April 2006 News Stories

Wall Street Journal
April 30, 2006

BP Employees Invade Juneau Over Oil-tax Bill
April 30, 2006 7:18 p.m.

JUNEAU, Alaska (AP)--Legislators are calling it the BP invasion.

During a recent floor session of the Alaska House, the galleries were filled with employees of BP Exploration (Alaska) Inc. Following tradition, lawmakers introduced the spectators from their district, and worker after worker stood to be acknowledged.

As the legislators politely applauded, it was hard not to get the message: We're watching you.

The heat is being turned up on the Legislature on proposed changes to Alaska's oil tax system. At stake are billions of dollars and possibly the future of a $25 billion natural-gas pipeline that would run natural gas to Midwestern markets.

The change would create a production tax that is based on the profits of oil companies' Alaska operations. The tax is to be rolled into a contract between Gov. Frank Murkowski and BP (BP), ConocoPhillips (COP) and Exxon Mobil Corp. (XOM) on a key factor in building a pipeline - the tax and royalty terms to recover the 35 trillion cubic feet of North Slope natural gas. The governor is keeping the contract under wraps until the new tax is passed and the regular legislative session ends.

Murkowski and the three oil companies agreed on the particular rates and incentives to be included in the new tax. But when it got to the Legislature, lawmakers in both the House and Senate changed the deal, raising the tax rate and trimming some of the incentives that were included in the governor's bill.

The industry cried foul. The tax rates being proposed are too high and would stifle investment in the North Slope, company representatives said. Higher taxes than those agreed to by the governor and the producers could cause the parties involved in gas line negotiations to reevaluate the project, said Brian Wenzel of ConocoPhillips.

Those with an interest in the proposed change are now making sure their voices are heard as a final decision nears. Industry and industry-supported groups like the Alaska Oil and Gas Association and Alaska's Future are flooding the airwaves and newspapers with ads against raising the tax rate.

"The key thing that we're trying to get across to the public is that we're in a critical stage of Alaska's history," said AOGA spokeswoman Kara Moriarty, whose members are Alaska oil and gas producers, explorers and industry support companies. "Production is declining and it's declining in a serious manner. The (net-profits tax) is very important to our future."

The BP employees have the same message but they are going eyeball-to-eyeball with their legislators make the point.

It takes effort to get to Juneau from just about anywhere else in Alaska, which generally means it's the usual gang of lobbyists who are actually in the Capitol to try to influence lawmakers.

But members of BP's Citizen Action Program have been cycling in and out of Juneau over the past month from Anchorage and the North Slope on the company's dime. About four or five a week fly in, and 15 were in Juneau April 26 as the tax bill took center stage.

Andrew Van Chau, a BP spokesman who flew down last week to talk to his representatives about the oil tax, said the workers who came to Juneau volunteered to do so. They are in the capital for the day, meet with their representatives, and then fly out.

"It's a long-standing program where employees who are civic minded want to participate in the process," said Van Chau. "For many of these employees, this is their first time to Juneau specifically to see the Legislature at work."

The BP workers don't have to register as lobbyists. State law requires 40 hours of lobbying by an individual in a 30-day period before having to register with the state.

Legislators say they are happy to hear from their constituents, but they don't feel pressured by the BP employees to change their views on the bill.

Rep. Mike Hawker, R-Anchorage, said he already has plenty of practice at home fending off lobbying. His wife works for an oil company and has plenty to say about the net-profits tax, he said.

"If you can't look them in the eye and say no, you shouldn't be in office," Hawker said.

Many are saying no. The Senate passed the higher tax despite industry protest and the ad blitzes. Some House members are calling for a higher tax rate now that the bill is in the House Finance Committee.

Those legislators say a higher tax rate is needed for the state to claim its fair share of the profits and that there is no evidence that it would hurt future North Slope investment.

Tired of hearing from the governor that the wrong tax would hurt the gas contract between the state and oil companies, more lawmakers are also demanding the release of the contract. Murkowski says he now plans to release it May 10, the day after the end of the legislative session, but legislators say they want it now.

"We're intelligent, we're concerned, we care and if we don't understand something, we're trained to ask intelligent questions," said Rep. Max Gruenberg, D-Anchorage. "We can handle the knowledge."




Houston Chronicle
April 29, 2006


BP blast sparks criminal probe
Copyright 2006 Houston Chronicle

A federal grand jury has been empaneled to investigate possible criminal wrongdoing in connection with the BP Texas City refinery explosion that caused the deaths of 15 workers last year, according to sealed documents filed in county, state and federal courts this week.

It is not clear whether the grand jury has begun taking testimony or hearing evidence in the case.

Department of Justice officials declined to comment, saying they cannot talk about pending investigations. And the documents  motions filed by federal prosecutors  do not address the status of the grand jury's investigation.

But federal investigators and prosecutors appear to be ramping up their probe, parties involved in the litigation said Friday.

"I have an understanding that federal investigators and/or attorneys have talked to some high level representatives of British Petroleum," said Brent Coon, a Beaumont lawyer representing hundreds of injured workers and their families.

Of the prosecutors' motions, Coon said, "This lends credence to the perception that the Department of Justice is taking its job seriously."

The Justice Department began its investigation after the Occupational Safety and Health Administration in September levied a record $21.3 million fine against BP and slapped it with more than 300 willful violations, the most serious kind.

Local FBI agents and investigators with the Environmental Protection Agency's environmental crimes division are said to be leading the federal probe.

Many of the violations found by OSHA centered on the lack of maintenance and routine safety guidelines, as well as numerous instances of broken equipment. In announcing the violations, OSHA's regional director said it appeared the company's management turned a blind eye to safety issues.

In its internal report released in November, BP acknowledged serious management lapses that it believed led to the accident. And although the company originally fought to block their release, BP also made public in recent months two scathing internal reports regarding safety at the refinery.

Specifically, the motions by federal prosecutors seek to curtail the efforts of plaintiffs' lawyers to obtain information for the hundreds of various civil cases pending in Galveston County court-at-law, state district court and federal court.

The government is asking judges in those courts to order all parties in the civil cases to refrain from talking about anything they may learn about the grand jury proceedings.

Limits sought
Prosecutors also want all civil lawyers to notify them when they plan to take any deposition, and they want those lawyers and their clients barred from asking any questions of any potential government witness about the federal case.

"Here the United States requests limitations on discovery in these civil cases in order to protect the ongoing criminal investigation," the motions state.

It adds that the government is requesting "reasonable limitations" on discovery until the criminal investigation is complete.

Prosecutors also asked the judge to seal its request.

Galveston County State District Judge Susan Criss, who is overseeing all but a handful of the pending civil cases, said she would not set a hearing or rule on the motions for at least another week.

Coon and other lawyers reached Friday said they were befuddled by the motions, called them vague, and said they wanted to learn more from federal prosecutors about their intent.

September trial
However, they said that they would oppose any attempt to slow down their cases, the first batch of which is scheduled to go to trial in September.

"We are sensitive to their need to investigate the possibility of criminal conduct," Coon said. "But plaintiffs in these civil cases do not believe that the discovery that has been initiated or the discovery that needs to be conducted will adversely impact the criminal investigation."

Objection filed
Attorneys for the Houston Chronicle, which has intervened in the civil litigation in Criss' court in order to gain access to discovery documents, filed an objection to the government's request to seal its motions.

So far, BP has turned over millions of pages of documents through discovery, and lawyers have taken the depositions of hundreds of witnesses, Coon said.



Fairbanks News Miner
April 28, 2006


Feds scold BP on pipeline maintenance
By SAM BISHOP News-Miner Washington Bureau
Friday, April 28, 2006 

WASHINGTON--A top federal official said Thursday that her agency had received "no acceptable answer" from BP Exploration (Alaska) Inc. about why it hadn't regularly cleaned North Slope oil transit lines, including one that leaked this winter.

The lapse has allowed the lines to accumulate so much sludge that it's delaying more leak-prevention tests, said Stacey Gerard, acting administrator of the Pipeline and Hazardous Materials Safety Administration. She told a House of Representatives subcommittee that most companies clean such pipes every week or two with a "scraper pig."

BP officials, in a statement and a document provided to the News-Miner, disputed that assertion.

BP last cleaned the transit line serving Prudhoe Bay's western operating area in 1998. Sludge that built up in the line may have contributed to the corrosion that apparently caused the leak discovered March 2, Gerard said.

Now the sludge is hindering BP's compliance with the agency's March 15 order to test the lines with a "smart pig" within three months. A smart pig runs inside the lines and records any anomalies.

"At the time that we wrote the order, we did not realize that there was a large amount of deposit that had been built up inside the walls of these pipelines, which needs to be removed prior to the testing with a smart pig," Gerard said.

BP has requested an extension of four to six weeks to deal with the problem, she said.

BP Alaska spokesman Daren Beaudo said the company plans to increase its use of maintenance pigs in the future.

"We're going to improve on what we thought was already a very effective system--one that is supported by the fact that in the 30-year history of operations, prior to the GC-2 transit line spill, no one can remember a leak occurring on a Prudhoe Bay crude oil transit line," he said.

Beaudo said it wasn't clear that the maintenance should occur every week or two, though, as Gerard suggested.

"The frequency of pigging depends on many factors," he said.

The smart pigs that the PHMSA wants used on the transit lines haven't been widely employed on the North Slope because the above-ground pipes are accessible for a wide variety of more precise tests, Beaudo said. BP has conducted more than 3,000 such tests on the three major transit lines since the recent leaks and found that "those lines are fit for service," he said.

Gerard made her comments in response to questions from Rep. Ed Markey, D-Mass., at a hearing before a subcommittee of the House Energy and Commerce Committee. Markey repeatedly asked Gerard why BP had not run a scraping pig through the lines regularly.

"Obviously it can't be that BP doesn't have enough money. Or is it just another cost-saving measure, regardless of what the consequences are?" Markey asked.

He also asked whether the government bore some responsibility for having not regulated this sort of line.

"It was our expectation that they would have been running those scraper pigs, and most companies do run scraper pigs on about a weekly to biweekly basis," Gerard said. "There's a general standard of care that most operators exercise, that are exercised without our regulating them. Obviously we wish we had regulations in place sooner."

Markey's questions were similar to those posed in a six-page letter that Rep. John Dingell, D-Mich., sent Tuesday to Transportation Secretary Norman Mineta. Gerard's pipeline agency is a branch of the U.S. Department of Transportation.

Markey and Dingell both asked why Alyeska Pipeline Service Co. pigs the trans-Alaska oil pipeline every 14 days, while some key feeder lines owned by the North Slope producers have gone 14 years without.

A BP official, in a document prepared in response to Dingell's letter and forwarded to the News-Miner by Beaudo, said pigging is done on an as-needed basis. He contradicted Gerard's assertion that pigging once every week or two is the industry standard.

"The frequency of pigging depends upon many factors including the buildup of sediments and other deposits such as wax," BP's Greg Swank wrote in the response, which he sent to the Association of Oil Pipelines' director in Washington, D.C., on Wednesday.

Paraffin buildup in the Northstar pipeline, for example, requires pigging every two weeks, Swank noted. BP runs about 370 maintenance pigs annually on the North Slope.

Dingell also wrote DOT's Mineta that one BP official had told his committee's staff that "previous attempts were made to operate scraper pigs on the major lines (in the eastern area and on the Lisburne line) ... yet some of these efforts were abandoned due to the volume of sludge being produced."

Swank noted that BP took over those particular lines in 2000 after a merger with Arco and a reconfiguration of Prudhoe Bay operations. Records do not report high sludge volume from pigging the lines in the early 1990s, Swank said, but "anecdotal information suggests that previous attempts to pig the (Prudhoe Bay Eastern Operating Area) line pushed considerable solids to Pump Station 1."

Dingell's letter said the Democratic committee staff member who visited Alaska earlier this month heard such warnings.

"Company officials interviewed by staff said there is potential for approximately 1,000 to 2,500 cubic yards of sludge to be removed from the pipelines" serving the eastern operating area and the Lisburne field, Dingell wrote.

Swank said BP doesn't have a precise estimate of the solids volume. The company plans to run a maintenance pig through all three major transit lines and has requested Alyeska's help to keep sludge from entering the trans-Alaska pipeline.

Beaudo said no one wants the solids to enter "the sales stream."

"You want to have pure hydrocarbon going into that pipeline," he said.

Developing a plan to deal with potential solids has slowed down compliance with the PHMSA's order, Beaudo said.

Gerard said after the hearing Thursday that the solids hadn't been conclusively blamed for the leak on the western transit line.

Swank said sediments in the line "may" contribute to corrosion by absorbing or blocking chemical corrosion inhibitors.

However, officials are also looking at whether the corrosion inhibitors' effectiveness on the western transit line "was reduced because of a reaction with an emulsion breaker," according to an April 3 letter from BP Alaska's President Steve Marshall to Dingell.

Beaudo explained that the emulsion breaker is added in Gathering Center 2, upstream of the leak location, to help separate water and sediment from the heavy oil that is produced in that area of the field.

"We think that it's unique to that line," Beaudo said.

BP officials have noted that monitoring didn't indicate a problem on the line as recently as September. After the leak was discovered, ultrasonic tests showed "recent and rapid corrosion rates," Swank said.

Washington, D.C., reporter Sam Bishop can be reached at (202) 662-8721 or sbishop@newsminer.com  .


Wall Street Journal
April 28, 2006

OSHA Opens Second Probe Of BP Ohio Refinery
April 26, 2006 4:47 p.m.

HOUSTON -- The Occupational Health and Safety Administration opened a second investigation this week of the BP Plc (BP) refinery that was sanctioned Tuesday for safety violations, agency officials said Wednesday.

The federal agency opened the investigation on Monday, April 24 after receiving a referral from another federal agency for a safety issue, according to Kate Dugan, a spokeswoman for the federal agency.

