Legislative & Regulatory Update on Validation of MAOPs of Transmission Pipelines January 17, 2012 Best Practices Kickoff Meeting Andrew Lu alu@aga.org AGA

Key Issues: San Bruno accident has cast a bright spotlight on the safety of all pre-1970 pipelines, particularly transmission pipes in HCAs where there is no record of a pressure test NTSB, Congress, PHMSA and other parties are suggesting that the “grandfathering clause” in 192.619(C) should be removed from the federal code as a way to establish MAOP In its comments to the ANPRM issued by PHMSA, AGA expresses general support, but not a complete removal of this as a method to determine a transmission pipeline’s MAOP. (Sufficient time must also be given to operators to make an orderly transition) AGA supports 2011 Legislation. A significant percentage of the 45,000 miles of transmission pipe operated by LDCs is lacking pressure test record LDCs have unique challenges in pressure testing in-service transmission pipe that interstates simply do not have

General Thoughts on MAOP Using the highest actual operating pressure from 1965-70 as basis for MAOP was necessary to transition pre-code pipe and is still relied on today by operators Unfortunately, grandfathering clause has received a black eye in the public arena However, several utilities pressure tested their pipe to meet ASME standards in place at the time and some states even had regulations in place prior to 1970 Records are often lost or mis-placed due to company mergers and acquisitions and office relocations In 2011, AGA members created two white papers on MAOP – www.aga.org/our- issues/safety/pipleinesafety/Technicalreports/Pages/default.aspx Companies have begun (and some completed) MAOP records review due to January 2011 PHMSA advisory bulletin issued

Update on Legislation Reauthorization began in 2010 and finally resulted in a bill passed by Congress Dec 13, 2011 and signed by Obama on Jan 3, 2012 Senate and House bills were reconciled Industry lobbyists worked extremely hard to ensure that unwarranted and incredibly costly mandates were kept out The legislation largely reflects a compromise between various interests and should have a substantial impact in enhancing pipeline safety at a reasonable cost to natural gas pipeline operators and their ratepayers

Pipeline Safety Reauthorization Language under Section 23 MAOP (1 of 2) Mandates DOT to require operators to conduct, within 6 months of enactment, a verification of records related to gas transmission lines in class 3 and 4 locations and in class 1 and 2 HCAs to ensure that records accurately reflect the physical and operational characteristics of the pipelines and confirm the established MAOP of the pipelines. The verification will include elements considered appropriate by DOT. Transmission pipeline operators must identify and submit to DOT, within 18 months of enactment, documentation related to segments for which the records are insufficient to confirm the established MAOP. Operators must report exceedances of MAOP greater than allowable buildup of pressure-limiting devices to DOT and states within 5 days of occurrence. Risk can only be managed. Nothing in life is 100%.

Pipeline Safety Reauthorization Language under Section 23 MAOP (2 of 2) For pipelines within insufficient MAOP records, DOT must: a) Require the operator to reconfirm a MAOP as expeditiously as economically feasible; and b) Determine what actions are appropriate until a MAOP is confirmed. DOT must take into account potential consequence to public safety and the environment, impacts on pipeline system reliability and deliverability, and other factors Requires DOT to issue regulations, within 18 months after enactment, for conducting tests to confirm material strength of previously untested gas transmission lines in HCAs operating > 30% SMYS. DOT must consider safety testing methodologies, including pressure testing, ILI and other methods determined to be of equal or greater effectiveness. Requires DOT, in consultation with FERC and state regulators, to establish timeframes for mandated testing that account for potential consequences to public safety that minimizes costs and service disruptions. Risk can only be managed. Nothing in life is 100%.

Summary AGA supports the provisions within the 2011 Pipeline Safety Reauthorization Many pipeline operators are still in the process of reviewing MAOP records for transmission pipelines Some transmission pipelines without pressure test records will need to be pressure tested or have an ILI performed The NTSB recommendations must be acted on Federal regulations written by PHMSA must meet Congressional intent in the legislation Expect PHMSA to likely issue an NPRM by the end of 2012 AGA is conducting a workshop on Feb 29 – March 1 to discuss pending transmission pipeline regulations and to hear from operators