{"operation":"document","citation":"CPF 520157001","title":"FREEPORT-MCMORAN OIL & GAS — Notice of Probable Violation","source_type":"enforcement","agency":"Pipeline and Hazardous Materials Safety Administration","status":"historical","official":true,"published_on":"2015-08-21","effective_on":null,"summary":"CLOSED notice of probable violation citing 195.452(h)(2).","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-enforcement-520157001.json","markdown":"https://regulus.evalyn.ai/document/phmsa-enforcement-520157001.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-enforcement-520157001","source_url":"https://primis.phmsa.dot.gov/enforcement-data/case/520157001","body":"Notice of Probable Violation involving FREEPORT-MCMORAN OIL & GAS. PHMSA's enforcement data identifies the cited regulation as 195.452(h)(2). The case was opened on 2015-08-21 and is reported as closed as of 2016-12-01. Proposed civil penalty: $4,500. Assessed civil penalty: $4,500. Open the official case record for notices, responses, orders, and the latest status.\n\nOfficial case documents:\n\n520157001_Final Order_11152016.pdf: https://primis.phmsa.dot.gov/enforcement-documents/520157001/520157001_Final%20Order_11152016.pdf\n\n520157001_Final Order_11152016_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/520157001/520157001_Final%20Order_11152016_text.pdf\n\n520157001_NOPV PCP_08212015.pdf: https://primis.phmsa.dot.gov/enforcement-documents/520157001/520157001_NOPV%20PCP_08212015.pdf\n\n520157001_NOPV PCP_08212015_text.pdf: https://primis.phmsa.dot.gov/enforcement-documents/520157001/520157001_NOPV%20PCP_08212015_text.pdf\n\n520157001_Operator Response to Notice_09222015.pdf: https://primis.phmsa.dot.gov/enforcement-documents/520157001/520157001_Operator%20Response%20to%20Notice_09222015.pdf\n\n520157001_Final Order_11152016_text.pdf\n\nNovember 15, 2016\nMr. Richard C. Anderson\nPresident and Chief Executive Officer\nFreeport-McMoRan, Inc.\n333 North Central Avenue\nPhoenix, Arizona 85004\nRe: CPF No. 5-2015-7001\nDear Mr. Anderson:\nEnclosed please find the Final Order issued in the above-referenced case to your subsidiary,\nFreeport-McMoRan Oil & Gas, LLC. It makes one finding of violation and assesses a civil\npenalty of $4,500. The penalty payment terms are set forth in the Final Order. This enforcement\naction closes automatically upon receipt of payment. Service of the Final Order by certified mail\nis deemed effective upon the date of mailing, or as otherwise provided under 49 C.F.R. § 190.5.\nThank you for your cooperation in this matter.\nSincerely,\nAlan K. Mayberry\nActing Associate Administrator\nfor Pipeline Safety\nEnclosure\ncc: Mr. Chris Hoidal, Director, Western Region, OPS\nMr. Steve Rusch, Vice President of EH&S and Government Affairs, Freeport-McMoRan\nOil and Gas, LLC, 5640 South Fairfax Avenue, Los Angeles, CA 92256\nCERTIFIED MAIL - RETURN RECEIPT REQUESTED\n\n\n\nU.S. DEPARTMENT OF TRANSPORTATION\nPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION\nOFFICE OF PIPELINE SAFETY\nWASHINGTON, D.C. 20590\n____________________________________\nIn the Matter of )\nFreeport-McMoRan Oil and Gas, LLC, ) )\n)\n)\nRespondent. )\n____________________________________)\nCPF No. 5-2015-7001\nFINAL ORDER\nBetween March 9 and March 12, 2015, pursuant to 49 U.S.C. § 60117, a representative of the\nPipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety\n(OPS), conducted an on-site pipeline safety inspection of the facilities and records of Freeport-\nMcMoRan Oil & Gas, LLC1 (FMOG or Respondent), in California. Respondent operates the\nPoint Pedernales Pipeline, a 20-inch, onshore and offshore pipeline that transports crude oil from\nthe company’s Platform Irene to the Lompoc Oil and Gas Plant in Santa Barbara, California.2\nThe onshore portion of the pipeline is approximately 12 miles long.\nAs a result of the inspection, the Director, Western Region, OPS (Director), issued to\nRespondent, by letter dated August 21, 2015, a Notice of Probable Violation and Proposed Civil\nPenalty (Notice). In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that\nRespondent had violated 49 C.F.R. § 195.452(h)(2) and proposed assessing a civil penalty of\n$4,500 for the alleged violation.\nFMOG responded to the Notice by letter dated September 22, 2015 (Response). The company\ncontested the allegation of violation and presented information seeking elimination of the\nproposed penalty. Respondent did not request a hearing and therefore has waived its right to\none.\nFINDING OF VIOLATION\nThe Notice alleged that Respondent violated 49 C.F.R. Part 195, as follows:\n1 Freeport McMoRan Oil and Gas, LLC, is an operating company of Freeport-McMoRan, Inc.\n2 Freeport-McMoRan Inc., Annual Report (Form 10-K), at 43 (2015), available at\nhttp://s2.q4cdn.com/089924811/files/doc_financials/annual/2015/10_k2015.pdf.\n\n\n\nCPF No. 5-2015-7001\nPage 2\nItem 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.452(h)(2) which states:\n§ 195.452 Pipeline integrity management in high consequence areas.\n(a) . . .\n(h) What actions must an operator take to address integrity issues?. . .\n(2) Discovery of condition. Discovery of a condition occurs when an\noperator has adequate information about the condition to determine that\nthe condition presents a potential threat to the integrity of the pipeline.