2015 AZ NG Program Evaluation - az2015ngprogramevaluation (Arizona; Natural Gas State Program Evaluation)

AZ NG Program Evaluation, 2015, page 1Official PDF1200 New Jersey Avenue SE Washington DC 20590 U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2015 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 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 1#

AZ NG Program Evaluation, 2015, page 22015 Gas State Program Evaluation -- CY 2015 Gas State Agency: Arizona Rating: Agency Status: Date of Visit: 04/11/2016 - 06/10/2016 Agency Representative: Arizona PHMSA Representative: Michael Thompson, Agustin Lopez Commission Chairman to whom follow up letter is to be sent: Name/Title: Doug Little, Chairman Agency: Arizona Corporation Commission Address: 1200 West Washington City/State/Zip: Phoenix, Arizona 85007-2996 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 2015 (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 13 13 C Program Performance 46 46 D Compliance Activities 15 15 E Incident Investigations 11 11 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 121 121 State Rating................................................................................................................................................... 100.0 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 2#

AZ NG Program Evaluation, 2015, 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 Yes = 1 No = 0 Needs Improvement = .5 1 1 Evaluator Notes: No Issues; Found in the Arizona constitution under Article XV, Section 2 and Arizona Revised Statutes 40-441. 2 Review of Inspection Days for accuracy - Progress Report Attachment 2 1 1 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No Issues; They use daily, monthly and annual activity reports for each inspector to track this data. I reviewed the records for accuracy. 3 Accuracy verification of Operators and Operators Inspection Units in State - Progress 1 1 Report Attachment 3 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No Issues; They use their annual audit/inspection schedule for each year to track this. They could ad a Column to show all units every year to help make it more clear. 4 Were all federally reportable incident reports listed and information correct? - Progress Report Attachment 4 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, the records were reviewed and no issues found. 1 1 5 Accuracy verification of Compliance Activities - Progress Report Attachment 5 1 1 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: accuracy. No issues; they use their daily and monthly activity reports to track this information and the records were reviewed for 6 Were pipeline program files well-organized and accessible? - Progress Report Attachment 6 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, all files were well organized and made available for review during the evaluation. 2 2 7 Was employee listing and completed training accurate and complete? - Progress Report 1 1 Attachment 7 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, this was very well documented on a spread sheet showing all employees and the training they have received since joining the AZCC. 8 Verification of Part 192,193,198,199 Rules and Amendments - Progress Report Attachment 8 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 1 The Arizona CC does rule adoptions every two years. They following amendments are in "Taking Steps" category this year. DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 3#

AZ NG Program Evaluation, 2015, page 49 List of Planned Performance - Did state describe accomplishments on Progress Report in 1 1 detail - Progress Report Attachment 10 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. In attachment 10 of the progress report, the state has provided a description of their planned annual and long term goals, along with their accomplishments. 10 General Comments: Info Only Info Only Info Only = No Points Evaluator Notes: The AZCC was asked to add a column to their documents showing operators and inspection units to show an overall total number of inspection units. Total points scored for this section: 10 Total possible points for this section: 10 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 4#

AZ NG Program Evaluation, 2015, page 5PART B - Program Inspection Procedures Points(MAX) Score 1 Standard Inspection procedures should give guidance to state inspectors that insure consistency in all inspections conducted by the state? The following elements should be addressed at a minimum - pre-inspection activities, inspection activities, post-inspection activities. Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. Section 5, pages 1 & 2 of the inspection procedures manual. 2 2 2 IMP and DIMP Inspection procedures should give guidance to state inspectors that insure consistency in all inspections conducted by the state? The following elements should be addressed at a minimum - pre-inspection activities, inspection activities, post-inspection activities. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Section 5, page 1 of the inspection procedures manual. 1 1 3 OQ Inspection procedures should give guidance to state inspectors that insure consistency in all inspections conducted by the state? The following elements should be addressed at a minimum - pre-inspection activities, inspection activities, post-inspection activities. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Section 5, page 1 of the inspection procedures manual. 1 1 4 Damage Prevention Inspection procedures should give guidance to state inspectors that 1 1 insure consistency in all inspections conducted by the state? The following elements should be addressed at a minimum - pre-inspection activities, inspection activities, post- inspection activities. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Section 5, page 1 of the inspection procedures manual. The Damage Prevention Inspections are conducted during Standard Inspections. 5 Any operator training conducted should be outlined and appropriately documented as 1 1 needed. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Section 7, page 6 of the inspection procedures manual. The training is conducted for Master Meter operators. 6 Construction Inspection procedures should give guidance to state inspectors that insure consistency in all inspections conducted by the state? The following elements should be addressed at a minimum - pre-inspection activities, inspection activities, post-inspection activities. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Section 5, page 3 of the inspection procedures manual. It was revised in March 2016. 1 1 7 Does inspection plan address inspection priorities of each operator, and if necessary each 6 6 unit, based on the following elements? Yes = 6 No = 0 Needs Improvement = 1-5 a. Length of time since last inspection (Within five year interval) Yes No Needs Improvement DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 5#

