The Commission adopts amendments, in Subchapter A, to §8.5, relating to Definitions; in Subchapter B, adopts amendments to §8.115 and new §8.135, relating to New Construction Commencement Report and Penalty Guidelines for Pipeline Safety Violations; in Subchapter C, adopts amendments to §§8.203, 8.205, 8.210, 8.215, 8.225, 8.230, and 8.235, relating to Supplemental Regulations; Written Procedure for Handling Natural Gas Leak Complaints; Reports; Odorization of Gas; Plastic Pipe Requirements; School Piping Testing; and Natural Gas Pipelines Public Education and Liaison; and, in Subchapter D, adopts amendments to §§8.301, 8.305, 8.310, and 8.315, relating to Required Records and Reporting; Corrosion Control Requirements; Hazardous Liquids and Carbon Dioxide Pipelines Public Education and Liaison; and Hazardous Liquids and Carbon Dioxide Pipelines or Pipeline Facilities Located Within 1,000 Feet of a Public School Building or Facility. The amendments in §§8.205, 8.210, 8.215, and 8.301 and new rule §8.135 are adopted with changes to the proposed versions published in the October 10, 2008, issue of the Texas Register (33 TexReg 8461); the amendments in §§8.5, 8.115, 8.203, 8.225, 8.230, 8.235, 8.305, 8.310, and 8.315 are adopted without changes to the proposed versions. The effective date of the amendments and new rule will be February 4, 2009.

The Commission adopts the amendments and new rule to provide guidelines for filing required reports with the Commission, to address new risk management initiatives for the Commission's pipeline safety evaluation program, and to remove outdated or duplicative rule requirements.

The Commission received comments from ten entities. Five groups or associations submitted comments: Texas Pipeline Association ("TPA"); Texas Independent Producers and Royalty Owners ("TIPRO"); Texas Oil and Gas Association ("TxOGA"); Permian Basin Petroleum Association ("PBPA"); and Texas Coalition of Cities for Utility Issues ("TCCFUI"), whose member cities are Abernathy, Addison, Alamo, Allen, Andrews, Arlington, Balcones Heights, Belton, Benbrook, Big Spring, Bowie, Breckenridge, Brenham, Brookside Village, Brownfield, Brownwood, Buffalo, Canyon, Carrollton, Cedar Hill, Center, Cleburne, Conroe, Corinth, Corpus Christi, Cottonwood Shores, Crockett, Dallas, Denison, Denton, Dickinson, El Lago, Electra, Euless, Fairview, Flower Mound, Fort Worth Fredericksburg, Friendswood, Frisco, Galveston, Grand Prairie, Grapevine, Greenville, Gregory, Henrietta, Huntsville, Irving, La Grange, La Joya, Lampasas, Lancaster, Laredo, League City, Leon Valley, Levelland, Lewisville, Longview, Los Fresnos, Mansfield, McAllen, Midlothian, Missouri City, Newark, Nolanville, North Richland Hills, Oak Point, Palacios, Pampa, Paris, Pearsall, Plainview, Plano, Port Neches, Ralls, Refugio, Reno, Richardson, River Oaks, Rosenberg, San Jacinto City, San Marcos, San Saba, Selma, Seminole, Seymour, Smithville, Snyder, South Padre Island, Spearman, Stephenville, Sugar Land, Sunset Valley, Sweeny, Taylor Lake Village, Terrell, Thompsons, Timpson, Trophy Club, Tyler, University Park, Vernon, Victoria, Waxahachie, Webster, West University Place, and Westlake. Other comments were submitted by Atmos Energy Corporation ("Atmos Energy"); CenterPoint Energy Arkla, CenterPoint Energy Entex and CenterPoint Energy Intrastate Pipeline, Inc. (collectively "CenterPoint"); Texas Gas Service ("TGS"); CPS Energy; and one individual.

TPA stated that it appreciates the Commission's efforts to clarify the issues identified last year.

