SINCLAIR TRANSPORTATION COMPANY — Notice of Probable Violation

party submissionOfficial PDF320155006_Operator Response to Notice_07012015.pdf#

320155006_Final Order_10152015_text.pdf, page 1Official PDFOctober 15, 2015 Mr. Mark A. Petersen President Sinclair Transportation Company 550 E. South Temple P.O. Box 30825 Salt Lake City, UT 84130 Re: CPF No. 3-2015-5006 Dear Mr. Petersen: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation, assesses a civil penalty of $34,200, and specifies actions that need to be taken by Sinclair Transportation Company to comply with the pipeline safety regulations. This is to acknowledge receipt of payment of the full penalty amount, by wire transfer dated June 30, 2015. When the terms of the compliance order have been 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: Allan C. Beshore, Director, Central Region, OPS CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

320155006_Final Order_10152015_text.pdf, page 2U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ____________________________________ ) In the Matter of ) ) Sinclair Transportation Company, ) CPF No. 3-2015-5006 ) Respondent. ) ____________________________________) FINAL ORDER On November 25-27 and December 2-6, 2013, 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 Sinclair Transportation Company (Sinclair or Respondent) in Carrollton, Missouri. Sinclair operates an 8-inch pipeline transporting refined products approximately 320 miles from Olathe, Kansas, to Montrose, Iowa.1 As a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent, by letter dated June 3, 2015, a Notice of Probable Violation, Proposed Civil Penalty, 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 Sinclair had violated 49 C.F.R. § 195.581 and proposed assessing a civil penalty of $34,200 for the alleged violation. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violation. The warning item required no further action, but warned the operator to correct the probable violation. FINDING OF VIOLATION In its Response, Sinclair did not contest the allegation in the Notice that it violated 49 C.F.R. Part 195, as follows: 1 Pipeline Safety Violation Report (Violation Report), (July 16, 2014) (on file with PHMSA), at 1.#

320155006_Final Order_10152015_text.pdf, page 3CPF No. 3-2015-5006 Page 2 Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.581, which states: § 195.581 Which pipelines must I protect against atmospheric corrosion and what coating material may I use? (a) You must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. (b) Coating material must be suitable for the prevention of atmospheric corrosion. (c) Except portions of pipelines in offshore splash zones or soil-to-air interfaces, you need not protect against atmospheric corrosion any pipeline for which you demonstrate by test, investigation, or experience appropriate to the environment of the pipeline that corrosion will— (1) Only be a light surface oxide; or (2) Not affect the safe operation of the pipeline before the next scheduled inspection. The Notice alleged that Respondent violated 49 C.F.R. § 195.581 by failing to clean and coat each portion of pipeline that is exposed to the atmosphere. Specifically, the Notice alleged that Sinclair did not clean and coat portions of its Missouri pipeline to protect it from atmospheric corrosion. Inspection records showed that the coating on portions of the pipeline was in poor condition, or that the pipeline was completely bare, with many spans of pipeline exhibiting corrosion. During the on-site inspection, PHMSA’s inspector observed corrosion pits on multiple exposed pipe spans. 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. § 195.581 by failing to clean and coat each portion of pipeline that is exposed to the atmosphere. This finding of violation will be considered a prior offense 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 $200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any related series of violations.2 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; 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 2 The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, Pub. L. No. 112-90, § 2(a)(1), 125 Stat. 1904, January 3, 2012, increased the civil penalty liability for violating a pipeline safety standard to $200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any related series of violations.#

320155006_Final Order_10152015_text.pdf, page 4CPF No. 3-2015-5006 Page 3 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 $34,200 for the violations cited above. Item 1: The Notice proposed a civil penalty of $34,200 for Respondent’s violation of 49 C.F.R. § 195.581, for failing to clean and coat each portion of pipeline that is exposed to the atmosphere. Sinclair neither contested the allegation nor presented any evidence or argument justifying a reduction in the proposed penalty. Atmospheric corrosion can cause serious damage to an exposed pipeline system, and can lead to a pipeline failure. Respondent is fully culpable for the failure to protect its pipeline from this risk. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $34,200 for violation of 49 C.F.R. § 195.581. Respondent paid the civil penalty by wire transfer on June 30, 2015. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 in the Notice for violation of 49 C.F.R. § 195.581. 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. 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 actions to ensure compliance with the pipeline safety regulations applicable to its operations: 1. 2. With respect to the violation of § 195.581 (Item 1): a. Within 90 days of the issuance of this order, Respondent must: i. Assess the integrity of the Missouri Pipeline at all locations where aboveground pipe is known to exhibit corrosion; ii. Make necessary repairs to the pipe; and iii. Clean and recoat the pipe at each repaired location. b. Within 30 days of the issuance of this order, Respondent must submit to the Director a plan and schedule to complete inspection and repair of aboveground pipe locations exhibiting bare soil to air transition areas. Respondent must perform the planned repairs within 18 months. Respondent must provide the Director with quarterly progress reports, and a final report upon completion of repairs. PHMSA requests that Sinclair maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to the Director. 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#

