Plains Products Terminals LLC — Notice of Probable Violation

520090018_NOPV PCP PCO_06262009_text.pdf, page 1Official PDFNOTICE OF PROBABLE VIOLATION PROPOSED CIVIL PENALTY and PROPOSED COMPLIANCE ORDER CERTIFIED MAIL - RETURN RECEIPT REQUESTED June 26, 2009 Mr. Jordan Janak Director, Environmental & Regulatory Compliance Plains Products Terminals LLC c/o Plains Pipeline LLC P.O. Box 4648 Houston, TX 77210-4648 CPF 5-2009-0018 Dear Mr. Janak: On November 4, 2008, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, inspected your Martinez Terminal Gas Line in Martinez, 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. §192.603 General Provisions. (b) Each operator shall keep records necessary to administer the procedures established under §192.605.#

520090018_NOPV PCP PCO_06262009_text.pdf, page 2Operator staff could not provide implementation records to demonstrate they were properly administering the procedures. Specifically, records documenting the following activities were all unavailable at the time of the inspection: the procedural manual review required under §192.605(a), review of personnel work under §192.605(b)(8) and §192.605(c)(4), a location specific emergency plan required by §192.615(b)(2), emergency procedure training required by §192.615(b)(3), liaison with public officials required by §192.615(c), public awareness program activities required by §192.616 (e, f, and g), pipeline patrolling required by §192.705, leak surveys for years other than 2007 as required by §192.706, inspection and testing of pressure limiting and regulating stations required by §192.739 (under PG&E supply contract), and determination of adequate overpressure protection as required by §192.743. 2. §192.605 Procedural manual for operations, maintenance, and emergencies. (a) General Each operator shall prepare and follow for each pipeline, a manual for conducting operations and maintenance. 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 once each calendar year. This manual must be prepared before operations of a pipeline commence. Appropriate parts of the manual must be kept at locations where operations and maintenance activities are conducted. At the time of the inspection, the operator did not have specific written procedures for the natural gas pipeline. Some applicable procedures were available in its Part 195 hazardous liquid pipeline manual that is used for their intrastate pipelines inspected by the California State Fire Marshal, but a comprehensive procedural manual for operation, maintenance and emergencies was not available for our inspector’s review. Based upon our conversations with your field staff, the operator apparently made a decision to consider the natural gas pipeline to be non-regulated under Part 192. It does appear some operations and maintenance activities, such as corrosion control monitoring for the pipeline, were performed along with analogous Part 195 work. This resulted in only partial compliance with the Federal safety regulations. 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 $108,800 as follows: Item number PENALTY 1 $44,400 2 $64,400 2#

520090018_NOPV PCP PCO_06262009_text.pdf, page 3Proposed Compliance Order With respect to items 1 and 2 pursuant to 49 United States Code § 60118, the Pipeline and Hazardous Materials Safety Administration proposes to issue a Compliance Order to Plains Products Terminals. 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 5-2009-0018 and for each document you submit, please provide a copy in electronic format whenever possible. Sincerely, Christopher Hoidal 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 J. Stahoviak (#120716) 3#

520090018_NOPV PCP PCO_06262009_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 Plains Products Terminals a Compliance Order incorporating the following remedial requirements to ensure the compliance of Plains Products Terminals with the pipeline safety regulations: 1. In regard to Item Number 1 of the Notice pertaining to failure to keep records of required operations and maintenance activities as listed, the operator must perform and document all such required activities. 2. In regard to Item Number 2 of the Notice pertaining to lack of a procedural manual for operations, maintenance, and emergency response, the operator must either develop a free-standing manual for its natural gas pipeline, or adapt its existing hazardous liquid procedural manual to include the required procedures that must be adhered to for the natural gas pipeline. 3. The operator must develop and perform all required procedures within 90 days. 4. Plains Products Terminals 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. 4#

520090018_closure letter_02122015_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED February 12, 2015 Mr. Troy Valenzuela Vice President of Environmental Health and Safety Plains Marketing, L.P. 333 Clay Street, Suite 1600 Houston, TX 77002 Re: CPF 5-2009-0018 Closure Letter Dear Mr. Valenzuela: On July 8, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Final Order to Plains All American Pipeline, L.P. in the above-referenced case. This Final Order included a Compliance Order and Civil Penalty assessment. Based on our review of the documentation you provided, confirmation of payment of the civil penalty, and a field inspection conducted by agency personnel on December 17, 2014, it has been determined that you have complied with the terms of this Order. Accordingly, this case is now closed and no further action is contemplated with respect to the matters involved in this case. Thank you for your cooperation in this matter. Sincerely, Chris Hoidal Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 J. Stahoviak (#120716)#