AZ NG Program Evaluation, 2015, page 6b. 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 e. 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: Yes. Arizona takes all of the above items into consideration when scheduling and conducting inspections. All operators; Gas, LPG, LNG, and hazardous liquid operators with the exception of Priority 2 master meter operators are inspected every year. Priority 2 master meter operators are described in Arizona policies and procedures and are inspected once every two years. If the inspector feels that there is an increased risk based on leaks or other risk factors such as increased number of violations, the procedure allows the inspector to reclassify the inspection to a higher risk priority 1 status requiring annual inspections. 8 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 13 Total possible points for this section: 13 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 6#

AZ NG Program Evaluation, 2015, 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 Yes = 5 No = 0 5 5 A. Total Inspection Person Days (Attachment 2): 1341.00 B. Total Inspection Person Days Charged to the Program (220 X Inspection Person Years) (Attachment 7): 220 X 11.50 = 2530.00 Ratio: A / B 1341.00 / 2530.00 = 0.53 If Ratio >= 0.38 Then Points = 5, If Ratio < 0.38 Then Points = 0 Points = 5 Evaluator Notes: Yes the ration was acceptable. The Arizona CC had a .53 ratio for the 2015 inspection cycle. 0.11 percent of the 2015 inspections were Construction Inspections. 2 Has each inspector and program manager fulfilled the T Q Training Requirements? (See 5 5 Guidelines Appendix C for requirements) Chapter 4.4 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 e. Verify inspector has obtained minimum qualifications to lead any applicable standard inspection as the lead inspector. Yes No Needs Improvement Evaluator Notes: Yes, Reviewed the Arizona CC training records and SABA records to verify the information. 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 Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: Yes. Robert Miller has been program manager for 9 years, has served on many NAPSR/PHMSA committees and is served as NAPSR National Chairman 2014-2015. 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 Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: Yes, the Chairman's letter went out on October 28, 2015 and the response was mailed on December 15, 2015. 5 Did State hold PHMSA TQ Seminar in Past 3 Years? Chapter 8.5 Yes = 2 No = 0 Evaluator Notes: Yes, the seminar was held on 2/15/2015 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 Yes = 5 No = 0 Needs Improvement = 1-4 5 5 Evaluator Notes: DUNS: 141953807 2015 Gas State Program Evaluation Yes, the inspection schedule for 2015 was reviewed along with approximately 35 percent of the actual inspection report Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 7#

AZ NG Program Evaluation, 2015, page 8documents for all operators other than master meter. A smaller percentage of the master meter inspections were reviewed randomly. All types of inspections were completed in accordance to the time intervals established in their written procedures. 7 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 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, 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 Yes = 1 No = 0 Evaluator Notes: N/A 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 Yes = 1 No = 0 Evaluator Notes: N/A 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 Yes = 1 No = 0 Evaluator Notes: Yes, it is on the state inspection form under 614.(c).(6).(i) 1 1 11 Did the state review operator records of previous accidents and failures including 1 1 reported third party damage and leak response to ensure appropriate operator response as required by 192.617? Chapter 5.1 Yes = 1 No = 0 Evaluator Notes: Yes. This is reviewed and addressed on Arizona's inspection report. All state reportable damages track notification to company time vs gas off times. Arizona also collects and tracks pipeline damage information including number of locate tickets, damages per thousand tickets and by type of damage; no ticket, mis-marked locate, 1st 2nd and 3rd party damages. 12 Has the state reviewed Operator Annual reports, along with Incident/Accident reports, for accuracy and analyzed data for trends and operator issues? Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: The Arizona CC uses mandatory quarterly reports for leaks and accidents/damages from operators to track this information. It give a good real time account of the information . 13 Did state input all applicable OQ, DIMP/IMP inspection results into federal database in a timely manner? This includes replies to Operator notifications into IMDB database. Chapter 5.1 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, reviewed the data base and state records. DUNS: 141953807 2015 Gas State Program Evaluation 2 2 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 8#

