E6-2350. Finding of No Significant Impact and Summary Environmental Assessment Valero Logistics LP Pipeline in Hidalgo County, TX

The proposed action is to issue a Presidential Permit to Valero Logistics Operations LP (“Valero”) to construct, connect, operate and maintain an 8-inch outer diameter pipeline to convey light naphtha (“naphtha”) across the border from Mexico to the Valero Terminal in Hidalgo County, Texas. On behalf of Valero, URS Corporation of Austin, Texas, prepared a draft Environmental Assessment under the guidance and supervision of the Department of State (the “Department”). The Department placed a notice in the Federal Register (70 FR 36225 (June 22, 2005)) regarding the availability for inspection of Valero's Presidential Permit application and the draft Environmental Assessment.

Numerous Federal and state agencies independently reviewed the draft Environmental Assessment. They include: The United States Section of the International Boundary and Water Commission, the Department of Transportation, the Department of the Interior, the U.S. Fish and Wildlife Service, the Environmental Protection Agency, the Federal Emergency Management Administration, the U.S. Department of Homeland Security, the Department of Defense, the Department of Commerce, the Council on Environmental Quality, the Texas Railroad Commission, the Texas Historical Commission, the Texas Parks and Wildlife Department, and the Texas Commission on Environmental Quality. Prior to publishing the notice, Valero hosted a public meeting on behalf of the Department of State, where public input on the project was received. The principal concern expressed by the public at that time was whether there would be any tank-vehicle transfers at Valero's Edinburg terminal as a result of this project, which Valero representatives assured the public would not be the case. Valero also hosted a follow-up meeting with area residents to address concerns raised during the public meeting about the general operation of the Edinburg terminal. However, no formal written comments from the public were submitted on the draft Environmental Assessment. Comments received from the Federal and state agencies were responded to directly or by incorporation in the analysis contained in the draft Environmental Assessment.

No additional mitigation measures beyond those proposed in the draft Environmental Assessment have been proposed.

This summary, together with the comments submitted by the Federal and state agencies on the project, the responses to those comments, and the draft Environmental Assessment, as amended to take into account those comments, together constitute the Final Environmental Assessment of the proposed action by the Department under the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq., the Council on Environmental Quality (CEQ) regulations implementing NEPA, 40 CFR 1501.3, 1508.9, and the Department's NEPA regulations, 22 CFR 161.8(b), 161.9(a)(2).

Summary of the Environmental Assessment

I. The Proposed Project

The Department is charged with the issuance of Presidential Permits for the construction, connection, operation and maintenance of pipelines crossing international boundaries. See Executive Order 13337 of April 30, 2004, 69 FR 25299 (2004). Valero has applied for a Presidential Permit to construct, connect, operate and maintain an 8-inch outer diameter pipeline (“the Valero Burgos Pipeline”) at the U.S.-Mexico border. The proposed pipeline would connect the Valero terminal in Edinburg, Texas, with the Petroleos Mexicanos (PEMEX) Burgos gas plant near Reynoso in the state of Tamaulipas, Mexico. The U.S. portion of the project consists of approximately 34 miles of new pipeline from a location on the Rio Grande southeast of Penitas, to the Valero terminal approximately 6 miles north of downtown Edinburg. The Mexican portion consists of approximately 20 kilometers of new pipeline from the expanded Burgos gas plant near Reynosa, Tamaulipas, Mexico to the Rio Grande crossing.

At the Valero Edinburg Terminal, naphtha would be stored in a new dedicated 80,000 barrel naphtha storage tank. Naphtha would be pumped from this tank through a new pipeline currently being built by Valero to link its Edinburg and Harlingen terminals, and to link its Harlingen terminal with the Port of Brownsville.

Over half of the route of the proposed Valero Burgos Pipeline from the Rio Grande to the Edinburg terminal would adjoin existing pipeline rights-of-way, minimizing the amount of additional environmental impact. The routing has also been designed to avoid, to the maximum extent possible, populated areas of Hidalgo County.

The Valero Burgos Pipeline is being designed to transport up to 24,000 barrels (1 million gallons) of naphtha daily from Mexico to the United States.

