Wolverine Pipe Line Co. v. DOT, PHMSAWolverine Pipe Line Co. v. DOT, PHMSA
On Petition for Review from the United States Department of Transportation, Pipeline and Hazardous Materials Safety Administration. No. 3-2019-5016.
COUNSEL
ARGUED: Joshua S. Johnson, VINSON & ELKINS, LLP, Washington, D.C., for Petitioner. Casen B. Ross, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent. ON BRIEF: Joshua S. Johnson, Ronald J. Tenpas, Jeremy C. Marwell, VINSON & ELKINS LLP, Washington, D.C., for Petitioner. Casen B. Ross, Abby C. Wright, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent.
NALBANDIAN, J., delivered the opinion of the court in which READLER, J., joined. BATCHELDER, J. (pp. 19-22), delivered a separate dissenting opinion.
NALBANDIAN, Circuit Judge. The Pipeline and Hazardous Materials Safety Administration imposed a civil penalty on Wolverine Pipe Line Company for violating two of its pipeline regulations. Wolverine claims this action was arbitrary and capricious and violated its due process rights. We disagree, and we affirm the agency‘s decision and deny Wolverine‘s petition.
A.
Regulatory Framework. More than two million miles of pipeline crisscross the United States. These pipelines cаrry oil, gasoline, and natural gas from state to state, powering American homes, infrastructure, and industry along the way. But with energy reward comes risk. Pipelines can leak, fail, or spill, hurting the environment or wreaking havoc in populated areas. To protect against such risks, Congress enacted a series of pipeline safety laws. See
Examples illustrate the point. For instance, pipeline operators retain discretion to develop and implement their own integrity management programs, or IMPs. These IMPs set plans for periodic pipeline assessments, as well as remedial plans for any pipeline repair issues an assessment brings to light. See generally
The regulations here, known as the integrity management regulations, fit this collaborative mold. Taking specific aim аt spill prevention in “high consequence areas,” these regulations set repair standards for pipelines that transport hazardous liquids. See
Post-discovery, PHMSA classifies integrity issues on a spectrum. The higher the risk, the faster an operator must act. In this vein, some especially dangerous repair conditions require immediate repair. If an operator identifies an immediate repair condition—like certain metal loss, a predicted pipe burst—оr, as relevant here, a pipeline dent—it “must temporarily reduce the operating pressure or shut down the pipeline until the operator completes the repair of the[] condition[]” to “maintain safety.”
B.
Factual Background. Wolverine transports refined petroleum products in its 700-mile pipeline system. These pipelines run from refineries in the Chicago area to terminals and other pipelines in and around Indiana and Michigan. Because Wolverine transports refined petroleum, a hazardous liquid, the company falls into PHMSA‘s regulatory orbit.
A few years ago, PHMSA conducted a routine inspection of Wolverine‘s records, procedures, and facilities. That inspection identified several issues. So not long after, PHMSA sent Wolverine a Notice of Probable Viоlation, or a NOPV. The Notice, which acts as an informal charging document for the agency, described nine potential violations of PHMSA‘s regulations. Only two of those items—“Item 5” and “Item 6“—matter here.
1. Item 5
We begin with the events prompting Item 5. An in-line inspection report (ILI report) landed in the inbox of Daniel Cooper, Wolverine‘s only risk management specialist at the time, on June 10, 2015.1 But Cooper didn‘t open the ILI report for another 13 days. Why? On June 10, Cooper was on vacation. And right after, Wolverine sent him on a work trip. Cooper explained that he “did not have access to email” on vacation. (Hr. Tr., A385.) Later, he noted that he “may have seen the e-mail, but [he] did not open the report until [he] got back from [his] travels.” (Id.) In any event, Cooper eventually returned to the office and read the report on June 23, 2015. The report described a dent with metal loss on the topside of one of Wolverine‘s pipe segments.
Once Cooper learned about the dent, he sprang into action. First, he reached out to the third-party vendor who prepared the ILI report to confirm that the pipe showed metal loss. After the vendor confirmed, Cooper convened a June 26, 2015 meeting with his Wolverine coworkers. There, they decided to treat the pipeline “anomaly” as a “possible immediate repair.” (Hr. Ex. 29, A589.) As Wolverine worked toward a repair, the operator prepared to implement the temporary pressure reduction the regulations require.
