U.S. DOT/PHMSA - Special Permit Analysis and Findings

Page 11 U.S. DEPARTMENT OF TRANSPORTATION PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION (PHMSA) Special Permit Analysis and Findings Special Permit Information: Docket Number: Pipeline Operator: Date Requested: Code Section(s): PHMSA-2008-0213 Empire Pipeline, Inc., (operator of Empire State Pipeline) August 8, 2008 49 CFR § 192.61l(a) Purpose: The Pipeline and Hazardous Materials Safety Administration (PHMSA) provides this information to describe the facts of the subject special permit application submitted by Empire Pipeline, Inc. (Empire), operator ofthe Empire State Pipeline. PHMSA also provides discussion of any relevant public comments received with respect to the application, presents the engineering and safety analysis of the special permit application, and makes findings regarding whether the requested special permit should be granted and if so under what conditions. Pipeline System Affected: This special permit request involves five (5) special permit segments along Empire's 24-inch natural gas transmission pipeline known as the Empire State Pipeline. The five special permit segments are located in Niagara, Genesee, and Monroe Counties, NY. The class location ofthe special permit segments have changed from Class 1 Locations to Class 2 Location or a Class 21 Locations to Class 3 Locations. Niagara, Genesee, and Monroe Counties, NY 1 The Class 3 segments were originally a Class I Location that was upgraded to Class 2 Location by reason of hydrostatic test in accordance with § 192.611(a).#

Page 22 This special permit applies to the special permit segments defined using Empire's Survey Station Numbers. Mileposts are provided for information only. • Special Permit Segment 1 - 24-inch Empire State Pipeline mainline, approximately 730 feet in length, located in Genesee County, New York, from Survey Station 3027 + 50 to Survey Station 3034 + 80; (MP 57.33 to MP 57.49) • Special Permit Segment 2 - 24-inch Empire State Pipeline mainline, approximately 1,715 feet in length, located in Monroe County, New York, from Survey Station 4018 + 73 to Survey Station 4035 + 88; (MP 76.09 to MP 76.42) • Special Permit Segment 3 - 24-inch Empire State Pipeline mainline, approximately 1,650 feet in length, located in Monroe County, New York, from Survey Station 4483 + 10 to Survey Station 4499 + 60; (MP 84.88 to MP 85.19) • Special Permit Segment 4 - 24-inch Empire State Pipeline mainline, approximately 2,675 feet in length, located in Niagara County, New York, from Survey Station 1230 + 69 to Survey Station 1257 + 44; (MP 23.30 to MP 23.81) • Special Permit Segment 5, 24-inch Empire State Pipeline mainline, approximately, 1,760 feet in length, located in Niagara County, New York, from Survey Station 1330 + 50 to Survey Station 1348 + 10; (MP 25.19 to MP 25.54) Niagara, Genesee, Monroe, Ontario, Wayne, Cayuga, Onondaga and Oswego Counties, NY Special permit inspection area - means the area that extends 220 yards on each side of the centerline of 24" mainline along the entire length ofthe Empire State Pipeline from Mile Post 0 (NY/Canada Border) to Mile Post 157 (Phoenix, NY). The special permit inspection area is located in Niagara, Genesee, Monroe, Ontario, Wayne, Cayuga, Onondaga and Oswego Counties, NY. The total length of the special permit inspection area is approximately 157 miles. The Empire State Pipeline special permit inspection area includes the following sections: • Western Section - from Mile Post 0 in Niagara County, New York to Mile Post 90.8 in Ontario County, New York and the pipeline has an MAOP of 1440 pounds per square inch gauge (psig); and • Eastern Section - from Mile Post 90.8 in Ontario County, New York to Mile Post 157 in Oswego County, New York and the pipeline has an MAOP of 1000 psig.#

Page 33 Special Permit Request Empire submitted an application to PHMSA on August 8, 2008, for a special permit seeking relief from the Federal pipeline safety regulations in 49 CFR § 192.611(a) for five (5) segments of the Empire State Pipeline where a change has occurred from a Class 1 or 2 to Class 3 Locations. As requested, this special permit would allow Empire to continue to operate the pipeline segments at their current maximum allowable operating pressure (MAOP) of 1440 psig in the Western Section and 1000 psig in the Eastern Section. The Federal pipeline safety regulations in 49 CFR § 192.611(a) require natural gas pipeline operators to confirm or revise the MAOP of a pipeline segment after a change in class location. A special permit would allow Empire to continue to operate each of the five (5) special permit segments at their existing MAOP's despite a change in class location. In its application, Empire suggested that the five (5) special permit segments be included in one separate special permit inspection area (see Empire's applicat,ion for the specific details). The special permit inspection area on the Empire State Pipeline will begin approximately 23.3 miles upstream of the beginning of the special permit segment 1 extend through the five special permit segments and end approximately 71.8 miles downstream of the ending of special permit segment 5, The total length of the special permit inspection area is approximately 157 miles. Public Notice: On January 23,2009, PHMSA posted a notice of this special permit request in the Federal Register (74 FR 4297). The request letter, Federal Register notice and all related documents are available for review in Docket No. PHMSA-2008-0213 in the Federal Docket Management System (FDMS) located on the internet at www.Regulations.gov. PHMSA did not receive any public comments on this special permit request. Analysis: Background: On June 29, 2004, PHMSA published in the Federal Register (69 FR 38948) the criteria it uses for the consideration of class location change waivers, now being granted through special permits. First, certain threshold requirements must be met for a pipeline section to be further evaluated for a class location change special permit. Second, the age and manufacturing#

