MAGELLAN PIPELINE COMPANY, LP — Notice of Probable Violation

case documentOfficial PDF320085007_ConsentAgreement_09222009.pdf#

case documentOfficial PDF320085007_ConsentAgreement_09222009_text.pdf#

party submissionOfficial PDF320085007_Operator_Response_and_Request_for_Hearing_07232008.pdf#

320085007_ConsentOrder_09222009_text.pdf, page 1Official PDFSEP 22 2009 U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ____________________________________ In the Matter of ) Magellan Pipeline Company, L.L.C., ) CPF No. 3-2008-5007 ) ) ) Respondent. ) ____________________________________) CONSENT ORDER On June 23, 2008, the Pipeline and Hazardous Materials Safety Administration (PHMSA), U.S. Department of Transportation, issued to Magellan Pipeline Company, L.L.C. (Respondent) a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order in this case. The Notice alleged that Respondent had committed violations of 49 C.F.R. Part 195 and proposed assessing a civil penalty of $784,000 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violations. In response to the Notice, Respondent requested an informal hearing and Respondent and PHMSA engaged in good faith settlement discussions resulting in the Consent Agreement attached to this Order that settles all of the allegations in the Notice. Accordingly, the foregoing Consent Agreement is hereby approved and incorporated by reference into this Order. The Respondent is hereby ordered to comply with the terms of the Consent Agreement, effective immediately.#

320085007_ConsentOrder_09222009_text.pdf, page 2Pursuant to 49 U.S.C. 60101 et seq. and 49 C.F.R. § 190.221, failure to comply with this Consent 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. The terms and conditions of this Consent Order are effective upon receipt. ____________________________________ _________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 2#

320085007_nopv pcp pco_06232008_text.pdf, page 1Official PDFU 5 Department of Transporfation Pipeline and Hazardous Matenals Safety Administration 90t Locust Street Suite 462 Kansas City MO 64106 2641 NOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTV and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT RE UESTED June 23, 2008 Mr Rtchard Olsen Senior Vice President Operations and Technical Services Magellan Pipehne Company, L L C One Wtlhams Center Tulsa, OK 74172 CPF 3-2008-5007 Dear Mr Olsen On May 23, 2005, a representative of the Pipehne and Hazardous Matenals Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code investigated the accident on Magellan Pipeline Company's ¹4-8" Line at milepost 9 46 in the Fairfax lndustnal District of Kansas City, Kansas This May 23, 2005 pipehne failure occurred at approximately 00 51 hours and resulted in the release of 2936 barrels of unleaded gasohne from the ptpehne, a portion oi which flotsed into the Missouri River The release also caused closing of a railroad hne, shutdown of a utihty power plant and closing of businesses As a result of the investigation, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations The items investigated and the probable violation(s) are#

320085007_nopv pcp pco_06232008_text.pdf, page 21. Subpart F - Operations and Mamtenance Il 195. 401 General requirements. (b) Whenever an operator discovers any condition that could adversely affect the safe operation of its pipehne system, it shall correct it within a reasonable time. However, if the condition is of such a nature that it presents an immediate hazard to persons or property, the operator may not operate the affected part of the system untd it has corrected the unsafe condition Magellan Pipelme Company, L L C (Magellan) failed to maintam pressure instrumentation within a reasonable time which conutbuted to the failure The pressure monitors at Milepost 156 on Magellan's ¹6-10" were not functioning properly for approximately twelve (12) days prior to the failure Servicmg of the umts was not successful dunng this penod resulting in eleven (11) hi-hi alarms withm five hours prior to the release at 00 51 on May 23 Hi-hi alarms from the momtors were bemg ignored by controllers whde they were still operatmg the hne At 00 39 a high pressure alartri at the Kansas City Termmal (not at milepost 156) was received by the controller and cleared without investigation When the "A/D Fail" alarm at Kansas City Terminal indicating that the transmitter had gone out of range was received at 00 48, the alarm was simply acknowledged without further reaction or recognition that pressures above normal conditions had occurred The failure to correct the instrumentation problem causing the false hi-hi pressure alarm indications from Milepost 156 instrumentation rd in a timely manner contributed to mappropnate reaction by the controller on May 23 and was a contributory factor to the pipehne failure Z. ft 195 402 Procedural manual for operations, mamtenance, and emergencies (a) General. Each operator shall prepare and follow for each pipeline system a manual of wntten procedures for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies. Magellan failed to follovv its written procedures manuals (RPOC-ADM-002 Section 1 2 1) for conductmg normal operations pertaining to start-up of a pipehne Operations and monitoring of the El Dorado to Kansas City Termmal ¹6-10"/¹4-8" pipehne was performed by two SCADA controllers Controller ¹1 on Console 4 performed stdrtup and shutdown functions and morutortng of the line from El Dorado to Milepost 156 while Controller ¹2 on Console 2 monitored alarms for Milepost 156 through the Kansas City Terminal Controller ¹1 did not follow wTttten procedures manual RPOC-ADM-002 Section 1 2 I "Startup of a Pipehne Segment with No units m Current Operation" by not opening all mamhne valves to deliver the product stream The last sentence of Section 1 2 1 states, "The Controller ivill remotel& open all mainhne valves to deliver the product stream and e~ther start or have the appropnate field personnel start the umt " Controller ¹1 failed to open the Kansas City Terminal mainlme valve (550 Valve 6S) until 26 mmutes after starting the hne Failure to open this valve per the procedures allov ed abnormally high pressure on the hne resulting m the ¹4-8" hne's rupture#

