{"operation":"document","citation":"CPF 320071006","title":"ANR PIPELINE CO — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2007-02-08","effective_on":null,"summary":"CLOSED notice of probable violation citing 192.201, 192.203, 192.465(a), 192.603(b), 192.625.","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-320071006.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-320071006.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-320071006","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/320071006","body":"Notice of Probable Violation involving ANR PIPELINE CO. PHMSA's enforcement data identifies the cited regulations as 192.201,  192.203,  192.465(a),  192.603(b),  192.625. The case was opened on 2007-02-08 and is reported as closed as of 2012-04-23. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n320071006_Amendment to Petition for Reconsideration_01282010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Amendment%20to%20Petition%20for%20Reconsideration_01282010.pdf\n\n320071006_Closure_04232012.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Closure_04232012.pdf\n\n320071006_Closure_04232012_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Closure_04232012_text.pdf\n\n320071006_Decision on the Petition for Reconsideration_12302010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Decision%20on%20the%20Petition%20for%20Reconsideration_12302010.pdf\n\n320071006_Decision on the Petition for Reconsideration_12302010_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Decision%20on%20the%20Petition%20for%20Reconsideration_12302010_text.pdf\n\n320071006_Final Order_12042009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Final%20Order_12042009.pdf\n\n320071006_Final Order_12042009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Final%20Order_12042009_text.pdf\n\n320071006_NOPV letter_02082007.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_NOPV%20letter_02082007.pdf\n\n320071006_nopv letter_02082007_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_nopv%20letter_02082007_text.pdf\n\n320071006_operator response to notice_03132007.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_operator%20response%20to%20notice_03132007.pdf\n\n320071006_Petition for Reconsideration_12302009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Petition%20for%20Reconsideration_12302009.pdf\n\n320071006_Closure_04232012_text.pdf\n\nCERTIFIED MAIL - RETURN RECEIPT REQUESTED\nApril 23, 2012\nMr. Vern Meier\nVice President, US Pipeline Operations\nANR Pipeline Company\nTransCanada\n717 Texas Avenue\nHouston, TX 77002-1006\nCPF 3-2007-1006\nDear Mr. Meier:\nOn December 4, 2009, the Pipeline and Hazardous Materials Safety Administration (PHMSA)\nissued to ANR Pipeline Company a Final Order in the above-referenced case. This Order\nincluded a Compliance Order. Based on our review of the documentation you provided, it has\nbeen determined that you have complied with the terms of this Order.\nAccordingly, this case is now closed and no further action is contemplated with respect to the\nmatters involved in this case. Thank you for your cooperation in this matter.\nSincerely,\nDavid Barrett\nDirector, Central Region\nPipeline and Hazardous Materials Safety Administration\n\n320071006_Decision on the Petition for Reconsideration_12302010_text.pdf\n\nDEC 30 2010\nMr. Lee Hobbs\nPresident\nANR Pipeline Company\n717 Texas St Ste 2500\nHouston, TX 77002\nRe: CPF No. 3-2007-1006\nDear Mr. Hobbs:\nEnclosed please find the Decision on the Petition for Reconsideration filed by ANR Pipeline\nCompany in the above-referenced case. For the reasons set forth in the Decision, your petition is\ndenied on all counts, except that PHMSA will not consider the company’s violation to be a\n“prior offense” for purposes of any future civil penalty assessment.\nThe stay of the compliance order, which was previously granted on January 15, 2010, is hereby\nlifted and therefore ANR must comply with the order by the deadlines specified in the Decision.\nWhen the terms of the compliance order have been completed, as determined by the Director,\nCentral Region, this enforcement action will be closed. Service of this document by certified\nmail is deemed effective upon the date of mailing, or as otherwise provided under 49 C.F.R.\n§ 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nJeffrey D. Wiese\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Mr. David Barrett, Director, Central Region, PHMSA\nMr. Eugene R. Morabito, Attorney for ANR Pipeline Company\n5250 Corporate Drive, Troy, Michigan 48098\nCERTIFIED MAIL – RETURN RECEIPT REQUESTED [ 7005 1160 0001 0039 9969]\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, D.C. 20590\n____________________________________\nIn the Matter of )\nANR Pipeline Company, ) CPF No. 3-2007-1006\n)\n)\n)\nPetitioner. )\n____________________________________)\nDECISION ON PETITION FOR RECONSIDERATION\nOn December 4, 2009, pursuant to 49 U.S.C. § 60118 and 49 C.F.R. § 190.213, the Pipeline and\nHazardous Materials Safety Administration (PHMSA) issued a Final Order in this proceeding,\nfinding that ANR Pipeline Company (ANR or Petitioner) had violated 49 C.F.R. § 192.625(b) by\nfailing to odorize natural gas transported by transmission pipeline in certain populated areas.