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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

KRC Comments On Oil and Gas Gathering Line Regulations  Posted: December 1, 2003

Kentucky Resources Council, Inc.

Post Office Box 1070

Frankfort, Kentucky 40602

(502) 875-2428 phone (502) 875-2845 fax

e-mail: fitzKRC@aol.com

www.kyrc.org

December 1, 2003

Rick Bender, Director By e-mail

Division of Oil and Gas

P.O. Box 2244

1025 Capital Center Drive

Frankfort, Kentucky 40601

Re: Proposed Regulation 805 KAR 1:190

Gathering Lines

Dear Director:

These comments are submitted on behalf of the Board and membership of the Kentucky Resources Council, Inc., concerning the proposed regulation governing gathering lines, 805 KAR 1:190.

After review of the proposed regulation, KRC submits these comments for the agency's consideration. Prior to addressing the specific provisions in the proposed regulation, it is instructive to review the statutory authority and obligations of the agency in the promulgation of these regulations.

Background

The proposed regulation governing gathering lines is required by KRS 353.500(2), which provides that:

The General Assembly finds that governmental responsibility

for regulating all aspects of oil and gas exploration, production,

development, gathering, and transmission rests with state

government. The department shall promulgate regulations

relating thereto and take all actions necessary to assure efficient

oil and gas operations and to protect the property, health, and

safety of the citizens of the Commonwealth in a manner consistent

with KRS Chapter 353, and to the exclusion of all other nonstate

governmental entities except as provided in KRS Chapter 100. The

department shall promulgate regulations relating to gathering lines

within 6 months of the effective date of this Act. Nothing in this

section shall be construed as limiting the rights of local govern-

mental units to regulate the use of streets, highways, and rights-

of-way.

The legislature has thus provided the yardstick against which any regulation of gathering lines associated with oil and gas operations must be measured, i.e. does the regulation provide for protection of the property, the health, and the safety of the citizens of the commonwealth from the potential adverse effects of gathering lines.

Any state regulation that does not provide full protection of the public would fall short of this statutory mandate.

Public Outreach

KRC appreciates the outreach efforts of the Division in the preparation of this regulation, including the opportunity to have submitted comments concerning the issues and principles that KRC and other interested groups and persons believed should be components of any regulatory framework governing gathering lines.

In response to the invitation by the Division of Oil and Gas to submit preliminary comments, KRS identified these concerns by letter dated July 3, 2003:

1. The term "gathering lines" should be defined to include all pipe lines constructed or used for the purpose of or serving to transport natural gas from a production facility to a transmission or main line, including all such lines except those under the exclusive jurisdiction of the Federal Energy Regulatory Commission under the Natural Gas Act or the Natural Gas Policy Act of 1978.

2. The regulation of gathering line location on the same property as the well that the line serves should continue to be reviewed under the operations and reclamation proposal for those instances in which the surface and mineral estates are severed and the applicant is required to provide such a proposal under KRS 353.5901.

3. In all other cases, including those instances where the gathering line traverses a property other than that on which the well it serves is located, and on wellhead properties not covered under KRS 353.5901, an operations and reclamation plan should be submitted that meets these substantive requirements:

a. A prohibition against construction or operation of a segment of a gathering line unless that person has obtained a permit from the Division of Oil and Gas (DOG).

b. Publication of a public notice of intent to seek a permit to construct or operate a regulated natural gas gathering line, in a local paper of general circulation a notice describing the project, the expected timeline for completion, and a map showing the affected areas. This notice shall be published at least once a week for three (3) consecutive weeks before commencement of any construction of regulated natural gas line, or the initiation of condemnation proceedings.

c. Proof of ownership or other right of entry onto the property on which the gathering line is to be constructed or operated. Where the right-to-enter and construct gas gathering lines is contested, the Council believes firmly that the agency has no business issuing a permit in such an instance, but rather must await an adjudication by a court of competent jurisdiction of the validity of the instrument(s) upon which right-of-entry is alleged to rest.

d. Submittal of a plan, bearing the signature of the landowner approving the plan and including:

(i) A narrative description of the location of all areas to be disturbed, including the location of all roads and gathering lines. Accompanying this narrative description shall be a plat depicting the location of the land of all of these disturbances or facilities;

