SHELL PIPELINE CO., L.P. — Notice of Probable Violation

party submissionOfficial PDF420145022_Operator Response to Notice_10142014.pdf#

420145022_Closure_06032015_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED AND VIA E-MAIL June 3, 2015 Mrs. Deborah Price Integrity & Regulatory Services Manager Shell Pipeline Company, LP Two Shell Plaza 777 Walker Street Houston, Texas, 77002 Re: CPF 4-2014-5022, Closure Dear Mrs. Price: In reference to the Compliance Order for the subject case, Shell Pipeline Company, L. P. (Shell) submitted its revised damaged prevention procedures in a letter dated April 1, 2015. PHMSA approved the revised procedures in a letter dated April 2, 2015. Shell submitted a statement of completion of the required training on the revised procedures on May 28, 2015. This letter is to inform you no further action is necessary and this case is now closed. Thank you for your cooperation. Sincerely, R. M. Seeley Director, Southwest Region Pipeline and Hazardous Materials Safety Administration#

420145022_Final Order_01082015_text.pdf, page 1Official PDFJANUARY 8, 2015 Mr. Greg Smith President Shell Pipeline Company, LP Two Shell Plaza 777 Walker Street Houston, Texas 77002 Re: CPF No. 4-2014-5022 Dear Mr. Smith: Enclosed please find the Final Order issued in the above-referenced case. It makes a finding of violation, specifies actions that need to be taken by Shell Pipeline Company, LP, to comply with the pipeline safety regulations, and assesses a civil penalty of $144,000. This is to acknowledge receipt of your payment of the full penalty amount, by wire transfer, dated October 27, 2014. 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 Ms. Deborah Price, Integrity & Regulatory Services Manager, Shell Pipeline Company LP - Two Shell Plaza, 777 Walker Street, Houston, Texas 77002 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420145022_Final Order_01082015_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 ) ) Shell Pipeline Company, LP, ) CPF No. 4-2014-5022 a subsidiary of Royal Dutch Shell, plc, ) ) Respondent. ) ____________________________________) FINAL ORDER On March 7, 2014, 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 investigation of a pipeline accident near Port Neches, Texas, involving the Houston-to-Houma pipeline operated by Shell Pipeline Company, LP (Shell or Respondent). Shell, a subsidiary of Royal Dutch Shell, plc,1 owns and operates seven tank farms across the United States, and annually transports more than 1.5 billion barrels of crude oil and refined products through 3,800 miles of pipelines across the Gulf of Mexico and five states. 2 The Houston-to-Houma pipeline is comprised of more than 350 miles of 20-inch and 22-inch- diameter pipe running from Houston, Texas, to Houma, Louisiana.3 The investigation arose out of an accident occurring on March 6, 2014, when a contractor working for Shell damaged the Houston-to-Houma pipeline when preparing to perform a horizontal directional drill (HDD) installation (Accident). An anchor for the HDD equipment was lowered into the ground directly above the pipeline, rupturing the line and releasing approximately 364 barrels of crude oil into the environment. As a result of the PHMSA investigation, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated September 15, 2014, 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 Shell had violated 49 C.F.R. § 195.442(a), assessing a civil penalty of $144,000 for the alleged violation, and ordering Respondent to take certain measures to correct the alleged violation. 1 About Shell – Who We Are – Shell at a glance, http://www.shell.us/aboutshell/who-we-are-2013/at-a-glance.html (last visited November 7, 2014). 2 About Shell – About Shell Pipeline Company, L.P., http://www.shell.us/products-services/solutions-for- businesses/pipeline/about-shell-pipeline html (last visited November 7, 2014). 3 Pipeline Safety Violation Report (Violation Report), (September 15, 2015) (on file with PHMSA), at 1.#