But this pressure reduction never came to pass. Based on an eight-month-old hydrostatic test,2 Cooper felt “confident” that the dent could withstand any pressure “and was not likely to fail in the next few days.”3 (Hr. Tr., A356.) Besides, in its IMP, Wolverine had interpreted the immediate repair regulation to give it a choice: “[C]omplete” the repair within “up to 5 . . . working days” after an operator determines there is “an immediate repair condition”
During the inspection, PHMSA reviewed Wolverine‘s response and found it lacking. So Item 5 of the Notice cited Wolverine for a violation of the immediate repair regulation,
2. Item 6
Next, we turn to Item 6. This item dealt with 180-day conditions, rather than immediate repair conditions. One of the 180-day conditions occurs when “[a] calculation of the remaining strength of the pipe shows an operating pressure that is less than the current established maximum operating pressure at the location of the anomaly.”
Wolverine received another ILI report identifying four such conditions on June 12, 2015. At each anomaly location, the report calculated the remaining strength of the pipes using both the R-STRENG and the B31G method. But the different methods yielded different results. Under the R-STRENG method, the strength value of each anomaly was greater than the maximum operating pressure at that location. But under the B31G method, the strength values were less than the maximum operating pressure at the four anomaly locations. So if Wolverine accepted and confirmed the R-STRENG calculations, the four anomalies would not qualify as 180-day conditions. But if it took the other path, relying on B31G instead, they would.
Wolverine took the latter route. With the report in hand, Cooper worked to confirm its contents. But he only recalculated and relied on the B31G values. Indeed, at the agency hearing, Cooper stated he “[n]ormally . . . use[d] [the] B31G [method]” to “prepar[e] repair plans.” (Hr. Tr., A429.) Although he doesn‘t “doubt” the R-STRENG values provided in ILI reports, he doesn‘t “have all the information necessary to assess [them],” which leads him to “take the more conservative [B31G] approach.” (Id.)
Wolverine‘s repair plans confirm Cooper‘s assessment that Wolverine solely relied on the B31G calculations to classify the four anomalies as 180-day conditions. The plans state that Cooper ran “the modified ASME B31G calculations” and found that four anomalies qualified as 180-day conditions. (JO-KA Repair Plan 10/19/2015, A148-49; JO-KA Repair Plan Summary 10/19/2015, A627.)
With the plans complete, Wolverine started on repairs. For two of the anomalies, the company met the 180-day mark.
Agency Hearing. After it received the Notice, Wolverine contested PHMSA‘s accusations. Its defense started with a request for an agency hearing. See
Wolverine‘s approach to Item 5 emphasized June 26 as the discovery date. To understand why, recall the language of the immediate repair regulation: “To maintain safety, an operator must temporarily reduce the operating pressure or shut down the pipeline until the operator completes the repair.”
For Wolverine to win on this theory, it needed PHMSA to accept the June 26 discovery date. So at the hearing, Wolverine went back and forth with PHMSA‘s investigators about Wolverine‘s claimed discovery date of June 26. In one such instance, Wolverine‘s counsel asked one of PHMSA‘s investigators, Ms. Alexander, about the discovery date. Wolverine‘s counsel said: “[D]o you dispute that June 26th, 2015, is the date of discovery for this subject condition?” (Hr. Tr., A329.) Alexander answered: “No, I‘m not disputing it. That is per Wolverine.” (Id.) But Wolverine‘s counsel persisted: “I want to know what you think . . . . Do you have a dispute with June 26th as the discovery date?” (Id.) This time, Alexander simply answered: “No.” (Id.)
This conversation, though, was just one of many instances when the parties argued about discovery for Item 5. At the start, Wolverine‘s counsel read the Notice to Alexander. Twice counsel asked if the allegation that Wolverine discovered a dent was “the regulatory version of discovery?
As for Item 6, Wolverine came to the table with a new theory: The repairs weren‘t 180-day conditions under the regulation. To make its case, Wolverine first pointed out that the regulation included both the R-STRENG and B31G as “[s]uitable remaining strength calculation methods.”
PHMSA‘s decision. In the end, Wolverine‘s arguments at the hearing failed to convince PHMSA. The agency‘s Final Order found Wolverine liable for violating both the immediate repair and 180-day condition regulations. And although Wolverine petitioned for reconsideration, the agency stayed firm, upholding both its liability findings and its $65,800 fine.
