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This week’s Pipeliners Podcast episode features first-time guest Steve Allen of ENERGY worldnet, Inc. (EWN) discussing pipeline safety from the perspective of a state regulator with host Russel Treat.

In this episode, you will learn about the difference in jurisdictions between PHMSA and state regulators, the growing need for pipeline safety management systems at the state level, the importance of communication between state regulators and pipeline operators not just during the audit, and more important topics for operators.

Pipeline Safety from State Regulator Perspective: Show Notes, Links, and Insider Terms

Pipeline Safety from State Regulator Perspective: Full Episode Transcript

Russel Treat:  Welcome to the Pipeliners Podcast, episode 108, sponsored by EnerSys Corporation, providers of POEMS, the Pipeline Operations Excellence Management System, SCADA compliance, and operations software for the pipeline control center. Find out more about POEMS at enersyscorp.com.

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Announcer:  The Pipeliners Podcast, where professionals, Bubba geeks, and industry insiders share their knowledge and experience about technology, projects, and pipeline operations. Now your host, Russel Treat.

Russel:  Thanks for listening to the Pipeliners Podcast. I appreciate you taking the time. To show that appreciation, we are giving away a customized YETI tumbler to one listener each episode. This week, our winner is Jim Linn with the American Gas Association. Congrats, Jim, Merry Christmas, your YETI is on its way.

This week, for the first time, we have Steve Allen joining us. I’m going to let Steve give his introduction when we bring him on. I’d just like to say that he’s been a great fan of the podcast and certainly been an encouragement to me. I’m very glad we were finally able to get him on. Without further introduction, let’s welcome Steve.

Steve, welcome to the Pipeliners Podcast. So glad we were finally able to get this on our mutual calendars and get you on to have the conversation.

Steve Allen:  Thank you, Russel. I’m glad to be here.

Russel:  If you would, why don’t you tell the listeners a little bit about your background?

Steve:  I spent a lifetime, what seemed like a lifetime, in industry. I work for a large local distribution company here in Indiana. Spent 20 years doing lots of things related to accounting, internal audit, taxes, meter reading, billing, and so on and so forth. Nothing in engineering or operations other than the work that I did at internal audit.

From there, I was President of one of the company’s non-regulated subsidiaries for six or seven years, at which point in time the company was sold to some private equity investors that came knocking on our door. At that point, I left industry and stayed with the private equity investors for a couple years.

Decided I just did not want to work for them anymore and took an early retirement. I tried to reinvent myself. A friend of mine and I started an excavating business. Bought a backhoe, bulldozer, truck, and trailer and hired some employees. That was actually a ball. I got to learn how to operate a backhoe quite well and enjoyed it. About that time, the housing market tanked.

Even though we were cash flow positive, it just wasn’t worth the time and effort, so we closed up that shop. I jumped back into industry doing some consulting work and ended up in a consulting arrangement with the State of Indiana doing planning and integrated resource work and ultimately did a situation assessment or SWOT analysis of the state’s pipeline safety program.

They actually asked if I would come in and take over the program. The director at the time was someone that I knew. He didn’t have the appetite or did not enjoy all the administration and stuff that went along with running the program. He just really wanted to run the program from an inspector’s perspective.

In 2012, I went to work for the State of Indiana as a Director of Pipeline Safety. That ended up resulting in me eventually getting involved with the National Association of Pipeline Safety Representatives. In 2016, I believe it was, I became the National Chair of NAPSR.

With that role, I ended up getting involved with PHMSA quite a lot on different work groups, task groups, committees, and whatnot. In 2016, Secretary Fox of the United States Department of Transportation appointed me to the GPAC. I stayed on the GPAC, participated in GPAC for the next two years.

Came off last November when I left the State of Indiana and went to work for ENERGY worldnet as the Executive Director of Pipeline Safety. My focus with EWN is all about pipeline safety management system advocacy, trying to help the industry along with adoption, and helping with their journey.

