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Lacking key gas pipe records, Cascade faces up to $2.5M fine, audit

Cascade Natural Gas Corp. could pay up to $2.5 million in penalties under a proposed settlement for not having the proper records for 40% of the company's high-pressure pipelines in Washington state.

As much as $1.5 million of that sum may be dropped if the utility meets a number of upcoming safety benchmarks, according to the company's agreement with staff at the Washington Utilities and Transportation Commission, filed on Dec. 15.

The utility in April owned up to operating 116 high-pressure pipe segments totaling about 222 miles without having the records to show what the lines' maximum allowable operating pressures were supposed to be. Based on that, the Utilities and Transportation Commission, or UTC, in July issued a complaint against the company, recommending at the time that the utility pay a $4 million penalty.

Although the settlement penalty is substantially lower, Cascade Natural Gas agreed to a compliance program that would have the company validate the maximum allowable operating pressure for 50% of the mileage by the end of 2018 and 100% of the mileage by the end of 2023. At each of these junctures, if Cascade Natural Gas has not lived up to its commitment, the company would have to pay a $250,000 penalty.

A consultant is reviewing the utility's records to see whether there are any other high-pressure lines that are missing important information. Depending on the findings of that review, the UTC staff and the utility agreed to file an amended settlement agreement in early 2018, and if the company does not comply with that agreement, Cascade Natural Gas would have to pay a $500,000 penalty.

As part of a long-term safety strategy, Cascade Natural Gas and the UTC staff also agreed that the company should have a third-party audit based on pipeline safety management systems, an industry recommended practice for risk management. The audit report would be due to the commission by the end of 2017, or Cascade Natural Gas would have to pay another $500,000.

The best practice at the heart of the audit, known as American Petroleum Institute recommended practice 1173, has been a growing part of utility commission compliance strategies. Although 1173 is voluntary, safety experts have said it may be one of the most effective strategies for improving safety in the industry and have encouraged regulators to use it as a bargaining chip in settlement negotiations when utilities break pipeline safety rules.

"CNGC has agreed to settlement terms that go above and beyond resolving the specific violations alleged in the complaint regarding missing documentation," a UTC filing on the settlement said. "CNGC has agreed to take steps to implement recommended practices, although these particular standards are not required by code. ... [T]he steps Cascade is taking as part of the compliance program are best practices that will enhance the long-term integrity of its system."

The UTC commissioners still need to review and approve the settlement agreement for it to go into effect. Cascade's parent company is MDU Resources Group Inc. (Washington UTC docket PG-150120)