# 2016 NJ NG Program Evaluation - nj-2016-gas-program-evaluation (New Jersey; Natural Gas State Program Evaluation)

- **operation:** document
- **citation:** PHMSA nj-2016-gas-program-evaluation
- **title:** 2016 NJ NG Program Evaluation - nj-2016-gas-program-evaluation (New Jersey; Natural Gas State Program Evaluation)
- **source type:** inspection
- **agency:** Pipeline and Hazardous Materials Safety Administration
- **status:** historical
- **official:** true
- **published on:** 2016-01-01
- **effective on:** Not available
- **summary:** 2016 PHMSA natural gas program evaluation for New Jersey.
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- **source url:** https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/docs/subdoc/2881/nj-2016-gas-program-evaluation.pdf
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1200 New Jersey Avenue SE Washington DC 20590 U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 2016 Gas State Program Evaluation for NEW JERSEY BOARD OF PUBLIC UTILITIES 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: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 1

2016 Gas State Program Evaluation -- CY 2016 Gas State Agency: New Jersey Rating: Agency Status: Date of Visit: 07/31/2017 - 08/04/2017 Agency Representative: Mike Stonack, PE Bureau Chief, Pipeline Safety Jim Guiliano, Director of Reliability & Security Juan Urena, Environmental Engineer 2 John Staudenmayer, Environmental Enginner 1 Andre Moses, Environmental Engineer Trainee PHMSA Representative: Glynn Blanton, PHMSA State Programs Commission Chairman to whom follow up letter is to be sent: Name/Title: Richard S. Mroz, President Agency: New Jersey Board of Public Utilities Address: 44 South Clinton Avenue, 3rd Floor, Suite 314, PO Box 350 City/State/Zip: Trenton, NJ 08625-0350 60105(a): Yes 60106(a): No Interstate Agent: No 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 2016 (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 47 47 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) 0 0 I 60106 Agreement State (If Applicable) 0 0 TOTALS 116 116 State Rating................................................................................................................................................... 100.0 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 2

PART 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: A review and comparison of 2015 & 2016 Attachment 1 found two less master meter operators. The names of the master meter operators were not listed in the note selection but provided in attachment 3. Lakewood Housing Authority (JFK Apartments) was eliminated as a Master Meter facility in CY 2016. Gas service to the apartment complex was abandoned by NJNG, the property was sold, and it is being planned for demolition. Perth Amboy Housing Authority (William A. Dunlap Homes) was eliminated as a Master Meter facility in CY 2016. The complex was converted to separate services and metered by ETG to be part of the ETG distribution system. 2 Review of Inspection Days for accuracy - Progress Report Attachment 2 Yes = 1 No = 0 Needs Improvement = .5 1 1 Evaluator Notes: Inspection days are less for CY2016 than CY2015: 427/495. Discussion with Program Manager determined this was due to loss of experienced inspectors. Excellent detail on the type of inspections performed on each operator. 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 with listing of operators and match attachment 1. Description of master meter systems being sold and eliminated was provided in note section of attachment. 4 Were all federally reportable incident reports listed and information correct? - Progress Report Attachment 4 Yes = 1 No = 0 Needs Improvement = .5 1 1 Evaluator Notes: Yes, all four incidents were listed and match incident report data in Portal. Reviewed incident reports in the office and found a great amount of detailed information on the incidents. No issues. 5 Accuracy verification of Compliance Activities - Progress Report Attachment 5 1 1 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Verification of compliance activities were checked and found correct. In CY2016, NJ BPU collected $150,000 in civil penalties from one operator. 6 Were pipeline program files well-organized and accessible? - Progress Report Attachment 6 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, files were reviewed and found to be well-organized. 2 2 7 Was employee listing and completed training accurate and complete? - Progress Report Attachment 7 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, reviewed TQ training records and found employees have completed the required training. 1 1 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 3

8 Verification of Part 192,193,198,199 Rules and Amendments - Progress Report 1 1 Attachment 8 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: No issues. Senate Bill S-2673 was introduced on 11/21/2016 to increase the Maximum Penalties to $200,000/$2 M. The bill was placed on hold pending the next gubernatorial administration. 9 List of Planned Performance - Did state describe accomplishments on Progress Report in detail - Progress Report Attachment 10 Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, excellent description on past and future performance was provided. No areas of concern. 1 1 10 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in the review of this section. Info Only Info Only Total points scored for this section: 10 Total possible points for this section: 10 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 4

