Steve:

As you requested, the following is a detailed update on pipeline safety 
legislation currently moving through Congress:

Pipeline safety reauthorization legislation

Authorization for pipeline safety programs, as administered by the U.S. Dept. 
of Transportation, Office of Pipeline Safety (OPS), is currently set to 
expire at the end of FY 2000.    At the beginning of the 106th Congress, 
industry was focused on securing a simple, two year re-authorization bill 
that basically extends current pipeline safety programs with some modest 
increases in funding levels.  In fact, the House Commerce Committee (who 
shares jurisdiction over pipeline safety with the Transportation & 
Infrastructure Committee) acted early in 1999 to pass a simple, two year 
reauthorization bill (H.R. 1378).

Unfortunately, the issue became more complex from that point.   A serious 
liquid pipeline accident in Bellingham, Washington that occurred last summer, 
killing several children, dramatically changed the debate over pipeline 
safety.   Members of the House and Senate from Washington state (backed by 
the governor and numerous state and local officials) moved swiftly to 
introduce legislation that they feel is designed to address some of the 
shortcomings in federal pipeline regulation that they believe may have 
allowed the Bellingham incident to occur.

In the Senate, Senator Patty Murray (D-WA) has introduced S. 2004, which is 
designed to expand State authority over interstate pipelines in several new 
areas, such as inspection and testing, emergency response plans, leak 
detection, and operator training and qualification.   The bill also would 
authorize a large increase in OPS funding through pipeline user fees, to 
increase the amount of grants to the States, allow for hiring of additional 
inspectors, and increase R&D for inspection and leak detection technologies.  
The current OPS budget is around $36 million (with $30 million from user 
fees) -- the Murray bill would authorize $50 million in FY2001, which would 
require a sizeable increase in user fees.  Senator Slade Gorton (R-WA) has 
recently decided to co-sposnor the Murray bill, and will be actively involved 
in trying to gain Republican support for the bill.   On the House side, Rep. 
Jack Metcalf (R-WA) has introduced a similar bill, H.R. 3558, which a number 
of the Washington representatives have co-sponsored.

Interstate natural gas pipelines have been placed in a very difficult 
situation.    The Bellingham incident was a liquid pipeline accident, and 
liquids pipelines generally have less stringent regulatory requirements than 
natural gas pipelines.   The Washington delegation has highlighted the fact 
that 280 deaths and 1500 injuries have occurred over the past 14 years 
related to natural gas pipeline incidents, but they fail to distinguish the 
fact that almost all of those incidents were on LDC systems (which 
ironically, are entirely State regulated).  Only 39 fatalities in that period 
were natural-gas related, and the majority of those accidents were caused by 
third party damage.  In short, the INGAA crowd is being dragged down by the 
poor records of the LDCs and the liquid pipelines.    

The calls for more state regulation of interstate pipeline are largely 
misguided, based on the fact that the interstate pipelines under federal 
regulation have an exemplary safety record.   In addition, OPS is already 
working on a "Pipeline Integrity" Rulemaking that would implement a number of 
additional measures to prevent accidents on federally-regulated pipelines.

As you mentioned, INGAA has not been doing the best job representing us on 
these issues.  They have been working in a group effort with API, AGA, and 
the Association of Oil Pipelines (AOPL) to try and deflect the negative 
claims of the Murray and Metcalf legislation, but have not been forceful 
enough in distinguishing interstate natural gas pipelines' positive record 
from the liquids and LDCs.  Thus, they have given the impression that INGAA 
companies might be willing to submit to additional regulation that liquids 
and LDC are under political pressure to submit to due to Bellingham.  We have 
been working with other major INGAA companies (El Paso, in particular) to 
make sure that the perspective and positive record of our natural gas 
pipelines is heard clearly by the key legislators.

The odds of these measures (S. 2004, H.R. 3558) passing on their own is 
fairly slim.   They will get a great deal of attention, however.  The Senate 
Commerce Committee held a field hearing in Bellingham, Washington yesterday, 
at which Senators Gorton and Murray testified along with OPS and the families 
of Bellingham victims -- the press coverage was not good (i.e., USA Today 
cover story "When Pipelines Are Time Bombs").   These bills (or portions of 
them) will likely be offered and considered as amendments to Pipeline Safety 
Reauthorization legislation as it comes before the House Transportation & 
Infrastructure and Senate Commerce Committee later this year.   

The increased controversy caused by these bills will likely doom efforts to 
pass a pipeline safety reauthorization bill this year.   The leadership of 
the House and Senate Committees will not likely want to face a bitter debate 
between safety advocates, OPS, States, and industry in their committees in 
this tough election year.   While this is probably a good sign, there is an 
increased risk that industry may face some large hurdles in the 
appropriations process.

Appropriations Legislation

While Members of Congress push for their stand alone bills and/or amendments 
to reauthorization bills, the greater danger is that some of these issues 
will be dealt with in an appropriations context.    In particular, the fact 
that Senator Slade Gorton is now actively engaged in pushing for extensive 
pipeline safety reforms is troubling -- he is a key member of the Senate 
Appropriations Committee, is close to Republican leadership, and has a tough 
re-election fight coming up.   Senator Murray is also on Senate 
Appropriations.  Both are on the Transportation Appropriations Subcommittee, 
which funds OPS.

It is quite likely that the Senators will make a push to get increases in the 
OPS budget for FY 2001 that would enable the kinds of reforms contemplated by 
their stand-alone legislation (more state funding, more inspectors, more 
R&D).  Much of this increase would be funded through increases in user fees.  
INGAA indicates that it expects we could be facing increases in the range of 
10-15% from FY2000.   There is also the possibility that an attempt will be 
made to add legislative riders to the OPS appropriations -- such as requiring 
OPS to mandate inspections, increase operator qualifications, or allow 
increased state authority.   I would predict that legislative riders can be 
prevented, but it will be very difficult to avoid some kind of increases 
(beyond mere adjustments for inflation) in the OPS budget and user fees.  

The reauthorization will indeed receive attention in 2000, but our advocacy 
efforts will clearly need to be focused on the appropriations process, in 
order to minimize the impact on interstate pipeline user fees and prevent 
other harmful mandates.  

We will continue to work with key members of the authorizing and 
appropriations committees to ensure that the interstate natural gas 
perspective is clearly heard and, if possible, we avoid being dragged down in 
attempts to impose more strict regulation on liquids and LDCs.

Please let me know if you have questions or require additional information.  
Thank you.