{"operation":"document","citation":"CPF 220193001","title":"SOUTHERN LNG, INC — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2019-12-11","effective_on":null,"summary":"CLOSED notice of probable violation citing 191.25(a), 191.5(a).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-220193001.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-220193001.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-220193001","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/220193001","body":"Notice of Probable Violation involving SOUTHERN LNG, INC. PHMSA's enforcement data identifies the cited regulations as 191.25(a),  191.5(a). The case was opened on 2019-12-11 and is reported as closed as of 2020-06-29. Proposed civil penalty: $55,200. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n220193001_NOPV PCP_12112019.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_NOPV%20PCP_12112019.pdf\n\n220193001_NOPV PCP_12112019_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_NOPV%20PCP_12112019_text.pdf\n\n220193001_Op Resp and Req for Sttlmnt Mtg and Req for Hrng and Req for Writ Resp and Stmnt of Issues- Title Pg_02212020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_Op%20Resp%20and%20Req%20for%20Sttlmnt%20Mtg%20and%20Req%20for%20Hrng%20and%20Req%20for%20Writ%20Resp%20and%20Stmnt%20of%20Issues-%20Title%20Pg_02212020.pdf\n\n220193001_Op Resp to Notice and Req for Sttlmnt Mtg and Req for Hrng and Req for Writ Resp and Stmnt of Issues_02212020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_Op%20Resp%20to%20Notice%20and%20Req%20for%20Sttlmnt%20Mtg%20and%20Req%20for%20Hrng%20and%20Req%20for%20Writ%20Resp%20and%20Stmnt%20of%20Issues_02212020.pdf\n\n220193001_PHC Hearing Scheduled (Amended)_06122020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_PHC%20Hearing%20Scheduled%20(Amended)_06122020.pdf\n\n220193001_PHC Hearing Scheduled (Amended)_06122020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_PHC%20Hearing%20Scheduled%20(Amended)_06122020_text.pdf\n\n220193001_PHC Hearing Scheduled_03112020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_PHC%20Hearing%20Scheduled_03112020.pdf\n\n220193001_PHC Hearing Scheduled_03112020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_PHC%20Hearing%20Scheduled_03112020_text.pdf\n\n220193001_Region Withdrawal of Notice Letter_06292020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_Region%20Withdrawal%20of%20Notice%20Letter_06292020.pdf\n\n220193001_Region Withdrawal of Notice Letter_06292020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/220193001/220193001_Region%20Withdrawal%20of%20Notice%20Letter_06292020_text.pdf\n\n220193001_PHC Hearing Scheduled (Amended)_06122020_text.pdf\n\nJune 12, 2020\nVIA ELECTRONIC MAIL TO: Catherine.Little@troutman.com and James.Urisko@dot.gov\nMs. Catherine Little\nCounsel for Colonial Pipeline Company\nTroutman Sanders, LLP\n600 Peachtree Street NE, Suite 3000\nAtlanta, Georgia 30308\nMr. James Urisko\nDirector, Southern Region, PHMSA\n230 Peachtree Street NW, Suite 2100\nAtlanta, Georgia 30303\nRe: Notice of Hearing, Southern LNG Company, LLC\nCPF No. 2-2019-3001\nDear Ms. Little and Mr. Urisko:\nIn accordance with 49 C.F.R. § 190.211, an informal hearing will be held regarding the Notice of\nProbable Violation and Proposed Civil Penalty issued by the Office of Pipeline Safety in the above-\nreferenced case. The hearing has been rescheduled to take place via videoconference on July 16, 2020,\nbeginning at 9:00 a.m. Eastern Time.\nBoth parties must submit and exchange any additional written materials they intend to present at least\n10 calendar days prior to the hearing (July 6, 2020), along with a list of attendees, and the names of\nany witnesses who may testify. You may provide this information electronically. If you have any\nquestions, please contact me at (202) 366-6139 or at kristin.baldwin@dot.gov.\nIf you have any questions, please do not hesitate to contact me.\nSincerely,\nKristin Baldwin\nPresiding Official\ncc (email): Ms. Melanie Stevens, Counsel, Office of Pipeline Safety, PHMSA\nMs. Ahuva Battams, Counsel, Office of Pipeline Safety, PHMSA\n\n220193001_Region Withdrawal of Notice Letter_06292020_text.pdf\n\nNOTICE OF WITHDRAWAL\nVIA ELECTRONIC MAIL TO: Jessica_Toll@kindermorgan.com and\nCatherine.Little@troutman.com\nJune 29, 2020\nMs. Kimberly Allen Dang\nPresident\nKinder Morgan, Inc.