in-aid payments mandatory, to extend the time for State compliance with the act's requirements concerning sanctions, and to require a prompt study of the amount of grants-in-aid needed for the succeeding fiscal years. I am appending further remarks (attachment III) adapted from the prepared testimony of George I. Bloom, past president of the National Association of Regulatory Utility Commissioners and Chairman of the Pennsylvania Public Utility Commission, before the House Subcommittee on Communications and Power of the Committee on Interstate and Foreign Commerce, concerning State judicial sanctions and improvements to the grants-in-aid program. This concludes my formal presentation, Mr. Chairman. (Attachments follow :)

ATTACHMENT I

RESOLUTION RE SAFETY OF INTERSTATE PIPELINES

Whereas the United States Department of Transportation has issued regulations, effective November 12, 1970, establishing nationwide standards concerning the safety of interstate pipeline; and

Whereas such standards were promulgated over the vigorous objection of State agencies that they were weak and inadequate, and fell below the requirements of a number of the States, in particular because they failed to require either odorization or cathodic protection; and

Whereas the Natural Gas Pipeline Safety Act purports to preempt the States from imposing more rigorous standards, despite the fact that such standards are denominated as "minimum standards," and thus raises a grave constitutional question as to the police powers of the States with respect to safety; and

Whereas the inadequacy of the Federal standards imposes serious risks of catastrophes, especially where pipelines traverse heavily populated areas; and Whereas the National Association of Regulatory Utility Commissioners has historically taken the position that the Federal standards should be minimum standards and that the States should be free to impose stricter standards as required by local condiions: Be it

Resolved, That the National Association of Regulatory Utility Commissioners recommends and endorses the following actions:

(1) That the Department of Transportation be urged to revise its said regulations so as to protect the public safety, particularly with regard to odorization and cathodic protection;

(2) That NARUC supports the action of any State or States which challenge the validity of the said regulations in depriving the States of the right to require a higher degree of safety protection than afforded by the Federal standards;

(3) That NARUC attempt to secure an amendment of the Natural Gas Pipeline Safety Act which would make clear that the Federal standards do not preempt the States from requiring higher standards of pipeline safety; and

(4) That copies of this resolution be sent to the Secretary of Transportation and to the respective chairmen of the Senate and House Commerce Committees of the Congress of the United States.

Adopted November 19, 1970, by the Eighty-second NARUC Annual Convention.

ATTACHMENT II

PROPOSED AMENDMENT TO NATURAL GAS PIPELINE SAFETY ACT TO RESTORE AUTHORITY OF STATES TO REGULATE SAFETY OF INTERSTATE GAS PIPELINES

The Natural Gas Pipeline Safety Act of 1968 is amended as follows in order to restore to the States their authority to regulate the safety of interstate gas pipelines:

Strike the phrase "not subject to the jurisdiction of the Federal Power Commission under the Natural Gas Act" in the last sentence of section 3 (a),

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in the last sentence of section 3(b), the first sentence section 5(a), twice in the first sentence of section 5(b), in the first sentence of section 5(d), and in the first sentence of section 11.

In section 3 (a) strike the phrase at the end of the section: "but may not adopt or continue in force after the interim standards provided for above become effective any such standards applicable to interstate transmission facilities".

In section 3 (b) strike the phrase at the end of the section: "but may not adopt or continue in force after the minimum Federal Safety Standards referred to in this subsection become effective any such standards applicable to interstate transmission facilities".

In the fourth sentence of section 3 (e) insert at the end of the phrase "the Secretary objects in writing to the granting of the waiver" the following: "as incompatible with the Federal minimum standards".

In section 5(a), item (2), insert after "has adopted each Federal Safety Standard" the following: "or more stringent standards".

In the second sentence of section 10 (a) change "an action" to a "Federal action".

