Distribution Integrity Program Structure August – 2008 1

Should be considered food for thought Our objective of this presentation is to facilitate consensus thinking within the industry as to a methodology that is scalable to any size operator regardless of any state specific requirements. This presentation: Should be considered food for thought Represents one companies perspective Has NOT been reviewed by PHMSA I will be trying to watch Jeff and Lane If you see them frown… please get my attention Overview Program Positions Processes Record Keeping Summary Can we site a reference to this intent? 2

The DIMP NPRM is different from past Overview Program Positions Processes Record Keeping Summary The DIMP NPRM is different from past rules in that it considers the fact that distribution systems may differ in a wide variety of ways so that a “one size fits all” approach would be ineffective. The NPRM: Is high level Is flexible Is risk driven Which allows YOUR Program to fit YOUR system And allows for performance based decisions 3

Proposed Rule Requirements Contained in GPTC: Overview Program Positions Processes Record Keeping Summary Proposed Rule Requirements Contained in GPTC: Knowledge Threats Risk Mitigation Performance Measurement Evaluation / Improvement Reporting Can we site a reference to this intent? 4

Proposed Rule Requirements NOT Overview Program Positions Processes Record Keeping Summary Proposed Rule Requirements NOT Contained in GPTC Plastic Pipe Failure Reporting Prevention Through People Deviation of Inspection Frequencies These will not be addressed in this presentation as they seem to be the components with the most disagreement. However, the approach we are going to talk about today will apply to whatever is contained in the final rule. Can we site a reference to this intent? 5

Overview Program Positions Processes Record Keeping Summary “Distribution Integrity does not have to be more work…… it simply needs to be more organized work”

More Organized Work can be Overview Program Positions Processes Record Keeping Summary More Organized Work can be accomplished thru the Implementation of a Formalized Program Program Formalization supports: Clarification of your approach Consistent Implementation The ability to Demonstrate Performance A Baseline from which to Evaluate A Baseline from which to Improve

The Distribution Integrity Program Can Be Formalized by Creating “Procedures” are the engineering standards / SOP / guidance that provide specifics as to “HOW” the tasks / steps will be accomplished Procedures Processes Positions “Processes” are “WHAT” you schedule, implement, track and report. They need to be designed to capture the results of you integrity activities, providing the information YOU need to evaluate your program in order to determine if improvement (enhancement) is necessary. For more detail as to what might be included as position in your program, see the elemental examples presented below. “Positions” are the foundation of the program, detailing Your interpretation of the Rule.

Processes (What You Do) Overview Program Positions Processes Record Keeping Summary Positions We consider corrosion a threat to our system We will mitigate the threat of corrosion by our leak management program Processes (What You Do) Determine the highest risk segments for corrosion Prioritize the leak management efforts Implement the leak surveys Feedback the results as required to determine additional mitigation requirements Procedure (How You Do It) How the survey is to be run How the results are transferred to the office How you notify along the ROW Can we site a reference to this intent? 9

to require more inspections but to organize Overview Program Positions Processes Record Keeping Summary Most distribution operators are already meeting the mitigative requirements of the NPRM; however, what they are not doing is: Implementing a Risk Model to Prioritize Mitigation Evaluating Results Documenting Program Improvement WHERE Required The intent of the rule is NOT necessarily to require more inspections but to organize the information from what inspections and other work is being done so that: The results can be measured and evaluated, Risk mitigation measures are employed as needed to manage the safety & reliability of the system… Think of Your Program as a contract whereby you agree to what you will do 10

Question Time? How many of you are… Overview Program Positions Processes Record Keeping Summary 11

How do we Structure a Distribution Integrity Program? Overview Program Positions Processes Record Keeping Summary How do we Structure a Distribution Integrity Program? 12

Start by documenting Your “Positions” Positions are non-repeating items that define your interpretation of the rule Positions are initially developed and changed over time as necessary based on the evaluation of the integrity activity results Procedures Processes Positions For more detail as to what might be included as position in your program, see the elemental examples presented below. 13

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on threat identification? The requirement to identify threats might be the first thing you do so that you can determine how your system data will support the assessment of risk. Your position outlining the threats you have selected, why they were selected and what data will be associated with each for the purposes of risk management needs to be documented in the program. This determination is up to you and dependent on your system. Your position on why the remaining threats were not considered should also be documented. Can we site a reference to this intent?

