ALYESKA PIPELINE SERVICE CO — Notice of Probable Violation

party submissionOfficial PDF520035002_petition for reconsideration_06152005.pdf#

case documentOfficial PDFcpf_520035002.pdf#

case documentOfficial PDFCPF_NO5_2003_5002.pdf#

520035002_final order_05192005_text.pdf, page 1Official PDFU. S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 400 Seventh Street, S. W. Washington, D C. 20590 htAY ) 3t Mr. David Wight President and CEO Alyeska Pipeline Service Company P. O. Box 60469 Fairbanks, Alaska 99706 Re: CPF No. 5-2003-5002 Dear Mr. Wight: Enclosed is the Final Order issued by the Associate Administr above-referenced case. The Final Order makes findings of violation, to comply with the pipeline safety regulations and assesses a civil pen of the Final Order constitutes service of that document under 49 C. F. Sincerely, tor for Pipeline Safety in the specifies actions to be taken lty of $18, 500. Your receipt . 5 190. 5. James Reynolds Pipeline Compliance Re) Office of Pipeline Safellr 1stry Enclosure cc: Lee Schoen Sheila Doody Bishop Chris Hoidal, Regional Director Western Region, OPS CERTIFIED MAIL - RETURN RECEIPT RE UESTED#

520035002_final order_05192005_text.pdf, page 2DEPARTMENT OF TRANSPORTATIO PIPELINE AND HAZARDOUS MATERIALS SAFETY OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 MINISTRATION' In the Matter of ) Alyeska Pipehne Service Company, ) Respondent ) ) ) ) C F No. 5-2003-5002 FINAL ORDER From July 7-11, 2002, August 12-16, 2002, August 28-September 3, 2002, representatives of the Office of Pipehne Safety (OPS), purs conducted on-site pipeline safety inspections of Respondent's facilities Trans Alaska Pipeline System (TAPS). As a result of the inspections, the Director, Western Region, OPS, iss dated January 23, 2003, a Notice of Probable Violation, Propos Compliance Order and Notice of Amendment (Notice). In accordanc the Notice proposed finding that Respondent had violated 49 C. F. R 195. 575(a), 195. 571 and 195 573(a) and (e), proposed assessing a civil p of the alleged violations, and proposed that Respondent take certain m violations. The Notice also proposed, in accordance with 49 C. F. R. amend its procedures for Operations, Maintenance and Emergencies. On February 3, 2003, Respondent requested an extension until April Notice, which the Regional Director granted on March 6, 2003. Respo to the Notice on April 28, 2003 (Response). Respondent conteste 2002 and September 15-20, ant to 49 U. S. C. ) 60117, manuals and records on the ed to Respondent, by letter d Civil Penalty, Proposed with 49 C F. R. $ 190. 207, ) )195. 420(a), 195. 567(c), nalty of $18, 500 for several asures to correct the alleged 190. 237, that Respondent 28, 2003 to respond to the dent submitted its response the allegations, submitted This case was initiated by the Office of Pipehne Safety in the Research Administration (RSPA). However, this case is no longer before RSPA. 2005, the Pipehne and Hazardous Materials Safety Administration (PHP further the highest degree of safety in pipeline transportation and hazard( 0 a 1 AQ ~C'+L XT~~n~ V hEinotn Q~eonvr h anil lldllbpvll4HUll. Bee secllon j. vo vj. ILL lluluuul x . xvuxxvsu iivovuivii auiu Improvement Act (Pubhc Law 108-426, 118 Stat. 2423-2429 (Novembe 70 Fed. R~e. 8299 (February 18, 2005) redelegating the pipeline safety Administrator, PHMSA. d Special Programs Effective February 20, SA) was created to us materials nc ri sl Prnorvmc 30, 2004)). See also, nctions to the#