AZ NG Program Evaluation, 2015, page 914 Has state confirmed intrastate transmission operators have submitted information into NPMS database along with changes made after original submission? Yes = 1 No = 0 Needs Improvement = .5 1 1 Evaluator Notes: Yes, this information is reviewed by inspectors prior to conducting inspections and is found in question 191.22 on their form. 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 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, No issues 2 2 16 Is state verifying operators OQ programs are up to date? This should include verification 2 2 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 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, this is verified during all annual inspections, incident/accident inspection and verified while in the field. 17 Is state verifying operator's gas transmission integrity management programs (IMP) are 2 2 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 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, completed during annual inspections and can be found in box 1 of audit procedures for intrastate standard. (Gas. LNG or Liquid) 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 have been complete by December 2014 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. Arizona completed all inspections by December 2014. 2 2 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 conducted every four years per RP1162 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, No issues 2 2 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). Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 1 Yes, Arizona maintains a public website, maintains a working relationship and meets with the Arizona Utility Group. Arizona is a member of; the AZ National Utility Contractors Association, One call ticket resolution committee, Arizona DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 9#

AZ NG Program Evaluation, 2015, page 10Emergency Response Committee Advisory Board, the Arizona and National Common Ground Alliance. Arizona participates as a sponsoring member of the AZ 811 Alliance. Arizona meets quarterly with their largest LDC, Southwest Gas Corporation to discuss possible safety issues, ongoing maintenance, operational issues and vintage pipe replacement projects or other issues relevant to the safe operation of pipelines in Arizona. 21 Did state execute appropriate follow-up actions to Safety Related Condition (SRC) Reports? Chapter 6.3 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: N/A No SRC's in 2015. 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? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, they did a survey of all their operators in 2014 and have disallowed the use of certain plastic pipe through rule making. They are also adding this as a question to their inspection form to follow up with each operator. 23 Did the state participate in/respond to surveys or information requests from NAPSR or 1 1 PHMSA? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, Robert Miller, Program Manager was the NAPSR National Chair for 201-2015, so he definitely participated. 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. No = 0 Needs Improvement = .5 Yes = 1 Evaluator Notes: No active waivers at this time. 1 NA 25 Did the state attend the National NAPSR Board of Directors Meeting in CY being evaluated? No = 0 Needs Improvement = .5 Yes = 1 Evaluator Notes: Yes, The national meeting was hosted by the Arizona CC in Phoenix. 1 1 26 Discussion on State Program Performance Metrics found on Stakeholder Communication 2 2 site - http://primis.phmsa.dot.gov/comm/states.htm No = 0 Needs Improvement = 1 Yes = 2 a. Discussion of Potential Accelerated Actions (AA's) based on any negative trends Yes No Needs Improvement b. NTSB P-11-20 Meaningful Metrics Yes No Needs Improvement Evaluator Notes: Robert Miller is very familiar with State Performance Metrics, he was on the PHMSA/NAPSR Meaningful Metrics Committee. 27 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only DUNS: 141953807 2015 Gas State Program Evaluation Total points scored for this section: 46 Total possible points for this section: 46 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 10#

AZ NG Program Evaluation, 2015, 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 4 resolution of a probable violation? Chapter 5.1 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: Yes, Found in Section 5, Page 1 for Compliance Officer and Section 5, Page 5 for Compliance Actions in their policy and procedures manual. 2 Did the state follow compliance procedures (from discovery to resolution) and adequately 4 4 document all probable violations, including what resolution or further course of action is needed to gain compliance? Chapter 5.1 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. Document probable violations Yes No Needs Improvement c. Resolve probable violations Yes No Needs Improvement d. Routinely review progress of probable violations Yes No Needs Improvement e. Were applicable civil penalties outlined in correspondence with operator(s) Yes No Needs Improvement Evaluator Notes: Yes, all compliance actions reviewed showed that the AZCC did follow their compliance procedures and were adequately documented. 3 Did the state issue compliance actions for all probable violations discovered? Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, 358 compliance actions were initiated in 2015 and the records were reviewed to verify the count. 2 2 4 Did compliance actions give reasonable due process to all parties? Including "show cause" hearing if necessary. Yes = 2 No = 0 Evaluator Notes: Yes 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) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes 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: Yes, $7500.00 in civil penalties were issued in 2015. 1 1 7 General Comments: Info Only = No Points DUNS: 141953807 2015 Gas State Program Evaluation Info Only Info Only Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 11#

