Taking the first step to implement its new emergency order authority, PHMSA has issued an interim final rule which will be effective immediately upon publication in the Federal Register.  Final rules must be issued by March 19, 2017, but PHMSA will accept and consider comments filed within 60 days of publication.  Congress conferred pipeline emergency order authority to PHMSA in the Protecting our Infrastructure of Pipeline and Enhancing Safety (PIPES) Act of 2016 .  Under the Act, PHMSA can issue emergency orders to a group of operators or the entire industry based upon a written finding that an unsafe condition or practice constitutes or is causing “an imminent hazard” which must be corrected immediately.  An entity subject to the order would be able to petition PHMSA for administrative review of the order, requesting a formal or informal hearing, and subsequent expedited judicial review in federal District Court.  While the interim final rule largely tracks the relevant provisions of the PIPES Act and existing hazardous materials regulations, there are several important aspects of the rule that may require clarification and industry comment, particularly with respect to the basis for issuance, effective notice and time to appeal and the fact that the Agency retains unilateral authority to extend the effectiveness of an order during any proceedings.

In the interim final rule, PHMSA asserts that there is a “current gap” in its authority that prevented it from addressing conditions or practices that extend beyond or affect more than a single pipeline operator and must be immediately addressed to protect life, property or the environment.  Prior to the PIPES Act, however, PHMSA already had emergency authority with respect to individual operators and facilities that, in the Agency’s judgment, are or would be “hazardous” (referred to as a “corrective action order”) or pose an integrity risk (referred to as a “safety order”).  49 U.S.C. §§ 60112; 60117(l).  In addition, PHMSA already has the ability to, under certain circumstances—including emergencies—issue a final rule that is immediately effective for the entire industry.  Department of Transportation (DOT) Secretary Anthony Foxx commented on the rule noting that, “[w]e hope we never have to use [emergency order authority], but it is an important safety tool that will result in greater protection for the American public.”  If the government truly believes that this new authority may rarely be used, it begs the question why it was deemed so important to establish.  Observers are concerned that the statutory provision and interim final rules suggest instead that PHMSA may consider using this new authority in lieu of advisories.

The preamble to the rule identifies several (non-exhaustive) examples of when an emergency order may be warranted, including (1) a natural disaster impacting many pipelines in a single geographic region; (2) a serious flaw in pipe, equipment manufacturing or supplier materials; and (3) an accident that reveals a specific industry practice that is unsafe and needs immediate or temporary correction.  The rule incorporates the PIPES Act definition of “imminent hazard” (which was borrowed from the hazardous materials context and resembles that used in other contexts, such as RCRA Section 7003) to include “substantial likelihood of death, serious illness, severe personal injury or substantial endangerment to health, property, or the environment [that] may occur before the reasonable foreseeable completion date of a formal administrative proceeding.”  Consistent with the statute, PHMSA must consider a variety of factors in issuing an emergency order, including impacts on national or regional economy and national security and the impact on an operator’s facilities to maintain reliability and continuity of service to customers, as well as the results of consultation with appropriate federal and state agencies knowledgeable in pipeline safety and operations.  The preamble explains that an order must be “narrowly tailored to the discrete and specific safety hazard” and identify corrective actions to remedy the hazard.

The regulations largely track the emergency order provisions of the PIPES Act and are for the most part consistent with emergency order regulations on the hazardous materials side of the DOT, which have been in place since 2011 albeit infrequently used.  There are nonetheless several significant distinctions and important ambiguities that may require clarification and/or reconsideration:

Notice:  Entities that are subject to emergency orders will be notified through publication of the order in the Federal Register “as soon as practicable upon issuance” and on the Agency’s website.  It is unclear when notice becomes “effective” for the purposes of enforcing the order, however.

Timeframe to Contest:  Similarly, there is no set timeframe for an entity aggrieved by an emergency order to request review and/or hearing, as compared to the hazardous materials regulations which allow an entity 20 days from issuance of the emergency order to seek review.

Option for Formal or Informal Hearings:  Further, while the preamble notes the option to request either an informal hearing before PHMSA or a formal hearing conducted by the DOT’s Office of Hearings by an Administrative Law Judge as an “on the record” hearing subject to the Administrative Procedures Act, the regulations do not expressly provide for an informal hearing in the context of an emergency order.  Potentially undermining an entity’s “choice” of forum, PHMSA also retains the discretion to direct any petition to the formal hearing process.

Authority to Extend Emergency Orders:  When an emergency order is challenged, PHMSA has 30 days to make a determination on the order or the order is no longer effective.  Notably, this provision is undercut by the ability of PHMSA to simply extend the effectiveness of the order pending review of a petition and may be particularly problematic when the order includes expansive corrective measures.

Request that Fails to State Material Facts:  In addition, the Agency appears to have the ability to automatically issue a decision on merits of a request for hearing, even for a formal hearing, that “fails to state material facts in dispute.”  This may be problematic particularly because it is unclear what that standard means.

Timeframe to Petition ALJ Recommendation:  The one day timeframe to petition for reconsideration an ALJ’s report/recommendation seems too short, although it is consistent with the relevant hazardous materials regulations.

No Stay Pending Judicial Review:  Finally, the regulations expressly state that the filing of an action for judicial review does not stay or modify the force and effect of the agency’s final decision, but it is unclear whether an operator could seek one prior to that time or whether a court could grant a stay upon good cause shown.

While this is an interim final rule, PHMSA has requested comments within 60 days of publication (which the Agency anticipates will be in the next 7-10 days) and committed to, where appropriate, making changes prior to issuing final regulations, due by statute no later than March 19, 2017.  It remains unclear whether the new law will adequately limit unnecessary and unauthorized imposition of injunctive relief on the pipeline industry—and whether the industry will be able to successfully challenge that imposition, whether administrative or judicially.  For that reason, we recommend that industry review and comment on these rules and consult their trade organizations.