AIR PRODUCTS & CHEMICALS INC — Notice of Probable Violation

party submissionOfficial PDF420131001_Operator Response and Request for Hearing and Preliminary Statement of Issues_02212013.pdf#

party submissionOfficial PDF420131001_Operator_Response_05162013.pdf#

420131001_Final Order_08102015_text.pdf, page 1Official PDFAugust 10, 2015 Mr. Seifi Ghasemi Chairman, President, and Chief Executive Officer Air Products and Chemicals, Inc. 7201 Hamilton Blvd. Allentown, PA 18195-1501 Re: CPF No. 4-2013-1001 Dear Mr. Ghasemi: Enclosed please find the Final Order issued in the above-referenced case. It withdraws both allegations of violation and the proposed civil penalty. Therefore, this case 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. Rodrick M. Seeley, Director, Southwest Region, OPS Mr. James B. Curry, Esq., Van Ness Feldman, LLP, 1050 Thomas Jefferson St. N.W., 7th Floor, Washington, D.C., 20007, Counsel for Respondent CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420131001_Final Order_08102015_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 ) ) Air Products and Chemicals, Inc., ) CPF No. 4-2013-1001 ) Respondent. ) ____________________________________) FINAL ORDER From June – September 2012, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted a new-construction pipeline safety inspection of the facilities and records of Air Products and Chemicals, Inc. (Air Products or Respondent), in Lake Charles and Plaquemine, Louisiana. The company’s 184-mile Gulf Coast Connection Project (GCCP) connects Air Products’ hydrogen pipeline systems in Louisiana and Texas. As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated January 2, 2013, 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 Air Products violated 49 C.F.R. §§ 192.461 and 192.303 and assessing a civil penalty of $80,000 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violations. Respondent requested the case file by letter dated January 14, 2013, and requested a 30-day extension based on its receipt of the case file. OPS forwarded the case file and extended the response deadline to February 22, 2013. Respondent submitted a timely Request for Hearing and OPS Preliminary Statement of Issues by letter dated February 21, 2013, and on March 15, 2013, the Presiding Official scheduled a hearing for May 16, 2013. On April 17, 2013, Respondent withdrew its hearing request and asked that its final response deadline be extended to May 17, 2013, a request granted by the Presiding Official. Air Products responded to the Notice by letter dated May 16, 2013 (Response). The Respondent contested the allegations, presented information seeking elimination of the proposed penalty, and requested a hearing. By letter dated April 17, 2013, Respondent withdrew its request for a hearing and thereby authorized the entry of this Final Order without further notice. On March 28, 2014, Air Products submitted a written response to the Regional Director’s December 9, 2013 Recommendation and requested that it be included in the case file.#

420131001_Final Order_08102015_text.pdf, page 3CPF No. 4-2013-1001 Page 2 WITHDRAWAL OF ALLEGATIONS 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. § 192.461(e), which states: § 192.461 External corrosion control: Protective coating. (a) … (e) If coated pipe is installed by boring, driving, or other similar method, precautions must be taken to minimize damage to the coating during installation. The Notice alleged that Respondent violated 49 C.F.R. § 192.461(e) by failing to take precautions to minimize damage to coated pipe installed by boring, driving, or other similar method. Specifically, the Notice alleged that Air Products failed to take precautions when installing 22-mils Fusion Bonded Epoxy coating (FBE) pipe to minimize damage to the coating at bored and horizontal directional-drilled (HDD) crossings. According to PHMSA, the company’s own construction specifications called for coating thicknesses to be 22 mils nominal if only an FBE coating were being applied. In cases where the company was performing “directional drills in geographic locations where soil or rock formations may be abrasive to the external coating,” then “Abrasion Resistant Overlays (ARO) should be considered….” PHMSA alleged that Air Products personnel had acknowledged using only FBE coating in its HDD locations, rather than adding AROs on top of the FBE coating. According to the Notice, Air Products’ staff further stated that extra precautions such as AROs were not needed on the GCCP due to the company’s operating experience and long history with native soils (primarily clay and sand) along the Gulf Coast. PHMSA noted that despite several requests, Air Products had been unable to provide PHMSA with documentation from the manufacturer of the 22-mils FBE coating that it was adequate and resistant to damage from bored and HDD installations. In its Response, Air Products contested the allegation of violation and presented several reasons why the company believed it had taken adequate precautions to minimize damage to pipe coating during HDD installations on the GCCP. First, it challenged the statement in PHMSA’s Violation Report that “3M FBE 6233 (without abrasion resistant overlays) is not designed for HDD applications, bores and river crossings.”1 According to Respondent, the manufacturer’s brochure did not make any such statement, nor did PHMSA produce any evidence showing that the 3M FBE 6233 coating was inappropriate for HDD installations.2 Second, Air Products asserted that it had taken precautions for its bored and HDD installations by selecting a thicker application of FBE coating that it normally used. According to the Response: Air Products’ engineering specification provides for 14-16 mils of 1 Pipeline Safety Violation Report (Violation Report), (January 2, 2013) (on file with PHMSA), at 4. 2 Response, at 5.#