"We're addressing an issue that was referred to us by another federal agency," Dugan said. "We have opened another investigation."

Dugan declined to comment on the substance of inquiry. A regional OSHA spokesman confirmed the probe, but also declined to elaborate.

On Tuesday, OSHA fined BP $2.4 million for a series of violations unearthed at the 160,000 barrel-a-day Ohio refinery in the aftermath of BP's disastrous March 2005 refinery explosion at its Texas refinery. OSHA fined BP $21.3 million for violations in Texas.

In a harshly phrased news release, OSHA faulted BP for locating staff in vulnerable buildings, poor shutdown procedures and a number of other failures. Some of the problems were similar to factors that contributed to the Texas accident, which killed 15 workers and injured 170.

BP spokesman Scott Dean characterized the latest round of oversight as a routine for a major industrial facility."

"Another visit would not be unusual," said Dean, adding that BP has taken steps to enhance safety in Ohio following the Texas accident.

"We've been cooperative with them, and we would of course be cooperative with them on any future visits," Dean said.

-By John M. Biers, Dow Jones Newswires; 713-547-9214; john.biers@dowjones.com


Wall Street Journal
April 27, 2006

Exxon 1st-Quarter Net Rises But Doesn't Hit New Record
Oil Giant Reports Profit of $8.4 Billion,
Faces Scrutiny Amid High Gasoline Prices
April 27, 2006 12:23 p.m.

Exxon Mobil Corp., the world's biggest publicly traded oil company, rode surging energy prices to another quarter of blockbuster earnings, but its profit of more than $8 billion wasn't enough to meet Wall Street's eager expectations.

Exxon's net income of $8.4 billion, or $1.37 a share, was up 7% from $7.9 billion, or $1.22 a share, in the year-earlier period. That amounted to a record first-quarter take for the Irving, Texas, energy giant. But it was lower than the company's best-ever quarterly result  the $10.71 billion Exxon earned in last year's fourth quarter. And, at $1.37 a share, it was 7% below what analysts expected Exxon to earn in the first quarter, according to Thomson First Call.

Exxon is facing increasingly vocal calls in Washington for the oil industry to reinvest more of its mounting cash pile to boost the supply of energy for consumers. President Bush, long an oil-industry friend, joined the industry's critics in calling for such a move this week.

In its press release, Exxon trumpeted two statistics as indications that it's scrambling to get more oil and natural gas out of the ground.

The company said its capital and exploration spending totaled $4.8 billion in the quarter, up an unusually large 41% from the year-earlier period. And it said its fossil-fuel production averaged 4.6 million barrels of oil equivalent per day, up an unusually strong 5% from a year earlier. In the case of both oil and natural gas, it pulled enough new hydrocarbons out of the ground to more than offset the natural decline of existing fields. Oil production was buoyed by the performance of fields in West Africa. Natural-gas production relied heavily on Qatar.

Exxon's cash flow from operating activities in the quarter was $14.6 billion, up 12% from the year-earlier period. Including asset sales, its quarterly cash flow was $15 billion, up 1.4%.

Exxon's "upstream" earnings  the money it made producing and selling crude oil and natural gas  soared to $6.4 billion, up 26% from the year-earlier quarter. Still, that amounted to "a real negative," Paul Sankey, a Deutsche Bank oil analyst, wrote in a research note. Given the rise during the first quarter both in global oil prices and in Exxon's production, Exxon's upstream earnings should have been even higher, he suggested.

Exxon's "downstream" earnings  the money it made refining oil into usable products like gasoline and diesel fuel and then selling those products  fell to $1.27 billion, 13% below the year-earlier result. Excluding special items in the year-earlier quarter, however, Exxon's downstream earnings were up 11%.

Earnings from the company's chemical operations were $949 million, 34% lower than a year earlier. Excluding special items in the year-earlier quarter, chemical earnings were down 26%.

Heat on Oil

Today's results come as the political heat has been on Exxon and other oil companies. Their record profits come while American car drivers face ever-rising gasoline prices. Exxon got even more bad press this month when it disclosed that its retiring chief executive, Lee Raymond, reaped a total compensation package of $69.7 million, mostly through restricted stock awards and exercising options.

President Bush, facing pressure to curb soaring gas prices, this week called them "a hidden tax on the working people" and said his administration would get tougher on any price gougers and also suspend refilling the Strategic Petroleum Reserve. Meanwhile, on Capitol Hill, some lawmakers have been calling for eliminating tax breaks for oil companies and even levies on their profits.

Rising gas prices have intensified discontent with Washington. A new Wall Street Journal/NBC News poll underscores a striking gap between Americans' mood and the nation's economic performance. Fully 77% call themselves uneasy about the state of the economy rather than confident, even as data showed new-home sales and factory orders remain strong.

Federal Reserve Chairman Ben Bernanke, speaking before a congressional committee Thursday, said rising energy prices jeopardize a currently strong economy, as he left the door open to the possibility of further interest rate increases to keep inflation in check. (See related story.3)

Exxon's report follows earnings releases from other major oil companies this week. Wednesday, ConocoPhillips, the nation's third-largest oil and gas producer, said profit rose 13% as stronger exploration and production results yielded the best first-quarter earnings since Phillips Petroleum Co. and Conoco Inc. combined in 2002.

On Tuesday, BP PLC kicked off the oil majors' earnings season with a 15% drop in first-quarter net profit, as the company struggled to fully capture the benefit of soaring oil prices while the effects of hurricanes continued to hurt output.

Write to Jeffrey Ball at jeffrey.ball@wsj.com


Financial Times
April 27, 2006


Pipeline sludge hits BP Alaska repair efforts
By Sheila McNulty in Houston
Published: April 27 2006 03:00 |
Last updated: April 27 2006 03:00

Important BP Alaska pipelines have been so poorly maintained that the British oil giant cannot comply with a US government order to perform high-tech maintenance and corrosion tests on the system within three months, the Financial Times has learned.
Sludge build-up in the lines, which risks trapping the testing equipment, has forced BP to obtain an extension in yet another embarrassing admission of the poor state of its US facilities.

Last month, BP suffered the biggest oil spill ever at Prudhoe Bay, Alaska - North America's largest oil field. Last year, an explosion at its biggest refinery killed 15 people and injured 500 in Texas. This week regulators cited BP for "unsafe operations" at its Ohio refinery.

News of BP's failure to meet the Department of Transportation's corrective order comes as Congress begins hearings today on the Pipeline Safety Act, which government officials say will include heightening regulation over BP Alaska.

Daren Beaudo, BP spokesman, admitted BP had not used high-tech maintenance and corrosion-testing procedures on some pipelines for 16 years. The procedures are known as "pigging", after the squeal they once made running through the lines.

Yet BP had in 2003 told regulators it typically ran them every five years. And the neighbouring Alyeska pipeline cleans all 800 miles of its pipeline with a scraper pig once every 14 days, according to John Dingell, senior Democrat on the US House of Representatives' Committee on Energy and Commerce.

Mr Beaudo said BP needed the extension to determine how to "capture the materials" pushed through during cleaning. Letting sludge build in the lines, as BP did, can lead to corrosion, which can spring leaks. In the future, Mr Beaudo said, BP will increase pigging frequency.

Mr Dingell said in a letter to Norman Mineta, Transportation secretary, that company officials said there could be up to 2,500 cubic yards of sludge in key pipelines, and that sending a pig through now could risk shutting down flow stations, as it could get stuck. That would cut into global supplies.

"At a time when crude oil prices are again reaching record-high levels and the supply of oil is tight, the soundness of the pipelines that serve the greater Prudhoe Bay operating area is critical to the nation's national security," Mr Dingell said in the letter, a copy of which was obtained by the FT.

Brigham A McCown, acting administrator for the Transportation department's Pipeline and Hazardous Materials Safety Administration, said it would "exercise all laws in our statutory authority to assure BP Exploration (Alaska) returns these low-stress pipelines to fully safe operation".


Houston Chronicle
April 26, 2006


BP violations found in Ohio
OSHA proposes $2.4 million fine over plant safety problems
Copyright 2006 Houston Chronicle

Federal regulators on Tuesday proposed a $2.4 million fine against BP Products North America over safety violations at an Ohio plant that are similar to those found during an investigation of the explosion at the company's Texas City plant last year that killed 15 people.

"It is extremely disappointing that BP Products failed to learn the lessons of Texas City to assure their workers' safety and health," Edwin Foulke Jr., assistant secretary for the U.S. Occupational Safety and Health Administration, said in a prepared statement.

After last year's explosion, OSHA fined BP $21.3 million, citing hundreds of violations.

OSHA started an inspection of BP's refinery in Oregon, Ohio, near Toledo, last fall under the agency's Enhanced Enforcement Program, which focuses on companies that have had repeated problems with safety despite education and enforcement efforts by OSHA, spokeswoman Kate Dugan said.

BP was placed in the program after last year's Texas City explosion, meaning OSHA officials stepped up the number of inspections at all BP cites throughout the country.

The Toledo refinery has about 460 employees and processes some 160,000 barrels of crude oil a day to produce fuels, propane and kerosene, among other products.

OSHA found 39 violations at the refinery, according to the release, including locating people in vulnerable buildings among the processing units; failing to correct depressurization deficiencies; failing to correct deficiencies with gas monitors; and failing to prevent the use of nonapproved electrical equipment in locations in which hazardous concentrations of flammable gases or vapors may exist.

BP spokesman Ronnie Chappell declined to comment on the allegations or the specifics of the citations, but said the company has already addressed many of the issues.

"We have been in action on those issues that arose from the OSHA inspection for some time and will continue to work with the agency to take any corrective measures that continue the safe operations of the plant," Chappell said.

"We are disappointed with the actions announced today. We disagree with the substance and characterization of many of the alleged violations."

He also noted that, after the Texas City blast, the company quickly worked to move temporary structures at its plants nationwide from areas where explosions could cause significant damage.

Those who died and suffered the most serious injuries were in temporary structures at the time of the explosion.

The company has 15 days to respond to the citations.

Chappell said the company will seek an informal settlement conference with the agency.

Carolyn Merritt, chairman of the Chemical Safety Board, which investigates industrial chemical accidents, echoed Foulke's comments.

"The willful citations would seem to indicate continuing problems with BP's safety culture, and appear to further substantiate the basis for the ongoing independent investigation into the company's safety culture as recommended last year by the CSB," she said in a written statement released Tuesday.


Reporter Tom Fowler contributed to this report.


Financial Times
April 26, 2006


BP fined $2.4m for new safety violations in US
By Sheila McNulty in Houston
Published: April 26 2006 03:00 |
Last updated: April 26 2006 03:00

BP, the UK oil company, yesterday suffered another embarrassment over safety issues when it was fined $2.4m for "unsafe operations" at its Ohio refinery.

The action by the US Department of Labour comes as the company is still reeling from a major spill in Alaska and a deadly explosion in Texas.

"It is extremely disappointing that BP Products failed to learn from thelessons of Texas City to assure their workers' safety and health," said Edwin Foulke Jr, assistant secretary for the department's Occupational Safety and Health Administration (OSHA).

The Texas City refinery accident on March 23 last year killed 15 workers and injured an estimated 500 in the worst refinery incident in more than a decade. Last month, BP suffered the biggest spill ever in Prudhoe Bay, Alaska, north America's largest oilfield.

OSHA said a review of BP's Ohio refinery, undertaken following the Texas accident, uncovered numerous violations similar to those at the Texas facility, which involved a maximum fine of $21m.

The review was undertaken through the agency's Enhanced Enforcement Programme, which requires it to inspect facilities similar to those with problems.

"Our Enhanced Enforcement Programme exists for companies like this who, despite our enforcement and outreach efforts, ignore their obligations under the law and continually place their employees at risk," Mr Foulke said.

Ronnie Chappell, BP spokesman, said: "We are disappointed by this action. We disagree with the substance and characterisation of many of the alleged violations."

He said BP would seek a meeting with OSHA to resolve the issue. He added that the company had addressed all issues raised by the agency during its inspection, and would work to address additional ones raised.

OSHA claimed BP placed workers in vulnerable buildings among the processing units; failed to correct de-pressurisation deficiencies and problems with gas monitors; and failed to prevent the use of non-approved electrical equipment in locations where hazardous concentrations of flammable gases or vapours might exist.

OSHA also found two wilful violations, in which it is claimed the company neglected to develop shutdown procedures and failed to establish a system to promptly address recommendations made three years ago after an incident in which a large feed pump failed. Those recommendations had still not been implemented at the time of the inspection, the agency claimed.

OSHA also found other violations, including failure to periodically inspectpressure-piping systems.

BP has 15 working days to contest the claims and the proposed fine.


Wall Street Journal
April 25, 2006

BP's Net Falls 15% Amid Drop
In Oil, Gas Output, Tax Charges
April 25, 2006 8:53 a.m.

LONDON -- BP PLC Tuesday said net profit fell 15%, in spite of soaring oil prices and following a drop in oil and gas output, a Texas refinery shutdown and higher tax charges.

Kicking off the oil majors' earnings season, the world's second-largest oil company by market capitalization posted a first-quarter net profit of $5.623 billion, compared with $6.602 billion for the year-earlier period.

First-quarter profit last year benefited from $1.07 billion of proceeds from divestments, mostly the sale of BP's 10.34% stake in Ormen Lange, a natural gas field off Norway's continental shelf.

Quarterly clean replacement cost profit for the three months ended March 31 stood at $5.282 billion, up 6% from $4.96 billion for the same period.

Replacement cost profit, which strips out the impact of inventory gains and losses from the bottom line, is a figure closely watched by analysts. Analysts had expected the figure to be around $5.1 billion.

BP's profits were largely driven by higher oil prices, with North Sea Brent contracts, a key crude benchmark, rising by 30% in the first quarter compared with the same period last year.

