KPC PIPELINE, LLC — Notice of Probable Violation

party submissionOfficial PDF320111014_Operator Response and Request Time Extension_10112011.pdf#

party submissionOfficial PDF320111014_Operator Response to Notice_12012011.pdf#

party submissionOfficial PDF320111014_Petition for Reconsideration_06282013.pdf#

party submissionOfficial PDF320111014_Petition for Reconsideration_07032013.pdf#

320111014_Final Order_06102013_text.pdf, page 1Official PDFJUNE 10, 2013 Mr. Terry W. Carter, CEO PostRock Energy Corporation 210 Park Ave #2750 Oklahoma City, Oklahoma 73102 Mr. Gary Navarro, President MV Purchasing, LLC 8301 East 21st Street, Suite 370 Wichita, Kansas 67206 Re: CPF No. 3-2011-1014 Gentlemen: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation, assesses a civil penalty of $65,000 against PostRock Energy Corporation, and specifies actions that need to be taken by MV Purchasing, LLC, the new owner of PostRock’s facilities, to comply with the pipeline safety regulations. When the civil penalty has been paid and the terms of the compliance order 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, Central Region Director, OPS Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

320111014_Final Order_06102013_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 ) ) PostRock Energy Corporation, ) CPF No. 3-2011-1014 f/d/b/a PostRock KPC Pipeline, LLC, ) ) Respondent, ) ) and ) ) MV Purchasing, LLC. ) ____________________________________) FINAL ORDER On October 18-22, 25-28, and November 2-5, 2010, 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 PostRock KPC Pipeline, LLC, a subsidiary of PostRock Energy Corporation (PostRock or Respondent), in Olathe, Kansas. As of the date of the OPS inspection, PostRock operated a 1,120-mile interstate pipeline transporting natural gas from northern Oklahoma and western Kansas to Wichita and Kansas City. In late 2012, the pipeline was sold and is now operated by MV Purchasing, LLC, a privately owned energy logistics company offering various energy services to oil and gas producers and petroleum refiners throughout the United States.1 As a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent, by letter dated August 23, 2011, a Notice of Probable Violation and Proposed Compliance Order (Notice), which also included a warning pursuant to 49 C.F.R. § 190.205. In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that PostRock had committed various violations of 49 C.F.R. Part 192, assessing a civil penalty of $65,000, and ordering Respondent to take certain measures to correct the alleged violations. The warning item required no further action, but warned the operator to correct the probable violation or face possible enforcement action. PostRock responded to the Notice by letter dated December 1, 2011 (Response). Respondent did 1 MV Purchasing, LLC, by letter dated November 12, 2010, informed PHMSA that it had purchased PostRock in October 2012. See http://www.pstr.com/ and http://www.mvpurchasing.com/news//view/4 (last accessed May 16, 2013).#

320111014_Final Order_06102013_text.pdf, page 32 not contest the allegations of violation but provided an explanation of its actions and requested that the proposed civil penalty be reduced and the proposed compliance order be modified. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION In its Response, PostRock did not contest the allegations in the Notice that it violated 49 C.F.R. Part 192, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.465(d), which states: § 192.465 External corrosion control: Monitoring. (a) Each pipeline that is under cathodic protection must be tested at least once each calendar year, but with intervals not exceeding 15 months, to determine whether the cathodic protection meets the requirements of § 192.463… (d) Each operator shall take prompt remedial action to correct any deficiencies indicated by the monitoring. The Notice alleged that Respondent violated 49 C.F.R. § 192.465(d) by failing to take prompt remedial action to correct deficiencies indicated by annual corrosion control monitoring. Specifically, the Notice alleged that during its inspection, PHMSA discovered that between calendar years 2006 and 2010 there were 12 test station locations on PostRock’s 8-inch P-80 pipeline that were either damaged or exhibited cathodic protection readings not meeting the minimum voltage criteria found in Appendix D to Part 192. Section 192.463 requires that each cathodic protection system required by this subpart must provide a level of cathodic protection that complies with one or more of the applicable criteria contained in Appendix D. The Notice alleged that the deficiencies remained uncorrected on one or more subsequent annual inspections. Respondent did not contest this allegation of violation but noted that seven of the 12 deficiencies occurred prior to PostRock’s acquisition of line P-80 in 2007 and that its corrosion monitoring work was actually performed by another operator having two other pipelines in the same right- of-way. PostRock, however, has a responsibility to correct external corrosion deficiencies if such problems are indicated at any time during its ownership and operation of the pipeline, and that it bears such a responsibility regardless of what company or contractor is actually performing the work on behalf of PostRock. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.465(d) by failing to take prompt remedial action to correct deficiencies indicated by annual corrosion control monitoring. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.481(a), which states:#

