HILCORP NORTH SLOPE, LLC — Corrective Action Order

case documentOfficial PDF520065015H_Consent Decree Appendix A_07132011.pdf#

case documentOfficial PDF520065015H_Consent Decree Appendix A_07132011_text.pdf#

case documentOfficial PDF520065015H_Consent Decree_07132011.pdf#

case documentOfficial PDF520065015H_Consent Decree_07132011_text.pdf#

case documentOfficial PDFBP 5-2006-5015H - Final.pdf#

case documentOfficial PDFCPF_5_2006_5015H.pdf#

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case documentOfficial PDFCPF_NO5-2006-5015H.pdf#

CPF_No_5-2006-5015 Amendment-2.pdf, page 1Official PDFQUG-09-2006 23:53 PHMSA AK DIST OFFICE P. 02 U.S. Department of Transportation Pipeline and Hazardous Materials Safety Admlnlstration 400 Seventh Street, S.W. Suite 841 7 Washington, DOC. 20590 Via Federal Express and Facsimile To: (907) 564-5000 Ms. Maureen L. Johnson Senior Vice President & Greater Prudhoe Bay Performance Unit Leader BP Exploration (Alaska), Inc. 900 E. Benson Blvd. Anchorage, AK 99508 RE: CPF #5-2006-5015H Amendment No.2 to Corrective Action Order Dear Ms. Johnson: Enclosed is Amendment No. 2 to the March 15,2006 Corrective Action Order (CAO) issued by the Associate Administrator for Pipeline Safety to BP Exploration (Alaska), Inc., (BP). Amendment No. 2 sets forth further preliminary findings based on PHMSA's continuing oversight of BP's compliance with the March 15, 2006 CAO, and the results of recent testing and inspections of the subject lines. Amendment No. 2 imposes additional monitoring, testing, and information requirements and prescribes standards and deadlines for the repair of pipeline defects. The Amendment also imposes new requirements arising out of BP's decision to suspend or terminate operations involving one or more of its pipelines segments. Except as expressly provided in Additional Preliminary Finding No. 16, Amendment No. 2 does not waive, alter or supplant the original terms and requirements of the July 20,2006 Amendment No. 1 to the CAO or the March 15,2006 CAO. Your receipt of the enclosed document constitutes service of that document under 49 C.F.R. 8 190.5. The terms and conditions of this Amendment are effective upon receipt. Sincerely, Acting Associate Administrator for Pipeline Safety Enclosure cc: Chris Hoidal, P,E., Director Western Region, PHMSA#

CPF_No_5-2006-5015 Amendment-2.pdf, page 2AUG-09-2006 23:21 PHMSA AK DIST OFFICE DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of BP Exploration (Alaska) Inc., ) CPF No. 5-2006-5015H Respondent AMENDMENT No. 2 TO CORRECTIVE ACTION ORDER Background & Purpose On March 15,2006, under authority of 49 U.S.C. 5 601 12, the Associate Administrator for Pipeline Safety, Pipeline and Hazardous Materials Safety Administration (PHMSA), issued a Corrective Action Order (CAO) to BP Exploration (Alaska), Inc., @P), finding that the continued operation of three crude oil transmission pipelines in BP's Prudhoe Bay Operating Area -the Western Operating Area (WOA), Eastern Operating Area (EOA) and Lisburne crude oil pipelines - would be hazardous to life, property, or the environment without the implementation of corrective measures. The CAO was issued in response to a failure on BP's WOA pipeline that caused the discharge of an estimated 20 1,000 gallons of crude oil. In addition to addressing the immediate consequences of the pipeline failure, the March 15,2006 CAO required BP to take various measures to evaluate the condition of the subject Iines, and to make any necessary repairs. Items 3,4, and 7 of the CAO required BP to perform cleaning operations on the three pipelines, assess the condition of the pipeline walls, and measure any corrosion or other defects using an instrumented in-line inspection tool (known as a "smart-pig"). On July 20,2006, under authority of 49 U.S.C. $601 12, the Associate Administrator issued Amendment No. 1 to the March 15,2006 CAO. Amendment No. 1 set forth additional preliminary findings based on PHMSA's oversight of BP3s activities and PHMSAYs continuing investigation of pipeline conditions on BP's Prudhoe Bay Operating Area. Amendment No. 1 required BP to perform additional integrity assessments and to develop and implement plans for addressing new and ongoing safety risks associated with its failure to complete diagnostic measures required by Items 3,4, and 7 of the March 15,2006 CAO.#

