SABINE PASS LNG, L.P. (Cheniere) — Notice of Probable Violation

case documentOfficial PDF420163002_NOPV PCP_10172016.pdf#

party submissionOfficial PDF420163002_Operator Response to Notice_11282016.pdf#

420163002_Final Order_06052017_text.pdf, page 1Official PDFJune 5, 2017 Mr. Jack A. Fusco President and Chief Executive Officer Cheniere Energy, Inc. 700 Milam Street Houston, TX 77002 Re: CPF No. 4-2016-3002 Dear Mr. Fusco: Enclosed please find the Final Order issued in the above-referenced case. It makes a finding of violation and assesses a civil penalty of $32,400 against Sabine Pass LNG, LP, a subsidiary of Cheniere Energy, Inc. The penalty payment terms are set forth in the Final Order. This enforcement action closes automatically upon receipt of payment. Service of the Final Order by certified mail is deemed effective as provided under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Alan K. Mayberry Associate Administrator for Pipeline Safety Enclosure cc: Mr. Jon Manning, Acting Director, Southwest Region, Office of Pipeline Safety, PHMSA Mr. R. Keith Teague, Vice President, Asset Group, Sabine Pass LNG, LP CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420163002_Final Order_06052017_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 ) ) Sabine Pass LNG, LP, ) CPF No. 4-2016-3002 a subsidiary of Cheniere Energy, Inc., ) ) Respondent. ) ____________________________________) FINAL ORDER From June 24, 2016, to August 17, 2016, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted an on-site pipeline safety inspection of the facilities and records of Sabine Pass LNG, LP (SPLNG or Respondent), in Louisiana. Sabine Pass LNG, LP, is a wholly-owned subsidiary of Cheniere Energy, Inc. (Cheniere), which owns the Sabine Pass LNG Terminal.1 The Sabine Pass LNG Terminal is located on over 1,000 acres of land along the Sabine Pass River in Cameron Parish, Louisiana, with an expected nominal production capacity of 27 million metric tons per annum of liquefied natural gas (LNG). 2 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated October 17, 2016, a Notice of Probable Violation and Proposed Civil Penalty (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that SPLNG had violated 49 C.F.R. § 191.22, and proposed assessing a civil penalty of $32,400 for the alleged violation. SPLNG responded to the Notice by letter dated November 28, 2016 (Response). The company contested the allegation and requested that the proposed civil penalty be reconsidered. Respondent did not request a hearing and therefore has waived its right to one. The Notice alleged that Respondent violated 49 C.F.R. Part 191, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 191.22(c)(1), which states: FINDING OF VIOLATION 1 Pipeline Safety Violation Report (Violation Report), (October 18, 2016) (on file with PHMSA), at 1. 2 Cheniere Energy, Inc., website, available at http://www.cheniere.com/terminals/sabine-pass/ (last accessed February 8, 2017).#

