BELLE FOURCHE PIPELINE CO — Notice of Probable Violation

party submissionOfficial PDF520045010_petition for reconsideration_02152007.pdf#

case documentOfficial PDFCPF_5-2004_5010.pdf#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 1Official PDFVIA CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7005 0390 0005 6162 5579] Mr. Hank A. True III President Belle Fourche Pipeline Company 455 North Poplar Street P. O. Box 2360 Casper, WY 82602 RE: CPF No. 5-2004-5010 Dear Mr. True: Enclosed is this agency’s decision on the Petition for Reconsideration filed by Belle Fourche Pipeline Company in the above-referenced case. For the reasons stated in the decision, the Petition is granted in part and denied in part. When the terms of the Compliance Order have been completed, as determined by the Director, Western Region, this enforcement action will be closed. Your receipt of this decision constitutes service under 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Jeffrey D. Wiese Associate Administrator for Pipeline Safety Enclosure: cc: Mr. Manuel A. Lojo, Esq., Belle Fourche Pipeline Company Mr. Chris Hoidal, Director, Western Region, PHMSA#

520045010_Decision On Petition For Reconsideration_07152009_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 ) ) Belle Fourche Pipeline Company, ) CPF No. 5-2004-5010 ) Petitioner. ) ______________________________) DECISION ON PETITION FOR RECONSIDERATION On December 11, 2006, pursuant to 49 C.F.R. § 190.213, the Acting Associate Administrator for Pipeline Safety, Pipeline and Hazardous Materials Safety Administration (PHMSA), issued a Final Order finding that Belle Fourche Pipeline Company (Belle Fourche or Petitioner) had for four of the violations, and ordering the company to take certain actions to comply with the pertinent regulations. violated various pipeline safety regulations,1 assessing Petitioner a total civil penalty of $61,500 On December 18 and 22, 2006, Belle Fourche received personal service of the Final Order,2 and on December 29, 2006, the company paid the entire penalty. Six weeks later, on February 16, 2007, Belle Fourche filed this Petition for Reconsideration (Petition) pursuant to 49 C.F.R. § 190.215. By letter dated February 17, 2009, PHMSA granted Petitioner an additional 60 days to supplement the record, and Belle Fourche did so by letter dated April 15, 2009. Petitioner seeks reconsideration of only two of the seven Findings of Violation in the Final Order. First, Belle Fourche contests the finding in Item 3 that Belle Fourche incorrectly applied 49 C.F.R. § 195.303, the regulation providing a risk-based alternative to the pressure-testing requirements of 49 C.F.R. § 195.302, as applied to three of Belle Fourche’s pipeline segments constructed with pre-1970 electric resistance-welded and lapwelded (ERW) pipe. Second, Petitioner contests the finding in Item 10 that Belle Fourche incorrectly applied 49 C.F.R. 1 49 C.F.R. §§ 195.1(a), (b)(1)-(4), 195.50(b), 195.54(a), 195.303, 195.402(a), 195.406, 195.408, 195.428(a), 195.432(b), and 195.436. 2 On December 18, 2006, Mr. Greg Vineyard signed a U.S. Postal Service Domestic Return Receipt, PS Form 3811, at Petitioner’s official corporate mailing address, acknowledging receipt of the Final Order on behalf of Mr. Manual A. Lojo, counsel for Belle Fourche. https://wyobiz.wy.gov/Ecommerce/Common/FilingDetail.aspx?FilingNum=1980-000073155 (corporate information on Belle Fourche obtained on January 21, 2009, from official website of the Wyoming Secretary of State). On December 22, 2006, Mr. Vineyard signed another PS Form 3811, at Petitioner’s Casper, Wyoming office, acknowledging receipt of the Final Order on behalf of Mr. Hank A. True III, president of Belle Fourche.#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 32 § 195.406(a)(1) in establishing the maximum operating pressure (MOP) of two other pipeline segments because the company lacked adequate documentation of the design specifications or materials testing of the pipe in those segments. The Final Order assessed Belle Fourche a civil penalty of $20,000 for Item 10 and directed it to take certain actions to correct the violations found in both Items 3 and 10. No penalty was assessed for Item 3. As provided in 49 C.F.R. § 190.215(a)-(e), the pipeline safety regulations afford a respondent the opportunity to file a petition with the Associate Administrator for reconsideration of a final order. The purpose of this procedure is not to provide a right of appeal or de novo review, but to allow for the presentation of previously unknown or unavailable information or arguments and to permit the agency to reconsider and correct any errors in the final order. Consistent with these principles, the regulations provide that the Associate Administrator is not obliged to consider repetitious information, arguments, or petitions, and that a petitioner must provide valid reasons why any additional facts or arguments were not presented in a timely manner. It is clear from the record in this case that the Petition could be summarily dismissed as untimely filed. Under the controlling regulation, a petition must be “received no later than 20 days after service of the final order upon the respondent. until approximately seven weeks after the president of Belle Fourche and its counsel received personal service of the Final Order. Furthermore, Petitioner has not offered any valid reason why the additional evidence and arguments raised in this Petition were not submitted prior to issuance of the Final Order. Despite these deficiencies, I have reviewed the entire record of these proceedings as a matter of administrative discretion and concluded that the case presents a significant legal question that should be addressed. Based upon such review and for the reasons cited below, I am granting the Petition in part and denying it in part. ”3 PHMSA did not receive the Petition in this case I. Discussion A. Item 3 - Belle Fourche’s Violation of 49 C.F.R. § 195.303 Item 3 of the Final Order found that Belle Fourche failed to comply with 49 C.F.R. § 195.303, as applied to three pipeline segments constructed with pre-1970 ERW pipe. Before discussing the specific circumstances of Petitioner’s request for reconsideration, I will provide some useful background information on 49 C.F.R. § 195.302, the regulation that imposes a pressure-testing requirement on all hazardous liquid pipelines, and 49 C.F.R. § 195.303, the regulation that establishes an elective, risk-based alternative to such testing. 3 49 C.F.R. § 190.215(a).#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 43 Section 195.302 prohibits the operation of a hazardous liquid pipeline that has not been subjected to a valid pressure test.4 However, that regulation includes certain exemptions, two of which are relevant to this proceeding. First, an interstate hazardous liquid pipeline constructed before January 8, 1971, may be operated without a pressure test, so long as the operator of that line established its MOP under 49 C.F.R. § 195.406(a)(5) on or before December 7, 1998.5 This exemption ensures that an adequate margin of safety exists in the absence of a pressure test6 by limiting the MOP of such a line to no more than “80 percent of the test pressure or highest operating pressure to which the pipeline was subjected for 4 or more continuous hours that can be demonstrated by recording charts or logs made at the time the test or operations were conducted.”7 Second, older hazardous liquid pipelines, including those constructed with pre-1970 ERW pipe, may be operated without a pressure test if the operator elects to use the risk- based alternative provided in 49 C.F.R. § 195.303 and a pressure test is not otherwise required under the criteria specified in that regulation. 