320111014_Final Order_06102013_text.pdf, page 43 § 192.481 Atmospheric corrosion control: Monitoring. (a) Each operator must inspect each pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion, as follows: If the pipeline is located: Then the frequency of inspection is: Onshore At least once every 3 calendar years, but with intervals not exceeding 39 months. . . . The Notice alleged that Respondent violated 49 C.F.R. § 192.481(a) by failing to perform atmospheric corrosion inspections for onshore pipelines exposed to the atmosphere, within the 39-month maximum interval. Specifically, the Notice alleged that PostRock did not perform atmospheric corrosion inspections on 82 valves and 66 pipe spans exposed to the atmosphere within the 39-month maximum interval. Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.481(a) by failing to perform atmospheric corrosion inspections for onshore pipelines exposed to the atmosphere within the 39-month maximum interval. Item 4: The Notice alleged that Respondent violated 49 C.F.R. § 192.479(a), which states: § 192.479 Atmospheric corrosion control: General. (a) Each operator must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. The Notice alleged that Respondent violated 49 C.F.R. § 192.479(a) by failing to clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except as otherwise provided under paragraph (c) of § 192.479. Specifically, the Notice alleged that Respondent did not coat exposed pipe at four creek crossings (MP 179 on the P-40 pipeline, MP 190 on the P-30 pipeline, MP 319 on the P-50 pipeline, and MP 104 on the P-20 pipeline) with a suitable material to prevent atmospheric corrosion. Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.479(a) by failing to clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except as otherwise provided under paragraph (c) of § 192.479.#

320111014_Final Order_06102013_text.pdf, page 54 Item 5: The Notice alleged that Respondent violated 49 C.F.R. § 192.605, which states, in relevant part: § 192.605 Procedural manual for operations, maintenance, and emergencies. (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include procedures for handling abnormal operations. This manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least once each calendar year. This manual must be prepared before operations of a pipeline system commence. Appropriate parts of the manual must be kept at locations where operations and maintenance activities are conducted. . . (c) Abnormal operation. For transmission lines, 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: . . . (4) Periodically reviewing the response of operator personnel to determine the effectiveness of the procedures controlling abnormal operation and taking corrective action where deficiencies are found. The Notice alleged that Respondent violated 49 C.F.R. § 192.605(c)(4) by failing to prepare and follow a manual of written procedures for conducting operations and maintenance activities and for emergency response. Specifically, it alleged that PostRock failed to prepare and follow written procedures for periodically reviewing the response of its personnel to determine the effectiveness of its procedures for abnormal operations and taking corrective action where deficiencies were found. Specifically, the Notice alleged that PostRock had instances of unintended activations of emergency compressor shutdowns that PostRock did not regard as abnormal operations as long as the pipeline did not exceed the maximum allowable operating pressure (MAOP). Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.605(c)(4) by failing to prepare and follow a manual of written procedures for conducting operations and maintenance activities and for emergency response. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed $100,000 per violation for each day of the violation, up to a maximum of $1,000,000 for any related series of violations. In determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature,#

