{"operation":"document","citation":"CPF 320081002","title":"PANHANDLE EASTERN PIPELINE CO — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2008-07-01","effective_on":null,"summary":"CLOSED notice of probable violation citing 192.479.","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-320081002.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-320081002.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-320081002","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/320081002","body":"Notice of Probable Violation involving PANHANDLE EASTERN PIPELINE CO. PHMSA's enforcement data identifies the cited regulation as 192.479. The case was opened on 2008-07-01 and is reported as closed as of 2011-07-08. Proposed civil penalty: $180,000. Assessed civil penalty: $180,000. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n320081002_Final Order_06172011.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320081002/320081002_Final%20Order_06172011.pdf\n\n320081002_Final Order_06172011_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320081002/320081002_Final%20Order_06172011_text.pdf\n\n320081002_NOPV PCP_07012008.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320081002/320081002_NOPV%20PCP_07012008.pdf\n\n320081002_nopv pcp_07012008_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320081002/320081002_nopv%20pcp_07012008_text.pdf\n\n320081002_Operator Response and Request for Hearing_08062008.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320081002/320081002_Operator%20Response%20and%20Request%20for%20Hearing_08062008.pdf\n\n320081002_Final Order_06172011_text.pdf\n\nJUN 17 2011\nMr. Eric Amundsen\nVice President Technical Services\nPanhandle Eastern Pipeline Company\n5444 Westheimer Road\nHouston, TX 77056\nRE: CPF No. 3-2008-1002\nDear Mr. Amundsen:\nEnclosed please find the Final Order issued in the above-referenced case. It makes a finding of\nviolation and assesses a civil penalty of $180,000. The penalty payment terms are set forth in the\nFinal Order. This enforcement action closes automatically upon payment. Service of the Final\nOrder by certified mail is deemed effective upon the date of mailing, or as otherwise provided\nunder 49 C.F.R. § 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nJeffrey D. Wiese\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, Pipeline Safety\nMr. David Barrett, Director, Central Region, PHMSA\nMr. Louis Soldano, Chief Legal Officer, Panhandle Eastern Pipeline Co.\nMr. Jerry Rau, Director of Pipeline Integrity and Codes, Panhandle Eastern Pipeline Co.\nCERTIFIED MAIL – RETURN RECEIPT REQUESTED[7005 1160 0001 0075 9459]\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, D.C. 20590\n___________________________________\n)\nIn the Matter of )\n)\nPanhandle Eastern Pipeline Company, ) CPF No. 3-2008-1002\n)\nRespondent. )\n___________________________________ )\nFINAL ORDER\nOn April 29, 2007, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and\nHazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), initiated\nan investigation of an incident involving the pipeline system of Panhandle Eastern Pipeline\nCompany (Respondent or Panhandle) near Pawnee, Illinois (Incident). Panhandle operates\nvarious gas pipeline systems, consisting of over 15,000 miles of transmission lines: Panhandle\nEastern Pipeline; Florida Gas Transmission; Trunkline Gas; and Transwestern Pipeline. The\ncompany also operates approximately 6,500 miles of natural gas pipeline, extending from\nAmarillo, Texas, to Detroit, Michigan.1\nThe investigation arose out of a failure on Panhandle’s Glenarm 200 Line near Pawnee, Illinois,\non April 29, 2007. The failure blew out a 109-inch section of 22-inch diameter pipe, releasing\n38 mmcf of natural gas that ignited. The rupture and fire resulted in the evacuation of one\nresidence and the death of farm animals.\n2\nAs a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent,\nby letter dated July1, 2008, a Notice of Probable Violation and Proposed Civil Penalty (Notice).\nIn accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Respondent had\nviolated 49 C.F.R. § 192.479 and assessing a civil penalty of $180,000 for the alleged violation.\nThe company responded to the Notice by letter dated August 6, 2008 (Response). Panhandle\ncontested the allegation, offered additional information regarding mitigation of the proposed\npenalty, and requested a hearing. A hearing was subsequently held on December 11, 2008, in\nKansas City, Missouri, with an attorney in the Office of Chief Counsel, PHMSA, presiding. At\nthe hearing, Respondent was represented by counsel. At the close of the hearing, Panhandle was\n1 www.panhandleenergy.com, (last accessed 5/28/2011).\n2 Violation Report, page 2 of 12.\n\n\n\n2\ngiven 30 days to provide a post-hearing submission, which it subsequently provided by letter\ndated January 30, 2009 (Closing).