Wolverine Pipe Line Co. v. DOT, PHMSA ( 2023 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 23a0116p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
WOLVERINE PIPE LINE COMPANY,
│
Petitioner, │
> No. 21-3405
│
v. │
│
UNITED STATES DEPARTMENT OF TRANSPORTATION, │
Pipeline and Hazardous Materials Safety │
Administration, │
Respondent. │
┘
On Petition for Review from the United States Department of Transportation,
Pipeline and Hazardous Materials Safety Administration.
No. 3-2019-5016.
Argued: March 10, 2022
Decided and Filed: June 2, 2023
Before: BATCHELDER, NALBANDIAN, and READLER, Circuit Judges.
_________________
COUNSEL
ARGUED: Joshua S. Johnson, VINSON & ELKINS, LLP, Washington, D.C., for Petitioner.
Casen B. Ross, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Respondent. ON BRIEF: Joshua S. Johnson, Ronald J. Tenpas, Jeremy C. Marwell, VINSON
& ELKINS LLP, Washington, D.C., for Petitioner. Casen B. Ross, Abby C. Wright, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent.
NALBANDIAN, J., delivered the opinion of the court in which READLER, J., joined.
BATCHELDER, J. (pp. 19–22), delivered a separate dissenting opinion.
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 2
_________________
OPINION
_________________
NALBANDIAN, Circuit Judge. The Pipeline and Hazardous Materials Safety
Administration imposed a civil penalty on Wolverine Pipe Line Company for violating two of its
pipeline regulations. Wolverine claims this action was arbitrary and capricious and violated its
due process rights. We disagree, and we affirm the agency’s decision and deny Wolverine’s
petition.
I.
A.
Regulatory Framework. More than two million miles of pipeline crisscross the United
States. These pipelines carry oil, gasoline, and natural gas from state to state, powering
American homes, infrastructure, and industry along the way. But with energy reward comes
risk. Pipelines can leak, fail, or spill, hurting the environment or wreaking havoc in populated
areas. To protect against such risks, Congress enacted a series of pipeline safety laws. See
49 U.S.C. §§ 60101 et seq. These laws direct the Secretary of Transportation to issue minimum
safety standards for pipelines. Id. § 60102(a)(2). The Secretary, in turn, delegates this standard-
issuing authority to an agency: the Pipeline and Hazardous Materials Safety Administration.
See 49 C.F.R. § 1.97. The agency, PHMSA for short, has used this authority to issue a host of
regulations. Although these regulations are complex, PHMSA’s collaborative approach to
pipeline safety is simple. That is, the regulations grant pipeline operators flexibility on the front
end, but PHMSA approves operators’ plans and verifies their regulatory compliance on the back
end.
Examples illustrate the point. For instance, pipeline operators retain discretion to develop
and implement their own integrity management programs, or IMPs. These IMPs set plans for
periodic pipeline assessments, as well as remedial plans for any pipeline repair issues an
assessment brings to light. See generally 49 C.F.R. § 195.452(b). What’s more, in many
instances, the regulations allow operators to choose the methodology they will use to conduct
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 3
those assessments. By implementing “performance-based standards,” the regulations permit
operators to choose an assessment method that best fits the needs of their specific pipelines.
65 Fed. Reg. 75,382, 75,388 (Dec. 1, 2000). This front-end flexibility requires back-end
verification. To that end, PHMSA approves operators’ IMPs and reviews operators’ records to
check for regulatory compliance.
The regulations here, known as the integrity management regulations, fit this
collaborative mold. Taking specific aim at spill prevention in “high consequence areas,” these
regulations set repair standards for pipelines that transport hazardous liquids. See 49 C.F.R.
§ 195.452(h); PHMSA, HL IM Performance Measures, https://www.phmsa.dot.gov/pipeline/
hazardous-liquid-integrity-management/hl-im-performance-measures (last updated Jan. 28,
2020). The standards start with discovery, which “occurs when an operator has adequate
information to determine that a condition presenting a potential threat to the integrity of the
pipeline exists.” 49 C.F.R. § 195.452(h)(2). Under PHMSA’s timeline, an operator must
discover an integrity issue “promptly, but no later than 180 days” after it receives an assessment
that identifies the problem. Id.Post-discovery, PHMSA classifies integrity issues on a spectrum. The higher the risk, the
faster an operator must act. In this vein, some especially dangerous repair conditions require
immediate repair. If an operator identifies an immediate repair condition—like certain metal
loss, a predicted pipe burst—or, as relevant here, a pipeline dent—it “must temporarily reduce
the operating pressure or shut down the pipeline until the operator completes the repair of the[]
condition[]” to “maintain safety.” Id. § 195.452(h)(4)(i). Other repairs, like 180-day or 60-day
conditions, require less urgent treatment. Id. § 195.452(h)(4)(ii)-(iv). Although an operator must
complete the repair within a given timeline, it needn’t reduce pressure or shut down the pipeline.
With this background in mind, we turn to Wolverine’s case.
B.
Factual Background. Wolverine transports refined petroleum products in its 700-mile
pipeline system. These pipelines run from refineries in the Chicago area to terminals and other
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 4
pipelines in and around Indiana and Michigan. Because Wolverine transports refined petroleum,
a hazardous liquid, the company falls into PHMSA’s regulatory orbit.
A few years ago, PHMSA conducted a routine inspection of Wolverine’s records,
procedures, and facilities. That inspection identified several issues. So not long after, PHMSA
sent Wolverine a Notice of Probable Violation, or a NOPV. The Notice, which acts as an
informal charging document for the agency, described nine potential violations of PHMSA’s
regulations. Only two of those items—“Item 5” and “Item 6”—matter here.
