CHAPTER 20. The Federal Pipeline Safety Statutes: The Need for Increased Company Awareness

CHAPTER 20 The Federal Pipeline Safety Statutes: The Need for Increased Company Awareness John T. Scott and John E. Graykowski Crowell & Moring Washington, D.C. Synopsis 20.01. Introduction. 20.02. The Office of Pipeline Safety. [1]--Statutory Authority. [a]--legislative History of NGPSA and HLPSA. [b]--1988 Amendments to NGPSA and HLPSA. [2]--Scope of OPS Jurisdiction. [3]--Federal-State Cooperative Efforts. 20.03. Enforcement Tools. [1]--Civil and Criminal Penalty Provisions. [2]--Hazardous Facilities Orders. [3]--Citizen Suits as an Enforcement Tool. 20.04. The Enforcement Process. [1]--Response Options. [2]--Hearing Procedures. [3]--Judicial Review. [4]--Conclusion. 20.05. OPS Enforcement and The Administrative Procedure Act. [1]--APA Rulemaking Requirements. [2]--The Air Transport Association Decision. [3]--Promulgation of OPS Civil Penalty Rules. 20.06. Procedural Due Process and the OPS Procedures. [1]--Due Process Requirements for Agency Adjudications.

[2]--Due Process Analysis of OPS Procedures. [3]--Burden and Standard of Proof. [4]--Lack of Impartial Decisionmaker. [5]--Lack of Criteria for Civil Penalty Assessments. 20.07. Suggested Remedies to Cure OPS Enforcement Problems. 20.08. Conclusion. 20.01. Introduction. In a corner of the United States Department of Transportation (DOT) lies an agency with extensive authority over the operations of the nation's pipeline industry. This agency, the Office of Pipeline Safety (OPS), is responsible for the regulation and safety of oil, gas, and hazardous liquids pipelines and related facilities. It accomplishes its mission directly and through a cooperative regulatory program with the states, pursuant to two separate but parallel federal statutes, the Hazardous Liquid Pipeline Safety Act and the Natural Gas Pipeline Safety Act. Recent amendments by Congress to these major federal statutes, and new rulemakings by OPS setting tougher safety standards for pipelines, make it essential for companies transporting oil and gas by pipeline to be aware of what these statutes require and of the potential liabilities they create. This Chapter will provide an overview of the two federal pipeline statutes and of their implementation by OPS. The pipeline statutes raise several current issues of concern to pipeline operators. First, amendments to the statutes now give OPS the power to impose substantially more severe penalties for violations of the standards. (1) Second, the citizens' suit remedy in both statutes creates a source of liability above and beyond the sanctions available to OPS; liability that can include attorneys fees for parties who bring their own "private enforcement actions" against a pipeline operator. (2) Third, OPS's enforcement regulations pose numerous difficulties for pipeline operators who are charged with a violation. OPS has the authority to develop and promulgate safety standards affecting the entire pipeline industry and the power to enforce those regulations through the imposition of civil or criminal penalties. The Associate Administrator for Pipeline Safety (Associate Administrator) has the authority to issue final orders imposing significant monetary penalties on pipeline operators or requiring them to modify the operation of their pipeline facilities. The enforcement regulations under which these agency actions can be taken were issued in final form without any advance notice or an opportunity for public comment. Because they can have a substantive adverse impact on operators, there is a serious question as to whether the rules were adopted in violation of the federal Administrative Procedure Act and are thus invalid. (3) It also appears that persons subject to OPS enforcement actions may not be offered adjudicative procedures which afford them adequate due process protections. Although significant civil penalties can be assessed, in amounts as high as $500,000 for a single occurrence, and a pipeline can be shut down, the enforcement procedures OPS has adopted are extremely informal and provide a minimal opportunity for the operator charged with a violation to develop a record. (4) This Chapter will examine the OPS enforcement procedures in light of due process considerations that are found in other administrative proceedings. Congress and the courts have determined that agency adjudications which lead to significant civil penalties implicate due process rights, and that those rights must

