CYPRESS INTERSTATE PIPELINE LLC — Notice of Probable Violation

party submissionOfficial PDF320075007_operator response to notice_04122007.pdf#

320075007_Closure_07252012_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED July 25, 2012 Mr. Wes Christensen Senior Vice President of Operations ONEOK North System, LLC 100 West Fifth Street Tulsa, Oklahoma 74102 CPF 3-2007-5007 Dear Mr. Christensen: On November 16, 2010, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Kinder Morgan Energy Partners and ONEOK North System, LLC (ONEOK) a Final Order in the above-referenced case. This Order included a Compliance Order specifying actions to be taken by ONEOK as the pipeline’s current owner and operator. On March 23, 2011, ONEOK submitted documentation addressing the requirements of the Compliance Order. Based on our review of the documentation you provided, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, David Barrett Director, Central Region Pipeline and Hazardous Materials Safety Administration#

320075007_Notice letter_03062007.pdf, page 1Official PDFMA,. 0 7 ";il? @ U.S. Deportment of Tronsporlqllon Plpellne ond Hozordous l oterlob Sotely Admlnbtrofion 901 Locust Street, Suite 462 Kansas CiN. MO 64106-264'l NOTICE OF' PROBABLE VIOLATION AND PROPOSED COMPLIAIICE ORDER CERTIF'IED MAIL - RETURN RECEIPT REOUESTED March 6, 2007 Mr. Ron McClain Vice President Operations Kinder Morgan Energy Partners, L.P. 500 Dallas Street, Suite 1000 Houston, TX77002 cPF 3-2007-5007 DearMr. McClain: On April 4-8, April I l-15, April 25-29, and May 9-13, 2005, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to chapter 601 of 49 United states code inspected your pipeline facilities in lllinois, Iowa, Kansas, Missouri, Indiana, and Nebraska. As a result of the inspection, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The items inspected and the probable violations are: 1. $195.432 Breakout tanks. (b) Each operator shall inspect the physical integrity of in-service atmospheric and low-pressure steel aboveground breakout tanks according to section 4 of API Standard 653, However, if structural conditions prevent access to the tank bottom, the bottom integrity may be assessed according to a plan included in the operations and maintenance manual under $195.402(c)(3). Kinder Morgan has not conducted inspections of breakout tanks according to the requirements of API Standard 653. The Lemont, IL and Monis, IL facilities have one breakout tank each, spherical tanks with a maximum operating pressrue (MOP) of 10 psig. The tank at Lemont was built in1967 and the tank at Morris was built in1975,#

