WESTERN GAS INTERSTATE CO — Notice of Probable Violation

420101001_NOPV PCP PCO_01132010_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED January 13, 2010 Richard Hatchett Western Gas Interstate 211 North Colorado Midland, Texas 79701 CPF 4-2010-1001 Dear Mr. Hatchett: On April 14-17, 2009, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code inspected your Western Gas Interstate (WGI) in Guymon, Oklahoma. As a result of the inspection, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The items inspected and the probable violation(s) are: 1. §192.463 External corrosion control: Cathodic protection (a) Each cathodic protection system required by this subpart must provide a level of cathodic protection that complies with one or more of the applicable criteria contained in appendix D of this part. WGI procedure P-192.455 titled “Installation of Cathodic Protection System” identifies the various criteria from appendix D allowed to determine adequate cathodic protection. However, WGI procedure P-192.465(a) titled “Conduct Cathodic Protection Surveys” which references 192.463, only describes and allows one acceptable method for determining cathodic protection in#

420101001_NOPV PCP PCO_01132010_text.pdf, page 2the section titled “Measure Pipeline-to-Soil Potentials, DC” and that method is the negative voltage of at least 850 millivolts. WGI could not demonstrate compliance with this code requirement as demonstrated in the following table. Further, WGI could not demonstrate compliance with any of the other acceptable criteria found in appendix D. Western Gas Interstate Table 1 Test Station Location 2009 2008 2007 Note: All readings negative unless otherwise stated Three (3) locations with readings 2+ years out of compliance Buckles #2 Reg Sta 0.546 mv 0.519 mv 0.756 mv .25 S Buckles Ranch Entrance 0.609 mv 0.627 mv 0.787 mv 1M N of rectifier #1 @ W House 0.775 mv 0.644 mv 0.708 mv Nineteen (19) locations with readings 1+ years out of compliance 1 mi. E. of bacon Tie-In 0.799 mv 0.683 mv 1 mi. E. of Rect. #9 0.818 mv 0.714 mv 1 mi. from Last Test Station 0.533 mv 0.746 mv Same location as last test station 0.461 mv 0.670 mv Clifford Evans Corner 0.763 mv 0.592 mv 1 mi. from last test station 0.708 mv 0.622 mv 1 mi. from last test station 0.832 mv 0.735 mv 1 mi. from Rect. 17 0.765 mv 0.752 mv .5M S Rectifier #6 0.698 mv 0.721 mv Schertler Reg Sta. 0.655 mv 0.700 mv S Smith Sta. 0.664 mv 0.692 mv 1.3 M North of T/S # 51 0.743 mv 0.729 mv 1 Mile North 0.750 mv 0.738 mv ½ Mile North 0.776 mv 0.752 mv Steffins 0.717 mv 0.686 mv 1 Mile North 0.694 mv 0.641 mv 1 Mile North 0.369 mv 0.641 mv Union Lat W Side 287 0.845 mv 0.593 mv Sandyview Reg. Sta 0.717 mv 0.674 mv 2#

420101001_NOPV PCP PCO_01132010_text.pdf, page 32. §192.465 External corrosion control: Monitoring (d) Each operator shall take prompt remedial action to correct any deficiencies indicated by the monitoring. WGI requires in its “Gas Operations and Maintenance Manual” in section 3.3 Compliance Requirements, that prompt remedial actions per 192.465(d) are implemented per WGI’s 3.37 Table 7: Necessary Compliance Records. However, WGI has no procedures or forms for implementing 192.465(d). The operator should have made all necessary evaluations and decisions based on their cathodic protection readings and completed the necessary actions prior to the next annual cathodic protection survey. As indicated in item 1. above, pipelines showing inadequate test readings for one or more consecutive years indicate inadequate levels of cathodic protection. WGI had not corrected three locations in more than two years and nineteen locations in more than one year, which does not represent a reasonable time for Prompt Remedial Actions. Proposed Civil Penalty Under 49 United States Code, § 60122, you are subject to a civil penalty not to exceed $100,000 for each violation for each day the violation persists up to a maximum of $1,000,000 for any related series of violations. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violation(s) and has recommended that you be preliminarily assessed a civil penalty of $120,000 as follows: Item number PENALTY 1 $60,000 2 $60,000 Proposed Compliance Order With respect to items 1 & 2, pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to Western Gas Interstate. Please refer to the Proposed Compliance Order, which is enclosed and made a part of this Notice. Response to this Notice Enclosed as part of this Notice is a document entitled Response Options for Pipeline Operators in Compliance Proceedings. Please refer to this document and note the response options. Be advised that all material you submit in response to this enforcement action is subject to being made publicly available. If you believe that any portion of your responsive material qualifies for confidential treatment under 5 U.S.C. 552(b), along with the complete original document you must provide a second copy of the document with the portions you believe qualify for confidential treatment redacted and an explanation of why you believe the redacted information qualifies for confidential treatment under 5 U.S.C. 552(b). If you do not respond within 30 days of receipt of this Notice, this constitutes a waiver of your right to contest the allegations in this 3#

