Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14719

Comments: Send all comments

regarding this information collection to

Joel C. Richard, Department of

Transportation, Maritime

Administration, MAR–120, Room 7210,

400 Seventh Street, S.W., Washington,

D.C. 20590. Send comments regarding

whether this information collection is

necessary for proper performance of the

function of the agency and will have

practical utility, accuracy of the burden

estimates, ways to minimize this

burden, and ways to enhance quality,

utility, and clarity of the information to

be collected.

By Order of the Maritime Administrator.

Dated: March 24, 1997.

Joel C. Richard,

Secretary.

[FR Doc. 97–7826 Filed 3–26–97; 8:45 am]

BILLING CODE 4910–81–P

Research and Special Programs

Administration

[Docket No. PS–142; Notice 5]

Requests for Applications for the

Pipeline Risk Management

Demonstration Program

AGENCY: Office of Pipeline Safety, DOT.

ACTION: Notice of request for letters of

intent.

SUMMARY: The Research and Special

Programs Administration’s (RSPA)

Office of Pipeline Safety (OPS) invites

eligible pipeline operators to submit

Letters of Intent expressing interest in

participating in its Pipeline Risk

Management Demonstration Program.

This notice begins the solicitation

process by specifying a deadline and

address for Letters of Intent, by directing

interested operators to supplementary

guidance documents, and by providing

updated guidance for operators

interested in participating.

DATES: Letters of Intent will be accepted

no later than July 25, 1997.

ADDRESSES: Letters of Intent should be

sent to Richard B. Felder, Associate

Administrator for Pipeline Safety,

Research and Special Programs

Administration, Department of

Transportation, Room 2335, 400 7th St.,

SW, Washington, DC, 20590.

SUPPLEMENTAL DOCUMENTS:

(1) Program Framework for Risk

Management Demonstrations (61 FR

58605): Describes the processes by

which OPS will receive, review,

approve, monitor, modify, and

terminate company risk management

demonstration projects, and provides a

description of the information a

company should include in its Letter of

Intent. The guidance in the Program

Framework is current except where

noted in Section II of this notice. The

significant information in the Program

Framework is contained in Appendix A

of this document or available on the

Internet at OPS address http://

ops.dot.gov.

(2) Interim Risk Management Program

Standard: Describes the essential

elements and characteristics of a

company’s risk management program. A

Letter of Intent should include evidence

that the company will address all

considerations raised in the Program

Standard. It is available by contacting

Eben Wyman at (202)366–0918 or on

Internet at OPS address http://

ops.dot.gov.

(3) Guidance on Performance

Measures: Provides the basis for

participating companies and OPS to

assess, through the demonstration

projects, whether risk management is an

effective alternative to the current

regulatory environment; and to

determine whether superior public

safety and environmental protection is

being achieved. OPS considers the

performance measures proposed in the

consultation process to be critical to

approving a demonstration project.

Companies may include proposed

performance measures, if available, in

their Letters of Intent. The March 1997

guidance is available by contacting Eben

Wyman at (202)366–0918 or on Internet

at http://opspm.volpe60.dot.gov.

(4) Risk Management

Communications Plan: Outlines the

processes to enable all stakeholders

(including OPS, companies, States, and

local officials) to exchange information

about the goals, objectives, and status of

the Demonstration Program and

individual projects. The

Communications Plan describes the

information OPS intends to share with

stakeholders via local prospectuses once

candidate companies are selected for

consultations. Companies may consult

the Plan to ensure their Letters of Intent

contain sufficient information for the

prospectuses, and for guidance on local

level communications the company

should conduct. OPS will continue to

develop communications with the

public during the Demonstration

Program. The Plan is available by

contacting Eben Wyman at (202)366–

0918 or on Internet at OPS address

http://ops.dot.gov.

(5) Risk Management Training

Curricula: Describes the content of the

risk management training that will be

provided to industry and regulator

participants in the Demonstration

Program. Companies who submit Letters

of Intent and who OPS identifies as

candidates for selection will be invited

to participate in the training. The

company may request an orientation

with the OPS personnel who will be

assigned to evaluate and monitor its

demonstration project. An outline of the

curricula is available by contacting Eben

Wyman at (202)366–0918 or on Internet

at OPS address http://ops.dot.gov.

(6) Proceedings from January 28, 1997

Public Meeting held at the Hilton

Riverside Hotel, New Orleans, LA:

Record of OPS response to public

comment on elements of the

Demonstration Program. Available by

contacting Eben Wyman at (202)366–

0918, or on Internet at OPS address

http://ops.dot.gov. A summary of OPS

comments at the public meeting is

contained in Appendix B of this notice.

FOR FURTHER INFORMATION CONTACT:

Eben M. Wyman, (202) 366–0918, or by

E-mail (eben.wyman@rspa.dot.gov),

regarding the subject matter of this

document. Persons wishing to review

previously submitted comments may

contact the RSPA Dockets Clerk, (202)

366–5046, U.S. Department of

Transportation, room 8421, 400 Seventh

Street, SW, Washington, DC 20590.

Inquiries should identify the docket

number (PS–142). The Dockets Facility

is open from 10:00 a.m. to 5:00 p.m.,

Monday through Friday, except on

Federal holidays when the facility is

closed.

SUPPLEMENTARY INFORMATION:

I. Overview

The Program Framework for Risk

Management Demonstrations (Program

Framework)(61 FR 58605), published on

November 15, 1996, describes the

Pipeline Risk Management

Demonstration Program and its

objectives and statutory basis, and

provides guidance for pipeline operators

who may wish to participate. The

Demonstration Program will enable

participating pipeline operators to

substitute compliance with the

provisions of an OPS-approved

demonstration project for compliance

with existing pipeline safety standards.

The objective of the Demonstration

Program is to test whether allowing

operators the flexibility to allocate

safety resources through risk

management is an effective way to

improve public safety, environmental

protection, and reliability of service. It

will also provide data on how to

administer risk management as a

permanent feature of the Federal

pipeline safety program, should risk

management prove to be a viable

regulatory alternative.
14720 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

Guidance for participation by

companies, regulators, and the public in

the Demonstration Program is contained

in the documents referenced at the front

of this notice. OPS expects documents

(1) through (5) will be refined and

improved as more is learned during the

course of the Program. OPS will report

at least annually on the Program’s

progress, via Federal Register notices,

nationally broadcast two-way video

teleconferences, mailed updates on the

individual project prospectuses, and

other means. By March 31, 2000, OPS

will submit a Report to Congress on the

Demonstration Program status. A final

report will be issued in four years

evaluating how effectively safety,

environmental protection, and

reliability of service have been

improved by participating operators, the

feasibility of risk management in

general, and recommending whether

and in what form risk management

should be incorporated into the Federal

pipeline safety program on a permanent

basis.

II. Modifications and Clarifications to

Program Framework

The following modifications and

clarifications to the Program Framework

for Risk Management Demonstrations

are in response to public comment to

the docket, meetings with individual

operators, national public,

environmental and other interested

organizations, and continued interaction

with industry and the States through

‘‘joint risk management quality teams’’

(JRAQT).

1. Window for submission of Letters of

Intent

Companies considering participating

in a demonstration project must submit

a Letter of Intent to OPS no later than

July 25, 1997. This provides operators a

120-day window, rather than the

previously published 60-day window.

2. Phased Selection of Demonstration

Projects

OPS will likely select a few

candidates for consultations before the

120-day window for submission of

Letters of Intent has closed. This phased

approach would allow OPS to better

manage workload. OPS would base

these selections on evidence in the

Letter of Intent that the proposed

demonstration project has a high

likelihood of being approved per the

criteria described in the Program

Framework.

3. Screening Criteria

As part of the screening criteria,

previously described in the Program

Framework, OPS will favor companies

with a demonstrated commitment to

risk management and a demonstrated

ability to communicate with OPS by, for

example, being forthcoming with

relevant data. OPS will favor proposed

projects that:

• Are comprehensive, indicating a

more systematic and thorough

assessment of risk and risk control

options so that superior protection can

be achieved;

• Provide a good opportunity to

evaluate risk management as a

regulatory alternative; and

• Contain distinguishing features,

such as support from or a preestablished relationship with local or

stakeholders.

4. Informational Meetings with OPS

OPS is continuing its informational

meetings at company sites to discuss

demonstration project concepts, to

explore the potential for more

comprehensive project proposals, and to

provide companies a better

understanding of Program objectives,

opportunities, and the administrative

process and approach to application

evaluation. In addition to assisting

companies with questions about risk

management, these meetings could

position OPS to better plan the

evaluation phase of the Demonstration

Program.

5. Local Distribution Companies (LDC)

are Not Eligible to Participate in the

Current Demonstration Program

As stated in the Program Framework,

eligibility for the current Demonstration

Program is limited to interstate natural

gas transmission and hazardous liquid

pipeline companies. However, on

February 26, 1997, the National

Association of Regulatory Utility

Commissioners (NARUC) Committee on

Gas passed a Resolution supporting an

LDC Risk Assessment Quality Action

Team to conduct a feasibility study of

risk management as a regulatory

alternative.

