CHEVRON PRODUCTS COMPANY — Warning Letter

520085013W_warning letter_06042008.pdf, page 1Official PDFU.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 REQUESTED June 4,2008 Mr. Peter Prather HES Manager Chevron Products Company 6001 Bollinger Canyon Road, Room L-2184 San Ramon, CA 94583-2324 CPF 5-2008-5013W Dear Mr. Prather: On March 19, 2008, representatives of the Pipeline and Hazardous Materials Safety Administration (PHMSA) and California State Fire Marshal (CSFM), pursuant to Chapter 601 of 49 United States Code, inspected Chevron Products Company's (CPC) Integrity Management Program in San Ramon, California. 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: 1. 9195.452 Pipeline integrity management in high consequence areas. f) What are the elements of an integrity management program? An integrity management program begins with the initial framework. An operator must continually change the program to reflect operating experience, conclusions drawn from results of the integrity assessments, and other maintenance and surveillance data, and evaluation of consequences of a failure on the high consequence area. An#

520085013W_warning letter_06042008.pdf, page 22. 3. operator must include, at minimum, each of the following elements in its written integrity management program: (1) A process for identifying which pipeline segments could affect a high consequence area; CPC did not complete an annual HCA review using their "facility form" as part of their segment identification to determine could affect an HCA. 9195.452 Pipeline integrity management in high consequence areas. (f) What are the elements of an integrity management program? An integrity management program begins with the initial framework. An operator must continually change the program to reflect operating experience, conclusions drawn from results of the integrity assessments, and other maintenance and surveillance data, and evaluation of consequences of a failure on the high consequence area. An operator must include, at minimum, each of the following elements in its written integrity management program: (6) Identification of preventive and mitigative measures to protect the high consequence area (see paragraph (i) of this section); (i) What preventive and mitigative measures must an operator take to protect the high consequence area? (1) General requirements. An operator must take measures to prevent and mitigate the consequences of a pipeline failure that could affect a high consequence area. These measures include conducting a risk analysis of the pipeline segment to identify additional actions to enhance public safety or environmental protection. Such actions may include, but are not limited to, implementing damage prevention best practices, better monitoring of cathodic protection where corrosion is a concern, establishing shorter inspection intervals, installing EFRDs on the pipeline segment, modifying the systems that monitor pressure and detect leaks, providing additional training to personnel on response procedures, conducting drills with local emergency responders and adopting other management controls. CPC did not conduct an evaluation of their preventive and mitigative measures in a timely manner. The target dates to implement an appropriate preventive and mitigative measures outlined in the IMP would not be completed for several years. 9195.452 Pipeline integrity management in high consequence areas. (f) What are the elements of an integrity management program? An integrity management program begins with the initial framework. An operator must continually change the program to reflect operating experience, conclusions drawn from results of the integrity assessments, and other maintenance and surveillance data, and evaluation of consequences of a failure on the high consequence area. An#

520085013W_warning letter_06042008.pdf, page 34. operator must include, at minimum, each of the following elements in its written integrity management program: (6) Identification of preventive and mitigative measures to protect the high consequence area (see paragraph (i) of this section); (i) What preventive and mitigative measures must an operator take to protect the high consequence area? (3) Leak detection. An operator must have a means to detect leaks on its pipeline system. An operator must evaluate the capability of its leak detection means and modify, as necessary, to protect the high consequence area. An operator's evaluation must, at least, consider, the following factors-length and size of the pipeline, type of product carried, the pipeline's proximity to the high consequence area, the swiftness of leak detection, location of nearest response personnel, leak history, and risk assessment results. CPC did not produce any documentation to show that an evaluation of the leak detection capability of their breakout tank facilities was performed and completed. 8195.452 Pipeline integrity management in high consequence areas. (f) What are the elements of an integrity management program? An integrity management program begins with the initial framework. An operator must continually change the program to reflect operating experience, conclusions drawn from results of the integrity assessments, and other maintenance and surveillance data, and evaluation of consequences of a failure on the high consequence area. An operator must include, at minimum, each of the following elements in its written integrity management program: (7) Methods to measure the program's effectiveness (see paragraph (k) of this section); (k) What methods to measure program effectiveness must be used? An operator's program must include methods to measure whether the program is effective in assessing and evaluating the integrity of each pipeline segment and in protecting the high consequence areas. See Appendix C of this part for guidance on methods that can be used to evaluate a program's effectiveness. CPC has not yet implemented their program evaluation. Under 49 United States Code, 5 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 Chevron Products Company being subject to additional enforcement action.#

520085013W_warning letter_06042008.pdf, page 4No reply to this letter is required. If you choose to reply, in your correspondence please refer to CPP 5-2008-5013W. 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). Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PWP-60 Compliance Registry PHP-500 H. Nguyen (#I21 192)#