CPF_No_5-2006-5015 Amendment-2.pdf, page 3QUG-09-2006 23:22 PHMSQ QK DIST OFFICE P. 04 Additional Preliminary Findings Prudhoe Bay EOA Transmission Pipeline 1. The EOA pipeline is constructed of X60 Grade, 0.344-inch wall thickness pipe manufactured between 1976 and 1979. The fust segment of the EOA pipeline, extending approximately three (3) miles from Flow Station 2 (FS2) to Flow Station 1 (FS l), is constructed of 30-inch nominal diameter pipe. The second segment, constructed of 34- inch nominal diameter pipe, extends approximately five (5) miles fiom FS 1 to Skid 50; just upstream of the Trans Alaska Pipeline System (TAPS). 2. 3. 4. 5. 6. On or about July 22,2006,3 7 days after the deadline established under the March 1 5, 2006 CAO (as extended), BP performed smart pigging of the FS2-FS1 segment of the EOA pipeline. BP reportedly received initial reports of the smart pig data on August 4, 2006. These reports identified sixteen (16) anomalies (representing wall loss in excess of 70 percent, including two (2) over 80 percent) at twelve (1 2) separate areas on the FS2-FS 1 segment of EOA pipeline. According to BP, the data indicated each of the sixteen anomalies is approximately 1.5 by 1.5 inches in size and is located in the lower quadrant of the pipe (between the 5:45 to 6:45 positions). On or about August 5,2006, BP began performing direct visual and ultrasonic inspection of the locations identified by the smart-pig data as having significant wall loss. In the course of that work, according to BP reports, BP discovered a location where crude oil apparently had leaked through the pipe wall and onto the insulation material. On the basis of that discovery, BP reportedly initiated shut down of the FS2-FS 1 segment of thc EOA pipeline at approximately 6:00 a.m. on August 6,2006. Later in the morning of August 6,2006, according to BP, BP personnel discovered crude oil leaking from a different location on the FS2-FS 1 segment of the EOA pipeline. According to BP, field inspection of the leak site revealed multiple holes in the pipe wall at a single location, contributing to an estimated spill of approximately five (5) barrels of processed crude oil. Since August 6,2006, BP reportedly has discovered pinhole leaks on at least four additional locations on the FS2-FS 1 segment of the EOA pipeline. 7. On the afternoon of August 6,2006, BP notified the Director of P M S A ' s Western Region Pipeline Safety Ofice of the EOA pipeline spill and advised PHMSA that BP had decided to shut down all of its Prudhoe Bay production fields on the North Slope. BP further stated that the Lisburne pipeline and associated production facilities would remain in service. On August 8,2006, BP indicated its desire to maintain operations of the WOA pipeline if pipeline integrity could be demonstrated through further field assessments.#

CPF_No_5-2006-5015 Amendment-2.pdf, page 4RUG-89-2086 23:22 PHMSR QK DIST OFFICE P. 85 8. To date, BP has not performed cleaning or smart pigging operations on the FS 1-Skid 50 (34-inch diameter) segment of the EOA pipeline. 9. On or about August 7,2006, a team of PHMSA personnel and officials were deployed to BP facilities in Alaska to investigate the August 6,2006 spill, examine the basis for BP's decision to cease operations, oversee BP's shutting down o f pipeline operations, and evaluate what procedures would be necessary to safely restart operations. 10. On August 9,2006, BP announced that it had decided to replace the FS2-FSI segment and that BP had no plans to return the segment to operation. Pmdhoe Bav Lisburne Transmission Pipeline 11. On or about June 30,2006, fifteen (15) days after the deadline established under the March 15,2006 CAO (as extended), BP performed smart pigging of the Lisbume pipeline. BP reportedly received initial reports of the smart pig data on or about July 13, 2006. 12. BP reports that smart-pigging data indicate ten (10) areas in which external wall loss exceeded 40 percent. Prudhoe Bay WOA Transmission Pipeline 13, The WOA pipeline consists of two segments of 34-inch nominal diameter pipe. The first segment (OT-2 1) extends approximately three (3) miles from Gathering Center 2 (GC2) to Gathering Center 1 (GCI). The OT-21 segment is currently bypassed by a jumper pipeline (GHX21). The second, downstream segment extends approximately fivc (5) miles from GC1 to Skid 50, and then to Pump Station 1 (PSI), just upstream of TAPS. 14. To date, BP has not performed cleaning or smart-pigging operations on either segment of the WOA pipeline. 15. BP took the OT-21 segment out of service following the spill discovered March 2,2006 and has not returned the line to service since that date. Pursuant to Item 16 of Amendment No. 1 to the March 15,2006 CAO, BP has submitted a plan for de-oiling the OT-21 segment beginning on or before August 22,2006. The Director of the Western Region Pipeline Safety Office has reviewed and concurs with the plan. 16. BP has advised PHMSA by letter dated July 28,2006, that the OT-21 segment will not be returned to service and will be permanently replaced with a new pipeline. To the extent that OT-2 1 will not be returned to service and is deoiled, BP is not required to complete smart-pigging of that segment as otherwise required by the March 15,2006 CAO. 17. On June 6,2006, BP submitted a plan for conducting assessment of pipeline wall integrity using ultrasonic testing (UT) to measure the thickness of the pipe wall at particular points on the line. BP proposed to use this inspection method until it conducts 3#

