# 2010 AZ NG Program Evaluation - az2010ngprogramevaluation (Arizona; Natural Gas State Program Evaluation)

- **operation:** document
- **citation:** PHMSA az2010ngprogramevaluation
- **title:** 2010 AZ NG Program Evaluation - az2010ngprogramevaluation (Arizona; Natural Gas State Program Evaluation)
- **source type:** inspection
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** historical
- **official:** true
- **published on:** 2010-01-01
- **effective on:** Not available
- **summary:** 2010 PHMSA natural gas program evaluation for Arizona.
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1200 New Jersey Avenue SE Washington DC 20590 U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2010 Natural Gas State Program Evaluation for ARIZONA CORPORATION COMMISSION Document Legend PART: O -- Representative Date and Title Information A -- General Program Qualifications B -- Inspections and Compliance - Procedures/Records/Performance C -- Interstate Agent States D -- Incident Investigations E -- Damage Prevention Initiatives F -- Field Inspection G -- PHMSA Initiatives - Strategic Plan H -- Miscellaneous I -- Program Initiatives DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 1

2010 Natural Gas State Program Evaluation -- CY 2010 Natural Gas State Agency: Arizona Rating: Agency Status: Date of Visit: 05/16/2011 - 05/20/2011 Agency Representative: Robert Miller, Pipeline Safety Supervisor Corky Hanson, Assistant Pipeline Safety Supervisor Alan Borne, Senior Pipeline Safety Inspector PHMSA Representative: Glynn Blanton, DOT/PHMSA State Programs Patrick Gaume, DOT/PHMSA State Programs Commission Chairman to whom follow up letter is to be sent: Name/Title: Gary Pierce, Chairman Agency: Arizona Corporation Commission Address: 1200 West Washington Street, 2nd Floor City/State/Zip: Phoenix, AZ 85007 60105(a): Yes 60106(a): No Interstate Agent: Yes INSTRUCTIONS: Complete this evaluation in accordance with the Procedures for Evaluating State Pipeline Safety Program. The evaluation should generally reflect state program performance during CY 2010 (not the status of performance at the time of the evaluation). All items for which criteria have not been established should be answered based on the PHMSA representative's judgment. A deficiency in any one part of a multiple part question should be scored as needs improvement. Determine the answer to the question then select the appropriate point value. If a state receives less then the maximum points, include a brief explanation in the space provided for general comments/regional observations. If a question is not applicable to a state, select NA. Please ensure all responses are COMPLETE and ACCURATE, and OBJECTIVELY reflect state program performance. Increasing emphasis is being placed on performance. This evaluation together with selected factors reported in the state's annual certification/agreement attachments provide the basis for determining the state's pipeline safety grant allocation. Field Inspection (PART F): The field inspection form used will allow different areas of emphasis to be considered for each question. Question 13 is provided for scoring field observation areas. In completing PART F, the PHMSA representative should include a written summary which thoroughly documents the inspection. Scoring Summary PARTS Possible Points Points Scored A General Program Qualifications 26 25 B Inspections and Compliance - Procedures/Records/Performance 22.5 22.5 C Interstate Agent States 7 7 D Incident Investigations 7 7 E Damage Prevention Initiatives 9 9 F Field Inspection 10 10 G PHMSA Initiatives - Strategic Plan 9.5 8.5 H Miscellaneous 3 3 I Program Initiatives 9 9 TOTALS 103 101 State Rating................................................................................................................................................... 98.1 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 2

