# MAGELLAN PIPELINE COMPANY, LP — Notice of Probable Violation

- **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:** Not available
- **summary:** CLOSED notice of probable violation citing 195.452(d)(1), 195.452(e)(1), 195.452(f)(1).
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- **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.

Official case documents:

420065020_AmendedFinalOrder_12232009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_AmendedFinalOrder_12232009.pdf

420065020_AmendedFinalOrder_12232009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_AmendedFinalOrder_12232009_text.pdf

420065020_Closure_08052010.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_Closure_08052010.pdf

420065020_Closure_08052010_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_Closure_08052010_text.pdf

420065020_FinalOrder_07092009.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_FinalOrder_07092009.pdf

420065020_FinalOrder_07092009_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420065020/420065020_FinalOrder_07092009_text.pdf

420065020_AmendedFinalOrder_12232009_text.pdf

DEC 23 2009
Mr. Richard A. Olson
Vice President, Transportation Operations
Magellan Midstream Partners, L.P.
One Williams Center
P.O. Box 22186
Tulsa, OK 74121-2186
Re: CPF No. 4-2006-5020
Dear Mr. Olson:
It has come to my attention that there is a clerical error in the July 9, 2009 Compliance Order
issued in the above-referenced case. The completion dates for Items 1 and 2 of the Compliance
Order were inadvertently omitted. Although Magellan was required to complete Items 3 and 4
within 60 days from the date of receipt of the Final Order, there was no such completion deadline
for Items 1 and 2 of the Compliance Order.
In the attached Amended Final Order, I am now correcting the clerical error and allowing
Magellan an additional sixty days from the receipt of this Amended Final Order to complete the
tasks listed in Items 1 and 2 of the Compliance Order. If Magellan needs a further extension of
time, the company may submit such a request in writing to the Director, Southwest Region. Any
request for extension must be timely and demonstrate good cause for the extension. The
completion deadline for Items 3 and 4 will remain the same. Magellan should have already
completed these tasks since sixty days have transpired since Magellan received the Final Order.
When the terms of the Amended Compliance Order have been completed, as determined by the
Director, Southwest Region, CPF No. 4-2006-5020 will be closed. Your receipt of this letter and
Amended Final Order constitute service of those documents under 49 C.F.R. § 190.5.
Thank you for your cooperation in these matters.
Sincerely,
Jeffrey D. Wiese
Associate Administrator
for Pipeline Safety
Enclosure
cc: Paul E. Pratt, Esq., Magellan Midstream Partners, L.P.
Mr. Rod M. Seeley, Director, Southwest Region, PHMSA
CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7009 1410 0000 2464 5867]



U.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. 4-2006-5020
)
)
)
Respondent. )
____________________________________)
AMENDED FINAL ORDER
Between April 11-15 and May 2-6, 2005, pursuant to 49 U.S.C. § 60117, representatives of the
Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety
(OPS) and its state agent, the Minnesota Office of Pipeline Safety, conducted an on-site pipeline
safety inspection of the Integrity Management Program procedures and records of Magellan
Midstream Partners, L.P. (Magellan or Respondent), at the company’s offices in Tulsa,
Oklahoma. Magellan is a major energy supplier in the United States whose assets include an
8,700-mile petroleum products pipeline system and a 1,100-mile ammonia pipeline system.
As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to
Respondent, by letter dated May 2, 2006, a Notice of Probable Violation, Proposed Civil
proposed finding that Respondent committed certain violations of 49 C.F.R. Part 195 and
Penalty, and Proposed Compliance Order.1 assessing a civil penalty of $215,000 for the alleged violations. The Notice also proposed that
Respondent be required to take certain measures to correct the alleged violations.
In accordance with 49 C.F.R. § 190.207, the Notice
Magellan responded to the Notice by letter dated June 2, 2006 (Response). Respondent
contested the allegations, penalties, and proposed compliance order, and requested a hearing. A
hearing was subsequently held on September 21, 2006, in Houston, Texas, with an attorney from
the Office of Chief Counsel, PHMSA, presiding. After the hearing, Respondent provided two
post-hearing submissions dated October 17, 2006, and February 23, 2007 (collectively, Brief).
2
On July 9, 2009, PHMSA issued a Final Order making findings of violation, assessing a civil
penalty, and issuing a Compliance Order. This Amended Final Order addresses a clerical error
in the Compliance Order and sets deadlines for the actions required in Items 1 and 2 of the
Compliance Order.
1 The Notice originally assigned docket number CPF No. 4-2005-5020 to this action. It was later re-designated as
CPF No. 4-2006-5020.
2 Unless otherwise noted, all citations to Respondent’s Brief refer to the October 17, 2006, document.



