MAGELLAN TERMINALS HOLDINGS, LP — Notice of Probable Violation

party submissionOfficial PDF420205009_Operator Response to Notice and Request for a Revised Case File and a Revised Proposed Civil Penalty Worksheet_06152020.pdf#

420205009_Final Order_09112020_text.pdf, page 1Official PDFSeptember 11, 2020 VIA ELECTRONIC MAIL TO: melanie.little@magellanlp.com Ms. Melanie A. Little Senior Vice President, Operations and Environmental, Health, Safety & Security Magellan Midstream Partners, LP One Williams Center Tulsa, Oklahoma 74172 Re: CPF No. 4-2020-5009 Dear Ms. Little: Enclosed please find the Final Order issued to Magellan Terminals Holdings, LP, in the above- referenced case. It makes one finding of violation and assesses a reduced civil penalty of $124,400. 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 electronic mail is effective upon the date of transmission 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 L. McDaniel, Director, Southwest Region, Office of Pipeline Safety, PHMSA Mr. Michael N. Mears, President and Chief Executive Officer, Magellan Midstream Partners, LP, mike.mears@magellanlp.com Mr. Mark Materna, Director - Pipeline Integrity, Magellan Midstream Partners, LP, mark.materna@magellanlp.com CONFIRMATION OF RECEIPT REQUESTED#

420205009_Final Order_09112020_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 ) ) ) Magellan Terminals Holdings, LP, ) a subsidiary of Magellan Midstream Partners, LP, ) Respondent. ) ________________________________________________) ) CPF No. 4-2020-5009 FINAL ORDER Between April 15-19, and June 3-7, 2019, 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 Magellan Terminals Holdings, LP’s1 (Magellan or Respondent) Breakout Tank #2533 located in Cushing, Oklahoma, following an accident that allegedly occurred on December 18, 2018. Magellan operates four 250,000 bbl gross volume cone roof tanks and associated station piping and equipment in Cushing, Oklahoma.2 As a result of the inspection, the Director, Southwest Region, OPS (Director), issued to Respondent, by letter dated May 12, 2020, a Notice of Probable Violation and Proposed Civil Penalty (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Magellan had violated 49 C.F.R. § 195.202 and proposed assessing a civil penalty of $213,268 for the alleged violation. Magellan responded to the Notice by letter dated June 15, 2020 (Response). The company did not contest the allegation of violation but provided an explanation of its actions and requested that the proposed civil penalty be reduced. Respondent did not request a hearing and therefore has waived its right to one. 1 Magellan Terminals Holdings, LP is a subsidiary of Magellan Midstream Partners, LP, see https://sec report/Document/0001126975-20-000047/exhibit21201910-k htm (identifying subsidiaries of Magellan Midstream Partners, LP as of December 31, 2019) (last accessed September 9, 2020). 2 Pipeline Safety Violation Report, dated May 12, 2020 (Violation Report), at 1 (on file with PHMSA).#

420205009_Final Order_09112020_text.pdf, page 3CPF No. 4-2020-5009 Page 2 FINDING OF VIOLATION In its Response, Magellan did not contest the allegation in the Notice that it violated 49 C.F.R. Part 195, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.202, which states: § 195.202 Compliance with specifications or standards. Each pipeline system must be constructed in accordance with comprehensive written specifications or standards that are consistent with the requirements of this part. The Notice alleged that Respondent violated 49 C.F.R. § 195.202 by failing to construct its Breakout Tank #2533, located in Cushing, Oklahoma, in accordance with its written Specification For Aboveground Atmospheric Storage Tanks Rev 9, Date 1-25-2017, and in accordance with the requirements of § 195.132(b)(3), both of which contain certain requirements for vacuum tests on bottom lap welds for aboveground breakout tanks. Specifically, the Notice alleged that an accident investigation of tank #2533, which was placed into service on December 16, 2018, and had a failure two days later, led to the discovery of a pinhole leak on a bottom plate weld seam caused by a localized inadequate penetration weld defect. Following the accident, Magellan conducted vacuum box retesting of the bottom plate welds to determine if there were more defects that had not been found and repaired during the construction. The vacuum box re-testing revealed that an additional 79 bottom plate welds failed the tests. The company’s detailed written specifications, Specification For Aboveground Atmospheric Storage Tanks Rev 9, Date 1-25-2017, requires the welds to be examined by vacuum box testing at the time of construction. The accident investigation and post-accident testing of the welds allegedly indicated that the vacuum box testing was performed, but failed to identify approximately 80 defective welds on the tank bottom; therefore, the testing was insufficient to follow the company’s own written specifications. 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. § 195.202 by failing to construct its Breakout Tank #2533, located in Cushing, Oklahoma, in accordance with its own written specifications, and in accordance with the requirements of § 195.132(b)(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.3 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 3 These amounts are adjusted annually for inflation. See 49 C.F.R. § 190.223.#

