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Remarks Before the American Petroleum Institute Annual Pipeline Conference, Dallas, Texas
Jim Hall
American Petroleum Institute Annual Pipeline Conference, Dallas, Texas

When George Persyn of Exxon invited me to address this Conference, I was pleased to accept because this is a good opportunity for me to speak to both liquid and natural gas pipeline operators on improving pipeline safety. Also, I was relieved about the timing of my presentation because my brother, who recently retired his position with a major pipeline; won't be here to heckle me.

Seriously, the timing for this presentation is good because major changes are occurring in the pipeline industry and the manner in which the industry addresses these changes will greatly affect both your and the Safety Board's actions in the future.

As you know, the National Transportation Safety Board is an independent federal agency that I have been privileged to lead for almost 3 years. We investigate all aviation accidents and all major accidents in the surface modes of transportation, as well as conducting safety studies on issues of national significance. From these, it makes recommendations to prevent recurrence of accidents. We are the eyes and ears of the American people at accident sites.

You are undoubtedly familiar with our ongoing investigations of ValuJet and TWA flight 800. Last November, we launched a team to investigate what has turned out to be the deadliest pipeline accident in the Safety Board's history, the natural gas explosion that killed 33 people in San Juan, Puerto Rico. Such catastrophes are doubly tragic if we do not learn from them and do all we can to make sure they don't happen again. That is the fruit of our recommendation process, and it is in that spirit that I come before you today to discuss pipeline safety.

To return to my opening thought about change, your industry has reacted well to change in the recent past. Once pipeline operators merely transported liquids and gases in the continental United States. Now you are a major factor in producing, as well as transporting, product that meets not only the nation's needs, but the needs of the world, as well. With recent mergers between pipeline operators and competitors like electric power companies, you are diversifying by providing multiple forms of energy.

Improvements in technology are also changing the way pipelines operate. Remote monitoring and control systems and more effective testing equipment have made your operations less dependent on labor and this has resulted in large restructuring of companies and a reduction in personnel. It is difficult to imagine what the next change might be, but you can be assured that this industry will continue to be transformed.

As an essential provider of fuels, chemical feed stocks, and now various energy resources, your industry has been highly regulated both for economic and safety reasons. You have argued for the need for greater flexibility to meet changing circumstances so you can make cost-effective economic and safety decisions that will allow you to use your operating and maintenance monies more wisely.

Last year your industry testified about this need and the Congress responded by enacting in both the liquid and natural gas pipeline safety acts provisions for you to incorporate risk management demonstration programs. Those who enter these programs would not have to comply with the Federal minimum pipeline safety standards, at least for those operations covered by the demonstration program. The ultimate goal of these demonstration programs would mean the end of Federal pipeline safety standards as we know them today. And that prospect has the pipeline industry excited.

First, let me note that I am puzzled about this so-called "new" opportunity. Risk management is not at all new. It has been practiced for many years by the military, the nuclear power industry, and even by some of the pipeline operators represented in this room. Its roots go back more than 30 years - back to the 1960s. The use of a risk based program for managing pipeline systems was first proposed by the Safety Board in 1972. The Board advocated that RSPA and the FRA, the two U.S. Department of Transportation agencies that then regulated pipeline safety, along with private industry develop and incorporate proven risk management principles into their operations. Specifically, the Safety Board asked the API to develop guidance for its members to establish such a program for controlling day-to-day hazards in both their operations and maintenance activities.

Unfortunately, at that time, not many in the industry seemed excited about the prospect of using risk management, not the federal pipeline regulatory agencies, not the pipeline associations, and not many of the pipeline operators. The Safety Board, however, continued to support the program. We believe that once the industry has become proficient in the use of risk management, its leaders will learn from their failures and our investigation of pipeline accidents.

While I am pleased that the industry is now excited about the government allowing you to incorporate risk management principles, understand that you have never been prohibited from using those principles. That is why Shell, Tenneco, and others have for years incorporated risk management into their operations. You did not then nor do you now need federal approval. Considering your present expectations of risk management for enhancing pipeline safety, just imagine how much progress might have been made had these principles been incorporated industry-wide since the 1970s.

