EVAN ENERGY CO LC — Notice of Probable Violation

120020003_Final Order_09012005.pdf, page 1Official PDFof Transporation U.S. Department 400 Seventh Street, S.W. Pipeline and Washington, D.C. 20590 Administration Hazordous Materials Satety SEP - 1 2005 Mr. Craig Massey President 4 North Fourth Street, Suite 100 Evan Energy Company, LC Richmond, VA 23219 Re: CPF Nos. 1-2003-0002, 1-2002-0003, 1-2002-0002M Dear Mr. Massey: Enclosed is a Final Order issued by the Associate Administrator for Pipeline Safety. The Order finds Evan Energy violated the terms of two previously-issued Final Orders (CPF Nos. 1- 2002-0003 and 1-2002-0002M). The Order also amends the terms of a Compliance Order and finds that Evan Energy has partially addressed some of the inadequacies in its procedures. When nforcement action will be closed. Your receipt of the Final Order constitutes service of tha he terms of the Order are completed, as determined by the Director, Eastern Region, OPS, thi docurient under 49 C.F.R. $//90.5. Sincerely,| tant James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosures ..cE: Mr. Brint Camp Chief Operating Officer Evan Energy Company, LC Mr. Massoud Tahamtani Director, Division of Utility and Railroad Safety Virginia State Corporation Commission CERTIFIED VAIL KETURN RECEIPT KEQUESTEU#

120020003_Final Order_09012005.pdf, page 2DEPARTMENT OF TRANSFORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 2Ut90 In the Matter of Evrn Energy Company, L.C., Rerpoudentr CPF Noo. l-20034m2. l-2002-0003. r-2002-um2-M FINAL ORDER On or about December 10, 2003, a rcpresentative of the Oflice of Pipeline Safety (OPS), Research and Special Programs Administration (RSPA), conducted an investigation to determine Reryondent's compliance with two Final ffiers issued to Respondent in October and Decernber, 2002 (CPF Nos. l-2002-0003 and l-2002-0002M, respectively).r As a resutt of the investigation, the Director, Eastern Region, OPS, issued to Respondent, by letter datcd Deccrnber 10,2003, a Notice of Probable Violation and Proposcd Civil Penalty (CPF No. l- 2003-0002). [n accordancc with 49 C.f.R. $ 190.207, the Notice proposed finding Respondent had violated the wo above-refercnccd Final Orders and proposed assessing a civil pcnalty of $10,000 for the alleged violations, Respondent responded to the Notice by letter dated Juuary 2, zO04. Respondent initially contested one of the allegations and requcsted a hearing. The hearing was held on March 23, 2004 in Washingron, DC. Aftsr the hearing, Rcspondcnt provided additional infiormation by letter dated April 19, 2004. In its post-hcaring letter, Respondent aclnowledged the validity of the facts alleged in the Notice, requested the proposed penalty be eliminated, and reguested amendment to one of the Ordcn. By email dated April 21, 2004, Respondent submitted procedural amendments to the Director, Eastem Region, OPS. FINDINGS OFVIOLATION Item A in the Notice alleged Respondent violated the terms of a Final Order issued to Respondcnl on October 30, 2W2 (CPF No. l-2002-0003). By the terms of that Order, Respondcnt was required to clean and eithcr coat or jacket each aboveground segmenl of Respondent's ten-mite Red Onion Pipeline. Respondent did not contest the allegation that it failed to clean and coat the pipelinc as required in that frcr. ' The Norman Y. Mrneta Rescorch and Special Programs Ifiprovemcnt Act, Pub. L. No. 108-426, I l8 Srar. 2421 (2W4), creatcd the Pipeline and Hazardous Matcrials Safety Administration (PHMSA) and transfened the authority of RSPA cxerciscd rmda chapter 601 of title 49, Unitcd States Code, to thc Adminisraror of PHMSA. See also 70 Fcd. Reg.8299, 8301-t302 (2005) (dclcgating authonty to the Administrator of PHMSA).#