1. Item 5
We begin with the events prompting Item 5. An in-line inspection report (ILI report)
landed in the inbox of Daniel Cooper, Wolverine’s only risk management specialist at the time,
on June 10, 2015.1 But Cooper didn’t open the ILI report for another 13 days. Why? On June
10, Cooper was on vacation. And right after, Wolverine sent him on a work trip. Cooper
explained that he “did not have access to email” on vacation. (Hr. Tr., A385.) Later, he noted
that he “may have seen the e-mail, but [he] did not open the report until [he] got back from [his]
travels.” (Id.) In any event, Cooper eventually returned to the office and read the report on June
23, 2015. The report described a dent with metal loss on the topside of one of Wolverine’s pipe
segments.
Once Cooper learned about the dent, he sprang into action. First, he reached out to the
third-party vendor who prepared the ILI report to confirm that the pipe showed metal loss. After
the vendor confirmed, Cooper convened a June 26, 2015 meeting with his Wolverine coworkers.
There, they decided to treat the pipeline “anomaly” as a “possible immediate repair.” (Hr. Ex.
29, A589.) As Wolverine worked toward a repair, the operator prepared to implement the
temporary pressure reduction the regulations require.
1Pipeline operators typically outsource pipeline assessments to third-party analysts, who prepare ILI
reports. These reports give operators a segment-by-segment look at their pipes and identify any integrity issues.
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 5
But this pressure reduction never came to pass. Based on an eight-month-old hydrostatic
test,2 Cooper felt “confident” that the dent could withstand any pressure “and was not likely to
fail in the next few days.”3 (Hr. Tr., A356.) Besides, in its IMP, Wolverine had interpreted the
immediate repair regulation to give it a choice: “[C]omplete” the repair within “up to 5 . . .
working days” after an operator determines there is “an immediate repair condition” or
“implement a pressure reduction as necessary.” (Hr. Ex. 28, A585; Hr. Tr., A351–53.) Relying
on its IMP and the recent testing, and using June 26 as the relevant trigger date, Wolverine took
the first path. Within four days of the June 26 meeting, Wolverine completed the repair without
implementing a temporary pressure reduction.
During the inspection, PHMSA reviewed Wolverine’s response and found it lacking.
So Item 5 of the Notice cited Wolverine for a violation of the immediate repair regulation,
49 C.F.R. § 195.452(h)(4)(i)(C). Wolverine, PHMSA explained, had “received a final ILI report
on June 10, 2015 . . . claimed a discovery date of June 26, 2015 and completed repairs on the
pipeline segment on June 30, 2015.” (NOPV, A71.) But for the time spanning June 10 to June
30, Wolverine “could not provide a record that a temporary pressure reduction was taken.” (Id.)
Because Wolverine “failed to temporarily reduce the operating pressure,” the Notice alleged that
Wolverine “committed [a] probable violation[]” of the regulation and recommended a $36,000
penalty. (Id. at A68, 71, 74.) And PHMSA’s subsequent Violation Report stated that this
violation started on June 10, 2015—the date Cooper received, and failed to open, the ILI report.
2. Item 6
Next, we turn to Item 6. This item dealt with 180-day conditions, rather than immediate
repair conditions. One of the 180-day conditions occurs when “[a] calculation of the remaining
strength of the pipe shows an operating pressure that is less than the current established
2“A hydrostatic test is performed by subjecting a pipeline to pressures that exceed its maximum operating
pressure, thereby identifying the weakest segments of the pipeline.” ExxonMobil Pipeline Co. v. U.S. Dep’t of
Transp., 867 F.3d 564, 568 n.1 (5th Cir. 2017).
3According to Wolverine, the average pressure per square inch at the location of the dent hovered around
200 pounds. About a year earlier, in October 2014, the pipe had withstood 1,700 pounds of pressure per square inch
during hydrostatic testing. In Cooper’s view, if the pipe withstood 1,700 pounds of pressure per square inch a year
earlier, it could withstand 200 pounds of pressure until Wolverine completed the immediate repair.
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 6
maximum operating pressure at the location of the anomaly.” 49 C.F.R. § 195.452(h)(4)(iii)(D).
To calculate the remaining strength, the regulation allows operators to use “suitable” methods,
including, but not limited to, two methods called the B31G method and the R-STRENG method.
Id.Wolverine received another ILI report identifying four such conditions on June 12, 2015.
At each anomaly location, the report calculated the remaining strength of the pipes using both the
R-STRENG and the B31G method. But the different methods yielded different results. Under
the R-STRENG method, the strength value of each anomaly was greater than the maximum
operating pressure at that location. But under the B31G method, the strength values were less
than the maximum operating pressure at the four anomaly locations. So if Wolverine accepted
and confirmed the R-STRENG calculations, the four anomalies would not qualify as 180-day
conditions. But if it took the other path, relying on B31G instead, they would.
Wolverine took the latter route. With the report in hand, Cooper worked to confirm its
contents. But he only recalculated and relied on the B31G values. Indeed, at the agency hearing,
Cooper stated he “[n]ormally . . . use[d] [the] B31G [method]” to “prepar[e] repair plans.”
(Hr. Tr., A429.) Although he doesn’t “doubt” the R-STRENG values provided in ILI reports, he
doesn’t “have all the information necessary to assess [them],” which leads him to “take the more
conservative [B31G] approach.” (Id.)
Wolverine’s repair plans confirm Cooper’s assessment that Wolverine solely relied on
the B31G calculations to classify the four anomalies as 180-day conditions. The plans state that
Cooper ran “the modified ASME B31G calculations” and found that four anomalies qualified as
180-day conditions. (JO-KA Repair Plan 10/19/2015, A148–49; JO-KA Repair Plan Summary
10/19/2015, A627.)
With the plans complete, Wolverine started on repairs. For two of the anomalies, the
company met the 180-day mark. But at the other two locations, it missed the deadline. PHMSA
noted the missed deadlines during its inspection. So in Item 6 of its Notice, PHMSA cited
Wolverine for violating the 180-day condition regulation and recommended a $39,200 penalty.
In response to the Notice, Wolverine provided a written response that admitted it did not meet
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 7
the deadline and assured PHMSA that new procedures were put in place to prevent the violation
from happening again.
