HILCORP NORTH SLOPE, LLC — Warning Letter

520105016W_warning letter_08192010_text.pdf, page 1Official PDFWARNING LETTER CERTIFIED MAIL - RETURN RECEIPT REQUESTED August 19, 2010 Greg Mattson VP, HSSE & Engineering BP Exploration (Alaska), Inc. PO Box 196612 Anchorage, AK 99519-6612 CPF 5-2010-5016W Dear Mr. Mattson: On July 30, 2009, a representative of the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to Chapter 601 of 49 United States Code, inspected your Natural Gas Liquid (NGL) pipeline in Prudhoe Bay, Alaska. As a result of the inspection, it appears that you have committed probable violations of the Pipeline Safety Regulations, Title 49, Code of Federal Regulations. The items inspected and the probable violations are: 1. § 195.208 Welding of supports and braces. Supports or braces may not be welded directly to pipe that will be operated at a pressure of more than 100 p.s.i. (689 kPa) gage. Our inspector observed prohibited welded supports on the NGL Pipeline. BP had welded supports onto the newly constructed meter run piping in Module 4984. When questioned about the pipe supports welded to the piping, the operator indicated that he was planning on replacing the pipe support with non welded ones. On July 14, 2010, BP provided photographs that showed the welded supports replaced with non welded supports.#

520105016W_warning letter_08192010_text.pdf, page 22. § 195.563 Which pipelines must have cathodic protection? (a) Each buried or submerged pipeline that is constructed, relocated, replaced, or otherwise changed after the applicable date in Sec. 195.401(c) must have cathodic protection. The cathodic protection must be in operation not later than 1 year after the pipeline is constructed, relocated, replaced, or otherwise changed, as applicable. A portion of the NGL pipeline, which is insulated and designed to be elevated above the ground, was found partially buried in the soil near the Central Gas Facility. The metal jacket and insulation of the NGL pipeline would not protect the pipeline from corrosion where the pipeline contacts the soil. Moisture could enter the insulation at this location and corrode the pipe. The pipeline would require cathodic protection if left in contact with soil. On July 29, 2010, a PHMSA inspector performing a standard inspection of another facility at Prudhoe Bay examined the portion of pipe which had been in contact with the soil and found that the pipe had been raised and was resting on wooden cribbing. Under 49 United States Code, § 60122, you are subject to an administrative civil penalty not to exceed $100,000 for each violation for each day the violation persists up to a maximum of $1,000,000 for any related series of violations. We have reviewed the circumstances and supporting documents involved in this case, and have decided not to conduct additional enforcement action or penalty assessment proceedings at this time. We advise you to take measures to prevent future deficiencies similar to those described above. Failure to do so will result in BP Exploration Alaska being subject to additional enforcement action. No reply to this letter is required. If you choose to reply, in your correspondence please refer to CPF 5-2010-5016W. 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). Sincerely, Dennis Hinnah Deputy Director, Western Region Pipeline and Hazardous Materials Safety Administration 2#