CPF_No_5-2006-5015 Amendment-2.pdf, page 5PHMSR RK DIST OFFICE smart pigging as required by the March 15,2006 CAO, and interprets the results. BP contended that by extrapolation from the UT data, BP could obtain information, of equivalent reliability to smart pig results, for understanding the pattern and extent of internal corrosion in its pipelines. BP submitted the results of ultrasonic testing, performed from March through July, 2006, on the GC1-Skid 50 segment of the WOA pipeline. 18. Following the recent discovery of leaks and internal corrosion on the EOA line, BP announced a plan to conduct more thorough,continuous automatic UT testing (AUT) of the in-service segment of its WOA pipeline. As of August 9,2006, BP reportedly had initiated AUT testing on the GC1-Skid 50 segment. 19. As of August 8,2006, BP has advised PHMSA investigators that a11 available resources are being deployed for completing inspection of the in-service segment of the WOA pipeline as soon as possible. BP representatives have advised PHMSA investigators and officials that they have deployed all available equipment and resources in support of completing continuous AUT testing as soon as possible. At the same time, BP reports that it is moving ahead with plans to smart pig all or part of the WOA pipeline by acquiring equipment and planning preliminary operations. 20. PHMSA has not ordered BP to cease operating the GC1-Skid 50 segment or the OT21 bypass (CHX21) of the WOA pipeline, and PHMSA is not aware of any data concerning the current condition of pipe on the GC1 -Skid 50 segment, or the GHX21 bypass, that would necessitate an immediate cessation of operations on the WOA pipeline in order to protect life, property, or the environment. DETERMINATION OF NECESSITY FOR AMENDMIENT OF C O W C T I V E ACTION ORDER AND RIGHT TO A HEARING Section 601 12 of Title.49, United States Code, provides for the issuance of a Corrective Action Order, after reasonable notice and the opportunity for a hearing, when PHMSA decides that a pipeline facility is hazardous. Corrective action may include the suspended or restricted use of a pipeline facility, physical inspection, testing, repair, replacement or other appropriate action. The basis for deciding that a pipeline facility is hazardous, requiring corrective action, is set forth both in the above-referenced statute and 49 C.F.R. 5 190.233. Section 601 12(e) of Title 49, United States Code, and the regulations promulgated thereunder (49 C.F.R. $190.233(b)), provide for the issuance of a Corrective Action Order without prior opportunity for notice and hearing upon a finding that a failure to issue the Order expeditiously will likely result in serious harm to life, property, or the environment. In such cases, an opportunity for a hearing will be provided as soon as practicable after the issuance of the Order. Based on the additional preliminary findings set forth above and the preliminary findings in the March 15,2006 CAO and Amendment No. 1, I continue to find that the presence of hazardous#

CPF_No_5-2006-5015 Amendment-2.pdf, page 6conditions on the EOA, Lisburne, and WOA pipelines, without the implementation of corrective measures, would result in likely serious harm to property or the environment. Additionally, after considering the circumstances surrounding the failures discovered on August 6 and March 2,2006, the number and severity of anomalies discovered on the EOA line, the immediate proximity of the pipeline to environmentally sensitive areas, and the safety and environmental threats posed by serious internal corrosion of the EOA line, I find that failure to expeditiously issue this Amendment would result in likely serious harm to life, property and the environment. Within ten (10) days of receipt of this Order, BP may request a hearing, to be held as soon as practicable, by notifying the Associate Administrator for Pipeline Safety in writing, delivered personally, by mail or by facsimile at (202) 366-3666. A hearing, if requested, will be held in Lakewood, Colorado or Washington, DC on a date that is mutually convenient to PHMSA and BP. A hearing requested on this Amendment may be consolidated with the hearing BP has already requested on this CAO. In the course of this investigation, P W S A may identifjr additional measures that need to be taken to ensure the safety of BP's pipeIines covered by the CAO. The terms of the March 15, 2006 CAO and the additional terms added by Amendment No. 1, this amendment, and subsequent amendrnent(s) will remain in place for as long as the Associate Administrator deems necessary to ensure the subject pipelines are operated in a safe and environmentally sound manner. The actions required by this CAO are in addition to and do not waive or modify any requirements that apply to BP's pipeline systems under any provision of Federal or state law, or under any other order issued to BP under authority of 49 U.S.C. §§60101 et seq. Amendments to Required Corrective Action Pursuant to 49 U.S.C. 5 601 12, I hereby order BP to immediately take the following additional corrective actions with respect to BP's Prudhoe Bay oil transmission pipeline system: The following items are added to the Corrective Action Order: Item 22. Additional Measures for Monitoring and Response. Within one (1) day of receipt of this Amendment No. 2, and until further order of the Western Region Director, BP shall begin four times daily visual and handheld infrared surveys via ground patrol of the entire length of the EOA, Lisburne, and WOA pipelines. Surveys shall seek out signs of leaks and any other threats to pipeline integrity. BP shall report the results of the surveys to the Western Region Director on a weekly basis, provided that any leaks or threats to pipeline integrity must be reported immediately. Prudhoe Bav EOA Transmission Pioeline Item 23. EOA Plan. Within 30 days of receipt of this Amendment No. 2, BP shall submit a report to the Western Region Director, detailing its proposed actions and plans for replacing,#

