February 2007 News Stories

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Wall Street Journal
February 28,2007

BP Hopes To Reopen Northstar Oil Field Late Next Week
DOW JONES NEWSWIRES
February 28, 2007 9:14 p.m.

ANCHORAGE, Alaska (AP)--An offshore oil field operated by BP PLC (BP) in the Arctic Ocean that was shut down almost two weeks ago when a pinhole-size leak was discovered during a routine inspection could be back up and running in about 10 days, a spokesman for the British oil company said.

"We're looking at the end of next week for the restart of Northstar," said Daren Beaudo.

About 200 feet (60 meters) of 8- to 14-inch (20-to 36-centimeter) pipe, used to carry natural gas between compression stages, will be replaced, Beaudo said. He did not know the estimated cost of repairs.

The repairs, which require crane lifts, could be delayed by bad weather such as high wind, whiteouts or severe cold, Beaudo said.

The facilities are on a man-made gravel island six miles (10 kilometers) off the north coast of Alaska. The 27-square-mile (70-square-kilometer) field is 39 feet (12 meters) beneath the ocean surface.

The shutdown cut BP's daily North Slope production by about one-eighth, or 40,000 barrels a day.

There was no environmental damage and no safety hazard associated with the leak, Beaudo said. The leak likely was caused by corrosion, Beaudo said.

The leak was on an 8-inch (20-centimeter) diameter pipe that integrates five stages of natural gas compression. After gas is split off from oil, the stages remove liquids and boost pressure. The gas is then reinjected under high pressure into the field, which helps maintain pressure in the oil-producing reservoir.

The latest shutdown comes several months after a pair of leaks caused BP to temporarily slash oil production at its Prudhoe Bay facilities for several weeks starting in August. Company officials believe those leaks were also caused by corrosion.

The latest leak was detected by the field's operator. After the field was shut down, inspections were expanded and the company found thinning in other pipe.

The inspection was managed by BP's new technical directorate, Beaudo said, an in-house body created in August to provide independent verification within the company that all operations are following BP codes and rules by regulatory agencies. The group reports directly to the BP Alaska president, Beaudo said.

"We obviously see the importance of these kinds of tasks and these responsibilities and we're upping our game in how we're approaching integrity management," Beaudo said.
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Wall Street Journal
February 26, 2007

In Alaska, an Oil Player Loses Favor VECO Gets Chilly Treatment From Once-Friendly Politicians As FBI Probe Jolts Statehouse
By JIM CARLTON
February 26, 2007; Page A4

ANCHORAGE, Alaska -- The oil industry has long enjoyed a cozy relationship with the state government here -- not to mention the residents, who receive an annual dividend from the industry.

A Federal Bureau of Investigation probe of influence peddling -- which has focused on one of the oil industry's most powerful players -- is shaking up those ties.

At the center of the turmoil is closely held VECO Corp., the state's largest oil-services company, which has provided construction, engineering, management and other services for pipelines, refineries and other facilities.

VECO has long been one of Alaska's most prodigious campaign contributors; Chairman Bill Allen and top VECO executives have donated a total of more than $1 million to state campaigns since 1998. A year ago, a witness saw Mr. Allen in the gallery of the state legislature passing notes to a Republican politician backed by the company -- at the same time that legislators were debating a measure to cut taxes on the industry.

In August, FBI agents swarmed into legislative offices throughout the state seeking evidence of payments to state lawmakers by Mr. Allen and his executives, according to a warrant. Since then, a cloud from the investigation has hung over the state's capital, Juneau.

In recent months, a number of Alaska politicians have publicly distanced themselves from VECO and refused to take any donations from it. The new governor, Republican Sarah Palin, made a refusal to accept any VECO donations part of her platform when she challenged former Gov. Tony Knowles -- a Democrat who had made a similar pledge.

No VECO executives have been charged in the probe. FBI officials and Mr. Allen declined requests for comment. Amy Menard, an Anchorage attorney representing VECO, said, "There is no question that VECO and some VECO executives have always, from day one, had an interest in politics. But to suggest that there has been improper or inappropriate political contributions is an unfair charge."

In December, one state official was charged in connection with the influence-peddling investigation. The legislator, Tom Anderson, was indicted by a federal grand jury in Anchorage on charges of extortion, conspiracy, bribery and money laundering stemming from an FBI undercover operation in the case. Mr. Anderson, who had accepted campaign contributions from Mr. Allen and other VECO executives, faces up to 115 years and fines of up to $2.5 million. He has pleaded not guilty.

It isn't clear whether his case was related to VECO, nor whether the investigation extends beyond the company. It isn't clear what spurred the initial investigation. According to the search warrants executed in August on offices of VECO and six state legislators, FBI agents were authorized to seize documents relating to VECO, Mr. Allen and several other VECO officials.

For years, regulators paid relatively little attention to the industry here. As the nation's energy supplies have become more uncertain amid political tensions around the world, the Bush administration and its allies have made tapping Alaska's oil reserves a top energy strategy. That has brought attention to the once oil-friendly political scene in Alaska.

The Environmental Protection Agency last year launched a criminal probe into BP PLC's maintenance of its aging oil facilities at Alaska's Prudhoe Bay. BP was forced to shut down the giant oil field for several days during the summer. EPA officials launched a criminal inquiry into corrosion problems on the 800-mile Trans-Alaska Pipeline, which ferries crude across the state to the ice-free port of Valdez, Alaska. The investigations are continuing.

Mr. Allen, who arrived in Alaska in 1968 as a high-school dropout from New Mexico, has built VECO into an oil-services giant, with more than 5,000 employees and $5 billion in world-wide contracts. It has helped companies like BP and ConocoPhillips construct pipelines, transport equipment and design oil-field power plants.

[ Mr Allen ? ]
formidable, behind-the-scenes political forces. From early in his career, he has talked about making sure the oil industry's views are represented in the state capital -- and sometimes gotten in hot water.

In 1983, Mr. Allen co-founded a political-action committee to support five Republican legislative candidates who promised to hold down taxes on the oil industry. VECO and some of its subsidiaries then set up a payroll-deduction plan through which employees donated about $40,000 to the candidates, according to state documents.

Two years later, the Alaska Public Offices Commission fined VECO $72,660, saying the employee contributions weren't properly disclosed. The fine later was reduced to $28,000 on appeal by VECO. The candidates Mr. Allen recommended all went on to win, and later helped vote down a proposal by Democrats to increase taxes on the industry.

Along the way, the 69-year-old has fashioned himself into one of the state's In 2002, Mr. Allen spent so much time personally lobbying for legislation in Juneau that state regulators ordered him to register as a professional lobbyist. Mr. Allen complained, saying he considered contacts with legislators his right as a businessman. Soon afterward, the legislature passed a law that critics dubbed "the Bill Allen bill." The law increased the time someone could spend pushing for legislation before being considered a lobbyist to 40 hours each month from four hours -- effectively exempting Mr. Allen from registering as a lobbyist.

In early 2006, then-Gov. Frank Murkowski presented a proposal to give oil producers a tax break as an incentive to build a natural-gas pipeline that would ship an estimated $20 billion of natural gas from the state's North Slope field. Democrats argued that Alaska would be giving away millions in potential revenue. Mr. Allen took up residence in Juneau to help push for the measure. Though it failed to pass in the regular session, it was approved in a special session last summer.

In his December indictment, Mr. Anderson was accused of accepting $26,000 in payments from a consultant for a private corrections company. In return, the indictment claims he agreed to perform unspecified "official acts" to help that person's business, according to a Justice Department news release. The consultant was working as a confidential informant for the FBI.

Federal officials won't discuss the case nor say whether it ties into VECO. But Mr. Allen and VECO did lobby for a private prison in Alaska in 2002. Though much of VECO's business is with the oil industry, the company does other work, including building prisons.

Mike Chenault, a Republican state legislator who co-chairs the House finance committee, said he has voted for oil-industry bills backed by Mr. Allen, but not because he received money from him or anyone else. He professed an admiration for the VECO chairman, who got his start in Alaska in the legislator's district on the Kenai Peninsula. "He's actually fulfilled the Alaskan dream to come up here and do well," Mr. Chenault said.

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

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Houston Chronicle
February 24, 2007

http://www.chron.com/disp/story.mpl/business/4578434.html

Question of BP chief's testimony still open
Lawyers must show they can't get information from lower-level personnel
By KRISTEN HAYS

Whether BP Chief Executive John Browne ultimately has to give sworn testimony for lawsuits related to the deadly blast at his company's Texas City refinery depends on whether plaintiffs lawyers convince the Texas Supreme Court that he can provide information about the blast that lower-ranking managers can't, experts say.

Jay Grenig, a professor at Marquette University Law School in Milwaukee, said that in order to obtain sworn testimony from CEOs and other top-ranking executives, plaintiffs have to show they have "personal knowledge that is unique from what other managers at lower levels can give."

BP spokesman Neil Chapman has repeatedly said Browne, whose office is in BP's home base of London, has no personal knowledge of the March 2005 blast that killed 15 people and injured scores.

Browne had been slated to give a deposition at a law firm in London on Friday. But in response to his appeal of a court order to give the testimony, the state's high court issued a stay late Thursday to allow both sides to argue why he should or should not testify.

Plaintiffs and BP will submit briefs on the issue. The court could hear arguments or rule after reading the briefs.

Brent Coon, who represents workers injured in the blast and nearby residents with property or injury claims, said Friday the deposition had already been postponed in case the high court issued a last-minute stay.

Also, he said he and BP on Thursday settled an injury lawsuit that had been slated to go to trial in Galveston on Monday, erasing the urgency in getting Browne's testimony.

Grenig said efforts to get depositions from CEOs and other high-level executives are increasing.

Judges do order chief executives to testify, but lawyers have to show they can't get it from lower-ranking executives, said Grenig, who was cited as an authority on the subject in a brief that Exxon Mobil Corp. and several oil and chemical industry trade groups filed this week supporting BP's appeal.

For example, in 2001 then-Ford Motor Co. Chairman William Clay Ford Jr. gave a court-ordered deposition in litigation stemming from deaths and injuries involving Ford Explorers and Firestone tires.

A federal judge in Indiana issued that order upon finding that Ford had discussed his personal knowledge of the tire recall, Explorer safety and litigation matters, Grenig said.

But in a Texas case in 2005, a state appeals panel reversed a district judge's order compelling then-Texas Genco CEO Jack Fusco to give sworn testimony in a lawsuit over another company's move to drill a gas well on property designated for waste disposal.

The appeals panel said the other company failed to show it had sufficiently tried to getthe information "through less intrusive means."

David Berg, a Houston civil litigator, said BP likely has the advantage because such rulings show Texas appellate courts are more apt to side with corporations and corporate officers than those in most other states.

The fact that Ford "was forced to give a deposition should give no solace to the BP plaintiffs," Berg said. "This court will look for every way it can to protect corporate officers from giving testimony under oath."

Coon said Friday that he believed he has shown that Browne's involvement in setting budget, staffing and training levels shows such personal knowledge.

In October, State District Judge Susan Criss, who presides over the BP litigation in Galveston, ordered Browne to give the deposition for blast-related lawsuits.

BP is appealing Criss' order.

The case that settled Thursday involved a painter/sandblaster and a boilermaker, both in their 60s. The two men said they sustained back and other injuries.

Chapman, the BP spokesman, said terms of the settlement are confidential. He also has repeatedly said BP is working to settle all such cases.

All cases involving deaths have already been settled. Those remaining involve worker injuries or property or injury claims of residents who live adjacent to the refinery, Coon said.

Coon also noted that more lawsuits are likely to be filed before March 23, the two-year anniversary of the blast.

Two years is the deadline for plaintiffs to make such claims.

kristen.hays@chron.com

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Wall Street Journal
February 24, 2007

2nd UPDATE:
Two BP Texas City Settlements Could Lead To More
DOW JONES NEWSWIRES
February 23, 2007 1:50 p.m.
(Recasts lede and updates with comments from plaintiffs' lawyer and details throughout.)
By Jessica Resnick-Ault
Of  DOW JONES NEWSWIRES
 
HOUSTON (Dow Jones)--BP PLC's settlement of two injury lawsuits related to a deadly explosion at its Texas City oil refinery indicate the company will likely avoid trial for similar complaints, a plaintiffs' attorney said Friday.

Lead plaintiffs' attorney Brent Coon represents both people who settled with BP on Thursday, as well as more than 150 others. Coon, of Beaumont, Texas, said he believes BP can resolve the 500 or more remaining Texas City cases without going to trial.

BP has said it would prefer to settle cases directly to help victims of the March 2005 explosion and fire at the Texas City, Texas, refinery reach a quick resolution.

A BP spokesman confirmed Friday that the company had settled two court cases Thursday related to the refinery explosion.

"We've settled the two cases that were due to go to trial next week," said spokesman Neil Chapman.

The cases charged the oil major with gross negligence leading up to the accident that killed 15 people and injured over 170 at the company's largest U.S. refinery.

Meanwhile, BP recently received a stay from the Texas state Supreme Court that protects BP Chief Executive John Browne from deposition by plaintiffs' attorneys, Chapman said.

Plaintiffs' attorneys had planned to question Browne in London on Friday.

This is the second time that an attempt to depose Browne has coincided with the settlement of a case.

The next group of cases is set to go forward in June, Chapman said. Plaintiffs' attorneys didn't immediately respond to requests for comment.

Plaintiffs' lawyer Coon said earlier this week that approximately 500 injury cases in connection with the blast remain outstanding. BP has settled all fatality cases. The Anglo-American company has set aside thus far $1.6 billion to settle the cases.

The terms of the latest settlements are confidential, Chapman said.

A previous settlement in the case included large, public charitable donations in addition to a confidential personal settlement. No such charitable-contribution riders were built into the most recent settlements, Chapman said.

 
   Settlements Likely
 
Motions scheduled to be heard Monday - including a request by plaintiffs for release of a controversial internal audit - have been put on hold until March 5, Galveston District Court Judge Susan Criss said.

There are about 40 cases scheduled for trial in June, Criss said. She declined to speculate on the likelihood of a pre-trial settlement in those cases.

"Six months ago, I would have said it would go to trial," said Coon. However, after the oil giant settled with plaintiff and Coon client Eva Rowe, a young woman whose parents both died in the blast, Coon said a trial was unlikely. Rowe's settlement agreement, reached on the eve of a scheduled trial, included a multimillion-dollar charity contribution from the company and the release of documents related to the case.

It's possible another plaintiff could chose to hold out for a trial and refuse to settle with BP, Coon said. The company seems willing to pay large sums, he said, explaining that in its settlements this week, the company agreed to sums requested by both plaintiffs.

The cases resulting from the blast generally "have more often than not settled for values that are higher than typical," he said. The larger settlements may be partially due to BP's realization that it could be hit with punitive damages in the case, he said.

While the first group of cases, settled last fall, were filed by young or badly injured victims, or represented the estates of those who died, the cases going forward were filed by older workers, or those with less severe injuries, Coon said. Both plaintiffs who settled ahead of Monday's trial were over 60 years old, Coon said.

While BP has maintained that its chief executive is protected from deposition by Texas state law, Coon and other plaintiffs' lawyers say the executive has inserted himself into the case and should be questioned.

"It's disappointing that the [Texas] Supreme Court has granted the stay," Coon said. The state's highest court will review briefings from both sides in March, and may hear oral arguments in April, Coon said.

If the court decides to uphold its stay of the deposition, no further appeals are possible, Coon said.
 
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208;
jessica.resnick-ault@dowjones.com  

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Anchorage Daily News
February 23, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8665138p-8556365c.html

Palin wants leaner Slope oversight
CORROSION: Governor says pipeline
problems can be monitored for less.

By SABRA AYRES
Anchorage Daily News
Published: February 23, 2007
Last Modified: February 23, 2007 at 02:26 AM

JUNEAU -- Gov. Sarah Palin wants to scrap a pipeline corrosion oversight office created after last year's Prudhoe Bay spills and replace it with a less expensive, leaner mechanism for monitoring oil field practices.

Details of the oversight program are still being hashed out, but the Palin administration stressed that cutting back on costs would not mean reducing the effectiveness of how the state monitors oil field pipelines.

"Bottom line is we are looking for stricter oversight on pipeline corrosion," said Meghan Stapleton, a spokeswoman for Palin. "The previous administration's plan was a nebulous concept that was hastily put together. We think we can do better."

Then-Gov. Frank Murkowski in October said he was muscling up state oversight of North Slope oil fields by adding more inspectors and regulators to "look over the shoulder" of the oil and gas industry.

Murkowski's move came after two major incidents at Prudhoe Bay, the nation's largest oil field.

In March workers for oil company BP discovered a corroded pipeline had caused the largest oil spill ever on the Slope. In August, a smaller leak and a report outlining extensive corrosion among pipes at the nearly 30-year-old oil field prompted BP to shut down half of Prudhoe temporarily. Taxes and other oil company payments from Prudhoe is a significant source of state revenue.

Murkowski created a pipeline monitoring program called the Lease Monitoring and Engineering Integrity Coordinator's Office, or LMEICO. The office was to operate out of the Department of Natural Resources' Division of Oil and Gas.

Palin's administration said LMEICO was created without a thorough analysis of where the state was in terms of monitoring the condition and maintenance of oil field pipelines. Murkowski responded to the oil spills and pipeline shut downs with a $4.5 million plan that created unnecessary layers of expensive bureaucracy, Stapleton said.

"The pressure was there to do something, but what they did isn't in the best interest of the state," Stapleton said. "It's unclear to us how the plan was put together and how they figured the dollar amounts needed. We are trying to not to create management with high costs."

One industry observer said the state was in desperate need of creating some kind of pipeline monitoring system, and welcomed Palin's intentions as a marked improvement from Alaska's failed history in scrutinizing pipeline maintenance records.

"Right now, there is no real oversight of the pipelines except from state employees in Juneau and Anchorage or Fairbanks, while Prudhoe Bay is miles away," said Chuck Hamel, an advocate for oil workers in the North Slope. "The state has failed miserably." Poor state oversight of Prudhoe Bay pipelines has been occurring for years, he said.

Officials from the Department of Natural Resources said in a House Resources Committee session this week that the Palin proposal was likely to use less staff than the Murkowski plan. The Division of Oil and Gas would appoint staffers who would use other state and federal agencies as support in monitoring the pipelines, according to Nico Bus of the Department of Natural Resources.

Murkowski's former chief of staff, Jim Clark, referred any comments to Michael Menge, former state resources commissioner or Kurt Fredriksson, former state environmental commissioner, saying they were the main architects behind LMEICO. Neither Menge nor Fredriksson could be reached for comment.

Palin is expected to announce her plan as the Petroleum Systems Integrity Office, or PSIO, at the beginning of next month, when she introduces her budget plan to the Legislature. Costs for the PSIO and how many, if any, new positions will be created are being developed," Stapleton said.

"LMEICO was like the creation of Homeland Security -- a response to a crisis," said Rep. Carl Gatto, R-Palmer, the co-chair of the House Resources Committee. "PSIO sounds more like a straightforward way of doing things, an overhaul of LMEICO."

In addition, "we can now get the energy companies involved and say we've got a procedure in a place that's going to help us avoid -- with 99.9 percent certainty -- another crisis happening," he said.

Daily News reporter Sabra Ayres can be reached at
sayres@adn.com   or 907-586-1531.

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http://www.adn.com/money/industries/oil/prudhoe/story/8665138p-8556391c.html

Murkowski warns state that pipeline opportunity wanes
'LIMBO': The senator says if Alaska doesn't act, investors will explore other options.
By STEVE QUINN
The Associated Press
Published: February 23, 2007
Last Modified: February 23, 2007 at 02:26 AM

JUNEAU -- U.S. Sen. Lisa Murkowski on Thursday delivered a now-familiar mantra from Washington, D.C., to Alaska lawmakers: The state must soon act on a natural gas pipeline project.

While the message is familiar, Alaska's junior Republican senator delivered it with a sense of urgency to both lawmakers and Gov. Sarah Palin's administration, which is seeking to pass a bill designed to bring natural gas from the North Slope.

"America is not going to wait on Alaska forever," Murkowski warned lawmakers during her annual address to a joint session of the House and Senate.

Murkowski also reiterated words delivered from producers and federal regulators to lawmakers the last few weeks: The state is behind the curve in developing the pipeline.

"If the promise of Alaska's gas continues to remain in limbo, what happens is that investors look elsewhere for development opportunities, and consumers look to other supply sources," she said.

While the need is urgent, Murkowski said she is willing to take a wait-and-see approach to Palin's pipeline plan -- even after state lawmakers last year made it a daily practice to question her father, former Gov. Frank Murkowski.

Palin and Murkowski met briefly Thursday in Juneau, and the governor is scheduled to update the congressional delegation on the plan early next week while she is in Washington.

Palin has said she will present her pipeline bill to lawmakers next Friday, a proposal that encourages competition among natural gas producers and pipeline companies.

It's in stark contrast to efforts from Murkowski's father who ultimately limited negotiations to oil producers BP, Exxon Mobil Corp. and Conoco Phillips.

"I'm not going to try to second guess her approach," Murkowski said afterward in a news conference.

"The approach she is taking is one where she will outline what the terms and conditions are, which I think is fair and appropriate," she said. "If you're interested, you know what it is to expect and how to craft that proposal. I want to make sure that you don't have an invitation to a party and have nobody come."

While urging state lawmakers and the Palin administration to move quickly on the pipeline, Murkowski said that should not be interpreted to mean the state should concede to "any and all" conditions put forward by the oil and gas industry to reach an agreement.

"Far from it," she told lawmakers. "It is imperative that any gas line deal benefit the state of Alaska and its citizens, but it also has to be a deal that maintains Alaska's position as a state that America can count on to provide a secure source of energy."

The Federal Energy Regulatory Commission last summer said there is over 6,000 trillion cubic feet of natural gas awaiting sale worldwide, Murkowski said, noting Alaska's 35 trillion cubic feet seems small by comparison.

And competition will be fierce.

FERC has approved five new liquefied natural gas terminals with another 18 LNG projects nearing approval, she said. Companies are locking in 25- and 30-year contracts to import LNG from overseas, and investments are increasing in alternative sources of energy, like coal-fired and nuclear plants.

"The window of opportunity that we have as a state for our gas is not an indefinite window," Murkowski said.

Meanwhile, FERC told Congress in a recent report that Alaska's progress on getting a pipeline built is lagging.

"I'm not happy with the pace period," Alaska's senior senator, Republican Ted Stevens, said this week, ahead of his own visit in March to Juneau.

Murkowski said prolonged indecision can make Congress a little skittish.

"They read things like the FERC report and they wonder how serious Alaska is about getting its gas to America," she said at the news conference. "In the meantime, they aren't going to sit and stew and wonder. They are going to get focused on new things.

"The message I want to make sure Alaskans hear is that we appreciate the desire and the need to get the project right, but we don't want to be in a position where in an effort to find perfection, we end up without a gasline."
 

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Wall Street Journal
February 23, 2007

Deposition of BP's Browne Put On Hold -Plaintiff's Attorney
DOW JONES NEWSWIRES
February 22, 2007 3:13 p.m.

HOUSTON (Dow Jones)--The hotly contested deposition of BP PLC (BP) chief executive John Browne was put on hold again Thursday.

"We want to resolve some judicial issues," said Brent Coon, a plaintiff's lawyer who had planned to depose Browne at the oil giant's London headquarters on Friday.

The move comes just days before a trial is slated to begin, charging the oil major with gross negligence leading up to a March 2005 accident that killed 15 and injured 170 at the company's Texas City refinery.

If the remaining case case does not settle, it will be the first from the accident to go forward. Another set of cases, slated for trial in the fall of 2006 settled on the day that jury selection was to begin. Another case, set to go forward on Monday, settled early Thursday, Coon said on the sidelines of a luncheon presentation Thursday.

BP didn't immediately respond to requests for comment. Coon and other plaintiffs had called for Browne's deposition, saying that the executive had forfeited protections offered to chief executives by Texas state law.

Browne had unique knowledge of the case, necessitating his testimony, Coon said.

The Anglo-American oil company initially appealed a state court ruling requiring Browne to testify. After the appeals court ruled in favor of the deposition, BP took the case to the state supreme court.

Exxon Mobil Corp. (XOM) and state oil and gas associations joined BP, filing a brief with the top court, arguing that Browne ought to be protected.

Over 500 cases are outstanding, according to Coon and other plaintiff's lawyers. All cases involving those killed have been settled - those that remain involve plaintiffs who have injury or property damage claims. -By Jessica Resnick-Ault, Dow Jones Newswires:; 713-547-9208; jessica.resnick-ault@dowjones.com
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Financial Times
February 23, 2007

http://www.ft.com/cms/s/f07bbe6a-c2e3-11db-9e1c-000b5df10621.html

BP employee destroyed documents after subpoena
By Sheila McNulty in Houston
Published: February 23 2007 02:00 |
Last updated: February 23 2007 02:00

A BP employee has admitted destroying documents, after plaintiffs' lawyers subpoenaed her laptop.

That followed an anonymous tip that she had information useful in the lawsuits against the UK oil company arising from its fatal refinery explosion.

Court records show that on November 3 2006, plaintiffs' lawyers subpoenaed Susan Moore, BP regulatory affairs manager, requesting certain documents and the laptop she has used for the past two to three years in her work for BP.

The subpoena specifically instructed BP: "You are urged not to destroy or attempt to destroy, delete, erase, or otherwise alter any of the electronic data, data files, meta data, media, records, charts, forms, or other documents stored on Ms Moore's hard drive.''

When plaintiffs' lawyers questioned Ms Moore on January 26 2007, a transcript reveals she said BP had not shown her the subpoena until earlier in the week and that she had deleted e-mails in the two months since the subpoena.

Ms Moore did not know if she had deleted word files, did not think she had deleted folders but did not recall whether she had deleted presentations.

"I can't speculate on why someone might think my laptop would be useful,'' Ms Moore said.

"To the best of my knowledge, I have not deleted information relative to this case.''

Yet Joseph Gourrier, the plaintiffs' attorney questioning Ms Moore, responded, "It's not up to you to determine what would be relevant to this case.''

The case was filed against BP by plaintiffs' lawyers on behalf of the 15 people killed and 500 injured when BP's Texas City refinery exploded in 2005.

Brent Coon, the lead plaintiffs' lawyer in the case, said judges had a tremendous amount of discretion in determining if there has been abuse of process.

Once a subpoena has been served, deleting documents created an inference that they were prejudicial and the burden shifted to BP to prove the deleted documents were irrelevant to the litigation.

Judge Susan Criss ruled, therefore, that BP had to produce the deleted documents by today. "We have agreed to deliver Ms Moore's hard drive to a third party expert who will determine what has been deleted,'' BP said. "If we find anything relevant to the case, we will turn it over to plaintiffs counsel or the court.

"No one at BP has been instructed to delete relevant documents,'' the company said.

BP added: "We have made it clear that staff are to preserve relevant documents, including relevant e-mails.''
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Anchorage Daily News
February 22, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8661512p-8553172c.html

Oil field workers say OT is risky
18-HOUR DAYS: Union officials fear serious injury because of fatigue.
By ELIZABETH BLUEMINK
Anchorage Daily News
Published: February 22, 2007
Last Modified: February 22, 2007 at 02:21 AM

A shortage of hourly workers is leading to fatigue and safety risks at the Prudhoe Bay oil field, according to union officials who represent the workers.

The technicians maintaining Prudhoe Bay's three massive gathering stations -- which hold crude oil pumped from North Slope wells -- are working "horrendous" amounts of overtime, union officials said this week.

It's not unusual for technicians at Prudhoe, the nation's largest oil field, to work 18 hours per day for 10 days of their two-week shifts on the North Slope, said Glenn Trimmer, treasurer of the United Steelworkers Local 4959.

"No reasonable person is going to say that by working 18 hours a day and getting four hours of sleep at night, you aren't taking a hell of a chance," he said.

Trimmer formally complained to BP managers in September, but the problem has existed for several years, he said. Trimmer also complained last fall to BP's new ombudsman, who said Wednesday he is frustrated the problem isn't resolved yet.

BP Alaska officials said Wednesday they are working to place nine new workers at the gathering centers in April.

"We met with employees and (the union) in late fall and agreed that we needed to hire some more people in those jobs," BP Alaska spokesman Steve Rinehart said.

But the union says BP has unnecessarily delayed the process.

The complaint is the latest in a string of criticisms about how BP has managed Prudhoe Bay. A year ago a leaking, corroded pipeline caused the largest North Slope oil spill ever. In August, more corrosion problems led to Prudhoe's temporary partial shutdown. Federal criminal investigators have subpoenaed millions of documents from the company, and congressional committees have held hearings.

About 250 technicians work at Prudhoe Bay, doing jobs such as monitoring gauges, opening and closing valves, starting and stopping pumps and turbines and checking for leaks. The steelworkers union represents them, union officials said.

Staff shortages have gotten worse in recent years, as experienced Prudhoe Bay technicians retire and some vacant slots aren't filled quickly, union officials said.

Trimmer said he took the matter up with BP's health and safety committee and with BP executives in September after former BP U.S. president Bob Malone sent a letter to all of BP's Alaska employees, amid the six-week partial Prudhoe Bay shutdown.

In the letter, Malone said employees needed to ensure operations were safe, Trimmer said.

BP ombudsman Stan Sporkin said Wednesday he thought filling the new jobs was a "no-brainer."

"I'm a little bit frustrated," said Sporkin, a retired federal judge based in Washington, D.C., who got involved in dealing with the Prudhoe Bay overtime issue last fall when the union complained.

"I thought we had an agreement (between the union and BP) to go out and recruit and get the jobs filled," Sporkin said.

He added, "I don't know what happened. ... Apparently it didn't get done."

BP officials said Wednesday they had to go through a lot of processes and deal with holiday delays to get the jobs filled.

Rinehart said BP advertised the jobs internally in October. But the company didn't get enough applicants, so BP started an external search in January, he said.

Union officials said that the problem has gone on too long and that the company is lucky that no fatigue-related accidents have occurred.

"We've expressed our frustration to them and they've offered a lot of excuses," said local Steelworkers president Chris Nye.

He said, so far, he was unaware of any fatigue-related accidents at Prudhoe Bay. He said workers have been "pretty good" about just refusing to work when they are too tired.

But Nye said it's easy to spot fatigued employees at the gathering center.

"You can tell that they are not all there. It's causing a lot of apprehension," Nye said.

At Nye's gathering station, this month's average of an employee's overtime during a two-week shift has been about 20 hours, he said.

Some of the technicians end up working a lot more overtime hours than others do, he said.

A 2005 study of 10,793 American workers between 1987 and 2000 showed that those who worked overtime faced a 61 percent higher risk of injury than those who worked normal hours.

The study by the University of Massachusetts Medical School's Center for Health Policy and Research also found that injury rates rise in relation to the number of hours worked.

In the past, federal regulators have cited fatigue as a possible factor in at least one U.S. pipeline accident.

Eight years ago, the National Transportation Safety Board said it was concerned about the potential for fatigue due to the rotating schedules for pipeline controllers.

The board raised the concern after investigating a 1996 pipeline rupture in Fork Shoals, S.C., that sent 967,600 gallons of fuel oil into a river.

The pipeline controller working said he had adequate sleep the night before but had been awake for almost 17 hours at the time of the accident, the board said.

The board concluded in its safety recommendation that fatigue from the controller's work schedule "may have affected his alertness, vigilance and responsiveness" during the accident.

Daily News reporter Elizabeth Bluemink can be reached at ebluemink@adn.com or 257-4317.

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Houston Chronicle
February 22, 2007

http://www.chron.com/disp/story.mpl/business/4571916.html

Lawyers try to block deposition
BP chief to talk in London about refinery blast
By ANASTASIA USTINOVA

BP's CEO receives performance bonus BP Chief Executive John Browne is scheduled to give a deposition Friday in London, but lawyers in Texas are still working to block the order requiring his testimony about the Texas City refinery blast.

Exxon Mobil Corp. and four business groups have filed a brief supporting BP in the appeal before the Texas Supreme Court, saying that the running battle to push Browne to testify would hurt the Texas business community.

Brent Coon, an attorney representing workers suing the company, said this was an effort to put political pressure on Supreme Court justices who, he said, rely on the campaign contributions from businesses.

"They are applying political pressure to something that should not be political," Coon said during a conference call.

BP spokesman Neil Chapman said he had no comment beyond what the company has previously said about the deposition. BP has said previously that Browne has no personal knowledge about the incident.

Coon said he will question Browne on Friday morning in a law office in London about corporate policies affecting the refinery.

