Overview
On June 29, 2016, the Federal Energy Regulatory Commission (FERC) issued Order No. 826,1 an interim final rule adjusting the amount of civil penalties FERC may assess under the Federal Power Act (FPA), Natural Gas Act (NGA), and the Interstate Commerce Act (ICA).2 The order was issued pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,3 and represents the first time civil penalties under the ICA have been increased since the Congress established civil monetary penalties for ICA violations in 1910 and the first time since the Energy Policy Act of 2005 fines have increased for violations of the FPA or NGA. Fines for violations of those two provisions increased to $1,193,970 per day per violation; ICA adjustments are discussed in detail below. Oil pipeline operators, which are regulated under the ICA and are subject to FERC jurisdiction, are encouraged to take note of this recent development.
Pursuant to Order No. 826, civil penalties have been increased for Section 6(10) of the ICA, Section 16(8), Section 19a(k) and Section 20(7)(a). The chart below highlights the relevant sections, the conduct covered by section, the previous penalty the Commission could impose and the revised penalty.
| ICA Section | Conduct Covered by Section | Previous Penalty | Revised Penalty |
| Section 6(10) | Imposes a civil penalty on oil pipeline operators for failure or refusal to comply with regulations or orders issued by the Commission concerning the posting and filing of rate schedules | $500 per offense and $25 per day after the first day | $1,250 per offense and $62.50 per day after the first day |
| Section 16(8) | Imposes a civil penalty on oil pipeline operators for knowing or neglectful failure to comply with Commission orders under Sections 3, 13, or 15 of the ICA | $5,000 per offense, per day | $12,500 per offense, per day |
| Section 19a(k) | Imposes a civil penalty on oil pipeline operators for failure to comply with requirements to provide information, or access, in connection with the Commission’s valuation of a pipeline carrier’s property under Section 19(a) | $500 per offense, per day | $1,250 per offense, per day |
| Section 20(7)(a) |
Imposes a civil penalty on oil pipeline operators for failure to keep or submit certain accounts, records, or |
$500 per offense, per day | $1,250 per offense, per day |
Importantly, under Order No. 826 oil pipelines found in violation of any of the above sections are subject to the revised penalty regardless of the date on which the violation occurred.4 Moreover, pursuant to the statute FERC must update the revised penalty amounts on an annual basis every January 15th.5 Subsequent adjustments will be based on year-to-year inflation.
If you have any questions regarding this new FERC rule or would like to further discuss compliance issues, please contact oil pipeline partners Steven Reed, Steven Brose and Daniel Poynor, or FERC enforcement defense partners Daniel Mullen and Charles Mills.
[1] 155 FERC ¶ 61,320 (2016).
[2] 49 App. U.S.C. 1 et seq. (1988).
[3] Sec. 701, Pub. L. 114-74, 129 Stat. 584, 599.
[4] See Order No. 826 at P 7.
[5] 28 U.S.C. 2461 note, at § (4).