Agency Hearing. After it received the Notice, Wolverine contested PHMSA’s
accusations. Its defense started with a request for an agency hearing. See 49 C.F.R. § 190.211.
There, the parties debated the Item 5 and Item 6 violations.
Wolverine’s approach to Item 5 emphasized June 26 as the discovery date. To
understand why, recall the language of the immediate repair regulation: “To maintain safety, an
operator must temporarily reduce the operating pressure or shut down the pipeline until
the operator completes the repair.” 49 C.F.R. § 195.452(h)(4)(i). In Wolverine’s view, this
regulation didn’t impose a categorical command. Instead, it believed the regulation was most
naturally read as not requiring the pipeline operator to implement a pressure reduction if the
operator could complete the repair quickly. Under that approach, Wolverine contended it didn’t
violate the regulation. It discovered the repair on June 26 and completed the repair on June 30
“before there was time to effectuate the pressure reduction.” (Hr. Tr., A391.)
For Wolverine to win on this theory, it needed PHMSA to accept the June 26 discovery
date. So at the hearing, Wolverine went back and forth with PHMSA’s investigators about
Wolverine’s claimed discovery date of June 26. In one such instance, Wolverine’s counsel asked
one of PHMSA’s investigators, Ms. Alexander, about the discovery date. Wolverine’s counsel
said: “[D]o you dispute that June 26th, 2015, is the date of discovery for this subject condition?”
(Hr. Tr., A329.) Alexander answered: “No, I’m not disputing it. That is per Wolverine.” (Id.)
But Wolverine’s counsel persisted: “I want to know what you think . . . . Do you have a dispute
with June 26th as the discovery date?” (Id.) This time, Alexander simply answered: “No.” (Id.)
This conversation, though, was just one of many instances when the parties argued about
discovery for Item 5. At the start, Wolverine’s counsel read the Notice to Alexander. Twice
counsel asked if the allegation that Wolverine discovered a dent was “the regulatory version of
discovery? 49 C.F.R. 195.452(h)(2).” (Id. at A326–327.) Alexander confirmed. She also
stated: “Wolverine claims a discovery date.” (Id. at A327.) Later, PHMSA’s lawyer, Ms.
Stevens, emphasized that June 26th was “Wolverine’s date.” (Id. at A339.) When Wolverine’s
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 8
counsel retorted that Ms. Alexander “indicated no dispute with that date,” Ms. Stevens clarified
“there’s no dispute that Wolverine stated that date [of June 26]. That’s what she’s indicating.”
(Id.; see also id. at A341 (“Wolverine claimed the discovery date on June 26th.”).)
As for Item 6, Wolverine came to the table with a new theory: The repairs weren’t 180-
day conditions under the regulation. To make its case, Wolverine first pointed out that the
regulation included both the R-STRENG and B31G as “[s]uitable remaining strength calculation
methods.” 49 C.F.R. § 195.452(h)(4)(iii)(D). And under the R-STRENG values, Wolverine
contended that the anomalies weren’t 180-day conditions. To shore up its argument, it
introduced a new chart that incorporated the R-STRENG values from the ILI report. This chart
compared the R-STRENG values with the maximum operating pressure at each anomaly,
showing that the R-STRENG value was greater than the maximum operating pressure. So if
Wolverine had used the R-STRENG values instead of the B31G values, the repairs wouldn’t
have qualified as 180-day conditions. (Hr. Ex. 33, A626; see also Wolverine Post-Hearing Br.,
A655 (asserting that Wolverine could “have rested on the RSTRENG results and done absolutely
nothing”).) Still, as one of PHMSA’s officers pointed out, Wolverine didn’t provide any
R-STRENG analysis until October 2019—two years after PHMSA’s inspection and four years
after it first formulated its repair plans.
PHMSA’s decision. In the end, Wolverine’s arguments at the hearing failed to convince
PHMSA. The agency’s Final Order found Wolverine liable for violating both the
immediate repair and 180-day condition regulations. And although Wolverine petitioned for
reconsideration, the agency stayed firm, upholding both its liability findings and its $65,800 fine.
Wolverine now petitions for review of PHMSA’s Item 5 and Item 6 decisions, arguing
that each was arbitrary and capricious and contrary to law.
II.
We review PHMSA’s action under the Administrative Procedure Act. See 49 U.S.C.
§ 60119(a)(3). Under that Act, we may “set aside” the agency’s decision only if it is “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A). Arbitrary and capricious review is deferential. The question is not what we would
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 9
have done, nor whether we agree with the agency’s action. Rather, the question is whether the
agency “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action.”
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)
(explaining that there must be a “rational connection between the facts found and the choice
made” (citation omitted)). So long as “the agency’s path may reasonably be discerned,” we will
uphold a decision of even “less than ideal clarity.” Alaska Dep’t of Env’t Conservation v. EPA,
540 U.S. 461, 497 (2004) (citation omitted).
III.
We consider PHMSA’s Item 5 adjudication first. Wolverine contends this decision
violated its due process rights and is arbitrary and capricious. PHMSA responds that its
conclusion was a textbook application of the immediate repair regulation.
We think PHMSA has the better of the two arguments here. The text of the regulation
goes a long way to showing why. “To maintain safety,” the regulation tells us, “an operator must
temporarily reduce the operating pressure or shut down the pipeline until the operator completes
the repair of these conditions.” 49 C.F.R. § 195.452(h)(4)(i) (emphasis added). In its Item 5
decision, PHMSA simply read the regulation to mean what it says. “[C]lear on its face,” the
provision informed the regulated community “that, pending repair, an operator must take certain
actions.” (Reconsideration Decision, A19.) According to PHMSA, this mandate “does not
afford operators the ability to defer a pressure reduction . . . if, in their engineering judgment it is
simply more convenient to proceed to a repair.” (Id. at A18.) Put another way, the regulation
represents PHMSA’s call that “[t]o maintain safety,” an operator must reduce pressure pending a
repair. 49 C.F.R. § 195.452(h)(4)(i).
