BELLE FOURCHE PIPELINE CO — Notice of Probable Violation

party submissionOfficial PDF520045030_Petition for Reconsideration_07282006.pdf#

case documentOfficial PDFCPF_NO_5-2004-5030.pdf#

520045030_Final Order_07102006.pdf, page 1Official PDFU.S. Department of Transportation Pipeline and Hazardous Materidls Safety Administration 400 Seventh Street, S.W. Washington, D.C. 20590 JUL 1 0 : ' b w , i Mr. Hank A. True I11 President Belle Fourche Pipeline Company 895 W. River Cross Road Casper, WY 82602 Re: CPF No. 5-2004-5030 Dear Mr. True: Enclosed is the Final Order issued by the Associate Administrator for Pipeline Safety in the above-referenced case. It makes findings of violation and assesses a civil penalty of $50,000. The Final Order also specifies actions to be taken to comply with the pipeline safety regulations and requires the revision of certain of your operating and maintenance procedures. The penalty payment terms are set forth in the Final Order. When the pivil 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 *ill be closed. Your receipt of the Final Order constitutes service under 49 C.F.R. § 190.5. Sincerely, 'U James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure CERTIFIED MAIL -RETURN RECEIPT REQUESTED#

520045030_Final Order_07102006.pdf, page 2DEPARTMENT OF TRANSPORTATION ~ PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ) In the Matter of 1 Belle Fourche Pipeline Company, Respondent ) 1 ) 1 CPF NO. 4-2004-5030 FINAL ORDER Between May 17 and 19,2004, pursuant to 49 U.S.C. § 601 17, representatives 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 integrity management program (IMP) in Casper, Wyoming. As a result of the inspection, the Director, Western Region, PHMSA issued to Respondent, by letter dated September 30,2004, 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 $50,000 for one of the alleged violations, and proposed that Respondent take certain measures to correct another of the alleged violations. The Notice also alleged inadequacies ip Respondent's IMP and proposed to require amendment of Respondent's procedures to comply with the requirements of 49 C.F.R. 195.452. Respondent failed to respond within 30 days after it had received the Notice. Under 49 C.F.R. tj 190.209(c), Respondent's failure to respond constitutes a waiver of Respondent's right to contest the allegations in the Notice and authorizes the entry of this Final Order. FINDINGS OF VIOLATION Respondent did not contest the alleged violations in the Notice. Accordingly, I find that Respondent violated the following sections of 49 C.F.R. Part 195 as more fully described in the Notice: ' Effective February 20,2005, the Pipeline and Hazardous Materials Safety Administration (PHMSA) succeeded Research and Special Programs Administration as the agency responsible for regulating safety in pipeline transportation and hazardous materials 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 pipeline safety authorities and functions to the PHMSA Administrator.#

520045030_Final Order_07102006.pdf, page 3Item 2(a)-49 C.F.R. 9 195.452(c)-failing to establish a baseline integrity assessment schedule prioritizing its pipeline segments based on all risk factors that reflect the risk conditions on each segment; and Item 2(b)-49 C.F.R. § 195.452(c)-failing to include a seam failure susceptibility analysis on all pipeline segments containing low frequency electric resistance welded pipe (ERW) and lap welded pipe to determine which segments are susceptible to seam failure prior to selecting baseline integrity assessment methods for applicable segments. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60 122, 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. 5 60122 and 49 C.F.R. 9 190.225 require that, in determining the amount of the civil penalty, I consider the following criteria: nature, circumstances, and gravity of the violation, degree of Respondent's culpability, history of Respondent's prior offenses, Respondent's ability to pay the penalty, good faith by Respondent in attempting to achieve compliance, the effect on Respondent's ability to continue in business, and such other matters as justice may require. Item 2(a) of the Notice proposed a civil penalty of $50,000.00 for violation of 49 C.F.R. $ 195.452(c). Respondent violated 49 C.F.R. § 195.452(c) in that it did not develop a BAP that uses risk factors in establishing the base line assessment methads and schedule. Prioritizing pipeline segments for integrity assessments by risk is a key step in managing pipeline integrity. Respondent did not provide information that would warrant a reduction in the civil penalty amount proposed in the Notice. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $50,000 for violation of 49 C.F.R. $ 195.452(c). Respondent has the ability to pay this penalty without adversely affecting its ability tio continue in business. Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C.F.R. 8 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 73 125; (405) 954-8893. Failure to pay the $50,000 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. 9 901.9 and 49 C.F.R. 8 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if#

