Testimony 

Before the Committee on Commerce, 

Science and Transportation, U.S. Senate

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 9:30 a.m. EDT 

Tuesday, June 15, 2004 PIPELINE SAFETY

Preliminary Information on 

the Office of Pipeline 

Safety's Enforcement 

Activities 

Statement of Katherine Siggerud, Director 

Physical Infrastructure Issues 

GAO-04-826T 
Highlights of GAO-04-826T, a testimony 

before the Committee on Commerce, 

Science and Transportation, U.S. Senate 

www.gao.gov/cgi-bin/getrpt?GAO-04-826T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine 

Siggerud at (202) 512-2834 or 

siggerudk@gao.gov. 

June 15, 2004

PIPELINE SAFETY

Preliminary Information on the Office of 

Pipeline Safety's Enforcement Activities 

The effectiveness of OPS’s enforcement strategy cannot be determined 

because the agency has not incorporated three key elements of effective 

program management—clear program goals, a well-defined strategy for 

achieving goals, and performance measures that are linked to program goals. 

(See below.) Without these key elements, the agency cannot determine 

whether recent and planned changes in its strategy will have the desired 

effects on pipeline safety. Over the past several years, OPS has focused on 

other efforts—such as developing a new risk-based regulatory approach—

that it believes will change the safety culture of the industry. While OPS has 

become more aggressive in enforcing its regulations, it now intends to 

further strengthen the management of its enforcement program. In 

particular, OPS is developing an enforcement policy that will help define its 

enforcement strategy and has taken initial steps toward identifying new 

performance measures. However, OPS does not plan to finalize the policy 

until 2005 and has not adopted key practices for achieving successful 

performance measurement systems, such as linking measures to goals. 

 

Incorporation of Key Program Management Elements into OPS's Enforcement Strategy 

OPS increased both the number and the size of the civil penalties it assessed 

against pipeline operators over the last 4 years (2000-2003) following its 

decision to be “tough but fair” in assessing penalties. OPS assessed an 

average of 22 penalties per year during this period, compared with an 

average of 14 per year for the previous 5 years (1995-1999), a period of more 

lenient “partnering” with industry. In addition, the average penalty increased 

from $18,000 to $29,000 over the two periods. About 94 percent of the 216 

penalties levied from 1994 through 2003 have been paid. The civil penalty is 

one of several actions OPS can take when it finds a violation, and these 

penalties represent about 14 percent of all enforcement actions over the past 

10 years. While OPS has increased the number and size of civil penalties, 

stakeholders—including industry, state, and insurance company officials and

public advocacy groups—expressed differing views on whether these 

penalties deter noncompliance with safety regulations. Some, such as 

pipeline operators, thought that any penalty was a deterrent if it kept the 

pipeline operator in the public eye, while others, such as safety advocates, 

told us that the penalties were too small to be effective sanctions. 

Interstate pipelines carrying 

natural gas and hazardous liquids 

(such as petroleum products) are 

safer to the public than other 

modes of freight transportation. 

The Office of Pipeline Safety 

(OPS), the federal agency that 

administers the national regulatory 

program to ensure safe pipeline 

transportation, has been 

undertaking a broad range of 

activities to make pipeline 

transportation safer. However, the 

number of serious accidents—

those involving deaths, injuries, 

and property damage of $50,000 or 

more—has not fallen. Among other 

things, OPS takes enforcement 

action against pipeline operators 

when safety problems are found. 

OPS has several enforcement tools 

to require the correction of safety 

violations. It can also assess 

monetary sanctions (civil 

penalties). 

This testimony is based on ongoing 

work for the Senate Committee on 

Commerce, Science and 

Transportation and for other 

committees, as required by the 

Pipeline Safety Improvement Act of 

2002. The testimony provides 

preliminary results on (1) the 

effectiveness of OPS’s enforcement 

strategy and (2) OPS’s assessment 

of civil penalties. 

GAO expects to issue a report in 

July 2004 that will address these 

and other topics and anticipates 

making recommendations. 
Page 1 GAO-04-826T 

Mr. Chairman and Members of the Committee: 

We appreciate the opportunity to participate in this hearing on the 

oversight of the Office of Pipeline Safety (OPS). As you know, pipeline 

transportation for hazardous liquids and natural gas is the safest form of 

freight transportation, and OPS has taken many steps to make it safer.1

However, the number of serious hazardous liquid accidents has stayed 

about the same while the number of serious natural gas accidents has 

increased.2

 (See fig. 1.) Finally, the serious accident rate—which considers 

the amount of product and distance shipped—for hazardous liquids has 

decreased. None of these statistics show a constant pattern. In part, the 

lack of significant change over time and the fluctuation over time may be 

due to the relatively small number of serious accidents—an average of 

about 150 per year for both types combined. 

