NUSTAR LOGISTICS, L.P. — Notice of Probable Violation

520035001_final order_11032004_text.pdf, page 1Official PDF2 — 21 — 07, 10 29AM , 202 366 704' ¹ 21 6 U 5 Department of Transportation Research and Speciat Programs Administration 400 Seventh Si S W Washington D C 20sg0 NOV -3 ZOe Mr. Rodney Reese Vice President Valero Logistics Operations, LP 6000 North Loop, 1604 West San Antonio, TX 78249-1112 Re: CPF No. 5-2003-5001 Dear Mr Reese: Enclosed is the Final Order issued by the Associate Adrrunistrator for Pipeline Safety in the above-referenced case. It withdraws one of the allegations of violation, makes a finding of violation, and assesses a civil penalty of $8, 000. The Order also finds that you have addressed the inadequacies in your procedures that were cited in the Notice of Amendment. The penalty payment terms are set forth in the Final Order This enforcerinent action closes automatically upon payment. Your receipt of the Final Order constitutes service of that document under 49 C. F. R. g 190. 5. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure CERTIFIED MAIL — RETURN RECEIPT RE UES TED#

520035001_final order_11032004_text.pdf, page 22. — 21 — 07; 10 29WI 202 366 &04& DEPARTMENT OF TRANSPORTATION RESEARCH AND SPFCIAL PROGRAMS ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of ) ) Valero Logistics Operations, LP ) Respondent ) ) ) CPF No. 5-2003-5001 FINAL ORDER On March 11, 2002, pursuant to 49 U S C. f 60117, a representative of the Office of Pipeline Safety (OPS), conducted an on-site pipeline safety inspection of Respondent's Colorado Springs Pipeline facilities and records. As a result of the mspection, the Director, Western Region, OPS, issued to Respondent, by letter dated January 14, 2003, a Notice of Probable Violation, Proposed Civil Penalty, and Notice of Amendment (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 195 and proposed assessing a civil penalty of $18, 000 for the alleged violations. The Notice also proposed, in accordance with 49 C. F. R. g 190237, that Respondent amend its procedures for operations, maintenance and emergencies. The Notice also warned Respondent to take appropriate corrective action with respect to maintaiiimg records of certain rectifier inspections. Respondent responded to the Notice by letter dated February 14, 2003 {Response). Respondent offered information in explanation of the allegations, offered information concerning the corrective actions it has taken, requested the reduction or elimination of the proposed civil penalty, and requested a hearing. The hearing was held via teleconference on May 19, 2003. After this hearing, Respondent provided additional information for the record on May 27 and June 16, 2003. FINDING OF VIOLATION Item 3 in the Notice alleged that Respondent had violated 49 C. F. R. g 195. 412 by failing to adequately perform right-of-way inspections between Mile Post (MP) 84 and MP 357 during the 2000-2001 period. In its response and at the hearing, Respondent did not contest the alleged violation. Accordingly, I find that Respondent violated the following section of 49 C. F. R. Part 195, as more fully described in the Notice: 49 C. F. R. $ 195. 412 — failing to adequately perforin right-of-way inspections between Mile Post (MP) 84 and MP 357 during the 2000-2001 period.#

