OLYMPIC PIPE LINE COMPANY — Notice of Probable Violation

520065034_FinalOrder_09012009_text.pdf, page 1Official PDFSEP 01 2009 Mr. Jim Lamanna President BP Pipelines (North America) Inc. Olympic Pipe Line Company 28100 Torch Parkway Warrenville, IL 60555 Re: CPF No. 5-2006-5034 Dear Mr. Lamanna: Enclosed is the Final Order issued in the above-referenced case. It makes a finding of violation and assesses a civil penalty of $23,000. It further finds that you have completed the actions specified in the Notice required to comply with the pipeline safety regulations. When the civil penalty is paid, this enforcement action will be closed. Your receipt of the Final Order constitutes service of that document 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. Chris Hoidal, Director, Western Region, PHMSA CERTIFIED MAIL – RETURN RECEIPT REQUESTED [ 7005 0390 0005 6162 5791]#

520065034_FinalOrder_09012009_text.pdf, page 2) CPF No. 5-2006-5034 DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ____________________________________ In the Matter of ) ) ) BP Pipelines (North America), Inc., ) Respondent. ) ____________________________________) FINAL ORDER From February 27 to March 2, 2006, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), inspected a 15-mile portion of BP Pipelines (North America), Inc.’s (Respondent’s or BP’s) Olympic Pipeline and related facilities near Portland, Oregon, as well as Respondent’s operation and maintenance records at its Renton, relevant portion of the Olympic Pipeline originates at the Washington-Oregon border near the Columbia River and transports petroleum products to delivery facilities and terminals along the Williamette River. Washington office. Located entirely within a High Consequence Area (HCA),1 the As a result of the inspection, the Director, Western Region, PHMSA, issued to Respondent, by letter dated September 8, 2006, a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Respondent had violated 49 C.F.R. § 195.432(b), assessing a civil penalty of $23,000, and ordering Respondent to take certain measures to correct the alleged violation. BP responded to the Notice by letters dated October 16 and November 9, 2006 (Response). Respondent did not contest the allegation of violation, but provided information concerning the corrective actions it had taken and requested that the civil penalty be reduced or eliminated. Respondent also waived its right to an informal hearing. 1 An HCA is defined for purposes of Part 195 as a “commercially navigable waterway, . . . [a] high population area, . . . [a]n other populated area, . . . [or] [a]n unusually sensitive area . . .” 49 C.F.R. § 195.450. A commercially navigable waterway is “a waterway where a substantial likelihood of commercial navigation exists;” a high population area is “an urbanized area, as defined and delineated by the Census Bureau, that contains 50,000 or more people and has a population density of at least 1,000 people per square mile;” an other populated area is “a place, as defined by the Census Bureau, that contains a concentrated population, such as an incorporated or unincorporated city, town, village, or other designated residential or commercial area.” Id; and, an unusually sensitive area is “a drinking water or ecological resource area that is unusually sensitive to environmental damage from a hazardous liquid pipeline release.” 49 C.F.R. § 195.6.#

520065034_FinalOrder_09012009_text.pdf, page 32 FINDING OF VIOLATION Item 1 of the Notice alleged that BP violated 49 C.F.R. Part 195, which states: § 195.432 Inspection of in-service breakout tanks. (a) … (b) Each operator shall inspect the physical integrity of in- service atmospheric and low-pressure steel above-ground breakout tanks according to section 4 of API Standard 653…. The Notice alleged that Respondent violated 49 C.F.R. § 195.432(b) by failing to properly inspect the physical integrity of two in-service atmospheric and low-pressure steel above-ground breakout tanks according to section 4 of API Standard 653. BP has not disputed the allegation. Accordingly, I find that Respondent violated § 195.432(b) by failing to properly inspect the physical integrity of two in-service atmospheric and low- pressure steel above-ground breakout tanks according to section 4 of API Standard 653. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent. 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 $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: the nature, circumstances, and gravity of the violation, including adverse impact on the environment; the degree of Respondent’s culpability; the history of Respondent’s prior offenses; Respondent’s ability to pay the penalty and any effect that the penalty may have on its ability to continue doing business; and the good faith of Respondent in attempting to comply with the pipeline safety regulations. In addition, I may consider the economic benefit gained from the violation without any reduction because of subsequent damages, and such other matters as justice may require. The Notice proposed a total civil penalty of $23,000 for violation of 49 C.F.R. § 195.432(b). Respondent argues that the proposed civil penalty should be reduced or eliminated. In particular, BP states that its consultant completed an analysis of the two breakout tanks at issue after the OPS inspection, and that the contractor’s analysis showed that neither of those tanks posed “an imminent threat to public safety . . .”2 BP also contends that these post-inspection actions show that it “continues to act within the spirit of the regulations, which are designed to foster continuous improvement of safety 2 Response at 2.#