320111014_Final Order_06102013_text.pdf, page 65 circumstances, and gravity of the violation, including adverse impact on the environment; the degree of Respondent’s culpability; the history of Respondent’s prior offenses; the Respondent’s ability to pay the penalty and any effect that the penalty may have on its ability to continue doing business; and the good faith of Respondent in attempting to comply with the pipeline safety regulations. In addition, I may consider the economic benefit gained from the violation without any reduction because of subsequent damages, and such other matters as justice may require. The Notice proposed a total civil penalty of $65,000 for the violations cited above. Respondent requested that the proposed penalties for Items 1 and 3 be reduced because all or a portion of the alleged violations occurred prior to its ownership of the P-80 pipeline and because the corrosion monitoring work had been performed by an operator other than PostRock. However, as discussed above, such circumstances do not negate an operator’s responsibility to comply with the pipeline safety regulations at all times it actually owns or operates a pipeline or to ensure that all work performed by contractors is done properly and in a timely manner. For these reasons, I see no basis to reduce either penalty. Item 1: The Notice proposed a civil penalty of $28,900 for Respondent’s violation of 49 C.F.R. § 192.465(d), for failing to take prompt remedial action to correct deficiencies indicated by annual corrosion control monitoring. Respondent did not contest the allegation but requested a penalty reduction. Section 192.465 is intended to minimize the risk of external corrosion that can cause failures and injuries to people and the environment, by requiring operators to take prompt and effective action to address integrity threats. Accordingly, having reviewed the record and considered the assessment criteria, as discussed above, I assess Respondent a civil penalty of $28,900 for violation of 49 C.F.R. § 192.465(d). Item 3: The Notice proposed a civil penalty of $22,700 for Respondent’s violation of 49 C.F.R. § 192.481(a), for failing to perform, within the 39-month maximum interval, atmospheric corrosion inspections on each pipeline exposed to the atmosphere. Respondent did not contest the allegation but requested a penalty reduction. Operators are required to inspect their pipelines for atmospheric corrosion to prevent pipe failures that could cause injury to people, property, or the environment. Accordingly, having reviewed the record and considered the assessment criteria, as discussed above, I assess Respondent a civil penalty of $22,700 for violation of 49 C.F.R. § 192.481(a). Item 4: The Notice proposed a civil penalty of $13,400 for Respondent’s violation of 49 C.F.R. § 192.479(a), for failing to clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, unless excepted under paragraph (c) of § 192.479. Respondent did not contest the allegation. Proper cleaning and coating of each pipeline is vital to preventing and controlling corrosion and ensuring safe operation of the pipeline. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $13,400 for violation of 49 C.F.R. § 192.479(a). In summary, having reviewed the record and considered the assessment criteria for each of the Items cited above, I assess Respondent a total civil penalty of $65,000. Payment of the civil penalty must be made within 20 days of service. Federal regulations#

320111014_Final Order_06102013_text.pdf, page 76 (49 C.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal Reserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 269039, Oklahoma City, Oklahoma 73125. The Financial Operations Division telephone number is (405) 954-8893. Failure to pay the $65,000 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a district court of the United States. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 1, 3, 4, and 5 in the Notice for violations of 49 C.F.R. §§ 192.465, 192.481, 192.479, and 192.605, respectively. Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Director has indicated that Respondent has taken the following corrective actions: 1. Item 1 – The Proposed Compliance Order required that PostRock identify and repair all broken test stations, and remediate known deficiencies in cathodic protection voltage criteria found through its annual corrosion control monitoring program. PostRock provided evidence that it had identified and repaired all broken test stations and remediated all known deficiencies. 2. Item 4 – A portion of the Proposed Compliance Order required that Respondent assess the integrity of the pipe at the four locations outlined in Item 4, make necessary repairs, clean and coat the pipe at each location, and furnish PHMSA with a report on the completed actions. PostRock provided evidence that it had assessed the integrity of the four locations cited in Notice and made the necessary repairs. 3. Item 5 – The Proposed Compliance Order required that Respondent establish and maintain a specific record or log, in accordance with its operating procedures to document abnormal operations. PostRock provided evidence that it had established and maintained such a log. This addresses a portion of the proposed compliance terms for Item 5 of the Notice. Accordingly, I find that compliance has been achieved with respect to Item 1 and portions of Items 4 and 5 of the Notice. Therefore, the compliance terms proposed for these Items are not included in this Order.#