\n1001 Louisiana Street, Suite 1000\nHouston, Texas 77002\nCPF 2-2019-3001\nDear Ms. Dang:\nOn December 11, 2019, the Pipeline and Hazardous Materials Safety Administration, Office of\nPipeline Safety (OPS), Southern Region issued a Notice of Probable Violation and Proposed\nCivil Penalty (Notice) for the case number referenced above to your subsidiary, Southern LNG\nCompany (SLNG). The Notice cited SLNG for two alleged violations of 49 CFR Part 191\nregarding failure to file an incident report and a safety-related condition report following an\nincident that occurred at SLNG’s Elba Island liquefied natural gas facility in Savannah, Georgia\non May 15, 2018 (Incident). The Notice proposed a civil penalty of $55,200 for both items.\nUpon further deliberation, OPS Southern Region has decided to withdraw the Notice until such\ntime that it has completed its investigation of the Incident. This letter, thereby, informs you that\nPHMSA is withdrawing the Notice for CPF 2-2019-3001, without prejudice, and that the case is\nnow closed. PHMSA retains its authority to continue its investigation of the Incident, and reserves\nits right to seek enforcement if necessary.\nSincerely,\nJames Urisko\nDirector, Southern Region, OPS\nPipeline and Hazardous Materials Safety Administration\ncc: Ms. Jessica Toll, Esq., Kinder Morgan, Inc., 370 Van Gordon St, Lakewood, CO 80228\n(Jessica_Toll@kindermorgan.com)\nMs. Catherine D. Little, Esq., Troutman Sanders LLP, 600 Peachtree Street NE, Suite\n5200, Atlanta, GA 30308 (Catherine.Little@troutman.com)\n\n220193001_PHC Hearing Scheduled_03112020_text.pdf\n\nMarch 11, 2020\nVIA CERTIFIED MAIL AND EMAIL TO: Catherine.Little@troutman.com and\nJames.Urisko@dot.gov\nMs. Catherine Little\nCounsel for Colonial Pipeline Company\nTroutman Sanders, LLP\n600 Peachtree Street NE, Suite 3000\nAtlanta, Georgia 30308\nMr. James Urisko\nDirector, Southern Region, PHMSA\nPipeline and Hazardous Materials Safety Administration\n230 Peachtree Street NW, Suite 2100\nAtlanta, Georgia 30303\nRe: Notice of Hearing, Southern LNG Company, LLC\nCPF No. 2-2019-3001\nDear Ms. Little and Mr. Urisko:\nIn accordance with 49 C.F.R. § 190.211, an informal hearing will be held regarding the Notice of\nProbable Violation and Proposed Civil Penalty issued by the Office of Pipeline Safety in the above-\nreferenced case. The hearing has been scheduled to take place via videoconference on June 16, 2020,\nbeginning at 9:00 a.m. Eastern Time.\nBoth parties must submit and exchange any additional written materials they intend to present at least\n10 calendar days prior to the hearing (June 6, 2020), along with a list of attendees, and the names of\nany witnesses who may testify. You may provide this information electronically. If you have any\nquestions, please contact me at (202) 366-6139 or at kristin.baldwin@dot.gov.\nIf you have any questions, please do not hesitate to contact me.\nSincerely,\nKristin Baldwin\nPresiding Official\ncc (email): Ms. Melanie Stevens, Counsel, Office of Pipeline Safety\nMs. Ahuva Battams, Counsel, Office of Pipeline Safety\n\n220193001_Op Resp to Notice and Req for Sttlmnt Mtg and Req for Hrng and Req for Writ Resp and Stmnt of Issues_02212020.pdf\n\nBefore the\nU.S. Department of Transportation\nPipeline and Hazardous Materials Safety Administration\nOffice of Pipeline Safety\nWashington, D.C.\n____________________________________\nIn the Matter of )\n) CPF No. 2-2019-3001\nSouthern LNG Company, L.L.C. ) Notice of Probable Violation\n)\n)\nRespondent. )\n____________________________________)\nREQUEST FOR HEARING, WRITTEN RESPONSE,\nAND STATEMENT OF ISSUES\nI. Request for Hearing\nSouthern LNG Company, L.L.C. (Southern LNG or the Company) respectfully requests an in-\nperson hearing on the above referenced Notice of Probable Violation (NOPV) and Proposed\nCivil Penalty issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA),\npursuant to 49 C.F.R. §§ 190.208(a)(4) and 190.211(b). The NOPV alleges two violations of 49\nC.F.R. Part 191 regarding incident reporting and safety-related condition reporting at the\nCompany’s Elba Island liquefied natural gas (LNG) terminal (Terminal) and proposes a total\ncivil penalty of $55,200 for both items. The NOPV was received by Southern LNG on\nDecember 20, 2019. PHMSA granted Southern LNG’s January 7, 2020 request for an extension\nof time to respond to the NOPV on January 13, 2020, extending the response deadline to\nFebruary 24, 2020. As such, this request is timely pursuant to 49 C.F.R. § 190.208.