Testimony 

Before the Subcommittee on Energy and 

Air Quality, Committee on Energy and 

Commerce, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 11:00 a.m. EDT 

Tuesday, July 20, 2004 PIPELINE SAFETY

Preliminary Information on 

the Office of Pipeline 

Safety’s Actions to 

Strengthen Its Enforcement 

Program 

Statement of Katherine Siggerud, Director 

Physical Infrastructure Issues 

GAO-04-985T 
Highlights of GAO-04-985T, a testimony 

before the Subcommittee on Energy and Air 

Quality, Committee on Energy and 

Commerce, House of Representatives 

www.gao.gov/cgi-bin/getrpt?GAO-04-985T.

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. 

July 20, 2004

PIPELINE SAFETY

Preliminary Information on the Office of 

Pipeline Safety’s Actions to Strengthen 

Its Enforcement Program 

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 

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

approach—that it believes will change the safety culture of the industry. 

OPS has also became more aggressive in enforcing its regulations and now 

plans 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 a 

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 the size of its 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. When safety 

problems are found, OPS can take 

enforcement action against 

pipeline operators, including 

requiring the correction of safety 

violations and assessing monetary 

sanctions (civil penalties). 

This testimony is based on ongoing 

work for the House Committee on 

Energy and Commerce 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 

the next several days that will 

address these and other topics and 

anticipates making 

recommendations aimed at 

improving OPS’s enforcement 

program and management controls 

over civil penalty collection. 
Page 1 GAO-04-985T 

Mr. Chairman and Members of the Subcommittee: 

We appreciate the opportunity to participate in this hearing on progress 

made by the Office of Pipeline Safety (OPS) in implementing the 

provisions of the Pipeline Safety Improvement Act of 2002. The act 

strengthens federal pipeline safety programs, state oversight of pipeline 

operators, and public education on pipeline safety. My remarks center on 

work, required by the act, that we have almost completed on the 

effectiveness of OPS’s enforcement strategy and its use of monetary 

sanctions (civil penalties) when safety problems are found. The act also 

requires that we report in 2006 on OPS’s implementation of its risk-based 

safety program, called integrity management, and on a requirement that 

operators assess their facilities every 7 years for safety risks. We expect to 

begin work on these two topics next year. 

OPS has been taking many steps to make pipeline transportation safer. 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 

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 aspects of OPS’s 

enforcement program that should be useful to OPS as it decides how to 

proceed and to this subcommittee as it continues to exercise oversight. 

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

the House Committee on Energy and Commerce and for 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) 
Page 2 GAO-04-985T 

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 in the next few days. 

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

and discussions with OPS officials and a broad range of stakeholders.1 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 proposed and assessed civil 

penalties from 1994 through 2003 and the extent to which pipeline 

operators have paid them.2

 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 exception, were sufficiently reliable for our purposes.3

 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 

 1

These stakeholders represent industry trade associations, pipeline companies, federal 

enforcement agencies, state pipeline agencies and associations, pipeline safety advocacy 

groups, and pipeline insurers. 

2

Before OPS imposes a civil penalty, it issues a notice of probable violation to the pipeline 

operator that documents the alleged violation and identifies the proposed civil penalty 

amount. OPS then allows the operator to present additional evidence. Unless the proposed 

violation and penalty are withdrawn after this step, OPS issues a final order that requires 

the operator to pay the penalty (termed “assessed penalties”). 

3

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

opinion, too unreliable to use to report on the timeliness of payments. This limitation did 

not create a major impediment to our reporting on OPS’s use of civil penalties overall. 
Page 3 GAO-04-985T 

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 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. OPS assessed the 

penalty that it proposed 69 percent of the time (150 of 216 civil penalties). 

For the remaining 66 penalties, OPS reduced the assessments by about 37 

percent—from a total of about $2.8 million to about $1.7 million. OPS’s 

database does not provide summary information on why penalties are 

reduced. As a result, we are not able to provide information on the most 

common reasons why penalties were reduced. Civil penalties are one 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. 
Page 4 GAO-04-985T 

Pipeline transportation for hazardous liquids and natural gas is the safest 

form of freight transportation.4

 By one measure, the annual number of 

accidents, the hazardous liquid pipeline industry’s safety record has 

greatly improved over the past 10 years. (See fig. 1.) From 1994 through 

2003, accidents on interstate hazardous liquid pipelines decreased by 

almost 49 percent from 245 in 1994 to 126 in 2003.5

 However, the industry’s 

safety record for these pipelines has not improved for accidents with the 

greatest consequences—those resulting in a fatality, injury, or property 

damage totaling $50,000 or more—which we term serious accidents.6

 The 

number of serious accidents stayed about the same over the 10-year 

period—about 88 every year. The overall accident rate for hazardous liquid 

pipelines—which considers both the amounts of products and the 

distances shipped—decreased from about 0.41 accidents per billion 

ton-miles shipped in 1994 to about 0.25 accidents per billion ton-miles 

shipped in 2002.7

 The accident rate for serious interstate hazardous liquid 

pipeline accidents stayed the same, averaging about 0.15 accidents per 

billion ton-miles shipped from 1994 through 2002. 

 4

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

anhydrous ammonia, and carbon dioxide. 

5

Until February 2002, OPS required pipeline operators to report incidents with gross 

product losses of 50 barrels or more. In February 2002, OPS reduced the reporting 

threshold to 5 barrels. To maintain consistency over the 10-year period on which we are 

reporting, we use the 50-barrel threshold for product losses after February 2002. 

