MACPHERSON OIL COMPANY — Notice of Probable Violation

case documentOfficial PDF520160016_NOPV PCO_09072016.pdf#

case documentOfficial PDF520160016_NOPV PCO_09072016_text.pdf#

party submissionOfficial PDF520160016_Operator Petition for Reconsideration_09152017.pdf#

party submissionOfficial PDF520160016_Operator Response to Notice_10072016.pdf#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 1Official PDFJune 27, 2019 Mr. Donald R. Macpherson, Jr. President and Chief Executive Officer Macpherson Oil Company 100 Wilshire, Suite 800 Santa Monica, California 90401 Re: CPF No. 5-2016-0016 Dear Mr. Macpherson: Enclosed please find my Decision on the Petition for Reconsideration filed by Macpherson Oil Company in the above-referenced case. For the reasons explained therein, the Decision grants, in part, and denies, in part, the Petition. The Decision modifies several terms of the Compliance Order contained in the Final Order that was issued by PHMSA on August 24, 2017. When the terms of the Compliance Order, as modified, have been completed, as determined by the Director, Western Region, this enforcement action will be closed. This Decision constitutes the final administrative action in this proceeding. Service of this Decision is made pursuant to 49 C.F.R. § 190.5. Thank you for your cooperation in this matter. Sincerely, Alan K. Mayberry Associate Administrator for Pipeline Safety Enclosure cc: Mr. Dustin Hubbard, Director, Western Region, Office of Pipeline Safety, PHMSA Mr. Tim Lovley, Director HSE, Macpherson Oil Company, PO Box 5368, Bakersfield, California 93388 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