6. Role of States in the Demonstration

Program

In keeping with the statutory

provision (49 US USC 60126(d)) that

allows the Department to provide for

State consultation in the Demonstration

Program, OPS will contact State

pipeline safety agencies that may be

affected by a proposed demonstration

project to discuss the extent of the

State’s involvement in the project. This

could entail the State providing input

on geographic, socioeconomic, and

other local factors that the Project

Review Team (PRT) should consider

during its consultation with an operator.

It could also entail the State pipeline

safety agency acting as a conduit for

other State agencies wishing to provide

input to the PRT. The State could serve,

along with OPS and the company, as a

point-of-contact for members of the

public providing comments and raising

questions. Should the State pipeline

safety agency choose not to participate

in the Demonstration Program, OPS will

find alternative means of ensuring that

the PRT considers input from other

State agencies and the public.

7. Meaning of ‘‘Clear & Established

Safety Record’’ in Presidential Directive

A Presidential directive to the

Secretary of Transportation directs the

Secretary to limit risk management

demonstration projects to those pipeline

operators that have clear and

established records of compliance with

respect to safety and environmental

protection. OPS will review its records

to determine if candidate companies

have historically met requirements of

applicable State pipeline safety

regulations. Operators should have

addressed all safety and environmental

protection actions prescribed by existing

regulations and orders, including

consent orders and commitments for

corrective action made to OPS. OPS will

consult with other agencies about their

knowledge of the company’s safety and

environmental compliance record. A

company may include in its Letter of

Intent a statement identifying the

relationship of any ongoing prescribed

actions to the proposed demonstration

project.

8. Role of Other Agencies

At the annual National Response

Team (NRT) Regional Response Team

(RRT) Co-chairs’ meeting in February,

1997, OPS invited the 15 State NRT

agencies to participate in the

Demonstration Program. Once OPS

announces the candidate demonstration

sites, OPS will contact NRT officials

whose regions may be affected by a

proposed demonstration project to

identify an appropriate role for the

officials’ participation in the

Demonstration Program. This could

entail the NRT official identifying any

issues and concerns he or she may have

with a candidate demonstration project,

including the company’s safety and

environmental compliance record. OPS

will keep these officials abreast of the

Demonstration Program and individual

projects in their regions via periodic

program briefings, project prospectuses,

and updates. At the State level, State

pipeline safety agencies participating in

the Demonstration Program may act as
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14721

points-of-contact for other State

agencies (including State environmental

agencies).

10. Clarification of Term ‘‘Stakeholder’’

OPS uses the term stakeholder in

reference to parties at the National,

State, and local levels that have interest

in the Pipeline Risk Management

Demonstration Program.

11. Error in Citing Part 192 as Source of

Reporting Requirements for Gas

Operators

OPS could issue orders exempting

participating operators from any but the

reporting requirements in 49 CFR Parts

191 or 195, but expects that the projects

approved in 1997 will require

exemptions from only one or a portion

of the regulations. The Program

Framework erroneously cited Part 192

as the source for reporting requirements

for gas operators.

12. Clarify Role of Local Public Officials

The Program Framework was unclear

about why OPS asks that participating

companies establish a dialogue with

local officials in proximity to their

demonstration projects. The expected

benefits of local public involvement

include:

• Providing information about

specific local conditions that may not be

known at the Federal or State level;

• Ensuring that government agencies

have considered all relevant factors in

making decisions to approve projects;

and

• Providing local feedback as to

whether the Program is accomplishing

the goals for which it was designed.

To broaden opportunities for public

involvement, other planned outreach

opportunities include an Internet

homepage with each project’s status and

national two-way video teleconferences

available via Internet.

OPS is seeking a diverse set of

demonstration projects, and encourages

all interested interstate natural gas

transmission and hazardous liquid

pipeline operators to submit Letters of

Intent for consideration.

Issued in Washington, DC on March 24,

1997.

Richard B. Felder,

Associate Administrator for Pipeline Safety.

Appendix A—Excerpt from the

Program Framework for Risk

Management Demonstrations (61 FR

58606)

SUPPLEMENTAL INFORMATION:

I. Overview

Section 5 of the Accountable Pipeline

Safety and Partnership Act of 1996

(Pub.L.No.104–304, Oct. 12, 1996)

requires OPS to establish the Pipeline

Risk Management Demonstration

Program and sets forth requirements for

carrying out risk management projects.

In a memorandum issued when the

statute was enacted, the President

directed the Secretary of Transportation

to use his discretion to administer the

Demonstration Program with certain

safeguards in place. The safeguards

identified in the President’s

memorandum to the Secretary include

making provisions for:

• Accepting projects that can achieve

superior public safety and

environmental protection.

• Enabling full and meaningful

participation by affected communities

and constituencies in risk management

project approval.

• Using orders ensuring that the

requirements of risk management

projects are subject to full enforcement

authority.

• Limiting the number of

demonstration projects to ten (10).

• Limiting participation to operators

with clear and established records of

compliance with respect to safety and

environmental protection.

The statutory requirements, the

President’s memorandum to the

Secretary, comments on previous

framework concepts (published in 60 FR

49040, September 21, 1995, and 60 FR

65725, December 20, 1995), and other

stakeholder input were used to develop

the present framework, which provides

guidance to operators who may decide

to participate in the demonstration

projects that are expected to begin in

1997.

Risk management can provide

pipeline owners and operators greater

flexibility in their choice of safetyrelated activities than is possible within

OPS’s present universally applicable

regulatory program. Risk management

enables a company to customize its

safety program to address its pipeline’s

particular risks. Furthermore, risk

management is a dynamic process, with

built-in features for evaluating and

improving safety activities as experience

is gained.

The demonstration projects will test

whether allowing operators the

flexibility to allocate safety resources

through risk management is an effective

way to improve safety, environmental

protection, and reliability. They will

also provide data on how to administer

risk management as a permanent feature

of the Federal pipeline safety program,

should risk management prove to be a

viable regulatory alternative. The new

standards, technologies, and

communication processes developed by

operators and OPS for the risk

management demonstration projects

will be adapted to support the range of

risk-based regulatory, compliance, and

research and development activities

OPS presently has under development.

OPS expects that risk management

methods and the formalized process of

interactions and negotiation between

regulators and company personnel will

result in superior public safety and

environmental protection than could

otherwise be attained through existing

regulatory requirements. Risk

management is, by OPS definition, a

more systematic and thorough

assessment of risk and risk control

options, with the intended result of

superior decision making. As a result of

improved assessment, OPS believes

there is a potential to identify more risk

than may have been found using

existing practices.

OPS plans to select companies for

demonstration projects with a

demonstrated commitment (1) to work

in partnership to evaluate merits of risk

management processes and technologies

and (2) to develop risk management as

an integral part of company day-to-day

business practices, at least related to the

demonstration project. The selection

criteria favors projects showing

potential for more comprehensive risk

management applications. All

participants will be focused on

improving safety and environmental

results, prioritizing resources more

effectively, and enhancing the ability of

government and industry to effect

positive outcomes. OPS will have clear

profiles of its assessment of pipeline

integrity before and after the

demonstration program. At the program

conclusion, OPS fully expects to have a

better understanding of individual

pipeline risks and to be in a better

position to evaluate risk control options.

Finally, OPS expects risk management

to be able to provide better

accountability for safety and

environmental protection, and a better

basis to communicate with the public.

To assure that safety and environmental

protection improve, OPS will measure

local, project-specific data such as

current physical data, new test data,

comparison with similar segments,

outcomes from risk control actions,

precursor or ‘‘anticipative’’ event

measures, level of risk awareness,

history of service interruptions and

incident data. OPS also expects to

measure improvements in

communications, understanding, and

resulting increased ability of

government and industry to effect

desired safety and environmental

project outcomes. OPS and operators
14722 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

participating in the Demonstration

Program will report to the public

periodically during the four year period.

OPS will be accepting into the

Demonstration Program those projects,

as proposed or ultimately negotiated,

that are expected to achieve superior

public safety and environmental

protection than is currently being

achieved through regulatory

compliance. Because of the nature of the

risk management process, OPS believes

that operators choosing to participate

will be able to propose projects

demonstrating such protection.

Each demonstration project is

expected to have a four-year duration.

Participation in risk management

demonstrations will be voluntary and

subject to OPS approval based on

criteria set forth later in this notice.

Eligibility for the demonstration projects

beginning in 1997 is limited to interstate

natural gas transmission and hazardous

liquid pipeline companies. RSPA may

later broaden eligibility to include

distribution and other intrastate

operators.

II. Activities Presently Underway and

Next Steps

The December 20, 1995, Federal

Register notice gave the background for

OPS’s consideration of companyspecific risk management projects as an

alternative to the existing regulations.

The notice described many of the safety,

environmental, legislative, technical,

public perception, and economic factors

driving government, corporate, and

public interest in risk management.

