This week’s Pipeliners Podcast episode features first-time guest Charlene Wright discussing how pipeline operators can more effectively view and approach regulatory compliance.

In this episode, you will learn about the importance of processes organically flowing from the management of assets in pipeline operations, how to optimize recordkeeping to support compliance, the advancement of Pipeline SMS from a high-level discussion to implementation and culture change, and more critical topics.

Pipeline Regulatory Compliance: Show Notes, Links, and Insider Terms

• Charlene Wright is the managing partner of Wright & Associates PLLC. Connect with Charlene on LinkedIn.
  • Charlene’s practice focuses on regulatory matters and litigation arising from the construction and operation of natural gas, crude oil, refined products and gas liquids pipelines and the transportation and storage of hazardous materials in North America.
• Pipeline and Hazardous Materials Safety Administration (PHMSA) is responsible for providing pipeline safety oversight through regulatory rulemaking, NTSB recommendations, and other important functions to protect people and the environment through the safe transportation of energy and other hazardous materials.
  • The CRM Rule (Control Room Management Rule as defined by 49 CFR Parts 192 and 195) introduced by PHMSA provides regulations and guidelines for control room managers to safely operate a pipeline. PHMSA’s pipeline safety regulations prescribe safety requirements for controllers, control rooms, and SCADA systems used to remotely monitor and control pipeline operations.
• Pipeline SMS (Pipeline Safety Management Systems) or PSMS is an industry-wide focus to improve pipeline safety, driving toward zero incidents.
  • API 1173 established the framework for operators to implement Pipeline Safety Management Systems (SMS). A significant part of this recommended practice is a training and competency aspect.
    • PipelineSMS.org is a useful resource with various safety tools that was developed by pipeline operators to help other operators enhance safety in their operation.
  • The Plan Do Check Act Cycle (Deming Method) is embedded in Pipeline SMS as a continuous quality improvement model consisting of a logical sequence of four repetitive steps for continuous improvement and learning: Plan, Do, Check (Study), and Act.
• Alarm Management is the process of managing the alarming system in a pipeline operation by documenting the alarm rationalization process, assisting controller alarm response, and generating alarm reports that comply with the CRM Rule for control room management.
  • Alarm rationalization is a component of the Alarm Management process of analyzing configured alarms to determine causes and consequences so that alarm priorities can be determined to adhere to API 1167. Additionally, this information is documented and made available to the controller to improve responses to uncommon alarm conditions.
    • API 1167 provides operators with recommended industry practices in the development, implementation, and maintenance of an Alarm Management program. The implementation of API 1167 is required by reference in the CRM Rule.

Pipeline Regulatory Compliance: Full Episode Transcript

Russel Treat:  Welcome to the Pipeliners Podcast, episode 159, sponsored by EnerSys Corporation, providers of POEMS, the Pipeline Operations Excellence Management System, compliance and operations software for the pipeline control center, recently releasing ComplyMgr software to streamline audit readiness. Find out more about POEMS at enersyscorp.com.

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Announcer:  The Pipeliners Podcast, where professionals, Bubba geeks, and industry insiders share their knowledge and experience about technology, projects, and pipeline operations. Now your host, Russel Treat.

Russel:  Thanks for listening to the Pipeliners Podcast. I appreciate you taking the time. To show appreciation, we give away a customized YETI tumbler to one listener each episode. This week, our winner is Olivia Ohlstein with Cameron. Congratulations, Olivia. Your YETI is on its way. To learn how you can win this signature prize, stick around till the end of the episode.

This week, pipeline attorney Charlene Wright joins us to talk about compliance from a process perspective. Charlene, welcome to the Pipeliners Podcast.

Charlene Wright:  Thank you, Russel.

Russel:  Very good to have you. Before we get into it, would you give us a little bit about your background and tell us how you got into pipelining?

Charlene:  My introduction to the pipeline industry came from representing operators in litigation arising from pipeline incidents, ruptures, failures. That led me to an in-depth exploration of the pipeline safety code, both on the federal level and then state regulations and a better understanding of processes that drive decisions inside of pipeline companies.

Russel:  What would you say you learned in doing that?

Charlene:  What I learned in the incident investigation and in that litigation arena is that pipeliners try to do the right thing. For the most part, pipeline operators are great people trying to do their best. Yet there are gaps that occur. There are risks that are present that if not accounted for can result in a failure.