2
FINDINGS OF VIOLATION
The Notice alleged three violations with respect to Magellan’s Integrity Management Program
(IMP) under 49 C.F.R. § 195.452. These consisted of (1) a failure to include in its program a
process for identifying which of its pipeline segments could affect High Consequence Areas
first; and (3) a failure to establish an assessment schedule based on all risk factors reflecting the
condition of each segment. Each of these allegations is discussed more fully below.
(HCAs);3 (2) a failure to follow company procedures by assessing the highest-risk segments
Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.452(f)(1), which states:
§ 195.452 Pipeline integrity management in high consequence areas.
(a) . . . .
(f) What are the elements of an integrity management program?
An integrity management program begins with the initial framework. An
operator must continually change the program to reflect operating
experience, conclusions drawn from results of the integrity assessments,
and other maintenance and surveillance data, and evaluation of
consequences of a failure on the high consequence area. An operator must
include, at minimum, each of the following elements in its written
integrity management program:
(1) A process for identifying which pipeline segments could affect
a high consequence area; . . . .
The Notice alleged that Magellan violated 49 C.F.R. § 195.452(f)(1) by failing to include in its
IMP a process for identifying which of its pipeline segments could affect an HCA. Specifically,
the Notice alleged that although Magellan’s IMP purported to identify those segments of its
pipeline system that “could affect” HCAs, it failed to use a technically justifiable or defensible
methodology as part of that identification process.
The Notice alleged that Magellan had performed an “Overland Spread Analysis” as the
underlying basis or model for identifying its “could affect” pipeline segments. This analysis was
designed to estimate, for every 100-foot segment of pipe, the ground area that could potentially
be affected by a hazardous liquid spill.
4 Magellan calculated the overland spill volume by
assuming a 15-minute pipeline flow rate plus 28% of the drain-down volume.5
Respondent then
overlaid a map of the area where the product would potentially spill with available HCA maps to
make the ultimate determination of which HCAs could be affected by a spill. According to the
Notice, there was inadequate technical justification for limiting the drain-down volume to 28%;
therefore, the use of this percentage could have the effect of significantly reducing the total
number of miles deemed capable of affecting an HCA.
3 HCAs are defined as commercially navigable waterways, high population areas, and areas unusually sensitive to
environmental damage. See 49 C.F.R. § 195.450.
4 Brief, at 7.
5 The drain-down volume is the volume that could drain from pipeline segments upstream and downstream of the
leak site. Respondent explained in its Brief that it calculated the maximum drain-down volume by estimating the
volume of product that could potentially “gravity drain” into the release site, taking into account pipeline and
location-specific information. Id.