PART A - General Program Qualifications Points(MAX) Score 8 7 1 Did the state submit complete and accurate information on the attachments to its most current 60105(a) Certification/60106 (a) Agreement? (NOTE: PHMSA Representative to verify certification/agreement attachments by reviewing appropriate state documentation. Score a deficiency in any one area as "needs improvement". Attachment numbers appear in parenthesis) Previous Question A.1, Items a-h worth 1 point each Yes = 8 No = 0 Needs Minor Improvement = 3-7 Needs Major Improvement = 2 a. State Jurisdiction and agent status over gas facilities (1) b. Total state inspection activity (2) c. Gas facilities subject to state safety jurisdiction (3) d. Gas pipeline incidents (4) e. State compliance actions (5) f. State record maintenance and reporting (6) g. State employees directly involved in the gas pipeline safety program (7) h. State compliance with Federal requirements (8) SLR Notes: Information reviewed in 2011 Natural Gas Certification attachments 1, 2 & 3 are correct with inspection units and activities. All incident reports, attachment 4, were submitted with good details of the incidents and information on cause code was entered correctly. Compliance information, attachment 5, was found to be incorrect with the number of probable violations to be corrected at end of Calendar Year. The number reported was 579. The correct number is 17. One point reduction was assessed for not correctly filling out the form. List of records maintained by the agency on their inspection program was reviewed and found to be complete. Training requirements for pipeline safety staff in attachment 7 was found to be correct and meets the requirements of the federal guidelines. Michael Bell and Marion Garcia completed the required training courses in 2010 to meet the mandatory gas inspector category. James Kroneberger also completed the Operator Qualification Web Base Training course in 2010. A review of Ryan Weight's category classification in the 2011 certification document with Robert Miller confirmed the individual is a Engineer, has three years of experience and successfully completed the T&Q courses. This meets the requirements as described in the guidelines manual located on page 14. 2 Did the state have an adequate mechanism to receive operator reporting of incidents to ensure state compliance with 60105(a) Certification/60106(a) Agreement requirements (fatality, injury requiring hospitalization, property damage exceeding $50,000 - Mechanism should include receiving "after hours" reports)? (Chapter 6) Previous Question A.2 Yes = 1 No = 0 SLR Notes: Yes, AZCC's regulations section R14-5-203, state law and telephonic incident report form address this required information. 1 1 3 Has the state held a pipeline safety TQ seminar(s) in the last 3 years? (NOTE: Indicate date of last seminar or if 2 2 state requested seminar, but T&Q could not provide, indicate date of state request for seminar. Seminars must be held at least once every 3 calendar years.) (Chapter 8.5) Previous Question A.4 Yes = 2 No = 0 SLR Notes: The last seminar was held on November 4 -5, 2009 in Phoenix, AZ. This was a LPG seminar and eighteen individuals attended the meeting. 4 Were pipeline safety program files well-organized and accessible?(NOTE: This also includes electronic files) (Chapter 5) Previous Question A.5 Yes = 1 No = 0 1 1 SLR Notes: Yes, a review of files indicated they are located in a secure area. All current inspection reports and exhibits are electronically backed-up as submitted by each staff member. AZCC IT department routinely backs-up all reports on a weekly schedule. 5 Did state records and discussions with the state pipeline safety program manager indicate adequate knowledge of PHMSA program and regulations? (Chapter 4.1, Chapter 8.1) Previous Question A.6 Yes = 2 No = 0 Needs Improvement = 1 2 2 SLR Notes: Yes, Robert Miller has fourteen years of experience in compliance and tweny-one year in industry work pertaining to pipeline safety. He understands the requirements in submitting grant application and payment agreement documents. 6 Did the state respond in writing within 60 days to the requested items in the Chairman's letter following the Region's last program evaluation? (No response is necessary if no items are requested in letter and mark "Yes") (Chapter 8.1) Previous Question A.8 DUNS: 141953807 2010 Natural Gas State Program Evaluation 1 1 Arizona ARIZONA CORPORATION COMMISSION, Page: 3

