2008 Iowa Pipeline Safety Seminar

1. 2008 Iowa Pipeline Safety Seminar Des Moines, Iowa August 19, 2008

2. Discussion Topics • Pipeline Safety Basics • Stage Setting Comments • Big Picture Data Review • Regulatory Update • Focus on DIMP • Non-Regulatory Initiatives Update • Alternative Fuels Update • Concluding Remarks / Q & A

3. Pipelines reach across our country. See: http://www. npms.phmsa. dot.gov/

4. Pipeline Safety Basics • OPS’ Charter from the U.S. Congress • Ensure the safe, clean, and reliable delivery of energy products across the U.S. • Historical Operational Model • Incrementally fix problems after the fact – change was driven by outside events • Operated quietly, and at our desks or in the field doing compliance inspections • Not engaged much beyond State partners and pipeline industry • The word “partner” was frowned on • We were quietly engaged on experimental approaches to managing risks

5. Pipeline Safety Basics (cont.) • Dramatic change was driven by outside events – but that is the hard way • What OPS is about today • Goals • Safe, Clean, and Reliable Energy Transportation • Objective • Impact the performance of pipeline operators • Strategies • Improve integrity of the system and reduce risks using a data-driven systems-focused approach • Integrity Management • Incident/Accident reporting • Root cause and near miss reporting to sharpen focus • Improving data quality and mining for information • Looking beyond the regulations and standards • Operate as a model regulator • Focus on risk: consequence & likelihood • Spot light on problem solving • Stand tough but fair – when needed • Operate transparently • Be inclusive and engaged – even beyond our bounds

6. Pipeline Safety Basics (cont.) • OPS’ Strategies (cont.) • Engage, lead, and help strengthen others who play a role in pipeline safety • Public Awareness – many audiences • Emergency responders – key to confidence • Anticipate future challenges and help prepare communities for changes • Alternative fuels • LNG • Take care of our people and listen to them • Shifted heavily to team focus • Dramatically increasing training • Providing flexibility in working conditions

7. Setting the Stage Current Events and Worries Congressional Attention Keeps us Busy PIPES Act Mandates Hearings Audits and Recommendations Heavily Driven by Accidents 10 year annual average for major consequences: 50 serious accidents / 20 fatalities / 65 injuries / $250 MM property damage Daily by excavation damage Increasingly in shared ROW’s Construction boom is worrisome Periodically, but notably, by corrosion failures E.g., Alaska, Louisiana Increasingly Driven by Supply Issues Need for Aggressive Workforce Planning and Recruitment – Government and Industry

8. Stage Setting (cont.) • Some Givens We Have To Deal With • Change – constant and accelerating • Requires vigilance and challenging old assumptions • Risk – controlling both known and unknown • Keep an eye both on frequency and consequence • Look beyond our own experience • Engage appropriate, active involvement of others • Workforce changes / shortages • Role of operators • Role of service providers • Growing dependency on service • Commensurate growth in expectations • Countervailing profit pressures • Rate constraints and questioning “fair return”

9. Big Picture Data Review

10. Big Picture Data Review

11. Big Picture Data Review

12. Regulatory Update • Major Rulemaking Efforts & Status • MAOP / 80% SMYS – nearing final • Distribution Integrity & EFV’s – proposed • Control Room Management – nearing proposal • Low Stress – Phase 2 – in development / survey • Minor Rulemaking & Miscellaneous • “One Rule” – in development • Accident/Incident Form Changes – near proposal

13. Distribution Integrity Management Program The U.S. Congress required PHMSA to create DIMP regulatory requirements – PIPES Act NPRM published June 25, 2008 in FR Outreach Efforts Began Soon After NPRM Public website Web-casts of key rule elements AND origins** Attending other stakeholders’ meetings – such as the August 13th AGA/APGA meeting in Chicago Supporting state seminars – such as this one

14. DIMP Webcast • Webcast Outline (4.3 hours) • Introduction • Baseline and Goals • Executive Summary • System Description • AGF and DIGIT, Earlier Risk Data Analysis, PHMSA Report to Congress on DIMP, Phase 1 – Organization & Findings, Developing Rules Guide • Rule Content (majority of minutes) • PHMSA and State Perspective • GPTC Guidance and Relation to NPRM • Small Operators • Improvements Panel • Q&A Panel • Next Steps

15. DIMP – EFV Requirement The PIPES Act specified that DIMP standards must include a requirement for natural gas distribution system operators to install an excess flow valve on each single family residence service line installed or entirely replaced after June 1, 2008 if: gas pressure on the service line is continuously higher than 10 psig; there is no reason to believe contaminants in the gas stream will interfere with the valve operation; installation of an excess flow valve is not likely to cause loss of service or interfere with necessary operation or maintenance activities; and an excess flow valve meeting the necessary performance standards is commercially available

16. DIMP - EFV (Continued) PHMSA expects operators of natural gas distribution systems to begin installing excess flow valves on service lines installed or entirely replaced after June 1, 2008, as specified by Congress in the PIPES Act Neither PHMSA, nor the States, can enforce the requirement to install excess flow valves until a Final Rule is issued PHMSA, the States, and industry are strongly encouraging operators to voluntarily comply with the Congressional deadline

17. Non-Regulatory Initiatives Update • Damage prevention • Common Ground Alliance & Regional Partners • State Damage Prevention Assistance Program • Federal Enforcement • Technology Improvements to One-Call Process • EDP Technology Deployment • Public Communications and Awareness • Stakeholder Communications, mapping & ET • ROW Encroachment – PIPA Initiative • Emergency responders – training and partners • Research and development • New technologies and knowledge

18. Alternative Fuels Targets Energy Policy Act of 2005: Mandated 7.5 billion gallons of biofuels (can include biodiesel) by 2012. President’s 2007 20-in-10 Plan: State of the Union address--proposal to reduce nationwide gasoline consumption by 20 percent in 10 years by increasing the supply of renewable and alternative fuels. Plan would require 35 billion gallons of renewable and alternative fuels by 2017. Energy Independence and Security Act of 2007: Modifies the Renewable Fuel Standard (RFS) to require fuel producers to use at least 36 billion gallons of biofuels by 2022. Requires the Department of Energy, in consultation with the Department of Transportation, to conduct a study examining the feasibility of transporting ethanol via dedicated pipelines.

19. Alternative Fuels Actions Assure Integrity While Eliminating Barriers Issued jurisdictional notice – July 2007 Joined a JIP looking at technical challenges Participated in ethanol future road mapping Issuing new R&D projects addressing gaps Ethanol Pipeline Notification Policy -- June 2008 Expect to issue focused R&D solicitation on remaining gaps Work with Standard Developing Organizations to push new knowledge into consensus standards Work with Emergency Response Community Revise emergency response plans & measures Assess ethanol blend physical properties (flammability/toxicity) Investigate response equipment effectiveness with ethanol & blends Absorption booms and foam retardants http://primis.phmsa.dot.gov/comm/AlternativeFuels.htm

20. Concluding Remarks / Q & A For more information on PHMSA http://www.phmsa.dot.gov For more information on Pipeline Safety http://ops.dot.gov Thanks for your time & enjoy the week!