NATURAL GAS PIPELINE CO OF AMERICA (KMI) — Notice of Probable Violation

party submissionOfficial PDF420031005_Petition for Reconsideration_11092004.pdf#

420031005_decision on petition_10142005_text.pdf, page 1Official PDFU. S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 400 Seventh Street, S. W. Washington, D. C. 205SO Mr. Dwayne Burton Vice President Gas Operations Natural Gas Pipeline Company of America Kinder Morgan, Inc. One Allen Center 500 Dallas Street, Suite 1000 Houston, TX 77002 Re: CPF No. 4-2003-1005 Dear Mr. Burton: Enclosed is a decision on the petition for reconsideration filed in the above-referenced case. The Associate Administrator for Pipeline Safety has denied the petition and therefore, payment of the $30, 500 civil penalty is due immediately. Actions specified in the Compliance Order must also be taken. Your receipt of this decision constitutes service under 49 C. F. R. ) 190. 5. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure CERTIFIED MAIL — RETURN RECEIPT RE UESTED#

420031005_decision on petition_10142005_text.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ) In the Matter of ) ) Natural Gas Pipeline Company of America, ) ) A wholly-owned subsidiary of ) Kinder Morgan, Inc. , ) ) Petitioner ) ) CPF No. 4-2003-1005 DECISION ON PETITION FOR RECONSIDERATION On October 21, 2004, pursuant to 49 U. S. C. $ 60112, the Associate Administrator for Pipeline Safety issued a Final Order in this case finding Petitioner violated the pipeline safety regulations, assessed a civil penalty in the amount of $30, 500 and incorporated a Compliance Order that requires Petitioner to take specific steps to come into compliance with the regulations. On November 9, 2004, Petitioner filed a petition for reconsideration and requested a stay of the Compliance Order. OPS granted Petitioner a preliminary extension of time and by letter dated July 14, 2005 stayed the terms of the Compliance Order until the issuance of this Decision. Payment of the civil penalty was stayed automatically. In its petition, Petitioner sought reconsideration of the findings in the Final Order that Petitioner violated 49 C. F. R. $$ 192. 465(d) and 192. 705(a) (Items 2 and 3, respectively) and the civil penalties associated with those violations. Petitioner also sought reconsideration of the terms of the Compliance Order associated with Item 3. Item 2 of the Final Order found Petitioner violated $ 192. 465(d) by failing to take prompt remedial action at seven locations on the Love County Lateral to correct deficient cathodic protection readings. Section 192. 465(d) requires each operator take prompt remedial action to correct any deficiencies indicated by monitoring. The Final Order found Petitioner had eight low pipe-to-soil potential readings on the lateral during consecutive annual surveys in June 1999 and June 2000. Petitioner's records indicated that aAer some corrective action had been taken, only one of the eight locations was tested and found in compliance. The remaining seven locations were not tested ior another nine months. The Final Order found the delay in remediating the seven deficiencies supported finding Petitioner had violated $ 192. 465(d) and assessed a civil penalty of $3, 500.#

