PHILLIPS 66 PIPELINE LLC — Notice of Probable Violation

party submissionOfficial PDF420175003_Operator Response to Notice and Request for Hearing_03172017.pdf#

420175003_NOPV PCP PCO_02132017_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED February 13, 2017 Mr. Todd Denton President Phillips 66 Pipeline, LLC 1075 West Sam Houston Pkwy N Suite 200, N82005 Houston, Texas 77043 CPF 4-2017-5003 Dear Mr. Denton: On October 31, 2016 through November 2, 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 Beaumont Terminal facility in Nederland, Texas. As a result of the inspection, it is alleged that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The item inspected and the probable violation is:#

420175003_NOPV PCP PCO_02132017_text.pdf, page 21. § 195.432 Inspection of in-service breakout tanks (b) Each operator must inspect the physical integrity of in-service atmospheric and low-pressure steel above-ground breakout tanks according to API Std. 653 (except section 6.4.3, Alternative Internal Inspection Interval) (incorporated by reference, see §195.3). However, if structural conditions prevent access to the tank bottom, its integrity may be assessed according to a plan included in the operations and maintenance manual under §195.402(c)(3). The risk-based internal inspection procedures in API Std. 653, section 6.4.3 cannot be used to determine the internal inspection interval. On three occasions Phillips 66 failed to conduct internal inspections of their in-service breakout tanks at their required inspection dates in accordance with requirements of API Standard 653 section 6.4. Three tanks (designated by Phillips 66 as 122, 126 and 129) had properly established the following deadlines for internal inspection under section 6.4.2: Tank 122: October 10, 2011 Tank 126: January 3, 2013 Tank 129: April 7, 2012 At the time of the inspection the required inspections had not been completed. Tank 122 was constructed in 1975 with the most recent internal inspection conducted September 11-16, 2001. Due to the installation of new lining, the previous operator established a re-inspection date of October 10, 2011 under API Standard 653 section 6.4.2.2. Tank 122 had not been re- inspected to this interval when the previous operator completed a Risk Based Inspection on August 31, 2013 to re-establish the interval under API Standard 653 Section 6.4.3. This analysis was completed 692 days after the internal inspection was due. Tank 126 was constructed in 1979 with the most recent internal inspection report conducted January 3, 2003. Due to the unknown effectiveness of cathodic protection, the previous operator established a re-inspection date of January 3, 2013 under API Standard 653 Section 6.4.2.2. Tank 126 had not been re-inspected to this interval when the previous operator completed a Risk Based Inspection on August 31, 2013 to re-establish the interval under API Standard 652 Section 6.4.3. This analysis was completed 241 days after the internal inspection was due. Tank 129 was constructed in 2002 and the previous operator set the first internal inspection date to April 7, 2012. On June 20, 2006 a tank bottom scan was completed, and inspection date was extended to June 20, 2016 based on results. Upon purchasing the asset, Phillips 66 personnel evaluated the interval and determined the inspection date to be April 7, 2012. 2#

420175003_NOPV PCP PCO_02132017_text.pdf, page 3Phillips 66 provided most recent internal inspection reports and documentation setting the re- inspection deadlines to the dates listed above. During the inspection, operator personnel provided a timeline stating planned inspection dates in late 2016 (Tanks 122 and 129), and 2017 (Tank 126). 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 a maximum penalty not to exceed $1,000,000 for 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 $62,200. 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 Phillips 66 Pipeline LLC. 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#

420175003_NOPV PCP PCO_02132017_text.pdf, page 4In your correspondence on this matter, please refer to CPF 4-2017-5003 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#

420175003_NOPV PCP PCO_02132017_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 Phillips 66 Pipeline LLC (Phillips 66) a Compliance Order incorporating the following remedial requirements to ensure the compliance of Phillips 66 with the pipeline safety regulations: 1. 2. 3. In regard to Item Number 1 of the Notice pertaining to Phillips 66 failure to complete internal inspections for Tanks 122, 126 and 129, Phillips 66 must perform inspections in accordance with API Standard 653 Section 6.4 and provide documentation to indicate that Tanks 122, 126 and 129 have been inspected. Provide PHMSA with documentation that verifies completion of number 1 within 90 days following the receipt of the final order. It is requested (not mandated) that Phillips 66 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#

420175003_Final Order_02132018_text.pdf, page 1Official PDFFebruary 13, 2018 Mr. Todd Denton President Phillips 66 Pipeline, LLC 1075 West Sam Houston Parkway N Suite 200, N82005 Houston, TX 77043 Re: CPF No. 4-2017-5003 Dear Mr. Denton: Enclosed please find the Final Order issued in the above-referenced case. It makes one finding of violation, assesses a civil penalty of $62,200, and specifies actions that need to be taken by Phillips 66 Pipeline, LLC to comply with the pipeline safety regulations. The penalty payment terms are set forth in the Final Order. When the civil penalty has been paid and the terms of the compliance order completed, as determined by the Director, Southwest Region, this enforcement action will be closed. Service of the Final Order by certified mail is effective upon the date of mailing 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: Acting Director, Southwest Region, Office of Pipeline Safety, PHMSA Mr. Van P. Williams, Senior Counsel, Phillips 66 Pipeline, LLC CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420175003_Final Order_02132018_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 ) Phillips 66 Pipeline, LLC, ) CPF No. 4-2017-5003 ) ) ) Respondent. ) ____________________________________) FINAL ORDER On October 31, 2016, pursuant to 49 U.S.C. § 60117, representatives 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 Phillips 66 Pipeline, LLC (Phillips 66 or Respondent), in Nederland, Texas. Phillips 66 is the owner and operator of petroleum products, crude oil, and natural gas pipeline systems across the United States.1 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated February 13, 2017, 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 Phillips 66 violated 49 C.F.R. § 195.432(b), and proposed assessing a civil penalty of $62,200 for the alleged violation. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violation. Phillips 66 responded to the Notice by letter dated March 16, 2017 (Response). The company contested the allegation and requested a hearing, which was subsequently held on August 23, 2017, in Houston, Texas, before a Presiding Official from the Office of Chief Counsel. At the hearing, Respondent was represented by counsel. FINDING OF VIOLATION Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.432(b), which states: § 195.432 Inspection of in-service breakout tanks. (a) . . . (b) Each operator must inspect the physical integrity of in-service 1 http://www.phillips66midstream.com/EN/Pages/pipelines.aspx (accessed November 21, 2017).#