A blast there killed 15 and injured scores of others on March 23, 2005.

Browne's deposition comes before the jury selection Monday for the civil lawsuits filed by Clarence Kinard and E.J. Godeaux, contract workers injured in the Texas City blast.

BP has avoided trials by settling cases related to the 2005 refinery explosion.

It's not uncommon for a CEO to give a deposition, according to Gerald Treece, a law professor at the South Texas College of Law.

He said that the Texas Supreme Court is unlikely to overrule Browne's deposition.

"They cannot just say, 'You can't talk to our CEO,' " said Treece, who expects BP to settle the case.

And Coon "has to prove that the defendant was colossally indifferent of the rights of the plaintiffs."

State District Judge Susan Criss, who is overseeing several cases related to the Texas City refinery explosion, ordered Browne to give a deposition. The October order was delayed by a BP appeal. Browne is expected to step down in July.

Exxon Mobil was joined by the Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business in its "friend of the court" or amicus brief, which argued that the deposition would set a precedent in the business community.

"We feel that the district court, in ordering Mr. Browne's deposition, is eroding clear Texas jurisprudence on when a company CEO can be deposed," Mark Boudreaux, an Exxon spokesman, said in an e-mail.

anastasia.ustinova@chron.com

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http://www.chron.com/disp/story.mpl/business/4571685.html

BP's CEO receives performance bonus
By STEPHEN VOSS
Bloomberg News

BP has paid Chief Executive Officer John Browne shares worth about $4 million in an annual performance bonus that covers the time when BP experienced a refinery explosion and pipeline leaks.

BP's bonus plan granted Browne 380,668 shares on Feb. 15, "in respect of the performance period 2004-2006," the London-based company said in a stock exchange statement Wednesday.

The bonus payment for Browne, who turned 59 Tuesday, is worth about $4 million.

He was awarded 30 percent of the maximum number of shares he could have received under the program. BP spokeswoman Wendy Silcock in London declined to comment.

Browne announced last month he would resign in July, more than a year earlier than planned, after investor confidence was eroded by criticism over a 2005 fatal refinery blast, pipeline leaks and shutdowns in Alaska, and probes into energy trading manipulation.

BP on Feb. 6 slashed forecasts for production growth, in part because of equipment failures and delays at two key oil and gas projects in the Gulf of Mexico. BP stock fell 8.3 percent last year, making it the third-worst in the U.K.'s FTSE-100 Index.

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Wall Street Journal
February 22, 2007

BP Gives CEO Browne GBP2M Of Shares As Performance Reward
DOW JONES NEWSWIRES
February 22, 2007 7:54 a.m.
 
LONDON (Dow Jones) -- U.K. oil giant BP PLC's (BP) Chief Executive John Browne was handed more than GBP2 million worth of shares Wednesday as part of the company's long-term performance incentive plan for 2004-2006, the company said in a statement.

Browne received 380,668 ordinary shares in the company, purchased at a price of GBP5.37 a share on February 15. Browne subsequently sold around GBP840,000 worth of the shares at the same price on February 19.

Browne will retire from BP in July 2007, to be replaced by former Head of Exploration and Production Tony Hayward.

The size of his departing pay settlement has attracted some controversy. Earlier this month the London Pension Funds Authority joined with U.S. pension fund Unite in legal action to prevent Browne receiving $140 million (GBP71.79 million) in total pay as he departs the company.

William Lerach, with one of the plaintiff firms, Lerach Coughlin Stoia Geller Rudman & Robbins in San Diego, California, said Browne "has inflicted BP damage" after incidents that happened in the U.S. under his tenure and his payments should be frozen as a result.

Company Web site:
http://www.bp.com  

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317;
james.herron@dowjones.com 

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Financial Times
February 21, 2007

http://www.ft.com/cms/s/62c5cfc2-c151-11db-bf18-000b5df10621.html

Observer:
BP's taxing problem
Published: February 21 2007 02:00 |
 Last updated: February 21 2007 02:00

After a year in which it suffered the biggest ever spill on land at its Alaskan oil field and then had to shut half of it for "severe corrosion", one might assume that BP would be care- fully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m in tax breaks under new rules that allow the cost of replacing pipelines to be deducted. The legislators said BP replaced one of its pipelines only because it was corroded after poor maintenance and so should not get a write-off. They also noted the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, insisted on deductions as well.

In his response to the legislators, however, Doug Suttles, BP Alaska president, dismissed those concerns. "This is not about replacement," he said. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

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http://www.ft.com/cms/s/c354c390-c14f-11db-bf18-000b5df10621.html

Alaska cold to BP's plea for tax break
By Clay Harris
Published: February 21 2007 02:00 |
 Last updated: February 21 2007 02:00

After a year in which it suffered the biggest-ever spill at its Alaskan oilfield and then had to shut half of it for "severe corrosion", one might assume that BP would be carefully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m (£5.6m) in tax breaks under new rules that allow deducting the cost of replacing pipelines. The legislators said BP replaced one of its pipelines only because it was corroded after being poorly maintained and so should not get a write-off.

They noted that the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, also insisted on deductions.

In his response to the legislators, however, BP Alaska president Doug Suttles said: "This is not about replacement. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

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http://www.ft.com/cms/s/6a922214-c151-11db-bf18-000b5df10621.html

BP supported over Browne court order
By Sheila McNulty in Houston

Published: February 21 2007 02:00 | Last updated: February 21 2007 02:00

ExxonMobil has thrown its weight behind rival BP in an attempt to block a precedent-setting court order requiring Lord Browne, the UK oil group's beleaguered chief executive, to testify on Friday in a civil lawsuit.

Exxon, the world's biggest public oil company, and a string of Texas business groups, are petitioning the Texas Supreme Court to overrule a decision by lower courts compelling Lord Browne to testify in the lawsuit arising from BP's Texas refinery explosion.

The 2005 explosion, which killed 15 people and injured 500, was the biggest US industrial accident in a decade.

The Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business have all signed the petition.

It argues that forcing Lord Browne to be questioned for up to six hours in London would scare business from Texas and set a legal precedent that foreign courts could invoke to order Texas-based senior managers to be deposed in distant places about incidents in affiliate operations. The questioning would be filmed to be played by plaintiffs in the case, which goes to trial next week.

"Companies would be reluctant to shift business operations to Texas if doing so meant that those activities could subject their senior officers - many of whom are located in other states or countries - to depositions in Texas, regardless of whether the relevant evidence is available through less disruptive means,'' said the petition.

Brent Coon, the leading plaintiffs lawyer in the civil lawsuit, said Exxon and the others "did not have a dog in this fight". His position is that Lord Browne has unique knowledge pertaining to the case because he visited the refinery immediately following the explosion, made budgetary cuts that affected the maintenance and staffing of the refinery, and took remedial efforts after the accident.

BP insists none of that proves Lord Browne has unique knowledge.

Lord Browne has, nonetheless, taken a hit from the disaster, bringing forward his retirement to this year after the refinery explosion was followed by a spill in Alaska that led to the closure of half that oilfield because of corrosion.
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AP Alaska
February 21, 2007

http://www.adn.com/news/alaska/ap_alaska/story/8656389p-8548243c.html

BP shuts down offshore oil field after small gas leak discovered
By JEANNETTE J. LEE, Associated Press Writer
Published: February 20, 2007
Last Modified: February 20, 2007 at 03:30 PM

ANCHORAGE, Alaska (AP) - BP PLC has shut down an offshore oil field in the Arctic Ocean after a small leak was detected in a gas line, a company official said Tuesday.

The shutdown of the Northstar oil field cut the company's daily North Slope production by about one-eighth, or 40,000 barrels a day, since Friday or Saturday, according to BP spokesman Daren Beaudo.

Beaudo said he was not sure when the field would resume operations.

"In order to fix it, we had to shut down the facility," Beaudo said. "They're taking the opportunity to take a look at other upgrades that need to be made."

There was no environmental damage and no safety hazard associated with the leak, Beaudo said. It was found in an 8-inch pipe containing extraneous gas from the field and likely caused by corrosion, he said.

The pinhole-sized leak was discovered during a routine inspection of Northstar's wells and processing facilities, which sit atop a man-made gravel island six miles off the northern coast of Alaska. The 27-square-mile field is located 39 feet beneath the ocean surface.

The latest shutdown comes several months after a pair of leaks caused BP to temporarily slash oil production at its nearby Prudhoe Bay facilities for several weeks starting in August. Company officials believe those leaks were also caused by corrosion.

"Corrosion continues to be an enemy to us and something we need to be vigilant about," Beaudo said. "It's something we have committed to reviewing globally."

In October 2001, BP began siphoning Northstar crude into the 800-mile trans-Alaska oil pipeline via an undersea pipeline.

State and federal agencies were not involved since no spill was reported.

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Anchorage Daily News
February 21, 2007

http://www.adn.com/money/industries/oil/story/8658822p-8550656c.html

Shell receives OK to drill in Beaufort Sea
EXPLORATION: Critics say a more thorough look at impacts is lacking.
By RICHARD RICHTMYER
Anchorage Daily News
Published: February 21, 2007
Last Modified: February 21, 2007 at 03:12 AM

Map of Shell Beaufort area
http://www.adn.com/ips_rich_content/230-21Shell_CamdenBay-150-x-115.gif

MMS Beaufort Web Site
http://www.mms.gov/alaska/

The U.S. Minerals Management Service has approved Shell's plan to drill as many as a dozen exploration wells over the next two years in the Beaufort Sea.

The agency, which supervises oil and gas leasing in Alaska's vast offshore regions, on Tuesday released an environmental assessment of the planned drilling and said its analysis found that the project would not cause "undue or serious harm or damage to the human, marine or coastal environment."

Last month, Shell filed its exploration plan with the agency, detailing its intent to drill as many as a dozen offshore wells over the next two years. The ambitious exploration project would include two drilling ships and a small fleet of other vessels to support the drilling ships and prevent them from getting jammed in the ice.

Environmental groups are protesting the approval, saying federal officials should allow a more thorough public evaluation of its potential impact on the environment and the North Slope's indigenous people before allowing any drilling.

Earthjustice, a nonprofit law firm representing five Alaska environmentalist groups, urged MMS officials to prepare a much more detailed environmental impact statement, which could take years, before allowing the drilling to happen. They said Shell's activity could harm the bowhead whales, polar bears, migratory birds and other area wildlife. The whales are listed as an endangered species.

"The bowhead whale is the species of greatest concern," said Deirdre McDonnell, an attorney with the firm.

The oil exploration work, particularly seismic surveys that involve firing underwater air guns to study rock formations beneath the sea floor, could spook the whales and force them further offshore, making it more difficult for Native hunters to take them, McDonnell said.

An Alaska Native group called Resisting Environmental Destruction on Indigenous Lands also weighed in, urging the agency to conduct a more thorough review of the drilling project's potential environmental impact.

Most of the drilling would be in western Camden Bay, where exploratory wells have been drilled before.

Shell, one of the world's largest oil companies, returned to Alaska in 2005 and immediately became the company most avidly interested in the oil prospects offshore of the North Slope. It spent more than $44 million to acquire Beaufort Sea exploratory leases that year.

The Dutch oil giant was part of a partnership that discovered an estimated 200 million barrels of oil in a find called Hammerhead in 1985-86. That would be a medium-sized North Slope field, but a large one in the Lower 48. The Hammerhead prospect is now named Sivulliq, and Shell plans to drill there to outline the oil field.

The MMS documents released Tuesday hint that Shell will be doing more than just probing the waters looking for crude. They say that the company plans to take samples from the sea floor between Sivulliq and the shore, which suggests some sort of production plan.

Some drilling and other work would take place in waters near the village of Kaktovik. Robert Thompson, an Inupiat whaler who lives there, said he is concerned that the offshore activity could hurt his village's whaling activities.

Thompson said the MMS needs to consider not just Shell's activities over the next two years but all of the oil industry activity over time in the region.

Shell executives in Alaska and MMS officials in the state said Tuesday they couldn't comment until they had permission from their superiors.

In its exploration plan, Shell spelled out a bowhead whale monitoring program that includes using spotters aboard ships and in aircraft as well as drone aircraft that will be used to keep an eye on the whales in the area and head off any adverse impacts so as to avoid any potential disruptions in their migration patterns.

The MMS in its environmental assessment concluded there would be minimal disturbance to the bowhead whales, citing prior exploration drilling under a similar scenario to the one Shell is planning.

Shell plans to start its drilling campaign this summer. However, it still must clear a series of other regulatory hurdles before it can begin the work.

That includes reaching a "conflict avoidance agreement" with the Alaska Eskimo Whaling Commission and the Whaling Captain's Association of Kaktovik, according to a letter MMS officials sent the company Tuesday.

Daily News reporter Richard Richtmyer can be reached at
rrichtmyer@adn.com  or 257-4344.

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Financial Times
February 21, 2007

http://www.ft.com/cms/s/c354c390-c14f-11db-bf18-000b5df10621.html

Alaska cold to BP's plea for tax break
By Clay Harris
Published: February 21 2007 02:00 |
 Last updated: February 21 2007 02:00

After a year in which it suffered the biggest-ever spill at its Alaskan oilfield and then had to shut half of it for "severe corrosion", one might assume that BP would be carefully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m (£5.6m) in tax breaks under new rules that allow deducting the cost of replacing pipelines. The legislators said BP replaced one of its pipelines only because it was corroded after being poorly maintained and so should not get a write-off.

They noted that the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, also insisted on deductions.

In his response to the legislators, however, BP Alaska president Doug Suttles said: "This is not about replacement. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

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http://www.ft.com/cms/s/6a922214-c151-11db-bf18-000b5df10621.html

BP supported over Browne court order
By Sheila McNulty in Houston

Published: February 21 2007 02:00 | Last updated: February 21 2007 02:00

ExxonMobil has thrown its weight behind rival BP in an attempt to block a precedent-setting court order requiring Lord Browne, the UK oil group's beleaguered chief executive, to testify on Friday in a civil lawsuit.

Exxon, the world's biggest public oil company, and a string of Texas business groups, are petitioning the Texas Supreme Court to overrule a decision by lower courts compelling Lord Browne to testify in the lawsuit arising from BP's Texas refinery explosion.

The 2005 explosion, which killed 15 people and injured 500, was the biggest US industrial accident in a decade.

The Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business have all signed the petition.

It argues that forcing Lord Browne to be questioned for up to six hours in London would scare business from Texas and set a legal precedent that foreign courts could invoke to order Texas-based senior managers to be deposed in distant places about incidents in affiliate operations. The questioning would be filmed to be played by plaintiffs in the case, which goes to trial next week.

"Companies would be reluctant to shift business operations to Texas if doing so meant that those activities could subject their senior officers - many of whom are located in other states or countries - to depositions in Texas, regardless of whether the relevant evidence is available through less disruptive means,'' said the petition.

Brent Coon, the leading plaintiffs lawyer in the civil lawsuit, said Exxon and the others "did not have a dog in this fight". His position is that Lord Browne has unique knowledge pertaining to the case because he visited the refinery immediately following the explosion, made budgetary cuts that affected the maintenance and staffing of the refinery, and took remedial efforts after the accident.

BP insists none of that proves Lord Browne has unique knowledge.

Lord Browne has, nonetheless, taken a hit from the disaster, bringing forward his retirement to this year after the refinery explosion was followed by a spill in Alaska that led to the closure of half that oilfield because of corrosion.

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Anchorage Daily News
February 20, 2007

http://www.adn.com/opinion/view/story/8656148p-8547971c.html

Limit oil tax write-offs ...
BP pipeline repairs are at issue
Published: February 20, 2007
Last Modified: February 20, 2007 at 03:02 AM

You know the old joke about the kid who kills both his parents and has the chutzpah to beg the court for mercy because he's an orphan?

Something of the same mentality is at work in Alaska's oil patch.

BP cut corners on maintaining its North Slope oil lines until leaks started sprouting. The company had to shut down part of the nation's largest oil field for weeks, costing the state treasury millions of dollars in oil revenue. Now BP wants Alaskans to help pay for part of fixing the pipeline. Those costs are arguably allowable deductions when BP and Prudhoe Bay partners calculate what they owe in state oil production taxes.

Alaskans shouldn't have to pay a penny toward BP's pipeline replacement -- but it may take a new law to make sure that doesn't happen.

The current oil production tax law allows the state to disqualify costs arising from "gross negligence." In BP's case, that could be a difficult legal standard to meet.

Many Alaskans and their legislators are outraged that North Slope producers might get away with deducting this expense. More than half the Legislature has signed on to legislation to bar oil production tax deductions for repairs of "improperly maintained" property or equipment.

Supporters include 17 of 20 Senate members and 21 of 40 House members. Co-sponsors include some surprising recruits, like Senate President Lyda Green, who last year helped the oil industry resist more costly versions of the new oil production tax.

The concept behind the legislation (Senate Bill 80 and House Bill 128) is simple. Translating the concept into bulletproof tax law, though, won't be so easy. No doubt, Alaska will see some drawn-out tax fights if, as appears likely, this year's reform proposal passes. But Alaska is going to have those fights anyway.

Last year, the state shifted from the relatively simple tax on gross oil production to a much more complicated tax with deductions for operations, maintenance and new investment. Excluding repairs for "improper maintenance" would be just one more point of contention in an inherently contentious process.

By passing this year's proposal, legislators will add a bit more complexity to the tax. They'll also improve Alaska's ability to get our fair share of profits from oil production.


-- Matt Zencey, editorial writer

Xxxxx

... No need to 'fix' law

Existing protections are sufficient

There is nothing all that wrong with how pipeline repair and replacement expenses are handled under the state's oil production tax law passed last year.

What's wrong is that much of the public and many legislators are still angry over the new production tax law. That anger grew when BP's faulty maintenance at Prudhoe Bay caused major shutdowns last year, with hefty repair and replacement bills that could be deductible under the new law.

So more than half the Legislature figures the solution is to change the law, making it harder for oil producers to deduct expenses possibly due to maintenance shortcomings.

That's the wrong answer.

If lawmakers don't like last year's switch to a tax on net income, round up the votes and change it back. Until then, the law allows companies to deduct operating costs from their production taxes. It also allows a 20 percent tax credit for capital investments as an incentive for building new pipe and new facilities to pump new oil on the North Slope.

In return for the new deductions and credits, the state profits from a substantially higher tax rate, adding about $1 billion a year to the treasury at current oil prices.

This year's bills to limit oil tax write-offs, however, would adopt an ill-defined provision. Enforcement could be a mess.

Expenses due to "improper maintenance" would be ineligible for deductions and credits. The legislation would require state tax auditors to define and determine "improper maintenance," a term with no definition in statute and no legal history. The term is so subject to guesswork that the state and taxpayers would be taking a number, waiting for their turn in court on each tax return.

The fact is, state law already has adequate protections against abusive write-offs for repair or replacement work:

• Companies cannot deduct spill and cleanup costs.

• Repair work is not eligible for tax credits, so there is no need to fight over that one. Only investments in long-term items such new pipe or drill pads are eligible for the credits.

• Companies cannot deduct expenses due to "fraud, willful misconduct or gross negligence." If a court or federal or state regulatory agency finds "gross negligence" at Prudhoe Bay, state tax auditors can go back and retroactively disallow any improper tax deductions.

• And last year's legislation gives the Department of Revenue the authority to adopt a regulation that could help. As BP repairs and replaces miles of pipe, it will ask partners Conoco Phillips and Exxon Mobil to pay their shares. The partners may say, "No, we're not paying you, BP; you caused this mess, you pay the bills." If the partners think the expenses are due to BP's negligence, the new regulation would say that's good enough for the state to disallow the deductions and credits. The Department of Revenue needs to get started on drafting these regulations immediately.

The state has the laws to handle the tax matter in our favor. Just let the system work.


-- Larry Persily, editorial writer

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http://www.adn.com/money/industries/oil/story/8655248p-8547092c.html

Officials seek key to unlock frozen gas
Slope test well yields 'gold mine of data' on huge hydrate deposits
By WESLEY LOY
Anchorage Daily News
Published: February 20, 2007
Last Modified: February 20, 2007 at 03:28 AM

BP teamed with government agencies to drill an exploratory well this month that could help unlock a fabulous new supply of North Slope natural gas.

The well probed a layer of material just beneath the permafrost, called gas hydrate. The hydrate is a solid, crystalline form of gas, usually methane, mixed in sandstone and water. A combination of cold and pressure keeps the gas as a solid.

Hydrates exist in many locations around the world, including under seabeds. On the North Slope, government geologists estimate there are 450 trillion cubic feet of gas hydrate. That's a staggering volume -- more than 12 times the amount of conventional gas known to exist within Prudhoe Bay and other North Slope oil fields.

For now, however, the hydrate is little more than tantalizing. The industry and government scientists say they first must figure out how to get the frozen gas to the surface, and it's likely to be several more years at least before any is produced commercially.

A test well just completed in BP's Milne Point field, northwest of Prudhoe, yielded much new information that could help lead to commercial production someday, BP and federal geologists and engineers said Monday in Anchorage.

The team drilled a well 3,000 feet deep on a prospect called Mount Elbert, named for the highest peak in Colorado, where one government hydrate expert, Tim Collett of the U.S. Geological Survey, hails from.

The purpose of the well was to run certain tests and to bring hydrate core samples to the surface -- something that's rarely been done anywhere in the world.

A hydrate sample looks like a hunk of sandstone laced with white swirls. Drop it into a bucket of water and it bubbles.

Collett and other scientists were excited by the results from the test well.

"We got a gold mine of data," said Ray Boswell, methane hydrates technology manager with the U.S. Department of Energy's National Energy Technology Laboratory.

The DOE funded the $4.6 million test well, with BP contributing seismic data, staffing and other support.

The North Slope hydrate was discovered decades ago, but historically the material wasn't of much interest to companies focused on producing light crude oil, which is roughly three times as deep as the hydrate.

To reach the oil, drillers bore straight through the hydrate layer. That's somewhat dangerous, because the heat from the drilling operations can cause the hydrate to thaw, freeing the volatile gas, said Scott Digert, a BP Milne Point field manager.

The Mount Elbert well isn't the first hole sunk on the North Slope to test the hydrate resource. Anadarko Petroleum Corp. drilled an experimental hydrate well in 2003 south of the Kuparuk oil field.

Despite enormous hydrate deposits known to exist in Arctic regions, in the deepwater Gulf of Mexico and elsewhere, no one has begun commercial production, Collett said.

India and Japan are pushing hard on hydrates, and India aims for commercial production by the end of the decade, according to a recent article in the trade publication Oil and Gas Investor.

The trick is freeing the frozen gas.

Engineers know that sinking a well into hydrates and simply running it as a conventional gas well will bring some gas to the surface. A resulting drop in reservoir pressure then causes the hydrate to dissociate, or revert to gas and water.

But such a well probably wouldn't flow strongly for very long because the formation would tend to freeze again, Digert said.

The solution might be to develop techniques for forcing heat into the hydrate formation to unlock the gas. But that would increase the cost of production, Collett said.

Because of the extraordinary amounts of hydrate, Congress has taken a big interest in funding research, authorizing more than $200 million in spending since 2000.

For now, hydrate doesn't figure into plans for an Alaska natural gas pipeline, Digert said. The conventional gas on the Slope likely is ample for that megaproject, he said.

Other participants in the Mount Elbert test well included Arctic Slope Regional Corp., the University of Alaska Fairbanks and Doyon Drilling Inc.

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


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http://www.adn.com/news/politics/story/8655279p-8547118c.html

Stevens proposes new plan for ANWR
STRATEGIC RESERVES: Alaska senator wants to
lift drilling ban so refuge oil can boost nation's cache.
By LISA DEMER
Anchorage Daily News
Published: February 20, 2007
Last Modified: February 20, 2007 at 02:47 AM

Stevens' plan would add ANWR oil to the nation's 700 million barrels in emergency reserves.

U.S. Sen. Ted Stevens on Monday tossed out a new approach for opening up the Arctic National Wildlife Refuge: Make it part of the nation's emergency stockpile of oil.

The idea came up during a nearly hour-long briefing for news reporters in Anchorage. Alaska's senior senator also talked about the war in Iraq, the Alaska gas pipeline and the interim U.S. attorney.

Stevens, wearing a casual brown shirt and no tie, said he was struck by a Sunday column in The Washington Post that analyzed President Bush's call to expand the Strategic Petroleum Reserve.

The stockpile consists of about 700 million barrels of federal-government-owned crude stored for a national emergency in huge salt caverns in Louisiana and Texas. The president can release it if commercial oil supplies are disrupted, and it also can be drawn down for other nonemergency reasons.

Stevens said his staff and Sen. Lisa Murkowski's have been reviewing the president's proposal, publicized last month in his State of the Union speech, to buy more oil for the reserve.

"We came up with the thought 'Why not ask that they add ANWR to the petroleum reserve?' And now this op-ed piece says the same thing," Stevens said.

The refuge lies in the northeast corner of Alaska. Its coastal plain is considered the nation's best onshore prospect for a major oil discovery. It also is an area prized by environmentalists nationally. Efforts in Congress to open the coastal plain to oil development have failed repeatedly over the past three decades.

In his column, Gal Luft, head of the energy security think tank Institute for the Analysis of Global Security, said "reframing the issue to cast the refuge as an emergency stockpile rather than a source of production might well change the politics."

Congress could compensate Alaskans by leasing the oil for a set amount of time, after which the state could sell it, Luft said in the column, under the headline "An Oil Reserve Right at Hand."

Alaskans who have tried to open ANWR to drilling said they haven't heard of this new twist but noted that execution would be very complex.

"I don't understand the concept," was the immediate reaction of Roger Herrera, an oil and gas consultant in Anchorage who has been working on ANWR nearly 30 years.

After giving the idea some quick thought, he said that additional exploration likely would be required to confirm the amount of oil in ANWR, and that equipment would need to be in place so that it could be extracted when needed.

Stevens told reporters he thinks the reserve idea may solve the ANWR issue.

"It is in the national interest to produce from ANWR and certainly by the time we could get it ready to produce it would be a ready reserve," Stevens said.

Stevens also talked about:

ALASKA'S NEW U.S. ATTORNEY

The Bush administration's appointment of interim U.S. Attorney Nelson Cohen bypassed the normal route in which the president nominates a candidate who is then confirmed by the Senate. Instead, the U.S. attorney general plucked Cohen from Pennsylvania in August and put him into the Alaska job indefinitely. It was done under a little-known provision of the U.S. Patriot Act, Stevens said.

The move upset the senator, who had proposed Alaskan candidates, but he didn't try to undo it. Nine days after the appointment, the FBI raided the offices of six state legislators, including Stevens' son, Ben.

"Because of the circumstance of the investigation, I did not want to get involved. With my son's name involved, that just would not have been proper," Stevens said.

He wasn't sure if Cohen's appointment was related to the investigation, but it was in the "back of my mind."

In the last week, Stevens said, he discussed the appointment with other senators. The same thing has happened in other states, and it skews the balance of power, he said. They likely are going to try to change the law to prevent such indefinite appointments. Stevens said he had nothing against Cohen. "He's just doing his job. He's a career prosecutor."

ALASKA'S GAS PIPELINE

Stevens said he's not happy with the progress on the project and wants a partnership with the federal government, Alaska and Canada.

He plans to meet with Gov. Sarah Palin next week in Washington, D.C.

"I'm planning to listen to her," Stevens said. "Senators don't tell governors what to do and vice versa.

THE WAR IN IRAQ

He supports the troop surge being pushed by Bush and was among the Senate Republicans on Saturday who blocked a vote on a resolution opposing the troop buildup.

"If we left right now there would be anarchy," Stevens said. "That government could not survive."

Democrats in Congress want to make the Iraq war seem like "Vietnam all over again," Stevens said. He said it's nothing like Vietnam.

"They have a democracy. The question is: Can they defend it themselves?" Stevens said.

The surge is necessary for security as more areas are turned over to Iraqi control, the senator said. He gave reporters maps of Iraq showing where the Iraqi army and the national police had lead responsibility for counter-insurgency in May 2006 compared to now. Iraq is now responsible for much more, according to the maps.

If the troop buildup fails, Stevens said he's not sure of the answer.

Daily News reporter Lisa Demer can be reached at
ldemer@adn.com .

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Fairbanks News Miner
February 20, 2007

http://newsminer.com/2007/02/20/5368/

Arctic warming the hot topic of the day
By Eric Lidji
Staff Writer
Published February 20, 2007

Alaska engineers have tricks for building on the permafrost that covers so much of the state thermal pipes, raised wooden foundations and insulated gravel pads.

These building methods assume that the permafrost, or the layer of continually frozen underground soil, will remain frozen as it has for thousands of years. Reports of a warming climate challenge that assumption, and it’s forcing scientists to question how changes to one of Alaska’s most reliable features could ripple into other areas of daily life and environmental well being.

That was the message at the first day of the seventh annual International Conference on Global Change: Connection to the Arctic, a two-day symposium hosted in Fairbanks by the International Arctic Research Center and a consortium of Japanese universities.
“People everywhere are riveted on the topics you’ll be discussing at this conference,” University of Alaska Fairbanks Chancellor Steve Jones said.

The GCCA-7, as it is called, is a global event, not only because the scientists represent countries across the world but also because their research draws connections between faraway lands that share arctic features.

It is an event where, during a coffee break, a German meteorologist and a Japanese glacier expert argue in three languages about the accuracy of comparing climate predications and weather predictions.

With presentations on topics like “Representativeness of snow water equivalent measurements for hydrologic applications on Alaska’s Arctic Slope,” the conference was not for laymen, and even some of the scientists in the room occasionally nodded off, but IARC Director Larry Hinzman said, “It’s not nebulous at all.”

Funding agencies are beginning to force scientists to create practical applications from their research, Hinzman said.

Permafrost is found on nearly one quarter of the globe, meaning engineering tricks used in Tibet can be applied to projects in Alaska, and research starting at UAF can carry implications around the Arctic.

Conference organizers were quick to note the timeliness of the conference, coming two weeks after the release of a report highlighting the effect humans are having on climate change and two weeks before the start of the fourth International Polar Year, which will bring scientists from 60 countries to conduct studies in the Arctic over the next year.

“Each and every IPY has left a legacy for Alaska,” said Buck Sharpton, UAF vice chancellor for research.

Past Polar Years have left behind important research facilities in Alaska, like the Point Barrow Observatory and the Geophysical Institute. While no one is sure what the legacy will be for this Polar Year, many scientists presented ideas for networks to monitor permafrost around the globe.

Sharpton also said that an important legacy from this Polar Year will be to attach a human element to studies taking place on a global scale, something that has generally been absent from previous Polar Years.

For instance, recent work by linguist Olga Lovick examines some of the language barriers scientists face on visits to isolated Native communities that do not have words to describe the environmental changes threatening their subsistence lifestyle.

With climate change becoming a prominent discussion topic both inside and outside the scientific community, Hinzman said the expectation is that the research leads to change.

Or, as University of Alaska President Mark Hamilton put it, “Ultimately the public policy has got to come from science and not from bumper stickers.”

Contact staff writer Eric Lidji at 459-7504 or
elidji@newsminer.com .

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Houston Chronicle
February 20, 2007

http://www.chron.com/disp/story.mpl/business/energy/4565149.html

Attorneys plan to depose BP CEO this week
By JUAN A. LOZANO
Associated Press

GALVESTON  Attorneys representing workers injured during BP PLC's deadly Texas City plant explosion in 2005 said today they plan to question outgoing company chief executive Lord John Browne about the accident this week, unless the Texas Supreme Court intervenes.

Earlier this month, a Houston appeals court ordered Browne to give a deposition to attorneys for Clarence Kinard and E.J. Godeaux, contract workers suing BP for injuries they sustained during the blast. Fifteen people died and more than 170 others were injured.

During a court hearing today, BP attorney Stephen Fernelius said the company has asked the Texas Supreme Court to stop the deposition.

The workers' civil lawsuits are set for trial next week. They would be the first cases connected to the blast to go to trial.

The deposition originally was ordered in October by state District Judge Susan Criss in Galveston, who is overseeing the case. BP's appeal delayed the deposition.

Attorney Brent Coon said he planned on flying to London, where the company is based, and deposing Browne on Friday.

Coon said Browne has unique knowledge about budget cuts and other company decisions that contributed to equipment failures at the plant and caused the explosion.

"Lord Browne does not have any unique knowledge of the incident," said BP spokesman Neil Chapman.

BP announced last month that Browne would step down by the end of July  more than a year ahead of schedule.

His retirement comes after a series of high-profile mishaps including the deadly blast and a giant oil spill in Alaska tarnished the image of one of the world's largest oil companies.

