{"operation":"document","citation":"CPF 320115012","title":"WHITE CLIFFS PIPELINE, LLC — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2011-09-21","effective_on":null,"summary":"CLOSED notice of probable violation citing 195.214(b), 195.260(e).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-320115012.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-320115012.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-320115012","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/320115012","body":"Notice of Probable Violation involving WHITE CLIFFS PIPELINE, LLC. PHMSA's enforcement data identifies the cited regulations as 195.214(b),  195.260(e). The case was opened on 2011-09-21 and is reported as closed as of 2013-02-13. Proposed civil penalty: $27,600. Assessed civil penalty: $11,200. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n320115012_Final Order_02052013.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320115012/320115012_Final%20Order_02052013.pdf\n\n320115012_Final Order_02052013_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320115012/320115012_Final%20Order_02052013_text.pdf\n\n320115012_NOPV PCP_09212011.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320115012/320115012_NOPV%20PCP_09212011.pdf\n\n320115012_NOPV PCP_09212011_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320115012/320115012_NOPV%20PCP_09212011_text.pdf\n\n320115012_Final Order_02052013_text.pdf\n\nFEBRUARY 5, 2013\nMr. David Minielly\nVice President of Operations\nSemGroup Corporation\nWhite Cliffs Pipeline, LLC\n3030 NW Expressway\nSuite 1100\nOklahoma City, OK 73112\nRe: CPF No. 3-2011-5012\nDear Mr. Minielly:\nPlease find the enclosed Final Order issued in the above-referenced case. It makes findings of\nviolation and assesses a reduced civil penalty of $11,200. The penalty payment terms are set\nforth in the Final Order. This enforcement action closes automatically upon receipt of payment.\nService of the Final Order by certified mail is deemed effective upon the date of mailing as\nprovided under 49 C.F.R. § 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nJeffrey D. Wiese\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Mr. Chris Paul, McAfee & Taft, 1717 S. Boulder, Suite 900, Tulsa, OK 74119\nMr. David Barrett, Director, Central Region, OPS\nMr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS\nCERTIFIED MAIL - RETURN RECEIPT REQUESTED\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, D.C. 20590\n___________________________________\nIn the Matter of )\nWhite Cliffs Pipeline, LLC, ) CPF No. 3-2011-5012\n)\n)\n)\nRespondent. )\n___________________________________ )\nFINAL ORDER\nOn May 23-27 and June 20-23, 2011, pursuant to 49 U.S.C. § 60117, a representative of the\nPipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety\n(OPS), conducted an on-site pipeline safety inspection of the facilities and records of White\nCliffs Pipeline, LLC (White Cliffs or Respondent) in Kansas and Colorado. White Cliffs is a\nsubsidiary of SemGroup Corporation, which owns and operates the 527-mile crude oil pipeline\nin Colorado, Kansas, and Oklahoma.1\nAs a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent,\nby letter dated September 21, 2011, a Notice of Probable Violation and Proposed Civil Penalty\n(Notice). In accordance with 49 C.F.R. § 190.207, the Notice alleged that White Cliffs\ncommitted two violations of the hazardous liquid pipeline safety regulations in 49 C.F.R. Part\n195 and proposed a civil penalty of $27,600 for the alleged violations.\nWhite Cliffs responded to the Notice by letter dated October 11, 2011 (Response), contested the\nproposed civil penalty and requested a hearing. In accordance with 49 C.F.R. § 190.211, a\nhearing was held on March 28, 2012, in Kansas City, Missouri, before the Presiding Official\nfrom the Office of Chief Counsel, PHMSA. After the hearing, Respondent submitted additional\ninformation for the record by letter dated April 27, 2012 (Closing).\nFINDINGS OF VIOLATION\nThe Notice alleged that Respondent violated the pipeline safety regulations in 49 C.F.R. Part\n195, as follows:\n1 System information for calendar year 2011 was reported by White Cliffs pursuant to 49 C.F.R. § 195.49. See also\nSemGroup Corporation SEC Form 10-K, February 2012, at 10.\n\n\n\n2\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.214(b), which states:\n§ 195.214 Welding procedures.\n(a) Welding must be performed by a qualified welder in accordance\nwith welding procedures qualified under Section 5 of API 1104 or Section\nIX of the ASME Boiler and Pressure Vessel Code (incorporated by\nreference, see § 195.3). The quality of the test welds used to qualify the\nwelding procedure shall be determined by destructive testing.\n(b) Each welding procedure must be recorded in detail, including the\nresults of the qualifying tests. This record must be retained and followed\nwhenever the procedure is used.