Wolverine now petitions for review of PHMSA‘s Item 5 and Item 6 decisions, arguing that each was arbitrary and capricious and contrary to law.
II.
We review PHMSA‘s action under the Administrative Procedure Act. See
III.
We consider PHMSA‘s Item 5 adjudication first. Wolverine contends this decision violated its due process rights and is arbitrary and capricious. PHMSA responds that its conclusion was a textbook application of the immediate repair regulation.
We think PHMSA has the better of the two arguments here. The text of the regulation goes a long way to showing why. “To maintain safety,” the regulation tells us, “an operator must temporarily reduce the operating pressure or shut down the piрeline until the operator completes the repair of these conditions.”
Wolverine never took these actions. Did it have a dent that met the criteria for an immediate repair? Wolverine admits as much. Did it complete the repair without temporarily reducing the pressure? Wolverine concedes the point. Indeed, during oral argument, Wolverine took the position that whether it opened the letter on June 10 or June 26, it would not have implemented a pressure reduction. In PHMSA‘s view, these two concessions were enough to find Wolverine liable for violating the regulation.
Wolverine reads the immediate repair regulation differently. It contends that the regulation “cannot reasonably be read to require a pressure reduction or shutdown if the repair can precede those actions.” (Wolverine Reply Br. at 10.) “Any alternative interpretation,” it suggests, would “require[] a repair to be delayed pending implementation of a pressure reduction or shutdown” and “undermine” the regulation‘s express “objective of maintaining safety.” (Id. (citation omitted).) So, the argument goes, operators do not need to reduce pressure or shutdown a pipeline if simply repairing it would be faster.
But Wolverine‘s reading runs headlong into the regulation‘s text, which tells operators: “To maintain safety, an operator must temporarily reduce operating pressure or shut down the pipeline until the operator completеs the repair of th[at] condition.”
Due Process. Before we address the heart of Wolverine‘s argument, we begin with a bit of context. The Fifth Amendment‘s due process clause applies to “administrative proceedings just as it does to other instances of government action.” Karst Robbins Coal Co. v. Dir., Off. of Workers’ Comp. Programs, 969 F.3d 316, 329 (6th Cir. 2020); see also Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 313 (1950).
And in the administrative law context, due process arguments often come in two forms. First, an agency offends due process if it “sustain[s] a charge different from any listed in the complaint,” Hodgins v U.S. Dep‘t of Agric., 238 F.3d 421, 430 (6th Cir. 2000) (table) (citations omitted), or “change[s] theories in midstream without giving [] reasonable notice of the change,” Yellow Freight Sys., Inc. v. Martin, 954 F.2d 353, 357 (6th Cir. 1992) (citation omitted). And second, even if an agency “properly construe[s]” a regulation, its action might violate due process if “the regulation is so vague in its requirements that its enforcement would violate” the Fifth Amendment. Diebold, Inc. v. Marshall, 585 F.2d 1327, 1335 (6th Cir. 1978); see also Ohio Cast Prods., Inc. v. OSHA, 246 F.3d 791, 798-99 (6th Cir. 2001); Albert C. Lin, Refining Fair Notice Doctrine: What Notice is Required of Civil Regulations? 55 Baylor L. Rev. 991, 1001 (2003) (explaining that courts often treat “[w]hether an agency‘s interpretation is permissible and whether an agency gave adequate notice of that interpretation” as “separate issues“).
Wolverine claims that the agency‘s actions violated both strands of due process doctrine. First, Wolverine contends that PHMSA “violated due process by relying on a novel theory of untimely discovery not adequately alleged” in the Notice. (Wolverine Br. at 30 (cleaned up)). In other words, Wolverine argues it lacked fair notice that the agency took issue with its claimed discovery date of June 26. (Id. at 37-38.) Second, Wolverine asserts it lacked fair notice that its conduct would violate the discovery regulation because the regulation‘s
We reject Wolverine‘s argument that it did not know its claimed discovery date would be at issue in the proceedings. Wolverine‘s claimed discovery date played an “ancillary part” throughout the proceedings. (Reconsideration Deсision, A21.) This is because an operator‘s “obligation to [reduce pressure] is dictated by when it discovers that it has an immediate repair condition on its pipeline.” (Id. at A17.) And so PHMSA sought to determine when that obligation kicked in.