520035002_final order_05192005_text.pdf, page 3detailed information to explain the allegations and reserved the right o a hearing. A hearing was held in the Western Region, OPS, on March 23, 2004. After the he ng, Respondent submitted a Closmg Response dated May 22, 2004. FINDINGS OF VIOLATION Item 4 in the Notice alleged that Respondent had violated 49 C. F. R. ) 195. 420(a) that requires an operator to maintain each valve that is necessary for the safe operation f its pipeline system in good working order. The Notice alleged that Respondent had not maintaine the incoming and discharge valves on Relief Tank No. 111 at PS01. The Notice more specifically al eged that on April 23, 2002, when Respondent was isolating Tank 111, Respondent found that bot the incoming and discharge valves would not seal properly and that the valves were leaking int the tank. Because of the leakage, the Notice alleged that Respondent could not isolate the tank and complete the scheduled internal inspection within the ten-year time frame required by API 65 . In its Response Respondent contended that it took maintenance action o address the leaking valves and that extending the internal tank inspection to 2003 did not jeopar ize the integrity of the tank or of the system. Respondent maintained that it replaced the 20TO d 20T1 Tank 111 isolation valves within a reasonable time considering the long lead (12-mo h) requirements, the short construction window (four months) on the north slope, and the stat of corrosion on the tanks Respondent further argued that during this period the operating risk w acceptable and the integrity of the pipeline was never compromised. Respondent explained that in arly 2002 it found the Tank 111 isolation valves were leaking into the tank and installed stopples o the inlet and outlet hnes of the tank, and in 2003 replaced the isolation valves. According to Resp ndent, the valve installation was delayed because of the long lead time required for the 48-inch valv s, and, even with expedited service, it took nine months, until February 2003, to get the new valv s. Respondent explained that after replacing the isolation valves on Tank 11, it inspected and repaired the tank bottom. According to Respondent, API standard 653 provide that the inspection interval is determined by the corrosion rates measured during previous inspect'ons or anticipated corrosion rates based on experience with tanks in similar service, with a 20-year aximum inspection interval. Respondent's senior corrosion engineer determined that no significant orrosion would be expected on the floor of Tank 111, and extending the internal inspection to 20 3 would not jeopardize the integrity of the tank or system. Respondent mamtained that when it i spected the tank in 2003, its engineering analysis was verified. Section 195. 420(a) requires that each valve necessary for the safe oper tion of its system be in good working order at all times. Although Respondent may have replaced t e valves within a reasonable time frame, considering the circumstances that necessitated a 12-mont lead time for replacement, the valves were noi in good working order at aH times. The leakino ~ alves were isolation valves, and due to their leaking, would not have worked properly to shut off th flow to Tank 111. Because they were leaking, Respondent could not isolate Tank 111 to perform t e inspection. Although the corrosion rate may have been slow enough that the integrity of the t floor was not impaired and#

520035002_final order_05192005_text.pdf, page 4the tank inspection could be delayed a year, this does not alter the req to have been m good working order at all times. Accordingly, I find ) 195. 420(a). irement that the valves were hat Respondent violated Item 5 alleged two violations. The first (Item 5(a)) was that Resp ndent violated $ 195. 567(c) because at the Atigun Pass road crossing, from MP 165. 77 to MP 16 l5. 8, a continuity test showed that the casing test lead was directly shorted to the carrier pipe. The otice alleged that without a hard wire connection to the casing, Respondent could not confirm th t the casing was electrically isolated from the carrier pipe The regulation requires that an operato maintain the test lead wires in a condition that enables the operator to obtain electrical measuremen s to determine if the cathodic protection meets criteria. Item 5's second allegation (Item 5{b)) was that Respondent had violate Atigun Pass road crossing, both the casing vent and settlement rod indi of-1. 25 volts. This reading suggested that the casing and/or casing test with the carrier pipe and not electrically isolated. The regulation requi isolate each buried or submerged pipehne from other metallic struc electrically interconnected and cathodically protected as a single unit. ) 195. 575{a), because at the ated a pipe-to-soil potential lead was in electrical contact es an operator to electrically ures, unless the pipeline is Respondent agreed that the casing vent at the Atigun Pass road cr ssing could be shorted and explained that it planned to correct the potential shorting by the end o~ f 2004, but no later than the end of 2005. Respondent argued that the existing state of corrosion oes not represent an unsafe condition and that the 2004-2005 time frame for repair is reasona le considering the state of c orrosl oil. Respondent's time frame for correcting the shorting is not at issue. Re the casing and/or test lead may be shorted to the camer pipe; there committed both violations of )$ 195. 567(c) and 195. 575(a). Respon condition will be addressed in the Compliance Order section. pondent did not dispute that ore, I find that Respondent ent's actions to correct the Item 6 alleged four violations of ))195. 571 and 195. 573 (a)(1) and (e an operator to monitor external corrosion control to determine if cathocf with one or more of the applicable criteria in NACE standard RP01 specified intervals and to correct any identified deficiency in corrosio . These regulations require ic protection (CP) complies 9-96 by conducting tests at control. The first allegation was that cathodic protection pipe-to-soil tests con 12. 63 did not meet the CP criteria in NACE standard RP 0169-96 for th Respondent did not dispute the allegation but maintained it was makin time frame. Respondent explained it had installed a continuous an nwwrrant PD rtrrtcarn in '7AAA 4)it that the rc«nnto nwuor cnnnlxr rlili nnf n Vus+vuL Vx oposvuz us c vvv vugg ui a, uxv xviuvw yv vv vi vuyyig viv uvre, t planned to install a new power generation and battery storage system in ucted at MP 12. 31 and MP years 2000, 2001 and 2002. the repairs in a reasonable de (Anodeflex) impressed «fo««n Resnondent said it 2003 orbytheendof2004.#

