{"operation":"document","citation":"CPF 420203003","title":"FREEPORT LNG DEVELOPMENT, L.P. — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2020-08-07","effective_on":null,"summary":"CLOSED notice of probable violation citing 191.3, 191.5(a), 191.5(b), 193.2011, 193.2503(b), 193.2515(c).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-420203003.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-420203003.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-420203003","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/420203003","body":"Notice of Probable Violation involving FREEPORT LNG DEVELOPMENT, L.P.. PHMSA's enforcement data identifies the cited regulations as 191.3,  191.5(a),  191.5(b),  193.2011,  193.2503(b),  193.2515(c). The case was opened on 2020-08-07 and is reported as closed as of 2021-08-30. Proposed civil penalty: $263,347. Assessed civil penalty: $263,347. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n420203003_Closure Letter_08302021_(15-150389S).pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_Closure%20Letter_08302021_(15-150389S).pdf\n\n420203003_Closure Letter_08302021_(15-150389S)_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_Closure%20Letter_08302021_(15-150389S)_text.pdf\n\n420203003_Final Order_02172021.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_Final%20Order_02172021.pdf\n\n420203003_Final Order_02172021_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_Final%20Order_02172021_text.pdf\n\n420203003_NOPV PCP PCO_08072020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_NOPV%20PCP%20PCO_08072020.pdf\n\n420203003_NOPV PCP PCO_08072020_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_NOPV%20PCP%20PCO_08072020_text.pdf\n\n420203003_Operator Response to Notice_08252020.pdf: https://primis.phmsa.dot.gov/enforcement-documents/420203003/420203003_Operator%20Response%20to%20Notice_08252020.pdf\n\n420203003_Closure Letter_08302021_(15-150389S)_text.pdf\n\nELECTRONIC MAIL - RETURN RECEIPT REQUESTED\nAugust 30, 2021\nMichael S. Smith\nChairman & Chief Executive Officer\nFreeport LNG Development, LP\n333 Clay Street, Suite 5050\nHouston, Texas 77002\nCPF 4-2020-3003\nDear Mr. Smith:\nOn February 17, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA)\nissued to Freeport LNG Development, L. P. (FLNG) a Final Order in the above-referenced case.\nThis Order included a Compliance Order and a Civil Penalty. Based on PHMSA’s review of the\ndocumentation provided by FLNG and payment of the Civil Penaly, it has been determined that\nFLNG has complied with the terms of the Final Order\nAccordingly, this case is now closed, and no further action is contemplated with respect to the\nmatters involved in this case. Thank you for your cooperation.\nSincerely,\nMary L. McDaniel, P.E.\nDirector, Southwest Region\nPipeline and Hazardous Materials Safety Administration\ncc: Mr. Mark Mallet, Vice President, Operations and Engineering, Freeport LNG\nDevelopment, mmallet@freeportlng.com\nMr. Michael Stephenson, Regulatory Compliance Manager, Freeport LNG Development,\nmstephenson@freeportlng.com\n\n420203003_NOPV PCP PCO_08072020_text.pdf\n\nNOTICE OF PROBABLE VIOLATION\nPROPOSED CIVIL PENALTY\nand\nPROPOSED COMPLIANCE ORDER\nELECTRONIC MAIL - RETURN RECEIPT REQUESTED\nAugust 7, 2020\nMichael S. Smith\nChairman & CEO\nFreeport LNG Development, L. P.\n333 Clay Street, Suite 5050\nHouston, Texas 77002\nCPF 4-2020-3003\nDear Mr. Smith:\nOn August 7, 2019, a representative of the Pipeline and Hazardous Materials Safety\nAdministration (PHMSA), Office of Pipeline Safety (OPS), pursuant to Chapter 601 of 49 United\nStates Code (U.S.C.) inspected the liquefied natural gas (LNG) export facility (Facility) operated\nby Freeport LNG Development, LP (FLNG), in Quintana, Texas. PHMSA initiated its\ninvestigation following an August 1, 2019 unintended release of natural gas after a piping failure\noccurred at the Facility during commissioning. On that date, FLNG was performing a “cool down”\noperation as part of the steps to commission Train 1, when it experienced a failure as it attempted\nto reduce the time required to properly cool down the Facility. FLNG flowed high-pressure,\nchilled natural gas at approximately 917 pounds per square inch (psig) through bypass piping into\npiping designed for a maximum operating pressure of 90 psig. The bypass line consequently failed\naround the area where a branch weld joined the pipes. The failure of the bypass line resulted in an\nunintended release of roughly 315 million cubic feet of natural gas and an estimated property\ndamage of $76,220.1\nSeparate from this enforcement action, PHMSA issued to FLNG a Notice of Proposed Safety\nOrder (NOPSO) [CPF No. 4-2019-3002S] on August 29, 2019. As a result of the NOPSO and\nsubsequent discussions between PHMSA and FLNG pursuant to 49 CFR §190.239, the parties\nentered into a Consent Agreement and Order, dated January 21, 2020, whereby FLNG agreed to\ntake corrective measures aimed at addressing certain safety issues raised by the incident. The\nConsent Agreement and Order remains open.