TIPRO commented that it understands the purpose of the proposed changes is to implement new federal regulations governing persons owning or operating pipelines in Texas. By adopting the federal regulation by reference, rules covering pipeline safety in Texas would conform to federal requirements. These rules should be no more or no less stringent than the federal rules. TIPRO agrees with that effort, and with the Commission's authority to regulate all common carrier and common purchaser pipelines in Texas.

PBPA stated its full support of the comments provided by TxOGA regarding these proposed rule changes.

TCCFUI stated that, overall, the rules provide a positive revision to the Commission's pipeline safety rules. It is critical to the safety of the general public, and in particular the populations of urban areas, that the Commission continue to examine and amend its pipeline safety rules to put in place a regime that is comprehensive and consistent with federal law, yet efficient in its implementation. Given the increasing production of natural gas in densely populated areas, such as in the Barnett Shale, it is indeed imperative that the Commission update its pipeline safety rules to create orderly and effective mechanisms to handle penalties for violations, leak complaints, and odorization issues with respect to natural gas lines. Public awareness regarding natural gas pipelines is also an important component to pipeline safety, both through public education and public notice. TCCFUI stated that the proposed rules represent an excellent step in this direction.

CenterPoint stated its general support of the goal of updating the state rules to achieve consistency with their federal counterparts, and acknowledged that the Commission has both the right and a policy imperative to amplify upon the federal rules and enact stricter rules governing intrastate pipelines in areas such as incident reporting and odorization. Most of CenterPoint's comments seek clarification of the proposed rules and the Commission's intent behind them.

TGS stated its support of the efforts of the Commission to clarify the rules and increase safety within the industry. TGS supports the concepts contained in the proposed Chapter 8 rules.

CPS Energy agreed with a vast majority of the proposed Chapter 8 rule changes, but recommends that the Commission consider its specific suggested changes to §8.205 and §8.210.

Regarding the proposed amendment of the definition of the term "transportation of gas" in §8.5(28), TIPRO sought to clarify the use of the phrase "production facilities." This section of the rule concerns definitions applicable to pipelines covered by the Commission's proposal. Again, TIPRO commented, if the Commission intends to adopt the federal rules by reference and not expand the coverage of the rules, TIPRO agrees with that effort. However, TIPRO believes the inclusion of "production" expands the scope of the federal rules. TIPRO seeks clarification to determine if that expansion is intended. In response, the Commission affirms its intent that the rules will apply to production facilities, as set forth in foregoing paragraphs.

In §8.115, the Commission proposed to clarify the requirements for filing a new construction report and to specify that the requirement applies to liquefied petroleum gas distribution systems. TCCFUI supports the Commission's proposed amendments to §8.115, but recommends additional changes that, in TCCFUI's view, do not attempt to remove the Commission's amendments, but instead seek to improve on the quality of information provided by natural gas pipeline operators to the Commission and to increase public awareness of the construction and installation of natural gas pipelines within the certain portions of the corporate limits of a municipality, prior to construction. Specifically, TCCFUI would require that the pre-construction reports also identify public streets, right-of-ways, and alleys to be traversed that are located with the corporate limits of a municipality, if any, and that each operator filing a Form PS-48 report for the construction of a natural gas pipeline with the Commission in accordance with this rule also submit a copy of that report with every municipality, through its City Manager, that has a public street, right-of-way, or alley that is proposed to be traversed by such pipe, at least 30 days prior to commencement of construction of that pipe.

