Articles, Alerts & Perspectives

Transportation Safety Alert

(by Boyd Stephenson and James Curry)

On October 24, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) proposing to amend the Hazardous Materials Regulations (HMR) to allow the bulk transport of liquefied natural gas (LNG) in DOT-113C120W (DOT-113) specification railcars.  PHMSA issued the NPRM in response to a petition for rulemaking filed by the Association of American Railroads (AAR).  Also, an April 10, 2019, Executive Order directed PHMSA to issue a final rule on bulk transportation of LNG by rail by May 2020.  Comments on the NPRM are due by December 23, 2019.

Over the last decade, the number of LNG facilities, and total storage and vaporization capacities have drastically increased.  And, according to PHMSA, total liquefaction capacity increased by 939% due to new LNG export terminals.  With this growth, PMHSA has recognized there may be a need for greater flexibility in the modes of transporting LNG.  While LNG is already authorized for transportation by highway and in maritime vessels, LNG may only be transported by railcar with a special permit from PHMSA or in smaller, portable tanks loaded onto a railcar.  However, other cryogenic liquids that are chemically similar to LNG are already authorized to be transported by rail under the HMR.

Currently, there is a pending special permit renewal application to transport bulk LNG in DOT-113 specification railcars using requirements identical to those proposed in the NPRM.  The comment period ended on August 7, 2019, with PHMSA receiving nearly 3,000 comments.  PHMSA has not yet acted on the special permit application.

Proposed Changes

In the NPRM, PHMSA proposes to:

• Amend the LNG entry on the Hazardous Materials Table (UN 1972, Methane, refrigerated liquid (cryogenic liquid), 2.1) to allow transportation of bulk LNG in rail tank cars under the terms of 49 C.F.R.

…

Pipeline Safety Alert

(by James Curry, Keith Coyle and Brianne Kurdock)

This is the third alert in a four-part Babst Calland series on the Pipeline and Hazardous Materials Safety Administration’s (PHMSA or the Agency) final rule amending the federal safety standards for gas pipeline facilities (Rule). PHMSA published the Rule in the Federal Register on October 1, 2019. The first alert reviewed new requirements for materials verification and reconfirmation of maximum allowable operating pressure (MAOP). The second alert provided a summary of the integrity assessment requirements for areas outside of high consequence areas. This alert will summarize the new Part 192 recordkeeping requirements. Finally, Babst Calland will survey the remaining Rule topics.

New Part 192 Recordkeeping Requirements – 49 C.F.R. §§ 192.5, 192.67, 192.205, 192.127, 192.227, 192.517, 192.607, 192.619, and 192.624

At an earlier point in the rulemaking process, PHMSA proposed to establish several new retroactive recordkeeping requirements in Part 192. PHMSA also took the position that all records had to satisfy the reliable, traceable, verifiable, and complete (TVC) recordkeeping standard. A version of this standard was used by the National Transportation Safety Board (NTSB) in its recommendations after the 2010 San Bruno pipeline incident. PHMSA did not propose a definition of the TVC recordkeeping standard but instead referred to the agency’s TVC guidance issued in 2012.

In the Rule, PHMSA made significant changes to its proposed recordkeeping requirements including clarifying that the new recordkeeping requirements are prospective only and removing ‘reliable’ from TVC since that term was never used by the NTSB. PHMSA also drew distinctions in several regulations between the obligations that apply to operators of pipelines installed prior to July 1, 2020, which only require retention of existing records, and those installed after this date, further emphasizing the prospective nature of the new obligations. …

Environmental Alert

(by Lisa Bruderly and Gary Steinbauer)

On October 22, 2019, the U.S. Environmental Protection Agency (USEPA) and U.S. Army Corps of Engineers (Corps) published a final rule in the Federal Register repealing the Obama administration’s 2015 rule redefining “waters of the United States” (WOTUS) under the Clean Water Act, typically referred to as the “Clean Water Rule” (CWR).  In addition to repealing the CWR, the final rule will restore the regulatory definition of WOTUS that existed prior to the CWR for the 22 states (including Pennsylvania) where the CWR’s WOTUS definition is currently in effect.  The pre-CWR definition of WOTUS, along with agency guidance, are themselves controversial.  The final repeal rule becomes effective on December 23, 2019.

USEPA and the Corps released a pre-publication version of the final repeal rule on September 12, 2019.  Almost immediately, environmental groups and several states vowed to file lawsuits challenging the final repeal rule.  These lawsuits likely will be heard by multiple federal district courts throughout the country and could seek injunctions preventing the final repeal rule from taking effect.  While the intent of the final repeal rule is to end the existing regulatory patchwork where the CWR’s WOTUS definition currently is in effect in 22 states, the lawsuits challenging the final repeal rule could result in a different regulatory patchwork, further exacerbating the regulatory uncertainty surrounding the application definition of WOTUS.  In an interesting twist, the New Mexico Cattle Growers’ Association filed a lawsuit on October 22, 2019 in a federal district court in New Mexico, challenging the final repeal rule because the pre-CWR WOTUS definition and related agency guidance that it readopts are allegedly unlawful.

