Lawrence J. Bracken II, Michael S. Levine and Geoffrey B. Fehling

In today’s interconnected society, cyber breaches are inevitable. As the saying goes, it is not a matter of if, but when, an organization will be breached. This is particularly true for businesses in the energy sector, which is one of the most frequently targeted industries for cyber attacks. From producers to pipelines and refineries, energy companies’ computer systems are increasingly at risk of becoming the target of a sophisticated and targeted cyberattack, making cyber risk mitigation paramount.

See the full article, published in The American Oil & Gas Reporter, December 2017.

The legacy of Keystone XL lives on, as fallout from that politically influenced debate has created a stigma for many new pipeline construction projects.  The Sierra Club and other opposition groups openly admitted that their challenge to the Keystone XL pipeline was really a stalking horse to bring more attention to climate change generally.  While that opposition was not intended as a more specific objection to pipelines, regional and local citizen groups are now opposing almost any form of new pipeline construction, on a more confrontational basis, using Keystone XL climate change type arguments even where they are not relevant.

Continue Reading Pipeline Construction After Keystone

In a recent critique, Politico.com offered a harsh evaluation of PHMSA, pointing out (among other things) that the Agency has been lax in enforcing existing rules and slow to promulgate new ones.  The article dubs PHMSA the “can’t-do agency,” claiming that it “lacks the manpower to enforce the rules and the willpower to write stronger ones.”  One week before the Politico piece was published, the House Subcommittee on Railroads, Pipelines, and Hazardous Materials began hearings on reauthorization of the Pipeline Safety Act (PSA).  Several politicians, including Rep. Jeff Denham (R-CA), pointedly questioned PHMSA Acting Administrator Tim Butters on why the Agency has been so slow to issue the crude-by-rail and pipeline safety rules that were pending when the Subcommittee convened hearings on these rulemakings last year.  Butters responded by pointing out that PHMSA is in the final stages of developing its high hazard flammable train rule, and that the Agency has completed 22 of the 42 Congressional mandates in the 2012 PSA.  He emphasized the demands on the Agency in the wake of the energy production boom, rapid expansion in pipeline construction, and numerous pipeline incidents in recent years (noting that in addition to the aforementioned Congressional mandates, PHMSA has received 49 new NTSB recommendations, 16 OIG recommendations, and 7 GAO recommendations).

Continue Reading Criticism of PHMSA Downplays Constraints and Industry Achievements

The development of new oil and gas in various shale plays around the U.S. has led to a rise in the number of transfers and acquisitions of pipeline assets.  Prudent operators have always requested and reviewed documentation as part of their due diligence in making acquisitions, but it is becoming increasingly important that certain records be located during due diligence or factored into the transaction if such records are lacking and must be recreated.  Decision makers involved in pipeline acquisitions may only involve pipeline safety managers or counsel late in the process, without sufficient time to include the issue of records as part of the transaction.  That can be a costly mistake.

Continue Reading Focus on Records During Acquisitions, or Risk Significant Liabilities

Recent legislative and regulatory developments at the federal and state levels signal lawmakers’ increased attention to issues related to the abandonment of oil and gas pipelines.  The U.S. House of Representatives is currently considering a bill, proposed earlier this year in the wake of a release of crude oil in the streets of a Los Angeles suburb from an out-of-service pipeline. The bill would amend the federal Pipeline Safety Act to require inspections of pipelines to confirm their status each time they are listed as abandoned or transferred as part of a sale.  Just after this bill was introduced in the House, the State of Louisiana passed a law requiring approval from the State Public Service Commission for the abandonment of portions of interstate natural gas pipelines entirely within the State, allowing the Commission to deny such approval if abandonment would cause gas supply inadequacies.  Other states, such as North Dakota, have also recently passed legislation concerning proper procedures for pipeline abandonment.  These developments reflect the range of issues associated with pipeline abandonment, from public safety to energy supply reliability.

Continue Reading Pipeline Abandonment: Safety and Supply Concerns at the Heart of Recent Developments

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).

Continue Reading The Legal Effect of Advisories and Guidance

In 2012, following a 2010 oil pipeline accident in Marshall, Michigan, NTSB recommended that API develop a pipeline Safety Management Standard (SMS).  SMSs are used in various sectors (aviation, maritime, labor, food management, etc.), and typically follow ISO frameworks.  The general intent behind a SMS is to ‘provide a systematic way to identify hazards and control risks while maintaining assurance that these risk controls are effective,’ and they are meant to reflect a ‘businesslike approach to safety.’

Continue Reading The Pipeline Safety Management Standard (Draft API RP 1173): What It Means to Operators

In the wake of a pipeline release, beyond notifying all required federal and state government agencies, an operator should keep in mind another important notification—its insurer.  Most insurance policies contain mandatory conditions, including notice of claims and cooperation with the insurer.  Failure to comply with these conditions may result in a denial of coverage.  The Fourth Circuit recently held that an insured was not entitled to reimbursement under its insurance policy because the policyholder failed to comply with the policy conditions.   Perini/Tompkins Joint Venture v. ACE American Ins. Co., No. 12-2415 (4th Cir. Dec. 16. 2013).  In that case, the insured failed to comply with provisions in its policy that require notice of underlying litigation and the insurer’s consent prior to entering into settlement.  This resulted in the Court affirming a complete denial of coverage for what otherwise should have been a covered settlement.  As noted in a more lengthy Hunton & Williams client alert, this case illustrates the critical importance of ensuring that policyholders obtain sound coverage advice at all stages of a claim.  Pipeline incidents, environmental releases and shareholder claims may all be events that trigger required notification of a claim and cooperation with the insurer.  Involving experienced coverage counsel from the outset of a claim and throughout the claim process will help ensure that the policyholder satisfies any conditions to coverage and complies with all policy requirements.

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).

Continue Reading Corrective Action Orders: Targeted Use, Expansive Requirements

Creating a record in PHMSA enforcement actions is an important step toward protecting and preserving the legal rights of pipeline owners and operators.  If an operator seeks judicial review of the Agency’s final decision in an enforcement action, the administrative record will be a key component of the case.  The Pipeline Safety Act requires that any request for judicial review of final agency action be brought in a federal court of appeals.  Such courts do not hear witnesses or find facts; they rely solely on the administrative record presented, and the briefs and legal arguments of counsel.  For that reason, the written transcription of any administrative enforcement hearing is likely to be an essential part of that record.  Just a few months since PHMSA promulgated revisions to its procedural regulations at 49 C.F.R. Part 190 (see prior pipelinelaw alert), the Agency has indicated if an operator wishes to have a hearing transcribed, it must arrange for a court reporter to be physically present to transcribe the proceedings.  This is a new interpretation of PHMSA regulations, and one that was not clearly articulated in the Agency’s rulemaking preambles.  Final Rule, 78 Fed. Reg. 58897 (Sep. 25, 2013); NPRM, 77 Fed. Reg. 48112 (Aug. 13, 2012).

Continue Reading Creating a Record for Enforcement Hearings: New PHMSA Policy Mandates Use of Court Reporters