III. THE REGULATORY FRAMEWORK

In l968, Congress adopted the first comprehensive federal pipeline safety statute, the Natural Gas Pipeline Safety Act (NGPSA), in response to a tremendous increase in the nation's use of natural gas, the concurrent growth in population, and several well publicized gas pipeline accidents. ¹² Eleven years later, in 1979, Congress passed a parallel regulatory program for hazardous liquid pipelines with passage of the Hazardous Liquid Pipeline Safety Act (HLPSA). ¹³

Under both statutes ('the Acts'), the U. S. Department of Transportation (DOT) was granted primary regulatory authority to establish reporting and record-keeping requirements for the industries, to set technical standards for the design, construction, testing, and maintenance of pipeline facilities, and to enforce safety standards. This authority was delegated, in turn, to the Office of Pipeline Safety (OPS) in the Research and Special Programs Administration. By 1970, OPS had adopted core requirements for the gas pipeline industry ¹⁴, with regulations for liquified natural gas following in 1980 ¹⁵, interstate hazardous liquid in 1981, and intrastate hazardous liquid in 1985. ¹⁶

Although the Acts envisioned that pipeline safety would be primarily a federal responsibility, they also encouraged a federal-state partnership whereby the federal government would have set and enforce national safety standards for interstate pipelines but states would have the freedom to assume day-to-day inspection and administrative duties and could even adopt more stringent safety standards for intrastate pipelines. Specifically, the Acts provided that OPS could "certify" states to assume federal jurisdiction over intrastate pipelines if they had adopted the federal standards (and did not adopt more stringent standards that were "incompatible" with federal standards).

Certified states could also become "agents" of OPS to administer the interstate program, except that all interstate enforcement authority would remain with OPS. States were encouraged to take over both programs through a cost-reimbursement formula that enabled states to recover up to fifty percent (50%) of their costs from the federal government. ¹⁷

This bifurcated federal-state system for gas and liquid pipelines has led to a cumbersome and confusing regulatory network. As of today, 48 states are certified to implement the intrastate gas program, 12 serve as agents to administer the interstate gas program, 2 are permitted to inspect intrastate gas or liquid facilities but not to enforce federal standards, 12 are certified to implement the intrastate liquid program, and 4 serve as agents to administer the interstate liquid program. ¹⁸ It is a system that only OPS and the pipeline industry can figure out.

The Acts give OPS broad enforcement powers to impose civil money penalties of up to $25,000 per day per violation, to obtain injunctive relief, punitive damages, and criminal penalties for willful violations. ¹⁹ The agency can also utilize a special statutory administrative tool called a "hazardous facility order," which allows OPS to make a finding, after notice and hearing, that a pipeline or other facility is either
    (1) hazardous to life, property, or the environment; or (2) constructed or operated, or a component of the facility is constructed or operated, with equipment, material, or a technique the Secretary [of Transportation] decides is hazardous to life, property or the environment. ²⁰

Certified states can assume enforcement authority for intrastate, but not interstate, facilities.

The only major aspect of on-shore pipeline regulation ²¹ that has not been assigned to OPS has been the siting of new pipelines. ²² The Natural Gas Act provides that the Federal Energy Regulatory Commission (FERC) has jurisdiction over the siting of new interstate gas pipelines ²³ and new liquid pipelines are governed by applicable state and local laws.

With its primary jurisdiction over pipeline safety and broad powers to develop a strong safety program, the Office of Pipeline Safety has failed to live up to its Congressional mandate. From its inception in 1970, the agency has been underfunded, understaffed, and largely beholden to the industry it is supposed to regulate.

For the past 25 years, OPS has consistently lagged behind Congress and its watchdog agency, the National Transportation Safety Board (NTSB), when it has come to taking the lead on pipeline safety issues. For example, NTSB has recommended for 25 years that OPS require gas pipeline operators to install certain equipment known as "excess flow valves" to isolate failed pipelines after they break, thus reducing the risk of fire and explosion. In 1992, Congress required the agency to formulate performance standards for such valves and to determine in what circumstances, if any, they must be installed. Three years later, in 1995, OPS finally concluded that no such valves should be required. ²⁴

In response to a series of major oil pipeline accidents, Congress in 1992 made an historic change in the agency's charter. OPS was ordered to incorporate "protection of the environment" into its regulatory mission and to establish criteria for identifying pipelines located in high density population areas and in environmentally sensitive areas in order that higher safety standards and environmental protection measures could be applied in those high-risk areas. The agency was given until two years, October 24, 1994, to complete this task. ²⁵ Two years after the deadline, no final rule on the criteria has been adopted, much less on the actual selection of the sites.

But perhaps most damaging is the agency's dismal enforcement record. During a period when other federal regulatory agencies, particularly in the environmental arena, have levied increasingly tough penalties against polluters, OPS has rarely imposed penalties against pipeline operators with poor safety records. During the period from 1987 to 1989, for example, at a time when over 33 million gallons of petroleum were spilled in 580 separate accidents, OPS collected fines of only $188,000. This adds up to less than five cents per gallon spilled. ²⁶