420163002_Final Order_06052017_text.pdf, page 3CPF No. 4-2016-3002 Page 2 § 191.22 National Registry of Pipeline and LNG Operators. (a) …. (c) Changes. Each operator of a gas pipeline, gas pipeline facility, underground natural gas storage facility, LNG plant, or LNG facility must notify PHMSA electronically through the National Registry of Pipeline, Underground Natural Gas Storage Facility, and LNG Operators at http://opsweb.phmsa.dot.gov of certain events. (1) An operator must notify PHMSA of any of the following events not later than 60 days before the event occurs . . . (iii) Construction of a new LNG plant or LNG facility . . . . The Notice alleged that Respondent violated 49 C.F.R. § 191.22(c)(1) by failing to electronically notify PHMSA not later than 60 days before the construction of a new LNG facility. Specifically, the Notice alleged that on June 28, 2016, SPLNG submitted an Operator Identification assignment request to PHMSA for LNG Train 5, which is part of Cheniere’s Sabine Pass LNG project. The construction project described in the request included an anticipated start date for field work activities of January 4, 2016. It was confirmed that construction of LNG Train 5 began prior to June 28, 2016. Accordingly, SPLNG should have submitted its notification not later than 60 days before January 4, 2016, or by November 5, 2015, in order to provide PHMSA the requisite notice of construction of a new LNG facility. In its Response, SPLNG argued that LNG Trains 1 through 6 are process units to the whole plant, rather than separate facilities. SPLNG stated it provided a New Construction Notification for the Sabine Pass Liquefaction Project on October 11, 2012, and the initial project included the addition of four LNG Liquefaction Trains. Subsequently, an expansion of the liquefaction facility included LNG Trains 5 and 6, both of which are within the original property boundary. SPLNG further argued that its updated notification on June 28, 2016, was at the direction of a PHMSA representative and was not meant to construe each LNG Train as separate and distinct projects. Section 191.22(c)(1)(iii) requires each operator to notify PHMSA electronically 60 days before the construction of a new LNG facility. An LNG facility is defined in 49 C.F.R. § 193.2007 as “a pipeline facility that is used for liquefying natural gas or synthetic gas or transferring, storing, or vaporizing liquefied natural gas.” A pipeline facility is defined in 49 C.F.R. § 193.2007 as “new and existing piping, rights-of-way, and any equipment, facility, or building used in the transportation of gas or in the treatment of gas during the course of transportation.” Pursuant to these definitions, SPLNG’s Train 5 is an LNG facility and SPLNG was required to notify PHMSA of its construction not later than 60 days before the event. In this case, SPLNG should have submitted its notification for Train 5 by November 5, 2015, in order to provide PHMSA the requisite notice. SPLNG’s Application for Authorization Under Section 3 of the Natural Gas Act, submitted to the Federal Energy Regulatory Commission, stated LNG Trains 1 and 2 were to be part of the Liquefaction Project Stage 1, and LNG Trains 3 and 4 were to be part of Liquefaction Project#

420163002_Final Order_06052017_text.pdf, page 4CPF No. 4-2016-3002 Page 3 Stage 2.3 The Project Description described the LNG Trains in terms of liquefaction capacity and as containing treatment facilities and equipment for removing solids and liquefying the natural gas.4 SPLNG then filed an Application for Authorization Under Section 3 of the Natural Gas Act for LNG Trains 5 and 6 in September 2013. This demonstrates that the notification of the first project did not include LNG Train 5 within its scope, and LNG Train 5 was a separate facility requiring an electronic notification to PHMSA. Accordingly, after considering all of the evidence, I find that Respondent violated 49 C.F.R. § 191.22(c)(1) by failing to electronically notify PHMSA not later than 60 days before the construction of LNG Train 5 of Cheniere’s Sabine Pass LNG Project. 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. 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 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 $32,400 for the violation cited above. Item 1: The Notice proposed a civil penalty of $32,400 for Respondent’s violation of 49 C.F.R. § 191.22(c)(1), for failing to electronically notify PHMSA not later than 60 days before the construction of LNG Train 5 of Cheniere’s Sabine Pass LNG project. As discussed above, SPLNG argued in favor of a penalty elimination or reduction because Respondent treats the LNG Trains as units to the whole plant and not as separate facilities requiring separate construction notifications. This argument is rejected because Respondent submitted separate notifications for Trains 1-4 and Trains 5-6 and the notification for Train 5 was not timely under the regulation. The gravity of the violation in this case was slight in that pipeline safety and integrity was minimally affected by the failure to adequately notify PHMSA of the construction. However, I find that, with respect to culpability, Respondent failed to take appropriate action to comply with a clearly applicable requirement. Even though SPLNG stated it did not consider each LNG Train a separate LNG facility, PHMSA’s regulations clearly define LNG facilities to include those facilities used for liquefying natural gas just as Respondent’s LNG Trains are used. 3 Violation Report, Ex. A, FERC Submittal #20110131-5069. 4 Id., at 2.#