520035002_final order_05192005_text.pdf, page 5The second allegation was that in 2001, based on the coupon test statio' survey, the coupon pipe-to- soil potentials at seven locations did not meet either the -850mV or 1 OmV depolarization criteria in NACE standard RP 0169-96. Respondent did not dispute that th pipe-to-soil readings at the seven locations failed to meet the NACE criteria. Respondent presen ed information showing that in subsequent CP coupon testing in 2002, five of the seven locations met criteria, and in 2003, all the coupons met the criteria. The third ailegatton tn Item 6 was that based on the close interval stIrvey (CIS) Respondent had conducted in 2001, pipehne pipe-to-soil potentials at survey markers 0312+50 to 30321+00 (MP 574. 1 to MP 574. 26) and 31195+50 to 31197+80(MP 590. 82 to 590. 8 ) did not meet the CP criteria in RP Standard 0169-96. The Notice further alleged that the mainlin corrosion control report for the period ending December 31, 2000 indicated several areas o f low pi e-to-soil potentials between MP 574. 01-578. 01 and MP 590 82. Respondent did not dispute that t ere were low pipeline-to-soil potentials at these locations, but maintained that CIS data, by itsel, does not demonstrate the adequacy of CP. Respondent explained that it took action in 200 to adjust the Black Rapids rectifier and that all but one location now showed adequate cathodic rotection. I find that Respondent committed the three violations of ($195. 57) and 195. 573 (a)(1) and (e) concerning deficiencies in its cathodic protection at the cited locati)ns. A close interval survey (CIS) gives a better condition of the cathodic protection (CP levels) $n the pipe. A coupon only measures the CP protection on a coupon, not on the pipe. HoweveI; a CIS &s similar to a prpe reading in that the CIS lead is connected to the pipe. The CIS is surveyed every foot along the pipe compared with a pipe station that is located about every /g mile. Thus, CIS covers more of the pipe than a test station or coupon. A CIS can confirm that CP potentials a e low. Item 6's fourth allegation was that Respondent had violated $)195. 571 and 195. 573 (a)(1) and (e) because at the Valdez Marine Terminal (VMT) the crude oil piping etween West Metering and Berth 4, and between Berths 4 and 5 did not meet the NACE cr teria for adequate cathodic protection. Respondent did not dispute the allegation that the cathodic protectio was deficient on this piping but maintained it had, nonetheless, demonstrated good faith in addressi g cathodic protection system deficiencies. Respondent explained that the piping from West Mete 'ng to Berth 4 and between Berths 4 and 5 is protected by a single rectifier and the low cathodi protection is due to a poor rectifier and anode bed design. According to Respondent, piping rep ir projects have necessitated Respondent's turning off the rectifier to assure its workers' safety. Bec use of the short construction season, cathodic protection testing is done when the rectifier is off or hen insufficiently polarized. Respondent discussed the cathodic protection system repairs it ha conducted to improve the cathodic protection. In its Response and at the hearing, Respondent agreed that there wer deficiencies m the cathodic protection on this piping. After submitting its Response and bef re the hearin, Respondent submitted a letter, dated June 25, 2003, to OPS maintaining that Res ondent now considered the#

