1. Joe Killins & Associates, LLC Pipelines & Risk Based Management How Safe is Safe?

2. Joe Killins & Associates, LLC How Safe is Safe? Energy Transportation Network Energy Transportation Network What does safe operation require? What does safe operation require? What does risk management provide? What does risk management provide? Hazardous Liquid IMP Rule Hazardous Liquid IMP Rule What is Risk? What is Risk? Pipeline Threats Pipeline Threats Recent industry performance Recent industry performance

3. Joe Killins & Associates, LLC Energy Transportation Network 160,000 miles of onshore and offshore Hazardous Liquid Pipelines 160,000 miles of onshore and offshore Hazardous Liquid Pipelines 298,000 miles of onshore and offshore Gas Transmission Pipelines 298,000 miles of onshore and offshore Gas Transmission Pipelines 1,850,000 miles of Natural Gas Distribution pipelines 1,850,000 miles of Natural Gas Distribution pipelines

4. Joe Killins & Associates, LLC Pipelines Are A Long Term Asset 67% of Hazardous Liquid Pipelines built before 1970 67% of Hazardous Liquid Pipelines built before 1970 In-service degradation can be mitigated In-service degradation can be mitigated Corrosion control – Cathodic Protection and Coatings Corrosion control – Cathodic Protection and Coatings Trained personnel Trained personnel Protection from 3 rd Party Damage Protection from 3 rd Party Damage Testing with smart and smarter pigs; non-destructive testing; other inspection Testing with smart and smarter pigs; non-destructive testing; other inspection Timely Repairs and maintenance Timely Repairs and maintenance

5. Joe Killins & Associates, LLC Safe Operation Requires: Sound system design; Sound system design; Selection and use of qualified materials; Selection and use of qualified materials; Proper construction; Proper construction; Thorough and adequate inspection, testing, maintenance and repair; Thorough and adequate inspection, testing, maintenance and repair; Continuous system monitoring and control; Continuous system monitoring and control; Operations conducted by trained and qualified workers; Operations conducted by trained and qualified workers; Implementation of damage prevention best practices; Implementation of damage prevention best practices; Identification and mitigation of risks; and Identification and mitigation of risks; and Coordination and preparation for emergency response. Coordination and preparation for emergency response.

6. Joe Killins & Associates, LLC Risk Management Should: Identify needs Identify needs Analyze cost vs benefit of various choices Analyze cost vs benefit of various choices Establish an operating discipline Establish an operating discipline Measure all the processes Measure all the processes Continuously improve all aspects of the operation Continuously improve all aspects of the operation

7. Joe Killins & Associates, LLC Hazardous Liquid IMP Rule IMP Rule March 2001 IMP Rule March 2001 Identify segments that could affect HCAs by December 31, 2001 Identify segments that could affect HCAs by December 31, 2001 Written IMP by March 31, 2002 Written IMP by March 31, 2002 Assess 50% of segments by September 30, 2004 Assess 50% of segments by September 30, 2004 Complete Baseline Assessments by March 31, 2008 Complete Baseline Assessments by March 31, 2008

8. Joe Killins & Associates, LLC What is Risk? Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, "risk" is often used synonymously with the probability of a loss or threat. In professional risk assessments, risk combines the probability of an event occurring with the impact that event would have Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, "risk" is often used synonymously with the probability of a loss or threat. In professional risk assessments, risk combines the probability of an event occurring with the impact that event would haveconceptimpactassetvalueprocesseventprobabilitythreatconceptimpactassetvalueprocesseventprobabilitythreat

9. Joe Killins & Associates, LLC Risk Assessment Methods Risk = Likelihood x Consequence

10. Joe Killins & Associates, LLC Pipeline Threats Time Dependent Time Dependent External corrosion External corrosion Internal Corrosion Internal Corrosion Stress Corrosion Cracking Stress Corrosion Cracking Stable Stable Manufacturing Related Defects Manufacturing Related Defects Defective pipe seam Defective pipe seam Defective pipe Defective pipe

11. Joe Killins & Associates, LLC Pipe Threats Welding/Fabrication Related Welding/Fabrication Related Defective pipe girth weld Defective pipe girth weld Defective fabrication weld Defective fabrication weld Wrinkle bend or buckle Wrinkle bend or buckle Stripped threads/broken pipe/coupling failure Stripped threads/broken pipe/coupling failure Equipment Equipment Gasket O-ring failure Gasket O-ring failure Control/Relief equipment malfunction Control/Relief equipment malfunction Seal/pump packing failure Seal/pump packing failure Miscellaneous Miscellaneous

12. Joe Killins & Associates, LLC Pipe Threats Time Independent Time Independent Third Party/Mechanical Damage Third Party/Mechanical Damage Damage inflicted by first, second or third parties (instantaneous/immediate) Damage inflicted by first, second or third parties (instantaneous/immediate) Previously damaged pipe (delayed failure mode) Previously damaged pipe (delayed failure mode) Incorrect operations Incorrect operations Incorrect operational procedure Incorrect operational procedure Weather Related and Outside Force Weather Related and Outside Force Cold weather Cold weather Lightning Lightning Heavy rains or floods Heavy rains or floods Earth Movement Earth Movement

13. Joe Killins & Associates, LLC Uses of Risk Management Prioritization of Line Assessment Schedules Prioritization of Line Assessment Schedules Selection of Assessment Methods Selection of Assessment Methods Elimination of tens of thousand of integrity threats Elimination of tens of thousand of integrity threats Preventive and Mitigative Measures Preventive and Mitigative Measures Implementing damage prevention best practices Implementing damage prevention best practices Enhanced cathodic protection monitoring Enhanced cathodic protection monitoring Set appropriate inspection intervals Set appropriate inspection intervals Enhanced training Enhanced training Installing EFRDs Installing EFRDs Modifying leak detection and pressure monitoring systems Modifying leak detection and pressure monitoring systems

14. Joe Killins & Associates, LLC