Rulemaking Process and Cost Benefit Analysis John A. Gale Director Office of Standards & Rulemaking

Goals Regulatory Process Cost Benefit Analysis Improve your knowledge of the regulatory process Improve your knowledge of how you can be involved in the process Cost Benefit Analysis Better understanding of how “Cost Benefit Analysis” affects rulemaking development – in particular rulemakings affecting pipeline safety

Steps 1-5 Step 1 – Initiating event – THE PROBLEM” Steps 2 & 3 – Development of the Notice of Proposed Rulemaking Development of cost benefit analysis (Regulatory Impact Analysis” Small Business Impact Information Collection Step 4 – OMB Review – Significant rule Step 5 – Publication of NPRM in the Federal Register Public comment period

www.regulations.gov Please comment!!! Positive or negative comments. Additional data https://www.federalregister.gov/agencies

Steps 6-9 (Plus one more) Extra Step – Pipeline Advisory Committees GPAC/LPAC Steps 6-7 – summarize comments, develop final rule, revise proposed regulatory changes based on comments and data Step 8 OMB Review Step 9 Publish in the Federal Register

Rule Process Non-Significant rules Significant rules PHMSA - Federal Register Significant rules PHMSA - OST – OMB – Federal Register OMB Determines what rules are Significant Most PHMSA Pipeline Safety Rulemakings are deemed Significant

Rule Process Significant vs Non-Significant Rulemakings (EO 12866) Have an annual effect on the economy of $100 million or more… Create a serious inconsistency or with another agency; Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this Executive order.

Significant Rulemakings Relational Reference Significant Rulemakings Statute(s) OMB Secretary of DOT Administrator of PHMSA Office of Pipeline Safety

Rule Process Where can I find information on the Status of rulemakings? PHMSA – www.phmsa.dot.gov DOT DOT Significant Rulemakings (Monthly reports) www.dot.gov/regulations/report-on-significant-rulemakings OMB www.reginfo.gov

DOT Significant Rulemaking report

Cost Benefit Analysis EO 12866, EO 13563 and OMB guidance A4 Provides Federal agencies guidance and direction on the development of regulatory analysis …agencies should propose or adopt a regulation only upon a reasoned determination that is its benefits justify its costs… Select those regulatory approaches that maximize net benefits

Cost Benefit Analysis Cost benefit analysis Mandate vs Discretion 49 USC 60102(b)(5) – Federal Pipeline Safety Statute “… the Secretary shall propose or issue a standard under this chapter only upon a reasoned determination that the benefits of the intended standard justify its costs.” Pipeline Advisory Committees Mandate vs Discretion if appropriate; reasonable; practicable; minimize costs

Cost Benefit Analysis Averages over last 20 years for Gas Transmission incidents: Fatalities – 2 Injuries – 9 Property damages - $88.6 million Excluding excavation damage/Outside or natural force damage incidents: Fatalities - 1 Injuries - 6 Property damages - $52.3 million

Cost and Benefits Number of Gas Transmission miles that would be affected to Hydro-test a mile of pipeline: 45,000 miles Estimated cost to implement NPMS amendments: PHMSA – $85 million over three years INGAA - $820m covering 180,000 miles of GT API - $10.8m-$21m per operator

THOUGHTS Rulemaking development is a process Improve our “benefit formula” Bring additional economic expertise into the organization Public involvement/engagement/education

QUESTIONS

Current Rulemakings in Process Hazardous Liquid NPRM Gas Transmission NPRM Excess Flow Valve NPRM Plastic Pipe NPRM Operator Qualification and Cost Recovery NPRM Rupture Detection and Automatic shutoff Valve NPRM Standards Update Excavation Damage Final Rule Miscellaneous Final Rule