American Oil and Gas Reporter - June 2020 - 25

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Definition Of Terms
Will Determine Outcome
Of PHMSA Proposal
Pipeline safety, always of critical importance, is the subject
of several ongoing proceedings, affecting both hazardous liquids
and natural gas pipelines, operated as transmission, distribution,
gathering and production lines. The Department of Transportation's
Pipeline and Hazardous Materials Safety Administration has
been grappling with regulation of farm taps since it issued its
Distribution Integrity Management Program (DIMP) and then
its Operator Qualification (OQ) rules. This has prompted
PHMSA to issue Proposed Farm Taps Frequently Asked
Questions, with comments due June 19.
PHMSA's interest in farm taps has come indirectly. The OQ
rule, adopted in January 2017, required operators to inspect and
perform tests on pressure regulating or limiting devices, relief
devices (except rupture discs), automatic shut-off devices and
associated equipment located on "any service line directly connected to a production, gathering or transmission pipeline that
is not operated as part of a distribution system." In early 2107,
producers and operators of rural gathering lines rightly viewed
themselves as not falling within PHMSA's purview. We missed
the OQ rule and its implications for operations warranting a different regulatory treatment from that of gas utilities and the
homes and businesses with whom those utilities have a business
relationship-the traditional provider-customer relationship.
For producers, farm taps usually have provided the quid pro
quo for access to a homeowner's property to lay piping. In
return, the homeowner usually would contract with a plumber
to install the necessary equipment to receive the producer's or
gatherer's gas off the tap. The gas was often free, or the
homeowner would be allowed a specific volume of free gas,
after which it then would pay for volumes above that amount.
These were viewed as contractual arrangements that did not fall
within federal jurisdiction covering taps off transmission or distribution lines.
No definition of "farm tap" exists in federal regulations, but
PHMSA describes them as "individual service lines" that are
referenced in regulation. This is the hook for farm tap regulation.
According to PHMSA regulations, "Service line means a distribution line that transports gas from a common source of supply
to an individual customer, to two adjacent or adjoining residential
or small commercial customers, or to multiple residential or
small commercial customers served through a meter header or
manifold. A service line ends at the customer outlet or at the
connection to a customer's piping, whichever is further downstream, or at the connection to customer piping if there is no
meter."
The customer relationship deserves greater scrutiny. For many
producers with farm taps, that producer has not installed the
piping, may not even know where the piping is located and, in
most cases, does not bill the homeowner nor receive any payment
other than the in-kind benefit of having pipe that traverses the
homeowner's property. PHMSA can make this distinction in its
review of the FAQ comments. Recipients of gas from farm taps
off production lines are not customers. Their lines are privately

"Such regulation defies logic and

certainly is unwarranted from a risk
standpoint. It could not withstand a
cost/benefit analysis.

"

owned. They are not the ratepayers of a regulated utility.
If PHMSA chooses to reject this line of reasoning, it then
must grapple with the enormity of its undertaking. For one
small Appalachian producer with almost 200 wells, 50 farm
taps with an average length of 500 feet would become subject
to PHMSA regulation. Such regulation, as detailed in the FAQs,
would require the farm tap provider to submit a gas distribution
annual report, obtain an operator identification number, use
only operators qualified under PHMSA regulations to perform
certain tasks on these service lines, as well as prepare and
follow an operations and maintenance manual in accordance
with PHMSA regulations. Such regulation defies logic and certainly is unwarranted from a risk standpoint. It could not
withstand a cost/benefit analysis.
If PHMSA maintains its interpretation of farm taps as
regulated service lines, then PHMSA should provide a broad
exemption, such that "customer-owned piping following the
first isolation point does not constitute a service line if the
common source of supply originates from an unregulated production line, regardless of the presence of a customer meter."
After issuing the FAQs, PHMSA released its Gas Regulatory
Reform Notice of Proposed Rulemaking, published in the
June 9 Federal Register. Although it would scale back some
of the regulation entailed in the Farm Tap FAQs, the proposal
is only that-a proposal. Producers cannot count on any of the
suggested changes.
PHMSA must promote safety, but it also must do so
judiciously, placing responsibility where it belongs. Producers
are not local distribution companies.
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 more
than three decades.
JUNE 2020 25



American Oil and Gas Reporter - June 2020

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2020

Contents
American Oil and Gas Reporter - June 2020 - Intro
American Oil and Gas Reporter - June 2020 - 1
American Oil and Gas Reporter - June 2020 - 2
American Oil and Gas Reporter - June 2020 - Contents
American Oil and Gas Reporter - June 2020 - 4
American Oil and Gas Reporter - June 2020 - 5
American Oil and Gas Reporter - June 2020 - 6
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