320085007_nopv pcp pco_06232008_text.pdf, page 33 Il 195 402 Procedural manual for operations, mamtenance, and emergencies. (a) General. Each operator shall prepare and follow for each pipehne system a manual of written procedures for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies. Magellan failed to follow its written procedures manuals (RPOC-ADM-002 Sections 1 2 2 and 1 2 3) for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies Operations and monitonng of the El Dorado to Kansas City Terminal ¹6-10"/¹4-8" pipehne was performed by two SCADA controllers Controller ¹1 on Console 4 performed startup and shutdown functions and mont tonng of the hne from El Dorado to Milepost 156 while Controller ¹2 on Console 2 monitored alarms for Milepost 156 through the Kansas City Terminal Controllers ¹1 and ¹2 did not follow wntten procedures manual RPOC-ADM-002 Sections 1 2 2 and 1 2 3 "Startup of a Pipelme Segment with No units in Current Operation" by not appropnately monitonng for abnormal conditions and taking actions to prevent further development of the abnormal operating condition Conditions of high pressure and low flow occurred as a result of pumpmg agamst a closed valve at the Kansas City Termmal Section 1 2 2 states, "Upon unit startup, the Controller will monitor the segment ol the pipelme affected via the SCADA system (including pressure and flow rates) The Controller will watch for signs of pending abnormal conditions and take appropriate actions to prevent further development" Section 1 2 3 states, "The Controller should observe the affected segment with heightened awareness until stable operating conditions are achieved" Section 3 3 1 3 2 is also associated with the controllers' actions which states, "While the general auto parameters are deactivated Conlrollers need to heighten their awareness for abnormal operating conditions " Upon the startup of the El Dorado Pump Station and the ¹6-10"/¹4-8" hnes' operations, these procedures were not followed in regard to the following factors 1 Parameter alarms were deactivated while the El Dorado to Kansas City hne was in an unsteady state dunng start-up 2 Controller ¹1 received 28 alarms not on the hne wluch ruptured which averted his attention &om the start-up of the El Dorado — Kansas City hne 3 Controller ¹1 did not actively monitor and react to pressure and flow on the hne while the hne was in an unstable condition Controller ¹1 reported that efforts to momtor the ¹6-10"/¹4-8 hne segments were hampered by display changes occumng as the result of problems on other pipelines 4 The line went to an abnormal state of high pressure and low flow with no corrective reaction by controllers Failure to appropnately monitor the pipehne during start-up per these procedures allowed abnormally high pressure on the hne which was a contnbuting factor to the ¹4-8" hne's rupture#

320085007_nopv pcp pco_06232008_text.pdf, page 44 h 195 402 Procedural manual for operations, maintenance, and emergencies. (a) GeneraL Each operator shall prepare and follow for each pipehne system a manual of wntten procedures for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies Magellan failed to follow its wntten procedures manuals (RPOC-ADM-002 Sections I 3 I) for conductmg normal operations and maintenance activities and handhng abnormal operations and emergencies Operations and monhtonng ot the El Dorado to Kansas City Terminal ¹6- 10"/¹4-8" pipehne was performed by two SCADA controllers Controller ¹I on Console 4 performed startup and shutdown functions and momtorhng of the line from El Dorado to Milepost 156 while Controller ¹2 on Console 2 momtored alarms for Mdepost 156 through the Kansas City Terminal Controller ¹I did not appropriately follow wntten procedures manual RPOC-ADM-002 Section 1 3 I "Startup of an Intermediate Pumping Unit on a Currently Operating Pipelme" by starting an additional pumping unit when it was not required Section I 3 1 states, "When operatmg conditions require additional pumping units to be placed m service on a pipeline segment that is currently in operation, the Controller shall decide what umt or umts to start The Controller will observe the conditions on the pipehne segment to be affected pnor to startmg a umt" The controller was not cognizant of the abnormal pipehne conditions of the pressure at Kansas City being over 1000 pshg with the flow near zero prior to the rupture, nor the other abnormal flow and pressure conditions along the lme from El Dorado to Empona, to Topeka and on to Kansas City that existed pnor to the rupture Controller ¹I issued a command at 00 55 to start Topeka pump station at MP 103 82 without properly monitoring and evaluating the pipehne operation The pump station start was initiated afler the rupture occurred at 00 51 rt 195 402 Procedural manual for operathons, maintenance, and emergencies. (a) GeneraL Each operator shall prepare and follow for each pipehne system a manual of wntten procedures for conducting normal operations and maintenance activities and handlmg abnormal operations and emergencies (d) Abnormal operation The manual required by paragraph (a) of this section must include procedures for the following to provide safety when operating design limits have been exceeded; (1) Respondhng to, investigating, and correchng the cause of; (v) Any other malfunction of a component, deviation from normal operation, or personnel error which could cause a hazard to persons or property. (3) Correcting vanations from normal operahon of pressure and flow equipment and controls.#

