MAGELLAN TERMINALS HOLDINGS, LP — Notice of Amendment

120166001M_Order Directing Amendment_04182017_text.pdf, page 1Official PDFApril 18, 2017 Mr. Michael N. Mears Chairman of the Board, President and Chief Executive Officer Magellan Terminals Holdings, LP One Williams Center, Mail Drop 27 Tulsa, OK 74172 Re: CPF No. 1-2016-6001M Dear Mr. Mears: Enclosed please find the Order Directing Amendment issued in the above-referenced case. It makes a finding of inadequate procedures and requires that Magellan amend certain of its operating and maintenance procedures. In addition, it finds that Magellan has addressed certain inadequacies in its procedures that were cited in the Notice of Amendment. When the amendment of procedures is completed, as determined by the Director, Eastern Region, this enforcement action will be closed. Service of the Final Order is deemed effective 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 Burrough, Acting Director, Eastern Region, OPS Mr. Michael Pearson, VP, Technical Services, Magellan Terminals Holdings, LP CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

120166001M_Order Directing Amendment_04182017_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 ) Magellan Terminals Holdings, LP, ) CPF No. 1-2016-6001M a subsidiary of Magellan Midstream ) Partners, LP, ) ) ) ) Respondent. ) ____________________________________) ORDER DIRECTING AMENDMENT From May 18, 2015, through May 22, 2015, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted an on-site pipeline safety inspection of the procedures of Magellan Terminals Holdings, LP (Magellan or Respondent), in New Haven, Connecticut. Respondent is a subsidiary of Magellan Midstream Partners, LP, which operates a 9,700-mile refined-products pipeline system with 53 connected terminals and 27 independent terminals, as well as a 1,100- mile ammonia pipeline system.1 Magellan Midstream Partners, LP, also owns 2,100 miles of crude-oil pipelines and storage facilities, and operates five marine terminals.2 As a result of the inspection, the Director, Eastern Region, OPS (Director), issued to Respondent, by letter dated December 15, 2016, a Notice of Amendment (Notice). The Notice alleged certain inadequacies in Magellan’s procedures for operations, maintenance and emergencies, and proposed, in accordance with 49 C.F.R. § 190.206, that Respondent amend its procedures. Magellan responded to the Notice by letter dated January 13, 2017 (Response). Respondent contested Item 1 in the Notice and submitted amended procedures for Items 2 and 3 in the Notice. Respondent did not request a hearing and therefore has waived its right to one. The Director has reviewed the amended procedures submitted by Respondent on January 13, 2017. Based on the result of this review, I find that Respondent’s procedures were inadequate but that its amendments adequately address Items 2 and 3 in the Notice. For the reasons discussed below, I find that the procedures in Item 1 are inadequate and must be amended. 1 Magellan Midstream Partners, LP website, available at http://www.magellanlp.com/AboutUs/Default.aspx (last accessed February 21, 2017). 2 Id.#

