BELLE FOURCHE PIPELINE CO — Notice of Probable Violation

party submissionOfficial PDF520075002_operator_response_10122007.pdf#

party submissionOfficial PDF520075002_petition for reconsideration_05222008.pdf#

party submissionOfficial PDF520075002_Request For Hearing_03082007.pdf#

520075002_decision on petition_07142008_text.pdf, page 1Official PDF0 S Department of Transportation Pipeline and Hazardous Materials Safety Administration 1 200 New Jersey Ave 5 E Washington DC 20590 JUL 1 4 2008 VIA OVERNIGHT COURIER AND FACSIMILE TO: 303 866-02W Mr. Hank True President Belle Fourche Pipeline Company 455 N. Poplar St. Casper, WY 82601-1783 Re: CPF No. 5-2007-5002 Dear Mr. True: Enclosed is the decision on the petition for reconsideration filed by Belle Fourche Pipeline Company in the above-referenced case. For the reasons specified therein, the decision affirms the Final Order and denies your request for a stay. However, the deadline for completion of the Compliance Order has been extended to 40 days from receipt of the decision. This decision is the final administrative action in this proceeding. Your receipt of the document 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: Colin G. Harris, Esq. Holme Roberts k Owen LLP 1801 13th St. Ste 300 , Boulder, CO 80302-5387 Fax: (303) 866-0200#

520075002_decision on petition_07142008_text.pdf, page 2U. S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATKRIAI S SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTONs D*C 20590 In the Matter of Belle Fonrche Pipeline Company, Petitioner. CPF No. 5-2007-5002 DECISION ON RECONSIDERATION In accordance with 49 U. S. C. $ 60118 and 49 C. F. R. $ 190. 213, the Pipeline and Hazardous Materials Safety Administration {PHMSA) issued a Final Order in this matter on April 28, 2008, finding that Belle Fourche Pipeline Company (Belle Fourche or Petitioner) committed certain violations of the agency's hazardous liquids pipeline safety regulations. Specifically, the Final Order found that Belle Fourche had violated ) 195. 110(a), relating to a lack of proper supports for external loads and vibration on its pipeline facilities (Item 1), and $ 195. 583, relating to a failure to perform inspections for atmospheric corrosion (Item 8). In addition, it found that Belle Fourche had committed 10 other probable violations and advised the company to correct them or face possible future enforcement action. Finally, the Final Order included a compliance order for Items 1 and 8 but did not seek any civil penalties. Under $ 190. 215, a respondent may file a petition for reconsideration of a final order issued pursuant to $ 190. 213, requesting that the Associate Administrator reconsider his decision. Although the Associate Administrator does not consider repetitious information, arguments or petitions, a respondent may request consideration of additional facts or arguments, provided that the company submits the reason they were not presented prior to issuance of the final order. $ 190. 215. The purpose of this rule is to allow a respondent to present information or arguments that were unavailable or unknown prior to issuance of the final order, as well as to allow the agency to correct any error in the final order, but not to provide the operator an appeal or de novo review. Belle Fourche's Petition for Reconsideration in this case does not request consideration of additional facts but presents a mixture of legal issues, some of which are based upon alleged errors in the Final Order. Petitioner's arguments are discussed in greater detail below. Item 1: The Final Order found that Petitioner violated 49 C. F. R, $ 195. 110{a) by failing to provide for anticipated external loads, vibration, thermal expansion, and contraction in the design of certain facilities that had been constructed in 2000. Petitioner contends that PHMSA erred in stating in the Final Order that Belle Fourche did not "contest" this allegation. Belle Fourche also contends that the agency failed to meet its burden of proving the allegation.#

520075002_decision on petition_07142008_text.pdf, page 3As for the first contention, it is true that Petitioner did not admit the allegations set forth in the Notice and, in fact, presented evidence that it had taken efforts to address the issue of temporary supports by making certain repairs. The statement in the Final Order that Belle Fourche did not "contest" the allegation merely reflected the fact that the company had not presented any evidence disputing the basic factual allegation that, as of the date of the inspection, Belle Fourche's facilities at the Sussex pump station and breakout tank still had temporary supports, which failed to meet the requirements of $ 195. 110(a). I have reconsidered the record and still can find no indication that Belle Fourche presented any evidence that would contradict the allegations in the Notice. In Belle Fourche's March 8, 2007 Response, the company simply stated, "This matter has been addressed. " Response at 3. In its October 11, 2007 Post-Hearing Submittal (Brief), Belle Fourche addressed Item 1 only by stating, "OPS also alleged that Belle Fourche was using temporary blocks as supports at a station. Asthetestimonydemonstrated„thismatterhasbeencorrected. " Briefat14. Finally, in its Petition, Belle Fourche noted that it had submitted "both direct testimony and an affidavit regarding this matter. Specifically, Belle Fourche's live witness. . . testified that the supports at the Sussex station were repaired after OPS' inspection that identified the issue. " Petition at $ 2. All of these statements and evidence speak to the company's efforts to address the noncompliant condition after PHMSA had already identified it. Regardless of whether or not Petitioner "contested" the allegation, Petitioner's only evidence consisted of statements concerning subsequent actions to remedy the violation, which are irrelevant to the issue of whether or not a violation occurred in the first place. As for the second contention that PHMSA did not meet its burden of proving this violation, I have reconsidered the record and find that the agency has indeed met its burden of proving the allegations in Item 1. The evidence showed that during the agency's 2005 inspection, the PHMSA inspector observed that the company was still using temporary supports for pipeline facilities that had been constructed in 2000. The inspector photographed the areas at issue and those photos are in the record. Belle Fourche was using stacked wooden and concrete block supports that were not securely fastened to the ground or other permanent feature. Excessive vibration could cause such temporary wooden and concrete blocks to topple. For the reasons stated above, I find no reason to alter the finding in the Final Order that Belle Fourche violated $ 195. 110(a). The finding of violation and terms of the compliance order associated with the violation remain in effect, subject to the revised deadline set forth below. Item 8: The Final Order also found that Petitioner violated 49 C. F. R. $ 195. 583 by failing to inspect each pipeline or portion of pipeline exposed to the atmosphere for evidence of atmospheric corrosion, with particular attention given to pipe surfaces at pipe supports. Petitioner contends, first, that because the proposed compliance order in the Notice contained a typographical error that referenced "Item 9" instead of "Item 8, " there was no valid compliance term associated with Item 8 in the Final Order. Furthermore, Petitioner contends that PHMSA would be required to amend the Notice in order to obtain such relief, but that to allow such an amendment at this point would violate the company's due process rights and be arbitrary,#