320085007_nopv pcp pco_06232008_text.pdf, page 5Magellan recognizes Il 195 402(d)(3) as a requirement by stating the rule m its abnormal operations manual RPOC-ADM-003 Section 1 2 3 3, but failed to follow its wntten procedures manuals (RPOC-ADM-003 Section 1 2 1) addressing this abnormal operation A pipehne controller did not take immediate action to correct an abnormal operatmg condition on thc El Dorado-Kansas City Terminal pipelme Operations and monitonng of the El Dorado to Kansas City ¹6-10"/¹4-8" pipehne was performed by two SCADA controllers Controller ¹1 on Console 4 performed startup and shutdown functions and monitonng of the hne from El Dorado to Milepost 156 while Controller ¹2 on Console 2 monitored alarms for Milepost 156 through the Kansas City Termmal Controller ¹2 did not appropriately follow wntten procedures manual RPOC-ADM- 003 Section 1 2 1 states, "The Controller, upon learning of an abnormal situation, will proceed to immediately correct it or have field personnel correct it" Controller ¹2 received a high pressure alarm at 00 39 at the Kansas City Termmal According to the Event Summary, Controller ¹2 received an "A/D - Fail" alarm at 00 48 which indicated a pressure transmitter for the Kansas City Terminal was out of range Controller ¹2 did not alert Controller ¹1 to the occurrence of the two alarms indicative of high pressure at Kansas City Terminal Controller ¹2 cleared the pressure alarm at 00 49 No further action on the ¹6-10"/¹4-8" was taken by either Controller until after the hne ruptured at 00 51 Magellan's mtemal accident report interviews of Controllers indicate that Controller ¹2 cleared the high pressure alarm at Kansas City Termmal and did not recogmze this alarm as an abnormal operatmg condition Also this report mdicates that several minutes passed before Controller ¹1 notified Controller ¹2 that a release had occurred Controller 2 then reviewed the trend at Kansas City Termmal and venfied that a release had occurred The delayed actions of Controller ¹2 cleanng an alarm at 00 49 on the ¹4-8" and not notifying Conholler ¹1 of the two alarms indicative ot high pressure at the Kansas City Terminal caused abnormal conditions to continue which contnbuted to the pipehne failure t) 195. 402 Procedural manual for operations, maintenance, and emergencies. (a) General Each operator shall prepare and follow for each pipelme system a manual of written procedures for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies. (e) Emergencies. The manual required by paragraph (a) of this section must include procedures for the following to provide safety when an emergency condition occurs. (4) Taking necessarv action, such as emergency shutdo&vn or pressure reduction, to mininuze the volume of hazardous liquid or carbon dioxide that is released from an& section of a pipeline system in the event of a fadure Magellan failed to follow its wntten procedures (RPOC-ADM-004 Sections 3 2 1 5) for conductmg normal operations and maintenance activities and handhng abnormal operations and emergencies to minimize the amount of hazardous liquid at the failure site Tulsa Controllers did not appropnately follow wntten procedure manual RPOC-ADM-004 Section#