Yes = 1 No = 0 SLR Notes: No response was required in letter to Chairman Kristin Mayes, dated October 21, 2010. 7 What actions, if necessary, did the State initiate as a result of issues raised in the Chairperson's letter from the previous year? Did actions correct or address deficiencies from previous year's evaluation? (No response is necessary if no items are requested in letter and mark "Yes") (Chapter 8.1) Previous Question A.8/A.9 Yes = 1 No = 0 SLR Notes: No response was required in letter to Chairman Kristin Mayes, dated October 21, 2010. 1 1 Personnel and Qualifications 8 Has each inspector fulfilled the 3 year TQ training requirement? If No, has the state been granted a waiver regarding TQ courses by the Associate Administrator for Pipeline Safety? (NOTE: If the State has new inspectors who have not attended all TQ courses, but are in a program which will achieve the completion of all applicable courses within 3 years of taking first course (5 years to sucessfully complete), or if a waiver has been granted by the applicable Region Director for the state, please answer yes.) (Chapter 4.4) Previous Question A.10 Yes = 3 No = 0 3 3 SLR Notes: A review of attachment 7 in certification document indicates all AZCC pipeline safety staff member have completed the three year requirement courses except for Mr. Brady Sargent, who completed his first course PL3275, Pipeline Awareness, on July, 2010. 9 Brief Description of Non-TQ training Activities: Info Only = No Points For State Personnel: Within one year from date of employment, each new employee must successfully complete the following In- House Training courses: New Employee training, LPG Inspection, Pipeline Failure Investigation, Pipeline Welding Inspection and Underground Facilities Law. For Operators: Sixteen Master Meter Class Training courses were conducted during calendar 2010 and two hundred seventy-on attendees. These classes were held at Tucson, Phoenix, Flagstaff and Prescott, AZ. For Non-Operator Entities/Parties, Information Dissemination, Public Meetings: Various staff members serve on the following organization and present information on pipelines safety regulations and damage prevention. These organizations are listed below: AZ Response Commission, Phoenix Light Rail Correlating Committee and Manufacturer Housing Community. Info Only Info Only SLR Notes: 10 Did the lead inspectors complete all required T&Q OQ courses and Computer Based Training (CBT) before conducting OQ Inspections? (Chapter 4.4.1) Previous Question A.12 Yes = 1 No = 0 1 1 SLR Notes: Yes. The lead inspectors for OQ are Corky Hanson, Alan Borne, Robert Hippe, Ryan Weight, Eric Villa, Michael Bell, Marion Garcia, Joel Perry, Scott Frye, Robert Primera and James Kroneberger. 11 Did the lead inspectors complete all required TQ Integrity Management (IMP) Courses/Seminars and CBT before conducting IMP Inspections? (Chapter 4.4.1) Previous Question A.13 Yes = 1 No = 0 1 1 SLR Notes: Yes, Corky Hanson, Robert Miller, Alan Bourne, Ryan Weight and Eric Villa are the lead inspectors and have completed all IMP training courses. 12 Was the ratio acceptable of Total inspection Person-days to Total Person-days charged to the program by state inspectors? (Region Director may modify points for just cause) (Chapter 4.3) Previous Question B.12 Yes = 5 No = 0 A. Total Inspection Person Days (Attachment 2): 1307.50 B. Total Inspection Person Days Charged to the Program (220 X Inspection Person Years) (Attachment 7): 220 X 9.48 = 2086.33 DUNS: 141953807 2010 Natural Gas State Program Evaluation 5 5 Arizona ARIZONA CORPORATION COMMISSION, Page: 4

Ratio: A / B 1307.50 / 2086.33 = 0.63 If Ratio >= 0.38 Then Points = 5, If Ratio < 0.38 Then Points = 0 Points = 5 SLR Notes: Yes, A=1307.5 total inspection person days: B= (220 x 9.48333=2086.3326) A/B= 1307.5/2086.3326= 0.63 meets the large amount of .38 requirement 13 Have there been modifications or proposed changes to inspector-staffing levels? (If yes, describe) Previous Question B.13 Info Only = No Points Info Only Info Only SLR Notes: Two new employees have been hired to replace the previous two safety inspectors that retired in 2010. 14 Part-A General Comments/Regional Observations Info Only = No Points Info Only Info Only SLR Notes: Question A.1: Compliance information, attachment 5, was found to be incorrect with the number of probable violations to be corrected at end of Calendar Year. The number reported was 579. The correct number is 17. One point reduction was assessed in this section for not correctly filling out the form. Total points scored for this section: 25 Total possible points for this section: 26 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 5

