Refining, manufacturing, in-plant pipe exceptions, §195.1(b)(8)

The hazardous liquid regulations define those pipelines that are covered by Part 195 in §195.1(a).  There is also a long list of exceptions in §195.1(b).  The exceptions include in paragraph (8) “Transportation of a hazardous liquid or carbon dioxide through onshore production (including flow lines), refining, or manufacturing facilities or storage or in-plant piping systems associated with such facilities;”.

To assist in determining these facilities there is a definition of in-plant piping in §195. 2 Definitions:

In-plant piping systems means piping that is located on the grounds of a plant and used to transfer hazardous liquid or carbon dioxide between plant facilities or between plant facilities and a pipeline or other mode of transportation, not including any device and associated piping that are necessary to control pressure in the pipeline under §195.406(b).

Even with all this, it may be difficult to determine what facilities can be considered in-plant piping for the purposes of this exception.

The following new interpretation from PHMSA reviews an operator’s system and provides insight to the exception.

U.S. Department of Transportation
Pipeline and Hazardous Materials Safety Administration
1200 New Jersey Ave, S.E.
Washington, D.C. 20590

FEB 28 2012

Mr. Wesley Christensen
Senior Vice President
NGL Operations
ONEOK NGL Pipeline, L.P.
100 West Fifth Street
Tulsa, OK 74103-4298

Dear Mr. Christensen:

By letter dated August 4, 2011, you asked the Pipeline and Hazardous Materials Safety Administration (PHMSA) for a written interpretation on the applicability of 49 CFR Part 195 to your natural gas liquids (NGLs) processing plant in Bushton, Kansas. Specifically, you asked whether certain facilities at the plant fall within the scope of the exception in 49 CFR 195.1(b)(8) for the transportation of hazardous liquids through production, refining, or manufacturing facilities and associated storage and in-plant piping systems under 49 CFR 195.2.

The minimum Federal safety standards in Part 195 apply to any facilities at the Bushton plant that are used directly for the transportation of hazardous liquids by pipeline, but not to any facilities that are only used to fractionate NGLs.

Background

In your letter, you state that the plant receives NGLs from pipelines that are owned by your company or other third parties, that the NGLs are processed on the grounds of the plant using certain piping systems and underground storage facilities. and that refined products are then re­injected back into pipelines for continued transportation.

You further state that you agree that Part 195 applies to the incoming and outgoing pipelines and any devices within the boundaries of the plant that are necessary to ensure the safe operation of those pipelines under 49 CFR § 195.406(b). However, you believe that Part 195 does not apply to any of the other facilities at the plant by virtue of the exception in § 195.1(b)(8) for production. refining, or manufacturing facilities (and associated storage or in-plant piping systems).

You note that those facilities are covered by the Occupational Safety and Health Administration’s Process System Management requirements in 29 CFR 1910.119, and that the Bushton plant is not used for the transportation or storage of oil; therefore, the limitations established in PHMSA’s Memoranda of Understanding with the U.S. Environmental Protection Agency are not relevant.

After providing additional information on the inspection history of the Bushton plant, you conclude by asking for a response to two questions:

1.  If a pipeline delivers or receives product to or from the Bushton facility, is the jurisdictional boundary between the PHMSA-regulated pipeline and the facility processing operations delineated as described by the definition of “in-plant piping system” in § 195.2 and, therefore, not subject to PHMSA’s jurisdiction?

2.  Is the underground storage at the Bushton facility (here, underground caverns) “storage associated with refining’. and, as such, within the exception set forth in §195.1(b)(8) and, therefore, not subject to PHMSA’s jurisdiction?

Analysis

Section 195.1(b)(8) states that the pipeline safety standards in Part 195 do not apply to the “[t]ransportation of hazardous liquid or carbon dioxide through onshore production (including flow lines), refining, or manufacturing facilities or storage or in-plant piping systems associated with such facilities.” Section 195.2 further states that “[i]n-plant piping system means piping that is located on the grounds of a plant and used to transfer hazardous liquid or carbon dioxide between plant facilities or between plant facilities and a pipeline or other mode of transportation, not including any device and associated piping that are necessary to control pressure in the pipeline under § 195.406(b).”

