S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

* * * * *

In the matter of the application of )

BASIN PIPELINE L.L.C. )

for a waiver of compliance with the hydrostatic )

design pressure specification for reinforced ) Case No. U-17567

thermosetting plastic pipe currently contained by )

reference in the Michigan gas safety standards. )

)

At the July 22, 2014 meeting of the Michigan Public Service Commission in Lansing,

Michigan.

PRESENT: Hon. John D. Quackenbush, Chairman

Hon. Greg R. White, Commissioner

Hon. Sally A. Talberg, Commissioner

ORDER APPROVING SETTLEMENT AGREEMENT

On February 25, 2014, Basin Pipeline L.L.C. (Basin) filed an application with the

Commission requesting a waiver of compliance with the plastic pipe hydrostatic design pressure

specification in Rule 460.20201 of the Michigan Gas Safety Standards, 1999 AC, R 460.20201.

Specifically, Basin sought a waiver that would enable it to repair its existing Basin Pipeline

System (Basin Pipeline) by installing a 2-1/2 inch outside diameter (OD) reinforced thermosetting

plastic pipe within a three and one-half mile segment of already existing 4-1/2 inch OD steel pipe.

A prehearing conference was held on April 17, 2014, before Administrative Law Judge

Mark D. Eyster. Basin and the Commission Staff (Staff) participated in the proceedings.

Subsequently, the parties submitted a settlement agreement resolving all issues in the case.

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U-17567

According to the terms of the settlement agreement attached as Exhibit A, the parties agree

that Basin owns and operates the Basin Pipeline in Manistee and Mason Counties. The

Commission approved construction and operation of this 32-mile gathering system in its

October 20, 1993 order in Case No. U-10364 (October 20 order). The October 20 order approved

the use of steel pipe in the construction of the Basin Pipeline. In Case No. U-11605, the

owner/operator of the Basin Pipeline and the Staff agreed and stipulated that the Basin Pipeline

would be subject to the Commission’s gas safety jurisdiction pursuant to 1969 PA 165. The

Commission issued an order on December 12, 1997, in Case No. U-11605 approving the parties’

agreement and stipulation.

The segment of the Basin Pipeline to be repaired consists of three and one-half miles of 4-1/2-

inch OD steel pipe that runs from the Lakeland oil and gas facility to an interconnection with the

8-5/8-inch OD section of the Basin Pipeline. This segment lies entirely within a class 1 location,

as that term is defined in 49 CFR § 192.5(b)(1). As noted above, the parties agree that, in order to

maintain and improve the integrity of this pipeline segment, Basin should be authorized to make

repairs by installing 2-1/2-inch OD reinforced thermosetting plastic pipe within the existing 4-1/2-

inch OD steel pipe segment of the Basin Pipeline. The pipe to be installed is manufactured by

Fiberspar LinePipe LLC.

Pursuant to Rule 460.20201 of the Michigan Gas Safety Standards, 1999 AC, R 460.20201,

and the applicable federal safety standards contained in 49 CFR § 192.121, which are incorporated

by reference in R 460.20606, the hydrostatic design basis (HDB) for reinforced thermosetting

plastic pipe qualified for use is specified generically as 11,000 pounds per square inch gauge

(psig). The HDB is used to determine the maximum allowable operating pressure (MAOP).

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U-17567

The parties agree that the calculated HDB for the Fiberspar LinePipe to be used for the

replacement was determined pursuant to a national standard adopted by the American Society for

Testing and Materials and that the HDB is 32,600 psig. Using a HDB of 32,600 psig, and

applying the formula set forth in 49 CFR § 192.121 results in an MAOP of 1,478 psig.1 The

current operating pressure of the Basin Pipeline 4-1/2-inch OD steel pipeline segment is 750 psig

to 850 psig, with an MAOP of 1,200 psig, as determined by the federal regulation identifying the

MAOP for steel or plastic pipelines found in 49 CFR § 192.619. The parties agree that use of

Fiberspar LinePipe up to a MAOP of 1,200 psig in the 3-1/2-mile segment of the Basin Pipeline

containing the 4-1/2-inch OD steel pipe will ensure that an equivalent or better level of pipeline

safety is maintained. The parties further agree that Basin will commit to the measures listed in

Attachment 1 to the settlement agreement to ensure the safety of the pipeline.

