Reauthorization of Natural Gas and Hazardous Liquid Pipeline Safety Acts

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PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.
THE REAUTHORIZATION OF NATURAL GAS AND HAZARDOUS LIQUID PIPELINE SAFETY ACTS

TUESDAY, MARCH 14, 1995

Subcommittee on Surface Transportation,

Committee on Transportation and Infrastructure,

Washington, DC.

    The committee met, pursuant to notice, at 1:03 a.m. in room 2167, Rayburn House Office Building, Hon. Thomas E. Petri (chairman of the subcommittee) presiding.

    Mr. PETRI. I am pleased to hold this hearing on the reauthorization of the Natural Gas and Hazardous Liquid Pipeline Safety Acts early in this Congressional session. Both of these acts need to be reauthorized by the end of the current year.

    I'd like to especially welcome to our subcommittee Bob Franks, who is a colleague on this committee, and former committee colleague Frank Pallone, who have both been extremely active in the pipeline safety area and are here to testify on their respective bills.

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    Pipelines are one of the safest modes of transportation in the United States. Among all modes—highway, rail, aviation, marine, and pipeline—fatalities from pipeline accidents represent less than 3/1000 of 1 percent of the total number of fatalities on an annual basis.

    This year we find ourselves at a crossroads on the approach that should be taken to ensure the continuation of this fine record.

    In the past, Congress has been very prescriptive in pipeline safety statutes by directing the Department of Transportation to pursue specific regulatory actions. While at times this has been a wise course, it has been increasingly apparent that it does not always result in the best approach to improve the safety of our Nation's pipelines.

    Both the Administration and the industry have embraced risk assessment/risk management approaches as more prudent and efficient ways to ensure safe operation of natural gas and hazardous liquid pipelines.

    While there are differences in how the methodology in evaluating risk in making safety decisions is determined between the two approaches, I, myself, believe the general principles embraced by both the Department of Transportation and the industry are worthwhile. We have to fully understand how the science of risk assessment/risk management can be applied to the pipeline safety program.

    I would like to take a moment to recognize the associate administrator of the Office of Pipeline Safety at the Department of Transportation, Mr. George Tenley. He has served as the chief of the Pipeline Safety Office for 5 years. Prior to that, he served as chief counsel of the Research and Special Programs Administration for 24 years.

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    George has been a primary force behind the movement towards a risk management approach to pipeline safety. Unfortunately, I understand the Department will be losing him next week as he retires to go on to what we all know will be bigger and better things.

    We commend his fine service with the Department and wish him well in his new endeavors.

    We look forward to hearing from Doctor Sharma and George Tenley of DOT and our industry representatives today to further explore how we can change the direction of the pipeline safety programs in a positive way, but first our colleagues, Representatives Franks and Pallone.

    Gentlemen, the floor is yours. Proceed as you wish.

TESTIMONY OF HON. BOB FRANKS, A REPRESENTATIVE IN CONGRESS FROM NEW JERSEY; AND HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM NEW JERSEY

    Mr. FRANKS. Mr. Chairman, thank you very much.

    It is a pleasure to appear today before our subcommittee to talk about a subject that I suspect in the minds of many might be considered routine, but I can assure you that to my constituents, to Mr. Pallone's constituents, and others throughout our State, the fact of the matter is that this issue is of the utmost importance.

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    It was just a year ago this month that a huge explosion took place in Edison, New Jersey, a community that is shared by Mr. Pallone and me. The fact of the matter is that the explosion actually took place in Mr. Pallone's section of Edison, but may of the rescue squads and emergency personnel that were first on the scene were from my Congressional District.

    Mr. Chairman, that night a fireball some 500 feet tall lit up the skies for three States. It was easily seen in New York City. It was seen in Pennsylvania. It was seen throughout central New Jersey. Most people who I spoke to after that explosion thought, in fact, that they were witnessing a nuclear explosion. In fact, several hundred telephone calls to local 911s and police departments asked, in fact, if they were witnessing a nuclear explosion.

    The power was enormous. The apartment complex that was victimized by this explosion—128 units and 8 full buildings—were totally decimated, literally incinerated, charred remains. The most remarkable thing that happened was that only one person died as a result of the explosion and there were a relatively small number of injuries.

    I'd like to say at the outset that there is no doubt, when you look at the volume of gas that is transmitted via these pipelines and the extensive network that runs throughout our country, this industry has a remarkably good safety record. But it is very difficult to tell that to my constituents back home in New Jersey after having witnessed this incredibly terrifying inferno.

    Mr. Chairman, it was for that reason that Mr. Pallone and I began to look at the safety issues concerning these pipelines and both have introduced legislation looking to make them even safer.

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    I'd like to particularly look at a couple of the items that are incorporated into my legislation.

    First, my bill would increase criminal and civil penalties for anyone violating Federal pipeline safety standards.

    Secondly, my bill calls for the increased inspections of certain natural gas pipelines.

    Thirdly, my bill would make it a Federal crime to damage one of these pipelines without reporting it promptly to the pipeline operator.

    Fourth, my bill would require a risk assessment of the risks to public safety and to the environment posed by these natural gas pipelines.

    Lastly, we are asking that the Secretary of Transportation compile a comprehensive mapping system to locate with precision where these gas transmission pipelines are located.

    Mr. Chairman, if some of these provisions had been in place last year, the Durham Woods explosion may have been avoided. For example, the unknown third party who damaged the pipeline may have come forward and reported the damage to the company if that person knew that it would be a Federal crime if they were not to do so.

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    Additionally, my bill would require that in high-density population areas the Secretary would identify stretches of the pipeline which were piggable, and that would need to be inspected on a least a one-in-seven-year basis. If they would have pigged that line subsequent to the last time they had actually done it in 1986, they may have found that a piece of excavation equipment had nicked the pipeline and made it very much weakened.

    There is no doubt, Mr. Chairman, that no amount of increased inspections can guarantee safety for every section of the pipeline, but I do believe that particularly in these highly densely populated areas that we need to make a bit of a stronger approach.

    I know from your opening remarks, Mr. Chairman, that we are moving away from a command and control approach and moving toward a risk management approach where companies within the industry would develop guidelines with the assistance of the Office of Pipeline Safety, and the particular components of the safety program would be essentially managed by the industry.

    I think I like that approach, to be candid with you, Mr. Chairman, but I need to caution all of us that I think the fine details here could be very, very important as to how this risk management program would actually protect the safety of our constituents who live near these pipelines.

    Mr. Chairman, some of the concerns that have voiced about my bill include the mapping provisions contained in section 8, but I'm a little bit surprised, Mr. Chairman, that not all of the pipeline companies can tell you with absolute confidence that they know where every one of these transmission lines is located. It seems to me that there needs to be a national effort to be certain that the location of these pipelines is known to a certainty in order that local contractors, local officials, emergency service personnel know precisely where all of these pipelines are and have ready access to their locations.

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    Mr. Chairman, another issue that I think is very important is the issue that I think Mr. Pallone will want to talk about, the issue of remotely-or automatically-controlled valves. We learned that in the case of the Durham Woods explosion that it took 752 manual turns of the valve to turn off the gas that was feeding that fire ball. It took hours, Mr. Chairman, and the fact of the matter is that one would hope that in this era of high technology there has to be a better way.

    While that type of remote shut-off valve may not be appropriate in every location across the country, again where these pipelines are parallel to enormous housing projects, whether they be apartments or downtown business areas, one might believe that if it could be done in a cost-effective and reliable manner we ought to be encouraging that kind of auto shut-off in the event that there is an explosion of one of these lines in a heavily-populated area.

    Finally, Mr. Chairman, I wanted to comment on another issue that wasn't directly addressed in my bill, but I think it is crucial, nonetheless, and that's the Office of Pipeline Safety's budget.

    As my colleagues are undoubtedly aware, OPS' budget was nearly doubled last year in response to the Durham Woods disaster. While I certainly support greater funding for OPS, I have to question whether it is wise to give that degree of increase in an appropriation to an agency—an agency that hadn't worked up a plan to use those monies effectively. I'm not sure that showering them with that much of an additional allocation leads to a necessarily well-thought-out enhanced safety program.

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    I hope that's not the case with OPS. I don't know it to be the case. But I have a natural curiosity as to whether or not any agency can effectively manage such an enormous 1-year increase. I think it is up to our subcommittee to exercise effective oversight to determine whether the OPS increased budget is improving public safety or just adding to existing bureaucracy.

    Mr. Chairman, I strongly believe that this Congress has to take strong steps as we reauthorize this Pipeline Safety Act. And while we need to do it in as cooperative a manner as possible, in a manner that is the least intrusive to the industry involved, we also have to be able to look at each other when the day is over and know that ultimately the safety of our constituents has been protected by the actions that the subcommittee takes.

    Thank you, Mr. Chairman.

    Mr. BATEMAN [assuming Chair]. Thank you, Mr. Franks. We are pleased to have your testimony.

    Let me explain the absence of our chairman. He has had to go before the Rules Committee, and as soon as he is done his duty there I'm sure he will return to the Chair.

