2024-17993. Pipeline Safety: Proposed Waiver of the Build America, Buy America Act Requirements for Gas Service Risers and Gas Meters Under the NGDISM Program

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Department of Transportation

Pipeline and Hazardous Materials Safety Administration

1. [Docket No. PHMSA-2024-0131]

AGENCY:

Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Transportation (DOT).

ACTION:

Notice; request for comments.

SUMMARY:

The Pipeline and Hazardous Materials Safety Administration (PHMSA), proposes to waive the Build America, Buy America (BABA) Act's domestic preference requirements for certain products widely used in natural gas distribution systems on the basis of nonavailability. The proposed duration of the waiver will apply to expenditures on or after the effective date of the final waiver for recipients of funding under the Natural Gas Distribution Infrastructure Safety and Modernization (NGDISM) Grant Program and would expire after three years. In accordance with Section 70914(c) of BABA, PHMSA is seeking public comments on the proposed waiver.

DATES:

Comments must be received by August 28, 2024.

ADDRESSES:

Please submit your comments to the Federal eRulemaking Portal at http://www.regulations.gov, Docket No. PHMSA-2024-0131, and follow the online instructions for submitting comments.

Instructions: You must include the agency name and docket number at the beginning of your comments. Except as described below under the heading “Confidential Business Information,” all submissions received, including any personal information provided, will be posted without change or alteration to http://www.regulations.gov. For more information, you may review the U.S. Department of Transportation's complete Privacy Act Statement published in the Federal Register on April 11, 2000 (65 FR 19477).

FOR FURTHER INFORMATION CONTACT:

For questions about this notice, please contact Ms. Shakira Mack, Office of Pipeline Safety, 202-366-5090, or via email at [e-mail]. Office hours for PHMSA are from 8:30 a.m. to 5 p.m., E.T., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

A copy of this Notice, all comments received on this Notice, and all background material may be viewed online at http://www.regulations.gov using the docket number listed above. Electronic retrieval help and guidelines are also available at http://www.regulations.gov. An electronic copy of this document also may be downloaded from the Office of the Federal Register's website at: www.FederalRegister.gov and the Government Publishing Office's website at: www.GovInfo.gov.

Confidential Business Information

Confidential Business Information (CBI) is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this notice contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this notice, it is important that you clearly designate the submitted comments as CBI. You may ask PHMSA to give confidential treatment to information you give to the agency by ( print page 65970) taking the following steps: (1) mark each page of the original document submission containing CBI as “Confidential”; (2) send PHMSA, along with the original document, a second copy of the original document with the CBI deleted; and (3) explain why the information you are submitting is CBI. Unless you are notified otherwise, PHMSA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this Notice. Submissions containing CBI should be sent to: Ms. Shakira Mack, PHMSA, 1200 New Jersey Avenue SE, Washington, DC 20590. Any comment submissions that PHMSA receives that are not specifically designated as CBI will be placed in the public docket for this matter.

Background

The NGDISM program was authorized by the Infrastructure Investment and Jobs Act (IIJA) (Pub. L. 117-58). The program provides Federal funding to municipal- or community-owned natural gas utilities (not including for-profit entities) to repair, rehabilitate, or replace their natural gas distribution pipeline systems or portions thereof, or to acquire equipment to (1) reduce incidents and fatalities and (2) avoid economic losses. The IIJA appropriates $200 million per year for each of Fiscal Years (FY) 2022 through 2026 for the NGDISM program ($1 billion in total). The IIJA provides that 2 percent of this amount shall be used to pay the administrative expenses of the NGDISM program. Accordingly, the total amount expected to be awarded as grant funding over the five-year period is approximately $980,000,000. In FY22, PHMSA awarded approximately $196 million to 37 municipal- and community-owned natural gas utilities across the nation to fund pipeline replacement projects and the purchase of leak-detection equipment.

Congress also enacted the Build America, Buy America Act (BABA), providing that “none of the funds made available for a Federal financial assistance program for infrastructure . . . may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.” IIJA, Public Law 117-58, § 70914(a). Under IIJA Section 70914(b), PHMSA has authority to waive the requirements of BABA (1) if a domestic product is unavailable, (2) if using a domestic product would present an unreasonable cost, or (3) if application of BABA would not be in the public interest.

In January 2024, PHMSA was contacted by several FY22 NGDISM recipients who requested waivers for certain products on the basis of nonavailability and submitted the results of their independent market research to PHMSA. The products requested to be waived included gas service risers and gas meters. PHMSA considers these products to be either “iron or steel products” or “manufactured products” under BABA depending on the cost of the iron and steel components incorporated in each product. See2 CFR 184.3. A more detailed description of each product is provided below:

• Gas Service Risers: Service risers are sections of pipe that provide a 90-degree connection between underground gas service lines and aboveground meter assemblies. Risers are made primarily of steel but typically also include polyethylene components, and may include a protective sleeve over the polyethylene components. Service risers are manufactured in a variety of sizes, and may be rigid or flexible. PHMSA proposes to waive BABA requirements for field assembly risers and service head adapter risers.
• Gas Meters: Gas meters are placed outside of a residence or business that utilizes natural gas and allows the utility operator to track how much gas is being used by the residence or business. Gas meters incorporate a variety of components made of different materials, but are typically made primarily of aluminum. “Smart” meters are not typically used in the gas industry. Instead, gas meters are commonly paired with automated meter reading technology (AMR) that uses radio waves to transmit gas usage data. Accordingly, gas meters are typically not capable of connecting to the internet. PHMSA proposes to waive BABA requirements for both smaller-volume meters designed for residential use and larger-volume meters designed for use on commercial establishments.

