{"operation":"document","citation":"CPF 420065020","title":"MAGELLAN PIPELINE COMPANY, LP — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2006-05-02","effective_on":null,"summary":"CLOSED notice of probable violation citing 195.452(d)(1), 195.452(e)(1), 195.452(f)(1).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-420065020.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-420065020.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-420065020","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/420065020","body":"Notice of Probable Violation involving MAGELLAN PIPELINE COMPANY, LP. PHMSA's enforcement data identifies the cited regulations as 195.452(d)(1),  195.452(e)(1),  195.452(f)(1). The case was opened on 2006-05-02 and is reported as closed as of 2010-08-05. Proposed civil penalty: $215,000. Assessed civil penalty: $147,500. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n420065020_AmendedFinalOrder_12232009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_AmendedFinalOrder_12232009.pdf\n\n420065020_AmendedFinalOrder_12232009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_AmendedFinalOrder_12232009_text.pdf\n\n420065020_Closure_08052010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_Closure_08052010.pdf\n\n420065020_Closure_08052010_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_Closure_08052010_text.pdf\n\n420065020_FinalOrder_07092009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_FinalOrder_07092009.pdf\n\n420065020_FinalOrder_07092009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_FinalOrder_07092009_text.pdf\n\n420065020_AmendedFinalOrder_12232009_text.pdf\n\nDEC 23 2009\nMr. Richard A. Olson\nVice President, Transportation Operations\nMagellan Midstream Partners, L.P.\nOne Williams Center\nP.O. Box 22186\nTulsa, OK 74121-2186\nRe: CPF No. 4-2006-5020\nDear Mr. Olson:\nIt has come to my attention that there is a clerical error in the July 9, 2009 Compliance Order\nissued in the above-referenced case. The completion dates for Items 1 and 2 of the Compliance\nOrder were inadvertently omitted. Although Magellan was required to complete Items 3 and 4\nwithin 60 days from the date of receipt of the Final Order, there was no such completion deadline\nfor Items 1 and 2 of the Compliance Order.\nIn the attached Amended Final Order, I am now correcting the clerical error and allowing\nMagellan an additional sixty days from the receipt of this Amended Final Order to complete the\ntasks listed in Items 1 and 2 of the Compliance Order. If Magellan needs a further extension of\ntime, the company may submit such a request in writing to the Director, Southwest Region. Any\nrequest for extension must be timely and demonstrate good cause for the extension. The\ncompletion deadline for Items 3 and 4 will remain the same. Magellan should have already\ncompleted these tasks since sixty days have transpired since Magellan received the Final Order.\nWhen the terms of the Amended Compliance Order have been completed, as determined by the\nDirector, Southwest Region, CPF No. 4-2006-5020 will be closed. Your receipt of this letter and\nAmended Final Order constitute service of those documents under 49 C.F.R. § 190.5.\nThank you for your cooperation in these matters.\nSincerely,\nJeffrey D. Wiese\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Paul E. Pratt, Esq., Magellan Midstream Partners, L.P.\nMr. Rod M. Seeley, Director, Southwest Region, PHMSA\nCERTIFIED MAIL – RETURN RECEIPT REQUESTED [7009 1410 0000 2464 5867]\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, DC 20590\n____________________________________\nIn the Matter of )\nMagellan Midstream Partners, L.P., ) CPF No. 4-2006-5020\n)\n)\n)\nRespondent. )\n____________________________________)\nAMENDED FINAL ORDER\nBetween April 11-15 and May 2-6, 2005, pursuant to 49 U.S.C. § 60117, representatives of the\nPipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety\n(OPS) and its state agent, the Minnesota Office of Pipeline Safety, conducted an on-site pipeline\nsafety inspection of the Integrity Management Program procedures and records of Magellan\nMidstream Partners, L.P. (Magellan or Respondent), at the company’s offices in Tulsa,\nOklahoma. Magellan is a major energy supplier in the United States whose assets include an\n8,700-mile petroleum products pipeline system and a 1,100-mile ammonia pipeline system.\nAs a result of the inspection, the Director, Southwest Region, OPS (Director), issued to\nRespondent, by letter dated May 2, 2006, a Notice of Probable Violation, Proposed Civil\nproposed finding that Respondent committed certain violations of 49 C.F.R. Part 195 and\nPenalty, and Proposed Compliance Order.1 assessing a civil penalty of $215,000 for the alleged violations. The Notice also proposed that\nRespondent be required to take certain measures to correct the alleged violations.