CHAPTER 8. PIPELINE SAFETY REGULATIONS

ViaData Note: Comment period ends March 12, 2012. Submit comments to https://www.rrc.state.tx.us/general-counsel/rules/comment-form-for-proposed-rulemakings/

SUBCHAPTER B. REQUIREMENTS FOR ALL PIPELINES

16 TAC §8.135

The Railroad Commission of Texas (Commission) proposes to amend §8.135, relating to Penalty Guidelines for Pipeline Safety Violations. On October 25, 2011, the Commission authorized staff to draft proposed amendments to the current guidelines in Chapter 8 to be considered by the Commission in determining the amount of administrative penalties for violations of Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders or permits relating to pipeline safety adopted under those provisions; and for violations of Texas Utilities Code, §121.201, or a safety standard or rule adopted under that provision. During the 82nd Legislative Session, the Sunset Commission recommended that the Commission adopt its penalty guidelines in rule form, and that the rule should assign penalties to violations based on their risk and severity. Although the Commission has had a penalty guideline rule in place in Chapter 8 for some time, with the proposed amendments, the Commission seeks to align all penalty guidelines, creating consistency and transparency agency-wide.

The proposed amendments would add violations for rules adopted since the penalty guidelines were initially adopted, and will increase penalties for some violations that are currently in the rule. The matrix will include typical penalty amounts for violations of the statutes cited above or the provisions of a rule adopted or an order, license, permit, or certificate issued under those statutes, as well as guidelines for penalty enhancements based on the severity of the violation, the culpability of the person charged, any prior violations within past seven years, and the amount of previous penalties for violations within the past seven years.

Proposed new subsection (a) states the Commission's policy on compliance and enforcement. Improved safety and environmental protection are the desired outcomes of any enforcement action. Encouraging operators to take appropriate voluntary corrective and future protective actions once a violation has occurred is an effective component of the enforcement process. Deterrence of violations through penalty assessments is also a necessary and effective component of the enforcement process. A rule-based enforcement penalty guideline to evaluate and rank pipeline safety-related violations is consistent with the central goal of the Commission's enforcement efforts to promote compliance. Penalty guidelines set forth in this section will provide a framework for more uniform and equitable assessment of penalties throughout the state, while also enhancing the integrity of the Commission's enforcement program.

Proposed subsection (b) is similar to current subsection (a), with citation and grammatical changes. This subsection continues to provide that this section complies with the requirements of Texas Natural Resources Code, §81.0531(d), and Texas Utilities Code, §121.206(d). The penalty amounts contained in the tables in this section are provided solely as guidelines to be considered by the Commission in determining the amount of administrative penalties for violations of provisions of Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, or a safety standard or other rule prescribed or adopted under that provision.

Proposed subsection (c) is similar to current subsection (b), and provides that the establishment of these penalty guidelines in no way limits the Commission's authority and discretion to cite violations and assess administrative penalties. The typical minimum penalties listed in this section are for the most common violations cited; however, this is neither an exclusive nor an exhaustive list of violations that the Commission may cite. The Commission retains full authority and discretion to cite violations of Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders, or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, or a safety standard or other rule prescribed or adopted under that provision, and to assess administrative penalties in any amount up to the statutory maximum when warranted by the facts in any case, regardless of inclusion in or omission from this section.

The Commission proposes to re-designate current subsection (c) as subsection (d); the text is unchanged. The amount of any penalty requested, recommended, or finally assessed in an enforcement action will be determined on an individual case-by-case basis for each violation, taking into consideration the person's history of previous violations, including the number of previous violations; the seriousness of the violation and of any pollution resulting from the violation; any hazard to the health or safety of the public; the degree of culpability; the demonstrated good faith of the person charged; and any other factor the Commission considers relevant.

