MAGELLAN PIPELINE COMPANY, LP — Notice of Probable Violation

party submissionOfficial PDF420055016_Petition for Reconsideration_09282006.pdf#

case documentOfficial PDFCPF_NO_4-2005-5016.pdf#

420055016_Decision on Petition_02132009_text.pdf, page 1Official PDFVIA CERTIFIED MAIL – RETURN RECEIPT REQUESTED Mr. Paul E. Pratt, Esq. Magellan Midstream Partners, L.P. One Williams Center Suite 2800 Tulsa, OK 74172 Re: CPF No. 4-2005-5016 Dear Mr. Pratt: Enclosed is the decision on the petition for reconsideration filed by Magellan Midstream Partners, L.P., in the above-referenced case. For the reasons specified therein, the petition is granted, in part. Payment of the $120,500 civil penalty is due within 20 days of service. The findings of the Final Order remain unaltered and stand as stated therein. When the civil penalty is paid, this enforcement action will be closed. Your receipt of this decision constitutes service under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety Enclosure#

420055016_Decision on Petition_02132009_text.pdf, page 2U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾) In the Matter of ) Magellan Midstream Partners, L.P. ) CPF No. 4-2005-5016 Petitioner. ) ) ) ) ) DECISION ON PETITION FOR RECONSIDERATION On September 6, 2006, pursuant to 49 U.S.C. § 60112, the Associate Administrator for Pipeline Safety (Associate Administrator) issued a Final Order in this case finding Petitioner had violated the pipeline safety regulations and assessing a civil penalty in the amount of $183,500. PHMSA’s records are unclear as to the date Petitioner filed a petition for reconsideration of the Final Order. Therefore, I am treating the petition as timely filed. In its petition, Petitioner sought reconsideration of the $183,500 civil penalty assessed for two pipeline safety violations: (1) failing to provide records demonstrating that three hundred and fifteen (315) of its employees were properly qualified to perform the covered task under Respondent’s operator qualification (OQ) plan; and (2) failing to ensure through evaluations that individuals performing covered tasks were qualified. Petitioner seeks a reduction in the civil penalty assessed on the grounds that PHMSA erred by stating in the Order that Petitioner “failed to justify mitigation or elimination of the civil penalty.” Specifically, Petitioner argues PHMSA failed to consider three mitigating factors Petitioner had presented prior to the issuance of the Final Order – factors PHMSA was required to consider. Petitioner claims the penalty should have been mitigated based on the information submitted in its Post- Hearing brief, based on its expeditious response in correcting the violations, and based on “other matters as justice may require.” First, Petitioner argues that PHMSA ignored the mitigating information Petitioner had provided in its post-hearing brief when PHMSA considered the nature, circumstances and gravity of the violation. The Final Order indicates that the records provided in its post-hearing brief did not remove the finding of violation; however, the Final Order did not adequately address the issue of mitigation of the penalty based on the information submitted in its Post-Hearing brief. In the Final#

420055016_Decision on Petition_02132009_text.pdf, page 3Order, I found Petitioner had not adequately reviewed the qualification records transferred from Williams since it did not have them readily accessible during the inspection. After reviewing the case file, including Petitioner’s documentation submitted with its post-hearing brief, I find that the documentation does warrant some mitigation of the penalty. Petitioner’s second argument is that its expeditious response in correcting the violations demonstrates a good faith attempt to achieve compliance, thereby warranting a reduction in the penalty. The “good faith” factor represents an operator’s good faith in attempting to comply with the regulations prior to an inspection. The factor is designed to give an operator credit for its attempt to comply, even if it ultimately was not in compliance. After reviewing the documentation submitted with its post-hearing brief, Petitioner appears to have made good faith efforts to comply with the regulations and some mitigation is warranted. Petitioner’s third basis for a reduction is the criterion “such other matters as justice may require.” Petitioner argues that PHMSA’s failure to mitigate the penalty will have a chilling effect on other companies who are considering what action to take following an inspection. Although Petitioner made efforts to bring itself into compliance in a timely manner following the inspection, it did not take any actions that were not already required under the regulations. Petitioner should not derive any benefit for its failure to comply or for its prompt response to bring a violation into compliance following an inspection. Relief Granted, in part I have considered Petitioner’s request for reconsideration. This Decision does not alter the findings of violation as described in the Final Order. Although the additional information submitted with Petitioner’s post-hearing Brief warrants mitigation of the civil penalty, it does not establish that the violations found in the Final Order did not occur. The civil penalty of $183,500 assessed in the Final Order should have been reduced to reflect all of the information submitted by Petitioner during the course of the enforcement proceeding. Accordingly, I hereby assess a civil penalty of $120,500. 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. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 269039, Oklahoma City, OK 73125; (405) 954-8893. 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. 2#

