Fines for oil spills and other pipeline accidents are surging under the Biden administration, but industry critics and supporters aren’t sure if the trend will last.
Federal civil penalties for pipeline safety violations topped $10 million for the first time in 2021 and rose again last year to $11.6 million. During the Trump administration, fines averaged about $4.5 million per year.
Pipeline safety has taken on a higher profile in recent years, both in terms of protecting vulnerable communities and trying to prevent methane leaks that exacerbate climate change. Some observers say conclusions shouldn’t be drawn from a mere two years of data. But others say the rising numbers highlight an increased vigilance on pipeline safety from the Biden administration.
“It kinda jumps out at you,” said Bill Caram, executive director of the Pipeline Safety Trust, a Bellingham, Wash.-based advocacy group. “This administration seems to be taking pipeline safety more seriously than previous administrations, including Democratic administrations.”
Other signs, he said, include industry fighting harder against the new rules it has proposed.
The average amount of each fine sought by the Pipeline and Hazardous Materials Safety Administration also jumped substantially in 2021 before growing in 2022 to nearly $264,000. A recent large fine for an offshore California oil spill caused the average penalty for this year, so far, to surge to nearly $367,000.
Any shift comes as pipelines become an increasingly controversial part of the climate debate. PHMSA, the federal pipeline regulatory agency, is preparing new regulations to crack down on emissions of methane from pipeline infrastructure.
President Joe Biden is drawing heat for agreeing to force completion of the Mountain Valley pipeline. And his administration’s plans for pipelines for carbon capture and sequestration to fight climate change are drawing increasing criticism from both ends of the political spectrum.
PHMSA Deputy Administrator Tristan Brown said the agency has been working to speed up enforcement cases. That, he said, resolves cases faster, holds companies accountable and gets safety measures in place faster.
“We certainly work to hold non-compliant operators accountable for their actions with the underlying goal of advancing safety and improving protections for people and the environment,” Brown said in a statement to E&E News.
He also said the agency has been trying to foster greater collaboration with other agencies, such as EPA. PHMSA and EPA clashed in 2012 over how to penalize Enbridge Energy Partners LP for spilling hundreds of thousands of gallons of crude oil into Michigan’s Kalamazoo River.
Fines, though, are a small part of a company’s cost for an accident or a safety violation.
Companies reported spending $386 million to comply with PHMSA orders and enforcement actions from 2018 to 2022. That’s more than 10 times the $37 million in fines sought by the agency during that time.
And that $386 million is probably a huge undercount. The amount comes from a standing request from PHMSA asking companies to report what they spend on compliance. Few do. The agency received data for only 21 of the 1,100 enforcement cases — including cases with no fines — during the time period.
“With impactful pipeline incidents [being] relatively rare, especially in light of the 20 billion barrels of liquid energy we deliver each year, it’s hard to base a trend on 2 years of data and spikes for isolated cases,” said John Stoody, a vice president at the Liquid Energy Pipeline Association, which represents operators shipping crude oil, carbon dioxide, gasoline and other liquids, in an email.
Getting attention
During his tenure, Brown’s Trump-appointed predecessor, Skip Elliott, threw cold water on the idea that big fines would increase safety during his tenure.
It’s “not as though we are going to inspire further carefulness with punitive measures,” Elliott told the members of two oil and gas trade groups in a 2018 speech.
But he said they can still be useful. In a phone interview with E&E News, he said fines can send a strong message to problematic operators — “those companies that put their proverbial middle finger up.”
“That was the way you could get someone’s attention,” Elliott said. “I hate to say it, but sometimes that’s what it took.”
Brown avoided criticizing Elliott, instead praising his predecessor’s ability to increase and strengthen PHMSA’s enforcement actions. He also said Elliott provided guidance on the process of increasing the agency’s fining authority.
“I’m grateful for Skip’s effort to help modernize PHMSA’s civil penalty system,” Brown said.
PHMSA is a relatively small unit of the Department of Transportation with a $300 million annual budget and roughly 600 employees.
