NATIONAL FUEL GAS SUPPLY CORP — Notice of Probable Violation

party submissionOfficial PDF120161005_Operator Petition for Reconsideration and Request for Stay_05092019.pdf#

case documentOfficial PDF120161005_Operator Post-Hearing Submissions_06122017.pdf#

party submissionOfficial PDF120161005_Operator Response to Notice And Request for Hearing_09302016.pdf#

120161005_NOPV PCP PCO_08042016_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER OVERNIGHT EXPRESS DELIVERY August 04, 2016 David Bauer President, National Fuel Gas Supply Corp. 6363 Main Street Williamsville, NY 14221 CPF 1-2016-1005 Dear Mr. Bauer: On March 6, 2015, representatives of the New York State Department of Public Service (NYDPS), acting as agents for the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code, responded to and conducted an investigation into an incident that occurred on the regulator on the start gas line for the compressors at the National Fuel Gas Supply Corporation’s (NFG) Beech Hill Compressor Station, located in the town of Wellsville, NY 14895, approximately 55 miles west of Corning, NY in a rural, wooded area. On March 5, 2015, at 17:54 (EST), a regulator failed on the start gas line for the compressors at the NFG Beech Hill Compressor Station. The failure caused an increase in pressure in the piping downstream of the regulator from 175 psig to 341 psig. The downstream piping had a maximum allowable operating pressure (MAOP) of 300 psig. A rupture disc relief device, rated at 311 psig, burst and natural gas was released into the atmosphere through the vent stack. The gas discharged up the side of the M&R building into the eave, located approximately ten feet above the top of the vent piping, and ignited. NFG personnel responded to a call from a neighbor, and activated the Emergency Shutdown System; the fire was extinguished. The regulator was replaced, and the station was back in service on March 6, 2015.#

120161005_NOPV PCP PCO_08042016_text.pdf, page 21-2016-1005 There were no evacuations, injuries, deaths, or extensive property damage associated with this incident. The estimated natural gas product loss was reported to be 12,400 thousand cubic feet (MCF). Estimated incident costs were reported in excess of $42,000. NFG notified the National Response Center (NRC Report #1109781) on March 6, 2015, at 09:11 (EST). On March 23, 2015, NFG submitted DOT Form F 7100.2 for the incident (Incident Report). The Incident Report described the incident as a regulator malfunction, raising downstream pressure above the set point causing a relief rupture disc to burst, thereby allowing natural gas to vent. In the Incident Report, NFG indicated that the rupture disc burst at 17:54 (EST) on March 5, 2015. The fire was reported at 05:04 (EST) on March 6, 2015. The estimated pressure at the point and time of the incident was given as 300 psig. The apparent cause of the incident was given as equipment failure. As a result of the investigation, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The items inspected and the probable violations are: 1. §192.169 Compressor stations: Pressure limiting devices (a) Each compressor station must have pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the maximum allowable operating pressure of the station piping and equipment is not exceeded by more than 10 percent. NFG failed to ensure that each compressor station had pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the maximum allowable operating pressure of the station piping and equipment was not exceeded by more than 10 percent. Specifically, NFG exceeded the maximum allowable operating pressure on its start gas line at the Beech Hill Compressor Station by more than 10 percent. On March 5, 2015, a pressure regulator controlling the gas pressure in the start line and the pressure in the line downstream of the failed regulator reached 341 psig. The MAOP of this line is 300 psig, and the maximum pressure allowed during a pressure relieving event is 330 psig. The pressure exceeded the maximum allowed by §192.169(a) by 11 psig. Evidence for this probable violation includes the NFG-submitted DOT Form F 7100.2 part H, the manufacturer’s rupture disc information, and NFG Supervisory Control and Data Acquisition (SCADA) logs that showed the pressure in the start gas line exceeded 330 psig at approximately 17:45 (EST) on March 5, 2015. 2. §192.169 Compressor stations: Pressure limiting devices. (b) Each vent line that exhausts gas from the pressure relief valves of a compressor station must extend to a location where the gas may be discharged without hazard. NFG failed to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extends to a location where the gas may be discharged without hazard. On March 5, 2015, a rupture disc relief device burst, and natural gas was released to the atmosphere through the vent stack. The gas discharged up the side of the M&R building into the eave of the building, located approximately ten feet above the top of the vent piping. The force of this gas flow peeled back the steel flashing from the side of the building. Subsequently, the gas ignited. 120161005_NOPV PCP PCO_08042016 Page 2 of 6#

120161005_NOPV PCP PCO_08042016_text.pdf, page 31-2016-1005 Thus, NFG failed to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extends to a location where the gas may be discharged without hazard. Evidence for this probable violation includes NYSDPS photographs of the relief stack, NFG submitted DOT Form F 7100.2, and maps showing the incident location. 3. §192.617 Investigation of failures Each operator shall establish 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. NFG’s procedures for analyzing accidents and failures failed to include details on how to determine the causes of the failure, and how to minimize the possibility of a recurrence. During the failure investigation, NYSDPS reviewed NFG Procedure Section 11.5 Investigation of Failures, dated 01-13. The procedure states in part that, “All necessary precautions shall be taken to eliminate a recurrence or similar failure.” The procedure does not provide direction for determining the root cause of the failure, or direction on how to minimize the possibility of a recurrence, such as: 1. What is the process for performing the root cause analysis? 2. What is the process for minimizing the possibility of a recurrence? 3. What it the make-up of the investigation team (individual)? 4. What are the qualifications of the personnel on the team? 5. What is the extent of the investigation / how is it determined? 6. What documentation is required? 7. Who is responsible for approving conclusions reached by the investigation team? 8. How are lessons learned applied to other similar facilities? NFG placed the line back in service without correcting the vent issue that resulted in the fire. 4. §192.605 Procedural manual for operations, maintenance, and emergencies (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include procedures for handling abnormal operations. This manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least one each calendar year. This manual must be prepared before operations of a pipeline system commence. Appropriate parts of the manual must be kept at locations where operations and maintenance activities are conducted. NFG failed to follow, for each pipeline, a manual of written procedures for emergency response. Specifically, NFG failed to notify the NRC of a regulator failure and fire, requiring an emergency shut down of the station within the required time frame, as specified in NFG Procedure Section 11.5 Paragraph 11.5.1, dated 07/13. NFG’s Procedure Section 11.5 Department of Transportation Notification Procedures And Federal Energy Regulatory Commission, paragraph 11.5.1 Incidents, states in part that: 120161005_NOPV PCP PCO_08042016 Page 3 of 6#

