Order Clarifying Issue Related to Establishment

L/ice Date of Issuance February 10, 2017 Decision 17-02-016 February 9, 2017 0

0BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission’s Own Motion to Adopt New Safety and Reliability Rulemaking 11-02-019 Regulations for Natural Gas Transmission and (Filed February 24, 2011) Distribution Pipelines and Related Ratemaking Mechanisms.

ORDER CLARIFYING ISSUE RELATED TO ESTABLISHMENT OF MAXIMUM ALLOWABLE OPERATING PRESSURE, AND DENYING REHEARING OF DECISION (D.) 15-06-034

In this Order, we dispose of the application for rehearing of Decision (D.) 15-06-034 (or “Decision”),1 filed jointly by the City of San Carlos and the Commission’s Office of Ratepayer Advocates (“ORA”) (collectively, “rehearing applicants”). I. BACKGROUND D.13-12-042 2 authorized Pacific Gas and Electric Company (“PG&E”) to operate natural gas transmission Line 147 at a pressure no higher than 330 pounds per square inch gauge. Located along the San Francisco Peninsula, Line 101 runs 34 miles from Milpitas Terminal in Santa Clara County to the San Francisco Gas Load Center in San Francisco. Gas coming into Milpitas Terminal supplies all the customers along the San Francisco Peninsula. Line 101 approximately follows the alignment of Highways 237 and 101. Line 147 is a 3.8 mile crosstie that connects Line 101 at mile point 21.54 to Lines 109 and 132, which also serve the San Francisco Peninsula. In D.11-09-006,3 the Commission adopted an expedited process by which

1 All citations to Commission decisions are to the official pdf versions which are available on the Commission’s website at: http://docs.cpuc.ca.gov/DecisionsSearchForm.aspx. 2 Order Instituting Rulemaking on the Commission’s Own Motion to Adopt New Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanisms (“Decision Establishing Maximum Operating Pressure for Pacific Gas and Electric Company’s Natural Gas Transmission Line 147”) [D.13-12-042] (2013), as modified by Order Modifying D.13-12-042, and Denying Rehearing, As Modified [D.15-06-034] (2015). The latter is the decision being challenged in the instant application for rehearing. 3 Order Instituting Rulemaking on the Commission’s Own Motion to Adopt New Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanisms.—Decision Adopting Procedure for Lifting Operating Pressure Restrictions [D.11-09-006] (2011). 170214444 1 R.11-02-019 L/ice

PG&E could request authorization to lift operating pressure restrictions to its natural gas transmission lines. The Commission imposed the operating pressure limitations in response to the rupture and explosion of Line 132 in the City of San Bruno on September 10, 2010. The Commission also adopted the substantive showing required by PG&E and directed that PG&E’s presentation must “include a responsible engineer’s review of the pipeline construction and assessment of the pressure test results. In short, PG&E must be fully accountable for the pressure test and the assertion that the line can be safely operated at the restored MAOP.” (D.11- 09-006, supra, at p. 13 (slip op.).) The Commission further required PG&E to submit the following specific

2 R.11-02-019 L/ice information in support of any request to lift an operating pressure restriction on a natural gas transmission line: (1) number of segment, general description, location, length of segment, and percent specified minimum yield strength at maximum allowable operating pressure (“MAOP”); (2) maximum operating pressure (“MOP”) and MAOP for each segment and the entire Line prior to the pressure reduction; (3) reason for MAOP reduction; (4) complete pressure test results for each segment in Class 3 or Class 4 locations or Class 1 or Class 2 High Consequence Areas (“HCA”) where MAOP will be restored, including explanation of findings and any actions taken based on results of pressure testing; (5) MAOP validation records for non-HCA segments where MAOP will be restored; (6) proposed MOP and MAOP for each segment and the entire Line and proposed effective date; (7) a safety certification, including a verified statement from the PG&E officer responsible for gas system engineering that PG&E has validated pipeline engineering and construction, reviewed pressure test results and can confirm that a strength test was performed on the segment in accord with 49 CFR Part 192, subpart J, or the regulations in effect at the time the pressure test was performed, and in the professional judgment of the engineering officer, the system is safe to operate at the proposed MAOP; (8) concurrence of the Commission’s Consumer Protection and Safety Division.4 The Commission applied the standards set out above in reviewing PG&E’s request to increase operating pressure on Lines 101, 132A, and 147 in D.1112048, 5 adopted on December 15, 2011. In D.11-12-048, the Commission found that PG&E had presented pressure test results, supporting information, and the testimony of its responsible engineer verifying that the MOP of Lines 101, 132A, and 147 could be safely restored to 365 pounds per square inch gauge (“psig”). Part of PG&E’s validation process for Lines 101, 132A, and 147 included a pipeline features list showing each component of the pipeline facilities. In the earlier proceeding, PG&E explained that it based its pipeline features list on design plans, asbuilt drawings, purchase orders, pressure test records, coating information, as well as other available documents. PG&E then reviewed the pipeline features list to establish the maximum pressure

