ALYESKA PIPELINE SERVICE CO — Safety Order

party submissionOfficial PDF520115001S_operator response and request for Informal Consultation_02152011.pdf#

520115001S_proposed safety order_02012011_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED February 1, 2011 Mr. Thomas Barrett President Alyeska Pipeline Service Company 900 E. Benson Blvd. P.O. Box 196660 Anchorage, AK 99519 CPF 5-2011-5001S Dear Mr. Barrett: Enclosed is a Notice of Proposed Safety Order (Notice) issued in the above-referenced case. The Notice proposes that Alyeska Pipeline Service Company (Alyeska) take certain measures with respect to the Trans-Alaska Pipeline System to ensure pipeline safety and protection of the environment. Your options for responding are set forth in the Notice. Your receipt of the Notice constitutes service of that document under 49 C.F.R. § 190.5. We look forward to a successful resolution to ensure pipeline safety. Please direct any questions on this matter to Dennis Hinnah at 907-271-6517 or me at 720-963-3160. Sincerely, Chris Hoidal Director, Western Region Pipeline and Hazardous Materials Safety Administration Enclosure: Notice of Proposed Safety Order 49 C.F.R. § 190.239 cc: Dennis Hinnah, Deputy Region Director, Western Region, PHMSA Office of Pipeline Safety, 188 West Northern Lights Blvd., Suite 520, Anchorage, AK 99503#

520115001S_proposed safety order_02012011_text.pdf, page 2DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY ____________________________________ In the Matter of ) Alyeska Pipeline Service Company, ) CPF No. 5-2011-5001S ) ) ) Respondent ) ____________________________________) NOTICE OF PROPOSED SAFETY ORDER Background and Purpose Pursuant to Chapter 601 of title 49, United States Code, the Pipeline and Hazardous Materials Safety Administration (PHMSA) has initiated an investigation of the safe operation of the Trans-Alaska Pipeline System (TAPS), including the investigation of a pipeline leak at Pump Station 1 (PS-1) that began on January 8, 2011. The TAPS is operated by Alyeska Pipeline Service Company (Alyeska) and transports crude oil from the production fields in Prudhoe Bay, Alaska, to their marine transfer facilities in Valdez, Alaska. As a result of the investigation, it appears that multiple conditions exist on your pipeline facility that pose a pipeline integrity risk to public safety, property or the environment. Pursuant to 49 U.S.C. § 60117(l), PHMSA issues this Notice of Proposed Safety Order, notifying you of the preliminary findings of the investigation, and proposing that you take measures to ensure that the public, property, and the environment are protected from the potential risk. Preliminary Findings • The affected pipeline is the 800-mile long, 48-inch diameter TAPS which transports crude oil from PS-1 in Prudhoe Bay, Alaska, to the Valdez Marine Terminal in Valdez, Alaska. PS-1 receives crude oil from production oil fields on the North Slope of Alaska. • The TAPS was constructed between 1975 and 1977, and began transport of oil on June 20, 1977. During that period, average daily oil throughput increased until it peaked at 2.033 million barrels per day (bpd) in 1988. At the end of December 2010, it was averaging#

520115001S_proposed safety order_02012011_text.pdf, page 3between 600,000 and 700,000 bpd, and averages a throughput decline of approximately 6% per year. • The reduced throughput has resulted in numerous integrity challenges that have not been fully addressed by Alyeska’s operational and maintenance activities. Significant challenges for TAPS future operations include decreasing crude oil temperatures, water freezing due to these decreased temperatures, increased wax precipitation and deposition on the pipe wall, slack line conditions at multiple locations, and changing oil composition. Two issues in particular need to be addressed to ensure the long-term integrity of TAPS: water in the TAPS stream and deposition of crude oil solids (i.e., wax) on the pipeline wall. o The present pipeline specification allowing crude oil containing up to 0.35% Basic Sediment and Water (BS&W) to enter TAPS is based on an average and does not prevent free water and water slugs from entering the TAPS crude stream. This water can create a corrosion-susceptible environment. During a TAPS shut down in extreme cold temperatures, there is a risk of water accumulation in low points freezing and creating ice plugs which could impede restart of TAPS and damage valves, instrumentation, and other pipeline components. If flowing crude temperature drops below freezing, ice crystals may form in the crude stream, potentially adversely affecting equipment and instrumentation. o At lower crude temperatures, increased wax precipitation from the crude stream adheres to the pipeline wall creating a corrosion-conducive environment. Soft wax in the crude stream clogs inline inspection tool (smart pig) sensors. Increased wax from lower crude temperatures creates wax management issues during maintenance pigging. • There is a history of both internal and external corrosion problems on pipelines upstream of PS-1. This has prompted replacement of several pipelines including the OT501 pipeline and the Oil Transit line system transporting sales oil crude from Gathering Center 2 and Flow Station 2 by the owner of those pipelines. • In 2008, Alyeska identified several locations with internal corrosion, two locations with over 80% wall loss and three locations with over 50% wall loss, in the above ground piping in the PS-1 Tank Farm that required mitigation. Alyeska installed full encirclement metal sleeves to mitigate the wall loss. The locations that required sleeves are on piping that connects the PS-1 tanks to the suction side of the booster pumps and the meter building. • Significant changes have been implemented on the TAPS during the last 15 years to address this reduced throughput, including taking Pump Stations 2, 6, 8, and 10, out of service (the breakout storage tanks associated with these stations were also decommissioned) and placing PS-7 and the tank at PS-12 on standby status. • The U.S. Environmental Protection Agency notified the Director, Western Region, PHMSA (Director), of the leak on Saturday, January 8, 2011. Shortly after this notification, Alyeska reported the spill and subsequent shutdown of the pipeline system to PHMSA. Alyeska reported the leak to the National Response Center (NRC) (incident report # 964075). • The area around PS-1 has been deemed a High Consequence Area per 49 CFR Part 195.#