\n1 Exhibit B.4 - PHMSA Form F 7100.3 Incident Report LNG 20190005 at 2.\n\n\n\n2\nAs a result of the inspection, it is alleged that you have committed probable violations of the\nPipeline Safety Regulations, Title 49, Code of Federal Regulations (CFR). The items inspected\nand the probable violations are:\n1. § 193.2011 Reporting.\nIncidents, safety-related conditions, and annual pipeline summary data for LNG\nplants or facilities must be reported in accordance with the requirements of Part 191\nof this subchapter.\n§ 191.5 Immediate notice of certain incidents.\n(a) At the earliest practicable moment following discovery, but no later than one\nhour after confirmed discovery, each operator must give notice in accordance with\nparagraph (b) of this section of each incident as defined in §191.3.\n(b) Each notice required by paragraph (a) of this section must be made to the\nNational Response Center either by telephone to 800-424-8802 (in Washington, DC,\n202 267-2675) or electronically at http://www.nrc.uscg.mil and must include the\nfollowing information: . . .\n§ 191.3 Definitions.\nAs used in this part and the PHMSA Forms referenced in this part-\n. . .\nIncident means any of the following events:\n(1) An event that involves a release of gas from a pipeline, gas from an\nunderground natural gas storage facility, liquefied natural gas, liquefied petroleum\ngas, refrigerant gas, or gas from an LNG facility, and that results in one or more of\nthe following consequences:\n(i) A death, or personal injury necessitating in-patient hospitalization;\n(ii) Estimated property damage of $50,000 or more, including loss to the operator\nand others, or both, but excluding cost of gas lost; or\n(iii) Unintentional estimated gas loss of three million cubic feet or more.\n(2) An event that results in an emergency shutdown of an LNG facility or an\nunderground natural gas storage facility. Activation of an emergency shutdown\nsystem for reasons other than an actual emergency does not constitute an incident.\n(3) An event that is significant in the judgment of the operator, even though it did\nnot meet the criteria of paragraph (1) or (2) of this definition.\nFreeport LNG Development, L.P. (FLNG) failed to notify the National Response Center\n(NRC) of an incident that occurred at its liquefied natural gas (LNG) facility on Quintana\nIsland, Texas on August 1, 2019. The release was caused by the failure of a 2-inch bypass\npipe at the connection to a 6-inch flare header during initial startup operations. The incident\nwas not reported to the NRC as required by §191.5 that resulted in estimated costs (i.e. cost\nof repairs) exceeding $50,000 and unintentional gas loss of 300 million cubic feet. FLNG\nalso initiated an emergency shutdown of the facility following discovery of the release.\nFLNG’s own procedures, Appendix L PHMSA Incident Reporting Requirements, require\nthat FLNG notify the NRC following “an event that results in an emergency shutdown of\n\n\n\n3\nan LNG facility.” PHMSA first learned of the incident from the Federal Energy Regulatory\nCommission (FERC) on August 6, 2019, five days after the incident occurred. PHMSA\nfurther determined that FLNG had reported the incident to FERC on August 1, 2020, in the\nhours following the failure, as a significant event. Therefore, despite the failure of a 2-inch\nbypass pipe meeting the requirements of an incident under §191.5, FLNG failed to notify\nthe NRC of the incident within one hour of the release, as required by §191.5 and\n§193.2011, as well as the requirements of FLNG’s own procedures.\n2. § 193.2503 Operating procedures.\nEach operator shall follow one or more manuals of written procedures to provide\nsafety in normal operation and in responding to an abnormal operation that would\naffect safety. The procedures must include provisions for:\n(a) . . .\n(b) Startup and shutdown, including for initial startup, performance testing to\ndemonstrate that components will operate satisfactory in service.\nFLNG failed to follow its written procedure for the startup of its Quintana Island LNG\nfacility. As noted above, on August 1, 2019, during the commencement of a cooldown\nprocess on Train 1, FLNG experienced a failure resulting in a hydrocarbon release at the\nconnection of a 2-inch purging/depressurizing line and a 6-inch flare header.\nPHMSA’s investigation revealed that FLNG had deviated from its startup procedures by\nperforming an operation for which FLNG did not have a written procedure. Specifically,\nat the time of the failure, FLNG used the 2-inch line for an operation outside of the design\nspecifications for the piping in an effort to reduce the cool down time. FLNG’s written\nprocedure did not account for this operation, nor did it permit FLNG to deviate from the\nprocedures to perform an operation outside the design specifications, during the startup of\nthe LNG facility. Therefore, FLNG failed to follow its written procedures for startup as\nrequired by §193.2503.