Russel:  It’s a really interesting background. I remember very well my first trip up to D.C. to go to GPAC. There was a break for lunch. I was standing behind you. I said, “Can I join you guys for lunch?” You said, “Sure.” That’s what started our relationship.

Steve:  I remember that.

Russel:  It’s interesting how those things occur. How in your experience is state pipeline safety or state pipeline safety programs different than federal?

Steve:  The big difference is the fact that while PHMSA has jurisdiction over all pipelines in the country, the Pipeline Safety Act of 1968 allowed the federal government to delegate that authority to states if the states agreed to enter into certification agreements and basically follow the guidelines that PHMSA lays out for the states.

PHMSA has jurisdiction over basically interstate transmission pipelines. State programs will have jurisdiction over everything that is intrastate, which is basically all distribution pipelines, as well as intrastate transmission lines. That is the big difference. With distribution operators, that’s where all the people are.

It really is a huge distinction between operating a pipeline across a corn field versus operating a pipeline down Main Street of Anywhere, USA. That is a big difference.

Russel:  I hadn’t thought about that. That makes perfect sense. I guess another way to say that is state regulators are regulating more pipe that lands in high-consequence areas, as a rule.

Steve:  Absolutely. I can’t remember exactly what the statistics are. I think state pipeline safety programs have jurisdiction over 85 percent of the pipelines in the country.

Russel:  It’s probably 100 percent of the utilities.

Steve:  Yes, absolutely. That’s the other thing that is different between PHMSA and state programs. Most state programs do work for or are in the public utility commissions. Those public utility commissions, their task or their charge is to basically ensure that safe, reliable, and affordable service is provided.

You notice I said safe was the first thing. That’s where the pipeline safety programs come into play. In order for the state pipeline safety programs to be able to execute their responsibilities or execute their duties, they have to work through the state commission. If the state commission has an appetite for, let’s say, enforcement, then that’s what we are allowed to do. If not, then we’re not.

Russel:  At least in my experience — it’s certainly very limited — the state programs tend to be less structured. They operate under the federal structure and then adapt that federal structure to what they think their state needs are.

That’s different if you’re someplace like North Dakota, with not a lot of population but a lot of pipelines, versus someplace like New York, with a lot of people and not a lot of pipelines other than utilities.

Steve:  That’s really a good observation, Russel. All state pipeline safety programs are not created equally. You get up into North Dakota and South Dakota, they may only have two inspectors. That’s it. Indiana, we were a decent-sized program. We had 12 or 13 of us.

The structure, it does vary based on the state government and the pure numbers, but PHMSA, through the certification agreement I mentioned earlier, the guidelines that PHMSA prescribes for state pipeline safety programs that enter into those certification agreements, it is 600 pages of guidance that says, “Here is exactly how you need to run your state program.”

There are [about] 15 different individual types of inspections that a pipeline safety program is required to perform. The deal is that these state pipeline safety programs need to ask and answer each and every question on each and every individual inspection form for each and every inspection unit for each and every operator at least once every five years.

PHMSA does not have that same sort of approach. PHMSA uses integrated audits, where their audits are really driven more towards risk. They allocate their resources based on risk. While state programs also allocate resources based on risk, they’re also obligated to complete each and every inspection at least once every five years.

Russel:  It’s really interesting. When you think about some of the states with small populations and large pipeline infrastructure, that starts getting challenging. There’s likewise some small states that don’t really even have pipeline safety programs. They rely on the feds to do that, notably, at least in my experience, Hawaii.

Steve:  Yeah, Hawaii. Now, Alaska, they do not have a state program, either. Everywhere else there’s a state program reporting either up through the public utility commission, fire marshals, or something like that.

Russel:  That’s another interesting point, is that the structure of the programs, not just their contents but the structure and how they report, is different depending on how the state government’s organized. Some of this would go up through a public utility commission. Others would go straight to a state agency, like in Texas, it goes straight to the Railroad Commission. The Railroad Commission doesn’t have any authority over utilities.