120161005_NOPV PCP PCO_08042016_text.pdf, page 41-2016-1005 “A. At the earliest practicable moment and not later than one hour following discovery, notice shall be given in accordance with Paragraph (B) of this section for any release of gas that: 1. 2. Caused a death, or personal injury necessitating in-patient hospitalization. Estimated property damage of $50,000 or more, including loss to the operator and others, or both, but excluding cost of gas lost. 3. Unintentional estimated gas loss of three million cubic feet or more. Engineering Services should be contacted to calculate gas loss. 4. Any event that in the judgment of the operator was significant, even though it did not meet the above criteria.” B. Each notice required by Section (A) will be made by telephone to the Superintendent. The Superintendent receiving notice of an incident will contact the National Response Center at 1-800-424-8802. Department of Transportation ("DOT") notification through the National Response Center ("NRC") is required and should be made within one hour of confirmed discovery by the Superintendent for any reportable incident. The local field or station foreman will prepare a draft report on form PHMSA- F-7100.2, which must also be sent to the Superintendent within 5 days of the incident.” On March 6, 2015 at 05:19 (EST), NFG’s Station Manager responded to the Beech Hill Compressor Station, and activated the Emergency Shut Down system. In the afternoon, NYSDPS Staff interviewed the Station Manager. The Station Manager stated that after he ensured that the shutdown was successful, he began to make notification calls to NFG personnel, including Gas Control and the Superintendent. He approximated that these calls were made around 06:00 (EST). NFG notified the NRC at 09:11 (EST). This exceeds the reporting requirement in NFG’s procedures by 2 hours and 11 minutes. Proposed Civil Penalty Under 49 United States Code, § 60122, you are subject to a civil penalty not to exceed $200,000 per violation per day the violation persists up to a maximum of $2,000,000 for a related series of violations. For violations occurring prior to January 4, 2012, the maximum penalty may not exceed $100,000 per violation per day, with a maximum penalty not to exceed $1,000,000 for a related series of violations. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violations and has recommended that you be preliminarily assessed a civil penalty of $202,900 as follows: Item number PENALTY 1 $31,600 2 $149,700 3 $21,600 Warning Items With respect to Item 4, we have reviewed the circumstances and supporting documents involved in this case, and have decided not to conduct additional enforcement action or penalty assessment proceedings at this time. We advise you to promptly correct this item. Failure to do so may result in additional enforcement action. 120161005_NOPV PCP PCO_08042016 Page 4 of 6#

120161005_NOPV PCP PCO_08042016_text.pdf, page 51-2016-1005 Proposed Compliance Order With respect to Items 2 and 3 pursuant to 49 United States Code § 60118, PHMSA proposes to issue a Compliance Order to NFG. Please refer to the Proposed Compliance Order, which is enclosed and made a part of this Notice. Response to this Notice Enclosed as part of this Notice is a document entitled Response Options for Pipeline Operators in Compliance Proceedings. Please refer to this document and note the response options. All material you submit in response to this enforcement action may be made publicly available. If you believe that any portion of your responsive material qualifies for confidential treatment under 5 U.S.C. 552(b), along with the complete original document, you must provide a second copy of the document with the portions you believe qualify for confidential treatment redacted, and an explanation of why you believe the redacted information qualifies for confidential treatment under 5 U.S.C. 552(b). Not responding within 30 days of receipt of this Notice constitutes a waiver of your right to contest the allegations in this Notice, and authorizes the Associate Administrator for Pipeline Safety to find facts as alleged in this Notice without further notice to you and to issue a Final Order. Please submit all correspondence in this matter to Byron Coy, PE, Director, PHMSA Eastern Region, 820 Bear Tavern Road, Suite 103, W. Trenton, NJ 08628. Please refer to CPF 1-2016- 1005 on each document you submit and please, whenever possible, provide a signed PDF copy in electronic format. Smaller files may be emailed to Byron.Coy@dot.gov. Larger files should be sent on a CD accompanied by the original paper copy to the Eastern Region Office. Additionally, if you choose to respond to this (or any other case), please ensure that any response letter pertains solely to one CPF case number. Sincerely, Byron Coy, PE Director, Eastern Region Pipeline and Hazardous Materials Safety Administration Cc: Mr. Kevin Speicher, NYSDPS Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 120161005_NOPV PCP PCO_08042016 Page 5 of 6#

120161005_NOPV PCP PCO_08042016_text.pdf, page 61-2016-1005 PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to National Fuel Gas Supply Corporation (NFG) a Compliance Order incorporating the following remedial requirements to ensure the compliance of NFG with the pipeline safety regulations: 1. In regard to Item 2 of the Notice pertaining to NFG’s failure to ensure that each vent line that exhausts gas from pressure relief valves at compressor stations extends to a location where the gas may be discharged without hazard, for all NFG compressor stations in the State of New York, NFG must submit documentation demonstrating that all relief vent lines do (or modify as necessary) relieve to a location where the gas may be discharged without hazard. 2. In regard to Item 2 of the Notice, NFG will have 180 days after receipt of the Final Order to submit documentation that all relief devices exhaust gas to a location where the gas may be discharged without hazard. 3. In regard to Item 3 of the Notice pertaining to NFG’s procedures for analyzing accidents and failures to include details on how to determine the causes of the failure and how to minimize the possibility of recurrences, NFG must revise the language of its operations and maintenance (O&M) procedures to address failure investigation, including a process for root cause analysis. 4. In regard to Item 3 of the Notice, NFG will have 90 days after receipt of the Final Order to revise its procedures to address failure analysis and follow-up. 5. It is requested (not mandated) that NFG maintains documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Byron Coy, PE, Director, Eastern Region, Pipeline and Hazardous Materials Safety Administration. It is requested that these costs be reported in two categories: 1) total cost associated with preparation/revision of plans, procedures, studies and analyses, and 2) total cost associated with replacements, additions, and other changes to pipeline infrastructure. 120161005_NOPV PCP PCO_08042016 Page 6 of 6#

