Buried pipelines crossing active fault zones are highly susceptible to catastrophic rupture and environmental hazards due to large ground deformations. While macroscopic stress distributions are well-documented, the underlying micro-mechanical mechanisms governing the interaction between granular soil and buried steel pipelines during faulting remain largely unexplored. Traditional continuum-based methods often fail to capture the highly discontinuous nature of shear band formation, soil arching, and local soil-pipe separation. This study presents a high-fidelity 3D Discrete Element Method (DEM) investigation, implemented within the YADE open-source framework, to analyse the mechanical behaviour of continuous buried pipelines subjected to normal faulting with varying dip angle. The model incorporates a rolling resistance contact law to accurately reproduce the interlocking effect of angular soil particles. To overcome the limitations of macroscopic continuum models, this research correlates the macroscopic pipe response with micro-structural descriptors, specifically the evolution of coordination number and cumulative plastic energy dissipation. These metrics are utilised to identify the onset of shear strain localization and the precise mechanisms of soil arching degradation. Results demonstrate that the pipeline's failure mode is governed by the asymmetric mobilization of soil shear strength. Specifically, the simulation captures the formation of a localized void beneath the pipeline, which induces a critical zone of bending moment and stress concentration within the pipe often overlooked in simplified models. Furthermore, peaks in inter-particle energy dissipation are found to coincide with maximum pipe tensile strains. By linking granular dynamics to structural performance, this method offers superior accuracy in predicting critical failure locations compared to continuum approaches, providing theoretical guidelines for the optimal placement of structural health monitoring sensors in geohazard-prone areas.