4 Effective January 1, 2013, the Consumer Protection and Safety Division changed its name to the Safety and Enforcement Division (“SED”). 5 Order Instituting Rulemaking on the Commission’s Own Motion to Adopt New Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanisms (“Decision Establishing Maximum Operating Pressure for Lines 101,132A, and 147”) [D.11-12-048] (2011). 3 R.11-02-019 L/ice for each feature. PG&E originally requested an MOP of 365 psig for Line 147. (D.13-12-042, p. 4 (slip op.).) As part of a 2012 leak repair, PG&E discovered that certain information used in its 2011 pipeline features list for Line 147 was erroneous. With the correct information reflected in the pipeline features list, the MOP for Line 147 was 330 psig, not the 365 approved by the Commission in D.11-12-048. The timing and means by which PG&E informed the Commission and the parties of this error and correction for Line 147 has led to significant controversy. PG&E reduced the operating pressure on Line 147 to 300 psig and in October 2013 reduced it further to 125 psig. On October 8, 2013, the assigned Commissioner and Administrative Law Judge (“ALJ”) issued a ruling directing PG&E to file and serve an updated Safety Certification for Line 147. The ruling required PG&E to file and serve the updated Safety Certification no later than October 11, 2013, and further required the certification to conform to the requirements set forth in D.11-09-006 and to include any supporting information or analysis not previously provided for the record. On October 11 and 16, 2013, with a supplement on October 18, 2013, PG&E provided its Supporting Information. PG&E indicated that its October 11 submission included the following information: (1) Pipeline Features List for Line 147 mainline pipe; (2) MAOP Report for the Line 147 mainline pipe; (3) Pipeline Centerline Survey Results for Line 147 mainline pipe (2.61 miles of 3.98 miles); and (4) pressure-volume data for the 2011 strength test for Line 147. The Pipeline Centerline Survey Results were attached to the submission. All other information was included in Exhibit A, which was not attached to the document submitted to the Commission or the parties. PG&E explained that Exhibit A contained sensitive information regarding the location critical infrastructure, the disclosure of which could pose a public safety risk. For that reason, PG&E made this information available for the parties’ inspection but not copying. On October 16, 2013, PG&E provided Additional Supporting Information, consisting of the following: (1) Pipeline Features List for Line 147 shorts (15 smaller diameter pipelines that serve individual customers); (2) MAOP Report for the Line 147 shorts; (3) Pipeline Centerline Survey Results for the remaining 1.37 miles of Line 147 mainline pipe; and (4) safety certification of PG&E engineering officer. The Pipeline Centerline Survey Results and

4 R.11-02-019 L/ice the Engineering Officer’s safety certification were attached to the document submitted. As with the October 11 submission, the specific pipeline information was made available to the parties for inspection but not copying as part of Exhibit B to the request to lift operating pressure limitation. On October 21, 2013, the assigned Commissioner and ALJ convened a prehearing conference to set the procedural schedule for the Line 147 issues. PG&E explained that Line 147 was “shut in,” meaning that no gas was flowing through the pipeline and pressure was being maintained at 125 psig. PG&E agreed to voluntarily limit pressure to 125 psig pending further order of the Commission, and SED recommended that PG&E also remove the “shut in” requirement.6 As required by D.11-09-006, SED reviewed the Supporting Information provided by PG&E. In a report dated November 14, 2013, SED explained its detailed review of PG&E’s Supporting Information and investigation of the leak found and repaired on segment 109 of Line 147 and concluded that it had found no issues that would prevent the Commission from authorizing PG&E to operate Line 147 at 330 psig. (D.13-12-042, pp. 6 & 16 [Finding of Fact 5].) On October 18, 2013, PG&E filed and served on the parties a supplement to an earlier Verified Statement of the Vice President of Gas Transmission Maintenance and Construction. This supplement included up-to-date reports on PG&E’s efforts to validate the MAOP of Line 147. PG&E also included in this supplement a report from Kiefner & Associates, authored by Michael J. Rosenfeld, P.E., on the fitness for service of Line 147. This report concluded that the October 2011 hydrostatic pressure spike test confirmed the fitness for service of the pipeline for its MAOP without doubt. The report further indicated that a review of data concerning pipeline integrity threats provides no evidence that the integrity or fitness for service of Line 147 has degraded in the two years since the October 2011 hydrostatic tests were conducted.7 ORA presented written direct testimony of its Senior Engineer, which raised issues with the completeness of PG&E’s pressure test results and the reliability of its natural gas transmission system records. (Evidentiary Hearing Exhibit P.) SED also presented direct

