprehensive internal audits for compliance that

will be subject to external verification by OPS. To be accepted into

the program, the candidate company must demonstrate that:

A formal internal audit process is in place;

Internal audits are regularly conducted;

Audit findings are documented and communicated;

Corrective actions to address audit findings are defined

and implemented; and

Corrective action status is tracked and communicated.

After a company is accepted into the SII Pilot Program, the SII

Team will verify internal audit records and field performance to ensure

that the company is effectively implementing its internal audit

process. The Appendix to the notice describes the approach OPS will use

for conducting this verification.

This enhancement of current inspection practices will improve

communication and information sharing between operators and the

government, and focus management attention and resources on the most

important risks to pipeline safety. After reasonable experience with

the pilot, OPS will determine whether and in what form the SII approach

should be incorporated into the Federal pipeline safety program on a

permanent basis.

The Notice ``Pipeline Safety: Request for System Integrity

Inspection Pilot Program Applications'' (63 FR 68819) published on

December 14, 1998, announced the initiation of the SII Pilot Program,

and requested that operators interested in participating in this

program submit Application Letters to OPS. The Notice also described

the SII Pilot Program, and the process to select operators for this

program.

OPS has completed an initial screening of three candidate companies

for the SII Pilot Program: Conoco Pipe Line Company, El Paso Natural

Gas Company, and Portland Pipe Line Corporation. OPS believes these

companies' SII project proposals satisfy the eligibility and screening

criteria delineated in the December Federal Register Notice, based on a

review of each company's Application Letter and safety and compliance

record. OPS has begun discussion with these companies to better

understand their proposed SII projects. These discussions will focus

on:

Operating history and a more detailed description of the

pipeline system proposed for the SII Pilot Program.

Internal audit program and processes the operator uses to

ensure regulatory compliance.

System integrity activities, processes, and programs the

operator uses to monitor, maintain, and improve pipeline integrity,

including programs that exceed regulatory requirements in addressing

potential safety and environmental threats from system operation.

Management processes used to identify and prioritize the

most significant threats to pipeline integrity, and how maintenance and

capital projects are identified, prioritized, and implemented to

address these threats.

New technologies, or innovative applications of existing

technologies, to improve operation and enhance safety and environmental

performance.

Performance measures to assure that a company's integrity

management program is effective, including indicators of the company's

understanding of pipeline system-wide condition, familiarity with and

implementation of risk assessment and risk control approaches,

integration and communication of system integrity-related information,

effectiveness of its internal audit program and processes, performance

assessment, feedback and results orientation, and visibility of company

management commitment to safety.

Before making its final selection of SII Pilot Program

participants, OPS invites public comment on any aspect of a candidate

company's participation in the SII Pilot Program. Each company's

Application Letter is available via an internet-accessible information

system that can be reached through the OPS web site at http://

ops.dot.gov. OPS will also consult with eligible state pipeline safety

agencies from the states affected 1 by a proposed SII

project. This feedback will be considered in the final selection of SII

Pilot Program companies.

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\1\ ``Affected states'' means states through which the pipeline

system proposed for the SII Pilot Program passes. An eligible state

pipeline safety agency is one that has active Interstate Agent

status.

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OPS may screen additional SII Pilot Program candidates in the near

future. Summaries of their application letters will be published in

subsequent Federal Register Notices.

II. Application Letter Summaries

Each of three pipeline operators identified in this notice

submitted an Application Letter to the SII Pilot Program. In these

letters, senior management committed to improving the safety and

environmental performance of its operations, and to the SII approach as

a means of furthering that objective. These companies have committed to

work with OPS, openly discussing and sharing information on integrity

issues that might not be fully addressed through the traditional

inspection process. The letters also summarized each company's internal

audit process for assuring compliance, and its system integrity program

that goes beyond the minimum regulatory requirements to address

potential risks to its pipeline system. In discussions

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with each company, OPS intends to explore these programs in more detail

to be sure they will support a meaningful demonstration of the SII

approach. The remainder of this section describes the pipeline systems

proposed for the SII Pilot Program.

1. Conoco Pipeline Company (Conoco): Conoco is proposing a total of

2,610 pipeline miles in nine different pipeline systems for the SII

Pilot Program. A summary description of each system follows.

Glacier Pipeline System: The Glacier System transports crude oil

from the U.S.-Canadian border near Carway, Alberta, to several

locations in Montana. The system is composed of 8-inch, 10-inch, and

12-inch diameter mainlines, and several lateral lines that deliver oil

to refineries in Billings and Laurel, Montana, and tank storage areas.