be protected in the procedures which govern those adjudications. The Chapter concludes by proposing new procedures which will better protect operators' rights to a full and fair adjudication. (5) The natural gas pipeline distribution system in the United States consists of more than 1.6 million miles of pipelines which are owned or operated by more than 2,000 entities. This includes approximately 37,000 miles of gathering lines, 290,000 miles of transmission lines, 812,000 miles of distribution mains, and 406,000 miles of service lines. In addition, approximately 81,000 master meter operators are regulated by OPS. (6) DOT's jurisdiction over hazardous liquid pipelines, which currently transport mostly petroleum and petroleum products, extends to more than 208 operators and approximately 155,000 miles of pipelines. (7) Fatalities and injuries do occur in conjunction with the operation of pipelines. For example, in 1988, the last year for which OPS has published figures, there were 258 reported incidents in natural gas transmission, gathering, or distribution pipelines. (8) These incidents resulted in eighteen fatalities and eighty-seven injuries. (9) With respect to hazardous liquid pipelines, in 1988 there were 196 incidents reported by operators which resulted in two fatalities and nineteen injuries. (10) Beyond the safety of individuals, pipeline failures can also result in environmental damage to surrounding areas. For example, in 1988, more than 216,000 barrels of hazardous liquids, such as crude oil, diesel fuel, liquefied petroleum gas (LPG), and toluene were released as a result of pipeline failures. (11) Thus, while pipelines may be "one of the safest modes of transportation," (12) they do represent a risk to persons and property close to them. It is this risk that OPS attempts to reduce through regulation, enforcement, and research and development. 20.02. The Office of Pipeline Safety. OPS activities fall into six categories: (1) promulgation of pipeline safety regulations, (2) inspection of pipelines under federal jurisdiction, (3) enforcement of the regulations, (4) training of federal and state inspectors to inspect and enforce the regulations, (5) research and development projects to prevent pipeline failures, and (6) dissemination of data and educational materials to those involved in pipeline transportation. Of these, the two activities with the greatest direct impact on pipeline operators are the promulgation and enforcement of safety regulations. [1]--Statutory Authority. Pipeline safety jurisdiction has been vested in the DOT by Congress. The authority to enforce pipeline safety regulations has been delegated by the Secretary of Transportation to the Research and Special Programs Administration (RSPA) (13) which in turn has designated OPS as the lead enforcement agency. (14) Regulation of pipelines by OPS is governed by the following statutes: (1) the Natural Gas Pipeline Safety Act of 1968 (NGPSA), (15) (2) the Hazardous Liquid Pipeline Safety Act of 1979 (HLPSA), (16) (3) the Deepwater Port Act of 1974, (17) (4) the International Bridge Act of 1972, (18) (5) the Mineral Leasing Act, (19) and (6) the Outer Continental Shelf Lands Act. (20) However, most of the regulatory activities associated with pipeline facilities are based upon the statutory requirements of NGPSA and HLPSA. [a]--legislative History of NGPSA and HLPSA. NGPSA was originally enacted in 1968. It established minimum federal standards to govern the transportation of natural gas by pipeline and provided DOT with the statutory authority to regulate and enforce natural gas pipeline safety. DOT has exclusive federal jurisdiction over all interstate facilities, and

federal minimum standards are enforced in intrastate facilities through state inspection and enforcement programs. The scope of NGPSA reaches transmission lines, distribution lines, service lines to end-use customers, and other pipeline facilities. The Pipeline Safety Act of 1979 (21) amended NGPSA to improve DOT's enforcement and investigative powers. It also created a new statute for the regulation of hazardous liquid pipelines, the Hazardous Liquid Pipeline Safety Act. (22) Prior to enactment of the Pipeline Safety Act of 1979, (23) the transportation of hazardous liquids by pipelines was regulated in the federal criminal code under the Transportation of Explosives Act (TOEA). (24) The 1979 act was the result of heightened public and Congressional awareness of "potential safety problems associated with the transportation of" LNG and other hazardous materials. (25) Congress had received several reports from government oversight agencies which concluded that regulation of hazardous liquids transportation was "inadequate." (26) Congress also determined that OPS' predecessor agency, MTB, had a low priority within DOT as "reflected in the personnel policies for pipeline programs which left numbers of positions vacant,... the failure of the administration to appoint a permanent director, and the slowness of the MTB in promulgating several major rulemakings." (27) Congress determined that "NGPSA and TOEA [did] not provide all the necessary tools for a sensible and effective Federal pipeline safety program," (28) and thus enacted HLPSA, which mirrors the regulatory structure under NGPSA. The acts have periodically been reauthorized. In 1982, (29) 1984, (30) and 1986 (31) only relatively minor changes were made to DOT's pipeline safety inspection and enforcement authority. (32) [b]--1988 Amendments to NGPSA and HLPSA. In 1988, Congress enacted a major increase in the civil penalties that could be assessed for violations of pipeline safety regulations. (33) Previously, the maximum civil penalty was $1,000 for each violation with a maximum aggregate penalty of $200,000 for a series of related violations, and these levels had not been adjusted since the original enactments of NGPSA and HLPSA. The 1988 Act increased these levels to $10,000 for each violation, with a maximum aggregate penalty of $500,000. In making this change, Congress stated: "Enforcement experience under the statute indicates a need to strengthen DOT's authority with respect to civil penalties in order that they maintain their deterrent effect." (34) Congress felt that the existing penalty levels were too low to provide effective deterrence; by raising the maximum penalty DOT would have "greater discretion to adjust penalties more equitably with regard to the size of the particular company involved." (35) Furthermore, the Congress stated that the $500,000 level would allow DOT to "appropriately sanction particularly egregious violations, or those with catastrophic results." (36) The 1988 amendments made a number of other changes to increase OPS regulatory authority. Among these were: (1) authority to require that all pipeline operators meet minimum qualifications and be certified by OPS; (2) mandatory disclosure of information regarding the pipeline facilities; (3) authority to impose qualification requirements for states to meet; and (4) a requirement that every pipeline facility be inspected at least every two years, and authority to require testing of the pipeline facilities. [2]--Scope of OPS Jurisdiction. NGPSA and HLPSA establish federal regulatory jurisdiction over the transportation of gas or hazardous