520045030_Final Order_07102006.pdf, page 4payment is not made within 1 10 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriatq action in a United States District Court. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 2(b) in the Notice. Under 49 U.S.C. 5 601 18(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. $601 18(b) and 49 C.F.R. 8 190.21 7, Respondent is ordered to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations: 1. With respect to Item 2(b) of the Notice, perform a seam failure susceptibility analysis on all pipeline segments containing low-frequency (ERW) and lap welded pipe to determine which segments are susceptible to seam failure. This analysis must conclude which assessment methods are capable of addressing their specific seam issues; 2. Document the costs associated with fblfilling this Compliance Order and submit the documentation to the Director, Western Region, Office of Pipeline Safety, Pipeline and Hazardous Materials Safety Administration, 12300 West Dakota Ave, #110, Lakewood, Colorado 80228. Please refer to CPF No. 5-2004-5030 on all correspondence; and 3. Complete the above items within 60 days of receipt of this Final Order and submit the required documentation and procedures to the Director, Western Region, Office of Pipeline Safety. 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 l(a-d), 2(c-d), 3(b), 4,5(a-b), 6,7(a-d), 8(a-f), 9(a-d), lO(a-b), and 1 1 of the Notice alleged inadequacies in Respondent's IMP and proposed to require amendment of Respondent's procedures to comply with the requirements of 49 C.F.R. 195.452. Respondent did not contest the Notice of Amendment. Accordingly, I find that Respondent's procedures as described in the Notice are inadequate to ensure safe operation of its pipeline#

520045030_Final Order_07102006.pdf, page 5system. Pursuant to 49 U.S.C. 5 60 108(a) and 49 C.F.R. 5 1 90.237, Resp~ndent is ordered to make the following revisions to its procedures: 1. 2. 3. 4. 5 . 6. 7. 8. 9. Amend its IMP to include an evaluation of each individual pipeline facility to determine whether a release incident could affect a High Consequence Area (HCA). This analysis must include potential facility release volumes; Amend its IMP to properly define the boundaries of those segments that could affect a HCA. A properly defined pipeline segment could affect a EICA at any location between its end points; Amend its IMP to include technical justification showing that their use of the one mile area of impact for on-land spills is conservative; Amend their IMP to include technical justification for the assumption that any segment of pipeline that crosses a stream with a HCA is considered to affect that HCA; Amend its IMP BAP so that it consolidates all portions of Respondent's system and includes: 1) the required assessment schedule; 2) an explanatlion of assessment methods selected and; 3) the risk analysis results used to establish the schedule; Amend its IMP BAP to include a process for revising the BAP and appropriately documenting those revisions; Amend its IMP baseline assessment schedule to ensure that 50% of Category 2 pipe are assessed by the applicable regulatory deadline; Amend its IMP to include a process for the incorporation of changes that may cause new segments of its pipeline to affect a HCA; Amend its IMP to include training and qualification requirements for personnel performing key integrity management functions (e.g., review of assessment results, risk analysis); 10. Amend its IMP to include criteria for: 1) vendor in-line-inspection (ILI) tool tolerances; 2) vendor reporting requirements; 3) operatorlvendor process for resolution of variances and problems; 4) vendor ILI assessment personnel qualifications. One possible solution is to develop vendor specifications; 1 1. Amend its IMP to include a process to correlate ILI indications with other data such as cathodic protection (CP) monitoring, one-call records, etc; 12. Amend its IMP to include processes for validating assessment results and for making tool tolerance adjustments resulting from validation activities;#

520045030_Final Order_07102006.pdf, page 6Amend its IMP to include a method for determining the amount of immediate repair pressure reduction, or provide guidance to use an alternate 20% pressure reduction, when ASMEJANSI B3 1.4 45 1.7 does not apply; Amend its IMP to include a process for the prioritization and scheduling of remediation activities resulting from assessment activities [Ref. 5192.452(h)(3)]; Amend its IMP to include procedures to notify PHMSA if the remediation schedule can not be met and safety can not be provided through a temporary reduction in pressure; Amend its IMP risk analysis process to ensure risk factors reflect the risk conditions on the pipeline segment. The factors an operator must consider include, but are not limited to all of the risk factors listed under 5 195.452(e)(l); Amend its IMP risk analysis process to ensure that the domiylant causes of risk are readily identifiable; Amend its IMP risk analysis process to ensure that probability of failure (POF) categories are not weighted equally, but instead properly reflect system-specific and industry threat history; Amend its IMP risk analysis process to ensure that consequence of failure (COF) categories weight public safety and environmental considersqtions appropriately and that do not over emphasize non-safety considerations such a$ business impacts; Amend its IMP risk analysis process to ensure that the application of the risk analysis process is to pipeline segments that could affect a HCA and not to pipeline sections that have in their length one or more pipeline segmqnt(s) that could affect HCAs; Amend its IMP risk analysis process to include the application of the risk analysis process to all pipeline facilities; Amend its IMP preventative and mitigative measures to incllude a determination of the likelihood of a pipeline release occurring and how such a release could affect a HCA. At a minimum the following risk factors shall be considered; terrain surrounding the pipeline segment, including drainage systems such as small streams and other smaller waterways that could act as a conduit to the HCA, elevation profile, characteristics of the product transported, amount of product that could be released, possibility of a spillage in a farm field following the drain tile into a waterway, ditches along side a roadway the pipeline crosses, physical support of the pipeline segment such as by a cable suspension bridge, exposure of the pipeline to operating pressure exceeding established maximum operating pressure;#