320075007_Notice letter_03062007.pdf, page 37 with both tanks constructed to API Standard 620, "Design and Construction of Large, Welded, Low-Pressure Storage Tanks." Since the tanks were constructed per API 620,they are low-pressure breakout tanks that require inspection according to API 653 as stated in $195.432(b). Kinder Morgan inspected these two tanks according to its breakout tank inspection procedure, "Operating Manual Maintenance Inspection of Storage Tanks and Vessels, Section III, number 03-02," which does not address all the requirements listed under Section 4 ofAPI 653. For example, as referenced by $195.432(b), API 653 specifies tank shell evaluation including shell wall thickness measurements, corrosion rate calculations, and intemal tank inspections, but these items were not addressed in Kinder Morgan's procedures. Therefore, the two low- pressure breakout tanks at Lemont, IL and Monis, IL have not been inspected according to API 653 as required by $ 195.a320). See Exhibit # I for the identification of the two breakout tanks. $195.432 Breakout tanks. (c) Each operator shall inspect the physical integrity of in-service steel aboveground breakout tanks built to API Standard 2510 according to section 6 of API510. Kinder Morgan has not conducted inspections of breakout tanks according to the requirements of API 510. The Lemont, IL facility has one breakout tank, a spherical tank with a MOP of 125 psig. The Morris, IL facility has 27 breakout tanks as follows: three spherical tanks with MOP's ranging from 50 to 80 psig, and 24 bullet- type tanks each with a MOP of 250 psig. The Des Moines, IA facility has one breakout tank, a bullet-type tank with a MOP of 3 12 psig. The Wichita, KS facility has four breakout tanks, spherical tanks with MOP's ranging from 40 to 60 psig. Each of these 33 breakout tanks were constructed per the ASME pressure vessel code, from the years 1963 to 1990. Editions of the API Standard 2510, "Design and Construction of LPG Installations," including the ls edition of June 1957, state that tanks constructed per API 2510 shall meet the requirements of the ASME Boiler and Pressure Vessel Code. Since these 33 breakout tanks are ASME pressure vessels, they meet the tank design and construction standards ofthe prior editions ofAPI Standard 2510, and require inspection per API 510 as stated in $195.432(c). Kinder Morgan inspects these 33 breakout tanks according to its breakout tank inspection procedure, "Operating Manual Maintenance Inspection of Storage Tanks and Vessels, Section III, number 03-02," which does not address all the requirements listed under secfion 6 of API 5 10. For example, as referenced by $ I 95.432(c), API 510 specifies tank shell evaluation including shell wall thickness measutements, corrosion rate calculations, and intemal tank inspection, but these items were not addressed in Kinder Morgan's procedures. Therefore, the 33 breakouttanks located at Lemont, Morris, Des Moines, and Wichita have not been inspected according to APl5l0asrequiredby$195.a32(c). SeeExhibit#2fortheidentificationofthe33 breakout tanks.#

320075007_Notice letter_03062007.pdf, page 5Proposed Compliance Order Pursuant to 49 United States Code $ 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to Kinder Morgan Energy Partners, L.P. Please refer to the Proposed Compliance Order thatis 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. Be advised that all material you submit in response to this enforcement action is subject to being made publicly available. Ifyou believe that any portion ofyour 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 qualift for confidential heatment redacted and an explanation of why you believe the redacted infotmation qualifies for confidential treatment under 5 U.S.C. 552@). 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 j finA Order. In your correspondence on this matter, please refer to cPF 3-2007-5007 and for each document you submit, please provide a copy in electronic format whenever possible. ffi.ws- Director, Central Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings#

320075007_Notice letter_03062007.pdf, page 7PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code $ 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to Kinder Morgan Energy partners, L.p. a compliance order incorporating the following remedial requirements to ensure the compliance of Kinder Morgan Energy parnrers, L.p. with the pipeline safety regulations: 1- In regard to Item Number I of the Notice pertaining to the inspection of two low- pressure steel aboveground breakout tanks per section 4 of ApI 653, provide pHMSA with a plan, schedule, and procedures to inspect these tanks. At a minimum the plan shall include performing an intemal inspect'ron for each tank. The procedures that will be utilized to inspect the tanks shall be fully documented and provide a description of how each element required by API 653 is to be accomplished. Submit the plan, schedule, and procedures to the Director, central Region, pipeline and Hazardous Materials safety Administration, 901 Locust streel Room 462, Kansas City, MO 64t06. 2' In regard to Item Number 2 of theNotice periaining to the inspection of 33 breakout tanks per section 6 of ApI 510, provide PHMSA with a plan, schedule, and procedures to inspect tl-rese tanks. The plan shall includi performing an intemal inspection of each tank. The procedures that will be utilized to insp'ect the tanks shall be fully documentedand prwide a descripfion of how each element required by ApI 510 is to be accomplished. Submit the plan, schedule, and procedwes to the Director, Central Region, Pipeline and Hazardous Materials Safef Alministration, 901 Locust Street, Room 462, Kansas City, MO 64106. 3. The proposed inspection plans, schedules, and procedures in ltems I and 2 ofthe compliance order shall be submitted to the Diiector, central Region, pipeline and Hazardous Materials saf€ty Administration within 60 days folloiing Kinder f4ol8an's receipt of the Final Order. The proposed intemal inspectilns in Items I and 2 of the compliance order shall be compreted within 2 y"*, oiyo* r"ceipt of the Final Order. 4' As intemal inspections are completed for each tank, a report for each tank shall be prepared and submitted to the Director, central Region that includes, but is not limited to, the following: records of the inspection results, third party inspection recommendations, any resulting repairs or alterations, and other irndings and outcomes of the inspections. When all appropriate actions have been completed in regard to the above-items in this compliance order, submit a surnmary report and notice of completed actions to the Director, Central Region, Pipeline and Hazardous Malerials safety Administration, 901 Locust street, Room 462, Kansas city, Mo 64106. 5' Kinder Morgan shall maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to the Director,#

