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May 10, 2013
PHMSA's inspection authority upheld

In a case with important implications for companies with pipelines inside their plants as well as any company subject to an inspection by a federal agency, a U.S. district court denied a petition by ONEOK Partners to prevent the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) from inspecting its internal pipelines. 

Confusing regulations

The dispute began late in 2012 when PHMSA began an inspection of the ONEOK natural gas liquids facility in Bushton, Kansas, to determine the company’s compliance with federal hazardous liquid pipeline and storage safety regulations.  ONEOK petitioned the U.S. District Court for the Northern District of Oklahoma for a restraining order to force PHMSA to discontinue the inspection.  ONEOK claimed that PHMSA was exceeding its authority under the Pipeline Safety Act (PSA).  The company argued that PHMSA’s jurisdiction is limited to pipelines entering and leaving the plant.  However, pipelines inside the plant are regulated by the EPA and OSHA, said ONEOK. 

“We believe PHMSA is outside its jurisdictional authority by inspecting and attempting to impose different regulations on the assets and operating procedures currently regulated by OSHA and the EPA,” said ONEOK.  “We believe that having different rules within the same plant could result in misinterpretation and confusion.”
The petition was granted and the court ordered the inspection stayed pending additional review by the court.

Jurisdiction

When the district court again took up the matter, PHMSA stated that the PSA specifies that parties may petition a PHMSA order only in the U.S. Court of Appeals for the D.C. Circuit or in the U.S. appeals court for the circuit with jurisdiction over the area where the business is located.  Therefore, the case was outside the district court’s jurisdiction.  ONEOK rebutted by arguing that PHMSA’s attempt to inspect the Bushton plant did not constitute an order; therefore, the case was within the jurisdiction of the district court.  The court disagreed with ONEOK.

According to District Judge James H. Payne, PHMSA’s action is “easily classified as an order for purposes of the PSA’s judicial review provision.”  Payne notes that there is no mention in the PSA of what agency action might constitute an order for purposes of judicial review.  However, Payne continues, the Administrative Procedures Act (APA) defines an order as a “final disposition … in a matter other than rule making.” 

‘Simple notice of an enforcement policy’

Payne goes on to cite an opinion in which the Court of Appeals for the 9th Circuit stated:
“‘Order’ carries a note of finality, and applies to any agency decision which imposes an obligation, denies a right, or fixes some legal relationship.  In other words, if the order provides a ‘definitive’ statement of the agency’s position, has a ‘direct and immediate’ effect on the day-to-day business of the party asserting wrongdoing, and envisions ‘immediate compliance with its terms,’ the order has sufficient finality to warrant the appeal….”

From this, Payne concludes that “even a simple notice of an enforcement policy constitutes an order for purposes of judicial review statutes,” and PHMSA’s decision to inspect the Bushton plant falls within the definition.  Accordingly, ONEOK’s petition to block PHMSA’s inspection was denied by Payne for lack of jurisdiction. 

After a 4-month delay, PHMSA resumed its inspection of the Bushton plant during the week of April 15, 2013.

Click here for the district court’s opinion. .  

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