520045030_Final Order_07102006.pdf, page 723. Amend its IMP to include an evaluation of potential preventhive and mitigative measures to prevent or minimize the likelihood of a pipeline release. The preventative and mitigative measures may include, but are nat limited to; implementing damage prevention best practices, better monitoring of CP where corrosion is a concern, establishing shorter inspection intervals, installing emergency flow restriction devices (EFRDs) on the pipeline segment, modifying the systems that monitor pressure and detect leaks, providing additional training to personnel on response procedures, conducting drills with local emergency responders and adopting other management controls; 24. Amend its IMP preventative and mitigative measures to include a process to evaluate the capability of leak detection on their system and a process to modify their leak detection capability, as necessary, to protect HCAs. The evaluation process must, at least, consider, the following factors-length and size of the pipeline, type of product carried, the pipeline's proximity to the HCA, the swiftness of leak detection, location of nearest response personnel, leak history, and risk assessment results; 25. Amend its IMP preventative and mitigative measures to include an analytical process for determining if an EFRD is needed on a pipeline siegment to protect a HCA in the event of a hazardous liquid pipeline release. At a minimum this analysis shall consider the following factors-the swiftness of leak detection and pipeline shutdown capabilities, the type of commodity carried, the rate of potential leakage, the volume that can be released, topography or pipeline profile, the potential for ignition, proximity to power sources, location of nearest response personnel, specific terrain between the pipeline segment and the HCA, and benefits expected by reducing the spill size; 26. Amend its IMP to include processes for the technical justificqtion of the reassessment interval for each assessment section. Five years is not a default reassessment interval. The reassessment interval must be justified; 27. Amend its IMP to include provisions for notifications to PHMSA for: 1) reassessment variances and 2) the use of other technology, as needed; 28. Amend its IMP to include a monitoring and evaluation process for determining the program's effectiveness in assessing and evaluating the integrity of each pipeline segment in protecting the HCAs; and 29. In complying with each of these items in this Amendment of Procedures section, ensure that the required processes and procedures have the fsur characteristics identified as (a) through (d) below. The items all relate to the need for Respondent to improve its IMP documentation. PHMSA recognizes that a number of program elements are still in the development stage, and that documentation will continue to evolve as methods are fully developed and defined. However, these procedures as well as the management and analytical process guidance used to implement the program must be of sufficient detail and specificity to:#

520045030_Final Order_07102006.pdf, page 8a. Clearly articulate the necessary steps to perform each grogram element and ensure repeatability, b. Describe the key input information sources, c. Define the process output products, their documentation (including the justification for decisions), and document retention requirements, and d. Specify organizational responsibilities for performing key process steps. 30. Submit the amended procedures and technical justifications tq the Director, Western Region, PHMSA within 30 days following receipt of this Ordbr Directing Amendment. 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 ITEM The Notice did not propose a civil penalty or corrective action for Item 3(&). Therefore, this is considered to be a warning item. Respondent is warned that if it does not take appropriate action to correct this item, enforcement will be taken if a subsequent inspection r~veals a violation. Under 49 C.F.R. 5 190.215, 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. Date Issued iate Administrator Pipeline Safety#

520045030_decision on petition_12052008_text.pdf, page 1Official PDFU S Department of Transportation Pipeline and Hazardous Materials Safety Administration 1200 New Jersey Aire S E Washington DC 20590 DEC 5 @OS VIA CERTIFIED MAIL — RETURN RECEIPT RE UESTED Mr. Hank A. True III President Belle Fourche Pipeline Company 895 W. River Cross Road Casper, WY 82602 Re: CPF No. 5-2004-5030 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 specified therein, the petition is denied. Payment of the $50, 000 civil penalty is due within 20 days of service. The Compliance Order and the Amendment Items remain unaltered and stand as stated in the Final Order. Please be advised that appropriate corrective action regarding the remainder of the Compliance Order and all Amendment Items must be taken if such action has not already been completed. When the civil penalty has been paid and the terms of the Compliance Order and Amendments of Procedures 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: Chris Hoidal, Director, Western Region#