\nPrior to issuance of the NOPV, the Company had been in discussions with PHMSA with regard\nto the extent of its jurisdiction at the Terminal. In order to continue those discussions with\nPHMSA, Southern LNG respectfully requests an in person settlement meeting with the Southern\nRegion. While the Company fully believes that this matter can be resolved without resort to a\nhearing, Southern LNG is filing this Request for Hearing, Written Response, and Statement of\nIssues as set forth under 49 C.F.R. § 190.211(b) in order to preserve its rights. In the event that a\nhearing is scheduled in this matter, please be advised that Southern LNG in-house counsel and/or\nTroutman Sanders law firm will represent the Company at any hearing.\nAs set forth below, Southern LNG believes, consistent with applicable law and prior historical\npractice, that the particular portion of the Terminal at issue is exclusively regulated by the U.S.\nCoast Guard (USCG) and is expressly exempt from PHMSA jurisdiction. For that reason, the\n\n\n\nCompany respectfully requests that the entire NOPV and the Proposed Civil Penalty be\nwithdrawn.\nPlease note that with this submission, Southern LNG makes reference to the various aspects of\nthe facility as well as PHMSA’s Pipeline Safety Violation Report (PSVR) which include\ncontrolled unclassified information (CUI), critical energy infrastructure information (CEII),\nsensitive security information, and/or confidential business information that is protected from\ndisclosure under exemptions to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as well\nas regulations issued by the Federal Energy Regulatory Commission (FERC) at 18 C.F.R. §\n388.113 and PHMSA at 49 C.F.R. Part 7 and 49 C.F.R. § 190.343.\nII. Background\nA. Terminal Background\nSouthern LNG operates the Terminal located in Chatham County, Georgia. The Terminal was\noriginally installed in the 1970s to import LNG from marine cargo for domestic use. In the\n1980s, the Terminal was decommissioned and in 2000 it was recommissioned and subsequently\nexpanded to receive marine cargos at two docks and vaporize imported natural gas to\ninterconnections and the interstate pipeline grid. In 2016, the Terminal was again expanded to\nallow LNG to be liquefied and loaded for export at the existing marine cargo facility. The first\nliquefaction train was placed in service in 2019.\nSouthern LNG has historically operated and maintained the Terminal subject to the jurisdiction\nof various federal regulatory agencies, including the USCG, PHMSA, and FERC. Specifically,\nSouthern LNG operates its Terminal consistent with established jurisdictional boundaries based\non relevant federal statutes, federal regulations, and various memoranda of understanding\n(MOU) clarifying potentially overlapping jurisdiction of federal agencies.\nClearly delineated jurisdictional boundaries are essential to operation of any LNG marine\nterminal, including this Terminal. Based on PHMSA and USCG regulations and as informed by\nMOUs between the agencies, Southern LNG has designated the beginning of PHMSA pipeline\nsafety jurisdiction at the Terminal as the last valve immediately before the receiving tanks. This\njurisdictional demarcation is also consistent with historical inspections of the Terminal by\nPHMSA and the USCG. Figure 1 below depicts the jurisdictional demarcation as it relates to the\nportion of the Terminal at issue in the NOPV allegations.