HECO - HAWAIIAN ELECTRIC COMPANY, INC. — Safety Order

party submissionOfficial PDF520186001S_Operator Response to Notice and Requests for Informal Consultation_02092018.pdf#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 1Official PDFCERTIFIED MAIL - RETURN RECEIPT REQUESTED January 9, 2018 Mr. Alan M. Oshima President & Chief Executive Officer Hawaiian Electric Company, Inc. 900 Richards Street Honolulu, Hawaii 96813 CPF 5-2018-6001S Dear Mr. Oshima: Enclosed is a Notice of Proposed Safety Order (Notice) issued in the above-referenced case. The Notice proposes that you take certain measures with respect to Hawaiian Electric Company, Inc.’s Waiau Pipeline, which travels from Kalaeloa through Kapolei, Waipahu, and Pearl City to the Waiau Power Plant, to ensure pipeline safety. 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 me at 720-963-3183. Sincerely, Dustin Hubbard Acting Director, Western Region Pipeline and Hazardous Materials Safety Administration Enclosures: Notice of Proposed Safety Order Attachments: A – General Overview Map B – Waiau pipeline map showing proximity to Unusually Sensitive Areas#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 2cc: Mr. Alan K. Mayberry, Associate Administrator for Pipeline Safety, OPS Ms. Linda Daugherty, Deputy Associate Administrator for Field Operations, OPS Mr. Ronald R. Cox, Senior Vice President, Operations#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 3DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WESTERN REGION LAKEWOOD, COLORADO 80228 ________________________________________________ In the Matter of ) ) ) Hawaiian Electric Company, Inc., ) ) CPF No. 5-2018-6001S 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 and information review of the safety of your Waiau Pipeline, which transports low sulfur fuel oil from Barbers Point Tank Farm (BPTF) to the Waiau Power Plant in Pearl City, Hawaii, with approximately 12.7 miles of in-service pipeline mileage.1 As a result of the investigation and information review, it appears that conditions exist on your pipeline facilities 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 (Notice), notifying you of the preliminary findings of the investigation, and proposing that you take measures to ensure that the public, property, or the environment are protected from the integrity risks identified in this Notice. Preliminary Findings  The Hawaiian Electric, Inc. (HECO) Waiau Pipeline (Waiau Pipeline or Affected Segment) transports low sulfur fuel oil from the Barbers Point Tank Farm (BPTF) eastwards to the Waiau power generation plant in Pearl City, Hawaii. There is a spur off the pipeline that goes to the Kahe power plant. The Waiau Pipeline is considered a hazardous liquids pipeline subject to Federal Pipeline Regulations 49 C.F.R., Part 195.  The Waiau Pipeline passes through the towns of Kapolei, Waipahu, and Pearl City, HI. 1 Attachment A, General Overview Map.#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 42  The pipeline is an 8-inch diameter pipe with 0.322 and 0.500-inch wall thickness, consisting of API 5L-X42 grade pipe. The pipeline is coated with fusion bonded epoxy coating, with 2-inch urethane foam insulation and a High Density Polyethylene (HDPE) jacket. The pipeline was installed in 2004.  The product being transported by the Waiau Pipeline is low sulfur fuel oil that is typically introduced into the pipeline at a temperature of 200 °F when it enters the line.  The Waiau Pipeline was initially hydrostatically tested in 2004 and put into service as a 1350 psig MOP pipeline later that year. The normal operating pressure for the pipeline is between 150 and 200 psig.  The Waiau Pipeline runs alongside much of Hawaii Highway 1, numerous roads, and other transportation corridors. The line crosses near Pearl Harbor and terminates in Pearl City, HI. The Waiau Pipeline is located in a High Consequence Area (HCA) due to its proximity to the populations of Pearl Harbor and Honolulu, as well as its proximity to Unusually Sensitive Area (USA) drinking water resource and ecological resource.2  The Waiau Pipeline crosses geological formations and soils that are potentially abrasive such as volcanic rock and coral sands.  