8 Those criteria require that each pipeline segment be classified on the basis of several risk indicators, such as location, product, volume, and probability of failure, 9 and that a pressure test be performed on any segment constructed with pre-1970 ERW pipe unless a supplementary engineering analysis shows that the line is not susceptible to longitudinal seam failure.10 In this case, the Final Order found that Petitioner elected to use the 49 C.F.R. § 195.303 risk-based alternative to pressure testing for three pipeline segments constructed with pre- 1970 ERW pipe. 11 It also found that while Belle Fourche had performed a metallurgical seam evaluation on samples from one of those lines (i.e., the Donkey Creek to Guernsey line), Petitioner was not able to adequately document that the pipe used throughout that line was qualitatively similar to the samples tested. The Final Order further found that Petitioner had not completed an adequate seam analysis of the Alzada to Belle Creek or the Belle Creek to Highway 14-16 pipeline segments. Therefore, the Final Order 4 Specifically, that regulation provides that “no operator may operate a pipeline unless it has been pressure tested under this [Subpart E] without leakage.” 49 C.F.R. § 195.302(a). The specific terms and conditions that must be followed in conducting such tests, including test-pressure and time requirements, are prescribed in 49 C.F.R. §§ 195.304-310. 5 49 C.F.R. § 195.302(b)(1)(i), (c)(1)(ii). 6 Department of Transportation, Research and Special Programs Administration, Pressure Testing Older Hazardous Liquid and Carbon Dioxide Pipelines, 59 Fed. Reg. 29379 (Jun. 7, 1994) (providing reasons or bases for the adoption of 49 C.F.R. § 195.302). 7 49 C.F.R. § 195.406(a)(5). 8 49 C.F.R. § 195.302(b)(4). 9 49 C.F.R. § 195.303(a)-(b). 10 49 C.F.R. § 195.303(c)-(d). 11 Those pipeline segments were the 8-inch Alzada to Belle Creek line, the 10-inch Belle Creek to Highway 14-16 line, and the 12-inch Donkey Creek to Guernsey line.#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 54 concluded that Belle Fourche violated § 195.303 as applied to each of these three segments. While not entirely clear, Petitioner appears to seek reconsideration of these findings on the basis of 49 C.F.R. §§ 195.302(b)(1)(i) and (c)(1)(ii). In particular, Petitioner contends that the three segments in question were all constructed prior to January 8, 1971, thereby qualifying for the § 195.302(b)(1)(i) exception to mandatory pressure testing. On April 15, 2009, Belle Fourche also submitted a pressure chart from October 14, 2000, showing that “the Donkey Creek line” was continuously operated on that date at 1440 psi for more than four hours. Petitioner therefore argues that the “lawful” MOP of that line under §§ 195.302(b)(1)(i), (c)(1)(ii) and 195.406(a)(5) is 1150 psi (or 80% of 1440 psi), and that Item 3 of the Final Order should be withdrawn. Petitioner’s argument, however, is not persuasive. First, Belle Fourche elected not to seek an exemption from the mandatory pressure-testing requirement under §§ 195.302(b)(1)(i) and (c)(1)(ii) for the three segments at issue. Petitioner’s compliance with those regulations is not relevant to whether it violated the requirements of § 195.303, the regulation that Belle Fourche chose to apply to these three pipeline segments. 12 Therefore, Second, even if §§ 195.302(b)(1)(i) and (c)(1)(ii) were somehow relevant to Petitioner’s violation of § 195.303, Belle Fourche has not shown that it established the MOP of the Donkey Creek line under § 195.406(a)(5) on or before December 7, 1998. On the contrary, Petitioner’s pressure chart for that line is dated October 14, 2000, nearly two years after the deadline for establishing MOP on the basis of the highest continuous 4-hour operating pressure. Accordingly, Belle Fourche has not shown that it complied with §§ 195.302(b)(1)(i) and (c)(1)(ii), even if those regulations were applicable. In sum, an operator is not required to use the risk-based alternative provided in § 195.303. However, if an operator elects to use that alternative and the segment in question is constructed with pre-1970 ERW pipe, then a valid engineering analysis must be performed to rebut the presumption that the line is susceptible to longitudinal seam failure and therefore requires pressure testing. 13 There is no factual dispute here that the three segments at issue were all constructed, at least in part, with pre-1970 ERW pipe,14 and that Petitioner elected to use the § 195.303 risk-based alternative to pressure testing for those lines. Since the record does not reflect any valid engineering analysis to rebut the presumption of longitudinal seam failure for any of the three lines, I must deny 12 Belle Fourche’s written procedures at the time of the inspection, attached as Exhibit 4 to the OPS inspector’s original violation report, state that the company had “elected to follow the risk-based alternative to pressure testing per 195.303” for these three lines. 13 49 C.F.R. § 195.303(c)-(d). 14 The record indicates that the Alzada to Belle Creek line was constructed in 1966 with ERW pipe, that the Belle Creek to Highway 14-16 line was constructed in 1966 with ERW pipe, and that the Donkey Creek to Guernsey line was constructed in 1968 with ERW pipe.#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 65 Petitioner’s request for reconsideration of Item 3 of the Final Order and affirm the finding that Belle Fourche violated 49 C.F.R. § 195.303. B. Item 10 - Belle Fourche’s Violation of 49 C.F.R. § 195.406 Item 10 of the Final Order found that Petitioner failed to comply with 49 C.F.R. § 195.406 in calculating the MOP of two lines constructed with pre-1970 ERW pipe. Specifically, it found that Belle Fourche lacked adequate documentation of the specified minimum yield strength (SMYS) and other material specifications of the pipe in the Twentymile to Guernsey line and the Highway 450 Station to 12-inch Junction line. The Final Order also found that as a result of such inadequate documentation, Petitioner had to use certain default values in establishing the MOP for those two lines under § 195.406(a)(1), the regulation that limits MOP on the basis of the internal design pressure of the pipe. Because the company had exceeded the MOP that PHMSA concluded should have been calculated on the basis of these default values, the Final Order concluded that Belle Fourche violated 49 C.F.R. § 195.406. Having carefully reviewed the entire record, I conclude that the Finding of Violation in Item 10 cannot be sustained, yet not for the reasons cited by Petitioner. 15 Section 195.406(a)(1) limits the MOP of hazardous liquid pipelines on the basis of their internal design pressure, a value that is determined by using a formula set forth in 49 C.F.R. § 195.106. previously determined that pipelines designed, constructed, and installed prior to April 1, 1970, are not subject to the requirements of § 195.406(a)(1). 16 However, PHMSA has Specifically, in response to a request from the American Petroleum Institute on the relationship between 49 C.F.R. §§ 195.106 and 195.406(a)(1) and the potential retroactive application of those regulations to existing pipelines, PHMSA’s predecessor agency, the Materials Transportation Bureau, issued a formal letter of interpretation. 17 Dated October 15, 1976, the letter states that “§ 195.406(a)(1) only applies to pipelines to which § 195.106 applies (i.e., pipelines which are constructed, relocated, or otherwise changed on or after April 1, 1970, the effective date of [section] 195.106).”18 It also states that “[w]here § 195.406(a)(1) is inapplicable, one of the other standards in [section] 195.406(a) would govern the maximum 15 In its Petition, Belle Fourche asserts arguments previously considered and rejected in the Final Order. First, Petitioner argues that it has shown through credible evidence that the SMYS of the pipe used in one of the disputed lines is 60,000 psi, and that the SMYS of the pipe used in the other line is 42,000 psi. Petitioner also introduces, as Exhibit 2 to its Petition, an affidavit from the company’s long-time superintendent of operations, Mr. Lyle Sessions, to corroborate the evidence previously submitted with its Response, including a construction map that allegedly shows the SMYS and other specifications of the pipe used in the two segments in question. Given the ultimate disposition of the Finding of Violation in Item 10, further consideration of this evidence is unnecessary. 16 Under 49 C.F.R. § 195.106, the internal design pressure of a pipe is calculated by inputting certain specific criteria into a predetermined formula. 17 Operating Pressure for Platform Piping; Interpretation, Department of Transportation, Materials Transportation Bureau, Docket No. OPSO-35 (Oct. 15, 1976). 18 Id.#

