WEST TEXAS GAS INC — Notice of Probable Violation

420111007_Final Order_04242012_text.pdf, page 1Official PDFAPR 24 2012 Mr. J.L. Davis President West Texas Gas, Inc. 211 N. Colorado Midland, TX 79701 Re: CPF No. 4-2011-1007 Dear Mr. Davis: Enclosed please find the Final Order issued in the above-referenced case. It makes a finding of violation, assesses a civil penalty of $27,500, and specifies actions that need to be taken by West Texas Gas, Inc. to comply with the pipeline safety regulations. This is to acknowledge receipt of payment of the full penalty amount, by wire transfer, dated September 22, 2011. When the terms of the compliance order have been completed, as determined by the Director, Southwest Region, this enforcement action will be 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, Southwest Region, OPS Mr. Alan Mayberry, Deputy Associate Administrator for Field Operations, OPS CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420111007_Final Order_04242012_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 ) ) West Texas Gas, Inc. , ) CPF No. 4-2011-1007 ) Respondent. ) ____________________________________) FINAL ORDER From June 21-22 and August 30 - September 2, 2010, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted on-site pipeline safety inspections of the facilities and records of West Texas Gas, Inc. (West Texas or Respondent) in Amarillo, Texas. Respondent’s system is composed of 532 miles of interstate and 1,058 miles of intrastate natural gas pipelines in Texas and the Oklahoma Panhandle region.1 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated August 22, 2011, 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 West Texas violated 49 C.F.R. §192.935 and proposed assessing a civil penalty of $27,500 for the alleged violation. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violation. West Texas responded to the Notice by letter dated September 22, 2011. Respondent did not contest the Notice. However, it stated that while West Texas had paid the civil penalty, in doing so it did not admit guilt or waive any of its rights or defenses to the alleged violation. FINDING OF VIOLATION In its Response, West Texas did not contest the allegation in the Notice that it violated 49 C.F.R. Part 192.935, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.935, which states in relevant part: § 192.935 What additional preventive and mitigative measures must an operator take? (a) General requirements. An operator must take additional 1 Pipeline Safety Violation Report (PSVR), at 1, 8/22/2011.#

420111007_Final Order_04242012_text.pdf, page 32 measures beyond those already required by Part 192 to prevent a pipeline failure and to mitigate the consequences of a pipeline failure in a high consequence area. An operator must base the additional measures on the threats the operator has identified to each pipeline segment. (See §192.917) An operator must conduct, in accordance with one of the risk assessment approaches in ASME/ANSI B31.8S (incorporated by reference, see §192.7), section 5, a risk analysis of its pipeline to identify additional measures to protect the high consequence area and enhance public safety. Such additional measures include, but are not limited to, installing Automatic Shut-off Valves or Remote Control Valves, installing computerized monitoring and leak detection systems, replacing pipe segments with pipe of heavier wall thickness, providing additional training to personnel on response procedures, conducting drills with local emergency responders and implementing additional inspection and maintenance programs. The Notice alleged that Respondent violated 49 C.F.R. § 192.935(a) by failing to conduct a risk analysis of its pipeline, in accordance with one of the risk assessment approaches in ASME/ANSI B31.8S, to identify additional measures to protect high consequence areas and enhance public safety. Specifically, the Notice alleged that West Texas was unable to identify any measures or actions that it took to satisfy Article 10, “Identification of Preventative and Mitigation Measures” of its integrity management plan. In order to comply with the requirements outlined in 49 C.F.R. § 192.935(a), Respondent’s Integrity Management Program requires completion of Appendix E, “Preventative and Mitigative Measures Evaluation Form,” which documents the decision process and implementation schedule for certain preventative and mitigative (P&M) measures. At the time of inspection, West Texas was unable to either identify completed P&M measures or produce any completed Appendix E forms indicating compliance with its own procedure. Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.935(a) by failing to conduct a risk analysis of its pipeline to identify additional measures to protect high consequence areas and enhance public safety, as required by Appendix E and its integrity management plan. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent. ASSESSMENT OF PENALTY Item 1: The Notice proposed a civil penalty of $27,500 for Respondent’s violation of 49 C.F.R. § 192.935(a), for failing to conduct a risk analysis of its pipeline, as required by its integrity management program. West Texas did not contest the allegation of violation. This regulation requires an operator to take P&M measures in order to reduce the potential consequences arising from pipeline failures in high consequence areas. High consequence areas#

