{"operation":"document","citation":"CPF 320190005","title":"LAKES GAS COMPANY — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2019-11-25","effective_on":null,"summary":"CLOSED notice of probable violation citing 192.465(a), 192.603(b), 192.619(a), 192.739(a), 192.805(b).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-320190005.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-320190005.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-320190005","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/320190005","body":"Notice of Probable Violation involving LAKES GAS COMPANY. PHMSA's enforcement data identifies the cited regulations as 192.465(a),  192.603(b),  192.619(a),  192.739(a),  192.805(b). The case was opened on 2019-11-25 and is reported as closed as of 2021-08-19. Proposed civil penalty: $62,800. Assessed civil penalty: $62,800. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n320190005_Closure Letter_08192021_(18-160553S).pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Closure%20Letter_08192021_(18-160553S).pdf\n\n320190005_Closure Letter_08192021_(18-160553S)_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Closure%20Letter_08192021_(18-160553S)_text.pdf\n\n320190005_Corrected Final Order Cover Letter_12172020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Corrected%20Final%20Order%20Cover%20Letter_12172020.pdf\n\n320190005_Corrected Final Order Cover Letter_12172020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Corrected%20Final%20Order%20Cover%20Letter_12172020_text.pdf\n\n320190005_Final Order_12042020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Final%20Order_12042020.pdf\n\n320190005_Final Order_12042020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Final%20Order_12042020_text.pdf\n\n320190005_NOPV PCP PCO_11252019.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_NOPV%20PCP%20PCO_11252019.pdf\n\n320190005_NOPV PCP PCO_11252019_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_NOPV%20PCP%20PCO_11252019_text.pdf\n\n320190005_Corrected Final Order Cover Letter_12172020_text.pdf\n\nVIA ELECTRONIC MAILTO: thampton@lakesgasco.com\nMr. Trent Hampton\nPresident and Chief Executive Office\nLakes Gas Company\n919 1st Street SW\nCrosby, Minnesota 56441\nRe: CPF No. 3-2019-0005\nDear Mr. Trent Hampton:\nOn December 4, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA)\nissued a final order in the above-referenced case (Final Order). The cover letter for the Final\nOrder incorrectly stated that the assessed civil penalty for the findings of violation was $63,800.\nAs noted in the Final Order, the assessed civil penalty for the findings of violations was $62,800.\nI apologize for this typographical error.\nSincerely,\nJames Pates\nAssistant Chief Counsel for Pipeline Safety\nOffice of Chief Counsel\nPipeline & Hazardous Materials Safety\nAdministration\ncc: Mr. Gregory Ochs, Director, Central Region, Office of Pipeline Safety, PHMSA\nMr. Steven Sargeant, Executive Vice President of Operations, Lakes Gas Company,\nssargeant@lakesgasco.com\nCONFIRMATION OF RECEIPT REQUESTED\n\n320190005_Closure Letter_08192021_(18-160553S)_text.pdf\n\nAugust 19, 2021\nMr. Trent Hampton\nPresident and Chief Executive Officer\nLakes Gas Company\n919 1st Street SW\nCrosby, MN 56441\nRe: CPF No. 3-2019-0005\nDear Mr. Hampton:\nFrom September 4, 2018, through September 6, 2018, a representative of the Pipeline and\nHazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS),\npursuant to Chapter 601 of 49 United States Code (U.S.C.) conducted an on-site inspection of the\nfacilities and records of Lakes Gas Company (Lakes Gas) liquid propane systems in Door\nCounty, Wisconsin. As a result of the inspection, Lakes Gas was issued a Notice of Notice of\nProbable Violation, Proposed Civil Penalty and Proposed Compliance Order on November 25,\n2019.\nLakes Gas submitted responses in December 23, 2019 and March 27, 2020. PHMSA issued a\nfinal order on December 4, 2020 which included a Civil Penalty and Compliance Order. Lakes\nGas made payment of the Civil Penalty on March 4, 2021. My staff reviewed the requirements\nof the Final Order and determined that all compliance elemtents have been met.\nThis letter is to inform you no further action is necessary and this case is now closed. Thank you\nfor your cooperation.