120161005_Closure Letter_07102020_text.pdf, page 1Official PDFOVERNIGHT EXPRESS DELIVERY July 10, 2020 David Bauer President National Fuel Gas Supply Corp. 6363 Main Street Williamsville, NY 14221 CPF 1-2016-1005 Dear Mr. Bauer: On April 18, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to National Fuel Gas Supply Corp. a Final Order in the above-referenced case. This Order included a Compliance Order and Civil Penalty assessment. Based on our review of the documentation you provided, and confirmation of payment of the civil penalty, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, Robert Burrough Director, Eastern Region Pipeline and Hazardous Materials Safety Administration#

120161005_Final Order_04182019_text.pdf, page 1Official PDFApril 18, 2019 Mr. David Bauer President National Fuel Gas Supply Corporation 6363 Main Street Williamsville, NY 14221 Re: CPF No. 1-2016-1005 Dear Mr. Bauer: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation, assesses a reduced civil penalty of $53,200, and specifies actions that need to be taken by National Fuel Gas Supply Corp. to comply with the pipeline safety regulations. The penalty payment terms are set forth in the Final Order. When the civil penalty has been paid and the terms of the compliance order completed, as determined by the Director, Eastern Region, this enforcement action will be closed. Service of the Final Order by certified mail is effective upon the date of mailing as provided under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Alan K. Mayberry Associate Administrator for Pipeline Safety Enclosure cc: Mr. Robert Burroughs, Director, Eastern Region, Office of Pipeline Safety, PHMSA Ms. Brianne K. Kurdock, Counsel, Babst Calland, 805 15th Street, N.W., Suite 601, Washington, DC 20005 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

120161005_Final Order_04182019_text.pdf, page 2U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 ____________________________________ In the Matter of ) National Fuel Gas Supply Corporation, ) ) ) ) Respondent. ) ____________________________________) CPF No. 1-2016-1005 FINAL ORDER On March 6, 2015, pursuant to 49 U.S.C. § 60117, representatives of the New York State Department of Public Service, as agents for the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), responded to and investigated an incident involving the release of natural gas which ignited at the National Fuel Gas Supply Corporation’s (NFG or Respondent) Beech Hill Compressor Station located in the town of Wellsville, New York. NFG operates a 2,200-mile pipeline system, which includes 33 storage fields and 42 compressor stations, from the U.S.–Canadian border at the Niagara River in New York, into western New York and parts of Pennsylvania.1 As a result of the investigation, the Director, Eastern Region, OPS (Director), issued to Respondent, by letter dated August 4, 2016, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice), which also included a warning pursuant to 49 C.F.R. § 190.205. In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that NFG had committed three violations of 49 C.F.R. Part 192 and proposed assessing a total civil penalty of $202,900 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct two of the alleged violations. The warning item required no further action, but warned the operator to correct the probable violation or face possible future enforcement action. Following a request for an extension of time to respond which was granted, NFG responded to the Notice by letter dated September 30, 2016 (Response). NFG contested the allegations and requested a hearing. NFG provided a pre-hearing submission by letter dated May 1, 2017, and a hearing was subsequently held on May 11, 2017, in West Trenton, New Jersey, before a PHMSA Presiding Official. At the hearing, which was transcribed, Respondent was represented by counsel. After the hearing, both parties provided a post-hearing submission on June 12, 2017 (NFG Closing and OPS Closing). The Director provided a recommendation dated August 10, 1 Pipeline Safety Violation Report (Violation Report), (Aug. 4, 2016) (on file with PHMSA), at 1; https://www nationalfuelgas.com/supply/ (last accessed Nov. 9, 2018).#

120161005_Final Order_04182019_text.pdf, page 3CPF No. 1-2016-1005 Page 2 2017, and NFG provided a reply to the recommendation dated September 8, 2017. FINDINGS OF VIOLATION The Notice alleged that Respondent violated 49 C.F.R. Part 192, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.169(a), which states: § 192.169 Compressor stations: Pressure limiting devices. (a) Each compressor station must have pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the maximum allowable operating pressure of the station piping and equipment is not exceeded by more than 10 percent. The Notice alleged that Respondent violated 49 C.F.R. § 192.169(a) by failing to ensure that the Beech Hill Compressor Station had pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the maximum allowable operating pressure (MAOP) of the station piping and equipment was not exceeded by more than 10 percent. Specifically, the Notice alleged that the MAOP of a gas line at the station (300 psig) reached 341 psig on March 5, 2015, exceeding the maximum by more than 10 percent. In its Response and at the hearing, NFG did not contest the fact that the pressure relief device in question did not have adequate sensitivity to ensure that the MAOP was not exceeded by more than 10 percent.2 However, Respondent argued that the regulation should be read as two separate requirements, one for sensitivity and one for capacity, and that OPS must meet the burden of proof for each.3 NFG further argued that OPS failed to do so with respect to the capacity requirement and contended that, as a result, this portion of the alleged violation should be withdrawn and the proposed civil penalty be reduced accordingly.4 OPS disagreed, stating that the regulation required the device to have both sufficient capacity and sensitivity and the failure to meet either one of these constituted a violation of the regulation.5 In general, a regulation such as § 192.169(a), which consists of a single sentence, should be read in its entirety. With respect to NFG’s argument that the alleged violation must be bifurcated and both lack of capacity and lack of sensitivity must be proven, Respondent cited prior PHMSA enforcement cases that did not limit PHMSA from issuing multiple citations for violations of different parts of a regulation.6 In addition to involving very different regulations, however, the 2 Hearing Transcript at 99. 3 NFG Closing at 28. 4 NFG Closing at 29. 5 Hearing Transcript at 99-100. 6 NFG Closing at 28.#

