UNITED STATES
DEPARTMENT OF TRANSPORTATION

PIPELINE RISK MANAGEMENT DEMONSTRATION
PROGRAM PUBLIC MEETING

New Orleans Hilton

2 Poydras Street

New Orleans, Louisiana

Tuesday, January 28, 1997

8:00 a.m.

Office of Pipeline Safety

RICHARD FELDER

Assistant Administrator for Pipeline Safety

STACEY GERARD

IVAN HUNTOON

BRUCE HANSEN

BETH CALLSEN

Pipeline and Hazardous Materials Safety Administration

KELLEY COYNER

Deputy Administrator

Also Present

DENISE HAMSHER

Lakehead Pipe Line

DON STURSMA

Iowa Commerce Department

RICHARD SANDERS

Transportation Safety Institute

MIKE NEUHARD

Fairfax County Fire Department

ANDY DRAKE

Pan Energy

GARY ZIMMERMAN

Shell Pipeline

JOE MARTINELLI

Petroleum Industry Sponsor

API General Committee on Pipelines

JOHN RIORDAN

Gas Industry Sponsor

INGAA Pipeline Safety Task Force

A G E N D A

AGENDA ITEM:

Welcome and Introduction

Richard Felder

Associate Administrator for Pipeline Safety

Office of Pipeline Safety

PHMSA Perspectives

Kelley Coyner

Deputy Administrator

Pipeline and Hazardous Materials Safety Administration

Risk Management Building Blocks Panel

Richard Felder, Moderator

Program Framework

Stacey Gerard

Office of Pipeline Safety

Program Standard

Denise Hamsher

Lakehead Pipe Line

Performance Measures Guidance

Ivan Huntoon

Office of Pipeline Safety

Don Stursma

Iowa Commerce Department

Communications Plan

Stacey Gerard

Training Outline

Richard Sanders

Transportation Safety Institute

Audience Questions and Comments

Afternoon Session

Prototypes

Moderator: Mike Neuhard

Fairfax County Fire Department

Participants: Bruce Hansen

Office of Pipeline Safety

Andy Drake

Pan Energy

Beth Callsen

Office of Pipeline Safety

Gary Zimmerman

Shell Pipeline

Audience Questions and Comments

Summary

Joe Martinelli

Petroleum Industry Sponsor

API General Committee on Pipelines

John Riordan

Gas Industry Sponsor

INGAA Pipeline Safety Task Force

Closing

Richard Felder

State Business Meeting

P R O C E E D I N G S

8:15 a.m.

Welcome and Introductions

MR. FELDER: Good morning, everyone.

I'm Rich Felder, Associate Administrator for Pipeline Safety.

I want to welcome everyone to our third public meeting on our Risk Management Demonstration Program.

A couple little housekeeping things. You'll see that you have index cards in your books. If you want to at any point write down questions and pass them to the aisles, and we can move them up, and at the appropriate time, address them up here. We'll also have opportunities for question and answer. We've got mikes out there as well.

Anyone who managed to slip into the room without signing up, we'd appreciate it if you'd take some time during the day and be sure that you sign in, so that you're on our mailing list, so that we know that you were here.

We've run this not as a conference but as a public meeting, and we'd very much like to know who our friends are.

And in fact, I'd like to really start off by talking a little bit about why we are here. We've come to this third meeting after starting off with a small group, some quality teams that explored the possibilities of risk management in the gas and liquid industries.

We started out with a realization, certainly from the Office of Pipeline Safety, from the industries, from the states, that there may be a better way of approaching pipeline safety regulation.

I've been at this business -- I was thinking this week -- this is a good week for me to think. I'm going to be 50 at the end of the week. I realize I spent 25 years working on regulatory issues inside and outside of government. I don't know if that's a good thing or a bad thing, but standing up here, it feels like it's a good thing because I think that what we're approaching here is a regulatory alternative, a different way of doing business, something that is not event-driven, something that doesn't result in specification-based regulation that doesn't quite fit the circumstance, but hopefully something that will give us better safety solutions, a better approach, a more collaborative approach, which will help us to move this program through to the future and help the industries that we regulate allocate their resources more effectively.

Perhaps the best thing that I can do to give you a feel for where we've been and what we've come to is to read as I promised to do for Bruce Ellsworth, a message to this group. Bruce, who's Commissioner up in New Hampshire, has served with us from the beginning on our steering committee. He could not be with us here today, and many of you who attended earlier meetings know Bruce, have heard him speak. He's in many ways one of the deans of the state regulatory community, and let me read you his thoughts.

"I apologize for not being able to be with you today. As some of you know, I have a specific interest and a particular fondness for gas pipeline safety in general and our federal and state relationship in particular.

Due in part to the outstanding safety record of the gas industry, which I firmly believe has been enhanced by the enactment of the Natural Gas Pipeline Safety Act of 1968, I admit to having reacted cautiously and skeptically to the proposals to replace the provisions of the existing pipeline safety standards with a new risk management program.

The Act and its standards have served us well. The industry has been assured of consistent standards throughout the country, and both federal and state regulators have been provided with specific construction, operation and maintenance standards by which to judge their jurisdictional companies.

I was and to a certain extent am reluctant to fix something that does not appear to be broken. I have been convinced, however, as a result of my participation on the Joint Risk Assessment Quality Team Policy Steering Committee, that although the system may not be broken, there may be an opportunity to make it work better, cheaper and more effectively.

I have come to believe that the Office of Pipeline Safety has been right in its decision to explore the viability of establishing a risk management program for interstate transmission operators as an alternative to some of the performance standards which they now enforce.

I support OPS' proposal to establish a pilot program for interstate transmission operators in order to evaluate the relative effectiveness of such a program.

While I understand the demonstration program will be limited for the next few years to interstate pipelines, I believe it is very appropriate for OPS to have included state agencies in the planning process, even though it would not have been the traditional role for us to play.

That way, we have the opportunity to be educated by the lessons the program offers right from the beginning, and to offer advice to OPS based on our knowledge of local conditions that should be considered that could affect the pipeline projects.

We have been hearing about risk management demonstration projects for a long time. From what I have observed, I believe we have a good planning basis to start the program.

Efforts by teams of federal and state government, industry and public representatives, have produced a regulatory framework, technical standard, performance measures, communications and training plan.

I think it is significant that most stake-holders approach the program as a learning experience, so that adjustments are expected.

I congratulate all who have worked to prepare for the start of this program and hope to see this cooperative spirit applied in the work ahead of us. May your discussions today further inform the planning process and send you off to a great start next month."

I certainly thank Bruce for those very thoughtful and kind words as we embark on our program today.

Now, the program that we're talking about, our risk management program, is a national program, and as I've said, it's designed to test the concept that has a series of objectives. I mean we're looking for more effective allocation of resources. We're very much looking to find risks that were not being located under our traditional program.

We're taking what we believe to be a systemic approach. We're looking for a new way really of dealing with public entities and using our state partners to reach out in a new public communications paradigm for us.

One thing that we found out as our reauthorization was approaching was that there was tremendous concern, some of which I think was well directed, and some of which was, I think, a product of not having been involved in our process, and this was a concern about pipeline safety from the environmental community, from some public interest groups, and as we edged toward the President signing our reauthorization bill, we were all convinced that we needed to take a much greater and much more active stance toward the communities in which pipelines operate, and I think you'll see today in this program and in some of the words of our -- of our speakers a new awareness and a new resolve to address the -- the issues of public involvement.

Obviously we'd like to develop this process so that we can make the best use of -- of existing technologies, hope to develop new technologies.

We know that this is going to be a very, very different system of oversight. It's not going to be the clipboard and the check sheet from the compliance standpoint. It's going to be a system-wide approach. It's going to be a comprehensive approach. It's going to be something which lets operators in collaboration with states and federal officials weigh and balance different opportunities to address pipeline safety.

In doing this, we're going to try and find ourselves up to 10 projects to look at, and as we look at the possibilities, we're going to try and vary the geography, hopefully size of the companies that participate. We're going to look for different operating situations.

This is a demonstration program. This is a program where we hope to learn, we hope to continuously improve, and in doing that, the only way we will succeed and convince ourselves and convince the public at large that we've actually embarked on something that's worthwhile and may translate into a future of different regulatory approach is if we collect information and share information in a different way as well. That's another issue that we'll be looking at through -- throughout the day.

Obviously there is certain information that's collected for regulatory programs. Many complain that once that information is collected, it goes into the file cabinet, and it's not used effectively or it's not used at all. I think this is an indictment which is often well deserved, and one of the things that we're going to be looking for in this process is collecting different kinds of information that tells us whether or not what we're doing is working well.

I think there's some concern about the subject of data collection, but from my own standpoint, based on what I've seen, I think once we get into these projects, it's not going to be difficult to decide on what kind of information is to be shared. It's going to be the kind of information that's going to validate what's going on in each one of the projects, and I -- I don't foresee any difficulty between the regulators and the operators and the public in understanding the types of information that are going to be useful in this process.

Throughout the day, we'll be seeing a graphic up on our -- on our screen as a -- as a reminder, and we'll be talking about five basic building blocks that make up the system that we're going to be reviewing, and the -- the blocks themselves are the Program Framework, our Program Standard, Performance Measures, Training and Communications. You see them listed there, and our panel will take up a good part of our morning, will be addressing those one-by-one, and then we will have an opportunity to ask questions, have comments and discussion about those -- those subjects.

I think that's probably just about enough from me as a -- as a -- as a quiet starting point here. I'll be back with you later in the day.

One thought I wanted to share with you. There was a little celebration that I went to a couple of years back, and it was for a friend of mine, and he -- he was being feted by his friends and congratulated for what he had done, and when these kinds of occasions take place, people like to reflect on some wise person who is thought of, a guiding principle that takes you through life, and you never know where a good one's going to come from, but I particularly liked this one.

It came from a major league baseball player of very limited repute, and he didn't have much of a career. He's kind of a nice guy, and they asked him -- he had spent a dozen or so years in professional baseball, hadn't quite made his mark, but his career was over, and they asked him what it was that got him through all those years, and if he had any advice to pass on to those who were to follow, and he said, "Every time I got up there, I swung hard just in case I hit the ball."

And I think that's something that we need to do in this process. We need to give it our best effort. We need to work together on it, and we need to make it as successful as possible.

We all know why we're here. I think we need to do something different, and in order to do it that way, we've got to focus on these building blocks, learn about them, see if we can improve them, and put together a regulatory program that's going to work for all of us.

Now, to really us get going, I want to introduce to you someone who I work with in the Department of Transportation, who, believe it or not, actually makes my life a lot easier.

There's a -- I think there's a myth that in large cabinet departments, people are generalists. They're not focused. They're -- they're busy doing things that kind of take them from year-to-year, but they don't focus on the day-to-day, that they don't get down with the staff, spend time with the staff, under-stand the programs, work with them carefully, really get their arms around the process.

Certainly my experience in the Pipeline and Hazardous Materials Safety Administration, where the Office of Pipeline Safety resides, has been one in which we've had tremendous involvement from the senior level and from the policy office on the work that we're doing.

We're doing interesting work. We're doing exciting work, and people on my staff, people who are at the level above, are all involved, and because of that, we've asked Kelley Coyner, who's our Deputy Administrator, to come and give us some words of encouragement to start off our program today.

Kelley?

PHMSA Perspective

MS. COYNER: Good morning.

I am delighted to be in New Orleans. My mother's view of New Orleans, we're from Houston, was that New Orleans is halfway between anywhere you're going east. So, if we were going to Meridian, Mississippi, or Atlanta or Philadelphia, we always stopped in New Orleans. So, if there was any way to get me to come to a place is to host something here, even though we have to deal with the logistical issues brought along by the Super Bowl.

But as -- as Rich knows, when it comes to pipeline safety, and when it particularly comes to the really exciting issues posed by the Risk Management Demonstration Project, I'm really more like a moth to a flame. I don't have any self-control at all. I want to be there. I want to get in it.

Stacey gave me this notebook partly just to get me out of her office last week, sort of go read this, Kelley, you know, and come ask me some questions later. She didn't expect for me to mark it up and then complain that she gave me a new notebook to replace it.

It's appropriate that we're here in Louisiana. It's a place that has been very involved with the pipeline safety program over the years. We in fact have an office here. The members of the congressional delegation in Louisiana were particularly involved in our reauthorization of the Act and our budget for this program in past years, and we have certainly received a very warm welcome here in -- in the Bayou City, although those of you who are from Houston know that Houston's really the Bayou City.

It's great to see so many of you this morning. Because we held this as a public meeting rather than as a conference, one of the little nuances of the Federal Government, we didn't really know how many people would show, but there is certainly a lot of interest from the state folks. I've visited with a number of you as well as people from industry.

I'm also proud to see such a strong participation from our own staff, both in headquarters and the regional offices. There are a lot of other things on everyone's plates, and it does take time for folks to come here and spend time learning about a project that is going to involve only 10 of our customers in the coming year, but a very important project, we think, for our future.

Before I turn to my remarks, I also want to not only thank those folks who helped prepare the conference from the Office of Pipeline Safety, but also to thank those of you from state, local and industry who spent a good deal of time not only yesterday as we worked through the presentations and some of you worked through the presentations until quite late last night, but those of you who have been working on the whole process over the last several years to get us here today.

There's been a tremendous amount of work that's gone into that, and all of us should be grateful for it.

Today, I'm here to talk about two twins, and those are the twins of opportunity and responsibility that risk management presents us. We have a tremendous opportunity in this initiative, but only if we take the responsibility to do it right very seriously.

The initiative that we're talking about is a very bold one, and anything that is worth doing also has a lot of challenges and things that it forces us to ask questions and look at and to re-examine as we go along.

We are talking about a process, a tool that has been used in a variety of other industries, one that is in fact used in the pipeline safety industry now, but it is an alternative for us in Federal Government to use.

There have been some efforts, albeit a few of them, to use it, but what we're talking about is using risk management as a means of regulating the pipeline safety infrastructure.

We are looking for an alternative and a better way of regulating the pipeline infrastructure to protect the public, the environment and property while maintaining an efficient and reliable transportation system.

I believe this is the type of change the President spoke to last week when he talked about needing a new government for a new century. Can we take his direction to heart in our work today? Is this alternative one that will help us protect public safety and the environment within limited resources and make the best use of all the tools available to us?

He talked in particular about a government that is humble enough not to try to solve all our problems but strong enough to give us the tools to solve our problems ourselves, and while I think he may have had something slightly different in mind, I think that message is a particularly important one for us as we embark on the risk management paradigm.

We've all heard that the pipeline industry has done a pretty good job of keeping energy flowing to American homes. In fact, some have asked why don't we just leave everything alone, and I think that was in fact a question that Bruce Ellsworth asked us and others asked us over the course of the last several years.

I think the answer is that we've all come to realize, whether it's the Department of Transportation, the Research and Special Programs front office, the states or the industries, that there are better ways to address a unique industry, an industry which has a fixed infrastructure, where each pipeline system presents slightly different challenges, and each pipeline company has slightly different operating approaches.

We hope that risk management has a potential to be the kind of tool that helps us to solve our problems ourselves, and here, I mean ourselves not just in the sense of industry solving its problems, but in the state and the Office of Pipeline Safety working together to solve the problems.

You might ask how would risk management be that tool? I think the -- those of you who are familiar with the standard will be familiar with the concepts of why this would be an effective tool.

Let me go through a couple of them. The risk management approach allows us to analyze precursors and the causes of potential incidents, allows us to examine the likelihood of severity of potential incidents, to provide a comprehensive and integrated means for examining a spectrum of risks and prevention mitigation strategies.

It allows us to structure a way to identify and prioritize risks and risk reduction measures and, perhaps most importantly to this endeavor, to track our performance to ensure improvement.

Through this process, we can create a new basis for how the industry and regulators can interact to assess and improve safety and environmental initiatives.

Risk management gives us the opportunity to be smarter about how we think about pipeline safety, how we evaluate what is going on in industry, and how to be accountable to you for using this information to ensure a superior level of safety in our pipelines.

I spoke about the opportunity, and I spoke about the responsibilities, and I think that the remainder of my remarks really address what I consider our key responsibility today, which is to -- to raise questions about how we got here and how we move forward.

The first question you might ask is how did we get here, and how do we prepare for this endeavor? In a word, it was through partnership. As you probably know, the Office of Pipeline Safety, the pipeline industry, state and local government representatives, have examined together what risk management has to offer, both government and industry, and how to apply risk management in pipeline regulations.

We worked together to build a technical standard, performance measures, a training program, communications plan, and a program framework to tie the entire program process -- the entire process together.

If we stepped no further into the future, the partnership has already enhanced communications between the pipeline industry and the regulators enough to be considered a significant program benefit in and of itself.

But we believe that there is value to the risk management having engaged in this effort, and I think the key is understanding what it allows us to do that we're not doing now.

Risk management complements both the role of government and industry by enabling pipeline operators and the Office of Pipeline Safety to understand better what and where the risks are. It allows us to improve our rules in addressing these issues by determining where and how resources can effectively reduce risks across the pipeline system.

Through this, the OPS, the Office of Pipeline Safety, and the operator gain a deeper understanding of the risks to pipeline operations, and also how we might go about addressing those risks.

Operators bring flexibility to address problems that are unique to their systems. Both government and industry should have a better ability to achieve superior safety and environmental protection and increase reliability of pipeline safety -- of the pipelines.

One of the other keys is that risk management is a continuous improvement program, which will allow us to make improvements in how we address pipeline safety issues as we go along.

A question that comes up frequently is how are we focused in our energies to make sure that we succeed? I think the key to this is that we take the five building blocks that we've identified, and as we select the companies who participate in the project, that we as the Office of Pipeline Safety have to ensure that companies that selected will comply with the standard. These must be companies that can achieve superior protection for risk management.

These companies must work in partnership with the Office of Pipeline Safety to evaluate the merits of risk management and the technologies available. These companies must have a corporate commitment to use risk management process as part of their day-to-day business practices, and the companies that enter this program must have a clear record of compliance.

Another issue which I think I mentioned at the end of listing what I thought were the values of risk management, we talked about the need to be able to build our measure of performance.

In order to do that, we must set clear and ambitious performance goals. Improved accountability is a key factor in the success of the risk management demonstration project. We've developed guidance on performance measures to evaluate the results of the process, and we have found this to be one of our biggest challenges, and as we go through today's program, you will find that it will continue to be one of our biggest challenges as we move through the process.

Some performance measures are designed to evaluate whether superior safety and environmental protection are achieved through this process. Other measures are designed to monitor other expected benefits; namely, the improved ability of government and industry to realize the desired safety and environmental and reliability outcomes.

The improved accountability of OPS and the operator to their public and their representatives should be possible with these measures.

As experiences gain with the program, lessons will emerge, and the performance measures will evolve over time.

Another key question we have to ask ourselves is are we adequately not only welcoming but ensuring that people are aware of this pipeline risk management pilot, so that they have input up front, they're aware of the process as we go along, and they understand the outcomes when we get to the end of the pilot phase.

Improving public involvement has been a program goal from the beginning. Stacey Gerard will discuss this very fully in her remarks, but just in short, I would say -- I would state that since November of 1995, we have made sure that there's been input not only from state and local government but from our industry partners.

The public views have been sought in a variety of ways. Some of them, through electronic technology, using our home page on the Internet, through presentations and newsletters, through meetings with a variety of organizations, including the National Governors Association, the National League of Cities, the National Towns and Townships Association, the National Conference of State Legislatures, and the list goes on.

We will continue to provide national and project-specific information. We will provide contacts within the Office of Pipeline Safety, state agencies and companies who can answer questions about specific demonstration projects that have been proposed or approved.

One of the things that I ask of you today as you listen to our presentation in detail of what we expect in the Communications piece of this project, that you let us know if this is sufficient or if there are better ways to achieve our goal of ensuring the public's comfort with this project.

A question the public will have is, is it clear that the basic safeguards for pipeline integrity will be maintained? I think Stacey answers it will when she says that while risk management is based on choices about where resources should be allocated, all locations along a pipeline demonstration project must be demonstrated.

In other words, what we expect is that there will likely be only parts of a system that are involved in our project, and all the other pieces of it must continue to be safeguarded along with the project.

The Office of Pipeline Safety and the states will continue to oversee all pipelines involved in the demonstration projects to determine that pipeline integrity is maintained and protection against threats, such as corrosion, excavation damage, over-pressured, human error, is working as intended.

Our approval of a project has to mean that the pipeline integrity is maintained at least as well as it was under the traditional standard.

Of course, the regulatory program which has been in place for 25 years will continue to be a means of oversight for all the pipelines not volunteering to participate in the program.

I spoke at the beginning about our responsibilities, and I think that one of the things that's important to come away from today about is what are the roles of government, what is the role of industry?

A goal of -- a role -- the role of government is to make sure that the public's interests are protected, that the public's interest in safety and environmental protection and a reliable and efficient transportation system within the pipeline industry is also realized.

We have to be in a position of not only providing answers but, better yet, asking the right questions. Some of the questions that we'll be asking as we go along are: are we now in a better position to perform our basic function and assess an operator's management and safety and integrity of the pipeline? Will we be able to understand the options available and evaluate the merits in a broad and systematic way?

Will we be able to come to agreement with the company on goals and know if the program is on target?

Are there adequate opportunities to consult with the public and know that the local condition and relevant factors have been considered?

Do we have a plan to communicate and be accountable for the impact of our efforts?

The bottom line is that we can't proceed unless we believe the answer is yes. To date, we strongly believe that the answer is yes, and we hope that you will be convinced with us that these are questions that we will continue to ask as the project proceeds.

Today, we will be looking at giving a close inspection to each of the five building blocks, and we ask you to ask have we come up with the best possible basis to oversee the companies volunteering for risk management?

The result of past risk management efforts in today's work has to be it's good, it's the systems we have today, and in fact, President Clinton has directed us that we must try for a result that is superior to the current level of safety.

Our job is to ensure that the building blocks are solid enough to test our premise that risk management can be applied as a regulatory alternative, to provide superior safety and environmental protection, and improve pipeline reliability and efficiency.

My role today and in the future is much like yours today. I am a fairly recent parent, and, so, little phrases about learning have really stuck in my mind, and one that sticks in my mind is stop, look, listen, and I'd like to add to that learn because I think that we've sort of stopped in our every-day today to listen and to look at what this program is, but the most important thing is that we need to learn about our preparation for risk management.

I may offer my comments on areas that I think need improvement or adjustment, but your comments are much more valuable. You come from a variety of perspectives, and we ask that you really take seriously the challenge that we have today to make sure that we're off to a good start as we begin to look for letters of intent of people who wish to propose -- who wish to participate in this program.

I will be returning to Washington later this week and will be asked to give a progress report on this alternative and, I believe, creative way of governing. I encourage all of you to go back to your home organizations and do the same, and I look forward to continuing the dialogue about this program in the future.

I'm delighted to be here, and I look forward to talking with all of you over the course of the day.

Thank you.

(Applause)

MR. FELDER: I'll trade you. Thank you, Kelley.

Risk Management Building Blocks Panel

MR. FELDER: As we go through the day today, I -- you know, there are a number of things that -- about this program that I want to continue to point out and have people take note of.

Certainly on the -- on the public outreach aspect of it, I think as many of you know, in many ways, pipelines have been invisible to the communities that they run through. It's a safe form of transportation. People tend not to be aware of the pipelines unless something goes wrong. Every once in awhile, they'll -- you know, they may see a marker and they may recognize it, they may not.

But as we move into risk management and constituencies that have not paid much attention to pipeline safety in the past will be coming to the fore and participating in this process, seeing what we're doing, and it's important to remember that what we're doing is not -- we're not citing a pipeline. We're not constructing a pipeline. We're figuring out better ways of regulating the safety of pipelines that are already out there.

We're looking for a new way of looking at the pipeline infrastructure. We're looking to learn from processes that in many companies are already -- is already the dominant way of doing business. Risk management.

We're trying to mirror that on the regulatory side, so that we're not standing in the way, instead the regulators are working together with partners, whether it's the public or the companies, in finding a better way to allocate pipeline safety resources. So, we're not started -- we're not inventing a new game. In many ways, we're -- we're really reshuffling the deck.

The balance of our morning is really going to be taken up with a -- our panel on the Building Blocks for Risk Management. The building blocks, as I've said, our -- our Program Framework -- got those? Yeah. There we are.

The Program Framework, which is really the -- kind of the holistic way of dealing with receiving, reviewing, approving and then, finally, monitoring the plan; our Program Standard, which is the way that the company is going to carry out its risk management project: Performance Measures, very important for us, the way we're going to determine whether or not we're doing it right; and I want to reflect a little bit on -- on the Measurement side.

You'll probably see that we will spend more time on Measurement this morning than we have in the past. It's kind of the latest and the greatest as far as we are concerned up here. We've done a lot of work on the framework. We've been through a few iterations of it. People seem pretty satisfied with it, based on the comments that we've received.

The standard is much in the same vein, but performance measures, that's the toughest. Some of you are probably familiar with other voluntary and some statutory programs of this type, and it's been in the performance measurement area that the least progress has been made by other agencies.

We feel, Number 1, that we've made some great strides here. We feel we probably have a ways to go, but I think as you observe what we have here, you will see that we're going to embark on the risk management programs with a very good start and, I think, a better start than others have had in the performance measurement area.

On the training side, some of you may know, we are actually looking to take about 50 percent of our Transportation Safety Institute Pipeline Safety Training budget and move that toward a risk management curriculum. You'll hear about that this morning, and, finally, our Communications Plan that Stacey will be talking to, something that we have again put on the table more recently.

Even though, as Kelley said, we have been communicating for quite a long time on this subject, we're looking to broaden our outreach, and what I'd like to do now is -- is turn to our panel.

First up will be Stacey Gerard, talking about the Program Framework.

Program Framework

MS. GERARD: Good morning. I'm just a little bit excited to be here. This is kind of a big day for a lot of us who've been working pretty hard to make this all come together.