Browne's deposition would come a few days before the start of jury selection in the lawsuits of Kinard and Godeaux.

Godeaux, 61, a painter and sandblaster, sustained neck and back injuries and had his right eardrum blown out. Kinard, 67, who worked as a boilermaker, injured his back after being knocked down on top of a scaffold. Attorneys said the men also suffer from post traumatic stress disorder.

Jury selection in the case is set for March 1 and 2, with opening statements on March 5.

"Not good," Coon said when asked about the chances the cases would be settled before next week.

Chapman said BP is working to settle the lawsuits, as it has done with the majority of the more than 1,000 claims filed against the company.

The Texas City explosion occurred when part of the plant's isomerization unit, which boosts the level of octane in gasoline, overfilled with highly flammable liquid hydrocarbons.

A geyserlike release of flammable liquid and vapor ignited as the unit started up. Alarms and gauges that should have warned of the overfilling equipment failed to work at the plant, located about 40 miles southeast of Houston.

The unit had a history of problems and was not hooked up to a flare system that burns off vapor and could have prevented or minimized the accident, according to the U.S. Chemical Safety and Hazard Investigation Board, one of several agencies looking into the blast.

The CSB also found that BP fostered bad management at the plant and that internal documents showed budget cuts caused a progressive deterioration of safety at the refinery.

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Anchorage Daily News
February 17, 2007

http://www.adn.com/money/industries/oil/story/8647815p-8539562c.html

BP reports it's ready to move on Liberty project in Beaufort Sea
SEEKS OK: Well could be on line by 2011 and produce 40,000 barrels a day.
By TIM BRADNER
Alaska Journal of Commerce
Published: February 17, 2007
Last Modified: February 17, 2007 at 02:40 AM

BP Exploration (Alaska) Inc. said it will seek approval this year for a $1 billion project to develop its Liberty oil field.

BP is spending $30 million this year in engineering studies and permitting for the project, according to Carl Lundgren, Liberty project manager. The company had 25 people dedicated to the project last year and will add to that number in 2007, he said.

Lundgren and other BP officials recently briefed state House Ways and Means Committee members on upcoming projects that will result in more oil being produced.

Liberty is in the Beaufort Sea five miles offshore from Mikkelson Bay and northeast of the Prudhoe Bay oil field, the North Slope's largest field. Liberty will be developed with wells drilled from a pad near the Endicott field eight miles to the west.

The wells, drilled laterally 40,000 to 45,000 feet from the surface location of the drill rig, will set world records for extended-reach drilling, Lundgren said. The longest extended-reach wells, also drilled by BP at the Wytch Farm oil field in the United Kingdom, reach out to about 35,000 feet. If the ultra-extended reach wells can successfully produce from Liberty, the technology could be applied at other locations in the Beaufort Sea where oil reservoirs are discovered a few miles offshore. This would eliminate the need to build costly artificial gravel islands.

If the project goes ahead, BP will order long lead-time equipment and begin construction in early 2008. Included in the equipment needed will be a specialized drill rig to be built for the project, Lundgren told the legislators. Liberty could be in production in 2011, according to the current schedule, he said. Its peak production rate will be about 40,000 barrels per day.

Lundgren said the field has about 100 million barrels of recoverable oil and is the largest undeveloped known conventional oil reservoir on the North Slope.

BP has been working for several years on ways of developing Liberty. The field is similar to BP's offshore Northstar field to the west. BP developed Northstar using a man-made gravel island to support the wells and processing facilities. A subsea pipeline was laid to shore.

Northstar experienced delays, some due to permitting issues, and wound up costing much more than the oil company had estimated. BP had initially considered a plan for an artificial island and subsea pipeline for Liberty, but in 1992 and 1993 began investigating whether the field could be economically produced with long-distance wells drilled from shore.

The current plan is for the wells to be drilled from the Endicott field, where there is ample spare capacity in oil processing facilities and pipelines to handle the production from Liberty. Endicott started production in 1987 and its facilities and pipelines were designed for a peak production rate of 120,000 barrels per day. Endicott is now producing only 15,000 barrels per day, leaving substantial unused capacity at the field.

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Corporate Crime Reporter
February 16, 2007

http://www.corporatecrimereporter.com/trimmer021607.htm

CORPORATE CRIME REPORTER

Steelworkers Union Doesn’t Trust BP Ombudsman Sporkin
21 Corporate Crime Reporter 9, February 16, 2007

Glenn Trimmer doesn’t trust Stanley Sporkin.

Trimmer is an operator at BP’s gathering center on Alaska's North Slope.

He’s also secretary treasurer of United Steelworkers Local 4959.

And he sits atop a volatile facility that takes in crude oil and separates it into one billion cubic feet of natural gas, 50,000 barrels of oil, and 110,000 barrels of water  a day.

Sporkin is BP’s ombudsman  the oil company’s workers’ representative.

At least, that’s what the company says.

Trimmer says he doesn’t trust Sporkin.

That’s because five months ago, Trimmer complained to BP and to Sporkin that his workers were working too many 18-hour days.

And five months ago, BP and Sporkin agreed that this presented a dangerous situation to the workers.

And they agreed to hire the necessary operators to relieve the danger.

And now, five months later, nothing has been done.

“Don't wait until someone is killed or badly hurt,” Trimmer wrote in a September 11, 2006 memo to BP USA President Bob Malone and then BP Alaska President Steve Marshall. “Correct this before something happens.”

Trimmer said that one worker had worked ten eighteen hour shifts out of the 14 days he was on the slope.

Another worker had worked 350 hours overtime in a one-month period.

Trimmer said that he wrote the memo because Bob Malone urged workers to report hazardous working conditions to management.

Trimmer says he didn’t want BP management to be surprised if something went wrong.

Soon thereafter, Trimmer laid out the case and gave Sporkin the documentation. Sporkin agreed it was a hazardous situation and promised to resolve the problem.

Union officials then met with Kemp Copeland, BP’s field manager.

And Copeland agreed that it was a hazardous situation.

BP agreed to hire nine to ten operators with ten years or more operating experience.

“We helped them write the posting,” Trimmer told Corporate Crime Reporter. “We agreed that we would hire those people and that would eliminate the need for us to do 18-hour shifts. Copeland said they would do the job posting immediately.”

But the posting went out only within BP  and was never posted outside of BP.

And now five months later, nobody has been hired.

“If you work eighteen hour shifts and you are working in an oil handling facility, your judgment is going to be impaired,” Trimmer said. “They don’t let truck drivers drive a truck 18 hours because it’s hazardous. You are fatigued  especially if you are going to do it several days in a row  ten out of 14 days. I see it in my co-workers faces. Just look at their faces. These are not guys I want making decisions about hot oil. And management knows that. We sat right there with Kemp Copeland the field manager. And he says  yes, it’s a hazardous condition. He has acknowledged that. And in five months, no concrete action has been taken to correct it. It doesn’t take five months to hire somebody.”

As for Judge Sporkin, Trimmer says you have to build trust. And so far, it’s been all words and no deeds.

“It’s like I told Judge Sporkin  I would look at what he has done more than what he has said,” Trimmer told Corporate Crime Reporter. “So far, he hasn’t done anything. No, I don’t trust him. After I spoke with him initially, the first phone call I got was from Billie Garde (a Washington, D.C.-based lawyer who has worked for BP for years). She said she was working for the ombudsman’s office and said she would like to interview me about the concern I turned in  the 18-hour days. And I said no thanks, I’m not talking to you about anything. And I just hung up on her. I don’t trust her. We had dealings with her in the past. When the Judge called me back, I said look  if you are going to work through her, we don’t have anything to talk about.”

“And Judge Sporkin says  no no no, she’s just doing the preliminary interview because I couldn’t get back to you. He assured me she didn’t have anything to do with his office.”

But in an interview with Corporate Crime Reporter, Sporkin says Billie Garde now works for him. And he said that the union, management and he are all on the same page.

“Trimmer is a good fella,” Sporkin said. “I agree with him that we have to get this thing done. The problem is that there has been a change of management up there. Everybody is on board. It’s just a question of communication to get the people together. The resolution is a simple resolution. We’re all on the same page.”

But what good is it if everybody is on the same page and the page gets thrown in the trash?

Which reminds Trimmer of an incident from last year.

Maureen Johnson was a business unit leader for BP on the north slope.

“Last fall right after the August oil spill, BP managers were coming around giving us updates,” Trimmer says. “Maureen Johnson came around and had a meeting here. All of the operators went to that meeting. She took notes about their concerns. But before she left the meeting, she threw the piece of paper with her notes into the trash. One of the workers dug it out of the trash. Steve Marshall was President of BP Alaska at the time and was Johnson’s boss. Later, he came here to hold a similar meeting. I let the meeting go for about a half hour. And I then said to Marshall  I see you are taking notes there. I wonder if you are going to throw them away? He said  what? I said  your business unit leader for all of Prudhoe Bay was up here last week. She just threw her notes in the trash when she left. At first, he said  she has a photographic memory. The whole room laughed. But then he said  she shouldn’t have done that. I’ll certainly talk to her. He picked up his notes and left.”

Earlier this week, Trimmer e-mailed Judge Sporkin expressing his frustration with the situation.

“Everyone I have spoken to admits it's a hazardous condition,” Trimmer wrote. “I am at a loss to understand why it takes over five months to hire someone. In the past, BP has wondered why their employees have felt the need to go to outside agencies and the press with their concerns. It's because they feel their concerns are being ignored.”

Worker advocate Charles Hamel says that Sporkin is just shielding BP and Bob Malone.

"He does an investigation and doesn't release the findings," Hamel said. "What good is that? It shields his paymasters  Bob Malone and BP. And that's it."

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Anchorage Daily News
February 16, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8645992p-8536908c.html

BP to seek tax breaks for pipeline repairs
$11 MILLION: Money would pay in part for replacing corroded pipes.
By WESLEY LOY
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 01:58 AM

BP plans to seek $11 million in tax breaks in connection with replacing corroded Prudhoe Bay pipelines that last year leaked hundreds of thousands of gallons of oil onto the tundra.

In a letter to state lawmakers, BP Alaska president Doug Suttles said Thursday the company is entitled to take deductions and credits under the state's newly revamped oil tax law.

But some lawmakers as well as a spokeswoman for Gov. Sarah Palin said Thursday they likely will challenge BP's bid for the tax breaks. They said it's questionable whether BP qualifies because of the company's poor maintenance of the corroded pipes, which leaked and led to a jarring temporary shutdown of half of the nation's largest oil field.

Rep. Les Gara, D-Anchorage, said BP's heads-up that it would seek the tax breaks came as no surprise. He said the tax law is flawed, and such deductions and credits shouldn't be allowed.

"We knew this was going to happen, that they were going to charge us for their negligence in failing to maintain their pipelines," he said.

But Suttles said in his letter the tax breaks are justified because BP isn't seeking simply to replace corroded pipelines. Rather, the new pipes will be modern investments in keeping Prudhoe Bay producing oil for decades to come, he said.

Suttles said the pipes that leaked were 30 years old and "would have been replaced in the normal course of business, even if the events of last year had not taken place."

He stressed he was speaking only for BP's intentions. The other major Prudhoe field owners, including Exxon Mobil and Conoco Phillips, will have to make their own decisions on whether to seek tax deductions and credits, he said.

London-based BP runs Prudhoe on behalf of all its owners.

The company this winter and next plans to replace 16 miles of major trunk lines at the center of Prudhoe Bay with new pipes smaller in diameter than the originals. Smaller pipes will work because Prudhoe's production, at around 800,000 barrels per day, is less than half its peak in the late 1980s, BP managers say.

Lawmakers last year rewrote state law to base oil taxes on company profits rather than oil production. The law provides for tax deductions and credits related to a company's costs or investments in the oil fields.

This year, most lawmakers already have signed on as co-sponsors of companion Senate and House bills that would tighten the rules for seeking oil tax breaks by creating a three-member state review panel.

One of the prime sponsors, Sen. Tom Wagoner, R-Kenai, said he was a little skeptical of BP's claim that it was going to replace the leaky pipes anyway.

"There's a lot of other lines up there on the North Slope and they're not pulling those out and putting smaller lines in," he said.

Wagoner and Sen. Gene Therriault, R-Fairbanks, said BP might, in the end, qualify for some of the tax deductions and credits it plans to seek.

But they said such tax relief needs more scrutiny than the current law allows.

Their bill would create a panel made up of the commissioners of revenue and environmental conservation, plus the chair of the state Oil and Gas Conservation Commission, to disallow costs related to poorly maintained equipment.

Therriault said so far lawmakers hadn't heard from Conoco and Exxon on whether they will join BP in seeking tax breaks. He said he wouldn't be surprised to see the trio end up in a court fight over the corroded Prudhoe pipes.

"I've gotta believe that BP's business partners, Conoco and Exxon, aren't too happy about this happening at facilities that BP was supposed to be maintaining on their behalf, and that Conoco and Exxon have been paying BP to maintain on their behalf," Therriault said.

After corrosion ate holes in the pipelines last year, leading to two spills -- including one exceeding 200,000 gallons, the largest oil spill ever on the North Slope -- BP drew intense scrutiny and criticism from federal pipeline regulators and members of Congress. Federal criminal investigators also are looking into the big spill.

Wagoner said BP likely will seek more than $11 million in tax relief, because under the law companies can seek tax credits on a given project over three years.

BP spokesman Daren Beaudo said replacing and modernizing the Prudhoe pipes is expected to cost $250 million.

Suttles, in his letter to lawmakers, said the company won't seek to deduct costs associated with cleaning up the oil spills. That cost, said Beaudo, exceeded $20 million.

Suttles also urged lawmakers not to tinker with the oil tax law passed last year. He noted BP will pay more than $500 million in oil taxes for 2006, almost triple what would have been due under the old tax law.

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

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http://www.adn.com/news/environment/story/8645245p-8536989c.html

Alaska industry tagged biggest polluter
PER CAPITA: Alaskans produce more CO2 than Americans on average.
By GEORGE BRYSON
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 03:16 AM

A new study that estimates the amount of global-warming-related carbon dioxide emissions the state spews into the atmosphere each year has found that, one, it's a big number and, two, it's getting bigger every year.

The report commissioned by the state Department of Environmental Conservation also determined that the greatest source of Alaska's CO2 emissions isn't the car or the homeowner or the utility company. It's the huge industry that generates its own power.

Statewide in 2005, Alaska produced 52 million metric tons of CO2 equivalents, according to the study by E.H. Pechan & Associates of California. That's about 21 percent more greenhouse gases than the state generated in 1990. And by 2020, it's expected to increase that number by another fifth.

Compared to Texas, which in the year 2000 generated about 750 million metric tons of greenhouse gases (more that year than all of Canada), that's minuscule. But on a per-capita basis, Alaskans managed to produce nearly four times more CO2 than Americans do on average.

The reason why, says Steve Roe, one of the study's principal authors, is that Alaska has some big industries that generate CO2 far out of proportion to the state's tiny population. But exactly who they are isn't known yet.

"That's likely to involve some follow-up work," Roe said Thursday. "I know there are some folks (in the state Department of Environmental Conservation) interested in doing that."

State DEC air-quality director Tom Chapple on Thursday agreed that the study begs more answers.

"How much of that (CO2) comes from the natural gas that's used by our oil industry on the Slope?" Chapple said. "All our seafood processors generate their own power (too). Almost all of our mines generate their own power. How does that all break down?"

The study provides a few clues. By reviewing state energy consumption data, the report's authors determined that industries burning fuel for operations generated 41 percent of Alaska's annual CO2 emissions -- and that an additional 7 percent was traceable to the release of methane (measured in terms of "CO2 equivalents") by the fossil fuel industries alone.

The transportation sector was the next most significant culprit, generating 35 percent of the state's CO2 emissions. But don't just blame drivers of big SUVs. Most of the transportation-related CO2 -- about three-fifths -- is traceable to jet fuel emissions by the aviation sector, according to the study.

(An Alaskan who eliminates just one airplane trip Outside each year saves the CO2 emission equivalent of driving a car 5,000 to 10,000 miles less, says UAA climate change researcher Steve Colt. "It's huge," Colt said at a recent UAA climate change forum. "And it's doable.")

According to the study, offshore boats and ships generate more CO2 emissions each year than all the gas-powered cars in Alaska do. And diesel-burning vehicles generate nearly the same amount of emissions as all of the state's gas-fueled vehicles combined.

Roe released the findings Wednesday at a climate change symposium at the weeklong Alaska Forum on the Environment at Anchorage's Egan Center.

Discussion moderator Deborah Williams, a former Department of Interior director for Alaska, applauded the study as a hopeful first step toward the state acknowledging its carbon footprint.

The second step, she said, will be to do something about it -- just as New Mexico, Arizona and California have begun to do by pledging to lower their CO2 emissions in coming years.

"I mean, if Arizona can do it, we should do it," Williams said, noting that Alaska is at "ground-zero" of a warming planet.

"We have more at stake in Alaska than any other state in the nation."

Daily News reporter George Bryson can be reached at gbryson@adn.com.


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http://www.adn.com/money/industries/oil/pipeline/story/8645151p-8536912c.html

Cost figures dull beauty of constructing gas line
50 PERCENT INCREASE: State officials say higher price doesn't surprise, but estimate needs review.
By SABRA AYRES
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 03:05 AM

JUNEAU -- Groups seeking to build an alternative to a producer-owned gas pipeline said Thursday that increased construction cost estimates revealed this week by energy companies came as no surprise given a rise in market prices of steel, labor and other construction materials.

But the state may have relied too heavily on the producers' numbers in the past and made the gas pipeline project less attractive as the price of getting North Slope gas to market becomes more expensive, they said.

"We kind of had to believe their numbers all along without any explanation of how they got them," said Harold Heinze of the Alaska Natural Gas Development Authority. "It's normal business to be subjected to third-party review, but it never happened" on their estimates.

The new numbers mean "consumers will have to pay 50 percent more (for natural gas) than previously thought," Heinze said.

Natural gas producers BP, Conoco Phillips and Exxon Mobil told a House Resources Committee this week that their previous cost estimate of $20 billion was likely to increase as much as 50 percent on a pipeline that would run down the state and through Canada to Chicago.

The Alaska Gasline Port Authority, which has pushed an approach that would include building a pipeline to Valdez and then converting the gas into liquid before shipment, said its construction estimates had also seen significant increases.

The Port Authority pipeline proposal would be 800 miles long, compared with some 3,600 miles involved in the producers' pipeline proposal. The Port Authority's estimated cost of construction of its project is now $10 billion, an increase of 30 percent from 2001 to 2005, according to Bill Walker, the project manager for the Port Authority.

"A 50 percent increase from the producers' 2001 estimates doesn't surprise me, since we've seen our own estimates increase," Walker said.

Both Walker and Heinze were critical of BP, Exxon Mobil and Conoco Phillips lack of public discussion on how their estimates were originally generated.

"The question is, at $30 billion, will they need more concessions from state than they did at the $20 billion price tag?" Walker said.

Rep. Ralph Samuels, R-Anchorage, said the numbers announced this week by the energy producers were not new to him either. Samuels, the House majority leader, said he had reviewed other reports indicating gas and oil project costs were rising worldwide.

"So does it change the debate in the state? Fundamentally, the choices remain the same, but the cost increase makes the project a little less attractive," Samuels said. "Still, we have to keep moving down the road toward a pipeline."

Daily News reporter Sabra Ayres can be reached in Juneau at sayres@adn.com or 1-907-586-1531.

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Anchorage Daily News
February 15, 2007

http://www.adn.com/money/industries/oil/story/8643245p-8535146c.html

Gas line cost goes up $10 billion
ESTIMATE: Exxon Mobil pins the blame on global cost increases.
By SABRA AYRES
Anchorage Daily News
Published: February 15, 2007
Last Modified: February 15, 2007 at 02:15 AM

JUNEAU -- The anticipated price of building Alaska's natural gas pipeline has risen dramatically from previous estimates, thanks to global cost increases in labor, materials and transportation, energy producers warned Alaska lawmakers Wednesday.

Contract talks last year estimated pipeline construction costs to be in the range of $20 billion if the state chose to build a pipeline that stretched through Canada and into the Lower 48. But a jump in steel, labor and other construction prices has driven that estimate to what could be "well into $30 billion," according to Craig Haymes, a representative from Exxon Mobil Corp.'s Alaska division.

"It's probably going to be in that 30s ballpark range," Haymes said during a House Resources Committee hearing. Other large projects worldwide have seen project costs increase 50 percent to 100 percent, he said.

Last year's contract negotiations with the state's three largest natural gas producers ended after former Gov. Frank Murkowski's proposed contract failed to come to fruition.

Gov. Sarah Palin, who took office in December, has said she plans to introduce legislation this year that would set new guidelines and incentives under which natural gas producers could approach the state with pipeline proposals. Palin said the legislation, if it passes, would level the playing field for interested parties and create a more transparent negotiation process.

But Exxon Mobil's top official, addressing journalists this week in Houston at an energy conference, hinted at frustrations with contractual changes to the pipeline negotiations under Palin's administration. Exxon Mobil, Conoco Phillips and BP were the only three companies involved in Murkowski's pipeline proposal.

"I don't really know where we are. I don't think it looks like Alaska knows where it wants to go, either," Exxon Mobil chairman and chief executive officer Rex Tillerson was quoted as saying.

Palin said the comment made Exxon seem uninterested in the "competitive, open and transparent" process her administration is working on.

"What bothers me is that Alaska tried it Exxon's way. The result was a contract that is not viable. It did not have the support of the public or the Legislature," she said in a statement. "We know exactly where we're going and have a plan to move forward."

At Wednesday's hearing, however, representatives from BP, Exxon Mobil and Conoco Phillips said they remained interested in working with the state and the new administration on furthering the development of a gas pipeline in Alaska.

The three said a producer-owned pipeline would be the best option for the state, despite the financial risks. As gas producers already operating in the state, the companies have obvious commercial incentives for wanting to get the gas to market as quickly as possible.

"For BP, the North Slope is the largest known but undeveloped resource in our portfolio, and frankly, we'd like to get rid of that idea," said David Van Tuyl, a representative from BP. "BP's future is directly linked to the future of the Alaska gas pipeline."

BP invests about $1 billion a year in the company's operations in Alaska, he said. The company's investments ensure its intention to continue working with the state, despite the projected cost increases, he said.

"Most mega-projects are exceeding sanctioned costs, and the Alaska project isn't just any mega project."

Van Tuyl said even if a deal was to be signed by 2008, natural gas would most likely not start to flow to market until as late as 2018.


Daily News reporter Sabra Ayres can be reached in Juneau at
sayres@adn.com   or 1-907-586-1531

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Wall Street Journal
February 15, 2007

Oil Cos Say They Should Operate Alaska Pipeline
DOW JONES NEWSWIRES
February 14, 2007 11:30 p.m.

JUNEAU, Alaska (AP)--Exxon Mobil Corp. (XOM), BP PLC (BP), and ConocoPhillips (COP) told lawmakers the producers should own and operate the state's prospective natural gas pipeline.

The oil companies told the House Resources committee Wednesday that an independent owner would have no incentive to reign in costs, which get passed on to producers.

Critics, however, are concerned that a producer-owned pipeline would create antitrust problems and not enable others fair access.

"The producers are best qualified to undertake this massive endeavor," said David Van Tuyl, BP's gas commercializing manager.

"Producers are also commercially motivated to maximize the value of our gas - the state's gas - and to deliver a low-cost project," he said. "The state has the same motivation."

While the companies touted the value of a producer-owned pipeline, Gov. Sarah Palin separately pledged Wednesday to unveil her gas pipeline plan to lawmakers in about two weeks.

Lawmakers have been awaiting Palin's bill designed to re-establish project criteria which energy companies must meet in exchange for inducement incentives from the state. The big three oil companies were hand selected last year by the former governor to lead the project but the deal was never approved by the legislature.

The stakes are a multibillion project designed to deliver Alaska's 35 trillion cubic feet of proven natural gas reserves to a nation watching reliance on imports grow.

Proponents say the three major producers have the largest stake and will not jeopardize that by letting cost overruns go unchecked.

"It only makes sense that the parties taking the risk need to be able to manage those risks, especially on something the scope of this project," Exxon Mobil's Marty Massey told the Senate committee last week.

But critics are worried that letting the three producers operate the pipeline would not enable the state to maximize all its resources.

"I still believe in the best protections long-term for state and citizens come if we have an independently owned and operated pipeline," said Republican Sen. Gene Therriault of North Pole.

Former Gov. Frank Murkowski reached an agreement with BP, Exxon Mobil and ConocoPhillips to build a $25 billion pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered about 4.5 billion cubic feet of natural gas a day, which is about 7% of the current U.S. demand.

But lawmakers felt the deal gave too many considerations to the big firms, including locking in tax rates for several decades.

The deal led to bickering among lawmakers, plus unproductive meetings and special sessions last year that left a bitter taste with the current Legislature - and no contract.

"Rhetoric has to really stop in order to move this project forward and start to understand and work with each other," Joe Marushack, ConocoPhillips vice president of gas development, told the Senate Resources committee.

Marushack also said the state is now behind the curve on the project's timeline, which includes 10 years to build the pipeline.

Rep. Carl Gatto, R-Palmer, who co-chairs the House Resources committee, says he believes progress is being made.

"We are not anywhere close to where we need to be, but we are getting there," he said.

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Financial Times
February 14, 2007

http://www.ft.com/cms/s/b167e704-bbd0-11db-afe4-0000779e2340.html

BP blast probe calls for sackings
By Sheila McNulty in Houston
Published: February 14 2007 02:00 |
Last updated: February 14 2007 02:00

BP's internal investigation into management accountability for the oil company's fatal Texas refinery explosion calls for the sacking of four senior executives, the Financial Times has learnt.

They include Mike Hoffman, who recently retired as the UK company's group vice-president for refining and marketing; Pat Gower, US refining vice-president; Don Parus, the Texas City refinery manager who has been on leave since the accident; and Willie Willis, a plant employee who had apparently been in the process of being groomed to succeed Mr Parus.

The four were among a dozen or so senior managers investigated by Wilhelm Bonse-Geuking, group vice-president of BP, after the explosion at the Texas City refinery in 2005, which killed 15 people and injured 500. They were identified in the report, a copy of which was seen by the FT, as "Tier 1", which was defined as those with direct responsibility for substantial management activities.

"The team believes that each of the individuals identified in Tier 1 failed to perform their management accountability in significant ways, and recommends that BP seek ways to conclude their employment relationships on fair and just terms, in a timely manner,'' the report concluded. It said Mr Hoffman "has not performed his duties effectively'', and added that his departure was consistent with what the investigation team would have wanted.

Mr Gower, the report said, "failed to actively control and supervise the performance of the most complex and difficult facility, even in the face of alarming reports and findings and the severe precursor incidents in 2004''. Two BP workers were scalded to death by boiling water after a pipe ruptured on September 2, 2004.

The report said that whereas Mr Parus, who red-flagged deficiencies at the plant to senior management in the run-up to the accident, took clear accountability for the tragedy, he, nonetheless "failed to adequately carry out his accountability from a management perspective". It noted that Mr Willis "did not properly carry out his management accountability".

The FT called all four executives named in the report for comment yesterday. By the time the paper went to press, only the lawyer acting for Mr Parus had responded.

Judson Starr, lawyer for Mr Parus, said: "We have received the report. We are examining it and no official action has been taken against Don Parus."

BP said: "The team found no evidence that anyone acted in bad faith or violated BP's code of conduct. The team did determine there were shortcomings in the management performance of some members of the refining management team. As a matter of policy BP does not comment on personnel matters."

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Anchorage Daily News
February 13, 2007

http://www.adn.com/money/industries/oil/story/8637977p-8530289c.html

Investigation finds oil wells aren't leaking
PRUDHOE: Critic claimed BP let overflow contaminate tundra ponds.
By WESLEY LOY
Anchorage Daily News
Published: February 13, 2007
Last Modified: February 13, 2007 at 09:05 AM

An allegation that 50 North Slope oil wells were "leaking to the surface" and polluting tundra ponds doesn't appear to be true, according to results of an investigation by two state agencies.

The investigation found that BP, the company that operates the wells, didn't violate any regulations, and state officials are not proposing any penalties.

However, the investigation did turn up petroleum contamination in the gravel sumps, or cellars, at the base of wellheads, and this could lead to new standards for cellar design.

"What we discovered was a gap in our regulations," said Cathy Foerster, an engineer and a member of the Alaska Oil and Gas Conservation Commission. "That's the good that came out of doing the investigation."

The probe largely seemed to clear BP, and regulatory agencies themselves, of serious charges leveled against them by Chuck Hamel, a Virginia resident and longtime oil industry critic. BP manages giant Prudhoe Bay and many other North Slope oil fields.

Last June, Hamel wrote to the commission and the Department of Environmental Conservation, the state's anti-pollution agency, alleging that 50 corroded oil wells were "leaking to the surface," with oil accumulating in well cellars and flowing with spring flood waters over or through gravel drill pads to nearby tundra ponds.

Hamel's letter further stated "it appears your two agencies are complicit in permitting and concealing these spills.

"Don't you recognize BP's conduct as immoral? Reputable oil field petroleum engineers are aghast that you permit these leaking wells to go unrepaired," the letter said.

Hamel also charged that BP contractors had littered the tundra with trash and debris over last winter.

Reached at his home Monday, Hamel said he hadn't yet seen the state investigative report and couldn't comment on it. He said, however, that he wasn't surprised officials hadn't recommended any action against BP, asserting that the FBI is investigating the two state agencies for their "complicity" in BP's Prudhoe Bay pipeline corrosion crisis.

The commission hired an independent investigator, Edward Morgan of Fairbanks, to look into Hamel's allegations on the well cellars. Morgan described himself as a retired Navy ship captain who once worked for Alyeska Pipeline Service Co., the company partly owned by BP that runs the trans-Alaska oil pipeline.

Morgan reported he asked Hamel to say which 50 wells were leaking, but Hamel refused.

That meant Morgan and state officials had to make an educated guess on which of BP's more than 2,100 North Slope wells might be leaky. They targeted wells already known to have had fluid releases into their cellars or leaks in surface casings. In some cases, BP already had shut down some wells due to leaks or other problems.

In all, Morgan and state officials inspected 76 wells.

In many cases, they found standing water and petroleum sheens in the cellars. But they found no evidence that crude oil from deep in the ground was "leaking to the surface" into the well cellars.

Rather, the likely source of the small amounts of petroleum seen in cellars -- generally less than a gallon -- was from fluids such as diesel that are "purposely and properly" poured down a well to prevent freezing, according to a commission letter summarizing the investigation.

Sometimes rising heat in a well, or a casing leak, can cause freeze-protection fluids to flow into a well cellar, but that's not a violation of state regulations, the commission letter said.

The inspectors looked at tundra ponds, but found no contamination except for a sheen containing an estimated teaspoon of hydrocarbon fluid on one Prudhoe Bay pond, the Morgan report said. Analysis, however, could not prove it wasn't naturally occurring.

Morgan's report said only extensive gravel borings could determine whether contamination perhaps migrated out of a well cellar and through a gravel pad. Given the porosity of the pads, it's "certainly possible" that oil carried by snowmelt or rainwater runoff could carry oil to tundra ponds, the report said.

As for the allegation that state agencies went along with a BP cover-up of spills, Morgan wrote he found "simply no evidence" to suggest it.

Hamel's allegation of extensive trash in the oil fields following breakup last spring appears to be true, Morgan said, with "nearly everyone" he interviewed saying the littering was more extensive than usual.

"Most said they were personally embarrassed by the trash because it reflected very poorly on BP and BP employees," his report said. BP hires college students each summer to work on the Slope, and they did a good job cleaning up the trash, he added.

The inspectors also found a range of "housekeeping" worries inside BP wellhouses including graffiti, tools and debris in well cellars, torn cellar liners and caution tags adrift on the floor.

The investigation cost the commission at least $70,000, Foerster said.

BP spokesman Daren Beaudo said Monday his company was pleased the investigation cleared the company of Hamel's main allegations.

-----------------------------------------------------

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

---------------------------------------------------

BP workers surveyed

As part of a state probe into alleged leaks from North Slope oil wells, an investigator polled drill site operators and other workers about their work environment. Here are the responses for two questions.

• Do you believe that you can report HSE (health, safety and environment) concerns to your supervisor without fear of retaliation?

Yes 102
No 3

• When you report an HSE concern is it resolved in a timely manner?

Yes 70
No 19
No answer 15

Note: 105 of 203 workers receiving questionnaires returned them. Some responders didn't answer every question.