520160016_Decision on Petition for Reconsideration_06272019_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 ) Macpherson Oil Company, ) CPF No. 5-2016-0016 ) ) ) Petitioner. ) ____________________________________) DECISION ON PETITION FOR RECONSIDERATION From June 22 through 25, 2015, 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 Macpherson Oil Company (Macpherson or Petitioner) at its Kern County Gas Line facilities in Bakersfield, California.1 As a result of the inspection, the Director, Western Region, OPS (Director), issued to Petitioner, by letter dated September 7, 2016, a Notice of Probable Violation and Proposed Compliance Order (Notice), which also included a warning pursuant to 49 C.F.R. § 190.205. In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Macpherson had committed various violations of 49 C.F.R. Part 192 and proposed ordering Petitioner to take certain measures to correct the alleged violations. The warning items required no further action but warned the operator to correct the probable violations or face possible future enforcement action. Macpherson responded to the Notice by letter dated October 7, 2016 (Response). It did not contest the allegations of violation, but provided information concerning the corrective actions it had taken, as well as the financial burdens that would result from compliance with the Proposed Compliance Order. Macpherson did not request a hearing and therefore waived its right to one. Pursuant to § 190.209(b)(7), the Director submitted a written evaluation of Petitioner’s response material on January 31, 2017 (Recommendation). On August 24, 2017, pursuant to 49 C.F.R. § 190.213, PHMSA issued a Final Order in this proceeding, finding that Macpherson had committed violations of Part 192, as alleged in the Notice. The Final Order included a Compliance Order (Compliance Order) that ordered Macpherson to take certain corrective actions, among others, related to violations of 49 C.F.R. § 192.13(c). The Final Order did not modify Item 1(a) of the Proposed Compliance Order based on the estimated costs raised by Macpherson because the information submitted by the company 1 The Kern County Gas Line is a 6.8-mile, 6” gas transmission line. See, Pipeline Safety Violation Report (Violation Report), (Sept. 7, 2016) (on file with PHMSA), at 1.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 3CPF No. 5-2016-0016 Page 2 did not provide sufficient detail to justify modification. In accordance with § 190.243, Macpherson objected to this portion of the Compliance Order and filed a timely Petition for Reconsideration (Petition) of the Final Order on September 15, 2017, seeking reconsideration of Compliance Order Item 1(a) based on “the disproportionate financial burden relative to any risk reduction gained by such requirements.”2 Macpherson did not seek reconsideration of the finding that it had violated § 192.13(c) by failing to maintain the plans and programs that it was required to establish under Part 192 for the Kern County Gas Line. Specifically, the Final Order found that the company was unable to document that: (1) the pipeline was welded using a qualified welding procedure(s) per § 192.225(a); (2) each welding procedure was recorded in detail, including the results of the qualifying tests, and the record was retained and followed whenever the procedure was used per § 192.225(b); (3) welders were qualified in accordance with the appropriate referenced standard(s) per § 192.227(a); (4) pipeline welds were visually inspected by a qualified individual per § 192.241(a); (5) pipeline welds were nondestructively tested in accordance with § 192.243; or (6) the pipeline was initially installed with the minimum cover required by § 192.327. In its Petition, Macpherson objected to the terms of the Compliance Order, Item 1(a), which required that Macpherson take certain corrective actions, including the development of a Fitness for Service (FFS) plan that would assess the condition of the pipeline system to demonstrate its safety and integrity. Under the terms of the Compliance Order, the FFS plan was required to include the following measures relating to girth welds on the pipeline: (1) Destructive Testing – Cut out at least one in-line girth weld and destructively test it in accordance with § 192.225; (2) Nondestructive Testing – Write a nondestructive testing (NDT) procedure in accordance with § 192.243 to NDT girth welds. Excavate and NDT: (a) at least 40 girth welds equally spaced along the entire pipeline, (b) all tie-in girth welds made after the post-construction pressure testing in 1998, and (c) all known fabricated and station girth welds; (3) Repair or replace all girth welds that fail the NDT. For every girth weld repaired or replaced, excavate and NDT one additional girth weld; and (4) Hydrotest the entire pipeline in accordance with the requirements in Part 192 if more than three girth welds fail the NDT. In response to the Petition, on November 3, 2017, pursuant to § 190.243(d), I requested that Macpherson provide additional information to determine the proper disposition of the Petition. Specifically, I requested that Macpherson present any probative evidence demonstrating that the proposed compliance terms would impose a substantial financial burden on the company. I also 2 Petition, at 1.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 4CPF No. 5-2016-0016 Page 3 requested that the Director, Western Region, evaluate the information contained in the Petition and consult with Macpherson, if appropriate, on the issues raised in the Petition regarding the Compliance Order. Petitioner provided additional information on December 1, 2017 (Petition Addendum No. 1) and on April 20, 2018 (Petition Addendum No. 2). As directed, on June 27, 2018, the Director, Western Region, submitted a Revised Region Recommendation regarding the disposition of the Petition (Revised Recommendation). Legal Standard of Review Pursuant to 49 C.F.R. § 190.243, an operator may petition the Associate Administrator for reconsideration of a final order issued under § 190.213. Reconsideration does not constitute an appeal or an opportunity to seek a de novo review of the record. It is, instead, an opportunity for a petitioner to request that errors in the final order be corrected or to present information that was not previously available, provided the petitioner submits a valid reason explaining why such information was not presented prior to issuance of the final order. PHMSA may grant or deny, in whole or in part, a petition for reconsideration without further proceedings, but may request additional information or comment if deemed appropriate. Under § 190.243(b), the petitioner must submit reasoning why any additional facts or arguments were not presented prior to issuance of the final order. Analysis As noted above, Petitioner requested relief from Item 1(a) of the Compliance Order, relating to violations of 49 C.F.R. § 192.13(c), on the grounds that the requirements would impose a “disproportionate financial burden relative to any risk reduction gained by such requirements.” Macpherson stated that the primary cost driver of its objections was related to the loss of production, i.e., lost revenue, by eliminating steam injection into the reservoir for a period of time to meet the compliance obligations in the Compliance Order. The Western Region reviewed Macpherson’s additional financial documentation and explained that Macpherson’s system requires a continuous supply of natural gas for the production of oil in the Round Mountain oil field. It uses the gas to: (1) generate steam for injection into the Round Mountain oil field formation; (2) generate heat for oil dehydration; (3) pressurize oil measuring equipment; and (4) make up gas for Air Permitting Compliance.3 Macpherson produces oil from the Round Mountain field by injecting steam into the formation, heating the oil and enabling it to migrate to the production wells. The oil produced at the Round Mountain field is a heavy oil that requires extensive and continuous steam injection to heat the oil. Removing the steam injection has an adverse effect on oil production by allowing the oil-field formation to cool, thus slowing or stopping the migration of oil to the production wells.4 Shutting down the system in order to 3 Revised Recommendation (on file with PHMSA), at 2. 4 Id.