420031005_decision on petition_10142005_text.pdf, page 3In its pe i ion, e i ion t't, P t't' er advanced two reasons for setting aside the viola ' ' lation. First Petitioner otice of Probable ar ed that OPS based the violation on a matter that was never alleged in the Notice o ro a e Violation P1otice) or at the hearing. Petitioner argued OPS improper y ase P t t' ' f '1 e to survey the entire lateral following completion of the corrective action. Petitioner contended that OPS did not give proper notice that the issue of surveying t e would be considered. As such, Petitioner "was not given the opportunity to present evidence on the point. " Petition at 3. The Notice issue in s case ege e u d in this case alle ed Petitioner did not take prompt remedial action aAer discovering low pipe-to-soil potentials on the Love County Latera . e o ice i specific locations where pipe-to-soil potential reading s were below criteria levels during two consecutive years. Although etitioner s a e 1 h gh P tit' t t d that it had taken remedial action, the order found Petitioner failed to survey the entire lateral to veri&» fy whether the deficiencies had been remediated. The order found Petitioner spot-checked only one of '~~h f eight locations (710+99) on August 15, 2000 to determine compliance, but Petitioner did not survey e the rest of the lateral— specifically the seven other locations — until May 15, 2001. Since remedial action necessarily fyi h th th h urse of action has actually remediated the deficiencies, Petitioner had clear notice that one of the issues to be determined was whether Petitioner a promptly verified the remediation of each deficiency. Petitioner also conten e a d d that OPS did not fully consider evidence that it complied with g 192. 465(d). AAer a review of the record, I confirm the findings in t e ina r er. S ecifically, the order found Petitioner began to correct the deficiencies within approximately peci ca y, eor er o two months of discovering them by installing a new recti ifier. Over the next six months, Petitioner determined the new rectifier was insufficient to remediat e the deficiencies and began d I nt of a new deep well groundbed, which was completed within approximately thirteen eve opmen o anew months of the initial discovery. Petitioner's test point records (Petitioner s x i i . ) ' that Petitioner spot-checked location number 710+99 on Augus st 15 2000, one month after completing the deep we groun e, u e 11 db d b t there is no record that Petitioner surveyed the remaining seven locations until May 15, 2001. In most situations, operators should correct a deficiency indicated by monitoring by the next ins ection cycle. When an operator has not remediated a deficiency y e nex insp inspec ion cyc e. ' OPS looks at the circumstances to determine whether remediation w y n was unreasonably delayed. In ' the present case, Petitioner initiated corrective action within a few months o f months of discove and ry completed the activities shortly after the next inspection cycle. However, Petitioner delayed May 15, 2001. Prompt remedial action necessarily requires prompt verification to s ow t e deficiencies have been reme iate . e e ay o d' t d. Th d I ofanadditionalninemonthstoverifyremediation was unreasonable. Accordingly, I affirm the finding that Petitioner violated ) 192. 465(d) at seven locations. The $3, 500 civil penalty assessed for the violation is appropriate. Item 3 of the Final Order found Petitioner violated $ 192. 705 when it failed to patrol 34 right-of- way locations. Section 192. 705(a) requires each operator have and follow a patrol program to#

420031005_decision on petition_10142005_text.pdf, page 43 observe surface conditions on and adjacent to a transmission line right-of-way for indications of leaks, construction activity, and other factors affecting safety and operation. The &equency of patrols is determined by class location and other relevant factors, but intervals may not be longer than prescribed in f 192. 705(b). Transmission lines in Class 1 and 2 locations must be patrolled at a maximum interval of 15 months, but at least once each calendar year. All highway and railroad crossings in Class 1 and 2 locations must be patrolled at a maximum interval of 7/~ months, but at least twice each calendar year. The Final Order found that Petitioner's records indicated 34 locations had never been patrolled. Petitioner's employees also stated during the inspection that Petitioner was not patrolling the locations. In its response to the Notice, Petitioner claimed that it had patrolled the locations by aerial patrol once a year. However, Petitioner submitted no documentation to demonstrate the identified locations had been patrolled. Petitioner also failed to submit such evidence at the hearing or in Petitioner's post-hearing submission. Instead, Petitioner argued that g 192. 705 does not apply to the majority of the 34 locations because they are not "highway crossings. " The Final Order determined that $ 192. 705 applies to each of the identified locations and found Petitioner failed to patrol the locations in violation of g 192. 705. In the Petition, Petitioner again stated its position that some of the locations are not highway crossings. Whether or not the locations are highway crossings does not bear on the issue of whether Petitioner ever patrolled the locations. Section 192. 705 clearly states that Petitioner must patrol all Class 1 and 2 locations at least once each calendar year, if not more oAen. The Final Order found "Petitioner did not dispute the allegation that it did not provide records to demonstrate that the locations identified in the Notice were patrolled. " Final Order at 6. Although Petitioner repeatedly asserted that it had patrolled the locations, there is no evidence in the record to rebut the allegation that 34 locations "have never been patrolled. " Notice at 3 — 4. Accordingly, I affirm the finding that Petitioner violated $ 192. 705. The $27, 000 civil penalty assessed for the violation is appropriate. With respect to the frequency of patrolling, under $ 192. 705, highway crossings in Class 1 and 2 locations must be patrolled at a maximum interval of 7/~ months, but at least twice each calendar year. "All other places" on and adjacent to a transmission line right-of-way in Class 1 and 2 locations, must be patrolled at a maximum interval of 15 months, but at least once each calendar year. Petitioner put forward several reasons why it believed that 32 of the 34 locations are not highway crossings. First, Petitioner raised due process concerns with respect to its contention that OPS was defining highway outside of a rulemaking. For the purpose of determining maximum interval between patrols, the term "highway crossing" in $ 192. 705 includes locations on Petitioner's pipeline system where a transmission line crosses any aved or hard-surfaced road. This includes, but may not be limited to, any state or county public highway or any road with a paved, asphalt, or chip-seal surface. The record indicates 29 locations identified in the Notice are highway crossings. Accordingly, g 192. 705 requires patrolling at a maximum interval of 7A months, but at least twice each calendar year at those 29 locations. All other locations, including unpaved, gravel, and dirt road crossings, must be#