Source: Alaska Oil and Gas Conservation Commission

-----------------------------------------------------
Chuck Hamel recently leveled new charges about oil industry operations in Alaska Some have been found to be true and some have been disproven. To read Hamel's letter to U.S. Rep. John Dingell and a story about the charges.
http://www.adn.com/static/images/graphics/hammel_letter.pdf

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Los Angeles Times
February 13, 2007

http://www.latimes.com/news/printedition/asection/la-oe-vogel13feb13,1,2966670.story?coll=la-news-a_section

When do 'good' firms go 'bad'?
Ranking corporations by ethics is popular, but telling the good guys from the bad is not clear-cut.
By David Vogel,
DAVID VOGEL teaches business ethics at UC Berkeley's Haas School of Business and is the author of "The Market for Virtue: The Potential and Limits of Corporate Social Responsibility."
February 13, 2007

SUSTAINABLE FIRMS. Green businesses. Socially responsible corporations. A growing number of magazines, activist groups and websites publish such lists, suggesting that one can distinguish the good companies from the bad.

The claim that such distinctions are possible is likewise central to ethical mutual funds, indexes and stock rating services that recommend "responsible" investing  with some even asserting that "better" firms have superior financial performance.

But corporate social responsibility isn't such a clear-cut matter. People are rarely consistent in their ethical behaviors, as numerous psychological studies have shown. An individual can cheat on his spouse and file an honest income tax return, or be a model employee and an irresponsible parent. Andrew Carnegie and John D. Rockefeller were ruthless businessmen yet also generous philanthropists  a category in which some also place Bill Gates. Interestingly, the work of the Bill & Melinda Gates Foundation  criticized in The Times recently for "irresponsible" investing  reflected so well on Microsoft that the company topped the Wall Street Journal's Reputation Quotient survey.

So if it is difficult to judge the overall ethics of an individual, it is certainly more so in the case of complex business organizations. Few firms widely regarded as socially responsible consistently exhibit ethical behaviors, while even the most criticized are not without virtues. The more closely one looks, the harder the determination gets.

Consider, for example, British Petroleum  long entrenched in the pantheon of corporate responsibility because of its leadership on the issue of global climate change. Yet after a major oil leak last year, it was revealed that BP had not maintained its pipelines in Alaska. Corporate cost-cutting also contributed to a 2005 oil refinery explosion in Texas that resulted in 15 deaths and 180 injuries. How, then, should we rank BP's overall environmental record?

Another icon of corporate responsibility is American Apparel. This firm has been widely praised for manufacturing all of its products in the United States and for the high wages and other benefits it provides employees at its Los Angeles factory. Yet its marketing uses images of women that border on soft pornography, and its founder and chief executive has been repeatedly accused of sexual harassment. On balance, is American Apparel a virtuous firm?

Merck has been widely and appropriately applauded for its decision to develop, produce and distribute without charge the drug Mectizan, which prevents river blindness. Since 1987, Merck has distributed more than 250 million doses, and its programs currently reach 40 million patients a year. Yet this same pharmaceutical firm aggressively marketed the anti-pain drug Vioxx, which increased the risks of heart attacks and strokes. In measuring Merck's overall corporate virtue, how should we assess the millions of individuals saved from river blindness against the firm's belated response to the health risks of its highly profitable, bestselling drug?

On the other hand, consider Altria, which owns Philip Morris. It's shunned by virtually all ethical funds because it makes cigarettes, a product that is inherently harmful. Yet Philip Morris has long been a generous contributor to the arts as well as to the Congressional Black Caucus. Tobacco is still grown primarily on family farms, many of which are minority owned.

Wal-Mart, another corporate villain, is widely condemned for its low wages and unwillingness to provide adequate healthcare coverage for its employees. Yet by using its low costs to lower prices, Wal-Mart is estimated to save American consumers $30 billion a year  the equivalent of a gift of $270 to every family in the U.S. It has also embarked on a number of potentially far-reaching environmental initiatives.

No energy firm has been criticized as vehemently by environmentalists as Exxon Mobil, which refuses to acknowledge, let alone ameliorate, the risks of global climate change. Yet, in contrast to BP, since the 1979 Exxon Valdez oil spill, Exxon Mobil has had an exemplary record on both workplace safety and pollution control. And unlike Shell, another energy firm applauded for its commitment to "sustainability," its financial reporting has been a model of probity. How then should we rank Exxon Mobil's overall ethical behavior?

These examples are hardly atypical. Few "virtuous" firms are without sin, and few business "villains" have no good qualities. That does not mean we should give up comparing companies' social or environmental performance. But we shouldn't expect to find many black-hatted corporate villains or heroes on white steeds. In corporate America, it's usually shades of gray.

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Wall Street Journal
February 13, 2007

UPDATE:
BP's BTC Pipeline Needs Extra Monitoring-US Agency
DOW JONES NEWSWIRES
February 12, 2007 1:37 p.m.
(Adds report is from OPIC's internal watchdog)
 
LONDON (Dow Jones)--Extra monitoring is needed on BP PLC's (BP) Baku-Tbilisi-Ceyhan pipeline, particularly on cracks and leakages in its coating, the U.S. Overseas Private Investment Corporation, or OPIC, said in a report.

The document from the agency's internal watchdog, the accountability office, was leaked Monday by environmental groups Green Alternatives, Pacific Environment and Platform and follows a new assessment of the project's risk.

The U.S. government credit agency looked into its decision to back the pipeline following a complaint from non-governmental organizations about a $142 million political insurance policy it granted on loans to finance the BTC Transcaucasian pipeline.

The subsequent review, completed on Jan. 29, recommends that "OPIC renew its focus on environmental monitoring of the project in the medium to long term."

It also asks for "specific attention to implementation of the additional monitoring for field joint coating cracks or leakage."

An OPIC spokesman didn't return a request for comment.

The BP-operated pipeline transports crude over 1,750 kilometers from the Caspian to the Mediterranean Sea and started operating in July 2006.

The report comes as the U.K. oil major is reeling from a string of problems at its U.S. operations, including a government probe into heavy corrosion and a small leak in its Alaska pipeline.

The assessment deals only with OPIC's compliance with its own policies of environmental risk mitigation, and isn't binding for other parties such as BP.

OPIC decided in May to address grievances from NGOs alleging that OPIC wasn't properly informed about issues regarding the coating material used for BTC's pipes. This marked the first time the agency had agreed to review a complaint on a project it has backed.

The NGOs said the pipeline operator didn't inform OPIC, before it took its decision, about a BTC consultant report claiming the coating used was likely to result in widespread oil leakage. The accusations relating to corrosion risks, which the company denies, first surfaced in press reports on Feb. 15, 2004.

The U.S. agency's watchdog concludes that "although pipeline construction commenced during due diligence, OPIC did not access all construction monitoring data that could be material to due diligence."

The document shows that the company didn't disclose information about cracks in the anti-corrosion coating pipeline - discovered in November 2003 - until after the insurance contract came into force on Feb. 3, 2004.

A BP spokesperson said it had received the OPIC report and that the report "acknowledges BTC's extensive and comprehensive reporting to the lenders throughout the construction of the pipeline."

According to the OPIC report, consultants assessing the project for the lenders during its construction also voiced concerns about "the compatibility of the selected (field joint coating) material and the pipe coating."

It says they questioned BTC about whether it could be difficult to maintain pipeline-coating integrity for the design life of the project and that repair would likely be required and extra monitoring would be appropriate in sensitive areas.

A consultant for the lenders also recommended that coating conditions in high-groundwater areas be monitored and inspected at more frequent intervals than BP planned.

The BP spokesman said: "Based upon our initial review of the report, we are confident that our extensive ongoing monitoring and assurance program for BTC addresses the recommendations made to BP during the construction process. We will work closely with OPIC to clarify any actions that are required of BP in the future."
 
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com 

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Anchorage Daily News
February 10, 2007

http://www.adn.com/news/alaska/story/8629559p-8521843c.html

Natural resources boss gets job back
IRWIN: Murkowski removed him for disputing
gas line talks; now Palin has reappointed him.
By ANNE SUTTON
The Associated Press
Published: February 10, 2007
Last Modified: February 10, 2007 at 02:00 AM

JUNEAU -- A former head of the state's Natural Resources Department who was forced from his position when he criticized Gov. Frank Murkowski's contract negotiations for a natural gas pipeline is back on the job.

Gov. Sarah Palin on Friday announced the appointment of Tom Irwin as commissioner of the Department of Natural Resources.

Marty Rutherford, who has served as acting commissioner since Palin took office, was named deputy commissioner.

Palin said Irwin is the right man for the job.

"Tom has the experience, talent and know-how to manage Alaska's resources and bring those resources, including Alaska's gas reserves, to market," Palin said in a prepared statement.

Palin said Rutherford, who is drafting legislation to guide the governor's gas line negotiations, will continue to lead her gas line team.

Irwin, who was appointed commissioner in January 2003, was asked to resign in October 2005 after he wrote a memo questioning the legality of state concessions to oil producers during contract negotiations for a natural gas pipeline from the North Slope.

Rutherford and five other high-ranking department officials quit in protest of Irwin's ouster.

Republican leaders in the Legislature tried to convince Murkowski not to let Irwin go, saying his departure could adversely affect future pipeline talks and damage public opinion of the administration.

Sen. Tom Wagoner, R-Kenai, who co-chaired Senate Resources Committee hearings on gas line and oil tax issues last year, said he "wanted to do back flips" over news of Irwin's reappointment.

"I think he has great integrity," Wagoner said. "Two years ago, when this flap happened between him and the governor, I thought he was right. I supported him then and I support him now. I think he'll do a good job."

Wagoner, now a member of the Senate minority, said he did not foresee problems with Irwin's confirmation.

Rep. Les Gara, D-Anchorage, also had high praise for Irwin, although he voted against his confirmation four years ago.

"He won me over with his conduct. I thought he didn't have any of the prejudices I feared he was going to have. I thought he was really a strong commissioner," Gara said.

Judy Brady, director of the Alaska Oil and Gas Association, said Irwin and Rutherford made a strong and experienced team, and she did not foresee serious concerns from the producers over Irwin's past criticism of the process.

"His criticism was in the context of a part of that negotiation, and we're in a new world now," Brady said. "If everybody is working for the same goal, then it's just a matter of working through what's possible."

Irwin is currently working as vice president of government and public affairs for Golden Valley Electric Co.

He also led Palin's transition team for the department.

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Anchorage Daily News
February 10, 2007

http://www.adn.com/money/industries/oil/story/8629495p-8521800c.html

Lawsuit targets Browne's benefits
BP: Mishaps in Alaska and Texas should
impact CEO's retirement, stockholders say.
By JEANNETTE J. LEE
The Associated Press
Published: February 10, 2007
Last Modified: February 10, 2007 at 12:33 AM

Two large BP stockholders asked an Alaska court Friday to freeze millions in retirement benefits for outgoing chief executive John Browne, saying he does not deserve compensation in light of recent crises at the oil giant's facilities in Texas and Alaska.

At stake is at least $140 million in cash bonuses as well as stock, stock options, long-term performance pay and pension benefits, according to documents obtained by The Associated Press.

The motion, filed in Alaska's Superior Court, asks that Browne's retirement package be placed in a court-approved trust while shareholders litigate with BP over alleged violations of worker safety and environmental protection laws.

The lawsuit was brought by the London Pensions Fund Authority, which owns 3.2 million shares of BP stock, and the U.S.-based Unite Here National Retirement Fund, a clothing, hotel and restaurant union that owns 6,000 shares.

The two pension funds said BP's assets have suffered from the partial shutdown of the Prudhoe Bay field in Alaska following a pair of spills last year, and a refinery explosion in Texas City, Texas, that killed 15 people and injured more than 100 in 2005.

London-based BP reported this week that its fourth-quarter profit had dropped 22 percent to a two-year low following the high-profile mishaps. The company has slashed its growth targets and raised its capital expenditure forecast for this year. BP said adjusted net profit dropped to $2.88 billion from $3.69 billion a year ago.

BP spokesman Daren Beaudo said the company doesn't comment on pending legal matters.

Collecting damages over BP's management practices and weakened assets would be much easier for shareholders if Browne's access to the hefty retirement package is blocked, attorneys said.

"The notion is that by his conduct, he hurt the corporation and since the board won't sue him, the stockholders are allowed to step up and say, 'I will sue for the corporation,' " said William S. Lerach, a San Diego-based attorney for the plaintiffs.

In January the company announced Browne would leave the CEO position by the end of July, a year ahead of schedule.

The motion on Friday sought to temporarily stash Browne's departure package in short-term U.K. Treasury Gilts (bonds) or other liquid assets approved by the court. The package includes $40 million in pension benefits, $54.5 million in long-term performance pay, $30.7 million in stock options and $18.3 million in previously awarded cash bonuses, according to court documents.


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http://www.adn.com/money/industries/oil/story/8629555p-8521855c.html

Oil taxes may bring $1 billion
TAX REVENUE: Lawmakers are listing ways to
spend the windfall, which could change with accounting.
By WESLEY LOY
Anchorage Daily News
Published: February 10, 2007
Last Modified: February 10, 2007 at 02:02 AM

Alaska lawmakers will be keeping a sharp lookout for the mailman come April 2, and for good reason.

That's the day oil companies are supposed to send in unusual tax payments that could total close to $1 billion, state revenue officials told legislators in Juneau this week.

"April 2 is going to be a big day, as long as the checks come in when we expect them to," said Cherie Nienhuis, a petroleum economist with the Department of Revenue.

The payments are the result of last year's overhaul of the state oil and gas tax code.

The new tax regime generally was aimed at increasing state revenue by more heavily taxing oil production -- or more particularly, oil company profits. The oil tax is one of the state's most important revenue streams.

To help accountants for both the state and the oil companies ease into the complex new tax code, oil companies were allowed for most of last year to make their monthly tax payments based on the old system, and then "true up" the difference owed under the new tax rules this spring.

State tax director Jon Iversen, along with Nienhuis, on Thursday gave members of the House Special Committee on Oil and Gas their best estimate of what the one-time true-up payments will total: $950 million.

That's a huge sum -- equal to about a quarter of all the money the state had last year for general spending -- and lawmakers have no shortage of ideas on how to spend it.

"I'll be interested to see whether we get a spending spree or a more mature approach toward a windfall," said state Sen. Hollis French, D-Anchorage.

Areas needing attention include the multibillion-dollar shortfall in state pension funds for teachers and public employees, an expected sharp increase in the cost of the state's Medicaid program, and chronic school funding needs, French said.

House Speaker John Harris, R-Valdez, concurred with that list of priorities.

The latest estimate of the state's looming, unfunded pension liability is on the order of $10 billion, he said.

Spending the oil tax windfall to shore up the pension plans wouldn't be "the most sexy way" to spend the money, but that's what lawmakers ought to do, Harris said.

The main goals for oil tax reformers were to give the state a bigger bite of the record oil profits seen in recent years and encourage more drilling.

Nienhuis stressed that the $950 million expected April 2 is just an estimate, and that the actual amount of money coming in could differ.

Much depends on the amount of deductions and tax credits the oil companies qualify for under the new tax rules for exploration, construction or other investment in the oil fields.

Regulators are still finalizing regulations to implement the oil tax reform, but already a fight is brewing over whether BP and other companies can claim tax breaks stemming from last summer's partial shutdown of the Prudhoe Bay oil field, the nation's largest. Lawmakers on both sides of the aisle have filed bills to prevent deductions for the repair or replacement of leaky pipelines that weren't properly maintained.

BP spokesman Daren Beaudo said Friday his company has not yet decided what tax breaks to seek.

French said the Revenue Department's windfall estimate sounds great, but oil company accountants might have a very different interpretation of the new tax code.

"I'm waiting to see the money," he said. "I'm afraid their interpretation is less than a billion dollars."

Gov. Sarah Palin has taken a conservative spending stance in her first year in office, asking her department chiefs to trim their budget plans by a combined $150 million.

The belt-tightening approach won't change because of the projected oil tax windfall, which is money that was expected and already has been factored into spending plans, said Sharon Leighow, Palin's deputy press secretary.

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

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http://www.adn.com/money/industries/oil/pipeline/story/8629545p-8521851c.html

Stevens urges action on gas pipeline
SUMMIT: State, federal and Canadian officials should set goals, he says.
By MICHELE HELLER
McClatchy Newspapers
Published: February 10, 2007
Last Modified: February 10, 2007 at 03:17 AM

WASHINGTON -- U.S. Sen. Ted Stevens said Friday he wants Alaska, U.S. and Canadian officials to meet to set a timeline for getting moving on a proposed natural gas pipeline from Alaska to the Midwest.

Saying time is critical, the Alaska Republican called for a summit to help get the multibillion dollar project rolling.

"We are really looking to proceed now," Stevens told Alaska reporters. "We've got to get together and get coordination in the beginning ... in order to develop the project and get it going as quickly as we can to meet the needs of the country."

He said he met recently with Vice President Dick Cheney and Canadian parliament officials about the pipeline, and said they shared his concerns about the pace of the state, which needs to take the first step by setting out a bidding process and resolving such issues as oil company taxes.

"I had some meetings with the vice president about it. We're both concerned about the time frame of state action because there's so much still left to be done," Stevens said. "The vice president assures me he's going to stay involved."

Gov. Sarah Palin's spokeswoman Meghan Stapleton said, "We understand that time is of the essence, not only for Alaska but also for the national interest. Our proposal gets there faster than any previous proposal. We at least have a schedule for project benchmarks built within our plan."

In an interview with the Associated Press on Friday, Palin said, "We are further along today with that project than (former Gov. Frank) Murkowski was. That proposed plan was never going to get us a gas pipeline. His plan was terms of an agreement laid out that helped the producers get locked-in oil and gas tax rates for many years, but there were no benchmarks that would have assured a gas line at the end of the line," she said.

The governor plans to unveil draft pipeline legislation within a month, her spokeswoman said, and will share it with Alaska's congressional delegation when she meets with it in Washington the week of Feb. 26.

State officials have been under the gun since the Federal Energy Regulatory Commission said in a report last week that prospects for the pipeline "are more remote than a year ago." It blamed the state for delaying the schedule.

When Palin, who has taken issue with the report's criticism of the state's timeline, took office in January she reopened the contract process Murkowski had started last year. Murkowski's plan to contract with three oil companies -- Exxon Mobil, Conoco Philips and BP -- stalled amid resistance from state legislators who charged that it was too generous to the producers.

Stevens had a strong message for Palin on Friday. "I hope she'll cooperate with us," he said. "I hope the state will make the decision what its preference is and hopefully do that in conjunction with negotiations with the Canadian government and the federal government and we'll all come down in the same place."

He said a pipeline route across Canada "ought to be the preferred route right now."

Palin spokeswoman Stapleton had no specific reaction to Stevens' calls for a summit, other than to say that the governor will discuss it and other pipeline issues with the senator when they meet this month.

Contrary to initial concerns among the Alaska congressional delegation that the White House did not support funding for a federal pipeline coordinator, President Bush's budget recommendations issued last week did request that Congress appropriate $2.32 million to fund the office.

Stevens said it is up to the state to decide the details of the project, but once it is under way, it is considered interstate commerce and becomes a federal issue.

Michele Heller is a reporter in the McClatchy Newspapers Washington bureau.

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http://www.adn.com/news/alaska/story/8629564p-8522612c.html

Palin confident of gas line plan
By STEVE QUINN
The Associated Press
Published: February 10, 2007
Last Modified: February 10, 2007 at 03:17 AM

JUNEAU - Sarah Palin knows Alaska an image problem, an identity she inherited two months ago when she was sworn in as the state's first female and youngest governor.

One way to sway critics would be to rally state lawmakers behind a soon-to-be released plan outlining terms for natural gas pipeline contract negotiations.

It would pave the way for a multi-billion project designed to deliver 35 trillion cubic feet of proved natural gas reserves to a nation watching reliance on imports grow.

"It's the most important thing we are working on right now," she said Friday in a 40-minute interview with The Associated Press. "Ethics reform and building a trust, that's a given. You take that foundation and the gas line, and it is the most important thing we are working on."

But this month, the state's timetable was questioned in a report by federal energy regulators that says Alaska's progress has "slipped considerably."

The federal report said the prospects for a pipeline are "more remote than last year," when former Gov. Frank Murkowski got three producers to agree to a fiscal contract but failed to convince lawmakers, who felt terms gave too much to oil companies.

Palin's message to all concerned: All is well.

"We are further along today with that project than Murkowski was," she said during a wide-ranging interview. "That proposed plan was never going to get us a gas pipeline.

"His plan was terms of an agreement laid out that helped the producers get locked-in oil and gas tax rates for many years, but there were no benchmarks that would have assured a gas line at the end of the line."

Since taking office two months ago, Palin has made the gas line a top priority, meeting immediately with 12 companies or groups interested in being part of the pipeline construction.

Palin will personally deliver her positive message to federal authorities in a few weeks while attending a state governor's conference in the Lower 48.

She offered no specific timetable for delivering new legislation to state lawmakers outlining terms for natural gas pipeline contract negotiations, but said the House and Senate will have plenty of time to review her plans. Friday was the 25th day of the 121-day session.

"We are going to get this thing rolled out in enough time for them to have good, deliberative debate and discussion on this in order for it to be passed this session," she said. "They are ready for it."

Palin, a Republican who turns 43 on Sunday, took over Dec. 4.

Getting here meant trouncing incumbent Murkowski in the GOP primary - he finished third - then defeating Democrat Tony Knowles, who served for eight years before Murkowski.

By then, the state became a symbol of wasteful federal spending on two so-called "Bridges to Nowhere," and immediate fodder for political humorists.

Then an oil spill on the North Slope forced Prudhoe Bay pipeline operator BP PLC to partially shut down the nation's largest oil field. Federal lawmakers scolded company officials, not the state.

Undaunted, Palin's mission is still to tap into the state's natural resources at a time federal lawmakers want to lessen dependence on foreign oil and natural gas.

She also wants to shift public opinion that it's time to drill in Alaska's Arctic National Wildlife Refuge; the state's efforts to do so have already failed for more than two decades.

And with the Democrats taking control of Congress, environmentalists now want a permanent ban on drilling in ANWR.

"What we are talking about is the state of Alaska being a leader in a national energy plan," she said. "The nation could be and should be looking to Alaska to supply domestically safe sources of energy for our nation."

The oil-rich coastal strip is about 1.2 million acres and is believed to contain about 10.2 billion barrels of oil, according to the Interior Department.

"To create a safe nation, much of it has to do with energy supplies coming from a fellow state instead of looking to import foreign supplies of energy," Palin said.

Palin, who cut her teeth in the political world as the mayor of the town of Wasilla, is no novice to the oil and gas world.

She served a year as a commissioner for the Alaska Oil and Gas Conservation Commission, which oversees safe operation and recovery of the state's resources.

Additionally, her husband, Todd, worked nearly two decades years on the North Slope, most recently as a production operator.

Palin, however, refuses to get sucked into the national perception that the state has an overly chummy relationship with the Big Oil firms.

During her State of the State address last month, she rebuked Exxon Mobil Corp. for what she believes to be broken promises for developing natural gas fields in Point Thomson.

Point Thomson is the North Slope's second largest natural gas field, after Prudhoe Bay, and could be a crucial component to the pipeline.

It is estimated to hold about 9 trillion cubic feet of gas reserves, more than a quarter of the known gas in all North Slope fields.

The Irving, Texas, company wants a state Superior Court to overturn the state's decision to revoke the company's Point Thomson leases.

"We are trying to convince the rest of the nation to let that federal land be opened up for development, yet we haven't in 30 years been able to get it together in our own state land project with Point Thomson," she said. "This isn't a matter of standing up against anybody. It's a matter of standing up for state's rights.

"It's a matter of making sure we have a mutually beneficial relationship with the producers. My job is making sure Alaska's interest are also being met. The state is ready for development. The nation is ready for development."

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Wall Street Journal
February 10, 2007

Texas Appeals Court Clears Way For BP's Browne To Testify
DOW JONES NEWSWIRES
February 9, 2007 6:03 p.m.

HOUSTON (Dow Jones)--A Texas state appeals court Friday resurrected a seemingly dead issue, clearing the way for the a state court to depose BP chief executive John Browne.

The court lifted a previous stay on Browne's testimony in conjunction with suits stemming from the March 23, 2005 explosion at the company's Texas City, Texas refinery.

Whether the decision will result in Browne's deposition remains to be seen. "We're considering the options that we have," BP spokesman Neil Chapman told Dow Jones late Friday.

The decision came seven months after plaintiffs' lawyers first called for Browne's deposition.

In the intervening time, the remaining cases involving fatalities in the suit have all settled, and Browne has moved up his retirement date at the Anglo-American oil giant to June 2007.

A group of cases brought on behalf of some of those injured in the blast are set to go to trial later this month.

"We have stated before, and we'll state again that Lord Browne doesn't have any unique personal knowledge about the incident," said BP's Chapman. State law protects executives from testimony if they lack "unique" knowledge on a particular incident.

However, Galveston county district Judge Susan Criss, who's hearing the case has ruled that Browne does have unique knowledge about the blast.

"Lord Browne, in his PR campaign, indicated that he had unique, superior knowledge of certain elements," said Criss said during an October hearing. Pointing to the executive's public appearances and a media interview, Criss ruled that Browne interjected himself into the litigation, and that his deposition could be taken.

Criss' decision was appealed to the First Appeals Court of Texas, which initially stayed the deposition, but lifted the stay on Friday for unspecified reasons.

-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com

 Corrected February 9, 2007 18:06 ET (23:06 GMT)
 
In the intervening time, the remaining cases involving fatalities in the suit have all settled, and Browne has moved up his retirement date at the Anglo-American oil giant to June 2007.
 
(In the item "Texas Appeals Court Clears Way For BP's Browne To Testify," published at 5:47 p.m. EST, Browne's retirement date was misstated.)

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Exxon Shift On Warming Science Signals New Era In Debate
DOW JONES NEWSWIRES
February 9, 2007 6:20 p.m.
By John M. Biers
Of  DOW JONES NEWSWIRES
 
HOUSTON (Dow Jones)--In an op-ed article seven years ago headlined "Unsettled Science," Exxon Mobil Corp. (XOM) said it was "impossible" to attribute higher temperatures to human-produced emissions and suggested that elevated carbon dioxide levels could improve forest growth.

In a conference call with reporters Thursday, Exxon Mobil executives declared their determination to take immediate steps to address global warming, in the process affirming a recent scientific finding that global warming is caused, at least in part, by human activity.

The change in Exxon Mobil's position on global warming science - which had been suggested in some earlier public comments but has now been made explicit - comes amid increasing signs that further government action on warming is inevitable.

The issue has gained sudden visibility in recent months in the wake of the Democratic takeover of the U.S. Congress in November and the release of a U.N.-backed study highlighting the need for immediate action to counter global warming.

Against this backdrop, Exxon Mobil's statement this week "is a strong signal that the debate is over for those that matter," said Truman Semans, who directs the Business Environmental Leadership Council at the Pew Center on Global Climate Change, a nonprofit group. "Those that continue to question the science are really out of step."

The world's largest publicly traded oil company, Exxon Mobil has generally been viewed as the most antagonistic oil company to climate change policy.

Semans said the list of corporate skeptics on warming science has narrowed to mainly a few trade associations, some of which are likely to follow Exxon Mobil's lead. Exxon Mobil "has been a bellwether of views for the more cautious members of the U.S. business community," he said.

Different Sorts of Headlines
 
In some ways, Exxon Mobil's shift on science is more one of emphasis than content.

Exxon Mobil has long pointed to the wisdom of preventive steps on warming, advocating "responsible action" even in its most skeptical column. And while Exxon Mobil officials this week explicitly affirmed a human component behind warming, they stressed that uncertainty lingers on the comparative importance of that component versus geologic factors.

But the change means that Exxon Mobil no longer publishes op-eds with headlines like 2000's "Political Cart Before a Scientific Horse," another old warming column that is no longer available on the company's Web site. There, the most recent op-ed listed is headlined "Taking action to reduce greenhouse gas emissions."

Exxon Mobil spokesman Mark Boudreaux described the changes in Exxon Mobil's comments on global warming science as appropriate and logical in light of changing science.

"Certainly we know more today than we did in the late 1990s and even in 2000," Boudreaux said. "Our position and commentary has evolved as the science has evolved."

In Thursday's conference call, Exxon Mobil officials reiterated that their position has been mischaracterized because of their opposition to the Kyoto Protocol. "Many people incorrectly combine the science side with the policy side," said Vice President Ken Cohen, adding that Exxon Mobil fought Kyoto because it didn't "pass muster" as a cogent policy.

But an examination of Exxon Mobil's statements going back to 2000 show that the company's position on global warming science has evolved gradually and that the current acknowledgment on human influence is relatively recent.

 Gradual Change Since 2000
 
Exxon Mobil articulated some of its most pointed criticism of global warming science in 2000.

"Geologic evidence indicates that climate and greenhouse gas levels experience significant natural variability for reasons that have nothing to do with human activity," Exxon Mobil said in a 2000 editorial. "Against this backdrop of large, poorly understood natural variability, it is impossible for scientists to attribute the recent small surface temperature increase to human causes."

By 2004, Exxon Mobil no longer was publishing global warming op-eds with glib headlines like "Unsettled Science," but company executives continued to express misgivings about the human influence on warming.

A February 2004 company report observed a "warming trend" in the 20th Century, but said the "cause of this trend and whether it is abnormal remain in dispute." The report then listed a variety of mostly non-human factors, including solar radiation and orbital changes of the earth.

But during Thursday's conference call, Exxon Mobil executives praised the recent report by the U.N.-backed Intergovernmental Panel on Climate Change. Executives said they agreed with the report's finding that greenhouse gas emissions have "increased markedly as a result of human activities since 1750."

Cohen affirmed that stance when pressed later in the call.

"There is no question that human activity is the source of carbon dioxide emissions," Cohen said.

John Wilson, director of socially responsible investing at Christian Brothers Investment Services, called Exxon Mobil's shift on global warming a "significant change" that has "probably taken place over a period time."

Wilson said the current stance follows a "period of ambiguity" when the company's more moderate tone was muddied by its support for some advocacy groups that continue to question global warming science. Exxon Mobil has since renounced support of some of those groups.

"They recognize the debate has moved on," Wilson said. "They recognize that if they want a seat at the table, they need to at least accept what everyone else does."

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

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Financial Times
February 10, 2007

http://www.ft.com/cms/s/5be992ee-b899-11db-be2e-0000779e2340.html

BP to trim board in shake-up
By Kate Burgess and Ed Crooks in London
Published: February 10 2007 00:05 |
Last updated: February 10 2007 00:05

BP has signalled to shareholders that it will shake up the board in the wake of a series of problems that have hit its shares in the past two years.

Investors said the company had indicated that some of the six executive directors would go and long-standing non-executives would retire.

One said: “There are going to be further changes on the board. You are likely to see at least two new non-executive changes and there will be moves to shrink the executive side. There is a sense that the board is too big.”

BP refused to comment but a source close to the company said: “Any change would not be dramatic or sudden  it would be more of an evolution.”

Meanwhile, Lord Browne suffered a blow on Friday when a Texas appeals court ruled that attorneys for those injured in the deadly 2005 explosion at BP’s Texas refinery can question the oil group’s chief executive.

BP said the company was reviewing the opinion: “As we’ve said before Lord Browne doesn’t have any unique knowledge of the events leading up to the explosion.”

A report due soon on the Texas explosion from the US Chemical Safety Board is expected to be critical of BP’s performance.

Tony Hayward, who takes over as chief executive in August, is not expected to demand an immediate clear-out of top executives. But shareholders said the company had for months been trying to reassure them about its ability to resolve problems and board changes would follow.

The company’s standing has been hit by a series of troubles, including the Texas explosion, which killed 15 people; oil spills in Alaska; delays to its prestigious Thunder Horse project in the Gulf of Mexico; and investigations into its oil and gas trading activities in the US.

Lord Browne announced last month he would step down in July, 17 months before schedule.

But one investor said BP had acknowledged that failures could not be laid at one person’s door. “There is a recognition that this is not the failure of one person but the failure of a team.”

Another shareholder said: “The board is not stale but it does need refreshing.”

Senior directors at BP have indicated for some time that they thought the board was too big. By most UK standards the board, made up of 10 non-executives and six executives including Lord Browne, is large.

The company has also indicated to shareholders that it will make the link between safety, health and environmental issues and executive bonuses clearer.

Some of BP’s biggest shareholders have been concerned that remuneration of the management team appear to have been untouched by its US problems.