520035002_final order_05192005_text.pdf, page 6VMT mani fold piping downstream of the breakout tank outlet pressur controlling device excluded from regulation. At the hearing Respondent again contended that OP did not regulate this piping. Respondent maintained that the piping is terminal piping exclu ed from regulation under (195. 1(b)(8)(ii) This provision excludes from regulation the trans ortation of hazardous hquid through facihties located on the grounds of a materials transport tion terminal that are used exclusively to transfer oil between a non-pipeline mode (tank vessels) and a pipehne mode (except for any device and associated pipehne necessary to control pressu e in the mainline pipeline). Respondent presented several interpretations by OPS addressing que tions about the regulation of in-plant and terminal piping and drawings used by the Transportation ' Safety Institute (TSI), which Respondent argued approximated the VMT piping at issue. In its after-hearing Statement, Respondent submitted a diagram of the piping at issue. Respondent continued to contend that the VMT piping was not regulated becaus it is used to transfer crude between the pipeline and the tankers. Part 195 excludes from its regulation transportation ofhazardous hqui through facihties located on the grounds of a materials transportation terminal that are used excl sively to transfer hazardous hquid between non pipehne modes of transportation or between a non ipeline mode and a pipeline, not including any device and associated piping that are necessary to c ntrol pipehne pressure. The OPS interpretations cited in Respondent's response provide that pipel e facihties at a terminal are regulated except for the pipmg used exclusively to transfer product froIn a storage or breakout tank to a non pipeline mode of transportation or between non pipeline mod~s of transportation. The TSI diagrams illustrate this concept. However, the piping configuration t VMT is different from the piping described in the interpretations and illustrated in the TSI diagr ms. The VMT piping is not used exclusively as transfer piping. The 48-inch piping from MP 8 0 to the loading berths is a continuation of the mainline. The configuration is such that the tank could be bypassed and the crude oil could flow directly from MP 800 to the berths. The piping se s mainline pressure because mainline pressure, i. e hydraulic head pressure, rather than pumps, is t e force that causes the oil to flow to the berths. Thus, I find that the VMT piping at issue is regulated under Part 195. ince Respondent agreed that the cathodic protection on the piping was low because of poor recti ier and anode bed design, I father find that Respondent violated ) )195. 571 and 195. 573 (a)(1) and e). Respondent's corrective actions to increase the cathodic protection are discussed in the Compl ance Order section below. These findings of violation will be considered prior offenses in any su sequent enforcement action taken against Respondent. PENALTY ASSESSMENT Under 49 U. S. C. ) 60122, Respondent is subject to a civil penalty ot to exceed $100, 000 per violation for each day of the violation up to a maximum of $1, 000, 00 for any related series of violations. The Notice proposed a total civil penalty of $18, 500 for t e violation of )) 195. 420(a) (Item 4), and the four violations of $$ 195. 571 and 195. 573(a) (1)(e) Items 6a, 6b, 6c and 6d)#

520035002_final order_05192005_text.pdf, page 749 U. S. C. ) 60122 and 49 C. F. R $ 190. 225 require that, in determi ing the amount of the civil penalty, I consider the following criteria: nature, circumstances, and avity of the violation, degree of Respondent's culpabihty, history of Respondent's prior offenses, R)spondent's abihty to pay the penalty, good faith by Respondent in attempting to achieve complianc), the effect on Respondent's ability to continue in business, and such other matters as ~ustice may quire. The Notice proposed a civil penalty of $10, 000 for violation of 49 P. F. R. ) 195. 420(a) for not maintainmg the incoming and discharge valves on Rehef Tank 111 at Pgmp Station 1. As mitigating factors, Respondent offered that it had replaced the valves in a reasonable time frame, considering the long lead time necessary to make such a repair, and that pipeline saf ty was not threatened during the time as evidenced by the state of corrosion on the tanks. Res ondent added that the tank isolation valves have never been used to isolate the tanks in an emerg ncy situation. Tank isolation valves are critical valves to the pipehne system, even if Respondent has not had to use them in an emergency. Although Respondent has not had to use th valves in an emergency, an emergency is not the time to find they do not work. That is why they are to be maintained in good working order at all times. But because they were leaking, the two valv s would not have functioned as they were intended to function. Respondent replaced the leaking v Ives, but this was necessary to have functioning valves. Mitigation is not warranted for aetio s to bring the valves into comphance. Nor is mitigation warranted because the corrosion rate w s slow enough that the tank inspection could be delayed. Therefore, I assess a civil penalty of $1, 000 for this violation. The Notice proposed civil penalties of $2000, $3500 and $2000 for t e three violations of )) 195. 571 and 195. 573 (a) and (e) for the cathodic protection defici ncies (Items 6a, 6b and 6c). Respondent asked that the penalty amounts be reconsidered. For tho e areas not corrected by the 2003 testing, Respondent said it would take additional action to correc the low cathodic protection areas by installing a new impressed current remote power supply. Re pondent maintained it uses sound engineering practice to control corrosion through alternate me s, and its pig data shows the state of corrosion does not threaten pipehne safety. Mitigation is not warranted for taking corrective action to address he low cathodic protection readings, and to bring them into compliance with one or more o the NACE criteria, as the regulations require. Some of the low cathodic protection readings e isted for at least three years (2000-2002). Respondent's use of in-line inspection tools to monitor c rrosion is prudent but is not a substitute for restoring protection to required levels. Furthermore, R spondent's assertions about examining pig data it had obtained since 1994 (locations cited in 6a) 1998 (locations cited in 6b and 6c) are unclear as to how these pig runs correspond to the period hen the areas did not meet the NACE criteria. Although Respondent asserts that pipeline safety as not jeopardized, this was luck, not a reason for mitigation. The purpose of external monitorin for corrosion is not for an '+ be fore Iow cathodic nrotertion eadings result in corrosion in~urious to the pipeline. I assess $2, 000 for the low readings at the lo ations cited in 6a, $3500 for the low readings at the locations cited in 6b, and $2000 for the low re dings at the locations cited 111 6c.#