\nFINDING OF VIOLATION\nThe Notice alleged that Respondent violated 49 C.F.R. Part 192, as follows:\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.479, which states, in\nrelevant part:\n§ 192.479 Atmospheric corrosion control: General.\n(a) Each operator must clean and coat each pipeline or portion of the\npipeline that is exposed to the atmosphere, except pipelines under\nparagraph (c) of this section.\n(b) Coating material must be suitable for the prevention of\natmospheric corrosion….\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.479 by failing to coat each pipeline\nor portion of the pipeline exposed to the atmosphere with coating material suitable for the\nprevention of atmospheric corrosion. Specifically, it alleged that Panhandle failed to maintain\nsuitable coating on a portion of its Glenarm 200 Line that was exposed to the atmosphere. In\nsupport of the allegation, the Notice asserted that Panhandle’s own records indicated it had\nviolated the company’s operating procedures by failing to repair and remove the poor coating\nafter it had first been identified in 2003 and then again in 2005. PHMSA also alleged that\nPanhandle’s failure to address the poor coating at this location was “a major factor” in the\neventual failure that resulted in the Incident.\nIn its Response, Panhandle acknowledged that “the atmospheric coating system installed at this\nlocation was in poor condition,” but raised several defenses to the allegation that it had violated\n§ 192.479.3 First, it disputed the assertion that the company’s own records suggested the coating\nneeded remediation. Second, it argued that the company had identified external corrosion at the\nsite of the exposed pipe but had addressed it in an appropriate manner.4 Respondent\nacknowledged that the company’s Standard Operating Procedure, Atmospheric Pipe Inspection,\n2-5020 (SOP2-5020) referenced in the Notice required atmospheric corrosion inspections, but\nasserted that the company had managed this particular section of pipe in accordance with a\ndifferent procedure, Inadequate Cover and Waterway SOP 1-6050 (SOP1-6050), which did not\nrequire inspections for atmospheric corrosion.\n5 Third, the company argued that neither\nPanhandle nor its third-party contractor had been able to determine whether the external\ncorrosion defect that caused the failure had been on a buried or an exposed section of pipe.\n6\nSince this third defense relates to the gravity of the alleged violation (i.e., whether the violation\n3 Response, at 3.\n4 Hearing Transcript, page7, lines 9-12 and page 9, lines 18-25, dated December 11, 2008.\n5 Panhandle stated it had classified the portion of the pipeline in question as “shallow pipe” and had therefore\nmanaged it in accordance with SOP1-6050.\n6 Response, at 3.\n\n\n\n3\nwas a cause of the accident), rather than the substantive violation itself, it will be discussed in the\nAssessment of Penalty section below.\nAs for Panhandle’s first argument that its records did not in fact indicate the corrosion on the\nexposed pipe needed remediation, the company proffered that its records showed the exposure in\nquestion was classified as a “Priority C” condition with a recommended remediation interval\ngreater than five years.\nIn response, PHMSA asserted that Panhandle’s own 2003 and 2005 atmospheric corrosion\ninspection records documented the poor condition of the coating on the exposed portion of the\nGlenarm 200 Line, but that no remediation was undertaken following either inspection.\n7\nPHMSA explained that Panhandle’s own photo, dated February 3, 2005, showed an exposed six-\nfoot section of the Glenarm 200 Line at MP160+89, with a handwritten notation stating\n“[c]oating is in poor condition, the pipe is rusty but there is no pitting visible. 20 feet of recoat\nwould be required.”\nPHMSA also referenced Respondent’s own Incident Report, dated June 11, 2007, which\nacknowledged that external corrosion “on the body of the pipe at an area exposed to the\natmosphere” had contributed to the failure.8 Finally, the agency pointed to the Respondent’s\nSOP2-5020, which required the repair and removal of poor coating.\nevidence, it is evident that external corrosion existed on this exposed section of pipe as early as\n2003 and that under the company’s own SOP2-5020, the coating was so poor that it warranted\nremediation before the next inspection and was not “suitable for the prevention of atmospheric\ncorrosion.