520045010_Decision On Petition For Reconsideration_07152009_text.pdf, page 76 allowable operating pressure.” This 1976 letter of interpretation remains valid today and is consistent with the long-standing statutory prohibition, currently codified at 49 U.S.C. § 60104(b), on the retroactive application of design, construction, and initial testing standards to pipelines in existence when such standards are adopted.19 It is undisputed that the Twentymile to Guernsey line and Highway 450 Station to 12-inch Junction line were both designed, constructed, and installed in 1968, several years before the effective dates of 49 C.F.R. §§ 195.406(a)(1) and 195.106.20 Therefore, in accordance with the 1976 letter of interpretation and the statutory prohibition on retroactive application of design and construction standards, I find that Belle Fourche had no obligation to consider § 195.406(a)(1) in establishing the MOP of these two pipeline segments. Accordingly, I grant the Petition as to Item 10 of the Final Order and withdraw the Finding of Violation with respect to 49 C.F.R. § 195.406. Relief Granted Based on the information provided in the Petition, a review of the relevant portions of the record, and for the reasons stated above, I find that Belle Fourche did not violate 49 C.F.R. § 195.406 in calculating the MOP for the Twentymile to Guernsey and Highway 450 Station to 12-inch Junction lines. Therefore, I withdraw Item 10 of the Final Order, the $20,000 civil penalty associated with that Finding of Violation, and the compliance actions related to that finding and outlined in paragraph 3 of the Compliance Order. The Final Order is otherwise affirmed. A copy of this Final Order shall be forwarded to the Federal Aviation Administration for the proper disposition and refund of the $20,000 penalty that was assessed and collected for Item 10 of the Final Order. This decision on reconsideration is the final administrative action in this proceeding. _____________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 19 49 U.S.C. § 60104(b) (“Nonapplication.—A design, installation, construction, initial inspection, or initial testing standard does not apply to a pipeline facility existing when the standard is adopted.”); see also, Bowen v. Georgetown University Hosp., 488 U.S. 204, 208-09 (1988) (holding that regulations are presumed not to apply retroactively). 20 The Final Order did not consider whether any of the lines in question had been replaced, relocated, or otherwise changed on or after the date that the applicable standards were adopted. If so, Belle Fourche would be required to comply with 49 C.F.R. §§ 195.106 and 195.406(a)(1) in establishing the MOP of those lines.#