\nANR, a subsidiary of TransCanada Corporation, operates approximately 10,000 miles of\npipelines transporting natural gas from production fields in Louisiana, Oklahoma, Texas, and the\nthe violation, but required Petitioner to take certain corrective actions to comply with the\nregulation.\nGulf of Mexico to markets in the Midwest.1 The Final Order did not assess a civil penalty for\nBy letter dated December 23, 2009, ANR requested an extension of time to file a petition for\nreconsideration of the Final Order. Before PHMSA responded to that request, ANR submitted\nits Petition for Reconsideration dated December 30, 2009 (Petition). In its Petition, ANR\nrequested reconsideration of the one finding of violation. The company also requested, in the\nalternative, that PHMSA extend the deadline for completing the terms of the compliance order,\nand that the finding of violation not be considered a prior offense. In addition, ANR requested\nleave to amend the Petition and requested a stay of the compliance order pending this Decision.\nBy letter dated January 15, 2010, PHMSA stayed the terms of the compliance order pending the\nissuance of this Decision and granted Petitioner an additional 10 days to amend the Petition.\nANR submitted an Amendment to the Petition by letter dated January 28, 2010 (Petition\nAmendment).\nPursuant to 49 C.F.R. § 190.215, a respondent may petition PHMSA for reconsideration of a\nfinal order. PHMSA does not consider repetitious information, arguments, or petitions, but may\nconsider additional facts or arguments, provided that the respondent submits a valid reason why\nsuch information was not presented prior to issuance of the final order. PHMSA may grant or\n1 ANR Pipeline Company website, http://www.anrpl.com/company_info.\n\n\n\n2\ndeny, in whole or in part, a petition for reconsideration without further proceedings, but may\nrequest additional information, data, and comment as deemed appropriate.\nI. Background\nANR operates a system of natural gas pipelines that includes a major interstate transmission line\nthat transports gas from Texas and Oklahoma to Wisconsin and Michigan. The portion of the\nANR system relevant to this proceeding is the Illinois–Wisconsin lateral system, a subsidiary\nsystem of transmission pipelines that branches away from the main interstate line at a single\npoint in Illinois (Sandwich Station), delivering gas to different distribution facilities in\nWisconsin.2 The lateral system consists of various branches, compressor stations, and pipes with\nvarying diameters and pressures. In some areas of the lateral system, pipelines branch away\nfrom other pipelines, which themselves branch from other pipelines. The system runs through\nvarious Class 1, Class 2, and Class 3 areas, as defined in 49 C.F.R. § 192.5.\n3\nThe Final Order, issued on December 4, 2009, found that ANR had violated § 192.625(b) by\nfailing to odorize gas in those portions of the lateral system located in Class 3 areas. Section\n192.625 provides, in pertinent part:\n§ 192.625 Odorization of gas.\n(a) A combustible gas in a distribution line must contain a natural\nodorant or be odorized so that at a concentration in air of one-fifth of the\nlower explosive limit, the gas is readily detectable by a person with a\nnormal sense of smell.\n(b) After December 31, 1976, a combustible gas in a transmission line\nin a Class 3 or Class 4 location must comply with the requirements of\nparagraph (a) of this section unless: . . .\n(3) In the case of a lateral line which transports gas to a distribution\ncenter, at least 50 percent of the length of that line is in a Class 1 or Class\n2 location; . . . .\nThis regulation requires ANR to odorize gas in those portions of its lateral system located in\nClass 3 areas, unless, in the case of a lateral line which transports gas to a distribution center, at\nleast 50 percent of the length of that line is in a Class 1 or Class 2 location. ANR acknowledged\nthat the subject pipelines were not odorized, but argued that the pipelines were lateral lines that\nran mostly through rural areas and therefore qualified for the exception from odorization under\n§ 192.625(b)(3).4\n2 A transmission line is “a pipeline, other than a gathering line, that: (1) transports gas from a gathering line or\nstorage facility to a distribution center, storage facility, or large volume customer that is not down-stream from a\ndistribution center; (2) operates at a hoop stress of 20 percent or more of [specified minimum yield strength]; or (3)\ntransports gas within a storage field.” 49 C.F.R. § 192.3.\n3 Class 1 and Class 2 locations are generally rural areas with lower concentrations of population near the pipeline,\nwhile Class 3 and Class 4 locations have more population and other sensitive areas near the pipeline. See 49\nC.F.R. § 192.5.\n4 Final Order at 3.