PHMSA Pipeline Safety Programs Update

1. PHMSA Pipeline Safety Programs Update Office of Pipeline Safety 2007 Western Regional Gas Conference Tempe, Arizona August 21, 2007

2. Presentation Overview • Basic Message • Things We Worry About, Not Covered Today • Pipeline Soapbox • Government’s Challenging Context • Regulatory Philosophy • Performance Equation • Regulatory Approach Menu • PHMSA Programs Update • Heavy Focus on DIMP

3. Basic Message • Your Work is Vital to The Country • Your performance is watched closely and that’s growing in relation to your criticality • Good people are helping on many fronts • Times Have Changed – For the Better • Incrementalism is out and performance is in • You Have Strong Representation • Both at State and industry level • Your Voice Has Been Heard and Heeded • Recognize there are constraints

4. Things We Worry About • Transportation Fuels and Products Supply • Capacity, constraints to growth, new fuels, and the market influence on prudent planning • Natural Force Events • Made-Made Threats • Community Engagement and Education • ROW Encroachment • Enforcement Transparency

5. Pipeline Soapbox • Energy is our Lifeblood and a Birthright • Our Economic Mobility is Fueled by Energy • Energy Demand is Growing but Changing • Growing Criticality of Pipelines in a Rate Constrained Day • Pipelines and the Environments They Cross Are Unique • Regional Constraints in Capacity • Supply and Consumption Centers Are Shifting • Demographics Are Changing • Pipelines Are Increasingly Interdependent with Other Utilities • Potential Consequences of Long-Term Disruptions Are Growing • BANANA Cake – Confidence is Improving but Strained

6. Government’s Challenging Context • Change Averse (i.e. – slow) Requirements • Partisan Environment with Myopic Interests • Growing Competition for Resources • Both within government and within industry • Aging Workforce – Little Time for Training • Rapidly Evolving Technology and Knowledge • Performance Based Budgeting and Evaluation • Age of metrics v. Inability to gather sufficient data • Continually Changing Face of Pipeline Industry

7. Regulatory Philosophy at PHMSA • Goals: • Safe, clean & reliable energy transportation • Objective: • Improve the performance of this critical infrastructure • Overall Strategy: • Positively impact the performance of individual operators and industry direction • One size does not fit all and can misallocated resources • Reliance on systematic management for performance • Deliberative, risk-based, data driven decisions • Commitment to continuous improvement

8. Performance = R / S + C.O. + B.C. • P = Performance • Quantitative and qualitative • Must factor contributions from people, processes, and technology • All are critical and are heavily intertwined • All are important layers of defense in risk reduction and loss control • R / S = Regulations and Consensus Standards • Regulations as minimum floor fleshed out/improved by standards • Includes waivers and interpretations • Development must be transparent, inclusive, and communicative • C.O. = Compliance Oversight • Inspections, audits, accident investigations, use of enforcement toolkit • Credibility is important to both government and industry • B.C. = Beyond Compliance • Excavation damage prevention, emergency preparedness, research & Development, Partnerships, Communications, ROW Management

9. Regulatory Approach Menu • Command and Control (aka, Prescriptive) • Performance • Management • Composite – A Blend of All of the Above • Pros and Cons to Each Approach • For both the industry and the regulator • A blend of all approaches is working for PHMSA • Requires data, documentation, and active assessment

10. Inspection Approach • PHMSA Uses a Mix of Inspection Approaches • Ensure compliance with fundamentals • Standard inspections • Operations and maintenance manual reviews • Drive performance through systematic approaches based in continuous improvement • Integrity Management • Operator Qualification • Defensible risk ID, assessment, and mitigation are not only important but essential to inspection success • Documentation is a necessary evil/ingredient

11. PHMSA Programs Update • Process • Distribution Integrity Management – Only Rule Discussed in Depth • Transmission Integrity Management • LNG Community Preparedness and Siting Standards Adequacy • People • Operator Qualification • Drug and Alcohol Programs • Control Room Management / Fatigue Management • Public Awareness • Emergency Responder Training and Outreach – NASFM • Damage Prevention: CGA, State Efforts, and PHMSA Support • Technology • Maximum Allowable Operating Pressure • Research and Technology Development/Demonstration

