TALLGRASS INTERSTATE GAS TRANSMISSION, LLC — Notice of Probable Violation

320031006_Final Order_05042004.pdf, page 1Official PDFw U.S.Deporlment of Tronsoortotion Reseorch ond Speciol Progroms Admanistrofion 400 Seventh St S W Washrngton, D.C 20590 MAY - 4 2404 Mr. Dwalme Burton Vice President of Gas Operations Kinder Morgan, Inc. One Allen Center 500 Dallas Street - Suite 1000 Houston, TX 77002 RE: CPF No. 3-2003-1006 Dear Mr. Burton: Enclosed is the Final Order issued by the Associate Administrator for Pipeline Safety in the above-referenced case. It makes findings ofviolation and assesses a civil penaltyof $81,250. Your receiptoftheFinalOrderconstitutesserviceofthatdocumentunder49C.F.R.$190.5. Atsuchtime that the terms of the compliance order are completed, as determined bythe Director, Central Region, this enforcement action will be closed. Your receipt of the Final Order constitutes service of that document under 49 C.F.R. $ 190.5. Sincerely, iln ff*f !- Iames Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure cc: Ivan Huntoon, Director, OPS Central Region CERTIFIED MAIL. RETURN RECEIPT REOUESTED#

320031006_Final Order_05042004.pdf, page 2DEPARTMENT OF TRANSPORTATION RESEARCH AND SPECIAL PROGRAMS ADMINISTRATION OFFICE OF PIPELTNE SAFETY WASHINGTON, DC 20590 In the Matter of ) Kinder Morganr Inc., ) Respondent ) CPF No. 3-2003-1006 FINAL ORDER During the periods of June 12-16,June26-30, July 24-28, August 7-11, August2I-25, September 18-22, October 2-6 and October 16-20,2000 and Apil2-6, Apil23-27, April30-May4, August , 13-17, August 20-24 and August2T-31,2001 pursuant to 49 U.S.C. $ 60117, representatives of the Central and Western Regions, Office of Pipeline Safety (OPS) conducted onsite pipeline safety inspections ofRespondent's interstate gas transmission facilities in its Kansas, Nebraska, Colorado, and Wyoming operational areas. As a result ofthis investigation, the Director, Central Region, OPS, issued to Respondent, by letter dated March 20,2003 , a Notice ofProbable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. $ 190.207, the Notice proposed finding that Respondent had committed violations of 49 C.F.R.Part lgL,proposed assessing a total civil penalty of $92,000 for the alleged violations, and proposed that Respondent take certain measures to correct the alleged violations. Respondent responded to the Notice by letter dated, Apil 17 ,2003 (Response). Respondent did not contested the allegations, but paid the proposed civil penalty, requested a hearing seeking a Consent Order and clarification of some terms of the Compliance Order. The hearing was held on June 17, 2003 in Kansas City, Missouri. After this hearing, Respondent provided a closing Response dated July 2,2003, with additional information and a summary of the information it had presented at the hearins. FINDINGS OF VIOLATION Uncontes ted Violations Respondent did not contest the alleged violations of $$192.619(a),192.481,192.739, and 192.745 (Items 3,4,6 andT) in the Notice. Accordingly, I find that Respondent violated 49 C.F.R .Part I92, as more fully described in the Notice: 49 C.F.R. $I92.619(a) - failure to operate a segment of steel orplastic pipeline at an operating pressure with the lowest pressure listed in accordance with $192.619, as the regulator for pipeline #0062 the Bloomington Lateral and pipeline #0240 the Greeley Lateral were set above the MAOP.#