\n3. § 193.2515 Investigations of failures.\n(a) . . .\n(c) If the Administrator or relevant state agency under the pipeline safety laws\n(49 U.S.C. 60101 et seq.) investigates an incident, the operator involved shall make\navailable all relevant information and provide reasonable assistance in conducting\nthe investigation. Unless necessary to restore or maintain service, or for safety, no\ncomponent involved in the incident may be moved from its location or otherwise\naltered until the investigation is complete or the investigating agency otherwise\nprovides. Where components must be moved for operational or safety reasons, they\nmust not be removed from the plant site and must be maintained intact to the extent\npracticable until the investigation is complete or the investigating agency otherwise\nprovides.\n\n\n\n4\nFLNG failed to make available to PHMSA all relevant information and provide reasonable\nassistance to PHMSA's investigation following the incident that occurred on August 1,\n2019. Specifically, on the morning of August 7, 2019, PHMSA communicated to FLNG\nthe agency's intent to investigate the incident via a telephone conversation and follow-up\nemail. However, FLNG removed the failed component from the site just prior to PHMSA's\narrival at the site later that same morning. PHMSA had provided no instruction to FLNG\nto move or otherwise alter the component in order to restore or maintain service or for\nsafety purposes, and neither had FLNG communicated the need to remove the components\nfor those reasons prior to removal. Therefore, FLNG violated §193.2515 (c) by failing to\nprovide reasonable assistance while PHMSA conducted its investigation.\nProposed Civil Penalty\nUnder 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed\n$218,647 per violation per day the violation persists, up to a maximum of $2,186,465 for a\nrelated series of violations. For violation occurring on or after November 27, 2018 and before\nJuly 31, 2019, the maximum penalty may not exceed $213,268 per violation per day, with a\nmaximum penalty not to exceed $2,132,679. For violation occurring on or after November 2,\n2015 and before November 27, 2018, the maximum penalty may not exceed $209,002 per\nviolation per day, with a maximum penalty not to exceed $2,090,022. For violations occurring\nprior to November 2, 2015, the maximum penalty may not exceed $200,000 per violation per\nday, with a maximum penalty not to exceed $2,000,000 for a related series of violations. Also,\nfor each violation involving LNG facilities, and additional penalty of not more than $79,875\noccurring on or after July 31, 2019 may be imposed. For each violation involving LNG\nfacilities, an additional penalty of not more than $77,910 occurring on or after November 27,\n2018 and before July 31, 2019 may be imposed. For each violation involving LNG facilities\noccurring on or after November 2, 2018 and before November 27, 2018, an additional penalty of\nnot more than $76,352 may be imposed. For each violation involving LNG facilities occurring\nprior to November 2, 2015, an additional penalty of not more than $75,000 may be imposed. We\nhave reviewed the circumstances and supporting documentation involved for the above probable\nviolation(s) and recommend that you be preliminarily assessed a civil penalty of $263,347 as\nfollows:\nItem number\nPENALTY\n1\n$44,700\n2\n$218,647\nProposed Compliance Order\nWith respect to item 3, pursuant to 49 U.S.C. § 60118, the Pipeline and Hazardous Materials\nL. case restration ross 0 CompliCe prier, Wich to reset 12 made a pamorthis\nNotice.\n\n\n\n5\nResponse to this Notice\nEnclosed as part of this Notice is a document entitled Response Options for Pipeline Operators\nin Enforcement Proceedings. Please refer to this document and note the response options. All\nmaterial you submit in response to this enforcement action may be made publicly available. If\nyou believe that any portion of your responsive material qualifies for confidential treatment\nunder 5 U.S.C. 552(b), along with the complete original document you must provide a second\ncopy of the document with the portions you believe qualify for confidential treatment redacted\nand an explanation of why you believe the redacted information qualifies for confidential\ntreatment under 5 U.S.C. 552(b).\nFollowing the receipt of this Notice, you have 30 days to submit written comments, or request a\nhearing under 49 CFR § 190.211. If you do not respond within 30 days of receipt of this Notice,\nthis constitutes a waiver of your right to contest the allegations in this Notice and authorizes the\nAssociate Administrator for Pipeline Safety to find facts as alleged in this Notice without further\nnotice to you and to issue a Final Order. If you are responding to this Notice, we propose that\nyou submit your correspondence to my office within 30 days from receipt of this Notice. This\nperiod may be extended by written request for good cause.