{"operation":"document","citation":"CPF 32024031WL","title":"ZENITH ENERGY TERMINALS JOLIET HOLDINGS LLC — Warning Letter","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2024-05-31","effective_on":null,"summary":"CLOSED warning letter citing 195.402(a), 195.404(c)(1), 195.440(i), 195.446(c)(2), 195.452(j)(3), 195.452(l)(1)(ii), 195.505(i), 195.507(b), 195.579(b)(3).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-32024031wl.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-32024031wl.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-32024031wl","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/32024031WL","body":"Warning Letter involving ZENITH ENERGY TERMINALS JOLIET HOLDINGS LLC. PHMSA's enforcement data identifies the cited regulations as 195.402(a),  195.404(c)(1),  195.440(i),  195.446(c)(2),  195.452(j)(3),  195.452(l)(1)(ii),  195.505(i),  195.507(b),  195.579(b)(3). The case was opened on 2024-05-31 and is reported as closed as of 2024-05-31. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n32024031WL_Warning Letter_05312024_(22-233382).pdf: https://primis.phmsa.dot.gov/enforcement-documents/32024031WL/32024031WL_Warning%20Letter_05312024_(22-233382).pdf\n\n32024031WL_Warning Letter_05312024_(22-233382)_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/32024031WL/32024031WL_Warning%20Letter_05312024_(22-233382)_text.pdf\n\n32024031WL_Warning Letter_05312024_(22-233382)_text.pdf\n\nWARNING LETTER\nVIA ELECTRONIC MAIL TO: Jeff.armstrong@zenithterminals.com;\nCarlos.Munguia@zenithterminals.com; Jonathan.Patneau@zenithterminals.com\nMay 31, 2024\nJeff Armstrong\nChief Executive Officer\nZenith Energy Terminals Joliet Holdings LLC\n1 Highland Lane\nMetuchen, NJ 08840\nCPF 3-2024-031-WL\nDear Mr. Armstrong:\nFrom September 12, 2022 through November 30, 2022, a representative of the Pipeline and\nHazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United\nStates Code (U.S.C.), conducted an on-site inspection of Zenith Energy Terminals Joliet\nHoldings LLC’s (Zenith Energy) pipeline facilities, procedures, and records in Joliet, Illinois.\nAs a result of the inspection, it is alleged that Zenith Energy has committed probable violations\nof the Pipeline Safety Regulations, Title 49, Code of Federal Regulations (CFR). The items\ninspected and the probable violations are:\n1. § 195.404 Maps and records.\n(a) . . . .\n(c) Each operator shall maintain the following records for the periods specified:\n(1) The date, location, and description of each repair made to pipe shall be\nmaintained for the useful life of the pipe.\nZenith Energy must maintain pipe repair records for the useful life of the pipe as required by\n§ 195.404(c)(l). Zenith Energy failed to provide records documenting the coating repair on a 6.5-\nfoot piping section on the 20-inch JBBR pipeline that was exposed in calendar year 2020 at Dig\n1 (Site ID 40000005) to verify and validate external metal loss indication(s) reported by the In-\nLine Inspection (ILI) survey.\n\n\n\nFollowing the PHMSA inspection, Zenith Energy reviewed and revised its procedures to ensure\nthat the responsible personnel can verify that coating repairs and inspections will be performed\nas required by the minimum expectations within the procedures and the regulations.\n2. § 195.452 Pipeline integrity management in high consequence areas\n(a) . . . .\n(l) What records must an operator keep to demonstrate compliance? (1) An\noperator must maintain, for the useful life of the pipeline, records that demonstrate\ncompliance with the requirements of this subpart. At a minimum, an operator must\nmaintain the following records for review during an inspection:\n(i) . . . .\n(ii) Documents to support the decisions and analyses, including any modifications,\njustifications, deviations and determinations made, variances, and actions taken, to\nimplement and evaluate each element of the integrity management program listed in\nparagraph (f) of this section.\nZenith Energy failed to provide documentation of decisions and analyses, including any\nmodifications, justifications, deviations and determinations made, variances, and actions taken to\nimplement and evaluate each element of the integrity management program listed in §\n192.452(f). Specifically, Zenith Energy did not maintain records to demonstrate that pipeline\nsystem’s (including facilities) Preventive and Mitigative Measures to protect the HCAs have\nbeen considered and evaluated in a timely manner during calendar years 2018 through 2020, as\nrequired by § 195.452(l)(1)(i), and in accordance with section 5.1, titled Risk Analysis Process,\nand section 6.0; titled “Preventive and Mitigative Measures” of Zenith Energy’s former IMP.\nIt should be noted that Zenith Energy shut down its pipeline in February, 2020 because of market\nconditions and proceeded with blocking the pipeline from its source and filled it entirely with\nnitrogen after purging all remaining crude oil during the week ending June 29, 2022.\n3. § 195.446 Control room management.\n(a) . . . .