The exception in § 195.1(b)(8) is based on section 60101(a)(22) of the Pipeline Safety Laws./1/ That provision states that PHMSA does not have the authority to regulate the “mov[ement] of hazardous liquid through . . . onshore production, refining, or manufacturing facilities; or storage or in-plant piping systems associated with onshore production, refining, or manufacturing facilities.” According to the legislative history, Congress enacted that prohibition in the Hazardous Liquid Pipeline Safety Act (11LPSA) of 1979 (P.L. 96-129) after concluding that “such lines present[ed] insufficient risk to life and property to require regulation.” S. REP. NO. 96-182 (May 15, 1979), reprinted in 1979 U.S.C.C.A.N. 1971, 1988.

PHMSA’s predecessor agency, the Research and Special Programs Administration (RSPA), established the definition in § 195.2 for in-plant piping systems in a 1994 final rule (59 FR 33388). RSPA explained that “the physical distinction between a regulated pipeline serving a plant and unregulated in-plant piping [wa]s unclear” without that definition. RSPA also noted that “[t]he aim of the proposed definition was to distinguish unregulated piping, not to limit the jurisdiction of other government agencies,” and further stated that if the in-plant piping did not include a device to control pipeline pressure, then the application of Part 195 would terminate at the plant boundary (59 FR 33389). RSPA observed that [s]ince neither the HLPSA nor its legislative history explain “in-plant piping,” the agency had “adopt[ed] an ordinary, reasonable understanding of the term. Id/2/

With regard to your first question, the exception in § 195.1(b)(8) applies to any facilities at the Bushton plant that are used for the production, refining, or manufacturing of NGLs, including any associated storage or in-plant piping systems as defined in §195.2. It does not, however, apply to any facilities that are used directly in the transportation of hazardous liquids by pipeline./3/ Such facilities fall within the scope of PHMSA’s statutory authority to regulate the movement of hazardous liquids by pipeline under 49 U.S.C. § 60101(a)(22) and present a sufficient risk to public safety to warrant regulation under Part 195.

The information submitted with your request and obtained from PHMSA’s Central Region Office indicates that Bushton is not a traditional NGL processing plant. In most cases, all of the NGLs that are delivered to these plants undergo a chemical transformation as part of the fractionation process before being sent out for continued transportation as refined products. In the case of your plant, however, a shipper has the ability to direct NGLs to bypass the plant, or to divert those products to private or co-mingled storage, without processing. Consequently, only the piping and equipment used to facilitate the fractionation process meets the “in-plant piping” definition for purposes of the exception in §195.1(b)(8).

With regard to your second question, some of the products received at the Bushton plant are stored underground and placed back into the pipeline system without processing. Product is also transported through the manifold piping and directly back into regulated pipelines without being processed. These portions of the storage field and manifold piping are used for transportation of hazardous liquids by pipeline and are regulated by PHMSA under Part 195.

Because PHMSA does not have specific regulations at this time for underground hazardous liquid storage facilities, the application of Part 195 would stop at the wellhead site valve. The specific valve at the wellhead site can be wellhead. casing head. choke assembly. or line valve based on your operations and maintenance manual.

I hope that this information is helpful to you. If I can be of further assistance, please contact me at 202-366-4046.

John Gale
Director, Office of Standards and Rulemaking

cc: Environmental Protection Agency Occupational Safety and Health Administration

/1/Another PHMSA predecessor, the Materials Transportation Bureau, relied on that provision in promulgating the original regulatory exception for production, refining. or manufacturing facilities and associated storage or in-plant piping systems in a 1981 final rule (46 FR 38358).

/2/In the preamble to the 1994 final rule, RSPA stated that the definition of in-plant piping would include piping that crosses a single public thoroughfare on the grounds of plant. In a subsequent letter of interpretation, RSPA stated that railroad crossings, like road crossings, would qualify as public thoroughfares for purposes of that definition as well. Interpretation #PI-98-006 (Nov, 18, 1998).

/3/See PHMSA Interpretation #PI-96-015 (stating that “[a] although Part 195 does not define manufacturing facilities, furthering pipeline transportation is not the primary function of such facilities,” and that “[t]he Skid 50 Pad facilities are operated primarily to further the transportation of natural gas liquids by pipeline.,” therefore, those facilities are not exempt from Part 195) (Jul. 22, 1996).

The Pipeline and Hazardous Materials Safety Administration, Office of Pipeline Safety provides written clarifications of the Regulations (49 CFR Parts l90-199) in the form of interpretation letters. These letters reflect the agency’s current application of the regulations to the specific facts presented by the person requesting the clarification. Interpretations do not create legally-enforceable rights or obligations and are provided to help the public understand how to comply with the regulations.