420031005_decision on petition_10142005_text.pdf, page 54 patrolled at a maximum interval of 15 months, but at least once each calendar year. ' This is consistent with the language of g 192. 705 and the term "highway, " which is not separately defined in OPS regulations. It is also consistent with the intent of ) 192. 705, which requires more frequent patrolling at transmission line right-of-way locations where a pipeline may be subject to regular vehicular or locomotive traffic. It is not inconsistent with other OPS regulations, specifically f$ 191. 23 and 195. 55 (safety-related condition reports). Petitioner also contended that OPS "ignored unrebutted evidence at the hearing that a prudent person familiar with the pipeline industry and safety purposes of the standard could have believed that an unpaved road such as Bill Barrett Road would be a 'highway' under 49 C. F. R. g 192. 705. " Petition at 5. The testimony of Petitioner's witness regarding what he or she could have believed is not controlling on this Decision. Petitioner further urged OPS to consider a Federal Railroad Administration (FRA) regulation. I find the regulation is inapplicable. Under the terms of the Compliance Order, Petitioner must verify compliance with $ 192. 705 in accordance with this Decision. Relief Denied I have considered Petitioner's request for reconsideration. I do not find Petitioner's assertions warrant withdrawal of the findings of violation, reduction in the civil penalty, or amendment to the terms of the Compliance Order. The terms of the Final Order remain in effect, including assessment of the civil penalty in the amount of $30, 500. Payment of the civil penalty must be made within 20 da s of service. Federal regulations (49 C. F. R. g 89. 21(b)(3)) require this payment be made by wire transfer, through the Federal Reserve Communications System (Fedwire), to the account of the U. S. Treasury. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-120), Federal Aviation Administration, Mike Monroney Aeronautical Center, P. O. Box 25082, Oklahoma City, OK 73125; (405) 954-4719. Failure to pay the 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. Failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a United States District Court. The stay of the terms of the Compliance Order granted by letter dated July 14, 2005 is withdrawn. Accordingly, Respondent is directed to comply with the terms of the Compliance Bill Barrett Road, Boots Havard Road, C. R. 223, Greens Road, and Jack Station are not highway crossings according to their description and pictures provided in Petitioner's Exlubit II. 5. Petitioner cited 49 C. F. R. $ 222. 37, an FRA regulation pertaimng to the establishment of "quite zones. " The regulation mentions a "county road" and "State highway" in a parenthetical example of a pubhc grade crossing under the authority and control of more than one pubhc authority.#