I want to thank Kelley for the remarks that she made. Somebody on the panel handed me a note that said, "Kelley has just told you everything that we're going to tell you. Can we go home now?" And I think it's -- you know, that should be an indication to you, you guys should all feel pretty good that our management above us has such a grip on this program, that it isn't just the risk management staff and the RAQTs, but Rich and Kelley could tell you in detail anything that we're going to talk about today.

As Rich said, I'm going to talk about the framework first, and we won't spend as much time on it because this is a building block that has been maturing and has not seen as much change over the last few years as some of the other elements.

I'm now going to try hand-eye coordination with the mouth. I'm trying, John. I'm pressing the left button.

(Pause)

MS. GERARD: Bingo. Okay. I feel better now.

One of the things that's happened since we've gotten together last is that the basis for the program has solidified a lot. We have a law. We have a presidential directive. We have a program framework with those five great building blocks that you've been hearing a lot about, and, so, we think we're looking a lot more solid.

The law tells us, of course, that this is a demonstration program with voluntary participation. We are talking about evaluating safety and cost effectiveness. That's in the law. We now have the new authority to exempt from current and future regulatory requirements. The law gave us the specific requirement to provide equal or greater safety, and then we have President Clinton's policy directive on top of that.

Some of you who have asked, well, what's the difference between equal or greater in the law and the presidential directive? Well, this is an Administration, and the President is telling us how we're going to carry out that law, and we're working on superior. Superior safety and environmental protection.

The President's directive also told us to put more emphasis on meaningful public and community involvement, which we'll be talking about more. He also said make sure it's enforceable, work with the Department of Justice to make sure it's enforceable.

You'll hear us talk about clear and established record, and what that means, and then the Number 10, 10 demos.

When the presidential directive was given to us, we were a little bit surprised about it. I mean we had a heads-up it was coming, and there were people talking about it, and we were quaking in our boots there for a few days, and then we really thought, well, haven't we always been talking about that the risk management program was about trying to improve, and the more we thought about it, we said, this is really what we were doing all along.

The very fact that we have risk management methods, that we have a more formalized approach and structure for interacting and negotiating together. We've always said that this was a more systematic and thorough assessment, and that we have gone into this program because we believe that we'll have the opportunity to identify risks that might not have been found, fixed rates that may not have been found, and to measure that the new approach in fact was working.

So, doesn't that mean we're working on a superior program? We look at superior as the overall effect of being in risk management, and meaningful public involvement did become a more important objective, which we'll talk about later.

We will introduce the term "public communication" and "focused communications" later in our panel.

Just to give you kind of an overview of the entire process, the screening step and the -- the letter of intent that companies will give us are the basis for our exercising our prerogative to choose the projects that we think we can learn the most from, to look for diverse set of projects, and to look for that -- that corporate commitment.

The consultative process, which we're going to be spending most of our time on today, to talk to you about how that's going to work, especially in the afternoon. You're going to hear it a lot of ways. The interactive process, working on resolving issues, developing a work plan. The consultative process is what leads to the formal application, but the work is in that step.

You'll also hear the term "the audit plan". We think that it's important to give back to the company at the time of the commitment an understanding about what the level of effort that they can expect in terms of sharing information.

There's that overview of the process, and then the culmination is in the order, which lays out what the terms and the conditions are, basically the basis of our knowing that you're complying with the plan.

As I talk today, I'm going to try to work in the comments that we've gotten on the docket and tell you how we are making an adjustment or not as a result of those comments.

I think we've created a new term of art, and I kept hearing in the dress rehearsal, the "LOI". This is the letter of intent. It is the basis on which we will screen the projects to go in the consultative process with.

That letter of intent has to clearly lay out what the company's intentions are, what the merits of their proposal, the kind of commitment they're going to make, and it's the basis on which we'll select the demonstration projects that are going to give us the most educational benefits.

One of the commenters talked about expanding the window of time for the letter of intent. Based on the comments, we are going to widen that to a 90-day period from our solicitation going out. So, there will be at least a 90-day period to get those letters in, and if you're thinking about doing risk management at any time in the risk management program, whether you're ready right now or not, please send us a letter, so that we know.

We had talked at one time about holding places for second-year starters, and we've -- we've decided that since there are only 10, it's a limited amount of time, four years isn't that much experience, the congressional report is actually required before the four years are out, get your letters of intent in now, and as our staff and Bruce is telling me all the time, there's no way we can handle them all at once anyway in terms of going through the process.

He presented the bubble diagram from hell the other day. So, get the letters in, and we'll get to them as we can.

The issue of clear and established. There were comments about what that meant, and that the companies felt they should have an opportunity to clear up anything that they might consider a blemish on their record, and we absolutely want to work to be sure that a company can be clear, have a clear record of compliance to start the project, and that -- and we will work with the company to resolve issues to be able to be sure that there is a clear record, and to have an opportunity to have a clear record.

As a result of practicing this -- and we have been talking about prototypical projects in the field. We've talked about 16 companies individually. We've talked to companies in groups. We've worked with our regional directors. We found that to make the process more efficient, we wanted to have a pre-consultation with the company, where we would go out, and Beth Callsen and Bruce Hansen, who you'll be seeing practice this presentation this afternoon, will sit with the company to talk about its program, and to get a sense about issues that are going to come in for the project review team to consult with the company on, and this is a way of trouble-shooting out issues and establishing communication between OPS and the company, so that everybody on both sides knows what to expect in going through the consultative process.

The issue of what type of data, what type of performance measures, they would be generally discussed in the pre-consultation, but the focus would be on the company's program, the way the standard describes the program.

There were comments from states about their role in the process and what kind of input, and I think it's important for us to clarify. We are inviting states to come to the table. We are not dictating or mandating or laying that as a requirement on states. We hope that they'll want to participate, but if they don't want to participate or don't have the resources, questions and comments from the local level can certainly come into the Office of Pipeline Safety.

I like whoever prepared the slide. The dedicated staff. That is, not only that they're dedicated to risk management, but they are dedicated throughout the project. We want -- we want the companies to know that when we start the demo project, that you will have a consistent team to work with you on the project from the beginning. It may be a different team from project to project, but, you know, we're expecting some sort of permanence to get nationally-consistent policy across the entire process.

Also want to point out to you a document that you may not have seen that's in your notebooks, and it's called "Review Protocols". This document is the basis of the OPS reviewers working through the consultative process. So, it's there in plain daylight, so everybody knows whichever side of the fence you're on how we are going to approach, what types of questions, how we're going to document what the consultative process tells us.

You like your notebooks? Thank you, consultant team and staff, for doing such a good job on those notebooks.

Finally, the consultation rolls up into the application, and this is really an indication of the partnership. We will have been working with you on resolving the issues, and you will hear this afternoon, by the time we get to the application, there should not be any surprises. We should know whether or not the company thinks it can attain superior and how, what kind of a program, what kind of scope, what kinds of project-specific data.

As Rich says, this issue of data and under-standing has been plaguing us throughout, and as we go through these practice sessions, it really doesn't seem to be such a big issue anymore, that it becomes clear what kind of information is relevant to the project, and there was a comment on the docket. We are talking about information on the project. This is not company-wide.

Those company commitments, of course, are rolled up in the order. This is a risk management order. This will be the formal structure, the basis by which we know that the company is doing what they should do. The terms and conditions will be attached. It provides the exemption from regulatory requirements as they are appropriate, and, of course, the public will be notified about what's in that order.

I mentioned the audit plan. The audit plan will coincide with the company's key decision points. When the company is evaluating safety activities, those should be points of discussion with us, where we will try to lay out as best we can up front, you know, what the times are that we're going to want to get together with the company. Again, the audit plan is limited to the scope of the demonstrations.

Some of the comments went to the hope of having more data available, especially on the environmental side. We can only work with the data that's available today, and over time, we'll have activities going on to try to improve access to data that's meaningful, the right kind of data that is of benefit to everybody.

Later in the panel, I'm going to come back to the communications topic, but just to say there will be numerous opportunities for public input and particularly focused input from people who could be affected by a demonstration project throughout the entire process.

What's next? Based on comments today, there are going to be activities to progress certain aspects of the building blocks. The performance measurement team will be meeting later in the week to do some more work on that document.

We'll make some adjustments to the framework based on some of the things I've said to you today, and we hope to have a republication of the framework as a solicitation to submit letters of intent very shortly.

We've seen a tremendous amount of spin-offs from this philosophy throughout OPS already. It's kind of exciting to be in OPS and watching the entire organization get involved in preparing for this.

We've had advice from our steering committee throughout this process, which we've tried to benefit from and live up to. We've tried to keep it simple. While you're going to hear a lot of words today, and you're going to hear the same thing repeated several times, basically we're describing a structured process about communicating and resolving issues.

We are trying to keep it simple. We're trying to be as clear as possible about what the company needs to do to prepare and to come in and to present.

We're trying to quote the words of Joe Martinelli, "just do it". We have spent a lot of time going out in the field and talking to companies. If you're a company that would like us to come talk to you, we'd be happy to come talk to you, just to develop a better understanding about how we think, how you think, where you're at, whether you want to be a demo now or ever. That's what this is about.

This is just a new structured process to do what a lot of OPS staff have been doing as part of how they do their work with you today, but it's structured in a more formal and more comprehensive manner.

A lot of talk about communications. I guess our hope is that you feel that the lines of communication are open and have been open, and that if nothing else, that that communication had made all this work worthwhile.

Thank you, and I'll come back up later on Communications.

Don? No. Ivan? Whoops.

(Pause)

Program Standard

MS. HAMSHER: I'll go ahead and get started while they put up the beginning slide.

I'm Denise Hamsher with IPL Energy, USA, the operator of Lakehead Pipe Line.

I'll talk a little bit in a few minutes about the team that worked on putting the program standard together, and I view the program standard -- I'm not sure we're in the right order because although we've been talking about building blocks, I think the program standard should be considered the starting block.

It's really the -- the -- the structure that the company needs to rely on to put together their initial intent and risk management program.

I am not going to go through the standard in a lot of detail. I trust many of you, in fact I hope many of you, have read it. The standard has been out. It was made available in the Federal Register in November. We asked for comments. It's in your packet today. So, you'll be able to read it, and -- and hopefully the work that we did in explaining it can do a better job, and I won't take up a lot of time doing that.

However, what I'm going to do is spend a few minutes talking about our approach to developing the standard, how it should be used, what it is, and what it isn't, and some of the guiding principles.

The work of the prior Gas and Liquid Quality Action Teams evaluated risk management in the industry and made the recommendation that this has some potential and should be tried as an alternative to the prescriptive rulemaking, an alternative that may be applicable in some cases for some segments of the pipeline and not a wholesale substitution.

But in order to proceed along that route, there needed to be a common understanding. There was a lot of discussion two years ago about risk management, risk assessment, and there was a lot of interchangability of terms and perhaps not an under-standing.

There also needed to be a guideline for companies to use, and there needed to be the starting block that I referred to. There needed to be some structure by which the applications that come in from companies had some kind of common elements.

In developing the program standard, we had a great deal of diverse input. The standard team was co-chaired by John Gawronski with the Public Service Commission and myself. Let me mention that Jeff Patry, formerly with Chevron, preceded me as co-chair.

In addition, we had people that had been involved in part of the development or the analysis of risk management in the industry on the prior Gas and Liquid Teams. So, there was some continuity over time.

The standard team also then pulled in some state regulator input, industry input, and we had some assistance with API and some of the other consultants and contractors on this. We had a little bit of help on an ad hoc basis from many others.

Along the way, we provided some early drafts of the standard to people in the industry, at the state level, people with companies that hadn't been involved in the development. I refer to this as -- as a reality check, and that helped us kind of get back on track, clarify some terms. You tend when you're writing a document like that to start getting tunnel vision, particularly with the -- with the jargon.

Then, as I said, in November, the standard was made available pretty much in its -- its present form but with some changes based on that -- on those comments.

We clarified the purpose. It was clear from some of the commenters that there wasn't an under-standing of the standards role when you looked at it as one of the components in the building blocks.

We -- we tried to either define or avoid some of the jargon, and where we needed to use it, we put some of the demonstration program jargon or terminology up front.

We also clarified the section on performance measures. One of the things that we needed to do with the standard all along the way is to kind of stay in sync with the development of the framework as it moved along, the communication plan as it moved along, and the performance measures because the standard needed to reflect the components that the company needed to develop, but we're still in sync with the overall program and communication.

However, despite some requests from some commenters, we're still avoiding in the standard a tool box approach. The propensity is to try to put a lot of examples in. In fact, as we wrote the standard, it was often easier for us to do that. Sometimes you can kind of clarify what you're trying to say by putting examples in.

But the risk of doing that is that the examples start becoming prescriptive. So, although we have on occasion done that to help clarify a point, we have avoided a long list of examples or, frankly, preparing a standard that substitutes one prescriptive set of risk management requirements for -- for the prescriptive regs that we all are suggesting need to be tested for flexibility.

The approach that we took again built on the prior risk team work and the industry experience. The diversity that was at the table often worked two ways. In many ways, it helped complement and bring to the table, I think, a better document. In other ways, we had to work through people coming to the table with different expectations.

The issue of performance measures was one issue. The goal that we're trying to achieve was some other expectations. So, there was a lot of working through those issues before we could get there.

One of the things that we did by overcoming that is really staying focused on what the role of the standard was, that it is a tool for the company to get off the starting block, to develop the letter of intent and application, and it is only then that the consultation process starts, and then perhaps some oversight, some discussions among the regulators or project review team about the appropriateness that the company chose to choose -- chose to develop in their risk management plans.

The other thing that we did was about mid-way through the development of the standard, we had a couple of companies come in and talk about risk management in their company and how they're applying it for issues, decision-making support, for issues that are above and beyond regulation. Again, that all helped us understand a little bit more about the application.

We acknowledged that people had different roles, and I think we encouraged candor, and I think those that have been involved at one level or other teams probably appreciate the process of coming to the table and developing that, and that in itself has achieved a lot more understanding across the table as we also start on this project.

The building blocks -- the building blocks for the whole demonstration project includes the standards, and it's important as I go in and talk about how we've developed the standards, some of the components, that you understand that the -- that the standard is -- is a communication tool to the company.

So, as you see terminology in there that says the company shall develop a communications plan, remember that that's not a unilateral decision. It is part of the proposal that they put together, and then there will be later negotiations.

The purpose of the standard again is a guideline for our volunteer. One of the things that we see in here, and I really want to point out, is what the standard is and what it's not.

It is a starting point for the project review team, but it is not a checklist or protocol for them. It is not a manual or training substitute or a tool box. But once a company does volunteer to get -- come into the risk management demonstration program, there has to be some elements in their risk management plan that -- that demonstrate to the project review team that this is a comprehensive approach to risk management. This isn't just a risk assessment, yes or no or quantitative decision, but they've actually taken a very comprehensive approach.

So, that -- although we call it a guideline or performance standard, there is some -- some wording in there that -- that does suggest that once you're a volunteer, those elements are mandatory. Nevertheless, there's a great deal of flexibility within the design of each element.

We also hope the standard, besides being a guideline for companies that are going to volunteer, is also a guideline for non-volunteer companies as we continue to evolve in the industry and mature in risk management, comprehensive risk management programs.

We also hope that by avoiding a tool box or prescriptive manual, that the standard provides the kind of flexibility without having to be rewritten that over this four years and in the future, that there's a lot of flexibility built in such that we can evolve and mature or continually improve over time.

One of the things we did early on in developing this standard was come up with several guiding principles, and that helped us as we went back and wrestled with the writing of that. There's several pages that describe those guiding principles. I invite you to read them, but let me just point out a few, and I'm probably preaching to the converted.

But we need to remember that this isn't a substitution for decision-making. Risk management is a -- is a management decision support process, that even the most quantitative risk assessment models have built into it some levels of assumptions, inter-relationships between data. So, it does not replace that decision-making.

Although it's difficult to -- to write down and particularly when you're speaking to a public audience outside the industry, we need to all recognize and reinforce and somehow overcome the obstacles as we're communicating with the public, that zero risk is not possible.

I think that's one of the biggest risks. Those of us who have talked to angry landowners or citizens groups realize that although objectively they wouldn't say that they expected zero risk, that's really the expectations they're communicating. So, we need to go into that premise and -- and remind ourselves, particularly in the communication.

Risk management increases and integrates information. There's an encouragement for cross-functional information. There's an encouragement for more information flow between regulators and the industry. It's assumed that in the long run, effective risk management is cost effective for the company.

We built on a wealth of experience when we did this standard, and -- and actually the first point should -- should be rewarded slightly. Although there has been experience, and, Rich, you alluded to this, in -- in the industry with risk management, I think the prior gas and liquid teams found that there is little applications of comprehensive risk management programs.

Now, over the last couple of years, that might have changed some, but there isn't a great deal of comprehensive integrated overall risk management programs experience in the industry.

There is experience with risk management applications, however, on both sides. I think that the pipeline regulations, we would suggest with perhaps a few politically-mandated exceptions, that are risk-based, and we hope that they are.

Many of the industry standards that we use and have -- and in some cases have been incorporated by reference are risk-based. Regulator prioritizations of resources and inspections are often risk-based. What we found and what we're striving for, and I hope what the standard does, is describe what is meant by a more comprehensive and integrated approach, however, to risk management.

Again, the standard will go into this in more detail. I won't go into that detail up here. But I want to kind of lay out this chart which is really the overview of what we mean by an integrated comprehensive approach, an approach that provides some feedback loops for continuous improvement.

Section 2 of the standard provides an overview of the key program and process elements. This is how we've categorized them, and the requirement then that each of these elements must be included in a risk management program that is put forth to be an application process.

However, the standard does provide great latitude in the approach that an individual company might take in -- in developing each element.

It also calls for company program evaluation and performance monitoring, which is the continuous improvement in the risk management area that we all want to strive for.

For instance, one of the process elements talks about risk assessment models. The standard does not prescribe a specific model nor does it give a great deal of detail about the development of any given model.

However, what we do acknowledge is that various risk assessment models can be equally appropriate, depending on the application. If the risk at hand is -- is not extremely complex with a lot of inter-related factors, there's no need to have a very complex model to -- to analyze that risk.

However, the choice of the risk assessment model is not a unilateral decision once you start entering into the consultation phase. The company may develop what they believe is an appropriate model, but in consultation, perhaps there's some tweaking of that model that the project review team suggests in order to make better decisions.

The assumption is made that no -- that the specific model indexes, values or algorithms used in a model are -- are better developed by an individual company, so they're not laid out or described in the standard, and perhaps the individual company with the help of vendors, consultants and more formal training.

Some models in fact may have some proprietary information in them. However, we would expect that the project review team will review and -- and go into that model to look at the assumptions that have been made.

Ivan and Don will talk a little bit more thoroughly about performance monitoring, but let me point out that the standard has a section that -- that describes the element that the company must develop on project performance measures.

The requirement is that in order to be a kind of comprehensive risk management, one must look forward to pre-identify measures of success. The measures are going to be unique to individual company and projects. So, we've made no attempt to provide listings or exhaustive lists of examples for fear that those lists would then start prescribing measures.

The issue of performance measures was a difficult one for the project review team, and it was only after kind of coming up with that roadblock, if you will, that the performance measures team was developed, and then that issue was fleshed out much more thoroughly.

What's next? The -- I want to re-emphasize that the standard is a guideline. Although we're going to have a lot of learning over the next four years, because we wrote it in such a way that the elements are there but not prescribed or laid out, we would hope that the standard will remain a very helpful structure throughout the demonstration project and not need a lot of modifications.

However, we will need to tap the on-going experience of volunteer projects, so that the standard can be refined and improved. That is why it's an interim standard right now, and although this program standard doesn't look and feel like the technical standard that many of you are used to seeing in the industry, we still view this as an eventual industry consensus standard, whether it be in the ASTM, API or others.

Our specific approach to captioning these comments and modifying the standard at the end of the four years has still not been developed.

Thank you for taking a few minutes. We're going to take questions at the end of the panel on each of the building blocks, and let me just close by saying that the standard team is hopeful that this provides a useful guideline for one of the building blocks.

Thank you.

Performance Measures Guidance

MR. HUNTOON: Good morning. My name is Ivan Huntoon. I'm the Regional Director for the Office of Pipeline Safety Central Region in Kansas City.

This morning, Don Stursma from the Iowa Department of Commerce and I will brief you on some of the issues that led to the performance measures work group's formation and issues that have been addressed over the course of the last six months.

The work group was formed after a number of performance measure issues were identified by the program standard team. While all the members agreed that measures were necessary, there were divergent views about the information requirements, use and potential interpretation.

In reporting this to the Joint RAQT Team, a separate group was suggested to resolve these issues and to develop more guidance for demonstration program participants on performance measures.

The Joint RAQT Team agreed to establish the work group and agreed to assign representatives to help with its work. The work group was directed to coordinate its work closely with the program standard team.

The work group consisted of 16 or so members, including representatives from the gas and liquid pipeline industries, state and federal government, pipeline industry groups, and a sprinkling of other associated subject matter experts, better known as consultants.

Several folks served on both the performance measures and the program standard teams. This co-mingling of team members was deliberate to ensure that there was sharing of both ideas and concerns as the Joint RAQT Team directed.

In fact, most of the performance measures meetings were held in conjunction with the program standard group to further enhance the information interchange between the groups.

This -- these lists of the members are in the back of your hand-out, I'm told, if -- if you can't read that.

Over the six months, the group held eight work sessions. There were opportunities for conflict and heated discussions, but I feel that we have all gained a better understanding of each other's views as a result of the process.

In the end, however, the group worked in a cooperative and constructive manner. We have a better appreciation for the difficulty that lies ahead in establishing a comprehensive set of performance measures.

We recognize that as much as we have accomplished in the past months, it represents only a beginning which will be revisited many times over the course of the demonstration program.

Without going into a lot of details of the meetings, I would like to share some of the areas of work group debate before discussing the guidance document.

The intent of introducing these is to let all of you know the extent of our discussions. Many factors that don't show up in the report were discussed. Please recognize that my talk may not do justice to the effort or level of emotion that was committed in the work group discussion.

An initial discussion that took up a lot of time and emotion was understanding just what the work group was chartered to accomplish. Because we were established after the two industry risk assessment quality teams and the program standards team, we felt that many of the tough issues that might have been addressed earlier had fallen to the measurement work group to resolve. This issue stayed with us for a couple of meetings, until I think we really gained confidence as a team and were willing to pass some of the tough issues back to where they should really be resolved.

This is one area where it helped to have members that were also members of the technical standard team.

Close behind the first question was another tough issue to resolve: what are we trying to measure? Was it safety? Relative risk? What is safety? And so on.

Ultimately, and after many interesting starts and stops, we focused on developing performance measures needed to evaluate the acceptability of individual demonstration projects and the benefits of risk management as a regulatory alternative.

There was also a lot of discussion directed at the availability of data. That issue had the following three dimensions: how much data would be needed, how would the data be used, how valid is the data going to be?

How much data would be needed? Some regulators felt that a lot was needed. The industry representatives felt that about the same as now was sufficient. This question got more complicated when discussed in conjunction with the cost and sensitivity of providing more data.

How would the data be used? One extreme was that data would be used to educate. The other extreme was that without extensive precautions, data collected could be routinely mis-interpreted, even and especially outside the demonstration program.

How valid is the data going to be? This discussion really focused on the current view of the safety of the industry and a recognition that there probably would not be enough time to gather meaningful results in the course of the demonstration program.

In other words, some data would be limited in its short-term application, like accidents and fatalities, injuries, this type of data.

Finally, recognizing that the group was addressing many issues that others would be faced with as the demonstration projects unfolded, there was a lot of discussion of how to present the results of our deliberations.

Initially, there were some participants who felt that success would be achieved if and only if the work group could establish a standard set of specific measures that would last forever.

However, after much discussion, the group moved toward providing a framework for the eventual development of an accepted set of performance measures.

Complicating the discussion presentation, there was also the desire to leave as much of a legacy trail as possible without restricting the needed refinement of the work. The results of these final discussions resulted in the creation of the guidance on performance measures for the risk management demonstration program.

I will now discuss the document structure with Don providing a discussion of the performance measures that have been established.

Before I begin that discussion and to make sure that the message is clear, the performance measures guidance document is only one of the building blocks guiding the overall risk management program. It supports and hopefully integrates with the program framework that defines how the Office of Pipeline Safety will accept, review, approve and monitor proposed industry risk management demonstration projects, and the risk management program standard that describes the essential elements and necessary characteristics of an operator's risk management program.

Additionally, the communications plan and the development and integration of risk management in pipeline safety training programs.

The report was intended to provide guidance for operators who are planning to participate in the risk management demonstration program on the types of performance measures needed to evaluate the acceptability of individual demonstration projects and the benefits of risk management as a regulatory alternative.

Hopefully, the guidance will assist operators in developing a performance monitoring process for the demonstration projects and provide participants in the demonstration program with the measures that OPS needs to assess the overall effectiveness of risk management as a regulatory alternative.

Although the pipeline industry safety record is very good, the work group felt that in some cases, the regulations specify activities to control risks that do not exist in certain locations or that are not the most effective methods for controlling the risks that do exist. Yet in other cases, regulations may not address risks that are very real.

Risk management would seek to address these situations. This would result in improved safety through better risk control decisions.

Within this context, the work group felt that performance measures need to address the following four questions: does risk management result in a greater safety, a greater environmental protection and a greater service reliability than would otherwise be achieved through compliance with safety regulations?

Are resources being better prioritized, and are resources more effectively applied under risk management? Have agency and industry involvement in the discussion of risks and risk control options and the agency and industry's ability to impact desired outcomes increased under risk management?

The acceptability of a project will depend on its potential to achieve superior public safety, environmental protection, and other factors. For these proposals, relevant project-specific measures need to be established for the portion of the system under risk management.

These measures, sometimes called local measures, will be included as part of the operator's application for consideration, review and approval by the project review team prior to acceptance into the risk management demonstration program.

Selection of these project-specific performance measures will depend on the expected outcomes of the risk management project and should reflect the selected risk control activities.