\n2\n\n\n\nFigure 1, Delineation of PHMSA and USCG Jurisdiction\nat Relevant Portion of LNG Terminal\nB. Event at Issue and Subsequent Discussions with PHMSA\nSouthern LNG experienced an event on May 15, 2018, when the main fill valve (HV-21061) for\nLNG Tank D-4 and an out of service lateral 32-inch piping on the tank side of the valve – areas\nof the Terminal that are exclusively regulated by the USCG – were subjected to increased\npressure. Southern LNG letter to Mr. Urisko, PHMSA (Sep. 26, 2019). The section of the pipe\nwhere the event occurred was out of service for tie-ins as part of the construction of the\nliquefaction project at the facility (i.e., the pipe was isolated and LNG was evacuated from the\npipe). Id. at p. 2. Southern LNG verbally reported the event to FERC that day. Following\nsubsequent investigations into the cause of the event, the Company determined that combustion\noccurred on the out of service line, causing a detonation at the closed Tank D-4 main fill valve\nHV-21061. Id. The detonation within the pipe caused the pipe to expand, damaged the fill\nvalve, and stretched the flange bolts, allowing LNG to pass through and drip into the insulation.\nId.\nUpdates regarding Southern LNG’s investigation of the event were provided verbally and in\nwriting to FERC pursuant to FERC’s June 1, 2016 Order Granting Section 3 and Section 7\nAuthorizations to Southern LNG. PHMSA received notice of the event during an October 3,\n2018, phone call with Terminal personnel and Southern LNG provided PHMSA with a copy of\nthe incident report following that call and separately provided facility diagrams on October 4,\n2018. Southern LNG and PHMSA further discussed jurisdictional delineations at the Terminal\nby telephone on October 17, 2018 and Southern LNG provided additional information, including\nrelevant piping and instrumentation diagrams and a third party inspection report.\nDuring a subsequent in-person meeting at the Terminal on October 30, 2018, PHMSA and\nSouthern LNG engaged in additional discussion regarding jurisdiction as it relates to the event.\nAt that meeting, PHMSA indicated that it would meet with the USCG to discuss the issue further\nand would follow-up with Southern LNG after those meetings. In November 2018, Southern\n3\n\n\n\nLNG provided PHMSA with additional valve information and a copy of the Company’s final\ninvestigation report. The parties engaged in additional brief discussions regarding the event and\nPHMSA jurisdiction during a June 2019 PHMSA inspection of the Elba Island liquefaction\nproject.\nIn response to an August 2019 request from PHMSA to file a safety related condition (SRC)\nreport, Southern LNG submitted a letter to PHMSA on September 26, 2019, to file a SRC report\nwhile expressly stating that the Company did not consider the event to qualify for reporting\nunder Part 191. Southern LNG letter to Mr. Urisko, PHMSA (Sep. 26, 2019). For the reasons\nstated in the letter, Southern LNG specifically requested a waiver of the five day reporting\nrequirement in the event that PHMSA did not agree with Southern LNG’s position. Id.\nSubsequently, Southern LNG responded to an October 2019 email from PHMSA requesting\ninformation regarding the cost of the repair. Id. The Company expected to continue to work\nwith both PHMSA and the USCG to clarify the jurisdictional boundaries at the Terminal and, if\nnecessary, file a formal request for jurisdictional determination. After fully cooperating with\nPHMSA and providing the information requested by the Agency, the only follow-up Southern\nLNG received from PHMSA since October 2019, however, is the NOPV at issue.\nIII. Southern LNG’s Response to PHMSA NOPV Allegations\nAs explained above, Southern LNG believes that the event in question occurred in an area of the\nTerminal that is exclusively regulated by the USCG, consistent with federal regulations and\nexemptions, historical agreements between PHMSA and the USCG, and prior regulatory\ninspections of the Terminal. For that reason, the PHMSA incident and SRC reporting\nregulations do not apply to this portion of the LNG facility. Further, there is no prior regulatory\nenforcement or guidance that indicates otherwise. To the extent that PHMSA intends to expand\nits jurisdiction beyond what is established in its regulations, the Agency must comply with fair\nnotice and due process requirements under the Administrative Procedure Act and the U.S.\nConstitution.\nSouthern LNG does not believe that PHMSA has jurisdiction over the valve and piping at issue\nin the NOPV allegations, but even if PHMSA did have jurisdiction, the Company believes that\nthe event could not have been both a reportable incident and a reportable safety-related condition\nunder Part 191.