320111014_Final Order_06102013_text.pdf, page 87 As for the remaining compliance terms, MV Purchasing, LLC, is expected to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations. Upon the request of Respondent and pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217: PHMSA requests MV Purchasing, LLC, to take the following actions: 1. With respect to the violations of §§ 192.481(a) and 192.479(a) (Items 3 and 4), MV Purchasing, LLC, must establish a plan to identify, inspect, and perform necessary repairs to all creek crossings, spans, and pipe exposed by soil erosion, according to a prioritized schedule. The operator must furnish a copy of the plan to the Director for review and must complete all such work by January 31, 2014. 2. With respect to the violation of § 192.605(c)(4) (Item 5), MV Purchasing, LLC, must: i. Make modifications to its Operations and Maintenance procedures so that it is clear that exceeding “operating design limits” applies to all applicable system design parameters, including unintended emergency shutdowns and any other mechanical or electrical parameters associated with § 192.605(c)(1)(i) through (v). The procedures must make clear that exceeding MAOP is not the sole criteria for determining when abnormal operations have occurred. ii. Identify five types of abnormal operations specific to its compressor stations and conduct training and testing for all operations personnel and submit copies of the related records to the Director. iii. Upon the issuance of this Final Order and continuing until the case is closed, MY Purchasing, LLC, must provide semi-annual reports to the Director, describing any significant abnormal operations that have occurred and how they have been resolved. 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. WARNING ITEM With respect to Item 2, the Notice alleged a probable violation of 49 C.F.R. Part 192 but did not propose a civil penalty or compliance order for this item. Therefore, this is considered to be warning item. The warning was for: 49 C.F.R. § 192.476(c) (Item 2) ─ Respondent’s alleged failure to evaluate the impact of change on internal corrosion risk to its pipeline upon the proposed reconfiguration of its P-100, P-110, P-30 and P-40 lines.#

320111014_Final Order_06102013_text.pdf, page 98 If OPS finds a violation of this provision in a subsequent inspection, MV Purchasing, LLC, may be subject to future enforcement action. Under 49 C.F.R. § 190.215, Respondent has a right to submit a Petition for Reconsideration of this Final Order. 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. The filing of a petition automatically stays the payment of any civil penalty assessed. Unless the Associate Administrator, upon request, grants a stay, all other 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#

320111014_Closure Letter_05302016_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED May 30, 2016 Mr. Lee Bullock President KPC Pipeline, LLC 19970 West 161st Street Olathe, Kansas 66062 Re: CPF 3-2011-1014 Dear Mr. Bullock: On June 10, 2013, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to KPC Pipeline, LLC, formerly PostRock Energy Corporation, a Final Order in the above-referenced case. This Order included a Compliance Order and Civil Penalty assessment. Based on our review of the documentation you provided and confirmation of payment of the civil penalty, 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, Allan C. Beshore Director, Central Region, OPS Pipeline and Hazardous Materials Safety Administration cc: Mr. Terry W. Carter Mr. Gary Navarro#

320111014_NOPV PCP PCO_08232011_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED August 23, 2011 Mr. Tom Saunders PostRock (KPC) Pipeline, LLC 9520 North May Avenue Suite 300 Oklahoma City, Oklahoma 73120 Dear Mr. Saunders: CPF 3-2011-1014 On October 18-22, 25-28, and November 2-5, 2010, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code inspected your records and facilities in Olathe, Kansas. 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. §192.465 External corrosion control: Monitoring. (d) Each operator shall take prompt remedial action to correct any deficiencies indicated by the monitoring. PostRock did not take prompt remedial action to correct deficiencies indicated by annual corrosion control monitoring. PHMSA discovered during the records review that between the 2006 and 2010 calendar years there were 12 test station locations on PostRock’s 8-inch P-80 pipeline that were either damaged or exhibited cathodic protection readings that did not meet minimum voltage criteria found in Appendix B to Part 192. These deficiencies remained uncorrected on one or more subsequent annual inspections as shown by the table below.#

320111014_NOPV PCP PCO_08232011_text.pdf, page 2Milepost Deficiency Subsequent annual inspections remaining uncorrected 105 38+52 low cathodic potentials 2 years (2009-2010) 130 01+45 low cathodic potentials 1 year (2009) 140 10+23 low cathodic potentials 3 years (2008-2010) 141 15+82 low cathodic potentials 3 years (2008-2010) 255 18+25 broken test station 4 years (2007-2010) 291 06+28 broken test station 1 year (2006) 296 40+88 low cathodic potentials 1 year (2006) 297 23+80 broken test station 1 year (2006) 299 20+95 low cathodic potentials 1 year (2007) 301 15+27 broken test station 1 year (2006) 302 45+34 broken test station 1 year (2006) 354 37+15 broken test station 1 year (2007) 2. §192.476 Internal corrosion control: Design and construction of transmission line. (c) Change to existing transmission line. When an operator changes the configuration of a transmission line, the operator must evaluate the impact of the change on internal corrosion risk to the downstream portion of an existing onshore transmission line and provide for removal of liquids and monitoring of internal corrosion as appropriate. PostRock did not perform an evaluation of the impact of reconfiguring its P-100, P-110, P-30, and P-40 pipelines prior to placing the pipelines into service for bidirectional flow. PHMSA discovered during the records inspection that PostRock had reconfigured the pipelines for reverse flow in September, 2010; however, no evaluation had been initiated. Subsequent to the inspection, PostRock agreed to perform additional internal corrosion monitoring. 3. §192.481 Atmospheric corrosion control: Monitoring. (a) Each operator must inspect each pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion, as follows: If the pipeline is located: Then the frequency of inspection is: Onshore…………………. At least once every 3 calendar years, but with intervals not exceeding 39 months Offshore…………………. At least once each calendar year, but with intervals not exceeding 15 months 2#