520045030_decision on petition_12052008_text.pdf, page 2U. S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of Belle Fourche Pipeline Company, Petitioner. ) ) ) ) ) ) ) CPF No. 5-2004-5030 DECISION ON PETITION FOR RECONSIDERATION On July 10, 2006, pursuant to 49 U. S. C. $( 60118 and 60122 and 49 C. F. R. $ 190. 213, the Associate Administrator for Pipeline Safety (Associate Administrator) of the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Final Order in this proceeding against Belle Fourche Pipeline Company (Belle Fourche or Petitioner), finding that Petitioner had committed certain violations of 49 C. F. R. $ 195. 452(c) with respect to its integrity management program (IMP). The Final Order found that Petitioner had: (1) failed to establish a baseline assessment plan (BAP) schedule that prioritized pipeline segments based on identified risk conditions for each such segment; and (2) failed to include a seam failure susceptibility analysis on all pipeline segments containing low frequency electric resistance welded (ERW) and lap welded pipe in order to determine which segments were susceptible to seam failure and to select appropriate baseline assessment methods for each such segment. As for the first violation, the Final Order assessed a civil penalty in the amount of $50, 000. As for the second violation, it ordered Petitioner to perform a seam failure susceptibility analysis for all pipeline segments containing low frequency ERW and lap welded pipe and to determine which assessment methods were appropriate for each segment. The order also instructed Petitioner, pursuant to 49 U. S. C. $ 60108 and 49 C. F. R. $ 190. 237, to make various other amendments to its IMP plans and procedures. On July 31, 2006, Petitioner filed a petition for reconsideration pursuant to 49 C. F. R. $ 190. 215 (Petition). In its Petition, Belle Fourche sought reconsideration of the entire Final Order, including the findings of violation, the civil penalty assessed, the terms of the compliance order, and the order directing amendment of Petitioner's IMP plans and procedures. Petitioner sets forth several grounds for reconsideration. First, Petitioner contends that the Final Order is based upon the incorrect assumption that Petitioner did not respond to the Notice of Probable Violation (Notice). Second, Petitioner contends that it did not commit the violations of $ 195. 452(c) alleged in the Notice and therefore should not be assessed a civil penalty or ordered to take corrective action.#

520045030_decision on petition_12052008_text.pdf, page 3Alternatively, Petitioner contends that the order of amendment should be withdrawn to the extent that it applies to pipeline facilities not owned nor operated by Belle Fourche or to an IMP that was developed for one of Petitioner's related companies. This Decision addresses each of Petitioner's contentions in turn. I. Timel Res onse to Notice of Probable Violation The Final Order found that Petitioner failed to file a timely response to the Notice, thereby waiving Belle Foiuche's right to contest the allegations in the Notice and authorizing entry of the Final Order without further notice. Pursuant to 49 C. F. R. $ 190. 209(c), if an operator fails to respond "within 30 days of receipt of a [N]otice, " the Associate Administrator is authorized to find the facts as alleged in the Notice and to issue a Final Order without further notice to the respondent. PHMSA issued the Notice in this case on September 30, 2004. Petitioner has not shown and the record does not reflect the date on which Belle Fourche actually received the Notice. Petitioner has acknowledged, however, that it did receive the Notice and claimed that its counsel, Mr. Manuel A. Lojo, filed a written response on November 4, 2004 (November Letter). Petition, Attachment to Exhibit C. I have reviewed the record and remain unconvinced that Belle Fourche actually filed a timely response. Petitioner has presented no documentary evidence (e, g. , a certified mail return receipt) showing that counsel mailed or otherwise transmitted the November Letter on November 4, 2004. Instead, Belle Fourche submitted Mr. Lojo's affidavit, dated July 20, 2006, in which he stated: Because OPS has not responded to this matter for nearly two years, I do not have a specific recollection about how I directed that this particular communication (the Response Letter) be sent to the OPS, However, it was my customary practice then and still is today to send any communications to regulatory agencies such as the OPS by expedited means, either by facsimile or overnight mail. I believe that I transmitted the Response Letter to OPS by expedited means on November 4, 2004. While Mr. Lojo may believe that he filed a response with the Office of Pipelme Safety (OPS) on November 4, 2004, PHMSA has no record of having received the November Letter until it was included with the Petition filed on July 28, 2006, and received by OPS on July 31, 2006. An affidavit made nearly two years after the events in question is insufficient proof that Petitioner responded to the Notice within 30 days of its actual receipt. Upon a careful review of the entire record, I can find no reason to alter the finding in the Final Order that Petitioner failed to file a response within 30 days after receipt of the Notice and that Belle Fourche therefore waived its right to contest the allegations in the Notice and authorized entry of a Final Order under 49 C. F R. ) 190. 209(c). Notwithstanding the foregoing, I have fully reviewed and reconsidered the entire record in this proceeding and all of the substantive issues raised by Petitioner in its November Letter and the Petition. Belle Fourche's arguments relating to Item 2(a) in the Notice, regarding#

