BEFORE THE PUBLIC UTILITIES COMMISSION OF OHIO In the Matter of the Investigation of The East Ohio Gas Company

d/b/a Dominion East Ohio Relative to Its Compliance with the Natural Gas Pipeline Safety Standards and Related Matters. ) ) ) ) ) )

Case No. 12-380-GA-GPS

FINDING AND ORDER The Commission finds: (1) The East Ohio Gas Company d / b / a Dominion East Ohio (DEO or the Company) is a public utility and a natural gas company within the meaning of Sections 4905.02, 4905.03, and 4905.90, Revised Code, and is, therefore, a public utility and an operator subject to the ongoing jurisdiction and supervision of the Commission, pursuant to Sections 4905.02, 4905.04, 4905.05, 4905.06, and 4905.90 through 4905.96, Revised Code. Accordingly, DEO is required to comply with the minimum gas service standards found in Chapter 4901:1-13, Ohio Administrative Code (O.A.C), as well as the gas pipeline safety (GPS) rules contained in Chapter 4901:1-16, O.A.C, which set forth the safety standards and requirements for intrastate gas pipeline facilities subject to the Commission's jurisdiction. Pursuant to Rule 4901:1-16-03(A), O.A.C, the GPS rules incorporate the United States Department of Transportation's GPS regulations, as contained in 49 Code of Federal Regulations (CF.R.) Parts 40,191,192, and 199. On January 23, 2012, Staff filed a report detailing the results of its investigation into DEO's compliance v^th the GPS rules following a series of fires that occurred in the village of Fairport Harbor, Ohio, on January 24, 2011. According to the report, 11 homes were severely damaged and 150 homes required appliance repair or replacement from what was identified as a major gas leak, causing an estimated property damage of nearly $1,300,000, and, thus, meeting the definition of an incident, pursuant to Rule 4901:1-1601(G), O.A.C., and 49 CF.R. 191.3.

(2)

12-380-GA-GPS (3) Staff reports that the subsequent investigation revealed that two low pressure regulating devices at the High Street regulator station in Fairport Harbor had failed due to the presence of pipeline fluids in the devices, which caused the pressure in the system to increase beyond the set point. The increased pressure resulted in damage to customers' appliances and multiple structural fires. Following its investigation. Staff concluded that DEO had violated several sections of 49 CF.R. Part 192, as well as provisions of the Company's standard operating procedures (SOP) and design and consttuction manual (DCM) related to the design and operation of the regulator station. Staff further reports that, on October 20, 2011, Staff issued DEO a notice of probable noncompliance concerning the violations below: (a) DEO failed to follow its SOP and DCM in the design and operation of the regulator station, in violation of 49 C.F.R. 192.13(c). DEO did not properly operate or design the regulating devices at the regulator station, in violation of 49 CF.R. 192.619(a)(1), SOP Section 190.01(III)(A), and DCM Section 6.1.1. DEO did not perform the appropriate inspections and tests necessary to ensure the regulating devices at the regulator station were properly installed and protected from dirt, liquids, or other conditions that may prevent proper operation, in violation of 49 C.F.R. 192.739(a)(4) and SOP Section 210.02(II)(C)(4). Additionally, DEO failed to install the proper filter system to protect the regulating devices at the regulator station, tn violation of 49 CF.R. 192.739(a)(4) and DCM Section 6.8(A)(1) and (4). Staff emphasizes that DEO was aware that pipeline fluids had previously been found in the intermediate pressure regulating devices at the same regulator station during an inspection conducted on October 19, 2010.

-2-

(4)

(b)

(c)

12-380-GA-GPS (d) Although the regulator station was installed in 1999 and should have been inspected at least once per calendar year, its first inspection did not occur until October 26, 2009, in violation of 49 CF.R. 192.739(a) and SOP Section 210.02(II)(B)(1). DEO failed to keep adequate records necessary to administer procedures for appropriate inspection of the regulator station, in violation of 49 CF.R. 192.603(b).

-3-

(e)

(5)

According to Staff, DEO responded to the notice of probable noncompliance on November 8, 2011, but did not provide any additional documentation or evidence to dispute Staff's conclusions about the cause of the incident. Additionally, Staff notes that a meeting occurred between DEO and Staff on October 12, 2011, to review actions taken by the Company to prevent a recurrence of overpressurization of the low pressure system due to regulator failure. Staff reports that these actions consisted of completion of 452 accelerated inspections of low pressure regulator stations and the identification and redesign of eight regulator stations found to have a configuration similar to the failed regulator station; the inclusion of 287 low pressure stations into a program to install remote pressure monitoring and alarm equipment; and strengthening DEO's fluid management procedures and training related to the inspection of production stations for fluid and the enforcement of gas quality standards for local Ohio production. hi its report. Staff concludes that DEO violated 49 CF.R. 192.13(c), 192.603(b), 192.619(a)(1), 192.739(a), and 192.739(a)(4), as well as failed to follow the Company's owTi plans and procedures for the design and operation of the regulator station, which caused the incident in Fairport Harbor. Although Staff recognizes that DEO has already taken actions intended to prevent recurrence of a similar incident. Staff makes a number of additional recommendations:

