To: Editors, News Directors

Date: May 7, 2004

For: Immediate Release

ACC and Southwest Gas Reach Accord Over
Emergency Response in Queen Creek Incident
Southwest Gas Agrees to Pay Fine and Institute New Procedures

PHOENIX – Rather than engage in lengthy litigation over a natural gas incident that occurred in February of this year, Southwest Gas officials worked with the Arizona Corporation Commission’s Utilities Division and Pipeline Safety Section to make procedural changes and arrive at an appropriate civil penalty. The resulting consent agreement makes important changes to the safety procedures that Southwest Gas emergency response teams will follow in any future incidents. The order also requires Southwest Gas to pay a $100,000 civil penalty to Arizona’s General Fund.

The incident – a natural gas leak and subsequent explosion at a Queen Creek home – led to the March 26, 2004 issuance of a Complaint and Order to Show Cause by the Commission’s Office of Pipeline Safety. The complaint alleged that Southwest Gas failed to follow state safety regulations designed to prevent property damage and allow for the safe operation of a natural gas utility system.

As background, on January 15, 2004, Southwest Gas responded to an odor complaint at a home in Queen Creek. Natural gas is odorless, tasteless and colorless. The telltale "rotten egg" smell is added to natural gas to make it easy to detect its presence.

Southwest Gas identified the source of the leak, which was determined to be a loose fitting that had allowed two sections of pipe to separate. The fitting was repaired on the same day. Because natural gas had accumulated in the ground in the residential area, Southwest Gas ordered the evacuation of seven homes. Mechanical aerators were used in an effort to pull all of the natural gas out of the ground. Over the next two days, residents were allowed to return to their homes.

Southwest Gas continued to operate the aerators through February 2, 2004. Leak surveys were also conducted to monitor for any residual natural gas.

On February 2, 2004, an explosion occurred in one of the homes when the homeowner turned on his garbage disposal. This ignited a small amount of natural gas trapped in the open space beneath and behind the sink, resulting in the explosion. The back of homeowner’s kitchen island was blown out. Fortunately for all parties concerned, no one suffered any personal injuries.

Residents were again evacuated and Southwest Gas installed modified aeration technology to remove residual natural gas deposits from the area. As of Thursday’s Commission meeting, all but one of the affected families were back in their homes.

Key terms and conditions of the consent agreement include:

• Southwest Gas must pay a civil penalty of $100,000 to the Pipeline Safety Revolving Fund.
• Southwest Gas is to notify state Pipeline Safety inspectors within two hours of evacuating anyone from a residential, commercial or industrial facility.
• Southwest Gas will provide refresher training sessions for all of its duty management personnel in accordance with the terms of the agreement.
• Southwest Gas will submit changes to its Emergency Plan/Operations Manuals for review and approval in accordance with the terms and conditions of the agreement.
• Staff and Southwest Gas agree to abide by the terms and conditions outlined in a previous Commission decision (Decision 66166 from August 14, 2003), which also ordered procedural changes and additional training in response to prior alleged failures by Southwest Gas emergency personnel.

Comments from the Commissioners

"The biggest single issue for me was that our staff was not properly notified that this serious incident had occurred," Commission Chairman Marc Spitzer said. "Our staff wasn’t notified of the Grade 1 leak. Worse yet, we were not notified of the explosion until the next day. If we are to adequately protect the public safety, health and welfare, we must be getting prompt and reliable information from the utilities."

After the meeting, Commissioner Bill Mundell said: "I expect Southwest Gas and all utilities to follow the letter and spirit of state and federal regulations. I do want to say, though, I am impressed by the response of new leadership at Southwest Gas and trust they will ensure we never see a repetition of these problems again."

Commissioner Jeff Hatch-Miller asked several questions about the incident itself and the manner in which Southwest Gas and fire department personnel handled the situation. "I want our staff to ensure that Southwest Gas follows the proper safeguards in the future," Hatch-Miller said.

"Our order compels Southwest Gas to do a much better job of communicating with our Pipeline Safety section," Commissioner Mike Gleason said after speaking with staff. "It is absolutely imperative that our safety staff have open lines of communication with Southwest Gas to receive immediate notification of emergency situations."

Ernest Johnson, head of the Commission’s Utilities Division testified that Southwest Gas had greatly improved its communication with his staff following this incident.

"As regulators, the Commission must have open and accurate communication from the regulated utilities," Commissioner Kristin Mayes said. "But more importantly, we must have responsive communications with the utilities and we must get prompt, accurate answers to our inquiries before, during and after a problem occurs. Those should be our minimum expectations."