PUC enforcement

Last week (April 3, 2019) Sunoco and the PUC’s Bureau of Investigation and Enforcement (BI&E) jointly filed a proposed settlement agreement intended to resolve the formal complaint that BI&E brought against Sunoco in December 2018. The complaint was the result of BI&E’s investigation into a leak of the Dragonpipe (Mariner East pipeline system) near Morgantown, PA, that occurred in 2017. The leak involved Mariner East 1, the repurposed 1930s-era pipeline, which was the only operational part of the Mariner East system at the time. The full text of the proposed settlement (including the text of the original complaint) is here. The full five-member Commission will still need to vote to adopt it is it is to become effective.

The basic facts of the settlement have been well publicized. Sunoco will pay a fine of $200,000, an amount that is almost meaningless in the context of a multi-billion-dollar project. Sunoco must also do additional testing and monitoring, and cooperate in a “remaining life study” on ME1.

The specific details of the proposed settlement have not gotten enough attention, in my opinion. They fall far short of the “requested relief” that BI&E originally wanted.

What’s in the settlement?  Let me start by emphasizing that Sunoco does not actually acknowledge any wrongdoing. It says it would have disputed the BI&E’s allegations if there had been a hearing. However, as the proposed settlement puts it, Sunoco “realizes the need to prevent similar allegations from recurring,” and is thus willing to accept the steps laid out in the compromise.

The two major elements of the proposed settlement are a “remaining life study” of ME1 and stepped-up inspection of the pipeline. In addition, the BI&E has backed off from its requirements about replacement of corroded pipe. Here are some of the details that stood out for me.

Sunoco gets to determine what pipe gets replaced. This is a major point of apparent compromise. In its original complaint, the BI&E wanted Sunoco to be required to replace inadequately protected pipeline. It would have required that

“… if the results of the cathodic protection measurements indicate [inadequate protection], then [Sunoco] shall replace the impacted sections of bare or inadequately coated steel pipe on ME1”.

That’s clear enough. The inadequately protected sections will be replaced.

In the proposed settlement, we have this instead:

“The Parties agree that I&E is not requesting that [Sunoco] immediately replace [inadequately protected pipe]. Instead, I&E understands that when [Sunoco] detects anomalies, the Company maintains the discretion to initiate and/or utilize various remedial measures to preserve the integrity of the pipe or, if ultimately deemed necessary, to physically replace segments of the pipe. The Parties agree with [Sunoco’s] proposed approach as follows: If the results of cathodic protection measurements indicate [inadequate protection, Sunoco] will take action consistent with its Corrosion Control Plans, Integrity Management Program and applicable Federal regulations.”

In essence, Sunoco decides what, if anything, to do about inadequately protected pipe.

How will the “remaining life” of ME1 be determined? This is the other big compromise, in my view. In the original BI&E formal complaint, the “requested relief” included this: “Conduct a ‘remaining life study’ of ME1 to determine the forecasted retirement age of ME1.” That’s also a clear request: Sunoco was asked to set a date by which Mariner East 1 would be taken out of service.

But there is no such requirement for a date in the proposed settlement. Instead, there is a laundry list of testing and reporting which the BI&E will hire an “independent expert” to do. Here are the 12 elements to be included in the “remaining life study”:

  • ME1 corrosion growth rate based on the most recent In-Line-Inspection run, sectionalized as appropriate;
  • Supporting documentation to demonstrate the corrosion growth rate. This may include a graph estimating corrosion growth from installation of ME1 to the present time;
  • Retirement thickness calculations that consider: (1) pressure design thickness; and (2) minimum structural thickness; Remaining life calculations by: (1) segment; (2) age; (3) coating type; and (4) soil conditions;
  • A schedule identifying portions of the pipeline to be replaced or remediated over the next five (5) years;
  • A summary of the portions of ME1 that were previously retired with an explanation of the characteristics of the pipeline sections that led to the replacements;
  • A listing and description of threats specific to ME1, with a summary of how each threat and the associated risks are mitigated;
  • A summary of the top ten (10) highest risks identified on ME1 with an explanation as to how the risks are mitigated;
  • An explanation of how anomalies, dents and ovalities are formed on the pipeline and addressed by mitigative measures;
  • A summary of the leak history on ME1 including a description of the size of each leak;
  • A discussion of the history of ME1, including when cathodic protection was installed, when coating was applied, and the various measures performed by SPLP, including the implementation of new procedures; and
  • A discussion to illustrate how managing integrity lengthens pipeline life.

Nothing on this list says that the independent expert will “forecast a retirement age” for ME1 or determine its “remaining life”. In fact, this so-called “remaining life study” amounts to an assessment of the history and integrity of the pipeline and a description of the methods of maintaining it—useful perhaps, but far short of the retirement plan that BI&E obviously intended.

It is also unclear how independent the “independent expert” will be. Sunoco is to submit the names of three candidates for BI&E to choose among. How independent are the “experts” nominated by Sunoco likely to be?

