# LAKES GAS COMPANY — Notice of Probable Violation

- **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:** Not available
- **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.

Official case documents:

320190005_Closure Letter_08192021_(18-160553S).pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Closure%20Letter_08192021_(18-160553S).pdf

320190005_Closure Letter_08192021_(18-160553S)_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Closure%20Letter_08192021_(18-160553S)_text.pdf

320190005_Corrected Final Order Cover Letter_12172020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Corrected%20Final%20Order%20Cover%20Letter_12172020.pdf

320190005_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

320190005_Final Order_12042020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Final%20Order_12042020.pdf

320190005_Final Order_12042020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_Final%20Order_12042020_text.pdf

320190005_NOPV PCP PCO_11252019.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_NOPV%20PCP%20PCO_11252019.pdf

320190005_NOPV PCP PCO_11252019_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/320190005/320190005_NOPV%20PCP%20PCO_11252019_text.pdf

320190005_Corrected Final Order Cover Letter_12172020_text.pdf

VIA ELECTRONIC MAILTO: thampton@lakesgasco.com
Mr. Trent Hampton
President and Chief Executive Office
Lakes Gas Company
919 1st Street SW
Crosby, Minnesota 56441
Re: CPF No. 3-2019-0005
Dear Mr. Trent Hampton:
On December 4, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA)
issued a final order in the above-referenced case (Final Order). The cover letter for the Final
Order incorrectly stated that the assessed civil penalty for the findings of violation was $63,800.
As noted in the Final Order, the assessed civil penalty for the findings of violations was $62,800.
I apologize for this typographical error.
Sincerely,
James Pates
Assistant Chief Counsel for Pipeline Safety
Office of Chief Counsel
Pipeline & Hazardous Materials Safety
Administration
cc: Mr. Gregory Ochs, Director, Central Region, Office of Pipeline Safety, PHMSA
Mr. Steven Sargeant, Executive Vice President of Operations, Lakes Gas Company,
ssargeant@lakesgasco.com
CONFIRMATION OF RECEIPT REQUESTED

320190005_Closure Letter_08192021_(18-160553S)_text.pdf

August 19, 2021
Mr. Trent Hampton
President and Chief Executive Officer
Lakes Gas Company
919 1st Street SW
Crosby, MN 56441
Re: CPF No. 3-2019-0005
Dear Mr. Hampton:
From September 4, 2018, through September 6, 2018, 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 (U.S.C.) conducted an on-site inspection of the
facilities and records of Lakes Gas Company (Lakes Gas) liquid propane systems in Door
County, Wisconsin. As a result of the inspection, Lakes Gas was issued a Notice of Notice of
Probable Violation, Proposed Civil Penalty and Proposed Compliance Order on November 25,
2019.
Lakes Gas submitted responses in December 23, 2019 and March 27, 2020. PHMSA issued a
final order on December 4, 2020 which included a Civil Penalty and Compliance Order. Lakes
Gas made payment of the Civil Penalty on March 4, 2021. My staff reviewed the requirements
of the Final Order and determined that all compliance elemtents have been met.
This letter is to inform you no further action is necessary and this case is now closed. Thank you
for your cooperation.
Sincerely,
Gregory A. Ochs
Director, Central Region, OPS
Pipeline and Hazardous Materials Safety Administration
Cc: David Anderson, District Manager, danderson@lakesgasco.com
Steven Sargenat, EVP of Operations, ssargeant@lakesgasco.com

320190005_Final Order_12042020_text.pdf

December 4, 2020
VIA ELECTRONIC MAILTO: thampton@lakesgasco.com
Mr. Trent Hampton
President and Chief Executive Office
Lakes Gas Company
919 1st Street SW
Crosby, Minnesota 56441
Re: CPF No. 3-2019-0005
Dear Mr. Trent Hampton:
Enclosed please find the Final Order issued in the above-referenced case. It makes findings of
violation, assesses a civil penalty of $63,800, and specifies actions that need to be taken by
Lakes Gas Company 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 electronic mail is effective upon the date of
transmission as provided under 49 C.F.R. § 190.5.
Thank you for your cooperation in this matter.
Sincerely,
Alan K. Mayberry
Associate Administrator
for Pipeline Safety
Enclosure
cc: Mr. Gregory Ochs, Director, Central Region, Office of Pipeline Safety, PHMSA
Mr. Steven Sargeant, Executive Vice President of Operations, Lakes Gas Company,
ssargeant@lakesgasco.com
CONFIRMATION OF RECEIPT REQUESTED



