NUSTAR PIPELINE OPERATING PARTNERSHIP L.P. — Notice of Probable Violation

party submissionOfficial PDF320115005_Operator Response to NOPV PCP PCO_05202011.pdf#

party submissionOfficial PDF320115005_Petition_for_Reconsideration_01182012.pdf#

320115005_FinalOrder_12292011_text.pdf, page 1Official PDFDEC 29 2011 Mr. Todd Denton Vice President Pipelines & Terminal Operations NuStar Pipeline Operating Partnership, L.P. 2330 N. Loop 1604 West San Antonio, TX 78248 Re: CPF No. 3-2011-5005 Dear Mr. Denton: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation, assesses a reduced civil penalty of $101,200, and specifies actions that need to be taken by NuStar Pipeline Operating Partnership, L.P. to comply with the pipeline safety regulations. The penalty payment terms are set forth in the Final Order. 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, Director, Central Region, OPS Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS CERTIFIED MAIL - RETURN RECEIPT REQUESTED [71791000164202982016]#

320115005_FinalOrder_12292011_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 ) ) NuStar Pipeline Operating ) CPF No. 3-2011-5005 Partnership, L.P., ) ) Respondent. ) ____________________________________) FINAL ORDER Between April 5-9, 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 NuStar Pipeline Operating Partnership, L.P. in Wichita, Kansas. NuStar Pipeline Operating Partnership, L.P. (NuStar or Respondent) is a subsidiary of NuStar Energy, L.P., which owns and operates 5,605 miles of refined product pipelines, 2,000 miles of anhydrous ammonia pipelines, and 812 miles of crude oil pipelines.1 As a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent, by letter dated April 21, 2011, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that NuStar had violated 49 C.F.R. §§ 195.50, 195.412, 195.573 and 195.404 and assessing a civil penalty of $112,000 for the alleged violations. The Notice also proposed 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. NuStar responded to the Notice by letter dated May 20, 2011 (Response). The company contested the allegations of violation, provided an explanation of its actions, and requested that the proposed civil penalty be reduced. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION The Notice alleged that Respondent violated 49 C.F.R. Part 195.50, as follows: 1 See http://www.nustarenergy.com/COMPANY/Pages/default.aspx (last accessed November 7, 2011).#

320115005_FinalOrder_12292011_text.pdf, page 32 Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.50, which states in relevant part: § 195.50 -- Reporting accidents. An accident report is required for each failure in a pipeline system subject to this part in which there is a release of the hazardous liquid or carbon dioxide transported resulting in any of the following… (b) Release of 5 gallons (19 liters) or more of hazardous liquid or carbon dioxide, except that no report is required for a release of less than 5 barrels (0.8 cubic meters) resulting from a pipeline maintenance activity if the release is: (1) Not otherwise reportable under this section (2) Not one described in § 195.52(a)(4); (3) Confined to company property or pipeline right-of-way; and (4) Cleaned up promptly… The Notice alleged that Respondent violated 49 C.F.R. § 195.50(b) by failing to file an accident report for three hazardous liquid releases that occurred between 2007-2010. Section 195.50 requires an operator to file a report for all releases of 5 gallons or more unless the spill meets the exception listed in § 195.50(b). On December 1, 2007, NuStar experienced a release of 50 gallons at its Geneva Station during a tank switching operation. The second release occurred on October 6, 2009 at the Elm Creek Pump station in which a sump overflowed releasing 89 gallons of fuel oil. The third release occurred on January 22, 2010 at the El Dorado Station during the start up of the mainline pump, resulting in a release of 50 gallons. OPS argued in the Notice that all three releases occurred during pipeline system operations and therefore should have been reported. Response NuStar argued that each of the three spills met the exception listed under § 195.50(b) since each release resulted from pipeline maintenance activity and was less than 5 barrels (210 gallons). In support of this argument, NuStar filed a statement summarizing the three spills and relied on the relevant rulemaking documents establishing these exceptions. With regard to the first spill, NuStar argued that it occurred during a maintenance activity on the pipeline manifold area which involved tying in all block and bleed valves to a common header intended to carry product to a sump if the valves were left open. However, according to NuStar, the maintenance activity was not completed at the time of the release and the header pipe discharged product into a 5 gallon bucket rather than the sump. In its explanation of the release, NuStar stated that the operator of the station failed to close the block and bleed valve allowing product to escape the valve body. NuStar stated that the product was carried a distance into the 5 gallon bucket and therefore the release went unnoticed until 50 gallons had spilled into the manifold area. NuStar stated that clean up was completed immediately.2 2 Response, Exhibit A.#