The “in-line” and “close-interval” inspections. In addition to the “remaining life study”, Sunoco agreed to two kinds of inspections, each to be performed twice during the next three years. The first is an in-line inspection (ILI), which involves sending an electro-magnetic monitoring device (known as a “pig”) through the pipeline. It does not involve shutting down the pipeline; the pig is carried along by the flow of the product itself. Pigs can sometimes detect serious thinning due to corrosion and large cracks, but smaller defects are often missed.

As Richard Kuprewicz, a pipeline safety expert, noted in his recent Congressional testimony: “… I have investigated too many transmission pipeline ruptures that occurred following ILI inspections, that on further investigation are proving to be downright embarrassing to the pipeline operators as well as disastrous and expensive.” And some pipeline companies seem to favor ILI software that fails to detect some problems. After all, if a problem is detected, they may have to shut a profitable pipeline operation down to fix it.

The second type of inspection is a “close-interval survey”. Sunoco’s primary anti-corrosion measure is called cathodic protection. This involves setting up a small electrical current flowing between a buried piece of metal (the “anode”) and the pipe. The only way to be sure it is working is to send out survey crews with metal rods that are driven into the ground near the pipe to measure the voltage.  The measurements are taken at “close intervals” (typically every 2.5 feet).

The survey can show that the cathodic protection is working, but it can’t show how much corrosion has already occurred. It also will not deal with:

  • Deeply-buried pipe (i.e. HDD sections)
  • Pipeline in rock or loose gravel (it requires conductive soil around the pipe)
  • Areas where the pipeline coating has come loose (“disbonded”)
  • Electrical interference (from other pipelines, high-tension power lines, or train power lines)

And those are just the problems that can occur when the cathodic protection system is being operated correctly. There are many ways it can be done wrong, as outlined in the link above.

Taken together, these limitations of cathodic protection and in-line inspection mean that significant parts of the Dragonpipe will not be protected from corrosion, the primary cause of serious pipeline failure. In short, in spite of these inspections, we can still expect corrosion to cause leaks.

The whole route won’t even be inspected for 18 months. The proposed settlement only calls for inspections in 2019 of the final part of ME1 in Chester and Delaware County, a stretch of less than 50 miles. The full pipeline won’t be inspected for 18 months (and again in 36 months). That’s despite the fact that BI&E, in its original complaint, requested annual inspections and alleged that “… there is a statewide concern with [Sunoco’s] corrosion control program around the soundness of [Sunoco’s] engineering practices with respect to cathodic protection.” If there is dangerously thin or unprotected pipe in the other 300 miles of the Dragonpipe in Pennsylvania, it will be 18 months before anyone knows about it. (And the public may never know until it’s too late.)

Improved maintenance procedures. Sunoco revised its maintenance procedures in 2018 to address some of the issues involved in the 2017 leak. As part of the settlement, Sunoco agrees to follow the new procedures. (Are the procedures improved? There’s no way to know, since there is no public information about them.)

No enforcement mechanism. The proposed settlement is silent about what happens if Sunoco fails to comply with the terms or cooperate in the required “remaining life study”. This is a problem: Sunoco has a history of failing to fulfill its promises and regulatory obligations. Will this document also be ignored?

What’s next? The full PUC must vote on the proposed settlement before it can go into effect. That is most likely to happen at one of its regular public meetings (the next one is April 11). After that, the settlement calls for a 30-day public comment period “within thirty (30) days of entry’ of any Commission Order that publishes this Settlement Agreement.” I’m not sure comments will change anything, but it is important to let our voices be heard. If a comment period is announced, I will let you know and I urge you to let the PUC know how you feel.

The net result. What we are left with is an agreement that does not set requirements for pipe replacement and that does not result in a retirement date for ME1. Those are serious shortcomings. And there is no mention of consequences if Sunoco does not follow through.

On the other hand, the agreement does provide for a study that could shed light on the state of corrosion of ME1, and it does result in beefed up inspections for the next three years. Those represent steps in the right direction, though small ones.

Although I am sure Sunoco would rather not have to deal with the “remaining life” study or the extra inspections, the settlement, if adopted, is a huge win for them. Not only do they avoid being forced to replace pipe or specify a retirement date for ME1, they also avoid the entire trial before the PUC on this subject. The trial would reveal exactly how the company made its decisions about pipeline maintenance, about following regulations and agreements, and about consideration of the safety of the public.  It would not be a pretty picture.

However, it is likely that the PUC will vote to adopt the settlement. They have generally been friendly toward pipeline operators, and they have a policy of encouraging settlements, rather than incurring the time and expense of hearings.

If the PUC decided to reject the settlement, the case would proceed to trial. I hope they reject it. We need to know the full scope of Sunoco’s failures to maintain its pipelines and protect the public, and a trial is the way to do that.