This position, long taken by the agency, leaves no room for an operator, like Wolverine,
to impose its own judgment. See, e.g., In the Matter of Centurion Pipeline, LP, CPF No. 4-2014-
5028, 2017 WL 1363408, at *9 (D.O.T. March 30, 2017) (noting that “[i]n prior enforcement
proceedings . . . PHMSA has [] determined that § 195.452(h)(4) requires a pressure reduction or
a shutdown even if the condition meets immediate repair criteria only after factoring in
conservative tool tolerances”); id. (“An operator must immediately reduce pipeline operating
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 10
pressure or shut down a pipeline that has an immediate repair condition.” (emphasis added)); In
the Matter of Buckeye Partners, L.P., CPF No. 1-2011-5013, 2012 WL 4025918, at *2 (D.O.T.
Jul. 27, 2012) (“Pipeline operators are obligated to take immediate action including temporarily
reducing operating pressure . . . .”). No matter the discovery date and no matter the speed of the
repair, operators must take steps to reduce the pressure or shut down the pipeline.
Wolverine never took these actions. Did it have a dent that met the criteria for an
immediate repair? Wolverine admits as much. Did it complete the repair without temporarily
reducing the pressure? Wolverine concedes the point. Indeed, during oral argument, Wolverine
took the position that whether it opened the letter on June 10 or June 26, it would not have
implemented a pressure reduction. In PHMSA’s view, these two concessions were enough to
find Wolverine liable for violating the regulation.
Wolverine reads the immediate repair regulation differently. It contends that the
regulation “cannot reasonably be read to require a pressure reduction or shutdown if the repair
can precede those actions.” (Wolverine Reply Br. at 10.) “Any alternative interpretation,” it
suggests, would “require[] a repair to be delayed pending implementation of a pressure reduction
or shutdown” and “undermine” the regulation’s express “objective of maintaining safety.” (Id.
(citation omitted).) So, the argument goes, operators do not need to reduce pressure or shutdown
a pipeline if simply repairing it would be faster.
But Wolverine’s reading runs headlong into the regulation’s text, which tells
operators: “To maintain safety, an operator must temporarily reduce operating pressure or shut
down the pipeline until the operator completes the repair of th[at] condition.” 49 C.F.R.
§ 195.452(h)(4)(i) (emphasis added). This “prophylactic” directive represents PHMSA’s call
about the best way to “maintain safety.” (PHMSA Br. at 6 (“Immediate repair conditions are
those that PHMSA has determined could result in imminent pipeline failure; the agency thus
promulgated this prophylactic measure—requiring an operator to reduce or shut down a
pipeline’s pressure while repairing these conditions—to ‘maintain safety’ by minimizing strain
on the pipeline and decreasing the prospect of imminent failure.”).) That we can imagine a
scenario where an operator could complete a repair before implementing a pressure reduction is
of no moment. The text of the regulation is clear. An operator must implement a pressure
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 11
reduction or shut down the pipeline. Wolverine asks us to read an exception into this
straightforward directive. We decline to do so.4
Wolverine challenges this conclusion on several additional fronts. It starts with two due
process arguments and then makes a Chenery claim. We consider each in turn.
Due Process. Before we address the heart of Wolverine’s argument, we begin with a bit
of context. The Fifth Amendment’s due process clause applies to “administrative proceedings
just as it does to other instances of government action.” Karst Robbins Coal Co. v. Dir., Off. of
Workers’ Comp. Programs, 969 F.3d 316, 329 (6th Cir. 2020); see also Mullane v. Cent.
Hanover Bank & Tr. Co., 339 U.S. 306, 313 (1950).
And in the administrative law context, due process arguments often come in two forms.
First, an agency offends due process if it “sustain[s] a charge different from any listed in the
complaint,” Hodgins v U.S. Dep’t of Agric., 238 F.3d 421, 430 (6th Cir. 2000) (table) (citations
omitted), or “change[s] theories in midstream without giving [] reasonable notice of the change,”
Yellow Freight Sys., Inc. v. Martin, 954 F.2d 353, 357 (6th Cir. 1992) (citation omitted). And
second, even if an agency “properly construe[s]” a regulation, its action might violate due
process if “the regulation is so vague in its requirements that its enforcement would violate” the
4In fact, Wolverine is as likely to fall within its proposed exception as it is to fall outside of it. In other
words, it’s not clear how long the pressure reduction process would have taken versus the actual repair. This is
because, on the record before us, it doesn’t seem that Wolverine determined how long it would have taken to reduce
pressure. (Hr. Tr., A380 (Cooper indicated Wolverine took some steps to “begin[] the” pressure reduction “process”
but didn’t know whether Wolverine ever took “further action to actually implement any kind of a pressure
reduction” or “what documentation exist[ed].”).) Instead, it seems that Wolverine made a judgment call based on
experience. (Id. at A354 (Cooper recommended that Wolverine forego a pressure reduction because it could “get in
within just a few days and repair [the pipeline].”); Id. at A356 (In Cooper’s judgment, “if [the] anomaly had
survived a 1,700 pound eight-hour test [] it was not likely to fail in the next few days at 50 pounds or maybe 200
pounds.”).) Later, the operator posited that it “might have achieved a pressure reduction ‘as soon as possible,’ and
safely so, but never will we know since the repair was effected so quickly.” (Wolverine Post-Hearing Br., A662.)
“Never will we know” about sums up the record on this issue. Wolverine can point to no record
evidence—other than its own uncorroborated statements to the contrary—that shows it could have completed the
repair “before there was time to effectuate a pressure reduction.” (Wolverine Br. at 34 (citation omitted).)