The following integrity risk conditions have been identified on the Affected Segment: HECO installed the Waiau pipeline, a below ground insulated and HDPE jacketed pipeline, in 2004. A below ground insulated pipeline may eventually have corrosion problems due to the fact that applied cathodic protection (CP) (either impressed or galvanic), is not able to reach the wall of the pipeline. Eventually, the jacket of the pipeline can fail, allowing moisture to ingress into the foam insulation causing corrosion. Although CP may be applied to an insulated pipeline, the CP current typically cannot pass through the insulation and corrosion of the underlying steel pipe may occur where the insulation contains water. Coupled with heat from the pipeline, the corrosion may become accelerated and “corrosion under insulation” (CUI) may occur. CUI can occur despite normally adequate amounts of impressed CP being applied. Furthermore, CP monitoring methods utilizing conventional methods, e.g. test stations, half cells, and close interval surveys, typically cannot detect CUI.  PHMSA identified these risk conditions as a result of several inspections of the Waiau pipeline since 2004, from the conclusions of a NACE International (NACE) technical committee report titled “Effectiveness of Cathodic Protection on Thermally Insulated Underground Metallic Structures” dated September 2006 (NACE International Publication 10A392, 2006 Edition) (NACE Report), and from lessons learned from the May 19, 2015 Plains pipeline spill in Santa Barbara County, California that occurred on a heated insulated pipeline where the coating had become compromised (Plains release). The results of that accident report were issued to the public on May 20, 2016. An 2 Attachment B, Map of Unusually Sensitive Area’s traversed by the Waiau Pipeline.#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 53 Advisory Bulletin, (ADB-2016-04) (PHMSA-2016-0071) dated June 15, 2016, (ADB), was also issued alerting pipeline operators to the potential corrosion risks associated with insulated pipelines.  The NACE Report was prepared as a guide for external corrosion control of thermally- insulated underground metallic surfaces and considerations of the effectiveness of CP. The NACE report made the following conclusions: (1) ‘‘Generally, the application of external CP to thermally insulated metallic surfaces has been ineffective; (2) The principal or primary means of corrosion control of thermally-insulated metallic surfaces is the application of an effective coating on the metallic surface; (3) Care is typically taken in the application of the external jacket and during pipe installation to minimize water ingress, which causes corrosion at imperfections in the primary coating; (4) When practical, the thermally insulated metallic surfaces need to be inspected at routine time intervals for metal loss (e.g., an internal pipeline inspection tool could be used).’’3  As discussed in the ADB, insulated coatings on buried pipes can result in a corrosion byproduct that occurs between the insulation and the exterior pipe wall and results in In- Line Inspection (ILI) surveys that underestimate the amount of corrosion present. This was identified by PHMSA as a contributing factor to the Plains release and is a documented integrity risk on below ground insulated pipelines.4  PHMSA conducted construction inspections during the installation of the Waiau pipeline in 2004. Standard inspections were conducted in 2005 and 2008. An Integrated Inspection was conducted in March, 2016. As a result of the inspection, PHMSA determined that the foam insulation and HDPE jacket on the pipeline would shield any CP from reaching the pipe wall if the jacket was compromised, and water infiltrated the insulation. Accurate CP monitoring of the entire pipeline would also not be possible.  The last ILI was conducted in November 2013 utilizing a Magnetic Flux Leakage (MFL) tool. The results of the inspection activities indicate the Waiau Pipeline is affected by metal loss corrosion anomalies with the majority of the metal loss indications between 10 and 19% wall loss.  By letter dated November 13, 2017, HECO made a formal request to PHMSA for a Special Permit for its Waiau pipeline for the purpose of addressing the issues identified in this Notice and to ensure compliance with 49 CFR § 195.571. PHMSA is currently evaluating HECO’s special permit application.  The serviceability of the Waiau Pipeline is currently impaired because the risk conditions identified above could result in a failure of the pipeline. A failure on the Waiau Pipeline could result in the release of low sulfur fuel oil into HCA locations in and around Honolulu, HI and Pearl Harbor, HI. The potential spill would affect commercial 3 See NACE Report. 4 See ADB.#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 64 properties, residential properties, and tourism in the area in and around the Waiau Pipeline. The Pearl Harbor area is a National Monument and tourist attraction. 