II. Alternatives Considered

The Department considered several alternatives to the proposed Burgos Valero Pipeline. These are described in detail in the Environmental Assessment, as amended, and in a summary fashion below.

No Action Alternative: The “no action” alternative would involve delivery of naphtha to the Port of Brownsville via tanker trucks. There are two realistic options for this delivery. Under one option, the product could be transported through Reynosa to cross the Rio Grande near McAllen, and then proceed approximately 56 miles on U.S. highways to the Port of Brownsville. Under a second option, product would travel approximately the same distance on the Mexico side of the border, crossing one of the commercial bridges near Brownsville.

While these “no action” alternatives would avoid the minor and/or temporary noise and air quality impacts associated with the construction of the pipeline, truck transport is not a preferred alternative. Up to 120 tanker trucks daily would be needed to transport naphtha from the Burgos gas plant to the Port of Brownsville in quantities comparable to the expected daily capacity of the proposed pipeline.

This would result in (i) exhaust emissions of nitrogen oxides (NO_X), carbon dioxide (CO₂), sulfur dioxides (SO₂), volatile organic compounds (VOC), and particulate matter (PM) that exceed that of pipeline transport; (ii) extra loads on busy highways and road bridges; (iii) transportation-related environmental degradation, such as noise impacts and water contamination related to operation of a tanker truck fleet, including fueling and maintenance; and (iv) a continuous safety risk in transportation corridors, including increased exposure to emissions, spills, and accidents during truck loading and unloading operations.

The tanker trucks would produce a substantially higher regional diesel exhaust burden, resulting in emission of 77 tons per year of NO_X, 22 tons per year of CO₂, 238 tons per year of PM, 241 tons per year of VOC, and 3 tons per year of SO₂.

Routing Alternatives: Other potential pipeline routings to transport naphtha to Brownsville included: (1) A 75-mile pipeline on the Mexico side of the border, from the Burgos terminal eastward to an existing PEMEX LPG terminal west of Matamoros, where it would be connected to a currently unused Rio Vista Energy Partners pipeline that connects the PEMEX terminal and the Rio Vista LPG terminal at the Port of Brownsville; and (2) a pipeline crossing of the Rio Grande near the proposed Valero Burgos Pipeline crossing, and then a pipeline to transport the naphtha from the Rio Grande crossing to Brownsville following, to the extent possible, the U.S. 281 corridor eastward before deviating to the north of Brownsville to enter the Port of Brownsville from the north, requiring approximately 85 miles of new pipeline construction on the U.S. side of the border.

These options would both have resulted in significantly higher environmental impacts and costs for product transport than the proposed interconnect to the Valero system. In the Rio Grande Valley, there are substantially more environmentally sensitive sites closer to the river that would be affected by such routings, including U.S. National Wildlife Refuge holdings, population centers, and higher quality irrigated croplands.

With respect to any decision on whether to move forward with the pipeline from the Burgos Gas Plant to the Valero Edinburg Terminal, linking to the Valero system for transport to the Brownsville Terminal, there is a tradeoff between pipeline length and potential impacts to population sensitive areas.

A shorter pipeline from the Rio Grande crossing to the Valero Edinburg Terminal would be approximately 24 miles in length, or approximately 2/3 the length of the proposed Valero Burgos pipeline. As this alignment would run through or near to a number of municipalities, including Palmview, Mission, Alton, Palm Hurst, and Edinburg, it was discarded early in the analysis process in favor of the proposed 34-mile route which only crosses 1 mile of metropolitan area immediately prior to entering the Valero Edimberg Terminal. In addition, any attempts to create a more direct routing would result in much greater potential impacts to population sensitive areas, water quality sensitive areas, and biologically sensitive areas. The proposed route would maintain the maximum buffer possible between the pipeline and population sensitive areas and would follow existing pipeline rights-of-way to the extent possible. These benefits more than offset the marginally increased risks associated with having a longer pipeline.

