CHAPARRAL ENERGY, LLC — Corrective Action Order

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 1Official PDFVIA CERTIFIED MAIL AND FAX TO: 405-425-8421 Mr. Mark A. Fischer Chairman & CEO Chaparral Energy, LLC 701 Cedar Lake Blvd. Oklahoma City, OK 73114 Re: CPF No. 4-2015-5017H Dear Mr. Fischer: Please find enclosed the Post-Hearing Decision regarding the Corrective Action Order issued to Chaparral Energy, LLC on August 28, 2015. The Decision confirms the Corrective Action Order with respect to the Coffeyville pipeline. This Decision is being served by facsimile and certified mail in accordance with 49 C.F.R. § 190.5. The terms of the decision are effective upon receipt. Thank you for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety Enclosure cc: Ms. Linda Daugherty, Deputy Associate Administrator for Field Operations, OPS Mr. R.M. Seeley, Director, Southwest Region, OPS Mr. Ahren Tryon, Tryon Law Firm (via email to atryon@tryonenergy.com)#

420155017H_Post-Hearing Decision Regarding CAO_10082015_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 ) ) Chaparral Energy, LLC, ) CPF No. 4-2015-5017H ) Respondent. ) ___________________________________ ) POST-HEARING DECISION CONFIRMING CORRECTIVE ACTION ORDER On August 28, 2015, the Associate Administrator for Pipeline Safety, Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), issued a Corrective Action Order (CAO) under authority of 49 U.S.C. § 60112 and 49 C.F.R. § 190.233, finding that continued operation by Chaparral Energy, LLC (Chaparral or Respondent) of its Coffeyville carbon dioxide (CO2) pipeline would be hazardous to life, property, or the environment. The CAO made preliminary findings that the hazards were associated with a failure of the pipeline discovered August 25, 2015, and the hazards would continue unless certain corrective measures were taken. The CAO also found that failure to issue the order expeditiously without prior notice would result in a likelihood of serious harm to life, property, or the environment. Pursuant to § 190.233, Respondent requested expedited review of the CAO to determine whether the order should remain in effect. In accordance with 49 C.F.R. §§ 190.211 and 190.233(c), a hearing was held October 1, 2015, in Houston, Texas, before a Presiding Official from the Office of Chief Counsel, PHMSA, who presided by video teleconference. At the hearing, Respondent provided an overview of its pipeline system, discussed the characteristics of CO2, updated factual information about the pipeline accident, and argued the CAO should be terminated because there is not a hazardous condition. In the alternative, Respondent requested that the terms of the corrective action be amended. Background On August 25, 2015, at 9:00 a.m. CDT, Chaparral received a report from a landowner of a vapor cloud in the area of its Coffeyville CO2 pipeline. Chaparral personnel arrived on site shortly before 10:00 a.m. CDT and confirmed there was a pipeline leak. Personnel closed valves upstream and downstream of the failure and blew down the line between the two valves, a total distance of 20 miles, by 12:35 p.m. CDT.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 3CPF No. 4-2015-5017H Page 2 It is not known when the release started. The pipeline was not operating when the accident was discovered, but it was shut-in at operating pressure. After looking at pressure recording charts, Respondent initially believed the release started approximately 7 days prior to discovery. Respondent later revised that estimate to 2-3 days prior to discovery. Respondent initially estimated that the amount of CO2 released as a result of the failure was 2,648 barrels. At the hearing, Respondent explained this early estimate was made without benefit of knowing the size of the hole. Based on more accurate information concerning the hole size, Respondent believed the failure resulted in a release of only 28 barrels. Even if the release occurred for 7 days, Respondent stated the release would still be less than 100 barrels. The blowdown resulted in an additional 6,800 barrels of CO2 released. Respondent reported that property damage as a result of the release was less than $11,000. The accident occurred in a remote location and did not cause any injuries, evacuations, or impacts to the environment. Video of the release shows CO2 vapor rising through an opening in the ground above the pipeline. As the vapor gets five to ten feet off the ground, it moves downwind and then dissipates into the atmosphere. Respondent reported the plume of vapor was approximately 15 feet downwind. Respondent repaired the pipeline and returned it to service under a restart plan approved by the Director pursuant to the terms of the CAO. The failed section of pipe was sent to a metallurgical lab for testing under protocols approved by the Director. An inline inspection was also performed on the pipeline. The results of the metallurgical testing and inline inspection are pending. Photographs of the removed pipe show what appears to be localized external corrosion with two pinholes. Respondent’s preliminary investigation leads the Company to believe the external corrosion was caused by stray current from a nearby pipeline. The Coffeyville pipeline was constructed in 2012 and consists of 8-inch, 0.220” nominal wall thickness, Grade X-65 pipe. The pipeline began operating in 2013. When Chaparral performed a deformation tool run following construction, Respondent identified an area with 43% wall loss from external corrosion. The pipeline has experienced two failures since operations began, both seemingly caused by external corrosion. In addition to the failure discovered August 25, 2015, there was an earlier failure discovered May 4, 2015. Chaparral operates approximately 300 miles of pipeline transporting CO2 in Texas, Oklahoma, and Kansas. The Coffeyville pipeline is approximately 68 miles long and transports CO2 from the Coffeyville Resources Nitrogen Fertilizer Plant in Coffeyville, Kansas, to the North Burbank production field near Shidler, Oklahoma. The pipeline travels through Montgomery County in Kansas and the counties of Nowata, Washington, and Osage in Oklahoma. The failure occurred near the end of the pipeline in proximity to Shidler, Oklahoma. The maximum operating pressure (MOP) of the pipeline is 2,220 psig, established by hydrostatic test in 2013. The pressure at the point of the failure was approximately 1,100 psig when the failure occurred.