 1

Hazardous liquid pipelines carry products such as crude oil, diesel fuel, gasoline, jet fuel, 

anhydrous ammonia, and carbon dioxide. 

2

Serious accidents are those resulting in a death, injury, or $50,000 or more in property 

damage. 
Page 2 GAO-04-826T 

Figure 1: Numbers of Serious Accidents and Accident Rate for Interstate Pipelines, 1994 through 2003 

Notes: This figure does not include the injuries that occurred during one series of accidents caused 

by severe flooding near Houston, Texas, in October 1994. 

The accident rate is the number of serious accidents per billion ton-miles shipped. (A ton-mile is 1 ton 

of a product shipped 1 mile.) 

The accident rates are based on the volume of petroleum products shipped. Federal agencies and 

industry associations we contacted could not provide data on other hazardous liquids shipped. 

Aggregated industry data on the amounts of products shipped through hazardous liquid pipelines for 

2002 and 2003 are not available so we do not present accident rate information for those years. We 

are inquiring into the availability of data on natural gas shipped through interstate pipelines; these 

data are needed to calculate the accident rates for this type of pipeline. 

A cornerstone to OPS’s efforts over the past several years has been the 

agency’s development and implementation of a risk-based approach that it 

believes will fundamentally improve the safety of pipeline transportation. 

This approach, called integrity management, requires interstate pipeline 

operators to identify and fix safety-related threats to their pipelines in 

areas where an accident could have the greatest consequences. OPS 

believes that this approach has more potential to improve safety than its 

traditional approach, which focused on enforcing compliance with safety 
Page 3 GAO-04-826T 

standards regardless of the threat to pipeline safety. Officials have 

emphasized that integrity management, coupled with other initiatives, 

such as oversight of operators’ programs to qualify employees to operate 

their pipelines, represents a systematic approach to overseeing and 

improving pipeline safety that will change the safety culture of the 

industry and drive down the number of accidents. 

Now that its integrity management approach and other initiatives are 

substantially under way, OPS recognizes that it needs to turn its attention 

to the management of its enforcement program. Accordingly, my 

testimony today focuses on opportunities for improving certain aspects of 

OPS’s enforcement program that should be useful to OPS as it decides 

how to proceed and to this committee as it continues to exercise 

oversight. 

My statement is based on the preliminary results of our ongoing work for 

this committee and others. As directed by the Pipeline Safety 

Improvement Act of 2002, we have been (1) evaluating the effectiveness of 

OPS’s enforcement strategy and (2) examining OPS’s assessment of 

monetary sanctions (called civil penalties) against interstate pipeline 

operators that violate federal pipeline safety rules. We expect to report on 

the results of our work on these and other issues next month. 

Our work is based on our review of laws, regulations, program guidance, 

and discussions with OPS officials and a broad range of stakeholders.3

 To 

evaluate the effectiveness of OPS’s enforcement strategy, we determined 

the extent to which the agency’s strategy incorporates three key elements 

of effective program management: clear program goals, a well-defined 

strategy for achieving goals, and measures of performance that are linked 

to program goals. We also examined how OPS assessed civil penalties 

from 1994 through 2003 and the extent to which pipeline operators have 

paid them. Finally, we interviewed stakeholders on whether OPS’s civil 

penalties help deter safety violations. As part of our work, we assessed 

internal controls and the reliability of the data elements needed for this 

engagement, and we determined that the data elements, with one 

 3

These stakeholders represent industry trade associations, pipeline companies, federal 

enforcement agencies, state pipeline enforcement agencies and associations, pipeline 

safety advocacy groups, and pipeline insurers. 
Page 4 GAO-04-826T 

exception, were sufficiently reliable for our purposes.4 We performed our 

work in accordance with generally accepted government auditing 

standards. 

