Exxon challenges U.S. claims

It seeks hearing on order, proposed fines of $2.6 million

Exxon Mobil on Friday formally challenged federal allegations that it had violated nine safety regulations before its Pegasus pipeline ruptured last spring, spilling an estimated 210,000 gallons of heavy crude oil into a Mayflower neighborhood.

Document set

Mayflower oil spill

The oil giant requested a hearing on those allegations, as well as on proposed fines totaling more than $2.6 million and a proposed compliance order issued Nov. 6 by the federal Pipeline and Hazardous Materials Safety Administration, often called PHMSA.

Attorneys for Exxon Mobil Pipeline Co., the Exxon Mobil Corp. subsidiary that operates the Pegasus pipeline, and Mobil Pipe Line Co., the subsidiary that owns the pipeline, detailed their arguments in a 17-page response in which they denied the allegations, raised “both issues of fact and of law,” described the proposed fine as “excessive” and illegal, and said the March 29 spill already had cost Exxon Mobil more than $70 million in response efforts.

Further, the attorneys argued, the safety administration doesn’t even contend that the alleged safety violations caused the rupture or that “multiple requirements” that the agency wants included in the company’s integrity management plan would have prevented the oil spill.

Besides, they said, it’s possible for a spill “to occur even when an operator is in full compliance with applicable law.”

“The [Pipeline Safety Act] does not create strict liability for every incident that occurs, and the Company was in compliance with the [federal agency’s] [Integrity Management Program] regulations at the time of the incident,” they wrote.

In challenging the safety administration’s notice of probable violation, Exxon Mobil attorneys wrote, “While the Agency investigated the Company’s operation and maintenance of the Pegasus Pipeline, it makes no allegation that EMPCo’s [Exxon Mobil Pipeline Co.’s] operation of the pipeline caused the release.

“There is no allegation that EMPCo failed to shut down the Pipeline in a timely manner,” they added. “There is no allegation that EMPCo employed an incorrect response plan when it responded to the incident. There is no allegation that the Pipeline’s transport of Wabasca Heavy crude oil caused or contributed to the accident.”

The attorneys say the alleged violations are “essentially unrelated to the incident.”

“Nowhere in the [notice of probable violation] does the Agency contend that any of the Company’s alleged violations caused the release or that earlier implementation of the multiple requirements in the proposed compliance order would have prevented the release,” they add.

The proposed civil penalties reflect, among other things, the federal government’s position that Exxon Mobil’s schedule for assessing the pipeline’s integrity did not take into account multiple water-pressure test failures or other information that the industry has known about for decades - that the type of pipe used in much of the Pegasus line tends to fracture along the welded seams running the length of the pipeline. That kind of pipe is no longer made.

In July, a laboratory hired by Exxon Mobil to examine the broken-pipe segment found manufacturing defects - cracking that the laboratory said likely occurred shortly after the pipe was made in 1947-48 and worsened over time.

Exxon Mobil said Friday, though, that its integrity management plan “did properly consider seam failure as a risk” and that the company included it in preventive and mitigating measures.

In a statement, U.S. Rep. Tim Griffin, R-Ark., countered, “While risk of a spill can never be completely eliminated, Exxon Mobil knew this type of pipe had a history of defects, and as a general matter did not take the steps necessary to minimize the risk of a seam failure.

“Their failure to remedy obvious shortcomings in pipeline protection such as exposed pipe in a creek bed - whether technical violations or not - call into question their willingness to do all that is necessary to protect the [drinking] water supply of over 400,000 Arkansans.

“Proof that the alleged violations resulted in the spill is not required,” said Griffin, whose 2nd Congressional District includes Mayflower and the Lake Maumelle watershed. A 13.5-mile segment of the 850-mile-long Pegasus pipeline runs through the watershed.

Exxon Mobil attorneys complained that the proposed compliance order’s requirements “purport to require modifications” to the management plan “on a system-wide basis” and not solely to the Pegasus pipeline, which runs from Patoka, Ill., to the Texas Gulf Coast.

Such proposed action would “ordinarily” be associated with a federal audit, not a federal accident investigation, of the company, they said.

“Such audits are lengthy, more comprehensive inquiries that provide the Agency with an opportunity to gain a better understanding of the Company’s programs,” the attorneys wrote.

“A high profile Agency accident investigation, conducted according to a timetable driven by public, media and governmental interest as well as litigation concerns, is the wrong tool for conducting an inquiry into the workings of complex management systems and, predictably, this accident investigation came to the wrong conclusions regarding those systems.”

Griffin said, “Exxon Mobil shouldn’t be surprised that an oil spill in a neighborhood resulted in great interest and concern by elected officials and the community, and have offered no evidence whatsoever that the timetable of PHMSA’s investigation prejudiced them. To the contrary, one could argue that given more time, PHMSA could have conducted a more rigorous and comprehensive investigation.”

Arkansas Attorney General Dustin McDaniel - who, along with U.S. Attorney Christopher Thyer, sued Exxon Mobil subsidiaries over the spill in June - said Exxon Mobil’s filing “is more of their same litigation posture and should come as no surprise to anyone.”

That lawsuit is pending in U.S. District Court in Little Rock.

The safety administration also has accused Exxon Mobil of failing to follow its own operations and maintenance procedures “by selectively using results” of its Threat Identification and Risk Assessment Manual … process in 2011.”

That action resulted in a “failure to properly characterize the risk of a release to the Lake Maumelle Watershed” and other high consequence areas in the segment of pipeline running from Conway to Foreman, the government said in November.

But Exxon Mobil attorneys responded, saying its programs “properly considered seam failure susceptibility as a risk to the Conway to Corsicana (Texas) pipeline segment.”

They added, “Because the susceptibility to long seam failures was not an identified threat for this pipeline, the risk of release was not characterized for any area of the pipeline.” But the company identified Lake Maumelle and other water bodies as high-consequence areas “and included them in its risk assessment” calculations, the attorneys wrote.

Company attorneys also said the proposed fines exceed “the statutory maximum” allowed by federal law.

“The alleged violations occurred prior to January 3, 2012, when the maximum administrative civil penalty applicable to this matter was $100,000 per violation, not to exceed $1 million for any ‘related series of violations,’” they wrote.

The Pegasus pipeline has been closed since the Mayflower rupture in the Northwoods neighborhood. Residents in 22 homes there evacuated for months, and many have not moved back. Three of the houses have been demolished.

The spilled oil also reached a cove of Lake Conway but not the main portion of the lake, authorities have said.

The safety administration had not announced a hearing date as of Friday afternoon.

Front Section, Pages 1 on 12/07/2013

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