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DCA Insights

DCA Insights

April 2017

Tuesday, April 11, 2017

Executive Orders and Approval of Key Pipelines Sends Positive Message to Pipeline Industry

While continuing to shake up the Washington establishment, the Trump administration has taken significant steps to improve the outlook for American energy policy by finalizing the approval of two major pipeline projects. These measures are not without the controversy that has become the “new normal” when it comes pipelines, but they have also injected a sense of confidence into the industry. Both during the 2016 campaign and since taking office, the president has spoken of the need to accelerate domestic energy production and the construction of pipelines that can bring oil and gas to market.

In February, the U.S. Army Corps of Engineers granted the final permit needed to complete the Dakota Access Pipeline (DAPL), a nearly 1,200-mile line that will shuttle crude oil from North Dakota’s Bakken shale to Illinois. The move came two weeks after President Trump instructed the Army Corps to conduct an expedited review of a 30-year easement in North Dakota, underscoring the administration’s intent to spur development of energy infrastructure. The pipeline will cross four states and carry crude oil from the rich shale oil basins of western North Dakota to the pipeline networks and refineries in the Midwest. Opponents continue to argue that it could damage the environment and disturb ancient burial grounds, while supporters maintain DAPL will deliver American energy to key markets across the country.

Last month, the administration issued a permit to build the Keystone XL pipeline, reversing the Obama administration and clearing the way for the $8 billion project to be completed. The latest approval caps a prolonged fight between environmental groups and energy advocates over the pipeline’s fate, one that became a political football in the underlying debate over global warming.

The State Department, responsible for reviewing the project because it crosses an international border, once again determined that building the 1,700 pipeline would serve U.S. national interests. That conclusion followed the latest environmental review as well as economic and diplomatic considerations, according to State Department officials. What isn’t clear is what exactly has changed since the last review when the State Department reached the opposite conclusion two years ago, other than a changing of the guard in the White House. Pro-Keystone advocates are being careful not to ask too many questions.

TransCanada, which first applied for a presidential permit in 2008, called the decision a “significant milestone,” and that they “look forward to working with [the White House] as we continue to invest in and strengthen North America’s energy infrastructure.” When completed, Keystone XL will carry oil from tar sands in Alberta, Canada, to refineries along the Gulf Coast, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma. The project will result in the delivery of roughly 800,000 barrels of oil per day, reflecting more than one-fifth of Canadian oil exports to the U.S., and create up to 13,000 jobs.

Making a general commitment to pro-energy policies, the president issued an Executive Order (EO) on March 28, entitled “Promoting Energy Independence and Economic Growth,” which directs the Environmental Protection Agency (EPA) to review, suspend, revise or rescind the Obama-era Clean Power Plan rule, which was stayed by the Supreme Court in February 2016.  Federal agencies were also directed to review all existing regulations, orders, guidance documents, and policies that burden the development and use of domestically produced energy resources to include natural gas, coal, nuclear material, flowing water, renewables, etc. 


Gold Shovel Standard “Participants Conference” Results in More Questions than Answers
Since taking a lead role in raising awareness and educating key stakeholders about the growing concerns surrounding the Gold Shovel Standard (GSS), DCA has seen little progress made to make GSS a workable approach to damage prevention. In fact, as GSS leaders work to “improve” the program, more and more questions are raised regarding its goals, structure, and most importantly, the overall need of the program itself.

As a reminder, the GSS is sold as a certification and monitoring program intended to reduce damages to underground infrastructure through certifying contractors’ damage prevention training, testing, policies and procedures, but is viewed as little more than a new layer of training, reporting, and information-sharing requirements. The GSS administrator discussed the program with DCA members at the 2016 Fall Meeting last October, where the following main concerns were presented:
     -Consideration of root cause is almost entirely neglected in the GSS process, especially in situations where excavation damage is the result of an unmarked or mismarked facility.
     -The GSS “EICO score” is based entirely on number of facility hits, and does not take number of employees/workers, number of projects, location of work, etc. into consideration. 
     -The requirement that all employees (including subcontractors) are GSS certified, and that the scores of subcontractors impact the EICO scores of general contractors is not acceptable.
     -The EICO Scores maintained in the GSS database of all utility damages could be used against participants in litigation, and will inevitably be used by protesters and anti-pipeline activists.
     -Because of its one-sided approach, GSS will inevitably result in a ‘blacklist’ of contractors who work in good faith to prevent excavation damage to underground facilities.