420101001_NOPV PCP PCO_01132010_text.pdf, page 4Notice and authorizes the Associate Administrator for Pipeline Safety to find facts as alleged in this Notice without further notice to you and to issue a Final Order. In your correspondence on this matter, please refer to CPF 4-2010-1001 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, R. M. Seeley Director, Southwest Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 4#

420101001_NOPV PCP PCO_01132010_text.pdf, page 5PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to Western Gas Interstate a Compliance Order incorporating the following remedial requirements to ensure the compliance of Western Gas International with the pipeline safety regulations: 1. In regard to Item Number 2 of the Notice pertaining to monitoring the adequacy of cathodic protection, Western Gas Interstate must create new procedures and forms for implementing 192.465(d). 2. Western Gas Interstate must implement corrective measures necessary to remediate the low potentials identified in the inspection and provide documented proof of the corrective measures. 3. In regard to Item Number 1 of the Notice pertaining to the criteria for determining the adequacy of cathodic protection, Western Gas Interstate must submit documentation that shows the required cathodic protection criteria has been met along the continuous length of the pipelines as required by §192.463 and the Western Gas Interstate Operations, Maintenance, and Emergencies Manual. This documentation should include those pipeline segments specifically noted in the spread sheet shown above. 4. Western Gas Interstate shall maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to R. M. Seeley, Director, Southwest Region, Pipeline and Hazardous Materials Safety Administration. Costs shall be reported in two categories: 1) total cost associated with preparation/revision of plans, procedures, studies and analyses, and 2) total cost associated with replacements, additions and other changes to pipeline infrastructure. 5#

420101001_Final Order_12222011_text.pdf, page 1Official PDFDEC 22 2011 Mr. J. L. Davis President Western Gas Interstate Company 211 N. Colorado Midland, TX 79701 Re: CPF No. 4-2010-1001 Dear Mr. Davis: Enclosed please find the Final Order issued in the above-referenced case. It withdraws the allegations of violation, the proposed compliance order and the proposed civil penalty. This enforcement action is now closed. Service of the Final Order by certified mail is deemed effective upon the date of mailing, or as otherwise provided 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, OPS, Southwest Region Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS Mr. Bart Bean, Operations Manager, Western Gas Interstate Company Mr. Billy Hawkins, Division Manager, Western Gas Interstate Company CERTIFIED MAIL - RETURN RECEIPT REQUESTED [_71791000164203020243 _]#

420101001_Final Order_12222011_text.pdf, page 2U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 _________________________________________ In the Matter of ) Western Gas Interstate Company, ) CPF No. 4-2010-1001 ) ) ) Respondent. ) _________________________________________ ) FINAL ORDER On April 14 -17, 2009, 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 Western Gas Interstate Company (WGI or Respondent) in Guymon, Oklahoma. WGI, headquartered in Midland, Texas, owns and operates 150 miles of natural gas pipeline in the Texas and Oklahoma Panhandles. 1 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated January 13, 2010, 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 WGI had violated 49 C.F.R. §§ 192.463(a) and 192.465(d) and proposed assessing a civil penalty of $120,000 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violations. Upon requesting and receiving an extension of time, WGI responded to the Notice by letter dated April 9, 2010, contesting the allegations and requesting a hearing (Response). A hearing was subsequently held on November 3, 2010, in Houston, Texas, with an attorney from the Office of Chief Counsel, PHMSA, presiding. After the hearing, Respondent provided additional written material for the record, by letter dated November 22, 2010 (Closing). FINDINGS OF VIOLATION The Notice alleged that Respondent violated 49 C.F.R. Part 192, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.463(a), which states, in relevant part: 1 http://www.westerngasinterstate.com/ (last accessed 6/15/2011).#