(ii) A proposal to prevent eroding of and sedimentation from the construction of the gathering line, including all disturbed areas;

(iii) A plan to coordinate the timing of the operation to accommodate seasonal uses of the land by the surface owner and the need of the operator to locate the gathering line expeditiously; (iv) A plan to minimize the impact on the other uses of the land by the surface owner, including the use of timber, houses, barns, ponds, crops, and other improvements and (v) A plan for timely, effective reclamation of all disturbed areas.

e. A prohibition against location of a natural gas gathering line within three hundred (300) feet of any building used as a primary residence without the written consent of the property owner of that building.

f. All gathering lines shall be buried at least two (2) feet below the natural level of the terrain unless the landowner has waived the requirement to bury the line, or burial of the line is demonstrated to be infeasible for topographic and geologic reasons.. A line marker shall be placed every 500 feet on the surface indicating the underground pipe and maintained as close as practical over each buried line.

g. A requirement that at all times during the construction, and operation of natural gas gathering lines, the person owning or operating such gas lines shall at its own expense maintain in force a general comprehensive liability insurance policy. The coverage represented by such a policy or policies shall cover any bodily injury, death and property damage due to the activities of the natural gas line operator.

h. A requirement that each operator of a regulated natural gas gathering line shall submit for approval and implement a continuous program of emergency response preparedness and training which addresses the following:

(i) Emergency plans. Each operator shall establish written procedures to minimize hazard resulting from a regulated natural gas gathering line emergency. At a minimum, procedures shall provide for the following:

1) Receiving, identifying, and classifying notices of events that require immediate response by the operator.

2) Establishing and maintaining adequate means of communication with appropriate fire, police, and other public officials.

3) Prompt and effective response to a notice of each type of emergency, including gas, fire, explosion or natural disaster near or involving a building with the regulated natural gas pipeline or related facility.

4) Availability of personnel, equipment, tools, and materials, as needed at the scene of emergency.

5) Actions directed toward protecting people first and then property.

6) Emergency shutdown and pressure reduction in any section of the operator's gathering line or pipeline system necessary to minimize hazards to life or property.

7) Making safe any actual or potential hazard to life or property.

8) Notifying appropriate fire, police and other public officials of natural gas pipeline emergencies and coordinating with them, both planned responses and actual responses during an emergency.

(ii) Each operator shall:

1) Furnish its supervisors who are responsible for emergency action a copy of that portion of the latest edition of emergency procedures established under paragraph (a) of this subsection as necessary for compliance with those procedures.

2) Train appropriate operating personnel in emergency procedures and verify that training is effective.

3) Review employee activities to determine whether procedures were effectively followed in each emergency.

4) Provide for training of all local emergency response teams.

(iii) Each operation shall establish and maintain liaison with appropriate fire, police, and other public officials to:

1. Learn the responsibility and resources of each government organization that may respond to a gas line emergency;

2. Acquaint officials with the operator's ability to respond to a regulated natural gas gathering line emergency;

3. Identify types of natural gas gathering line emergencies of which the operator notifies officials; and

4. Plan how the operator and officials can engage in mutual assistance to minimize hazards to life or property.

i. Any section of gathering line that becomes unsafe shall be replaced, repaired, or removed. The line shall be removed and all disturbed areas restored and revegetated when no longer in continuous use for a period of over thirty (30) days.

J. All maps, designs and plans submitted should be certified by a registered professional engineer or geologist, as appropriate; and the maps and plans should be of sufficient scale to allow ready identification of features and property lines.

k. The application should bear the certification of an authorized principal of the business entity submitting the application, attesting under oath that the information is true and correct to the best of the affiant’s information after reasonable inquiry.

l. The operations and reclamation proposal should require the applicant to briefly identify and describe the methods to be employed to protect surface waters and to prevent contamination of land resources from the construction, use, maintenance and

removal of the gathering lines.

m. A revegetation plan addressing restoration of disturbed areas to pre-operation levels of productivity, and of a diverse, effective, permanent vegetative cover.

n. Notice should be provided to the surface landowner in the event that transfer of a well is proposed, since the authority to conduct such operations may be personal to the permittee, and further because the landowner should have the right to review and determine the sufficiency of the transfer documentation.

o. N otice to and coordination of line location and crossing of public roads with local governments should be required.

p. Setback requirements to protect public and other occupied buildings from explosion and other risks, should be imposed.