520035002_final order_05192005_text.pdf, page 8The Notice proposed a civil penalty of $1, 000 for the violation of )) 95. 571 and 195. 573 (a) and (e) for the cathodic protection deficiencies on the piping at the Valdez Marine Terminal (Item 6d). Respondent maintained that it demonstrated good faith in addressing he CP system deficiencies. Although Respondent has tried to address the low cathodic protec ion on the Valdez Marine Terminal piping, these actions to come into compliance with the r) gulations do not warrant a reduced civil penalty. Accordingly, having reviewed the record and considered the assessmentt criteria, I assess Respondent a total civil penalty of $18, 500. Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C. F. R. ) 89. 21(b)(3)) require this payment be made by wire transfer, through the Federal Reserve Communications System (Fedwire), to the account of the U. S. Treas . Detailed instructions are contained in the enclosure. Questions concerning wire transfers sho ld be directed to: Financial Operations Division (AMZ-120), Federal Aviation Administration, ike Monroney Aeronautical Center, P. O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the $18, 500 civil penalty will result in accrual of interes at the current annual rate in accordance with 31 U. S. C. $ 3717, 31 C. F. R. $ 901. 9 and 49 C. F. R. $ 8 . 23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will e charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil enalty may result in referral of the matter to the Attorney General for appropriate action in a Unite States District Court. WARNING ITEMS Item 1 in the Notice warned Respondent that it had not reviewed its elding manual WL-1 since May 15, 1995. Section 195. 402(a) requires an operator to review it manual of procedures for conducting normal operations and maintenance each calendar year, a intervals not exceeding 15 months. Respondent maintained that when it reviewed a document an did not make changes, the revision date was not changed. Rather, the documents showing the eview were filed with the document management group. Item 2 warned Respondent that it was not following its procedures for eeping all rectifier data on work done on the rectifiers in the rectifier cabinet. Respondent explai ed that the official record is kept in the pump station files, not at the rectifier box. Respondent s bmitted copies of the work order package for rectifier readings, which shows that the official fo is to be filed at the pump station. Respondent must continue to ensure that it makes and documents the re 1- --3 +1- a a t 1 va ~~r4 1ranvw'err we r nnewetnn1 uni'h 1tc Arnee lndlludlb dllV llldl LA dL luaL zw veau avvpulg io vvllOJOWLJI TT Lu warned that if OPS finds a violation for any of these items in a subsequ action will be taken. uired reviews of each of its grec 2 ecnnndent ic again nt inspection, enforcement#

520035002_final order_05192005_text.pdf, page 9COMPLIANCE ORDER The Notice proposed a compliance order with respect to the items hs 6a, 6b, 6c and 6d. ed in the Notice as 4, Sa, Sb, For violation of 49 C. F. R. $ 195. 412(a) (Item 4), the Notice propose suction and discharge valves 20TO and 20T1 and complete an internal i It will not be necessary to include this item in a comphance order beca the isolation valves and made the inspection. that Respondent repair the spection of relief Tank 111. se Respondent has replaced For the two violations of $ ) 195. 567(c) and 195. 575(a) (Items Sa and Respondent evaluate the cathodic protection levels on the undergrou road crossing and take appropriate action to bring the level of cathodi with the criteria in NACE standard RP0169-96. Respondent maintain the road crossmg ends to investigate and correct any potential shorting the casing test lead. Respondent said it planned to correct the potentia or 2005 and until corrected would momtor corrosion using high technology The Region has verified that Respondent has excavated road crossing. Therefore, there is no need to include this item in a co b), the Notice proposed that d piping at the Atigun Pass protection into comphance d that it planned to excavate d problems associated with shorting by the end of 2004 esolution inhne inspection d repaired the casing at the pliance order. For the three violations of $$ 195. 571 and 195. 573 (Items 6a, 6b and 6 Respondent evaluate the cathodic protection levels at MP 12. 31, MP 770. 66, 773. 78, 780. 61, 789. 49, 789. 84, MP 574. 1 to 574. 26 and appropriate action to bring the level of cathodic protection into comph criteria in NACE standard RP0169-96, and add cathodic protection ), the Notice proposed that 12. 63, MP 754. 35, 760. 09, P 590. 82 to 590. 86, take ce with at least one of the here appropriate. In response to 6a, Respondent said it would repair the power supply power generation and battery storage system The Region has confi now working and that the cathodic protection levels are now adequat subsequent testing in 2003 showed all coupons at issue (Locations 754. 780 61, 789. 49, 789. 940) met the criteria. To address 6c, Respondent the Black Rapids rectifier, which corrected the cathodic protection at a part of its Corrosion Monitoring and Mitigation and Capital Improve additional action in 2004 to correct the areas with low readings. The coupons at the cited locations now meet the NACE criteria. Because the proposed corrective actions, they will not be included in the Comp n 2004 by instalhng a new ed that the power supply is For 6b Respondent said 5, 760. 09, 770. 66. 773. 78, aid that m 2003 it adjusted 1 locations but one, and, as ents Programs, would take Region confirmed that the Respondent has carried out iance Order. To address 6d, Respondent said it was taking appropriate action althou h the VMT piping was not regulated under the pipehne safety regulations. As discussed in the Fin ings section, this piping is rs mzl atr ri seal ac caar h maaet hsarra ariranaasto r sthnriin aarntrar tinn Thence hie iteavn nrin vravnnaaa iaa theaavyuausvu& uaau uo ouvua uauoe aauv v uuvatuuev vuuavuav iravevveavaa. a. aauo& s aaaS aevaaa vv ala avaaaalaa aaa aaav Compliance Order.#