As presented in the risk management program standard, the following criteria were defined for project-specific measures: supports the intent of the risk management initiative in achieving superior safety; be relevant to the risk control decisions being made in each proposed application, and track their short-term and long-term effectiveness; document starting conditions, either through historical data, current physical data, new test data or comparison with similar segments; establish expected outcomes from risk control decisions in the form of discreet values or ranges for each measure; and enable auditing, monitoring and documentation of performance.

Additional criteria that an operator might consider in the selection of performance measures include the availability of data, the cost of data collection, the perceived reliability of the measure, the consistency of interpretation, and the ability to adequately quantify the measures.

Any operator who becomes a participant in the risk management program would be expected to provide general measures. These general measures are called program-wide measures and are intended as a common basis for the overall assessment of the success of the risk management demonstration program.

They are designed to monitor the anticipated benefits of the risk control decisions as well as unintended or unexpected outcomes.

Program-wide measures will provide an aggregate representation of all participants in the demonstration program measured against the risk management objectives. These measures would be common to all participants and supplemented through the periodic surveying of regulators, operators, and other stakeholders.

As I mentioned earlier, the program-wide measures must address the following three areas and associated questions: safety and reliability. Does risk management result in greater safety, environmental protection and service reliability than would otherwise be achieved through compliance with the safety regulations?

Resource effectiveness. Are resources being better prioritized and more effectively applied under risk management?

Communication and partnership. Have agency and industry involvement in the discussion of risks and risk control options and the agency and industry's ability to impact desired outcomes increased under risk management?

At this point, before turning the podium over to Don Stursma to discuss these program-wide measures in more detail, I would like to quickly summarize some of the major messages that I have tried to develop in this discussion.

The guidance on performance measures is intended to be a beginning step with refinement expected, both in modifications to the proposed measures and addition of new measures.

Performance measures are needed to evaluate the acceptability of an individual demonstration project and the effectiveness of risk management as a regulatory alternative.

Performance measures are of two types. First, project-specific measures, which are included in the operator's proposal, negotiated and approved by the project review team. Second, program-wide measures which an operator would be expected to provide, regardless of the scope of its project.

In closing, I want to thank you for your time and attention. I will now turn the program over to another member of the Performance Measures Work Group, Don Stursma.

MR. STURSMA: Thank you, Ivan.

Before I get into my official text here, I have a public service announcement. Because we're running a little long, after my speech, we will be taking our break, close to on time but a little earlier in the schedule than what we had proposed.

Now, as Ivan mentioned, the major focus of my discussion will be the program-wide measures, although I have also some remarks on local measures, and, in addition, while I agreed to do this presentation, I did not write it. It is written for me in officialese, and it's not always easy to follow, so I will occasionally be offering some English translations of the content.

Okay. First, program-wide measures are intended to answer the following three questions. First: does risk management result in superior safety, environmental protection, and service reliability than would otherwise be achieved through compliance with the safety regulations? Does risk management offer improved performance?

Second: are resources being better prioritized and more effectively applied under risk management? Do we have increased efficiency?

And third: has agency and industry involvement in the discussion of risk and risk control options and the agency and industry's ability to impact desired outcomes increased under risk management? Do we have better industry-government cooperation?

I'm getting behind on my slides here. Will it flick? No. There it goes.

Within the first question, safety means the protection of the public, the environment and property, and risk is a measure of the threats to that protection.

Reliability is the degree to which service to customers is free from disruptions, considering not only the frequency and duration of disruption but also its impact and significance.

The performance measures that address the first question, which was improved performance, fall under the following categories: incident measures. These are the one of the traditional measures of the performance of the pipeline industry, includes deaths, injuries, number of releases, amount of property damage, and amount of product released.

The Office of Pipeline Safety hasn't in the past taken data on environmental impacts and environmental damages, but to the extent that data is available, that could also be considered an incident measure.

Now, these measures would be expected to decrease under risk management. However, the group recognizes that because pipeline incidents are relatively rare, statistically significant trends are not expected to emerge in the four-year demonstration projects. Quite frankly, if the industry does well enough that -- we just don't expect that there's going to be enough incidents to truly establish any trends of significance. That's good for the industry, not good for statistics.

Risk awareness. These measures will show the identification of new and previously-unrecognized hazards and consequences, along with an evaluation of their significance, including low-probability/high- consequence events.

In response to the increased emphasis on risk identification and assessment, it is expected that these measures will increase under risk management. Translation: by thinking risk instead of code compliance, are potential problems found that were not recognized before?

Public customer service measures will show changes in complaints about safety or environmental issues. Many public complaints will have nothing to do with safety issues. They involve rates. They involve right-of-way disputes.

We have identified specific criteria for considering data in these measures. Data that relates only to impacts on safety or environmental protection.

Such a measure would be expected to decrease under risk management regulatory alternatives since more meaningful dialogue should be occurring between operators, stakeholders and regulators, resulting in better appreciation of local concerns.

Overall communication, whether positive or negative, is expected to increase. Short version: do public and company get along better, and do public relations improve?

Operator-customer service measures would capture any significant disruptions caused by system upsets, lost production, product outages, curtailment of customer service, or other disruptive loss of service.

Planned service interruptions, like maintenance, typically do not result in disruptive loss of service and are not included in this measure.

These measures are expected to decrease under risk management. Short version: we expect fewer problems for customers.

At this point, I would note the group's recognition that measures based on incident releases are primarily across industry. For example, large-scale risk-related measures include frequency and severity of incidents, percentage or amount of spilled product recovered, likelihood of number of casualties per release, extent of environmental damage per release incident, number of customers or end users affected, cost of lost delivery per release, including penalties, and other measures specific to risk-control decisions.

On smaller scales, such as for these portions of the pipeline systems involved in the demonstration project, the rarity of such events may limit effective performance measurement. Therefore, other types of measures, such as pre-cursors or anticipative events, are needed for these smaller-scale measures.

Now, a pre-cursor is a word for a condition which, if not corrected, could eventually lead to a failure, release or at least a service interruption. Example: you check the oil in your car, oil is low, that's a pre-cursor of engine failure. But again it's not a big deal, just like 90 percent of the stuff that you deal with in the pipeline industry. You put in a quart of oil, and you go on your way.

If you keep track of how often you have to add that oil, you've got a performance measure. It tells you something about the condition of your system, the condition of your engine.

Pre-cursor data will also be available from existing operating or maintenance records kept -- that you already have, that you've been keeping for years under regulations or under your own initiative. Analysis of this information might be used to establish the starting conditions of the system or to look for previously-unrecognized problems or opportunities.

Now, -- what was that? There we go. Examples of pre-cursor events in your -- by the pipelines would be inoperable valves, set point drift and pressure control devices, abnormal cathodic protection readings, encroachments on to the right-of-way, customer service difficulties.

Now, pre-cursors, like other performance measures, are not necessarily static conditions. The data may show trends in which case the success of risk management would be measured by other -- by whether favorable trends are encouraged or undesirable trends are reversed. Performance would not be measured by comparison to the status quo. Example: if two years ago, I was putting a quart of oil in my car every 2,000 miles, last year, it was every thousand miles, this year it's every 500 miles, I've established a trend. It should be telling me something. Like it's time for a new pick-up, you know.

Also, normal variations or fluctuations must be considered. If the frequency of event shifts, is it a pre-cursor of a failure or is it within the normal frequency variation? For example, if it said that the average frequency of a pre-cursor is four per year, and the first year under risk management demonstration project, the frequency is eight, it could be interpreted as a hundred percent increase and cause for alarm.

However, if the operator can show that the normal range for this event is two to 12 times a year, then your level of concern drops. Your measures need to be able to recognize if shifts or variations are significant or not.

If I normally add a quart of oil every 2,000 miles, I look back and say, hey, last month, I added a quart of oil every 500 miles, well, that's the month I went on vacation and went out to the lake. I was pulling a bass boat. I had, you know, 20 cases of beer in the back of it, you know. It used a little bit more oil, and there's a reason for it. You have to understand what your -- what your normal ranges are.

Moving to the second question that we're attempting to address, are resources being better prioritized and more effective applied under risk management, that is increased efficiency.

The performance measures are intended to provide operators with information on the degree of improvement made by use of customer resources for risk management. For regulators, these measures would include information on the degree to which the regulatory process has become more effective and efficient.

Performance measures of resource effectiveness will probably include many indirect metrics which contain better assumptions. For example, if the demonstration projects seek to expand the scope of their project, either through adding more of their system to the project or trying more alternatives to regulations, we can conclude that risk management is an effective way to allocate resources since operators always act in their own best interests.

With that as an introduction, the resource effectiveness performance measures fall into the following categories: Number 1 is level of participation.

Level of participation measures the number of demonstration participants, the fraction of an operator's system included in the demonstration project, number of letters of intent, and survey of participants to determine whether they intend to use risk management again or to expand the scope of their present project.

It's expected that the first three measures will increase if risk management is successful. Short version: success can be measured by how many operators want to use the method, and by how much existing operators want to use the method more.

Operator resources -- operator resources and innovation measures determine the number of new technologies, alternative methodologies, innovative approaches, and new risk control activities used by participants.

These measures would be expected to increase if risk management is effective. The short version: if the regulations have truly inhibited innovation and new technology, we should start seeing some new ideas being used. If the regulations save if your oil is low, you add a quart, if it gets too bad, you rebuild the engine, you say, well, that's what the regulations say, but I'd like to try an oil additive, I'd like to see if some Slick 50 solves my problems, do something new and innovative, although my experience with oil additives doesn't make that a particularly good example.

Regulator resources and innovation measures help track the federal and state resources necessary to implement risk management. These include the staffing needed to monitor the program, number of inspection days, number of reviewing monitoring days and number of rulemakings or risk management considerations were an influencing factor.

If the demonstration project is successful, the first three measures would be expected to decrease over the long term, although regulator level of effort may increase in the short term, until regulators determine whether they're confident in risk management as an alternative.

The last measure, risk management-based justification for new and amended regulations, would be expected to increase. Short version of all this is what is the impact of risk management on the regulatory workload and/or processes?

The third question, which had to do with better government-industry cooperation. Has agency and industry involvement in the discussion of risk and risk control options and the agency and industry's ability to impact desired outcomes increased under risk management?

The proposed performance measures are intended to address communication among regulators, operators and other stakeholders to determine risk management's effectiveness in promoting mutual under-standing of and involvement in the identification of risk and risk control activities.

With that as an introduction, -- I'm one ahead here. With that as an introduction, the performance measure developed for this communication effectiveness question fall into the following categories: mutual understanding of risk, communication, and stakeholder involvement.

Now, program-wide performance measures are needed by the Office of Pipeline Safety to ultimately prepare a report to Congress describing the results of the risk management demonstration project, and we expect that others besides Congress will be quite interested in a report on the success of the risk management regulatory alternative.

We expect this report to address the effects of each individual project and provide an overall recommendation on the application of risk management. Now, the guidance document is intended to provide participants in the risk management demonstration project with an initial set of measures to be incorporated into each of their project proposals and plans.

However, we expect these performance measures will be refined and modified as experience is gained from the approved risk management demonstration projects.

To really help all participants prepare for the final report, as well as support the validation of the measures and provide guidance to companies considering risk management, it is expected that the Office of Pipeline Safety, a successor to the existing performance measure work group, and operators participating in the demonstration projects will jointly prepare interim annual progress reports.

These reports would describe the adequacy of the current set of measures, provide specific examples of risk control activities and their outcomes, and hopefully establish an evolving measure of the effectiveness of risk management.

This report will be provided to the joint risk assessment quality team participants for their consideration in refining and evaluating the overall risk management program.

Now, to conclude with this summary, the performance measures -- is that the right one? The performance measures and associated survey recommendations are a beginning that will be refined during the course of the demonstration projects.

We propose that a successor group to the existing performance measures work group be established to support the refinement of these measures. Member- ship in this work group would include representation of those companies participating in the risk management demonstration process.

We expect that the successor work group will prepare yearly interim reports to help gain a better understanding of both the effectiveness of the measures, the effectiveness of risk management as an -- and the effectiveness of risk management as an alternative to the current regulatory environment.

And before I conclude, for my friends from other state agencies who think that my participation on these panels means I've sold out to the enemy, let me add that states can effectively participate in risk management initiatives only if the core inspection and enforcement -- if the core inspection and enforcement programs are sound. That means adequately funded.

Therefore, I'm sure that everybody in this room will support adequate appropriations for the state pipeline safety grant program.

Now that I've made sure OPS will never let me near a microphone again, thank you for your attention. I understand we're going to take a break.

Stacey, will you announce how long, and we'll welcome any follow-up questions or comments later during our question and answer period.

MR. FELDER: Well, there is no question in my mind that Don Stursma is a human performance measure for this program because when I get up here --

(Applause)

MR. FELDER: -- and share the podium with him and see the kind of job that he's done on the performance measurement team, I know that we're making progress.

We are somewhat on schedule, and we will take a break. I want to emphasize to you, I'm sure as during the break you're going to be thinking hard about questions, about what you've heard, and about how we're going to spend the balance of the morning, the reason that we are holding questions is because we honestly believe that this set of building blocks is an integrated group of ideas and integrated group of activities, and I think you really need to hear all of it before framing your questions.

I want to mention quickly when Denise was up there, you saw that she was not talking about a technical standard; she was talking about a program standard.

When you heard performance measures described, I think Don was very helpful in giving us some personal examples of performance measures. When we talked about the framework, that's a document that we were somewhat familiar with and a process that we all understand fairly well.

But I know as I spoke to people this morning, many were saying, well, we're dealing with these ethereal concepts. We're dealing with things that we can't quite get our hands on, but try and keep in mind that we're doing what Denise was talking about as she discussed the standard.

We're trying to stay away from things that are prescriptive. We're trying to set up a framework, a guidance, a standard, that companies can use, that regulators can use, that can be interactive, so that we capture the very important goal of being able to reallocate resources in particular circumstances.

Okay. We're going to take a break. We're going to come back here at 25 minutes after the hour, and at that time, we will resume with Richard Sanders.

(Whereupon, a recess was taken.)

MR. FELDER: Okay. Let's all sit down. We're going to get -- get ourselves back on schedule, resuming our panel presentation.

Next up, talking about the Communications Plan, is Stacey Gerard.

Communications Plan

MS. GERARD: Come on, Tenley, step it up. I see you, George.

We've been talking about communications in the Joint RAQT for a number of months. It was sort of a late-bloomer in the building block department. We were pretty much talking about communications between the people who were going to be involved in the risk management demonstration. We called it the vertical slice concept.

We felt that in terms of rolling out communications, that we couldn't bring everybody up to the same level all at once. So, we would focus on the states that were going to have projects that would affect their state, and the companies who were interested in doing it, and our folks and so on.

Until we started getting some comments on the framework, and one of the people who commented is a member of our technical advisory committee, Lois Epstein, from the Environmental Defense Fund. She spent some time giving us some comments about her view of what meaningful public involvement meant, and after listening to Lois, we decided that we needed to have a different focus for our communications plan, and that it couldn't be just an internal plan that told everybody, you know, what we were trying to do, but that we needed to go to the outside world with our values and say this is what's important to us, and we really mean it, and we encourage you to communicate with us, and we're going to make it a lot clearer what the feedback loops are.

We call the stage of development that we're concluding today the program development stage. Up until this point in time, there have been a number of what we consider public communications via public meetings and Federal Register notices and our Internet home page, and I think Kelley mentioned earlier some of the national organizations that we've talked to, like the National Governors Association, National League of Cities, International Association of Fire Chiefs.

We can call those public communications, but we came up with a concept, actually it was a Gary Zimmerman concept, to call this, the other thing we really need to do better, focused communications, much more focused communication on the areas that can be affected by a demonstration project.

To date, we have been identifying national organizations that can point us to local representatives, when we select demonstration areas, to find the local representatives from that particular interest area that would want to be involved, and, so far, every organization that we've gone to has surprisingly been quite interested in starting to identify people at the local level when we can give them more specifics.

I think many of you would have received the risk management newsletters that we started putting out a few months ago, and by virtue of signing in and getting a book today, you got added to the mailing list, if you haven't gotten a newsletter in the past, and, of course, we are committed to doing briefings in the future.

We'll be working on a communications plan to identify what -- what will be a meaningful way for us to do briefings on the -- in the future on progress.

Okay. Can somebody pull up the next slide?

(Pause)

MS. GERARD: John, are you back there pulling the strings? Thank you.

Okay. Okay. Moving into the future, we're in the implementation stage. We talked about how important the letter of intent is. The letter of intent takes on an additional meaning in our communications plan because this is how we'll really begin the focused communications.

OPS Headquarters will take on the responsibility of summarizing the letter of intent and developing something, for lack of a better word, we're calling a prospectus, a brochure, that we will distribute to local officials that have been identified at the national level or that the company identifies who want information on what is the concept of the projects that we're going to begin talking about? Who are the companies? What are their objectives? What are the different alternatives that they're considering? What kind of a communications plan do they have or program do they have that they might be building on?

That's the kind of information that would be in the letter of intent, and we are proposing that we will distribute a prospectus on each demonstration project with that information in it and three points of contact, if we can get three points of contact. At least one at OPS Headquarters, one in the company, and if the affected state agrees and wants to be a point of contact for local officials to come to with questions or comments.

We heard very strongly that it was important to have a feedback loop, that our framework notice wasn't clear enough about how information came back in. So, information, comments, questions about the company, company's objectives, the alternatives they're looking at, communications, and if they have any idea on performance metrics at that point. We would put this in the prospectus and mail it out.

Some people have said isn't that a little premature? You won't really know that much. You won't even have talked to the company. We think it's a very important way to identify information that local people are concerned that we know about and are considering. That's the purpose, and we have heard that if we have a very aggressive program, and we are -- go forward with this type of approach early on, that it's a lot smarter way of getting people to have a good attitude about what's going on in the demonstration project.

We also will have a Federal Register notice that says the same information. So, that is the public communication, and the prospectus is the focused communication. Plus, we'll continue to brief those national organizations I mentioned earlier.

Information that comes back, questions, comments, will feed into the pre-consultation and the consultative process. As information evolves as a result of the back and forth and the negotiation, we may have additional information, we might provide an update prospectus, still in the consultative stage. We're not at the approval stage. We're keeping people posted on what's going on.

The time of the formal application. That is the document that is on the public record. The issues from the consultation have hopefully been resolved and rolled up. No surprises. We know about scope. We know about application. We know about performance measures. We know about program. It's all in the application. The application is the public document. It's on the docket. People can come see that document.

When the projects are approved, we issue another Federal Register notice saying they have been approved.

Monitoring will be going on for a long time. We know that we'll have an aggressive communications program. What the shape is, whether we do regional meetings instead of this type of meeting, we have a commitment to work that sort of thing out. We'll have input from the company. We'll have input from the state.

This communications plan is the youngest of our building blocks. It's a work-in-progress. We expect to hear comments and questions about this after this panel presentation, and, so, this is a work-in-progress. What we're talking about right now is a plan, and the plan is going to mature and evolve.

Should, for whatever reason, the program terminate early or upon conclusion, you heard the performance measures team representatives talk about an annual report or an annual briefing. That's the type of update information that we would be concerned about getting out at some point during the project.

Again, keeping the different levels, the national level, the state level, and the local level, keeping them informed about how it's going. It's a big commitment to outreach. It's a lot more of a commitment than we've ever made, and we're making this commitment because we're coming to understand how important it is for projects of this type to be successful.

That is the process that you're going to see talked about and dramatically enacted this afternoon. You've dealt with, you know, most of the building blocks. Richard's going to talk about training in a minute.

Just to reiterate, what we've understood is that we need to have a more aggressive communications program, to have local information identified that we may not have been aware, to validate that we're considering the right factors, and to receive feedback during the life of the project, that it is in fact accomplishing the goals, and representatives at the local level feel that that is something that they need to do.

So, the objectives of our communication plan are to inform and to educate, to provide for well-informed participants out there, and to be able to exchange information, and to repeat, the type of information we're talking about is the demonstration projects' objective, its scope, the different types of applications being considered, the types of communication from the company, who we are, how you contact us, and the general means of communicating back and forth.

That's -- that's all I'll say about communications, and at the conclusion of the panel, I expect there will be a number of comments and questions on that.

Training Outline

MR. SANDERS: Let's turn our attention to the training phase. For those of us that are involved in the training, we consider ourselves neophytes at this point in time, being that the training cannot evolve until some of these other building blocks that we've got scheduled come together.

From that, we'll develop the building blocks specific to go forward into the demonstrational program. So, early on, the training that will be designed and aimed towards those industry and federal and state people that will be involved in the program itself.

So, there will be some head start-type programs set up, trying to make sure that we're on target with our training program.

Transportation Safety Institute, some of you have heard the name, or TSI, some I know are familiar with us, but we're the training arm within the Government itself, but it needs to be pointed out that the contractors and their subcontractors are very active in the development phase of this training.

We're there to make sure that the lesson plans, class design documents and that type material is provided for the courses itself. So, we're heavily depending on our contractors to make sure that we get the subject and materials together as needed.

Also, within this, we're going to be looking at fundamentals of risk management to bring our people up to speed. Also, being sure that we address and meet the requirements that are covered under the Act of the 1960 -- 1996 requirements.

Key roles is to be sure that we continue with this partnership with industry and the states and the Federal Government, to make sure that we're all on the same wavelength, and that the training meets the needs for each one of those entities as they see fit.

Within the training, we've envisioned about eight steps. If you will look in the packet of material that you've been provided today, you will find a more detailed breakdown on this. Certainly we hope that you will review it, make notes and certainly comment back to us if you see a training need that we've omitted or not included into this packet.

Under these five areas, we will try to develop the training in a modular format, so that depending on your specific needs, you might be able to break this material out, use it internally or certainly in a large body such as this.

The other questions that we're asking on the training phase, do we need to do it from a lecture standpoint, from a textbook, from a video, from a CBT, from an Internet training standpoint?

So, your input into those areas as to the way that we could provide that information is certainly a key issue to us.

The other thing that we anticipate is under those eight items that you're seeing, we probably will pick several of those up front, limiting the monitoring, modification and termination on the demonstration project to a later date as that -- that particular module evolves through some of the overview.

So, keep that in mind, that all eight of these may not occur simultaneously. They may be done again in the modular format.

Looking at the levels, it's our plan to look toward those individuals that have no background or limited backgrounds for training on this start-up, and as you would anticipate, we feel that the vast majority of the people going into the demonstration program are certainly not going to have backgrounds in all the areas that are required to get up to speed. So, that would be our initial plans.

Schedule for training. We anticipate somewhere around March 10th to get the head start program going. This will be an attempt to go through and make sure that we have addressed those issues, that we've got the right information, that we've accumulated the history that leads up to this program, so that there will be the understanding necessary for the people that participate, and also the road maps so that we will stay on track as we go along.

The materials. Key role. Again, we ask for your input as you review the material that you got here, certainly the slide presentations and other developed materials that will go into this program, we ask your input to make sure we covered and addressed those issues paramount to the risk management program.

So, if you have training needs, and we can meet those under the guidelines of the Act, by all means, give us the opportunity. Something that we've said time and time again when we talk with industry, regulatory and state people, is that many of us in the training end are out there doing the same thing, spending thousands of dollars, developing this same program.

It's time we get smart, join together in this partnership, develop it once, do it right, and provide it for the masses and move on to those very technical idiosyncrasies of our companies to spend our money.

With that in mind, we would hope that we're headed for a sunny future, along that railroad track that George, I've heard, talk about time and time again. We're headed out, government and industry at arm's length, but certainly we're in a partnership that we can make this training and this program work.

So, with that, let me turn the program back over to Rich, so that we can get into our question and answer session.

MR. FELDER: Thank you, Richard.

First, before we get to our questions and answers, I'd like to recognize the panel. I think they deserve a warm round of applause.

(Applause)

Audience Questions and Comments

MR. FELDER: Thank you, all.

Questions, we can take at the mikes. We can also take written questions, passed up along the way. I have one written one here, which I'll note and attempt to address as people prepare themselves.

This was actually a -- this is a liability question. I know there are a lot of questions about liability, and some of these issues, I think, we'll explore this afternoon in the prototypes, but the -- the issue really goes to whether someone under a demonstration -- that's involved in a demonstration project have the federal preemption of state regulation would operate, and I want to emphasize that participation in the demo project is not an exemption from the statute as a whole. It's simply a commitment to abide under those regulations according to the terms of the project.

The underlying regulations that would otherwise apply would not apply to the segment or the project. What would apply would be the project itself. So, if someone is wanting to measure whether or not a company is in compliance, they would be looking at compliance with the project. Within the project, they'll be looking at compliance with the plan, with the program.

So, there's -- there's no -- there's not a double standard there. I know there are some voluntary government programs which have had difficulty in the past. A number of them have not been statutory, where the company has been not only required to be in compliance with its plan, but also with all other regulations.

The idea here is to create an alternative on the assumption that the up-front process has assured certainly at the outset a superior level of safety, and, certainly as the statute says, equals or exceeds what you would have had under minimum federal standards.

There should be no problem from the public's perspective if the company is in compliance with its plan as opposed to being in compliance with the under-lying regulations.

Questions, comments, on any of the building blocks?

MR. RACKLEFF: I have some comments that I want to make very briefly, please.

My name is Bob Rackleff. I'm here as a consultant to the Environmental Defense Fund, and I'm here on behalf of myself, and my comments are directed to the portion of the risk management demonstration project that pertains to hazardous liquid pipelines. That's our primary concern.

The -- President Clinton, when he signed the bill, directed the Office of Pipeline Safety to include full and meaningful participation by affected communities and constituencies beyond formal notice and comment, and included participation in project approvals.

He also directed limiting the participation to operators with clear and established records of compliance.

You have -- the Office of Pipeline Safety has said they -- that it expects risk management to provide better accountability for safety and environmental protection, and better basis to communicate with the public.

This risk management plan that I've read achieves none of these objectives. Let me center on two weaknesses.