\nIn your correspondence on this matter, please refer to CPF 4-2020-3003 and, for each document\nyou submit, please provide a copy in electronic format whenever possible.\nSincerely,\nMary L. McDaniel, P.E.\nDirector, Southwest Region\nPipeline and Hazardous Materials Safety Administration\nEnclosures: Proposed Compliance Order Response Options for Pipeline Operators in\nEnforcement Proceedings\ncc: Mr. Mark Mallet, Vice President, Operations & Engineering, Freeport Development, L.P.\nMr. Mark Roscoe, FERC Regulatory Compliance and Warranty Manager, Freeport LNG\nDevelopment, L.P.\n\n\n\n6\nPROPOSED COMPLIANCE ORDER\nPursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety\nAdministration (PHMSA) proposes to issue to Freeport LNG Development, L. P. (FLNG) a\nCompliance Order incorporating the following remedial requirements to ensure the compliance of\nFLNG with the pipeline safety regulations:\n1. 2. 3. In regard to Item Number 3 of the Notice pertaining to the operator’s removal of\nfailed components from the Terminal prior to direction from PHMSA, the operator\nshall ensure that its procedures for investigations of failures within the LNG facility\nclearly demonstrate alignment with the requirements of §193.2515. If in its review,\nthe operator determines revision are required, pertinent personnel must be made\naware of any changes to the processes.\nFLNG must submit all procedures and necessary revisions to the PHMSA\nSouthwest Region Director within 30 days of issuance of the Final Order.\nIt is requested (not mandated) that Freeport LNG Development, L. P. maintain\ndocumentation of the safety improvement costs associated with fulfilling this\nCompliance Order and submit the total to Mary McDaniel, Director, Southwest,\nPipeline and Hazardous Materials Safety Administration. It is requested that these\ncosts be reported in two categories: 1) total cost associated with\npreparation/revision of plans, procedures, studies and analyses, and 2) total cost\nassociated with replacements, additions and other changes to pipeline\ninfrastructure.\n\n420203003_Final Order_02172021_text.pdf\n\nFebruary 17, 2021\nVIA ELECTRONIC MAIL TO: msmith@freeportlng.com\nMr. Michael S. Smith\nChairman and Chief Executive Officer\nFreeport LNG Development, LP\n333 Clay Street, Suite 5050\nHouston, TX 77002\nRe: CPF No. 4-2020-3003\nDear Mr. Smith:\nEnclosed please find the Final Order issued in the above-referenced case. It makes findings of\nviolation, assesses a civil penalty of $263,347, and specifies actions that need to be taken by\nFreeport LNG Development, LP to comply with the pipeline safety regulations. The penalty\npayment terms are set forth in the Final Order. When the civil penalty has been paid and the\nterms of the compliance order completed, as determined by the Director, Southwest Region, this\nenforcement action will be closed. Service of the Final Order by electronic mail is effective\nupon the date of transmission as provided under 49 C.F.R. § 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nAlan K. Mayberry\nAssociate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Ms. Mary McDaniel., Director, Southwest Region, Office of Pipeline Safety, PHMSA\nMr. Mark Mallet, Vice President, Operations and Engineering, Freeport LNG Development,\nmmallet@freeportlng.com\nMr. Michael Stephenson, Regulatory Compliance Manager, Freeport LNG Development,\nmstephenson@freeportlng.com\nCONFIRMATION OF RECEIPT REQUESTED\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, D.C. 20590\n____________________________________\n)\nIn the Matter of )\n)\nFreeport LNG Development, LP, ) CPF No. 4-2020-3003\n)\nRespondent. )\n____________________________________)\nFINAL ORDER\nOn August 7, 2019, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and\nHazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS),\nconducted an on-site pipeline safety inspection of the liquefied natural gas (LNG) export facility\n(Facility) operated by Freeport LNG Development, LP (FLNG or Respondent), in Quintana,\nTexas. PHMSA initiated its inspection following an August 1, 2019 unintended release of\nnatural gas related to a piping failure that occurred at the Facility during commissioning. The\nFacility includes three new liquefaction trains (Trains 1, 2 and 3) positioned in parallel and\noccupying a 2,140-foot-long by 860-foot-wide rectangular footprint west of the existing Facility\narea. Each train would be capable of producing 4.4 million metric tons per annum (mtpa) of\nLNG for export, which equates to a total liquefaction capacity of approximately 1.8 Bcf/d of\nnatural gas. Each train would produce 4.48 mtpa of LNG; beyond the 4.4 mtpa that would be\navailable for export, the remaining 0.08 mtpa would become boil-off gas (BOG).1\nAs a result of the inspection, the Director, Southwest Region, OPS (Director), issued to\nRespondent, by letter dated August 7, 2020, a Notice of Probable Violation, Proposed Civil\nPenalty, and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the\nNotice proposed finding that FLNG had committed three violations of 49 C.F.R. Part 193 and\nproposed assessing a civil penalty of $263,347 for the alleged violations. The Notice also\nproposed ordering Respondent to take certain measures to correct the alleged violations.