2013 AZ NG Program Evaluation - az2013ngprogramevaluation (Arizona; Natural Gas State Program Evaluation)

AZ NG Program Evaluation, 2013, page 1Official PDF1200 New Jersey Avenue SE Washington DC 20590 U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2013 Natural Gas State Program Evaluation for ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety Document Legend PART: O -- Representative Date and Title Information A -- Progress Report and Program Documentation Review B -- Program Inspection Procedures C -- Program Performance D -- Compliance Activities E -- Incident Investigations F -- Damage Prevention G -- Field Inspections H -- Interstate Agent State (If Applicable) I -- 60106 Agreement State (If Applicable) DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 1#

AZ NG Program Evaluation, 2013, page 22013 Natural Gas State Program Evaluation -- CY 2013 Natural Gas State Agency: Arizona Rating: Agency Status: 60105(a): Yes 60106(a): No Interstate Agent: Yes Date of Visit: 04/01/2014 - 01/01/1900 Agency Representative: Robert Miller, Alan Borne PHMSA Representative: Rex Evans - Office Evaluation April 1-3, 2014, Jim Anderson Field Evaluation Commission Chairman to whom follow up letter is to be sent: Name/Title: Bob Stump, Chairman Agency: Arizona Corporation Commission Address: 1200 West Washington City/State/Zip: Phoenix, AZ 85007-2996 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 2013 (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 progress report attachments provide the basis for determining the state's pipeline safety grant allocation. Field Inspection (PART G): 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 G, the PHMSA representative should include a written summary which thoroughly documents the inspection. Scoring Summary PARTS Possible Points Points Scored A Progress Report and Program Documentation Review 10 10 B Program Inspection Procedures 15 14 C Program Performance 43 40.5 D Compliance Activities 15 13 E Incident Investigations 8 8 F Damage Prevention 8 8 G Field Inspections 12 12 H Interstate Agent State (If Applicable) 6 6 I 60106 Agreement State (If Applicable) 0 0 TOTALS 117 111.5 State Rating................................................................................................................................................... 95.3 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 2#

AZ NG Program Evaluation, 2013, page 3PART A - Progress Report and Program Documentation Review Points(MAX) Score 1 Accuracy of Jurisdictional Authority and Operator/Inspection Units Data - Progress Report Attachment 1 (A1a) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues with data listed 1 1 2 Review of Inspection Days for accuracy - Progress Report Attachment 2 (A1b) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Inspection days reviewed in book appear accurate. 1 1 3 Accuracy verification of Operators and Operators Inspection Units in State - Progress Report Attachment 3 (A1c) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: List of operators appears accurate. Master meter files appeared to match up to listing on sample reviewed. 1 1 4 Were all federally reportable incident reports listed and information correct? - Progress 1 1 Report Attachment 4 (A1d) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: All incidents listed were also in Pipeline Data Mart. Some incidents listed were rescinded and reminded that those did not need to be listed. 5 Accuracy verification of Compliance Activities - Progress Report Attachment 5 (A1e) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues with numbers reported, almost all were master meter related. 1 1 6 Were pipeline program files well-organized and accessible? - Progress Report Attachment 6 (A1f, A4) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Files were well organized and able to review with no issues. 2 2 7 Was employee listing and completed training accurate and complete? - Progress Report Attachment 7 (A1g) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Transcript provided by TQ, no issues. 1 1 8 Verification of Part 192,193,198,199 Rules and Amendments - Progress Report Attachment 8 (A1h) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues 1 1 9 List of Planned Performance - Did state describe accomplishments on Progress Report in detail - Progress Report Attachment 10 (H1-3) 1 1 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 3#

AZ NG Program Evaluation, 2013, page 4Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues 10 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 10 Total possible points for this section: 10 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 4#