420031005_decision on petition_10142005_text.pdf, page 6Order contained in the Final Order within 60 da s of service of this Petition. The Director, Southwest Region, OPS may grant an extension of time for compliance with any of the terms of the Compliance Order upon a written request by the Petitioner demonstrating good cause for an extension. This decision on reconsideration is the final administration action in this proceeding. p7 pe & 4 M Date Issued S a y erard A ciate Administrator for Pipeline Safety#

420031005_final order_10212004_text.pdf, page 1Official PDFUS Department of Transportation Research and Special Programs Administration 400 Seventh St, " W Washington D i. ?0590 OCT 2 t Mr. Scott E. Parker President Natural Gas Pipeline Company of America 747 East 22" Street Lombard, IL 60148-5072 RE: CPF No. 4-2003-1005 Dear Mr. Parker: Enclosed is the Final Order issued by the Associate Administrator for Pipeline Safely in the above-referenced case. It makes findings of violation, requires certain corrective action. and , assesses a civil penalty of $30, 500. Your receipt of the Final Order constitutes service of that document under 49 C. F. R. $ 190. 5. At such time that the civil penalty is paid and the terms &f the compliance order are completed, as determined by the Director, Southwest Region, this enfor ct ment action will be closed. Your receipt of the Final Order constitutes service of that document u ider 49 C. F. R. 5 190. 5. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety cc; . Mr. Michael Noone, Attorney for NGPL Mr. Dwayne Burton, Vice-President of Gas Pipeline Operations, NGPL Mr. R. M. Seeley, Director, OPS Southwest Region CERTIFIED MAIL - RETIJRN RECEIPT RE UESTED#

420031005_final order_10212004_text.pdf, page 2DEPARTMENT OF TRANSPORTATION RESEARCH AND SPECIAL PROGRAMS ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 Natural Gas Pipeline Company of America, ) Respondent ) ) ) ) ) CPF No. 4-2003-1005 FINAL ORDER Between February 25 and July 26, 2002 pursuant to 49 U. S. C. $ 60117, representatives of the Southwest Region, Office of Pipeline Safety (OPS), conducted onsite pipeline safety inspections on multiple units of Respondent's natural gas onshore Gulf Coast pipehne system in Texas and Louisiana and the Oklahoma Extension and Mountain View pipeline systems, which consist of Ratliff City, Mooreland, Roxton, Mt. View, Lufkin, Victoria, Robstown, Wharton, New Caney, Cameron, Devers and Marshall. Respondent is a subsidiary of KN Energy, Incorporated. As a result of this investigation, the Director, Southwest Region, OPS, issued to Respondent, by letter dated May 14, 2003, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Comphance Order (Notice). In accordance with 49 C. F. R. ) 190. 207, the Notice proposed finding that Respondent had committed violations of 49 C. F. R. Part 192, proposed assessing a total civil penalty of $31, 000 for the alleged violations, and proposed that Respondent take certain measures to correct the alleged violations. Respondent responded to the Notice by letter dated, June 13, 2003 (Response). Respondent contested two of the three allegations, offered information in explanation of the allegations and in mitigation of the proposed penalty and requested a hearing. The hearing was held on November13, 2003 in Houston, TX. After this hearing, Respondent provided additional information and a closing Response dated December 2, 2003. FINDINGS OF VIOLATION In its Response and at the hearing, Respondent did not contest Item 1 of the Notice. Accordingly, I find that Respondent violated the following sections of 49 C. F. R. Part 192, as more fully described in the Notice:#

