# NUSTAR LOGISTICS, L.P. — Notice of Probable Violation

- **operation:** document
- **citation:** CPF 420055048
- **title:** NUSTAR LOGISTICS, L.P. — Notice of Probable Violation
- **source type:** enforcement
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** historical
- **official:** true
- **published on:** 2005-12-14
- **effective on:** Not available
- **summary:** CLOSED notice of probable violation citing 195.406(a), 195.410(a), 195.410(a)(1), 195.410(c), 195.412(a), 195.420(c), 195.436, 195.438, 195.581(a).
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**body:**

Notice of Probable Violation involving NUSTAR LOGISTICS, L.P.. PHMSA's enforcement data identifies the cited regulations as 195.406(a),  195.410(a),  195.410(a)(1),  195.410(c),  195.412(a),  195.420(c),  195.436,  195.438,  195.581(a). The case was opened on 2005-12-14 and is reported as closed as of 2010-05-04. Proposed civil penalty: $255,000. Assessed civil penalty: $115,000. Open the official case record for notices, responses, orders, and the latest status.

Official case documents:

420055048_FinalOrder_ 03112009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420055048/420055048_FinalOrder_%2003112009_text.pdf

420055048_FinalOrder_03112009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420055048/420055048_FinalOrder_03112009.pdf

420055048_finalorder_03112009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420055048/420055048_finalorder_03112009_text.pdf

420055048_finalorder_03112009_text.pdf

U S Department
of Transportation
Pipeline and Hazardous Materials
Safety Administration
1200 New Jersey Ave, SE
Washington, DC 20590
MAR 112009
Mr. Todd Denton
Vice President of Regional Operations
NuStar Logistics, L. P.
2330 North Loop 1604 West
San Antonio, Texas 78248
Re: CPF No. 4-2005-5048
Dear Mr. Denton:
Enclosed is the Final Order issued in the above-referenced case. It makes findings of violation,
withdraws certain allegations of violation, assesses a reduced civil penalty of $115, 000, and
specifies actions that need to be taken by NuStar 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, 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.
Thank you for your cooperation in this matter.
Sincerely,
Jeffrey D. Wiese
Associate Administrator
for Pipeline Safety
Enclosure
cc: Mr. R. M. Seeley, Director Southwest Region, PHMSA
Ms. Rebecca L. Fink, Esquire
CERTIFIED MAIL — RETURN RECEIPT RE UESTED



U. S. DEPARTMENT OF TRANSPORTATION
PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION
OFFICE OF PIPELINE SAFETY
WASHINGTON, D. C. 20590
)
In the Matter of
)
)
NnStar Logistics, L. P.
, )
f/k/a Valero Logistics Operations, L. P.
, )
)
Respondent
)
CPF No. 4-2005-504S
FINAL ORDER
On September 27-October 1, November 1-5 and 15-19, and November 29-December 3, 2004,
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 Valero Logistics Operations, L. P. 's (Valero or
Respondent) hazardous liquid pipeline system throughout Texas. ' On or about April 1, 2007,
Valero's parent company, Valero, L. P.
, changed its name to NuStar Energy, L. P.
,
and currently
operates Respondent's pipeline facilities through a subsidiary, NuStar Logistics, L. P. NuStar
Energy operates over 4, 000 miles of hazardous liquid pipelines throughout the United States.
As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to
Respondent, by letter dated December 14, 2005, 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 Respondent had violated 49 C. F. R. )) 195 406(b), 195. 410(a),
195. 410(c), 195. 412(a), 195. 420(a)-(c), 195. 436, 195. 438, and 195. 581(a) and assessing a civil
penalty of $255, 000 for the alleged violations. The Notice also proposed ordering Respondent to
take certain measures to correct the alleged violations.
Respondent responded to the Notice by letter dated January 18, 2006 (" Response" ), and
requested a hearing. In its Response, Valero set forth a statement of the issues that it planned to
raise at the hearing. The company supplemented its Response with a revised statement of issues
and a list of prospective hearing attendees, by letter dated July 26, 2006. Prior to the hearing,
Valero submitted the written statement of one of its prospective witnesses, Mr. Todd Denton,
along with certain exhibits, by letter dated August 9, 2006 ("Prefiled Testimony" ). A hearing via
telephone conference was subsequently held on August 17, 2006, with Mr. Jim Curry, Esquire,
' The OPS representative mspected the following Valero petroleum pipehne systems Denver Products, Turpm
Products; Clawson Crude Oil, El Paso Products, Albuquerque Products, Southlake Products, and Trans-Texas
Liquefied Petroleum Gas (LPG)



