VENOCO, INC — Notice of Probable Violation

520022001_Final Order_11292004.pdf, page 1Official PDFo U.5. Deporlment ol TronsDortotion Reseorch ond Speciol Progroms Administrotbn 400 Seveolh Sl . S.W Washrnglon. D C 20590 I'l0V 2 g Zli;r Mr. Roger Hamson Vice President, Southem Assets Venoco. Inc. 5464 Carpinteria Avenue, Suite J Carpinteria, CA 9301 3-1423 R.e: CPF No. 5-2002-200i Dear Mr. Hamson: Enclosed is the Final Order issued by the Associate Administrator for Pipeline Safety in the above-referenced case. It makes findings of violation, assesses a civil penalty of $9,000, and specifies actions to be taken to comply with the pipeline safety regulations, The Final Order also makes a finding ofinadequate procedures and requires amendment ofcertain ofyour procedures for operations, maintenance, and emergencies. The penalty pa)rment terms are set forth in the Final Order. When the civil penalty is paid and the terms of the Compliance Order and Amendment of Procedures are completed, as determined by the Director, Westem Region, OPS, this enforcement action will be closed. Your receipt of the Final Order constitutes service of that document under 49 C.F.R. { 190.5. Sincerely, \r. --f"'-'^ [ lt-- - James Reynolds Pipeline Compliance Registry Office of Pipeline SafetY Enclosure#

520022001_Final Order_11292004.pdf, page 2DEPARTMENT OF TRANSPORTATION RESEARCH AND SPECIAL PROGRAMS ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON. DC 20590 In the Matter of Venoco, Inc., Respondent. CPF No. 5-2002-2001 FINAL ORDER Between July 31 and August 2,2001, pursuant to 49 U.S.C. $ 601 17, a representative of the Office of Pipeline Safety (OPS) conducted an on-site pipeline safety inspection of Venoco, Inc.'s (Respondent's) facilities and records in Carpinteria, California. As a result of the inspection, the Director, Western Region, OPS, issued to Respondent, by letter dated August16,2002, a Notice of ProbableViolation, Proposed CivilPenalty,ProposedCompliance Order, andNotice ofAmendment (Notice). In accordance with 49 C.F.R. $ 190.207, the Notice proposed finding that Respondent had committed violations of 49 C.F.R. Part 192, proposed assessing a civil penalty of $9,000 for the alleged violations, and proposed that Respondent take certain measures to correct the alleged violations. The Notice also proposed, in accordance with 49 C.F.R. $ 190.237, that Respondent amend its procedures for operations, maintenance and emergencies. Respondent failed to respond within 30 days after it had received the Notice. Respondent's failure to respond constitutes a waiver of Respondent's right to contest the allegations in the Notice and authorizes the entry of this Final Order. Respondent did not contest the alleged violations in the Notice. Accordingly, pursuant to 49 C.F.R. g 190.209(c) and 49 U.S.C. 5 60L22,I find that Respondent violated the following sections of 49 C.F.R. Part 192, as more fully described in the Notice; 49 C.F.R. $ 192.605 (item 1) - failing to maintain a written procedural manual having suffrcient detail to allow its personnel to conduct operations in accordance with all requirements of Pm 192; 49 C.F.R. * 192.479 (Item 2) - failing to protect above-ground pipeline components from atmospheric corrosion at the flange riser on the Platform Grace;#

520022001_Final Order_11292004.pdf, page 32 49 C.F.R. § 192.481 (Item 8) - failing to demonstrate that above-ground pipeline components were evaluated for atmospheric corrosion as required in 1999; 49 C.F.R. § 192.706 (Item 9) - failing to conduct leakage surveys at onshore locations within the maximum required interval; 49 C.F.R. § 192.739 (Item 10) - failing to conduct testing and inspections of a pressure limiting and regulating station at an offshore location within the maximum required interval; 49 C.F.R. § 192.745 (Item 11) - failing to conduct testing and inspections of two transmission line valves at the Carpenteria Plant within the maximum required interval. 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 a civil penalty not to exceed $100,000 per violation for cach day of the violation up to a maximum of $1,000,000 for any related series of violations. 49 U.S.C. § 60122 and 49 C.F.R. § 190.225 require that, in determining the amount of the civil penalty, I consider the following criteria: nature, circumstances, and gravity of the violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve compliance, the effect on Respondent's ability to continue in business, and such other matters as justice may require. The Notice proposed a total civil penalty of $9,000 for the violation of §§ 192.481, 192.706, 192.739, and 192.745 (Items 8, 9, 10, and 11, respectively). With respect to Item 8 - failure to demonstrate that above-ground pipeline components were evaluated for atmospheric corrosion as required in 1999 - the Notice proposed a civil penalty of $2,000. Failure to timely evaluate and take remedial measures to protect the above-ground portions of the pipeline could potentially jeopardize the integrity of those areas of pipe. Respondent did not offer any information that would justify a reduction in the penalty amount proposed in the Notice for this violation. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $2,000 for its violation of § 192.481. With respect to Item 9- failure to conduct leakage surveys at onshore locations within the maximum required interval - the Notice proposed a civil penalty of $2,000. Failure to timely conduct leakage surveys could have adversely impacted public safety. Respondent did not offer any information that would justify a reduction in the penalty amount proposed in the Notice for this violation. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $2,000 for its violation of § 192.706.#

