U.S. proposes fining oil firm $2.65 million

Exxon Mobil notified of 9 likely spill-tied violations

A federal agency notified Exxon Mobil of nine “probable” violations of safety regulations Wednesday and proposed fines totaling more than $2.6 million as a result of the March rupture of the company’s aging Pegasus pipeline that spilled tens of thousands of gallons of oil into a Mayflower neighborhood.

Exxon Mobil Pipeline Co. has the right to contest the federal findings, which are not final. The company described the government’s analysis as “flawed.”

The proposed civil penalties total $2,659,200 and reflect, among other things, the Pipeline and Hazardous Materials Safety Administration’s view that Exxon Mobil’s schedule for assessing the pipeline’s integrity did not take into account multiple water-pressure test failures or other information the industry has known for decades - that the type of pipe used in much of the Pegasus line tends to fracture along the welded seams running the length of the pipeline.

That type of pipe, manufactured by a now-defunct company in Youngstown, Ohio, is no longer made.

In a July report, a laboratory hired by Exxon Mobil to examine the broken pipe segment found manufacturing defects - cracking that the report said likely occurred shortly after the pipe was made in 1947-48 and worsened over time.

Exxon Mobil spokesman Aaron Stryk issued a statement in which the company said it was “disappointed” by the government’s notice of probable violations and said it was cooperating with the Pipeline and Hazardous Materials Safety Administration, often called PHMSA, in the accident investigation.

The company said it was still reviewing the notice and has “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.

“For example, Alleged Violation [No. 2] claims that [Exxon Mobil Pipeline Co.] failed to conduct a re-assessment of Pegasus within [five] years of the 2005-06 baseline assessments,” the company said. “In fact, [the pipeline company] conducted the required reassessment in 2010.”

The federal agency also issued a proposed compliance order in which it said Exxon Mobil would have to submit a spreadsheet identifying all pre-1970s electric resistance welded pipe operated under its integrity management program. Later, the company would be required to revise its process for analyzing crack growth and to make sure that identified threats are not overlooked.

Each probable violation carries a separate proposed civil fine, with the largest one totaling $783,300 and dealing with the Lake Maumelle watershed, through which the 850-mile-long pipeline runs - a concern to the Central Arkansas Water utility because the lake provides drinking water to more than 400,000 residents.

Money from such fines goes to the U.S. Treasury Department, said Damon Hill, a spokesman for the pipeline agency, which is part of the Transportation Department.

The safety administration said Exxon Mobil failed to follow its own operations and maintenance procedures “by selectively using results” of its Threat Identification and Risk Assessment Manual … process in 2011.” That action resulted in a “failure to properly characterize the risk of a release to the Lake Maumelle Watershed” and other high consequence areas in the segment of pipeline running from Conway to Foreman, the government said.

The proposed order said, in part, that Exxon Mobil should revise its risk-assessment processes so that “appropriate training, interdisciplinary participation and management level review and oversight are carried out to ensure that the integrity decisions that affect the final risk scores are not manipulated, or that processes are not circumvented, and that risk assessment assumptions are appropriately conservative.

“The revised process shall ensure that checks and balances are integrated into the process to avoid conflicting budget goals with integrity prioritization decisions,” the agency added.

Richard Kuprewicz, who serves on the agency’s technical advisory committee and is advising Central Arkansas Water on the pipeline issue, said this particular allegation, if true, was serious.

“The [federal] assertion is that they cherry-picked at the risks so that they didn’t have to” address some of the pipeline’s risks, Kuprewicz said. “This is a problem occurring … on numerous pipeline failures. … The risk assessments are not thorough enough.”

Further, referring to Exxon Mobil, he said, “To say you didn’t know about low frequency ERW [electric resistance welded] seam threats” in some pre-1970s pipe would not work. “You can’t claim you didn’t know this,” when the industry has been aware of such manufacturing problems for years. “You’ve got some serious problems with the integrity management folks, and you need to rectify them.”

The notice of probable violations faults Exxon Mobil for not considering such risk factors.

“The operator experienced multiple hydrostatic test failures on the Pegasus Pipeline as a result of ERW long seam failures in 1991 hydrotesting and subsequent 2005-2006 hydrotesting,” the notice says.“The pipe manufacturing information, fracture toughness, and hydrostatic testing failure history of the … pre-1970 low frequency ERW pipe … provided more than adequate information for the pipe to be considered susceptible to seam failure.”

The agency also said Exxon Mobil had not inspected the pipeline as fast as it should have and that the company did not prioritize assessment of pipeline segments based on those that pose the highest risk to high-consequence areas.

The segment from Corsicana, Texas, to Conway had more hydrostatic test failures in 2006 than the Conway to Patoka, Ill., segment did, the agency noted. “This segment had all of the seam failures during the 1991 hydrotesting.This segment experienced an in-service ERW seam leak, and had more miles of Youngstown [manufacturing plant] ERW pipe,” it added.

Yet Exxon Mobil’s decision to perform an “inspection on the Patoka to Conway segment first was not documented, and was not based upon appropriate risk considerations that would indicate the [inspection] should have been performed on the Conway to Corsicana segment first.”

The company also merged four segments of the Patoka-to-Corsicana segment into two testable segments, the report said. “As a result of the change, the Longer Testable Segments negatively impacted … risk assessments by masking higher threat intermediate segments (such as the Lake Maumelle Watershed and the Mayflower populated areas) with the dilution” of resulting risk scores, the notice said.

U.S. Sen. Mark Pryor, D-Ark., issued a statement saying, “Exxon Mobil has caused undue harm to Arkansas families, and they must be held accountable.

“I commend the Pipeline and Hazardous Materials Safety Administration for issuing this [proposed] penalty. The fight’s not over, but this is a positive step forward as we work to make the Mayflower community whole again,” Pryor said.

Congressman Tim Griffin, R-Ark., said in a statement that the federal report “raises more questions about Exxon Mobil’s operation of the Pegasus Pipeline, and I’m committed to holding them accountable.”

Griffin, who toured the Lake Maumelle watershed Monday, said he would continue to urge the oil company “to relocate the pipeline away from the watershed.”

U.S. Sen. John Boozman, R-Ark., said in a statement that, “Exxon Mobil has accepted responsibility for the spill, and we will continue holding its feet to the fire. Exxon Mobil must continue working to make this right. The PHMSA penalty is an important part of the post-spill recovery and investigation. Arkansas families were harmed by this spill, and I will continue listening to everyone who was harmed and do all that I can to help.”

Aaron Sadler, spokesman for Arkansas Attorney General Dustin McDaniel said, “We are glad to see that PHMSA has held Exxon accountable for this incident, as we also intend to do in court.”

McDaniel and U.S. Attorney Christopher Thyer have sued Exxon Mobil in U.S. District Court over the spill.

The Pegasus pipeline ruptured March 29, spilling an estimated 210,000 gallons of heavy crude oil into the Northwoods subdivision, drainage ditches and Dawson Cove of Lake Conway. The cleanup in the cove continues, and many of the 22 homes evacuated in the subdivision remain unoccupied. Two of the houses, which had oil beneath their foundations, have been demolished.

Front Section, Pages 1 on 11/07/2013