\nSincerely,\nGregory A. Ochs\nDirector, Central Region, OPS\nPipeline and Hazardous Materials Safety Administration\nCc: David Anderson, District Manager, danderson@lakesgasco.com\nSteven Sargenat, EVP of Operations, ssargeant@lakesgasco.com\n\n320190005_Final Order_12042020_text.pdf\n\nDecember 4, 2020\nVIA ELECTRONIC MAILTO: thampton@lakesgasco.com\nMr. Trent Hampton\nPresident and Chief Executive Office\nLakes Gas Company\n919 1st Street SW\nCrosby, Minnesota 56441\nRe: CPF No. 3-2019-0005\nDear Mr. Trent Hampton:\nEnclosed please find the Final Order issued in the above-referenced case. It makes findings of\nviolation, assesses a civil penalty of $63,800, and specifies actions that need to be taken by\nLakes Gas Company to comply with the pipeline safety regulations. The penalty payment terms\nare set forth in the Final Order. When the civil penalty has been paid and the terms of the\ncompliance order completed, as determined by the Director, Central Region, this enforcement\naction will be closed. Service of the Final Order by electronic mail is effective upon the date of\ntransmission as provided under 49 C.F.R. § 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nAlan K. Mayberry\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Mr. Gregory Ochs, Director, Central Region, Office of Pipeline Safety, PHMSA\nMr. Steven Sargeant, Executive Vice President of Operations, Lakes Gas Company,\nssargeant@lakesgasco.com\nCONFIRMATION OF 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 )\nLakes Gas Company, ) CPF No. 3-2019-0005\n)\n)\n)\nRespondent. )\n____________________________________)\nFINAL ORDER\nFrom September 4, 2018, through September 6, 2018, pursuant to 49 U.S.C. § 60117, a\nrepresentative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office\nof Pipeline Safety (OPS), conducted an on-site pipeline safety inspection of the facilities and\nrecords of Lakes Gas Company’s (Lakes Gas or Respondent) liquid propane system in Door\nCounty, Wisconsin. Lakes Gas supplies propane to residential, commercial and wholesale\ncustomers in Minnesota, Wisconsin, Michigan, and South Dakota.1 Lakes Gas operates seven\nsmall liquid propane gas distribution systems in Door County, Wisconsin.2 The largest system\nhas 73 customers, while the remaining six have 10 or less customers.3\nAs a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent,\nby letter dated November 25, 2019, a Notice of Probable Violation, Proposed Civil Penalty, and\nProposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the Notice\nproposed finding that Lakes Gas had committed five violations of 49 C.F.R. Part 192 and\nproposed assessing a civil penalty of $63,800 for the alleged violations. The Notice also\nproposed ordering Respondent to take certain measures to correct two of the alleged violations.\nLakes Gas responded to the Notice by letter dated December 23, 2019 (Response). The\ncompany did not contest the allegations of violation but provided an explanation of its actions,\nrequested a reduction of the proposed civil penalty, and proposed alternative compliance terms.\nOn April 10, 2020, Lakes Gas submitted a supplemental filing in response to the Central\nRegion’s March 30, 2020 request for the company to provide financial records supporting its\nrequest for a reduced civil penalty (Supplemental Response). Respondent did not request a\nhearing and therefore has waived its right to one.\n1 Lakes Gas Company website, About Us, available at https://www.lakesgas.com/about-us html (last accessed\nSeptember 21, 2020).\n2 Pipeline Safety Violation Report (Violation Report), (November 25, 2019), (on file with PHMSA), at 1.\n3 Id.\n\n\n\nCPF No. 3-2019-0005\nPage 2\nFINDINGS OF VIOLATION\nIn its Response, Lakes Gas did not contest the allegations in the Notice that it violated 49 C.F.R.\nPart 192, as follows:\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.465(a), which states:\n§ 192.465 External corrosion control: Monitoring.\n(a) Each pipeline that is under cathodic protection must be tested at\nleast one each calendar year, but with intervals not exceeding 15 months, to\ndetermine whether the cathodic protection meets the requirements of\n§192.463. However, if tests at those intervals are impractical for separately\nprotected short sections of mains or transmission lines, not in excess of 100\nfeet (30 meters), or separately protected service lines, these pipelines may\nbe surveyed on a sampling basis. At least 10 percent of these protected\nstructures, distributed over the entire system must be surveyed each\ncalendar year, with a different 10 percent checked each subsequent year, so\nthat the entire system is tested in each 10-year period.\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.465(a) by failing to test each\npipeline that is under cathodic protection at least once each calendar year, but with intervals not\nexceeding 15 months, to determine whether the cathodic protection meets the requirements of\n§ 192.463. Specifically, the Notice alleged that Lakes Gas’ records indicated that it did not test\nits cathodic protection system at the Birch Grove Condos at the requisite intervals in 2015 and\n2016.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 192.465(a) by failing to test each\npipeline that is under cathodic protection at least once each calendar year, but with intervals not\nexceeding 15 months, to determine whether the cathodic protection meets the requirements of\n§ 192.463.