320085007_nopv pcp pco_06232008_text.pdf, page 63 2 I 5 to determine the need to open or close the KC mainhne valve at the Kansas City Termmal followmg the fadure of the ¹4-8" hne Section 3 2 I 5 states that the controller is to, 'Review pipehne ahgnment sheet to become famihar with the elevation charactenstics in the vicinity of the leak and to determine the Iocanon oi mainhne valves and the proximity of the leak to Company facihties In con)unction with the field personnel, utihze the information gathered from the ahgnment sheets to determine the need to open or close remote or manual mamhne block valves in order to alleviate pressure and to minimize product at the leak site as required " Failure to properly evaluate factors to successfully alleviate pressure and minimize product at the leak site resulted in backflow to the leak site from the Kansas City Tenmnal Hydraulic factors to consider on the ¹4-8" line feedmg into the Kansas City Terminal which could cause backflow were I) tank elevations and liquid level to which it was flowing and/or 2) any pressured hnes in the Kansas City Terminal to wluch the ¹4-8" would be connected The ¹4-8" was ahgned through valves and pipmg to a mamfold pressurized to approximately 60 psig by Tank 1242's booster pump This manifold also connected the Des Momes 6N-12" which would receive product from the tank and/or the ¹4-8" hne The leak site elevation was approximately 760 feet compared to the Kansas City Termmal elevation of 742 feet above sea level, without considenng the tank hquid level Also because the manifold was pressunzed to 60 psig (equivalent to approximately 189 feet of static head pressure oi unleaded gasoline) the 18 teet elevation difference would be overcome and flow reversed if pumping ceased on the ¹4-8" hne The approximate leak site in regard to the Kansas City Terminal was known by 01 52 on May 23, yet closure of the Terminal valve, the Kansas City mainhne valve, was not mitiated until approximately 02 45-02 47 by the Kansas City Station operator not the Tulsa Controllers Upon actuating the valve, a low pressure alarm was received at 02 46 41 on the ¹4-8" hne, confirmmg that isolation of the failed pipe segment was occumng and backflow from the termmal had taken place Tulsa Controllers had closed the mainhne valve V6 at MP 156 which was 12 97 miles upstream of the leak at approximately 01 02 57 No other downstream mainlme SCADA motor-operated valves existed on the line from MP 156 V6 until the Kansas City Station Terminal valve This Kansas City mainhne valve was located approximately 3 0 miles downstream from the leak site Magellan's controllers failed to follow m a timely manner its procedures to determme, in con)unction with the field personnel, backflow influences on the ¹4-8" hne which would necessitate valve closure to minimize product released at the leak site Failure to close the Kansas City mainhne valve contnbuted 2200 barrels of the 2936 barrels to the gasohne spill volume g 195. 402 Procedural manual for operations, maintenance, and emergencies (c) Maintenance and normal operations. The manual required by paragraph (a) of this section must include procedures for the followmg to provide safety during maintenance and normal operations: (5) Analyzing pipeline accidents to determme their causes.#

320085007_nopv pcp pco_06232008_text.pdf, page 7(6) Minimizing the potential for hazards identified under paragraph (c)(4) of this section and the possibihty of recurrence of accidents analyzed under paragraph (c)(5) of this section. Magellan did not have a wntten procedure established to perform analyses necessary to minimize the possibihty of recurrence of an accident After metallurgical analysis reported microbiologically influenced corrosion (MIC) as the cause of the ¹4-8" line metal loss at the May 23, 2005 rupture site, Magellan did not have a wntten procedure for testing for it at seven dig sites evaluated in the Kansas City Fairfax Comdor Magellan failed to have a MIC testing procedure and test for its presence in a timely manner so as to determine if those seven sites were also at nsk to this factor Magellan received the Kiefner and Associates Metallurgical Report regardmg the ruptured ¹4- 8" pipe segment on or about September 12, 2005, which stated m the Conclusion on page 2, "The failure was the result of microbiologically influenced corrosion" (MIC) Magellan conducted anomaly digs in the Fairfax Distnct pipehne comdor from September through mid- December without a procedure to check for microbiological bactena in the soil Magellan provided the documented procedure "KC Comdor Bactena Samphng Protocol" dated 12/1' 05 Seven dig sites were performed dunng the penod from September 12, 2005 to mid- December without MIC testing or a metallurgical analysis for MIC Only water samples of encased pipehnes were taken and evaluated for pH and smell as this was Magellan's usual standard procedure which did not mclude analyzing for MIC Afler receiving knowledge of the threat of MIC, Magellan delayed 3 months m producing a protocol to address the samphng for MIC wh~le Magellan continued to perform field excav ations of their pipelmes in the suspect area Magellan failed to adequately analyze seven dig sites for MIC and mmimize the possibihty of recurrence at these sites as required by ( 195 402 (c)(6) 8 tI 195. 402 Procedural manual for operations, maintenance, and emergencies (a) GeneraL Each operator shall prepare and follow for each pipeline system a manual of written procedures for conducting normal operations and maintenance activities and handhng abnormal operations and emergencies. (c) Itfaiareaance and normal operanons The manual required by paragraph (a) of this section must include procedures for the following to provide safety dunng maintenance and normal operations. (5) Analyzing pipeline accidents to determine their causes. Magellan did not follow its procedures (7 02-ADM-002) nor were the procedures adequate regarding marking removal and preparation of pipe segments involved in accidents to be sent for metallurgical analysis On May 25, 2005 a PHMSA mspector witnessed Magellan's#