The first, the lack of adequate data and lack of understanding of the actual risk of liquid pipeline accidents.

Two, the failure to communicate directly with the public. I'll explain this in some brief detail.

First, the problem -- the data problem. The most fundamental failure of this plan, and in fact has been of the Office of Pipeline Safety program over the years, is it's largely inadequate and ultimately useless data.

This has been pointed out in recent years by the National Transportation Safety Board, the National Research Council, the New Jersey Institute of Technology, and others.

The OPS data is on only a fraction of the accidents that actually happen to liquid pipelines because of the reporting requirements that are quite loose.

The problem is the data probably cover only one out of every 10 leaks and spills, and what data it does have tells very little about causes, consequences and risk factors.

Let me also add that the OPS at this point has no map that shows the location of all liquid pipe-lines in the United States.

Because of this, you propose to embark on risk management demonstration projects without the knowledge of the actual level of leaks and spills in the industry or the leaks and spills by the individual companies, lack of knowledge about actual risk factors involved, lack of knowledge about the environmental damage caused by liquid pipeline accidents, and its potential for future damage.

There is therefore no baseline. So, what would be the basis for saying that a company does or does not have superior performance? Superior compared to what?

The result is that we're going to have a risk management program in which we don't know the risk.

Let me address public involvement. In the plan for public involvement, full and meaningful public participation has evolved to numerous lofty goals, (b) a communication plan that's one-way only, obscure, and the antithesis of public disclosure, and (c) a plan to involve the affected public which will serve only to shut out public involvement.

Let me quote from part of the Communication Plan. "The operator is responsible for active communication with state and local officials regarding risk management." Not OPS, the operators. Such a dialogue would enable and -- and further it says, "Such a dialogue would enable local officials to reassure the public that an appropriate regulatory presence is in place and how the overall safety and environmental protection are enhanced by risk management."

In other words, the public needs only to be reassured that what is going to happen to projects that affect their communities is being done on a sound basis, that the only communication that's needed is one-way, and that the Office of Pipeline Safety has no need to learn from the public.

I'm coming to closure very quickly, I hope. Please don't get nervous.

Now, when it does choose to communicate, the OPS proposes to do it through the Federal Register. I should point out that there's been no -- the most recent annual report of pipeline safety by the Office of Pipeline Safety is 1992.

The remainder of the Communication Plan is to rely on operators themselves or to let the states do it. Well, I live in a state, and there are 38 states in this country that have no state liquids pipeline program. So, who is supposed to communicate to us, and who are we supposed to communicate to?

The extent of consultation with local governments and publics is that we can go to our state officials, and in the case of 38 states, there aren't any officials who have expertise about liquid pipelines, who will tell our -- whom we will tell our concerns to and expect them to relay them to OPS.

You also propose to communicate with a few national organizations. Let me remind you that pipeline accidents and spills do not victimize state agencies. They do not victimize national organizations. They victimize communities, and these communities affected by these demonstration projects deserve full communications and full participation. It has to be two ways.

Let me propose some changes. First, gather data -- the OPS should gather data that's comprehensive and accurate about the operation of hazardous liquid pipelines and determine actual risk factors.

The California State Fire Marshal's Office did this a few years ago with its risk assessment project and which does provide a baseline of knowledge for pipelines in California, but that's only one of 49 states.

Gather data that allows comparisons of the safety records and environmental records of the companies that are applying to -- for these demonstration projects.

Third, full disclosure and public access to accident data that allow analysis by affected communities and independent experts.

And I might add there another request for you all to begin -- for the Office of Pipeline Safety to issue a -- to get up-to-date on its annual reports on pipeline safety.

Fourth, full disclosure and public access to all data submitted in an application for risk management demonstration projects.

The current plan allows for summaries and dockets that will be in some distant location in Washington, D.C., and which most local communities simply will not have access to.

Fifth, public hearings in or near affected communities affected by these demonstration projects, and, sixth, meetings for consultations and approval that will be open to the public and to the affected public.

Now, if you do this, you will have a risk management program that begins to accomplish its purposes of protecting public safety and the environment.

Thank you very much.

MR. FELDER: Thank you, Bob.

I think I -- I might start myself on -- on some of the areas that you've remarked on.

One of the reasons that we're here is -- is not to look at the past operation of -- of the Office of Pipeline Safety, which as recently as three-four years ago had single-digit budgets, had numbers of employees half of what we have today, had inadequate funding of state pipeline safety programs.

It's very, very easy to look back and talk about something that was small and something that was

-- did not have the scope or the goals of today's program and say that that type of program is not in a position to do the kinds of things we're talking about today. I couldn't agree with you more.

If we were talking about using that kind of a structure and the kinds of information that we were gathering then, we would never be standing here today after three -- after three public meetings about to launch a program and have -- and have our wits about us or any chance of success.

On the other hand, what we've tried to do here today is identify new pathways to get us to the kinds of information that we need to have an adequate database, to look at local conditions, look at broader national trends.

We don't think that we're going to have difficulty putting together that kind of data. I don't think that the past is an indicator of where we're going in the future as far as this initiative is concerned.

On the communications side, if you take a look at the package of -- of materials that we've put together, and we've been through this on a number of occasions, the idea is not for the government officials to take responsibility for everything. The President doesn't want it. The Secretary of Transportation doesn't want it. I don't want it, and the American people don't want it.

What they want is a partnership with their government, and at some point, it's important to under-stand that the people who run companies and the industries that we regulate as many of the companies that I've been involved with over the years in different other forms of regulation, they are also citizens of the country. They have a great stake in the outcome of the work they do each day, and a great stake in the outcome of the communities that they affect, and that is why we are enlisting their resources as part of the public outreach process.

It is a partnership, and it's important to embrace these concepts because if we're relying on the idea that we need one government employee to tuck us each into bed at night, we're simply not going to get where we need to go. We need a partnership between the states, the industry and the federal regulators to get us where we need to go in this type of an enterprise.

Also, this is a demonstration project. We're not claiming that we're in a perfect position to accomplish all of these goals in the first year, the second year, the third year. Perhaps when we get to the fourth year, we still may not have succeeded. We will write a report to the Congress and talk about what we have or have not accomplished.

In addition, we are not extending the demonstration programs to every company in the industry. The President has said, and we intend on limiting ourselves to a maximum of 10 companies, something we think that we can do effectively, something we think we can do responsibly.

I mean I think some of the other areas are not as critical for our program here today, but those who follow the activities of the Office of Pipeline Safety know that we're involved in a multi-year project to put together a national map of pipelines. No one has ever had those maps.

On the other hand, each company has a map of its pipelines. There are maps and records requirements. We oversee that activity. They're fully available to us, and as we roll this out, in fact, in participation with our state and local officials, putting together that map, that very information that Bob has said is not available will become more universally available, and we, too, understand that some of the data that we have is -- is insufficient, and we've worked with the Safety Board on that -- on those issues.

So, you know, we would hope that we won't carp on problems that we've had in the past in a variety of areas, but -- but, instead, identify some of the ways that we can move into the future together, and the national organizations that we are working with are not just people who sit in Washington and talk with each other.

The reason that we've gone to the national organizations, and I've spent one or two days a week in the past couple of weeks talking personally with each of these organizations, is that they've got people in every community in America.

We went out to talk to the National Fire Chiefs group because the fire chiefs are in our communities. We understand that in Washington, we don't have the opportunity to deal directly with people the way we would like to. So, we've engaged in this extraordinary outreach, which is going to get us down to the local community level. We intend to be there, and we will be there.

Panel?

MS. GERARD: Just a couple of points of clarification because obviously there's a number of comments that, you know, we accept as fully valid, but there are a couple of comments that maybe we can respond to with a little bit of illumination.

We accept the fact that we have to engage in an unprecedented outreach effort from the Office of Pipeline Safety. While the Communications Plan does talk about responsibilities that the company has, we have also talked throughout our organization about the best way to take on the level of effort in communications that is required for this project, and we've decided to handle it from headquarters.

We are talking about producing a lot of information that is focused locally. That's the document that we call the prospectus. We are looking to get help in building a mailing list of officials at the local level who are points of contact into the community.

We've talked about the fire chiefs. We've talked about the -- the town manager. We've talked about the state legislature. We've talked about the governor. We've talked about a number of entities, but that is just a beginning for us, and it is something that we believe in OPS we do need to take responsibility for.

We don't feel that one contact at the state level, if the state decides they want to take on that role, would be enough. We believe we need three contacts at the state level, at the company level, and in OPS to be able to provide answers and a dialogue with people from the local community who have questions and comments that they want to make, and we're committed and are setting aside the resources to do that, and it is an unprecedented effort. We've never done anything like this before.

We've said that in terms of public meetings in the future, that at least a regional concept is something that we're open to, and this is something that we'll discuss, and we'll certainly consider the need to have a different type of communications style in terms of public meetings like this.

On the point about access to maps, it certainly is an issue we've been discussing, but just to set the record straight on that, the Office of Pipeline Safety does have access to a commercial database of the liquid pipelines. It's not what we consider good enough, and we do have a mapping team working on a national pipeline mapping standard that would include content information and the meta data standard that we need to have to get digital information over a period of time, so that we can exchange pipeline location information with other databases on water, population, road infrastructure and that sort of thing.

I think those are the comments I want to make. The -- the performance measures team used to be called the baseline team, and we eliminated the word "baseline" from the title of that team because we knew we didn't have one and weren't about to get one, but we sure are working hard at least on the company level to be able to identify the kind of information that we can use to track improvements.

MS. HAMSHER: Let me just comment and maybe supplement the responses that you made on the issue of communications.

Both as the chair and the co-chair of the standards group, and also one of the only industry representatives up here, I want to point out that one of the things that we -- that we are trying to emphasize in the standard on the Communication Plan that needs to be developed by the company is a two-way communication plan.

So, the comment suggested that this is a lot of information that's given to the public. Quite the contrary. We are challenging ourselves in a volunteer demonstration project as well as outside the particular topic of today. I think the industry is challenging itself with a much more pro-active means of communication.

So, it's there. I think as we go forward with the letters of intent and consultation, the project review teams will -- will oversee and comment on the thoroughness of that two-way communication at the local level.

The other challenge, while saying that, I think the other challenge that we face in pipeline companies is that we're a long-distance facility. It is very difficult to capture the public short of new facilities or a terminal that -- that have the interest and concern to sit at the table and learn enough about complex issues, to work through these.

We tend as a -- as companies to resort to the representative form of government, the local officials and fire departments, and we suggest that they often represent community interests and really grope with a difficult process in getting face-to-face communications on issues of pipeline safety that can be complex, and unless the tempo is raised by the public, which it might be new facilities or after an accident, it's a challenge to do that.

But I think that we ask people to try to meet that challenge in the standard by developing a two-way dialogue.

MS. GERARD: I'd like to ask a question back of Mr. Rackleff just to get some reaction to a couple of ideas that we've had batted around and not really landed on yet involving use of new technologies, and that would be, would it be helpful to have an Internet page with a -- a screen devoted to each of the projects which would provide the type of information on progress with the project, more or less on a real time basis, as we become aware of it, whether you think that use of an Internet page is something that, you know, over the next few years, that people will come to accept as a means of communication, and then another idea that we had talked about was the idea of hosting two-way audio-visual teleconferences from project sites, so that if there are a lot of people that are interested in having communications, that they could have like a two-way video dialogue.

As Denise said, we are talking about a lot of geography here, but we could set up sites in a variety of areas along the line that people could go to to interact in a two-way audio-visual teleconference.

MR. RACKLEFF: First of all, I don't want to take everybody's time, and I'd be glad to discuss this in more detail with -- with you afterwards or in some other means.

But, yes, I think it's a very useful start, what you describe. The only -- and -- but I -- I have tried to use -- to access your Web page, and it's very difficult to find, and unless you're a computer expert, and one of those people who -- rare people who has that kind of talent, it's -- it's not easy to find out.

The teleconferences, I think, are another way to use technology and would be useful as well.

But let me -- let me just remind you that a lot of the communities affected are not very sophisticated. They're isolated. They tend to be -- to be out of that kind of loop. They need a more direct kind of communication.

I -- I can -- my reference would be -- for you would be to look at what some states do when they want to inform the public about changes to their growth management plans and zoning plans and the kind of requirements that they expect local governments and applicants to follow in informing the public, and that usually is more traditional media, like newspapers and television, and -- and public hearings on the site.

Thank you.

MR. MOSINSKIS: I'm George Mosinskis. I represent Pacific Offshore Pipeline Company and the Southern California Gas Company.

I have a couple of questions. One is related to the framework. Are the letters of intent public documents in a docket? In other words, will the public be given an opportunity to review the exact text of the letters of intent or, Stacey, you had mentioned that the letter -- that the formal applications will be in the docket.

Will the letters of intent be in the docket?

MR. FELDER: Yes. Both of those documents will be there for people to examine.

MR. MOSINSKIS: Okay. The other question I had was, will screening be an interactive process with the candidate or will there be just a one-way process whereby a candidate will be notified that they've been accepted or denied?

MR. FELDER: No. There will be lots of consultation.

MR. MOSINSKIS: Okay. So, in other words, it's a negotiated process, and that's kind of what I'm trying to get at.

In these documents, it's not really very clear that this whole process is a negotiated process. In a lot of the -- in a lot of the activities here, it appears that there's going to be a lot of negotiation, and in a way, I wanted to commend the agency for trying to build this partnership and to take a negotiated approach in this -- in this -- in this process, but I think it needs to be clarified in the documents that it is a negotiated process and at appropriate locations.

I'm sure there are locations or specific instances where there's a requirement that must be fulfilled without negotiation. For example, in interpretation, and we run into this all the time in connection with compliance, if there's a difference in interpretation between the -- the operators and the regulators during the risk management demonstration project, will there be a dispute resolution, and where will that be addressed?

MR. FELDER: Well, one thing that we want to emphasize is that we're not changing the ultimate responsibility for public safety, which does sit in the hands of the regulators.

So that we're going to have a very interactive process, but, ultimately, we're going to end up with the last word.

MS. GERARD: May I comment on that?

MR. FELDER: Yeah.

MS. GERARD: I think one thing that your comment means we have to clarify, George, is that in terms of the screening process, obviously there's a lot of information resident within OPS, and that we're actually collecting every day that sort of builds our knowledge about the company and what it's thinking about and what its commitment is like, and we have encouraged companies to invite us to come out to their headquarters to get to know better where they're at with this kind of process, and it isn't something that stops just with our planning for this meeting, that, you know, we hope we get invitations to come out and show you how we're thinking about it, and what some of these people are like who are involved, and to be able to bring more people from the company together, and we've done about 16 of these types of visits, and from what we've heard from our guys, Bruce and Beth and John and Patrick and others who have gone, it's been very educational for us, and we've heard good things from the company standpoint.

So, that kind of information doesn't go in a black hole somewhere. It's informing us all the time, and that kind of communication will be on-going.

In terms of the dispute resolution process, the project review team structure that we've alluded to kind of minimally so far this morning, you'll see a little bit more discussion about that in the dramatic enactment this afternoon.

The project review team is a new structure that we created to formalize the interactive process within OPS, between the regions and headquarters. It's a different kind of structure because this is a demonstration project, and we do want to assure policy continuity throughout the program.

So, the project review team would be populated by OPS office directors, their staff, supported by states who want to participate, and experts that we've brought on board, not to mention the local and state input that we expect to get as a result of this outreach program that we're engaged in.

So, you have a different kind of structure to bring more wise men and women together to deliberate on and to negotiate with each other and bring their partners along to a point of view.

So, it's a different process that should eliminate sort of black and white lines.

MS. LOWE: Good morning, and thank you for the opportunity to be here today.

My name is Janis Lowe, and I have three questions. One of the assembly, and two of you.

You referred to, Denise, industry representatives. Could I ask everyone here who's an industry representative to raise their hand?

(Show of hands)

MS. LOWE: Okay. Is there anyone here that is not industry representative but would represent the public participation that Denise is referring to?

(Show of hands)

MS. LOWE: Okay. There's five -- six, seven of us, and I would like -- eight, nine. I'd like to meet all of you -- 10 -- at lunch. I am Mayor Pro Tem in the City of Friendswood. That's in Texas, and we are lone rangers in regards to addressing this communication problem that we have with you all.

The meaningful public process is why I'm here today and representing my city, to tell you we have a problem, look at the numbers, the 10 of us raised our hand.

I could have brought more people to this meeting. We didn't know about it. Mr. Felder and I have played telephone basketball very effectively for a year, but I am here to ask you, Denise, in regards to Page 7 on the Communications, you have Item Number 4 that represents communication outreach, and you state there at the bottom of the paragraph that you are briefing national organizations representing the public and safety -- in other words, this is past tense, identifying local officials in the area of this coming demonstration project, and you further state on the page that you have used the governors association, I didn't have any lead-in there, and the National League of Cities, National Towns.

How did you use National League of Cities? Could I ask you specifically on what contacts OPS made with the National League?

MR. FELDER: Actually, you want to ask me because I had the meeting with them.

We went over to the National League of Cities. I went there along with other folks from the Office of Pipeline Safety. We had a representative from the gas industry. We had a representative from the liquid industry, so that they could answer questions that came up, and the -- the effort there was to familiarize the person who I -- who we spoke with was Cameron Whitman, and she sat with us for well over an hour.

We gave her a briefing on what we've done in the risk management area, what we were looking for in terms of public participation, enlisting her support in getting information out, using newsletter, using their periodic meeting, using whatever means they had at their disposal to get information out to their membership.

The idea is to try and create at as local a level as possible an awareness of this program so that those who are interested, and, you know, not everyone is -- I like to think we're doing the most interesting thing in the world, but not everyone is interested in pipeline safety, but that those who are interested will have a good baseline information on what the program is, so that they will be looking for the prospectuses. They'll be looking for the projects as they're announced to the public through these means, through as many means as possible, so if they want to become involved with the development of those projects and follow them over the four-year demonstration period, they'll be able to do so.

We got a very good reception there as we did with the fire chiefs, as we did with the governors, as we did with the -- the towns and cities, and we're going to continue to do that. I mean that's -- that's the process.

MS. LOWE: Can you tell me when you met with Cameron? What month last year or something?

MR. FELDER: I guess it was about --

MS. LOWE: Just some time frame.

MR. FELDER: -- three weeks ago.

MS. LOWE: About three weeks ago? Okay. If I could kind of maybe help you in trying to resource that, I just completed a year as vice chair of the Public Safety and Crime Prevention Committee, and we had an agenda item to write national policy in regards to emergency preparedness on the local level and disaster relief, and pipeline safety is a part of that national policy that we will present in March.

I would like to encourage you once again to utilize that resource. Now, you said you just did it three weeks ago. We had communications with you when the bill was signed in September because we were in process and in meeting in Daytona Beach when we contacted you about that, and we got a copy of the bill, and we were very excited about the fact that we had learned how to use you.

I would like to ask you on my second comment to use us. We have a pipeline -- excuse me -- a public safety and crime prevention committee, one of six of National League of Cities, representing across the nation 35 steering committee members. We meet twice a year. We will meet the first or second weekend of June, do not know the location, we will determine that in March.

Could I ask you all, please, to initiate a letter back to Cameron Whitman, to the pipeline safety -- do it again. I'm speaking on this meeting. Public Safety and Crime Prevention Committee, to address these issues with you, to help bring the awareness, so that our communities across the nation understand the resource of what you are trying to provide? That would be my second comment.

My third comment then, Denise, to you is, on these letters -- I mean -- sorry -- Stacey, these letters of intent that you're asking, can cities volunteer to be a demonstration project or are you only asking industry to come forward?

MS. GERARD: That would be an entirely new concept that we haven't considered yet. So far, we're talking about pipeline operators having a risk management program.

MS. LOWE: Okay. Well, I have 14 pipeline operators in my community with 31 pipelines, 17 of which are true liquid lines, 14 are HVLs.

MS. GERARD: You're talking about municipal pipelines?

MS. LOWE: Yes. I said are you -- our cities allowed to give you a letter of intent that we would like you to consider us for --

MS. GERARD: Not yet. So far, the scope of the project is limited to interstate gas, natural gas

MS. LOWE: We have some.

MS. GERARD: -- and hazard -- so far. So, if --

MS. LOWE: We have some.

MR. FELDER: Right. But the problem is --

MS. GERARD: Do you want to apply to do risk management or do you want to be on the project review team?

MS. LOWE: I want to participate with you to help bring awareness of the problem. My question specifically was letters of intent. I believe it's from the industry to say we'd like to be considered as a demonstration project.

To the reverse, may cities ask you that they would like for you to consider what qualifies for your projects to be utilized through cities? In other words, the city can say can you find one of those to fit in our city, to help be a pilot project with us?

MR. FELDER: It is -- it's a voluntary program. It's --

MS. LOWE: Anybody want to volunteer?

MS. GERARD: Well, Janis, --

MR. FELDER: You know, it's -- it's --

MS. GERARD: -- it's an interesting concept, and it's, you know, a new idea, and that's why we come to meetings like this. So, let us work with you to see how we can match up companies that are interested that might go through cities that you might have a contact with.

MS. LOWE: And I think that will work, Denise, with you as far as I heard you state that in representing industry, that you're saying you want the two-way communication with the local municipalities.

We, too, want that. We have a lot of questions about this. We look for the answers. My city has taken the time to become educated on it. So, I certainly support what you're doing. We are activating our LEPCs, our local emergency protection coordinating committees.

We are having a difficult time, Rich, producing maps. We'd appreciate any help in doing that. Our city spent eight months. We got no where. We picked up the pace, and we finally got it done, but now we're going to try to do it on a county level. So, that mapping issue is very tantamount to the issue, and let me tell you how I learned that.

At our Spring meeting last year of the Public Safety Committee, I took a situation that's occurring in my town to the committee and asked if anyone was aware of the pipelines in their community. Universally, the 28 of the 35 members said no. I gave them all a challenge, to go home, work with their emergency management coordinators, and try to find out what pipelines are in their community, because the breach, the disaster belongs to the local officials.

We met again, as I said, in Daytona, and everyone came back, and they were amazed at the lack of information that they were even able to resource to begin to deal with the concern that we had brought forward in our disaster relief and emergency preparedness policy.

So, the pipeline safety office helping us do that will be a great resource to cities, and again I encourage you to do National League, and thank you for the opportunity to address you today.

MR. FELDER: Thanks, Janis.

Other questions?

MR. MILLER: My name is Larry Miller with the Port of Houston Authority.

We are not pipeline operators, but we are affected by what transpires and what happens with the outcomes from this project here.

I just want to make sure that you realize there is a positive following for what you're doing. I'd like to take my hat off that I'm not wearing to the Office of Pipeline Safety, API, INGAA, and the other associated agencies that are working together.

I get excited when you start talking about partnering, teaming. This is one of the few opportunities you have to improve upon safety, improve a final product, while at the same time possibly saving money.

So, I think this is nothing but a positive. You've got to start somewhere. I think Stacey indicated that the data that is available right now is not perfect, but it is a starting point, and through the teaming effort that takes place here today and in the future, I think that will be improved upon.

So, I just want to make sure you realize that there is a positive following in Houston. By the way, Houston is one of the few places you can go to work for a petro-chemical company one month, and the next month take a cruise. We are -- Norwegian Cruise Lines decided to home port in Houston. So, we want to make sure you're aware of that.

Thank you.

(Applause)

MR. FELDER: Thanks for kind words, Larry.

MR. WRIGHT: My name is David Wright. I'm with GATX Terminals and responsible for our pipelines.

Mine is a relatively quick question. How do you envision your program relating to other regulatory groups like the EPA and OSHA?

MR. FELDER: Well, one thing that we're trying to do as we put our program together is to share the experience that we've had with other federal agencies.

Thus far, we've had some pretty close collaboration with the Mineral Management Service. We work fairly closely with the Coast Guard, who's part of DOT, but we also are starting to put together a larger network, including components of the Department of Energy, to take a -- really create a risk management group so that what we've done and what others are doing can be shared.

You'll hear before this afternoon's presentation, we actually had a little study done. We actually benchmarked 15 other federal programs that have -- that are either voluntary or statutory in this area because we figured it would be a value to us to learn a little bit more about what others have done, and there is a tab in your binder which has the executive summary of that -- of that study.

So, we're -- we're trying to blaze ahead in that area. Some of the toughest problems for us were small, and our jurisdiction is limited, but we want to get a lot closer to EPA in particular, where we have some -- some shared jurisdiction over tanks.

In fact, we have a meeting, an open meeting tomorrow, in which we're looking at our Oil Pollution Act plans, an interim plan, which we're hoping to make final. It's got a fairly aggressive agenda, a number of topics that we'll be looking at, and part of that is -- is -- is a jurisdictional overlap.

So, we've worked with -- I've had a couple meetings with EPA. We're hoping to have more. We've done a little bit with OSHA, and hopefully we'll be able to do more there as well.

I like to think that one of the reasons that I'm here and one of the reasons why we're doing this is -- is this commitment to this overall alternative approach, which I think has and will have very strong applications at other federal agencies, and this is the first demonstration program which has so many of the carefully-thought-out components in it, which I hope will -- will be a model for other federal agencies and larger programs.

MS. HAMSHER: I'd like to add to that a little bit, I think, because I think we're talking at a national level, your responses were made at the regulatory level.

Let me turn that around and tell you that -- and many in the audience will know this, you know, that pipeline companies -- this isn't going to be done in a glass box and separate. As we deal every day with issues of -- of employee safety, environmental issues, regulatory requirements, I think the comprehensive risk management process and resolving and assessing risk can't help but be integrated with other regulatory agencies and other aspects that affect the daily operations.

So, you really can't take -- in the ideal sense, you can, but -- regulatory sense, you can, but you -- but day-to-day, you really can't separate pipeline Part 192 or Part 195 risk management and not pay attention to the inter-relationship that that has on -- on other regulatory issues, such as environmental.

MR. FELDER: Yeah. Yeah. We certainly see that as well. I mean there are only going to be 10 -- maximum of 10 companies involved in these programs, but that does not mean that everything else is going to stand still.