    It is now my pleasure to welcome to the committee and to invite him to testify, the gentleman from New Jersey, Mr. Pallone.

    Mr. PALLONE. Thank you, Mr. Chairman.

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    I have a statement for the record, which I would ask unanimous consent be——

    Mr. BATEMAN. Without objection it will be entered in the record.

    Mr. PALLONE. Thank you. I'll try to summarize and be as brief as possible because my colleague I think outlined many of the things that I would want to say—Mr. Franks—as well as the fact that we went through a lot of this last week, as well, in the Commerce Committee.

    I did want to thank you, though, and the members of the committee, many of whom were here last year, for your cooperation in moving one of the bills that I have sponsored, the one-call notification bill which, as you know, was released by this committee and was passed in the full House last session and, of course, has been re-introduced along with a broader Pipeline Safety Act reauthorization bill, as well as the bill that Congressman Franks has sponsored that try to address the issues that came out of the Edison pipeline disaster.

    Some of you were here earlier, and some were not. Both of us represent Edison township, where the accident occurred. Actually the community, Durham Woods Apartment Complex, that was actually affected by the accident is in my District, but Mr. Franks' District is—I think we figured no more than about a mile away. Obviously, this was something that had a broad impact not only on Edison township, but on the State and, indeed, the Nation.

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    What I wanted to stress today, if I could, was to first recognize the fact that there is a lot more concern now, as I think there should be, about the whole issue of risk assessment. I know that this committee, as well as the Commerce Committee, has been concerned that pipeline safety regulation in the past has been more, if I could say disaster-driven, rather than using a more calculated risk management approach. And I do believe that risk management makes sense.

    We can argue over what kind of risk management we should have and whether or not the bill we passed in the full House was a good or bad bill, but all of us recognize there needs to be a risk management approach.

    I would say, however, that should be followed at the same time, though, that we keep in mind that these disasters do have a direct impact on people's lives. We were very fortunate in the case of Edison because no one was actually killed from the direct impact of the accident, but it could easily have occurred that a few hundred, or even a few thousand, people could have been killed if things had not gone the way they had when the accident occurred. I think we were fortunate in that respect, though, and I'm certainly pleased that was the case.

    What I want to talk about today is that perhaps, even when we move to a risk management regulatory regime, we have to continue to ensure—and I think this is what my colleague was mentioning—that a high degree of safety continues in populated areas.

    I think that I have recognized, both in this committee and the Commerce Committee, that people approach these issues of pipeline safety differently if you are in a highly-populated area such as Edison as opposed to maybe an area where it is not as densely populated, a more rural area in the western States, or whatever. Perhaps that might be significant. How we approach it, what kind of rules we adopt might be different for the highly-populated areas, as opposed to the more rural areas.

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    I also think it is very important that we look at new technologies. My colleague mentioned remote or automatic shut-off valves. This has become a major issue in Edison because it took so long to turn the gas off.

    My bill actually specifies that we would require remote automatic control devices in areas where those are necessary, again making a distinction, perhaps, between the highly-populated areas and the others.

    This has become a major issue even a year after the Edison accident. In fact, right now there still are no remote or automatic shut-off valves in place along the pipeline in Edison, and there is a lot of concern in the community that that hasn't occurred because the pipeline company hasn't felt it was necessary to do so.

    There are a lot of new technologies out there now that can perhaps deal with the safety issues more effectively, and I was hoping that this committee would look into some of those technologies.

    There are two bills that I have introduced, if I could outline them briefly.

    One is the One-call Notification Act, which is essentially the same bill that was introduced and passed in the last session of Congress. It proposes a simple solution that says before excavators begin digging they must call a central phone number to learn whether there are any underground facilities at the excavation site. And facility operators, once notified, have to come to mark the site. Again, a simple procedure, one that isn't followed right now in a lot of States, but it is not uniform in the various States. We feel that there needs to be some uniformity, if possible.

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    What I wanted to stress is that the One-call Notification Act that passed this committee, that passed the House, and has been reintroduced does not contain a mandate that States adopt a system. Basically it provides for grants to States that do choose to institute an effective one-call system. The only burden on the States in the legislation is to consider the system.

    I believe that once States delve into this issue they will conclude, as I have, that a comprehensive system is a life-saving device. Of course, we would provide for a certain amount of uniformity if they choose to go along with the Federal suggestions and receive Federal funds to do so.

    As you know, I think, the one-call enjoys the support of the National Transportation Safety Board, the Office of Pipeline Safety, and the pipeline industry. The people that testify today will indicate that.

    The other bill that I have introduced makes recommendations or proposals that go a long way, I believe, towards improving pipeline safety. This is H.R. 432. It requires a schedule for pipeline inspections, including inspections with smart pigs where possible. It requires that automatic or remotely-controlled valves must be used wherever it is technically and economically feasible to do so. It also deals with siting issues.

    What we found in the case of the Edison accident was that there was a tremendous amount of dumping that occurred on top of the pipeline that may have contributed to the third-party damage that occurred. And we also have provisions in here that would actually prohibit dumping and provide fines and penalties for the type of dumping that occurs.

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    It also seeks to address citing issues in the sense of providing information to towns if they are in densely-populated areas where there are existing pipelines, how they may choose to go about zoning or land use or new development in that area, because a lot of the towns are not necessarily familiar and would seek some guidance from the Federal Government in that regard.

    I want to conclude here, if I could, Mr. Chairman, but let me say that I think both Congressman Franks and I believe that in reauthorizing the pipeline safety or the pipeline authorization acts that this committee is going to consider this year, we would like to see some of these recommendations included, perhaps not as mandates but perhaps through some sort of financial incentives or other ways of going about moving in the direction of doing some inspection—more inspection with the smart pigs, more remote or automatic shut-off valves, using some of the technology without perhaps mandating it—but providing some sort of incentives in the legislation so that we can, if you will, prod the industry towards doing some of those changes that we think are helpful in the aftermath of the Edison accident.

    Thank you once again. This committee has really been great in terms of addressing this issue.

    Mr. BATEMAN. I thank both of the gentlemen from New Jersey for coming and sharing their views with the committee.

    At this time I would recognize the gentleman from West Virginia, Mr. Rahall, for any questions he may have of our Member witnesses.

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    Mr. RAHALL. Thank you, Mr. Chairman.

    I have no questions. I just want to thank both Bob and Frank for their leadership on this issue. You come to the subcommittee once again with a great wealth of knowledge, personal experience, and your leadership is invaluable to us on this issue. We thank you.

    Mr. BATEMAN. Does the gentleman from Illinois have any questions?

    Mr. LAHOOD. No questions.

    Mr. BATEMAN. The gentleman from Texas, Mr. Laughlin?

    Mr. LAUGHLIN. Thank you, Mr. Chairman.

    Mr. Franks, one of the things I appreciate your saying in your testimony is your bill has flexibility in it, recognizing that the situation in the area of the explosion that you and Mr. Pallone have now gotten interested in—the reason I appreciate it is too often we see bills directed as a result of some catastrophic event like your constituents were subjected to, and bills try to fix that problem fixing the rest of the Nation.

    Quite frankly, I have areas that I represent with substantially more pipelines than perhaps you have where there are no people within miles.

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    I really appreciate that, and if that's the approach of your legislation—and I haven't seen it—I certainly think it is legislation we ought to carefully consider.

    The pipeline industry is very important not just to the area where I grew up, but certainly to the major part of this country because of the safety involved.

    As I have said in here before, I not only grew up closer to a pipeline than the width of this building, and my entire life was spent living around pipelines, I also, in litigation, was involved in both sides of litigation dealing with pipelines. My experience has been a substantial number of incidents involve someone other than who is running and operating and using the pipelines cause the problem. I appreciate your approach to that.

    I do have a question on item one where you talk about increasing criminal and civil penalties for anyone violating Federal pipeline safety standards. Not having seen your bill, is that directed exclusively to the pipeline operator, or is it more broad than that? The reason I ask is our pipeline operators are subjected to inspections—or should be inspected. We already have some fines in place. I just want to know where you are coming from.

    Mr. FRANKS. Two different directions.

    Number one, we create a new Federal crime for doing damage to a pipeline and failing to report that damage to the operator. That would not be a crime of—the defendant in such a case would not be the pipeline operator, it would be the individual who inflicted the damage on the pipeline and failed to take measures to report that damage immediately.

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    The other increased penalties are existing penalties that we have upgraded through our legislation. We have increased civil and criminal penalties that are already crimes under the Federal law.

    Mr. LAUGHLIN. Thank you.

    Frank, I have supported your bill in the past, and we've gotten it through the House. We've run into problems across the street for various reasons.

    Do you feel any more optimism that those problems that have concerned more learned representatives than you and I——

    Mr. PALLONE. I guess I won't comment into the pros and cons of what the Senate is going to do on this bill or any other bill this session or any other session, but I think that basically what happened, Greg, was that it was at the end of the session. In other words, we were in that period within six weeks or so of the election, sort of the ''silly season,'' or whatever you want to call it, and it only took one Senator to basically object and the bill didn't come up, because the only way it could get passed in the Senate was if it was on the—I guess the ''unanimous consent list'' is what they call it.