U.S. DEPARTMENT OF TRANSPORTATION
PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION
OFFICE OF PIPELINE SAFETY
WASHINGTON, D.C. 20590
____________________________________
In the Matter of )
Lakes Gas Company, ) CPF No. 3-2019-0005
)
)
)
Respondent. )
____________________________________)
FINAL ORDER
From September 4, 2018, through September 6, 2018, 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 Lakes Gas Company’s (Lakes Gas or Respondent) liquid propane system in Door
County, Wisconsin. Lakes Gas supplies propane to residential, commercial and wholesale
customers in Minnesota, Wisconsin, Michigan, and South Dakota.1 Lakes Gas operates seven
small liquid propane gas distribution systems in Door County, Wisconsin.2 The largest system
has 73 customers, while the remaining six have 10 or less customers.3
As a result of the inspection, the Director, Central Region, OPS (Director), issued to Respondent,
by letter dated November 25, 2019, 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 Lakes Gas had committed five violations of 49 C.F.R. Part 192 and
proposed assessing a civil penalty of $63,800 for the alleged violations. The Notice also
proposed ordering Respondent to take certain measures to correct two of the alleged violations.
Lakes Gas responded to the Notice by letter dated December 23, 2019 (Response). The
company did not contest the allegations of violation but provided an explanation of its actions,
requested a reduction of the proposed civil penalty, and proposed alternative compliance terms.
On April 10, 2020, Lakes Gas submitted a supplemental filing in response to the Central
Region’s March 30, 2020 request for the company to provide financial records supporting its
request for a reduced civil penalty (Supplemental Response). Respondent did not request a
hearing and therefore has waived its right to one.
1 Lakes Gas Company website, About Us, available at https://www.lakesgas.com/about-us html (last accessed
September 21, 2020).
2 Pipeline Safety Violation Report (Violation Report), (November 25, 2019), (on file with PHMSA), at 1.
3 Id.



CPF No. 3-2019-0005
Page 2
FINDINGS OF VIOLATION
In its Response, Lakes Gas did not contest the allegations in the Notice that it violated 49 C.F.R.
Part 192, as follows:
Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.465(a), which states:
§ 192.465 External corrosion control: Monitoring.
(a) Each pipeline that is under cathodic protection must be tested at
least one each calendar year, but with intervals not exceeding 15 months, to
determine whether the cathodic protection meets the requirements of
§192.463. However, if tests at those intervals are impractical for separately
protected short sections of mains or transmission lines, not in excess of 100
feet (30 meters), or separately protected service lines, these pipelines may
be surveyed on a sampling basis. At least 10 percent of these protected
structures, distributed over the entire system must be surveyed each
calendar year, with a different 10 percent checked each subsequent year, so
that the entire system is tested in each 10-year period.
The Notice alleged that Respondent violated 49 C.F.R. § 192.465(a) by failing to test each
pipeline that is under cathodic protection at least once each calendar year, but with intervals not
exceeding 15 months, to determine whether the cathodic protection meets the requirements of
§ 192.463. Specifically, the Notice alleged that Lakes Gas’ records indicated that it did not test
its cathodic protection system at the Birch Grove Condos at the requisite intervals in 2015 and
2016.
Respondent did not contest this allegation of violation. Accordingly, based upon a review of all
of the evidence, I find that Respondent violated 49 C.F.R. § 192.465(a) by failing to test each
pipeline that is under cathodic protection at least once each calendar year, but with intervals not
exceeding 15 months, to determine whether the cathodic protection meets the requirements of
§ 192.463.
Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.603(b), which states:
§ 192.603 General provisions.
(a) ….
(b) Each operator shall keep records necessary to administer the
procedures established under §192.605.
The Notice alleged that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep records
necessary to administer the procedures established under § 192.605, which requires all gas
pipeline operators to prepare and follow a manual of written procedures for conducting
operations and maintenance activities and emergency response. Subparagraph (b)(1) of
§ 192.605 requires that an operator’s written manual include applicable procedures for
“[o]perating, maintaining, and repairing the pipeline in accordance with each of the requirements



