On September 7, 2018, a jury in a California state court found Plains All American Pipeline guilty on 9 criminal counts, stemming from a release of 140,000 gallons of crude oil from a Plains pipeline near Santa Barbara in 2015. Media across America reported on the criminal verdict in the Plains case, and certain commenters predict that the verdict could further energize pipeline opposition groups around the country. The case may be viewed best, however, as somewhat of an anomaly: a broadside of state legal requirements brought after an oil spill to a sensitive environment in California.
In a letter issued to the Reporters Committee for Freedom of the Press (RCFP) and E&E News last week, PHMSA’s new Chief Counsel Paul Roberti announced its intention to publicly post advance notice of hearings requested by operators. As reported by E&E News and reflected in the letter, PHMSA will now post hearing scheduling letters to the enforcement activity page on its website. To the extent the press (and presumably the public) is interested in attending, PHMSA asks that a request be submitted in advance for consideration. This decision potentially brings the Agency and the industry one step closer to opening hearings to the public.
Just a few months ago, PHMSA approved a request from the media (E&E News) to attend a hearing in the Agency’s Southwest Region offices as reported in our prior post of March 22, 2018. This marked the first time that a PHMSA administrative hearing was opened to the public, even if only partially (it was closed following a break). As we noted at that time, “While this does not likely signal an official policy change on behalf of the Agency, it nonetheless suggests that PHMSA could make the decision to open administrative enforcement hearings to the public in the future, on a case by case basis.” The decision to post hearing scheduling letters is in keeping with that prior observation, and does not constitute a blanket grant of public access to all hearings.
Requests for hearings are filed in response to administrative enforcement actions issued by PHMSA to address issues of fact and law, including in response to Notices of Probable Violations, Corrective Action Orders, Emergency Orders and Proposed Safety Orders. PHMSA hearings are, by regulation, “informal.” 49 C.F.R. Part 190.211(e). As a result, the rules of evidence do not apply and the hearings are, in effect, formal meetings (there is no express language in the Pipeline Safety Act or its implementing regulations that governs public participation in the enforcement context). The purpose of that approach is to facilitate a frank discussion of the issues and to encourage the possibility of resolution, within the context of applicable law. Consistent with that purpose, and following recent discussions with us, PHMSA’s Office of Chief Counsel recently confirmed its willingness to engage in pre-hearing discussions to explore settlement of some or all issues in advance of a hearing (in a letter issued the same day as the letter to RCFP and E&E). That approach is similar to pre-trial conferences that are required by federal and most state laws in litigation. Notably, pre-trial conferences are not open to the public.
Even if opened for public attendance, administrative enforcement hearings are not ‘public hearings.’ There is no allowance for public participation in the form of questions or statements. The purpose of the hearing is for the parties to explain and argue their respective positions on questions of fact and law, as moderated by a Hearing Officer. PHMSA enforcement hearings are held in Agency offices, with limited space. A request by third parties to attend hearings could present logistical challenges and potentially interfere with PHMSA’s obligation to ensure public safety where hearings are addressing imminent safety issues. Delays in scheduling of hearings due to the need to post hearing scheduling letters and handle requests for public attendance, and arrange logistics for hearing space, could affect the Agency’s ability to address safety issues in an efficient manner.
The public has a right to know what federal agencies do, and that right is given effect through the Freedom of Information Act (FOIA), which was relied upon as the basis to allow public attendance at the PHMSA hearing in March. Information presented in advance of and during a hearing is frequently subject to protection from disclosure under FOIA, however, as enforcement or settlement confidential, security sensitive or protection of confidential commercial information. That consideration could add further complexity to logistics planning for a hearing.
We will continue to monitor these developments closely.
A recent Report to Congress mandated by the most recent amendments to the Pipeline Safety Act was released by the Government Accountability Office (GAO), reviewing federal and state responsibilities and resources for inspection of pipelines that transport product across state lines. Increases in funding have allowed the federal agency charged with regulating pipeline safety, the Pipeline and Hazardous Material Safety Administration (PHMSA or the Agency), to expand its own inspection workforce and reduce its reliance on state agents. The Report to Congress finds that the Agency has not assessed future workforce needs, however, to determine the appropriate level of state participation.
