PACIFIC COAST ENERGY COMPANY, LP — Notice of Probable Violation

party submissionOfficial PDF520090009_operator response_07302009.pdf#

520090009_FinalOrder_03212011_text.pdf, page 1Official PDFMAR 21 2011 Mr. Halbert S. Washburn Chief Executive Officer Breitburn Energy Corporation L.P. 515 South Flower Street, Suite 4800 Los Angeles, CA 90071 Re: CPF No. 5-2009-0009 Dear Mr. Washburn: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation and assesses a civil penalty of $105,000. It further finds that Breitburn Energy Corporation L.P. has completed the actions specified in the Notice to comply with the pipeline safety regulations. When the civil penalty has been paid, this enforcement action will be closed. Service of the Final Order by certified mail is deemed effective upon the date of mailing, or as otherwise provided 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 1160 0001 0073 9659]#

520090009_FinalOrder_03212011_text.pdf, page 22 U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 ____________________________________ ) In the Matter of ) ) Breitburn Energy Corporation L.P., ) CPF No. 5-2009-0009 ) Respondent. ) ____________________________________) FINAL ORDER In June 2008, 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 on- site pipeline safety inspection of the facilities and records of Breitburn Energy Corporation L.P. (Breitburn Energy or Respondent) in Seal Beach, California. Breitburn Energy operates a 5-mile pipeline facility in that area on behalf of the Seal Beach Gas Processing Joint Venture. As a result of the inspection, the Director, Western Region, OPS (Director), issued to Respondent, by letter dated January 8, 2009, 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 Breitburn Energy had violated 49 C.F.R. §§ 192.465, 192.609, 192.619, 192.739, and 192.745 and proposed assessing a civil penalty of $105,000 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violations. Breitburn Energy responded to the Notice by letter dated July 30, 2009 (Response). The company did not contest the allegations of violation, but offered explanations for its actions, and requested that the proposed civil penalty be reduced. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION The Notice alleged that Respondent committed violations of 49 C.F.R. Part 192, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.465, which states, in relevant part:#

520090009_FinalOrder_03212011_text.pdf, page 33 § 192.465 External corrosion control: Monitoring. (a) . . . . (b) Each cathodic protection rectifier or other impressed current power source must be inspected six times each calendar year, but with intervals not exceeding 2 ½ months, to insure that it is operating. The Notice alleged that Respondent violated 49 C.F.R. § 192.465 by failing to inspect a rectifier that provides impressed cathodic protection for its pipeline at least six times a year, with intervals not exceeding 2 ½ months. Specifically, the Notice alleged that, during the three years prior to the PHMSA inspection, Breitburn Energy only inspected that rectifier once a year, i.e., during the annual pipe-to-soil survey conducted by its third-party contractor. In its Response, Breitburn Energy did not contest this allegation of violation, but explained that the employee responsible for maintaining its records had taken or destroyed all of those documents when he left the company. Respondent further stated that it was confident that the required inspection had occurred, even though it could not provide any of the required documentation. 1 Breitburn Energy has an obligation to retain a record of each rectifier inspection for at least 5 years. inspections occurred. Moreover, Breitburn Energy acknowledges that the employee responsible for conducting the inspections and maintaining the records made false statements about the performance of his duties. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.465 by failing to inspect the rectifier at least six times per year, with intervals not exceeding 2 ½ months, for a period of three years. 2 Without any rectifier inspection records, Breitburn Energy cannot demonstrate that the Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.609, which states: § 192.609 Change in class location: Required study. Whenever an increase in population density indicates a change in class location for a segment of an existing steel pipeline operating at hoop stress that is more than 40 percent of SMYS, or indicates that the hoop stress corresponding to the established maximum allowable operating pressure for a segment of existing pipeline is not commensurate with the present class location, the operator shall immediately make a study to determine: (a) The present class location for the segment involved. (b) The design, construction, and testing procedures followed in the original construction, and a comparison of these procedures with those required for the present class location by the applicable provisions of this part. (c) The physical condition of the segment to the extent it can be 1 Response at 2. 2 49 C.F.R. § 192.491(c).#