520035001_final order_11032004_text.pdf, page 3202 366 204 42 6 2 — 21 — 07, 10 29AM This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent WITHDRAWAL OF ALLEGATION Item 4 in the Notice alleged that Respondent violated 49 C. F. R. $ 195. 432 by failing to adequately inspect eight breakout tanks at the Colorado Spnngs Terminal between May 2001 and March 2002. In its response and at the hearing, Respondent submitted information demonstrating that with respect to the specified tanks, although at the time it did not use a form of the kind suggested in API 653 to record the mspections, its inspection practices were in substantial compliance with regulatory requirements and these inspections were documented on alternative forms. Based on this information demonstrating compliance with the regulation, I am withdrawing this allegation of violation, Respondent should note, however, that use of standard monthly forms ensures that best practices are employed on a consistent basis and facilitates the OPS inspector's compliance determinations. ASSESSMEN1. OF PENALTY Under 49 U. S. C. g 60122, Respondent is subject to a civil penalty not to exceed $100, 000 per violation for each day of the violation up to a maximum of $1, 000, 000 for any related series of violations 49 U. S. C, g 60122 and 49 C. F. R. f 190. 225 require that, in determining the amount of the civil penalty, I consider the followmg 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 civil penalty of $8, 000 for the violation of g 195. 412 (Item 3) and a civil penalty of $10, 000 for the violation of g 195. 432 (Item 4). As indicated above, Item 4 has been withdrawn. %ith respect to Item 3, Respondent acknowledged that the right-of-way inspections between Mile Post (MP) 84 and MP 357 were not adequately performed dunng the 2000-2001 period. Specifically, 14 instances were identified where the maximum interval of 21 days between patrols was exceeded for various sections of the line. Right of way patrolling is the primary means by which a pipeline operator monitors the conditions along a pipeline's route and identifies potential safety concerns such as the exposure of pipe due to soil erosion or encroachment on the nght-of-way due to new construction. In its response and at the hearing, Respondent explained that its right-of-way inspections were conducted via aerial patrols performed by a third-party contractor and mdicated that it was unaware at the time that the contractor had failed to conduct the patrols in accordance with $ 195 412. Respondent further explained that it has replaced this contractor with a new service provider and now requires the contractor to submit a written report documenting each aerial patrol within 24hours#

520035001_final order_11032004_text.pdf, page 42 — 21 — 07, 10 29AM, 202 36b 7J4& of conducting it and that these patrols are now conducted on a weekly basis. We recognize that ' Respondent has no history of noncompliance in this area and took prompt action to correct the lack of compliance Nevertheless, Respondent is responsible for the actions of its third-party contractor and because portions of the right-of-way are near populated and environmentally sensitive areas near Colorado Springs and Denver, the failure to conduct right-of-way patrols within the specified intervals could have adversely impacted public safety Respondent has not presented any information that would warrant a reduction in the civil penalty amount proposed for this item in the Notice. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $8, 000 for its violation of g 195. 412. payment of the civil penalty must be made within 20 days of service. Payment may be made by sending a certified check or money order (containing the CPF Number for this case) payable to "u S. Department of Transportation" to the Federal AvIation Administration, Mike Monroney Aeronautical Center, Financial Operations Division (AMZ-120), P O. Box 25082, Oklahoma City, OK 73125. Federal regulations (49 C. F. R g 89. 21(b)(3)) also permit this 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 (AMZ-120), Federal Aviation Administration, Mike Monroney Aeronautical Center, P. O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the $8, 000 civil penalty will result in accrual of interest at the current annual rate m accordance with 31 U. S. C. $ 3717, 31 C. F. R. ) 901 9 and 49 C. F. R. g 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 United States District Court. 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 requirements of 49 C. F. R. Part 195 Specifically, Item 1 of the Notice alleged inadequacies in Respondents procedures for submitting supplemental accident reports and Item 2 of the Notice alleged inadequacies in Respondent's procedures for operating laterals in accordance with maximum pressure limits, breakout tank inspections, and coriosion control. In its response, Respondent acknowledged the inadequacies in its procedures cited in the Notice, stated that it subsequently amended its procedures, and submitted copies of the amended procedures which the Director, Western Region, OPS reviewed. Based on the results of this review, I find that Respondent's original procedures as described in the Notice were inadequate to ensure safe operation of its pipeline systein, but that Respondent has corrected the identified inadequacies. Therefore, issuance of an order directing amendment of Respondent's procedures is unnecessary.#

520035001_final order_11032004_text.pdf, page 52 — 2 1 — 07, 10 29AM pOP 366 704' ¹ 6l WARNING ITEM The Notice did not propose a civil penalty or corrective action for Item 5, failing to mamtain records demonstrating that the inspection of certain rectifiers had been performed in accordance with the max&mum intervals in g 195 573, but warned Respondent that it should take appropriate corrective action to correct the item Respondent presented information in its response showing that it has addressed the cited item. Respondent is again warned that if OPS finds a violation for any of this item in a subsequent inspection, enforcement action mill be taken. Under 49 C. F. R. g 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's receipt of this Final Order and must contain a brief statement of the issue(s). The filing of a petition automatically stays the payment of any civil penalty assessed. However if Respondent submits payment for 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 on receipt, Stacey Gerard Associate Administrator for Pipeline Safety Date Issued#