\nThe Notice alleged that White Cliffs failed to retain the results of the qualifying test for welding\nprocedure BW-2. Specifically, the Notice alleged that welding procedure BW-2 was used during\nthe installation of two 12-inch block valves near the Arkansas River crossing in November 2009,\nbut during the OPS inspection in 2011, Respondent could not locate the results of the qualifying\ntest for the welding procedure.\nIn its written submissions and at the hearing, White Cliffs explained that procedure BW-2 had\nbeen qualified in accordance with § 195.214(a), but a record of the qualifying test most likely\nwas misplaced when Respondent’s engineering manager left the company. When Respondent\nrealized the record was missing around the time of the OPS inspection in 2011, it took action to\nlocate the record by contacting the former employee as well as the contractor who performed the\nqualification test. Once Respondent determined that it could not locate the results of the\nqualifying test, it performed a second qualification test to verify that procedure BW-2 was\nappropriate for the material being welded. The requalification test was completed June 15, 2011,\nbefore the conclusion of the OPS inspection. Respondent submitted the new qualification record\nalong with a letter from the retired engineering manager, dated June 21, 2011, stating that BW-2\nand several other procedures were destructively tested and qualified four years ago. Respondent\nstated that it will maintain the Welding Manual in hard copy and in electronic format with the\nengineering materials to prevent similar issues in the future.\nSection 195.214(b) requires operators to record the results of qualifying tests for welding\nprocedures and to retain those records. In this case, Respondent performed a qualification test of\nprocedure BW-2, but misplaced the record of the qualification test sometime during the next four\nyears.\nAccordingly, after considering all of the evidence, I find that Respondent violated 49 C.F.R.\n§ 195.214(b) by failing to retain a record of the qualifying test for welding procedure BW-2.\nItem 2: The Notice alleged that Respondent violated 49 C.F.R. § 195.260(e), which states:\n§ 195.260 Valves: Location.\nA valve must be installed at each of the following locations:\n(a) . . . .\n\n\n\n3\n(e) On each side of a water crossing that is more than 100 feet (30\nmeters) wide from high-water mark to high-water mark unless the\nAdministrator finds in a particular case that valves are not justified.\nThe Notice alleged that White Cliffs failed to install valves on each side of the Arkansas River\ncrossing, which is more than 100 feet wide from high-water mark to high-water mark.\nSpecifically, the Notice alleged that Respondent’s pipeline was placed into service on June 1,\n2009, and operated for several months before Respondent measured the river crossing to be 120\nfeet and installed valves on each side of the crossing.\nIn its written submissions and at the hearing, White Cliffs explained that the river is narrow at\nthis point and dry a significant portion of the year. Respondent stated that the contractor who\ndesigned the pipeline may have missed identifying this crossing as requiring valves because the\nhigh water mark to high water mark “may not have been readily apparent when originally\nsurveyed.”2\nRespondent further explained that it discovered the issue when it was conducting an emergency\nresponse exercise in November 2009, several months after the pipeline was placed in service.\nDuring the exercise, personnel noted that the Arkansas River crossing might need valves on\neither side. “It was not readily apparent what the width of the river was ‘high water mark to high\nwater mark,’” but the company made a conservative measurement of 120 feet, and decided to\nretroactively install valves on either side of the river on November 18, 2009.3 Respondent\nproduced pictures of the crossing at the hearing.4\nBased on the pictures of the crossing and Respondent’s description of the narrow and normally\ndry conditions, it is reasonable to conclude that the applicability of § 195.260 may not have been\napparent at certain times during the design and construction of the pipeline. Respondent is\nindeed credited for installing valves once it determined water levels had reached a point at which\nthe crossing exceeded 100 feet.\nThe regulation, however, does not make exceptions for crossings that exceed 100 feet only\nduring certain months of the year. According to the evidence in the record, seasonal fluctuations\nin water level at this location are typical. The crossing should have been measured when water\nwas present in the river and the width from high water mark to high water mark was at or near its\nexpected maximum levels to determine if valves would be required under the regulation.\nAs measured by Respondent in November 2009, the water crossing was 120 feet wide and valves\nhad not been installed. Accordingly, after considering all of the evidence, I find that Respondent\nviolated 49 C.F.R. § 195.260(e) by failing to install valves on each side of the water crossing\nprior to placing the pipeline in service.\n2 Respondent hearing presentation at 15 (Mar. 28, 2012).\n3 Closing at 5 (citing Violation Report, Exhibit F).