\nItem 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.603(b), which states:\n§ 192.603 General provisions.\n(a) ….\n(b) Each operator shall keep records necessary to administer the\nprocedures established under §192.605.\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep records\nnecessary to administer the procedures established under § 192.605, which requires all gas\npipeline operators to prepare and follow a manual of written procedures for conducting\noperations and maintenance activities and emergency response. Subparagraph (b)(1) of\n§ 192.605 requires that an operator’s written manual include applicable procedures for\n“[o]perating, maintaining, and repairing the pipeline in accordance with each of the requirements\n\n\n\nCPF No. 3-2019-0005\nPage 3\nof [subpart L]4 and subpart M of [Part 192].” Specifically, the Notice alleged that Lakes Gas\nfailed to keep records demonstrating annual valve maintenance pursuant to § 192.747(a), which\nstates that for distribution systems “[e]ach valve, the use of which may be necessary for the safe\noperation of a distribution system, must be checked and serviced at intervals not exceeding 15\nmonths, but at least once each calendar year.” According to the Notice, Lakes Gas’ staff\nindicated to the PHMSA inspector that no annual valve inspection records for the company’s\nseven distribution systems had been kept for calendar years 2015 and 2016.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep\nrecords necessary to administer the company’s procedures established under § 192.605.\nItem 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.619(a)(1), which states:\n§ 192.619 Maximum allowable operating pressure: Steel or plastic\npipelines.\n(a) No person may operate a segment of steel or plastic pipeline at a\npressure that exceeds a maximum allowable operating pressure determined\nunder paragraph (c) or (d) of this section, or the lowest of the following:\n(1) The design pressure of the weakest element in the segment,\ndetermined in accordance with subparts C and D of this part. However, for\nsteel pipe in pipelines being converted under §192.14 or uprated under\nsubpart K of this part, if any variable necessary to determine the design\npressure under the design formula (§192.105) is unknown, one of the\nfollowing pressures is to be used as a design pressure….\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.619(a)(1)5 by failing to have the\nmaximum allowable operating pressure (MAOP) of its seven systems established according to\nthe design pressure of the weakest element in the segment. Specifically, the Notice alleged that\nLakes Gas’ seven systems had a MAOP of 30 psig, but house service regulators on the segments\nhad a maximum inlet pressure limit of 10 psig. Therefore, the Notice alleged, Lakes Gas’\nMAOP for its seven systems exceeded the design pressure of the weakest element in the\nsegment.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 192.619(a)(1) by failing to have the\nMAOP of its seven systems established according to the design pressure of the weakest element\nin the segment.\nItem 4: The Notice alleged that Respondent violated 49 C.F.R. § 192.739(a), which states:\n§ 192.739 Pressure limiting and regulating stations: Inspection and\ntesting.\n4 Subpart L includes 49 C.F.R. § 192.747(a).\n5 At 84 FR 52247, Section 192.619(a) was subsequently amended by final rule effective July 1, 2020.\n\n\n\nCPF No. 3-2019-0005\nPage 4\n(a) Each pressure limiting station, relief device (except rupture discs),\nand pressure regulating station and its equipment must be subjected at\nintervals not exceeding 15 months, but at least once each calendar year, to\ninspections and tests to determine that it is—\n(1) In good mechanical condition;\n(2) Adequate from the standpoint of capacity and reliability of operation\nfor the service in which it is employed;\n(3) Except as provided in paragraph (b) of this section, set to control or\nrelieve at the correct pressure consistent with the pressure limits of\n§ 192.201(a); and\n(4) Properly installed and protected from dirt, liquids, or other\nconditions that might prevent proper operation.\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.739(a) by failing to test and inspect\neach pressure limiting station, relief device (except rupture discs), and pressure regulating station\nand equipment at least once each calendar year, but at intervals not exceeding 15 months, to\ndetermine that they met the requirements of § 192.739(a)(1) – (a)(4). Specifically, the Notice\nalleged that Lakes Gas personnel indicated to PHMSA that the company did not perform\nregulator and overpressure-protection inspections and tests on its seven stations at least once\neach calendar year during 2015 and 2016.