ONEOK PARTNERS

August 18, 2011

John Gale
Director, Standards and Rulemakings (PHP-30)
United States Department of Transportation,
1200 New Jersey Avenue, SE
Washington, D. C. 20590-0001

Subject: Request for Written Interpretation

Dear Mr. Gale:

On August 4, 2011, representatives from ONEOK Partners, L.P. (ONEOK), met in Kansas City, Missouri, with David Barrett, Greg Ochs, Hans Shieh, and Michael Falk of the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) to discuss regulations for the transportation of hazardous liquids through refining facilities and the underground storage and in-plant piping systems associated with such facilities. It was suggested at that meeting that we write to you to obtain a written interpretation of PHMSA’s position on the matters we wished to have clarified.

The Layout

ONEOK owns a processing (refining) facility located in Bushton, Kansas (Bushton or “the Facility”) (see Attachment A, Aerial View 1). The Facility consists of fractionation operations and associated in-plant piping systems and underground storage caverns. Bushton receives natural gas liquids (NGL) from PHMSA Part 195 jurisdictional pipelines (Pipelines), some of which are owned by ONEOK and others which are owned by third parties. Diagram 1 (Attachment B) shows the general layout of the Bushton Facility and the functional break (vertical dotted centerline) between ONEOK’s processing facilities (refining) and PHMSA-jurisdictional Pipeline facilities. The Bushton layout and jurisdictional boundaries are similar to those that may be found in oil refineries where PHMSA-jurisdictional pipelines deliver crude oil into a refinery, where it is processed, stored, and delivered via tank car, truck rack, or pipeline system.

At Bushton, the various PHMSA-regulated Pipelines (e.g., the North System (in)) deliver NGL to the Facility. The liquid is then transported through the Facility (fractionation, associated in-plant piping, storage) and, eventually, product leaves the Facility via Pipeline (e.g., line 5, North System, 800 line out).

The Facility cannot operate without its associated in-plant piping and storage systems, the functions of which are to transfer NGL between the various processing operations at Bushton. The underground storage caverns associated with the Bushton Facility are not breakout tanks” under 49 CFR 195.2 because they are not tanks./1/

Overpressure devices are located on ONEOK property where required for safe operation per 49 CFR 195.406(b) and are treated as jurisdictional to PHMSA./2/ ONEOK has maintained the property such that the Pipelines, including piping between pressure control devices and the Pipelines, are treated as jurisdictional to PHMSA, while the Bushton Facility (including associated in-plant piping leading up to any pressure control device, the fractionation system, and associated underground storage caverns) are treated as non-jurisdictional to PHMSA pursuant to 49 CFR § 195.1(b)(8) and 195.2 (in-plant piping). The locations of these Pipeline facilities are shown in Attachment A, Aerial View 2.

According to 49 CFR § 195.1(b)(8), Part 195 does not apply to transportation of hazardous liquids through refining facilities or storage or in-plant piping systems associated with such facilities. In-plant piping” is defined in § 195.2 as the piping that is located on the grounds of a plant and used to transfer hazardous liquid between plant facilities or between plant facilities and a pipeline or other mode of transportation, not including any device and associated piping that are necessary to control pressure in the pipeline under § 195.406(b). It is noteworthy that the 195.1(b)(8) refinery facility exemption applies to transportation through facilities or storage or in-plant piping systems associated with such facilities. This is in contrast to the 195.1(b)(9)(ii) terminal facility exemption, which requires that to be exempt, the piping must be exclusively used for the terminal facility.

