Appeals panel voids Exxon pipe-risk order

Oil giant followed U.S. integrity regulations at time of 2013 spill, decision says

A federal appeals court panel has handed Exxon Mobil a victory in the oil giant's clash with the government over a regulatory order resulting from the Pegasus pipeline oil spill in Mayflower more than four years ago.

In a decision issued Monday and made public Tuesday, a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans vacated an order that Exxon Mobil revise its process for determining the seam-risk factor for all of the company's older pipes still used in lines similar to the aging Pegasus.

In an accompanying opinion, the court wrote: "The fact that the Mayflower release occurred, while regrettable, does not necessarily mean that [Exxon Mobil] failed to abide by the pipeline integrity regulations in considering the appropriate risk factors. If it did, then an operator that experiences a seam-related pipeline leak on its pipeline system could never escape liability under pipeline integrity regulations.

"The unfortunate fact of the matter is that, despite adherence to safety guidelines and regulations, oil spills still do occur," the court added.

The federal Pipeline and Hazardous Materials Safety Administration had issued the now-vacated order in October 2015. It could have applied to more than 1,000 miles of pipeline that Exxon Mobil has said was in similar condition to the Pegasus and that was subject to federal safety regulations.

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Exxon Mobil contended the agency was wrong to apply its order to pipelines other than the Pegasus and said the same kind of pipe used for the Pegasus is in 25 percent of the nation's oil pipelines.

The oil industry has known for decades that pre-1970s electric resistance welded pipe is more susceptible to seam failure than newer pipe. The older pipe is no longer manufactured.

In its other rulings, the court affirmed one of the safety administration's nine safety-violation findings but questioned the related fine.

The court concluded that Exxon Mobil had misled the government in 2011 on whether it had conducted a specific pipeline assessment. But the court said the government had not properly determined that this action caused the March 29, 2013, accident in Mayflower. So the safety administration should re-evaluate the corresponding $783,300 fine, the court said.

The appeals court vacated five other parts of the regulatory agency's October 2015 order.

"Because the regulations unambiguously instruct pipeline operators to 'consider' certain risk factors, and because the evidence demonstrates that [Exxon Mobil] did carefully consider those factors, we conclude that the agency's decisions" pertaining to those findings "were arbitrary and capricious," the court's opinion said.

The court let stand three of the nine findings. The court said Exxon Mobil had forfeited those arguments because it did not challenge them in proceedings originally before the safety administration.

The safety administration had fined Exxon Mobil $2,630,400. The court vacated $1,634,100 of those fines in addition to ordering the $783,300 re-evaluation.

The case now returns to the federal agency for further proceedings in keeping with the court's opinion.

In an email Tuesday, Exxon Mobil spokesman Todd Spitler said, "We agree with the Court's decision that [subsidiary Exxon Mobil Pipeline Co.] complied with pertinent regulations applicable to inspecting and managing the Pegasus pipeline."

Spitler said the decision reaffirms that Exxon Mobil "expressly and properly considered seam failure susceptibility of the Pegasus pipeline prior to the 2013 incident, following the process established by" the safety administration in a previously commissioned report.

"We share PHMSA's goal to ensure public safety and will continue to work with industry and PHMSA on ways to further enhance pipeline system integrity," Spitler added.

The safety administration did not reply to an emailed request for comment, including whether it hopes to appeal to the U.S. Supreme Court.

The Pegasus pipeline, built in 1947-48, cracked open between two houses in Mayflower's Northwoods subdivision on a Good Friday afternoon. Tens of thousands of gallons of heavy crude spilled into the neighborhood and a cove of Lake Conway.

Exxon Mobil shut down the roughly 850-mile-long Pegasus running through Arkansas, Illinois, Missouri and Texas shortly after the accident. Only a 211-mile section in Texas has reopened.

Judge James Graves Jr., a 5th Circuit panelist, issued a brief opinion saying he agreed with the decision to vacate five of the findings. He said he also agreed that the misrepresentation finding should be affirmed but said he would give the agency more deference in enforcement.

State Desk on 08/16/2017

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