320115005_FinalOrder_12292011_text.pdf, page 43 The second release occurred when a sump overflowed. NuStar stated in its Response that after restarting the pipeline, the control center detected a high level sump alarm. NuStar determined that a valve had been left partially opened during maintenance inspections which caused the release. NuStar stated in its Response that the released product was immediately cleaned up.3 The third release occurred when NuStar personnel were repairing the motor to the #2 mainline pumping unit. According to NuStar, as part of the maintenance procedures, the unit was started up to test for proper installation and alignment. During this test, the release occurred. NuStar stated in its Response that the product was immediately cleaned up.4 Finally, NuStar asserted that PHMSA did not define the meaning of “resulting from a pipeline maintenance activity” in the Final Rule and therefore operators must interpret for themselves which spills meet the exception.5 NuStar also argued that collecting information for spills attributable to maintenance would “taint the data analysis efforts of PHMSA”.6 Analysis Section 195.50 requires all operators to report spills of 5 gallons or more. The reporting requirement dates back to July 27, 1981 when the Materials Transportation Bureau, a predecessor to PHMSA, amended the pipeline safety regulations in Part 195 to conform to terminology used in the Hazardous Liquid Pipeline Safety Act of 1979.7 improve the quality of accident data, the agency amended the requirement to reduce the threshold for reporting from 50 barrels to 5 gallons. At that time, the agency also included an exception for spills under 5 barrels resulting from pipeline maintenance activities. At the time the rule was issued, RSPA, the predecessor to PHMSA, directly addressed this exception. In 2002, in an effort to Our information is that such spills occur regularly upon the opening of pipelines for insertion of spheres, smart pigs, or for routine inspections. The spills are usually caught in a berm or other containment device; are cleaned up immediately; and have little to no impact on the environment. We believe information on such releases would not be helpful in accident trending analysis. Maintenance spills must be promptly cleaned up to avoid the reporting requirement. Any non-maintenance spill of 5 gallons or more must be reported.8 3 Id. 4 Id. 5 Id. 6 Id. 7 “Transportation of Liquids by Pipeline”, 46 Fed. Reg. 38357, 38363 (July 27, 1981). 8 “Pipeline Safety: Hazardous Liquid Pipeline Accident Reporting Revisions”, 67 Fed. Reg. 831 (January 8, 2002).#

320115005_FinalOrder_12292011_text.pdf, page 54 Certainly, the agency’s intention was to exclude planned or expected maintenance spills that occurred from opening the line. The instructions for the Accident Report (PHMSA Form 7000- 1) explicitly state that “hazardous liquid releases during maintenance or other routine activities need not be reported if the spill was less than 5 barrels, not otherwise reportable under 49 C.F.R. § 195.50, and did not result in water pollution as described by 49 C.F.R. § 195.52(a)(4).”9 NuStar’s three spills were certainly not planned and did not occur during maintenance activities. Rather, the spills occurred during a start up of the pipe and occurred as a result of personnel error after the maintenance activity had concluded. NuStar admitted that the first spill occurred during normal operational activities.10 The second release occurred “after the completion of the maintenance inspections and restart of the pipeline”.11 The third release occurred during a start up test, which although is considered part of maintenance activities, the release was not planned akin to removing a pig, etc. As documented in the Violation Report, NuStar personnel confirmed during the OPS inspection that this failure occurred due to equipment failure.12 Specifically, problems with the settings of the relief valve and case pressure during start up operations caused the release of product.13 I do not find NuStar’s argument persuasive that requiring the reporting of these types of spills would force operators to report all spills. Operators should be reporting all spills greater than 5 gallons. The narrow exception only exempts reporting if the spill occurred during a maintenance activity, did not cause an explosion, fire, death, or injury, and is cleaned up promptly. As stated above, the exception is intended to capture only those spills that are planned or intended during maintenance. If the Section 195.50(b) exception were intended to include all spills that were in any way related to maintenance, then numerous spills would go unreported. Accordingly, after considering all of the evidence, I find that NuStar violated the pipeline safety regulations by failing to report all three releases. The spills were not planned releases that occurred during maintenance activities but were rather caused by operator error or equipment failure during pipeline system operations. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 195.573, which states in relevant part: § 195.573 -- What must I do to monitor external corrosion control? (a) Protected pipelines. You must do the following to determine whether cathodic protection required by this subpart complies with Sec. 195.571: (1) Conduct tests on the protected pipeline at least once each calendar 9 Instructions for Form PHMSA F 7000-1 (1-2001) (emphasis added) located at http://www.phmsa.dot.gov. 10 Response, Exhibit A, page 2. 11 Id. at 3. 12 Violation Report, at 3. 13 Id.#