CPF No. 3-2019-0005
Page 3
of [subpart L]4 and subpart M of [Part 192].” Specifically, the Notice alleged that Lakes Gas
failed to keep records demonstrating annual valve maintenance pursuant to § 192.747(a), which
states that for distribution systems “[e]ach valve, the use of which may be necessary for the safe
operation of a distribution system, must be checked and serviced at intervals not exceeding 15
months, but at least once each calendar year.” According to the Notice, Lakes Gas’ staff
indicated to the PHMSA inspector that no annual valve inspection records for the company’s
seven distribution systems had been kept for calendar years 2015 and 2016.
Respondent did not contest this allegation of violation. Accordingly, based upon a review of all
of the evidence, I find that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep
records necessary to administer the company’s procedures established under § 192.605.
Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.619(a)(1), which states:
§ 192.619 Maximum allowable operating pressure: Steel or plastic
pipelines.
(a) No person may operate a segment of steel or plastic pipeline at a
pressure that exceeds a maximum allowable operating pressure determined
under paragraph (c) or (d) of this section, or the lowest of the following:
(1) The design pressure of the weakest element in the segment,
determined in accordance with subparts C and D of this part. However, for
steel pipe in pipelines being converted under §192.14 or uprated under
subpart K of this part, if any variable necessary to determine the design
pressure under the design formula (§192.105) is unknown, one of the
following pressures is to be used as a design pressure….
The Notice alleged that Respondent violated 49 C.F.R. § 192.619(a)(1)5 by failing to have the
maximum allowable operating pressure (MAOP) of its seven systems established according to
the design pressure of the weakest element in the segment. Specifically, the Notice alleged that
Lakes Gas’ seven systems had a MAOP of 30 psig, but house service regulators on the segments
had a maximum inlet pressure limit of 10 psig. Therefore, the Notice alleged, Lakes Gas’
MAOP for its seven systems exceeded the design pressure of the weakest element in the
segment.
Respondent did not contest this allegation of violation. Accordingly, based upon a review of all
of the evidence, I find that Respondent violated 49 C.F.R. § 192.619(a)(1) by failing to have the
MAOP of its seven systems established according to the design pressure of the weakest element
in the segment.
Item 4: The Notice alleged that Respondent violated 49 C.F.R. § 192.739(a), which states:
§ 192.739 Pressure limiting and regulating stations: Inspection and
testing.
4 Subpart L includes 49 C.F.R. § 192.747(a).
5 At 84 FR 52247, Section 192.619(a) was subsequently amended by final rule effective July 1, 2020.



CPF No. 3-2019-0005
Page 4
(a) Each pressure limiting station, relief device (except rupture discs),
and pressure regulating station and its equipment must be subjected at
intervals not exceeding 15 months, but at least once each calendar year, to
inspections and tests to determine that it is—
(1) In good mechanical condition;
(2) Adequate from the standpoint of capacity and reliability of operation
for the service in which it is employed;
(3) Except as provided in paragraph (b) of this section, set to control or
relieve at the correct pressure consistent with the pressure limits of
§ 192.201(a); and
(4) Properly installed and protected from dirt, liquids, or other
conditions that might prevent proper operation.
The Notice alleged that Respondent violated 49 C.F.R. § 192.739(a) by failing to test and inspect
each pressure limiting station, relief device (except rupture discs), and pressure regulating station
and equipment at least once each calendar year, but at intervals not exceeding 15 months, to
determine that they met the requirements of § 192.739(a)(1) – (a)(4). Specifically, the Notice
alleged that Lakes Gas personnel indicated to PHMSA that the company did not perform
regulator and overpressure-protection inspections and tests on its seven stations at least once
each calendar year during 2015 and 2016.
Respondent did not contest this allegation of violation. Accordingly, based upon a review of all
of the evidence, I find that Respondent violated 49 C.F.R. § 192.739(a) by failing to test and
inspect each pressure limiting station, relief device (except rupture discs), and pressure
regulating station and equipment at least once each calendar year, but at intervals not exceeding
15 months, to determine that they met the requirements of § 192.739(a)(1) – (a)(4).
Item 5: The Notice alleged that Respondent violated 49 C.F.R. § 192.805(b), which states:
§ 192.805 Qualification program.
Each operator shall have and follow a written qualification program.
The program shall include provisions to:
(a) ….
(b) Ensure through evaluation that individuals performing covered tasks
are qualified; …
The Notice alleged that Respondent violated 49 C.F.R. § 192.805(b) by failing to follow its own
written qualification program to ensure through evaluation that individuals performing covered
tasks were qualified. Specifically, the Notice alleged that Lakes Gas’ operator qualification
procedures required individuals performing covered task to be qualified prior to performing the
covered task and to be requalified every three years, but that one particular Lakes Gas employee
started performing several covered tasks in 2014 without being qualified and was still
unqualified at the time of the PHMSA inspection in 2018.
Respondent did not contest this allegation of violation. Accordingly, based upon a review of all
of the evidence, I find that Respondent violated 49 C.F.R. § 192.805(b) by failing to follow its



