The most recent amendments to the Pipeline Safety Act became effective two years ago. Those amendments called for new studies and rulemaking, on issues ranging from verification of MAOP/MOP, potential changes to the identification of HCAs and/or Class Locations, new construction oversight, water crossing standards, and more. While PHMSA has completed two-thirds of the required studies, few rulemakings have been completed to date, with the only substantive rulemaking focused on sharpening the Agency’s enforcement tools. PHMSA has nevertheless continued to initiate an increasing number of enforcement actions seeking record amounts of civil penalties, in part in response to heightened public criticism as well as judicial challenges. Over the same time period, the oil and gas industry has continued an unprecedented era of growth in the U.S., involving production from shale sources, construction of new lines, reversals of flow and change of product in existing lines.
2014 promises to continue all of these trends: increased industry activity to keep up with growing production and demand, coupled with more vigilant Agency enforcement focused on various integrity issues. In addition, several recent high profile incidents have prompted increased public scrutiny and continued calls for more effective regulatory oversight, on issues ranging from new construction to aging pipe to the relative safety of transportation by rail. New rulemakings are also on the horizon. All of these developments will inevitably translate into increased regulation and enforcement of pipeline operations in the year ahead, as apparent from the ambitious objectives cited in PHMSA’s 2014 Budget Request. A point often lost in the discussion, unfortunately, is the fact that pipelines continue to be the most safe and reliable mode of transportation for oil and gas.
In order to be well-positioned for 2014, operators should anticipate increased Agency inspections and oversight by PHMSA and certified states, including onsite construction field inspections, system wide inspections and more targeted investigations. Operators should anticipate more requests for disclosure of operational information under the Freedom of Information Act (FOIA), and be prepared to claim all appropriate protections for confidential, privileged or security sensitive material. Companies should also watch for action on various rulemakings that are scheduled to be proposed and issued in 2014 (this website will be tracking these developments). As enforcement actions implement new rules or policies, operators should also be prepared to challenge the Agency where it relies on or invokes new regulatory interpretations that are not clearly based in established regulations or associated guidance, or that are applied differently across the regions and the industry. In addition, operators and industry representatives should continue to press PHMSA for transparency with regard to penalty calculations and options for settlement of enforcement actions. Lastly, operators should be closely reviewing their own operations as new initiatives play out, comparing individual policies or procedures to evolving standards or best practices. To this end, operators may consider performing internal compliance audits protected under the attorney-client privilege in order to identify compliance issues and assess potential liabilities.