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Pipeline plan rejected, U.S. notifies Exxon

Pegasus to remain closed this year, oil company says by Debra Hale-Shelton | July 8, 2015 at 3:56 a.m. | Updated July 8, 2015 at 3:56 a.m.

A federal regulatory agency has found that Exxon Mobil's proposed remedial work plan for the shuttered 648-mile portion of the Pegasus pipeline was inadequate, according to a Justice Department document filed in court Tuesday.

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In a letter dated July 1 and also filed in U.S. District Court, an Exxon Mobil attorney said the company has no plans to submit a revised work plan this year -- a necessary step before restarting the line's segment running from Patoka, Ill., to Corsicana, Texas.

The records also raised questions about whether the Pegasus, built in 1947-48, will ever restart, though an Exxon Mobil spokesman said Tuesday that the company still expects to restart it "in the future."

The Justice Department filed the documents to support its motion asking the court in Little Rock to approve the state and federal governments' proposed consent decree with Exxon Mobil Pipeline Co. and Mobil Pipe Line Co., both subsidiaries of Exxon Mobil Corp.

The Pegasus has been shut down since March 29, 2013, when it ruptured and spilled tens of thousands of gallons of heavy crude into a Mayflower subdivision, ditches and a cove of Lake Conway.

"It is unknown if or when Exxon Mobil will be able to restart the pipeline," the department wrote in a supporting brief.

Among the department's exhibits was a letter from Richard Byrne, general counsel for Exxon Mobil Pipeline Co., to the U.S. Environmental Protection Agency's Dallas office.

Byrne wrote that the company's "decision to restart the northern segment of the Pegasus Pipeline will be made consistent with the priorities established in managing its portfolio of pipeline operations, and its decision-making process will take market conditions into account."

He added, "At this time, we do not anticipate submitting a revised remedial work plan, a necessary predicate to restarting the northern segment of the Pegasus Pipeline, to the Pipeline and Hazardous Materials Safety Administration (PHMSA) this year."

In May, Central Arkansas Water and 10 other utilities or government entities urged the Justice Department to withdraw or renegotiate the proposed settlement of a 2-year-old lawsuit against the Exxon Mobil subsidiaries. Key elements of the proposed decree include a $3,190,000 federal civil penalty under the Clean Water Act, $1 million in state civil penalties, $600,000 to improve Lake Conway's water quality and $280,000 for the state's legal costs.

The Justice Department argued Tuesday that Central Arkansas Water "fails to recognize the significance" of a safety provision in the decree that would require Exxon Mobil to treat its entire northern section as "susceptible to longitudinal seam failure" under federal regulations.

"This designation will require them [the subsidiaries] to impose more frequent and heightened levels of testing and monitoring of the pipeline from Illinois to Texas, changing how ExxonMobil approaches pipeline safety on the Pegasus Pipeline," the department wrote. "Whether ExxonMobil should have designated the pipeline as susceptible to seam failure before the rupture would be a central issue in dispute at trial."

Central Arkansas Water oversees Lake Maumelle, which provides drinking water to more than 400,000 central Arkansans. The underground pipeline runs through about 13.5 miles of the lake's watershed.

The Justice Department said "much of CAW's suggestions regarding specific technical improvements for testing and restart are based on its consultant's criticism of ExxonMobil's proposed remedial plan from March 2014."

"Importantly, CAW fails to acknowledge that PHMSA did not approve the proposed plan and sent it back to ExxonMobil as inadequate and in need of further development," the department added.

Exxon spokesman Christian Flathman said in an email interview Tuesday that the safety administration returned the remedial work plan, which Exxon Mobil had submitted in March 2014, with comments in April 2014.

Flathman did not directly answer a question Tuesday on whether Exxon Mobil disputed that its work plan was inadequate. He did, however, suggest that the companies hope to use the Pegasus again. The pipeline's 211-mile southern section, all in Texas, is newer than the rest of the line and already has resumed operation.

The Pegasus "has in the past played an important role in connecting energy markets, and it is anticipated that it will do so in the future," Flathman wrote.

Exxon Mobil would only restart the line "when it is safe to do so" and has federal approval, he said. The "decision-making process will take market conditions into account."

The Justice Department also rejected suggestions that the proposed decree require relocation of the pipeline.

"Given the current long-term idling of the pipeline, the uncertainty of future operations, and the immense cost and effort that would be involved in ExxonMobil re-routing the existing pipeline, the comment suggesting that the United States reject the Consent Decree and attempt to negotiate a relocation of the pipeline is not a reasonable alternative in this situation," the department wrote.

The department called the proposed decree "fair, adequate, reasonable, and consistent with the goals and purposes of the Clean Water Act."

The department said it was already aware of concerns by those, including Central Arkansas Water, that submitted comments on the proposed decree and took those concerns into account during negotiations with Exxon Mobil.

"After giving careful attention to the comments ... the United States has determined that none of the comments introduces new facts or arguments that warrant reconsideration of the alleged violations or the terms of the settlement, and none presents a valid basis for the United States to withhold its consent to the settlement," the department wrote.

Further, it contended, "[Central Arkansas Water's] rhetoric on the supposed insanity of the settlement appears to be based on a misunderstanding, or disregard, of key facts and the federal regulatory mechanisms at work in this situation."

Central Arkansas Water spokesman John Tynan said Tuesday that he was already aware the Pegasus wouldn't be restarted this year.

"If the overall intent of the motion is to proceed forward and more or less dismiss all of the comments that Central Arkansas Water and others submitted, then obviously Central Arkansas Water needs to review the motion in detail," Tynan said. "We will be looking at all of our options moving forward."

A safety administration spokesman did not return email and phone messages seeking comment Tuesday. The agency has not released the comments it made on the work plan.

The agency notified Exxon Mobil of nine probable safety violations in November 2013 -- a finding that included proposed fines totaling $2,659,200. Exxon Mobil has appealed.

A Section on 07/08/2015

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