Since December 1995, OPS has been

working with ‘‘joint risk management

quality teams’’ (JRAQT) composed of

representatives of State pipeline

regulatory agencies, the oil and gas

industries, and local public safety and

environmental representatives to

develop the five primary components of

the Pipeline Risk Management

Demonstration Program. These

components include the Interim Risk

Management Program Standard, the

guidance for assessing risk management

as a regulatory alternative using general

industry data, the training protocols for

instructing government and corporate

participants about their new roles under

risk management, a plan for productive

communication between all participants

and the public, and the regulatory

framework presented in this notice. The

standard and the regulatory framework

are now ready for public comment. The

guidance for assessing risk management

as a regulatory alternative will be ready

for public comment in November.

The Interim Risk Management

Program Standard will serve as a

common ground upon which the

pipeline industry can develop and

refine effective risk management

demonstration projects that regulators

can approve and monitor. It defines

certain elements that all programs

should contain, but allows flexibility to

each company to customize its project

to fit its particular needs and corporate

practices, and allows projects to evolve

as experience is gained. The standard

will also provide companies guidance

for selecting performance measures to

ensure that safety and environmental

protection are safeguarded in

demonstration projects. Directions for

obtaining and commenting on the

standard are at the front of this notice.

The regulatory framework component

presented in this notice guides pipeline

companies in how they can gain OPS

approval of their risk management

projects and describes how OPS would

monitor the plans. The framework

presented here will guide the

demonstration projects that begin in

1997. The experience gained from the

demonstration projects will help OPS to

later develop a permanent procedure for

approving risk management projects, if

risk management proves to be a viable

regulatory alternative. Directions for

public comment on the regulatory

framework are also at the front of this

notice.

To help ensure that the

Demonstration Program components

provide the flexibility to fairly and

consistently evaluate and support actual

risk management projects, OPS has been

conducting a series of meetings with

individual operators since August 1996.

The topics of discussion include risk

management projects the operator has in

place or under consideration and

criteria OPS might use to evaluate them.

During the meetings, operators also

learn about and comment on the

Demonstration Program components

under development.

OPS has held two public meetings on

risk management demonstration projects

and will hold a third on Tuesday,

January 28, 1997, in New Orleans,

Louisiana. At that meeting, OPS and the

JRAQT will present the Interim Risk

Management Program Standard that

operators will use during the

demonstration projects. OPS will also

present prototype risk management

projects to illustrate the documentation

needed and the types of issues to be

addressed during project review,

approval and monitoring. After the

meeting, OPS will publish a Federal

Register notice to begin the project

approval process described in Section

IV of this notice. Between now and the

January meeting, OPS will continue to

refine the Demonstration Program

components based on public comment

on this notice, meetings with individual

operators, national public,

environmental and other interested

organizations, and continued interaction

with industry and the States through the

JRAQT teams.

III. Risk Management Demonstration

Project Objectives and Policies

The objectives of the Pipeline Risk

Management Demonstration Program,

which stem from the statutory

requirements and the Presidential

directive, are to accomplish the

following:

• To show that more effective

allocation of resources can result in

improved safety and environmental

protection over what is presently

achieved through regulatory

compliance.

• To address risks not addressed by

regulations by capitalizing on features

inherent to the risk management

process, such as improved quality and

integration of safety data and, as a

result, more comprehensive assessment

of threats.

• To systematically test risk

management as a regulatory alternative

through objective evaluation under a

broad range of conditions.

• To establish a common framework

for productive communication with

public safety officials and the public,

and for getting meaningful public input

into the risk management process.

• To develop and apply new risk

assessment models, processes and

technologies.

OPS believes that the following

elements need to be structured into the

Demonstration Program:

(1) Operators participating in the

Pipeline Risk Management

Demonstration Program will need to

provide sufficient data and background

information to enable OPS to determine

whether risk management is an effective

regulatory alternative that provides

superior safety and environmental

protection.

Implicit in a company’s participation

in the Demonstration Program should be

the commitment to work in partnership

with OPS to determine whether and

how risk management might become a

permanent feature of the Federal

pipeline safety program. OPS will ask

for evidence that risk management, as it

relates to the proposed demonstration

project, is or will be developed and

implemented as an integral part of the

day-to-day business practices of the

company. OPS will also periodically ask
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14723

companies for suggested refinements to

the primary program components.

In keeping with the Interim Risk

Management Program Standard, the

operator must identify project-specific

performance measures that demonstrate

the effectiveness of the risk-control

decisions being made. During the

project approval process, OPS will

determine whether these local projectspecific performance measures appear

appropriate and adequate. Throughout a

demonstration project, the operator will

evaluate local and broader program

measures and ensure that the

performance measures are appropriate

and adequate. The operator would

periodically report on these projectspecific performance measurements to

OPS.

OPS is developing guidance for

additional more general measures

operators would report during the fouryear demonstration period to enable

OPS to determine the effectiveness of

risk management as a regulatory

alternative. These measures will help

OPS answer the following questions:

• Does risk management result in a

greater safety, environmental protection,

and service reliability than would

otherwise be achieved through

compliance with the safety regulations?

• Are resources being better

prioritized and more effectively applied

under risk management?

• Has agency and industry

involvement in the discussion of risks

and risk control options, and the agency

and industry’s ability to impact desired

outcomes, increased under risk

management?

(2) Operators will be allowed to

reallocate resources geographically, as

long as safety is adequately safeguarded

at each location along a demonstration

site

OPS will allow operators the

flexibility in a risk management

demonstration project to reallocate

safety resources across several pipeline

segments. An operator may substitute

one or more activities for others, or do

away with redundant activities

altogether, as long as the basic safety

and environmental protection along the

pipeline is safeguarded at each point.

However, it is still expected that the

overall demonstration project

performance will result in superior

safety and environmental protection.

(3) OPS will consider approving

demonstration projects of various

scopes and complexities

The scope of a risk management

demonstration project may be an entire

pipeline system and all safety activities,

or may be focused on parts of a system

and specific activities.

Since operators have different levels

of experience with, and confidence in,

risk management, OPS expects some

proposals to begin with approaches that

are limited in scope. Therefore, an

operator may propose a phased entry

into a demonstration project,

broadening the scope of the project as

experience is gained. During the project

approval process, OPS will favor

projects showing a potential for

expansion and more comprehensive

application of risk management. OPS

expects to work with companies to

develop a profile which compares the

demonstration site to the rest of the

pipeline.

OPS recognizes that significant

benefits can accrue from even the less

sophisticated applications of risk

management. Because no single risk

management approach will be

universally appropriate for every

situation, OPS is looking for those that

match the level of risk management

with the complexity of the risks being

managed. However, any operator who

participates in the Demonstration

Program must have in place the program

elements defined in the Interim Risk

Management Program Standard. The

program elements provide the structure

for the limited scope proposal.

When an operator proposes risk

control alternatives to implement during

a demonstration project, the operator

should demonstrate a knowledge and

understanding of the range of risks

along the demonstration site and show

that it has considered significant failure

modes. An operator may draw on

corporate experience, skills, and

available documentation to support the

proposed alternatives.

(4) OPS considers an operator’s

compliance with the provisions of an

OPS-approved risk management project

to be an equivalent and acceptable

alternative to compliance with the

regulations

OPS considers the provisions of an

approved risk management project to be

a regulatory commitment. The terms

and conditions of the project will be

incorporated into an order that is

subject to enforcement authority. By this

order, an operator conducting risk

management activities in an approved

project will be exempt from regulations

corresponding to the stated scope of the

project, but will be required to comply

with the provisions of the project. An

operator not complying with the

provisions of its OPS-approved project

will be subject to the same civil

penalties administered under existing

regulations.

OPS has the authority to exempt, by

order, an owner or operator

participating in a risk management

demonstration project from all or a

portion of the regulatory requirements,

and from any new regulations, applying

to the covered pipeline facility. OPS

could issue orders exempting

participating operators from any but the

reporting requirements in 49 CFR Parts

192 or 195, but expects that the projects

approved in 1997 will require

exemptions from only one or a portion

of the regulations.

When the project concludes at the end

of four years, or if it is terminated

earlier, consideration will be given to

installations or facility modifications

made during the demonstration project

that conflict with existing or future

regulatory actions. Actions taken by the

operator in good faith in an approved

risk management project could be

‘‘grandfathered’’ and exempt from future

regulatory compliance, provided safety

and environmental protection are not

compromised.

(5) The operator is responsible for active

communication with State and local

officials regarding risk management.

OPS will ensure that such

communication is part of the operator’s

demonstration project plan and that the

communication is carried out.

OPS sees potential for risk

management to provide better

accountability to the public for safety

and environmental programs. OPS is

beginning to explore appropriate

strategies for productive communication

with public safety officials and the

public, and for getting meaningful

public input into the risk management

process. Similarly, OPS realizes the

importance of training and other

information exchange in supporting the

institutional change that would occur

under risk management.

