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U.S. Auditors Fault Pipeline Oversight

Friday, May 16, 2014

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The federal agency tasked with pipeline safety is doing an inadequate job and lacks effective management and oversight, concludes a new audit by the U.S. Department of Transportation's Office of Inspector General.

The Pipeline and Hazardous Materials Safety Administration needs to improve in several areas to address crucial pipeline risks, according to the report. PHMSA is responsible for enforcing federal safety requirements on the majority of 2.5 million miles of U.S. pipeline.

"PHMSA's guidelines, policies, and procedures for State programs lack steps to effectively manage the State Pipeline Safety Program and identify safety weaknesses in State programs," said the audit, released May 7.


There were 24 serious incidents on U.S. distribution pipelines in 2012 and 21 in 2013, according to PHMSA. This one, in Alabama in December 2011, was blamed on external corrosion.

The report found that PHMSA's policies for state safety programs (e.g., inspector staffing, training, scheduling, and inspection forms) lacked elements to ensure that state inspections cover federal requirements and that operators comply with safety standards.

Additionally, auditors said, the agency's oversight is insufficient to ensure that states comply with program evaluation requirements and properly use suspension grant funds. Those are funds that PHMSA has awarded since 2009 to some states hard hit by the recession.

San Bruno Response

The OIG announced its plans to conduct the audit in April 2012, in response to a recommendation from the National Transportation Safety Board following the deadly 2010 pipeline explosion in San Bruno, CA, that killed eight people and leveled a neighborhood.

In its final report on the San Bruno incident, the NTSB cited longstanding weaknesses in PHMSA's monitoring of state pipeline safety oversight programs, including a lack of meaningful metrics to assess state oversight.

The United States has a network of about 2.5 million miles of pipelines that move millions of gallons of hazardous liquids and 55 billion cubic feet of natural gas every day.

About 85 percent of these pipelines are under state authority; PHMSA authorizes states to oversee and enforce operators' compliance with federal safety regulations through its State Pipeline Safety Program. Hawaii and Alaska are the only states that do not participate in the agency's pipeline safety program.

PHMSA also allocates grants to state programs, which have more than doubled between 2008 ($19.5 million) and 2013 ($46 million).

NTSB recommended that the Secretary of Transportation conduct the audit to ensure state safety programs and federal safety grants are used to effectively conduct oversight of intrastate pipeline operations.

Lowering Incidents

Auditors provided a draft report of their findings to PHMSA in February and received a response April 24 that is included with the audit.

Cynthia L. Quarterman, PHMSA's Administrator, defended the agency's performance.

"Under PHMSA's oversight, State pipeline safety programs have reduced the rate of serious pipeline incidents for gas distribution pipelines by approximately two-thirds over the last 30 years," Quarterman said in a response.


According to the audit, PHMSA is relying on an outdated formula to calculate how often pipeline inspections are necessary.

According to Quarterman, 2012 saw 24 serious incidents on distribution pipelines and 2013 saw 21—"the lowest number of serious incidents on record for the past 30 years."

Last month, PHMSA issued an advisory bulletin telling pipeline owners and operators to "evaluate their safety programs and implement any changes to eliminate deficiencies similar to the ones" NTSB identified after a 30-inch pipeline owned by Enbridge ruptured in July 2010 near Marshall, MI.

NTSB determined that the probable cause was stress corrosion cracking that grew and coalesced from disbonded polyethylene tape coating. Beyond the hardware problems, however, were a wealth of training, risk assessment, integrity management and procedural lapses that allowed the spill to spread to disastrous proportions.

Accused of Neglecting Duties

It's not the first time the OIG has discovered shortcomings with PHMSA's oversight of pipeline integrity management programs. An audit that started in December 2010 and was released in June 2012 criticized PHMSA for inspection backlags, regulatory loopholes and other "key deficiencies."

Following the San Bruno incident, the City of San Francisco filed a lawsuit against PHMSA in February 2012, accusing the agency of neglecting its duties under the federal Pipeline Safety Act “to ensure that the California Public Utilities Commission is complying with its certification and that federal pipeline safety standards are being enforced in California.”

Regulators "were either asleep at the switch or far too cozy with the industry they're supposed to regulate," City Attorney Dennis Herrera alleged.

135 Non-Compliances

For its audit, the OIG randomly selected five states to review 400 program evaluation requirements and detected 135 non-compliances, while PHMSA only identified 12, according to the audit. For example, states:

  • Could not provide evidence that all inspections were conducted within required timeframes;
  • Did not have have inspection procedures for all types of inspection activities; and
  • Lacked trend analysis of operators' annual reports.
 Mbz1 / Wikimedia Commons

NTSB recommended the audit after its review of the 2010 pipeline explosion in San Bruno, CA, which killed eight people. NTSB cited weaknesses in PHMSA's oversight of state safety programs.

The audit said PHMSA was using an outdated formula to determine how many inspectors each state needs, lacked qualification requirements for inspectors, and lacked details for how states should recommend risk factors for scheduling inspections.

The formula, developed in the 1990s, does not account for integrity management, operator qualification and operator training programs, auditors said. Nor does it address some key factors that impact pipeline risk, such as age and material composition.

More than 20 percent of the nation's gas distribution pipelines are more than 50 years old or made of cast iron or bare steel—a risk that PHMSA does not factor in when determining additional inspection resources, the OIG said.

Critical Risk Considerations

There are 14 risk factors that PHMSA requires states to consider when scheduling inspections, including corrosion, construction, high consequence areas, population density and time since last inspection.

However, the agency's guidelines don't include thresholds for the risk factors or prioritize the list, according to the report.

In fact, the five states reviewed for the audit did not use most of the 14 risk factors for scheduling 2010 and 2011 inspections, the OIG said.

pipeline risk factors
OIG Audit

Of five states reviewed for the audit, four considered only one of 14 risk factors in scheduling inspections.

Four of the states considered only the length of time since the last inspection; the fifth state used only five factors.

7 Recommendations

The OIG issued seven recommendations to PHMSA:

  • Revise the inspection staffing formula and periodically analyze state-provided inspection unit data;
  • Develop and include in state program guidelines minimum training requirements for inspectors, a system to track federal inspection forms and notify states of new ones, and standards for time allowed between inspections;
  • Develop and implement procedures to review the adequacy of inspection procedures annually;
  • Provide guidance to ensure that states implement risk-analysis methods for scheduling inspections;
  • Document procedures for triennial grant reviews;
  • Develop a training program for PHMSA evaluators to verify whether states comply with program requirements and accurately notify states in writing of non-compliance; and
  • Develop and implement a plan to audit states' use of suspension funds.

In its response, PHMSA concurred with recommendations 2, 5, and 7 and partially concurred with the rest. The OIG said it considered recommendations 2, 4, 5, 6, and 7 resolved, pending further information in some instances.

Regarding the inspection staffing formula, PHMSA said it had taken action independent of the recommendation. However, the OIG said those actions "do not go far enough" and "do not adequately address ... factors that impact pipeline risk."

While PHMSA said it plans to enhance its inspection guidance to address recommendation 3, it remains unresolved because the agency did not provide specific enhancements, according to the report.


Tagged categories: Department of Transportation (DOT); Explosions; Health & Safety; Inspection; NTSB (National Transportation Safety Board); PHMSA; Pipeline

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