Proposed subsection (e) is similar to current subsection (d) and contains Table 1, the typical penalties for violations of provisions of Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders, or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, or a safety standard or other rule prescribed or adopted under that provision. The table includes proposed increases to guideline penalty amounts for violation of §3.70 of this title, relating to Pipeline Permits Required, and §8.51 of this title, relating to Organization Report, from $1,000 to $5,000; the removal of the line item for §8.110 of this title, cited as Operations and Maintenance Procedures; the amendment to the title of the rule for §8.201 of this title, relating to Pipeline Safety and Regulatory Program Fees; the addition of line entries for §8.206 of this title, relating to Risk Based Leak Survey Program, §8.207 of this title, relating to Leak Grading and Repair, §8.208 of this title, relating to Mandatory Removal and Replacement Program, and §8.209 of this title, relating to Distribution Facilities Replacements, all of which have proposed guideline penalty amounts of $5,000; the proposed increase in the penalty guideline amount for violations of §8.215 of this title, relating to Odorization of Gas, from $5,000 to $10,000; the proposed increase in the penalty guideline amount for violations of §8.230 of this title, relating to School Piping Testing, from $1,000 to $5,000; the proposed addition of a line entry for §8.235 of this title, relating to Natural Gas Pipelines Public Education and Liaison, for violations related to pipeline facilities located within 1,000 feet of a public school building or public school recreational area, with a guideline penalty amount of $5,000; the proposed increase in the penalty guideline amount for violations of §8.315 of this title, relating to Hazardous Liquids and Carbon Dioxide Pipelines or Pipeline Facilities Located within 1,000 Feet of Public School Building or Facility, from $2,500 to $5,000; the proposed addition of a line entries for violations related to requirements for corrosion control, maintenance, and gas distribution integrity management requirements, with penalty guideline amounts of $5,000 each; the proposed increase in penalty guideline amounts from $2,500 to $5,000 for violations related to qualification of pipeline personnel and public awareness; and a proposed increase in the penalty guideline amount from $500 to $1,000 for violations related to drug and alcohol testing.

Proposed subsection (f) is similar to current subsection (e) in setting forth penalty enhancements for certain violations. For violations that involve threatened or actual pollution; result in threatened or actual safety hazards; or result from the reckless or intentional conduct of the person charged, the Commission may assess an enhancement of the typical penalty, as shown in Table 2. The enhancement may be in any amount in the range shown for each type of violation. As proposed, there are new enhancements for pollution and for any hazard to the health or safety of the public resulting from a violation in a range of $5,000 to $25,000; increased enhancements for impacts to residential or public areas and for exceeding pressure control limits in a range of $5,000 to $25,000; and proposed new enhancements for the seriousness of a violation and for violations that result in death or personal injury in a range of $5,000 to $25,000. The Commission proposes to remove the enhancement for time out of compliance, because the statutes provide that each day that a violation continues may be considered a separate violation.

Proposed subsection (g) is similar to current subsection (f), and pertains to penalty enhancements for certain violators. For violations in which the person charged has a history of prior violations within seven years of the current enforcement action, the Commission may assess an enhancement based on either the number of prior violations or the total amount of previous administrative penalties, but not both. The actual amount of any penalty enhancement will be determined on an individual case-by-case basis for each violation. The guidelines in Tables 3 and 4 are intended to be used separately. Either guideline may be used where applicable, but not both. The Commission does not propose any change to the current enhancement amounts.

Proposed subsection (h) is similar to current subsection (g), and allows for penalty reduction for settlement before hearing. The recommended penalty for a violation may be reduced by up to 50% if the person charged agrees to a settlement before the Commission conducts an administrative hearing to prosecute a violation. Once the hearing is convened, the opportunity for the person charged to reduce the basic monetary penalty is no longer available. The reduction applies to the basic penalty amount requested and not to any requested enhancements.

Proposed subsection (i) is similar to current subsection (h) and provides that in determining the total amount of any penalty requested, recommended, or finally assessed in an enforcement action, the Commission may consider, on an individual case-by-case basis for each violation, the demonstrated good faith of the person charged. Demonstrated good faith includes, but is not limited to, actions taken by the person charged before the filing of an enforcement action to remedy, in whole or in part, a violation or to mitigate the consequences of a violation.