Companies must establish appropriate

dialogue with State and local public

safety and environment officials. At a

minimum, these public officials should

be aware that a risk management

demonstration project is underway on

the pipeline, that OPS is monitoring the

project, and who functions as a pointof-contact. Such a dialogue would

enable local officials to reassure the

public that an appropriate regulatory

presence is in place and how the overall

safety and environmental protection are

enhanced by risk management. OPS will

discuss external communications with

the operator during a consultation prior

to formal application.
14724 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

IV. Process for Selecting Projects

OPS is providing the following as

guidance for operators to seek approval

of their risk management demonstration

projects. OPS plans to formally solicit

operators to voluntarily participate in

the risk management demonstration

projects via a Federal Register Notice in

first quarter 1997. That notice will give

target dates for the various steps

described below.

(1) Letter of Intent

Operators would notify OPS of

interest in participating in a

demonstration project, and OPS would

screen operators to ensure that only

companies whose demonstration project

concepts have a reasonable likelihood of

being approved expend the resources to

develop formal applications. OPS will

screen Letters of Intent to identify no

more than ten projects as candidates for

selection in the Demonstration Program.

Ten is the maximum number OPS can

reasonably expect to evaluate and, if

selected, to monitor. OPS would accept

Letters of Intent during a 60-day

window in early 1997. A Letter of Intent

is an expression of a company’s interest,

but does not obligate a company to

participate in a demonstration.

OPS would require that a

demonstration project cover any part or

all of a pipeline system that is covered

by either 49 CFR Part 192 or 195, is

under State oversight or oversight by a

participating interstate agent, and is

currently in operation or under

conversion to service. Operators should

commit to a project duration of at least

four years, and provide evidence that

they will address all considerations

raised in the Interim Risk Management

Program Standard. This includes

providing a description of the means by

which the company would

communicate with local officials

regarding its demonstration project.

OPS would like to choose operators

who provide evidence of consistent

corporate commitment to risk

management. This could be

demonstrated by a corporate officer,

who controls the resource allocation for

the demonstration project and

competing operations, signing the Letter

of Intent.

The Letter of Intent would include a

general discussion of risk management

principles as part of a company’s

operating philosophy. To provide OPS

adequate data to choose a diverse set of

demonstration projects, the Letter

would provide a brief system profile of

the pipeline, including product(s)

transported, pipeline age and operating

history, types of population

distributions and geographic conditions

in proximity of the pipeline, and any

other features the operator thinks are

notable. The Letter would also describe

the scope of the project as defined per

the Interim Risk Management Program

Standard and any new technologies and

processes to be developed or deployed

during the demonstration phase.

In making its choice, OPS would

consider those operators who have clear

records of safety and environmental

compliance, based on OPS records and

consultation with other interested

agencies. OPS will also limit selection

to projects which would achieve

superior safety and environmental

protection. Operators should have

completed any OPS-initiated corrective

actions.

OPS will publish for public comment

a Federal Register notice describing

proposals of selected companies and the

demonstration sites under

consideration. OPS will also follow

through with national public,

environmental and other interested

organizations about the sites under

consideration so that local officials can

be notified and informed.

(2) Consultation

OPS would invite each operator

submitting a promising Letter of Intent

to a consultation within 60 days of

receipt of the Letter of Intent. The

purpose of the consultation would be to

familiarize OPS and affected States with

specific aspects of an operator’s risk

management project concept, to provide

guidance to the operator on what

refinements (if any) are needed for OPS

to approve the concept as a

demonstration project, to enable

regulators to plan the expected level of

monitoring based on the company’s own

audit process, and to enable regulators

and the operator to agree on the roles

and responsibilities of each throughout

the project duration. OPS intends that

the consultation begin a negotiation

process that results in a demonstration

project that OPS could approve.

OPS will provide notification that

encourages local officials and the public

with questions about demonstration

projects to raise them with State

pipeline safety officials who can raise

them in the consultation process.

OPS would constitute a Project

Review Team (PRT) to consult with the

operator, keep abreast of any subsequent

discussions, and provide technical

input on whether a demonstration

project could be approved. OPS would

customize the make-up of each PRT to

the company and project. The PRT

members’’ roles would be defined in

OPS-developed protocols, designed to

ensure rigorous yet fair and consistent

treatment of all operators throughout

plan negotiation, approval, and

monitoring. The mix of States and OPS

regional personnel on the PRTs, as well

as any outside technical expertise

consulted, would vary from project to

project depending on the

demonstration’s technical focus and

geographic location.

Some of the same OPS headquarters

staff would be on all PRTs to ensure

consistent application of policy

throughout the project and to follow all

issues raised during the consultations to

their resolution.

The consultation would focus on the

design, operations, and maintenance

practices that would replace practices

required by 49 CFR Part 192 or 195, and

that would achieve superior overall

safety and environmental protection.

The operator would provide the

rationale for these risk control

alternatives by generally describing the

specific risk management models,

processes, and sources of data

supporting their selection.

Other consultation discussion topics

would include the program goals, the

project scope defined per the Interim

Risk Management Program Standard,

the project-specific performance

measures, the operator’s auditing plan,

a plan for OPS audits, proprietary

issues, provisions for public

communication, and the outline for a

work plan including benchmarks, risk

assessment processes, new technologies

applied, points-of-disclosure, and

mechanisms for monitoring and

refinement.

(3) Formal Application and Approval

An operator would submit an

application formally indicating its

intent to enter into a risk management

demonstration project. Consistent with

the program standard’s intent for an

efficient information flow among

appropriate stakeholders, a summary of

this formal application would be

published in the Federal Register, and

the application itself would be made

available for review and comment in the

docket. OPS will again communicate

with national public, environmental and

other interested organizations about the

sites in which we intend to approve

demonstration projects so that local

officials can be notified and informed.

The formal application, including a

detailed work plan, would document

operator/PRT resolution of issues raised

during the consultation and any

subsequent discussions. It would also

provide assurance of a corporate

commitment to implement the project in

accordance with the operator’s risk

management application. Other issues

may be included at the operator’s
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14725

discretion, such as how to return to

compliance with the regulations should

a demonstration be terminated.

OPS would review the application

and comments, and decide whether to

approve the project. If OPS decides to

approve the project, OPS would issue

the operator a written order. The order,

in addition to exempting an operator

from the applicability of specified

pipeline safety regulatory requirements

for the period of the demonstration,

would set forth the terms and

conditions for the operator’s

participation in the demonstration

project. The order would be enforceable.

(4) Implementation

A risk management project would

start as soon as OPS approves the formal

application and work plan, issues the

order, and notifies the public through

the Federal Register that the order is in

effect. Regulators and operators would

monitor risk management

demonstration projects for compliance

with the order. OPS would provide each

participating operator with a plan

describing the regulators’ expected level

of effort in monitoring the

demonstration, including the type of

audits, their frequency, the participants,

the audit scope, and the operator’s

means of addressing those aspects of the

demonstration site remaining in

compliance with the regulations, but

this plan would not limit OPS’s

statutory authority to inspect a pipeline

facility during the period of the

demonstration. Planned OPS audits

would coincide with the operator’s data

taking at key decision points, such as

when the operator evaluates the

effectiveness of safety activities or

considers modifying safety activities.

An operator would notify OPS of any

intent to make substantive

modifications to the risk management

project once a demonstration is

underway. The PRT may reconvene to

renegotiate project approval or to

resolve other significant issues.

Provisions will be made for public

review and comment on renegotiated

projects.

OPS could, through appropriate

administrative action, address any

unsafe conditions that arise during the

demonstration period to ensure that

such conditions are quickly addressed.

OPS would also administer civil

penalties within the provisions of the

existing regulations for operators not

complying with the order.

(5) Termination

OPS intends that, where a risk

management demonstration project is

determined to have been successful, the

operator could, in lieu of switching to

compliance with the regulations,

continue to exercise risk management

on that part of the system that was

covered by the demonstration. However,

this determination could not be made

until the end of the demonstration

period. Upon conclusion of the project,

or if it is terminated earlier,

consideration would be given to

installations or facility modifications

made during the demonstration project

that conflict with future regulatory

actions.

OPS may consider terminating a

demonstration project if:

(i) The operator requests termination

due to changed circumstances;

(ii) The operator does not comply

with the terms and conditions of the

approved risk management project;

(iii) Safety has been compromised; or

(iv) OPS and the operator fail to agree

on a substantive modification to a risk

management project.

V. Summary of Means of Achieving

Meaningful Public and Community

Involvement

OPS is providing numerous

opportunities for public participation in

the design and implementation of the

Pipeline Risk Management

Demonstration Program. One of OPS’s

objectives for the demonstrations is to

establish a common framework for

productive communication with public

safety officials and the public, and for

getting meaningful public input into the

risk management process. OPS believes

meaningful public input is essential if

the demonstrations are to be successful.

The public was invited to comment

on early regulatory framework concepts

via Federal Register notices published

in 60 FR 49040, September 21, 1995,

and 60 FR 65725, December 20, 1995.