\n\n\n\n3\nThe term “lateral line” is not defined in 49 C.F.R. Part 192. In the Final Order, PHMSA agreed\nwith ANR that the subject pipelines were “laterals,” based on the generally understood meaning\nthat such lines are ones transporting gas from transmission lines to particular end points.\n5 The\nFinal Order determined that PHMSA had never expressly articulated how to apply the exception\nin § 192.625(b)(3) to a lateral line that was part of a “lateral system.” In other words, the agency\ndid not have an established method for determining the length of a lateral line for purposes of\ncalculating whether “at least 50 percent of the length of that line is in a Class 1 or Class 2\nlocation” under § 192.625(b)(3). While it was clear from the text of the regulation that the end\npoint of the pipeline was the distribution center, the beginning point was not so certain.\n6\nIn deciding how the length of a lateral line should be measured for purposes of applying\n§ 192.625(b)(3), the Final Order evaluated the text of the rule, the intent and safety purpose of\nthe odorization requirement, and the methods for calculating length advocated by ANR and\nPHMSA regional staff at the hearing. The Final Order concluded that the most reasonable\ninterpretation of the regulation was to calculate the length of a lateral line, for purposes of this\nsection, by measuring the line from its terminus at a distribution center to the first upstream\nconnection with another transmission line, whether that was another lateral transmission line or a\nnon-lateral transmission line. A diagram was provided in the Final Order to help clarify this\ninterpretation and how § 192.625(b)(3) should be applied to the lateral system operated by ANR.\nIn the Final Order, PHMSA rejected the methodology advocated by ANR because it involved\ncalculating the length of each lateral line from the distribution facility all the way back to the\nbeginning of the entire lateral system at Sandwich Station. This method was rejected because it\nresulted in “double counting” upstream portions of the lateral system lying closer to the main\ninterstate line that served as common branches for multiple lateral lines. The duplicative\ncounting of such mileage—mileage generally located in rural Class 1 and Class 2 areas—skewed\nthe calculation towards determining that each pipeline had more than 50 percent of its length in a\nClass 1 and Class 2 location. The Final Order found ANR’s methodology had artificially\ninflated the number of lines meeting the exception for odorization, resulting in up to 100 miles of\nClass 3 populated areas being un-odorized. This practice was found to frustrate the safety\npurposes of the rule, which provides for the odorization of gas in populated areas in order to\nincrease the likelihood that a gas leak will be detected, i.e., smelled, by persons living and\nworking in the vicinity of the lines. The methodology proposed by ANR was also found to be\ninconsistent with the intent of the exception in § 192.625(b)(3), which “in most cases” was to\nexclude only “short” segments of pipeline in predominantly rural areas where the likelihood of\ndetecting odorized gas was reduced, due to the smaller population in such areas.\n7\nThe Final Order also rejected ANR’s contention that PHMSA regional offices had historically\naccepted the company’s methodology, finding “there is no evidentiary support for this assertion\n5 Id. at 5 (citing PHMSA’s Stakeholder Communications website definition of “lateral.”)\n6 This only becomes an issue where a lateral line is part of a “lateral system,” because if a lateral line simply runs\nbetween a non-lateral transmission line and a distribution center, the only possible means of calculating the length of\nthat lateral would be from its beginning at the non-lateral transmission line to its end at the distribution center.\n7 Final Order at 6.\n\n\n\n4\nother than perhaps an absence of enforcement cases against operators for similar violations. The\nabsence of prior enforcement cases does not equate to an affirmative statement of administrative\npolicy.”8\nAfter reviewing all of the evidence presented in light of the regulatory interpretation, the Final\nOrder determined that the lateral transmission pipelines at issue in the case did not meet the\nexception for odorization and therefore the gas transported by the pipelines in Class 3 locations\nhad to be odorized. Since ANR had acknowledged such pipelines were not odorized, PHMSA\nfound the company in violation of § 192.625(b). The Final Order did not assess a civil penalty\nfor the violation, but ordered ANR to take certain actions to bring the pipeline system into\ncompliance.\nII. Discussion\nIn its Petition, ANR advances two basic arguments for withdrawing the finding of violation.\nFirst, the company contends that in interpreting the regulation in the Final Order, PHMSA has\ncreated and applied a new substantive rule without notice and comment, in violation of the\nAdministrative Procedures Act (APA), 5 U.S.C. § 553.9 Second, ANR contends that the\nmethodology articulated in the Final Order is arbitrary and unreasonable.10 I address these\narguments in turn.