The Glacier system also consists of an 8-inch diameter line that

transports crude oil from Byron, Wyoming, to Laurel and Billings,

Montana. The total pipeline system mileage is approximately 775 miles,

located in Montana and Wyoming.

Yellowstone Pipe Line Company: The Yellowstone system delivers

refined petroleum products through a 10-inch diameter mainline and two

6-inch diameter spurs. The mainline provides products from the

refineries in Billings, Montana, to terminals in Bozeman, Helena, and

Missoula, Montana, and Spokane, Washington. The Moses Lake spur

connects Moses Lake, Washington, and Spokane. This spur includes

delivery stations at Fairchild Air Force Base and Geiger International

Airport. The Great Falls spur extends from Helena to Great Falls,

Montana. The total pipeline system mileage is approximately 742 miles,

located in Montana, Idaho, and Washington.

Seminoe Pipeline System: The Seminoe system is located in Montana

and Wyoming. The Seminoe system consists of an 8-inch diameter refined

products line extending 335 miles from Billings, Montana, to Sinclair,

Wyoming. The system passes through Casper, Wyoming, where interim

storage tanks are located.

Pioneer Pipe Line Company: The Pioneer system is located in Wyoming

and Utah. The Pioneer system consists of an 8-inch diameter refined

products pipeline, which extends 291 miles from Sinclair, Wyoming, to

Salt Lake City, Utah. Refined products are delivered to Conoco's Rock

Springs, Wyoming, product terminal and to Salt Lake Terminal Company's

North Salt Lake tank storage facility.

Rocky Mountain Pipeline System: The Rocky Mountain system is a

crude oil system located in Wyoming and Colorado. This 288-mile system

originates at Lance Creek, Wyoming, where it receives crude oil from

various other pipeline companies and gathering systems. The system

passes through Guernsey, Wyoming, and on to Cheyenne, Wyoming,

transporting oil in 8-inch and 10-inch diameter lines. At Cheyenne, the

oil is delivered to a refinery or to breakout tanks, where it is

subsequently transported to Denver, Colorado, via a 10-inch diameter

line.

Centennial Pipeline System: The Centennial system transports crude

oil via a 12-inch diameter pipeline from Guernsey to Cheyenne. This 82-

mile system is located entirely in Wyoming.

Cheyenne Products Pipeline System: The Cheyenne system is a 6-inch

diameter refined products line that extends 105 miles from Cheyenne,

Wyoming, to Sidney, Nebraska.

DIA Jet Fuel Pipeline System: This system transports commercial jet

fuel from Conoco's Denver refinery to the Chase Pipe Line terminal that

services Denver International Airport. The system consists of 8-inch,

6-inch, and 4-inch diameter lines totaling approximately 7.5 miles.

Denver Diesel Pipeline System: This system is a 4-inch, 2.75-mile

pipeline that transports diesel fuel from Conoco's Denver refinery to

the Union Pacific Railroad tank farm.

2. El Paso Natural Gas Company (El Paso): El Paso is proposing to

include two interstate natural gas pipelines in the SII Pilot Program.

These systems collectively comprise over 10,000 miles of pipeline and

are powered by 58 compressor stations.

El Paso Natural Gas System: The El Paso system provides interstate

gas transmission services from the major producing regions in West

Texas, New Mexico, Colorado, and Oklahoma to industrial end-user

customers and to local natural gas distribution companies in

California, Nevada, Arizona, New Mexico, Texas, and northern Mexico.

The approximately 9,870-mile system is located in Arizona, Colorado,

New Mexico, Oklahoma, and Texas.

Mojave Pipeline Operating Company: The Mojave system connects the

Bakersfield, California, area with northwest Arizona, providing natural

gas to industrial users and distribution companies in California. This

362-mile system is located almost entirely in California with a

compressor station just east of the Colorado River in Arizona.

1. Portland Pipe Line Corporation (Portland): Portland Pipe Line

Corporation, along with Montreal Pipe Line Limited, comprise the

Portland-Montreal Pipe Line System. This system transports crude oil

from South Portland, Maine, to Montreal East, Quebec. Portland owns the

portion of this system that is located in the United States, and is

proposing these facilities for the SII Pilot Program. The Portland

portion of the system has 18-inch and 24-inch diameter pipelines laid

side-by-side in the same right-of-way. Together these lines comprise

332 pipeline miles traversing the states of Maine, New Hampshire, and

Vermont. The systems enters Canada near Highwater, Quebec. The Portland

system has a tanker unloading terminal and tank farm at South Portland,

Maine.