OPS is soliciting public comment on the

latest framework concepts via this

notice. In addition to the notices, OPS

has held two public meetings in

preparation for the demonstrations and

has scheduled a third for January 28,

1997, in New Orleans, LA. The previous

public meetings were held on November

7, 1995, in McLean, Virginia, and on

April 14–15, 1996, in Houston, TX. At

the third meeting, OPS plans to present

the final framework and supporting

documents, and to demonstrate the

review and approval process using

prototype risk management projects.

This notice directs interested

members of the public to the docket, to

the American Petroleum Institute (API),

or to a website to obtain and comment

on the latest draft of the Interim Risk

Management Program Standard. The

standard describes the elements that

OPS, its State partners, and industry

agree must be common to all

demonstration projects. One

requirement is an external

communications element, in which

regulator and other stakeholder interests

and concerns are understood, and

program goals and results are

communicated to and discussed with

the public, as well as Federal, State, and

local regulators, and other stakeholders

as appropriate. The docket associated

with this notice will have available for

review any comments received on the

standard and on the regulatory

framework.

This notice also describes the

numerous opportunities OPS is offering

the public for comment during the

demonstration review and approval

process. Before formal applications are

due, OPS will publish for public

comment a Federal Register notice

describing the demonstration projects

under consideration and each

company’s concept for communicating

with local safety officials should OPS

approve its demonstration project. The

public will be noticed again once the

formal application is received and

approval is imminent. At this time, a

summary of the formal application will

be published in the Federal Register,

and the application itself will be made

available for review and comment

through the docket. At each opportunity

for notice in the Federal Register, OPS

will communicate with national public,

environmental and other interested

organizations about the sites under

consideration so that local officials can

be notified and informed about planned

program activities.

Affected States will be a part of the

Project Review Team (PRT)

recommending whether or not OPS

should approve a demonstration project.

OPS will provide notification that

encourages local officials and the public

with questions about demonstration

projects to raise them with State

pipeline safety officials who can raise

them with the PRT.

OPS and industry’s communications

effort focusing on public and

environmental officials and other

interested organization representatives

is intended to provide these officials

with adequate information to reassure

the public that an appropriate regulatory

presence is in place during the

demonstrations, and to describe how

safety and environmental protection

will be enhanced by risk management.

OPS would appreciate comments on

whether these mechanisms are adequate

to ensure public and community

involvement, and if not, what OPS and

operators choosing to participate in the
14726 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

demonstration projects can do to

achieve such involvement.

VI. Report to Congress

By March 31, 2000, OPS will submit

a Report to Congress on the results of

the demonstration projects, evaluating

how effectively safety, environmental

protection, and reliability have been

improved by participating operators, the

feasibility of risk management in

general, and recommending whether

and in what form risk management

should be incorporated into the Federal

pipeline safety program on a permanent

basis.

Appendix B—The Pipeline Risk

Management Demonstration Program

Public Meeting, January 28, 1997, New

Orleans, Louisiana

Note: The complete transcript of this

Public Meeting is available on the Internet at:

http://ops.dot.gov

1. Background and Objectives

Moving into Implementation

Over the last few years, the Office of

Pipeline Safety (OPS) has been

investigating the use of risk

management as a regulatory alternative

that would produce superior

performance in more cost-effective

ways. Over this time, OPS has worked

in partnership with the pipeline

industry and State regulators through a

series of Risk Assessment Quality

Teams (RAQTs) and has discussed

progress and concerns at a series of

meetings and conferences, including a

Pipeline Safety Summit in 1994, and

Risk Management Conferences in 1995

and 1996.

The initial RAQTs, which

investigated the feasibility of using risk

management within the pipeline

industry, concluded that risk

management had the potential to

provide significant benefits by

improving safety, environmental

protection, reliability, and cost-effective

operation. However, these Teams noted

a variety of technical and regulatory

issues that still needed to be resolved,

and recommended that a demonstration

program be planned and implemented

to test the viability of risk management

as a regulatory alternative.

The first Risk Management

Conference, held in McLean, Virginia,

in November 1995, identified the most

important of these issues. A major

conclusion from this first Risk

Management Conference was that a set

of ‘‘building blocks’’ needed to be

developed to provide an adequate

foundation upon which a viable and

responsible Risk Management

Demonstration Program could be

constructed. After this conference,

partnerships representing OPS, States,

localities, industry and the public were

formed to design and construct the

following building blocks:

• The Risk Management Program

Framework that defines how OPS

receives, reviews, approves, and

monitors operators risk management

demonstration projects;

• The Risk Management Program

Standard that defines the essential

elements and characteristics of an

operator’s risk management program;

• Guidance on Performance Measures

that supports the ability of operators

and OPS to monitor performance,

ensure that superior performance is

being achieved, and evaluate the results

of the Risk Management Demonstration

Program;

• A Communications Plan that

describes how information about the

demonstration projects will be provided

to local safety officials and other

interested parties, and how information

from these parties will be input to the

demonstration process;

• A Training Plan that defines how

OPS, States, and industry will be

trained in the risk management building

blocks.

Work commenced on these building

blocks in early 1996. A second Risk

Management Conference was held in

Houston, Texas in April, 1996 to review

progress and to hear input, concerns,

and suggestions about the building

blocks.

A draft version of the Program

Framework was developed by OPS and

published in the Federal Register on

November 15, 1996, followed by a 60-

day public comment period.

A draft Program Standard was

developed by the Program Standard

Quality Team and referenced in the

Federal Register notice. Comments were

received, and incorporated into an

Interim Program Standard in early

January, 1997.

A draft Performance Measures

Guidance was produced by the

Performance Measures Working Group,

and distributed for comment in

December, 1996.

A draft Communications Plan was

produced by OPS and the JRAQT

Coordination Team and distributed for

comment in early January, 1997.

A draft Training Plan was produced

by OPS and distributed for comment in

early January, 1997.

The Accountable Pipeline Safety and

Partnership Act of 1996 was passed by

Congress and signed into law by

President Clinton on October 12, 1996.

This Act required the Secretary of

Transportation to ‘‘establish risk

management demonstration projects—

A) to demonstrate, through the

voluntary participation by owners and

operators of gas pipeline facilities and

hazardous liquid pipeline facilities, the

application of risk management, and B)

to evaluate the safety and costeffectiveness of the program.’’ President

Clinton provided additional direction to

the Secretary through a Memorandum

that directed the Secretary to implement

administrative safeguards for carrying

out the law that will enhance

accountability and protection of public

safety and the environment.

Meeting Purpose

This Public Meeting was designed to

allow OPS to: 1) Present to the public

the basic risk management

demonstration program building blocks,

2) Describe and illustrate, with simple

examples, how the review and approval

process is envisioned to work, and 3)

Obtain input from all interested parties

concerning the building blocks or any

other aspect of the Risk Management

Demonstration Program.

Each of the draft building block

documents, the Act of 1996, the

President’s Directive, and other relevant

documents were provided as handout to

each person attending the meeting and

distributed to all State pipeline safety

agencies.

[OPS received input from this

Meeting, revised the draft building

blocks as necessary, and published a

final Program Framework in the Federal

Register in March 1997, inviting

companies to submit Letters of Intent for

risk management demonstration

projects.]

2. Conference Synopsis

This section provides a brief summary

of each of the major sessions on the

Meeting agenda.

Welcome and Introduction

Richard Felder—Associate

Administrator for Pipeline Safety

Mr. Felder opened the conference by

welcoming everyone. He noted that OPS

and its State and industry partners

started out over two years ago with the

realization that there may be a better

way of approaching pipeline safety

regulation, an approach that is not

event-driven and that does not result in

specification-based regulation. OPS is

looking for a better approach that will

give superior safety through

customization, flexibility, collaboration,

and innovation.

Mr. Felder read a letter from Mr.

Bruce Ellsworth, a Public Service

Commissioner in New Hampshire and
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14727

Chairman of the National Association of

Regulatory Utility Commissioners, to

illustrate changes in perception from the

first risk management meetings until

now. Mr. Ellsworth noted that he was

originally skeptical about replacing the

existing safety regulations with risk

management. He believes that the

Natural Gas Pipeline Safety Act of 1968

has led to an outstanding safety record,

and was reluctant to fix something that

was not broken. However, as a result of

his participation on the Joint Risk

Assessment Policy Steering Team, he

has seen that there may be an

opportunity to make the system work

better, cheaper, and more effectively. Mr

Ellsworth’s letter stated that he believed

OPS has been right in exploring the

viability of risk management as a

regulatory alternative, and

communicated his support for the pilot

demonstration program.

Mr. Felder then delineated the basic

building blocks of the Demonstration

Program and emphasized the new

awareness and resolve on the part of

OPS to address the issues of public

involvement.