520075002_decision on petition_07142008_text.pdf, page 4capricious, and contrary to law. Second, Belle Fourche contends that PHMSA is apparently willing to accept only written "documentation" of Belle Fourche's actions regarding this Item and unwilling to consider direct testimony or other forms of relevant and reliable evidence. These two issues warrant separate discussion. Procedura/ Issue. The Notice contained eight probable violations (Items 1 — 8). Each probable violation included a "[s]tatement of the. . . regulations. . . which the respondent is alleged to have violated and a statement of the evidence upon which the allegations are based, " as required by ) 190. 207. The probable violation identified as "Item 8" in the Notice alleged that Belle Fourche violated $ 195. 583 by failing to inspect its pipeline for atmospheric corrosion. The proposed compliance order in the Notice specified that Belle Fourche would be required to inspect its pipeline for atmospheric corrosion to come into compliance. The proposed compliance order, however, mistakenly referred to this alleged violation as "Item 9" instead of "Item 8. " Notice at 6. This error was compounded elsewhere in the Notice when Item 8 was included in a list of warning items for which the agency "decided not to conduct additional enforcement. " Notice at 4. There were several indications early in the proceeding that this was a typographical error. First, the subject matter of the proposed compliance order (atmospheric corrosion inspections) was clearly associated with the allegation in Item 8 stating that Belle Fourche had violated $ 195. 583 by failing to inspect its pipeline for atmospheric corrosion. Second, there was no probable violation listed as "Item 9" in the Notice. Third, an earlier Notice of Probable Violation issued to Belle Fourche on February 21, 2006, had charged the company with the same violation of $ 195. 583 and had proposed a compliance order (without an error); that Notice was withdrawn and reissued in the form of the present Notice. ' Finally, on April 24, 2007, roughly four months prior to the hearing, PHMSA provided Belle Fourche with a copy of the agency's Violation Report that indicated on pages 4 and 5 that PHMSA had proposed a compliance order for the alleged violation of $ 195. 583. Upon receipt of the Notice, Belle Fourche apparently recognized the typographical error and acknowledged the proposed compliance terms in its Response, stating„"There is no 'Item 9' to the NPV. Accordingly, this purported remedial requirement is a nullity. On the other hand, to the extent the order requires the requested relief, and assuming a violation existed. . . [the corrective action is unnecessary or excessive], " Response at 3. If there were still any confusion as to whether Item 8 was an allegation of violation with a proposed compliance order, PHMSA brought up the issue at the hearing and explained that the alleged violation of $ 195. 583 was not merely a warning but included the proposed corrective action mistakenly ascribed to "Item 9" in the proposed compliance order. At that point, Belle Fourche was given an opportunity to respond to the allegation, both at the hearing and through written materials submitted after the hearing. Belle Fourche took advantage of both opportunities. Discussion at the hearing and testimony by the company's witnesses concerned Belle Fourche and the other co-respondents' compliance The original notice of probable violation was withdrawn and reissued to Belle Fourche and two other companies in response to ob]ections by Belle Fourche that the proper entities had not been named Final Order at I#