320085007_nopv pcp pco_06232008_text.pdf, page 8personnel prepanng the failed segment of the //4-8" hne and casing for removal and transportation for metallurgical evaluation Magellan's personnel did not have its Pipe Specimen Cut-Out Protocol 7 02-ADM-002 at the failure site and were unclear as to what markings should be apphed Additionally, the procedures were not specific regarding pipe marking practices for removal ot pipe that is involved in a failure The PHMSA inspector directed Magellan's personnel to properly mark the pipe sequent pnor to cutout and again prior to shipment, as the mitial markings had not been transferred to the pipes which had been shortened for transportation Protocol 2 1 7 regarding marking the pipe specimen was later added to the Magellan Pipe Specimen Cut-Out Protocol on 01/01/06 9. t'1 195. 402 Procedural manual for operations, maintenance, and emergencies e) Emergencies The manual required by paragraph (a) of this section must include procedures for the following to provide safety when an emergency condition occurs; (9) Providing for a post accident review of employee activities to determme vvhether the procedures were effective in each emergency and taking corrective action where deficiencies are found. Magellan did not follow its wntten procedure (RPOC-ADM-004 Section I 5 1) regarding post accident review RPOC-ADM-004 Section 1 5 1 states, "For actual emergencies, the Manager of Operations Control will ensure that the Incident Investigation for that incident includes a review of the effectiveness of these emergency operations procedures, and will take corrective action as needed " Magellan did not take sufficient corrective actions to address the findings m the post accident review Magellan's operating personnel both in the SCADA Control Center and Kansas City Terminal failed to close the Kansas City Terminal mainhne block valve resulting m an additional 2, 200 barrels of gasoline back flowing from the termmal and spilhng at the rupture site The post accident review stated mdividuals' recommendations that emergency operation procedures for the Kansas City Terminal be hne specific for this location instead of global company wide Also, the post accident review and follow-up studies did not adequately consider pipeline system modifications, such as backflow prevention devices, as corrective actions to minimize additional hazardous hquid flowing from the Kansas City Terminal and being released in the event ot a failure 10. fI 199. 225 Alcohol tests required Each operator shall conduct the following types of alcohol tests for the presence of alcohol: (a) Post-accident. (1) As soon as practicable following an accident, each operator shall test each surviving covered employee for alcohol if that employee's performance of a covered function either contributed to the accident or cannot be completely discounted as a contributing factor to the accident. The decision not to#

320085007_nopv pcp pco_06232008_text.pdf, page 9administer a test under this section shall be based on the operator's determination, using the best available information at the time of the determination, that the covered employee's performance could not have contributed to the accident (2)(1) If a test required by this section is not administered within 2 hours following the accident, the operator shall prepare and maintain on file a record stating the reasons the test was not promptly administered If a test required by paragraph (a) is not administered within 8 hours following the accident, the operator shall cease attempts to admunister an alcohol test and shall state in the record the reasons for not administering the test. Magellan did not comply with the alcohol testing requirement that covered employees be tested and that they be tested within the allotted 2 hour time frame or document why testing was not promptly administered Two controllers were operating and monitoring the pipeline at the time of its failure One controller was tested 3 hours and 29 minutes after the accident, and Magellan had no records stating the reason for not promptly administering the alcohol test A second controller was not tested for alcohol Magellan's Drug and Alcohol Policy does state in Section 1 Subsection B that it has adopted PHMSA Alcohol Misuse Prevention Plan and its policy is intended to comply with the requirements of 49 FR Parts 199 and 40 Proposed Civil Penalty Under 49 United States Code, $ 60122, you are subject to a civil penalty not to exceed Item number Penalty $200,000 2 $100,000 $100,000 S100,000 S100,000 $100,000 $ 43,000 10 $ 41,000 Warning e have reviewed the cırcumstances and supporting documents involved in item 8, and hav cided not to conduct additional enforcement action or penalty assessment proceedings at th 9#

