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August 31, 2017

Fifth Circuit Vacates Penalties against ExxonMobil

Connor Choate

The Fifth Circuit vacated multiple violations charged against ExxonMobil Pipeline Co. for a 2013 oil spill. The U.S. Pipeline and Hazardous Materials Safety Administration determined in 2015 that ExxonMobil had violated federal safety regulations related to the Mayflower oil spill of one of their pipelines and charged ExxonMobil with nine violations, in total amounting to a $2.6 million civil penalty, of which ExxonMobil challenged six.

Five of the contested violations were based on federal law that requires pipeline operators “consider” risk factors associated with the pipeline. Though the court generally defers to agency interpretations of ambiguous regulations, the court determined the consideration of risk factors regulation to be unambiguous, with “consider” referring to a decision process without a prescribed outcome. Because ExxonMobil “conducted a lengthy, repeated, and in-depth analysis of those risk factors,” the court found ExxonMobil had satisfied the requirements of considering risk factors and acted reasonably. The agency’s decisions on these violations were found to be “arbitrary and capricious” and were therefore vacated. The court provided additional justification for vacating these violations in that ExxonMobil had no way of knowing the PHMSA had a different interpretation of the regulations at hand, let alone what that interpretation was, so the PHMSA could not fairly enforce their differing interpretation (ExxonMobil Pipeline Co. v. United States Department of Transportation, No. 16-60448 (5th Cir. 2017)).

The court also affirmed the agency’s decision in the last contested violations, though still remanded it to have the fine reevaluated because the violation did not clearly cause the Mayflower spill.

Connor Choate

Austin Law Firm in Raleigh, North Carolina.