520075002_decision on petition_07142008_text.pdf, page 5with $ 195. 583 without distinguishing between them. Petitioner's counsel also filed a joint Post-Hearing Submittal on behalf of Belle Fourche and the other respondents. Although he neglected to mention Belle Fourche by name in his discussion of $ 195. 583, the statements and evidence put forward in the Post-Hearing Submittal were found by PHMSA to be applicable in Belle Fourche's defense because they repeated the same discussion that took place at the hearing regarding all three companies' compliance with $ 195. 583 and because the allegations against all three companies raised the same factual questions about whether or not the companies' single manual of procedures was compliant and whether the companies' personnel actually performed the required inspections. The Final Order found that Belle Fourche had been provided actual notice of the proposed compliance terms for Item 8 despite the typographical error in the Notice and had "availed itself of the opportunity to contest the allegation" by submitting evidence and statements to defend against the charge it violated $ 195. 583. Final Order at 3. The evidence and statements submitted by Belle Fourche were fully considered and duly reflected in the Final Order. Petitioner nevertheless argues that since the Notice contained a typographical error, the issue of compliance with $ 195. 583 was not a subject of the proceeding. Petitioner fisher argues that the only way such a defect can now be cured is for PHMSA to amend the Notice. Since PHMSA has not amended the Notice, Petitioner argues that any decision on the issue at this point would violate its right to due process. On the contrary, I am aware of no legal requirement that PHMSA must formally amend a Notice to correct a typographical error that has been pointed out by the agency in a timely manner and acknowledged by the respondent. PHMSA regulations state, "The Associate Administrator, OPS may amend a notice of probable violation at any time prior to issuance of a final order, " but do not specify the circumstances under which amendment is required. $ 190. 207(c). Nor does the Administrative Procedure Act set forth any procedural requirements that apply to this informal adjudication, because the Federal pipeline safety laws do not require that this adjudication be "on the record" pursuant to 5 U. S. C. $ 554(a). Belle Fourche claims that the issuance of the Final Order without formal amendment would violate due process but cites no authority to support its position. Federal courts have held the contrary, stating that "technical flaws in a notice can be cured if the actual conduct of the administrative proceedings provides notice to the participants of that which is under consideration. " Nat'I Steel k Shi buildin Co. v. Office of Workers' Com . Pro rams, 616 F. 2d 420, 421 (9th Cir. 1980), citing, among other cases, Golden Grain Macaroni Co. v. FTC, 472 F. 2d 882 (9th Cir. 1972). In Golden Grain, the court held there was no due process violation even though the complaint did not explicitly allege a violation of the law the respondent was ultimately found to have violated. An examination of the proceedings by the court showed "that The hearing concerned Belle Fourche and two separate cases against related compames. All three respondents were charged with the same violation of ) 195. 583 because they shared both the same manual of written procedures, as well as certain employees whose actions served as the basis for the alleged violations A single hearing was held and the compames Jointly submitted a smgle Post-Hearing Submittal In fact, Petitioner acknowledges in its Petition that the evidence presented at the hearing was put forward in Belle Fourche*s defense, stating, "In the consolidated hearing, Belle Fourche provided direct testimony . about compliance with 49 C F R. $ 195. 583, based on . personal knowledge, and submitted [an] affidavit on the same point " Petition at $ 11.#

520075002_decision on petition_07142008_text.pdf, page 6while there was some confusion as to the nature of the charge, all facts relevant to the alleged unlawful acts were fully litigated. " Id. at 886. As stated by the court, "[T]here is no due process violation, if the party proceeded against understood the issue and was afforded full opportunity to justify its conduct. " Id. at 885 (internal citations omitted). The record in this case reflects that Belle Fourche received actual notice of the nature of the allegation in Item 8 and of the nature of the proposed compliance terms in the mislabeled "Item 9" of the proposed compliance order. Petitioner was given ample opportunity to defend itself throughout the proceeding and actually presented evidence on the facts relevant to the alleged violation in Item 8. Therefore, I find there has been no violation of law or regulation arising out of the typographical error in the Notice. Evidentiary Issue. With respect to Item 8, Petitioner further disputes "the apparent finding in the NPOV [sic] that the only relevant or reliable evidence to defend against liability is 'documentation. '" Petition at $ 11. Petitioner cites the Federal Rules of Evidence and PHMSA's procedural regulations in support of its argument that evidence other than documentation must be accepted. Petitioner notes that it provided testimony at the hearing about compliance with $ 195. 583 and submitted an affidavit based on a witness's personal knowledge. Belle Fourche concludes, "To allow OPS to prevail because Respondent did not spoon-feed OPS some unarticulated form of 'documentation' that Respondent can only guess at would turn the burden of proof on its head. " Petition at $ 11. Contrary to Petitioner's assertion, PHMSA does not require operators to "spoon-feed OPS some unarticulated form of documentation, " but requires each operator to "maintain a record of each analysis, check, demonstration, examination, inspection„ investigation, review, survey, and test" required by $ 195. 583 for a period of at least 5 years. $ 195. 589(c). Also contrary to Petitioner's suggestion that PHMSA appears willing to consider only documentary evidence {or lack thereof), I have carefully reviewed and weighed all of the evidence submitted by Belle Fourche in accordance with the agency's regulations. PHMSA's regulation governing informal hearings provides that a respondent "may offer any facts, statements, explanations, documents, testimony or other items which are relevant to the issues under consideration. " $ 190. 211(f). In addition, pursuant to ) 190. 213 and prior to the issuance of a final order, I review all materials submitted by a respondent, including materials submitted by the respondent during and after a hearing. Petitioner's reliance on the Federal Rules of Evidence is misplaced because those rules govern proceedings in the courts of the United States and other judicial proceedings, not informal adjudications before this agency. In the present case, I have considered all of the evidence presented to the presiding official at the hearing and each written document, including affidavits, submitted by Belle Fourche throughout this proceeding. Upon reconsideration of all such evidence and legal arguments, I affirm that the evidence supports finding Petitioner violated ) 195. 583 by failing to perform inspections for atmospheric corrosion. This evidence included various forms of evidence. During the PHMSA inspection, Belle Fourche could not produce any record that it had performed atmospheric corrosion inspections. The PHMSA inspector documented a statement made by Petitioner's lead engineer to the inspector that the company had no plans to perform inspections for atmospheric corrosion. Areas of#