120161005_Final Order_04182019_text.pdf, page 4CPF No. 1-2016-1005 Page 3 cases cited by Respondent do not establish the proposition that a regulation having multiple conjunctive requirements requires proof that the operator failed to meet every aspect of them. To the contrary, they are examples of cases where an operator was cited more than once under the same code section for violating multiple requirements. The purpose of the regulation at issue is to prevent significant overpressure events which can damage the pipe and risk failure. As OPS correctly noted, “A device with sufficient capacity but insufficient sensitivity cannot prevent an initial pressure increase above 110 percent MAOP, while a device with sufficient sensitivity but insufficient capacity cannot adequately relieve overpressure after the device is triggered.”7 NFG acknowledged that the MAOP was exceeded by more than 10 percent and did not contest the fact that the pressure relief device in question did not have adequate sensitivity to ensure that the MAOP was not exceeded by more than 10 percent. Accordingly, after considering all of the evidence and the legal issues presented, I find that Respondent violated 49 C.F.R. § 192.169(a) by failing to ensure that the Beech Hill Compressor Station had pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the MAOP of the station piping and equipment was not exceeded by more than 10 percent. To the extent that Respondent’s argument is relevant to the assessment of a civil penalty, it will be addressed in the Assessment of Penalty section below. Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.169(b), which states: § 192.169 Compressor stations: Pressure limiting devices. (a)… (b) Each vent line that exhausts gas from the pressure relief valves of a compressor station must extend to a location where the gas may be discharged without hazard. The Notice alleged that Respondent violated 49 C.F.R. § 192.169(b) by failing to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extended to a location where the gas may be discharged without hazard. Specifically, the Notice alleged that the vent line that exhausts gas at the Beech Hill Compressor Station discharged gas up the side of the M&R building into the eaves located approximately ten feet above the top of the vent piping, and that gas was discharged with a force that peeled back the steel flashing on the building and that the gas subsequently ignited. In its Response and at the hearing, NFG stated that there was no regulatory requirement that all such vent stacks must clear the roof line and any finding that § 192.169(b) involves a height requirement would be arbitrary and capricious.8 NFG stated that the stack had been in place for 36 years and no prior inspections including one only eight months prior to the incident had identified a concern with the stack.9 NFG stated that the stack was not near a walkway, the 7 OPS Closing at 3. 8 NFG Pre-hearing Submittal at 20. 9 Hearing Transcript at 19-21.#

120161005_Final Order_04182019_text.pdf, page 5CPF No. 1-2016-1005 Page 4 building was not combustible, there was no overhang, and no prior inspection had identified a concern.10 NFG further argued that PHMSA did not prove that the vent stack design caused the fire. Finally, Respondent argued that even if the stack design was inconsistent with the regulation, the applicable five-year statute of limitations had long since run and it could not be penalized for the violation.11 With respect to NFG’s argument that there was no prescriptive code requirement that all vent stacks must clear the roof line, it does not necessarily follow that no violation occurred. The regulation at issue is a performance-based regulation. In this case, in light of all the factors that go into vent stack design, the designers may have proceeded on the assumption that a discharge from this vent stack would not cause a hazard.12 There is no question, however, that the discharge in this instance through this stack did cause a hazard. If a design used by an operator fails to meet a performance standard, yet that operator could not be cited, it would render the standard virtually meaningless. Therefore, I cannot accept NFG’s argument that the failure to achieve the performance deemed to be acceptable under § 192.169(b) does not equate to failure to meet the regulatory requirement. As for Respondent’s argument that under § 192.169(b) PHMSA was required to prove that the vent stack design caused the ignition, I disagree. The failure to adequately vent gas away from a gas facility such as a compressor station presents a hazard regardless of the source of the ignition when an incident involves ignition. With respect to NFG’s argument that the stack had been in place for many years and no prior inspection had resulted in a citation does not negate the non-compliance.13 It is well established that the absence of a citation in a prior inspection does not guarantee that a future inspection or accident investigation might allege a violation.14 Accordingly, after considering all of the evidence and the legal issues presented, I find that Respondent violated 49 C.F.R. § 192.169(b) by failing to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extended to a location where the gas may be discharged without hazard. Respondent’s argument concerning whether it could be penalized for this violation given the applicable statute of limitations is addressed in the Assessment of Penalty section below. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.617, which states: § 192.617 Investigation of failures. Each operator shall establish procedures for analyzing 10 Hearing Transcript at 23-25. 11 NFG Closing at 2-3. 12 Hearing Transcript at 23-24. 13 In some circumstances, this argument may be relevant to mitigating a civil penalty assessment if one were involved. 14 See ConocoPhillips Pipeline Co., Final Order, CPF No. 3-2005-5015, 2010 WL 6531628, at 2 (Sept. 13, 2010).#

120161005_Final Order_04182019_text.pdf, page 6CPF No. 1-2016-1005 Page 5 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. The Notice alleged that Respondent violated 49 C.F.R. § 192.617 by failing to have procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence. Specifically, the Notice alleged that NFG’s Procedure Section 11.5.4, Investigation of Failures, stated in relevant part that “All necessary precautions shall be taken to eliminate a recurrence or similar failure.” but the procedures did not function to ensure the root cause of the incident was identified and the possibility of recurrence was minimized. In its Response and at the hearing, NFG explained that its personnel had completed a “Gas System Reliability Report” (SRR) pursuant to Procedure Section 5.1.1 which involved producing a description of the failure and the remedial steps subsequently taken before returning the line to service including replacing the failed regulator.15 OPS noted that Section 11.5.4 did not contain a cross-reference to Section 5.1.1.16 While Section 11.5.4 did briefly mention reviewing the operating conditions at the time of a failure and the possible use of lab analysis to determine the cause of failure for “blowouts,” OPS is correct that basic failure analysis implementation steps were absent and Section 11.5.4 did not cross-reference the SRR report provision. Moreover, while NFG stated that it later evaluated its other compressor stations for venting hazards, there was nothing in Section 11.5.4 to ensure responsibility for documenting this process by a qualified individual having responsibility for approving any decisions made or actions taken.17 It appears that no documentation of NFG’s evaluation of its other compressor stations for the possible presence of the root cause of the Beech Hill incident—which was not identified before that line was placed back into service— was provided, illustrating the importance of having such procedures to meet the requirement of ensuring the possibility of recurrence is minimized. NFG’s argument that it completed the SRR and replaced the regulator does not negate the failure to meet the requirements of § 192.617 by failing to have procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence. Accordingly, after considering all of the evidence and the legal issues presented, I find that Respondent violated 49 C.F.R. § 192.617 by failing to have procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence. These findings of violation will be considered prior offenses in any subsequent enforcement 15 NFG Closing at 19. 16 Hearing Transcript at 75. 17 NFG Closing at 20.#