\n4 Respondent hearing presentation at 19-20.\n\n\n\n4\nThese findings of violation will be considered prior offenses in any subsequent enforcement\naction taken against Respondent.\nASSESSMENT OF PENALTY\nUnder 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed\n$100,000 per violation for each day of the violation, up to a maximum of $1,000,000 for any\nrelated series of violations.5 The Notice proposed a total civil penalty of $27,600 for the\nviolations cited above.\nIn determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I\nmust consider the following criteria: the nature, circumstances, and gravity of the violation,\nincluding adverse impact on the environment; the degree of Respondent’s culpability; the history\nof Respondent’s prior offenses; any effect that the penalty may have on Respondent’s ability to\ncontinue doing business; and the good faith of Respondent in attempting to comply with the\npipeline safety regulations. In addition, I may consider the economic benefit gained from the\nviolation without any reduction because of subsequent damages, and such other matters as justice\nmay require.\nItem 1: The Notice proposed a civil penalty of $11,200 for Respondent’s violation of 49 C.F.R.\n§ 195.214(b), for failing to retain a record of the qualifying test for welding procedure BW-2.\nWith regard to the nature, circumstances, and gravity of the violation, the failure to retain\nrecords to demonstrate that a welding procedure is safe to use poses a risk to safety. In this case,\nthere is evidence that Respondent performed the qualification test to ensure the procedure was\nsafe, but simply did not retain the record. Respondent completed a second qualification test after\nit realized the record could not be located, which demonstrated procedure BW-2 was safe. Also,\nRespondent explained that procedure BW-2 was identical to a procedure the company had used\nin the past, which Respondent did have the qualification records for. Accordingly, I find the\nviolation minimally affected safety. A civil penalty of $11,200 appropriately reflects the nature,\ncircumstances, and gravity of this violation.\nWith regard to culpability, Respondent objected to the “harsh and unsupported” designation by\nOPS that the company exhibited “a severe level of culpability” for the violation.\n6 Respondent\ncontested the notion that it had failed to take any action or minimally attempted to comply. The\ncompany claimed that it was cognizant of the regulatory requirement and took some steps to\naddress the issue, but simply misplaced the record. Respondent also asserted there were\nextenuating circumstances. Specifically, SemGroup Corporation, the parent of White Cliffs, had\nunexpectedly filed for bankruptcy and Respondent’s integrity engineer left the company shortly\nthereafter. It was during this transition that Respondent believes the record was misplaced.\n5 After issuance of the Notice in this case, the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011,\nPub. L. No. 112-90, § 2(a), 125 Stat. 1905, increased the civil penalty liability for a pipeline safety violation to\n$200,000 per violation for each day up to a maximum of $2,000,000 for a related series of violations.\n6 Closing at 2.\n\n\n\n5\nRespondent’s characterization of culpability as “harsh” and “severe” is not representative of the\nway PHMSA considers this assessment factor. PHMSA does not consider “severe culpability”\nor “high level culpability,” nor does it consider culpability to be an aggravating factor. When\nevaluating an operator’s culpability, PHMSA considers the extent to which the operator deserves\nthe blame for the violation that occurred.7 A pipeline operator is expected to be cognizant of the\nregulatory requirements applicable to its operations and is held responsible for complying with\nthose requirements. Thus, an operator will generally be considered culpable for any failure to\ncomply with the requirements absent some justification for the failure, such as an unforeseeable\nevent outside of its control. Finding an operator culpable does not increase the level of the\npenalty, but if there is a lesser degree of blameworthiness, such as where there is some\njustification for a failure to comply, PHMSA may find it appropriate to reduce the civil penalty.\nIn this case, Respondent is culpable for its failure to retain the qualification test record and there\nwas no justification for not retaining the record. The filing for bankruptcy by Respondent’s\nparent company should not have interfered with the operator’s routine maintenance of safety\nrecords. Employee turnover is also not an unforeseeable event. Respondent’s subsequent efforts\nto locate the missing record and to requalify the procedure to come into compliance were\nprudent, but for the limited purpose of this assessment factor, such efforts do not lessen\nculpability for the violation that had already occurred. Likewise, evidence that Respondent\nqualified the procedure in the first place is not material to the question of whether Respondent is\nto blame for not retaining the test record. Finally, mere cognizance of the regulatory requirement\ndoes not itself justify a penalty reduction.