In a Nutshell:

The MEGA Rule in the U.S. is approaching its initial release in 2019. The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) has worked for a number of years to construct the MEGA Rule for natural gas transmission and gathering pipelines. The MEGA Rule is defined by the large breadth of changes it will bring to pipeline regulation at a significant cost to the industry1. The three elements serving as the basis for the MEGA Rule are: 1. Congressional Mandates Resulting from National Transportation Safety Board (NTSB) Recommendations. 2. Improvements to Integrity Management Practices. 3. Incorporation of Gathering Pipelines into Pipeline Regulation.

We are fortunate enough to know a large number of pipeline experts in the U.S. pipeline industry. Mr. Dave Johnson of Energy Transfer and Mr. Dan Cote, retired from NiSource, are two of those distinguished individuals. Bryce Brown of the ROSEN Group had the opportunity to sit down with them to ask a few questions about the MEGA Rule. Here are their answers.

BROWN: Can you briefly tell us what effect the MEGA Rule will have on operators?

JOHNSON: Overall, it will have a significant impact, specifically in the requirements for materials verification, MAOP reconfirmation, and the integration and management of data/records. These are the areas that need to be understood and interpreted correctly by all of the stakeholders from the start. Data and records integration and management has been generally required of us. However, particularly for larger operators, the amount and complexity of the data and the heightened expectations and demands regarding data integration, analysis and use probably outstrip the abilities of simple spreadsheet tools and will require more sophisticated and robust systems.

COTE: In my view, the MEGA Rule will require a fundamental rethinking of the way operators approach transmission integrity management going forward, beginning with a reassessment of many of their tactical and operational Integrity Management and Compliance execution processes, which are likely to include:

  • How to comply with the elimination of the grandfather rule in establishing Maximum Allowable Operating Pressure (MAOP) on grandfathered facilities that operate at a pressure greater than 30% of Specified Minimum Yield Strength (SMYS).
  • How to comply with new material verification requirements, particularly as they apply to the verification of physical and operational characteristics of their older pipelines.
  • The need for retesting or supplemental testing of existing post-grandfathered lines, depending on the quality and completeness of the existing pressure testing data they already have.
  • Expanding their risk-assessment processes to include areas in non-high-consequence areas and possibly moderate-consequence areas.
  • Potentially changing the records required to be retained for the life of the facility that are kept on new transmission facilities.
  • Rethinking the way pipelines are repaired in both high-consequence areas and non-high-consequence areas based on the new requirements, with a particular focus on corrosion and external stress risks.
  • New standards for responding to extreme weather events and, potentially, to seismic activity.
  • The need for rigorous and well-documented management of change processes.
  • A general increase in the focus and rigor of integrity assessments required to be carried out on other “similar facilities” following the discovery of an elevated risk, particularly if that risk was discovered through leakage or a more serious incident on a pipeline segment.
  • This rule will produce the most significant change for gathering line regulators, as their industry segment will fall under PHMSA jurisdiction for the first time.

BROWN: What is the number one takeaway from the MEGA Rule and why?

JOHNSON: There is an increased expectation – or again, demand – that we do better. Every year, we have more pipelines delivering more energy located in closer proximity to more people. The mathematics of risk show that we have to decrease failure likelihoods to even maintain the same level of risk, as the potential consequences continually increase. So, we have to be better. That takes good decisions based upon deeper knowledge derived from adequate data and information.

The amount of detail to be gathered on our regulated pipeline systems is growing. We have been addressing pipeline integrity for many decades already. We started with the collective wisdom embodied in the ASME pipeline standards, which have evolved into B31.8 for gas and B31.4 for hazardous liquid pipelines. On the gas side, B31.8 was largely transformed into regulations in the early 1970s per the Pipeline Safety Act of 1968. The next major stride was the introduction of Integrity Management Programs for High Consequence Areas in the early 2000s. This has brought us to where we are today, collecting much more data about our pipelines’ integrity and turning the data into information for decision-making purposes to improve safe operation and move towards “zero incidents. “The MEGA Rule is intended to be the next step up, adding even more data to be collected, integrated, housed and analyzed to provide us with timely information for the next decisions to be made. This is bringing us into more discussions on Big Data, AI, Machine Learning, Data Science, Data Analytics, Data Lakes, etc. and will likely require us to add additional resources to our staffs that will be our internal Subject Matter Experts (SMEs) on this (these) subject(s).