520045010_final order_12112006_text.pdf, page 1Official PDFU 5 Department of Transportation Pipeline and Hazardous Materials Safety Administration 400 Seventh Street, S W Washington, D C 20590 DEC 1 1 RECEIVED DEC )5 roos Mr. Hank A. True III President Belle Fourche Pipeline Company 895 W. River Cross Road Casper, WY 82602 Re: CPF No. 5-2004-5010 Dear Mr. True: Enclosed is the Final Order issued by the Acting Associate Administrator for Pipeline Safety in the above-referenced case. It withdraws one of the allegations of violation, makes findings of violation and assesses a civil penalty of $61, 500. The Final Order also specifies actions to be taken to comply with the pipeline safety regulations and revision of certain operating and maintenance procedures. The penalty payment 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, Western Region, this enforcement action will be closed. Your receipt of the Final Order constitutes service under 49 C. F. R. g 190. 5. Sincerely, James Reynolds Pipeline Compliance Registry PHMSA-Office of Pipeline Safety Enclosure cc: Mr, Chris Hoidal, P. E. , Mr. Manuel A. Lojo, Esq. P. O. Drawer 2360 Casper, WY 82602 Director Western Region, PHMSA CERTIFIED MAIL — RETUEIV RECEIPT RE UES TED#

520045010_final order_12112006_text.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of Belle Fourche Pipeline Company, Respondent CPF No. 5-2004-5010 FINAL ORDER Between August 18 and 22, 2003, pursuant to 49 U. S. C. $ 60117, a representative of the Pipeline and Hazardous Materials Safety Administration's (PHMSA's)' Office of Pipeline Safety conducted an on-site pipeline safety inspection of Respondent's hazardous liquid pipeline facilities in Montana and Wyoming and supporting Operation and Maintenance records in Casper, Wyoming. As a result of the inspection, the Director, Western Region, PHMSA, issued to Respondent, by letter dated May 19, 2004, a Notice of Probable Violation, Proposed Civil Penalty, Proposed Compliance Order, and Notice of Amendment (Notice). In accordance with 49 C. F. R. $ 190. 207, the Notice proposed finding that Respondent committed violations of 49 C. F. R. Part 195, proposed assessing a civil penalty of $67, 500 for the alleged violations, and proposed ordering Respondent to 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/plans. Respondent responded to the Notice in a letter dated June 24, 2004, later supplemented in a letter dated November 2, 2004 per PHMSA's request for additional information (Response). Subsequently, PHMSA issued an Amendment to the Notice on April 5, 2005. Respondent responded to the amended Notice in a letter dated May 3, 2005 (May 3, 2005 correspondence included in "Response" ). Respondent contested many of the allegations, offered information to explain the allegations, and requested that the proposed civil penalty be reduced. Respondent did not request a hearing, and therefore has waived its right to one. ' Effective February 20, 2005, the Pipeline and Hazardous Matenals Safety Administration (PHMSA) succeeded Research and Special Programs Administration as the agency responsible for regulatmg safety in pipehne transportation and hazardous matenals transportation See, section 108 of the Norman Y Mineta Research and Special Programs Improvement Act (Public Law 108-426, 118 Stat 2423-2429 (November 30, 2004)) See also, 70 Fed Reg 8299 (February 18, 2005) redelegating the pipehne safety authorities and functions to the PHMSA Administrator#

520045010_final order_12112006_text.pdf, page 3FINDINGS OF VIOLATION Item I in the Notice alleged Respondent violated 49 C. F. R. ) 195. 1(a), (b)(1-4) and ) 195. 402(a) in that Respondent did not include the 8-inch line segment that connects its 10-inch diameter pipeline at the Elk Creek pump station to its 12-inch diameter pipeline at the Donkey Creek pump station in its operations, maintenance, and emergency procedures manual as required by 49 C. F. R. $195. 402(a). In its June 24, 2004 letter, Respondent indicated that the 8- and 10-inch pipelines at issue had been purged and abandoned. PHMSA then requested that Respondent provide a map showing the location of those abandoned pipelines. In its November 2, 2004 letter, Respondent provided a map that depicts only a portion of the pipeline at issue as having been abandoned. The balance that has not been abandoned is depicted on its map as being 8- and 10-inch gathering only. Since a portion of this line is depicted as being 10-inch, it cannot be a gathering line as per the definition in 49 C. F. R. $195. 2 that states "Gathering line means a pipeline 219. 1 mm (8 5/8 in) or less nominal outside diameter that transports petroleum from a production facility. " With the changes to this pipeline system, the Compliance Order below is amended to address Respondent's operational changes. Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 1 (a), (b){1-4) and $ 195. 402(a) in the Notice. Item 2 of the Notice proposed a civil penalty of $25, 500 for violation of 49 C. F. R. $$ 195. 50(b) and 195. 54(a) in that Respondent failed to report a 120-barrel spill that occurred at its Alzada pump station pig launching facilities on June 10, 2003 within the required 30-day period. This accident was not reported for 86 days, which was 56 days beyond the 30 days allowed by Federal regulation. In its June 24, 2004 letter, Respondent stated that it did not contest the violation but that jt requested the penalty be substantially reduced. In support of the reduction, Respondent stated that the spill was wholly contained within a containment dike and has been used as an opportunity to underscore to employees the importance of timely reporting of all spills. Here, the Respondent did not report the spill until a PHMSA inspector observed the spill, which was 86 days aAer the spill and 56 days aAer the latest that it should have been reported. Accordingly, I find that Respondent violated 49 C. F. R. $$ 195. 50{b) and 195. 54(a) in the Notice. Item 3 in the Notice alleged Respondent violated 49 C. F. R. ) 195. 303 in that Respondent incorrectly applied the Risk-based alternative to pressure testing for the following pipelines: 1. 8-inch segment between Alzada and Belle Creek built in 1966; 2. 10-inch line from Belle Creek to Highway 14-16 built in 1966; and 3. 12-inch line from Donkey Creek to Guernsey built in 1968.#

