The Pipeline and Hazardous Materials Safety Administration (PHMSA) is responsible for determining whether proposed and existing liquefied natural gas (LNG) facilities meet Federal safety standards. According to the U.S. Energy Information Administration, LNG exports from the United States are projected to rise from about 2 trillion cubic feet in 2020 to 6 trillion cubic feet in 2030. Given the importance of PHMSA’s oversight of LNG facilities, we initiated this audit with the following objectives: to assess PHMSA’s (1) review of new LNG facilities’ plans for compliance with Federal siting requirements, (2) inspection of existing LNG facilities in accordance with Agency policies and Federal standards, and (3) evaluation of State gas programs’ oversight of LNG facilities.

 

PHMSA’s standard operating procedures for its reviews of LNG facility developer applications are generally comprehensive, but they do not include a second-level verification of reviews by engineers. Second-level verification steps reduce the risk that PHMSA’s analysis will be incomplete, contain errors, or lack consistency. In addition, while PHMSA’s inspections of existing interstate LNG facilities met Agency standards, its evaluations of State gas programs missed deficiencies in inspection intervals and inspector training. One factor is that PHMSA’s guidance does not require evaluators to document which records they review. Evaluators described using their own judgment when selecting records, but that means some State records may never be reviewed due to the inherent biases in judgmental sampling. As a result, there is an increased risk that the Agency’s evaluation results will neither accurately measure State gas program performance nor give PHMSA the information it needs to respond to inquiries, conduct inspections, and pass on institutional knowledge to new evaluators.

 

PHMSA concurred with and implemented our three recommendations to improve its guidance on reviewing applications and evaluating State programs. We consider all three recommendations resolved and closed.