North American Oil & Gas Pipelines

OCT 2018

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

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Page 15 of 43

16 North American Oil & Gas Pipelines | OCTOBER 2 018 T his fall, change is in the air. The Environmental Protection Agen- cy (EPA) is rolling back the prior administration's regulations to reduce greenhouse gas (GHG) emissions. The Federal Energy Regulatory Commission (FERC) lost a Republican Commissioner, leaving an evenly split commission to address applications for new natural gas pipelines, and, together with the Pipe- line and Hazardous Materials Safety Administration (PHMSA), announced a new memorandum of understanding (MOU) to streamline the regulatory re- view process for new liquefied natural gas (LNG) terminals and relieve the cur- rent regulatory logjam. Clean Power Plan Replacement In August, EPA proposed the Afford- able Clean Energy (ACE) rule to establish emission guidelines for states to address greenhouse gas (GHG) emissions from existing coal-fired generators. The ACE rule would replace the Obama admin- istration's broader and more aggressive Clean Power Plan (CPP), which was stayed by the Supreme Court and never went into effect. The CPP provided each state with a goal for reducing existing power plant emissions of carbon dioxide (CO2), goals that could only be met by substituting combined cycle gas generation or re- newable generation for coal-fired plants. States were required to begin reducing emissions by 2022, so that by 2030, Unit- ed States' power plant emissions of CO2 would be 32 percent lower than in 2005. The ACE rule is not as expansive or ag- gressive as the CPP. ACE seeks to improve heat rate efficiency for coal-fired (not gas-fired) facilities and would not force an accelerated shift to renewable gen- eration. ACE identifies a list of candidate technologies (each with a relatively low price tag) that could be used to improve a generator's heat rate. [Heat rate mea- sures the amount of energy required to generate electricity. If a unit's heat rate is improved, it becomes more efficient, con- sumes less fuel, and therefore emits less pollutants.] Each state would have three years to submit an implementation plan. The ACE rule represents an attempt by the administration to throw a "life- line" to the coal industry and coal-fired generators. Currently, an electric genera- tor would have to apply for a permit to upgrade its facility if emissions would increase over a year. In most cases, that would be cost-prohibitive for a coal gen- erator, and the upgrade would not be made. But ACE would allow the coal generator to avoid that permit, if (after the upgrade) emissions would not in- crease on an hourly basis. From the coal generator's perspective, a modest invest- ment might make sense and could result in increased dispatches. Environmental- ists however decry the result, because in- creased coal-generation dispatches would translate into increased GHG emissions. But the truth is that, in response to various economic factors, including the availability of abundant and inexpen- sive supplies of natural gas and increas- ing amounts of renewable energy, the electric market has been moving away from coal generation for some time. The CPP would simply have accelerated the market trends. The ACE rule represents a victory for the coal industry, but its impact is likely to be short-lived. In the end, market forces, not regulation, will ultimately prevail. "More regulation is not the best answer to every problem." — Jerome Powell Methane Rule Rollback Last month, the EPA proposed to roll- back a 2016 rule designed to combat cli- mate change – i.e., regulations requiring the testing and repairing methane leaks in production and compression opera- tions. The leaks (what the EPA calls "fu- gitive emissions") can occur at a well site or compressor station when connections are not properly fitted or when seals and gaskets start to deteriorate. The 2016 rule requires owners/operators develop and implement a fugitive emissions monitor- ing plan at oil and natural gas well sites or at compressor stations, setting sched- ule for monitoring and for repairing any leaking components found. The pro- posed amendments would modify the schedule for monitoring and repairing fugitive emissions, including only an- nual monitoring on the Alaskan North Slope, where winter weather makes it difficult to conduct inspections. Finally, the proposed amendments would allow energy companies located in states with methane standards — there are six states — to follow the state standards instead of the EPA standards. When adopting the 2016 rule, the EPA estimated that oil and gas com- panies would have to pay about $530 million to comply with the by 2016 rule. Most of those compliance costs would be eliminated by the proposed rule, which would save the oil and gas industry up to $75 million a year, for a total of $484 million during the 2019- 25 period (using a 3 percent discount rate). In order to obtain these industry savings, however, some emission re- ductions would not occur. Tension at FERC over New Gas Pipeline Authorization In August, Commissioner Robert Powelson resigned, leaving FERC with just four members, two Republicans and two Democrats. Before his departure, however, FERC issued several orders involving NGA Section 7(c) certificate WA S H I N G T O N WA T C H By Steve Weiler A Look at New Rules Set to Impact the Pipeline Industry Changes Coming

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