\nFLNG responded to the Notice by letter dated August 25, 2020 (Response). The company did\nnot contest the allegations of violation but provided an explanation of its actions and requested\nthat the proposed civil penalty be reduced. FLNG did not request a hearing and therefore has\nwaived its right to one.\n1 Pipeline Violation Safety Report (on file with PHMSA). Separate from this matter, PHMSA issued to FLNG a\nNotice of Proposed Safety Order (NOPSO) (CPF No. 4-2019-3002S) on August 29, 2019. As a result of the\nNOPSO, pursuant to 49 C.F.R. § 190.239, the parties entered into a Consent Agreement and Order, dated February\n14, 2020, whereby FLNG agreed to take corrective measures to address safety issues raised by the incident.\n\n\n\nCPF No. 4-2020-3003\nPage 2\nFINDINGS OF VIOLATION\nIn its Response, FLNG did not contest the allegations in the Notice that it violated 49 C.F.R. Part\n193, as follows:\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 193.2011, which states:\n§ 193.2011 Reporting.\nIncidents, safety-related conditions, and annual pipeline summary data\nfor LNG plants or facilities must be reported in accordance with the\nrequirements of Part 191 of this subchapter.\nThe Notice alleged that Respondent violated 49 C.F.R. § 193.2011 by failing to notify the\nNational Response Center (NRC) of an incident that occurred at its LNG facility on Quintana\nIsland, Texas on August 1, 2019. Specifically, the Notice alleged that the incident resulted in\nestimated property damage (including cost of repairs) exceeding $50,000 and unintentional\nestimated gas loss of more than 300 million cubic feet, and was therefore required to be reported\nto the NRC as soon as practicable, but not later than one hour after discovery, pursuant to\n§§ 191.3 and 191.5.2 Furthermore, the Notice alleged that FLNG failed to comply with its own\nprocedures, Appendix L PHMSA Incident Reporting Requirements, which requires FLNG to\nnotify the NRC following “an event that results in an emergency shutdown of an LNG facility.”\nFinally, the Notice alleged that PHMSA first learned of the incident from another Federal agency\nfive days after the incident occurred.\nRespondent did not contest this allegation of violation, but offered additional information and\ncorrections to either reduce or eliminate the proposed civil penalty. I discuss the additional\ninformation below with respect to the proposed civil penalty. Accordingly, based upon a review\nof all of the evidence, I find that Respondent violated 49 C.F.R. § 193.2011 by failing to notify\nthe NRC as soon as practicable but not later than one hour after discovery of an incident that\noccurred at its LNG facility on Quintana Island, Texas on August 1, 2019.\nItem 2: The Notice alleged that Respondent violated 49 C.F.R. § 193.2503(b), which states:\n§ 193.2503 Operating procedures.\nEach operator shall follow one or more manuals of written procedures\nto provide safety in normal operation and in responding to an abnormal\noperation that would affect safety. The procedures must include provisions\nfor:\n(a) ….\n(b) Startup and shutdown, including for initial startup, performance\ntesting to demonstrate that components will operate satisfactory in service.\nThe Notice alleged that Respondent violated 49 C.F.R. § 193.2503(b) by failing to follow its\n2 A reportable incident includes, among other things, an event that involves a release of gas from an LNG facility\nthat results in estimated property damage of $50,000 or more, or unintentional estimated gas loss of 3 million cubic\nfeet or more. § 191.3.\n\n\n\nCPF No. 4-2020-3003\nPage 3\nwritten procedure for the startup of its Quintana Island LNG facility. Specifically, Respondent\nperformed an operation for which it did not have a written procedure. Respondent did not\ncontest this allegation of violation. Accordingly, based upon a review of all of the evidence, I\nfind that Respondent violated 49 C.F.R. § 193.2503(b) by failing to follow its written procedure\nby using a 2-inch line for an operation outside of the design specifications for the piping in an\neffort to reduce the cool down time.\nItem 3: The Notice alleged that Respondent violated 49 C.F.R. § 193.2515(c), which states:\n§ 193.2515 Investigation of failures.\n(a) ….