PART B - Inspections and Compliance - Procedures/Records/ Performance Points(MAX) Score Inspection Procedures 1 Does the State have a written inspection plan to complete the following? (all types of operators including LNG) 6.5 6.5 (Chapter 5.1) Previous Question B.1 + Chapter 5 Changes + Incorporate LNG Yes = 6.5 No = 0 Needs Improvement = 50% Deduction a Standard Inspections (Including LNG) (Max points = 2) b IMP Inspections (Including DIMP) (Max points = .5) c OQ Inspections (Max points = .5) d Damage Prevention (Max points = .5) e On-Site Operator Training (Max points = .5) f Construction Inspections (Max points = .5) g Incident/Accident Investigations (Max points = 1) h Compliance Follow-up (Max points = 1) Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement SLR Notes: Section a:Yes, AZ CC 2010 Policy and Procedures book: Master Meter, Section 6, pages 1 & 2 ; Major Operators, Section5, (Intrastate) page 1 & (Interstate) page 2. Section b:Yes, Major Operators, Section 4, page 1 for intrastate & page 2 for Interstate. Section c: Yes, Major Operators, (policy) Section 4 pages 1 & 2, (Procedure) Section 5 pages 1& 2. Master Meter Section 6, page 6. Section d: Yes, Section 8 & 9 and Arizona Underground Facility Law, Title 40, Chapter 2. Section e: Yes, Section 7, page 6. Section f: Yes, Master Meter (policy), Section 6 pages 8, 9 & 10, (procedures) Section 7, page 2. Major Operators Section 5 pages 3 & 4. Construction is address in state law. Section g: Yes, section 10. Section h: Yes, Master Meter (procedures) Section 7 page 4 and (policy) Section 6 page 11. Major Operators (procedures) Section 4, pages 3 & 5. 2 Did the written Procedures for selecting operators adequately address key concerns? (Chapter 5.1) Previous 2 2 Question B.2, items a-d are worth .5 point each Yes = 2 No = 0 Needs Improvement = 50% Deduction a Length of time since last inspection Yes No Needs Improvement b History of Operator/unit and/or location (including leakage , incident and compliance history) Yes No Needs Improvement c Type of activity being undertaken by operator (construction etc) Yes No Needs Improvement d For large operators, rotation of locations inspected Yes No Needs Improvement SLR Notes: Yes to items a thru d. A review of AZ CC 2010 Policy and Procedures Section 6, pages 1 & 2, Section 4, pages 1 & 2, Section 7, page 1, Major operator's - Section 5 pages 1 & 2, Section 6 & 7, Section 5 pages 3 & 4, Section 5 page 1, Section 4 page 2 confirm they have addressed these items. Inspection Performance 3 Did the state inspect all types of operators and inspection units in accordance with time intervals established in its written procedures? (Chapter 5.1) Previous Question B.3 Yes = 2 No = 0 2 2 SLR Notes: Yes, a review of 2010 Certification attachment 1 - Stats on Operators and AZ CC 2010 Policy and Procedures book confirm time intervals were met. In this regard all priority one inspection units were inspected each year and all priority two inspection units were inspected every two years. 4 Did the state inspection form cover all applicable code requirements addressed on the Federal Inspection forms? (Chapter 5.1 (3)) Previous Question B.4 Yes = 1 No = 0 1 1 SLR Notes: Yes. A review of the inspections forms in the 2010 Policy and Procedure document indicated all items in the federal inspection match their forms. On interstate inspections they use the PHMSA forms. Additionally, all proposed or suggested inspection forms are reviewed by the PHMSA Western prior to being implemented. 5 Did state complete all applicable portions of inspection forms? (Chapter 5.1 (3)) Previous Question B.5 Yes = 1 No = 0 DUNS: 141953807 2010 Natural Gas State Program Evaluation 1 1 Arizona ARIZONA CORPORATION COMMISSION, Page: 6

SLR Notes: Yes, a review of their inspection documents found this information is being completed in each document. 6 Did the state initiate appropriate follow-up actions to Safety Related Condition Reports? (Chapter 6.3) Previous Question B.6 Yes = .5 No = 0 SLR Notes: They did not have any SRCRs in 2010. .5 NA 7 Did the state review operator procedures for determining if exposed cast iron pipe was examined for evidence of graphitization and if necessary remedial action was taken? (NTSB) Previous Question B.7 Yes = .5 No = 0 SLR Notes: The state does not have any cast-iron pipelines. .5 NA 8 Did the state review operator procedures for surveillance of cast iron pipelines, including appropriate action resulting from tracking circumferential cracking failures, study of leakage history, or other unusual operating maintenance condition? (Note: See GPTC Appendix G-18 for guidance) (NTSB) Previous Question B.8 Yes = .5 No = 0 SLR Notes: The state does not have any cast-iron pipelines. .5 NA 9 Did the state review operator emergency response procedures for leaks caused by excavation damage near buildings and determine whether the procedures adequately address the possibility of multiple leaks and underground migration of gas into nearby buildings Refer to 4/12/01 letter from PHMSA in response to NTSB recommendation P-00-20 and P-00-21? (NTSB) Previous Question B.9 Yes = .5 No = 0 .5 .5 SLR Notes: Yes, this is during the standard inspection and is a requirement by Arizona Corporation Commission's administrative law R14-5-202, Section R which states operators of an intrastate pipeline shall survey and grade all leaks by using ASME Guide for Gas and Transmission and Distribution Pipeline, Guide Materials Appendix G-11 and for LPG Appendix G-11A. 10 Did the state review operator records of previous accidents and failures including reported third party damage and leak response to ensure appropriate operator response as required by 192.617? (NTSB) Previous Question 1 1 B.10 Yes = 1 No = 0 SLR Notes: Section S. Yes, this information is monitored during the standard inspection and required by Arizona Corporation Commission's Administrative rule R14-5-202, Compliance - 60105(a) States 11 Did the state adequately document sufficient information on probable violations? (Chapter 5.2) Previous 1 1 Question B.14 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: Yes, information in file folders indicated they are including photos and other relative information to support their findings on probable violations. 12 Does the state have written procedures to identify the steps to be taken from the discovery to the resolution of a 1 1 probable violation as specified in the "Guidelines for State Participating in the Pipeline Safety Program"? (Chapter 5.1) Previous Question D(1).1 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: This is addressed in their 2010 Policy manual for Major Operators, Section 5, page 5 and Master Meter operators, Section 7, page 3. 13 SLR Notes: DUNS: 141953807 2010 Natural Gas State Program Evaluation Does the state have written procedures to notify an operator when a noncompliance is identified as specified in the "Guidelines for States Participating in the Pipeline Safety Program"? (Chapter 5.1(4)) Previous Question D (1).2 Yes = 1 No = 0 Needs Improvement = .5 1 1 Arizona ARIZONA CORPORATION COMMISSION, Page: 7