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 5CPF No. 5-2016-0016 Page 4 comply with the terms of the Compliance Order would introduce risks and negatively impact reservoir behavior and well productivity.5 Macpherson provided three sets of documents in support of this statement.6 Macpherson provided direct cost totals for such requirements, indirect costs, costs associated with performing the requested work, reduction in production, 10 days without heat for oil processing, and recovery time for the reservoir heat.7 In support of its Petition, Macpherson stated that its pipeline was low risk, decreasing the threat of eliminating or modifying Compliance Order, Item 1(a). Specifically, Macpherson stated that: (1) the gas pipeline passed a hydrostatic test prior to being placed into service in 1998; (2) a cathodic-protection system has been in use since the line’s initial commissioning; (3) non- destructive testing performed on both buried and exposed piping indicate wall strength that meets design and operation conditions; and (4) the gas pipeline is in a remote location with no road crossing and a low population.8 Macpherson indicated that it relies exclusively on the pipeline to provide natural gas to fuel the steam generators that make oil production possible in the Round Mountain oil field, meaning that shutting down the gas pipeline would adversely affect oil production in the Round Mountain oil field and would place an unreasonable financial burden on Macpherson.9 I agree that the Compliance Order, as issued, would adversely affect oil production in the field and could place an unreasonable financial burden on the company. Therefore, based on the financial documents provided, the estimates of the cost of complying with the Compliance Order as written, and certain alternative actions proposed by Macpherson to ensure compliance with the pipeline safety regulations, I find that it is reasonable and prudent to order certain modifications to the Compliance Order. These modifications allow Macpherson to achieve compliance with pipeline safety regulations using less financially burdensome means than those originally required by the Compliance Order.10 Accordingly, pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, I order that Paragraph 1(a) of the Compliance Order be amended. Petitioner is ordered to develop, and submit for approval within 90 days of receipt of this Decision, a written FFS plan to assess the condition of the pipeline system to demonstrate its safety and integrity. The FFS plan must address those actions required in Paragraphs 1(a)(i) through 1(a)(iii) of the Compliance Order, as modified below: 5 Petition, at 1. 6 Petition; See also Petition Addendum No. 1, and Petition Addendum No. 2. 7 Petition at 1; See also Petition Addendum No. 1, at Att. A. 8 Petition, at 3-4; Revised Recommendation, at 2. 9 Petition, at 1 (stating that a total shut down of the Round Mountain field could result in the estimated losses of $5.9M or potentially the loss of the entire field production); Revised Recommendation, at 3. 10 Petition Addendum No. 1 at Att. A, Petition Addendum No. 2, at Att. A.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 6CPF No. 5-2016-0016 Page 5  Paragraph 1(a)(i): Destructive Testing - Cut out at least one in-line girth weld and destructively test it in accordance with § 192.225 to establish the strength of the weld. In its Petition, Macpherson stated that “given the location of the pipeline, original hydrotest, that exposure of the pipeline presents opportunities to damage the factory applied coating, and 20 years of safe operation, [paragraph 1(a)(i)] seems like an unnecessary and costly requirement.” Instead, it proposed that the terms of Item 1(a)(i) be modified to “if a girth weld is replaced, as outlined below, it shall be destructively tested in accordance with § 192.225 to establish the strength of the weld. Any other methods proposed for determining the strength of the girth weld shall be approved by the PHMSA.” Based on the estimate of the direct costs associated with this item and Macpherson’s proposed alternative,11 I find that compliance with this item as originally written constitutes an unreasonable financial burden on Macpherson, and that Macpherson’s alternative achieves compliance with the pipeline safety regulations. I therefore amend Item 1(a)(i) to require that if a girth weld is replaced, as required in Item 1(a)(iii), it shall be destructively tested in accordance with § 192.225 to establish the strength of the weld. Any other methods proposed for determining the strength of the girth weld shall be approved by the Director.  Paragraph 1(a)(ii): Nondestructive Testing - Write an NDT procedure in accordance with § 192.243 to test girth welds. Excavate and NDT at least 40 girth welds equally spaced along the entire pipeline, all tie-in girth welds made after the post-construction pressure testing in 1998, and all known fabricated and station girth welds. In its Petition, Macpherson proposed an alternative to “ensure that piping located at the tie in points have been NDT tested, further reducing the risk profile of the pipeline.”12 It suggested removing the requirement to excavate and NDT at least 40 girth welds equally spaced along the entire pipeline, and added the sentence that “[a]ny other methods for determining acceptability of welds shall be approved by the PHMSA.”13 Based on the estimate of the direct costs associated with this item and Macpherson’s proposed alternative,14 I find the proposed alternative would not achieve an acceptable level of compliance with § 192.243 and that excavating and NDT of at least 40 girth welds equally spaced along the pipeline would not impose an unreasonable financial burden on Macpherson. Given that Macpherson has not produced documentation showing that the welds were visually and non- destructively tested, and NDT does not affect pipeline or oil production operations, I find that NDT of the required 40 welds is appropriate to demonstrate compliance with §§ 192.13(c), 192.241 and 192.243. I therefore decline to modify Item 1(a)(ii) of the Compliance Order. 11 Petition, at 1; See also Petition Addendum No. 1, at Att. A. 12 Petition, at 4-5. 13 Petition, at 4. 14 Petition, at 1; See also Petition Addendum No. 1, at Att. A.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 7CPF No. 5-2016-0016 Page 6  Paragraph 1(a)(iii): Repair or replace all girth welds that fail the NDT. For every girth weld repaired or replaced, excavate and NDT one additional girth weld. In its Petition, Macpherson proposed modifying Item 1(a)(iii) of the Compliance Order from requiring that "for every girth weld repaired or replaced, excavate and NDT (x-ray radiograph) one additional girth weld,” to excavating and NDT the closest girth weld to any girth weld that fails NDT. I find that Macpherson’s alternative achieves compliance with the pipeline safety regulations. I therefore amend Item 1(a)(iii) to require that Macpherson repair or replace all girth welds that fail the NDT and for every girth weld repaired or replaced, excavate and NDT one additional girth weld closest to the weld that failed the NDT.  Paragraph 1(a)(iv): Hydrotest the entire pipeline in accordance with the requirements in Part 192 if more than three girth welds fail the NDT. In its Petition, Macpherson requested removal of the requirement to hydrotest the entire pipeline, and proposed to hydrotest all segments of replacement pipe in the shop in accordance with Part 192. In support, Macpherson stated that removing the hydrotest requirement of the entire pipeline will “eliminate the need to fill the line with water and creating [sic] a potentially corrosive environment.”15 I have considered both the financial documents provided by Petitioner, as well as its argument that the pipeline passed a hydrotest prior to operation, that the pipeline has a safe operational history, and that the line is in a Class 1 location.16 Based on this review, and at the recommendation of the Director, I find that Item 1(a)(iv) of the Compliance Order is not necessary to demonstrate compliance with the pipeline safety regulations. I therefore remove Item 1(a)(iv) from the Compliance Order. Conclusion Based on a review of the record and the information provided in the Petition, I hereby grant, in part, and deny, in part, the Petition and modify the Compliance Order, Item 1(a), for the reasons set forth above. Paragraph 1(a) of the Compliance Order is amended to read as follows: a. Girth Welds – Macpherson must develop a written Fitness for Service (FFS) plan for girth welds and submit the FFS to the Director, Western Region, OPS, for review and approval within 90 days of receipt of this Decision. The FFS for girth welds must include the following at a minimum: i. If a girth weld is replaced, as outlined in paragraph 1(a)(iii), it shall be destructively tested in accordance with § 192.225 to establish the strength of the weld. Any other 15 Petition, at 5. Macpherson’s recommended change is a restatement of the requirements of § 192.503(a). 16 Petition, at 2.#