420163002_Final Order_06052017_text.pdf, page 5CPF No. 4-2016-3002 Page 4 With respect to the good faith of Respondent in attempting to comply with the pipeline safety regulations, I find that Sabine did not make a reasonable interpretation of the requirement. By SPLNG’s own description in its FERC Application, SPLNG acknowledged the LNG Trains perform the same function as an LNG facility and in the practical sense treated the LNG Trains as LNG facilities with equipment and facilities used to liquefy natural gas. Upon consideration of Respondent’s arguments, I am unconvinced that a penalty reduction is warranted. Accordingly, having reviewed the record and considered the assessment criteria for the Item cited above, I assess Respondent a civil penalty of $32,400 for violation of 49 C.F.R. § 191.22(c)(1). Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal Reserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMK-325), Federal Aviation Administration, 6500 S MacArthur Blvd., Oklahoma City, Oklahoma 79169. The Financial Operations Division telephone number is (405) 954-8845. Failure to pay the $32,400 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a district court of the United States. Under 49 C.F.R. § 190.243, Respondent has the right to submit a Petition for Reconsideration of this Final Order. The petition must be sent to: Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA will accept petitions received no later than 20 days after receipt of the Final Order by the Respondent, provided they contain a brief statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays the payment of any civil penalty assessed but does not stay any other provisions of the Final Order, including any required corrective actions. If Respondent submits payment of the civil penalty, the Final Order becomes the final administrative decision and the right to petition for reconsideration is waived. The terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. June 5, 2017 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

420163002_ NOPV PCP_10172016_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION and PROPOSED CIVIL PENALTY CERTIFIED MAIL - RETURN RECEIPT REQUESTED October 17, 2016 Mr. R. Keith Teague Sabine Pass LNG, L.P. 700 Milam Street Houston, TX 77002 CPF 4-2016-3002 Dear Mr. Teague: From June 24, 2016 to August 17, 2016, representatives of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), pursuant to Chapter 601 of 49 United States Code inspected your late submittal of an operator registry notification by Sabine Pass LNG, L.P., a wholly owned subsidiary of Cheniere Energy. As a result of the late submittal, it appears that you have committed a probable violation of the Pipeline Safety Regulations, Title 49, and Code of Federal Regulations. The items inspected and the probable violation is:#

420163002_ NOPV PCP_10172016_text.pdf, page 21. §191.22 National Registry of Pipeline and LNG operators. (c) Changes. Each operator of a gas pipeline, gas pipeline facility, LNG plant or LNG facility must notify PHMSA electronically through the National Registry of Pipeline and LNG Operators at http://opsweb.phmsa.dot.gov, of certain events. (1) An operator must notify PHMSA of any of the following events not later than 60 days before the event occurs: (i) Construction or any planned rehabilitation, replacement, modification, upgrade, uprate, or update of a facility, other than a section of line pipe that costs $10 million or more. If 60 day notice is not feasible because of an emergency, an operator must notify PHMSA as soon as practicable; (ii) Construction of 10 or more miles of a new pipeline; or (iii) Construction of a new LNG plant or LNG facility. Sabine Pass LNG failed to provide adequate notification for the construction of Train 5 which is a part of Cheniere’s Sabine Pass LNG project as required by 49 CFR §191.21(c)(1). On June 28, 2016, Sabine Pass LNG submitted an OPID assignment request to PHMSA (J-20160628-11783). The construction project described in this submittal had an anticipated start date of field work activities on January 4, 2016 which was before the notification date. Sabine Pass LNG’s representative and Cheniere’s website confirmed that construction began prior to the date of operator registry notification. The notification should have been submitted no later than November 5, 2015 in order to provide PHMSA the required 60 day notice prior to construction as required by §191.21(c)(1). As a result, Sabine Pass LNG notified PHMSA 236 days late. Proposed Civil Penalty Under 49 United States Code, § 60122, you are subject to a civil penalty not to exceed $205,638 per violation per day the violation persists up to a maximum of $2,056,380 for a related series of violations. For violations occurring between January 4, 2012 to August 1, 2016, the maximum penalty may not exceed $200,000 per violation per day, with a maximum penalty not to exceed $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 maximum penalty not to exceed $1,000,000 for related series of violations. Also, for LNG facilities, an additional penalty of not more than $75,123 for each violation may be imposed. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violation and has recommended that you be preliminarily assessed a civil penalty of $32,400. 2#

420163002_ NOPV PCP_10172016_text.pdf, page 3Response 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 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 4-2016-3002 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 Enclosure: Response Options for Pipeline Operators in Compliance Proceedings 3#