In a surprising turn of events this week, PHMSA approved a request from the media to attend a hearing in the Agency’s Southwest Region offices in Houston yesterday. An environmental reporting service (E&E News) submitted a request to PHMSA last week to attend a hearing requested by Cheniere, in response to an enforcement action related to an incident at that company’s LNG export facility, and threatened legal action after receiving no response to their request. [See E&E News March 16, 2018 article E&E News seeks open PHMSA hearing on Cheniere leaks and E&E News March 21, 2018 article Pipeline regulators open Sabine Pass safety hearing.] In agreeing to the request just days before the Hearing, PHMSA’s Associate Administrator for Pipeline Safety Alan Mayberry was quoted by E&E News as stating that “PHMSA has decided for purposes of this hearing to open the hearing to the press and to members of the public.” Although the hearing yesterday was open to the public at the outset, it was later closed following a break. To date, PHMSA administrative enforcement hearings have been closed to the public. While this does not likely signal an official policy change on behalf of the Agency, it nonetheless suggests that PHMSA could make the decision to open administrative enforcement hearings to the public in the future, on a case by case basis.
Oil and gas pipeline technical advisory committee meetings will be held on December 13-15 in Washington, D.C. The agenda covers updates on PHMSA pipeline safety programs and policy issues. The oil and gas peer review committees, comprised of federal and state agency representatives, industry and the public, will discuss a variety of topics within that agenda, related to inspection and enforcement, updates regarding pending rulemakings and regulatory reform initiatives, underground gas storage, and more. This is one of the first opportunities to hear from the Agency’s new leadership (especially recently appointed PHMSA Administrator Skip Elliott and Deputy Administrator Drue Pearce). The meetings should provide valuable insight to the priorities and policy initiatives under the Trump Administration affecting oil and gas critical energy infrastructure. Continue Reading Advisory Committee Meetings May Add Insight to Policy Priorities
In October 2017, the National Academy of Sciences (NAS) issued a pre-publication report on “Designing Safety Standards for High Hazard Industries.” Sponsored by PHMSA (and many years in the making), the Report focuses on oil and gas pipelines and the regulatory scheme used by the Pipeline and Hazardous Materials Safety Administration (PHMSA). Noting the differences between prescriptive and performance based rulemakings, the Report observes that while most federal agencies use a combination of both, PHMSA is one of the few federal agencies that primarily relies on performance based standards. The rationale used by PHMSA, the Report notes, is that pipeline integrity management is best maintained by placing responsibility on individual operators to identify and manage risks that may not be known to the regulators or common to the industry. (Report, p. viii).
The 5th Circuit U.S. Court of Appeals reversed several key aspects of a PHMSA Final Order in a recent opinion issued on August 14, 2017. That decision is significant for the fact that few final actions by this agency have been presented for judicial review, and, of those, even fewer have been successful. The decision is based on a complex set of facts and legal issues that went through several years of administrative appeals before the agency. As with most complex cases, many of the factual issues were unique, and are not likely to be repeated. There are a few larger, procedural themes to be gleaned from the decision that apply more broadly, however, both to this agency and administrative law generally.
The 5th Circuit issued a lengthy opinion on August 14, 2017, reversing most of the violations of a PHMSA enforcement action that began in November 2013 in conjunction with investigation of a failure on the Pegasus Pipeline. In that matter, PHMSA alleged that the ExxonMobil Pipeline Company (EMPCo) failed to properly consider the risk of failure on a segment of pre-1970 low frequency electric resistance welded (LF-ERW) pipe. The Agency assessed a penalty of nearly $2.7 million for the various alleged violations. In a rare judicial decision regarding a PHMSA Final Order and Decision on Petition for Reconsideration, the Court reversed all but one of the items on appeal, and vacated the penalty associated with those alleged violations (dismissing over $1.6M of the total penalty). The Court remanded the one remaining item back to PHMSA for recalculation of the associated penalty.
The Pipeline Safety Management System (SMS) industry standard API RP 1173 was published in July 2015 and developed by API with input from NTSB, PHMSA, states, and industry representatives, following the 2010 oil pipeline accident in Marshall, Michigan. The standard’s purpose is to help pipeline operators create a framework for developing a comprehensive, process-oriented approach to safety, emphasizing continual assessment and improvement. As the industry and other stakeholders reflect on the almost 2 years since publication of the standard, there are several important takeaways.
Since the Trump Administration took office, oil and gas industry stakeholders have questioned whether pending PHMSA rulemakings will move forward, whether the rate of PHMSA enforcement will continue, and whether agency priorities will change. The API conference held in San Antonio last week provided a rare opportunity in recent months for the industry to hear from key PHMSA personnel and industry practitioners on the status of agency priorities, rulemakings, enforcement and leadership vacancies. As explained below, while the Agency currently lacks key leadership positions and is analyzing executive directives on rulemaking, it intends to move forward with proposed rules and continue enforcement.