320075007_Notice letter_03062007.pdf, page 9Cenhal Region, Pipeline and Hazardous Materials Safety Administration. Costs shall be reported in two categories: 1) total cost associated with preparationirevision of plans, procedures, studies and analyses, and 2) total cost ofreplacement, additions, and other changes to the pipeline iafrastructure#

320075007_Notice letter_03062007.pdf, page 11Exhibit # I 2005 PHMSA Standard lnsoection Kinder Morgan Breakout Tanks thai require inspection in according to the requirements ofAPl Standard 653 Item LOCATION NAME/TAG # Type of Tank LEMONT 1 GASOLINE TK. MORRIS GASOLINE TK. Sphere Sphere Exhibil # 2 2005 PHMSA Standard InsDection Kinder Morgan Breakout Tanks that require inspection in according to the requirements ofAPl 510 Item # LOCATION NAME/TAG # Type of Tank 1 LEMONT SLOP TK, Sphere 4 o 7 I U 1 0 1 1 1 2 1 a 1 4 1 6 1 7 1 8 1 9 20 21 22 24 ZJ 26 27 28 MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS MORRIS TK. #1 TK. #2 TK. #3 TK. #4 TK. #5 TK. #6 TK. #7 TK. #8 TK. #9 TK. #10 rK. #11 TK, #12 TK. #13 TK. #14 TK. #15 TK. #16 TK. #17 TK. #18 ISO BUTANE TK, BUTANE TK. #1 BUTANE TK. #2 PROPYLENE TK, #1 PROPYLENE TK. #2 PROPYLENE TK. #3 PROPYLENE TK. #4 PROPYLENE TK. #5 PROPYLENE TK- #6 Bullet Bullet Buliet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Sphere Sphere Sphere Bullet Bullet Bullet Eullet Bullet Bullet 29 DES MOINES BUTANE BLEND TK. Bullet 30 31 32 ?a WICHITA WICHITA WICHITA WICHITA T-201A T-201 B T-204 Sphere Sphere Sphere Sphere Charts made by Judy Johnson, PHMSA Cenhal Region's Staff Engineer, from dala provided by Kinder Morgan.#

320075007_Notice letter_03062007.pdf, page 13Response Options for Pipeline Operators in Compliance Proceedings The requirements of 49C.F.R. Part 190, Subpart B ($$ 190.201-lg0-237) govem response ro Iqli":l issued by a Regional Director, Pipeline and Hazardous Materials Saffl Administration (PHMSA). I. Procedures for Respondins to a NOTICE OF PROBABLE VIOLATION: Within 30 days of receipt of a Notice of Probable Violation, the respondent shall respond to the Regional Director who issued the Notice in the following way: a. When the Notice contains a proposed CIVIL PENALTY* -- l. Pay the proposed civil penalty and advise the Regional Director of the pa),rnent. This authorizes PHMSA to make findings and to close the case with prejudice to the respondent. Payment terms are outlined below; 2. Submit written explanations, information, or other materials in response to the allegations and/or seek eliminati6n or mitigation of the proposed civil penalty. Refer to 49 C.F.R. S 190.225 for assessment considerations, which include the respondent's ability to pay and the effect on the respondent's ability to stay in business, upon which civil penalties are based; or 3. Request a hearing as described below to contest the allegations and/or proposed assessment ofa civil penalty. b. When the Notice contains apronosed COMPLIANCE ORDER* - 1. Notiff the Regional Director that you intend to take the steps in the proposed compliance order; Submit written explanations, information, or other materials in answer to the allegations in the Notice and object to or seek clarification of the proposed compliance order items in whole or in part; or a Request a hearing as described below to contest the allegations and/or proposed compliance order items; c. When the Notice contains a IYARITIING ITEM -- No written response is required. The respondent is warned that if it does not take appropriate action to correct these items, enforcement action will be taken ifa subsequent inspection reveals a violation. 1of 5#

