utility internal auditor’s training · 2015-08-27 · strategy& | pwc background on integrity...
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Pipeline Integrity Management
Utility Internal Auditor’s Training
August 25, 2015
Strategy& | PwC
With you today…
Jared Racine
Power and Utilities Manager
Strategy&, part of the PwC network
(678) 419-2672
1
Strategy& | PwC
Background on integrity management
Introduction to DIMP and TIMP
Regulatory landscape
Safe and reliable assets
Natural gas infrastructure
Recent pipeline incidents
Upcoming regulatory changes
Components of pipeline safety
The role of internal audit + case studies
2
Background on integrity management
Strategy& | PwC
Introduction to TIMP and DIMP
3
• Regulation:
– Federal
• DOT – Department of Transportation / PHMSA – Pipeline and Hazardous Materials
Safety Administration
– TIMP – Transmission Integrity Management Program (effective 2004)
– DIMP – Distribution Integrity Management Program (effective 2011)
• NTSB – National Transportation Safety Board
– State and local
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PHMSA TIMP
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• TIMP – Transmission Integrity Management Program1
– Covered segments within High Consequence Areas (HCAs)
– Threat identification for covered segments and risk assessment in accordance with ASME B31.8S considering available data
– Baseline assessment to address threats
– Pressure reduction and remediation of anomalies
– Additional preventive and mitigative measures
– Continual evaluation and re-assessment
– Integrity verification process (IVP) for maximum allowable operating pressure (MAOP)2
1) PHMSA 49 CFR Part 192, Subpart O – https://primis.phmsa.dot.gov/gasimp/
2) Current status of IVP – https://www.aga.org/pipeline-integrity-verification-process
pending
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PHMSA DIMP
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• DIMP – Distribution Integrity Management Program1
– Less prescriptive than TIMP
– Leak management
– Legacy pipeline replacement prioritization
• State and local regulators typically have additional requirements for integrity management of distribution assets
– Maximum leak survey intervals based on population density
– Maximum leak repair windows based on grade / classification
1) PHMSA 49 CFR Part 192, Subpart P – https://primis.phmsa.dot.gov/dimp/
DIMP Required Elements:
1) Knowledge
2) Identify Threats
3) Evaluate and Rank Risks
4) Identify and Implement Measures to
Address Risks
5) Measure Performance, Monitor Results,
and Evaluate Effectiveness
6) Periodically Evaluate and Improve Plan
7) Report Results
Strategy& | PwC
Background on integrity management
Introduction to DIMP and TIMP
Regulatory landscape
Safe and reliable assets
Natural gas infrastructure
Recent pipeline incidents
Upcoming regulatory changes
Components of pipeline safety
The role of internal audit + case studies
6
Background on integrity management
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• US is the leader in natural gas production as of 20121
• US oil and gas infrastructure investment of $60 to $90 billion for the next 10 years2
– Natural gas infrastructure represents roughly 30% of total investment
– Half of the US interstate transmission pipeline was installed between 1950 and 19703
Natural gas infrastructure
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1) BP Statistical Review of World Energy 2012
2) IHS base case – API infrastructure Investment Study
3) 2009 Distribution, Transmission, and Liquid Annual Data published by the PHMSA, U.S. Department of Transportation. http://www.phmsa.dot.gov/
4) Data based on the NPMS’ 2013 (CY2012) gas pipelines only – https://www.npms.phmsa.dot.gov/Documents/NPMS_Pipelines_Map.pdf
Map of US gas transmission
pipeline system4
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• PG&E asset family structure1 from 2014 Gas Safety Plan
– Gas storage
– Compression & Processing
– Measurement & Control
– Transmission Pipe
– Distribution Mains
– Distribution Services
– Customer-connected Equipment
– Compressed Natural Gas / Liquefied Natural Gas
• Unique risk profile for each asset type
Example of classifying asset types
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1) Pacific Gas & Electric Gas Safety Plan, 2014 – http://www.pge.com/includes/docs/pdfs/safety/systemworks/gas/GasSafetyPlan_2014.pdf
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Recent pipeline incidents
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2010 – San Bruno
• 30-inch diameter intrastate transmission pipeline ruptured
• Failure caused by seam weld flaw in combination with increasing pressure
• Integrity management blamed for not remediating risk
2011 – Allentown
• 12-inch diameter distribution main pipeline ruptured
• Failure caused by circumferential crack on cast iron pipeline