\nIn accordance with 49 C.F.R. § 190.207, the Notice\nMagellan responded to the Notice by letter dated June 2, 2006 (Response). Respondent\ncontested the allegations, penalties, and proposed compliance order, and requested a hearing. A\nhearing was subsequently held on September 21, 2006, in Houston, Texas, with an attorney from\nthe Office of Chief Counsel, PHMSA, presiding. After the hearing, Respondent provided two\npost-hearing submissions dated October 17, 2006, and February 23, 2007 (collectively, Brief).\n2\nOn July 9, 2009, PHMSA issued a Final Order making findings of violation, assessing a civil\npenalty, and issuing a Compliance Order. This Amended Final Order addresses a clerical error\nin the Compliance Order and sets deadlines for the actions required in Items 1 and 2 of the\nCompliance Order.\n1 The Notice originally assigned docket number CPF No. 4-2005-5020 to this action. It was later re-designated as\nCPF No. 4-2006-5020.\n2 Unless otherwise noted, all citations to Respondent’s Brief refer to the October 17, 2006, document.\n\n\n\n2\nFINDINGS OF VIOLATION\nThe Notice alleged three violations with respect to Magellan’s Integrity Management Program\n(IMP) under 49 C.F.R. § 195.452. These consisted of (1) a failure to include in its program a\nprocess for identifying which of its pipeline segments could affect High Consequence Areas\nfirst; and (3) a failure to establish an assessment schedule based on all risk factors reflecting the\ncondition of each segment. Each of these allegations is discussed more fully below.\n(HCAs);3 (2) a failure to follow company procedures by assessing the highest-risk segments\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.452(f)(1), which states:\n§ 195.452 Pipeline integrity management in high consequence areas.\n(a) . . . .\n(f) What are the elements of an integrity management program?\nAn integrity management program begins with the initial framework. An\noperator must continually change the program to reflect operating\nexperience, conclusions drawn from results of the integrity assessments,\nand other maintenance and surveillance data, and evaluation of\nconsequences of a failure on the high consequence area. An operator must\ninclude, at minimum, each of the following elements in its written\nintegrity management program:\n(1) A process for identifying which pipeline segments could affect\na high consequence area; . . . .\nThe Notice alleged that Magellan violated 49 C.F.R. § 195.452(f)(1) by failing to include in its\nIMP a process for identifying which of its pipeline segments could affect an HCA. Specifically,\nthe Notice alleged that although Magellan’s IMP purported to identify those segments of its\npipeline system that “could affect” HCAs, it failed to use a technically justifiable or defensible\nmethodology as part of that identification process.\nThe Notice alleged that Magellan had performed an “Overland Spread Analysis” as the\nunderlying basis or model for identifying its “could affect” pipeline segments. This analysis was\ndesigned to estimate, for every 100-foot segment of pipe, the ground area that could potentially\nbe affected by a hazardous liquid spill.\n4 Magellan calculated the overland spill volume by\nassuming a 15-minute pipeline flow rate plus 28% of the drain-down volume.5\nRespondent then\noverlaid a map of the area where the product would potentially spill with available HCA maps to\nmake the ultimate determination of which HCAs could be affected by a spill. According to the\nNotice, there was inadequate technical justification for limiting the drain-down volume to 28%;\ntherefore, the use of this percentage could have the effect of significantly reducing the total\nnumber of miles deemed capable of affecting an HCA.\n3 HCAs are defined as commercially navigable waterways, high population areas, and areas unusually sensitive to\nenvironmental damage. See 49 C.F.R. § 195.450.\n4 Brief, at 7.\n5 The drain-down volume is the volume that could drain from pipeline segments upstream and downstream of the\nleak site. Respondent explained in its Brief that it calculated the maximum drain-down volume by estimating the\nvolume of product that could potentially “gravity drain” into the release site, taking into account pipeline and\nlocation-specific information. Id.\n\n\n\n3\nAt the hearing and in its Brief, Magellan defended its Overland Spread Analysis generally and its\n28% drain-down figure in particular. Magellan stated in its Brief:\nThe drain down volume calculation and the application of the 28%\nfactor was derived from a review of the 1993 California Fire Marshall\nStudy and the 2000 Longhorn Valve Study. Additionally, in order to\nsubstantiate the application of the 28% factor, historical refined\nproduct release volumes were analyzed and compared to the\ntheoretical spill volumes as determined by the calculation method.