3
At the hearing and in its Brief, Magellan defended its Overland Spread Analysis generally and its
28% drain-down figure in particular. Magellan stated in its Brief:
The drain down volume calculation and the application of the 28%
factor was derived from a review of the 1993 California Fire Marshall
Study and the 2000 Longhorn Valve Study. Additionally, in order to
substantiate the application of the 28% factor, historical refined
product release volumes were analyzed and compared to the
theoretical spill volumes as determined by the calculation method.
Magellan analyzed ten years of applicable historical Refined Products
mainline releases which constituted 62 releases from 1994 to 2003.6
According to Magellan, its model was based initially upon the California and Longhorn studies
and further supported by historical spill data drawn from its own system. Its own internal data
was used to verify the assumption that the total amount of product potentially spilled from any
particular pipe segment was only 28% of the maximum potential drain-down volume. The
company noted that all 62 of the historical Magellan releases studied (with one notable
exception) resulted in an actual spill volume that was less than the amount calculated using the
methodology from the California study. Magellan argued that 64% of its own historical releases
produced a spill volume of less than 10% of the amount initially predicted using the 28% drain-
down factor. Therefore, Magellan claimed that its methodology was a conservative, technically
justifiable, approach. It further asserted that not only was such a performance-based approach
allowed under § 195.452(f)(1), it was actually encouraged since the regulation recognized the
need to consider actual conditions and location-specific information.7
At the hearing, the OPS Southwest Region staff rejected Magellan’s Overland Spread Analysis
for several reasons. First, OPS contended that the model was not properly based upon location-
and pipeline-specific information from Magellan’s own system. OPS acknowledged that the
agency’s integrity management regulations are indeed performance-based and designed to
provide operators with the flexibility to tailor their IMPs to the unique conditions presented by
their own particular systems. Operators are encouraged to design their own methodologies,
taking into account the unique circumstances of their particular systems, including the potential
for excavation damage, the results of other inspections required by the pipeline safety
regulations, cathodic protection survey results, topography, roadway crossings, etc.8 However,
as noted during the notice-and-comment period for the hazardous liquid integrity management
6 Brief, at 8. Respondent did not submit formal copies of either study for the written record. However, it is
apparent that one of the studies referred to is a paper entitled, “Hazardous Liquid Pipeline Risk Assessment,” and
was conducted by EDM Services for the California State Fire Marshal. This 1993 study assessed 10 years of
pipeline failure and leak data in California. Respondent did not provide information regarding the 2000 Longhorn
Valve study.
7 In support of its position, Magellan quoted from the Preamble of the final IMP rule: “The proposed rule used
primarily performance-based language to allow operators to use pipeline- and location-specific information to
determine the necessary integrity management practices.” See, Pipeline Safety: Pipeline Integrity Management in
High Consequence Areas (Hazardous Liquid Operators With 500 or More Miles of Pipeline) Part III, 65 FR 75378
(December 1, 2000).
8 Id. at 75395.



4
rulemaking process, an operator’s assessment methodology for designating “could affect” pipe
segments must still be technically defensible.9
In this case, Magellan initially calculated the volume of product that would drain out in the event
that the line ruptured in a specific location, considering the specific commodity, pipeline
specifications, and the effects of the local terrain. However, it then reduced this maximum
volume by multiplying it by a factor of 28%, thus greatly reducing the potential areas affected by
a spill. The OPS Southwest Region rejected the use of this borrowed 28% factor, stating that it
could not be applied universally to other pipeline systems, including Magellan’s.
The agency cited several reasons. First, the 28% factor was based upon historical accident data
for specific pipelines in California between 1981 and 1990. Second, specific topographical,
pipeline configuration, and operational differences existed between the pipelines studied in
California and those operated by Magellan. Third, the California study utilized the 28% factor as
part of a totally different type of risk analysis (i.e., a “cost-benefit” analysis) than the one
applying the 28% factor from the California study, which had already accounted for topography,
basis.
involved in PHMSA’s integrity management program (i.e., a “could-affect” analysis).10 Fourth,
further reduced the maximum drain-down volume in a manner that lacked an adequate technical
OPS also contended that Magellan’s use of its own historical spill data did not serve to validate
the use of the 28% drain-down factor plus 15 minutes of pipeline flow rate. Most of the leaks
Magellan included in its analysis were relatively small. The company acknowledged that one
release in 1999 on its El Dorado to Walthena JCT line segment resulted in a spill volume that far
exceeded Magellan’s drain-down volume calculation method. In fact, the evidence shows that it
exceeded the calculated spread distance by almost 300 percent.11
While Magellan contended in its Brief that this one major leak was an anomaly, the OPS staff
argued that the purpose of § 195.452(f)(1) is to determine whether HCAs could be affected by a
spill, not what the normal or historical effects of most spills had been in the past. At the hearing,
when OPS staff asked Respondent if this one major leak was the worst case possible, Respondent
replied that it was not. Therefore, OPS argued, Magellan should not be relying on the 28%
drain-down factor when it was clear that a spill could exceed the spread area assumed under its
model.
9 Id. at 75385. PHMSA has also stated in guidance materials that an operator’s methodology should be developed
with “sound engineering judgment with a reasonable amount of conservatism to account for uncertainties in the
assumptions and calculation methods used in the analysis.” See, Integrity Management Rule Frequently Asked
Questions (FAQ) (3.4), (February 18, 2003), available at Pipeline & Hazardous Materials Safety Administration,
OPS Integrity Management, http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm.
10 Appendix C to Part 195 provides guidance on factors that operators should consider in determining whether a
pipeline “could affect” an HCA. These factors are quite different than the type of data used in a cost-benefit
analysis.
11 Brief, at 10.