Proposed subsection (j) is similar to current subsection (i) and contains the penalty calculation worksheet. The penalty calculation worksheet shown in Table 5 lists the typical penalty amounts for certain violations; the circumstances justifying enhancements of a penalty and the amount of the enhancement; and the circumstances justifying a reduction in a penalty and the amount of the reduction. Lines 1 through 42 of the table list specific sources of violations, show the recommended penalty amount, and leave a space to insert the recommended penalty amount, if any. Line 43 is a subtotal line, and line 44 is where any adjustment for settlement before hearing may be made. Line 45 is another subtotal; and lines 46 through 52 show penalty enhancements which may be added if the violation threatened or resulted in actual pollution or a safety hazard. Line 53 is for penalty enhancements because of the seriousness of the violation. Line 54 is another subtotal line; lines 55 and 56 are for penalty enhancements for reckless or intentional conduct. Lines 57 through 61 are for penalty enhancements based on the number of prior violations or warnings within the previous seven years. Lines 62 through 66 are for penalty enhancements based on the total amount of penalties assessed within the previous seven years. Line 67 is a subtotal line. Line 68 is where any adjustment for the demonstrated good faith of the person charged may be made; and line 69 is the total recommended penalty.

Mary ("Polly") Ross McDonald, Director, Pipeline Safety Division, has determined that for each of the first five years the proposed amendments will be in effect, there will be no fiscal implications for state government. The Pipeline Safety Division currently administers the Pipeline Safety Program, including the citation of violations and the assessment of administrative penalties. Ms. McDonald anticipates that there will be no fiscal implication for the Railroad Commission because these programming changes will be handled as part of a general IT programming effort that is being funded by a grant. Ms. McDonald anticipates also that there may be fiscal implications for any state governmental entity that is required to comply with the Commission's pipeline safety rules. For example, certain state residential facilities are classified as master meter operators under the pipeline safety rules, and operators of those systems can be cited for violations of the safety rules applicable to master meter systems and assessed administrative penalties. It is not possible to anticipate the type or number of violations that a state governmental entity might commit; whether any of those violations could or would be subject to penalty enhancements; or whether a state governmental entity might elect to settle an enforcement action in exchange for a reduced penalty amount.

Ms. McDonald has also determined that for each of the first five years the proposed amendments will be in effect, there will be fiscal implications for local governments. Local governments, such as municipalities, that own and operate natural gas distribution systems are required to comply with pipeline safety standards for distribution facilities. It is not possible to anticipate the type or number of violations that a local government might commit; whether any of those violations could or would be subject to penalty enhancements; or whether a local government might elect to settle an enforcement action in exchange for a reduced penalty amount.

Ms. McDonald further anticipates that for the first year of the first five years that the proposed amendments will be in effect, enforcement of the penalty provisions may result in an increase in revenue to state government as new or increased penalties are assessed for violations. However, even though the proposed amendments add new violations and increase the typical penalties for others, if the number and/or type of violation changes, total penalty revenue could decrease. It is not possible to estimate the amount of the revenue, or whether that is an increase or decrease to current revenue, because the amount of penalty revenue will be entirely dependent on the extent of compliance or non-compliance with the proposed amendments. Ms. McDonald acknowledges that the revenue to the state derived from penalty payments could decrease as persons who are already familiar with the rules recognize the additional violations and the increased typical penalties for some violations and conform their conduct accordingly. The increased revenue to the state will not be revenue for the Railroad Commission; under Texas Natural Resources Code, §81.0531, revenue derived from administrative penalties is deposited to the State General Revenue Fund.

Ms. McDonald has also determined that for each year of the first five years the proposed amendments will be in effect, the public benefit anticipated as a result of enforcing the amendments will be an improvement in safety due to an increased awareness of both the importance of complying with pipeline safety standards and practices and the potential penalties associated with not doing so. By establishing typical penalty amounts for additional violations of the pipeline safety rules and increasing the typical penalties for some current violations, the Commission finds that the proposed amendments could result in a reduction in the number of violations and a corresponding increase in public safety.