CPF_No_5-2006-5015 Amendment-2.pdf, page 7RUG-09-2086 23:25 PHMSR RK DIST OFFICE P.08 abandoning, and/or restoring operation of the FSZFS1 and FS 1 -Skid 50 segments of EOA. The report shall include preliminary or final engineering plans and timetables, and identify all necessary equipment, parts, and supplies, specifying, inventories, availability and delivery schedules. Item 24. Interim Ultrasonic Testing of EOA FS1-Skid 50 Segment. Until BP has completed cleaning and smart pigging of the EOA pipeline in accordance with Items 4 and 7 of the March 15,2006 CAO, BP shall perform interim alternative testing in accordance with the requirements of this paragraph, on a basis not to interfere with AUT inspections on operational oil transmission lines. BP shall conduct AUT inspection of the 34-inch diameter segment of the EOA line fiom FS1 to Skid 50. The AUT inspection shall cover 100% of the len& of the FS 1 - Skid50 segment and the bottom 120 degrees of pipe circumference (between the 4:00 and 8:00 positions). BP shall ensure that the AUT scans are performed, verified, calibrated, and recorded in accordance with established industry practices and shall submit data to the Western Region Director, in raw and graphical formats, within seven (7) days of receipt of AUT results by BP. Item 25. Ultrasonic Testing of Anomalies Identified by Smart-Pigging. Within three weeks of receipt of this Amendment No. 2, BP shall perform external UT assessment at the location of each anomaly where wall loss exceeds SO%, as revealed by smart-pig data collected on the FS2- FS 1 segment. BP shall provide PHMSA data reports and a graphical comparison of smart-pig and UT data for anomalies specified above within six (6) weeks of receipt of this order. Item 26. Plan For De-Oiling EOA Pipeline. Within 30 days of receipt of this Amendment No. 2, BP shall develop, and submit for approval to the Western Region Director, a plan to safely remove the crude oil in the segments of the EOA pipeline that will not be restored to operation. The plan shall provide for removal of the crude oil, in a safe and environmentally sound manner, and in compliance with all applicable federal, state and local laws and regulations. BP shall implement such plan upon approval. Item 27. Safe Resumption of Operations. BP may return the EOA pipeline to operation only with the prior approval of the Director of PHMSA's Western Region Pipeline Safety Office, upon a record of satisfactory testing, repair, inspection, and planning in accordance with the March 15,2006 CAO, the July 20,1006 Amendment No. I, and this Amendment No. 2. Any request for resumption of operations, temporary or otherwise, shall be submitted no fewer than fourteen (14) days in advance of the proposed restart date. Prudhoe Bay Lisburne Transmission Piaeline Item 28. Ultrasonic Testing of Anomalies Identified by Smart-Pigging. Within three weeks of rcceipt of this Amendment No. 2, BP shall perfonn external UT assessment at the location of each anomaly where wall loss exceeds 50 %, as revealed by smart-pig data collected on the Lisburne line. BP shall provide PHMSA data reports and a graphical comparison of smart-pig and UT data for anomalies specified above within six (6) weeks of receipt of this order. Item 29. Repair of Pipeline Defects. BP shall document and repair all defects and other conditions defined under 49 C.F.R. §195.452@)(4)(i) through (iv) on a schedule that at a 6#