420175003_Final Order_02132018_text.pdf, page 3CPF No. 4-2017-5003 Page 2 atmospheric and low-pressure steel above-ground breakout tanks according to API Std 653 (except section 6.4.3, Alternative Internal Inspection Interval) (incorporated by reference, see § 195.3). However, if structural conditions prevent access to the tank bottom, its integrity may be assessed according to a plan included in the operations and maintenance manual under § 195.402(c)(3). The risk-based internal inspection procedures in API Std 653, section 6.4.3 cannot be used to determine the internal inspection interval. The Notice alleged that Respondent violated 49 C.F.R. § 195.432(b), by failing to inspect the physical integrity of in-service atmospheric and low-pressure steel above-ground breakout tanks according to API Std 653 (except section 6.4.3, Alternative Internal Inspection Interval) (incorporated by reference, see § 195.3). Specifically, the Notice alleged that Phillips 66 failed to conduct an inspection of Tanks 122, 126, and 129 by their required inspection date in accordance with API Standard 653 section 6.4. At the hearing, Respondent did not contest this allegation of violation, and voluntarily agreed to an inspection schedule with the Region. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 195.432(b) by failing to inspect the physical integrity of in-service atmospheric and low-pressure steel above-ground breakout tanks according to API Std 653 (except section 6.4.3, Alternative Internal Inspection Interval) (incorporated by reference, see § 195.3). 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.2 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 $62,200 for the violation cited above. Item 1: The Notice proposed a civil penalty of $62,200 for Respondent’s violation of 49 C.F.R. § 195.432(b), for failing to inspect the physical integrity of in-service atmospheric and low- 2 These amounts are adjusted annually for inflation. See, e.g., Pipeline Safety: Inflation Adjustment of Maximum Civil Penalties, 82 Fed. Reg. 19325 (April 27, 2017).#

420175003_Final Order_02132018_text.pdf, page 4CPF No. 4-2017-5003 Page 3 pressure steel above-ground breakout tanks according to API Std 653. At the hearing, Phillips 66 did not contest the allegation or present any evidence or argument justifying a reduction in the proposed penalty. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $62,200 for violation of 49 C.F.R. § 195.432(b). In summary, having reviewed the record and considered the assessment criteria for each of the Items cited above, I assess Respondent a total civil penalty of $62,200. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 in the Notice for violation of 49 C.F.R. § 195.432(b). 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. 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. 2. 3. 4. 5. With respect to the violation of § 195.432(b) (Item 1), Respondent must remove Tank 126, the remaining tank in service, from service within 15 days following receipt of the Final Order. Phillips 66 must provide PHMSA with documentation that verifies completion of this item within 15 days following receipt of the Final Order. Phillips 66 must provide PHMSA with a written plan outlining the timing for completing the internal inspection for Tank 126 in accordance with API 653, within 15 days following receipt of the Final Order. Following submission of this written plan, Phillips 66 must provide monthly status reports to PHMSA documenting the company’s progress in completing the internal inspection for Tank 126 in accordance with their written plan. Phillips 66 must provide PHMSA with preliminary and final inspection reports regarding the internal inspections of Tanks 122, 126, and 129 within 10 days that Phillips 66 receives and/or completes the reports. All documentation pertaining to the above compliance items should be sent to the Director of the Southwest Region, Pipeline and Hazardous Materials Safety Administration. It is requested (not mandated) that Phillips 66 maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to the 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.#

420175003_Final Order_02132018_text.pdf, page 5CPF No. 4-2017-5003 Page 4 The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by the Respondent and demonstrating good cause for an extension. Failure to comply with this Order may result in the administrative assessment of civil penalties not to exceed $200,000, as adjusted for inflation (49 C.F.R. § 190.223), 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. Under 49 C.F.R. § 190.243, Respondent may submit a Petition for Reconsideration of this Final Order to the 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, no later than 20 days after receipt of service of this Final Order by Respondent. Any petition submitted must contain a 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. The other terms of the order, including corrective action, remain in effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. February 13, 2018 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

420175003_Closure Letter_05142018_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED May 14, 2018 Mr. Todd Denton President Phillips 66 Pipeline LLC 1075 W Sam Houston Pkwy N. Suite 200 N812-03 Houston, TX 77043 CPF 4-2017-5003 Dear Mr. Denton: On February 13, 2018, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Phillips 66 Pipeline LLC a Final Order in the above-referenced case. This Order included a Compliance Order and Civil Penalty assessment. Based on our review of the documentation you provided and confirmation of payment of the civil penalty, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, Mary L. McDaniel, P.E. Director, Southwest Region Office of Pipeline Safety Pipeline and Hazardous Materials Safety Administration#