liquids by pipeline. The acts also direct DOT to prescribe and enforce minimum federal safety standards applicable to the transportation of gas or hazardous liquids by pipelines. These standards apply to interstate and intrastate pipeline facilities. (38) DOT's authority to enforce the standards, however, does not extend to intrastate facilities if a State meets certain statutory conditions. In order to meet these conditions, a state must certify annually that it (1) has regulatory jurisdiction over intrastate pipeline facilities, (2) has adopted each federal safety standard established by DOT, (3) is enforcing each standard by means of inspections conducted by qualified personnel, (4) is encouraging and promoting programs to prevent damage to facilities as a result of excavation or other construction activity, (5) has authority to require record-keeping by operators "substantially the same" as provided in NGPSA and HLPSA, and, finally, that the law of the state "makes provision for the enforcement" of safety standards "by way of injunctive and monetary sanctions substantially the same as" those contained in NGPSA and HLPSA. (39) OPS has exclusive regulatory authority over interstate natural gas facilities, which are defined as those pipeline facilities subject to the jurisdiction of the Federal Energy Regulatory Commission. (40) The scope of this jurisdiction extends to the "gathering, transmission, or distribution of gas by pipeline, or its storage in interstate or foreign commerce." (41) The types of facilities covered by NGPSA include "new and existing pipe, rights-of-way, and any equipment, facility, or building used in the transportation of gas or the treatment of gas during the course of transportation." (42) OPS authority over hazardous liquids encompasses the "movement of hazardous liquids by pipeline, or their storage incidental to such movement, in or affecting interstate or foreign commerce." (43) The types of facilities covered by HLPSA include "new and existing pipe, rights-of-way, and any equipment, facility, or building used or intended for use in the transportation of hazardous liquids." (44) Federal Preemption of State Safety Standards. NGPSA and HLPSA contain provisions which preempt all state and local regulation of interstate gas and hazardous liquids facilities. (45) The legislative history of NGPSA supports this preemption. Congress found that the purpose of the act was "to provide for the prescription and enforcement of minimum Federal safety standards for the transportation of natural and other gas by pipeline and for pipeline facilities." (46) Courts have consistently held that this language left no room for "supplementary state regulation" and that "Congress intended to preclude the states from regulating in any manner" interstate facilities. (47) However, the acts permit states to impose "additional or more stringent safety standards for intrastate pipeline facilities," as long as those standards are "compatible with the Federal standards issued under this title." (48) There is, therefore, statutory and judicial support for the proposition that states and localities have a substantive role in pipeline safety regulation as long as their efforts are compatible with the federal scheme. [3]--Federal-State Cooperative Efforts. Both NGPSA and HLPSA provide for the implementation of federal-state cooperative regulatory programs which have enabled OPS to augment the resources applied to pipeline safety regulation. "The existing Federal resources alone could not adequately ensure the safe operation of pipeline facilities given the size of the regulated community and the complexity of pipeline transportation operations." (49) By means of a system of grants-in-aid, states are encouraged to participate in the cooperative program and assume responsibility for regulating intrastate facilities. (50) Through the annual certification of compliance

required by the statutes, (51) states are given full responsibility for the inspection and enforcement of safety standards. If a state is unable to meet the certification requirements, it can formally agree with OPS to inspect pipeline facilities but must leave enforcement actions to OPS. (52) Another aspect of the cooperative program enables states to inspect interstate facilities, but all enforcement actions must be referred to OPS. In return for assuming those regulatory duties, states receive federal grants-in-aid to defray the costs associated with the enforcement program. (53) Federal reimbursement is limited to a maximum grant level of fifty percent of the cost of personnel, equipment and state pipeline safety activities. If a state elects not to seek federal certification or enter into an inspection agreement, OPS will retain regulatory authority for all facilities in that state. Forty seven states, the District of Columbia, and Puerto Rico participate in the federal-state cooperative natural gas pipeline program and receive federal reimbursements. Alaska, Idaho, and South Dakota have elected not to particiate. OPS is responsible for all regulatory activities in those states. Only nine states are participating in the hazardous liquids program and are eligible to receive federal reimbursements. In 1988, federal reimbursements totalled $4,396,423 for natural gas-related programs and $293,701 for the hazardous liquids program. 20.03. Enforcement Tools. Both NGPSA and HLPSA provide civil penalties for violations of the statute or OPS regulations. Criminal penalties may also be assessed, but there is no indication that this authority has been used by OPS. Finally, OPS has the authority to require specific relief in the form of hazardous facilities orders. Another form of enforcement action is possible under NGPSA and HLPSA through the use of citizens' suits to obtain compliance with the statutes or OPS regulations. [1]--Civil and Criminal Penalty Provisions. Civil penalties can be assessed under both statutes, after notice and an opportunity for an informal hearing, in the amount of $10,000 for each violation for each day that violation persists, up to a maximum of $500,000 for any related series of violations. (54) Before civil penalties can be assessed, OPS must consider various factors, such as the nature, circumstances, and gravity of the violation, the operator's history of prior violations, its ability to pay, and the effect the payment of the assessment would have on the operator's ability to continue in business. (55) Criminal penalties can be levied for "willful and knowing" violations of the statutes or OPS regulations. (56) The penalties run to a maximum fine of not more than $25,000 for each offense, "imprisonment for a term not to exceed five years, or both." (57) OPS enforcement activities have increased dramatically in recent years. In 1985, OPS collected only $56,500 in penalties for pipeline safety violations. (58) By 1988, the latest year for which figures are available, this amount had grown to $354,100, which is an increase of more than 600%. (59) There is evidence that in recent years OPS has placed more emphasis on increasing, not only the size of the penalties, but also the frequency with which penalties are assessed. (60) In its 1988 Annual Report, the Agency stated: "RSPA's revised enforcement practices have resulted in the issuance of more civil penalties, more uniformity in enforcement among the regions, and the imposition of more severe sanctions on operators with a history of repeat violations." (61)