    There was one person who objected to it—I don't even remember who—and his objection was not really substantive. I think if we had had an opportunity to talk to him in advance it wouldn't have happened.

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    I think we are in pretty good shape.

    Mr. LAUGHLIN. From my knowledge of the bill last time, it was an excellent bill, and I understood there were people across the street that had concerns over there at the other Body, and I wondered if those have been addressed or if they still exist.

    Mr. PALLONE. I think they have been addressed. When the bill—I hate to say this, but I don't remember where the changes occurred, either in Commerce or here in Public Works, but at one point it was just an absolute mandate that the States had to establish a one-call system, and somewhere between Commerce or here—or maybe you made those changes before it went out to the floor—we addressed the concern over a mandate and made it into a grant incentive-type system.

    Once that happened, everybody was pretty much on board in the House.

    I think in the Senate the problem was just misunderstanding on the behalf of on Senator, and I don't remember who that was. Generally everyone was——

    Mr. LAUGHLIN. I'll tell you when we're not in the hearing.

    Mr. PALLONE. All right. But I don't think we are going to have the problem again, frankly, because there is so much support not only from industry but also from all the different sectors that are involved.

    There is also a Senate equivalent of the bill that is moving, as well.

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    Mr. LAUGHLIN. Thank you very much.

    Thank you, Mr. Chairman.

    Mr. BATEMAN. The gentleman from Pennsylvania, Mr. Clinger?

    Mr. CLINGER. No questions, Mr. Chairman.

    Mr. BATEMAN. The gentleman from Illinois, Mr. Poshard?

    Mr. POSHARD. Mr. Chairman, thank you.

    May I ask unanimous consent to submit an opening statement for the record?

    Mr. BATEMAN. Without objection, it will be agreed to.

    [Mr. Poshard's prepared statement follows:]

    [Insert here.]

    Mr. POSHARD. Mr. Chairman, in my District in Illinois, the 19th Congressional District, the great Texas Eastern pipeline system runs right through the middle of my district, and Marathon has a pipeline that goes through my District. This is an important issue for those of us in Illinois. To the gentlemen, our colleagues, that are before us today, I thank you for your interest in this and the tremendous undertaking that you went through last year especially, Frank, in developing this bill.

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    I know the Secretary had a summit last year, and we paid pretty close attention to that with respect to a lot of the issues that came out of that summit, and hopefully this year we'll authorize a bill here that is going to meet some of the continuing needs of this industry.

    Thank you, Mr. Chairman.

    Mr. LAUGHLIN. Mr. Chairman, I have an opening statement that I'd ask unanimous consent that it be made a part of the record.

    Mr. BATEMAN. Without objection it will be made a part of the record.

    Mr. LAUGHLIN. Thank you, sir.

    [Mr. Laughlin's prepared statement follows:]

    [Insert here.]

    Mr. BATEMAN. The gentleman from Florida, Mr. Mica?

    Mr. MICA. I thank the chairman.

    I am interested in this hearing because the questions of risk assessment, which I have been involved in, are actually being applied, I think, and theoretically applied as some of the legislation which passed the House may come to bear on this type of incident that you have related.

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    I notice Mr. Pallone is not to much of a happy camper with using risk assessment as a management tool in this process. You have some problems with that?

    Mr. PALLONE. Let me say this. I don't want to confuse you in terms of where I am coming from.

    I believe very strongly there needs to be flexibility in risk assessment, and, Mr. Mica, when the bill that passed the House this year, the risk assessment bill, came before the Commerce Committee I stated flatly—and I'll state again—that I think we do need risk assessment, but I was concerned about that bill because I felt that it sort of straight jacketed risk assessment by insisting that the same sort of principles be used for every agency, whereas, from my knowledge, a lot of the different agencies do risk assessment, some more effectively than others, and like to have a certain amount of flexibility in terms of how they do it.

    For example, the Nuclear Regulatory Commission, for example, has followed certain risk assessment principles for power plants for a number of years. They came before our Commerce Committee and objected to the fact that they would have to go through a totally new procedure under the bill that eventually passed the House, which they felt was duplicative and maybe even contrary to the public interest.

    On the issue that is before us of pipeline safety, I know that the Office of Pipeline Safety does risk assessment, and I think they are going to probably testify later today about the nature of what they do. Their plea, I believe, is the same plea they made before the Commerce Committee—flexibility. They want to be able to look at pipelines and different types of pipelines in different areas and be flexible about the rules that they apply—sort of the same thing that I think some of the Members here are concerned about. You might want different rules in densely populated areas than you do in more rural areas, or whatever.

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    I guess my only plea to all of you today would be to sort of follow what OPS is saying, which is, let's allow for a certain amount of flexibility in the way this risk assessment is applied, and don't rule out, in reauthorizing the pipeline bills this year, the fact that we need to move forward in certain types of new technologies.

    That doesn't necessarily mean that these things should be mandated, but try to incorporate, if possible, things like remote controlled valves and smart pigging without saying it is mandated in any case necessarily. At least do something, if we can collectively, to move in that direction.

    I don't want to keep talking, but in the one-call bill we came up with a scheme that basically does it through incentive grants. Maybe there is something similar that could be done with some of these other new technologies so that it is an incentive system rather than just mandating things because of a disaster.

    Mr. MICA. Well, again, if you apply some basic risk and cost benefit analysis to even some of these proposals, increase criminal and civil penalties for anyone violating Federal pipeline safety standards. I think in Mr. Frank's testimony he said that you have a better chance of being struck by lightening than being killed or injured in a gas pipeline explosion, so we have now created a class of a Federal penalty and it may or may not make any difference.

    Most of these are probably either an accidental hit or some type of accidental damage that I don't see any of these things that have been proposed that really will detect those.

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    I think you have some pigging requirements here. It says at least once every seven years. At the seventh year and tenth day, somebody also nicks a pipeline and puts it in a dangerous position, I'm wondering what we are really achieving, not that I don't think we should do everything possible to protect public health, safety, welfare, particularly where there are high-density populations, but I just wonder—we are Federalizing a problem and passing more regulations, and are they going to do that much?

    Mr. FRANKS. Mr. Chairman, if I might respond, because Congressman Mica cited a couple of provisions in my bill, John, there is no doubt in my mind that there is no action available to the Government or the industry to make this transmission of this volume of natural gas absolutely safe under every conceivable circumstance.

    But what we sought to do was to create a menu of actions that could be taken by the pipeline company that, if these pipelines, after a risk assessment was done, if they could choose among that menu they could identify a series of actions that could greatly reduce the likelihood of the kind of inferno that we saw last year.

    Are they appropriate in every instance for every pipeline everywhere in America on a uniform basis? Absolutely not. But what we sought to do was to create a menu of both incentives and penalties that we thought would, at the very least, heighten awareness that when excavators are working in the vicinity of one of these 36-inch pipelines, that they need to take greater care.

    Information is a part of it. That's the one-call system, providing the information to the person working at the site.

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    The other is to say that if you do damage to a pipeline you just can't walk away, because the interim impact of that over a period of time, a weakened structure of that pipeline, can lead to a catastrophe that few I think can even believe.

    Mr. PALLONE. John, if I could add—and I don't want to be repetitive—I recognize with risk assessment that you have got to look at the ultimate risk. You're going to say, ''Look, as with most pipeline accidents they don't occur that often. The risk is not very great.''

    But I guess what we are saying is we feel that there are some very simple things that could be done, and we don't want to necessarily just leave those to the industry outright and say, ''Okay, the industry knows best, and the Government has no role here.''

    There is no question in my mind that we should be moving in the direction of things like remote control valve, and using smart pigs, and using some of the new technologies that can be used for inspection.

    The industry people will undoubtedly tell you we are doing that anyway, but my feeling is that if there is some way to move that along without absolutely mandating it, that would be helpful

    There are other issues that I would say are even more important for the Government to do. For example, with regard to the mapping, I think it is important that the OPS have a mapping system in place so that we know where the pipelines are in case there is an emergency or there is a disaster. It also would be helpful from an information point of view for the towns, if they could call upon the Federal Government to give them expertise and advice about citing pipelines.

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    I guess you could argue that all that should just be done by the industry, but I think if there isn't some prodding or some help and cooperation with the Federal Government that you may find that the industry just says, ''Well, we don't have to do that,'' not that they are not acting in good faith, because they do and they have been very good, but there is a role, I think, for the Government.

    Mr. MICA. I applaud your intent. I only question the net result. So I thank you and I yield back to the chairman.

    Mr. BATEMAN. My understanding is the gentleman from Illinois has a question.

    Mr. LAHOOD. I apologize for being late, and I apologize for my ignorance on this. Is the bill that you have introduced this year the same as the one that you introduced last year, basically the same?

    Mr. FRANKS. Mine is substantially similar. Yes.

    Mr. PALLONE. The one-call bill that I have introduced is substantially the same as the one that passed the House and came out of this committee. It was different from the one that was introduced because the changes occurred in this committee and when it finally went to the floor. So it is the same pretty much as the one that passed the House.

    Mr. LAHOOD. How does the pipeline industry feel about your legislation? Have you worked with them and they with you on crafting this?