520115001S_proposed safety order_02012011_text.pdf, page 4• The leak appears to be located in the below-ground station piping and headers between the PS-1 booster pumps and the mainline pumps. The pipe was manufactured and installed in the 1970s and encased in concrete in the early 1990s. • The leak occurred in piping connected to or in low-flow, dead leg piping. Such locations are susceptible to corrosion because they cannot be cleaned with cleaning pigs and because sediment accumulates and prevents corrosion inhibitors and biocides from reaching the pipe wall. TAPS has other locations within PS-1 and other facilities where low flow and dead leg piping exists. Dead legs in underground piping cannot be assessed by smart pigs (ILI) or external ultrasonic transducer (UT) testing measurements. • The failed pipe has not yet been excavated to determine the cause of the leak; however it is believed to be the result of external or internal corrosion. Internal sampling of fluids and internal pipe wall sediment and materials occurred on January 21, 2011, and testing is underway by Alyeska contractors. • After the leak was discovered, it took approximately ten (10) days for temporary above- ground bypass piping at PS-1 to be constructed to allow TAPS to return to full service and to seal off the leaking pipe. The bypass piping began service on January 17, 2011. • The minimum pipeline oil temperature recorded at a TAPS pump station during the shutdown as reported by Alyeska was 25.7 degrees Fahrenheit. • Since this pipeline was encased in concrete, the exact leak site could not be easily identified or be repaired before TAPS would need to be restarted due to the lack of sufficient storage at PS-1 and the cold temperature conditions. To prevent potential freezing conditions on the remaining portions of TAPS, which could have caused additional pipeline damage and leaks, Alyeska operated the pipeline with containment and recovery from January 11, 2011, to January 15, 2011, while repairs were ongoing. • Alyeska has a Cold Restart Plan that was created as early as 2001 to address the possibility of needing to restart the pipeline after a prolonged shutdown of TAPS during cold temperature conditions. This plan was revised in December 2005 and further revised in December 2010. Alyeska indicated that this Cold Restart Plan had never been used in operation or tested under cold weather conditions. Alyeska did indicate that the equipment and piping was deployed in 2006 during a response plan exercise according to the version of the Plan that was in place at the time. • During the leak at PS-1, Alyeska had difficultly implementing the latest version of the Cold Restart procedures, partially due to the inability to quickly move equipment to the necessary locations along the pipeline. In addition, the Cold Restart Plan required that certain regulatory requirements be disregarded in order to be implemented. • At the current flow rate through TAPS, Alyeska has two cleaning pigs in the pipeline at any given time. A cleaning pig could cause a plug in the pipeline if the line is shut down and there is a need to implement the Cold Restart Plan. Two scraper cleaning pigs were in transit when the pipeline was shutdown as a result of the leak. One was near MP 424 and the other was close to the southern end of TAPS. The only permanent pig receiver that could have#