520075002_decision on petition_07142008_text.pdf, page 7Petitioner's pipeline facility were photographed showing atmospheric corrosion that appeared to have been there for a significant length of time. At the hearing and in an affidavit, Petitioner's lead engineer acknowledged that "specific external corrosion inspection procedures were not necessarily written down, " although the company's operations and maintenance (O&M) manual included a "reference to external corrosion. " Brief Ex. 6 at $ 28. The witness stated further that "any significant external corrosion that was found [during routine O&M inspections] would have been addressed. " Brief Ex. 6 at $ 28. The fact that Petitioner has no record of inspecting for or discovering atmospheric corrosion on its pipeline facility is indicative of a failure to perform the required inspections, particularly in light of this other evidence. Furthermore, I find unpersuasive the statements by Petitioner's lead engineer that the company's routine O&M inspections complied with $ 195. 583. Although he stated the company performed routine inspections, he never stated explicitly that the company always inspected for atmospheric corrosion. Instead, he merely indicated that if the company found any external corrosion during routine inspections, it would have been addressed. Brief Ex. 6 at)28. There is a marked difference between purposefully inspecting for atmospheric corrosion and merely performing routine general inspection. In the latter, an operator may not find a condition the operator is not specifically looking for. If an operator's procedures do not require checks for atmospheric corrosion, employees may not necessarily look for and record such conditions. This appears to have been the situation in this case. Petitioner did not have any procedures for performing atmospheric corrosion inspections and photographs of Petitioner's facility showed that atmospheric corrosion had apparently been present but ignored for a significant period of time in the course of Petitioner's routine inspections. Having reconsidered all of the evidence concerning Belle Fourche's compliance with $ 195. 583, I find that PHMSA put forth sufficient evidence of noncompliance to meet its burden of proof and that the greater weight of evidence supports the finding that Belle Fourche violated the regulation as alleged. Accordingly, the finding of violation and terms of the compliance order remain in effect, subject to the revised deadline set forth below. Request for Stay or for Extension of Time. Belle Fourche requested a stay of the terms of the compliance order because "Belle Fourche believes that this case presents unique circumstances, created by OPS, that have the potential to severely prejudice Belle Fourche. " Petition at $ 12, Petitioner provides no rationale or evidence to support this assertion but claims that it would be "manifestly unjust" to compel compliance actions "based on a claim that was never pled. " Petition at $ 12. I find that Petitioner has failed to make an adequate showing as to why the terms of the Final Order should be stayed. Accordingly, I deny Petitioner's request for a stay. In the alternative, Petitioner requested "at least 120 days to investigate and address the issue of compliance with 49 C. F. R. $ 195. 583, rather than the 60 days allowed in the Final Order. " Petition at 5 13. As set forth in the Final Order, an extension of time to comply with any of the required corrective action items may be granted upon a written request timely submitted demonstrating good cause for an extension. Again, Petitioner has not demonstrated any good reason why an extension should be granted. Belle Fourche has had more than two years and four#

520075002_decision on petition_07142008_text.pdf, page 8months since the first Notice of Probable Violation was issued in February 2006 to "investigate and address" the compliance issues set forth in this matter and, more recently, over 10 months since the hearing was held in August 2007. Nothing has prevented the company from investigating and addressing the issues during this time. Notwithstanding the lack of merit in Petitioner's request, I believe it would be fair and not inconsistent with pipeline safety to allow Petitioner a reasonable period of time to comply with the terms of the Final Order, upon issuance of this decision. Therefore, I hereby modify the terms of the compliance order in order to allow Petitioner additional time to achieve compliance. The applicable terms of the compliance order are amended to read as follows: 4. Complete each of the above items and submit documentation of compliance within 40 days of receipt of the Decision on Reconsideration. . . . This Decision on Reconsideration is the final administrative action in this proceeding. Jeffrey . iese Associate Administrator for Pipeline Safety D teIs ed#

520075002_decision on petition_07142008_text.pdf, page 9PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF CHIEF COUNSEL 1200 NE% JERSEY AVE, SE %ASHINGTON, DC 20590 ROOM E26-122 Fax: (202} 366-7041 FAX COVER SHKKT FAX NUMBER TRANSMITTED TO: ~@. II'6 6 . ~~ . . : +. M+9 Of: @'&~ ~~@ Fro Client/Matter: @ ~ P G' ~+ ~g DOCUMENTS NUMBER OF PAGES* (Includin Cover Sheet COMMENTS: * NOT COUNTING COVER SHEET IF YOU DO NOT RECEIVE ALL PAGES, PI. EASE TELEPHONE US IMMEDIATELY AT (202} 366-4400#

