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

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

15. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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. Office of Pipeline Safety 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