Two pension funds filed a motion on Friday in a court in Alaska to block the payout of $140m (£71.8m) to Lord Browne.

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http://www.ft.com/cms/s/a6f613e0-b8ab-11db-be2e-0000779e2340.html

Russia tightens grip on BP gas venture
By Catherine Belton in Moscowand Ed Crooks in London
Published: February 10 2007 02:00 |
Last updated: February 10 2007 02:00

TNK-BP, the Russian venture that is 50 per cent owned by BP, has been told it is in violation of its agreement to develop Kovykta, its vast east Siberian gasfield. The move is the latest sign of Russia's tightening grip on its energy resources.

The natural resources ministry gave TNK-BP three months to fix the violations or risk losing its licence. TNK-BP declined to comment.

At the end of last year, Royal Dutch Shell was forced to cede control of Sakhalin-2, its $22bn (£11.3bn) gas and oil project off the far east coast of Russia, to Gazprom, the state-controlled gas company, after months of pressure from the same ministry.

Gazprom has long been eyeing a stake in Kovykta. TNK-BP has made clear it would welcome it as a partner and has offered a majority stake in the project. But talks over Gazprom's participation appear to have reached deadlock.

Alexander Medvedev, Gazprom's deputy chief executive, last month said that a TNK-BP statement that it could reach a deal in the first half of the year was "over-optimistic". TNK-BP is no longer expecting an imminent resolution.

The mounting pressure over Kovykta is seen by many as part of a broader state plan to gain control of TNK-BP itself.

Analysts say TNK-BP's Russian shareholders are preparing to sell their stakes to Gazprom or Rosneft, the state-controlled oil company, this year when a moratorium on change of ownership expires.

TNK-BP's Russian shareholders have denied any such moves.

At the moment, Kovykta accounts for just over 1 per cent of TNK-BP's production but it has significant long-term potential.

By the middle of the next decade, it could be producing 30bn cubic metres of gas a year, which could be exported to energy-hungry China through a new pipeline.

For that, it needs an agreement with Gazprom, which has a monopoly on export routes out of Russia.

Under the terms of its Kovykta licence, signed in 1992, TNK-BP was due to produce 9bn cubic metres of gas this year. It will actually produce about 1.5bn, rising to perhaps 2.5bn by the end of the decade.

TNK-BP says producing that much would mean it wouldhave to flare off most of thegas because there is notenough local demand to make use of it.

However, an official at the natural resources ministry appeared to hold out hope that an agreement could be reached

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Anchorage Daily News
February 9, 2007

http://www.adn.com/money/industries/oil/story/8626849p-8519180c.html

Shell plans wells for Beaufort Sea
TESTING THE WATERS: The oil producer anticipates a summer start for exploration.
By ALAN BAILEY
Petroleum News
Published: February 9, 2007
Last Modified: February 9, 2007 at 02:13 AM

Shell Well Locations
http://www.adn.com/ips_rich_content/17-09Shell_CamdenBay.gif

Shell Offshore Inc. has filed plans the U.S. Minerals Management Service that call for drilling up to 11 exploration wells over the next two years in the Beaufort Sea.

The drilling would be concentrated in the Camden Bay area, offshore the eastern end of the North Slope and the Arctic National Wildlife Refuge.

The company also hopes to acquire some seismic data in the Beaufort Sea during the summer open-water season -- when the ice is gone -- but it is unclear whether any seismic will be shot in the Chukchi Sea to the west.

One Beaufort prospect is called Sivulliq; it once was known as Hammerhead. It lies due north of Flaxman Island on the western side of Camden Bay.

This prospect contains a known oil pool penetrated by two exploration wells Unocal drilled in 1985 and 1986. The federal mineral service estimates that the prospect contains 100 million to 200 million barrels of technically recoverable oil. But the oil pool has not been fully delineated.

Another prospect that could be targeted is called Olympia. It lies on the eastern side of Camden Bay about seven miles northwest of Barter Island near the village of Kaktovik. In the mid-1980s, it was known as the Erik prospect. It's never been drilled, according to Shell's exploration plan.


THREE WELLS IN 2007

At a recent Alaska Support Industry Alliance meeting, Rick Fox, Shell's asset manager for Alaska, said his company plans to initially evaluate the Sivulliq prospect by drilling three wells this summer. The Kulluk, a floating drilling platform Shell purchased last year, and the drill-ship Frontier Discoverer will drill the wells.

Shell is refurbishing the Kulluk in McKinley Bay, Canada. The Discoverer is coming from Singapore. It is being equipped for Arctic drilling and having its hull strengthened for operating in sea ice. Both vessels will move to the Beaufort Sea in time for the drilling season and will leave at the end of the season.

"If everything works out, we'll plan to have them over here for about an Aug. 1 start," Fox said.

Two ice-class support vessels -- an icebreaker and an anchor handler -- will accompany each drilling vessel. And Shell has built a new ice-class, 500-foot vessel for oil spill response to support its Beaufort operations, Fox said.

ASRC RTS will manage and operate the on-site oil-spill-response equipment and has been preparing Shell's comprehensive response plan. Fox emphasized, however, that modern drilling technology has significantly reduced the risk of an oil spill and that "our first line of defense is prevention."


BEAUFORT SEISMIC

Also this summer, Shell hopes to acquire some new seismic data for its Beaufort Sea leases, Fox said. Seismic testing involved shooting sound waves through the ocean floor to get a "look," using the echoes of those sound waves, at rock formations deep underground. Certain rock formation are more likely to hold oil than others.

The company had hoped to start acquiring the seismic data last summer, but difficult ice conditions prevented the work. Shell is researching how it might acquire seismic data during the winter, when ice is present.

As for the Chukchi, where Shell also would like more seismic data, "there is some question as to whether Shell Offshore Inc. or other operators will conduct seismic in the Chukchi in 2007," according to the exploration plan.


MARINE-MAMMAL MONITORING

Shell is also working with the National Marine Fisheries Service, the North Slope Borough wildlife department, Conoco Phillips and others to continue the marine-mammal monitoring program it operated during last summer's open- water season.

North Slope Natives in particular are concerned about how seismic tests and drilling might affect migrations of whales they hunt for subsistence food.

According to the exploration plan, Shell will station marine mammal observers on all of the vessels involved in its exploration program. The company may also conduct aerial surveys to monitor marine mammals in the area of its drilling.

Shell also proposes to try using unmanned aerial vehicles to augment the manned aerial surveys. Initially, part of the purpose would be to evaluate the application of drone technology in wildlife surveillance, following experiments already conducted into the use of the technology.

"It is not likely that a drone program (in 2007) would either replace or significantly reduce the anticipated manned aerial programs," the exploration plan says.

In the Chukchi Sea, a drone program might offer opportunities for more wide-ranging data collection in lieu of vessel-based programs, the plan says.

Arrays of acoustic recorders in the Beaufort and Chukchi seas will also help document the regional distribution of marine mammals. And Shell is conducting several studies into Arctic marine wildlife.


SUPPORT FROM WEST DOCK

Shell is negotiating the use of the West Dock on the Beaufort coast at the Prudhoe Bay oil field to support its drilling vessels. A 400-foot diesel supply vessel will support the operations. And service vessels will haul the various forms of waste from the drilling operations to Prudhoe Bay.

The company is contracting the use of a support base at Deadhorse, next to Prudhoe, and construction of it should be done by April 1. Flight operations will be based out of Deadhorse.

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http://www.adn.com/news/alaska/ap_alaska/story/8625414p-8517763c.html

Lawmakers call for financial pipeline accountability
By STEVE QUINN, Associated Press Writer
Published: February 8, 2007
Last Modified: February 8, 2007 at 06:00 PM

JUNEAU, Alaska (AP) - A bipartisan group of state senators plans to introduce a bill Friday designed to keep oil companies from deducting facility maintenance costs that are the result of neglect.

The bill essentially renews a narrowly failed amendment to the Petroleum Production Tax passed last year, which created loopholes that could make the state ultimately pay the costs of replacing improperly maintained equipment.

Lawmakers said they are concerned that BP PLC will use the current bill to pass the multimillion dollar costs of repairing miles of corroded Prudhoe Bay pipeline back to the state through deductions and tax credits.

Eight senators, led by Tom Wagoner, R-Kenai, say they want to make sure companies are held accountable for their maintenance practices.

"The state of Alaska should not be put in a position where the people of the state of Alaska and the state treasury is being penalized due to poor maintenance practices," Wagoner said.

BP spokesman Daren Beaudo said Thursday the company wants to reserve comment until it could read the bill.

Still, Beaudo took issue with characterizing the Prudhoe Bay pipeline leaks as neglectful, saying it should be the legal system that determines neglect.

"I do reject the notion there was neglect involved," Beaudo said. "I'm not aware of anyone who has made that conclusion. We thought we were doing what we needed to maintain the facilities on the North Slope.

"We realize we had some gaps," he said. "What we are doing in order to maintain a healthy oil business is we are spending capital to replace equipment that's reached its useful life."

No cost assessment was available for the bill, but Wagoner and other lawmakers say they fear losing "tens of millions of dollars" if it isn't approved.

Rep. Kurt Olson, R-Soldotna, said he plans to introduce a companion bill when the House meets Monday, and he's already received support for his measure.

"I have a dozen people so far and I haven't even tried and that's on both sides of the aisle," Olson said.

Under Wagoner's proposed bill, the Department of Revenue would determine whether the costs claimed are due to improper maintenance.

As a result, the legislation does not make the distinction between work done to fix poor maintenance and work to replace old materials.

"There may be some justification to that argument if in fact the state decides to allow capital costs (deductions) when they put new pipe in," Wagoner said. "But you have to take into account whether that new pipe would have been necessary had the proper maintenance been done on it."

Sen. Gene Therriault, R-North Pole, also tried to push this consideration into the state's new tax bill last year just a few days after BP partially shut down Prudhoe Bay, the nation's largest oil field, following the discovery of a small leak and fears of corrosion.

The company is now replacing 16 miles of pipeline in Prudhoe Bay, at a cost of about $250 million. Corrosion also was to blame for another leak - one that spilled more than 200,000 gallons - last March in a BP pipeline at Prudhoe Bay.

To avoid complete state subsidization, last year the Legislature did insert a late amendment to the Petroleum Production Tax. It calls for companies to pay a minimum out of their own pockets for their capital expenses, about 30 cents for every barrel of oil produced. North Slope oil rose $2 a barrel Thursday to $57.46.

But that concession was not enough protection for some lawmakers.

"Before PPT, these costs would never have been deducted," said Rep. Les Gara, D-Anchorage.

Gara voiced additional concern that BP can legally wait as long as two years before taking deductions for the Prudhoe Bay repairs.

"BP has every incentive to hide their intention on deductions as long as possible," Gara said. "They don't want people to see the glaring need for oil tax reform."

Joining Wagoner and Therriault in co-sponsoring the bill are Republicans Fred Dyson of Eagle River and Gary Wilken of Fairbanks; and Democrats Hollis French of Anchorage, Kim Elton of Juneau, Joe Thomas of Fairbanks, and Albert Kookesh of Angoon.

"This isn't a partisan issue," Wagoner said. "This is an issue about the state of Alaska and making sure the state is protected.

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Bellingham Herald
February 9, 2007

http://www.bellinghamherald.com/102/story/48426.html

PUBLIC SAFETY
Watchdog groups support bill on pipelines
Proposal would limit public access to data
SAM TAYLOR

A bill limiting public access to detailed pipeline information has the support of local safety groups, legislators and the parents of at least one child killed in a 1999 explosion in Bellingham.

A proposed amendment to the 2000 Pipeline Safety Act would exempt data about specific parts of a pipeline from public disclosure.

The state House of Representatives’ Technology, Energy and Communications Committee has passed the bill to the House Rules Committee. A vote has not been scheduled yet; the Senate has no companion bill.

Pipeline geographic information system data includes specific locations for pipeline valves, compressor stations and other potentially vulnerable areas of the pipes. While the amendment would exempt this information from public record, it would still allow local governments and first responders access to the information.

Critics contend the bill, HB 1478, will prevent citizens or watchdog groups from holding pipeline companies accountable and keeping themselves safe. Supporters of the bill say it will protect sensitive data about the underground lines while keeping important information public.

“I need to know if there is a pipe in my park that carries gasoline,” said Katherine Dalen, mother of Stephen Tsiorvas, who was killed in the 1999 Olympic Pipe Line Co. explosion. “Did I know that before the accident? Absolutely not, I had no idea.”

Local safety groups and parents pushed for the 2000 Pipeline Safety Act after an Olympic pipeline leaked in Whatcom Falls Park, leading to the explosion. Killed were 18-year-old Liam Wood and 10-year-old friends Stephen Tsiorvas and Wade King. Dalen said Thursday that the amendment would not hamper the public’s right to other critical pipeline information.

She said that the geographic information system data is generally too technical for the average citizen, and the information that will remain public is what’s needed to ensure public safety. She added that the 2000 law gave the public access to valuable information about the location of pipelines and whether they were being maintained properly.

The bill’s primary sponsor, Rep. Jeff Morris, D-Mount Vernon, who represents part of Bellingham and is chairman of the Technology, Energy and Communcations Committee, created the amendment with language taken directly from a position paper written by members of the Northwest Gas Association, a pipeline lobbying group. Rep. Kelli Linville, D-Bellingham, is a bill co-sponsor with several other legislators.

THE DEBATE

Dan Kershner, executive director of the Northwest Gas Association, said the detailed information is sensitive and can be used by terrorists or vandals to damage critical infrastructure of pipelines.

Work on the amendment has been several years in the making, with the governor-appointed Citizen’s Committee on Pipeline Safety voting this year to lend its support to the measure. The Washington Utilities and Transportation Commission, which regulates pipeline companies in the state, also supports the measure.

Amendment critic Ken Meyer of Seattle said limiting any information about pipelines will only hurt the people’s ability to protect themselves.

“The bottom line (is), knowing that there is a pipeline in your backyard is tantamount to worthless … unless you, or some expert you retain, can analyze the quality of the pipe’s design, construction, operation, and maintenance,” said Meyer, who worked on pipeline safety issues for the Department of Ecology in the 1990s.

But Carl Weimer, Whatcom County Councilman and executive director of the Pipeline Safety Trust in Bellingham, said that much of the information Meyer believes is in the GIS data is actually not there, and the public still has access to it in other forms that will remain public.

Weimer said the law will help ensure that critical data is protected and still allow the public access to maps that show where pipelines are. Annual reports and inspections of pipelines by the Utility and Transportation Commission will also remain public, Weimer said.

“You’ll still be able to find out how many leaks a pipeline might have had in a year,” Weimer said. Legislators and safety

Morris, lead sponsor of the bill, refused to speak with The Bellingham Herald about it. He said a recent editorial in The Herald and articles in other newspapers about the proposed amendment were inaccurate. Via e-mail Morris said he had nothing else to say over the phone than what he wrote in a statement.

“House Bill 1478 is supported by the regulatory agency that oversees pipeline safety, the UTC, a majority of the citizens commission that advises the UTC on pipeline safety, and the head of the watchdog Pipeline Safety Trust,” Morris wrote. “The only group opposing the measure is a powerful special interest group Allied Daily Newspapers, an organization that lobbies for the state’s newspaper publishers.”

The Bellingham Herald is a member of Allied Daily Newspapers of Washington.

Morris’ claim, however, is also inaccurate, as critic Meyer also testified in front of the TEC committee opposing the measure. But far more groups are supporting the measure than opposing it.

Linville said she supported the bill because it was important to protect the GIS data while at the same time making sure that adequate information about pipelines and their safety is available to citizens.

When asked if she supported an exemption that would prohibit a property owner from knowing if there was a specific valve or other sensitive piece of a pipeline near his or her property, Linville said that while she was not the author of the bill, it did concern her because a property owner should have a right to that information. She said she would probably look into it, but still supported the measure.

“I wouldn’t do anything that would keep the public less safe or take away their right to know,” Linville said.



Reach Sam Taylor at
sam.taylor@bellinghamherald.com   or call 715-2263

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Houston Chronicle
February 9, 2007

http://www.chron.com/disp/story.mpl/front/4539329.html

Front page
Exxon Mobil has no more doubts on warming
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

Oil behemoth Exxon Mobil Corp. has dropped any pretense of questioning whether global warming is real. Now the company is seeking to position itself as an active player in efforts to lower greenhouse gases.

"The appropriate debate isn't on whether climate is changing, but rather should be on what we should be doing about it," Kenneth Cohen, Exxon's vice president of public affairs, told reporters on a conference call Thursday.

The call came less than a week after an international panel of hundreds of scientists said new research showed global warming was "unequivocal" and that human activity was primarily responsible for the most significant factor in temperature change  greenhouse gases.

"Climate is changing. It's a serious issue. The evidence is there," Cohen said on the call, which was arranged in part to allow Exxon to state its position on the Intergovernmental Panel on Climate Change's report.

When pressed, Cohen said "there is no question that human activity is the source of carbon dioxide emissions," and emphasized that Exxon is working with various policy groups and universities to find ways to produce energy while lowering greenhouse gases.

Cohen's statements appeared to be the most definitive yet in the company's effort to show Exxon cares about climate change and wants to do something about it.

It's a far cry from former CEO Lee Raymond's rigid stance on the issue in the late 1990s, when he questioned science that linked fossil fuels to global warming. Raymond acknowledged in a 2000 speech that climate change caused by carbon dioxide emissions was a "legitimate concern."

'Certainly have mellowed'

Upon succeeding Raymond as CEO last year, Rex Tillerson labeled climate change a serious issue. He later said the company needed to soften its public image and better explain its stance on global warming.
"They certainly have mellowed somewhat," said Art Smith, chairman and CEO of John S. Herold, an energy research and consulting firm. "They took a pretty hard stance that everyone else was wrong about this."

Chris Miller, a global warming campaigner for Greenpeace, said Exxon had little choice but to embrace climate change as genuine because too much scientific data exists for the company to credibly say otherwise.

"It just became too difficult for them to say that with a straight face given everything we know," Miller said. "They are finessing this position, and they have done so since Tillerson took over."

Cohen, who oversees Exxon's charitable giving, also addressed Exxon's funding for think tanks.

The company came under fire when environmental groups said that one think tank that received Exxon funding, the American Enterprise Institute, had offered scientists $10,000 to critique the IPCC study. AEI said it was focused on global warming policy, not science.

But Cohen said Thursday that Exxon has stopped funding a "small handful" of think tanks involved in climate change policy discussions because the ensuing criticism was a distraction.

"We did that because we felt some of the attention being devoted to the issue was diverting attention from what we wanted to be focusing on," which Cohen said was a need for global action to reduce emissions.

Not focusing on renewables

In a speech last year, Tillerson promoted reducing emissions through coal-fired plants that spit fewer gases into the air and more fuel-efficient vehicles. The company also is studying the viability of carbon storage and dedicating scientists to find technologies to cut emissions.
Cohen said that's Exxon's focus because 80 percent of the world's energy comes from oil, natural gas and coal, a situation that isn't expected to change in the next 20 years despite the growth of renewables backed by government subsidies.

Sherri Stuewer, Exxon's global vice president of health, safety and environment, who joined Cohen on the call, said Exxon isn't seeking to pour money into renewables despite such efforts by its peers because they aren't currently viable without subsidies. Stuewer said Exxon has had solar and nuclear initiatives in the past that proved unprofitable.

"Our interest is in being in energy options that are successful," she said.

kristen.hays@chron.com 

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Wall Street Journal
February 9, 2007

Groups:
US Gulf Coast Refineries Need Tighter Air Regulations
DOW JONES NEWSWIRES
February 8, 2007 6:49 p.m.
 
WASHINGTON (AP)--Environmental activists on Thursday said more stringent air-quality regulations are needed for oil refineries along the U.S. Gulf Coast, a region densely populated with petroleum industry plants.

The Environmental Integrity Project blamed state-level regulations that are weaker than in other parts of the country, as well as lax oversight, for above-average levels of noxious emissions.

The Washington-based advocacy group also released a list of the top 10 most polluting refineries in the country, based on an analysis of 2004 emissions data from the Environmental Protection Agency.

Topping the list, with nearly 2.1 million pounds of carcinogens such as benzene and formaldehyde was BP PLC's (BP) refinery in Texas City, Texas, though the advocacy group said that number was skewed dramatically upward due to a one-time release of nearly 2 million pounds of formaldehyde in 2004.

Eric Schaeffer, director of the Environmental Integrity Project, said the high numbers from BP, compared with other companies, raise questions about whether oil refiners are reporting their emissions accurately to the government.

"There's a gap between what people are breathing and what companies are reporting," Schaeffer said.

But BP spokesman Scott Dean said the number resulted from a "sizable error" the company made in its 2004 data, which inflated its carcinogen results by at least 1.2 million pounds.

"We're working very hard to get real monitoring data that can give us some real numbers," Dean said. In addition, he said, BP is spending $300 million in upgrades to cut down on toxic emissions at Texas City.

The National Petrochemical and Refiners Association called the report "misleading." Specifically, the association said that while the EPA data count total emissions, they don't measure human impact. A better measure, the group said, is air quality stations around the country, which have shown declines in toxic air levels since the early 1990s.

Moreover, all of the refineries in the report are operating "well within" EPA-permitted levels, Charlie Drevna, the group's executive vice president, said. "We are making cleaner and cleaner burning products, whether it's gasoline or diesel, and we have also significantly reduced emissions," Drevna said.

Second on the list was Exxon Mobil Corp.'s (XOM) Baytown, Texas refinery. Third was privately held Koch Industries Inc.'s Flint Hills refinery in Corpus Christi.

Fourth was Delek US Holdings Inc.'s (DK) La Gloria refinery in Tyler, Texas, and fifth was Lyondell Chemical Co.'s (LYO) refinery in Houston.

Fred Green, vice president and chief operating officer of Delek Refining, said in an e-mailed statement that his company, which acquired the Tyler refinery in spring 2005, has installed new testing equipment and expects to report a "substantial reduction" in benzene emissions for 2006.

Environmentalists noted that California's stringent pollution regulations kept that state's refineries off the top 10 polluters list, which included six in Texas, three in Louisiana and one in Pennsylvania. California's strict clean-air rules are also one reason the state's motorists pay some of the highest fuel prices in the country.

Texas refineries spewed more than double the amount of carcinogens per barrel of oil than California refineries in 2004, the study found.

Several activists said the Environmental Protection Agency has not been aggressive enough under the Bush Administration in overseeing refinery pollution, and also said public officials in Texas and Louisiana have been reluctant to confront oil interests.

"There simply isn't the political will, in Texas anyway, to impose the kinds of regulations that California has," said Meg Healy, research director of the Galveston-Houston Association for Smog Prevention, an environmental group.

Jennifer Wood, an EPA spokeswoman, said in an e-mail the agency has entered into settlements covering nearly 80% of the country's refining capacity and is "committed to holding polluters accountable."

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Anchorage Daily News
February 8, 2007

http://www.adn.com/money/industries/oil/story/8624196p-8516672c.html

Problems continue to plague BP ships
MOORING BITTS: Three tankers had posts replaced after one broke off.
By WESLEY LOY
Anchorage Daily News
Published: February 8, 2007
Last Modified: February 8, 2007 at 03:12 AM

BP's new fleet of oil tankers, already dogged by cracked rudders and missing anchors, now has a new glitch.

Fleet managers have been forced to replace deck fixtures called mooring bitts on three of four ships after tests showed they were defective and one violently broke down.

Mooring bitts are stout metal posts around which ropes are lashed for tugging on ships or securing them to a dock.

On Sept. 12, the tanker Alaskan Navigator was approaching the dock in Valdez when a bitt on the starboard bow broke off as a tug boat pulled on a mooring line, according to people with the U.S. Coast Guard, the ship's operator and a Valdez-based oil-industry watchdog group.

When it broke, the heavy iron bitt shot over the side of the ship and plunked into the water.

Fortunately, no one was in the way when the bitt broke loose, said Cmdr. Michael Gardiner, captain of the port for the Coast Guard in Valdez.

"If you were standing near it, it probably would have scared you pretty good," he said. "It was a pretty big piece of metal flying through the air."

The ship's operator, Alaska Tanker Co. of Beaverton, Ore., used X-rays and other tests to determine that the failed bitt plus dozens more on three ships were defective and needed to be replaced.

The bitt problem is the latest bobble for the new fleet of $250 million double-hull tankers, the first of which began carrying North Slope crude oil to West Coast refineries in the summer of 2004.

In spring 2005, two of the ships -- built in a San Diego shipyard -- were laid up for weeks after cracks were discovered in their rudders.

And in December, two ships, including the Alaskan Navigator, each lost a 16-ton anchor -- they simply broke off -- as the tankers sailed across the rough Gulf of Alaska with loads of oil.

Managers with Alaska Tanker Co., whose ships carry oil exclusively for BP, said the rudders have been repaired and the anchors that cracked and fell into the sea have been replaced.

Anil Mathur, president of the tanker company, said the string of problems has been a disappointment. But he added that he believes the ships are fundamentally safe.

"If I did not, we would not be running them," he said.

John Devens of the Prince William Sound Regional Citizens' Advisory Council, a congressionally sanctioned and industry-funded watchdog group, called the glitches "troubling."

The new double-hull ships built by another oil company, Conoco Phillips, don't seem to be having the same kind of problems, he said.

The oil companies were required to replace their single-hull oil tankers with double hulls after the Exxon Valdez oil spill in Prince William Sound in 1989. Today, the shipping revolution is all but complete as most every ship now calling on Valdez has a double hull, a feature believed to reduce the risk of a catastrophic release of oil should, for example, a ship run aground on rocks.

In BP's defense, Devens said the company under federal law had to build its new ships in a U.S. shipyard and those yards don't have the same experience or modern construction techniques as much busier Asian yards.

"The facility that built the BP tankers, it would seem obvious that some of the materials they used were substandard," Devens said. "We don't blame BP for it."

He added that, to his knowledge, the problems aren't due to BP cost cutting.

The mooring bitt broke despite being rated to handle considerably more force than the tug was applying to it, Mathur said. An investigation found that the cast mooring bitts on three ships were too weak to remain in use, while the fabricated bitts on the fourth ship were OK, he said.

Mooring bitts are mounted all along the decks of the 941-foot tankers.

Twelve key mooring bitts on three ships have been replaced, but ultimately about 74 will be replaced, said Chris Merten, engineering superintendent with Alaska Tanker Co.

Gardiner, of the Coast Guard, said he would have been more concerned had the broken bitt been one of the "towing bitts" on the stern of the tankers. These bitts are bigger and stronger and are what tug boats hook to for pulling or stopping tankers in an emergency.

In shipping, it's not unheard of for a mooring bitt to snap off, Gardiner said.

The problem usually is a flaw in the metal that can't be seen from the outside and might not show up even with testing, he said.

The critical navigational, power and safety systems on BP's tankers have performed well, Gardiner said, and the company should be proud of the ships despite the problems with the bitts and other hardware.

"I don't think you would consider the whole class of vessels to be lemons," Gardiner said. "Anytime you have a new class of vessels, there's going to be things that you don't find until you actually get out and operate the vessel."

An Alaska Tanker Co. e-mail provided by the Regional Citizens' Advisory Council detailed an unexpected engine shutdown on the Alaskan Navigator -- the same ship that lost the mooring bitt -- as the vessel left the dock Nov. 28 at Cherry Point, Wash.

The vessel "was not in danger" and the source of the problem was fixed, the e-mail says. Afterward, the company set a new policy that any maneuvering tanker must have at least three of its four engines running, not just two.

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

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Wall Street Journal
February 7, 2007 pm

BP Ombudsman To Probe Pipeline
Poor-Maintenance Allegations
DOW JONES NEWSWIRES
February 7, 2007 5:08 p.m.

ANCHORAGE, Alaska (AP)--BP PLC (BP) is looking into allegations by a long-time oil industry watchdog, including a claim that a company employee substituted water for more expensive chemical agents used to prevent corrosion in its Prudhoe Bay pipelines.

The company ombudsman, retired federal judge Stanley Sporkin, said Wednesday he has assembled a team of engineers and attorneys to investigate the allegations raised against BP last week by long-time industry critic Chuck Hamel.

"We're going to do a very solid investigation, I can assure you that," Sporkin said from his office in Washington, D.C. "I don't engage in witch hunts. One of my most important priorities is to be absolutely fair to everyone."

Hamel said the evidence for the allegations comes from an oil field employee, whom he would not name. Hamel said he passed along "hard evidence" of the substitutions to an investigator with the Environmental Protection Agency in Seattle.

The agency is conducting a criminal investigation into BP's management practices at Prudhoe Bay and could not comment on the information from Hamel.

"During an ongoing criminal investigation, there's not a lot we can say," EPA spokesman Mark MacIntyre said.

BP manages the oil field, North America's largest, on behalf of its fellow owners, ConocoPhillips and Exxon Mobil Corp.

London-based BP created the ombudsman position in September, a month after a leak in poorly maintained pipelines led to the partial shutdown of production at Prudhoe Bay. The shutdown occurred several months after a corroded transit line resulted in the biggest spill in the history of the field. As much as 267,000 gallons of crude leaked.

The ombudsman independently investigates employee and public complaints regarding BP and shares the results with managers.

"Whenever issues are raised by employees or folks like Mr. Hamel, we always look into them," said BP spokesman Daren Beaudo. "We take these issues very seriously."

Sporkin said it is up to the company to decide whether to publicize results of the investigation.

Hamel is a former shipping broker from Virginia who frequently publicizes information from whistle-blowing employees in Alaska's oil industry.

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Anchorage Daily News
February 7, 2007

http://www.adn.com/money/industries/oil/story/8622290p-8514885c.html

BP broke rules, one critic says
PRUDHOE: A letter to a lawmaker says company
scrimped by adding water instead of chemicals to pipes.
By ELIZABETH BLUEMINK
Anchorage Daily News
Published: February 7, 2007
Last Modified: February 7, 2007 at 02:09 AM

Hamel Letter to US House Energy and Commerce Committee
http://www.adn.com/static/images/graphics/hammel_letter.pdf

North Slope oil company BP substituted water for corrosion-inhibiting chemicals in Prudhoe Bay pipes and had a policy of allowing some equipment to fail before replacing it, a long-time North Slope oil industry watchdog asserts.

BP's motivation was to save money, Chuck Hamel wrote in a letter late last week to U.S. Rep. John Dingell, chairman of the House Energy and Commerce Committee.

Alec Gerlach, a spokesman for Dingell, said this week the congressman doesn't plan to respond to the letter. He declined to say why. But he added, "Just because we're not responding doesn't mean we're not taking a look at it."

Pipeline corrosion at the giant Prudhoe Bay oil field caused the North Slope's largest oil spill ever last winter and, after another leak in August, led to the temporary shutdown of half of Prudhoe's production.

BP runs Prudhoe Bay on behalf of itself and other oil companies, and Congress and others have faulted BP for failing to stay on top of corrosion in the 30-year-old oil field.

BP Alaska spokesman Daren Beaudo said the company takes Hamel's new allegations seriously and has asked BP's ombudsman, retired federal judge Stan Sporkin, to investigate them. "We will await his findings and act if actions need to be taken," Beaudo said.

Though Dingell's office isn't responding to Hamel's new allegations, state officials were already investigating at least one of them.

The state Department of Environmental Conservation said Monday it is investigating a mid-December leak of about 3 barrels of crude oil and 6,580 barrels of water from a tank used to skim oil from water that comes up wells with oil. BP had listed the tank as "out of service" in a document filed with the state, DEC officials said Monday. Yet the tank was in service when the accident happened.

"It's automatically something that gets our undivided attention," said Leslie Pearson, DEC's program manager for spill prevention and emergency response.

In his letter to Dingell, Hamel claimed the December spill has resulted in many oil wells being shut down, cutting North Slope production by a projected 50,000 barrels a day.

But BP and state officials said that's not true. They said the spill resulted in no production loss because BP switched to using another tank of the same size already on site.

Hamel's relationship to Alaska oil goes back over 20 years. At one time he was a broker for oil shipments, but for two decades he has been the industry's loudest and most effective critic.

From his home in Alexandria, Va., he has accused the industry of excessive air and water pollution and retaliating against whistle-blowers who raised safety issues, among other charges. His efforts have led to heightened regulatory oversight, costing the Alaska oil industry tens of millions of dollars.

But he hasn't prevailed on every accusation. State regulators rejected his claim that the industry sold him watered-down oil when he was a broker. And courts ruled against him when he charged that Exxon cheated him on some valuable oil leases he once owned.