320115005_FinalOrder_12292011_text.pdf, page 65 year, but with intervals not exceeding 15 months. However, if tests at those intervals are impractical for separately protected short sections of bare of ineffectively coated pipelines, testing may be done at least once every 3 calendar years, but with intervals not exceeding 39 months…. The Notice alleged that Respondent violated 49 C.F.R. § 195.573 by failing to conduct corrosion control monitoring tests at various test stations once each calendar year between 2006-2009. Specifically, NuStar failed to conduct tests at stations on the 10-inch line for two years at MP 154.31, MP 172.69, and MP 225.96. Further, NuStar failed to conduct tests on the 16-inch line at MP 165.94 for two years and MP 172.69 for four years. In its Response, NuStar only contested the allegations as they applied to MP 154.31 and MP 172.69 on the 10–inch line. In support of its argument that these two stations were tested on an annual basis, NuStar provided close interval survey records from 2009 for both test stations and explained that MP 154.31 was replaced on October 24, 2009. I have reviewed these records and find them acceptable. Therefore, I am withdrawing these two test stations from Item 3 but find a violation has occurred for the other three test stations. Accordingly, I find that Respondent violated 49 C.F.R. § 195.573 by failing to conduct tests at MP 225.96 on the 10-inch line and MPs 165.94 and 172.69 on the 16–inch line. Item 4: The Notice alleged that Respondent violated 49 C.F.R. § 195.404, which states in relevant part: § 195.404 -- Maps and Records. (c) Each operator shall maintain the following records for the period specified; (3) A record of each inspection and test required by this subpart shall be maintained for at least 2 years or until the next inspection or test is performed, whichever is longer. The Notice alleged that Respondent violated 49 C.F.R. § 195.404 by failing to maintain records for each inspection and test required by Subpart F. Specifically, NuStar failed to maintain inspection records for an overpressure safety device at the Arkansas Pump station for at least two years. During the inspection, NuStar could not produce overpressure inspection records for the previous two years. Although NuStar stated that the device was inspected and tested by a third party, NuStar could not produce the records to meet its obligations under § 195.404. In its Response, NuStar provided the records of the tests which were conducted by ConocoPhillips, the supplier of the line. NuStar stated that it would immediately begin joint inspections with ConocoPhillips so that NuStar could maintain its own documentation. Section 195.404 of the pipeline safety regulations requires the operator to maintain records of each inspection and test for at least two years. Even in situations where a third-party performs the test, NuStar must maintain its own records for tests on its facilities to be in compliance with the regulations. Accordingly, after considering all of the evidence, I find that Respondent violated 49 C.F.R. § 195.404 by failing to maintain records for overpressure tests at the Arkansas Pump station.#

320115005_FinalOrder_12292011_text.pdf, page 76 These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. 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, 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 $112,000 for the violations cited above. Item 1: The Notice proposed a civil penalty of $64,100 for Respondent’s violation of 49 C.F.R. § 195.50(b), for failing to file accident reports for three hazardous liquid pipeline releases. In its Response, NuStar argued that the company should receive a credit for good faith since the agency had not clearly defined what types of spills qualified for the maintenance activity exception. As cited above, both the Final Rule and the Accident Report instructions have clarified the narrow intent of this exception and that it only applies to releases that occur during maintenance, not related to maintenance. The proposed civil penalty is based on the civil penalty assessment factors listed in 49 C.F.R. § 190.225. As stated in the Violation Report, the gravity for this violation was low since it involved a failure to file a report; however, the operator did not file the accident report for three different accidents which was factored into the proposed civil penalty.14 The violation was discovered by PHMSA, not the operator. Finally, the operator’s prior history was a factor civil penalty assessment factors and the evidence presented in this case, I find that the proposed civil penalty of $64,100 is justified. Accordingly, I assess Respondent a civil penalty of $64,100 for violation of 49 C.F.R. § 195.50(b). since NuStar had three Final Orders issued in the previous five years.15 Having reviewed the Item 3: The Notice proposed a civil penalty of $28,700 for Respondent’s violation of 49 C.F.R. § 195.573, for failing to conduct corrosion control monitoring tests from calendar year 2006 to 2009. As stated above, I have withdrawn the allegations related to MP 154.31 and MP 172.69 on the 10-inch line. The civil penalty amount is reduced to reflect that only three test stations were missed instead of the proposed five. However, the foundation of the penalty amount is based on the gravity of the violation, the circumstances surrounding the violation including the duration of the missed tests, and the prior history of the operator. NuStar’s failure to inspect three test stations for consecutive years was factored into the civil penalty amount. ASSESSMENT OF PENALTY 14 Violation Report, at 4. 15 Violation Report, at 15.#