520160016_Decision on Petition for Reconsideration_06272019_text.pdf, page 8CPF No. 5-2016-0016 Page 7 methods proposed for determining the strength of the girth weld shall be approved by the Director. ii. Nondestructive Testing – write a nondestructive testing (NDT) procedure in accordance with § 192.243 for testing girth welds. Excavate and NDT at least 40 girth welds equally spaced along the entire pipeline, all tie-in girth welds made after the post-construction pressure testing in 1998, and all known fabricated and station girth welds. iii. Repair or replace all girth welds that fail the NDT. For every girth weld repaired or replaced, excavate and NDT one additional girth weld closest to the weld that failed the NDT. iv. [Removed] All other terms of the Final Order remain in effect. This Decision constitutes final agency action taken by PHMSA in the enforcement proceeding. The terms and conditions of this Decision are effective upon service in accordance with 49 C.F.R. § 190.5. June 27, 2019 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

520160016_Final Order_08242017_text.pdf, page 1Official PDFAugust 24, 2017 Mr. Donald R. Macpherson, Jr. President and Chief Executive Officer Macpherson Oil Company 100 Wilshire, Suite 800 Santa Monica, CA 90401 Re: CPF No. 5-2016-0016 Dear Mr. Macpherson: Enclosed please find the Final Order issued in the above-referenced case. It makes findings of violation and specifies actions that need to be taken by Macpherson Oil Company to comply with the pipeline safety regulations. When the terms of the compliance order have been 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, Alan K. Mayberry Associate Administrator for Pipeline Safety Enclosure cc: Director, Western Region, Office of Pipeline Safety, PHMSA Mr. Tim Lovley, Director HSE, Macpherson Oil Company, P.O. Box 5368, Bakersfield, CA 93388 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

