Keynote Remarks
Managing Through a Crisis: Energy Transition and Upheaval
Washington, DC
October 12, 2022

Good afternoon.  Thank you for that introduction, for putting together such a thoughtful program, and for the honor of being able to share some thoughts with this esteemed group today.

The topic at hand today and the tremendous program that you have over the course of the conference underscores the increasingly rapid pace of change in the energy (and transportation sectors). And for me, the solution that has often eluded the private sector, the government, and other stakeholders—is radical transparency.

But before I get too far into the discussion today, I presume there are at least a few people in the room who may not be intimately familiar with the work of the Pipeline and Hazardous Materials Safety Administration (or “PHMSA”). Our agency, formerly known as the Research and Special Programs Administration, was established within the Department of Transportation, with a focus on overseeing the safe transport of hazardous materials—through pipelines and via other modes of transportation—including planes, trains, trucks, vessels, and automobiles. Since then, the agency and its responsibilities have expanded significantly.

In that vein, we oversee the safe design, operations, and maintenance of our nation’s nearly 3.3 million miles of oil, gas, and other hazardous materials pipelines including hydrogen, carbon dioxide, and other emerging fuels. Our oversight of hazardous materials via other modes includes nearly 1 in 10 goods that are transported in the U.S.—everything from nuclear waste, to lithium ion batteries, to explosives used in excavation, mining, and energy production—and in this space, we also chair the international standards making body for the transport of these materials at the United Nations. 

Since the beginning of last year, under Secretary Buttigieg’s leadership, PHMSA has been focused on executing bipartisan congressional mandates in the PIPES Act of 2020, historic infrastructure investments that came out of the Bipartisan Infrastructure Law of 2021, maintaining and strengthening our safety mission, and ensuring the U.S. maintains the most efficient and competitive transportation system in the world. To this end, PHMSA has been integral to the whole-of-government approach to mitigating unnecessary greenhouse gas emissions—an essential component of operating the most efficient and competitive transportation and energy system of the 21st century.  

In the United States, nearly 2/3 of the energy we consume is transported via pipeline; and I am proud of PHMSA’s important role in contributing to the trend of pipeline safety, which has been improving in recent years.

This is particularly impressive because over the past few decades, growth in energy production in the United States has increased to record levels. Concurrently, U.S. transportation of these products has necessarily increased, and exports of energy have—according to the Energy Information Administration—also reached record levels. This has placed new and heightened demands on our nation’s 3 million miles of pipelines, natural gas and refined products storage infrastructure, as well as export facilities, such as LNG terminals, which PHMSA also regulates. 

From the standpoint of the volume of work before us, the challenges in carrying out our safety mission have never been greater. We oversee an aging infrastructure that is not easily maintained or replaced. Indeed, most of the cross-country infrastructure was built shortly after WWII—meaning many pipelines are over 80 years old.  There are even still a few operating gas distribution segments installed during the Civil War, over 150 years ago.

The bipartisan PIPES Act of 2020 significantly strengthened PHMSA’s jurisdiction to include the minimization of the public safety and environmental risks from all methane emissions across all of our regulated entities. PHMSA’s implementation efforts here are being undertaken while the number of entities under PHMSA’s jurisdiction has been increasing at a steady pace. For example, as of this year, PHMSA now has jurisdiction of nearly 400,000 miles of additional “gas gathering” pipelines—largely built out as a result of the fracking boom that began in the 2000s but remained unregulated at the Federal level until this past year. On the hazardous materials side of the agency, PHMSA regulates the safe transport of lithium batteries—which have also seen exponential growth in recent years—but which also pose new safety and environmental challenges; and we regulate the transportation of hydrogen—by truck, train, plane, and vessel—which is seeing a tremendous upswing in investment from nearly every sector of the economy. 

Back to the heart of today’s topic of discussion—a tremendously important and thoughtful prompt— “Managing Through a Crisis: Energy Transition and Upheaval.” PHMSA has had a fair amount of experience and focus on crises—and we have been very busy preparing for the transition. Over the last few years, we’ve had one of the largest pipeline systems in the country abruptly shut down due to a cyberattack—reducing access to fuel to nearly 70 million Americans; we’ve had the second largest LNG exporter abruptly shut down; and we had the most significant carbon dioxide pipeline incident occur in the United States.