Steve:  That’s correct. The standard is typically though that the pipeline safety programs report up to the public utility commission. That’s probably 90 percent of the programs out there.

Russel:  That actually leads me into another question that I had. NAPSR, to me, because I’m a vendor and not a state regulatory agency, is a black box, if you will. What goes on at NAPSR?

Steve:  NAPSR is a not-for-profit organization that’s members are all of the state programs that have certification agreements with PHMSA. NAPSR basically is the body that represents the state programs. Through the Grant Allocation Committee and Strategic Planning Committee, those committees work directly with PHMSA regarding the guidelines and any changes in guidelines.

Many times with those guidelines, there might be something added because of a Congressional mandate or some changes in a different regulation or whatnot. NAPSR really works on behalf of its members to help make sure the certification agreements run smoothly.

Russel:  Would it be fair to say that similar to how API has regulatory programs and they’re monitoring what’s going on with PHMSA and working with their membership to put together standards and coordinate with PHMSA about rulemaking and those standards. NAPSR’s doing the same thing, but it’s around the state programs and how those relate to what PHMSA’s doing?

Steve:  That’s correct. In the process with working with PHMSA, NAPSR always advocate for more grant assistance, where the statute basically says that PHMSA can provide up to 80 percent of the funds required to operate a pipeline safety program. In my days at the state, that varied anywhere from 55 percent maybe up to 80 percent, and that’s tough.

That’s really tough, to be able to attract quality professionals to operate the program because of dollars. The states don’t have a bottomless pit of money available to spend on pipeline safety.

Russel:  We all have that challenge.

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Steve:  With NAPSR, again NAPSR works on behalf of its members to help to change any of the guidance that PHMSA requires of us. How that works — a lot of people don’t understand this — is the grant, basically it’s a formula grant. There’s two parts of it.

One part is related to are you complying with the requirements of the certification agreement. Are you completing or have you adopted all of the federal safety regulations into the state code? That’s based on the annual report that the state programs fill out and send in to PHMSA for review.

The second-half of that formula is based on an actual field audit, where PHMSA regulators will come out to the state program and go through our records and observe inspections and so on and so forth. State programs are audited and inspected just like the operators are.

Russel:  Interesting. I guess that makes perfect sense, but I never thought about it that way. Maybe to shift the conversation a little bit. We talked a little bit, as we were getting ready to get on the mic, about enforcement and how enforcement works in a state program versus how enforcement works in a federal program. Maybe you could talk to us a little bit about that.

Steve:  One of the requirements of a state program is that it needs to enforce. There are a lot of state programs that the only amount of enforcement that they do typically is just with notices of probable violation, which is basically a line in the sand saying, “Look, you didn’t follow the regulations. You need to do so. Here is your notice. You’re on notice to comply.”

When non-compliance becomes an issue where you have — I’d mention triggering events as example. If there’s an incident where there’s a fatality, there’s an injury that required overnight hospitalization or an incident that was $50,000 or something in that line, those triggering events tend to lead towards an actual civil penalty.

PHMSA has similar guidelines that they go through. For each state, it’s up to them to determine how they are going to enforce. In Indiana, what we tried to do is — a civil penalty was the very last thing that we wanted to do. We felt like you attract more bees with honey than you do vinegar.

So, we tried to collaborate with our operators, had that open relationship, and tried to achieve compliance. We very rarely issued civil fines or penalties for violation of minimum pipeline safety standards.

The other side of that on enforcement penalties or enforcement is for damage prevention programs. Each state has a different approach to enforcing damage prevention.

In Indiana, we had a statute that was passed that required the establishment of an advisory committee and development of enforcement standards and penalties. That is a very mature program right now that basically any professional excavator that damages a pipeline and it’s their fault, they end up getting a penalty of some sort or another.

Russel:  Those are statutory penalties.