The Commission finds that the settlement agreement is reasonable and in the public interest,

and should be approved. The Commission further finds that the requested waiver is not

inconsistent with gas pipeline safety.

THEREFORE, IT IS ORDERED that:

A. The settlement agreement, attached as Exhibit A, is approved.

B. Basin Pipeline L.L.C.’s application requesting a waiver of compliance with the plastic pipe

hydrostatic design pressure specification in Rule 460.20201 of the Michigan Gas Safety Standards,

1999 AC, R 460.20201, is approved.

1 Although the settlement agreement language refers to the 1,478 psig as being the MAOP, this

design pressure is the result of the calculation found in 49 CFR § 192.121 and is incorrectly

referred to as the MAOP.

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U-17567

C. Basin Pipeline L.L.C. is authorized to install and operate Fiberspar LinePipe up to a

maximum allowable operating pressure of 1,200 pounds per square inch gauge in the 3-1/2-mile

long 4-1/2-inch outside diameter steel pipe segment of the Basin Pipeline.

D. Basin Pipeline L.L.C. shall comply with the terms of the settlement agreement including

the measures listed in Attachment 1 to that agreement to ensure the public safety of the pipeline.

The Commission reserves jurisdiction and may issue further orders as necessary.

Any party desiring to appeal this order must do so in the appropriate court within 30 days after

issuance and notice of this order, under MCL 462.26.

MICHIGAN PUBLIC SERVICE COMMISSION

________________________________________

John D. Quackenbush, Chairman

________________________________________

Greg R. White, Commissioner

________________________________________

Sally A. Talberg, Commissioner

By its action of July 22, 2014.

____________________________________

Sally L. Wallace, Acting Executive Secretary

{01573069 1 }

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

_____________________

In the matter of the Application of )

Basin Pipeline L.L.C. for a Waiver of )

Compliance With the Hydrostatic Design )

Pressure Specification for Reinforced )

Thermal Setting Plastic Pipe Currently )

Contained by Reference in the Michigan )

Gas Safety Standards )

)

Case No. U-17567

SETTLEMENT AGREEMENT

On February 25, 2014, Basin Pipeline L.L.C. (“Basin” or the “Applicant”) filed an

application with the Michigan Public Service Commission (“Commission”) pursuant to 1969 PA

165, MCL 483.152(2) for a waiver of compliance with the reinforced thermosetting plastic pipe

hydrostatic design pressure specification found by reference in Rule 460.20201 of the Michigan

Gas Safety Standard, 1999 AC, R 460.20201, with regard to a three and one-half mile segment of

the Basin Pipeline System.

The prehearing conference in this case was held on April 17, 2014 before Administrative

Law Judge Mark E. Eyster. The parties to the case are Basin and the Commission Staff. On

May 14, 2014, Basin filed testimony and exhibits.

For purposes of settlement of all issues in Case No. U-17567, the undersigned parties

agree and stipulate as follows:

1. Applicant owns and operates the Basin Pipeline System (Basin Pipeline) in

Manistee and Mason Counties. The construction and operation of this pipeline was approved by

the Michigan Public Service Commission in Case No. U-10364 by Order dated October 20,

1993. Exhibit A attached to the application is a route map of the Basin Pipeline.

EXHIBIT A

{01573069 1 } 2

2. The Order issued in Case No. U-10364 approved using steel pipe in the

construction of the Basin Pipeline.

3. In MPSC Case No. U-11605, the owner/operator of the Basin Pipeline and the

MPSC staff agreed and stipulated that the Basin Pipeline would be subject to the MPSC’s gas

safety jurisdiction pursuant to 1969 PA 165. This agreement and stipulation was approved by

the MPSC by Order dated December 12, 1997.