Justification for the Waiver

PHMSA has preliminarily determined that these products are not manufactured in the United States in sufficient and reasonably available quantities or of a satisfactory quality. To support this determination, PHMSA evaluated the market research performed by the NGDISM grant recipients who requested the waiver. PHMSA also conducted its own market research on the products identified by NGDISM grant recipients. The market research performed by the NGDISM grant recipients consisted of engaging the supplier scouting services of the National Institute of Standards and Technology's Manufacturing Extension Partnership (NIST-MEP), publicizing Invitations for Bids that included terms requiring bidders to certify compliance with BABA, and individually contacting known suppliers and vendors to identify potential sources of BABA-compliant products. PHMSA thereafter conducted its own supplier scouting through NIST MEP and independently engaged with industry to confirm the findings of the NGDISM grant recipients. At the conclusion of this process, PHMSA identified a company who could produce BABA-compliant versions of certain types of gas risers. Specifically, the company PHMSA identified currently produces standard “anodeless service risers” that meet the requirements of BABA but could not produce the “field assembly risers” or “service head adapter risers” that are sometimes used in lieu of standard risers, and that are needed by some NGDISM recipients. Accordingly, PHMSA narrowed the scope of its proposed waiver to exclude standard anodeless service risers.

The FY22 NGDISM recipients also requested a nonavailability waiver for service regulators. Service regulators are devices incorporated into a meter assembly designed to allow gas from a higher-pressure service line to enter a residence's or business's gas lines at a lower pressure ideal for everyday use. During its market research, PHMSA identified a single company that currently produces BABA-compliant service regulators and accordingly removed service regulators from the scope of this proposed waiver, as PHMSA's market research did not support a clear finding of nonavailability. However, some NGDISM recipients have expressed concern about whether a single company would be able to supply regulators needed by all NGDISM award recipients. PHMSA has engaged with the company to determine its production capacity for service regulators, but PHMSA lacks information on the anticipated demand for service regulators during the life of the NGDISM program. A lack of sufficient supply could unduly delay the safety-critical construction projects funded by the NGDISM program; thus, PHMSA is specifically requesting comments from industry on the demand for service regulators purchased through the NGDISM program to inform its future consideration of any potential ( print page 65971) waivers of BABA requirements for service regulators.

Proposed Waiver and Request for Comments

The products covered by this proposed waiver are essential products used in every natural gas distribution system. Accordingly, nearly every NGDISM project that includes infrastructure expenditures will have a need for these products. Without these products, most NGDISM projects would not be able to be completed safely and successfully.

PHMSA does not anticipate that this proposed waiver would have a material impact on domestic manufacturing capabilities for these products. The NGDISM program is authorized to fund $196 million of pipeline replacements per year over five years, which PHMSA believes represents a small fraction of the total market for pipeline replacement construction projects in the United States. For example, in the first year of the NGDISM program, PHMSA received grant applications requesting over $1 billion in total funding combined. This suggests that only a fraction of the overall market for these products will be funded by the NGDISM program, and thus only a small fraction will be subject to BABA requirements even in the absence of this waiver.

The products proposed to be waived will also constitute a small percentage of total infrastructure spending under the NGDISM program. Although the data currently available to PHMSA are incomplete, PHMSA anticipates that only approximately $56 million of the $196 million awarded per year will be spent directly on materials for pipeline infrastructure. PHMSA further estimates that of this amount, less than approximately $1.9 million per year will be spent on the products proposed to be covered under this waiver across all recipients. Accordingly, PHMSA believes that the purchasing power of the NGDISM program is simply not great enough to incentivize the market to begin domestic production of these parts in large enough quantities to meet the needs of NGDISM award recipients before the program is slated to end in FY26.

For similar reasons, PHMSA proposes to waive BABA requirements for these gas service risers and gas meters for expenditures made in a period of three years following publication of a Notice of Final Waiver.

In addition, the proposed BABA waiver would not affect recipient compliance with any other requirements of the NGDISM program, including requirements to ensure the security and resilience of critical infrastructure, requirements to perform a site-specific environmental assessment pursuant to the National Environmental Policy Act, or requirements to comply with Executive Orders applicable to Federal financial assistance programs.

Under OMB Memorandum M-24-02, agencies are expected to assess “whether a significant portion of any cost advantage of a foreign-sourced product is the result of the use of dumped steel, iron, or manufactured products or the use of injuriously subsidized steel, iron, or manufactured products” as appropriate before granting a public interest waiver. PHMSA's analysis has concluded that this assessment is not applicable to this waiver, as it is being proposed on the basis of nonavailability, rather than public interest or unreasonable cost.

PHMSA will consider all comments received in the initial 15-day comment period during our consideration of the proposed waiver, as required by section 70914(c)(2) of the IIJA. Comments received after this period, but before notice of our finding is published in the Federal Register , will be considered to the extent practicable. PHMSA is specifically requesting comments on the demand for service regulators purchased through the NGDISM program to evaluate whether a waiver of BABA requirements for service regulators is warranted.

Issued in Washington, DC, on August 7, 2024, under authority delegated in 49 CFR 1.97.

Tristan H. Brown,

Deputy Administrator.