Reauthorization of the Natural Gas Pipeline Safety Act and the Hazardous Liquid Pipeline Safety Act

Subcommittee on Energy and Air Quality
March 19, 2002
2:00 PM
2318 Rayburn House Office Building 

Mr. Bruce Nilles
Staff Attorney
Earthjustice
Oakland Regional Office
426 - 17th Street 5th Floor
Oakland, CA, 94612

Mr. Chairman and Ranking Member Boucher, I am very pleased to have this opportunity to meet with you and the Members of this Subcommittee to discuss pipeline safety and reauthorization of the existing pipeline statutes.  

I am currently a staff attorney with Earthjustice in Oakland, California.   Earthjustice is a non-profit public interest law firm dedicated to protecting the magnificant places, natural resources, and wildlife of this earth, and to defend the right of all people to a healthy environment.  We bring about far-reaching change by enforcing and strengthening environmental laws on the behalf on hundreds of organizations and communities. 

We represent - without charge - hundreds of public interest clients, large and small. Earthjustice works through the courts to safeguard public lands, national forests, parks, and wilderness areas; to reduce air and water pollution; to prevent toxic contamination; to preserve endangered species and wildlife habitat; and to achieve  environmental justice.  In short, with almost fifty lawyers in nine regional offices nationwide, we have extensive experience regarding how the laws that you enact are faithfully enforced. 

Prior to joining Earthjustice in early 2000, I worked for four years as an attorney at the U.S. Department of Justice, in the Environment and Natural Resources Division.  In my last year at the Justice Department I was Special Counsel to the former Assistant Attorney General.  In this position I was intimately involved in various aspects of pipeline safety.  First, I had the primary responsibility for coordinating the Department's review of all pending pipeline legislation, including the Administration's pipeline bill.  My charge was to determine how the existing law could be changed to improve compliance, as well as how the civil and criminal enforcement provisions could be strengthened.  Second, I worked very closely with the Office of Pipeline Safety ("OPS") in the promulgation of the hazardous liquid pipeline Integrity Management Rule.  67 Fed. Reg. 75378 (Dec. 1, 2000).  And, third, I coordinated the Department's review of several of OPS's Risk Management Demonstration Projects. 

Today, I would like to discuss the importance of a robust enforcement program, OPS's history of nonenforcement, and then offer some suggestions as to how the enforcement situation could be improved.  Finally, I will give some initial views on how Representative Young's pipeline bill, H.R. 3609, could be strengthened. 

A.  The Importance of Environmental Enforcement 

Environmental  and public safety statutes promote and encourage voluntary compliance.  But it is a vigorous and fair enforcement program that drives widespread compliance.  While many people may comply with the law for the good of the community, there are always some bad actors that would not comply but for the threat of meaningful sanctions.  How many people would send the IRS their tax checks this April if tax violations carried no penalty?  People comply with the tax laws in part because they run the risk of being caught, and sanctioned, if they do not.  So too, we cannot expect voluntary compliance with environmental and public safety laws unless those laws are enforced, and enforced rigorously. 

Enforcement actions are brought for several important reasons relating to achieving better compliance rates:  to protect the environment and the public's health, to remedy environmental harm, to punish wrongdoers, to deter future violations, and to compel reluctant agencies to comply with their nondiscretionary duties. 

Environmental and public safety violations have real victims.   When a toxic waste site pollutes an underground drinking water supply it can theaten the health of thousands of people.  An oil spill that damages an entire ecosystem - such as the Exxon Valdez spill in Alaska - may undermine the economic foundation of surrounding communities.  The harm from environmental violations may extend far into the future, affecting the healthy of generations yet unborn.  Damage to natural resources can be permanent, as when a species is lost forever, a productive wetland is destroyed, or a drinking water aquifer or fishery is contaminated beyond repair.  Thus, strong enforcement is critical if we are to reduce the number of victims harmed and the natural resources that are destroyed when pipline operators fail to comply with federal law. 

B.  OPS's History of Non-Enforcement Is Having Serious Public Safety and Environmental Consequences 

OPS administers the national regulatory program established to ensure the safe operation of nearly 2.2 million miles of natural gas and hazardous liquid pipelines in the United States.  The mission of OPS is to develop, issue and enforce pipeline safety and environmental protection regulations.  By any measure, OPS has failed, and continues to fail, in fulfilling this important mission.  OPS has one of the very worst enforcement records of any federal agency.  GAO calculated in 1998 that OPS proposed a civil penaly in just one out of every twenty five enforcement actions.[1]  This record was a precipitous decline from 1990 when OPS proposed a penalty in fifty percent of its enforcement actions.[2]  Imagine how seriously anyone would take speed limits if each time you were pulled over for speeding that there was only a four percent chance that a fine would even be proposed, let alone collected?  So too, pipeline operators facing such a low risk of any sanctions have little incentive to comply with safety and environmental protections. 