While the Division has incorporated several of KRC's comments, particularly concerning emergency response, into the regulation, there are several critical areas in which the regulations are in need of significant revision and clarification.

Specific comments

Specific comments follow, referenced by issue or regulatory section as appropriate.

1. The proposed definition of gathering lines is too narrow, excluding those gathering lines that have interconnected with other gathering lines but which are still simply gathering gas prior to transferring that gas to a transmission line (with or without compression). "Gathering lines" should be defined to include all pipe lines constructed or used for the purpose of or serving to transport natural gas from a production facility to a transmission or main line, including all such lines except those under the exclusive jurisdiction of the Federal Energy Regulatory Commission under the Natural Gas Act or the Natural Gas Policy Act of 1978. That a line includes one or more interconnections from individual gas wells does not alter the nature of the line, which is to gather the well from wellhead for collocation and any processing before transmission. The use of one or more interconnections to exempt wells which are yet engaged in gathering natural gas is arbitrary, and has the effect of undercutting the goals of the statute of comprehensive protection against adverse effects of the siting and operation of such lines.

2. The provisions of Section 3 are unclear as to whom is responsible for applying for the license, and for compliance with the requirements of the regulation. The first sentence references "[t]he operator of any gathering line" as being responsible for obtaining a license to operate an oil or gas gathering line. The next sentence places the responsibility on an "operator in physical control of any gathering line" to maintain a current license, even if the line is shut in or idle.

The regulation should clarify who is the responsible party and when a license must be obtained. Further, the Division should explain why both a license and a permit (or permit by rule) is required for each gathering line rather than simply requiring a permit for each line.

KRC believes that a permit should be required for all new gathering lines, and for all existing that are capable of being utilized as gathering lines. Existing lines should be permitted within six (6) months, and any gathering lines in existence as of the effective date of the regulation that are abandoned within that time should be required to be removed and the surface reclaimed.

3. The allowance of eighteen (18) months for operators of existing gathering line to file a map showing the location of such lines is far too lenient. Each company already has in its possession location maps for all such lines, and the compilation and filing of such maps is a simple task that can be accomplished in far shorter time than allowed. Six (6) months should be the outside limit for the permitting of all existing gathering lines. The regulation should provide a prohibition against construction of any new segment of gathering line or (after six months) operation of an existing gathering line unless that person has obtained a permit from the Division of Oil and Gas.

4. KRC vigorously opposes the concept of allowing "permits by rule" for oil production flow lines and natural gas production flow lines, for a number of reasons.

First, the statutory mandate of providing protection of public property, safety and health makes no differentiation between those segments of gathering lines that run from the wellhead to tank battery and those that run from the tank battery to transmission or main lines, nor from wellhead to a production compressor and those running from the production compressor to where the gas enters the transmission network. The differentiation is without statutory authority and is arbitrary in light of the goals of the statute, since the potential for adverse impact on the public land, safety and health is unrelated to the distinction drawn, and those lines accorded less rigorous regulatory attention may in fact be more of public concern because of proximity to dwellings.

Second, the concept effectively exempts from individual permits all gathering lines, since the definition of "gathering lines" excludes from regulation all gathering lines that are interconnected with other gathering lines, and the definition of "gas production flow line" includes all gas gathering lines up until the interconnection. It is ironic that the

very lines that caused the controversy leading to the enactment of the statute is given the most cursory regulatory treatment by a permit-by-rule.

No new disturbances for construction or operation of gas or oil gathering lines should be allowed except under permit issued by the agency. The emergency response, notification, and reclamation obligations should be imposed on all existing lines within a six month period, and all lines abandoned after the date of adoption of the final regulation should be subject to reclamation of disturbed areas.

5. Beyond the arbitrary nature of the distinction between permits (requiring agency approval) and "permits by rule" requiring notification, Section 5 of the regulation is unclear regarding when notification is required. Section 5(1)(a) and (2)(a) require notification prior to installation or disturbance, suggesting that the operator could disturb the land before notification as long as the notice was given before actual installation of the lines. Clearly, in order to be effective, agency approval should be required before any site disturbance.