520160016_Final Order_08242017_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 ) ) Macpherson Oil Company, ) CPF No. 5-2016-0016 ) Respondent. ) ____________________________________) FINAL ORDER On June 22-25, 2015, 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 Macpherson Oil Company (Macpherson or Respondent), a subsidiary of Macpherson Energy Corporation, at its Kern County Gas Line facilities in Bakersfield, California. The Kern County Gas Line is a 6.8- mile, 6” gas transmission line.1 As a result of the inspection, the Director, Western Region, OPS (Director), issued to Respondent, by letter dated September 7, 2016, a Notice of Probable Violation and Proposed Compliance Order (Notice), which also included a warning pursuant to 49 C.F.R. § 190.205. In accordance with 49 C.F.R. § 190.207, the Notice proposed finding that Macpherson had committed five violations of 49 C.F.R. Part 192 and proposed ordering Respondent to take certain measures to correct the alleged violations. The warning items required no further action, but warned the operator to correct the probable violations or face possible enforcement action. Macpherson responded to the Notice by letter dated October 7, 2016 (Response). The company did not contest the allegations of violation, but provided information concerning the corrective actions it had taken and requested that certain portions of the Proposed Compliance Order be modified, as discussed more fully below. Respondent did not request a hearing and therefore has waived its right to one. FINDINGS OF VIOLATION In its Response, Macpherson did not contest the allegations in the Notice that it violated 49 C.F.R. Part 192, as follows: 1 Pipeline Safety Violation Report (Sept. 7, 2016) (on file with PHMSA), at 1. See also, http://www.macphersonenergy.com (last accessed July 20, 2017).#

520160016_Final Order_08242017_text.pdf, page 3CPF No. 5-2016-0016 Page 2 Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 192.13(c), which states in relevant part: § 192.13 What general requirements apply to pipelines regulated under this part? (a) No person may operate a segment of pipeline [after March 12, 1971] unless: (1) The pipeline has been designed, installed, constructed, initially inspected, and initially tested in accordance with this part . . . . (c) Each operator shall maintain, modify as appropriate, and follow the plans, procedures, and programs that it is required to establish under this part. The Notice alleged that Respondent violated 49 C.F.R. § 192.13(c) by failing to maintain the plans and programs it was required to establish under Part 192 for its Kern County Gas Line, which was constructed and placed into service in 1998. The Federal pipeline safety regulations in § 192.13(a)(1) required the Kern County Gas Line to be designed, installed, constructed, initially inspected, and initially tested in accordance with the applicable regulations in Part 192. Section 192.13(c) required the operator to maintain the plans, procedures, and programs it used to design, install, construct, initially inspect, and initially test its pipeline in accordance with Part 192. Specifically, the Notice alleged that during the inspection when the OPS inspector queried Macpherson personnel about the construction, installation, initial inspection, and initial testing of the Kern County Gas Line, Respondent did not provide any records or any other documentation to demonstrate compliance with § 192.13(c). Because Macpherson did not maintain all the plans and programs it was required to establish under Part 192 for the Kern County Gas Line, it was unable to document that (1) the pipeline was welded using a qualified welding procedure(s) per § 192.225(a); or (2) each welding procedure was recorded in detail, including the results of the qualifying tests, and the record was retained and followed whenever the procedure was used per § 192.225(b). Further, Macpherson could not document that: (3) the welders were qualified in accordance with the appropriate referenced standard(s) per § 192.227(a); (4) pipeline welds were visually inspected by a qualified individual per § 192.241(a); (5) pipeline welds were nondestructively tested in accordance with § 192.243; or (6) the pipeline was initially installed with the minimum cover required by § 192.327. Respondent did not contest these allegations of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.13(c) by failing to maintain the plans and programs it was required to establish under Part 192 for the Kern County Gas Line. Item 3: The Notice alleged that Respondent violated 49 C.F.R. § 192.615(a), which states: § 192.615 Emergency plans. (a) Each operator shall establish written procedures to minimize the hazard resulting from a gas pipeline emergency . . . .#