Office of Chief Counsel, PHMSA, presiding. At the hearing, Respondent was represented by
counsel. Following the hearing, Respondent's counsel timely submitted a closing statement, by
letter dated September 5, 2006 (" Closing" ). The following Final Order discusses each of the
allegations set forth in the Notice and the issues raised by Respondent and is divided into three
sections: Findings of Violation; Assessment of Penalty; and Compliance Order.
FINDINGS OF VIOLATION
I. Uncont'ested Allegations
At the hearing, Respondent did not contest the allegations in the Notice that it violated 49 C. F. R.
Part 195 as follows:
Item 3: The Notice alleged that Respondent violated 49 C. F. R. ) 195. 410(c), which states:
g 195. 410 Line markers.
(a)
(c) Each operator shall provide line marking at locations where the line is
above ground in areas that are accessible to the public.
The Notice alleged that Valero violated ) 195. 410(c) by failing to provide line marking where its
pipelines are above ground in areas that are accessible to the public. Specifically, the Notice
alleged that certain spans of formerly buried pipelines in ravines and water drainage areas had
been washed out and left exposed. The company did not contest this allegation. Accordingly, I
find that Respondent violated 49 C. F. R. $ 195. 410(c) by failing to provide line marking at
certain spans of formerly buried pipelines in ravines and water drainage areas that had been
washed out and left exposed.
Item 4: The Notice alleged that Respondent violated 49 C. F. R. $ 195 412(a), which states:
g 195. 412 Inspection of rights-of-way and crossings under navigable waters.
(a) Each operator shall, at intervals not exceeding 3 weeks, but at least 26
times each calendar year, inspect the surface conditions on or adjacent to
each pipeline right-of-way. Methods of inspection include walking, driving,
flying or other appropriate means of traversing the right-of-way.
The Notice alleged that Respondent violated ) 195. 412(a) by failing to inspect the surface
conditions on sections of its Trans-Texas, Southlake, Albuquerque, and El Paso pipelines.
Respondent routinely conducts aerial right-of-way (ROW) surveillance, yet certain areas on or
adjacent to these pipelines were not visible from the air because the ROWs were obscured by
vegetation. Valero did not contest this portion of the allegation. The Notice also alleged that the
PHMSA inspector had observed Valero's aerial surveillance aircraft veer off of the ROW during
an aerial inspection. The Notice indicated that this observation raised the issue of the adequacy
of Respondent's ROW surveillance, clearing and marking programs. Respondent failed to
present any evidence that in this particular instance, the pilot had not veered off course.
Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 412(a) by failing to inspect the
surface conditions on the above-described portions of its pipeline ROW,