Russel:  That’s certainly my experience, Charlene, that in general pipeline operators, and not just the companies but really the people at those companies, are really trying to do their very best to get the job done and get it done safely. Why do you think that these gaps exist? What leads to having those gaps happen?

Charlene:  Russel, we work in one of the most highly regulated industries in the country, certainly in North America. Understanding all of those regulatory requirements, in addition to understanding systems that have been in place for decades, for longer than most of the folks who are maintaining them have been in the industry, it’s a complex process.

It involves having to make decisions on resources and on direction inside of a company that have a lot of moving parts. Oftentimes, if there are not processes in place to manage those complexities, gaps occur.

Russel:  [laughs] I can talk to that. I’ve just passed my three-year anniversary of doing this podcast. I tell people all the time that I am amazed by two things. One, just how technical this business is, and the other is how broad it is, how many different technologies and disciplines are involved in running these systems. It’s really a very complex and wide-ranging challenge.

Charlene:  You’re right, Russel. It is interesting. What the public doesn’t necessarily hear and see firsthand is that pipeline operators are responsible for making pipelines safer and for developing, through the investment of resources, some of the technology that has led to advanced leak detection, advancements in corrosion management and prevention, advancements in the kinds of materials that we use to build pipelines.

It’s more than just moving product through the gas line or through a liquid line. It’s much more complex than that.

Russel:  Before we got on the microphone, we were visiting a little bit and talking football analogies. My analogy to that is that being a pipeline operator is like being an offensive lineman.

Charlene:  That’s right.

Russel:  The only time you get your name called is when you get flag thrown.

Charlene:  [laughs] That’s true.

Russel:  The best offensive linemen are generally the ones you’ve never heard about. [laughs]

Charlene:  You’re absolutely right.

Russel:  That’s not completely true, but I think the point’s well made. We’re talking about just how broad and complex running a pipeline is, and one of the things you’ve got to do is have processes. How does a pipeline operator understand? How do they develop understanding around all of their processes?

Charlene:  That’s a great question, Russel. I always tell folks that the way to start, the basis for all understanding, is not the regulations, but it’s actually their own system. Understanding their assets and knowing what the risks are related to each of those assets is the place to start.

From that point, they can understand better which processes will help them to effectively and safely operate their systems, and the regulatory piece can then flow from that. Regulatory compliance is not a bolt-on, it’s a process that should flow organically from managing your assets.

Russel:  Yeah, I call that natural compliance.

Charlene:  That’s a great term.

Russel:  You should do what you need to do to operate the facilities and the assets, and compliance should just fall out of how you’re operating. Now, that’s really easy to say. That is not easy to do.

Charlene:  You’re absolutely right, and part of it is that, in trying to understand the bigger picture, we often lose track of all of the details that go into those processes.

Even though we’re trying to do the right thing, and every day, I think operators go to work, and they understand that they’ve put something in the ground that’s going to be there for a long time, and they are absolutely mindful of employee safety and the public safety in everything that they do, but if you miss the process piece, then you miss a lot of opportunities to improve, to identify gaps, and to understand what things could be done better.

It is a little bit about intent and a lot about documenting a robust process.

Russel:  Yeah, and [laughs] again, that’s a mouthful. I often get tripped up between three words, policy, process, and procedure. How would you say that those three things are distinct?

Charlene:  That’s a great question, and I don’t think I’ve ever been asked that before. Inside different companies that I have the pleasure of doing work for, those terms are often used interchangeably, but I don’t think they are really the same thing.

I consider a policy an overarching, high-level commitment by leadership of a company on how they intend to do business and what values the company has. I consider process to be about what is done. How is it going to be done? What are we going to use?

What is our repeatable, auditable process that gets us from point A to point Z, and identifies gaps in the audit of that process? How do we carry out our intended operations, and what are our tolerant defects? How do we minimize deficiencies and deviations? That’s process.

Procedures are more of first-line doer instructions, if you will. The devil’s in the details? Well, they’re in your procedures. [laughs] They are absolutely required under the pipeline safety code. Every operator is required to, not only have, but follow a written set of procedures to safely operate their system.

Those are really important words, because it means you best be careful what you put in your procedures and make sure you understand what you’ve committed to, because those procedures have now become a federal requirement.