320031006_Final Order_05042004.pdf, page 349 C.F.R. $192.a81(a) - failure to inspect 385 miles of Top-of-Ground pipe for atmospheric corrosion at the required 3 year intervals. 49 C.F.R. 5192.739 - failure to test and inspect each pressure limiting device, relief device, and pressure regulating station and its equipment at intervals not exceeding 15 months, as the main line regulator and relief valves at Marienthal, KS, Healy, KS and Red Willow, KS were not set to function at the correct pressure. 49 C.F.R. 5Lg2.745- failure to inspect and partially operate transmission line valves at intervals not exceeding 15 months, but at least once each calendar year. An examination of the mainline valve inspection records for the years 1998,1999, and 2000 for the Clay Center and Hastings areas revealed that inspections exceeded the rcnr.i*o.l i-cnanfinn infanr-l ^. -^^rr;--J L,' 8.1O', -7A< isliuriiru riiJpvuUUii iriisiviii a5 igqutlUu vy 3i>L.t+J. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. As for the request for a Consent Order, Respondent explained that it viewed the Consent Order as a vehicle to demonstrate its efforts towards continuous cooperation with OPS to ensure pipeline safety and its diligence to achieve compliance. After further discussion, Respondent expressed its intent to comply with the Notice in all respects. Respondent advised that, based on clarifications received as to the nature of Consent Orders compared with Compliance Orders, its request for a Consent Order is withdrawn. ASSESSMENT OF PENALTY Under 49 U.S.C. 5 60122,Respondent is subject to a civil penalty not to exceed $100,000 per violation for each day of the violation up to a maximum of $1,000,000 for any related series of violations. The Notice proposed a total civil penalty of $92,000 for violation of 49 C.F.R. $ $ 1 92.6 1 9, 192.7 39 , and 192.7 45, already paid by the Respondent. 49 U.S.C. g 60122 and 49 C.F.R. S 190.225 require that, in determining the amount of the civil penalty, I considerthe following criteria: nature, circumstances, and gravity ofthe violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve compliance, the effect on Respondent's ability to continue in business, and such other matters as justice may require. Theproposedpenaltyforltem3(a)is$5,000forviolationof 49 C.F.R. $192.619(a). Respondent did not contest the allegations ofviolation. In its Response, during and after the hearing, Respondent argued that the civil penalties were excessive and inappropriate and sought clarification regarding assessment of the penalties. OPS representatives presented testimony as to the methodology employed to assess the civil penalties. Respondent advised that it has revised its operating procedures and the regulator was reset. Nevertheless, Respondent has not shown any circumstance that would have prevented or justified its operating with the regulator set above the MAOP.#

320031006_Final Order_05042004.pdf, page 4J Respondent did not present any mitigating information. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $5,000. The proposed penalty for Item 3(b) is $5,000 for violationof 49 C.F.R. $192.619(a), as Respondent operated a segment of steel or plastic pipeline that exceeded the lowest pressure required by 49 C.F.R. $195.619. Respondent did not contest the alleged violation but argued that the civil penalty was excessive and inappropriate and sought clarification regarding assessment ofthe penalty. OPS representatives presented testimony as to the methodology employed to assess the civil penalty. Respondent did not present any mitigating information. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $5,000. Theproposedpenaltyforltem6(a)is$3,000forviolationof49C.F.R.5lg2.73g,asthemainline regulator and relief valve at the Marienthal, KS was not set to function at the correct pressure. Respondent did not contest the alleged violation but argued that the civil penaltywas inappropriate and sought clarification regarding assessment of the penalty. OPS representatives presented testimony as to the methodology employed to assess the civil penalty. Respondent did not present any mitigating information. The MAOP of the line is 135 psi, which allows the maximum overpressure protection set point to be 148.5psi. The Marienthal, KS relief valve was set at 155 psi. Respondent has not shown any circumstance that would have prevented or justified its failure to inspect and test each pressure limiting device, relief valve, pressure regulator, or other item of pressure control equipment at the required intervals, which is essential to knowing that the pipeline equipment is being maintained and will function properly. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $3,000. The proposed penalty for ltem 6(b) is $ I 5,000 for violatio n of 49 C.F.R. SI92.73g,as the main line regulator and relief valve at Healy, KS was not set to function at the correct pressure. Respondent did not contest the alleged violation but argued that the civil penaltywas inappropriate, as it was not commensurate with the violation. Respondent sought clarification regarding assessment of the penalty. OPS representatives presented testimony as to the methodology employed to assess the civil penalty. Respondent did not present any mitigating information. The MAOP of the line is 250 psi, which allows the maximum overpressure protection set point to be 27 5 psi. The Healy, KS relief valve was set at320 psi. Inspection and testing at the required intervals are essential to knowing that the pipeline equipment is being maintained, will function properly and that the integnty of the pipeline system is not compromised. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $ 15,000 The proposed penalty for Item 6(c) is $ 15,000 for violation of 49 C.F.R. 1.lg2J39,as the McCook main line regulator and reliefvalve at Red Willow, KS was not set to function at the correct pressure. Respondent did not contest the alleged violation but argued that the civil penaltywas inappropriate, not commensurate with the violation and sought clarification regarding assessment of the penalty. OPS representatives presented testimony as to the methodology employed to assess the civil penalty. Respondent did not present any mitigating information. The MAOP of the line is 400 psi, which allows the maximum overpressure protection set point tobe 440 psi. The Red Willow, KS relief valve was set at 460 psi. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $15,000.#