420101001_Final Order_12222011_text.pdf, page 32 § 192.463 External corrosion control: Cathodic protection. (a) Each cathodic protection system required by this subpart must provide a level of cathodic protection that complies with one or more of the applicable criteria contained in appendix D of this part…. The Notice alleged that Respondent violated 49 C.F.R. § 192.463(a) by failing to demonstrate that it had provided a level of cathodic protection that complied with one or more of the applicable criteria contained in appendix D of this part. Specifically, it alleged that WGI’s procedure “P-192.455, Installation of Cathodic Protection System, ” had identified criteria from appendix D that the company used to determine adequate cathodic protection. However, another WGI procedure, Conduct Cathodic Protection Surveys, acceptable method for determining cathodic protection, which was the negative voltage of at least 850 millivolts (mv). PHMSA alleged that the company had failed to apply this criteria to certain pipe segments and that the company’s records and pipe-to-soil potential test operations revealed several locations that failed to meet the -0.85 mv criteria. 2 described and allowed only one In Response, WGI presented two defenses. First, the company argued that the pipeline segments identified in the Notice were uncoated steel that had been constructed and placed in service prior to August 1, 1971. WGI contended that cathodic protection equipment was not required3 on the bare pipe installed prior to 1971 in the absence of “active corrosion. ” In support of its position, the company pointed out that under 49 C.F.R. § 192.465(e)(1), the term “active corrosion” was defined as “continuing corrosion which, unless controlled, could result in a condition that is any of the pipeline segments identified in the Notice and that its procedure for providing detrimental to public safety.” 4 The company contended that active corrosion was not found on cathodic protection on bare pipe was voluntary and not a regulatory requirement. Second, the company speculated that the Notice stemmed from a certain ambiguity or imprecise wording in its Operations and Maintenance (O&M) Manual. WGI acknowledged that its O&M procedure P-192.465(a) for cathodic protection could be interpreted to imply that WGI intended to achieve -0.85 mv of cathodic protection for its entire pipeline system, even though that was neither the company’s intent nor practice. 5 Respondent argued that the Notice identified areas where WGI’s O&M Manual needed clarification but that it failed to identify a regulatory violation regarding installation of cathodic protection equipment. 2 WGI Procedure P-192.465(a), Conduct Cathodic Protection Survey. See PHMSA Violation Report, Exhibit A. 3 49 C.F.R. § 192.457(b) states: (b) Except for cast iron or ductile iron, each of the following buried or submerged pipelines installed before August 1, 1971, must be cathodically protected in accordance with this subpart in areas in which active corrosion is found: (1) Bare or ineffectively coated transmission lines… 4 49 C.F.R. 192.465(e)(1) Response, at 3. This regulation has since been amended (75 FR 48603; Aug. 11, 2010). 5 WGI stated that “certain cathodic protection procedures which were intended to apply only to pipelines installed after August 1, 1971 could have been read to apply to pipelines installed before August 1, 1971. Closing, at 1.#

420101001_Final Order_12222011_text.pdf, page 43 Upon consideration of all of the evidence, I find that the company’s procedures described and allowed negative voltage of at least 850 mv as the only acceptable method for determining cathodic protection and that such procedures were not followed with regard to the bare pipe segments in question here. However, it is clear that the Notice did not allege a failure by Respondent to follow its own procedures under 49 C.F.R. § 605(a). 6 I further find the evidence does not support a finding of violation of 49 C.F.R. § 192.463(a) since there is no proof that WGI was required to use the negative voltage of at least 850 mv on this pre-1971 pipe. After the hearing, Respondent subsequently submitted revised procedures in its Closing. A review of the revised procedures shows that WGI’s procedures are now consistent with the current regulation and clarify that WGI considers pipelines installed prior to 1971 under different criteria than those pipelines installed after that date. Based upon the foregoing, I hereby order that Item 1 of the Notice be withdrawn. Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.465(d), which states: § 192.465 External corrosion control: Monitoring. (a) …. (d) Each operator shall take prompt remedial action to correct any deficiencies indicated by the monitoring. The Notice alleged that Respondent violated 49 C.F.R. § 192.465(d) by failing to take prompt remedial action to correct deficiencies following test readings that showed inadequate levels of cathodic protection. The supporting allegation of violation in Item 1 was withdrawn; therefore, this allegation of violation is also withdrawn. 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. In determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I must 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 $120,000 for the violations cited above. The allegations of violation for Items 1 and 2 in the Notice have been withdrawn so therefore the proposed civil penalty is also withdrawn. 6 I would note that had the agency cited Respondent for a violation of 49 C.F.R. 192.605(a), it is likely that WGI would have been found in violation, based on the company’s failure to follow its own cathodic protection procedures.#

420101001_Final Order_12222011_text.pdf, page 54 COMPLIANCE ORDER The Notice proposed a Compliance Order with respect to Item 1 and 2 in the Notice for violations of 49 C.F.R. §§192.463(a) and 192.465(d), respectively. The allegations of violations have been withdrawn. Accordingly, the compliance terms are not included in this Order and no further action is required. Under 49 C.F.R. § 190.215, Respondent has a right to submit a Petition for Reconsideration of this Final Order. The petition must be sent to: Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA will accept petitions received no later than 20 days after receipt of service of this Final Order by the Respondent, provided they contain a brief statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.215. The filing of a petition automatically stays the payment of any civil penalty assessed. Unless the Associate Administrator, upon request, grants a stay, all other terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. ___________________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#