320115005_FinalOrder_12292011_text.pdf, page 87 Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $27,900 for violation of 49 C.F.R. § 195.573. Item 4: The Notice proposed a civil penalty of $19,200 for Respondent’s violation of 49 C.F.R. § 195.404, for failing to maintain records for each inspection and test, as required under Subpart F. PHMSA has examined the civil penalty assessment factors and determined that Respondent should receive a reduced civil penalty on account of its culpability. Although NuStar ensured that the required overpressure protection tests were conducted, it failed to maintain inspection records for an overpressure safety device at the Arkansas Pump station for at least two years. ConocoPhillips conducted the overpressure protection inspections on NuStar’s inlet piping and therefore NuStar was unaware that it was also required to maintain records of these tests. NuStar has agreed to conduct joint inspection and testing of the overpressure protection devices in the future. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a reduced civil penalty of $9,200 for violation of 49 C.F.R. § 195.404. 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 $101,200. Payment of the civil penalty 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 $101,200 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 and 4 in the Notice for violations of 49 C.F.R. §§ 195.50(b) and 195.404, respectively. Under 49 U.S.C. § 60118(a), each person who engages in the transportation of hazardous liquids or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Director has indicated that Respondent has taken the following actions to address some of the cited violations: Item 4: NuStar has documented the inspections of the overpressure device at the Arkansas pump station and has entered an agreement with ConocoPhillips to conduct joint inspections of this facility in the future.#

320115005_FinalOrder_12292011_text.pdf, page 98 Accordingly, I find that compliance has been achieved with respect to this violation. Therefore, the compliance terms proposed in the Notice for Item 4 are not included in this Order. As for the remaining compliance terms, pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is ordered to take the following action to ensure compliance with the pipeline safety regulations applicable to its operations: 1. With respect to the violation of § 195.50(b) (Item 1), Respondent must submit to PHMSA within 30 days of issuance of the Final Order, an accident report on Form 7000- 1 for each of the three accidents and any additional accidents not previously reported that meet reporting criteria. NuStar must also notify the Director, Central Region that reports have been submitted including the number of reports, accident dates, date submitted to PHMSA, and PHMSA report number. 2. It is requested (not mandated) that NuStar 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. The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by the Respondent and demonstrating good cause for an extension. Failure to comply with this Order may result in the 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 probable violations of Part 195 specifically considered to be a warning item. The warning was for: 49 C.F.R. § 195.412 (Item 2) ─ Respondent’s alleged failure to complete 26 patrols of six of its pipeline right-of-ways during the 2009 calendar year. NuStar completed 25 patrols but its contractor failed to complete the final patrol due to weather related issues. NuStar presented information in its Response showing that it had taken certain actions to address the cited items. If OPS finds a violation of this provision in a subsequent inspection, Respondent 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#

320115005_FinalOrder_12292011_text.pdf, page 109 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#

320115005_Decision on Reconsideration_06142012_text.pdf, page 1Official PDFJUNE 14, 2012 Mr. Michael Truby Vice President, Pipeline Operations NuStar Pipeline Operating Partnership, L.P. 2330 N. Loop 1604 West San Antonio, TX 78248 Re: CPF No. 3-2011-5005 Dear Mr. Truby: Enclosed please find the Decision on Reconsideration issued in the above-referenced case. It denies your Petition for Reconsideration. 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: Mr. David Barrett, Director, Central Region, OPS Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS CERTIFIED MAIL – RETURN RECEIPT REQUESTED#