But the impact of soaring prices on net profit was offset by lower production, a Texas refinery shutdown and a higher tax charge. Production averaged 4.035 million barrels of oil equivalent a day, compared with 4.101 million in the same period last year.

Output was hit by the shut-in of platforms in the U.S. Gulf of Mexico, notably Mars, which has yet to restart after the passage of Hurricane Katrina in August. Royal Dutch Shell PLC announced Thursday it would resume output in early May at the Mars platform, where BP owns a 28.5% stake and Shell owns 71.5%.

BP's global output was also hurt by lower production at its Russian joint-venture TNK-BP, which reflected the impact of production-asset disposals and of extremely cold weather in the first quarter.

Profits were also impacted by the continued shutdown of its 460,000-barrel-a-day Texas City, Texas, refinery, the largest it owns in North America.

The plant, which was shut down as a precaution ahead of Hurricane Rita last September, restarted gasoline production the weekend before last and is now running at 200,000 barrels a day. The company has also said it was delaying output resumption at the Texas City refinery to increase safety after 15 workers died in a blast there in March 2005.

"Further units will be brought onstream across the balance of 2006," BP's Chief Executive John Browne said in a statement.

Write to Benoit Faucon at benoit.faucon@dowjones.com


Anchorage Daily News
April 21, 2006


Spill alerts rang, dismissed as false
NORTH SLOPE: Several factors could have set off alarms;
oil leak went on at least five days.

Anchorage Daily News
Published: April 21, 2006
Last Modified: April 21, 2006 at 03:23 AM

A pipeline leak-detection system sounded warnings on four straight days in the week leading up to last month's record North Slope oil spill, but field workers interpreted the signals as false alarms, a new investigative report says.

The report, prepared by a team of BP and state investigators, confirms that the leak from a large Prudhoe Bay oil field pipeline went on undetected for at least five days "and probably much longer."

The highly technical, 125-page report also suggests that the pipeline's leak- detection system is effective only in catching leaks that release large volumes of oil rapidly. It doesn't work well in detecting small, slow leaks that over time can result in large spills.

A Prudhoe Bay worker driving along the pipeline discovered the spill March 2 after catching a whiff of petroleum in the air.

Spill responders estimate 201,000 gallons, or 4,790 barrels, of oil oozed over almost 2 acres of snow-covered tundra and the edge of a frozen lake. Corrosion was blamed for eating an almond-sized hole in the steel pipeline, which remains out of service for repairs.

The line is a major artery in the web of pipes that drain the Prudhoe Bay field, the nation's largest.

BP this week presented the investigative report to the state Department of Environmental Conservation, which continues to weigh a fine or other penalties against BP. The U.S. Environmental Protection Agency also is conducting a criminal investigation, BP spokesmen have said.

The seven-member investigative team included BP managers and engineers based in Alaska as well as Houston, BP attorney Randal Buckendorf, a Prudhoe field worker representing the United Steelworkers union, and Gary Evans, a DEC environmental specialist.

The report says that on four consecutive days, Feb. 25-28, the pipeline's leak-detection alarms went off "but were ruled out as a spill" after people monitoring the system considered a variety of technical factors.

For one thing, a leak should have been indicated by readings on an adjoining segment of the pipeline, but that wasn't the case, the investigators found.

Other factors also made the three-mile pipeline prone to false leak alarms, the report says. The oil flowing through it had a relatively high level of sediment, and the amount of oil moving through the line can fluctuate depending on output from an upstream oil processing plant.

All those factors create "noise" that can mask indications of an actual leak, especially a small one, the report says.

Under state regulations, the pipeline's detector is supposed to be able to spot a leak amounting to 1 percent or more of daily throughput. The leak was too much of a trickle to hit that trigger, the investigators found.

Still, the leak detector emitted alerts because it was set on high sensitivity to detect a leak as small as 0.5 percent of daily throughput.

Engineers and other workers who monitor the system were aware of the warnings but determined the alarms were false, the report says.

It stops short of blaming anyone for the spill.

A $6 million cleanup of the oiled tundra is essentially complete, and DEC officials say they believe environmental damage to the tundra will be minimal.

Taking the leaky pipeline out of service for weeks caused North Slope oil production to decline by as much as 12 percent or 100,000 barrels per day, but BP says it has restored most of that production by routing oil down other pipelines.

Federal pipeline regulators have ordered BP to closely inspect the leaky pipe and two other major trunk lines to look for potential trouble spots. They also ordered the company to step up the use of pigs -- bullet-shaped devices that slide through pipelines to look for corrosion or to swab out sludge.

The above-ground pipeline leaked at a point where it passed through a mound of gravel known as a caribou crossing, which works as a sort of bridge for the migratory animals. In 1998, a pig run identified six spots at the caribou crossing where corrosion was chewing pits into the pipe's inner wall. One of those six was where the oil leaked, the report says.

BP had not done another pig run since 1998 to test for internal corrosion.

Maureen Johnson, a BP senior vice president, has said the company plans to work with the DEC on ways to detect smaller spills that might evade leak detectors.

One idea, she said, might be to increase the use of aerial infrared surveys, which can spot warm oil obscured by snow.

BP runs Prudhoe and owns 26 percent of the production. The biggest Prudhoe owners are Exxon Mobil and Conoco Phillips, each with about 36 percent.

Daily News reporter Wesley Loy can be reached at wloy@adn.com   or 257-4590.

BP SAFETY: The chairman of BP, Peter Sutherland, told investors Thursday that the company had learned valuable lessons.

Spill report at a glance

BP and the state released joint findings Thursday on what led to the 201,000-gallon oil spill at Prudhoe Bay discovered March 2:

• A pipeline leak detector warned of a possible spill four times before March 2.

• Field workers interpreted alarms as false.

• The corroded spot where the pipeline hole developed had been known of since 1998.


Wall Street Journal
April 21, 2006

BP Executives Defend Record On Global Safety
April 21, 2006

LONDON -- Executives at BP PLC strongly defended the company's global safety and environmental record, amid criticism and probes of big accidents at BP facilities in Texas and Alaska.

At BP's annual shareholders meeting, Chief Executive John Browne acknowledged a host of operational setbacks in 2005, including a deadly explosion at BP's Texas City, Texas, refinery and widespread damage sustained in the Gulf of Mexico during last year's hurricane season. "In many ways, 2005 was a year of mixed fortunes for BP," he said. "In some respects, it was a very difficult year."

But he said the company was committed to applying the lessons learned from the March 2005 refinery explosion to improve safety at BP operations around the world. And BP's nonexecutive chairman, Peter Sutherland, forcefully defended the company's global safety record. "We don't accept that this company has a problem of an endemic nature," he said.

In March 2005, an explosion at BP's Texas City plant killed 15 and led U.S. workplace-safety regulators to impose a $21.4 million fine on the British oil giant. The U.S. Labor Department referred the case to the Justice Department for possible criminal charges.

More recently, BP has been blasted in Alaska, where a BP pipeline ruptured, causing a large oil spill. State officials blamed corrosion for the incident; BP has said it is cooperating with authorities in both investigations.

Write to Chip Cummins at chip.cummins@wsj.com


Anchorage Daily News
April 20, 2006


Warnings sounded for days before Prudhoe leak was discovered, report says
Anchorage Daily News
Published: April 20, 2006
Last Modified: April 20, 2006 at 03:27 PM

A pipeline leak-detection system sounded warnings on four straight days in the week leading up to last month’s record North Slope oil spill, but field workers interpreted the signals as false alarms, a new investigative report says.

The report, prepared by a team of BP and state investigators, confirms that the leak from a major Prudhoe Bay oil field pipeline went undetected for at least five days “and probably much longer.”

It also suggests that the pipeline’s leak-detection system is ineffective except in the event of leaks that release large volumes of oil rapidly. The system doesn’t catch slow leaks that, over time, can still result in large spills.

The report says the 34-inch pipeline that leaked had circumstances that made leak detection difficult, including a relatively high level of sediment moving through the pipe along with the oil. Also, fluctuations in the volume of oil sent down the line from a processing plant can mask potential leaks, it says.

Prudhoe Bay field workers discovered the leak March 2 and later determined that 201,000 gallons of oil had spread over almost 2 acres of tundra. The leaky pipeline remains out of service while field workers check out corrosion problems.

Corrosion was blamed for causing an almond-sized hole through which the oil escaped.

BP this week presented the state Department of Environmental Conservation with its 125-page investigative report into the oil spill, the largest ever to hit the North Slope oil fields.

Federal and state pollution regulators are investigating the spill. A more extensive article on this report will be available Friday in the Daily News and at www.adn.com.

Contact reporter Wesley Loy at wloy@adn.com or (907) 257-4590.


Financial Times
April 18, 2006


Two more corrosion leaks hit Alaska BP facility
By Sheila McNulty in Houston
Published: April 18 2006 20:10 |
Last updated: April 18 2006 20:10

Chuck Hamel, an advocate for BP workers in Alaska, wrote at the weekend to Stephen Johnson, administrator of the US Environmental Protection Agency (EPA), to report that BP had suffered two additional corrosion leaks last week, which it had not yet reported.

“They have yet to reveal the newly discovered existing leak from a hole in the same transit line at another recently excavated caribou crossing . . . barely a mile away,’’ he said in the letter, a copy of which was obtained by the FT.

“It is apparently indeterminate just how long this second internal corrosion leak has existed . . . so silence is the rule.’’

On top of that, Mr Hamel said, BP has not publicly revealed the “six-inch R-19 gas line ruptured with a loud roar. External corrosion created a 1.5-inch hole in the elevated line’’.

In response, Daren Beaudo, BP spokesman, admitted to the gas leak, but said it was too small to report.

He said BP had not yet completed its inspection of the transit line, “but, to date, we’ve detected no additional holes or leaks on the crude line”.

Related stories on the BP safety inquiry:
• Repair delays had BP staff fearing for safety

• BP remains on the defensive over Alaska

• BP refinery staff ‘feared going in to work’


Fairbanks News Miner
April 17, 2006


Pipeline's value scrutinized
Staff Writer
Monday, April 17, 2006

A disagreement between oil companies and three local governments over the assessed value of the trans-Alaska pipeline system will likely be heard by a formal review board for the second year in a row.

The state of Alaska says the 800-mile pipeline system is worth $3.64 billion. The consortium of oil companies that own the pipeline have argued it is worth $1 billion, and municipalities that collect property tax from the system--the Fairbanks North Star and North Slope boroughs and the city of Valdez--say its assessed value should be closer to $5.6 billion.

The difference could lead the oil companies to ask a review board to take a closer look at the state of Alaska's 2006 pipeline assessment. Representatives for ConocoPhillips and BP, two of the companies with subsidiaries in the consortium Alyeska Pipeline Service Co., which operates the pipeline, said they will decide later this month whether to appeal.

Municipalities say they are certain to ask for the review.

Fairbanks borough Mayor Jim Whitaker said local governments want to ensure the state of Alaska gets a fair assessment on the pipeline, an annual assessment that takes into account the pipeline, the right of way below it and other pipeline-related infrastructure. He noted property assessments inside the borough--not counting oil and gas properties and infrastructure--have increased by 83 percent over the past decade. Meanwhile, the pipeline's assessed value has decreased over that time.

"There is no logical basis for that," Whitaker said in a recent interview. "I've worked very hard to reverse that trend. Alyeska has to be treated as any other citizen is."

The disagreement centers partly on what method the state uses to assess the pipeline property, approximately 9 percent of which lies within the borough.

Changes to the assessment, assigned every spring by the office of the state of Alaska's Petroleum Property Assessor, can have a big impact on the amount in property taxes collected by the state and local governments. The state collected close to $30 million last year in property taxes on the pipeline. The Fairbanks North Star Borough received more than $3.6 million--5 percent of all the property taxes it collected--from the consortium.

A major change in their tax bill can affect the amount of taxes paid by other property owners. An upward adjustment to the initial 2006 assessment of 8 percent earlier this month allowed the Borough Assembly to decrease the rate of property tax in the borough by around one-half of 1 percent.

If the state Assessment Review Board meets next month and increases the 2006 assessment significantly, the effect could be larger. Local governments would have to decide where to spend the extra money if the assessment rises, or where to cut services if it comes back lower.

The Fairbanks North Star Borough Assembly could reduce property taxes, said Assemblyman Luke Hopkins. It could also choose to give any extra revenue to the school district, said Assemblywoman Nadine Hargesheimer, who noted the borough's proposed 2007 budget falls $1.7 million short of the district's request.

If it collected less from pipeline owners, the borough would be faced with the difficult decision of whether to raise taxes or cut services, said Hopkins. He said he would, in that case, advocate for small cuts from a broad slice of borough services and press the Alaska Legislature harder to share money through a sustainable community dividend plan.

Any cuts, Hargesheimer said, would be difficult for assembly members to make. "It's a tight budget," she said.

Last year, state assessors began estimating how much money it would cost to replace the pipeline system, said Randy Hoffbeck, the state's petroleum-property assessor. The method replaced the previous approach of basing the estimate on income collected by the pipeline owners from the tariffs charged for transporting unrefined oil.

The pipelines' owners, including those that own major oil reserves, have in the past argued the state should have continued to use the tariff-income approach. Their subsidiaries in the ownership consortium make all their money off tariffs, noted BP spokesperson Daren Beaudo. Representatives from ConocoPhillips and BP said they have not committed to an appeal, where they theoretically could again ask the state to take a different approach to the assessment.

"We're still evaluating exactly what we're going to say," said Beaudo.

The three local municipalities, on the other hand, have challenged the state's estimates from a number of angles. They have considered asking the state to estimate how much money a firm would pay to buy the system, and, according to state documents, argued the state should take into consideration the market value of the oil companies' stocks, bonds and other securities.

Taken together, the differences in opinion amount to the gap of $4.6 billion between the two parties' estimates of how much the pipeline system is worth.