520090018_FinalOrder_07082011_text.pdf, page 1Official PDFJUL 8 2011 Mr. John Keffer Vice President, Terminals Plains All American Pipeline, L.P. 333 Clay Street, Suite 1600 Houston, TX 77002 Re: CPF No. 5-2009-0018 Dear Mr. Keffer: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation, assesses a civil penalty of $108,800, and specifies actions that need to be taken by Plains All American Pipeline, L.P., to comply with the pipeline safety regulations. The penalty payment terms are set forth in the Final Order. When the civil penalty has been paid and the terms of the compliance order completed, as determined by the Director, Western Region, 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. Alan Mayberry, Deputy Associate Administrator for Field Operations, Pipeline Safety Mr. Chris Hoidal, Director, Western Region, PHMSA Mr. Jordan Janek Senior Director, Environmental and Regulatory Compliance Plains All American Pipeline, L.P. P.O. Box 4648 Houston, TX 77210-4648 CERTIFIED MAIL - RETURN RECEIPT REQUESTED [7005 0390 0005 6162 5326]#

520090018_FinalOrder_07082011_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 ) ) Plains All American Pipeline, L.P., ) CPF No. 5-2009-0018 ) Respondent. ) ____________________________________) FINAL ORDER On November 4, 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 Plains All American Pipeline, L.P. (Plains or Respondent), the operator of a 1-mile pipeline system that supplies natural gas to a terminal in Martinez, California.1 As a result of the inspection, the Director, Western Region, OPS (Director), issued to Respondent, by letter dated June 26, 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 Plains had violated 49 C.F.R. §§ 192.603(b) and 192.605(a) and proposed assessing a civil penalty of $108,800 for the alleged violations. The Notice also proposed ordering Respondent to take certain measures to correct the alleged violations. Plains responded to the Notice by letter dated July 28, 2009 (Response). The company contested the allegations on legal grounds, arguing that its pipeline is not subject to the requirements in Part 192. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.603(b), which states: § 192.603 General provisions. (a) . . . . (b) Each operator shall keep records necessary to administer the procedures established under §192.605. 1 SEC Form 10-K, Plains All American Pipeline, L.P., 2010, http://www.sec.gov/Archives/edgar/data/1070423/000110465910010102/a09-36206_110k.htm#

520090018_FinalOrder_07082011_text.pdf, page 32 The Notice alleged that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep the records necessary to administer the procedures established under § 192.605. In particular, the Notice alleged that Plains did not have any records concerning: (1) the procedural manual required under § 192.605(a); the review of personnel work required under § 192.605(b)(8) and (c)(4); the emergency plan required under § 192.615; the emergency training procedures required under § 192.615(c); the public awareness program required under § 192.616(e)-(g); the pipeline patrolling program required under § 192.705; the leak surveys required under § 192.706 (other than for the 2007 calendar year); the relief device inspection and testing required under § 192.739; and the overpressure protection determinations required under § 192.743. In its Response, Plains argued that its pipeline is not subject to any of the requirements of 49 C.F.R. Part 192, because it is not a gathering line, transmission line, or distribution line used in the transportation of gas. Specifically, Respondent stated that its 1-mile pipeline supplies fuel gas to an intermittent operating thermal oxidizer and process heater at the Martinez terminal, and that its normal operating pressure is 90 psig. Plains further noted that its pipeline interconnects with a Pacific Gas & Electric (PG & E) transmission line, that it is located downstream from a regulator and customer meter, and that it is the sole user of the gas provided by PG & E. Based on these facts, Respondent asserted that its pipeline “is definitely not a gathering or distribution line.” Plains also provided a more detailed explanation for why its pipeline is not a transmission line, arguing that it operated at a hoop stress that is below 20 percent of its specified minimum yield strength (SMYS), did not transport gas within a storage field or to distribution center or storage facility, and did not transport gas to a large volume customer according to the definition provided in 49 C.F.R. § 192.3 and a February 14, 1990 letter of interpretation.2 Accordingly, Respondent argued that its pipeline is not a gathering line, transmission line, or distribution line used for the transportation of gas or subject to the pipeline safety requirements. Section 192.3 states that for purposes of 49 C.F.R. Part 192: Transmission line means a pipeline, other than a gathering line, that: (1) Transports gas from a gathering line or storage facility to a distribution center, storage facility, or large volume customer that is not down-stream from a distribution center; (2) operates at a hoop stress of 20 percent or more of SMYS; or (3) transports gas within a storage field. NOTE: A large volume customer may receive similar volumes of gas as a distribution center, and includes factories, power plants, and institutional users of gas. For purposes of this case, I accept Respondent’s contentions that its pipeline is not a gathering line or a distribution line, and that the applicability of Part 192 turns solely on whether its pipeline is a transmission line used for the transportation of gas. With regard to the latter, I also accept Respondent’s assertion that its pipeline does not operate at a hoop stress of 20 percent or more of SMYS or transport gas within a storage field. Therefore, the only remaining issue is whether Respondent’s pipeline “transports gas from a gathering line or storage facility” to a “large volume customer that is not down-stream from a distribution center.” 2 The Response refers to the interpretation as PI-89-019, dated September 18, 1989. However, the relevant interpretation is actually PI-90-004, dated February 14, 1990.#