Like many government agencies at all levels, PHMSA’s increasingly outsized role—dealing with major challenges and crises across the energy sector--has required us to do much more with an amount of resources that have not seen a commensurate increase (at least from an operations standpoint, i.e., excluding our grant programs).  

Similarly, the entities that we regulate face similar challenges of doing more, often without a commensurate increase in their budgets. Our regulated communities similarly face an increasing pace of new industry standards, government regulations, workforce challenges, and a market that is demanding additional transparency and performance that includes taking into account public impacts. Specifically, as most in the room are aware, investors are increasingly demanding additional disclosures and considerations of information such as publicly traded companies’ environment and social government (ESG) plans. Regulated entities are not only having to develop and constantly update and execute ESG plans but also respond to increased demands from customers who are also facing similar ESG planning and reporting pressures. This is a sort of “trickle-up” transparency that’s making major waves—not just in the energy and transportation sectors, but nearly every sector of the economy.

I emphasize the pace of these aforementioned changes because they are a major challenge for government regulators and the regulated sector alike. As I understand it, this new pace has provided a lot of you in this room with substantial job security and kept you very busy. I’d say “you’re welcome” but it is actually the public that deserves the credit here. The public is demanding more and better results and that is unlikely to change anytime soon—despite what some politicians have recently called for. We are all expected—and rightly so—to demonstrate improved safety performance while also producing improved social and environmental impact performances.  

Now I hear frequently from trade associations and the leaders of their member companies—particularly leaders in the midstream space—that the pace of change, particularly on the regulatory front has been too fast. I hear that in conversations, but I also read that in legal briefs filed in court. 

That it takes time to implement new regulations is of course not new. But from my perspective, in this day and age, waiting to see what government regulations will be—particularly final regulations (vs. a yet-to-be-proposed regulation), is increasingly an outdated way of operating—and certainly comes with its own risks. In the last year, PHMSA finalized three significant rulemakings that were more than a decade in the making. All of which were proposed more than five years ago and all of which—in keeping with the requirements of the Administrative Procedures Act—substantially tracked their proposed versions. 

Last week, I was listening to one of my favorite pipeline podcasts—hosted by Russel Treat. My old friend, colleague, and sometimes antagonist, Keith Coyle, was on the show—as he often is—talking about a new PHMSA rulemaking. He noted that in recent years there was a lot of “waiting around” for regulations to be promulgated, but now—to paraphrase, “regulations are coming out at a nearly unprecedented pace.” This struck me because the “unprecedented pace” is way slower than the allotted time Congress has given our agency to finalize these rulemakings—and it made me wonder, “how long does a proposed regulation have to be hanging out in the ether before people start to take action in preparation of the rule being finalized?” It also got me thinking about the Administrative Procedures Act written in the 1940s, for a time with a drastically different pace of transition and change. 

Today, most agencies take many, many years to draft a new regulatory proposal, and certainly many months and years to implement new regulations, often with extensive guidance and public outreach. And to add to the quixotic nature of it all, I—and I know many others in this room—also often hear from industry that we are actually too slow to promulgate regulation and we need to increase the pace of updating incorporations by reference of standards or international harmonization efforts. 

I get that some folks in the room might differentiate a safety and environmental regulation from a regulation that actually reduces companies’ operating burdens, but nonetheless, there’s a dichotomy here that happens to be two sides of the same coin. 

Now, in the past, when industry has faced increased pressure from governments to take action, politicians have come to the rescue to try to relieve some of the burdens. But I think that playbook may finally be worn out. And I say worn out because in the past, investors in our regulated entities may have been happy to support policies that ease the burden on the companies in which they are invested. But now, investors see companies that aren’t keeping up with the myriad demands and challenges as weak and a less desirable investment. As a regulator, whose been charged by Congress and the public to demand more, I am happy that competitive markets are beginning to serve their purpose here. Companies that aren’t allocating sufficient resources to keep up with safety and environmental and other emerging risks, like cyberattacks, and choose instead to try to reduce scrutiny of their operations are actually receiving greater scrutiny from the market, and in some cases may necessitate greater scrutiny from regulators because of the greater risk they may pose to the public. To this end, I’ve literally had CEOs tell me they see the value in having a regulator require them to take action because it will avoid unnecessary financial scrutiny from their board of directors. 