6. The provisions concerning transfer of ownership make meaningless the concept of agency oversight of such transfers, by allowing a transfer of oil or gas production lines from one to another person with no notice or prior approval by the agency. If the agency intends to allow such transfers without notice, simply say so rather than stating that the operator is "deemed" to have given notice.

It is puzzling why the agency would deprive itself, and the public, of the protections of requiring approval of transfers of ownership and responsibility. In many cases, a lease or grant of right-of-way, or other authorization, is personal, and dependant on the reputation, experience or solvency of the current operator. In order to avoid transfers to those without the experience, financial ability, compliance history, or intent to comply with the obligations of the current operator, prior notice and approval by the Division based on documentation that the surface owner and lessor has been given notice and has approved or that the right-of-entry documentation supports such a transfer of ownership; and that the successor has assumed all reclamation and other obligations, posted all bonds, and demonstrated insurance and other capability to comply with the regulations, must be required.

7. The requirement for insurance should include a requirement that the policy be noncancellable, and that the policy either include no deductible or that the operator post bond or a letter of credit for the deductible, in order to assure that the agency and injured parties aren't left unprotected. Also, the regulation should specify that the policy shall include any bodily injury, death and property damage due to the activities of the natural gas line operator.

8. KRC is concerned that the approach that has been taken by the Division in the gathering line regulation does not result in proper protection of public health, safety and property as intended by the legislature. The regulation should be rewritten to remove the substantive provisions of the reclamation plan from Section 8 and to combine them with the requirements of Section 7 in order to provide for a requirement to submit, provide public notice of, and to follow an operations and reclamation plan that is applicable to all operations (except those already covered under 353.5901) and is not waivable by surface owners.

Sections 7 and 8 should be rewritten to clearly provide for a single set of application requirements applying to all gathering lines except

those gathering lines that are located on the same property as the well that the line serves, on lands where the surface and mineral estates are severed and the applicant is required to provide such a proposal under KRS 353.5901.

In all other cases, an operations and reclamation plan should be submitted that meets these substantive requirements:

a. Publication of a public notice of intent to seek a permit to construct or operate a regulated natural gas gathering line, in a local paper of general circulation a notice describing the project, the expected timeline for completion, and a map showing the affected areas. This notice shall be published at least once a week for three (3) consecutive weeks before commencement of any construction of regulated natural gas line, or the initiation of condemnation proceedings.

It is remarkable that the Division has provided no public notice in the regulation, and no opportunity to review or comment on proposed gathering lines.

b. Proof of ownership or other right of entry onto the property on which the gathering line is to be constructed or operated.

Proposed Section 8 should be rewritten to more simply provide

that the applicant identify and provide evidence that it possesses

the right to enter and conduct such operations, and the obligation to conduct operations in accordance with the operations and reclamation plan should be imposed by regulation rather than simply by agreement of the parties.

By attempting to impose the reclamation plan requirements through right of way agreements, the Division does several things – first, it effectively exempts existing gathering lines from regulation, when in reality the operation and reclamation of those lines should be regulated. Second, it makes compliance with the substantive requirements of Section 8 a matter of agreement between the parties rather than a regulatory responsibility of the Cabinet. Third, it allows the surface owner to waive environmental accountability that cannot be waived consistent with the statute since to do so may adversely affect other property or public health and safety.

All gathering line operators should be required to submit operations and reclamation plans meeting the requirements of Section 7 and 8(a) –(e) and these provisions should not be waivable

Finally, where the right-to-enter and construct gas gathering lines is contested, the Council believes firmly that the agency has no business issuing a permit in such an instance, but rather must await an adjudication by a court of competent jurisdiction of the validity of the instrument(s) upon which right-of-entry is alleged to rest.

c. An operations and reclamation plan, bearing the signature of the landowner approving the plan, should include the following:

(i) A narrative description of the location of all areas to be disturbed, including the location of all roads and gathering lines. Accompanying this narrative description shall be a plat depicting the location of the land of all of these disturbances or facilities;

(ii) A proposal to prevent erosion and sedimentation from the construction of the gathering line, including all disturbed areas;

(iii) A plan to coordinate the timing of the operation to accommodate seasonal uses of the land by the surface owner and the need of the operator to locate the gathering line expeditiously (which may be waived by express consent of the surface owner); (iv) A plan to minimize the impact on the other uses of the land by the surface owner, including the use of timber, houses, barns, ponds, crops, and other improvements and (v) A plan for timely, effective reclamation of all disturbed areas.