\n1. Whether the interpretation in the Final Order required APA notice and comment.\nPetitioner contends that PHMSA’s interpretation of § 192.625(b)(3) in the Final Order departs\nfrom long-standing agency policy and therefore constitutes a new substantive rule issued without\nnotice and comment, in violation of the APA. Specifically, ANR contends that “the Order’s new\nmethodology for calculating the length of a lateral pipeline constitutes a new substantive rule\nchanging established PHMSA practice and as such must be submitted for notice and comment\nunder the APA.”11 Petitioner argues further that the Final Order “does not merely provide an\ninterpretation of an ambiguous or unclear regulation; rather, the Order substantively alters an\nestablished regulatory and universally accepted practice by adopting a novel ‘segment’\ninterpretation of a lateral line . . . .”12\nANR has raised this argument before.13\nIn response to the company’s contention that the\ninterpretation would constitute a change in administrative policy that must be adopted by\nrulemaking, PHMSA stated in the Final Order that it found no evidence to suggest there was\nsettled administrative policy upset by this case. It noted that ANR had not cited any agency\nstatement or practice that had established another method for calculating the length of a lateral in\n8 Id. at 8.\n9 Petition at 1.\n10 Id. at 1.\n11 Id. at 3.\n12 Id. at 2.\n13 See, e.g., ANR’s Response to the Notice of Probable Violation (Response), at 3 (Mar. 13, 2007).\n\n\n\n5\na lateral system under § 192.625(b)(3). PHMSA also dismissed ANR’s contention that several\nPHMSA regional offices had accepted the company’s understanding of the regulation, on the\nground that there was simply no evidence on this issue “other than perhaps an absence of\nanything, the lack of public statements on the issue showed that PHMSA had not formally\nconsidered or determined a definitive method for calculating the length of lateral lines under\nenforcement cases against operators for similar violations.”14 The Final Order concluded that, if\n§ 192.625(b)(3).\nAs referenced above, 49 C.F.R. § 190.215 provides that PHMSA does not consider repetitious\narguments presented in a petition for reconsideration. Therefore, I dismiss, as a matter of\nprocedure, ANR’s repetitious argument that PHMSA has departed from long-standing agency\npolicy. I do note, however, that ANR has presented, for the first time, a citation to a court\ndecision that the company believes supports its position. For the sole purpose of distinguishing\nthat judicial decision, I briefly address Petitioner’s argument.\nIn its Petition, ANR cites Shell Offshore Inc. v. Babbitt in support of its contention that PHMSA\nhas created a new substantive rule by departing from its long-standing agency policy.\n15 In Shell\nOffshore, the court held that the Department of Interior had changed its policy of approving the\nuse of tariff rates by lessee royalty payors—a policy that it had consistently followed for at least\nfive years. Although the former policy of accepting the use of tariff rates had never been\nreduced to a written statement, the court found that the policy “was undeniably [the agency’s]\nlong established and consistently followed practice.\n”16 The court held that “[i]f a new agency\npolicy represents a significant departure from long established and consistent practice that\nsubstantially affects the regulated industry, the new policy is a new substantive rule and the\nagency is obliged, under the APA, to submit the change for notice and comment.”17\nThe holding in Shell Offshore was based, in part, on a decision by the D.C. Circuit Court of\nAppeals in Alaska Professional Hunters Assoc. v. FAA.\n18 In that case, an FAA regional office\nhad for years advised hunting and fishing guides in Alaska that they were exempt from certain\ncommercial pilot regulations. When the FAA headquarters discovered this policy being\nespoused by its regional office, the agency published a notice announcing that such guides were\nno longer considered exempt. On appeal, the court found that the FAA’s consistent affirmative\nstatements regarding Alaskan hunting and fishing guides over the years had established a\ndefinitive interpretation of the regulation, and that “[w]hen an agency has given its regulation a\ndefinitive interpretation, and later significantly revises that interpretation, the agency has in\neffect amended its rule, something it may not accomplish without notice and comment.”19\n14 Final Order at 8.\n15 238 F.3d 622 (5th Cir. 2001).\n16 Id. at 630.\n17 Id.\n18 177 F.3d 1030 (D.C. Cir. 1999).\n19 Id. at 1034.