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    Mr. PALLONE. Yes. You'll hear from them today. Basically the One-call Notification Act they are completely supportive of the bill that has been reintroduced and passed the House. The other bills that Congressman Franks and I have introduced—there are actually three bills. The other two bills are more controversial.

    They would not, for example, in the case of my bill, be supportive, I would assume, of any kind of mandates with regard to remote control valves or smart pigging, but there are other provisions in the bills that they would support.

    Mr. LAHOOD. Thank you.

    Thank you, Mr. Chairman.

    Mr. BATEMAN. The gentleman from Arkansas, Mr. Hutchinson, do you have any questions?

    Mr. HUTCHINSON. No questions, Mr. Chairman.

    Mr. BATEMAN. Does anyone else on the committee have further questions?

    [No response.]

    Mr. BATEMAN. If not, we thank our colleagues for coming and appearing before us. I appreciate the testimony they've given us.

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    At this time I'd like to call up the second panel, the Honorable Dharmendra K. Sharma. Doctor Sharma is administrator of Research and Special Projects Administration of the Department of Transportation, and is accompanied by Mr. George W. Tenley, Junior, the associate administrator for Pipeline Safety, Research and Special Programs Administration, Department of Transportation.

    Welcome to you both. We're glad to have you.

    Before you begin your testimony, I have a unanimous consent request, I believe, from Mr. Rahall.

    Mr. RAHALL. Yes, Mr. Chairman. I would just like to give my opening statement that I failed to do at the beginning at this point, with the subcommittee's permission.

    Mr. BATEMAN. Without objection, we will do that.

    Let me, in the meantime, ask Mr. Clinger if he would mind presiding since I have now reached the point where I have to leave to go make a speech. I assume Mr. Petri will return upon his completion of his task before the Rules Committee.

    Mr. RAHALL. Thank you, Mr. Chairman.

    Mr. Chairman, I had originally envisioned the reauthorization of the Pipeline Safety Acts as being noncontroversial and something that we could do in an expeditious manner considering they expire at the end of the current fiscal year. I hope that this will still be the case.

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    The pipeline industries are seeking a greater degree of flexibility in how they comply with safety requirements. They are supporting a shift away from, in the words of the DOT testimony that we are about to receive, ''a command and control regulatory regime to one premised on risk assessment and cost/benefit analysis.''

    It is my understanding this is an idea that the Administration embraces, as well.

    However, there are ways, and then there are ways, to achieve that goal. One can be supportive of employing risk assessment analyses in certain carefully-defined regulatory situations, but not as we have heard from our colleagues on the previous panel, and not necessarily use the exact wording of the ill-conceived Contract on America inspired generic risk assessment legislation that was recently passed by the House.

    With this noted, I think many democrats would appreciate some flexibility from the majority as to the manner by which the reauthorization legislation addresses this issue if it does at all, because when all is said and done, after we bandy about brave and bold new terms such as risk assessment and risk management, the bottom line is that we all have pipelines running through our Congressional Districts. We all represent people whose safety on a daily basis is, in part, dependent upon how safe those pipelines are from rupture and explosion.

    So I would say to my colleagues that must be the principles we use to guide us in our deliberations over this reauthorization exercise.

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    I thank you for this opportunity.

    Mr. CLINGER [assuming Chair]. I thank the gentleman.

    Now we'll recognize Doctor Sharma.

TESTIMONY OF DR. D.K. SHARMA, ADMINISTRATOR, RESEARCH AND SPECIAL PROGRAMS ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION, ACCOMPANIED BY GEORGE W. TENLEY, JR., ASSOCIATE ADMINISTRATOR FOR PIPELINE SAFETY, RESEARCH AND SPECIAL PROGRAMS ADMINISTRATION

    Dr. SHARMA. Thank you, Mr. Chairman.

    I have a written statement I'd like to submit for the record.

    Mr. CLINGER. Without objection.

    Dr. SHARMA. If I may, I will now proceed to summarize my remarks.

    Good afternoon, Mr. Chairman and members of the subcommittee.

    As RSPA's first Senate-confirmed administrator, it is a particular honor to testify before you today concerning reauthorization of the pipeline safety program.

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    The safety of the Nation's pipeline infrastructure is of critical importance to the President, Secretary Pena, and me. A number of serious pipeline incidents over the last few years, including the gas pipeline explosion in Edison, New Jersey one year ago next week, have demonstrated that the inherent risks posed by pipeline transportation can have serious safety and environmental consequences.

    As a result, the Federal Government must work with the pipeline industry to help ensure that the risks to the public and the environment inherent in pipeline transportation are minimized to the maximum extent practical.

    Mr. Chairman, we are committed to developing even closer partnerships with industry, the States, and the public to help ensure the integrity of our pipeline infrastructure. Last year the Secretary led the first ever pipeline safety summit. He also played the key role in securing much-needed funding authority to dramatically increase the Department's pipeline technical competence.

    These improvements in knowledge and resources are necessary to ensure that we can properly assess America's pipeline infrastructure and industry's efforts to minimize the inherent risks of pipeline transportation.

    Our commitment to partnerships in pipeline safety is perhaps most visible in our continuing effort to shift to a risk management approach in pipeline safety.

    Under this approach, we are replacing traditional command and control regulatory schemes with a system that allows Government and industry to work together to minimize the risks inherent in pipeline safety.

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    Risk management technologies, the unique nature of pipeline systems and segments places more pipeline safety decisionmaking with the people who have the greatest understanding of pipeline transportation, the pipeline industry.

    At the same time, it enables Government to better understand how and why industry makes certain safety decisions and allows Government to leverage its available resources to the areas with the greatest potential for risk reduction.

    Moreover, it replaces outdated minimum safety standard approaches with positive performance measures to judge industry performance. Under this system, industry can use the best means practical to continually meet risk assessment standards, thereby achieving steady improvements in the integrity of pipeline systems.

    Mr. Chairman, we have a number of important risk-based initiatives already underway. In partnership with industry and various agencies at all levels of Government, we are developing the foundation for our risk management criteria. We have created a multi-interest, multi-disciplinary team of industry and Government representatives to develop the basic elements of a national pipeline mapping program. We are building a program to prioritize the risks inherent in pipeline transportation and we are working with the pipeline industry to develop a collaborative research agenda.

    Although risk management is a major focus of our pipeline program, we also are working on a number of other important safety initiatives. We will again seek passage of comprehensive one-call legislation which is critical to addressing the primary threat to pipeline integrity—damage caused by excavation.

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    We completed review and approval of more than 1,100 pipeline operator oil spill response plans submitted under the Oil Pollution Act of 1990. We issued a number of final rules, and we have several pending rulemakings.

    Finally, Mr. Chairman, we have reached a decision in our excess flow valve rulemaking. After a thorough evaluation we decided not to issue a final rule requiring the installation of excess flow valves on certain gas service lines.

    Mr. Chairman, I am very enthusiastic about the future of the pipeline safety program. I look forward to further developing our partnership with industry, other agencies in Government, and the public.

    Thank you for the opportunity for us to appear before you today. I will be glad to answer any questions.

    Mr. PETRI [resuming Chair]. Thank you very much.

    Mr. Rahall, I'll yield my time.

    Mr. PETRI. Mr. Laughlin?

    Mr. LAUGHLIN. Thank you, Mr. Chairman.

    Doctor Sharma, first I want to ask you how you go about rulemaking that you have mentioned several times in your testimony and in your statement. Do you talk to the industry, the States, and other interested parties before commencing a formal rulemaking procedure? Do you seek peer review of your rules just prior to issuing them? And what impediments do you encounter to a more open discussion?

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    Dr. SHARMA. Mr. Chairman, I'll ask George Tenley to give you details about rulemaking, but we certainly—it is a process in which we involve all the concerned parties, and we hear from them. So it is, indeed, a process in which the affected parties are involved.

    George, if you would like to elaborate on that?

    Mr. TENLEY. Mr. Laughlin, in our rulemaking process we rely heavily on public input to the public docket. In fact, if you look at the history of our rulemaking I would say that more than 99 percent of the data that we receive to do rulemaking comes from the industry that we regulate.

    We have a goal in the last two years to greatly increase the number of public meetings that we have for rulemaking, and we also, under the statute, use the two technical advisory committees to perform what could be called peer review of our proposed rulemakings.

    Mr. LAUGHLIN. Doctor Sharma, you say risk management places more of the right kind of pipeline decisionmaking with the pipeline industry. Given that statement, if you give more decisionmaking to the industry, I understand that your department has asked for $22 million more in resources. How do you justify that amount of money if you are going to place more of the risk management on the pipeline operator?

    Dr. SHARMA. Mr. Laughlin, you are referring to the significant increase in the resources that Congress appropriated last year, and as a result of the incidents we have had in the past couple of years—one in Virginia and the one in Edison, New Jersey, about which the two Congressmen before us spoke. They are for a number of efforts, if I might suggest.