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420031005_final order_10212004_text.pdf, page 4920+94 06/24/99 06/21/00 . 845 . 832 953+76 06/24/99 06/21/00 . 822 . 830 In response to the Notice and at the hearing, Respondent acknowledged that its corrosion control records showed low pipe-to-soil readings but contended that the readings were not at "critical" levels. Respondent argued that it took immediate action in response to the 6/19/99 low pipe-to-soil readings in the affected area by installing a new rectifier on 8/24/99. However, the new rectifier did not improve the low pipe-to-soil potentials. Respondent explained that when it discovered that the rectifier had not improved the readings, it designed a deep ground bed system. Respondent further explained that it took approximately 6-7 months to obtain the necessary approvals and permits, execute bid packages and select a contractor for the ground bed system. The ground bed system was installed between 7/10/00 and 7/12/00. Respondent stated that its annual survey, performed on 5/18/01, showed all readings were in compliance. Respondent contends that these steps show that it took prompt remedial action within the 15 month inspection mterval to address low pipe-to-soil condition readings. OPS argued that at the time of the 2002 inspection, Respondent's corrosion control records on the Love Country Laterals indicated that pipe-to-soil potentials had been low for multiple years with no documented remedial action. Respondent acknowledged that at the time of the inspection its corrosion control records showed there were low pipe-to-soil readings. During the hearing, Respondent submitted documents to indicate remedial action had been completed, Although Respondent argued that it had initiated several projects to address low pipe-to-soil readings in the subject area, Respondent's documentation and records at the hearing did not demonstrate that the entire lateral was surveyed before the next inspection cycle. Respondent's annual survey was performed on 5/18/01. Consistent low cathodic protection readings indicate that a pipeline is not receiving adequate protection, a condition that could adversely affect the safe operation of a pipeline system. The risk of corrosion on the pipeline significantly increases with inadequate pipe-to-soil potentials and can result in a pipeline failure. Prompt remedial action at the earliest warning or indication of low pipe- to-soil readings is critical to safety of the public, environment and property. Respondent's Love County Laterals had low pipe-to-soil readings with no indication or documentation of timely corrective action on the entire lateral before the next inspection cycle. Documentation submitted by Respondent at the hearing showed completion of remedial action at only one location, Mile Post 710+99, where the reading on 8/15/00 was 1. 298. Accordingly, I find that Respondent violated 49 C. F. R. $192. 465(d) by not taking prompt remedial action actions to correct the condition. Item 3 in the Notice alleged that Respondent had violated 49 C. F. R. $ 192. 705(a) by not providing records at the time of the inspection to show that it patrolled its pipelines to observe surface conditions on and adjacent to the transmission line right-of-way for indications of leaks, construction#

420031005_final order_10212004_text.pdf, page 5activity, and other factors affecting safety and operation. At highway and railroad crossings, in Class 1 and 2 locations, the maximum intervals between patrols is 7 /~ months, but at least twice each calendar year. At the time of the inspection, Respondent's records for the Mt. View District indicated that Line Number OEP1 has 13 highway crossings that have never been patrolled, ' Line Number MAM has 15 crossings that have never been patrolled, ' and in the Roxton and Chico Districts 5 highway crossings have never been patrolled. ' Also, in the Lufkin District there are 21 highway crossings that have never been patrolled. ' OPS testified that during the inspection, a request was made for patrol records and that in response to the request, records were provided by Respondent's employee with the locations identified in the Notice. OPS inspector testified that while reviewing the records identified by Respondent's employee as patrol records, he saw that the form identified locations as highways and written next to some of the highways was "N/A". The OPS inspector testified that he questioned the "N/A" designation and Respondent's employee stated that they were not inspecting those locations. Respondent countered that it is not responsible for personnel providing incorrect forms that led the OPS inspector to request the patrol records which lead to the Notice. Respondent stated that it patrols all Class 1 and Class 2 areas by aerial patrol once a year. Respondent argued that some of the roads identified by OPS are not highways. Although Respondent conceded that two of the locations were highways, Respondent argued that the remaining locations are county roads and that regulations do not require the patrol of county roads. Respondent stated that the county does not consider these locations highways. During the hearing, Respondent submitted an excerpt from Webster's Dictionary II and argued that Webster's defines highway as "A main public road, esp. one connecting towns and cities. " Respondent further argued that 49 C. F. R. $195. 55 (b)(1) defines highways in relation to safety-related condition reports and in that regulation a distinction is made between highways, roads and streets. Respondent submitted color photographs of the locations identified in the Notice to support its position that the locations are not highways. Thirteen crossings not patrolled at Mile Numbers: 141, 146, 151, 153, 155, 157, 158, 173, 174, 182, 187, 196 and 202. Fifteen crossmgs not patrolled at Mile Numbers. 143, 146, 151, 153, 154, 157, 158, 164, 166, 170, 172, 176, 177, 178 and 186 Five highways and crossmg not patrolled at FM 1658 at MP 346, Highway 101 at MP 344, FM 1655 at MP 339 and MP 337 and Highway 287 at MP 333. Twenty-one highway crossings not patrolled: Strmg Town Road, River Jordan Road, Industrial Road, Providence Road, Rayon Road, Greens Road, Jack Station, Bill Barrett, Princess Road, Boot Harvard Road, C R 257, C R. 285, Deer Lane, Hoskin Road, Carrel Road, C. R. 137a, Water Well Road, C R 220, C R. 223, C. R 260 and C R. 263.#