5
Findings:
Upon review of all of the evidence and the arguments of the parties, I find that Magellan’s use of
its Overland Spread Analysis to identify pipe segments that “could affect” HCAs was not
technically justifiable. The fact that one of the releases in Magellan’s historical study exceeded
the predicted spill volume by roughly 300% is significant. It shows that Magellan’s
methodology did not fully take into account what could happen if a portion of Magellan’s line
ruptured in close proximity to an HCA. I further find that the 28% drain-down factor used in the
model did not adequately take into account the specific conditions of Magellan’s own line,
including the topography of the area. Accordingly, I find that Magellan violated 49 C.F.R.
§ 195.452(f)(1) by failing to include in its IMP an adequate process for identifying which of the
company’s pipeline segments could affect an HCA.
Item 2B: The Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(e)(1), which states:
§ 195.452 Pipeline integrity management in high consequence areas.
(a) . . . .
(e) What are the risk factors for establishing an assessment schedule
(for both the baseline and continual integrity assessments)?
(1) An operator must establish an integrity assessment schedule that
prioritizes pipeline segments for assessment (see paragraphs (d)(1) and (j)(3)
of this section). An operator must base the assessment schedule on all risk
factors that reflect the risk conditions on the pipeline segment. The factors an
operator must consider include, but are not limited to:
(i) Results of the previous integrity assessment, defect type and size
that the assessment method can detect, and defect growth rate;
(ii) Pipe size, material, manufacturing information, coating type and
condition, and seam type;
(iii) Leak history, repair history and cathodic protection history;
(iv) Product transported;
(v) Operating stress level;
(vi) Existing or projected activities in the area;
(vii) Local environmental factors that could affect the pipeline ( e.g.,
corrosivity of soil, subsidence, climatic);
(viii) Geo-technical hazards; and
(ix) Physical support of the segment such as by a cable suspension
bridge.
The Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(e)(1) by failing to establish
an integrity assessment schedule that was based on all risk factors reflecting the conditions of
each “could affect” pipeline segment. Specifically, OPS alleged that the relative risk scores in
Magellan’s model did not adequately reflect the likelihood of threats and actual failures
experienced by Respondent, including such risk factors as cathodic protection, coating condition,
fatigue, one-call, and hazard identification.



