Regulatory conflict and a latent public safety risk? The case of gas infrastructure

Abstract

AbstractWhile the literature on regulatory compliance is extensive, little scholarly attention has focused on how companies respond to conflicting regulatory requirements. As a case in point, gas pipelines and networks—deemed monopolies—are subject to economic regulation to emulate the price pressures of competition and encourage “efficient” expenditure. Technical (safety) regulation of the same infrastructure also addresses an expenditure trade‐off with safety, potentially drawing different conclusions as to the most appropriate balance. This article reports on a study—drawing on 49 interviews, document review and case studies—analyzing if these two regulatory regimes, as enacted in Australia, are in conflict. We find a significant tension between the two regimes, exhibited through the impact that economic regulation has on a company's planned safety‐related expenditure and thus, long‐term public safety outcomes may be at risk. Australian safety regulation is performance‐based, requiring “reasonably practicable” measures are in place to minimize risk to the public. The San Bruno California disaster, in which eight people died as a result of failed gas infrastructure in the US, shows that such regulatory conflicts also exist in jurisdictions that have adopted prescriptive forms of safety regulation.