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on system knowledge? Now that you've identified the threats you will be considering in your risk assessment, you need to know what system attributes / data will contribute to these threats. Your position outlining what system data contributes to each threat, where it is located and how current / accurate it is should be included in the program. This data might include leak patrol frequency, material, one call information, knowledge regarding urban projects, and whatever else you determine will have an affect on risk assessment.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on risk evaluation? In distribution you have the flexibility to assess risk from different levels. You may choose to work at a system, line or segment basis depending on the threats considered and the availability of system data. You may use a qualitative or a quantitative approach Your position as to what Risk Assessment methodology you will employ and why it makes sense for your assets should be documented in your program.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary FAQ 13 - Must an operator use a computer-based risk analysis model? No. Risk analysis is a process of understanding what factors affect the risk posed by a pipeline system and where they are relatively more important than others. In many cases, tools are already in place that prioritizes leak management, damage prevention or pipe replacement; however, these tools may be lacking a consequence component. Since mitigation methods typically address single threats, you may determine risk on a per threat basis and mitigate accordingly.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on mitigation of risk? Your position as to what activities will be implemented, the system data they may affect, their frequencies and the results to be collected should be documented in your program. Additionally, in support of improving system knowledge the program should include your position as to which activities should be tagged with what ancillary data will be collected during implementation.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary Although all threats must be considered, based on statistics, the Primary mitigative measures to be implemented based on the highest incident rates are: Damage Prevention, Leak Management This varies significantly from transmission where all threats were aggregated to determine risk and prior to selecting an assessment method or mitigation measure.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary FAQ 14 - Must an operator implement new actions to reduce risk from its pipeline? Not necessarily. Operators are already taking actions to control risks, some of which are required by regulation and some of which are implemented by operators voluntarily. FAQ 18 - If an operator already has a leak management program, why do they have to implement a new program in response to this rule? They don’t. Leak management is an important factor in managing the risk from distribution pipeline systems.

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on performance measures? Your position as to what performance measures will be utilized to evaluate the effectiveness of your processes as well as the improvements to the safety & reliability of the assets should be documented in your program. Both the Key Performance Measures (KPM) as prescribed in the rule as well as any others you may incorporate to support you position on Program Improvement, will need to be documented in your program. 25

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary An example of additional KPM that could be used to trigger program based improvement might be: Activity Implementation Based Did you fully implement your program? Were the activities effective? If not, why not and change the program System Attribute Data Based Are you improving the system data thru other integrity activities? Are your data collection techniques effective? 26

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary Risk Results Based Does your risk methodology accurately reflect your system If not, why not and change the program FAQ 22 - Why has PHMSA selected the performance measures that it has for periodic reporting? PHMSA has concluded it would be most useful for operators to report a few performance measures. Number of hazardous leaks repaired by cause Second is number of excavation damages / one-call “tickets” The last is the number of EFV installed 27

Evaluation / Improvement Overview Program Positions Identify Threat System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Processes Record Keeping Summary How many of you know your position on evaluation and improvement of the program? Your program needs to detail your position on evaluation of the implementation and results of integrity activities whose results have been tagged as KPM The program should describe the metrics to be used in the evaluation and what improvements will be considered Once the Program has been improved, are there plans in place to continue its implementation on a frequency determined to support continued improvement of safety and reliability considering the primary risks. 29

“Processes” support activities that you schedule, implement, track and report. “Processes” outline the tasks / steps necessary to effect the desired outcomes “Process” documentation captures the results of your activities which are required to evaluate your program in order to determine if improvement (enhancement) is necessary. Procedures Processes Positions For more detail as to what might be included as position in your program, see the elemental examples presented below. 30

Evaluation / Improvement Overview Program Positions Processes System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Record Keeping Summary What steps will be taken to manage the system knowledge? What steps will be taken to update the system knowledge based on new data collected during mitigation activities? What results will be documented? 31

Evaluation / Improvement Overview Program Positions Processes System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Record Keeping Summary What steps will be taken to execute the risk model? What steps will be taken to prioritize the results? What results will be documented? 32