AZ NG Program Evaluation, 2013, page 5PART B - Program Inspection Procedures Points(MAX) Score 1 Standard Inspections (B1a) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Their inspection plan is in Section 5 pages 1-2 of procedures manual 2 2 2 IMP Inspections (including DIMP) (B1b) 1 0.5 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Looking for improvement and more details in this area. Current procedures lack any detail as to how programs will be reviewed on a timely basis and current program only provides for a limited amount of checklist boxes. Need some detail as to what happens in field. 3 OQ Inspections (B1c) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 0.5 Only field portion of OQ is address and no formal plan reviews are addressed and what time period that will occur. 4 Damage Prevention Inspections (B1d) 1 1 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Section 5 of procedures, part of standard 5 On-Site Operator Training (B1e) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Section 7 - primarily for master meter operators where a program is in place 1 1 6 Construction Inspections (B1f) 1 1 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Section 5 of procedures manual. Note should be taken about construction inspections playing an overall part of inspection plan and lack of construction inspections taking place at this time. 7 Incident/Accident Investigations (B1g) 2 2 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Section 10 of manual. 8 Does inspection plan address inspection priorities of each operator, and if necessary each 6 6 unit, based on the following elements? (B2a-d, G1,2,4) Yes = 6 No = 0 Needs Improvement = 1-5 a. Length of time since last inspection Yes No Needs Improvement b. Operating history of operator/unit and/or location (includes leakage, incident and compliance activities) Yes No Needs Improvement c. Type of activity being undertaken by operators (i.e. construction) Yes No Needs Improvement d. Locations of operators inspection units being inspected - (HCA's, Geographic areas, Population Density, etc) Yes No Needs Improvement DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 5#

AZ NG Program Evaluation, 2013, page 6e. Process to identify high-risk inspection units that includes all threats - (Excavation Damage, Corrosion, Natural Forces, Outside Forces, Material and Welds, Equipment, Yes No Needs Improvement Operators and any Other Factors) f. Are inspection units broken down appropriately? Yes No Needs Improvement Evaluator Notes: I am giving full points in this section. Great lengths are taken to inspect all operators every year, other than Priority 2 Master Meters who are inspected every two years. Further inspections are based on compliance issues and follow-up occurs. Risk basis would be used if extended time frames for inspections were occuring and that does not happen here. 9 General Comments: Info Only = No Points Evaluator Notes: Recommend overall review of format Info Only Info Only Total points scored for this section: 14 Total possible points for this section: 15 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 6#

AZ NG Program Evaluation, 2013, page 7PART C - Program Performance Points(MAX) Score 1 Was ratio of Total Inspection person-days to total person days acceptable? (Director of State Programs may modify with just cause) Chapter 4.3 (A12) Yes = 5 No = 0 A. Total Inspection Person Days (Attachment 2): 1667.00 B. Total Inspection Person Days Charged to the Program (220 X Inspection Person Years) (Attachment 7): 220 X 10.15 = 2233.00 Ratio: A / B 1667.00 / 2233.00 = 0.75 If Ratio >= 0.38 Then Points = 5, If Ratio < 0.38 Then Points = 0 Points = 5 Evaluator Notes: 1667 Inspection days. Inspection day ratio .75 above .38 required. No issues. 5 5 2 Has each inspector and program manager fulfilled the T Q Training Requirements? (See 5 5 Guidelines for requirements) Chapter 4.4 (A8-A11, G19) Yes = 5 No = 0 Needs Improvement = 1-4 a. Completion of Required OQ Training before conducting inspection as lead? Yes No Needs Improvement b. Completion of Required DIMP*/IMP Training before conducting inspection as lead? *Effective Evaluation CY2013 Yes No Needs Improvement c. Root Cause Training by at least one inspector/program manager Yes No Needs Improvement d. Note any outside training completed Yes No Needs Improvement Evaluator Notes: Review of training transcripts indicate no issues. Three inspectors went to API welding school and in house training. 3 Did state records and discussions with state pipeline safety program manager indicate adequate knowledge of PHMSA program and regulations? Chapter 4.1,8.1 (A5) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Miller has several years experience and serves on several NAPSR/PHMSA task teams and committees. 2 2 4 Did state respond to Chairman's letter on previous evaluation within 60 days and correct or address any noted deficiencies? (If necessary) Chapter 8.1 (A6-7) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Letter sent on June 26 with response on August 23rd with issues addressed. 2 2 5 Did State hold PHMSA TQ Seminar in Past 3 Years? Chapter 8.5 (A3) Yes = 2 No = 0 Evaluator Notes: January 2012 was last seminar. 2 2 6 Did state inspect all types of operators and inspection units in accordance with time intervals established in written procedures? Chapter 5.1 (B3) Yes = 5 No = 0 Needs Improvement = 1-4 5 5 Evaluator Notes: From the records reviewed all non-master meter and approximately 5% of all master meter inspections that were reviewed appeared to have been inspected within designated time frames. Database concurs with that information. DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 7#