\n(c) Provide adequate information. Each operator must provide its controllers with\nthe information, tools, processes and procedures necessary for the controllers to\ncarry out the roles and responsibilities the operator has defined by performing each\nof the following:\n(1) . . . .\n(2) Conduct a point-to-point verification between SCADA displays and related field\nequipment when field equipment is added or moved and when other changes that\naffect pipeline safety are made to field equipment or SCADA displays;\nZenith Energy failed to conduct an adequate point-to-point verification between SCADA\ndisplays and related field equipment when Zenith Energy moved its control room operations to a\nthird-party SCADA system in July, 2022. During PHMSA’s field inspection, PHMSA observed\nthe remote operation of an isolation valve at the Joliet terminal (ESD-2060) by the third party’s\n\n\n\nControl Room located in Texas. There was an extensive delay observed in performing the remote\nvalve operation due to confusion surrounding misidentification of the valve on the third party’s\nSCADA screen.\nPHMSA checked the labeling of this valve and confirmed that this valve was ESD-2060 and the\nvalve was consistent with the P&ID drawing. Upon reviewing the point-to-point verification\ndocument between the third-party SCADA displays and the valve. The \"SCADA Tag\nName\" incorrectly showed the valve as XV-2060, whereas the \"SCADA Tag\nDescription\" captured the ESD-2060 labeling.\nThe schematic of the original equipment identification that was approved by the third party to\nimplement with the SCADA console monitor, showed the isolation valve as XV-2060. PHMSA\nobserved a screenshot of the SCADA console monitor, it was discovered that the valve ID was\nbeing duplicated and incorrectly displayed as XV-2060A. Displays, control panels, and other\nindicators used in both locations must be consistent. Naming conventions including equipment\ntags, station names, and other identifiers between the control center and remote locations need be\nstandardized as dictated by section 11.3 of API 1165 (IBR) and in accordance with\n§ 195.446(c)(1). This must also be an element of a point-to-point verification.\nFollowing the PHMSA inspection, Zenith Energy provided a new equipment identification\nschematic showing the corrected and proper labeling of the valve on the SCADA console\nmonitor.\n4. § 195.440 Public awareness.\n(a) . . . .\n(i) The operator’s program documentation and evaluation results must be available\nfor periodic review by appropriate regulatory agencies.\nZenith Energy did not have program documentation, evaluation results or other records to\ndemonstrate that it had conducted annual audits or review of its Public Awareness Program for\ncalendar years 2018 through 2020, in accordance with the American Petroleum Institute\nRecommended Practice 1162 (API RP 1162). Section 8.3 - Measuring Program Implementation\nin API RP 1162 requires an operator to complete an annual audit or review of its Public\nAwareness Program to ascertain whether the program has been developed and implemented\naccording to the guidelines in API RP 1162. Zenith Energy stated that they review the Public\nAwareness Program information provided by Paradigm (including email correspondence) each\nyear. Zenith Energy also provided a sample for a Public Awareness Program report developed\nby a vendor for the calendar year 2020 whose actual purpose is to outline the processes and\nmethods used in the implementation of Zenith Energy baseline public awareness program.\nHowever, Zenith Energy provided no documentation of a program reviews for calendar years\n2018 through 2020.\nFollowing the PHMSA inspection, Zenith Energy revised its written Public Awareness Program\nin calendar year 2023, which includes updated revision log and amended guidance on assessing\nprogram implementation and effectiveness on annual basis annually and evaluating the need for\n\n\n\nprogram enhancements. Zenith Energy provided a record of the assessment of the Public\nAwareness Program Implementation for the year 2022. This assessment was conducted by the\nvendor on July 7, 2023.\n5. § 195.505 – Qualification program.\nEach operator shall have and follow a written qualification program. The program\nshall include provisions to:\n(a) . . . .\n(i) After December 16, 2004, notify the Administrator or a state agency participating\nunder 49 U.S.C. Chapter 601 if the operator significantly modifies the program\nafter the administrator or state agency has verified that it complies with this section.\nNotifications to PHMSA may be submitted by electronic mail to\nInformationResourcesManager@dot.gov, or by mail to ATTN: Information\nResources Manager DOT/PHMSA/OPS, East Building, 2nd Floor, E22-321, New\nJersey Avenue SE., Washington, DC 20590.