520090018_FinalOrder_07082011_text.pdf, page 43 The “determination of whether a pipeline is . . . transmission line” is made “on a case-by-case basis depending on the set of circumstances for each line. ”3 Citing a February 14, 1990 letter of interpretation, Respondent first argues that a pipeline which operates at 90 psig cannot be considered a transmission line for purposes of 49 C.F.R. Part 192. examples of large volume customers provided in § 192.3, i.e., factories, power plants, and institutional users of gas, consume “tens to hundreds of millions of cubic feet [of gas] per day,” while “[t]he average gas delivery to the Martinez Terminal over the past years was 0.25 million cubic feet.” According to Respondent, that makes it “more . . . akin to a small commercial customer, a term used in conjunction with residential customers in PHMSA’s definition of a service line.” 4 Plains further argues that the I do not find either of these arguments persuasive. With regard to the first contention, the February 14, 1990 letter of interpretation concluded that the pipeline at issue in that case, a tap on an interstate pipeline which operated in the range of 400-800 psig, was making large volume deliveries for purposes § 192.3. It did not establish that range as a minimum threshold or exclude a pipeline operating at less pressure from that definition. In fact, in a subsequent rulemaking, PHMSA stated that it had chosen not to “specify a minimum volume of gas a pipeline must transport to a customer to qualify as transmission” for purposes of Part 192, because “[v]olumes vary, and setting an arbitrary threshold might unfairly reclassify some existing lines.”5 With regard to the second contention, the Martinez pipeline begins at a PG&E transmission line, where a pressure regulator and customer meter are located, and transports fuel gas to a terminal located approximately 1-mile away. In so doing, it crosses an interstate highway and delivers, on average, approximately 252,000 cubic feet of fuel gas each day. Under these circumstances, I cannot find that the Plains pipeline is “akin to a small commercial customer.” Rather, it is a pipeline that transports gas to a large volume customer, i.e., a transmission line subject to the requirements of 49 C.F.R. Part 192. Respondent did not contest the allegation of violation on any other grounds. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.603(b) by failing to keep the records necessary to administer the procedures established under § 192.605. Item 2: The Notice alleged that Respondent violated 49 C.F.R. § 192.605(a), which states: § 192.605 Procedural manual for operations, maintenance, and emergencies. (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 3 In the Matter of Unocal Corporation, PHMSA Interpretation #PI-96-021 (Sep. 25, 1996) (available at http://www.phmsa.dot.gov/pipeline/regs/interps). 4 The Response refers to the interpretation as PI-89-019, dated September 18, 1989. However, the relevant interpretation is actually PI-90-004, dated February 14, 1990. 5 Regulatory Review; Gas Pipeline Safety Standards, 61 FR 28770, 28772 (June 6, 1996).#

520090018_FinalOrder_07082011_text.pdf, page 54 manual must be reviewed and updated by the operator at intervals not exceeding 15 months, but at least once 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. The Notice alleged that Respondent violated 49 C.F.R. § 192.605(a) by failing to have a manual of written procedures for conducting operations and maintenance activities and for emergency response. In particular, the Notice alleged that Plains had determined that its pipeline was not subject to the requirements of 49 C.F.R. Part 192 and therefore did not have a comprehensive manual for performing these activities. For the reasons provided in Item 1, I find that Respondent’s pipeline is a transmission line subject to the requirements of Part 192. Based upon a review of all of the evidence, I find that Plains violated 49 C.F.R. § 192.605(a) by failing to have a manual of written procedures for conducting operations and maintenance activities and for emergency response. 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; 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 $108,800 for the violations cited above. Item 1: The Notice proposed a civil penalty of $44,400 for Respondent’s violation of 49 C.F.R. § 192.603, for failing to keep the records necessary to administer the procedures established under § 192.605. Plains did not dispute the factual basis for that allegation, but argued that its pipeline was not subject to the requirements of 49 C.F.R. Part 192 as matter of law. For the reasons provided above, I find that Respondent’s pipeline transports gas to a large volume customer and is a regulated transmission line. Plains has not argued that the penalty should be reduced on any other grounds and the proposed amount is justified by the relevant assessment considerations, including those that relate to the nature, circumstances, and gravity of the violation, and the degree of operator culpability. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $44,400 for violating 49 C.F.R. § 192.603. Item 2: The Notice proposed a civil penalty of $64,400 for Respondent’s violation of 49 C.F.R. § 192.605(a), for failing to have a manual of written procedures for conducting operations and maintenance activities and for emergency response. Plains did not dispute the factual basis for that allegation, but argued that its pipeline was not subject to the requirements of 49 C.F.R. Part#

520090018_FinalOrder_07082011_text.pdf, page 65 192 as matter of law. For the reasons provided above, I find that Respondent’s pipeline transports gas to a large volume customer and is a regulated transmission line. Plains has not argued that the penalty should be reduced on any other grounds and the proposed amount is justified by the relevant assessment considerations, including those that relate to the nature, circumstances, and gravity of the violation, and the degree of operator culpability. Accordingly, having reviewed the record and considered the assessment criteria, I assess Respondent a civil penalty of $64,400 for violating 49 C.F.R. § 192.605(a). 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. Failure to pay the $108,800 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 and 2 in the Notice for violations of 49 C.F.R. §§ 195.603(b) and 195.605(a), 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. 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: 1. With respect to the violation of § 192.603 (Item 1), Respondent must develop and implement procedures for maintaining all of the records necessary to administer the procedures established under 192.605. 2. With respect to the violation of § 192.605 (Item 2), Respondent must develop a manual of written procedures for conducting operations and maintenance activities and for emergency response. 3. Respondent must complete the actions in Items 1 and 2 within 90 days. 4. It is requested that Respondent maintain documentation of the safety improvement costs associated with fulfilling this compliance Order and submit the total to Chris Hoidal, Director, Western Region, PHMSA. It is requested that the costs be reported in two categories: (1) total costs associated with preparation/revision of plans,#