RSPA Perspectives

Kelley Coyner, Research and Special

Programs Administration

Ms. Coyner’s discussion focused on

the two twins of ‘‘opportunity’’ and

‘‘responsibility’’ that risk management

presents. Risk management provides a

tremendous opportunity, but only if we

take the responsibility to do it right very

seriously. She said that the pipeline risk

management initiative was consistent

and supportive of President Clinton’s

vision of a government that is humble

enough not to solve all of our problems,

but strong enough to give us the tools

to solve our problems ourselves.

Ms. Coyner described the

opportunities that risk management

provides to comprehensively analyze

risks, prioritize resources, and track

performance; to be smarter and more

accountable. She spoke of the

responsibilities of continuing the

partnerships that got us to this point, to

continuously improve as we move

forward, and to set clear and ambitious

performance goals.

A major theme of Ms. Coyner’s talk

was the need for communication and

public involvement. Improving public

involvement has been a program goal

from the beginning. She asked members

of the audience to take seriously the

challenge to make sure that OPS and its

partners are off to a good start and going

in the right direction by providing their

comments in this public meeting.

Risk Management Building Blocks Panel

Program Framework

Stacey Gerard, Office of Pipeline Safety

Program Standard

Denise Hamsher, Lakehead Pipe Line

Performance Measures Guidance

Ivan Huntoon, Office of Pipeline Safety,

Don Stursma, Iowa Commerce

Department

Communications Plan

Stacey Gerard, Office of Pipeline Safety

Training Outline

Richard Sanders, Transportation Safety

Institute

Program Framework

Ms. Gerard discussed the Program

Framework, which describes the

processes by which OPS will receive,

review, approve, audit, and

communicate information about

operator risk management

demonstration projects. She described

the contents of the draft Program

Framework (published in the Federal

Register) and the comments received on

this draft. Ms. Gerard also discussed the

Accountable Pipeline Safety and

Partnership Act of 1996 and the

President’s Directive that accompanied

the law. She noted that the President’s

Directive requires that risk management

demonstration projects produce

superior safety and environmental

protection, and directed OPS to place

more emphasis on meaningful public

and community involvement.

Ms. Gerard outlined the basic steps in

the regulatory process, including:

• The Letter of Intent (LOI), in which

the company communicates its

intention to develop and propose a risk

management demonstration project;

• The Screening Process, in which

OPS screens the LOI to select a set of

potential projects that have the best

chance of supporting the Demonstration

Program goals;

• Pre-consultations, in which OPS

staff meets with the selected operators

to discuss their proposed project, clarify

information in the LOI, and prepare the

Project Review Team (PRT) for an

efficient consultation with the operator;

• The Consultation Process, in which

an PRT meets with the company, and

through a series of discussions,

information exchange, and interactions

come to agreement on the scope and

characteristics of an acceptable risk

management demonstration project,

leading to the submittal of an

application by the operator;

• The Review and Approval Process,

in which OPS reviews the operator’s

application, approves it if appropriate,

and reflects the commitments and terms

and conditions of the program in a DOT

Order;

• The Audit Plan, developed by OPS,

which will coincide with the company’s

Work Plan milestones and decision

points, and which describes the specific

processes and areas of OPS audits of the

risk management demonstration project;

• The Implementation Phase, in

which OPS and the operator monitor

progress, and modify or terminate the

project as necessary.

She noted that, based on comments to

the FR Notice, the window of time for

submitting LOIs will be extended to 90

or 120 days. She strongly encouraged

capable companies to submit LOIs.

Ms. Gerard discussed the issue of the

‘‘clear and established’’ safety record

required by the President in his

Directive of all demonstration program

participants. She noted that OPS wanted

companies with a clear record of

compliance to start the project, and OPS

will work with companies to be sure

there is a clear record.

Ms. Gerard also discussed the issue of

‘‘superior performance’’. The President’s

Directive states that: ‘‘The Secretary [of

Transportation] shall require each

project to achieve superior levels of

public safety and environmental

protection when compared with

regulatory requirements that otherwise

would apply.’’ Ms. Gerard noted that,

consistent with other aspects of the

President’s Directive, superior

performance would be achieved through

a combination of:

(a) Improved analytical and decisionmaking processes. Risk management

programs consistent with the Program

Standard would be expected to include

a comprehensive examination of risks,

improved allocation of resources,

enhanced communications within the

company, better interactions with the

regulators, meaningful public

involvement, and other features that

would lead to superior performance.

(b) Selection of an integrated set of

risk control activities that is expected to

reduce risks to the public, workers, and

the environment.

(c) Full accountability. Operators will

be expected to identify project-specific

performance measures and submit

project work plans that explicitly define

operator commitments. These

commitments are reflected in Orders

that delineate the terms and conditions

under which the operator’s risk

management program is authorized, and

which are subject to the full
14728 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

enforcement authority of the United

States.

She clarified the role of the States,

stating that OPS is inviting the States to

participate in the PRT process, but not

mandating participation of the States.

Program Standard

Ms. Hamsher, Co-Chair of the Joint

Risk Assessment Program Standard

Team, described the basic objectives of

the Program Standard, how it was

developed, and its basic elements. She

stated that the Program Standard

describes the basic elements and

characteristics of an operator’s risk

management program. The Program

Standard describes the basic program

and process elements, and the

functional requirements of a risk

management program, but does not

specify exactly how these elements or

functions should be performed,

allowing operators to customize their

specific programs and technical tools to

their situation and needs. It is not an

instruction manual, a substitute for

training, or a tool box. The Program

Standard can provide the starting point

for the OPS review of proposed

demonstration projects, but it is not

intended as a checklist for review and

approval of demonstration projects.

Ms. Hamsher discussed some of the

risk management guiding principles that

were developed by the JRAQT. One of

the key guiding principles is that risk

management is a management decision

support process. It is not just a set of

technical models, but a comprehensive

program that is integrated with the

overall operation of the company to

produce better decisions leading to

superior performance. Risk management

supports responsible, prudent, and

experienced managers, it does not

replace them. She also noted a guiding

principle that risk can be controlled and

often reduced, but it cannot be totally

eliminated. We all need to reinforce,

and communicate this realization so

that expectations for zero risk are not

established. Another guiding principle

that went into the development of the

Standard was that risk management

produces integrated information about

safety and environmental protection.

Risk management increases information

and information flow, between the

company, its regulators, and the public.

She noted that the JRAQT recognized

that the technical models, tools, and

processes associated with a risk

management program necessarily

include some subjective judgements,

uncertain assumptions, and limited

data. Accordingly, the Program

Standard includes a Performance

Monitoring element that includes the

definition and monitoring of

performance measures that are directly

tied to validating the specific

assumptions and input data of the

operator’s risk assessment model and

process.

Ms. Hamsher concluded by discussing

the future of the Program Standard.

Progress on the demonstration projects

will be monitored, and the Program

Standard will be refined and improved

over the next four years. However,

because of the way the Program

Standard was developed, laying out the

basic elements without prescribing

details, it is not expected that major

modifications will be necessary over the

demonstration period. It is expected that

this Program Standard will eventually

be transformed into an industry

consensus standard.

Performance Measures Guidance

Mr. Huntoon, Regional Director for

the OPS Central Region, and Don

Stursma, from the Iowa Commerce

Department, discussed the work of the

Performance Measures Workgroup and

the issues the group addressed in

producing the draft Guidance on

Performance Measures. The

Performance Measures Workgroup was

formed after a number of issues related

to performance measures were

identified by the JRAQT Program

Standard Team.

The Workgroup concluded that there

were two key areas where performance

measures were important:

(1) In monitoring the specific results

produced by individual company

demonstration projects to ensure that

the underlying assumptions and input

data of the risk assessment and risk

control models are valid, and that the

approved projects are indeed resulting

in superior performance as predicted.

(2) In assessing the overall success of

the Risk Management Demonstration

Program, providing input to the

required OPS report to Congress, and

other progress reports.

Key issues that the Workgroup

addressed were the availability of data

to support meaningful performance

monitoring and the cost and sensitivity

of data reporting.

The report produced by the

Workgroup is intended to provide

guidance for operators who are planning

to participate in the risk management

demonstration program. The guidance

should assist operators in developing a

performance monitoring process as

described in the Program Standard, and

provide OPS the information it needs to

assess the overall effectiveness of risk

management as a regulatory alternative.

The project-specific performance

measures will be included as part of the

operator’s demonstration project

application, and will depend upon the

expected outcomes of the demonstration

project, and the selected risk control

activities. Mr. Huntoon delineated some

of the criteria developed by the

Workgroup for these project-specific

performance measures.

In order to assess the overall benefit

of risk management as a regulatory

alternative, the Workgroup felt that

program-wide performance measures

were needed to allow individual

companies and OPS to address the

following questions:

(1) Safety and Reliability. Does risk

management result in greater safety,

environmental protection, and service

reliability than would otherwise be

achieved through compliance with the

safety regulations?

(2) Resource Effectiveness. Are

resources being better prioritized and

more effectively applied under risk

management?

(3) Communication and Partnership.

Have agency and industry involvement

in the discussion of risks and risk

control options, and the agency’s and

industry’s ability to impact desired

outcomes increased under risk

management?

