Pipeline Safety, Panelist for the Environmental and Safety Committee

Interstate Oil and Gas Compact Commission Annual Meeting
Theopolis Holeman
Executive Vice President
Duke Energy Gas Transmission

San Antonio, TX

Good afternoon. Thank you for the opportunity to talk about a topic that is very important to you, the residents of your state and to those of us who work in the natural gas transmission industry. That topic is pipeline safety.

First, I’d like to tell you a little about my company. Duke Energy is a diversified, multinational energy company. I am a senior vice president for Duke Energy Gas Transmission, which operates four interstate pipeline systems that total about 12,000 miles. These pipelines deliver Gulf Coast and Canadian supplies of natural gas to the growing Northeast and mid-Atlantic market—equivalent to about 8% of the natural gas consumed in the U.S.

One of the challenges for Duke Energy Gas Transmission - and our industry - is navigating in a business environment that anticipates the annual demand for natural gas to reach almost 30 trillion cubic feet by the year 2010 - up from today’s consumption of nearly 22 trillion cubic feet.

Driving this growth is increased demand for natural gas fired electric generation, particularly in the Northeast and Southeast where the largest growth is anticipated.

Pipelines that will carry energy to this market will draw supplies from several basins, including Western Canada, Eastern Canada and the Gulf of Mexico.

The growth of this particular market segment will impact how interstate pipeline systems are used and how capacity additions will be made in the future.

For instance, we expect:

• There will be higher pressure requirements at the end of the system.
• There will be larger demand “swings” as generating plants start up and shut down multiple times during the day.
• Storage systems will be dispatched on an economic basis all year, based on gas trading as a commodity - rather than the traditional injections over the summer to meet the high demand for the heating load in the winter.
• Since the bulk of the electric load is summer peak, the utilization of the mainline capacity in the summer will dramatically increase, competing with storage fill for utilization of that capacity.

However, meeting this demand does not come without its challenges—and the largest and most critical of them all is pipeline safety.

The interstate natural gas transmission industry has a good safety record - but we cannot rest on this record. We must continue to improve and find new ways to ensure the integrity of our pipelines. We must honestly evaluate our operations and continue to accept the responsibility for pipeline safety. There is no simple solution to this complex issue.

There has been a heightened focus on the issue of pipeline safety in recent months. And this focus has included all pipelines. But today, I am specifically talking about interstate natural gas transmission lines because that is the business I represent.

As I am sure you are aware, there are significant differences between liquid pipelines and natural gas transmission lines and the rules that govern each type of pipeline.

Today, I’d like to tell you what we - both Duke Energy Gas Transmission and the gas pipeline industry - are doing about ensuring the safety of our interstate natural gas pipelines.

My company, as well as the industry, has a long history of commitment to safety - including 50 years of voluntary research and the investment of hundreds of millions of dollars.

Interstate natural gas pipelines spend about $600 million annually on safety activities - about half the industry’s maintenance budget. The money is used for research… emergency response training… public information… facilities testing… maintenance… and construction activities.

Natural gas transmission is our business. We view this expenditure not only as an investment in our business, but as an investment in public safety. Our industry is committed to maintaining the safety and reliability of the nation’s interstate natural gas delivery system.

Safety also means careful planning and execution - from pipeline construction to customer service. At Duke Energy Gas Transmission, our five-point integrity management program begins with design and construction and continues through corrosion control, damage prevention, employing qualified employees and inspection and maintenance.

Safety also means strict adherence to pipeline safety regulations and continuous research on how to improve the methods we use to keep the public safe and the system reliable.

The pipeline industry has been under increased scrutiny because of the tragic incidences at Edison, New Jersey; Bellingham, Washington and more recently, Carlsbad, New Mexico.

Now… I am not saying that this increased scrutiny is bad. Those of us who work in the interstate pipeline industry take our jobs as stewards of public safety and protectors of the environment very seriously.

