GAS TRANSMISSION NORTHWEST LLC — Notice of Probable Violation

520081004_nopv pco letter_01112008_text.pdf, page 1Official PDF. . — t p, PLOP 5t ~ ~~~ . - iy4Y Hectronlcal y tiai &te&'P~ — — — t i 1 Q4 it, t Copte'-- ' , Date. U. 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 January 11, 2008 Mr. Ross Parker Regional Director TransCanada — Gas Transmission Northwest 1400 SW Fifth Avenue Suite 900 Portland, OR 97201 CPF 5-2008-1004 Dear Mr. Parker: On June 25 to 29, 2007, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, inspected your Gas Transmission Northwest System's, Sandpoint District in Idaho, As a result of the inspection, it appears that you have committed violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations The items inspected and the probable violations are: $192. 463 External corrosion control: Cathodic protection. (a) Each cathodic protection system required by this subpart must provide a level of cathodic protection that compiies with one or more of the applicable criteria contained in Appendix D of this part. If none of these criteria is applicable, the cathodic protection system must provide a level of cathodic protection at least equal to that provided by compliance with one or more of these criteria. TransCanada has not remediated low cathodic protection (CP) monitoring levels at test station MP 14. 1 on the B-Line of the Gas Transmission Northwest System. Records show that these low levels were documented during their 2005 CP survey, 2006 CP survey, and again during an October 2006 CP survey Specifically, the CP monitoring levels at station MP 14. 1 have not met the criteria listed under Appendix A, 49 CFR 192 which requires CP monitoring levels to I) be more negative than -850 mV with CP#

520081004_nopv pco letter_01112008_text.pdf, page 2being interrupted, an "off' reading, or 2) have a depolarized shift of at least 100 mV. CP monitoring records also show that "off' readings at MP 14. 1 were less negative than depolarized readmgs at the above three CP monitoring surveys. This test station is also adjacent to a cased railroad crossing. CP monitoring levels must meet one or more of the criteria listed in Appendix A, 49 CFR 192. Also depolarized readings that are more negative than "off' readings indicate possible interference with the cased crossing or other problems with either the CP system or the method of CP monitoring. $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 procedures 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. TransCanada was unable to provide records documenting the reviews, once each calendar year not to exceed 15 months, of all procedures required under $192. 605. TransCanada did provide documentation showing that their master Operations and Maintenance manual had been updated in June 2005 and September 2006 This manual describes how TransCanada will meet the requirements of 49 CFR 192, and in doing so references procedures that reside in other TransCanada manuals. TransCanada could not provide documentation that those referenced procedures had been reviewed once each calendar year not to exceed 15 months. An operator must review all operation and maintenance procedures it uses for complying with 49 CFR 192. Review of a master manual alone is not considered adequate. $192. 705 Transmission lines: Patrolling. (a) Each operator shall have a patrol program to observe surface conditions on and adjacent to the transmission line right-of-way for indications of leaks, construction activity, and other factors affecting safety and operation. During this inspection it was observed that the pipeline right-of-way (ROW) was covered by dense vegetation. TransCanada uses aircraft to fulfill their patrollmg requirements of the ROW. An operator must keep the ROW and areas adjacent to the ROW in a condition that will allow them to observe leak indications, construction activity and other factors affecting safety and operation. If an operator chooses to use aerial patrols then the surface condition must be kept adequately cleared to allow observation of the ground when flying overhead.#

520081004_nopv pco letter_01112008_text.pdf, page 3Pro 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 TransCanada. Please refer to the Proposed Compliance Order that is enclosed and made a part of this Notice. Warnin Items With respect to items 2 and 3, 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 TransCanada being subject to additional enforcement action. Res 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. 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 responsive 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). 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 5-200S-1004 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 (G Davis ¹ 118881) Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings#

520081004_nopv pco letter_01112008_text.pdf, page 4PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code $ 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to TransCanada a Compliance Order incorporating the following remedial requirements to ensure the compliance of TransCanada with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to low cathodic protection (CP) monitoring levels at MP 14. 1 and pertaining to depolarized CP monitoring levels that were more negative than "off' CP monitoring levels at MP 14. 1, TransCanada must: a. Initiate an investigative excavation to inspect the condition of the pipe at MP 14. 1, b, Make repairs to the pipe at MP 14. 1 if necessary, c. Ensure that CP monitoring levels meet one or more of the criteria listed in Appendix A of 49 CFR 192 and, d. Resolve the depolarized CP monitoring levels being higher than the "off' CP monitoring levels. 2, TransCanada must complete Item 1 within 30 days after receipt of the Final Order. 3. TransCanada shall maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Chris Hoidal, 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 infrastrucMe.#

520081004_FinalOrder_09012009_text.pdf, page 1Official PDFSEP 01 2009 Mr. Ross Parker Regional Director, Gas Transmission Northwest TransCanada 1400 SW Fifth Avenue Suite 900 Portland, OR 97201 Re: CPF No. 5-2008-1004 Dear Mr. Parker: Enclosed is the Final Order issued in the above-referenced case. It makes findings of violation and specifies actions that TransCanada needs to take 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 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: Chris Hoidal, Director, Western Region, PHMSA CERTIFIED MAIL – RETURN RECEIPT REQUESTED [7005 0390 0005 6162 5784]#