PART B - Program Inspection Procedures Points(MAX) Score 1 Standard Inspection procedures should give guidance to state inspectors that insure 2 2 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, Standard inspection procedures include pre-inspection, inspection and post inspection information located on pages 42-44 under Section 7, Inspection and Compliance Program, in NJ BPU Procedure Manual. 2 IMP and DIMP Inspection procedures should give guidance to state inspectors that insure 1 1 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, IMP & DIMP inspection procedures include pre-inspection, inspection and post inspection information located on pages 42-44 under Section 7, Inspection and Compliance Program, in NJ BPU Procedure Manual. 3 OQ Inspection procedures should give guidance to state inspectors that insure 1 1 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, OQ inspection procedures include pre-inspection, inspection and post inspection information located on page 45 under Section 7, Inspection and Compliance Program, in NJ BPU Procedure Manual. 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, Damage prevention inspection procedures are located on page 45 under Section 7, Inspection and Compliance Program, in NJ BPU Procedure Manual. 5 Any operator training conducted should be outlined and appropriately documented as 1 1 needed. Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Procedure Manual. Yes, Operator Training procedures are located on page 45 under Section 7, Inspection and Compliance Program, in NJBPU 6 Construction Inspection procedures should give guidance to state inspectors that insure 1 1 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, construction inspection procedures are located on page 44 under Section 7, Inspection and Compliance Program, in NJBPU Procedure Manual. 7 Does inspection plan address inspection priorities of each operator, and if necessary each unit, based on the following elements? Yes = 6 No = 0 Needs Improvement = 1-5 DUNS: 189737682 2016 Gas State Program Evaluation 6 6 New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 5

a. Length of time since last inspection (Within five year interval) 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 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: Items a thru f are located on page 37 under Section 7, Inspection and Compliance Program, in NJ BPU Procedure Manual. 8 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in this section of the review. Info Only Info Only Total points scored for this section: 13 Total possible points for this section: 13 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 6

PART 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): 427.50 B. Total Inspection Person Days Charged to the Program (220 X Inspection Person Years) (Attachment 7): 220 X 3.54 = 779.17 Ratio: A / B 427.50 / 779.17 = 0.55 If Ratio >= 0.38 Then Points = 5, If Ratio < 0.38 Then Points = 0 Points = 5 Evaluator Notes: A.Total Inspection Person Days (Attachment 2)= 427.5 B.Total Inspection Person Days Charged to the program(220*Number of Inspection person years(Attachment 7)=779.16652 Formula:- Ratio = A/B = 427.5/779.16652 = 0.55 Rule:- (If Ratio >=.38 then points = 5 else Points = 0.) Thus Points = 5 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: a. John Grillo, Juan Urena & Eric Weaver completed the OQ course. b. Eric Weaver has completed the DIMP course requirements. c. John Grillo has completed the root cause course. d. No outside training was completed or attended by staff in CY2016. e. Yes, John Grillo, Juan Urena, Michael Stonack & Eric Weaver have completed all required courses pertaining to gas inspector training requirements. 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 Evaluator Notes: Yes, Mike Stonack has over eleven years of experience in pipeline safety as the Program Manager. 2 2 4 Did state respond to Chairman's letter on previous evaluation within 60 days and correct 2 2 or address any noted deficiencies? (If necessary) Chapter 8.1 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, President Richard S. Mroz's response letter to Zach Barrett was received on October 26, 2016 and within the sixty day time requirement. 5 Did State conduct or participate in pipeline safety training session or seminar in Past 3 Years? Chapter 8.5 Yes = 1 No = 0 1 1 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 7

