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Spill Factors: A Statistical Analysis of the Effectiveness of Pipeline Regulations

For decades, pipelines have been built in the United States without much controversy. The result: 2.5 million miles of pipelines now traverse our nation to deliver natural gas, oil and other hazardous liquids to their destinations.1 Aside from well-publicized ruptures like the San Bruno, California natural gas explosion that took eight lives in 2010, the Kalamazoo Enbridge tar sands spill that occurred in the same year, and the recent Mayflower, Arkansas, spill that coated suburban play sets in oil, it would, at first glance, appear that our nation’s pipelines are extremely safe, that spills are a rarity. However, a closer look reveals that spills are all too common—in 2011 alone there were over 1,000 spills from pipelines.3 Such a high number of spills year after year and the high consequence locations in which many of these spills occur have caused pipeline safety watchdogs and the National Transportation Safety Board to take a hard look at pipeline regulations and push for higher standards.4 The overwhelming implication in their reports is that federal regulations are not enough to reduce pipeline risk.5

But the idea that pipelines are sufficiently regulated is one that the pipeline industry works hard to legitimize—according to the Association of Oil Pipelines, “Liquid pipelines operate under many layers of protection. Federal and state laws, rules and regulations, regulators and operators all work to keep pipelines safe.”2 While pipeline companies tout their goals for zero spills and claim that regulations are more than sufficient, it is clear that in reality; much more can be done to improve the safety of pipelines.

Although the connection between lack of regulation and spills may seem obvious, there are to date no studies published that use statistical analysis to back up the claim that greater regulation would in fact be able to significantly reduce pipeline spills and increase pipeline safety. This is important for a couple of reasons. Before the Pipeline and Hazardous Materials Safety Administration—the federal body that regulates pipelines—can pass additional regulations on pipeline safety, the agency must conduct a cost-benefit analysis to prove that the benefit of additional regulations would outweigh its costs.6 Aside from this being a unique requirement for a regulation affecting “health, safety and environmental fields,”7 the burden that these requirements place on PHMSA essentially makes it harder to increase safety standards on pipelines than it is to actually put a pipeline in the ground. States also have the power to put in place additional regulations on intrastate pipelines and place requirements on the routing and siting of all pipelines within their borders. Between burdens that prevent putting more regulations in place and a general attitude against over regulating the industry, a solid statistical analysis would be helpful in demonstrating that a higher level of regulation is necessary to improve the safety of pipelines.

I decided to use the requirement that I write a senior thesis in my last semester as an undergrad as an opportunity to address this issue by conducting a study that examined pipeline regulations and their effectiveness in reducing the spill rates of pipelines. Pipeline safety and regulation has been a primary issue in the fight against the Keystone XL. We have demanded studies into the corrosiveness of tarsands as opposed to typical crude oil and we worked tirelessly to persuade our state officials to hold a special session to put regulations on oil pipelines in place. And throughout the fight, we have demanded that Nebraska use its authority to route the pipeline away from the Ogallala Aquifer.  Meanwhile, TransCanada has promised that this pipeline will be the safest ever built – after all, they agreed to “57 special safety conditions,” and since the start of the fight, TransCanada has tried to confuse public officials and citizens about the role that states can play in regulating pipelines. Ultimately, I conducted this study with the hope that the results would support the arguments that we have been making for years, however, I knew that most of the time these types of studies don’t yield significant results. What I found had more implications than I had hoped for.

Results and Implications of the Study

 The responsibility for pipeline spills falls both on the regulator and the regulated, the government agencies and pipeline operators. I argue that the reason spills occur in such large numbers is two-fold: (1) there are not enough regulations, or oversight of existing regulations, guarding the behavior of pipeline operators, and (2) this lack of regulation and accountability leads pipeline operators to become “rational polluters” who avoid putting in place proper measures to prevent spills from occurring. But perhaps the greatest problem with pipeline regulations in the United States is that the real regulators of thousands of miles of pipelines have become those who are supposed to be regulated—the pipeline operators themselves.