I believe this renewed public interest in the environment and public safety is enhanced by the high tech world we live in today. With the click of a button, we can join online chat groups, view websites dedicated to specific causes … We can watch breaking news in real-time.

This technology lets the public keep up with their interests and allows them to easily organize with others who support their causes. But it also gives those of us in the interstate natural gas pipeline industry a forum to tell our story as well. It is a story about an industry that is concerned about public safety, the environment, its employees and the communities it serves.

Under federal law, the Department of Transportation regulates the safety of interstate natural gas pipelines. But the primary responsibility for safe pipeline operations rests with the interstate natural gas pipeline industry.

Five years ago, prior to the reauthorization of the pipeline safety bill, George Tenley, a former Associate Administrator for DOT’s Office of Pipeline Safety, conceptualized - and championed—a risk management approach to pipeline safety.

The concept was fully embraced by the industry, since companies like Duke Energy Gas Transmission had - for several years - utilized a risk management approach that went far beyond prescriptive regulations.

Rich Felder, the associate administrator who replaced George Tenley - and Stacey Gerard who recently replaced Rich - have led a collaborative effort to apply this approach to enhancing pipeline safety.

This DOT initiative has been - and continues to be - keenly focused on ensuring that the collaborative process includes all of the relevant stakeholders, including state and local officials, landowners, residents, the general public, as well as the pipeline industry.

The work that led to the development of the Operator Qualification Rule, as well as the current work on the development of a Pipeline Integrity Rule, are examples of the collaborative application of Risk Management in action.

Through Rich and Stacey’s leadership, we are now starting to see the positive results of a Risk Management based approach that grew out of the 1996 Pipeline Safety Bill.

Safety and environmental issues impact how we do business. Our industry, however, has increased pressure from a concerned public with a growing NIMBY - Not In My Back Yard - attitude.

We already abide by strict federal regulations that guide design, construction, maintenance, operation, replacement, inspection and monitoring of our pipelines.

The Office of Pipeline Safety - the federal agency that oversees our industry - is under constant pressure to impose even stricter regulations and oversight, including turning over interstate regulatory oversight to states.

How, then, does the interstate natural gas pipeline industry answer the environmental and safety challenge posed by this changed environment?

As I mentioned earlier, we firmly support risk management plans - such as the DOT Risk Management Demonstration Program currently under way between several interstate pipeline companies - including Duke Energy Gas Transmission - and the Office of Pipeline Safety.

We feel that risk management plans improve pipeline safety by allocating resources to the areas that will benefit pipeline safety the most.

Risk management plans give pipeline operators - and pipeline regulators alike—the opportunity to closely scrutinize options to improve pipeline safety and custom fit the best solutions to manage those concerns that are specific and unique to each pipeline.

Coupled with standard prescriptive compliance options, this new risk management program will be a win-win solution for industry and residents alike.

In an effort to further improve pipeline safety and bolster public confidence, the industry has been collaborating with the Office of Pipeline Safety to develop an Integrity Program for proposed rulemaking which is based on the concepts developed in the Risk Management program and recognizes the need for increased communication and involvement with the public.

Earlier this year, both houses of Congress failed to agree on stipulations to reauthorize the Natural Gas Pipeline Safety Act. President Clinton has since issued an Executive Order to the Office of Pipeline Safety to develop a comprehensive plan - by January 15 - to improve safety standards for gas pipelines.

We continue to support a risk management program and will continue our long term working relationship with government officials and industry to craft a fair and equitable plan that truly aids safety.

We should not forget the recent tragedies. But we also must not let these incidents become rallying points for inappropriate legislation. We must correct a public misconception of a system that is broken, when in reality, it is not. We need to enlist the public’s support and involvement in pipeline safety.

Regardless of where an event occurs in the country, all operators should be able to constructively learn from the experience. The best way to accomplish this is through a single oversight agency at the federal level.