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 4CPF No. 4-2015-5017H Page 3 Standard for Reviewing Issuance of a Corrective Action Order The authority for issuing a CAO is specified in 49 U.S.C. § 60112 and 49 C.F.R. § 190.233. Under those provisions, the Associate Administrator may issue a CAO if a pipeline facility is or would be hazardous to life, property, or the environment. Prior notice to the operator of the facility must be given before issuance of a CAO, but prior notice may be waived if the Associate Administrator finds that failure to do so would result in the likelihood of serious harm to life, property, or the environment. The CAO may include corrective measures including suspended or restricted use of the facility, physical inspection, testing, repair, replacement, or other appropriate action. The primary purpose of a hearing following issuance of a CAO without prior notice is to determine whether the CAO should remain in effect or be terminated or amended.1 If the Associate Administrator finds the facility is or would be hazardous to life, property, or the environment, the Associate administrator confirms the CAO. If the Associate Administrator does not find the facility is or would be hazardous, the Associate Administrator terminates the order. In making such a determination, the Associate Administrator must consider, if relevant: (1) the characteristics of the pipe and other equipment used in the pipeline facility, including its age, manufacturer, physical properties (including its resistance to corrosion and deterioration), and the method of its manufacture, construction or assembly; (2) the nature of the materials transported (including their corrosive and deteriorative qualities), and the pressure required for such transportation; (3) the characteristics of the geographical areas in which the pipeline facility is located, in particular the climatic and geologic conditions (including soil characteristics) associated with such areas, and the population density and population and growth patterns of such areas; and (4) any other factors the Associate Administrator consider appropriates. These factors are considered below. (1) Characteristics of the Pipe The Coffeyville pipeline is relatively new. It was constructed in 2012 and began operating in 2013. New pipe generally presents a lower risk of time dependent threats because such conditions, like external corrosion, usually take extended periods of time to develop and potentially lead to a failure. Despite being relatively new, Respondent’s pipeline has already experienced external corrosion significant enough to cause multiple failures. In addition to the August 25, 2015, failure that gave rise to this proceeding, Respondent’s pipeline experienced a failure in May 2015 that was also preliminarily attributed to external corrosion. An estimated 4.5 barrels of CO2 were released as a result of that failure, with estimated property damage of approximately $13,000. Blowdown of the line after the May 2015 release resulted in the loss of 6,800 barrels of CO2. 1 § 190.233(b).#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 5CPF No. 4-2015-5017H Page 4 Also, following construction of Respondent’s pipeline, Chaparral performed a deformation tool run that identified an area with 43% wall loss due to external corrosion. The Coffeyville pipeline is evidently not resistant to external corrosion at the level required for safe operation of the facility. The rate at which Respondent’s new pipeline has developed significant wall loss from corrosion is concerning. Without immediate corrective action, including investigation and remediation, more corrosion and potential pipeline failures would likely occur. (2) Nature of the Materials Transported Respondent reported that the CO2 transported by the Coffeyville pipeline is 99.984% pure and does not contain any flammable or toxic hydrocarbons. Respondent explained that CO2 is an odorless, colorless, non-flammable gas. It occurs naturally in the atmosphere, is used by plants, produced by humans during respiration, and produced in various manufacturing and industrial facilities. Respondent contended that the CO2 transported by the Coffeyville pipeline presents very little hazard. At atmospheric pressure CO2 is a gas. At higher pressures, CO2 enters a supercritical fluid state, resembling the density of a liquid. This occurs at a critical pressure of roughly over 1,000 psig. Pipelines transporting CO2 are operated at very high pressures to keep the product in a supercritical fluid state. Respondent stated that most CO2 pipelines are operated between 1,200 and 3,000 psig. The maximum operating pressure of the Coffeyville pipeline is 2,220 psig. Since the line has no pump stations, pressure decreases as product moves downstream. Pressure at the failure location near the end of the pipeline was estimated to be 1,100 psig at the time of the accident. Respondent produced information about CO2 from the Occupational Safety and Health Administration (OSHA) website. The OSHA documentation confirmed CO2 is a colorless, odorless, non-flammable gas. It is also classified as an asphyxiant gas.2 In the atmosphere, CO2 normally exists at concentrations between 300-700 ppm. The OSHA permissible exposure limit is 5,000 ppm. Exposure to higher concentrations can result in increased respiratory rate, headache, convulsions, dizziness or narcosis. At 30,000 ppm there may be loss of consciousness; at 40,000 ppm, CO2 becomes immediately dangerous to life.3 Chaparral argued the risk of such harm resulting from a pipeline release is very low, since the release would be in the open air. Respondent noted that the August 25, 2015, release resulted in a released concentration of CO2 of just under 3,100 ppm, which is less than the OSHA permissible exposure limit. Respondent also cited a presentation by an individual from the University of Texas who concluded the likelihood of a fatality from a CO2 pipeline failure was 2 Chaparral Pre-hearing Submission, Supporting Documentation (SD) at 97. 3 Chaparral SD at 93.