4. One segment of the Basin Pipeline consists of three and one-half miles of 4-1/2-

inch OD steel pipe which runs from the Lakeland oil and gas facility to an interconnection with

the 8-5/8-inch OD section of the Basin Pipeline. This segment of the Basin Pipeline is shown on

Exhibit A of the application. This segment lies entirely within a class 1 location. To maintain

and improve the integrity of this pipeline segment, Applicant proposes to make repairs by

installing 2-1/2-inch OD reinforced thermosetting plastic pipe as needed within the existing 4-

1/2-inch OD steel pipe segment of the Basin Pipeline. The pipe to be installed is manufactured

by Fiberspar LinePipe LLC.

5. Exhibit B as attached to the application is a document that shows the applicable

specifications for the 2500 Series FS LPJ 2½” 2500 (E) Fiberspar LinePipe Applicant proposes

to use.

6. Pursuant to Rule 460.20201 of the Michigan Gas Safety Standards, 1999 AC

R 460.20201 and the applicable federal safety standards contained in 49 CFR § 192.121, which

are incorporated by reference in R 460.20606, the hydrostatic design basis (HDB) for reinforced

thermosetting plastic pipe qualified for use is specified generically as 11,000 psig.

7. The American Society for Testing and Materials (ASTM) has adopted a national

standard pertaining to determining HDB for reinforced thermosetting plastic pipe: ASTM D-

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2992. This ASTM standard is in turn listed in standard ASTM D-2517, a standard which is a

listed specification for plastic pipe in 49 CFR § 192.59 Appendix B.

8. The manufacturer of Fiberspar LinePipe has determined the HDB (32,600 psig) in

accordance with ASTM D2992. See Fiberspar LinePipe Engineering Guide, Exhibit C, pp. 42-

43, attached to the application. Using a calculated HDB of 32,600 psig and applying the formula

set forth in 49 CFR § 192.121 results in a maximum allowable operating pressure (MAOP) of

1,478 psig.

9. The Pipeline Hazardous Material Safety Administration of the United States

Department of Transportation has granted a waiver with regard to determination of the HDB

under 49 CFR § 192.21 for Fiberspar reinforced thermosetting plastic pipe which allowed the

HDB to be calculated in accordance with ASTM D-2517 and ASTM D-2992, See Docket No.

PHMSA-2010-0063.

10. The current operating pressure of the Basin Pipeline 4-1/2-inch OD steel pipeline

segment is 750 psig to 850 psig. The MAOP is 1,200 psig.

11. Applicant is requesting that it be allowed to install as needed and operate

Fiberspar LinePipe up to a MAOP of 1200 psig in the three and one-half mile segment of the

Basin Pipeline containing the 4-1/2-inch OD steel pipe.

12. Applicant will install the Fiberspar LinePipe within the existing 4-1/2-inch OD

steel pipe. This installation method will result in less impact and disruption to the ground

surface than would installation of a new steel pipeline parallel to the existing steel pipeline. The

existing steel pipeline will serve as a conduit for the Fiberspar LinePipe.

13. Fiberspar LinePipe can be manufactured in long lengths which reduces the

number of joints which need to be connected. Fiberspar LinePipe is more corrosion resistant

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than steel pipe, and more tolerant to impact damage. Installing the Fiberspar LinePipe within the

existing 4-1/2-inch steel pipe will provide greater protection of the active pipeline than would

installing a separate single pipeline.

14. Applicant agrees to additional measures listed in Attachment 1 to this Settlement

Agreement to ensure public safety of the pipeline.

15. Approval of the use of the Fiberspar LinePipe as proposed will produce numerous

public benefits, including maintaining and improving the integrity of the Basin Pipeline,

minimizing disruption to the surface of property along the Basin Pipeline right-of-way, and

reducing the costs which would be incurred to physically remove and replace the existing pipe.

16. Approval of the use of Fiberspar LinePipe as proposed will ensure that an

equivalent or better level of pipeline safety is maintained.

17. The parties request that the Commission grant the waiver as requested and

approve installation and use as needed of Fiberspar LinePipe up to a MAOP of 1200 psig in the

three and one-half mile long 4-1/2-inch OD steel pipe segment of the Basin Pipeline and

determine that the request is not inconsistent with gas pipeline safety and will serve the public

interest.