The state of Alaska also levies a property tax on the pipeline system, and collected approximately $30 million last year in property taxes on the pipeline, Hoffbeck said.

This is not the first time the municipalities, the state and the oil companies have disagreed over the value of the 800-mile pipeline system. In 2001, a disagreement led the state to agree to hold the assessed value at just over $3 billion until last year, when challenges arose again.

The state's assessments of the pipeline system began during its construction in 1975, according to Hoffbeck. The assessed value peaked in 1979, when the state assessed the system's worth at $8.4 billion.

Chris Eshleman can be reached at 459-7582 or ceshleman@newsminer.com .


Wall Street Journal
April 17, 2006

BP Finds New Pipeline Rupture
Caused by Corrosion in Alaska

April 17, 2006; Page A3

BP PLC said it has found another pipeline break caused by corrosion at a BP-operated facility on the Alaskan North Slope, at a time when the company faces a criminal investigation by federal environmental officials into its management of pipelines in the region.

The latest rupture took place April 6 on an elevated natural-gas line at a production building, BP officials said Friday. BP spokesman Daren Beaudo said corrosion appears to have caused the leak. Officials of the British energy giant, which operates the giant Prudhoe Bay oilfield, said they didn't report the leak to regulatory agencies because the resulting gas releases were small. Mr. Beaudo said the three-inch line has been taken out of service pending repairs.

BP critics said the company should have made the leak public because a rupture in 1998 that they say is similar resulted in a fire at another production building at Prudhoe Bay. Critics and some workers have charged that corrosion is a growing problem at Prudhoe Bay because BP won't spend enough money to prevent it.

"We are at the point where there is so much damage to the lines from corrosion, we don't know where another leak will occur," said Marc Kovac, a BP worker and steward of the United Steelworkers of America local at Prudhoe Bay.

BP has said its spending decisions have had no adverse effect on safety.

Mr. Kovac relayed news of the latest leak to Charles Hamel, who has long served as a conduit for safety-related complaints by Alaskan oil-industry workers. Mr. Hamel, of Alexandria, Va., on Friday notified the Environmental Protection Agency about the incident.

The rupture follows a large crude-oil spill in the same vicinity that state officials have blamed on pipeline corrosion. Criminal investigators with the EPA are looking at corrosion issues on the ruptured line, as well as others in the area, said a person familiar with the matter, and they have expanded the investigation to include the March oil spill. BP officials said they are cooperating with all regulatory agencies in their investigations.

An EPA spokesman wasn't available for comment, but in the past officials there have said they can't comment on pending criminal investigations. Alaska Department of Environmental Conservation officials say they are investigating both the March and April ruptures.

The big energy company is also under regulatory scrutiny following an explosion last year at the company's Texas City plant, which killed 15 and triggered a $21.3 million fine from workplace-safety regulators.

Meanwhile, BP officials said they are investigating a "dark material" that workers found several days ago underneath the pipeline near the March spill. Mr. Beaudo said BP has determined the material -- possibly residue from an old spill -- didn't come from any other breaks in the line.

Write to Jim Carlton at jim.carlton@wsj.com


Financial Times
April 17, 2006


BP staff feared for safety
By Sheila McNulty in Houston
Published: April 16 2006 22:02 |
Last updated: April 16 2006 22:02

A safety audit of BP’s biggest refinery, obtained by the Financial Times, reveals the UK oil giant deferred maintenance and delayed repairs to the extent that staffers concluded equipment was in a “dangerous condition”.

The views in that 2005 audit conducted by an independent consultancy echoed those of BP staffers as far away as Alaska, who have warned for four years that staff and the environment were at significant risk, as accidents continued unabated.

In the past year, both locations have experienced severe accidents. The audited refinery in Texas City exploded in 2005, killing 15 people and injuring an estimated 500 in the deadliest refinery accident for more than a decade. Last month, BP Alaska suffered the biggest-ever oil spill at Prudhoe Bay, North America’s largest oil field. There was at least one other leak last week.

That BP operations in Texas and Alaska have suffered such significant lapses, amid employee complaints about safety, supports the US Chemical Safety and Hazard Investigation Board, an independent federal agency charged with investigating industrial chemical accidents, in questioning BP’s safety culture.

“We’re looking at BP’s global oversight of safety,’’ said Don Holmstrom, the Board’s lead investigator into the Texas City accident. Even as the Board began investigating, a similar accident took place at another BP facility in the US, in Indiana, although nobody was injured.

“We know that BP devoted a lot of attention to reducing occupational injuries. But did the company focus enough effort on process safety systems designed to avoid catastrophic accidents?’’ Mr Holmstrom asked.

“Did the company encourage reporting of near-miss accidents and then try to identify and learn from those with catastrophic potential? The information we’ve uncovered in Texas City makes these questions relevant.”

Ronnie Chappell, a BP spokesman, said all BP-operated refineries had been assessed and initiatives imposed. “These initiatives address factors such as leadership, culture, control of work procedures and the repositioning of occupied temporary buildings,’’ Mr Chappell said. “The assessments found that no other BP-operated refinery presented safety and operational integrity concerns on the same level as those identified at Texas City.’’



BP refinery staff ‘feared going in to work’
By Sheila McNulty in Houston
Published: April 16 2006 22:02 |
Last updated: April 16 2006 22:02

In late 2004, Don Parus, site manager at BP’s biggest refinery, realised something was terribly wrong.

The site had suffered 22 fatalities over 30 years, its safety business plan for 2005 noted there was a key risk of the death of a worker in 12-18 months, and a BP safety presentation opened with the words: ”Texas City is not a safe place to work.”’

He commissioned a safety audit by the Telos Group, a Texas-based consultancy, which surveyed more than 1,100 employees, roughly 60 per cent of the current workforce, and interviewed over 100.

The 338-page report, a copy of which has been obtained by the Financial Times, reveals a safety culture that made many fear working in the facility.

“The history of investment neglect, coupled with the BP culture of lack of leadership accountability from frequent management changes, is setting BP Texas City up for a series of catastrophic events,’’ is just one comment in the audit.

The report was finalised on January 21 2005. Two months later, the accident predicted by several in the audit arrived: an explosion killed 15 people and injured an estimated 500 in the deadliest refinery accident in more than a decade. Four months later, the site suffered another explosion.

It is unclear how much BP’s leadership knew about site safety. Several in the audit said they were bullied about accidents so much that many went unreported. A risk identified in BP’s 2005 safety business plan, seen by the FT, was that the site would not report all incidents for “fear of consequences”.

Ronnie Chappell, BP spokesman, said there had been a “comprehensive effort by Texas City refinery leadership to drive continued safety improvement, encourage the reporting of injuries and near misses and ensure the thorough and complete investigation of injuries and incidents at the refinery.’’

That said, an investigation of the accident by the US Chemical Safety and Hazard Investigation Board (CSB), an independent federal agency that investigates industrial chemical accidents, revealed BP decided against upgrading equipment that might have prevented the accident; operated with malfunctioning equipment; and had worked staff 30 days straight in 12-hour shifts, before the accident. It questioned the training and experience of key staff.

“In a corporation with a good safety culture, near-miss reporting is actively encouraged and corrective steps are put in place before disaster strikes,’’ said Carolyn W Merritt, chairwoman of the CSB. “The CSB was concerned enough about what we saw in Texas City to recommend an examination throughout BP North America.’’

BP has undertaken that examination and shut the refinery for a $1bn repair programme. The Department of Labor uncovered over 300 violations and settled with BP, which did not admit fault, but agreed to improve processes and pay a maximum $21m fine.

The Department of Labor has referred the case to the Department of Justice to review for “criminal action”.

“Even if the lapses at the Texas City refinery were an aberration, where was the corporate oversight to bring that facility into line?” Ms Merritt asked. “BP needs to make certain that it has effective safety systems, maintenance resources, staffing, and auditing in place to prevent major safety or environmental incidents.”

BP has settled all but two of the fatality cases but is embroiled in hundreds of lawsuits with those injured inside and outside the refinery.

“When they got the Telos report, BP had a choice: Embrace safety and do it the right way, or just keep profits and production going,’’ said John Eddie Williams Jr, managing partner at Williams Bailey, which is handling 145 cases. “They made the conscious decision to keep running this plant instead of doing a safety stand-down.’’

He is to take a deposition from John Browne, BP’s chief executive, next month to discover whether he knew the refinery had been so unsafe for so long.

“It’s a lot like Ken Lay,’’ he said, referring to Enron’s former chief executive, who is fighting criminal charges relating to the company’s bankruptcy. “If he says he did not know, then we want to know why he did not know.’’

Mr Chappell will not comment on the litigation, but says managers had been concerned about the continued safety issues, despite their best efforts, and, following three deaths in 2004, went forward with the Telos audit.

He said it “does not report the ‘objective’ truth about safety performance or conditions’’ but rather “is an accurate representation of the attitudes, perceptions and statements made by survey participants.”

And, despite those perceptions, he insisted BP encouraged reporting injuries and near misses, and investigated both.

But in the Telos audit, staff surveyed rated ”making money” BP’s number one priority and “people” its last, at nine.

“At the refinery, there’s a frame of mind like, ‘We are the ones that make the money’,” said a worker in the audit. “They take pride in running on thin air, but if they do it by killing someone every 18 months, then you don’t have bragging rights about production.’’

William Bradley Bessire, a contract worker, was so severely injured in the explosion he has metal plates in his back, can barely move his neck, and is in constant pain. He is suing for gross negligence. “I always worried about the safety of being in that refinery,” he told the FT. “Every time you drove up to the gate and badged in, you worried; there is not a person who works in that place that does not worry.”



BP remains on the defensive over Alaska
By Sheila McNulty in Houston
Published: April 16 2006 22:02 |
Last updated: April 16 2006 22:02

In 2003, Steve Marshall, president of BP Alaska, warned in an internal memo to staff: “Beginning now, we will focus on safety as we have never focused on it before, as if our lives and our future in Alaska depended on it. Because they do.”

The previous year, the site had more than 11 recordable injuries and one day-away-from-work case per month, a well explosion that severely injured an operator, the death of a contract worker, and an average of more than six vehicle incidents per month. It seemed things could only get better.

Yet, in the three years since Mr Marshall’s call to action, BP has continued to suffer accidents and regulatory violations.

The situation came to a head last month, when a BP pipeline spilled up to 270,000 gallons of crude the biggest spill ever in Prudhoe Bay, North America’s largest oil field.

The Alaska Department of Environmental Conservation has blamed corrosion for the spill, something workers have for years complained had been neglected by management.

“BP management is focused on their own short-term profit and not on BP’s long-term impact to this country,” said Marc Kovac, a mechanic who has worked at the Alaska field for 28 years. “This breach is not an isolated case. BP has experienced ruptures in the recent past and more lines other than this one are in a similar condition.”

Indeed, Chuck Hamel, an advocate for BP workers in Alaska, alerted the Environmental Protection Agency’s criminal investigation division in July 2005 to problems in BP’s corrosion control operations, which are under investigation.

Yet Daren Beaudo, BP spokesman, says BP has increased its corrosion inspection and maintenance programme over the years, from $50m in 2004 to $58m last year and $71m this year, to maintain an inspection programme in line with regulatory requirements, and has “manageable corrosion rates”.

Workers in Alaska have long disputed that, complaining that BP cuts corners, putting workers and the environment at risk charges BP adamantly denies. As far back as 1999, an e-mail obtained by the FT documents concerns being raised over staff ability to respond to critical events given the increase in workloads.

To keep day-away-from-work cases down, one worker said, BP sometimes ordered those injured back to work a complaint also made in a safety audit on BP in Texas.

An internal union e-mail obtained by the FT says a worker helping with the March clean-up in Alaska slipped on the icy road, breaking a wrist and tearing two knee ligaments: “To hide the incident, BP management ordered this man back to work to keep this incident off the “time off work for a work-related injury” record, the union said. Mr Beaudo insisted: “There was absolutely no attempt to hide a serious injury.” The man had doctor’s clearance for light work, which he voluntarily accepted.

This is not the first time BP Alaska has found itself under heightened scrutiny. Last year the federal government released BP from a probation imposed in 2000, after it pleaded guilty to delaying notification of federal agencies when allegations of illegal disposal of hazardous waste in Alaska were raised.

Less than a year later, BP is once more on the defensive.

The latest spill was under a reindeer crossing and flowed into a nearby lake. Mr Beaudo expects “little if any environmental damage’’ once the clean-up is complete. Yet workers fear more accidents.

“Competent federal oversight is desperately called for before Prudhoe suffers a disaster such as BP’s deadly Texas City refinery explosion last year,” Mr Hamel said.


Anchorage Daily News
April 16, 2006


Oil patch probes North Slope
Energy industry in Alaska subject of several investigations

Anchorage Daily News
Published: April 16, 2006
Last Modified: April 16, 2006 at 03:22 AM

Times are splendid in the oil industry, with prices for North Slope crude hitting record highs of nearly $68 a barrel last week. Oil companies are spending some of that cash on numerous exploratory drilling and development plans.

But the enthusiasm is tempered by a pall of worry created by criminal and civil investigations in the oil patch. In recent weeks, details have emerged of probes by federal and state environmental regulators, federal prosecutors, pipeline regulators, members of Congress and the U.S. Coast Guard.

Authorities declined to comment on the nature of the investigations, whether they're connected, or where they'll go.

One thing is nearly certain: The probes are a distraction for oil company executives who otherwise are enjoying an unprecedented payoff on every barrel, and who hope to strike deals with the state this year to lock in oil taxes for the long haul and ink a fiscal contract that could someday help spur construction of a $20 billion natural gas pipeline.

The most acute problem for the oil industry is the March 2 spill in the giant Prudhoe Bay oil field, run by BP Exploration (Alaska) Inc. The leak from a hole in a corroded pipeline allowed an estimated 201,000 gallons, or 4,786 barrels, of oil to dirty nearly two acres of tundra.

