Private Oversight of Keystone XL: For Scrutiny or For Budget?

If the Keystone XL pipeline goes ahead, TransCanada will have to step up its safety measures. That’s the word from the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), which instituted two new regulations to address issues like bad welds and defective pipeline coating that were found in Keystone's southern leg.

Keystone XL inspections: Faulty welds

Inspections by PHMSA revealed that there had been an inordinate number of welds that required repairs. This was revealed in two warning letters issued last year, which highlighted the need to increase safety measures. One of the letters, issued last September, noted a 72 percent repair rate for welds conducted over a one-week period. During another week, 205 of 425 welds had to be redone.

According to the letter, PHMSA alleges that TransCanada is hiring welders who don’t have the specialized experience for this work, and are consequently using the wrong welding techniques. Welders are apparently required to pass a test demonstrating their familiarity with pipeline construction work.

A November 2013 report also highlighted an exceptional number of times in which construction workers were required to dig up and repair defects in the pipes themselves. According to PHMSA records, workers were required to remove and repair piping 125 times that was at risk of bending or sagging, causing increased risk for spills.

New requirements, new costs for Keystone XL

So in January, PHMSA quietly added two new requirements to the appendices of the State Department’s Environmental Impact Statement (EIS). These requirements will cost TransCanada substantially more money, but they also presumably raise the bar in terms of expectations for any go-ahead of the northern portion of the Keystone XL pipeline.

Per the EIS, TransCanada would be required to hire a third-party contractor to oversee construction and report on any construction issues or oversights. And no, TransCanada doesn’t get to approve the choice of the contractor. PHMSA does.

The federal government would also require the company to design and enforce a quality management program to ensure that the pipeline is “built to the highest standards by both Keystone personnel and its many contractors.”

The new requirements raise the list of “special conditions” to 59 stipulations that TransCanada must agree to and enforce for the project to go ahead. Given the significant financial benefits from this project, it’s doubtful that new conditions numbered 58 and 59 will quash the project.

Private contractors and PHMSA cutbacks

But they do give PHMSA a bit more late-night peace of mind about potential spills. And judging by the department’s recent news about staffing changes, that will be well-timed. Apparently PHMSA expects to cut its staff by as much as 9 percent in mid-June.  Last year’s offer to employees of a buyout deal received 13 takers, and as of this month, the number has risen to about 40.

PHMSA hasn’t said how this jibes with the increased number of pipeline spills that it’s had to deal with this year, but maybe the new privately paid contractors that TransCanada would be expected to pay for will catch on as a way to decrease costs for a beleaguered federal department that knows a lot more oversight is needed at pipeline construction sites.

Decision indefinitely on hold

Meanwhile, the Obama administration has indefinitely delayed the decision of whether it will approve the construction.  It's likely that no decision would be made until after the November 2014 elections. That's of little surprise, given the controversy Keystone has kicked up, but it's particularly understandable in light of an April 2013 letter from the Environmental Protection Agency to the Department of State noting the impact Keystone could cause. According to the letter signed by Assistant Administrator for Enforcement and Compliance Assurance Cynthia Giles, Keystone could add as much as 18.7 more metric tons of CO2-e (carbon dioxide equivalent) to the atmosphere than conventional crude oil.

Ouch! Talk about a hot potato.

Image credit: Keystone pipeline, 2009, Shannon Ramos