6
The OPS inspector noted in his Violation Report that Magellan’s risk model did not effectively
utilize these risk factors because it was too heavily weighted toward the consequences of
accidents and not enough toward their likelihood. This meant that the model could therefore be
masking many likelihood-related relative risk factors.
Since the integrity management program set forth in § 195.452 applies only to those pipeline
segments that “could affect” HCAs and there are a limited number of different types of HCAs, it
is common to have dissimilar segments of pipeline within or close to similarly categorized
HCAs. In such cases, the differences in associated relative risks should be primarily based on
likelihood, since the consequences are similar.
The Magellan risk model was comprised of four indexes based on failure modes (likelihood) and
Respondent’s risk model were weighted so that important differences in the likelihood of
pipeline failure were not reflected in the risk scores. For example, several piggable pipe sections
scheduled for assessment in 2007 had high-risk scores and should have been assessed prior to
September 30, 2004, but were not. Respondent’s explanation for not having assessed these
pipelines was that these lines were of less concern because they had received an assessment in
2000, yet their risk scores did not reflect this lower risk. Under Magellan’s scoring system, a
completed internal inspection carried a maximum score of only 7, out of a total of 400, on
Magellan’s relative likelihood of failure index. Given the significant risk reduction that can be
a leak impact factor (consequences).12 OPS alleged that many of the factors within
achieved through the completion of an internal inspection tool run, OPS contended that this
weighting appeared to be inaccurate.
The Violation Report further noted that Magellan had utilized several risk factors taken directly
from the popular text on integrity management, Pipeline Risk Management Manual, First
Edition (Muhlbauer, 1992), but that the company had failed to use the factors effectively in
developing its own model. At the hearing, OPS cited four specific risk factors used by
Muhlbauer that Magellan had allegedly misapplied:
Cathodic Protection - The Violation Report alleged that Magellan’s risk model did not
utilize the corrosion risk factor effectively because it was set at a constant (lowest risk) value
instead of being adjusted to take into account differing conditions for various segments. Thus,
the OPS inspection team questioned its usefulness as a risk factor. According to the Muhlbauer
model, an operator should consider varying conditions and historical data (e.g., anode bed
depletion, changing conditions, and equipment malfunctions) and make appropriate adjustments
to this risk factor, depending upon the unique characteristics of different segments.
In response, Magellan stated that each of the indexes in its model took into account the current
protections on the line. For example, in developing the corrosion index, Respondent considered
that its corrosion control program was designed to manage and mitigate comprehensive corrosion
risks such as anode bed depletion, equipment malfunctions, and changing conditions. In
addition, the company’s Additional Preventive and Mitigation Analysis evaluated the
effectiveness of the company’s overall corrosion control program and identified other potential
12 Magellan’s Risk Model Indexes were third party, corrosion, design, and incorrect operations. The leak impact
factor considered product type, dispersion factor, population, environmental, and leak history. Brief, at 21.



7
“enhancements” that were subsequently evaluated to enhance its cathodic protection system.13
Therefore, Magellan stated that a constant risk factor was appropriate since its cathodic
protection system has always met compliance standards.
Coating Type and Condition – The Violation Report alleged that Magellan’s risk model
did not utilize the coating type and condition risk factor properly because it only considered
coating type and did not take coating condition into account at all, as required by §
195.452(e)(1)(ii). For example, a proper model should consider differing conditions in various
segments, such as disbondment and incorrect coating application during installation. Muhlbauer
recommends rating the quality of the coating, the quality of the application, the quality of the
inspection, and the quality of the defect correction program, with each being rated as “good,”
“fair,” “poor,” or “absent.
” In response, Magellan argued that it utilized only the coating type
since information on the coating condition of its pipe segments was unreliable.
Fatigue - The Violation Report alleged that Magellan’s risk model did not effectively
utilize the fatigue risk factor because it simply considered whether or not a pressure cycle
analysis had been performed on a particular pipe segment. A pressure cycle analysis, however,
is only performed on low-frequency electric resistance welded (LF-ERW) pipe. Since Magellan
used the default factor of the highest risk for all segments that had not had a pressure cycle
analysis, OPS noted that this could produce the anomalous result that LF-ERW segments with
high-pressure cycles might receive a lower risk score than non-LF-ERW segments that had not
undergone a pressure cycle analysis. In addition, OPS questioned whether Magellan’s approach
was sufficiently sophisticated to determine whether a particular segment was susceptible to
fatigue. Muhlbauer, for example, recommends a more elaborate fatigue analysis that does more
than simply note whether or not a pressure cycle analysis had been performed.
In response, Magellan stated that its fatigue factor was derived by comparing the percent of
Maximum Operating Pressure (MOP) at which the pipeline operated to the number of lifetime
cycles. Its model assigned a default number of lifetime cycles for segments that had not
undergone a pressure cycle analysis, with the score derived by comparing the number of lifetime
cycles to the percentage of MOP.
One-Call14
- The Violation Report alleged that Magellan’s risk model did not effectively
utilize the “One-Call” risk factor because it simply noted whether a One-Call system was
mandated by the state and whether it was widely used. OPS noted that such an approach failed
to address potential or “projected activities in the area,” as required by § 195.452(e)(1)(vi). This
is generally done by reviewing the level of third-party or construction activities in an area, as
well as measuring the frequency of one-call activity in the vicinity. Such information is
important since third-party activity near pipelines is a significant risk factor for the likelihood of
failures.
Respondent contended at the hearing at its “Activity Level” risk factor did properly account for
third-party activity near the line. It was calculated on the basis of population levels and foreign
line crossings; Respondent assigned a score through an algorithm using population density and
the number of foreign utility crossings in the area. In contrast, Muhlbauer recommends a
13 Brief, at 4.
14 This factor is referred to in § 195.452(e)(1)(vi) as “existing or projected activities in the area.”