520090009_FinalOrder_03212011_text.pdf, page 44 ascertained from available records; (d) The operating and maintenance history of the segment; (e) The maximum actual operating pressure and the corresponding operating hoop stress, taking pressure gradient into account, for the segment of pipeline involved; and (f) The actual area affected by the population density increase, and physical barriers or other factors which may limit further expansion of the more densely populated area. The Notice alleged that Respondent violated 49 C.F.R. § 192.609 by failing to immediately make a study to determine the present class location for a portion of its pipeline. In particular, the Notice alleged that Breitburn Energy’s records indicated the entire pipeline is in a Class 1 location, even though a short section of its pipeline is in a Class 3 location. In its Response, Breitburn Energy explained that it has consistently maintained that a 0.97-mile portion of transmission line in its system is in a Class 3 location, and it included a copy of its 2008 Class Location Survey for its pipeline, which shows that this line is in a Class 3 location.3 Respondent also explained that it has prepared an additional Class Location Survey and included it in its pipeline manual as an addendum. The Class Location Survey submitted by Breitburn Energy is dated June 24, 2008, several days after the OPS on-site safety inspection occurred in this case. Therefore, that report does not show that Respondent had conducted a class location study prior to the inspection. Breitburn Energy did not submit any other evidence demonstrating that it had previously performed such study. Accordingly, based upon a review of all of the evidence, I find that Respondent has violated 49 C.F.R. § 192.609 by failing to conduct a class location study. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.619, which states, in relevant part: § 192.619: Maximum allowable operating pressure: Steel or plastic pipelines.4 (a) Except as provided in paragraph (c) of this section, no person may operate a segment of steel or plastic pipeline at a pressure that exceeds the lowest of the following: (1) . . . . (2) The pressure obtained by dividing the pressure to which the segment was tested after construction as follows: (i) . . . . (ii) For steel pipe operated at 100 p.s.i. (689 kPa) gage or more, the test pressure is divided by a factor determined in accordance with the following table: 3 Class Location Survey, attached to Response. 4 Section 192.619 was amended by the final rule published on October 17, 2008 (73 FR 62148).#

520090009_FinalOrder_03212011_text.pdf, page 55 Factors Class location Segment Installed Segment Installed Segment Converted Before (Nov 12, 1970) after (Nov 11, 1970) under § 192.14 1 1.10 1.10 1.25 2 1.25 1.25 1.25 3 1.40 1.50 1.50 4 1.40 1.50 1.50 The Notice alleged that Respondent violated 49 C.F.R. § 192.619 by operating its pipeline at a pressure that routinely exceeds the established maximum allowable operating pressure (MAOP). Specifically, the Notice alleged that Breitburn Energy specified that the MAOP of its line was 200 psi based on the results of a 1994 hydrostatic pressure test. However, the Notice further alleged that Respondent maintained a normal operating pressure for this line of 200-250 psi, and that it had set the pressure relief valve at 250 psi. Breitburn Energy did not contest the allegation of the violation, but explained that it had mistakenly reported the operating pressure to be 200- 250 psi. Respondent also claimed that the operating pressure of the line, based on measurements taken after the OPS inspection, is and has been 160-175 psi. The records reviewed at the time of the OPS inspection showed that Breitburn Energy was consistently operating the line above its MAOP. Respondent has not introduced any evidence that refutes that fact. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.619 by exceeding the established MAOP for its pipeline. Item 4: The Notice alleged that Respondent violated 49 C.F.R. § 192.739, which states, in relevant part: § 192.739 Pressure limiting and regulating stations: Inspection and testing. (a) Each pressure limiting station, relief device (except rupture discs), and pressure regulating station and its equipment must be subjected at intervals not exceeding 15 months, but at least once each calendar year, to inspections and tests to determine that it is – (1) In good mechanical condition; (2) Adequate from the standpoint of capacity and reliability of operation for the service in which it is employed; (3) Except as provided in paragraph (b) of this section, set to control or relieve at the correct pressure consistent with the pressure limits of § 192.302(a); and (4) Properly installed and protected from dirt, liquids, or other conditions that might prevent proper operation. The Notice alleged that Respondent violated 49 C.F.R. § 192.739 by failing to inspect the pressure regulating valve on its line at the prescribed intervals. Specifically, the Notice alleged that for the 3-year period preceding the OPS inspection, Breitburn Energy did not have any records to show that it had inspected its pressure limiting device at least once each calendar year, at intervals not exceeding 15 months, to ensure that it is in good mechanical condition,#