\nA. NOPV Item 1 Should be Withdrawn\n1. PHMSA Allegation\n§ 191.5 Immediate notice of certain incidents.\n(a) At the earliest practicable moment following discovery, but no later than one hour after\nconfirmed discovery, each operator must give notice in accordance with paragraph (b) of\nthis section of each incident as defined in § 191.3\nKM failed to notify PHMSA at the earliest practicable moment following discovery, but no later\nthan one hour after confirmed discovery, of a reportable incident, in violation of 49 C.F.R. §\n4\n\n\n\n191.5. As of the date of this letter, KM has not notified PHMSA of the incident described above,\nwhich was discovered on August 2, 2018.\nReportable incident is defined in 49 C.F.R. § 191.3 to include the following:\n(1) An event that involved a release of . . . liquefied natural gas, liquefied\npetroleum gas, refrigerant gas, or gas from an LNG facility, and that results in one or\nmore of the following consequences:\n(ii) Estimated property damage of $50,000 or more, including loss to the operator and\nothers, or both, but excluding cost of gas lost;\n(3) An event that is significant in the judgement of the operator, even though it did not\nmeet the criteria of paragraph (1) or (2) of this definition.\nKM is required to notify PHMSA of an incident involving a release of LNG or natural gas from\nan LNG facility and causing more than $50,000 in property damage. Note that KM followed the\nrecommendations of the \"Kinder Morgan, Savannah, GA, Inspection 32-inch Line to Tank D4\"\nreport prepared by TEAM Industrial Services, Inc. dated August 27, 2018 (TEAM Report), and\nremoved and replaced the damaged components. The estimated cost associated with the defects\nand physical damages to the listed components above was reported by KM as $497,880, which\nexceeds $50,000.\nKM is also required to report an event that is significant in the judgement of the operator. KM\ndetermined the event significant when it reported the event to FERC in its January to April 2018\nand June 2018 Semi-Annual Operating report.\n2. Southern LNG Response to NOPV Item 1\nThe portion of the Terminal at issue in the May 15, 2018 event meets the plain language of\nPHMSA’s “marine cargo transfer system” exemption. That exemption provides that transfer\npiping from a vessel loading dock to a receiving tank is exempt in relevant part under PHMSA\nPart 193 and Part 191 regulations. As confirmed in applicable federal regulations, MOUs, and\nPHMSA guidance, PHMSA jurisdiction begins at the last manifold or, in the absence of a\nmanifold, the last valve immediately before the receiving tanks. Because there is no manifold\nimmediately before the receiving tanks, PHMSA jurisdiction begins at the last valve (i.e., HV-\n21066 and HV-21064, which are respectively the top fill and bottom fill valves) immediately\nbefore and including tank D-4 and equipment and piping leading to and including the LNG\nfacility (as reflected in Figure 1).1 In turn, the USCG solely regulates transfer piping from that\nvalve to the vessel loading docks, including the valve and piping involved in the May 15, 2018\nevent (HV-21061).2 This jurisdictional demarcation is consistent with historical inspections of\nthe Terminal by PHMSA and the USCG.\n1 This interpretation is consistent with PHMSA’s own guidance, which states that “other than the siting requirements\nin Subpart B of 49 CFR Part 193,” marine cargo transfer system “facilities between the vessel and the last valve on\nthe storage tank are not regulated under 49 CFR Part 193.” FAQ 49 CFR Part 193, available at\nhttps://search.usa.gov/search?query=Marine+Cargo+Transfer+System&op=GO&affiliate=dot-phmsa-2.\n2 A marine transfer area for LNG, as regulated by the USCG under the Ports and Waterways Safety Act, 46 U.S.C. §\n5\n\n\n\nThe federal Pipeline Safety Act defines an LNG facility as a gas pipeline facility used in\ntransporting or storing LNG or for LNG conversion, in interstate or foreign commerce, which\nexpressly “does not include” any part of a structure or equipment located in navigable waters (as\ndefined in the Federal Power Act). 49 U.S.C. § 60101(14). Along those lines, “marine cargo\ntransfer systems” and associated piping are expressly exempt in relevant part from PHMSA\nregulation under 49 C.F.R. Part 193, as “marine cargo transfer systems and associated facilities. .