520045010_final order_12112006_text.pdf, page 4Respondent did a metallurgical seam evaluation on samples of the 12-inch line in May of 2000, but it did not have sufficient construction documentation to verify that all of the 12-inch line was of the same quality as the pipe samples tested. For the 8-inch segment between Alzada and Belle Creek and the 10-inch line from Belle Creek to Highway 14-16, Respondent did not complete a metallurgical seam evaluation nor did it hydro test these pipeline segments. In its June 24, 2004 letter, Respondent stated that the Elk Creek line was removed from service on March 1 and that the Donkey Creek Line has been operating recently at a MOP of less than 1152. Although some of Respondent's pipe has been taken out of service, substantial sections of pipeline manufactured from pre-70 electric resistance weld pipe still have not been hydrostatically tested. Respondent's metallurgical analysis of these sections of pipeline is not statistically sufficient nor does Respondent have sufficient construction records to substantiate that the entire pipeline installed is similar to the pipe that received a metallurgical analysis. Accordingly, I find that Respondent violated 49 C. F. R. ) 195. 303 in the Notice. Item 10 in the Notice Amendment alleged Respondent violated 49 C. F. R. ) 195. 406 in that Respondent has not been able to provide adequate records certifying the yield strength {SMYS) of 60, 000 psi for the pipe used in construction of its 12. 75-inch, . 219 inch wall thickness pipeline section between Twentymile Station and Guernsey. Respondent has determined the MOP of this line section, using 49 C. F. R. )195. 106 with a SMYS of 60, 000 psi, to be 1440 psig. Without adequate records or materials testing that certifies the actual material strength of the pipe, Respondent cannot use a SMYS any greater than 24, 000 psi, which results in a MOP no greater than 593. 6 psig. Additionally, Respondent's records show that the pressure shutdown switch at the Twentymile station is set at 1440 psig, which is 243% of the design pressure lacking any pipeline material certification. Respondent normally operates this segment between 900 psig and 1100 psig. Respondent could not provide adequate records certifying the SMYS of 42, 000 psi for the pipe used in construction of its 12. 75-inch, . 25 inch wall thickness pipeline section between Highway 450 Station and the 12-inch mainline Junction. Respondent has determined the MOP of this line section, using 49 C. F. R. )195. 106 with a SMYS of 42, 000 psi, to be 1390 psig. Without adequate records or materials testing that certifies the actual material strength of the pipe, Respondent cannot use a SMYS any greater than 24, 000 psi, which results in a MOP no greater than 677. 6 psig. Additionally, Respondent's records show that the pressure shutdown switch at the South Hilight station is set at 1300 psig, which is 192 % of the design pressure lacking any pipeline material certification. Respondent normally operates this segment between 300 psig to 800 psig. In its November 2, 2004 letter to PHMSA, Respondent provided a township/section map depicting the pipeline rights-of-way as a solid line with an arrow labeled "333, 055' 12 3/4 . 219X60 29. 31¹" pointing to that solid line. Respondent contends that this is a copy of an original construction map and it shows that the pipeline section in dispute is made from X-60#

520045010_final order_12112006_text.pdf, page 5pipe and not X-52 pipe. Subsequently, it contends that this pipeline was correctly listed as having a MOP of 1440 psig. Since Respondent could not provide further evidence substantiating the material strength of the pipe used in the construction of either pipeline section originally cited, PHMSA issued an Amendment to the May 19, 2004 Notice, dated April 5, 2005. That Amendment changed the violation from incorrectly calculating the MOP for the two pipeline sections to a violation of using a SMYS of 60, 000 psi for calculating the MOP on one pipeline section and using a SMYS of 42, 000 psi for the other pipeline section without having sufficient records or materials testing or to verify the SMYS of the pipe used in construction of either pipeline. Respondent responded to the Amended Notice in a letter dated May 3, 2005. In that response, Respondent contends that it is permitted to operate at 80 percent of the highest operating pressure to which the pipeline was subjected to for four or more continuous hours that can be demonstrated by recording charts of logs made at the time the operations were conducted. It maintains that the Twentymile to Guernsey pipeline has been operated at 1440 psig for four or more continuous hours and it will be retrieving those documents to support this argument. Respondent asserts this would allo~ them to establish a MOP of 1152 which is 80'/~ of 1440 psig. Additionally, Respondent contends that it has pressure tested its Highway 450 section to a pressure of 1500 psig in 1994 and again in 2005. 49 C. F. R. $ 195. 106, using Hooke's law, governs how pressure is to be determined under the code. Respondent may use 80 percent of the highest operating pressure recorded for four or more continuous hours in lieu of a pressure test. However, an operator may not operate a pipeline at a pressure that exceeds either 80 percent of the highest operating pressure or the test pressure recorded for four or inore continuous hours, the design pressure of the pipe, or the pressure rating of any component. Though it may have adequate records to allow them to use 80'/o of an operating pressure in lieu of pressure test, it may not exceed the design pressure of the pipeline. Without adequate construction records or statistically viable metallurgical testing, it cannot use a SMYS any higher than 24, 000 psi. Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 406 in the Notice. Item 11 in the Notice alleged Respondent violated 49 C. F. R. $ 195. 408(a) and (b)(1) in that Respondent does not attend or monitor its Highway 14-16 pump station, which receives crude oil from tankage. In its June 24, 2004 Response, Respondent stated that the Highway 14-16 Station is a gathering line and it has been since March 1, 2004. It appears that the Highway 14-16 Station injects crude oil into what Respondent labeled on a map transmitted to PHMSA as "8 inch and 10 inch segments in gathering service only as of March 2004. " Since the line that the Highway 14-16 Station injects crude into has pipe that is 10-inch, this pipeline appears to be transmission and not gathering as per the definition in 49 C. F. R. $ 195. Therefore, because the Highway 14-16 Station appears to control the delivery#