AZ NG Program Evaluation, 2015, page 12Evaluator Notes: Total points scored for this section: 15 Total possible points for this section: 15 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 12#

AZ NG Program Evaluation, 2015, page 13PART E - Incident Investigations Points(MAX) Score 1 Does the state have written procedures to address state actions in the event of an incident/ 2 2 accident? Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, They can be found in Section 10 of their policies and procedures manual, and in their training manual. 2 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 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, they have a dedicated phone number (602-252-4449) that is forwarded to the on call inspector after hour for response. 3 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 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, they investigate and document all reportable incidents. 1 1 4 Were all incidents investigated, thoroughly documented, and with conclusions and 3 3 recommendations? 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: Yes, Reviewed all reportable incidents. 5 Did the state initiate compliance action for violations found during any incident/accident 1 1 investigation? Yes = 1 No = 0 Evaluator Notes: Yes, 3 total violations with findings. No civil penalties were issued in 2015, however they are pursuing action on the 12/16/2015 incident in Thatcher into 2016. 6 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 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes 1 1 7 Does state share lessons learned from incidents/accidents? (sharing information, such as: at NAPSR Region meetings, state seminars, etc) Yes = 1 No = 0 Evaluator Notes: DUNS: 141953807 2015 Gas State Program Evaluation 1 1 Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 13#

AZ NG Program Evaluation, 2015, page 14Yes, Information on all reportable incidents was shared at the 2015 NAPSR Western Region meeting, and can also be found on the NAPSR website. 8 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 11 Total possible points for this section: 11 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 14#

AZ NG Program Evaluation, 2015, page 15PART F - Damage Prevention Points(MAX) Score 1 Has the state reviewed directional drilling/boring procedures of each pipeline operator or 2 2 its contractor to determine if they include actions to protect their facilities from the dangers posed by drilling and other trench less technologies? NTSB Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes. This is found on the standard inspection form, page 2, and is also addressed during the in-house training course for master meters and with major operators during inspections. 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? Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: 2 2 Yes. This is on the standard inspection check list on page 2 and is reviewed during each standard inspection. 3 Did the state encourage and promote practices for reducing damages to all underground 2 2 facilities to its regulated companies? (i.e. such as promoting/adopting the CGA Best Practices encouraging adoption of the 9 Elements, etc.) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, They do Damage Prevention seminars that reach 3000 plus people per year. They participate in stakeholder meeting around the state, have information on the AZCC website and provide a learning DVD as part of their enforcement process. 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) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, The AZCC collects quarterly damage reports on damages from all operators (except master meter) the information provided includes the number of tickets, number of damages and the cause of damages. This information is reviewed by the AZCC. 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 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 15#

AZ NG Program Evaluation, 2015, page 16PART G - Field Inspections Points(MAX) Score 1 Operator, Inspector, Location, Date and PHMSA Representative Info Only Info Only Info Only = No Points Name of Operator Inspected: Arizona Public Service (APS) Name of State Inspector(s) Observed: Bryan Frye- Lead: Greg Taylor-Inspector Location of Inspection: Phoenix, AZ Date of Inspection: June 6-10, 2016 Name of PHMSA Representative: Agustin Lopez Evaluator Notes: Evaluated Mr. Bryan Frye and Greg Taylor perform an inspection of APS Transmission pipeline. Mr. Frye was the lead inspector and Mr. Taylor assisted on the inspection. Both performed an excellent job and interacted with each other on a regular basis. 2 Was the operator or operator's representative notified and/or given the opportunity to be present during inspection? Yes = 1 No = 0 1 1 Evaluator Notes: Yes, the operator was notified in advance and given a chance to have any representatives present during the inspection. 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) Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: Yes, the inspectors utilized a modified PHMSA form which includes the state rules and regulations. Both inspectors used an electronic version and used it as a guide during the inspection. 4 Did the inspector thoroughly document results of the inspection? Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, the inspector documented the results on the form. 2 2 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.) Yes = 1 No = 0 Evaluator Notes: Yes, the inspector verified that technicians had equipment to operate valves and take pipe-to-soil readings. 1 1 2 2 6 Did the inspector adequately review the following during the field portion of the state evaluation? (check all that apply on list) Yes = 2 No = 0 Needs Improvement = 1 a. Procedures b. Records c. Field Activities d. Other (please comment) Evaluator Notes: The inspector reviewed procedures, records and conducted a field inspection of the operator pipeline facilities. Procedures and records were thoroughly reviewed by the inspector. During field inspection the inspector verified OQ of technicians and asked questions on the operations of the pipeline. The inspector conducted an exceptional job.DUNS: 141953807 Arizona 2015 Gas State Program Evaluation ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 16#