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 age of the pipe involved, the hazardous nature of the product transported and the pressure required for transporting such product, the characteristics of the geographical areas where the pipeline facility is located, the environmentally sensitive area in and around the location of the Waiau pipeline, the likelihood of CUI occurring, 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 Segment without corrective measures poses 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 (you will also have the opportunity to request an administrative hearing before a safety order is issued). Informal consultation provides you with the opportunity to explain the circumstances associated with the risk condition(s) 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#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 75 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 5-2018-6001S 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 to HECO a safety order incorporating the following remedial requirements with respect to the Affected Segment: 1. To ensure continued safety, HECO shall conduct biennial ILI surveys, and investigate all anomalies that exceed more than 40% of the nominal wall thickness. The tool used for the first ILI run must utilize ultrasonic technologies, subsequent ILI runs will alternate technologies between magnetic flux leakage (MFL) and ultrasonic technologies. The entire length of the Affected Segment shall be patrolled at least two times per week. The first ILI run referenced in this Notice shall be conducted no later than 60 days after the issuance of a final safety order, and subsequent ILI surveys shall be conducted at the intervals not exceeding 30 months, but at least once each two calendar years. There should be at least two calibration digs and anomaly assessments conducted for the ILI surveys required under this Notice to ensure that the ILI assessment is accurate. 5. HECO shall provide the Acting Director, Western Region, with documentation of compliance and supporting data, to all Items above. 6. HECO shall submit quarterly reports to the Acting Director, Western Region, that: (1) include analysis of all 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. The Acting Director, Western Region, 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. 2. 3. 4. 7.#

520186001S_Notice Of Proposed Safety Order_01092018_text.pdf, page 86 8. The items required by the safety order shall remain in effect unless and until HECO obtains a special permit for the Waiau pipeline that addresses the safety concerns identified in this Notice. 9. Respondent may appeal any decision of the Acting Director, Western Region, to the Associate Administrator for Pipeline Safety. Decisions of the Associate Administrator shall be final. 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. After 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. ___________________________________ __________________ Dustin Hubbard Date issued Acting Director, Western Region Pipeline and Hazardous Materials Safety Administration#

520186001S_Closure Letter_04082019_text.pdf, page 1Official PDFCERTIFIED MAIL – RETURN RECEIPT REQUESTED April 8, 2019 Mr. Alan M. Oshima President & Chief Executive Officer Hawaiian Electric Company, Inc. 900 Richards Street Honolulu, Hawaii 96813 RE: CPF 5-2018-6001S Case Closure Dear Mr. Oshima: On May 18, 2018, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Consent Order and Consent Agreement (Agreement) to Hawaiian Electric Company, Inc. (HECO). The Agreement required HECO to implement certain corrective measures to address the safety concerns with the Waiau Pipeline, which transports low sulfur fuel oil from Barbers Point Tank Farm (BPTF) to the Waiau Power Plant in Pearl City, Hawaii. The corrective measures required by the Agreement are as follows: (1) perform In-Line inspections (ILI) using alternate technologies (magnetic flux leakage and ultrasonic technologies); (2) prepare a corrosion risk model incorporating all susceptible corrosion risk factors, and incorporate the risk model into HECO’s integrity management plan; (3) investigate, through calibration digs and anomaly assessments, at least four ILI anomalies that exceed 10% of the nominal wall thickness but do not exceed 35% of the nominal wall thickness; (4) investigate, through calibration digs and anomaly assessments, all ILI anomalies that exceed 35% nominal wall thickness; and (4) submit quarterly reports detailing all available data and results from the testing and evaluations required by the Agreement. On several occasions between November and December 2018, PHMSA personnel conducted field inspections of the Waiau Pipeline to ensure HECO’s compliance with the Agreement. Based on the inspections, and a review of the required submittals from HECO, PHMSA has determined that HECO is in compliance with the Agreement. The Agreement required HECO to continue implementing the corrective measures contained therein until they were all completed, or until HECO obtained a Special Permit for operation#

