1. LESSONS LEARNED FROM RECENT PIPELINE INCIDENTS FLORIDA NATURAL GAS ASSOCIATION (FNGA) OPERATING & MARKETING CONFERENCE ROD WALKER PRINCIPAL CONSULTANT MANAGEMENT CONSULTING DIVISION 18September 2012

2. AGENDA WHAT’S CHANGED IN THE NATURAL GAS INDUSTRY? REVIEW ROOT CAUSES, ISSUES, COMMON THREADS WHAT CAN WE LEARN FROM THESE EVENTS? PRACTICAL STEPS UTILITY MANAGERS, STAFF CAN TAKE EXAMPLES FROM ASSESSMENTS OF UTILITIES Q/A 2

3. 27 YEARS IN NATURAL GAS INDUSTRY; 19 YEARS SPENT AT UTILITIES IN OPERATIONS, MANAGEMENT AND ENGINEERING DOMESTIC AND INTERNATIONAL EXPERTISE IN UTILITY RISK ASSESSMENTS and DUE DILIGENCE ADVISORY TO CALIFORNIA ENERGY COMMISSION (CEC) ON SAN BRUNO INCIDENT SPEAKER BACKGROUND 3

4. We are PG&E’s lead partner for its GAS Transmission Asset Management System (GTAMS) Project The Project is to: Provide an integrated automated records system for their transmission system Provide the required pipeline data Provide system for managing inspections, testing and maintenance and providing transparency and compliance. Design and drive the mobile field systems and corporate systems through integration Orchestrate the organization to a single enterprise integrated solution CLIENT EXAMPLE: PIPELINE INTEGRITY ASSIGNMENT 4

5. INDUSTRY DISCUSSION 5

6. WHAT’S CHANGED? 6 Increasing number of high profile natural gas incidents Heighted level of attention by federal and state regulatory agencies Increased level of critical data collection, review, maintenance, and regulatory direction, oversight and requirements

7. STATE OF THE INDUSTRY 7 Distribution System Age – 50-100 years Distribution System – Material determination Aging Infrastructure Baby Boomers Facing Retirement 60% utility workers retiring within 5 years Next Generation Transfer Issues Aging Workforce Accuracy issues Not updated/integrated for system integrity issue illumination Records Management Not updated or checked for accuracy and effectiveness “It’s the way we’ve always done it” Procedures Pressure to meet business metrics, as opposed to traditional regulated business “Obligation to Serve” Maintenance of Rate Base Rate Case issues and Strategies Business Pressures

8. REVIEW ROOT CAUSES AND COMMON THREADS OF PIPELINE INCIDENTS 8

9. RECENT PIPELINE INCIDENTS ROOT CAUSES, ISSUES, COMMON THREADS 9 Pipeline Incidents Data Management Workforce Planning Aging Infrastructure Procedures Emergency Response Communication

10. PATH TO SUCCESS 10 Safe, Reliable, Profitable Natural Gas Delivery Infrastructure System Integration & Data Management ProceduresCommunicationPersonnel

11. WHAT CAN WE LEARN FROM THESE EVENTS? 11

12. Can’t Control Regulation Can’t Control Others digging around your pipeline Limited Resources and Time Can evaluate how your utility system stacks up to root causes Preventative Review vs. Reactive Correction Make a plan and take steps LESSONS LEARNED: WHAT CAN UTILITIES TAKEAWAY, CONTROL AND DO? 12

13. UTILITY MANAGERS NEED TO TAKE A DEEPER LOOK AT YOUR UTILITY 13 Safe, reliable, profitable delivery of natural gas Holistic review of utility’s operationsIndependent Review Review of management side of utility as well as operations and engineering Identify and Mitigate Risk Find problems before they find you Benchmarking/Best Practices Identify Internal/External Factors

14. UTILITY AREAS THAT NEED A DEEPER LOOK 14 OPERATIONS Procedures review, Leak response times, Review of past incident response, Known regulatory compliance issues, Technology review, Customer Service/Meter to Cash policies, Gas supply portfolio review MANAGEMENT Organizational structure, management team, Review of Capex, Opex budgets-5 years, Employee experience, turnover, Aging workforce issues, Transition plans, Safety record ENGINEERING Engineering Standards, Replacement Program Methodology, Data Management, Coordination with Operations Personnel, Procurement Process, Regulatory Programs, Integrity Management, Public Awareness, Operator Qualification INFRASTRUCTURE Age, Replacement/System Improvement Programs, Leak trends, Leak History-5 years, Benchmarking, Cathodic Protection History-5 years, 3rd party damages, Known system issues, Site visits to key facilities, Lost and Unaccounted for Percentage-5 years