520035002_final order_05192005_text.pdf, page 10Under 49 U. S. C. ) 60118(a), each person who owns or operates a p jpeline facility is required to comply with the applicable safety standards established under chapter 01 Pursuant to the authority of 49 U. S. C. $ 60118(b) and 49 C F. R. ( 190. 217, Respondent is hereby ordered to take the following actions to ensure compliance with the pipehne safety egulations applicable to its operations Respondent must— 1 Evaluate the cathodic protection levels on the piping at the Val West Metering and Berth 4 and between Berth 4 and Berth 5 a protection into comphance with one or more of the apphcable c set forth in paragraphs 6. 2 and 6. 3 of NACE standard RPO16 2 Submit documentation to the Western Regional Director de protection deficiencies have been addressed. 3 Complete the above-hsted items within 60 days from issuanc The Regional Director may extend the period for complying with an Respondent requests an extension and adequately justifies the reason AMENDMENT OF PROCEDURES The Notice (Item 3) alleged inadequacies in Respondent's Mainhn proposed that Respondent amend the procedures to require ground su surveillance, to observe the conditions Respondent characterizes as n with Vertical Support Members. The Notice alleged that some of the n be seen by ground surveillance. Respondent disagreed that its procedures are inadequate and nee explained that its manual defines notable conditions as those which c d~ng aerial inspection. Respondent contended that its weekly a requirements of )195. 412, and that the regulation does not require gr Section 195. 412 requires an operator to inspect the surface conditions o right-of-way at specified intervals. The method of inspection is leA to is concerned that the aerial surveillance may not adequately assess the c Vertical Support members, the record does not substantiate the necess its manual. The record does not support a finding that the procedures fo combined with quarterly ground surveillance, and an annual line walk a the conditions Respondent hsts as notable. Therefore, Respondent wil ~wsa~A its hEninlw~n aiinrow11anra Vnaniinl nmr S iiiiVS'C lv Qillbilv iQ iYlciilliiiiv slii v viilullvv xllulluuL pvvvuvxvu ez Marine Terminal between d bring the level of cathodic 'teria for cathodic protection -96. onstrating that the cathodic of this Final Order. of the required items if the for the extension. Surveillance Manual and eillance, rather than aerial table conditions associated table conditions could only amendment. Respondent be qualitatively observed 'al inspections exceed the und surveillance. or adjacent to each pipehne he operator. Although OPS nditions associated with the ty for Respondent to amend weekly aerial surveillance, e not adequate for assessing not be required at this time Failure to comply with this Final Order may result in the assessmen of civil penalties of up to $100, 000 per violation per day, or in the referral of the case for judici I enforcement#

520035002_final order_05192005_text.pdf, page 1110 Under 49 C F. R. $ 190. 215, Respondent has a right to petition for Order. The petition must be received within 20 days of Respondent's r must contain a brief statement of the issue(s). The filing of the pet payment of any civil penalty assessed. All other terms of the order, incl action, remain m full effect unless the Associate Administrator, upo terms and conditions of this Final Order are effective upon receipt. econsideration of this Final ceipt of this Final Order and tion automatically stays the ding any required corrective request, grants a stay. The Stacey Gerard Associate Achninistrator for Pipeline Safety Date Issued#

520035002_decision on petition for reconsideration_03032006_text.pdf, page 1Official PDFOP ~) U. S. Department of Transportation Pipeline and Hmardous Materials Safety Administration 400 Seventh Street, S. W. Washtngton, D. C. 20590 NH — 3 "'0 Mr. David Wight President and CEO Alyeska Pipeline Service Company P. O. Box 60469 Fairbanks, Alaska 99706 i4 '~QA ic, . gy Re: CPF No. 5-2003-5002 Dear Mr. Wight: Enclosed is a decision on the petition for reconsideration filed in the above-referenced case. The Associate Administrator for Pipeline Safety has granted the petition regarding item 6d in the Final Order. The civil penalty is reduced by $1, 000. Payment of the remaining $17, 500 civil penalty is due immediately. The Compliance Order portion of the Final Order is amended by striking all portions related to item 6d. Please be advised that appropriate corrective action regarding the remainder of the Compliance Order and all Warning Items must be taken if such action has not already been completed. Your receipt of this decision constitutes service under 49 C. F. R. $ 190. 5. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure CERTIFIED MAIL — RETURN RECEIPT RE UKSTED#