CPF No. 3-2019-0005
Page 5
own written qualification program to ensure through evaluation that individuals performing
covered tasks were qualified.
These findings of violation will be considered prior offenses in any subsequent enforcement
action taken against Respondent.
ASSESSMENT OF PENALTY
Under 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed
$200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any
related series of violations.6 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; 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 $62,800 for the violations cited above.
Item 1: The Notice proposed a civil penalty of $19,300 for Respondent’s violation of 49 C.F.R.
§ 192.465(a), for failing to test each pipeline under cathodic protection at least once each
calendar year, but with intervals not exceeding 15 months, to determine whether the cathodic
protection meets the requirements of § 192.463. In its Response, Lakes Gas did not contest the
violation or offer specific arguments against the proposed civil penalty. Rather, Lakes Gas
explained that the noncompliance was due, in part, to a personnel change. The company also
argued, generally, that the overall proposed penalties were “very excessive,” based on the size of
the company’s systems and requested that they be reduced. Lakes Gas explained that its
operations were very small and that the overall proposed civil penalty of $62,800 was “many
years of net revenue.”7
In response to a March 30, 2020 request from PHMSA for additional documentation to support
its contention that the penalties were excessive, based on Respondent’s ability to pay, Lakes Gas
provided 2019/2020 account records for its seven liquid propane gas distribution systems in
Door County, and argued that “based on the volume size of the pipelines under review,” the size
of [its] jurisdictional system and the actual infractions that took place,” a “better review of the
penalty assessment” would be warranted. Lakes Gas also argued that since these were small
propane systems, its employees “regularly make contact and see [the] tank and regulator
involvement and operation.” Lastly, Lakes Gas explained that since receiving the Notice, it had
worked with the OPS Central Region office to resolve any outstanding issues. Therefore, for all
those reasons, Lakes Gas argued, the overall penalty should be reduced.
6 These amounts are adjusted annually for inflation. See 49 C.F.R. § 190.223.
7 Response, at 2 (on file with PHMSA).



CPF No. 3-2019-0005
Page 6
In determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I
must consider any effect that a proposed penalty may have on a respondent’s ability to continue
doing business. However, respondents “must provide PHMSA with the means by which the
agency can accurately determine the company’s true financial condition.”8 PHMSA has
previously instructed operators that asserting a claim of financial hardship requires that the
company submit “accurate and reliable information on the financial condition” of the company.9
Lakes Gas’ website indicates that it operates in four states and has 43 locations. According to
Dun and Bradstreet, Lakes Gas has over 25 branches.10 The account records that Lakes Gas
submitted in its Supplemental Response focused solely on its Door County branch and did not
provide any credible information that would enable me to determine the company’s (not just the
branch’s) overall ability or inability to pay the penalty. Without such supporting financial
documentation, I have no basis for reducing or eliminating the civil penalty on the grounds of
financial hardship.
In addition, while I acknowledge and appreciate Lakes Gas’ eagerness to work with PHMSA to
resolve any outstanding issues, I do not find that this action – seeking to come into compliance
with the pipeline safety regulations – warrants a withdrawal or reduction of the civil penalty.
Turning now to the other penalty considerations, regarding nature and circumstances, PHMSA
noted in the Violation Report that the alleged violation related to a failure to perform a required
activity and that the violation was discovered by PHMSA or one of its state partners. It is
uncontested that Lakes Gas failed to test each pipeline that is under cathodic protection at least
once each calendar year, but with intervals not exceeding 15 months, to determine whether the
cathodic protection meets the requirements of § 192.463, and it is uncontested that PHMSA
discovered this violation instead of the operator.
Regarding gravity, PHMSA noted in the Violation Report that pipeline safety was minimally
affected. Therefore, the proposed penalty already accounted for the fact that the pipeline
integrity was never compromised. Regarding culpability, Lakes Gas did not contest the violation
and has thus acknowledged that it failed to comply with an applicable requirement of Part 192.
Regarding good faith, in its Response, Lakes Gas explained that certain lapses took place due to
a change in personnel. It is the pipeline operator’s responsibility to ensure that all personnel
know how to comply with the pipeline safety regulations. As such, a reduction of the proposed
civil penalty under the “good faith” standard is not warranted.
Accordingly, having reviewed the record and considered the assessment criteria, I assess
Respondent a civil penalty of $19,300 for violation of 49 C.F.R. § 192.465(a).
8 E.g., In the Matter of Tampa Bay Pipeline Corp., Decision on Reconsideration, CPF No. 2-2005-6012, 2008 WL
902910, at 2 (Mar. 31, 2008). See also, In the Matter of Tampa Pipeline Corporation, CPF 2-2008-6002, 2010 WL
2228556, at 19 (April 26, 2010).
9 Id.
10 See, Dun and Bradstreet Comprehensive Report for Lakes Gas Company, accessed November 20, 2020, (on file
with PHMSA) at 5. Dun and Bradstreet is a company that provides commercial data, analytics, and insights for
businesses.



