California’s Proposed Requirements to Reduce Pipeline Spills Will Present New Challenges and Burdens for Industry; Comment Deadline is April 2, 2019

March 11, 2019

On February 14, 2019, the California Office of the State Fire Marshall (“OSFM”) published long awaited draft regulations to reduce the volume of pipeline oil spills in coastal areas. The proposed regulations, which implement AB 864 (2015), will impose substantial and costly burdens on companies that own and operate pipelines within California near environmentally and ecologically sensitive areas (“EESA”) in or with a connection to the coastal zone. OSFM predicts the proposed regulations will cover approximately 600 miles of California’s intrastate pipelines and cost operators approximately $220 million over the next three years.

The proposed regulations will require pipelines that operate in the coastal zone to use best available technology (“BAT”) for existing as well as new and replacement pipelines. The draft regulations attempt to define several key terms and outline processes to implement the BAT requirements. Several key aspects of the proposed regulations are summarized below.

Burden Placed on Pipeline Operators to Demonstrate Pipelines Are Exempt from BAT

OSFM believes that less than 10% of the intrastate pipeline system in the state will be subject to the BAT requirement. This estimate, however, may expand as the proposed regulations place the burden on operators to demonstrate that pipelines outside of the coastal zone are exempt. AB 864 requires BAT installation on intrastate pipelines, under the jurisdiction of the OSFM, that are located near EESA in the coastal zone. The proposed regulations define the term “near” as within 1/2 mile. The regulations also state that pipelines near EESA in the coastal zone or near EESA “with a connection” to the coastal zone are presumptively subject to BAT. Pipeline operators have the burden to demonstrate that a pipeline outside of the coastal zone is not subject to BAT by submitting a risk analysis demonstrating that a reasonable worst-case release cannot reach the coastal zone portion of EESA.

OSFM Will Determine BAT on a Case-by-Case Basis

BAT is defined as the “technology that provides the greatest degree of protection by limiting the quantity of oil released in a spill” and must consider processes used or available for purchase anywhere in the world.  Pipeline operators are tasked with reviewing available processes and equipment and proposing BAT for their pipelines. The operators must consider leak detection technology, automatic shutoff systems, and/or remote controlled sectionalized block valves. OSFM will review proposals submitted by the operators and determine whether the proposal meets BAT requirements. The proposed regulations outline factors OSFM will consider including feasibility and site-specific conditions.

Aggressive Implementation Schedule for Existing Pipelines

The regulations would require operators of all existing pipelines to submit a risk analysis and an initial BAT implementation plan by July 2020. The risk analysis and implementation plan, subject to OSFM approval, must examine the fate of reasonable worst-case releases; evaluate BAT; and provide a schedule for the installation of BAT. Unless operators can show good cause for any delay, all necessary permits and approvals and installation of BAT must be completed by January 2022.

The proposed regulations raise several issues and unanswered questions. How far inland will the AB 864 BAT requirement reach for pipelines located near or intersecting EESA with a connection to the coastal zone? How will other permitting requirements and CEQA affect the timeframes for compliance? Will such requirements and other factors outside the control of pipeline operators meet the “good cause” requirement for delayed implementation? Will such factors be consistently applied?

OSFM will accept comments on the proposed regulations until April 2, 2019 and will hold a public meeting on April 2 in Sacramento. The draft regulations and Initial Statement of Reasons are posted here.