Record $9.6 million fine for Third Coast after substantial oil spill in the Gulf of Mexico

Pipeline regulators imposed a record $9.6 million fine Monday against Third Coast for a massive oil spill in the Gulf of Mexico, marking the largest penalty ever issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA).

The Houston-based company was responsible for leaking 1.1 million gallons of oil off Louisiana’s coast in 2023, an environmental disaster that regulators say stemmed from systemic safety failures and inadequate emergency procedures.

Despite the unprecedented size of the fine, industry watchdogs question whether the penalty will have meaningful impact on the company’s operations. Bill Caram, Executive Director of Pipeline Safety Trust, praised the record-setting fine but noted it represents less than 3% of Third Coast Midstream’s estimated annual earnings.

“True deterrence requires penalties that make noncompliance more expensive than compliance,” Caram said in a statement.

The financial impact appears minimal for Third Coast, which operates approximately 1,900 miles of pipeline infrastructure. Just months after the spill, in September, the company secured nearly $1 billion in loans, underscoring its substantial financial resources.

Federal investigators determined that Third Coast failed to properly respond when initial warning signs appeared. The National Transportation Safety Board (NTSB) found that pipeline operators took nearly 13 hours to shut down operations after their gauges first indicated a problem—a critical delay that significantly increased the spill’s volume.

Regulators cited multiple violations, including failure to establish proper emergency procedures, inadequate risk assessment, and poor maintenance of the 18-inch Main Pass Oil Gathering pipeline. PHMSA specifically noted that Third Coast “failed to perform new integrity analyses or evaluations following changes in circumstances that identified new and elevated risk factors.”

The NTSB’s final report, released in June, revealed that underwater landslides triggered the leak. These landslides resulted from environmental hazards, particularly hurricane activity, that the company should have recognized and addressed.

“Third Coast missed several opportunities to evaluate how geohazards may threaten the integrity of their pipeline,” the NTSB stated. “Information widely available within the industry suggested that land movement related to hurricane activity was a threat to pipelines.”

A Third Coast spokesperson expressed surprise at the allegations and fine amount, suggesting the company would contest some aspects of the penalty. “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.

While significantly smaller than the catastrophic 2010 BP Deepwater Horizon disaster, which released 134 million gallons of oil into the Gulf, the Third Coast spill represents another major environmental incident in a region still recovering from previous oil industry accidents.

This fine stands out in the regulatory landscape, as it nearly equals the total penalties PHMSA typically issues in an entire year, which range between $8-10 million annually. The case highlights ongoing tensions between regulatory agencies and the oil and gas industry regarding pipeline safety standards and enforcement.

The Gulf Coast region, critical to America’s energy infrastructure with its dense network of underwater pipelines, remains vulnerable to both operational failures and environmental hazards. This incident underscores the continuing challenge of balancing energy production with environmental protection in one of the nation’s most ecologically sensitive and economically important coastal areas.