Now that your industry has been successful in drawing the support of Congress and the Office of Pipeline Safety for replacing pipeline safety standards with risk management, I believe that you need to be aware of several concerns I have if you are to be successful in securing a place for risk management in the future for the pipeline industry. First, effective risk analysis standards must be developed. RSPA issued on December 9, 1996, its draft guidance document on performance measures for use in the pipeline risk management demonstration program. That document makes it clear that the performance measures included are only a beginning and that adjustments will be made based on program experience. It seems a little premature to be talking about performance measures for programs when there has been no guidance issued about the various types of safety, hazard assessment, or risk analyses, and no analysis conducted on their performance relative to their usefulness in evaluating pipeline systems.

Nor has guidance been developed on the manner and types of documentation that must be kept for review to assess the adequacy of the programs and their results. We need to develop a method to gauge the success of the pilot programs.

Another concern you should have is the knowledge of your regulators when it comes to risk management principles. It is clear that the industry has the primary risk management experience and knowledge, and that the guidance and requirements now being developed are primarily the product of the pipeline industry. You may view this as a benefit now, but for you to have effective future interaction with your regulators it is to your advantage that they understand risk management. Knowledgeable regulators would prove an asset - providing independent and impartial assessments of your risk management programs. Their broad view of the program will most definitely be beneficial to you as an individual operator. On the other hand, inexperienced regulatory oversight of your risk management practices will be burdensome, consuming unreasonable amounts of review time and raising unnecessary criticism of the program. It is to your advantage to work closely with them and make sure they understand the structure of your program.

A third concern you should have, and one that is already evident, is the lack of public acceptance of a federally-approved risk management program option. People fear that such programs will relieve industry of having to adhere to basic safety standards. The demonstration program has not yet begun and already there is some fear that the relationship between the Office of Pipeline Safety and the industry is too close - that the program is a ruse designed to relieve the industry of its public safety obligations. No doubt an improperly run program could be just that, but with constructive industry effort and an effective regulatory body, the Safety Board sees this as an opportunity for enhancing public safety.

A properly operated and documented risk management program will make available for public scrutiny the hazard identification analyses, the risk assessments, the economic assessments, and the bases of decisions made by management to eliminate, reduce, or accept risks identified through quality assessments. It is essential that the analyses and decision processes employed be documented concisely to provide for effective federal compliance reviews.

The Safety Board is encouraged that finally there is movement to incorporate risk management principles into pipeline operations. When properly implemented, we believe it will be much easier for us to gain your acceptance of our safety improvement recommendations -- recommendations such as those dealing with the need for effective employee training programs and with the need to rapidly shut down failed pipelines, especially those that occur in densely populated areas.

Since 1969 the Safety Board has identified the need for improving employee training programs. Our first safety recommendation concerning employee training was for the Indiana Public Service Commission to determine the adequacy of training procedures being used by a gas pipeline operator. In the period from 1975 through 1986, the Safety Board addressed the need for improving employee training in more than 100 additional recommendations made to pipeline operators, industry associations, and to RSPA. Then on February 18, 1987, the Safety Board urged RSPA to require pipeline operators to develop effective training programs for their employees. Specifically, that recommendation called for training programs to provide the knowledge and skills needed for employees to correctly carry out all assigned safety-related tasks and that the effectiveness of the training be assessed through testing and other evaluation means.

RSPA promptly issued on March 23, 1987, an advance notice of proposed rulemaking proposing to establish minimum training and testing standards for pipeline employees. It has now been 10 years since that proposal was issued and we still do not have minimum standards for training and testing pipeline employees. Instead, on June 25, 1996 the proposed rulemaking was withdrawn and the next day, RSPA announced that it would establish a committee to negotiate a rule. Three weeks ago, RSPA issued a notice of public meeting - it notes that an advisory committee will hold its first meeting on the 23rd and 24th of April, to address minimum training and testing standards. API is a member of this committee, and I urge you to take positive action and get the job done. It is well overdue.