\nMagellan analyzed ten years of applicable historical Refined Products\nmainline releases which constituted 62 releases from 1994 to 2003.6\nAccording to Magellan, its model was based initially upon the California and Longhorn studies\nand further supported by historical spill data drawn from its own system. Its own internal data\nwas used to verify the assumption that the total amount of product potentially spilled from any\nparticular pipe segment was only 28% of the maximum potential drain-down volume. The\ncompany noted that all 62 of the historical Magellan releases studied (with one notable\nexception) resulted in an actual spill volume that was less than the amount calculated using the\nmethodology from the California study. Magellan argued that 64% of its own historical releases\nproduced a spill volume of less than 10% of the amount initially predicted using the 28% drain-\ndown factor. Therefore, Magellan claimed that its methodology was a conservative, technically\njustifiable, approach. It further asserted that not only was such a performance-based approach\nallowed under § 195.452(f)(1), it was actually encouraged since the regulation recognized the\nneed to consider actual conditions and location-specific information.7\nAt the hearing, the OPS Southwest Region staff rejected Magellan’s Overland Spread Analysis\nfor several reasons. First, OPS contended that the model was not properly based upon location-\nand pipeline-specific information from Magellan’s own system. OPS acknowledged that the\nagency’s integrity management regulations are indeed performance-based and designed to\nprovide operators with the flexibility to tailor their IMPs to the unique conditions presented by\ntheir own particular systems. Operators are encouraged to design their own methodologies,\ntaking into account the unique circumstances of their particular systems, including the potential\nfor excavation damage, the results of other inspections required by the pipeline safety\nregulations, cathodic protection survey results, topography, roadway crossings, etc.8 However,\nas noted during the notice-and-comment period for the hazardous liquid integrity management\n6 Brief, at 8. Respondent did not submit formal copies of either study for the written record. However, it is\napparent that one of the studies referred to is a paper entitled, “Hazardous Liquid Pipeline Risk Assessment,” and\nwas conducted by EDM Services for the California State Fire Marshal. This 1993 study assessed 10 years of\npipeline failure and leak data in California. Respondent did not provide information regarding the 2000 Longhorn\nValve study.\n7 In support of its position, Magellan quoted from the Preamble of the final IMP rule: “The proposed rule used\nprimarily performance-based language to allow operators to use pipeline- and location-specific information to\ndetermine the necessary integrity management practices.” See, Pipeline Safety: Pipeline Integrity Management in\nHigh Consequence Areas (Hazardous Liquid Operators With 500 or More Miles of Pipeline) Part III, 65 FR 75378\n(December 1, 2000).\n8 Id. at 75395.\n\n\n\n4\nrulemaking process, an operator’s assessment methodology for designating “could affect” pipe\nsegments must still be technically defensible.9\nIn this case, Magellan initially calculated the volume of product that would drain out in the event\nthat the line ruptured in a specific location, considering the specific commodity, pipeline\nspecifications, and the effects of the local terrain. However, it then reduced this maximum\nvolume by multiplying it by a factor of 28%, thus greatly reducing the potential areas affected by\na spill. The OPS Southwest Region rejected the use of this borrowed 28% factor, stating that it\ncould not be applied universally to other pipeline systems, including Magellan’s.\nThe agency cited several reasons. First, the 28% factor was based upon historical accident data\nfor specific pipelines in California between 1981 and 1990. Second, specific topographical,\npipeline configuration, and operational differences existed between the pipelines studied in\nCalifornia and those operated by Magellan. Third, the California study utilized the 28% factor as\npart of a totally different type of risk analysis (i.e., a “cost-benefit” analysis) than the one\napplying the 28% factor from the California study, which had already accounted for topography,\nbasis.\ninvolved in PHMSA’s integrity management program (i.e., a “could-affect” analysis).10 Fourth,\nfurther reduced the maximum drain-down volume in a manner that lacked an adequate technical\nOPS also contended that Magellan’s use of its own historical spill data did not serve to validate\nthe use of the 28% drain-down factor plus 15 minutes of pipeline flow rate. Most of the leaks\nMagellan included in its analysis were relatively small. The company acknowledged that one\nrelease in 1999 on its El Dorado to Walthena JCT line segment resulted in a spill volume that far\nexceeded Magellan’s drain-down volume calculation method. In fact, the evidence shows that it\nexceeded the calculated spread distance by almost 300 percent.11\nWhile Magellan contended in its Brief that this one major leak was an anomaly, the OPS staff\nargued that the purpose of § 195.452(f)(1) is to determine whether HCAs could be affected by a\nspill, not what the normal or historical effects of most spills had been in the past. At the hearing,\nwhen OPS staff asked Respondent if this one major leak was the worst case possible, Respondent\nreplied that it was not. Therefore, OPS argued, Magellan should not be relying on the 28%\ndrain-down factor when it was clear that a spill could exceed the spread area assumed under its\nmodel.