Russel:  They’re also, when you look at an incident investigation, they’re one of the first things to get evaluated.

Charlene:  Absolutely.

Russel:  They’ll tend to be evaluated initially from a “do they meet the code?” They’ll also be evaluated from a standpoint of, “Did they contribute to the incident?”

Charlene:  Absolutely, and did the operator train their employees and contractors on what those procedures require?

Russel:  Yeah, you could do a whole series of podcasts just on that particular question. I define this policy, process, procedure as a governance program, where my policy’s the law. If you think about that from the military perspective, it would be, “Here’s my standing orders.”

What was the mission? In World War II, it was total defeat of the Germans, that kind of thing. The process is, well, we’re first going to land. Then we’re going to drive to this point, and then we’re going to drive to this point. Procedures get down to, “Well, here’s how you drive the landing craft.”

Procedures tend to be more one person doing something. They can be a little bit more complex than that, but your point, I think, was really well stated. It’s the detailed, “You do X, Y, and Z.”

Charlene:  That’s right.

Russel:  That’s really important to have that all put together. What do you think operators miss when they talk about compliance, and when you think about what people are doing with their policy, process, and procedures?

Charlene:  I think there are a couple of things that get missed. First is that they forget about documenting the recordkeeping requirements for their own procedures and for the regulations. That’s really absolutely critical, because your recordkeeping can save you, or it can kill you.

Regulators, both state and federal regulators, expect operators to maintain records that will clearly demonstrate that required activities from their procedures and from the regulations were satisfied, and they were done according to the requirements that were set forth.

The second piece of this is it’s not just about satisfying that requirement, but it’s using those records to determine whether your process and procedures were effective. They miss that piece of it. It’s not enough to say, “I’ve checked a box. I’ve done something because I have to do it, or because it’s a requirement.”

It’s more important to also say, “We did this, but was it enough for our system? Was it effective for our system? Is it effective in the areas that we operate?” Those are really important questions that can’t be missed.

Russel:  That’s broader than just compliance. That’s really, “Am I doing what is appropriate, effective, and efficient for my organization, for my assets?”

Charlene:  That’s right. That’s the world we live in in the context of SMS.

Russel:  Right. That’s a great segue, because I was going to ask about that as well. How does this relate to pipeline safety management systems?

Charlene:  Pipeline Safety Management Systems are important in that we are beginning to look at the totality of what we do, and also how different processes and procedures interrelate, and how we are looking at them in a fashion that allows us to understand whether we are improving safety by what we’re doing.

I think SMS is really important, and it’s something that we are always talking about now in the industry. I really hope — it is my fervent hope — that operators don’t just see this as the next big thing that they need to check off their list.

We tend to have a little bit of shiny object syndrome. We go to the next shiny thing that’s out there that we can put as a gold star, “We’ve accomplished this.” SMS is really not something that is a one and done. It is something that you have to live with, adapt, and mature over a long period of time.

It should grow organically through your company DNA. It can’t be a bolt-on. It can’t be something where we say, “We can check each of these boxes, and so we’re done.” That’s the big, important part about SMS, is really understanding this is a commitment that is not a short term thing.

It’s definitely something that you’re going to have to get a handle on in terms of resourcing it and documenting it for the long haul.

Russel:  I’ve related this story in the past, but I recall visiting with one operator. I was talking to the gentleman that was responsible for the alarm management program. Alarm management program is one of the parts of Pipeline SMS. It’s API 1167.

I asked him, what was he doing with regards to Pipeline SMS. He had never heard of Pipeline SMS. This was maybe a year, year and a half ago that I had this conversation.

Charlene:  Wow.

Russel:  I’m like, okay, well, that confirms for me what I suspected, which is Pipeline SMS right now is a high-level programmatic conversation. It has not really worked its way down to where the boots are hitting the dirt.

I’m with you. I think that this conversation about compliance and policy, process, and procedure, and Pipeline SMS are all bound up together. I also agree that Pipeline SMS is a cultural thing. It’s a capability you’re building into a company. It’s a way of thinking about how you do your business. I also think we’ve got a long ways to go.

Charlene:  Yes. Not every company is ready for SMS. I hate to bring us back to football, Russel, but it’s a very complicated play, and if you don’t know how to block and tackle yet, learn to block and tackle first. That’s really what they need to do before they try to tackle something as complicated as SMS.