520045030_decision on petition_12052008_text.pdf, page 4the company's alleged failure to establish a proper BAP schedule based upon the risk conditions on each pipeline segment, are discussed in Section II below Its arguments relating to Item 2(b), regarding the company's alleged failure to include a seam failure susceptibility analysis for all pipe segments containing low frequency ERW and lap welded pipe to determine which segments are susceptible to seam failure, are discussed in Section III. Its arguments relating to the civil penalty, the compliance order, and the order directing amendments, are discussed in Sections IV, V, and VI, respectively. The Final Order found that Petitioner violated 49 C. F. R. ) 195. 452(c), as set forth in Item 2(a) of the Notice. That Section states, in relevant part: $ 195. 452 Pipeline integrity management in high consequence areas. (c) What must be tn the baseline assessment plan~ (1) An operator must include each of the following elements in its written baseline assessment plan: (i) The methods selected to assess the integrity of the line pipe. An operator must assess the integrity of the line pipe by any of the following methods. The methods an operator selects to assess low frequency electric resistance welded pipe or lap welded pipe susceptible to longitudinal seam failure must be capable of assessing seam integrity and of detecting corrosion and deformation anomalies. . . . (ii) A schedule for completing the integrity assessment; [and] (iii) An explanation of the assessment methods selected and evaluation of risk factors considered in establishing the assessment schedule. . . . The Notice alleged that as of the date of the inspection, Belle Fourche had not completed an analysis of the risk conditions on each segment of its pipeline system that "could affect" High Consequence Areas (HCAs). Therefore, Petitioner's BAP schedule was not properly based upon an evaluation of the specific risk factors identified for each pipeline segment, Such schedule should prioritize the pipeline segments for assessment based upon risk. ' In its November Letter and Petition, Belle Fourche contends that it had completed the risk analysis process required under $ 195. 452(c)(1), as of the May 2004 inspection date, for all 49 C. F R $ 195. 452(e) states, m relevant part' (e) What are the nsk factors for establishing an assessment schedule (for both the baseline and continual integrity assessments) z (I) An operator must establish an mtegrity assessment schedule that prioritizes pipelme segments for assessment . An operator must base the assessment schedule on all risk factors that reflect the nsk conditions on the pipeline segment . ' In its Petition, Belle Fourche reiterated this claim by submitting the affidavit of Mr Robert Stamp, a Belle Fourche employee, who stated that "At the time of the inspections, [Belle Fourche] had completed the requnements of 29 CFR $ 195. 452(a) [sic] for its pipelme systems, as of December I, 2003 Specifically, BFP had identified 'high consequence areas' and performed nsk assessments for those segments"#

520045030_decision on petition_12052008_text.pdf, page 5of its facilities. In the November Letter, Belle Fourche stated that its IMP "was, in fact, completed in January 2003 for an operator with less than 500 miles. " Petitioner's defense to this Item is based upon several incorrect assertions. First, Belle Fourche contends that there was confusion about exactly which IMP was being reviewed during the May 2004 inspection. In the November Letter, it stated that its 2003 IMP was one of two plans that were reviewed by the PHMSA inspector. The other was a combined IMP for both Belle Fourche and Bridger Pipeline LLC, which Belle Fourche acquired in December 2003, According to Petitioner, this combined plan was still a work "in progress" at the time of the May 2004 inspection. This contention is unfounded. First, the record does not indicate that Belle Fourche provided more than one IMP document to the PHMSA inspector or that the agency reviewed more than one plan. The only IMP that Belle Fourche submitted to PHMSA at the time of the inspection was identified on the cover page as follows: INTEGRITY MANAGEMENT PLAN Umted States Department of Transportation 49 CFR Part 105 Belle Fourche Pipeline Company And Bridger Pipeline LLC November 2003 Revised January 2004 The cover page clearly indicates that the IMP was initially effective as of November 2003 and then revised in January 2004, four months pnor to the inspection. It is this combined IMP (Plan) that is the subject of this proceeding. It is also apparent that the Plan was used jointly for two separate pipeline operators, namely, Belle Fourche Pipeline Company, which is a party to this proceeding, and Bridger Pipeline, LLC, which is not. Petitioner contends in the November Letter that its risk analysis process had been completed for the Belle Fourche lines as of the date of the inspection, but not for the Bridger lines, which were acquired in January 2004. The November Letter states that ". . . the BFPL plan was complete, for BFPL assets, as of January 2003 some 16 months prior to the inspection. " For pmposes of this Decision, I have reviewed the Plan as it existed on the date of the inspection and as it applied to the Belle Fourche facilities identified in the Plan. Second, Belle Fourche asserts that it only had three pipeline segments that "could affect" HCAs and that those lines had been assessed as of the inspection date. On the contrary, ' The November Letter states, "In addttion, it is unclear to us exactly on to what plan the violation is being assessed. Item 2(a) states that BFPL 'had not completed their risk analysis. ' But the BFPL plan was complete, for BFPL assets, as of January 2003 some 16 months prior to the inspection " Petition, Attachment to Exhibit C#