12. Distribution Integrity – The Rule • Enterprise Approach to Rule Development • In Rulemaking Now • NPRM publication ~ Nov-Dec 2007 • GPTC Guidelines pending NPRM publication • DIMP Final Rule ~ Summer 2008 • EFV Requirement Effective 6/1/2008 • DIMP Effective Date ~Early 2010

13. Why DIMP? • Distribution Incidents Continue to Occur – Recently Trending Upward, Resulting in Significant Share of Consequences • Effecting a Significant Reduction in Pipeline Accidents, Deaths, and Injuries Cannot be Done Without Addressing Distribution • Integrity Management Principles Can Help Operators Focus on/Control System Risks • U.S. Congress Required It – PIPES Act of 2006

14. Pipeline Accident Frequency – 1999 - 2006 13% by operators of unknown service size 5% by operators with less than 12000 services 81% by operators with equal or more than 12000 services 36% 27% 36% Source: PHMSA Liquid Accidents and Gas Incidents Reports Data as of 2/15/2007.

15. Major Issues in Rule Development • Excess Flow Valves (EFVs) • Development/Use of Industry Guidance • Leak Management • Performance Measures • Reportable at the national level • Operator specific

16. Excess Flow Valves (EFVs) • EFVs Are One Mitigation Option • When Properly Specified & Installed, EFVs Function As Designed • Fire Fighters Strongly Supported Mandatory Installation Of EFVs On New Services • Pipes Act 2006 Requires EFV Installation • NARUC Resolution GA-4 Emphasizes Caution In Promulgating New Requirements

17. Guidance – Overview • Larger Operators Want Choices; Smaller Operators Require Clarity - Not Choices • GPTC Asked To Develop Guidance Describing Candidate Approaches To Implement Such A Regulation • GPTC Divisions Approved The Draft Guidance In November ’06. Guide Will Publish For Public Comment After The NPRM • APGA, With PHMSA Funding, Is Developing A Model DIMP Plan (SHRIMP) For The Small Operators • PHMSA Proposed Rule Will Include Even Simpler Guidance (Baby SHRIMP) For MM And LPG Operators

18. Guidance – “SHRIMP” • APGA’s SIF To Develop More Detailed Guidance For Smallest Operators • Simple, Handy, Risk-based, Integrity Management Plan (SHRIMP) • Turbo Tax-like Approach • Flexibility Traded Off For Simplicity • Development Planned For 2007-2008

19. Leak Management • Require Process For Managing Leaks • Locate the leak • Evaluate its severity • Act appropriately to mitigate the leak, • Keep records • Self-Assess to determine if additional actions are necessary to keep the system safe • Require Better National Data Reporting & Expansive Analysis By Operator • National reporting changed to focus on hazardous leaks removed & pipe materials • Guidance to be developed on operator-specific measures and analysis

20. Performance Measures • Both Reportable, National Measures & Operator-specific Measures • National-Level • Incidents & normalized incidents • Excavation damages per 1000 tickets • Hazardous leaks removed and normalized • EFVs installed • Operator-Specific • Tailored to operator circumstances • Measures to clarify management effectiveness in addressing and reducing key identified threats • GPTC Guidance will provide choices

21. Elements of an Operator’s Distribution Integrity Management Program • Operators Should Have: • Written Plan • Understanding of their infrastructure • Process to identify the threats • Process to assessing the risks • Program/plans to address the threats and risks • Process to monitor performance and adjust approach as needed • Plan for reporting results

22. Elements of Effective Statewide Excavation Damage Prevention Programs • Enhanced Communications between operators and excavators • Fostering support & partnership of all stakeholders • Operator’s use of performance Measures • Partnership in employee training • Partnership in public education • Dispute resolution process • Fair and consistent enforcement of the law • Use of technology to improve process • Analysis of data to continually evaluate/improve program effectiveness

23. Regulatory Outreach • PHMSA Advisory Bulletin • Industry/Public Meeting(s) During The Rule Comment Period – Maybe Web-Based Overview • APGA Working To Assist Small Operators • Planning 12 Regional Workshops • States Will Need To Reach Out To Master Meter And LPG Operators • PHMSA Will Support State Operator Meetings • Community Assistance And Technical Services (CATS) • PHMSA Website • PHMSA Training &Qualifications Program Will Provide Training To States and Outreach to Operators

24. The End • Closing Thought • Leadership Matters – You are leaders • Make a difference with your system, your people, and your customers and it will pay, as well as feel good • Thanks for Your Time • More Importantly – Thanks for Taking Time to Do It Well