\n\n\n\n6\nCentral to both these decisions is that the two agencies in question had both followed long-\nestablished, open, and consistent policies from which the agencies suddenly and significantly\ndeparted, giving rise to the legal challenges in question. In the present matter, however, there is\nsimply no evidence that PHMSA had “given its regulation a definitive interpretation, and later\nwhere administrative agencies have not clearly established a policy or practice, courts have\ndeclined to follow Shell Offshore or Alaska Professional Hunters. Similarly, courts have also\nbeen unwilling to find that the mere absence of enforcement action by an agency constitutes a\nregulatory interpretation or an established practice from which an agency may only depart\nthrough notice and comment.\nsignificantly revised that interpretation.”20 This factual distinction is critical, since in situations\nFor example, in MetWest Inc. v. Secretary of Labor, the court found that OSHA’s 13-year\npractice of not enforcing a particular provision of its regulations regarding the disposal of\nneedles in the workplace did not establish an “express, direct, and uniform interpretation” of the\napplicable regulation, and therefore the agency had not created a substantive rule change when it\nissued a citation for violating the provision.21 Likewise, in Warshauer v. Solis, the court\ndetermined that an agency’s decision not to enforce certain requirements, even if it could be\nconsidered a “policy,” did not rise to the level of an established interpretation under Alaska\nProfessional Hunters.\n22 In Warshauer, despite a showing that the agency had an enforcement\npolicy of “mere acquiescence” to the conduct at issue was found insufficient to trigger the need\nfor notice-and-comment rulemaking.23\nAs explained in the Final Order, PHMSA did not have an established policy or position on the\nmethod of calculating the length of a lateral line in a lateral system for purposes of the\nodorization exception, and the mere absence of prior enforcement did not rise to the level of\nconstituting an affirmative statement of agency policy. In its Petition, however, ANR contends\nthat PHMSA “ignores relevant statements in the record demonstrating that the present\n‘interpretation’ runs contrary to PHMSA’s past practices.”24 Specifically, Petitioner points to its\nstatement at the hearing that compliance audits by PHMSA since 1990 included discussion of\nANR’s interpretation of the regulation and that “compliance audit reviews . . . implicitly\nacknowledged Respondent’s qualification for the § 192.625(b)(3) exception without finding a\nviolation.”25\n20 Id.\n21 560 F.3d 506, 510 (D.C. Cir. 2009).\n22 577 F.3d 1330, 1340-41 (11th Cir. 2009).\n23 Id. at 1340. See also, Devon Energy Corp. v. Norton, [verify cite] 2007 WL 2422005 *5 (D.D.C. 2007)\n(distinguishing Shell Offshore, because in that case, “there was no question that Interior had made a change in policy\nand departed significantly from a consistent, prior practice of not requiring the certification. By contrast, in [Devon]\n. . . it is not all clear that the 2003 decision is a departure from a longstanding practice of Interior.”); Visiting Nurse\nAssoc. v. Thompson, 378 F. Supp.2d 75, 89 (E.D.N.Y. 2004) (declining to follow Shell Offshore and Alaska\nProfessional Hunters because there was “no evidence that the [agency’s interpretation] was at odds with either a\nprior written interpretation of the cost-reporting regulations or any pattern of practice sufficiently longstanding to\nestablish that the Secretary had arrived at a definitive interpretation of these rules.”)\n24 Petition at 4.\n25 Id. (citing ANR Hearing Presentation, Slide 20); Petition Amendment at 1.\n\n\n\n7\nPetitioner’s statements in this regard were not “ignored” in the Final Order. Rather, PHMSA\nfound there was simply no evidence demonstrating that the statements were true. While ANR is\ncorrect that agency representatives at the hearing did not introduce evidence refuting the\ncompany’s assertion,\ntrue. Since the statements could not be supported with any probative evidence, the claims simply\ndid not carry much value in determining whether or not PHMSA had a long-standing policy.\n26 ANR likewise failed to produce any evidence that the statements were\nIn apparent response to such lack of evidence, ANR presents in its Petition Amendment, for the\nfirst time, an affidavit dated January 25, 2010, from the company’s Senior Field Compliance\nEngineer, who attests that in 2002 PHMSA performed an inspection of the ANR pipeline facility\nand discussed with him the odorization, or lack thereof, of the Illinois–Wisconsin lateral system.\nThe employee stated that, based on his knowledge and experience, the fact that PHMSA did not\nissue a citation for a violation of § 192.625(b) following the 2002 inspection indicated that\nPHMSA found the company’s practice to be acceptable.\n27\nAs a procedural matter, ANR did not submit in its Petition any reason why such evidence was\nnot presented prior to issuance of the Final Order, as required under § 190.215. Even accepting\nthe validity of the witness’s statement, however, this new evidence demonstrates only that at a\nsingle point in time, a PHMSA representative reviewed ANR’s methodology and did not issue a\nprobable violation. This fact alone, even if true, does not constitute a “long established and\nconsistently followed practice” upon which ANR could reasonably rely.