520090009_FinalOrder_03212011_text.pdf, page 66 has adequate capacity, sets to control or relieve at the correct pressure, and is installed properly. Respondent did not contest the allegation of violation, but stated that employee responsible for performing those inspections and retaining the required records had taken or destroyed all of those documents when he left the company. Breitburn Energy also stated that its pressure relief device had been “effectively” tested on a routine basis, as “it is set off each time the Southern California Gas Company shuts down its receiving line due to gas quality issues, which in turn causes pressure buildup of the transmission line causing the relief device to go off.”5 Breitburn Energy is required to retain a record of each pressure relief inspection for at least 5 that the pressure relief inspections occurred, because it has no records of the inspections. Moreover, Breitburn Energy acknowledges that the employee responsible for performing those inspections and retaining the required records made false statements about the performance of his duties. Furthermore, the actuation of the relief device as described in Breitburn Energy’s years or until the inspection occurs, whichever is longer.6 Breitburn Energy cannot demonstrate Response does not constitute an adequate inspection for purposes of this regulation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.739 by failing to inspect the pressure relief valve for its pipeline at the required intervals. Item 5: The Notice alleged that Respondent violated 49 C.F.R. § 192.745, which states, in relevant part: § 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. The Notice alleged that Respondent violated 49 C.F.R. § 192.745 by failing to inspect the mainline block valves on its pipeline at the required intervals. Specifically, the Notice alleged that Breitburn Energy did not have any records to show that it had inspected the block valve on its line for the 3 years preceding the OPS inspection, and that each transmission mainline block valve that may be required during any emergency must be inspected at least once a year, with intervals not exceeding 15 months. Respondent did not contest this allegation of violation, but explained that its policy is to conduct emergency shutoff valve inspections on an annual basis, and that management was told the required testing was done in this case. However, Breitburn Energy also acknowledged that the documentation associated with those inspections was not in its files. 7 5 Response at 3. 6 49 C.F.R. § 192.709(c). 7 Response at 4.#

520090009_FinalOrder_03212011_text.pdf, page 77 Breitburn Energy has a duty to retain a record of each valve inspection for at least 5 years or until the inspection occurs, whichever is longer.8 Without records of valve inspections, Breitburn Energy cannot demonstrate that the inspections occurred. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.745 by failing to inspect the mainline block valves on its pipeline at the required intervals. ASSESSMENT OF PENALTY Under 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed $100,000 per violation for each day of the violation, up to a maximum of $1,000,000 for any related series of violations. In determining the amount of a civil penalty under 49 U.S.C. § 60122 and 49 C.F.R. § 190.225, I must 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; the 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 $105,000 for the violations cited above. In its response, Respondent alleged that for each of the violations, the inspection records are missing because a former employee destroyed or removed the documents from Breitburn premises without permission. Breitburn Energy explained that the employee charged with conducting the required inspections and maintaining the associated records regularly reported to his superiors that the inspections were conducted and recorded. Additionally, the employee verified to Breitburn’s Environmental, Health and Safety department that all DOT compliance work was up to date. However, Breitburn Energy later learned that the employee had made false representations to management. This employee is no longer working at Breitburn Energy. After the employee left, Breitburn’s management determined that the records of inspections were missing. They believe that the former employee is responsible for the compliance issues and missing records. Since the inspection, Breitburn Energy has replaced the crew at the Seal Beach facility. In addition, Breitburn Energy has instituted new internal policies and procedures to better monitor performance and to duplicate records.9 Item 1: The Notice proposed a civil penalty of $35,000 for Respondent’s violation of 49 C.F.R. § 192.465, for failing to inspect the rectifier that provides impressed cathodic protection for the pipeline. Breitburn Energy had no records to show that it had conducted the monitoring at least six times per year, with intervals not exceeding 2 ½ months. In its response, Breitburn Energy requested that the penalty be reduced because there was no adverse impact on the environment, Breitburn Energy has not had any prior violations at this location, and because the missing inspection records are the result of the personnel issue described above. Breitburn Energy stated 8 49 C.F.R. § 192.709(c). 9 Response at 1.#