III. Summary of the Assessment of the Potential Environmental Impacts Resulting From the Proposed Action

A. Impacts of Construction and Normal Operation of the Pipeline

The Environmental Assessment, as amended, contains detailed information on the environmental effects of the Valero Burgos Pipeline and the no-action alternative. None of the routing alternatives was considered to have the potential to reduce impacts to any environmentally sensitive sites. In particular, the Environmental Assessment analyzed the impacts of construction and normal operation of the pipeline on air and sound quality, topography, water resources, soils, mineral resources, biological resources, land use, transportation, socioeconomic resources, and recreation and cultural resources. Based on the detailed environmental assessment and information developed by the Department and other federal and state agencies in the process of reviewing the draft Environmental Assessment, the Department concluded the following:

i. Environmental Concerns: There would be no impacts to or on, inter alia, geology and topography, groundwaters, the heritage status of the Rio Grande, wetlands, mineral resources, and recreation resources. There would be insignificant, minor or temporary impacts to or on, inter alia, noise, surface waters and canals, soils, and protected biological resources. Finally, there would be net benefits to air quality through the elimination of exhaust emissions of CO₂, NO_X, VOC, SO₂, and particulate matter that would be generated when tankers move fuel across the border.

ii. Transportation and Land Use: The Valero Burgos Pipeline does not conflict with existing land use plans for Hidalgo County or Edinburg. By maximizing the use of existing fence line and pipeline corridors, the pipeline would avoid splitting parcels and thereby complicating future development, and would minimize new impacts. The pipeline would represent a net positive benefit to local transportation by removing additional truck traffic from roadways.

iii. Homeland Security: There would be net benefits to homeland security because the pipeline would reduce the truck traffic volume at border crossings, thereby resulting in fewer trucks that would need to be searched at the border for smuggled individuals and/or weapons. Valero has completed an evaluation of the infrastructure for the proposed Valero Burgos Pipeline under the principles outlined by the National Infrastructure Protection Center for protecting critical assets, and a determination has been made that the Valero Burgos Pipeline would not meet the criteria for a critical asset;

iv. Irreversible and Irretrievable Commitments of Resources: There would be a commitment of land resources that would need to be dedicated to the new pipeline right-of-way. At the same time, the operation of the pipeline would represent a critical part of a system that would greatly reduce the energy requirements for transporting naphtha from the Burgos gas plant to the Port of Brownsville.

Between mile point 4 and 6 of the proposed pipeline, the right-of-way would divert 1200 feet to the west to avoid crossing an operational rock quarry in Hidalgo County, thus avoiding impacts to the future productive capacity of the quarry.

v. Cumulative Effects: The pipeline would expand an existing pipeline corridor traveling north from the Rio Grande. The corridor currently is occupied by two natural gas pipelines, and operation of the naphtha line within the corridor would represent a limited increase in potential risks from pipeline accidents in this area.

A more detailed analysis of each of these factors is provided in the Environmental Assessment, as amended, which addresses issues raised by Federal and state agencies and the public.

B. Impacts Due to Corrosion of the Pipeline or Damage From an Outside Agent

The Environmental Assessment, as amended, also contains detailed assessment of the potential environmental effects of the Valero Burgos Pipeline arising from pipeline integrity issues. A release of naphtha from the pipeline, though improbable, would have very different impacts from those associated with construction and normal operation.

i. Human Health and Safety Concerns: Potential human health and safety impacts that may result from a release of hazardous liquids include: (i) Fire or explosion from refined product liquid and/or vapors; (ii) short-term exposure to hazardous vapors resulting from a refined product release; (iii) long-term exposure to hazardous vapors resulting from contaminated soils, ground water, or surface water following a release of refined product; and (iv) exposure to toxic constituents of refined product from ingestion.

The potential risks to human health and safety would be most concentrated in areas where the pipeline would be close to residences, businesses, or transportation corridors. Only six short segments of the proposed Valero Burgos Pipeline would be located in areas where a pipeline accident could result in risk to nearby residences and businesses. A large portion of the pipeline would be located in rural areas where no development is likely in the near future.