The oil spill was the largest ever on the North Slope and has drawn the attention of state pollution regulators, as well as U.S. Department of Transportation officials who have ordered BP to fix numerous corroded spots in the pipeline and improve maintenance before placing it back in service.

Dealing with the spill continues to crimp daily oil flow worth millions of dollars, and BP and its partners in Prudhoe, the nation's largest oil field, have spent $6 million so far on the cleanup, BP spokesman Daren Beaudo said.

Beaudo on Friday confirmed that federal investigators are conducting a criminal probe into the spill. BP knows this, he said, because an industry contractor, Coffman Engineers, recently received a subpoena.

Coffman works for the state to monitor the corrosion-control programs inside BP and Conoco Phillips, the North Slope's two biggest oil producers.

Although BP has not been served directly with a subpoena, the company is ready to work with federal authorities, Beaudo said.

"We've informed our employees and have asked them to cooperate fully," he said.

The spill also drew the attention of two Democratic congressmen, Reps. John Dingell of Michigan and George Miller of California, who sent a letter to BP's Alaska chief, Steve Marshall, inquiring about the company's corrosion control and other issues. The congressmen sent a similar letter to Kevin Hostler, chief executive of Anchorage-based Alyeska Pipeline Service Co., which runs the 800-mile trans-Alaska oil pipeline on behalf of owners BP, Conoco Phillips, Exxon Mobil, Chevron and Koch Industries.

Last week, Chris Knauer, a staff investigator for the Democratic minority on the House Energy and Commerce Committee, came to Alaska to visit the spill site and the Alyeska pipeline. Tom Hassenboehler, a majority staffer on the committee, also made the trip.

U.S. Environmental Protection Agency investigators also have been involved since a BP oil field worker discovered the snow-covered spill with his nose shortly before dawn on March 2.

In recent weeks, indications have surfaced that the EPA, with the help of a federal grand jury, has been conducting a criminal inquiry into oil industry activities on the Slope since last summer.

An EPA spokesman said the agency can't acknowledge the existence of a criminal investigation.

Alyeska spokesman Mike Heatwole said his company also had received no direct inquiry from federal criminal investigators. As for the visit by congressional staffers, he said that wasn't anything unusual.

"Folks from D.C. come up here from time to time to look at a wide variety of things," Heatwole said. "We don't get very many takers in the wintertime, but we always offer."

He said Knauer has traveled here several times over the years, but it was the first visit for Hassenboehler, who works for Rep. Joe Barton, R-Texas, the Energy and Commerce Committee chairman.

Aside from the Prudhoe spill, an incident at a drilling rig working at a site called Oooguruk in the Beaufort Sea in March 2003 is drawing interest from federal investigators.

Drilling company Nabors Industries disclosed a criminal investigation in a recent filing with the U.S. Securities and Exchange Commission. Nabors said it received a grand jury subpoena from the U.S. Attorney's Office in Anchorage on Dec. 22 seeking documents and information related to a spill of drilling fluids from its rig.

Another firm, Pioneer Natural Resources Co., disclosed in its own recent SEC filing that the EPA was conducting a criminal investigation into the 2003 spill. Pioneer, an oil and gas company based in Irving, Texas, had hired the Alaska subsidiary of Nabors, based in Bermuda, to drill the Oooguruk well on a man-made ice island in the Beaufort Sea shallows, offshore the giant Kuparuk oil field.

Two men, one a roughneck for Nabors and the other a retired planner for Alyeska, say they believe the federal investigators might be conducting a wider inquiry than just a look back at the Oooguruk matter. Mike Mason, the Nabors worker, can recite numerous current and former workers and managers whom he said have been interviewed by investigators.

Glen Plumlee, the former Alyeska planner, said that since December, he'd spoken with criminal investigators several times regarding what he believed were improper financial reports at Alyeska. Once, he said, he met with several agents -- he declined to identify exactly who they work for -- at the Hilton Anchorage hotel. Plumlee lodged a complaint with federal Labor Department officials, accusing Alyeska executives of denying him a post-retirement consulting job because he blew the whistle on the company by talking to the investigators.

Heatwole acknowledged that Plumlee, who retired this month, did file the Labor Department complaint, but said he couldn't say much more.

The oil industry has at least one other worry.

In its annual report filed with the SEC in late February, Conoco Phillips said the U.S. Attorney's Office in Anchorage as recently as June 29 of last year had hit the company with subpoenas for possible environmental violations including discharge of oily water on two of its tankers, the Polar Discovery and the Polar Alaska.

"We are fully cooperating with the governmental authorities in their investigation," the company wrote.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.



Oil industry under scrutiny
Published: April 16, 2006
Last Modified: April 16, 2006 at 03:22 AM

Alaska oil industry investigations at a glance:

Oil spill: BP confirms federal officials launch criminal probe into March 2 Prudhoe spill.

Drilling: EPA, Anchorage federal grand jury look into 2003 spill from Beaufort Sea rig.

Congress: House Energy and Commerce Committee sends staffers to look at Prudhoe spill site, pipelines.

Tankers: U.S. Coast Guard probes possible pollution violations on Conoco Phillips oil tankers.

Alyeska Pipeline: Ex-employee files Labor Department whistle-blower complaint against company.

Anchorage Daily News


Anchorage Daily News
April 15, 2006


Corrosion blamed for 2nd recent leak on Slope
AT KUPARUK: Up to 500 gallons of water with a trace of crude oil spilled in March.

Anchorage Daily News
Published: April 15, 2006
Last Modified: April 15, 2006 at 02:39 AM

Corrosion is to blame for a pipeline leak that sent hundreds of gallons of oily water onto the tundra last month in the Kuparuk River oil field, concludes a report this week from the Alaska Department of Environmental Conservation.

The leak, discovered March 9, was overshadowed by a much bigger spill of crude oil -- an estimated 201,000
gallons -- in the Prudhoe Bay field, which neighbors Kuparuk. That spill was discovered March 2.

Though small, the Kuparuk spill of up to 500 gallons of water with a trace of crude oil caused significant disruption for Conoco Phillips Alaska Inc., which runs the state's second-largest oil field.

The spill forced the shutdown of the leaky pipeline and 15 wells, halting the flow of as much as 4,000 barrels a day of crude oil.

Conoco workers have restored that production by diverting the oil through a parallel pipeline, the DEC report says.

The spilled Kuparuk liquid is known as produced water. Typically, North Slope wells send up a mixture of hot crude oil and water, and this water is separated and moved through pipelines.

State pollution regulators say produced water, which is sometimes salty, can be as harmful to tundra plant life as oil.

DEC officials say a cleanup of about 2,000 square feet of snow-covered tundra is complete.

Corrosion eating away at the inside of the pipeline, 24 inches in diameter, caused the spill, officials said.

Internal pipeline corrosion also caused the March 2 spill at Prudhoe. It was the largest oil spill ever on the North Slope.

Oil company managers say they spend millions of dollars a year to control corrosion, particularly as the vast network of pipelines across the Slope age. Oil production began at Kuparuk 25 years ago.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.


Anchorage Daily News
April 11, 2006


No fine for BP in past spill
6,000 GALLONS: State filed no civil, criminal action in 2003 pipeline leak.

Anchorage Daily News
Published: April 11, 2006
Last Modified: April 11, 2006 at 01:54 AM


In May 2003, cleanup workers try to contain and recover a 6,000-gallon spill of crude oil and oily water in the Prudhoe Bay oil field. The spill from a corroded pipeline occurred about a mile from where another line, also weakened by corrosion, leaked an estimated 201,000 gallons of crude oil onto the tundra this winter. Alaska pollution regulators considered criminal charges or a fine against BP for the 2003 spill but ultimately took no action. Now the state is faced with the question of whether to punish BP for this year's spill, the largest ever on the Slope.

Last week, Alaska's top pollution regulator, Kurt Fredriksson, said the state might hit BP with a "sizable" fine for a pipeline leak last month that caused the largest oil spill ever on the North Slope.

A top Alaska manager for BP, Maureen Johnson, said in the days immediately following the March 2 discovery of the spill that the London-based company anticipated punishment.

"If you mess up, you expect to be penalized for that," she said.

But if the spill investigation plays out the same way a similar case did three years ago, when another pipeline in the heart of the giant Prudhoe Bay oil field sprang a leak, BP might escape with nary a dollar in state fines.

The May 2003 leak occurred little more than a mile from last month's spill and sparked a vigorous internal debate among state environmental officials and lawyers about how to punish BP for a delay in reporting a 6,000-gallon spill onto the tundra. They even considered charging BP with a crime, according to documents obtained by the Daily News.

In the end, BP got off with no criminal charges and no civil fine.

Now state officials are weighing how to handle a far larger spill in the BP-managed Prudhoe Bay field -- an estimated 201,000 gallons of crude oil, or 4,786 barrels.

Cleanup workers are still trying to scrub the spilled oil off nearly 2 acres of tundra and the edge of a frozen lake.

The spill has been a costly headache for BP, forcing creation of a small army of cleanup workers and halting production of up to 100,000 barrels of oil per day -- oil worth more than $6 million at today's prices.

Company investigators believe corrosion ate an almond-sized hole in the pipeline, a major artery in the web of pipes that drain the Prudhoe field. The leak happened at a point where the pipeline, 34 inches in diameter, passes through a caribou crossing -- a mound of gravel heaped on top of large, above-ground pipes to give the migratory animals a path to cross over.

State and federal officials are investigating to see whether BP violated any regulations in detecting or preventing the spill. BP managers acknowledge they knew the pipeline had corrosion problems and the corrosion was getting worse.

Corrosion likewise was to blame for the 2003 pipeline leak.

Documents from the Alaska Department of Environmental Conservation, which enforces pollution laws, show that regulators were primed in 2003 to take stern action against BP.

State regulators expect oil companies to report spills within 30 minutes of discovery, which BP did in March.

But in 2003, the company took 19 hours and 15 minutes to alert state officials of a 6,000- gallon leak of oil and oily water from a 24-inch pipe known as the Y-36 line.

As with last month's pipeline leak, the Y-36 line failed at a point where the pipe passed through a caribou crossing. Caribou crossings can heighten the risk of leaks because corrosive water tends to pool at the crossings, and the pipelines are harder to inspect where buried.

BP subsidiary BP Exploration (Alaska) Inc. already was well-acquainted with the sensitivity of oil-spill reporting, having pleaded guilty to a federal criminal pollution violation in 1999. A federal judge sentenced the company to five years on probation for failing to immediately report hazardous-materials dumping by a contractor at the company's Endicott field on the North Slope.

BP was fined $500,000 and ordered to spend $15 million to develop a new environmental management system for its U.S. oil fields.

As BP was seeking early release from its probation, Fredriksson's predecessor at DEC, Ernesta Ballard, wrote a toughly worded letter to federal environmental officials in December 2003. She used BP's tardiness in reporting the Y-36 spill as an example of why BP needed continued scrutiny by federal authorities. She said BP had failed to meet its "corporate accountability and environmental responsibility objectives."

That wasn't the only tough talk at DEC about what to do to BP because of the Y-36 spill. In the months leading up to Ballard's letter, rank-and-file DEC investigators and state attorneys mulled what punishment the state should dish out, according to state documents.

The starting point was criminal charges.

On Sept. 2, 2003, Walt Sandel, a DEC environmental specialist, wrote to Kevin Burke, a state environmental-crimes prosecutor, asking whether BP's failure to promptly report the Y-36 spill warranted criminal charges.

Seven days later, Burke replied that, no, criminal prosecution wasn't justified.

Burke noted that BP managers had explained that a succession of communication errors, starting with the contractor who discovered the spill, led to the long delay in reporting the spill to state officials.

"In short, there was a breakdown of communication, but no particular individual can be said to have acted criminally," Burke wrote.

He added, however, that "given the complete breakdown in spill reporting," it might be appropriate to seek civil penalties.

BP knew it was in trouble. Managers already had taken steps to show they respected the state's demand for quickly reporting oil spills. The steps included a "bed drop," in which BP placed a hard copy of a bulletin on every worker's bed reminding all to dial the Slope's "spill hotline" even before telling a supervisor of a spill, according to a BP e-mail to DEC officials.

By late November 2003, another lawyer for DEC had developed some options, according to the internal agency documents. One involved filing suit against BP seeking a $100,000 civil fine.

"The mere filing of the complaint would cause BP considerable discomfiture," the state assistant attorney general wrote in a Nov. 28 memo to DEC officials.

State officials could "meet with BP privately," he wrote, lay out the lawsuit as a "potential scenario," and "offer them an immediate, take-it-or-leave-it cash settlement of $100,000." And if BP didn't pay up, the state could seek internal BP documents about its oil field costs and possibly cost-cutting in its environmental management -- a potential embarrassment to the company.

According to DEC documents, state regulators and attorneys had ongoing talks and meetings with BP attorneys and executives, including Bob Batch, BP's environmental manager in Alaska. Jeanne Pascal, an official with the U.S. Environmental Protection Agency involved in supervising BP during its probation, also was in the mix.

By Jan. 22, 2004, Ballard had made her decision. That day she e-mail her staff:

"Bob Batch and I had a very cordial meeting. I, too have had several lengthy conversations with Jeanne. I have also talked to Gregg Renkes, who does not want us to take civil action against BP."

Renkes at the time was Alaska's attorney general. He resigned under fire in February 2005 after public reports that he used his state position to promote a coal technology company whose stock he owned.

Renkes, who now lives out of state, could not be reached for comment.

Ballard, now a vice president with timber giant Weyerhaeuser Co. of Federal Way, Wash., said in an interview last week that "BP was very responsive to our concerns."

The company determined the cause of the spill, figured out why it wasn't reported sooner and changed procedures to avoid future lapses, she said.