\nFinally, Petitioner argues that PHMSA “abused its discretion” under the APA by interpreting and\napplying § 192.625(b)(3) in an adjudication rather by rulemaking.28 Again, ANR has raised this\nbasic argument before.29 In response to the contention that PHMSA should enunciate this\ninterpretation by rulemaking, the agency determined in the Final Order that it is not necessarily\nrequired to undertake a rulemaking in order to interpret its own regulations, and that courts have\nrecognized the discretion of agencies to set forth regulatory interpretations either by adjudication\nor rulemaking.\n30\nAs referenced above, PHMSA does not consider repetitious arguments presented in a petition for\nreconsideration. Therefore, I dismiss ANR’s repetitious argument that PHMSA failed to comply\nwith the APA by interpreting this particular regulation through its adjudication process. I note\nfurther, however, that ANR has suggested the agency consider several court decisions the\ncompany believes support its position. For the sole purpose of distinguishing those decisions, I\naddress Petitioner’s argument.\n26 Petition Amendment at 2.\n27 Petition Amendment, Attachment 1 at ¶ 6.\n28 Id. at 2.\n29 See Final Order at 8 (citing ANR’s Supplemental Response to the Notice of Probable Violation at 2 (Nov. 20,\n2007).\n30 Final Order at 9 (citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 292–94 (1974) (stating that an agency is “not\nprecluded from announcing new principles in an adjudicative proceeding”)).\n\n\n\n8\nIn its Petition Amendment, ANR cites the decision in First Bancorporation v. Board of\nGovernors of the Federal Reserve System, where the Board had issued an order unconditionally\nallowing the petitioner to acquire a particular financial institution.\n31 Several years later, when\nthe same party applied for approval to acquire a similar institution, the agency issued an order\nimposing new conditions on such an acquisition and, at the same time, placed those same new\nconditions on petitioner’s previous acquisition, which had already been unconditionally\napproved. The court found that the second order “contains no adjudicative facts having any\nparticularized relevance to petitioner,” and therefore that the Board’s order “was thus merely a\nan abuse of discretion for the agency to improperly attempt to change its policy with regard to\nvehicle by which a general policy would be changed.”32 Under such facts, the court held it was\nsuch acquisitions by adjudication, and that such a significant policy change was required to be\nmade through rulemaking under the APA.\nSimilarly, in the other case cited by ANR, Patel v. Immigration and Naturalization Service, the\ncourt looked at facts involving the agency’s alleged attempt to implement a new substantive rule\nthrough adjudication.\n33 In that case, the INS had issued an order finding that the respondent had\nfailed to meet an exception for deportation because he had not complied with what the agency\nviewed as a requirement for aliens to show their commercial investment in the U.S. through\nexpanded job opportunities. The court found that not only was the job opportunities requirement\nnot mentioned in the regulation establishing an exception for aliens who have made significant\ncommercial investments in the U.S., but the INS had previously proposed to include such a\ncondition in the regulation but then, in response to comments, had eliminated it from the final\nrule. For this reason, the court found that the INS had “attempted to add a requirement to the . . .\nregulation [through its order] which had been expressly discarded during its rulemaking\nproceedings.”34 Under such facts, the court held that the agency had abused its discretion by\nannouncing what amounted to a new substantive rule by adjudication rather than rulemaking.\nIn contrast to these cases, in which an agency tried to use the adjudicatory process to implement\na significant policy change or to establish a new requirement, the present matter does not reflect\nan attempt by PHMSA to use this adjudication “merely [as] a vehicle by which a general policy\nwould be changed.\nand in this Decision, PHMSA has not changed an established policy, but, rather, has interpreted\nthe manner in which the exception in § 192.625(b)(3) should be applied to the specific facts\npresented by Petitioner’s particular pipeline system.\n”35 Moreover, as has already been discussed at length, both in the Final Order\nIn a court decision more analogous to the present matter, the FCC interpreted an otherwise\nambiguous regulatory term (i.e., “in substantial accordance with . . . . the station authorization”)\nin an adjudication by deciding that, in the context of radio station construction, the term means\nwithin one mile of the coordinates authorized by the agency.36\nOn appeal by several parties who\n31 728 F.2d 434 (10th Cir. 1984).\n32 Id. at 438.\n33 638 F.2d 1199 (9th Cir. 1981).\n34 Id. at 1202.