Right off the bat, PHMSA‘s informal charging documents put Wolverine on notice that the agency took issue with the operator‘s timeline. The Notice began by faulting Wolverine for failing to “temporarily reduce the operating pressure when it discovered a dent.” (NOPV, A71.) It then added that “Wolverine received a final ILI report on June 10, 2015” but “claimed a discovery date of June 26, 2015 and completed repairs on June 30, 2015.” (Id.) In addition, PHMSA‘s follow-on Violation Report listed “the [d]ate the violation started” as June 10, 2015. (Violation Report, A112.) These documents gave Wolverine sufficient warning that PHMSA took issue both with the time between the receipt of the ILI report and the repair and with Wolverine‘s failure to implement a pressure reduction during that time. See ECM BioFilms, Inc. v. FTC, 851 F.3d 599, 618 (6th Cir. 2017) (“Although the complaint does not define ‘reasonably short period of time’ as a specific time period, that level of detail was unnecessary to ‘reasonably apprise’ [the company] of the issues in controversy.“).
Next, Wolverine‘s own actions confirm that it understood that PHMSA took issue with the time between the receipt of the ILI report and the repair. At the agency hearing, Wolverine tried to pin PHMSA down on the June 26 discovery date. And the parties wrangled over the discovery date multiple times.5 Also, leading up to this discussion about Wolverine‘s claimed discovery date, Wolverine had a line of questioning about how quickly operators must reduce pressure when an immediate repair condition is identified.
Again, in its post-hearing recommendation (which Wolverine responded to),
So it is not true that PHMSA shifted its theory from alleging that Wolverine violated the immediate repair regulation by failing to reduce pressure to alleging that Wolverine violated the immediate repair regulation by failing to reduce pressure in a timely fashion. Timeliness was an “ancillary” issue throughout. (Reconsideration Decision, A21.) And at the end of the day, PHMSA found that Wolverine violated the immediate repair regulation without fixing a discovery date, without charging Wolverine with a discovery regulation violation, cf. Carlisle Equip. Co. v. Sec‘y of Lab. & Occupational Safety, 24 F.3d 790, 795 (6th Cir. 1994); Freight” cite=“954 F.2d 353” pinpoint=“355, 358” court=“6th Cir.” type=“short“>Yellow Freight, 954 F.2d at 355, 358, and without changing its theory of the case, cf. Bendix Corp. v. FTC, 450 F.2d 534, 542 (6th Cir. 1971).6
Chenery. Wolverine next invokes Chenery I and Chenery II, arguing that PHMSA shifted its reasoning on appeal. This matters because agency action “cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained.” SEC v. Chenery Corp., 318 U.S. 80, 95 (1943). Wolverine points to the fact that, during the agency proceedings, PHMSA acknowledged that discovery played an “ancillary” part of its immediate-repair regulation analysis and spent much time chastising Wolverine for its “lаckadaisical approach.” (Reconsideration Decision, A20-21.) But on appeal, PHMSA left out that chastisement, asserting that “any dispute as to when Wolverine discovered the dent that required repair is orthogonal to the regulatory requirement that Wolverine reduce or shutoff the pipeline pressure.” (PHMSA Br. at 28.) Wolverine argues these differences in framing require us to vacate the agency‘s order below.
We disagree. Whatever the space between “ancillary” and “orthogonal,” it doesn‘t change our outcome here. Chenery “tells us not to sustain an administrative order on a different ground from the one the agency offered.” MISO Transmission Owners v. FERC, 860 F.3d 837, 843 (6th Cir. 2017); Chenery Corp., 318 U.S. at 94-95; accord SEC v. Chenery Corp., 332 U.S. 194, 196 (1947). It doesn‘t keep this Court from upholding an agency action “on the same basis articulated in the order by the agency itself.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 169 (1962). As the Reconsideration Decision held: “This finding of violation is, and always has been, squarely focused on the fact that Wolverine never took a pressure reduction or shut down the pipelinе.” (Reconsideration Decision, A21.) And we‘ve explained, the immediate repair regulation tells an operator it “must temporarily reduce the operating pressure or shut down the pipeline.”