Page 44 process of the pipe; system design and construction; environmental, operating and maintenance histories; and integrity management program elements are evaluated as significant criteria. These significant criteria are presented in matrix form and can be reviewed in the FDMS, Docket Number PHMSA-2004-1740I. Third, such special permits may only then be granted when pipe conditions and active integrity management provide a level of safety greater than or equal to a pipe replacement or pressure reduction. Threshold Requirements: Each of the threshold requirements published by PHMSA in the June 29, 2004, FR notice is discussed below in regards to the Empire special permit petition. 1) No pipeline segments in a class location changing to Class 4 Location will be considered. This special permit request is for five segments of Empire's Empire State Pipeline where a class location change has occurred from Class 1 Location to Class 3 Location or Class 2 Location to Class 3 Location. Empire has met this requirement. 2) No bare pipe will be considered. The Empire special permit segments are coated with fusion bonded epoxy (FBE) coating. Empire has met this requirement. 3) No pipe containing wrinkle bends will be considered. There are no wrinkle bends in this special permit segment. Empire Pipeline has met this requirement. 4) No pipe segments operating above 72% of the specified minimum yield strength (SMYS) will be considered for a Class 3 special permit. This special permit segment operates at or below 72 percent SMYS. Empire has met this requirement. 5) Records must be produced that show a hydrostatic test to at least 1.25 x MAOP for class location change from Class 1 or Class 2 to Class 3 Location and 90 percent of SMYS for class location change from Class 1 to Class 3 Location. Empire Pipeline records submitted show that the Class 1 pipe (0.343") of the 24-inch Empire State Pipeline existing within the special permit segments, has been hydrostatically tested to a minimum of 1,808 psig, which is 1.25 x MAOP and 90% of SMYS for class location change from Class 1 to Class 3 Location. Pipe used in Class 1 Locations for tie-ins and road crossings is heavier wall pipe (0.4 1 2-inch and 0.494-inch), but has been tested to the same pressure as the 0.343-inch wall pipe. Empire has met these requirements. 6) In-line inspection (ILl) must have been performed with no significant anomalies identified that indicate systemic problems. The proposed special permit segment was last inspected by#

Page 55 7) ILl in 2004, with no immediately actionable anomalies found. Empire has met this requirement but will need to run an ILl tool to detect dents and re-run ILl for anomalies and corrosion by September 30, 2011. The criteria for consideration of class location change waiver, now being granted through special permits, define a waiver inspection area (special permit inspection area) as up to 25 miles of pipe either side of the waiver segment (special permit segment). The special permit inspection area must be inspected according to Empire's integrity management program and periodically inspected with an in-line inspection technique. The portion of the special permit inspection area is approximately 157 miles long which is the entire length of the Empire State Pipeline. The special permit inspection area transverses from Mile Post 0 (NY/Canada border) to Mile Post 157 (Phoenix, NY) through Niagara, Genesee, Monroe, Ontario, Wayne, Cayuga, Onondaga and Oswego Counties, NY. From Mile Post 0 to 90.8 (western portion) in Niagara, Genesee, Monroe, and Ontario, NY, the Empire State Pipeline has a MAOP of 1,440 PSIG. From Mile Post 90.8 to Mile Post 157 (eastern portion) in Ontario, Wayne, Cayuga, Onondaga and Oswego Counties, NY, the Empire State Pipeline has a MAOP of 1,000 PSIG. This special permit will require Empire to incorporate each of the five special permit segments into its written integrity management program as "covered segment" in a "high consequence area" (HCA) per 49 CFR § 192.903. The special permit segments meet the threshold requirements; however additional ILl tool runs will be necessary to ensure safety and therefore will be required by the special permit conditions. Criteria Matrix: The original and supplemental data submitted by Empire for the special permit segments have been compared to the class location change special permit criteria matrix. The data fall within the probable acceptance column of the criteria matrix for all criteria except submittal of material test reports with charpy-impact toughness and performing internal line inspections within one-year after issuance of the special permit. • The five special permit segments fall in the probable acceptance column of the criteria matrix for all criteria except for: o Possible acceptance - ILl time frame - Special permit conditions will require ILL#