\n9 Id. at 75385. PHMSA has also stated in guidance materials that an operator’s methodology should be developed\nwith “sound engineering judgment with a reasonable amount of conservatism to account for uncertainties in the\nassumptions and calculation methods used in the analysis.” See, Integrity Management Rule Frequently Asked\nQuestions (FAQ) (3.4), (February 18, 2003), available at Pipeline & Hazardous Materials Safety Administration,\nOPS Integrity Management, http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm.\n10 Appendix C to Part 195 provides guidance on factors that operators should consider in determining whether a\npipeline “could affect” an HCA. These factors are quite different than the type of data used in a cost-benefit\nanalysis.\n11 Brief, at 10.\n\n\n\n5\nFindings:\nUpon review of all of the evidence and the arguments of the parties, I find that Magellan’s use of\nits Overland Spread Analysis to identify pipe segments that “could affect” HCAs was not\ntechnically justifiable. The fact that one of the releases in Magellan’s historical study exceeded\nthe predicted spill volume by roughly 300% is significant. It shows that Magellan’s\nmethodology did not fully take into account what could happen if a portion of Magellan’s line\nruptured in close proximity to an HCA. I further find that the 28% drain-down factor used in the\nmodel did not adequately take into account the specific conditions of Magellan’s own line,\nincluding the topography of the area. Accordingly, I find that Magellan violated 49 C.F.R.\n§ 195.452(f)(1) by failing to include in its IMP an adequate process for identifying which of the\ncompany’s pipeline segments could affect an HCA.\nItem 2B: The Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(e)(1), which states:\n§ 195.452 Pipeline integrity management in high consequence areas.\n(a) . . . .\n(e) What are the risk factors for establishing an assessment schedule\n(for both the baseline and continual integrity assessments)?\n(1) An operator must establish an integrity assessment schedule that\nprioritizes pipeline segments for assessment (see paragraphs (d)(1) and (j)(3)\nof this section). An operator must base the assessment schedule on all risk\nfactors that reflect the risk conditions on the pipeline segment. The factors an\noperator must consider include, but are not limited to:\n(i) Results of the previous integrity assessment, defect type and size\nthat the assessment method can detect, and defect growth rate;\n(ii) Pipe size, material, manufacturing information, coating type and\ncondition, and seam type;\n(iii) Leak history, repair history and cathodic protection history;\n(iv) Product transported;\n(v) Operating stress level;\n(vi) Existing or projected activities in the area;\n(vii) Local environmental factors that could affect the pipeline ( e.g.,\ncorrosivity of soil, subsidence, climatic);\n(viii) Geo-technical hazards; and\n(ix) Physical support of the segment such as by a cable suspension\nbridge.\nThe Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(e)(1) by failing to establish\nan integrity assessment schedule that was based on all risk factors reflecting the conditions of\neach “could affect” pipeline segment. Specifically, OPS alleged that the relative risk scores in\nMagellan’s model did not adequately reflect the likelihood of threats and actual failures\nexperienced by Respondent, including such risk factors as cathodic protection, coating condition,\nfatigue, one-call, and hazard identification.\n\n\n\n6\nThe OPS inspector noted in his Violation Report that Magellan’s risk model did not effectively\nutilize these risk factors because it was too heavily weighted toward the consequences of\naccidents and not enough toward their likelihood. This meant that the model could therefore be\nmasking many likelihood-related relative risk factors.\nSince the integrity management program set forth in § 195.452 applies only to those pipeline\nsegments that “could affect” HCAs and there are a limited number of different types of HCAs, it\nis common to have dissimilar segments of pipeline within or close to similarly categorized\nHCAs. In such cases, the differences in associated relative risks should be primarily based on\nlikelihood, since the consequences are similar.