\n”\n9 From these three pieces of\nAs for Panhandle’s second argument that it had properly addressed the atmospheric corrosion,\nRespondent referenced 49 CFR §192.479 (c)(1) to suggest that pipeline operators are allowed to\ndetermine whether or not corrosion appearing as light surface oxide will be detrimental to the\nintegrity of the system. Panhandle is correct that the regulation does allow operators to make\nsuch a determination. However, the regulation applies to pipelines “for which the operator\ndemonstrates by test, investigation, or experience appropriate to the environment of the pipeline\nthat corrosion will only be a light surface oxide; or not affect the safe operation of the pipeline\nbefore the next scheduled inspection.” The regulation is not applicable here, as Panhandle has\nfailed to provide any evidence demonstrating that it satisfied the four elements of the regulation.\nThe company further argued that under SOP1-6050, immediate remediation of the coating was\nnot required. Respondent proffered that under that procedure, “remediation should be scheduled\nbased on priority” (emphasis in original) and that this section of pipe had been given an\nappropriate schedule for remediation based on the severity of the corrosion.\n10\n7 Violation Report, Exhibit F, page 10 of 12. PHMSA contended that the manner in which Panhandle “classified”\npipe and the various versions of its SOPs may have led to a blurring of the lines between the assessments of exposed\nand buried pipe and to the company’s decision to treat the pipe as “shallow” instead of “exposed.”\n8 Violation Report Exhibit E, page 9 of 12.\n9 When Panhandle discovered the poor coating, the company needed to determine the extent of the deterioration and\ndetermine the appropriate action to remediate the poor coating, per SOP2-5020. In 2005, the Respondent’s\ninspection indicated that the coating needed repairs. Violation Report, Exhibit G, page 11 of 12.\n10 Closing, at 3.\n\n\n\n4\nI reject both arguments. As for the first, I find that Panhandle’s own Pipeline Exposure\nInspection History form11 indicated that this particular section of pipe had been treated by the\ncompany not as shallow pipe but as “Exposed Pipe in Creeks and Ditches,\n” a fact confirmed\nof exposed pipe. There is no question but that the six feet of pipe with poor coating was exposed\nto the atmosphere from 2003-2007, with no indication that it was ever cleaned or coated with\nsuitable protective material under either procedure. Therefore, it does not matter which\nprocedure should have been used or when Panhandle intended to remediate the coating on this\nduring the hearing.12 As for the second, it is immaterial which procedure applied to this section\nsection of pipe. The record shows that the company failed to maintain coating material suitable\nfor the prevention of atmospheric corrosion on this section of exposed pipe.\nI am convinced that Respondent’s atmospheric coating system installed in the area of the pipe\nthat failed was in poor condition as early as 2003, that Panhandle discovered and documented the\npoor condition of the coating at that time and also in 2005, and that the company took no action\nto remediate the external corrosion prior to the Incident. Further, the issue of which procedure\napplied to the remediation of external corrosion on this section of pipe is immaterial.\nRespondent has not been charged with violating its own procedures; instead, it has been charged\nwith failing to maintain proper coating on this section of pipe.\nAccordingly, I find that Respondent violated 49 C.F.R. § 195.479 by failing to coat each\npipeline or portion of the Glenarm 200 Line pipeline exposed to the atmosphere with coating\nmaterial suitable for the prevention of atmospheric corrosion.\nThis finding of violation will be considered a prior offense in any subsequent enforcement action\ntaken against Respondent.\nASSESSMENT OF PENALTY\nUnder 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed\n$100,000 per violation for each day of the violation, up to a maximum of $1,000,000 for any\nrelated series of violations.\nIn determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I\nmust consider the following criteria: the nature, circumstances, and gravity of the violation,\nincluding adverse impact on the environment; the degree of Respondent’s culpability; the history\nof Respondent’s prior offenses; the Respondent’s ability to pay the penalty and any effect that\nthe penalty may have on its ability to continue doing business; and the good faith of Respondent\nin attempting to comply with the pipeline safety regulations. In addition, I may consider the\neconomic benefit gained from the violation without any reduction because of subsequent\ndamages, and such other matters as justice may require. The Notice proposed a total civil\npenalty of $180,000 for the violation cited above.\n11 Panhandle’s Pipeline Exposure Inspection History form, dated April 26, 2003, that was used to document pipeline\ninspections had a place to indicate the type of inspection and the form clearly shows a check mark in the box next to\nExposed Pipe in Creeks and Ditches. ( Violation Report, Exhibit F, page 10 of 12)\n12 Hearing Transcript, at 20.