\nAn operator must promptly, but no later than 180 days after an integrity\nassessment, obtain sufficient information about a condition to make that\ndetermination, unless the operator can demonstrate that the 180-day\nperiod is impracticable.\nThe Notice alleged that Respondent violated 49 C.F.R. § 195.452(h)(2) by failing to promptly\ndiscover a condition on the Point Pedernales Pipeline within 180 days of an integrity assessment.\nSpecifically, the Notice alleged that Respondent failed to obtain sufficient information about the\nPoint Pedernales Pipeline within 180 days of two separate integrity assessments to determine\nwhether the condition presented a potential threat to the integrity of the pipeline. The Notice\nalleged that FMOG conducted integrity assessments of the Point Pedernales Pipeline on July 16,\n2013, and August 21, 2014. However FMOG did not receive the final report for the July 2013\nassessment until February 19, 2014, and did not receive the final report for the August 2014\nassessment until March 16, 2015. Both final reports noted an anomalous condition that required\nevaluation and remediation, but neither was obtained by FMOG within 180 days of the\nrespective assessments.\nIn its Response, FMOG did not contest the allegation that discovery was made beyond 180 days\nafter the assessments, but argued that it was impracticable to obtain sufficient information within\n180 days. FMOG explained that, in 2011, the company learned the magnetic flux leakage (MFL)\ntechnology it was employing indicated an unexplained increase in wall loss in the Point\nPedernales Pipeline. In response, FMOG changed the pigging and corrosion-inhibitor programs\nto address the anomaly, but without success. FMOG stated that it subsequently determined the\nMFL technology was not differentiating between internal and external corrosion in situations\nwhere both occurred. FMOG further explained that it coordinated with smart-pig vendors to\ninvestigate potential solutions to the issue.\nAccording to FMOG, the company ultimately decided to run multiple tools, including MFL,\nultrasound, and shallow internal-corrosion technologies, to address the different types of\ncorrosion on the line. FMOG contended that additional time was needed to process the data\nfrom these three separate technologies into one report because the data had to be manually\ncombined. FMOG therefore argued that the 180-day timeline was “impracticable” for both the\nJuly 2013 and August 2014 assessments.\nI disagree. On the one hand, PHMSA has recognized in prior enforcement actions that “in some\nsituations a delay in receiving ILI results from a tool vendor may render the 180-day discovery\n\n\n\nCPF No. 5-2015-7001\nPage 3\nperiod impracticable.”3 On the other hand, PHMSA has also found that while it is sometimes\npossible for such situations to arise occasionally, “generally it is not an impracticability where\nthe vendor delay could have been anticipated ahead of time, or where there was some action by\nthe operator that contributed to the delay.”4\nIn this case, the Respondent planned to run three separate tools on the Point Pedernales Pipeline\nand chose to combine the data from the three tool runs into one report, thereby increasing the\namount of information collected and the time needed for the information to be processed and\nreported. It is commendable that FMOC sought to undertake a series of in-line inspection (ILI)\nruns in an effort to learn more about the nature of the condition and to take a more\ncomprehensive approach to understanding and addressing anomalous conditions. However, such\nan approach must still recognize that the 180-day period specified in § 195.452(h)(2) is based\nupon the premise that when an operator learns of an anomalous condition on its pipeline, it needs\nto obtain sufficient information about the nature of that condition within a reasonable period of\ntime to effectively remediate a condition that may pose a real safety risk. This time period has a\nspecific outer limit of 180 days.\nAs the operator of a hazardous liquid pipeline, Respondent bears the risk that an increased\nnumber of tests may result in longer processing times that would impact compliance with the\n180-day discovery period. In this case, I find that that the actions of the Respondent contributed\nto the delay in receiving ILI information and that therefore “impracticability” does not apply\nhere. Further, I find that FMOG could have reasonably foreseen that it would not be able to\nobtain sufficient information from both reports within 180 days to make the proper determination\nand would therefore need to take alternative measures.\nAccordingly, after considering all of the evidence, I find that Respondent violated 49 C.F.R.\n§ 195.452(h)(2) by failing to obtain sufficient information about a condition on its pipeline to\ndetermine that the condition presented a potential threat to the integrity of the pipeline within\n180 days following an integrity assessment.\nASSESSMENT OF PENALTY\nUnder 49 U.S.C. § 60122, Respondent is subject to an administrative civil penalty not to exceed\n$200,000 per violation for each day of the violation, up to a maximum of $2,000,000 for any\nrelated series of violations. In determining the amount of a civil penalty under 49 U.S.C.