6 Reporter’s Transcript (“RT”), Prehearing Conference 3, Vol. 1, at pp. 68 – 72. 7 Supplemental Declaration of Sumeet Singh, Exhibit F, Letter Report from Michael Rosenfeld, PE, Chief Engineer, Kiefner & Associates (October 18, 2013). 5 R.11-02-019 L/ice written testimony of its outside consultant which questioned PG&E’s ability to perform a root cause analysis of the 2012 leak in Line 147, and the system-wide disarray of PG&E’s pipeline records. (Evidentiary Hearing Exhibit O.) The City of San Carlos presented written testimony of its expert, Dr. Glen Stevick, included in the formal evidentiary record as Exhibit S. Dr. Stevick concluded that a fracture assessment should be completed to enable PG&E to determine an allowable operating pressure and set the time table for retesting Line 147. Dr. Stevick recommended that PG&E’s database be further corrected, and appropriate operating pressure be determined based on the consideration of all failure modes including fracture, appropriate remaining life calculations performed and made available to PG&E engineering and all regulatory bodies, and complete fracture testing be performed on materials available from repairs. Dr. Stevick sought an end-to- end proof test that PG&E had hydrotested the entire Line 147. Dr. Stevick concluded that without knowing the accuracy of the pipeline database, it is difficult to determine an accurate safe operating pressure. Dr. Stevick also reviewed PG&E’s metallurgical test of the portion of Line 147 removed with the leak repair and found no evidence of crack growth during hydrotesting or during service, and that the leak resulted from a faulty repair weld. Dr. Stevick sought additional information from PG&E to finalize his assessment. On November 18, 2013, PG&E presented its Vice President of Gas Transmission Maintenance and Construction, Senior Director of Integrity Management in Gas Operations, and Mr. Rosenfeld from Kiefner & Associates for cross-examination by the parties. The witnesses answered questions from the parties, and the parties requested additional clarification on the technical details of the testimony offered by PG&E. On November 19, 2013, PG&E convened a workshop at its offices to further explain and provide documentation of the Supporting Information to the parties. On November 20, 2013, the evidentiary hearing resumed and the parties explained that their technical questions had been substantially resolved, and that no party disputed PG&E’s pressure test results as required by D.11-09-006.8 Parties did, however, raise issues regarding PG&E’s Procedure for Resolving Unknown Pipeline Features, which was approved by the Commission in D.1212-030,9 and is currently before the Commission in 8 RT, Vol. 18, at p. 2719. 9 Order Instituting Rulemaking on the Commission’s Own Motion to Adopt New Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanism — Decision Mandating Pipeline Safety Implementation Plan, Disallowing Costs, Allocating Risk of Inefficient Construction Management to Shareholders, and 6 R.11-02-019 L/ice

PG&E’s update application, filed on October 29, 2013, Application (A.) 13-10-017. The parties were invited to pursue these issues in the update application proceeding. At the conclusion of cross-examination, the evidentiary hearing was concluded and the issue of restoring the pressure on Line 147 was submitted for consideration by the Commission. With the submission of late-filed exhibits, the record was closed. On December 24, 2013, the Commission issued D.13-12-042. The Commission authorized PG&E to operate Line 147 at a pressure no higher than 330 psig. (D.13-12-042, pp. 1 & 17.) The Commission determined that the MOP on Line 147 could be safely restored to 330 psig and found that PG&E had complied with pressure testing requirements and the supporting information requirements of D.11-09-006. On January 23, 2014, the City of San Carlos and ORA filed an application for rehearing of D.13-12-042. The rehearing application challenged D.13-12-042 on the following grounds: (1) the Decision committed legal and factual error by approving a maximum operating pressure (“MOP”) rather than a maximum allowable operating pressure (“MAOP”); (2) the Commission legally erred by concluding that the federal regulations governing the MAOP of lines currently in service do not apply to lines installed before 1970, and there was no showing that PG&E properly calculated the MAOP for Line 147 consistent with these federal regulations; (3) the Decision committed legal error by denying San Carlos due process by making a decision without a complete record; (4) the Commission acted unlawfully by erroneously excluding key evidence from the record; and (5) the Decision contains factual and legal error because it fails to consider whether PG&E’s showing demonstrates that its records can be relied upon. PG&E filed a response to the rehearing application on February 7, 2014. On June 12, 2015, the Commission issued D.15-06-034, modifying D.13-12-042 and denying rehearing, as modified. The Commission determined that D.13-12- 042 should be modified to include a determination that PG&E has validated 330 psig as both the MAOP and the MOP for Line 147, due to the safety-related concerns raised by rehearing applicants. (D.15-06-034, pp. 11, 12, 16.) The Commission further determined that rehearing applicants should file a petition to modify D.13-12-042 under Rule 16.4 of the Commission’s Rules of Practice and Procedure if rehearing applicants “have any new or additional evidence to

