# ANR PIPELINE CO — Notice of Probable Violation

- **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:** Not available
- **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.

Official case documents:

320071006_Amendment to Petition for Reconsideration_01282010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Amendment%20to%20Petition%20for%20Reconsideration_01282010.pdf

320071006_Closure_04232012.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Closure_04232012.pdf

320071006_Closure_04232012_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Closure_04232012_text.pdf

320071006_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

320071006_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

320071006_Final Order_12042009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Final%20Order_12042009.pdf

320071006_Final Order_12042009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Final%20Order_12042009_text.pdf

320071006_NOPV letter_02082007.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_NOPV%20letter_02082007.pdf

320071006_nopv letter_02082007_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_nopv%20letter_02082007_text.pdf

320071006_operator response to notice_03132007.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_operator%20response%20to%20notice_03132007.pdf

320071006_Petition for Reconsideration_12302009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320071006/320071006_Petition%20for%20Reconsideration_12302009.pdf

320071006_Closure_04232012_text.pdf

CERTIFIED MAIL - RETURN RECEIPT REQUESTED
April 23, 2012
Mr. Vern Meier
Vice President, US Pipeline Operations
ANR Pipeline Company
TransCanada
717 Texas Avenue
Houston, TX 77002-1006
CPF 3-2007-1006
Dear Mr. Meier:
On December 4, 2009, the Pipeline and Hazardous Materials Safety Administration (PHMSA)
issued to ANR Pipeline Company a Final Order in the above-referenced case. This Order
included a Compliance Order. Based on our review of the documentation you provided, it has
been determined that you have complied with the terms of this Order.
Accordingly, this case is now closed and no further action is contemplated with respect to the
matters involved in this case. Thank you for your cooperation in this matter.
Sincerely,
David Barrett
Director, Central Region
Pipeline and Hazardous Materials Safety Administration

320071006_Decision on the Petition for Reconsideration_12302010_text.pdf

DEC 30 2010
Mr. Lee Hobbs
President
ANR Pipeline Company
717 Texas St Ste 2500
Houston, TX 77002
Re: CPF No. 3-2007-1006
Dear Mr. Hobbs:
Enclosed please find the Decision on the Petition for Reconsideration filed by ANR Pipeline
Company in the above-referenced case. For the reasons set forth in the Decision, your petition is
denied on all counts, except that PHMSA will not consider the company’s violation to be a
“prior offense” for purposes of any future civil penalty assessment.
The stay of the compliance order, which was previously granted on January 15, 2010, is hereby
lifted and therefore ANR must comply with the order by the deadlines specified in the Decision.
When the terms of the compliance order have been completed, as determined by the Director,
Central Region, this enforcement action will be closed. Service of this document by certified
mail is deemed effective upon the date of mailing, or as otherwise provided under 49 C.F.R.
§ 190.5.
Thank you for your cooperation in this matter.
Sincerely,
Jeffrey D. Wiese
Associate Administrator
for Pipeline Safety
Enclosure
cc: Mr. David Barrett, Director, Central Region, PHMSA
Mr. Eugene R. Morabito, Attorney for ANR Pipeline Company
5250 Corporate Drive, Troy, Michigan 48098
CERTIFIED MAIL – RETURN RECEIPT REQUESTED [ 7005 1160 0001 0039 9969]