320111014_NOPV PCP PCO_08232011_text.pdf, page 3Between the 2006 and 2010 calendar years (CY) PostRock did not perform atmospheric corrosion inspections on 148 pipe locations exposed to the atmosphere within the 39 month maximum interval. PHMSA found during the records inspection that many atmospheric corrosion reports were missing. Subsequent to PHMSA’s inspection, PostRock provided an itemized log of completed atmospheric corrosion inspections. The log showed that 82 valves and 66 pipe spans had not been inspected within the 3 CY frequency. Many inspections exceeded the 39 month maximum interval by 1 or more full years because they had last been inspected in CY 2002, 2003, or 2004. 4. §192.479 Atmospheric corrosion control; General. (a) Each operator must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. PostRock did not clean and coat four locations where its pipelines were exposed to the atmosphere at creek crossings. PostRock did not perform tests or investigations to demonstrate that the atmospheric corrosion would not affect the safe operation of the pipeline per the exception in §192.479(c). During the field verification the exposed pipe at four creek crossings were observed by PHMSA to be in a condition that was not coated with a suitable material to prevent atmospheric corrosion. The following locations were observed to have exhibited atmospheric corrosion: MP 179 on the P-40 pipeline, MP 190 on the P-30 pipeline, MP 319 on the P-50 pipeline, and MP 104 on the P-20 pipeline. 5. §192.605 Procedural manual for operations, maintenance, and emergencies (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include procedures for handling abnormal operations. (c) Abnormal operation. For transmission lines, 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: (4) Periodically reviewing the response of operator personnel to determine the effectiveness of the procedures controlling abnormal operation and taking corrective action where deficiencies are found. 3#

320111014_NOPV PCP PCO_08232011_text.pdf, page 4PostRock did not conduct reviews of its abnormal operations. PostRock personnel informed PHMSA during the records review that they did not have abnormal operations records or reviews because they never exceeded the pipeline “design limits. ” However, during the field inspection, PHMSA discovered recorded instances of unintended activations of safety devices, such as emergency compressor shut downs (ESD’s). ESD’s are abnormal operations; however, PostRock personnel did not regard the ESD’s and other safety device actuations as abnormal operations as long as the pipeline did not exceed maximum allowable operating pressure (MAOP). Exceeding “operating design limits” does not exclusively mean exceeding MAOP/design pressure of pipe or pipeline system components. Operating design limits include all control parameters, procedures, or settings relevant to §192.605(c)(1). Proposed Civil Penalty Under 49 United States Code, § 60122, you are subject to a civil penalty not to exceed $100,000 for each violation for each day the violation persists up to a maximum of $1,000,000 for any related series of violations. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violations and has recommended that you be preliminarily assessed a civil penalty of $65,000 as follows: Item number PENALTY 1 $28,900 3 $22,700 4 $13,400 Proposed Compliance Order With respect to item numbers 1, 3, 4 and 5 pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to PostRock (KPC) Pipeline, LLC. Please refer to the Proposed Compliance Order, which is enclosed and made a part of this Notice. Warning Items With respect to item number 2 we have reviewed the circumstances and supporting documents involved in this case and have decided not to conduct additional enforcement action or penalty assessment proceedings at this time. We advise you to promptly correct this item. Be advised that failure to do so may result in PostRock being subject to additional enforcement action. 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 4#