320115005_Decision on Reconsideration_06142012_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 ) ) NuStar Pipeline Operating ) CPF No. 3-2011-5005 Partnership, L.P., ) ) Petitioner. ) ____________________________________) DECISION ON RECONSIDERATION On December 29, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), issued a Final Order in this matter to NuStar Pipeline Operating Partnership, L.P. (NuStar or Petitioner), finding that NuStar had committed several violations of the hazardous liquid pipeline safety regulations. I assessed Petitioner a civil penalty of $101,200 and ordered the company to complete certain corrective actions. On January 18, 2012, NuStar submitted a timely Petition for Reconsideration (Petition) seeking review of Items 1 and 3 of the Final Order and the associated civil penalties and compliance items. First, NuStar argues that I erred in finding that the company violated 49 C.F.R. § 195.50 (Item #1) by failing to report three releases of more than five gallons of product. Second, NuStar asserts that the civil penalty assessed for Item #3 of the Final Order should be reduced. Standard of Review A respondent may petition the Associate Administrator for reconsideration of a final order. Reconsideration is not a right to appeal or seek a de novo review of the record.1 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. Requests for consideration of new facts or arguments must be supported by a statement of reasons as to why those facts or arguments were not presented prior to the issuance of the Final Order. Repetitious information or arguments will not be considered. 1 49 C.F.R. § 190.215(a)-(e).#

320115005_Decision on Reconsideration_06142012_text.pdf, page 32 Analysis Item 1 In its Petition, NuStar argues that the finding made in Item #1 of the Final Order should be dismissed for two of the three releases. Specifically, NuStar argues that the second and third releases met the maintenance exception to the reporting requirement and therefore were not violations. NuStar does not request dismissal of the first release, a spill of 50 gallons at its Geneva station, which occurred after the operator failed to close the block and bleed valve prior to start up. NuStar admitted in its Response that this spill occurred during normal operational activities.2 In its Petition, NuStar argues that the second release resulted from a maintenance activity because the valve that was left partially open occurred during normal maintenance inspections of the equipment.3 This release occurred at the Elm Creek Pump station in which a sump overflowed releasing 89 gallons of fuel oil. NuStar argues that the third release also resulted from a maintenance activity since Respondent was testing newly installed equipment at the time pump, resulting in a release of 50 gallons. of the release.4 This release occurred at the El Dorado Station during the start up of the mainline I have reviewed NuStar’s arguments in its Petition and I do not find them compelling. In the Final Order, I made a finding that all three spills cited in the Notice, including the two referenced that any information provided by NuStar in its Petition supports a reversal of my decision in the Final Order. above, did not meet the maintenance exception and should have been reported.5 I do not find As stated in the Final Rule for § 195.50, the maintenance exception is intended to apply to “…spills [that] occur regularly upon the opening of the pipelines for insertion of spheres, smart pigs, or for routine inspections.”6 “Any non-maintenance spill of five gallons or more must be reported.”7 The second release occurred when a sump overflowed and not during a maintenance activity. In fact, NuStar acknowledged in its Response that the second release occurred “after the completion of the maintenance inspections and restart of the pipeline”.8 This exception was not intended to cover accidental valve closures that occur after a maintenance activity has concluded. Failing to shut a valve at the conclusion of maintenance is not a maintenance activity 2 Response, Exhibit A, page 2. 3 Petition, at 5. 4 Id. 5 Final Order, at 4. 6 Pipeline Safety: Hazardous Liquid Pipeline Accident Reporting Revisions”, 67 Fed. Reg. 831 (January 8, 2002). 7 Id. 8 Response, Exhibit A, page 3 (emphasis added).#