ATTACHMENT III

FURTHER REMARKS ON COURT SANCTIONS AND GRANTS-IN-AID, ADOPTED FROM THE TESTIMONY OF GEORGE I. BLOOM, FORMER PRESIDENT OF NARUC AND CHAIRMAN OF THE PENNSYLVANIA PUBLIC UTILITY COMMISSION, ON MARCH 9, 1971, BEFORE THE HOUSE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE SUBCOMMITTEE ON COMMUNICATIONS AND POWER, H.R. 5065

Court Imposed Injunctive and Monetary Sanctions

One facet of Section 5(a) (4) of the Act [49 U.S.C.A., Sec. 1674(a) (4)] has created a conflict of interpretation between the State agencies and the Office of Fipeline Safety of the Department of Transportation. Section 5(a) provides, as one of the conditions for State certification, that:

"... the law of the State makes provision for the enforcement of the safety standards of such State agency by way of injunctive and monetary sanctions substantially the same as are provided under sections 9 and 10; except that a State agency may file a certification under this subsection without regard to the requirement of injunctive and monetary sanctions under State law for a period not to exceed two years after the date of enactment of this Act." (Emphasis supplied.)

1

The Office of Pipeline Safety has interpreted the phrase "substantially the same as" to mean that a state agency itself must possess the authority to fix and compromise penalties against gas companies committing safety violations.

Traditionally, many States have reserved such authority for exercise by the judiciary and not regulatory agencies. This certainly appears to be a permissible policy decision when we consider that the judiciary is the ultimate guardian of the rights of the people and that some State agencies may not be appropriately staffed for this function.

Irrespective of the enormous responsibility placed upon the judiciary under our system of government, and the excellent record it has made in meeting this responsibility since the establishment of our government, the Office of Pipeline Safety has determined that the judicial fixing of penalties is inadequate.

Many States have attempted to change their laws to conform with DOT's interpretation during the two year period specified in Section 5(a) which expired on August 12, 1970. However, thus far the Office of Pipeline Safety has determined that the laws of only 38 States, the District of Columbia and Puerto Rico satisfy its imaginative interpretation regarding monetary sanctions and other requirements. It has determined that the laws of the following 12 jurisdictions are inadequate and, therefore, require amendment: Connecticut, Delaware, Hawaii, Louisiana, Massachusetts, Minnesota, Nebraska, New Jersey, North Dakota, Ohio, Pennsylvania and Rhode Island.

Furthermore, we believe that the legislative history of the Natural Gas Pipe

1 The Act was signed by the President on August 12, 1968.

line Safety Act indicates the acceptability of judicially imposed monetary sanctions for certification purposes.

When S. 1166 (90th Cong.) passed the Senate and was referred to the House Committee on Interstate and Foreign Commerce on November 13, 1967, Section 5(a) provided that the primary means of State participation under the Act would be by means of an agreement entered into between a "State agency" and the Secretary of Transportation. Section 5(a) provided in part that "No such agreement may be concluded with any State agency which does not have the authority (i) to impose the sanctions provided under sections 9 and 10. . .". Section 9 provided for a maximum civil penalty of 1,000 dollars for each day a violation continued with a maximum penalty of 400,000 dollars for a related series of violations.

The NARUC testified before this Subcommittee on S. 1166 and related bills on February 27, 1968. In Appendix B (pp. 7-8) to its written statement filed with the Subcommittee on that day, the NARUC pointed out that:

"Section 5(e) further provides that the Secretary cannot contract with a State commission which does not have the authority to impose a civil penalty of $1,000 per day violation and to enjoin violations. Most, if not all, of the State commissions do not possess such authority, and it is doubtful if most could be so authorized because State constitutions frequently reserve such judicial remedies for exclusive exercise by the courts.

"Consequently, we recommend that Section 5(e) be amended to include sanctions imposed by both State commissions and courts and, further, that where State law does not permit the imposition of such sanctions an agreement may nevertheless be executed with the understanding that the civil penalty and injunctive relief prescribed by S. 1166 would have continued application in the State."

These views were reiterated in a letter of the NARUC General Counsel, dated March 19, 1968, which responded to a letter from the Chairman of the Subcommittee inquiring as to the State agencies, if any, which were empowered to impose the civil penalty sanctions referred to in Section 5(a) (3) (i) of S. 1166. The text of this letter is reported in the Hearings before the Subcommittee on Natural Gas Pipeline Safety, 90th Congress (Serial No. 90–28), p. 336.