320111014_NOPV PCP PCO_08232011_text.pdf, page 5action is subject to being made publicly available. If you believe that any portion of your 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 qualify for confidential treatment redacted and an explanation of why you believe 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 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 a Final Order. In your correspondence on this matter, please refer to CPF 3-2011-1014 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, David Barrett Director, Central Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 5#

320111014_NOPV PCP PCO_08232011_text.pdf, page 6PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to PostRock KPC Pipeline, LLC a Compliance Order incorporating the following remedial requirements to ensure the compliance of PostRock KPC Pipeline, LLC with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to deficiencies in corrosion control monitoring on its P-80 pipeline, PostRock must identify and repair all broken test stations, and remediate known deficiencies in cathodic protection voltage criteria found through the annual corrosion control monitoring program. A plan to accomplish this Item shall be furnished to PHMSA within 30 days of issuance of the Final Order for approval by the Director, Central Region. PostRock must complete necessary repairs as delineated in the approved plan within 90 days of the director’s approval. 2. In regard to Item Numbers 3 and 4 of the Notice pertaining to the deficiencies in atmospheric corrosion monitoring and control, PostRock must accomplish the following within 30 days of issuance of the Final Order: i. Assess the integrity of the pipe at the four locations outlined in Item 4 of the Notice, make necessary repairs, clean and coat the pipe at each location, and furnish to PHMSA a report of the completed actions. ii. Establish a plan to identify, inspect, and perform necessary repairs to all creek crossings, spans, and pipe exposed by soil erosion according to a 12-month prioritized schedule and furnish to the Director, Central Region a copy of the plan for review. 3. In regard to Item Number 5 of the Notice pertaining to PostRock’s failure to review its abnormal operations, within 90 days of the issuance of the Final Order PostRock must: 6#

320111014_NOPV PCP PCO_08232011_text.pdf, page 7i. Make modifications to its Operations and Maintenance procedures so that it is clear that exceeding “operating design limits” applies to all applicable system design parameters, including unintended ESD’s and any other mechanical or electrical parameters associated with §192.605(c)(1)(i) through (v). The procedures must make it clear that exceeding MAOP is not the sole criteria for determining when abnormal operations have occurred. Establish and maintain a specific record or log, in association with operating procedures, in order to document abnormal operations. Identify abnormal operations (based on the modified procedures) that have occurred within the 36 months prior to the issuance of the Final Order, and incorporate the related records into the log required by ii above. ii. Perform a review of the personnel responses to the abnormal operations identified in the log required by ii and iii above in order to determine the effectiveness of procedures, and supply to the Director, Central Region the results of the review. The results shall include a plan to take necessary corrective actions based on the findings of the review. iii. Hold training meetings as necessary so that the changes to abnormal operations procedures and documentation required by this Item are well understood by all applicable personnel, and submit a roster of all personnel who received the training to the Director, Central Region. 4. It is requested (not mandated) that PostRock maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to David Barrett, Director, Central Region, Pipeline and Hazardous Materials Safety Administration. It is requested that these costs 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. 7#

320111014_Decision on Petitions for Reconsideration_12052013_text.pdf, page 1Official PDFDECEMBER 5, 2013 Mr. Terry W. Carter, CEO PostRock Energy Corporation 210 Park Ave #2750 Oklahoma City, Oklahoma 73102 Mr. Gary Navarro, President MV Purchasing, LLC 8301 East 21st Street, Suite 370 Wichita, Kansas 67206 Re: CPF No. 3-2011-1014 Gentlemen: Enclosed please find the Decision on Petitions for Reconsideration issued in the above- referenced case. It grants the Petition for Reconsideration, in part, to the extent that PostRock Energy Corporation requests to be removed as a party to this proceeding is granted. Further, the joint petition filed by MV Purchasing and KPC Pipeline, LLC is granted, in part, and denied in part. MV Purchasing’s petition for dismissal from the proceeding is granted. However, the request for a reduction of the civil penalties is denied. The Decision upholds the findings of violation and the civil penalty set forth in the Final Order. Service of the Decision 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: Ms. Linda Daugherty, Central Region Director, OPS CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