Finally, Wolverine is not in a great position to be advocating for an interpretation that is grounded in
speediness. Wolverine, after all, received information identifying an immediate repair on June 10 and completed
that repair on June 30. During that time, as PHMSA noted, Wolverine took a “lackadaisical approach,” failing to
even open the report for 13 days. (Reconsideration Decision, A20.) Then, acting on its own, Wolverine found a
pressure reduction unnecessary because it could complete the repair quickly. Given the 20 days between receipt of
the report and the repair, Wolverine had no excuse for its failure to act.
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 12
Fifth Amendment. Diebold, Inc. v. Marshall, 585 F.2d 1327, 1335 (6th Cir. 1978); see also Ohio
Cast Prods., Inc. v. OSHA, 246 F.3d 791, 798–99 (6th Cir. 2001); Albert C. Lin, Refining Fair
Notice Doctrine: What Notice is Required of Civil Regulations? 55 Baylor L. Rev. 991, 1001
(2003) (explaining that courts often treat “[w]hether an agency’s interpretation is permissible and
whether an agency gave adequate notice of that interpretation” as “separate issues”).
Wolverine claims that the agency’s actions violated both strands of due process doctrine.
First, Wolverine contends that PHMSA “violated due process by relying on a novel theory of
untimely discovery not adequately alleged” in the Notice. (Wolverine Br. at 30 (cleaned up).) In
other words, Wolverine argues it lacked fair notice that the agency took issue with its claimed
discovery date of June 26. (Id. at 37–38.) Second, Wolverine asserts it lacked fair notice that its
conduct would violate the discovery regulation because the regulation’s mandate to act
“promptly” is unconstitutionally vague. (Id. at 42–43.)
We reject Wolverine’s argument that it did not know its claimed discovery date would be
at issue in the proceedings. Wolverine’s claimed discovery date played an “ancillary part”
throughout the proceedings. (Reconsideration Decision, A21.) This is because an operator’s
“obligation to [reduce pressure] is dictated by when it discovers that it has an immediate repair
condition on its pipeline.” (Id. at A17.) And so PHMSA sought to determine when that
obligation kicked in.
Right off the bat, PHMSA’s informal charging documents put Wolverine on notice that
the agency took issue with the operator’s timeline. The Notice began by faulting Wolverine for
failing to “temporarily reduce the operating pressure when it discovered a dent.” (NOPV, A71.)
It then added that “Wolverine received a final ILI report on June 10, 2015” but “claimed a
discovery date of June 26, 2015 and completed repairs on June 30, 2015.” (Id.) In addition,
PHMSA’s follow-on Violation Report listed “the [d]ate the violation started” as June 10, 2015.
(Violation Report, A112.) These documents gave Wolverine sufficient warning that PHMSA
took issue both with the time between the receipt of the ILI report and the repair and with
Wolverine’s failure to implement a pressure reduction during that time. See ECM BioFilms, Inc.
v. FTC, 851 F.3d 599, 618 (6th Cir. 2017) (“Although the complaint does not define ‘reasonably
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 13
short period of time’ as a specific time period, that level of detail was unnecessary to ‘reasonably
apprise’ [the company] of the issues in controversy.”).
Next, Wolverine’s own actions confirm that it understood that PHMSA took issue with
the time between the receipt of the ILI report and the repair. At the agency hearing, Wolverine
tried to pin PHMSA down on the June 26 discovery date. And the parties wrangled over the
discovery date multiple times.5 Also, leading up to this discussion about Wolverine’s claimed
discovery date, Wolverine had a line of questioning about how quickly operators must reduce
pressure when an immediate repair condition is identified.
Again, in its post-hearing recommendation (which Wolverine responded to), PHMSA
took issue both with the time between the receipt of the ILI report and the repair and with
Wolverine’s failure to implement a pressure reduction.
So it is not true that PHMSA shifted its theory from alleging that Wolverine violated the
immediate repair regulation by failing to reduce pressure to alleging that Wolverine violated the
immediate repair regulation by failing to reduce pressure in a timely fashion. Timeliness was an
“ancillary” issue throughout. (Reconsideration Decision, A21.) And at the end of the day,
PHMSA found that Wolverine violated the immediate repair regulation without fixing a
discovery date, without charging Wolverine with a discovery regulation violation, cf. Carlisle
Equip. Co. v. Sec’y of Lab. & Occupational Safety, 24 F.3d 790, 795 (6th Cir. 1994); Yellow
5Wolverine contends that certain exchanges between its counsel and Alexander (a PHMSA investigator)
confirmed that PHMSA didn’t dispute its claimed discovery date. But viewing the transcript as a whole, it’s clear
that’s not the case. (Hr. Tr., A326–27 (Wolverine Counsel: “[The notice] says that Wolverine discovered a dent.
Top line over to the right side. Discovered a dent.” Alexander: “I didn’t say they discovered a dent. I said
Wolverine claims a discovery date.” Wolverine Counsel: “We’ll come to that in a moment . . . .”); Id. at A329
(Wolverine Counsel: “Regarding the statement that Wolverine claimed a discovery date of June 26, 2015, do you
dispute that June 26, 2015, is the date of discovery for this subject condition?” Alexander: “No, I’m not disputing
it. That is per Wolverine.” Later, Wolverine Counsel: “Do you have a dispute with June 26 as the discovery date?”
Alexander: “No.”); Id. at A338–39 (Wolverine Counsel: “Just a couple things inside the violation report . . . .
[T]here is a question, the date of violation started and it says what date.” Alexander: “It says June 10, 2015.” Later,
Wolverine Counsel: “Why did you start that on receipt of the ILI report? Earlier you suggested that the action
needed to be taken — you didn’t suggest. You stated very clearly the actions should occur upon discovery of the
condition. What date was that?” PHMSA Counsel: “Wolverine’s date. That’s what — Wolverine’s discovery date
was June 26.” Wolverine Counsel: “She indicated no dispute with [the 26th].” PHMSA counsel: “Well, there’s no
dispute that Wolverine stated that date [June 26]. That’s what [Alexander’s] indicating.”); Id. at 340–41 (Alexander
states that the violation report didn’t talk about discovery and she “didn’t contest discovery.” Wolverine
Counsel: “That’s right. And the discovery in the NOPV is stated as what date?” Alexander: “Wolverine claimed
the discovery date on June 26.”).)