520160016_Final Order_08242017_text.pdf, page 4CPF No. 5-2016-0016 Page 3 The Notice alleged that Respondent violated 49 C.F.R. § 192.615(a) by failing to establish written procedures to minimize the hazard resulting from a gas pipeline emergency. During the inspection, Macpherson failed to provide the OPS inspector with any written emergency procedures for its Kern County Gas Line. In its Response, Macpherson did not contest the allegation and explained that it had updated its manual of written procedures during the June 2015 OPS inspection, and had subsequently provided a copy of the revised manual, dated September 6, 2016. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.615(a) by failing to establish written procedures for minimizing the hazard resulting from a gas pipeline emergency. Item 4: The Notice alleged that Respondent violated 49 C.F.R. § 192.705(b), which states: § 192.705 Transmission lines: Patrolling. (a) Each operator shall have a patrol program to observe surface conditions on and adjacent to the transmission line right-of-way for indications of leaks, construction activity, and other factors affecting safety and operation. (b) The frequency of patrols is determined by the size of the line, the operating pressures, the class location, terrain, weather, and other relevant factors, but intervals between patrols may not be longer than prescribed in the following table: Maximum interval between patrols Class loca- tion of line 1, 2 . . . . . . At highway and railroad crossings At all other places 71∕2 months; but at least twice 15 months; but at least once 3 . . . . . . . . each calendar year 41∕2 months; but at least four each calendar year. 71∕2 months; but at least twice 4 . . . . . . . . each calendar year. 41∕2 months; but at least four times each calendar year 41∕2 months; but at least four times each calendar year times each calendar year. The Notice alleged that Respondent violated 49 C.F.R. § 192.705(b) by failing to patrol its Kern County Gas Line at a frequency determined by the size of the line, the operating pressures, the class location, terrain, weather, and other relevant factors, but with intervals between patrols not being longer than prescribed in the above table. Specifically, the Notice alleged that the pipeline was located entirely within a Class 1 location and that Respondent failed to patrol it at least once each calendar year, with intervals not exceeding 15 months, since 1998. In its Response, Macpherson submitted its right-of-way procedures and reports from September 20, 2016; June 11, 2015; July 29, 2014; May 7, 2013; and May 29, 2012, but did not submit documentation to demonstrate the pipeline had been patrolled prior to 2012. Accordingly, I find that Respondent violated 49 C.F.R. § 192.705(b) by failing to patrol its pipeline at the required intervals.#

520160016_Final Order_08242017_text.pdf, page 5CPF No. 5-2016-0016 Page 4 Item 5: The Notice alleged that Respondent violated 49 C.F.R. § 192.739(a), which states: § 192.739 Pressure limiting and regulating stations: Inspection and testing. (a) Each pressure limiting station, relief device (except rupture discs), and pressure regulating station and its equipment must be subjected at intervals not exceeding 15 months, but at least once each calendar year, to inspections and tests to determine that it is— (1) In good mechanical condition; (2) Adequate from the standpoint of capacity and reliability of operation for the service in which it is employed; (3) Except as provided in paragraph (b) of this section, set to control or relieve at the correct pressure consistent with the pressure limits of § 192.201(a); and (4) Properly installed and protected from dirt, liquids, or other conditions that might prevent proper operation. The Notice alleged that Respondent violated 49 C.F.R. § 192.739(a) by failing to inspect and test the pressure limiting relief device on its Kern County Gas Line at intervals not exceeding 15 months, but at least once each calendar year, to determine that it was in good mechanical condition, adequate from the standpoint of capacity and reliability of operation for the service in which it is employed, set to control or relieve at the correct pressure consistent with the pressure limits of § 192.201(a), and properly installed and protected from dirt, liquids, or other conditions that might prevent proper operation. Specifically, the Notice alleged that during the inspection, the OPS inspector observed that the Kern County Gas Line was connected to an upstream gas pipeline. The inspector observed a pressure-relief device on the Kern County Gas Line that was set to relieve pressure. While there is a relief device installed on the Kern County Gas Line, it is located in a fenced-in area controlled by the upstream gas provider. Respondent allegedly did not have access to the relief device and did not inspect or test it. According to the Notice, Respondent relied on the gas provider’s personnel to perform these functions, but Respondent’s personnel did not witness the inspections or testing of the relief device. Furthermore, the Notice alleged that Respondent did not provide any records, as required by § 192.709(c), to show that the relief device was inspected or tested at the required intervals. According to the Notice, Respondent also did not provide any records as required by § 192.807 to show that the gas provider’s personnel were Operator Qualified to perform this covered task on the Kern County Gas Line. Lastly, Respondent allegedly did not provide any written documents to show that it had an agreement with the gas provider to inspect and test the relief device. Respondent did not contest this allegation of violation. Accordingly, based upon a review of all of the evidence, I find that Respondent violated 49 C.F.R. § 192.739(a) by failing to inspect and test the pressure limiting relief device on its Kern County Gas Line at intervals not exceeding 15 months, but at least once each calendar year.#

