President Trump’s recent executive orders have benefited the oil pipeline industry in a number of ways, including most notably, giving the final “okay” to the Dakota Access Pipeline. But some legislative mandates have been out of the reach of the President’s pen. On April 27, the federal Pipeline and Hazardous Materials Safety Administration (“PHMSA”), within the Department of Transportation, released a final rule revising its maximum penalties for violations of pipeline safety laws. The rule titled, Pipeline Safety: Inflation Adjustment of Maximum Civil Penalties, was issued pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which requires federal agencies to adjust their civil monetary penalties annually to account for changes in inflation. So what’s changed?
A pipeline operator in violation of 49 U.S.C. § 60101 et seq., including requirements for excess flow valves and pipeline facility standards, may be fined $209,002 for each violation for each day the violation continues, with a maximum penalty not to exceed $2,090,022 for a related series of violations, which is an increase from the $2,056,380 maximum. Violations of 49 U.S.C. § 60103 relating to minimum safety standards for designing and installing new liquefied natural gas pipelines, and operation and maintenance standards, may face a penalty up to a maximum of $76,352 which may be in addition to other penalties. The previous penalty was $75,123 for this section. Finally, a violation of 49 U.S.C. § 60129 which protects employees from workplace discrimination carries a maximum penalty of $1,214, increased from $1,194. The maximum fine for a related series of violations will be capped at approximately $2.09 million, which is increased from $2.06 million.
While only inflationary adjustments, the increased fines apply broadly to the transport of liquefied natural gas, petroleum, biofuels and other hazardous liquids through pipelines. While the standalone fines do not represent a significant increase, together the new fines can add up to a substantial sum when everything is said and done. Will revisions be coming anytime soon to this statutory scheme? Only time and the current Congress will tell, but for now Congressional leaders have their hands full with larger legislative goals. In the meantime, Operators should continue to adhere to PHMSA’s pipeline safety requirements to avoid paying a penalty in the first instance.