API RP 1173 Implementation How to Eat an

API RP 1173 Implementation: How to Eat an Elephant AGA PSMS Workshop, April 12, 2017

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Utility Pipeline Safety Management November 2013 Target Stores Cyber breach October 2012 Superstorm Sandy • $68 B March 2011 Fukushima Daiichi Earthquake & Flood 2010 July Enbridge Pipeline Leak 2010 Sept PG&E San Bruno Gas Explosion March 2014 • East Harlem Gas Explosion • Ebola Virus Outbreak May 2014 Pennsylvania Coal Explosion November 2014 Civil Unrest (MO) 2013 -2014 2010 -2012 February Anthem Cyber Breach October Aliso Canyon/Porter Ranch Gas Leak November • Paris Terror Attack December • Ukraine Cyber Attack • San Bernardino Terror Attack January • Flint (MI) Water Contamination • Zika Virus – total cost unknown April • Suburban D. C. Gas Explosion • Brussels Terrorist Attack -- 35 Fatalities; 300 Injured May • Pennsylvania Gas Pipeline Explosion March • London Terror Attack • St. Petersburg Terror Attack 2017 2016 2015 lato egu R & e lativ s i g e L ntion erve ry Int ctors t Ve Threa ls of e ts & v a e e r L h tions g T a n i t g s c n a e i p nd Incre er Ex Expa m o t us ment e C c g n n a Risi Adv y g o l no Tech

Outcomes of an API 1173 Assessment From Assessment through Implementation, a collaborative approach is best. • Understand API RP 1173 requirements Utility Strength 3 rd Party Assessor Strength • Identify strengths and gaps • Roadmap to address the gaps • Begin to meet regulatory requirements • Company knowledge • Utility expertise • Cultural familiarity • Know key personnel • “Skin in the Game” • Objective industry knowledge • Risk & Asset Management Expertise • Focused; Can ask the Difficult Questions • No “Skin in the Game” • Build on areas where utility already meets API tenets • Realistic timeline to implement API RP 1173 and enhance PSMS • Understand importance of their leadership to next steps

Davies Consulting SMS Experience Lessons Learned API RP 1173 Assessment • • Comparison of ISO 55000 and API RP 1173 • Large electric & gas utility • Analysis of similarities and differences of API guidance and international asset management standard • Parallel implementation of API RP 1173 alongside ISO 55000/55001 and ISO 31000 for both gas and electric commodities Risk, Safety, Emergency Management • Ongoing consulting for major electric & gas utility • Evolving enterprise-wide (cross-commodity) processes, founded on ISO standards and industry leading practices • Regulatory communications and rate case support has helped secure funding for evolution Compliance Review • Current project at large electric & gas utility • Review of compliance processes • Change management for implementation of new processes Large gas utility Informed evolution of asset management strategy Leveraged elements already in place and driving improvements Implementing API RP 1173 conformance roadmap to align the company’s PSMS framework with API guidance

Baseline Assessment Approach TASK 1 TASK 2 TASK 3 TASK 4 TASK 5 TASK 6 Kick off meeting for members of the project team to establish scope, project approach, communication plan, and milestones. Collection and review of information about the existing PSMS. Data will be gathered through document requests and interviews with key utility personnel. Establish existing utility practices that align with API RP 1173. Develop a more detailed gaps analysis of the existing practices, and collaborate with the utility team to define the company’s desired “To Be” state. Document an inventory of processes, practices, and procedures impacted by the gaps analysis. This document will identify and prioritize opportunities to improve conformance with API RP 1173. Validate the findings and share them with the utility project manager in a Power Point document, which will serve as the project’s final report.

SMS: Typical Challenges for Utilities Leadership & Management Commitment Contractor Management Stakeholder Engagement Integration: comprehensive, life cycle approach to PSMS Risk Management Consistency & Communication Measurement, monitoring feedback into CI Operational Controls Operational risk management – lexicon, risk registry, tools Incident Investigation, Evaluations, Lessons Learned Safety Assessment & Culture Management Review & Continuous Improvement Emergency Preparedness & Response Use of ICS principles Competence, Awareness & Training Documentation & Record Keeping Solutions: people process tools Data & procedure updates

How to Eat the Elephant Evolution takes time! § Socialize/Culture Change § Develop Skills § Develop & Implement New Processes § Implement Tools § Establish Metrics

Approach and Timeline Implementation through a phased and iterative approach over 2 -4 years

Example of Resource Needs Year 1 Year 2 – Center of Excellence Utility Implementation Team 3– 5 FTEs • 5 members • Weekly workshop to review • Revise and track progress through Co. E Davies Consulting • Former gas utility ops SME • Risk management SME • Process experts 1– 2 FTEs • 2 members • Weekly workshop support of the Co. E Resources Year 1 Year 2 Outside consulting support can be reduced after year 1 Center of Excellence § Continued support implementing, tracking and continuously improving the API 1173 SMS § Led by Operations and supported by Davies Consulting § Comprised of experts from various organizations within the utility, such as: • Operations • Engineering • Risk Management • Audit

Year 1 Outcomes § Build on Existing Operator Safety manual – API 1173 section incorporating governance and industry best practices § Within each API section (of the manual), each API chapter should include: – Ownership, authority, policy – A clear process with swim lanes and interfaces supported by procedures – KPIs leading/lagging § Key findings in your gap assessment specifically addressed § Field checks to ensure practical implementation completed § Center of Excellence established to ensure continuous improvement § Post implementation assessment to get to next level of conformance

API 1173 Long-Term Benefits Comprehensively understand, manage, and continuously improve safety. Process System People • Risk based decision making • Transparent processes with defined interfaces • Company Center of Excellence driving continuous improvement and maturity • Leveraging Condition monitoring systems, KPI and asset health index • Improve record management systems • Life cycle models • Visible leadership with demonstrated focus on safety, implementation of API 1173 & best practices • Clear governance for processes and assets to go beyond compliance • Strong safety culture with engaged workforce and shared vision of safety

Measuring Success – Some Example Metrics API 1173 tenets Measure Leadership and Management Commitment Employee engagement and safety culture Stakeholder Engagement List of stakeholders and their expectations Risk Management Risk reduction based on execution Proposed Metric § Results of employee engagement survey Results of safety culture survey § Communication plan execution § Percentage of aldyl-A leaks/breaks per mile replaced # of corrosion leaks per miles replaced § § Operational Controls Leak survey and repairs § Year end leak backlog # of outside leaks discovered by leak survey vs customer call Incident Investigation, Evaluation, and Lessons Learned Inspection findings § # of pre-PUC internal inspection findings Safety Assurance Safety audits § Continuous Improvement Level of conformance with API 1173 Percentage of safe job site activities and surrounding work site environment Trending all metrics § § § Emergency Preparedness and Response Emergency response and planning Competence, Awareness, Training Human operating errors and OQ pass rates Documentation and Record Keeping QA/QC Records § § § # of emergency overtime call outs # of emergency drills conducted Time to respond to gas odor calls # of human operating errors # of employees passing OQ test at 70, 80, 95 % # incorrect or incomplete orders # incorrect or incomplete as-builts

API Recommended Practice 1173 Each element is vital for success. § Framework to drive integration of utility systems API RP 1173 Sections Leadership & Management Commitment § Not a standard to achieve Stakeholder Engagement § Constant pursuit of improvement Risk Management § There is no finish line Operational Controls Incident Investigation, Evaluations, Lessons Learned Safety Assessment & Culture Management Review & Continuous Improvement Emergency Preparedness & Response Competence, Awareness & Training Documentation & Record Keeping

Thank you. Colin Shay, colin. shay@Accenture. com