Federal regulators are working to update rules on pipeline safety in light of the changing landscape of the United States' oil industry. Over the coming months, pipeline operators will incur potentially significant costs in order to meet the new regulations, and the Federal Energy Regulatory Commission (FERC) has proposed a system whereby they could recover some of that expenditure.
Under FERC's policy proposal, qualified operators could add a surcharge to their base rates, to be paid by the companies that use their pipelines. Assessment will be on a case-by-case basis, affecting single pipelines and not all of a company's operations. In order to qualify, a pipeline must meet five requirements laid out by FERC:
- An updated base rate review to ensure that costs are adequate.
- Only modifications to comply with safety or environmental regulations will be included, and operators must detail them.
- Operators will not be able to modify customers' rates if the pipeline's throughput changes as a result of the upgrades.
- The pipeline will be reviewed periodically to ensure that the rates and surcharge remain reasonable.
- Operators must work with shippers to plan modernization projects.
FERC is basing its proposal on an agreement reached between NiSource and its customers, by which the base rate of the Columbia Gas Transmission from Louisiana to New York was reduced by $60 million in exchange for the shippers covering the cost of a modernization tracker. FERC has opened a 30-day period for industry insiders to submit comments to the proposal.
Beyond physical upgrades, pipeline safety training can go a long way toward preventing accidents. Pipeline workers can obtain operator qualification certifications in compliance with Department of Transportation regulations.