120166001M_Order Directing Amendment_04182017_text.pdf, page 3CPF No. 1-2016-6001M Page 2 FINDING OF INADEQUATE PROCEDURES The Notice alleged certain inadequacies in Respondent’s procedures. Respondent contested the allegation with respect to Item 1 in the Notice. I have reviewed the procedure and considered the following factors: relevant available pipeline safety data; whether the plan is adequate for Respondent’s unique facilities and for the facilities’ particular location; the reasonableness of the procedure; and the extent to which the procedure contributes to public safety. Upon review of the procedure under 49 C.F.R. § 190.206, I find the following procedure to be inadequate, as follows: Item 1: The Notice alleged that Respondent’s procedures are inadequate to assure safe operation of its pipeline facilities with respect to 49 C.F.R. § 195.310(b), which states: § 195.310 Records. (a) A record must be made of each pressure test required by this subpart . . . . (b) The record required by paragraph (a) of this section must include: (1) The pressure recording charts; (2) Test instrument calibration data; (3) The name of the operator, the name of the person responsible for making the test, and the name of the test company used, if any; (4) The date and time of the test; (5) The minimum test pressure; (6) The test medium; (7) A description of the facility tested and the test apparatus; (8) An explanation of any pressure discontinuities, including test failures, that appear on the pressure recording charts; (9) Where elevation differences in the section under test exceed 100 feet (30 meters), a profile of the pipeline that shows the elevation and test sites over the entire length of the test section; and (10) Temperature of the test medium or pipe during the test period. The Notice alleged that Respondent’s procedure, 7.10-ADM-007 – Aboveground Storage Tank Hydrostatic Testing Procedure, failed to include sufficient guidance on documenting hydrostatic testing of breakout tanks when tested in accordance with § 195.432.3 Section 2.4 of 7.10-ADM- 007 entitled Documentation states, in part, that “[h]ydrostatic test results shall be recorded on the Hydrostatic Test Form . . .” However, neither the procedure nor the form addresses certain records of the test. For example, when performing a hydrostatic test, § 195.310(b) lists records that must be kept, including: pressure-recording charts; test instrument-calibration data; minimum test pressure; an explanation of any pressure discontinuities, including test failures, that appear on the pressure-recording charts; and, where elevation differences in the section under test exceed 100 feet (30 meters), a profile of the pipeline showing the elevation and test sites over the entire length of the test section. In its Response, Magellan stated that according to 49 C.F.R. §195.432, operators must inspect in- 3 Section 195.432 requires operators to inspect their breakout tanks in accordance with American Petroleum Institute Standard 653 (API Std 653) (incorporated by reference, see § 195.3).#

120166001M_Order Directing Amendment_04182017_text.pdf, page 4CPF No. 1-2016-6001M Page 3 service atmospheric breakout tanks according to API Std 653, which does not include specific documentation requirements. Additionally, Magellan stated its Hydrostatic Test Form – 07- FORM-0053 – is used to document parameters applicable to an atmospheric storage tank. Finally, Magellan argued that, according to a separate Notice of Amendment issued to a different operator in 2012 (CPF No. 4-2012-5008M), the requirements of § 195.310(b) are specific for hydrostatically testing pipelines. I disagree. First, even if API Std 653 does not include records requirements, PHMSA’s regulations in Part 195 do contain such records requirements in § 195.310(b). There are important safety reasons to keep records documenting a hydrostatic test. For example, a pressure-recording chart documents the test pressure maintained over the entire test period. Test instrument calibration data assures pressure readings observed during the test are accurate. These and other vital records are necessary to validate the test and determine the integrity of the breakout tank. Since Respondent’s hydrostatic test procedures do not require keeping these records, I find that the company’s procedures are inadequate to assure safe operation. With respect to the 2012 matter in CPF No. 4-2012-5008M, Respondent cited to the Notice of Amendment in that case but not the Final Order Directing Amendment. In the Matter of Enterprise Crude Pipelines, LLC (Enterprise), Order Directing Amendment, C.P.F. No. 4-2012-5008M (August 1, 2013)4 stated that the documentation and records-retention requirements of § 195.310 apply to hydrostatic testing records for breakout tanks. In that case, the operator was ordered to revise its procedures to include the record-retention requirements of § 195.310(b) for testing its aboveground storage tanks. Accordingly, I find that Magellan’s procedures for aboveground storage tank hydrostatic testing are inadequate to ensure safe operation of its pipeline system. Respondent must revise 7.10-ADM-007 – Aboveground Storage Tank Hydrostatic Testing Procedure to include all of the records listed in 49 C.F.R. § 195.310(b). Pursuant to 49 U.S.C. § 60108(a) and 49 C.F.R. § 190.206, Magellan is ordered to: 1. Submit revised procedures pursuant to Item 1 above within 30 days following receipt of this Order. All documentation demonstrating compliance with the Order must be submitted to the Director. 2. It is requested (not mandated) that Magellan maintain documentation of the safety improvement costs associated with fulfilling this Order and submit the total to Robert Burrough, Acting 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. 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 4 Available at www.phmsa.dot.gov/pipeline/enforcement.#