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 192.739(a) by failing to test and\ninspect each pressure limiting station, relief device (except rupture discs), and pressure\nregulating station and equipment at least once each calendar year, but at intervals not exceeding\n15 months, to determine that they met the requirements of § 192.739(a)(1) – (a)(4).\nItem 5: The Notice alleged that Respondent violated 49 C.F.R. § 192.805(b), which states:\n§ 192.805 Qualification program.\nEach operator shall have and follow a written qualification program.\nThe program shall include provisions to:\n(a) ….\n(b) Ensure through evaluation that individuals performing covered tasks\nare qualified; …\nThe Notice alleged that Respondent violated 49 C.F.R. § 192.805(b) by failing to follow its own\nwritten qualification program to ensure through evaluation that individuals performing covered\ntasks were qualified. Specifically, the Notice alleged that Lakes Gas’ operator qualification\nprocedures required individuals performing covered task to be qualified prior to performing the\ncovered task and to be requalified every three years, but that one particular Lakes Gas employee\nstarted performing several covered tasks in 2014 without being qualified and was still\nunqualified at the time of the PHMSA inspection in 2018.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 192.805(b) by failing to follow its\n\n\n\nCPF No. 3-2019-0005\nPage 5\nown written qualification program to ensure through evaluation that individuals performing\ncovered tasks were qualified.\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$200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any\nrelated series of violations.6 In determining the amount of a civil penalty under 49 U.S.C.\n§ 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature,\ncircumstances, and gravity of the violation, including adverse impact on the environment; the\ndegree of Respondent’s culpability; the history of Respondent’s prior offenses; any effect that\nthe penalty may have on its ability to continue doing business; and the good faith of Respondent\nin attempting to comply with the pipeline safety regulations. In addition, I may consider the\neconomic benefit gained from the violation without any reduction because of subsequent\ndamages, and such other matters as justice may require. The Notice proposed a total civil\npenalty of $62,800 for the violations cited above.\nItem 1: The Notice proposed a civil penalty of $19,300 for Respondent’s violation of 49 C.F.R.\n§ 192.465(a), for failing to test each pipeline under cathodic protection at least once each\ncalendar year, but with intervals not exceeding 15 months, to determine whether the cathodic\nprotection meets the requirements of § 192.463. In its Response, Lakes Gas did not contest the\nviolation or offer specific arguments against the proposed civil penalty. Rather, Lakes Gas\nexplained that the noncompliance was due, in part, to a personnel change. The company also\nargued, generally, that the overall proposed penalties were “very excessive,” based on the size of\nthe company’s systems and requested that they be reduced. Lakes Gas explained that its\noperations were very small and that the overall proposed civil penalty of $62,800 was “many\nyears of net revenue.”7\nIn response to a March 30, 2020 request from PHMSA for additional documentation to support\nits contention that the penalties were excessive, based on Respondent’s ability to pay, Lakes Gas\nprovided 2019/2020 account records for its seven liquid propane gas distribution systems in\nDoor County, and argued that “based on the volume size of the pipelines under review,” the size\nof [its] jurisdictional system and the actual infractions that took place,” a “better review of the\npenalty assessment” would be warranted. Lakes Gas also argued that since these were small\npropane systems, its employees “regularly make contact and see [the] tank and regulator\ninvolvement and operation.” Lastly, Lakes Gas explained that since receiving the Notice, it had\nworked with the OPS Central Region office to resolve any outstanding issues. Therefore, for all\nthose reasons, Lakes Gas argued, the overall penalty should be reduced.\n6 These amounts are adjusted annually for inflation. See 49 C.F.R. § 190.223.\n7 Response, at 2 (on file with PHMSA).