{"operation":"document","citation":"CPF 320085006","title":"JAYHAWK PIPELINE LLC — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2008-05-19","effective_on":null,"summary":"CLOSED notice of probable violation citing 195.402(a), 195.406(b), 195.428(a).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-320085006.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-320085006.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-320085006","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/320085006","body":"Notice of Probable Violation involving JAYHAWK PIPELINE LLC. PHMSA's enforcement data identifies the cited regulations as 195.402(a),  195.406(b),  195.428(a). The case was opened on 2008-05-19 and is reported as closed as of 2011-01-03. Proposed civil penalty: $365,000. Assessed civil penalty: $365,000. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n320085006_Final Order_12162010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320085006/320085006_Final%20Order_12162010.pdf\n\n320085006_Final Order_12162010_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320085006/320085006_Final%20Order_12162010_text.pdf\n\n320085006_NOPV_PCP_05192008.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320085006/320085006_NOPV_PCP_05192008.pdf\n\n320085006_nopv_pcp_05192008_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320085006/320085006_nopv_pcp_05192008_text.pdf\n\n320085006_Response to NOPV_PCP_06172008.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320085006/320085006_Response%20to%20NOPV_PCP_06172008.pdf\n\n320085006_Final Order_12162010_text.pdf\n\nDEC 16 2010\nMr. Rick Peterson\nGeneral Manager\nJayhawk Pipeline, LLC\n2000 S. Main Street\nMcPherson, Kansas 67460\nRe: CPF No. 3-2008-5006\nDear Mr. Peterson:\nEnclosed please find the Final Order issued in the above-referenced case. It makes findings of\nviolation and assesses a civil penalty of $365,000. The penalty payment terms are set forth in the\nFinal Order. This enforcement action closes automatically upon receipt of payment. Service of\nthe Final Order by certified mail is deemed effective upon the date of mailing, or as otherwise\nprovided under 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. David Barrett, Director, Central Region, PHMSA\nCERTIFIED MAIL – RETURN RECEIPT REQUESTED [7005 1160 0001 0041 0749]\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)\nJayhawk Pipeline, LLC, ) CPF No. 3-2008-5006\n)\nRespondent. )\n____________________________________)\nFINAL ORDER\nPursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety\nAdministration (PHMSA), Office of Pipeline Safety (OPS), conducted an investigation of an\nincident involving the pipeline system operated by Jayhawk Pipeline, LLC (Jayhawk or\nRespondent), in McPherson, Kansas. The investigation arose out of a release of crude oil from\nRespondent’s El Dorado pipeline on August 18, 2006. Jayhawk, a subsidiary of the National\nCooperative Refinery Association, operates approximately 1200 miles of crude oil transmission\nand gathering pipelines in Kansas, Nebraska, Oklahoma, and Texas.1\nAs a result of the investigation, the Director, Central Region, OPS (Director), issued to\nRespondent, by letter dated May 19, 2008, a Notice of Probable Violation and Proposed Civil\nPenalty (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that\nJayhawk had violated 49 C.F.R. §§ 195.402, 195.406, and 195.428, and proposed assessing a\ncivil penalty of $365,000 for the alleged violations.\nJayhawk responded to the Notice by letter dated June 17, 2008 (Response). The company did\nnot contest the allegations of violation, but provided an explanation of its actions and requested\nthat the proposed civil penalty be eliminated. Respondent did not request a hearing and therefore\nhas waived its right to one.\nFINDINGS OF VIOLATION\nIn its Response, Jayhawk did not contest the allegations in the Notice that it violated 49 C.F.R.\nPart 195, as follows:\n1 Jayhawk website, www.jayhawkpl.com, accessed July 19, 2010.\n\n\n\n2\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.402(a), which states in\nrelevant part:\n§ 195.402 – Procedural manual for operations, maintenance, and\nemergencies.\n(a) General. Each operator shall prepare and follow for each pipeline\nsystem a manual of written procedures for conducting normal operations\nand maintenance activities and handling abnormal operations and\nemergencies. . . .\nThe Notice alleged that Respondent violated 49 C.F.R. § 194.402(a) by failing to follow its\nwritten procedures for transferring crude oil from the El Dorado pipeline to a tank at the\nMcPherson, Kansas refinery. Specifically, the Notice alleged that Jayhawk’s dispatcher failed to\nfollow the procedures for aligning the proper valves for delivery of product to the proper tank.\nOn the day of the spill, the Oil Movements Supervisor directed the dispatcher to begin delivery\nto tank J-6. However, the dispatcher directed the oil to tanks J-5/J-7, and the entry valves for this\npath were closed. This caused the overpressure condition at the manifold that led to the spill.