U.S. DEPARTMENT OF TRANSPORTATION
PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION
OFFICE OF PIPELINE SAFETY
WASHINGTON, D.C. 20590
____________________________________
In the Matter of )
ANR Pipeline Company, ) CPF No. 3-2007-1006
)
)
)
Petitioner. )
____________________________________)
DECISION ON PETITION FOR RECONSIDERATION
On December 4, 2009, pursuant to 49 U.S.C. § 60118 and 49 C.F.R. § 190.213, the Pipeline and
Hazardous Materials Safety Administration (PHMSA) issued a Final Order in this proceeding,
finding that ANR Pipeline Company (ANR or Petitioner) had violated 49 C.F.R. § 192.625(b) by
failing to odorize natural gas transported by transmission pipeline in certain populated areas.
ANR, a subsidiary of TransCanada Corporation, operates approximately 10,000 miles of
pipelines transporting natural gas from production fields in Louisiana, Oklahoma, Texas, and the
the violation, but required Petitioner to take certain corrective actions to comply with the
regulation.
Gulf of Mexico to markets in the Midwest.1 The Final Order did not assess a civil penalty for
By letter dated December 23, 2009, ANR requested an extension of time to file a petition for
reconsideration of the Final Order. Before PHMSA responded to that request, ANR submitted
its Petition for Reconsideration dated December 30, 2009 (Petition). In its Petition, ANR
requested reconsideration of the one finding of violation. The company also requested, in the
alternative, that PHMSA extend the deadline for completing the terms of the compliance order,
and that the finding of violation not be considered a prior offense. In addition, ANR requested
leave to amend the Petition and requested a stay of the compliance order pending this Decision.
By letter dated January 15, 2010, PHMSA stayed the terms of the compliance order pending the
issuance of this Decision and granted Petitioner an additional 10 days to amend the Petition.
ANR submitted an Amendment to the Petition by letter dated January 28, 2010 (Petition
Amendment).
Pursuant to 49 C.F.R. § 190.215, a respondent may petition PHMSA for reconsideration of a
final order. PHMSA does not consider repetitious information, arguments, or petitions, but may
consider additional facts or arguments, provided that the respondent submits a valid reason why
such information was not presented prior to issuance of the final order. PHMSA may grant or
1 ANR Pipeline Company website, http://www.anrpl.com/company_info.



2
deny, in whole or in part, a petition for reconsideration without further proceedings, but may
request additional information, data, and comment as deemed appropriate.
I. Background
ANR operates a system of natural gas pipelines that includes a major interstate transmission line
that transports gas from Texas and Oklahoma to Wisconsin and Michigan. The portion of the
ANR system relevant to this proceeding is the Illinois–Wisconsin lateral system, a subsidiary
system of transmission pipelines that branches away from the main interstate line at a single
point in Illinois (Sandwich Station), delivering gas to different distribution facilities in
Wisconsin.2 The lateral system consists of various branches, compressor stations, and pipes with
varying diameters and pressures. In some areas of the lateral system, pipelines branch away
from other pipelines, which themselves branch from other pipelines. The system runs through
various Class 1, Class 2, and Class 3 areas, as defined in 49 C.F.R. § 192.5.
3
The Final Order, issued on December 4, 2009, found that ANR had violated § 192.625(b) by
failing to odorize gas in those portions of the lateral system located in Class 3 areas. Section
192.625 provides, in pertinent part:
§ 192.625 Odorization of gas.
(a) A combustible gas in a distribution line must contain a natural
odorant or be odorized so that at a concentration in air of one-fifth of the
lower explosive limit, the gas is readily detectable by a person with a
normal sense of smell.
(b) After December 31, 1976, a combustible gas in a transmission line
in a Class 3 or Class 4 location must comply with the requirements of
paragraph (a) of this section unless: . . .
(3) In the case of a lateral line which transports gas to a distribution
center, at least 50 percent of the length of that line is in a Class 1 or Class
2 location; . . . .
This regulation requires ANR to odorize gas in those portions of its lateral system located in
Class 3 areas, unless, in the case of a lateral line which transports gas to a distribution center, at
least 50 percent of the length of that line is in a Class 1 or Class 2 location. ANR acknowledged
that the subject pipelines were not odorized, but argued that the pipelines were lateral lines that
ran mostly through rural areas and therefore qualified for the exception from odorization under
§ 192.625(b)(3).4
2 A transmission line is “a pipeline, other than a gathering line, that: (1) transports gas from a gathering line or
storage facility to a distribution center, storage facility, or large volume customer that is not down-stream from a
distribution center; (2) operates at a hoop stress of 20 percent or more of [specified minimum yield strength]; or (3)
transports gas within a storage field.” 49 C.F.R. § 192.3.
3 Class 1 and Class 2 locations are generally rural areas with lower concentrations of population near the pipeline,
while Class 3 and Class 4 locations have more population and other sensitive areas near the pipeline. See 49
C.F.R. § 192.5.
4 Final Order at 3.