III. Information Available to the Public

The Federal Register Notice, ``Pipeline Safety: Request for System

Integrity Inspection Pilot Program Applications'' describes the SII

approach that will be evaluated during the Pilot Program. In addition,

OPS provides current information on the SII Pilot Program through a web

site that can be reached via the OPS home page at http://ops.dot.gov.

This web site contains descriptive information about the SII Pilot

Program, frequently asked questions and answers, and access to program-

related documents. OPS will announce its selections of SII Pilot

Program participants through the web site. After selection, information

on a company's performance will be available through this site. The SII

web site also supports OPS's on-going communication and outreach

efforts by providing an opportunity for the public to communicate

directly to OPS using the ``Feedback'' feature on the web site. OPS

welcomes comments and input throughout the SII Pilot Program.

Issued in Washington, DC, on December 7, 1999.

Stacey L. Gerard,

Director, Policy, Regulations and Training.

Appendix A--Internal Audit Program Review

An essential element of the SII Pilot Program approach is the

operator's internal program for conducting assessments to ensure

compliance with pipeline safety regulations. During the SII Pilot

Program, standard inspections for compliance with the Federal

pipeline safety regulations will not be conducted on the operator's

system. Instead, the operator must conduct regular internal audits

on its system to ensure compliance with applicable regulatory

requirements. OPS will then verify the operator's internal audits

during the annual SII Team reviews.

For this approach to be successful, it is imperative that the

operator have a formal, comprehensive, and effective internal audit

program. After an operator is accepted into the SII Pilot Program,

the SII Team will

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review its internal audit program to confirm that it ensures

compliance with the pipeline safety regulations. During this review,

the SII Team will examine the company's management processes for

conducting and documenting internal audits, and will check records

and facilities to confirm that the program is effective.

This appendix describes the key elements of the SII Team's

internal audit program review. It is divided into three sections.

The first section deals with review of the internal audit program

and processes; the second part discusses field verification of

performance; and the final section describes the summary report

documenting the internal audit program review.

A.1 Internal Audit Program Review

Prior to conducting the on-site internal audit review, the SII

Team members will review the operator's safety and environmental

performance history, its compliance record, and the key facility and

pipeline system design features. This will assure that the Team

members are well-informed when they arrive at the company's offices

so the review can quickly focus on the internal audit program and

its documentation. This advance preparation will include:

Reviewing recent compliance history as documented in

Safety-Related Condition Reports, Annual Reports (for gas

operators), compliance actions, documentation and findings from

recent OPS or interstate agent inspections, and any accident/

incident documentation.

Reviewing the Federal Emergency Management Agency

(FEMA) hazard index and other information sources to identify

geographic or environmental areas of special concern.

Reviewing the results of the joint Operations and

Maintenance Manual Review, and how the company has addressed any

findings from this review.

Obtaining information from OPS inspectors, interstate

agents from affected states, Regional Directors, and OPS

Headquarters Program Directors on:

Company program strengths and innovative approaches

to internal evaluation;

Use of technology to support internal evaluation;

Recurring areas of concern identified during

inspections and receptiveness to OPS/interstate agent

recommendations to address these issues;

Lessons learned and actions taken following leaks,

incidents, or other abnormal operational events; and

State, local, or regional issues, and any public

complaints.

The on-site review of the operator's internal audit program will

involve an examination of the company's internal audit program

documentation and records, as well as interviews with key management

personnel responsible for implementation of the process. While the

specific SII Team review activities will be tailored for the

company's management system and tools, the major activities are

expected to include:

Reviewing formal documentation of the operator's

internal audit program. This includes the policies, procedures,

guidelines, and manuals that describe how the company conducts its

program. In examining this documentation, the SII Team will look for

the following elements:

A description of a comprehensive process assuring

the company critically examines the operations for compliance with

Federal pipeline safety regulations. This process should also

include:

Conducting internal audits,

Documenting and communicating internal audit findings,

Defining corrective actions to address audit findings,

Reviewing, approving, and authorizing corrective

actions to address findings,

Tracking and communicating the status of corrective

actions,

Ensuring timely and successful completion of corrective

actions, and closing out original audit findings,

Documenting and communicating internal audit results to

appropriate company management and personnel,

Establishing the schedule by which systems or portions

of systems are to be audited (based on risk, past performance, and

previous audit results),

Obtaining regulatory interpretation on potential

compliance issues,

Ensuring that new regulatory requirements are

implemented appropriately and consistently, and

Developing and updating the company's internal audit

program documentation and procedures.