420031005_final order_10212004_text.pdf, page 6As for Respondent's position that it is not responsible for personnel providing incorrect forms that led the OPS inspector to request the patrol records, an employer is ultimately responsible for the actions of its employees. Although Respondent's employee may have provided the incorrect forms initially, it was those forms that dictated further inquiry and led to a closer inspection of Respondent's patrol records. It is an appropriate response for an OPS inspector, in his or her quest to determine compliance, to follow-up on, inspect and to investigate documentation that raises questions about compliance with pipeline safety laws and regulations. With respect to Respondent's position that some o f the locations identified by OPS are not highways and that the regulations do not require Respondent to patrol county roads, Respondent argued that for OPS to apply 49 C. F. R. $ 192. 705(a) to county roads a rulemaking is required by the Administrative Procedures Act, as this represents a substantive policy change. It is common for a Respondent found in violation of OPS regulations to claim that OPS' interpretation of the regulation is misplaced; or that the agency's interpretation of the statute, even if permissible, renders the statutory language sufficiently vague that reasonable persons could not have been expected to understand that their conduct was unlawful. The ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation. Interpretation begins with the language of the statute or regulation itself and is based largely on reading the language of the regulation being interpreted, in light of the purpose of the regulation and the agency's general policy goal. In this case, it is the broad powers and authority to enforce pipeline safety. Respondent is considered to have received fair notice of the agency's interpretation if a prudent person familiar with the pipeline industry and the safety purposes of the standard would have recognized the safety requirement. In applying the reasonable person standard to the notice issue, consideration is given to a variety of factors, including the language of the regulation, its purpose, its placement in the overall regulatory scheme, its regulatory history, the agency's enforcement, and OPS' advisory notices and interpretations informing the regulated community of its interpretation. Pre-enforcement efforts such as advisory bulletins, agency interpretations and 49 C. F. R. $190. 11 provide notice and enable Respondent to identify with ascertainable certainty the standards with which OPS expects parties to conform. Respondent failed to cite anyprecedent where OPS excluded county roads from the definition of highway, for purposes of enforcing the patrolling requirements. As. for the Respondent's argument about the dictionary definition ofhighway, we believe that most definitions of "highway"included a common term, the word "public. " ' The primary objective of the Federal gas pipeline safety standards and the purpose for the patrolling requirements is to maintain public safety. Notably, the Federal Highway Act, Title 23 of the United States Code, Section 101, subsection(a), which contains definitions, defines the term "highway" as including a road, street, and parkway; a right-of-way, bridge, railroad-highway crossing, tunnel, drainage structure, sign, Webster's International Dictionary, for example, defines a highway as 'a road or way open to the use of the pubhc ' Funk & Wagnalls Standard Dictionary defines a highway as '1, A pubhc thoroughfare; specified hne of 'travel 2 A common or open way or course#