Some of the impetus for the increased enforcement efforts may be traced to Congressional criticism of DOT's pipeline safety program in the mid-1980's. For example, in 1984 the Congressional oversight report on the pipeline safety program stated: "Both [the National Transportation Safety Board] and [the General Accounting Office] have found that [DOT] management has not allocated its limited resources effectively to carry out an efficient pipeline safety program." (62) [2]--Hazardous Facilities Orders. An alternative means of enforcement, in the form of a "hazardous facilities order," is available where OPS finds that a pipeline facility is "hazardous to life and property." (63) Under this authority, OPS can order an operator to take corrective action to mitigate the hazards at the facility. Required action may include the "suspended or restricted use of the facility, physical inspection, testing, repair, replacement, or any other action, as appropriate." A hazardous facilities order generally cannot be issued without reasonable notice and an opportunity for hearing. The hearing is to occur on an expedited basis and a decision with respect to the order is to be issued within forty-eight hours after the conclusion of the hearing. The pre-order hearing can be bypassed, however, if OPS determines that the delay caused by the hearing would result in "the likelihood of serious harm to life or property." In these cases, the order would be issued and the opportunity for the hearing would occur "as soon as practicable" after the issuance of the order. (64) The factors which must be considered before issuing a hazardous facility order include the characteristics of the equipment, the nature of the materials being transported, and aspects of the areas in which the pipeline facility is located. (65) [3]--Citizens' Suits as an Enforcement Tool. NGPSA and HLPSA both permit civil actions to be commenced "for mandatory or prohibitive injunctive relief" by private parties against a pipeline operator on the grounds that a violation of "this chapter or of any order or regulation" has occurred or is occurring. (66) However, these actions cannot be commenced (1) until sixty days after the plaintiff has given notice of the alleged violation to the agency responsible for regulating the facility in question (either DOT or the certified state agency); or (2) if the agency "has commenced and is diligently pursuing" administrative or judicial proceedings "with respect to the alleged violation." (67) Because the states are permitted to enact more stringent standards or practices, the statutes impose an additional restriction if the allegations involve violations of state-imposed standards or practices; the alleged violation will exist "only to the extent that such standard or practice is not more stringent than the comparable Federal minimum safety standard." (68) If a plaintiff is successful in bringing this action, the statutes provide for the award of "the costs of suit, including reasonable attorney's fees and reasonable expert witness fees." However, if an action is deemed "frivolous or meritless," these costs may be awarded to the successful defendant. (69) While the citizens' suit provisions appear to offer considerable power to individuals or municipalities to enforce compliance with NGPSA and HLPSA, a recent decision demonstrates the difficulties plaintiffs face in bringing these suits. In Williams Pipe Line Co. v. City of Mounds View, (70) the municipality alleged that a gasoline pipeline operator's violations of HLPSA and OPS regulations had resulted in a fatal fire and property damage. It brought a citizens suit under Section 2014(a) of HLPSA and sought an injunction "ordering the pipeline to be removed from the municipality or ordering it replaced and operated in accordance with the law." (71)

The decision rested on the construction of the "diligent pursuit" provision of Section 2014(a). As a result of the accident, OPS had imposed civil penalties of $115,000 for violations of HLPSA regulations, and issued various compliance orders. The federal district court agreed with the operator that OPS had been "diligent" in its enforcement actions and therefore dismissed the citizens' suit. "The continuous and considerable enforcement actions of OPS in response to the Mounds View accident constitutes `diligent pursuit' under Section 2014(b) and precludes Mounds View's citizens' suit." (72) The ample opportunity for OPS to receive notice of the suspected violation and to initiate enforcement actions provided by the citizens' suit provisions would seem to limit the availability of the citizens' suit as an enforcement mechanism. The "diligent pursuit" provision appears to encompass a wide variety of agency actions; all of which could defeat a citizens' suit claim. In order to prevail, a private party would not only have to prove the existence of the violation, but would appear also to face the considerable burden of showing a lack of diligence on the part of OPS. Nevertheless, the citizens' suit remedy supplies the public with a tool which supplements OPS's own enforcement powers. Particularly in cases where a pipeline has created environmental damage, or where interested parties determine that OPS is taking insufficient actions to redress a violation, the citizens' suit provisions may create additional liabilities for pipeline operators. 20.04. The Enforcement Process. Both NGPSA and HLPSA are silent with respect to the specific enforcement procedures that OPS must employ. The statutes state simply that civil penalties can be assessed if, "after notice and an opportunity for a hearing," it is determined that a statutory provision, regulation, or order has been violated. (73) Thus OPS has considerable latitude to develop and implement its method of enforcement. (74) The enforcement process generally begins with an inspection of an operator's facilities by OPS regional staff. The inspection entails an onsite evaluation of facilities and a review of records or other information provided by the operator. (75) If probable violations are found to exist, the OPS Regional Chief may determine that civil penalties are not appropriate and, instead, issue a "warning letter" to the pipeline operator. The warning letter advises the operator of the probable violation and requires it to correct the problem or face continued enforcement action by OPS. (76) The Regional Chief may, however, elect to begin a formal enforcement proceeding by serving a "notice of probable violation" on the operator. The notice of probable violation is accompanied by either a "notice of proposed civil penalty" or a "notice of proposed compliance order." If a civil penalty is proposed, the amount of the proposed penalty and the maximum civil penalty for which the operator would be liable must be shown. (77) At the conclusion of the enforcement process, the final order assessing a penalty cannot impose a penalty in an amount greater than that proposed in the original notice of probable violation. (78) On the other hand, if a notice of proposed compliance order is served, the remedial action sought by OPS must be stated in that order. (79) [1]--Response Options. Upon the issuance of a notice of probable violation, the pipeline operator has thirty days to respond. Where a notice of proposed civil penalty has been served, the operator may: (1) pay the penalty and close the case with prejudice; (80) (2) offer a compromise payment, which OPS either accepts or rejects; (81) (3) submit a written explanation or other materials to support mitigation of the penalty; (82) or (4) request a hearing. (83)