CPF_No_5-2006-5015 Amendment-2.pdf, page 8PHMSQ QK DIST OFFICE minimum, comports with the deadlines set out in 49 C.F.R. §195.452(h)(4) and in a manner consistent with ASME B-3 1.4. Within 30 days of receipt of this order, BP shall extract, record and provide to the Western Region Director dimensional data of all anomalies found, including data on distance from upstream and downstream girth weld, position, minimum and maximum remaining wall thickness, and remedial actions taken with respect to each anomaly. As repairs are made, BP shall submit monthly reports to the Western Region Director documenting each repair made (including photographs) with respect to each such anomaly. Prudhoe Bay WOA Transmission Pi~eline Item 30. Information Request. Within 48 hours of receipt of this Amendment No. 2, BP shall provide the Western Region Director with all data and risk analyses not previously provided by BP, concerning the current condition of the WOA pipeline, including all data and analyses on the basis of which BP announced its original decision to cease operation of the WOA pipeline. Item 31. Ultrasonic Testing Pending Smart-Pigging. Until BP has completed cleaning and smart pigging of the GC1-Skid 50 segment of the WOA pipeline in accordance with Items 3 and 4 of the March 15,2006 CAO, BP shall perform testing in accordance with the requirements of this paragraph. BP shall conduct AUT inspection of the GC1-Skid 50 segment of WOA. The AUT inspection shall cover 100% of the length of the GC1-Skid 50 segment and the lowest 120 degrees of pipe circumference (between the 4:00 and 8:00 positions). The entire circumference of the pipe shall be visually inspected and any areas of general external corrosion shall be assessed and documented. BP shall ensure that the AUT scans are performed, verified, calibrated, and recorded in accordance with established industry practices and shall submit data to the Western Region Director, in raw and graphical formats, within seven (7) days of receipt of AUT results by BP. Any external corrosion shall also be reported at that time. item 32. Documentation and Repair of Pipeline Defects. BP shall document and repair all defects and other conditions defined under 49 C.F.R. §195.452(h)(4)(i) through (iv) on a schedule that at a minimum, comports with the deadlines set out in 49 C.F.R. §195.452@)(4) and in a manner consistent with ASME B-3 1.4. Within 30 days of receipt of this order, BP shall extract, record and provide to the Western Region Director dimensional data of all anomalies found, including data on distance fiom upstream and downstream girth weld, position, minimum and maximum remaining wall thickness, and remedial actions taken with respect to each anomaly. As repairs are made, BP shall submit monthly reports to the Western Region Director documenting each rcpair made (including photographs) with respect to each such anomaly. Item 33. Condition of GHX21 Bypass. Within 30 days of receipt of this Amendment No. 2, BP shall provide a report to the Western Region Director detailing all maintenance, cleaning and inspection, and repair activities with respect to GHX21. BP shall also develop, submit to the Western Region Director for review and approval, o plan for performance of smart pigging at regular intervals not to exceed five (5) years, and a schedule for the repair of anomalies identified through those inspections.#

CPF_No_5-2006-5015 Amendment-2.pdf, page 9QUG-09-2006 23:26 PHMSR QK DIST OFFICE Item 34. Inspection Plan for OT501. Within 30 days of receipt of this Amendment No. 2, BP shall provide a report to the Western Region Director detailing the results of inspections and testing of the OT501 section, and plans for future inspection and testing. Except as expressly provided in Additional Preliminary Finding No. 16, this Amendment does not modify, waive or supplant any requirements imposed under the March 15,2006 CAO, the July 20,2006 CAO Amendment No.1. This Amendment No.2 does not modify, waive, or supplant any requirements that apply to BP7s pipeline systems under any other provision of federal, state, or local law, or permit. With respect to all actions undertaken pursuant to this Amendment, BP is responsible for achieving and maintaining compliance with all applicable federal, state and, local laws, regulations and permits. This Amendment is not and shall not be construed to be a permit, or a modification of any permit, under any federal, state, or local law or regulation. In accordance with 49 U.S.C. 5 60 122 and 49 C.F.R. 5 190.223, failure to comply with the CAO, as amended, may result in the assessment of administrative civil penalties of not more than $100,000 per violation per day pursuant to 49 U.S.C. $6012.2, or in the imposition of civil judicial penalties and other appropriate relief pursuant to 49 U.S.C. 560120. The terns and conditions of this Amendment are effective upon receipt. Theodore L. *illke I I bate h u e d Acting Associate Administrator for Pipeline Safety TOTRL P.10#

520065015H_closure letter_03062012_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED March 6, 2012 Mr. John Eldred VP, Safety & Operational Risk BP Exploration Alaska, Inc. 900 East Benson Boulevard Mailbox 3-1 P.O. Box 196612 Anchorage, AK 99501 Re: Closure of Corrective Action Order CPF 5-2006-5015H Dear Mr. Eldred: On March 15, 2006, the Associate Administrator for Pipeline Safety, Pipeline and Hazardous Materials Safety Administration (PHMSA), issued a Corrective Action Order (CAO) in the above-referenced case. The CAO and subsequent Amendments to the CAO (Amendment 1 dated July 20, 2006, Amendment 2 dated August 10, 2006, and Amendment 3 dated April 27, 2007) required BP Exploration (BPXA) to take corrective actions, including, but not limited to, cleaning, smart pigging (ILI), and inspection of the Oil Transit Lines in Prudhoe Bay, Alaska. BPXA did not fully meet the terms of the CAO due to delays in cleaning and internal inspections. The US Department of Justice filed a complaint on behalf of PHMSA seeking relief in the US District Court for the District of Alaska on March 31, 2009. A Consent Decree resolving this complaint was accepted by the court on July 13, 2011. In this Consent Decree, BPXA agreed to injunctive relief and a civil penalty and certified that it had replaced the Oil Transit Lines that were the subject of the CAO. PHMSA believes the Consent Decree resolves the terms of the CAO and the subsequent Amendments to the CAO. This case is now closed. 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 D. Hinnah#