Fredriksson, the current DEC commissioner, said the outcome of a prior spill case doesn't mean the March spill will get the same treatment.

"Each case really does have to be taken separately, in its own context," he said.

Ultimately, the state took no criminal or civil action against BP for the Y-36 affair.

BP did, however, send the state a check for $31,709 on April 2, 2004, to cover DEC's costs in responding to the spill.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.


Wall Street Journal
April 9, 2006

Emotional Hearing Held On Exxon Valdez Oil Spill Claims
April 9, 2006 2:24 a.m.

ANCHORAGE, Alaska (AP)--Oil from the 1989 Exxon Valdez tanker grounding still lingers on and just below Alaska's surface. So does the resentment.

Like ripping open a thin scab from a wound that never healed, a recent series of state hearings on the continued effects of the 11-million-gallon spill has brought the pain and anger of those affected by the spill bubbling back to the surface.

In sometimes emotional testimony on Saturday, Alaska fishermen, Native leaders, conservationists and academics told a panel of state and federal officials that new damages of up to $100 million should be claimed against Exxon Mobil Corp. (XOM) for the unexpected effects of the tanker grounding.

"What Exxon did to us is not fair, what has been done to us is a travesty," said Robert Wolfe, a fisherman who lives in Girdwood.

Dozens of people have spoken at hearings in the cities of Anchorage, Cordova and Kodiak that state officials are holding to decide whether to file a claim for additional damages. Additional hearings are scheduled in Valdez and Seward.

Some who testified raged against Exxon Mobil. Some offered ideas about research and restoration projects that could be done with the money. Others talked about specific species that haven't recovered in Prince William Sound, such as Pacific herring.

"We're just fishermen, but it's a way of life and it's been destroyed," said Evan Beedle of Cordova.

Bill Hall, a former mayor of Cordova said the state and federal governments should be able to figure out for themselves the lingering effects of the oil spill. These hearings have sharpened the pain of the memories, he said.

"This for me is an experience of a lingering effect of the oil spill. It's dragging and making it more painful and sustained over time," Hall said.

Alaska Attorney General David Marquez, who is holding the hearings, said he was struck by the emotion of the hearings.

"One of the things, of course, we have been reminded about is the great passion that surrounds the aftermath of this horrible tragedy, and that's important for us to hear," Marquez said.

In a 1991 civil settlement, Exxon agreed to pay $900 million over a 10-year period ending in 2001. A "reopener" provision created a window from 2002 to 2006 in which the state and federal governments could claim up to an additional $100 million.

That is separate from an unresolved punitive damage judgment of $4.5 billion against the company, which has not been paid.

Exxon Mobil spokesman Mark Boudreaux has said the company has paid the compensation it owes and the company's studies show that Prince William Sound is "healthy, robust and thriving."

But an assessment of the lingering oil presented by consultant Lucinda Jacobs for the Exxon Valdez Oil Spill Trustee Council estimated that as much as six miles of shoreline in Prince William Sound are still affected by the spill, and as much as 100 tons of Exxon Valdez oil remains in the sound.

An undetermined amount lingers beyond the sound, she said.

Besides herring, killer whales, sea otters, harbor seals, some species of sea birds and other animals still have populations less than before the spill.

There is a great deal of uncertainty, particularly with the herring population, of whether the continued declined populations is due to the lingering effects of the oil.

The reopener provision in the settlement with Exxon expires Sept. 1, and the state and federal governments must file a claim 90 days before that date.

To claim the money, the governments would have to prove that a population, habitat or species had suffered loss or decline in the area of the spill, and that loss can be linked to the spill. Plus, the state and federal governments would have to prove the loss was not known or anticipated when the settlement was signed.


April 8, 2006


BP: Beyond pathetic
By Thomas Borelli
Apr 8, 2006

““Beyond Pathetic” seems a more appropriate name for BP”

What’s your “carbon footprint”? That’s the question asked by the latest version of BP’s high profile advertisements saturating both newspapers and TV. I don’t know mine, but part of BP’s current carbon footprint is about 200,000 gallons of crude oil resulting from a leak in a corroded pipeline causing the largest oil accident ever in the North Slope of Alaska.

But that’s only a start let’s not forget about the tragic explosion last year at the BP refinery in Texas City, Texas that claimed 15 lives and injured 170 people. With that disastrous track record measured in terms in human and environmental damage you would imagine BP would rethink its empty-headed advertising strategy before it ends up putting its own “footprint” in its mouth. Don’t bet on it though.

BP’s record is a classic business case study of the real world consequences of a corporate social responsibility-driven public relations campaign. BP is proving that a company can’t serve two masters at once.

While BP tries to score well in public opinion polls and please the anti-oil mob by positioning the company as an “environmentally conscious” company, it apparently has neglected the basics like facility safety. As the company highlights its investment in questionable renewable energy programs, it distances itself from its oil and gas foundation, and gleefully advertises that the manmade global warming hoax is real.

As some in the company literally appear to believe their own advertising that they are beyond petroleum and they are acting accordingly, ignoring the fundamental basics and complexity of operating running its oil and gas business.

Last year’s the tragic accident occurred when an explosive vapour was improperly ventilated and seeped from an octane-enhancing unit in the refinery during plant start up. The vapour was ignited by an idling truck resulting in the tragic explosion that was felt miles away.

BP took full responsibility for the accident whatever good that does and the U.S Occupational Health and Safety Administration fined the company over $20 million for hundreds of violations of health and safety regulations. Due to the number and seriousness of the violations, OSHA referred the case to the FBI for possible criminal charges against the company.

BP paid millions of dollars in settlement claims from the some of the victims and their survivors, and it faces more legal challenges from the hundreds of other plaintiffs that will make full use of the company’s negligence as evidenced in its own documents and records.

In the North Slope episode of operational failure and negligence, once again the company’s maintenance and safety record raises questions. According to an article in the New York Times, maintenance concerns were raised by onsite pipeline workers. “The company had been warned about cutting back on maintenance” and the spill “could have been prevented,” according to the workers.

It’s no wonder BP has become the darling of the environmental special interest groups the company’s incompetence makes the environmentalists’ argument that oil companies can’t be trusted to exercise due care.

Moreover, BP spends $100 million annually on global warming advertising campaigns that try to manipulate the public into believing that human activity is responsible for global warming and that renewable energy is economically feasible. With oil friends like that, Greenpeace and NRDC really don’t need any corporate enemies.

You can bet the next time drilling in the Arctic National Wildlife Refuse (AWNR) comes up for a vote, BP’s operational failures will be trumpeted by anti-oil activists who think higher energy prices are the way to go.

“Beyond Pathetic” seems a more appropriate name for BP something you may want to keep in mind the next time you pass by one of those green-and-yellow flowered gas stations.

Thomas J. Borelli, Ph.D. is the editor of FreeEnterpriser.com and a senior fellow at The National Center for Public Policy Research, a Townhall.com Gold partner. The opinions expressed are his own.


Anchorage Daily News
April 8, 2006


Alyeska lab tech falsified water test data
SENTENCED: Pressures of work blamed; man lost job, receives probation.

Anchorage Daily News
Published: April 8, 2006
Last Modified: April 8, 2006 at 02:06 AM

A federal judge Friday sentenced a former laboratory technician for Alyeska Pipeline Service Co. to three years on probation for falsifying wastewater test data filed with environmental regulators.

Thomas R. Austin, who worked from April 2001 to August 2003 in the lab at Alyeska's oil tanker terminal at Valdez, had pleaded guilty Jan. 25 to making false statements under the federal Clean Water Act.

In addition to probation, U.S. District Judge Ralph Beistline ordered Austin to pay a $1,000 fine.

Austin in 2002 "manually modified the analysis performed on a laboratory sample," making it look like the sample had passed quality-control criteria when, in fact, it failed, according to a Friday news release from the U.S. Attorney's Office in Anchorage. The falsified data ultimately reached the Environmental Protection Agency, which regulates Alyeska wastewater discharges at Valdez.

Austin, 44, of Valdez, lost his job as a result of his actions, prosecutors said.

Neither Austin nor his attorney, Herbert Viergutz, could be reached for comment Friday evening.

However, in a written statement filed with the court prior to sentencing, Austin admitted he unlawfully manipulated data. Austin wrote that he did it not to deceive the EPA, but "to avoid conflicts and problems with management" at Alyeska.

"The expectations of the laboratory manager ... were that no mistakes were allowed," Austin wrote.

Austin added that he'd tried to do what is right and ethical in his life, but he let concerns about a large salary, a new wife, his declining health due to cerebral palsy, and a desire not to have to move again "overcome my common sense."

Federal court documents available late Friday make no suggestion that Alyeska as a company or its managers did anything wrong.

Alyeska is an Anchorage-based consortium that runs the 800-mile trans-Alaska oil pipeline and the Valdez tanker dock on behalf of five owner energy companies including BP, Exxon Mobil, Conoco Phillips, Chevron and Koch.

Alyeska spokesman Mike Heatwole said Friday that company management suspected something was wrong in the lab and conducted an internal investigation that turned up the falsified data.

He said Alyeska took its findings to the EPA and "cooperated fully" with federal officials.

Meantime, Austin was fired, Heatwole said.

The news release from the U.S. Attorney's Office said the investigation found that Austin has falsified and changed 102 data samples.

The release added that Alyeska changed lab procedures, and "there was no evidence that the manipulations by Austin impacted the operation of the wastewater plant or resulted in environmental damage."

Heatwole said Austin worked in a complex system in which ballast water drained off tankers arriving in Valdez is cleaned up in a treatment plant, tested and then discharged into the sea. Alyeska has a federal permit for the discharges.

After reading Austin's court statement Friday night, Heatwole said he was unable to provide an immediate response.

However, he said he was unaware of any other disciplinary measures within the company associated with the Austin case.

According the prosecutors, the maximum sentence Austin could have received was two years in prison and a $250,000 fine.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.


Financial Times
April 7, 2006


BP faces probe on Alaska spill
By Stephanie Kirchgaessnerin Washington
Published: April 7 2006 03:00 |
Last updated: April 7 2006 03:00

BP is under investigation by US regulators in connection with an Alaska oil spill last month when up to 267,000 gallons of crude leaked out of a BP-operated pipeline.

A person familiar with the investigation said the Environmental Protection Agency and the Department of Transportation, which oversees the safety of US pipelines, were investigating BP's ruptured line and whether the company violated safety regulations.

Officials at Alaska's Department of Environmental Conservation have separately said they would take action against BP because of the spill, including issuing "sizeable" fines.

The incident, which was discovered on March 2, occurred over an estimated five days on a transit line on the North Slope in an area that contains the largest oil field in the US.

BP said yesterday that it had not received inquiries from the EPA or Alaska state regulators since the days after the spill but that regulators were "pleased" with the company's clean-up efforts to date.

The company said it had completed its investigation of the spill with the help of state regulators and members of a steel union, and that its report was being vetted by the Alaska agency.

News of the investigation undermines efforts by BP to portray the UK oil group as an environmentally friendly company.

The spill has raised broader questions about BP's maintenance of its aging oil facilities in Alaska and whether the company ignored warnings from workers about maintenance standards.

The investigation and potential fines against BP come just months after US regulators questioned the oil group's safety culture in the wake of a Texas oil refinery explosion in 2005 that killed 15 people and injured more than 170.


Anchorage Daily News
April 7, 2006


Congressmen, EPA probe Prudhoe spill
QUESTIONS: Legislators want to know if trans-Alaska pipeline could have similar corrosion.

The Associated Press
(Published: April 7, 2006)

Last month's Prudhoe Bay oil spill, the largest ever on the North Slope, is drawing attention from a growing stable of investigators.

U.S. Environmental Protection Agency investigators who are conducting a criminal probe into a Beaufort Sea drilling spill in 2003 have reportedly added the Prudhoe spill to their inquiry list.

Last week, two congressmen started their own investigation into the spill, and they are questioning whether the 800-mile trans-Alaska pipeline is susceptible to the same type of corrosion that ate a hole in a major Prudhoe feeder pipeline, allowing the oil to spill.

Democratic Reps. John Dingell of Michigan and George Miller of California are dispatching to Alaska next week Christopher Knauer, the minority investigator of the U.S. House Committee on Energy and Commerce.

They asked the head of Alyeska Pipeline Service Co., the Anchorage-based oil company consortium that runs the trans-Alaska pipeline, whether the chemical additives suspected to have caused the corrosion in the Prudhoe feeder line could have reached the main pipeline.

The spill was discovered March 2 in a pipeline connecting two processing plants in the Prudhoe Bay oil field. As much as 270,000 gallons of crude spilled onto about two acres of tundra over a period of five days or more.

Last week, Dingell and Miller sent Steve Marshall, president of BP subsidiary BP Exploration (Alaska) Inc., a list of questions on the leak's cause and corrosion testing the company had conducted on its pipes. BP runs Prudhoe on behalf of itself and other owners.

Marshall sent the congressmen an 18-page response Monday. In it, Marshall writes the investigation is not complete, but "recent and aggressive internal corrosion is the likely cause of the leak."

State environmental regulators and Marshall say a possible contributor to the corrosion was an emulsion-breaking additive in the line.

The additive is used to reduce water and silt in the oil.

In their query to Alyeska president Kevin Hostler, Dingell and Miller asked whether the chemical additives used by BP have hurt the trans-Alaska pipeline, which carries North Slope oil south to the tanker port at Valdez.

"Assuming the theory that the rapid onset of corrosion was caused by the emulsion-breaking additive proves true, it would suggest that (the trans-Alaska pipeline) itself may be vulnerable to the same corrosion caused by the additive," the letter reads.

Dingell and Miller also asked Alyeska whether the pipeline company uses the same additives as BP. The congressmen further asked about Alyeska's methods and frequency of testing for corrosion.