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 6CPF No. 4-2015-5017H Page 5 less than the likelihood of a fatality from a lightning strike.4 In conclusion, Respondent argued the nature of CO2 does not support finding Respondent’s pipeline is or would be hazardous to life, property, or the environment. PHMSA agrees the information presented by Respondent demonstrates CO2 does not pose the same risk as hazardous liquids that are flammable or toxic. PHMSA notes the pipeline safety regulations in 49 C.F.R. Part 195 define hazardous liquids to include petroleum, petroleum products, anhydrous ammonia, and ethanol, but supercritical CO2 is not included in that definition. When PHMSA initially proposed amending the safety regulations in 1989 to include CO2 pipelines, the Agency noted that CO2 differed from flammable and toxic substances already regulated under the definition of hazardous liquid.5 Therefore, PHMSA proposed to regulate CO2 pipelines in Part 195 without calling CO2 a hazardous liquid. This is not to say CO2 pipelines are without risk. The primary hazard of CO2, as noted by PHMSA in the proposed rule, is the potential for asphyxiation if a high concentration is accidentally released from a pipeline. PHMSA noted that Congressional concerns over the safety of CO2 pipelines were reflected in the Pipeline Safety Reauthorization Act of 1988, which directed the Agency to amend Part 195 to ensure the safety of CO2 pipelines. As documented in the proposed rule, Congress recognized despite “its pervasive nature and absolute necessity to life, CO2 has the potential to be as lethal as any other gas when it is present in concentrations greater than 10 percent. This could happen if a CO2 pipeline ruptured.”6 Since then, PHMSA has applied the pipeline safety regulations to supercritical CO2 pipelines and hazardous liquid pipelines in essentially the same manner. For example, integrity management regulations require “each hazardous liquid pipeline and carbon dioxide pipeline that could affect a high consequence area” to be covered by an integrity management program (IMP) designed to ensure greater safety in those areas.7 Operators must design, test, operate, and maintain CO2 pipelines to prevent accidental release just as they must for hazardous liquids pipelines. Accidents must be reported for both hazardous liquid and carbon dioxide pipelines.8 Respondent has made a strong case that the risks of CO2 are generally considered to be less than other hazardous liquids, but there are still risks. PHMSA has determined through rulemaking 4 Chaparral SD at 149. 5 Transportation of Carbon Dioxide by Pipeline, 54 Fed. Reg. 41912, 41914 (proposed Oct. 12, 1989). 6 54 Fed. Reg. at 41913. 7 § 195.452. Respondent noted that some high consequence areas, namely unusually sensitive environmental areas, are only applicable to hazardous liquid pipelines. Populated areas, which are of importance here, are applicable to both hazardous liquid pipelines and CO2 pipelines. 8 §§ 195.50 and 195.52.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 7CPF No. 4-2015-5017H Page 6 that the risks inherent to the transportation of CO2 by pipeline must be managed to protect life and property. The nature of the CO2 transported by Respondent’s pipeline is no less hazardous. (3) Characteristics of the Geographical Areas in Which the Pipeline Facility Is Located Respondent’s pipeline is approximately 68 miles long and travels through the high consequence area (HCA) of Coffeyville, Kansas, at the very beginning of the pipeline. There are two other HCAs that could be affected by the pipeline. South Coffeyville, Oklahoma, is 471 feet from Respondent’s pipeline near the beginning of the line. Shidler, Oklahoma, is 0.51 miles from the pipeline near the end. All three HCAs are populated areas. The remainder of the 68-mile pipeline, including the location of the failure, is rural. Pictures from the location of the failure show flat, grassy land in all four directions. The Director noted that Respondent’s pipeline traverses ravines and low-lying areas, which could pose a risk of CO2 pooling in higher concentrations. Respondent argued that if corrosion is being caused by stray current, then the risk of corrosion is confined to the later portion of the Coffeyville pipeline where a third-party pipeline runs parallel. Respondent noted that both pipeline failures and wall loss anomaly occurred in the later portion of the Coffeyville line. Respondent reasoned that the HCAs near the beginning of the pipeline are not subject to the same risk. Respondent also questioned whether its pipeline could actually affect the HCA near the end of the line. PHMSA notes that the cause of the external corrosion has not yet been determined to be stray current from the parallel pipeline. Until such a decision is reached, PHMSA cannot discount the possibility that additional corrosion could develop and lead to failure affecting an HCA. Also the risks to persons and property from a CO2 pipeline release in a rural area cannot be entirely discounted. In fact, the August 25, 2015, failure was discovered by a local land owner. (4) Other Appropriate Factors Respondent presented several other arguments to support its position that the CAO should be terminated. Firstly, Respondent noted that the August 25, 2015, accident did not meet the regulatory threshold for immediate telephonic reporting. PHMSA recognizes the revised volume of product released would not have exceeded the threshold for immediate telephonic reporting. Respondent initially believed the release resulted in the loss of 2,648 barrels, which exceeds the threshold for immediate reporting. It should be noted that Respondent was still required to file a written accident report under § 195.50, because the accident resulted in the loss of more than 5 barrels of product. Respondent also analyzed past data on CAOs, telephonic reports, and PHMSA accident reports to demonstrate the relatively low risk of CO2 pipeline failures and the absence of past enforcement by the Agency similar to this case. For example, Respondent looked at all CAOs issued since 2005, and found virtually all involved either fire, evacuation, environmental#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 8CPF No. 4-2015-5017H Page 7 damage, affected water, closure of roadway, or a high consequence area. Respondent’s pipeline failure did not involve any of those. Respondent analyzed telephonic reports to the National Response Center since 1990, including all 24 reports involving releases of CO2 from a pipeline. None involved a fatality, injury, or damage to wildlife or the environment. Only one involved an