The Continuing Education of the New Deputy Director

I’m now in my 4^th week, and the state of our nation’s pipeline safety continues to shock me.  I have seen many examples of the industry writing its own rules.  Why the regulators abdicate this important work is beyond me.  Expect to hear more from Carl on this soon.

But I’d like to focus on something else in my space this week.  As I dig into each area of pipeline safety, I continually run into the same question in my head – Why on earth don’t these regulations go far enough!?  Surprisingly, there is generally one answer – the Cost-Benefit Requirement. 

Why is it that in response to a Congressional Mandate after the catastrophic failures of Enbridge in Michigan and PG&E in San Bruno, CA does PHMSA come back with such a tepid response that barely scratches the surface of what is truly needed?  The Cost-Benefit Requirement.  Any new proposed regulation must make economic sense for the industry.  Any proposed rule must not cost too much relative to the benefits.  I’d like to clearly state here that the benefits we are talking about are not just protecting our clean water and natural world, but also human life.  I’m morbidly curious what dollar value is placed on a human life in their calculations.  And on the cost side of the equation, who calculates what a new proposed rule would cost?  The industry groups do.  I don’t know about you, but this shocked me.

Also embedded in this requirement is a classic Catch-22, on par in absurdity with much of the novel’s circular logic:

• New regulations need to pass the cost-benefit test.
• In order to pass the cost-benefit test, the agency needs to calculate benefits (read human lives saved).
• In order to calculate benefits, incidents need to be reported.
• In order to be reported, incidents need to be part of a regulated system.
• In order to be part of a regulated system, we need to pass new regulations.
• Return to the top and repeat

This system is maddening, broken, and needs an overhaul.

How did we get here?  Are other regulatory agencies similarly hamstrung?  To answer these questions, we need to revisit the mid-1990’s and Newt Gingrich’s “Contract with America”.  House Republicans had an ideological belief that “overburdensome” regulations were counterproductive and believed instead in “Rationalism” when it came to environmental, health, and safety standards – cost-benefit requirements comprising a core tenet of this “rationalist” approach.  It turns out that their power to induce change was relatively short-lived and they were able to apply this mandate to only one piece of legislation – The Pipeline Safety Act of 1996, passed in response to the explosion on a pipeline owned by the Texas Eastern Transmission Corporation in Edison, NJ.  Our nation’s pipeline industry is the only industry protected by such an explicit and codified cost-benefit test.

We can blame this requirement for much of our regulatory shortfall.  Why aren’t our more than 400,000 miles of natural gas gathering lines regulated at all?  Why don’t we have better standards for leak detection and responsive shut-off?  Why aren’t pipeline segments that cross rivers sufficiently protected?  Largely, because of the cost-benefit requirement.

It is irreconcilable to have a regulatory agency and industry group tout the goal of “zero-incidents” while hiding behind this requirement that explicitly allows for incidents.  It is unfathomable to trust industry to calculate costs.  It is unconscionable to assign a dollar value to a human life.  We need to abolish the cost-benefit requirement.

I believe that our safety, health, and environment should be subject to more vigilant standards that are responsive to public values, not oil and gas companies’ bottom lines.