Mr. Stursma discussed each of these

major areas in turn, describing the

issues that the Workgroup discussed in

the process of producing the Guidance

on Performance Measures. He also gave

a variety of practical, everyday

examples of the different types of

performance measures to illustrate the

concepts.

He noted that the information gained

from these program-wide performance

measures will be used by OPS to

prepare a report to Congress on the

results of the Risk Management

Demonstration Program. The report will

address each individual project and

provide an overall recommendation on

the application of risk management as a

regulatory alternative. It was

recommended that a successor group to

the Performance Measures Workgroup

be formed, which would prepare

annual, interim progress reports. It is

expected that OPS, the successor group

to the Performance Measures

Workgroup, and operators participating

in the demonstration program will

jointly prepare the interim annual

progress reports.

Communication Plan

Ms. Gerard described the evolution of

the Communications Plan and its basic

elements. She reiterated the importance

of meaningful public involvement to the
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14729

success of the risk management

program, and summarized the numerous

mechanisms planned for

communication and involvement. In

response to concerns expressed by some

that the public would only be informed

too late in the game to have any

meaningful impact, Ms. Gerard pointed

out that OPS will, right at the beginning

of the review and approval process,

summarize the Letters of Intent from

companies selected to provide risk

management project applications. In

addition to publication in the Federal

Register, project summaries will be

distributed to local safety officials, and

feedback loops will be established to

obtain input from interested parties, at

the very beginning of the consultation

process. Information that comes in will

feed into the pre-consultation and

consultation process.

Each project summary, referred to as

a prospectus, will describe to local

officials the objectives of each project,

the safety alternatives being discussed,

and the company’s approach to

communications with the public. The

prospectus will define at least three

points of contact for anyone wishing to

provide information or comment. One

point of contact will be from OPS

Headquarters, one will be at the State

level (if the State agrees), and one from

the operating company. As new or

additional information is developed

during the consultation process, the

prospectus will be updated to keep

people posted on events throughout the

process.

At the time of the formal application

from the company, the company’s

application will be made available in

the docket, and a summary will be

published in the Federal Register.

When the application is approved and

an Order is issued, OPS will issue

another Federal Register Notice.

Ms. Gerard stated that the aggressive

OPS communications effort under risk

management is a much larger

commitment that they have ever made

before because they understand how

important meaningful public

involvement is to the success of the

program.

Training Outline

Mr. Sanders, from the Transportation

Safety Institute, summarized the

training program that OPS is developing

to support the risk management

demonstration program. OPS is

committed to joint government/industry

training to ensure that all parties have

a mutual understanding of the program,

and speak the same language (or can at

least accurately interpret each other’s

language) to facilitate the consultation

process, and ensure high quality,

comprehensive risk management

programs result that produce superior

performance.

Mr. Sanders outlined the currently

envisioned training program, which is

designed to support the Project Review

Team, OPS, and the company during the

project review and approval process.

The program includes:

• An Overview of the Risk

Management Demonstration Program.

• The Demonstration Process and

Building Blocks.

• The Risk Management Program and

Process Elements.

• OPS Auditing of an Approved Risk

Management Demonstration Project.

• Prototypical Examples to Illustrate

the Demonstration Process.

The training program will be

developed in a modular format, so that

orientations and training courses can be

customized to the specific audience, its

level of experience, and its specific

training needs. The first two blocks of

the training listed above, and selected

portions of the other blocks, can be

provided as an orientation or

‘‘headstart’’ program to those that have

not been actively involved in the

program development phase, or who

wish to establish a common starting

point.

The Risk Management Program and

Process Elements portion of the training

is based on the Program Standard

building block produced by the JRAQT,

and will provide overview descriptions

of various types of risk assessment and

prioritization models and processes.

Mr. Sanders asked for review of the

training material, and input about

training needs, including the usefulness

of video, computer-based training, or

Internet interactive training.

Prototypes

Moderator: Mike Neuhard, Fairfax

County Fire Department

Panelists: Bruce Hansen, Office of

Pipeline Safety, Andy Drake, PanEnergy

Corporation, Beth Callsen, Office of

Pipeline Safety, Gary Zimmerman, Shell

Pipeline

Two examples of possible regulatory

alternatives, one from the natural gas

industry and one from the hazardous

liquid industry were discussed to

illustrate the demonstration process

described in the Program Framework

and discussed in the Building Blocks

Panel. The examples were simplified

versions of what would be expected in

a real demonstration project, designed

to illustrate the interactive process

between OPS and the company, and

were not presented as practical

examples of comprehensive risk

management programs or to illustrate

the critical public involvement aspects

of the process.

The topics addressed by each of the

prototypes included:

• The information expected in the

Letter of Intent.

• The characteristics of the proposed

demonstration project that OPS would

look for in screening Letters of Intent.

• The topics that would be discussed

at pre-consultation sessions between

OPS staff and the operator.

• The discussions between the PRT

and the company concerning the riskbased justification for the proposed

safety alternatives.

• The performance measures

necessary to validate assumptions of the

risk models and to confirm that superior

performance was being produced.

Audience Questions and Comments

Questions and comments from the

audience were received by speakers and

panelists at a few different points in the

meeting. Some of the major areas of

questions and comments are

summarized below. A full, verbatim set

of all questions, comments, and OPS

responses is available in the meeting

transcript.

• The liability of companies under

risk management demonstration

projects for compliance with the existing

Federal or State regulations.

Mr. Felder stated that a company that

implements an OPS-approved

demonstration project is committed to

abiding under the terms of their

approved application, as reflected in the

associated OPS Order. Participation in a

demonstration project is not an

exemption from the minimum Federal

pipeline safety standards as a whole.

The underlying regulations that would

otherwise apply would not apply to the

segment of the pipeline within the

demonstration project; the approved

project and corresponding Order would

apply. There should be no problem from

the public’s perspective if the company

is in compliance with the provisions of

its demonstration project as opposed to

being in compliance with the

underlying regulations; compliance

with provisions of the project is

equivalent to compliance with the

pipeline safety regulations. The up-front

review and approval process assures at

the outset that the demonstration project

will result in a superior level of safety

compared to what you would have

under the minimum State standards.

• The quality of the data to support

risk management.

Mr. Felder noted that some of the

audience comments reflected the
14730 Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices

situation at OPS in years past, but did

not reflect the many efforts over the past

few years that OPS has taken in

increasing partnership with industry,

States, and the public to identify new

regulatory pathways, to get the type of

information needed to regulate

effectively. He also noted that

considerable work has gone into

ensuring that the risk management

process will significantly improve the

amount and quality of data that will be

available to OPS. The past is not a good

indicator of where OPS is going in the

future as far as risk information and data

is concerned.

• The level and type of

communication with the public, and

OPS’s role in this process.

Mr. Felder and Ms. Gerard reiterated

the importance placed on

communication by OPS, and the need to

engage in an unprecedented outreach

effort from OPS, but also noted the joint

responsibility for communication

among OPS, industry, local safety

officials, and the public. Government

cannot, and should not, do everything.

Mr. Felder said that it was important to

understand that the people who run the

companies are also citizens of the

country. They have a great stake in the

outcome of the work they do, and a

great stake in the communities that they

affect. That is why OPS is enlisting their

resources as part of the public outreach

process. He further noted that OPS is

working with national organizations

because they have people and resources

in every community in America, and

this can leverage OPS efforts in getting

down to the local community level. He

stated that we need a communication

partnership among Federal regulators,

the States, national organizations, local

officials, and the public.

Mr. Felder also pointed out that the

situation with a risk management

demonstration project is not analogous

to the siting of new pipeline, where a

company may be introducing a new risk

into a community that did not exist

before. Risk management demonstration

projects will only be allowed by OPS

where the company can demonstrate

that superior performance can be

achieved. The communications and

due-process needs and mechanisms are

accordingly different than that

associated with a new right-of-way or

zoning change hearing where new and

additional risks are being introduced.

Ms. Hamsher pointed out that, in

addition to the OPS Communication

Plan, the Program Standard contained

explicit requirements for the company

to develop a two-way communications

effort, ensuring that public information

will be input to the risk assessment and

risk control processes.

• Public access to the Letters of

Intent.

Mr. Felder stated that the Letters of

Intent, as well as the formal company

application will be available in the

docket for public examination.

• The interactive nature of the

screening process.

Mr. Felder and Ms. Gerard stated that

the screening process may require

information meetings and interactions

with the companies to clarify points in

the Letters of Intent or to gather

additional information needed by OPS.

However, any interactions,

consultations, or discussions with the

company or States does not change the

ultimate responsibility for public safety,

which sits in the hands of the OPS

regulators.

• The relationship between the OPS

program and other regulators such as

EPA.

Mr. Felder noted that OPS has had

close collaboration with Mineral

Management Service and works closely

with the Coast Guard, a part of DOT.