Some of Hamel's newest claims have been borne out. In the last few days, the company that runs the 800-mile trans-Alaska oil pipeline verified his claim that it lost a piece of a high-tech cleaning device in the pipeline about six weeks ago. He was also correct that DEC was investigating the BP tank that leaked while it was listed as out of service.

His most serious claims haven't been verified.

For example, Hamel said this week he has "hard evidence" that BP has substituted water for corrosion inhibitors. In his letter to Dingell, he said that information was provided to him by a former BP employee.

To save money, BP repeatedly ordered too little anti-corrosion chemicals for pipelines from oil wells, Hamel said in an interview. He said he couldn't say how long the substitutions occurred but corrosion crews would run out of the chemical each fall, then place water instead in the chemical reservoirs at each well.

He said he gave the information he obtained to a federal criminal pollution investigator in Seattle.

The investigator, Scott West of the Environmental Protection Agency, was out of the office Monday and Tuesday, according to his phone message, and could not be reached for comment.

The DEC is aware of that allegation as well.

"I suspect that as time allows we'll take a look at it," Pearson said, noting that the DEC is already wrapped up in four different North Slope pipeline-related investigations resulting from last year's pipeline leaks.

Hamel asked Dingell to look into other pipeline problems.

These include:

• An alleged 1990s-era "Demolition Maintenance Program" for BP supervisors that instructed them whenever possible to refrain from replacing deficient equipment until it failed.

• Chronic ongoing equipment problems at the trans-Alaska pipeline's Pump Station 9 near Delta Junction, caused by what Hamel termed "design blunders."


Daily News reporter Elizabeth Bluemink can be reached at ebluemink@adn.com or 257-4317.

Oil watchdog's allegations

• BP saved money by substituting corrosion-inhibiting chemicals with water in pipelines at wellhead injection points.

• BP suffered production losses due to a leak at a Prudhoe Bay tank in December. (BP and state officials assert no production was lost.)

• In the 1990s, BP instructed Prudhoe Bay supervisors to let deficient systems run until they failed as a cost-saving measure.

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Houston Chronicle
February 7, 2007

http://www.chron.com/disp/story.mpl/business/4532258.html

BP lowers production projections
Oil giant faces change in leaders while profit falls
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

Earnings trend Outgoing BP chief John Browne may have sought to ease his successor's transition by slashing production growth projections for the next several years, analysts said Tuesday.

The news that production would be flat  a reversal from 4 percent annual growth targets  came as the company announced a 22 percent drop in its fourth-quarter profit amid lower oil and natural gas prices and increased spending to improve safety.

BP also announced a 1.3 percent drop in year-end 2006 profit despite record-high oil prices that surpassed $77 a barrel last summer.

"Overall, '07 will be a year to get back on track," Browne said Tuesday.

John Parry, an analyst with John S. Herold, called the lower production projection "a dose of reality" for the market six months before BP exploration and production head Tony Hayward succeeds Browne as CEO.

"I think they didn't want to have him climb too steep a ladder to please the investment community," Parry said. "They decided to set Tony Hayward up with less of an obstacle course to achieve."

Hayward called 2006 "a disappointing year" with production that fell 5 percent to 3.8 million barrels of oil equivalent per day.

An oil spill prompted the temporary shutdown of half the production at the Prudhoe Bay, Alaska, oil field BP operates. North Sea operations underperformed. And the company faces continued delays in getting two key Gulf of Mexico oil platforms on line.

Addressing problems

The incoming CEO's future includes addressing fallout from those problems as well as implementing an independent review panel's recommendations for improved safety at BP's U.S. refineries.

Last month, Browne announced he had moved his 2008 exit from the company to July of this year. Days later, the panel chaired by former Secretary of State James A. Baker III released a harshly worded report that criticized BP for safety lapses at its U.S. refineries.

The report stemmed from the panel's investigation of BP refinery safety in light of a 2005 explosion at the company's Texas City plant that killed 15 people.

On Tuesday, Browne reiterated BP's commitment to consult with the panel on how to implement its 10 recommendations, including the appointment of an independent monitor.

"I think we are in the early stages of transforming BP into a leader in process safety as the panel recommends," Browne said.

Citigroup analyst Jonathan Wright said in a research note Tuesday that investors may suspect that BP "kitchen-sinked" production expectations in anticipation of Hayward's ascension, but the company's revised guidance for volume growth "is now at a similar level to Royal Dutch Shell, i.e. anemic."

BP expects production to reach 4 million barrels of oil per day equivalent by 2009  the same level as 2005  and 4.3 million barrels of oil per day equivalent by 2012. The company noted that it replaced 113 percent of its reserves "organically" last year, or without having to make acquisitions.

"With no real growth or valuation advantage relative to its peers, it is difficult to see relative outperformance unless the company can start delivering positive surprises relative to expectations," Wright said.

Holdup on platforms

BP's holdups in getting its Thunder Horse and Atlantis platforms up and running in the Gulf will contribute to reduced production expectations.

Thunder Horse, the bigger of the two oil platforms, originally was scheduled to go on line in 2005. That date has been pushed to 2008 because of delays stemming from hurricane-related repairs and the failure of a piece of equipment that controls the flow of oil and natural gas from multiple wells.

Atlantis is now expected to go on line at the end of 2007 instead of this summer because the company chose to make a more "realistic estimate," BP spokesman Neil Chapman said.

Also Tuesday, BP said 2007 capital spending would rise about $1 billion to $18 billion because of increasing costs to find oil and gas. The company aims to spend $1.7 billion annually to improve refinery safety.

In the quarter, BP earned $2.9 billion, down from $3.7 billion in the same period of 2005. For the year, the profit was $22 billion, down from $22.3 billion in 2005.

Quarterly revenue was $63.8 billion, up from $62.8 billion in the prior-year period. Revenue for the year was $274 billion, up from $245 billion in 2005.

kristen.hays@chron.com

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Wall Street Journal
February 7, 2007

BP's Next Slogan: 'Beyond Probes'
Peter Sutherland Faces Tough Task at Oil Titan After Scandal, Missteps
By CHIP CUMMINS and CARRICK MOLLENKAMP
February 7, 2007; Page C1

LONDON -- For years, Peter Sutherland's most prominent public role as chairman of BP PLC was hosting the company's annual meeting. But after a run of oil spills, deadly accidents and an energy-trading scandal at BP, the 60-year-old former rugby player has rushed into the scrum.

Last year, the Irish politician and banker forced Chief Executive John Browne to publicly pin down his retirement date. After Lord Browne's surprise decision last month to depart a year and a half earlier than planned, Mr. Sutherland must now buff BP's image and manage the company's first executive-suite transition in more than a decade.

 
Despite soaring oil prices, its shares rose just 4.5% in 2006, compared with a 36% rise by Exxon Mobil Corp. and 15% at Royal Dutch Shell PLC. Yesterday, the company reported fourth-quarter net income fell 22%, in part reflecting lower production and lower natural-gas prices.

BP, meanwhile, faces U.S. criminal probes on three fronts -- corrosion and oil spills in Alaska; a March 2005 refinery blast that killed 15 in Texas; and its energy-trading practices, with federal officials alleging BP traders manipulated propane markets in 2004. BP denies manipulating markets and says it is cooperating with investigators on all three inquiries.

Mr. Sutherland's higher profile also underscores a trend that goes beyond BP: a shift in the boardroom dynamics at many of Europe's biggest publicly traded companies. Nonexecutive directors here have in the past been criticized for leaving too much decision-making in the hands of powerful executives. Now, many firms are moving to shore up their boards with strong and independent directors.

Until an accounting scandal rocked Shell in 2004, Shell's British holding company had as its chairman a professor of geology. After the scandal, it recruited Jorma Ollila, former chief executive officer of Nokia Corp., as chairman. Unilever appointed an outside chairman last month to cap a restructuring at the Anglo-Dutch consumer-goods giant.

Mr. Sutherland's mission at BP has always been to establish a "robust" and independent board structure, he said in a recent interview. After stints as Ireland's attorney general and Europe's competition czar, Mr. Sutherland took over negotiations known as the General Agreement on Tariffs and Trade in Geneva in 1993. There, he clinched the Uruguay Round, a pivotal trade agreement that set the stage for today's World Trade Organization.

To get the accord passed, he sometimes kept negotiators at the table late into the night and nailed down agreements on sections of the 22,000-page document with the bang of a wooden gavel. The deal came together after seven years of negotiations, and the gavel sits on his desk at his office in London, where he serves as chairman of the arm of Goldman Sachs Group Inc. that oversees Europe, the Middle East and Africa.

 
"His big secret is combining great charm with great directness," says fellow Irishman Charlie McCreevy, the European Union commissioner in charge of market regulation. "He can be exceptionally tough."

In 1995, he rejoined Goldman Sachs, where he had previously worked as an adviser. Eugene Fife, then head of the firm's London office, recruited him after they met on a London-to-New York flight. Former and current Goldman employees say Mr. Sutherland gave the bank a lift when it was trying to break into Europe.

"Peter was just ideal" for winning business away from London's big merchant banks as well as European financial firms, says Peter Weinberg, who once ran Goldman's European operations. He brought with him a stable of high-level contacts. He is close to Italian Prime Minister Romano Prodi. More recently, he accompanied former Goldman CEO Henry Paulson on trips to China and Russia before Mr. Paulson became treasury secretary last year.

He also helped forge a relationship between Goldman and Mittal Steel Co. That paid off when Mittal hired Goldman as lead banker in its $39 billion takeover of Arcelor SA last year.

In 1995, he joined BP's board for the second time and became nonexecutive chairman in 1997. For years, Mr. Sutherland and Lord Browne got along well privately, say people who know the two. They share a fondness for cigars and opera. The portly and sometimes-rumpled Mr. Sutherland moves easily in London's clubby business world. That contrasts with the more formal public style of the slightly built and immaculately tailored Lord Browne.

As chief executive, Lord Browne transformed the company through aggressive deal making, supported quietly from the sidelines by Mr. Sutherland and his fellow directors. "John Browne clearly was the guy running the company, and I was there to run the board," he says.

But private divisions between the two over Lord Browne's departure plans spilled into the open last year. Lord Browne had long been set to retire in 2008 at age 60, BP's customary retirement age. Media reports speculated that he might stay on longer. Merrill Lynch at the time even said Lord Browne's retirement posed a "potential medium-term risk" for the company.

In a meeting last July at Mr. Sutherland's BP office, Mr. Sutherland told the CEO to put a stop to the speculation. That conversation leaked to the British press, triggering fresh speculation about a split between the two and about BP's succession.

The following week, Lord Browne confirmed he would step down as planned at the end of 2008, but played down any rift. The two had a "good and vigorous give and take" about many BP matters, he said in a news conference at the time. Mr. Sutherland was annoyed by the July leak, but he says he doesn't "bear any grudges."

Once Lord Browne confirmed plans to step down in 2008, Mr. Sutherland and the board wasted little time finding a successor. In December, they agreed on Tony Hayward, a top Browne lieutenant. Shortly after, board members and Lord Browne agreed that a two-year transition was too long. Early last month, Lord Browne said he would step down this July.

In a news conference yesterday, Lord Browne said the company was learning from its missteps last year. "BP can and will emerge from this testing period a stronger and better company," he said.

The media frenzy surrounding the succession planning was unfortunate, Mr. Sutherland says. Still, he was always clear that "the board should not be caught in a position where it hadn't done its job," he says.

Write to Chip Cummins at
chip.cummins@wsj.com  and Carrick Mollenkamp at carrick.mollenkamp@wsj.com



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BP Hurt by Low Output, Prices Earnings Decline 22%;Spending Outlook Lifted Amid Problems in U.S.
By BENOÎT FAUCON
February 7, 2007; Page C6

LONDON -- BP PLC, which is struggling with operational and governance issues, posted a 22% decline in net profit for the fourth quarter, hurt by lower output and declining natural-gas prices.

The United Kingdom company also raised its outlook on capital expenditure this year and lowered its medium-term output target as it tries to address problems in its U.S. operations.

BP said capital spending would be around $18 billion in this year, up from $16.9 billion in 2006, excluding acquisitions. That is significantly higher than forecasts it gave last year of $16 billion for 2008, with an annual increase of $500 million from 2006 to 2008.

The company said net profit fell to $2.88 billion from $3.69 billion a year earlier. Revenue fell 1.7% to $62.53 billion from $63.61 billion.

The results follow Chief Executive Officer John Browne's announcement last month that he will leave 17 months ahead of schedule, after transforming the company into a profit machine from a near-bankrupt laggard during his 12-year tenure as CEO. His departure comes as BP is reeling from a string of U.S. probes into a deadly Texas City, Texas, refinery blast and heavy corrosion in an Alaska pipeline. A company spokesman on Monday denied any link between the early exit and the inquiries.

Lord Browne will be succeeded in August by Tony Hayward, the head of exploration and production who oversaw BP's expansion trail into the U.S. Andy Inglis, a veteran of the company's upstream business, will succeed Mr. Hayward.

"The fourth-quarter result reflects the recent declines in the overall price and margin environment, as well as operational factors and increased safety and integrity investments," Lord Browne said.

BP, whose Thunder Horse platform in the Gulf of Mexico is set to start up by late 2008, lowered its 2007 output forecast.
The company has announced a spending increase on its U.S. refining assets to $1.7 billion a year from this year to 2010 from $1.2 billion in 2005 to improve safety and reliability. It also plans to spend more than $550 million in the next two years on "integrity management" in Alaska.

BP realized an average price of $40.10 a barrel of oil equivalent in the period, down 10% from last year, as a 5% rise in realized crude-oil prices was offset by a 30% drop in realized gas prices.

The latest results include charges and gains that combined for a net nonoperating charge of $152 million. The company had a net nonoperating charge of $553 million in the fourth quarter of 2005, largely because of changes in the value of natural-gas contracts and in accounting standards.

BP's output averaged 3.84 million barrels of oil equivalent a day in the quarter, down 5% from 4.02 million barrels a day a year earlier. Divestments and lower entitlements under production-sharing deals weighed down production, it said.

Production this year is expected to be between 3.8 million and 3.9 million barrels a day, stable or slightly lower compared with last year's production of 3.93 million barrels a day. BP said it expects to produce more than four million barrels a day by 2009, assuming an oil price of $60 a barrel.

Mr. Hayward linked the lowered production forecast to a tight industry supply chain, an increased focus on safety and operational integrity, and a lower entitlement to crude under production-sharing agreements if prices are at $60.

He also said BP lowered its output target because of a delay in two U.S. Gulf of Mexico projects. The Thunder Horse platform is scheduled to start up by the end of 2008, three years later than initially planned, and Atlantis will start up by the end of this year instead of last year as intended. Thunder Horse has production capacity of 250,000 barrels of oil and 200 million cubic feet of gas a day, and Atlantis can produce 200,000 barrels of oil and 180 million cubic feet of gas a day.

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

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UPDATE: BP:
Thunder Horse Project To Start Up By End 2008
DOW JONES NEWSWIRES
February 6, 2007 6:20 p.m.
(Adds comments from analyst, closing stock price)
 
LONDON (Dow Jones)--BP PLC's (BP) Thunder Horse oil and gas project is due to start up by the end of 2008, the company's designate chief executive, Tony Hayward, said Tuesday.

BP had previously said the project wouldn't start before mid-2008.

The start of production at the company's Thunder Horse field in the Gulf of Mexico was postponed from 2005 to 2008, after the offshore platform was damaged due to a technical fault as a hurricane approached.

Thunder Horse - which will produce hydrocarbons from a depth of 6,000 feet - is designed to process 250,000 barrels of oil and 200 million cubic feet of gas per day, BP said.

Hayward made the comments at a press conference following the announcement of BP's fourth-quarter earnings. He will replace current BP Chief Executive John Browne in August.

Earlier Tuesday, BP posted a 22% drop in net profit for the fourth quarter, hurt by lower output and declining natural gas prices and refining margins.

BP's shares closed at $63.25, down 54 cents.

Hayward also said the start-up of Atlantis, another Gulf of Mexico project, is now due by the end of 2007. The company had previously said production was scheduled to start in the second half of the year. The platform's planned capacity is 200,000 barrels of oil and 180 million cubic feet of gas a day.

About Thunder Horse, Hayward said "it will happen." The project is now three years behind the original schedule.

Thunder Horse is "something that hasn't been done before...We probably pushed the technology envelope a little bit too far," he added.

Hayward said the new guidance, more cautious than previously announced, was largely due to supply-chain issues, with the oil services sector now running at full tilt. "There was no new incident. It's just recognizing the reality of the industry today," he said.

Thunder Horse's troubles are representative of an industry that has a critical shortage of technical expertise and is facing longer delays as a result, said Standard & Poor's equity analyst Tina Vital. "Thunder Horse is one of the most complex field developments in the world," she said. "The project is being delayed by the limitations of the system."

Even though delays can be bothersome, caution is the right approach in dealing with state-of-the-art projects like Thunder Horse, Vital said. "They're doing the correct thing by taking their time."

Speaking on the sidelines of the press conference, Hayward also said the company will decide in 2008 whether to go ahead with an expansion plan for its 60,000 b/d Clair oil field in the U.K.'s North Sea.

 Company Web site:
http://www.bp.com  

 -By Benoit Faucon and Angel Gonzalez, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com 

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Guardian Unlimited
February 7, 2007

http://business.guardian.co.uk/story/0,,2007230,00.html

Safety failures and delays force BP to slash targets
Terry Macalister
Wednesday February 7, 2007
The Guardian

BP has been forced to slash some production targets by up to 20% and increase capital expenditure as it moves to tackle safety and output problems in the aftermath of accidents in the US.
Oil and gas output was now expected to fall or be flat until 2009, when it would grow only marginally from 3.9m to 4m barrels a day - compared with previous targets of just under 5m - the company told a disappointed City yesterday.

"While this new conservative guidance is a reduction on what we have said previously, it is important to remember that the reserves have not gone away, their production will merely be delayed," said Tony Hayward, the head of exploration and production who becomes group chief executive when Lord Browne steps down on July 31.
"We have further increased our focus on safety and operational integrity, and will in some cases deliberately slow the pace of our activity in order to improve safety and efficiency," he added, pointing to potential lower production from the North Sea.

The production outlook has already been hit by delays in output from the Atlantis and Thunder Horse fields in the Gulf of Mexico, divestments of lower-quality producing assets and a reduction in volumes from production-sharing agreements because of higher oil prices.

The company said it was also suffering from a shortage in the supply chain which was forcing prices up by 40% in some cases year on year. Increased demand for staff meant many inexperienced workers coming into the industry, which could also affect safety levels. Capital expenditure is being raised from $16.9bn (£8.6bn) in 2006 to $18bn for 2007.

BP was severely criticised over safety at the Texas City refinery in the US by the Baker panel, a body established by the company to assess its performance in the aftermath of an explosion that killed 15 and injured 150 workers.

Mr Hayward said he would take over from Lord Browne "a great company with great assets and great people" but needed to put emphasis on operational integrity. "My priority is simple and clear, it is to implement our strategy by focusing like a laser on safe and reliable operations." The future leader of the company was sitting alongside Lord Browne as BP reported annual replacement cost profits of $22.25bn - up 15% from 2005 on the back of strong oil prices. The fourth quarter income came in at $3.89bn, down 12% on the same period of 2005.

Giving his last annual results presentation, Lord Browne said the company had learned and responded to the Baker panel and other problems in the US. He did not accept that there was any systemic failure at BP America, involving pipeline spills in Alaska, suspected propane trading irregularities and the disaster at its Texas City plant. He insisted he had no regrets. "My bias is not to have regrets. Things are the way they are. You have got to be a concrete realist," he said.

But Lord Browne also sought to defend his legacy, saying the staff at BP had built a "truly great" company and this should not blind people to its successes. "Some report cards were better than others...when you step back you can see what has been accomplished. There has been a lot of noise and talk about BP this last year. A lot of this has obscured many of the great accomplishments made by our staff around the world," he said.

Citigroup analyst Jonathan Wright said BP's cautious growth forecasts gave the appearance it was getting bad news out of the way before Mr Hayward's formal takeover. "In some respects the market will assume BP has 'kitchen-sinked' expectations ahead of the new chief executive taking the reins. Nevertheless, the market will need to wait another year for growth and beyond that growth expectations are now in line with Shell," Mr Wright said.

Another investment house, Investec Securities, described the BP results and trading update as "adequate but underwhelming". "Although the results are slightly ahead of market expectations, a modest 10% dividend increase and a scaled-back production growth expectation demonstrates that BP is also wrestling with industry-wide pressures," analyst Tony Eccles said.

BP shares fell 6.5p to 535p in a rising market.

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Financial Times
February 7, 2007

http://www.ft.com/cms/s/e77e6b7c-b650-11db-9eea-0000779e2340.html

BP clears the decks for Hayward with
procession of bad news
By Ed Crooks, energy editor
Published: February 7 2007 02:00 |
Last updated: February 7 2007 02:00

"My bias is not to have regrets," Lord Browne said yesterday.

This followed his decision last month to step down as chief executive of BP at the end of July, 17 months earlier than planned. "Things are the way they are; one has to be a concrete realist."

From such an intensely cerebral man, that wasprobably as much of anoutpouring of emotion as one could have expected, even at his last full-year results presentation after 12 years at the top.

But he did sound a little wistful as he reflected on BP's "great people, great assets", adding: "I know Tony Hayward will look after these and put his own stamp on the future of BP."

Yesterday showed how far the company is going to smooth Mr Hayward's passage into the job.

It is standard practice for new chief executives to get the bad news out as soonas they arrive; BP is doingit while the old chief executive still has nearly six months to go.

BP's new guidance onproduction was the big shock in yesterday's strategy update. On Monday, Goldman Sachs put out a note changing its recommendation on BP from neutralto buy. It estimated that2009 production would be 4.515m barrels of oil equivalent per day.

Yesterday, BP said it expected that year's production to be only 4m b/d - less than 2 per cent higher than last year's 3.926m.

A year ago, the company was talking about 4 per cent average annual production growth and suggesting it could reach 4.85m b/dby 2009. The new guidanceis 18 per cent less than that.

In part, the diminished expectations for production growth reflect BP's problems.

Mr Hayward said his priority was simple and clear: "To implement our strategy by focusing like a laser on safe and reliable operations."

It seems that focus will, to some degree, come at the expense of growth. Mr Hayward said BP would "in some cases deliberately slow the pace of our activity to improve safety and efficiency".

That constraint bites particularly because of the shortage of skilled people in the industry. BP and itssubcontractors have been recruiting a new generation of people into the industry, after years of job losses, and newer people need to go more slowly, it has learned.

The search for oil in ever more hostile environments is also taking BP to the "technological frontier", Mr Hayward said.

An example is its Thunder Horse platform in the deep water of the Gulf of Mexico, which was last year put back another 18 months to the second half of 2008.

The delay to that and the Atlantis project, also in the Gulf of Mexico, will cost 100,000 b/d from 2008's production.

But there is also an element in the new figures that is entirely presentational. A higher oil price means that countries in which BP operates take higher volumes of oil under their production-sharing agreements, cutting BP's share.

The previous guidance was based on an oil price of $40 a barrel; the new guidance is based on $60 a barrel. That has the effect of cutting 300,000 b/d from expected production in 2009.

Whether $60 is a more realistic estimate of the oil price in 2009 than $40 is open to debate. But using the higher assumption creates more room for pleasant surprises in the years to come.

As Mark Ianotti of Merrill Lynch put it, there is a "distinct possibility that BP has taken the market to a place where it can now (forthe first time in two years) exceed expectations".

Amid all the bad news surrounding BP, its success in finding oil stands out. Last year it replaced 113 per cent of its production with booked reserves and it has made important discoveries at Kaskida in the Gulf of Mexico, the deep water off Angola and the Nile Delta in Egypt.

Unlike Royal Dutch Shell, its closest rival, BP has not invested in high-cost sources such as oilsands and can make good returns at a lower level of the oil price.

With those advantages in place and the decks cleared for him, Mr Hayward has a fair chance to turn BP's performance and reputation around. It is up to him now to take it.


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http://www.ft.com/cms/s/0c2c8ffe-b650-11db-9eea-0000779e2340.html

BP's clear-out
Published: February 7 2007 02:00 |
Last updated: February 7 2007 02:00

Apart from a new leather chair, an incoming chief executive often reserves space in his new office for one other vital piece of equipment: a kitchen sink.

Tony Hayward, the head of BP's upstream business, who is due to take over running of the group from Lord Browne this summer, seems to have had his fitted early. As with Royal Dutch Shell's fourth-quarter results last week, BP's 2006 numbers yesterday were overshadowed by a cut in targets. BP now forecasts upstream output of about 4m barrels of oil equivalent per day in 2009, against earlier expectations of about 4.6m.

The breakdown of that gap is interesting. In particular, about half is owing to an increase in BP's reference oil price for production in the next few years from $40 a barrel to $60. This cuts the output claimed from fields operating under production sharing agreements. BP, historically conservative on its oil price assumptions, does not really believe crude will average $60 to the end of the decade. But it wants headroom. Lord Browne emphasised the new targets should be regarded as a floor.

BP's premium rating has been battered since 2005, so, tactically, it makes sense to clear the decks. In that respect, BP's position has come more into line with Shell's. One important difference is that BP has barely raised its capital expenditure forecast for 2007. So while it has lost its growth advantage over Shell, it continues to enjoy a better free cash flow yield. Lower production forecasts have thinned that cushion, which is also vulnerable to any further falls in oil and gas prices. So the potential for a re-rating of BP's stock any time soon looks limited.

Still, at least BP can now reasonably hope to do something it has struggled with for the past two years: deliver some pleasant surprises to investors.

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http://www.ft.com/cms/s/0fbb3c06-b650-11db-9eea-0000779e2340.html

BP cuts its production forecasts
By Carola Hoyos and Ed Crooks
Published: February 7 2007 02:00 |
Last updated: February 7 2007 02:00

BP sharply reduced its expectations of future production yesterday, as its new chief executive promised to focus "like a laser" on safe and reliable operations.

Europe's second-biggest oil company said it hoped to produce 4m barrels a day of oil equivalent by 2009; 18 per cent less than in its previous guidance a year ago.

The cut in growth expectations was another blow for the company, affected by a series of safety and operational failings during the past two years.

Analysts said more cautious guidance about future production would help Tony Hayward, new chief executive who takes over on August 1, surprise markets with good news subsequently.

Oil spills in Alaska, investigations of gas and oil trading in the US, delays to large projects in the Gulf of Mexico, and the explosion at the Texas City refinery in 2005 that killed 15 people, contributed to a loss of confidence.

Last month Lord Browne, chief executive for nearly 12 years, said he would step down at the end of July, 17 months early.

In his last presentation of full-year results, he said in his time at the head of BP "we've built a truly great company", adding: "When you step back you can see what has been accomplished." Asked about his decision to go early, he said it was "too early to reflect on the past".

Mr Hayward, a long-time BP staffer who was head of exploration and production, said his priority was "simple and clear". BP had to implement strategy "by focusing like a laser on safe and reliable operations".

He cited fresh focus on safety and efficiency, as well as supply constraints including shortages of trained personnel, as reasons why production fell below expectations in the past two years. Mr Hayward also blamed missed forecasts on cautious assumptions about share of oil going to BP by production agreements with oil-producing countries.

This year's production is expected to be roughly flat compared with last year allowing for disposals, at about 3.8m-3.9m b/d. Longer-term production growth is expected to be slower than hoped, rising to 4.3m b/d by 2012.

The downbeat view of the outlook overshadowed BP's results for 2006, also released yesterday.

Profits rose 15 per cent from the year before to $22.3bn (£11.3bn). Earnings per share were up 22 per cent at 111.10 cents for the year, reflecting share buybacks.

But fourth-quarter profits, which fell 12 per cent, showed the impact of falling oil and natural gas prices, struggles to increase production, and the slow restart of its Texas City refinery.

The dividend was up 10 per cent from the 2005 equivalent period to 10.325 cents for the fourth quarter. Shares fell 6½pto 535p.

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Corporate Crime Reporter
February 6, 2007

http://www.corporatecrimereporter.com/harris020607.htm

CORPORATE CRIME REPORTER

BP Challenges Alaska Speaker John Harris, You Calling Us Liars?
21 Corporate Crime Reporter 7, February 6, 2007

In London, BP Chairman Lord Browne was clearly concerned.

Was the Speaker of the Alaska House of Representatives, John Harris, accusing BP of lying to the Alaska legislature?

Apparently.

Harris wrote the accusatory letter August 31, 2006 to BP.

Whatever Harris wrote in the letter, it clearly unnerved BP.

BP’s top people  including BP Alaska President Steve Marshall  appeared before the Alaska Senate and House Resources Committee on August 18, 2006.

The committee called the hearing after BP discovered leaks and corrosion in the North Slope pipeline system that threatened to take 400,000 barrels a day out of production.

But something in BP’s testimony ticked off Harris.

And Harris being upset didn’t sit well with Lord Browne.

“You have raised a number of charges which both our US subsidiary and I, as Group Chief Executive, take most seriously,” Lord Browne wrote in a letter obtained by Corporate Crime Reporter. “Whilst your letter does not provide specific detail, our Alaska managers are accused of being less than forthright and honest when meeting with you and during their testimony before your legislative body. They are claimed to have provided misleading information or actually to have lied.”

“Steve Marshall is accused of making such misleading statements,” Lord Browne wrote.

Lord Browne said that he was turning the matter over to BP Ombudsman Stanley Sporkin to “conduct a full and immediate investigation into the allegations made.”

“If the allegations are found to be substantiated we will take the necessary and appropriate action,” Lord Browne wrote. “I ask that you share with this investigation all of the information that you have which forms the basis of the assertions contained in your letter.”

Sporkin it turns out hired a law firm  Clifford & Garde  with direct ties to BP America chair Robert Malone. Clifford & Garde actually work for Malone and BP.

But that didn’t stop the ombudsman from hiring Clifford & Garde to track down the Harris allegations.

The firm’s John Clifford contacted Susan Harvey, a former state official who has had her own run-ins with BP, to check into the allegations.

Clifford sent Harvey a transcript of the testimony, and a copy of Lord Browne’s letter to Harris.

“If you have information that is relevant  one way or the other  about the allegation that BP managers . . .have provided false or misleading testimony to the Alaska legislature, I am requesting you to share it with the ombudsman,” Clifford wrote in an e-mail to Harvey. “If not, then maybe this ‘lead’ was mistaken and I will not bother you again.”

“In closing, let me reiterate the assurance I gave you yesterday,” Clifford wrote to Harvey. “Judge Sporkin's only objective is to provide a complete and accurate response to the allegations presented by Speaker Harris. I have known Judge Sporkin for many years and even tried cases in his court. His reputation for complete integrity is unchallenged and well earned. If you have relevant evidence on this allegation, you can rest assured that Judge Sporkin will deal with it appropriately. He is a guy who lets the chips fall where they may, without fear or favor.”

Harvey said that Clifford wanted her to volunteer her efforts.

“Sporkin is not working for free, Clifford is not working for free, Billie Garde is not working for free,” Harvey told Corporate Crime Reporter. “But they want us to work for them so they can get a judgment to get them out of the ditch  for free. It wasn’t a very serious approach.”

As for Ombudsman Sporkin’s reputation for letting the chips fall where they may, worker advocate Charles Hamel now has his doubts.

For months now, Sporkin and federal criminal investigators have been pursuing parallel investigations into whether BP told the truth to federal authorities when it said that a critical valve at its North Slope oil operations was reconditioned and hydrotested.

Hamel says that the valve was never reconditioned and hydrotested.

In fact, Hamel says, the valve was taken from the scrap yard and installed directly into a new process water flow line.

That valve ruptured on December 4, 2004  spilling 500 barrels of toxic water onto the tundra.

“How can the workers complain to Judge Sporkin, and then he turns around and hires Clifford & Garde to investigate BP?” Hamel asked. “He’s done it for the valve investigation. And now he’s done it for the Harris investigation. An ombudsman is supposed to have a degree of independence. Clifford & Garde is working for BP. I’m troubled by Judge Sporkin’s lack of independence. He conducts an investigation with Clifford & Garde as lawyers, and then he doesn’t release the results of the investigation? I’m troubled by this, because I am involved in the valve matter and I have been made out be a liar by BP. And I’ve been waiting for Judge Sporkin to vindicate me. He’s completed his report and turned it over to Bob Malone. But it hasn’t been made public. I’m looking forward to being vindicate.”

Harris did not return repeated calls to his office.