520065034_FinalOrder_09012009_text.pdf, page 43 programs.”3 For these reasons, BP argues that a compliance order is not necessary and that a reduction or elimination of the proposed civil penalty is warranted. Respondent’s arguments are not persuasive. First, BP knew that it had to conduct an engineering evaluation of these two breakout tanks several years prior to the 2006 OPS inspection. Specifically, Respondent’s 2001 inspection records note that the out-of- plane-edge settlement of these tanks did not comply with API’s guidelines, and that an engineering analysis of the tanks was required. BP did not conduct the recommended engineering analysis for the next five years and only did so when prompted by the OPS inspection. Contrary to Respondent’s assertions, such inaction and delay clearly undermined public safety. While the results of its belated engineering analysis ultimately showed that the nature of the threat was not serious, the fact that Respondent failed to act promptly potentially placed the health and welfare of the public in jeopardy. Respondent’s conduct was not consistent with the text or spirit of the pipeline regulations. With regard to the statutory factors, the unusual length of time from discovery to remediation aggravates the gravity of this particular offense. It is also true, as BP states, that PHMSA considers the “good faith” of an operator in calculating and assessing civil penalties. However, such good faith is ordinarily limited to only those actions that an operator took in a reasonable attempt to achieve compliance before an inspection or enforcement action. Indeed, once a violation is discovered, PHMSA expects any prudent operator to cooperate in remediating and preventing a reoccurrence of that condition. Respondent also has the ability to pay this penalty without adversely affecting its ability to continue in business. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a total civil penalty of $23,000 for failing to perform the necessary engineering analysis or properly evidencing why an analysis was not required at the time of inspection. 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-341), Federal Aviation Administration, Mike Monroney Aeronautical Center, P.O. Box 25082, Oklahoma City, OK 73125; (405) 954-8893. COMPLIANCE ORDER The Notice proposed a Compliance Order with respect to Item 1 in the Notice for violation of 49 C.F.R. Part 195. 3 Id.#

520065034_FinalOrder_09012009_text.pdf, page 54 Under 49 U.S.C. § 60118(a), each person who engages in the transportation of gas or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. The Director has indicated that Respondent has satisfactorily completed the following actions specified in the Proposed Compliance Order: 1. 49 C.F.R. § 195.432(b) -- With regard to the violation described in Item 1 of the Notice, in its Responses BP included the final reports for the engineering analysis of breakout tanks 105 and 106 that were undertaken after the PHMSA inspection to ensure the out-of-plane settlements were within the specified API 653 limits. The Director, Western Region, PHMSA has reviewed this information and indicated it satisfies the terms of the proposed Compliance Order. Accordingly, since compliance has been achieved with respect to this violation, the compliance terms are not included in this Order. Under 49 C.F.R. § 190.215, Respondent has the right to submit a petition for reconsideration of this Final Order. Should Respondent elect to do so, the petition must be received within 20 days of Respondent’s receipt of this Final Order and must contain a brief statement of the issue(s). The filing of a petition automatically stays the payment of any civil penalty assessed. However if Respondent submits payment for the civil penalty, the Final Order becomes the final administrative decision and the right to petition for reconsideration is waived. The terms and conditions of this Final Order shall be effective upon receipt ___________________________________ __________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#

520065034_Decision on the Petition for Reconsideration_11232009_text.pdf, page 1Official PDFNOV 23 2009 VIA CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7009 1410 0000 2464 5775] Mr. Steve Pankhurst President BP Pipelines (North America) Inc. U.S. Pipelines and Logistics 28100 Torch Parkway Warrenville, IL 60555 Re: CPF No. 5-2006-5034 Dear Mr. Pankhurst: Enclosed is this agency’s decision denying your company’s Petition for Reconsideration in this case. The penalty payment terms are set forth in the Final Order. This enforcement action closes automatically upon payment. Your receipt of this Decision constitutes service of that document 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. Chris Hoidal, P.E., Director, Western Region, PHMSA Mr. David O. Barnes, P.E. Manager DOT & Integrity BP Pipelines (North America) Inc.#