Texas Government Code, §2006.002, relating to Adoption of Rules with Adverse Economic Effect, directs that, as part of the rulemaking process, a state agency prepare an economic impact statement that assesses the potential impact of a proposed rule on small businesses and micro-businesses, and a regulatory flexibility analysis that considers alternative methods of achieving the purpose of the rule if the proposed rule will have an adverse economic effect on small businesses or micro-businesses.

Entities that perform activities under the jurisdiction of the Commission are not required to report to the Commission the number of their employees or their annual gross receipts, which are elements of the definitions of "micro-business" and "small business" in Texas Government Code, §2006.001; therefore, the Commission has no factual bases for determining whether any persons engaged in the operation of gas gathering, transmission, and distribution pipelines and pipeline facilities and in the operation of pipelines and pipeline facilities for the gathering and transmission of hazardous liquids and carbon dioxide will be classified as small businesses or micro-businesses, as those terms are defined. Specifically, Texas Government Code, §2006.001(2), defines a "small business" as a legal entity, including a corporation, partnership, or sole proprietorship, that is formed for the purpose of making a profit; is independently owned and operated; and has fewer than 100 employees or less than $6 million in annual gross receipts. Texas Government Code, §2006.001(1), defines "micro-business" as a legal entity, including a corporation, partnership, or sole proprietorship, that is formed for the purpose of making a profit; is independently owned and operated; and has not more than 20 employees. The North American Industrial Classification System (NAICS) sets forth categories of business types. Operators of gas, hazardous liquids, and carbon dioxide pipelines gathering and transmission lines fall with the general category of pipeline transportation. This category is listed on the Texas Comptroller of Public Accounts website page entitled "HB 3430 Reporting Requirements-Determining Potential Effects on Small Businesses" as business type 486, (Pipeline Transportation). For that category, there are listed 154 businesses in Texas, of which 106 (68.83%) are identified as small businesses or micro-businesses, as those terms are defined in Texas Government Code, §2006.001. Operators of gas distribution systems fall within the general category of natural gas distribution, listed on the Texas Comptroller of Public Accounts website page entitled "HB 3430 Reporting Requirements-Determining Potential Effects on Small Businesses" as business type 2212 (Natural Gas Distribution). There are 144 businesses listed in this category in Texas, of which 119 (82.64%) are identified as small businesses or micro-businesses, as those terms are defined in Texas Government Code, §2006.001.

The Commission anticipates no adverse economic effect on small businesses, micro-businesses, or individuals, primarily because the proposed amendments do not alter the current requirements imposed under Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders or permits relating to pipeline safety adopted under those provisions; and for violations of Texas Utilities Code, §121.201, or a safety standard or rule adopted under that provision. The proposed amendments would add violations to the penalty guidelines and would increase the typical penalty amounts for some violations. Entities that are required to comply with pipeline safety regulations will be able to avoid all adverse financial effects by complying with them. In addition, the Commission has determined that because the purpose of the proposed amendments is to improve the safety of pipeline operations, it is not feasible to reduce any economic impact of the rules. Safe operation of pipelines and pipeline facilities is essential regardless of whether the operator is a large corporation, a small business, a micro-business, or an individual. The proposed amendments are a refinement of the existing Commission authority to impose monetary penalties on entities that violate pipeline safety standards and rules; these are intended to deter non-compliance and, to be an effective deterrent, the penalty amounts must be punitive. The economic consequences can be avoided by compliance with the rules.

Pursuant to Texas Government Code, §2001.022, the Commission has determined that the proposed amendments in §8.135 will not affect any local economy; therefore, no local employment impact statement is required.

Pursuant to Texas Government Code, §2001.0225, the Commission has determined that the proposed amendments in §8.135 are not major environmental rules and therefore no regulatory analysis under that section is required.