In cases where a notice of proposed compliance order has been served on the operator, it may (1) agree to the proposed compliance order, (84) (2) request the execution of a consent order under provisions of 49 C.F.R. Section 190.219, (85) (3) object to the proposed compliance order and submit explanatory information in answer to the allegations of violations, (86) or (4) request a hearing. (87) If the operator ignores a compliance order, OPS has the statutory authority to seek relief in U.S. district court. (88) This is a rare occurrence; the 1988 Annual Report refers to the "first suit brought by RSPA to enforce a compliance order." (89) This case resulted in the issuance of a consent decree in which the defendant city agreed to renovate its gas distribution system and bring it into compliance with federal standards. Consent Orders. When the notice of probable violation contains a proposed compliance order, the operator may elect to negotiate a consent order with OPS. (90) The proposed compliance order represents OPS' unilateral judgment of the steps that are necessary to bring a facility into compliance. On the other hand, at any time before a final order is issued, "the Director [now Associate Administrator] and the respondent may agree to dispose of the case by joint execution of a consent order." (91) With this mechanism, the operator and OPS can negotiate the terms, conditions and schedule for bringing a facility into compliance. The joint execution of a consent order will be considered the final enforcement order. The regulations require: (1) an admission by the operator of all jurisdictional facts; (2) an express waiver by the operator of all rights to seek additional administrative or judicial relief, or to contest the validity of the order; (3) an acknowledgment that the notice of probable violation may be used to form the basis of the consent order; and (4) a statement of the actions the operator will take to remove the violation and the time by which those actions will be taken. (92) [2]--Hearing Procedures. For purposes of OPS enforcement procedures, a hearing is defined as "an informal conference or a proceeding for oral presentation." (93) If the operator requests a hearing, following the initiation of any of the enforcement actions described above, the hearing will be conducted pursuant to 49 C.F.R. Section 190.211. The request for the hearing must state the issues which the operator intends to raise. Failure to specify an issue in the request may be a waiver of the operator's right to raise that issue at the hearing. The operator must also indicate at this time whether it will be represented by counsel. (94) The presiding official is "the person who conducts any hearing related to civil penalty assessments, compliance orders, or hazardous facilities orders." (95) Under OPS regulations, this official can be a "representative of the OPS Region in which the facility is located." (96) Typically, however, an attorney from the Office of Chief Counsel, RSPA, will serve as the presiding official. (97) The regulations direct that the hearings be conducted in an informal manner. No detailed record is kept of the proceeding, and the federal rules of evidence do not apply. (98) The regulations are also silent on both the allocation of the burden of proof between the parties and the standard of proof that must be met before the civil penalty can be imposed. The presiding official will present the material in the OPS enforcement file pertinent to the matter. The operator may then respond and rebut whatever facts are presented. It may offer additional facts or testimony relevant to the issues under consideration. (99) Following the operator's case, OPS may present rebuttal information. (100)