520090018_FinalOrder_07082011_text.pdf, page 76 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 and demonstrating good cause for an extension. Failure to comply with this Order may result in the 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. 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 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#

520090018_Decision on Reconsideration_08302013_text.pdf, page 1Official PDFAUGUST 30, 2013 Mr. Greg L. Armstrong Chairman and CEO Plains All American Pipeline, LP 333 Clay Street, Suite 1600 Houston, TX 77002 Re: CPF No. 5-2009-0018 Dear Mr. Armstrong: Enclosed please find the Decision on Reconsideration issued in the above-referenced case. It grants your Petition for Reconsideration, in part, to the extent that you sought reconsideration of an erroneous factual determination in the July 8, 2011 Final Order that the Martinez pipeline was a transmission pipeline, but denies your Petition insofar as it requested that the Final Order be vacated in its entirety for lack of PHMSA jurisdiction over the pipeline. The Decision upholds the findings of violation and the civil penalty set forth in the Final Order. Service of the Decision 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, OPS Ms. Linda Daugherty, Deputy Associate Administrator for Field Operations, OPS William V. Murchison, Esquire, Counsel for Petitioner, 325 North St. Paul Street, Suite 2700, Dallas, TX 75201 Mr. Jordan R. Janek, Senior Director, Environmental and Regulatory Compliance, Plains All American Pipeline, LP, P.O. Box 4648, Houston, TX 77210-4648 CERTIFIED MAIL – RETURN RECEIPT REQUESTED#