320075007_Notice letter_03062007.pdf, page 15il. UL IV. * Failure of the respondent to respond to the Notice within 30 days of receipt constitutes a waiver of the right to contest the allegations in the Notice and authorizes the Associate Administrator for Pipeline Safety to find facts as alleged in the Notice without further notice to the respondent and to issue a Final Order. ,, Procedures for Resnondine to a NOTICE OF AMENDMENT*- Within 30 days of receipt of a Notice of Amendment, the respondent shall respond to the Regional Directorwho issued the Notice in the following way: Notifu the Regional Director of your plans to address the inadequacies identified in the Notice; b. Submit written explanations, information, or other materials in answer to the allegations in the Notice and/or object to or seek clarification ofthe proposed amendment items in whole or in part; or c. Request a hearing as described below to con{est the allegations in the Notice. * Failure of the respondent to respond to the Notice within 30 days of receipt constitutes a waiver of the right to contest the allegations in the Notice and authorizes the Associate Administrator for Pipeline Safety to find facts as alleged in the Notice without firrther notice to the respondent and to issue a Final Order. Procedure for Rpquestinq a Hearins A request for a hearing must be in writing and accompanied by a statement of the issues whioh the respondent intends to raise at the hearing. The issues may relate to the allegations, new information, or to the proposed compliance order or proposed civil penalty amount. Refer to 49 C.F.R. $ 190.225 for assessment considerations upon which civil penalties are based. A respondent's failure to specify an issue may result in waiver ofthe right to raise that issue at the hearing. The respondent's request must also indicate whether or not respondent will be represented by counsel at the hearing. Failure to request a hearing in writing within 30 days of receipt of a Notice waives the right to a hearing. In addition, if the amount of the proposed civil penalty or the proposed corrective action is less than $10,000, the hearing will be held by telephone, unless the respondent submits a written request for an in-person hearing. Complete hearing procedwes can be found at 49 C.F.R. $ 190.21 l. Extensions of Time An extension of time to prepare an appropriate resporuie to a Notice may be granted, at the agency's discretion, following submittal of a written request to the Regional Director. The request must indicate the amount of time needed and the reasons for the extension. The request must be submitted within 30 days of receipt of the Notice. 2of5#

320075007_Notice letter_03062007.pdf, page 17V. Freedom of Information Act Any material prepared by PHMSA, including the violation report, the Notice, and any order issued in this case, and any material provided to PHMSA by the respondent, may be considered public information and subject to disclosure under the Freedom of Information Act (FOIA). If the information you provide. is security sefsitive, privileged, confidential or may cause your company competitive disadvantages, please clearly identiff the material and provide justification why the documents, or portions of a document, should not be released under FOIA. If we receive a request for your material, we will notiSr you if PHMSA, after reviewing the materials and your provided justification, determines that withholding the materials does not meet any exemption provided under the FOIA. You may appeal the agency's decision to release material under the FOIA at that time. Your appeal will stay the release of those materials until a final decision is made. u. Small Business Resulatory Enforcement Fairness Act Information The Small Business and Agricultural Regulatory Enforcement Ombudsman and l0 Regional Fairness Boards were established to receive comments from small businesses about federal_agency enforcement actions. The Onrbudsman will annually evaluate the enforcement activities and rate each agency's responsiveness to small business. Ifyou wish to comment on the enforcement actions of the Pipeline and Hazardous Materials Safety Administration, call 1-888-REG-FAIR (l-888-734-3247) or go to http ://www. sba. gov/ombudsman/dsp_faq.html. 3 of 5#