420111007_Final Order_04242012_text.pdf, page 43 are positively correlated with risk of accident or injury to human life, the environment, and property. It is therefore critical that pipeline operators take measures designed to prevent and reduce the consequences of such failures. In this case, West Texas failed to provide any evidence that it complied with its own procedure. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $27,500, already paid by Respondent for violation of 49 C.F.R. § 192.935(a). COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 in the Notice for violation of 49 C.F.R. § 192.935(a). Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. 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 respect to the violation of § 192.935(a) (Item 1), Respondent must perform and document additional P&M measures that have not been identified, documented, implemented or scheduled for implementation by West Texas within 90 days of receipt of the Final Order. 2. It is requested that Respondent 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. It is requested that these costs 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. The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by the Respondent and demonstrating good cause for an extension. Failure to comply with this Order may result in the administrative assessment of civil penalties not to exceed $100,000 for each violation for each day the violation continues or in referral to the Attorney General for appropriate relief in a district court of the United States. The 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#

420111007_NOPV PCP PCO_08222011_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED August 22, 2011 Mr. Richard D. Hatchett West Texas Gas, Inc 7517 Canyon Drive Amarillo, TX 79110 CPF 4-2011-1007 Dear Mr. Hatchett: During the week of August 30, 2010, representatives of the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code inspected your integrity management program in Amarillo TX. 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 item probable violation is: 1. §192.935 What additional preventive and mitigative measures must an operator take? (a) General requirements. An operator must take additional measures beyond those already required by Part 192 to prevent a pipeline failure and to mitigate the consequences of a pipeline failure in a high consequence area. An operator must base the additional measures on the threats the operator has identified to each pipeline segment. (See § 192.917) An operator must conduct, in accordance with one of the risk assessment approaches in ASME/ANSI B31.8S (incorporated by#

420111007_NOPV PCP PCO_08222011_text.pdf, page 2reference, see § 192.7), section 5, a risk analysis of its pipeline to identify additional measures to protect the high consequence area and enhance public safety. Such additional measures include, but are not limited to, installing Automatic Shut-off Valves or Remote Control Valves, installing computerized monitoring and leak detection systems, replacing pipe segments with pipe of heavier wall thickness, providing additional training to personnel on response procedures, conducting drills with local emergency responders and implementing additional inspection and maintenance programs. West Texas Gas (WTG) failed to perform the necessary risk analysis and identification of additional preventive and mitigative (P&M) measures. WTG’s program spells out what the steps and actions it will take related to P&M measures in article 10 “Identification of Preventative and Mitigation Measures” of their IM program. One step in the process requires the Director of Integrity Management to utilize Appendix E “Preventative and Mitigative Measures Evaluation Form” to document the decision process and implementation schedule for selected P&M measures. During the inspection WTG was asked to present their analysis and identify measures that were implemented. WTG did not present any completed Appendix E forms. WTG could not identify any measures they had implemented nor was a documented analysis presented. Retention of the analysis is consistent with the record keeping requirement of §192.947 and should have been made available during the inspection. 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 $ 27,500. Proposed Compliance Order With respect to item 1 pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to West Texas Gas, Inc. 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 2#

420111007_NOPV PCP PCO_08222011_text.pdf, page 3confidential 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 Notice 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 4-2011-1007 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 3#

420111007_NOPV PCP PCO_08222011_text.pdf, page 4PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to West Texas Gas, Inc a Compliance Order incorporating the following remedial requirements to ensure the compliance of West Texas Gas, Inc with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to additional preventive and mitigative measures that have not been identified, documented, implemented or scheduled for implementation by West Texas Gas. West Texas Gas should perform and document the necessary analysis. Then, based off of the analysis implement the appropriate preventative and mitigative measures per 49CFR Part 192 Subpart O and West Texas Gas IM procedures. 2. West Texas Gas should complete item 1 within 90 days of receipt of the Final Order. 3. It is requested (not mandated) that West Texas Gas, Inc 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. It is requested that these costs 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. 4#

420111007_Closure_06042013_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED June 4, 2013 Mr. Richard D. Hatchett Vice President West Texas Gas, Inc 7517 Canyon Drive, Amarillo, TX 79110 CPF 4-2011-1007 Dear Mr. Hatchett: On April 24, 2012, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to West Texas Gas, Inc. a Final Order in the above-referenced case. This Order included a Compliance Order and Civil Penalty assessment. Payment of the civil penalty was received on September 23, 2011. Based on our review of the documentation you provided, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, R. M. Seeley Director, Southwest region Pipeline and Hazardous Materials Safety Administration#