In recent years, the New York Public Service Commission ("PSC") has taken on the issue of odorizing natural gas gathering lines. This has included various enforcement actions against certain midstream operators for failure to odorize gas in accordance with their PSC Certificates of Environmental Compatibility and Public Need ("Certificates"). This issue was brought to the forefront at the PSC's regular session on June 13, 2013.
The regulation at issue, 16 NYCRR § 255.625(a) requires that "[a]ll gas transported in transmission lines, and distribution mains operating at 125 PSIG or more "¦ be adequately odorized . . . so as to render it readily detectable by the public and employees of the operator at all gas concentrations of one fifth of the lower explosive limit and above." The statutory authority, Public Service Law § 65(1), requires that gas service, instrumentalities and facilities be "safe." Violations of section 255 carry a fine of up to $100,000 per offense per day.
To date, midstream operators have pushed back against the need for odorization and argued that the regulation applies only to transmission lines as opposed to gathering lines. Other arguments have included that (1) the interstate pipelines to which certain gathering lines connect do not accept odorized gas, and (2) the economics do not justify the expense of odorization. The PSC, however, has not been persuaded.
During its June session, the PSC considered the failure of one operator in particular to odorize the gas in its gathering lines. With respect to this particular operator, the PSC had granted it various Certificates, which the PSC asserted required odorization. Specifically, the Certificates required, in general terms, that the gathering lines be "design[ed], construct[ed], test[ed], operate[d] and maintain[ed] "¦ in accordance with the provisions of 16 NYCRR Part 255, applicable to steel transmission lines." The Certificates did not explicitly require odorization. Moreover, this operator's notices of intent to construct clearly indicated that the gas would not be odorized.
Without any discussion of whether the odorization requirement even applied, Staff recommended that the PSC reject this operator's proposed alternatives to odorization which had included line markers, increased leakage surveys, volume/pressure monitoring, and methane monitors. Staff also recommended that that the PSC commence an enforcement action against the operator in state court to require it to comply with section 255.625(a) and odorize the gas flowing through its gathering lines. The PSC adopted staff's recommendations by a unanimous 4-0 vote. In doing so, the PSC reiterated the importance of odorization and strongly encouraged compliance with the odorization requirement.
PSC's hardened stance on its odorization requirement is significant, both in terms of its applicability to gathering lines and in rejecting alternatives. As such, it should stand as a strong warning to midstream operators in New York. The PSC likely will require all natural gas gathering lines that exceed 125 PSIG to be odorized and will not accept alternatives.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact Richard Capozza, Chair of the Energy Practice Area at 315-425-2710 or rcapozza@hblaw.com or Yvonne E. Hennessey, Chair of our Oil & Gas Team at 518-429-4293 or yhennessey@hblaw.com.