VALERO TERMINALING AND DISTRIBUTION COMPANY — Warning Letter

220075003w_warning letter_04182007_text.pdf, page 1Official PDFU 5 Department of Transportation Pipeline and Hazardous Materials Safety Administration 233 Peachtree Street Ste 600 Atlanta GA 30303 WARNING LETTER CERTIFIED MAIL — RETURN RECEIPT RE UESTED Apnl 18, 2007 Mr Paul Brochu Vice President Valero Energy Corporation The Premcor Pipeline Company One Valero Way San Antonio, TX 78249 CPF 2-2007-5003Vtr Dear Mr Brochu On June 19 — 22, 2006, a representative of the Pipehne and Hazardous Matenals Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code inspected your Premcor Pipeline Company's Hazardous Liquid Pipehne facihties and reviewed records in Mississippi, Tennessee and Arkansas As a result of the inspection, it appears that you have commttted probable violations of the Pipehne Safety Regulations Title 49, Code of Federal Regulations The items inspected and the probable violations are f'1195. 49 Annual report. Beginntng no later than June 15, 2005, each operator must annually complete and submit DOT form RSPA F 7000-1 I for each type of hazardous hquid pipelme acdity operated at the end of the previous year. A separate report is required for crude oil, HVL (including anhydrous ammonia), petroleum products, and carbon dioxide pipehnes. Operators are encouraged, but not required, to file an annual report by June 15, 2004, for calendar year 2003.#

220075003w_warning letter_04182007_text.pdf, page 2Premcor filed its annual report atter June 15, 2006 2. (l195. 406 Maximum operating pressure. (a) Except for surge pressures and other variations from normal operations, no operator may operate a pipelme at a pressure that exceeds any of the following (I) The internal design pressure of the pipe determined in accordance with tt195. 106. However, for steel pipe in pipehnes bemg converted under I)195. 5, if one or more factors of the design formula (tk195. 106) are unknown, one of the following pressures is to be used as design pressure: (i) Eighty percent of the first test pressure that produces yield under section N5. 0 of appendix N of ASME B31. S, reduced by the appropriate factors in 8195. 106(a) and (e); or (u) If the pipe is 12'/4 in (324 mm) or less outside diameter and is not tested to yield under this paragraph, 200 p. s. i (1379 kPa) gage. (2) The design pressure of any other component of the pipehne. (3) Eighty percent of the test pressure for any part of the pipehne which has been pressure tested under Subpart E of this part (4) Eighty percent of the factory test pressure or of the prototype test pressure for any individually mstalled component which is excepted from testing under I)195. 305. (5) For pipehnes under @195. 302 (b)(1) and (b)(2)(i) that have not been pressure tested under subpart E of this part, 80 percent of the test pressure or highest operating pressure to which the pipehne was sublected for 4 or more contmuous hours that can be demonstrated by recordmg charts or logs made at the time the test or operations were conducted. (b) No operator may permit the pressure in a pipeline during surges or other variattons from normal operations to exceed 110 percent of the operating pressure hmit established under paragraph (a) of this section. Each operator must provide adequate controls and protective equipment to control the pressure within this limit. Premcor did not provide a record venfymg the calculated MOP of its pipehne I')195. 577 What must I do to alleviate interference currents? (a) For pipehnes exposed to stray currents, you must have a program to identify, test for, and mtnimixe the detrimental effects of such currents. Premcor did not provide a record venfyiug testmg for stray currents or analysis of non-exposure to stray currents#

220075003w_warning letter_04182007_text.pdf, page 34. $195. 575 Which facihties must I electrically isolate and what inspechons, tests, and safeguards are required? (a) You must electrically isolate each buried or submerged pipeline from other metallic structures, unless you electrically interconnect and cathodically protect the pipehne and the other structures as a single unit. (c) You must inspect and electrically test each electrical isolation to assure the isolation is adequate. Premcor did not provide a record verifying inspection of its electncal isolations 5. ('l195. 589 What corrosion control information do I have to maintain? (a) You must maintam current records or maps to show the location of— (1) Cathodically protected pipehnes; (2) Cathodic protection facihties, including galvamc anodes, installed after January 29, 2002; and (3) Neighbormg structures bonded to cathodic protection systems. (b) Records or maps showing a stated number of anodes, installed in a stated manner or spacing, need not show specific distances to each buried anode. Premcor did not provide an adequate record and or map showing location of the following sacrificial anodes, ground beds, cntical and non-crit&cal bonds, rectifiers, elecu'ical isolations, test stations, AC interference components, hghtemng arrestors and grounds (l195. 402 Procedural manual for operations, maintenance, and emergencies. (c) Mamtenance 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: (13) Penodically reviewing the work done by operator personnel to determine the effectiveness of the procedures used in normal operation and maintenance and taking corrective action where deficiencies are found. (d) Abnormal operation. The manual required by paragraph (a) of this section must mclude procedures for the followmg to provide safety when operating design hmits have been exceeded: (5) Periodically reviewing the response of operator personnel to determine the effectiveness of the procedures controlling abnormal operation and taking corrective action where deficiencies are found.#

220075003w_warning letter_04182007_text.pdf, page 4Premcor did not provide a record verifying penodic review of personnel work normal and abnormal operations to determine effectiveness of procedures t'l 195. 569 Do I have to examme exposed portions of burred pipehnes? Whenever you have knowledge that any portion of a buried pipehne is exposed, you must examme the exposed portion for evidence of external corrosion if the pipe is bare, or if the coating is deteriorated. If you find external corrosion requiring corrective action under )195 585, you must investigate circumferentially and longitudmally beyond the exposed portion (by visual examination, indirect method, or both) to determine whether additional corrosion requiring remedial action exists in the vicinity of the exposed portion. Premcor did not provide a record venfying inspection of exposed buried pipehnes 8. t'l195 573 What must I do to monitor external corrosion control" (a) Protected pipefmes. You must do the following to determine whether cathodic protection required by this subpart comphes with $195. 571: (2) Identify before December 29, 2003 or not more than 2 years after cathodic protection is installed, whichever comes later, the circumstances m which a close- interval survey or comparable technology is practicable and necessary to accomphsh the oblectives of paragraph 10. 1 1. 3 of NACE Standard RP0169-96 (incorporated by reference, see $195 3). Premcor did not provide a record of this evaluation Post inspection PHMSA received response from operator regarding tlus requirement This response did not provide verificatio that Premcor had identified circumstances in which a close-mterval survey or comparable technology would be practicable and necessary to accomplish the ob)ectrves of paragraph 10 1 1 3 of NACE standard RP0169-96 Under 49 United States Code, $ 60122, you are sub) ect to a civil penalty not to exceed $100, 000 for each violation for each day the violations persists up to a maximum of $1, 000, 000 for any related senes of violatious 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 correct the items identified in this letter Be advised that failure to do so will result in Premcor Pipehue Company being sub)ect to additional enforcement action#

220075003w_warning letter_04182007_text.pdf, page 5No reply to this letter is required If you choose to reply, in your correspondence please refer to CPF 2-2007-5003W Be advised that all material you submit in response to this enforcement action is sublect to being made publicly available If you believe that any portion of your responsive matenal quahfies 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 quahfies for confidential treatment under 5 U S C 552(b) Sincerely, C6&oQ Linda Daugherty Director, Southern Region Pipehne and Hazardous Matenals Safety Administration#