320111014_Decision on Petitions for Reconsideration_12052013_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 ) ) PostRock KPC Pipeline, LLC, ) CPF No. 3-2011-1014 now known as KPC Pipeline, LLC , ) ) Respondent. ) ___________________________________ ) DECISION ON PETITIONS FOR RECONSIDERATION On June 10, 2013, pursuant to 49 U.S.C. § 60122 and 49 C.F.R. § 190.213, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), issued a Final Order in this proceeding, finding that PostRock Energy Corporation (PostRock Energy) committed various violations of the Pipeline Safety Regulations in 49 C.F.R. Part 192. The Final Order assessed a civil penalty of $65,000 and specified actions that needed to be taken by MV Purchasing, LLC (MV Purchasing), the current owner of the pipeline system, to comply with the Pipeline Safety Regulations. By letters dated June 28, 2013, and July 3, 3013, PostRock Energy and MV Purchasing, in concert with KPC Pipeline, LLC (KPC), respectively, submitted separate Petitions for Reconsideration. PostRock Energy requested reconsideration of its inclusion as a named party in the Final Order. MV Purchasing and KPC’s joint petition (Joint Petition) requested reconsideration of whether: 1) MV Purchasing was a properly named party; 2) the Associate Administrator properly applied the penalty mitigation factors set forth in 49 C.F.R. § 190.225; and 3) the proposed civil penalty should be reduced in light of the mitigating factors. Pursuant to 49 C.F.R. § 190.215, a respondent may petition the Associate Administrator for reconsideration of a final order. Reconsideration is not a right to appeal or to seek a de novo review of the record. It is an opportunity to present the Associate Administrator with previously unavailable information or to request that any errors in the Final Order be corrected. A respondent must submit a valid reason why such information was not presented prior to issuance of the Final Order. The Associate Administrator may grant or deny, in whole or in part, a petition for reconsideration without further proceedings, or may request additional information, data, and comment as deemed appropriate.#

320111014_Decision on Petitions for Reconsideration_12052013_text.pdf, page 32 I. Background PHMSA issued a Notice of Probable Violation, Proposed Civil Penalty and Proposed Compliance Order (“Notice”) in this proceeding on August 23, 2011. The Notice was issued to PostRock KPC Pipeline, LLC (PostRock KPC).1 PHMSA received response letters from both PostRock KPC and PostRock Energy.2 After the Notice was issued but prior to the date of the Final Order, MV Purchasing, by letter dated November 12, 2012, informed PHMSA that it had purchased PostRock KPC in September 2012. Accordingly, PHMSA issued the Final Order on June 10, 2013, to PostRock Energy, directing that PostRock Energy pay a civil penalty of $65,000 and requesting that MV Pipelines, as the new owner, to perform the necessary actions set forth in the Proposed Compliance Order. II. PostRock Energy’s Petition In its Petition, PostRock Energy argues that it is not a proper party to the proceeding and should be removed entirely from the Final Order. It asserts that at the time of the Notice, PostRock KPC’s sole member was PostRock Energy Services Corporation (PESC), a wholly-owned subsidiary of PostRock Energy, but that at no time did PostRock Energy or PESC own or operate the pipeline. On the contrary, PostRock Energy represents that, at all relevant times, PostRock KPC has been a separate legal entity and has therefore been the only real party in interest in this proceeding.3 Once PostRock KPC was purchased by MV Pipelines, the entity’s name was simply changed from “PostRock KPC Pipeline, LLC” to “KPC Pipeline, LLC.” PHMSA issued the Final Order to both PostRock Energy, the putative parent of PostRock KPC, and MV Purchasing, the new owner, due to the 2012 sale of PostRock KPC’s membership units to MV Purchasing. However, based upon the new information provided by PostRock Energy in tis Petition about the legal status of PostRock KPC, now operating under its new name of KPC Pipeline, LLC, I find that the Final Order in this proceeding should be issued solely to the new operating entity, KPC Pipeline, LLC, instead of the two previously-named companies. III. Joint Petition In the Joint Petition, MV Purchasing and KPC (jointly, Petitioners) request reconsideration of whether: 1. 2. MV Purchasing is a proper party to this proceeding; the Associate Administrator properly applied the mitigating factors set forth in 49 C.F.R. § 190.225; and 3. the proposed civil penalty should be reduced in light of the mitigating factors. 1 While the Notice was issued to PostRock KPC Pipeline, LLC, the Final Order was issued to PostRock Energy and MV Purchasing. 2 At the time the Final Order was issued, PHMSA was under the impression that PostRock KPC was a wholly- owned subsidiary of PostRock Energy. 3 PostRock Energy’s Petition, at 1-2.#