520115001S_proposed safety order_02012011_text.pdf, page 5been used to remove the pigs from the pipeline was located at the Valdez Marine Terminal. At the current average rate of 630,000 bpd, it takes approximately two weeks for a cleaning pig to transverse the pipeline from PS-1 to Valdez. As throughput in TAPS changes, the number of pigs in the pipeline at any given time may need to be increased. • If tank storage at PS-1 reaches capacity when TAPS is shut down, production on the North Slope must be halted, which can cause damage to the production facilities upstream from PS- 1. At the current approximate production rate of 630,000 bpd, tank storage at PS-1 is filled to capacity in about half a day. If production is prorated to 5% of the current approximate production rate of 630,000 bpd, tank storage at PS-1 is filled to capacity in about 10 days. • To prevent tank storage at PS-1 from reaching full capacity, the North Slope production rate was adjusted throughout the incident, based upon the changing situation, from the time the leak was discovered on January 8, 2011, until the bypass was completed on January 17, 2011. Production was prorated to as low as 5% for several days. • Based on these preliminary findings, the alleged risk conditions on TAPS that pose a pipeline integrity risk are: 1) The loss of system integrity that resulted in a hazardous liquid leak at PS-1. The location of the leak could not be assessed because it is not accessible by smart pigs (ILI) or external UT measurements. Other buried station piping and buried deadlegs exist on other portions of TAPS and they similarly cannot be assessed to ensure that there are no pipe integrity threats. 2) The inability to capture or launch cleaning or inline inspection (ILI) devices at interim locations between Pump Station 4 and Valdez Marine Terminal despite the fact that this is where the coldest operating conditions exist and the potential for waxing and freezing is higher than on other portions of TAPS. 3) The feasibility of and the time it takes to implement the Cold Restart Plan. 4) The lack of sufficient storage facilities at key locations along the pipeline, particularly immediately upstream of PS1, causes integrity challenges during TAPS shutdowns or lengthy production prorations and increases the risk of an additional release during cold weather, thus making prompt response and repair essential. Proposed Issuance of Safety Order Section 60117(l) of Title 49, United States Code, provides for the issuance of a safety order, after reasonable notice and the opportunity for a hearing, requiring corrective measures, which may include physical inspection, testing, repair, or other action, as appropriate. The basis for making the determination that a pipeline facility has a condition or conditions that pose a pipeline integrity risk to public safety, property, or the environment is set forth both in the above-referenced statute and 49 C.F.R. § 190.239, a copy of which is enclosed. After evaluating the foregoing preliminary findings of fact and considering the undetermined cause of the pipeline leak, the age of the pipe involved, the method of construction, including encasement, the inability of Alyeska to perform internal inspections or external UT measurements of piping, the inability to capture or launch cleaning or ILI devices at interim locations, the feasibility of and the time it takes to implement the Cold Restart Plan, the lack of sufficient storage facilities at PS-1 and other key locations, the hazardous nature of the product transported, the pressure required for#

520115001S_proposed safety order_02012011_text.pdf, page 6transporting such product, the characteristics of the geographical areas where the pipeline facility is located, and the likelihood that the conditions could worsen or develop on other areas of the pipeline and potentially impact its serviceability, it appears that the continued operation of the affected pipeline without corrective measures would pose a pipeline integrity risk to public safety, property, or the environment. Accordingly, PHMSA issues this Notice of Proposed Safety Order to notify Respondent of the proposed issuance of a safety order and to propose that Respondent take measures specified herein to address the potential risk. Response to this Notice In accordance with § 190.239, you have 30 days following receipt of this Notice to submit a written response to the official who issued the Notice. If you do not respond within 30 days, this constitutes a waiver of your right to contest 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 Safety Order. In your response, you may notify that official that you intend to comply with the terms of the Notice as proposed, or you may request that an informal consultation be scheduled. Informal consultation provides you with the opportunity to explain the circumstances associated with the risk conditions alleged in the notice and, as appropriate, to present a proposal for a work plan or other remedial measures, without prejudice to your position in any subsequent hearing. If you and PHMSA agree within 30 days of informal consultation on a plan and schedule for you to address each identified risk condition, we may enter into a written consent agreement (PHMSA would then issue an administrative consent order incorporating the terms of the agreement). If a consent agreement is not reached, or if you have elected not to request informal consultation, you may request an administrative hearing in writing within 30 days following receipt of the Notice or within 10 days following the conclusion of an informal consultation that did not result in a consent agreement, as applicable. Following a hearing, if the Associate Administrator finds the facility to have a condition that poses a pipeline integrity risk to the public, property, or the environment in accordance with § 190.239, the Associate Administrator may issue a safety order. 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). In your correspondence on this matter, please refer to CPF 5-2011-5001S and for each document you submit, please provide a copy in electronic format whenever possible. Proposed Corrective Measures Pursuant to 49 U.S.C. § 60117(l) and 49 C.F.R. § 190.239, PHMSA proposes to issue a safety order to Alyeska requiring the following:#

520115001S_proposed safety order_02012011_text.pdf, page 71. Submit to PHMSA by February 15, 2011, a written plan for a third-party investigation of the leak site at PS-1 that will include conducting appropriate tests, analyses, and evaluations to establish the probable cause of the leak. The Director must approve the selection of the third party contractor. The investigation plan must include collecting samples of sediments, deposits, bacteria, and preserving the pipe for forensic analysis. Ship any removed samples and the removed pipe to a laboratory approved by PHMSA for analysis. Complete the work required by this plan, including the third party analysis regarding leak cause, and provide the results to PHMSA by July 1, 2011. 2. Replace any piping along TAPS that cannot be assessed using ILI tools or other assessment technologies as approved by the Director which upon failure would interrupt the safe operation of TAPS. The safe operation of TAPS requires that there be no extended shutdown of TAPS that would put other portions of the pipeline at risk due to reduced flow or low temperatures. Submit for approval by the Director a listing of such piping being replaced and a written plan and timeline for replacement by June 15, 2011. 3. Submit an assessment of the need for additional permanent pig launchers and receivers, taking into account the anticipated continued reduction in TAPS throughput. Submit for approval by the Director a recommendation from a third-party regarding the need for additional permanent pig launchers and receivers and a plan for installing the additional recommended equipment by May 15, 2011. 4. Submit a written plan and proposed timeline for installing at least one additional permanent pig launcher and permanent pig receiver between PS-5 and PS-10 for approval by May 15, 2011, and complete installation according to the approved timeline. This launcher and receiver must be equipped to handle both routine maintenance pigs and ILI tools. 5. Perform a documented evaluation of the need for increased tank capacity at pump stations to assist during prolonged outages and the implementation of a cold restart, submit this written documented evaluation to PHMSA by September 30, 2011, and complete any identified increase in tank capacity by September 30, 2012. Alyeska will use best efforts to perform project actions, and obtain necessary regulatory approvals. 6. Pre-position all Cold Restart Equipment at the facility where it would need to be utilized, according to the company’s current version of the Cold Restart Plan, immediately. The cold restart equipment should be assembled and protected so that the time to implement cold restart is minimized. a. Apply for the applicable regulatory permits and request expedited consideration by March 15, 2011. b. Demonstrate to the Director that all equipment is configured onsite and Cold Restart can be implemented in less than 72 hours within 7 days of receipt of regulatory permits. 7. Submit to PHMSA a revised “Cold Restart Plan” to address the possibility of a prolonged shutdown of the pipeline by July 15, 2011. a. Utilize lessons learned and data collected during the January 2011 incident and any other research or lessons learned to date to support revisions to the Cold Restart plan.#