520090018_Decision on Reconsideration_08302013_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 ) Plains All American Pipeline, LP, ) ) ) ) Petitioner. ) _____________________________ ) CPF No. 5-2009-0018 DECISION ON RECONSIDERATION In a July 8, 2011 Final Order, I found that Plains All American Pipeline, LP (Plains or Petitioner), had committed two violations of the natural gas pipeline safety regulations in 49 C.F.R. Part 192 with respect to its Martinez Pipeline. 1 Specifically, I found that Plains had violated 49 C.F.R. § 192.603(b) by failing to keep records for administering its operations, maintenance, and emergency procedures; and had violated § 192.605(a) by failing to have a complete manual of procedures for conducting operations, maintenance, and emergency activities. 2 I assessed Plains a civil penalty of $108,000 for committing these violations and ordered the company to take certain actions to comply with the cited regulations. 3 On September 2, 2011, Plains submitted a Petition for Reconsideration (Petition) of the Final Order. 4 In its Petition, Plains contends that the Martinez Pipeline is “not a gathering line, is not a distribution line, [and] is not a transmission line” and therefore is not subject to the Part 192 pipeline safety regulations at all. 5 Petitioner further contends that because the Martinez Pipeline is an intrastate pipeline, PHMSA lacks authority to regulate it insofar as PHMSA has delegated 1 In the Matter of Plains All American Pipeline, L.P., Final Order, CPF No. 5-2009-0018 (Jul. 8, 2011). The original Notice of Probable Violation, Proposed Civil Penalty and Proposed Compliance Order (Notice) was issued to Plains Products Terminals, LLC, the operator of the Martinez Pipeline. The Final Order, however, was issued to Plains Products Terminal’s parent company, Plains All American Pipeline, LLC. The Petition was filed on behalf of both entities. 2 Final Order at pp. 1-4. 3 Id. at pp. 4-6. 4 On July 20, 2011, Plains submitted a request for an extension of the 20-day deadline for filing its Petition under 49 C.F.R. § 190.215, which PHMSA granted. On August 5, 2011, Plains submitted an additional request to extend the filing deadline until September 15, 2011, which PHMSA also granted. On November 6, 2011, PHMSA granted a stay of the Final Order pending the issuance of a Decision on Reconsideration. 5 Petition at pp. 13.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 32 direct regulatory responsibility for intrastate natural gas pipelines in California to the California Public Utilities Commission (CPUC), in accordance with the annual certification process set forth in 49 U.S.C. § 60105. For these reasons, Petitioner contends that the Final Order should be vacated in its entirety for lack of PHMSA jurisdiction and authority over the pipeline. On December 21, 2011, the Western Region, Office of Pipeline Safety (OPS), submitted a Response to the Petition (Response) and on January 4, 2012, Plains submitted a Reply to the Response (Reply). Having reviewed the record, including all factual and legal arguments, I find that the July 8, 2011 Final Order made an erroneous factual determination that the Martinez Pipeline is a transmission line. I further find that a preponderance of the evidence establishes the Martinez Pipeline is a distribution line, not a transmission line. Accordingly, the Petition is granted in part, to the extent that it sought reconsideration of this erroneous factual determination. I also find that the Martinez Pipeline, as an intrastate distribution pipeline subject to the jurisdiction of 49 U.S.C. 60101 et seq., is subject to PHMSA’s direct regulatory authority because, notwithstanding its § 60105 certification, the CPUC does not actually regulate California lines such as the Martinez Pipeline that are not within the definition of a “public utility” subject to the CPUC’s authority under state law. Accordingly, the Petition is denied insofar as it requested that the Final Order be vacated in its entirety for lack of PHMSA jurisdiction and authority over the pipeline. Background The Martinez Pipeline is a six-inch-diameter natural gas pipeline constructed in 1995 that originates at a meter run located in the 1900 block of Marina Vista Avenue in Martinez, Contra Costa County, California, and transports natural gas a distance of approximately one mile to Petitioner’s Martinez Petroleum Products Terminal (Terminal). Petitioner, a publicly-traded company engaged in the transportation, storage, and marketing of petroleum and natural-gas- related petroleum products, is the operator of the pipeline, having acquired it on November 15, 2006.6 The gas transported in the pipeline supplies a thermal oxidizer unit and a process heater at the Terminal. The Terminal is the sole consumer of the gas transported by the pipeline. PHMSA has a history of regulating the Martinez Pipeline and its prior operators, including on- site inspections by PHMSA in 2001, 2005, and 2008. On September 20, 2004, PHMSA issued a Final Order in an enforcement action against Shore Terminals, LLC, the former operator of the Martinez Pipeline.7 This Final Order required that certain actions be taken to comply with the federal pipeline safety regulations, including establishing written operating and maintenance procedures, recordkeeping programs, and the placement of markers along the route of the pipeline. These actions had not all been completed by the time Plains acquired the pipeline in November of 2006. Therefore, this enforcement proceeding was still open at the time Plains 6 http://www.paalp.com/ (last accessed Apr. 11, 2012). 7 In the Matter of Shore Terminals, LLC, CPF No. 5-2001-0010, Final Order (September 20, 2004). The Research and Special Programs Administration was PHMSA’s predecessor agency.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 43 acquired the pipeline and presumably, through its due diligence process, Plains was aware that PHMSA had exercised federal authority over the pipeline in the past. On November 4, 2008, an inspector from the Western Region, OPS, performed an on-site pipeline safety inspection of the Martinez Pipeline. Following the inspection, by letter dated June 26, 2009, the Director, Western Region, OPS (Director) issued the Notice to Plains, alleging that it had violated 49 C.F.R. §§ 192.603(b) and 192.605(a) by failing to have a manual of written procedures and keeping the records necessary to administer its procedures for conducting operations, maintenance, and emergency activities. The Notice proposed assessing a civil penalty of $108,800 for the alleged violations and proposed ordering Plains to take certain measures to correct the same. On July 28, 2009, Petitioner responded by contesting the allegations in the Notice on legal grounds.8 Plains argued that the Martinez Pipeline is not a transmission line under the definition provided in 49 C.F.R. § 192.3 because the line operates at a hoop stress below 20 percent of its specified minimum yield strength (SMYS), does not transport gas within a storage field or to a distribution center or storage facility, and does not transport gas to a large volume customer. On April 14, 2011, I issued the Final Order in this case. Based on the available record at that time, I agreed that Petitioner’s line does not operate at a hoop stress of 20 percent or more of SMYS or transport gas within a storage field. However, I did find that it transports gas to a large volume customer and determined that it therefore met the definition of a transmission line and on that basis was subject to the Part 192 requirements for transmission lines.9 Plains did not dispute the allegations in the Notice on any other grounds, and the evidence showed that Petitioner did not have a manual or keep the records necessary to administer its procedures for conducting operations, maintenance, and emergency activities for the Martinez Pipeline. Accordingly, I found that Petitioner violated 49 C.F.R. §§ 192.603(b) and 192.605(a), assessed Plains a civil penalty of $108,800, and ordered the company to take certain actions to comply with the natural gas pipeline safety regulations in 49 C.F.R. Part 192.10 On September 2, 2011, Plains filed its Petition, contending that the Martinez Pipeline is “not a gathering line, is not a distribution line, [and] is not a transmission line” and therefore is not subject to the federal pipeline safety requirements at all. 11 In particular, Plains argues that the Martinez Pipeline is not a transmission line under § 192.3 because it does not transport gas to a large volume customer and is downstream from a distribution center.12 Petitioner further argues that the Martinez Pipeline is a customer-owned service line, making it exempt from the Part 192 8 Petitioner did not request an informal hearing under 49 C.F.R. §§ 190.209-211. 9 Final Order at pp. 1-4. 10 Id. at pp. 4-6. 11 Petition at pp. 13. 12 Id. at pp. 6-11.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 54 requirements. 13 In addition, Petitioner contends that because the Martinez Pipeline is an intrastate pipeline, PHMSA lacks authority to regulate it since the agency has delegated direct regulatory responsibility over intrastate natural gas pipelines in California to the CPUC, in accordance with the annual certification process set forth in 49 U.S.C. § 60105. Based on these arguments, Petitioner contends that the Final Order should be vacated in its entirety for lack of PHMSA jurisdiction and authority over the pipeline. Standard of Review A Petitioner is afforded the right to petition the Associate Administrator for reconsideration of a Final Order. That right, however, does not constitute an appeal or an opportunity to seek a de novo review of the record. Instead, a Petitioner may present previously unavailable information or ask for the correction of any errors in a final order. Repetitious information or arguments will not be considered.14 Section 190.215(b) of the pipeline safety regulations states that “[i]f the respondent requests the consideration of additional facts or arguments, the respondent must submit the reasons they were not presented prior to issuance of the final order.” Plains acknowledges that it is seeking to present additional facts and arguments in its Petition and Reply, but states that they should be considered on reconsideration for several reasons. First, Petitioner states that any information relating to PHMSA’s jurisdiction over the Martinez Pipeline must be admitted because jurisdictional challenges are not subject to waiver and can be raised at any time in a proceeding. In particular, Plains argues that information obtained just before it filed its Reply concerning the proper regulatory classification of the line should be admitted, as it had to be obtained from Pacific Gas and Electric (PG&E), a third-party, and is directly relevant to the extent of the regulatory authority on which the Final Order was based. Finally, Petitioner notes that the Director has not objected to the introduction of this additional information, and had indicated in his Response to the Petition that further information could impact the appropriate regulatory classification of the Martinez Pipeline. I agree that the additional facts and arguments presented by Plains should be considered in this proceeding. Jurisdictional challenges can generally be raised at any point in a proceeding, and Petitioner’s new information relates to PHMSA’s authority to regulate the Martinez Pipeline. Moreover, key information regarding the classification of the pipeline supplying the Martinez Pipeline was not obtained until after the issuance of the Final Order. I am, therefore, considering the additional arguments, facts, information, and evidence offered by Plains in its Petition and Reply. Analysis I. Regulatory Classification of the Martinez Pipeline 13 Id. at 11-12. 14 49 C.F.R. § 190.215(a)-(e).#