120161005_Final Order_04182019_text.pdf, page 7CPF No. 1-2016-1005 Page 6 action taken against Respondent. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed $200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any related series of violations.18 In determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature, circumstances, and gravity of the violation, including adverse impact on the environment; the degree of Respondent’s culpability; the history of Respondent’s prior offenses; any effect that the penalty may have on its ability to continue doing business; and the good faith of Respondent in attempting to comply with the pipeline safety regulations. In addition, I may consider the economic benefit gained from the violation without any reduction because of subsequent damages, and such other matters as justice may require. The Notice proposed a total civil penalty of $202,900 for the violations cited above. Item 1: The Notice proposed a civil penalty of $31,600 for Respondent’s violation of 49 C.F.R. § 192.169(a), for failing to ensure that the Beech Hill Compressor Station had pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the MAOP of the station piping and equipment was not exceeded by more than 10 percent. Respondent disagreed with the amount of the proposed civil penalty and questioned whether it was supported by the penalty consideration factors in the Pipeline Safety Act and § 190.225 regulations. With respect to the nature and circumstances of NFG’s violation of § 192.169(b), ensuring that MAOP is not exceeded by more than 10 percent is a basic code requirement. With respect to the gravity of the offense, ensuring that MAOP is not exceeded by more than 10 percent is a key part of safety. If overpressure events occur, they can compromise the integrity of piping and accelerate the failure of any defects in steel pipe. In this instance, a release of gas and ignition were involved. Notably, however, the gravity factor for this violation was not assigned at a high level that would correspond to being a causal factor in an accident, but rather at a medium-to- lower level.19 With respect to culpability, there were no circumstances beyond Respondent’s control that prevented it from complying with the regulation and action was not taken to achieve compliance until after the violation was discovered by OPS. As discussed above, I did not agree with Respondent’s argument that the violation must be bifurcated and lack of capacity and lack of sensitivity read as two separate requirements for purposes of finding a violation. For the same reasons, I see no justification for a reduction in the civil penalty amount proposed in the Notice for this violation. I further find that the record supports the points assigned for prior offenses and good faith. Respondent has presented no information or arguments that would warrant a reduction in the 18 These amounts are adjusted annually for inflation. See, e.g., Pipeline Safety: Inflation Adjustment of Maximum Civil Penalties, 82 Fed. Reg. 19325 (April 27, 2017). 19 Violation Report at 10.#

120161005_Final Order_04182019_text.pdf, page 8CPF No. 1-2016-1005 Page 7 civil penalty amount proposed in the Notice for this violation. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $31,600 for violation of 49 C.F.R. § 192.169(a). Item 2: The Notice proposed a civil penalty of $149,700 for Respondent’s violation of 49 C.F.R. § 192.169(b), for failing to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extended to a location where the gas may be discharged without hazard. In its response and at the hearing, NFG argued that under 28 U.S.C. § 2462, PHMSA was time- barred from pursuing “…an action, suit, or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise…unless commenced within five years from the date when the claim first accrued…”.20 NFG contended that the claim first accrued when the vent stack and the rest of the station were designed and constructed in 1980.21 OPS disagreed and argued that under 49 U.S.C. § 60122, a new violation occurred every day that that the Beech Hill facility was not in compliance. OPS’ argument amounts to the proposition that a violation of a design requirement such as § 192.169(a) can be penalized even decades later. The application of the statute of limitations in regulatory proceedings such as this is governed by 3M Company v. Browner, 17 F.3d 1453, a major D.C. Circuit Court of Appeals case holding that the statute of limitations for regulatory violations generally begins running at the time a violation occurs, not the time it was discovered by the government which is often much later. The court explains that the purpose of the statute of limitations, disallowing stale cases where the accused can no longer properly defend itself, would be frustrated if regulated entities remained exposed to penalties for decades after a discrete violation occurs.22 As applied to most typical pipeline enforcement matters involving ongoing, periodic operating and maintenance requirements, OPS would be correct that § 60122 means a new violation occurs each day the noncompliance is present and as a result are generally not time barred as long as the noncompliance cited does not extend back more than five years from the commencement of the case.23 This provision, however, only applies if the violation actually repeats itself periodically. The particular violation in this case involves a design and construction requirement. As NFG correctly pointed out, design requirements have a very different nature than ongoing operating and maintenance requirements and a design decision is a discrete event that occurred at one time in the past (although it should be noted that even design and construction requirement violations can be subject to time of discovery if the noncompliance is latent or undiscoverable by the government). This instance, however, presents the relatively rare circumstance where the violation both involved a design requirement and was discoverable by the government. In these narrow circumstances, NFG is correct that failing to apply the five-year period from the time a 20 NFG Closing at 3. 21 Id. 22 See Sierra Club v. Oklahoma Gas and Electric Company, 816 F.3d 666 (10th Cir. 2016). 23 For purposes of applying 28 U.S.C. § 2462, commencement of the case means issuance of the Notice.#

120161005_Final Order_04182019_text.pdf, page 9CPF No. 1-2016-1005 Page 8 discoverable design requirement was violated when a facility is built would conflict with the fundamental purpose of the statute of limitations and would be inconsistent with the D.C. Circuit’s holding in the 3M case. Accordingly, OPS’ argument on this point fails and the agency is time-barred from imposing civil penalties against NFG for this particular violation. Based on the foregoing, I withdraw the proposed penalty for violation of 49 C.F.R. § 192.169(b). Because the violation also involved a proposed compliance order, which is a remedial action not a penalty action, the proposed compliance terms for Item 2 are addressed below in the Compliance Order section.24 Item 3: The Notice proposed a civil penalty of $21,600 for Respondent’s violation of 49 C.F.R. § 192.617, for failing to have procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence. Respondent disagreed with the amount of the proposed civil penalty and questioned whether it was supported by the penalty consideration factors in the Pipeline Safety Act and § 190.225 regulations. With respect to the nature and circumstances of NFG’s violation of § 192.617, having procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence is a key part of safety and the non- compliance was discovered by the OPS inspector. With respect to the gravity of the offense, the gravity factor for this violation was assigned at a medium-to-lower level commensurate with the offense.25 With respect to culpability, there were no circumstances beyond Respondent’s control that prevented it from complying with the regulation and NFG was given credit for making some effort to have these procedures, albeit not enough to achieve compliance.26 I further find that the record supports the points assigned for prior offenses and good faith. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $21,600 for violation of 49 C.F.R. § 192.617. In summary, having reviewed the record and considered the assessment criteria for each of the Items cited above, I assess Respondent a total civil penalty of $53,200. Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal Reserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMK-325), Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 S MacArthur Blvd, Oklahoma City, Oklahoma 79169. The Financial Operations Division telephone number is (405) 954-8845. 24 See United States v. Telluride, 146 F.3d at 1248-49. 25 Violation Report at 26. 26 Violation Report at 27.#