520075002_decision on petition_07142008_text.pdf, page 10Date/Time LocalID 1 LocalID 2 07-14-2008 202 366 7041 02 36 49 p m Transmission Report Transmit Header Text Local Name 1 Local Name 2 This document: Confirmed {reduced sample and details below) Document size: 8. 5 "x11" PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF CHIEF COUNSEL 1200 NE% JERSEY AVE, SE %ASHINGTON, DC 20590 ROOM E26-122 Fax. (202) 366-TQal FAX COVER SHEET „+. P~+9t e~ C)ICIII/Matter @» ~P~ P /6F AFEBFt DOCLIM8NTS ~J ~ NUMBER OF PAGES', l Q NMFRC ' BRFN2 CCIMMPJFFf 8 B FIOT COUNTIFIG COVER SHEET IF YOU DO NOT RECEIVE ALL PAOBS, PLBASB TB BPHONIB US IBFIMBDIATELT AT(202) 366~ Total Pages Scanned . 9 No Job Remote Station 001 885 303-866-0200 Abbreviations HS. Host send HR Host receive WS, Waiting send Total Pages Confirmed 9 Start Time 02, 33 29 p. m 07-14-2008 00. 02, 45 Duration Pages 9/9 Line Mode Job Type 1 EC HS Results CP28800 PL Polled local PR Polled remote MS, Mailbox save MP, Mailbox pnnt CP Completed FA Fail TU Terminated by user TS Terminated by system 63 Group 3 RP Report EC Error Correct#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 1Official PDFU, S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 12300 W Dakota Ave, Suite 110 Lakewood, CO 80228 NOTICE OF PROBABLE VIOLATION and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT RE UESTED February 2, 2007 SENT TO COMPLIANCE REGISTRY Hardcopy Electrontcall 0 of Coptes~l Date '7 Mr. Hank True President Belle Fourche Pipeline Company 895 W. River Cross Road Casper, WY 82602 CPF No. 5-2007-5002 Dear Mr. True: Between June 6-10, 2005, July 18-21, 2005, and August 15-18, 2005, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA) pursuant to Chapter 601 of 49 United States Code inspected your of Belle Fourche Pipeline Company's (BFPL) Belle Fourche pipeline systems in Montana and Wyoming. This inspection included a review of supporting Operation and Maintenance (O&M) records for all systems in Casper and New Castle, Wyoming and Baker, Montana. As a result of the inspection, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The items inspected and the probable violations are: l. $195. 110. External loads (a) Anticipated external loads (e. g. ), earthquakes, vibration, thermal expansion, and contraction must be provided for in designing a pipeline system. In providing for expansion and flexibility, $419 of ASMElANSI 831. 4 must be followed.#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 2The Sussex pump station and breakout tank was constructed in 2000 and still has temporary wooden and concrete blocks used as supports under the pig trap and receiver as well as supports for the tank booster pump piping. 2. $195. 402 Procedural manual for operations, maintenance, and emergencies. (a) General. Each operator shall prepare and follow for each pipeline system a manual of written procedures for conducting normal operations and maintenance activities and handling abnormal operations and emergencies. This manual shall be reviewed at intervals not exceeding 15 months, but at least once each calendar year, and appropriate changes made as necessary to insure that the manual is effective. This manual shall be prepared before initial operations of a pipeline commence, and appropriate parts shall be kept at locations where operations and maintenance activities are conducted. a. During the interim time period when BFPL was developing a combined manual of operation and maintenance procedures for BFPL and the Bridger Pipeline Company, BFPL was using their old manual for day to day operations and maintenance procedures. The BFPL manual that was used during the interim period exceeded the required review period between January 23, 2004 when the BFPL manual was last reviewed and July 2005 when the new combined manual was adopted, a period of 17. 3 months. b. BFPL procedures require periodic review of work done by the operator to determine the adequacy of procedures used in normal operations and maintenance. BPL has not completed any of these reviews. c. BPL procedures require periodic review of work done by the operator to determine the adequacy of procedures used in controlling abnormal operations. BPL has not completed any of these reviews. 3. $195. 402 Procedural manual for operations, maintenance, and emergencies. (c) Maintenance and normal operations. The manual required by paragraph (a) of this section must include procedures for the following to provide safety during maintenance and normal operations: (12) Establishing and maintaining liaison with fire, police, and other appropriate public officials to learn the responsibility and resources of each government organization that may respond to a hazardous liquid or pipeline emergency and acquaint the officials with the operator's ability in responding to a hazardous liquid or carbon dioxide pipeline emergency and means of communication. BFPL liaison activity efforts do not insure that local responders, including those at remote locations, understand how to respond to a pipeline emergency for the Belle Fourche pipeline system.#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 3$195. 403 Emergency Response Training. (b) At the intervals not exceeding 15 months, but at least once each calendar year, each operator shall: (1) Review with personnel their performance in meeting the objectives of the emergency response training program set forth in paragraph (a) of this section; and (c) Each operator shall require and verify that its supervisors maintain a thorough knowledge of that portion of the emergency response procedures established under 195. 402 for which they are responsible to ensure compliance. a. BFPL does not review with personnel, once each calendar year not to exceed 15 months, their performance in meeting the objectives of the emergency response training program. b. BFPL does not verify that their supervisors have adequate knowledge of emergency response procedures. 4. $195. 404 Maps and Records. (b) Each operator shall maintain for at least 3 years daily operating records that indicate- (2) Any emergency or abnormal operation to which the procedures under $195. 402 apply. There is no documentation of abnormal operations and actions taken in response to those abnormal operations for the Belle Fourche pipeline system. 5. $195. 410 Line markers. (a) Except as provided in paragraph (b) of this section, each operator shall place and maintain line markers over each buried pipeline in accordance with the following: (1) Markers must be located at each public road crossing, at each railroad crossing, and in sufficient number along the remainder of each buried line so that its location is accurately known. During this inspection several markers were down along the Belle Fourche system's Bicentennial line, 6. $195. 420 Valve maintenance. (c) Each operator shall provide protection for each valve from unauthorized operation and from vandalism. Neither the vault nor the block valve on Belle Fourche system's Bicentennial line west of Wibaux, Montana was locked to prevent unauthorized operation. 7. $195. 440 Public awareness Each operator shall establish a continuing educational program to enable the public, appropriate government organizations and persons engaged in excavation-related activities to recognize a hazardous liquid or a carbon dioxide pipeline emergency and#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 4to report it to the operator or the fire, police, or other appropriate public officials. The program must be conducted in English and in other languages commonly understood by a significant number and concentration of non-English speaking population in the operator's operating areas. BFPL Public Awareness Program does not provide adequate pipeline information to the general public. 8. $195. 583 What must I do to monitor atmospheric corrosion control? (a) You must inspect each pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion, as follows: If the pipeline is located: Then the frequency of inspection is: Onshore At least once every 3 calendar years, but with intervals not exceeding 39 months Offshore At least once each calendar year, but with intervals not exceeding 15 months (b) During inspections you must give particular attention to pipe at soil-to-air interfaces, under thermal insulation, under disbonded coatings, at pipe supports, in splash zones, at deck penetrations, and in spans over water. (c) If you find atmospheric corrosion during an inspection, you must provide protection against the corrosion as required by Sec. 195. 581. BFPL has not completed or documented any of their atmospheric corrosion inspections. BFPL has no plan for examining those pipe surfaces that are in contact with concrete saddles. Pro osed Com liance Order Pursuant to 49 United States Code $ 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to BFPL. Please refer to the Proposed Compliance Order that is enclosed and made a part of this Notice. Warnin Items With respect to items 2a, 2b, 2c, 3, 4a, 4b, 5, 6, 7, and 8 we have reviewed the circumstances and supporting documents involved in this case and have decided not to conduct additional enforcement action or penalty assessment proceedings at this time. We advise you to promptly correct these items. Be advised that failure to do so may result in BFPL being subject to additional enforcement action.#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 5Res onse to this Notice Enclosed as part of this Notice is a document entitled Response Options for Pipeline Operators in Compliance Proceedings. Please refer to this document and note the response options. If you do not respond within 30 days of receipt of this Notice, this constitutes a waiver of your right to contest the allegations in this Notice and authorizes the Associate Administrator for Pipeline Safety to find facts as alleged in this Notice without further notice to you and to issue a Final Order. In your correspondence on this matter, please refer to CPF 5-2007-5002 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, C ' oia Director, Western Region Pipeline and Hazardous Materials Safety Administration Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings cc; PHP-60 Compliance Registry PHP-500 (G. Davis 114331, 114330, 114253)#

