CHEVRON PRODUCTS COMPANY — Notice of Probable Violation

case documentOfficial PDF520166013_NOPV PCO_12082016.pdf#

case documentOfficial PDF520166013_NOPV PCO_12082016_text.pdf#

party submissionOfficial PDF520166013_Operator Response to Notice (Chevron)_01102017.pdf#

party submissionOfficial PDF520166013_Operator_Response_to_Notice_(Island_Energy)_01042017.pdf#

520166013_Final Order_06022017_text.pdf, page 1Official PDFJune 2, 2017 Mr. Jon Mauer President and CEO Island Energy Services, LLC 91-480 Malakole Street Kapolei, HI 96707 Re: CPF No. 5-2016-6013 Dear Mr. Mauer: Enclosed please find the Final Order issued in the above-referenced case. It makes a finding of violation and specifies actions that need to be taken by Island Energy Services, LLC 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 as 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. Mark Hepburn, Logistics Manager, Island Energy Services, LLC Mr. John Watson, Chairman and CEO, Chevron Products Company, 6001 Bollinger Canyon Road, San Ramon, CA 94583 Mr. Fiaz Mohammed, Area Operations Manager, Southwest, Chevron Products Company, 145 S State College Blvd., Suite 500, Brea, CA 92821 CERTIFIED MAIL - RETURN RECEIPT REQUESTED#

520166013_Final Order_06022017_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 ) ) Island Energy Services, LLC, ) CPF No. 5-2016-6013 ) Respondent. ) ____________________________________) FINAL ORDER On March 8-10, 2016, 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 Chevron Products Company’s (Chevron) Hilo Terminal in Hilo, Hawaii. Hilo Terminal is a multi-modal refined- products terminal that includes a breakout tank and approximately 700 feet of above-ground facility piping and equipment.1 As a result of the inspection, the Director, Western Region, OPS (Director), issued to Chevron, by letter dated December 8, 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 Chevron had violated 49 C.F.R. § 195.401(a) and proposed ordering the company to take certain measures to correct the alleged violation. The warning item required no further action, but warned the operator to correct the probable violation or face possible enforcement action. Effective November 1, 2016, Island Energy Services, LLC (Island Energy or Respondent) purchased the Hilo Terminal facility from Chevron and responded to the Notice by letter dated January 4, 2017 (Response).2 The company did not contest the allegation of violation. Respondent did not request a hearing and therefore has waived its right to one. FINDING OF VIOLATION In its Response, Island Energy did not contest the allegation in the Notice that it violated 1 Pipeline Safety Violation Report (Violation Report), (December 8, 2016) (on file with PHMSA), at 1. 2 Chevron also responded to the Notice, by letter dated January 10, 2017, confirming that Island Energy had purchased the Hilo Terminal facilities and other assets as of November 1, 2016.#

520166013_Final Order_06022017_text.pdf, page 3CPF No. 5-2016-6013 Page 2 49 C.F.R. Part 195, as follows: Item 1: The Notice alleged that Respondent violated 49 C.F.R. § 195.401(a), which states: § 195.401 General requirements. (a) No operator may operate or maintain its pipeline systems at a level of safety lower than that required by this subpart and the procedures it is required to establish under § 195.402(a) of this subpart. The Notice alleged that Respondent violated 49 C.F.R. § 195.401(a) by operating and maintaining its pipeline systems at a level of safety lower than that required by Subpart F of 49 C.F.R. 195. Part 195 requires that an operator establish the maximum operating pressure (MOP) for each of its pipelines. The criteria required for determining MOP are found at 49 C.F.R. § 195.406(a). Operators must consider the requirements of either §§ 195.406(a)(3) or (5). Section 195.406(a)(3) states that “. . . no operator may operate a pipeline at a pressure that exceeds . . . [e]ighty percent of the test pressure for any part of the pipeline which has been pressure tested under subpart E of this part.” Section 195.406(a)(5) states that “[f]or pipelines … that have not been pressure tested under subpart E of this part, 80 percent of the test pressure or highest operating pressure to which the pipeline was subjected for 4 or more continuous hours that can be demonstrated by recording charts or logs made at the time the test or operations were conducted.” Specifically, the Notice alleged that Island Energy did not properly establish the MOP for the 8-inch-diameter CUSA/HELCO pipeline within the Hilo Terminal. The CUSA/HELCO pipeline is an intrastate steel pipeline constructed in 1983. As such, the pipeline may be operated without a Subpart E pressure test if its MOP is established under § 195.406(a)(5).3 In addition, Island Energy’s MOP determination did not consider § 195.406(a)(3) requirements, i.e. 80 percent of a Subpart E pressure test. Although Island Energy’s MOP determination was required to consider either § 195.406(a)(5) or § 195.406(a)(3) requirements, neither was considered. Therefore, without a properly established MOP, the CUSA/HELCO pipeline was operating at a level of safety lower than that required by Part 195, Subpart F. 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. § 195.401(a) by operating and maintaining its pipeline systems at a level of safety lower than that required by Subpart F of 49 C.F.R. 195. This finding of violation will be considered a prior offense in any subsequent enforcement action taken against Respondent. 3 49 C.F.R. § 195.302(b)(1) states, “[e]xcept for pipelines converted under § 195.5, the following pipelines may be operated without pressure testing under this subpart: . . . (iii) An intrastate pipeline constructed before October 21, 1985. . . .”#