PHMSA’s online records go back to 2002, when it was still part of the Department of Transportation’s Research and Special Programs Administration. The data has limitations. Numbers surge when a large fine is levied because of an egregious accident. Cases can take years and span presidential terms, so the work of one administration can be reflected in the next.
From 2002 to 2008, when President George W. Bush was in office and PHMSA was created as an agency, fines averaged a little less than $80,000 per case.
In 2002, the agency proposed penalties of nearly $1.8 million, with an average fine of slightly more than $38,000. The rise since then has been fairly steady, except in 2008 when the agency sought a $3.4 million fine against El Paso Corp. in connection with a 2006 fatal explosion on a pipeline in Wyoming.
There was another spike in former President Barack Obama's years. In 2012, PHMSA officials touted their "record" $3.7 million fine against Enbridge Energy Partners for spilling hundreds of thousands of gallons of crude oil into Michigan's Kalamazoo River in 2010. EPA officials, though, privately derided the penalty as "very small." During Obama's tenure, the average fine was about $135,000.
The largest fine sought during the Trump administration was $864,000 in connection with a 2014 explosion at a liquefied natural gas facility in Plymouth, Wash., that led to five injuries and $72 million in property damage.
In the first two years of Biden's tenure, penalty cases averaged $236,000 each. That figure was driven up by some of PHMSA's largest fines, including a nearly $4 million penalty sought against Denbury Inc. for a carbon dioxide pipeline rupture in Mississippi that sent 45 people to the hospital.
The accident gained attention after an examination of the Mississippi rupture by the Climate Investigations Center, which monitors the activities of companies and other groups. Carbon dioxide pipelines also emerged as a hot issue because the 2021 bipartisan infrastructure law that Biden signed promoted carbon capture projects with big tax incentives.
'Strong regulator'
Brown rolled out the penalty in coordination with the announcement of new, tougher rules for carbon capture pipelines.
PHMSA officials say that for cases involving civil penalties or proposed compliance actions in 2022, they reduced the average time to initiate and fully close an enforcement case to 323 days from 405 days in 2020. From 2009 to 2022, the agency says it reduced the average time by 76 percent.
The Interstate Natural Gas Association of America, which represents large interstate pipeline companies, said the numbers demonstrate PHMSA's focus on regulation.
"We appreciate PHMSA being a strong regulator, and our members work hard every day to reduce the overall number of pipeline events. PHMSA has the latitude to assess penalties based on the severity of the events that they evaluate and the data bears that out," Ben Kochman, INGAA's director of pipeline safety policy, said in a statement.
The Pipeline Safety Trust's Caram said his applause for the Biden administration's approach to pipeline safety goes beyond enforcement and penalties to the regulations it has been drafting and implementing. That includes regulating gathering lines in rural areas, strengthening safety requirements for gas transmission lines and bolstering environmental requirements for pipelines in the Great Lakes region.
"All of these are really strong rules," Caram said. "They've been fought by industry at levels we haven't seen before."
Still, he said, the agency has a long way to go. Congress sharply limits PHMSA's ability to levy big fines, he said. PHMSA hasn't been as aggressive as some safety advocates want with the authority it does have.
A case in point for Caram is the record fine that PHMSA sought against Denbury for the Satartia, Miss., rupture. PHMSA dropped the fine by $1 million in settling the case, and Denbury did not have to admit any wrongdoing.
"From our perspective, that was disappointing to see," Caram said.
Denbury did not immediately return a request for comment Monday.
Brown said PHMSA is required to take into account "mitigating evidence" a company produces after being cited an enforcement action is issued, and Denbury did so.
"The operator also agreed, without exception, to undertake all of PHMSA's proposed compliance actions, which are aimed at improving safety and preventing incidents like the one that impacted Satartia, MS," Brown said in a statement.
The reduced amount was 0.6 percent of Denbury's profits for 2022, Caram said. He said that makes him question how much the fine would serve as an incentive to improve safety.
"It is not meaningful enough to change an operator's behavior," he said.
