IMTT-BAYONNE — Notice of Probable Violation

party submissionOfficial PDF120175004_Operator Response To Notice_03292018.pdf#

120175004_NOPV PCP PCO_12212017_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER OVERNIGHT EXPRESS DELIVERY December 21, 2017 Mr. James Hooke Chief Executive Officer Macquarie Infrastructure Corporation, LLC 125 West 55th Street New York, NY 10019 CPF 1-2017-5004 Dear Mr. Hooke: On February 26, 2016 and August 16, 2016, representatives of 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 involving International-Matex Tank Terminals1 (IMTT) 16-inch Packards to Curries pipeline within the Halecky-IMTT Park in Bayonne, NJ. On February 22, 2016, at approximately 17:30 Eastern Standard Time (EST), IMTT was notified of a potential release of product in the vicinity of their facilities located at Halecky-IMTT Park in Hudson County, Bayonne, NJ. Over the next 24 hours, IMTT’s investigation into the notification, and subsequent excavation within the park, revealed a release of Ultra Low Sulfur Diesel from IMTT’s 16-inch Packards to Curries pipeline (the Pipeline). IMTT estimated 359 barrels of product were released, and approximately 300 barrels of the commodity were recovered. 1 International-Matex Tank Terminals is a wholly-owned subsidiary of Macquarie Infrastructure Company, LLC.#

120175004_NOPV PCP PCO_12212017_text.pdf, page 2CPF 1-2017-5004 The National Response Center was notified of the release at 16:07 EST on February 23, 2016. Halecky-IMTT Park was closed to the public from February 22, 2016, until March 10, 2016. There were no fires or injuries reported as a result of this accident. Excavation at the release site revealed that the Pipeline, which was partially replaced in September 2015, was resting directly on a section of steel sheet piling (SSP) that was used in the construction process. IMTT submitted Form PHMSA F 7000.1 Accident Reports to PHMSA on March 22 (Initial), August 16 (Supplemental), and September 8, 2016 (Final). The Final Accident Report filed by IMTT identified the point that was resting on the SSP as the failure location, stating in part that “Over time and movements, the pipe failed from the stress and the puncture.” IMTT determined the apparent cause of the release was a “Material Failure of Pipe or Weld with a sub- cause of Construction, Installation, or Fabrication-related.” As a result of the investigation, it appears that you have committed a probable violation of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The item inspected and probable violation is: 1. §195.250 Clearance between pipe and underground structures. Any pipe installed underground must have at least 12 inches (305 millimeters) of clearance between the outside of the pipe and the extremity of any other underground structure, except that for drainage tile the minimum clearance may be less than 12 inches (305 millimeters) but not less than 2 inches (51 millimeters). However, where 12 inches (305 millimeters) of clearance is impracticable, the clearance may be reduced if adequate provisions are made for corrosion control. IMTT failed to maintain at least 12 inches of clearance between the outside of the pipe and extremity of any other underground structure. Specifically, IMTT replaced a segment of the Pipeline and failed to maintain at least 12 inches of clearance between the outside of the Pipeline and a section of SSP that was used during the construction process. During the investigation, the PHMSA inspector reviewed documentation for the replacement of approximately 1,125 feet of the 16-inch Pipeline (the “Project”). During the Project, SSP was utilized as shoring in a jack and bore pit located in Halecky-IMTT Park. Segments of this SSP were removed by torch cutting, creating “windows” to allow for installation of the carrier pipe and casing. In an email dated 11/14/2016, the Project Superintendent for the pipeline contractor described the window cutting process as follows: The "window" cutting process is a pipe location (field) driven event that allows for pipe egress (launching pit) and entry (receiving pit) and is not in the realm of responsibility of the sheet pile contractor, this is performed by the pipe contractor, The Napp-Grecco Company in this instance. The casing pipe jack/bore would require "windows" to be torch cut through the sheet piling near the base of the excavation (short wall), while the carrier pipe would exit the excavation at a point 120175004_NOPV PCP PCO_12212017_text Page 2 of 5#