\n(c) If the Administrator or relevant state agency under the pipeline\nsafety laws (49 U.S.C. 60101 et seq.) investigates an incident, the operator\ninvolved shall make available all relevant information and provide\nreasonable assistance in conducting the investigation. Unless necessary to\nrestore or maintain service, or for safety, no component involved in the\nincident may be moved from its location or otherwise altered until the\ninvestigation is complete or the investigating agency otherwise provides.\nWhere components must be moved for operational or safety reasons, they\nmust not be removed from the plant site and must be maintained intact to\nthe extent practicable until the investigation is complete or the investigating\nagency otherwise provides.\nThe Notice alleged that Respondent violated 49 C.F.R. § 193.2515(c) by failing to make\navailable to PHMSA all relevant information and provide reasonable assistance to PHMSA’s\ninvestigation following the incident that occurred on August 1, 2019. Specifically, Respondent\nremoved the failed component from the incident site, without PHMSA permission, after being\ninformed PHMSA was investigating the incident.\nRespondent did not contest this allegation of violation. Accordingly, based upon a review of all\nof the evidence, I find that Respondent violated 49 C.F.R. § 193.2515(c) by failing to provide\nreasonable assistance while PHMSA conducted its investigation.\nThese findings of violation will be considered prior offenses in any subsequent enforcement\naction taken against Respondent.\nASSESSMENT OF PENALTY\nUnder 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed\n$200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any\nrelated series of violations.3 In determining the amount of a civil penalty under 49 U.S.C.\n§ 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature,\ncircumstances, and gravity of the violation, including adverse impact on the environment; the\n3 These amounts are adjusted annually for inflation. See 49 C.F.R. § 190.223.\n\n\n\nCPF No. 4-2020-3003\nPage 4\ndegree of Respondent’s culpability; the history of Respondent’s prior offenses; any effect that\nthe penalty may have on its ability to continue doing business; and the good faith of Respondent\nin attempting to comply with the pipeline safety regulations. In addition, I may consider the\neconomic benefit gained from the violation without any reduction because of subsequent\ndamages, and such other matters as justice may require. The Notice proposed a total civil\npenalty of $263,347 for the violations cited above.\nItem 1: The Notice proposed a civil penalty of $44,700 for Respondent’s violation of 49 C.F.R.\n§ 193.2011, for failing to notify the NRC of an incident that occurred at its LNG facility on\nQuintana Island, Texas on August 1, 2019.\nIn its Response, FLNG argued that the proposed civil penalty should be reduced or eliminated.\nFLNG based its position on several arguments. First, FLNG asserted that the Notice contains a\nfactual inaccuracy regarding the amount of gas released. The Notice alleged that 315 million\ncubic feet (MMCF) of gas was released when the correct amount was 315 thousand cubic feet\n(MCF), possibly due to an inadvertent conversion from MCF to MMCF. FLNG argued that this\nfactual inaccuracy warrants a reduction in the civil penalty amount. FLNG is correct that the\nvolume of gas released identified in the Notice is inaccurate. The amount of gas released was\n315 MCF, not 315 MMCF. However, the amount of gas released was not a factor considered in\nthe calculation of the proposed civil penalty.4 Therefore, the correction to the record regarding\nthe amount of gas released does not warrant a reduction or withdrawal of the proposed civil\npenalty for this Item.\nFLNG’s second argument is directed at the allegations in the Notice that support the underlying\nviolation. Specifically, FLNG argued that within one hour of the event, it did not know that the\nevent met the definition of “incident” under § 191.3.5 The three prongs of the definition that are\nparticularly relevant to this event, as argued by Respondent, are: (1) whether the event resulted in\nestimated property damage of $50,000 or more, including the loss to the operator and others, or\nboth; (2) whether the event is significant in the judgment of the operator, even though it did not\nmeet the other criteria of “incident”; and (3) whether the event resulted in an emergency\nshutdown of an LNG facility.6 According to FLNG, because it did not believe that any of these\nprongs were met within one-hour of the release, it should not be subject to such a high civil\npenalty for its admitted non-compliance. I note that Respondent did not make this argument with\nrespect to the underlying allegation of violation, which FLNG did not contest and therefore\nwaived its right to challenge.7\nThe relevant considerations when determining a proposed civil penalty are the civil penalty\n4 Moreover, the Violation Reported recognized this violation as “minimally” affecting pipeline safety.