Evaluation / Improvement Overview Program Positions Processes System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Record Keeping Summary What steps will be associated with each of the mitigation activities implemented What results will be documented? 33

Evaluation / Improvement Overview Program Positions Processes System Knowledge Evaluate Risk Mitigate Risk Performance Evaluation / Improvement Record Keeping Summary What steps will you take to aggregate the performance measure data and the evaluate it in order to determine what, if any, improvement is necessary? What results will be documented? 34

Addressing Record Keeping Requirements Overview Program Positions Processes Record Keeping Summary Addressing Record Keeping Requirements A written IM program in accordance with § 192.1005; The written program includes the company’s positions taken in regards to integrity management The written program must include processes for implementation and improvement of the program

Record Keeping Documents supporting threat identification; Overview Program Positions Processes Record Keeping Summary Record Keeping Documents supporting threat identification; Threats are defined and technically justified in the program The implementation of the processes for threat identification support the requirement A written procedure for ranking the threats; The risk methodology will be documented in the program The processes implemented and documented to characterize risk will be defined in the program

Overview Program Positions Processes Record Keeping Summary Record Keeping Documents to support any decision, analysis, or process developed and used to implement and evaluate each element of the IM program; The processes in the program need to include decision trees where applicable. The process implementation documentation will then support that requirement to manage and document decisions In the event actions are taken OUTSIDE the program, these will require technical justification and decision documentation on a case by case basis

Overview Program Positions Processes Record Keeping Summary Record Keeping Records identifying changes made to the IM program, or its elements, including a description of the change and the reason it was made; The Program will include processes for review and feedback as well as the collection of the changes made and the associated drivers The means by which results will be monitored, performance measures analyzed and the subsequent changes to the program will be defined in the initial program Processes to collect, analyze and manage change to the program will be defined in the program with their implementation documented

Overview Program Positions Processes Record Keeping Summary Record Keeping Records on performance measures. However, an operator must only retain records of performance measures for ten years. If a process management application is utilized, document retention becomes a moot point as one of the core functions of process management is its inherent documentation capability.

Program Requirement Summary Overview Program Positions Processes Record Keeping Summary Program Requirement Summary The Impact analysis indicates the initial effort for the development of the program is expected to take (960 hours) The Impact analysis indicates the initial effort for the development of the processes is expected to take (800 hours)  With an effective use of a Positions & Process Management methodology, these should be accomplished in a fraction of the time 40

The Distribution Integrity Program Can Be Formalized by Creating “Procedures” are the engineering standards / SOP / guidance that provide specifics as to “HOW” the tasks / steps will be accomplished Procedures Processes Positions “Processes” are “WHAT” you schedule, implement, track and report. They need to be designed to capture the results of you integrity activities, providing the information YOU need to evaluate your program in order to determine if improvement (enhancement) is necessary. For more detail as to what might be included as position in your program, see the elemental examples presented below. “Positions” are the foundation of the program, detailing Your interpretation of the Rule. 41

Once the Program has been developed Overview Program Positions Processes Record Keeping Summary Once the Program has been developed the Rubber Meets the Road when the: Processes are scheduled Processes are implemented Process results are documented Results are evaluated The Program is improved as necessary AND ONLY AS NECESSARY 42

Your Program IS YOUR Protocol Overview Program Positions Processes Record Keeping Summary Your Program IS YOUR Protocol Present your Program to the regulators During audit show that you have done what you said you would do in your Program If regulators have suggestions as to how you might improve your program and why – consider them and change your Program accordingly During audit demonstrate where you are going to change your Program and why Can we site a reference to this intent? 43

Overview Program Positions Processes Record Keeping Summary Key Points To Take Away DIMP is not more work, it is more Organized work You are already meeting many of the requirements of the NOPR Formalization of the Program organizes what you are already doing The Program consists of Positions & Processes Implement the Program / Evaluate the Results and Improve the Program as required 44

Key Points To Take Away Your Program will also support Overview Program Positions Processes Record Keeping Summary Key Points To Take Away Your Program will also support Sustainability Continuity Continuous Improvement In the battle against workforce attrition and aging infrastructure 45

Distribution Integrity Is easier to Manage once you Formalize your Program and Define your Processes

Questions? gwhite@piconfluence.com 713-520-5050