520160016_Final Order_08242017_text.pdf, page 6CPF No. 5-2016-0016 Page 5 Item 6: The Notice alleged that Respondent violated 49 C.F.R. § 192.745(a), which states: § 192.745 Valve maintenance: Transmission lines. (a) Each transmission line valve that might be required during any emergency must be inspected and partially operated at intervals not exceeding 15 months, but at least once each calendar year. The Notice alleged that Respondent violated 49 C.F.R. § 192.745(a) by failing to inspect and partially operate the transmission line valves on its Kern County Gas Line that might be required during an emergency, at intervals not exceeding 15 months but at least once each calendar year. Specifically, the Notice alleged that Respondent had not inspected or partially operated the valves since the line was placed into service in 1998. In its Response, Macpherson stated that it had procedures for the valve inspections and had performed the required manual valve operation and inspections on September 2, 2015, and September 20, 2016. Respondent did not submit documentation to demonstrate the valves had been inspected and partially operated at least once each calendar year prior to 2015. Accordingly, I find that Respondent violated 49 C.F.R. § 192.745(a) by failing to inspect and partially operate the valves at the requisite intervals. These findings of violation will be considered prior offenses in any subsequent enforcement action taken against Respondent. COMPLIANCE ORDER The Notice proposed a compliance order with respect to Items 1, 3, 4, 5, and 6 in the Notice for violations of 49 C.F.R. §§ 192.13(c), 192.615(a), 192.705(b), 192.739(a), and 192.745(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. The Director has indicated that Macpherson submitted the required written procedures and records to demonstrate that appropriate action has been taken to ensure compliance with the violations cited in Items 3, 4, and 6. Macpherson also provided additional information to show that the actions required under Item 1(c) of the Proposed Compliance Order had been satisfied. Therefore, it is not necessary to include compliance actions associated with these Items in this Final Order. Macpherson provided additional information on the actions it had taken to address Items 1 and 5 for the violations of §§ 192.13(c) and 192.739(a), respectively, and requested that certain changes be made to those provisions in the Compliance Order. I have considered these suggestions and modified those items as set forth below. 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:#