420031005_final order_10212004_text.pdf, page 7guardrail, and protective structure, in connection with a highway; and a portion of any interstate or international bridge or tunnel and the approaches thereto. There is a clear indication that these locations are areas traversed by the public. The "true test" of whether a "way" is a highway is "whether the 'way or place of whatever nature' is open to the use of the public for purposes of vehicular travel. " Crouse v. Pugh, 188 Va. 156, 164, 49 S. E. 2d 421, 426, 4 A. L. R. 2d 1242. ' Respondent argued that the regulations do not require Respondent to patrol county roads or roads that are composed of certain materials and in support of that position submitted color photographs o f areas that it deemed county roads. The Court in Crouse v. Pugh clearly states that a highway ". . . or place is not determined by whether the way is improved or consists of dirt and gravel". Id at 165. A pubhc way is a way which all the people have the right to use. The patrolling of county roads open to use by the public does not expand or represent a change in OPS pohcy or interpretation, as pipelines must be patrolled to observed surface conditions for indications of leaks, construction activity, and other factors affecting safety and operation and for the purpose of insuring against pipeline encroachments and preventing tree roots from damaging underground pipes in a manner sufficient to cause corrosion. When a pipeline is not adequately monitored and a system of inspection maintained an operator will not be able to insure reasonable promptness in the detection of all surface conditions on and adjacent to the transmission line right- of-way for indications of any and all factors affecting the safety and operations of the pipeline. Patrolling is particularly critical at highway and railroad crossings where the public traverse almost constantly. Patrolling reduces the risk of damage to property, persons and the environment. Without the required documentation an operator cannot adequately demonstrate that it patrolled its pipelines to observe surface conditions on and adjacent to the transmission line right-of-way for indications of leaks, construction activity, and other factors affecting safety and operation. Without this history of patrol records, an operator will have difficultly determining areas where there are problems that need to be addressed. Respondent does not dispute the allegation that it did not provide records to demonstrate that the locations identified in the Notice were patrolled. Accordingly, I find that Respondent violated 49 C. F. R. $192. 705(a). These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. In Crouse v Pugh, 188 Va. 156, 164, 49 S. E. 2d 421, 426 (1948), 4 A. L R 2d 1242, the Court said 'This section needs no construction. Its meamng is perfectly plam, copiprehensive and unambiguous. It does not hriut the meamng of the word 'lughway' to a hard-surfaced or partly hard-surfaced way or to a dirt and gravel way. It does not confine a highway to the mam-travelled portion of the way or to lanes specifically designated for vehicular traffic No exception is made as to the shoulders or slopes of a way The nature of the way or place is not deternuned by whether the way is improved or consists of dirt and gravel. The paving of a way does not make it a 'lughway ' The true test is whether the 'way or place of whatever nature' is 'open to the use of the pubhc for purposes of vehicular travel. '#