COTE: I believe that the number one strategic takeaway from this is the continuing regulatory transition from prescriptive compliance-based regulations to regulations that place much more focus on the individual operator’s responsibility to carry out effective integrity management, even if that means thinking outside of the four corners of specific regulations. In my view, this is being driven by an overall decline in society’s tolerance of pipeline incidents, reflected by the politicians who represent society, and by a lack of acceptance on the part of the general public to quietly accept the historic risks associated with our industry.

BROWN: Where do service providers and operators need to put their focus?

JOHNSON: We have been working closely with many service providers over the past 15 years, since we have Integrity Management Programs for High Consequence Areas. Sometimes we do not communicate well enough with each other. We all are caught up in our day-to-day job activities, with pressure to move on to the next project or task at hand. Under the MEGA Rule and in this upcoming regulatory environment, further improving pipeline safety and moving towards zero incidents, our communications are going to need to be more frequent, open and deep-diving than ever before. This is not only good for our collective businesses, but I see it as required to be a primary focus moving into the future. We already have vehicles and organizations that can help us facilitate these communications and inquiries. These include research organizations such as PRCI and GTI, various joint industry projects (JIPs), trade associations such as INGAA, API and AGA, and other organizations. As a colleague of mine recently said, when we walk into the room, we must learn to take off our individual company hats and put on our industry hat. In short, the focus needs to be on clearly identifying technological needs, securing the resources needed and then collaboratively applying the resources to meet the identified needs.

COTE: Clearly, the focus of the industry has to be on older lines where the quality of the data being used to assess the safety and integrity of the pipeline segments may not be as good as it is for today’s lines, or where construction techniques were not as sophisticated as they are today compared to when the line was installed. Further, the focus should not be exclusively on pre-code or grandfathered lines but on any facility, almost regardless of age, where the data that impacts operational performance is not thorough and complete. Lastly, finding better methods to assess these lines, particularly those lines that are assessed through a direct assessment rather than ILI process, is also critical in reducing industry risk.

BROWN: What role do service providers, regulators and operators play in regard to the MEGA Rule?

JOHNSON: Well, in some cases we are almost joined at the hip. Seriously, we are connected when you consider some of the joint efforts that already exist. Examples include the Advance Notice of Proposed Rulemaking and Notice of Proposed Rulemaking comment process, the Gas and Liquid Pipeline Advisory Committees (GPAC and LPAC), and the more recently added Voluntary Information-sharing System (VIS) Committee. These are all led by PHMSA and include various pipeline safety stakeholders: operators, technology and service providers, public advocates, standards organizations, academia, and state and federal regulators. This phrase – pipeline safety stakeholders – is something we all need to get used to. Collectively, we are working closer together, and the MEGA Rule will again ask us to get better at this. The need for a common understanding of objectives, supported by the necessary SMEs from each of these stakeholders, will drive us into the future for success.

I think an important factor in achieving what may be termed “success” is setting expectations. If different stakeholder groups each have their own expectations, some of which may be realistic and achievable and some perhaps not, rather than share expectations and objectives, then objectives will be subjective, expectations will not be met and at least some will characterize the effort as a failure. Communication and collaboration are key.