320111014_Decision on Petitions for Reconsideration_12052013_text.pdf, page 43 Issue 1: This issue has already been discussed above as part of PostRock Energy’s Petition. As discussed above, I find that KPC is the proper party in this proceeding. Issue 2: Petitioners argue that the Associate Administrator failed to consider the mandatory factors provided in 49 C.F.R. § 199.225(a) in assessing the penalties; therefore, it deserves a reduction of the civil penalties imposed in the Final Order. Petitioners assert that the Associate Administrator failed to consider that the violations of §§ 192.465(d), 192.481(a) and 192.479(a) concern long-term monitoring and prevention, rather than acute conditions posing a more immediate hazard. Petitioners point to the fact that there were no pipeline failures, and no injuries to persons, property or the environment arising out of the violations. I have reviewed the record and find that the civil penalty proposed in the Notice and documented in the Violation Report already took into account that there were no pipeline failures or injuries to persons, property or the environment. Additionally, Petitioners reiterate that for Item 1, seven of the twelve deficiencies relate to a period of time before KPC owned and operated the pipeline. In addition, the violations in Item 3 occurred both before and after KPC became the owner and operator of the pipeline. Petitioners suggest that while KPC does not seek to avoid liability for all the instances of noncompliance, the fact that some of them occurred prior to KPC’s ownership of the line should serve to mitigate a portion of the penalty. This argument, however, was raised in the Response and considered in the issuance of the Final Order and no new information has been provided; therefore, I will not address this issue here.4 Petitioners also point to the fact that KPC is not “a habitual violator.” Again, as noted in the Violation Report, KPC’s compliance history was already taken into account in the proposed penalty. One prior case against KPC PostRock, involving two violations, was considered and used in calculating the proposed penalty. There is no indication that these prior violations prompted PHMSA to consider PostRock KPC “a habitual violator”, but prior violations are generally considered in assessing all civil penalties. 5 Finally, as part of their good faith argument, Petitioners argue that KPC corrected all of the deficiencies enumerated in Item 1 of the Notice either before PHMSA’s inspection or before the Notice was issued. They further assert that for Item 3, KPC purchased new software to better comply with regulatory monitoring duties and completed an entire inspection of the pipeline for exposed pipe. It also submitted a schedule to PHMSA for completing all remedial work as a result of that inspection and has since completed that schedule and remediated the four exposed pipe locations identified in the Notice within a month of receiving the Notice. Petitioners argue that these good faith actions, taken both before and after the issuance of the Notice, should serve as an additional basis to reduce the proposed penalty. I disagree. In determining a penalty reduction based on good faith, the agency does not look at what an 4 Final Order at 5. 5 Violation Report at 23.#

320111014_Decision on Petitions for Reconsideration_12052013_text.pdf, page 54 operator does after a violation has occurred, but instead considers “if the operator’s interpretation of the requirement was reasonable and the operator had a credible belief that its approach to achieving compliance was faithful to its duty to meet the regulatory obligation.”6 In this case, there is no indication that PostRock KPC based its actions, even prior to the PHMSA inspection, on a reasonable or credible belief that it was complying with the regulation. Moreover, the agency expects any reasonable operator to take preventative measures post-violation to ensure that a violation does not occur again in the future. Therefore, I do not find Respondent’s arguments persuasive that its actions warrant mitigation of the proposed penalty. IV. Conclusion Based on a review of the record and for the reasons stated above, PostRock Energy’s request to be removed as a party to this proceeding is granted. I further grant, in part, and deny, in part, the Joint Petition. MV Purchasing’s petition for dismissal from the proceeding is granted. However, the request for mitigation of the civil penalties assessed in the Final Order for violations of §§ 192.465(d) (Item 1) and 192.481(a) (Item 3) is denied. Payment of the civil penalty of $65,000 is now due and must be made within 20 days of service. Federal regulations (49 C.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal Reserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 269039, Oklahoma City, Oklahoma 73125. The Financial Operations Division telephone number is (405) 954-8893. Failure to pay the $65,000 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a district court of the United States. This decision is the final administrative action in this proceeding. ___________________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 6 Violation Report at 6.#