CPF No. 3-2019-0005
Page 7
Item 2: The Notice proposed a civil penalty of $20,000 for Respondent’s violation of 49 C.F.R.
§ 192.603(b), for failing to keep records necessary to administer the procedures established
under § 192.605. As with Item 1, Lakes Gas did not provide a specific reason why the proposed
civil penalty for Item 2 should be reduced or eliminated. Rather, Lakes Gas argued that the
overall penalty was excessive and should be reduced. For the reasons stated above, I find no
reason to reduce or eliminate the civil penalty based on financial hardship.
Regarding nature and circumstances, PHMSA noted in the Violation Report that the alleged
violation was a records violation and that the violation was discovered by PHMSA or one of its
state partners. It is uncontested that Lakes Gas failed to keep records necessary to administer the
procedures as established under § 192.605, and it is uncontested that PHMSA discovered this
violation and not the operator.
Regarding gravity, PHMSA noted in the Violation Report that the pipeline safety was minimally
affected. Therefore, the proposed penalty already accounted for the fact that the pipeline
integrity was never compromised. Regarding culpability, Lakes Gas did not contest the violation
and has thus acknowledged that it failed to comply with an applicable requirement of Part 192.
Regarding good faith, as noted above, Lakes Gas explained that certain lapses took place due to a
change in personnel. Therefore, a reduction of the proposed civil penalty under the “good faith”
standard is not warranted.
Accordingly, having reviewed the record and considered the assessment criteria, I assess
Respondent a civil penalty of $20,000 for violation of 49 C.F.R. § 192.603(b).
Item 4: The Notice proposed a civil penalty of $23,500 for Respondent’s violation of 49 C.F.R.
§ 192.739(a), for failing to test and inspect each pressure limiting station, relief device (except
rupture discs), and pressure-regulating station and equipment at least once each calendar year,
but at intervals not exceeding 15 months, to determine that they met the requirements of
§ 192.739(a)(1) – (a)(4). As stated previously, Lakes Gas did not provide a specific reason why
the proposed civil penalty for Item 4 should be reduced or eliminated, and I found no reason to
reduce or eliminate the civil penalty based on financial hardship.
Regarding nature and circumstances, PHMSA noted in the Violation Report that the alleged
violation was an activities violation and that the violation was discovered by PHMSA or one of
its state partners. It is uncontested that Lakes Gas failed to test and inspect each pressure-
limiting station, relief devices, and pressure-regulating station and equipment, and it is
uncontested that PHMSA discovered this violation rather than the operator. Regarding gravity,
PHMSA noted in the Violation Report that the pipeline safety was minimally affected.
Therefore, the proposed penalty already accounted for the fact that the pipeline integrity was
never compromised. Regarding culpability, Lakes Gas did not contest the violation and has thus
acknowledged that it failed to comply with an applicable requirement of Part 192. Regarding
good faith, as noted above, Lakes Gas explained that due to a change in personnel, that certain
lapses took place. Therefore, a reduction of the proposed civil penalty under the “good faith”
standard is not warranted.
Accordingly, having reviewed the record and considered the assessment criteria, I assess