\n. between the marine vessel and the last manifold (or in the absence of a manifold, the last\nvalve), located immediately before a storage tank.” 49 C.F.R. § 193.2001(b)(3).\nPHMSA defines “cargo transfer systems” to include “a component, or system of components\nfunctioning as a unit, used exclusively for transferring hazardous fluids in bulk between a tank\ncar, tank truck, or marine vessel and a storage tank.” 49 C.F.R. § 193.2007.3 Further, PHMSA\ndefines a “waterfront LNG plant” as “an LNG plant with docks, wharves, piers, or other\nstructures in, on, or immediately adjacent to the navigable waters of the United States or Puerto\nRico and any shore area immediately adjacent to those waters to which vessels may be secured\nand at which LNG cargo operations may be conducted.” Id. While PHMSA does not define\n“manifold” in its Part 193 regulations, associated guidance or relevant enforcement precedent,\ncommon dictionaries, technical dictionaries, and industry standards define “manifold,” which\nderives its meaning from the word “many,” to generally mean a chamber or pipe with many or\nseveral outlets or branches.4\nIn 1986, the USCG and a predecessor agency to PHMSA executed a MOU “to avoid duplication\nof regulatory efforts regarding waterfront LNG facilities and to maximize the exchange of\nrelevant information.” MOU Between the USCG and the Research and Special Programs\nAdministration for Regulation of Waterfront Liquified Natural Gas Facilities (May 1986).\n5 The\n70034 et seq., includes “that part of a waterfront facility handling LNG between the vessel, or where the vessel\nmoors, and the last manifold or valve immediately before the receiving tank.” 33 C.F.R. § 127.005 (emphasis\nadded).\n3 Although the term “marine cargo transfer system” is not defined in Part 193 regulations, PHMSA uses the\ndefinition of a “cargo transfer system.” PHMSA Interpretation, Letter from J. Wiese to J. Wright (July 31, 2009)\n(stating that “a marine cargo transfer system is defined in Subpart A as ‘a component, or system of components\nfunctioning as a unit, used exclusively for transferring hazardous fluids in bulk between a . . . marine vessel and a\nstorage tank’”).\n4 See e.g., Merriam Webster https://www merriam-webster.com/dictionary/manifold (defining “manifold” in this\ncontext as “a pipe fitting with several lateral outlets for connecting one pipe with others.”); Oxford English\nDictionary (2d ed. 1989) (defining “manifold” in the context of mechanics as “a pipe that has a number of branches,\nor a number of inlets or outlets); Dictionary of Mechanical Engineering (4th ed. 1996) (defining “manifold” as “a\nchamber or pipe with many openings.”); Schlumberger Oilfield Glossary (defining “manifold” in the context of\nproduction as “[a] common pipe or chamber having several lateral outlets.”); National Fire Protection Association\n(NFPA) Glossary of Terms (2019 ed.) (defining “manifold” in the context of design and installation of oxygen-fuel\ngas systems (NFPA 51) as “an assembly of pipe and fittings for connecting two or more cylinders for the purposes\nof supplying gas to a piping system or directly to a consuming device.”).\n5The 1986 MOU superseded an earlier 1978 MOU which included identical in substance language regarding\nPHMSA jurisdiction. In 2004, PHMSA’s predecessor, USCG, and FERC executed an Interagency Agreement (IA)\nto clarify and avoid duplicative regulation of waterfront LNG facilities. That IA similarly provided that USCG is\nresponsible for “all matters pertaining to the safety of facilities and equipment located in or adjacent to navigable\n6\n\n\n\nMOU designates USCG as responsible for regulatory requirements for “all matters pertaining to\nstructure or equipment (or portions thereof) located in the navigable waters and facilities located\nbetween the vessel and the last manifold (or valve) immediately before the receiving tank(s)”\nother than site selection responsibilities of PHMSA’s predecessor agency. Id. (emphasis added).\nPHMSA’s predecessor agency was in turn responsible for establishing regulations with respect to\n“all other matters pertaining to the facility beyond and (including) the last manifold (or valve)\nimmediately before receiving tank(s),” except those structures or equipment located in navigable\nwaters. Id. (emphasis added).