Week Ending September 25, 2020

GAO Finds FERC Can Improve Oversight of Natural Gas Pipelines

This Article Appears as Published in Foster Report No 3317
GAO Finds FERC Can Improve Oversight of Natural Gas Pipelines

FERC does not use all of the information at its disposal to fully understand the reliability risks associated with interstate natural gas pipelines, the Government Accountability Office (GAO) said in a September 23 report.

The interstate pipeline grid is quite reliable, but FERC does not take a proactive approach with the information it collects from pipeline operators to examine factors before they arise and instead reacts to firm transportation (FT) service interruptions as they are reported, GAO said in the report, Gas Transmission Pipelines: Interstate Transportation of Natural Gas is Generally Reliable, But FERC Should Better Identify and Assess Emerging Risks  (GAO-20-658). “FERC does not, according to officials, look for problems, such as risks to reliability, but rather responds to problems as they arise.”

GAO interviewed officials with FERC, several interstate pipelines, state regulators, utilities, and other federal agencies – including the Department of Energy and the Pipeline and Hazardous Materials Safety Administration (PHMSA). While PHMSA is responsible for pipeline safety, FERC has as part of its mission to assist consumers in obtaining efficient and reliable interstate transportation service on pipelines at a reasonable cost.

When presented with findings of the investigation, FERC Chairman Neil Chatterjee told GAO that the Commission examines public and non-public data on pipeline transportation service and includes relevant comment in State of the Market reports for winter and summer each year.

FERC “will establish a process to incorporate the serious interruption of service reports into the Commission’s ongoing efforts in monitoring and addressing the reliability of the interstate natural gas pipeline grid,” Chatterjee wrote in a letter to GAO, which is included in the report.

GAO noted that the Interstate Natural Gas Association of America (INGAA) shared data indicating that from 2006 to 2016, 51 interstate pipelines in a survey delivered 99.79% of their FT contractual commitments.

When compared with interruptible service outages or electric utility outages that are more frequent and often last longer, the FT service interruptions are limited and may or may not result in outages to utility customers, GAO said. The report noted that bidirectional flow on pipelines, multiple pipeline connections by utilities, the ability to reroute gas around problem areas and many pipelines having two mainlines within the same right-of-way limiting the effects of FT service interruptions.

The report shows that interstate pipeline transportation service is reliable and that service interruptions rarely affect communities and businesses, INGAA President and CEO Amy Andryszak said when asked about the report. “Our members remain committed to working with our shippers and regulators to further enhance the safety and reliability of our nation’s energy delivery system,” Andryszak said in an e-mailed statement.

Some regions of the U.S. with limited gas storage service or no pipeline capacity available for new customers can make pipeline service interruptions more serious for consumers, GAO pointed out.

Furthermore, the interstate pipeline grid is becoming more important and its use will ratchet up as more gas-fired power plants are added, meaning pipeline service interruptions can affect more consumers, GAO said. Two pipeline operators told GAO that they expect more use of their systems to result in the pipelines being less flexible and possible resulting in more FT service outages. “State officials and gas and electric industry representatives told us that more intensive use of interstate transmission pipelines could increase the risk of service interruptions,” GAO said.

The GAO investigation was done at the request of Rhode Island Sens. Jack Reed and Sheldon Whitehouse, both Democrats, after a January 2019 incident in which more than 7,000 customers in the state went without heat for several days. Algonquin Gas Transmission experienced a low-pressure problem that resulted in utility customers in Rhode Island losing gas service for seven days in the middle of winter, with other issues listed as contributing factors.

GAO examined “serious interruptions of service” on interstate pipelines between 2015 and 2019 that are required to be reported to FERC. Such reports are required under FERC regulations when an FT customer experiences an unplanned outage that lasts three hours or more. Service interruptions that are planned due to maintenance or construction or that last less than three hours or only involve interruptible transportation service customers are not subject to the reporting requirement.

The reports are generally used for information purposes only, and while FERC has the authority to penalize companies that do not submit a report, FERC officials said they have not done so, GAO noted. FERC learned about the Rhode Island service interruption from news reports and contacted Algonquin to learn more, so it did not deem it necessary for Algonquin to file a report on the events.

Among the serious interruptions of service reported to FERC, about 21% resulted in an outage to pipeline customers.

However, because FERC’s reporting requirement does not call for pipelines to disclose whether an outage to gas consumers took place, it’s possible that more outages are not reflected in the FERC reports, GAO said. The Commission also does not require pipeline operators to disclose the duration of any outage. Among the reports examined when that information was included, none of the outages lasted longer than 24 hours.

Among the 2015-2019 reports filed with FERC, a majority (64%) of the unplanned service interruptions were caused by physical failures such as mechanical problems, compressor station failures or corrosion. Damage from third parties – pipelines being struck by construction equipment or vehicles – caused 11% of the interruptions. Weather-related events or gas supply issues were responsible for 14% of the interruptions, while pipeline operator error accounted for 5% and unknown or unspecified causes were listed at 7%. Rounding of the percentages result in the figures not totaling 100%, GAO noted.

FERC does not take a big-picture look to put the pipeline interruption data together to spot patterns or highlight potential risks, GAO said. “Although FERC is responsible for assisting consumers in obtaining reliable natural gas service, it does not use the data it collects to identify or assess trends in the frequency or scope of service interruptions on interstate transmission pipelines. Without this analysis, FERC is not well positioned to take action, if necessary, to fulfill its mission of working to ensure reliable natural gas transportation,” according to the report.

Officials in 10 states said improved federal oversight of interstate pipeline reliability is needed, and FERC is missing a chance to provide data and information with others for input, the report continued. “Sharing information on service interruptions could improve DOE’s and PHMSA’s own efforts to understand how frequently service interruptions occur and the effects of the interruptions,” GAO said.

By Tom Tiernan ttiernan@fosterreport.com

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