This lack of enforcement may be one reason why pipelines incidents are increasing.  The GAO reported in May 2002 that there were over four major oil and natural gas incidents per week between 1989 and 1998, with a major incident defined as one causing a death, an injury, or more than $50,000 in property damage.[3]  Even more alarming, GAO determined that pipeline incidents were increasing at an average rate of four percent per year.[4] 

C.  Recommendations to Improve Compliance With Safety and Environmental Protections 

To reverse the upswing in pipeline incidents, and to make sure pipeline incidents become increasingly rare events, Congress should undertake five prudent actions:  1) Provide OPS, the Justice Department, and citizens with the full range of modern enforcement authorities necessary to enforce existing laws; 2) Keep the pressure on OPS to issue long overdue protections and comply with NTSB recommendations; 2) Extend the penalty provision of the Oil Pollution Act to include hazardous liquid spills to land and groundwater 4) Give OPS twenty-four months to demonstrate it is operating an effective civil and criminal enforcement program, and if it fails, transfer OPS's enforcement functions to a more responsive agency; 5) Sunset the incredibly wasteful Risk Management Demonstation Projects Program; instead redirect the resources currently being used for this program towards OPS's basic mission of developing, issuing and enforcing pipeline safety and environmental  rules. 

1)  Modernize the Pipeline Safety Enforcement Program 

Pipeline operators have for too long operated in a world where the regulators are strugging to protect communties with one hand tied behind their backs.  The current enforcement scheme lacks many of the basic aspects of a modern enforcement program, and so inhibits the ability of regulators to do their job.  For example, under the current statute, the Department of Justice may not seek civil penalties in a judicial enforcement action.  Instead, penalties may only be sought through a separate administrative proceeding.   Thus, to bring a basic enforcement case to compel compliance with safety requirements and to impose a penalty it is currently necessary to commence two separate proceedings.  This is both unwieldy and ineffective from the perspective of an efficient enforcement program.  Citizens are barred from seeking penalties altogether.  Another outdated aspect is that the criminal enforcement provision establishes a much higher burden on criminal prosecutors than other environmental statutes.   

Recommendations[5]: 

• Authorize the Justice Department and citizens to seek civil penalties in a judicial action for violations of the pipeline safety statute up to $27,500 per violation without any limit on the total penalty for related violations.  See e.g. Sections 311(b) and 304 of the Clean Air Act ("CAA"), 42 USC Secs. 7413(b) & 7604.  Multi-million dollar penalties are sometimes necessary to serve as a meaningful sanction and deterrent against large corporations.  This was the case in United States v. Smithfield Foods in which the judge imposed a fine of $12,600,000 for more than 5,000 violations of the Clean Water Act.  972 F.Supp. 338 (E.D. Va, 1997). 

• Lower the mens rea threshold for criminal prosecutions to a straightforward "knowing" standard to mirror other environmental statutes.  See e.g. CAA Section 311(c), 42 USC Sec. 7413(c). 

•  Add "economic benefit"as a factor for a court and the agency to consider when calculating the appropriate size of a civil penalty.  Such an improvement would ensure that a bad actor who gained an unfair competitive advantage over its competitors by violating the law could be required to disgorge its illgotten gains.  See e.g.,  CAA Section 113(e), 42 USC 7413(c).  For example, just last month a federal judge in Pennsylvania imposed a $8,250,000 penalty against Allegheny Ludlum Steel Corporation for 1,122 days of Clean Water Act violations.  Most of this penalty was based on the economic benefit that Allegheny achieved over its competitors by violating the law. 

• Increase the number of civil and criminal inspectors.  This could be done by both an increase in overall resources, as well as redirecting existing OPS resources away from its Risk Management Demonstration Projects and other similarly wasteful projects. 