3
The term “lateral line” is not defined in 49 C.F.R. Part 192. In the Final Order, PHMSA agreed
with ANR that the subject pipelines were “laterals,” based on the generally understood meaning
that such lines are ones transporting gas from transmission lines to particular end points.
5 The
Final Order determined that PHMSA had never expressly articulated how to apply the exception
in § 192.625(b)(3) to a lateral line that was part of a “lateral system.” In other words, the agency
did not have an established method for determining the length of a lateral line for purposes of
calculating whether “at least 50 percent of the length of that line is in a Class 1 or Class 2
location” under § 192.625(b)(3). While it was clear from the text of the regulation that the end
point of the pipeline was the distribution center, the beginning point was not so certain.
6
In deciding how the length of a lateral line should be measured for purposes of applying
§ 192.625(b)(3), the Final Order evaluated the text of the rule, the intent and safety purpose of
the odorization requirement, and the methods for calculating length advocated by ANR and
PHMSA regional staff at the hearing. The Final Order concluded that the most reasonable
interpretation of the regulation was to calculate the length of a lateral line, for purposes of this
section, by measuring the line from its terminus at a distribution center to the first upstream
connection with another transmission line, whether that was another lateral transmission line or a
non-lateral transmission line. A diagram was provided in the Final Order to help clarify this
interpretation and how § 192.625(b)(3) should be applied to the lateral system operated by ANR.
In the Final Order, PHMSA rejected the methodology advocated by ANR because it involved
calculating the length of each lateral line from the distribution facility all the way back to the
beginning of the entire lateral system at Sandwich Station. This method was rejected because it
resulted in “double counting” upstream portions of the lateral system lying closer to the main
interstate line that served as common branches for multiple lateral lines. The duplicative
counting of such mileage—mileage generally located in rural Class 1 and Class 2 areas—skewed
the calculation towards determining that each pipeline had more than 50 percent of its length in a
Class 1 and Class 2 location. The Final Order found ANR’s methodology had artificially
inflated the number of lines meeting the exception for odorization, resulting in up to 100 miles of
Class 3 populated areas being un-odorized. This practice was found to frustrate the safety
purposes of the rule, which provides for the odorization of gas in populated areas in order to
increase the likelihood that a gas leak will be detected, i.e., smelled, by persons living and
working in the vicinity of the lines. The methodology proposed by ANR was also found to be
inconsistent with the intent of the exception in § 192.625(b)(3), which “in most cases” was to
exclude only “short” segments of pipeline in predominantly rural areas where the likelihood of
detecting odorized gas was reduced, due to the smaller population in such areas.
7
The Final Order also rejected ANR’s contention that PHMSA regional offices had historically
accepted the company’s methodology, finding “there is no evidentiary support for this assertion
5 Id. at 5 (citing PHMSA’s Stakeholder Communications website definition of “lateral.”)
6 This only becomes an issue where a lateral line is part of a “lateral system,” because if a lateral line simply runs
between a non-lateral transmission line and a distribution center, the only possible means of calculating the length of
that lateral would be from its beginning at the non-lateral transmission line to its end at the distribution center.
7 Final Order at 6.



4
other than perhaps an absence of enforcement cases against operators for similar violations. The
absence of prior enforcement cases does not equate to an affirmative statement of administrative
policy.”8
After reviewing all of the evidence presented in light of the regulatory interpretation, the Final
Order determined that the lateral transmission pipelines at issue in the case did not meet the
exception for odorization and therefore the gas transported by the pipelines in Class 3 locations
had to be odorized. Since ANR had acknowledged such pipelines were not odorized, PHMSA
found the company in violation of § 192.625(b). The Final Order did not assess a civil penalty
for the violation, but ordered ANR to take certain actions to bring the pipeline system into
compliance.
II. Discussion
In its Petition, ANR advances two basic arguments for withdrawing the finding of violation.
First, the company contends that in interpreting the regulation in the Final Order, PHMSA has
created and applied a new substantive rule without notice and comment, in violation of the
Administrative Procedures Act (APA), 5 U.S.C. § 553.9 Second, ANR contends that the
methodology articulated in the Final Order is arbitrary and unreasonable.10 I address these
arguments in turn.
1. Whether the interpretation in the Final Order required APA notice and comment.
Petitioner contends that PHMSA’s interpretation of § 192.625(b)(3) in the Final Order departs
from long-standing agency policy and therefore constitutes a new substantive rule issued without
notice and comment, in violation of the APA. Specifically, ANR contends that “the Order’s new
methodology for calculating the length of a lateral pipeline constitutes a new substantive rule
changing established PHMSA practice and as such must be submitted for notice and comment
under the APA.”11 Petitioner argues further that the Final Order “does not merely provide an
interpretation of an ambiguous or unclear regulation; rather, the Order substantively alters an
established regulatory and universally accepted practice by adopting a novel ‘segment’
interpretation of a lateral line . . . .”12
ANR has raised this argument before.13
In response to the company’s contention that the
interpretation would constitute a change in administrative policy that must be adopted by
rulemaking, PHMSA stated in the Final Order that it found no evidence to suggest there was
settled administrative policy upset by this case. It noted that ANR had not cited any agency
statement or practice that had established another method for calculating the length of a lateral in
8 Id. at 8.
9 Petition at 1.
10 Id. at 1.
11 Id. at 3.
12 Id. at 2.
13 See, e.g., ANR’s Response to the Notice of Probable Violation (Response), at 3 (Mar. 13, 2007).