320075007_Notice letter_03062007.pdf, page 19VU. PAYMENTINSTRUCTIONS Civil Penatty Puyments of Less Than $10,000 ,,. Paynent ofa civil penalty ofless than $10,000 proposed or assessed, under Subpart B ofPart 190 of the Pipeline Safety Regulations can be made by certified check, money order or wire transfer. Payment by certified check or money order (containing the CPF Number for this case) should be made payable to the "Department of Transportation" and should be sent to: Federal Aviation Administration Mike Monroney Aeronautical Center Financial Operations Division (AMZ-300) P.O. Box 25082 Oklahoma City, OK 73125-4915 wire transfer payrnents of less than $10,000 may be made through the Federal Reserve Communications System (Fedwire) to the account of the U.S. Treasury. Detailed instructions are provided below. Questions concerning wire transfer should be directed to the Financial Operations Division at (405) 954-8893, or at the above address. Civil Penalty Payments of 910,000 or more Payment ofa civil penalty of$10,000 or more proposed or assessed under Subpart B ofPart 190 of the Pipeline Safety Regulations must be made wire transfer (49 C.F.R. $ 89.21 (bX3), through the Federal Reserve Communications System (Fedwire) to the account of the U.S. Treasury. Detailed instructions are provided below. Questions concerning wire transfers should be directed to the Financial Operations Division at (405) 954-8893, or at the above address. INSTRUCTIONS FOR ELECTRONIC T'UND TRANSFERS (1) RECEIVERABANO. 021030004 (2) TYPE/SUB-TYPE (Provided by sending bank) (3) SENpTNGBANKABANO. (Provided by sending bank) (4) SENDTNG BANK REF NO. @rovided by sending bank) (5)AMOUNT (6) SENDINGBANKNAME (Provided by sending bank) (7) RECEMRNAME TREASNYC (8) PROpUCT COpE (Normally CTR, or as provided by sending bank) (9) BENEFICIAL GNF) = AGENCY LOCATION CODE BNF = /ALC-69-14-0001 (10) REASONS FOR PAYMENT Example: PHMSA - CPF # / Ticket Number/Pipeline Assessment number 4 of5#

320075007_Notice letter_03062007.pdf, page 21INSTRUCTIONS: You, as sender of the wire transfer, must provide the sending bank with the information for blocks (1), (5), (7),(9), and (10). The information provided in Blocks (1), (7), and (9) are constant andremain the same for all wire transfers to the Pipeline and Hazardous Materials Safety Administration, Department of Transportation. ; Block#1 - RECEIVER ABA NO. - "021030004". Ensure the sending bank enters this 9-digit identification number; it represents the routing symbol for the U.S. Treasury at the Federal Reserve Bank inNew York. Block #5 - AMOUNT - You as the sender provide the amount of the transfer. Please be sure the ffansfer amount is punctuated with commas and a decimal point. EXAMPLD: $10.000.00 Block #7 - RECEIVER NAME - "TREAS NYC", Ensure the sending bank enters this abbreviation. It must be used for all wire tansfers to the Treasury Departrnent. Block#9 -BENEFICIAL - AGENCY LOCATION CODE - "BNF=/ALC-69-14-0001". Ensure the sending bank enters this information. This is the Agency Location Code for the Pipeline and Hazardous Materials Safety Administration, Department of Transportation, Block #10 - REASON FOR PAYMENT - "AC-payment for PHMSA Case # / To ensure your wire transfer is credited properly, enter the case number/ticket number or Pipeline Assessment number, and counfil." NOTE: A wire transfer must comply with the format and instructions or the Department cannot accept the wire transfer. You as the iender can assist this process by notifying the Financial Operations Division (405) 954-8893 at the time you send the wire transfer. November 2006 ) o I )#