520045010_final order_12112006_text.pdf, page 6of crude oil into jurisdictional pipeline, this station must meet the requirements of 49 C. F, R. $ 195. 408. Accordingly, I find that Respondent violated 49 C. F. R. ) 195. 408(a) and (b)(1) in the Notice. Item 13 in the Notice alleged Respondent violated 49 C. F. R. ) 195. 428(a) in that Respondent's pressure shutdown switches only receive a functional test which does not ensure that these switches will operate at the correct pressure. Pressure transducers do not receive annual calibration to insure it is transmitting correct pressures. Respondent responded to this issue in its June 24, 2004 letter by stating that new procedures would be written and implemented. It provided no documentation showing that all of its pressure control equipment had been properly tested and inspected, including calibration if necessary. Accordingly, I find that Respondent violated 49 C F. R. $ 195. 428(a) in the Notice. Item 14 in the Notice alleged Respondent violated 49 C. F. R. $ 195. 432(b) in that Respondent is required by API 653 Section 4. 3. 1. 2 to conduct a routine in-service inspection once each month. Respondent only does a routine inspection of its Sussex breakout tank once each year. During the inspection, Respondent's engineer informed the PHMSA inspector that it did not do monthly inspections. In its June 24, 2004 correspondence, Respondent submitted its Sussex Station reports in response to this allegation. Respondent directs our attention to the far right column labeled "Signature" in these reports where there are employee initials and a handwritten "VI. " Respondent contends that the "VI" stands for "Visual Inspection" and asserts that this indicates compliance with the requirements of section 4 of API Standard 653, claiming that the inspections took place on a basis more frequently than once per month. Although Respondent may rely on the handwritten "VI" markings as evidence that the tank had been visually inspected on a basis more frequently than once a month, there was not a specific column in Respondent's Sussex Station reports to indicate that the tank had been inspected. The evidence does not support an argument that the tank was inspected in accordance with API 653 Section 4. Respondent must still include a monthly inspection that will incorporate and document the condition of those items listed under of API 653 Section 4. 3. 1. 3 for the Sussex breakout tank. Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 432(b) in the Notice. Item 16 in the Notice alleged Respondent violated 49 C. F. R. $ 195. 436 in that there is no security fencing at the Elk Creek pump station and the Alzada pump station and pig launcher facilities. The controls and facilities at these pump stations are unmanned and readily accessible by the public via state highways that are adjacent to these two stations.#

520045010_final order_12112006_text.pdf, page 7The June 24, 2004 response to this issue was that both Alzada station and Elk Creek station had been abandoned. In its November 2, 2004 Response, Respondent provided evidence to support that the pipeline from Alzada to Elk Creek had been abandoned. It appears that because the Alzada station is associated with the upstream end of this pipeline section it should be considered abandoned. However, the Elk Creek station may still be injecting crude oil into Respondent's "8'inch and 10-inch segments in gathering service only as March 2004. " Since part of this line is 10-inch at least, that portion that is 10-inch is considered to be transmission. It appears that the Elk Creek station injects into this pipeline system and therefore it is considered to be a jurisdictional facility. Therefore, the Elk Creek station should have increased security provided. Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 436 in the Notice. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. %WITHDRAWAL OF ALLEGATIOIV Item 17 in the Notice alleged that Respondent had violated 49 C. F. R. $ 195. 567 by failing to install an adequate number of test stations or demonstrate that test stations are at sufficient intervals to indicate the adequacy of the cathodic protection system. In its Response, Respondent provided a cathodic protection monitoring procedure that requires test leads to be spaced from between one to two miles. The exception to this is only allowed if one of the following has been met: 1) close interval survey has been performed, 2) operating history demonstrates no leaks nor evidence of external corrosion, or 3) pipeline inspection logs, assume for ILI, demonstrate no wall loss. If one of these exceptions is met, then Respondent's procedures assume that sufficient cathodic protection exists. It its Response, Respondent's submission of this procedure appears to have met the intent of 49 C. F. R. $ 195. 567. Based on this information demonstrating compliance with the regulation, I am withdrawing this allegation of violation. ASSESSMENT OF PENALTY Under 49 U. S. C. $ 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. ) 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 m 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 $67, 500 for the violations. Item 2 of the Notice proposed a civil penalty of $25, 500 for violation of 49 C. F. R. $$ 195. 50(b) and 195. 54(a) in that Respondent failed to report a 120-barrel spill that occurred at its Alzada#