Requiring Ongoing Improvement in Safety Engineering [D.12-12-030] (2012).

7 R.11-02-019 L/ice present” for the Commission’s review “affecting the safety of Line 147 or the validation and establishment of the proper MOP and/or MAOP for this line.” (D.15-06-034, p. 14.) Finally, the Commission determined that rehearing applicants should file a petition for modification of D.13- 12-042 “if they believe the recordkeeping issues with respect to Line 147 remain unresolved by the OSC and pose a hazard to public safety.” (D.15-06-034, p. 16.) As modified, the Commission denied rehearing of D.13-12-042. On July 13, 2015, the City of San Carlos and ORA jointly filed an application for rehearing of D.15-06-034. The rehearing application challenges D.15-06-034 on the following grounds: (1) the rehearing order fails to clarify that section 619(a) of the minimum federal safety standards applies to all pipelines, not just those installed after 1970; and (2) while the rehearing order suggests that PG&E’s compliance is “implicit” in its compliance with certain Commission directives, the rehearing order fails to address the argument that the Commission should have required PG&E to demonstrate that it properly calculated MAOP for Line 147 consistent with federal regulations. On July 28, 2015, PG&E filed a response to the joint rehearing application. We have carefully considered the arguments raised in the application for rehearing, and are of the opinion that good cause has been established to clarify a specific issue related to the establishment of MAOP under applicable federal regulations. Having clarified this issue in today’s decision, we deny rehearing of D.15-06-034.

II. DISCUSSION A. Application of section 619(a) to Pre-1970 Pipelines. Rehearing applicants allege that D.15-06-034 fails to clarify that 49 C.F.R. § 192.619(a) (“section 619(a)”) applies to all pipelines, not just those installed after 1970. (Rehearing Application (“Reh. App.”), pp. 7-9). Rehearing applicants have raised this issue in several filings during the pendency of this proceeding.10 In response to a written request from ORA, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) posted on its website a public interpretation of sections 619(a) and 619(c) dated January 23, 2015. (PHMSA Interpretation, January

10 See, e.g., ORA Comments on Line 147 PD (December 13, 2013), at pp. 5-8; City of San Carlos Comments on Line 147 PD (December 13, 2013), at pp. 4-5; Joint Parties’ Application for Rehearing of D.13-12-042 (January 23, 2014), at pp. 13-17. 8 R.11-02-019 L/ice

23, 2015 (Ref. No. PI-14-0005).) 11 This interpretation states that section 619(a) applies in establishing MAOP regardless of whether the pipeline was placed in service prior to July 1, 1970, but that sections 619(c) or 619(d) may be used instead of section 619(a) to establish MAOP, provided the requirements of those sections are met. (See PHMSA Interpretation, January 23, 2015, at pp. 2-3.) This Commission’s understanding and application of section 619(a) is consistent with federal regulations as affirmed by PHMSA in its January 23, 2015 Interpretation. However, in D.13-12-042, supra, we made a statement that could arguably be viewed as unclear in light of the PHMSA Interpretation.12 For that reason, we clarify in today’s decision that, in establishing MAOP, the analysis begins with section 619(a), regardless of when the pipeline was placed in service. For the reasons discussed above, our understanding and application of section 619(a) with respect to the establishment of MAOP is hereby clarified. Given this clarification, rehearing of this issue is denied. B. Calculation of MAOP Consistent with Federal Regulations. Rehearing applicants next allege that the Commission in D.15-06-034 did not address their argument as to whether PG&E had properly calculated the MAOP for Line 147 consistent with applicable federal regulations. (Reh. App., pp. 3-7.) Rehearing applicants further allege that PG&E was not clear during the proceeding regarding which portion of the federal guidelines it was using to establish MAOP for Line 147. (Reh. App., p. 6.) This allegation of error lacks merit because Line 147 is currently operating at an MAOP supported by pressure test results. In D.12-12-030 and D.15-04-021, we determined that PG&E’s inaccurate and incomplete recordkeeping prevented PG&E from meeting certain requirements in section 619(c) of the federal regulations. (See Decision Mandating Pipeline Safety Implementation Plan, Disallowing Costs, Allocating Risk of Inefficient Construction