520160016_Final Order_08242017_text.pdf, page 7CPF No. 5-2016-0016 Page 6 1. With respect to the violation of § 192.13(c) (Item 1), Macpherson must develop a written Fitness for Service (FFS) plan to assess the condition of the pipeline system to demonstrate its safety and integrity. Macpherson must submit the written FFS to the Director, Western Region, OPS, for review and approval within 90 days of the date of issuance of the Final Order. At a minimum, the FFS must include the following: a. Girth Welds i. Destructive Testing – cut out at least one in-line girth weld and destructively test it in accordance with § 192.225 to establish the strength of the weld. ii. Nondestructive Testing – write a nondestructive testing (NDT) procedure in accordance with § 192.243 to NDT girth welds. Excavate and NDT: at least 40 girth welds equally spaced along the entire pipeline; all tie-in girth welds made after the post-construction pressure testing in 1998; and all known fabricated and station girth welds. iii. Repair or replace all girth welds that fail the NDT. For every girth weld repaired or replaced, excavate and NDT one additional girth weld. iv. Hydrotest the entire pipeline in accordance with the requirements in Part 192 if more than three girth welds fail the NDT. b. Depth of Cover i. Perform a Direct Current Voltage Gradient (DCVG) survey and depth of cover survey over the entire pipeline. Repair all coating anomalies found during the DCVG survey that are classified as “moderate” (i.e., 35% IR and above) or “severe,” based on NACE International Standard Practice 0502-2010, “Pipeline External Corrosion Direct Assessment Methodology” (NACE SP 0502-2010) (incorporated by reference, see § 192.7). A minimum of two coating survey assessment classifications must be excavated, classified and/or remediated per each survey crew each time the survey is performed. ii. Conduct spot checks over the entire pipeline, remediate any cover depths that do not meet the requirements in § 192.327, and submit dig reports that show depth-cover. 2. With respect to the violation of § 192.739(a) (Item 5), Respondent must: a. Prepare (or amend) and follow written test and inspection procedures for the pressure limiting device on its Kern County Gas Line to ensure it is tested and inspected in accordance with § 192.739. Submit the written procedures to the Director within 120 days of the date of issuance of the Final Order. b. Test and inspect the pressure limiting device on the Kern County Gas Line within 30 days of the date of issuance of the Final Order. Submit records or other documentation to show this has been completed within 45 days of the date of issuance of the Final Order. It is requested that Macpherson maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Director, Western#

520160016_Final Order_08242017_text.pdf, page 8CPF No. 5-2016-0016 Page 7 Region, OPS. It is requested that these costs 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. 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 $200,000, as adjusted for inflation (49 C.F.R. § 190.223), 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. WARNING ITEMS With respect to Items 2, 7, and 8, the Notice alleged probable violations of Part 192, but did not propose a civil penalty or compliance order for these items. Therefore, these are considered to be warning items. The warnings were for: 49 C.F.R. § 192.603(b) (Item 2) ─ Respondent’s alleged failure to keep records necessary to administer the procedures it established under § 192.605 for its Kern County Gas Line. While Macpherson had the required procedures, it allegedly failed to keep records necessary to administer those procedures. Specifically, Macpherson allegedly failed to keep or produce any records pertaining to the construction, start-up, or shutdown of any part of its Kern County Gas Line. 49 C.F.R. § 192.807(a)(4) (Item 7) ─ Respondent’s alleged failure to maintain records that demonstrated compliance with 49 C.F.R. Part 192, Subpart N, with respect to the operation qualification method(s) used for its Kern County Gas Line. 49 C.F.R. § 192.807(b) (Item 8) ─ Respondent’s alleged failure to maintain records that demonstrated compliance with 49 C.F.R. Part 192, Subpart N, with respect to supporting an individual’s current qualification while the individual performed a covered task on the Kern County Gas Line. Macpherson allegedly utilized contract personnel to perform covered tasks on its Kern County Gas Line, but did not provide records to show that the contractor personnel who performed the covered tasks were qualified to perform those tasks per § 192.805(b). Macpherson presented information in its Response showing that it had taken actions to address the cited warning items. If OPS finds a violation of any of these items in a subsequent inspection, Respondent may be subject to future enforcement action. Under 49 C.F.R. § 190.243, Respondent may submit a Petition for Reconsideration of this Final Order to the 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#

520160016_Final Order_08242017_text.pdf, page 9CPF No. 5-2016-0016 Page 8 Chief Counsel, PHMSA, at the same address, no later than 20 days after receipt of service of this Final Order by Respondent. Any petition submitted must contain a statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.243. The terms of the order, including corrective action, remain in effect unless the Associate Administrator, upon request, grants a stay. The terms and conditions of this Final Order are effective upon service in accordance with 49 C.F.R. § 190.5. August 24, 2017 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

520160016_Closure Letter_08142019_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED August 14, 2019 Mr. Donald R. Macpherson, Jr. President and Chief Executive Officer Macpherson Oil Company 100 Wilshire, Suite 800 Santa Monica, California 90401 CPF 5-2016-0016 Closure Letter Dear Mr. Macpherson: On June 27, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Macpherson Oil Company a Decision on the Petition for Reconsideration filed by Macpherson Oil Company in the above-referenced case. This Decision modified several items of the Order which included a requirement to take corrective actions on your pipeline. Based on our review of the documentation you provided, 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, Dustin Hubbard Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 J. Dunphy (#166482) Mr. Tim Lovley, Director HSE, Macpherson Oil Company, P.O. Box 5368 Bakersfield, CA 93388#