520115001S_proposed safety order_02012011_text.pdf, page 8b. Ensure that all key pressure transducers at Remote Gate Valves 36, 65, 98, and 121 remain functioning at all times, including during freezing conditions and restricted or reduced flow. c. Pre-position all cold restart equipment according to the revised Cold Restart Plan and provide predesignated flange connection points for all cold restart equipment by October 31 of each year. This equipment and connection points are to remain in place through May 1 of the following year. d. Conduct an engineering review of all restart components to ensure they meet the PHMSA pipeline safety regulations. Submit this engineering review to PHMSA for review by August 1, 2011. 8. Demonstrate to the Director the implementation and operational status of the revised Cold Restart Plan equipment, but not the engines, by August 31, 2011. Tying the engines into the Cold Restart equipment and demonstrating their operational status will occur within 7 days of receipt of regulatory permits. 9. Submit quarterly reports to the Director and Deputy Region Director that: (1) include available data and results of the testing and evaluations required by the safety order; and (2) describe the progress of the repairs and other remedial actions being undertaken to comply with the safety order. 10. The Director or Deputy Region Director may grant an extension of time for compliance with any of the terms of the safety order upon a written request timely submitted demonstrating good cause for an extension. 11. Respondent may appeal any decision of the Director or Deputy Region Director to the Associate Administrator for Pipeline Safety. Decisions of the Associate Administrator shall be final. 12. It is requested that Alyeska maintain documentation of the safety improvement costs associated with fulfilling this Safety Order and report such costs in its quarterly reports as required in item 8. It is requested that these costs be reported in two categories: a. Total cost associated with preparation/revision of plans, procedures, studies, and analyses, and b. Total cost associated with replacements, additions, and other changes to pipeline infrastructure. 13. Submit information, reports, and notifications required by this safety order to: a. Director, Western Region, PHMSA Office of Pipeline Safety, 12300 West Dakota Avenue, Suite 110, Lakewood, CO 80228, and b. Deputy Region Director, Western Region, PHMSA Office of Pipeline Safety, 188 West Northern Lights Blvd., Suite 520, Anchorage, AK 99503. The actions proposed by this Notice of Proposed Safety Order are in addition to and do not waive any requirements that apply to Respondent’s pipeline system under 49 C.F.R. Parts 190 through 199, under any other order issued to Respondent under authority of 49 U.S.C. § 60101 et seq., or under any other provision of Federal or state law.#

520115001S_proposed safety order_02012011_text.pdf, page 9After receiving and analyzing additional data in the course of this proceeding and implementation of the work plan, PHMSA may identify other safety measures that need to be taken. In that event, Respondent will be notified of any proposed additional measures and, if necessary, amendments to the work plan or safety order. ___________________________________ __________________ Chris Hoidal Date issued Director, Western Region Pipeline and Hazardous Materials Safety Administration#

520115001S_Closure Letter_05032018_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED May 3, 2018 Mr. Rod Hanson Senior Vice President, Operations and Maintenance Alyeska Pipeline Service Company 3700 Centerpoint Drive Anchorage, Alaska 99503 CPF 5-2011-5001S Closure Letter Dear Mr. Hanson: On August 17, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Alyeska Pipeline Service Company (Alyeska) a Consent Order (Order) in the above- referenced case. The Order approved and incorporated by reference a Consent Agreement (Agreement), signed on August 12, 2011, and dated August 17, 2011. Based on our review of documentation you provided and confirmation of work you have accomplished under the Agreement, it has been determined that you have complied with the terms of the Order. On January 8, 2011, a hazardous liquid leak was discovered at Alyeska’s Pump Station 1 facility, a part of the Trans Alaska Pipeline System. As a result of the hazardous liquid leak, PHMSA issued a Notice of Proposed Safety Order (Notice) to the operator on February 1, 2011. The Notice alleged multiple conditions existing on TAPS that would, without corrective measures, pose a pipeline integrity risk to public safety, property, or the environment. In response to the Notice, pursuant to 49 CFR 190.239(b)(2), Alyeska requested informal consultation. PHMSA and Alyeska engaged in good faith discussions regarding the Notice and agreed to enter into the above-mentioned August 17, 2011 Consent Agreement to resolve the Notice without further administrative proceedings or litigation. Since January 2011, work progressed across TAPS to address pipeline integrity risks by performing actions identified in Section II of the Agreement (Work to be performed). Plans required by Section II were revised as new information was received in accordance with Paragraph 11 of the Agreement. Work performed and revisions in plans and schedules have been found to be acceptable by PHMSA and appear to be complete.#