5
a lateral system under § 192.625(b)(3). PHMSA also dismissed ANR’s contention that several
PHMSA regional offices had accepted the company’s understanding of the regulation, on the
ground that there was simply no evidence on this issue “other than perhaps an absence of
anything, the lack of public statements on the issue showed that PHMSA had not formally
considered or determined a definitive method for calculating the length of lateral lines under
enforcement cases against operators for similar violations.”14 The Final Order concluded that, if
§ 192.625(b)(3).
As referenced above, 49 C.F.R. § 190.215 provides that PHMSA does not consider repetitious
arguments presented in a petition for reconsideration. Therefore, I dismiss, as a matter of
procedure, ANR’s repetitious argument that PHMSA has departed from long-standing agency
policy. I do note, however, that ANR has presented, for the first time, a citation to a court
decision that the company believes supports its position. For the sole purpose of distinguishing
that judicial decision, I briefly address Petitioner’s argument.
In its Petition, ANR cites Shell Offshore Inc. v. Babbitt in support of its contention that PHMSA
has created a new substantive rule by departing from its long-standing agency policy.
15 In Shell
Offshore, the court held that the Department of Interior had changed its policy of approving the
use of tariff rates by lessee royalty payors—a policy that it had consistently followed for at least
five years. Although the former policy of accepting the use of tariff rates had never been
reduced to a written statement, the court found that the policy “was undeniably [the agency’s]
long established and consistently followed practice.
”16 The court held that “[i]f a new agency
policy represents a significant departure from long established and consistent practice that
substantially affects the regulated industry, the new policy is a new substantive rule and the
agency is obliged, under the APA, to submit the change for notice and comment.”17
The holding in Shell Offshore was based, in part, on a decision by the D.C. Circuit Court of
Appeals in Alaska Professional Hunters Assoc. v. FAA.
18 In that case, an FAA regional office
had for years advised hunting and fishing guides in Alaska that they were exempt from certain
commercial pilot regulations. When the FAA headquarters discovered this policy being
espoused by its regional office, the agency published a notice announcing that such guides were
no longer considered exempt. On appeal, the court found that the FAA’s consistent affirmative
statements regarding Alaskan hunting and fishing guides over the years had established a
definitive interpretation of the regulation, and that “[w]hen an agency has given its regulation a
definitive interpretation, and later significantly revises that interpretation, the agency has in
effect amended its rule, something it may not accomplish without notice and comment.”19
14 Final Order at 8.
15 238 F.3d 622 (5th Cir. 2001).
16 Id. at 630.
17 Id.
18 177 F.3d 1030 (D.C. Cir. 1999).
19 Id. at 1034.



