The issuance of a Corrective Action Order (CAO) can have significant and ongoing consequences for a pipeline operator.  A powerful enforcement tool typically associated with the shutdown of a pipeline facility, a CAO often means numerous compliance obligations and significant disruption of normal operations, not to mention the stigma accompanying a CAO’s pre-requisite finding that continued operation of a pipeline facility would be “hazardous to life, property, or the environment.”  49 U.S.C. 60112(a)(1).

CAOs tend to target urgent situations posing an immediate threat to public safety or the environment such as pipeline failures, accidents, or spills.  PHMSA issues them somewhat sparingly relative to other types of enforcement tools, reserving the CAO for high-profile incidents with immediate and significant consequences.  In the 2-year period from January 1, 2011 to December 31, 2013, the Agency initiated CAO cases at an average rate of about one per month.  A review of these orders provides the basis for some general observations about PHMSA’s use of the CAO and what operators should expect if their facilities are targeted for corrective action.

Typical Circumstances.  Of the 25 CAO cases initiated in the last 2 years, 23 involved pipeline failures that resulted in the release of product into the environment.  CAOs were issued with slightly more frequency where liquid product was released, as opposed to natural gas, and almost half involved a pipeline that intersected a high consequence area, frequently at the failure site (which occurred in about 40% of cases).  In all cases of pipeline failure, the cause of failure was unknown and causal investigation was ongoing at the time the CAO was issued.

An “Emergency” Timeline.  It took an average of 5 days for PHMSA to issue a CAO after an incident, but in 2 cases the order was issued the very next day.  With only one exception in the last 2 years (a case not involving a pipeline failure), PHMSA has issued CAOs on an emergency basis, meaning that operators had to immediately comply with the order without the benefit of advance notice and the opportunity for a hearing.

Extensive Requirements Reflect Enforcement Priorities Beyond a Particular Incident.  Standard corrective action requirements included submission of a restart plan to the Agency, operational pressure restrictions, regular reporting to PHMSA, root cause failure analyses, and metallurgical testing.  Other requirements, which were less common but nonetheless prevalent, may signal the Agency’s willingness to impose compliance obligations reaching beyond the particular issues on the pipeline segment that prompted issuance of the CAO.  These likely reflect broader enforcement priorities, some of which have been previously expressed in PHMSA Advisory Bulletins and NTSB recommendations to the Agency.  As examples, CAOs in the past 2 years have required:

  • Records verification and reporting to PHMSA on the records used to confirm the operating specifications for MOP/MAOP, both for the affected segment involved in a release, as well as for the entire pipeline;
  • Both in-line inspection and pressure testing (often including a spike test) of older low-frequency ERW pipe;
  • Leak surveys and/or leak detection plans;
  • Consultation with and involvement of an independent third party in performing root cause failure analysis (RCFA); and
  • Submission of an Integrity Verification and Remediation Plan to PHMSA for approval.

Another observable trend the past 2 years was the expansive scope of the orders, which often (especially in high-profile cases) required corrective action to be taken on an entire pipeline or system, as opposed to just the isolated segments where the failures occurred.

Response Options.  Operators should consider requesting a hearing on a CAO, both to challenge the factual basis for the Order and to correct the record upon which it is based.  While PHMSA takes the position that the only issue to be addressed in a hearing is whether or not the “hazardous facility” finding was appropriate, there may be an opportunity to raise other issues, such as:

  • Mistakes of fact or erroneous conclusions with regard to causation;
  • The inclusion of a third party in the RCFA; and
  • Whether the required corrective actions are appropriate in the absence of a definitive analysis on causation (or, if a cause has been identified, whether the measures appropriately target the root cause).

Lastly, operators should be aware of the right to request a hearing if the Agency requires corrective measures beyond those identified in the CAO or expands the scope of existing CAO corrective actions.