320115005_Decision on Reconsideration_06142012_text.pdf, page 43 but rather an error on the part of the company and is the proximate cause of the release. Therefore, this spill should have been reported and the finding of violation issued in the Final Order stands. As for the third spill, the 50 gallon spill at the El Dorado Station occurred when NuStar personnel were repairing the motor to the #2 mainline pumping unit. According to NuStar, the unit was started up to test for proper installation and alignment.9 During this test, the release occurred. In its Petition, NuStar maintains that this release occurred as result of maintenance because if the test for proper installation and alignment had not occurred, there would not have been a release. However, as noted in the Final Order, NuStar personnel confirmed during the OPS inspection that this release occurred due to the failure of unit #2, specifically the settings of the relief valve and case pressure during startup operations. 10 The OPS Central Region has established that this particular release met the requirements of § 195.50 in that it was a release of hazardous liquid of five gallons or more. Certainly, the restart of a line can be related to maintenance in certain circumstances but NuStar has not provided enough information to support its argument that the maintenance exception applies in this specific situation. NuStar makes several other arguments in support of its position including the reasonableness of the agency’s interpretation, reliance on guidance material, and use of the word ‘intentional’. First, NuStar’s asserts that a Federal agency cannot issue interpretations within an enforcement decision. To the contrary, an agency is “not precluded from announcing new principles in an adjudicative proceeding. ”11 PHMSA can and does develop such interpretations in its enforcement decisions. 12 Federal courts have held that an order issued in an adjudicatory proceeding is not subject to the notice and comment procedures of the Administrative Procedure Act.13 Second, NuStar states in its Petition, that “[p]ast agency opinions related to § 195.50 have not mentioned, much less applied, these “planned or expected” or “intended” and “during a maintenance or normal activities” requirements. ” However, NuStar failed to cite to any specific pipeline interpretation to support this statement. 14 9 Petition, at 5. 10 Violation Report, at 3. 11 NLRB v. Bell Aerospace Co., 416 U.S. 267, 292-94 (1974). 12 See In the Matter of ANR Pipeline Company, Final Order, CPF No. 3-2007-1006)(available at www.phmsa.dot.gov/pipeline/enforcement). 13 R/T 182, LLC v. FAA, 519 F.3d 307, 310 (6th Cir. 2008) (emphasis added). 14 PHMSA’s interpretations are located at http://www.dot.gov/phmsa.#

320115005_Decision on Reconsideration_06142012_text.pdf, page 54 Third, in the Final Order, I reviewed the regulatory history of § 195.50 and referred to guidance materials including the instructions for the Accident Report to support the agency’s position.15 NuStar argued in its Petition that this reference to the Accident Report instructions was improper and cited the Explorer Pipeline Company (CPF No. 3-2009-5018) case to discount this information.16 Specifically, NuStar cited to a statement in Explorer that the forms “are not interpretations of the regulations and the instructions are simply provided to assist operators in filling out the forms properly.”17 This quote is from the summary of the OPS Central Region’s argument and not my finding. The exact quote is that “PHMSA also contended that its annual reporting forms are not interpretations of the regulations and the instructions are simply provided to assist operators in filling out the form properly.”18 I stated in Explorer that “I find that of the OPS forms are guidance and not binding regulation. My reference to them in the Final instructions to complete forms are guidance, not binding regulation.”19 The instructions to any Order was consistent with this approach. Finally, NuStar objects to my use of the word “intentional” in the Final Order to describe the type of spills that would be included under the maintenance exception. Specifically, I stated – Certainly, the agency’s intention was to exclude planned or expected maintenance spills that occurred from opening the line. The instructions for the Accident Report (PHMSA Form 7000-1) explicitly state that “hazardous liquid releases during maintenance or other routine activities need not be reported if the spill was less than 5 barrels, not otherwise reportable under 49 C.F.R. § 195.50, and did not result in water pollution as described by 49 C.F.R. § 195.52(a)(4).”20 NuStar’s three spills were certainly not planned and did not occur during maintenance activities. Rather, the spills occurred during a start up of the pipe and occurred as a result of personnel error after the maintenance activity had concluded….. As stated above, the exception is intended to capture only those spills that are planned or intended during maintenance. If the Section 195.50(b) exception were intended to include all spills that were in any way related to maintenance, then numerous spills would go unreported.21 15 Final Order, at 3-4. 16 In the Matter of Explorer Pipeline, CPF No. 3-2009-5018 (July 22, 2011). 17 Petition, at 3 (citing In the Matter of Explorer Pipeline, CPF No. 3-2009-5018, at 5). 18 CPF No. 3-2009-5018, at 5. 19 Id. 20 Instructions for Form PHMSA F 7000-1 (1-2001) (emphasis added) located at http://www.phmsa.dot.gov. 21 Final Order, at 4.#