520035002_decision on petition for reconsideration_03032006_text.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of Alyeska Pipeline Service Company, Petitioner CPF No. 5-2003-5002 DECISION ON PETITION FOR RECONSIDERATION On May 19, 2005, pursuant to 49 U. S. C. $ 60112, the Associate Administrator for Pipeline Safety (Associate Administrator) issued a Final Order in this case finding that Petitioner had violated the pipeline safety regulations and assessing a civil penalty in the amount of $18, 500. The Final Order also ordered Petitioner to take certain actions to ensure compliance with the pipeline safety regulations. The Final Order warned Petitioner to take appropriate corrective action regarding some of Petitioner's practices for recording data and reviewing documents. On June 15, 2005, Petitioner filed a petition for reconsideration of the Final Order. ' In its petition, Petitioner sought reconsideration of one finding of violation in the Final Order, on the grounds that the relevant piping was covered by the "termmal facilities exception" in 49 C. F. R $ 195 I (b)(8)(ii). Petitioner also complained the delay between the filing of Petitioner's response to the Notice of Probable Violation (NOPV) and the issuance of the Final Order violated Pipeline and Hazardous Materials Safety Administration (PHMSA) regulations and Executive Order 12988. The Final Order found Petitioner committed six violations of the pipeline safety regulations. Petitioner seeks reconsideration of the finding that Respondent violated sections 195. 571 and 195. 573(a)(1), (e) due to inadequate cathodic protection of crude oil piping between West Metering and Berth 4 and between Berths 4 and 5 at the Valdez Marine Terminal (VMT) (heremafter "violation 6d"). Petitioner also seeks a stay of the Final Order with regard to violation 6d 1 The petition for reconsideration mdicated Petitioner intended to brief the issues raised m the petition PHMSA did not receive a brief on the petition ' Although Petitioner "complained" about the delay, Petitioner did not state what relief, if any, it sought Petitioner did not allege any pre~udice or harm resulting from the delay#

520035002_decision on petition for reconsideration_03032006_text.pdf, page 3Petitioner argues that, unless violation 6d is withdrawn, the Final Order would amend the terminal facilities exception by imposing size and pressure requirements as part of the exception. Petitioner claims the piping at issue in violation 6d is not within PHMSA's jurisdiction to regulate Petitioner further argues that, even if the piping is within PHMSA's statutory jurisdiction, it is not within the scope of the current regulations and that PHMSA cannot now extend the scope of regulation to include this piping without notice and comment rulemaking. Through delegations from the Secretary of Transportation, the Hazardous Liquid Pipeline Safety Act of 1979 ("HLPSA") provides the authority for PHMSA to prescribe mmimum safety standards for pipeline transportation, which is "the movement of hazardous liquid by pipeline, or the storage of hazardous liquid incidental to the movement of hazardous liquid by pipeline, in or affecting interstate 773 or foreign commerce. " Pipeline transportation "does not include moving hazardous liquid through . . . onshore production, refining, or manufacturing facihties; or storage or in-plant piping systems associated with onshore production, refining, or manufacturing facilities. " Accordingly, PHMSA's jurisdiction encompasses the movement of hazardous liquids by pipeline and the storage incidental to that movement. There is no question that the terminal facilities at the Valdez Marine Terminal are "incidental" to a pipeline. The facility is connected to a pipeline and receives hazardous liquids directly from a pipeline, making it incidental to pipeline transportation. See, e g, Exxon v. U. S. Secretary of Transportation, 978 F. Supp. 946, 950 (E. D. Wash. 1997). Therefore, all piping at this terminal clearly falls within the statutory definition o f pipeline transportation. 5 As noted by Petitioner, however, even if the piping is within PHMSA's statutory jurisdiction, the piping may not fall within the area traditionally regulated by PHMSA. The plain language of the terminal facilities exception, found at 49 C. F. R ) 195. 1(b)(8)(ii), states that Part 195 does not apply to transportation of a hazardous liquid through facilities located on the grounds of a materials transportation terminal that are used exclusively to transfer the hazardous hquid between a non-pipeline mode and a pipeline. However, Part 195 does apply to "any device and associated piping that are necessary to control pressure in the pipeline under ) 195. 406(b)" that would otherwise be excepted from Part 195 under the terminal facilities exception. 6 Several pertinent facts are undisputed. Other than the piping associated with the breakout tanks, no piping at the terminal facility is used to transport hazardous liquids out of the terminal by pipeline — all hazardous liquids leave the facility by a See 49 U S C $ 60101(19) and (22)(A) 49 U S C $ 60101(22)(B)(n) and (ni) 5 The Valdez Manne Terminal facihties are not onshore production, refining, or manufacturing facihties, or storage or in-plant piping systems associated with onshore production, refining, or manufacturing facdities 49 C F R $ 195 1(b)(8)(n)#