420145022_Final Order_01082015_text.pdf, page 3CPF No: 4-2014-5022 Page 2 Shell responded to the Notice by letter dated October 14, 2014 (Response). Respondent did not contest the allegation of violation but provided information concerning the corrective actions it had taken. As provided in 49 C.F.R. § 190.227, Shell paid the proposed civil penalty of $144,000 by wire transfer dated October 27, 2014. Payment of the penalty serves to close the case with prejudice to Respondent as to those items for which a penalty was proposed. Respondent did not request a hearing and therefore has waived its right to one. FINDING OF VIOLATION In its Response, Shell did not contest the allegation that it violated 49 C.F.R. Part 195, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.442(a), which states: § 195.442 Damage prevention program. (a) Except as provided in paragraph (d) of this section, each operator of a buried pipeline must carry out, in accordance with this section, a written program to prevent damage to that pipeline from excavation activities. For the purpose of this section, the term “excavation activities” includes excavation, blasting, boring, tunneling, backfilling, the removal of above-ground structures by either explosive or mechanical means, and other earthmoving operations. The Notice alleged that Respondent violated 49 C.F.R. § 195.442(a) by failing to carry out a section of its own written damage prevention program. Specifically, the Notice alleged that Shell failed to mark its Houston-to-Houma pipeline as specified in Section 3.23 of its procedure, Pipeline Inspection & Maintenance Manual, Section 3.23 – Temporary Locating and Marking. The Notice further alleged that as a result of Shell’s failure to properly locate and mark its own line, on March 6, 2014, a second-party contractor working for Shell damaged the pipeline when preparing to perform an HDD installation. As the pipeline had not been temporarily identified and marked by Shell personnel, as required by Section 3.23, an anchor for the HDD equipment was lowered into the ground directly above the pipeline, rupturing the line and releasing approximately 364 barrels of crude oil into the environment. 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. § 195.442(a) by failing to carry out a section of its own written damage prevention program. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed $200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any related series of violations.#

420145022_Final Order_01082015_text.pdf, page 4CPF No: 4-2014-5022 Page 3 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; and any effect that the penalty may have on its ability to continue doing business; and the good faith of the 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 $144,000 for the violation cited above. Item 1: The Notice proposed a civil penalty of $144,000 for Respondent’s violating 49 C.F.R. § 195.442(a), by failing to carry out a section of its own written damage prevention program. As discussed above, I found that a Shell contractor failed to follow Section 3.23 of the company’s procedure for locating and marking a section of its Houston-to-Houma pipeline, resulting in an accident and release of crude oil into the environment. The company paid the proposed penalty, which serves to close the case with prejudice to Respondent. Accordingly, having reviewed the record and considered the assessment criteria for each of the Items cited above, I assess Respondent a total civil penalty of $144,000 for violating 49 C.F.R. § 195.442(a), which amount has already been paid in full. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1, for violating 49 C.F.R. § 195.442(a). 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 established under Chapter 601. In its Response, Shell did not contest the allegation of violation and stated its intent to address the violation stated in the Notice.4 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 § 195.442(a), (Item 1), Respondent must revise its damage prevention procedures in the following areas: a. Revise or update the detailed work process for all project work that requires coordination between Shell Right-of-Way Technicians and Shell Projects Personnel to ensure clear roles and responsibilities for line locating and temporary marking of pipeline facilities. Additionally, all roles and responsibilities related to monitoring and/or observation activities shall be reviewed, and any necessary procedural revisions formalized, through a Management of Change process; and 4 In its Response, Shell took issue with a statement in the Violation Report that the PHMSA inspector had discovered the violation leading to the Accident. Respondent asserted this statement was incorrect, that the company had actually discovered the violation and reported it to PHMSA, and that the record should be corrected. Since the penalty has been paid and Respondent has not submitted any evidence to support its claim, I am not in a position to modify the record as requested.#

420145022_Final Order_01082015_text.pdf, page 52. 3. 4. 5. CPF No: 4-2014-5022 Page 4 b. Develop a requirement within the Comprehensive Horizontal Directional Drill (CHDD) Plan to provide to Shell contractors. The requirement shall ensure coordination of activities associated with the CHDD Plan. Additionally, ensure that the evaluation of equipment is considered during the project planning phase and subsequent damage prevention activities. Shell shall carry out training for all affected employees to cover the procedural revisions resulting from Item 1 of this Compliance Order, and share the lessons learned from the investigation within the Shell organization affected employees. Shell shall complete Item 1 above no later than 90 days after the issuance of the Final Order and submit the procedures for review and concurrence from PHMSA prior to carrying out the training required by Item 2. Shell shall complete Item 2 above no later than 60 days after the PHMSA approval of the procedures submitted under Item 1. It is requested, not mandated, that Shell 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 Final Order may result in administrative assessment of civil penalties not to exceed $200,000 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#