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 14
Freight, 954 F.2d at 355, 358, and without changing its theory of the case, cf. Bendix Corp. v.
FTC, 450 F.2d 534, 542 (6th Cir. 1971).6
Chenery. Wolverine next invokes Chenery I and Chenery II, arguing that PHMSA
shifted its reasoning on appeal. This matters because agency action “cannot be upheld unless the
grounds upon which the agency acted in exercising its powers were those upon which its action
can be sustained.” SEC v. Chenery Corp., 318 U.S. 80, 95 (1943). Wolverine points to the fact
that, during the agency proceedings, PHMSA acknowledged that discovery played an “ancillary”
part of its immediate-repair regulation analysis and spent much time chastising Wolverine for its
“lackadaisical approach.” (Reconsideration Decision, A20–21.) But on appeal, PHMSA left out
that chastisement, asserting that “any dispute as to when Wolverine discovered the dent that
required repair is orthogonal to the regulatory requirement that Wolverine reduce or shutoff the
pipeline pressure.” (PHMSA Br. at 28.) Wolverine argues these differences in framing require
us to vacate the agency’s order below.
We disagree. Whatever the space between “ancillary” and “orthogonal,” it doesn’t
change our outcome here. Chenery “tells us not to sustain an administrative order on a different
ground from the one the agency offered.” MISO Transmission Owners v. FERC, 860 F.3d 837,
843 (6th Cir. 2017); Chenery Corp., 318 U.S. at 94–95; accord SEC v. Chenery Corp., 332 U.S.
194, 196 (1947). It doesn’t keep this Court from upholding an agency action “on the same basis
articulated in the order by the agency itself.” Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 169 (1962). As the Reconsideration Decision held: “This finding of violation is,
and always has been, squarely focused on the fact that Wolverine never took a pressure reduction
or shut down the pipeline.” (Reconsideration Decision, A21.) And we’ve explained, the
immediate repair regulation tells an operator it “must temporarily reduce the operating pressure
or shut down the pipeline.” 49 C.F.R. § 195.452(h)(4)(i) (emphasis added). Because Wolverine
failed to take either action, PHMSA did not act arbitrarily or capriciously when it determined
6Because PHMSA’s theory of the case did not depend on whether Wolverine violated the discovery
regulation, we decline to address Wolverine’s argument that the discovery regulation’s terms are vague. To the
extent that PHMSA concluded that Wolverine did not act “promptly,” as required by the discovery regulation, that is
dicta, and we need not address it. (Reconsideration Decision, A18–19.)
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 15
Wolverine violated the regulation. This failure formed the core of PHMSA’s decision below,
and it informs our decision now.
IV.
We turn our attention next to Item 6, which concerns PHMSA’s 180-day condition
regulation. Because Wolverine’s repair of two pipeline anomalies exceeded the 180-day limit,
PHMSA found the operator violated the regulation. Wolverine doesn’t contest that its repairs
stretched past 180 days. Rather, it argues that the anomalies didn’t qualify as 180-day conditions
in the first place and that PHMSA’s contrary conclusion was arbitrary and capricious.
It was not. Far from being “arbitrary and capricious,” PHMSA’s Item 6 adjudication
aligned with its front-end flexibility, back-end verification approach to regulation. On the front
end, PHMSA explained that an operator may “run 10,000 different methodologies (provided
those methodologies were proven) — as long as it documented its calculations and relied on
those calculations to devise an implementation strategy.” (Reconsideration Decision, A22.) But
on the back end, PHMSA must be able to verify an operator’s decision-making during an
inspection. This means an operator must “determine what methodologies to use, record its
calculations, and present those calculations to inspectors if called upon to justify [its] conduct.”
(Id.)
Wolverine failed to follow these simple steps. A step-by-step walk through the time
between its receipt of the ILI report and PHMSA’s inspection proves the point. Recall that the
report included both R-STRENG and B31G values. But once Wolverine had the ILI report in
hand, it only ran, recalculated, and relied on the B31G data. Cooper testified as much at the
hearing. (Hr. Tr. at 429 (“Normally in preparing plans, I will use B31G . . . Oftentimes the tool
vendors will provide values based on R-STRENG or the effective area method . . . which while I
don’t doubt those, I don’t have all of the information necessary to assess that, so I take the more
conservative [B31G] report.”).) And Wolverine’s repair plans tell a similar tale. They flagged
the anomalies as 180-day conditions under B31G. (See JO-KA Repair Plan 10/19/2015, A148
(explaining Cooper ran “the modified ASME B31G calculations” and found the four anomalies
qualified as 180-day conditions); see also Hr. Ex. 35: JO-KA Repair Plan Summary, A627.)
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 16
Although the ILI report listed the raw R-STRENG values, Wolverine did nothing with that data.
Indeed, during the inspection, Wolverine presented no documents that showed use of the
R-STRENG values would lead to a different conclusion. As a result, PHMSA’s Notice faulted
the operator for missing the 180-day deadline for a few of its repairs. Wolverine admitted as
much when it responded. But at the agency hearing, the operator changed its tune. There,
Wolverine produced a chart that incorporated the R-STRENG values and showed the anomalies
didn’t qualify as 180-day conditions under that method. PHMSA weighed this new evidence
along with the rest and found Wolverine violated the regulation. “Operators may not,” it
explained, “rely on one calculation method, devise an implementation strategy and repair plan
deadlines, then when presented with an allegation of violation four years later, run different
calculation methods.” (Reconsideration Decision, A22.)