120020003_Final Order_09012005.pdf, page 3Instead, Respondent contested the underlying finding of violation in the previously-issued Order. Since Respondent did not file a petition for reconsideration in accordance with § 190.215 within 20 days of service of that Order, Respondent has waived its right to request reconsideration of that Order. Accordingly, the Order will not be reconsidered. Respondent also contested the authority of OPS to regulate the Red Onion Pipeline. At the hearing, OPS presented evidence showing the pipeline is subject to OPS regulatory authority. In its post- hearing submission, Respondent agreed to recognize the Red Onion Pipeline as a transmission line subject to OPS regulativn Accordingly, I find Respondent violated the terms of the Final Order (CPF No. 1-2002-0003) by failing to clean and coat the pipeline as ordered. Item B in the Notice alleged Respondent violated the terms of another Final Order issued to Respondent on December 3, 2002 (CPF No. 1-2002-0002M). By the terms of that Order, Respondent was required to amend its procedures and submit documentation of compliance within 90 days. In its Response and at the hearing, Respondent did not contest the allegation that it failed to amend its procedures as required by that Order. Accordingly, 1 find Respondent violated the terms of the Final Order (CPF No. 1-2002-0002M) by failing 10 amend its procedures within 90 days. These| findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60122, Respondent is subject to a civil penalty not to exceed 3100,000 per violation for each day of the violation up to a maximum of $1,000,000 for any related series of violations. The Notice proposed a total civil penalty of $10,000 for the violations. 49 U.S.C. § 60122 and 49 C.F.R. § 190.225 require that, in determining the amount of the eivil penalty, I consider the following criteria: nature, circumstances, and gravity of the violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve compliance, the effect on Respondenr's ability to continue in business, and such other matters as justice may require. The pipeline safety standards located at 49 C.F.R. Part| 192 ensure a level of safety for the protection of the public, property and the environment. Actions specified in orders issued by compliance with these safety standards. Respondent's failure to comply with the terms of two OPS are designed to bring an operator's pipeline system and applicable procedures into orders presenred i threat to safety by atlowing a noncompliant condition to remam on#

120020003_Final Order_09012005.pdf, page 4In its Response and at the hearing, Respondent requested elimination of the civil penalty duc to Respondent's limited financial resources. At the hearing, Respondent submitted evidence of its annual gross and net income. In its post-hearing response, Respondent again provided yearly revenue figures and requested OPS consider Respondent as a "small business" defined by the U.S. Small Business Administration. Based on the financial information provided by Respondent, I find assessment of a civil penalty would have an adverse effect on Respondent's ability to continue in business. Accordingly, having reviewed the record and considered the assessment criteria, I do not assess a civil penalty for the violations. ITEM A. COMPLIANCE ORDER Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns OT! operates a pipeline facility is required to comply with the applicable safety standards established under Chapter 601. Pursuant to 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, OPS issued to Respondent, on October 30, 2002, a Compliance Order (CPF No. 1-2002-0003) requiring Respondent to take specific action to ensure compliance with the pipeline safety regulations., In its post-hearing letter dated April 19, 2004, Respondent requested OPS amend the terms of the Compliance Order to allow Respondent to umplement a less costly alternative to the originally. ordered compliance terms. After reviewing the proposal submitted by Respondent and the recommendation of the Director, Easter Region, OPS, I find amendment to the compliance terms of the Order is appropriate. The amended terms will ensure the safety of the pipeline system and avoid undue financial hardship to Respondent. Accordingly, 1 hereby amend the Order (CPF No. 1-2002-0003) as follows: The following Items replace the originally-ordered terms of the Compliance Order CPF No. I- 2002-0003: 1.| Crib and electrically insulate from contact with the soil each aboveground segment of Respondent's pipeline at a rate of no less than fifteen percent (15%) of the aboveground segments per year to be completed by September 30, 2011. Cribbing shall involve raising the aboveground pipe and resting it on 6-inch pipe segments (the cribbing pipe) placed at 50-foot intervais. The cribbing pipe shall be at least 24-inches in length and sleeved with a non-electrically conductive sleeve, such as plastic or reinforced fiberglass, placed between the cribbing pipe and the aboveground gas pipeline to prevent clectrical contact between the aboveground pipeline and the soil. 2. Until Item 1 is completed in full, conduct annual inspections (spot checks) for corresion conditions on un-cribbed aboveground pipeline segments at the points of transition from wet to dry soil conditions. These inspections shall consist of digging beneath the pipe, cleaning the pipe, and determining whether corrosion activity is taking place. Document#

