NEW ORLEANS -- Judges on Monday grilled the attorneys representing a federal agency and Exxon Mobil Pipeline Co. -- two bodies at odds over the government's decision last year to fine the oil giant $2.6 million because of purported safety violations that preceded an oil spill in Mayflower.
Exxon Mobil has challenged six of the nine violations and has taken its case to the 5th U.S. Circuit Court of Appeals in New Orleans, where attorneys on both sides presented oral arguments to a three-judge panel.
Exxon Mobil attorney Reagan Simpson opened the hearing by stating: "Exxon Mobil fully supports pipeline safety. What Exxon Mobil opposes in this case are unfounded violations and penalties pertaining to the Pegasus pipeline that had a safe history of operation for 65 years and had one regrettable but unpreventable release."
Simpson's reference was to an event on the afternoon of March 29, 2013, a Good Friday, when the aging pipeline cracked open between two houses in Mayflower's Northwoods subdivision and sent tens of thousands of gallons of thick, black crude into the neighborhood, drainage ditches and a cove of Lake Conway. Twenty-two homes were evacuated on a long-term basis; three of them eventually were demolished. Many residents never moved back.
Exxon Mobil shut down the roughly 850-mile-long pipeline, running through Illinois, Missouri, Arkansas and Texas. Only a 211-mile segment has resumed operation.
Exxon Mobil contends the safety administration reinterpreted its safety regulations after the accident and without fair notice.
But Catherine Dorsey, a U.S. Justice Department attorney representing the federal Pipeline and Hazardous Materials Safety Administration, told the judges, "This is not a bait-and-switch as" Exxon Mobil has suggested.
Attorneys on both sides repeatedly referred to the "Baker Report," which Dorsey said the safety administration has suggested pipeline companies use for guidance.
Read in context, the report says a pipeline segment is considered susceptible to failure if an in-service leak or a leak during hydrostatic, or water-pressure, testing occurs, Dorsey said.
During water-pressure testing in 2005-06, she said, the Pegasus experienced 11 seam failures. Pipelines are idle during such testing.
A judge asked Dorsey about the company's argument that a 2007 audit by the government didn't fault the company's safety practices then.
Dorsey replied that the audit "was a very high-level companywide [one] for [Exxon Mobil] that made sure they had an integrity management plan. It was not a drilling-down looking at the nuts and the bolts."
Dorsey also said the company was misapplying a flow chart in the Baker Report. Exxon Mobil officials can't rely on it, she said, "to close their eyes to that risk just because there was no evidence of preferential seam corrosions or pressure cycling" at that time.
Another judge told Simpson, "What you found in the hydrostatic test ... was troubling ... and an expert should have known it was troubling."
Simpson replied, "These hydrostatic failures are something that are expected. ... It's not troubling when you have hydrotest leaks. ... They're part of the process and part of the analysis."
He said the company repairs those cracks that are big enough, while those that are too small are not expected to grow enough to fail in the pipeline's projected life span.
Further, Simpson said. "If that was the only test whether you had failures in hydrotest, then there would be no reason for the rest of the report which goes on at length to say you have to look at the causes."
One judge asked Dorsey where it details what Exxon should have done to handle the situation differently.
Dorsey said the Baker report and regulations do just that when it comes to a history of seam failures.
"The regulations set out that an operator is to consider and assess the risks in its baseline assessment," Dorsey said earlier. "That is clear language in the regulation. That language required the operator here to take [into] account the manufacturing type of the pipe."
The industry has known for decades that pre-1970s electric resistance welded pipe is more susceptible to seam failure than newer pipe. The older pipe is no longer manufactured.
Exxon Mobil is especially concerned about a safety administration order that the company revise its seam-failure susceptibility process for all such pipes in all of the pipelines it operates, not just the Pegasus.
The company has said it operates more than 1,000 miles of pipeline that is in similar condition to the Pegasus and that is subject to federal safety regulations. The same kind of pipe is used in 25 percent of the nation's oil pipelines, it said.
Judges hearing the oral arguments were Jennifer Walker Elrod of Texas, Leslie H. Southwick of Mississippi and James E. Graves Jr. of Mississippi.
A Section on 11/01/2016