COTE: In my opinion, all three of those groups need to shed what appears to be the conventional view of their historic roles – e.g. that the regulator’s job is enforcing the regulations, a service provider’s role is to give customers what they asked for and an operator’s role is meeting the requirements of code – and transition to a new way of thinking about how to support ongoing incremental pipeline safety beyond the requirements of code. That new way of thinking should start with the initial premise from all parties that the industry cannot continue to have major pipeline failures and that all three groups have a responsibility to support the effort to achieve zero incidents. What that might look like at a practical level is that regulators need to think about and make recommendations/suggestions outside of the specific boundaries of code that promote pipeline safety, not just compliance. Further, it means that service providers need to think beyond what their customers ask them for and think about how to provide services to truly improve pipeline safety for that individual operator, which will ultimately translate to the industry. And it means that operators need to think about their systems and how to operate and manage them based on the societal expectation that there cannot be incidences, and over time transition from risk remediation to risk elimination and prevention.

BROWN: Please provide your expert response to the following question: “Does being compliant mean that you are also safe?”

JOHNSON: The short answer is “absolutely not.” Compliance, in the generally used sense, means meeting a particular set of laws, rules and regulations. What we must comply with are the “minimum federal safety standards” established for pipelines. Note that the title contains the word “minimum.” The implication is that, if operators comply with these regulations, most pipelines should be relatively safe, i.e. have a low likelihood of failure. However, regulations constantly evolve as issues are identified and technology, knowledge and capabilities improve. Regulations are never perfect.

It is also impossible to construct a set of regulations that cover every possible condition and circumstance and prescribe a remedy. The regulations and standards provide a base from which to work and generally identify the sorts of topics that need to be considered. Look, for example, at the titles of the subparts of Part 192. They include materials, design, joining and welding, construction testing, corrosion control, operations, maintenance, integrity management and operator qualification. There are many requirements in each of these subparts. But operators need to try to understand how they are all interrelated and how they are impacted by the local conditions and environment along their pipelines. This is a fundamental difference between knowing what is needed to comply and knowing your pipeline and its operations. It is totally impractical to tell operators they must do everything possible to keep their pipelines safe and to do those things everywhere and all the time. Getting to know a pipeline system, its quirks, nuances, peculiarities, potentially troublesome locations and what makes them troublesome, etc. takes time and experience. Once acquired, that knowledge can be used very productively to enhance safety.

We must therefore stay inquisitive, somewhat idealistic regarding our duty to prevent our pipelines from harming others, realistic about our abilities, and diligent about sharing our knowledge and experience with those to whom we are ultimately handing over our responsibilities.

COTE: Pipeline safety and compliance with regulations are two fundamentally different concepts that are likely to produce very different outcomes over time. Compliance is the expectation that if operators meet the minimum standards for pipeline design, construction and operations, etc. as defined in CFR 49 Parts 190 to 199, then they are compliant with the regulations and thus safe from censure. That said, the reality is that there have been any number of situations in our industry where we as operators were fully compliant with the minimum standards of federal code and nonetheless had very serious incidents that caused great concern in the eyes of the public and in the judgment of the regulators. How often have we heard following a serious incident in the industry that “we were fully compliant with all pipeline safety requirements?” How often did that statement appear to protect that operator from significant litigation or even something worse? Effective pipeline safety execution means achieving the vision that operators will not have serious incidents that place the public or their property at risk.

Finally, in my view, industry history has demonstrated clearly that compliance is simply not enough, and any operators who are not striving every day to reduce their system risk and improve their public safety profile are placing themselves in constant jeopardy, which will almost inevitably catch up with them in time.

The historic mathematics of risk in our industry has changed, and today society often severely punishes those operators who have major incidents. Therefore, the only conclusion one can reach from that is that for the pipeline industry the old adage that an ounce of prevention is worth a pound of cure is no longer valid. In my view, the new paradigm is that effective prevention can eliminate the need for an almost limitless amount of cure. And unfortunately, there are examples we have seen in recent history that underscore this new reality, including the need for the creation of this MEGA Rule.