The House Committee on Interstate and Foreign Commerce on May 15, 1968, favorably reported S. 1166 with amendments. House Report No. 1390, 90th Congress. The Committee version of S. 1166 passed the House without amendment. The House version of S. 1166 revised Section 5(a) to establish the "certification" concept as the primary means of State participation under the Act. More specifically, the revised Section 5(a) provided that the Act generally would not apply to intrastate facilities within a State when the safety standards applicable to them are regulated by a "State agency" which:

". . . submits to the Secretary an annual certification that such State agency (1) has regulatory jurisdiction over the safety standards and practices such pipeline facilities and transportation of gas; (2) has adopted each Federal safety standard applicable to such pipeline facilities and transportation of gas established under this Act as of the date of the certification; (3) is enforcing each such standard; and (4) has the authority to require record maintenance, reporting, and inspection substantially the same as are provided under section 12 and the filing for approval of plans of inspections and maintenance described in section 11; and that the law of the State makes provision for the enforcement of the safety standards of such State agency by way of injunctive and monetary sanctions...." (Emphasis supplied.)

Obviously, a comparison of this language with the Senate version of Section 5(a) demonstrates that the House intended that judicially imposed penalties would be acceptable for certification purposes.

This conclusion is supported by the following comment from House Report No. 1390, pp. 28-29:

"In the course of the hearings before the committee it was pointed out that whereas a condition precedent to a written agreement was that the State agency has authority to impose the penalties provided under section 9 and seek the injunction relief provided by section 10, must State agencies did not have such authority as to penalties, although most of them could seek enforcement through injunctions (see app. B). It thus appeared that some amendment to section 5(a) must be made if any such State enforcement program were to be initiated.

...

"In the bill as reported, the committee incorporates the results of its consider. ation of the need to amend the agreement conditions and alternative proposal. "The language adopted by the committee indicates a reaffirmation of the intent that State law and State enforcement replace the Federal law for local facilities where the State agency has undertaken conscientiously and effectively to adopt and enforce the Federal standards."

66

Upon consideration of S. 1166 by the Conference Committee (House Report No. 1795, p. 12, 90th Congress) the conferees agreed upon a substitute which: retain the certification procedure of the House amendment but provides that there be a condition precedent to State agency certification; namely that the law of the State make provision for injuntive and monetary sanctions "substantially the same as are provided under section 9 and 10." The conference substitute also adds a provision that a State agency may file a certification without regard to the requirement of injunctive and monetary sanctions under State law for a period of not more than 2 years after the date of enactment of this legislation."

The substitute version of S. 1166 was enacted by the Congress and signed by the President on August 12, 1968.

Since the Conferees adopted the House language stating that "the law of the State makes provision for the enforcement of the safety standards of such State agency by way of injunctive and monetary sanctions . . ." (which encompassed the judicial imposition of sanctions), rather than reverting to the original Senate language which required that the State agency itself must possess the authority to impose such sanctions, we believe that the Congress clearly intended that judicially imposed sanctions would be acceptable for certification purposes.

We believe that the language added by the conferees to require that the State sanctions must be "substantially the same as provided under sections 9 and 10," was merely to insure that the level of penalties between the Federal and State laws would be substantially the same.

If a State agency is to be de-certified under the Act, we believe it should be for substantial cause such as its inability to effectively enforce the Federal minimum safety standards. To de-certify a State agency on frivolous grounds, such as for judicially imposed penalties, could easily mean a loss of effective State programs. Such a loss to public safety would be intolerable under any circumstances, and especially now when the Office of Pipeline Safety has a national field force of only two engineers based in Houston, Texas; the entire Office of Pipeline Safety includes only 21 professional and 7 clerical personnel.

In view of these considerations, the NARUC believes that the interpretation adopted by the Office of Pipeline Safety, which is contradicted by the legislative history, is bad policy because it minimizes the time-honored judicial role and because it will seriously impair the Federal-State safety program intended by the Congress."