There is a more detailed analysis of the regulatory structure surrounding pipelines below, but here are the main points that will be useful to know moving forward:

  • PHMSA (Pipeline & Hazardous Materials Safety Administration) is the federal body in charge of regulating and enforcing regulations on pipelines. According to PHMSA’s own mandate, federal pipeline safety standards are “written as the minimum performance standards, setting the level of safety to be attained and allowing the pipeline operators discretion in achieving that level.”8
  • Not all pipelines are regulated by PHMSA—for example, a class of pipelines called “gathering lines,” which are pipelines that take the product from its source of production to its next step, are not federally regulated.9
  • States can develop their own pipeline safety program for intrastate pipelines (pipelines that begin and end within the state)—these regulations can be simple adoption of PHMSA’s regulations, or they can go “above and beyond” the federal code of regulations. This means that intrastate pipelines may be more heavily regulated than interstate pipelines.10
    • The response of states in utilizing this authority has been uneven: Forty-eight states have had their natural gas safety regulations on intrastate lines certified by PHMSA, while only sixteen have done so for intrastate hazardous liquid pipelines. Oil pipelines are included in the category of hazardous liquid pipelines, which includes all liquid petroleum products and anhydrous ammonia. The vast majority of spills of hazardous liquid were crude oil products.11
    • While forty-eight states have become certified to regulate intrastate natural gas pipelines, only forty-four states have placed additional standards on natural gas lines, ranging in number from just one additional step to seventy-eight additional regulations. While sixteen states have become certified for intrastate hazardous liquid lines, only six states have put in place additional regulations, and the maximum number of regulations that go above federal standards for hazardous liquid lines in any state is fourteen.12
  • The enforcement of violations of the code of federal regulations on pipelines is not robust. While it is possible for pipeline operators to be fined up to “$200,000 per violation per day” and various lengths of imprisonment depending on the violation, records of fines administered and collected by PHMSA show that “most of the pipeline agency’s fines do not exceed $25,000.”13
  • PHMSA’s regulations primarily focus on structural aspects of the pipeline, not on the safe routing of pipelines. Pipeline operators do not have to receive a permit from PHMSA unless there is a specific regulation that the operator wants to be exempted from. Implicitly then, PHMSA’s strategy is not to avoid risks but to try to mitigate them through engineering requirements that hopefully are sound enough to prevent spills from occurring. Natural gas pipelines are subject to federal routing requirements and permits through the Federal Energy Regulatory Commission (FERC).14

How the Study was Conducted

The Political Science Department of Nebraska Wesleyan University requires its majors to use multiple regression statistical analysis in order to create new knowledge on the research questions we choose to pursue. Multiple regression allows the researcher to predict the outcome of one variable on the basis of several other variables that could play a role in determining the dependent variable’s value. So, my study looked at what factors (independent variables) are significant in determining the spill rate (dependent variable) in a state. The variables I included would tell me if the following would have an impact on the spill rate in a state in 2011, the year of analysis:

  • If the pipeline was exposed above ground
  • If the pipeline was located in or near water
  • The type of entity responsible for the pipeline, public or private
  • Proportion of hazardous liquid pipelines in a state (would tell me if hazardous liquid pipelines are more likely to spill)
  • Violation deterrents (would tell me if current penalties and fines are effective at reducing the spill rate):
    • The rate of dollars collected out of what was assessed from penalties from 2001-2010
    • The rate of penalties collected out of what was assessed from 2001-2010
  • Rate of violations corrected from 2001-2010 (would tell me if the rate of corrections actually made by pipeline operators had a significant impact on reducing the spill rate)
  • Regulations:
    • If the pipeline was regulated by PHMSA (would tell me if federal regulations have an impact on reducing spill rates)
    • If a state had a pipeline safety program certified by PHMSA on interstate/intrastate natural gas (would tell me if PHMSA certified state regulations on natural gas lines have an impact on reducing the spill rate)
    • If a state had a pipeline safety program certified by PHMSA on interstate/intrastate hazardous liquid (would tell me if PHMSA certified state regulations on hazardous liquid lines have an impact on reducing the spill rate)

The results shed an important light on pipeline safety and what steps public officials can take to reduce the risk pipelines pose to the public. Nearly fifty percent of a state’s spill rate can be explained by the percentage of the state’s pipelines that are hazardous liquid lines, if they have PHMSA certified regulations on intrastate natural gas pipelines, and if the pipelines were located in or near water.