520186001S_Closure Letter_04082019_text.pdf, page 2of the Waiau Pipeline. HECO was granted a Special Permit for operation of the Waiau Pipeline (PHMSA-2017-0155) on October 2, 2018. Accordingly, HECO has successfully completed the terms of the Agreement and this case is now closed with no further enforcement action with respect to the matters involved in this case. Sincerely, Chris Hoidal Acting Director, Western Region Pipeline and Hazardous Materials Safety Administration cc: PHP-60 Compliance Registry PHP-500 R. Guisinger 159059#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 1Official PDFMay 18, 2018 VIA CERTIFIED MAIL AND FAX TO: (907) 777-8301 Mr. Alan M. Oshima President & Chief Executive Officer Hawaiian Electric Company, Inc. 900 Richards Street Honolulu, Hawaii 96813 CPF No. CPF 5-2018-6001S Dear Mr. Oshima: Enclosed please find a Consent Order incorporating the terms of the Consent Agreement between the Pipeline and Hazardous Materials Safety Administration (PHMSA) and Hawaiian Electric Company, Inc. (HECO) which was executed on May 17, 2018. 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, Alan K. Mayberry Associate Administrator for Pipeline Safety Enclosure: Order and Consent Agreement cc: Ms. Kim West, Director, Western Region, OPS Mr. Chris Hoidal, Senior Technical Advisor, Program Development, OPS Mr. Derek Sato, Director, Fuels Infrastructure, Fuels, HECO, at derek.sato@hawaiianelectric.com Mr. K. Noa Dettweiler-Pavia, Associate General Counsel, HECO, at Kahikino.dettweiler@hawaiianelectric.com#

520186001S_Consent Order and Agreement_05182018_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 ) ) Hawaiian Electric Company, Inc., ) CPF No. 5-2018-6001S ) Respondent. ) ) CONSENT ORDER By letter dated January 9, 2018, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS or Agency), issued a Notice of Proposed Safety Order (Notice) to Hawaiian Electric Company, Inc. (HECO or Respondent). In accordance with 49 C.F.R. § 190.239, the Notice alleged that conditions exist on Respondent’s Waiau Pipeline that pose a pipeline integrity risk to public safety, property, or the environment. The Notice also proposed that Respondent take certain corrective measures to remedy the alleged conditions and ensure that the public, property, and the environment are protected from the potential risk. In response to the Notice, Respondent requested an informal consultation, whereupon the parties engaged in good-faith settlement discussions that have resulted in the Consent Agreement attached to this Consent Order that settles all of the allegations in the Notice. Accordingly, the Consent Agreement is hereby approved and incorporated by reference into this Consent 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., failure to comply with this Consent Order may result in the assessment of civil penalties of up to $200,000, as adjusted for inflation (see 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. The terms and conditions of this Consent Order are effective upon service in accordance with 49 C.F.R. § 190.5. May 18, 2018 Alan K. Mayberry Date Associate Administrator for Pipeline Safety#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 3U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION OFFICE OF PIPELINE SAFETY WASHINGTON, D.C. 20590 ____________________________________ In the Matter of Hawaiian Electric Company, Inc., Respondent. ) ) ) ) ) ) ) CPF No. 5-2018-6001S CONSENT AGREEMENT On January 9, 2018, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS or Agency), issued a Notice of Proposed Safety Order (Notice) to Hawaiian Electric Company, Inc. (HECO or Respondent). The Notice alleged that conditions exist on Respondent’s Waiau Pipeline that pose a pipeline integrity risk to public safety, property, or the environment. The Notice also proposed that Respondent take certain corrective measures to remedy the alleged conditions and ensure that the public, property, and the environment are protected from the potential risk. HECO responded to the Notice by timely submitting a written response and a request for an informal consultation. An informal consultation was held on March 13, 2018 at HECO’s office in Barbers Point, Hawaii. As a result of the informal consultation, PHMSA and HECO (collectively, Parties) agreed that settlement of this proceeding will avoid further administrative proceedings or litigation of the Notice and that entry into this Consent Agreement (Agreement) is the most appropriate means of resolving the issues raised in the Notice and is generally in the public interest. Therefore, pursuant to 49 C.F.R. Part 190, without adjudication of any issue of fact or law, and upon consent and agreement of HECO and PHMSA, the Parties agree as follows: I. General Provisions 1. Respondent acknowledges that as the operator of the Waiau Pipeline, Respondent and its Waiau Pipeline system is 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, Respondent 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. The Waiau Pipeline transports low sulfur fuel oil from the Barbers Point Tank Farm (BPTF) eastwards to the Waiau power generation plant in Pearl City, Hawaii, and is defined more specifically as the Affected Pipeline Facility in Paragraph 12(a) of this Agreement.