520090018_Decision on Reconsideration_08302013_text.pdf, page 65 In its Petition, Plains contends that the Martinez Pipeline is “not a gathering line, is not a distribution line, [and] is not a transmission line” and therefore is not subject to the Part 192 pipeline safety regulations at all.15 The pipeline regulatory classification system is based on the Natural Gas Pipeline Safety Act of 1968 (NGPSA) (P.L. 90-481), codified at 49 U.S.C. 60101 et. seq., which authorizes the Secretary of Transportation to regulate the safe transportation of natural gas by pipeline. Under 49 U.S.C. § 60101(a)(6), the definition of an “Interstate gas pipeline facility” is as follows: Interstate gas pipeline facility means a gas pipeline facility— (A) used to transport gas; and (B) subject to the jurisdiction of the [Federal Energy Regulatory] Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); Under 49 U.S.C. § 60101(a)(9), the definition of an “Intrastate gas pipeline facility” is as follows: Intrastate gas pipeline facility means a gas pipeline facility and transportation of gas within a State not subject to the jurisdiction of the [Federal Energy Regulatory] Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); Under 49 U.S.C. § 60101(a)(21), the definition of the phrase “Transporting gas,” in relevant part, is as follows: Transporting gas (A) means the gathering, transmission, or distribution of gas by pipeline, or the storage of gas, in interstate or foreign commerce; . . . . Therefore, PHMSA’s safety authority broadly encompasses the entire natural gas pipeline transportation network, from the gas gathering lines that move natural gas from production-well areas, to the gas transmission lines that transport natural gas across long distances from producing areas to consuming areas, to the gas distribution lines that deliver gas to end-users such as homes and businesses. Thus, PHMSA’s authority under the NGPSA is even broader than the authority of the Federal Energy Regulatory Commission under the Natural Gas Act in that it includes gas distribution pipelines which are intrastate” pipelines.16 The Secretary of Transportation has delegated the authority to regulate pipeline safety to PHMSA, which promulgated the implementing regulations at 49 C.F.R. Part 192.17 The definitions of “Distribution line”, “Gathering line”, and “Transmission line” in 49 C.F.R. § 192.3 are as follows: 15 Petition at pp. 13. 16 The term “intrastate pipeline” is used as a label for purposes of designating whether a state having a § 60105 certification will be the primary regulator of the subject line or whether PHMSA will exercise its residual authority to regulate pipelines that are not regulated by the state. 17 See 49 C.F.R. § 1.53 for the Secretary’s delegation of this authority to the Administrator of PHMSA.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 76 Distribution line means a pipeline other than a gathering or transmission line. Gathering line means a pipeline that transports gas from a current production facility to a transmission line or main. Transmission line means a pipeline, other than a gathering line, that: (1) Transports gas from a gathering line or storage facility to a distribution center, storage facility, or large volume customer that is not down-stream from a distribution center; (2) . . . NOTE: A large volume customer may receive similar volumes of gas as a distribution center, and includes factories, power plants, and institutional users of gas. Under this classification system, every pipeline transporting gas is either a gathering line, a transmission line, or a distribution line. Therefore, I cannot accept Petitioner’s argument that the Martinez Pipeline is none of the above. Doing so would create an anomaly that has never existed in the four decades the pipeline safety regulations have been in effect and would create a gap in pipeline safety regulation that would run counter to the purpose and intent of the NGPSA. As noted above, the April 14, 2011 Final Order determined that the Martinez Pipeline is a transmission line. In its Reply, however, Petitioner provided a key piece of new information. The PG&E pipeline “upstream” of the Martinez Pipeline, which supplies the gas entering the Martinez Pipeline, is designated as DFM 3019-02 and is not a transmission line, as was thought at the time the Final Order was issued. Rather, DFM 3019-02 is actually a distribution pipeline.18 While intrastate pipeline and/or distribution systems can include both transmission lines and distribution lines, once gas has entered a distribution line, the smaller diameter, lower pressure lines branching downstream of that distribution line are generally also considered to be distribution lines, not transmission lines. While there can be certain exceptions to this in the case of “looped” distribution systems, in this case we are not dealing with a looped portion of a distribution system. Therefore, the fact that the Martinez Pipeline is downstream of a distribution pipeline means that the Martinez Pipeline is a distribution pipeline as well. This also makes the arguments concerning whether the Martinez Pipeline transports gas to a large volume customer and any other arguments concerning the definition of a transmission line moot. This brings us to Petitioner’s alternative argument, as presented in its Reply, that the Martinez Pipeline is not regulated under Part 192 because it is a “customer owned service line.”19 A service line is defined in § 192.3 as follows: Service line means a distribution line that transports gas from a common source of supply to an individual customer, to two adjacent or adjoining residential or small commercial customers, or to multiple residential or small 18 E-mail from Frank Eich, Sr. Account Manager, PG&E to Jordan R. Janek, Senior Director, Environmental & Regulatory Compliance, Plains All American Pipeline, L.P., dated January 2, 2012 (Plains Reply, Exhibit C). DFM 3019-02 is downstream of a PG&E transmission pipeline designated as “StandPac-3.” 19 Reply at pp. 41-45.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 87 commercial customers served through a meter header or manifold. A service line ends at the outlet of the customer meter or at the connection to a customer's piping, whichever is further downstream, or at the connection to customer piping if there is no meter. Service lines, therefore, are a subset of distribution lines. To say that a distribution line such as the Martinez Pipeline is a service line does not necessarily mean it is unregulated.20 The term “customer owned” service line is typically used to refer to a service line owned by the customer that is downstream of the meter or other point where the pipeline company’s operator status ends. Typically, such a line is located entirely on the grounds of the customer’s property, such as when the meter is located at the edge of the customer’s property, as opposed to being located at the wall of the home or building being supplied. The fact that transportation has ended is the basis for the absence of regulation on a customer-owned service line located entirely on a 21 customer’s property. However, if the line is not located entirely on the customer’s own property but transports gas across property owned by others, across public lands, under roadways, and over other areas accessible to the public, then the “customer” is actually engaged in pipeline transportation itself. In this case, Petitioner is both the operator of the Martinez pipeline and the ultimate consumer of the gas being transported. The fact that the Martinez Pipeline is not located entirely on Petitioner’s property and extends approximately one mile across areas open and accessible to the public means that the line is still subject to the jurisdiction of the NGPSA. Simply put, Petitioner is using the Martinez Pipeline to transport gas.22 In summary, the preponderance of the evidence establishes that the Martinez Pipeline is a distribution pipeline. Accordingly, I find on reconsideration that the factual determination made in the July 8, 2011 Final Order that the Martinez Pipeline was a transmission pipeline was erroneous. I also find, however, that the transportation of gas through the Martinez Pipeline by Petitioner is subject to the pipeline safety regulations for distribution lines and that the Martinez Pipeline is not exempt from regulation, regardless of whether or not Petitioner labels it as a customer owned service line. II. Effect of the CPUC’s § 60105 Certification on PHMSA’s Authority to Regulate the Martinez Pipeline. 20 See 49 C.F.R. §§ 192.361−192.381. 21 In some cases, the pipeline operator maintains customer-owned service lines. Under 49 U.S.C. § 60113, operators of gas pipelines supplying customer owned service lines are obligated to provide hazard notifications and safety assistance. 22 In its Petition, Plains refers to a February 13, 1996 PHMSA interpretation letter that designates a gas line fueling the lighting for a planned community’s entrance as a customer owned service line that was not entirely confined to private property. This interpretation, however, does not indicate if the line crossed public property. Although the exact facts were not discussed in the interpretation, the line appears to have been very short and on private property, with an easement to the homeowners association. In contrast, the Martinez Pipeline is approximately a mile in length and crosses a major highway, toll areas, and a railroad, creating a different safety risk than a short line from a customer’s property line to a building. See also 60 Fed. Reg. 41821 discussing customer owned service lines.#