Implications of Significant Variables

The variable that has the greatest impact on a state’s rate of pipeline spills shows that if a pipeline is located in water, then it is more likely to spill. This result was unanticipated but has very important implications for the routing of pipelines. Water is an inherently valuable resource as it gives life to everything on this planet. In the debate over the Keystone XL pipeline, TransCanada has argued that they can safely route a pipeline through water by putting in place additional safety measures. However, these results show that regardless of additional safety measures, pipelines are still more likely to spill if they are in water. This has significant implications for the current route of the Keystone XL pipeline through Nebraska, as much of it is routed through the Ogallala Aquifer. According to my results, it would be safer to route the pipeline around the Aquifer not only to reduce the damage a spill would have, but also to reduce the risk of a spill happening at all. While this is an idea that pipeline opponents have been arguing in favor of for years, the results of this study provide statistical evidence to support that argument. States should use this information and utilize it when they formulate routing requirements.

Whether or not a state has in place regulations on intrastate natural gas pipelines has the second greatest impact on the spill rate in a state. Simply put, if a state has regulations, then spill rates are lower. Because so many states have a certified program for intrastate natural gas pipelines, I conducted a second regression analysis to narrow this scope and find out if the level of regulations (not just their simple existence) also has an impact on the spill rate. The results showed that a higher number of regulations did have a significant impact on reducing the spill rate. This result gives further evidence supporting that more regulation leads to fewer spills.

If a state has a higher proportion of pipelines pumping hazardous liquids, its spill rate will be higher. This result demonstrates that hazardous liquid pipelines are more likely to spill than natural gas pipelines, and I think that is most likely because the regulations on hazardous liquid lines are not as effective as those on natural gas lines. I reach this conclusion from this result because 1) there are far fewer miles of hazardous liquid pipelines than there are natural gas pipelines, 2) even though hazardous liquid lines make up a smaller proportion of overall pipeline miles they still have a significant impact on increasing the spill rate and 3) hazardous liquid pipelines are not regulated nearly to the extent that natural gas pipelines are. As previously mentioned, only six states regulate intrastate hazardous liquid lines and the maximum number of regulations on hazardous liquid lines is fourteen. Other qualities of hazardous liquid lines that could make them more likely to spill include the nature of the substances they carry, as they may be more corrosive to the pipeline. Whatever the characteristics of hazardous liquids that may make them more likely to spill could be mitigated by regulations to address those issues.

Implications of Insignificant Variables

While the variables that came up as significant have telling implications for pipeline safety and pipeline regulations, those that came up as insignificant also have important consequences. Federal regulations in general do not seem to have an effect on pipeline spills when state level regulations are also taken into account—this is disheartening because it means that the resources being spent on PHMSA to regulate pipelines are not having the impact that they could. It also means that intrastate pipelines really are being more effectively regulated than interstate pipelines. However, the results of this study should not be taken to mean that we should do away with the regulatory body. Rather, PHMSA should be strengthened with increased numbers of inspectors on staff and a simplified process by which to coordinate with state regulatory agencies. It is time for federal regulators to step up their game in order to better protect the public from the hazards pipelines pose.

The rate of dollars and penalties collected from pipeline operators in the decade before 2011 is insignificant. This supports the research that argues current levels of penalties are not a great enough deterrent.  It is important to note here that this variable only takes into account the penalties and fines assessed at a federal level, it does not include fines levied by states. The insignificance of fines in reducing the spill rate means that pipeline operators need to be held more accountable. The whole theory behind penalizing operators for violations is that it will deter future violations from happening—but that theory apparently doesn’t yield its desired results. Whether the operator was a public or private entity also had no impact on the spill rate. This variable could be insignificant because the level of federal regulation is not enough to deter either type of entity from putting the proper amount of measures in place to prevent spills.