520065034_Decision on the Petition for Reconsideration_11232009_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 ) BP Pipelines (North America) ) CPF No. 5-2006-5034 Inc., ) ) ) ) Petitioner. ) ______________________________) DECISION ON PETITION FOR RECONSIDERATION BP Pipelines (North America) Inc. (Petitioner or BP) is the operator of the Olympic Pipeline, a hazardous liquid pipeline system that transports petroleum products from the Washington- Oregon border to facilities along the Williamette River. One of those facilities, located near Portland, Oregon (Portland Delivery Facility), contains a pair of 2,000-barrel breakout tanks. In the spring of 2006, the Office of Pipeline Safety (OPS) inspected those tanks and the company’s associated records. Those records included a July 2001 expert report finding that the out-of-plane-edge settlement for both tanks was not compliant with Part 195 of the Pipeline Safety Regulations and recommending that BP perform an engineering analysis. There is no dispute that Petitioner had still not performed those analyses as of the date of the OPS inspection. Thereafter, in letter dated September 8, 2006, the Director, Western Region, OPS, issued BP a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (Notice). The Notice alleged that BP violated 49 C.F.R. § 195.432(b) by failing to properly inspect the physical integrity of the breakout tanks at the Portland Delivery Facility. The Notice further proposed that Petitioner pay a $23,000 civil penalty and perform certain corrective actions for committing that violation. On September 1, 2009, after BP submitted two written responses to the Notice, a Final Order issued finding that Petitioner had violated 49 C.F.R. § 195.432(b) and assessing the company a $23,000 civil penalty for that violation. On September 24, 2009, BP filed this Petition for Reconsideration (Petition). In that Petition, BP proposes, without further explanation, to “bring” a series of “additional facts to light[.]”1 First, the company states that the condition affecting the breakout tanks at the Portland Delivery Facility did not require immediate remediation. Second, BP argues that section 4 of API 1 Petition at 1.#

520065034_Decision on the Petition for Reconsideration_11232009_text.pdf, page 32 Standard 653, a standard incorporated by reference into § 195.432(b), uses an “equation for non- planar settlement” which “is overly conservative for [the] small diameter tanks” at issue in this proceeding. 2 Third, Petitioner complains that regulatory ambiguity left the Portland Delivery Facility’s status as a high-consequence area (HCA) in doubt from 2001 through 2003. Fourth, Petitioner asserts that its primary focus in 2001 was on restarting the northern portion of the Olympic Pipeline and complying with the terms of a Corrective Action Order issued by this agency, not on the condition of the tanks at the Portland Delivery Facility. Finally, BP contends that those tanks only perform certain limited functions and that neither “serve[s] the purpose of mainline breakout tank storage.”3 I. Discussion Before turning to the merits, I will address the procedural adequacy of this Petition. Under Part 190 of the Pipeline Safety Regulations, “[i]f [a] respondent requests the consideration of additional facts or arguments [in a petition for reconsideration], the respondent must submit the reasons they were not presented prior to the issuance of the final order. ”4 In this case, Petitioner wishes to “bring[] additional facts to light” on reconsideration. However, none of the five issues raised in this Petition were mentioned in either of BP’s written responses to the Notice, Petitioner has not provided a statement of the reasons why those facts were not presented before the issuance of the Final Order. Accordingly, I find that BP has not complied with the procedural requirements for raising new facts and arguments on reconsideration. Moreover, as BP has not properly raised any other arguments in this Petition, I am denying reconsideration on that basis alone and affirming the Final Order without modification. 5 and In the alternative, I find that Petitioner’s arguments on the merits do not warrant reconsideration. First, with regard to BP’s contention that the condition affecting the Portland Delivery Facility breakout tanks did not require immediate remediation, the Pipeline Safety Regulations explicitly state that “no operator may operate or maintain its pipeline system at a level of safety lower than that required by” Subpart F of Part 195, including §195.432(b). In addition, the Pipeline Safety Regulations further state that “[w]henever an operator discovers any condition that could 2 BP notes that the requirements in section 4 of API Standard 653 are now codified in section 6 of API Standard 653. Petition at 1-2. Petitioner is advised, however, that the standards incorporated by reference in the Pipeline Safety Regulations remain effective until amended in a final rule, and that Part 195 still incorporates the requirements of section 4 of Standard 653 (3rd edition, including Addendum 1, 2003). 49 C.F.R. §§ 195.3, 195.432(b); but see Department of Transportation, Pipeline and Hazardous Materials Safety Administration, Pipeline Safety: Periodic Updates of Regulatory References to Technical Standards and Miscellaneous Edits, 74 Fed. Reg. 36139, 36143 (Jul. 22, 2009) (“PHMSA is proposing to revise paragraph (b) to eliminate the reference to section 4 in API Standard 653. All sections in API Standard 653 relating to inspection of in-service atmospheric and low-pressure steel aboveground breakout tanks are incorporated by reference.”). 3 Petition at 2. 4 49 C.F.R. § 190.215(b). 5 In responding to the Notice, BP simply stated that condition affecting these two tanks did not pose “an imminent threat to public safety” and that the company’s post-inspection actions, including its performance of the recommended engineering analyses, were consistent with “the spirit of the regulations[.]” Petitioner did not request an informal hearing.#