520090018_Decision on Reconsideration_08302013_text.pdf, page 98 In its Petition and Reply, Plains further argues that PHMSA is precluded from regulating the Martinez Pipeline because “PHMSA has ceded jurisdiction over the Subject Line…to the CPUC.”23 Petitioner bases its argument on the CPUC’s annual certification under 49 U.S.C. § 60105 that, with certain exceptions not relevant here, authorizes the CPUC to regulate intrastate natural gas pipelines in California. Respondent points to the language of § 60105(a) stating that “…the Secretary of Transportation may not prescribe or enforce safety standards and practices for an intrastate pipeline facility or intrastate pipeline transportation to the extent that the safety standards and practices are regulated by a State authority . . . that submits [an annual certification] to the Secretary.” In his Response, the Director points out that the prohibition in § 60105(a) only applies to the extent that the safety standards and practices for an intrastate gas pipeline facility are regulated by a state authority. The Director, who works in close partnership with the CPUC, states that the CPUC does not have the authority to regulate the Martinez Pipeline or Plains, because the CPUC has determined that neither meets the definition of a “public utility” or “gas corporation” in Cal. Pub. Util. §§ 216 and 222. In the absence of regulation of the Martinez Pipeline by the CPUC, the Director maintains that PHMSA is not prohibited by § 60105(a) from prescribing and enforcing the safety standards and practices for the operation of the Martinez Pipeline. While the NGPSA establishes broad federal regulation of the entire natural gas pipeline transportation system, Petitioner is correct that the federal pipeline safety laws included a role for the states in regulating the intrastate pipelines within their borders through authority derived from the § 60105 certification process. PHMSA’s policy is to encourage each state to take responsibility for as much of the intrastate pipeline transportation within its borders as possible and federally funds these state pipeline safety programs. PHMSA works in close partnership with the state programs, provides training to state pipeline inspectors, and periodically evaluates the effectiveness of the state programs in regulating their intrastate pipelines. If PHMSA determines that a state pipeline safety program is inadequate, PHMSA can revoke its certification, in which case responsibility for regulating the intrastate pipelines in that state reverts back to PHMSA. Therefore, PHMSA has residual authority to directly regulate intrastate pipelines when a state is not doing so.24 With respect to the prohibition in § 60105(a), we first look to the plain language of the statute and the presumption that a legislature says in a statute what it means and means in a statute what it says.25 In that regard, the plain language of the prohibition in § 60105(a) only applies “to the extent” that the safety standards and practices for an intrastate gas pipeline facility “are regulated” by a state authority. Consistent with the purpose and federal-state structure established by the NGPSA, this prohibits PHMSA from overlapping with state regulatory activity but ensures that PHMSA has a residual “backstop” authority where, for whatever reason, 23 Reply at pp. 17. 24 See 49 U.S.C. § 60105(f). 25 Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 450 (2002); Conn. Nat. Bank v. Germain, 503 U.S. 249, 253- 254 (1992).#