Conclusion

As the results of this study demonstrate, we do have the ability to increase pipeline safety. While we may not completely eradicate spills (even states with the highest levels of regulation still experience some spills), we could lower the number of spills that occur. This could be done through routing pipelines away from water—a task that states will have to take on when dealing with hazardous liquid pipelines and that FERC should keep in mind when approving or denying natural gas pipeline routes.

In terms of regulations, the results of this study can be read in three ways: 1) states need to utilize the authority given to them to regulate pipelines; 2) the federal government needs to increase its level of regulation; or 3) a combination of both 1 and 2. I believe that the last option is the best: states need to exercise the authority that they have to route and site pipelines and put in place additional regulations on intrastate pipelines, but the federal government also needs to put in place additional regulations. Both need to happen before our nation’s pipeline system is truly safer. Increased federal regulation would improve the spill record of interstate lines while intrastate line safety would be improved by greater state regulation. Ultimately, states are better suited to understand what they need from pipeline regulations and pipeline siting, which is why it is so important for them to utilize that authority. As it currently stands in most instances, the company has full discretion in the route it selects unless the state already has routing laws in place. It is also imperative that regulators take into consideration more than just the engineering aspect of pipeline safety so to avoid risks rather than just hope that the pipeline already in the ground doesn’t spill.

While this study used state by state analysis of pipeline regulations, the results can be applied to the international Keystone XL. The KXL carries a hazardous liquid, diluted bitumen, and is routed through the Ogallala Aquifer. As this study demonstrates, these qualities mean that the KXL will increase the spill rates of the states that it goes through, especially Nebraska as it is routed through so much water in this state. The level of federal regulation on interstate pipelines is inadequate and ineffective at reducing spill rates. That much is clear. Knowing that the level of regulation that we have now is inadequate, and choosing to accept a route that will increase the risk of a spill is negligent. Before accepting more pipelines that put the public at risk, PHMSA needs to take a serious look at the regulations they have in place and conduct a comprehensive study to determine how to be more effective at reducing spills.

 

More Detailed Background on Pipeline Regulation

Research demonstrates that regulations governing pipelines are extremely irregular and full of gaps that leave some types of pipelines totally unregulated, and most pipelines regulated at the bare minimum. 15 One of the most important distinctions made in pipeline regulations is between interstate and intrastate pipelines. Interstate lines are those that cross state borders, while intrastate pipelines begin and end within the state. 16

Interstate Pipelines

The federal government regulates interstate pipelines through the Pipeline and Hazardous Materials Safety Administration (PHMSA), a branch of the Department of Transportation. Within PHMSA, the Office of Pipeline Safety is responsible for the “regulation and oversight” of the nation’s pipelines. 17 Officially, federal pipeline safety regulations are “written as the minimum performance standards, setting the level of safety to be attained and allowing the pipeline operators discretion in achieving that level.” 18 Through its regulations, PHMSA tries to prevent what the agency has defined as “the leading causes of pipeline failure, such as corrosion, excavation damage, and equipment failure.”19 PHMSA’s regulations primarily focus on engineering, structural requirements of the pipeline, providing regulation on the “design, construction, installation, inspection, testing, operation, emergency plans and procedures, extension, replacement, and maintenance of pipeline facilities.” 20 PHMSA does not provide guidance or regulation on the siting or routing of a pipeline, and pipeline operators do not have to obtain any sort of permit through PHMSA before putting a pipeline in the ground unless they want to be exempted from one of PHMSA’s standards. 21 Because of this, there is “no federal process that guarantees consideration of the long-term environmental impact of oil pipeline routing decisions.” 22