We're taking a risk-based approach throughout the program and are hoping to create some graded and tiered regulations where there will be opportunities for other companies to interact with -- with OPS through the regulatory program, to get some different choices, to reallocate their resources in different ways, and I'm sure, as you know, many of my staff are attending meetings and are participating in national consensus organizations where best industry practices are being developed and being brought back to our program and being incorporated into our regulatory structure. So, there's -- it's -- it's more than just the -- the demos.

MS. GERARD: Plus, at the state level, we have received the comment from the Environmental Defense Fund on the framework, encouraging us to work through our state pipeline safety contacts to funnel out to the state DNR, the state environmental agencies, and other places, so they -- so that the sort of information transfer and opportunity for comment goes across the state horizontally to other federal agencies, not just at the national level but at the state agency, and I think that will encourage our state partners who do get involved in the demos to try to make that communication happen.

MR. CATHA: Yes. My name is Stephen Catha with Crossroads Technology.

We've been the developer of several leading edge technologies for the pipeline industry. We've been working with Gas Research for over a year now, and we're entering the advanced technology program with a new product called Smart Pipe. This, as TransCanada described it, is potentially the only permanent fixed solution to the problems of an aging or deteriorating pipeline.

We need one other U.S. company, pipeline company, interested in entering this program with us. If there's anyone who would like to hear more about it, I'll be in the back of the room during the lunch break.

Thank you.

MR. FELDER: Thank you.

Kelley?

MS. COYNER: I said that I would ask questions here. So, I'm fulfilling my usual role.

Rich described me as someone who gets my arms around the program, and I think that sometimes the more accurate characterization is that I sort of get down in the weeds, but I feel very, very strongly about this issue of communication with local governments.

My -- one of the functions I had before I came to the Department of Transportation was to serve as the chair of my local environmental commission and energy conservation commission, and, so, I know first-hand how difficult it is to get information that you understand, to keep up with the project that's technically very complex, and you're dealing with citizens who have other jobs and family responsibilities.

The question that I have for Stacey and others on the panel is that we focus a lot on sort of the big picture communication. What is the nature of the project, and we've talked some about the selection process, but to me, the real issue is how do you keep in touch with local officials, local citizens, during the course of the demonstration project, and one very specific question is, what sort of information will you know and will the localities know about efforts to expand the demonstration project beyond its original -- the original plans for it?

MS. GERARD: You notice how she can go on both sides of this podium. It's a real advantage.

Okay. Well, there's a number of things that we've mentioned and some of the ideas we've talked about that -- let's reiterate. We've talked about a written direct mail-type of communication to a mailing list which will be built both by us at the national level with the contacts from the fire chiefs, the towns and townships, and the National League of Cities, National Council of State Legislatures, environmental organizations, Wildlife Federation and so on.

So, we'll have a direct mail campaign that will be frequent during the consultative process and to the time that we do the approvals. There will be -- we've committed to do at least two updates before we get to the application stage, as we learn information to pass it on, things that we think that would be interesting about the type of physical information that might become available that we'll be seeing at the project.

That's the type of thing that would be an update over the original, what you might call, the bigger picture communication.

We've talked about electronics, like a home page, and trying -- you know, and hoping that the state-of-the-art becomes more mainstream over the period of time.

We've talked about video teleconferencing. We've talked about -- and when we say that, we don't mean from Washington, but from a regional site, where you might have host sites at hotels and company headquarters and things along a pipeline.

You got some other ideas, Denise?

MS. HAMSHER: Well, I -- I really want to get at the grassroots, and I think that that's part of the comments that we're hearing.

All that's good. I think we need to do some things at the national level. We need to have people attend meetings, but until it really affects you in your backyard, you don't get the interest up, and, so, I think we need to, and we're prompting the plans to do so in the standard, by talking to the local people, be that the county board person or the chair of the local forest or -- or the type of people that are affected by the pipeline route, and I think that those sitting down in formal meetings, not talking about regulatory structures or framework or letters of intent, but really getting down to talk about the pipeline itself, the alternatives, the ways that the risks are being controlled, talking to the county emergency management coordinator and the fire departments about risk control measures, such as emergency plans and enhancing those, so the effects of -- of -- of a leak would be reduced.

I think when it really gets down to that more face-to-face communication with the local people, that's what I'm hearing by some of the comments. It's a difficult process.

When we're talking about in our case 2,700 miles of -- of right-of-way, you know, what is your public? But if you can segment that and break it down to a particular geographical area, I think it's a challenge that we should try to achieve.

MR. FELDER: Yeah. Two of the areas that I think we'll hit indirectly are, Number 1, the emergency response community has more and more of an interest on -- on the front end, on the -- on the safety end of things, and we do have, I think, a fairly decent -- fairly decent lines of communication into the emergency response community through our -- at least through our liquid program. So, I think that we can mine that pathway.

The other area which I think is going to be very helpful to us is we have a damage prevention quality action team that is putting together a national public education campaign on hits on pipelines, on one-call -- availability of one-call. It's 30 to 40 percent of pipeline incidents. It's something that people can relate to. It's something that occurs at the local level, and we feel that as we roll out this national public education campaign, which will happen toward the end of the year, we should help raise public consciousness about pipeline safety in general, and hopefully these two things will help to come together as people think about risk management.

They'll have some background. They may have seen the education campaign on -- on tv, maybe they've heard some radio spots, and they'll have more of a personal connection with the subject.

MS. GERARD: Another suggestion is building on the LEPCs, the local emergency planning committee. I think Janis mentioned that earlier, and that's certainly something that Jim Macras from EPA has suggested that we tap into, and we really haven't tapped that market yet, but, you know, there's a lot of people here who have chemical contacts that we could -- we could branch out that way as well.

MR. FELDER: Bernie?

MR. SELIG: Bernie Selig, Hartford Steam Boiler Inspection and Insurance Company.

First of all, I want to compliment all of you, industry, government, on how far you've come over the two-two and a half years that you've been involved in this.

I can -- as I'm listening, I can hear the culture change that has occurred, and that is indeed what has really taken place.

Just an input, if I may. I would like to recommend that as part of your negotiations with the companies that are in the demonstration programs, you need a process in place beforehand of what you will jointly do when, not if, but when there is an incident on a pipeline that's on the program.

You have to have all the roles and responsibilities lined up before that incident occurs. So, when it happens, that's really part of the local communication, if you will, because those are the people that are most affected by it.

MR. FELDER: Good point.

MS. GERARD: Bernie, that is -- that is a vulnerability that was identified in that tab under Regulatory Experience of all the Achilles heels in terms of the 15 other programs.

In fact, other people have come to that conclusion. So, there's a lot of wise men on that subject, and any suggestions on how to approach that would be appreciated.

MR. FELDER: Other questions?

MS. MORGAN: Beth Morgan, Arthur D. Little.

You'll gather from my accent that it's a bit of an external perspective. In the U.K., we've had -- well, last year, we passed pipeline safety regulations as well, which are risk-based, goal-oriented, but in practice, we've had a risk-based approach for many years for pipeline safety.

I think the success of that has really hinged on a mutual respect between certainly myself in assisting pipeline operators and the regulators in the U.K., and it's been very much sort of a cooperative approach, so that when we're thinking about various options for reducing risks, it generally becomes a dialogue between myself and my own experience and the regulator, and to basically get into a horse trade of what sort of risk benefit will you give me if I do this, and what if I do that there, and now without meaning any disrespect, some of my discussions with pipeline operators over here would suggest that you have a more confrontational relationship historically, and I think that might -- I mean obviously that's something that you're going to have to -- to work on.

But presumably the people getting involved in the demonstration program maybe feel happier about their relationship than the others that were not going to -- to even apply, and, so, given hopefully the success of the demonstration program, how are you going to bring in all those other people who are really too nervous to get involved in the first place and really don't quite trust you?

MR. FELDER: Well, first of all, welcome back. I'm glad that you're here.

We actually spent some time looking at the British model, and one thing that I envy about the British model is they decided that they would have very kind of non-specific rules, very performance-oriented rules, and they would supplement that by having an enormous staff.

They have lots and lots of people doing this, and they also have very well-trained people doing this, so that when -- when the regulators go nose-to-nose with the -- with the operators, the interchange is a little bit easier because of the longstanding relationships and the ability to -- to really send a lot of folks out into the -- into the -- into the fray.

On the other hand, we're dealing with a program which hasn't been around all that long in total and certainly has not been around all that long at this scope. So, we do have a ways to go.

I appreciate the -- the comment because it's something that -- that we feel is -- is a problem for us to overcome. I mean on the culture side of it, it's not just from company experiences with the Office of Pipeline Safety, but it's with the -- the whole Federal Government and state governments as well, and the regulatory approaches that have been taken over many, many years.

So, the -- you know, Bernie's comments of how far we've come in two and a half years are -- are -- are welcomed comments, and we appreciate those, but we know that we have a long way to go.

We have state partners who are, you know, enthusiastic supporters of this. We have state partners who are skeptics of the concept. We have the same thing in the industries that we regulate. I don't -- not everyone in every company is -- is just raring to go and wants to just dive into risk management as quickly as they can.

There are a lot of folks who are very comfortable with the way things are and don't exactly want to open their doors and invite me in and my counter-parts in. They'd just as soon have someone come in with a clipboard and a check sheet and check off the boxes and give it a lick and a kick and walk out the door.

But we have higher goals than that, and -- and like the -- our counterparts in the U.K. have done, we want to create that trust. We want to create a partnership that will get us to where we need to be to create this alternative.

MS. GERARD: If Bruce Ellsworth were here, he would caution us that we have to be careful to say that this is a test of risk management, and that we're not here presuming what the outcome of this is going to be, and when you look at the bubble diagrams that the risk management staff has put together in terms of what it would take to actually get through this whole process, it's -- you know, it is very labor intensive, and, you know, we're going to do what we can to make it work, but it is a test, and we're not presuming the outcome, and we hope it works, but, you know, we're -- we've been sensitized to appearing to presume the outcome of the demonstration.

MR. FELDER: Well, if there are no others, why don't we wrap this up for this morning? It's time for lunch, and we will resume here at 1:30.

(Whereupon, at 12:00 p.m., the meeting was recessed, to reconvene this same day, Tuesday, January 28th, 1997, at 1:30 p.m.)

A F T E R N O O N S E S S I O N

1:30 p.m.

MR. FELDER: It's about time to get started. Let's get those last couple of stragglers in the room, and we will get underway.

This morning, we spent our time on the risk management building blocks, and I hope that by the time the morning wound its way down, people could start to see a little bit better how the program fits together.

I think, fortunately, we've put together a set of materials -- set of materials for all of our attendees, and I hope you'll share these in your companies, organizations, agencies, when you return.

It's a full set of sort of everything you need to know about what got us here, and hopefully what's going to take us into the future.

This afternoon, we hope we'll pique your interest by taking the building blocks and using them in prototype sessions of risk management plan review and approval processes.

We're going to have a -- a gas one and a liquid one, but don't think that because you come from one industry or another, you might not be interested in the others or because you come from one background -- state regulatory background or the other or whatever, that it's not going to be interesting.

We've tried to actually spread our issues throughout the prototypes. So, pay close attention to both, and I think you'll be able to learn from both.

One of the issues that I think is important to talk about before we get into the prototypes -- I know it's, you know, something that -- that people have been concerned about and need to hear about, is something we started to talk about a little bit this morning, was, you know, the liability issue, and we had a question on that, which I addressed.

But I want you to keep on the top of your minds that what's going to come out of an approved risk management letter of intent and application is an order, and the order, the approved order, which is going to embody the -- the plan for the four-year period of -- although it will be subject to change, continuous improvement, but it's going to set out the ground rules for that period of time.

Compliance with that plan is equivalent to compliance with OPS regulations. So, this is a -- an alternative. It's a substitute for regulatory compliance which not only meets the minimum federal standards but promises superior safety and environmental protection.

But otherwise, outside of the project itself, either on that individual pipeline or throughout the system, all other current protections do apply.

I mentioned this morning that we -- we tried to benchmark off of other federal programs, and I do hope that those of you who have participated in other programs, to the extent that you haven't had a chance to participate in our effort here, will give us some of the lessons that you learned and communicate with us on that score.

There are a lot of programs out there, some more successful than others, but we think that all of them can help us to do what we're doing here a little bit better.

Now, we do have a process, and a lot of it came in the question and answer, that is going to involve local community input. We have found in the past that a lot of that community involvement tends to be after an incident or after something untoward occurs, and the focus tends to be, yeah, we need a solution, but we need a solution for somebody else, you know. Our solution is to -- is to back off and not get involved or -- or have this thing fixed or have it shut down or -- or do this, that, or the other thing.

We are looking for a much stronger local commitment than simply taking people -- telling people to take their business elsewhere because we are involved not with, as I said, not with construction, we're involved with pipelines that are there, pipelines that we're trying to make safer, and there are good protections in place, and there may be better protections that are possible when resources are allocated to the highest areas of risk.

So, that's what we want to -- to concentrate on, not trying to export difficulties, but trying to deal with them in the most effective way.

Again, as we go into the -- in to the prototypes, get your questions ready. We're going to run through both of those prototypes, and then we'll be taking questions after those sessions. Feel free to commit them to writing or save them up and come up to the mikes when we reach that part of the program.

Rather than try and take this forward myself, I've got David Frost -- is that -- no. Mike Neuhard over here, who is -- has been a special friend of the Office of Pipeline Safety. I say special friend because not only is he nice to us, but he also tells us when we do the wrong thing.

Mike is from the Fairfax County Fire Department. He has participated on our quality teams. He sits on our technical advisory committee. He has given more than anyone has -- should be asked to give to this process, and, amazingly enough, he's come back for more.

He's certainly known around OPS as that silver-tongued devil, and I will simply turn it over to him to run our prototypes for this afternoon.

Thank you, Mike.

Prototypes

MR. NEUHARD: Thank you, Rich.

Good afternoon, everyone. Thank you. I have the mouse. I do not have control of the technology behind it, but I have the mouse. So, we'll see how this works this afternoon.

First, I'm told I must hold this down for two seconds, and then I will have control. I do have it.

This afternoon, our focus, as has been mentioned through the morning session, is going to be on illustrating the principles that were described this morning in your sessions.

It's really going to provide, I think, context to what we've talked about, and for some, it's going to clarify things further. For others, hopefully it will be entertaining and will again provide some context.

Before I get started, I'd like to introduce those that are going to be participating. Some of them you may know, to others they may be introduced for the first time.

Bruce Hansen is from the Office of Pipeline Safety. He is playing himself today.

(Applause)

MR. NEUHARD: Andy Drake from Pan Energy is playing the NagCo Gas representative.

(Applause)

MR. NEUHARD: They got yours, too.

Beth Callsen from OPS, again playing herself today. For those interested in risk management, those are two key players --

(Applause)

MR. NEUHARD: -- in the process.

And last but certainly not least is Gary Zimmerman from Shell Oil Products Company, who is playing our Liquids operator today.

(Applause)

MR. NEUHARD: The purpose is to improve your understanding of the demonstration process by illustrating how the process might work in practical and actual practice and in practical application using realistic examples from both the oil and gas industries.

Now, it's important to realize that while we have two prototypes here, the message is universal. So, gas gang, don't get up and walk out after we get finished with your part, because there are things for you to listen to and understand, and we go into more detail in the two prototypes. So, please stay and listen to all portions of it.

We're not here to discuss the technical issues. They've been debated. They will be debated, but we're simply trying to illustrate the process with perhaps at times what are going to seem like over-simplified examples. Again, we're looking for some kind of a context that you can latch on to that will further your understanding.

We will be talking about all parts of this process, but the focus is going to be on the most important part, and that is the consultation portion. You're going to hear us talking about the consultation process and the consultation step. We hope to be able to define those for you as we go through the presentation.

We really do believe that this is where the relationship will be forged and where the success or failure of the overall program will occur in terms of getting to that application stage.

I passed the first one. Okay. Let's just review this morning. Now, you've seen similar slides in this morning's presentation, and I want to just review the process with you very quickly.

It starts with the company providing to the Office of Pipeline Safety a letter of intent. A screening then occurs which will select what OPS believes are the best companies suited for going into the demonstration projects.

There will then be a pre-consultation phase. It's important to remember that if you looked at the Federal Register notice, that this phase was not noted in the Federal Register. We're going to talk about that a little bit more in a few moments.

The consultation phase. Then you're there. Then you're ready to submit your formal application and either be rejected or -- or actually once the formal application is in, to start the actual formal process of getting into some kind of operational mode with it, if you will.

We're going to be focusing on the letter of intent, the screening, the pre-consultation, the consultation, because you can't get in the application if you don't have all of that straight, and this is again where you've got to work out all of those technical details and questions, and you're going to really know where you're going with this, and OPS is going to know, and everyone -- all of the stakeholders will know at that point where you're going.

Then you get into review and approval, monitoring and ultimately modification and/or termination, depending on how long the process goes on and where in the overall time frame of the demonstration projects we are in terms of years.

The process is structured, as you can see, but it's designed to promote interaction and discussion among all parties. It must do that. All of us know that it will not work if it does not.

We will be focusing again on the pre-consultation and consultation steps because that is where most of the interaction will take place.

The characteristics of the process are noted here. It is structured, but there is built-in flexibility, room for negotiation. It is designed to ensure a regulated risk management program. Regulated risk management. Those that know me know that to me, this is the most important thing, and it is one of the most difficult to get past for some people, that we're not doing risk management, we are in a technical sense; the difference is we're using this as a regulation mode, but it is important that we do that.

Accountability is built in from the start, and it is designed again to promote what you're going to hear over and over, interaction, discussion, openness, communication, which we think ultimately is going to lead to trust, and a better and safer pipeline system.

We're about to see how this interactive process might work in actual practice. Remember, the first step is the submittal of a letter of intent from the company to the Office of Pipeline Safety.

Here's a representative from the NagCo Gas Company to describe how a company would put together a letter of intent.

MR. HANSEN: Good afternoon. As we discussed in our operating committee meeting last month, NagCo has, after evaluating the risk management demonstration project, elected to submit a proposal to the OPS to participate in the project.

In order to participate, the first step is to develop and submit the letter of intent to the Office of Pipeline Safety.

Now, to get a better feel for what that entails, I'll try to overview what it is that we have to put in this letter, and what this letter is not.

First of all, it is not an official application. We're not legally bound to do anything if we submit this letter. It doesn't need to provide a detailed description. We're not looking for volumes here. The OPS is not looking for volumes of information nor are they trying to get all the details of our technical justification.

What they are looking for is an overview of our proposal with enough detail that the intent of our proposal is clear, with enough detail to explain the merits of our project and the company's commitment that OPS will project during the screening.

This proposal, this letter of intent, should be based on the guidance that is provided in the Program Framework and the Program Standard. We have these materials with us. Some of us -- we have them in our books. We've seen them for weeks and months now. We used those things as the basis for developing our letter of intent.

Specifically, letter of intent should include the scope of our project, should define the physical location, should identify the breadth of the analysis that we intend to use, and the potential expansion of this application if we intend to make one.

It should describe the facilities that will be involved in the proposal, including their size, their age, their type of material that they're made of, any adjacent population status, and any pertinent geographic information relative to the proposal.

The bottom line is here, we need to be as specific as possible, describing what alternative safety practice we intend to implement in the project.

We need to identify any regulations that will be affected by our project. Our letter of intent should reflect our commitment to complying with the Program Standard, including our willingness to work with the OPS to define an effective means of communicating with local officials about our project.

MR. NEUHARD: The outcome of this step is a letter of intent, sufficient enough for screening, being sent from the company to the Office of Pipeline Safety.

Now, if you look into -- in your hand-outs this morning, you'll find at the back of the section that we're currently in, there's an example of an LOI in there. I believe it's facing toward the rear of your hand-out. Use that as a guide, not as a template.

The next step is the screening of the LOIs by OPS. Here are Office of Pipeline Safety representatives to talk about how this part of the process might work.

MS. CALLSEN: Hi. I just want to interrupt the program just a second to talk a little bit about Bruce's and my role in this.

When the OPS team developed this process, we wanted to make sure we could tap a wide array of experts and stakeholders in improving the demo projects or in evaluating the demo projects, and as you'll see as today's program unfolds, you know, there are a lot of people that have roles.

OPS regional directors, experts from OPS headquarters staff, state pipeline officials, local officials and others.

These experts, they will vary from demo project to demo project, depending on the technical scope of the projects or where they're located.

But we want to make sure that we're considering relevant but complete information as we evaluate these demos.

But we also want to make sure that we're fair and consistent throughout this process, from one project to another, and then as each individual demo works its way through the process, we want to make sure that all the issues are captured and carried forward and dealt with, and that's where Bruce and I come in. We'll be the glue that holds the whole thing together, hopefully. I hope I'm not promising more than we can deliver.

But one of us will be assigned to each project, and we'll be the OPS point of contact. We'll follow all the issues through. We'll make sure that they're resolved, and if -- if possible, we'll follow them through, and we'll make sure that there's consistency in this process.

We're both engineers. We have a pretty good history of working together at OPS, even before risk management came -- became an OPS initiative. You know, we got in on the ground floor. We've watched and -- and assisted as the building blocks have come into being.

So, we think we understand the process about as well as anyone, and we've written big roles for ourselves in today's drama, as it's promised, because anyone who is part of the -- of a demo project is likely to see a lot of one or the two of us.

So, Bruce, if there's anything you'd like to add, please do so.

MR. HANSEN: I think Beth gave a very clear picture of what she does. Stacey still is wondering what I'm going to do. I'm going to try to explain the screening process right now, go through this a little bit in detail.

One of the reasons we feel like we need a screening process is we really believe we're going to get more than 10 letters of intent. So, we need some way to get down to the number of 10 -- Number 10.

There are some basic qualifications that you've already heard for getting into the demonstration project. It has to be an interstate transmission company. It has to be a liquid or gas company. It has to be jurisdictional to Part 192 or Part 195. We're looking for operations or maintenance demos.

The other thing that we need to be clear is that OPS is making the final selections. The question this morning about whether there would be any interaction at the letter of intent. I think if there's clarifications that need to be made, obviously we will -- we will make an effort to get the clarifications, but it needs to be clear that OPS does make that final selection.

The other basic reason for the letter of intent is we just don't really feel we want operators to do a lot of work up front on the demonstration project that may for whatever reason not -- not make the cut.

One of the important ideas that we're trying to do with the screening also is to give some diversity. We don't want all the demos in one region. We'd like to have different-sized companies. We'd like to have some kind of balance between liquid and gas companies.

Basically, we're looking -- obviously the common thread through this is the superior safety and the superior environmental safety that we're looking for. These are the two things, two basic things that we're going to be looking for throughout this.

Some of the attributes that we may be considering in the LOIs are basically what or how -- how it shows with the distinguishing features of the demos. It needs to be clear what your demo is. We need to -- need to be able to compare them with others.

We are looking for demonstration projects that will have the capability to expand either to other parts of the system or possibly other parts of the regulation over the four-year demonstration period.

We need a clear company commitment as far as risk management and the demonstration process go, and then obviously from the conversation this morning, the Communications Plans are going to be very essential to the letters of intent and the way they're screened.

MR. NEUHARD: The outcome of this step is a written invitation from the Office of Pipeline Safety to the selected companies to participate in consultations about their proposed project.

A Federal Register notice will announce the selected companies and provide a summary of their letter of intent.

So, now the Office of Pipeline Safety believes that the company has the potential to produce an acceptable proposal, but it needs to interact with the company to understand better what the company is proposing, and to help the company mold its program into one of the Office of Pipeline -- into one that the Office of Pipeline Safety can accept.

Since the consultation process is so important, let's first make sure we understand all that we're trying to do during that particular step.

The consultations are part of an interactive process between the company and the Office of Pipeline Safety with the objective of coming to an agreement on the key features of a demonstration project that OPS can accept.

Consultations are good because we can only have a limited number of demos, and we need to make sure that each demo provides the most benefits to the overall program.

Consultations allow us to reach this result in an efficient way by providing for direct face-to-face interactions between the parties rather than a post office style of receive, reject, resubmit, reject, resubmit, process.

To make them even more efficient, there will be a pre-consultation in which either Bruce or Beth or both and company staff meet to fill in the information gaps and prepare the main parties for what is hoped to be efficient consultations.

Back me up one. I lost. I want to take a few minutes to review this -- this slide. Remember that we're looking in this -- in this process, the consultation process, which starts after the screening but actually involves two specific steps, that we're trying to optimize efficiency. We're trying to ensure through face-to-face interactions that the project review team, which you're about to hear about, has what they need to make decisions, that this process extends into follow-up discussions after you go through the consultation -- the pre-consultation and consultation step, and that -- that ultimately it has facilitated your application, if you're interested, and ultimately that project approval.

So, the question is, who are the project review teams, and what will they be looking for? Let's turn our attention to them for a moment.

They are a regulator group, and they're composed of Office of Personnel -- Office of Pipeline Safety personnel. They are regulators. They will be supported by headquarters staff from OPS, regional staff, affected state pipeline safety regulators, and, of course, contractors and consultants.

The input from local officials as we heard this morning and other stakeholders will also be provided to the PRT through the state representatives or, in the absence of the state representative, or if by preference, to -- directly to the Office of Pipeline Safety headquarters staff.

The PRT will be using logical and relevant criteria to guide the process. The consultations will not be an examination of everything that the company does. Rather, it will be focused on reviewing and following the OPS review protocols.

You have a copy of that in your manual. Hopefully you're there. I think it's around Tab 9 or so. You want to take a look at that. Only data relevant to the review criteria and the demonstration project will need to be provided by the company.

You need to meet these three basic criteria, and your program needs to be consistent with the standard. It needs to reduce risk and produce superior safety and environmental performance, and it has to have a practical work plan and perform its monitoring plan.

The first criteria, that is the Program Standard, will be focused on the pre-consultation step. The second will be most focused on during the PRT consultations, and the third criteria, broad criteria, will be focused on during -- largely during follow-on discussions after the project review team meetings.