In contrast, we have regulated entities that embrace radical transparency. So much so, in fact, we’ve worked with companies that are willing to share intimate details of their internal failures not just with us—the regulator—but also with their competitors. Why you might wonder? Because today’s successful leaders realize that continuous self improvement can actually be greatly aided by the insight of regulators, competitors, or even market analysts. 

Now I realize there are lawyers in the room—maybe even most lawyers in the room—that welcome other companies operating with this modus operandi of transparency, but would maybe err against encouraging your clients to operate in this way. And I would entreat you to give that additional consideration. In the age of data that we live in, the light of day will find its way into revealing whether a company is sufficiently keeping up with the pace of change in the marketplace, including on the transparency and performance fronts. Maybe not tomorrow, and maybe not next month, but next year or soon thereafter. And companies that are subject to internal and external scrutiny through increased transparency, I believe, will thrive over their competitors. 

In the age of data that we’re living in, we can see that achieving a sufficient level of safety, environmental protection, and efficiency, requires adequate investments to identify risks to energy production and transportation operations and adequate investments to mitigate such risks. It’s important to note that while we’ve seen an increase in safety nationally in our regulated space, all while significantly increased throughput has occurred, the trends of improvement on a safety level are largely meaningless to anyone who is directly affected by a failure in their own backyard… and new data and methods of obtaining data are suggesting that environmental gains may not be what we thought. The backlash from the public when failures occur, or the data reveals that an industry performance isn’t as rosy as it was purported to be, comes with cost risks that have historically been significantly underestimated. See, for example, failures in the aviation manufacturing industry in the last few years or the Deepwater Horizon incident a few years ago—two oversight endeavors that I engaged in as a Senate staffer, and which may have ended with less tragic stories if not for companies so averse to greater scrutiny from their regulators.

Fortunately, as we prepare for major new investments in the Hydrogen and CO2 transportation space as the result of the impending investments from the Bipartisan Infrastructure Law and Inflation Reduction Act, we have nearly universally receptive stakeholders when it comes to strengthening safety and environmental protections—at least to a significant extent. Learning from failures such as that occurred in Satartia, Mississippi in 2020—when a super critical carbon dioxide pipeline ruptured as the result of land movement after extreme weather events—is essential to safer deployment of new infrastructure, and everyone seems to agree about this basic point.

For those who aren’t familiar, a pipeline rupture occurred around dinner time in February 2020 in a small town northwest of Jackson, MS. Just as it was getting dark, a large cloud of carbon dioxide gas enveloped a rural community—causing dozens of people to seek medical attention. Unfortunately, according to our investigation, the company failed to promptly alert first responders of the incident. First responders were left to figure out how to deal with an unknown threat that they hadn’t been trained to deal with. Ultimately, most of the key requirements we had in place were not—in our assessment—adhered to causing nearly every aspect of the response to go wrong—save for heroic efforts from the first responders, with whom I had the pleasure of meeting when I visited the town earlier this year. 
Luckily, no one was killed. And fortunately, there’s a growing consensus for a need to update the rules around these pipelines, which we are working to advance in the coming months. 

As I noted earlier, nearly a year ago, many of us on the East Coast—but especially those working in the energy space in the federal government experienced first-hand how impactful new IT-related risks can be to our economy and our communities—when Russian hackers launched a ransomware attack on the Colonial Pipeline system.  I will spare any of you who struggled to find gas during that period a rehashing of that week, but I do want to note that there have been many lessons to learn—both for government entities as well as private sector entities—particularly along the theme of transparency. 

One overarching and encompassing lesson is the need for increased coordination between government entities and the private sector. Under that umbrella-lesson is a need for improved communication between the government and private sector entities, improved communication and coordination between private sector operators, and improved communication on a common path forward from both the government and private sector—particularly when it comes to government regulation. To put it simply, a go-it-alone approach or a reliance on one’s own ability to “self-regulate” is not a recipe for the sector's or for our nation’s, success.   

From PHMSA’s perspective, as I alluded to earlier, we have broad statutory authority to prescribe standards governing the safe operation of pipeline facilities and to intervene on an emergency basis to address imminent hazards.  While we don’t currently have regulations governing cybersecurity of pipeline systems, there is clearly a nexus between cybersecurity and the safe operations that we oversee. 