120020003_Final Order_09012005.pdf, page 54 cach inspection and detail findings of corrosion on a "Record of Pipe Inspection" form. If corrosion is observed, the section of pipe must be cribbed or an anode must be installed affect the safe operation of the pipeline unless Respondent can document that the corrosion is of a light oxide variety that will not 3. Monitor all aboveground annually for corrosion activity and maintain documentation of corrosion monitoring and determinations of the presence and degree of corrosion. Monitoring shall continue for the life of the pipeline Of until otherwise determined in writing by the Director, Eastern Region, OPS 4. Install a sacrificial anode at rach transition point on the pipeline where buried/coated pipe meets aboveground/incoater Pipe. Installation of anodes Must be completed by September 30, 2007 5. Within 90 days of receipt of this Amendment, submit to the Director, Eastern Ragion. OPS, for approval a plan and schedule for implementing cach of the ahove items 6. A1 least once each six months, starting September 30. 2005, submit a written report on the status of actions taken under each of the above items. Submit the report to the Director, Eastern Region, OPS, and the Director, Division of Utility and Railroad Safety, Virginia State Corporation Commission. Supplement the written report with applicable data if requested by the Director, Pastern Region, OPS. Respondent shall submit anual reports for the life of the pipeline Of until otherwise determined in writing by the Director, Fastern Region, (PS The Director, Eastern Region, OPS may grant an extension of time to comply with any of the required items upon a written request by the Respondent demonstrating gond canse for an extension. ITEM B: AMENDMENT OF PROCEDURES Pursuant to 49 U.S.C. § 60108(a) and 49 CF.R. § 190.237, OPS issued to Respondent, On December 3, 2002, a Final Order (CPF No. 1.2002-0002M) requiring Respondent revise its Operations and Maintenance Procedures within 90 days. Although Respondent did not timely comply with the Order, Respondent submitted amendments by email to the Director, Eastern Region, OPS. on April 21, 2004. The Director, Eastern Region, OPS has reviewed the amended procedures and indicated that Respondent has achieved compliance only with Items 1, 2, 3, 4. 5. 1, and 12 of the Order. Respondent has not achieved compliance with Items 6, 8, 9, 10. 11. 13. and 14 of the Order. Accordingly, 1 find portions of Respondent's procedures remain inadequate to ensure the safe operation of its pipeline system. Respondent must make the following revisions to its procedures, which were originally ordered in the above referenerd Final Order Respondent must:#

120020003_Final Order_09012005.pdf, page 65 1. Amend its Operating and Maintenance Procedures to include procedures for checking variations from normal operation after abnormal operation has ended al sufficient critical locations in the system to determine continued integrity and safe operation, in accordance with 49 C.F.R. § 192.605(c)(2). (Item 6 in original). 2. Amend its Operating and Maintenance Procedures to include procedures for periodically taking corrective action where deficiencies are found, in accordance with 49 C.F.R. reviewing the response of operator personnel in controlling abnormal opcration and $ 192.605(c)(4). (Item 8 in original) 3. Amend its Operating and Maintenance Procedures to include procedures for continuing surveillance of its facilities to determine and take appropriate action concerning changes in class location, failures, leakage history, corrosion, substantial changes in cathodic protection requirements, and other unusual operating and maintenance conditions, in accordance with 49 C.F.R. § 192.613(a). If a segment of pipeline is determined to be in unsatisfactory condition but no immediate hazard exists, the operator must take action to recondition or phase out the segment involved, or, if the segment cannot be reconditioned or phased out, to reduce the maximum allowable operating pressure, in accordance with 49 C.F .R. § 192.613(b). (Item 9 in original). Respondent's procedures do not address leakage history, corrosion, and substantial changes in cathodic protection requirements. 4. Amend its Operating and Maintenance Procedures for its damage prevention program to include procedures for follow-up inspection of pipelines that it has reason to believe could he damaged by excavation activities, in accordance with 49 C.F.R. § 192.614(cX6). (Item 10 in original). Respondent's procedures do not address leakage surveys in the case of blasting. 5. Amend its Operaung and Maintenance Procedures to include procedures for analyzing accidents and failures, including the selection of samples of the failed facility or equipment for laboratory examination, where appropriate, for the purpose of determining the causes of the failure and minimizing the possibility of a recurrence, in accordance with 49 C.F.R. § 192.617. (Item 1] in original). 6. Amend its Operating and Maintenance Procedures to reflect the requirement that each tap made on a pipeline under pressure must be performed by a crew qualified to make hot taps, in accordance with 49 C.F.R. § 192.627. (Item 13 in original). Respondent's procedures do not include a requirement that the crew be qualified 7. Amend its Operating and Maintenance Procedures to include procedures for addressing the reduction in pipeline wall thickness caused by localized or general corrosion, in accordance with 49 C.F.R. $ 192.485. (Item 14 in original) Respondent's procedures do not define what "severe pitting" means.#