In summary: 

• The effectiveness of OPS’s enforcement strategy cannot be evaluated 

because the agency has not incorporated three key elements of effective 

program management—clear program goals, a well-defined strategy for 

achieving those goals, and measures of performance that are linked to the 

program goals. Without these three key elements, OPS cannot determine 

whether recent and planned changes in its enforcement strategy are 

having or will have the desired effects on pipeline safety. Under a more 

aggressive enforcement strategy (termed “tough but fair”) that OPS 

initiated in 2000, the agency is using the full range of its enforcement tools, 

rather than relying primarily as it did before on more lenient 

administrative actions, such as warning letters. However, OPS has not 

established goals that specify the intended results of this new strategy, 

developed a policy that describes the strategy and the strategy’s 

contribution to pipeline safety, or put measures in place that would allow 

OPS to determine and demonstrate the effects of this strategy on pipeline 

safety. OPS is developing an enforcement policy that will help define its 

enforcement strategy and has taken some initial steps toward identifying 

new measures of enforcement performance. However, it does not 

anticipate finalizing this policy until sometime in 2005 and has not adopted 

key practices for achieving successful performance measurement systems, 

such as linking measures to program goals. 

• OPS increased both the number and the size of the civil penalties it 

assessed in response to criticism that its enforcement activities were weak 

and ineffective. For example, from 2000 through 2003, following its 

decision to be tough but fair in assessing civil penalties, OPS assessed an 

average of 22 penalties per year, compared with an average of 14 penalties 

per year from 1995 through 1999, when OPS’s policy was to “partner” with 

industry, rather than primarily to enforce compliance. In addition, from 

2000 through 2003, OPS assessed an average civil penalty of about $29,000, 

compared with an average of $18,000 from 1995 through 1999. 

Departmental data show that operators have paid 94 percent (202 of 216) 

of the civil penalties issued over the past 10 years. Civil penalties are one 

 4

The data elements needed to determine when civil penalties were paid were, in our 

opinion, too unreliable to use to report on timeliness of payments. This limitation did not 

create a major impediment to our reporting on OPS’s use of civil penalties overall. 
Page 5 GAO-04-826T 

of several enforcement actions that OPS can take to increase compliance 

and represent about 14 percent of all enforcement actions taken over the 

past 10 years. Although OPS has increased both the number and the size of 

its civil penalties, it is not clear whether this action will help deter 

noncompliance with the agency’s safety regulations. The pipeline safety 

stakeholders we spoke with expressed differing views on whether OPS’s 

civil penalties deter noncompliance with the pipeline safety regulations. 

Some—such as pipeline industry officials—said that civil penalties of any 

size act as a deterrent, in part because they keep companies in the public 

eye. Others—such as pipeline safety advocacy groups—said that OPS’s 

civil penalties are too small to deter noncompliance. 

OPS, within the Department of Transportation’s Research and Special 

Programs Administration (RSPA), administers the national regulatory 

program to ensure the safe transportation of natural gas and hazardous 

liquids by pipeline.5

 The office attempts to ensure the safe operation of 

pipelines through regulation, national consensus standards, research, 

education (e.g., to prevent excavation-related damage), oversight of the 

industry through inspections, and enforcement when safety problems are 

found.6

 The office uses a variety of enforcement tools, such as compliance 

orders and corrective action orders that require pipeline operators to 

correct safety violations, notices of amendment to remedy deficiencies in 

operators’ procedures, administrative actions to address minor safety 

problems, and civil penalties. OPS is a small federal agency. In fiscal year 

2003, OPS employed about 150 people, about half of whom were pipeline 

inspectors. 

Before imposing a civil penalty on a pipeline operator, OPS issues a notice 

of probable violation that documents the alleged violation and a notice of 

proposed penalty that identifies the proposed civil penalty amount. Failure 

by an operator to inspect the pipeline for leaks or unsafe conditions is an 

 5

In general, OPS retains full responsibility for inspecting interstate pipelines and enforcing 

regulations applicable to them. OPS certifies states to perform these functions for 

intrastate pipelines. OPS has agreements with 11 state pipeline enforcement agencies, 

known as interstate agents, to help it inspect segments of interstate pipelines within these 

states’ boundaries. However, OPS undertakes any enforcement actions identified through 

inspections conducted by interstate agents. 

6

Standards are technical specifications that pertain to products and processes, such as the 

size, strength, or technical performance of a product. National consensus standards are 

developed by standard-setting entities, such as the American Society for Testing and 

Materials, on the basis of an industry consensus. 

Background 
Page 6 GAO-04-826T 

example of a violation that may lead to a civil penalty. OPS then allows the 

operator to present evidence either in writing or at an informal hearing. 