11 The PHMSA Interpretation can be found at the following weblink: http://phmsa.dot.gov/pipeline/regs/interps/date. The applicable date is January 23, 2015. 12 Decision Establishing Maximum Operating Pressure for Pacific Gas and Electric Company’s Natural Gas Transmission Line 147 [D.13-12-042], supra, at p. 14 (slip op.).) 9 R.11-02-019 L/ice

Management to Shareholders, and Requiring Ongoing Improvement in Safety Engineering [D.12-12-030] (2012), at pp. 95-96; Modified Presiding Officer’s Decision Regarding Allegations of Violations Regarding Pacific Gas and Electric Company’s Operations and Practices with Respect to Facilities Records for its Natural Gas Transmission System Pipelines [D.15-04-021] (2015), at p. 75.) However, PG&E’s MAOP for Line 147 ultimately was not based on section 619(c), but on Pub. Util. Code, § 958 subd. (a). The PHMSA Interpretation, discussed above, notes that the Commission may impose regulations more stringent than the applicable federal regulations by establishing them through state law. (See PHMSA Interpretation, January 23, 2015, at p. 2.) Regardless of whether or not a pipeline had met the criteria established in the federal guidelines, the Commission established an additional requirement in D.11-06-017 that “[n]atural gas transmission pipeline operators should be required to replace or pressure test all transmission pipeline that has not been so tested.” (See D.11-06-017, supra, at pp. 18, 28 [Findings of Fact 6 & 7] (slip op.).) This requirement has been codified by the California Legislature as Public Utilities Code section 958. (See Pub. Util. Code, § 958 subd. (a) (“Each gas corporation shall prepare and submit to the commission a proposed comprehensive pressure testing implementation plan for all intrastate transmission lines to either pressure test those lines or to replace all segments of intrastate transmission lines that were not pressure tested or that lack sufficient details related to performance of pressure testing.”).) This additional requirement, which is more stringent than the applicable federal regulations, means that Line 147 is currently operating at an MAOP supported by pressure test results, as discussed extensively in D.13-12-042. (See D.13-12-042, pp. 9-13.) As noted in D.13-12-042, both the NTSB and the PHMSA have recommended strength testing to revalidate pipeline operating pressures. (D.13-12- 042, p. 7.) SED also determined that PG&E’s analysis was consistent with proper MAOP validation. (D.13.12-042, p. 11.) Thus, Line 147 is currently operating with an MAOP of 330 psig that is supported by the more stringent Commission and statutory requirement that older pipelines be either pressure-tested or replaced.

10 R.11-02-019 L/ice

For the reasons discussed above, rehearing applicants’ argument as to our application of federal guidelines related to the establishment of MAOP is without merit. III. CONCLUSION As discussed above, we have clarified the application of section 619(a) in terms of establishing MAOP for natural gas transmission pipelines. This clarification is consistent with the guidance offered in the PHMSA Interpretation dated January 23, 2015. Having clarified this issue, and having concluded our review of the issues set forth in the application for rehearing, we have determined that good cause does not exist to grant rehearing of D.15-06-034. Accordingly, rehearing is hereby denied. However, as we noted in D.15-06-034 at pp. 11, 14, 15, 16, if rehearing applicants have any new or additional information relevant to the safety of Line 147, this information should be presented to the Commission by way of a petition for modification pursuant to Rule 16.4 of the Commission’s Rules of Practice and Procedure. The safety of California’s pipelines is our overarching concern, and we are interested in any information that is relevant to this issue. THEREFORE, IT IS ORDERED that: 1. Having herein clarified the issue related to section 619(a) and the establishment of MAOP, rehearing of D.15-06-034 is hereby denied. 2. This proceeding, R.11-02-019, remains open. This order is effective today. Dated February 9, 2017, at San Francisco, California.

MICHAEL PICKER President CARLA J. PETERMAN LIANE M. RANDOLPH MARTHA GUZMAN ACEVES CLIFFORD RECHTSCHAFFEN Commissioners