Comments on the proposal may be submitted to Rules Coordinator, Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967; online at www.rrc.state.tx.us/rules/commentform.php; or by electronic mail to rulescoordinator@rrc.state.tx.us. The Commission will accept comments until 5:00 p.m. on Monday, March 12, 2012, which is 31 days after publication in the Texas Register. The Commission finds that this comment period is reasonable because the proposal as well as an online comment form will be available on the Commission's web site no later than the day after the open meeting at which the Commission approves publication of the proposal, giving interested persons over two additional weeks to review, analyze, draft, and submit comments. Comments should refer to GUD Docket No. 10131. The Commission encourages all interested persons to submit comments no later than the deadline. The Commission cannot guarantee that comments submitted after the deadline will be considered. For further information, call Polly McDonald at (512) 463-7008 or David Flores at (512) 936-0959. The status of Commission rulemakings in progress is available at www.rrc.state.tx.us/rules/proposed.php.

The Commission proposes the amendments under Texas Natural Resources Code, §81.051 and §81.052, which give the Commission jurisdiction over all common carrier pipelines in Texas, persons owning or operating pipelines in Texas, and their pipelines and oil and gas wells, and authorize the Commission to adopt all necessary rules for governing and regulating persons and their operations under the jurisdiction of the Commission as set forth in §81.051, including such rules as the Commission may consider necessary and appropriate to implement state responsibility under any federal law or rules governing such persons and their operations; Texas Natural Resources Code, §81.0531, which requires the Commission to adopt by rule guidelines to be used in determining the amount of the penalty for a violation of a provision of Texas Natural Resources Code, Title 3, or a rule, order, or permit relating to pipeline safety adopted under those provisions; Texas Natural Resources Code, §§117.001-117.102, which give the Commission jurisdiction over all pipeline transportation of hazardous liquids or carbon dioxide and over all hazardous liquid or carbon dioxide pipeline facilities as provided by 49 United States Code Annotated, §§60101, et seq.; and Texas Utilities Code, §121.201, which authorizes the Commission to adopt safety standards and practices applicable to the transportation of gas and to associated pipeline facilities within Texas to the maximum degree permissible under, and to take any other requisite action in accordance with, 49 United States Code Annotated, §§60101, et seq.

Texas Natural Resources Code, §§81.051, 81.052, 81.0531, and 117.001-117.102; Texas Utilities Code, §121.201; and 49 United States Code Annotated, §§60101, et seq.; are affected by the proposed amendments.

Statutory authority: Texas Natural Resources Code, §§81.051, 81.052, 81.0531, and 117.001-117.102; Texas Utilities Code, §121.201; and 49 United States Code Annotated, §§60101, et seq.

Cross-reference to statute: Texas Natural Resources Code, Chapters 81 and Chapter 117; Texas Utilities Code, Chapter 121; and 49 United States Code Annotated, Chapter 601.

Issued in Austin, Texas, on January 24, 2012.

§8.135.Penalty Guidelines for Pipeline Safety Violations.

(a) Policy. Improved safety and environmental protection are the desired outcomes of any enforcement action. Encouraging operators to take appropriate voluntary corrective and future protective actions once a violation has occurred is an effective component of the enforcement process. Deterrence of violations through penalty assessments is also a necessary and effective component of the enforcement process. A rule-based enforcement penalty guideline to evaluate and rank pipeline safety-related violations is consistent with the central goal of the Commission's enforcement efforts to promote compliance. Penalty guidelines set forth in this section will provide a framework for more uniform and equitable assessment of penalties throughout the state, while also enhancing the integrity of the Commission's enforcement program.

(b) [(a)] Only guidelines. This section complies with the requirements of Texas Natural Resources Code, §81.0531(d), and Texas Utilities Code, §121.206(d). The penalty amounts contained in the tables in this section are provided solely as guidelines to be considered by the Commission in determining the amount of administrative penalties for violations of provisions of [Title 3 of the] Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, [or Subchapter I (121.451 - 121.454)], or a safety standard or other rule prescribed or [relating to the transportation of gas and gas pipeline facilities] adopted under that provision [those provisions].

(c) [(b)] Commission authority. The establishment of these penalty guidelines shall in no way limit the Commission's authority and discretion to cite violations and assess administrative penalties. The typical minimum penalties listed in this section are for the most common violations cited; however, this is neither an exclusive nor an exhaustive list of violations that the Commission may cite. The Commission retains full authority and discretion to cite violations of Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders, or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, or a safety standard or other rule prescribed or adopted under that provision, and to assess administrative penalties in any amount up to the statutory maximum when warranted by the facts in any case, regardless of inclusion in or omission from this section.