AZ NG Program Evaluation, 2013, page 87 Did inspection form(s) cover all applicable code requirements addressed on Federal Inspection form(s)? Did State complete all applicable portions of inspection forms? Chapter 5.1 (B4-5) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: The non-master meter forms were reviewed for completeness, no issues. 2 2 8 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) Chapter 5.1 (B7) Yes = 1 No = 0 Evaluator Notes: No cast iron 1 NA 9 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) Chapter 5.1 (B8) Yes = 1 No = 0 Evaluator Notes: No cast iron 1 NA 10 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) Chapter 5.1 (B9) Yes = 1 No = 0 Evaluator Notes: This is reviewed on inspection form page 2 when reviewing operator procedures. 1 1 11 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? Chapter 5.1 (B10,E5) Yes = 1 No = 0 Evaluator Notes: This is addressed on inspection checklist and response records review. Page 9 1 1 12 Has the state reviewed Operator Annual reports, along with Incident/Accident reports, for 2 2 accuracy and analyzed data for trends and operator issues? Data Initiative (G6-9,G16) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Annual reports are reviewed at inspection time. Data captured and trended on leaks by operators required to file annual reports. Analysis also conducted on damage prevention trends. Also UAG tracked to leaks shown 13 Did state input all applicable OQ, IMP inspection results into federal database in a timely manner? This includes replies to Operator notifications into IMDB database. Chapter 5.1 (G10-12) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: All completed inspections appear to have been uploaded. No issues. 2 2 14 Has state confirmed intrastate transmission operators have submitted information into NPMS database along with changes made after original submission? (G14) Yes = 1 No = 0 Needs Improvement = .5 DUNS: 141953807 2013 Natural Gas State Program Evaluation 1 0.5 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 8#

AZ NG Program Evaluation, 2013, page 9Evaluator Notes: Indicated staff person Ryan took care of looking at these, but no verification by operator could be found and needs improvement and added to checklist. 15 Is the state verifying operators are conducting drug and alcohol tests as required by regulations? This should include verifying positive tests are responded to in accordance with program. 49 CFR 199 (I1-3) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Each operator had a short form completed on drug and alcohol verification. No issues at this time. 2 2 16 Is state verifying operators OQ programs are up to date? This should include verification 2 1 of any plan updates and that persons performing covered tasks (including contractors) are properly qualified and requalified at intervals determined in the operators plan. 49 CFR 192 Part N (I4-7) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Improvement needed in this area. There have been no full blown plan reviews other than one general question on the annual checklist without any comprehensive reviews. 17 Is state verifying operator's gas transmission integrity management programs (IMP) are 2 1 up to date? This should include a previous review of IMP plan, along with monitoring progress on operator tests and remedial actions. In addition, the review should take in to account program review and updates of operators plan(s). 49 CFR 192 Subpart 0 (I8-12) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Improvement is also needed in this area. No specific documenation of monitoring progress on operator tests or remedial action, other than three questions on the annual standard checklist. There is no record of any field verifications and processes to reviewing IMP plans. 18 Is state verifying operator's gas distribution integrity management Programs (DIMP)? This should include a review of DIMP plans, along with monitoring progress. In addition, the review should take in to account program review and updates of operators plan(s). 49 CFR 192 Subpart P DIMP ? First round of program inspections should be complete by December 2014 2 2 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: All first round inspections are finished. Recommended looking at DIMP procedures and make sure process is in place for annual review of DIMP progress by operators. 19 Is state verifying operators Public Awareness programs are up to date and being followed. State should also verify operators have evaluated Public Awareness programs for effectiveness as described in RP1162. 49 CFR 192.616 (I13-16) PAPEI Effectiveness Inspections should be complete by December 2013 2 2 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Most of these were actually complete prior to end of 2012. No issues at this time, but needs to make sure those effectiveness evaluations are continued. 20 Does the state have a mechanism for communicating with stakeholders - other than state pipeline safety seminar? (This should include making enforcement cases available to public). (G20-21) Yes = 1 No = 0 Needs Improvement = .5 DUNS: 141953807 2013 Natural Gas State Program Evaluation 1 1 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 9#