320031006_Final Order_05042004.pdf, page 54 The proposed penalty for Item 7 is $49,000 for violation of 49 C.F.R. i792.7 45,based on the failure to inspect or partially operate each transmission line valve at intervals not exceeding 1 5 months. The Notice further indicated that the 98 valves consisted of 25 mainline valves, 43 blowdown valves, and 30 lateral valves. Respondent did not contest the alleged violation. Discussions during the hearing revealed confusion as to the categoization of the 43 blowdown valves as critical safety valves. Respondent asserted that the 43 valves in question are not critical safety valves because they have bolt-on blind flanges that have to be removed before they could be used in an emergency. Respondent advised that it inspects the valves under the maintenance program but excludedthe 43 blowdown valves from its emergency lists. Testimony further revealed that discussions during previous inspections may have led Respondent to revise its procedures and tc allovr the categoriza+"ionof the 4;? .rai*res to remain unchanged. OPS representatives clarified that the 43 blowdown valves are subj ect t o $192.7 45, as an emergency could necessitate the use of the 43 blowdown valves. OPS representatives further testified that $192.I79(c) requires blowdown valves on each section of a transmission line and that the blow down valves should have enough capacity to allow the transmission line to be blown down as rapidly as practicable. Each blowdown discharge must be located so the gas can be blown to the atmosphere without hazard. Therefore, the 43 blowdown valves must be inspected per $192.745. In an emergency, the 43 blow down valves in question maybe activated to reduce the amount of gas vented at the rupture or leak site on the pipeline. This would reduce the duration of the emergency and lessening the impact of the leaking gas on the public, property and the environment. Although, the bolt-on blind flange has to be removed, where there is a line section between fwo mainline valves and the need arises to blow down the section quickly, the blowdown valves may be used. In an instance where a home or railroad is in close proximity to the faiiure site reducing the time that it takes to blow down the line is critical. The 43 blowdown valves are inspected per 5192.745. Respondent is to make the necessary amendments to ensure compliance and to ensure no confusion regarding the utilization of blowdown valves and the processes related thereto. Respondent did not contest the alleged violation so there is no question that a violation was committed. However, Respondent argued that the civil penalty was not commensurate with the violation and sought clarification regarding assessment of the penalty. OPS representatives presented testimony as to the methodology employed to assess the civil penalty to address Respondent's argument that the civil penalty was not commensurate with the violation. Based upon the post hearing documentation submitted by Respondent combined with its testimony and that of OPS representatives, I find that factors exist for an adjustment of the proposed civil penalty. 49 U.S.C. S 60122 and 49 C.F.R. S 190.225 require that, in determining the amount of the civil penalty, I consider the following criteria: nature, circumstances, and gravity of the violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve compliance, the effect on Respondent's ability to continue in business, and such other matters as justice may require.#

