U.S.: Exxon ignored pipeline risk

Exxon Mobil Pipeline Co. is trying to “escape responsibility” for not considering the aging Pegasus pipeline susceptible to seam failure despite a history of such problems, a federal regulatory agency said Friday.

In an appeal to the 5th U.S. Circuit Court of Appeals in New Orleans, Exxon Mobil has challenged the agency’s findings that the oil giant violated safety regulations that led to the pipeline’s rupture in Mayflower in 2013. The company, a subsidiary of Exxon Mobil Corp., also has challenged the $2.6 million fine levied by the agency, the Pipeline and Hazardous Materials Safety Administration.

In a document filed in the appeal battle, the safety administration said the Pegasus pipeline, built in 1947-48, “had experienced numerous seam failures, both during testing and in-service.”

Those included an in-service “leak” in 1984 as well as leaks during hydrostatic, or water-pressure, testing in 1969, 1991 and 2005-06. The failures had been increasing while also occurring at lower test pressures over the years, the agency said. Both factors indicate “a likelihood that seam degradation was taking place,” it said.

To conduct a hydrostatic test, an operator must shut down the pipeline.

“Indeed, the 2005-2006 hydrostatic tests resulted in [11] seam-related failures,” the safety administration wrote. “Yet, despite the known heightened risk of pre-1970 ERW [electric resistance welded] pipe to seam failure and an extensive history of seam failures, [Exxon Mobil] … nevertheless declared that the Pegasus Pipeline was not susceptible to seam failure.”

The agency blamed that conclusion on Exxon Mobil’s “flawed risk analysis and testing regime.”

“Exxon Mobil’s] attempts to escape responsibility for failing to consider the pipeline susceptible to seam failure are without merit,” the safety administration wrote.

Because of the company’s “flawed analyses,” the agency said, Exxon Mobil failed to determine the pipe’s risk for seam failure — “when no other conclusion would have been reasonable — but it also failed to comply with a number of other regulatory requirements.”

The industry has known for decades that the type of pre-1970 pipe used in the Pegasus has an increased risk of longitudinal seam failure, specifically manufacturing defects or hook cracks like the kind that caused the pipeline to break open in Mayflower’s Northwoods subdivision March 29, 2013. That kind of pipe is no longer made.

Exxon Mobil is especially concerned about an agency 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.

As a result of not recognizing the seam risks in the Pegasus, the agency said, Exxon Mobil did not establish a safety program that properly prioritized the inspection of pipe segments. The company also didn’t test the segments often enough and didn’t use the kinds of tests more likely to detect seam problems, the agency said.

After the company restarted the long-idled Pegasus in 2006, it should have used more hydrostatic testing rather than rely solely on the less-accurate in-line inspections, the agency said.

The safety administration acknowledged that one of its regulations gives an operator the “discretion” to consider and weigh risk factors but said “that discretion is not unbounded.”

“The regulation … does not give operators carte blanche to ignore relevant risk factors,” the agency wrote.

Exxon Mobil also should have considered the pipe’s brittleness, or lack of toughness, in determining whether the metal was susceptible to seam failure, the agency said.

The safety administration also disputed Exxon Mobil’s argument that the agency based its findings on afterthe-fact interpretations of federal guidelines. Exxon Mobil “had fair warning in this case,” the agency said.

The government noted that Exxon Mobil had argued that the safety administration had audited the company’s safety program periodically and had never found fault with the company’s process for determining seam susceptibility.

But the agency said those audits “do not absolve” Exxon Mobil of responsibility. The agency said inspections of a company’s records and procedures are not equivalent to an approval of operations.

The Mayflower rupture led to the long-term evacuation of 22 homes. Three of those were demolished, and many residents never moved back into the neighborhood. Exxon Mobil shut down the roughly 850-mile pipeline running from Patoka, Ill., to Texas shortly after the accident. All but a 211-mile section, all in Texas, remains closed.

Exxon Mobil’s response to the agency’s latest filing is due Sept. 30. Oral arguments are set for Oct. 31 in New Orleans.