GENESIS OFFSHORE HOLDINGS, LLC — Notice of Probable Violation

party submissionOfficial PDF420192001_Operator Response to Notice_02262019.pdf#

420192001_NOPV PCP PCO_01282019_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED January 28, 2019 Jeff Gifford Vice President GENESIS OFFSHORE HOLDINGS, LLC 919 Milam St. Suite 2100 Houston, Texas 77002 CPF 4-2019-2001 Dear Mr. Gifford: On, March 6, 2017 through June 12, 2017, 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 (U.S.C.) inspected procedures, records, and facilities for your Viosca Knoll, Independence Trail, Anaconda, and High Island offshore gas pipeline systems in the Gulf of Mexico. 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 (CFR). The items inspected and the probable violations are:#

420192001_NOPV PCP PCO_01282019_text.pdf, page 21. §192.605 Procedural manual for operations, maintenance, and emergencies. (c) Abnormal operation. For transmission lines, the manual required by paragraph (a) of this section must include procedures for the following to provide safety when operating design limits have been exceeded: (4) Periodically reviewing the response of operator personnel to determine the effectiveness of the procedures controlling abnormal operation and taking corrective action where deficiencies are found. Genesis Offshore Holdings failed to follow its O&M Gas Manual procedure for conducting periodic reviews. Genesis could not provide records to show the periodic reviews were conducted for work done by operating personnel. Genesis O&M Procedure Manual – Gas - Abnormal Operation (Section 300) 3.3 requires that the Pipeline Control Room Manager and all Location Supervisors shall periodically review the response of their personnel to determine the effectiveness of these abnormal operation procedures and take corrective action where deficiencies are found. Additionally, Section 200, 2.0, item 4 requires that Form 201A to be completed for everyone during the effectiveness review. During the audit, PHMSA requested a copy of form 201A as an example of record review. Genesis provided a copy of form 601A, which is the form referred to in O&M Procedure Manual -Liquid, but it applies to both gas and liquid systems which is inconsistent with O&M Procedure Manual - Gas requirements. 2. §192.605 Procedural manual for operations, maintenance, and emergencies. (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include procedures for handling abnormal operations. This manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least once each calendar year. This manual must be prepared before operations of a pipeline system commence. Appropriate parts of the manual must be kept at locations where operations and maintenance activities are conducted. Genesis failed to follow its procedure (Abnormal Operation - Section 300 in the O&M Section 3.1) using the appropriate forms to document and record the communications and actions taken by the field personnel and control room during and after Abnormal Operation Condition. During the audit, the PHMSA inspector reviewed two Abnormal Operation Conditions listed on console 4 in the Control Room report (9/27/2016_AC Power Fail, and 11/20/2016_Outgoing Valve shows open). The PHMSA inspector noticed that there were no forms or documentation generated as per the procedure to record the communications and actions taken by the field personnel. Genesis informed the PHMSA inspector, they only use phone calls and e-mail to communicate such actions. 2#

420192001_NOPV PCP PCO_01282019_text.pdf, page 33. §192.479 Atmospheric corrosion control: General (a) Each operator must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. Genesis failed to clean and coat portions of their pipeline exposed to the atmosphere at the 30” HVLT-301D valve area and at the 30” HVRT-304A valve area. The PHMSA inspector observed disbonded coating, atmospheric corrosion, and severe pitting on flanges, risers, valves, and the pipeline. Proposed Civil Penalty Under 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed $213,268 per violation per day the violation persists, up to a maximum of $2,132,679 for a related series of violations. For violation occurring on or after November 2, 2015 and before November 27, 2018, the maximum penalty may not exceed $209,002 per violation per day, with a maximum penalty not to exceed $2,090,022. For violations occurring prior to November 2, 2015, 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. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violations and has recommended that you be preliminarily assessed a civil penalty of $52,400 as follows: Item number PENALTY 2 3 $24,500 $27,900 Warning Items With respect to item 1 we have reviewed the circumstances and supporting documents involved in this case and have decided not to conduct additional enforcement action or penalty assessment proceedings at this time. We advise you to promptly correct this item. Failure to do so may result in additional enforcement action. Proposed Compliance Order With respect to item 3 pursuant to 49 U.S.C. § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to GENESIS OFFSHORE HOLDINGS, 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 3#

420192001_NOPV PCP PCO_01282019_text.pdf, page 4material 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). Following the receipt of this Notice, you have 30 days to submit written comments, or request a hearing under 49 CFR § 190.211. 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. If you are responding to this Notice, we propose that you submit your correspondence to my office within 30 days from receipt of this Notice. This period may be extended by written request for good cause. In your correspondence on this matter, please refer to CPF 4-2019-2001 and, for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Mary L. McDaniel, P.E. Director, Southwest Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 4#