Attorneys from RSPA’s Office of Chief Counsel preside over these 

hearings. Following the operator’s presentation, the civil penalty may be 

reaffirmed, reduced, or withdrawn. If the hearing officer determines that a 

violation did occur, the Office of Chief Counsel issues a final order that 

requires the operator to correct the safety violation (if a correction is 

needed) and pay the penalty (called the “assessed penalty”). The operator 

has 20 days after the final order is issued to pay the penalty. The Federal 

Aviation Administration (FAA) collects civil penalties for OPS.7

From 1992 through 2002, federal law allowed OPS to assess up to $25,000 

for each day a violation continued, not to exceed $500,000 for any related 

series of violations. In December 2002, the Pipeline Safety Improvement 

Act increased these amounts to $100,000 and $1 million, respectively. 

The effectiveness of OPS’s enforcement strategy cannot be determined 

because OPS has not incorporated three key elements of effective program 

management—clear performance goals for the enforcement program, a 

fully defined strategy for achieving these goals, and performance measures 

linked to goals that would allow an assessment of the enforcement 

strategy’s impact on pipeline safety. 

OPS’s enforcement strategy has undergone significant changes in the last 5 

years. Before 2000, the agency emphasized partnering with the pipeline 

industry to improve pipeline safety rather than punishing noncompliance. 

In 2000, in response to concerns that its enforcement was weak and 

ineffective, the agency decided to institute a “tough but fair” enforcement 

approach and to make greater use of all its enforcement tools, including 

larger and more frequent civil penalties.8

 In 2001, to further strengthen its 

 7

To consolidate its accounting functions, in September 1993 RSPA began contracting with 

FAA to collect its accounts receivable, including civil penalties for OPS. 

8

For example, in May 2000, we reported that OPS had dramatically reduced its use of civil 

penalties and increased its use of administrative actions over the years without assessing 

the effects of these actions. See Pipeline Safety: Office of Pipeline Safety Is Changing 

How It Oversees the Pipeline Industry, GAO/RCED-00-128 (Washington, D.C.: May 15, 

2000). 

Key Management 

Elements Are Needed 

to Determine the 

Effectiveness of OPS’s 

Enforcement Strategy 

OPS’s Enforcement 

Strategy Has Been 

Evolving 
Page 7 GAO-04-826T 

enforcement, OPS began issuing more corrective action orders requiring 

operators to address safety problems that led or could lead to pipeline 

accidents. In 2002, OPS created a new Enforcement Office to focus more 

on enforcement and help ensure consistency in enforcement decisions. 

However, this new office is not yet fully staffed, and key positions remain 

vacant. 

In 2002, OPS began to enforce its new integrity management and operator 

qualification standards in addition to its minimum safety standards. 

Initially, while operators were gaining experience with the new, complex 

integrity management standards, OPS primarily used notices of 

amendment, which require improvements in procedures, rather than 

stronger enforcement actions. Now that operators have this experience, 

OPS has begun to make greater use of civil penalties in enforcing these 

standards. 

OPS has also recently begun to reengineer its enforcement program. 

Efforts are under way to develop a new enforcement policy and 

guidelines, develop a streamlined process for handling enforcement cases, 

modernize and integrate the agency’s inspection and enforcement 

databases, and hire additional enforcement staff. However, as I will now 

discuss, OPS has not put in place key elements of effective management 

that would allow it to determine the impact of its evolving enforcement 

program on pipeline safety. 

Although OPS has overall performance goals, it has not established 

specific goals for its enforcement program. According to OPS officials, the 

agency’s enforcement program is designed to help achieve the agency’s 

overall performance goals of (1) reducing the number of pipeline 

accidents by 5 percent annually and (2) reducing the amount of hazardous 

liquid spills by 6 percent annually.9

 Other agency efforts—including the 

development of a risk-based approach to finding and addressing 

significant threats to pipeline safety and of education to prevent 

excavation-related damage to pipelines—are also designed to help achieve 

these goals. 

 9

OPS refers to the release of natural gas from a pipeline as an “incident” and a spill from a 

hazardous liquid pipeline as an “accident.” For simplicity, this testimony refers to both as 

“accidents.” 

OPS Needs Goals for its 

Enforcement Program 
Page 8 GAO-04-826T 

OPS’s overall performance goals are useful because they identify the end 

outcomes, or ultimate results, that OPS seeks to achieve through all its 

efforts. However, OPS has not established performance goals that identify 

the intermediate outcomes, or direct results, that OPS seeks to achieve 

through its enforcement program. Intermediate outcomes show progress 

toward achieving end outcomes. For example, enforcement actions can 

result in improvements in pipeline operators’ safety performance—an 

intermediate outcome that can then result in the end outcome of fewer 

pipeline accidents and spills. OPS is considering establishing a goal to 

reduce the time it takes the agency to issue final enforcement actions. 