bfpl 5-2007-5002 nopv-pco 2-2-07_text.pdf, page 6PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code $ 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to BFPL a Compliance Order incorporating the following remedial requirements to ensure the compliance of BFPL with the pipeline safety regulations: 1. With respect to Item 1 of the Notice, BFPL must: Remove and replace all existing temporary supports on above ground pipeline appurtenances at the Sussex pump station and replace with adequate permanent supports. Provide PHMSA documentation showing the replacement of all temporary supports at the Sussex pump station. 2. With respect to Item 9 of the Notice BFPL must: Complete an atmospheric corrosion inspection of all exposed piping on the Poplar, Butte, and Belle Fourche pipelines. These inspections shall include but not be limited to the soil to air interfaces and under pipe supports. Document all of the above inspections. Provide protection for all areas of corrosion found during the above inspections. 3. Within 60 days of issuance of the Final Order, Belle Fourche Pipeline Company must complete the above items, and submit the required documentation and procedures to the Director, Western Region, Office of Pipeline Safety, Pipelines and Hazardous Materials Administration, Lakewood, Colorado 80228. 4. BFPL must maintain documentation of the costs associated with fulfilling this compliance order and submit the total to the Director, Western Region, Office of Pipeline Safety. 5. BFPL shall maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to, Director, Western Region, Pipeline and Hazardous Materials Safety Administration. Costs shall be reported in two categories: 1) total cost associated with preparation/revision of plans, procedures, studies and analyses, and 2) total cost associated with replacements, additions and other changes to pipeline infrastructure.#

520075002_final order_04282008_text.pdf, page 1Official PDFO U S Department of Transportation Pipeline and Hazardous Materials Safety Administration APRONS 2II 1200 flew Jersey Aye S E Washington DC 20000 VIA CERTIFIED MAIL — RETURN RECEIPT RE UESTED Mr, Hank True President Belle Fourche Pipeline Company 455 N. Poplar St. Casper, WY 82601-1783 Re: CPF No. 5-2007-5002 Dear Mr. True: Enclosed is the Final Order issued in the above-referenced case. It makes findings of violation and specifies actions to be taken to comply with the pipeline safety regulations, When the terms of the compliance order have been completed, as determined by the Director, Western Region, this enforcement action will be closed. Your receipt of this Final Order 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: Colin G. Harris, Esq. Holme Roberts 4 Owen LLP 1801 13th St. Ste 300 , Boulder, CO 80302-5387#

520075002_final order_04282008_text.pdf, page 2U. S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D. C. 20590 In the Matter of Belle Fourche Pipeline Company, Respondent. CPF No. 5-2007-5002 FINAL ORDER On June 6-10, July 18-21, and August 15-18, 2005, pursuant to 49 U, S. C. $ 60117, a representative of the Pipelme and Hazardous Materials Safety Administration's Office of Pipeline Safety (OPS) conducted an on-site pipeline safety inspection of Belle Fourche Pipeline Company's (Belle Fourche or Respondent) pipeline facilities and records in Montana and Wyoming. Respondent's pipeline system transports crude oil and refined petroleum products in North Dakota, Montana, and Wyoming. As a result of the inspection, the Director, Western Region, OPS (Director), issued to Respondent, by letter dated February 21, 2006, a Notice of Probable Violation and Proposed Compliance Order. By letters dated May 26 and December 26, 2006, Respondent submitted written objection to the issuance of the Notice on the grounds that the proper entities had not been named. In response to those objections, the Director withdrew the original charges on February 2, 2007, and, on the same date, issued a revised Notice of Probable Violation and Proposed Compliance Order to Respondent (Notice). In accordance with 49 C. F. R. ) 190. 207, the Notice proposed finding that Respondent had committed violations of 49 C. F. R Part 195 and proposed ordering Respondent to take certain measures to correct the alleged violations. In accordance with 49 C. F. R. $ 190. 205, the Notice also advised Respondent to take appropriate corrective action to address several warning items. Respondent responded to the Notice by letter dated March 8, 2007 (Response). In its Response, Belle Fourche contested the allegations of violation and requested a hearing. In accordance with 49 C. F. R. $ 190. 211, a hearing was held on August 31, 2007 in Lakewood, Colorado, with an attorney from the Office of Chief Counsel, PHMSA, presiding, Both the Western Region, OPS, and Respondent were represented by counsel at the hearing. Respondent also submitted a post- hearing brief, dated October 11, 2007, and additional information by letter dated December 21, 2007.#