#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 4CPF No. 5-2018-6001S Page 2 2. Respondent 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 (Corrective Measures) and to abide by the terms of this Agreement. This Agreement does not constitute a finding of violation of any Federal law or regulation and may not be used in any civil or administrative 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 Respondent returns this signed Agreement to PHMSA, the Agency’s representative will present it to the Associate Administrator for Pipeline Safety, recommending that the Associate Administrator 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 the Associate Administrator. Once accepted, the Associate Administrator will issue a Consent Order incorporating the terms of this Agreement. 4. Respondent consents to the issuance of the Consent Order, and hereby waives any further procedural requirements with respect to its issuance. Respondent 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, except as set forth herein. 5. This Agreement shall apply to and be binding upon PHMSA, and upon HECO, its officers, directors, and employees, and its successors, assigns, or other entities or persons otherwise bound by law. Respondent agrees to provide a copy of this Agreement and any incorporated work plans and schedules to all of HECO’s officers, employees, and agents whose duties might reasonably include compliance with this Agreement. 6. For all transfers of ownership or operating responsibility of HECO’s Waiau Pipeline, Respondent will 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 PHMSA Western Region Director (Director) who issued the Notice. 7. This Agreement constitutes the final, complete and exclusive agreement and understanding between the Parties with respect to the settlement embodied in this Agreement. The Parties acknowledge that there are no representations, agreements or understandings relating to settlement other than those expressly contained in this Agreement, except that the terms of this Agreement may be construed by reference to the Notice. 8. Nothing in this Agreement affects or relieves Respondent of its responsibility to comply with all applicable requirements of the Federal pipeline safety laws, 49 U.S.C. § 60101, et seq., and the regulations and orders issued thereunder. Nothing in this Agreement alters PHMSA's right of access, entry, inspection, and information gathering or PHMSA's authority to bring enforcement actions against HECO pursuant to the Federal pipeline safety laws, the regulations and orders issued thereunder, or any other provision of Federal or State law.#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 5CPF No. 5-2018-6001S Page 3 9. This Agreement does not waive or modify any Federal, State, or local laws or regulations that are applicable to Respondent’s pipeline systems. This Agreement is not a permit, or a modification of any permit, under any Federal, State, or local laws or regulations. HECO 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 party not party to this Agreement. The U.S. Department of Transportation is not liable for any injuries or damages to persons or property arising from acts or omissions of Respondent or its officers, employees, or agents carrying out the work required by this Agreement. HECO agrees to hold harmless the U.S. Department of Transportation, its officers, employees, agents, and representatives from any and all causes of action arising from any acts or omissions of Respondent or its contractors in carrying out any work required by this Agreement. 