\nRespondent also suggested that the penalty should be reduced because the company is a “small\nor new operator.” I find the record does not support reducing the penalty for this reason. Even a\nsmall or new operator is expected to comply with straightforward record keeping requirements,\nsuch as § 195.214(b). Moreover, Respondent operates over 500 miles of interstate pipeline and\nhas been operating for several years.\nLastly with regard to culpability, Respondent objected to a reference in the Violation Report that\nthe operator experienced issues with the quality of x-ray film in 2008. Respondent argued it was\ninappropriate to rely on such information. After reviewing the record, I find the reference to the\n2008 issue does not impact the finding of culpability. In addition, the issue was not cited as a\nprior offense.\n8 Accordingly, the reference did not influence the civil penalty.\nWith regard to good faith in attempting to comply, Respondent argued that it was unfair for OPS\nto suggest the company had acted in “bad faith” solely based on a single missing record,\nparticularly since the company had qualified the welding procedure.9 Respondent argued it had\nacted in good faith by following the required welding procedures, by believing the appropriate\n7 Belle Fourche Pipeline Co., CPF No. 5-2009-5042, at 19, 2011 WL 7006607 (Nov. 21, 2011). Final orders are\nalso available at http://primis.phmsa.dot.gov/comm/reports/enforce/Enforcement.html; click Enforcement Actions.\n8 Violation Report at 13.\n9 Closing at 3-4.\n\n\n\n6\nqualification records were retained, by taking action to locate the missing record, and by\nimmediately requalifying the welding procedure once it determined the record was missing.\nThere is no allegation in the record that White Cliffs acted in “bad faith.” For purposes of\nguiding the determination of an appropriate penalty, OPS checked a box in the Violation Report\nthat amounts to an allegation that there did not exist sufficient conduct on the part of the operator\nin attempting to comply to warrant a penalty reduction. When PHMSA finds there is not\nsufficient reason to reduce a penalty under the good faith consideration, it does not mean the\nagency has determined that the operator acted in bad faith or that the operator did not otherwise\nexhibit good faith in attempting to comply with the pipeline safety regulations in general.\n10\nWhen considering good faith in attempting to comply, PHMSA looks at the attempt by the\noperator to comply with the cited regulation prior to the occurrence of the violation.11 If an\noperator made a clear, demonstrable effort to comply with the cited regulation when the violation\noccurred, PHMSA may find it appropriate to reduce the civil penalty. In this case, there is an\nabsence of evidence demonstrating what actions Respondent took to maintain the qualification\ntest records during the four-year period following performance of the qualification test. The\noperator believed a particular employee had it, but such a belief does not indicate an attempt to\ncomply that is sufficient to warrant reducing the penalty.\n12\nHaving reviewed the record and considered the assessment criteria, I find the proposed civil\npenalty is appropriate. Accordingly, Respondent is assessed a civil penalty of $11,200 for\nviolation of 49 C.F.R. § 195.214(b).\nItem 2: The Notice proposed a civil penalty of $16,400 for Respondent’s violation of 49 C.F.R.\n§ 195.260(e), for failing to install a pipeline valve on each side of a river crossing.\nWith regard to the nature, circumstances, and gravity of the violation, the failure to install valves\nnear a water crossing can potentially compromise public safety and the environment in the event\nof a release. Fortunately, Respondent remediated the issue shortly after placing the line in\nservice. The area was not a high consequence area, as defined in § 195.450.\nOPS noted in the Violation Report that the agency discovered this violation during the 2011\ninspection; however, the facts demonstrate that Respondent discovered the noncompliance on its\nown in November 2009 and remediated the issue the same month. This was well before the OPS\ninspection in 2011. Accordingly, the penalty should be adjusted to reflect that Respondent\ndiscovered and remediated the violation on its own prior to an inspection by OPS.\n10 See, e.g., Enron Transportation Services Co., CPF No. 4-2002-1003, at 2, 2003 WL 25429892 (Dec. 30, 2003)\n(finding that it did not appear the operator acted in “bad faith” even though respondent’s personnel knew the\ntelephone number on line markers had not been working for over three years).\n11 Kinder Morgan Liquids Terminals LLC, CPF No. 1-2011-5001, at 11, 2012 WL 6184429 (Oct. 17, 2012).\n12 Similarly to culpability, this finding does not increase the penalty.