U.S. agency proposes nearly $1 million penalty on Colonial for safety violations

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A plastic bag covering a fuel pump to signal no gas is available is seen at a Circle K gas station after a cyberattack crippled the biggest fuel pipeline in the country, run by Colonial Pipeline, in Lakeland, Florida, U.S. May 14, 2021. REUTERS/Octavio Jones

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May 5 (Reuters) - The top U.S. pipeline regulator on Thursday said it proposed a nearly $1 million penalty for management failures at energy pipeline operator Colonial Pipeline Co that contributed to widespread fuel shortages along the U.S. East Coast in 2021.

A cyberhack shut down Colonial's 5,500-mile (8,900-km) pipeline for five days last year, disrupting supplies of gasoline, diesel and jet fuel to thousands of stations and airports. read more

Colonial had failed to plan and prepare for a manual restart and shutdown operation, which contributed to the national impacts after the cyber attack, said the regulator, the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), in a notice.

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"Colonial Pipeline's ad-hoc approach toward consideration of a 'manual restart' created the potential for increased risks to the pipeline's integrity as well as additional delays in restart, exacerbating the supply issues and societal impacts," the regulator said.

PHMSA also issued an order requiring the pipeline operator to test and verify its internal communication plan for manual operation and develop a procedure to verify correct alarm set-points values amongst other tests.

Colonial said in a statement it looked forward to engaging with PHMSA to resolve the matters raised, adding that the notice was the first step in a multi-step regulatory process.

"Our coordination with government stakeholders was timely, efficient and effective as evidenced by our ability to quickly restart the pipeline in a safe manner five days after we were attacked, which followed localized manual operations conducted before the official restart," a spokesperson said.

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Reporting by Kavya Guduru in Bengaluru; Editing by Richard Pullin

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