520045010_final order_12112006_text.pdf, page 8pump station pig launching facilities on June 10, 2003 within the required 30-day period. This accident was not reported for 86 days, which was 56 days beyond the 30 days allowed by Federal regulation. In its June 24, 2004 letter, Respondent stated that it did not contest the violation but that it requested the penalty be substantially reduced. In support of the reduction, Respondent stated that the spill was wholly contained within a containment dike and has been used as an opportunity to underscore to employees the importance of timely reporting of all spills. Here, the Respondent did not report the spill until a PHMSA inspector observed the spill, which was 86 days after the spill and 56 days after the latest that it should have been reported. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $25, 500 for the violation. Item 10 of the Notice proposed a civil penalty of $20, 000 for violation of 49 C. F. R. $195. 406, as fully described in the Amendment to the Notice and as discussed above, in that Respondent used a SMYS of 60, 000 psi for calculating the MOP on the pipeline section between Twentymile Station and Guernsey and used a SMYS of 42, 000 psi for the pipeline section between Highway 450 Station and the 12-inch mainline Junction without having sufficient records or materials testing to verify the SMYS of the pipe used in construction of either pipeline. As discussed above, although Respondent replied to the May 3, 2005 Amendment, it did not provide adequate consMction records or statistically viable metallurgical testing that supports a SMYS higher than 24, 000 psi. The segment of the pipeline that crosses the North Platte River could have an environmental or public impact. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $20, 000 for the violation. Item 12 of the Notice proposed a civil penalty of $10, 000 for violation of 49 C. F. R. $195. 410 in that Respondent failed to maintain an adequate number of pipeline markers to accurately determine the pipeline location. Furthermore, when the PHMSA representative called the emergency phone number shown on the pipeline markers for the Montana/Dakota pipeline, he received a disconnected phone message with no forwarding phone number. It its June 24, 2004 Response, Respondent notes a typographical error in the Notice. Since the body of the Notice addresses Respondent's alleged violation and the paragraph on civil penalties lists Notice Item 12 as a proposed civil penalty, the typographical mistake is a harmless error. Respondent requested that no penalty be assessed since it intends to continue installing additional correct markers. However, Respondent has not presented any information that would warrant a reduction or withdrawal of the civil penalty. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $10, 000 for the violation. Item 14 of the Notice proposed a civil penalty of $12, 000 for violation of 49 C. F. R. $195. 432(b) in that Respondent is required by API 653 Section 4. 3. 1. 2 to conduct a routine in-service inspection once each month. Respondent only does a routine inspection of its Sussex breakout tank once each year. As discussed above, Respondent's Response does not support that the Sussex tank was inspected in accordance with API 653 Section 4; however, it appears that the tank was minimally looked at periodically, which supports a reduced penalty. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a reduced civil penalty of $6, 000 for the violation.#

520045010_final order_12112006_text.pdf, page 9Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $61, 500. Respondent has the ability to pay this penalty without adversely affecting its ability to continue in business. 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. Treasury. Detailed instructions are contained in the enclosure. Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-300), Federal Aviation Administration, Mike Monroney Aeronautical Center, P. O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the $61, 500 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 United States District Court. COMPLIANCE ORDER The Notice proposed a Compliance Order with respect to Items 1, 3, 10, 11, 13, 14, and 16 in the Notice (Notice Item 17 was withdrawn). Under 49 U. S. C. $ 60118(a), each person who engages in the transportation of hazardous liquids 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. ) 60118(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. Respondent must- With respect to Item 1 of the Notice, incorporate into its operations, maintenance, and emergency manual as required by 49 C. F. R, $ 195. 402(a) all pipeline from the Donkey Creek pump station upstream to the upstream end of the furthest upstream segment of 10-inch pipe; With respect to Item 3 of the Notice, pressure test all pipeline segments that have not been previously pressure tested in accordance with 49 C. F. R. $ 195 Subpart E; With respect to Item 10 of the Notice, reduce the MOP of the following line segments so that the MOP of these segments are in accordance with 49 C. F. R. $ 195. 406: a. The Twenty Mile station to Guernsey station section; b. The Highway 450 to 12" Junction section; and c. All other line sections that do not have adequate records to certify the yield strength of the pipe contained in each section. Reduce the set pressure for all pressure control devices that protect each of the above#