8
methodology that includes population density, utility crossings, construction activity and volume
of one-calls or reconnaissance reports near each segment.
Hazard Identification - The Violation Report alleged that Magellan’s risk model did not
effectively utilize the hazard identification risk factor because all segments were assigned the
same score of “Average” instead of assigning different scores based upon relative risk. OPS
noted that under Magellan’s model, in order for a particular segment to receive an “Above
Average” or “Excellent” score, a thorough hazard analysis or Haz-op would have to be
performed and a hydraulic study completed. Magellan had only completed the hydraulic
analysis. Magellan stated that it had assigned an “Average” score to all segments during the
development of its BAP since it had not completed the necessary hazard analyses. In addition, it
claimed that it used its Additional Preventive and Mitigative Measures process as a type of
nature of all potential hazards, including possible failures, prior to employing the appropriate
hazard analysis.15 risk reduction measures.
In contrast, Muhlbauer recommends that an operator clearly understand the
Findings:
Upon review of all of the evidence and the arguments of the parties, I find that Respondent
violated 49 C.F.R. § 195.452(e)(1) by failing to establish an integrity assessment schedule based
on all of the risk factors that reflected the risk conditions on each “could affect” pipeline
segment. Section 195.452(e)(1) lists nine factors that must be considered in establishing a
schedule but leaves it up to the operator to determine what other factors need to be considered,
how to assign risk scores to each factor and pipe segment, and how to prioritize assessments.
Magellan failed to do this. The company’s scoring system did not adequately reflect the actual
risks posed by each pipe segment because it was too heavily weighted toward spill consequences
and not enough toward the likelihood of accidents. In addition, Magellan failed to provide
adequate documentation to validate or justify its weighting of the various risk factors used in its
model. Finally, the record shows that Magellan took certain risk factors directly from the
Muhlbauer model but failed to consider them in a fashion that was consistent with the Muhlbauer
approach or that was sufficient to account for actual differences in risk for each pipeline
segment. In short, Magellan had the beginnings of a proper risk model but not enough detail to
support an adequate risk-based assessment schedule.
Accordingly, I find that Respondent violated § 195.452(e)(1) by failing to establish an integrity
assessment schedule based upon all risk factors that reflect the risk conditions on each pipeline
segment that “could affect” HCAs, including the nine factors set forth in said regulation.
These findings of violation will be considered prior offenses in any subsequent enforcement
action taken against Respondent.
15 Brief, at 37.



