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Interpretation Response #PI-14-0022 ([Caelus Energy Alaska LLC] [Mr. J Patrick Foley])

Below is the interpretation response detail and a list of regulations sections applicable to this response.

Interpretation Response Details

Response Publish Date:

Company Name: Caelus Energy Alaska LLC

Individual Name: Mr. J Patrick Foley

Location State: AK Country: US

View the Interpretation Document

Response text:

Mr. J. Patrick Foley
Senior Vice President
Caelus Energy Alaska LLC
3700 Centerpoint Drive, Suite 500
Anchorage, AL 99503

Dear Mr. Foley:

In a letter to the Pipeline and Hazardous Materials Safety Administration (PHMSA) dated December 5, 2014, Caelus Energy Alaska LLC (Caelus) requested an interpretation of the applicability of the hazardous liquid pipeline safety regulations to a 2-inch diesel fuel line that Caelus operates in connection with the Oooguruk oil field offshore of the North Slope of Alaska. You stated that 49 CFR 195.1(b)(5) exempts certain offshore pipelines from PHMSA regulation where the pipeline is located in state waters upstream from the farthest downstream facility where produced hydrocarbons are first processed and requested PHMSA's interpretation whether this exemption is applicable to Caelus' 2-inch diesel line.

You stated Caelus has constructed a gravel island in the shallow waters of the Beaufort Sea on which it operates a drill site and production equipment. The island is located in state waters near a state-owned island known as Thetis Island, and the coastline within Harrison Bay. Caelus also operates an onshore tie-in pad which provides an onshore base of operations and logistical support for the offshore production operations. Caelus does not own and operate its own processing facilities on the island but instead, contracts to have its produced fluids processed onshore at the Kuparuk River Unit (KRU) processing facilities.

You stated that the 2-inch diameter diesel pipeline is bundled with three other pipelines including the crude oil pipelines inside a 16-inch outer diameter conductor pipe. This pipe-within-a-pipe is encased in concrete. Unlike the crude oil pipeline that transports crude from the production facilities on the gravel island to the KRU processing facilities, the diesel line transports diesel fuel in the opposite direction out to the production facility on the gravel island to power the drill rig and carries base oil used to make drilling mud.

You noted that the regulatory exemption established in § 195.1(b)(5) applies to pipelines that: (i) transport hazardous liquid or carbon dioxide; (ii) are situated offshore in state waters; and (iii) are located upstream of the outlet flange of the farthest downstream facility. You pointed out that the diesel pipeline is located upstream of the KRU facility and expressed the view that because Caelus' diesel line meets these criteria it should qualify for the exemption.

Section 195.1(b)(5) states, in relevant part:

§195.1 Which pipelines are covered by this Part?
(b) Excepted. This Part does not apply to any of the following:
(5) Transportation of hazardous liquid or carbon dioxide in an offshore pipeline in state waters where the pipeline is located upstream from the outlet flange of the following farthest downstream facility: The facility where hydrocarbons or carbon dioxide are produced or the facility where produced hydrocarbons or carbon dioxide are first separated, dehydrated, or otherwise processed;

Based on the information you provided, Caelus' conclusion that the exemption in § 195.1(b)(5) applies to its 2-inch diesel line appears to be incorrect. In this case, the diesel pipeline is not transporting produced liquids downstream for processing, but is transporting finished diesel fuel that was already in the stream of regulated transportation out to a production facility to be used as an energy source for production. The gravel island is not the facility where the diesel fuel was produced. Therefore, the 2-inch diesel pipeline is regulated under § 195.1(a)(2) because it transports processed petroleum products to the gravel island where they will be consumed.

Please note that this response to your December 5, 2014, request reflects PHMSA's initial determination of the applicability of the Part 195 regulations based on the limited information in your description of the facilities in your letter and is subject to further consideration if any additional information about the facility would be relevant to this determination.

If we can be of further assistance, please contact Tewabe Asebe of my staff at 202-366-5523.




John A. Gale
Director, Office of Standards
and Rulemaking


cc:PHP-30:OfficialFile:Sharepoint:Web site
T:/PHP-30:Interps:Open:Caelus Energy Alaska-PI-14-0022-Part 195.1

Regulation Sections

Section Subject
195.1 Which pipelines are covered by this Part?