(d) [(c)] Factors considered. The amount of any penalty requested, recommended, or finally assessed in an enforcement action will be determined on an individual case-by-case basis for each violation, taking into consideration the following factors:

(1) the person's history of previous violations, including the number of previous violations;

(2) the seriousness of the violation and of any pollution resulting from the violation;

(3) any hazard to the health or safety of the public;

(4) the degree of culpability;

(5) the demonstrated good faith of the person charged; and

(6) any other factor the Commission considers relevant.

(e) [(d)] Typical penalties. Typical penalties for violations of provisions of [Title 3 of the] Texas Natural Resources Code, Title 3, relating to pipeline safety, or of rules, orders, or permits relating to pipeline safety adopted under those provisions, and for violations of Texas Utilities Code, §121.201, [or Subchapter I (121.451 - 121.454), ] or a safety standard or other rule prescribed or [relating to the transportation of gas and gas pipeline facilities] adopted under that provision [those provisions] are set forth in Table 1.

Figure: 16 TAC §8.135(e)

Table 1. Typical Penalties

[Figure: 16 TAC §8.135(d)]

(f) [(e)] Penalty enhancements for certain violations. For violations that involve threatened or actual pollution; result in threatened or actual safety hazards; or result from the reckless or intentional conduct of the person charged, the Commission may assess an enhancement of the typical penalty, as shown in Table 2. The enhancement may be in any amount in the range shown for each type of violation.

Figure: 16 TAC §8.135(f)

Table 2. Penalty Enhancements

[Figure: 16 TAC §8.135(e)]

(g) [(f)] Penalty enhancements for certain violators. For violations in which the person charged has a history of prior violations within seven years of the current enforcement action, the Commission may assess an enhancement based on either the number of prior violations or the total amount of previous administrative penalties, but not both. The actual amount of any penalty enhancement will be determined on an individual case-by-case basis for each violation. The guidelines in Tables 3 and 4 are intended to be used separately. Either guideline may be used where applicable, but not both.

Figure 1: 16 TAC §8.135(g)

Table 3. Penalty enhancements based on number of prior violations within seven years

Figure 2: 16 TAC §8.135(g)

Table 4. Guideline Penalty enhancements based on total amount of prior penalties within seven years

[Figure 1: 16 TAC §8.135(f)]

[Figure 2: 16 TAC §8.135(f)]

(h) [(g)] Penalty reduction for settlement before hearing. The recommended penalty for a violation may be reduced by up to 50% if the person charged agrees to a settlement before the Commission conducts an administrative hearing to prosecute a violation. Once the hearing is convened, the opportunity for the person charged to reduce the basic monetary penalty is no longer available. The reduction applies to the basic penalty amount requested and not to any requested enhancements.

(i) [(h)] Demonstrated good faith. In determining the total amount of any penalty requested, recommended, or finally assessed in an enforcement action, the Commission may consider, on an individual case-by-case basis for each violation, the demonstrated good faith of the person charged. Demonstrated good faith includes, but is not limited to, actions taken by the person charged before the filing of an enforcement action to remedy, in whole or in part, a violation [of the pipeline safety rules] or to mitigate the consequences of a violation [of the pipeline safety rules.]

(j) [(i)] Penalty calculation worksheet. The penalty calculation worksheet shown in Table 5 lists the typical penalty amounts for certain violations; the circumstances justifying enhancements of a penalty and the amount of the enhancement; and the circumstances justifying a reduction in a penalty and the amount of the reduction.

Figure: 16 TAC §8.135(j)

Table 5. Penalty calculation worksheet

[Figure: 16 TAC §8.135(i)]

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 24, 2012.

TRD-201200315

Mary Ross McDonald

Director, Pipeline Safety Division

Railroad Commission of Texas

Earliest possible date of adoption: March 11, 2012

For further information, please call: (512) 475-1295