evacuation, and Chaparral theorized this was due to the presence of hydrogen sulfate with the CO2. Respondent then analyzed PHMSA 7000.1 Accident Reports filed by operators since 1994, including all 71 reports involved CO2 pipeline released. Respondent found zero fatalities, injuries, fires, damage to environment, evacuations, or third-party property damage. The data submitted by Respondent demonstrates the Agency does not have a history of issuing CAOs for pipeline failures involving CO2. The Parties can only postulate as to the reasons for an absence of enforcement. The assumption of Chaparral that this could be due to the lack of serious consequences associated with CO2 accidents is a plausible explanation. In reviewing the issuance of the CAO in this case, however, PHMSA must evaluate the facts of this particular accident to determine if the Coffeyville pipeline is or would be hazardous. The data provided by Respondent, while informative of past Agency practice, has limited relevance to this evaluation because it does not concern the actual facts of this case. I find it more relevant to consider the characteristics of the Coffeyville pipeline, the nature of CO2 transported by the pipeline, and the geographical areas through which the pipeline travels. Analysis and Finding of Hazardousness As noted above, the characteristics of Respondent’s pipeline are concerning. The pipeline has already experienced two corrosion failures and another significant corrosion anomaly in the short period of time it has been in operation. The cause of the corrosion has not yet been determined, and therefore has not been remediated. The evidence suggests Respondent’s pipeline is experiencing corrosion at an usually high rate and the pipeline would likely experience more failures caused by corrosion until appropriate corrective action is taken. Such failures could affect populated areas. There are documented risks of CO2 in elevated concentrations even if the product does not present the same level of risk as flammable and toxic liquids. A CO2 pipeline experiencing periodic failures resulting in uncontrolled releases of product at very high pressures is a hazardous condition that must be promptly addressed to ensure safety. Given all of these considerations, the evidence in the record demonstrates there is a hazardous condition that warrants continuation of the CAO. Whether the Terms of the CAO Should Be Amended Respondent requested, in the alternative, that the CAO be amended. Specifically, at the hearing Chaparral requested the pressure restriction be modified. Following the hearing, Chaparral submitted a document requesting several other modifications.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 9CPF No. 4-2015-5017H Page 8 (1) Pressure Restriction The pressure restriction in Paragraph 3 of the CAO states that when Chaparral returns the Coffeyville pipeline to service “the operating pressure must not exceed eighty percent (80%) of the actual operating pressure in effect immediately prior to the Failure.” Respondent argued this pressure restriction is problematic from a technical standpoint because it would prevent Respondent from delivering CO2 in a supercritical state. The pipeline was operating at approximately 1,100 psig at the location of the failure when the accident occurred. Eighty percent of that pressure is approximately 880 psig, which is below the pressure required for CO2 in a supercritical state. Chaparral suggested that a revised pressure restriction should be 80% of MOP. From a legal perspective, Respondent also argued the pressure restriction would be problematic because the pipeline safety regulations in 49 C.F.R. Part 195 apply to pipelines that transport CO2 in a supercritical state. Respondent contended that if at any point in time the CO2 is not in a supercritical state, the pipeline cannot be subject to Part 195. Operating a pipeline at no more than 80% of the highest pressure the line was safely operated or tested is a long-established method of ensuring an appropriate safety margin. For example, under Part 195, pipelines may be operated at a pressure up to 80% of their test pressure.9 When a pipeline failure occurs, the terms of any CAO will regularly require a similar margin of safety based on the level of pressure on the line when the failure occurred. After considering Respondent’s technical position, PHMSA finds the hazardous condition requires the same margin of safety until Respondent can demonstrate it is safe to resume operations on the Coffeyville pipeline at its pre-failure level. The Director has authority under the existing terms of the CAO to modify the pressure restriction upon a showing that a pressure increase is safe. With regard to the legal argument, PHMSA disagrees with Respondent’s contention that the pipeline would not be subject to Part 195 at a lower pressure. The Coffeyville pipeline is subject to the pipeline safety regulations by virtue of its regular transport of CO2 in a supercritical state. The pipeline remains subject to those regulations, including applicable maintenance requirements, during any temporary conditions involving lowered pressure, shutdown, idling, or purging of product. (2) Other Amendments Following the hearing, Respondent submitted a document requesting additional amendments to the terms of the CAO. These amendments were not discussed at the hearing. 9 § 195.406.#

420155017H_Post-Hearing Decision Regarding CAO_10082015_text.pdf, page 10CPF No. 4-2015-5017H Page 9 Pressure test or ILI in lieu of pressure restriction. As an alternative to its proposal for a revised pressure restriction, Respondent requested to return the pipeline to service either after performing a pressure test or submitting certain ILI data. Since these proposals were not discussed at the hearing, PHMSA finds no basis to amend the CAO at this time. The Director has authority under the existing terms of the CAO to remove or modify the pressure restriction upon a showing that a pressure increase is safe. Time periods. Respondent requested to change the 90-day time period to 150 days for performing a root cause failure analysis and for developing a remediation work plan. Chaparral also requested to delay the start date for quarterly reporting. No reason was given for these requested extensions. PHMSA finds no basis to amend the CAO in this regard. The Director has authority under