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

 NTSB/PHMSA Investigations  CPUC Independent Panel Review  Public Awareness

Source: PHMSA 2011 Annual reports California Companies and Mileage

 Elimination of grandfather clause for transmission  Tougher enforcement Historical Operating Pressure

 New pipeline safety plan  Management and financial audits

Rulemaking R (June 2011)  Pressure test required for all transmission pipe  Remote Control Valves/Automatic Shut-off Valves must be considered

Rulemaking R (June 2011)  Modifications to accommodate in-line inspection devices must be considered  Operators had to submit a plan in August 2011 addressing requirements

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

Citation Process 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

R (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.”

R (April 2012)  “provide opportunities for meaningful, substantial, and ongoing participation by the gas corporation workforce in the development and implementation of the 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.”

 “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.”

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

Commissioners 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 Excavation damage (AB 1514) 4.Location and specification of pipe in the ground 5.Unmonitored class location change

6.Aging infrastructure and interacting threats 7.Infrastructure, maintenance, and parts 8.Utility resource management and workforce development 9.Gas leak identification and response 10.Pipe with characteristics susceptible to failure 11.Protection redundancy.

12.Accommodating in-line inspection tools (smart pigs) 13.Utility management deficiencies (safety first culture) 14.RCVs/ASVs 15.Customer-owned or operated lines 16.Master-metered systems not in mobile home parks 17.Inadequate regulations

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