520115001S_Closure Letter_05032018_text.pdf, page 2This 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, Kim West Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-Compliance Registry PHP-500 Adelheid Marlowe / Robert Guisinger (#138252)#

520115001S_Consent Order_08172011_text.pdf, page 1Official PDFAUG 17 2011 Mr. Michael W. Joynor Senior Vice President of Operations Alyeska Pipeline Service Company 900 E. Benson Blvd. P.O. Box 196660 Anchorage, AK 99519 Re: CPF No. 5-2011-5001S Dear Mr. Joynor: Enclosed please find a Consent Order incorporating the terms of the Consent Agreement that you signed on August 12, 2011. Service of the Consent Order and Consent Agreement 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. Dennis Hinnah, Deputy Director, Western Region, PHMSA CERTIFIED MAIL - RETURN RECEIPT REQUESTED [7005 1160 0001 0070 4183]#

520115001S_Consent Order_08172011_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 ) ) Alyeska Pipeline Service Company, ) CPF No. 5-2011-5001S ) Respondent. ) ____________________________________) CONSENT ORDER By letter dated February 1, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA) Office of Pipeline Safety issued a Notice of Proposed Safety Order (Notice) to Alyeska Pipeline Service Company (Respondent) in this case. In accordance with 49 C.F.R. § 190.239, the Notice alleged that multiple conditions exist on the Trans-Alaska Pipeline System (TAPS) that, without corrective measures, would pose a pipeline integrity risk to public safety, property, or the environment. Specifically, the Notice alleged that such conditions caused a loss of system integrity and a hazardous liquid leak that began on January 8, 2011, at the company’s Pump Station 1 facility, demonstrating the presence of integrity risks on TAPS. In response to the Notice, Respondent requested an informal consultation. Respondent and PHMSA engaged in good-faith settlement discussions resulting in the Consent Agreement, attached to this Order, that settles all of the allegations in the Notice. Accordingly, the foregoing Consent Agreement is hereby approved and incorporated by reference into this Order. The Respondent is hereby ordered to comply with the terms of the Consent Agreement, effective immediately. Pursuant to 49 U.S.C. 60101 et seq. and 49 C.F.R § 190.221, failure to comply with this Consent Order may result in the assessment of civil penalties of up to $100,000 per violation per day, or in the referral of the case for judicial enforcement. The terms and conditions of this Consent Order are effective upon service in accordance with 49 C.F.R. § 190.5. ___________________________________ __________________________ Jeffrey D. Wiese Date Issued Associate Administrator for Pipeline Safety#

520115001S_Consent Agreement_08172011_text.pdf, page 1Official PDFAUG 17 2011 U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, DC 20590 ____________________________________ In the Matter of ) Alyeska Pipeline Service Company, ) CPF No. 5-2011-5001S ) ) ) Respondent. ) ____________________________________) CONSENT AGREEMENT On February 1, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), issued a Notice of Proposed Safety Order (Notice) to Alyeska Pipeline Service Company (Alyeska or Respondent). Alyeska operates a transmission pipeline known as the Trans-Alaska Pipeline System (TAPS) that transports crude oil from production fields in Prudhoe Bay, Alaska, to the company’s marine transfer facilities in Valdez, Alaska. The Notice alleged that multiple conditions exist on TAPS that, without corrective measures, would pose a pipeline integrity risk to public safety, property, or the environment. Specifically, the Notice alleged that such conditions caused a loss of system integrity and a hazardous liquid leak that began on January 8, 2011, at the company’s Pump Station 1 facility, demonstrating the presence of integrity risks on TAPS. On February 15, 2011, pursuant to 49 C.F.R. § 190.239(b)(2), Alyeska submitted a request for informal consultation in response to the Notice. On February 17, 2011, a meeting was held in Lakewood, Colorado, to begin the process, which has continued to date. Alyeska and PHMSA (Parties) have engaged in good-faith discussions regarding the Notice and have agreed that settlement of this proceeding will avoid further administrative proceedings or litigation and that entry of this Consent Agreement (Agreement) is the most appropriate means of resolving the Notice without adjudication of any issue of fact or law. While Alyeska disputes some of the Preliminary Findings in the Notice, the Parties agree that the Preliminary Findings in the Notice will be used to construe the terms of this Consent Agreement. The Parties agree as follows: I. General Provisions 1. Alyeska acknowledges, as operator of TAPS, that Alyeska and its pipeline system are subject to the jurisdiction of the Federal pipeline safety laws, 49 U.S.C. §§ 60101, et seq., and the regulations and administrative orders issued thereunder. For purposes of this Agreement, Alyeska acknowledges that it received proper notice of PHMSA’s action in this proceeding and that the Notice states claims upon which relief may be granted pursuant to 49 U.S.C. §§ 60101, et seq., and the regulations and orders issued thereunder.#