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Anchorage Daily News
February 6, 2007

http://www.adn.com/money/industries/oil/story/8618949p-8511540c.html

Stevens concerned over gas pipeline plan
REPORT: Feds say the timetable has slipped; senator says urgency is required to feed the market.
By STEVE QUINN
The Associated Press
Published: February 6, 2007
Last Modified: February 6, 2007 at 01:56 AM

JUNEAU -- Alaska's senior senator expressed reservations Monday on the heels of a federal report that says the state's schedule for a natural gas pipeline had "slipped considerably."

"I'm very concerned about it; it concerns me in that it lays out a problem that can't be solved here in Washington," U.S. Sen. Ted Stevens, R-Alaska, said in a telephone interview.

Stevens spoke after getting reassurance from John Katz, the state's advocate in Washington, D.C., that the pipeline is on track.

Katz regularly meets with members of Congress and federal agencies to tout Alaska's prospective role in energy security, but his job has taken on more urgency after the Federal Energy Regulatory Commission reported last week that the state is behind schedule.

"What we are saying and telling them is that we understand commercializing the North Slope is of national interest," Katz said of his Monday meeting with Stevens. "We intend to do everything to fulfill that national need. We understand the urgency."

Katz also plans to meet later this week with U.S. Sen. Lisa Murkowski, R-Alaska, about the FERC report on licensing and constructing the pipeline, which offered this assessment:

"The federal government is ready to act. However, no pipeline application has been developed, and the prospects of an application are more remote than a year ago. Over the past year, the schedule for an Alaska gas pipeline has slipped considerably."

The report put Gov. Sarah Palin's office, state lawmakers and resource officials on the defensive, saying there is no slippage.

It also pressed Katz into reassuring federal officials that Palin understands the pipeline's national implications.

"The message is Alaska has significant reserves of natural gas; they represent a secure domestic supply, and we are ready and willing to provide them to the country," Katz said.

Stevens said he was pleased with the meeting, but warned the federal government's message of urgency must be heeded.

"(Katz has) assured me the pipeline is on the front burner of the governor's office, and that we are working toward the same goal," Stevens said.

"The report from FERC, it reflects the urgency within the federal government to have the state act as quick as possible," he said.

Last year, former Gov. Frank Murkowski struck an agreement with BP PLC, Exxon Mobil Corp. and Conoco Phillips that laid groundwork for a $25 billion pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand. It would also help offset the rising dependency on imports of liquefied natural gas, also known as LNG.

But state lawmakers believed the deal gave too many considerations to the big firms, including locking in tax rates for several decades, and provided few key assurances for the state. No legislative vote was ever taken on that before Murkowski left office in December.

Katz said Palin is fulfilling her public pledge to renegotiate a deal, but one that benefits the state.

She has since met with 12 groups interested in delivering 35 trillion cubic feet of proved natural gas reserves from the North Slope to the best available market. She has promised to provide a proposal to the Legislature soon.

Stevens says time is critical.

"We are the reservoir for the country in future production for natural gas, and every indication is as we go west in the North Slope, we get more gas and less oil," Stevens said.

"It's just the beginning of the gas age," he said. "It's not the end. But it all depends on what we do now, how we handle it, and the processing of the applications and time frames."

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Wall Street Journal
February 6, 2007

4th UPDATE:
BP 4Q -22% On Lower Output; Ups Capex Target
DOW JONES NEWSWIRES
February 6, 2007 8:26 a.m.
(Updates an item that ran at 1018 GMT with downgrade on output guidance, updated Thunder Horse start-up date, more executive comments and updated share price.)
By Benoit Faucon
Of  DOW JONES NEWSWIRES
 
LONDON (Dow Jones)--BP PLC (BP) Tuesday posted a 22% drop in net profit in the fourth quarter, hurt by lower output and declining natural gas prices and refining margins.

The company raised its guidance on capital expenditure for 2007 and lowered its medium-term output target as it tries to address serious operational problems in the U.S.

The U.K. oil major said net income for the three months ended Dec. 31 was $2.88 billion, or 14.9 cents a share, compared with $3.69 billion, or 17.7 cents a share, in the fourth quarter of 2005.

The company said capital expenditure would be around $18 billion in 2007, compared with $16.9 billion in 2006 excluding acquisitions.

That's significantly higher than guidance given last year of $16 billion in 2008, with an annual increase of $500 million between 2006 and 2008.

The quarterly results follow Chief Executive John Browne's announcement in January that he is leaving 17 months ahead of schedule, after transforming the company into a giant profit machine from a near-bankrupt laggard during his 12-year tenure as CEO.

But his departure comes as BP is reeling from a string of U.S. probes into a deadly Texas City, Texas, refinery blast and heavy corrosion in an Alaska pipeline. A company spokesman Monday denied any link between the early exit and the investigations.

Quarterly revenue fell 2% to $62.53 billion from $63.61 billion.

All numbers conform to International Financial Reporting Standards, which differ from U.S. Generally Accepted Accounting Principles.

BP's fourth-quarter group result included a net non-operating charge of $152 million driven by increases in estimated decommissioning costs associated with divested hurricane-damaged fields in the Gulf of Mexico, legal provisions and reassessment of certain provisions in the "other businesses and corporate" segment.

The charge compared with a net non-operating charge of $553 million in the fourth quarter of 2005, largely due to changes in the value of natural-gas contracts and in accounting standards.

"The fourth-quarter result reflects the recent declines in the overall price and margin environment, as well as operational factors and increased safety and integrity investments," Browne said in a statement.

BP realized an average of $40.1 per barrel of oil equivalent in the fourth quarter, down 10% from the fourth quarter of 2005, as a 5% rise in realized crude oil prices was offset by a 30% drop in realized gas prices.

In a report, KBC Securities said BP's operating replacement cost profit was "disappointing" at $5.47 billion for the quarter, down 16% from $6.48 billion in the same period the previous year. The replacement cost profit - which excludes the impact of inventories - came in well below KBC's estimate of $7.06 billion.

The broker said the main difference from its forecast was the disappointing performance of BP's refining and marketing operations, hit by the impact of its Texas troubles, including increased spending. KBC said it keeps a reduce rating on BP's shares with a 500 pence price target.

BP's output averaged 3.84 million barrels of oil equivalent a day in the quarter, down 5% from 4.02 million boe/d in the same period the previous year.

The company said divestments and lower entitlements under production-sharing agreements had negatively affected its numbers.

BP reported in October that output from its Prudhoe Bay oil field in Alaska had returned to more than 400,000 barrels a day, after halving production from the BP-operated field in August when it discovered pipeline corrosion and a small oil spill. But it has also said Alaskan production gains were partially offset by weather-related delays.

BP said production in 2007 is expected to be between 3.8 million and 3.9 million boe/d, stable or slightly lower compared with 2006 annual production of 3.93 million boe/d.

The company said it expects to produce more than 4 million boe/d by 2009, assuming an oil price of $60 a barrel. A year ago, it forecasted to grow production by about 4% a year to 2010 in a $40/bbl price environment.

At a press conference following the results, Tony Hayward, who has been appointed to succeed Browne as CEO in August, linked the downgraded guidance to a tight industry-supply chain, an increased focus on safety and operational integrity and a lower entitlement to crude under production-sharing agreements if prices are at $60.

He also said the company lowered its output target because of a delay in two key U.S. Gulf of Mexico projects. Thunder Horse is now due to start up by the end of 2008, three years later than initially planned, and Atlantis will start up by the end of this year instead of last year as intended.

Thunder Horse has production capacity of 250,000 barrels of oil and 200 million cubic feet of gas per day, and Atlantis can produce 200,000 b/d and 180 mcf of gas.

BP is also increasing its spending, partly to address maintenance and safety issues in the U.S.

"We remain committed to addressing the recent operational issues while executing our strategy with discipline and focus," Browne said.

The company has announced a spending increase on its U.S. refining assets to $1.7 billion a year from 2007 to 2010 from $1.2 billion in 2005 to improve their safety and reliability. It also plans to spend more than $550 million in the next two years on "integrity management" in Alaska.

But BP is also increasing investment in existing facilities while at the same time facing industrywide cost inflation.

In September, the company also said it had committed to investing $3 billion on the expansion of its Whiting, Indiana refinery, an upgrade slated to start this year.

BP reported a reserves-replacement ratio of 113% as of Dec. 31 2006 under U.S. Securities and Exchange Commission rules, compared to 95% a year earlier.

The reserves-replacement ratio indicates how much of BP's annual production it replaced with new reserves - through exploration and development or acquisitions - in the same year.

At 1321 GMT BP's shares were trading down 1.85% or 10 pence at 532 pence.

Company Web site: http://www.bp.com
 
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com 

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BTC Pipeline Throughput Reaches 600,000 B/D Crude - BP
DOW JONES NEWSWIRES
February 6, 2007 7:27 a.m.
 
MOSCOW (Dow Jones)--Throughput at the Baku-Tbilisi-Ceyhan crude oil pipeline has reached 600,000 barrels a day, pipeline operator BP PLC (BP) said in a statement Tuesday.

The company plans to eventually increase throughput to 1 million b/d.

The first tanker lifted oil from the pipeline in June 2006. Since then, 73 million barrels of crude has been exported through the BTC, which brings crude from Baku, Azerbaijan, through Tblisi, Georgia, to a Mediterranean port in Ceyhan, Turkey.

The pipeline initially carried only oil from the Azeri-Chirag-Gunashli fields. But the first delivery of gas condensate from the Azeri offshore Shah Deniz gas and condensate field was made into the line in January this year.

"It is expected that future volumes will include those from across the Caspian, possibly commencing by the end 2007," the statement said.

The BTC shareholders include operator BP with 30.1%, Chevron Corp. (CVX) with 8.9%, Norway's Statoil ASA (STO), Italy's Eni SpA (E) with 5.0%, France's Total SA (TOT) 5.0%.

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Alabama Court To Review $3.6 Billion Verdict Against Exxon
DOW JONES NEWSWIRES
February 5, 2007 4:51 p.m.
 
MONTGOMERY, Ala. (AP)--A $3.6 billion verdict won by the state against Exxon Mobil Corp. (XOM) goes before the Alabama Supreme Court on appeal Tuesday with the company arguing the judgment - bigger that the state's General Fund budget - is unconstitutionally excessive.

The verdict, which could swell to $4.7 billion when interest and deferred payments are added, was the largest returned in America in 2003 and is a record in Alabama.

The state sued Exxon Mobil claiming it defrauded Alabama out of millions in offshore natural-gas royalties.

But Exxon Mobile attorney David Boyd of Montgomery calls the verdict "astronomical" and contends the jury that heard the case was improperly influenced by news reports of the state's budget woes at the time.

The interest in the case is so great that Gov. Bob Riley plans to attend the arguments before the Supreme Court Tuesday, his communications director, Jeff Emerson, said.

After the Supreme Court hears arguments Tuesday, it is under no deadline on when it must rule, but attorneys said it usually takes four to six months.

In 2003, a Montgomery jury agreed with the state's arguments that Exxon Mobil intentionally underpaid the state in royalties from natural-gas wells drilled in state-owned waters along the Alabama coast, and it returned a verdict of $102.8 million in compensatory damages and $11.8 billion in punitive damages.

Circuit Judge Tracy McCooey cut the punitive damages to $3.5 billion, which dropped the total verdict to $3.6 billion. Even after the verdict was cut, it was still the largest in America for 2003, according to the annual rankings by the National Law Journal and VerdictSearch.

The judgment has kept growing while on appeal. If the state wins, it would collect 12% annual interest on the judgment, which would add another $1 billion, and as much as $100 million in disputed royalties since the case went to trial, state attorneys said.

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Guardian Unlimited
February 6, 2007

http://business.guardian.co.uk/story/0,,2006866,00.html

BP pays for safety and production woes
Fiona Walsh, business editor
Tuesday February 6, 2007
Guardian Unlimited

Oil giant BP today reported a fall in fourth-quarter profits, but still pushed its full-year figure up to a record $22.25bn (£11.33bn), an increase of 15% on 2005.

Hit by lower production, the group's profits for the final three months of the year fell by 12% to $3.9bn, against $4.4bn a year ago, and almost $7bn in the third quarter.

At the same time it raised spending targets from $15.5bn to $18bn due to increased investment in improving safety at its US refineries

BP's profits are given on a replacement cost basis, reflecting the current cost of supplies. The fourth-quarter figure included an exceptional cost of $152m, without which profits would have been just over $4bn.

But by midday, BP shares were 12p down at 529.5p as it disappointed analysts by lowering its production targets for the current year. It now expects to produce 3.8 - 3.9m barrels of oil a day in 2007, down from 3.93m in 2006.

The shares have fallen from a peak of 723p in April last year.

BP's profits were slightly ahead of analysts' expectations but contrast with those of rival Shell, which turned in strong fourth-quarter results last week, helping its annual profits soar by 21% to $25bn.

Exxon, the world's largest oil group, also reported record results last week, pushing its net income up to $39.5bn - the biggest-ever profit in US corporate history.

BP chief executive Lord Browne said today the fourth-quarter results reflected the "recent declines in the overall price and margin environment, as well as operational factors and increased safety and integrity investments".

He added: "Our record full-year replacement cost profit and operating cash flow supported the group's capital programme and increased dividends and share buybacks.

"We remain committed to addressing the recent operational issues while executing our strategy with discipline and focus."

These will be the last set of annual figures presented by Lord Browne, who has bowed to pressure and is stepping down at the end of the year.

His departure follows a series of setbacks for the group, from the Texas City refinery explosion, in which 15 people lost their lives and many more were injured, to the oil spill in Alaska.

According to a report in today's Financial Times, federal criminal investigators are examining new safety allegations made against the group.

These involve claims that its BP Alaska operation substituted water for corrosion-inhibiting chemicals as far back as 1998, issuing staff with written instructions against replacing deficient systems, components and pipes to save money.

Grand juries in Alaska and Texas are already reviewing evidence by the federal investigators to decide whether to bring criminal charges against BP and its executives.

Lord Browne had enjoyed the reputation of Britain's most admired industrialist, but his standing in industry and the City has been shattered over the past year.

Last month, the Baker inquiry into safety issues at BP in the wake of the Texas City disaster detailed a series of lapses at the group, accusing it of "a corporate blindspot" relating to safety.

Lord Browne will be replaced as chief executive in August by BP's exploration and production director, Tony Hayward.

· Email
business.editor@guardianunlimited.co.uk

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Financial Times
February 6, 2007

http://www.ft.com/cms/s/2df8bc80-b587-11db-a5a5-0000779e2340.html

Federal criminal investigators launch probe into BP Alaska
By Sheila McNulty in Houston
Published: February 6 2007 02:00 |
Last updated: February 6 2007 02:00

Federal criminal investigators are probing allegations that BP Alaska substituted water for corrosion-inhibiting chemicals as far back as 1998 and issued staff with written instructions against replacing deficient systems, components and pipes to save money.

The charges were brought to investigators by Chuck Hamel, longtime advocate for oilfield workers in Alaska.

Since then, the investigators have spoken to several BP workers who supported claims BP was substituting water for corrosion-inhibiting chemicals.

The investigators are searching for any written instructions for staff to bypass maintenance on equipment - which would heighten risks to staff and the environment - and instead run it to failure.

BP declined comment on the specific allegations, which, if proved true, would be damaging to the company: grand juries in Alaska and Texas are reviewing evidence by the federal investigators to decide whether to bring criminal charges against BP and/or its executives.

Ronnie Chappell, BP spokesman, said the company would ask Stanley Sporkin, its ombudsman, to investigate the claims.

The grand juries were empanelled after BP suffered last year the biggest-ever spill at Alaska's Prudhoe Bay oilfield - North America's biggest - and was forced to shut half the oilfield for severe corrosion.

That followed an explosion in 2005 at BP's Texas City refinery - the company's largest refinery worldwide - that killed 15 people and injured 500 in the worst industrial accident in the US in more than a decade.

These latest charges against BP come as state environmental authorities have launched yet another investigation into possible wrongdoing by BP in Alaska.

Mr Hamel said BP Alaska suffered a spill in December from a tank the company had told the Alaska Department of Environmental Conservation (Adec) was out of service after admitting it needed replacing.

He said a leak in the 8,000-barrel tank, which holds crude oil and produced water, sprayed for five days from December 15, forcing BP to shut wells and cut production by as much as 50,000 barrels per day for several months until it can replace the tanks.

Adec confirmed the tank "is listed as 'out of service' in BP's Greater Prudhoe Bay state approved contingency plan,'' said Adec. "Since a spill occurred involving this tank, it was 'in service'. The incident is under investigation by Adec.''

That BP was using a tank it had told authorities it was not is not only subject to sanction but embarrassing for the company.

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http://www.ft.com/cms/s/d6199ed0-b5b8-11db-9eea-0000779e2340.html

BP cuts growth forecasts as profits slump
By Carola Hoyos

Published: February 6 2007 08:42 |
Last updated: February 6 2007 08:42

BP, Europe’s second largest listed international energy group, on Tuesday significantly scaled back its growth expectations after a year of struggling to complete new projects on time and to stem the natural decline of its older fields.

Video
Carola Hoyos on a difficult fourth quarter for BP
http://www.ft.com/cms/s/d6199ed0-b5b8-11db-9eea-0000779e2340.html

The company said it hoped to produce 4m barrels a day of oil by 2009 and 4.3m b/d by 2012  approximately a 12.5 per cent decrease in growth expectations.

Nevertheless, it increased its capital expenditure target to $18bn in 2005 from $16.9bn last year to offset higher industry costs, such as taxes, contractor fees and rig rental payments.

The news that growth will not match previous expectations is the latest blow for the company which has also been hit by a series of safety failings over the past two years.

Problems at its refineries in the US, its rigs in the Gulf of Mexico and its pipelines in Alaska have forced BP to invest to fix the aging infrastructure.

The US problems forced last month Lord Browne to announce his early retirement after 11 years in as chief executive.

BP also announced on Tuesday 2006 profits rose 15 per cent from the year before. But its fourth quarter profits, which fell 12 per cent, revealed the impact of falling oil and natural gas prices, the company’s struggles to grow production and the slow restart of its Texas City refinery, which exploded in March 2005.

For the year replacement cost profit, which strips out changes in the value of inventories, was $22.2bn, compared to $19.3bn in 2005, while in the fourth quarter it fell to $3.9bn, from $4.4bn. The drop was in line with analysts’ forecasts.

BP’s exploration and production group struggled in the fourth quarter, especially because of lower gas prices and volumes, but also because of the increased costs.

Production fell as BP was unable to keep up with the decline in its old fields with oil from new projects, many of which have been delayed because of technical and managerial problems.

BP’s results were disappointing, but not totally unexpected. They were weaker than those announced by ExxonMobil of the US and Royal Dutch Shell last week and sent the shares, which were among the worst performers on the FTSE 100 last year, down 1.3 per cent or 7p to 534½p in early trading.

Anglo/Dutch Shell, BP’s closest competitor, last year managed to grow production and put behind it the reserves crisis of 2004, which led to an investigation by US and UK regulators and the loss of its top three executives.

Nevertheless, Goldman Sachs, the investment bank, on Tuesday put out a note urging its customers to buy BP shares, noting they had fallen 25 per cent from their April peak and were now trading at a significant discount to those of BP’s peers. The bank’s analysts said they did not expect a major shift in strategic reaction from Tony Hayward, who takes over as BP’s chief executive in July.

“While we do not underestimate the impact of any of these problems [operational issues, safety, project delivery and trading integrity], we think BP is now moving beyond many of these issues and 2007 should mark a turnaround in news flow if the company can get back into its stride,” the analysts said.

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Houston Chronicle
February 5, 2007

http://www.chron.com/disp/story.mpl/business/energy/4527445.html

BP to release annual financial results, strategy update
Oil giant hopes plan to repair its reputation reassure
investors in wake high profile accidents
By JANE WARDELL
Associated Press

LONDON  Struggling oil major BP PLC will seek to reassure investors about its battered reputation when it posts annual results and a strategy update Tuesday.

Analysts expect BP to report a significant drop in profits after six successive quarters of lower oil and gas production, despite soaring oil prices. But the focus will be on the company's plans to restore confidence in its business following a series of high-profile mishaps, including a deadly refinery blast in Texas and a giant oil spill in Alaska.

The company has already taken some steps toward repairing its reputation with investors and the public, particularly in the United States.

It announced last month that Chief Executive John Browne would step down by the end of July, bringing his expected departure forward by more than a year. Browne, 58, whose ability to stay in control of the company had been the subject of intense speculation, had announced in July that he would step down at the end of 2008.

He will be succeeded by Tony Hayward, the current head of exploration and production, who oversaw BP's expansion trail into the United States, involving a number of takeovers, including the 1998 merger with Amoco and the subsequent acquisitions of Arco and Castrol. Andy Inglis, a veteran of the company's upstream business, will take Hayward's job.

But analysts said Tuesday's earnings announcement will need to show the company is taking further steps.

"BP's management must step up to the plate. We believe a 'business as usual' approach will not be acceptable to a skeptical market," said Investec analyst Tony Eccles.

BP shares underperformed on the London Stock Exchange's FTSE 100 index by 17 percent last year, one of its worst performances in a decade.

The stock did pick up 1.5 percent today to $10.62 after Goldman Sachs raised its recommendation for the oil producer to "buy" from "neutral," citing an improving outlook and "attractive valuation" in the share price.

"BP can put the majority of its recent troubles behind it and move forward," said analysts at Goldman Sachs. "BP now trades at a significant discount to key major peers."

Royal Dutch Shell PLC last week reported a 21 percent increase in fourth-quarter earnings, buoyed in part by high energy prices and its sale of some operations. But it also lowered its production guidance because of ongoing security problems in Nigeria and the recent loss of half its stake in the Sakhalin-2 oil and gas project in Russia.

Analysts expect BP's adjusted net profit  earnings before extraordinary items and excluding changes in the value of inventories  to come in around $3.8 billion to $3.9 billion, a fall of around 22 percent on last year's $4.99 billion.

Investors are hoping that the company's U.S. woes are at an end and that it will take heed from an independent report released last month into the 2005 Texas City explosion, which found that BP failed to emphasize safety at its U.S. refineries. The blast killed 15 people.

The panel, led by former U.S. Secretary of State James A. Baker III, said the company had made strides in personal accident prevention but came up short on the bigger picture.

BP was also forced to temporarily close some of its operations at the Prudhoe Bay oil field in Alaska because of a major pipeline spill and delayed the opening of its key Thunder Horse platform in the Gulf of Mexico because of equipment failure. U.S. authorities are also investigating allegations that the company was involved in illegal price-fixing in the propane market.

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Anchorage Daily News
February 5, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8617334p-8509875c.html

Ring remains at large in Alaska pipeline
SEARCH CONTINUES: "We'll just keep looking,''
Alyeska spokesman says.
By RACHEL D'ORO
The Associated Press
Published: February 5, 2007
Last Modified: February 5, 2007 at 01:52 AM

An aggressive cleaning device sent through the trans-Alaska oil pipeline failed to find a 20-inch diameter metal ring that went missing in the line in December, a spokesman for the operator said Sunday.

The stainless steel ring is part of another cleaning tool called a scraping pig that broke apart inside the 800-mile line. A later scraping pig pushed out other missing pieces. The pigs are run every seven to 14 days.

The cleanings removed wax buildup from the pipeline's 48-inch diameter walls, but they failed to turn up the ring. On Saturday Alyeska Pipeline Service Co., the pipeline operator, ran a more aggressive device called a disc pig through the line.

The device scraped out enough wax to fill 11 55-gallon drums, but also failed to find the ring, said Mike Heatwole, an Alyeska spokesman.

"We'll just keep looking," he said.

Now Alyeska plans to strain the paraffin collected earlier to see if the missing part is there. The paraffin is currently on a barge heading south for processing. The barge is expected to arrive in Seattle in late February.

"Results are not expected for as much as two months from now," Heatwole said.

Alyeska has downplayed the risk, saying there is a low probability that the ring would interfere with a check valve that stops the flow of oil in the case of a leak.

Meanwhile, cleaning pigs will be run through the pipeline every five days in preparation for an inspection with a "smart pig," a device that assess the condition of the pipeline.

Smart pigs usually are employed every three years. But Alyeska moved the schedule up by a year after a March 2006 spill from a leaking feeder line at Prudhoe Bay, the nation's largest oil field and the North Slope starting point of the trans-Alaska pipeline.

Alyeska launched the smart pig just before more leaks were discovered at Prudhoe in August, prompting a partial shutdown of the field. But the completion of the inspection was later put on hold after Alyeska found data collected was compromised by excessive wax buildup south of a pump station about 200 miles from the north end of the pipeline, Heatwole said.

The job will be resumed in late February or early March, he said.

The pipeline runs from Prudhoe Bay to Valdez on Prince William Sound, where oil tankers collect crude oil and deliver it to West Coast refineries. It averaged 809,412 barrels per day in December.

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http://www.adn.com/news/alaska/kenai/story/8617291p-8509867c.html

Push for port stirs distrust in Cordova
OPPOSITION: Fishermen against facility as planned by Eyak and town's leaders.
By BRANDON LOOMIS
Anchorage Daily News
Published: February 5, 2007
Last Modified: February 5, 2007 at 02:28 AM

SOLDOTNA -- Cordova lost its deep-water port when the 1964 Good Friday earthquake lifted the ocean floor. Now local Alaska Native groups are trying to get it back.

Using oil spill settlement and federal and state transportation dollars, the Native Village of Eyak and its partners want to build an oil spill response center that doubles as a deep-water port for exporting goods. Eyak and Cordova leaders say it's a win-win proposition: better protection against a disaster such as local fisheries sustained from the 1989 Exxon Valdez oil spill, better economics for an isolated community still haunted by that event and an ever-fainter industrial identity.

"Cordova was built as a deep-water port for exporting copper," said Bruce Cain, executive director for the Eyak tribal village. "Since 1964 we've had basically an 18-foot all-tides channel in town, which limits what you can do."

What the village and its associates at the Chugach Alaska Corp. might do with a deep port, though, is causing an upwelling of fear and distrust. Some Cordovans argue that rather than safeguarding Prince William Sound, village leaders are using oil spill funds to build an industrial port to export coal and timber or attract large cruise ships.

"The smokescreen is that they're using an oil spill response center to get their money. Their hidden agenda is coal and industry," said Robert Masolini, a 23-year-old Cordova fisherman who says he has gathered dozens of signatures from young fishermen opposing the port as currently planned.

Chugach Alaska, the regional Native corporation, has coal reserves in the Cordova area, and in years past has exported logs from the region. It denies that future logging or mineral exports would need a deep-water port. The corporation is co-owner of a salmon cannery site at Shepard Point where the port and response center would be built.

The U.S. Bureau of Indian Affairs has completed an environmental impact statement on behalf of Eyak, assessing several downtown sites and the one at Shepard Point. The agency prefers Shepard Point, which requires 4.5 miles of new road. At $30.5 million, it is by far the costliest plan studied. So far the agency has identified $18 million in potential funding, including $9.5 million from the Alyeska Pipeline Service Co. settlement for the Exxon Valdez spill. Another $5.1 million would come from federal and state highway funds, and $3 million would come from the Bureau of Indian Affairs

Kristin K'eit, a Juneau-based environmental scientist with the BIA, said the 1992 court settlement that followed the Exxon Valdez required three Prince William Sound spill response centers, at Chenega, Tatitlek and Cordova. The first two already exist.

The Shepard Point alternative offers a naturally occurring 70-foot-deep navigational channel at low tide, compared to 25 feet in the shallowest portion of the channel accessing the downtown Cordova locations.

In the downtown scenarios, dredging would deepen the channel to 35 feet. The downtown options cost from $14 million to $19 million.

A representative of Alyeska Pipeline Service Co.'s spill response branch, Barry Romberg, told BIA's consultants that tugs working a spill require 22 feet of draft. Barges loaded with skimming equipment require far less, he said, and though they require up to 37 feet when loaded with oily water, they would dock at Valdez and not Cordova once filled.

Coast Guard and other spill responders listed in the EIS likewise would fit at downtown response centers.

Cain said that doesn't mean the downtown options are as effective. If the Exxon Valdez spill proved anything, he said, it is that an environmental disaster requires a massive supply chain -- including fuel and groceries and items brought on container ships.

"There were 3,000 people out there," he said. "That's a city. You're not going to be able to do that without getting bigger boats in and out."

Moreover, Cain doesn't shy from asserting that the project should provide the side benefit of economic development. A deep-water port could lead to a bottled water industry in a region that gets 200 inches of rain a year, he said. It could make fish shipping cheaper. And yes, it could benefit timber and mineral shipping, though he said those projects could occur without a port.

"Any of those commodities could be shipped on big boats," he said. "Some people say that's good. Some people say that's bad. We're just trying to build a port."

Eyak has the support of its neighbors in Cordova city government. Several times the City Council has resolved in support of the Shepard Point project, and last week Mayor Tim Joyce reiterated the support.

"With deep water you've got the option of bringing in larger vessels," Joyce said. "There could be cruise ships that come in. There could be container ships that come in. There's a variety of economic benefits to look at. But don't get me wrong: The primary reason is response."

Some opponents find it ironic that oil spill settlement funds may be used to develop an industrial port, and they say Shepard Point is actually a worse response location than the downtown harbor.

"Realistically, it's the only one that will not work for oil-spill response," gillnet fisherman Masolini said. Cordova's fishing fleet would provide the first response to a spill, he said, and its boats moor downtown. Putting equipment at Shepard Point adds 20 minutes to the response time, and twice that if the spill is in the opposite direction -- a feared pipeline leak coming down the Copper River.

The Cascadia Wildlands project, a Northwestern rain forest protection group with an office in Cordova, considers the port its top current issue in the state, field representative Gabriel Scott said. He calls the project a moneymaking scheme that profits from public dollars while adding to spill response times. He and other opponents point out that the proposed Shepard Point road crosses numerous avalanche chutes, potentially cutting people and supplies off during an emergency.

"Clearly Shepard Point is not the best option for spill response," Scott said. "There must be some other motivation. BIA, doing the bidding for Chugach Alaska Corp., is going to push this road through, damn the torpedoes, regardless of whether it's justified."

"It's not a big conspiracy, as some would suggest," said Rick Rogers, vice president of land and resources for Chugach Alaska. "What it's meant to do is improve spill response. ... That's our primary interest. We were affected greatly by the Exxon Valdez oil spill."

A local environmental group formed in the wake of the Exxon Valdez opposes the project partly because it uses environmental protection funds for industrial development. The consulting agencies and companies quoted in the EIS clearly say they don't need a deep-water port, said Jennifer Gibbins of the Eyak Preservation Council.

"It's really important for people to keep their eye on the ball here," she said. "This project is supposed to be about effective oil spill response. If that's what we're doing here, Shepard Point is not the answer."

Daily News reporter Brandon Loomis can be reached at bloomis@adn.com or in Soldotna at 1-907-260-5215, ext. 24.

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Guardian Unlimited
February 5, 2007

http://business.guardian.co.uk/story/0,,2005872,00.html

Shell hires Bush's environmental adviser
Terry Macalister
Monday February 5, 2007
The Guardian

Gale Norton, a former interior secretary for the Bush administration and a supporter of opening up the Arctic National Wildlife Refuge and other sensitive environmental landscapes for oil production, has taken up a senior legal post at Shell.

The 52-year-old's arrival is the latest in a series of controversial US appointments at the company which has been trying to increase output of carbon-intensive shale and oil sands schemes from places such as Colorado while also arguing it wants a key role in the fight against climate change.

Ms Norton has joined as a general counsel for Shell's exploration and production business in the US and will be based primarily in Colorado, where she was once state attorney general.
Shell confirmed she would concentrate on "unconventional" resources, meaning shale. "Ms Norton will provide and coordinate legal services for Shell," said a company spokeswoman.

Critics in the local environment movement believe it was Ms Norton's advice that led President Bush to open up the sensitive Bristol Bay area of Alaska to oil and gas development.

Shell, which reported record profits last week, has also recently appointed another perceived enemy of the green lobby, Cam Toohey, to work in Alaska.

Mr Toohey used to work for Ms Norton in the interior department having moved from a post as head of Arctic Power, a group which lobbied for oil development in the Arctic National Wildlife Refuge.

When he was taken on by Ms Norton, one Democrat critic described the move as an "ethical oil spill".

In addition, Shell has taken on Elizabeth Stolpe, a Bush environment adviser and former oil industry lobbyist.

She previously worked for a former Republican senator and governor of Alaska, Frank Murkowski. In an address to the Alaska state legislature in January 2003, Mr Murkowski said he was doing all he could to "open the coastal plain of ANWR".