(6)

12-380-GA-GPS (a) DEO should conduct a complete inventory of all regulator stations in its Ohio systems that provide gas to its distribution systems. The inventory should determine whether the regulator stations are properly designed and provide protection from pipeline fluids when there is a reasonable expectation that the station could be exposed to pipeline fluids. Improperly designed or protected regulator stations should be redesigned and replaced. DEO should be required to submit a summary report describing the identified regulator stations and provide a proposed schedule for redesign and replacement by December 31,2012. DEO should modify its SOP to require that an annual internal regulator inspection be performed when fluids are suspected in the upstream pipeline. An internal regulator inspection involves partially disassembling the regulator to inspect for fluids or contaminants on the diaphragm, orifice, and seat. If the regulator is pilot operated, all upstream control lines must be inspected. DEO should clearly define the conditions where fluids are suspected to include situations where pipeline fluid has been discovered in other regulator stations being supplied from a common source. Staff further recommends that DEO provide a copy of the modified SOP to Staff within 60 days of the Commission's finding and order in this case. DEO should develop a written fluid mitigation program designed to detect and remove fluids from its pipeline system. The program should address the monitoring of transfer points from production operations and the assessment of lines for the presence of pipeline fluids through monitoring of drips, internal inspection, or other methods based

-4-

(b)

(c)

12-380-GA-GPS on sound engineering principles. Staff further recommends that DEO provide a copy of the written fluid mitigation program for review by Staff within 60 days of the Commission's finding and order in this case. (d) DEO should compare the regulator stations identified in its strategic asset management system database with the regulator station inspection database utilized by the Company to track maintenance requirements for regulator stations. Any discrepancies between the two databases should be investigated and corrected. Staff further recommends that DEO report on its comparison within 60 days of the Commission's finding and order in this case. DEO should devise and implement a written plan to provide additional overpressure protection for all low pressure distribution systems from any similar overpressure occurrence where production fluid may interfere with the workings of both the control and monitor regulators. Any proposed additional overpressure protection must be based on sound engineering principles and resistant to failure due to a buildup of production fluid. Staff further recommends that DEO provide a copy of the plan to Staff within 60 days of the Commission's finding and order in this case. Given the number and severity of the violations, a forfeiture of $500,000 should be assessed against DEO, pursuant to Section 4905.95(B)(1)(b), Revised Code, for failure to comply with the GPS requirements for the design atnd operation of regulator stations.

-5-

(e)

(f)

(7)

On October 15, 2012, DEO and Staff filed a stipulation and recommendation (stipulation), which would resolve all of the issues in this case. The stipulation provides, inter alia,

12-380-GA-GPS that, after discussions between DEO and Staff regarding the recommendations in Staff's report, the Company agrees to complete the follovsdng actions, which Staff agrees will satisfy its recommendations: (a) DEO is in the process of conducting a physical inventory of all regulator stations in its Ohio pipeline distribution systems. A copy of the regulator station inventory, a summary of the results of the design and engineering analysis, and the review of low pressure regulating stations in comparison to Appendix 1, which is attached to the stipulation, will be provided to Staff by December 31, 2012. DEO will utilize the inventory to complete the following actions: (i) DEO will ensure that all regulator stations are designed and engineered in accordance with 49 CF.R. 192.619(a)(1), 192.739(a)(4), and 192.13(c), as well as any requirement of 49 C.F.R. Part 192 that is applicable to regulator design. Low pressure regulators determined not to be in compliance with 49 CF.R. 192.619(a)(1), 192.739(a)(4), and 192.13(c), as well as any requirement of 49 C.F.R. Part 192 that is applicable to regulator design, will be brought into compliance by March 31,2013. Regulatofs, other than low pressure regulators, identified as not designed and engineered in compliance with 49 CF.R. 192.619(a)(1), 192.739(a)(4), and 192.13(c), as well as any requirement of 49 CF.R. Part 192 that is applicable to regulator design, will be brought into compliance by June 30,2013.