320031006_Final Order_05042004.pdf, page 65 The primary objective of the Federal pipeline safety standards is safe operation of pipeline systems. Failure to conduct inspections at the specified intervals to find and to correct any deficiencies could adversely affect public safety. Testimony indicated that the valves were inspected as part of maintenance but not as emergency valves. I note that the degree by which the interval was exceeded in 1998, 1999, and 2000 was not great. I also note that Respondent's confusion may have been based on discussions at a prior inspection. The record suggests that the proposed civil penalty be reduced from $500 to $250 per blowdown valve. Accordingly, having reviewed the record and considered the assessment criteria and mitigating factors, I assess Respondent a civil penalty of $38,250. Based upon the adjustment of the civil penalty, a request has been made to the Financial Operations Division, Federal Aviation Administration, to make a similar adjustment in the amount paid by Kinder Morgan. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 3a,3b, 4a, and 6a-6c. Under 49U.S.C.$60118(a),eachpersonwhoengagesinthetransportationofgas orwhoownsoroperates a pipeline facility is required to comply with the applicable safety standards established under chapter60l. Pursuanttotheauthorityof49U.S.C. $ 60118(b) and49 C.F.R. Sl90.2l7,Respondent is hereby ordered to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations. 1. In regards to Item 3(a), 3(b) and 6(a)-6(c) of the Notice, review the MAOP for each of your line segments to determine the correct MAOP and pressure control set points for regulators and overpressure protection devices. A. Within 60 days ofthe receipt ofthis Final Order, Respondent must submit aplan and implementation schedule to evaluate each of its line segments to determine the correct MAOP and pressure control set points for regulators and overpressure protection devices to the Director, Central Region, OPS. B. Within I year of the receipt of this Final Order, Respondent must complete the evaluation of its line segments to determine the correct MAOP and pressure control set points for regulators and overpressure protection devices. C. Submit documentation, records and notice of,completed actions to the Director, Central Region, OPS, 901 Locust Street, Suite 462, Kansas City, MO 64106- 2641. 2. [n regard to Item 4(a) of the Notice, 385 miles of TOG pipe that has not been evaluated for atmospheric corrosion : A. Perform a study to determine areas of atmospheric corrosion and establish continuing program to inspect TOG pipe for atmospheric corrosion.#

320031006_Final Order_05042004.pdf, page 7B. Within 60 days of the receipt of this Final Order, Respondent must submit a plan and implementation schedule for the study of areas of atmospheric corrosion. C. Inspect and remediate any findings of active corrosion on your ToG pipe in the region in increments. The inspection and remediation shall be complete within three (3) years of receipt of this Final Order. D. Submit documentation, records and notice of completed actions to the Director, Central Region, OPS, 901 Locust Street, Suite 462, Kansas City, MO 64106-264r. 3. The Director, Central Region may grant an extension of time for compliance with any of the terms of this order for good cause. A request for an extension must be in writing. WARNING ITEMS The Notice did not propose any civil penalties or compliance actions with respect to the following items; therefore, Respondent is warned that if it does not take appropriate corrective action to address these items and OPS finds a violation in a subsequent inspection, enforcement action will be taken. Item I in the Notice alleged that Respondent failed to follow'maintenance procedures to annually inspect five fire extinguishers at the Holdrege Compressor Station, as required by 49 C.F.R. $ 1e2.60s. Item 2a in the Notice alleged inadequacies in Respondent's Operations, Maintenance and Emergencies Manual, as it incorrectly listed the MAOP for pipeline #0018, NE/KS State line to Holdrege, as 800 psi. The correct MAOP is 795 psi. Item 2b in the Notice alleged inadequacies in Respondent's Operations, Maintenance and Emergencies Manual, as it incorrectly listed the MAOP for pipeline #0063, the Franklin Lateral, as 656 psi. The correct MAOP is 505 psi. Item 5 in the Notice alleged that Respondent failed to test and inspect the relief device for the Guernsey Compressor Station, unit #3003, within the required 15 months interval, in accordance with 49 c.F.R. 5 192.731. Under 49 C.F.R. $ 190.215, Respondent has a right to petition for reconsideration of this Final Order. The petition must be received within 20 days of Respondent's receipt of this Final Order and must contain a brief statement of the issue(s). The filing of the petition automatically stays the payment of any civil penalty assessed. All other terms of the order, including any required corrective#

320031006_Final Order_05042004.pdf, page 81 action, shall remain in full effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective upon receipt. Failure to comply with any aspect of this Final Order may result in the assessment of civil penalties of up to $100,000 per violation per day, or in the referral of the case for judicial enforcement. MAY - 4 2004 Date Issued iate Administrator for Pipeline Safety#