320155006_Final Order_10152015_text.pdf, page 5CPF No. 3-2015-5006 Page 4 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 $200,000 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 but did not propose a civil penalty or compliance order for this item. Therefore, this is considered to be a warning item. The warning was for: 49 C.F.R. § 195.452(k) (Item 2) ─ Respondent’s alleged failure to include methods to measure the integrity management program’s effectiveness in assessing and evaluating the integrity of each pipeline segment and in protecting the high consequence areas, specifically the failure to evaluate the effectiveness of hydrotest assessments. 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. § 190.243, 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. § 190.243. Unless the Associate Administrator, upon request, grants a stay, the 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#

320155006_Closure Letter_10202017_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED October 20, 2017 Mr. Mark A. Petersen President Sinclair Transportation Company 550 E. South Temple P.O. BOX 30825 Salt Lake City, UT 84130 CPF 3-2015-5006 Dear Mr. Petersen: On October 15, 2015, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Sinclair Transportation Company a Final Order in the above referenced case. This Order included a Compliance Order and Civil Penalty assessment. On September 6, 2017 PHMSA received your final report as required by Item 1.b. of the Compliance Order, summarizing the completion of repairs to your pipeline. 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#

320155006_NOPV PCP PCO_06032015_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED June 3, 2015 Mr. Mark Petersen Vice President Transportation Sinclair Transportation Company 550 East South Temple P.O. Box 30825 Salt Lake City, Utah 84102 CPF 3-2015-5006 Dear Mr. Petersen: On November 25-27 and December 2-6, 2013, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), pursuant to Chapter 601 of 49 United States Code inspected your records and facilities in Carrollton, Missouri. 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. §195.581 Which pipelines must I protect against atmospheric corrosion and what coating material may I use? (a) You must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. (b) Coating material must be suitable for the prevention of atmospheric corrosion.#

320155006_NOPV PCP PCO_06032015_text.pdf, page 22. (c) Except portions of pipelines in offshore splash zones or soil-to-air interfaces, you need not protect against atmospheric corrosion any pipeline for which you demonstrate by test, investigation, or experience appropriate to the environment of the pipeline that corrosion will- (1) Only be a light surface oxide; or (2) Not affect the safe operation of the pipeline before the next scheduled inspection. Sinclair did not protect its pipe spans and exposures on its Missouri Pipeline from atmospheric corrosion. Atmospheric inspection records showed that the coating on many spans was in very poor or completely bare condition with many spans exhibiting general corrosion. PHMSA observed during on-site inspection multiple exposed pipe locations exhibiting corrosion pits. Sinclair span numbers: 1, 2, 45, 63, 71, 88, 117, and 130.1 were observed on site and found to have significant pits measuring from between 0.070 inches in depth up to 0.150 inches in depth. Transition areas were also not protected by a suitable coating. §195.452 Pipeline integrity management in high consequence areas. (k) What methods to measure program effectiveness must be used? An operator's program must include methods to measure whether the program is effective in assessing and evaluating the integrity of each pipeline segment and in protecting the high consequence areas. See Appendix C of this part for guidance on methods that can be used to evaluate a program's effectiveness. Sinclair did not have definitive methods to measure the effectiveness of integrity assessments by hydrotest. Sinclair’s process and procedures for evaluation of hydrotest assessment results and subsequent repairs did not measure whether the integrity management program is effective in reducing the risk of a release due to corrosion. Proposed Civil Penalty Under 49 United States Code, §60122, you are subject to a civil penalty not to exceed $200,000 per violation per day the violation persists up to a maximum of $2,000,000 for a related series of violations. For violations occurring prior to January 4, 2012, the maximum penalty may not exceed $100,000 per violation per day with a maximum penalty not to exceed $1,000,000 for a 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 $34,200 as follows: Item Number PENALTY 1 $34,200 2#

320155006_NOPV PCP PCO_06032015_text.pdf, page 3Warning 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. Failure to do so may result in additional enforcement action. Proposed Compliance Order With respect to item 1 pursuant to 49 United States Code §60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to Sinclair Transportation Company. 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. All material you submit in response to this enforcement action may be 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 3-2015-5006 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Allan C. Beshore Director, Central Region, OPS Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 3#

320155006_NOPV PCP PCO_06032015_text.pdf, page 4PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to Sinclair Transportation Company a Compliance Order incorporating the following remedial requirements to ensure the compliance of Sinclair Transportation Company with the pipeline safety regulations: 1. 2. In regard to Item Number 1 of the Notice pertaining to deficiencies in the protection of exposed pipe from corrosion, Sinclair Transportation Company must accomplish the following: a. Within 90 days of the issuance of the Final Order: assess the integrity of the Missouri Pipeline at all locations where aboveground pipe is known to exhibit corrosion, make necessary repairs, clean and recoat the pipe at each location. b. Within 30 days of the issuance of the Final Order: furnish to the Director, Central Region, a plan and schedule to complete inspection and repair of aboveground pipe locations exhibiting bare soil to air transition areas. i. ii. Perform the planned repairs within 12 months. Furnish to the Director additional quarterly progress reports, and a final report upon completion of repairs. It is requested (not mandated) that Sinclair Transportation Company maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Allan C. Beshore, 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. 4#