Approval revisited

It’s quite a long time since I wrote about approval under AS 2885.  Since then the 2012 amendment to AS 2885.0 added considerable detail although the basic requirement that certain items must be approved by the “Licensee” remains unchanged.  Nevertheless there is still some confusion on a few aspects of approval.

It is worth reiterating that approval under the Standard means approval by the organisation responsible for the pipeline (the Licensee), not the regulator.  The regulators in each state may have additional requirements, but that is separate to compliance with AS 2885.

There are only a few basic elements to the approval requirements:

  • Just about everything under AS 2885 must be approved by somebody
  • Certain things must be approved by the Licensee and not delegated
  • Other things may be delegated, and the Licensee must prepare an approvals matrix to define who can approve what
  • Approval can only be granted by people or organisations who are competent, and that competence must be audited occasionally

Although the Standard does not spell it out, it seems reasonable to interpret these rules as having the objective of ensuring that senior management of the Licensee organisation are aware of, and knowingly take responsibility for, everything to do with the design, construction and operation of a pipeline and in particular are directly aware of the important documents that have been nominated as not to be delegated.  The note at the end of Clause 3.1 in Part 0 gives a pretty clear clue:  “Approval demonstrates that the Licensee has accepted responsibility for the safety and integrity of the pipeline for the matters addressed by the document.”

The two main areas of uncertainty appear to be who can be the Licensee’s official representative for the purpose of approval under the Standard (given that the Licensee is an organisation, not a person), and the “design and construction records” item in the list of things that cannot be delegated.

The Standard does not clearly indicate who can be the Licensee’s representative.  The term “Licensee” itself gives a hint – I take the view that the representative should be the person who is authorised to take responsibility for all other things required under the Licence such as approving reports to the regulator.  (This assumes that the pipeline is in fact licensed, which is another ambiguity I’ll come back to shortly.)

It follows that the representative does not have to have full technical expertise in every matter that they are required to approve.  This has caused a bit of discussion around some parts of the industry but is not an unusual situation.  All senior executives must make decisions on a variety of matters in which they do not have full personal competence.  It seems to me that part of the executive role is to be competent in selecting support people who can provide trustworthy advice.  Certain approvals cannot be delegated, but there is a difference between delegation and taking appropriate expert advice.

It also follows from this that for pipelines in Queensland the representative does not have to be an RPEQ, which is a question that arises from time to time.

One interpretation of the “design and construction records” item is that it means all design and construction documents.  However it is unreasonable to expect the Licensee to approve (without delegation) every minor document such as data sheets for DN 25 valves.  A more reasonable interpretation is that it applies to the design and construction records handed over to the operator on completion of commissioning. Any conscientious Licensee should want to be satisfied that the documentation received from the project team provides an adequate basis for the long term future operation and maintenance of the pipeline.

Finally, a bit about who is the “Licensee”.  There are a couple of different definitions in the Standard (unfortunate).  Clause 1.6.27 of Part 1 has one definition.  There is a similar but expanded definition in Part 0, Section 2, paragraph (c).  Because the latter is more comprehensive I’ll rely mainly on that:

(c) The Licensee is the entity responsible for the design, construction, inspection, testing, operation and maintenance of a pipeline. The Licensee is responsible for the safety and integrity of the pipeline.

Where a pipeline is licensed, the Licensee is the entity held responsible by the regulatory authority.

Where a pipeline is not licensed, the Licensee is defined in legislation or approval documentation that applies to the pipeline.

The first paragraph is pretty clear.  The subsequent paragraphs clarify that the term “Licensee” does not necessarily imply that a pipeline is actually licensed.  The clear intention of the definition is that the Licensee is the entity responsible.  Depending on legislation in each state or country that may be a literal licensee (of a licensed pipeline) or or it may be an entity referred to by some other title but whom the regulatory authority views as holding responsibility for the pipeline, regardless of the actual terminology.  Whether that intention actually meshes correctly with the legislation is a moot point.

This has ended up being rather longer and more complicated than I intended (and probably pretty dry).  However approval is an important requirement, and the principles outlined in the bullet points near the top of this post remain clear and simple.

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3 Responses to Approval revisited

  1. Chris Harvey says:

    Hi Peter, helpful discussion of the topic.

    However, I’m still not clear that the definitions deal with who acts as the Licensee, both approving as the licensee (and not a delegate) and in delegating Approval. It would seem to me, from my understanding (limited) of corporations law, that unless it is clearly spelled out, the only person who can act as the entity on behalf of the Licensee is the Public Officer or Company Secretary acting under the direction of the Board through a Board approved decision. If I am correct, then the Approvals that cannot be delegated must be made by the Board. Equally delegation of Approvals would need to be made by the Board.
    I may not be correct about this, or may be missing something from Standard, but it may be worth talking to a corporate lawyer to clarify this point, because it I am correct it would be important to clarify this issue in the Standard.
    It appears to me that currently the Licensees representative (i the person acting as the Licensee) is assumed to be someone with sufficient authority, but unless this is specifically delegated by the Board this may be a point of significant uncertainty.
    In the alternative, there is a concept in corporate law of “ostensible authority” where the authority can be assumed because an individual holds senior office within a company. That is why a manager can write on behalf of a company without formal delegation; it is reasonably assume that the person has the authority to represent the company, by virtue of seniority and title.
    I hope this helps rather than confuses the thinking processes.

  2. Colin Bristow says:

    One immediate comment I would like to make.
    AS2885.1 states “The Licensee is generally the organization named in the pipeline licence issued by the Regulatory Authority”.
    This is in conflict with AS2885.0 where the word generally is used.
    So I work for the organization responsible for the design, construction, testing, inspection, operation and maintenance for a pipeline. The licensee for the pipeline happens to be 4 major energy companies.
    It is obvious that my organization is the responsible entity but is not accroding to AS2885.0.

  3. petertuft says:

    Chris and Colin both raise points that demonstrate the uncertainty around this subject is – thanks for those additional perspectives. There are no simple answers. We can hope that the next revision of the Standard will make things more clear and more consistent with legislation.

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