420145022_NOPV PCP PCO_09152014_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED September 15, 2014 Mr. Greg Smith President Shell Pipeline Company, L.P. P.O. Box 2648 Houston, TX 77252 CPF 4-2014-5022 Dear Mr. Smith: On March 6, 2014, Shell Pipeline Company, L.P. (Shell) experienced an excavated related accident on its Houma Pipeline System 20-inch line near Port Neches, TX. As a result of this accident, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), pursuant to Chapter 601 of 49 United States Code conducted an accident investigation and performed an inspection of your related Damage Prevention practices. As a result of the investigation and inspection, it appears that you have committed a probable violation of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The item inspected and the probable violation is:#

420145022_NOPV PCP PCO_09152014_text.pdf, page 21. §195.442 Damage prevention program. (a) Except as provided in paragraph (d) of this section, each operator of a buried pipeline must carry out, in accordance with this section, a written program to prevent damage to that pipeline from excavation activities. Shell failed to mark its underground facilities in accordance with their damage prevention program, Pipeline Inspection & Maintenance Manual Section 3.23 – Temporary Locating and Marking, resulting in the damage to its Houston to Houma 20” pipeline. On March 6, 2014, a second party contractor working for Shell damaged the pipeline while setting the anchors for their equipment to perform a horizontal directional drill (HDD) installation. Prior to the start of excavation, the pipeline’s location was not temporarily identified adequately by Shell personnel, causing the pipeline to be damaged during the set-up for the excavation activities being overseen by the operator. During set-up, an anchor for the HDD equipment was lowered into the ground directly above the Shell pipeline, rupturing the line and releasing approximately 364 barrels of crude oil into the environment. 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 4, 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 violation(s) and has recommended that you be preliminarily assessed a civil penalty of $[total amount] as follows: Item number PENALTY 1 $144,000 Proposed Compliance Order With respect to Item 1, pursuant to 49 United States Code § 60118, PHMSA proposes to issue a Compliance Order to Shell. 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. All2#

420145022_NOPV PCP PCO_09152014_text.pdf, page 3material 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. In your correspondence on this matter, please refer to CPF 4-2014-5022 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#

420145022_NOPV PCP PCO_09152014_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 Shell Pipeline Company, L.P. (Shell) a Compliance Order incorporating the following remedial requirements to ensure the compliance of Shell with the pipeline safety regulations: 1. 2. 3. 4. 5. In regard to Item Number 1 of the Notice pertaining to Shell’s Damage Prevention processes; Shell shall revise its Damage Prevention Procedures in the following areas: a. Revise/update the detailed work process for all Project work that requires coordination between Shell ROW Technicians and Shell Projects personnel to ensure clear roles and responsibilities for line locating and temporary marking of pipeline facilities. Additionally, all roles and responsibilities related to monitoring and/or observation activities shall be reviewed and any necessary procedural revisions shall be formalized through a Management of Change (MOC) process. b. Develop a requirement within the Comprehensive Horizontal Directional Drill (HDD) Plan to provide to Shell contractors. The requirement shall ensure coordination of activities associated with the HDD. Additionally, ensure the evaluation of equipment is considered during the project planning phase and subsequent damage prevention activities. Shell shall carry out training for all affected employees to cover the procedural revisions resulting from Item 1 of this Order, and share the lessons learned from the investigation within the Shell organization affected employees. Shell shall complete Item 1 no later than 90 days after the issuance of the Final Order and submit the procedures for review and concurrence from PHMSA prior to carrying out the training required by Item 2. Shell shall complete Item 2 no later than 60 days after the PHMSA approval of the procedures submitted under Item 1. It is requested (not mandated) that Shell 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#