120166001M_Order Directing Amendment_04182017_text.pdf, page 5CPF No. 1-2016-6001M Page 4 extension. Failure to comply with this Order may result in administrative assessment of civil penalties not to exceed $200,000 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. Under 49 C.F.R. § 190.243, Respondent has a right to submit a Petition for Reconsideration of this Order. The petition must be sent to: 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. PHMSA will accept petitions received no later than 20 days after receipt of service of this Final Order by the Respondent, provided they contain a brief statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.243. Unless the Associate Administrator, upon request, grants a stay, the terms and conditions of this Order are effective upon service in accordance with 49 C.F.R. § 190.5. April 18, 2017 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

120166001M_Closure Letter_05242017_text.pdf, page 1Official PDFOVERNIGHT EXPRESS DELIVERY May 24, 2017 Mr. Michael Pearson VP, Technical Services Magellan Terminals Holdings, LP One Williams Center, Mail Drop 27 Tulsa, OK 74172 CPF 1-2016-6001M Dear Mr. Pearson: From May 18 through May 22, 2015; a representative from the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to chapter 601 of 49 United States Code, inspected Magellan Terminals Holdings, LP’s (Magellan) procedures in New Haven, Connecticut. As a result of the inspection, Magellan was issued a Notice of Amendment on December 15, 2016; which proposed amendment of its procedures. Magellan submitted its amended procedures on January 13, 2017. In its response, Magellan requested that Item #1 of the NOA be removed. PHMSA responded on April 18, 2017; with an Order Directing Amendment, directing Magellan to revise the procedures for Item #1 of the NOA. Magellan then submitted its amended procedures on May 17, 2017. My staff reviewed the amended procedures, and it appears that the inadequacies outlined in this Notice of Amendment have been corrected. This letter is to inform you that no further action is necessary, and this case is now closed. Thank you for your cooperation. Sincerely, Robert Burrough Acting Director, Eastern Region Pipeline and Hazardous Materials Safety Administration#

120166001M_Notice of Amendment_12152016_text.pdf, page 1Official PDFNOTICE OF AMENDMENT OVERNIGHT EXPRESS DELIVERY December 15, 2016 Mr. Michael Pearson VP, Technical Services Magellan Terminals Holdings, LP One Williams Center, Mail Drop 27 Tulsa, OK 74172 CPF 1-2016-6001M Dear Mr. Pearson: From May 18 – May 22, 2015, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, inspected Magellan Terminals Holdings, LP’s (Magellan) procedures in New Haven, Connecticut. On the basis of the inspection, PHMSA has identified the apparent inadequacies found within Magellan’s plans or procedures, as described below: 1. § 195.402 Procedural manual for operations, maintenance, and emergencies (c) Maintenance and normal operations. The manual required by paragraph (a) of this section must include procedures for the following to provide safety during maintenance and normal operations: (3) Operating, maintaining, and repairing the pipeline system in accordance with each of the requirements of this subpart . . . Magellan’s procedures for operating, maintaining, and repairing the pipeline system in accordance with each of the requirements of this subpart were inadequate for aboveground storage tanks. Specifically, the procedures failed to provide sufficient guidance on documenting hydrostatic testing of Breakout Tanks as per §195.432. Magellan’s Aboveground Storage Tank Hydrostatic Testing Procedure was inadequate in that Magellan failed to require records be kept as per the requirements in §195.310(b). During the inspection, the PHMSA inspector reviewed Magellan’s 7.10-ADM-007 – Aboveground Storage Tank Hydrostatic Testing Procedure revision 2 dated 2/13/13. Section 2.4 Documentation states in part that, “Hydrostatic test results shall be recorded on the Hydrostatic Test Form . . .” Neither the procedure, nor the referenced form included sufficient guidance to address the requirements of#