• Integrity management blamed for not continually surveying and failing to replace cast iron in a timely fashion
2012 – Sissonville
• 20-inch diameter interstate trasmission pipeline ruptured
• Failure caused external corrosion due to deteriorated coating and ineffective cathodic protection
• Integrity management blamed for not inspecting the corrosion more frequently
2014 – East Harlem
• Natural gas-fueled explosion
• Failure caused by defective fusion joint and sagging line without support
• Quality procedures and public awareness blamed for severity of incident
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Guidance frameworks
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ISO 55000 / PAS 55
• Asset-focused international standard
• Based on asset management system including several components:
– Organizational context
– Leadership, policy, and roles
– Asset management objectives and actions to address risks
– Training and awareness
– Information and communication
– Operational planning and control
– Monitoring and measurement
– Continuous improvements
API RP 1173
• Pipeline safety guidance document
• Based on a pipeline safety management system including several components in a Plan-Do-Check-Act cycle1
1) Safety Management Systems – https://primis.phmsa.dot.gov/dimp/docs/LGA_Wednesday_10AM%20SMS_McLaren_07.22.2015.pdf
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Upcoming regulatory changes
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• Pipeline Safety, Regulatory Certainty, and Job Creation Act of 20111 authorized PHMSA’s federal pipeline safety programs through 2015 – completed 26 of the 42 mandates and 2 of the 6 required actions
• PHMSA expects to issue updated rules by the end of the year which may include previously explored enhancements such as IVP
• Re-authorization could include additional mandates or required actions such as new in-line inspection (ILI) technology
1) Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 – http://www.phmsa.dot.gov/pipeline/psa/overview-and-progress
Strategy& | PwC
Background on integrity management
Introduction to DIMP and TIMP
Regulatory landscape
Safe and reliable assets
Natural gas infrastructure
Recent pipeline incidents
Upcoming regulatory changes
Components of pipeline safety
The role of internal audit + case studies
12
Background on integrity management
Strategy& | PwC
Context of industry
Percentage of respondents saying there’s high scope for improvement in the following areas of P&U company operations1
13
P&U areas for improvement
1) 13th PwC Annual Global Power & Utilities Survey
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PwC’s gas operations framework
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Asset managementRisk prioritized work
Investment balancingAllocate capital and
expense to minimize risk
Work managementComplete projects and
manage work
Gas Operations Excellence
Critical Enablers
Data Management/Analytics
Regulatory Strategy
Risk Management
Performance Management
QA/QC
Technology
Governance and
Accountability
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Pipeline safety assessment
15
Combination of evolving guidance frameworks used to assess the pipeline safety program
API: American Petroleum Institute COSO: The Committee of Sponsoring Organizations of the Treadway Commission
RP: Recommended Practice ISO: International Standards Organization PAS: Publicly Available Standard
• Baseline pipelines specific practices for safety management
• Plan-Do-Check-Act Cycle• Pipeline safety
management system (PSMS) must be flexible, scalable and supported by strong culture of safety
• Integrated framework for internal controls across all industries
• Leverages various types of control throughout all functions of the organization
• Outlines asset management capabilities to manage physical assets
• Can be applied to integrate risk , data, and performance management along with asset management
• Aligns the asset management objectives with the organizational objectives
• Safety management strategies of companies in the following industries reviewed: utilities, energy, chemicals, aviation
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Gas operations – governance and accountability
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• Governance and accountability includes organizational and strategic aspects of pipeline safety
– Leadership commitment, roles, responsibilities, and governance authority with an understanding of organizational context
– Alignment of internal and external stakeholder objectives
– Governance and management of change
– Alignment of incentive structure to system and public safety
• Audit topics:
– Organizational alignment with integrity management requirements
– Decision-making authority and process
– Documentation of historical integrity management decisions
