Pipe Replacement & DIMP. Omni Hotel, Fort Worth, TX September 12, 2011

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1 Pipe Replacement & DIMP AGA Management of Vintage Pipelines Workshop Omni Hotel, Fort Worth, TX September 12, 2011

2 Company Overview Atmos Energy serves 3.2 million customers in 12 States Atmos Energy provides natural gas marketing and procurement services to industrial, commercial and municipal customers in 22 states Atmos Energy manages company-owned owned natural gas pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas 2

3 Service Territory 3

4 Historical Replacement Projects/Programs Mid-Tex early generation poly pipe replacement Mississippi cast iron replacement Georgia cast iron replacement Tennessee bare steel replacement Mid-Tex pre-bent riser replacement Mid-Tex steel service line replacement Kentucky bare steel Operational segment replacements 4

5 Atmos Energy DIM Program Leverage our expertise as an operator in conjunction with software tools to: 1. Identify risks to the integrity of our distribution infrastructure 2. Rank the risks 3. Designate measures to reduce or mitigate risk as appropriate (including pipe replacement) 5

6 Enterprise DIM Program Town level risk analysis (i.e. IP Bare Steel in Fort Worth) In-house software solution to aid in risk assessment Mathematical calculation; numerical score for each threat Risk = Likelihood (of a given threat causing a failure) x Consequence (impact in event of a failure) Calculation considers large volume of information from company databases and public sources Complements the assessment process of a local decision maker Local Subject Matter Expert (SME) identifies specific facilities/segments within given town 6

7 Texas Regulatory Requirements Federal (DOT CFR 192) State of Texas (TAC Title 16) State of Texas (TAC Title 16) Distribution Integrity Risk-Based Leak Distribution Facilities Management Plan Survey Replacement Identification of high risk facilities per Federal DIM Measures Operator takes to mitigate risk largely at our discretion Texas State Regulators promulgated rules that require Operator to take specific measures to mitigate risk Adjust survey frequency based on risk Replace service lines or 5% of high risk facilities Includes special accounting treatment for costs incurred 7

8 Atmos Energy Mid-Tex Division Acquired by Atmos Energy in M 1.5M customers Primarily serves North, Central, and East Texas 8

9 Service Line Replacement Replacing 100,000 steel service lines by September 2012 per agreements with cities Affecting 44 cities in Texas Approximately 1/5 th of steel service line inventory Verifying poly services tied to steel mains Replacing every steel service line on identified map sheets 9

10 Mid-Tex DIM Program Segment level risk analysis (i.e. IP Bare Steel along Houston St. from 11 th St. to 14 th St. in Fort Worth) Purchased commercially available software tool Groups segments of pipe by physical and operational characteristics Mathematical calculation; consolidated numerical score for all threats Numerical Risk Score = Likelihood (of a failure from all threats) x Consequence (impact in event of a failure) Calculation considers large volume of information from company databases and public sources Aids assessment process for the local decision maker by performing preliminary identification of facilities based on risk Local Subject Matter Expert (SME) reviews facilities identified by the tool and adds other facilities based on local knowledge 10

11 Mid-Tex DIM Project Pool Mid-Tex DIM Program establishes a pool of piping segments with indications of risk that will be tracked and are candidates for replacement under Texas Rule DIM/Risk-based replacements scoped around identified segments Risk may not be constrained to exact footage identified; conversely, risk may only affect a small portion of the footage identified Variety of references and exhibits prepared to increase awareness of the locations of identified segments and those slated for replacement for use by field personnel, management, engineers, etc. Recognize that we need to be responsive to discoveries in the field and/or changing conditions 11

12 Questions & Comments? THANKS FOR YOUR ATTENTION! Lance Andrews Director, Operations Atmos Energy Mid-Tex Division Andrew Marshall, P.E. Manager, Compliance Atmos Energy Mid-Tex Division 12