\nAs applied to the Terminal, and consistent with federal statutes, regulations, MOUs, and\nPHMSA guidance regarding the same, PHMSA jurisdiction does not begin until the last valve\nlocated immediately before the receiving storage tank, D-4, which are located at the top and\nbottom fill valves, HV-21066 and HV-20164 respectively. There is no “manifold” in this area as\nthat term is defined by Southern LNG in its procedures and as understood by industry.\nSpecifically, Southern LNG procedures define “manifolds” as “[c]omplex array of pipes and\nvalves that allows station operators to direct incoming fluids from any receiving point to pieces\nof equipment or exit points.” Southern LNG Procedure LNG-P0005 Master Glossary. As\ndepicted in Figure 1, PHMSA jurisdiction begins downstream from the valve (HV-21601) and\npiping involved in the May 15, 2018 event. That valve and piping are considered marine transfer\npiping subject to USCG regulation under 33 C.F.R. Part 127 and explicitly excluded from\nregulation by PHMSA under the plain language of 49 C.F.R. § 193.2001(b)(3).\nThere is no prior PHMSA enforcement precedent or regulatory guidance which indicates an\nalternate jurisdictional demarcation and there is no support for PHMSA’s position that regulatory\njurisdiction between PHMSA and USCG stops and starts at the main fill valve for receiving\ntanks. The NOPV’s expansive application of the Agency’s jurisdiction has not previously been\narticulated to the regulated community and is contrary to fair notice requirements under the\nAdministrative Procedure Act (5 U.S.C. § 554), due process requirements under the U.S.\nConstitution (U.S. Const. amend. V.), and newly promulgated Department of Transportation\nregulations incorporating recent policy memorandums regarding transparency, due process, and\nfairness in enforcement (49 C.F.R. Part 5).\nB. PHMSA NOPV Item 2 Should be Withdrawn\n1. PHMSA Allegation\n§ 191.25 Filing safety-related condition reports.\n(a) Each report of a safety-related condition under § 191.23(a) must be filed (received\nby OPS within five working days, not including Saturday, Sunday, or Federal Holidays)\nafter the day a representative of the operator first determines that the condition exists,\nwaters up to the last valve immediately before the receiving tanks.” Interagency Agreement Among the FERC,\nUSCG, and the Research and Special Programs Administration for the Safety and Security Review of Waterfront\nImport/Export Liquified Natural Gas Facilities (February 2004).\n7\n\n\n\nbut not later than 10 working days after the day a representative of the operator\ndiscovers the condition. Separate conditions may be described in a single report if they\nare closely related. Reports may be transmitted by electronic mail to\nInformationResourcesManager@dot.gov or by facsimile at (202) 366-7128.\nKM failed to file a safety-related condition report as soon as the condition was discovered, but\nnot later than 10 working days after discovery, in violation of 49 C.F.R. § 195.25 [sic]. KM\nfiled the safety-related condition report on September 26, 2019, which is 288 working days\nafter discovery.\n49 C.F.R. § 191.23(a)(6) states, in relevant part, that each operator shall report a safety-\nrelated condition involving facilities in service with \"[a]ny malfunction or operating error\nthat causes the pressure of a . . . LNG facility that contains or processes LNG to rise above\nits . . . working pressure . . . plus the margin (build-up) allowed for operation of pressure\nlimiting or control devices.\" For plastic deformation to occur, the pipe must experience an\ninternal pressure that exceeds the yield stress of the pipe material. The fact that plastic\ndeformation occurred indicates that the LNG facility experienced an internal pressure above\nits designed working pressure plus the allowable build-up for operation of pressure limiting\nor control devices.\nDespite concluding that a 3/4-inch vent valve was inadvertently left open, creating a\ncombustible mixture that resulted in a detonation and over pressure event in the pipe between\nD-4 and HV-21061, KM did not file a safety related condition report until September 26,\n2019, in violation of 49 C.F.R. § 195.25 [sic].