Item 6: The Notice alleged that Respondent violated 49 C. F. R. $ 195. 436, which states:
g 195. 436 Security of facilities.
Each operator shall provide protection for each pumping station and
breakout tank area and other exposed facility (such as scraper traps) from
vandalism and unauthorized entry.
The Notice alleged that Respondent violated $ 195. 436 by failing to provide protection for
certain pump stations from vandalism and unauthorized entry. Specifically, the Notice alleged
that Respondent failed to protect most of its Albuquerque pipeline pump stations by allowing
holes to remain in the chain link fencing surrounding the pump stations after certain piping going
through the fencing had been removed. The Notice also alleged that Respondent failed to protect
some of its Trans-Texas, Southlake, and El Paso pipeline pump stations by allowing gaps to form
under the chain link fencing surrounding the pump stations. Valero did not contest this
allegation. These holes and gaps threatened pipeline safety because unauthorized persons could
have gained easy access to sensitive facilities through or under the fencing. Accordingly, I find
that Respondent violated 49 C. F. R. $ 195. 436 by failing to protect certain pump stations from
vandalism and unauthorized entry.
II. Contested Allegations
The Notice alleged that Respondent violated 49 C. F. R. Part 195, as follows;
Item 1: The Notice alleged that Respondent violated 49 C. F. R. $ 195. 406(b), which states:
g 195. 406 Maximum operating pressure.
(a)
(b) No operator may permit the pressure in a pipeline during surges or
other variations from normal operations to exceed 110 percent of the
operating pressure limit established under paragraph (a) of this section.
Each operator must provide adequate controls and protective equipment to
control the pressure within this limit.
Item 1 of the Notice alleged that Respondent violated ) 195. 406(b) by failing to provide
adequate controls and protective equipment to control the pressure on its pipelines within the
limit established under ) 195. 406(a) Specifically, the Notice alleged that Respondent could not
provide documentation that its pipelines were protected from overpressure, or that surge
overpressure had been considered and could be prevented. Respondent contested this allegation
of violation,
Respondent first argued that the Notice did not allege that Valero was out of compliance with
$ 195. 406(b). Instead, it contended that the allegation was actually that Respondent had failed
to provide "on-the-spot" documentation of its "compliance procedures. "" I disagree with
Respondent's characterization of the allegation. At the hearing, the PHMSA inspector testified
' Five examples of holes in and gaps under fencing are mcluded m PHMSA's Violation Report as Figures 30-34.
' Supplement to Response, at 2
' Id, and Prefiled Testimony, at 6



that during the inspection, he had observed that Respondent's systems did not use full flow
pressure relief valves or breakout tanks to control pressure. He explained that this observation
led him to ask Respondent for information on how the company had determined whether it had
adequate pressure controls and protective equipment.
Inherent in this performance-based requirement that Respondent provide "adequate" controls and
protective equipment to control pressure is the notion that the company must use reasonable
means to determine what constitutes "adequate" controls and equipment for its own particular
pipeline system and document such a decision-making process. If it hasn't performed such an
analysis, Respondent might, for example, select undersized equipment or an insufficient number
of pressure control devices. Valero asserted that it had, in fact, performed analyses of each of its
pipelines to verify that they were protected from surges.
' However, despite having been given
numerous opportunities, Respondent failed to provide any evidence that such analyses had
actually been performed or that they were adequate.
Respondent did provide other information, however, in support of its argument that it had
adequate pressure controls and protective equipment on its pipelines. It offered portions of its
Operations and Maintenance (OAM) manual, information about pipeline operating history, and
overpressure protection calibration and inspection records However, none of this information
addressed the key issue of whether Valero's overpressure controls and protective equipment
were adequate.
During the hearing, Respondent offered a segment of its OAM manual. This document
contained cursory statements that overpressure controls must be provided but provided no
explanation as to how to determine whether such controls were adequate. Respondent next
offered information about the operating history of its pipelines Respondent's operating history
does not confirm the adequacy of controls and protective equipment nor does it indicate that
surge overpressure had been adequately analyzed. An operating history that reveals no instances
of pipeline overpressure may simply be a matter of Respondent's luck. Finally, Respondent
offered information regarding the inspection and calibration of its overpressure safety devices. 9
While such information may indeed indicate that Valero's equipment was functioning properly,
it does not show that the equipment was adequate to control pressure on the system. For
example, a well-maintained and calibrated device might still be undersized for the system and
therefore inadequate to control pressure within the prescribed limits.
After considering all of the evidence in the record, I find that Respondent violated 49 C. F. R.
) 195. 406(b) by failing to provide adequate controls and protective equipment on its pipelines to
control the pressure within the limit established under ) 195. 406(a)
Item 2: The Notice alleged that Respondent violated 49 C. F. R. ) 195. 410(a), which states:
g 195. 410 Line markers.
' Prefiled Testimony, at 7
Prefiled Testimony, at 7, and Ex. 4, at 316-1, Valero L. P OkM Manual 316 Maximum OPerating Pressure
' Prefiled Testimony Ex. 4, at 316-1, 5
' Prefiled Testimony, at 6-8
' ld, at 8-9, and Prefiled Testimony Ex 5