520075002_final order_04282008_text.pdf, page 3The hearing held on August 31, 2007 concerned the present case and two related cases, all arising from the 2005 OPS inspection described above. The other two cases are: In the Matter of Brid er Pi eline Com an (Bridger), Notice of Probable Violation and Proposed Compliance Order, CPF No. 5-2007-5003 (Feb. 2, 2007); and In the Matter of Butte Pi eline Com an (Butte), Notice of Probable Violation and Proposed Compliance Order, CPF No, 5-2007-5008 (Feb. 8, 2007). By letter dated December 26, 2006, Respondent explained that the Belle Fourche, Bridger, and Butte companies are separate legal entities, although they do share the same manual of operating procedures and some of the same employees. FINDINGS OF VIOLATION Item 1: The Notice alleged that Respondent violated 49 C F. R. $ 195. 110(a), which states: g 195. 110 External loads. (a) Anticipated external loads (e. g. ), earthquakes, vibration, thermal expansion, and contraction must be provided for in designing a pipeline system. In providing for expansion and flexibility, section 419 of ASME/ANSI B31. 4 [incorporated by reference] must be followed. In its Response, at the hearing, and in its post-hearing brief, Respondent did not contest this allegation and stated that it had addressed the matter. At the time of the inspection, Respondent was still using temporary supports for pipeline facilities that had been constructed in 2000. The stacked wooden and concrete block supports were not securely fastened to the ground or other permanent feature. Excessive vibration could have caused the vertically stacked wooden and concrete blocks to topple. Accordingly, I find that Respondent violated 49 C. F. R. $ 195. 110(a) by failing to provide for anticipated external loads, vibration, thermal expansion, and contraction. Item 8: The Notice alleged that Respondent violated 49 C. F. R. $ 195, 583, which states: g 195. 583 What must I do to monitor atmospheric corrosion control? (a) You must inspect each pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion. . . . (b) During inspections you must give particular attention to pipe at soil-to- air interfaces, under thermal insulation, under disbonded coatings, at pipe supports, in splash zones, at deck penetrations, and in spans over water. (c) If you find atmospheric corrosion during an inspection, you must provide protection against the corrosion as required by $195. 581. The Notice alleged that Respondent violated $ 195 583 by failing to inspect each pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion, and to give "particular attention" to pipe surfaces at pipe supports. More specifically, the Notice alleged that Respondent had not completed or documented any atmospheric corrosion inspections and did not have plans to give particular attention to pipe surfaces in contact with concrete supports.#

520075002_final order_04282008_text.pdf, page 4As a preliminary matter, at the hearing, OPS acknowledged a typographical error in the Notice concerning Item 8, OPS acknowledged that the Proposed Compliance Order erroneously referred to Item 8 as "Item 9. " (The Notice did not contain an Item 9. ) In connection with that error, the Notice erroneously referred to Item S as a warning item, when in fact a compliance order had been proposed for the item. Respondent was made aware of this error at the hearing, and as discussed below, availed itself of the opportunity to contest the allegation. At the hearing and in its post-hearing brief, Respondent contested the allegation that it violated ) 195. 583. Respondent explained that it routinely performed general operations and maintenance (OA. M) inspections and that if any significant external corrosion were found during such inspections, it would be addressed. Respondent also stated that it had written O&M procedures that referenced external corrosion on exposed surfaces. The extent to which Respondent's routine OAM inspections achieved compliance with the requirements of $ 195. 583 is not evident in the record because Respondent never submitted any documentation from those inspections showing that Belle Fourche inspected each exposed pipeline or portion of pipeline for evidence of atmospheric corrosion, with particular attention given to pipe surfaces at pipe supports. Similarly, while Respondent contended that it had OAM procedures that referenced external corrosion on exposed surfaces, Respondent never submitted any documentation to show that such procedures were followed to ensure that each pipeline exposed to the atmosphere was inspected, particularly at pipe supports, as required by $ 195. 583. On the contrary, the record shows that at the time of the OPS inspection, Respondent did not have records indicating that any atmospheric corrosion inspections had been performed. Furthermore, the pipe appeared to the inspector that it had not been inspected. Photographs taken during the inspection show pipe coating in poor condition at the location of pipe supports, indicative of years without regular examination and remediation. Finally, Respondent's lead engineer, interviewed during the inspection, stated that Respondent did not have plans to perform atmospheric corrosion inspections of above-ground pipe at the location of pipe supports. After considering all of the evidence, I hereby find that Respondent violated $ 195. 5S3 by failing to inspect each pipeline or portion of pipeline exposed to the atmosphere for evidence of atmospheric corrosion, with particular attention given to pipe surfaces at pipe supports. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 and Item 8 in the Notice for violations of 49 C. F. R. )$ 195. 110(a) and 195. 583, respectively. At the hearing and in its written submissions, Respondent indicated that it had taken measures to remedy these items. With respect to Item 1, Respondent contended that the matter "has been corrected" but did not submit documentation showing that each temporary support had been removed and replaced, as proposed in the Notice With respect to Item 8, Respondent stated that#