d. The regulation should establish a mandatory setback against location of a natural gas gathering line within three hundred (300) feet of any building used as a primary residence, which may be waived by express written consent of the property owner of that building.

e. Concerning the burial of gathering lines, KRC believes that Section 11(1) should be modified to require that all gathering lines be buried at least two (2) feet below the natural level of the terrain unless the landowner has expressly waived the requirement to bury the line, or burial of the line is demonstrated to be infeasible for topographic and geologic reasons. The proposed regulation limits the obligation to bury lines to agricultural uses or where needed to prevent roadway impacts; failing to acknowledge that the above-ground location of such lines may interfere with other land uses or pose a greater risk of rupture because of exposure to the elements and the possibility of damage due to other uses of the land.

Concerning gathering lines, Section 11(c) should be modified to remove the phrase "if requested" since it could be read o limit the obligation to maintain records at all to those cases where the Division requests that they be maintained, instead of what is apparently intended, which is that the records be maintained so that they can be inspected if the division requests to inspect them. Section 15(1) should be rewritten to clarify the right to inspect all records required to be kept under this regulation.

f. The operations and reclamation proposal should require the applicant to briefly identify and describe the methods to be employed to protect surface waters and to prevent contamination of land resources from the construction, use, maintenance and

removal of the gathering lines. The proposed regulation addresses only erosion and sedimentation and fails to fully account for the possibility of contamination of land and water resources from other on-site activities and releases.

g. A revegetation/reclamation plan should require that the applicant restore disturbed areas to pre-operation levels of productivity, and provide a diverse, effective, permanent vegetative cover.

9. The emergency reporting and notification requirements should be strengthened to provide for prompt reporting of incidents,

The requirement that incidents be reported "[a]s soon as reasonably practicable" is meaningless, since it is bears no objective definition nor enforceable requirement. A requirement for immediate telephonic notification to the state and county Emergency Response Planning coordinator and NREPC Emergency Response contact, followed by a written report within 72-hours should be imposed for all occurrences involving injury that necessitates emergency response; fatalities, releases threatening public safety, health or the environment; fires or explosions.

Section 13 contains many of the requirements for sound emergency response plans, but lacks a few provisions needed to properly anticipate and plan for emergency situations. First, the regulation should impose a strict timeframe requiring that the plans be developed and training occur before any new gathering line permitted under this regulation is put into use, and within 6 months for existing lines. Obviously, no gathering line should be put into use until employees are properly trained in emergency response.

Second, a copy of the plan should be provided to local fire, police and emergency response personnel for each affected county, along with a copy of a map showing the locations of the lines.

10. No gathering lines should be allowed to be abandoned in place. Any section of gathering line that becomes unsafe or is abandoned should be removed and all disturbed areas restored and revegetated. Abandonment should be defined as no continuous use for a period of over thirty (30) days, or a longer but specific period provided by and justified by the permittee. All insurance, bond and other requirements must remain in effect where the gathering line is idled or shut in temporarily.

Allowing lines to remain in place after abandonment is inconsistent with the concept of reclamation, and constitutes improper open dumping of waste industrial materials. Additionally, those lines may contain pipe scale or other materials that may adversely affect uses of the land in the future. No waste piping should be allowed to remain in place after closure.

11. All maps, designs and plans submitted should be certified by a registered professional engineer or geologist, as appropriate; and the maps and plans should be of sufficient scale to allow ready identification of features and property lines.

12. The application should bear the certification of an authorized principal of the business entity submitting the application, attesting under oath that the information is true and correct to the best of the affiant’s information after reasonable inquiry. Electronic filing should not be accepted as a substitute unless the certification is enforceable against the responsible party or parties. In all cases, the permit application, inspection and compliance files must be available for public review and copying consistent with state open records laws, and should be made available in regional offices and Frankfort.

In closing, the proposed regulation contains a number of provisions that are a first step towards meeting the statutory goal of protecting public property, safety and health, but fall short in several critical areas and are in need of clarification as recommended above in order to satisfy the legislative goal of a comprehensive and effective regulatory program.

Thank you for your consideration of these comments.

Cordially,

Tom FitzGerald

Director



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