120020003_Final Order_09012005.pdf, page 76 Respondent must submit the amended procedures to the Regional Director, Eastern Region, OPS, within 30 days following receipt of this Final Order. The Regional Director may extend the period for complying with the required items if the Respondent requests an extension and adequately justifies the reasons for the extension. Failure to comply with this Order may result in the assessment of civil penalties of up 1o $100,000 per violation per day, or in the referral of the cast for judicial entorcement. Under 49 C.F.R. § 190.215, Respondent has a right to submit a Petition for Reconsideration of this Amendment to Final Order. The petition must be received within 20 days of Respondent's receipt of this Amendment and must contain a brief statement of the issue(s). The terms of the order, including any required corrective action, remain in full effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective on receipt. SEP - 1 2005 Statey Gerard Date Issued Associate Administrator for Pipcline Safety#

120020003_Final Order_04032009_text.pdf, page 1Official PDFAPR 3 2009 Mr. Craig Massey President Evan Energy Company, LC 4 North Fourth Street, Suite 100 Richmond, Virginia 23219 Mr. John Ebert President Appalachian Natural Gas Distribution Company 271 West Main Street, Suite 200 Abingdon, Virginia 24210 Re: CPF Nos. 1-2003-0002; 1-2002-0003; and 1-2002-0002M Dear Mr. Massey and Mr. Ebert: I am writing in reference to the Final Order issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA) in the above-referenced enforcement actions on September 1, 2005, to Evan Energy Company, LC (Evan), regarding the company’s 10-mile intrastate gas transmission pipeline that serves the Red Onion State Prison in Pound, Virginia (Final Order). The Final Order required Evan to take certain actions to ensure compliance with the Federal Pipeline Safety laws and to revise its written safety procedures. While some of these actions have been completed to date, it appears that others may not have been fully satisfied. As you are aware, the Virginia State Corporation Commission (SCC) has recently assumed jurisdiction over all intrastate gas pipelines in Virginia pursuant to legislation enacted by the Virginia General Assembly in 2005. The SCC currently inspects all intrastate gas pipelines and carries out other pipeline safety responsibilities in Virginia under certification from PHMSA pursuant to 49 U.S.C. § 60105. The SCC has informed PHMSA that Appalachian Natural Gas Distribution Company (Appalachian) is the new owner and operator of this line, as of January 1, 2008, and that it has made progress in completing the requirements of the Final Order. Therefore, in accordance with the foregoing certification, PHMSA hereby transfers all of its rights and authority under the September 1, 2005 Final Order, to the SCC. Accordingly, the pending PHMSA enforcement actions [CPF Nos. 1-2003-0002, 1-2002-0003, and 1-2002-0002M] involving Evan and its successor-in-interest, Appalachian, are now closed.#

120020003_Final Order_04032009_text.pdf, page 2Page 2 Mr. Craig Massey Mr. John Ebert Re: CPF Nos. 1-2003-0002; 1-2002-0003; and 1-2002-0002M Any further questions you have regarding compliance with pipeline safety regulations should be directed to Mr. Massoud Tahamtani, Director, Division of Utility and Railroad Safety, State Corporation Commission, P.O. Box 1197, Richmond, Virginia 23218. Please note that originals of this letter have been sent to Evan Energy Company, LC and Appalachian Natural Gas Distribution Company. Thank you both for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety cc: Byron Coy, Director, Eastern Region, PHMSA Massoud Tahamtani, VA State Corporation Commission CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7005 0390 0005 6163 7497]#

120020003_final order_10302002_text.pdf, page 1Official PDF400 seventh stteet 8 w Weehtngten, D C 20590 Mr. Bob A. Dahlin, II Manager, Pipeline Design k Service Evan Fnergy Company, L. C. 1999 East Stone Drive, Suite 201 Kingsport, TN 37660 Re: CPF No. 1-2002-0003 Dear Mr. Dahlin: Enclosed is the Final Order issued by thc Associate Administrator for Pipeline Safety in the above"rcfercnccd case, It makes 8 founding of vtolation and requires certain corrective acbon. tIIt hen the terms of the compliance order are completed, as determined by the Director, Eastern Region„ this cnforccrncnt action will bc closed. Your receipt of this Final Order constitutes service of th8t document under 49 C. F. R. ( 190. 5, Gwendolyn M. 1 ill Pipeline Compliance Registry OAice of Pipeline Safety CERTIFIED MAII. - RETURN RECEIPT RE UF. 'TED#