420031005_final order_10212004_text.pdf, page 8ASSESSMENT OF PENALTY The Notice proposed a $31, 000 civil penalty for violation of 49 C. F. R. ) $192. 465(d) and 192. 705(a). Under 49 U. S. C. $ 60122, Respondent is subject to a civil penalty not to exceed $100, 000 per violation for each day of the violation up to a maximum of $1, 000, 000 for any related series of violations. 49 U. S. C. $ 60122 and 49 C. F. R. $ 190. 225 require that, in determining the amount of the civil penalty, I consider the following criteria: nature, circumstances, and gravity of the violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve comphance, the effect on Respondent's ability to continue in business, and such other matters as justice may require. The proposed penalty for Item 2 is $4, 000 for violation of 49 C. F. R. )192. 465(d). Respondent failed to timely correct for multiple years low pipe-to-soil readings on its Love County Laterals, which could adversely affect the safe operation of its pipeline system. Respondent did contest the alleged violation and requested that the proposed violation and civil penalty be set aside, Although Respondent provided documentation to show completion of remedial action at one location, Mile Post 710+99, Respondent's Love County Laterals had low pipe-to-soil readings with no indication or documentation of timely corrective action on the entire lateral before the next inspection cycle. However, based upon documentation that showed the completion of remedial action at one location the proposed civil penalty is reduced. Without adequate cathodic protection, corrosion can occur resulting in a pipeline failure. A failure in a line careering hazardous material poses a danger to the public and the environment. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $3, 500. The proposed penalty for Item 3 is $27, 000 for violation of 49 C. F. R. $ 192. 705(a). Although Respondent contested the alleged violation and contended that the proposed civil penalty associated with county roads be eliminated, Respondent conceded that two of the locations were highways. County roads are open to the use of the public for purposes of vehicular travel and the dirt, gravel or paving does not restrict, confine or limit it as a highway. As discussed above, 49 C. F. R. $ 192. 705(a) does not limit the meaning of the word 'highway* to a particular surface and does not confine a highway to a main public road, one connecting towns and cities. Minimum safety standards for pipeline safety are inclusive and not exclusive. Pipelines must be patrolled to obser ved surface conditions for indications of leaks, construction activity, and other factors affecting safety and operation and for the purpose of insuring against pipeline encroachments and preventing tree roots from damaging underground pipes in a manner sufficient to cause corrosion. Respondent failed to exercise vigilance commensurate with the danger to protect the pubhc, environment, and property. Respondent is responsible for compliance with the pipeline safety regulations, which includes sound record keeping. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $27, 000.#

420031005_final order_10212004_text.pdf, page 9Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $30, 500. A determination has been made that Respondent has the ability to pay this penalty without adversely affecting its ability to continue business. Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C. F. R. $ 89. 21(b)(3)) require this payment be made by wire transfer, through the Federal Reserve Communications System (Fedwire), to the account of the U. S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-120), Federal Aviation Administration, Mike Monroney Aeronautical Center, P. O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the $30, 500 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 ~nd 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 United States District Court. COMPLIANCE ORDER The Notice proposed a comphance order with respect to Item 3 for violation of 49 C. F. R. 5192. 705(a). 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. 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. Respondent must- 1. Within 30 days of the receipt of this Final Order, perform an audit to ensure all NGPL pipelines are in compliance with 49 C. F. R. $192. 705(a). This audit shall include: (A) Review of all applicable procedures and amendment of procedures, as necessary. Any amended procedures shall be submitted to the Southwest Regional Director. (B) Perform survey of pipelines throughout NGPL's system to evaluate patrol program to ensure that the patrolling ofhighways, including countyroads, are performed in accordance with $192. 705(a); and (C) After completion of the review and survey, develop a plan for patrolling highway crossings to bring NGPL into comphance. Submit plan along with a summary and evidence of completion the plan to Southwest Regional Director,#

420031005_final order_10212004_text.pdf, page 102. Within 30 days of receipt of this Final Order, submit confirmation and/or evidence of completion of these actions to the Director, OPS, Southwest Region, 8701 South Gessner Street, Suite 1110, Houston, TX 77074. The Director, OPS, Southwest Region may grant an extension of time for compliance with any of the terms of this order for good cause. A request for an extension must be in writing. Failure to comply with this Final Order may result in the assessment of civil penalties of up to $100, 000 per violation per day, or in the referral of the case for judicial enforceinent. Under 49 C. F. R. $ 190. 215, Respondent has a right to submit a Petition for Reconsideration of this Final Order. The petition must be received within 20 days of Respondent's receipt of this Final Order and must contain a brief statement of the issue(s). The filing of the petition automatically stays the payment of any civil penalty assessed. All other terms of the order, including any required corrective action, remain in full effect unless the Associate Administrator, upon request, grants a sta he terms and conditions of this Final Order are effective on receipt OCT 2 ] ZP. Date Issued Stac ss yG rard iate Administrator ipeline Safety#