CPF No. 3-2019-0005
Page 8
Respondent a civil penalty of $23,500 for violation of 49 C.F.R. §192.739(a).
In summary, having reviewed the record and considered the assessment criteria for each of the
Items cited above, I assess Respondent a total civil penalty of $62,800.
Failure to pay the $62,800 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 3 and 5 in the Notice for
violations of 49 C.F.R. §§ 192.619(a), and 192.805(b), respectively. Under 49 U.S.C.
§ 60118(a), each person who engages in the transportation of gas or who owns or operates a
pipeline facility is required to comply with the applicable safety standards established under
chapter 601.
With regard to the violation of § 192.619(a) (Item 3), Respondent argued that the compliance
terms should be modified. Lakes Gas noted that it had set the MAOP based on guidance it
received from the Minnesota Office of Pipeline Safety, but proposed reducing the MAOP of its
system to 13 psig. During the inspection, the PHMSA inspector found house service regulators
with a maximum inlet pressure limit of 10 psig. Therefore, Respondent’s proposed modification
does not comply with § 192.619(a), which requires that the MAOP not exceed the design
pressure of the weakest element of the segment.
With regard to the violation of § 192.805(b) (Item 5), Respondent did not contest the proposed
compliance order.
For the above reasons, the Compliance Order is not modified as set forth below.
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. With respect to the violation of § 192.619(a) (Item 3), Respondent must determine
and document its MAOP of each system and adjust its pressure-limiting and
overpressure protection devices to not exceed these limits.
2. With respect to the violation of § 192.805(b) (Item 5), Respondent must qualify
through evaluation and documentation those individuals allowed to perform covered
task on its systems.



CPF No. 3-2019-0005
Page 9
3. Lakes Gas must within 90 days after receipt of this Final Order complete Items 1
and 2, and send the applicable documentation to the Director, Central Region, Office
of Pipeline Safety, PHMSA.
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.
It is requested (not mandated) that Respondent 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.
Failure to comply with this Order may result in the administrative assessment of civil penalties
not to exceed $200,000, as adjusted for inflation (49 C.F.R. § 190.223), 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.
Under 49 C.F.R. § 190.243, Respondent may submit a Petition for Reconsideration of this Final
Order to the 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, no later than 20 days after receipt of service of this
Final Order by Respondent. Any petition submitted must contain a statement of the issue(s) and
meet all other requirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays
the payment of any civil penalty assessed. The other terms of the order, including corrective
action, remain in effect 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.
December 4, 2020
___________________________________ __________________________
Alan K. Mayberry Date Issued
Associate Administrator
for Pipeline Safety

320190005_NOPV PCP PCO_11252019_text.pdf

NOTICE OF PROBABLE VIOLATION
PROPOSED CIVIL PENALTY
and
PROPOSED COMPLIANCE ORDER
CERTIFIED MAIL - RETURN RECEIPT REQUESTED
November 25, 2019
Steve Sargeant
President and Senior Executive
Lakes Gas Company
655 South Lake Street
Forest Lake, MN 55025
CPF 3-2019-0005
Dear Mr. Sargeant:
From September 4-6, 2018, 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 (U.S.C.) inspected your liquid propane systems and records in Door County,
Michigan.
As a result of the inspection, it is alleged that you have committed probable violations of the
Pipeline Safety Regulations, Title 49, Code of Federal Regulations (CFR). The items inspected
and the probable violations are:



1. §192.465 External corrosion control: Monitoring.
(a) Each pipeline that is under cathodic protection must be tested at least once each
calendar year, but with intervals not exceeding 15 months, to determine whether the
cathodic protection meets the requirements of §192.463. However, if tests at those
intervals are impractical for separately protected short sections of mains or
transmission lines, not in excess of 100 feet (30 meters), or separately protected
service lines, these pipelines may be surveyed on a sampling basis. At least 10
percent of these protected structures, distributed over the entire system must be
surveyed each calendar year, with a different 10 percent checked each subsequent
year, so that the entire system is tested in each 10-year period.
Lakes Gas Company (Lakes) failed to test its cathodic protection at least once each
calendar year, but with intervals not exceeding 15 months, to determine whether the
cathodic protection system meets the requirements of §192.463. Lakes did not test its
cathodic protection system at the Birch Grove Condos at the requisite intervals in 2015
and 2016, as found by the PHMSA field records inspection and stated by Lakes’ staff.
2. §192.603 General provisions.
(a) . . . .
(b) Each operator shall keep records necessary to administer the procedures
established under §192.605.
Lakes failed to keep records necessary to administer the procedures as established under
§ 192.605. Section 192.605(b)(1) requires that an operator's written manual include
applicable procedures for “[o]perating, maintaining, and repairing the pipeline in
accordance with each of the requirements of [subpart L] and subpart M of [Part 192].”
Specifically, Lakes failed to document each valve, which the use of may be necessary for
the safe operations of its distribution system, was checked and serviced at intervals not
exceeding 15 months, but at least once each calendar year.1 No annual valve inspection
records for their seven systems were kept for 2015 and 2016 as stated by Lakes’ staff.
1 Section 192.747(a) states that for distribution systems “[e]ach valve, the use of which may be necessary for the
safe operation of a distribution system, must be checked and serviced at intervals not exceeding 15 months, but at
least once each calendar year.”
2