420055016_Decision on Petition_02132009_text.pdf, page 4Pursuant 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. This decision on reconsideration is the final administrative action in this proceeding. ____________________________ _____________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 3#

420055016_Final Order_09062006.pdf, page 1Official PDFU.S. Department 400 Seventh Street, S.W. of Transportation Washington, D.C. 20590 Pipeline and Hazardous Materials Safety Administration Richard A. Olson Vice President, Transportation Operations Magellan Midstream Partners, L.P. One Williams Center P.O. Box 22 186 Tulsa, OK 74 12 1 RE: CPF NO. 4-2005-50 16 Dear Mr. Olson: Enclosed is the Final Order issued by the Acting Associate Administrator for Pipeline Safety in the above-referenced case. It makes findings of violation, assesses a civil penalty of $1 83,500 and specifies actions to be taken to comply with the pipeline safety regulations. The penalty payment terms are set forth in the Final Order. When the civil penalty is paid and the terms of the compliance order completed, as determined by the Director, Southwest Region, this enforcement action will be closed. Your receipt of the Final Order constitutes service of that document under 49 C.F.R. 190.5. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety cc: Mr. Paul E. Pratt, Counsel for Magellan Midstream Partners, L.P. Mr. Rod Seeley, Director, Southwest Region, OPS Enclosure CERTIFIED MAIL - RETURN RECEIPT REOUESTED#

420055016_Final Order_09062006.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 In the Matter of 1 Magellan Midstream Partners, L.P., ) CPF No. No. 4-2005-5016 Respondent. 1 FINAL ORDER On April 28-29,2004, pursuant to 49 U.S.C. 9 601 17, a team of representatives of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Southwest Region, and the Minnesota Office of Pipeline Safety conducted an on-site pipeline safety inspection of Respondent's Operator Qualification records and procedures in Tulsa, Oklahoma. As a result of the inspection, the Director, Southwest Region, issued to Respondent, by letter dated April 18, 2005, a Notice of Probable Violation, Proposed Civil Penalty and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. 5 190.207, the Notice proposed finding that Respondent had violated 49 C.F.R. §195.505(b) and proposed assessing a total civil penalty of $1 83,500 for the alleged violation. The Notice also proposed that Respondent take certain measures to correct the alleged violation. Respondent responded to the Notice by letter dated May 19,2005 (Response). Respondent contested part A of the allegation, offered information to explain the allegation and requested that the proposed civil penalty be eliminated. Respondent also requested a hearing. The hearing was held in Houston, Texas via teleconference on September 2 1,2005. Respondent was granted permission to submit a post-hearing Response. In support of its position, Respondent submitted a Post-Hearing Brief dated October 28, 2005. On December 29, 2005, Respondent. submitted records of all employees that had been re-evaluated pursuant to the proposed compliance order. FINDINGS OF VIOLATION Uncontested Respondent did not contest the alleged violation of 49 C.F.R. $195 in Item 1B of the Notice. Accordingly, I find that Respondent violated 49 C.F.R. Part 195, as more filly described in the Notice: 49 C.F.R. §192.505(b) - failure to ensure through evaluations that individuals performing covered tasks are qualified. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent.#