\nThe Magellan risk model was comprised of four indexes based on failure modes (likelihood) and\nRespondent’s risk model were weighted so that important differences in the likelihood of\npipeline failure were not reflected in the risk scores. For example, several piggable pipe sections\nscheduled for assessment in 2007 had high-risk scores and should have been assessed prior to\nSeptember 30, 2004, but were not. Respondent’s explanation for not having assessed these\npipelines was that these lines were of less concern because they had received an assessment in\n2000, yet their risk scores did not reflect this lower risk. Under Magellan’s scoring system, a\ncompleted internal inspection carried a maximum score of only 7, out of a total of 400, on\nMagellan’s relative likelihood of failure index. Given the significant risk reduction that can be\na leak impact factor (consequences).12 OPS alleged that many of the factors within\nachieved through the completion of an internal inspection tool run, OPS contended that this\nweighting appeared to be inaccurate.\nThe Violation Report further noted that Magellan had utilized several risk factors taken directly\nfrom the popular text on integrity management, Pipeline Risk Management Manual, First\nEdition (Muhlbauer, 1992), but that the company had failed to use the factors effectively in\ndeveloping its own model. At the hearing, OPS cited four specific risk factors used by\nMuhlbauer that Magellan had allegedly misapplied:\nCathodic Protection - The Violation Report alleged that Magellan’s risk model did not\nutilize the corrosion risk factor effectively because it was set at a constant (lowest risk) value\ninstead of being adjusted to take into account differing conditions for various segments. Thus,\nthe OPS inspection team questioned its usefulness as a risk factor. According to the Muhlbauer\nmodel, an operator should consider varying conditions and historical data (e.g., anode bed\ndepletion, changing conditions, and equipment malfunctions) and make appropriate adjustments\nto this risk factor, depending upon the unique characteristics of different segments.\nIn response, Magellan stated that each of the indexes in its model took into account the current\nprotections on the line. For example, in developing the corrosion index, Respondent considered\nthat its corrosion control program was designed to manage and mitigate comprehensive corrosion\nrisks such as anode bed depletion, equipment malfunctions, and changing conditions. In\naddition, the company’s Additional Preventive and Mitigation Analysis evaluated the\neffectiveness of the company’s overall corrosion control program and identified other potential\n12 Magellan’s Risk Model Indexes were third party, corrosion, design, and incorrect operations. The leak impact\nfactor considered product type, dispersion factor, population, environmental, and leak history. Brief, at 21.\n\n\n\n7\n“enhancements” that were subsequently evaluated to enhance its cathodic protection system.13\nTherefore, Magellan stated that a constant risk factor was appropriate since its cathodic\nprotection system has always met compliance standards.\nCoating Type and Condition – The Violation Report alleged that Magellan’s risk model\ndid not utilize the coating type and condition risk factor properly because it only considered\ncoating type and did not take coating condition into account at all, as required by §\n195.452(e)(1)(ii). For example, a proper model should consider differing conditions in various\nsegments, such as disbondment and incorrect coating application during installation. Muhlbauer\nrecommends rating the quality of the coating, the quality of the application, the quality of the\ninspection, and the quality of the defect correction program, with each being rated as “good,”\n“fair,” “poor,” or “absent.\n” In response, Magellan argued that it utilized only the coating type\nsince information on the coating condition of its pipe segments was unreliable.\nFatigue - The Violation Report alleged that Magellan’s risk model did not effectively\nutilize the fatigue risk factor because it simply considered whether or not a pressure cycle\nanalysis had been performed on a particular pipe segment. A pressure cycle analysis, however,\nis only performed on low-frequency electric resistance welded (LF-ERW) pipe. Since Magellan\nused the default factor of the highest risk for all segments that had not had a pressure cycle\nanalysis, OPS noted that this could produce the anomalous result that LF-ERW segments with\nhigh-pressure cycles might receive a lower risk score than non-LF-ERW segments that had not\nundergone a pressure cycle analysis. In addition, OPS questioned whether Magellan’s approach\nwas sufficiently sophisticated to determine whether a particular segment was susceptible to\nfatigue. Muhlbauer, for example, recommends a more elaborate fatigue analysis that does more\nthan simply note whether or not a pressure cycle analysis had been performed.\nIn response, Magellan stated that its fatigue factor was derived by comparing the percent of\nMaximum Operating Pressure (MOP) at which the pipeline operated to the number of lifetime\ncycles. Its model assigned a default number of lifetime cycles for segments that had not\nundergone a pressure cycle analysis, with the score derived by comparing the number of lifetime\ncycles to the percentage of MOP.