120161005_Final Order_04182019_text.pdf, page 10CPF No. 1-2016-1005 Page 9 Failure to pay the $53,200 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a district court of the United States. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 2 and 3 in the Notice for violations of 49 C.F.R. §§ 192.169(b), and 192.617, respectively. Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns or operates a pipeline facility 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 regulations applicable to its operations: 1. With respect to the violation of § 192.169(b) (Item 2), within 180 days following receipt of this order, Respondent must submit documentation to the Director showing that all vent lines that exhaust gas from the pressure relief valves at all compressor stations located in the State of New York extend to a location where the gas may be discharged without hazard. 2. With respect to the violation of § 192.617 (Item 3), within 90 days following receipt of this order, Respondent must submit documentation to the Director showing that it has revised its procedures for analyzing accidents and failures to set forth the process steps for how to determine the causes of the failure including analyzing the root cause and minimizing the possibility of a recurrence. The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by the Respondent and demonstrating good cause for an extension. It is requested (not mandated) that Respondent maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to the Director. It is requested that these costs be reported in two categories: (1) total cost associated with preparation/revision of plans, procedures, studies and analyses; and (2) total cost associated with replacements, additions and other changes to pipeline infrastructure. Failure to comply with this Order may result in the administrative assessment of civil penalties not to exceed $200,000, as adjusted for inflation (49 C.F.R. § 190.223), for each violation for each day the violation continues or in referral to the Attorney General for appropriate relief in a district court of the United States.#