Evaluator Notes: Yes, the last seminar was held on October 26, 2016 in Edison, NJ. Eighty private operator representatives attend the meeting. A review of the attendee list showed a good representation from the private sector but none of the forty-five master meter operators were in attendance. Suggest in the future to invite master meter operators or have separate seminar to this group. 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: Yes, a review of NJ BPU database confirmed all private operators and units were inspected in accordance to the time schedule. A review of master meter operators found 28.6% of them were inspected in CY2016 and this was the first year in the three year cycle. No areas of concern with this requirement. 7 Did inspection form(s) cover all applicable code requirements addressed on Federal 2 2 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, they are using the federal inspection forms along with NJ BPU forms in reviewing the operator's compliance with the pipeline safety regulations. All forms are listed in the pipeline safety procedure manual. 8 Did the state review operator procedures for determining if exposed cast iron pipe was 1 1 examined for evidence of graphitization and if necessary remedial action was taken? (NTSB) Chapter 5.1 Yes = 1 No = 0 Evaluator Notes: Yes, this item is listed in NJ BPU Form GS-2 page 2. NJ BPU is considering adding this question to their construction form to continue monitoring the operator's compliance. 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: Yes, this item is listed in NJ BPU Form GS-3 page 1, under B 4. 1 1 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, this item is listed in NJ BPU Form GS-3 page 2. B 8 (7) 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 Yes = 1 No = 0 Evaluator Notes: Yes, this item is listed in NJ BPU Form GS-3, page 2, B10. 1 1 12 DUNS: 189737682 2016 Gas State Program Evaluation Has the state reviewed Operator Annual reports, along with Incident/Accident reports, for accuracy and analyzed data for trends and operator issues? 2 2 New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 8

Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, NJ BPU engineers review the operator's annual reports and perform an analysis on the data yearly. This information is posted on a spreadsheet maintained by the Program Manager. Additionally, each inspector reviews with the operator their annual report during a pipeline safety inspection. 13 Did state input all applicable OQ, DIMP/IMP inspection results into federal database in a 2 2 timely manner? This includes replies to Operator notifications into IMDB database. Chapter 5.1 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, a review of the Operator Qualification site found eighteen inspections were performed in CY2016. Additionally, four DIMP and eight Gas Transmission inspections were performed. No areas of concern. 14 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, operators submitted to NJ BPU annually a report of any changes that have incurred including updates on their facilities. Additionally, this question is listed on NJ BPU inspection form GS-3 section E.4 on page 9. 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, this is accomplished by using the PHMSA Form GS-40-199. 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 accomplished using GS-21 or PHMSA Form 14. NJ BPU has a rule N.J.A.C. 14:7-1.23 that requires the operator to file with their organization any proposed updates. 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). (Are the State's largest operators programs being contacted or reviewed annually?). 49 CFR 192 Subpart 0 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, this is accomplished in NJ BPU GS-31, Transmission IMP Inspection .NJ BPU has a rule N.J.A.C. 14:7-1.23 that requires the operator to file with their organization any proposed updates. In CY2016, all four of the private operators were inspected and reviewed pertaining to the IMP program. 18 Is state verifying operator's gas distribution integrity management Programs (DIMP)? 2 2 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). (Are the State's largest operators programs being contacted or reviewed annually?). 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, all DIMP inspections were performed in CY2014. The second round of DIMP inspections were performed in CY2016.DUNS: 189737682 New Jersey 2016 Gas State Program Evaluation NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 9

19 Is state verifying operators Public Awareness programs are up to date and being 2 2 followed. State should also verify operators have evaluated Public Awareness programs for effectiveness as described in RP1162. PAPEI Effectiveness Inspections should have been completed by December 2013. PAPEI Effectiveness Inspections should be conducted every four years by operators. 49 CFR 192.616 Yes = 2 No = 0 Needs Improvement = 1 Evaluator Notes: Yes, Public Awareness program reviews were initially conducted in December 2013. In CY2016, four operator's public awareness programs were reviewed. The operators were Elizabethtown Gas Company, New Jersey Natural Gas, South Jersey Gas & Public Service Electric & Gas. 20 Does the state have a mechanism for communicating with stakeholders - other than state 1 1 pipeline safety seminar? (This should include making enforcement cases available to public). Yes = 1 No = 0 Needs Improvement = .5 Evaluator Notes: Yes, NJ BPU members continue to attend NJ CGA quarterly meetings to communicate with stakeholders. The meeting dates were January 6, April 6, June 8th & October 5, 2016. A NJ 811 proclamation is signed by the Governor each year that designates April as the Underground Damage Prevention Month. 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: No safety related condition reports in CY2016. 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, this was accomplished by e-mail sent to each operator. A review of files confirm this item was completed by NJ BPU in CY2016. 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, a review of emails from Robert Clarillos to Mike Stonack confirm several responses were provided to NAPSR. 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 waivers or special permits were issued in CY2016. 1 NA 25 Did the state attend the National NAPSR Board of Directors Meeting in CY being 1 1 evaluated? No = 0 Needs Improvement = .5 Yes = 1 Evaluator Notes: Yes, Mike Stonack was unable to attend the NAPSR Board of Directors meeting in Indianapolis, IN but Eric Weaver did. DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 10