Our industry is adamant that operations and safety activities on interstate natural gas transmission pipelines are operated as a system and should remain under the jurisdiction of the DOT - and not transferred to state agencies. We believe separate regulations would result in less efficient, less safe systems.

We are not dismissing state regulators as unimportant to the safety process. On the contrary, we work closely with state agencies on such programs as one-call centers, damage prevention programs and on programs to educate the public about pipeline safety. State regulators currently have jurisdictional oversight over intrastate pipelines and distribution systems - 75% of all the pipelines in the United States.

We welcome the current role state regulators play in our interstate operations. However, we believe that the DOT should remain solely responsible - through federal regulations - for those pipelines that cut across state borders.

We also need to continue and strengthen our efforts to educate the public about our industry. More importantly than ever, our leadership should make public education a top priority. We need continuous promotion of statewide one call programs…we need to publicize teaming with other industries to employ safety practices.

As I mentioned earlier, Duke Energy Gas Transmission and other companies are proactively working with DOT in innovative programs—such as the risk management demonstration program—to enhance current safety practices.

Millions of dollars continue to be invested by the Gas Research Institute and the Pipeline Research Committee International to research and develop improved safety practices. It is an investment in our industry - as well as an investment in enhanced public safety and protection of our environment.

What can our industry do to insure pipeline safety? We can address the solution toward the two main reasons pipeline accidents occur - outside forces and corrosion.

The first of these … and the leading cause of pipeline accidents… is damage by an outside force - what we call “Third Party” damage. These incidents usually occur when construction or excavation equipment accidentally strikes an underground pipeline. At Duke Energy Gas Transmission, we keep a close watch for potential problems by conducting regularly scheduled right-of-way aerial flyovers, vehicular patrols and walking inspections.

As part of our education and public information efforts, we spend time in each community where we have pipeline operations, reviewing development plans and talking to local government officials about pipeline safety. By educating the public - and encouraging states to use and support the one-call centers - we can avoid accidents and avoid disrupting the lives of the public … and our customers by actively involving the public in the process.

Corrosion is the second leading cause of pipeline accidents. In an effort to mitigate corrosion, historically the industry has always used state-of-the-art materials when constructing pipelines. During installation, we are careful to protect the pipeline’s coating. We employ construction practices that ensure the pipeline is protected in order to maintain its integrity and maximize its service life.

To protect against corrosion, high quality steel pipe is selected for construction and is coated at the mill with a tough epoxy film. Once the pipeline construction is complete, the facilities are hydrostatically tested to ensure their integrity before being placed in service.

After the pipeline is placed in service, pipeline companies employ a variety of techniques to further mitigate corrosion and insure the integrity of the pipeline. Among these practices are cathodic protection systems, close interval surveys, bell hole inspections, hydrostatic re-testing and smart pigging.

Certainly, smart pigs have been the focus of a great deal of recent discussion. And, just as certainly, smart pigs are a valuable and effective tool.

However, it is essential to understand that they are not a silver bullet. Smart pigs do have limitations. There are other tools used to insure the integrity of the pipeline system. It is incumbent upon us to keep all tools available for use… use these tools when appropriate - and not overestimate their ability.

In summary:

Natural gas pipelines are the safest means of transportation. And, there is no “one size fits all” solution to pipeline safety. It requires due diligence on the part of everyone who works in the industry and those who govern it.

Here’s what your state can do to help:

• Support the One-Call Center in your state and help spread the “Call before You Dig” message Apply for and utilize federal grant money earmarked for states to improve underground damage prevention programs
• Encourage developers in your state to use pipeline rights-of-way as green space
• Continue your public information and community safety efforts through user fees paid by members belonging to the Interstate Natural Gas Association of America
• Support the continued development of uniform pipeline safety standards for application across all states

With your help, we will continue our efforts to stand ready to meet the expanding need for environmentally friendly natural gas to fuel our future.