Now that we've got a basic idea about the overall consultation process, let's go back and see how this pre-consultation might work. Remember, here we are. We're in the top three. Letter of intent, screening, now we've moved into pre-consultation.

Pre-consultation step again was not in the Program Framework that was noticed in the Federal Register. However, after consultation with the regional directors and other industry representatives, it was felt that it was absolutely necessary to stick this particular step into the overall framework.

It's designed to facilitate the consultation step and support the information required by the PRT. The pre-consultation meeting will be a meeting between the company and Bruce or Beth, most likely at the company's site, probably with some support contractors present.

Pre-consultation will focus on the risk management process, but it is not decisional. No decisions come out of pre-consultation. It is designed to provide input and flag areas of concern for possible further discussion.

The ultimate outcome of this step is a briefing to the project review team which we will now illustrate.

Bruce is about to provide his report to the PRT after having pre-consultation sessions at the company offices of the NagCo Gas Company, which had submitted the letter of intent that we looked at before.

Remember, at this point, the LOI has been received. OPS has selected this company during the screening process. The Federal Register notice is out, and the PRT has been assigned.

MR. HANSEN: These are some of the things that we think we're going to see at a presentation, either Beth or myself, will see from the company at a pre-consultation presentation.

Again, these are some of the things we were talking about before, but we expect to see a good representation of what the project scope is. The alternatives need to be very well defined so we can understand what they are and what -- what regulations they're being proposed to replace.

The technical basis for the superior performance needs to be discussed in detail, also. This is again a key issue that we need to look at. These are all important things, but the thing -- the areas we're going to spend most of our time on, it looks like, is going to be actually on the risk management program itself, what the company is doing for risk management.

This will include -- obviously again we spent a lot of time on performance measures this morning. The performance measures at the pre-consultation will be the first time that we will probably really see a definitive attempt at -- at doing the performance measures.

So, we expect that to be a key element that we will see at the company presentation, and again that will be Beth or myself and probably a consultant. We're talking a very small contingent at this point.

What we would do at that point after we meet with the company, and we would brief the company on what we were going to take back to the PRT before we took the report to the project review team, basically what we would -- what we would do is tell them what we had looked at, a brief outline of what the information was, and give them some characterization of what kind of information that we -- we talked to about with the company as far as what the risk management program was, and especially the areas of the risk assessments and so forth.

At this point, we want to be very clear that there is a viable alternative there, that all the information regarding pipe, whatever is involved in the alternative is very clear at this point, and that there is a good risk management demonstration.

We want to be able to report back to the project review team that we had very open discussions, both on the part of the Office of Pipeline Safety and the operator.

Once we report back to the project review team, we expect to get some feedback from the team prior to the consultation. We think probably from the NagCo pre-consultation, we would get things like you're looking at right now.

One of the issues that NagCo has is that they're concerned about how much access OPS would have to certain parts of information. There -- there -- there might be some issues about risk management training.

Again, there's an issue of are we going to approve a risk management process or are we going to approve expansion on a case-by-case basis within the demonstration?

And I think something that also is going to follow through all of our -- our conversations will be what kind of audit plan is -- is being proposed?

The -- again, the additional areas that are raised by the project review team would be taken back to the company, so that they know prior to the consultation all of the issues that are on the table, both from the pre-consultation and from the project review team, after they have reviewed the letter of intent and reviewed the report on the pre-consultation. These will be, I think, probably some pretty basic issues that we'd be looking at.

It would probably be the same thing or -- or a spin-off from what the pre-consultation report gave them, but again performance measures would be an important part of it.

This particular demonstration that NagCo is proposing has a lot of information that we require or that we will need to talk about as far as damage prevention goes, and again we would get back into the specifics of the audit plan.

MR. NEUHARD: Now that we have seen and heard how a pre-consultation might work, let's see how the actual consultation might go when the company and the PRT get together in the same room.

In this next scene, we are at NagCo Gas Company offices, and the gas company rep is in the middle of his initial presentation to the PRT. He is describing the scope of the project, the proposed alternative safety practices that have resulted or will result from the implementation of the program, and the technical basis for these alternatives.

Because of the pre-consultation, these discussions are going smoothly. As a part of his presentation, he will address some of the specific issues that he knows the PRT is interested in hearing more about.

MR. DRAKE: Bruce, based on your response following the pre-consultations, we have gone back through some of the issues in our proposed project.

I think we can address some of the concerns that you've noted, but as a review and to help us try to work through this, maybe I can go back over our project's proposal, and let's try to work out some of these issues that you stated are concerns in your response.

First of all, NagCo, as you know, operates an interstate natural gas transmission system that is approximately 5,000 miles in total length. The system is generally about 30 years old. Our proposal specifically involves a 90-mile section in South Central Georgia, between our Columbus and Macon compressor stations.

The pipe in this area is typically 26 inches diameter by .256 wall thickness. It's X-60 grade and desol welded. We hydro'd this pipe to 953 pounds in 1968, which is about 80 percent of smyce. Subsequently, we retested this pipe to 1,063 psi in 1980, which is about 90 percent of smyce. The MAOP of the line is 850 pounds, which is about 72 percent of smyce. The coating on the pipe is mill-applied coal tar enamel.

Recently, we identified a class change from Class II to III of about 2,000 feet near Junction City, Georgia, that under the current regulations would require a pipe replacement or a pressure reduction or even a gradient-based pressure restriction, but the pressure -- lowering the pressure really won't work for us here because we need to maintain the pressure in order to meet our contract obligations on through-put.

As an alternative, NagCo is proposing to pig the 90-mile section between Columbus and Macon, using a conventional low-resolution tubascope magnetic flux leakage tool. We will reinspect this section in 15 years and will remediate all the anomalies that we find on any of the runs that are affecting the MAOP in the class change area based on a physical inspection using the B-31G criteria, which, as you know, is a little bit more conservative than some of the current criteria.

We are increasing our patrolling in the class change area to every two months as well as incorporating some other damage prevention measures, such as public awareness programs.

We'd like to talk to you about being able to expand this application to other similar sites across our system based on the agreement that we reach here during the demonstration project.

As you can see, we've been working on implementing our state-of-the-art cad program. We're still working out the details, but it clearly depicts our system and the class change somewhere in the state of Georgia.

We have -- we have evaluated the risk threats and consequences in the face of this section. We feel that the additional four houses outside of Junction City create some additional risks due to third-party damage probability and increased consequences. But we feel we can address these risks.

The risk reduction associated with the pipe replacement is actually relatively small because the risks change only very slightly over a very short distance, but they consume a significant amount of resources to do that. Those same resources could be more constructively used to reduce the risks in the class change area while also benefitting the adjacent 88-mile section.

Our risk assessment, as detailed in our proposal and as discussed during the pre-consultation, illustrate that the risks are actually lowered more effectively with the internal inspection, patrolling and damage prevention programs that we're proposing.

Our technical alternative actually decrease the likelihood of pipeline failure due to corrosion as well as third-party damage and provides safety information on the entire 90-mile section. They work together to reduce the overall risk to a greater extent than the pipe replacement alone.

Bruce, I know that based on your response following our pre-consultation that there were some questions associated with our proposed performance measures, which we anticipated.

As we noted in our consultation, we are proposing to compare the anomalies that we find during the pig run in the 88-mile section against any that are in the 10,000-foot class change area. We're also willing to compare the leaks by cause in the 88-mile section against any that occur in the class change area.

Also, compare third-party damage incidents again in and outside the class change area, and compare patrol findings, both in and outside of the class change area.

MR. HANSEN: Well, basically, yeah, we -- we agree that the anomaly performance measure looks like that's one that's going to be key to this. The anomaly performance measures is something we're very interested in, and we think we're right -- you're right on the button as far as that one goes.

The leak comparison one, we have some concern about. We don't really anticipate you finding any leaks either in the class location change or in the other 88 miles of transmission line that you're talking about. So, we really don't think you're going to show much over a four-year period as far as a performance measure goes there.

Can you propose anything else maybe? And I know we can.

MR. DRAKE: It is hell, isn't it? Well, certainly you're right. This is a very low-frequency event. We could use our close interval survey data as well as our current logs from our rectifiers, and we could try to trend this data for changes both inside and outside the class change area, and we can confirm those projections and those trends by our bell-hole inspections and the pig-run data. We could run that correlation.

MR. HANSEN: Basically, the other -- the other -- well, one of the other issues that we wanted to talk about is what you -- how do you define a third-party damage incident? Carefully.

MR. DRAKE: Your mike is live, you see.

MR. HANSEN: I said it real softly.

MR. DRAKE: Well, we propose using two criteria. First, we would classify things that are called near-miss criteria, near-miss events. Things that would fall in that category might be things, such as unauthorized excavation that is within the right-of-way, where there's no contact with the pipeline, or mismarks, where we've actually marked the system.

The one-calls worked. We came out and marked the system, but we mismarked it, and hopefully again no contact.

The other category would be actual contact with the pipeline, things such where we were notified following the contact by an excavator or places where we actually detected it through our follow-ups based on aerial findings or whatever, but we weren't ever contacted. The one-call system didn't work, and we're trying to categorize the failures in the system or try to identify the failures in the system.

MR. HANSEN: So, basically, that -- that sounds good. What -- what will you do to measure or use a performance measurement for -- for patrol findings in this particular instance?

MR. DRAKE: Well, we intend to track our aerial and ground patrol sightings in the class change area and correlate that data against our historical patrol sightings data for the area as well as for other similar locations along the system to determine if our public awareness and damage prevention efforts in the project area are effectively reducing unauthorized encroachment.

MR. HANSEN: Basically that sounds like a good -- a good start. We can start with that performance measure in this case.

One of the other issues that we had talked about, we hadn't quite resolved yet, are what the sensitivity or data sensitivity issue is. We under-stand that there is some data that for one reason or another is not something that needs to -- to get a lot of dissemination, but we do feel that we need to access to quite a bit of that data.

Is there something we can do to resolve this issue?

MR. DRAKE: Well, you're right, Bruce. That's probably the stickiest wicket we're dealing with here. We want to give you all the information that's legitimately needed by the OPS to make a decision, but the information has to be relevant to the decision at hand.

MR. HANSEN: We feel like the key issue is the remaining pig data for the 88 miles outside the class location. We feel like to fulfill your objective of demonstrating superior safety on this particular segment, we need to know what that information is, and how you report out, and -- and repair of anomalies and so forth.

It's basically central to the performance measures that you're proposing for demonstrating superior performance.

MR. DRAKE: Well, okay, I think -- I think we can work on something there, but how about if we just provide access to the information in our offices? Instead of sending you official reports to Washington, we really are very concerned about little anomalies that exist on the log and will always be there and may have been there when the pipe was manufactured and aren't a problem being taken out of context if the raw data is distributed too widely and -- and not prefaced with all the related information.

MR. HANSEN: I think we understand that issue, and I think reviewing the data and the reports and so forth in your offices will take care of our needs.

MR. DRAKE: Well, we think risk management will provide significant benefits. This is our other caveat here. We -- we want to expand its use to obtain the full benefits we can during the demo project. We don't want to be limited in four years to what we can justify just on one day.

MR. HANSEN: Well, we're just not comfortable with doing an automatic expansion of the project at this point. I think that we need to talk about this some more, that an automatic expansion just isn't something we can -- we can do right now.

MR. DRAKE: Well, how about if we try to establish some sort of clear criteria that would have to be satisfied before we expanded to another site? For example, if we have a successful experience in this segment that we've approved or trying to do in this project proposal, that we could develop some sort of alternative sites or expand it to alternative sites as long as they included the same provisions that we've agreed to here and met the same general profile, and that we would pig and patrol and use the damage prevention things that we've agreed to here?

We would try to use the risk models, the same models that we used in our assessments for this specific project, and that you're familiar with through our consultation periods to indicate that the sections we're going to apply this yield the same benefits as the one that we're talking about here, that the superior performance is still there, just as in this case.

MR. HANSEN: I like the idea of the additional criteria you're proposing, but it's still not something that I think we can do an automatic approval on.

I think that the additional criteria that you're proposing and the way you've got it set up will help expedite the approval process over the short run, but I think we're going to have to approve each expansion individually for the time being.

MR. DRAKE: Okay. But you're willing to talk with us on this?

MR. HANSEN: Absolutely. Basically, the damage prevention program again is the key issue. It's obvious that some of the primary risks of the pipeline are from third-party damage. The specifics of your proposed additional damage prevention activities are another obvious key to the acceptance of your proposal.

MR. DRAKE: Well, you're right. We want to implement actions that focus directly on the actual risks. We propose to do the following specific activities. We want to focus on new construction utilities and try to develop some sort of excavator awareness of the one-call programs specifically with that entity.

We want to expand our advertising efforts for one-call and try to improve the general public awareness. We want to try to enlist the public as an active agent to defend the pipeline from encroachment.

We also want to try to improve our locating and marking in construction areas as well as to try to provide closer interval permanent markers throughout the class change area to raise the public's awareness of the pipeline.

MR. HANSEN: And you're going to use the same third-party damage performance measures that we were talking about before, right?

MR. DRAKE: Yes. Our -- our risk assessment/risk control activities and the performance measures we've selected are all focused on the issues that are driving the real risks in this pipeline.

MR. HANSEN: Basically this discussion would go on for awhile, we're sure.

MR. DRAKE: Days.

MR. HANSEN: But eventually we will get to a conclusion, and the conclusion, we think, is going to look something like this. The proposed alternatives and the technical basis were going to be determined to be adequate for the information we have at this particular time, that NagCo has agreed to provide us access to the information we need to see for the entire 90-mile segment, that they are going to implement some additional risk management training, and that each scope expansion will get a pre-approval from the PRT before it's implemented, and that the NagCo formal application is going to reflect all these consultation agreements.

MR. NEUHARD: So, that's how one consultation process might work. Remember, at this point, the company would submit a formal application that describes their proposed demo project, including a work plan and a performance monitoring plan that reflects the consultation discussions.

Now it could be that additional follow-on discussions are needed to address additional important issues, but the idea is to talk the issues through before a formal application is submitted.

There should be no surprises in the application, and the Office of Pipeline Safety should have all the information necessary by that point to fully evaluate the application.

The gas company consultation illustrated some important points about the process, but now let's look at another consultation, this time with the liquid company, that illustrate some additional key points.

In this scene, we are seeing the Office of Pipeline Safety representative give the pre-consultation report to the PRT after visiting the liquid company's offices.

Remember, we're back to our master screen here. We've gone through the letter of intent. We've gone through the screening. We have now completed pre-consultation, and this is the report to the PRT.

MS. CALLSEN: I'm going to step out of character just a minute, even though I'm playing myself.

Well, I just want to say you're not going to be distracted in this prototype by bad behavior on the part of the actors. This is the dignified prototype. We promised a contrast, and you'll see it.

Okay. I want to welcome the PRT and those assisting the PRT. This pre-consultation briefing is the first time that the PRT will convene. Some folks on this PRT will be involved in other demo projects, but for others of you here, this will be the only demo project you're involved in. So, I think that introductions are needed.

Because this demo project is in the state of Nevada, we have our Western Region director here and support staff from that region. We also have a state pipeline official from the state of Nevada. This demo project involves certain technical issues, ERW piping, seismic issues. So, we have our OPS headquarters metallurgy expert here. We have a contractor with seismic experience, and this group is rounded out by some headquarters OPS directors.

At the pre-consultation, we got a really good understanding of the company's proposal. We understand the letter of intent. We clarified the scope. We went through the program process elements, and we met all the company folks that are involved in this demo project that we'll be working with throughout.

I had a support contractor present with me at the pre-consultation to make sure that no information was lost, and we carried forward all the important issues.

I'm happy to report, I think our screening process worked really well. I think we have a real strong demo candidate here. The company showed -- I think will be -- work in great partnership with us. They're open, forthright. I'm going to move this thing. They have a good awareness of what's in the standard and framework.

There's some room for improvement, and I'll talk about that a little bit more in a minute.

There's strong corporate commitment, also. One reason I sense such strong corporate commitment to risk management is this company has actually been implementing risk management for a year or two before even thinking about entering the demo program.

They're seeing some pay-off beyond just regulatory relief. Program found some interesting new information that's already having a beneficial impact. For example, through risk management, they found that seismic threats were greater risks than they had ever realized before, and they're proposing a bold new technology called rattle vaults to address those risks.

In addition to fault line-related failures, the company's risk management -- risk assessment focused concern on external corrosion and new third-party damage, especially because of the public drinking water reservoir in the area, and there was one regulatory issue. This company wants to pig rather than hydro-test a segment of their pipeline.

There were some key areas within the company's program and process elements that show room for improvement as I said earlier. The external communication program could benefit by being better coordinated with what OPS is doing at the national level.

As you know, communication is very important in this demo program, and OPS is -- is making a greater effort in this area than they ever have historically.

Also, the quality and applicability of the data underlying the risk assessment, you know. I need to understand. We have ERW issues here, and this company is proposing to pig rather than hydro test, and have they really -- did they really have the data that -- that makes the case for that? Have they considered national data or just their internal -- own internal understanding?

Those are the types of issues I'm, you know, just speaking to the audience now, that would come up during the pre-consultation, and after I speak to the PRT, I expect that they might have some issues for me to take back to the company, so that when the company does finally come for their consultation meeting with the PRT, that everyone is properly prepared.

In this case, I expect any time there's a new technology, that the PRT's really going to want to put a lot of emphasis on that. So, I would tell the company come, you know, really prepared to talk about these rattle vaults.

Also, the consultation is the time for the company to come with a full-fledged idea of what it is they want to do, the real specifics of their proposal, because during this consultation process, we need enough specifics to develop the order and to also develop a regulator's audit plan.

MR. NEUHARD: Now let's move to the actual PRT session with the liquid company. In this next scene, we are at liquid company's offices, and the liquid company representative is in the middle of his initial presentation to the project review team.

He is describing the scope of the project, proposed alternative safety practices that will result from that program, and the technical basis for those alternatives.

Once again, because of the pre-consultation, these discussions are going smoothly.

MR. ZIMMERMAN: Well, Beth, as you're aware, as the group's aware, we're proposing as a demo project one section of our 200-mile eight-inch Nevada products pipeline system. The 48-mile section that we've selected is located entirely within Kings County, Nevada. It transports approximately 40,000 barrels a day of products from our last pump station on the pipeline Dalton pump station to our terminal near Smithville.

We're proposing an all-encompassing risk management plan which covers all aspects of our operation and all threats posed to or by our pipeline.

We're planning the following key risk control activities as a result of this risk management plan.

Number 1. We'd like to install two motor operators on two existing main line block valves at Anders Creek, and then remote them to our control center.

We want to install what we're calling rattle vaults on either side of an active fault line, and (3) we want to run an in-line inspection device in lieu of hydro testing for the recently-issued hydro test rule.

We believe that these actions appropriately address the risks for this particular section and represent reasonable steps to prevent releases and mitigate the most serious of consequences.

As suggested in the pre-consultation session, we are -- we're prepared to discuss some of the things that were raised there, both our internal inspection strategy and our public education and damage prevention efforts, and we also understand, based on the feedback we've gotten from the PRT, that they'd like to know a little bit more about our own in-house assessment of ERW pipe versus using what you folks are calling nationally-available data. So, we plan to discuss this in detail as well.

Another concern that you've expressed is -- is a little bit more detail about our communication plan, and we hope to get into that as well. We'd like to identify our various audience groups and the message we're going to try and convey.

Just a little overview of the system. Again, it's a refined product system, transports diesel, Jet A primarily. It's a 48-mile segment that's entirely located in Nevada. It was constructed in '62. We bought it in '72, and we do not have any past records of any hydro tests that were performed on that system. It's ERW pipe, eight-inch diameter, .188 wall thickness, and it's got a specified minimum yield strength of 42,000. It -- it is protected with rectified and pressed current cathodic protection, and it has a coal-tar enamel coating.

We also monitor it with scata and our scata system does have leak detection capabilities, and the system can accommodate internal inspection devices.

As the map shows, this is the approximate lay-out of the section we want to include in the demo. The section runs about 48 miles, 38 miles of which are within the water district property. That's a fenced property zone. The remaining 10 miles, five miles on either side, are located in basically rural area, about 20 miles or so from -- from any town.

The five-mile segment near Dalton Pump Station, however, we've understood there's some survey work going on that indicates that residential development is imminent within the next three to five years.

The pipeline, as you can see, crosses Anders Creek upstream of the reservoir. This Anders Reservoir is the sole source of drinking water for both Dalton and Smithville as well as some other towns in the immediate vicinity.

The pipeline also crosses Anders Creek again downstream of the reservoir. That isn't as big an issue. The creek downstream is typically dry, and it terminates in a dry lake bed, and there are no significant environmental or public sites downstream of that -- that location.

In conducting our risk assessment as we -- as we mentioned in our letter of intent, we discovered one unique threat to the pipeline that we didn't realize was there. This is over and above the external damage or external corrosion and third-party damage concerns that we expected we'd find, and that was that the section crosses the previously-unidentified fault line.

So, we've looked at numerous potential risk control options, including relocating the entire line section, but we've determined that a combination of remotely-controlled motor-operated valves on to key valves and strategically locating something that we're calling rattle vaults on either side of this fault line provide the best overall control for this particular risk.

These rattle vaults represent a fairly new technology, kind of an innovative approach to dealing with the relative ground movement we expect to find at this site. They're basically 60-foot long boxes filled with -- with a gravel-sand mix that -- that allows some free pipe movement within that box.

Because of this free-suspension effect, we believe that we'll be able to significantly reduce the probability of failure due to a seismic event.

Also, because we can isolate where an earthquake-related failure will occur, and we have remoted those two key block valves I mentioned, we feel we can reduce any anticipated spill volume that might occur.

With these motor operators in place, we expect to reduce the valve closure time by some three hours or so, and thereby reducing the potential worse case spill volume at Anders Creek from around 10,000 barrels to more like 300 barrels.

Turning now to our -- our risk control strategy for threats related to, you know, the things we expected, the external corrosion and past third-party damage, we'd like to talk a little bit about our internal inspection strategy.

As the information sheet shows, we took CP readings since we've owned the line and past records prior to that point, and they indicate that we've got generally good compliance with accepted standards.

Back in 1990, as a precautionary measure, we ran a geometry pig. We were kind of concerned about, you know, whether there'd been any significant past mechanical deformation or past earthquake activity that might have caused a deformation in the line, and we found absolutely nothing. So, we had a clean run there.

Last year, we conducted a close interval survey, and what we found was that at some locations, the potentials were not as good as what we had found based on our test lead readings. So, what we'd like to do, after we conducted some exploratory digs, is go back now and -- and run a metal loss pig later this year as a part of our demo project, and then based on the results of this run, we'll consider whether we need to do some additional close interval surveys eventually or maybe even rerun the smart pig in 10 years or so.

What we'll end up doing is correlate the data from last year's close interval survey with -- with this year's smart pig run, determine where anomalies need to be repaired, where we need to make coating repairs, and where -- if we find any locations where we have low CP potential.

This internal inspection strategy forms the basis, too, for our proposing that we run this smart pig in lieu of the hydro test. This hydro test would be required under the new hydro test rule for previously-grandfathered pipes because we can't find any hydro test records on this particular line.

We have, however, located some construction records which give us some indications, very good indication that -- that we don't expect ERW seam failures to be the kind of risk that you'd find in this particular ERW pipe. It has to do with where the -- where the pipe was manufactured, the kind of processes the mill used, etc., and we can get into that a little bit later.

And we understand that there are significant advantages to hydro testing in some ways because of what it tells you about the line right when you finish the hydro test, but -- but we have some desire to see the additional information that a smart pig run will show us. So, overall, we -- we think we've got a better game plan if we run the smart pig instead of conducting a one-time hydro test.

And we think we've -- we've shown this in our -- our pre-consultation session, but we can go over those calculations again, but the risk assessment process we used showed that at this point in time, the smart pigging will -- will have a better chance at reducing the longer-term overall risk on the pipeline system than the net hydro test would.

And now I'd like to talk a little bit about the -- the local performance measures that we're going to propose for this demo. These are the measures that we believe are key to the success of our risk management plan.

As we've covered in the pre-consultation session and again today in some more detail, our risk assessment of this section shows that we're most concerned with releases due to external corrosion, new third-party damage and fault line-related failures.

So, in particular, we're concerned with any release that could negatively impact Anders Reservoir.

The risk control activities we have planned for this demo project address all the identified risks and the activities we're taking to respond to those. Our internal inspection strategy, our remoting of the two motor-operated valves, our plan to monitor four and control potentially-damaging third-party activities in the vicinity of our pipeline, and our installation of the rattle vaults for earthquake-related failures.

So, our performance measures reflect our desire to closely monitor our risk control activities in these areas.

First and foremost on our list of key activities is our internal inspection strategy. This strategy depends on the successful analysis of any anomalies we uncover due to the combination of the metal loss run we've done and any close interval surveys or other investigative work we perform. So, our first performance measure to be tracked includes the number of anomalies we discover, and this -- this should trend towards zero throughout the demonstration period.

Now, in a real session, you notice we got some other performance measures up here. We have similar discussions like we just had regarding the smart pig inspection strategy on -- on our customized performance measures relating to the scata reliability, relating to the number of third-party encounters, the number of public education and awareness meetings held, and also on our assessment of the effects of any seismic events on our rattle vaults.

So, we need to go into detail in each of these performance measures and show why those were critical to success of our program.

MS. CALLSEN: Gary, before you go any further, I'd like to ask some questions about your performance measures.

MR. ZIMMERMAN: Okay. We -- we expected that.

MS. CALLSEN: Okay. You've mentioned that you plan to track anomalies requiring repair coming out of your internal inspection strategy. How do you decide when an anomaly needs repair? What's your criteria?

MR. ZIMMERMAN: Well, we use B-31G, you know. In some cases, we end up making repairs that go above and beyond B-31G that wouldn't be required, but that's only because it's convenient, we're there, and we've decided to go ahead and make the repair while the line's exposed. That's -- that's kind of a judgment call by the inspector on site.