520075002_final order_04282008_text.pdf, page 5it had added a new section to its OAM manual regarding atmospheric corrosion inspections, had created a form to document such inspections, and was now performing inspections as required by the regulation. Again, Respondent did not submit any documentation showing that these measures had been completed. Therefore, I cannot find, as Respondent has suggested, that the actions in the proposed compliance order are unnecessary In addition, I cannot find, as Respondent has suggested, that the proposed compliance actions are excessive or that the time period for compliance is unrealistic. If Respondent is subsequently faced with unexpected circumstances that justify an extension of time to comply, Respondent may request an extension from the Director, as specified below. Under 49 U. S. C. $ 60118(a), each person who engages in the transportation of hazardous liquid by pipeline or who owns or operates a hazardous liquid pipeline facility is required to comply with the applicable safety standards established under chapter 601. Pursuant to the authority of 49 U. S. C. $ 60118(b) and 49 C. F. R. ) 190. 217, Respondent is hereby ordered to take the following actions with respect to its pipeline system to ensure compliance with the pipeline safety regulations applicable to its operations. Respondent must— 1. Remove each temporary support for above-ground pipeline appurtenances and replace them with adequate permanent supports that comply with 49 C. F. R. ) 195. 110(a). Submit documentation showing these actions have been completed. 2. Complete an atmospheric corrosion inspection of each pipeline and portion of pipeline exposed to the atmosphere, in accordance with $ 195. 583(a). Each inspection shall give particular attention to pipe at soil-to-air interfaces and at pipe supports, among other locations, in accordance with $ 195 583(b). Provide protection against any atmospheric corrosion found during the inspection, in accordance with $ 195. 583(c). Submit documentation showing these actions have been completed. 3. Maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and report the cost as follows: (a) total cost associated with preparation, revision of plans and procedures, and performance of studies and analyses; and (b) total cost associated with physical changes to the pipeline infrastructure, including replacements and additions. 4. Complete each of the above items and submit documentation of compliance within 60 days of receipt of this Final Order. Documentation shall be submitted to the Director, Western Region, Office of Pipeline Safety, Pipeline and Hazardous Materials Safety Administration, 12300 W. Dakota Ave. ¹ 110, Lakewood, CO 80228-2585. The Director may grant an extension of time to comply with any of the required items upon a written request timely submitted by the Respondent demonstrating good cause for an extension. Failure to comply with this Order may result in administrative assessment of civil penalties not to exceed $100, 000 for each violation for each day the violation continues or in referral to the Attorney General for appropriate relief in a district court of the United States.#

520075002_final order_04282008_text.pdf, page 6WARNING ITEMS With respect to Items 2(a), 2(b), 2(c), 3, 3(a), 3(b), 4, 5, 6, and 7, the Notice alleged probable violations of 49 C. F. R. Part 195 but did not propose a civil penalty or compliance order for these items. Therefore, these are considered to be warning items. The warnings were for: 49 C. F. R. $ 195. 402(a) (Notice Item 2a) — Respondent's alleged failure to review its manual of operations and maintenance procedures at intervals not to exceed 15 months, 49 C. F. R. ) 195. 402(a) (Notice Item 2b) — Respondent's alleged failure to follow its written procedures for periodically reviewing completed work to determine the adequacy of procedures used in normal operations and maintenance. 49 C. F. R. $ 195. 402(a) (Notice Item 2c) — Respondent's alleged failure to follow its written procedures for periodically reviewing completed work to determine the adequacy of procedures used in controlling abnormal operations. 49 C. F. R, $ 195, 402(c)(12) (Notice Item 3) — Respondent's alleged failure to establish and maintain liaison with local responders, particularly those at remote locations, to learn about their resources and responsibilities for responding to pipeline emergencies, and to acquaint them with Respondent's abilities and means of communication. 49 C. F. R. $ 195. 403(b)(1) (Notice Item 3a) — Respondent's alleged failure to review with personnel at intervals not to exceed 15 months, but at least once each calendar year, their performance in meeting the objectives of Respondent's emergency response training program. 49 C. F. R. $ 195. 403(c) (Notice Item 3b) — Respondent's alleged failure to verify whether its supervisors had maintained a thorough knowledge of the emergency response procedures for which they were responsible. 49 C. F. R. $ 195. 404(b)(2) (Notice Item 4) — Respondent's alleged failure to maintain daily operating records that documented each abnormal operation and response taken in accordance with Respondent's procedures. 49 C. F. R. $ 195. 410(a)(1) (Notice Item 5) — Respondent's alleged failure to maintain line markers over the buried Bicentennial pipeline. 49 C. F. R. $ 195. 420(c) (Notice Item 6) — Respondent's alleged failure to protect each vault and block valve on the Bicentennial pipeline from unauthorized operation. 49 C. F. R, $ 195. 440 (Notice Item 7) — Respondent's alleged failure to have a continuing education program with adequate information to enable the public to recognize a pipeline emergency and report it.#

520075002_final order_04282008_text.pdf, page 7Respondent did not address these warning items in its Response, at the hearing, or in its post- hearing brief, but indicated the items were mvestigated and have been addressed. Having considered such information, I find, pursuant to 49 C. F. R. $ 190. 205, that probable violations of 49 C. F. R. )$ 195. 402(a) (Items 2a, 2b, and 2c), 195. 402(c)(12) (Item 3), 195. 403(b)(1) (Item 3a), 195. 403(c) (Item 3b), 195. 404(b)(2) (Item 4), 195. 410(a)(1) (Item 5), 195. 420(c) (Item 6), and 195. 440 (Item7) have occurred. Respondent is hereby advised to ensure compliance with respect to these items. Respondent is warned that if OPS finds a violation for any of these items in a subsequent inspection, Respondent may be subject to future enforcement action. Under 49 C. F. R. $ 190. 215, Respondent has a right to submit a Petition for Reconsideration of this Final Order. The petition must be received within 20 days of Respondent's receipt of this Final Order and must contain a brief statement of the issue(s). The terms of the Final Order, including any required corrective actions, shall remain in full effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order shall be effective upon receipt. APR P, S 2008 Date Issued Jeffrey D. Wiese Associate Administrator for Pipeline Safety#