In response to the cyberattack, PHMSA engaged round-the-clock, monitored the safety of the pipeline, and worked with the pipeline company to ensure a safe restart. As a result of the close collaboration with PHMSA, within days, the pipeline was able to move nearly a million barrels of fuel on a manual basis—and ultimately to get back up and running. 

Prior to the cyberattack, PHMSA actually attempted to engage more closely with companies related to cyber issues, particularly as they relate to our jurisdictional area of control room management. We introduced a series of voluntary discussion points with pipeline operators to raise their awareness of internal or external threats. When we started these discussions in 2019, 50 percent of operators declined to engage in the voluntary cyber discussions with us—which I would be in no way surprised might have been because some in-house or outside-counsel thought that having unnecessary conversations with the regulator might not be wise.  After the 2021 cyberattack, however, no operator has declined our invitations to voluntarily discuss cyber-related issues. So, it’s fair to say that communication has improved in the last year. But it shouldn’t take an incident like this to have constructive dialogue. And for our part, we’re engaging to see if there’s anything we can do on our end to improve voluntary dialogue to improve safety.

Now I know these challenges aren’t just between regulators and their regulated communities. They can also be between government agencies. Instead of turf wars of the past, we’re trying to support the work of other dedicated professionals to advance the common cause of the public’s interests. On our end, PHMSA and the Department of Transportation have worked to improve communications across agencies. We provided feedback during development of TSA’s new cybersecurity directives and helped develop and participate in-new Cybersecurity Tabletop Exercises earlier this year. We’ve coordinated with the Environmental Protection Agency to avoid duplicative regulatory efforts while also ensuring no gaps in compliance and enforcement exist. We’ve also worked with a host of agencies including the Federal Energy Regulatory Commission and Nuclear Regulatory Commission on questions of safety and environmental issues to ensure the public has the peace of mind that government regulators are making careful, thoughtful decisions, with the public’s interest in mind. 

Perhaps the best example of improved collaboration and transparency relates to interagency and public-private collaboration in research—particularly with respect to the deployment of new CO2 and hydrogen technologies. 

Last year, PHMSA hosted a R&D forum with more than 500 participants including agencies across the government and international counterparts to focus on the challenges and solutions and areas of research needed for future fuels like hydrogen.

Since then, we’ve awarded dozens of research grants dealing with hydrogen leak detection, gas storage safety, lithium-ion battery safety, and carbon dioxide pipeline safety. 

If the last few years have taught us anything, they’ve underscored the fragility of just-in-time supply chains—when it comes to goods but also energy that is essential to the production and movement of goods. We’ve also seen energy supplies be weaponized as a tool of war. Adding these to the already long list of challenges and risks in this sector means that a go-it-alone approach, common in years past, may be outdated and underscores the value of transparency, communication, and cooperation. 

I’d like to conclude on the theme of communication, which is really an essential element to the overarching theme of transparency and its importance for the future. 

Earlier this year, I was asked by leaders of our regulated community—what do I think the regulated sector is doing well? 

In the pipeline world, two quick thoughts come to mind: the industry has come a long way in adopting and improving a Safety Management System approach to our work—something many sectors have achieved great success in and one in which we’re making major progress; and secondly, cybersecurity efforts are quickly and substantially improving—as I alluded to earlier. There is more work to do on both fronts and collaboration between regulator and regulated community will be paramount.  

But this is a great question—not just for regulators to ponder of the regulated community—but for the regulated community to consider for themselves. And maybe one step further, to borrow Harvard Psychiatrist and Founder of the Center for Public Leadership at the Kennedy School of Government Ron Heifetz that urges the practice of “going to the balcony”:  In other words, imagining yourself in your organization, viewing yourself and other decisionmakers from a vantage point high above removed from the interpersonal and professional ties of being in the room. Where can we improve our common goals of improving safety, efficiency, and environmental protection to deliver improved results for the American people?

PHMSA will continue its part on all fronts and I’m confident that with improved transparency and communication—such as events like this aim to foster—there will be a bright future with greater collaboration among the esteemed individuals in this room as well as greater results for customers, investors, companies, and the American people.

Thank you again for inviting me to speak today and for the important work you do for our nation.