\n\n\n\nCPF No. 3-2019-0005\nPage 6\nIn determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I\nmust consider any effect that a proposed penalty may have on a respondent’s ability to continue\ndoing business. However, respondents “must provide PHMSA with the means by which the\nagency can accurately determine the company’s true financial condition.”8 PHMSA has\npreviously instructed operators that asserting a claim of financial hardship requires that the\ncompany submit “accurate and reliable information on the financial condition” of the company.9\nLakes Gas’ website indicates that it operates in four states and has 43 locations. According to\nDun and Bradstreet, Lakes Gas has over 25 branches.10 The account records that Lakes Gas\nsubmitted in its Supplemental Response focused solely on its Door County branch and did not\nprovide any credible information that would enable me to determine the company’s (not just the\nbranch’s) overall ability or inability to pay the penalty. Without such supporting financial\ndocumentation, I have no basis for reducing or eliminating the civil penalty on the grounds of\nfinancial hardship.\nIn addition, while I acknowledge and appreciate Lakes Gas’ eagerness to work with PHMSA to\nresolve any outstanding issues, I do not find that this action – seeking to come into compliance\nwith the pipeline safety regulations – warrants a withdrawal or reduction of the civil penalty.\nTurning now to the other penalty considerations, regarding nature and circumstances, PHMSA\nnoted in the Violation Report that the alleged violation related to a failure to perform a required\nactivity and that the violation was discovered by PHMSA or one of its state partners. It is\nuncontested that Lakes Gas failed to test each pipeline that is under cathodic protection at least\nonce each calendar year, but with intervals not exceeding 15 months, to determine whether the\ncathodic protection meets the requirements of § 192.463, and it is uncontested that PHMSA\ndiscovered this violation instead of the operator.\nRegarding gravity, PHMSA noted in the Violation Report that pipeline safety was minimally\naffected. Therefore, the proposed penalty already accounted for the fact that the pipeline\nintegrity was never compromised. Regarding culpability, Lakes Gas did not contest the violation\nand has thus acknowledged that it failed to comply with an applicable requirement of Part 192.\nRegarding good faith, in its Response, Lakes Gas explained that certain lapses took place due to\na change in personnel. It is the pipeline operator’s responsibility to ensure that all personnel\nknow how to comply with the pipeline safety regulations. As such, a reduction of the proposed\ncivil penalty under the “good faith” standard is not warranted.\nAccordingly, having reviewed the record and considered the assessment criteria, I assess\nRespondent a civil penalty of $19,300 for violation of 49 C.F.R. § 192.465(a).\n8 E.g., In the Matter of Tampa Bay Pipeline Corp., Decision on Reconsideration, CPF No. 2-2005-6012, 2008 WL\n902910, at 2 (Mar. 31, 2008). See also, In the Matter of Tampa Pipeline Corporation, CPF 2-2008-6002, 2010 WL\n2228556, at 19 (April 26, 2010).\n9 Id.\n10 See, Dun and Bradstreet Comprehensive Report for Lakes Gas Company, accessed November 20, 2020, (on file\nwith PHMSA) at 5. Dun and Bradstreet is a company that provides commercial data, analytics, and insights for\nbusinesses.\n\n\n\nCPF No. 3-2019-0005\nPage 7\nItem 2: The Notice proposed a civil penalty of $20,000 for Respondent’s violation of 49 C.F.R.\n§ 192.603(b), for failing to keep records necessary to administer the procedures established\nunder § 192.605. As with Item 1, Lakes Gas did not provide a specific reason why the proposed\ncivil penalty for Item 2 should be reduced or eliminated. Rather, Lakes Gas argued that the\noverall penalty was excessive and should be reduced. For the reasons stated above, I find no\nreason to reduce or eliminate the civil penalty based on financial hardship.\nRegarding nature and circumstances, PHMSA noted in the Violation Report that the alleged\nviolation was a records violation and that the violation was discovered by PHMSA or one of its\nstate partners. It is uncontested that Lakes Gas failed to keep records necessary to administer the\nprocedures as established under § 192.605, and it is uncontested that PHMSA discovered this\nviolation and not the operator.\nRegarding gravity, PHMSA noted in the Violation Report that the pipeline safety was minimally\naffected. Therefore, the proposed penalty already accounted for the fact that the pipeline\nintegrity was never compromised. Regarding culpability, Lakes Gas did not contest the violation\nand has thus acknowledged that it failed to comply with an applicable requirement of Part 192.\nRegarding good faith, as noted above, Lakes Gas explained that certain lapses took place due to a\nchange in personnel. Therefore, a reduction of the proposed civil penalty under the “good faith”\nstandard is not warranted.\nAccordingly, having reviewed the record and considered the assessment criteria, I assess\nRespondent a civil penalty of $20,000 for violation of 49 C.F.R. § 192.603(b).\nItem 4: The Notice proposed a civil penalty of $23,500 for Respondent’s violation of 49 C.F.R.