January 2, 2002
The Honorable Norman Mineta Dear Mr. Secretary: I write with regard to the Enron Corporation and their natural gas transmission facilities that you regulate pursuant to the Natural Gas Pipeline Safety Act, as amended. As you probably know from numerous press accounts, recent revelations about Enron’s accounting practices have indicated that the company has systematically provided inaccurate reports of its financial transactions. For instance, Enron established and transacted with a complex web of off balance sheet special purpose entities; the business purpose and substance of these activities remain unknown. Also, recent lawsuits filed in Houston allege that the company misled participants in its 401(k) retirement plan about the risks of investing in Enron’s stock, noting the company’s actions that had the effect of forcing its employees to hold on to stock even as the share price plummeted. These and other actions by Enron and top corporate officials raise serious concern about the company’s business and accounting practices. While we do not yet know who profited from Enron’s complex business structure, nor do we know where all the money went, it certainly would be unwise to trust that their creative management practices extended only to some of the company’s transactions but not others. Specifically I am concerned that the apparent lack of veracity by Enron and its officials may extend into the conduct of its natural gas transportation business and question whether the company has devoted adequate resources to the maintenance of its natural gas facilities. While most pipeline operators probably understand that maintaining their physical assets is critical to the ultimate performance of their company, Enron’s apparent behavior suggests that, not only did they not understand what was important to the company’s performance, but that the physical well being of their pipelines may have been a minor concern compared to its other business ventures. The Enron case once again raises questions about the wisdom of the Office of Pipeline Safety’s (OPS) incorporation of risk management into its regulations. As I noted in a June 14, 2000, letter to your predecessor, the General Accounting Office reported that incorporation of risk management into OPS regulations was unjustified because OPS had yet to produce any credible, quantifiable evidence to support its claim that allowing industry to police itself is beneficial to the protection of public health and the environment. Now that we are faced with reports providing strong indications that Enron often "robbed Peter to pay Paul," I am concerned that this behavior may extend to the area of pipeline safety and security as well. In the aftermath of the revelations about Enron -- which owns a number of pipelines -- I again urge the Department to reevaluate the wisdom of OPS’s risk management approach to regulating the industry. In particular, I ask you to review your regulatory practice of allowing natural gas pipeline companies to design their own inspection programs: the Enron case shows that at a minimum, the potential exists that a company’s other interests may unduly influence decisions on safety expenditures. How can pipeline operators be trusted to make the right decisions to protect the public if their superiors only see the business as a resource for elaborate and risky schemes? I also request that you provide me, as expeditiously as possible, all material relating to the safety records of all natural gas transmission facilities that, since 1989, have either been owned by Enron and its subsidiaries outright, or in which Enron had a major financial interest. This should include, at a minimum, Enron Transportation Services and its major components: Northern Natural Gas, Transwestern Pipeline, Florida Gas Transmission, and Northern Border Partners, L.P. Finally, I request that you have the OPS begin immediately an investigation of all Enron’s natural gas facilities and the business transactions of the companies that manage those facilities: this may be the only way to assure the public that it is not being placed in harm’s way by Enron’s seemingly unscrupulous business practices. A thorough investigation would benefit the Department, too, by helping the public begin to regain some measure of confidence in OPS, whose credibility was significantly undermined last year in reports by both the GAO and the Department’s Inspector General suggesting that OPS was placing disturbing amounts of faith in the industry it is supposed to regulate. Thank you in advance for your prompt attention to my request. Because of the ongoing activity of the Committee on Energy and Commerce with regard to Enron and the potential for action early next year on pipeline safety reauthorization, I request you respond to my inquiry as soon as possible, but in any event, no later than Wednesday, January 30, 2002. Should you have any questions regarding my inquiry, please contact me, or have your staff contact Rick Kessler of the Committee on Energy and Commerce Minority staff at (202) 226-3400. Sincerely, JOHN D. DINGELL
cc: The Honorable W.J. "Billy" Tauzin, Chairman | |
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