Babst Calland discussed the final repeal rule in detail in a previous Environmental Alert and will continue to actively monitor the shifting regulatory landscape involving the definition of WOTUS.  …

Smart Business

(by Jayne Gest with Sara Antol and Chris Farmakis)

When companies start running out of capital and executives are pulled in a million different directions, they often look to an outside party — a person who is well-connected but is not a licensed broker/dealer — to support the fundraising. The two parties may come to an arrangement where he or she will make introductions, help secure additional investment and only be paid a commission if the financing round successfully closes.

The problem is, this scenario is illegal under the rules of Securities and Exchange Commission (SEC). And the excuse — everyone else is doing it — will not work if you are caught, says Sara M. Antol, shareholder at Babst Calland.

“When it comes to broker-dealer territory, many times businesses do not realize how strict the current regulatory environment is, or how extreme the consequences can be when you violate the law,” she says.

Smart Business spoke with Antol and Christian A. Farmakis, shareholder and chairman of the board at Babst Calland, about fundraising compensation.

How common are these arrangements?

Raising money is difficult — it takes time and can be frustrating. Because fundraising is relationship-driven, it is easy to want to bring in a well-connected person in some capacity. And if a company is on a tight budget, it may seem logical to just pay someone if they have success. However, only registered broker-dealers are allowed to engage in this type of activity. And, it is illegal for persons who have not undergone the steps to be registered to act as brokers.

What is permissible? …

Pipeline Safety Alert

(by James Curry, Keith Coyle and Brianne Kurdock)

This is the second alert in a four-part Babst Calland series on the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) final rule amending the federal safety standards for gas pipeline facilities at 49 C.F.R. Part 192 (Rule) published in the Federal Register on October 1, 2019.  The first alert reviewed new requirements for materials verification and reconfirmation of maximum allowable operating pressure (MAOP).

This alert discusses PHMSA’s extension of integrity assessment requirements to areas outside high consequence areas (HCAs).  The third alert will review the new recordkeeping requirements.  Finally, Babst Calland will survey the remaining Rule topics.

Assessing Areas Outside of High Consequence Areas – 49 C.F.R. §§ 192.3 and 192.710

PHMSA has introduced new regulations requiring an operator to conduct integrity assessments outside of HCAs.  The Agency has categorized these areas as Moderate Consequence Areas (MCAs).

What is in the Rule?

• Moderate Consequence Area Definition.  A “moderate consequence area” is an onshore area that is within a potential impact circle containing either five or more buildings intended for human occupancy or any portion of the paved surface, including shoulders, of a designated interstate, freeway, or expressway, or principal arterial roadway with four or more lanes, as defined by the Federal Highway Administration.
• Initial Assessment and Reassessment Interval. Operators with an onshore, steel, transmission pipeline segment with a MAOP greater than or equal to 30% SMYS located in a Class 3 or Class 4 location or a piggable MCA segment must assess these segments by July 3, 2034 and every ten years thereafter at intervals of 126 months. 

…

Transportation Safety Alert

(by Boyd Stephenson and James Curry)

On August 22, 2019, the Federal Motor Carrier Safety Administration (FMCSA) published a notice of proposed rulemaking (NPRM) containing potential changes to the hours of service (HOS) regulations for all drivers operating in interstate commerce and for drivers transporting hazardous materials in intrastate commerce.  FMCSA initiated the rulemaking to update the HOS in light of compliance challenges revealed by the Agency’s 2017 electronic logging device mandate.  In the NPRM, FMCSA proposes to:

• Expand the current “short-haul” exception to the HOS rules;
• Expand the adverse driving exception to the HOS rules;
• Allow any 30-minute period of non-driving time to count towards the30-minute rest break;
• Expand access to the sleeper berth exception; and
• Allow a single off-duty break to extend the driver’s on-duty window by the length of the break.

The proposed changes will likely provide operational flexibility to every sector of the trucking industry.  Local drivers’ on-duty windows will expand to equal the time currently allotted for long-haul drivers.  At the same time, the rules would provide more options to long-haul operators, who will be able to use on-duty time for their required break and to expand their driving window by strategically taking optional breaks at times that allow them to avoid driving in heavy traffic.  Comments are due by October 21, 2019.

