New and Proposed Pipeline Safety Regulatory Changes in California

August 21, 2012

Western Regional Gas Conference

Paul Gustilo

Southwest Gas Corporation

Driving forces Changes in effect today Changes in the pipeline California Public Utilities Commission (CPUC)

organizational changes

Outline

NTSB/PHMSA Investigations CPUC Independent Panel Review Public Awareness

Driving Forces

Who is Affected?

Source: PHMSA 2011 Annual reports

Distribution (Mains) Transmission

Alpine Natural Gas 34 - Gill Ranch Storage, LLC - 32 Lodi Gas Storage, LLC 45 Pacific Gas & Electric Co 42,309 5,744 San Diego Gas & Electric Co 8,417 - Southern California Edison Co 9 Southern California Gas Co 49,008 3,640 Southwest Gas Corp 3,106 15 West Coast Gas Co Inc 38 - Wild Goose Storage LLC - 34 Total Jurisdictional 102,921 9,510 Total for State (Inter and Intra) 104,337 11,642

% Jurisdictional 99% 82%

California Companies and Mileage

Elimination of grandfather clause for transmission

Key Changes in Effect Now

Tougher enforcement

HistoricalOperatingPressure

New pipeline safety plan

Key Changes in Effect Now

Management and financial audits

Rulemaking R.11-02-019 (June 2011)

Pressure test required for all transmission pipe Remote Control Valves/Automatic Shut-off Valves

must be considered

Elimination of Grandfather Clause (and more)

Rulemaking R.11-02-019 (June 2011)

Modifications to accommodate in-line inspection devices must be considered

Operators had to submit a plan in August 2011 addressing requirements

Elimination of Grandfather Clause (and more)

Enforcement - Prior to 2010

Caption from Figure 16 from the CPUC Independent Panel Report, June 2011

Statistics are from the period from 2001-2009 and were derived from PHMSA data.

Resolution approved in December 2011 Gives Consumer Protection and Safety Division

(CPSD) direct authority Increased fines from $20,000 - $50,000 per

violation Encourages self reporting Establishes process for citations

Enforcement Today (ALJ-274)

Citation Process

Enforcement Today (ALJ-274)

Citation Received

(fine issued)

Correct Violation or

Submit Appeal

Include Compliance Plan signed by CEO

w/in 10 days

Notify Local Officials

ALJ Schedules

Hearing

ALJ Issues Draft

Resolution to

Commission

w/in 60 days

Inspections and Investigations

More of them More in-depth More questions

Enforcement Today

R.11-02-019 (April 2012)

“…each gas corporation to develop and implement a plan for the safe and reliable operation of its gas pipeline facilities, and the Commission to accept, modify, or reject the plan by year-end 2012.”

New Safety Plan

R.11-02-019 (April 2012)

“provide opportunities for meaningful, substantial, and ongoing participation by the gas corporation workforce in the development and implementation of the plan.”

New Safety Plan

“Section 961(e) sets creating a “culture of safety” as an objective of the Commission’s regulation of California natural gas systems operators.”

“To evaluate whether California’s natural gas system operators have established a “culture of safety,” we must start with executive management.”

Management Audits

“We also order financial audits which include, but will not be limited to, comparing the authorized gas safety expenditures and capital investments to actual recorded amounts, and the rationale for any deviations.”

Financial Audits

Damage prevention enforcement (AB 1514) Emergency response standards (SB 44) Master meter systems (R.11-02-018) Access to safety records (ALJ-436) Whistleblower protection (R.11-02-019)

In the Pipeline

CPUC Organizational ChangesCommissioners

Consumer Protection and Safety Division (CPSD)

Consumer Protection and

Reliability

Electric Generation

Rail Transit and Crossing Safety

Branch

Railroad Operations

Safety Branch

South Office(Los Angeles)

North Offices(San Francisco & Sacramento)

Gas Safety & Reliability Program

Electric Safety & Reliability Program

Executive Director

Risk Assessment Unit

1. Susceptibility of older plastic pipe to premature brittle-like cracking

2. Grandfathering provisions in 49 CFR Part 1923. Excavation damage (AB 1514)4. Location and specification of pipe in the ground5. Unmonitored class location change

Top 17 Potential Hazards

6. Aging infrastructure and interacting threats7. Infrastructure, maintenance, and parts8. Utility resource management and workforce

development9. Gas leak identification and response10.Pipe with characteristics susceptible to failure11. Protection redundancy.

Top 17 Potential Hazards

12.Accommodating in-line inspection tools (smart pigs)13.Utility management deficiencies (safety first culture)14.RCVs/ASVs15.Customer-owned or operated lines16.Master-metered systems not in mobile home parks17. Inadequate regulations

Top 17 Potential Hazards

More regulations More inspection and investigations More enforcement actions More to come

Summary