The authority of the U.S. Department of Transportation (DOT) to establish minimum safety standards for the design, installation, and construction of pipeline facilities is clearly set forth in the Pipeline Safety Act (49 U.S.C. § 601 et seq.) (PSA or the Act), as is its authority to conduct design review of certain new facilities and new and novel technology by virtue of the 2012 amendments.  DOT’s authority to inspect and impose these standards during construction is not so clearly articulated, however.   Although DOT has established and enforced standards for pipeline construction since it began regulating the safety of pipelines in the late 1960s, it has published only limited guidance for the regulated community clarifying how this authority will be exercised.  It has also rarely asserted its authority to conduct construction inspections, until construction was complete.

In recent years, PHMSA has signaled its intention to interpret its construction and design oversight authority broadly, and to take an active role in monitoring pipeline projects for compliance with its safety standards before pipe is laid in the ground.  In the preamble to its 2010 Final Rule requiring pre-construction notification through the National Registry of Pipeline Operators for certain projects, for example, the Agency emphasized its desire to inspect construction activities “while they are underway, given that the pipeline is often buried before being placed in service and it is not then practical to inspect the quality of construction.” Final Rule, 75 Fed. Reg. 72887 (Nov. 26, 2010).  In recent reauthorizations of the PSA, Congress strengthened PHMSA’s ability to enforce its safety standards during the early stages of a pipeline project by allowing the Agency to recover its costs in conduct facility design safety reviews for certain large-scale projects (or those using “new or novel technologies or design”) from project proponents.  49 U.S.C. § 60117(n).

Significantly, Agency practices and published guidance suggest that PHMSA views its authority to impose design and construction standards as encompassing the ability to hold pipeline operators accountable for the manufacturing quality of pipe and other materials used in facility construction.  The Agency has stated in recent guidance that operators “must assure that steel and pipe mills, fitting and hot bend manufacturers have, and follow, quality management programs designed to ensure the production of quality materials (pipe, steel, fittings, and hot bends)” and that they need to inspect materials they receive “including during manufacturing” to assure that their specifications have been met.  PHMSA Pipeline Construction: FAQs, FAQ-21 (June 15, 2012).  This guidance goes beyond PHMSA regulations, which require operators to adhere to certain specified quality control measures during pipeline construction but do not impose a general obligation to ensure manufacturing quality.  Enforcement of such an obligation would therefore raise important questions about the proper reach of PHMSA authority over pipeline construction under the PSA.