Alyeska spokesman Mike Heatwole said company managers are preparing to meet with the committee investigator next week.

Dingell and Miller's inquiry is one of a growing number of investigations into the spill.

State environmental regulators said this week that
fines as high as $2.1 million could result from their investigation, which is being conducted jointly with BP.

Additionally, the EPA has launched its own investigation into the spill, according to The Wall Street Journal. A Washington-based spokesman for the EPA, Dale Kemery, would neither confirm nor deny any probe, citing agency policy.

Glen Plumlee, an Anchorage resident and strategic planning coordinator for Alyeska, said he has spoken with federal criminal investigators multiple times in recent months about corrosion spending and other matters. Plumlee said he also has filed a Labor Department complaint accusing Alyeska executives of retaliating against him, after he disclosed he talked with investigators, by reneging on the promise of a consulting job after he retires this Sunday.

The congressional committee does not have the power to prosecute. If the investigator finds evidence of criminal wrongdoing, Dingell and Miller plan to turn over that evidence to the Justice Department, said spokeswoman Jodi Seth.

In his response to the congressmen, BP's Marshall said the leaking line will not be brought back into service until its integrity is confirmed.

Ultrasonic tests showed increasing corrosion in the pipeline last fall, but the amount was manageable, Marshall said. Additional inspections were added as a result, he said.

The leak was at a point where the pipeline was buried for a caribou crossing, and it was not accessible to direct visual inspection. Ultrasonic testing of that area was not done, Marshall wrote.

Daily News reporter Wesley Loy contributed to this article. He can be reached at wloy@adn.com or 257-4590.


Bellingham Herald
April 6, 2006


Paper: BP focus of criminal investigation
No charges filed in North Slope pipeline probe


LONDON - U.S. environmental regulators are conducting a criminal investigation into the management of pipelines in Alaska's North Slope by British energy group BP PLC, a newspaper reported Thursday.

An investigation has been under way for several months by officials at the Environmental Protection Agency and was expanded to include a March 2 spill of an estimated 134,000 to 267,000 gallons of crude from a BP-operated pipeline at Prudhoe Bay, The Wall Street Journal reported.

London-based BP spokesman Robert Wine said that the company has not been served with any papers or informed of any charges.

Wine said that BP cooperated fully with the EPA in the days after the Prudhoe Bay spill, including providing access to the site. There had been no communication between investigators and the company since then, he added.

Alaska environmental regulators said Wednesday that an investigation into the spill could result in fines against BP subsidiary BP Exploration (Alaska) Inc. of more than $2 million.


The Wall Street Journal quoted people familiar with the matter that it did not identify by name as saying that federal investigators are looking at corrosion issues on the ruptured line, as well as others in the area, to determine if BP has committed any violations of the federal Clean Water Act.

A Washington, D.C.-based spokesman for the EPA, Dale Kemery, would neither confirm nor deny the existence of any probe, citing agency policy.


Wall Street Journal
April 6, 2006

BP's Pipeline Problems Spur U.S. Criminal Probe
Big Alaska Oil Spill Gives Company Fresh Black Eye After '05 Texas Explosion

April 6, 2006; Page A3

U.S. environmental regulators are conducting a criminal investigation into BP PLC's management of pipelines in Alaska's North Slope, according to people familiar with the matter, adding to mounting regulatory scrutiny of the British energy titan's U.S. operations.

These people said the investigation, which has been under way for several months by officials at the Environmental Protection Agency, was expanded to include an early March spill of an estimated 134,000 to 267,000 gallons of crude from a BP-operated pipeline at Prudhoe Bay. Alaska state conservation officials say the pipeline ruptured from internal corrosion, causing what is considered the largest oil spill ever in the energy-rich North Slope.

One person familiar with the matter said the federal investigators are looking at corrosion issues on the ruptured line, as well as others in the area, to determine if BP has committed any violations of the federal Clean Water Act. The act carries criminal and civil penalties for violations, such as allowing oil to spill into a federal waterway.

A BP spokesman, Daren Beaudo, said that EPA investigators were on site during the first several days of the spill and that BP hadn't heard from the agency since. "If they do contact us again, we will cooperate fully with their requests," he said in a written response to questions.

The EPA probe is just the latest embarrassment for BP -- the world's second-largest publicly traded oil company, after Exxon Mobil Corp. -- and Chief Executive John Browne, who has aggressively promoted the company as environmentally friendly and socially responsible.

The North Slope allegations come as U.S. investigators continue to pore over details of an explosion last year at the company's Texas City plant, which killed 15 and triggered a $21.3 million fine from workplace-safety regulators. The Labor Department referred the case to the Justice Department for possible criminal charges. Current and former plant workers accused BP of skimping on staff and maintenance; BP has said its spending decisions have had no effect on safety.

The allegations also come amid record profits for BP from rising crude-oil and gasoline prices, as well as amid rising political scrutiny. BP posted net profit of $22.63 billion last year.

Also yesterday, Alaska's Department of Environmental Conservation said it will seek fines that could amount to between $900,000 and $2 million against BP as restitution for much of the spilled oil. BP's Mr. Beaudo told Dow Jones Newswires that BP expected the action.

The North Slope spill covered a two-acre area of tundra and ice, as well as part of a lake. It prompted BP to curtail production by 95,000 barrels of oil a day, or about 10% of the normal amount that flows down the Trans-Alaska Pipeline to tanker ships in the port of Valdez. Crews are still attempting to clean up the crude. State officials say the line is expected to resume full production in about a week.

The investigation is being conducted by the EPA's criminal-investigation division. If investigators find any violations of the Clean Water Act, they will likely discuss the case with the U.S. attorney's office, which could forward the matter to a federal grand jury for possible prosecution, said a person familiar with the matter.

Charles Hamel, who for years has served as a conduit for safety-related complaints by oil-industry workers, said he alerted the EPA last year to the complaints from several past and current employees that BP has allegedly ignored their concerns regarding corrosion since at least 1999.

The 75-year-old Mr. Hamel, who lives in Alexandria, Va., said he went to EPA investigators for help after BP officials declined to act on warnings from some employees that cost-cutting had significantly reduced the company's program to monitor and repair corrosion at the network of aging pipes at Prudhoe Bay.

Mr. Beaudo, the BP spokesman, said the company has devoted more resources to its anticorrosion program, with spending rising to $71 million for inspection and chemical treatment this year, up from $58 million last year and $50 million in 2004.

--Chip Cummins contributed to this article.

Write to Jim Carlton at jim.carlton@wsj.com


April 5, 2006


Financial analyst claims he inflated Alyeska report
Wednesday, April 5, 2006 - by John Tracy
Anchorage, Alaska

A financial analyst at Alyeska Pipeline Service Co. claims the company asked him to inflate a report on the amount of money that it spends on corrosion.

Fifty-one-year-old Glen Plumlee, the planning coordinator at Alyeska, says last fall the company asked him to indicate in a report that it spent $48 million on corrosion efforts in 2004. Plumlee says he refused to do it, and he says he told federal investigators about the incident, along with other safety concerns he has regarding Alyeska’s downsizing efforts.

Plumlee says when he told his bosses, including Alyeska president Kevin Hostler about the investigation; he was isolated by his supervisors. He says previous offers of a consulting contract after his retirement disappeared.

“I had quite a few contacts in Europe, U.S. and obviously Kevin Hostler was very interested. Offered me, three times in the same breakfast meeting, work. So that’s come to an end. I’m not sure,” said Plumlee.

“You’re feeling at this point you’ll be blackballed?”

“Yes,” said Plumlee (left).

Alyeska spokesman Mike Heatwole says it’s against company policy to offer consulting contracts to current employees and says Hostler never made the offer. Heatwole also says Plumlee has provided no evidence that any corrosion report was doctored, and Alyeska says it has no knowledge of a federal investigation.

Plumlee has written a complaint to the U.S. Department of Labor under a whistleblower act claiming retaliation. Heatwole says the company welcomes a Department of Labor probe.


Fairbanks News Miner
April 5, 2006


Analyst: Alyeska falsified reports
By SAM BISHOP News-Miner Washington Bureau
Wednesday, April 05, 2006

WASHINGTON--A senior financial analyst at Alyeska Pipeline Service Co. has filed a complaint with federal labor officials alleging that he was asked to leave the company in retaliation for cooperating with criminal investigators from the Environmental Protection Agency in December.

Glen Plumlee of Anchorage, who will take an early retirement from Alyeska next week, said he told the federal investigators about his concerns with Alyeska's effort to build new pump stations and automate operations. He also said he was pressured to boost estimates of how much Alyeska was spending to fight corrosion on the trans-Alaska oil pipeline, which the company operates.

Plumlee, a senior analyst in the chief financial officer's department at Alyeska, said the investigators came to him.

"I did not seek them out, and they made it very plain to me that lying to them was a felony," he said in an interview Monday.

His bosses learned of his cooperation because shortly after the first interview with investigators he refused to write up a report on corrosion spending. His bosses wanted to him to inflate the numbers, he said.

"I'm not going to be Alyeska's designated felon on this," he said of his decision.

Alyeska spokesman Mike Heatwole said it was difficult to comment on the allegations because many of the details aren't in Plumlee's letter to the Labor Department. However, the company already has looked into some of the issues and feels it acted properly, he said.

"We have been aware of a lot of internal discussions around the issues that are in that letter," he said. "We've had a couple internal investigations. ... So far we don't see anything that concerns us."

Heatwole said the company was not aware of any criminal investigation.

Plumlee said he most recently met with an investigator at his home for two hours about two weeks ago.

Plumlee, 51, said he has "received regular commendations, bonuses and salary increases" in his job.

Alyeska President Kevin Hostler had even offered him a post-retirement consulting contract in December, he said, before he met with investigators the first time. The two haven't spoken since Hostler learned of the meeting with investigators.

"On March 11, 2006, another senior Alyeska executive, Vice President Lee Monthei, advised me that I should contact an employment agency and just 'move on,'" Plumlee wrote in his letter to the Labor Department.

Plumlee said the request to change the corrosion spending numbers in December wasn't the first time he had encountered such pressure. On Sept. 19, 2005, an Alyeska executive asked him to pull together the numbers on corrosion spending for Steve Marshall, BP Exploration (Alaska) Inc.'s president.

It was the Monday after The Wall Street Journal published a Saturday article about a list of 101 risks to the pipeline's integrity that Alyeska's soon-to-resign Chief Operating Officer Dan Hisey had written in August. One of the risks was corrosion.

Marshall was flying to London to talk with BP's CEO John Browne about the issues, Plumlee said.

Plumlee said his Alyeska bosses wanted him to inflate the amount spent on corrosion in 2004. He believes the proper number should be about $28 million. Instead, Marshall was given a figure of $46 million, citing an e-mail in his possession.

"They were false," he said of the numbers Marshall received. "I didn't falsify them. That's what they wanted me to do and they got someone else to do it."

BP Alaska spokesman Daren Beaudo said Monday he was not aware of the exchange and had no comment.

Plumlee said Alyeska increases or decreases its corrosion spending number depending on the expected audience by including more or fewer categories of work.

"I think we should use the number in our financial statements," which is closer to $28 million, Plumlee said.

Heatwole said he wasn't aware of the Sept. 19 exchange, either. However, he said, it is reasonable to expect that corrosion spending estimates could change based on what work is included. The effort to combat corrosion could include programs across the company--not only specific integrity investigations, but also maintenance and engineering work.

"It's a very, very comprehensive approach," he said.

Heatwole said he didn't have a total spending figure immediately available. In at least one place on Alyeska's Web site, an employee estimates anti-corrosion spending at "between $20 million to $40 million a year."

This isn't Plumlee's first run-in with Alyeska. He first went to work there in 1989. A few years later, he was working as an inspector and identified some "technical problems" on the pipeline in a report. He said he was fired, which led to testimony before a congressional committee in 1993.

Plumlee subsequently settled a complaint against Alyeska out of court and moved to the Lower 48 to attend law school. Alyeska called him in the mid-1990s and asked him to return, which he did. The company paid for his master's degree in business administration.

Until recently, he said, he believed the company was working hard to correct past troubles.

"I was a pretty loyal employee. I really did believe they were trying to do the right thing," he said.

That changed last spring when he said he thought top company officials ignored troubles with "strategic reconfiguration," the company's effort to simplify pipeline operations. That includes a plan to run four pipeline pump stations on electricity and use smaller, automated modular units at the others.

Plumlee's complaint letter to the Labor Department was given to the News-Miner by Chuck Hamel, a Virginia resident and former oil shipping broker with a long history of conflict with Alaska's petroleum industry.

Hamel also wrote a letter Monday to Rep. John Dingell, D-Mich., to make him aware of Plumlee's complaint.

Dingell led the hearing at which Plumlee testified in 1993, Hamel said.

Washington, D.C., reporter Sam Bishop can be reached at (202) 662-8721 or sbishop@newsminer.com .



BP official: State in danger of losing oil industry

Alaska could lose its oil industry as Detroit lost its automobile makers and Pittsburgh lost its steel, a BP representative said Tuesday during a Greater Fairbanks Chamber of Commerce speech.

The state could either attract additional billions of dollars in the coming years by approving the oil production tax system Gov. Frank Murkowski proposed or demand hundreds of millions of dollars in taxes now and jeopardize future revenue, said Al Bolea, who oversees pipelines and shipping for BP Alaska.

Bolea drew links between Alaska and some of the nation's most depressed cities. He described the boom and crash of the steel industry in Pittsburgh and suggested that Michigan and the Motor City could have been caught off guard by recent cuts in the auto industry.

"Did they ever really think the auto industry would move out?" he said.

Bolea warned that too much taxation could cause the oil industry to move elsewhere.

"You can't trap capital," he said after the talk, claiming that a company's ability to move its capital freely wherever it chooses sits at the base of our economic system.

