Consequence Analysis: A More Comprehensive Proposed Regulatory Approach Western Regional Gas Conference Tempe, Arizona Daron Moore August 19, 2014

TransCanada North American System Map Approximately 17,000 miles of natural gas transmission pipe in U.S. ANR, Great Lakes, GTN, Northern Border, Portland, Tuscarora, North Baja, Bison (AMAOP) Approximately 20,000 miles of natural gas transmission pipe in Canada and Mexico Approximately 2,000 miles of liquid transmission pipe in U.S. Keystone and Gulf Coast lines 2

Resume’ The brief version…. 3

Opening Comments The class location methodology has served the industry well The methodology has been around since 1958 Technology has moved ahead The Integrity Management Program rule includes newer technology (PIR) Accepted by science and PHMSA 4

Class Location Review Class 1 location is: An offshore area, or Any class location unit that has 10 or fewer buildings intended for human occupancy Class 2 location is: Any class location unit has more than 10 but fewer than 46 buildings intended for human occupancy Class 3 location is: Any class location unit that has 46 or more buildings intended for human occupancy An area where the pipeline is within 300 feet of either a building or a small, well-defined outside area that is occupied by 20 or more persons for at least 5 days a week for 10 weeks a year 5

High Consequence Area Review Method 1: A class 3 location A class 4 location Any area in a class 1 or class 2 location where the potential impact radius (PIR) is greater than 660 feet and the area within the PIR contains 20 or more buildings intended for human occupancy Any area in a class 1 or class 2 area where the PIR contains an identified site Method 2: Any area within the PIR containing: 20 or more buildings intended for human occupancy, or An identified site 6

Why Consider a Change Now? Better use of existing data Better quantification of consequences Public Pipeline employees Pipeline facilities Increased pipeline safety Major pipeline safety rule changes are coming Other significant changes could be assimilated more easily The technology is proven and accepted Hazardous liquid pipeline industry does not have class location methodology 7

How Would It Work? Only on new pipe It is unclear how this could be applied to existing pipelines given the modeled large-scale changes required Operators would be provided a choice of this model or the existing class location model The choice would look much like the same choice in 2002 in IMP between Method 1 and Method 2 Federal pipeline safety regulations would need to be changed No need for “special permit” approval; would look more like AMAOP rule Issues Congressional mandates, state laws, standards (ASME, API, etc) 8

Some Details, Please Subpart A Class Locations: Move definition of PIR to this section LCA – no structures in PIR and offshore MCA – 1-19 structures in PIR HCA – 20 or more structures plus identified sites VHCA – 3 or more four-plus story buildings 9

Some Details, Please Subpart B Transportation of Pipe: Class 1 could be consistent with LCA Classes 2, 3, and 4 could be consistent with MCA, HCA, and VHCA* * denotes where alternative methodology increases level of performance, throughout slides 10

Some Details, Please Subpart C (a) Design Factor (F) for steel pipe: LCA, MCA, HCA design factor of 0.72 VHCA design factor of (b)-(d) Design factor (F) for steel pipe: Where Class 1 is mentioned, replace with LCA, Class 2 with MCA* For existing (b), create a new (c); for HCAs,, employ a design factor of 0.5 or less New (d), for MCA and HCA, employ a design factor of 0.6 or less New section to address design factors for HCA and VHCA 11

Some Details, Please Subpart D (b)(6) Passage of internal inspection devices: Add VHCA in addition to Class Valve spacing: LCA and MCA within 10.0 miles HCA within 4.0 miles VHCA within 2.5 miles Subpart E Nondestructive testing: Adopt the percentage to corresponding class location designation replacement 12

Some Details, Please Subpart G Cover: LCA – adopt Class 1 cover requirements MCA, HCA, VHCA – adopt cover requirements for Class 2, 3, 4 Subpart J (c) General requirements: adopt the limitations of Class 1, 2, 3, 4 to LCA, MCA, HCA, VHCA (a) Strength test requirements for steel pipeline to operate at a hoop stress of 30 percent or more of SMYS Apply requirement for 125% test to LCA, MCA, HCA 13

Subpart J (continued) (b) Strength test requirements for steel pipeline to operate at a hoop stress of 30 percent or more of SMYS Pressure test LCA, MCA, HCA to Class 3 requirements Subpart K No changes needed Subpart L (a) Change in class location: Required study: Only change would be to VHCA where replacement is only course of action other than de-rate 14

Some Details, Please Subpart L (continued) (a)(2) Change in class location: Confirmation or revision of maximum allowable operating pressure: De-rate to level of new pipe in the same location or replace pipe only occurs when changing to VHCA classification Continuing surveillance: “…changes in class location or alternative classifications.” (a)(2) Maximum allowable operating pressure: Steel or plastic pipelines: Two test factors: 1.25 times for LCA, MCA, HCA, 1.50 times for VHCA 15

Some Details, Please Subpart L (continued) Alternative maximum allowable operating pressure for certain steel pipelines: Not contemplating allowing AMAOP for alternative classifications Odorization of gas: Use “straight” 50% of line length in HCA or VHCA, or perhaps 40% to compensate for eliminating the 50% downstream criterion) 16

Some Details, Please Subpart M Patrolling: Adopt Class 1, 2 requirements for LCA, MCA, adopt Class 3 requirements for HCA, adopt Class 4 requirements for VHCA Leak surveys: Adopt Class 1, 2 requirements for LCA, MCA, adopt Class 3 requirements for HCA, adopt Class 4 requirements for VHCA (b)(2), (b)(3) Line markers for mains and transmission lines: Not applicable to alternative classifications (b)(4) Line markers for mains and transmission lines: Adopt Class 3, 4 exception for HCA, VHCA 17

Some Details, Please Subpart O What definitions apply to this subpart? Definition of “covered segment” expanded to include MCA, HCA, VHCA* Need new definition for “Consequence Area” and describe MCA, HCA, and VHCA Need to treat Method 1 separately to preserve distinction Need to declare either class location or alternative classification methodology 192.9xx Various sections of Subpart O Need for various definitional changes under alternative classification 18

More Discussion Required Non-destructive testing issues Certain depth of cover requirements ( ) Odorization requirements Gathering requirements ( (b)) 19

How Would It Work? Only on new pipe It is unclear how this could be applied to existing pipelines given the modeled large-scale changes required Operators would be provided a choice of this model or the existing class location model The choice would look much like the same choice in 2002 in IMP between Method 1 and Method 2 Federal pipeline safety regulations would need to be changed No need for “special permit” approval; would look more like AMAOP rule Issues Congressional mandates, state laws, standards (ASME, API, etc) 20

Question and Speculation Time 21