520090018_Decision on Reconsideration_08302013_text.pdf, page 109 a state ends up regulating something less than all of the intrastate pipelines within that state. Petitioner’s argument amounts to the proposition that in those instances where a state is not regulating a given type of intrastate pipeline, then such a line is not regulated at all. I cannot accept this argument. If PHMSA did not have residual authority in instances where certain types of intrastate pipelines were not being regulated by a state, it would open up gaps in pipeline safety regulation, frustrate the purposes of the NGPSA, and put the public at risk.26 In the absence of the exercise of federal authority, the Martinez Pipeline would not be subject to any regulatory authority for pipeline safety purposes. Petitioner has not disputed the Director’s assertion that the CPUC does not have the authority to regulate the Martinez Pipeline under Cal. Pub. Util. §§ 216 and 222 and is not regulating it. For the reasons discussed above, I find that § 60105(a) does not prohibit PHMSA from enforcing the Part 192 regulations on the Martinez Pipeline. RELIEF GRANTED Based on a review of the record and for the reasons stated above, the factual determination made in the July 8, 2011 Final Order that the Martinez Pipeline was a transmission pipeline is vacated and the classification for the Martinez Pipeline is corrected to be that of a distribution pipeline. RELIEF DENIED Based on a review of the record and for the reasons stated above, the Petition is denied insofar as it requests that the findings of violation, civil penalties, and compliance order in the Final Order be vacated for lack of PHMSA jurisdiction and authority over the Martinez Pipeline. I further find that facts and evidence of record support the civil penalty assessed in the Final Order. 27 Service of this Decision terminates the stay of the Final Order granted on November 6, 2011. This Decision is the final administrative action in this proceeding. _____________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety 26 Many events can change the designation of a pipeline from interstate to intrastate or otherwise affect its regulatory status, including construction of a line that interconnects two pipelines or even a preemption decision by a federal court finding that a pipeline facility formerly designated as intrastate is actually interstate. Nothing in the NGPSA, however, suggests that such events would result in a pipeline being completely unregulated until such time as a state certification could be modified. 27 The Final Order violations involved code sections that apply to both transmission and distribution pipelines.#