MS. CALLSEN: Yeah. Have you ever considered R-String-2?

MR. ZIMMERMAN: Yeah. We've -- I can see where we might use that in some situations, but -- but we prefer the overly-conservative B-31G, and to date, we haven't resorted to using the less -- lesser-conservative approach.

MS. CALLSEN: Okay. That's fine. You know, just let us know if there's any change in your approach.

MR. ZIMMERMAN: Okay.

MS. CALLSEN: Now, in a real session, Gary and I would have the same type of discussion about each performance measure. Here's a sample of the types of questions that Gary might expect the PRT to ask.

Regarding the scata reliability, what are you actually measuring, and how do you define scata reliability? Regarding anticipated third-party activity, you said encroachment was imminent. What exactly do you know, and how do you know this? Are there any roads in the area, and do you really think the line markers you're proposing are enough?

Regarding public education audiences, who are the audience groups you need to contact? Since so much of your pipeline is contained within the water district property, have you ever considered extending your general mailing list to all those water district employees who work on the site?

Now back to the discussions. Gary, why don't you start by explaining to me in a little more detail what you plan to do once you've gotten data from the metal loss pig run?

MR. ZIMMERMAN: Okay. This gets kind of complicated pretty quick, and I'm sure you know there are many factors involved in how you decide what you're going to do. But if I start like this, once we've gotten the data from metal loss run, the first thing we're going to do is compare that against the close interval survey work that we had done last year.

Since the geometry pig didn't show us much when we ran it back in 1990, you know, I don't think we can -- it doesn't make sense to compare that with any smart pig run we do now.

But we'll select some locations from which to calibrate the log, and then we'll proceed with excavations and, if needed, making repairs based on the calibrated data.

MS. CALLSEN: Okay. At this point, the PRT might follow up with questions like how will you use what you learned to determine future courses of action? What are your plans if you experience shielding? And what type of metal loss pig do you plan to use, and why?

In the interest of time, I'm just going to describe the discussion the company and the PRT might have about the data that forms the basis for the company's decision-making. We called during the pre-consultation and during this consultation. We talked about the fact the ERW pipe, the pigging, etc., and whether or not the company had used any national data as the basis for its risk assessment.

And in this prototype, we're assuming that the company comes through this grilling with flying colors by citing construction records, sharing information about how this particular pipe is manufactured or sharing results of any relevant projects or studies.

And these discussions, I think, will be very helpful in providing DOT a basis for approving this project, but also as an engineer and as a regulator, I'm looking forward to these types of discussions to really learn exactly what the latest state-of-the-art pipeline technology is. This is a chance for me to really, you know, get my fingers in it.

So, let's move to your communication program. We didn't hear much discussion about activities you'll conduct to inform the public or local public officials about this demo project.

MR. ZIMMERMAN: Yeah. I guess that's primarily because we didn't want to unnecessary alarm people. We -- we feel -- feel like we can introduce in general our risk management approach along with our general public education brochure, and we think that, you know, risk management is integral to the way we've been doing our business for a long time. So, we think that's a good way to introduce it to the general public.

We definitely don't want to inappropriately alarm people and make them wonder if we're doing anything particularly dangerous or lowering standards instead of raising them. So, we're, I guess, looking for some guidance from you folks in telling us how best to talk about this issue with the general public.

MS. CALLSEN: Well, you've made some very good points, especially about unnecessarily alarming people. As far as the regulatory arena is concerned, we're participating in a very visible demonstration program.

We need to make sure local public officials understand this and are fully aware of what's going on. At the same time, we need to demonstrate to them that superior performance is the objective.

MR. ZIMMERMAN: Okay. Well, how -- how about we go back? We'll develop a list of all the local officials who -- who -- who we're aware of and that have some sort of stake in this demo project. Once we've got that list prepared, we'll -- we'll come back to you and -- and get together maybe to work out how many audience groups we have and -- and how best to convey the relevant information to them.

MS. CALLSEN: I think that's a great idea. Give me a call when you're ready to review the list. We have some folks who have been working with the national organizations, and we'll check with them to see what they suggest and bring that up at our next discussion.

MR. ZIMMERMAN: Good. We'd appreciate the help.

MS. CALLSEN: Again, in the interest of time, I'm just going to describe some of the discussion points between the PRT and the company in developing the regulator's audit plan.

This audit plan will describe the regulator's expected level of effort once the demo project is approved and into the implementation phase. This audit plan will be our best attempt to let the company know what they can expect from OPS.

The bullets on this slide are all points that would be addressed. Who on the PRT conducts audits? What is audited by the PRT? When should the PRT be notified, and how? And what plan activities the PRT would be present for?

In this prototype, we have some straight-forward performance measures, and Gary will give me thresholds, and I think that anyone on the PRT could -- could monitor those, but there's also the issue of -- of the pigging and correlating the pig results with the corrosion data, and some decision-making to be made once the demo project is up and running, and I think that the PRT will probably deliberate very carefully over who should be present, and at what point they should be present.

We wrote a happy ending for this liquid prototype. We are assuming that Gary takes away from the consultation the points that we've agreed on, and that's what shows up in the application, and there are no surprises for anyone, and it's very easy to just approve that and move forward.

There have been some adjustments. I mean Gary doesn't get probably what he came to the table with, but we've worked it out, discussed it, and we're both happy with -- with the result.

Just as important, it's given us the chance to understand this particular operator and the issues that he faces, and these discussions may form the basis for future activities. For example, Gary may come back and want to expand the scope of this demo project by adding more pipeline segments at a future date.

Speaking of the future, this project contains a drinking water reservoir, which looks like a potential USA or unusually sensitive area. We're glad to see the extra measures in place to provide superior protection to the reservoir, even though USA designations haven't been made yet.

When or if a rule is promulgated, PRT would re-examine the protection that Gary's provided here in light of any new information that may surface.

The measures that he's proposed may still be acceptable and exempted from a future regulation, even though he's taking a different approach than perhaps the regulation might specify.

So, good job.

MR. ZIMMERMAN: Thank you. I talked to Andy beforehand. I knew what to expect.

MR. NEUHARD: The outcome of the consultation step and process is the ability of the company to provide a good application. The application does not just address the proposal. The Office of Pipeline Safety won't just approve any plan and hope that superior performance results.

The company application will include a performance monitoring plan to ensure that the under-lying assumptions are true and expected results are obtained in actual practice.

OPS will develop its own audit plan based on the proposal, and both sides will closely monitor the program throughout its life.

We hope that this presentation has helped you understand more clearly and concisely how the process might work in actual practice. We hope that the -- that we have effectively illustrated the basic characteristics of the process, leading to better clarity by all.

As we have tried to illustrate on our final slide, this process again is structured but has built-in flexibility. It ensures a regulated risk management. Accountability is there from the start, and hopefully it has been designed to promote interaction, discussion, openness and communications.

We appreciate your attention. When we come back from the break, we'll turn the program over to Rich Felder, and there will be time for questions and answers.

Thank you very much.

(Applause)

(Whereupon, a recess was taken.)

MR. FELDER: Okay. We're -- we're going to resume. Some of you may have noticed that we have already put together the attendance list. It is available outside the room. If you have not already picked one up, please do pick one up, and it's nice to be in the information age.

Before we get to the question and answer session, I'm going to give the -- our four prototype panelists time to come up and join us on stage, and, Stacey, if you want to join us up here as well.

There are lots of people that we have to thank and recognize today, and we'll do some of that toward the end of the session, but I wanted to particularly make mention of my five regional directors, a number of whom you have seen up here today. The ones that you did not see up here today are all very active in the risk management initiative as well, participating on teams, providing feedback to us, meeting with pipeline safety partners in the states.

Again, my five regional directors, Fred Joyner, Ivan Huntoon, Jim Thomas, Ed Ondak, and I'm holding Bill for last because Bill Gute, my Eastern regional director, is actually spending his birthday today in this meeting.

(Applause)

MR. FELDER: So, we'll -- we'll wish him a happy birthday, and thanks to all of them.

Also, I -- one other brief housekeeping thing. The -- there is a meeting at 5:30 of the State Pipeline Safety Officials who are here at the -- at our meeting today. It's going to be up in the Magnolia Room, which is on the third floor. Just a reminder and the location for that meeting.

Everybody up here?

Audience Questions Comments

MR. FELDER: Okay. I'm going to open the floor for questions. I actually have two up here with me, and I will start out with those.

One is when a risk management demonstration program is established between the Department of Transportation and a specific company, will that program be proprietary to the company or will the details of the program be available for other companies to benchmark from?

Now, that's really something that's going to be up to the individual companies. As you've seen on the -- the way we've designed the program, we have not dictated specific risk management programs. I'm sure many of you know that there are a lot of ways to skin this cat.

We would hope that companies who were involved would want to share those details to the greatest extent possible with others. I think when it comes to safety issues, the more we have in the public domain, the better off we are. It probably won't hurt anyone selling a product. It will probably help them.

Another item that we had listed for question is, what happens at the termination of a program? It was noted that one of the slides noted that we finished with termination. What if a program terminates before the end of the four-year period? Is that a possibility?

Well, we -- certainly that is a possibility. You never know what's going to happen, but we would hope that as companies put projects together for proposals, that they would try and design situations which would take us through the four-year period. As you've noted, many have noticed that four years is not a very long time to -- to measure. It's not a long time to evaluate. It's not a long time to learn when you're talking about systems that have long life spans.

So, any other thoughts on those?

MS. GERARD: We understand they may need to drop out if it doesn't work, and it turns out to be costly.

MR. FELDER: Yeah. That could certainly happen as well. Stacey mentioning that sometimes you

-- you take a shot at it, and it really doesn't work. It's something that you might be better off going back to the drawing boards or going back to -- to a regulatory setting.

Hopefully things that don't work the way they were planned might be improved during the process, and we'd be able to stick with them in that way.

Other questions? The panelists are available. Stacey's up here as well. If you have questions, you can direct them either at the individuals or the group.

George?

MR. MOSINSKIS: Hi. George Mosinskis again for the record.

Question in connection with the pre-consultation and consultation. Looking at just from an outside viewpoint and perhaps because I've been too close to it, I may have answered the question myself, but as an outsider, I couldn't see just two sessions being sufficient for this. I would see a whole multiplicity of sessions, right? And I mean I would see this negotiating process beginning even ahead of the letter of intent in a sense.

Am I correct in this?

MS. GERARD: Yes.

MR. MOSINSKIS: Thanks.

MR. BOSS: Terry Boss, INGAA. I know the President's directive came out saying that there should be about 10 companies, and that's based on the idea of what the total effort's going to be here, but as you get into this project, maybe one to two to three years into the project, do you see some relooking at the thing since it is a directive rather than a law on how many people participate?

MR. FELDER: Well, I think there's -- there is always a possibility, based on experience, that we might want to make the case that we could handle more.

I don't know that we can or we can't at this point. It's -- it really is hard to tell.

On the other hand, I think there will be other regulatory activities that will give us a fairly full plate, and we are planning to put together a -- a quality team to look at the feasibility of risk management for local distribution companies.

We're just beginning that process now, and that should keep us fairly busy. We're not planning on having any demonstrations in the LDC area until we're

-- we've concluded the interstate transmission area. We've got -- it's a -- obviously from what you've seen here, a great commitment of time and energy, and we want to give these projects a chance to work and develop and improve.

But, yeah, we would -- I think that we would be flexible on that, if it turns out that we -- we have the resources and the -- and the potential is there.

Bob?

MR. RACKLEFF: Hi. I have a very brief observation and then a suggestion.

The observation is that the -- the role-playing that we saw was very useful, I think, in a few aspects. It illustrated the lack of public involvement in decision-making, that essentially this will be a closed process. It demonstrated the inaccessible -- inaccessibility of data to the public. The accident and test data will be held at company headquarters.

Three. The communications has been reduced to "public education".

Four. That it demonstrates the use of inadequate national data as the benchmark for deciding whether a -- a certain safety measure will be good or not.

My suggestion is far afield from those observations, and it is that in the implementation of risk management principles to damage prevention, damage by third parties, which we all agree is a very important problem, that you consider implementing what is in the public's -- the Pipeline Safety Act amendments of '96, concerning the report by the National Research Council, "Pipelines and Public Safety".

It talked -- it described at great length what local and state governments can do using their land use authority to improve pipeline safety by preventing damage on pipe -- to pipelines on their rights-of-way.

May I suggest that in implementing what is already -- that you've already been directed to, in these demonstration projects, directly approach -- OPS directly approach local governments in these demonstration -- where these demonstration projects will take place.

What's been described today is a very limited kind of demonstration project with -- with probably very few local governments involved, and brief them and educate them about what they can do through their local zoning and building codes to improve right-of-way safety.

For example, local governments should begin

-- should begin adding to their building codes the review of new development plans on or near pipeline right-of-ways by the pipeline companies. So that when a developer comes in with a great new subdivision, it's not going to lead to future damage to the pipeline because of this development.

Another one -- another aspect of this would be the local government being able to review the use of pipeline right-of-ways by other linear facilities. You know, there's a great deal of expansion by other -- by telephone companies and cable companies that can have an effect on pipeline rights-of-way.

The -- three is have them consider setback requirements for new developments, for new construction, so that they don't put a day care center right on top of a pipeline.

And then, fourth would be local regulation in general potentially damaging activities by third parties. For example, scrap metal company should be prohibited from piling its scrap metal on top of a pipeline right-of-way.

In other words, this is a way for in the demonstration project to learn how to listen to local governments and communities who are directly affected by these projects.

They can -- local governments can tell you and the pipeline operators about existing safety and environmental vulnerabilities that only they know about. They can also inform the operators and OPS about future development plans that would affect pipeline rights-of-way, pipeline -- what may look like a perfectly rural pipeline right-of-way this year, next year could be in the middle of a great deal of construction activity, but the only way to know about that is to directly communicate with the local government.

I propose this as a new way to learn for OPS and the companies about pipeline safety, and we could even learn how to make safety improvements to pipelines that would save companies money by relying on local governments to improve their own regulation of what happens on pipeline rights-of-way.

Thank you.

MR. FELDER: Well, taking the second point first, population and commercial encroachment on pipeline rights-of-way is a -- is a very important issue for obviously the companies and the communities that they're in.

It's not something that -- that our office has jurisdiction over. We don't do any -- any siting. On the other hand, I think we have -- I agree with you, we have a good opportunity to put those issues out to the public. The Congress has required us to disseminate the 219 report, which we are going to do with state and local officials.

In many instances, that's been done already, but we want to make sure that everyone has that in hand. One of the problems -- the continuing problem is you can hand as much information as you like to -- to folks, but as Denise said when she was up here and others have said before, no one pays a lot of attention to pipelines until something happens.

We'd like to reverse that trend by providing information up front that hopefully people will -- will attend to, and you would think that most people, when they build or -- or plan, would tend to build or plan and know what it is that they're building and planning in, around and on top of, but the fact is that often they don't.

So, you know, I think we're -- we're with you in terms of a role that we can play, and I think a role that -- that companies continue to play in this area.

On the other hand, a lot of the -- I mean most of the projects that we're talking about will not involve new construction. We're talking about lines that are already there and talking about better ways of -- of protecting those, and that's probably, you know, where the -- where the focus will be.

But to the extent that we have those opportunities, I'm sure that we'll avail ourselves of them.

I wanted to say on the -- on the consultation part, here we're -- we're talking about a new way of regulating. If we look at the old way of regulating, which is to have the government officials and the companies interact where regulations are being enforced, the public actually has no role in that, other than participating in notice and comment rulemaking and historically has never had a part in the actual compliance process of federal regulation.

So, again, looking at the past and looking at the future, we're creating something that's new, and the intention indeed is to create something new that includes a tremendous amount of public involvement, but I think it has to come at the right part of the process.

It's unlikely to come at the consultation stage because it's the consultation stage which is going to develop the plan that then can be rolled out so that people can look at it and understand it.

The -- I think the odds of really meaningful public participation at the consultation stage are limited, but again I mean we're willing to look at that and see how that can work.

On the other hand, I think we're going to have a lot of public participation, local and national groups who are interested from the beginning, from the -- from the letter of intent, and then going through that process right through to the conclusion.

So, hopefully we'll -- we'll do the right things at the right time, spread the information as -- as far down the chain as we possibly can and get the feedback that we need to incorporate local concerns into the process.

Other --

MS. GERARD: Just to make the point in case it wasn't clear that what you saw today in the depictions was really kind of allegorical, and that what you saw Beth and Bruce, for example, doing was representative of the entire OPS organization and all the input that would come in to the OPS organization through affected states and -- and contacts that we would have from local officials.

Secondly, here in this public meeting on the record, we are making the statement that we intend to do a very extensive outreach to local officials and to provide a very good feedback mechanism, however we can do it, to get that input in, to do exactly what Mr. Rackleff suggested, and that is to make sure we are considering all the local conditions and factors.

Number 3. I think it would be unrealistic to expect that the examples that were given today would be representative of the types of projects we expect to see from companies.

We expect to see very comprehensive proposals that may cover an entire pipeline system in as many as 12 states. So, in the interest of simplicity, we gave some very simple examples just to give you a flavor for it and hope that the simpleness of it didn't mis-represent our expectations.

MS. CALLSEN: The specific point I heard was that we would accept inadequate national data as a basis for risk assessment, and we talked about national data in the liquid prototype, and again these prototypes were mainly to illustrate the process, the steps, and the technical issues were kind of glossed over.

We will never accept inadequate data as the basis for any decision that we make.

MR. ZIMMERMAN: Just another point. On the liquid prototype, we had to cut some of the dialogue in the interest of time, but some of the things we had in the original versions had to do with the discussions that went -- that took place with the water district management, discussions that took place with a county road crew that crossed our right-of-way, discussions with the developers who were going to participate in any residential development in the five-mile section around Dalton Pump Station.

It's not there, but if you remember that discussion, I'd like to ask Mr. Rackleff, just in the true spirit of trying to understand what -- what additional kinds of public involvement are you -- can you anticipate or do you suggest?

MR. RACKLEFF: Let me use as an example what happens when a large project gets proposed that requires zoning changes?

The public is involved and most state and local governments, the public is involved at the earliest stage, when the application is made. The application is publicized and is a matter of public record in the newspapers. There -- very often, there will be a newspaper article or -- or tv -- local tv article about it. The file will be -- all the relevant documents will be on file at the county courthouse or city hall.

People can go and look at it and -- and judge for themselves whether -- how it will affect their -- their property or their daily lives. There are public hearings that are very specific to that project. There's a publicity that's required by law for people to be notified. There's direct mail and sometimes certified mail notification to adjacent landowners.

I mean there -- it's -- there's -- you know, this thing is -- sort of thing is done all the time at the -- at the state and local government level, and --

MR. FELDER: Right. And -- and I believe that we're trying to design a process which at the level that we're operating mirrors that without pretending that we're building a house on -- on a lot in the local community because that's not what we're doing.

We're trying to just have a regulatory alternative for how we're going to oversee the safety of a pipeline that's already there. So, I mean unless you're suggesting that we want to redo the process at the time the line was constructed, it's hard to under-stand, you know, what else we would do.

MR. RACKLEFF: Well, I mean I just -- I don't know. I thought I was making myself clear that the -- the way you do it is involve the public and inform the public at the earliest opportunity, before -- you know, at the application stage.

In this case, it would be the letter of intent.

MS. GERARD: We're actually going to do it way before the application stage, when we initially select the companies that we're going to go talk to way before the application, and we will go out with at least two direct mail campaigns prior to the application being reviewed.

MR. FELDER: I mean I don't think it's going to be any great mystery where -- where the 10 projects are. In fact, it's -- it's going to be one of the pieces of information that everyone is going to have. Everyone is going to know, and they're going to know what the nature of the projects are.

MR. RACKLEFF: Well, I'm sorry if I've been misunderstanding what's been going on because I've been relying on the -- on the written material that you provided, and evidently there's some other thoughts that have been -- that have taken place since then, but it's very difficult to see where you are going to have the meaningful public involvement that we were -- that the President was talking about.

MR. FELDER: Well, I suggest that you stay tuned because I think we're going to do it.

Other questions?

MS. LOWE: If I could address in the prototype kind of page-by-page, I made some notes that possibly offer an incorporation of some of his positions. I've discussed them with my emergency management coordinator from the city, and we kind of have some ideas that we wanted to share with you here in the public format in regards to this that might solve some of those problems.

Basically beginning on Page 1, where the last bullet says, "promotes interaction, discussion, openness and communication", is kind of where my thoughts are in representing my constituents, that you've referred, Rich, to a new way of regulating, and that's pretty much what's exciting about this, is that we are going to be talking about changing habits on the public part as well as the company part, and what I find for my constituents that I want to share with you is what I'm hearing today is people want minimal government interference, but they want the maximum of protection.

So, that's kind of where my thoughts are to address. Bottom of Page 2, you have another bullet that "LOI is the means of communicating with local officials".

Going to Page 4, I would have perhaps input here for a solution in regards to the project review team. If you could find a way to incorporate on the project review team what would be in the demonstration project, the local emergency management director that would either come in in the municipality or it would come in through the county, and all local authorities should be able to participate in that review team to address local issues with that person being a part of the review process and/or that local authorities would be afforded the opportunity of a technical assistance because with all due respect, you people alphabet us.

I mean your MAOPs and your psis and your RFPs and just all the things that are common to your language are going to be lost on your local authorities, and that does create an unfair advantage for us to be a responsible part of the communication team.

Additionally, those would represent people -- those would be people who would represent the local interest. You had talked about -- I saw in your opening statements for the last two formats in this regard, you used the word "trust", developing trust in the partnership, and local officials as well as the people that they represent are going to have some help in working to build that trust with the companies because I would think everybody would admit it's not been a part of the team action in the years past.

So, I think our emergency management directors, our fire marshals, our technical assistance afforded to the city would represent a beginning to build that trust.

On Page 7, my comment would be the map at the bottom is one of the better ones I've seen.

Page 8, when you refer to the middle slide, the anomalies, proposed local performance measures, the gentleman in the process -- application process says they're going to compare the 88 miles, and I would like for you to address in a moment when I finish compare to what? What is that? Those words are used there, "compare".

Page 9, the top slide would address the fact that the applicant was worried about how to access the information. Are they going to have to go give it to you in Washington? Are you going to come to their site?

The technical assistance, the local emergency management coordinator, etc., that city's representative could help disseminate that information on the local level because they're basically site-based.

The bottom slide, expanded advertising for the one-call system, I'll make the assumption and correct it if I'm wrong that the company would bear up under those costs to notify the residents in the demonstration area of how to use the one-call systems, and by the way, Texas doesn't have one, but our proposed legislation at our municipal league to allow the initiation of one-call in Texas, although it will be on local option, the state, as you know, doesn't support that, but local options to -- to apply one-call systems to our municipalities, and we're hoping to have success with that new legislation.

Also, at Page 9, it says, "Improve locating and marking and construction areas". Certainly that's a part. I believe the information process as well as the public education for the public, and I think the pipeline companies will be better served to have a million eyes watching the lines.

Page 10, the PRT conclusion. NagCo will implement a training program. My question would be, training of whom? Is that a training of local people? There's some reference made to the water district employees. Why don't you go educate them? This again comes back to education of our local staff in the municipalities or the county levels to deal with this. So, that is a question.

If we don't educate and utilize the communication systems on the local level, then basically what I see is we're going to continue business as usual, and I don't think that's what your goal is. I think your goal is integration.

I'm concerned in regards to the PRT's assessment to pick the demonstration sites, that they would not include what I've heard, which is in Nevada, there wasn't anything for five miles, and in 88 miles in Georgia or wherever that site was, there was only four houses. So, I would like the PRT to have it be in areas where it's going to make a difference, that we will gain benefit from this, that it's not in the middle of no where. So, I see you shaking your heads. So, I misunderstood that. Okay. Good. I probably heard some alphabet in there.

Additionally, -- and I forgot your name. What is your name?

MS. CALLSEN: Beth Callsen.

MS. LOWE: Beth. You had used the word -- the words back in the applicant's addressing you about OPS saying, yes, we don't want to alarm the citizens. My comment with that -- to that would be that at some point, anything that the companies do creates that alarm, and I call it a fear, and I think working together, we can replace that fear with knowledge, but it's going to have to be the concerted effort to do that, and to not let alarm be a part of our vocabulary anymore, that the company's willing to come in to do that communication aspect.

Again, with public awareness, city staff, local participation, and I would like a comment to be that if superior performance is our objective, that it would be achieved with superior information that would be the producing superior cooperation, and I think that we can basically achieve that goal, also.

Discovered risk, on Page 13, my comment would be, is there going to be any location used in regards to when they discover the risk -- let's say they do discover that the -- the local water source is there, and -- and I learned about rattle vaults. I mean I thought I knew everything about crack arresters, and now I've learned about rattle vaults today, and creative approaches to solving discovered risk.

But the gentleman said he was going to reduce the spill by the remote-operating valves from 10,000 barrels to 300 barrels. Well, is 300 barrels -- I mean the company would probably say that's good, but knowing that my local water source is vulnerable, I would say it needs to be the lowest possible, that the review team would try to apply any discovered risk to the strictest criteria based on the location of what that discovered risk is in proximity to the municipalities.

Again, the technical assistance in regards to helping us understand better, somebody's got to educate us so we can work with you, and my last question would be in regards to who is going to fund the additional effort from OPS in doing this? I haven't heard that addressed. Are -- have you all received additional federal funds to oversee this project or are the companies going to fund your additional staffing requirements?

MR. FELDER: Well, the only additional funding that we've gotten that's earmarked is for -- to support our state partners, but there are dollars on an on-going basis for the -- for risk management in our overall budget.

MS. LOWE: Okay. That was my question. Okay. Those were kind of my comments, and did anyone

--

MR. FELDER: Panel?

MS. LOWE: -- have anything back?