320085007_nopv pcp pco_06232008_text.pdf, page 10time We advise you to correct item 8 identifie m this letter Failure to do so will result in Magellan Pipehne Company, L L C being subject to additional enforcement action No reply to this item is required Pro osed Com liance Order With respect to item 9 pursuant to 49 United States Code ) 60118, the Pipehne and Hazardous Matenals Safety Admuustration proposes to issue a Comphance Order to Magellan Pipehne Company, L L C Please refer to the Proposed Compliance Order, which is enclosed and made a part ot this Notice Res onse to this Notice Enclosed as part of this Notice is a document entitled Response Options for Pipeline Operators in Compliance Proceedmgs Please refer to this document and note the response options Be advised that all material you submit in response to this enlorcement action is subject to being made pubhcly av ailable lf you beheve that any portion of your responsive material qualifies for confidential lreatment 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 quahfy for confidential treatment redacted and an explanation ol why you beheve the redacted information qualifies for confidential treatment under 5 U S C 552(b) If you do not respond within 30 days of receipt of tins Notice, this constitutes a waiver of your right to contest the allegations in this Notice and authonzes the Associate Admmistrator for Pipehne Safety to find facts as alleged m this Notice without further notice to you and to issue a Fmal Order In your correspondence on this matter, please refer to CPF 3-2008-5007 and for each document you submit, please provide a copy in electromc format whenever possible Sincerely, Ivan A Huntoon Director, Central Region Pipeline and Hazardous Materials Safety Admmistration Enclosures Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 10#

320085007_nopv pcp pco_06232008_text.pdf, page 11PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code ) 60118, the Pipeline and Hazardous Matenals Safety Admimstration (PHMSA) proposes to issue to Magellan Pipehne Company, L L C, a Comphance Order incorporating the following remedial requirements to ensure the comphance of Magellan Pipehne Company, L L C with the pipeline safety regulations 1 In regard to Item 9 of the Notice pertainmg to takmg corrective actions based on the deficiencies found dunng the post accident review, Magellan is to estabhsh specific written emergency procedures to mmimize the volume of hazardous hquid released in the Fairfax Industrial District m the event of a failure of mcoming and outgoing pipehnes at its Kansas City Terminal The wntten emergency procedures shall be based on an analysis of Magellan s incoming and outgomg pipehne systems at the Kansas City Terminal, including but not hmited to piping configuration, pumps, tanks, valves, pipe and tank elevations, mode of pipehne operation (steady state, static, transient) and pipehne contiol mechamsms 2 In regard to Item 9 of the Notice pertaming to takmg corrective actions based on the deficiencies found dunng the post ace~dent review, Magellan must install check valves to prevent backflow of hazardous liquid from the Kansas City Terminal to mcoming pipehnes in the event of a failure A check valve means a valve that permits fluid to flow freely in one direction and contams a mechanism to automatically prevent flow in the other direction 3 In regard to Item Number I of the Proposed Comphance Order, Magellan shall train its personnel at the SCADA Control Center and the Kansas City Terminal on these revised procedures and provide documentation of the traimng to the Director, Central Region, withm 90 days of a receipt of a Final Order 4 In regard to Item 2 of the Proposed Compliance Order, Magellan shall submit a plan and schedule to the Director, Central Region, for approval withm 90 days of receipt of a Final Order 5 Magellan shall maintam documentation ol the safety improvement costs associated with fultilhng this Comphance Order and submit the total to Ivan Huntoon, Director, Central Region, Pipeline and Hazardous Materials Safety Administration Costs shall be reported m two categories I) total cost associated with preparation/revision of plans, procedures, studies and analyses, and 2) total cost associated with replacements, additions and other changes to pipehne mfrastructure 11#

320085007_nopv pcp pco_06232008_text.pdf, page 12Response Options for Pipeline Operators in Compliance Proceedings The requirements of 49 C F R Part 190, Subpart B ()$ 190 201 — 190 237) govern response to Notices issued by a Regional Director Pipeline and Hazardous Matenals Safety Admmistration (PHMSAl Be adk ised that all material submitted by a iespondent in response to an enforcement action is subIect to being made publicly available If you beheve that any portion of your responsn e matenal qualdies foi confidential treatment under 5 U S C 552(bl along with the complete onginal document you must provide a second copy of the document wnth the portions you believe qualify for confidential treatment redacted and an explanation of why you beheve the redacted information quahfies lor confidential treatment under 5 L S C 552(bl I Procedures for Res ondrn 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 v, ay a When the Notice contams a ro osed CIVIL PENALTV"— I If you are not contesting any violations alleged m the Notice, pay the proposed civil penalty and adk ise the Regional Director of the payment This authorizes PHMSA to make findings and to close the case with pre&udkce to the respondent Payment terms are outhned below II you are not contesting any violations alleged in the Notice but wish to submit written explanations, information, or other matenals you beheve vi arrant mitigation of the civil penalty, you may submit such matenals This authonzes PHMSA to make findings and to issue a Final Order assessing a penalty amount up to the amount proposed m the Notice, If you are contestmg one or more of the items in the Notice but are not requesting an oral heanng submit a written response to the allegations and/or seek elimination or mitigation of the proposed civil penalty Refer to 49 C F R ss 190 225 for assessment considerauons, 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 4 Request a heanng as described belo~ to contest the allegations and/or proposed assessment of a civil penalty b When the Notice contains a ro used COMPLIANCE ORDER"— I If you are not contesting the comphance order, notify the Regional Dn ector that you mtend to take the steps m the proposed compliance order, I of 3#

