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

2. 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

4. 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

5. www.regulations.gov Please comment!!! Positive or negative comments.
Additional data

6. 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

7. 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

8. 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.

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

10. Rule Process
Where can I find information on the Status of rulemakings?
PHMSA –
DOT
DOT Significant Rulemakings (Monthly reports)
OMB

11. DOT Significant Rulemaking report

12. 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

13. 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

14. 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

15. 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

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

17. QUESTIONS

18. 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