9
WITHDRAWAL OF ALLEGATION
Item 2A: The Notice alleged that Respondent violated 49 C.F.R. §§ 195.452(d)(1), which
states:
§ 195.452 Pipeline integrity management in high consequence areas.
(a) . . . .
(d) When must operators complete baseline assessments?
Operators must complete baseline assessments as follows:
(1) Time periods. Complete assessments before the following
deadlines:
If the
pipeline is:
And assess at least 50
percent of the line pipe on an
expedited basis, beginning
with the highest risk pipe,
not later than:
Category 1 March 31, 2008 September 30, 2004.
Category 2 August 16, 2005.
Category 3 Not applicable.
Then complete baseline
assessments not later than the
following date according to a
schedule that prioritizes
assessments:
February 17, 2009 Date the pipeline begins
operation The Notice alleged that Respondent violated 49 C.F.R. § 195.452(d)(1) by failing to follow its
own procedure for establishing a Baseline Assessment Plan (BAP) schedule. Specifically, the
Notice alleged that Magellan had not followed its procedures for assessing the highest-risk
segments first. It stated that “[l]ess than half (47%) of the top 50% highest risk segments had
received a baseline assessment at the time of the inspection.”16 In its Response, the company
argued that it had indeed followed its procedures by assigning a risk ranking score to each
pipeline segment and by ranking the sections in order from highest to lowest risk. Magellan
acknowledged that certain conditions caused the company to deviate from the assessment
schedule but these types of modifications were provided for in Section 3.4 of its procedures.
Magellan also pointed to certain OPS regulatory guidance that acknowledged practical
considerations could cause operators to assess some lower-risk segments before higher-risk
17
ones.
Findings:
Upon consideration of all of the evidence and the arguments of the parties, I find that this
allegation is not supported by the evidence and is hereby withdrawn. Magellan submitted copies
of its procedures and it appears that the company did follow them by assigning a risk rank to
16 Notice, at 3. The Violation Report quoted from Section 3 of Magellan’s IMP, which states that “[b]y using the
risk-ranked order of sections, MMP will specify pipeline sections that must be assessed each year (beginning with
year one) to satisfy the requirements of assessing at least one half of the HCAs in the first three and one half years
(September 30, 2004), and the remainder within the next three and one half years (March 31, 2008).” Violation
Report, at 3.
17 Brief, at 3. See, Integrity Management Rule FAQ 4.14, (February 18, 2003), available at Pipeline & Hazardous
Materials Safety Administration, OPS Integrity Management, http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm.



10
each segment and then assessing it in accordance with the company’s own schedule. Further,
Magellan’s procedures provided for modification of the initial assessment schedule on the basis
of ILI tool availability, operational readiness, workforce availability, previous integrity testing
history, and other factors.
Although the Notice focused on Magellan’s procedures and did not refer specifically to
Magellan’s mileage assessment obligation under § 192.452(d), it is important to understand the
regulation because differing interpretations presented by OPS and the company led to their
disagreement over whether Magellan had complied with its own procedures. Under
§192.452(d), Magellan was required 1) to assess at least 50% of the line pipe on an expedited
basis, and 2) to begin with the highest risk pipe. According to the data Magellan provided, the
company had 2976 miles of “could affect” HCA pipe in its system. Therefore, by September 30,
2004, Magellan was required to have assessed at least 50%, or 1488 miles, of such pipe.
Magellan exceeded this requirement by assessing 63%, or 1865 miles, by the deadline. Magellan
was also required to start its assessments “with the highest-risk pipe” first, but not to have
completed any particular percentage of highest–risk pipe by the deadline.
In support of this interpretation, the OPS guidance specifically states:
The rule requires that baseline assessments must have been completed on at
least 50 percent of the category 1 line pipe that can affect HCAs by September
30, 2004, (or August 16, 2005 for category 2 pipe), starting with the highest risk
pipe. Although PHMSA Pipeline Safety expects operators to have concentrated
on the highest risk pipe, some segments not among the highest risk pipe may
have been counted towards the 50 percent requirement. PHMSA Pipeline
Safety recognizes that practical issues associated with scheduling and
conducting assessments may have led to some lower risk pipe being assessed
prior to high-risk pipe. For example, during a pig run to address a high risk
segment, an operator may also have assessed another lower risk segment that
happens to be located in the same section of pipe that was being inspected. This
additional segment may be credited against the September 30, 2004, (or August
16, 2005) deadline. PHMSA Pipeline Safety inspections will review how an
operator has prioritized segments for assessment to assure that appropriate
emphasis is being placed on the highest-risk pipe.” (emphasis in original)18
The passage quoted above does not minimize the need to address higher-risk pipeline segments
as soon as practicable. Instead, it merely recognizes that some lower-risk segments will naturally
be assessed along with higher-risk ones. In accepting that lower-risk segments might be assessed
as part of the initial assessment, the FAQ continues to emphasize the need to place a priority on
assessing higher-risk segments at the beginning of the process, not the end.
18 See, Integrity Management Rule FAQ 4.14, (February 18, 2003), available at Pipeline & Hazardous Materials
Safety Administration, OPS Integrity Management,. http://primis.phmsa.dot.gov/iim/docsf/faq_text.htm