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 195.402(a) by failing to follow its\nwritten procedures for transferring crude oil from a pipeline to a refinery tank.\nItem 2: The Notice alleged that Respondent violated 49 C.F.R. § 195.406, which states in\nrelevant part:\n§ 195.406 – Maximum operating pressure.\n(a) . . . .\n(b) No operator may permit the pressure in a pipeline during surges or\nother variations from normal operations to exceed 110 percent of the\noperating pressure limit established under paragraph (a) of this section.\nEach operator must provide adequate controls and protective equipment to\ncontrol the pressure within this limit.\nThe Notice alleged that Respondent violated 49 C.F.R. § 195.406 by failing to provide adequate\ncontrols and protective equipment to maintain pipeline pressure within the required limit.\nSpecifically, the Notice alleged that, before 2001, Respondent rendered its overpressure system\ninoperable by placing a plate over part of a relief valve installed for overpressure protection. The\nNotice alleged that this overpressure system remained inoperable through the date of the\ninspection. Respondent did not contest this allegation of violation. Accordingly, based upon a\nreview of all of the evidence, I find that Respondent violated 49 C.F.R. § 195.406 by failing to\nprovide adequate controls and protective equipment to maintain pipeline pressure within the\nrequired limit.\nItem 3: The Notice alleged that Respondent violated 49 C.F.R. § 195.406, as quoted above, by\npermitting the pressure in its pipeline to exceed 110 percent of the established operating pressure\nlimit. Specifically, the Notice alleged that on the day of the spill, Respondent caused the\n\n\n\n3\npressure in the El Dorado pipeline to exceed the permissible pressure by over 100 percent. The\nestablished operating pressure of the pipeline at McPherson was 275 psig, meaning that the\nmaximum pressure allowed under § 195.406 was 302.5 psig. The Notice alleged that on the day\nof the spill, pressure at McPherson reached 609 psig, and reached 680 and 665 psig at two other\nlocations on the pipeline. Respondent did not contest this allegation of violation. Accordingly,\nbased upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 195.406\nby permitting the pressure on its pipeline to exceed 110 percent of the maximum operating\npressure.\nItem 4: The Notice alleged that Respondent violated 49 C.F.R. § 195.428, which states in\nrelevant part:\n§ 195.428 – Overpressure safety devices and overfill protection\nsystems.\n(a) Except as provided in paragraph (b) of this section, each operator\nshall, at intervals not exceeding 15 months, but at least once each calendar\nyear, or in the case of pipelines used to carry highly volatile liquids, at\nintervals not to exceed 71⁄2 months, but at least twice each calendar year,\ninspect and test each pressure limiting device, relief valve, pressure\nregulator, or other item of pressure control equipment to determine that it\nis functioning properly, is in good mechanical condition, and is adequate\nfrom the standpoint of capacity and reliability of operation for the service\nin which it is used.\nThe Notice alleged that Respondent violated 49 C.F.R. § 195.428 by failing to inspect and test\nten pressure relief valves at least once each calendar year. Specifically, the Notice alleged that\nRespondent failed to inspect ten specified relief valves between 2001 and the date of the\ninspection. Respondent did not contest this allegation of violation. Accordingly, based upon a\nreview of all of the evidence, I find that Respondent violated 49 C.F.R. § 195.428 by failing to\nconduct required inspections of relief valves.\nThese findings of violation will be considered prior offenses in any subsequent enforcement\naction taken 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. In determining the amount of a civil penalty under 49 U.S.C.\n§ 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature,\ncircumstances, and gravity of the violation, including adverse impact on the environment; the\ndegree of Respondent’s culpability; the history of Respondent’s prior offenses; the Respondent’s\nability to pay the penalty and any effect that the penalty may have on its ability to continue doing\nbusiness; and the good faith of Respondent in attempting to comply with the pipeline safety\nregulations. In addition, I may consider the economic benefit gained from the violation without\nany reduction because of subsequent damages, and such other matters as justice may require.