6
Central to both these decisions is that the two agencies in question had both followed long-
established, open, and consistent policies from which the agencies suddenly and significantly
departed, giving rise to the legal challenges in question. In the present matter, however, there is
simply no evidence that PHMSA had “given its regulation a definitive interpretation, and later
where administrative agencies have not clearly established a policy or practice, courts have
declined to follow Shell Offshore or Alaska Professional Hunters. Similarly, courts have also
been unwilling to find that the mere absence of enforcement action by an agency constitutes a
regulatory interpretation or an established practice from which an agency may only depart
through notice and comment.
significantly revised that interpretation.”20 This factual distinction is critical, since in situations
For example, in MetWest Inc. v. Secretary of Labor, the court found that OSHA’s 13-year
practice of not enforcing a particular provision of its regulations regarding the disposal of
needles in the workplace did not establish an “express, direct, and uniform interpretation” of the
applicable regulation, and therefore the agency had not created a substantive rule change when it
issued a citation for violating the provision.21 Likewise, in Warshauer v. Solis, the court
determined that an agency’s decision not to enforce certain requirements, even if it could be
considered a “policy,” did not rise to the level of an established interpretation under Alaska
Professional Hunters.
22 In Warshauer, despite a showing that the agency had an enforcement
policy of “mere acquiescence” to the conduct at issue was found insufficient to trigger the need
for notice-and-comment rulemaking.23
As explained in the Final Order, PHMSA did not have an established policy or position on the
method of calculating the length of a lateral line in a lateral system for purposes of the
odorization exception, and the mere absence of prior enforcement did not rise to the level of
constituting an affirmative statement of agency policy. In its Petition, however, ANR contends
that PHMSA “ignores relevant statements in the record demonstrating that the present
‘interpretation’ runs contrary to PHMSA’s past practices.”24 Specifically, Petitioner points to its
statement at the hearing that compliance audits by PHMSA since 1990 included discussion of
ANR’s interpretation of the regulation and that “compliance audit reviews . . . implicitly
acknowledged Respondent’s qualification for the § 192.625(b)(3) exception without finding a
violation.”25
20 Id.
21 560 F.3d 506, 510 (D.C. Cir. 2009).
22 577 F.3d 1330, 1340-41 (11th Cir. 2009).
23 Id. at 1340. See also, Devon Energy Corp. v. Norton, [verify cite] 2007 WL 2422005 *5 (D.D.C. 2007)
(distinguishing Shell Offshore, because in that case, “there was no question that Interior had made a change in policy
and departed significantly from a consistent, prior practice of not requiring the certification. By contrast, in [Devon]
. . . it is not all clear that the 2003 decision is a departure from a longstanding practice of Interior.”); Visiting Nurse
Assoc. v. Thompson, 378 F. Supp.2d 75, 89 (E.D.N.Y. 2004) (declining to follow Shell Offshore and Alaska
Professional Hunters because there was “no evidence that the [agency’s interpretation] was at odds with either a
prior written interpretation of the cost-reporting regulations or any pattern of practice sufficiently longstanding to
establish that the Secretary had arrived at a definitive interpretation of these rules.”)
24 Petition at 4.
25 Id. (citing ANR Hearing Presentation, Slide 20); Petition Amendment at 1.



7
Petitioner’s statements in this regard were not “ignored” in the Final Order. Rather, PHMSA
found there was simply no evidence demonstrating that the statements were true. While ANR is
correct that agency representatives at the hearing did not introduce evidence refuting the
company’s assertion,
true. Since the statements could not be supported with any probative evidence, the claims simply
did not carry much value in determining whether or not PHMSA had a long-standing policy.
26 ANR likewise failed to produce any evidence that the statements were
In apparent response to such lack of evidence, ANR presents in its Petition Amendment, for the
first time, an affidavit dated January 25, 2010, from the company’s Senior Field Compliance
Engineer, who attests that in 2002 PHMSA performed an inspection of the ANR pipeline facility
and discussed with him the odorization, or lack thereof, of the Illinois–Wisconsin lateral system.
The employee stated that, based on his knowledge and experience, the fact that PHMSA did not
issue a citation for a violation of § 192.625(b) following the 2002 inspection indicated that
PHMSA found the company’s practice to be acceptable.
27
As a procedural matter, ANR did not submit in its Petition any reason why such evidence was
not presented prior to issuance of the Final Order, as required under § 190.215. Even accepting
the validity of the witness’s statement, however, this new evidence demonstrates only that at a
single point in time, a PHMSA representative reviewed ANR’s methodology and did not issue a
probable violation. This fact alone, even if true, does not constitute a “long established and
consistently followed practice” upon which ANR could reasonably rely.
Finally, Petitioner argues that PHMSA “abused its discretion” under the APA by interpreting and
applying § 192.625(b)(3) in an adjudication rather by rulemaking.28 Again, ANR has raised this
basic argument before.29 In response to the contention that PHMSA should enunciate this
interpretation by rulemaking, the agency determined in the Final Order that it is not necessarily
required to undertake a rulemaking in order to interpret its own regulations, and that courts have
recognized the discretion of agencies to set forth regulatory interpretations either by adjudication
or rulemaking.
30
As referenced above, PHMSA does not consider repetitious arguments presented in a petition for
reconsideration. Therefore, I dismiss ANR’s repetitious argument that PHMSA failed to comply
with the APA by interpreting this particular regulation through its adjudication process. I note
further, however, that ANR has suggested the agency consider several court decisions the
company believes support its position. For the sole purpose of distinguishing those decisions, I
address Petitioner’s argument.
26 Petition Amendment at 2.
27 Petition Amendment, Attachment 1 at ¶ 6.
28 Id. at 2.
29 See Final Order at 8 (citing ANR’s Supplemental Response to the Notice of Probable Violation at 2 (Nov. 20,
2007).
30 Final Order at 9 (citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 292–94 (1974) (stating that an agency is “not
precluded from announcing new principles in an adjudicative proceeding”)).