the existing terms of the CAO to grant an extension of time for compliance with any of the terms in the order upon a written request timely submitted demonstrating good cause for an extension. Completed actions. Respondent requested to eliminate a provision in the CAO regarding the remedial work plan because the Company has already performed the required ILI tool run. PHMSA finds no reason to amend the CAO to eliminate provisions that are satisfied; by definition, completed terms require no further action. Scope of remedial work plan. Respondent requested to eliminate a provision regarding the remedial work plan that requires Chaparral to determine if conditions similar to those contributing to the August 25, 2015, failure are likely to exist elsewhere within the Company’s pipeline systems. Respondent did not provide an argument for why Chaparral should not be required to perform this action. PHMSA finds no support to eliminate this provision. Conclusion The CAO issued to Chaparral Energy, LLC on August 28, 2015, is confirmed and will remain in effect without change to its terms or deadlines. _______________________________ _______________________ Jeffrey D. Wiese, Date Issued Associate Administrator for Pipeline Safety#

420155017H_Corrective Action Order_08282015_text.pdf, page 1Official PDFAugust 28, 2015 VIA CERTIFIED MAIL AND FAX TO: 405-425-8421 Mr. Mark A. Fischer Chairman & CEO Chaparral Energy, LLC 701 Cedar Lake Blvd. Oklahoma City, OK 73114 Re: CPF No. 4-2015-5017H Dear Mr. Fischer: Enclosed is a Corrective Action Order issued in the above-referenced case. It requires Chaparral Energy, LLC, to take certain corrective actions with respect to its Coffeyville CO2 line that failed on August 25, 2015, near Shidler, Oklahoma. Service is being made by certified mail and facsimile. Service of the Corrective Action Order by electronic transmission is deemed complete upon transmission and acknowledgement of receipt, or as otherwise provided under 49 C.F.R. § 190.5. The terms and conditions of this Order are effective upon completion of service. Thank you for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety Enclosure cc: Ms. Linda Daugherty, Deputy Associate Administrator for Field Operations, OPS Mr. Rodrick Seeley, Southwest Regional Director, OPS#

420155017H_Corrective Action Order_08282015_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 ) Chaparral Energy, LLC, ) CPF No. 4-2015-5017H ) ) ) Respondent. ) ____________________________________) CORRECTIVE ACTION ORDER Purpose and Background: This Corrective Action Order (Order or CAO) is being issued, under the authority of 49 U.S.C. § 60112, to require Chaparral Energy, LLC (Chaparral or Respondent), to take the necessary corrective action to protect the public, property, and the environment from potential hazards associated with the recent failure on Chaparral’s Coffeyville carbon dioxide (CO2) pipeline. On August 25, 2015, a reportable accident occurred on the Coffeyville CO2 line, resulting in the release of approximately 2,648 barrels of carbon dioxide (Failure). The Coffeyville CO2 line (Coffeyville Line) is an 8-inch diameter pipeline approximately 65.7 miles in length that transports carbon dioxide from the Coffeyville Resources Nitrogen Fertilizer Plant in Coffeyville, Kansas, to the North Burbank production fields near Shidler, Oklahoma. The cause of the Failure has not yet been determined. Pursuant to 49 U.S.C. § 60117, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), initiated an investigation of the accident. The preliminary findings of the ongoing investigation are as follows. Preliminary Findings: • Chaparral is a privately owned company with oil and gas operations and 480 employees operating in Oklahoma, the Texas Panhandle and Southwest Kansas.1 • The Coffeyville Pipeline System consists of 67.5 miles of 8" carbon dioxide pipeline running from the Coffeyville Resources Nitrogen Fertilizer Plant in Coffeyville, Kansas, to the North Burbank production field near Shidler, Oklahoma. The pipeline originates in Montgomery County, Kansas, and travels through Nowata, Washington, and Osage 1 See http://www.chaparralenergy.com/operations. Current as of August 27, 2015.#

420155017H_Corrective Action Order_08282015_text.pdf, page 3CPF No. 4-2015-5017H Page 2 Counties, Oklahoma, a distance of approximately 67.5 miles (Affected Segment). The Failure occurred 1.7 miles east of mainline valve (MLV) 14 between milepost (MP) 67 and MP 66 near Shidler, Oklahoma (Failure Site). • The Coffeyville Line was installed in 2012 and began operating in 2013. The Affected Segment consists of 8-inch diameter, 0.220” wall thickness and Grade X65 pipe. The pipe was manufactured in 2011, and the pipe at the Failure Site has not had any changes in material since its installation. • The maximum operating pressure (MOP) of the pipeline is 2,220 psig, as established by hydrostatic test in 2013. At the time of the Failure, the pipeline was not operating. Chaparral received a report from a landowner regarding a potential leak on the company’s Coffeyville Line at 9:00 a.m. CST on August 25, 2015. Chaparral personnel arrived on site shortly before 10 a.m. CST and confirmed the leak and resulting release of approximately 2,648 barrels of carbon dioxide from the pipeline. Review of data indicates the leak may have started as early as August 18, 2015. The Failure occurred in a remote location, and was reported to the National Response Center (NRC Report No. 1126631) on August 25, 2015, at approximately 10:36 a.m. CST. • The Coffeyville Line was shut-in at the time of the Failure since the source plant at Coffeyville was offline. After notification from the landowner regarding a vapor cloud, Chaparral responded to the site and closed the valves immediately upstream and downstream of the failure location. The MLV at valve location 12 was closed at 11:55 am CST, and the MLV at valve location 13 was closed at 12:35 p.m. CST. Chaparral “blew down” the line from both valve locations (MLV 12 & MLV 13) at 12:35 p.m. CST, a total distance of 20 miles. • The Failure occurred in a remote location so PHMSA was the only agency to respond to the scene. • The cause of the Failure is unknown and the investigation is ongoing. The Coffeyville Line was installed in 2012 and began operating in 2013. Since the line has been in service, there has been both a reported corrosion failure