United States: Pipeline Safety: PHMSA Releases New Rule On Emergency Authority

On Monday, October 3, 2016, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released an interim final rule (IFR) establishing procedures to implement new imminent hazard authority created by the PIPES Act of 2016. The PIPES Act and PHMSA's new rule give the agency the authority – for the first time – to issue emergency orders to all or a segment of owners and operators of gas or hazardous liquid pipelines to abate an imminent hazard. This new tool is intended to augment PHMSA's existing authorities by giving the agency the ability to respond swiftly to conditions that pose a substantial threat to health and safety, like the recent natural gas leak at Aliso Canyon in California.

The IFR takes effect immediately upon publication in the Federal Register; however, the public will have 60 days from the date of publication to submit comments that will inform a final rulemaking. The IFR is currently available on the PHMSA site.

What's Notable About the PIPES Act?

President Obama signed the Protecting our Infrastructure of Pipelines and Enhancing Safety Act (the "PIPES Act") into law on June 22, 2016. The PIPES Act reauthorizes PHMSA's gas and hazardous materials pipeline program and is most notable for Section 16, which amends 49 U.S.C. § 60117 to provide PHMSA with new emergency authority to act immediately to abate an imminent hazard. Prior to the enactment of Section 16, PHMSA's authority to respond to pipeline incidents was limited to issuing (1) binding corrective action orders or safety orders to a specific pipeline facility or (2) non-binding safety advisories to relevant portions of the pipeline industry. PHMSA had no imminent hazard authority and no ability to take action to prevent conditions or practices that affect or pertain to more than one pipeline owner or operator. This stood in stark contrast to PHMSA's emergency authority to address imminent threats involving the transportation of hazardous materials ("hazmat") in other modes of transportation and constrained PHMSA's ability to take aggressive action to protect human health and safety in the pipeline sector.

Although Section 16 gives PHMSA important new authority, it reflects a carefully crafted compromise between members of Congress who wanted to provide PHMSA with emergency hazard authority to respond to incidents like Aliso Canyon and members who were concerned that PHMSA might not use such authority appropriately. The compromise language enacted into law gives PHMSA imminent hazard authority, but it also ensures that PHMSA must act reasonably and judiciously. Among other requirements in Section 16, PHMSA must consider three factors in determining whether to issue an emergency order: (1) "[t]he impact . . . on public health and safety"; (2) "[t]he impact, if any, on the national or regional economy or national security"; and (3) "[t]he impact . . . on the ability of owners and operators of pipeline facilities to maintain reliability and continuity of services to customers." PIPES Act Section 16, 49 U.S.C § 60117(o). The PIPES Act also requires PHMSA to consult with relevant federal and state agencies and "other entities knowledgeable in pipeline safety or operations" in considering the three factors set out above. Id. In addition, the PIPES Act requires that the emergency order must be in writing and that the order will cease to be effective if PHMSA fails to respond to an administrative petition for review within 30 days of its filing. Id. Finally, the PIPES Act provides for "expedited" judicial review in federal district court. Id. All of these provisions are intended to ensure that PHMSA engages with relevant stakeholders before issuing an order, reasonably justifies an emergency order, and narrowly tailors the order to abate only the imminent threat at hand.

Why is the Rule Necessary?

According to PHMSA, the IFR is necessary because the PIPES Act directed the agency to issue temporary regulations within 60 days of enactment of the legislation and final rules no later than 270 days after enactment. As a practical matter, the IFR largely mirrors the statutory mandates. But the IFR gives PHMSA the opportunity to explain why it believes new authority was needed:

  1. This new enforcement tool will allow the Administrator to issue an emergency order either prohibiting an unsafe condition or practice or imposing an affirmative requirement when an unsafe condition, practice, or other activity in the transportation of natural gas or hazardous liquids poses a threat to life or significant harm to property or the environment. . . . [It] is intended to serve as a flexible enforcement tool that can be used to address time-sensitive, safety conditions affecting multiple owners/operators, facilities, or systems that pose a threat....

IFR at 7-8.

PHMSA justifies the issuance of the IFR rather than a proposed rule based on good cause. The agency asserts that the statutory mandate to issue temporary rules within 60 days of the passage of the PIPES Act makes notice and comments on a proposed rule impracticable.

The significant aspects of the IFR are twofold. First, PHMSA lays out the procedures it intends to follow in exercising its new authority and considering administrative petitions for review of emergency orders. Second, the IFR is notably silent regarding how PHMSA might interpret and apply key elements of its new authority. For instance, what criteria or analytical approach, if any, will PHMSA use to evaluate the three "considerations" prescribed by statute? How will PHMSA determine which federal agencies, state agencies and "other entities knowledgeable in pipeline safety operations" are necessary to satisfy the purposes of its consultation requirements? What does "consultation" mean in practice? These are critical issues that stakeholders may want fleshed out.

What's Next?

The IFR takes effect immediately, but PHMSA is seeking comments to inform a final rule, which it intends to issue by March 19, 2017. Stakeholders who have an interest in shaping the final rule should consider filing comments with PHMSA within 60 days of publication of the IFR in the Federal Register. Publication is expected the week of October 10, 2016.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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