On October 17, 2016, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) released a General Policy Statement announcing the availability of its civil penalty framework, which is now publicly accessible on its website. Previously, PHMSA only provided its civil penalty framework upon request. Effective October 17, 2016, PHMSA will also allow a respondent in an enforcement proceeding to request a more detailed proposed civil penalty calculation. Accordingly, PHMSA’s recent announcement provides greater transparency into a formerly obscure civil penalty process.
Civil Penalty Framework
Following an inspection or investigation of a pipeline facility that reveals a probable violation, PHMSA’s Office of Pipeline Safety prepares a Violation Report to document the violation. Data from the completed Violation Report is then used to calculate a civil penalty, if warranted.
The civil penalty framework now reveals the range for a civil penalty that may be assessed under each assessment factor provided in 49 U.S.C. § 60122 and 49 C.F.R. § 190.225. The assessment factors include: (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 effort by the respondent to achieve compliance; and (5) the effect on the respondent's ability to continue in business. PHMSA also may consider the economic benefit gained from a violation and such other matters as justice may require.
In order to determine the magnitude of a civil penalty, the civil penalty framework lists the range of conduct under each statutory assessment factor, listed from least to most severe. Ultimately, PHMSA determines a civil penalty by combining the amounts assigned under each assessment factor. The total civil penalty per violation is calculated based on these assessment considerations and adjusted for the applicable daily and series limit. However, despite PHMSA’s increased transparency into its civil penalty process, PHMSA notes that it retains “broad discretion” in its evaluation of the assessment considerations outlined in its regulations.
If a calculated penalty exceeds the maximum amount permitted by statute, the penalty will be reduced by the amount exceeding the cap. For an administrative civil penalty that occurs on or after August 1, 2016, the maximum penalty is $205,638 per day. The maximum civil penalty for a series of related violations that occur on or after August 1, 2016 is $2,056,380.
Higher Penalties Across the Board
Notably, to apply stronger deterrence and drive down incident risk, PHMSA also intends to exercise its current civil penalty authority to impose higher penalties across the board for any violation of Federal pipeline standards. PHMSA will give greater weight to certain factors when assessing civil penalties, specifically for violations that:
1) Are causal to incidents or that increase the severity of incidents, including those involving smaller hazardous liquid spills or resulting in methane releases;
2) Are “repeat offenses” or violations of the same safety standard in the past five years; and
3) Involve multiple instances of the same violation.
PHMSA’s General Policy Statement announcing the release of the civil penalty framework is available here.