3. 4. §192.619 Maximum allowable operating pressure: Steel or plastic pipelines
(a) No person may operate a segment of steel or plastic pipeline at a pressure that
exceeds a maximum allowable operating pressure determined under paragraph (c)
or (d) of this section, or the lowest of the following:
(1) The design pressure of the weakest element in the segment, determined in
accordance with subparts C and D of this part. However, for steel pipe in pipelines
being converted under §192.14 or uprated under subpart K of this part, if any
variable necessary to determine the design pressure under the design formula
(§192.105) is unknown, one of the following pressures is to be used as design
pressure: . . .
Lakes failed to have the maximum allowable operating pressure (MAOP) of its seven
systems established according to the design pressure of the weakest element of the
segment. Specifically, Lakes stated during the inspection that its MAOP in each of its
seven systems was 30 psig, but the PHMSA inspector found house service regulators had
a maximum inlet pressure limit of 10 psig. This would restrict the MAOP to 10 psig.
Therefore, the MAOP of Lakes’ seven systems exceeded the design pressure of weakest
element on the segment.
§192.739 Pressure limiting and regulating stations: Inspection and testing.
(a) Each pressure limiting station, relief device (except rupture discs), and pressure
regulating station and its equipment must be subjected at intervals not exceeding 15
months, but at least once each calendar year, to inspections and tests to determine
that it is—
(1) In good mechanical condition;
(2) Adequate from the standpoint of capacity and reliability of operation for the
service in which it is employed;
(3) Except as provided in paragraph (b) of this section, set to control or relieve at
the correct pressure consistent with the pressure limits of §192.201(a); and
(4) Properly installed and protected from dirt, liquids, or other conditions that
might prevent proper operation.
Lakes failed to test and inspect its pressure limiting station, relief device (except rupture
discs), and pressure regulating station and equipment at least once each calendar year, but
at intervals not exceeding 15 months, to determine that they met the requirements under
§192.739(a). Lakes did not perform regulator and overpressure protection inspections
and tests on its seven stations in 2015 and 2016 at the requisite intervals as stated by
Lakes’ staff.
3



5.
§192.805 Qualification program.
Each operator shall have and follow a written qualification program. The program
shall include provisions to:
(a).....
(b) Ensure through evaluation that individuals performing covered tasks are
qualified;
Lakes failed to follow its written qualification program to ensure through evaluation that
individuals performing covered tasks were qualified. Lakes operator qualification
procedures require individuals performing covered tasks to be qualified prior to
performing covered tasks and requalified every 3 years. One individual who began work
in 2014 and subsequently performed covered tasks of regulator inspection, valve
inspection, atmospheric corrosion inspection, locates, patrols, etc. on Lakes' system was
not qualified at the time the tasks were performed. Additionally, the individual had still
not been qualified as the date of PHMSA's inspection in 2018.
Proposed Civil Penalty
Under 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed
$218,647 per violation per day the violation persists, up to a maximum of $2,186,465 for a
related series of violations. For violation occurring on or after November 27, 2018 and before
July 31, 2019, the maximum penalty may not exceed $213,268 per violation per day, with a
maximum penalty not to exceed $2,132,679. For violation occurring on or after November 2,
2015 and before November 27, 2018, the maximum penalty may not exceed $209,002 per
violation per day, with a maximum penalty not to exceed $2,090,022. For violations occurring
day, with a maximum penalty not to exceed $2,000,000 for a related series of violations. The
prior to November 2, 2015, the maximum penalty may not exceed $200,000 per violation per
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 $62,800 as follows:
Item number
PENALTY
1
$19,300
2
$20,000
4
$23,500
Proposed Compliance Order
With respect to items 3 and 5 pursuant to 49 U.S.C. § 60118, the Pipeline and Hazardous
Materials Safety Administration proposes to issue a Compliance Order to Lakes Gas Company.
4



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 und
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