\n§ 60122 and 49 C.F.R. § 190.225, I must consider the following criteria: the nature,\ncircumstances, and gravity of the violation, including adverse impact on the environment; the\ndegree of Respondent’s culpability; the history of Respondent’s prior offenses; and any effect\nthat the penalty may have on its ability to continue doing business; and the good faith of the\n3 E.g., In the Matter of ExxonMobil Pipeline Co., C.P.F. 4-2011-5016, Item 2, 2013 WL 4478404 at *14 (June 27,\n2013).\n4 In the Matter of ExxonMobil Pipeline Co., C.P.F. 4-2013-5027, Item 6, 2015 WL 7175715 at *20 (October 1,\n2015).\n\n\n\nCPF No. 5-2015-7001\nPage 4\ncompany in attempting to comply with the pipeline safety regulations. In addition, I may\nconsider the economic benefit gained from the violation without any reduction because of\nsubsequent damages, and such other matters as justice may require. The Notice proposed a total\ncivil penalty of $4,500 for the violations cited above.\nItem 1: The Notice proposed a civil penalty of $4,500 for Respondent’s violation of 49 C.F.R.\n§ 195.452(h)(2), for failing to promptly discover a condition on the Point Pedernales Pipeline\nwithin 180 days after an integrity assessment. Specifically, the Notice alleged the Respondent\nfailed to obtain sufficient information about the Point Pedernales Pipeline within 180 days of two\nseparate integrity assessments to determine whether the condition presented a potential threat to\nthe integrity of the pipeline. As explained above, I find that impracticability is not a defense for\nmissing the 180-day deadline in this instance, and the Respondent is therefore in violation of\n§ 195.452(h)(2).\nWith regard to the nature, circumstances and gravity of the violation, the Violation Report\nindicated that the violation resulted in a minimal impact on pipeline safety due to the more-\nfrequent assessment interval employed by FMOG than is required by § 195.452. The penalty\namount, therefore, already takes into account FMOG’s argument that the penalty should be\nreduced due to the company’s efforts in running additional integrity assessments on the Point\nPedernales Pipeline. Accordingly, PHMSA finds that the $4,500 civil penalty has already been\nproperly reduced to account for the severity of the violation.\nAccordingly, having reviewed the record and considered the assessment criteria, I assess\nRespondent a civil penalty of $4,500 for violation of 49 C.F.R. § 195.452(h)(2).\nIn summary, having reviewed the record and considered the assessment criteria for the Item cited\nabove, I assess Respondent a total civil penalty of $4,500.\nPayment of the civil penalty must be made within 20 days of service of this Final Order.\nPayment may be made by sending a certified check or money order (containing the CPF Number\nfor this case), made payable to “U.S. Department of Transportation,” to the Federal Aviation\nAdministration, Mike Monroney Aeronautical Center, Financial Operations Division (AMK-\n325), P.O. Box 269039, Oklahoma City, Oklahoma 73125. Federal regulations (49 C.F.R.\n§ 89.21(b)(3)) also permit payment to be made by wire transfer through the Federal Reserve\nCommunications System (Fedwire), to the account of the U.S. Treasury. Detailed instructions\nare contained in the enclosure. Questions concerning wire transfers should be directed to:\nFinancial Operations Division (AMK-325), Federal Aviation Administration, Mike Monroney\nAeronautical Center, P.O. Box 269039, Oklahoma City, Oklahoma 73125. The Financial\nOperations Division telephone number is (405) 954-8845.\nFailure to pay the $4,500 civil penalty will result in accrual of interest at the current annual rate\nin accordance with 31 U.S.C. § 3717, 31 C.F.R. § 901.9 and 49 C.F.R. § 89.23. Pursuant to\nthose same authorities, a late penalty charge of six percent (6%) per annum will be charged if\npayment is not made within 110 days of service. Furthermore, failure to pay the civil penalty\nmay result in referral of the matter to the Attorney General for appropriate action in a district\ncourt of the United States.\n\n\n\nCPF No. 5-2015-7001\nPage 5\nUnder 49 C.F.R. § 190.243, Respondent has the right to submit a Petition for Reconsideration of\nthis Final Order. The petition must be sent to: Associate Administrator, Office of Pipeline\nSafety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC\n20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA\nwill accept petitions received no later than 20 days after receipt of service of the Final Order by\nthe Respondent, provided they contain a brief statement of the issue(s) and meet all other\nrequirements of 49 C.F.R. § 190.243. The filing of a petition automatically stays the payment of\nany civil penalty assessed but does not stay any other provisions of the Final Order, including\nany required corrective actions. If Respondent submits payment of the civil penalty, the Final\nOrder becomes the final administrative decision and the right to petition for reconsideration is\nwaived.\nThe terms and conditions of this Final Order are effective upon service in accordance with 49\nC.F.R. § 190.5.\nNovember 15, 2016\n_________________________\nAlan K. Mayberry Date Issued\nActing Associate Administrator\nfor Pipeline Safety","truncated":false,"body_characters":15169}