While such a goal could help OPS improve the management of the 

enforcement program, it does not reflect the various intermediate 

outcomes the agency hopes to achieve through enforcement. Without 

clear goals for the enforcement program that specify intended 

intermediate outcomes, agency staff and external stakeholders may not be 

aware of what direct results OPS is seeking to achieve or how 

enforcement efforts contribute to pipeline safety. 

OPS has not fully defined its strategy for using enforcement to achieve its 

overall performance goals. According to OPS officials, the agency’s 

increased use of civil penalties and corrective action orders reflects a 

major change in its enforcement strategy. However, although OPS began 

to implement these changes in 2000, it has not yet developed a policy that 

defines this new, more aggressive enforcement strategy or describes how 

it will contribute to the achievement of its performance goals. In addition, 

OPS does not have up-to-date, detailed internal guidelines on the use of its 

enforcement tools that reflect its current strategy. Furthermore, although 

OPS began enforcing its integrity management standards in 2002 and 

received greater enforcement authority under the 2002 pipeline safety act, 

it does not yet have guidelines in place for enforcing these standards or 

implementing the new authority provided by the act.10

According to agency officials, OPS management communicates 

enforcement priorities and ensures consistency in enforcement decisions 

through frequent internal meetings and detailed inspection protocols and 

guidance. Agency officials recognize the need to develop an enforcement 

 10We have reported on challenges that OPS faces in enforcing its complex integrity 

management requirements consistently and effectively. See our August 2002 report, 

Pipeline Safety and Security: Improved Workforce Planning and Communication 

Needed, GAO-02-785 (Washington, D.C.: Aug. 26, 2002). 

OPS Needs to Fully Define 

Its Enforcement Strategy 
Page 9 GAO-04-826T 

policy and up-to-date detailed enforcement guidelines and have been 

working to do so. To date, the agency has completed an initial set of 

enforcement guidelines for its operator qualification standards and has 

developed other draft guidelines. However, because of the complexity of 

the task, agency officials do not expect that the new enforcement policy 

and remaining guidelines will be finalized until sometime in 2005. 

The development of an enforcement policy and guidelines should help 

define OPS’s enforcement strategy; however, it is not clear whether this 

effort will link OPS’s enforcement strategy with intermediate outcomes, 

since agency officials have not established performance goals specifically 

for their enforcement efforts. We have reported that such a link is 

important.11

According to OPS officials, the agency currently uses three performance 

measures and is considering three additional measures to determine the 

effectiveness of its enforcement activities and other oversight efforts. (See 

table 1.) The three current measures provide useful information about the 

agency’s overall efforts to improve pipeline safety, but do not clearly 

indicate the effectiveness of OPS’s enforcement strategy because they do 

not measure the intermediate outcomes of enforcement actions that can 

contribute to pipeline safety, such as improved compliance. The three 

measures that OPS is considering could provide more information on the 

intermediate outcomes of the agency’s enforcement strategy, such as the 

frequency of repeat violations and the number of repairs made in response 

to corrective action orders, as well as other aspects of program 

performance, such as the timeliness of enforcement actions.12

 11See U.S. General Accounting Office, Managing for Results: Strengthening Regulatory 

Agencies’ Performance Management Practices, GAO/GGD-00-10 (Washington, D.C.: Oct. 

28, 1999); Agency Performance Plans: Examples of Practices That Can Improve 

Usefulness to Decisionmakers, GAO/GGD/AIMD-99-69 (Washington, D.C.: Feb. 26, 1999); 

and The Results Act: An Evaluator’s Guide to Assessing Agency Annual Performance 

Plans, GAO/GGD-10.1.20 (Washington, D.C., Apr. 1998). 

12In addition, measures of pipeline operator integrity management performance and of the 

results of integrity management and operator qualification inspections could provide 

information on the intermediate outcomes of these regulatory approaches. 

OPS Needs Adequate 

Measures of the 

Effectiveness of Its 

Enforcement Strategy 
Page 10 GAO-04-826T 

Table 1: Enforcement Program Performance Measures That OPS Currently Uses and Is Considering Developing 

Measure Examples 

Measures OPS currently uses 

Achievement of agency performance goals Annual numbers of natural gas and hazardous liquid pipeline accidents 

and tons of hazardous liquid materials spilled per million ton-miles 

shipped. 