\nOne-Call14\n- The Violation Report alleged that Magellan’s risk model did not effectively\nutilize the “One-Call” risk factor because it simply noted whether a One-Call system was\nmandated by the state and whether it was widely used. OPS noted that such an approach failed\nto address potential or “projected activities in the area,” as required by § 195.452(e)(1)(vi). This\nis generally done by reviewing the level of third-party or construction activities in an area, as\nwell as measuring the frequency of one-call activity in the vicinity. Such information is\nimportant since third-party activity near pipelines is a significant risk factor for the likelihood of\nfailures.\nRespondent contended at the hearing at its “Activity Level” risk factor did properly account for\nthird-party activity near the line. It was calculated on the basis of population levels and foreign\nline crossings; Respondent assigned a score through an algorithm using population density and\nthe number of foreign utility crossings in the area. In contrast, Muhlbauer recommends a\n13 Brief, at 4.\n14 This factor is referred to in § 195.452(e)(1)(vi) as “existing or projected activities in the area.”\n\n\n\n8\nmethodology that includes population density, utility crossings, construction activity and volume\nof one-calls or reconnaissance reports near each segment.\nHazard Identification - The Violation Report alleged that Magellan’s risk model did not\neffectively utilize the hazard identification risk factor because all segments were assigned the\nsame score of “Average” instead of assigning different scores based upon relative risk. OPS\nnoted that under Magellan’s model, in order for a particular segment to receive an “Above\nAverage” or “Excellent” score, a thorough hazard analysis or Haz-op would have to be\nperformed and a hydraulic study completed. Magellan had only completed the hydraulic\nanalysis. Magellan stated that it had assigned an “Average” score to all segments during the\ndevelopment of its BAP since it had not completed the necessary hazard analyses. In addition, it\nclaimed that it used its Additional Preventive and Mitigative Measures process as a type of\nnature of all potential hazards, including possible failures, prior to employing the appropriate\nhazard analysis.15 risk reduction measures.\nIn contrast, Muhlbauer recommends that an operator clearly understand the\nFindings:\nUpon review of all of the evidence and the arguments of the parties, I find that Respondent\nviolated 49 C.F.R. § 195.452(e)(1) by failing to establish an integrity assessment schedule based\non all of the risk factors that reflected the risk conditions on each “could affect” pipeline\nsegment. Section 195.452(e)(1) lists nine factors that must be considered in establishing a\nschedule but leaves it up to the operator to determine what other factors need to be considered,\nhow to assign risk scores to each factor and pipe segment, and how to prioritize assessments.\nMagellan failed to do this. The company’s scoring system did not adequately reflect the actual\nrisks posed by each pipe segment because it was too heavily weighted toward spill consequences\nand not enough toward the likelihood of accidents. In addition, Magellan failed to provide\nadequate documentation to validate or justify its weighting of the various risk factors used in its\nmodel. Finally, the record shows that Magellan took certain risk factors directly from the\nMuhlbauer model but failed to consider them in a fashion that was consistent with the Muhlbauer\napproach or that was sufficient to account for actual differences in risk for each pipeline\nsegment. In short, Magellan had the beginnings of a proper risk model but not enough detail to\nsupport an adequate risk-based assessment schedule.\nAccordingly, I find that Respondent violated § 195.452(e)(1) by failing to establish an integrity\nassessment schedule based upon all risk factors that reflect the risk conditions on each pipeline\nsegment that “could affect” HCAs, including the nine factors set forth in said regulation.\nThese findings of violation will be considered prior offenses in any subsequent enforcement\naction taken against Respondent.\n15 Brief, at 37.\n\n\n\n9\nWITHDRAWAL OF ALLEGATION\nItem 2A: The Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(d)(1), which\nstates:\n§ 195.452 Pipeline integrity management in high consequence areas.\n(a) . . . .\n(d) When must operators complete baseline assessments?\nOperators must complete baseline assessments as follows:\n(1) Time periods. Complete assessments before the following\ndeadlines:\nIf the\npipeline is:\nAnd assess at least 50\npercent of the line pipe on an\nexpedited basis, beginning\nwith the highest risk pipe,\nnot later than:\nCategory 1 March 31, 2008 September 30, 2004.\nCategory 2 August 16, 2005.\nCategory 3 Not applicable.