420055016_Final Order_09062006.pdf, page 3Item 1A of the Notice alleged that Respondent violated 49 C.F.R. 5 195.505(b), when Respondent did not provide records to demonstrate that three hundred and fifteen (315) of its employees, transferred from Williams to Respondent, were qualified to perform the covered task under Respondent's operator qualification (OQ) program. The records contained no evidence that Respondent validated Williams' evaluations or that Respondent reviewed corresponding records to ensure that each of the employees in question successfully performed each covered task referred to as "qualified" to perform. The records were void of any documentation that the employees in question had performed each covered task on a regular basis prior to the effective date of the rule. The records were also void of any documentation that the tasks were performed without error and that the performance of any covered task did not result in an accident. Therefore, the OPS inspection team determined that the evaluation method actually used by Respondent was an un-documented misuse of the work performance history evaluation method, which amounted to "grandfathering" employees. In response to Item 1 A, Respondent advised that it requested and received a documented work performance history review worksheet for each Williams employee transferred to Respondent. Respondent further advised that the Williams organization that was operating the assets the hour before the transition to Respondent was the same organization (supervisors and employees) that were operating the organization an hour after the transition. Respondent stated that Williams performed a DOT-Operator Qualification Work History Performance Review Field Worksheet on its applicable employees. Respondent further stated that Williams transferred the Qualification Worksheets associated with each applicable employee to Respondent. In support of its position, Respondent submitted records that consisted of a six page document entitled "Work History Performance Review Field Worksheet" and a sample "Qualification Worksheet." Respondent contended that work history performance review (WHR) is specifically recognized as an acceptable evaluation methodology for transitional qualifications. Transitional qualification under the Final Rule' is defined as "qualification completed by October 28,2002, of individuals who have been performing a covered task on a regular basis prior to the effective date of the rule." Respondent further argued that the Final Rule specifically states, "Prior to the three year compliance date operators may use work performance history review as the sole method for evaluation when qualifying individuals." OPS argued that, during the compliance inspection, Respondent failed to provide records to demonstrate that three hundred and fifteen (3 15) of its employees, transferred from Williams to Respondent were properly qualified to perform the covered task or that they were properly qualified to perform the covered task under the Respondent's OQ program. The issue is whether Respondent provided adequate OQ records to demonstrated compliance with 49 C.F.R. 5 195.505(b) and that it validated the evaluations. '~inal Rule, Pipeline Safety: Qualification of Pipeline Personnel, 64 FR 46853, August 27, 1999.#

