Associated Press file
After a New Mexico pipeline exploded and killed 12 people, the Department of Transportation ordered El Paso Natural Gas to reduce the pressure on its line.
Posted on 10/15/2002 4:21:03 AM PDT by snopercod
El Paso Corp. Chairman William Wise has been writing a lot of letters lately; letters to Congress, letters to newspapers, letters to employees.
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Associated Press file
After a New Mexico pipeline exploded and killed 12 people, the Department of Transportation ordered El Paso Natural Gas to reduce the pressure on its line. |
The message is the same in all of them. Wise is vehemently disputing an administrative law judge's recommendation that the company be penalized because the judge concluded the company held natural gas off the market, raising prices during California's power crisis of 2000-2001.
The judge's recommendation -- which still must be accepted or rejected by the Federal Energy Regulatory Commission -- already has battered the stock and hurt El Paso's credit rating.
So El Paso has cranked its public relations machine into high gear. The Houston energy company has a reputation for vigorously defending itself in the court of public opinion, whether it's a tragedy like the explosion of its pipeline that killed 12 campers, or accusations of wrongdoing by one of its largest shareholders, Oscar Wyatt.
El Paso has been firing off letters to every member of Congress and responding to newspaper editorials that the company believes are off target with lengthy letters to papers, including the Houston Chronicle and the New York Times. It also has run full page ads expressing its position in major newspapers.
Employees of the company say they, too, have been receiving memos from Wise defending the company and criticizing the actions of the FERC judge.
The full-court press against the judge's action comes as the company is under scrutiny from the Securities and Exchange Commission and a federal grand jury in Houston for its energy trading. Some believe if the FERC lowers the boom on El Paso, it could be the coup de grâce for the company.
The judge's recommendation already has cost El Paso. The company's debt rating has been cut to one notch above junk-bond status, and its shares have lost about 27 percent of their value since the recommendation was issued Sept. 23, much of it on that day. The company's market capitalization has fallen from about $4.4 billion the day the order was issued to $3.2 billion on Wednesday.
If the commission decides to act on the judge's recommendation and penalize the company, it would likely open the door for an avalanche of litigation from shareholders, bondholders, consumers and states.
The company's barely investment grade credit rating could be slashed to junk status, which would effectively end its energy trading business and put the company in a precarious financial position.
The commission can act on the judge's recommendation or do nothing. It is expected to make a decision before the end of the year.
The company is defending itself by arguing the judge's reasoning could lead to other pipelines being forced to operate at maximum pressure continuously, which would be a safety hazard.
"Beyond the immediate effects on El Paso, however, the judge's opinion has serious implications for pipeline safety and reliability across the country," according to the letter Wise sent to members of Congress.
The judge based his decision in part on the company's not running its natural gas pipeline into California at maximum pressure when demand was high. But El Paso argues in its letters that it not only would have been unsafe to run the pipeline at that rate, but that it was blocked from doing so by a federal order following the explosion in southern New Mexico.
The question now is whether this pressure will yield positive results for the Houston energy companies.
Letter-writing campaigns can be effective tools for swaying appointed officials such as FERC commissioners and create public concern over an issue like the ones raised by El Paso, said Jim Albertine, president of the American League of Lobbyists in Washington, D.C.
"Certainly appointed positions such as FERC commissioners are responsive to the Congress," Albertine said. "It goes back to the issue of purse strings. This is not an unusual tactic to use in this kind of situation."
A spokesman for El Paso said the letter-writing campaign has elicited bipartisan support from members of Congress.
"The feedback that we have been getting in general is that everyone shares the same safety concerns that we have," said Mel Scott, an El Paso spokesman.
The company's efforts appear to have some support at the Department of Transportation, the agency that ordered the company to reduce pressure in its line to California after the August 2000 explosion.
The department issued a corrective order to the company ordering it to run the line at 80 percent of the rated operating pressure. A spokesman for the department said the line in question is still running at about 80 percent of its maximum-rated pressure.
An official at the Department of Transportation who asked not to be quoted by name said the agency is concerned about the judge's recommendation with regards to the safety issues it raises. The agency has not been a party to any of the FERC proceedings.