\n\n\n\n4\nThe Notice proposed a total civil penalty of $365,000 for the violations cited above. In its\nResponse, Jayhawk argued generally that the entire proposed civil penalty should be eliminated\nbased on its recent efforts to improve safety. First, Jayhawk stated that it installed overpressure\nprotection throughout its system less than sixty days after the spill. Second, Jayhawk stated that\nits pipeline assessment and repair program had reduced the frequency of spill incidents on its\nsystem, and noted that its last pipeline release (as of June 17, 2008, the date of the Response)\nwas on October 27, 2005. Third, Jayhawk stated that in recent years it had committed significant\nresources to upgrading and improving its stations. These improvements consisted of:\n• Pipeline improvements at Schurr station completed in 2006 at a cost of $585,000;\n• Modifications to Valley Center station completed in June 2008 at a cost of $441,000;\n• Modifications at Taloga station that were in progress as of June 2008 and for which\nan expenditure of $380,000 had been authorized;\n• Modifications at Eubanks station that were in progress as of June 2008 and cost\n$585,000; and\n• Previously completed assessments and modifications at Burrton, Chase, Hudson,\nCoffeyville Delivery, and Harper Ranch stations.\nFinally, Jayhawk claimed that the proposed penalty exceeded its “budgeted” monthly income\nand expressed its view that the amount would be better utilized for maintenance projects.\nWith respect to the corrective actions Jayhawk took on its overpressure protection system after\nthe August 2006 spill, these actions do not support reducing or eliminating the proposed penalty.\nPipeline operators are responsible for complying with the pipeline safety regulations at all times.\nThe proposed penalty was based on Jayhawk’s non-compliance with the regulations at the time\nof the inspection. Jayhawk was obligated to promptly correct conditions that violated the\nregulations after PHMSA identified them. Jayhawk presented no evidence that it attempted in\ngood faith to comply with the regulations before the violations were identified. Jayhawk’s post-\ninspection repairs to correct violations are not relevant to a penalty assessment and do not\nsupport any change in the proposed penalty.\nSecond, Jayhawk’s progress in reducing the frequency of pipeline releases does not support\nreducing or eliminating the proposed penalty. Jayhawk’s own incident reports submitted to\nPHMSA indicate that Jayhawk’s system experienced nineteen spills from October 27, 2005 to\nthe date of the Response. While many of these spills may be characterized as station releases\nrather than pipeline releases, this record indicates that Jayhawk has experienced frequent\nincidents in recent years. While any reduction in the number of pipeline releases is a positive\ndevelopment, given the nature of this incident it does not support reducing or eliminating the\nproposed penalty.\nThird, Jayhawk’s station improvements are a regular part of maintenance. Jayhawk noted in its\nResponse that it had experienced problems with respect to station integrity, and that it was\nconsequently carrying out improvements to its stations. Such improvements are consistent with\nthe general requirements of the pipeline safety regulations but do not support reducing or\neliminating the proposed penalty.\n\n\n\n5\nFourth, Jayhawk’s claim that the proposed penalty exceeded its “budgeted” monthly income did\nnot demonstrate an inability to pay to justify eliminating the proposed penalty. The regulations\nrequire PHMSA to consider “the Respondent’s ability to pay the penalty and any effect that the\npenalty may have on its ability to continue doing business” when assessing a civil penalty.\nJayhawk claimed that the proposed penalty exceeded its monthly “budgeted” income, but it\nprovided no evidence to indicate that Jayhawk would be unable to pay the proposed penalty. For\na company to demonstrate financial hardship it must provide PHMSA with certified financial\nstatements by which the agency may accurately determine the company’s ability to pay but\nJayhawk did not do so. Accordingly, Jayhawk did not establish financial hardship in a manner\nthat would support reducing or eliminating the proposed penalty. Finally, Jayhawk’s view that\nthe funds that it would use to pay the civil penalty would be better used for pipeline maintenance\ndoes not constitute grounds for a penalty reduction. All pipeline operators are obligated to\nmaintain compliance and satisfy their regulatory oversight responsibilities.\nItem 1: The Notice proposed a civil penalty of $84,000 for Respondent’s violation of 49 C.F.R.\n§ 195.402. As discussed above, I found that Respondent violated § 195.402 by failing to follow\nits written procedures for transferring crude oil to a refinery tank. On the day of the spill,\nRespondent’s dispatcher violated the company’s procedures by erroneously delivering oil to the\nwrong tank. The dispatcher directed an oil delivery to the wrong tank, and because the valves to\nthis tank were closed and the overpressure system was disabled, an oil spill occurred. This\nincident illustrates the importance of following the operations manual, and specifically of closely\nfollowing instructions regarding oil deliveries to tanks. Respondent has presented no\ninformation that would warrant a reduction in the civil penalty amount proposed in the Notice for\nthis violation. Accordingly, having reviewed the record and considered the assessment criteria, I\nassess Respondent a civil penalty of $84,000 for violation of 49 C.F.R. § 195.402.