Over the past several years PHMSA has issued numerous Advisories and Guidance notices. In fact, the Agency has issued nine times more informal guidance documents than formal rulemakings on pipeline safety issues since January 2012 (6 Notices or Advanced Notices of Proposed Rulemakings, compared to 54 interpretative letters, advisories or guidance). The Pipeline Safety Act comes up for reauthorization next year, and as of this post the Agency has still not proposed rules on four issues that Congress expressly directed PHMSA to address in 2012 (excluding an additional six issues that Congress gave PHMSA the discretion to issue regulations “if appropriate” or “as necessary”). To date, PHMSA has only issued one final rule as a result of the 2011 Pipeline Safety Act Reauthorization (which became effective January 2012).
The law that applies to oil and gas pipeline operators for construction, operation and maintenance activities comes from three principal sources: (1) legislation (the federal Pipeline Safety Act and Natural Gas Act, state legislation and sometimes local ordinances); (2) regulation (PHMSA, FERC, EPA, some states); and (3) certain written company procedures that are incorporated into federal or certified state law (O&M Manual, IMP Plan, etc.).
In light of the number of recently issued PHMSA guidance documents, operators are asking about the legal effect of an administrative agency’s interpretative letters, written advisories or guidance regarding the application of these laws. In short, although such pronouncements can help the regulated community better understand an agency’s expectations, they do not have the force of law, and are not enforceable or admissible in administrative or judicial proceedings as the basis for a claim or defense. Our system of laws requires federal agencies to promulgate binding and enforceable rules through public notice and comment (with allowance for emergency rules in limited circumstances). That process, in turn, is governed by the Administrative Procedure Act (APA) and various Executive Orders. Public review and comment of proposed rules are essential to the development of sound law.
When agencies attempt to enforce informal guidance, the courts routinely strike them down, sometimes harshly reminding the agencies that the only way to ‘make law’ for an agency is through the APA notice and comment rulemaking process. See, e.g., NRDC v. EPA, 643 F.3d 311, 321 (D.C. Cir. 2011) (chastising EPA for issuing guidance that purported to bind regional offices, stating that “[such guidance cannot] be considered a mere statement of policy; it is a rule”). The court instructed the same agency in another case, “If the [Agency] disagrees with the [statute’s] requirements…, it should take its concerns to Congress… In the meantime, it must obey the [statute] as written by Congress and interpreted by this court.” Sierra Club v. EPA, 479 F.3d 875, 884 (D.C. Cir. 2007). Courts have explained that it is “well-established that an agency may not escape…notice and comment requirements by labeling a major substantive legal addition to a rule a mere interpretation.” Appalachian Power Co. v. EPA, 208 F.3d 1015, 1024-25 (D.C. Cir. 2000); see also C.F. Communications Corp. v. FCC, 128 F.3d 735, 739 (D.C. Cir. 1997) (holding that the FCC “may not bypass [the APA’s notice and comment] procedure by rewriting its rules under the rubric of ‘interpretation.’”).
Just this month, PHMSA issued two advisories (September 11, 2014 and September 18, 2014) where the Agency appears to be issuing substantive legal rules under the guise of guidance, precisely what the APA and the courts forbid. Further, both of these advisories may conflict with current U.S. energy policy to the extent that they discourage activities in support of energy infrastructure to bring new sources to market. While rulemakings take considerable time and resources, and require additional review by the Office of Management and Budget, they satisfy due process requirements. Due process provides all affected stakeholders with an opportunity for comment and increases regulatory certainty for those impacted by the regulations.