(a) Except as provided in paragraph (b) of this section, each operator shall
place and maintain line markers over each buried pipeline in accordance with
the following:
(1) Markers must be located at each public road crossing, at each railroad
crossing, and in sufficient number along the remainder of each buried line so
that its location is accurately known. . . .
Item 2 of the Notice alleged that Respondent violated $ 195. 410(a) by failing to place and
maintain pipeline markers over each buried pipeline in sufficient number that the location of the
pipeline was accurately known. Specifically, the Notice alleged that when crossing cultivated
fields, Valero's pipeline markers frequently could not be seen on the far side of the fields and
that at valve sites, looking in both directions, markers were not visible.
Respondent contested this allegation, objecting to the so-called "line-of-sight" test used by
PHMSA to determine the adequacy of a pipeline operator's line marking. Valero contended that
its pipelines were marked under ) 195. 410(a) in a manner that accurately identified their location
and that the "line-of-sight" test "impermissibly create[ed] additional obligations on regulated
"'
parties beyond those in the rule. . . .
PHMSA acknowledges that the "line-of-sight" test, while simple to understand, has resulted in
confusion within the industry and has been applied differently in various regions. As a result, the
agency has initiated a re-examination of the use of the "line-of-sight" test but no decision has yet
been reached on whether or how it should be revised. ' Based upon the foregoing, I find that it is
appropriate to withdraw Item 2 of the Notice, PHMSA shall not be prejudiced, however, by this
withdrawal nor precluded from alleging future violations of $ 195. 410(a) against Respondent or
any other operator.
Item 5: The Notice alleged that Respondent violated 49 C. F. R. $ 195. 420(a)-(c), which states:
g 195. 420 Valve maintenance.
(a) Each operator shall maintain each valve that is necessary for the safe
operation of its pipeline systems in good working order at all times.
(b) Each operator shall, at intervals not exceeding 7Y2 months, but at least
twice each calendar year, inspect each mainline valve to determine that it is
functioning properly.
(c) Each operator shall provide protection for each valve from
unauthorized operation and from vandalism.
Item 5 of the Notice alleged that Respondent committed four violations of ( 195. 420, as follows:
By failing to maintain certain valves that were necessary for the safe operation of its pipeline
system; by failing to inspect various mainline valves within the required intervals; and by failing
to protect certain other valves from unauthorized operation and vandalism. Each of the specific
allegations is addressed separately below.
' Closing, at 4.
" PHMSA held a public workshop on February 20-21, 2008, m Houston, TX to discuss, among other issues, the
location of hne markers Pipeline Safety: Workshop on Public Awareness Programs for Pipehne Operators and
Location of Line Markers, 73 Fed. Reg 223 (Jan. 2, 2008)



1. Clawson Crude Oil Pipeline, Valve Site MP 11.
The Notice alleged that Valero failed to inspect the valve at Valve Site Mile Post (MP) 11 on its
Clawson Crude Oil Pipeline in accordance with the required 7'/~-month inspection interval set
out in $ 195. 420(b). The Notice alleged that PHMSA inspectors observed that the chain locking
the valve was adhered with paint to the hand wheel of the valve, and that the car seals locking the
valve in place were very corroded. ' The Notice further alleged that these conditions showed
that Respondent had not moved the valve for an extended period of time and therefore that the
valve could not have been inspected in a timely manner.
Valero responded by presenting evidence that the valve had been painted on the same day that
the valve was last inspected and that it had been inspected within the required interval. '
Respondent also presented credible evidence that the MP 11 valve was a ball-type valve that
could be completely closed in five (5) movements, that only a partial movement of the valve
hand wheel was necessary to inspect the valve, and that such a partial movement did not require
the removal or unlocking of the car seals. ' I find that Respondent presented sufficient evidence
to indicate that it had inspected the MP 11 valve in accordance with the 7'/~-month inspection
requirement set forth in $ 195. 420(b). Accordingly, upon considering all of the evidence, I
hereby withdraw that portion of the allegation in Item 5 relating to the MP 11 valve.
2. Turpin Products Pipeline, Valve Site MP 44.
The Notice alleged that Respondent failed to maintain its MP 44 valve in good working order at
all times as required by ( 195. 420(a). Specifically, the Notice alleged that Valero allowed the
pipeline into and out of the Turpin MP 44 valve (and therefore the valve itself) to be supported
by blocks of wood, thereby risking severe corrosion of the pipeline within a short period of time.
The Notice also alleged that Respondent did not provide any fencing or other protection for the
valve as required by ) 195. 420(c). The valve was located in a farm equipment storage yard,
where heavy equipment was frequently moved in and out, thereby exposing the valve to
unauthorized operation or vandalism.
Respondent acknowledged that the Turpin MP 44 valve site was out of compliance with
$ 195. 420. " Accordingly, upon considering all of the evidence, I find that Respondent violated
49 C. F. R. ) 195. 420(a) and (c) by failing to maintain the Turpin MP 44 valve in good working
order and by failing to provide protection for the valve from unauthorized operation and
vandalism.
3. Mainline Valve Inspection Interval.
The Notice alleged that Respondent failed to inspect a large number of mainline valves on the
Turpin, El Paso, Trans-Texas and Southlake pipelines within the 7'/~-month interval as required
" The "hand wheel" is the device used to open and close the valve The "car seals" are metal seals on the valve that
lock the valve m position
" Respondent offered two notarized affidavits from two of its employees as evidence that the MP 11 valve was
inspected Prefiled Testimony, at 22, Ex 9 and 10
"Prefiled Testimony, at 23, Ex 12, at 313-7
" Prefiled Testimony, at 25



