The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued a General Policy Statement for civil penalties (“Penalty Framework”) on October 17, 2016. The Penalty Framework allows a respondent in a PHMSA enforcement case to request a proposed civil penalty calculation related to its case, and provides a penalty range with corresponding factors used in calculating the penalty amount. Prior to publishing the Penalty Framework, the PHMSA only provided its civil penalty framework upon request.
In imposing a civil penalty, the PHMSA must consider five factors:
(1) The nature, circumstances and gravity of the violation, including adverse impact on the environment;
(2) The degree of the respondent’s culpability;
(3) The respondent’s history of prior offenses;
(4) Any good faith by the respondent in attempting to achieve compliance; and
(5) The effect on the respondent’s ability to continue in business.
49 U.S.C. § 60122.
The PHMSA published the Penalty Framework with a chart that sets out penalty calculation guidelines. The chart includes three columns: assessment consideration (nature, circumstances, gravity, culpability, etc.); range of conduct; and civil penalty range. The PHMSA will calculate the civil penalty for a single violation by combining the amounts assigned under each assessment factor, but application of the assessment factors in an individual case will depend on the facts specific to that case.
The Penalty Framework chart provides transparent and relatively concrete monetary penalty amounts. However, certain rows of the chart do not specify a figure. For example, depending on the gravity of a violation, a penalty may be calculated at $1,728 on the low end to “unlimited” at the high end. The gravity of the violation may include “Incident Consequences Factor Multipliers” for the base penalty in the case of a fatality or hazardous liquid release. Other assessment considerations may lead to a reduced penalty, such as good faith and operator action to address non-compliance prior to a violation.
Although the Penalty Framework may be useful for pipeline owners and operators in a PHMSA enforcement action, the PHMSA has made clear that such policy will not result in lighter penalties. In contrast, “PHMSA will, as appropriate, issue higher penalties in order to apply stronger deterrence and drive down incident risk.” To date in 2016, the PHMSA has closed 140 enforcement actions, as compared to a total of 195 closed enforcement actions in 2015 and 184 in 2014. It appears that the Penalty Framework seeks to impose higher accountability on both the PHMSA and pipeline owners and operators, with safety as the number one priority.