Steve:  That’s correct. The advisory committee then has the responsibility to determine what they feel is the most appropriate penalty amount. Then, they recommend that to the commission, who then has to go through an order and order that penalty. There’s a lot of due process that goes along with that.

Russel:  It’s interesting. I guess that’s one of the other things it would be. From an overall pipeline safety perspective, the damage prevention program, those programs, if you will, are more boots on the ground.

Because the state has the ability to regulate excavators more directly, I guess, than maybe the federal government, and to oversee that through construction inspection and permitting and so forth, I had never thought about that. It’s opening up a whole conversation for me about damage prevention and how that works.

Steve:  Really, I’m not so sure, honestly, that the state commissions or the state pipeline safety programs, they don’t have any sort of jurisdiction over excavators, unless that excavator also happens to be an operator. You know what I mean?

Russel:  Yes, I do. A state would have authority over that, although the state pipeline office might not.

Steve:  That’s correct.

Russel:  Or even all the way down a county or a city.

Steve:  That’s challenging in itself. That’s interesting. You mention county or a city. Municipal operators as an example. From a damage prevention perspective, the operator has requirements that they need to go out and mark and mark accurately their underground facilities.

Excavators have the responsibility to make sure that they call before they dig and that they observe the state rules regarding digging within the tolerance zone, and so on and so forth.

With a municipal operator, if they fail to locate properly and it’s determined that they were at fault for an excavation damage, it’s difficult for one governmental entity to want to or have the appetite to issue a civil penalty to another governmental entity. That’s challenging. I’m not saying that never happens, but it’s challenging. There’s a lot of considerations.

These municipal operators typically don’t have very deep pockets. Many times, they just don’t have the expertise, either. You have a small municipal operator where the person that’s responsible for pipeline operations is also the dog-catcher and so on and so forth.

Russel:  The guy getting the electricity done and getting the water done and the sanitation done.

Steve:  Exactly.

Russel:  It’s the city engineer, who does all of it. I’m maybe taking us a little bit off into the weeds. The other thing you were talking about, this is really an important thing. With you having a background running a state program, it’s important for pipeliners to hear this whole idea of we need to collaborate. You do more with honey than vinegar.

What do you think are some of the key things that states do or that operators ought to be aware of when it comes to trying to collaborate with the state regulators?

Steve:  I would say you’re seeing more and more damage-prevention councils out there that are typically represented by operators, excavators, the one call centers, and state regulators. That’s a huge opportunity for everybody to collaborate to move the needle forward on safety, especially as it relates to damage prevention.

There are lots of other opportunities for engagement and collaboration, including things like under API 1162 for public awareness, the regular gatherings or the regular communications. It’s interesting that API 1173, Pipeline Safety Management Systems under stakeholder engagement, they are looking for a lot of the same sorts of collaborative efforts that you would like to see.

There’s always an opportunity to collaborate on proposed regulations. In the process of developing regulations, the public has the opportunity to chime in. That’s really very important. While it might not be a face to face collaboration, it is a collaboration.

The GPAC, the LPAC, and PHMSA, they go through all those public opinions and try to incorporate whatever changes might need to be made in order to come up with a regulation that is more palatable or suitable for everybody.

Other collaborative opportunities would be with PHMSA work groups and study groups, where there’s a task that PHMSA wants to research. If an individual wanted to get involved with that, they would need to basically speak up. Now, that’s not a guarantee that they would be involved, but they certainly could be.

There are other organizations like API, the ASME, ASTM, and others that you could become involved with. I know the INGAA Foundation, that’s another great organization where you can become involved with the industry as well as state regulators to try to come up with collaborative solutions.

Russel:  Certainly, Steve, you’re listing a bunch of things that are formal. There’s also some informal things that can happen, too. A lot of that goes to just your perspective about the relationship between the operator and the regulator.

We did an episode — I think it was episode 90 that Dan Scarberry was on. He talked about how when he shifted his attitude from adversarial to collaborative, that a lot of things opened up and streamlined.