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    I'd just like to tell you some of the efforts that this money will go towards: mapping, increasing inspection, pigging, developing an index of environmentally sensitive areas, developing in-house technical capability, and what you just mentioned—develop this risk management approach, which is something recently that we have embarked upon. Also, the one-call campaign

    So it is for quite a few efforts that this money will go towards, not just the risk management.

    Now, what action items come out of the risk management plans that are submitted by the pipeline companies, we will look at that and we would concur or go back to the pipeline companies if any of the risk management plans need change and work with them on those items that come out in the risk management review of the pipeline area.

    Mr. LAUGHLIN. Doctor Sharma, who has the primary responsibility for pipeline safety? The pipeline companies or the Department of Transportation? And what are the leading causes of pipeline damage and fatalities? Lastly, as part of that, what do you suggest this committee do to prevent these problems?

    Dr. SHARMA. Mr. Laughlin, I believe all of us have responsibility for pipeline safety—the industry, the Government. Working together in partnership I think we can address this problem to the best extent possible. Nobody can guarantee that there will not be another pipeline incident, but we certainly are going to do our best working together.

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    There are many causes of pipeline incidents, not the least of which is the third-party damage, when excavation and all that—therefore, the need for one-call campaign, the one-call bill that I just mentioned and the two Congressmen talked about.

    If I forget any part of your question, if the Congressman would like——

    Mr. LAUGHLIN. I was asking about the leading causes, and you attribute the leading causes to third-party intervention?

    Dr. SHARMA. Yes, sir.

    Mr. LAUGHLIN. While we know there are other causes, the significant area of damage to pipelines resulting in either property damage or physical injuries or death would be third-party intervention?

    Dr. SHARMA. Yes, sir.

    Mr. LAUGHLIN. And the last part: what do you suggest we in the Congress do to try to address these problems?

    Dr. SHARMA. I think we——

    Mr. LAUGHLIN. This committee.

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    Dr. SHARMA. I think we need to find out, Mr. Laughlin, for a given area, what are the more likely causes of pipeline failure for that area. In other words, we are talking about risk management approach.

    For example, if the pipelines are older, aging is a problem, so we need to think about that. If there is a population density around, that is a consideration.

    We need to see what is unique about that area and determine what are the likely causes in that area.

    Mr. LAUGHLIN. Thank you, Mr. Chairman, and thank you, Mr. Rahall.

    Mr. PETRI. Mr. Horn, any questions?

    Mr. HORN. No questions.

    Mr. PETRI. I just had one area I wish you'd comment on, if you can, but first I want to say that the committee and staff appreciate the work that you and your department have been doing on this legislation attempting to develop new and more up-to-date ways of promoting safety in the pipeline industry. I think the legislation that we introduced at their request and your ideas are moving roughly in the same direction, and so I think we'll end up with a constructive exercise here and real improvement, hopefully, and improved focus of valuable resources to promote safety.

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    But there is a change when we try to go from traditional rulemaking and administering of rules on an industry to setting objectives and looking at cost/benefit analysis and looking at people to achieve the objective however they best can. It is harder to police.

    You can determine if someone fills out a form correctly. You can determine if something is 12 feet or 18 inches long or whatever, so it is administratively simpler, whether it actually helps or hurts getting to the objective. But we have probably done what we have done in the past partly because of its clarity and simplicity in administration rather than because it is necessarily the best way to get the job done.

    How are we going to administer this new approach? What thoughts do you have as to how we monitor improvements in a sensible way, avoiding being dragged down by the details, encouraging experimentation and yet at the same time not letting people get off with something that sounds good but suddenly we have an explosion on our hands because it hasn't had substance?

    Dr. SHARMA. Let me assure you, Mr. Chairman, that we'll do our best so that people don't get off. This is, indeed, an evolving process, instead of like what you were correctly saying that we have had this one-size-fits-all approach. We wanted to see what's unique in a particular area, as I was explaining, what is the best solution for a given area, for a given pipeline segment.

    We think that if we set certain performance criteria, certain performance standards, and they are clearly written, and if we give them to the pipeline industry, they, knowing their system best, can help us determine from a risk management perspective what is the best solution for that area. And these could be multi-faceted solutions.

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    We would, indeed, review that risk management plan that they will have. If we are not satisfied, we will have a dialogue with them and come to a mutually agreed-upon risk management, risk assessment based solution. We think that's the way to go. If I might use the word, kind of a ''tailor-made'' solution for each given area.

    Experience would be our guide, Mr. Chairman, as we work in this area. We will fine tune the process as necessary.

    Mr. PETRI. Thank you very much, Mr. Sharma.

    Dr. SHARMA. Thank you, Mr. Chairman.

    Mr. Rahall or Representative Mineta, do you have any other questions?

    Mr. RAHALL. Is there anything in current law that prohibits you from conducting risk assessment analysis as part of the pipeline safety rulemaking process?

    Dr. SHARMA. I beg your pardon, Mr. Rahall, but I really couldn't hear your question.

    Mr. RAHALL. I'm sorry. Is there anything in current law that prohibits you from conducting risk assessment analysis as part of the pipeline safety rulemaking process?

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    Dr. SHARMA. Mr. Rahall, I think I'll ask George Tenley to respond to that to what is in the current law.

    Mr. TENLEY. No, there isn't. We can do a range of risk assessments, and we are already in the business of doing risk assessments to a certain extent right now.

    Mr. RAHALL. It is my understanding that you have reviewed the industry's proposed reauthorization bill, and I would appreciate your views on its risk assessment regime, as well as its proposed risk management demonstration project.

    Mr. TENLEY. I haven't taken it apart like I'd like to, but I have had a chance to read it a couple of times and I do have some thoughts about it.

    There are two things in the bill. You described the two ends of the continuum—risk assessment and risk management. On the risk assessment side, I find it too constraining. I think it would be difficult for us to do our job in the Office of Pipeline Safety. Certainly the way we do our job would be greatly different, and our skills mix would be different. I think we'd need new and rededicated resources in order to do the kind of risk assessments that are prescribed in that provision.

    So I don't know that I favor it because of its constraining nature.

    The risk management, at the other end of the continuum— and I would make a distinction between risk assessment and risk management. Risk assessment is a tool. It is a means to make decisions. Risk management is the sum total of your thought and action on how you would run a program, whether it be a corporation or a pipeline safety office.

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    On the risk management side, I think the idea of a demonstration project that's in the bill is a very sound idea. I think the problem with the proposal in the industry's bill is that it is far too open-ended and would completely overwhelm our ability to effectively develop risk management principles for the future on which a demonstration project would be based.

    So I would like to see a little bit more finite terms in the risk management approach, perhaps limiting it to five or seven operators, perhaps, and do a thorough risk demonstration with those five or six operators and not leave it totally open-ended.

    Mr. RAHALL. Did you notice the definition of navigable waters in the industry's bill? If so, what would be the consequences of us enacting this provision on pipeline safety?

    Mr. TENLEY. I have long believed that, because of the prevalence of the terminology ''navigable water'' in the environmental arena, that we have had to craft a definition for pipelines that fits pipelines. However, I don't believe that the definition in the industry bill is broad enough. I think it is too narrow.

    I don't know that I want it to be as broad as it is in some other Federal legislation. I think we have to find a happy medium, but I don't think that provision is the happy medium.

    Mr. RAHALL. The industry bill sets a $1 million threshold for what would be a significant standard requiring a risk assessment analysis. The generic risk assessment bill that passed the House, however, has a $25 million threshold for certain activities, and I believe $100 million threshold for others.

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    Do you believe that $1 million is the appropriate threshold? If not, what should it be set at?

    Mr. TENLEY. I think $1 million is ludicrous. I don't know if $25 million is right or $50 million is right, but almost anything we do—any exhalation of breath in a Federal program is going to cost $1 million of effect in an industry. So if we are going to use that approach, we have to find a threshold that acknowledges more realistically what the costs are and the benefits are in regulating this industry.

    I don't think $1 million is an appropriate threshold at all.

    Mr. RAHALL. The industry's proposal would freeze the program authorizations at their fiscal year 1995 levels. Would this provide adequate funds to administer the program and engage in any new risk assessment activities required by the reauthorization?

    Dr. SHARMA. Mr. Chairman, if I might respond to that question?

    Mr. PETRI. Sure.

    Dr. SHARMA. As I have stated before, I think, after the two incidents, we identified quite a few action items that we need to work on ourselves and in partnership with industry, and they need resources, and the near doubling that the Congress gave us last year, we need those resources in order to be able to fulfill our responsibility to bring the pipeline safety program up to par.

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    Mr. RAHALL. Your testimony mentioned that you pretty much are not going to require the installation of excess flow valves. Have you heard any or many complaints about this decision, or is it too recent to have become public knowledge?

    Dr. SHARMA. We just recently made a decision in that regard, so it is a very recent occurrence, Mr. Chairman, and we have, as I said in my remarks, we met with NTSB and might have a disagreement with NTSB on this score, but we do agree with NTSB that it can be an important safety device under the right operating conditions, and we plan to work to encourage the development of excess flow valves for widespread use by industry.

    But we have not had any feedback yet because it is so recent from the industry. I have not yet heard. It is a very recent decision.

    Mr. RAHALL. Thank you.

    One last question, please.