\nZenith Energy failed to notify the PHMSA Administrator when it significantly modified its\nwritten Operator Qualification Program (OQ) in year 2020. Zenith Energy made significant\nchanges to the program when Zenith Energy transitioned from the NCCER based covered task\nlist to the Common Covered Task (CCT) list administered/managed by the Veriforce Operator\ngroup on December 15, 2020. However, the notification of this significant program modification\nwas not previously submitted since Zenith Energy initially thought that the NCCER cover tasks\nwere properly equated to the new Veriforce CCTs that were selected. PHMSA reviewed the\ncovered tasks equivalency and found that the above transition is significant in nature based on\nthe span of control (SOC) ratios increase for some of the common covered tasks identified in\nZenith Energy’s OQ program. PHMSA determined that an increase in SOC ratios for a covered\ntask is recognized as a significant change per section 3.2.15 of Zenith Energy’s former OQ\nprogram and section 2.0 of the new OQ program.\nFollowing the PHMSA inspection, an official notification for the significant OQ program change\nwas made to PHMSA on June 06, 2023.\n6. § 195.579 What must I do to mitigate internal corrosion?\n(a) . . . .\n(b) Inhibitors. If you use corrosion inhibitors to mitigate internal corrosion, you\nmust -\n(1) . . . .\n(3) Examine the coupons or other monitoring equipment at least twice each calendar\nyear, but with intervals not exceeding 7 ½ months.\nZenith Energy failed to examine internal corrosion coupons or other monitoring equipment at\nleast twice each calendar year, but with intervals not exceeding 7 ½ months in accordance with §\n195.579(b)(3). Zenith Energy missed a total of two internal corrosion coupon inspections or\nother monitoring equipment from 2020 through 2021. The Corrosion Coupon reports provided\n\n\n\nby Zenith Energy show that monitoring was done by a third-party vendor where internal\ncorrosion coupons were only taken for examination on March 16, 2020, and March 03, 2021.\nThe average corrosion rate was found to be under the KPI target of <1.0 mils per year and no\npitting was evident on the coupons as reported by the third-party vendor. Also, other records\nshow that pigging solids and liquid samples were collected at the pig receiver on March 16,\n2020, which is the same date as the corrosion coupons were removed for examination. It should\nbe noted that Zenith Energy shut down its crude oil pipeline in February, 2020 because of market\nconditions. However, the pipeline was stagnant prior to blocking it from its source and filling it\nentirely with nitrogen after purging all remaining crude oil during the week ending June 29,\n2022.\n7. § 195.452 Pipeline integrity management in high consequence areas\n(a) . . . .\n(j) What is a continual process of evaluation and assessment to maintain a pipeline's\nintegrity? –\n(1) . . . .\n(3) Assessment intervals. An operator must establish five-year intervals, not to\nexceed 68 months, for continually assessing the line pipe's integrity. An operator\nmust base the assessment intervals on the risk the line pipe poses to the high\nconsequence area to determine the priority for assessing the pipeline segments. An\noperator must establish the assessment intervals based on the factors specified in\nparagraph (e) of this section, the analysis of the results from the last integrity\nassessment, and the information analysis required by paragraph (g) of this section.\nZenith Energy failed to continually assess the line pipe’s integrity within a five-year interval, not\nto exceed 68 months, in accordance with § 195.452(j)(3). PHMSA reviewed Zenith Energy’s\npipeline integrity reassessment that was completed on December 11, 2019, using an In-Line\nInspection (ILI) tool. A short non-piggable 40-foot section of the 20-inch JBBR pipeline located\nat the MOJO facility was excluded from the 2019 integrity reassessment. Because it was not\nincluded in the 2019 integrity reassessment, that 40-foot section of pipe should have been\nassessed prior to or by July 21, 2020. During the 2022 inspection, Zenith Energy realized it did\nnot complete the integrity assessment on the relevant segment, and hydrostatically tested it on\nAugust 3, 2022. Therefore, Zenith Energy failed to continually test the 40-foot section of pipe\nfrom November 21, 2014 to August 3, 2022, exceeding the five-year, not to exceed 68 months,\ninterval required by § 195.452(j)(3).\n8. § 195.507 Recordkeeping.\n(a) . . . .\n(b) Records supporting an individual's current qualification shall be maintained\nwhile the individual is performing the covered task. Records of prior qualification\nand records of individuals no longer performing covered tasks shall be retained for\na period of five years.\n\n\n\nZenith Energy failed to maintain and provide for PHMSA during the inspection operator\nqualification (OQ) records for the contractor personnel that performed coating repair on a 6.5-\nfoot section of the 20-inch JBBR pipeline on December 14, 2020, contrary to the requirements of\n§ 195.507(b). The coating repair occurred at Dig 1 (Site ID 40000005) and was a covered task\nthat required OQ personnel to conduct it. Thus, the contractor personnel performed a covered\ntask and Zenith Energy failed to maintain OQ records in violation of § 195.507(b).\n9. § 195.402 - Procedural manual for operations, maintenance, and emergencies.