Yes, in the 2010 AZCC policy manual this is addressed for the Major Operators, Section 5, page 1 and Master Meter operators in Section 6, page 6. 14 Does the state have a written procedure for routinely reviewing the progress of compliance actions to prevent delays or breakdowns of the enforcement process, as required by the "Guidelines for States Participating in the Pipeline Safety Program"? (Chapter 5.1(5)) Previous Question D(1).3 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: Yes, AZCC Policy Manual, for Major Operators Section 5, page 5 and for Master Meter Operators Section 7, page 4. 1 1 15 Has the State issued compliance actions for all probable violations discovered? (Note : PHMSA representative 1 1 has discretion to delete question or adjust points, as appropriate, based on number of probable violations; any change requires written explanation) Previous Question D(1).4 Yes = 1 No = 0 SLR Notes: Yes, a review of the AZ Activity report indicated all probable violations are issued and compliance action monitored. Minor error in the number of violations found was found in activity report document. This error will be corrected to reflect the correct number of violations found and corrected in CY 2010. 16 Did the state follow its written procedures for reviewing compliance actions and follow-up to determine that prompt corrective actions were taken by operators, within the time frames established by the procedures and compliance correspondence, as required by the "Guidelines for States Participating in the Pipeline Safety Program"? Previous Question D(1).5 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: Yes. 17 If compliance could not be established by other means, did state pipeline safety program staff request formal action, such as a "Show Cause Hearing" to correct pipeline safety violations? (check each states enforcement procedures) Previous Question D(1).6 No = 0 Yes = 1 SLR Notes: NA, No Show Cause Hearings were held in 2010. 1 NA 18 Did the state adequately document the resolution of probable violations? (Chapter 5.1 (6)) Previous Question D(1).7 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: Yes, their written procedures and files indicate they adequately documented all probable violations. 1 1 19 Were compliance actions sent to a company officer? (manager or board member if municipal/government system) (Chapter 5.1(4)) Previous Question D(1).8 Yes = .5 No = 0 .5 .5 SLR Notes: Yes, AZCC 21010 Policy Manual Section 5 page 1 requires all correspondence be sent to the company officer or manager/board member if the operator is a municipality or governmental agency. 20 Did the compliance proceedings give reasonable due process to all parties? (check each states enforcement procedures) Previous Question D(1).9 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: Yes, Major Operators: Section 5 page 5 and Master Meter, Section 7 page 3 of their 2010 Policy and Procedures manual address these items. Compliance - 60106(a) States 21 Did the state use the current federal inspection form(s)? Previous Question D(2).1 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: 1 NA DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 8

22 SLR Notes: Are results adequately documented demonstrating inspection units were reviewed in accordance with state inspection plan? Previous Question D(2).2 Yes = 1 No = 0 Needs Improvement = .5 1 NA 23 Were any probable violations identified by state referred to PHMSA for compliance? (NOTE: PHMSA representative has discretion to delete question or adjust points, as appropriate, based on number of probable violations; any change requires written explanation.) Previous Question D(2).3 Yes = 1 No = 0 Needs Improvement = .5 1 NA SLR Notes: 24 SLR Notes: Did the state immediately report to PHMSA conditions which may pose an imminent safety hazard to the public or to the environment? Previous Question D(2).4 Yes = 1 No = 0 Needs Improvement = .5 1 NA 25 Did the state give written notice to PHMSA within 60 days of all probable violations found? Previous Question D(2).5 Yes = 1 No = 0 Needs Improvement = .5 1 NA SLR Notes: 26 Did the state initially submit adequate documentation to support compliance action by PHMSA on probable violations? Previous Question D(2).6 Yes = 1 No = 0 Needs Improvement = .5 1 NA SLR Notes: 27 Is the program manager familiar with state process for imposing civil penalties? Were civil penalties considered for repeat violations (with severity consideration) or violations resulting in incidents/accidents? (describe any actions taken) Info Only = No Points Info Only Info Only SLR Notes: Yes, program manager is familiar with civil penalties and has recommended and suggested this procedure in cases involving threatens to the public. He has used this action in the past and will continue to use it as a tool in future rate case hearings. 28 Part B: General Comments/Regional Observations Info Only = No Points SLR Notes: No issues noted in this section of the review. Info Only Info Only Total points scored for this section: 22.5 Total possible points for this section: 22.5 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 9