420192001_NOPV PCP PCO_01282019_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 GENESIS OFFSHORE HOLDINGS, LLC a Compliance Order incorporating the following remedial requirements to ensure the compliance of GENESIS OFFSHORE HOLDINGS, LLC with the pipeline safety regulations: 1. 2. In regard to Item Number 3 of the Notice pertaining to atmospheric corrosion and coating damage on portions of pipeline that are exposed to the atmosphere on platform HIA-573 on HIOS gas gathering system, Genesis must complete remedial action and submit documentation to PHMSA’s Southwest Region Director within 30 days of issuance of the Final Order. It is requested (not mandated) that GENESIS OFFSHORE HOLDINGS, LLC 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. 5#

420192001_Final Order_01242020_text.pdf, page 1Official PDFJanuary 24, 2020 Mr. Grant E. Sims Chief Executive Officer Genesis Energy, LP 919 Milam Street, Suite 2100 Houston, Texas 77002 Re: CPF No. 4-2019-2001 Dear Mr. Sims: Enclosed please find the Final Order issued in the above-referenced case to your subsidiary, Genesis Offshore Holdings, LLC (Genesis). It makes findings of violation and assesses a civil penalty of $52,400. It further finds that Genesis has completed the actions specified in the Notice to comply with the pipeline safety regulations. Therefore, when the civil penalty has been paid, 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: Ms. Mary McDaniel, Director, Southwest Region, Office of Pipeline Safety, PHMSA Mr. Jeffrey W. Gifford, Vice President, HSSE, Genesis Energy, LP, 919 Milam Street, Suite 2100, Houston, Texas 77002 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

420192001_Final Order_01242020_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 ) Genesis Offshore Holdings, LLC, ) CPF No. 4-2019-2001 a subsidiary of Genesis Energy, LP, ) ) ) ) Respondent. ) ____________________________________) FINAL ORDER From March 6 through June 12, 2017, 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 Genesis Offshore Holdings, LLC’s (Genesis or Respondent) offshore gas pipeline systems in the Gulf of Mexico. Genesis is a subsidiary of Genesis Energy, LP, which has approximately 1,000 miles of offshore gas pipelines in the Gulf of Mexico.1 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated January 28, 2019, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice), which also included a warning pursuant to 49 C.F.R. § 190.205. In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Genesis had committed two violations of 49 C.F.R. Part 192 and proposed assessing a civil penalty of $52,400 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct one of the alleged violations. The warning item required no further action but warned the operator to correct the probable violation or face possible future enforcement action. Genesis Energy, LP, on behalf of Genesis, responded to the Notice by letter dated February 26, 2019 (Response). The company did not expressly contest either of the two allegations of violation, but did offer additional information in response to the Notice. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION The Notice alleged that Respondent violated 49 C.F.R. Part 192, as follows: 1 Genesis Energy, LP’s website, available at https://www.genesisenergy.com/operations/pipeline/offshore/naturalgas/ (last accessed January 16, 2020).#

420192001_Final Order_01242020_text.pdf, page 3CPF No. 4-2019-2001 Page 2 Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.605(a), which states: § 192.605 Procedural manual for operations, maintenance, and emergencies. (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include procedures for handling abnormal operations. This manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least once each calendar year. This manual must be prepared before operations of a pipeline commence. Appropriate parts of the manual must be kept in locations where operations and maintenance activities are conducted. The Notice alleged that Respondent violated 49 C.F.R. § 192.605(a) by failing to follow its own manual of written procedures for handling abnormal operations. Specifically, the Notice alleged that Genesis failed to follow Section 3.1 of its Operations and Maintenance (O&M) Manual, which required that the “cause, consequences, and actions taken regarding the abnormal operation shall be reported in writing to the affected Operations Area Manager(s). Where appropriate, the report shall include recommendations to prevent a recurrence.” Section 3.1 goes on to list specific information that should be included in the report, including, “at a minimum, the date and time of occurrence, description of the abnormal operation, sequence of events, personnel involved, and steps taken to rectify the situation.”2 During the inspection, Genesis did not provide any records generated in accordance with Section 3.1 of its O&M Manual for two abnormal operating conditions (AOCs) shown on Console 4 in its control room. Instead, Genesis informed PHMSA that phone calls and e- mails were used to communicate this information. In its Response, Genesis noted that its control room utilized a different reporting format for AOCs and that this information had been provided to PHMSA during the 2017 inspection.3 It also noted that, since the time of the 2017 inspection, Genesis control room staff had held weekly conference calls to go over the latest AOCs, AOCs that had been corrected, and those that were outstanding.4 Finally, the operator attached a copy of its Form 810.01 Report of Abnormal Operating Conditions to its Response.5 After reviewing Form 810.01 and Table 1 in Genesis’s Response, I find that neither documents all of the information required to be reported in writing in Section 3.1 of Genesis’s O&M Manual. First, it is unclear whether Form 810.01 was provided to PHMSA during the inspection, or if this is a newly-created or revised form submitted to PHMSA after the inspection. In its Region 2 Pipeline Safety Violation Report (Violation Report), (January 28, 2019) (on file with PHMSA), at Exhibit A, Violation 2, Genesis Operations and Maintenance – Section 300. 3 Response, at 3 (Table 1, listing out the date, time, and location of the AOC and a narrative section). 4 Id. 5 In its Response to Item 2, the operator also made note of Section 1.3.3 of its Liquids O&M Manual that discusses reviews for effectiveness. However, this relates to Item 1 in the Notice, which was a warning item and therefore is not discussed here.#