520090009_FinalOrder_03212011_text.pdf, page 88 asserts that since the change of personnel at the facility, they have been maintaining and are able that it is “confident that these inspections were conducted.”10 Furthermore, Breitburn Energy to locate all required records. Respondent has not provided any evidence to substantiate its “confidence” in the fact that the required inspections ever occurred. The employee charged with performing those inspections has proven untrustworthy, and there is no other reliable evidence indicating that the inspections occurred. A reduction in the civil penalty is unwarranted because Breitburn Energy has not demonstrated that it took any action, over a period of three years, to ensure that the inspections its employee claimed to be conducting were actually conducted. Based upon the foregoing, I assess Respondent a civil penalty of $35,000 for violation of 49 C.F.R. § 192.465. Item 4: The Notice proposed a civil penalty of $35,000 for Respondent’s violation of 49 C.F.R. § 192.739, for failing to inspect the pressure relief valve on its pipeline at the required intervals. Respondent has requested a reduction in the proposed penalty because it has a policy in place for inspecting these valves, even though the required documentation is missing due to the actions of its former employee. Breitburn Energy also seeks a reduction because the violation did not result in any adverse impact on the environment, and it has no history of prior violations at this location. However, Breitburn Energy has not shown that it made any efforts to ensure that its policy of inspecting the pressure relief valves was followed by the employees charged with conducting the inspections. Accordingly, I do not find support for a reduction in the civil penalty. Based upon the foregoing, I assess Respondent a civil penalty of $35,000 for violation of 49 C.F.R. § 192.739. Item 5: The Notice proposed a civil penalty of $35,000 for Respondent’s violation of 49 C.F.R. § 192.745, for failing to inspect the transmission line emergency shutoff valve. Respondent requested a reduced penalty because management had been told the testing was performed, but the former employee destroyed or removed the relevant records. As explained in the assessment of penalty for Items 1 and 4, a reduction in the civil penalty is unwarranted because Breitburn Energy has not demonstrated that it took any measures to ensure that the inspections actually occurred. Based upon the foregoing, I assess Respondent a civil penalty of $35,000 for violation of 49 C.F.R. § 192.745. In summary, having reviewed the record and considered the assessment criteria for each of the Items cited above, I assess Respondent a total civil penalty of $105,000. Payment of the civil penalty must be made within 20 days of service. Federal regulations (49 C.F.R. § 89.21(b)(3)) require such payment to 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 269039, Oklahoma City, Oklahoma 73125. The Financial Operations Division telephone number is (405) 954-8893. 10 Response at 2.#

520090009_FinalOrder_03212011_text.pdf, page 99 Failure to pay the $105,000 civil penalty will result in accrual of interest at the current annual rate in accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to those same authorities, a late penalty charge of six percent (6%) per annum will be charged if payment is not made within 110 days of service. Furthermore, failure to pay the civil penalty may result in referral of the matter to the Attorney General for appropriate action in a district court of the United States. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 1, 2, 3, 4, and 5 in the Notice for violations of 49 C.F.R. §§ 192.465, 192.609, 192.619, 192.739, 192.745, respectively. 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 Respondent has taken the following actions specified in the proposed compliance order: 1. With respect to the violation of § 192.465 (Item 1), Respondent has replaced personnel at the Seal Beach Facility and has instituted procedures to monitor performance and to duplicate records. Since the change of personnel, Breitburn Energy has conducted timely external corrosion monitoring and maintained the required records.11 2. With respect to the violation of § 192.609 (Item 2), Respondent conducted a Class Location Survey dated June 24, 2008 and has prepared an additional Class Location Survey that it has included in its pipeline manual.12 3. With respect to the violation of § 192.619 (Item 3), Respondent took operating pressure measurements and determined that its normal operating pressure does not exceed its maximum allowable operating pressure. Respondent is also conducting a full evaluation of the pipelines at the facility to ensure that all systems are set at and operating at optimal pressures and settings.13 4. With respect to the violation of § 192.739 (Item 4), Respondent has corrected the personnel issues that led to the lack of records of inspections of the regulating valve. 5. With respect to the violation of § 192.745 (Item 5), Respondent has corrected the 11 See Response at 2, and attachment to Response: “Sample Rectifier Inspection Logs.” 12 See attachment to Response. 13 See Response at 3.#

