Exxon fights U.S. post-spill policy, seeks abidance delay

Exxon Mobil has appealed a federal agency's final order resulting from regulatory violations that the government found after the oil giant's Pegasus pipeline cracked open and spilled thousands of gallons of heavy crude oil into a Mayflower neighborhood more than three years ago.

"We respectfully disagree with the [federal] Pipeline and Hazardous Materials Safety Administration's ... after-the-fact changes of its regulatory interpretation and have appealed their final order," Exxon Mobil spokesman Ashley Smith Alemayehu said in an email Tuesday to the Arkansas Democrat-Gazette.

Exxon Mobil Pipeline Co., a subsidiary of Exxon Mobil Corp., also asked the 5th U.S. Circuit Court of Appeals in New Orleans on July 6 to stay, or put a hold on, the safety administration's compliance order, which has some deadlines set to expire July 30.

That order contains directives that "are not supported by applicable regulations or technical guidance," Smith Alemayehu said.

[Click here to read Exxon's appeal.]

The far-reaching order requires Exxon Mobil to modify its integrity-management program to ensure that it adequately identifies risks and addresses all of the company's pre-1970 electric-resistance welded pipe, not just problems with the Pegasus pipeline.

Built in 1947-48, the Pegasus line and some other pre-1970 carriers used a type of pipe that is no longer manufactured and that the industry has known for decades has an increased risk of seam failure. The problems stemmed from manufacturing defects such as hook cracks -- what Exxon Mobil has said caused the Pegasus pipeline to crack open in Mayflower's Northwoods subdivision on Good Friday, March 29, 2013.

Exxon Mobil shut down the 861-mile pipeline -- running from Nederland, Texas, to Patoka, Ill. -- shortly after the accident.

Only a 211-mile stretch in Texas has resumed service, and Exxon Mobil said it has "no current plans" to seek permission to restart the larger portion of the pipeline.

The appeals court on Tuesday agreed the federal government could have until Aug. 2 to respond to the proposed stay pending the court's review of the appeal.

In April, Exxon Mobil paid the federal government's fine of $2,630,400. For a company as large as Exxon Mobil, though, the compliance order could have a much greater impact than the fine.

In seeking a stay, the company said the compliance order "requires extensive and costly changes to current practices."

"[The safety administration's] action, if allowed to stand, will cost millions of dollars to implement what amount to agency policy changes ... imposed on one company, and not currently required of all pipeline operators," Exxon Mobil argued.

The safety administration's order "departed from the regulations' unambiguous text and abandoned its prior interpretation."

"It also repudiated the industry-standard methodology for determining a pipeline's 'susceptibility to longitudinal seam failure' under federal regulations," Exxon Mobil argued. "Ultimately, [the safety administration] seeks to create de facto new regulations imposing new requirements for assessing seam failure susceptibility for [low-frequency -- electric resistance welded] pipe."

Exxon Mobil said its appeal asks that the court stop the government "from enforcing relevant portions" of the final and compliance orders.

The company also wants the court to send the matter back to the safety administration for review in accordance with existing regulations.

The company says that in addition to or in place of that decision, the court should order the safety administration to use "notice-and-comment rule-making to undertake these extensive pipeline-policy and regulatory changes."

Even before the safety administration issued the final order, the company said, it "had already made extensive improvements to its organizational structure and pipeline risk and integrity management programs."

Those upgrades included "improvements to the processes associated with identifying, assessing the risk of, and addressing the threat of potential seam failures " on similarly welded low-frequency pipelines.

The government-order "changes would immediately result in multiple pipeline systems being subjected to more frequent, costly, and potentially destructive assessments, regardless of the actual risks presented by the pipeline systems and without clear regulations or fair notice," Exxon Mobil said.

Further, if the court reverses the order but doesn't issue a stay meanwhile, Exxon Mobil "will have unnecessarily spent millions of dollars, been placed at a competitive disadvantage as compared to other pipeline operators that will not have incurred such expenses."

The company also again denied that it had violated safety regulations.

State Desk on 07/20/2016

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