\n§ 192.739(a), for failing to test and inspect each pressure limiting station, relief device (except\nrupture discs), and pressure-regulating station and equipment at least once each calendar year,\nbut at intervals not exceeding 15 months, to determine that they met the requirements of\n§ 192.739(a)(1) – (a)(4). As stated previously, Lakes Gas did not provide a specific reason why\nthe proposed civil penalty for Item 4 should be reduced or eliminated, and I found no reason to\nreduce or eliminate the civil penalty based on financial hardship.\nRegarding nature and circumstances, PHMSA noted in the Violation Report that the alleged\nviolation was an activities violation and that the violation was discovered by PHMSA or one of\nits state partners. It is uncontested that Lakes Gas failed to test and inspect each pressure-\nlimiting station, relief devices, and pressure-regulating station and equipment, and it is\nuncontested that PHMSA discovered this violation rather than the operator. Regarding gravity,\nPHMSA noted in the Violation Report that the pipeline safety was minimally affected.\nTherefore, the proposed penalty already accounted for the fact that the pipeline integrity was\nnever compromised. Regarding culpability, Lakes Gas did not contest the violation and has thus\nacknowledged that it failed to comply with an applicable requirement of Part 192. Regarding\ngood faith, as noted above, Lakes Gas explained that due to a change in personnel, that certain\nlapses took place. Therefore, a reduction of the proposed civil penalty under the “good faith”\nstandard is not warranted.\nAccordingly, having reviewed the record and considered the assessment criteria, I assess\n\n\n\nCPF No. 3-2019-0005\nPage 8\nRespondent a civil penalty of $23,500 for violation of 49 C.F.R. §192.739(a).\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 $62,800.\nFailure to pay the $62,800 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.\nCOMPLIANCE ORDER\nThe Notice proposed a compliance order with respect to Items 3 and 5 in the Notice for\nviolations of 49 C.F.R. §§ 192.619(a), and 192.805(b), respectively. Under 49 U.S.C.\n§ 60118(a), each person who engages in the transportation of gas or who owns or operates a\npipeline facility is required to comply with the applicable safety standards established under\nchapter 601.\nWith regard to the violation of § 192.619(a) (Item 3), Respondent argued that the compliance\nterms should be modified. Lakes Gas noted that it had set the MAOP based on guidance it\nreceived from the Minnesota Office of Pipeline Safety, but proposed reducing the MAOP of its\nsystem to 13 psig. During the inspection, the PHMSA inspector found house service regulators\nwith a maximum inlet pressure limit of 10 psig. Therefore, Respondent’s proposed modification\ndoes not comply with § 192.619(a), which requires that the MAOP not exceed the design\npressure of the weakest element of the segment.\nWith regard to the violation of § 192.805(b) (Item 5), Respondent did not contest the proposed\ncompliance order.\nFor the above reasons, the Compliance Order is not modified as set forth below.\nPursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is\nordered to take the following actions to ensure compliance with the pipeline safety regulations\napplicable to its operations:\n1. With respect to the violation of § 192.619(a) (Item 3), Respondent must determine\nand document its MAOP of each system and adjust its pressure-limiting and\noverpressure protection devices to not exceed these limits.\n2. With respect to the violation of § 192.805(b) (Item 5), Respondent must qualify\nthrough evaluation and documentation those individuals allowed to perform covered\ntask on its systems.\n\n\n\nCPF No. 3-2019-0005\nPage 9\n3. Lakes Gas must within 90 days after receipt of this Final Order complete Items 1\nand 2, and send the applicable documentation to the Director, Central Region, Office\nof Pipeline Safety, PHMSA.\nThe Director may grant an extension of time to comply with any of the required items upon a\nwritten request timely submitted by the Respondent and demonstrating good cause for an\nextension.\nIt is requested (not mandated) that Respondent maintain documentation of the safety\nimprovement costs associated with fulfilling this Compliance Order and submit the total to the\nDirector. It is requested that these costs be reported in two categories: (1) total cost associated\nwith preparation/revision of plans, procedures, studies and analyses; and (2) total cost associated\nwith replacements, additions and other changes to pipeline infrastructure.\nFailure to comply with this Order may result in the administrative assessment of civil penalties\nnot to exceed $200,000, as adjusted for inflation (49 C.F.R. § 190.223), for each violation for\neach day the violation continues or in referral to the Attorney General for appropriate relief in a\ndistrict court of the United States.