We turn our attention next to Item 6, which concerns PHMSA‘s 180-day condition regulation. Because Wolverine‘s repair of two pipeline anomalies exceeded the 180-day limit, PHMSA found the operator violated the regulation. Wolverine doesn‘t contest that its repairs stretched past 180 days. Rather, it argues that the anomalies didn‘t qualify as 180-day conditions in the first place and that PHMSA‘s contrary conclusion was arbitrary and capricious.
It was not. Far from being “arbitrary and capricious,” PHMSA‘s Item 6 adjudication aligned with its front-end flexibility, back-end verification approach to regulation. On the front end, PHMSA explained that an operator may “run 10,000 different methodologies (provided those methodologies were proven)—as long as it documented its calculations and relied on those calculations to devise an implementation strategy.” (Reconsideration Decision, A22.) But on the back end, PHMSA must be able to verify an operator‘s decision-making during an inspection. This means an operator must “determine what methodologies to use, record its calculations, and present those calculations to inspectors if called upon to justify [its] conduct.” (Id.)
Wolverine failed to follow these simple steps. A step-by-step walk through the time between its receipt of the ILI report and PHMSA‘s inspection proves the point. Recall that the report included both R-STRENG and B31G values. But once Wolverine had the ILI report in hand, it only ran, recalculated, and relied оn the B31G data. Cooper testified as much at the hearing. (Hr. Tr. at 429 (“Normally in preparing plans, I will use B31G . . . Oftentimes the tool vendors will provide values based on R-STRENG or the effective area method . . . which while I don‘t doubt those, I don‘t have all the information necessary to assess that, so I take the more conservative [B31G] report.“)). And Wolverine‘s repair plans tell a similar tale. They flagged the anomalies as 180-day conditions under B31G. (See JO-KA Repair Plan 10/19/2015, A148 (explaining Cooper ran “the modified ASME B31G calculations” and found the four anomalies qualified as 180-day conditions); see also Hr. Ex. 35: JO-KA Repair Plan Summary, A627.)
Although the ILI report listed the raw R-STRENG values, Wolverine did nothing with that data. Indeed, during the inspection, Wolverine presented no documents that showed use of the R-STRENG values would lead to a different conclusion. As a result, PHMSA‘s Notice faulted the operator for missing the 180-day deadline for a few of its repairs. Wolverine admitted as much when it responded. But at the agency hearing, thе operator changed its tune. There, Wolverine produced a chart that incorporated the R-STRENG values and showed the anomalies didn‘t qualify as 180-day conditions under that method. PHMSA weighed this new evidence along with the rest and found Wolverine violated the regulation. “Operators may not,” it explained, “rely on one calculation method, devise an implementation strategy and repair plan deadlines, then when presented with an allegation of violation four years later, run different calculation methods.” (Reconsideration Decision, A22.)
This decision was neither arbitrary nor capricious. PHMSA “examine[d] the relevant data,” including Wolverine‘s last-minute R-STRENG calculations, and “articulate[d] a satisfactory explanation for its action.” State Farm Mut. Auto. Ins. Co., 463 U.S. at 43. What‘s more, when viewed through the lens of PHMSA‘s collaborative regulatory approach, its decision was reasonable. On the front end, Wolverine received two sets of values: One B31G, the other R-STRENG. Then, it documented, recorded, and relied
Wolverine pushes back against this holding in three ways. First, it contends that PHMSA‘s decision relied on a mistake of fact. To make its case, it points to a single footnote in PHMSA‘s Reconsideration Decision. It provided: “The evidence presented here is strong and supports the allegation that the Petitioner solely ran (and relied) on the B31G calculation methodology.” (Reconsideration Decision, A23 n.20). Wolverine asserts this statement shows PHMSA erroneously concluded “that the ILI vendor did not provide Wolverine with the R-STRENG values.” (Wolverine Br. at 50.) We disagree. Neither the Final Order nor the Reconsideration Decision assume or find that Wolverine received only B31G values from its ILI vendor. Instead, PHMSA‘s analysis focused on what Wolverine did with the ILI values. Here, the record shows Wolverine only used, confirmed, and relied on the B31G values during the time leading up to the 2017 inspection. It was only during the 2019 hearing that Wolverine gave PHMSA R-STRENG data suggesting a different result. It follows that PHMSA did not premise its decision on a “factual error.” (Id. at 49.) Although Wolverine received both R-STRENG and B31G values from the ILI vendor, the record showed it “solely ran (and relied) on the B31G calculation methodology.” (Reconsideration Decision, A23 n.20.)