PART C - Interstate Agent States Points(MAX) Score 1 Did the state use the current federal inspection form(s)? Previous Question D(3).1 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: Yes, they are using the federal forms on all their inspections. 1 1 2 Are results documented demonstrating inspection units were reviewed in accordance with "PHMSA directed inspection plan"? Previous Question D(3).2 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: to it in 2010." Yes. PHMSA Western Region stated, "They send us their entire inspection schedule matching the PHMSA directed inspection work plan and they adhered 3 Did the state submit documentation of the inspections within 60 days as stated in its latest Interstate Agent Agreement form? Previous Question D(3).3 Yes = 1 No = 0 SLR Notes: Yes. This information was confirmed by the PHMSA Western Region office. 1 1 4 Were any probable violations identified by state referred to PHMSA for compliance? (NOTE: PHMSA representative has discretion to delete question or adjust points, as appropriate, based on number of probable violations; any change requires written explanation.) Previous Question D(3).4 Yes = 1 No = 0 SLR Notes: Yes, PHMSA Western Region stated, "The TransCanada NOPV is one that was referred to PHMSA Western Region." 1 1 5 Did the state immediately report to PHMSA conditions which may pose an imminent safety hazard to the public or to the environment? Previous Question D(3).5 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: Yes, PHMSA Western Region stated, "We usually heard from AZ before we received a NRC report. One case in point is when AZ had a gas shortage and neither NRC nor PHMSA was for-warned of this item from FERC." 6 Did the state give written notice to PHMSA within 60 days of all probable violations found? Previous Question D(3).6 Yes = 1 No = 0 SLR Notes: Yes. PHMSA Western Region stated, "Yes, usually within 30 days." 1 1 7 Did the state initially submit documentation to support compliance action by PHMSA on probable violations? Previous Question D(3).7 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: case in point." Yes. PHMSA Western Region stated, "Yes, the fairly recent Civil Penalty and Compliance Order that originated against TransCanda in 2010 is an excellent 8 Part C: General Comments/Regional Observations Info Only = No Points SLR Notes: No issues or lost of points in this section of the review. Info Only Info Only Total points scored for this section: 7 Total possible points for this section: 7 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 10

PART D - Incident Investigations Points(MAX) Score 1 Are state personnel following the procedures for Federal/State cooperation in case of an incident? (See Appendix in "Guidelines for States Participating in the Pipeline Safety Program") (Chapter 6.1) Previous Question E.1 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: occurred in February, 2011." Yes. PHMSA Western Region stated, "We usually heard from AZ before we received a NRC report. One case in point is when AZ had a gas shortage 2 Are state personnel familiar with the jurisdictional authority and Memorandum of Understanding between NTSB and PHMSA? (See Appendix in "Guidelines for States Participating in the Pipeline Safety Program") (Chapter 6 ? Appendix D) Previous Question E.2 Yes = .5 No = 0 .5 .5 SLR Notes: Yes, Section 19 of AZCC Training and Investigation Manual and Section 10, page 3 of the 2010 AZCC Policy and Procedures Manual address this item. 3 Did the state keep adequate records of incident notifications received? Previous Question E.3 Yes = 1 No = 0 Needs Improvement = .5 1 1 SLR Notes: Yes, Arizona Corporation Commission keeps telephonic incident reports by year in a binder and this information is backed-up on their electronic data base program. In 2010, they received 1,026 telephonic incident reports pertaining to reportable and non-reportable incidents. 4 If an onsite investigation of an incident was not made, did the state obtain sufficient information by other means to determine the facts and support the decision not to go on-site? Previous Question E.4 Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: Yes, AZCC 2010 Policy and Procedures Manual, Section 1, page 16 and Telephonic Incident sheet addresses this item. 1 1 5 Were investigations thorough and conclusions and recommendations documented in an acceptable manner? Previous Question E.5, comprehensive question worth 2 points total Yes = 2 No = 0 Needs Improvement = 1 a. Observations and Document Review b. Contributing Factors c. Recommendations to prevent recurrences where appropriate SLR Notes: Yes, a review of three incident investigations determined all observations and contributing factors were reviewed correctly. No issues. 2 2 Yes No Needs Improvement Yes No Needs Improvement Yes No Needs Improvement 6 Did the state initiate enforcement action for violations found during any incident investigation(s)? Previous Question E.6 Variation Yes = 1 No = 0 Needs Improvement = .5 SLR Notes: No enforcement action was required in 2010 on incident investigations. 1 1 7 Did the state assist region office by taking appropriate follow-up actions related to the operator incident reports to ensure accuracy and final report has been received by PHMSA? (validate annual report data from operators concerning incidents/accidents and investigate discrepancies) (Chapter 6) Previous Question E.7/E.8 Yes = .5 No = 0 SLR Notes: Yes. PHMSA Western Region stated, "They cooperate very well with our Accident /Incident Coordinator- Peter Katchmar." .5 0.5 8 Part D: General Comments/Regional Observations Info Only = No Points SLR Notes: No issues in this section or loss of points. DUNS: 141953807 2010 Natural Gas State Program Evaluation Info Only Info Only Arizona ARIZONA CORPORATION COMMISSION, Page: 11