6

OPS requires that operators of hazardous liquid and natural gas pipelines report accidents 

involving deaths, injuries, and $50,000 or more worth of property damage, among other 

things. We selected this indicator because these reporting requirements are common to 

both types of pipelines and because it reflects accidents with serious consequences. 

7

A ton-mile is 1 ton of a product shipped 1 mile. Aggregated industry data on the amounts 

of products shipped through hazardous liquid pipelines for 2003 are not available. 

Background 
Page 5 GAO-04-985T 

Figure 1: Number of Accidents and Accident Rate for Interstate Hazardous Liquid Pipelines, 1994 through 2003 

Notes: The hazardous liquid accident rate is expressed in terms of accidents per billion ton-miles 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 

2003 are not available, so we do not present accident rate information for this year. 

In contrast to the decreasing number of accidents overall for hazardous 

liquid pipelines, the annual number of accidents on interstate natural gas 

pipelines increased by almost 20 percent from 81 in 1994 to 97 in 2003. 

(See fig. 2.) The number of serious accidents on interstate natural gas 

pipelines also increased, from 64 in 1994 to 84 in 2003, though they have 

fluctuated considerably over this time. Information on accident rates for 

natural gas pipelines is not available because of the lack of data on the 

amount of natural gas shipped through pipelines. For both hazardous 

liquid and natural gas pipelines, the lack of improvement in the number of 

serious accidents may be due in part to the relatively small number of 

these accidents. 
Page 6 GAO-04-985T 

Figure 2: Number of Accidents on Interstate Natural Gas Pipelines, 1994 through 

2003

Note: Data on the amounts of natural gas shipped through interstate pipelines are not available; these 

data are needed to calculate the accident rate. 

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. The office attempts to ensure the safe operation of 

pipelines through regulation, national consensus standards,8

 research, 

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

industry through inspections, and enforcement when safety problems are 

found. 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 

 8

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. 
Page 7 GAO-04-985T 

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 

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 

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

violation did occur, the OPS’s associate administrator 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.9

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 

 9

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

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

Key Management 

Elements Are Needed 

to Determine the 

Effectiveness of OPS’s 

Enforcement Strategy 

OPS’s Enforcement 

Strategy Has Been 

Evolving 
Page 8 GAO-04-985T 

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

larger and more frequent civil penalties.10 In 2001, to further strengthen its 

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.11 Other agency efforts—including the 

 10For 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). 

11OPS 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 9 GAO-04-985T 

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. 

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. 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, 

OPS Needs to Fully Define 

Its Enforcement Strategy 
Page 10 GAO-04-985T 

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

implementing the new authority provided by the act.12

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 

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.13

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 

 12We 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).

13See 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).

OPS Needs Adequate 

Measures of the 

Effectiveness of Its 

Enforcement Strategy 
Page 11 GAO-04-985T 

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.14

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 the 

information 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 

 14In 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. 
Page 12 GAO-04-985T 

decision-making.15 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 

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.16

• 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.

17 OPS uses its current 

 15See, 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). 

16We 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).

17See, 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 13 GAO-04-985T 

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. 

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.18 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. 3.) 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. 

 18The 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 14 GAO-04-985T 

Figure 3: 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 18. 

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 15 GAO-04-985T 

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

1995 through 1999, the average assessed civil penalty was about $18,000.19

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

62 percent to about $29,000.20 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). This analysis does not include the extraordinarily large 

penalty of $3.05 million that OPS proposed as a result of the Bellingham, 

Washington, accident because including it would have skewed our results 

by making the average penalty appear to be larger than it actually is.21 OPS 

has assessed the operator $250,000 as of July 2004.22 If we had included 

this penalty in our analysis we find that 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 the 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 

 19All 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). 

20The 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. 

21We also excluded from our analysis a proposed $2.5 million penalty resulting from the 

Carlsbad, New Mexico, accident. OPS had not assessed a penalty as of mid-July. RSPA has 

referred the penalty to the Department of Justice for judicial action. 

22OPS 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 16 GAO-04-985T 

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. Because we reviewed only a 

small number of instances in which penalties were reduced, we cannot say 

whether these examples are typical. 

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. 4.) Fourteen 

penalties (6 percent) remain unpaid, totaling about $836,700 (or 18 percent 

of penalty amounts). 

Figure 4: 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. 

Neither FAA’s nor OPS’s data show why the 14 unpaid penalties have not 

been collected. From the information provided by both agencies, we 

determined that OPS closed 2 of the penalty cases without collecting the 

penalties, operators are appealing 5 penalties, OPS recently assessed 3 

Operators Paid Full 

Amounts of Most Civil 

Penalties 
Page 17 GAO-04-985T 

penalties, and OPS acknowledged that 4 penalties (totaling $45,200) 

should have been collected. 

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 

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.23 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. 

 23OPS has agreements with 11 state pipeline 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. 

The Effect of OPS’s Larger 

Civil Penalties on 

Deterring Noncompliance 

Is Unclear 
Page 18 GAO-04-985T 

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.24 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. 

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

more fully on these and other issues in our report that we expect to issue 

later this week. 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 Subcommittee 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. 

 24Expected sanctions are the product of the sanction amount and the likelihood of being 

detected and sanctioned by that amount. 

Contacts and 

Acknowledgments 

(542044) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548