2010 Western Regional Gas Conference DIMP- Beyond the Final Rule August 24, 2010 Tempe, AZ

1. 2010 Western Regional Gas Conference DIMP- Beyond the Final Rule August 24, 2010 Tempe, AZ Bruce L. Paskett P.E. Principal Compliance Engineer NW Natural

2. NW Natural Company Background • Company founded in 1859 • Operate in Oregon and SW Washington • Serve approximately 670,000 residential, commercial and industrial customers • Designed, constructed, own and operate 603 miles of transmission main and 21,000 miles of distribution mains and services • Company has installed over 160,000 single family residential EFVs since 1999

3. NW Natural and Pipeline Safety NW Natural is committed to the Safe, Reliable and Cost Effective delivery of natural gas to our customers.

4. NW Natural and Pipeline Safety • Pipeline Integrity Management Programs- • Cast Iron Replacement Program-1983 to 2000 • Bare Steel Replacement Program-2001 • Natural Forces (Geohazard) Program-2001 • Transmission Integrity Management Program-2002 • Distribution Integrity Management Program-1983

5. The Evolution of DIMP • Pipeline Safety Improvement Act of 2002- Dec 2002 • D.O.T. Inspector General Testimony – July 2004 • AGF Study- January 2005 • PHMSA Phase 1 Investigations- December 2005 • GPTC DIMP Guidance- December 2006 • PIPES Act- December 2006 • DIMP NOPR- June 2008 • DIMP Final Rule- December 4, 2009

6. Elements of a DIMP Program • Written DIMP Integrity Management Plan must contain procedures for developing and implementing: • Knowledge • Identify threats • Evaluate and rank risks • Identify and implement measures to address risks • Measure performance, monitor results, and evaluate effectiveness • Periodic evaluation and improvement • Report results

7. Elements of a DIMP Program • 192.1007(b) Identify threats • Corrosion • Natural forces • Excavation damage • Other outside force damage • Material, weld or joint failure, including “compression couplings” • Equipment failure • Incorrect operation • Other

8. Elements of a DIMP Program • Based on the Final DIMP Rule, operators had all the information they needed to “Just Do it!” , right ? • Not exactly. The DIMP Rule has continued to evolve since the Final Rule. The “Final Rule” was not final!

9. DIMP - Beyond the Final Rule • Post-Rule “Highlights”- • Effective Leak Management Program • Aboveground leak reporting • Excavation Damage Prevention Programs • New Annual Report Form (Form F 7100.1-1) • Compression couplings vs. mechanical fittings • DIMP FAQs / Inspection Form / Pilot Audits • EFVs • Low stress transmission lines

10. DIMP - Beyond the Final Rule • Effective Leak Management Program- • 1007(d) Identify and implement measures to addressrisks. Required as a risk mitigation measure under DIMP unless all leaks are repaired when found • Phase 1 Report defines effective LEAKS Program- • Locate the leak • Evaluate it’s severity • Act appropriately to mitigate the leak • Keep records • Self assess • Inspections will focus on Leak Programs

11. DIMP - Beyond the Final Rule • 192.1007(d) Performance Measures- • Number of hazardous leaks eliminated or repaired by cause • Number of excavation damages • Number of excavation tickets • Total number of leaks eliminated or repaired by cause • Any additional measures the operator determines are necessary

12. DIMP - Beyond the Final Rule • 192.1001 Hazardous Leak was defined: • Hazardous Leakmeans a leak that represents an existing or probable hazard to persons or property and requires immediate repair or continuous action until the conditions are no longer hazardous • Mirrors the definition of a hazardous (Grade1) leak contained in the GPTC guide • GPTC provides excellent guidance for classification of below ground leaks • No consistent definition or reporting criteria for above ground leaks

13. DIMP - Beyond the Final Rule • What is a “Hazardous Aboveground Leak” ? • AGA Proposed Definition- • An unintentional escape of gas from above ground piping or related gas facilities that requires immediate make-safe action, because: • On outside piping, it: • Can be seen, heard or felt (e.g.-causes the blowing off of leak detection soap); and • Is in a location that may endanger the general public or property (e.g.-requires an immediate evacuation to protect public safety)

14. DIMP - Beyond the Final Rule • What is a “Hazardous Aboveground Leak” ? • On inside piping, it: • Can be seen, heard or felt (e.g.-causes the blowing-off of leak detection soap); and • Is in a location that may endanger the general public or property (e.g.-requires an immediate evacuation to protect public safety) or it generates a reading of 20% LEL or more in the general atmosphere of the structure

15. DIMP - Beyond the Final Rule • What is a “Reportable Aboveground Leak” ? • An aboveground leak determined to be hazardous based on the criteria defined above is reportable • Minor escapes of gas (non-hazardous releases) at threads on sound piping or at fittings that are detectable only with instruments in direct proximity or that give only slight indications with leak detection soap need not be considered as leaks if they could be eliminated by lubrication, adjustment or tightening, even if the operator elects to reconstruct the piping or replace parts in order to eliminate the minor escape of gas