420205009_Final Order_09112020_text.pdf, page 4CPF No. 4-2020-5009 Page 3 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 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 $213,268 for the violation cited above. Item 1: The Notice proposed a civil penalty of $213,268 for Respondent’s violation of 49 C.F.R. § 195.202, for failing to construct its Breakout Tank #2533, located in Cushing, Oklahoma, in accordance with its own written specifications, and in accordance with the requirements of § 195.132(b)(3). In its Response, Magellan stated that certain information contained in the Case File and used to calculate the proposed civil penalty was incorrect. Specifically, Magellan stated that the actual release volume from the incident was 1.00 barrel of crude oil, of which 0.50 barrel was recovered, not 1,000 barrels released with 950 barrels recovered, as stated in the Civil Penalty Worksheet. Magellan relied on the Final 7000-1 Report, date July 9, 2019, in support. In addition, Magellan stated that the violation occurred prior to November 27, 2018, not after as alleged in the Civil Penalty Worksheet. For violations occurring prior to November 27, 2018, but before July 31, 2019, the maximum total penalty for a single violation is $213,268, while a violation that occurred between November 2, 2015, and November 27, 2018, carries a maximum penalty for a single violation of $209,002. In support, Magellan relied on the vacuum box testing report showing that the violation (failure to follow its procedures for vacuum testing) occurred on June 29, 2018. Magellan did not contest the proposed civil penalty calculation on any of the other assessment criteria used to calculate the proposed civil penalty in this case. The Director conceded Magellan’s corrections to the record and recommended that the penalty be reduced accordingly. Upon review of the record and the Civil Penalty Worksheet, I find it is appropriate to reduce the proposed penalty under 49 C.F.R. § 190.225(b)(2) in consideration of such other matters as justice may require. Specifically, the proposed penalty was based largely on the fact that this accident was considered a reportable incident under 49 C.F.R. § 195.50. However, since the incident involved a spill of only 1.00 barrel of oil, of which 0.50 barrel was recovered, and the amount spilled was similar to amounts that would not be considered reportable under § 195.50, I find it is appropriate in this case to reduce the penalty to an amount that would ordinarily be assessed for a non-reportable incident, or $124,400.4 Based upon the foregoing, I assess Respondent a reduced civil penalty of $124,400 for violation of 49 C.F.R. § 195.202. 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. 4 Respondent also objected to the proposed penalty amount due to the date that the violation occurred. Since that date only affects a proposed penalty amount when it involves a maximum per-day penalty, the date becomes immaterial when the maximum penalty is not reached.#

420205009_Final Order_09112020_text.pdf, page 5CPF No. 4-2020-5009 Page 4 The Financial Operations Division telephone number is (405) 954-8845. Failure to pay the $124,400 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 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. September 11, 2020 ___________________________________ _________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