520090009_FinalOrder_03212011_text.pdf, page 1010 personnel issues that led to the missing records of inspections of the emergency shutoff valve, and has instituted procedures to better monitor performance of inspections. Accordingly, I find that compliance has been achieved with respect to these violations. Therefore, the compliance terms proposed in the Notice are not included in this Order. 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: Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA will accept petitions received no later than 20 days after receipt of service of this Final Order by the Respondent, provided they contain a brief statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.215. The filing of a petition automatically stays the payment of any civil penalty assessed. Unless the Associate Administrator, upon request, grants a stay, all other terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. ___________________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#

520090009_NOPV PCP PCO_01082009_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED January 8, 2009 Ms. Martha Brock EH&S Manager Breitburn Energy Corporation L.P. 515 South Flower Street, Suite 4800 Los Angeles, CA 90071 CPF 5-2009-0009 Dear Ms. Brock: On June 18-19, 2008, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, conducted an on- site pipeline safety inspection of the Breitburn Energy Corporation L.P. pipeline facilities in Seal Beach, 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. §192.465 External corrosion control: Monitoring (b) Each cathodic protection rectifier or other impressed current power source must be inspected six times each calendar year, but with intervals not exceeding 2 1/2 months, to insure that it is operating. Breitburn Energy did not inspect at the required frequency the rectifier that provides impressed cathodic protection for this pipeline. During the last three years, Breitburn only conducted monitoring during the annual Farwest’s pipe-to-soil potential survey. Each rectifier must be inspected at least six times a year, with intervals not exceeding 2½ months.#

520090009_NOPV PCP PCO_01082009_text.pdf, page 22. §192.609 Change in class location: Required study. Whenever an increase in population density indicates a change in class location for a segment of an existing steel pipeline operating at a hoop stress that is more than 40 percent of SMYS, or indicates that the hoop stress corresponding to the established maximum allowable operating pressure for a segment of existing pipeline is not commensurate with the present class location, the operator shall immediately make a study to determine; (a) The present class location for the segment involved. (b) The design, construction, and testing procedures followed in the original construction, and a comparison of these procedures with those required for the present class location by the applicable provisions of this part. (c) The physical condition of the segment to the extent it can be ascertained from available records; (d) The operating and maintenance history of the segment; (e) The maximum actual operating pressure and the corresponding operating hoop stress, taking pressure gradient into account, for the segment of pipeline involved; and, (f) The actual area affected by the population density increase, and physical barriers or other factors which may limit further expansion of the more densely populated area. A short section of sales line is located in a class 3 location. Breitburn Energy failed to conduct a class study to determine the present class location designation. Breitburn Energy Records indicated the entire pipeline to be in a class 1 location. 3. §192.619 Maximum allowable operating pressure: Steel or plastic pipelines. (a) Except as provided in paragraph (c) of this section, no person may operate a segment of steel or plastic pipeline at a pressure that exceeds the lowest of the following: (2) The pressure obtained by dividing the pressure to which the segment was tested after construction as follows: (ii) For steel pipe operated at 100 p.s.i. (689 kPa) gage or more, the test pressure is divided by a factor determined in accordance with the following table: Factors Class Segment Installed Segment Installed Segment Converted location Before (Nov 12, 1970) after (Nov 11, 1970) under §192.14 1 1.10 1.10 1.25 2 1.25 1.25 1.25 3 1.40 1.50 1.50 4 1.40 1.50 1.50 2#