\nThen complete baseline\nassessments not later than the\nfollowing date according to a\nschedule that prioritizes\nassessments:\nFebruary 17, 2009 Date the pipeline begins\noperation The Notice alleged that Respondent violated 49 C.F.R. § 195.452(d)(1) by failing to follow its\nown procedure for establishing a Baseline Assessment Plan (BAP) schedule. Specifically, the\nNotice alleged that Magellan had not followed its procedures for assessing the highest-risk\nsegments first. It stated that “[l]ess than half (47%) of the top 50% highest risk segments had\nreceived a baseline assessment at the time of the inspection.”16 In its Response, the company\nargued that it had indeed followed its procedures by assigning a risk ranking score to each\npipeline segment and by ranking the sections in order from highest to lowest risk. Magellan\nacknowledged that certain conditions caused the company to deviate from the assessment\nschedule but these types of modifications were provided for in Section 3.4 of its procedures.\nMagellan also pointed to certain OPS regulatory guidance that acknowledged practical\nconsiderations could cause operators to assess some lower-risk segments before higher-risk\n17\nones.\nFindings:\nUpon consideration of all of the evidence and the arguments of the parties, I find that this\nallegation is not supported by the evidence and is hereby withdrawn. Magellan submitted copies\nof its procedures and it appears that the company did follow them by assigning a risk rank to\n16 Notice, at 3. The Violation Report quoted from Section 3 of Magellan’s IMP, which states that “[b]y using the\nrisk-ranked order of sections, MMP will specify pipeline sections that must be assessed each year (beginning with\nyear one) to satisfy the requirements of assessing at least one half of the HCAs in the first three and one half years\n(September 30, 2004), and the remainder within the next three and one half years (March 31, 2008).” Violation\nReport, at 3.\n17 Brief, at 3. See, Integrity Management Rule FAQ 4.14, (February 18, 2003), available at Pipeline & Hazardous\nMaterials Safety Administration, OPS Integrity Management, http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm.\n\n\n\n10\neach segment and then assessing it in accordance with the company’s own schedule. Further,\nMagellan’s procedures provided for modification of the initial assessment schedule on the basis\nof ILI tool availability, operational readiness, workforce availability, previous integrity testing\nhistory, and other factors.\nAlthough the Notice focused on Magellan’s procedures and did not refer specifically to\nMagellan’s mileage assessment obligation under § 192.452(d), it is important to understand the\nregulation because differing interpretations presented by OPS and the company led to their\ndisagreement over whether Magellan had complied with its own procedures. Under\n§192.452(d), Magellan was required 1) to assess at least 50% of the line pipe on an expedited\nbasis, and 2) to begin with the highest risk pipe. According to the data Magellan provided, the\ncompany had 2976 miles of “could affect” HCA pipe in its system. Therefore, by September 30,\n2004, Magellan was required to have assessed at least 50%, or 1488 miles, of such pipe.\nMagellan exceeded this requirement by assessing 63%, or 1865 miles, by the deadline. Magellan\nwas also required to start its assessments “with the highest-risk pipe” first, but not to have\ncompleted any particular percentage of highest–risk pipe by the deadline.\nIn support of this interpretation, the OPS guidance specifically states:\nThe rule requires that baseline assessments must have been completed on at\nleast 50 percent of the category 1 line pipe that can affect HCAs by September\n30, 2004, (or August 16, 2005 for category 2 pipe), starting with the highest risk\npipe. Although PHMSA Pipeline Safety expects operators to have concentrated\non the highest risk pipe, some segments not among the highest risk pipe may\nhave been counted towards the 50 percent requirement. PHMSA Pipeline\nSafety recognizes that practical issues associated with scheduling and\nconducting assessments may have led to some lower risk pipe being assessed\nprior to high-risk pipe. For example, during a pig run to address a high risk\nsegment, an operator may also have assessed another lower risk segment that\nhappens to be located in the same section of pipe that was being inspected. This\nadditional segment may be credited against the September 30, 2004, (or August\n16, 2005) deadline. PHMSA Pipeline Safety inspections will review how an\noperator has prioritized segments for assessment to assure that appropriate\nemphasis is being placed on the highest-risk pipe.” (emphasis in original)18\nThe passage quoted above does not minimize the need to address higher-risk pipeline segments\nas soon as practicable. Instead, it merely recognizes that some lower-risk segments will naturally\nbe assessed along with higher-risk ones. In accepting that lower-risk segments might be assessed\nas part of the initial assessment, the FAQ continues to emphasize the need to place a priority on\nassessing higher-risk segments at the beginning of the process, not the end.