520081004_FinalOrder_09012009_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 ) TransCanada, ) CPF No. 5-2008-1004 ) ) ) Respondent. ) ________________________________________) FINAL ORDER From June 25 to June 29, 2007, pursuant to 49 U.S.C. § 60117, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), conducted an inspection of the facilities and records of the Gas Transmission Northwest system at the Sandpoint District in Idaho. This system is owned by TransCanada (Respondent) and consists, in part, of two parallel pipelines (A and B lines), totaling 232 miles of pipe, that run from the Canadian border through Idaho to the Washington border. As a result of the inspection, the Director, Western Region, OPS (Director), issued to Respondent, by letter dated January 11, 2008, a Notice of Probable Violation 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. § 192.463 and proposed ordering Respondent to take certain measures to correct the alleged violation. The Notice also proposed finding that Respondent had committed certain probable violations of 49 C.F.R. Part 192 and warning Respondent to take appropriate corrective action to address them or be subject to future enforcement action. Respondent responded to the Notice by letter dated January 18, 2008 (Response). Respondent did not contest the allegation of violation and provided information concerning the corrective actions it planned to take. Respondent did not request a hearing and therefore has waived its right to one. FINDING OF VIOLATION In its Response, Respondent did not contest the allegation in the Notice that it violated 49 C.F.R. Part 192, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.463(a), which states:#

520081004_FinalOrder_09012009_text.pdf, page 32 § 192.463 External corrosion control: Cathodic protection. (a) Each cathodic protection system required by this subpart must provide a level of cathodic protection that complies with one or more of the applicable criteria contained in Appendix D of this part. If none of these criteria is applicable, the cathodic protection system must provide a level of cathodic protection at least equal to that provided by compliance with one or more of these criteria. The Notice alleged that Respondent violated § 192.463(a) by failing to provide a level of cathodic protection that complies with one or more of the applicable criteria contained in adequate cathodic protection (CP) on its “B-Line” pipeline in 2005 and 2006. Respondent’s records of 2005 and 2006 CP surveys in the vicinity of Mile Post 14.1 on the B-Line showed negative voltages of 0.58 volt, 0.59 volt, and 0.46 volt, respectively, and that “off” readings at milepost 14.1 were less negative than depolarized readings during all three surveys. MP 14.1 is Appendix D of Part 192.1 Specifically, the Notice alleged that TransCanda failed to provide at the location of a cased pipeline crossing beneath railroad tracks. In its Response, TransCanda did not contest this allegation. Accordingly, I find that Respondent violated 49 C.F.R. § 192.463(a) by failing to provide a level of cathodic protection on its B-Line that complied with one or more of the applicable criteria contained in Appendix D of Part 192. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 in the Notice for violation of § 192.463(a), pertaining to inadequate levels of CP in the vicinity of MP 14.1 on the B-Line. 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. Pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is ordered to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations. Respondent must: 1. Conduct an investigative excavation to inspect the condition of the pipe at MP 14.1. 2. Repair any pipeline damage discovered in the vicinity of MP 14.1. 1 Appendix D requires CP levels to have either (1) a negative voltage of at least 0.85 volt with CP being interrupted, an “off” reading or (2) a minimum negative polarization voltage shift of 100 millivolts. 49 C.F.R. Part 192 app. D(A)(1) and (3). A typographical error in the Notice referred to Appendix A rather than Appendix D.#

520081004_FinalOrder_09012009_text.pdf, page 43 3. Take action to ensure that the level of CP meets one or more of the criteria in 49 C.F.R. Part 192, Appendix D, including CP levels measured in the depolarized state. 4. Complete the work described in paragraphs 1-3, above, within 30 days of receipt of the Final Order. 5. Maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Chris Hoidal, Director, Western Region, Pipeline and Hazardous Materials Safety Administration. Respondent must report costs 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. 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. WARNING ITEMS With respect to Items 2 and 3, the Notice alleged probable violations of Part 192 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. § 192.605(a) (Notice Item 2) ─ Respondent’s alleged failure to review and update its written manual of operations, maintenance and emergency procedures at least once each calendar year at intervals not to exceed 15 months; and 49 C.F.R. § 192.705(a) (Notice Item 3) ─ Respondent’s alleged failure to maintain its pipeline right-of-way adequately cleared of vegetation such that its patrol activities could effectively observe leaks, construction activity, and other factors affecting safety and operation of the pipeline. I find, pursuant to 49 C.F.R. § 190.205, that probable violations of 49 C.F.R. § 192.605(a) and 49 C.F.R. § 192.705(a) have occurred and Respondent is advised to correct such conditions. If OPS finds a violation for any of these items in a subsequent inspection, Respondent may be subject to future enforcement action.#

520081004_FinalOrder_09012009_text.pdf, page 54 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 sent to the Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590. 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 order, including any required corrective action, shall remain in full force and effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective upon receipt. ____________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#