120175004_NOPV PCP PCO_12212017_text.pdf, page 3CPF 1-2017-5004 1. 2. most sensible for a tie-in line up (job specific). In this case it was the east (long wall) of the excavation. The "window" cutting event would be consistent in practice, varying only in size required to accommodate whatever size infrastructure is being installed and location of the "window" The standard field practice is to cut out the required amount of sheet pile to accommodate the pipe being installed and then to continue the cut along the base to include the inter-locks on the adjoining sheet piles to create a disconnect from the sheet piles below the infrastructure and the sheet piles directly adjacent to them on both sides. This creates what are called "sacrificial" sheets, those remaining in place below the installed infrastructure and allows for removal and recovery of the sheet piles outside of the "window" area. The cuts into the adjacent sheet piles interlock are to prevent the "sacrificial" sheets from "hitchhiking", being pulled upward, as the recoverable sheets are removed. During the investigation, the PHMSA inspector established that: Excavation of the leak site by IMTT uncovered the Pipeline sitting on top of a remaining piece of SSP, which had penetrated the Pipeline over time as the Pipeline shifted during cycles of operation. Eventually this led to the release of product during a product transfer initiated on February 21, 2016 to Tank number 5605, located in the Packards Yard. The torch cutting of the window on the east end of the jack and bore pit resulted in fusion to the adjacent, interlocking piece of SSP. This fusion led to unintended lifting of the SSP under the Pipeline during the extraction of the SSP next to the windowed sheet. The section of SSP under the Pipeline lifted up, contacting the bottom of the Pipeline. The lifting went unnoticed during the extraction of the SSP, the project was completed, and the Pipeline was returned to service. Damage to the Pipeline due to contact with the piece of SSP led to failure of the Pipeline on February 22, 2016. Based on the above facts, the Investigator found that IMTT failed to maintain at least 12 inches of clearance between the outside of the pipe and extremity of any other underground structure. Proposed Civil Penalty Under 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed $209,002 per violation per day the violation persists, up to a maximum of $2,090,022 for a related series of violations. For violations occurring prior to November 2, 2015, the maximum penalty may not exceed $200,000 per violation per day, with a maximum penalty not to exceed $2,000,000 for a related series of violations. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violation(s) and has recommended that you be preliminarily assessed a civil penalty of $144,000 as follows: Item number PENALTY 1 $144,000 3. 4. 5. 120175004_NOPV PCP PCO_12212017_text Page 3 of 5#

120175004_NOPV PCP PCO_12212017_text.pdf, page 4CPF 1-2017-5004 Proposed Compliance Order With respect to Item 1 pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to IMTT. 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). If you do not respond within 30 days of receipt of this Notice, this 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 Robert Burrough, Director, PHMSA Eastern Region, 820 Bear Tavern Road, Suite 103, West Trenton, NJ 08628. Please refer to CPF 1-2017- 5004 on each document you submit, and whenever possible provide a signed PDF copy in electronic format. Smaller files may be emailed to robert.burrough@dot.gov. Larger files should be sent on a CD accompanied by the original paper copy to the Eastern Region Office. Sincerely, Robert Burrough Director, Eastern Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 120175004_NOPV PCP PCO_12212017_text Page 4 of 5#

120175004_NOPV PCP PCO_12212017_text.pdf, page 5CPF 1-2017-5004 PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to IMTT a Compliance Order incorporating the following remedial requirements to ensure the compliance of IMTT with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to IMTT’s failure to maintain at least 12 inches of clearance between the outside of the pipe and extremity of any other underground structure, IMTT must develop construction procedures to ensure that the requirements of §195.250, Clearance between pipe and underground structures, are met. 2. All documentation demonstrating compliance with each of the items outlined in this Compliance Order must be submitted to Robert Burrough, Director, Eastern Region, PHMSA, 820 Bear Tavern Road, Suite 103, West Trenton, NJ 08628, within 60 days of receipt of the Final Order. Documentation and recordkeeping must be consistent with appropriate regulations in 49 C.F.R. Part 195. 3. It is requested (not mandated) that IMTT maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Robert Burrough, 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. 120175004_NOPV PCP PCO_12212017_text Page 5 of 5#

120175004_Final Order_06222018_text.pdf, page 1Official PDFJune 22, 2018 Mr. James Hooke Chief Executive Officer Macquarie Infrastructure Corporation, LLC 125 West 55th Street New York, NY 10019 Re: CPF No. 1-2017-5004 Dear Mr. Hooke: Enclosed please find the Final Order issued in the above-referenced case to your subsidiary, International-Matex Tank Terminals, LLC (IMTT). It makes a finding of violation and assesses a civil penalty of $144,000. This is to acknowledge receipt of payment of the full penalty amount, by wire transfer dated February 20, 2018. The Order further finds that IMTT has completed the actions specified in the Notice to comply with the pipeline safety regulations. This enforcement action is now 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, Director, Eastern Region, Office of Pipeline Safety, PHMSA Mr. Richard Jurisich, Jr., General Counsel, International-Matex Tank Terminals, LLC, 321 St. Charles Ave, New Orleans, LA, 70130 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