\n35 First Bancorp., 728 F.2d at 438.\n36 Cassell v. FCC, 154 F.3d 478, 481 (D.C. Cir. 1998).\n\n\n\n9\nargued the FCC had adopted a substantive rule without notice and comment, the court found\ntheir argument “without merit.” The court held that “it is well settled that an agency is not\nprecluded from announcing new principles in an adjudicative proceeding.\nconsistent with the determination in the Final Order that the agency is not necessarily required to\nundertake a rulemaking in order to announce the interpretation of the exception in\n§ 192.625(b)(3).\n”37 This decision is\nFor all of the reasons set forth above and in the Final Order, I reject ANR’s contention that\nPHMSA violated the APA by issuing a final order interpreting an agency regulation without\ngoing through notice and comment.\n2. Whether the interpretation of § 192.625(b)(3) is reasonable.\nIn its Petition, ANR acknowledges that an agency interpretation of a regulation is generally\nentitled to deference.\n§ 192.625(b)(3) is arbitrary, capricious, unreasonable, and not supported by the evidence in the\nrecord. Petitioner presents several different arguments in this regard.\n38 The company argues, however, that PHMSA’s interpretation of\nFirst, ANR argues that the interpretation is arbitrary and capricious because it “introduces a new\ncriterion of length into the analysis of whether a lateral qualifies for the § 192.625(b)(3)\nexception.”39 Petitioner contends that the “interpretation is flawed and illogical in application”\nbecause the concept of length “is not a concept that is addressed in the regulatory definition of a\ntransmission line.”40 As grounds for its position, the company cites Acadian Gas Pipeline\nSystem v. FERC, which found that “[w]here any agency fails to distinguish past practice, its\nactions may indicate that lack of reasoned articulation and responsibility that vitiates the\ndeference the reviewing court would otherwise show.”41\nI reject Petitioner’s contention that PHMSA has introduced a “new criterion of length” into\n§ 195.625(b)(3) in the Final Order, or that the concept of length was not contemplated in the\nregulation. The text of the regulation clearly states that an exception for lateral lines applies only\nif at least 50 percent “of the length of that line” is in either a Class 1 or Class 2 location. Thus,\nthe regulation necessarily requires one to calculate the length of a lateral line from one point to\nanother in order to determine whether 50 percent of that distance is in a Class 1 or Class 2\nlocation. PHMSA has not introduced a new concept of length, but simply interpreted how that\nlength should be measured. The Acadian Gas case is further distinguished because there is no\npast practice from which the agency is departing. For these reasons, I reject Petitioner’s\nargument that PHMSA has introduced a new concept of length into the regulation.\n37 Id. at 486 (citations omitted).\n38 Petition at 5.\n39 Id.\n40 Id.\n41 878 F.2d 865, 868 (5th Cir. 1989).\n\n\n\n10\nIn a related argument, ANR asserts that PHMSA has introduced the new concept that a lateral\nline, in the context of § 192.625(b)(3), must be “short.” This is apparently in response to the\nfinding in the Final Order that ANR’s practice of artificially increasing the mileage of Class 1\nand Class 2 areas for each lateral line was inconsistent with the intent of the lateral line\nexception, which, “in most cases,” was to exclude “short” segments of pipeline in predominantly\nlaterals meeting the exception be short; instead, it rejects the practice of ANR in this particular\nrural areas.42 The interpretation set forth in the Final Order, however, does not mandate that all\ncase, because the result of the company’s actions is inconsistent with the intent of the rule.\nTherefore, I reject Petitioner’s argument.\nSecond, ANR questions the reasonableness of the interpretation on the ground that under the\nFinal Order, a lateral that otherwise meets the exception in § 192.625(b)(3) could be bifurcated\nby a newly constructed interconnecting pipeline, resulting in the loss of its exception status.43\nFor example, using the hypothetical lateral system diagram in the Final Order, Petitioner argues\nthat a lateral constructed from point H to point D might qualify for the exception, but if an\ninterconnection were subsequently built at point G, the portion from point H to point G might\nlose its exception status under § 192.625(b)(3).\nPHMSA has not been presented with an actual situation where a lateral meeting the exception in\n§ 192.625(b)(3) is subsequently bifurcated, and therefore the agency does not decide here\nwhether the interpretation enunciated in the Final Order would cause such a formerly exempt\nlateral to lose its exception status. I would note, however, in the hypothetical presented that even\nif the portion from point H to point G did not meet the exception in § 192.625(b)(3), ANR’s\nconcern over the “loss” of an exception is misplaced, because that portion of the line could still\npotentially qualify for another exception if certain criteria were met. For example,\n§ 192.625(b)(1) provides that odorization is not required for combustible gas in a transmission\nline in a Class 3 or Class 4 location if “at least 50 percent of the length of the line downstream\nfrom that location is in a Class 1 or Class 2 location.” Therefore, I reject Petitioner’s argument\nthat the interpretation is unreasonable in this regard.