on May 4, 2015, and an excavated dig site that identified a section of pipe with a 43% wall loss. Preliminary indications from the Failure also indicate the presence of external corrosion on the pipeline. Chaparral did not have adequate cathodic protection on the line until the year following initial construction. The pipeline currently remains out of service. • The accident did not cause any known injuries and no one was evacuated. There are no impacts to any water body. A vapor cloud was formed from released CO2, but has since cleared. • Following construction of the pipeline, a deformation in-line inspection tool was run through the pipeline. The tool run resulted in the identification of 19 anomalies. Chaparral has recently completed the investigation of those anomalies and made repairs to all but one of the anomalies as required. One of the anomalies identified by the pre- operational dent tool indicated a 43% wall loss due to external corrosion.#

420155017H_Corrective Action Order_08282015_text.pdf, page 4CPF No. 4-2015-5017H Page 3 Determination of Necessity for Corrective Action Order and Right to Hearing: Section 60112 of Title 49, United States Code, provides for the issuance of a Corrective Action Order, after reasonable notice and the opportunity for a hearing, requiring corrective action, which may include the suspended or restricted use of a pipeline facility, physical inspection, testing, repair, replacement, or other action, as appropriate. The basis for making the determination that a pipeline facility is or would be hazardous, requiring corrective action, is set forth both in the above-referenced statute and 49 C.F.R. § 190.233, a copy of which is enclosed. Section 60112 and the regulations promulgated thereunder provide for the issuance of a Corrective Action Order, without prior notice and opportunity for hearing, upon a finding that failure to issue the Order expeditiously would result in the likelihood of serious harm to life, property, or the environment. In such cases, an opportunity for a hearing and expedited review will be provided as soon as practicable after the issuance of the Order. After evaluating the foregoing preliminary findings of fact, I find that continued operation of the pipeline without corrective measures is or would be hazardous to life, property, or the environment. Additionally, having considered the release of product from the pipeline that resulted in a vapor cloud that could have affected the public and would be a problem in a subsequent release (the line originates in a populated area and traverses through populated areas and CO2 is an asphixyant), the risk to the environment which would result in frostbite to skin and eyes or the formation of frozen ground during a high pressure release from the pipeline, and a history of known problems on this pipeline, I find that a failure to issue this Order expeditiously to require immediate corrective action would result in the likelihood of serious harm to life, property, or the environment. Accordingly, this Corrective Action Order mandating immediate corrective action is issued without prior notice and opportunity for a hearing. The terms and conditions of this Order are effective upon receipt. Within 10 days of receipt of this Order, Respondent may contest its issuance and obtain expedited review, either by answering in writing or requesting a hearing under 49 C.F.R. § 190.211, to be held as soon as practicable under the terms of such regulation, by notifying the Associate Administrator for Pipeline Safety in writing, with a copy to the Director, Southwest Region, PHMSA (Director). If Respondent requests a hearing, it will be held telephonically or in-person in the Southwest Region office or Washington, D.C. After receiving and analyzing additional data in the course of this investigation, PHMSA may identify other corrective measures that need to be taken. In that event, PHMSA will notify Respondent of any additional measures that are required and an amended Order issued, if necessary. To the extent consistent with safety, Respondent will be afforded notice and an opportunity for a hearing prior to the imposition of any additional corrective measures. Required Corrective Actions: The “Affected Segment” means the entire 67.8 miles of Chaparral’s 8-inch pipeline from its origination in Coffeyville, Kansas, to Chaparral’s North Burbank production field near Shidler,#

420155017H_Corrective Action Order_08282015_text.pdf, page 5CPF No. 4-2015-5017H Page 4 Oklahoma. The pipeline originates in Montgomery County, Kansas, and travels through Nowata, Washington, and Osage Counties, Oklahoma. The "Isolated Segment" means the 20-mile segment of Chaparral’s 8-inch Line from the company’s MLV at valve location 12 to MLV 13. It is the portion of the "Affected Segment" that was shut-in after the Failure on August 25, 2015, by closing main line valves MLV 12 (upstream of the Failure Site) and MLV 13 (downstream of the Failure Site) and that must remain shut-in until a restart plan is approved by the Director. The "Director" means the Director, Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety, Southwest Region. The Director’s address is 8701 S. Gessner, Suite 1110, Houston, Texas 77074. Pursuant to 49 U.S.C. § 60112, I hereby order Chaparral to immediately take the following corrective actions for the Affected Segment and Isolated Segment, as applicable: CORRECTIVE ACTIONS: 1. 2. Shutdown of Pipeline. Chaparral must not operate the Affected Segment until authorized to do so by the Director. Restart Plan. Prior to resuming operation of the Affected Segment, develop and submit a written Restart Plan to the Director for prior approval. a. The Director may approve the Restart Plan incrementally without approving the entire plan but the Affected Segment cannot resume operation until the Restart Plan is approved in its entirety. b. Once approved by the Director, the Restart Plan will be incorporated by reference into this Order. c. d. e. f. g. The Restart Plan must provide for adequate patrolling of the Affected Segment during the restart process and must include incremental pressure increases during start up, with each increment to be held for at least two hours. The Restart Plan must include sufficient surveillance of the pipeline during each pressure increment to ensure that no leaks are present when operation of the line resumes. The Restart Plan must specify a day-light restart and include advance communications with local emergency response officials. The Restart Plan must provide for a review of the Affected Segment for conditions similar to those of the Failure, including a review of construction, operating and maintenance (O&M) and integrity management records such as in-line inspection (ILI) results, hydrostatic tests, root cause failure analysis of prior failures, aerial and ground patrols, corrosion, cathodic protection, excavations and pipe replacements. Operator must address any findings that require remedial measures to be implemented prior to restart. The Restart Plan must also include documentation of the completion of all mandated actions, and a management of change plan to ensure that all procedural modifications are incorporated into Chaparral’s operations and maintenance procedures manual.#