8
In its Petition Amendment, ANR cites the decision in First Bancorporation v. Board of
Governors of the Federal Reserve System, where the Board had issued an order unconditionally
allowing the petitioner to acquire a particular financial institution.
31 Several years later, when
the same party applied for approval to acquire a similar institution, the agency issued an order
imposing new conditions on such an acquisition and, at the same time, placed those same new
conditions on petitioner’s previous acquisition, which had already been unconditionally
approved. The court found that the second order “contains no adjudicative facts having any
particularized relevance to petitioner,” and therefore that the Board’s order “was thus merely a
an abuse of discretion for the agency to improperly attempt to change its policy with regard to
vehicle by which a general policy would be changed.”32 Under such facts, the court held it was
such acquisitions by adjudication, and that such a significant policy change was required to be
made through rulemaking under the APA.
Similarly, in the other case cited by ANR, Patel v. Immigration and Naturalization Service, the
court looked at facts involving the agency’s alleged attempt to implement a new substantive rule
through adjudication.
33 In that case, the INS had issued an order finding that the respondent had
failed to meet an exception for deportation because he had not complied with what the agency
viewed as a requirement for aliens to show their commercial investment in the U.S. through
expanded job opportunities. The court found that not only was the job opportunities requirement
not mentioned in the regulation establishing an exception for aliens who have made significant
commercial investments in the U.S., but the INS had previously proposed to include such a
condition in the regulation but then, in response to comments, had eliminated it from the final
rule. For this reason, the court found that the INS had “attempted to add a requirement to the . . .
regulation [through its order] which had been expressly discarded during its rulemaking
proceedings.”34 Under such facts, the court held that the agency had abused its discretion by
announcing what amounted to a new substantive rule by adjudication rather than rulemaking.
In contrast to these cases, in which an agency tried to use the adjudicatory process to implement
a significant policy change or to establish a new requirement, the present matter does not reflect
an attempt by PHMSA to use this adjudication “merely [as] a vehicle by which a general policy
would be changed.
and in this Decision, PHMSA has not changed an established policy, but, rather, has interpreted
the manner in which the exception in § 192.625(b)(3) should be applied to the specific facts
presented by Petitioner’s particular pipeline system.
”35 Moreover, as has already been discussed at length, both in the Final Order
In a court decision more analogous to the present matter, the FCC interpreted an otherwise
ambiguous regulatory term (i.e., “in substantial accordance with . . . . the station authorization”)
in an adjudication by deciding that, in the context of radio station construction, the term means
within one mile of the coordinates authorized by the agency.36
On appeal by several parties who
31 728 F.2d 434 (10th Cir. 1984).
32 Id. at 438.
33 638 F.2d 1199 (9th Cir. 1981).
34 Id. at 1202.
35 First Bancorp., 728 F.2d at 438.
36 Cassell v. FCC, 154 F.3d 478, 481 (D.C. Cir. 1998).