11. Measures set forth below. Upon issuance of the Consent Order, HECO agrees to perform the Corrective 12. Definitions: a. The Affected Pipeline Facility means the 8-inch diameter pipe with 0.322 and 0.500-inch wall thickness, consisting of API 5L-X42 grade pipe. The pipeline is coated with fusion bonded epoxy coating, with 2-inch urethane foam insulation and a High Density Polyethylene (HDPE) jacket. The pipeline was installed in 2004. b. The Affected Segment means the Waiau Pipeline, which transports low sulfur fuel oil from Barbers Point Tank Farm (BPTF) to the Waiau Power Plant in Pearl City, Hawaii, with approximately 12.7 miles of in-service pipeline mileage. The Affected Segment runs alongside the Hawaii Highway 1 in two short sections, and it crosses the light rail system at various points along the 12.7 miles of in-service pipeline mileage. The Affected Segment is located in a High-Consequence Area (HCA) due to its proximity to the populations of Pearl Harbor and Honolulu, as well as its proximity to Unusually Sensitive Area (USA) ecological resource. II. Corrective Measures 13. In-Line Inspection (ILI) Assessment. HECO shall conduct ILI surveys, and investigate, through calibration digs and anomaly assessments, all anomalies that exceed more than 35% of the nominal wall thickness. The tool used for the first ILI survey must utilize magnetic flux leakage (MFL) technologies. The second ILI survey must utilize ultrasonic technologies. Subsequent ILI surveys will alternate technologies between MFL and ultrasonic technologies (UT). a. HECO must conduct the first MFL ILI survey required by this Agreement no later than 60 days after the issuance of a Consent Order. HECO may submit#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 6CPF No. 5-2018-6001S Page 4 b. c. d. written documentation of the MFL ILI survey completed on or about April 17, 2018 to the Director to satisfy this requirement. HECO must conduct the first UT ILI survey required by this Agreement no later than 12 months after completion of the first MFL ILI survey required by this Agreement. All subsequent ILI surveys required by this Agreement shall be conducted at intervals not exceeding 30 months, but at least once every two calendar years. The results (draft and final reports) of the ILI surveys required by this paragraph must be sent to the Director within 30 days of receipt of each ILI vendor's report by HECO. Documentation of all subsequent anomaly assessments and associated repairs, must be sent to the Director within 30 days following completion of each anomaly assessment, and or repair. 14. Patrols. HECO must patrol the entire length of the Affected Segment at least one time per week. The patrols required by this paragraph shall continue until the Director provides written notification to HECO that the patrols are no longer required. 15. Risk Model. HECO shall develop a corrosion risk model of the Affected Segment and submit the risk model to the Director for review and written approval within 90 days of the issuance of this Consent Agreement. The risk model required by this paragraph must incorporate all susceptible corrosion risk factors such as terrain, water and road crossings, AC/DC interference, soil pH, standing water locations, coating failure, and all verified data from previous calibration digs and ILI results. The risk model required by this paragraph shall be incorporated into HECO’s integrity management plan and further developed with future ILI and integrity assessments. This model shall identify the highest areas of susceptible corrosion and HECO shall use the data to mitigate or investigate those areas. 16. Calibration Digs for Anomalies Between 11% and 35% of the Nominal Wall Thickness. In addition to the calibration digs required by paragraph 13 of this Agreement, HECO must investigate, through calibration digs and anomaly assessments, at least four anomalies on the first MFL run required by paragraph 13 of this Agreement that exceed 10% of the nominal wall thickness but do not exceed 35% of the nominal wall thickness. If there are more than four anomalies between 11% and 35% of the nominal wall thickness identified on the first MFL run required by paragraph 13 of this Agreement, the calibration digs and anomaly assessments required by this paragraph shall be conducted pursuant to the risk model required by paragraph 15 of this Agreement. 17. Documentation. HECO must retain on file documentation of compliance and supporting data to all Items above until this Consent Agreement is terminated. HECO must provide copies of documentation referenced in this paragraph upon written request by the Director. 18. Quarterly Reports. HECO must submit quarterly reports to the Director that: (1) include analysis of all available data and results of the testing and evaluations required by this Agreement; and (2) describe the progress of the repairs and other remedial actions being undertaken. The first report will be due 45 days from issuance of a final Consent Order.