11
In its Response and Brief, Magellan mischaracterized the meaning of 49 C.F.R. § 195.452(d) and
the guidance quoted above. Magellan stated:
The unambiguous requirement under 49 CFR § 195.452(d)(1) requires only
that 50% of the line pipe on an expedited basis be completed no later than
September 30, 2004…. There is no regulatory requirement that 50% of the
highest risk segments be completed by September 30, 2004. In fact,
PHMSA, in its regulatory guidance, specifically recognized that other lesser
risk segments would get completed as part of the practical consideration of
doing the baseline assessment and that those lesser risk segments would
count towards the 50 percent completion requirement. (emphasis in
original)19
In its Brief, Magellan chose to ignore a key phrase in the chart contained in § 195.452(d)(1),
namely, “beginning with the highest risk pipe.” That phrase makes clear that the intent of
§ 195.452(d)(1) is that operators must prioritize all of their pipe segments that “could affect”
HCAs according to the risks that they pose and then to assess them on an expedited basis,
beginning with the highest-risk pipe first. While there is no exact percentage of highest-risk pipe
that must be assessed by the deadline, the regulation does require a showing that the operator
make a deliberate effort to assess its HCA pipe in a manner that addressed the highest risk pipe
first. In this case, although Magellan may have misinterpreted the regulation and guidance, it
still met the requirement that it should place an emphasis on the highest-risk pipe. It
accomplished this by assessing more than the minimum amount of pipe it was required to assess
by the September 30, 2004 deadline. The company assessed 1865 miles of pipe, rather than the
minimum of 1488 miles that was required and 890 of those miles consisted of high-risk pipe.
Therefore, 60% of the total number of miles the company was required to inspect prior to
September 30, 2004 consisted of high-risk pipe.
Based upon the foregoing, I do not believe there is sufficient evidence to show that Magellan
violated either the letter or the spirit of its own procedures for assessing “could affect” HCA pipe
in accordance with a risk-based schedule. Accordingly, Item 2A is hereby withdrawn.
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.
The Final Order assessed a total civil penalty of $147,500, which Respondent has already
remitted to PHMSA.
AMENDED COMPLIANCE ORDER
The Notice proposed a Compliance Order with respect to Items 1 and 2 in the Notice. Under 49
U.S.C. § 60118(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
19 Brief, at 2.



12
established under Chapter 601. The Compliance Order is hereby amended to include deadlines
for Items 1 and 2 which were inadvertently omitted.
Pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is
ordered to take the following actions to ensure compliance with the pipeline safety regulations
applicable to its operations:
1. With regard to Item 1 of the Notice, modify its process to use a technically justified
methodology to estimate release volumes. The data used must be specific to
Respondent’s pipelines and surrounding terrain;
2. With regard to Item 1 of the Notice, identify HCAs in accordance with the process
developed in Item 1 above. Newly identified pipeline segments that could affect
HCAs must be added to Respondent’s program, along with identification of any
anomalies that must be remediated per the repair criteria in 49 C.F.R. § 195.452(h);
3. With regard to Item 2B of the Notice, modify Respondent’s risk model to
appropriately account for the threats to the integrity of its pipelines. Respondent must
consider the relative likelihood of all required threats listed in 49 C.F.R. § 195.452, as
well as additional threats identified by Respondent in its risk analysis and segment
relative risk ranking. The relative weightings applied to risk factors must be re-
evaluated to ensure that the risk analysis adequately reflects the risk conditions on the
pipeline segments and appropriately balances relative likelihood and consequence
considerations;
4. Compare the new risk ranking for all segments with the list of assessed segments to
ascertain the status of the baseline assessment program, and identify the higher
relative risk pipeline segments for which integrity assessments should have been
performed by September 30, 2004, but that have not been performed to date, if any;
5. Within 60 days of receipt of the Final Order, provide the revised risk model and the
anticipated assessment completion dates for the high risk segments for which
assessments were not completed by September 30, 2004, as set forth above, to the
Director, Southwest Region, 
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