\nItem 2: The Notice proposed a civil penalty of $101,000 for Respondent’s violation of 49\nC.F.R. § 195.406. As discussed above, I found that Respondent violated § 195.406 by failing to\nprovide adequate controls and protective equipment to maintain pipeline pressure within the\nrequired limit. Respondent disabled the overpressure protection equipment at the McPherson,\nKansas refinery from 2001 until after the August 2006 oil spill. This threatened the safety of\nemployees at the refinery, which is located in a high consequence area (HCA), as well as the\nenvironment. Overpressure protection is important to preventing oil spills. In this case,\nfunctioning overpressure protection would likely have prevented a spill from occurring.\nRespondent has presented no information that would warrant a reduction in the civil penalty\namount proposed in the Notice for this violation. Accordingly, having reviewed the record and\nconsidered the assessment criteria, I assess Respondent a civil penalty of $101,000 for violation\nof 49 C.F.R. § 195.406.\nItem 3: The Notice proposed a civil penalty of $84,000 for Respondent’s violation of 49 C.F.R.\n§ 195.406. As discussed above, I found that Respondent violated § 195.406 by permitting the\npressure in its pipeline to exceed 110 percent of the established operating pressure limit. On the\nday of the oil spill, the pressure inside Respondent’s pipeline system reached a level that was\nnearly double the maximum pressure permitted by the regulations. The pressure reached this\nlevel because the overpressure protection system was disabled, and the high pressure levels led\nto a release of crude oil. This incident illustrates the importance of ensuring that pressure levels\nremain within the permitted range, and demonstrates the consequences of allowing excessive\n\n\n\n6\npressure to develop in a pipeline. Respondent has presented no information that would warrant a\nreduction in the civil penalty amount proposed in the Notice for this violation. Accordingly,\nhaving reviewed the record and considered the assessment criteria, I assess Respondent a civil\npenalty of $84,000 for violation of 49 C.F.R. § 195.406.\nItem 4: The Notice proposed a civil penalty of $96,000 for Respondent’s violation of 49 C.F.R.\n§ 195.428. As discussed above, I found that Respondent violated § 195.428 by failing to conduct\nannual inspections of ten pressure relief valves between 2001 and the date of the inspection.\nRegular inspections of overpressure protection devices are crucial to ensuring the safe operation\nof pipelines. Inspections allow operators to identify and repair problems before incidents, such\nas oil spills, occur. Respondent’s failure to inspect ten pressure relief valves during a period of\nat least six years in this case illustrates the importance of annual valve inspections. Respondent\nfailed to identify the problem with the overpressure valve that allowed the spill to occur. Had\nRespondent carried out inspections as required, the spill may have been prevented. Respondent\nhas presented no information that would warrant a reduction in the civil penalty amount\nproposed in the Notice for this violation. Accordingly, having reviewed the record and\nconsidered the assessment criteria, I assess Respondent a civil penalty of $96,000 for violation of\n49 C.F.R. § 195.428.\nBased on the discussion above, having reviewed the record and considered the assessment\ncriteria, I assess Respondent a total civil penalty of $365,000.\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 such payment to 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, Oklahoma 73125. The\nFinancial Operations Division telephone number is (405) 954-8893.\nFailure to pay the $365,000 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 district\ncourt of the United States.\nUnder 49 C.F.R. § 190.215, Respondent has the right to submit a petition for reconsideration of\nthis Final Order. Should Respondent elect to do so, the petition must be sent to: Associate\nAdministrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building,\n2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at\nthe same address. PHMSA will accept petitions received no later than 20 days after receipt of\nservice of the Final Order by the Respondent, provided they contain a brief statement of the\nissue(s) and meet all other requirements of 49 C.F.R. § 190.215. The filing of a petition\nautomatically stays the payment of any civil penalty assessed but does not stay any other\nprovisions of the Final Order, including any required corrective actions. If Respondent submits\n\n\n\n7\npayment of the civil penalty, the Final Order becomes the final administrative decision and the\nright to petition for reconsideration is waived.\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":21213}