Seattle Cannot Impose Additional Safety Standards for Hazardous Pipeline

Terra Bowling, 3L, University of Mississippi School of Law

In February, the United States Court of Appeals for the Ninth Circuit ruled that the City of Seattle’s attempts to impose additional safety requirements on Olympic Pipe Line Company (Olympic Pipe Line) were preempted by the federal Pipeline Safety Act (PSA).

Background
The litigation involved a lateral delivery line, called the “Seattle Lateral,” that Olympic Pipe Line has operated under a franchise agreement with the city since 1966. The Seattle Lateral runs near elementary schools and a residential neighborhood, underneath Interstate 5, and next to electricity transmission lines. Seattle sought to regulate the pipeline after a segment exploded in Bellingham, Washington, killing three people and causing extensive environmental damage.

Olympic Pipe Line’s contract with the city came up for renewal soon after the Bellingham explosion. Before the city would consider agreeing to a new franchise agreement, it requested Olympic respond to thirty-three of its safety concerns. Among those items was a request that the company perform a hydrostatic test of the pipeline. The Office of Pipeline Safety of the Department of Transportation (DOT) notified Seattle that the tests of the Seattle Lateral were not necessary because the pipeline met federal regulatory standards. Olympic then filed an action in district court against Seattle to stop the city from ordering Olympic to shut down operations.

The district court ruled that the city was preempted from regulating the safety and inspection of the Seattle Lateral by the PSA. Seattle appealed, arguing that the PSA does not entirely preempt the city from regulation. The city also asserted that, even if the PSA does preempt the city’s actions, Olympic waived its right to argue preemption when it entered into the franchise and indemnity agreements with the city. Finally, the city asserted that those agreements should be enforced as a matter of public policy.

Preemption
The Ninth Circuit first considered whether the PSA preempted Seattle’s attempt to impose safety standards on a hazardous liquid pipeline. The court recognized that the Supremacy Clause of Article VI of the United States Constitution grants Congress the power to preempt state or local law. The court examined the statutory text of the PSA to determine whether it expressly prohibited regulation by local authorities or if it could be reasonably inferred that Congress did not leave room for local regulation.
The PSA has different rules for the regulation of interstate and intrastate pipelines. States and local authorities may exercise limited regulatory authority over interstate pipelines through a safety agreement or as an agent of the DOT, but generally they may not enact safety standards.1 After being certified by DOT, a state authority may regulate intrastate pipelines if its standards are consistent with federal pipeline safety standards.2 The court found that regardless of whether the Seattle Lateral was considered an interstate or intrastate pipeline, the city needed to receive authorization from the DOT to regulate the pipeline.

The state of Washington had received authority from DOT to participate in the pipeline safety program for intrastate lines after the Bellingham incident. The court, however, found that Seattle had neither sought nor been delegated authority to regulate the pipeline. The court concluded that the PSA expressly preempts the city’s attempt to impose safety regulations on the Seattle Lateral.

The court indicated that the city could impose requirements on Olympic Pipe Line, such as safety tests or the purchase of liability insurance, if Seattle is acting as a municipal proprietor rather than as a regulator. The court found, however, that Seattle’s interest was not that of a private market participant that owns a pipeline, but that of a regulator seeking to protect the public health and safety. As such, Seattle could not impose safety standards under the market proprietor exception.

Additional Claims
Seattle also claimed that the company had waived its right to use the preemption argument when it entered the franchise and indemnity agreements with the city. The court rejected this argument, holding that preemption is a federal power and not a right a private party can waive.

The court rejected Seattle’s argument that a court ruling that the city’s safety provisions are unenforceable will encourage other companies to enter into contracts they do not intend to honor. The court noted that the city’s policy concern is outweighed by the federal need to maintain uniformity in the establishment and enforcement of hazardous liquid pipeline safety regulations.

Conclusion
The Ninth Circuit affirmed the ruling of the district court that Seattle’s attempts to impose additional safety requirements on a hazardous liquid pipeline were preempted by the PSA.

Endnotes
1. 49 U.S.C. §§ 60104(c), 60106(a), 60117(c).
2. Id. § 60104(c).