420055016_Final Order_09062006.pdf, page 4Based upon the "undocumented" evaluation or lack of validation, OPS determined that no effort had been made by Respondent to ensure that the employees in question had performed each covered task on a regular basis prior to the rule's effective date, that the tasks were performed without error, and that the performance of any covered task did not result in an accident. OPS further argued that Respondent did not provide any additional information to support the evaluation or qualification of the employees. OPS concluded, based upon the lack of records and documentation, that the employees were "grandfathered," with their Williams qualifications and no validation of their evaluations. Respondent contended that it was in compliance with 49 C.F.R. §195.505(b) and did have documentation that employees who were transitionally qualified to perform specific covered tasks had 1) performed those tasks on a regular basis prior to the effective date of the rule, 2) performed the tasks without error. Respondent further contended that the inspection team did not ask Respondent to provide this documentation during the April 2004 PHMSA audit. Even considering Respondent's argument in a light most favorable to Respondent, it is Respondent is required to demonstrate compliance with an applicable regulation during a PHMSA inspection. The violation report clearly indicates that the PHMSA inspection team inquired about compliance with 49 C.F.R. §195.505(b) and were provided the "Williams Appendix C -Work History Performance Review" form and the "Magellan OJT Checklist - Performance Requirements" by one employee of the Respondent and was witnessed by another. Respondent acknowledged that an inspector discussed its deficiencies during the exit interview. Therefore, Respondent was well aware of the lack of sufficient documentation and the requirement to provide relevant OQ records to demonstrate compliance before the conclusion ofthe inspection. Respondent had ample opportunity, prior to the inspection, during the inspection, and during the exit interview, to provide any and all records to demonstrate compliance. Furthermore, an operator is required to maintain records in accordance with the requirements of 49 CFR 195, subpart G, for all individuals performing covered tasks. Operators are required to maintain records regarding covered task, individual performing, evaluation method(s), continuing performance evaluation, reevaluation interval, and reevaluation records. An inspector is not required to specifically request a particular form or document, as the inspector would have no knowledge of every form that an operator may use for its OQ Program. It is the operator that must provide proof of compliance. Respondent has an affirmative duty to achieve and maintain compliance. Therefore, during a pipeline safety inspection operators must provide the documentation and records, as required by federal pipeline safety laws and regulations, to demonstrate compliance. Ultimately, the Respondent is responsible for compliance with the pipeline safety regulations, which includes sound record keeping. During the inspection, in response to the Notice, and at the hearing, Respondent failed to present adequate evidence to demonstrate that an acceptable method, transitional or otherwise, was used to qualifL the employees in question to perform the covered task under Respondent's OQ program. No records were provided by Respondent to validate the evaluations or to show that Respondent reviewed corresponding records to ensure that each of the employees in question successfully performed each covered task, "qualified" to perform. The records were not provided during the inspection nor during the post inspection exit interview.#

420055016_Final Order_09062006.pdf, page 5On one hand, Respondent argued that there was a seamless transition of ownership interest from Williams to Magellan and all relevant records were transferred for applicable employees. If they were one and the same, then all of Respondent's OQ records and supporting documentation should have been readily available and provided during the inspection. The records and documentation of the qualification method used by Respondent should have been provided during the inspection to adequately show that an acceptable method was used for qualification and that employees were properly qualified to perform the covered task. Respondent has not provided any explanation or justification why the records and documentation were not provided during the inspection or exit interview to demonstrate compliance. Without the required records and history, it is difficult for an operator to demonstrate that employees are properly qualified to perform specific covered tasks, that they performed these tasks on a regular basis prior to the effective date of the rule and that they performed the tasks without error. Accordingly,I find that Respondent violated 49 C.F.R. $195.505(b), as Respondent failed to provide adequate records or data that carefully and thoroughly document and support the evaluation and qualification of the employees to perform specific covered tasks under Respondent's OQ program. ASSESSMENT OF PENALTY 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 compliance, the effect on Respondent's ability to continue in business, and such other matters as justice may require. The Notice proposed a total civil penalty of $ 183,500 for violations of 49 C.F.R. Part 195. The proposed civil penalty for Item 1A & B is $183,500 for violation of 49 C.F.R. $ 195.505(b), as Respondent failed to provide records to demonstrate that three hundred and fifteen (3 15) of its employees were properly qualified to perform the covered task under Respondent's operator qualification (OQ) program. Respondent also failed to ensure through evaluations that individuals performing covered tasks are qualified. Respondent countered that, given its response in the Post- Hearing Brief, to assess a civil penalty is without merit and unsubstantiated. Respondent also argued that after learning of the concerns expressed by the inspection team at the exit interview, it immediately commenced and diligently pursued acts to address those concerns. The concerns were addressed by the submission of a written action plan within approximately two (2) months of the inspection. Respondent also incorporated the results of the written action plan into its 2005 OQ Plan. Respondent also contended that the proposed civil penalty is greater than penalties assessed against other companies for violation of 49 C.F.R. $195.505.#