Management Systems

The vertical dotted centerline on Diagram 1 depicts the functional division between Pipelines and the Facility (refining) operations. As a result, it also depicts the division between the management systems under which the personnel and facilities operate. Bushton is operated under a Process Safety Management (PSM) system, as required by the Department of Labor’s Occupational Safety and Health Administration (OSHA) pursuant to 29 CFR 1910.119 (Plant). The Pipelines are operated under PHMSA Part 195. The Facility and its personnel operate and are trained per OSHA’s PSM system (29 CFR 1910.119), while the Pipelines and their personnel operate and are trained per PHMSA”s Part 195 regulations (49 CFR Part 195). These regulatory bodies have different areas of concern, approaches, and regulatory terminology and definitions; as a result, their management systems vary (including their operating and maintenance procedures, training, and required documentation). Because these two systems do not align in a manner allowing for consistent application of the two systems, OSHA and DOT have consistently stated their intent to clearly set forth each agency’s boundaries to avoid duplication or uncertainty within the federal requirements./3/ Again, both the Facility and the Pipelines are subject to safety regulations, but through different agencies. While the application of the regulations of the two agencies provide for an equivalent level of safety, the management processes and enforcement practices of the two agencies are not equivalent and would essentially require an operator to have two sets of procedures for the same piece of pipe to ensure compliance with the two agencies’ regulations. This does not improve, and in fact may have a negative impact on safety.

Non-OSHA/DOT Jurisdictional Delineation

In addition to the DOT and OSHA division of jurisdiction discussed above with respect to management and safety systems, the February 4, 2000 Memorandum of Understanding (MOU) between DOT and the Environmental Protection Agency (EPA) for the purposes of defining jurisdictional boundaries at particular plants, which specifically addressed breakout tanks” and storage as regulated by DOT in 49 CFR 194 and the EPA in 40 CFR 112.20./4/ This 2000 MOU between EPA and DOT reaffirmed the 1971 MOU between the same agencies wherein they defined transportation and non-transportation related facilities for the purpose of determining which agency regulated a facility’s compliance with the Clean Water Act’s oil pollution prevention requirements./5/

This delineation was for the express purpose of clarifying whether, for the purposes of oil pollution prevention plans, a facility must comply with DOT (49 CFR 194) or EPA (40 CFR 112.20) regulations, or both. Because of the types of products handled at Bushton, the Facility is exempt from these oil pollution plan requirements because NGL is not oil.” As a result, the diagrams in the 2000 MOU between EPA and DOT regarding jurisdiction over oil pollution prevention plans are irrelevant to the issue of which of two other competing agencies — DOT or OSHA — has jurisdiction regarding management systems. Despite the fact that these Diagrams are irrelevant to the division of jurisdiction between OSHA and DOT, PHMSA (Central Region) has applied them to the Bushton Facility’s associated underground storage caverns (as described in the Inspection History section below).

Inspection History

The various states and regions carrying out the inspection of facilities as described herein have typically applied the in-plant piping system definition such that the division between the Facility and the Pipelines is consistent with Diagram 1 (Attachment B). This has been ONEOK’s experience with similar facilities owned and operated by ONEOK in PHMSA’s SW Region. Additionally, after reading the interpretation offered by PHMSA to Cabot Oil & Gas Corporation for a facility located in West Virginia,/6/ ONEOK contacted the State of West Virginia’s Pipeline Safety Office to discuss their application of the jurisdictional boundaries where inspection of similar facilities occur. It is our understanding from that discussion that ONEOK’s position on the boundary between in-plant piping and pipelines is consistent with West Virginia’s inspection practices. It was only recently that ONEOK has experienced a different inspection perspective, which we believe is inconsistent with the regulations, guidance and interpretation documents, and the inspection practices in other regions./7/

In 2005, PHMSA (Central Region) inspected the pipelines adjacent to the Bushton Facility and applied the breakout tank/storage diagrams found in the 2000 MOU between DOT and EPA for the purposes of defining jurisdictional boundaries between OSHA and DOT at Bushton. PHMSA (Central Region) has taken these diagrams (designed to delineate agency oversight between DOT and EPA for compliance with oil pollution prevention regulations) and applied them to the facilities at Bushton to conclude that DOT (as opposed to OSHA) has jurisdiction over the Facility’s management system. As mentioned above, the 2000 MOU between EPA and DOT has nothing to do with which agency — DOT or OSHA — has jurisdiction over the Facility’s management system. In misapplying the EPA/DOT MOUs to a DOT/OSHA jurisdictional situation, PHMSA (Central Region) has apparently created its own term – “breakout storage facilities”. ONEOK does not find this definition in 49 CFR 195, 49 USC 60101, or in any letters of interpretation issued by PHMSA.

ONEOK has asserted its position that the facilities within Bushton are in fact associated with Bushton’s processing functions and, as such, 49 CFR §§ 195.1(b)(8), 195.2 apply to exempt the Facility and its associated in-plant piping and storage from PHMSA Part 195 jurisdiction. As a result of this exemption, the Facility is not required to change its OSHA PSM system to be compliant with PHMSA’s Part 195 requirements.