Total points scored for this section: 7 Total possible points for this section: 7 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 12

PART E - Damage Prevention Initiatives Points(MAX) Score 1 Has the state reviewed directional drilling/boring procedures of each pipeline operator or its contractor to determine if they include actions to protect their facilities from the dangers posed by drilling and other trench less technologies? Previous Question B.11 Yes = 2 No = 0 Needs Improvement = 1 2 2 SLR Notes: Yes, during their standard inspection this item is reviewed. Additionally, the Commission's in-house training course manual Section13, Major Code Compliance Audit, address this item under the Damage Prevention check list. 2 Did the state inspector check to assure the pipeline operator is following its written procedures pertaining to notification of excavation, marking, positive response and the availability and use of the one call system? New 2008 Yes = 2 No = 0 2 2 SLR Notes: Yes, this was checked during the standard inspections performed by all staff members. This is required by AZ state law. 3 Did the state encourage and promote the adoption of the Common Ground Alliance Best Practices document to 2 2 its regulated companies as a means of reducing damages to all underground facilities? Previous Question A.7 Yes = 2 No = 0 Needs Improvement = 1 SLR Notes: Yes, the Arizona Corporation Commission has been working with other organizations in promoting best practices and the adoption of the Common Ground Alliance Best Practices. SW Natural Gas has recently adopted all of the Common Ground Alliance best practices. 4 Has the agency or another organization within the state collected data and evaluated trends on the number of pipeline damages per 1,000 locate requests? New 2008 Yes = 1 No = 0 1 1 SLR Notes: Yes, this information is provided to the program manager from the three major natural gas pipeline companies, UniSource, Southwest Gas and City of Mesa. Arizona One Call Center collects information from all utility companies and provides this information to the program manager. 5 Did the state review operators' records of accidents and failures due to excavation damage to ensure causes of failure are addressed to minimize the possibility of recurrence as required by 192.617? Yes = 2 No = 0 SLR Notes: Yes, this item is reviewed on their standard inspection form entitled, "Gas Distribution Inspection Report", page 3. 2 2 6 Part E: General Comments/Regional Observations Info Only = No Points SLR Notes: No issues in this section or loss of points. Info Only Info Only Total points scored for this section: 9 Total possible points for this section: 9 DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 13