420055016_Final Order_09062006.pdf, page 6First, the assessment of civil penalties takes into account all of the factors identified in 49 C.F.R. $190.225 and the application of those factors are fact specific to the individual case in question. Therefore, Respondent is not privy to all of the various circumstances that may exist in a particular case, so any attempt to make a comparison based upon violation of a particular regulation and the amount of the penalty will produce an inaccurate and flawed result. Second, a determination was made in the "Findings" section of this Order that Respondent violated 49 C.F.R. $ 195.505(b), as Respondent failed to provide adequate records or data that carefully and thoroughly document and support the evaluation or qualification of the employees to perform specific covered tasks under Respondent's OQ program referenced in Item 1A of the Notice. Although Respondent argued that the assessment of the proposed civil penalty is without merit and unsubstantiated, Respondent has not provided any additional evidence to show that it demonstrated compliance with 49 C.F.R. 195.505(b) during the inspection or during the exit interview when the inspection team alerted the Respondent to deficiencies. The regulatory conditions for the conduct of inspections to determine compliance and gives OPS the general authority to inspect pipelines and related records for compliance with applicable regulations is set forth in 49 C.F.R. $190.203. Respondent is under an affirmative duty to achieve and maintain compliance. Respondent failed to meet its duty. Respondent failed to justify mitigation or elimination of the civil penalty. As for Item lB, Respondent failed to ensure through evaluations that individuals performing covered tasks are qualified. Respondent had begun the re-evaluation of employees, however, in many instances the evaluations were invalid. The inspection revealed evidence of "group" performance evaluations, rather than individual evaluations and evaluations were given to a group for "discussion" of the performance of a task. There was also evidence of two individuals re-evaluating and qualifying each other, as well as evidence that some individuals performing evaluations were not qualified to perform the covered task, were not subject matter experts and were not provided a standard "script" with which to conduct the evaluation. The Work History Performance Review Field Worksheet (WHPR) submitted by Respondent records contained an individual's name, employee ID number, an evaluator's name, a date and a table of covered tasks and columns to list records and knowledge. However, no additional documentation was provided to show corresponding records were reviewed to ensure the employees' successful performance of each covered task referred to as "qualified" to perform. Respondent did not contest the allegation of violation but offered an explanation. On December 29, 2005, Respondent submitted additional records. These records indicated that each individual whose qualifications were performed by WPHR have been re-evaluated or no longer perform covered tasks. Again, the Respondent is responsible for compliance with the pipeline safety regulations, which includes sound record keeping. Without adequate records it is difficult for to verify compliance with the Operator Qualification requirements. The primary objective of the Federal pipeline safety standards is safe operation of pipeline systems. Failure to conduct a proper operator qualification evaluation, the operator risks that a task essential in the day to day operation of the pipeline be incorrectly performed on its facility and thereby increases the risk of harm to the public and the environment.#

420055016_Final Order_09062006.pdf, page 7Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $183,500 for violation of 49 C.F.R. §195.505(b). Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C.F.R. 5 89.2 1(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-300), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 25082, Oklahoma City, OK 73 125; (405) 954-8893. Failure to pay the $1 83,500 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. 5 3717,31 C.F.R. 5 901.9 and 49 C.F.R. 5 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 compliance order with respect to Item 1 in the Notice for violation of 49 C.F.R. §195.505(b). Under 49 U.S.C. 5 601 18(a), each person who engages in the transportation of hazardous liquids or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Regional Director has indicated that Respondent has taken the following actions specified in the proposed compliance order: Respondent submitted records to show that each individual, whose qualifications were performed by work performance history review, have been reevaluated or no longer performs covered tasks. Accordingly, since compliance has been achieved with respect to this violation, the compliance terms are not included in this Order. Under 49 C.F.R. 5 190.215, 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. However if Respondent submits payment for the civil penalty, the Final Order becomes the final administrative decision and the right to petition for reconsideration is waived. The terms and conditions of this Final Order are effective on receipt. SEP - 6 2006 Date ISS& for Pipeline Safety#