2)  Keep the Pressure On OPS to Issue Long Overdue Protections and NTSB Recommendations 

As the GAO reported in September 2001, OPS has begun to make modest progress in addressing its substantial backlog of overdue regulations.[6]  However, GAO also found that OPS still has not implemented eleven regulations - including some significantly overdue regulations.[7]  Moreover, as of September 2001, there were forty-four open recommendations  from NTSB - or five more than were open in May 2000.[8] 

Overdue regulations include integrity management rules for natural gas pipelines; leak detection performance standards for oil pipelines to ensure that leaks of a particular size are rapidly discovered; specific requirements for shut-off valve location and used for oil and natural gas lines (as Congress mandated in 1992 and 1996, respectively); regulation of gathering lines (as Congress mandated in1992); enhanced regulation of low-stress lines given their potential for serious environmental impacts; requirements that operators submit revised incident reports once the full impact of the incident is determined (as recommended by the DOT IG); and failsafe requirements to prevent over-pressurization. 

In addition to OPS failing to focus sufficient resources on rulemaking, OPS's ability to expeditiously issue new rules is impeded by the cost-benefit provision added to the pipeline statute in 1996.  This provision bars OPS from issuing a new standard unless if can first determine that the "benefits of the intended standard justify its cost."  49 USC Sec. 60102(b)(5).  All agencies, including OPS, should be mindful of the relative costs of their programs; however, OPS should not be hamstrung with an onerous cost/benefit requirement which further impedes its already atrocious progress in issuing new protections. 

Recommendation:

• Require GAO to report on OPS's progress in issuing the overdue rules and responding to NTSB recommendations every six months until all rules and recommendations are either adopted or responded to.

• Remove the onerous cost/benefit mandate in Section 60102(b)(5), and instead require the agency to select the most cost-effective protections. 

3)  Establishing Civil Penalties for Hazardous Liquid Spills to Land and Groundwater 

One of the most serious gaps in pipeline regulation is the absence of meaningful penalties when hazardous liquids are spilled on land and into groundwater.  Without the threat of meaningful penalties for such spills, operators have little incentive to prevent spills; instead there is an incentive to simply clean up the spill after-the-fact, and patch the pipeline.  The industry's tendency to react to spills, rather than prevent spills, may explain why, as GAO reported, pipeline incidents are increasing by four percent per year.[9] 

The Oil Pollution Act of 1990 ("OPA") imposes a flat penalty on a per barrel basis for oil spills to water - $1,000 per barrel unless the spill was the result of gross negligence and the fine increases to $3,000 per barrel.  33 USC 1321(b)(7).  This penalty structure provides a tremendous incentive for companies to prevent spills to water in the first instance, and if spills should occur, to minimize the spills as much as possible.

 Recommendation:  Extend the penalty provisions of OPA to include spills of hazardous liquid to land and groundwater. 

4)  Give OPS Twenty-Four Months To Fix Its Enforcement Program 

The history of OPS's failure to enforce the most basic public safety and environmental protections is legendary.  Its record has been criticized by the public, states, DOT's IG, GAO and Congress.  In fact, it appears everyone is unhappy with its performance except, of course, the pipeline operators who enjoy operating without any accountability.   

Congress has been on record since at least 1979 regarding OPS's terrible enforcement record.  The Senate Report to the bill that became the Hazardous Liquid Pipeline Safety Act ("HLPSA") criticized the OPS for "not doing an adequate job of regulating [liquified natural gas] and [liquified petroleum gas] safety. . . . [T]he Committee has been concerned for several years that DOT has not placed sufficiently high priority on . . . programs in general."  S. Rep. 96-182, 96th Cong. 1st sess. at 3 (1979), reprinted in 1979 U.S.C.C.A.N 1971, 1973. 

Congressional criticism of OPS's enforcement efforts have continued to the present.  In the House Report for the 1984 Amendments to the HLPSA, the House Committee criticized the pipeline safety program as a "poorly managed program that needs a reevaluation of its direction."  H. Rep. 98-780, 98th Cong. 2nd sess. at 10 (1984), reprinted in 1984 U.S.C.C.A.N. 3154, 3163.   See also, H. Rep. 102-247, 102nd sess. at 14 (1991) ("DOT's performance in implementing the laws since the last authorization in 1988 has been mixed."), reprinted in 1992 U.S.C.C.A.N 264, 2644.  More recently Congress has removed its gloves in criticizing OPS during the debates on the Pipeline Safety Act of 2000 and the Pipeline Safety Improvement Act of 2001: 

[T]here is little to no enforcement of existing regulations.  The General Accounting Office found that the Office of Pipeline Safety had not enforced 22 of the 49 safety      regulations that are already on the book [sic]. . . .  It is enough to make me wonder if there is some collusion of some kind going on behind the scenes. Why else would this Federal agency be so lax in enforcing its own regulations?  Madam Speaker, this inaction of the Office of Pipeline Safety will not be excused by this Congress.   