520035002_decision on petition for reconsideration_03032006_text.pdf, page 4non-pipeline mode of transportation. Therefore, there is no question that the piping is on the grounds of a materials transportation terminal. It is also clear that hazardous liquids flow only from a pipeline to a non-pipeline mode of transportation. At issue is whether the outlet piping from the storage tanks is necessary to control pressure in the pipeline. 7 The terminal facihties exception finds its basis m the HLPSA. The HLPSA provides that PHMSA does not have the authority to regulate storage facilities that are not incidental to pipeline transportation. PHMSA has declined to regulate any terminal facilities except those that are necessary to control the pressure in the pipeline The fundamental basis of the terminal facilities exception is to exempt from regulation storage facilities. Facilities that are operationally part of the pipehne and that are not part of storage have never been excepted from Part 195 regulation. Petitioner argues that it does not use the piping to transport hazardous liquids directly to marine vessels, as described in the Final Order. Instead, Petitioner asserts that it only uses the piping to transfer hazardous liquids between storage tanks and non-pipeline modes of transportation. Petitioner argues that its ability to use the piping as a continuation of the mainline does not affect its exclusive use as transfer piping. Although I believe it was not the intent of the Office of Pipeline Safety to exempt piping under circumstances such as these, the piping between West Metering and Berth 4 and between Berths 4 and 5 at the Valdez Marine Terminal (VMT) falls within the language of the terminal facilities exception. The piping is not necessary to control pressure under section 195. 406(b). Therefore, the piping is not breakout tank piping subject to Part 195. Furthermore, the Deputy Associate Administrator for Pipeline Safety issued an interpretation letter dated December 27, 1995, regarding sections 195. 1(b)(6) and (b)(7). Paraphrased, the letter states: 1) Terminal facilities include piping located on the grounds of a terminal and used to transfer hazardous liquid between a pipeline and a non-pipeline mode of transportation, not including any device and associated piping necessary to control pressure in the pipeline under section 195. 406(b). 2) If there is no pressure control device on terminal grounds which is required by section 195. 406(b) for safe operation of a jurisdictional pipeline serving the plant, the terminal facilities extend to the terminal boundary 3) If there is such a device on termmal grounds, Part 195 applies to the device and to transfer piping that connects the device to the jurisdictional pipeline. In addition to the plain language of the regulation and the interpretation letter, language in the notice of proposed rulemaking proposing (NPRM) the current text of the regulation further supports Pet!tioner's position The NPRM stated: Id ' See Exxon Corporation v U S Secretary of Transportation, 978 F Supp 946, 953 (E D Wash 1997)#

520035002_decision on petition for reconsideration_03032006_text.pdf, page 5Also, because the pipeline mode of transportation is not mentioned, $ 195. 1(b)(7) has led some to conclude that terminal facilities used to transfer hazardous liquid between a pipeline and another mode of transportation are covered by part 195. However, this inference is incorrect, smce part 195 does not apply to facilities at pipeline terminals other than breakout tanks, as defined is $ 195. 2, and associated piping. The basis for violation 6d was that the piping is not transfer piping, but rather was part of the mainline because hazardous liquids could flow directly from the main pipehne, through the piping at issue, to the marine vessels. I agree that, if the piping was used in that way, the piping would be subject to Part 195. However, Petitioner states, and the OPS does not contest, that the piping is not, in fact, used in that manner. Instead, the hazardous liquids flow through storage tanks to the vessels. Therefore, the piping at issue is transfer piping between the storage tanks and the non-pipeline mode of transportation. Relief Granted Based on the information provided in the Petition, I find that the piping at issue in violation 6d is within the statutory jurisdiction of PHMSA but meets the terminal facilities exception and therefore is not regulated under Part 195. The civil penalty of $1, 000 for violation 6d is withdrawn; therefore, the civil penalty assessed in the Final Order is reduced to $17, 500. Furthermore, the Compliance Order is amended by removing item 6d. All other terms of the Final Order remain in effect. MAR - 3 Z);j6 Date Issued S ce A soc fo Ger d ate Administrator eline Safety#