9
argued the FCC had adopted a substantive rule without notice and comment, the court found
their argument “without merit.” The court held that “it is well settled that an agency is not
precluded from announcing new principles in an adjudicative proceeding.
consistent with the determination in the Final Order that the agency is not necessarily required to
undertake a rulemaking in order to announce the interpretation of the exception in
§ 192.625(b)(3).
”37 This decision is
For all of the reasons set forth above and in the Final Order, I reject ANR’s contention that
PHMSA violated the APA by issuing a final order interpreting an agency regulation without
going through notice and comment.
2. Whether the interpretation of § 192.625(b)(3) is reasonable.
In its Petition, ANR acknowledges that an agency interpretation of a regulation is generally
entitled to deference.
§ 192.625(b)(3) is arbitrary, capricious, unreasonable, and not supported by the evidence in the
record. Petitioner presents several different arguments in this regard.
38 The company argues, however, that PHMSA’s interpretation of
First, ANR argues that the interpretation is arbitrary and capricious because it “introduces a new
criterion of length into the analysis of whether a lateral qualifies for the § 192.625(b)(3)
exception.”39 Petitioner contends that the “interpretation is flawed and illogical in application”
because the concept of length “is not a concept that is addressed in the regulatory definition of a
transmission line.”40 As grounds for its position, the company cites Acadian Gas Pipeline
System v. FERC, which found that “[w]here any agency fails to distinguish past practice, its
actions may indicate that lack of reasoned articulation and responsibility that vitiates the
deference the reviewing court would otherwise show.”41
I reject Petitioner’s contention that PHMSA has introduced a “new criterion of length” into
§ 195.625(b)(3) in the Final Order, or that the concept of length was not contemplated in the
regulation. The text of the regulation clearly states that an exception for lateral lines applies only
if at least 50 percent “of the length of that line” is in either a Class 1 or Class 2 location. Thus,
the regulation necessarily requires one to calculate the length of a lateral line from one point to
another in order to determine whether 50 percent of that distance is in a Class 1 or Class 2
location. PHMSA has not introduced a new concept of length, but simply interpreted how that
length should be measured. The Acadian Gas case is further distinguished because there is no
past practice from which the agency is departing. For these reasons, I reject Petitioner’s
argument that PHMSA has introduced a new concept of length into the regulation.
37 Id. at 486 (citations omitted).
38 Petition at 5.
39 Id.
40 Id.
41 878 F.2d 865, 868 (5th Cir. 1989).



10
In a related argument, ANR asserts that PHMSA has introduced the new concept that a lateral
line, in the context of § 192.625(b)(3), must be “short.” This is apparently in response to the
finding in the Final Order that ANR’s practice of artificially increasing the mileage of Class 1
and Class 2 areas for each lateral line was inconsistent with the intent of the lateral line
exception, which, “in most cases,” was to exclude “short” segments of pipeline in predominantly
laterals meeting the exception be short; instead, it rejects the practice of ANR in this particular
rural areas.42 The interpretation set forth in the Final Order, however, does not mandate that all
case, because the result of the company’s actions is inconsistent with the intent of the rule.
Therefore, I reject Petitioner’s argument.
Second, ANR questions the reasonableness of the interpretation on the ground that under the
Final Order, a lateral that otherwise meets the exception in § 192.625(b)(3) could be bifurcated
by a newly constructed interconnecting pipeline, resulting in the loss of its exception status.43
For example, using the hypothetical lateral system diagram in the Final Order, Petitioner argues
that a lateral constructed from point H to point D might qualify for the exception, but if an
interconnection were subsequently built at point G, the portion from point H to point G might
lose its exception status under § 192.625(b)(3).
PHMSA has not been presented with an actual situation where a lateral meeting the exception in
§ 192.625(b)(3) is subsequently bifurcated, and therefore the agency does not decide here
whether the interpretation enunciated in the Final Order would cause such a formerly exempt
lateral to lose its exception status. I would note, however, in the hypothetical presented that even
if the portion from point H to point G did not meet the exception in § 192.625(b)(3), ANR’s
concern over the “loss” of an exception is misplaced, because that portion of the line could still
potentially qualify for another exception if certain criteria were met. For example,
§ 192.625(b)(1) provides that odorization is not required for combustible gas in a transmission
line in a Class 3 or Class 4 location if “at least 50 percent of the length of the line downstream
from that location is in a Class 1 or Class 2 location.” Therefore, I reject Petitioner’s argument
that the interpretation is unreasonable in this regard.
Third, ANR provides several alternatives to the agency’s interpretation of the term “lateral”
under § 192.625(b)(3) and suggests that PHMSA adopt such a “definition” in lieu of the one set
forth in the Final Order.44
As noted above, however, the definition of a lateral was not an issue
in the Final Order, because PHMSA agreed that the subject pipelines were indeed lateral
transmission lines. Rather, the issue was how to calculate the length of a lateral for the specific
purpose of applying § 192.625(b)(3). Furthermore, the alternatives provided by ANR provide no
further assistance in the application of § 192.625(b)(3), because they generally identify the
beginning point of a lateral as the upstream transmission line, just as the interpretation employed
by PHMSA does. To the extent there are any inconsistencies between PHMSA’s interpretation
42 Final Order at 6 (citing Odorization of Gas in Transmission Lines, 40 Fed. Reg. 20,279, 20,280 (May 9, 1975)).
43 Petition at 5.
44 Petition at 6.



