US imposes record fine for 2023 oil spill

After a 2023 oil spill that sent more than 4 million gallons of crude oil into the Gulf of Mexico off the coast of Louisiana, pipeline safety regulators proposed the largest fine in their history. But for the company facing enforcement action, the $9,6 million penalty is unlikely to be more than a minor expense, writes Euronews.

This single fine is close to the normal annual total of about $9 million to $11 million that the Pipeline and Hazardous Materials Safety Administration (PHMSA) imposes each year.

"This is the largest civil penalty ever proposed in a pipeline safety enforcement action," the U.S. Department of Transportation and its administered PHMSA said in a statement.

Pipeline owner Third Coast has a stake in about 3000 kilometers of pipelines, and in September the Houston-based company announced it had secured a loan of nearly 1 billion euros.

Record fines are not financially significant

US Transportation Secretary Sean Duffy said the fine sends a clear message.

"When companies do not follow the rules, we will not hesitate to act decisively," he said.

Pipeline Safety Trust CEO Bill Karam said this spill was the result of a systemic failure across the company, demonstrating the operator's fundamental failure to enforce pipeline safety rules, so the record fine is appropriate and welcome.

"However, even record fines are often not financially meaningful to pipeline operators. The proposed fine represents less than 3% of Third Coast Midstream's estimated annual revenues. True deterrence requires sanctions that make noncompliance more costly than compliance," Karam said.

What caused the incident?

PHMSA also said Third Coast failed to establish proper emergency procedures, which is part of the reason the National Transportation Safety Board (NTSB) found that operators failed to shut down the pipeline for nearly 13 hours after their gauges first indicated a problem.

The agency also said the company failed to adequately assess risks or properly maintain the 46-inch oil gathering pipeline. The company also failed to conduct new analyses or integrity assessments following changes in circumstances that identified new and increased risk factors.

This is consistent with the NTSB's assertions in its final report in June, which said that "Third Coast missed several opportunities to assess how geological hazards could threaten the integrity of their pipeline."

The NTSB also said the leak off the coast of Louisiana was the result of underwater landslides caused by hazards such as hurricanes that Third Coast, the owner of the pipeline, failed to address, even though the threats were well known in the industry.

The spill could have been much smaller.

A Third Coast spokesperson said the company was working to address regulators' concerns about the leak, so it was surprised by some of the details the agency included in its allegations, as well as the size of the fine.

"After constructive engagement with PHMSA over the past two years, we were surprised to see aspects of the recent allegations that we believe are inaccurate and go beyond established precedent. We will address these concerns with the agency moving forward," the company spokesperson said.

The amount of oil spilled in this incident is far less than the BP oil disaster in 2010, when 507 million liters were released in the weeks following an explosion on an oil rig.

"However, it could have been much less if workers in the Third Coast control room had acted more quickly," the NTSB said.