The presiding official does not issue a decision in the case, but, rather, prepares a written recommendation which is forwarded with the case file and whatever information and materials were presented at the hearing to the Associate Administrator, OPS. The Associate Administrator determines the final administrative action to be taken. (101) Unless the respondent petitions for reconsideration of a final order, the decision of the Associate Administrator is considered "final administrative action on that enforcement proceeding." (102) Petition for Reconsideration. Within 20 days following the receipt of a final order, a respondent may petition the Associate Administrator for reconsideration. (103) The petition must contain a statement of the complaint and the respondent's reasons why the final order should be stayed. The final order will not be stayed automatically upon the filing of the petition unless the Associate Administrator so provides. (104) The respondent may present additional information or arguments not previously considered as long as it states the reasons why this information was not presented before the final order was issued. (105) The Associate Administrator may grant or deny, in whole or in part, the petition for reconsideration. If the final order is reconsidered, a final decision may be issued without further proceedings or the Associate Administrator may request additional information or comments appropriate to the matter. (106) OPS policy states that the decision on the petition for reconsideration will be issued within twenty days following the receipt of the petition by the Associate Administrator, unless it is found to be "impracticable" and more time will be required before a decision can be issued. (107) [3]--Judicial Review. Both NGPSA and HLPSA contain judicial review provisions with respect to persons who are "adversely affected or aggrieved" by "any regulations" issued under these acts. Another section of these statutes provides that the Administrative Procedure Act (APA) (108) "shall apply to all actions establishing, amending, revoking, or directing, or waiving compliance with" any pipeline safety standard. (109) While these provisions might be construed as providing an avenue of judicial relief to persons subject to civil penalty orders, their context suggests that Congress did not create any special statutory appeal procedure for contesting civil penalties or compliance offers. (110) Where the governing statute is silent on the judicial review procedure for agency actions, the APA provides for appeal to the federal district courts (as long as the jurisdictional requirements for bringing such an action are met). (111) Operators aggrieved by a civil penalty or consent order thus have a remedy in federal court. They must be careful, however, to meet the deadlines, venue, and other requirements for seeking judicial review of the agency's order. [4]--Conclusion. In 1988, OPS and state agencies initiated 3,861 enforcement actions for violations of NGPSA and HLPSA. While the majority of these actions were resolved without the issuance of compliance orders or penalty assessments, eight compliance orders were issued directly by OPS and $354,100 in civil penalty assessments collected by OPS and the states. The largest single penalty was assessed in Arizona against one operator in the amount of $80,000. (112) None of these compliance orders or civil penalty assessments appears to have resulted in an appeal by the operator to a court. Recent decisions indicate a wide range of final civil penalties, with some exceeding $100,000. (113) Given the sizable potential liabilities faced by pipeline operators who are adjudged in violation of the statutes or regulations, a close look at OPS enforcement procedures, to determine that they comply with

general requirements for agency enforcement actions, is warranted. 20.05. OPS Enforcement and The Administrative Procedure Act. The Administrative Procedure Act (APA), (114) enacted in 1946, prescribes the general requirements for rulemaking, enforcement, and other administrative functions of federal agencies. The manner in which OPS promulgated its enforcement regulations (115) raises a substantial question as to whether it complied with the APA's rulemaking requirements. [1]--APA Rulemaking Requirements. Under the APA, a rule is defined as a statement by an agency which is "designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency...." (116) The APA requires agencies to give notice of proposed rules to the general public and to provide interested parties with the opportunity to comment on the proposed rules before they are issued in final form. The notice requirement is met through publication of the proposed rule in the Federal Register. The notice must indicate (1) the time and nature of public rulemaking proceedings, (2) the legal basis under which the rule is proposed, and (3) the terms or substance of the proposed rule. (117) One rationale that has been offered for the notice and comment requirements of the APA is that "informed administrative decisionmaking require[s] that agency decisions be made only after `affording interested persons' a means to communicate their views to the agency." (118) This requirement can only serve to enhance the administrative process through "openness, explanation, and participatory democracy." (119) Exemptions From Section 553(b) Requirements. The APA contains two principal exemptions from the notice and comment requirements: Except when notice or hearing is required by statute, this subsection does not apply (A) to interpretive rules, general statements of policy, or rules of agency organizations, procedure, or practice; or (B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. (120) These exemptions may be based on an assumption that interpretative or procedural rules and policy statements have less substantive impact on individual rights than a regulation proscribing certain activities. There has been, however, a considerable amount of litigation over the scope of the exemptions, (121) with one court "consistently" giving this section a narrow interpretation (122) and the Supreme Court stating that the exemption was merely a "housekeeping" provision. (123) This precedent strongly suggests that agency enforcement procedures such as those of OPS are substantive, not "housekeeping" rules, and must therefore be promulgated pursuant to advance notice and opportunity for comment as well as other APA procedures. [2]--The Air Transport Association Decision.