    Could you update us on the status of your rulemaking on the use of internal inspection devices, commonly known as ''smart pigs''?

    Dr. SHARMA. I'll ask George to respond to that.

    Mr. TENLEY. I can't give you a specific status update. I will say this about that particular rulemaking: in the spirit of risk management and the issue of applying technologies—in this case expensive technologies—where they can do the most good, we believe that this is a rulemaking appropriate for consideration for transitioning to a risk management approach to regulation, and we are looking at that possibility right now.

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    Mr. RAHALL. Thank you, gentlemen.

    Thank you, Mr. Chairman.

    Mr. PETRI. Mr. Mineta.

    Mr. MINETA. Thank you very much, Mr. Chairman.

    I apologize, Doctor Sharma and Mr. Tenley, for not having been here for your presentation.

    Mr. Chairman, I'd ask unanimous consent that my opening statement be made a part of the record.

    Mr. PETRI. So ordered.

    [Mr. Mineta's prepared statement follows:]

    [Insert here.]

    Mr. MINETA. I'd like to ask about the current flooding situation that we have in California, as it is my understanding it has caused at least three pipeline failures, including a spill of more than 8,000 gallons of crude oil. I was wondering: how can we improve our ability to prevent flood damage to pipelines and to prepare for accidents should they occur?

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    Dr. SHARMA. Mr. Mineta, the one thing that we would like to do, we propose to do when we develop this mapping, the nationwide mapping for pipelines, is that this intermodal mapping—in other words, when a pipeline crosses a major highway or a major road, identify those.

    In the risk management approach, it would be identified as an area in case of floods as something of a high risk, something to watch for.

    So when we develop our mapping capability, it will certainly help us be prepared in advance to be able to take care of those situations, so I think that would certainly help in cases like that, Mr. Mineta.

    Mr. MINETA. I understand that you have taken several initiatives to work closely with industry representatives in shaping regulations. I'm wondering if you could elaborate on that collaboration with industry and how it is coming along.

    Dr. SHARMA. I'll ask George to give you some details in that regard, Mr. Mineta.

    Mr. TENLEY. After the pipeline safety summit last summer, in coming out of the findings of that work, we began a risk quality team with the hazardous liquid industry to help set the standards for future risk management development in the United States. That report should be out in about two to three weeks, and we'll be taking it to various focus groups, including Congressional staffers, to talk about some of the exciting possibilities that group has done.

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    We are also working, as Doctor Sharma said, in a joint Federal/State/industry team on mapping so we do this the right way and we don't create burdens that aren't necessary for having the kind of information that we need for mapping.

    Those are two principal efforts that we have underway that I think are going to reshape the program and position us much better in the future. Other than that, as reflected, I think, in the industry's bill, is the effort to deal with the industry as much as we can prior to setting rulemaking activities in motion. That's a commitment that we have made, and we intend to see that through.

    Mr. MINETA. On this whole issue of risk assessment as it relates to the pipeline safety program, it is my understanding that the industry coalition proposal includes some prescriptive language. On the other hand, the DOT proposal would require the Secretary to conduct a broad-based review of risk associated with pipeline transportation. Would the industry's approach increase the effectiveness with which you address pipeline safety problems, or would it delay measures that would protect public health and public safety, as well as the environment?

    Dr. SHARMA. Mr. Mineta, I'll ask George to help add to my answer, but we need flexibility in risk assessment. Each area, as I said before—pipeline area—is a unique area in terms of the type of pipelines. Each pipeline area is a unique area in terms of the size of the pipelines and the age of pipelines, the environment that might be around the pipelines, the population density. We need flexibility in addressing the approach that we take to each region in terms of what the best solution might be to address pipeline safety. So we ask for that broad-based flexible approach.

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    George, would you like to add to that?

    Mr. TENLEY. I think it is basically a two-way street here. I think that we need to give the industry the necessary flexibility to do the right thing on a pipeline and not overly constrain that. By the same token, when we decide to do a regulation—and our goal is not to regulate more. Our goal is to assure pipeline safety—when we do have to issue a regulation, I don't think it is in the public interest that we be so constrained as we'd be under this particular provision.

    So I think there is an ability in the bill to work with the industry and with the committee to come up with an alternative consensus bill that will acknowledge the important risk assessment concepts without constraining either the industry or constraining us.

    Dr. SHARMA. Mr. Mineta, if I might just add on the philosophical basis that it is our intention on this in all of the areas, indeed, to work with industry. We cannot do the job of pipeline safety all by ourselves. We need to work with industry. We need to hear from the public.

    Working in partnership, I think we can indeed achieve our objective of assuring the public the best pipeline safety record that we possibly can have.

    Mr. MINETA. Let me ask you about cost/benefit analysis. Does the Office of Pipeline Safety currently use cost/benefit analysis for each new rule, as required by the President's Executive Order.

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    Dr. SHARMA. I'd ask George to respond to that.

    Mr. TENLEY. Yes, we do, Mr. Mineta, and have for several years.

    Mr. MINETA. The industry coalition proposal, however, calls for some extensive use of cost/benefit analysis. Compared to what you are doing, as compared to what the industry coalition is suggesting, how would you say you stack up?

    Dr. SHARMA. Mr. Mineta, again, the approach that we suggest is one of flexibility. In other words, the same straightjacket approach of doing cost/benefit is not appropriate to every case. We need to look at what the situation might be and what kind of cost/benefit analysis ought to be done, so we need some flexibility there.

    George, do you have anything to add to that?

    Mr. TENLEY. Yes. I think the critical part here is data and information, and there is no question that the way we've done cost/benefit analysis in the past could definitely be improved on. In part, I believe the largest percentage of the data we get is from the industry that we regulate, and I think we need other ways to get good data, and I think our budget request reflects that.

    On the other hand, as Doctor Sharma said, the flexibility necessary to do a cost/benefit analysis needs to be there, and, again, Mr. Mineta, although I haven't taken the bill apart, I'm not confident that the flexibility is in that provision.

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    Mr. MINETA. Thank you very much, Doctor Sharma and Mr. Tenley.

    Thank you very much, Mr. Chairman.

    Mr. PETRI. Mr. Cramer, any questions?

    Mr. CRAMER. No questions, Mr. Chairman. Thank you.

    Mr. PETRI. Gentlemen, thank you very much for your coming here today.

    Dr. SHARMA. Thank you, Mr. Chairman and members of the subcommittee.

    Mr. PETRI. Good luck.

    Mr. TENLEY. Thank you very much.

    Mr. PETRI. The next panel, panel three, is comprised of: Debbie Fretz, who is president of Sun Pipe Line Company and chairman of the Association of Oil Pipe Lines; and Mr. Ron Mucci, vice president of marketing for the Northwest Pipeline, and formerly vice president of operations for Williams Natural Gas. He is appearing on behalf of the National Gas Association and the American Gas Association.

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    Welcome to you both. Please proceed as you wish.

TESTIMONY OF DEBBIE FRETZ, PRESIDENT, SUN PIPE LINE COMPANY, AND CHAIRMAN, ASSOCIATION OF OIL PIPE LINES, ON BEHALF OF THE AMERICAN PETROLEUM INSTITUTE (API) AND THE ASSOCIATION OF OIL PIPE LINES (AOPL); AND RON MUCCI, VICE PRESIDENT OF MARKETING, NORTHWEST PIPELINE, AND FORMER VICE PRESIDENT OF OPERATIONS FOR WILLIAMS NATURAL GAS, ON BEHALF OF THE INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA (INGAA) AND THE AMERICAN GAS ASSOCIATION (AGA)

    Ms. FRETZ. My name is Debbie Fretz. I'm senior vice president of logistics for the Sun Company, and I'm chairman of the Association of Oil Pipe Lines. I'm here today on behalf of the American Petroleum Institute, API, and the Association of Oil Pipe LInes, the AOPL.

    AOPL is an unincorporated trade association of 78 common carrier oil pipeline companies, and API represents over 300 companies involved in all aspects of the oil and natural gas industry, including exploration, production, transportation, refining, and marketing. Together, these two organizations represent virtually all of the United States' pipeline transporters of petroleum and petroleum products.

    With a network of more than 200,000 miles of liquid pipelines, our industry transports over 50 percent of all petroleum moved in the United States today.

    My remarks today are directed to the oil pipeline safety program as it is presently administered by the Department of Transportation, and changes which we are suggesting might be made to complement that program. These changes are incorporated in H.R. 1187.

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    The following five observations summarize my statement.

    The industry supports an effective safety program administered by the Office of Pipeline Safety, the OPS. The industry supports continuation of the current regulatory program employed by OPS. The industry funds the OPS program through user fees and is naturally concerned that the program be cost-effective. The industry believes that risk assessment and cost/benefit analysis should be employed before the promulgations. And together with OPS and public sector representatives, the industry has been exploring risk assessment and risk management concepts and their application to regulatory programs.

    While the program, as presently administered, has been effective, we are here to provide you with our vision as to how we can better work jointly to address the challenges and continue to improve the safety record of the liquid pipeline industry.