\n5 Response, at 2-4.\n6 Respondent also noted that the incident did not result in death or personal injury necessitating in-patient\nhospitalization; however, I note that the Notice never alleged either of those had occurred.\n7 See id. at 1 (“While FLNG does not believe that a violation of these regulations has occurred, as a matter of\nadministrative economy, we have determined not to contest the alleged violation itself . . . .”).\n\n\n\nCPF No. 4-2020-3003\nPage 5\nassessment considerations set forth in § 190.225. At best, the argument put forward by FLNG\nregarding its failure to report to the NRC is directed at its good faith in attempting to achieve\ncompliance.8 Even when viewed in this regard, however, FLNG’s argument does not warrant a\nreduction of the proposed civil penalty.\nUnder the regulation, operators are required to report an incident to the NRC on the basis of an\nestimated property damage cost, not the actual costs. Furthermore, an operator may not delay an\nincident report to the NRC based on the amount of time it takes to calculate the actual dollar\namount of any property damage. The release occurred on August 1, 2019. FLNG’s first\nnotification to PHMSA about the release was not made until August 19, 2019. In that report,\nFLNG underestimated the property damage as $35,500. On August 23, 2019, FLNG filed a\nsupplemental report and increased the property damage to $45,500. It was not until October\n2019 that FLNG eventually reported the actual costs of the incident to PHMSA which was\ndetermined to be $76,221.80. FLNG underestimated the property damage costs by more than\n110 percent from its initial report to its final report. Further, FNLG did not provide its final\nestimate of the costs associated with the release until after nearly two months and several\nexchanges between PHMSA and FLNG to confirm the property damage costs. Under these\nfacts, I am not persuaded that FLNG acted in good faith in underestimating the costs associated\nwith the release. Respondent should have estimated that the $50,000 threshold had been met and\nreported the incident to the NRC accordingly.\nIn addition, while FLNG failed to submit a timely notification to NRC under PHMSA’s\nregulation, it did actively notify the Federal Energy Regulatory Commission (FERC) and other\nentities, including an office of Quintana, Texas, within hours following the release. FLNG\nasserts that even though it notified FERC and other entities of the release, it did not view the\nrelease as “significant,” creating any obligation to notify the NRC. The release resulted in a\ncomplete failure and separation of piping, as well as a shutdown of its LNG facility that was\ncaused by the operator’s improper deviation from its startup procedures. The facts in the record\ndemonstrate that Respondent should have viewed this release as “significant” and notified the\nNRC, notwithstanding that it failed to properly estimate the related property damage and costs.\nFinally, FLNG argues that an emergency shutdown of its LNG facility did not occur as a result\nof the release. In making this argument, FLNG asserts that it only initiated a “controlled”\nshutdown of the facility by slowing the refrigeration compressors down to a safe shutdown point\nin the control system and then manually taking the facility offline. According to FLNG, this is\nnot an emergency shutdown of an LNG facility that triggers a notification to the NRC. I\ndisagree. The facts show that the incident resulted in an emergency shutdown of the facility as a\ndirect result of the release. Specifically, the operations in the Main Cryogenic Heat Exchanger\nwere suspended immediately after the failure due to the release, and, as FLNG admits, the entire\nfacility was taken offline.\nAll of the above facts taken together rebut any argument that FLNG acted in good faith when it\ndid not believe the event triggered a requirement to make an NRC report within one-hour of the\nrelease. FLNG presented no evidence or argument to rebut any of the other penalty assessment\n8 § 190.225(a)(4).\n\n\n\nCPF No. 4-2020-3003\nPage 6\nconsiderations selected by the Director in the Violation Report that were used to calculate the\nproposed civil penalty for this Item.\nAccordingly, having reviewed the record and considered the assessment criteria, I assess\nRespondent a civil penalty of $44,700 for violation of 49 C.F.R. § 193.2011.\nItem 2: The Notice proposed a civil penalty of $218,647 for Respondent’s violation of 49\nC.F.R. § 193.2503(b), for failing to follow its written procedure for the startup of its Quintana\nIsland LNG facility. This violation was found to be causal to the incident. FLNG neither\ncontested the allegation nor presented any evidence or argument justifying a reduction in or\nelimination of the proposed penalty, and stated that it would pay the proposed civil penalty as\ndirected. I find that the penalty assessment criteria selected by the Director that were used to\ncalculate the proposed civil penalty are supported by the record and unchallenged by\nRespondent. Accordingly, having reviewed the record and considered the assessment criteria, I\nassess Respondent a civil penalty of $218,647 for violation of 49 C.F.R. § 193.2503(b).