PART F - Field Inspection Points(MAX) Score 1 Operator, Inspector, Location, Date and PHMSA Representative Info Only = No Points Name of Operator Inspected: City of Mesa, opid 12378 Name of State Inspector(s) Observed: Ryan Weight & James Kroneberger Location of Inspection: City of Mesa, 640 N Mesa Dr, Mesa, AZ 85211-1466 Date of Inspection: 2/28-3/1/2011 Name of PHMSA Representative: Patrick Gaume Info Only Info Only SLR Notes: 2 Was the operator or operator's representative notified and/or given the opportunity to be present during inspection? New 2008 Yes = 1 No = 0 1 1 SLR Notes: F.2. yes, and the inspection was held in the Operator's office. 3 Did the inspector use an acceptable inspection form/checklist and was the form/checklist used as a guide for the inspection? (New regulations shall be incorporated) Previous Question F.2 Yes = 2 No = 0 2 2 SLR Notes: F.3. yes, use a State Form that includes State & Fed requirements but omits the record prompts that are typically NA for modern Distribution companies. AZ is well familiar with the Federal Form and will use it if the inspection reveals a need to use it. 4 Did the inspector thoroughly document results of the inspection? Previous Question F.3 Yes = 2 No = 0 2 2 SLR Notes: F.4. yes, This inspection was focused on Records. The procedures were done in Dec, 2010. They completed the portion of the State Form that was intended for Monday & Tuesday. They included API 1162 - Public Awareness, 811 ? Damage Prevention, Excavator and Official notifications, Incident reports, Post incident reviews, annual manual reviews, including procedure review for normal operations, Drug and Alcohol procedure review with training records. 5 Did the inspector check to see if the operator had necessary equipment during inspection to conduct tasks viewed? (Maps, pyrometer, soap spray, CGI, etc.) New 2008 Yes = 1 No = 0 SLR Notes: F.5. NA, this portion of the inspection was totally in-office. 1 NA 6 What type of inspection(s) did the state inspector conduct during the field portion of the state evaluation? (i.e. Standard, Construction, IMP, etc) New 2008 Info Only = No Points SLR Notes: F.6, this portion of the inspection was a records review of a Standard Inspection and was totally in-office. Info Only Info Only 7 Did the inspector adequately review the following during the field portion of the state evaluation? (check all that apply on list) New 2008, comprehensive question worth 2 points total Yes = 2 No = 0 Needs Improvement = 1 a. Procedures b. Records c. Field Activities/Facilities DUNS: 141953807 2010 Natural Gas State Program Evaluation 2 2 Arizona ARIZONA CORPORATION COMMISSION, Page: 14

d. Other (Please Comment) SLR Notes: F.7. this portion of the inspection was a records review of a Standard Inspection and was totally in-office. 8 Did the inspector have adequate knowledge of the pipeline safety program and regulations? (Liaison will document reasons if unacceptable) Previous Question F.8 Yes = 2 No = 0 SLR Notes: F.8. Yes, Ryan and Jim showed good & adequate knowledge of the pipeline safety program goals and regulations. 2 2 9 Did the inspector conduct an exit interview? (If inspection is not totally complete the interview should be based on areas covered during time of field evaluation) Previous Question F.10 Yes = 1 No = 0 SLR Notes: F.9. NA, This inspection is still in progress. 1 NA 10 During the exit interview, did the inspector identify probable violations found during the inspections? Previous 1 1 Question F.11 Yes = 1 No = 0 SLR Notes: F.10. YES, some of the identified issues include procedures modification of the Public Awareness Plan, Procedures are inadequate to fully address Relief Device modifications if there is an indication of inadequatcy, and 605.b.9 Needs to clean up a typo. 11 What did the inspector observe in the field? (Narrative description of field observations and how inspector performed) Info Only = No Points SLR Notes: F.11. NA, this portion of the inspection was totally in-office. Info Only Info Only 12 Best Practices to Share with Other States - (Field - could be from operator visited or state inspector practices) Info Only Info Only Info Only = No Points SLR Notes: F.12. They offer in-house training to problem excavators to improve damage prevention results. They have numerous English-Spanish translators that are quite literate in both languages for the technical terms. They demonstrate an active buy-in for public awareness. They have a very stable staff. 13 Field Observation Areas Observed (check all that apply) Info Only = No Points a. Abandonment b. Abnormal Operations c. Break-Out Tanks d. Compressor or Pump Stations e. Change in Class Location f. Casings g. Cathodic Protection h. Cast-iron Replacement i. Damage Prevention j. Deactivation k. Emergency Procedures l. Inspection of Right-of-Way m. Line Markers n. Liaison with Public Officials o. Leak Surveys p. MOP q. MAOP Info Only Info Only DUNS: 141953807 2010 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Page: 15

r. Moving Pipe s. New Construction t. Navigable Waterway Crossings u. Odorization v. Overpressure Safety Devices w. Plastic Pipe Installation x. Public Education y. Purging z. Prevention of Accidental Ignition A. Repairs B. Signs C. Tapping D. Valve Maintenance E. Vault Maintenance F. Welding G. OQ - Operator Qualification H. Compliance Follow-up I. Atmospheric Corrosion J. Other SLR Notes: F.13. NA, this portion of the inspection was totally in-office. 14 Part F: General Comments/Regional Observations Info Only = No Points Info Only Info Only SLR Notes: F.14. Nat Gas Mr. Ryan Weight and Mr. James Kroneberger were observed conducting a Standard Inspection of City of Mesa, opid 12378. They inspected Records and the Drug and Alcohol Program. They showed professional level knowledge of the pipeline safety program goals and regulations, and conducted themselves cordially and profe
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