320115005_Decision on Reconsideration_06142012_text.pdf, page 65 The intent of the exception is to capture small spills that “occur upon the opening of the pipeline”. These spills occur regularly during maintenance activities. Obviously, the agency is not condoning intentional spills that do not fit this description. Having reviewed the evidence provided in the Notice of Probable Violation, Violation Report, Response and Petition, I find that the violation stands. NuStar’s petition for Item #1 is denied. Item 3 NuStar also argues in its Petition that the $27,900 civil penalty assessed in Item #3 should be reduced to 3/5 of the proposed civil penalty or $17,220. NuStar states that two of the five test stations were previously dismissed; therefore, the civil penalty should be reduced to 3/5 of the original amount. As explained in the Final Order, the proposed civil penalty was reduced to account for the removal of these test stations. Specifically, I stated that “the civil penalty amount is reduced to reflect that only three test stations were missed instead of the proposed five.”22 In addition, I stated that “…the foundation of the penalty amount is based on the gravity of the violation, the circumstances surrounding the violation including the duration of the missed tests, and the prior history of the operator.”23 NuStar’s failure to inspect these three test stations for amount was already reduced to reflect the removal of these two test stations from the finding of violation, and NuStar has not presented any new information in its Petition to support its argument for a further reduction, the assessed civil penalty amount stands. NuStar’s petition on this Item is denied. several consecutive years was factored into the civil penalty amount.24 Since the civil penalty PETITION DENIED Based on a review of the relevant portions of the record, and for the reasons stated above, I am denying NuStar’s petition. The Final Order is affirmed without modification. This Decision is the final administrative action in this proceeding. _____________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 22 Final Order, at 6. 23 Id. 24 Id.#

320115005_Closure_07092013_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED July 9, 2013 Mr. Gary Koegeboehn Vice President, Pipeline Operations NuStar Pipeline Operating Partnership, L.P. 2330 N. Loop 1604 West San Antonio, TX 78248 CPF 3-2011-5005 Dear Mr. Koegeboehn: On December, 29, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to NuStar Pipeline Operating Partnership, L.P. 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, David Barrett Director, Central Region Pipeline and Hazardous Materials Safety Administration#

320115005_NOPV PCP PCO_04212011_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED April 21, 2011 Mr. Todd Denton NuStar Pipeline Operating Partnership, L.P. 2330 Loop 1604 W. San Antonio, TX 78248 CPF 3-2011-5005 Dear Mr. Denton: On April 5-9, 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 Wichita, 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 violation(s) are: 1. § 195.50 Reporting accidents. An accident report is required for each failure in a pipeline system subject to this part in which there is a release of the hazardous liquid or carbon dioxide transported resulting in any of the following: (b) Release of 5 gallons (19 liters) or more of hazardous liquid or carbon dioxide, except that no report is required for a release of less than 5 barrels (0.8 cubic meters) resulting from a pipeline maintenance activity if the release is: (1) Not otherwise reportable under this section; (2) Not one described in Sec. 195.52(a)(4);#

320115005_NOPV PCP PCO_04212011_text.pdf, page 2(3) Confined to company property or pipeline right-of-way; and (4) Cleaned up promptly; NuStar Pipeline Operating Partnership, L.P. (NuStar) did not report three releases of petroleum products greater than 5 gallons in volume. The releases occurred during pipeline system operations; therefore, they must be reported as required by 49 CFR § 195.50(b). The first release (NuStar Incident ID: 466) occurred on December 1st , 2007 at the Geneva Station. The spill occurred during a tank switching operation, causing a release of 50 gallons. The second release (NuStar Incident ID: 4368) occurred on October 6th , 2009 at the Elm Creek Pump Station. The spill occurred when a sump overflowed releasing 89 gallons of fuel oil. The third release (NuStar Incident ID: 5345) occurred on January 22, 2010 at the El Dorado Station. The spill occurred during start up of a mainline pump, causing a release in the order-of-magnitude of 50 gallons. 2. §195.412 Inspection of rights-of-way and crossings under navigable waters. (a) Each operator shall, at intervals not exceeding 3 weeks, but at least 26 times each calendar year, inspect the surface conditions on or adjacent to each pipeline right-of-way. Methods of inspection include walking, driving, flying or other appropriate mean of traversing the right-of-way. NuStar did not complete 26 patrols of six of its pipeline rights-of-way in the 2009 calendar year. Only 25 patrols were completed on the following pipeline segments: McPherson to Geneva, Geneva to Phillipsburg, Geneva to North Platte, Sioux River to Rock Rapids, Council Bluffs to Sioux Falls, and Wood River to Huntington. The contractor for patrolling NuStar’s pipelines failed to complete the final 26th aerial patrol of these segments within the calendar year due to weather problems and notified NuStar in January, 2010 of the error. 3. §195.573 What must I do to monitor external corrosion control? (a) Protected pipelines. You must do the following to determine whether cathodic protection required by this subpart complies with Sec. 195.571: (1) Conduct tests on the protected pipeline at least once each calendar year, but with intervals not exceeding 15 months. However, if tests at those intervals are impractical for separately protected short sections of bare or ineffectively coated pipelines, testing may be done at least once every 3 calendar years, but with intervals not exceeding 39 months. 2#