AZ NG Program Evaluation, 2013, page 10Evaluator Notes: stakeholder meetings through one-call organization. Quarterly executive level meetings with SWG. There is a public website that is maintained. NUCA member. AZ CGA advisory board. Master meter training program. 21 Did state execute appropriate follow-up actions to Safety Related Condition (SRC) Reports? Chapter 6.3 (B6) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: None in CY2013 according to staff 1 NA 22 Did the State ask Operators to identify any plastic pipe and components that has shown a 1 1 record of defects/leaks and what those operators are doing to mitigate the safety concerns? (G13) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: All are reporting through PPDC. Mechanical fitting failure report forms. Regular discussion with SWG on M8000. 23 Did the state participate in/respond to surveys or information requests from NAPSR or PHMSA? (H4) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues. 1 1 24 If the State has issued any waivers/special permits for any operator, has the state verified conditions of those waivers/special permits are being met? This should include having the operator amend procedures where appropriate. Info Only = No Points Evaluator Notes: Discussed and no issues at this time Info Only Info Only 25 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 40.5 Total possible points for this section: 43 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 10#

AZ NG Program Evaluation, 2013, page 11PART D - Compliance Activities Points(MAX) Score 1 Does the state have written procedures to identify steps to be taken from the discovery to 4 3 resolution of a probable violation? Chapter 5.1 (B12-14, B16, B1h) Yes = 4 No = 0 Needs Improvement = 1-3 a. Procedures to notify an operator (company officer) when a noncompliance is identified Yes No Needs Improvement b. Procedures to routinely review progress of compliance actions to prevent delays or breakdowns Yes No Needs Improvement Evaluator Notes: Nothing in procedures about company officer notification. Also gap in procedures that talk about letter issuance after audit is complete and process should be added. Issues are tracked on operator "board" in program manager office, but process also needs to be memorialized in procedures. 2 Did the state follow compliance procedures (from discovery to resolution) and adequately 4 3 document all probable violations, including what resolution or further course of action is needed to gain compliance? Chapter 5.1 (B11,B18,B19) Yes = 4 No = 0 Needs Improvement = 1-3 a. Were compliance actions sent to company officer or manager/board member if municipal/government system? Yes No Needs Improvement b. Were probable violations documented? Yes No Needs Improvement c. Were probable violations resolved? Yes No Needs Improvement d. Was the progress of probable violations routinely reviewed? Yes No Needs Improvement Evaluator Notes: Letters of compliance were not sent to company officers in case of SWG and UniSource utilities. All violations appear to have been well documented and followed up on appropriately. 3 Did the state issue compliance actions for all probable violations discovered? (B15) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Compliance actions for all violations were addressed. 2 2 4 Did compliance actions give reasonable due process to all parties? Including "show cause" hearing if necessary. (B17, B20) Yes = 2 No = 0 Evaluator Notes: Found no issues with due process. 2 2 5 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) (B27) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes he is familiar and civil penalities are always mentioned in compliance correspondence. 2 2 6 Can the State demonstrate it is using their enforcement fining authority for pipeline safety violations? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: The last fine was in 2008, so yes they can demonstrate they have used fining authority. 1 1 7 General Comments: Info Only Info Only DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 11#