320075007_FinalOrder_11162010_text.pdf, page 1Official PDFNOV 16 2010 Mr. Ron McClain Vice President, Operations Kinder Morgan Energy Partners, L.P. 500 Dallas Street, Suite 1000 Houston, TX 77002 Mr. Wes Christensen Senior Vice President, NGL Operations ONEOK North System, L.L.C. 100 West 5th Street Tulsa, Oklahoma 74103 Re: CPF No. 3-2007-5007 Dear Mr. McClain and Mr. Christensen: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation and specifies actions that need to be taken by the pipeline’s current owner and operator, ONEOK North System, L.L.C., to comply with the pipeline safety regulations. When the terms of the compliance order have been completed, as determined by the Director, Central Region, this enforcement action will be closed. Service of the Final Order by certified mail is deemed effective upon the date of mailing, or as otherwise provided under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety Enclosure cc: Mr. David Barrett, Director, Central Region, PHMSA CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7005 1160 0001 0041 0633 & 0862]#

320075007_FinalOrder_11162010_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 ) Kinder Morgan Energy Partners, L.P. ) CPF No. 3-2007-5007 and ) ONEOK North System, L.L.C., ) ) ) ) ) Respondents. ) ____________________________________) FINAL ORDER On April 4-8, 11-15, and 25-29, and May 9-13, 2005, 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 facilities and records of the North System pipelines then operated by Kinder Morgan Energy Partners, L.P. (Kinder Morgan), in Illinois, Missouri, Indiana, Iowa, Kansas, and Nebraska, later acquired by ONEOK North System, L.L.C.(ONEOK). The North System is comprised of approximately 1629 miles of pipelines carrying refined petroleum products and highly volatile liquids. 1 As a result of the inspection, the Director, Central Region, OPS (Director), issued to Kinder Morgan, by letter dated March 6, 2007, a Notice of Probable Violation and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Kinder Morgan had violated 49 C.F.R. § 195.432 and proposed ordering Kinder Morgan to take certain measures to correct the alleged violations. Kinder Morgan responded by letter dated April 12, 2007 (Response). Kinder Morgan contested the allegations, but submitted a plan for satisfying the Proposed Compliance Order. The Director replied to Kinder Morgan on July 13, 2007, and rejected its proposed plan finding it inconsistent with the terms of the Proposed Compliance Order. Kinder Morgan notified PHMSA on August 10, 2007, of its plan to sell its North System pipeline facilities to ONEOK and suggested that ONEOK, rather than Kinder Morgan, should have the opportunity to respond in relation to the Proposed Compliance Order in the Notice. PHMSA had no objection and provided ONEOK with the opportunity to respond to the Notice. 1 On October 5, 2007, ONEOK North System, L.L.C. (ONEOK), acquired the North System from Kinder Morgan and became the operator of this system. ONEOK is a subsidiary of ONEOK Partners, L.P.#

