FAIRBANKS NATURAL GAS — Warning Letter

520080012w_warning letter_05022008_text.pdf, page 1Official PDFo U. S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 12300 W, Dakota Ave, Suite 110 Lakewood, CO 80228 WARNING LETTER CERTIFIED MAIL - RETURN RECEIPT RE UESTED May 2, 2008 Mr. Dan Britton President Fairbanks Natural Gas 3408 International Way Fairbanks, AK 99701-9701 CPF 5-2008-0012W Dear Mr. Britton: On August 24 and November 14-15, 2007, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, inspected your Point McKenzie Liquifaction Plant Transmission Pipeline near Big Lake, Alaska. 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 violation(s) are: 1. $192, 603 General provisions. (b) Each operator shall keep records necessary to administer the procedures established under $192. 605. $192. 605 Procedural manual for operations, maintenance, and emergencies. Each operator shall include the following in its operating and maintenance plan: (a) General. Each operator shall prepare and follow for each pipeline, a manual of written procedures for conducting operations and maintenance activities and for emergency response. For transmission lines, the manual must also include#

520080012w_warning letter_05022008_text.pdf, page 2procedures for handling abnormal operations. This manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least one each calendar year. This manual must be prepared before operations of a pipeline system commence. Appropriate parts of the manual must be kept at locations where operations and maintenance activities are conducted. Records have not been maintained to reflect that the annual O&M Manual was reviewed in 2006. 2. $192. 709 Transmission lines: Record keeping. Each operator shall maintain the following records for transmission line for the periods specified: (c) A record of each patrol, survey, inspection, and test required by subparts L and M of this part must be retained for at least 5 years or until the next patrol, survey, inspection, or test is completed, whichever is longer. $192. 745 Valve maintenance: Transmission lines. (a) Each transmission line valve that might be required during any emergency must be inspected and partially operated at intervals not exceeding 15 months, but at least once each calendar year. Records have not been maintained to indicate that block, shut down, valve (SDV-1) (also the isolation valve for the LNG plant), and the relief valve (PSV-0001) were inspected between 2003 and 2007. 3. $192. 453 GeneraL (Requirements for Corrosion Control) The corrosion control procedures required by $192. 605(b)(2), including those for the design, installation, operation, and maintenance of cathodic protection systems, must be carried out by, or under the direction of, a person qualified in pipeline corrosion control methods. At the time of the inspection, Fairbanks Natural Gas did not have any employee who was qualified to manage the Cathodic Protection system. Under 49 United States Code, g 60122, you are subject to a civil penalty not to exceed $100, 000 for each violation for each day the violation persists up to a maximum of $1, 000, 000 for any related series of violations, 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 correct the items identified in this letter. Failure to do so will result in Fairbanks Natural Gas being subject to additional enforcement action. No reply to this letter is required. If you choose to reply, in your correspondence please refer to CPF 5-2008-0012%'. Be advised that all material you submit in response to this enforcement action is subject to being made publicly available. If you believe that any portion of your#

520080012w_warning letter_05022008_text.pdf, page 3responsive material qualifies for confidential treatment under 5 U, S, C. 552(b), along with the complete original document you must provide a second copy of the document with the portions you believe qualify for confidential treatment redacted and an explanation of why you believe the redacted information qualifies for confidential treatment under 5 U. S. C. 552(b). Sincerely, Chri oidal Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 B. Brown (0118827)#