Inspection and enforcement activity Number of inspections completed; hours per inspection; accident 

investigations; enforcement actions taken, by type; and average 

proposed civil penalty amounts. 

Integrity management performance Annual numbers of accidents in areas covered by integrity management 

standards and of actions by pipeline operators in response to these 

standards, such as repairs completed and miles of pipeline assessed.a

 

Measures OPS is considering developing 

Management of enforcement actions The time taken to issue final enforcement actions, the extent to which 

penalty amounts are reduced, and the extent to which operators commit 

repeat violations. 

Safety improvements ordered by OPS Actions by pipeline operators in response to corrective action orders, 

including miles of pipeline assessed, defects discovered, repairs made, 

and selected costs incurred. 

Results of integrity management and operator qualification 

inspections 

The percentage of pipeline operators that did not meet certain 

requirements and the reduction in the number of operators with a 

particular deficiency. 

Source: GAO analysis of OPS information. 

a

OPS started collecting some of these data in 2002 but does not anticipate obtaining all of it on an 

annual basis until 2005. 

We have found that agencies that are successful in measuring performance 

strive to establish measures that demonstrate results, address important 

aspects of program performance, and provide useful information for 

decision-making.13 While OPS’s new measures may produce better 

information on the performance of its enforcement program than is 

currently available, OPS has not adopted key practices for achieving these 

characteristics of successful performance measurement systems: 

• Measures should demonstrate results (outcomes) that are directly linked 

to program goals. Measures of program results can be used to hold 

agencies accountable for the performance of their programs and can 

 13See, for example, GAO/GGD/AIMD-99-69; Executive Guide: Effectively Implementing the 

Government Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June

1996); and Tax Administration: IRS Needs to Further Refine Its Tax Filing Season 

Performance Measures, GAO-03-143 (Washington, D.C.: Nov. 22, 2002). 
Page 11 GAO-04-826T 

facilitate congressional oversight. If OPS does not set clear goals that 

identify the desired results (intermediate outcomes) of enforcement, it 

may not choose the most appropriate performance measures. OPS officials 

acknowledge the importance of developing such goals and related 

measures but emphasize that the diversity of pipeline operations and the 

complexity of OPS’s regulations make this a challenging task.14

• Measures should address important aspects of program performance 

and take priorities into account. An agency official told us that a key 

factor in choosing final measures would be the availability of supporting 

data. However, the most essential measures may require the development 

of new data. For example, OPS has developed databases that will track the 

status of safety issues identified in integrity management and operator 

qualification inspections, but it cannot centrally track the status of safety 

issues identified in enforcing its minimum safety standards. Agency 

officials told us that they are considering how to add this capability as part 

of an effort to modernize and integrate their inspection and enforcement 

databases. 

• Measures should provide useful information for decision-making, 

including adjusting policies and priorities.

15 OPS uses its current 

measures of enforcement performance in a number of ways, including 

monitoring pipeline operators’ safety performance and planning 

inspections. While these uses are important, they are of limited help to 

OPS in making decisions about its enforcement strategy. OPS has 

acknowledged that it has not used performance measurement information 

in making decisions about its enforcement strategy. OPS has made 

progress in this area by identifying possible new measures of enforcement 

results (outcomes) and other aspects of program performance, such as 

indicators of the timeliness of enforcement actions, that may prove more 

useful for managing the enforcement program. 

 14We have reported on the challenges faced by agencies in developing measures of program 

results and on their approaches for overcoming such challenges. See, in particular, 

GAO/GGD-00-10; Managing for Results: Measuring Program Results That Are Under 

Limited Federal Control, GAO/GGD-99-16 (Washington, D.C.: Dec. 11, 1998); and 

Managing for Results: Regulatory Agencies Identified Significant Barriers to Focusing 

on Results, GAO/GGD-97-83 (Washington, D.C.: June 24, 1997). 

15See, for example, GAO/GGD-96-118 and U.S. General Accounting Office, Results-Oriented 

Government: GPRA Has Established a Solid Foundation for Achieving Greater Results, 

GAO-04-38 (Washington, D.C.: Mar. 10, 2004). 
Page 12 GAO-04-826T 

In 2000, in response to criticism that its enforcement activities were weak 

and ineffective, OPS increased both the number and the size of the civil 

monetary penalties it assessed.16 Pipeline safety stakeholders expressed 

differing opinions about whether OPS’s civil penalties are effective in 

deterring noncompliance with pipeline safety regulations. 