AZ NG Program Evaluation, 2015, page 177 Did the inspector have adequate knowledge of the pipeline safety program and 2 2 regulations? (Evaluator will document reasons if unacceptable) Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, the inspector is very knowledgeable of the pipeline safety program and regulations. He has completed TQ courses and is a seasoned inspector. 8 Did the inspector conduct an exit interview? (If inspection is not totally complete the 1 1 interview should be based on areas covered during time of field evaluation) Yes = 1 No = 0 Evaluator Notes: Yes, the inspector conducted an exit interview but is not the final exit interview. The ACC conduct the final exit interview 30 days after completing the inspection in order to give operator chance to find any needed documents and to review findings with Program Manager. The final exit interview was scheduled during the evaluation. 9 During the exit interview, did the inspector identify probable violations found during the 1 1 inspections? (if applicable) Yes = 1 No = 0 Evaluator Notes: Yes, the inspector discussed with the operator of the probable violations found during the inspection. Some examples were; no internal corrosion inspection performed, inadequate maps, no bond reading procedures, etc. 10 General Comments: 1) What did the inspector observe in the field? (Narrative description of field observations and how inspector performed) 2) Best Practices to Share with Other States - (Field - could be from operator visited or state inspector practices) 3) 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 Info Only Info Only DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 17#

AZ NG Program Evaluation, 2015, page 18A. 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 Evaluator Notes: Mr. Bryan Frye and Greg Taylor reviewed procedures, records and conducted a field inspection of APS facilities. The procedures and records review included; MAOP, OPP, cathodic protection, emergency response, valve maintenance, public awareness program, compliance follow-up and odorization. In the field they observed for signs, markers, ROW condition, pipe-to-soil readings, atmospheric corrosion, and operated valves. They performed an excellent inspection and concluded the inspection with an exit interview. Total points scored for this section: 12 Total possible points for this section: 12 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 18#

AZ NG Program Evaluation, 2015, page 19PART H - Interstate Agent State (If Applicable) Points(MAX) Score 1 Did the state use the current federal inspection form(s)? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes. Uses PHMSA's Inspection Assistant inspection form on line. Reviewed IA inspection online. 1 1 2 Are results documented demonstrating inspection units were reviewed in accordance with "PHMSA directed inspection plan"? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes 1 1 3 Did the state submit documentation of the inspections within 60 days as stated in its latest Interstate Agent Agreement form? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes 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.) Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No probable violation were found in 2015 1 NA 5 Did the state immediately report to PHMSA conditions which may pose an imminent safety hazard to the public or to the environment? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes 1 1 6 Did the state give written notice to PHMSA within 60 days of all probable violations found? Evaluator Notes: Yes Yes = 1 No = 0 Needs Improvement = .5 1 1 7 Did the state initially submit documentation to support compliance action by PHMSA on probable violations? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, it is part of IA 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 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 19#

AZ NG Program Evaluation, 2015, page 20PART I - 60106 Agreement State (If Applicable) Points(MAX) Score 1 Did the state use the current federal inspection form(s)? 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? 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.) 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? 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? Evaluator Notes: Yes = 1 No = 0 Needs Improvement = .5 1 NA 6 Did the state initially submit adequate documentation to support compliance action by PHMSA on probable violations? Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: 1 NA 7 General Comments: Info Only = No Points Evaluator Notes: Info Only Info Only Total points scored for this section: 0 Total possible points for this section: 0 DUNS: 141953807 2015 Gas State Program Evaluation Arizona ARIZONA CORPORATION COMMISSION, Office of Pipeline Safety, Page: 20#