520115001S_Consent Agreement_08172011_text.pdf, page 22. Alyeska agrees, for purposes of this Agreement, to address the integrity risks identified in the Notice by completing the actions specified in Section II of this Agreement (Work to be Performed). These actions, including any work plans and schedules, shall automatically be incorporated into this Agreement upon approval by PHMSA. This Agreement does not constitute a finding of violation of any Federal law or regulation and may not be used in any civil proceeding of any kind as evidence or proof of any fact, fault or liability, or as evidence of the violation of any law, rule, regulation or requirement, except in a proceeding to enforce the provisions of this Agreement. 3. After Alyeska returns a signed original of this Agreement, PHMSA’s representative will present it to the Associate Administrator for Pipeline Safety (Associate Administrator), recommending that he adopt the terms of this Agreement by issuing an administrative order (Consent Order) incorporating the terms of this Agreement. The terms of this Agreement constitute an offer of settlement until accepted by Alyeska and the Associate Administrator. Upon the date on which this Consent Order is issued, any request for a hearing submitted by Alyeska shall be automatically withdrawn. 4. Alyeska consents to the issuance of the Consent Order, and hereby waives any further procedural requirements with respect to its issuance. Alyeska waives all rights to contest the adequacy of notice, or the validity of the Consent Order or this Agreement, including all rights to administrative or judicial hearings or appeals. 5. This Agreement shall apply to and be binding upon PHMSA and its successors and upon Alyeska, its officers, directors, and employees, and its successors, assigns, owners, or other entities or persons otherwise bound by law. Alyeska agrees to provide a copy of this Agreement and any incorporated work plans and schedules to all of Alyeska’s officers, employees, owners and agents whose duties might reasonably include compliance with this Agreement. 6. All references to “Director” in this Consent Agreement shall refer to the persons named below. Approval from either of the persons named below will satisfy any requirement for approval by the Director. Information, reports, and notifications required by this Agreement shall be submitted to the following persons: a. Director, Western Region, PHMSA Office of Pipeline Safety, 12300 West Dakota Avenue, Suite 110, Lakewood, CO 80228; and b. Deputy Director, Western Region, PHMSA Office of Pipeline Safety, 188 West Northern Lights Blvd., Suite 520, Anchorage, AK 99503. 7. For all transfers of ownership interests or operating responsibility of TAPS, Alyeska shall provide a copy of this Agreement to the prospective transferee at least 30 days prior to such transfer and simultaneously provide written notice of the prospective transfer to the Director. 8. Nothing in this Agreement affects or relieves Alyeska of its responsibility to comply with all applicable requirements of the Federal pipeline safety laws, 49 U.S.C. §§ 60101, et seq., and 2#

520115001S_Consent Agreement_08172011_text.pdf, page 3the regulations and orders issued thereunder. Nothing in this Agreement alters PHMSA’s right of access, entry, inspection, and information gathering or its authority to bring enforcement actions against Alyeska pursuant to the Federal pipeline safety laws, the regulations and orders issued thereunder, or any other provision of Federal or State law. 9. This Agreement does not waive or modify any Federal, State, or local laws or regulations that are applicable to Alyeska’s pipeline systems. This Agreement is not a permit, or a modification of any permit, under any Federal, State, or local laws or regulations. Alyeska remains responsible for achieving and maintaining compliance with all applicable Federal, State, and local laws, regulations and permits. 10. This Agreement does not create rights in, or grant any cause of action to, any third person not a party to this Agreement. The U.S. Department of Transportation (DOT) is not liable for any injuries or damages to persons or property arising from acts or omissions of Alyeska or its officers, employees, or agents carrying out the work required by this Agreement. Alyeska agrees to indemnify and hold harmless DOT, its agencies, officers, employees, agents, and representatives from any and all causes of action arising from any acts or omissions of Alyeska or its contractors in carrying out the work required by this Agreement. II. Work to be Performed 11. Alyeska agrees to perform all actions set forth below in paragraphs 12-21. The plans required below shall be revised as necessary to incorporate new information obtained during the evaluations and remedial activities performed under the plans. Alyeska will submit any such plan revisions to the Director for prior approval, who may approve plan elements incrementally. 12. On February 15, 2011, Alyeska submitted to PHMSA a written plan for a third-party investigation of the leak site at PS-1 that included conducting appropriate tests, analyses, and evaluations to establish the probable cause of the leak. The Director approved the selection of the third-party contractor by letter dated February 22, 2011. The investigation plan called for collection of samples of sediments, deposits, bacteria, and preservation of the pipe for forensic analysis, the shipment of any removed samples and pipe to a laboratory approved by PHMSA for analysis, and a third-party analysis regarding leak cause. Alyeska agreed to complete the work required by this investigation plan and to provide the results to PHMSA by July 15, 2011. Alyeska submitted Government Letter #23939 on July 15, 2011, and the submission is currently being reviewed by the Director. 13. Alyeska will replace or remove any hazardous liquid piping along TAPS which cannot be assessed using in-line inspection tools (or other suitable assessment methods approved by the Director) and which would compromise the safe operation of TAPS upon failure. The Director will approve assessment methods that provide an assessment of 100% of the length and circumference of the pipeline and that are capable of detecting internal and external corrosion features and other damage and determining the percentage metal loss, areal extent, and geometry of any damage. Alyeska performed a documented evaluation to determine the piping to be replaced. Alyeska agreed to submit a listing of such piping being replaced or removed and a written plan and timeline for replacement by July 15, 2011, to the Director for approval.3#