15. STEP 1: PERFORM AN ASSESSMENT OF EACH OF THESE AREAS STEP 2: DOCUMENT FINDINGS/GAPS STEP 3: MAKE A PLAN AND START WORK PRACTICAL STEPS UTILITY MANAGERS, STAFF CAN TAKE 15 Pipeline Incidents Data Management Workforce Planning Aging Infrastructure Procedures Emergency Response Communication

16. CRUCIAL for the proper OPERATIONS, DESIGN, MAINTENANCE AND MANAGEMENT OF YOUR NATURAL GAS SYSTEM NECESSITY NOT AFTERTHOUGHT ASSESSMENT STEPS-WHAT, WHERE AND WHEN WHAT DO YOU HAVE? MAPS, RECORDS, DATA PHYSICAL LOCATION WHEN ARE THEY UPDATED? REAL LIFE EXAMPLES: ACCURACY, MAOP RECORDS DATA, MAPS & RECORDS 16

17. GIVES DIRECTION to the OPERATIONS, DESIGN, MAINTENANCE AND MANAGEMENT OF YOUR NATURAL GAS SYSTEM DUST IS NOT A GOOD SIGN ASSESSMENT STEPS-WHAT, WHERE AND WHEN WHAT DO YOU HAVE? GENERAL, SPECIFIC, “THE WAY WE HAVE ALWAYS DONE IT” PHYSICAL LOCATION WHEN ARE THEY UPDATED? REAL LIFE EXAMPLES: TAKE ONE PROCEDURE AND FOLLOW IT FROM START TO FINISH I.E. SYSTEM UPDATES, NEW DIRECTIVES PROCEDURES 17

18. How do you know if your personnel will respond appropriately to an incident at your NATURAL GAS SYSTEM if you do not practice? DUST IS NOT A GOOD SIGN ASSESSMENT STEPS-WHAT, WHEN AND WHO HAVE YOU EVER HELD A MOCK DRILL? WHAT DID YOU MOCK? WHO PARTICIPATED? WHAT LESSONS DID YOU LEARN? WHAT CHANGES DID YOU MAKE? REAL LIFE EXAMPLES: MOCK DRILL COMMUNICATIONS EMERGENCY RESPONSE 18

19. YOUR GREATEST ASSET IS YOUR PEOPLE They are the folks who drive the OPERATIONS, DESIGN, MAINTENANCE AND MANAGEMENT OF YOUR NATURAL GAS SYSTEM DO YOU KNOW YOUR WORKFORCE? ASSESSMENT STEPS-WHO, WHAT AND WHEN RETIREMENT KNOWLEDGE TRANSFER HIRING ISSUES REAL LIFE EXAMPLES: DO YOU HAVE SOMEONE THAT IS THE ONLY EXPERT IN YOUR WORKFORCE? WORKFORCE PLANNING 19

20. BEST LAID PLANS HAVE TO BE COMMUNICATED for the OPERATIONS, DESIGN, MAINTENANCE AND MANAGEMENT OF YOUR NATURAL GAS SYSTEM to work efficiently, effectively and safely. COMMUNICATIONS IS NOT JUST ONE WAY ASSESSMENT STEPS-WHAT, HOW AND WHEN REGULAR ITEMS LESSONS LEARNED ITEMS EMERGENCIES REAL LIFE EXAMPLES: WHAT IS YOUR PERSPECTIVE OF REALITY IN THE FIELD? YOU MIGHT WANT TO CHECK WITH YOUR FOLKS TO MAKE SURE YOU ARE CORRECT….. COMMUNICATIONS 20

21. Can’t Control Regulation Can’t Control Others digging around your pipeline Limited Resources and Time Can evaluate how your utility system stacks up to root causes Preventative Review vs. Reactive Correction Make a plan and take steps FOCUS ON WHAT YOU CAN CONTROL AND TAKE ACTION SUMMARY 21

22. Q/A 22

23. FNGA