The central issue in Air Transport Association of America v. U.S. Department of Transportation was the procedure which the Federal Aviation Administration (FAA) (125) followed in promulgating final civil penalty regulations. The regulations, which prescribe administrative procedures for adjudicating administrative civil penalty actions were issued by the FAA in final form without notice or any opportunity for public comment. In explaining why the penalty rules were issued without notice and comment, one factor cited by the FAA was their "procedural character." The FAA's new rules were challenged as having been promulgated in violation of the APA. The D.C. Circuit rejected the FAA's contention that its identification of the rules as "procedural" rendered them exempt from the notice and comment requirements of the APA: "[A] rule does not fall within the scope of the exception merely because it is capable of bearing the label `procedural.'" (126) Rather, the court stated that a functional analysis must be employed to determine whether the rule applies to the "internal operations" of the agency and is, therefore, exempt from notice and comment requirements, (127) or whether it alters the rights of regulated parties, in which case it must satisfy the notice and comment requirements. (128) The court held that the civil penalty rules did affect the rights of persons subject to their provisions. It said that the FAA had made "discretionary choices" concerning the due process civil penalty defendants would be accorded and each of the choices "encode[d] substantive value judgment[s] on the appropriate balance between defendant's rights and administrative efficiency." (129) Thus, the court found that substantive rights were at issue and that the FAA was obliged to engage in pre-promulgation notice and comment. (130) The FAA argued that it had provided for the consideration of public comments following the issuance of the final civil penalty rules. The court flatly rejected this approach as a substitute for pre-promulgation notice and comment: "We strictly enforce this requirement because we recognize that an agency is not likely to be receptive to suggested changes" once final rules have been issued. (131) The court rebuked the FAA for suggesting that post-hoc comments were sufficient to meet the requirements of the APA: The FAA has not come close to overcoming the presumption of close-mindedness in this case. It made no changes in the penalty rules in response to public comments. Nor did the language of FAA's published replies suggest that the agency had afforded the comments particularly searching consideration. (132) [3]--Promulgation of OPS Civil Penalty Rules. The OPS enforcement rules were issued in final form on March 27, 1980. (133) The preamble accompanying the rules states that they constituted a "new Part 190" which was being added to Volume 49 of the Code of Federal Regulations "that prescribes procedures to be followed by MTB in carrying out its enforcement responsibilities" under NGPSA and HLPSA. (134) The new regulations set forth investigative and enforcement procedures for ensuring compliance with federal pipeline safety regulations and described the procedures governing the "imposition of sanctions" with respect to violations of those regulations. (135) The summary comments concluded: Since these rules relate to practice and procedures of the RSPA, MTB, and OOE, notice and public procedure is not necessary. However, because the RSPA contemplates a review of these procedures after they have been in operation for at least six months, and since it is desirous of public participation in that review, interested persons are invited to submit such comments as they desire. All comments received

before the close of business on September thirty, 1980 will be considered during the review and will be available in the Office of the Chief Counsel, both before and after that date. (136) It does not appear that this contemplation resulted in any type of formal review and revision of the enforcement regulations. There is no evidence that public comments were received by DOT during this review period and the enforcement regulations themselves contain no indication of amendment or modification as a result of the prescribed comment period following their promulgation. (137) The Air Transport decision casts serious doubt on the legality of OPS's civil penalty rules. Like the FAA rules adopted by its sister agency, OPS's rules were promulgated in final form without any provision for notice and public comment. OPS simply termed them "procedural" and deemed them exempt from the APA's requirements. The OPS civil penalty rules clearly implicate the property rights of affected persons, since violations of the Act can result in substantial monetary penalties and the regulations dictate to the industry the only means available to them for the adjudication of civil penalties. Air Transport states clearly that civil penalty rules "substantially affect a civil penalty defendant's right to an administrative adjudication." (138) This alone was sufficient for the Air Transport court to determine that "members of the aviation community had a legitimate interest in participating in the rulemaking process." (139) Indeed, the Air Transport court viewed civil penalty rules as affecting "matters far too important to be withdrawn from public consideration." (140) In the promulgation of its rules, OPS allowed for post-hoc comments and indicated that a review of the regulations would be undertaken within six months. As the court held in Air Transport, however, the provision for post-hoc comments does not satisfy the APA pre-adoption notice and comment requirements. Moreover, it appears that no formal post-promulgation review was ever conducted. Given the circumstances surrounding OPS's actions in this area, and courts' strong unwillingness to allow agencies to avoid notice and comment procedures by labeling rules as procedural, an operator facing an OPS enforcement action might consider a possible challenge to the rules on APA grounds. 20.06. Procedural Due Process and the OPS Procedures. Even though NGPSA and HLPSA do not require formal adjudicatory hearings before civil penalties are assessed, due process may require these procedures. (141) The due process clause protects individuals from the unjustified or mistaken deprivation of their constitutionally protected interests. "At the same time, it preserves both the appearance and reality of fairness," which is crucial to preserving the legitimacy of governmental authority. (142) A separate basis for challenging OPS's enforcement procedures may exist by asserting that the regulations fail to satisfy constitutional procedural due process requirements. [1]--Due Process Requirements for Agency Adjudications. Most analyses of due process in the context of administrative adjudications must determine (1) whether there is a constitutionally-protected interest; (2) whether due process requires a hearing to protect that interest; and (3) if so, what type of hearing is necessary to protect the interest. (143) In the case of the OPS regulations, the fact that a hearing has been provided for in the statutes and regulations indicates a recognition that a protected interest is implicated. Indeed, the holding in Air Transport states that, under the Due Process Clause, "a party has a right to notice and a hearing before being forced to pay a monetary penalty." (144) Thus, the question becomes whether the OPS informal hearing