520115001S_Consent Agreement_08172011_text.pdf, page 4Alyeska submitted Government Letter #23939 on July 15, 2011, and the submission is currently being reviewed by the Director. 14. The Low Flow Study Team is an independent team composed of external consultants and Alyeska engineers that recently produced a report on the impacts of reduced throughput on TAPS. On June 15, 2011, Alyeska submitted to the Director the Low Flow Study Team’s assessment of the need for additional permanent pig launchers and receivers. This report takes into account the anticipated continued reduction in TAPS throughput and includes a recommendation for the installation of an additional permanent pig launcher and receiver. Alyeska agreed to submit for approval by the Director a written plan and proposed timeline for installing an additional permanent pig launcher and permanent pig receiver between PS-5 and PS-10 by July 15, 2011. Alyeska submitted Government Letter #23939 on July 15, 2011, and the submission is currently being reviewed by the Director. Alyeska will complete installation according to the approved timeline. This launcher and receiver will be equipped to handle both routine maintenance pigs and in-line inspection tools. 15. Alyeska will perform a documented evaluation of the need for increased tank capacity at pump stations to mitigate the consequences of a cold weather shutdown. The evaluation will include the possibility of bringing existing tanks back into service. Alyeska will submit this documented evaluation to the Director by September 30, 2011. Based upon the results of the evaluation, Alyeska will submit a recommendation regarding projects related to tank capacity for approval by the Director by September 30, 2011. The recommendation will explain whether and how these projects will mitigate the consequences of a cold weather shutdown. Alyeska will develop a plan and timeline for recommended projects, if any, in consultation with the Director by December 31, 2011. Alyeska will complete the plan according to the schedule. 16. The “Cold Restart Plan” is a procedure that has been developed by Alyeska to mitigate the risks of restarting TAPS following a shutdown of the pipeline during cold weather conditions. Alyeska certifies that all equipment needed for the Cold Restart Plan was positioned at the facility where it would need to be utilized according to the company’s existing version of the Cold Restart Plan from January 16, 2011, to May 1, 2011. The equipment was assembled and protected so that the time to implement a cold restart was minimized. 17. Alyeska agreed to submit to PHMSA a revised Cold Restart Plan (Revised Cold Restart Plan) by July 15, 2011. Alyeska submitted Government Letter #23939 on July 15, 2011, and the submission is currently being reviewed by the Director. Alyeska will apply for any regulatory permits necessary to implement the Revised Cold Restart Plan (e.g., an Operating Permit under Title V of the Clean Air Act) by August 31, 2011. The company will also: a. Utilize lessons learned and data collected during the January 2011 incident and any other research or lessons learned to date to support revisions to the Cold Restart Plan; b. Ensure that all key pressure transducers at Remote Gate Valves 36, 65, 98, and 121 are maintained and operational under cold weather conditions and restricted or reduced flow; 4#

520115001S_Consent Agreement_08172011_text.pdf, page 5c. Pre-position all cold restart equipment according to the Revised Cold Restart Plan and provide predesignated flange connection points for all cold restart equipment by October 31 of each year. This equipment and connection points are to remain in place through May 1 of the following year; and d. Conduct an engineering review of all procedures and equipment needed for the Revised Cold Restart Plan to ensure they meet the PHMSA pipeline safety regulations and submit this engineering review for approval by the Director by August 1, 2011. 18. Alyeska will demonstrate to the Director the operational status of the equipment needed for the Revised Cold Restart Plan by October 1, 2011. A PHMSA inspector will make a field visit to see that the necessary operator-qualified individuals and equipment are available to implement the Revised Cold Restart Plan. The final steps of the Revised Cold Restart Plan will not be actually demonstrated, as that would require a shutdown of the entire system. 19. Alyeska will evaluate the minimum allowable temperature of crude oil needed to ensure safe operation of the pipeline, including safe restart following the effects of a prolonged shutdown, and submit this written evaluation to the Director by August 1, 2011. 20. Alyeska has proposed several projects which are aimed at maintaining crude oil temperatures on the pipeline at a level that will allow safe cold-weather operations. Based on current operational conditions, including crude oil characteristics, Alyeska will develop a plan and timeline for implementation and completion of proposed projects designed to create sufficient time to allow for safe restart or implementation of the Revised Cold Restart Plan, and safe ongoing cold weather operations. The projects will be designed to maintain the crude oil temperatures at or above the minimum allowable temperature, as determined by the evaluation in Item 19, in the event of a prolonged shutdown during cold weather conditions. The length of the shutdown and the cold weather conditions to be considered will be based on historic records of Alyeska’s repair times and winter weather conditions. Alyeska will submit its initial plan and timeline for approval by the Director no later than October 1, 2011. Changes to the plan are anticipated as new information is gathered and as project results are evaluated. After approval, Alyeska will provide a technical explanation to the Director for any decision to modify or cancel a project and will explain how such modifications do not increase the risks posed by oil characteristics and pipeline operating conditions. Planned projects may not be cancelled solely for financial reasons. 21. Alyeska agrees to submit quarterly reports to the Director that: (1) include all available data and results of the testing and evaluations required by the work plan; and (2) describe the progress of the repairs or other remedial actions being undertaken. Alyeska submitted an interim report on May 31, 2011. Alyeska submitted the first quarterly report for the period from April 1, 2011, through June 30, 2011, on July 15, 2011, in Government Letter #23938. The submission is currently being reviewed by the Director. 22. The Director may grant an extension of time for completion of any of the work to be 5#