\n\n\n\n5\nItem 1: The Notice proposed a civil penalty of $180,000 for Respondent’s violation of 49\nC.F.R. § 195.479, for failing to coat a portion of its Glenarm 200 Line pipeline exposed to the\natmosphere with coating material suitable for the prevention of atmospheric corrosion. The\nNotice also alleged that a major factor in the eventual failure of the pipeline was Panhandle’s\nfailure to address the poor coating. As noted above, I found that Respondent’s own records\nsubstantiated the company’s failure to properly remediate atmospheric corrosion on the exposed\npipe after the poor condition of the coating was noted in 2003 and 2005.\nPanhandle made two basic arguments for reduction of the proposed penalty. First, it argued that\nthere was “no evidence” that the alleged failure to address the poor coating on the exposed pipe\ngood-faith efforts to comply with the regulation, both before and after the Incident, warranted a\nwas a major factor in the eventual failure of the line.13 Second, it argued that the company’s\nsizeable reduction in the penalty.\nI disagree. As for the first argument, Panhandle discovered the corrosion on the exposed section\nof pipe during a 2003 close interval survey.14 Despite a notation by a Panhandle technician that\n20 feet of remediation was required, the company took no action to address the corrosion. While\nit is accurate to say that the record does not pinpoint the exact location of the failure, I find it\nreasonable to rely on the metallurgical report and other evidence presented at the hearing\nshowing that the location of the rupture was at Station Number 160+98, plus or minus several\nfeet, and that the exposed pipe was situated nearby at Station Number 160+89.\n15 The\nmetallurgical report also confirmed that the rupture initiated at a region of the external wall loss\nthat was the result of corrosion.\n16 Furthermore, Part G of the Respondent’s own Incident Report,\nin which the company described the factors contributing to the failure, stated that “apparently\nexternal corrosion occurred on the body of the pipe at an area exposed to the atmosphere” and\nthat “the external coating had become disbanded allowing external corrosion to occur on the top\nof the pipe.” 17\nConsidering all of the evidence, including the proximity of the failure location to the six feet of\nsection of exposed pipe and the company’s Incident Report, I find that Panhandle’s failure to\nmaintain a suitable coating on the section of exposed pipe lying within a few feet of the failure\nlocation constituted a contributing cause of the failure and supports the proposed penalty.\n13 Closing, at 2.\n14 The close interval survey was performed on the buried portion of the pipeline to the edge of the bank where the\npipe was exposed to the atmosphere. The survey failed to show any cathodic protection deficiencies on the buried\npipe. If corrosion were occurring in this area, the readings at the banks, or in the area of the banks, would have\ndisplayed some sort of deficient reading.\n15 Hearing Transcript, page 15-16; Violation Report, Exhibit C, page 7 of 12. As noted above, Respondent’s own\nrecords showed six feet of exposed pipe with corrosion and a 2003 notation calling for 20 feet of recoating.\n16 The metallurgical report states,”[t]he rupture initiated at a region of the external wall loss that was the result of\ncorrosion…results of the analysis showed that the rupture occurred when the size and extent of the external\ncorrosion exceeded the critical flaw size for the material properties, dimensions, and operating pressure of the pipe.”\n17 Violation Report, Exhibit E, page 9 of 12.\n\n\n\n6\nThe gravity of a violation is one of the principal factors that PHMSA considers in assessing civil\npenalties. Pipeline accidents, regardless of whether they constitute “near-misses,” spills,\nproperty damage, injuries, or fatalities, constitute the most serious threats to life, property and the\nenvironment under the federal Pipeline Safety Laws. When regulatory violations are\ncontributing causes of such accidents, it is both logical and appropriate that they serve to elevate\nsubstantially the amounts of the penalties assessed. In this case, the potentially disastrous\nconsequences of the Incident were directly linked to Respondent’s violation of its own\nprocedures and the regulation. Therefore, the specific facts of this case elevate both the gravity\nof the violation and the magnitude of the penalty.\nSecond, Respondent argued that it took a number of good-faith actions, both prior to and\nfollowing the failure, that should serve to reduce or eliminate the proposed penalty. Respondent\nadvised that it had modified the section of the Glenarm 200 pipeline to accommodate a July\n2007smart pig for in-line inspection that was not a regulatory requirement. Panhandle further\nadvised that its Midwest Division had remediated 25 exposed/shallow pipe segments between\n2003 and 2007.