U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Pipeline Advisory Committee Groundhog Day Jeff Wiese – OPS July 11, 2012

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Outline Opening Comments Groundhog Day? Perspective on Past Performance How Did We Get To “Here” The Fallout PHMSA Pipeline Priorities for 2012 & Beyond Upcoming Events

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Opening Comments We Have Made Good Progress – Together – Over the Years It’s Been A Tragic and Tough Couple of Years Clearly We Have Work to Do Your Advice and Counsel is More Important Now Than Ever We Can Wrest Control of Our Own Future, or Cede it to Others Resistance if Futile, Not to Mention an Expensive Time Waster Themes are Emerging That We Can’t Ignore –Some are fundamental – risk assessment, records, tools, QA/QC, emergency response preparedness, etc. –Some are finish work, but essential components – executive engagement, employee involvement, - 3 -

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Groundhog Day?? The more things change, the more they stay the same… We have a solid regulatory framework that still has many flexible, performance-based requirements, we make progress then… Numerous operator failures to rigorously implement this framework raise serious questions regarding need for additional prescription, as well as adding lots of work to do for both of us as a direct result of the backlash – once again, the agenda is driven by others 2012 ends the baseline period of transmission Integrity Management, and 2013 will bring serious reconsideration of the IMP framework and seek to identify/fill gaps and soft spots - 4 -

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Perspective on Past Performance - 5 -

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration - 9 -

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Significant Accidents – All Systems Total NumberFatalities 2 Injuries Year Average ( ) Year Average ( ) Year Average ( ) Data as of 03/05/ Roughly 70% of fatalities and injuries are members of the public

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Significant Accident Breakdown Total by Type (Fatalities) Total for All Types 1 Hazardous Liquid Gas Transmission Gas Distribution (19)121 (1)77 (10)53 (8) (15)136 (1)79 (0)62 (14) 3 Year Average ( ) 269 (16)121 (2)76 (3)65 (10) 5 Year Average ( ) 271 (14)118 (2)75 (2)68 (9) 10 Year Average ( ) 282 (15)122 (2)75 (2)75 (11) Does not include gathering lines - totals may not add – excludes “fire first” incidents; 2 data as of 03/05/2012

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration How Did We Get To “Here” Flashback to January 2010 –“Window” was open, and our performance had been good What happened next –DWH and fallout –A polarized political environment, and a media frenzy –A spate of tragic and highly visible accidents in 2010: Marshall, San Bruno, Allentown, Philadelphia, Yellowstone River, GA-TX-ND, etc. A prescription for damage from weak links / poor performers and tragic, outlier events

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration The Fallout – Thru 2011 Administration and Many Others Believe A Fix is Needed –Secretary LaHood’s Call to Action to ALL Parties –Push for regulatory framework fortification (prescription?) –Demand for stronger oversight at all levels –Case made for pipeline infrastructure reinvestment –Emergence of the economic regulator’s role NTSB has delivered their investigation findings and recommendations for both San Bruno Congress reauthorized US, with a ton of new mandates, little time, and no to few new resources – late before we begin

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Four More Years! Pipeline Safety Laws Just Reauthorized – only 15 hearings! What’s the Congress Calling For – A LOT! ( more on how in a minute ) –Stronger enforcement with due process protections – for basics (x2), restoring spill plan authority, and for excavation damage (exemptions) –MAOP Confirmation (grandfather clause), valves, leak detection, EFV’s, depth of cover, damage prevention (grants), emergency notification –Transparency: cast iron, oil spill plans, basic data –Studies galore: valves, leak detection, expansion of IMP, gathering lines, risks of dilbit transport, nonpetroleum hazardous liquid pipelines, new construction permit process (State and Federal - GAO) –Limitation on use of national consensus standards Flat funding for both Federal and State programs from Congress –But not from the Administration - FY 2013 Request to Congress

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Fallout – Continues in 2012 NTSB has now weighed in on the Marshall, MI failure, and is expected soon to deliver its reports on Illinois and Florida IG to has weighed in on their views on integrity management for HL pipelines, and is actively auditing our State programs

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2012 & Beyond Pipeline Safety Priorities

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Agency Priorities for 2012 Continue the cleanup we began in 2011 Focus on legislative mandates & NTSB recommendations –Regulatory (next) –Workshops (coming up) –Studies (transparent process) Deal with a variety of new audits – IG & GAO Operationally – CRM, DIMP, PA, move to II, new construction, and risk assessment/records verification, damage prevention, PIPA, etc. Follow through on QMS issues, fitness for service

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2012 Regulatory Priorities Major Priorities –Federal enforcement on excavation damage NPRM –Hazardous Liquid rule – through final phase –Pipeline Enforcement rulemaking – through final phase –Gas rulemaking – through proposed rule phase Likely to pick up most Congressional/NTSB items –MAOP verification in class 3 & 4 + HCA’s (and beyond?) Associated issues of records inadequacies, reporting exceedences, and material testing requirements

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2012 Regulatory Priorities Capacity Permitting –Gathering lines – data collection and report to Hill –Larger application EFV’s –Miscellaneous rulemaking: Seismicity, accident/incident notification, consensus standards updates –Cost recovery for “design reviews” –Incorporation of consensus standards – transparency –CO2 (gaseous) and biofuel pipeline fixes –Risk management and class location dilemma –Mapping – accuracy and HCA updates + awareness

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2012 Studies Valves for New/Rehabilitated Gas Pipes –GAO to look at application to existing pipelines Leak Detection – Hazardous Liquid and Natural Gas Cover Over Inland Water Crossings – Hazardous Liquid Cast Iron Inventory and Replacement/Rehabilitation Dilbit Transportation Risks Excavation Damage and Role of Exemptions R&D Results and Plan

U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Upcoming Events Emergency Responder Forum Follow-up Leak Detection Workshop – March 27 th (webcast) Valve Workshop – March 28 th (webcast) April – National Safe Digging Month – Call 811 DIMP Workshop – June 27 (DFW) (webcast) R&D Workshop – July Data and Metrics Workshop – September (webcast) Other possible workshops/events – capacity limited –Damage prevention exemptions –Risks Associated with Pipeline Transportation of Dilbit –Gas gathering, IMP Expansion / Class Location