520045030_decision on petition_12052008_text.pdf, page 6the Plan identifies the following eight lines as "could-affect" segments" operated by Belle Fourche: Bicentennial to Baker Segment 1 Bicentennial to Baker Segment 2 Dickinson Segment 1 Dickinson Segment 2 Dickinson Segment 3 Twenty-mile to Guernsey Segment 2 Twenty-mile to Guernsey Segment 3 Wright Segment 1. Upon a review of the Plan, it is clear that Belle Fourche operates the pipeline segments listed above. There is no indication in the Plan that a risk analysis for these segments had been conducted as of the date of the inspection. Third, Belle Fourche asserts that it completed a risk analysis for its facilities as of December 2003 and that it met the requirements of 49 C. F. R. ) 452(c). However, it is clear from my review of the Plan that it does not include an adequate explanation of the assessment methods selected or an evaluation of the risk factors considered in establishing an assessment schedule. In the November Letter, Petitioner acknowledges as much, stating: [T]he BFPL plan had very little in the way of risk analysis as stated in Item 2(a), but that was because there were only 3 "could-affect" line segments for BFPL, The IM plan laid out a schedule of assessment for the 3 segments based on easily identifiable risk characteristics in the text of the plan. A more rigorous risk analysis process was not warranted for these 3 segments. Section 195. 452(b) requires each operator to have an IMP that includes a plan to carry out baseline assessments of all pipeline segments that could affect HCAs. In accordance with $ 195. 452(c) and (e), an evaluation of risk factors that reflects the conditions on each covered pipeline segment must be included in a BAP in order to enable selection of the proper assessment method(s) and intervals, The Plan obtained from Petitioner during the May 2004 inspection shows that although Belle Fourche had developed the outline of a risk analysis process, the company had not completed a proper risk analysis of each pipeline segment that "could affect" a HCA. Specifically, the Plan states that the assessment methodologies were chosen by evaluating the risk factors outlined in Appendix A, Section IV. The Appendix, in turn, included certain worksheets designed to assist with and reflect the risk conditions on each particular ' See Plan at Introduction, p. I, and Appendix C ' Although the Wright System is not identified as a Belle Fourche asset m the introduction to the Plan, the System descnption in Appendix C indicates that the hne is operated by Belle Fourche See Plan at Introduction, p. 3.#

520045030_decision on petition_12052008_text.pdf, page 7pipe segment. These worksheets, however, were blank and apparently never used to complete an actual risk analysis. Accordingly, I find that the Plan reviewed during the May 2004 inspection did apply to facilities operated by Belle Fourche, that it included eight pipeline segments that "could affect" HCAs, and that an adequate risk analysis was not reflected in the Plan for each of these eights segments. Therefore, I find no basis to modify the finding in the Final Order that Petitioner violated ) 195. 452(c) by failing to establish a baseline assessment schedule based upon an evaluation of risk factors identified for each pipeline segment. III. Notice Item 2 b Item 2(b) in the Final Order found that Petitioner violated 49 C. F. R. $ 195. 452(c), as stated above, by failing to perform a seam failure susceptibility analysis on all pipeline segments that contained low frequency electric resistance welded (ERW) and lap welded pipe to determine which segments were susceptible to seam failure, prior to selecting appropriate assessment methods for each segment. Such an analysis is necessary because the assessment method chosen must be based on the actual risk conditions of each pipeline segment and whether the selected method is capable of adequately assessing pipe integrity. In this case, a seam failure susceptibility analysis is needed because Belle Fourche operates pipe segments that contain low frequency ERW pipe and at least one of Belle Fourche's ERW pipelines, the Donkey Creek to Guernsey line, has experienced a pipeline release associated with longitudinal seam failure. In its Petition, Belle Fourche raises three defenses to this allegation. First, it contends that one of the cited releases was from a 10-inch portion of the Poplar Pipeline and one was &om a 16-inch portion of the Butte Pipeline, neither of which is owned or operated by Petitioner. Assuming this is correct, the one failure that did occur on Petitioner's Donkey Creek to Guernsey line still establishes the need for Belle Fourche to conduct a seam failure susceptiblity analysis for all those segments constructed of similar pipe. Second, the Petition states that Belle Fourche was not required under 49 C. F. R. ) 452(d) to complete an "actual seam failure baseline assessment[s]. . . . until (as applicable to BFP) 2005 (for at least 50 percent of the line) and 2009 for the remainder of the line. " Petition at 5. This is correct but not responsive to the violation cited in Item 2(a). Section 195. 452(c) requires that Petitioner have had a completed plan at the time of the May 2004 inspection, not a completed assessment, and that the plan include a seam failure susceptibility analysis to determine the extent to which pipeline segments containing low frequency ERW or lap welded pipe were susceptible to seam failure. Because Belle Fourche operated segments containing low frequency ERW pipe, it was required to perform an analysis to determine which, if any, of them were susceptible to seam failure. If any segments were found to be susceptible, then Petitioner was required to choose an assessment method capable of assessing seam integrity. ' Accordmg to Petitioner, both the Poplar and Butte Pipehnes are owned and operated by Bridger Pipelme, LLC. ' The Twenty-mile to Guernsey hne is constructed of low frequency ERW pipe, which is particularly susceptible to longitudinal seam failure The Bicentenmal to Baker system, the Wright system, and the Dickinson system are also constructed of low frequency ERW pipe Belle Fourche was required to analyze the susceptibihty of each of these ERW pipe segments to longitudinal seam failure#