520090009_NOPV PCP PCO_01082009_text.pdf, page 3Breitburn Energy specified the MAOP of its sales line to be 200 psi based on the results of a 1994 hydrotest. The normal operating pressure of this line is 200-250 psi and the PRV is set at 260 psi. This operating pressure routinely exceeds their established MAOP. 4. §192.739 Pressure limiting and regulating stations: Inspection and testing. (a) Each pressure limiting station, relief device (except rupture discs), and pressure regulating station and its equipment must be subjected at intervals not exceeding 15 months, but at least once each calendar year, to inspections and tests to determine that it is– (1) In good mechanical condition; (2) Adequate from the standpoint of capacity and reliability of operation for the service in which it is employed; (3) Except as provided in paragraph (b) of this section, set to control or relieve at the correct pressure consistent with the pressure limits of §192.201(a);; and (4) Properly installed and protected from dirt, liquids, or other conditions that might prevent proper operation. Breitburn Energy did not inspect the only pressure regulating valve on its sales line for the last three years. Each pressure limiting device must be inspected at least once each calendar year not exceeding 15 months to ensure it is in good mechanical condition, has adequate capacity, sets to control or relieve at the correct pressure, and is installed properly. 5. §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. Breitburn Energy did not inspect the mainline bock valves on its sales line for the last 3 years. Each transmission mainline block valve that may be required during any emergency must be inspected at least once a year not to exceed 15 months. Proposed Civil Penalty Under 49 United States Code, § 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. The Compliance Officer has reviewed the circumstances and supporting documentation involved in the above probable violations and has recommended that you be preliminarily assessed a civil penalty of $105,000.00 as follows: 3#

520090009_NOPV PCP PCO_01082009_text.pdf, page 4Item number PENALTY 1 $35,000.00 4 $35,000.00 5 $35,000.00 Proposed Compliance Order With respect to items 1, 2, 3, 4, and 5, pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to Breitburn Energy Corporation. Please refer to the Proposed Compliance Order, which is enclosed and made a part of this Notice. Response 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 5-2009-0009 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Chris Hoidal Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 H. Monfared (#120750) Enclosures: Proposed Compliance Order Response Options for Pipeline Operators in Compliance Proceedings 4#

520090009_NOPV PCP PCO_01082009_text.pdf, page 5PROPOSED COMPLIANCE ORDER Pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to issue to Breitburn Energy Corporation a Compliance Order incorporating the following remedial requirements to ensure the compliance of BBE with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining external corrosion monitoring. Breitburn Energy must conduct inspection of its cathodic protection rectifier or other impressed current power source six times each calendar year, but with intervals not exceeding 2 1/2 months, to ensure that it is operating. 2. In regard to Item Number 2 of the Notice pertaining to the present class location for the segment involved. Breitburn Energy must conduct a class location study and make sure the maximum actual operating pressure and the corresponding operating hoop stress, taking pressure gradient into account, for the segment of pipeline involved meet the class location. 3. In regard to Item Number 3 of the Notice pertaining to maximum allowable operating pressure (MAOP), Breitburn Energy must make sure that its normal operating pressure does not exceed its MAOP and the relief set pint is no more than 110% of MAOP. 4. In regard to Item Number 4 of the Notice pertaining to pressure limiting and regulating stations inspection and testing. Breitburn Energy must conduct inspections of its pressure relief devices at intervals not exceeding 15 months, but at least once a year to make sure they are in good mechanical condition, have adequate capacity, and are protected from dirt, liquids or other conditions that might prevent proper operation. 5. In regard to Item Number 5 of the Notice pertaining to valve maintenance. Breitburn Energy must conduct inspections on its transmission line valves that might be required during any emergency and partially operate them at intervals not exceeding 15 months, but at least once each calendar year 6. Within 60 days of issuance of the Final Order, Breitburn Energy must complete the above items, and submit the required documentation and procedures to the Director, Western Region, Pipeline and Hazardous Material Safety Administration, 12300 West Dakota Avenue, Suite 110, Lakewood, Colorado 80228. 7. Breitburn Energy 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 infrastructure. 5#