Russel:  Yeah, it’d be like a sandlot team trying to engage in the West Coast offense. It’s not just going to work.

Charlene:  That’s right.

Russel:  For the football nerds in the audience.

Charlene:  That’s right. I’m in Texas here, so football’s big.

Russel:  Yeah, exactly. It’s part of the culture. What are the foundational elements of Pipeline SMS, and how do they relate to this conversation we’ve been having?

Charlene:  The foundational elements, honestly, they build on the plan-do-check-act cycle that we’ve had in the industry for decades now. It takes important pieces of that plan-do-check-act process, and it institutionalizes them.

It starts with risk management and understanding your system and where your risks are, where your threats are. Then it evolves into elements that deal with operational controls, training and competence of your individuals, record keeping, emergency preparedness, incident investigation, and safety assurance, and then going back through that cycle.

It’s a management commitment to understanding how all of those different elements interconnect in a way that basically provides a safety net to structure the rest of your procedures.

Russel:  If you think about the plan-do-check-act cycle, plan is make sure that you’ve thought through…I mean this as a question. I’m just teeing it up.

Plan is I’ve thought through and I’ve defined my policy, process, and procedures.

Do is I’m executing my procedures.

Check is I’m looking and seeing, have I accomplished what my policy and process says I should be accomplishing?

Act is I’m going to modify my policy, process, and procedures to improve my outcomes.

Charlene:  Exactly.

Russel:  Foundational to that is I have defined those policies, processes, and procedures. Two, I have the ability to analyze what occurred.

Charlene:  In order to analyze what has occurred, you have to first have metrics in place that are meaningful. Pipeline operators measure thousands of things. When you ask someone, “What are you measuring?” honestly, they will give you thousands of pieces of data or sets of data on what they measure.

If those measures are not driving decisions, they’re meaningless. They need to have meaningful metrics that tell leadership to do something or stop doing something. If it’s not feeding that information into management, then it’s really a pointless exercise.

Once you have metrics in place that align to your company’s goals and values, then you can begin to really check outcomes and effectiveness against those metrics, and it will drive your decisions.

Russel:  That’s the difference between data and information. Then even more so, it’s the difference between information and actionable information.

Charlene:  Right.

Russel:  I’m an engineer, so I always believe that more data is better.

Charlene:  [laughs] Okay, understood.

Russel:  I also am very aware that data for data’s sake, while I could do all kinds of interesting analysis, maybe find something, and do some kind of optimization, it’s not helpful from the terms of running an organization.

That pivots us into a conversation in more detail about records and record keeping. Really, if I’m going to understand outcomes, then I’ve got to create records. Those records have to create data that I can process into actionable information.

Charlene:  Correct.

Russel:  I think we’ve got a long ways to go as an industry in that domain.

Charlene:  We definitely do. I think there are different levels of maturity on recordkeeping that different operators have, both from the sense of what records they keep, but also, how they’re maintaining them.

If your records are being kept in a binder under someone’s desk, that data’s not getting analyzed and integrated into the decisions that are being made for the various programs, from integrity management to damage prevention. It’s just sitting there, collecting dust.

Let’s face it. Everybody listening has one person like this at least in their company that are still keeping their data in these binders under their desk. That doesn’t do anybody any good. They’re doing this, because if they get an inspection, they want to be able to produce this binder. That’s lovely, but you missed an opportunity.

Russel:  That’s right, and that’s the distinction between compliance and a compliance mindset versus an SMS mindset.

Charlene:  That’s absolutely right.

Russel:  The SMS mindset would be, “I’ve got this information. Well, how do I feed it into decision making to improve things?”

Charlene:  Right. Regulations, let’s face it, have become more complex over time. The last big new set of regulations that came out was back in 2011 with the Control Room Management Rule (CRM Rule). It certainly changed the way we looked at control rooms, becoming more of an information center than it used to be treated.

It created this need to keep so many different kinds of records that were not even generated inside the control room that people had to get their arms around it. I think there have been lots of different ways to do that that have popped up in the industry.

I’m a big fan of the POEMS Suite, because it actually captures not just the process, but it helps the operators understand what are the records that need to be kept, and how do they need to be kept?