\nThe company further indicated that following the Incident, it performed metallurgical testing to\nidentify the cause of the failure, completed an erosion control project at the failure location, ran a\nhigh-definition caliper tool and a high-resolution magnetic flux leakage tool, and accelerated the\nremediation of 69 anomalies identified as a result of the tool runs. Respondent proffered that it\nhad further demonstrated good faith, prior to the failure, when it performed a close interval\nsurvey in 2003 to confirm cathodic protection and depth-of-cover on its four mainlines in the\narea.\nWhile I acknowledge the value of these various actions taken by Panhandle, the fact remains that\nmost of them were either regulatory requirements or performed after, and as a result of, the\nIncident and were steps that any reasonable and prudent operator might take to prevent future\naccidents. I also find that the actions taken after the Incident do not cure the violation,\nthe Incident, none of them was aimed at achieving compliance with § 195.479. Furthermore, the\nfact remains that the company failed to take effective action, over a period of approximately four\nyears, to address known corrosion on this particular section of exposed pipe and that such\nviolation could easily have had catastrophic consequences. Although Panhandle argued that\nunder its assessment program, it had five years to remediate this location, the failure actually\n2003 and 2005.\ndemonstrate good faith, or warrant a reduction in the civil penalty.18 As for those taken prior to\noccurred within a few feet of where the company had recorded the discovery of corrosion in\nAfter considering and balancing Respondent’s arguments with the nature (corrosion),\ncircumstances (failing to maintain coating to prevent atmospheric corrosion and failing to\nremediate) and the gravity of the violation (the rupture and fire, the nexus between the regulatory\nviolation and the cause of the failure, and the evacuation of one residence and the death of farm\nanimals), I can find no basis for elimination or reduction of the civil penalty. The degree of\n18 With respect to Respondent’s argument that a comment in the Violation Report was erroneous because it stated\nthat Panhandle had not exhibited good faith in attempting to achieve compliance. Panhandle may have\nmisinterpreted the comment. It simply means that the operator is not entitled to a credit or reduction in the proposed\npenalty on account of good faith.\n\n\n\n7\nRespondent’s culpability is also high, in light of, the company’s knowledge of the corrosion\nsince 2003. The question of Respondent’s ability to pay is not an issue. Accordingly, having\nreviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of\n$180,000.\nPayment of the civil penalty must be made within 20 days of service. Federal regulations\n(49 C.F.R. § 89.21(b)(3)) require this payment be made by wire transfer, through the Federal\nReserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed\ninstructions are contained in the enclosure. Questions concerning wire transfers should be\ndirected to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike\nMonroney Aeronautical Center, P.O. Box 269039, Oklahoma City, OK 73125; (405) 954-8893.\nFailure to pay the $180,000 civil penalty will result in accrual of interest at the current annual\nrate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to\nthose same authorities, a late penalty charge of six percent (6%) per annum will be charged if\npayment is not made within 110 days of service. Furthermore, failure to pay the civil penalty\nmay result in referral of the matter to the Attorney General for appropriate action in a United\nStates District Court.\nUnder 49 C.F.R. § 190.215, Respondent has the right to submit a Petition for Reconsideration of\nthis Final Order. The petition must be sent to: Associate Administrator, Office of Pipeline\nSafety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC\n20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA\nwill accept petitions received no later than 20 days after receipt of the Final Order by the\nRespondent, provided they contain a brief statement of the issue(s) and meet all other\nrequirements of 49 C.F.R. § 190.215. The filing of a petition automatically stays the payment of\nany civil penalty assessed but does not stay any other provisions of the Final Order, including\nany required corrective actions. If Respondent submits payment of the civil penalty, the Final\nOrder becomes the final administrative decision and the right to petition for reconsideration is\nwaived.\nThe terms and conditions of this Final Order are effective upon service in accordance with 49\nC.F.R. § 190.5.\n___________________________________ __________________________\nJeffrey D. Wiese Date Issued\nAssociate Administrator\nfor Pipeline Safety","truncated":false,"body_characters":24280}