Next, Wolverine asserts that PHMSA‘s reading of the regulation “cannot be squared with” its “plain language,” which says “nothing about holding operators to an ‘upfront choice between calculation methods.‘” (Wolverine Br. at 51 (quoting Final Order, A7.)). But this argument selectively quotes the record to misstate PHMSA‘s position. True, PHMSA‘s Final Order offered: “[W]hile the regulation offеrs the upfront choice between calculation methods, an operator is held to its choice.” (Final Order, A7.) But its Reconsideration Decision elaborated, explaining that an operator could run “10,000 different methodologies” as long as PHMSA could check the work and follow the decision-making process. (Reconsideration Decision, A22.) Contrary to Wolverine‘s assertions, this position is not “founded on an unsupportable interpretation of” the regulation. (Wolverine Br. at 50.) Rather, like the regulation, it allows operators to use any number of “[s]uitable remaining strength calculation methods” when deciding whether they have a 180-day condition on their hands.
Last, Wolverine laments that PHMSA‘s decision will “deter[] operators from going beyond the regulatory minimum standard of care.” (Wolverine Br. at 28.) We do not share its concern. PHMSA only objects to post-hoc rationalizations. As noted above, PHMSA explained that “[i]f Wolverine had evidence that it conducted two (or more) analyses when first making its determinations,” the outcome here would change. (Reconsideration Decision, A22-23.) But such evidence must be available during the agency inspection. Any other course, in the PHMSA‘s view, would “undermine pipeline
Two takeaways follow. First, in the future, a savvy operator should run alternative calculations before, not after, PHMSA knocks at its door. And next, dueling notions of safety and deterrence lie in PHMSA‘s domain, not ours. So to the extent Wolverine believes another approach would better achieve PHMSA‘s desirеd policy outcomes, its argument “is one for resolution by [PHMSA].” Lake Bldg. Prods., Inc. v. Sec‘y of Lab., 958 F.3d 501, 506 (6th Cir. 2020).
V.
For these reasons, we deny Wolverine‘s petition for review.
DISSENT
ALICE M. BATCHELDER, Circuit Judge, dissenting. I believe that Wolverine used sound judgment in compliance with the regulations, whereas the Agency concocted after-the-fact excuses for its contrived rulings. I refuse to condone the Agency‘s conduct.
Item 5. On June 25, 2015, Daniel Cooper, Wolverine‘s Risk and Integrity Specialist, was reading an apparently routine In-Line Inspection (ILI) Report from a contractor and came across a surprising item about the contractor‘s discovery of a worrisome dent in the pipeline. According to the Report, the contractor had discovered the dent during a regular pipeline assessment back in April, but had not immediately called or emailed Cooper or the local operations engineer to alert Wolverine. Instead, the contractor just wrote it into the Report and emailed that Report to Wolverine over two months later, on June 10, without any indication of an emergency condition that would require immediate response. When Cooper read about the dent, however, he immediately called the contractor for confirmation and clarification, called Wolverine personnel working that portion of the pipeline for information, and scheduled a conference call with consultants, contractors, and Wolverine personnel for the next morning, June 26.
Thus, on June 26, Wolverine found that the dent presented an emergency-repair situation. And Wolverine determined that the safest and most expedient means of resolving that potentially hazardous situation was to repair the dent immediately, without the unnecessary delay of shutting off the pipeline and reducing the pressure. Wolverine completed the repair of the pipeline dent four days later, on June 30, without incident. By any practical measure, this was a success.
But not according to the Agency. The Agency fined Wolverine $28,000 fоr violating certain regulations by failing to shut off the pipeline and reduce the pressure. During the administrative hearing to adjudicate the violation, Wolverine argued that it discovered the dent on June 26 and promptly repaired it on June 30, in compliance with the regulations. The Agency did not dispute that argument at the hearing, but later insisted in its post-hearing briefing that Wolverine discovered the dent on June 10 when its contractor emailed the ILI Report.