– Established review process for asset management, investment balancing, work management, and critical enablers
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• Asset management considers the sophistication of risk identification and mitigation decision process connected to the corporate strategy
– Alignment of organizational strategy and objectives and asset-specific strategies and plans
– Development and maintenance of asset management policies, strategic objectives, and plans
– Validation of asset data
• Audit topics:
– Compliant integrity management programs with PHMSA and company policies
– Documented asset management objectives and plans to reduce risk
– HCA identification and maintenance process
Gas operations – asset management
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1) PwC, Asset management progression – http://www.pwc.com/en_US/us/power-and-utilities/assets/pwc-asset-management-powering-your-journey-to-success.pdf
Asset management progression1
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• Investment balancing allocates resources to the riskiest projects and development of critical enablers
– Implementation of asset management plans to define work execution across asset lifecycle
– Risk management, training, competence, information management and the coordination among these functions
• Audit topics:
– Defined budgeting process and project selection decision tree
– Established performance metrics and periodic goals based on investments
– Communication and alignment of investment priorities
Gas operations – investment balancing
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1) PwC, Asset investment planning lifecycle – http://www.pwc.com/en_US/us/power-and-utilities/assets/pwc-asset-management-powering-your-journey-to-success.pdf
Asset investment planning lifecycle1
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Gas operations – work management
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• Work management completes the selected projects and controls the schedule and finances of execution
– Execution of selected project to improve asset health(i.e., inspect, maintain, repair, and replace)
– Assignment to qualified operators
– Contractor relations and responsibilities
• Audit topics:
– Adherence to regulatory and corporate standards
– Validation and maintenance of operator qualifications
– Contractor compliance with corporate standards
– Leak survey, grading/classification, and remediation process
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Gas operations – critical enablers
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• Critical enablers improve the operations with supporting capabilities, tools, and controls
– Records and data management setup and practices including completeness, accuracy, and availability
– Internal and external communication to employees, regulators, customers, and other stakeholders
– Performance management to identify and measure of critical metrics
– Risk management to define, evaluate, and develop mitigation plans for an acceptable risk profile of operating the infrastructure
– Identification, selection, and implementation of the required technology to support business decisions and operations
– Controls to ensure quality throughout the operations
• Audit topics:
– Completeness and accuracy of asset data across records and systems
– Measurement of performance and metric alignment with organizational objectives
– Adherence to risk evaluation procedures and mitigation plans
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Pipeline safety framework
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Manage the connection of findings across several audit topics with a high-level framework
Asset managementRisk prioritized work
Investment balancingAllocate capital and
expense to minimize risk
Work managementComplete projects and
manage work
Gas Operations Excellence
Critical Enablers
Data Management/Analytics
Regulatory Strategy
Risk Management
Performance Management
QA/QC
Technology
Governance and
Accountability
Strategy& | PwC
Background on integrity management
Introduction to DIMP and TIMP
Regulatory landscape
Safe and reliable assets
Natural gas infrastructure
Recent pipeline incidents
Upcoming regulatory changes
Components of pipeline safety
The role of internal audit + case studies
22
Background on integrity management
Strategy& | PwC
Internal audit of pipeline safety
23
• Understand high-level components of integrity management
• Identify critical inputs to pipeline safety evaluation
• Evaluate consistent application of process and documentation of decision making
• Case studies
– Leak survey and leak database
– Pipeline prioritization for replacement
– Data management and system of record
Strategy& | PwC
Questions?
Jared Racine
Power and Utilities Manager
Strategy&, part of the PwC network
(678) 419-2672
24
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