420192001_Final Order_01242020_text.pdf, page 4CPF No. 4-2019-2001 Page 3 Recommendation, the Region noted that it was not provided with a copy of Form 810.01 during the inspection. There is no date on the form, and the operator does not otherwise clarify when the document was created. Regardless, I do not believe this form captures the requirements of Section 3.1 of Genesis’s O&M Manual. For example, the form does not include the consequences of an AOC. Second, the table that is included in Genesis’s Response does not include sufficient information to comply with Section 3.1 of the operator’s O&M Manual. For example, it does not include steps taken to rectify the AOC. Finally, the operator’s weekly conference calls to discuss AOCs, while a good practice, do not comport with the requirement in Section 3.1 that these discussions “shall be reported in writing to the affected Operation Area Manager(s)” (emphasis added). Accordingly, after considering all of the evidence, I find that Respondent violated 49 C.F.R. § 192.605(a) by failing to follow Section 3.1 of its manual of written procedures for recording abnormal operations. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.479(a), which states: § 192.479 Atmospheric corrosion control: General. (a) Each operator must clean and coat each pipeline or portion of pipeline that is exposed to the atmosphere, except pipelines under paragraph (c) of this section. The Notice alleged that Respondent violated 49 C.F.R. § 192.479(a) by failing to clean and coat each non-excepted pipeline or portion of pipeline that is exposed to the atmosphere. Specifically, the Notice alleged that Genesis failed to clean and coat the 30-inch HVLT-201D valve area and the 30-inch HVRT-304A valve area. During the inspection, the PHMSA inspector observed disbonded coating, atmospheric corrosion, and severe pitting on flanges, risers, valves and the pipeline at these locations. 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. § 192.479(a) by failing to clean and coat each non-excepted pipeline or portion of pipeline that is exposed to the atmosphere. These findings of violation will be considered prior offenses 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.6 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; 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 6 These amounts are adjusted annually for inflation. See 49 C.F.R. § 190.223.#

420192001_Final Order_01242020_text.pdf, page 5CPF No. 4-2019-2001 Page 4 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 $52,400 for the violations cited above. Item 2: The Notice proposed a civil penalty of $24,500 for Respondent’s violation of 49 C.F.R. § 192.605(a), for failing to follow its manual of written procedures for handling abnormal operations. Genesis failed to comply with a requirement that was clearly applicable and did not have a reasonable justification for its non-compliance. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $24,500 for violation of 49 C.F.R. § 192.605(a). Item 3: The Notice proposed a civil penalty of $27,900 for Respondent’s violation of 49 C.F.R. § 192.479(a), for failing to clean and coat each non-excepted pipeline or portion of pipeline that is exposed to the atmosphere. Genesis neither contested the allegation nor presented any evidence or argument justifying a reduction in, or elimination of, the proposed penalty. The proposed penalty amount takes into account that Genesis failed to comply with a requirement that was clearly applicable, and did not have a reasonable justification for its non-compliance. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $27,900 for violation of 49 C.F.R. § 192.479(a). 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 $52,400. 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, Mike Monroney Aeronautical Center, 6500 S MacArthur Blvd, Oklahoma City, Oklahoma 79169. The Financial Operations Division telephone number is (405) 954-8845. Failure to pay the $52,400 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. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 3 in the Notice for violation of 49 C.F.R. § 192.479(a). Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Director indicates that Respondent has taken the following actions specified in the proposed compliance order:#

420192001_Final Order_01242020_text.pdf, page 6CPF No. 4-2019-2001 Page 5 1. With respect to the violation of § 192.479(a) (Item 3), Respondent has completed remedial actions and submitted documentation to PHMSA reflecting corrective actions it has taken on portions of its pipeline exposed to the atmosphere on platform HIA-573 on the HIOS gas gathering system. Accordingly, I find that compliance has been achieved with respect to this violation. Therefore, the compliance terms proposed in the Notice are not included in this Order. WARNING ITEM With respect to Item 1, the Notice alleged a probable violation of Part 192 but did not propose a civil penalty or compliance order for this item. Therefore, this is considered to be a warning item. The warning was for: 49 C.F.R. § 192.605(c)(4) (Item 1) ─ Respondent’s alleged failure to have a manual of written procedures for periodically reviewing the response of operator personnel to determine the effectiveness of the procedures controlling abnormal operation and taking corrective action where deficiencies are found. Genesis presented information in its Response showing that it had taken certain actions to address the cited item. If OPS finds a violation of this provision in a subsequent inspection, Respondent may be subject to future enforcement action. 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 the Final Order by Respondent. Any petition submitted must 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. The other terms of the order, including any corrective action, remain in effect unless the Associate Administrator, upon request, grants a stay. 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. January 24, 2020 ____________________________________ ________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#