\n\n\n\n7\nWith regard to culpability, Respondent noted that the river is narrow at the location of the\ncrossing and dry a significant portion of time, which may have been why the contractor did not\nidentify the crossing as requiring valves. Even when measured by Respondent several months\nafter the pipeline was placed in service, “it was not readily apparent what the width of the river\nwas ‘high water mark to high water mark,’” but the company made a conservative measurement\nof 120 feet and installed valves.\n13 Respondent argued that it was inaccurate for OPS to allege\nthat the company had failed to attempt to adhere to the regulation, citing the company’s\ninstallation of 37 main line block valves during construction, including 8 valves at river\ncrossings.\nThe evidence in the record supports finding that the crossing was narrow and dry a significant\nportion of the time. Since the condition of the river most likely contributed to Respondent’s\nfailure to identify the crossing as requiring valves under the regulation, I find a penalty reduction\nis appropriate under this assessment factor.\nWith regard to good faith in attempting to comply, Respondent again objected to any allegation\nthat it did not have good faith intentions to comply with the regulation, citing the number of\nvalves that were installed during the construction project and the condition of the river that led to\na conclusion, at the time, that the regulation did not apply.\nRespondent has demonstrated that it made a good faith attempt to comply with the cited\nregulation by installing valves along the pipeline, including at a number of river crossings. The\ncondition of the river most likely contributed to Respondent’s failure to identify the crossing as\nrequiring valves. Accordingly, I find a reduction to the penalty is warranted.\nFinally, Respondent argued that to the extent PHMSA relied on any internal guidelines in\narriving at the civil penalty amount, such agency action “would not be in compliance with\nfederal rule-making requirements and [would be] arbitrary and capricious” under the\nAdministrative Procedure Act (APA).14\nThe rulemaking requirements referred to by Respondent in the APA require, among other things,\nthat federal agencies publish a notice in the Federal Register giving interested persons an\nopportunity to submit comments on a proposed rule before it is adopted by the agency.\n15 The\nrequirement to publish in the Federal Register does not apply to “interpretative rules, general\nstatements of policy, or rules of agency organization, procedure, or practice.”16 Since internal\nguidelines would fall into the latter category of materials, publication in the Federal Register is\nnot required.\n13 Closing at 5 (citing Violation Report, Exhibit F).\n14 Closing at 6.\n15 5 U.S.C. § 553.\n16 § 553(b)(A).\n\n\n\n8\nAccordingly, having reviewed the record and considered the assessment criteria, I withdraw the\nproposed penalty for violation of 49 C.F.R. § 195.260(e).\nRespondent does not have a history of prior offenses. The company did not assert that the\npenalty would have an effect on its ability to continue doing business.\nIn summary, having reviewed the record and considered the assessment criteria for each of the\nItems cited above, I assess Respondent a total civil penalty of $11,200.\nPayment of the civil penalty must be made within 20 days of service. Federal regulations\n(49 C.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal\nReserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed\ninstructions are contained in the enclosure. Questions concerning wire transfers should be\ndirected to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike\nMonroney Aeronautical Center, P.O. Box 269039, Oklahoma City, Oklahoma 73125. The\nFinancial Operations Division telephone number is (405) 954-8893.\nFailure to pay the $11,200 civil penalty will result in accrual of interest at the current annual rate\nin accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to\nthose same authorities, a late penalty charge of six percent (6%) per annum will be charged if\npayment is not made within 110 days of service. Furthermore, failure to pay the civil penalty\nmay result in referral of the matter to the Attorney General for appropriate action in a district\ncourt of the United States.\nUnder 49 C.F.R. § 190.215, Respondent may submit a petition for reconsideration of this Final\nOrder to the Associate Administrator for Pipeline Safety, PHMSA, 1200 New Jersey Avenue SE,\nEast Building, 2nd Floor, Washington, DC 20590, no later than 20 days after receipt of the Final\nOrder by the Respondent. Any petition submitted must contain a brief statement of the issue(s)\nand meet all other requirements of 49 C.F.R. § 190.215. The filing of a petition automatically\nstays the payment of any civil penalty assessed. If Respondent submits payment of the civil\npenalty, the Final Order becomes the final administrative decision and the right to petition for\nreconsideration is waived.\nThe terms and conditions of this Final Order are effective upon service in accordance with\n49 C.F.R. § 190.5.\n___________________________________ __________________________\nJeffrey D. Wiese Date Issued\nAssociate Administrator\nfor Pipeline Safety","truncated":false,"body_characters":25247}