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: a & b. Reviewed PHMSA State Program Metrics and found leaks repaired per 1,000 miles were trending downward from previous year due the cast iron and bare steel replacement projects. Additionally, hazardous leaks per 1,000 miles were trending downward. Leaks outstanding per 1,000 was trending upward. Mike Stonack will continue to review these items and discuss with pipeline safety engineers and take appropriate action. 27 Discussion with State on accuracy of inspection day information submitted into State Info Only Info Only Inspection Day Calculation Tool. (No points) Info Only = No Points Evaluator Notes: Discussed with Program Manager the SIDCT. It was suggested to review the number of inspection person days for master meters due to changes with two master meter operators. 28 Did the State verify Operators took appropriate action regarding Pipeline Flow Reversals, Info Only Info Only Product Changes and Conversions to Service? See ADP-2014-04 (No Points) Info Only = No Points Evaluator Notes: No pipeline flow reversals occurred in CY2016. NJ operators are required to inform NJ BPU of this action. 29 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in this section of the review. Info Only Info Only Total points scored for this section: 47 Total possible points for this section: 47 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 11

PART 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 c. Procedures regarding closing outstanding probable violations Yes No Needs Improvement Evaluator Notes: a.This is located on page 46, NJ BPU Operation Manual Section 7, Inspection & Compliance. No area of concern b.This is located on page 49, NJ BPU Operation Manual Section 7, Inspection & Compliance. c.This is located on page 49, NJ BPU Operation Manual Section 7, Inspection & Compliance. 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: a. Yes reviewed file and found compliance action was sent to Mr. Paul Zuccarino, South Jersey Gas Company on November 9, 2016 b. Yes, violations were found and noted in the letter: 192.805. c. Probable violations were resolved on November 30, 2016. d. The violation was reviewed monthly during November , 2016 e. Yes, this is identified in last paragraph of letter, NJAC 14:7-2.3 an amount of $100,000 per day or $1,000,000 for any series of violations. 3 Did the state issue compliance actions for all probable violations discovered? Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: Yes, eighteen compliance actions were issued in CY2016 as found in data base and listed on 2016 NJ BPU Progress Report, Attachment 5- Stats on Compliance Actions 4 Did compliance actions give reasonable due process to all parties? Including "show cause" hearing if necessary. Yes = 2 No = 0 Evaluator Notes: Yes, NJ BPU rule provides this due process in section 14:7-2.6 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: DUNS: 189737682 2016 Gas State Program Evaluation 2 2 New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 12

Yes, Mike Stonack is familiar with this process and issued a civil penalty in the amount of $150,000 against South Jersey Gas in CY2016. 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, the civil penalty in the amount of $150,000 against South Jersey Gas in CY2016. 1 1 7 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in the review of this section. Info Only Info Only Total points scored for this section: 15 Total possible points for this section: 15 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 13

PART 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, this information is located on pages 50-54, under section 8, Failure Investigation and Safety Related Condition Reports in NJ BPU Pipeline Safety Procedure Manual. It was suggested to update the contact information list in the document for PHMSA to the new PHMSA Accident Investigation Division. 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, a. page 51, under section 8, Failure Investigation and Safety Related Condition Reports in NJ BPU Pipeline Safety Procedure Manual address this item. Yes, b. this information is listed on page 51,NJ BPU Pipeline Safety Procedure Manual and the full documents are provided in Appendix D & E of their procedures. 3 If onsite investigation was not made, did state obtain sufficient information from the 1 1 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, all telephonic calls and emails from operators pertaining to incidents/accidents are responded to by NJ BPU pipeline safety inspectors. The operators are required to report all incidents/accidents by email to all inspectors. A decision to not go to a site will be rendered by the Program Manager and placed in the operator's file folder. 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, all four incidents that occurred in CY2016 were investigated and thoroughly documented with information and recommendations. Listed below are the four incidents: South Jersey Gas Company, March 17, 2016, Public Service Electric & Gas Company, March 30, 2016, New Jersey Natural Gas Company, August 9, 2016 and Public Service Electric & Gas Company, October 4, 2016. 5 Did the state initiate compliance action for violations found during any incident/accident investigation? Yes = 1 No = 0 Evaluator Notes: Listed below is the compliance action taken on each incident. South Jersey Gas Company, March 17, 2016, No violation issued. Public Service Electric & Gas Company, March 30, 2016, Under investigation. New Jersey Natural Gas Company, August 9, 2016 No violation issued. 1 1 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 14