120161005_Final Order_04182019_text.pdf, page 11CPF No. 1-2016-1005 Page 10 WARNING ITEM With respect to Item 4, the Notice alleged a probable violation of Part 192 but did not propose a civil penalty or compliance order for this item. Therefore, this is considered to be a warning item. The warning was for: 49 C.F.R. § 192.605(a) (Item 4) ─ Respondent’s alleged failure to follow its procedure for telephonic reporting the release to the National Response Center at the earliest practicable moment but not later than one hour following discovery. NFG presented information in its Response showing that it had taken certain actions to address the cited item. If OPS finds a violation of this provision in a subsequent inspection, Respondent may be subject to future enforcement action. Under 49 C.F.R. § 190.243, Respondent may submit a petition for reconsideration of this Final Order to the Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address, no later than 20 days after receipt of service of this Final Order by Respondent. Should Respondent elect to do so, the petition must contain a statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays the payment of any civil penalty assessed. The other terms of the order, including corrective action, remain in effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. April 18, 2019 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 1Official PDFNovember 15, 2019 Mr. David Bauer President and Chief Executive Officer National Fuel Gas Supply Corporation 6363 Main Street Williamsville, New York 14221 Re: CPF No. 1-2016-1005 Dear Mr. Bauer: Enclosed please find the Decision on the Petition for Reconsideration filed by National Fuel Gas Supply Corporation in the above-referenced case. For the reasons explained therein, the Decision denies your Petition for Reconsideration. This Decision constitutes the final administrative action in this preceding. Service of the Decision by certified mail is deemed effective upon the date of mailing, or as otherwise provided under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Alan K. Mayberry Associate Administrator Pipeline Safety Enclosure cc: Mr. Robert Burrough, Director, Eastern Region, Office of Pipeline Safety, PHMSA Ms. Sarah J. Mugel, General Counsel, National Fuel Gas Supply Corporation Ms. Brianne K. Kurdock, Counsel, Babst Calland, 805 15th Street, NW, Suite 601, Washington, DC 20005 CERTIFIED MAIL – RETURN RECEIPT REQUESTED#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 2U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 ____________________________________ ) In the Matter of ) ) National Fuel Gas Supply Corporation, ) CPF No. 1-2016-1005 ) Petitioner. ) ____________________________________) DECISION ON PETITION FOR RECONSIDERATION In an April 18, 2019 Final Order, I found that National Fuel Gas Supply Corporation (NFG or Petitioner) had committed three separate violations of 49 C.F.R. Part 192 following an investigation of an incident involving the release of natural gas which ignited at a gas compressor station operated by Petitioner in Wellsville, New York.1 I assessed a civil penalty of $31,600 for violation of 49 C.F.R. § 192.169(a) (Item 1). I withdrew the proposed civil penalty of $149,700 for violation of 49 C.F.R. § 192.169(b) on the grounds that the penalty was time barred; however, I required that NFG take certain measures to remedy the non-compliance with this regulation (Item 2). Finally, I assessed a civil penalty of $21,600 for violation of 49 C.F.R. § 192.617 and required that NFG to take certain measures to remedy the non-compliance with this regulation (Item 3). On May 9, 2019, NFG submitted a Petition for Reconsideration (Petition) of the Final Order.2 The Petition seeks reconsideration of Items 2 and 3 in the Final Order and requests that these items be withdrawn.3 Having considered the full record and the legal arguments presented in the Petition, I am denying the Petition and affirming the Final Order without modification. Background On March 5, 2015, a release of natural gas occurred at the Beech Hill Compressor Station operated by Petitioner in Wellsville, New York. The release was caused by a component failure that resulted in an over-pressurization event. The escaping gas ignited and resulted in a flash fire on the exterior of the compressor station facility. In accordance with the Pipeline Safety Act (49 U.S.C. 60101 et. seq.) and the regulations issued thereunder, representatives of the New York State Department of Public Service, as agents for the Pipeline and Hazardous Materials Safety 1 National Fuel Gas Supply Corporation, Final Order, CPF No. 1-2016-1005 (April 18, 2019) (Final Order). 2 Letter from Ms. Brianne K. Kurdock, Counsel for National Fuel Gas Supply Corp., to Mr. Alan K. Mayberry, Associate Administrator for Pipeline Safety, PHMSA, dated May 9, 2019 (Petition). 3 Id.#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 3CPF No. 1-2016-1005 Page 2 Administration (PHMSA), Office of Pipeline Safety (OPS), responded to and investigated the incident. As a result of the investigation, on August 4, 2016, the Director, Eastern Region, OPS (Director) issued a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice) to Petitioner.4 In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that NFG had committed three separate violations of 49 C.F.R. Part 192, proposed that a total civil penalty of $202,900 be assessed for the alleged violations, and proposed requiring NFG to take certain measures to remedy two of the alleged violations.5 NFG responded to the Notice by letter dated September 30, 2016. NFG contested the allegations and requested an administrative hearing. A hearing was subsequently held on May 11, 2017, in West Trenton, New Jersey before a PHMSA Presiding Official. On April 18, 2019, I issued a Final Order in this case. With respect to Item 1, I determined that Petitioner violated 49 C.F.R. § 192.169(a) by failing to ensure that the Beech Hill Compressor Station had pressure relief or other suitable protective devices of sufficient capacity and sensitivity to ensure that the maximum allowable operating pressure (MAOP) of the station piping and equipment was not exceeded by more than 10 percent. In assessing the civil penalty for this item, I applied the statutory civil penalty assessment factors including the nature, circumstances, gravity, and culpability of this violation.6 I noted that ensuring that the MAOP is not exceeded by more than 10 percent is a basic code requirement and a key part of safety. If overpressure events occur, they can compromise the integrity of piping and accelerate the failure of any defects in steel pipes. In this instance, a release of gas and ignition were involved. Accordingly, I found that the proposed civil penalty of $31,600 was supported by the record. With respect to Item 2, Petitioner violated 49 C.F.R. § 192.169(b) by failing to ensure that each vent line that exhausts gas from the pressure relief valves of a compressor station extended to a location where the gas may be discharged without hazard. Although the Notice had proposed a civil penalty of $149,700 for this item, I did not assess a penalty because the cited regulation specified a design requirement and the Beech Hill facility had been designed and constructed in 1980, well over five years prior to the commencement of this case. Accordingly, I found that under 28 U.S.C. § 2462, PHMSA was time-barred from penalizing NFG for this violation. The requirement for NFG to take certain measures to remedy the noncompliance was maintained as proposed in the Notice. With respect to Item 3, Petitioner violated 49 C.F.R. § 192.617 by failing to have procedures for analyzing accidents and failures that included details on how to determine the causes of the failure and minimizing the possibility of a recurrence. In assessing the civil penalty for this item, I applied the civil penalty assessment factors including the nature, circumstances, gravity, and culpability of this violation. I noted that having procedures for analyzing accidents and failures that include details on how to determine the causes of the failure and minimizing the possibility of a recurrence is a key part of safety and found that the proposed civil penalty amount in the 4 Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order, CPF No. 1-2016-1005 (August 4, 2016). 5 The proposed civil penalty amounts for the three violations were $31,600, $149,700, and $21,600 respectively. The Notice also alleged non-compliance with a fourth regulation which was reduced to a warning item. 6 49 U.S.C. § 60122(b).#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 4CPF No. 1-2016-1005 Page 3 Notice had already given NFG credit for making some effort to have these procedures, albeit not enough to achieve compliance. Accordingly, I found that the proposed civil penalty of $21,600 was supported by the record. The requirement for NFG to take certain measures to remedy the noncompliance was maintained as proposed in the Notice. On May 9, 2019, NFG submitted a petition requesting reconsideration of the remedial requirement for Item 2, and the civil penalty of $21,600 for Item 3. Standard of Review Under 49 C.F.R. § 190.243, a respondent is afforded the right to petition the Associate Administrator for reconsideration of a Final Order. However, that right is not an appeal or an opportunity to seek a de novo review of the record.7 It is a venue for presenting the Associate Administrator with information that was not previously available or requesting that any errors in the Final Order be corrected. Requests for consideration of additional facts or arguments must be supported by a statement of reasons as to why those facts or arguments were not presented prior to the issuance of the Final Order. Repetitious information or arguments will not be considered. Analysis With respect to Item 2, the Notice proposed a civil penalty of $149,700 be assessed for having a vent line that did not extend to a location where the gas may be discharged without hazard. As explained above, however, I completely withdrew this proposed civil penalty at the Final Order stage because I agreed with NFG’s argument at the hearing that under 28 U.S.C. § 2462, PHMSA was time-barred from penalizing NFG for this violation.8 In its Petition, however, NFG argues that in addition to the civil penalty being time barred, the compliance order requiring NFG to take certain measures to remedy the noncompliance is also time barred. Petitioner cites a U.S. Supreme Court case, Kokesh v. Security and Exchange Commission, in which the court found that a claim by the Securities and Exchange Commission (SEC) for the disgorgement of $34.9 million by Mr. Kokesh, an investment advisor who fraudulently misappropriated funds and violated securities laws, constituted a penalty for purposes of 28 U.S.C. § 2462.9 The court found that depriving a violator of a public law of his ill-gotten gains was done by the SEC for the primary purpose of deterrence and therefore constituted a penalty. The Kokesh case establishes that disgorgement is punitive. The issue presented in this case is whether a safety-related regulatory compliance order is punitive. The remedial requirement that Petitioner argues should constitute a penalty in this case reads, in its entirety: With respect to the violation of § 192.169(b) (Item 2), within 180 days following receipt of this order, Respondent must submit documentation 7 49 C.F.R. § 190.243(a)-(d). 8 Final Order, at 7-8. 9 Kokesh v. SEC, 137 S.Ct. 1635 (2017).#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 5CPF No. 1-2016-1005 Page 4 to the Director showing that all vent lines that exhaust gas from the pressure relief valves at all compressor stations located in the State of New York extend to a location where the gas may be discharged without hazard. Petitioner argues that PHMSA’s remedial requirement seeking documentation showing that vent stack compliance is being achieved at its other vented compressor stations to ensure that a hazard is not present should be treated as a “penalty” in the same manner as a $34.9 million disgorgement action under the securities laws. While Petitioner is certainly correct that the word “penalty” in 28 U.S.C. § 2462 is not limited to monetary penalties, the question is whether the remedial requirement in this particular case meets the Supreme Court’s test for determining what constitutes a penalty for purposes of 28 U.S.C. § 2462. First, we must recognize that the Kokesh disgorgement proceeding involved an entirely different remedial scheme and materially different statutory authorities. Disgorgement is an equitable remedy and often exceeds the profits gained leaving the defendant worse off which is a major factor in determining that disgorgement constitutes a penalty. Unlike the SEC, however, PHMSA is a public safety agency. Its mission is to protect people, property, and the environment from the risks posed by the transportation of flammable and hazardous products by pipelines and pipeline facilities.10 Ensuring compliance with safety requirements, whether issued by a state fire marshal or a federal agency such as PHMSA, is very different from SEC disgorgement actions involving the collection of and recoupment of ill-gotten monetary gains from persons who defraud investors and commit securities violations. PHMSA’s statutory authority to issue a compliance order is found at 49 U.S.C. § 60118(b) and reads: The Secretary of Transportation may issue orders directing compliance with this chapter, an order under section 60126, or a regulation prescribed under this chapter. An order shall state clearly the action a person must take to comply. Therefore, Congress expressly authorized the Secretary to issue compliance orders when determined to be appropriate by the Secretary. While PHMSA also has statutory authority to assess administrative civil penalties (which I agreed were time barred in this case), this civil penalty authority is found in 49 U.S.C. 60122(a), a completely separate section of title 49. Notably, the civil penalty authority in 49 U.S.C. § 60122 includes a tool for depriving violators of ill-gotten gains known as the “economic benefit” calculation option in connection with a civil penalty proceeding.11 That authority was never used in this case, not even in the proposed civil penalty in the Notice which was eliminated. PHMSA’s order in this case seeks to ensure that any identified deviations from federal safety standards are rectified in order to protect the public’s safety. Petitioner contended that the 10 49 U.S.C. § 60102(a). 11 The economic benefit authority is found at 49 U.S.C. § 60122(b)(2)(A).#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 6CPF No. 1-2016-1005 Page 5 remedial requirement was done for the purpose of deterrence and cited section 3, paragraph 3.1.1.4 of PHMSA’s Enforcement Manual which outlines PHMSA’s compliance order authority.12 However, the word “deterrence” does not actually appear in this provision, nor does it appear in 49 U.S.C. § 60118(b) or anywhere else in the federal pipeline safety laws or regulations.13 Petitioner also asserted its belief that a compliance order is intended to punish the Respondent. Petitioner, however, could not be more wrong on this point. As the Associate Administrator for Pipeline Safety, I can attest to the fact that correcting a current lack of compliance to achieve safety and protect the public is the sole reason for issuing a compliance order. 14 Petitioner also argues that an operator in its position cannot be cited for a regulatory violation at all because it would stigmatize the pipeline company by labeling it as a wrongdoer.15 This argument may be material in the case of an individual person who loses a securities license for non-compliance with an applicable regulation because a finding of violation itself could be seen as stigmatizing that person. It could potentially harm their future employment prospects to an extent that no regulatory relief of any type could be sought without the implication of punishment. Such a rationale, however, is not material in the case of a large oil and gas pipeline company that operates hundreds or thousands of miles of pipelines. Due to the inherent risks associated with the transportation of large volumes of flammable, toxic, and otherwise hazardous substances, operators are subject to a complex and multilayered regulatory regime involving regular inspections and compliance proceedings. It would not be realistic for a large pipeline operator such as NFG to expect that it will have zero history of citations, and one citation more- or-less does not significantly alter the company’s business prospects. Within this context, the company’s perceived reputation is simply irrelevant. The record in this case does not provide a basis to conclude that the remedial requirement regarding the gas compressor station vents was either ordered as a punishment or for deterrence. Rather the compliance order was intended to ensure that any known safety hazards to the public are eliminated. Accordingly, the remedial requirement is not time barred by 28 U.S.C. § 2462. It should be emphasized that the purpose of the compliance order in this case is to ensure that Petitioner’s gas vent stacks are compliant with applicable regulations and that any documented deviations are rectified. Such agency action was not done for the purpose of deterrence, does not constitute a penalty, and the Petitioner earns no right to operate a pipeline system in violation of existing safety regulations in perpetuity merely because the safety deficiency has existed for more than five years. 12 Petition, at 4. 13 It is not disputed that a monetary civil penalty under 49 U.S.C. § 60122(a) is intended at least in part to have a deterrent effect. 14 While a failure to satisfy a compliance order may entail consequences in a future inspection, such a directive falls outside of the scope of the Supreme Court’s “punitive” definition in Kokesh. 15 Petition, at 6. Petitioner inaccurately characterized PHMSA case as merely seeking declaratory relief and suggested that PHMSA could utilize a Corrective Action Order or a Safety Order because these actions are based on a finding that an operator’s facility is hazardous as opposed to being out of compliance. The hypothetical reputational damage Petitioner purports would be associated with non-compliance would be no less so if PHMSA had utilized a Corrective Action Orders or Safety Order and labeled its facility as “a hazardous facility.”#