520045010_final order_12112006_text.pdf, page 10line sections to a pressure that is commensurate with the MOP; 4. With respect to Item 11 of the Notice, either attend or monitor the Highway 14-16 station during operation per the requirements of 49 C. F. R. $ 195. 408(b)(1); With respect to Item 13 of the Notice, test and calibrate all pressure control devices per the requirements of 49 C. F, R. $ 195. 428, using proper pressure sensing equipment; With respect to Item 14 of the Notice, begin monthly inspection, for the Sussex breakout tank, as per section 4 of API Standard 653, incorporating a checklist of those items listed under paragraph 4. 3. 1. 3 of section 4 API Standard 653. Maintain records of all such inspections as required under 49 C. F. R. Part 195; With respect to Item 16 of the Notice, provide increased security at the Elk Creek station per requirements of 49 C. F. R. $ 195. 436; Maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Director, Western Region, PHMSA. Costs shall be reported in two categories: 1) total cost associated with preparation/revision of plans, procedures, studies and analyses, and 2) total cost associated with replacements, additions and other changes to pipeline infrastructure; and Within 60 days of receipt of the Final Order, submit documentation of procedures, costs and evidence of actions taken to the Director, Western Region, Pipeline and Hazardous Materials Safety Administration, 12300 West Dakota Avenue, Suite 110, Lakewood, Colorado 80228, Please refer to CPF No. 5-2004-5010 on any correspondence or communication in these matters. The Director, Western Region, may grant an extension of time to comply with any of the required items upon a written request timely submitted by Respondent demonstrating good cause for an extension. Failure to comply with this Order may result in the assessment of civil penalties of not more than $100, 000 per day and in referral to the Attorney General for appropriate relief in a United States District Court. AMENDMENT OF PROCEDURES Items 5(a-b), 6(a-g), 7(a-d), 8, and 9 of the Notice alleged inadequacies in Respondent's procedures/plans and proposed to require amendment of Respondent's procedures to comply with the requirements of 49 C. F. R. $ $ 195. 266(a), 195. 302(a), 195. 402(c)(3, 7, 8, 11, 13), 195. 403(b)(1), 195. 404(a)(1), 195. 422(a-b), 195. 559(a-f), 195. 561(a-b), 195. 563(a-e), 195. 567(a-c), 195. 573(e), 195. 583{a-c), and 195. 589{c). Respondent did not contest the Items in the Notice of Amendment with the exception of Items 6(d) and 7(b).#

520045010_final order_12112006_text.pdf, page 11In its Response, Respondent submitted copies of its amended procedures or information with respect to Notice Items 5(a), 6 (c-d), 7(d), and 8, which Western Region, PHlvISA, reviewed. Accordingly, based on the results of this review, I find that Respondent's procedures as described in the Notice were inadequate to ensure safe operation of its pipeline system, but that respondent has provided information and/or corrected the identified inadequacies. No need exists to issue an Order Directing Amendment with respect to Items 5a, 6(c-d), 7d, and 8. However, with respect to Notice Items 6(a-b, f), 7(a), and 9, Respondent's Response indicated that these Notice Items were not yet complete and submissions were not included in the Response. With respect to Notice Items 5b, 6(e, g), 7(b-c), although Respondent submitted amended procedures/plans to the Western Region, PHMSA, these procedures/plans do not address all of the inadequacies described in the Notice. Accordingly, I find that Respondent's procedures as described in the Notice are inadequate to ensure safe operation of its pipeline system. Pursuant to 49 U. S. C. $ 60108(a) and 49 C. F. R. $190. 237, Respondent is ordered to make the following revisions to its procedures: 1. Amend its procedures to adequately list pressure test requirements (Notice Item 5b); 2. Amend its corrosion control procedures to adequately address coating requirements (Notice Item 6a); 3. Amend its corrosion control procedures to adequately address the inspection of pipe prior to lowering it into the ditch (Notice Item 6b); 4. Amend its corrosion control procedures to adequately describe how and when external corrosion control deficiencies must be corrected (Notice Item 6e); 5. Amend its corrosion control procedures to adequately address atmospheric corrosion monitoring frequency (Notice Item 6f); 6. Amend its corrosion control procedures to adequately address appropriate records retention time (Notice Item 6g); 7. Amend its startup procedures to adequately describe startup and shutdown processes (Notice Item 7a); 8. Amend its procedures to require attendance or monitoring of the Highway 14-16 pump station during startup and shut-in operations (Notice Item 7b); 9. Amend its procedures to minimize the likelihood of accidental ignition near areas identified under 49 C. F. R. $195. 402(c)(4). Its procedures should define areas that would require immediate response in the case of failure or malfunction. It must have procedures for preventing accidental ignitions at those locations. Ignition sources may include but are not limited to: operating internal combustion engines; activities that could generate static electricity or electrical arcing; welding, cutting, and other#

520045010_final order_12112006_text.pdf, page 12hot work; using certain non-approved electric equipment (flashlights, power tools/equipment, etc. ); working on motors or appurtenances; working inside pipeline buildings; use of spark-producing hand tools; engine exhaust stack temperatures. Respondent should maintain restricted access to hazardous areas, including safety zones for vehicular and air space domains (Notice Item 7c); 10. Amend its maps and records to ensure that the location and identification of pipeline facilities are updated and complete (Notice Item 9); and 11. Within 30 days following receipt of this Order, submit the amended procedures to the Director, Western Region, PHMSA. The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by Respondent demonstrating good cause for an extension. Failure to comply with this Order Directing Amendment may result in the assessment of civil penalties of up to $100, 000 per violation per day, or in the referral of the case for judicial enforcement. WARNING ITEMS The Notice did not propose a civil penalty or corrective action for Notice Items 4 (49 C. F. R. $ $ 195. 402(a) and 195. 569), 15 (49 C. F, R. $ 195. 434), and 18 (49 C. F. R. $ 195. 583); therefore, these are considered warning items. Respondent is warned that if it does not take appropriate action to correct these items, enforcement 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. 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 the petition automatically stays the payment of any civil penalty assessed. All other terms of the Order, including any required corrective action and amendment of procedures, 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. he dore . Willke cti g Associate Administrator Pipeline Safety Date Issued#

520045010_closure letter_12012010_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED December 1, 2010 Mr. Tad True Vice President - True Oil, LLC Belle Fourche Pipeline Company 895 W. River Cross Road P.O. Drawer 2360 Casper, WY 82602 CPF 5-2004-5010 Dear Mr. True: On December 11, 2006, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Belle Fourche Pipeline Company a Final Order in the above-referenced case. This Order included a Compliance Order and Civil Penalty assessment and requirement to amend your procedures. Based on our review of the documentation you provided and confirmation of payment of the civil penalty, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, Chris Hoidal Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 J. Davis (#102323)#