1. LOGO Arizona Corporation Commission Safety Division rmiller@azcc.gov Robert Miller

2. New and Proposed Regulations and Their Impact on State Programs NAPSR - The National Association of Pipeline Safety Representatives is the national association representing the State pipeline safety inspectors in the contiguous United States as well as the District of Columbia and Puerto Rico. Through a unique partnership with the U.S. Department of Transportation, NAPSR members have oversight responsibilities for safe and reliable transportation of natural gas and hazardous liquids through pipelines.

3. New and Proposed Regulations and Their Impact on State Programs State pipeline safety personnel make up more than 75% of the State/federal inspection workforce. NAPSR provides these inspectors with a venue to share best practices, enhance communications with our federal counterparts, raise new issues, and influence policy. NAPSR is recognized by Congress, the courts, federal agencies, and the media as the national voice of the State pipeline safety community.

4. New and Proposed Regulations and Their Impact on State Programs NAPSR members have direct safety authority over more than 96% of regulated intrastate gas systems and 32% of hazardous liquid systems in the U.S. Most interstate pipeline inspectors are federal government employees focusing upon 12% of the gas infrastructure in the US while States monitor the remaining 88%.

5. New and Proposed Regulations and Their Impact on State Programs Recent statistics indicate that NAPSR members have safety authority of about 92% of the two million miles of gas distribution pipelines (pipelines serving retail consumers) in the country. State pipeline safety programs have been partially funded by the federal government since the 1968 Pipeline Safety Act.

6. New and Proposed Regulations and Their Impact on State Programs Each state receiving federal funding does so with the understanding that we must maintain our programs in accordance with our federal certification guidelines. Without this partnership and the funding it provides many states would be hard pressed to maintain our programs at their current levels.

7. New and Proposed Regulations and Their Impact on State Programs Although each state program is required to follow federal guidelines, due to the uniqueness of each state program and the pipeline operators within each state, we are allowed; To establish additional pipeline safety regulations provided; These regulations are either more stringent or as stringent as the current federal regulation already in place.

8. New and Proposed Regulations and Their Impact on State Programs As many of you here today can attest to, states are not hesitant when it comes to establishing a new regulations relevant to the safe operation of an intrastate pipeline within their jurisdiction. As reported in the recently released Compendium of State Pipeline Regulations as of September 2011 the total number state initiatives is 1154. For a copy of the full report go to www.napsr.org

9. New and Proposed Regulations and Their Impact on State Programs Today states are working hard to maintain their safety programs at a level that not only meets the needs and expectations of their state but also the needs of our federal partners in accordance with our state certification program. Due to state budget issues, hiring freezes, furloughs many state programs are doing more with less every day.

10. New and Proposed Regulations and Their Impact on State Programs While federal funding has increased over the past several years so have the number of new and challenging regulations. Beginning with Operator Qualifications, followed by Integrity Management for liquid operators followed by Integrity Management for transmission operators followed by Public Awareness followed by Distribution Integrity management followed by ???????.

11. New and Proposed Regulations and Their Impact on State Programs For the most part the regulations I listed are all performance based regulations and by there nature very difficult to evaluate requiring a high level of inspector training in order conduct an effective evaluation of the operators programs. Some states are concerned that new regulations may overlap other relatively new regulations before those regulations have had the full opportunity to demonstrate their effectiveness.

12. New and Proposed Regulations and Their Impact on State Programs New regulations often lead to new inspection guidelines and new training requirements. States are already working hard to keep up with existing federal training requirements. A failure by any state to complete our training in accordance with our certification could and has resulted in a reduction of funding for that state programs. This is of special concern to those states that have been able to add additional inspection personnel.

13. New and Proposed Regulations and Their Impact on State Programs Some states also have a concern over the possibility that we will be required to increase our civil penalties to match those of the federal government and dropping the “Ability to Pay” limitations. States are concerned that if they are required / forced to adopt the same level without limitations there are operators whom could not take such a hit and continue to provide safe reliable services.

14. New and Proposed Regulations and Their Impact on State Programs NAPSR members already use a wide range of compliance methods as part of their regulatory oversight, including: Corrective action orders, which direct the operator the to make specific safety related improvement; Civil penalties, such as monetary fines, taking into account a companies ability to pay. Without taking into consideration a companies ability to pay may have serious consequences unintended to both the operator and the rate payers they supply; and Rate-of-return control, which ensures that the operating company and its shareholders, not consumers, bear the cost of improving their safety record.

15. New and Proposed Regulations and Their Impact on State Programs Other concerns include the current ANPRM where in the federal government is considering taking authority for enforcement of state damage prevention programs that they determine are inadequate and to require states to collect data (investigate)on all damages to pipeline facilities. Collecting / investigating data on the surface sounds simple enough until you look at the number of damages / leaks / minor incidents the occur every day (9 to 12 per day / 3285 to 4380 per year).

16. New and Proposed Regulations and Their Impact on State Programs Collecting, confirming and investigating this many reports will require additional resources that could have a devastating impact on an already strained state budget. Also of concern is by what criteria will PHMSA determine a state damage prevention program to be inadequate and who will make that determination.

17. New and Proposed Regulations and Their Impact on State Programs A utomatic shut valves; real benefits v/s the perceived benefits of these valves. The realistic use of this technology must be weighed against the analytical study for their use and effectiveness and the total cost of installation. The point being, when do you feel comfortable placing the decision on shutting down an entire community or city to a piece of equipment v/s a live person making a calculated decision based on that persons knowledge, training and experience of the system.

18. New and Proposed Regulations and Their Impact on State Programs Every day State programs, in addition to our regular duties, are being inundated with notices of new and proposed rule changes requesting our attention and comments along with request for information from the public, our elected officials, the news media, lawyers and other stakeholder groups. Buried within this mountain of information and requests for information is the realization that if we do not manage our time and attention properly there can and have been dire consequences.

19. New and Proposed Regulations and Their Impact on State Programs Since their inception exiting regulations have provided a means of establishing industry standards and regulatory oversight that has made the transportation of hazardous gas and liquids by pipeline the safest and most efficient means of transportation. Although we have an excellent record it can and shall be improved upon.

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