420131001_Final Order_08102015_text.pdf, page 4CPF No. 4-2013-1001 Page 3 FBE coating (section 4.1.1.2) in trenched underground piping installation, and provides for the use of thicker, 22 mil FBE applications (section 4.1.1.4) for directional drills. This thicker FBE coating provides additional protection to ensure the integrity of the coating is maintained during the HDD installation.3 In addition, the company provided evidence to support its argument that the thicker, 22-mils FBE coating was a recognized and acceptable method of protecting pipe used in bored and directional drills. Specifically, it cited a National Association of Corrosion Engineers (NACE) paper that supported the use of either increased-thickness FBE coatings or an additional layer of ARO coating.4 It also cited NACE Recommended Practice RP0394, section 6.1.5.2, as support for its contention that a higher minimum-thickness FBE coating may be needed where the pipe “is placed through a drilled crossing” or where “rocky or high-impact backfill” is used.5 Third, Air Products argued that the precautions it had taken to minimize damage to coated pipe in HDD installations were adequate because the company’s experience with local soil conditions indicated there was no need to use the extra step of applying AROs. The company acknowledged that under its own specifications, it was required to “consider” AROs “for directional drills in geographic locations where soil or rock formation may be abrasive to the external coating.”6 According to Air Products, even though it was not required to consider ARO because of its experience in the Gulf Coast region, it still considered, but rejected, the additional step of using AROs on the GCCP.7 Fourth, the company submitted a recent hydrogeologist’s report that had reviewed the core borings performed on the GCCP and other available data on the company’s Gulf Coast right-of- way. The report concluded that “at the vast majority of the [project’s] HDDs and all of the borings, geological data demonstrates that no gravel or rock is present.” Finally, Respondent submitted a statement from one of its contract engineers that he did not recall encountering rock or gravel during the GCCP or observing any coating damage after HDD installations.8 I have carefully reviewed all of the evidence in the record and considered the arguments made by both parties. Several issues are clear. First, it is undisputed that Air Products did not use the AROs that PHMSA believes were necessary to minimize damage to coated pipe used for bored and HDD installations on the GCCP; instead, it used a thicker FBE coating than what Air Products used in normal, trenched underground piping installations. Second, it is clear that 3 Id. at 6. 4 Id. at 7. 5 Id. at Exhibit 2 (pp. 5-6). 6 Id. at 10, quoting Exhibit 1 (page 4). 7 Air Product’s Senior Project Manager stated by affidavit that due to the non-abrasive soil conditions found on the Gulf Coast, “the final decision not to select ARO [was] . . . based on our experience completing directional drills in the Gulf Coast during the last 20 years.” Id. at Exhibit 4 (page 4). 8 Id. at 11, Exhibit 6.#