18. This Settlement Agreement is entered into for the sole and express purpose of

reaching a compromise among the parties. All offers of settlement and discussions relating to

this settlement are, and shall be considered, privileged under MRE 408. If the Commission

approves this Settlement Agreement without modification, neither the parties to this Settlement

Agreement nor the Commission shall make any reference to, or use, this Settlement Agreement

or the order approving it, as a reason, authority, rationale, or example for taking any action or

position or making any subsequent decision in any other case or proceeding; provided, however,

{01573069 1 } 5

such references may be made to enforce or implement the provisions of this Settlement

Agreement and the order approving it.

19. This Settlement Agreement is based on the facts and circumstances of this case

and is intended for final disposition of Case No. U-17567. So long as the Commission approves

this Settlement Agreement without any modification, the parties agree not to appeal, challenge,

or otherwise contest the Commission order approving this Settlement Agreement. Except as

otherwise set forth herein, the parties agree and understand that this Settlement Agreement does

not limit any party’s right to take new and/or different positions on similar issues in other

administrative proceedings, or appeals related thereto.

20. This Settlement Agreement is not severable. Each provision of this Settlement

Agreement is dependent upon all other provisions of this Settlement Agreement. If the

Commission rejects or modifies this Settlement Agreement or any provision of this Settlement

Agreement, this Settlement Agreement shall be deemed to be withdrawn, shall not constitute any

part of the record in this proceeding or be used for any other purpose, and shall be without

prejudice to the pre-negotiation positions of the parties.

21. The parties agree that approval of this Settlement Agreement by the Commission

would be reasonable and in the public interest.

22. The parties agree to waive Section 81 of the Administrative Procedures Act of

1969 (MCL 24.281), as it applies to the issues resolved in this Settlement Agreement, if the

Commission approves this Settlement Agreement without modification.

WHEREFORE, the undersigned parties hereto respectfully request the Commission to

approve this Settlement Agreement on an expeditious basis and to make it effective in

accordance with its terms by final order.

EXHIBIT A-4 (AKP-4) Page 1 of 3

CASE NO. U-17567 July 15, 2014

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BASIN PIPELINE LLC SPECIAL CONDITIONS

FOR USE OF FIBERSPAR PIPE

1. If tap, branch, or split the special permit segment, only Fiberspar approved

connections will be used.

2. Materials used in the manufacture of the Fiberspar pipe installed within the special

permit segment, during construction or in future repairs or replacement, may not

contain any regrind or rework material.

3. The Fiberspar pipe used in the initial construction shall not be older than two years

from the manufacture date. Fiberspar pipe will not be installed above grade. Excess

Fiberspar pipe from the initial construction will be stored in a covered storage area

until needed for repair or replacement purposes.

4. Follow Fiberspar instructions regarding use of in-line inspection tools and

maintenance pigs. Document in O&M Manual.

5. Have all Fiberspar pipe that is used in the special permit segment factory pressure

tested to a minimum of 1.5 times MAOP for a minimum of one (1) hour. Submit

records demonstrating that all special permit segment pipe was factory pressure tested.

6. Protect all stainless steel mechanical connectors for Fiberspar LinePipe and metallic

appurtenances for each connection with anode(s) and a test point. Protect outer steel

casing with rectifier and obtain annual cathodic protection readings. Inspect Fiberspar

pipe ends after insertion prior to installation of connectors.

7. The Fiberspar pipe shall be designed and manufactured per the requirements of ASTM

D2517 and the pipe shall be marked accordingly.

8. In five years, cut out and test end of Fiberspar pipe at one connector location. If a

Fiberspar pipe section is removed for a tie-in to another well or any other reason,

removed section shall be tested. Non-destructive testing shall focus on the

composition and degradation of the pipe material and destructive testing shall include

a hydro test to burst pressure.

9. All construction or repair tasks associated with the special permit segment that could

affect the integrity of the pipeline shall be treated as a “covered-task” and shall require

the implementation of the requirements of Subpart N. Include in O&M Manual.

10. Use Fiberspar certified and operator qualified installer. Notify Fiberspar in advance

of date of initial pipe installation and request a Fiberspar representative be present.

11. Follow Fiberspar instructions regarding installation, insertion and joining. Incorporate

into O&M Manual.