This decision was neither arbitrary nor capricious. PHMSA “examine[d] the relevant
data,” including Wolverine’s last-minute R-STRENG calculations, and “articulate[d] a
satisfactory explanation for its action.” State Farm Mut. Auto. Ins. Co., 463 U.S. at 43. What’s
more, when viewed through the lens of PHMSA’s collaborative regulatory approach, its decision
was reasonable. On the front end, Wolverine received two sets of values: One B31G, the other
R-STRENG. Then, it documented, recorded, and relied on only one of those “[s]uitable
remaining strength calculation[s]”—the B31G method—to classify the anomalies as 180-day
conditions. 49 C.F.R. § 195.452(h)(4)(iii)(D). On the back end, PHMSA assessed Wolverine’s
own record and determined the operator missed the 180-day deadline. Because that record
omitted any R-STRENG calculations or statements that would have shown otherwise, we cannot
say PHMSA’s decision was arbitrary or capricious.
Wolverine pushes back against this holding in three ways. First, it contends that
PHMSA’s decision relied on a mistake of fact. To make its case, it points to a single footnote in
PHMSA’s Reconsideration Decision. It provided: “The evidence presented here is strong—and
supports the allegation that the Petitioner solely ran (and relied) on the B31G calculation
methodology.” (Reconsideration Decision, A23 n.20). Wolverine asserts this statement shows
PHMSA erroneously concluded “that the ILI vendor did not provide Wolverine with the
R-STRENG values.” (Wolverine Br. at 50.) We disagree. Neither the Final Order nor the
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 17
Reconsideration Decision assume or find that Wolverine received only B31G values from its ILI
vendor. Instead, PHMSA’s analysis focused on what Wolverine did with the ILI values. Here,
the record shows Wolverine only used, confirmed, and relied on the B31G values during the time
leading up to the 2017 inspection. It was only during the 2019 hearing that Wolverine gave
PHMSA R-STRENG data suggesting a different result. It follows that PHMSA did not premise
its decision on a “factual error.” (Id. at 49.) Although Wolverine received both R-STRENG and
B31G values from the ILI vendor, the record showed it “solely ran (and relied) on the B31G
calculation methodology.” (Reconsideration Decision, A23 n.20.)
Next, Wolverine asserts that PHMSA’s reading of the regulation “cannot be squared
with” its “plain language,” which says “nothing about holding operators to an ‘upfront choice
between calculation methods.’” (Wolverine Br. at 51 (quoting Final Order, A7.).) But this
argument selectively quotes the record to misstate PHMSA’s position. True, PHMSA’s Final
Order offered: “[W]hile the regulation offers the upfront choice between calculation methods, an
operator is held to its choice.” (Final Order, A7.) But its Reconsideration Decision elaborated,
explaining that an operator could run “10,000 different methodologies” as long as PHMSA could
check the work and follow the decision-making process. (Reconsideration Decision, A22.)
Contrary to Wolverine’s assertions, this position is not “founded on an unsupportable
interpretation of” the regulation. (Wolverine Br. at 50.) Rather, like the regulation, it allows
operators to use any number of “[s]uitable remaining strength calculation methods”
when deciding whether they have a 180-day condition on their hands. 49 C.F.R.
§ 195.452(h)(4)(iii)(D). Here, Wolverine ran and used one calculation, B31G, to classify its
pipeline anomalies as 180-day conditions. PHMSA’s decision, which assessed Wolverine’s data
based on the one calculation it ran, is not contrary to the regulation’s text.
Last, Wolverine laments that PHMSA’s decision will “deter[] operators from going
beyond the regulatory minimum standard of care.” (Wolverine Br. at 28.) We do not share its
concern. PHMSA only objects to post-hoc rationalizations. As noted above, PHMSA explained
that “[i]f Wolverine had evidence that it conducted two (or more) analyses when first making its
determinations,” the outcome here would change. (Reconsideration Decision, A22–23.) But
such evidence must be available during the agency inspection. Any other course, in the
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 18
PHMSA’s view, would “undermine pipeline safety” by “effectively permit[ting] an operator to
avoid regulatory scrutiny by invoking after-the-fact [] methodolog[ies] that PHMSA could not
evaluate during routine inspections.” (PHMSA Br. at 38, 40.)
Two takeaways follow. First, in the future, a savvy operator should run alternative
calculations before, not after, PHMSA knocks at its door. And next, dueling notions of safety
and deterrence lie in PHMSA’s domain, not ours. So to the extent Wolverine believes another
approach would better achieve PHMSA’s desired policy outcomes, its argument “is one for
resolution by [PHMSA].” Lake Bldg. Prods., Inc. v. Sec’y of Lab., 958 F.3d 501, 506 (6th Cir.
2020).
V.
For these reasons, we deny Wolverine’s petition for review.
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 19
_________________
DISSENT
_________________
ALICE M. BATCHELDER, Circuit Judge, dissenting. I believe that Wolverine used
sound judgment in compliance with the regulations, whereas the Agency concocted after-the-fact
excuses for its contrived rulings. I refuse to condone the Agency’s conduct.
Item 5. On June 25, 2015, Daniel Cooper, Wolverine’s Risk and Integrity Specialist, was
reading an apparently routine In-Line Inspection (ILI) Report from a contractor and came across
a surprising item about the contractor’s discovery of a worrisome dent in the pipeline.
According to the Report, the contractor had discovered the dent during a regular pipeline
assessment back in April, but had not immediately called or emailed Cooper or the local
operations engineer to alert Wolverine. Instead, the contractor just wrote it into the Report and
emailed that Report to Wolverine over two months later, on June 10, without any indication of an
emergency condition that would require immediate response. When Cooper read about the dent,
however, he immediately called the contractor for confirmation and clarification, called
Wolverine personnel working that portion of the pipeline for information, and scheduled a
conference call with consultants, contractors, and Wolverine personnel for the next morning,
June 26.
Thus, on June 26, Wolverine found that the dent presented an emergency-repair situation.