by $ 195. 420(b). According to the PHMSA inspector's review of company records and his
Violation Report, 220 mainline valves had not been properly inspected. '
In its Prefiled Testimony and at the hearing, Respondent admitted that 105 of the valves listed in
the Violation Report had not been timely inspected. ' However, Respondent asserted that the
remaining 115 valves were not mainline valves and therefore not subject to the 7'/2-month
inspection interval. Valero explained that the list of valves provided to PHMSA during the
inspection contained all valves, not just the mainline ones. The company provided an excerpt
from its 08aM manual containing a definition of the term "mainline valves, " to show that 115 of
the valves on the list did not qualify as such. ' Respondent also testified that its definition of
mainline valves had been in place prior to the inspection and that no valves had been re-
classified since that time.
Based upon a review of all the evidence, I find that Respondent violated 49 C. F. R. $ 195. 420(b)
by failing to inspect 105 of its mainline valves in accordance with the 7'/2-month interval
required by the regulation.
4. Valve Site Fencing.
The Notice alleged that Respondent failed to provide protection for numerous valves on its
pipeline systems from unauthorized operation and vandalism as required by $ 195. 420(c).
Specifically, it alleged that a large number of Valero's valves did not have fencing around the
valve sites; instead, many of the valves simply had pipe post-and-beam enclosures around them
that might serve to protect them from unauthorized operation but not from vandalism. It also
alleged that the Denver pipeline had valves with no fencing of any kind around them and that the
Trans-Texas pipeline had at least one valve site with a four-foot-high cyclone fence that would
not protect against vandalism, as it was located adjacent to a busy road in Mt. Belvieu, Texas. In
its Violation Report, PHMSA provided photographs of examples of the allegedly unprotected
valves.
Respondent asserted that ( 195. 420(c) does not specify the methods by which it must protect
valves from unauthorized operation and vandalism and that therefore the means of protection is
left to the discretion of the operator. Respondent also argued that the regulation does not require
it to place fencing around all of its pipeline valves.
Respondent is correct that $ 195. 420(c) does provide operators with flexibility in providing
protection for valves from unauthorized operation and vandalism. While fencing is a common
means of providing such protection, it is not the only possible one. However, inherent m the
flexibility provided by $ 195. 420(c) is the need for operators to show that they have considered
the particular circumstances at each valve site and determined the specific measures that are
needed to protect each valve. Without a documented process and evidence that it has been
satisfactorily implemented, neither Respondent nor PHMSA can determine whether the company
has provided adequate protection under the regulation, Depending on the results of a valve site
' Violation Report Ex 4b.
" Prefiled Testimony, at 26.
' Id, Prefiled Testimony Ex 15
"Prefiled Testimony, at 27, Ex. 12
"Closing, at 5