Accordingly, we respectfully urge that the Natural Gas Pipeline Safety Act be amended in the manner proposed in S. 1910 to clarify the Congressional intent as to the appropriateness of the judicial fixing of penalties for safety violations. Modification of Grant-in-Aid Program

We believe that Section 5(c) of the Act should be amended to modify the administration of the 50-50 matching grant-in-aid program to assist the State commissions in their safety regulation. As a result of the timing of the State commission's application for funds and the calendar year basis of the existing grant-in-aid program, most State commissions will not know the amount of Federal funds they are entitled to receive in any year until after their State legislatures have made appropriations for that year. Under these circumstances, a State legislature could easily fail to appropriate sufficient State funds to fully match the Federal funds apportioned to the State and hence the unmatched part of the apportionment would lapse.

Enactment of the amendment set forth in Section 4 of S. 1910 would permit Congressional authorization of a specific amount of funds for a given fiscal year to be apportioned among the several States well in advance of such fiscal year. Under this concept, the Federal authorizing legislation would be enacted during

2 Such an amendment is supported by the resolution adopted by the NARUC Executive Committee on July 22, 1970 (NARUC Bulletin No. 31-1970, p. 5). The text of the resolution is set forth in Appendix A to this Statement.

an even-numbered year, and the apportionment of funds to the States would be made before the close of that even-numbered year, so that the State legislatures (the vast majority of which meet during the odd-numbered years) would know the amount of State funds needed to match the apportioned Federal funds. The Federal-aid highway program is an outstanding example of the application of this concept.

The proposed amendment also contains a "contract authority" provision which means that when the Secretary of Transportation approves the gas safety program of a State commission, such approval "shall be deemed a contractual obligation of the Federal Government for the payment of its apportioned contribution thereto."

The provision of adequate and timely financial assistance to State agencies, on a matching basis, will reduce the need for establishing a large Federal field staff and thereby permit the Congress to implement its national safety program for far less than what it would otherwise cost for the Federal Government to assume the entire financial burden. In other words, the use of matching funds would in effect pull State money into a Federal program.

APPENDIX A

RESOLUTION RE GAS SAFETY

Whereas in 1968 Congress enacted the Natural Gas Pipeline Safety Act of 1968, Public Law 90-481, 82 Stat. 720; and

Whereas by its terms said Act does not apply to facilities and the transportation of gas within a State when the safety standards are regulated by a State agency which annually certified to the Secretary of Transportation the matters and things set forth in the Act; and

Whereas many States have been unable to meet certification requirements within the time limits prescribed in the Act; and

Whereas the Department of Transportation in recognition of said fact is sponsoring legislation (S. 3763 and H.R. 17335) now before Congress which would extend the deadline for State compliance from August 12, 1970, to August 12, 1971; and

Whereas a State desiring to preserve its regulatory jurisdiction over safety standards and practices of pipeline facilities and transportation of gas within the State must, among other things, certify that the law of the State makes provision for the enforcement of State standards by way of injunctive and monetary sanctions "substantially the same as" provided in Sections 9 and 10 of the Act; and

Whereas the Department of Transportation has formulated the legal opinion that in order to meet the substantial similar tests set forth in the Act the State must vest the authority to impose monetary sanctions in the administrative agency charged with regulating gas safety as distinguished from the judiciary; and

Whereas certain State regulatory agencies are prohibited, either by constitutional limitations, by statute, or by judicial decision, from fixing and determining monetary sanctions, but instead must resort to the courts for such enforcement; and

Whereas the opinion of the Department of Transportation would appear to be a forced and erroneous construction of the Act, contrary to the intent of Congress to effect a workable Federal-State partnership in the matter of gas safety enforcement: Be it therefore

Resolved, That the Executive Committee of the National Association of Regulatory Utility Commissioners, having reviewed the proposed amendment to the Natural Gas Pipeline Safety Act of 1968 to extend the date for State compliance to August 12, 1971, as contained in S. 3763 and H.R. 17335, 91st Congress, hereby concurs in the objectives of these amendments; and

a The proposed amendment, regarding the modification of the grant-in-aid program, formed a part of the NARUC proposed Natural Gas Pipeline Safety Act Amendment of 1969 which was introduced in the Ninety-first Congress as S. 1919 by Magnuson (D.-Wash.) and H.R. 12151 by Rooney (D.-Pa.). Representative Rooney on February 2. 1971, reintroduced this legislation in the Ninety-second Congress as H.R. 3324. Senator Magnuson on May 18, 1971, reintroduced the legislation as S. 1910.