520022001_Final Order_11292004.pdf, page 4J With respect to Item l0 - failure to conduct testing and inspections of a pressure limiting and regulating station at an offshore location within the maximum required interval - the Notice proposed a civil penalty of $2,000. Failure to timely inspect pressure relief valves could increase the risk of an overpressure incident. Respondent did not offer any information that would justify a reduction in the penalty amount proposed in the Notice for this violation. Accordingly, having reviewed the record and considered the assessment criteria. I assess Respondent a civil oenaltv of $2,000 for its violation of g 192.739. With respect to Item I 1 - failure to conduct testing and inspections of fwo transmission line valves at the Carpenteria Plant within the maximum required intewal - the Notice proposed a civil penalty of $3,000. Failure to timely inspect transmission line valve operation could result in a situation where the valve does not fully close when necessary, such as in response to a release incident. Respondent did not oflbr any information that would justify a reduction in the penalty amount proposed in the Notice for this violation. Accordingly having reviewed the record and considered theassessmentcriteria, IassessRespondentacivilpenaltyof$3,000foritsviolationof$ 192.745. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $9,000. Payrnent of the civil penalty must be made within 20 days of service. Payment may be made by sending acertified check ormoneyorder(containingthe CPFNumber forthis case) payableto "U.S. Department ofTransportation" to theFederal Aviation Administration, MikeMonroneyAeronautical Center, Financial Operations Division (ANIZ-120), P.O. Box 25082, Oklahoma City, OK 73125. Federal regulations (49 C.F.R. $ 89.21(bX3) also permit this payrnent to be made by wire transfer, throughthe Federal Reserve Communications System (Fedwire), to the account oftheU.S. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (,\NIZ-120), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the $9,000 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. fi3717,31 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 payrnent is not made within I I 0 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 United States District Court.#

520022001_Final Order_11292004.pdf, page 54 COMPLLANCE ORDER The Notice proposed a Compliance Order for violations of $$ 192.605 and 192.419 (Items I and 2, respectively). Respondent did not contest the proposed Compliance Order. Under 49 U.S.C. $ 601 1 8(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. Pursuant to the authority of 49 U.S.C. $ 601 l8(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. Within 60 days following receipt of this Order, Respondent must: I . With respect to the violation of $ 192.605 (Item 1), establish and follow written procedures for operations, maintenance and emergencies for the pipeline fully meeting all requirements of Par+" 192: 2. With respect to the violation of $ 192.479 (Item 2), perform an atmospheric corrosion control evaluation in accordance with the requirements of $ I 92.481 ; J . Within 60 days following receipt of this Order, submit documentation demonstrating that these actions have been completed to the Director, Western Region, Ofhce of Pipeline Safety, 12600 Colfax Avenue, Suite 4.-250, Lakewood, CO 0215. The Regional Director may extend the period for complying with any of the required items if the Respondent requests an extension and adequatelyjustifies the reasons for the extension. Failure to comply with this Order may result in the assessment of civil penalties of up to S100,000 per vioiation per day, or in the referral of the case for judicial enforcement. AMENDMENT OF PROCEDURES The Notice alleged inadequacies in Respondent's procedures for operations, maintenance and emergencies and proposed to require amendment of Respondent's procedures to comply with the requirementsof49C.F.R.Partl92. RespondentdidnotcontesttheproposedNoticeofAmendment. Accordingly, I find that Respondent's procedures are inadequate to ensure safe operation of its pipeline system. Pursuant to 49 U.S.C. $ 60108(a) and 49 C.F.R. S 190.237, Respondent is ordered to make the following amendments to its procedures. Within 30 days following receipt ofthis Order, Respondent must: l. With respect to Item 3 of the Notice, amend tlre procedures to include directions for submitting supplemental incident reports in accordance with $ 191 . 1 5. 2. With respect to Item 4 ofthe Notice, amend the procedures to include step-by-step processes for conductins continuins surveillance in accordance with 6 192.613.#

520022001_Final Order_11292004.pdf, page 65 3. With respect to Item 5 of the Notice, amend the procedures for line repairs to include the procedure(s) to be used for the permanent field repair of leaks in accordance with $ 192.717. A Within 30 days following receipt of this Order, submit copies of the amended procedures to the Director. Westem Reeion, OPS. The Regional Director may extend the period for complying with any of the required items if the Respondent roquests an extension and adequatelyjustifies the reasons for the extension. Failure to complywith this Amendment ofProcedures mayresult in the assessment of civil penalties ofup to $100,000 per violation per day, or in the referral ofthe case forjudicial enforcement. WARNINGITEMS The Notice did not propose a civil penalty or corrective action for Item 6, failing to demonstrate that the written manual ofprocedures for operations, maintenance, and emergencies had been reviewed and updated in years 1999 and 2000 in accordance with $ 195.605; or Itun 7, failing to demonstrate that rectifier R-1 was inspected in accordance with the maximum required interval in $ 192.465. Therefore, these are considered to be warning items. Respondent is warned that if it does not take appropriate action to corect these items, enforcement action will be taken if a subsequent inspection reveals a violation. Under 49 C.F.R. $ 190.215, Respondent has a right to submit a petition for reconsideration of this Final Order. Should Respondent elect to do so, the petition must be received within 20 days of Respondent'sreceiptofthisFinalOrderandmustcontainabriefstatementoftheissue(s). Thefiling of a petition automatically stays the payrnent of any civil penalty assessed. All other terms of the Order, including anyrqquired corrective action and amendment ofprocedures, remain in full effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective on receipt. li0y 2 3 l]ltll Date Issued Associate Administrator for Pipeline Safety#