Then also, are we just keeping these for compliance, or can we analyze them and look at this in, slice and dice this data in ways that make sense to us? That’s really important.

Russel:  That’s an easy thing to say, and I think the entire industry would agree that there’s value in that. I think the challenge is that there’s a lot that has to happen to figure out how to take all these records that we create and make them useful from a decision-making standpoint.

There’s a lot of interesting stuff going on around leak detection program management in particular — I talk about that, because that’s something I know a little bit about — and how they’re building frameworks that address the entirety of what you’re doing in leak detection, including your computerized models, your field inspections, camera imagery, and all kinds of other things that are being done around a program. Versus — I get a leak alarm, and here’s what I do as my process and procedure to respond to a leak alarm. That may be an oversimplification, but there’s a big difference between analyzing a program and performing and analyzing a task.

Charlene:  Absolutely, that’s correct.

Russel:  Where do you think the value’s at for the operators?

Charlene:  I think the value for the operators is understanding how to use their data so that they can become more efficient, become safer, and even more importantly, use limited resources in the best way possible.

I think the public sometimes thinks that pipeline operators have unlimited resources. Well, no company has unlimited resources. We all make decisions every single day about where to put our people’s time and where to invest money.

Those decisions should be data-driven decisions. If they’re using records to validate and evaluate processes, those decisions become easier to make.

Russel:  Right. I would absolutely agree with that, that they need to be data-driven. I think one of the big challenges in our business is that it’s so technical, and we end up having these managers that understand the technology.

They have data coming up to them, and they’re going through it, analyzing it, and preparing reports that go to others. A lot of that process, we actually got to figure out how to get what’s in these really good engineers’ heads and put it into systems that we can more universally understand.

That ain’t going to happen overnight. That’s a lifetime, a career kind of commitment that’s required to have those kind of things accomplished.

Charlene:  That’s really a good point, and it brings to mind the fact that we need to understand that we’re at a really pivotal time in our industry. We are at a time where we’ve got a lot of Baby Boomers that are retiring from their work, that have careers, and the kind of institutional knowledge that simply can’t be replaced.

If there aren’t already processes in place to capture that information and understand the importance of it, we’re going to miss out, and we’re going to have this enormous gap that isn’t going to be replaced by new, bright, talented engineers that don’t know the system, that don’t know the institutional history. We have to get it now, and we’re probably almost too late, if we haven’t already started.

Russel:  I think it depends on the company you talk about. Some companies have done an incredibly good job of institutionalizing their understanding about their various domains. Others, they just rely on what people know.

It’s interesting. If you talk about the smaller private equity-backed midstreams and such, they tend to have really sharp engineers that understand their business and can move quickly and get things done, but may not have the level of discipline and rigor around their policy, process, and procedure.

They’re flexible, and they can change and adapt. They tend to be the folks that adapt to new process, new technology quicker. Where the bigger guys tend to have very mature understanding in policy, procedure, process, etc., but may not have the flexibility necessary to adapt to and incorporate new technology and new understanding.

The difference between a PT boat and an aircraft carrier.

Charlene:  That’s right. If you’re acquiring systems that you haven’t operated and maintained over these last decades, everything is about those records. Understanding that and taking the time in advance to do your due diligence, look at the records, and understand what you’re getting into before you acquire a new system is really important.

Anything that you don’t get right away is going to be more difficult to obtain later on, so let’s make sure that we do that as well. We do see a lot in the industry, where different companies acquire different systems, and then that acquiring company is responsible to understand where the risks are, understand what records are there, and be able to defend what it does to operate those systems.

Russel:  I want to tee up as a wrap up a question for you. Give me a second or two, Charlene. I’m going to tee up a question around the idea of process quality. I got an MBA while I was in the military, and that MBA had a quantitative focus.

One of the things we did is we read the work that Deming did on total quality management. We would take manufacturing processes, and we would diagram them all the way from the floor, all the way through to what the CEO needed to see in order to run the company, and try to determine what was the data that was important in how you rolled that up.

It was really fascinating to me how you diagram that and so forth. A couple of things in order to do quality management that are required. The first is you have to have a documented process, and then I have to have clear either measurement or testing.

