RE: Variance Request #99 - Relocate the PPSI Pipeline Control Center from Taylor Yard to the ARCO Pipe Line Company Hynes facility, 5900 Cherry Avenue, Long Beach.

Dear Mr. Shauers:

We have reviewed the above-referenced variance request, and approve your request based on the following factors:

• As originally proposed by PPSI, the computerized operations center for the pipeline would be located in the general vicinity of Taylor Yard or in existing Los Angeles area offices of Chevron, Unocal, or Texaco (partners of PPSI). No construction was assumed for the control center building. Fiber optic cable would be installed between the control center and pipeline, and along the length of the pipeline to allow the control facility to monitor pipeline status information via the pipeline Remote Terminal Units. As proposed, either additional fiber optic or satellite connections would serve as the communication backup.

• Mitigation Measure ML-3 required PPSI to locate the control center within one-mile of Taylor Yard and maximize the use of local workers, including the use of at least 40% MBE firms for supplemental services (hauling, office supply, security and courier services, building maintenance, etc.).

• Variance Request #99 was reviewed in light of the following factors: 1) Control center construction, 2) extension of fiber optic service, and 3) consistency with use of local workers and MBE firms as required by Mitigation Measure ML-3.

Control Center Construction: Use of the ARCO Pipe Line Company Hynes facility as the PPSI Pipeline Control Center would not require any building construction.

Extension of Fiber Optic Service: To extend the fiber optic cable from the Pacific Pipeline to a control center within Taylor Yard, the installation of approximately one mile of cable would have been required. The proposed construction method for cable installation was trenching. Given the distance between the ARCO Hynes facility and Pacific Pipeline, an approximate five mile fiber optic connection would be required. However, given a nearby Southern California Edison (SCE) utility corridor, PPSI proposes to install the required fiber optic cable on existing SCE towers, requiring minimum construction. SCE has provided a letter, dated November 23, 1998, acknowledging that "SCE is working with Pacific Pipeline to lease Edison poles for installation of a fiber optic cable." The letter also states that "every effort is being made to expedite this project to allow the installation of the fiber cable by year-end." If pipeline fill and operation were to occur prior to the completion of fiber optic cable installation on the SCE towers, PPSI is proposing that their backup communication system (the use of high speed T-1 communication lines) be used over the interim period. The T-1 lines have already been installed and would provide full capability to communicate with all of Pacific Pipeline’s stations and valve sites. The T-1 lines provide for data transfer rates of 1.5 Mb/s which will support the full data rate required by the leak detection module, as well as other SCADA needs.

Local and MBE Hiring: The Taylor Yard area is located within a medium minority, low income area, while the ARCO Hynes station is located within a high minority, low income area. As part of the announced merger of Pacific Pipeline and the ARCO Pipe Line Company, ARCO would be the contract operator of Pacific Pipeline. ARCO’s employee base at their Hynes Cherry Avenue facility is ethnically diverse (40% minority). PPSI would also be hiring an approximate 8 to 10 additional employees. As proposed, PPSI would emphasize minority and low income hiring, and draw on as many qualified individuals as possible from the local communities along the pipeline corridor.

• The measures noted below shall be implemented:

- All applicable mitigation measures for the project shall be implemented during installation of the fiber optic cable on the SCE towers.

- The use of the T-1 high speed communication lines as the primary communication method between the control center and pipeline shall be allowed until the fiber optic cable has been installed on the SCE towers and is operable, or March 31, 1998, which ever is sooner.

- As proposed, PPSI shall emphasize minority and low income hiring, and draw on as many qualified individuals as possible from the local communities along the pipeline corridor. In accordance with Mitigation Measure ML-3, the quarterly reports on minority and low income hiring shall include the labor force and MBE firms utilized for the operation of the Pacific Pipeline, including the required ARCO employees.

- Prior to the commencement of pipeline operations, PPSI shall submit a letter which states that if the merger with ARCO does not happen, PPSI will implement Mitigation Measure ML-3.

- Implementation of this variance in accordance with the provisions noted above shall be verified on a random basis by a CPUC/ANF Environmental Monitor.