Atmos Energy has been replacing the steel service lines in its Mid-Tex Division since it acquired the natural gas distribution system from TXU Corp. in 2004. To date, we have replaced 51,000 of these lines. We now have 52 contract crews specifically dedicated to doing this work. They are replacing, on average, 500 steel service lines a week.

We are committed to replacing the Mid-Tex Division’s steel service lines on an accelerated schedule to ensure the safety and reliability of our distribution system. Just like electricity, water and telecommunications lines, natural gas utility infrastructure requires continual maintenance and modernization to keep it operating efficiently.

We support the objectives of the rulemaking outlined by Texas Railroad Commissioner Michael Williams for steel service-line replacements statewide. The goal is to make safe natural gas systems even safer. We have been working with the Safety Division of the Railroad Commission on engineering models to develop and implement the most efficient and effective program for replacing our remaining steel service lines.

We have received the outline of Commissioner Williams' proposal. However it will be at least August before a formal rulemaking is considered by the Railroad Commission. Until we see the specific proposal, we cannot speculate on the number of steel service lines, the number of cities that will be affected or the program’s cost.

We have been discussing the financial and operational details of a replacement program with representatives of 440 cities served by our Mid-Tex Division. The cities have original jurisdiction over our rates, and they own the underground water pipes and sewer lines as well as the streets under which they run. Replacing natural gas steel service lines will affect these cities’ property, and it will require their close cooperation and participation.

We are replacing our steel service lines with polyethylene lines and are joining them with fusing technology. Polyethylene pipe is strong, resistant to corrosion and has a long service life. We believe these replacements will help further safeguard our customers and the public.

The replacement program in our Mid-Tex Division typifies the preventive maintenance and renewal that we continually perform on our natural gas distribution system in all 12 states where we operate. This work also helps answer the larger call to action to renew the nation’s aging infrastructure of natural gas lines, water and sewer mains, bridges and highways, and the electric utility grid.

It is normal for businesses to replace their assets as they age. It is common for some steel lines to remain in our system for 50 years or more providing safe reliable service. To promote enhanced gas safety and reliability, state utility regulators have encouraged and approved accelerated program timetables. Replacement programs have been occurring in the states we serve because so much of the infrastructure was installed during the post-World War II economic boom of the 1950s to the early 1970s.

Coupled with the defined replacement programs are regulatory tariffs allowing gas utilities to recover all their program costs and to earn an allowed return on that invested capital. Replacement programs are highly capital-intensive. In our Mid-Tex Division and Atmos Pipeline-Texas Division from 2004 to 2009, we spent $1.1 billion on safety and reliability—which was 72 percent more than the same spending from 2000 to 2004 prior to our acquisition. Because the replacement programs require utilities to invest funds that they might otherwise use for other needed projects, public utility commissions wisely have approved a regulated return on these investments. Allowing a return promotes the programs, helps maintain the utilities’ financial condition and attracts the investors needed to provide large amounts of capital.

Atmos Energy has pursued in good faith a program to replace all steel service lines in its Mid-Tex Division. When repairing underground pipe or making service improvements, our technicians routinely have replaced any steel service lines with polyethylene piping. These investments as well as a regulated return on them are being paid for, as state law provides, under the Gas Reliability Infrastructure Program or under a special three-year rate recovery mechanism, which was agreed to by nearly all the municipalities the Mid-Tex Division serves.

Safety and reliability stand as our primary objective. We do it to protect our customers and the public, to maintain their confidence by providing reliable service and to be responsible stewards of the billions of dollars of assets that are entrusted to us to manage.

Atmos Energy intends to continue to work closely with the Railroad Commission of Texas and the cities in our Mid-Tex Division as we replace our steel service lines. We intend to promote and enhance safety to best serve the public.