\n2. Southern LNG Response to NOPV Item 2\nFor the same reasons articulated in Section III.A.2, Southern LNG believes that the event in\nquestion occurred in an area of the Terminal that is exclusively regulated by the USCG given\nthat it is a marine cargo transfer system exempt from PHMSA regulation. As such, PHMSA\nSRC reporting regulations do not apply.\nWhile Southern LNG believes that PHMSA does not have regulatory jurisdiction over the valve\nand piping at issue in the NOPV, even if PHMSA does have jurisdiction, both NOPV Item 1 and\nNOPV Item 2 cannot stand as a legal matter. By definition, a SRC report is not an “incident.”\n49 C.F.R. § 191.3 (defining incident); 49 C.F.R. § 191.23(b)(2) (outlining circumstances where a\nSRC report is not required, including a SRC that “is an incident or results in an incident before\nthe deadline for filing the safety-related condition report”). The reverse is also true. By\ndefinition, a pipeline “incident” is not a SRC. PHMSA may not allege both under the relevant\nPart 193 and Part 191 regulations for the same conditions.\nOn August 2, 2018, when the alleged SRC took place under the NOPV, the portion of the\nTerminal at issue remained out of service. Southern LNG returned the line back to service on\nNovember 11, 2018,6 after it completed repairs of the valve and fill line. As described above, in\n6 Southern LNG letter to Mr. Urisko, PHMSA (Sep. 26, 2019).\n8\n\n\n\norder to be responsive to PHMSA’s request for a SRC report, Southern LNG filed a written SRC\nreport for the May 15, 2018 event on September 26, 2019, while expressly noting that it did not\nconsider the event to qualify as a SRC that required reporting under Part 191. Southern LNG\nfurther requested that PHMSA waive the five day reporting requirement if it found that a report\nwas required; a request to which PHMSA did not respond.\nIV. Proposed Civil Penalty Should be Withdrawn\nBecause a violation of PHMSA reporting regulations did not occur, the entirety of PHMSA’s\nProposed Civil Penalty should be withdrawn along with the NOPV allegations. Further,\nPHMSA’s Proposed Civil Penalty as set forth in the Agency’s Proposed Civil Penalty Worksheet\ndoes not accurately reflect the relevant statutory and regulatory penalty factors, including but not\nlimited to, good faith and other matters as justice may require.\nV. Preliminary Statement of Issues\nSouthern LNG respectfully contests both alleged violations in the NOPV and the Proposed Civil\nPenalty in their entirety and the Company intends to raise the following issues at the Hearing:\n1. Whether NOPV Item 1, alleging a violation of 49 C.F.R. § 191.5(a), should be\nwithdrawn because it is incorrect as a matter of law;\n2. Whether NOPV Item 2, alleging a violation of 49 C.F.R. § 191.25(a), should be\nwithdrawn because it is incorrect as a matter of law;\n3. Whether PHMSA’s exercise of its jurisdiction violates due process and fair notice;\nand\nWhether the Proposed Civil Penalty should be withdrawn because the pipeline facility\nat issue is not jurisdictional to PHMSA.\nVI. Summary\nFor all of the reasons identified above, and in consideration of other matters as justice may\nrequire, the Company respectfully requests that PHMSA withdraw the NOPV and the Proposed\nCivil Penalty.\nIn the event that the parties are unable to resolve these issues in advance of a hearing, Southern\nLNG intends to present evidence and engage in discussion with PHMSA on these issues at the\nhearing in this case. Southern LNG reserves the right to revise and supplement this Written\nResponse and Statement of Issues at or before the hearing. Southern LNG also reserves the right\nto respond to any new factual assertions or arguments introduced by PHMSA during the\nproceeding of the case.\n4. 9\n\n\n\nRespectfully submitted,\nTroutman Sanders, LLP\nCatherine Little, Esq.\nAnnie Cook, Esq.\n600 Peachtree Street NE, Suite 3000\nAtlanta, GA 30308\n(404) 885-3056\nSouthern LNG, L.L.C.\nPatricia S. Frances, Esq.\nKinder Morgan, Assistant General Counsel\nJessica Toll, Esq.\nKinder Morgan, Assistant General Counsel\n(303) 914-7630\nJessica_toll@kindermorgan.com\nDate: February 21, 2020\n10","truncated":false,"body_characters":33658}