520065015H_Corrective_Action_Order_03152006.pdf, page 1Official PDFU.S. Department 400 Seventh Street, S.W. of Transportation Washington, D.C. 20590 Pipeline and Hazardous Materials Safety Administration MAR 1 5 2006 VIA FEDERAL EXPRESS AND FACSIMILE TO: (907) 564-5000 Ms. Maureen L. Johnson Senior Vice President & Greater Prudhoe Bay Performance Unit Leader BP Exploration (Alaska), Inc. P.O. Box 196612 Anchorage, AK 995 19-66 12 Re: CPF No. 5-2006-501 5H Dear Ms. Johnson: Enclosed is a Corrective Action Order issued by the Associate Administrator for Pipeline Safety in the above-referenced case. It requires you to take certain corrective actions with respect to the Prudhoe Bay West Operating Area, Prudhoe Bay East Operating Area, and Lisburne hazardous liquid pipeline facilities operated by BP Exploration (Alaska), Inc. Service is being made by Federal Express and facsimile. Your receipt of this Corrective Action Order constitutes service of the document under 49 C.F.R. tj 190.5. The terms and, conditions of this Corrective Action Order are effective upon receipt. Sincerely, James Reynolds Pipeline Compliance Registry Office of Pipeline Safety Enclosure cc: Chris Hoidal, Director, Western Region, PHMSAIOPS#

520065015H_Corrective_Action_Order_03152006.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 In the Matter of BP Exploration (Alaska), Inc., Respondent 1 CPF NO.5-2006-5015H CORRECTIVE ACTION ORDER Purpose and Background This Corrective Action Order is being issued, under authority of 49 U.S.C. § 601 12, to require BP Exploration (Alaska), Inc. (Respondent), to take necessary corrective action to protect the public, property, and the environment from potential hazards associated with a failure involving Respondent's Prudhoe Bay West Operating Area (PBWOA) hazardous liquid pipeline. On March 2,2006, Respondent discovered a leak on the PBWOA hazardous liquid pipeline in North Slope Borough, Alaska. The probable cause of the failure is internal corrosion. Pursuant to 49 U.S.C. 5 601 17, the Pipeline and Hazardous Materials Safety Administration (PHMSA) initiated an investigation of the accident. Preliminarv Findings On March 2,2006, at approximately 5:30 AM AKST, Respondent's surveillance crew discovered a crude oil spill in the proximity of Respondent's PBWOA hazardous liquid transmission pipeline in North Slope Borough, Alaska. Respondent determined the failure site to be at or near Mile 1.0 between Gathering Center 2 (GC-2) and Gathering Center 1 (GC-1) on the PBWOA pipeline, several miles upstream of the Trans Alaska Pipeline's first pump station (PS-1). No fires, injuries, or fatalities were reported in connection with the accident. The pipeline failure resulted in a release currently estimated at 5,000 barrels of processed crude oil, impacting the arctic tundra and covering approximately 2 acres of permafrost. Potential damage to the ecology and environment is presently unknown. Respondent's leak detection system was not effective in recognizing and identifing the failure. Following discovery of the spill, Respondent isolated the segment between GC-2#