OPS is interested in putting together a

larger network of agencies to share

experiences about risk management and

other alternative approaches to

regulation. OPS has already performed a

study that looked at over a dozen other

State agency programs in risk

management, defining and

incorporating lessons learned from these

programs into the pipeline risk

management program. OPS has began

meeting with EPA and will continue to

consult with the EPA on issues of

mutual interest.

[Subsequent to the public meeting,

OPS briefed the 15 State National

Response Team (NRT) agencies and

invited them to participate in the

Demonstration Program. As part of the

screening and selection process, OPS

will contact NRT officials whose regions

may be affected by a proposed

demonstration project to identify an

appropriate role for the officials’

participation in the Demonstration

Program. This could entail the NRT

official identifying any issues and

concerns he or she may have with a

candidate demonstration project,

including the company’s safety and

environmental compliance record. OPS

will keep these officials abreast of the

Demonstration Program and individual

projects in their regions via annual

program briefings, project prospectuses,

and updates.]

• Limitations on the number of

demonstration projects.

Mr. Felder stated that OPS is

restricted by Presidential directive to

ten demonstration projects, involving

interstate pipelines. No demonstration

projects are planned for the local

distribution companies at this time. In

addition, OPS will be undertaking a

variety of other initiatives related to

regulatory reform and risk-based

regulation beyond the demonstration

projects themselves. OPS is committed

to ensuring a high quality

demonstration program that protects

and improves safety and the

environment, understands the

significant resources required to support

this program, and will not take on any

more projects than it can responsibly

and prudently handle.

Summary and Closing

John Riordan, Interstate Natural Gas

Association of America (INGAA)

Pipeline Safety Task Force, Joe

Martinelli, API General Committee on

Pipelines, Rich Felder, Office of

Pipeline Safety

Mr. Riordan, from MidCon and the

spokesman for INGAA, discussed how

the Board of INGAA, which is

represented by the Chief Executive

Officers of the major pipelines in the

United States, Mexico, and Canada

became interested in risk management

as a means to improve safety. He noted

that society and the marketplace are

demanding increased accountability

from industry and the people that

regulate the industry, and INGAA

believes that the risk management

demonstration program is very

important in this regard. He emphasized

the importance of communications, and

the need to continuously improve in a

changing world.

Mr. Martinelli, past President of

Chevron Pipeline and Chairman of the

General Committee on Pipeline for API,

recounted the history of how industry,

OPS, and other interested parties got to

this point on risk management. He

applauded the tremendous amount of

work done by a large number of people

in government and industry and the

public. He noted that a key recognition

four years ago was ‘‘one size fits all’’

regulation was not in the best interests

of anybody, and a fundamental change

was needed. Mr. Martinelli discussed

the difficulty of change, whether in a

person, a company, or an entire

industry, and challenged all parties to

not be fearful of change. He warned

people not to get caught up in the ‘‘30-

year’’ syndrome or the ‘‘not invented

here’’ syndrome that resists change. He

also talked about the recognition that

government and industry had to be

more collaborative than adversarial. Mr.

Martinelli also noted that we were not
Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / Notices 14731

at the end of a journey with the

development of the risk management

building blocks, but just at the

beginning of the journey, and the

journey will be a long and hard one that

requires significant continued effort

from all parties. A key message was:

‘‘Get comfortable with change’’ and he

provided a rule of thumb called the Rule

of Three Positives. ‘‘When somebody

suggests a change to you, don’t say: ‘No,

that won’t work. That’s not the way I do

it.’ When somebody suggests something

new, stop and think and make three

positive comments about the new idea

before you make one negative

comment.’’ He challenged the

companies to be innovative, creative,

and provide OPS with so many quality

demonstration proposals that their

selection process will be difficult.

Mr. Felder closed the conference by

expressing appreciation to all those that

attended and to all of his staff that made

the public meeting possible. He and

Stacey Gerard then handed out DOT

certificates of appreciation to

individuals outside the government, in

industry, the public, and contractors,

that have worked with the various Risk

Assessment Quality Teams.

[FR Doc. 97–7827 Filed 3–26–97; 8:45 am]

BILLING CODE 4910–60–P

DEPARTMENT OF THE TREASURY

Customs Service

Announcement of National Customs

Automation Program Test of AccountBased Declaration Prototype

AGENCY: U.S. Customs Service,

Department of the Treasury.

ACTION: General notice.

SUMMARY: This notice announces

Customs’ plan to conduct an accountbased declaration prototype (NCAP/P)

under the National Customs Automation

Program (NCAP), and invites eligible

importers to participate. The NCAP/P

will be initially applicable to

merchandise imported by truck through

the ports of Laredo, Texas (Colombia

Bridge only), and Detroit and Port

Huron, Michigan. This notice provides

a description of the test, outlines the

development and evaluation

methodology to be used in the test, sets

forth the eligibility requirements for

participation in the test and invites

public comment on any aspect of the

planned test.

DATES: The account-based declaration

prototype (NCAP/P) will commence no

earlier than August, 1997 and will run

for approximately eighteen months,

with evaluations of the prototype

occurring periodically. All applications

to participate in the test must be

received on or before April 25, 1997.

Public comments on any aspect of the

planned test must be received on or

before April 25, 1997.

ADDRESSES: Applications should be

addressed to Ms. Margaret Fearon at

U.S. Customs Service, 1301 Constitution

Avenue, NW, Room 4139, Washington,

DC 20229.

FOR FURTHER INFORMATION CONTACT: For

inquiries regarding eligibility of specific

importers: Margaret Fearon, Process

Analysis and Requirements Team, at

(202)927–1413. For questions on

reconciliation: Shari McCann, Process

Analysis and Requirements Team, at

(202)927–1106. For questions on other

aspects of the Account-Based

Declaration Prototype: Daniel

Buchanan, Process Analysis and

Requirements Team, at (617)565–6236.

SUPPLEMENTARY INFORMATION:

Background

Title VI of the North American Free

Trade Agreement Implementation Act

(the Act), Public Law 103–182, 107 Stat.

2057 (December 8, 1993), contains

provisions pertaining to Customs

Modernization (the Mod Act). Subtitle B

of title VI establishes the National

Customs Automation Program (NCAP)—

an automated and electronic system for

the processing of commercial

importations. Section 631 in Subtitle B

of the Act creates sections 411 through

414 of the Tariff Act of 1930 (19 U.S.C.

1411–1414), which define and list the

existing and planned components of the

NCAP (section 411), promulgate

program goals (section 412), provide for

the implementation and evaluation of

the program (section 413), and provide

for remote location filing (section 414).

Section 101.9(b) of the Customs

Regulations (19 CFR 101.9(b)), concerns

the testing of NCAP components. See,

T.D. 95–21 (60 FR 14211, March 16,

1995).

A key element of Customs efforts to

re-engineer its Trade Compliance

process is a shift in emphasis from the

traditional transaction-based approach

of ensuring compliance with import

laws and regulations to an accountbased approach, which addresses an

importer’s overall compliance through

account management, process reviews,

and audits. One feature of this approach

is a new account-based declaration

process. Customs is also developing a

new commercial processing system, the

Automated Commercial Environment

(ACE), which will be designed to

support the new Trade Compliance

processes. An account-based declaration

prototype (NCAP/P) is being developed

to provide the first operational

demonstration of ACE capabilities for

processing imports, integrating the new

account-based import declaration

process with other aspects of the Trade

Compliance process and with selected

features of NCAP elements of the Mod

Act.

I. Development Methodology

NCAP/P will be monitored by a Joint

Prototype Team consisting of trade

participants, the Customs Offices of

Field Operations and Strategic Trade,

the ACE Development Team, and other

interested government agencies. This

team will meet regularly throughout the

prototype period in Detroit, Laredo and

Washington, DC, to set development

milestones, monitor progress, resolve

issues and evaluate program

effectiveness. The development effort

will be coordinated with other on-going

NCAP prototype programs such as

Remote Location Filing and

Reconciliation, and will be as consistent

as possible with the overall direction of

ACE development.

Potential participants should

recognize that this is a prototype test of

new processes. Data definitions and

values and formats for electronic

transmission of manifest, entry and

commercial data will differ from those

currently used in the Automated

Commercial System (ACS). It is also

important to note that development

efforts undertaken for NCAP/P may not

meet the eventual requirements for

programs as they are finally

implemented in ACE.

The public is invited to comment on

any aspect of the NCAP/P test as

described by this notice.

II. Eligibility Requirements

In order to be eligible for participation

in the NCAP/P, an importer must:

1. Be designated as one of the top 350

U.S. importers in terms of entered value,

while importing no less than 50% of

their merchandise specified as Customs’

Primary Focus Industries, which are as

follows:

(a) Advanced Displays

(b) Agriculture

(c) Auto/Truck Parts

(d) Automobiles

(e) Bearings

(f) Circuit Boards

(g) Fasteners

(h) Footwear

(i) Manufacturing Equipment

(j) Steel Products

(k) Telecommunications

(l) Textiles and Flatgoods

(m) Wearing Apparel