The fact that El Paso had been ordered to reduce pressure in its line during the period in question is not disputed by anyone, yet the corrective order that was in effect during the period is not even mentioned in the judge's recommendation.
"The record is clear that El Paso Pipeline could have operated at or near maximum allowable operating pressure without violating the Department of Transportations regulations," according to the recommendation of the FERC chief administrative law judge, Curtis Wagner.
Such letter-writing campaigns can be effective lobbying tools to get out a message and an opposing view, said Jerald Halvorsen, president of the Interstate Natural Gas Association of America, an industry trade and lobbying group that has also taken issue with the FERC judge's ruling.
"We find it usually does have an impact," Halvorsen said. "The regulators read the trade press in Washington and as long as it looks like you have some good arguments, it can help to get your side out."
A company like El Paso also can utilize shareholders to influence the opinion on an issue with their congressional representative.
"If you have several hundred shareholders in a district of a member of Congress, they can send a very effective message," Albertine said.
El Paso Natural Gas CORRECTIVE ACTION ORDER from the DOT
[cover letter removed for brevity]
Purpose and Background
This Corrective Action Order (Order) is being issued, under authority of 49 U.S.C. § 60112 to require El Paso Natural Gas Company (El Paso), a wholly owned subsidiary of the El Paso Energy Corporation, to take the necessary corrective action to protect the public and environment from potential hazards associated with its pipeline. The El Paso Pipeline System is both owned and operated by El Paso. The El Paso Pipeline System operates in Texas, Oklahoma, New Mexico, Colorado, Arizona and California. The Office of Pipeline Safety (OPS) has found that corrective action is necessary to prevent the recurrence of a failure similar to that which occurred on August 19, 2000.
On August 19, 2000, at approximately 5:30 a.m. MDT, El Paso's 30-inch natural gas transmission line 1103 ruptured and ignited near a Pecos River crossing in Eddy County, a rural area approximately 30 miles southeast of Carlsbad, New Mexico. The release and subsequent ignition resulted in eleven deaths and one critical injury.
Pursuant to 49 U.S.C. § 60117, the Southwest Region, OPS initiated an investigation of this incident.
Preliminary Findings
1. On August 19, 2000, at approximately 5:30 a.m. MDT, El Paso's 30-inch natural gas transmission line 1103 (line 1103) ruptured and ignited near a Pecos River crossing in Eddy County, a rural area approximately 30 miles southeast of Carlsbad, New Mexico, and
approximately 3000 feet upstream of El Paso's Pecos River Compressor Station and 300 feet on the east side of the Pecos River. The release and subsequent ignition resulted in eleven deaths and one injury.
2. Line 1103 is both owned and operated by El Paso and transports natural gas from its Keystone Compressor Station in Winkler County, Texas to La Paz County, California. It passes through or near the cities of El Paso, Texas; and Tucson and Phoenix, Arizona.
3. The ruptured pipeline, Line 1103, runs parallel to two other pipelines, Line 1100 and
Line 1110 at the Pecos River crossing Lines 1103 and 1110 are 30 inches in diameter and were built in 1950. Line 1100 is 26 inches in diameter and was built in 1947.
4. Line 1100 and its suspension cable bridge sustained an undetermined amount of damage at the Pecos River crossing, due to the fire. It is still undetermined whether Line 1110 sustained damage.
5. The release occurred on a 30-inch segment of Line 1103 pipeline at a low point in a section of the piping that does not allow an internal cleaning tool to traverse through it. This segment runs from the Keystone Compressor Station to the Pecos River Compressor Station. This segment is constructed with 30-inch, DSAW - X52 pipe with varying wall thicknesses.
6. Line 1103 has a maximum allowable operating pressure (MAOP) of 837 psig and has not been hydrostatically tested in its entirety since its construction in 1950.
7. The Keystone Compressor Station's operating pressure in effect at the time of the rupture at approximately 5:30 a.m. MDT on August 19, 2000 was 781 psig.
8. Preliminary investigation of Line 1103 by OPS and National Transportation Safety Board (NTSB) investigators indicates that significant internal corrosion was visible on the failed section. Internal corrosion may have been a contributing factor in the line failure. The possibility of internal corrosion on other lines in the area is a safety concern.
9. The cause of the incident is currently unknown as the investigation is on-going and all facts have not yet been determined.