320075007_FinalOrder_11162010_text.pdf, page 32 ONEOK responded to the Notice by letter dated December 12, 2007, in which it confirmed its acquisition of Kinder Morgan’s North System and that it had received Notice of this ongoing compliance proceeding in connection with the acquisition and reserved its right to a hearing. ONEOK also provided information to PHMSA on its efforts to satisfy the terms of the Proposed Compliance Order and requested a meeting. OPS regional staff met with ONEOK on July 31, 2009 at which time ONEOK submitted a proposed plan and schedule to satisfy the Proposed Compliance Order. ONEOK withdrew its request for a hearing by e-mail dated December 17, 2009, and thereby waived its right to a hearing. FINDINGS OF VIOLATION Item 1: The Notice alleged that Kinder Morgan violated 49 C.F.R. § 195.432(b), which states: § 195.432 – Inspection of in-service breakout tanks. (a) . . . . (b) Each operator shall inspect the physical integrity of in-service atmospheric and low-pressure steel aboveground breakout tanks according to section 4 of API Standard 653. However, if structural conditions prevent access to the tank bottom, the bottom integrity may be assessed according to a plan included in the operations and maintenance manual under § 195.402(c)(3). The Notice alleged that Kinder Morgan violated 49 C.F.R. § 195.432(b) by failing to inspect the physical integrity of two in-service low-pressure steel aboveground breakout tanks, one in Lemont, Illinois, and the other in Morris, Illinois, in accordance with API Standard 653.2 Specifically, the Notice alleged that although inspections of these tanks were performed, the procedure used to perform the inspections did not meet the requirements of API Standard 653. API Standard 653 requires shell wall thickness measurements every five years, routine monthly in-service inspections, and scheduled internal inspections, but Kinder Morgan’s internal procedure, entitled “Operating Manual Maintenance Inspection of Storage Tanks and Vessels, Section III, number 03-02,” did not contain these requirements. In its Response, Kinder Morgan acknowledged that it had not carried out internal inspections of tanks, which are required by API Standard 653, but contended that it was not out of compliance because the inspections of these tanks were governed by § 195.432(a) and its procedures conformed to § 195.432(a). I find this argument unpersuasive. Section 195.432(a) does not apply to the breakout tanks at issue. These tanks are in-service low-pressure steel aboveground breakout tanks and therefore must be inspected as provided in § 195.432(b) and (c). Thus, § 195.432(a) is irrelevant. 2 Section 195.432(b) provides that operators must inspect certain tanks according to section 4 of API Standard 653. However, Section 6, not Section 4, now contains the relevant provisions relating to inspections of the in-service breakout tanks described in Item 1. As PHMSA explained in a letter to Kinder Morgan dated July 13, 2007, API Standard 653 was revised in 1999, and the revised version was subsequently incorporated by reference into the Pipeline Safety Regulations. Section 4 of the earlier version addressed inspections, while inspections are covered by Section 6 of the revised standard.#

320075007_FinalOrder_11162010_text.pdf, page 43 Kinder Morgan further argued that under API Standard 653 it was not required to carry out the tank inspections until 2009. It based this argument on § 195.432(d), which states that inspection intervals for inspections required under § 195.432(b) and (c) “begin on May 3, 1999, or on the operator’s last recorded date of inspection, whichever is earlier.” I find this argument unpersuasive. API Standard 653 requires internal inspections of tanks every ten years. The regulation thus requires an operator to identify the date of the last inspection and schedule another inspection within ten years of that date. Unless the company can substantiate that the tanks were not previously inspected, the company is not permitted to calculate the inspection deadline for its tanks simply by adding ten years to May 3, 1999. This approach would be inconsistent with the requirements of API Standard 653 and the regulations. Finally, Kinder Morgan argued that its procedures did require tank wall thickness to be measured every five years consistent with API Standard 653. However, Kinder Morgan’s procedures required such measurements only for tanks in corrosive service, while API Standard 653 requires wall thickness measurements of all tanks, whether in corrosive service or not. Accordingly, based upon a review of all of the evidence, I find that Kinder Morgan violated 49 C.F.R. § 195.432(b) by failing to inspect the physical integrity of the two specified in-service low-pressure steel aboveground breakout tanks in accordance with API Standard 653. Item 2: The Notice alleged that Kinder Morgan violated 49 C.F.R. § 195.432(c), which states: § 195.432 – Inspection of in-service breakout tanks. (a) . . . . (c) Each operator shall inspect the physical integrity of in-service steel aboveground breakout tanks built to API Standard 2510 according to section 6 of API 510. The Notice alleged that Kinder Morgan violated 49 C.F.R. § 195.432(c) by failing to inspect the physical integrity of certain in-service steel aboveground breakout tanks built to API Standard 2510 according to section 6 of API Standard 510. Specifically, the Notice alleged that Kinder Morgan inspected 33 breakout tanks, in Lemont, Illinois; Morris, Illinois; Des Moines, Iowa; and Wichita, Kansas, according to the company’s relevant internal procedure, and that this procedure did not meet the requirements of API Standard 510. API Standard 510 provides that tank inspections should include shell wall thickness measurements, corrosion calculations, and scheduled internal inspections, but Kinder Morgan’s internal procedure, which is the same one referenced in Item 1, did not include these requirements. In its Response, Kinder Morgan acknowledged that it did not carry out internal inspections of the tanks but contended that it was not required to inspect the 33 specified tanks according to API Standard 510 because the tanks were not built to API Standard 2510. Kinder Morgan argued that tanks built in conformity with the ASME Boiler and Pressure Vessel Code (ASME Code) do not automatically need to meet the requirements of API Standard 2510. I find this argument unpersuasive. Because the tanks were built according to ASME Code, and because API Standard 2510 requires that breakout tanks be built according to that code, the tanks at issue were built according to API Standard 2510. There is no evidence that API Standard 2510 contains any requirements with respect to the construction of breakout tanks other than that they#