420131001_Final Order_08102015_text.pdf, page 5CPF No. 4-2013-1001 Page 4 PHMSA has not produced any evidence to support its position that AROs were necessary in this case to minimize damage to the pipe. The parties obviously disagree on what constitutes adequate “precaution” to minimize damage to pipe during HDD installations. It is also clear, legally, that PHMSA bears the burden of proving a violation of § 192.461(e) by a preponderance of the evidence. On balance, I do not believe that PHMSA has met its burden of proving that the 22-mils FBE coating used by Air Products did not constitute a reasonable precaution, under the circumstances of this particular case, or, conversely, that the additional step of applying ARO on top of the 22-mils FBE coating was essential to minimize damage to the pipe. While Respondent’s actions may not have been the most conservative measures available or ones that PHMSA would prefer for an operator to use on HDD crossings, I do not believe PHMSA has substantiated a violation of the Pipeline Safety Regulations. Accordingly, I find, based on the totality of the circumstances, that Air Products’ actions do not violate 49 C.F.R. § 192.461(e). Based upon the foregoing, I hereby order that Item 1 be withdrawn. Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.303, which states: § 192.303 Compliance with specifications or standards. Each transmission line or main must be constructed in accordance with comprehensive written specifications or standards that are consistent with this part. The Notice alleged that Respondent violated 49 C.F.R. § 192.303 by failing to construct each transmission line or main in accordance with comprehensive written specifications or standards that are consistent with Part 192. Specifically, the Notice alleged that Air Products performed the construction task of brazing without a qualified or approved brazing procedure. According to OPS, its inspector observed Air Products’ personnel installing 23 “decouplers”9 on its pipeline by brazing M8 pins on the carrier pipe. When asked by the inspector to provide a copy of its brazing specification or standard, Air Products allegedly provided the vendor’s (BAC) brazing procedure, but could not provide documentation that the procedure had been properly reviewed, approved or accepted by Air Products prior to commencement of the brazing work. The Notice further alleged that Air Products failed to comply with its own construction procedure, American Fabrication and Erection Specification, Pipelines – Installation, 670.810, Sections 4.1 and 4.1.1 (Welding Specification), which required that the procedure developed by the contractor and the qualification of the individual worker performing the work both be qualified in accordance with ASME BPVC, Section IX, and that such qualification be furnished to Air Products for approval, prior to commencement of the brazing work on the pipeline. Air Products contested the allegation, stating that its Welding Specification applied only to welding, and not pin brazing. Given that pin brazing is not subject to its own Welding Specification, Air Products argued that it was not required to document the review of the vendor’s pin-brazing procedure. 9 Decouplers are devices installed on pipelines for the purpose of eliminating direct current voltages within range that could harm the pipeline.#

420131001_Final Order_08102015_text.pdf, page 6CPF No. 4-2013-1001 Page 5 OPS acknowledged that Air Products’ Welding Specification, as cited in the Notice, did not cover brazing but argued, nevertheless, that Respondent was still responsible for having a “specification or standard” in place under § 192.303 to cover brazing and to ensure that its vendor’s “pin brazing procedure (BAC Corrosion Control Ltd) to [sic] be reviewed and approved as well as qualification record of the individual performing brazing, prior to the commencement of bracing.”10 The Region is correct that Air Products is required to have and approve comprehensive construction specifications and standards ensuring that any pin brazing work being performed in pipeline construction is being carried out in a manner consistent with Part 192. However, the Notice specifically ties this responsibility to Respondent’s Welding Specification and alleges that Air Products failed to qualify its pin brazing procedure in accordance with the Welding Specification. Since pin brazing is not covered under this particular specification, the Region has failed to meet its burden on proving a violation of 49 C. F. R. § 192.303. Accordingly, after considering all of the evidence, I hereby order that this Item be withdrawn. ASSESSMENT OF PENALTY As discussed above, Items 1 and 2 have been withdrawn. Therefore, I also withdraw the proposed civil penalty for both Items. 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 10 Region Recommendation, at 10.#

420131001_NOPV PCP PCO_01022013_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED January 2, 2013 Mr. Richard Boocock Vice President of Global Operations Air Products & Chemicals Inc. 7201 Hamilton Blvd Allentown, PA 18195-4153 CPF 4-2013-1001 Dear Mr. Boocock: During the month of June 2012, representatives of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS) conducted a new construction inspection of your 184 mile, hydrogen pipeline from Port Neches, Texas, to Plaquemine, Louisiana. This is a connection project between East and West Gulf Coast pipeline systems of Air Products & Chemicals (Air Products). The inspection consisted of both field and record audits related to the construction pursuant to Chapter 601 of 49 United States Code. 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 violations are: 1. §192.303 Compliance with specifications or standards. Each transmission line or main must be constructed in accordance with comprehensive written specifications or standards that are consistent with this part.#