146 Cong. Rec. H7841-42 (Rep. Pascrell)(200).  See also, 147 Cong. Rec. S524 (Sen. Dominici) ("Unfortunately, the Office of Pipeline Safety has had a poor history of regulation and enforcement.  It is true that the Office has traditionally been slow to act.") 2001).   

Against this backdrop of uniform condemnation regarding its enforcement programs, there are some very preliminary indications the agency may be finally making some progress:  Administrator Engelman has testified that the agency has completed a comprehensive review of its enforcement program, and has made several improvements.  In addition, Ms. Engelman testified that the agency has proposed $9 million in fines in the past year and a half.  These are important baby steps, but are far from building the type of robust enforcement program necessary to ensure all 2.2 million miles of pipeline are operating safety, and that pipeline incident rates decline rapidly. 

Recommendations: 

• Give OPS twenty-four months to build a robust enforcement program that is delivering results.  If it does not make substantial progress, I strongly urge Congress to reassign the entire enforcement program to another, more responsive agency.  OPS's progress should be measured against very clear performance standards, which could include: 1) the number of civil and criminal enforcement cases referred to the Justice Department (I am unaware of OPS ever referring a civil enforcement case to the Justice Department); 2) the number of cases where civil penalties are imposed (not proposed); 3) the average  size of the civil penalties imposed (not proposed); and 4) the number of OPS staff reassigned from other duties to its enforcement program.  

• As an interim measure I would suggest asking GAO and the DOT IG to review OPS's internal review of its enforcement program, and determining if the improvements proposed are meaningful and achievable. 

5)  Congress Should Immediately Sunset OPS's Risk Management Demonstration Projects 

As I described above, one of my prior tasks at the Justice Department was to review OPS's proposed Risk Management Demonstration Projects.  The Justice Department's primary interest was how OPS exercised its authority to waive regulatory requirements for specific companies, and how such waivers  would affect other enforcement actions.  For example, the criminal section was concerned about its ability to argue to a jury in a criminal enforcement case the seriousness of a pipeline operator violating an OPS rule if at the same time OPS has granted a waiver of the same rule to another company. 

 In addition to undermining enforcement, the risk management program had two other serious defects.  First, it consumed an inordinate amount of OPS resources.  Second, the program never appeared to yield any meaningful data that was in turn used to promulgate additional, more protective regulations.  There were even projects, such as the Equilon Demonstration Project where after years of investment of time and resources by OPS, the pipeline company never even exercised its option to operate under the OPS waiver.   All the "risk management" projects undertaken by Equilon certainly appeared like good ideas, and generated good press for the company, but there was absolutely no need for any investment of OPS resources.  OPS has much more important and pressing demands on its time than the feel-good activities of its Risk Management Demonstration Project. 

Recommendation:  Congress should immediately sunset OPS's Risk Management Demonstration Project program.  As long as OPS cannot perform its most basic mission of developing, issuing and enforcing safety regulations, it should not be engaging in new and unproven activities. 

D.  Initial Assessment of H.R. 3609 

To strengthen the enforcement provisions of existing law, H.R. 3609 should include provisions implementing the recommendations listed above.  In addition, I would propose three changes to the bill as currently drafted: 

1. Delete proposed Section 60133(f) which would modify the National Enviromental Policy Act ("NEPA") by allowing OPS to exclude the input of other agencies during the NEPA review process if the input is not timely.  This provisions would have the exact opposite effect desired by its author - it would cause more, not less, delay.   The most certain way to ensure a project is delayed and that it can be successfully challenged in court is to conduct an incomplete environmental review.   The same streamlining goal of this provision could be achieved by ensuring that commenting agencies, such as the U.S. Fish and Wildlife Service, have the resources necessary to be able to participate early and fully in all environmental reviews. 

2. Clarify Section 14 to ensure that OPS must provide all security sensitive information relating to a pipeline's vulnerability to EPA and the Justice Department, two agencies that serve a critical role in overseeing the nation's pipeline system. 

3. Require OPS to extend the protections required by its hazardous liquid integrity management rule to the entire network of hazardous liquid pipelines.  Currently, the reach of the rule is limited to approximately twenty percent of the nation's hazardous liquid pipelines.  This is far too narrow, and excludes such important areas as many rivers and streams.   

Thank you very much for inviting me to testify on the important issues surrounding pipeline safety.  I am happy to answer any questions you may have.

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