Any mode of transporting hazardous liquids shares these potential safety impacts. Since the accident rate for pipelines on a product-mile basis is in orders of magnitude lower than that of tanker or rail transport, the U.S. Department of Transportation (DOT) considers pipeline transport to be the safest transportation for refined product. As previously discussed, since the Valero Burgos Pipeline would traverse fewer areas where impacts to human health and safety are likely to result from a major accident than the “no-action” alternative, the pipeline would result in substantially lower risks to human health and safety than the “no action” alternative. Alternative pipeline routings would require significantly more new pipeline construction through populated areas, either along the Rio Grande (alternative routings to connect the Burgos gas plant and the Port of Brownsville), or across portions of Mission and Edinburg (alternative alignments from the Rio Grande crossing to the Valero Edinburg Terminal).

This pipeline project proposal incorporates many safety features to address health and safety concerns. These are presented as mitigation measures.

ii. Environmental Concerns: The air quality impacts from an accidental product release from the Valero Burgos Pipeline would be short term and would not constitute a significant impact. Significant groundwater contamination would be unlikely to occur from a leak, because local groundwater sources are at a depth where they would not be impacted rapidly by a release, allowing time for emergency response and cleanup of contaminated soils. A release resulting in fire would cause damage to vegetation in the immediate vicinity of the release, but would be unlikely to result in widespread fires because of the types and distribution of vegetation.

iii. Possible Conflicts Between the Valero Burgos Pipeline and the Objectives of Federal, Regional, State and Local Use Plans, Policies and Controls for the Area Concerned: The Valero Burgos Pipeline project does not conflict with the objectives of any Federal, Regional, or local land use plans, policies, or controls.

iv. Probable Adverse Environmental Effects Which Cannot Be Avoided: There would be a long-term increase in health and safety risk in the immediate vicinity of the pipeline due to the nature of the product being transported, which represents a shifting of risk from other portions of the Rio Grande Valley (including northern Mexico and southern Texas) that would handle substantial truck transport of product under the “No Action” alternative. Any potential impacts would be mitigated by the measures described below, which are proposed to prevent or mitigate potentially adverse environmental impacts and which Valero intends to take.

v. Cumulative Effects: There are two important considerations with respect to cumulative impact analysis for the Valero Burgos Pipeline. The first is the cumulative effect of risks to the pipeline, and correspondingly to those living or working near to the pipeline, due to potential accidents with respect to other pipelines in the vicinity. For the first 14 miles the right-of-way for the Valero Burgos Pipeline would largely adjoin the rights-of-way for two existing natural gas pipelines. The second is the cumulative effect of the increased overall risk to surrounding populations from an industrial accident occurring along the right-of-way that results in the release of naphtha from the Valero Burgos Pipeline, industrial sources or both. These represent two different scenarios. In the first, consider that each individual pipeline has a statistical probability of some sort of accident. For a person in the vicinity of the pipeline, there is a cumulative risk representing the summation of the probability of each individual pipeline having an accident. On this basis, if x, y, and z represent the probability of accident for each line, then some function of x+y+z will represent this cumulative risk, and the proposed pipeline can be said to increase the cumulative risk by “z”. The second case acknowledges that along with the independent risk (z) of an accident along the proposed pipeline, there is some additional risk (a function of x and y) resulting from its proximity to two other pipelines which could have accidents resulting in a rupture of the proposed pipeline. Under most pipeline studies this risk is acknowledged, but not quantified, because such events have occurred so rarely as to be statistically insignificant in any assessment of risk.

A study of U.S. DOT databases has not revealed any cases where a below ground pipeline has had an accidental release due to an unrelated accidental release, fire, or explosion of a nearby buried pipeline. No portions of the Valero Burgos pipeline would be above ground in the vicinity of any exposed portions of the adjoining pipelines.

Over much of the alignment there are no heavy industrial activities, particularly those involving hazardous liquids or gases, which would create a cumulative impact in combination with the Valero Burgos Pipeline. These factors all led to a no significant cumulative impacts assessment.

C. Environmental Justice/Socio-Economic Concerns

The environmental justice assessment for this project analyzed the impact of the potential human, health, socioeconomic, and environmental effects of the Valero Burgos Pipeline on minority and low-income populations. The population of Hidalgo County is heavily minority. To the extent that minority and low-income populations reside in the vicinity of the pipeline, they risk exposure to the insignificant, temporary and/or minor potential human health and environmental effects that are discussed in detail in the Environmental Assessment, as amended, and summarized above. These include temporary, minor construction related noise and threats to human safety due to fire or accidental product release.