    H.R. 1187 proposes two major improvements to the act and recommends limited technical corrections in several other areas. The improvements we are seeking are, first, a requirement that the Secretary conduct risk assessment, cost/benefit analysis during the development of regulations; and, second, statutory language allowing the Office of Pipeline Safety to establish a voluntary program to demonstrate the effectiveness of company-specific risk management programs as an alternative means of regulatory compliance and as a means of moving towards the goal of continuous improvement in pipeline safety rather than just regulatory compliance.

    When prescribing significant new standards or regulations, the Secretary would prepare a risk assessment document and prepare a cost/benefit analysis. Public and private resources available to address safety and environmental concerns are not unlimited. These resources need to be allocated to address the greatest needs in the most cost-effective manner so that the incremental costs of regulatory alternatives are reasonably related to the incremental benefits.

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    There would be a provision permitting a petition by an owner or an operator to the Secretary for risk assessment cost/benefit analysis of existing significant standards.

    H.R. 1187 is consistent with legislation that Congress is now considering on risk assessment which would have broader ramifications, but H.R. 1187 is designed to specifically accommodate circumstances that are unique to the pipeline industry.

    For example, the peer review function would be performed by the existing technical advisory committees, which consist of representatives from the Government, the industry, and the public sector. Qualifications of representatives would be appropriately modified to assume this new function.

    We believe that both OPS and industry are at a significant crossroad. That junction is defined by the continuing growth of our single solution-oriented prescriptive rules promulgated either directly by legislation or through regulations.

    The technical issues that remain are exceedingly complex, and no single solution can be expected to be applied both effectively and efficiently. It is time to stop mandating one-size-fits-all solutions to a sophisticated industry that is capable of evaluating risks and applying specific solutions to specific problems.

    But how do we get to this new paradigm?

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    H.R. 1187 contemplates a demonstration project whereby the Secretary may permit owners and operators of natural gas or hazardous liquid pipelines to develop risk management plans and conduct certain design, maintenance, inspection, and other activities in conformance with risk management plans reviewed and approved by the Secretary. Participation in the project would be voluntary.

    The Secretary would decide which owners or operators who have volunteered and which facilities would be allowed to participate. The Secretary would have the authority to inspect and require appropriate documentation as he designates. Also, during the regulation of the project, the participants would not be required to implement new regulations promulgated by the Secretary after the commencement of a demonstration project as to facilities covered by the project.

    At the conclusion of the project, not to exceed four years, the Secretary would report to the Congress on its results and recommend, as necessary, additional legislation.

    Both the regulators and the industry participants would be learning, which is required to establish new performance measures to manage operations, to improve those performance measures, and to apply the necessary resources to achieve the objective of continuously improving the performance of the system.

    I must also say, Mr. Chairman, that our industry believes that the one-call legislation, as is introduced in this Congress, is an essential element in an effective pipeline safety program. The greatest cause of pipeline incidents is third-party damage, usually the result of excavator activity. We urge this committee to hold hearings on this matter and to act to pass legislation in this session.

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    Mr. Chairman, this concludes my testimony. It is a pleasure to appear before your subcommittee to discuss this important subject. I assure you of our commitment to work closely with you and your staff as the legislative process moves forward.

    I would be pleased to answer any questions you or your colleagues may have.

    Mr. PETRI. Thank you very much.

    Mr. Mucci.

    Mr. MUCCI. Thank you, Mr. Chairman.

    Mr. Chairman, members of the committee, my name is Ron Mucci. I'm the vice president of marketing for Northwest Pipeline, formerly the vice president of operations and engineering for Williams Natural Gas. I'm here today to testify on behalf of the Interstate Natural Gas Association of America, INGAA, and the American Gas Association, AGA, on the issue of pipeline safety.

    I want to thank this subcommittee for holding this oversight hearing to review the status of pipeline safety and seek input on the ways the Pipeline Safety Act can be improved.

    INGAA and AGA support H.R. 1187 and thank you and Congressman Laughlin for introducing it.

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    Pipeline safety is a top priority of the members of INGAA and AGA. It is in our own interest to assure our customers, our employees, our shareholders, and the public that we have a safe system. Our commitment to safety has translated into a track record that shows we are the safest method of delivering the energy our Nation needs, as exemplified.

    However, we recognize that we must continually seek ways to assure that our systems are even safer. In fact, last year the INGAA board set up a board-level task force to review our safety procedures. This task force developed an action plan with several aggressive initiatives.

    The first initiative is to seek passage of legislation to encourage Sates to improve their one-call programs. Third-party damage causes 60 percent of the natural gas accidents that occur. We are grateful for the work you, Congressmen Franks, Rahall, Mineta, and this subcommittee did to move one-call legislation last year. We remain committed to working with this subcommittee to pass a comprehensive one-call bill.

    Developing a risk management approach to pipeline safety, reviewing our patrolling and monitoring procedures, improving public education and emergency preparedness, and reviewing the current pipeline safety-related research programs of both GRI and the Pipeline Research Committee were also addressed.

    The cost of these programs in compliance with Federal regulations are ultimately borne by the natural gas consumer in an increasingly competitive market. Therefore, Federal regulations must be cost-effective and only be imposed where there is the greatest potential to reduce risk.

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    For that reason we support H.R. 1187, which authorizes a formal risk assessment prioritization program which allows OPS to focus on those areas where a demonstrable, widespread risk exists, and to promulgate flexible, performance-based regulatory responses subject to review with public and industry representatives who understand pipeline safety issues.

    We also encourage Congress to provide a mechanism to allow OPS to discuss ideas or concerns with the industry and other interested parties prior to entering into a formal rulemaking process. We believe the acceptance of risk assessment principles by all stakeholders will ultimately improve the level of safety above what would result from one-size-fits-all regulations.

    I would now like to discuss the authorization level for the Office of Pipeline Safety.

    As a direct result of the Edison accident and a product pipeline accident in Virginia, the Office of Pipeline Safety fiscal year 1995 budget increased by over $18.2 million, to a total of $37.6 million. As a result, user fees have drastically increased.

    The industry wants to assure that this money is all being well spent. INGAA and AGA object to some of the programs that have been created in fiscal year 1995 as being duplicative and redundant with what either the industry or some other agency is doing.

    We urge Congress to reject the OPS request to increase its appropriation for fiscal year 1996 by another $4.1 million and encourage Congress to investigate the planned use of the fiscal year 1995 increase.

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    The bottom line: we want an efficient and cost-effective Office of Pipeline Safety, and we would like to work with OPS to explore ways to share information in a true and cost-effective partnership.

    In summary, pipelines are the safest mode of transporting energy and our safety record is outstanding.

    Second, it is vital that DOT apply risk assessment, cost/benefit analysis to the regulations they issue.

    Third, we want OPS to be adequately funded to carry out their mandate to assure safe pipeline system, but they must accomplish this goal in an efficient and cost-effective manner.

    Finally, we want the opportunity to initiate risk assessment programs which will allow pipeline operators the flexibility to direct available resources to activities with the greatest potential for reducing risk.

    That concludes my comments.

    Thank you, Mr. Chairman.

    Mr. PETRI. Thank you both for your testimony.

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    Mr. Rahall, do you have anything?

    Mr. RAHALL. Thank you, Mr. Chairman.

    Thank you both for your testimony this afternoon.

    Let me ask my first question. How does the industry's proposed reauthorization bill respond to the Edison Gas and Northern Virginia liquid line accidents?

    Mr. MUCCI. First of all, I would like to point out that the Edison accident was due to the number one cause of pipeline failures, which is third-party damage. We have vigorously tried to promote the passage of a national one-call legislation to encourage the States to pass such comprehensive legislation as New Jersey passed as a result of Edison.

    Risk management programs, for which we have a proposal to have a demonstration project, would provide pipeline operators with the flexibility to assess the relative risk of another Edison and focus available resources to improve pipeline safety.

    Relative to compliance with the minimum prescriptive regulations, the pipeline operator could choose the appropriate action when and where needed to reduce risk.

    The one-size-fits-all drains available resources, which in many cases are ineffective or not appropriately placed.

    We have also put in our own program the need for public education, improved communication, and we embrace the comments by the NTSB to encourage all parties to communicate to the public where the pipelines are located.

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    Lastly, we would suggest that local zoning laws be looked at in order to address the issue where construction is right on top of pipelines.

    We think all those things can be addressed through an effective risk assessment program where the bottom line is the pipeline operators are given the latitude within available resources to target the funds where they can be most effective, where there is the greatest probability of a failure and the greatest risk as a result of that failure. We can focus our resources in those areas.

    Mr. RAHALL. The risk assessment language in the industry bill is apparently verbatim from the generic risk assessment legislation recently passed by the House. Do you believe this exact language represents the very best way to achieve the goals of implementing a risk assessment regime in the pipeline safety program, or are you open to clarifying language, such as language that may be less prescriptive?

    Mr. MUCCI. Mr. Rahall, we want to work with all members of this committee to get legislation which includes sound risk assessment principles, cost/benefit analysis, peer review, and the ability for pipelines to implement risk management. It is critical that we get those concepts passed.