16. DIMP - Beyond the Final Rule • Effective Excavation Damage Prevention Program- • DIMP NOPR required enhancement of the excavation damage prevention program required under 192.614. However, the DIMP Final Rule is silent on this issue • Don’t be complacent! You must be able to demonstrate you have an effective excavation damage prevention program • Why? Because excavation damage presents the greatest threat to distribution pipeline safety

19. DIMP - Beyond the Final Rule • Excavation Damage Prevention Program Elements- • 192.614- Damage Prevention Program • 192.613- Public Awareness Program / RP 1162 • Phase 1 Report / 2006 PIPES Act- Nine Elements. Ensure your state has a comprehensive program. Note: PHMSA ANPRM- state program effectiveness • DIMP Reporting Metrics for Excavation Damage- (Excavation Damages / Tickets) • Consider EDPG internal metrics to evaluate “root causes” of excavation damages

20. DIMP - Beyond the Final Rule • PHMSA Revised Annual Report Form (F 7100.1-1) • Revised to allow reporting of DIMP performance measures, number of EFVs installed on SFR services and mechanical fitting failure data • Submit all DIMP metrics on 2010 Annual Report (due March 15, 2011), except for mechanical fittings • Gather mechanical fitting failure data beginning on January 1, 2011 for reporting on 2011 Annual Report (due March 15, 2012)

21. DIMP - Beyond the Final Rule • Compression Couplings vs. Mechanical Fittings- • Final Rule (192.1009) required reporting of “compression coupling failures” that result in hazardous (Grade 1) leaks, but DIMP Rule included a NOPR • Compression couplings essentially join pipe-to-pipe • PHMSA has determined that they want to gather “mechanical fitting failures” instead • Each (hazardous leak) failure requires a one page data submission in the Annual Report

22. DIMP - Beyond the Final Rule • Mechanical fitting definition- • Includes stab, nut follower and bolt type mechanical fittings • Steel to steel, steel to plastic and plastic to plastic • Includes service or main tees, tapping tees, transition fittings, valves, end caps, etc • Essentially any fitting that is not welded or fused!

23. DIMP - Beyond the Final Rule • Additional DIMP Guidance- • Frequently Asked Questions (FAQs-8/3/10) and DIMP Webcast (soon!). Provide additional clarity about; • EFVs • GPTC Guidance • Farm taps • Leak management • Reporting of performance measures • Mechanical fitting failure reporting • Alternative inspection intervals

24. DIMP - Beyond the Final Rule • DIMP Inspection Form and Pilot Audits- • PHMSA / NAPSR team has developed draft DIMP Inspection Form • “Pilot Audits” will be used to evaluate draft form • First audit- Virginia, September 14-15 • Additional pilot audits in November & December • Revise draft Inspection Form prior to end of year • Three pilot audits in January and February • Finalize DIMP Inspection Form

25. DIMP - Excess Flow Valve (EFV) Requirements Excess Flow Valve Rule (1998)- Required customer notification of availability of EFVs for all new or replaced single family residential services DIMP Phase 1 Report-Four study groups concluded that EFVs can be a valuable risk mitigation tool, but should not be mandated 2006 PIPES Act-Congress mandated EFVs only for new and replaced single family residential services after June 1, 2008 DIMP Final Rule-Requires operators to identify threats, evaluate risks, and implement measures to address risks GPTC DIMP Guidance suggests that operators consider the expanded use of EFVs as one possible additional / or accelerated action to address risk

26. DIMP - EFV Requirements 192.383 Excess Flow Valve installation (a) Definitions- Replaced service line means a natural gas service line where the fitting that connects the service line to the main is replaced or the piping connected to this fitting is replaced Service lineserving single-family residence means a natural gas service line that begins at the fitting that connects the service line to the main and serves only one single-family residence

27. DIMP - EFV Requirements 192.383 Excess Flow Valve installation (b) Installation Required. An excess flow valve (EFV) installation must comply with the performance standards in 192.381. The operator must install an EFV on any new or replaced service line serving a single-family residence after February 2, 2010, unless one or more of the following conditions is present:

28. DIMP - EFV Requirements 192.383 Excess Flow Valve Installation (b) Installation Required. Exceptions: (1) The service line does not operate at a pressure of 10 psig or greater throughout the year (2) The operator has prior experience with contaminants in the gas stream that could interfere with the EFV’s operation or cause loss of service to a residence (3) An EFV could interfere with necessary O & M activities, such as blowing liquids from the line; or (4) An EFV meeting performance standards of 192.381 is not commercially available to the operator

29. DIMP - EFV Requirements 192.383 Excess Flow Valve Installation (c) Reporting. Each operator must, on an annual basis, report the number of EFVs installed pursuant to this section as part of the annual report required by 191.11 Note: Part E of the new Annual Report Form requires reporting of the “Number of EFVs In System at End of Year on Single-family Residential Services”.