EXHIBIT A-4 (AKP-4) Page 2 of 3

CASE NO. U-17567 July 15, 2014

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12. Maintain cathodic protection for steel pipeline casing in which Fiberspar pipe inserted

through use of rectifier. Obtain annual cathodic protection reading.

13. If the steel pipeline casing is uncovered, install warning tape approximately two (2)

feet above the uncovered section of the casing. The tape shall be of such quality to

last for the life of the pipeline.

14. Inspect Fiberspar pipe during offloading and insertion for defects. Follow Fiberspar

guidelines for handling of defects. Incorporate guidelines into O&M Manual. Retain

records of any Fiberspar pipe that is rejected.

15. Obtain a preconstruction depth profile on existing steel pipeline at 100 foot intervals

where practical and at 5’-10’ intervals at road crossing. Notify MPSC if depth less

than 4 feet.

16. Install over-pressure protection equipment necessary to keep the pipeline pressure

from exceeding 1200 psig.

17. Monitor operating pressures by the installation of pressure transmitters and switches

in the piping system that report to the facility’s SCADA system.

18. Continuously monitor gas temperature in order that the pipeline is not exposed to

temperatures exceeding 120 degrees F.

19. Continuously monitor the special permit segment with a SCADA system. The valve

at the delivery point into the special permit segment shall have remote monitoring and

shut-in capability.

20. If communication is lost for over 3 hours, have personnel onsite to continue operations

and monitoring of the special permit segment pipeline; otherwise, the delivery point

into the special permit segment will shut in further flow into the pipeline.

21. Have tools and fittings in stock for operational maintenance and emergency repairs

(the number and types shall be detailed in O&M Manual).

22. Maintain a supply of Fiberspar pipe at maintenance yards for emergency purposes.

Excess Fiberspar pipe shall be stored in covered area.

23. Follow Fiberspar inspection instructions and document them within the O&M

Manual.

24. Follow Fiberspar pipe repair criteria and document them within the O&M Manual.

25. Prior to being put into service, the Fiberspar pipe, connections and appurtenances shall

be field hydrostatically tested at 1.5 times the MAOP for a minimum of 24 hours with

recording charts.

EXHIBIT A-4 (AKP-4) Page 3 of 3

CASE NO. U-17567 July 15, 2014

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26. Conduct leakage detection surveys of the entire special permit segment two (2) times

per calendar year at a minimum, not to exceed 7 1/2 months between surveys.

27. Maintain a log of all material suppliers and vendors, consultants, subcontractors,

employees, and all other parties involved in the material supply, design, construction,

and O&M of this special permit segment. Records will be kept on file.

28. Document all phases of the special permit segment construction with photographs and

videos. Records will be kept on file.

29. The MAOP calculation is as follows:

MAOP = 2(32,600) x .176 x (0.32)

(2.66 - .176)

= 1478 psi using 2500 series 2½ inch Fiberspar pipe

O.D. of Fiberglass = 2.86 – 2(.1) = 2.66

30. At least 30 days before beginning construction, notify the MPSC of the date, time, and

location of pipeline installation and provide opportunity to witness the installation.

31. No chemical that will affect the integrity of the Fiberspar pipe shall be used.

32. Fiberspar pipe shall be compatible with expected hydrogen sulfide concentration of

gas.

33. Comply with ASTM D-2517 (2000), except that it shall comply with the following

two (2) paragraphs, which reflect changes made to ASTM D-2517 (2000), but which

are not currently recognized in PHMSA regulations: 4.2 Fittings and 5.1.1 as

referenced in ASTM D-2517 (2006). Only 316 grade or higher stainless steel

mechanical connectors for Fiberspar LinePipe will be used. These stainless steel

mechanical connectors for Fiberspar LinePipe will be isolated from the outer steel

pipeline casing. The Fiberspar pipe shall be stamped so as to indicate it complies with

ASTM D-2517.

34. Install and maintain line-of-sight markings on the pipeline in the special permit

segment.

35. Perform ground or aerial right-of-way patrols on a monthly basis, not to exceed 45

days, in the special permit segment.