\nIn summary, having reviewed the record and considered the assessment criteria for each of the\nItems cited above, I assess Respondent a total civil penalty of $263,347.\nPayment of the civil penalty must be made within 20 days of service. Federal regulations (49\nC.F.R. § 89.21(b)(3)) require such payment to be made by wire transfer through the Federal\nReserve Communications System (Fedwire), to the account of the U.S. Treasury. Detailed\ninstructions are contained in the enclosure. Questions concerning wire transfers should be\ndirected to: Financial Operations Division (AMK-325), Federal Aviation Administration, Mike\nMonroney Aeronautical Center, 6500 S MacArthur Blvd, Oklahoma City, Oklahoma 79169.\nThe Financial Operations Division telephone number is (405) 954-8845.\nFailure to pay the $263,347 civil penalty will result in accrual of interest at the current annual\nrate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to\nthose same authorities, a late penalty charge of six percent (6%) per annum will be charged if\npayment is not made within 110 days of service. Furthermore, failure to pay the civil penalty\nmay result in referral of the matter to the Attorney General for appropriate action in a district\ncourt of the United States.\nCOMPLIANCE ORDER\nThe Notice proposed a compliance order with respect to Item 3 in the Notice for violation of 49\nC.F.R. § 193.2515(c). Under 49 U.S.C. § 60118(a), each person who engages in the\ntransportation of liquefied natural gas or who owns or operates a pipeline facility is required to\ncomply with the applicable safety standards established under chapter 601. Pursuant to the\nauthority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is ordered to take the\nfollowing actions to ensure compliance with the pipeline safety regulations applicable to its\noperations:\n\n\n\nCPF No. 4-2020-3003\nPage 7\n1. With respect to the violation of § 193.2515(c) (Item 3), Respondent must:\nA. In regard to Item Number 3 of the Notice pertaining to the operator’s removal\nof failed components from the Terminal prior to direction from PHMSA, the\noperator shall ensure that its procedures for investigations of failures within\nthe LNG facility clearly demonstrate alignment with the requirements of\n§ 193.2515. If in its review, the operator determines revision are required,\npertinent personnel must be made aware of any changes to the processes.\nB. FLNG must submit all procedures and necessary revisions to the PHMSA\nSouthwest Region Director within 30 days of issuance of this Final Order.\nThe Director may grant an extension of time to comply with any of the required items upon a\nwritten request timely submitted by the Respondent and demonstrating good cause for an\nextension.\nIt is requested (not mandated) that Respondent maintain documentation of the safety\nimprovement costs associated with fulfilling this Compliance Order and submit the total to the\nDirector. It is requested that these costs be reported in two categories: (1) total cost associated\nwith preparation/revision of plans, procedures, studies and analyses; and (2) total cost associated\nwith replacements, additions and other changes to pipeline infrastructure.\nFailure to comply with this Order may result in the administrative assessment of civil penalties\nnot to exceed $200,000, as adjusted for inflation (49 C.F.R. § 190.223), for each violation for\neach day the violation continues or in referral to the Attorney General for appropriate relief in a\ndistrict court of the United States.\nUnder 49 C.F.R. § 190.243, Respondent may submit a Petition for Reconsideration of this Final\nOrder to the Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey\nAvenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of\nChief Counsel, PHMSA, at the same address, no later than 20 days after receipt of service of this\nFinal Order by Respondent. Any petition submitted must contain a statement of the issue(s) and\nmeet all other requirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays\nthe payment of any civil penalty assessed. The other terms of the order, including corrective\naction, remain in effect unless the Associate Administrator, upon request, grants a stay.\nThe terms and conditions of this Final Order are effective upon service in accordance with 49\nC.F.R. § 190.5.\nFebruary 17, 2021\n___________________________________ __________________________\nAlan K. Mayberry Date Issued\nAssociate Administrator\nfor Pipeline Safety","truncated":false,"body_characters":39087}