420155017H_Corrective Action Order_08282015_text.pdf, page 6CPF No. 4-2015-5017H Page 5 3. Return to Service. After the Director approves the Restart Plan, Chaparral may return the Affected Segment to service but the operating pressure must not exceed eighty percent (80%) of the actual operating pressure in effect immediately prior to the Failure. 4. Removal of Pressure Restriction. a. The Director may allow the removal or modification of the pressure restriction upon a written request from Chaparral, demonstrating that restoring the pipeline to its pre-failure operating pressure is justified based on a reliable engineering analysis showing that the pressure increase is safe, considering all known defects, anomalies, and operating parameters of the pipeline. 5. The Director may allow the temporary removal or modification of the pressure restrictions upon a written request from Chaparral demonstrating that temporary mitigative and preventive measures are implemented prior to and during the temporary removal or modification of the pressure restriction. The Director's determination will be based on the failure cause and provision of evidence that preventative and mitigative actions taken by the operator provide for the safe operation of the Affected Segment during the temporary removal or modification of the pressure restriction. Appeals to determinations of the Director in this regard will be decided by the Associate Administrator for Pipeline Safety. 6. Mechanical and Metallurgical Testing. Within 45 days of receipt of this Order, complete mechanical and metallurgical testing and failure analysis of the failed pipe, including an analysis of soil samples and any foreign materials. Complete the testing and analysis as follows: a. Document the chain-of-custody when handling and transporting the failed pipe section and other evidence from the Failure Site. b. Within 10 days of receipt of this Order, develop and submit the testing protocol and the proposed testing laboratory to the Director for prior approval. c. Prior to beginning the mechanical and metallurgical testing, provide the Director with the scheduled date, time, and location of the testing to allow for an OPS representative to witness the testing. d. Ensure the testing laboratory distributes all reports whether draft or final in their entirety to the Director at the same time they are made available to Chaparral. 7. Root Cause Failure Analysis. Within 90 days following receipt of this Order, complete a root cause failure analysis (RCFA) and submit a final report of this RCFA to the Director. The RCFA must be supplemented/facilitated by an independent third-party acceptable to the Director and must document the decision-making process and all factors contributing to the Failure. The final report must include findings and any lessons learned and whether the findings and any lessons learned are applicable to other locations within Chaparral’s pipeline system. 8. Remedial Work Plan (RWP). a. Within 90 days following receipt of this Order, Chaparral must submit a Remedial Work Plan (RWP) to the Director for approval. b. c. The Director may approve the RWP incrementally without approving the entire RWP. Once approved by the Director, the RWP will be incorporated by reference into this Order.#

420155017H_Corrective Action Order_08282015_text.pdf, page 7CPF No. 4-2015-5017H Page 6 d. The RWP must specify the tests, inspections, assessments, evaluations, and remedial measures Chaparral will use to verify the integrity of the Affected Segment. It must address all known or suspected factors and causes of the Failure. Chaparral should consider both the risk of another failure and the consequence of another failure to develop a prioritized schedule for RWP related work along the Affected Segment. e. The RWP must include a procedure or process to: i. Identify pipe in the Affected Segment with characteristics similar to the contributing factors identified in the August 25, 2015 Failure. ii. Gather all data necessary to review the failure history (in service and pressure test failures) of the Affected Segment and to prepare a written report containing all the available information such as the locations, dates, and causes of leaks and failures. iii. Integrate the results of the metallurgical testing, root cause failure analysis, and other corrective actions required by this Order with all relevant pre-existing operational and assessment data for the Affected Segment. Pre-existing operational data includes, but is not limited to, construction, operations, maintenance, testing, repairs, prior metallurgical analyses, and any third party consultation information. Pre-existing assessment data includes, but is not limited to, ILI tool runs, hydrostatic pressure testing, direct assessments, close interval surveys, and DCVG/ACVG surveys. iv. Determine if conditions similar to those contributing to the Failure are likely to exist elsewhere within the Chaparral pipeline systems. v. Conduct additional field tests, inspections, assessments, and/or evaluations to determine whether, and to what extent, the conditions associated with the Failure and other failures from the failure history or any other integrity threats are present elsewhere on the Affected Segment. At a minimum, this process must consider all failure causes and specify the use of one or more of the following: 1) ILI tools that are technically appropriate for assessing the pipeline system based on the cause of Failure on August 25, 2015 and that can reliably detect and identify anomalies; 2) Hydrostatic pressure-testing; 3) Close-interval surveys; 4) Cathodic protection surveys, to include interference surveys in coordination with other utilities (e.g. underground utilities, overhead power lines, etc.) in the area; 5) Coating surveys; 6) Stress corrosion cracking surveys; 7) Selective seam corrosion surveys; and 8) Other tests, inspections, assessments, and evaluations appropriate for the failure causes. vi. Note: Chaparral may use the results of previous tests, inspections, assessments, and evaluations if approved by the Director, provided the results of the tests, inspections, assessments, and evaluations are analyzed with regard to the factors known or suspected to have caused the August 25, 2015 Failure. Describe the inspection and repair criteria Chaparral will use to prioritize, excavate,#