Page 66 o Requires substantial justification - none PHMSA has determined that imposing the special permit with conditions will provide a level of safety greater than or equal to pipe replacement or pressure reduction for this area. Operational Integrity Compliance: PHMSA reviewed this special permit request to ensure that integrity threats to the pipeline in the special permit segment and special permit area are addressed in the operator's operations and management plan (O&M Plan) to provide a systematic program to review and remediate the pipeline for safety concerns. PHMSA will require additional operational integrity review and remediation requirements through the special permit. The pipeline operational integrity requirements are to ensure that the operator has an ongoing program to locate and remediate safety threats. These threats to integrity and safety include the pipe coating quality, cathodic protection effectiveness, operations damage prevention program for third party damage, weld seam and girth weld integrity, anomalies in the pipe steel, and material and structures either along or near the pipeline that could cause the cathodic protection system to be ineffective. PHMSA carefully designed a comprehensive set of conditions that Empire will be required to meet under the special permit. Among other things, the conditions include: • A close interval survey to determine the effectiveness of the cathodic protection system must be performed within the special permit inspection area and all areas with inadequate cathodic protection must be remediated. • A coating survey to determine the quality of the pipe coating must be conducted and in- effective coating areas must be required to be remediated. • Stress corrosion cracking (SCC) surveys on the pipeline will be required to ensure that the pipe steel does not contain cracks due to the effects of high and near neutral pH SCC. • The latest methods of damage prevention must be incorporated by the operator, such as the best practices of the Common Ground Alliance (CGA) within the special permit inspection areas. • Interference currents from electric transmission lines and other interfering structures in the special permit inspection areas must be identified, controlled and mitigated by conducting surveys and installing grounding systems where required.#

Page 77 • An analysis of pipeline field coated girth welds that could have shielding coatings that could cause corrosion ofthe pipe steel must be undertaken in the special permit segments and in-line inspection logs that indicate 30% corrosion indications on shielding or unknown coatings must be exposed and evaluated. • Anomalies and dents in the pipeline must be repaired, based upon the special permit repair criteria. • Girth welds in the special permit segments must have been inspected to a non destructive test plan during construction, or a quality review and remediation program must be implemented by the pipeline operator. • All shorted casing at road crossings and railroad crossings in the special permit segments (either metallic or electrolytic) must be cleared to prevent corrosion. • Pipeline longitudinal seams within the special permit inspection area must have an engineering analysis to determine if there are any threats and remediated, if integrity threats are determined. • Periodic close interval surveys and in-line inspection surveys (pipeline internal surveys to determine corrosion in the pipeline) must be performed on the special permit segments at the applicable reassessment intervals. • In-line tool (ILl) inspections must be conducted through the five special permit segments and special permit inspection area by September 30, 2011 of the date of issuance of this special permit and remediate any findings in accordance with the 49 CFR Part 192, Subpart 0; § 192.485; and the conditions of this special permit. Empire must also remediate within nine (9) months of grant of this special permit all anomalies or dents that does not meet Condition 20 of the Special permit based upon existing ILl results from high resolution MFL and caliper/geometry tools ran in August and September, 2004. PHMSA has determined that imposing these conditions (along with the remainder of the conditions set forth in the special permit) will ensure that granting the special permit will not be inconsistent with pipeline safety. Past Enforcement History - 2000 through 2009:#

Page 88 A review of PHMSA enforcement actions against Empire from 2000 through 2009 shows the following enforcement actions against the companies. The enforcement actions place Empire in the "possible acceptance category" for a special permit grant. Empire Pipeline, Inc. is owned by the National Fuel Gas Company. Company assets are distributed among the following 4 business segments: Empire Pipeline, Inc. OPID #31592 National Fuel Gas Distribution Corporation OPID #13061 (PA) & 13062 (NY), National Fuel Gas Supply Corporation OPID #13063, and Seneca Resources Corporation OPID #18201. Below is a listing of the Empire State Pipeline enforcement matters of all types in all PHMSA Regions: • Eastern Region - 1 matter • Notice of Probable Violation's (NOPV) - 0 • States where violations have occurred: New York Empire State Pipeline's regulatory enforcement history from 2000 to 2009 indicates one non- compliance issue as shown above with 49 CFR 192 and no outstanding corrective action orders (CAO). The single enforcement item that includes 9 notices of amendment was issued in 2005 in the course of a Part 192, Subpart 0, Integrity Management Plan inspection with the National Fuel Gas Company which covered the National Fuel Gas Distribution Corporation, the National Fuel Gas Supply Corporation and Empire Pipeline, Inc. Based upon Empire State Pipeline's compliance history, PHMSA concludes that Empire State Pipeline's compliance history will not require additional assurances to ensure full compliance with the Special Permit conditions. PHMSA has determined that imposing the special permit conditions will ensure that granting the special permit will not be inconsistent with pipeline safety. Findings: Based on the information submitted by Empire and PHMSA's analysis of the technical, operational, and safety issues, and given the additional measures required and conditions that will be imposed, PHMSA finds that granting this special permit to Empire to operate five (5)#

Page 99 segments of the Empire State Pipeline, a natural gas transmission pipeline, at the current MAOP where a change in class location has occurred from a Class 1 location to a Class 3 location is consistent with pipeline safety. Completed in Washington DC on: ------'U..,.."lf---31)-:I-I,eh 2 nlJl-l1tBfJ------ Prepared By: PHMSA - Engineering and Emergency Support#