AZ NG Program Evaluation, 2013, page 12Info Only = No Points Evaluator Notes: DUNS: 141953807 2013 Natural Gas State Program Evaluation Total points scored for this section: 13 Total possible points for this section: 15 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 12#

AZ NG Program Evaluation, 2013, page 13PART E - Incident Investigations Points(MAX) Score 1 Does state have adequate mechanism to receive and respond to operator reports of 2 2 incidents, including after-hours reports? And did state keep adequate records of Incident/ Accident notifications received? Chapter 6 (A2,D1-3) Yes = 2 No = 0 Needs Improvement = 1 a. Acknowledgement of MOU between NTSB and PHMSA (Appendix D) Yes No Needs Improvement b. Acknowledgement of Federal/State Cooperation in case of incident/accident (Appendix E) Yes No Needs Improvement Evaluator Notes: Yes, very conservative procedures on operator reporting. Almost every gas release is reported, all involving any evacuation in addition to other reporting requirement. 2 If onsite investigation was not made, did state obtain sufficient information from the operator and/or by other means to determine the facts to support the decision to not go on-site? Chapter 6 (D4) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 1 Information is gathered on incident notification reports, mandatory investigation if death,injury etc. No issues in this area. 3 Were all incidents investigated, thoroughly documented, and with conclusions and 3 3 recommendations? (D5) Yes = 3 No = 0 Needs Improvement = 1-2 a. Observations and document review Yes No Needs Improvement b. Contributing Factors Yes No Needs Improvement c. Recommendations to prevent recurrences when appropriate Yes No Needs Improvement Evaluator Notes: incident at 1876 Boardwalk avenue, prescott on 8-5-13 was reviewed no issues. Incident at 200 East Knox, Unit 1 in Chandler 9-26-13 was reviewed with no issues. Incident at 11411 N. 33rd Avenue, Phoenix on 3-31-13. Fire first no issues. 7916 West Varney Road, Peoria on 10-16-13 4 Did the state initiate compliance action for violations found during any incident/accident investigation? (D6) Yes = 1 No = 0 Evaluator Notes: Not applicable. 1 NA 5 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 report data from operators concerning incidents/accidents and investigate discrepancies) Chapter 6 (D7) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues. 1 1 6 Does state share lessons learned from incidents/accidents? (sharing information, such as: at NAPSR Region meetings, state seminars, etc) (G15) Yes = 1 No = 0 Evaluator Notes: no issues. 1 1 7 General Comments: DUNS: 141953807 2013 Natural Gas State Program Evaluation Info Only Info Only Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 13#

AZ NG Program Evaluation, 2013, page 14Info Only = No Points Evaluator Notes: DUNS: 141953807 2013 Natural Gas State Program Evaluation Total points scored for this section: 8 Total possible points for this section: 8 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 14#

AZ NG Program Evaluation, 2013, page 15PART F - Damage Prevention 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? NTSB (E1) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: This is listed on inspection checklist. No issues 2 2 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? (E2) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Covered in damage prevention area on checklist. no issues. 2 2 3 Did the state encourage and promote practices for reducing damages to all underground facilities to its regulated companies? (i.e. such as promoting/adopting the CGA Best Practices encouraging adoption of the 9 Elements, etc.) (E3) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, this is done through stakeholder meetings, participation in reginal CGA and seminars. 2 2 4 Has the agency or another organization within the state collected data and evaluated 2 2 trends on the number of pipeline damages per 1,000 locate requests? (This can include DIRT and other data shared and reviewed by the pipeline safety program) (E4,G5) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, still collecting quarterly and annual comprehensive review of damages caused by excavation and reviews with operators (non MM) 5 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 8 Total possible points for this section: 8 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 15#