analysis, a variety of different protective measures may be appropriate, including, but not limited
to, post-and-beam enclosures, fencing, security cameras, motion detectors, concertina wire, brick
walls, or combinations of these measures.
During the hearing, PHMSA argued that the presence of many unfenced valve sites and the
existence of other valves in populated areas with only limited protection indicated that Valero
had not made adequate and consistent efforts to protect its valve sites. The company was unable
to show that it had a process in place for determining what types or levels of protections were
necessary in various locations.
Accordingly, based upon a review of all the evidence, I find that Respondent violated 49 C. F. R.
$ 195. 420(c) by failing to provide adequate protection for each valve from unauthorized
operation and vandalism.
Item 7: The Notice alleged that Respondent violated 49 C. F. R. ) 195. 438, which states:
g 195. 438 Smoking or open flames.
Each operator shall prohibit smoking and open flames in each pump
station area and each breakout tank area where there is a possibility of the
leakage of a flammable hazardous liquid or the presence of flammable vapors.
Item 7 of the Notice alleged that Respondent violated ) 195. 438 by failing to prohibit smoking
and open flames in each pump station area. Specifically, the Notice alleged that Respondent
failed to post clearly visible "No Smoking" signs at the entrances to its pump station facilities.
Valero contested the allegation but acknowledged that "No Smoking" signs were not posted at
all facility entrances. ' Respondent argued that hanging "No Smoking" signs was not the only
allowable means of achieving compliance with the regulation, contending that it had complied
with the regulation simply by having and following its 08aM manual, which included provisions
to "ensure" that ( 195. 438 was followed. The manual required that Valero post signs
prohibiting smoking and open flames around all facilities (including pump stations) where there
was a possibility of flammable hazardous liquid leaks or the presence of flammable vapors.
While it is necessary and appropriate for Respondent to have 0&M procedures prohibiting
smoking and open flames in pump station areas, the existence of such procedures alone does not
constitute compliance with the regulation. If it did, no operator would ever have to do anything
other than have a no-smoking policy on the books, Moreover, it is clear that Respondent did not
follow its own procedures.
In order to achieve compliance with $ 195. 438, an operator must take action that actually
implements a no-smoking policy for those persons who may not be familiar with the operator's
OAM manual. In this case, not all visitors to Respondent's facilities were privy to Valero's
internal prohibitions on smoking, and may not have learned about them upon entry to the facility.
For example, contractors, delivery persons, emergency responders, law-enforcement, and other
non-company personnel may have entered through the pump station gates. Without "No
Smoking" signs or other clear warnings that smoking was prohibited, visitors might be unaware
that smoking was prohibited. Respondent provided no evidence of how it had prohibited
' Prefiled Testimony, at 37
" Prefiled Testimony, at 38, Ex. 2l



smoking and open flames with regard to visitors in those locations where it had failed to install
"No Smoking" signs.
Accordingly, based upon a review of all the evidence, I find that Respondent violated 49 C. F. R.
) 195. 438 by failing to prohibit smoking and open flames in each pump station and breakout
tank area where there was a possibility of flammable hazardous liquid leaks or the presence of
flammable vapors.
Item S: The Notice alleged that Respondent violated 49 C. F. R. $ 195. 581(a), which states:
g 195. 5S1 Which pipelines must I protect against atmospheric
corrosion and what coating material may I usc?
(a) You must clean and coat each pipeline or portion of pipeline that is
exposed to the atmosphere, except pipelines under paragraph (c) of this
section.
The Notice alleged that Respondent violated $ 195. 581(a) by failing to keep certain pipeline
facilities properly coated. In many locations, the coatings had failed or were failing, leaving the
facilities susceptible to external corrosion. Specifically, the Notice and Violation Report
included examples of facilities that were not properly coated, including above-ground and
exposed pipelines, above-ground valves, and breakout tank roofs.
Valero responded by claiming that the facilities were properly protected from atmospheric
corrosion. In its Prefiled Testimony and during the hearing, the company described a variety of
measures it had taken to protect its facilities but failed to provide any credible evidence or
argtnnents that the facilities cited were in compliance with ) 195. 581 at the time of the
inspection. Accordingly, based upon a review of all the evidence, I find that Respondent
violated 49 C. F. R. ) 195. 581(a) by failing to keep certain of its pipeline facilities that were
exposed to the atmosphere properly coated, as more fully described in the Notice and Violation
Report.
These findings of violation will be considered prior offenses in any subsequent enforcement
action taken against Respondent.
III. Additional Issues Raised by Respondent
In addition to the specific allegations discussed above, Valero argued that PHMSA did not meet
the notice requirements of 49 C. F. R. ) 190. 207 because many items in the Notice contained
"general allegations and unidentified instances of non-compliance. " As a result, Respondent
contended that the Notice "provide an insufficient basis for PHMSA to allege any non-
compliance or seek penalties. " ' Valero asserted that its due process rights had been violated by
such lack of notice and announced its intention to challenge portions of the Notice based on the
generality of the allegations. However, Respondent did not provide details as to what portions
" Violation Report Ex 7. F&gures 39 — 45 consist of photographs of failmg and faded p&pelme coatings on the
Albuquerque, Denver, El Paso, Turpin, and Trans-Texas pipehne facihties
" Response, at 4
'Ij
Supplement to Response, at 2.