120166001M_Notice of Amendment_12152016_text.pdf, page 21-2016-6001M §195.310(b) such as: 1. The pressure recording charts 2. Test instrument calibration data 3. The minimum test pressure 4. An explanation of any pressure discontinuities, including test failures, that appear on the pressure recording charts 5. Where elevation differences in the section under test exceed 100 feet (30 meters), a profile of the pipeline that shows the elevation and test sites over the entire length of the test section 2. § 195.402 Procedural manual for operations, maintenance, and emergencies (c) Maintenance and normal operations. The manual required by paragraph (a) of this section must include procedures for the following to provide safety during maintenance and normal operations: (3) Operating, maintaining, and repairing the pipeline system in accordance with each of the requirements of this subpart and subpart H of this part Magellan’s procedures for operating, maintaining and repairing the pipeline system in accordance with each of the requirements of this subpart were inadequate for aboveground storage tanks. Specifically, Magellan’s Out-Of-Service Inspection Procedure for conducting internal inspections of breakout tanks was inadequate in that it failed to provide sufficient guidance on documentation of inspection and maintenance of out-of-service breakout tanks per §195.432(b). During the inspection, the PHMSA inspector reviewed Magellan’s Out-Of-Service Inspection Procedure 7.10-ADM-005 rev 4, dated 1/1/2015. Section 2.15.1 states that: “The out-of-service inspection shall be recorded on a form provided by the API 653 inspection company performing the inspection.” Section 2.15, Documentation, provides guidance on what information must be documented. The procedure does not provide guidance for retention of records in accordance with API Std. 653 Section 6.9.1. 3. § 195.402 Procedural manual for operations, maintenance, and emergencies (c) Maintenance and normal operations. The manual required by paragraph (a) of this section must include procedures for the following to provide safety during maintenance and normal operations: (3) Operating, maintaining, and repairing the pipeline system in accordance with each of the requirements of this subpart and subpart H of this part Magellan’s procedures for operating, maintaining and repairing the pipeline system in accordance with each of the requirements of this subpart were inadequate for aboveground storage tanks. Specifically, Magellan’s In-Service Inspection Procedure for conducting external inspections of breakout tanks was inadequate in that it failed to provide sufficient guidance on documentation of inspection and maintenance of out-of-service breakout tanks per §195.432(b). During the inspection, the PHMSA inspector reviewed Magellan’s In-Service Inspection Procedure 7.10- ADM-006 rev 7, dated 1/1/2015. Section 2.12.1 states that: “The in-service inspection shall be recorded on a form provided by the API 653 inspection company performing the inspection.” Section 2.12, Documentation provides guidance on what information must be documented. The procedure does not provide guidance for retention of records in accordance with API Std. 653 Section 6.9.1. 120166001M_NOA_12152016 Page 2 of 3#

120166001M_Notice of Amendment_12152016_text.pdf, page 31-2016-6001M Response to this Notice This Notice is provided pursuant to 49 U.S.C. § 60108(a) and 49 C.F.R. § 190.206. 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. Be advised that all material you submit in response to this enforcement action is subject to being 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). Following the receipt of this Notice, you have 30 days to submit written comments, revised procedures, or a request for a hearing under §190.211. Failure to respond 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 an Order Directing Amendment. If your plans or procedures are found inadequate as alleged in this Notice, you may be ordered to amend your plans or procedures to correct the inadequacies (49 C.F.R. § 190.206). If you are not contesting this Notice, we propose that you submit your amended procedures to my office within 30 days of receipt of this Notice. This period may be extended by written request for good cause. Once the inadequacies identified herein have been addressed in your amended procedures, this enforcement action will be closed. It is requested (not mandated) that Magellan maintain documentation of the safety improvement costs associated with fulfilling this Notice of Amendment (preparation/revision of plans, procedures) and submit the total to Robert Burrough, Acting Director, Eastern Region, Pipeline and Hazardous Materials Safety Administration. In correspondence concerning this matter, please refer to CPF 1-2016-6001M and, for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Robert Burrough Acting Director, Eastern Region Pipeline and Hazardous Materials Safety Administration Enclosure: Response Options for Pipeline Operators in Compliance Proceedings 120166001M_NOA_12152016 Page 3 of 3#