There is an additional level of federal regulation put on natural gas lines that does not exist for hazardous liquid lines. The Federal Energy Regulatory Commission (FERC) has overseen a permitting process for new interstate natural gas pipelines since the Natural Gas Act was instated in 1938. 23 While this act was geared toward promoting fair rates in the sale of natural gas, it also gave authority to FERC to “approve the siting and abandonment of interstate natural gas pipelines and storage facilities” and “oversee environmental matters related to natural gas projects.” 24 No such process exists for hazardous liquid pipelines unless the route crosses an international border—in these situations the State Department acts like FERC in approving the route proposed by the pipeline company. 25 This additional level of oversight over natural gas pipelines that is absent from hazardous liquid pipelines begins to demonstrate a major irregularity that exists in pipeline regulations—natural gas pipelines are regulated to a much greater extent than are hazardous liquid pipelines. 26

While PHMSA does not have authority to site or route hazardous liquid pipelines around sensitive areas, in 1992 Congress directed the Secretary of Transportation to identify “High Consequence Areas” (HCAs) where a pipeline would “cross ‘waters where a substantial likelihood of commercial navigation exists,’ that are located in an area of ‘high-density population,’ or that are located in an area that is ‘unusually sensitive to environmental damage.’” 27 In HCAs, regulations on hazardous liquid lines ask for a greater level of safety. 28 Pipeline operators must have an integrity management (IM) program—a more risk-based approach that includes assessment plans, risk analysis, and leak detection when their pipelines run through an HCA, and they must also comply with increased levels of monitoring in these areas. 29 When comparing IM requirements to general requirements, it is very clear that general requirements are lacking in significant areas—for example, pipelines that are not located in HCAs are not required to assess risks, have a leak detection system, and deadlines for repair of defects are non-existent. 30 Forty-Four percent of hazardous liquid pipelines cross HCAs and are therefore subject to IM requirements. 31

States can play a role in oversight of interstate pipelines by becoming certified to conduct inspections of interstate pipelines. 32 This certification process is the product of the emphasized “partnership” that federal regulators insist exists in regulating pipelines, but in reality has led to states taking on most of the inspection responsibilities. 33 The Pipeline and Hazardous Materials Safety Administration depends on state inspectors to conduct the majority of safety inspections on pipelines—75% of the federal/state inspection workforce in 2011 was made up of state personnel. 34 The integral role states play in inspections is also evidenced by the incredibly low number of PHMSA inspectors—as of 2010, the agency employed “110 inspectors, despite being authorized for 137, to oversee 2.5 million miles of natural gas and hazardous liquid lines.” 35

The importance role that states play in inspecting pipelines should come as a comfort after discovering the poor reputation of the Office of Pipeline Safety. According to Parker, the Office of Pipeline Safety “has always had a poor record as a regulator.” 36 Time and again, the Office of Pipeline Safety and state inspectors have been criticized for their oversight and inspection of pipelines. 37 In 2000, the United States Government and Accountability Office released a report criticizing the OPS for weak enforcement and lack of cooperation with states—they had published a similar report lambasting OPS for “weak enforcement, inaccurate records, and ineffective rules” 22 years earlier. 38 Where the federal inspectors are failing, the states have not necessarily picked up the slack. Unfortunately, state budgets often do not allow for the thorough inspections needed on the nation’s pipelines, 39 which in the words of the National Transportation Safety Board, is “a matter of great concern.” 40 This lack in inspections and oversight combined with inadequate basal regulations facilitates a poor safety record.

Intrastate Pipelines

Responsibility for intrastate pipelines largely rests with the states. Through a certification program, states can take responsibility for the “regulatory, inspection, and enforcement responsibilities” on intrastate lines. 41 States can simply adopt federal regulations on interstate pipelines for intrastate lines, or they can put in place additional regulations that go “above and beyond” federal regulations. 42 This means that regulations in place on intrastate pipelines can be more stringent than regulations on interstate pipelines.