Public Service Electric & Gas Company, October 4, 2016. Under investigation. 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: 1 1 Yes, follow-up actions were provided to PHMSA Eastern Region office during the four incidents that occurred in CY2016. 7 Does state share lessons learned from incidents/accidents? (sharing information, such as: 1 1 at NAPSR Region meetings, state seminars, etc) Yes = 1 No = 0 Evaluator Notes: Yes, Mike Stonack will continue to share information on incidents and accidents that have occurred in the State of New Jersey at the NAPSR Eastern Region meeting. 8 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in the review of this section. Info Only Info Only Total points scored for this section: 11 Total possible points for this section: 11 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 15

PART 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 accomplished by New Jersey Administrative Code Section 14:7-1.25 and reviewed with the operator during a construction inspection. 2 Did the state inspector check to assure the pipeline operator is following its written 2 2 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: Yes, this is accomplished during construction and office visits with the operator on NJ BPU GS 9-ST & GS 9- PL & GS-1 forms. 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, during the months of February thru April each year, a weekly breakfast and training seminar on damage prevention and using the 811 number is conducted with stakeholders. Over 1,400 stakeholders attended the 13 meetings in several regions of the state. 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, NJ BPU reviews the pipeline damages quarterly and annually. In CY2016, New Jersey had 2.88 pipeline damages per 1,000 locate request. The number of total ticket requests has increased by 7.5 percent from previous year. 5 General Comments: Info Only = No Points Evaluator Notes: No loss of points occurred in this section of the review. Info Only Info Only Total points scored for this section: 8 Total possible points for this section: 8 DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 16

PART 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: New Jersey Natural Gas Company Name of State Inspector(s) Observed: Juan Urena, Environmental Engineer 2 Location of Inspection: Red Bank and/or Middletown, NJ Date of Inspection: August 2-3, 2017 Name of PHMSA Representative: Glynn Blanton, PHMSA State Programs Evaluator Notes: August 2, 2017: This was a construction inspection of New Jersey Natural Gas Company in the Red Bank, NJ area who was installing two projects. The first project was a 8 inch PE3400 pipeline being installed along Hubbard Avenue to replace an unprotected coated steel main. The second project was located at New Monmouth Road and consisted of a 8 inch steel pipeline. New Jersey Natural Gas contacts were: Marc Panaccione, Senior Project Engineer and Angelo Papagiannakis, Project Engineer. NJ BPU inspector John Staudenmayer performed the inspection along with Juan Urena. August 3: This was an LNG inspection of New Jersey Natural Gas Company facility located in Howell, NJ. Company contact personnel were Ed Yurick, LNG Plant Manager and Wayne Becker, Supervisor. The facility was recently updated to include liquefaction and improvements in pumps and other components at a cost of $30M +. NY BPU John Grillo performed the LNG Personnel Qualification/ Training inspection along with Juan Urena. 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, New Jersey Natural Gas company personnel were notified two weeks prior to the two inspections being performed. 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, Juan Urena used Forms GS-9-Pl and GS-9-ST Field Construction Inspections and GS-22 OQ Field Inspection to check the construction project. The contractor was J.F. Kiely Company who was performing electrical fusion on the PE 3400 pipeline. Yes, Juan Urena used GS-53 LNG Security and John Grillo used GS-54 LNG Personnel Qualification/Training to check records and other components at the LNG facility. 4 Did the inspector thoroughly document results of the inspection? Yes = 2 No = 0 Needs Improvement = 1 2 2 Evaluator Notes: Yes, Juan Urena was documenting all responses to questions asked during the construction & LNG inspections. 5 Did the inspector check to see if the operator had necessary equipment during inspection 1 1 to conduct tasks viewed? (Maps,pyrometer,soap spray,CGI,etc.) Yes = 1 No = 0 Evaluator Notes: Yes, Juan Urena and John Staudenmayer were observed checking all equipment used by the company and company contractor in performing the construction work. DUNS: 189737682 2016 Gas State Program Evaluation New Jersey NEW JERSEY BOARD OF PUBLIC UTILITIES, Page: 17

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) 2 2 Evaluator Notes: Yes, Juan Urena was very thorough in checking the company's field records, drawings, OQ cards, written procedures and pressure requirements of the proposed pipeline projects. Additionally, it was observed by this writer Juan Urena performing an in-depth review of the LNG facility records and training requirements for all personnel. 7 Did the inspector have adequate knowledge of the pipeline safety program and regulations? 
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