520065034_Decision on the Petition for Reconsideration_11232009_text.pdf, page 43 adversely affect the safe operation of its pipeline system, it shall correct it within a reasonable time[,]” but “if the condition is of such a nature that it presents an immediate hazard to persons or property, the operator may not operate the affected part of the system until it has corrected the unsafe condition.”6 In this case, Petitioner’s own expert determined that the breakout tanks at the Portland Delivery Facility were not compliant with section 4 of API Standard 653—and by incorporation § 195.432(b)—and recommended that each of those tanks undergo an engineering analysis. While his opinion did not specify a particular time period for compliance, there is no dispute that Petitioner did not act on his recommendation for the next 5 years. That constituted a violation of an operator’s duty to correct “any condition that could adversely affect the safe operation of its pipeline system . . . within a reasonable time.” With regard to BP’s second argument, the requirements of section 4 of API Standard 653 are incorporated by reference into § 195.432(b). If Petitioner wishes to change or seek relief from one of those requirements, including the equation for non-planar settlement, the proper course of action is to file a petition for rulemaking, 7 request a special permit, 8 or contact the API standards committee. 9 Regardless, a petition for reconsideration is not the appropriate forum for achieving those objectives. 10 Turning to Petitioner’s third and fourth arguments, the status of the Portland Delivery Facility as an HCA is not relevant in this proceeding. Section 195.432(b) requires that the “physical integrity of in-service atmospheric and low-pressure steel aboveground breakout tanks” be inspected in accordance with the requirements of section 4 of API Standard 653. No exception is made for tanks located on the grounds of an HCA facility. Likewise, Petitioner’s desire to focus on the other portions of the Olympic Pipeline does not excuse its failure to comply with the requirements of Part 195 at the Portland Delivery Facility. Finally, BP acknowledges that the tanks in question “receive and store hazardous liquid transported by a pipeline for reinjection and continued transportation by pipeline. therefore, a “breakout tank” for purposes of the Pipeline Safety Regulations and subject to the requirements of 49 C.F.R. § 195.432(b). ”11 Each is, 6 49 C.F.R. § 195.401(a)-(b). 7 49 C.F.R. § 190.331. 8 49 C.F.R. § 190.341. 9 http://www.api.org/Standards/ (accessed on Nov. 5, 2009). 10 It is also worth noting that BP did not question its expert’s finding of non-compliance, his recommendation for corrective action, or his use of the formula in section 4 of API Standard 653 at any time prior to the filing of this Petition. 11 Petition at 2.#

520065034_Decision on the Petition for Reconsideration_11232009_text.pdf, page 54 For these reasons, I find that all of Petitioner’s arguments in favor of reconsideration lack merit. Accordingly, I am denying this Petition on that alternative basis and affirming the Final Order without modification. II. Conclusion This Petition is denied solely as a result of Petitioner’s failure to comply with the procedural requirements for raising new facts and arguments on reconsideration. In the alternative, this Petition is also denied on the merits. This decision on reconsideration is the final administrative action in this proceeding. _____________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#