30. EFV Installation Location

31. DIMP - EFV Requirements SUMMARY- Congress required installation of EFVs on SFR after June 1, 2008 in 2006 PIPES Act Final DIMP Rule requires EFVs on all new and replaced service lines serving single-family residences after February 2, 2010 End of Story, Right? The story continues……….

32. NTSB Recommendation P-01-2 • NTSB issued P-01-2 on June 22, 2001 in response to the South Riding, VA incident • PHMSA should “require that excess flow valves be installed in all new and renewed gas service lines, regardless of a customer’s classification, when the operating conditions are compatible with readily available valves”.

33. NTSB Recommendation P-01-2 • NTSB Safety Recommendations- • The Pipeline and Hazardous Materials Safety Administration is required by law to respond to Safety Recommendations issued by the National Transportation Safety Board (NTSB), an independent federal agency charged by Congress with investigating significant hazardous materials accidents/incidents.

34. Beyond DIMP - Large Volume EFV Industry believed that the single-family residential EFV requirements in the 2006 PIPES Act and the mandated and risk-based use of EFVs under the DIMP Rule is consistent with NTSB recommendation P-01-2 However, in response to the NTSB recommendation, PHMSA formed a “Large EFV Team” to study the issue beginning June 23, 2009 NTSB reiterated P-01-2 for all classes of customers in a September 21, 2009 letter to PHMSA.

35. PHMSA Large EFV Team Organizations Represented PHMSA soliciting input from following stakeholders: • »Regulators • PHMSA, OPS • NTSB • States, NAPSR • » Fire Services »Public »EFV Manufacturers »Distribution Operators AGA APGA

36. Incident Data 1984 - Jan 2009 1557 960 870

37. Summary of Industry Large Capacity EFV Issues • EFVs only work for significant service line breaks • Larger diameter service lines are less susceptible to a complete line break • EFVs can’t distinguish a major leak from a load • EFVs are not designed to protect from houseline failures • The operator does not know the life-cycle load (50-100 years) at the time of service installation, making proper service line and EFV sizing impossible

38. Summary of Industry Large Capacity EFV Issues • Multi-family, commercial and industrial customers have far greater load variability, routinely adding equipment and associated loads without notifying the operator • Commercial establishments are subject to frequent changes of ownership, product, gas equipment and associated loads, making appropriate EFV sizing impossible

39. Summary of Industry Large Capacity EFV Issues • Multi-family, commercial and industrial customers expect a highly reliable gas supply. A false EFV closure puts the customer out of business, with associated business losses, until the EFV can be replaced • An inadvertent shutoff of commercial or industrial facilities, such as hospitals, manufacturing or chemical plants, could create a greater hazard than the gas leak it was intended to address • The cost to replace an incorrectly sized EFV may be $5,000-$50,000 IF the municipality allows the street to be cut

40. Industry Large Capacity EFV Recommendation EFVs on multi-family, commercial and industrial service lines should be considered by operators as a risk management tool and should not be mandated

41. Industry Large Capacity EFV Recommendation Continue the implementation of effective State excavation damage prevention programs, including the nine key elements as defined in the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006

42. PHMSA Large EFV Project Summary / Timeline • Initial stakeholder meeting- June 23, 2009 • Stakeholder net-meeting- August 25, 2009 • Draft Technical Report-February 19, 2010 • Final Technical Report completed- mid-2010 • PHMSA Operator Survey- year end 2010 • Economic (cost/ benefit) analysis- 2Q 2011 • PHMSA / NAPSR respond to NTSB

43. PHMSA Large EFV Project Summary • Operators should continue to install EFVs on any new or replaced service line serving a single-family residence after June 1, 2008 • PHMSA will conduct a large EFV operator survey and cost / benefit study by mid-2011, then respond to NTSB recommendation • EFVs have become a Re-authorization issue. NTSB Chair re-confirmed P-01-2 in testimony on June 24. In congressional hearings, AGA’s spokesman was asked to work with other parties to find a workable path forward. Anticipate EFV language in the 2010 Re-authorization

44. DIMP - Beyond the Final Rule • Low Stress Transmission Lines- • Stress level less than or equal to 30 % SMYS at MAOP • DIMP Phase 1 Report recommended that integrity of low-stress transmission lines be managed under DIMP since these lines behave more like high pressure distribution lines • AGA has drafted language for the 2010 Pipeline Safety Re-authorization that would allow operators to manage the integrity of low stress transmission lines under TIMP or DIMP

45. DIMP - Beyond the Final Rule • In Summary- • The DIMP Final Rule only created a start point for your DIMP Program • There have been significant developments since the Final DIMP Rule was issued on December 4, 2009 • In order to successfully comply with DIMP, you have to go “Beyond the Final Rule”

46. Questions? Thank you!