In continuing ONEOK’s efforts to operate in a safe manner and to ensure compliance with the various regulations applicable to this Facility, ONEOK requests that you clarify PHMSA’s position on the following two subjects:

1.  If a pipeline delivers or receives product to or from the Bushton Facility, is the jurisdictional boundary between the PHMSA-regulated Pipeline and the Facility processing operations delineated as described by the definition of “in-plant piping system” in 49 CFR 195.2 and therefore not subject to PHMSA jurisdiction ?

2.  Is the underground storage at the Bushton Facility (here, underground caverns), “storage associated with refining” and, as such, within the exception set forth in 49 CFR 195.1(b)(8) and therefore not subject to PHMSA jurisdiction?

Thank you for your consideration of this matter. Should you have questions or need further information, you may either contact me at (918) 588-7600, or Vicky Hale, Vice President and Associate General Counsel, at (918) 588-7949.

Very truly yours,

Wesley Christensen
Senior Vice President, NGL Operations
Oneok NGL Pipeline, L. P.

Attachments

/1/See Amendment 195-22, Final Rule, effective date July 27, 1981, wherein Storage Subject to Regulation is described.

/2/See PHMSA Response Letter to Conoco Inc., PHMSA Interpretation # P1-91-008 (Mar. 25, 1991) (Attachment C) and PHMSA Response Letter to Marathon Ashland Pipe Line, LLC, PHMA Interpretation # 195.1 61 (February 15, 2001) (Attachment D), describing the demarcation between non-jurisdictional in-plant piping and jurisdictional pipelines.

/3/See the 1972 MOU between OSHA and DOT (Attachment E).

/4/The 2000 MOU between DOT and EPA (Attachment F) noted that “complex facilities” may have dual EPA and DOT jurisdiction and sought to delineate which agency had jurisdiction in a variety of contexts, including where overlapping or concurrent jurisdiction over the same facilities or processes do or do not exist, making use of several diagrams for reference. It is notable that Section V states the rules and enforcement practices of both agencies are substantially equivalent, thereby meaning that dual jurisdiction is two agencies applying substantially the same set of rules and practices. An example of “dual jurisdiction which is addressed at page 2 in the 2000 MOU, is a bulk storage container serving as a tank storing oil while also serving as a breakout tank for a pipeline or other transportation purposes.” As noted earlier, the underground storage caverns at Bushton are not tanks, and they do not store “oil” as defined in 49 CFR 194.5 and 40 CFR 112.2.

/5/The 1971 MOU between DOT and EPA (Attachment G) provides that the following are non-transportation related and within EPA jurisdiction, not DOT jurisdiction: refining facilities, including all equipment and appurtenances related thereto, in-plant processing units, storage units, piping, drainage systems, and waste treatment units used in the refining process; and oil storage facilities, including all equipment and appurtenances related thereto, as well as fixed bulk plant storage, terminal oil storage facilities, consumer storage pumps, and drainage systems used in the storage of oil, but excluding in-line or breakout storage tanks needed for the continuous operation of a pipeline system. Transportation-related facilities, within DOT jurisdiction and not EPA jurisdiction, include: pipeline systems, including pumps and appurtenances related thereto, as well as in-line or breakout storage tanks needed for continuous operation of a pipeline system, but excluding pipelines used for transportation within the confines of a nontransportation-related facility or terminal which are not intended to transport oil in interstate or intrastate commerce. See the 1971 MOU between DOT and EPA, sections II(1)(E), II(1)(F), II(2)(C).

/6/ See PHMSA Response Letter to Cabot Oil & Gas Corporation 195.1 058 (Dec. 2, 1998), describing the demarcation between non-jurisdictional in-plant piping and jurisdictional pipelines (Attachment H).

/7/ See Vectren Corp., 2003 WL 25429807 (Dep’t of Transp. Dec. 31, 2003) (final order), which distinguishes between a jurisdictional breakout tank and a non-jurisdictional process tank or process vessel (Attachment I). The Vectren Corp. final order is an example of the Central Region inappropriately treating storage as a breakout tank and issuing NPVs for failing to have Part 195 compliant policies and procedures when, as evidenced by the Office of Pipeline Safety s order overturning the decision, the storage was in fact not jurisdictional to Part 195.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s