Federal pipeline safety regulators on Monday issued a record $9.6 million fine against Third Coast Midstream, the Houston-based company whose 2023 pipeline failure spilled 1.1 million gallons of oil into the Gulf of Mexico off Louisiana’s coast.
The Pipeline and Hazardous Materials Safety Administration said Third Coast’s violations were systemic — including inadequate emergency procedures, insufficient risk assessments, and improper maintenance of the 18-inch Main Pass Oil Gathering pipeline — contributing to a leak that operators allowed to continue for nearly 13 hours before shutting down the line.
The fine is the largest PHMSA has ever assessed, but safety advocates say it may not be large enough to change behavior: at less than 3 percent of Third Coast’s estimated annual earnings, the penalty falls below the threshold where noncompliance becomes more costly than compliance.
A record fine in a low-fine regime
PHMSA typically assesses between $8 million and $10 million in total fines across all cases each year. The single penalty against Third Coast nearly matches or exceeds that entire annual output.
But the company’s financial position puts the number in a different light. Third Coast has a stake in approximately 1,900 miles of pipelines, and in September announced it had secured a nearly $1 billion loan.
Bill Caram, executive director of the Pipeline Safety Trust, said the penalty was appropriate given the scope of the failure but questioned whether it would alter the company’s calculus.
“However, even record fines often fail to be financially meaningful to pipeline operators. The proposed fine represents less than 3% of Third Coast Midstream’s estimated annual earnings,” Caram said. “True deterrence requires penalties that make noncompliance more expensive than compliance.”
Caram said the spill “resulted from a company-wide systemic failure, indicating the operator’s fundamental inability to implement pipeline safety regulations.”
What the investigations found
The National Transportation Safety Board, in its final report, determined the spill resulted from underwater landslides triggered by hurricane hazards — a risk that Third Coast failed to evaluate despite its prominence in industry knowledge.
“Third Coast missed several opportunities to evaluate how geohazards may threaten the integrity of their pipeline. Information widely available within the industry suggested that land movement related to hurricane activity was a threat to pipelines,” the NTSB said.
PHMSA said the company “failed to perform new integrity analyses or evaluations following changes in circumstances that identified new and elevated risk factors” for the pipeline. Regulators also said Third Coast did not establish proper emergency procedures — a failure they said contributed to operators waiting nearly 13 hours after gauges first indicated a problem before shutting down the line.
Company disputes allegations
A Third Coast spokesperson said the company had been working cooperatively with PHMSA for two years before Monday’s announcement and was caught off guard by the scope of the allegations.
“After constructive engagement with PHMSA over the last two years, we were surprised to see aspects of the recent allegations that we believe are inaccurate and exceed established precedent. We will address these concerns with the agency moving forward,” the spokesperson said.
Scale in context
The 1.1 million gallons spilled in 2023 was far smaller than the 2010 BP disaster in the Gulf of Mexico, when an oil rig explosion led to the release of 134 million gallons over several weeks. Regulators said the 2023 spill could have been substantially smaller had Third Coast’s control room operators acted more quickly once instruments first detected the problem.