10. Metallurgists and investigators are presently at the failure site to perform an evaluation of the failed pipe.
11. The El Paso pipelines are critical suppliers of natural gas to Arizona and Southern California. El Paso has arranged for rerouting gas supply from other storage sites.
Determination of Necessity for Corrective Action Order and Right to Hearing
[snip]
Required Corrective Action
Pursuant to 49 U.S.C. 60112, I hereby order El Paso Natural Gas Company to take the following corrective actions with respect to its pipelines in the vicinity of the Pecos River in New Mexico:
With respect to the line segment between valve no. 6 and the Pecos River Compressor Station on Line 1110,
1. Do not operate this segment until items 2 through 4 are completed and determined acceptable by the OPS Southwest Region Director:
2. Directly assess the integrity of the line pipe at all low points, pig traps, dead end stub lines, and crossover piping that may have a no flow condition, and any other
section of piping that liquids might settle in, and implement any needed corrective action. The direct assessment must include both x-ray and ultrasonic examinations to determine possible metal loss.
3. Hydrostatically test the line segment to 90 percent (90%) specified minimum yield strength (SMYS).
4. After completion of item 3, but before resuming operation, submit a return to service plan to the Region Director for his approval. The return to service plan should include a summary of all findings to date.
5. Once operation is resumed, restrict the maximum allowable operating pressure to 80 percent (80%) of the operating pressure of Line 1103 at the time of failure, which was calculated to be 538 psig.
6. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000 and the applicability of those factors to the operation of Line 1110.
With respect to the line segment between valve no. 6 and the Pecos River Compressor Station on Line 1103,
7. Do not operate this segment until a review of additional information about the factors that may have played a role in the accident of August 19, 2000, and the applicability of those factors to the operation of Line 1103.
With respect to the line segment between station 2482+52 to the Pecos River Compressor Station on Line 1100,
8. Do not operate this segment it shall remain out of service until items 9 through 12 are completed and determined acceptable by the OPS Southwest Region Director:
9. Submit the design for the temporary crossing of the Pecos River to the Region Director for his approval.
10. Directly assess the integrity of the line pipe at all low points, pig traps, dead end stub lines, crossover piping that may have a no flow condition, and any other section of piping that liquids might settle in, and implement any needed corrective action. The direct assessment must include both x-ray and ultrasonic examinations.
11. After installation of the new crossing, but before operating the segment, hydrostatically test it to 90 percent (90%) SMYS.
12. After completion of item 11, but before resuming operation, submit a return to service plan to the Region Director for his approval. The return to service plan should include a summary of all findings to date.
13. Once operation is resumed, restrict the maximum allowable operating pressure to 80 percent (80%) of the operating pressure of Line 1103 at the time of failure, which was calculated to be 538 psig.
14. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000 and the applicability of these factors to the operation of Line 1100.
With respect to the line segments between the Keystone Compressor Station and the Guadalupe Compressor Station on Lines 1110 and 1103, and between the Eunice Compressor Station and the Guadalupe Compressor Station on Line 1100,
15. Take immediate steps to restrict the maximum allowable operating pressure to 668 psig, which is 80 percent (80%) of the maximum operating pressure. The required pressure restriction must be achieved within five (5) days of the receipt of this Order.
16. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000, the applicability of these factors to the operation of Line 1110 and Line 1100, and the satisfactory completion of items 17 through 19.
17. Identify all crossings that cannot be traversed with an internal cleaning tool, similar to the Pecos River crossing, areas of no flow, and areas that include, but are not limited to, dead end pipe stubs, pig traps, valved off cross-overs, low spots, and any other section of piping that liquids might settle in.
18. After completion of item 17, develop a risk based plan to inspect, assess, and correct, as necessary, all of the areas identified in item 17 for signs of internal corrosion or other metal loss. Perform those inspections and provide the OPS Southwest Region Director with the results of the inspections.
19. Within 90 days of issuance of this Order, provide the Region Director an analysis of the continued safe operation of Line 1100, Line 1103, and Line 1110 based on the testing and inspection required under this Order, what is discovered about the failure of August 19, 2000, and other information available to the operator about the integrity of these pipelines.