The need for improved employee training continues to be identified as a critical factor in our accident investigations. The latest instance was the November 21, 1996, explosion at San Juan, Puerto Rico that I mentioned earlier, in which 33 people were killed and more than 80 were injured. Just two weeks ago, we issued recommendations calling for the operator to improve its employee training program. We believe that effective employee training programs will become even more important to public safety as newer technologies are introduced into your operations and as you downsize your staffs.

It makes good business sense to make certain that your employees know what is expected of them, that they are provided training adequate for them to fulfill their assignments, and that they understand how to carry out those assignments safely. Many operators understand that effective employee training is beneficial and have implemented training and even certification programs. I believe that through properly implemented risk management programs the industry will see the wisdom of having effective employee training programs even without government intervention.

We are disappointed in the lack of action on another important safety issue. Twenty six years ago the Safety Board recommended that RSPA conduct a study to develop standards on rapidly shutting down failed pipelines. The study was completed and the recommendation was closed, but no requirements were issued to implement the study's findings on improving ability of operators to rapidly shut down failed pipelines. We again addressed the need for improvements on shutting down failed pipelines in a 1987 recommendation, calling on RSPA to require the installation of remote-operated valves on liquid pipelines and to base their spacing on the population at risk.

The Congress also addressed the need for rapid shutdown for all pipelines that year, and on February 11, 1987, RSPA issued an advance notice of proposed rulemaking for the installation of remote and automatic valves. Two years later, it collected information from the pipeline industry on this issue. Ironically, while RSPA was reviewing the information it had collected, two major Safety Board investigations were documenting the consequences of not rapidly shutting down failed pipelines - the accidents on May 25, 1989 at San Bernardino, California and on March 13, 1990, at North Blenheim, New York. Nevertheless, on June 8, 1990, a rulemaking notice was issued stating that there did not appear to be sufficient justification for requiring the installation of remote- or automatic-operated valves.

The Congress disagreed. It required RSPA to conduct a study to determine whether remote- and automatic-operated valves were needed to enhance pipeline safety and to assess the cost and effectiveness of initiating a demonstration project on using emergency flow restricting devices. In March 1991, RSPA issued its study on emergency flow restricting devices and concluded that the only such devices that were technically feasible, effective and cost beneficial were remote-operated valves and check valves installed in offshore liquid pipelines and in onshore liquid pipelines that were located in environmentally sensitive and populated areas.

However, the Safety Board identified serious flaws in the study. The Board believed that the study incorrectly limited the locations where such valves could be effective and on January 18, 1995, we called on RSPA to expedite requirements for installing automatic- or remote-operated valves on all high-pressure pipelines - both liquid and natural gas -- in urban and environmentally sensitive areas. No action has yet been taken.

We believe that effective risk management programs will result in industry voluntarily taking action on the installation of remote and automatic shutdown valves where pipelines traverse densely populated areas without a Federal requirement to do so. It will also promote other actions recommended by the Safety Board, such as:

  1. The increased use of internal inspection equipment in pipelines that cross environmentally-sensitive and densely populated areas;
  2. The use of pipe steels with greater toughness properties, especially in colder environments and in areas where excavation-caused damage potentials are greater; and
  3. More effective supervisory control and data acquisition systems, complimented by leak detection systems, to aid controllers in recognizing quickly when product leakage has occurred and to assist in determining the approximate location of the release area.

These things will occur if the industry develops effective risk management programs. On the other hand, if the industry elects to use this opportunity as a ruse for avoiding compliance with present-day safety standards, then another scenario will evolve.

In this scenario there will be a few years in which the industry will save maintenance dollars by not performing the system maintenance and replacements that must be performed to maintain the system safely. The number of technicians and engineers employed by the industry will continue to fall. Employee knowledge will not be kept at the level necessary for safe operations. And then there will be a time of reckoning when a series of pipeline accidents with significant consequences will result in Congressional demands for a return to the days of uniform specifications for all pipeline operators. That's the regulatory posture from which you worked hard to free yourselves.

So I say to you in closing that your future is in your hands. Make it work for you and for improving pipeline safety, and not just you alone, but all Americans will be the beneficiaries.

If we believe you are acting in the best interests of the American people, the National Transportation Safety Board will support you every step of the way.

Thank you for inviting me.


Jim Hall's Speeches