These risks, however, must be weighed against the benefits that would result from the removal of tanker trucks as the primary mode of naphtha transportation. The removal of tanker trucks from roads, particularly border crossings, would increase safety at these highly sensitive locations and route naphtha away from more populous areas of town while in transit. Emissions of hazardous air pollutants during naphtha transfer operations within the lower Rio Grande airshed would be reduced. It is also worth noting that due to the overall demographic makeup of the lower Rio Grande Valley, all of the alternatives for consideration, including the “no-action” alternative of tanker truck transport of naphtha, would impact primarily low-income and minority populations. There is no evidence to suggest that minority or low-income populations would experience disproportionate adverse impacts as a result of the construction and operation of the Valero Burgos Pipeline. To the contrary, since most of the Valero Burgos Pipeline is situated away from areas where human health and safety could be adversely impacted, while truck transport necessarily takes place in areas where human health and safety are at risk, the pipeline would result in lower risks to the overall health and safety of minority and low-income populations than the “no-action” alternative.

IV. Prevention and Mitigation Measures

In order to control risks associated with outside force, damage, corrosion and leaks, Valero has undertaken or intends to undertake the prevention and mitigation measures listed below. Valero has or will:

• Bury the pipeline a minimum of 3 feet below grade.
• Place and maintain prominent warning markers at all crossings and property lines along the pipeline.
• Participate in all applicable one-call notification systems and coordinate with the local emergency planning committee.
• Conduct regular right-of-way drive-overs or over-flights in order to identify potential pipeline encroachments and unauthorized activities.
• Ensure that a Valero representative is physically present anytime there is construction activity within the pipeline right of way.
• Participate in on-going public education initiatives stressing pipeline safety and damage prevention.
• Use factory-applied fusion-bonded epoxy coating on all pipes.
• Use field-applied coating on all welded joints.
• Conduct annual surveys to determine effectiveness of corrosion control.
• Use a certified impressed current cathodic protection system.
• Use a heavy wall pipe at waterway, road, and rail crossings.
• Use high resolution internal inspection tools (i.e., pigs) at least every five years.
• X-ray all girth welds completely.
• Use pipe manufactured at an ISO 9000-certified mill.
• Hydro test pipe in place to 125% of its maximum allowable operating pressure for 8 hours.
• Require that material specification, design, and construction meet or exceed all applicable standards and codes established by API, ASME, DOT/OPS, and TRC.
• Perform comprehensive construction and installation inspection.
• Provide continuous 24-hour monitoring of the Valero Burgos Pipeline from a dispatch and control center, with a crew of technicians available on a rapid response basis.
• Use computers to identify significant operational deviations, and to set off appropriate alarms.
• Provide on-going training and performance certification of employees responsible for pipeline operations and maintenance, as required by the Operator Qualification regulation of DOT.
• Maintain a SCADA link via satellite to the Valero control center in San Antonio.

V. Conclusion: Analysis of the Environmental Assessment Submitted by the Sponsor

On the basis of the Environmental Assessment, as amended, the Department's independent review of that assessment, information developed during the review of the application and Environmental Assessment, comments received by the Department from Federal and state agencies, and measures that Valero has or is prepared to undertake to prevent or mitigate potentially adverse environmental impacts, the Department has concluded that issuance of a Presidential Permit authorizing construction of the proposed Valero Burgos Pipeline would not have a significant impact on the quality of the human environment within the United States. Accordingly, a Finding of No Significant Impact is adopted and an environmental impact statement will not be prepared.

The Final Environmental Assessment addressing this action is on file and may be reviewed by interested parties at the Department of State, 2200 C Street NW., Room 3535, Washington, DC 20520 (Attn: Mr. Charles Esser, Tel. [phone]).

Dated: January 26, 2006.

Stephen J. Gallogly,

Director, Office of International Energy and Commodity Policy, Department of State.