520045030_decision on petition_12052008_text.pdf, page 8Petitioner's Plan states that its assessment methodologies were chosen "by evaluating specific risk factors" and refers to Appendix A of the document. Appendix A states that Appendix C of the Plan lists the assessment method(s) selected for each segment of pipeline, which was an in-line inspection device known as a standard magnetic flux leakage tool, However, the Plan acknowledged that seam evaluation analysis was not available with in-line inspection tools for pipes with a diameter of less than 24 inches and that the assessments scheduled in its Plan would not be able to address seam integrity. Furthermore, Petitioner failed to provide any analysis to show that its low frequency ERW pipe was not susceptible to longitudinal seam failure and therefore that a susceptibility analysis was not needed. Third, the Petition contends, in the alternative, that even if Belle Fourche did not conduct a proper seam failure susceptibility analysis, it nevertheless met the requirements of Section 452(c) by timely reducing the operating pressure on segments susceptible to longitudinal seam failure. In his affidavit dated July 27, 2006, and attached to the Petition, Mr. Stamp states that Subpart E of 49 C. F. R. Part 195 . „. allows an operator to reduce maximum operating pressure (MOP) by 80% in lieu of pressure testing. BFP has elected to "assess" and mitigate the risk of seam failure on the applicable pre- 1970 low frequency ERW pipeline by reducing MOP by 80%. This was done in January 2005. This argument is also without merit. First, a pressure reduction is not an assessment method. ' Although a pressure reduction can provide a margin to failure equivalent to a hydrostatic pressure test, a pressure reduction provides no information about the condition of the pipeline. One of the primary objectives of $ 195. 452(c) is to ensure that operators gain a better understanding of the condition of their pipe so they can make well-founded technical decisions to reduce risk and protect HCAs. In addition, Section 195. 452(h)(1) specifies that a reduction in operating pressure taken to provide an immediate improvement in safety cannot extend more than 365 days without the operator taking additional remedial action. Finally, the Plan does not indicate that a pressure reduction is the intended assessment method, so it is not clear how Petitioner believes that a pressure reduction could fulfill its obligations to complete a BAP. Accordingly, I find that Belle Fourche operates eight line segments that are potentially susceptible to longitudinal seam failure and therefore that the company is required under $ 195. 452(c) to perform a seam failure susceptibility analysis as part of its overall risk analysis in determining the appropriate methods to perform baseline assessments. I further find that a pressure reduction of 80% is not permitted under ( 195. 452(c) in lieu of performing such an analysis. For these reasons, I affirm the finding in the Final Order that Petitioner violated ) 195. 452(c) by failing to include a seam failure susceptibility analysis on all pipeline segments containing low frequency ERW and lap welded pipe to determine which segments were susceptible to seam failure and that such analysis needed to be The Stamp affidavit misidentifies this as 29 C F. R mstead of 49 C F R. ' See Frequently Asked Questions 6 10 and 6 15 at htt 0 rimis hmsa dot ov!»mldocsf/fa text htm¹s6#

520045030_decision on petition_12052008_text.pdf, page 9performed prior to Belle Fourche selecting appropriate baseline integrity assessment methods for each pipe segment. IV. Civil Penal Assessment The Final Order assessed a civil penalty of $50, 000 under 49 U, S. C. ) 60122 for the violation listed in Item 2(a) of the Final Order. Under 49 U. S. C. $ 60122, a violator is subject to a civil penalty not exceed $100, 000 per violation for each day of the violation, up to a maximum of $1, 000, 000. As required by 49 C. F. R. 60122 and indicated in the Final Order, OPS considered the following criteria in determining the penalty amount: the nature, circumstances and gravity of the violation; the degree of the Petitioner's culpability; Petitioner's history of prior offenses; Petitioner's ability to pay the penalty; Petitioner's good faith in attempting to achieve compliance; the effect on Petitioner's ability to continue in business; and such other matters as justice may require. In its Petition, Belle Fourche argues that the civil penalty should be eliminated on the basis of the substantive grounds discussed above. In the alternative, Petitioner argues that the penalty should be reduced for several reasons. First, it argues that it made "good faith efforts to comply by timely completing an IM plan, " that "it recognized its obligation to conduct a risk analysis, " and that it did not "simply disregard its regulatory obligations. " Second, it argues that no environmental harm resulted from the alleged violation and that Petitioner did not realize any economic benefit from non-compliance because it committed the necessary resources to prepare an IMP and performed a risk analysis. Third, it argues that given the confusion over the facilities covered by Belle Fourche's IMP (and the fact that it did not own or operate some of the facilities upon which the penalty was based), it " would be "unjust and inequitable to impose anything but a de minimis penalty. . . I have reviewed the civil penalty in light of the discussion in the preceding Sections and have determined that the penalty imposed in the Final Order is reasonable and fully supported by the evidence. It is true that PHMSA recognizes the "good faith efforts" of operators to achieve full compliance with the pipeline safety regulations before an inspection has occurred. In this case, however, the IMP that Belle Fourche had in place at the time of the inspection fell so far short of the regulatory requirements of 49 C. F. R. ( 452(c)(1) that the company could not have reasonably expected its Plan to pass muster. As for the lack of environmental harm, this factor was considered in setting the initial penalty. As for the lack of economic benefit derived from Petitioner's non-compliance, this claim is questionable and not supported by any evidence submitted by Petitioner. Finally, the amount of the penalty is not based upon the number of line segments or line mileage ostensibly in Petitioner's system; therefore, no reduction in penalty is warranted by the fact that some of the lines covered by the Plan may have been owned and operated by Bridger Pipeline LLC. Accordingly, I find that the civil penalty imposed by the Final Order reasonably addresses Petitioner's failure to complete an IMP that included a comprehensive risk analysis process and a prioritized schedule based upon the risks posed by each pipeline segment.#