320115005_NOPV PCP PCO_04212011_text.pdf, page 3NuStar did not conduct corrosion control monitoring tests at various test stations from calendar year 2006 through calendar year 2009. The following locations were not tested for consecutive years on the 10-inch and 16-inch McPherson, KS to Geneva, NE parallel pipelines. MP 154.31 10" (’08- ’09)….. 2 yrs MP 165.94 16" (’07-‘08)….. 2 yrs MP 172.69 10" (’08- ’09)….. 2 yrs MP 172.69 16" (’06- ’09)….. 4 yrs MP 225.96 10" (’07- ’08)….. 2 yrs 4. §195.404 Maps and Records. (c) Each operator shall maintain the following records for the periods specified; (3) A record of each inspection and test required by this subpart shall be maintained for at least 2 years or until the next inspection or test is performed, whichever is longer. NuStar did not maintain the inspection records for a overpressure safety device at the Arkansas City Pump Station for at least two years. Per 49 CFR §195.428 overpressure safety devices require periodic inspection and testing. The high pressure shutdown switch installed on and protecting NuStar’s inlet piping at the Arkansas City Pump Station was reportedly inspected and tested by another party. NuStar had not acquired the documentation of the device’s annual inspections. During PHMSA’s regulatory inspection it was confirmed with NuStar that the pressure rating of the incoming pipeline system (operated by another company) has a higher maximum operating pressure rating than NuStar’s piping. 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 $112,000 as follows: Item number PENALTY 1 $64,100 3 $28,700 4 $19,200 3#

320115005_NOPV PCP PCO_04212011_text.pdf, page 4Warning Items With respect to item 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 NuStar being subject to additional enforcement action. Proposed Compliance Order With respect to items 1 and 4 pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to NuStar Pipeline Operating Partnership, L.P. Please refer to the Proposed Compliance Order, which is enclosed and made a part of this Notice. Response to this Notice Enclosed as part of this Notice is a document entitled Response Options for Pipeline Operators in Compliance Proceedings. Please refer to this document and note the response options. Be advised that all material you submit in response to this enforcement action is subject to being made publicly available. 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 3-2011-5005 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 4#

320115005_NOPV PCP PCO_04212011_text.pdf, page 5PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to NuStar a Compliance Order incorporating the following remedial requirements to ensure the compliance of NuStar with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to the three accidents that were not reported as required by §195.50, NuStar must submit to PHMSA within 30 days of issuance of the Final Order, an accident report on Form 7000.1 for each of the three accidents and any additional accidents not previously reported that meet reporting criteria. NuStar shall also notify the Director, Central Region that reports have been submitted; including the number of reports, accident dates, date submitted to PHMSA, and PHMSA report number. 2. In regard to Item Number 4 of the Notice pertaining to the failure to maintain inspection records on the overpressure protection device installed on NuStar pipe at the Arkansas City pump station, NuStar must be able to document the completion of all inspection and testing requirements of devices on NuStar pipe whether performed directly by NuStar personnel or performed on NuStar’s behalf pursuant to an agreement, and NuStar must maintain such documentation for the period specified in the regulations. Any required inspection and testing performed by another entity pursuant to an agreement must be performed by qualified personnel and copies of the records maintained by NuStar. Alternatively, NuStar may install overpressure protection device(s) on its inlet piping at the station and begin performing the necessary inspection and testing. 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. NuStar must complete necessary actions as delineated in the approved plan within 60 days of the Director’s approval. 3. It is requested (not mandated) that NuStar 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. 5#