\nThird, ANR provides several alternatives to the agency’s interpretation of the term “lateral”\nunder § 192.625(b)(3) and suggests that PHMSA adopt such a “definition” in lieu of the one set\nforth in the Final Order.44\nAs noted above, however, the definition of a lateral was not an issue\nin the Final Order, because PHMSA agreed that the subject pipelines were indeed lateral\ntransmission lines. Rather, the issue was how to calculate the length of a lateral for the specific\npurpose of applying § 192.625(b)(3). Furthermore, the alternatives provided by ANR provide no\nfurther assistance in the application of § 192.625(b)(3), because they generally identify the\nbeginning point of a lateral as the upstream transmission line, just as the interpretation employed\nby PHMSA does. To the extent there are any inconsistencies between PHMSA’s interpretation\n42 Final Order at 6 (citing Odorization of Gas in Transmission Lines, 40 Fed. Reg. 20,279, 20,280 (May 9, 1975)).\n43 Petition at 5.\n44 Petition at 6.\n\n\n\n11\nand the various other “definitions” suggested or cited by Petition, the latter are expressly rejected\nfor purposes of § 192.625(b)(3).45\nFourth, ANR objects to the decision in the Final Order that “double-counting” the upstream\nmileage of pipeline predominantly in Class 1 and Class 2 areas should not be allowed.46\nPetitioner contends that “there is no background in the preamble to the rule that indicates that\noverlapping should not be allowed.” I disagree. As explained in the Final Order, such a\nmethodology can artificially inflate the mileage calculated in Class 1 and Class 2 areas, which, in\nANR’s case, led to an improper and erroneous conclusion that approximately 100 miles of\npipeline in populated areas were exempted from the odorization standard.\nFifth, ANR suggests that PHMSA could calculate the length of the company’s lateral lines from\ntheir endpoints at the respective distribution centers back to the line that connects Sandwich\nStation to the interconnection between ANR’s facilities and another pipeline operated by\n“this line is the source of the majority of gas delivered in Wisconsin by ANR [and] is a ‘main’\ntransmission line from which various laterals emanate.” Petitioner also contends this suggestion\nwas discussed at the hearing but “not addressed in the Order.”\nTransCanada at Fortune Lake, Michigan.47 ANR contends this approach is justified because\nA review of Petitioner’s presentation at the hearing shows the company argued that each lateral\nin question should be viewed to begin at Sandwich Station, not some other location suggested in\nthe Petition.\n48 The Final Order specifically addressed this argument by noting that ANR had\nargued that the length of each lateral line “should be traced back to its point of origin at its\nprimary source of supply . . . at the Sandwich Compressor Station.”49 The Final Order noted that\nsuch methodology resulted in the “double-counting” of upstream mileage, and formed one of the\nbases for PHMSA’s rejection of ANR’s methodology for calculating the length of laterals.\n50\nFinally, ANR contends that the Final Order “arbitrarily limits the applicability of the lateral line\nexemption by excluding any ‘lateral line’ that does not meet the new test for measuring length,\nalthough the simple and unambiguous language in the text of the regulation does not exclude any\ntypes of lateral lines—whether such lines are of any particular length, or a certain diameter, or\noverlapping lines.”51\nANR suggests that the limits of the exception for odorizing gas pipelines in\npopulated areas be much broader than the text of the regulation permits. The regulation itself\nsets forth certain limiting factors, that is, at least 50 percent of the length of a lateral line ending\nat a distribution center must be in a Class 1 or Class 2 location. Given the safety importance of\n45 See Final Order at 5 (finding no significant inconsistency between the agency’s definition and the various other\ndefinitions cited by Petitioner).\n46 Petition at 6.\n47 Id.\n48 See ANR Hearing Presentation, Slides 16-18.\n49 Final Order at 3 (citing Response at 2).\n50 Id. at 5-7. To the extent Petitioner is proposing alternative measures or activities, the agency has set forth\nprocedures for considering such proposals at 49 C.F.R. § 190.341.\n51 Petition at 7 (emphasis in original).\n\n\n\n12\nresolved the ambiguity in the regulation presented by the novel situation of ANR’s lateral\nsystem. The resolution is an interpretation that constitutes a reasonable and justifiable approach\nbased on all of the reasons set forth in the Fin","truncated":true,"body_characters":80481}