120161005_Decision on Petition for Reconsideration_11152019_text.pdf, page 7CPF No. 1-2016-1005 Page 6 Item 3 With respect to Item 3, Petitioner contends that the $21,600 civil penalty assessed for its violation of 49 C.F.R. § 192.617 by lacking detailed written procedures for analyzing accidents and failures should be reduced or eliminated because its written procedures had been reviewed in previous inspections and proceedings and it had not been penalized previously. In its Petition, NFG asserted that in a 2012 enforcement case CPF 1-2012-1023M, PHMSA reviewed and deemed acceptable the same procedure at issue in Item 3. NFG contended that this 2012 proceeding estopped PHMSA from any future finding of non-compliance with its procedures in this area. While PHMSA’s February 20, 2013 Closure Letter in case CPF 1-2012-1023M did state that NFG had corrected the inadequacies outlined in PHMSA’s Notice of Amendment, PHMSA did not state that Petitioner did not need to make any further changes to § 11.5.4. In that case, PHMSA reviewed NFG’s procedures, alleged a specific failure to provide adequate guidance in § 11.5.4 concerning sample collection processes, and later accepted NFG’s revised sample- collection procedures as a correction to the specified inadequacy. PHMSA’s statements in that closure letter did not constitute a blanket approval of all NFG’s procedures, nor did it absolve NFG of any future violations concerning the procedures that were inspected. Different inspections tend to focus on different aspects of the pipeline operation and the manner in which the procedures are carried out. It is well established in prior PHMSA enforcement actions that the absence of a finding of non-compliance in one inspection does not preclude a future enforcement action if non-compliance is later identified.16 RELIEF DENIED Based on the information provided in the Petition, a review of the record, and for the reasons stated above, I am affirming the Final Order without modification. The Request to Stay Paragraph 1 of the Compliance Order on pages 9-11 of the Petition is dismissed as moot. This Decision is the final administrative action in this proceeding. November 15, 2019 _____________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety 16 See ConocoPhillips Pipeline Co., Final Order, CPF No. 3-2005-5015, 2010 WL 6531628, at *2 (PHMSA Sept. 13, 2010) (“review of procedures during an inspection [does not] constitute approval of procedures by [the Office of Pipeline Safety]”).#