10
of the Notice were too "general" or how it had been harmed by such purported generality. Upon
review of the record, I find that the Notice contained brief but adequate statements of each
allegation of violation. In addition, at Valero's request, PHMSA provided a copy of the
Violation Report, which set out detailed information in support of the allegations, including
photographs of specific examples of non-compliance at Respondent's facilities, procedures and
inspection records. Respondent did not renew its generality arguments at the hearing or in its
Closing.
Respondent also argued that the Notice "may be untimely" because it was issued more than one
year after the inspections. Respondent did not cite any authority or offer any evidence or
information in support of this contention. I find that the Notice was issued well within the
general five-year federal statute of limitations.
ASSESSMENT OF PENALTY
Under 49 U. S. C. $ 60122, Respondent is subject to an administrative 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: 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; the Respondent's ability to pay the penalty and 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 $255, 000 for violations of Part 195.
Notice Item I proposed a civil penalty of $10, 000 for violation of 49 C. F. R. ) 195. 406(b), for
Respondent's failure to provide adequate controls and protective equipment to control the
maximum operating pressure of the pipeline within the limits established under $ 195. 406(a).
Adequate pressure controls and protective equipment are particularly important means of
fostering pipeline safety because they serve to prevent pipeline overpressure and possible
ruptures, spills, and harm to life, property, and the environment. Respondent made several
arguments and offered information in opposition to the allegation and penalty, all of which are
discussed above. None of Respondent's arguments or information warrant a reduction or
elimination of the proposed civil penalty. Therefore, I assess Respondent a civil penalty of
$10, 000 for violating 49 C. F. R. $ 195. 406(b).
Notice Item 2 proposed a civil penalty of $25, 000 for violation of 49 C. F. R. $ 195. 410(a), for
Respondent's failure to provide sufficient line markers to accurately locate its pipelines. This
allegation of violation has been withdrawn. Accordingly, I withdraw the proposed penalty for
this Item.
" Response, at 4
See 28 U. S. C. ) 2462.