#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 7CPF No. 5-2018-6001S Page 5 19. Extensions of Time. The Director may grant an extension of time for compliance with any of the terms of the Agreement upon a written request timely submitted demonstrating good cause for an extension. The Director shall respond in writing to any such request. 20. Appeals. Respondent may appeal any decision of the Director to the Associate Administrator for Pipeline Safety. Decisions of the Associate Administrator will be final. III. Review and Approval Process 21. With respect to any submission under Section II (Corrective Measures) 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, reasonable conditions, (c) disapprove, in whole or in part, the submission, or (d) any combination of the foregoing. If the Director approves, approves in part, or approves with conditions, HECO will take all action as approved by the Director, subject to Respondent's right to invoke the dispute resolution procedures in Section IV with respect to any conditions the Director identifies. If the Director disapproves all or any portion of the submission, the Director will provide HECO with a written notice of the deficiencies. Respondent will correct all deficiencies within the time specified by the Director and resubmit it for approval. IV. Dispute Resolution 22. The Director and HECO will informally attempt to resolve any disputes arising under this Agreement. If Respondent and the Director are unable to informally resolve the dispute within 15 days of submittal of Respondent’s invoking dispute resolution, HECO may request in writing, within 10 days thereafter, a written determination resolving the dispute from the Associate Administrator for Pipeline Safety providing all information that Respondent believes is relevant to the dispute. If the request is submitted as provided herein, the Associate Administrator will issue a final determination in writing. The existence of a dispute and the PHMSA's consideration of matters placed in dispute will not excuse, toll, or suspend any term or timeframe for completion of any work to be performed under this Agreement during the pendency of the dispute resolution process except as agreed by the Director or the Associate Administrator in writing. V. Enforcement 23. This Agreement, as adopted by the Consent Order, is subject to all enforcement authorities available to the PHMSA under 49 U.S.C. § 60101, et seq., and 49 C.F.R. Part 190. All work plans and associated schedules set forth or referenced in Section II will be automatically incorporated into this Agreement and are enforceable in the same manner. VI. Recordkeeping and Information Disclosure 24. Unless otherwise required in this Agreement, HECO 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#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 8CPF No. 5-2018-6001S Page 6 deliverables required to be submitted to PHMSA pursuant to this Agreement, Respondent 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. Respondent must mark the claim of confidentiality in writing on each page, and include a statement specifying the grounds for each claim of confidentially. PHMSA determines 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. VII. Effective Date 25. The term “Effective Date,” as used herein, is the date on which the Consent Order is issued by the Associate Administrator incorporating the terms of this Agreement. Unless specified to the contrary, all deadlines for actions required by this Agreement run from the Effective Date of this Consent Order. VIII. Modification 26. The terms of this Agreement may be modified by mutual agreement of the Parties. Such modifications must be in writing and signed by both parties. IX. Termination 27. This Agreement shall remain in effect until the Corrective Measures are satisfied, as determined by the Director, or HECO obtains a special permit for the Waiau pipeline that addresses the safety concerns identified in the Notice and the final results of the January 9, 2018 accident investigation. The Consent Agreement shall not terminate until the Director confirms, in writing, that the Consent Agreement is terminated in accordance with this paragraph.. Nothing in this Agreement prevents Respondent from completing any of the obligations earlier than the deadlines provided for in this Agreement. X. Ratification 28. 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. 29. The Parties hereby agree to all conditions and terms of this Agreement.#

520186001S_Consent Order and Agreement_05182018_text.pdf, page 9CPF No. 5-2018-6001S Page 7 For Hawaiian Electric Company, Inc. (Respondent): ___________________________________ ________________________ Date For PHMSA: ___________________________________ Kim West Director, Office of Pipeline Safety PHMSA Western Region U.S. Department of Transportation ________________________ Date#