A delineation of the roles, responsibilities, and

authority for each of these internal audit activities.

Training for the company's audit personnel.

A schedule identifying which systems (or portions of

systems) will be audited in the near-term, and the frequency at

which all systems are evaluated for regulatory compliance.

A description of the internal audit records and

documentation that are prepared, and their management review and

retention requirements.

A management review process that periodically

evaluates the suitability, adequacy, and effectiveness of the

company's internal auditing process, and the need for improvements

to the internal auditing policies, process, or procedures.

Performance measures used by the company to

understand, evaluate, and communicate their regulatory compliance

status, and the effectiveness of their internal audit program.

Interviewing key personnel involved in implementing the

operator's internal audit process, including the managers

responsible for the internal audit program as well as personnel who

actually perform internal audits. The purpose of these discussions

is to understand how the operator actually implements the internal

audit process described in the company's program documentation.

Meeting with company management to understand the level

of management support and awareness of the internal audit process.

These discussions will also address how the results of the audits

are communicated and used in the company.

Reviewing representative records documenting the

internal audit process, such as:

Completed checklists,

Compliance tracking software output,

Internal audit reports,

Management summary reports,

Corrective action tracking database output,

Corrective action status reports,

Transmittal letters communicating findings and

action items to appropriate personnel, and

Company reports documenting management review of the

internal audit process and recommended improvements.

Reviewing the results of internal company evaluations

of the effectiveness of its internal audit process. This will help

the SII Team understand how the company has evolved and improved its

internal audit program.

Exhibit A of the Federal Register Notice announcing the SII

Pilot Program (63 FR 68819) delineates some key internal audit

process features that the SII Team will be considering in conducting

the activities listed above.

A.2 Internal Audit Field Validation

After the review of the operator's internal audit program,

processes, and documentation, the SII Team will conduct field

validation checks. These validation checks will confirm that the

operator is in compliance, and that the operator's internal audit

program has been effective in identifying and correcting any

noncompliance situations. These field validation checks will serve

to further verify the effective implementation of the internal audit

process.

The selection of field inspection sites will consider the

operator's internal audit findings and exceptions, system

performance data, and accident/incident information. Where possible,

the SII Team will perform an integrated review of information from a

variety of sources (e.g., internal inspection results, close

interval surveys, leak history, and other observed conditions) in

selecting field validation check sites. Portions of the system that

are crucial for public and environmental protection and operations

reliability will be given special emphasis by OPS in selecting field

validation sites. In addition, OPS has also identified several

specific areas that will be given high priority in field validation

site selection:

Pipe in, across, or over bridges, streams, national

parks, wild and scenic rivers, cultural areas, populated areas,

wetlands, environmentally sensitive areas, large reservoirs and

aquifers with water for human consumption, high hazard and high

consequence areas (as identified in FEMA reports);

Pipe at supports;

Locations with marginal cathodic potential readings,

including those identified during close interval surveys, or areas

where disbonded coating is suspect;

Right-of-way locations where there may be localized

issues or areas of unique interest identified in patrolling records;

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Locations with anomalous or unusual SCADA system

output;

Locations with ongoing operation/maintenance (e.g., re-

coating, lowering in-service lines, or pipe replacement activities);

Rehabilitation projects, condition of rehabilitated

pipe and coatings;

Class location change sites; and

Overpressure device settings.

During the field validation checks, the SII Team will examine

records, equipment used to transport and treat the product, and

other evidence to confirm compliance. The Team will also interview

selected field personnel to give the Team a practical perspective

from which to review field records and other evidence. These

discussions will also help the SII Team understand how well the

company's internal audit process is institutionalized, and the

operator's commitment to compliance.

A.3 Summary Report

After the SII Team has completed the internal audit program

review and the field validation checks, the Team will prepare a

summary report. This summary report will contain the SII Team's

observations on the operator's internal audit program and processes,

as well as on the effectiveness of this program in achieving

compliance. The report will document the positive features of the

company's internal audit program and any areas that need

improvement. If the SII Team and the operator have agreed upon

specific internal audit programmatic improvements that must be made,

these improvements will be articulated in the report, as well as a

schedule for their completion. If any compliance issues are

discovered during the review, the resolution of those issues will be

included in this report.

[FR Doc. 99-32203 Filed 12-10-99; 8:45 am]

BILLING CODE 4910-60-P