March 21, 2022
Pipeline infrastructure projects can be subject to significant regulatory, engineering and construction risks. Investment at the front end of the project will de-risk and limit the significant risks by implementing effective planning. This week’s article focuses on some of the risks experienced during the design stage which can have significant time and cost impacts, which may be detrimental to a project’s success.
Geological Risk
The identification and analysis of geological and geographical conditions of a proposed pipeline route are critical to the design and construction process. For linear structures like pipelines, the degree of risk is increased as a pipeline route must account for all complex site conditions caused by mountainous terrain or rivers and crossings.
This risk eventuates from the early design stages as project designers often rely on historical data to make critical decisions. For example, software such as Nearmap (NEA) may be utilised to provide aerial imaging and geospatial data of the site, which is evaluated and interpreted by the designers to ultimately determine the number of causeways/crossings required for the project. There is considerable risk in relying on historical data as site conditions may present some degree of uncertainty, particularly once construction commences. The aerial imagery relied upon at the design stage may not fully anticipate the number of causeways/crossings required once construction has commenced (i.e. the aerial image may have been captured during a period of drought). The resulting design modification to increase the number of causeways/crossings can have significant time and cost consequences and can be detrimental to the budget very early on in the project.
Regulatory Risk
The sheer size and stretch of a pipeline can be problematic when it comes to securing the pipelines ‘right of way’ (ROW). The ROW is a strip of land over and around the pipeline where some of the legal rights have been granted to the pipeline company. A long pipeline will usually crosses roads, railways, rivers, forestry, cultural heritage and underground services belonging to various authorities, therefore, permits and approvals must be obtained from appropriate regulatory bodies. Similarly, as they may also cross farmers’ fields, homes and businesses, long-term or temporary land arrangements with landowners is required to construct and operate the proposed pipeline within the ROW located across the property.
It is the responsibility of the project team to ensure all bodies or persons likely to be affected by the pipelines construction and operation are notified and provided sufficient information to enable them to carry out their duties or safeguard their interests. The risk of not obtaining agreements and approvals can have significant time and cost impacts, and often derives from the failure and inability to:
- plan and identify the required approvals;
- anticipate how long it takes to obtain approval;
- collaborate between project stakeholders to allocate responsibility as to who must obtain the approvals; and
- know whether the approval will be granted at all.
De-Risking the design phase
Lack of understanding and inadequate control of the above risks during the design stage threatens the success of any pipeline project. To mitigate these risks from the outset, the project team should:
- collaborate with key stakeholders;
- allocate responsibility for the solicitation of approvals;
- plan ahead to ensure correct approvals are obtained well in advanced; and
- undertake a detailed assessment of the pipeline routing and is progressively assessed throughout the projects design phases.
Further, it is vital that all stakeholders involved in the pipeline project are familiar with the AS 2885 (the Australian Standard for pipelines – Gas and Liquid Petroleum). The Standard provides fundamental principles and practical guidelines for use in a pipeline project to help manage risk. Part AS 2885.1 – Design and Construction, contains safety management processes which explains the risk management process during the operation of a pipeline until its abandonment, focusing on areas such as threat identification, threat control and residual risk management.
Legal Support
The issues identified above highlight the importance of seeking legal advice if you are engaged in a pipeline construction project. In addition to the issues identified, several risks become apparent throughout the life of the project.
A projects’ initial planning stage is often overlooked in the grander scheme, but it is integral to the successful completion of a pipeline project. A legal insight during these processes can be critical to:
- ensure a holistic approach is adopted to minimise the potential for disputes, delays and disruption across the duration of a project;
- develop contractual approaches and strategies which are tailored to the project;
- draft contractual provisions and amendments to facilitate a contract suite which accounts for unique project considerations and requirements;
- ensuring obligations across contractual suites are back-to-back to limit risk exposure;
- effectively navigate contractual provisions if the project is subject to time and cost overruns;
- effectively manage the ongoing legal considerations and requirements which arise on an ad hoc basis; and
- help mitigate risks and develop mitigation measures.
The complexities and associated risks of a pipeline construction project cannot be overstated, therefore, legal advice should be sought during any engagement in a pipeline project to ensure risks are effectively identified and managed.
Lamont Project & Construction Lawyers
We have the industry knowledge and experience to assist you from project inception through to practical completion and beyond. Our team can provide tailored support and detailed advice across the lifecycle of a project to assist clients as and when required.
If you have any questions about your current and future projects, please do not hesitate to contact LPC Lawyers for a discussion on how we can assist you.
The content of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Stephanie Purser
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