In support of its suggested additional requirements, TCCFUI's stated that although its proposed changes to §8.115 would require the Commission to add a line item to Form PS-48 requesting the streets, rights-of-way, and alleys traversed within the corporate limits of a municipality, the modifications do not place a greater burden on the Commission on a day-to-day basis. Additionally, the impact of these changes to operators is minimal. With these offered changes, TCCFUI stated, operators would be required to provide the Commission with the public streets, right-of-ways, and alleys within the corporate limits of a municipality that would be crossed by the proposed pipe route, and to provide a copy of Form PS-48 to that municipality. TCCFUI further asserted that the Commission has jurisdiction to incorporate these changes into §8.115 in this rulemaking. As noted in the Commission's discussion of the changes proposed for Chapter 8, Subchapter B, Texas Natural Resources Code §81.051 and §81.052, grants the Commission with jurisdiction over all common carrier pipelines, persons owning or operating pipelines in Texas, and authorizes the Commission to adopt all necessary rules for governing and regulating persons and their operations. In addition to this general authority, TCCFUI notes, Texas Utilities Code, §§121.201 - 121.210, authorize the Commission to adopt safety standards and practices applicable to the transportation of gas and for associated pipeline facilities. In particular, Texas Utilities Code, §121.2015, requires the Commission to adopt rules regarding public education and awareness of gas pipeline facilities. TCCFUI's argues that its proposed changes further public education and awareness, through municipal notice, regarding the location of new pipes that will be constructed within that city's corporate limits. Providing such information to municipalities, and thus, their citizenry, prior to construction will promote public safety and facilitate the construction of pipes within the corporate limits of a municipality. A municipality has an interest in being notified of the potential construction of any new natural gas pipelines within its city limits, prior to the initiation of construction. But for providing a municipality with a copy of Form PS-48, TCCFUI avers, a municipality may not otherwise be aware of the installation of a new pipeline. For example, under the Underground Facility Damage Prevention and Safety Act, Texas Utilities Code, Chapter 251, municipalities are not required to participate in the Texas One Call system. Further, water and sewer utility lines, designated as "Class B underground facilities," are not required to participate in a one-call notification center operation. See Texas Utilities Code, §121.107, which requires each operator of a Class A underground facility, including a political subdivision of this state, to participate in a notification center as a condition of doing business in this state. Thus, providing a municipality with the proposed pipe route through that city, prior to construction, could minimize the potential for rupturing water and wastewater utility lines that are already in place, as a pipeline operator may not be aware of the location of such utility lines. The Underground Facility Damage Prevention and Safety Act recognizes this possibility, as Texas Utilities Code, §251.153(a), places the duty on a One Call notification center, at the time an excavator provides a notification center with the excavator's intent to excavate, to advise the excavator that water, slurry, and sewage underground facilities in the area of the proposed excavation may not receive information concerning the excavator's proposed excavation. Thus, by providing municipalities with a copy of Form PS-48 prior to construction could reduce the likelihood and costs associated with repairing a ruptured line. In conclusion, TCCFUI noted that the Commission has done an exceptional job of following through on its proposed changes from 2007, incorporating subsequent public comment regarding pipeline safety. In these comments, TCCFUI seeks to add value to the hard work that has been put forth to date, and to offer additional changes to §8.115 that will not unduly burden the Commission, but instead inform the public of new pipeline construction initiatives within urban areas.

The Commission recognizes that, under the statutory provisions cited by TCCFUI, the Commission has the authority to impose the requirements suggested by TCCFUI, and that such additional requirements would be an efficient way of notifying many public entities of imminent pipeline construction. However, under Texas Government Code, Chapter 2001, state agencies must give notice of their intent to amend rules, and one of the requirements is to specifically identify the proposed wording changes. With respect to making changes upon the adoption of a proposed rule, the Third Court of Appeals wrote: " . . . should the proposed rules, as originally published, be ignored and others adopted or should other subjects or persons be affected by the altered rule, a new round of notice and comment should be required." (Emphasis added.) State Bd. of Ins. v. Deffebach, 631 S.W.2d 794, Tex. App. 3 Dist., 1982. The Commission has determined that, despite the reasonableness and efficiency of TCCFUI's suggested changes, the scope of notice in this rulemaking would not permit their inclusion. In the meantime, a municipality likely has the authority to require by city ordinance that a pipeline operator filing with the Railroad Commission a Form PS-48 showing a municipal street, right-of-way, or alley that is proposed to be traversed by a new pipeline also submit a copy of that report with the municipality's City Manager at least 30 days prior to commencement of construction of that pipeline.