420155017H_Corrective Action Order_08282015_text.pdf, page 8CPF No. 4-2015-5017H Page 7 vii. viii. f. g. evaluate, and repair anomalies, imperfections, and other identified integrity threats. Include a description of how any defects will be graded and a schedule for repairs or replacement. Based on the known history and condition of the Affected Segment, describe the methods Chaparral will use to repair, replace, or take other corrective measures to remediate the conditions associated with the Failure and to address other known integrity threats along the Affected Segment. Implement continuing long-term periodic testing and integrity verification measures to ensure the ongoing safe operation of the Affected Segment, considering the results of the analyses, inspections, evaluations, and corrective measures undertaken pursuant to the Order. Include a proposed schedule for completion of the RWP. Chaparral must revise the RWP as necessary to incorporate new information obtained during the failure investigation and remedial activities, to incorporate the results of actions undertaken pursuant to this Order, and/or to incorporate modifications required by the Director. i. Submit any plan revisions to the Director for prior approval. ii. The Director may approve plan revisions incrementally. iii. Any and all revisions to the RWP after it has been approved and incorporated by reference into this Order will be fully described and documented in the CAO Documentation Report (CDR). Implement the RWP as it is approved by the Director, including any revisions to the plan. Reporting. Submit quarterly reports to the Director that: (1) include all available data and results of the testing and evaluations required by this Order; and (2) describe the progress of the repairs or other remedial actions being undertaken. The first quarterly report is due on November 1, 2015. The Director may change the interval for the submission of these reports Other Requirements: 1. Documentation of Costs. It is requested but not required that Respondent maintain documentation of the costs associated with implementation of this Order. Include in each monthly report the to-date total costs associated with: (1) preparation and revision of procedures, studies and analyses; (2) physical changes to pipeline infrastructure, including repairs, replacements and other modifications; and (3) environmental remediation, if applicable. Approvals. With respect to each submission requiring the approval of the Director, the Director may: (a) approve the submission in whole or in part; (b) approve the submission on specified conditions; (c) modify the submission to cure any deficiencies; (d) disapprove the submission in whole or in part and direct Respondent to modify the submission; or (e) any combination of the above. In the event of approval, approval upon conditions, or modification by the Director, Respondent shall proceed to take all action required by the submission, as approved or modified by the Director. If the Director h. 9. 2.#

420155017H_Corrective Action Order_08282015_text.pdf, page 9CPF No. 4-2015-5017H Page 8 disapproves all or any portion of a submission, Respondent must correct all deficiencies within the time specified by the Director and resubmit it for approval. 3. Extensions of Time. The Director may grant an extension of time for compliance with any of the terms of this Order upon a written request timely submitted and demonstrating good cause for an extension. The actions required by this Corrective Action Order are in addition to and do not waive any requirements that apply to Respondent’s pipeline system under 49 C.F.R. Part 195, under any other order issued to Respondent under authority of 49 U.S.C. § 60101, et seq., or under any other provision of Federal or State law. Respondent may appeal any decision of the Director to the Associate Administrator for Pipeline Safety. Decisions of the Associate Administrator shall be final. 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). Failure to comply with this Order may result in the assessment of civil penalties and in referral to the Attorney General for appropriate relief in United States District Court pursuant to 49 U.S.C. § 60120. In your correspondence on this matter, please refer to CPF No. 4-2015-5017H and for each document you submit, please provide a copy in electronic format whenever possible. The terms and conditions of this Corrective Action Order are effective upon receipt. ______________________ ______________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#

420155017H_Closure Letter_09162019_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED September 16, 2019 Robert Sutherland Senior Vice President Operations Perdure Petroleum, LLC 12012 Wickchester Lane Houston, Texas 77079 CPF No. 4-2015-5017H Dear Mr. Sutherland: On August 28, 2015, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Corrective Action Order (CAO) to Chaparral Energy, LLC (Chaparral) for the Coffeyville CO2 Pipeline. Perdure Petroleum, LLC (Perdure) acquired the Coffeyville CO2 Pipeline from Chaparral on November 17, 2017, and immediately assumed operational control. PHMSA monitored the actions taken within the Remedial Work Plan and reviewed records submitted by Perdure. PHMSA has determined that the operator has substantially completed the requirements of the CAO. 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, Mary L. McDaniel, P.E. Director, Southwest Region Pipeline and Hazardous Materials Safety Administration#