    Mr. RAHALL. Let me ask you a question I asked the DOT earlier about the $1 million threshold. What would be a significant standard requiring a risk assessment analysis in the industry bill? Do you really believe that $1 million is the appropriate threshold?

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    Mr. MUCCI. We do, Mr. Rahall, for two primary reasons.

    First, off the off chance that we may have a difference of opinion with the Office of Pipeline Safety as to the cost of compliance, we think it is completely consistent to apply the principles of risk assessment and cost/benefit, and effectively all we are really asking is that when they promulgate regulations that they perform those analysis and that those be reviewed by a cross-functional group which is already functioning which is made up of industry representation as well as Government representation.

    Also, I may add there is the opportunity for certain regulations to be applicable only to a certain limited number of pipelines where the situations may fit those pipelines, and to the extent that yields $1 million of cost, which will be borne by a small group of pipelines, I can certainly say for our company $1 million operating a maintenance expense which was not budgeted is very significant.

    So we don't feel that it is a straightjacket. In fact, it is simply applying the principles that we suggested and OPS agrees should be incorporated.

    Ms. FRETZ. If I may, for a minute, on the oil pipeline side I think that this is something that has to be worked through with DOT, and the issue is maybe not the number but the appropriate methodology of going about how you get risk assessment and what makes sense to the industry. If it is $1 million or $5 million or $10 million, I think that still has to be determined working between the industry and DOT.

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    As you know, the bills are fairly early in evidence here, and there are still some things to be worked out between the two of us.

    Mr. MINETA. Thank you.

    Thank you, Mr. Chairman.

    Mr. PETRI. Thank you.

    Mr. Mineta, any questions?

    Mr. MINETA. Thank you very much, Mr. Chairman.

    Let me ask Ms. Fretz, in your testimony you describe the risk assessment quality team that DOT and the industry have put together. I'm wondering—I get the feeling, at least in reading the legislation, that—wouldn't it make sense to allow the team to move forward in terms of its own work of trying to define strategies for expanding the use of risk assessment and risk management without putting the Department in the straightjacket that is recommended in the legislative proposal?

    Ms. FRETZ. Well, I think that the committee is moving forward very well, but I think it fits into the bill because I don't—maybe I don't understand it, but I don't see the straightjacket there because everything we are saying is at the discretion of the Secretary in terms of whether he proceeds, of what projects he accepts to go forward.

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    We have been a long time coming to this issue, and I think it is appropriate that it be included into the bill.

    Again, as you go forward maybe some of the wording gets changed, but conceptually I think this is something that we ought to try and work toward over the next four years and see what it looks like to give the industry a chance to improve its operations.

    Mr. MINETA. I sort of get the feeling it is sort of like ''ready, fire, aim.''

    Ms. FRETZ. You mean in terms of risk assessment?

    Mr. MINETA. Well, just in terms of the approach here, because here we are trying to—it is just like your statement—I think it was your statement—that talked about being reluctant to have a one-size-fits-all type of approach, and yet it seems to me by being very prescriptive you are doing the very same thing to the Secretary that you are complaining about.

    It seems to me, rather than being that prescriptive, then it seems to me you ought to be working with the Department of Transportation to determine when and where that risk assessment is appropriate, and then determining how best to conduct the assessment.

    Ms. FRETZ. You know, today I run probably 9,000 miles of pipeline, and I have crude lines in Oklahoma and Texas, and I have product lines on the east coast here, and the whole issue of risk assessment and what will you do with a pipeline in Texas in a remote area versus what I have in Newark, New Jersey, on a petroleum pipeline project is two different things. To me, this project that is moving forward is simply an extension of that. It is something that the industry has been working on for years.

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    I don't think this is a fire and aim situation. I think this has been well thought-out, and that on the other side of that we are under rather prescriptive orders today in terms of no cost/benefit analysis from our standpoint, and these pipelines cost us a lot of money to run smart pigs through, and I think it is necessary to have it a little better defined as we move forward.

    Mr. MUCCI. Mr. Mineta, would you mind if I comment, please?

    Mr. MINETA. Yes. Of course, Mr. Mucci.

    Mr. MUCCI. I'd like to point out, to the extent there may be some degree of confusion, what we have laid out is, in essence, a bifurcated type of approach wherein, as a pipeline operator, we can enter into a collaboration with the Office of Pipeline Safety to develop a risk management program and, as pointed out, that will be an evolving product.

    I happen to be the token gas member on the liquids risk assessment quality team, as well as the co-chair of the gas risk assessment quality team. It is a very constructive group representing all segments of the industry, as well as Government and the public, and what we are proposing here is, in essence, if we voluntary develop, in conjunction with the Office of Pipeline Safety, a risk assessment program, we would be allowed to go forward with a demonstration project with a limited time, all recognizing that we must prove to the public the benefits of that program.

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    As an alternative, if certain companies or pipeline operators so choose not to go down that path, then the regulations would apply, and we're suggesting under that path that the Office of Pipeline Safety follow the same risk assessment and cost/benefit analysis in promulgating their regulations so that there is a bifurcated path.

    Mr. MINETA. Let me ask you, then, in your statement you note that INGAA is working to improve the industry's effort to promote public education about pipelines and emergency preparedness, yet the industry's legislative proposal eliminates that section requiring the Secretary to issue regulations regarding informing customers about the excess flow valves.

    Now, I'm wondering: do you support educating the public about excess flow valves and their potential to reduce damage in the event of an accident, given the elimination of that section?

    Mr. MUCCI. Yes, we do. I think it is a matter of—what we have proposed is that the industry, in conjunction with all of the stakeholders in the transportation in which we are involved and distribution of natural gas, in essence that we will undertake those efforts. In fact, in our board-level task group we have done quite a bit of work in working with local agencies in terms of trying to promote, for example, they call them ''b-rolls,'' so that we can have tapes that can be available, how to distribute literature, how we can get our message across.

    So we are taking those active efforts, but I want to point out that the DOT—ultimately those user fees are borne by all of the ratepayers of the services we provide, and I think it is a role that we feel we can step into to help promote the communication and education.

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    Ms. FRETZ. I would agree.

    Mr. MINETA. In your statement, Mr. Mucci, you also indicate that you felt that there are certain DOT activities that are duplicative of what the industry is doing. When it comes to data, trying to develop a database, are you suggesting that the DOT rely on industry-provided information in deciding how to protect the public interest? And isn't it appropriate for the DOT to obtain information from a variety of sources, including some that are not funded by groups with interests directly tied to the outcome of the proceedings?

    Mr. MUCCI. I think it is appropriate that we do provide information to the Office of Pipeline Safety and, in fact, a large part of the risk assessment—and I think I heard it referred to earlier, the paradigm shift that we are proposing here. Frankly, we are proposing to shift from a closely-held information to one of open communication. We think that we can, as part of that process, make data available to the Office of Pipeline Safety.

    We want to work with them. This is a collaborative effort, and we both are going to embark on risk management together, and I think we both have a mutually-vested interest to demonstrate to the public that it is yielding the greatest safety.

    So yes, we do support providing information to the Office of Pipeline Safety.

    Mr. MINETA. And do you feel that DOT ought to be able to obtain information from a variety of sources other than just industry, just from you folks and the others in the industry?

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    Mr. MUCCI. I think the broader issue raised is the application of that information and what is the ultimate goal. To the extent it is part of an overall program that has been justified through the risk assessment and cost/benefit, if that's a necessary element, we completely support it. The question is: what is the most cost-effective and efficient manner to get the information necessary to carry forward programs with the greatest potential to reduce risk.

    Mr. MINETA. Thank you very much.

    I will shift the paradigm to you, Mr. Chairman.

    Mr. PETRI. This must be a new dance.

    I just had one question. You touched on this some, but could one of you or both of you highlight the differences or similarities in the risk management approach proposed by the Administration and that in your bill? Are they basically the same, or are there differences? If so, what are the differences?

    Ms. FRETZ. Essentially they are the same, but what we are saying is that the pipeline industry has specific requirements, and there are already panels, technical advisory committees that operate today with DOT. What we are trying to suggest is to utilize that type of panel to act as a bench mark type approach to information or regulations that are coming out of DOT.

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    I don't know if you want to add to that.

    Mr. MUCCI. No. Once again, I think it is just critical that the principles and precepts that they evaluate and assess the risk in order to effectively rank the different processes and solutions that they would propose yield the greatest benefit, and they'd be done in a cost/benefit fashion.

    And, as was just pointed out, we have proposed that an already-functioning committee or panel be involved in that process so all stakeholders can assure that we are doing everything possible with our available resources to reduce risk.

    Mr. PETRI. Thank you both very much for coming and testifying.

    Ms. FRETZ. Thank you.

    Mr. PETRI. It sounds as though this may be an area where we will be able to develop, at least to some extent, a bipartisan or at least an Executive Branch/Legislative Branch converging approach. I appreciate your helping us do that.

    Ms. FRETZ. Thank you.

    Mr. MUCCI. Thank you, Mr. Chairman.

    Mr. PETRI. This hearing is adjourned.

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[Whereupon, at 2:45 p.m., the subcommittee was adjourned, to reconvene subject to the call of the Chair.]

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