\n(a) General. Each operator shall prepare and follow for each pipeline system a manual\nof written procedures for conducting normal operations and maintenance activities\nand handling abnormal operations and emergencies. This manual shall be reviewed\nat intervals not exceeding 15 months, but at least once each calendar year, and\nappropriate changes made as necessary to insure that the manual is effective. This\nmanual shall be prepared before initial operations of a pipeline system commence,\nand appropriate parts shall be kept at locations where operations and maintenance\nactivities are conducted.\nZenith Energy failed to review its written O&M Manual at intervals not exceeding 15 months,\nbut at least once each calendar year, in order to ensure that its procedures are effective, per the\nrequirements of § 195.402(a). Specifically, Zenith Energy’s written O&M Manual procedure No.\n203, entitled “Coating of Pipelines,” had not been reviewed annually, as admitted by Zenith\nEnergy during the inspection. The last revision date of the procedure was indicated as June 1,\n2001.\nZenith Energy’s written Public Awareness Program plan had also not been reviewed annually\nsince the plan was last updated in calendar year 2017. The plan change log showed that the\noriginal plan version number 1.0 had an issue date of September 1, 2016; version number 2.0 had\nan issue date of December 7, 2017. The plan also did not include the fact that Zenith Energy had\nbeen utilizing a vendor to fulfill public education and community awareness requirements. When\nrequested, Zenith Energy could not provide documentation showing annual program reviews\ntook place after the plan was last updated in calendar year 2017. Thus, Zenith Energy failed to\nreview its O&M Manual at intervals not exceeding 15 months, but at least once each calendar\nyear, in order to ensure that the manual is effective, in violation of § 195.402(a).\nFollowing the PHMSA inspection, Zenith Energy amended its procedure governing the\nperformance of internal corrosion coupon monitoring by including reinforced language for better\nunderstanding the responsibilities of key roles assigned to the management team.\nUnder 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed\n$266,015 per violation per day the violation persists, up to a maximum of $2,660,135 for a\nrelated series of violations. For violation occurring on or after January 6, 2023, and before\nDecember 28, 2023, the maximum penalty may not exceed $257,664 per violation per day the\nviolation persists, up to a maximum of $2,576,627 for a related series of violations. For violation\noccurring on or after March 21, 2022 and before January 6, 2023, the maximum penalty may not\nexceed $239,142 per violation per day the violation persists, up to a maximum of $2,391,142 for\na related series of violations. For violation occurring on or after May 3, 2021 and before March\n\n\n\n21, 2022, the maximum penalty may not exceed $225,134 per violation per day the violation\npersists, up to a maximum of $2,251,334 for a related series of violations. For violation\noccurring on or after January 11, 2021 and before May 3, 2021, the maximum penalty may not\nexceed $222,504 per violation per day the violation persists, up to a maximum of $2,225,034 for\na related series of violations. For violation occurring on or after July 31, 2019 and before\nJanuary 11, 2021, the maximum penalty may not exceed $218,647 per violation per day the\nviolation persists, up to a maximum of $2,186,465 for a related series of violations. For violation\noccurring on or after November 27, 2018 and before July 31, 2019, the maximum penalty may\nnot exceed $213,268 per violation per day, with a maximum penalty not to exceed $2,132,679.\nWe have reviewed the circumstances and supporting documents involved in this case, and have\ndecided not to conduct additional enforcement action or penalty assessment proceedings at this\ntime. We advise you to correct the item(s) identified in this letter. Failure to do so will result in\nZenith Energy Terminals Joliet Holdings LLC being subject to additional enforcement action.\nNo reply to this letter is required. If you choose to reply, in your correspondence please refer to\nCPF 3-2024-031-WL. Be advised that all material you submit in response to this enforcement\naction is subject to being made publicly available. If you believe that any portion of your\nresponsive material qualifies for confidential treatment under 5 U.S.C. § 552(b), along with the\ncomplete original document you must provide a second copy of the document with the portions\nyou believe qualify for confidential treatment redacted and an explanation of why you believe\nthe redacted information qualifies for confidential treatment under 5 U.S.C. § 552(b).\nSincerely,\nGregory A. Ochs\nDirector, Central Region, Office of Pipeline Safety\nPipeline and Hazardous Materials Safety Administration\ncc: Carlos Munguia, VP of Operations and Engineering, Zenith Energy,\nCarlos.Munguia@zenithterminals.com\nJonathan Patneau, Joliet Terminal Manager, Zenith Energy,\nJonathan.Patneau@zenithterminals.com","truncated":false,"body_characters":19739}