520166013_Final Order_06022017_text.pdf, page 4CPF No. 5-2016-6013 Page 3 COMPLIANCE ORDER The Notice proposed a compliance order with respect to Item 1 in the Notice for violation of 49 C.F.R. § 195.401(a). Under 49 U.S.C. § 60118(a), each person who engages in the transportation of hazardous liquids or who owns or operates a pipeline facility is required to comply with the applicable safety standards established under chapter 601. Pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is ordered to take the following actions to ensure compliance with the pipeline safety regulations applicable to its operations: 1. With respect to the violation of § 195.401(a) (Item 1), Respondent must establish the maximum operating pressure of the CUSA/HELCO pipeline within the Hilo Terminal pursuant to §§ 195.406(a)(3) or (5) and submit the maximum operating pressure determination to the Director, Western Region, OPS. 2. Respondent must submit to the Director, Western Region, OPS, within 30 days following receipt of the Final Order, a plan and schedule to comply with Item 1 above. 3. Respondent must complete Compliance Order Item 1 within 180 days following receipt of the Final Order. 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. In addition, pursuant to the authority of 49 U.S.C. § 60118(b) and 49 C.F.R. § 190.217, Respondent is requested (not mandated) to take the following action: Island Energy should maintain documentation of the safety improvement costs associated with fulfilling this Compliance Order and submit the total to Chris Hoidal, Director, Western Region, Pipeline and Hazardous Materials Safety Administration. 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. Failure to comply with this Order may result in the administrative assessment of civil penalties not to exceed $200,000 for each violation for each day the violation continues or in referral to the Attorney General for appropriate relief in a district court of the United States. WARNING ITEM With respect to Item 2, the Notice alleged a probable violation of Part 195 but did not propose a civil penalty or compliance order for this item. Therefore, this is considered to be a warning item. The warning was for:#

520166013_Final Order_06022017_text.pdf, page 5CPF No. 5-2016-6013 Page 4 49 C.F.R. § 195.583(a) (Item 2) ─ Respondent’s alleged failure to inspect each onshore pipeline or portion of pipeline that is exposed to the atmosphere for evidence of atmospheric corrosion at least once every 3 calendar years, but with intervals not exceeding 39 months. Island Energy presented information in its Response showing that it plans to take certain actions to address the cited item. If OPS finds a violation of this provision in a subsequent inspection, Respondent may be subject to future enforcement action. Under 49 C.F.R. § 190.243, Respondent has a right to submit a Petition for Reconsideration of this Final Order. The petition must be sent to: Associate Administrator, Office of Pipeline Safety, PHMSA, 1200 New Jersey Avenue, SE, East Building, 2nd Floor, Washington, DC 20590, with a copy sent to the Office of Chief Counsel, PHMSA, at the same address. PHMSA will accept petitions received no later than 20 days after receipt of service of this Final Order by the Respondent, provided they contain a brief statement of the issue(s) and meet all other requirements of 49 C.F.R. § 190.243. 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. June 2, 2017 ___________________________________ __________________________ Alan K. Mayberry Date Issued Associate Administrator for Pipeline Safety#

520166013_Closure Letter_10302017_text.pdf, page 1Official PDFVIA FACSIMILE TO (808) 682-2324 AND FED EX October 30, 2017 Mr. Jon Mauer President and CEO Island Energy Services, LLC 91-480 Malakole Street Kapolei, HI 96707 CPF 5-2016-6013 Closure Letter Dear Mr. Mauer: On June 2, 2017, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued to Island Energy Services, LLC a Final Order in the above-referenced case. This Order included a Compliance Order. 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 B. Hubbard Acting Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 T. Johnson (# 152136) Mr. Mark Hepburn, Logistics Manager, Island Energy Services, LLC#