420131001_NOPV PCP PCO_01022013_text.pdf, page 2§192.461 External corrosion control: Protective coating (e) If coated pipe is installed by boring, driving, or other similar method, precautions must be taken to minimize damage to the coating during installation. Air Products failed to take precautions to minimize damage to the coating during installation of the boring and/or Horizontal Directional Drills (HDDs) applications at highway, railroad, streams, river crossings, and at other locations. During the inspection, PHMSA identified that Air Products used 22 mils Fusion Bonded Epoxy Coating (FBE) pipe without Abrasion Resistant Overlays (ARO) in the HDDs and bored locations. Air Products was asked to provide the construction specification of the pipe coating that was used at bored and HDDs locations along its right-of-way (ROW). Air Product’s construction specifications, 4APL-20001, Section 4.1.1.4 states: ”the coating thickness shall be 560µm (22 mils) nominal if only the FBE coating is to be applied. Abrasion Resistant Overlays (ARO) should be considered for directional drills in geographic locations where soil or rock formation may be abrasive to the external coating.” According to the operator, Air Products used 3M Scotchkote Fusion Bonded Epoxy Coating (FBE) 6233 in bored or HDDs locations. But according to the Vendor’s (3M) specification, Fusion Bonded Epoxy Coating 6233 is “designed for corrosion protection of pipe” and not designed to protect from damage during pipeline directional drilling applications, bores, and river crossings. Air Products could not demonstrate that they took precautions to minimize damage to the coating during installation. Air Products stated that precautions are not required due to their operating experience, long history with native soil (primarily clay and sand) found in the Gulf Coast. Air Products was asked to provide supporting documentation and/or certification from 3M identifying whether the 6233 FBE 22 mils coating is adequate and resistant from damage during pipeline directional drilling applications, bores, and river crossings. To date, Air Products has not provided any supporting documentation from the vendor. 2. §192.303 Compliance with specifications or standards. Each transmission line or main must be constructed in accordance with comprehensive written specifications or standards that are consistent with this part. Air Products performed a construction task (brazing) without a qualified and/or approved brazing procedure. During the inspection of on Gulf Coast Connection Project, it was observed that Air Products installed twenty three (23) “Decouplers” on the pipeline. The installation of the “Decouplers” was done by brazing M8 pins on the carrier pipe. PHMSA requested Air Products to provide the brazing procedure that was used while brazing on their pipeline system. Air Products provided the vendor’s (BAC) brazing procedure. When questioned about the 2#

420131001_NOPV PCP PCO_01022013_text.pdf, page 3qualification of the vendor’s brazing procedure, Air Products could not provide any documentation whether the vendor’s procedure had been reviewed, approved and/ or accepted prior to the commencement of the brazing works on the specified pipeline project. According to Air Products’ procedure, Pipelines - Installation, 670.810, Section 4.1 and 4.1.1, it states that the procedure developed by the contractor and the qualification of the individual in accordance with ASME BPVC, Section IX, shall be furnished to Air Products Project Engineering or representative for approval before the start of any work. Air Products could not provide any documentation that the brazing procedure had been approved by Air Products prior to the commencement of the construction of Gulf Coast Pipeline Project. Proposed Civil Penalty Under 49 United States Code, § 60122, you are subject to a civil penalty not to exceed $200,000 per violation per day the violation persists up to a maximum of $2,000,000 for a related series of violations. For violations occurring prior to January 3, 2012, the maximum penalty may not exceed $100,000 per violation per day, with a maximum penalty not to exceed $1,000,000 for a related series of violations. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violations and has recommended that you be preliminarily assessed a civil penalty of $80,000 as follows: Item number PENALTY 1 $60,000 2 $20,000 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 Air Products & Chemicals 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. All material you submit in response to this enforcement action may be 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 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. 3#

420131001_NOPV PCP PCO_01022013_text.pdf, page 4In your correspondence on this matter, please refer to CPF 4-2013-1001 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#

420131001_NOPV PCP PCO_01022013_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 Air Products & Chemicals Inc. (Air Products) a Compliance Order incorporating the following remedial requirements to ensure the compliance of Air Products with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to §192.461(e), Air Products failed to take precautions to minimize damage to the coating during installation during Horizontal Directional Drills (HDDs) applications at highway, railroad, streams, river crossings, or other locations. Air Products must: a. For the entire 184 miles of hydrogen pipeline there are 82 HDD locations, at highway, railroad, streams, river crossings, or other locations along the right- of-way. Conduct an assessment of the crossings to verify the integrity of the pipe coating in all HDD locations. This would include the loss of coating thickness, coating disbondment from the pipe, or coating gouges that might damage the coating and pipe. Provide the qualification records of the individuals performing the survey, whether these individuals are Air Products employees or of a qualified vendor. This assessment must be completed within 60 days upon receipt of the Final Order. b. Submit the results of the assessment, including the disposition of issues identified. This shall be completed within 120 days upon receipt of the Final Order. 2. It is requested (not mandated) that Air Products 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. 5#