Current Daily Maximum Driving Times

While FMCSA proposes several exceptions to the basic daily rules, the Agency has not proposed changes to the daily base HOS requirement for property-carrying or passenger-carrying commercial motor vehicles (CMVs).

• A property-carrying CMV driver may drive up to 11 hours during a14-hour window beginning when the driver begins on-duty status.

…

Pipeline Safety Alert

(by James Curry, Keith Coyle and Brianne Kurdock)

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a final rule in the Federal Register amending the federal safety standards for gas pipeline facilities at 49 C.F.R. Part 192 (Rule). The Rule primarily addresses concerns identified in congressional mandates and National Transportation Safety Board (NTSB) recommendations for gas transmission lines.  The most significant provisions include new requirements for verifying pipeline materials, reconfirming maximum allowable operating pressure (MAOP), and performing periodic assessments of pipeline segments located outside of high consequence areas (HCAs), including in newly-defined moderate consequence areas (MCAs).  Other changes include amendments to the integrity management (IM) requirements, new requirements for reporting MAOP exceedances and the safety of inline inspection launcher and receivers, as well as related recordkeeping requirements.

This alert is the first in a four-part Babst Calland series on the Rule.  This first alert discusses the new MAOP reconfirmation and material verification requirements.  The next alert will cover MCAs and new assessment requirements for pipelines located outside of HCAs.  The third client alert will review the new recordkeeping requirements.  Finally, Babst Calland will survey the remaining Rule topics.

Materials Verification – 49 C.F.R. § 192.607

PHMSA established new materials verification requirements for certain kinds of gas transmission pipelines in response to a mandate in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (2011 Act).  Operators must create procedures for conducting destructive and nondestructive tests if they do not have traceable, verifiable, and complete (TVC) records for pipeline attributes required by other regulations.  Specifically, materials verification may be triggered by MAOP reconfirmation, integrity management, or repair regulations applicable to onshore gas transmission pipelines in Class 3 or 4 locations or HCAs. …

Pipeline Safety Alert 

(by James Curry, Keith Coyle and Brianne Kurdock)

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a final rule in the Federal Register amending the federal safety standards for hazardous liquids pipelines at 49 C.F.R. Part 195 (84 Fed. Reg. 52260) (Rule).  The publication of the Rule ends a nearly decade-long rulemaking process that began in the wake of a significant pipeline accident in Marshall, Michigan.  A prior version of the Rule, released in the closing days of the Obama administration, was returned to PHMSA for further review pursuant to a White House memorandum issued at the start of the Trump administration.  This version of the Rule reflects changes that PHMSA made after receiving input from the current administration, the most significant of which is the removal of new requirements for performing pipeline repairs. The effective date of the Rule is July 1, 2020.

What’s in the Rule?

The Rule includes the following changes to Part 195:

• Extension of reporting requirements to previously-unregulated gravity lines. Operators of gravity lines must submit annual, accident, and safety-related condition reports to PHMSA.  The accident and safety-related reporting requirements become effective on January 1, 2021, whereas the annual reporting requirement become effective on March 31, 2021.  The Rule contains a narrow exemption from the reporting requirements for low-stress gravity lines that travel no farther than one mile from a facility boundary without crossing any waterways used for commercial navigation.  The requirements to provide immediate notification of certain accidents, to submit information to the National Pipeline Mapping System, and to provide safety data sheets after a release do not apply to gravity lines.

…

Pipeline Safety Alert 

(by James Curry, Keith Coyle and Brianne Kurdock)

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Final Rule in the Federal Register updating its procedural requirements for issuing emergency orders (EO).  In 2016, PHMSA issued temporary regulations for issuing emergency orders in an interim final rule (IFR).  Unlike the process that ordinarily applies to PHMSA rulemakings under the Pipeline Safety and Administrative Procedure Acts, the Agency issued the temporary EO requirements without providing the public with prior notice or the opportunity to submit comments.  The final rule takes effect on December 2, 2019, and includes changes that the Agency deemed necessary based on comments submitted after the IFR.

What is an Emergency Order?

Congress authorized PHMSA to issue EOs in the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016.  In response to an imminent hazard, PHMSA may issue an EO imposing restrictions, prohibitions, or safety measures on pipeline owners and operators.  Unlike a Corrective Action Order or a Safety Order, PHMSA may issue an EO to a group of operators that share a common condition or even the entire industry.  PHMSA anticipates issuing an EO to respond to natural disasters, when serious flaws are discovered in pipes or in equipment manufacturing processes, or when an accident reveals an industry practice is unsafe. Aggrieved owners and operators may challenge an EO by choosing a formal hearing before an administrative law judge (ALJ) or filing a written response with the Associate Administrator.  In either scenario, the Associate Administrator must issue the final decision within 30 days of receipt of a petition for review. …