In conclusion, the MEGA Rule will inevitably touch all parts of our industry. The longevity, performance and safe operation of our industry assets now depend on what we choose to do in the face of change. We must come together for the safety of people and the environment to achieve zero incidents – with better, smarter technology and systems that empower confidence and progress and allow for smart decision-making.

About the Experts

David Johnson is Director for Pipeline Safety at Energy Transfer. David has a 45-plus-year career in the energy industry, with almost 40 of those years related to the operation, safety and integrity of natural gas transmission pipelines. He has been involved in materials specification and testing, failure investigations, welding, coatings and corrosion control, testing and inspection, regulatory compliance, and integrity management program development and implementation. He has worked on the development of several regulations, including the integrity management, operator qualification and control room management initiatives as well as the current “MEGA Rule,” and he has given several presentations at advisory committee and other public meetings on pipeline safety. He has also been heavily involved in pipeline industry research and development at both PRCI and GTI, the ASME B31.8 code committee, the SGA transmission programs, and he previously served as the chair of the INGAA Pipeline Safety Committee. A graduate from Purdue University with a Bachelor of Science and a Ph. D. in Materials Science and Metallurgical Engineering, he is a Professional Engineer in Texas.

Dan Cote is an independent consultant, retired from NiSource. Dan has 46 years of progressive responsibilities in both field and executive positions in the natural gas industry with demonstrated success in developing and implementing solutions to multidimensional complex operational problems. He has extensive knowledge of all functional areas of gas utility operations, including Gas Operations, Damage Prevention, Sales, Customer Service, including customer equipment installation and repair, Public Relations, Labor Relations and Executive Administration. He has comprehensive knowledge of federal and state codes, Pipeline Safety and Damage Prevention compliance. Consultant, Instructor and/or participant in workshops by state and federal safety and regulatory agencies including U.S. Department of Transportation, Northeast Gas Association Gas Operations School, Appalachian Gas Measurement Short Course, Virginia State Corporation Commission, Maine Public Utilities Commission and other regulatory agencies. He has authored and presented industry papers at AGA, NGA, SGA, MEA, VGOA and Virginia Pipeline Safety Conferences on a variety of operational subjects. Dan has testified in State regulatory commission proceedings in eight states on Damage Prevention, Natural Gas Operations and Pipeline Safety & Compliance Issues/Strategy (Maine, New Hampshire, Massachusetts, Pennsylvania, Maryland, Virginia, Kentucky and Indiana). He has aggressively promoted legislation resulting in passage of a number of related laws. He was Chairman of the Board of Directors, New England Dig Safe 1991 to 2006. In 1995, he was appointed by the Governor to the Maine Propane & Natural Gas Licensing Board. He has also led the Northeast Gas Association effort to develop a “New England Standard” Operator Qualification Program in 2000 to comply with the requirements of CFR 49 Part 192, Sub-Part N, and Operator Qualification of Pipeline Personnel. He chaired the Northeast Gas Association Operations Management Committee from 2002 to 2004. He was recently appointed by PHMSA to the VIS (Voluntary Information-sharing System) Committee in 2016. Dan graduated from the University of Southern Maine in 1972.

1 “The Pipeline and Hazardous Materials Safety Administration (PHMSA) has proposed Rulemaking to revise the Pipeline Safety Regulations (PSR) applicable to the safety of onshore gas transmission and gathering pipelines, via Agency Docket Number: PHMSA-2011-0023. The breadth of changes to PSR lead to the connotation of ‘mega’ to the Rulemaking. The Rulemaking will focus on three elements in three phases. The first is focused on Congressional Mandates from the Pipeline Safety Act of 2011. The Second is focused on the National Transportation Safety Board (NTSB) recommendations for improvements to Pipeline Integrity Management (PIM) and issues related to non-PIM. And the Third is focused on implementing Integrity Management on Gas Gathering pipelines. All changes to regulations will be included in Code of Federal Regulation (CFR) parts: 49 CFR 191 and 49 CFR 192.”