American Oil and Gas Reporter - April 2018 - 89

Distribution Line Label
Foists A Regulatory Nuisance
On Farm Tap Operators

"While PHMSA was adamant in finding
that all farm taps are distribution lines, the
agency did not receive comments that would

The topic of farms taps does not lend itself to clever quotes
or introductions. They remain prevalent in many states and
entail producers or gathering entities laying a short piece of
pipeline to a property owner, with a tap to provide free gas or
some other agreed-upon quantity in return for access across
that owner's property. The regulatory compact governing these
primarily rural lines has been altered dramatically in a yearold rule issued by the Department of Transportation's Pipeline
and Hazardous Materials Administration that deems all farm
taps to be distribution lines and therefore subject to a myriad
of regulations normally reserved for utilities and transmission
line operators.
The rule, titled "Pipeline Safety: Operator Qualification,
Cost Recovery, Accident and Incident Notification, and Other
Pipeline Safety Changes," became effective March 24, 2017.
To producers not subject to PHMSA jurisdiction or rural gathering entities subject to light-handed PHMSA jurisdiction, the
title of this rule did not adequately convey the sweeping
changes for producers and gatherers with farm taps. Several
utilities and transmission pipelines commented on the farm
tap provisions, with one suggesting that a farm tap be defined
as "a pipeline that maintains the same designation as the
pipeline from which it originates (transmission, storage,
gathering or production) and connects to a customer-owned
service line." Nevertheless, PHMSA insisted, "A farm tap is a
distribution line."
With that designation, producers and gatherers with farm
taps are obligated to register as distribution companies, obtain
an operator identification number, create an operations and
maintenance manual, adhere to operator qualification requirements,
and odorize the gas. One small concession in the rule was the
exclusion of farm taps from the Distribution Integrity Management
Program (DIMP) rule. PHMSA imposed a three-year interval
for inspections. Therefore, no farm tap operator is out of compliance at this time, as only one year has passed since the
effective date. However, states charged with enforcing this rule,
as well as companies that must comply with it, must determine
their implementation long before the three years are up.
While PHMSA was adamant in finding that all farm taps are
distribution lines, the agency did not receive comments that
would have helped guide its deliberations. No producer submitted
comments on the proposal, since production facilities are exempt
by statute from PHMSA jurisdiction. Given that producers do
not consider themselves to be operators of PHMSA-regulated
facilities, this proposed rule escaped producers' attention.
Had producers focused on the proposal, they could have informed PHMSA that the proposal would impact thousands of
farm taps. The Independent Oil and Gas Association of West
Virginia estimates the state contains at least 20,000 farm taps.
One small producer in the Marcellus region reports that 41
percent of his almost 400 shallow well production/gathering
lines have farm taps. Ohio has an estimated 45,000 taps. Given
these numbers, PHMSA's assessment of the rule's farm tap

"

have helped guide its deliberations.

costs could not have been accurate. PHMSA "estimated annual
compliance costs at $0.6 million (for the entire rule) less savings
to be realized from the removal of farm taps from the (DIMP)
requirements."
PHMSA goes on to note that data limitations preclude any
readily quantified annual benefits. In describing the "Small
Entities to Which This Rulemaking Action Will Apply," PHMSA's
"regulatory flexibility analysis found that the rule could affect a
substantial number of small entities . . . However, these impacts
would not be significant."
For individual residences with existing farm taps, it is unclear
how the producer or pipeline operator can inspect customer
lines beyond the tap and regulating devices. Long-standing
contracts may provide landowners with "free" gas in exchange
for pipeline access over the landowner's property. Significant
changes in the degree of regulation, the need to access devices
inside the home, and the accompanying increase in costs will
wreak havoc with many of these contracts.
Home owners with farm taps are aware of these devices and
should be aware of their responsibility to safely maintain them.
But there simply is no reason to regulate these farm taps at the
federal level, particularly since they are intrinsically low-risk
lines installed for the benefit of landowners to provide them inexpensive energy. In Kentucky, state law and regulations require
that farm tap equipment to be both owned and maintained by
the customer at the customer's expense. PHMSA's rule would
directly contravene existing regulations for Kentucky producers
with farm taps.
PHMSA is aware the rules pose problems and independent
producers are pushing to see those problems resolved. This correction would benefit producers, gathering operators and landowners with farm taps. It also would provide regulatory reform, a
key objective of the Trump Administration.
r

SUSAN GINSBERG is vice

president of crude oil and natural gas regulatory affairs for
the Independent Petroleum Association of America. She covers legislation and regulation,
focusing on the CFTC and
FERC. Her experience in natural gas regulatory affairs
spans 25 years.
APRIL 2018 89



American Oil and Gas Reporter - April 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2018

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