MS. GERARD: Janis, you raised an awful lot of issues that obviously are real concerns to you, and I think we're going to have to work to find an efficient way to provide orientation in general to sort of a first level of awareness about what we're doing for officials along the right-of-way.

It's very difficult for us to anticipate what the numbers of officials might be because you're -- you're talking about this as if it's one community. It could be 33,000 communities.

MS. LOWE: Right. 90 miles, you may have many communities.

MS. GERARD: Right. So, -- so, I think we're quite happy to work with you in terms of doing some modular training that we can find a system to deliver to local officials in appropriate ways. I'm sort of --

MR. FELDER: I mean that's why we're going to the national organizations, because we feel that they already have communications in place to put at least the baseline information out, and from there, we can see where the interest level is.

MS. LOWE: Okay. Got it. Okay. That's not my beeper.

MR. DRAKE: I believe you've asked me a couple questions, and I'm directly on the hook for it. So, I'll try to make the best of it. I apologize for

--

MS. LOWE: Well, you did real good. I wanted you to know that.

MR. DRAKE: I -- I -- thank you.

(Applause)

MR. DRAKE: I was really getting concerned for a second. These guys booed me when they introduced me. So, that makes me nervous. But the jargon is -- is something that we have to, I think, increase our sensitivity to. We use it because we become accustomed to -- to condense our conversations, but certainly the dialogue that hopefully this process will create helps nibble down some of the confusions or the -- the -- the -- clarifies some of the jargon.

Just as a point of clarity, the -- the site that we're talking about in this -- this fictitious example is not just for houses in 90 miles. It's for new houses in 90 miles. So, it would be many, many houses.

Of course, you know, Columbus and Macon, Georgia, are big cities. They would be very populated.

MS. LOWE: Obviously they don't have an economic development board.

MR. DRAKE: Well, -- well, just along the pipeline. Hopefully we've sited our pipeline as rural as we can get, and there aren't that much excitement about building next to it, which we know is not always the case.

But in particular, you asked me about the performance measures. Again, in the interest of trying to condense this -- this discussion into a reasonable time frame, we glossed over some of the technical issues a little bit, but the comparison of anomalies, I think, is a good point because it asks us what is the -- what is it that you're comparing? What is it that would be acceptable or not, and that's very much a reference back to our performance measures that we talked about this morning.

If we pig this pipeline, and we projected that by pigging this pipeline, we anticipate to find no significant anomalies or five, and we found a 150, that would be a significant problem. We would come back. I think our proposal would be to come back, and we may change our mind. We may say, well, we've got -- this is not a good application here. We've learned something. We may have "failed" the metric, but we learned a lot about the pipeline, and we've -- we've also learned a lot about what kind of assumptions we made about the pipeline that were maybe wrong or inaccurate, and we need to adjust those things.

MS. LOWE: And that's good.

MR. DRAKE: And that's good. So, that's good.

MS. LOWE: The criteria would mean your performance analysis that you initially submit?

MR. DRAKE: Right. It would be a comparison --

MS. LOWE: Okay.

MR. DRAKE: -- of what we expected to find --

MS. LOWE: Okay.

MR. DRAKE: -- versus what we found, both inside the place where the people -- the majority of the people in this area live and the other places where people don't live. It may be acceptable to have more outside in the middle of the woods than it would be to have it in the middle of the subdivision. Certainly we would all agree to that since we probably live in those kind of environments.

But that's -- that's the --

MS. LOWE: Okay. That answers it. Thank you. And I hope that you took those suggestions down, and i look forward to possibly discussing them at your next level.

Thank you.

MR. DRAKE: Thank you.

MR. FELDER: Thanks.

(Applause)

MR. FELDER: Other questions?

MR. MOSINSKIS: I have one other question.

MR. FELDER: Okay, George.

MR. MOSINSKIS: In the development of the protocols and the prototypes, did you consider what you will do if there is a NIMBY initiative at a local level? In other words, not in my backyard.

MS. GERARD: Yes.

MR. FELDER: Thank you. I put Stacey in charge of handling that. I think that obviously is -- is -- is a challenge every time you go out and look at a project.

There are folks that are not going to want to have things occurring where there are, and it's a -- it's an education effort. Again, it's not a pipeline that wasn't there before. It's one that's there that we're trying to improve the safety oversight of, and if we know how to get that message across, and we've approved a plan that promises that, it should be something that the local community has -- has taken as -- as something that's going to improve their quality of life as opposed to degrade it.

MS. GERARD: But we don't expect them to understand that right off the bat.

MR. FELDER: No.

MS. GERARD: And, so, there is a document that's in your -- the back of your prototype that's a very, very, very rough cut at some of the information that would be in the prospectus we talked about, and to reiterate the point that we will put at least three contacts down.

We hope to get the state, somebody at the companies, somebody in OPS. What is the point of those contacts? So that somebody who has a concern in their backyard has a real living, breathing person who they can call, talk on the phone, a few different people to get answers to their questions, to have things explained to them, but we are not trying to put the person in their backyard in charge of evaluating whether or not Andy's alternative is good.

We expect to explain what that alternative is, get those concerns, take them into our decision-making process. But we expect to get those concerns and factor in those issues.

QUESTION: I don't want to walk all the way over there. I'll talk loud.

MR. FELDER: Project.

QUESTION: Yeah. Is it restricted to 10 companies or 10 projects? If it is restricted to 10 companies, why not change it to 10 projects? Where you get proposals for common things, such as class location projects, that way we could leverage what you're learning and what you're doing over many more miles of pipeline and advantage many more people, including all the companies involved and not disadvantage them by leaving them out.

MR. FELDER: That's true, but we will also tax our resources to the point where we won't be able to -- to cover it. I mean what the Congress has asked us to do is not to get the broadest coverage, but instead to do 10 projects that everyone can watch and learn from.

But, again, I -- I want to remind you the world is not going to stand still while these 10 projects are -- are underway. There's a regulatory side to our shop, in which we're going to try and create some risk-based opportunities industry-wide.

There are other again national consensus-based standards groups that are creating standards to bring into the program that will create opportunities for companies that are not in projects, and, you know, I see a lot more occurring than just 10 projects. It's going to be hopefully an illumination for the entire community, federal, state and public.

QUESTION: A question. You talked about the world not standing still. I want to follow up on a statement that Beth made with the discussion with Gary on the liquid prototype, that with the emergence of new regulations, once the orders and risk management projects are accepted, particularly the reference that you made in the unusually environmentally sensitive area regulations, and requirements that may come forth to protect those, does that automatically mean that you see readdressing in this case the -- most of the liquid type of risk management plans or do you see it just being renegotiated to ensure that the risk analysis factored in and is still appropriate?

MR. FELDER: No, I don't -- I don't see us going back to -- to reopen things that have been negotiated. Presumably we are going to get ourselves a level of safety that's over and above, and whether we have a formal nationwide activity to identify these areas or not at this point, certainly as we go on a project-by-project basis, we are going to be identifying the areas along the -- in the project that we feel would meet that definition, and indeed we're going to have local input, and I'm sure constant reminders from those who want to protect those resources as to what we need to be doing on those projects.

So, I don't see future regulation as -- as a -- as a stumbling block.

Yes?

QUESTION: In the very unlikely event that you don't initially get 10 companies, 10 operators to participate in the project, for those companies that are on the bubble right now, they're interested, they've got one foot in, but they're not quite sure whether to jump, would the opportunity be there a year, a year and a half down the road for those companies to file a letter of intent to fill the 10 slots?

MR. FELDER: It's a possibility, but at this stage, I think that we'll probably have -- there's a good chance that we'll have a full deck up front. We may not. If we do not, I would -- I would still urge people to put in letters of intent. It doesn't mean that you're necessarily going to end up in a project, but if you're thinking about it, and you think you might be in a position to -- to get started, and you've got a company commitment to do so, it may just be worth your while.

MS. CALLSEN: One good question that I heard during one of the breaks kind of follows on to that. A company that really does not have a mature risk management program but still likes the idea of the demo projects and should they submit a letter of intent.

MS. GERARD: I think, you know, we have a certain amount of formality here in terms of setting up a structured process. We are the Federal Government after all, but what do we take away from all this, and that is we should be talking.

If there's something going on in your company, and you're excited about it, and you want to try some thing out, call us up and talk about it. I'm sure there's people from the regional office that want to know about it. I know we want to know about it.

There's -- there's all kinds of possibilities there. Communicate.

MR. FELDER: Okay. I want to thank the panel for their good work, and --

(Applause)

MR. FELDER: -- it's very much, I think, typical of the involvement that we've had across the program from the states, from the industry, and -- and from my staff, and as we work toward our conclusion, one of the first things I'd like to do is bring up here some of our sponsor organizations, who have worked so hard and so well to oversee this process and take us to where we are today.

First, let me bring up John Riordan from MidCon, who has been our gas industry sponsor.

John?

Summary

MR. RIORDAN: Good afternoon. I'm from MidCon, and I'm the spokesperson for the Interstate Natural Gas Association of America or INGAA as we're better known.

INGAA represents the interstate natural gas transmission pipelines operating in the United States and provincial pipelines operating in Canada as well as the natural gas companies in Mexico and Europe.

Our members operate over 200,000 miles of natural gas pipelines and related facilities, and we move over 90 percent of all the natural gas that's moved in interstate commerce.

One thing I -- there seems to be an impression that maybe some of us don't know where our pipelines are and don't have maps, but I want you to know that we do have maps of our pipelines. We know where our pipelines are, and we fly them on at least a monthly basis, and we walk those pipelines. So, we -- we do know where our pipelines are in our business, and they make certain that we know where our pipelines are.

The Edison incident occurred in March of 1994, and I think despite a lot of very significant work to make certain that these kind of incidents didn't happen, it did happen, and I think at that time, a lot of people questioned the safety and how we were operating within this business.

Realizing that that credibility gap occurred, the Board of INGAA, which is represented by the major CEOs of the pipelines within the United States, Mexico and Canada, decided that we needed to react to this and start looking at how we could help that credibility problem in the future, and one of the things that we did at that time was to take a look at -- at risk management.

We put together a committee at that time and looked at seven different issues that we needed to deal with. Several of our members at that time began to investigate the liquid risk management quality team effort, and we did participate in that event as we moved forward.

In the meantime, we involved ourselves with the Gas Research Institute or GRI, the Pipeline Research Committee, because research is a very important part of everything that we're doing to try to improve the safety of our operations.

In 1995, a separate gas transmission risk assessment quality team was formed by the Office of Pipeline Safety and INGAA. The steering group identified a strategy to investigate our risk management can be used to enhance pipeline safety, and we started looking at that, that really involved all seven of the issues that we'd addressed through INGAA that we needed to follow up with over a period of time.

The natural gas transmission industry in concert with the liquid pipeline industry and OPS mobilized to expand the concept of risk management to include the regulatory structure.

This philosophy was codified in the Pipeline Safety Act of 1996. So, the presentation you saw today is a result of this effort.

The set of documents that made up risk management demonstration project are truly a very collaborative effort of the industry and government. The process up to this point has really been a learning experience for all of us, the companies and the regulators, and I think this process is going to continue as we move forward in the future.

The society and the marketplace are demanding increased accountability from industry and the people that regulate the industry, and INGAA believes that the risk management demonstration project is very important to that.

I'll be reporting to the INGAA Board this week, the end of this week, on the progress we've made with risk management, and where we're going in the future, and we've got a lot of attention from the INGAA group as to how we're going to proceed as we move forward.

I think the plan that you've laid out today is a tactical plan to accomplish this strategy, which was really developed in 1995 by the steering group.

I think if we look through several points that we might want to make here, I think communications have been brought up several times. Communications are really very important. My job here today was to try to summarize what went on today, and that's very difficult, but the meeting today was a summary of an awful lot of work that's gone on over the past three years in trying to get this done.

So, you're not seeing all the details, and I think that's why some of these questions you're bringing up, we might not be covered in the data, may seem a little difficult for all of us to understand.

Within my organization, we've had -- I've had a tough time in the beginning to get our people to be involved with OPS on this. We have been involved with risk management before this process started. I'd say it goes back about three years before it got started. But we've had excellent communications with OPS. So, people within our organization who really didn't want to open up what we were doing with OPS, regulators and other people, have become very positive about what we're doing in this area.

So, communications really, really do help as we're moving forward in this area. So, we will -- our company will participate in risk management, and I don't think we're going to have too much trouble getting the 10 demonstration projects that we're looking for.

We're dealing with, as I said, a lot of different constituencies here. So, it's not an easy communications job for us, but that is no excuse for not doing it, and, so, we're going to keep working in this area. There's an awful lot of work has gone on over this period of time to get where we are.

It's not going to be simple. I like to see things really -- reasonably simple, but this is not going to be simple, even though we're trying to make it a lot easier for all of us to work with.

I think we're off to a really good start. I would not have guessed that we'd be here today three years ago when we got started here because I did not really believe that we'd all be able to communicate as well as we have been able to and work out some of our problems.

Bruce Ellsworth, who I have a lot of respect for, who you heard comments from him this morning, said if it isn't broke, don't fix it. I agree with him in many cases, but I think it's a little difficult situation or different situation today.

I think if you're not making things better, then it may break because whatever we've been doing isn't good enough for anything that we're going to do in the future because changes are going on so fast that you've got to continue to improve your operations.

We felt we've had a very good safe transmission, pipeline transmission business, but whatever we've been doing hasn't been good enough, and we're going to really try to help make it better in the future.

So, we really appreciate your involvement. We want you to stay involved, and we want to communicate with you, and I'm very pleased with where we are today.

Thank you.

(Applause)

MR. FELDER: Thank you, John.

Some of you may be wondering what's to become of our Joint RAQT Team. Does it have a future? It's the group that's brought us where we are today, set up the -- chartered the subcommittees that put the building blocks together.

I want to let you know that that group will be monitoring the use of the building blocks that we've created and making adjustments if those are required, planning and performance tracking and annual reporting of the projects as we move forward.

We do have a report to do to the Congress, and we're planning to do periodic reports along the way. Hopefully they will be supporting our communications and training efforts and providing us with sound advice as we go through the -- the four-year project.

There are, you know, lots and lots of people here to thank, but before we do that, I think we need to hear from our representative from the liquid industry.

Joe Martinelli recently retired from Chevron. I guess I have to call him up here. He's just -- he's just an agent for change now.

Joe?

MR. MARTINELLI: Thank you, Rich.

When I thought about coming before this group in the last little while, I've had -- I've been part of the steering group on the liquids side since this thing all started. Somebody said two and a half years ago, my recollection is more like four years ago. So, we've been a lot of places and done a lot of things, but in the last couple weeks, my personal situation has changed quite a bit.

I have fulfilled my obligation as chairman of the General Committee of Pipelines for API. So, I have no role to play there, and on January 2nd, I became early retired, unemployed, ex-president of a pipeline company.

Now who wants to hear anything from somebody with those kinds of qualifications and those kind of backgrounds? So, -- so, I did with some trepidation agree to make some comments, and obviously you should recognize what you heard today is the result of a tremendous amount of work by a tremendous number of people, both in government and industry and the public and just interested bystanders, and I would like to add my recognition, and I would ask you whether you agree with the conclusions that you've heard and what you've seen today, let's give a round of applause for those folk because they did us a great service.

(Applause)

MR. MARTINELLI: I'd like to go back maybe four years ago when this all started because there were a few of us sat in an office in Washington, D.C., and decided we wanted to start on this journey, and we didn't have the slightest idea where the hell we were going, but we needed -- we knew we needed to go some place.

Industry was facing some tremendous challenges. We were being asked to do more with less. We were right-sizing, down-sizing, side-sizing anything, anything you wanted to call it, but we were fundamentally being asked to do a lot more with a lot less.

As we looked at the challenges we had, clearly the regulatory process had a major impact on what we did and how we did it, and -- and we haven't heard it today, which surprises me because early on, we heard it a lot, that one of the challenges we face, both as industry and as regulators, was one size fits all regulation. I'm just amazed we haven't heard that today, Stacey.

But -- but, clearly, I think the conclusion we came to was one size fits all regulation probably isn't in the best interests of everybody. There was no guarantee that cause and effect really was there through one size fits all regulation.

We recognized the need again for fundamental change, fundamental change on the part of industry, fundamental change on the part of the government, fundamental change on the part of the public, fundamental change on the part of anybody who participated in the process, and as we all know from a personal perspective, change is not easy, and in fact, given a choice, we'd just as soon not bother. We're very comfortable with what we did the last 30 years.

In fact, some of the technical teams and the RAQT teams are very tired of hearing me say don't get caught up in the 30-year syndrome or the not here syndrome because to a large extent, that has controlled some of the things we've done, both in business and government and every place else.

So, fundamental change. John made reference to Bruce, and you talk about differences of opinion on the steering team. Bruce's attitude of if it ain't broke, don't fix it. My attitude if it ain't broke, break it and continuously improve it. So, even at the steering team level, we had some rather interesting discussions, and I guess we'd call them discussions, but -- but certainly the whole -- again, the whole aspect of fundamental change.

I think the other principle that we identified early on was we had to become more collaborative than adversarial. We wasted a lot of resources throwing rocks at each other, didn't do a whole bunch of good for anybody, and, so, the whole effort of collaborative versus adversarial was a key, key fundamental driver of what we tried to do when we started this process, and just from the comments you've heard today, maybe it isn't perfect. Maybe we aren't where we need to be in terms of the collaborative effort, the communication effort, but I have to tell you having spent 30 some years in this business, we have come a long way with the effort that's in front of you and that's been talked to you today -- about today.

So, -- so, don't -- don't give up. We're -- we're making progress. A lot -- one of the things that's pretty clear, John mentioned communication, I mentioned collaboration, one of the things that's pretty clear in accomplishing either of those is it takes time, it takes committed time, it takes willingness to listen to other people's points of view and develop consensus rather than my way's right, and your way is wrong because that's how we did an awful lot of it in the past. So, that's another challenge or another basic principle that I think we identified.

We wanted better results, not only better results in safety performance, environmental performance, but better results in the utilization of resources because again there was a lot of waste in the system, and, so, that was one of the other charges that we gave to the -- to the groups.

We also recognized that we didn't kid ourselves and say you were going to develop the absolutely perfect right solution to the issue because in my opinion, there is no such thing as perfect right solution to the issue.

What we wanted them to do is do a better job, and as time went on, we could continuously improve and make better whatever the group came up with. So, don't -- I don't want anyone to walk out of the room thinking that, well, they really didn't solve all the problems. No, they didn't, and you never will. So, let's start some place and get better because that's really the way it works in the real world, whether you're talking about business or whether you're talking about government or whether you're talking about education. So, that's another fundamental principle.

If any of you have spent any time at all in understanding a management improvement technique, termed total quality management, it doesn't take a whole lot of imagination to recognize that a lot of the principles that we established for this effort four years ago were really based on all of the principles that are encumbered -- that are included in the whole process of total quality management.

So, -- so, again, if you really think we created some new stuff, we really didn't create some new stuff. We used a lot of the principles, a lot of the techniques, a lot of the methodologies that had been used in some cases over 40 years ago. So, it's not like we've, you know, really done this marvelous thing, folks. We have used some -- some processes and techniques that have been around for a long time. I think that was very smart. Rather than try to re-create the wheel, we used processes that were available.

We haven't heard a lot today about the legislative effort that went on, to follow up on some of the stuff that -- that the teams developed just so that we could do and Rich could do and the Office of Pipeline Safety and some other folks could actually do some of the things we wanted to do. There's an awful lot of additional people over and above the -- the teams that developed this thing that we owe a debt of gratitude to for their effort in bringing this legislation about which allows us to go forward and do what we want to do.

From some of the comments I've heard today, I get the feeling that people think we're at the end of a journey. We're at the end of a journey. I don't want to shock you, and I don't want to surprise you, and I don't want to make you feel bad, but recognize we're at the beginning of a journey. We are trying to make some fundamental change in the way we do things. We do things. All of us do things. That takes a lot of time. It takes a lot of effort. It takes a lot of dedication. It's not just going to happen. It's not just going to happen.

Couple future challenges, opportunities, responsibilities that I'd like to place to the group, and that's easy for somebody who's retired to say, because I'm going to go sit on my island and do nothing, but that's not my problem anymore.

A couple of -- a couple of things. Number 1. I want to suggest that you all get comfortable with change. Comfortable with change. It's here. It's here at an ever-increasing dynamic rate, and it's -- and it -- it ain't going to change. It ain't going to get less. It's not going to get easier. There's more of it and more of it and more of it, just pick up the paper any day of the week. So, get comfortable with it. Don't fight it. Don't fight it. Accept it as a challenge.

I want to give you a little rule of thumb that I've used in the pipeline company. It's called the Rule of Three Positives. When somebody suggests something to you, a change to you, what is your normal reaction as a human being? Your normal reaction of a human being is that, oh, that won't work. That's not the way I do it. That's not the way I've done it. It just won't work.

Well, I was given a challenge a few years ago by a professor that said no, when somebody suggests something new and different to you, what you must do is stop and think, stop and think, and make three positive comments about that crazy idea before you can make one negative comment. Try it. You'll find it very challenging, but I think you'll find it very rewarding in terms of the ultimate outcome because we're too good at evaluating everybody else's stuff and saying everybody else's stuff is no good and ours is great. So, think about that a little bit. Think about that a little bit.

I guess the last encouragement particularly to the companies in this room, you play a significant part in making this change successful, and you can make -- make it successful by participating, by participating. Be innovative. Be creative. Take a risk. Participate in this process. Inundate the Office of Pipeline Safety with letters of intent. Make their job really tough in terms of selecting what we do to move this process forward.

It is important to the future of this industry because if this is successful, we will for the life of the industry change the way we do things with regard to the regulatory process or it is my hope that we will. So, -- so, participate.

I have to say that from a Chevron perspective, we have participated in this from the outset. We contributed, but we learned a lot. Cost us a lot of time. It cost us a lot of money, but believe me, it paid in spades.

Thank you.

(Applause)

Closing

MR. FELDER: It's easy to see the kinds of things that kept us going as we were putting this process together, the motivation, the friendship, the wisdom that we got from the John Riordans, from the Joe Martinellis, from the Bruce Ellsworths, Chuck Krambuhl, who also serves as a member of our steering committee, and we're delighted to have had their -- them as colleagues and look forward to continuing this process, which, as Joe says, we're just beginning, and, yes, we do accept Joe Martinelli's suggestion that he stay on as a public member of our steering committee.

Among the thanks that I want to extend before we close here is again to Mike Neuhard for his role up here as moderator of the prototypes.

Gary Zimmerman and Andy Drake, who you saw up here doing their little role playing, I can't tell you how many other roles they've filled for us as members of other committees, other groups, keeping us honest, keeping us busy, as Joe said, making our life a little tougher but more rewarding in the process.

I thank all of those who participated in the script-writing and the choreography of the prototype on our staff and in the industry groups. I'm very grateful to Richard Sanders from TSI and Dewitt Bordeaux and the rest of the TSI team who are a lot better at this technology than we are. They really helped to put together today's presentation, and Bob Smith and Tom McDonough from the Volpe Center up in Cambridge did a nice job for us on the technical side as well.

You know, what can I say? My own staff has worked very, very hard on this from top to bottom. Stacey Gerard.

(Applause)

MR. FELDER: And everyone in my organization who has come here today to participate in this meeting, to plan this meeting, and to work in the days ahead as we work on this project and others.

So, I won't hold you any longer myself. I'm going to turn the program to Stacey, who has worked so long and hard with members of the Joint RAQT Group. We've got some commendation and congratulations, and I thought it would be better coming from Stacey. I see she has friends. Many.

MS. GERARD: These are certificates of appreciation from the department which typically are reserved for government employees, and that we wanted to say thanks to our industry and state partners and some of our technical consultants, and if you would come forward, and we could give you this very small appreciation of our thanks for so many hours of work over the years.

Andy Drake. And they're in no particular order. Andy Drake.

(Applause)

MS. GERARD: Mike Neuhard.

(Applause)

MS. GERARD: Gary Zimmerman.

(Applause)

MS. GERARD: Gary. Okay. John Gawronski.

(Applause)

MS. GERARD: John Zurcher.

(Applause)

MS. GERARD: Denise Hamsher.

(Applause)

MS. GERARD: Dave Feiglstok.

(Applause)

MS. GERARD: Stuart Schwartz.

(Applause)

MS. GERARD: Bob Leonberger.

(Applause)

MS. GERARD: Tony Karahalios.

(Applause)

MS. GERARD: Doug Reed.

(Applause)

MS. GERARD: API.

(Applause)

MS. GERARD: Ted Willkie. You here, Ted?

Nancy Wolfe.

(Applause)

MS. GERARD: Okay. Keith Leewis.

(Applause)

MS. GERARD: Mike Cowgill.

(Applause)

MS. GERARD: Okay. Okay. Jim Von Herrmann.

(Applause)

MS. GERARD: Jim? Thank you so much, Jim.

Nancy? Cowgill? No. Mike? Okay.

Mark Hereth. There's Jim. Where is Mark? Thank you, Mark.

(Applause)

MS. GERARD: Terry Boss.

(Applause)

MS. GERARD: Marty Matheson.

(Applause)

MS. GERARD: Bob Pasteris.

(Applause)

MS. GERARD: Bob Pasteris?

Cherie Rees.

(Applause)

MS. GERARD: Thank you, Cherie.

Phil Dusek.

(Applause)

MS. GERARD: Thank you, Phil.

And the ever-so-quiet Don Stursma.

(Applause)

MS. GERARD: Scott Benton from the State of Texas. Are you here, Scott? Thank you.

(Applause)

MS. GERARD: Jerry Langley.

(Applause)

MS. GERARD: Jerry?

And Henry Cialone.

(Applause)

MS. GERARD: There's Henry.

Thank you all very much. I think we've -- we've really had a good time putting this presentation together. It's not over. Hope you'll continue to work with us.

Thank you very much. There's a state meeting at 5:30 in the Magnolia Room.

Thank you.

(Whereupon, at 5:00 p.m., the meeting was adjourned.)