procedures offer sufficient due process protections to those persons who are subject to civil penalties. Neither NGPSA nor HLPSA contain any direct references to Section 554 of the APA which enumerates the statutory procedural requirements for formal adjudications under the APA. (145) Generally, Section 554 "on the record" procedures are not fully applicable to adjudications unless they are specifically required by statutory mandate. NGPSA and HLPSA simply state, "[a]ny person who is determined by the Secretary, after notice and an opportunity for a hearing," to have violated the statutes or OPS regulations will be liable for a civil penalty. (146) It is interesting to note that the provision for "notice and an opportunity for a hearing" was not even added to the NGPSA and HLPSA until 1988. (147) In explaining this amendment, Congress stated: "Elevating these due process procedures to the statute would enhance the likelihood that the courts would give proper deference to DOT's administrative decisions and recognize the traditional substantial evidence test as the proper standard for judicial review." (148) The fact that full-scale trial-type procedures are not mandated by the pipeline statutes does not, however, obviate the need for OPS to craft procedures that will satisfy due process concerns. Indeed Congress expressly flagged these concerns. There is some question as to whether the informal procedures OPS has adopted satisfy these concerns. Under established case law, the adequacy of administrative procedures can only be determined by balancing the interests of the government against the rights of the individual. (149) In Mathews, the Supreme Court held that, in order to show that more procedural safeguards are necessary, beyond those already provided, one must show that there is "the risk of erroneous deprivation" of a protected interest and what the value will be of additional or substitute procedural safeguards. (150) In practical terms, this also means that a court will examine whether possible gains in accuracy of the decision and procedural fairness can be justified in light of the additional costs an agency will sustain as a result of the new procedures. [2]--Due Process Analysis of OPS Procedures. The hearing to adjudicate civil penalties is, by OPS' own definition, "an informal conference or a proceeding for oral presentation." (151) The regulations also state that the hearing, which may be requested by the respondent, will be conducted "informally" with no rules of evidence and no detailed record of the proceeding kept by the agency. (152) The presiding officer can be an official from the enforcement agency; even if an attorney presides he or she is employed by RSPA, the division of DOT which includes OPS. Finally, the decisions are made by the Associate Administrator for Pipeline Safety and are made on the basis of a case file which contains the written documentation of the violation and any materials submitted by the respondent. (153) These minimal procedures raise the issue of sufficient due process protections in light of the magnitude of the civil penalties. It can be argued that the OPS process is subject to a risk of erroneous deprivation and that the value of increased due process protections would outweigh the minimal cost to the agency. Due process concerns arise because the enforcement procedures do not clearly provide an adequate means to challenge enforcement decisions, question the judgment of enforcement officials, or suggest differing interpretations of a particular safety regulation. For example, any error committed by an enforcement official is compounded at every procedural step in the process leading to the final order, and there are additional impediments to developing fully all of the factual circumstances in a particular matter. (154) The hearings themselves are fact-oriented but, as with all regulatory activities, enforcement officials exercise a considerable amount of discretion and subjective judgment. These judgments form the basis for OPS' assertion that a violation has occurred. Furthermore, the final orders are issued by the head of OPS,

based on the case file, which is in large part a compilation of the documentation to support the enforcement action, and recommendations of the presiding official and the OPS Region Chief. There is no provision for discovery by either party. Thus, a respondent in an OPS proceeding may face difficulties in determining whether exculpatory information exists in OPS files. There are subpoena procedures to obtain documents or the attendance of witnesses, but they can only be issued upon an "adequate showing... that the information sought will materially advance the proceeding." (155) Unfortunately, the person who makes this judgment of adequacy is either the RSPA administrator, the RSPA Chief Counsel, or the official designated to preside at the hearings. These are also the only persons who can quash or modify a subpoena once it has been issued. There is nothing in the regulations defining the precise nature of the "material adequacy" standard that must be met to obtain a subpoena. It is unclear how an operator can obtain materials outside the formal case file to develop a defense, let alone ensure that they are considered. The contents of the case file are important since it is the sole basis on which decisions are made. The regulations defining the case file state that it includes: (1) The inspection reports and any other evidence of alleged violations; (2) A copy of the notice of probable violation; (3) Material submitted by the respondent in accord with Section 190.209 in response to the notice of probable violation; (4) The Region Chief's evaluation of the response material submitted by the respondent and recommendation for final action to be taken under this section; and (5) In cases involving a Section 190.211 hearing, any material submitted during and after the hearing and the presiding official's recommendations for final action to be taken under this section. (156) In addition to being confined to the case file, respondents have a limited right of cross-examination. Crossexamination is important to develop fully all facts in a particular matter; to develop evidence on the credibility, qualifications and competence of a witness; to determine whether there is any evidence of bias on the part of a witness; and to determine whether an agency has complied fully with its own enforcement policies. Furthermore, since no transcript is maintained and no detailed record of the hearing prepared, there is no way that the Associate Administrator can base a final decision on facts developed during the respondent's examination of the witness. Likewise, the presiding official who makes a recommendation to the Associate Administrator has no transcript or other detailed record of the examination on which to support a recommendation. [3]--Burden and Standard of Proof. Another aspect of fairness and due process concerns allocation of the burden of proof and the standard of proof required to impose sanctions. In administrative proceedings governed by Section 556(d) of the APA, generally the proponent of an order (in this case OPS) has the burden of going forward and also the burden of persuasion. A sanction cannot be issued unless it is supported by "reliable, probative, and substantial evidence." (157) However, OPS regulations are not necessarily governed by Section 556(d). They do not provide any indication of the sufficiency of evidence needed either to support the agency's enforcement position or to rebut it. While the Senate Committee Report language references the "traditional substantial evidence test," there is no statutory or regulatory language codifying that standard. Without some clearly defined standard,