DCA also helped put together a coalition of five national contractor organizations who have collectively resisted efforts to expand the scope of GSS unless and until significant improvements have been made. In response to this opposition, GSS leaders held a “Participants Conference” in Orlando, Fla. on March 13th. This three-hour meeting featured leading members of the GSS board of directors, including PG&E, Kinder Morgan, and Excel, as well as some 25 other interested companies and associations representing the contractors (considered "participants”) who have been forced to participate in the program as a condition of doing business.

Looking at GSS from a “then and now” perspective, to say that the program is still considered incomplete would be a big understatement. In fact, based on what was said in Orlando, GSS looks like a completely different program than it did only a few months ago. Among the more significant adjustments reported are:

     -Enrollment into GSS was originally structured to ensure that GSS contractors’ “policies and procedures adhere to the Gold Shovel Standard to establish and measure safety-worthiness.” GSS currently states that the program simply certifies that excavators have a “model safety management system.”
     -Reporting requirements, originally required for any damage to any facility, are now subject to an ‘opt-out’ provision until significant programmatic improvements are made.
     -The controversial “EICO Scores” are off the table. In fact, the “EICO Committee” is now the Metrics Committee, charged with developing “metrics for excavation safety, and associated reporting requirements are being drafted by a committee of contractors.” Furthermore, program leaders now contend that GSS “neither interprets, nor evaluates, metrics.”
     -While the GSS administrator has said that “the metric will be worthless if it doesn’t consider root cause, fault, circumstance, and a myriad of other considerations,” GSS now indicates that they are not in the business of determining fault and therefore “the concept of a subjective review committee has been removed” from the program.

There were conflicting opinions about information/data sharing of sensitive and often confidential material.

The GSS seems to be back to the drawing board in terms of structure, program requirements, and even underlying goals. With this in mind, DCA and other organizations again encouraged GSS leaders to suspend the entire program until these fundamental issues have been resolved. However, it was made very clear that the leading GSS utilities (PG&E, Excel, Kinder Morgan) have no intention of suspending the GSS program, including the aggressive solicitation of an admittedly incomplete program.

The new "Metrics Committee,” made up primarily of contractors, is supposedly charged with coming up with a workable metric as well as recommendations as to how that metric will be used. Will metrics lead to scores and/or ratings? Will these metrics be used to award business to certain contractors? Will these questions really be decided by contractors or will this responsibility be changed, as other fundamental parts of GSS already have?

At first glance it might seem like GSS has made some changes toward what we’ve been asking for, but if you’re skeptical as to whether these changes will remain in the ‘final product,’ you’re not alone. Most excavators question the function and need for GSS, even in its current form. If enrollment into GSS is only to certify that contractors “have a model safety management system,” and GSS will not review disputed hits, determine fault, or interpret or evaluate metrics, what exactly is the purpose of the program?

DCA will continue to work with other national associations to educate facility operators about the detriments of the GSS program and encourage a return to sharing responsibility in damage prevention. 

Local Governments, Construction Industry Ban Together to Protect Muni Bonds
DCA recently joined dozens of national construction organizations, financial institutions and local governmental associations signing onto a letter opposing any efforts to eliminate or cap the exempt status of tax-exempt municipal bonds, which have been the bedrock of financing critical infrastructure including the construction of water and sewer facilities, public power and gas utilities, roads and public transit for decades. As a “shot across the bow” from diverse and influential interest groups, a March 29 letter from the “Don’t Mess with Our Bonds Coalition” was sent to House leaders and the chairman and ranking member of the House Ways & Means Committee, which serves as the genesis of all tax legislation, including the highly-anticipated comprehensive tax reform measure.

“Proposals to reduce or repeal the tax exemption would have a severely detrimental impact on national infrastructure development and the municipal bond market,” the letter stated. “Such proposals would clearly increase the borrowing costs of state and local governments and create uncertainty for investors.” The coalition will continue to collectively protect tax-exempt muni bonds as the tax reform debate begins in earnest over the next couple of months. This tax exemption has a long history of success, and it continues to finance the majority of our nation’s infrastructure needs for state and local governments of all sizes. DCA is proud to help preserve this important financing tool.