In his opinion, the Agency Administrator acknowledged that “Wolverine [had] capably argued that, even when a condition is identified as an immediate repair, a pressure reduction cannot be implemented immediately. There are a number of intervening steps that an operator must take to capably and safely implement a pressure reduction.” Therefore, if the discovery date
There is no honest dispute that Wolverine actually discovered the hazard on June 26 and repaired it within days, or whether that was the basis of Wolverine‘s defense at the hearing. The most that the Agency and its Administrator can contend is that Wolverine should have discovered (constructively discovered) the existence of the hazard on June 10, when the contractor sent the IRI Report email. While that seems reasonable enough, and fits the Agency‘s and Administrator‘s desired outcome in this case, I question whether that is the law. Certainly, the opinion points to no regulation or rule to support that view. In fact, Wolverine might have constructively discovered the existence of the dent in April, when its agent (contractor) discovered it, or maybe Wolverine should have, with due diligence, discovered it even earlier—I saw nothing in the record to establish how or when the dent actually happened. The point is that the question of when Wolverine should have discovered, or constructively discovered, the dent became the determinative question in the adjudication, but Wolverine was never told that question was at issue and, in fact, was led to believe that it was not. So Wolverine had no opportunity to be heard on the facts or circumstances of that question. I cannot agree that satisfies Wolverine‘s right to notice and fair hearing.
Item 6. In April 2015, in a different part of the pipeline, a Wolverine contractor performing an integrity test pursuant to the regulations, conducted the test twice using two different methods: once with a method named B31G and once with a method named R-STRENG. Both methods are specifically approved in the regulations. Under the more conservativе B31G method, the contractor identified four suspect locations requiring further inspection and repair within 180 days of discovery. Under the more lenient R-STRENG method, however, those same locations passed the testing and required no further investigation. Wolverine could have relied solely on the R-STRENG results and taken no further action at these locations. But it did not. Instead, Wolverine conducted further assessments using B31G, prepared repair plans, and conducted repairs. By any practical measure, this was a commendable approach to pipeline maintenance and safety.
But not to the Agency. The Agency fined Wolverine $37,000 for failing to complete its voluntarily undertaken repairs within 180 days at two of those four locations. Wolverine argued that, because the locations passed the R-STRENG test, there was no 180-day-repair requirement and, therefore, no violation. The Agency answered that the R-STRENG test was irrelevant because Wolverinе had elected to use the B31G results to pursue the follow-up assessment and repair.
In rendering his decision, the Administrator added this oddity: “while the regulation offers the upfront choice between calculation methods, an operator is held to its choice of calculation methodology.” But the regulations do not require any “choice“—“upfront” or otherwise—nor do the regulations suggest, much less state, anything whatsoever about the operator‘s being forever “held to that choice.” The pertinent
This is not an issue of “interpretation“; this is the Agency‘s adding a requirement (i.e., an upfront choice) that is not contained in the regulation at all. In rejecting Wolverine‘s motion to reconsider, the Administrator opined that “it would be perfectly permissible for [Wolverine] to run 10,000 different methodologies (provided the methodologies were proven)—as long as it documented its calculations and relied on those calculations to devise an implementation strategy,” but Wolverine “may not rely on one calculation method [to conduct proactive, voluntary assessment and repair], then when presented with an allegation of violation years after the fact, [use those] alternative calculations as a defense.” The Administrator does not offer any justification for this ipse dixit proclamation. Nor does he explain why it is appropriate for the Agency to raise “an allegation of violation years after the fact,” concerning an operator‘s voluntary repairs, but inappropriate for the operator to respond to that unexpected allegation by producing the evidence that informed its years-ago decision.
There is no honest dispute that Wolverine tested its pipeline using the R-STRENG, in complete compliance with the regulations, and the pipeline passed the test. At the time, Wolverine also tested the pipeline using B31G and when four locations failed that test, Wolverine proactively and voluntarily undertook a precautionary assessment and repair in full compliance with all regulations. As a practical matter, this was not only appropriate, it was commendable. So, when the Agency showed up four years later imposing a $37,000 fine for Wolverine‘s failure to complete all of its voluntary repairs within 180 days, why is Wolverine prohibited from demonstrating that the repairs were not required at all, much less within 180 days, based on the R-STRENG results? I cannot agree that satisfies Wolverine‘s right to notice and a fair opportunity to be heard.
I would vacate the order. Because majority sees it differently, I respectfully dissent.