Industry Speaks Out On PHMSA’s Penalty Proposals, Other Actions

November 2012, Vol. 67, No. 11

Pipeline groups are unhappy with the way the Pipeline and Hazardous Materials Safety Administration (PHMSA) is interpreting the new penalty authority Congress provided it under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, which went into effect last January.

That law jacked up allowable civil penalties considerably, making PHMSA administration of the administrative legal process a much more significant issue. Civil penalties were doubled, to $200,000 per violation per day of violation, with a maximum of $2 million for a related series of violations. In addition to those increases, the 2011 pipeline law made numerous changes with regard to inspections, delivery of citations and the hearings which sometimes follow.

Dan Regan, regulatory attorney, Interstate Natural Gas Association of America (INGAA), says many of the proposed rule changes are positive steps forward. But they essentially "nibble around the edges," in technical ways, of the current PHMSA enforcement processes, which he argues are "inadequate." The INGAA wants the PHMSA to make broader changes in its legal processes.

Regan adds, "This relatively narrow focus overlooks broader, persistent concerns about the overall fairness and rigor of PHMSA’s enforcement processes. PHMSA should take this opportunity to reform its enforcement procedures and policies more broadly."

A number of parties are arguing that the agency has made a major misinterpretation of congressional intent. The PHMSA says the new penalty authority applies to pipeline safety violations which are discovered after the date the new law went into effect, in other words, Jan. 3, 2012. Regan argues that the law says higher penalties can only be assessed on violations committed after the law went into effect.

Andy Black, president of the Association of Oil Pipe Lines (AOPL), says he is concerned that PHMSA did not, as requested to do by Congress, define what would constitute an expedited hearing after the PHMSA issues a Corrective Action Order (CAO) which a company then challenges. Black calls a CAO a "huge tool" for the agency. In the rare instances where a pipeline contests a CAO, it wants a quick hearing and a quick decision. Instead of defining "expedited," the PHMSA in the proposed rule said it is its practice to have a hearing within 10 days of a company asking for a hearing. But it did not propose a deadline for the hearing. Nor did it propose a timeframe for making a decision after the hearing is held. Black says the AOPL want a 15-day maximum deadline for holding the hearing and then issuing a decision after the hearing.