420205009_ NOPV PCP_05122020_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION and PROPOSED CIVIL PENALTY ELECTRONIC MAIL - RETURN RECEIPT REQUESTED May 12, 2020 Michael N. Mears President and CEO Magellan Midstream Partners, LP One Williams Center P.O. Box 22186 Tulsa, Oklahoma 74172 CPF 4-2020-5009 Dear Mr. Mears: Between April 15-19 and June 3-7, 2019, 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 your subsidiary, Magellan Terminals Holdings, LP’s Breakout Tank #2533 located in Cushing, Oklahoma following an accident that occurred on December 18, 2018. As a result of the inspection, it is alleged that you have committed a probable violation of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations (CFR). The item inspected and the probable violation is:#

420205009_ NOPV PCP_05122020_text.pdf, page 22 1. §195.202 Compliance with specifications or standards. Each pipeline system must be constructed in accordance with comprehensive written specifications or standards that are consistent with the requirements of this part. §195.132 Design and construction of aboveground breakout tanks. (b) For aboveground breakout tank first placed in service after October 2, 2000, compliance with paragraph (a) of this section requires one of the following: (3) Vertical, cylindrical, welded steel tanks with internal pressures at the tank top approximating atmospheric pressures (i.e., internal vapor space pressures not greater than 2.5 psig (17.2 kPa), or not greater than the pressure developed by the weight of the tank roof) must be designed and constructed in accordance with API Std 650 (incorporated by reference, see §195.3). Magellan Terminals Holdings, LP (Magellan) failed to construct its Breakout Tank #2533, located in Cushing, Oklahoma, in accordance with its written specification for Aboveground Atmospheric Storage Tanks Rev 9, Date 1-25-2017. Magellan’s written procedures contain certain requirements for vacuum tests on bottom lap welds. Section 5.11 states that “Contractor shall vacuum test 100 percent of the bottom lap welds per API 650, Section 8.6, for a duration of not less than 5 seconds to 8 to 10 lbf/in2. Also, Section 5.12 requires that “Contractor shall provide documentation of completion by means of a weld map showing any defects found, with corresponding documentation showing the defect repair information.” Section 5.15 states that “Following the completion of the floor welds, the tank floor will be inspected by a 3rd Party inspection company selected by Magellan. This will include a visual inspection of the floor plates and a vacuum test for 100 percent of the bottom lap welds per API 650, Section 8.6, for a duration of not less than 5 seconds to 8 to 10 lbf/in2.” On December 18, 2018, Magellan notified PHMSA of a release from Tank #2533 (NRC 1233392). The tank was newly constructed and had been placed into service on December 16, 2018. An investigation of the accident led to the discovery of a pinhole leak on a bottom plate weld seam caused by a localized inadequate penetration weld defect. Following the accident, Magellan conducted vacuum box retesting of the bottom plate welds to determine if there were more defects that had not been found and repaired during the construction. The vacuum box re-testing revealed that an additional 79 bottom plate welds failed the tests. The detailed written specifications, “Specification For Aboveground Atmospheric Storage Tanks Rev 9 Date 1-25-2017,” requires the welds to be examined by vacuum box testing at the time of construction. The accident investigation and post-accident testing of the welds indicates the vacuum box testing was performed, but failed to identify approximately 80 defective welds on the tank bottom; therefore, the testing was insufficient to follow the written specification.#

420205009_ NOPV PCP_05122020_text.pdf, page 33 Proposed Civil Penalty Under 49 U.S.C. § 60122 and 49 CFR § 190.223, you are subject to a civil penalty not to exceed $218,647 per violation per day the violation persists, up to a maximum of $2,186,465 for a related series of violations. For violation occurring on or after November 27, 2018 and before July 31, 2019, the maximum penalty may not exceed $213,268 per violation per day, with a maximum penalty not to exceed $2,132,679. 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. We have reviewed the circumstances and supporting documentation involved for the above probable violation and recommend that you be preliminarily assessed a civil penalty as follows: Item number PENALTY 1 $213,268 Response to this Notice 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 the 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 4-2020-5009 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 cc: Michael Pearson, Vice President, Technical Services, Magellan Terminals Holdings, LP, One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74172 Enclosure: Response Options for Pipeline Operators in Enforcement Proceedings#