\nUnder 49 C.F.R. § 190.243, Respondent may submit a Petition for Reconsideration of this Final\nOrder to the Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey\nAvenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of\nChief Counsel, PHMSA, at the same address, no later than 20 days after receipt of service of this\nFinal Order by Respondent. Any petition submitted must contain a statement of the issue(s) and\nmeet all other requirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays\nthe payment of any civil penalty assessed. The other terms of the order, including corrective\naction, remain in effect unless the Associate Administrator, upon request, grants a stay.\nThe terms and conditions of this Final Order are effective upon service in accordance with 49\nC.F.R. § 190.5.\nDecember 4, 2020\n___________________________________ __________________________\nAlan K. Mayberry Date Issued\nAssociate Administrator\nfor Pipeline Safety\n\n320190005_NOPV PCP PCO_11252019_text.pdf\n\nNOTICE OF PROBABLE VIOLATION\nPROPOSED CIVIL PENALTY\nand\nPROPOSED COMPLIANCE ORDER\nCERTIFIED MAIL - RETURN RECEIPT REQUESTED\nNovember 25, 2019\nSteve Sargeant\nPresident and Senior Executive\nLakes Gas Company\n655 South Lake Street\nForest Lake, MN 55025\nCPF 3-2019-0005\nDear Mr. Sargeant:\nFrom September 4-6, 2018, a representative of the Pipeline and Hazardous Materials Safety\nAdministration (PHMSA), Office of Pipeline Safety (OPS), pursuant to Chapter 601 of 49\nUnited States Code (U.S.C.) inspected your liquid propane systems and records in Door County,\nMichigan.\nAs a result of the inspection, it is alleged that you have committed probable violations of the\nPipeline Safety Regulations, Title 49, Code of Federal Regulations (CFR). The items inspected\nand the probable violations are:\n\n\n\n1. §192.465 External corrosion control: Monitoring.\n(a) Each pipeline that is under cathodic protection must be tested at least once each\ncalendar year, but with intervals not exceeding 15 months, to determine whether the\ncathodic protection meets the requirements of §192.463. However, if tests at those\nintervals are impractical for separately protected short sections of mains or\ntransmission lines, not in excess of 100 feet (30 meters), or separately protected\nservice lines, these pipelines may be surveyed on a sampling basis. At least 10\npercent of these protected structures, distributed over the entire system must be\nsurveyed each calendar year, with a different 10 percent checked each subsequent\nyear, so that the entire system is tested in each 10-year period.\nLakes Gas Company (Lakes) failed to test its cathodic protection at least once each\ncalendar year, but with intervals not exceeding 15 months, to determine whether the\ncathodic protection system meets the requirements of §192.463. Lakes did not test its\ncathodic protection system at the Birch Grove Condos at the requisite intervals in 2015\nand 2016, as found by the PHMSA field records inspection and stated by Lakes’ staff.\n2. §192.603 General provisions.\n(a) . . . .\n(b) Each operator shall keep records necessary to administer the procedures\nestablished under §192.605.\nLakes failed to keep records necessary to administer the procedures as established under\n§ 192.605. Section 192.605(b)(1) requires that an operator's written manual include\napplicable procedures for “[o]perating, maintaining, and repairing the pipeline in\naccordance with each of the requirements of [subpart L] and subpart M of [Part 192].”\nSpecifically, Lakes failed to document each valve, which the use of may be necessary for\nthe safe operations of its distribution system, was checked and serviced at intervals not\nexceeding 15 months, but at least once each calendar year.1 No annual valve inspection\nrecords for their seven systems were kept for 2015 and 2016 as stated by Lakes’ staff.\n1 Section 192.747(a) states that for distribution systems “[e]ach valve, the use of which may be necessary for the\nsafe operation of a distribution system, must be checked and serviced at intervals not exceeding 15 months, but at\nleast once each calendar year.”\n2\n\n\n\n3. 4. §192.619 Maximum allowable operating pressure: Steel or plastic pipelines\n(a) No person may operate a segment of steel or plastic pipeline at a pressure that\nexceeds a maximum allowable operating pressure determined under paragraph (c)\nor (d) of this section, or the lowest of the following:\n(1) The design pressure of the weakest element in the segment, determined in\naccordance with subparts C and D of this part. However, for steel pipe in pipelines\nbeing converted under §192.14 or uprated under subpart K of this part, if any\nvariable necessary to determine the design pressure under the design formula\n(§192.105) is unknown, one of the following pressures is to be used as design\npressure: . . .