320075007_FinalOrder_11162010_text.pdf, page 54 be built according to the ASME Boiler and Pressure Code. Therefore, any tank built according to the ASME Code was built in conformity with API Standard 2510. Accordingly, these tanks were built in conformity with API Standard 2510 and were required to be inspected according to API Standard 510. Kinder Morgan further argued that it was not required to carry out the tank inspections until 2009. It presented the same argument it advanced in Item 1 with respect to the inspection deadline. For the reasons discussed above, in the absence of evidence that the tanks were not previously inspected, the regulations do not permit Kinder Morgan to calculate the inspection deadline for its tanks simply by adding ten years to May 3, 1999. Accordingly, based upon a review of all of the evidence, I find that Kinder Morgan violated 49 C.F.R. § 195.432(c) by failing to inspect the physical integrity of specific in-service steel aboveground breakout tanks in accordance with section 6 of API Standard 510. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Kinder Morgan. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 1 and 2 in the Notice for the violations of 49 C.F.R. § 195.432. 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. In its letter of July 31, 2009, ONEOK expressed its intent to complete the actions set forth in the proposed compliance order and described the actions it had initiated thus far. These actions included: 1. ONEOK submitted a plan and schedule to inspect the tanks described in Items 1 and 2 (Plan). As to the tanks discussed in Item 1, the Plan provided for inspections consistent with API Standard 653. As to the tanks discussed in Item 2, the Plan provided for inspections consistent with API Standard 510. 2. ONEOK has completed the tank inspections described in the Plan. ONEOK has thus partially satisfied the proposed compliance order, but not all aspects of the proposed compliance order are fully completed. Accordingly, pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, ONEOK is ordered to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations3 : 1. ONEOK must submit copies of the written procedures it used to conduct the tank inspections. 3 As the current operator, it is now ONEOK’s responsibility to bring the facilities into compliance with the regulations and complete the terms of the Compliance Order.#

320075007_FinalOrder_11162010_text.pdf, page 65 2. ONEOK must submit to the Director, Central Region, tank inspection reports for the inspections that it carried out pursuant to the Plan. Such reports must include, at a minimum, records of inspection results, third-party inspection recommendations, any resulting repairs or alterations, and other findings and outcomes of the inspections. 3. ONEOK must submit a summary report and notice of completed actions to the Director, Central Region including all required documentation within 6 months of receipt of this Final Order. 4. ONEOK must maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to the Director, Central Region. Costs must 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 demonstrating good cause for an extension. Failure to comply with this Order may result in administrative assessment of civil penalties not to exceed $100,000 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. § 190.215, Respondent has a right to submit a petition for reconsideration of this Final Order. Should Respondent elect to do so, 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. § 190.215. Unless the Associate Administrator, upon request, grants a stay, the terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. ___________________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#