520065015H_Corrective_Action_Order_03152006.pdf, page 3and GC-1, initiated shutdown at 6:49 AM AKST and depressurized the segment. Respondent located the leak site and installed a containment welded sleeve. Respondent also initiated oil spill response. The failure point is a 0.25-inch by 0.5-inch hole in the pipe. The probable cause of the failure is internal corrosion. There is evidence of bacterial corrosion (increased hydrogen sulfide and nitric acid in the crude oil) and increased water content. Respondent's PB WOA hazardous liquid pipeline system is approximately 10 miles in length and transports processed crude oil from GC-2 to PS- 1 on the Trans Alaska Pipeline in North Slope, Alaska. The PB WOA system is constructed of 34-inch nominal diameter, X52 Grade, 0.375-inch wall thickness, submerged arc welded pipe manufactured in 1975 through 1977. The pipe is not coated and it is not cathodically protected. The pipeline sits on a vertical support member above-ground and is surrounded by an air culvert. The pipe is insulated and has a steel jacket. Although the pipeline is above-ground, at the time of the failure, the pipeline was lying in water that had pooled from melting snow. The established maximum operating pressure (MOP) for the PBWOA is 826 pounds per square inch gauge (psig) established by design pressure. Estimated maximum normal operating pressure is 100 psig. Actual operating pressure was approximately 80 psig when the failure was discovered. The PBWOA operates at less than 20% of the specified minimum yield strength (SMYS) and is therefore a low-stress pipeline under 49 C.F.R. 5 195.2. Federal hazardous liquid pipeline safety regulations (49 C.F.R. Part 195) do not apply to the PBWOA under the exception in 49 C.F.R. 5 195.1 for onshore low-stress pipelines located in a rural area, outside a waterway currently used for commercial navigation, which do not transport highly volatile liquids. The PBWOA is one of three similar low-stress pipelines operated by Respondent that feed into PS- 1. The other two pipelines are the Prudhoe Bay East Operating Area (PBEOA) pipeline and the Lisburne pipeline. All three pipelines were constructed around the same time, operate in similar environmental conditions, transport the same quality crude oil that contributed to the cause of the internal corrosion in PBWOA, and are operated and maintained in a similar manner by Respondent. Respondent's failure investigation has identified at least six additional anomalies on the PBWOA segment between GC-2 and GC-1. Internal corrosion has been observed at several of those anomalies. The worst noted anomaly had a remaining wall thickness of 0.04-inches. An internal inspection of the PBWOA was last performed in 1998 using a high-resolution magnetic flux leakage (MFL) tool. Respondent has not established a regular internal inspection or maintenance pigging (cleaning pig) program. Respondent plans to bypass the segment between GC-2 and GC-1 using a 24-inch flow-line. Once the bypass is in place, Respondent plans to restart the PBWOA. Respondent#

520065015H_Corrective_Action_Order_03152006.pdf, page 4anticipates the bypass process will take up to 10 days before the PBWOA pipeline can be restarted. Determination of Necessity for Corrective Action Order and Right to Hearing Section 601 12 of Title 49, United States Code, provides for the issuance of a Corrective Action Order, after reasonable notice and the opportunity for a hearing, when PHMSA decides that a pipeline facility is hazardous. A pipeline facility is a pipeline, right-of-way, facility, building, or equipment used or intended to be used in the movement of hazardous liquid by pipeline, or the storage of hazardous liquid incidental to the movement of hazardous liquid by pipeline, in or affecting interstate or foreign commerce. A pipeline facility does not include movement of hazardous liquid through gathering lines in a rural area; onshore production, refining, or manufacturing facilities; or storage or in-plant piping systems associated with onshore production, refining, or manufacturing facilities. The basis for deciding that a pipeline facility is hazardous, requiring corrective action, is set forth both in the above-referenced statute and 49 C.F.R. 190.233, a copy of which is enclosed. Section 601 12 of Title 49, United States Code, and the regulations promulgated thereunder, provide for the issuance of a Corrective Action Order without prior opportunity for notice and hearing upon a finding that a failure to issue the Order expeditiously will likely result in serious harm to life, property, or the environment. In such cases, an opportunity for a hearing will be provided as soon as practicable after the issuance of the Order. After evaluating the foregoing preliminary findings of fact, I find that the PBWOA, PBEOA, and Lisburne pipelines operated by Respondent are pipeline facilities within the meaning of that term as used in 49 U.S.C. §§ 60101 and 601 12, notwithstanding the inapplicability of the pipeline safety regulations at 49 C.F.R. Part 195. Those pipelines are used in the movement of hazardous liquid by pipeline in interstate commerce and are not gathering lines in a rural area, onshore production, refining, or manufacturing facilities, or in-plant piping systems. Additionally, after considering the age of the pipe, the hazardousness of the product the pipelines transport, the large spill volume, the ineffectiveness of the leak detection system to identify the leak, the number, type, and severity of anomalies discovered on the segment that was inspected, the similarity of the PBEOA and Lisburne pipelines to the pipeline that failed, and the proximity of the pipelines to wildlife areas or other possible sensitive areas, I find that the continued operation of Respondent's PBWOA, PBEOA, and Lisburne hazardous liquid pipelines without corrective measures will be hazardous to life, property, and the environment. Moreover, failure to expeditiously issue this Order requiring immediate corrective action would likely result in serious harm to life, property, or the environment. Accordingly, this Corrective Action Order mandating immediate corrective action is issued without prior notice and opportunity for hearing. The terms and conditions of this Order are effective upon receipt. Within 10 days of receipt of this Order, Respondent may request a hearing, to be held as soon as practicable, by notifying the Associate Administrator for Pipeline Safety in writing, delivered personally, by mail or by facsimile at (202) 366-4566. The hearing will be held in Lakewood,#