And Wolverine determined that the safest and most expedient means of resolving that potentially
hazardous situation was to repair the dent immediately, without the unnecessary delay of shutting
off the pipeline and reducing the pressure. Wolverine completed the repair of the pipeline dent
four days later, on June 30, without incident. By any practical measure, this was a success.
But not according to the Agency. The Agency fined Wolverine $28,000 for violating
certain regulations by failing to shut off the pipeline and reduce the pressure. During the
administrative hearing to adjudicate the violation, Wolverine argued that it discovered the dent
on June 26 and promptly repaired it on June 30, in compliance with the regulations. The Agency
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 20
did not dispute that argument at the hearing, but later insisted in its post-hearing briefing that
Wolverine discovered the dent on June 10 when its contractor emailed the ILI Report.
In his opinion, the Agency Administrator acknowledged that “Wolverine [had] capably
argued that, even when a condition is identified as an immediate repair, a pressure reduction
cannot be implemented immediately. There are a number of intervening steps that an operator
must take to capably and safely implement a pressure reduction.” Therefore, if the discovery
date were June 26, then a repair by June 30 meant that Wolverine satisfied the requirement that
“[r]epairs must be made as soon as practicable.” But the Administrator instead accepted the
Agency’s post-hearing claim that the discovery date was June 10 and found that “the time that
elapsed” between June 10 and June 30 “was too long and did not meet the regulatory standard”
for an immediate repair. The Administrator held Wolverine in violation of the regulations and
imposed the fine.
There is no honest dispute that Wolverine actually discovered the hazard on June 26 and
repaired it within days, or whether that was the basis of Wolverine’s defense at the hearing. The
most that the Agency and its Administrator can contend is that Wolverine should have
discovered (constructively discovered) the existence of the hazard on June 10, when the
contractor sent the IRI Report email. While that seems reasonable enough, and fits the Agency’s
and Administrator’s desired outcome in this case, I question whether that is the law. Certainly,
the opinion points to no regulation or rule to support that view. In fact, Wolverine might have
constructively discovered the existence of the dent in April, when its agent (contractor)
discovered it, or maybe Wolverine should have, with due diligence, discovered it even earlier—I
saw nothing in the record to establish how or when the dent actually happened. The point is that
the question of when Wolverine should have discovered, or constructively discovered, the dent
became the determinative question in the adjudication, but Wolverine was never told that
question was at issue and, in fact, was led to believe that it was not. So Wolverine had no
opportunity to be heard on the facts or circumstances of that question. I cannot agree that
satisfies Wolverine’s right to notice and fair hearing.
Item 6. In April 2015, in a different part of the pipeline, a Wolverine contractor
performing an integrity test pursuant to the regulations, conducted the test twice using two
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 21
different methods: once with a method named B31G and once with a method named R-
STRENG. Both methods are specifically approved in the regulations. Under the more
conservative B31G method, the contractor identified four suspect locations requiring further
inspection and repair within 180 days of discovery. Under the more lenient R-STRENG method,
however, those same locations passed the testing and required no further investigation.
Wolverine could have relied solely on the R-STRENG results and taken no further action at
these locations. But it did not. Instead, Wolverine conducted further assessments using B31G,
prepared repair plans, and conducted repairs. By any practical measure, this was a commendable
approach to pipeline maintenance and safety.
But not to the Agency. The Agency fined Wolverine $37,000 for failing to complete its
voluntarily undertaken repairs within 180 days at two of those four locations. Wolverine argued
that, because the locations passed the R-STRENG test, there was no 180-day-repair requirement
and, therefore, no violation. The Agency answered that the R-STRENG test was irrelevant
because Wolverine had elected to use the B31G results to pursue the follow-up assessment and
repair.
In rendering his decision, the Administrator added this oddity: “while the regulation
offers the upfront choice between calculation methods, an operator is held to its choice of
calculation methodology.” But the regulations do not require any “choice”—“upfront” or
otherwise—nor do the regulations suggest, much less state, anything whatsoever about
the operator’s being forever “held to that choice.” The pertinent regulation says only: “Suitable
. . . test methods include, but are not limited to, [] B31G and [] R-STRENG.” 49 C.F.R.
§ 195.452(h)(4)(iii)(D).
This is not an issue of “interpretation”; this is the Agency’s adding a requirement (i.e., an
upfront choice) that is not contained in the regulation at all. In rejecting Wolverine’s motion to
reconsider, the Administrator opined that “it would be perfectly permissible for [Wolverine] to
run 10,000 different methodologies (provided the methodologies were proven)—as long as it
documented its calculations and relied on those calculations to devise an implementation
strategy,” but Wolverine “may not rely on one calculation method [to conduct proactive,
voluntary assessment and repair], then when presented with an allegation of violation years after
No. 21-3405 Wolverine Pipe Line Co. v. DOT, PHMSA Page 22
the fact, [use those] alternative calculations as a defense.” The Administrator does not offer any
justification for this ipse dixit proclamation. Nor does he explain why it is appropriate for the
Agency to raise “an allegation of violation years after the fact,” concerning an operator’s
voluntary repairs, but inappropriate for the operator to respond to that unexpected allegation by
producing the evidence that informed its years-ago decision.
There is no honest dispute that Wolverine tested its pipeline using the R-STRENG, in
complete compliance with the regulations, and the pipeline passed the test. At the time,
Wolverine also tested the pipeline using B31G and when four locations failed that test,
Wolverine proactively and voluntarily undertook a precautionary assessment and repair in full
compliance with all regulations. As a practical matter, this was not only appropriate, it was
commendable. So, when the Agency showed up four years later imposing a $37,000 fine for
Wolverine’s failure to complete all of its voluntary repairs within 180 days, why is Wolverine
prohibited from demonstrating that the repairs were not required at all, much less within 180
days, based on the R-STRENG results? I cannot agree that satisfies Wolverine’s right to notice
and a fair opportunity to be heard.
I would vacate the order. Because majority sees it differently, I respectfully dissent.