The level at which states have utilized this authority more fully demonstrates the uneven level of regulation that exists between pipelines carrying hazardous liquids and those carrying natural gas. Most states have not utilized their authority to regulate intrastate hazardous liquid pipelines. In contrast, most have put in place additional regulations on natural gas lines. In fact, forty-eight states have chosen to become certified by PHMSA for intrastate natural gas pipelines, while only sixteen states have done so for hazardous liquid lines. More telling, however, is the number of states that have imposed regulations “above and beyond” the federal code on intrastate lines. Forty-four states have placed additional standards on natural gas lines, ranging in number from just one additional step to seventy-eight additional regulations. 43 While sixteen states have become certified for intrastate hazardous liquid lines, only six states have put in place additional regulations, and the maximum number of regulations that go above federal standards for hazardous liquid lines is fourteen. 44

States also have authority to site and route pipelines, giving states the opportunity to work to ensure the safety of their land, water, and citizens by being intentional in their routing decisions. 45 Few states have taken the opportunity to route hazardous liquid pipelines, and those that have done so have very little in place. 46 example, in Michigan applicants only have to propose a route, which is then approved, and make a good faith effort to “minimize the physical impact” of their pipeline. In contrast, Minnesota has detailed criteria that pipeline operators must follow when they route pipelines, and there is a public process in place to allow for public input on several proposed routes. 47

The possibility to create additional regulations and the ability to take ownership of siting and routing pipelines are important tools that states can utilize to increase the safety of pipelines within their borders. Indeed, Stafford shows that “the additional liability imposed by state level penalties does serve to deter violators by increasing the cost of noncompliance. 48 Unfortunately, it is clear that most states have not exercised this authority on hazardous liquid lines, and have done so to an uneven extent on natural gas lines. 49 The visible discrepancy between the regulations placed on intrastate natural gas lines compared to hazardous liquid lines makes it possible to see the impact that a higher level of regulation can have on reducing the spill rate of pipelines in a state.

 

Sources:

1 Groeger, L. (2012, Nov 15). Pipelines explained: How safe are america’s 2.5 million miles of pipelines?. Retrieved from http://www.propublica.org/article/pipelines-explained-how-safe-are-americas-2.5-million-miles-of-pipelines

2  American Association of Oil Pipelines. (n.d.).Comprehensive safety laws and regulations. Retrieved from http://www.aopl.org/pdf/Comprehensive_Laws_Regs_pdf.pdf

4, 6, 14, 16, 19, 21, 22, 27, 28, 29, 30, 31, 32, 37, 45, 46, 47, 49:

Gosman, S., MacGregor, L., Tabak, G., & Woolard, J. (2012). After the marshall spill: Oil pipelines in the great lakes region. Retrieved from http://www.nwf.org/~/media/PDFs/Regional/Great-Lakes/Oil Pipelines in the Great Lakes Region Report v3.pdf?dmc=1&ts=20130314T0244415937

4, 5, 15, 37, 38:

Parker, C. M. (2004). The pipeline industry meets grief unimaginable: Congress reacts with the pipeline safety improvement act of 2001. Natural Resources Journal44, Retrieved from http://lawlibrary.unm.edu/nrj/44/1/08_parker_pipeline.pdf

4, 5, 15: National Transportation Safety Board, Office of Public Affairs. (2012). Pipeline rupture and oil spill accident caused by organizational failures and weak regulations. Retrieved from website: http://www.ntsb.gov/news/2012/120710.html

3, 11: US Coast Guard, National Response Center. (2011).Cy11.exe. Retrieved from website: http://www.nrc.uscg.mil/download.html

6, 7, Pipeline Safety Trust. (2011). Briefing paper #11: Cost benefit analysis. Retrieved from http://pstrust.org/docs/BriefingPaper11.pdf

12, 26, 34, 42, 43, 44: National Association of Pipeline Safety Representatives. (2011). Compendium of state pipeline safety requirements a& initiatives providing increased public safety levels compared to code of federal regulations. (1st ed.). Retrieved from http://www.phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Files/Pipeline/Compendium.pdf

13, 37, 40: Frosch, D., & Roberts, J. (2011, Sept. 09). Pipeline spills put safeguards under scrutiny. New York Times. Retrieved from http://www.nytimes.com/2011/09/10/business/energy-environment/agency-struggles-to-safeguard-pipeline-system.html?pagewanted=all&_r=0

35: (Quinlan, 2010).

39, 48: (Stafford, 2002: 303).

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