TPA expressed no objection to the Commission proposal in §8.115, but requested that the Commission staff work with industry representatives to streamline the construction notification process after the rule adoption. Because of significant activity in certain areas of the state, both operators and the Commission should have a process that maximizes the efficiency of the reporting process as well as guarantees the accuracy of the information being required and submitted. The current process places a significant burden on both the industry and the Commission for a number of reasons and does not accomplish the goals of the Commission. Because TPA did not offer specific criticisms of the ways in which the process is claimed to burden industry and the Commission, identify the ways in which the Commission's goals are not being met, or offer suggestions for changing the process that would not need to be part of the rule, the Commission is unable to respond to this comment.

TxOGA commented that while the wording does not specify production operations, TxOGA understands the Commission's intent to be that this provision will apply to regulated production operations as well, which means that the Commission's advance reporting requirement for gas pipelines is more stringent than federal or adjoining state requirements. TxOGA recommends that aligning the gas pipeline pre-construction notice requirements in the Texas regulations with those in the federal regulations and in some other major oil and gas states be considered by the Commission in a future pipeline safety rulemaking and that, if necessary, the Commission convene a workgroup to develop a specific recommendation in this regard. The Commission confirms its intent that the pre-construction notice requirements apply to production operations.

With respect to new §8.135, relating to Penalty Guidelines for Pipeline Safety Violations, TPA commented that it does not object to the proposal; however, TPA requests that the Commission further review how repeat or multiple violations impact operators, and, more specifically, when the violations are by different operational units or areas. This can be highlighted especially by those penalized under the damage prevention safety rules in Chapter 18 (relating to Underground Pipeline Damage Prevention). Larger operators have an inherent disadvantage in that they have a great exposure to increased penalty enhancement because of significantly more one-call tickets due to more miles of pipeline. A strong argument can be made that a large pipeline operator receiving tens-of-thousands of one-call tickets should not be penalized in the same manner as an operator who only receives 50 locate tickets per year.

TxOGA commented that the consolidation of gas and hazardous liquid pipeline penalty guidelines in §8.135 is not intended to change the current guidelines, but expressed an issue with regard to the current guideline. The "penalty enhancement" section provides for increased penalties for repeat offenders. TxOGA does not dispute the necessity of such penalty enhancement in some cases, but notes that there is no provision for consideration of such offenses on a regional basis for an operator with statewide operations. TxOGA recommends that such a refinement of the penalty enhancement provision for repeat offenders be considered by the Commission in a future pipeline safety rulemaking and that, if necessary, the Commission convene a workgroup to develop a specific recommendation in this regard.

The Commission neither agrees nor disagrees with these comments regarding enforcement policy for repeat or multiple violations; moving this rule from the subchapter devoted to natural gas pipelines to the subchapter applicable to all pipelines was intended to ensure that the Commission's penalty guidelines were administered equitably with respect to both natural gas pipelines and hazardous liquids and carbon dioxide pipelines.

The Commission received numerous comments regarding the proposed amendments in §8.205(3) that would require that the supervisory review of leak complaints be completed and documented by 10:00 a.m. each day for calls received by midnight on the previous day. CenterPoint stated that while it understands the need for a second level of review of leak response, using specially trained personnel with the requisite authority to require remedial action would achieve the same results. CenterPoint recommends that the rule allow this review to be conducted by such specially trained personnel, and that the rule also allow the review to be conducted by the next work day rather than the next calendar day.

Atmos Energy acknowledged that the proposed rule reflects recognition of the continuous operational aspects of natural gas distribution systems. Atmos Energy submits, however, that the rule should be modified to allow for review of the leak reports by 10 a.m. of the following business day as opposed to the proposed review by 10 a.m. of the following day. Additionally, Atmos Energy suggests that the "supervisory review" terminology be modified to more clearly establish that it is appropriate for experienced personnel who are not supervisors to perform this review.

CPS Energy recommends that §8.205(3) state that a trained person (i.e., a dispatcher or other qualified employee) may perform the review of all leak complaints. The current language implies that only a supervisor may perform the review of leak complaints for a gas operator. CPS Energy believes the proposed regulation places an unnecessary burden on its supervisors to perform this requirement 365 days a year when there are other trained and qualified individuals who are also capable of performing this function.