320085007_nopv pcp pco_06232008_text.pdf, page 13If i ou are not contesting the comphance order but wish to submit written explananons, information, or other matenals you beheve ivarrant modification of the proposed comphancc order m whole or in part, or you seek claufication of the terms of thc proposed compliance order you may submit such matenals This authorizes PHMSA to make findings and issue a comphance order If you are contesting the proposed compliance order but are not requesting an oral hearing, submit written explanations, mformation or other materials in answer to the allegauons in the Notice and stating your reasons for oblecting to the proposed comphance order items in whole or m patt, or 4 Request a heaung as descnbed below to contest the allegations and/or proposed comphance order items c When the Notice contams a WARNING ITEM No written response is required The respondent is warned that if it does not take appropnate action to correct these items, enforcement action wall be taken if a subsequent inspection reveals a violation " Failure of the respondent to respond to the Notice wtthtn 30 days of receipt constitutes a waivei of the nght to contest the allegations in the Notice and authonzes the Associate Admimstrator for Pipelme Safety to find facts as alleged in the Notice without further notice to the respondent and to issue a Fmal Order II Procedures for Res ondin to a NOTICE OF AMENDMKNT"— Within 30 days of receipt of a Notice of Amendment, the respondent shall respond to the Regional Director who issued the Notice in the following way a If you are not contesting the Notice, notify the Regional Director of your plans to address the madequacies identified in the Notice b If you are not contestmg the Notice but wish to submit wntten explanations, information, or other matenals you beheve warrant modification of the Notice of Amendment m whole or in part, or you seek clanfication of the terms of the Notice of Amendment you may submit such mateuals This authorizes PHMSA to make findings and issue an Order Directing Amendment, c If you are contesting the Notice of Amendment but are not requestmg an oral heanng, submit written explanations, information or other mateuals m answer to the alleganons in the Notice and stating your reasons for obl ecting to the Notice of Amendment items in whole or in part, or 2 ol 5#

320085007_nopv pcp pco_06232008_text.pdf, page 14d Request a hearing as descnbed below to contest the allegations in the Notice * Failure of the respondent to respond to the Notice withm 30 days of receipt constitutes a waiver of the nght to contest the allegations m the Notice and authorizes the Associate Admmistrator for Pipebne Safety to find facts as alleged in the Notice without further notice to the respondent and to issue a Final Order III Procedure for Re uestin a Heamn A request for a heanng must be in writmg and accompanied by a statement of the issues that the respondent intends to raise at the heanng 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 m waiver of the nght to iaise that issue at the heanng I'he respondent's request must also indicate whether or not respondent will be represented b& counsel at the heanng Failure to request a heanng in writing wtthtn 30 days of receipt of a Notice watves the nght to a hearing In addition, if the amount of the proposed civil penalty or the proposed corrective action-is less than $10, 000, the heaimg will be held by telephone unless the respondent submits a wntten request toi an m-person heanng Complete heanng procedures can be found at 49 C F R $ 190 211 IV Extensions of Time An extension of time to prepare an appropnate response to a Notice ma) be granted, at the agency's discretion, follounng submittal of a written request to the Regional Director I'he request must indicate the amount of time needed and the reasons for the extension The request must be submitted within 30 days ol receipt of the Notice V Freedom of Information Act Any matenal provided to PHMSA by the respondent, and matenals prepared by PHMSA including the Notice and any order issued in this case may be considered pubhc formation and sub3ect to disclosure under the Freedom of Information Act (FOIA) If you believe the information you are providing is secunty sensitive, pnvileged, confidential or may cause your company competitive disadvantages please clearly identify 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 matenal, we will notify vou if PHMSA after revtewtng the matenals and your provided 3usttficatton, determmes that withholdmg the materials does not meet any exemption provided under the FOIA You mal appeal the agency's decision to release matenal under the FOIA at that time Your appeal v:ill stay the release of those matenals until a final decision is made Vl Small Business Re ulatorv Enforcement Fairness Act Information The Small Business and Agncultuial Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were estabhshed to receive comments from small businesses about federal agency enforcement actions The Ombudsman v ill annually evaluate the enforcement acttv ities and rate each agency's responsiveness to small business If you 3 of 5#