520045030_decision on petition_12052008_text.pdf, page 10V. Com liance Order In its Petition, Belle Fourche requests that the compliance terms of the Final Order be rescinded because the company was in compliance with 49 C. F. R. ) 195. 452(c)(1), as discussed above. In the alternative, Petitioner contends that it did not own or operate some of the pipeline segments identified in the Notice and therefore that the compliance order should be modified to exclude these segments. Having fully considered these issues above, I affirm the terms of the compliance order as they apply to pipeline facilities operated by Belle Fourche, The compliance order requires Petitioner to determine the susceptibility to seam failure for all segments containing low-frequency ERW pipe and lap welded pipe. The compliance order does not require Petitioner to actually complete the integrity assessment for those segments within 60 days. Therefore, the schedule specified in the regulations for completion of baseline integrity assessments continues to apply. To date, Petitioner has not provided any information to PHMSA demonstrating that it has a BAP in place that meets the requirements of the regulations. In order to do so, Petitioner must determine the susceptibility of its line pipe segments to seam failure and determine an appropriate method and schedule for completing the integrity assessment based on its evaluation of risks. Therefore, the compliance order remains unchanged with regard to the lines operated by Belle Fourche but is hereby amended to delete any reference to the "10- inch portion of the Poplar Pipeline" and the "16-inch Butte Pipeline. "" VI. Order Directin Amendments In its Petition, Belle Fourche requests that items in the Notice "that were not directed at [Belle Fourche]'s plan or assets be withdrawn, " As there are no provisions in the Final Order specific to a particular pipeline, Petitioner's request is denied. Petitioner is ordered to make the revisions to its plans and procedures as indicated in the Final Order. VII. Conclusion I have considered Petitioner's petition for reconsideration and the additional information submitted with it, including the November Letter, and have reviewed the entire record of the May 2004 inspection Accordingly, I find that Belle Fourche failed to file a timely Response to the Notice issued on September 30, 2004, and that it therefore waived its right to a hearing and authorized the findings of fact as alleged in the Notice and entry of the Final Order without further notice. In the alternative, I find that Belle Fourche violated 49 C. F. R. $ 195. 452(c), as set forth in Items 2(a) and 2(b) in the Notice and discussed more fully above, and that the $50, 000 penalty assessed for Item 2(a) is reasonable and fully supported by the evidence. Accordingly, the assessment of the civil penalty remains unchanged. " To the extent that Bridger Pipehne, LLC, is operating under the same IMP as Belle Fourche, the former is advised to take corrective actions similar to those outlined herem#

520045030_decision on petition_12052008_text.pdf, page 1110 In addition, I find that Petitioner has failed to demonstrate that its plans and procedures comply with the integrity management requirements in 49 C. F, R. $ 195. 452, as more fully described in Items 1-11 of the Notice. Therefore, all terms of the Final Order shall remain in effect, including the compliance order and the order directing amendments to Petitioner's plans and procedures, except insofar as they apply to pipeline facilities owned and operated by Bridger Pipeline, LLC. Payment of the civil penalty must be made within 20 da s 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 Questions concerning wire transfers should be directed to: Financial Operations Division (AMZ-341), Federal Aviation Administration, Mike Monroney Aeronautical Center, P. O, Box 25082, Oklahoma City, OK 73125; (405) 954-8893. Failure to pay the 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. 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 Coint. This decision on reconsideration is the final administrative action in this proceeding. ljE(; 5 XM Date Issued Jeffrey D. Wiese Associate Administrator for Pipeline Safety#