Ideally, I’m going to be able to measure the process, because I can do that in real-time. Some processes, I actually have to look at the output and test it. Then I’ve got to correlate my testing of the output to the measurement of the device, and then I’ve got to figure out how to roll that up and determine what is and isn’t important.

Process quality requires a very disciplined process around getting the process documented and then a continuing effort to analyze that process and its performance, and look for ways to improve it. Deming transformed the manufacturing world by implementing what at that time was called TQM. Process safety management, pipeline safety management, other disciplines have come out of that.

Black Belt, Six Sigma, those sort of things come out of that idea. I’m giving you that as a background. I think that that’s someplace we need to head in pipelining. I’m wondering if you agree with that, and if you do, what do you think would be required for us to get there?

Charlene:  I definitely think that quality assurance and quality control is important. I think that, if we put in place processes that check our internal controls to see if they’re sufficient, and to be able to have a robust process that we have both checked and rechecked and adapted, it will make us better at everything that we do.

I think you’re right. I think there are elements of process controls and quality control that are baked into SMS, but to actually take that piece out and really think about it and really unpack all of those terms is important.

It would actually mean that you’d need a bit of a culture transformation inside of an organization to get everyone to be working on that same path. That’s the whole, the Deming approach to management, too, that internal transformation.

It’s interesting that you’re thinking about that. I don’t think there are that many…There have long been process controls inside of organizations, but they tend to be tied more to compliance and limited by compliance. I think there’s an opportunity to have compliance be one piece of a much larger concept.

Russel:  Yeah, I would agree with that, Charlene. I think the reason I think about it is it goes back to my training early on. I did this in my first job out of the military before I started getting into oil and gas, where I applied this successfully.

I think there’s a real big challenge in the pipeline world, because if I start looking at pipeline integrity or cathodic protection, and I’m trying to figure out how I’m going to get to a, what are the nodes in the network of the process, and what needs to happen in each of those nodes, and what do I need to measure about each of those nodes, that starts getting really complicated.

It’s as complicated as aviation, if not more so, in terms of really breaking down all the pieces and parts.

Charlene:  That’s true. The one thing that’s important about quality management is the consistency that can flow from it, and being able to adapt the principles that will help you to manage risk. We’re all about managing risk, right?

Russel:  That’s exactly right. I think that’s actually a very good point, too, because if you think about it from a manufacturing standpoint, what I’m trying to do is improve the quality and consistency of the output. I’m measuring for something that is occurring.

In pipelining, I’m often measuring for something I don’t want to occur, which is a much more difficult problem, technically.

Charlene:  That’s right. That’s right. That goes back to my comment on metrics. It’s really important not to just use those lagging indicators that are measurements of things we do not want to occur. It’s really important to have leading indicators that help us to understand whether we’re doing the right things to prevent those occurrences.

Russel:  Yeah, exactly. Well, listen, I’m going to ask this as a wrap-up question. What would you want the listeners to take away from this overall conversation?

Charlene:  I think the takeaway should be that this is a great industry. It’s a great place to work, with some really great people that are committed to safety for employees, for contractors, for the public, but good intentions are often not enough.

We are under heightened scrutiny in an incredibly highly-regulated industry. Process is king, and your records will save you, so that’s where your focus needs to be.

Russel:  Process is king, and your records will save you. I think that’s a great place to land this one. Then one final comment. Just thank you for the plugs for the POEMS CRM Suite. For the audience, that was not requested. That just happened out of the natural conversation.

Charlene:  Well, I’m a big fan.

Russel:  I appreciate that. Well, listen, Charlene, it’s been a pleasure to have you, and thanks for being a guest. We’d look forward to having you come back.

Charlene:  Well, thanks very much, Russel.

Russel:  I hope you enjoyed this week’s episode of the Pipeliners Podcast and our conversation with Charlene. Just a reminder before you go, you should register to win our customized Pipeliners Podcast YETI tumbler. Simply visit pipelinepodcastnetwork.com/win to enter yourself in the drawing.

If you would like to support this podcast, please leave us a review on Apple Podcasts, Google Play, or whatever smart device podcast app you happen to use to listen. You can find instructions at pipelinepodcastnetwork.com.

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Russel:  If you have ideas, questions, or topics you’d be interested in, please let me know on the Contact Us page at pipelinepodcastnetwork.com or reach out to me on LinkedIn. Thanks for listening. I’ll talk to you next week.

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