520115001S_Consent Agreement_08172011_text.pdf, page 6performed upon a written request timely submitted demonstrating good cause for an extension. III. Review and Approval Process 23. With respect to any submission under Section II of this Agreement that requires the approval of the Director, the Director may: (a) approve, in whole or in part, the submission; (b) approve the submission on specified conditions; (c) disapprove, in whole or in part, the submission; or (d) any combination of the foregoing. In the event of such approval, Alyeska will proceed to take all actions required by the submission as approved by the Director. In the event that the Director disapproves all or any portion of a submission, Alyeska will be provided with a written notice of the deficiencies. Alyeska will correct all deficiencies within the time specified by the Director and resubmit it for approval. IV. Dispute Resolution 24. Alyeska may appeal any decision made by the Director under this Agreement to the Associate Administrator. Decisions of the Associate Administrator shall be final. The existence of any dispute or PHMSA’s consideration of matters placed in dispute shall not excuse, toll, or suspend any term or timeframe for completion of any work to be performed under this Agreement during the pendency of such dispute resolution process, except as agreed upon in writing by the Director or the Associate Administrator. V. Enforcement 25. This Agreement, as adopted by the Consent Order, is subject to all enforcement authorities available to PHMSA under 49 U.S.C. §§ 60101, et seq., and 49 C.F.R. Part 190, including administrative civil penalties under 49 U.S.C. § 60122, of up to $100,000 per violation for each day the violation continues. This shall include any failure of Alyeska to comply with the terms of this Agreement, including determinations made by the Director, or, if appealed under Paragraph 24 above, by the Associate Administrator. All work plans and associated schedules set forth or referenced in Section II shall be automatically incorporated into this Agreement and are enforceable in the same manner. VI. Recordkeeping and Information Disclosure 26. Alyeska agrees to maintain records demonstrating compliance with all requirements of this Agreement for a period of at least five years following completion of all work to be performed. For any reports, plans, or other deliverables required to be submitted to PHMSA pursuant to this Agreement, Alyeska may assert a claim of business confidentiality or other protections applicable to the release of information by PHMSA, covering part or all of the information required to be submitted to PHMSA pursuant to this Agreement in accordance with 49 C.F.R. Part 7. Any claim of confidentiality shall be marked in writing on each page, and shall include a statement specifying the grounds for each claim of confidentially. PHMSA will determine release of any information submitted pursuant to this Agreement in accordance with 49 C.F.R. Part 7, the Freedom of Information Act, 5 U.S.C. § 552, DOT and PHMSA policies, and other applicable regulations and Executive Orders.6#

520115001S_Consent Agreement_08172011_text.pdf, page 7VII. Entire Agreement; Modification 27. This Consent Agreement constitutes the final, complete and exclusive agreement and understanding between the Parties with respect to the settlement embodied in this Agreement, and the Parties acknowledge that there are no representations, agreements or understandings relating to the settlement other than those expressly contained in this Agreement, except that the terms of this Agreement will be construed by reference to the Notice. 28. The terms of this Agreement may be modified by mutual agreement of the Parties. Such modifications will be in writing and signed by both Parties. VIII. Termination 29. This Agreement will terminate upon the completion of all terms set forth in Section II above. Alyeska may request written confirmation from PHMSA when this Agreement is terminated. To the extent ongoing monitoring is required, PHMSA may terminate this Agreement with respect to all other requirements with the exception of such monitoring. Nothing in this Agreement prevents Alyeska from completing any of the obligations earlier than the deadlines provided for herein. IX. Ratification 30. The Parties’ undersigned representatives certify that they are fully authorized to enter into the terms and conditions of this Agreement and to execute and legally bind such party to this document. 31. The Parties hereby agree to all conditions and terms of this Agreement: For PHMSA: For Respondent: ___________________________ ____________________________ Chris Hoidal Michael W. Joynor Director, Western Region Senior Vice President of Operations Office of Pipeline Safety Alyeska Pipeline Service Company PHMSA _____________________ _____________________ Date Date 7#