320085007_nopv pcp pco_06232008_text.pdf, page 15wish to comment on the enforcement actions of the Pipchne and Hazardous Materials Safety Administration call 1-888-RFO-FAIR (1-888-734-3247) or go to http //www sba govt ombudsman/dsp faq html VII Pa ment Instructions Civil Penal~i Payments of Less Than $10, 000 Payment of a civil penalty ol less than $10„000 proposed or assessed, under Subpart B of Part 190 of the Pipelme Safety Regulations can be made b) certified check, money order or v tre transfei Payment by certified check or money order (contammg the CPF Number for this case) should be made payable to the "Department of Transportation" and should be sent to Federal Aviation Administration Mike Monrone5 Aeronautical Center Fmancial Operations Dn ision (AMZ-341) P 0 Box 25082 Oklahoma City, OK 73125-4915 Wire transfer payments of less than $10, 000 may be made through the Federal Reserve Communications System (Fedw ire) to the account of the U S Treasury Detailed instructions are provided belov Questions concerning wire transfer should be directed to the Financial Operations Division at (405) 954-8893, or at the above address Ctvd Penalty Payments of $10, 000 or inore Payment of a civil penalty of $10, 000 or more proposed or assessed under Subpart B of Part 190 of the Pipelme Safety Regulations must be made wtre transfer (49 C F R ll 89 21 (b)(3)), through the Federal Reserve Communications System (Fedwire) to the account of the U S Treasury Detailed instructions are provided below Questions con&, eming wire transfers should be directed to the Financial Operations Division at (405) 954-8893, or at the above address 4of5#

320085007_nopv pcp pco_06232008_text.pdf, page 16INSTRUCTIONS FOR ELECTRONIC FI ND TRANSFERS I RECEIVER ABA NO 021030004 (2) TYPE, /SUB-TYPE (Provided by sending bank) (3) SENDING BANK ABA NO (Prot ided by sending bank) (4) SENDING BANK REF NO (Provided by sending bank) (5) AMOUNT (6) SENDING BANK NAME (Provided by sending bank) (7) RECEIVFR NAME TREAS NYC (8) PRODUCT CODE (Normally CTR or as provided by sending bank) (9) BENEFICIAL BNF = AGENCY LOCATION CODE BNF = /ALC-69-14-0001 (10) REASONS FOR PAYMENT Example PHMSA - CPF ¹ / Ticket Number/Pipeline Assessment number INSTRUCTIONS: You, as sender of the wire transfer, must provide the sending bank wnth the information for blocks (1), (5), (7), (9), and (10) The information provided m Blocks (1), (7), and (9) are constant and remain the same for all wire transfers to the Pipeline and Hazardous Matenals Safety Administration, Department of I ransportation Block ¹1 - 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 in New York Block ¹5 - AMOUNT - You as the sender provide the amount of the transfer Please be sure the transfer amount is punctuated wsth commas and a decimal point EXAMPLE $10 000 00 Block ¹7 - RECEIVER NAME - "TREAS NYC" Ensure the sending bank enters this abbreviation It must be used for all wire transfers to the Treasury Department Block ¹9 - BENEFICIAL - AGENCY LOCATION CODE — "BNF=/ALC-69-14-0001" Ensure the sendmg bank enters this information This is the Agency Location Code for the Pipeline and Hazardous Matenals Safety Admmistration Department of 'Iransportation Block ¹10 - REASON & OR PAYMENT - "AC-payment for PHMSA Case ¹ / To ensure lour wire transfer is credited properly, enter the case number/ticket number or Pipeline Assessment numbei, and country ' NOTE: A w ire transfer must comply math the format and instructions or the Department cannot accept the wire transfer You as the sender can assist this process by notilymg the Financial Operations Dn ision (405) 954-8893 at the time you send the wire transfer May 2008 5of5#

320085007_Closure Letter_01072011_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED January 7, 2011 Mr. Larry J. Davied Vice President - Technical Services Magellan Pipeline Company, L.L.C. One Williams Center, MD 27 Tulsa, OK 74172 CPF 3-2008-5007 Dear Mr. Davied: On September 22, 2009, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Magellan Pipeline Company, L.L.C. (Magellan) a Consent Order (Order) in the above-referenced case. In summary, the Order included a Consent Agreement containing a civil penalty and compliance measures to establish emergency procedures, train personnel, and make modifications at the Kansas City Terminal. Based on a review of the documentation Magellan provided, on-site inspection by PHMSA Central Region, and confirmation of payment of the civil penalty, it has been determined that you have complied with the terms of the Order and associated Consent Agreement. 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#