120020003_final order_10302002_text.pdf, page 2DEPAR IMFNT OF TRANSPOR'I ATION RESEARCII AND SPUCIAI. PROGRAMS ADMINISTRATION OFFICE OF PIPELKE SAFETY WASHINGTON, DC 20590 CPF No, 1-2002-0003 Eva. n Energy Company„L. C. , Respondent. FINAL ORDER On August 7„2001„pursuant to 49 U. S. C. ( 60117, 8 representative of the Office of Pipeline Safety (OPS) conducted an on-sltc plpcllnc safety Inspcctlon of Rcspondcnt s Rcd Onion MouAtatn facllltlcs and records in Rise County„Virginia. As a result of the inspection, the Director, Eastern Region, OPS issued to Respondent by letter dated January 29 2002 8 Notice of Probable Violation and Proposed Compliance Order (Notice) In accordance with 49 C F R ) 190 207 the Notice proposed flndlng that Respondent had vlo18tcd 49 C, F, R. ) 192. 479(8). Respondent fcspondcd to the Notice by letter d8tcd March 13, 2002 (Rcsponsc). Respondent contested the allegation and offered information to explain the allegations. Respondent did not request a hearing; consequently, Respondent waived its right to one. FINDINGS OF VIOLATION Item I in the Notice a11eges that Respondent violated 49 C. F. R. ( 192. 479(8) in failing to protect aboveground portions ot plpcllne h'oln atfnosphefle corrosion by clthef coatlAg of jacketlflg with. 8 material suitable for the prevention of atmospheric corrosion and by cleaning the aboveground portions. 49 C. F. R. P 192. 479(8) allows for noncompliance where the operator "can demonstrate by testy lnvcstlg8tlon, of cxpcflcncc In thc alca of appllcatlon, that 8 corrosive atlrlosphcfc docs not CXlst. In Icsponsc to Itcrn I, Rcspondcnt contested thc allcgcd vlolatlofl and cxp181flcd, ln I'ts Response, that cofnpany personnel had never observed a pipeline leak caused by atmospheric corrosion, Respondent states that the mspected plpelme connects thousands of gathering wells to aboveground gathering pipeline systems within two natural gas storage fields that have been in service since 1977 and 1984 and thus the length of service in those storage IICIds demonstrates " experience in the 8rea of apphcation, that 8 corrosive atmosphere does not exist. '* Respondent included with its letter 8, fn8p Indlc8tlng thc loc8tlon of thc lnspcctcd plpcllnc IA fclatlon to thc two g8S flckls 8nd gathering wells.#

120020003_final order_10302002_text.pdf, page 3Respondent did not provide OPS anv evi«lence from Respondent's own tests or investigations to assure the lack of 8 conosive atmosphere. The climate in Virginia is not unique such that 8 corrosive atmosplMI'c docs Ao't cxlst, TIM experience of thc EastcITl Rcglon, OPS„ ls that expose«1 stccl. plpc ls sub)ect to Btnlsphenc corrosion. Respondent ha«l coated approximately two of 10. 2 mlles of exposed plpclllM pI'lof to OPS lnspcctlon. Rcspondcnt « Id not provldc Bn cxplanatlon, however, Bs to why coating would be needed in these segments and not on other exposed segments of the same pipeline. AH exposed segments of the pipeline must meet the requirements of 49 C, F. R, ) 192 479(a) Accordingly 1 find Respondent violated 49 C F R ( 192 479(a) This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent, Under 49 U. S. C. ( 60118(a), each person who engages in the transportation of gas or who owns ol operates a pipeline facihty is required to comply with the applicable safety standards established under chapter 601. Pursuant to the authority of 49 U. S. C, $ 60118(b) and 49 C. F. R, ( 190, 217, Respondent is ordered to take the following actions to ensure compliance with the pipeline safety rcgulatlons applicable to its opcl'atlons, Clean and cltlMF coat ol" jacket, with 8 Fnatcrlal suitable for thc pl'cveA'tlon of atmospheric corrosion, each aboveground segnlenl. of thc plpcllnc that ls cxposcd to thc Btlrlosphcrc within 180 days of receipt of this Final Order, 2. Within 90 days of receipt of this Final Order, inform the Director, Eastern Region, OPS of the materia selected to be applied to prevent atmospheric corrosion. UAder 49 C. F, R. ( 190. 215, Respondent has a right to petition for reconsideration of this Final Order, . The petition must be received within 20 days of Respondent's receipt of this 1'inal Order and must contain a brief statement of the issue(s), The filing of the petition automatically stays the payment of any civil penalty assessed. All other terms of the order, including any required corrective action, shaH remain in Ml effect unless the Associate Admimstrator, upon request, grants a stay. 1 he terms and con«lltlons of this 1'lnal Order arc CAcctlvc on Iccclpt, Failure to cornplv with this 1'lnal Order nlay result ln thc Bssessmcn't oj clvll pcnaltlcs of up to $25, 000 per violation per day, or in the referral of the ease for judicial enforcement. tBccy Gcrard Assoclatc Admlnlstrator Por Pipeline Safety#