Ultimately, we’re all trying to do the same thing. We’re trying to operate these facilities safely. We’re trying to work together as an industry and as a society to deliver the things that the society needs and do that in a way that’s safe. When you’re coming at these things from that perspective, that opens up a lot of possibilities that wouldn’t otherwise be there. I want to say that.

Steve:  As I said before, the relationship between operators and the state regulator is so important. We had several operators — the larger operators — I think in Indiana we had 90 operators altogether; there were only three of them that had over, say, 30,000 customers. So, those larger local distribution companies, we regularly met with them on a quarterly basis and sometimes a monthly basis just to keep each other informed as to what was going on.

We would keep the operators informed of regulations that we’re looking at or our internal operations; our plans. We would give them a heads up as to when we would be coming out to inspect a certain area of their operations. Then they would come in and provide presentations to us to let us know what it is they’re doing regarding compliance in pipeline safety and pipeline safety management systems.

That in and of itself, just opening up that relationship, I could not encourage that more for any operator listening to this. Reach out or reach across the table to your state regulator and say, “Look, I think we need to talk. We need to stay in touch with each other and not just work with each other during an inspection.” There’s so much that goes on in between inspections that I think it’s important.

Russel:  Certainly, looking at rulemaking that’s going on at the federal level and having the ability to have a conversation with the state program, there’s some real opportunity there. To the extent we can streamline these things, we can do a better job and have more resources to spend on doing things that directly impact safety versus doing the administrative side of the program.

Steve:  You don’t want to just go through the motions. You don’t want this to be a check-the-box operation. You want it to be substantive and worthwhile.

Russel:  The last thing that probably we ought to talk about is just the nature of just like PHMSA and its programs are tied to who’s in office in the White House because they’re a part of the administrative branch of government, likewise at the state level, what’s going on in a program’s going to be tied to who’s in the governor’s mansion.

Steve:  That’s correct. Who’s in the governor’s office, and then also, what’s in the news. I can’t tell you how sensitive state pipeline safety programs in the public utility commissions are to the media.

They have to make sure that what it is that the state programs are doing is in lockstep with the governor, the governor’s office, and to make sure that we don’t make the governor look bad. I know that sounds funny, but that’s the way it is.

Russel:  That’s reality. The governor and the legislature’s there to represent the people. They’re going to be interested in what the people are interested in. I say this all the time. One of the unfortunate things about being a pipeline operator is it’s like being an offensive lineman. You only get your number called when you screw up. The best operators are the ones you never hear about.

Steve:  That’s correct.

Russel:  I do think it’s important to realize that states are driven by who’s in office. Who’s in offices is listening carefully to their constituency and trying to respond to what they’re asking for. That can be very different depending on the state.

Steve:  I remember — without getting any detail or naming any names — in damage prevention, because of the build out of fiber optics, there was an awful lot of cut lines and hit lines that that the public got up in arms over this. One of the politicians in the state took it upon themselves that this is going to be a cause that I champion.

I can tell you that work or that incident or series of incidents ate up an awful lot of our resources internally to address. Yeah, it’s all driven by who’s in office, I guess.

Russel:  What their agenda is, who their constituents are, and what they’re interested in — that all ties together. Hey, Steve. I really appreciate you coming on. I know we’ve been trying to do this for a long time. We’re definitely going to need to do it again but not take so long.

Steve:  Very good. I appreciate the opportunity, Russel.

Russel:  I hope you enjoyed this week’s episode of the Pipeliners Podcast and our conversation with Steve Allen.

Just a reminder before you go. You should register to win our customized Pipeliners Podcast YETI tumbler. Simply visit pipelinerspodcast.com/win to enter yourself in the drawing.

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Russel:  If you have ideas, questions, or topics you’d be interested in, please let me know on the Contact Us page at pipelinerspodcast.com or reach out to me on LinkedIn. Thanks for listening. I’ll talk to you next week.

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Transcription by CastingWords

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