Notice Item 5 proposed a civil penalty of $220, 000 for violation of 49 C. F. R. $ 195. 420(b), for
Respondent's failure to meet the 7'/z-month inspection interval for 220 mainline valves. The
Violation Report explained that PHMSA was proposing a civil penalty of $1, 000 for each of the
220 valves allegedly out of interval. As discussed more fully above, the evidence showed that
Respondent failed to meet the 7'/z-month inspection interval for only 105 valves, as opposed to
the 220 alleged in the Notice. No civil penalty was proposed for the other allegations in Item 5.
Respondent admitted that some penalty was warranted but made several arguments in favor of a
29
reduction. First, it argued that the proposed $1, 000-per-valve amount exceeded the penalties
assessed by PHMSA for similar violations by other operators in the past; in addition, it argued
that the penalty should be based upon how late each valve inspection occurred. Respondent
cited four past Final Orders to support its argument. ' Second, it argued that the missed valve
inspections occurred during a time period when the company was changing valve inspection
tracking systems and, therefore, that the missed inspections were inadvertent. Finally,
Respondent argued that the penalty should be reduced because the missed inspections did not
result in any adverse impact on the environment or public safety.
I find Respondent's arguments unpersuasive for several reasons. First, PHMSA proposes and
assesses civil penalties in accordance with the assessment criteria set forth in 49 U. S. C. $
60122(b) and 49 C. F. R. ) 190. 225. In applying these criteria, PHMSA has determined that the
most appropriate means of setting civil penalties is to apply the assessment criteria on a case-by-
case basis. When PHMSA proposes a penalty, it examines the allegations and supporting
evidence and applies the relevant assessment criteria to those particular facts. This analysis
generally includes, among other things, a review of an operator's compliance history, how the
alleged non-compliance was discovered and its duration, whether the respondent made a good
faith effort to comply with the regulation prior to the inspection, and whether there was any
immediate or potential safety or environmental impact. This fact-sensitive, case-by-case
approach is also consistent with PHMSA's largely performance-based regulatory scheme, which
involves the consideration of risk factors and complexities unique to each pipeline system.
Second, Respondent suggests that PHMSA take into consideration the amount of penalties
assessed against other operators in the past for "similar" violations and weigh the culpability of
Valero against that of other operators who have been assessed lesser amounts for the same
violation. PHMSA has found that such an approach is impracticable, given the unique facts of
each offense and operating conditions of each pipeline system. Respondent did not cite any law
or regulation requiring a standardized set of civil penalties, nor am I aware of any requirement
that PHMSA follow such an approach
' Closing, at 8
"Closmg, at 6
" See Prefiled Testimony at 43-46, citing In the Matter of Sinclair Pipeline Company, Fmal Order, CPF No 55503
(May 5, 1998), ln the Matter of Mobil Corporation, Fmal Order, CPF No 13504 (June 27, 1997), In the Matter of
Koch Pipeline Company L P Fmal Order, CPF No. 46501 (June 3, 1998), and In the Matter of Texas Eastern
Petroleam Products Company, Final Order, CPF No 3-2004-5027 (Jan 3, 2006)
' The Supreme Court has held that absent a statutory provision to the contrary, "uniformity of sanctions for similar
violations" is not required See Butz v Glover Livestock Commission Company, Inc, 411 U S 182, 186-87 (1973)
(holding that "the employment of a sanction within the authority of an admimstrative agency is thus not rendered
invalid in a particular case because it is more severe than sanctions imposed m other cases. ")



12
Third, PHMSA has found it appropriate to increase many of its civil penalties in recent years,
including those for violations of $ 195. 420(b). Most of the Final Orders cited by Respondent, in
which several other operators were assessed lower penalties for violations of $ 195. 420(b), were
initiated before Congress amended the Pipeline Safety Laws in 2002 to increase the maximum
penalties that PHMSA can assess through its administrative enforcement process, I would also
note that the $1, 000-per-valve penalty assessed in this case is consistent with other recent
enforcement cases in which PHMSA has proposed and, in most cases, assessed similar amounts
for violations of $ 195. 420(b). Unlike some of the older cases that Respondent cited, none of
the recent cases adjusted the per-valve penalty amount based upon the length of time the valve
inspections had been delayed.
Respondent also argued that its failure to timely inspect 105 valves was the result of a change in
the company's administrative tracking systems and that because its error was inadvertent, the
per-valve penalty should be reduced. I disagree. A change of tracking systems, if anything,
should have prompted Valero to exercise greater, not less, vigilance to ensure that inspections
were not missed.
Finally, I reject Respondent's argument that the penalty should be reduced because the missed
valve inspections did not result in an adverse impact on the environment or public safety.
Respondent's failure to conduct timely inspections of more than 100 mainline valves was a
serious violation that could have had a harmful effect upon public safety or the environment.
Properly functioning mainline valves are essential to the safe operation of hazardous liquid
pipeline systems; they are used to limit the volume of product released in the event of a spill.
One purpose of the mandatory valve inspection interval set forth in ) 195. 420(b) is to ensure that
valve problems are identified and corrected before they impact the safety of the pipeline system.
Accordingly, upon consideration of all of the evidence and the arguments presented, I hereby
assess Respondent a reduced civil penalty of $105, 000 for violations of 49 C. F. R. $ 195. 420(b).
In summary, having reviewed the record and considered the assessment criteria for Items 1 and
5, I assess Respondent a reduced total civil penalty of $115, 000. There is nothing in the record
indicating that payment of this penalty would adversely Respondent's ability to continue in
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-341), Federal Aviation Administration, Mike
Monroney Aeronautical Center, P. O. Box 269039, Oklahoma City, OK 73125; (405) 954-8893.
"The Pipehne Safety
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