With respect to all segments and all other areas mentioned in this Order:
20. Prior to implementing any correction action, which includes, but should not be limited to, repairs or replacements, submit a corrective action plan to the OPS Southwest Region Director for review and approval. The plan must describe the criteria for evaluating the corrosive area and the criteria used for selecting the corrective action. The corrective action must also meet current industrial standards and regulatory requirements.
21. In order to fully evaluate the information requested in this order, submit to the National Pipeline Mapping System (NPMS) all El Paso geospatial pipeline data that was not included in the Tennessee Gas Pipeline Company submission to the NPMS. If unable to include metadata initially, include both the geospatial and attribute data as discussed in the NPMS Operator Standards. Submit the data by August 24, 2000.
22. Submit any design for permanent Pecos River crossings for the OPS Southwest Region Director's approval. All permanent designs must include, but not be limited to, the ability of these segments to be traversed by an internal inspection tool.
23. Provide OPS with 48 hours advance notice prior to beginning the direct assessments, hydrotesting, and any corrective action required by this order to allow OPS to observe the actions.
24. Based on the results of the above requested information, develop a plan to assess the integrity of the remainder of the El Paso Pipeline System. The plan should include, but not be limited to, the actions required in Items 17 through 19.
25. The OPS Southwest Region Director may extend the time for compliance with any of the terms of this order for good cause. Extension requests must be in writing.
The procedures for the issuance of this Order are described in Part 190, Title 49, Code of Federal Regulations. Section 190.233, a copy of which is enclosed, is made part of this Order and describes the Respondent's procedural rights relative to this Order.
Failure to comply with this Order may result in the assessment of civil penalties of not more than $25,000 per day and in referral to the Attorney General for appropriate relief in United States District Court.
Sincerely,
Stacey Gerard
Associate Administrator for Pipeline Safety
It also makes no sense to me that integrated oil companies' stock is not rising. With war looming in the Gulf, and oil and natural gas prices at relatively high levels already, their stock should be soaring. Instead, it's been declining.
I couldn't help myself. Call me a fool, but I just bought 1000 @ 6.94 for my 401(k).
Good find Snoper!
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HeHeHe!!!
I was thinking the same thing....
I only got in on half the runup, but making 7% in one day is not bad. It feels SO GOOD to actually make some money in the market again. (Hope I don't look like a goat tomorrow.)
I noted that this latest EP run started on the 8th, and the Chron article came out on the 10th. Coincidence?
Hello! Is anybody out there? New information here. Hello???
Maybe tomorrow.
An administrative law judge is one who specializes in handling laws and regulations within a particular department of government. In this case, the judge works for the Federal Energy Regulatory Commission.
It looks like Wagner was originally appointed by Ford.
Chief Judge Curtis L. Wagner, Jr.
Chief Judge Curtis L. Wagner, Jr. received his law degree from the University of Tennessee in 1951 and received his pre- legal education at Tennessee Polytechnic Institute. He was admitted to the Tennessee. Bar on March 31, l952.His government service includes both the Criminal and Civil Divisions of the U.S. Department of Justice, and serving in a civilian capacity as Chief of the Regulatory Law Division in the Army's Office of The Judge Advocate General.
Prior to entering Government Service, Chief Judge Wagner was in the private practice of the law with Kramer, Dye, McNabb & Greenwood in Knoxville, Tennessee.
Chief Judge Wagner has extensive experience in mediation and other forms of alternative dispute resolution. He has successfully resolved many large multi-party cases at the Commission and has given many lectures on the subject.
He has been an Administrative Law Judge at FERC and its predecessor, the FPC, since l974, and has been Chief Judge since l978.
Chief Judge Wagner has received numerous awards including the Department of the Army's highest award, the Decoration For Exceptional Civilian Service. He appears in four separate editions of Who's Who.
There is obviously more to this story than has yet seen the light of day.
For some reason, this DOT order does not appear to have been referenced in the original FERC recommendation (http://www.ferc.fed.us/RP00-241-006-09-23-02.pdf). That is most likely because it was never introduced by the defendants.
The defendants, El Paso and its subsidiaries, did claim in the trial to have often pumped at MAOP. So either they were violating one order by pumping too much, or they were violating another regulation by pumping too little.
I've made some wonderful one-day paper profits.
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