AZ NG Program Evaluation, 2013, page 16PART G - Field Inspections Points(MAX) Score 1 Operator, Inspector, Location, Date and PHMSA Representative Info Only = No Points Name of Operator Inspected: Arizona Public Service Name of State Inspector(s) Observed: Ryan Weight and Joel Perry Location of Inspection: Phoenix, AZ Date of Inspection: August 5-7, 2014 Name of PHMSA Representative: Jim Anderson Evaluator Notes: Arizona Public Service is both a hazardous liquid operator and natural gas operator. Info Only Info Only 2 Was the operator or operator's representative notified and/or given the opportunity to be present during inspection? (F2) Yes = 1 No = 0 Evaluator Notes: Yes. 3 AZ Public Service employees were present during the entire inspection. 1 1 3 Did the inspector use an appropriate inspection form/checklist and was the form/checklist used as a guide for the inspection? (New regulations shall be incorporated) (F3) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. Uses PHMSA form and converts it to an Excel spreadsheet and adds IMP questions. 2 2 4 Did the inspector thoroughly document results of the inspection? (F4) 2 2 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. 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.) (F5) Yes = 1 No = 0 Evaluator Notes: Yes, Only equipment needed was volt meter and contractor provided it. 1 1 6 Did the inspector adequately review the following during the field portion of the state evaluation? (check all that apply on list) (F7) Yes = 2 No = 0 Needs Improvement = 1 a. Procedures b. Records c. Field Activities d. Other (please comment) Evaluator Notes: Completed O&M procedures/records review and field activities 2 2 7 Did the inspector have adequate knowledge of the pipeline safety program and regulations? (Evaluator will document reasons if unacceptable) (F8) 2 2 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 16#

AZ NG Program Evaluation, 2013, page 17Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. Ryan Weight has over 15 years experience and Joel Perry has over 5 years experience. 8 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) (F9) Yes = 1 No = 0 Evaluator Notes: 1 1 Partial exit interview conducted. Final exit interview will be conducted after final inspection report is completed. 9 During the exit interview, did the inspector identify probable violations found during the inspections? (if applicable) (F10) Yes = 1 No = 0 Evaluator Notes: Yes. Notices of amendments and possible noncompliances were discussed. 1 1 10 General Comments: What did the inspector observe in the field? (Narrative description of field observations and how inspector performed) Best Practices to Share with Other States - (Field - could be from operator visited or state inspector practices) Other. 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 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 Info Only Info Only DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 17#

AZ NG Program Evaluation, 2013, page 18G. OQ - Operator Qualification H. Compliance Follow-up I. Atmospheric Corrosion J. Other Evaluator Notes: Total points scored for this section: 12 Total possible points for this section: 12 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 18#

AZ NG Program Evaluation, 2013, page 19PART H - Interstate Agent State (If Applicable) Points(MAX) Score 1 Did the state use the current federal inspection form(s)? (C1) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: no issues 1 1 2 Are results documented demonstrating inspection units were reviewed in accordance with "PHMSA directed inspection plan"? (C2) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: no issues 1 1 3 Did the state submit documentation of the inspections within 60 days as stated in its latest Interstate Agent Agreement form? (C3) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: no issues 1 1 4 Were 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.) (C4) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: no issues 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? (C5) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: None during year. N/A 1 NA 6 Did the state give written notice to PHMSA within 60 days of all probable violations found? (C6) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: no issues 1 1 7 Did the state initially submit documentation to support compliance action by PHMSA on probable violations? (C7) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: yes - kinder morgan 1 1 8 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 6 Total possible points for this section: 6 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 19#

AZ NG Program Evaluation, 2013, page 20PART I - 60106 Agreement State (If Applicable) Points(MAX) Score 1 Did the state use the current federal inspection form(s)? (B21) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 2 Are results documented demonstrating inspection units were reviewed in accordance with state inspection plan? (B22) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 3 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.) (B23) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 4 Did the state immediately report to PHMSA conditions which may pose an imminent safety hazard to the public or to the environment? (B24) Yes = 1 No = 0 Needs Improvement = .5 1 NA Evaluator Notes: 5 Did the state give written notice to PHMSA within 60 days of all probable violations found? (B25) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 6 Did the state initially submit adequate documentation to support compliance action by PHMSA on probable violations? (B26) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 7 General Comments: Info Only = No Points Evaluator Notes: section not applicable Info Only Info Only Total points scored for this section: 0 Total possible points for this section: 0 DUNS: 141953807 2013 Natural Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 20#