\nLakes failed to have the maximum allowable operating pressure (MAOP) of its seven\nsystems established according to the design pressure of the weakest element of the\nsegment. Specifically, Lakes stated during the inspection that its MAOP in each of its\nseven systems was 30 psig, but the PHMSA inspector found house service regulators had\na maximum inlet pressure limit of 10 psig. This would restrict the MAOP to 10 psig.\nTherefore, the MAOP of Lakes’ seven systems exceeded the design pressure of weakest\nelement on the segment.\n§192.739 Pressure limiting and regulating stations: Inspection and testing.\n(a) Each pressure limiting station, relief device (except rupture discs), and pressure\nregulating station and its equipment must be subjected at intervals not exceeding 15\nmonths, but at least once each calendar year, to inspections and tests to determine\nthat it is—\n(1) In good mechanical condition;\n(2) Adequate from the standpoint of capacity and reliability of operation for the\nservice in which it is employed;\n(3) Except as provided in paragraph (b) of this section, set to control or relieve at\nthe correct pressure consistent with the pressure limits of §192.201(a); and\n(4) Properly installed and protected from dirt, liquids, or other conditions that\nmight prevent proper operation.\nLakes failed to test and inspect its pressure limiting station, relief device (except rupture\ndiscs), and pressure regulating station and equipment at least once each calendar year, but\nat intervals not exceeding 15 months, to determine that they met the requirements under\n§192.739(a). Lakes did not perform regulator and overpressure protection inspections\nand tests on its seven stations in 2015 and 2016 at the requisite intervals as stated by\nLakes’ staff.\n3\n\n\n\n5.\n§192.805 Qualification program.\nEach operator shall have and follow a written qualification program. The program\nshall include provisions to:\n(a).....\n(b) Ensure through evaluation that individuals performing covered tasks are\nqualified;\nLakes failed to follow its written qualification program to ensure through evaluation that\nindividuals performing covered tasks were qualified. Lakes operator qualification\nprocedures require individuals performing covered tasks to be qualified prior to\nperforming covered tasks and requalified every 3 years. One individual who began work\nin 2014 and subsequently performed covered tasks of regulator inspection, valve\ninspection, atmospheric corrosion inspection, locates, patrols, etc. on Lakes' system was\nnot qualified at the time the tasks were performed. Additionally, the individual had still\nnot been qualified as the date of PHMSA's inspection in 2018.\nProposed Civil Penalty\nUnder 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed\n$218,647 per violation per day the violation persists, up to a maximum of $2,186,465 for a\nrelated series of violations. For violation occurring on or after November 27, 2018 and before\nJuly 31, 2019, the maximum penalty may not exceed $213,268 per violation per day, with a\nmaximum penalty not to exceed $2,132,679. For violation occurring on or after November 2,\n2015 and before November 27, 2018, the maximum penalty may not exceed $209,002 per\nviolation per day, with a maximum penalty not to exceed $2,090,022. For violations occurring\nday, with a maximum penalty not to exceed $2,000,000 for a related series of violations. The\nprior to November 2, 2015, the maximum penalty may not exceed $200,000 per violation per\nCompliance Officer has reviewed the circumstances and supporting documentation involved in\nthe above probable violations and has recommended that you be preliminarily assessed a civil\npenalty of $62,800 as follows:\nItem number\nPENALTY\n1\n$19,300\n2\n$20,000\n4\n$23,500\nProposed Compliance Order\nWith respect to items 3 and 5 pursuant to 49 U.S.C. § 60118, the Pipeline and Hazardous\nMaterials Safety Administration proposes to issue a Compliance Order to Lakes Gas Company.\n4\n\n\n\nPlease refer to the Proposed Compliance Order, which is enclosed and made a part of this\nNotice.\nResponse to this Notice\nEnclosed as part of this Notice is a document entitled Response Options for Pipeline Operators\nin Compliance Proceedings. Please refer to this document and note the response options. All\nmaterial you submit in response to this enforcement action may be made publicly available. If\nyou believe that any portion of your responsive material qualifies for confidential treatment\nunder 5 U.S.C. 552(b), along with the complete original document you must provide a second\ncopy of the document with the portions you believe qualify for confidential treatment redacted\nand an explanation of why you believe the redacted information qualifies for confidential\ntreatment und","truncated":true,"body_characters":42768}