Becky Hultberg, the governor's spokeswoman, said Murkowski has expressed concerns about the effects of tax rates above what he proposed.

"There is a tipping point that could jeopardize the gas pipeline and limit future investment," she said.

In February, Murkowski proposed a production tax on oil that would tax companies 20 percent on statewide profits and offer a 20 percent investment credit.

The proposal, Bolea said, was "right at the edge of what we could handle." He said BP had sought a 12.5 percent tax and only agreed to pay 20 percent because the tax would provide a stepping stone toward a gas pipeline by providing certainty on oil taxation.

"We didn't expect to get certainty for free," he said.

Bolea disputed the "myth" he said had sprung up: Since the companies had agreed to a 20 percent tax rate without too much protest, the state was not getting all it could from them.

"It's not a bunch of giveaways," he said of the governor's proposal.

Since the governor introduced his oil tax legislation, the state House and Senate have both proposed changes to the tax legislation that would significantly increase the amount companies paid to the state.

With the changes proposed by the Senate, including a 25 percent tax on production, the state would have the highest tax structure in the United States as well as the highest cost of production in the United States, if not worldwide, Bolea said.

The result would be a decrease in investment in the state that would allow production decline to continue.

In his talk, Bolea also placed responsibility on the governor for keeping the gas line contract confidential.

BP's preference was to release the contract along with the proposed oil tax legislation so legislators could review them together, he said.

When he was asked if that would help legislators decide about the oil tax, he said, "It would absolutely eliminate the uncertainty that they are experiencing."

He said the secrecy around the contract has enabled the mistaken belief in a conspiracy between the companies and the government and has frustrated legislators.

"It's frustrating for us, too," he said. "BP has absolutely nothing to hide.

"The governor is running this thing the way he wants to run it," he said, adding that BP has no ability to override the governor.

Hultberg said the governor is looking forward to the time he can release the contract and has always indicated he will when it is complete.

A number of pieces still need to be worked through, she said.

In an e-mailed response to News-Miner questions, Mark Morones, spokesman for the attorney general's office, replied last month, "The Governor wants the legislature to deal with the PPT before we address the proposed contract."

Bolea said the oil production tax legislation being developed in Juneau will have a significant effect on every Alaskan now and in the future and encouraged chamber members to get involved.

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com or 459-7577.


Oh My News.com
AP Newswire
April 5, 2006


Alaska state regulators to fine BP for pipeline spill
JUNEAU, Alaska

The investigation into a March pipeline spill in the Prudhoe Bay oil field could result in fines against BP Exploration (Alaska) Inc. of more than $2 million (euro1.63 million), Alaska environmental regulators said.

Gov. Frank Murkowski also announced Wednesday that as a result of the spill, an interagency group will be formed to share information about pipeline integrity in arctic climates.

A pipeline between two gathering centers leaked between 130,000 gallons (492,000 liters) and 270,000 gallons (102,000 liters) of crude over an estimated five-day period before it was discovered March 2. Gathering centers separate oil from water and other materials that come out of the ground during drilling before shipping the oil down the main trans-Alaska pipeline.

An investigationby BP and Alaska Department of Environmental Conservation officials is not yet finished, but ADEC Commissioner Kurt Fredriksson said the state will be pursuing penalties and fines against BP, the company that operates the Prudhoe Bay field.

The amount will depend on how much crude spilled, he said.

''They could be sizable,'' Fredriksson said.

The potential fine is $8 (euro6.52) per gallon (3.8 liters) spilled, but there are other factors that could change that amount, said Larry Dietrick, ADEC director of spill prevention and response.

Given the estimates of the size of the spill, the fine against BP could be between $1 million (euro820,000) and $2.1 million (euro1.71 million) without those unnamed factors.

Fredriksson said regulators believe the corrosion that caused the leak was an isolated incident.

''Our investigation leads us to explore in greater depth where we see common occurrences or factors that may have contributed to the failure,'' Fredriksson said. ''We have not stumbled across those at this point to lead us into a more in-depth investigation beyond this particular segment.'' A contributing factor to the corrosion is believed to be a chemical put into that section of the line by an emulsion breaker.

Fredriksson said he was assured the chemical was not used in any other line but that one.

Lori Epstein, senior engineer for the pollution watchdog group Cook Inlet Keeper, said the chemical reaction caused by the emulsion breaker should have been anticipated beforehand by BP.

''Not having done that, I think the state has to look at whether they were in compliance with all the corrosion prevention protocol they needed to be,'' Epstein said. ''If this mistake in this one line caused increased corrosion, what about the downstream line?'' Epstein said she believed ADEC has done a good job as a regulator, but she questioned whether the department could be an effective enforcer, since Murkowski is in negotiations with BP and two other producers to build a $25 billion (euro20.39 billion) natural-gas pipeline.

''I am, frankly, skeptical that they will announce or collect a significant penalty from BP while they are undergoing negotiations,'' Epstein said. ''That's the DEC's job, to be a regulator. But they are a creature of state government.'' Murkowski spokeswoman Becky Hultberg called that a ridiculous contention and said the governor takes seriously his duties of environmental stewardship.

The interagency group the governor proposes forming would be made up of people from the ADEC, the state Department of Environmental Conservation, the state Department of Natural Resources, the Alaska Oil and Gas Conservation Commission and the federal Office of Pipeline Safety.

It will not be a regulatory body, and details of the group's functions are sketchy, but it is meant to share information and expertise between agencies, Fredriksson said.

He said he did not know whether lack of information sharing was a problem thatcontributed to the March spill.

The department also will soon be issuing new regulations for corrosion monitoring and prevention for flow gathering pipelines, Fredriksson said. Those regulations have been in the works for 18 months, he said.

However, the new regulations would not apply to the line that leaked, as the pressure of that line was low enough to receive a federal exemption from regulation.

BP spokesman Daren Beaudo said the company is still inspecting the line that leaked, and is digging up other portions of the line that were buried as caribou crossings to see if corrosion escaped detection there, too.

A bypass line has started operating and is now producing about 45,000 barrels per day. The usual daily production from the line had been about 100,000 barrels per day, Beaudo said.

He said the cleanup of the spill has progressed well.

''We'll be out there as long as it takes to clean it up as thoroughly as we can,'' Beaudo said.


Wall Street Journal
April 5, 2006

Alaska To Take Action Against BP Over Oil Spill
April 5, 2006 5:56 p.m.
(Updates with comments from BP and Alaskan Governor)

CALGARY -- Alaska will take action against BP PLC (BP) over a crude oil leak in March at a transit line on the North Slope, the state's Department of Environmental Conservation said Wednesday.

"We will take action against BP within state laws," DEC Commissioner Kurt Fredriksson told a conference call. "There are penalties and fines available and we will be pursuing those. They could be sizable, depending on the results of our investigation."

The spill took place on March 2 at a transit line on the North Slope, an area that's home to Prudhoe Bay, the largest oil field in the U.S. BP's Prudhoe Bay operations normally produce 470,000 b/d of crude, which eventually is shipped through the Trans-Alaska Pipeline. BP shut in about 100,000 b/d of output because of the spill.

Company and state officials said in March that between 201,000 and 267,000 gallons of crude oil was spilled in the leak. That makes the spill, which is equivalent to 4,786-6,357 barrels, the largest ever seen on the North Slope, surpassing a 38,850-gallon spill in 1989.

The oil spill had come as a "surprise" to authorities, Fredriksson said, because it had occurred at a crude oil transit line rather than at a flow gathering line, which is perceived to be higher risk.

He added that Alaska would now create a new information-sharing body, called the Arctic Pipeline Technology Team, which would look to bring together information without worrying about jurisdictional borders.

"We want to see that this incident doesn't happen again," Fredriksson said. "We want to reinforce systems in place and share expertise and information."

Fredriksson declined to say whether inadequate information sharing had been a factor in the BP leak. He said investigations had indicated that a chemical used as an emulsion breaker in the pipeline could have been a factor in causing the spill.

"We need to take a good hard look at our North Slope pipelines and the programs to protect them," Alaska Gov. Frank Murkowski said.

"The oil companies have complied with leak detection standards, they have extensive corrosion monitoring programs, yet we still had a very substantial leak," he added.

Alaska is in the final stages of adopting regulations on corrosion monitoring and protection in its crude gathering and flow lines. These regulations have been in development for 18 months, Fredriksson said. At present, there's no corrosion regulations in place for those types of pipelines.

BP spokesman Daren Beaudo told Dow Jones Newswires that while the company hadn't been in contact with the DEC specifically with regard to potential fines, it did understand that action was likely. He added that any fines likely wouldn't be determined until the clean-up was completed.

He added that BP approved of the decision to create an Arctic Pipeline Technology Team.

"We are supportive of that notion and are looking forward to participation," he said.

Beaudo was unable to say when the afflicted pipeline might fully return to service. However, the use of a byline would allow production and throughflow to return to around 75,000 b/d in approximately two weeks' time, he said.

-By Norval Scott, Dow Jones Newswires; 403-531-2912; norval.scott@dowjones.com


Anchorage Daily News
April 4, 2006


Oil flow partially restored
PRUDHOE BAY: Fifth of production
shut down since last month is back.

Anchorage Daily News
Published: April 4, 2006
Last Modified: April 4, 2006 at 02:18 AM

BP has restored 20 percent of the Prudhoe Bay oil production idled since March 2 due to a pipeline leak, but it will be weeks longer before the flow returns to normal, a company spokesman said Monday.

The oil company Sunday night began pumping about 20,000 barrels of crude per day through a 24-inch pipeline, which is being used to bypass a larger pipe that sprang a leak, causing the largest oil spill ever on the North Slope. Investigators believe corrosion ate a small hole into the line, allowing the oil to escape slowly over time.

The faulty line, which remains shut down, is a major 34-inch feeder pipe within Prudhoe that normally carries 100,000 barrels of oil per day, or 12 percent of total North Slope production.

Inspectors continue to search for more corroded or weak spots along the pipeline, which can't be restarted until it is fully repaired and government regulators approve, said BP spokesman Daren Beaudo.

The federal Pipeline and Hazardous Materials Safety Administration last month issued BP an order to prevent more leaks from the pipe, which spilled an estimated 201,000 gallons of oil over nearly 2 acres of tundra. The order revealed that the pipeline had at least six more trouble spots.

The pipeline was installed in 1976, a year before production began at Prudhoe, the nation's largest oil field.

The pipe leaked at a place where it passes through a caribou crossing -- a mound of gravel placed over pipelines to allow the migratory animals to walk over.

BP inspectors have unearthed other caribou crossings to better examine the pipeline, Beaudo said.

He didn't rule out a replacement.

"Our objective is to fully understand the mechanical integrity of that pipeline," he said. "It's our intent to put it back into service."

Using the 24-inch bypass line, BP believes it can gradually reactivate idled wells and restore as much as 75 percent of the lost oil production within two weeks, Beaudo said. Normally, North Slope production exceeds 850,000 barrels per day.

The state Department of Environmental Conservation said Monday that cleanup of the oiled tundra is nearly complete.

Two Democratic congressmen, Reps. John Dingell of Michigan and George Miller of California, have asked BP to answer questions about the spill and are sending staff members to Prudhoe to look at the spill site.

Beaudo said BP is nearly done preparing answers to the congressmen's questions.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.


Fairbanks News Miner
April 2, 2006


BP quizzed on Slope oil spill
By SAM BISHOP News-Miner Washington Bureau

Sunday, April 02, 2006 - WASHINGTON--Two Democratic congressmen have written to BP's Alaska president with several questions focused on the company's past inspections of a recently discovered leaky pipeline on the North Slope and the amount of solid material found in that line.

Reps. John Dingell of Michigan and George Miller of California thanked BP's president, Steve Marshall, for meeting with their staffs in mid-March.

In their March 24 letter, though, the congressmen presented what they said were several unanswered questions about the line's history and the cause of the spill. The line lost more than 200,000 gallons of oil and it was the largest spill ever on the North Slope, the congressmen said.

The "leading explanation appears to be corrosion," Dingell and Miller said.

Darin Beaudo, BP spokesman in Alaska, said Friday afternoon that the company was drafting a response to the congressmen. The investigation is not finished, he said.

"We haven't come to a conclusion yet as to whether there was a cause or multiple contributing causes," he said.

The congressmen said BP's Marshall and his staff told them the line had been tested with ultrasound within the past six months and the pipe thickness was "within tolerance."

"While we applaud such testing, we still remain unclear where such tests were taken and whether such tests were made on the section that ultimately failed," they said.

BP reported that the pipe was last tested with a "smart pig" in 1998, the congressmen said.

Beaudo explained that a smart pig, which runs inside the pipe, maps the condition of the entire section through which it moves. Using that information, the company then looks at specific locations with an ultrasound machine.

"We go back and go over spots that may have some corrosion tendencies," he said.

BP has an extensive corrosion management plan, with about 100,000 inspection points a year, he said. The company has replaced lines because of corrosion in the past.

The line that leaked carries about 15 percent viscous oil, Beaudo said. Viscous oil holds more solids than standard light oil, he said. That makes the line unique on the North Slope, he said.

"We haven't had the same kind of issue with other crude transfer lines," he said.

Dingell and Miller asked why the line hadn't been smart-pigged since 1998.

They also asked detailed questions about solids in the line.

"It has been reported to us that the line in question, while having a low water cut, also has a very low flow rate and that this essentially makes the (oil transit line) a giant 'oil-water separator,'" the congressmen said. "We are advised that this results in the settlement of solids in the underlying layer of stagnant water. Is this the case? If so, what are the implications of this?"

The congressmen noted that the leak occurred near a caribou crossing where the line dips underground. They asked if solids collect in such locations. If so, they asked, could a maintenance pig have removed them.

The congressmen asked for a response by Monday.

Washington, D.C., reporter Sam Bishop can be reached at sbishop@newsminer.com  or (202) 662-8721