Congress should increase the limits on fines that a federal regulatory agency is allowed to levy if elected leaders hope penalties will change the behavior of pipeline operators such as Exxon Mobil that make billions of dollars each year, a pipeline-safety advocate said.
Last week, the federal Pipeline and Hazardous Materials Safety Administration, a division of the U.S. Transportation Department, proposed that Exxon Mobil pay a total of $2,659,200 in fines for nine “probable” violations of safety regulations as a result of the March 29 rupture of the Pegasus pipeline in Mayflower.
“Fining a company like Exxon that routinely makes tens of billions of dollars in profit each year $2.6 million is like fining a motorist that drives in a manner that recklessly endangers the public $2.50,” said Carl Weimer, executive director of the Pipeline Safety Trust. “No one thinks that level of fine for reckless driving would change anyone’s behavior, so why would anyone think $2.6 million would change Exxon’s behavior?”
Exxon Mobil Corp. recently announced that its third-quarter net income totaled $7.8 billion, the corporation’s second-smallest quarterly profit since mid-2010.
“We need a Congress that is willing to add a few more zeroes on the end of PHMSA’s fining limits,” Weimer said of the pipeline-safety agency. Weimer’s safety-advocacy organization based in Bellingham, Wash., holds an annual conference attended by a wide range of people from inside and outside the pipeline industry, as well as federal regulators.
Exxon Mobil spokesman Aaron Stryk would not comment on Weimer’s call for higher fines but said the company “takes its responsibility for operating its pipelines in a safe and environmentally responsible manner very seriously.”
The Pegasus pipeline, built in 1947-48, spilled an estimated 210,000 gallons of heavy crude oil into Mayflower’s Northwoods neighborhood, ditches and a cove of Lake Conway on March 29. The cleanup, which has included the demolition of two houses,continues.
A laboratory hired by Exxon Mobil has blamed the rupture in part on manufacturing defects - specifically cracks, with some likely worsening over time.
The 850-mile-long Pegasus, running from Illinois to the Texas Gulf Coast, largely consists of pre-1970s pipe that the industry has known for decades is prone to such defects.
That kind of pipe is no longer made.
In notifying Exxon Mobil Pipeline Co. - a subsidiary of Exxon Mobil Corp. - of the probable violations, the federal administration said the pipeline company’s schedule for assessing the pipeline’s integrity did not take into account multiple water-pressure test failures or well-known information about that type of pipe’s tendency to fracture along welded seams running the length of the line.
Referring to the notice of probable violations, Weimer said, “The really disconcerting thing … is how they fly in the face of what the industry keeps saying about their efforts to make pipelines safe through their integrity management plan. This type of ERW [electric resistance welded] pipe has been known for years to have serious problems and this Notice of Violation makes it clear that Exxon did not recognize the risk or prioritize their testing program correctly to protect people or the environment.”
In an email, Weimer added, “Much of the current federal regulations aimed at ensuring the integrity of such pipelines places a huge amount of the responsibility for designing the testing and inspection of these pipelines with the pipeline companies themselves. It has become clear from a series of significant failures over the past few years that trusting the industry with this level of responsibility has not worked, and it is time for the regulators to step in with stronger oversight.”
Stryk said the company’s integrity management program “does take into account pre-1970 ERW seam pipe,” but he declined to comment on whether the company’s schedule for assessing the pipeline’s integrity took into account the test failures or the dated pipe’s tendency to crack.
He said the company has “in place a comprehensive Integrity Management Program … that meets or exceeds federal requirements, including a detailed and comprehensive seam integrity assessment for all its pipelines.”
In 2010 and 2013, Stryk said, the company used an inspection tool “specifically designed to detect long, narrow defects that run parallel to the pipeline, such as hook cracks.”
The $2.6 million proposed fine would be the second-largest fine the pipeline-safety administration has issued. The biggest was $3.7 million levied against Enbridge Energy, Limited Partnership in 2012 for a much-larger oil spill in Michigan in 2010.
Enbridge did not contest the violations it was accused of and agreed to pay the penalty, pipeline-administration spokesman Damon Hill said.
U.S. Sen. John Boozman, R-Ark., said civil penalties are “an important part of the post-spill recovery and investigation, but these fines are just one tool of many used to hold pipeline operators accountable.”
“Regulators have the authority to issue corrective action or shutdown orders. These orders have a huge cost to pipeline operators, in the form of lost income and new expenses,” Boozman said in a statement. “Also, when a spill occurs, the pipeline operator pays for the clean-up and associated costs.”
The Pegasus has been shut down since shortly after the Good Friday spill in Mayflower, and there’s been no indication of when it might reopen.
U.S. Rep. Tim Griffin, R-Ark., whose 2nd District includes Mayflower and the Lake Maumelle watershed through which the Pegasus line runs, said in an email that he was “carefully considering every available option - including increased fines - when it comes to holding Exxon Mobil accountable and making sure the water supply for 400,000 Arkansans remains safe and secure.”
Griffin said Congress last summer passed an amendment he introduced to transfer some Transportation Department funding to the pipeline administration’s operations. “I believe the [Department of Transportation] must target its resources to ensure more effective enforcement of the law,” he said.
In 2011, the Senate agreed to a bill that would have raised maximum fines more than the bill that Congress ultimately approved, said a spokesman for U.S. Sen. Mark Pryor, D-Ark.
No one in the Senate raised an objection seeking to halt the bill, and no roll call vote was taken. But the measure never went up for a vote in the House.
Instead, both chambers ultimately passed the less-stringent bill. Griffin reportedly voted for that measure in a voice vote. This one also passed in the Senate without a roll-call vote and by “unanimous consent,” meaning the entire chamber agreed to it because no one raised an objection to halt it.
This measure, now law, limits the penalty to $200,000 per violation per day that the violation persists up to a $2 million maximum for a related series of violations.
The Senate bill that died would have raised the maximum fine per day for a violation to $250,000 and to $2.5 million for a related series of violations, Pryor spokesman Michael Teague said. The measure also would have added civil penalties for obstructing investigations, he said.
Teague said Pryor was “not privy to [the safety administration’s] deliberations. However, Sen. Pryor is willing to work with PHMSA on new or stronger authority.”
In Exxon Mobil’s case, the proposed fines for the nine “probable” violations range from a low of $47,500 to a high of $783,300.
It was unclear how the safety administration arrived at each sum, which of the purported violations might be related and which ones might have been for more than one day.
Richard Kuprewicz, a pipeline safety consultant who serves on a technical advisory committee to the safety administration, said Weimer’s comments about such fines being too small were “pretty well spot-on.”
As they now exist, the fines don’t “get a multibillion-dollar company’s attention,” said Kuprewicz, who is advising Central Arkansas Water on pipeline issues relating to the Lake Maumelle watershed.
“How many seconds does it take for the pipeline company” or its parent company “to pay for the fine?” he asked. “I use the word ‘seconds.’”
Exxon Mobil has 30 days from the date it received the notice of violations to respond or to waive its right to contest them.
Stryk issued a statement last week in which Exxon Mobil said it was “still reviewing” the notice and had “not yet determined our future course of action.”
“However it does appear that PHMSA’s analysis is flawed and the agency has made some fundamental errors,” the statement said.
Front Section, Pages 1 on 11/10/2013