OPS assessed more civil penalties during the past 4 years under its current 

“tough but fair” enforcement approach than it did in the previous 5 years, 

when it took a more lenient enforcement approach. (See fig. 2.) From 2000 

through 2003, OPS assessed 88 civil penalties (22 per year on average) 

compared with 70 civil penalties from 1995 through 1999 (about 14 per 

year on average). For the first 5 months of 2004, OPS proposed 38 civil 

penalties. While the recent increase in the number and the size of civil 

penalties may reflect OPS’s new “tough but fair” enforcement approach, 

other factors, such as more severe violations, may be contributing to the 

increase as well. 

 16The civil penalty results we present largely reflect OPS’s enforcement of its minimum 

safety standards because integrity management enforcement did not begin until 2002. 

Our results may differ from the results that OPS reports because our data are organized 

differently. OPS reports an action in the year in which it occurred. For example, OPS may 

propose a penalty in one year and assess it in another year. The data for this action would 

show up in different years. To better track the disposition of civil penalties, we associated 

assessed penalties and penalty amounts with the year in which they were proposed—even 

if the assessment occurred in a later year. 

OPS Has Increased Its 

Use of Civil Penalties; 

the Effect on 

Deterrence Is Unclear 

OPS Now Assesses More 

and Larger Civil Penalties 
Page 13 GAO-04-826T 

Figure 2: OPS’s Use of Civil Penalties, 2000 through 2003, Compared with 1995 

through 1999 

Note: The amounts in this figure may not be comparable to the amounts that OPS reports. See 

footnote 16. 

Overall, OPS does not use civil penalties extensively. Civil penalties 

represent about 14 percent (216 out of 1,530) of all enforcement actions 

taken over the past 10 years. OPS makes more extensive use of other types 

of enforcement actions that require pipeline operators to fix unsafe 

conditions and improve inadequate procedures, among other things. In 

contrast, civil penalties represent monetary sanctions for violating safety 

regulations but do not require safety improvements. OPS may increase its 

use of civil penalties as it begins to use them to a greater degree for 

violations of its integrity management standards. 
Page 14 GAO-04-826T 

The average size of the civil penalties has increased. For example, from 

1995 through 1999, the average assessed civil penalty was about $18,000.17

From 2000 through 2003, the average assessed civil penalty increased by 

62 percent to about $29,000.18 Assessed penalty amounts ranged from $500 

to $400,000. 

In some instances, OPS reduces proposed civil penalties when it issues its 

final order. We found that penalties were reduced 31 percent of the time 

during the 10-year period covered by our work (66 of 216 instances). These 

penalties were reduced by about 37 percent (from a total of $2.8 million to 

$1.7 million). The dollar difference between the proposed and the assessed 

penalties would be over three times as large had our analysis included the 

extraordinarily large penalty for the Bellingham, Washington, incident. For 

this case, OPS proposed a $3.05 million penalty and had assessed $250,000 

as of May 2004.19 If we include this penalty, then over this period OPS 

reduced total proposed penalties by about two-thirds, from about $5.8 

million to about $2 million. 

OPS’s database does not provide summary information on why penalties 

are reduced. According to an OPS official, the agency reduces penalties 

when an operator presents evidence that the OPS inspector’s finding is 

weak or wrong or when the pipeline’s ownership changes during the 

period between the proposed and assessed penalty. It was not practical for 

us to gather information on a large number of penalties that were reduced, 

but we did review several to determine the reasons for the reductions. 

OPS reduced one of the civil penalties we reviewed because the operator 

provided evidence that OPS inspectors had miscounted the number of 

pipeline valves that OPS said the operator had not inspected. Since the 

violation was not as severe as OPS had stated, OPS reduced the proposed 

penalty from $177,000 to $67,000. 

 17All amounts are in current year dollars. Inflation was low during the 1995-2003 period. If 

the effects of inflation were considered, the average assessed penalty amount for 1995 

through 1999 would be $21,000 and the average amount for 2000 through 2003 would be 

$30,000 (in 2003 dollars). 

18The median civil penalty size for the 1995-1999 period was about $5,800 and the median 

size for the 2000-2003 period was $12,700. 