\n18 See, Integrity Management Rule FAQ 4.14, (February 18, 2003), available at Pipeline & Hazardous Materials\nSafety Administration, OPS Integrity Management,. http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm\n\n\n\n11\nIn its Response and Brief, Magellan mischaracterized the meaning of 49 C.F.R. § 195.452(d) and\nthe guidance quoted above. Magellan stated:\nThe unambiguous requirement under 49 CFR § 195.452(d)(1) requires only\nthat 50% of the line pipe on an expedited basis be completed no later than\nSeptember 30, 2004…. There is no regulatory requirement that 50% of the\nhighest risk segments be completed by September 30, 2004. In fact,\nPHMSA, in its regulatory guidance, specifically recognized that other lesser\nrisk segments would get completed as part of the practical consideration of\ndoing the baseline assessment and that those lesser risk segments would\ncount towards the 50 percent completion requirement. (emphasis in\noriginal)19\nIn its Brief, Magellan chose to ignore a key phrase in the chart contained in § 195.452(d)(1),\nnamely, “beginning with the highest risk pipe.” That phrase makes clear that the intent of\n§ 195.452(d)(1) is that operators must prioritize all of their pipe segments that “could affect”\nHCAs according to the risks that they pose and then to assess them on an expedited basis,\nbeginning with the highest-risk pipe first. While there is no exact percentage of highest-risk pipe\nthat must be assessed by the deadline, the regulation does require a showing that the operator\nmake a deliberate effort to assess its HCA pipe in a manner that addressed the highest risk pipe\nfirst. In this case, although Magellan may have misinterpreted the regulation and guidance, it\nstill met the requirement that it should place an emphasis on the highest-risk pipe. It\naccomplished this by assessing more than the minimum amount of pipe it was required to assess\nby the September 30, 2004 deadline. The company assessed 1865 miles of pipe, rather than the\nminimum of 1488 miles that was required and 890 of those miles consisted of high-risk pipe.\nTherefore, 60% of the total number of miles the company was required to inspect prior to\nSeptember 30, 2004 consisted of high-risk pipe.\nBased upon the foregoing, I do not believe there is sufficient evidence to show that Magellan\nviolated either the letter or the spirit of its own procedures for assessing “could affect” HCA pipe\nin accordance with a risk-based schedule. Accordingly, Item 2A is hereby withdrawn.\nASSESSMENT OF PENALTY\nUnder 49 U.S.C. § 60122, Respondent is subject to a civil penalty not to exceed $100,000 per\nviolation for each day of the violation, up to a maximum of $1,000,000 for any related series of\nviolations.\nThe Final Order assessed a total civil penalty of $147,500, which Respondent has already\nremitted to PHMSA.\nAMENDED COMPLIANCE ORDER\nThe Notice proposed a Compliance Order with respect to Items 1 and 2 in the Notice. Under 49\nU.S.C. § 60118(a), each person who engages in the transportation of hazardous liquids or who\nowns or operates a pipeline facility is required to comply with the applicable safety standards\n19 Brief, at 2.\n\n\n\n12\nestablished under Chapter 601. The Compliance Order is hereby amended to include deadlines\nfor Items 1 and 2 which were inadvertently omitted.\nPursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is\nordered to take the following actions to ensure compliance with the pipeline safety regulations\napplicable to its operations:\n1. With regard to Item 1 of the Notice, modify its process to use a technically justified\nmethodology to estimate release volumes. The data used must be specific to\nRespondent’s pipelines and surrounding terrain;\n2. With regard to Item 1 of the Notice, identify HCAs in accordance with the process\ndeveloped in Item 1 above. Newly identified pipeline segments that could affect\nHCAs must be added to Respondent’s program, along with identification of any\nanomalies that must be remediated per the repair criteria in 49 C.F.R. § 195.452(h);\n3. With regard to Item 2B of the Notice, modify Respondent’s risk model to\nappropriately account for the threats to the integrity of its pipelines. Respondent must\nconsider the relative likelihood of all required threats listed in 49 C.F.R. § 195.452, as\nwell as additional threats identified by Respondent in its risk analysis and segment\nrelative risk ranking. The relative weightings applied to risk factors must be re-\nevaluated to ensure that the risk analysis adequately reflects the risk conditions on the\npipeline segments and appropriately balances relative likelihood and consequence\nconsiderations;\n4. Compare the new risk ranking for all segments with the list of assessed segments to\nascertain the status of the baseline assessment program, and identify the higher\nrelative risk pipeline segments for which integrity assessments should have been\nperformed by September 30, 2004, but that have not been performed to date, if any;\n5. Within 60 days of receipt of the Final Order, provide the revised risk model and the\nanticipated assessment completion dates for the high risk segments for which\nassessments were not completed by September 30, 2004, as set forth above, to the\nDirector, Southwest Region, ","truncated":true,"body_characters":87597}