11
and the various other “definitions” suggested or cited by Petition, the latter are expressly rejected
for purposes of § 192.625(b)(3).45
Fourth, ANR objects to the decision in the Final Order that “double-counting” the upstream
mileage of pipeline predominantly in Class 1 and Class 2 areas should not be allowed.46
Petitioner contends that “there is no background in the preamble to the rule that indicates that
overlapping should not be allowed.” I disagree. As explained in the Final Order, such a
methodology can artificially inflate the mileage calculated in Class 1 and Class 2 areas, which, in
ANR’s case, led to an improper and erroneous conclusion that approximately 100 miles of
pipeline in populated areas were exempted from the odorization standard.
Fifth, ANR suggests that PHMSA could calculate the length of the company’s lateral lines from
their endpoints at the respective distribution centers back to the line that connects Sandwich
Station to the interconnection between ANR’s facilities and another pipeline operated by
“this line is the source of the majority of gas delivered in Wisconsin by ANR [and] is a ‘main’
transmission line from which various laterals emanate.” Petitioner also contends this suggestion
was discussed at the hearing but “not addressed in the Order.”
TransCanada at Fortune Lake, Michigan.47 ANR contends this approach is justified because
A review of Petitioner’s presentation at the hearing shows the company argued that each lateral
in question should be viewed to begin at Sandwich Station, not some other location suggested in
the Petition.
48 The Final Order specifically addressed this argument by noting that ANR had
argued that the length of each lateral line “should be traced back to its point of origin at its
primary source of supply . . . at the Sandwich Compressor Station.”49 The Final Order noted that
such methodology resulted in the “double-counting” of upstream mileage, and formed one of the
bases for PHMSA’s rejection of ANR’s methodology for calculating the length of laterals.
50
Finally, ANR contends that the Final Order “arbitrarily limits the applicability of the lateral line
exemption by excluding any ‘lateral line’ that does not meet the new test for measuring length,
although the simple and unambiguous language in the text of the regulation does not exclude any
types of lateral lines—whether such lines are of any particular length, or a certain diameter, or
overlapping lines.”51
ANR suggests that the limits of the exception for odorizing gas pipelines in
populated areas be much broader than the text of the regulation permits. The regulation itself
sets forth certain limiting factors, that is, at least 50 percent of the length of a lateral line ending
at a distribution center must be in a Class 1 or Class 2 location. Given the safety importance of
45 See Final Order at 5 (finding no significant inconsistency between the agency’s definition and the various other
definitions cited by Petitioner).
46 Petition at 6.
47 Id.
48 See ANR Hearing Presentation, Slides 16-18.
49 Final Order at 3 (citing Response at 2).
50 Id. at 5-7. To the extent Petitioner is proposing alternative measures or activities, the agency has set forth
procedures for considering such proposals at 49 C.F.R. § 190.341.
51 Petition at 7 (emphasis in original).



12
resolved the ambiguity in the regulation presented by the novel situation of ANR’s lateral
system. The resolution is an interpretation that constitutes a reasonable and justifiable approach
based on all of the reasons set forth in the Fin
- **truncated:** true
- **body characters:** 80481