120175004_Final Order_06222018_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 ) ) International-Matex Tank Terminals, LLC, ) CPF No. 1-2017-5004 a subsidiary of Macquarie Infrastructure ) Corporation, LLC, ) ) Respondent. ) __________________________________________) FINAL ORDER On February 26, 2016, and August 16, 2016, pursuant to 49 U.S.C. § 60117, representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted an onsite investigation into an accident involving International-Matex Tank Terminals, LLC (IMTT or Respondent), in Bayonne, New Jersey. The accident occurred on IMTT’s 16-inch Packards to Curries pipeline within the IMTT-Bayonne Terminal, located in Hudson County, New Jersey. IMTT operates 620 tanks with a total of 16 million barrels of capacity of refined petroleum products at its facility in Bayonne, New Jersey.1 As a result of the investigation, the Director, Eastern Region, OPS (Director), issued to Respondent, by letter dated December 21, 2017, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that IMTT had violated 49 C.F.R. § 195.250 and proposed assessing a civil penalty of $144,000 for the alleged violation. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violation. After requesting and receiving an extension of time to respond, Respondent paid the proposed civil penalty of $144,000 by wire transfer on February 20, 2018. The company did not contest the allegation of violation or the proposed compliance order. In accordance with 49 C.F.R. § 190.208(a)(1), such payment authorizes the Associate Administrator to make a finding of violation and to issue this final order. FINDING OF VIOLATION In its Response, IMTT did not contest the allegation in the Notice that it violated 49 C.F.R. Part 195, as follows: 1 See https://www.imtt.com/bayonne-new-jersey/ (last accessed May 3, 2018).#

120175004_Final Order_06222018_text.pdf, page 3CPF No. 1-2017-5004 Page 2 Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.250, which states: §195.250 Clearance between pipe and underground structures. Any pipe installed underground must have at least 12 inches (305 millimeters) of clearance between the outside of the pipe and the extremity of any other underground structure, except that for drainage tile the minimum clearance may be less than 12 inches (305 millimeters) but not less than 2 inches (51 millimeters). However, where 12 inches (305 millimeters) of clearance is impracticable, the clearance may be reduced if adequate provisions are made for corrosion control. The Notice alleged that Respondent violated 49 C.F.R. § 195.250 by failing to maintain at least 12 inches (305 millimeters) of clearance between the outside of the pipe and the extremity of any other underground structure. Specifically, the Notice alleged that IMTT replaced a segment of the 16-inch Packards to Currie pipeline, but failed to maintain at least 12 inches of clearance between the outside of the pipeline and a section of steel sheet piling that was used during construction. Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that IMTT violated 49 C.F.R. § 195.250 by failing to maintain at least 12 inches (305 millimeters) of clearance between the outside of the pipe and the extremity of any other underground structure. This finding of violation will be considered a prior offense in any subsequent enforcement 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.2 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; and 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 $144,000 for the violation cited above. Item 1: The Notice proposed a civil penalty of $144,000 for Respondent’s violation of 49 C.F.R. § 195.250, for failing to maintain at least 12 inches of clearance between the outside of the pipe and the extremity of any other underground structure. IMTT neither contested the allegation nor presented any evidence or argument justifying reduction or elimination of the 2 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).#

120175004_Final Order_06222018_text.pdf, page 4CPF No. 1-2017-5004 Page 3 proposed penalty. Accordingly, having reviewed the record and considered the assessment criteria for the Item cited above, I assess IMTT a total civil penalty of $144,000, which amount was paid in full on February 20, 2018. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 for the violation of 49 C.F.R. § 195.250. Under 49 U.S.C. § 60118(a), each person who engages in the transportation of hazardous liquids or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Director indicates that Respondent has taken the following actions specified in the proposed compliance order: 1. With respect to the violation of § 195.250 (Item 1), Respondent has developed construction procedures to ensure that the requirements of § 195.250, providing proper clearance between pipe and underground structures, are met. Accordingly, I find that compliance has been achieved with respect to this violation. Therefore, the compliance terms proposed in the Notice are not included in this Order. The terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. June 22, 2018 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#