19OPS proposed a $3.05 million penalty against Equilon Pipeline Company, LLC (Olympic 

Pipeline Company) for the Bellingham incident and later assessed Shell Pipeline Company 

(formerly Equilon) $250,000, which it collected. According to RSPA’s Office of Chief 

Counsel, the penalty against Olympic Pipeline is still open, waiting for the company to 

come out of bankruptcy court. 
Page 15 GAO-04-826T 

Of the 216 penalties that OPS assessed from 1994 through 2003, pipeline 

operators paid the full amount 93 percent of the time (200 instances) and 

reduced amounts 1 percent of the time (2 instances). (See fig. 3.) Fourteen 

penalties (6 percent) remain unpaid, totaling about $837,000 (or 18 percent 

of penalty amounts). 

Figure 3: Number of Civil Penalties Paid, 1994 through 2003 

In two instances, operators paid reduced amounts. We followed up on one 

of these assessed penalties. In this case, the operator requested that OPS 

reconsider the assessed civil penalty and OPS reduced it from $5,000 to 

$3,000 because the operator had a history of cooperation and OPS wanted 

to encourage future cooperation. 

For the 14 unpaid penalties, neither FAA’s nor OPS’s data show why the 

penalties have not been collected. We expect to present a fuller discussion 

of the reasons for these unpaid penalties and OPS’s and FAA’s 

management controls over the collection of penalties when we report to 

this and other committees next month. 

Although OPS has increased both the number and the size of the civil 

penalties it has imposed, the effect of this change on deterring 

noncompliance with safety regulations, if any, is not clear. The 

stakeholders we spoke with expressed differing views on whether the civil 

penalties deter noncompliance. The pipeline industry officials we 

contacted believed that, to a certain extent, OPS’s civil penalties 

Operators Paid Full 

Amounts of Most Civil 

Penalties 

The Effect of OPS’s Larger 

Civil Penalties on 

Deterring Noncompliance 

Is Unclear 
Page 16 GAO-04-826T 

encourage pipeline operators to comply with pipeline safety regulations 

because they view all of OPS’s enforcement actions as deterrents to 

noncompliance. However, some industry officials said that OPS’s 

enforcement actions are not their primary motivation for safety. Instead, 

they said that pipeline operators are motivated to operate safely because 

they need to avoid any type of accident, incident, or OPS enforcement 

action that impedes the flow of products through the pipeline and hinders 

their ability to provide good service to their customers. Pipeline industry 

officials also said that they want to operate safely and avoid pipeline 

accidents because accidents generate negative publicity and may result in 

costly private litigation against the operator. 

Most of the interstate agents, representatives of their associations, and 

insurance company officials expressed views similar to those of the 

pipeline industry officials, saying that they believe civil penalties deter 

operators’ noncompliance with regulations to a certain extent. However, a 

few disagreed with this point of view. For example, the state agency 

representatives and a local government official said that OPS’s civil 

penalties are too small to be deterrents. Pipeline safety advocacy groups 

that we talked to also said that the civil penalty amounts OPS imposes are 

too small to have any deterrent effect on pipeline operators. As discussed 

earlier, for 2000 through 2003, the average assessed penalty was about 

$29,000. 

According to economic literature on deterrence, pipeline operators may be 

deterred if they expect a sanction, such as a civil penalty, to exceed any 

benefits of noncompliance.20 Such benefits could, in some cases, be lower 

operating costs. The literature also recognizes that the negative 

consequences of noncompliance—such as those stemming from lawsuits, 

bad publicity, and the value of the product lost from accidents—can deter 

noncompliance along with regulatory agency oversight. Thus, for example, 

the expected costs of a legal settlement could overshadow the lower 

operating costs expected from noncompliance, and noncompliance might 

be deterred. 

 20Expected sanctions are the product of the sanction amount and the likelihood of being 

detected and sanctioned by that amount. 
Page 17 GAO-04-826T 

Mr. Chairman, this concludes my prepared statement. We expect to report 

more fully on these and other issues when we complete our work next 

month. We also anticipate making recommendations to improve OPS’s 

ability to demonstrate the effectiveness of its enforcement strategy and to 

improve OPS’s and FAA’s management controls over the collection of civil 

penalties. I would be pleased to respond to any questions that you or 

Members of the Committee might have. 

For information on this testimony, please contact Katherine Siggerud at 

(202) 512-2834 or siggerudk@gao.gov. Individuals making key 

contributions to this testimony are Jennifer Clayborne, Judy GuilliamsTapia, Bonnie Pignatiello Leer, Gail Marnik, James Ratzenberger, and 

Gregory Wilmoth. 

Contacts and 

Acknowledgments 

(542035) 
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