520065015H_Corrective_Action_Order_03152006.pdf, page 5Colorado or Washington, D.C. on a date that is mutually convenient to PHMSA and the Respondent. After receiving and analyzing additional data in the course of this investigation, PHMSA may identify other corrective action measures that need to be taken. In that event, Respondent will be notified of any additional measures required and amendment of this Order will be considered. To the extent it is consistent with safety considerations, Respondent will be afforded notice and an opportunity for a hearing prior to the imposition of additional corrective measures. Required Corrective Action Pursuant to 49 U.S.C. $ 601 12, I hereby order BP Exploration (Alaska), Inc. to immediately take the following corrective actions with respect to the PBWOA, PBEOA, and Lisburne hazardous liquid pipeline systems: 1. Repair all anomalies on the PBWOA segment between GC-2 and GC- 1, including those anomalies identified after the March 2, 2006 pipeline failure before resuming service. Extract and record dimensional data of all anomalies found, including data on distance from upstream and downstream girth weld, o'clock position, minimum and maximum remaining wall thickness, and remedial actions taken on each anomaly. 2. Obtain prior written approval from the Director, Western Region, PHMSA before resuming operations on the PBWOA pipeline. Operating pressure on the PBWOA is not to exceed 80 psig. This pressure restriction shall remain in effect until written approval to increase the pressure is obtained from the Director, Western Region, PHMSA. 3. Perform an internal inspection using a calibrated smart pig on the PBWOA pipeline within 3 months of placing the pipeline back in service. Take appropriate action to address all anomalies discovered by this inline inspection device, in accordance with the standards for anomaly repair in 49 C.F.R. Part 195. Record differences between inline inspection data and actual "as found" data for all anomalies and integrate that data in future analyses, mapping corrosion growth, and confirming data gathered by inline inspection tool. Develop and submit for approval a plan to perform internal inspections at regular intervals, not to exceed 5 years, and schedule for the repair of anomalies identified through those inspections. Implement that plan upon approval. 4. Develop and submit for approval a plan for running maintenance pigs (cleaning pigs) on the PBWOA, PBEOA, and Lisburne pipelines at regular intervals. Implement that plan upon approval. Until that plan has been approved and implemented, run maintenance pigs on those pipelines on a weekly basis. Conduct laboratory analyses on sludge to determine its corrosive properties and integrate those findings into the internal corrosion management plan in Item 5 below. 5. Conduct a review of the leak detection system for the PBWOA, PBEOA, and Lisburne pipelines and make necessary modifications to ensure that the leak detection systems comply with API 1 130, within 3 months of receipt of this order.#

520065015H_Corrective_Action_Order_03152006.pdf, page 66. Develop and submit for approval an internal corrosion management plan to reduce internal corrosion on the PBWOA, PBEOA, and Lisburne pipelines within 3 months of receipt of this order. The plan must address the use of corrosion inhibitors, emulsion breakers, and mechanisms to reduce water and solid particles. This plan should also allow for monitoring sludge extracted from pipelines to ensure that internal corrosion is being controlled. Implement that plan upon approval. Perform an internal inspection using a calibrated smart pig on the PBEOA and Lisburne pipelines within 3 months of receipt of this Order. Take appropriate action to address all anomalies discovered, in accordance with the standards for anomaly repair in 49 C.F.R. Part 195. Record differences between inline inspection data and actual "as f o u n d data for all anomalies and integrate that data in future analyses, mapping corrosion growth, and confirming data gathered by inline inspection tool. Develop and submit for approval a plan to perform internal inspections at regular intervals, not to exceed 5 years, and schedule for the repair of anomalies identified through those inspections. Implement that plan upon approval. 8. Perform infrared aerial surveys at already-established intervals for the entirety of the PB WOA, PBEOA, and Lisburne pipelines. 9. At the earliest practicable moment following discovery of any pipeline failure on the PBWOA, PBEOA, and Lisburne pipelines that involves the release of any amount of the hazardous liquid transported, give telephonic notice of the failure to the IVational Response Center in accordance with 49 C.F.R. § 195.52(b). 10. Submit for review each oil spill response plan developed pursuant to the requirements of Federal law or regulation for the PBWOA, PBEOA, and Lisburne pipelines. The Director, Western Region, PHMSA may grant an extension of time for compliance with any of the terms of this Order for good cause. A request for an extension must be in writing. Respondent may appeal any decision of the Director, Western Region, PHMSA to the Associate Administrator for Pipeline Safety. Decisions of the Associate Administrator are final. In accordance with 49 U.S.C. 3 60122 and 49 C.F.R. 5 190.223, 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. MAR 7 5 2006 Date Issued for pipeline Safety#