-6-

(ii)

(iii)

12-380-GA-GPS (iv) Construction work on low pressure regulating stations that require modifications to meet the design criteria shown in Appendix 1 will commence as soon as possible in 2013 and be completed as soon as possible, but not later than, September 30, 2013. Written progress reports of the regulator stations determined not to be in compliance with 49 CF.R. 192.619(a)(1), 192.739(a)(4), and 192.13(c), as well as any requirement of 49 C.F.R. Part 192 that is appHcable to regulator design, and low pressure regulating stations that require modifications to meet the design criteria shown in Appendix 1, must be provided to Staff on a monthly basis beginning 30 days from the issuance of the Commission's order in this proceeding. Within 60 days of the issuance of the Commission's order in this proceeding, DEO will modify its SOP to require an inspector to perform an internal inspection of a regulator when pipeline fluids are suspected. DEO agrees to complete all associated training and information technology modifications required to facilitate the new SOP by December 31,2012. DEO will develop a written fluid mitigation program designed to detect and remove, to the maximum extent practicable, fluids in its pipeline system. The program will address the monitoring of transfer points from production operations and the assessment of lines for the presence of pipeline fluids through monitoring of drips, internal inspection, or other methods based on sound engineering principles. DEO will provide

-7-

(v)

(b)

(c)

12-380-GA-GPS Staff with a copy of the plan for review within 60 days of the Commission's order in this case. (d) DEO will compare the regulator stations identified in the strategic asset management system database with the regulator station inspection system and reconcile any discrepancies between the two databases by June 1, 2013. DEO will provide Staff with monthly written updates on the status of the project beginning 30 days from the Commission's order in this proceeding. DEO will pay a civil forfeiture of $500,000 within 10 business days of the Commission's order adopting the stipulation, payable by certified check to the "Treasurer State of Ohio" and delivered to Staff. DEO may not recover the forfeiture in any pending or future proceeding before the Commission, as set forth by Rule 4901:1-16-14(0), O.A.C.

-8-

(e)

(Stipulation at 5-8.) (8) Rule 4901:1-16-11, O.A.C, permits DEO and Staff to enter into a stipulation for the purpose of resolving any alleged violations of the GPS requirements. Although DEO and Stafr refer to Rule 4901-1-30, O.A.C, as their underlying authority for the stipulation, the Commission will consider the stipulation pursuant to our enforcement powers under Section 4905.91, Revised Code, and Chapter 4901:1-16, O.A.C. The immediate issue before the Commission in this case is whether the stipulation, which embodies considerable time and effort by the signatory parties, is reasonable and should be adopted. However, the Commission's ultimate goal, where gas pipelines are concerned, is to ensure the safety of consumers by making certain that sufficient plans and procedures are in place to prevent future incidents. Additionally, Section 4905.95, Revised Code, authorizes the assessment upon an operator of forfeitures of not more

(9)

12-380-GA-GPS than $100,000 for each day of each violation or noncompliance found by the Commission, provided that the aggregate of such forfeitures does not exceed $500,000 for any related series of violations or noncompliances. In the current proceeding, the Commission finds that, given the number and severity of the violations reported by Staff, $500,000 is a considerable amount that can be expected to deter DEO from future violations. We emphasize that the Commission will not hesitate to impose total forfeitures of a much greater magnitude in future cases involving any operator, if the circumstances of the case justify such action. In this case, we find that the stipulation, including the recommended forfeiture of $500,000, is reasonable, given that DEO will be required to carry out a number of actions in response to the Company's inventory of all of its regulator stations in Ohio, make necessary modifications to its SOP, develop a written fluid mitigation program, and reconcile any discrepancies between the Company's strategic asset management system and regulator station inspection system databases. The stipulation further requires DEO to provide regular reports to Staff on the Company's progress in complying with these obligations. Finally, the stipulation offers a fair and equitable resolution of all of the issues raised by Staff in its initiation of this proceeding pursuant to Rule 4901:1-16-12, O.A.C, while emphasizing the critical importance of compliance with the GPS requirements through the assessment of a substantial monetary forfeiture. Accordingly, we conclude that the stipulation should be approved and adopted in its entirety. (10) As a final point, the Commission is committed to ensuring the safety of consumers and requiring operators of gas pipelines to take all reasonable steps to provide necessary safeguards. As another result of our decision today, the Commission expects that DEO will review its management and training practices related to GPS requirements and immediately correct any issues. We expect DEO to notify Staff of any issues that are identified and regularly report to Staff until the issues are resolved. Additionally, we direct Staff to continue its diligent efforts to work together with DEO and the other gas companies on compliance with GPS requirements. If Staff identifies any issues of concern that are not immediately resolved by the company

-9-

12-380-GA-GPS involved, the Commission will undertake any action necessary to investigate the situation and reach an appropriate resolution, including the initiation of a formal docket to audit the GPS practices and procedures of any affected company. It is, therefore.

-10-

ORDERED, That the stipulation and recommendation filed in this proceeding be approved and adopted in its entirety. It is, further, ORDERED, That nothing in this finding and order shall be binding upon this Commission in any future proceeding or investigation involving the justness or reasonableness of any rate, charge, rule, or regulation. It is, further. ORDERED, That a copy of this finding and order be served upon all parties of record. THE PUBLIC UTILITIES COMMISSION OF OHIO

Steven D. Lesser

Andre T. Porter

-^^-^:LY2^/e^
Cheryl L. Roberto Lynn Slaby

SJP/sc
Entered in the Journal

D C 12 m E
J^h<'KejJ^
Barcy F. McNeal Secretary