Also involved in Shell's government affairs team is Brian Malnak, who worked at the interior department and was a chief of staff for Mr Murkowski at the influential senate energy committee, where he too tried to push forward drilling in the Alaskan wildlife sanctuary.

Another former government official involved in developing Shell's policy work in the US is Kevin O'Donovan, a former domestic policy adviser to vice president Dick Cheney who was responsible for his climate change and energy policy.

In an article written for the FT last week, Shell chief executive Jeroen van der Veer outlined the different steps his company was taking to help tackle CO2 emissions and therefore global warming.

"Companies such as Shell clearly have an important role to play. Our own energy efficiency improvements are already delivering CO2 savings of about 1m tonnes a year. We are already one of the world's largest distributors of biofuels," he argued.

Friends of the Earth said it was time Shell stopped saying one thing and doing another. "The PR department is always talking about Shell's work on the environment while the rest of the business is working hard on producing as much oil as it can," said its corporate campaigner, Hannah Griffiths.
 

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Anchorage Daily News
February 4, 2007

http://www.adn.com/news/environment/story/8615000p-8507528c.html

Warming data notes Arctic changes
REPORT: In general, the scientific community supports its findings.
By TOM KIZZIA
Anchorage Daily News
Published: February 4, 2007
Last Modified: February 4, 2007 at 02:14 AM

The latest international scientific report on global warming, released Friday in Paris, is focusing new attention on changes to the Arctic, including a sharp increase projected for rain and snowfall in Alaska.

Unlike the previous international summary report, issued in 2001, this one repeatedly mentions the Arctic, according to two of Alaska's leading climate scientists. The northern latitudes have been heating up faster than anywhere else and are already showing significant signs of change.

University researchers in Fairbanks and Anchorage said Friday the world's scientific community is squarely behind the new report, which concludes there is no longer reasonable doubt that rising temperatures and sea levels are due to human activity. The United Nations-backed report says it is nearly certain -- with a confidence level of more than 90 percent -- that carbon dioxide and other greenhouse gases generated by humans have been the main cause of rising temperatures in the last half century.

"The smoking gun is now there in terms of human contribution," said John Walsh, a climate scientist at the University of Alaska Fairbanks. "It's going to be received as a call for action in the United States."

But Alaska's best-known climate-change skeptic, Syun Akasofu of the University of Alaska Fairbanks, said he's still not convinced. He said the 21-page summary report released Friday does not appear to allow sufficiently for natural fluctuations in climate.

"There is no question that climate change is occurring in the Arctic. The question is what's causing this," said Akasofu, an aurora scientist who retired Wednesday as director of the university's International Arctic Research Center. He said scientists must do a better job teasing out natural and regional heating trends and subtracting these effects from the overall measured changes.

Walsh disagreed. He said the detailed reports underlying Friday's release will spell out how natural variability has already been allowed for. One table released Friday showed solar radiation as only a minor contributor compared to emissions of carbon dioxide and other gases.

Walsh and Akasofu are traveling together to Washington, D.C., this weekend to brief the state's congressional delegation.

The new report is a product of the Intergovernmental Panel on Climate Change, drawing on work from hundreds of scientists from 113 countries. It represents the fourth such assessment of scientific thinking on the issue since 1990, when scientists were still trying to decide if the warming trend was real.

Deborah Williams, a global warming advocate with Alaska Conservation Solutions in Anchorage, said the strongly worded IPCC report should resolve the science dispute over causes for all but the most determined climate-change "deniers."

"To my mind, this is like the Supreme Court of international scientists issuing a final decision," Williams said.

This report focuses mainly on causes and projections. Detailed IPCC reports on impacts and options for limiting emissions are scheduled for release later this year.

Regarding effects on Alaska, the impact report will draw heavily on the 2004 Arctic Climate Impact Assessment, an international effort that received much discussion here, said Walsh, who helped write the new report's polar regions chapter.

Among the impacts in Alaska, which the scientists said will be detailed in the report to come: shrinking glaciers, receding sea ice and snow cover, melting permafrost and advancing tree lines. One anticipated impact that has not received much attention yet is an increase in precipitation in Alaska of 15 percent to 25 percent, Walsh said. That could mean more erosion and more frequent thunderstorms in Interior Alaska, he said.

"Stream flow runoff may have perhaps more consequences than temperature change in an area like Alaska," Walsh said.

Other new studies affecting the polar regions involve accelerated loss of sea ice, harm to polar bears and other marine mammals, and increasing ultraviolet radiation through an Arctic ozone hole, Walsh said.

The new report is bleak, noting that the globe will continue to warm for centuries even if carbon emissions are cut back to the levels of the year 2000.

The last IPCC report said it was "likely" -- defined as a confidence level of better than 66 percent -- that human activity was a major factor in global warming. The new report raised that level to "very likely," citing a multitude of new studies and climate models run by supercomputers.

The report said it is "very likely" that the world will experience more heat waves and heavy rainstorms and that Arctic sea ice will disappear "almost entirely" by the end of the century. It is "likely" that hurricanes will become fewer but more intense, the report said.

"How likely are these things? These are questions the insurance companies and Senator (Ted) Stevens have been asking," said Jeff Welker, director of the Environment and Natural Resources Institute at the University of Alaska Anchorage. "The scientific community is fully behind the conclusions."

The report forecast an increase in the earth's average temperature of between 3.5 and 8 degrees Fahrenheit over the next century, with northern latitudes feeling a much higher impact.

The biggest controversy around the report involved projected sea levels. The final language anticipated a rise of between 7 and 23 inches over the next century. That projection was based largely on thermal expansion -- the slight rise of the ocean as it warms. It marked a rarity in the debate over global warming -- a decline in projected impacts, from a forecast of 35 inches in the last IPCC report.

However, the report anticipated that the seas would continue to rise unchecked for centuries. And because of scientific uncertainty, the report did not allow for fresh water melting off the glaciers of Greenland and Antarctica. Critics last week said recent Greenland studies suggest melting ice could add several feet more to sea levels.

"Both past and future (human-caused) carbon dioxide emissions will continue to contribute to warming and sea level rise for more than a millennium, due to the time scales involved in removal of this gas from the atmosphere," the report said.

Reporter Tom Kizzia can be reached at tkizzia@adn.com or in Homer at 1-907-235-4244.

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Fairbanks News Miner
February 3, 2007

http://newsminer.com/2007/02/03/4931/

Pipeline shooter’s appeal denied
By Eric Lidji
Staff Writer
Published February 3, 2007

The man convicted of shooting a hole in the trans-Alaska oil pipeline lost his appeal of the state Superior Court’s 2003 decision that put him in prison.

Daniel Lewis argued the Superior Court erred by admitting statements he made to Alaska State Troopers after they accepted his right to remain silent and also for not moving the trial from Fairbanks in response to pre-trial publicity.

The first part of the appeal stems from separate questioning by various law enforcement agencies in the hours after troopers arrested Lewis on Oct. 4, 2001.

Troopers and FBI agents read Lewis his rights on three occasions.

Lewis told the FBI agents that he woke up from a mid-afternoon nap on the day of the shooting and went out to find his brother, Randy, when troopers detained him. He insisted he did not shoot the pipeline.

When state troopers took over the investigation, they again read Lewis his rights and Lewis declined to speak.

At the Fairbanks troopers office, another trooper took over the investigation and read Lewis his rights for a third time.

Lewis then waived his rights and proceeded to tell the trooper the same story he had told the FBI agents. Again he denied shooting the pipeline.

The trooper asked Lewis if he would take a polygraph test.

Lewis declined, saying “there’s nothing more I have to say, period.”

The questioning continued, and Lewis repeated his story, adding that he and his brother started the day “drinking about a half a gallon of whiskey and vodka” and that he had used a four-wheeler to find his brother after waking in the late afternoon.

The court disagreed with Lewis’ appeal that the statements made at the station should not be admissible and also found that his statements did not contribute to his conviction.

“We conclude that, to the extent the Superior Court erred in allowing some of Lewis’ statements to be admitted, the error was harmless,” Chief Judge Robert G. Coats wrote in the ruling.

The second part of the appeal stems from the heavy media coverage of the Lewis case in both Fairbanks and Anchorage during the time between his arrest and the start of his hearing.

Lewis specifically cited a television interview rebroadcast the night before jury selection began in which Lewis proclaimed innocence but admitted to being near the pipeline on the day it was shot. He argued the court could not find an unbiased jury from the Fairbanks or Anchorage area and requested a change in venue.

Lewis made his request before jury selection had been completed, though. A 1980 Alaska Supreme Court decision found that bias could only be determined through the jury selection process and that therefore a defendant must renew a request for a change in venue after the jury had been selected, which Lewis failed to do.

“Because Lewis did not renew his motion to change venue, we must presume that Lewis had a tactical reason for not renewing the motion. Lewis could well have concluded that the jury which he had selected was as favorable a jury as he was likely to get,” Coats wrote.

Lewis shot the pipeline near Livengood with a .338 Winchester Magnum rifle, causing a 285,000-gallon spill that cost $13 million to clean up.

Contact staff writer Eric Lidji at 459-7504 or
elidji@newsminer.com .

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Houston Chronicle
February 3, 2007

http://www.chron.com/disp/story.mpl/business/4523306.html

New manager at BP's Texas City plant says he wants workers to feel they can ask the boss tough questions about safety
REBUILDING TRUST
By BRETT CLANTON
Copyright 2007 Houston Chronicle

Keith Casey is no stranger to adversity.

In the last two years alone, he has seen his house flooded, his family displaced for nine months and his will tested as he led a post-hurricane restoration of a Motiva refinery in Norco, La.

But now he is stepping into what may be the biggest professional challenge of his life.

Late last month, Casey took over as manager of BP's troubled refinery in Texas City. In that role, he will not only spearhead a more than $1 billion renovation of the plant itself, but help the facility's 2,100 employees continue to rebound from the March 2005 explosion at the complex that killed 15 and injured scores more.

Casey, in one of his first interviews since he took the job, said he knows it won't be easy building the "new Texas City." But he said he is eager to usher in a new era for the complex.

"I believe it's not only important for BP, but it's important for the industry and it's important for America for this facility to return to being an incredibly safe and vibrant facility for the long term," he said.

Casey, 40, replaces Colin Maclean, a BP veteran who was brought in after the explosion.

And he arrives less than two weeks after an independent panel, led by former Secretary of State James A. Baker III, criticized BP in a report for safety lapses at its five U.S. refineries.

The panel was formed at the urging of the U.S. Chemical Safety Board, which plans to release its own report on March 20 that will use the Texas City tragedy to call for greater safety measures at refineries, a board spokesman said.

But Casey and BP are not waiting for the report to make changes in Texas City. Since he arrived, he said, he has spent most of his time meeting with employees, stressing a new initiative called "What You Say Matters." Casey said he needs to hear it all if safety is going to be a core value at the plant.

'Are people comfortable?'

"The tough questions. That's one thing you're looking for," he said. "Are people comfortable asking the boss the tough questions?"

Casey got a big dose of honesty on Jan. 16, the day the Baker panel report was released. On that day, both Casey and Maclean held town hall-style meetings with Texas City employees and were repeatedly asked how the company intends to follow up on the panel's recommendations, Casey said.

He points to the work going on outside his office window as proof the company is listening. Though the plant is running at only half its 460,000 barrel-a-day capacity, BP has delayed bringing other units online because of worker concerns about the safety of "blowdown drums," he said.

Much of the $1 billion-plus in renovations now is going to replace blowdown drums with flaring systems, both of which are backups for catching hazardous vapors from valves. In general, flare systems are better than blowdown stacks in many applications because flare systems are designed to burn oil and gas vapors under controlled conditions rather than releasing the vapors to the atmosphere, BP said.

More employees

BP is also building an employee building that will house a medical center and training rooms. It is renovating a 1940s-era catalytic cracker, it has replaced a 27-mile steam system running through the plant and it is building an employee parking lot across the street from the facility as part of a broader effort to keep people a safe distance from refinery units.

In addition, the company plans to hire 300 new employees in Texas City this year, including more safety inspectors.

"After the accident, the attention really turned toward safety," Glen Borah, a shift director, said during a tour of the plant. "It's a different mode."

Casey said his top priority is to safely restart all units at the plant by the end of 2007. Then, in a second phase, he wants to get "very embedded in our focus around operational excellence." And in a third phase, he wants to improve the competitiveness of the facility.

Casey said during the second phase he may consider an expansion of the facility's crude-processing capacity, but he added that there are no plans at the moment.

Like the Baker panel, U.S. Chemical Board spokesman Daniel Horowitz gives BP some credit for how it has responded since the Texas City accident. Moving nonessential workers out of the refinery and eliminating blowdown drums are especially positive steps, he said.

"We hope the rest of the industry will be following suit on both issues," he said.

But at the end of the day, no matter what reports say or what the headlines read, Casey said, he knows his workers will rise to the occasion and make the refinery a safer and better place to work. There is simply too much at stake not to get it right, he said.

"We're working tirelessly and with a great deal of humility towards trying to learn and build the new Texas City," he said.

brett.clanton@chron.com

RESOURCES
KEITH CASEY
•Plant manager at BP's Texas City refinery
• Start date: Jan. 24
• Age: 40
• Last job: refinery manager, Motiva Enterprises, Norco, La., 2004-2006
• Education: Bachelor of science in metallurgical and materials engineering, California Polytechnic Institute; management development programs at Wharton and Harvard
• Family: Married with three children
Sources: BP, Casey

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Financial Times
February 3, 2007

http://www.ft.com/cms/s/8800ab02-b32a-11db-99ca-0000779e2340.html

Sour grapes as Berkeley in California wins BP grant
By Jon Boone and Ed Crooks
Published: February 3 2007 02:00 |
Last updated: February 3 2007 02:00

A $500m (£254m) grant to research new sources of biofuels has been awarded to University of California Berkeley by BP in part to restore the oil giant's damaged corporate reputation in the US, the head of the UK's top science university claimed.

Sir Richard Sykes, the rector of Imperial College London and former chairman of GlaxoSmithKline, also claimed that neither Imperial nor Cambridge won the grant because of aggressive lobbying by Arnold Schwarzenegger, the governor of California, and because Imperial was barred from teaming up with other leading UK universities.

Berkeley, on the other hand, joined forces on its bid with the University of Illinois at Urbana-Champaign.

He said: "I do not believe the science on offer is any better in California. I am quite sure that we could compete equally on science and intellectual property, it is just all these other factors that make the playing field completely uneven."

The final round of bidding for a programme intended to find new ways to use bioscience in energy production pitted the US against the UK, with Cambridge and Imperial fighting it out against Berkeley, the University of San Diego and the Massachusetts Institute of Technology.

BP said it had selected Berkeley despite the strong proposals from the UK because of its ability to handle large-scale projects leading to commercial developments.

Lord Browne, BP's chief executive, said: "The proposal from UC Berkeley and its partners was selected in large part because these institutions have excellent track records of delivering 'Big Science' - large and complex developments predicated on both scientific breakthroughs and engineering applications that can be deployed in the real world."

But senior figures in the British research community were less sure, with one pointing out that the decision taken by the BP board had generated welcomepublicity in the US.

Sir Richard said positive PR was "unlikely to have been an overwhelming reason but they would have had a terrible press if they had not given in to the US considering all of Arnie'stantrums."

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New York Times
February 3, 2007
http://www.nytimes.com/2007/02/03/us/03pipe.html?ex=1171170000&en=f3a215526db8af21&ei=5099&partner=TOPIXNEWS
 
Photo of Pigs
http://graphics8.nytimes.com/images/2007/02/03/us/03pipe190.1.jpg
Alyeska, the company that runs the Alaska pipeline, uses these devices, called scraper pigs, to clear buildup from the pipeline's walls. One of the devices broke apart in December, and a piece of it is missing

Device Breaks Up in Pipeline, and Search Is on for Lost Piece
By FELICITY BARRINGER

WASHINGTON, Feb. 2  A device designed to clean waxy buildup from the walls of the 800-mile Alaska pipeline broke apart inside the pipeline in December, raising the possibility that any remaining shards of machinery might damage sensitive valves, an executive of Alyeska, the company that runs the pipeline, confirmed Thursday.

Most pieces of the broken cleaning device, known as a pig, were recovered in late December, according to an internal e-mail message from Jim F. Johnson, a vice president of Alyeska, but a large metallic ring has not been recovered. Mike Heatwole, a spokesman for Alyeska, confirmed the details in the message.

The pipeline was not shut down during the recovery operation, but, coming less than six months after supplies of Alaskan crude oil were temporarily cut in half after a leak in a feeder pipeline on the North Slope, the disintegration of the pig is a reminder of the maintenance challenges posed by the three-decade-old pipeline system and the increasingly sluggish rate at which the oil travels.

The loss of the device, called a scraper pig, "is a concern, yeah," said Rhea DoBosh, the spokeswoman for the Joint Pipeline Office, a consortium of 12 state and federal agencies that have some jurisdiction over the pipeline. "But," Ms. DoBosh said, "they have found most of the parts. There's just that one piece remaining, and there's a lingering question of where it might be."

She added, "The hope is that this piece is not lodged some place that it's going to do any damage."

Mr. Heatwole said such a failure was rare in the routine, biweekly practice of running maintenance pigs through the pipe.

"Somewhere along the line," he said, one device "came apart." He said the device was designed to do that if it hit a blockage so a stuck pig would not shut down oil deliveries.

Pat Klinger, a spokeswoman for the Pipeline and Hazardous Materials Safety Administration at the Transportation Department, which has authority over the pipeline, said Thursday, "We're concerned why this happened, and obviously there's a piece missing and we want to make sure that we all find that piece."

The primary concern, for the pipeline's operators and its regulators, is that the remaining piece could interfere with the valves that control the flow of oil through the system that links the oilfields in northern Alaska with the Port of Valdez.

At a September Congressional hearing into the failure of a BP feeder line in the Prudhoe Bay area, both Republican and Democratic lawmakers held up Alyeska's maintenance program as an object lesson to BP, asking why, if pigs can be run through the 48-inch Alaska pipeline every two weeks, BP had waited years to perform similar maintenance, allowing sludge and sediment to build up and hastening corrosion.

But a letter sent this week to Representative John D. Dingell, Democrat of Michigan and the chairman of the Energy and Commerce Committee, noted that at about the same time Kevin Hostler, the president of Alyeska, was testifying before the committee, a "smart" pig, filled with electronic sensors that measure the thickness of pipeline walls, was making an unsuccessful run through the pipe. Committee staff members had no immediate comment on the letter.

The letter, sent by Charles Hamel, who has long been a conduit for worker complaints about management on the North Slope, particularly involving the fight against corrosion, said, and an Alyeska spokesman confirmed, that the "smart" pig had been unable to get any readings for most of its run.

A new run of a pig with electronic sensors is planned in a few weeks.

Mr. Heatwole of Alyeska said in an e-mail message that after the scraper pig disintegrated in the pipe in December, a second scraper pig picked up 40 barrels' worth of wax, along with the remnants of the broken pig. The missing ring, he said, was made of stainless
steel and was 20 inches in diameter and one inch wide.

He added that, in a separate incident involving a six-inch bypass line, about 800 gallons of oil spilled last month at Atigun Pass in the Brooks Range of northern Alaska. Although there have been several spills in recent years in the network of feeder lines on the North Slope, which are not part of the Alyeska system, this month's spill was only the second on the large pipeline in the past five years. The last, in which 285,000 gallons were spilled, came after a bullet was fired into the pipe.

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San Juan Islander
February 2, 2007

http://www.sanjuanislander.com/state/doe/anacortes-shell.shtml

Ecology orders Shell refinery in Anacortes
to tackle leaking transfer pipelines
Washington State Department of Ecology
PRESS RELEASE:

After four oil spills in seven months, the Department of Ecology (Ecology) has ordered the Shell Puget Sound Refinery near Anacortes to inspect all of its oil transfer lines and related equipment.

Under an administrative order issued Jan. 30, 2007, Shell will report back to Ecology on the problems it has identified and how the company intends to fix them.

 The need for the inspections became apparent after the refinery reported two small gasoline spills on July 21 and Sept. 6, 2006. Ecology spill prevention engineers found that external pipeline corrosion had weakened portions of the three-mile long oil transfer lines that run between the refinery's tanks and the dock where oil is transferred to and from oil tankers and fuel barges.

 About two miles of the transfer lines run above marine waters along the causeway and the fueling dock area.

 After the 2006 spills, Ecology issued a notice of violation because of the substantial risk for more fuel leaks. Then on Jan. 27, 2007, five gallons of crude oil leaked from one of the refinery's pipeline segments under the loading dock. Ecology determined that that the spill occurred due to internal pipeline corrosion.

"The three oil spills clearly were preventable," said Dale Jensen, who oversees statewide spill prevention, preparedness and response activities for Ecology. "We issued our order out of strong concern regarding Shell's ability to keep spills from reaching the already-threatened Puget Sound. We need to be confident that the company is committed to preventing oil spills."

 In fall 2006, Shell started a series of inspections, using advanced technology including mechanical devices that flow the through the oil transfer lines searching for weak spots, cracks and other potential problems. Using the "smart pig" robots helps refinery engineers understand the condition of the piping and where to make any needed repairs.

"Our goal is to prevent all oil spills, big and small, from occurring and harming Puget Sound waters," said Sue Krienen, general manager for the Shell Puget Sound Refinery. "We are examining all of our oil transfer lines and related equipment as well as actively identifying and fixing any problems with fuel transfer lines and dock equipment. To accomplish this, we must be able to understand the condition of the two miles of marine piping that runs over water at our facility to prevent spills."

 Jensen and Krienen said Ecology and Shell will continue working closely together to identify and fix the problems with the refinery's fuel transfer lines and dock equipment.

 On Jan. 30, about one gallon of oil spilled into Fidalgo Bay during marine transfer operations. Krienen said that spill was not related to pipeline corrosion but is under investigation.

 Under the administrative order, Shell must:

  *       Submit progress reports to Ecology on a quarterly basis through 2009. The reports must contain copies of inspection data, evaluations whether pipelines are fit for service, and planned repair or replacement schedules.

       *       Evaluate the causes and response to the Jan. 27 spill including meeting with agency spill prevention and response personnel and provide a written report to Ecology. The report must identify a schedule for implementing lessons learned from the January incidents.

  *       Provide other reports as requested by Ecology.

Shell Oil Co. has 30 days to appeal Ecology's order.

Jensen said Ecology spill prevention inspectors will be checking the condition of similar fuel transfer lines and dock equipment at the state's other five oil refineries located at Ferndale, Anacortes and Tacoma.
--

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Houston Chronicle
February 2, 2007

http://www.chron.com/disp/story.mpl/business/4520207.html

Exxon Mobil breaks its own record
Profit is the most ever earned by a U.S. company in a single year
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

Energy earnings Exxon Mobil Corp. last year surged past its own record for the most profit ever earned by a U.S. company in a single year.

If it were a country, its 2006 profit would place it behind the gross domestic product of Kenya and ahead of Cambodia.

Wall Street expected the Irving-based oil behemoth to outdo its 2005 record of $36.1 billion in annual profit, but the company went even further. Oil prices that reached a summit of more than $77 a barrel in July largely drove the company's yearly net income to $39.5 billion  about $2.5 billion more than a consensus of analysts anticipated.

Excluding a tax benefit, Exxon Mobil, which has 16,732 workers in Houston, earned $39 billion last year, still dwarfing the $25.4 billion in annual income of the world's No. 2 oil company, Royal Dutch Shell, based in The Hague. Yearly revenue was $377 billion, $7 billion higher than in 2005.

Such numbers illustrate Exxon Mobil's sheer size, said Fadel Gheit, an oil analyst with Oppenheimer & Co. in New York. The company produces more oil than Kuwait, he said.

"It's a unique company in the way that it always outperforms," Gheit said after Exxon Mobil released results on Thursday. "It's like an athlete that never leaves the training room, whether it's off-season or in-season. They're always in shape."

London-based No. 3 BP is scheduled to release results next week, while San Ramon, Calif.-based No. 4 Chevron Corp. will do so today.

Exxon Mobil's quarterly results, however, reflected expectations of lower earnings after energy prices declined from lofty post-2005 hurricane levels. Oil prices ended the year $16 below their summer high, and natural gas prices were half their December 2005 high of $15 per million British thermal units.

Quarterly net income fell 4 percent to $10.2 billion, compared with $10.7 billion a year ago. Excluding the tax benefit, fourth-quarter income was $9.8 billion. Still, results blew past the $8.8 billion anticipated by analysts surveyed by Thomson Financial.

Quarterly revenue was $90 billion, down from $99 billion in the year-ago period.

Investors showed little reaction to Exxon Mobil's results. The company's shares closed up 98 cents, or less than 2 percent, at $75.08 Thursday on the New York Stock Exchange. Shares have traded in a 52-week range of $73.81 to $75.28.

Last week Houston-based ConocoPhillips, the world's fifth-largest oil major, showed a similar pattern with a 14 percent increase in net income for the year and 13 percent drop in quarterly net income.

Despite the dip in earnings, Exxon Mobil's per-share price in the quarter rose to $1.76 from $1.71 in light of its aggressive share buyback program. Excluding the tax benefit, the per-share price was $1.69 compared with $1.65.

Rex Tillerson, Exxon Mobil's chairman and CEO, said the company increased capital and exploration spending by 12 percent to nearly $20 billion in 2006. Those efforts fueled a rise in production for 2006 of 172,000 barrels of oil equivalent per day, or 4 percent, and a slight increase in natural gas production of 83 million cubic feet per day to 9.3 million cubic feet per day.

But the company didn't sit on the rest of its $52.4 billion in cash flow from operations and asset sales. Exxon Mobil distributed about $7 billion in dividends and spent the rest gobbling up shares.

"Exxon spent half its entire cash flow just buying its stock this year," said John Olson, an analyst with Sanders Morris Harris in Houston.

"Shrinking equity with surplus funds is a very common phenomenon, but it happens to be done a little bit more dramatically with Exxon because they had a hard time getting their spending over $20 billion this year. It's a good secondary use of funds, and it helps support the stock price because they are always in there buying stock."

Including impact of asset sales and entitlements, oil production fell by 1 percent in the quarter. Natural gas production also fell to 9.3 million cubic feet per day from 9.8 million cubic feet per day because of lower European demand and impact from mature field declines.

But Citigroup analyst Doug Leggate called Exxon Mobil "remarkably resilient" amid falling commodity prices, noting lower gas prices led to improved margins for the company's chemicals segment.

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/4520210.html

Shell breaks away from pack with higher quarterly results
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GRAPH of Energy Earnings
http://images.chron.com/photos/2007/02/02/bz02_02___bz0202profit/bz02_02___bz0202profit.jpg

Royal Dutch Shell differentiated itself from its Big Oil peers with a 21 percent jump in quarterly net income and a slight increase in full-year results.

But Marathon Oil Corp. followed the pattern of Exxon Mobil Corp. and ConocoPhillips  a drop for the quarter and a sizable gain for the year.

Royal Dutch Shell and Marathon reported fourth-quarter and year-end 2006 results Thursday alongside Exxon Mobil.

So far, most large oil companies are reporting increased profits for 2006 because of high energy prices last year. But quarterly results have dropped because oil ended the year at $61 and natural gas prices were half their December 2005 high of $15 per million British thermal units.

Royal Dutch Shell said its quarterly income of $5.3 billion, up from $4.4 billion in 2005's fourth quarter, stemmed largely from asset sale gains and contract valuations that offset higher operating costs and lower U.S. natural gas prices.

For the year, Royal Dutch Shell, based in The Hague, earned $25.4 billion, up 1 percent from $25.3 billion in 2003. Production rose 4 percent to 3.6 million barrels of oil equivalent per day for the quarter, though it fell 1 percent to 3.5 million barrels of oil equivalent per day for the year.

Marathon

Houston-based Marathon earned $1.1 billion, or $3.06 per share, a 17 percent drop from $1.3 billion, or $3.43 per share, in the fourth quarter of 2005 because of lower natural gas prices and refining margins. Excluding one-time items, Marathon earned $838 million, or $2.38 per share, compared with $1.3 billion, or $3.61 per share, in the year-ago period.

Either way, Marathon exceeded Wall Street expectations. Analysts surveyed by Thomson Financial expected earnings of $2.26 per share for the quarter. For the year, Marathon earned $5.2 billion, or $14.50 per share, up from $3 billion, or $8.44 per share, in 2005.

Quarterly revenue was $14 billion, compared with $17.2 billion in the year-ago period. Revenue for the year was $65.4 billion, compared to $63.3 billion.

Sales volumes for the quarter averaged 357,000 barrels of oil equivalent and averaged 365,000 barrels of oil equivalent per day for the year.

Apache

Also Thursday, Houston-based independent oil and gas producer Apache Corp. released results. While the larger companies that have exploration and production, refining, and chemical segments largely overcame rising industry costs, Apache, which focuses on exploration and production, felt the sting. Apache said the firm's 2006 earnings reached $2.55 billion, or $7.64 per share, compared with $2.6 billion, or $7.84 per share, in 2005.

Lower natural gas prices pushed Apache's quarterly earnings to $519 million, or $1.56 per share, from $787 million, or $2.35 a share, a year ago. Analysts expected earnings of $1.60 per share.

"They basically have no shock absorbers at all," said analyst Fadel Gheit with Oppenheimer & Co. "That's the difference between an integrated company and a refining company or a producing company."

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/4520211.html

Annual profit sets a record for Valero
Associated Press

SAN ANTONIO  Valero Energy reported Thursday its profit fell 17 percent in the fourth quarter amid lower revenue and reduced refining margins, but it still managed to post its biggest annual profit.

Valero earned $1.11 billion, or $1.80 per share, in the quarter, down from $1.34 billion, or $2.06 per share, in 2005. Results in 2005 reflected a rise in energy prices following the year's hurricanes.

For 2006, Valero reported profit of $5.5 billion, or $8.64 per share, up from $3.6 billion, or $6.10 per share, in 2005.

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Wall Street Journal
February 2, 2007

BP Sees Alaska Pipeline Construction
Mostly Done By 1H 2008
DOW JONES NEWSWIRES
February 2, 2007 7:33 a.m.
(This article was originally published Thursday)
By Mark Golden
Of  DOW JONES NEWSWIRES
 
SAN FRANCISCO (Dow Jones)--BP PLC's (BP) construction project to replace much of its Alaska pipeline network will be mostly finished by the first half of 2008, company executives said Thursday.

Bob Malone, chairman and president of BP America, described the construction as a two-year project with only a few months of the year allowing for construction. Only during the winter months is the tundra on Alaska's North Slope frozen hard enough for heavy trucks and equipment to operate without damaging the environment.

As a result, almost all of the major construction will be finished by the first half of 2008, a company spokesman said.

BP, which partially shut its giant Prudhoe Bay oil field in August after finding severely corroded pipelines, has described the project as a $150 million to $200 million venture. The company restored full production in October, employing a patchwork of bypass pipelines that required some new construction.

BP in August announced a plan to replace 16 miles of "transit" lines that transport oil from Prudhoe Bay to the Trans-Alaska Pipeline. From there it feeds into U.S. refineries, predominantly on the West Coast. The decision came after government-mandated testing pointed to severe corrosion in the eastern half of the field and after oilfield workers found a small oil spill in that area. The federal pipeline safety regulators ordered the tests after BP reported the largest oil spill in the history of North Slope production in March, also due to pipeline corrosion.

Of the 16 miles of pipe being replaced, BP continues to pump oil through about 10 miles of the transit lines. The company has permanently shut down about three miles of pipeline on each side of the field because of severe corrosion, according to BP and regulators.
 
-By Mark Golden, Dow Jones Newswires; 415-765-6118;
Mark.Golden@dowjones.com   

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The Scotsman
February 2, 2007

http://business.scotsman.com/latest.cfm?id=174182007

BP's U.S. chief sees progress in repairing image
By Adam Tanner

BERKELEY, California (Reuters) - BP North American chairman said on Thursday that the energy firm is making "tremendous progress" in overcoming the problems that have badly damaged its reputation over the past two years.

The company has struggled to rebuild its image after a March 2005 explosion in Texas City, Texas refinery killed 15 workers and the 2006 rupture of a corroded oil pipeline in Alaska spilt oil at BP's flagship Prudhoe Bay field.

"I'm just back from a 21-day road trip," Robert Malone, president and chairman of BP America Inc., told Reuters. "There is tremendous progress in Texas City....Both in the physical repair of the plant, but also it's about the culture change that I see going on."

"We've made real progress in Alaska," he added.

Malone, who is based in Houston, became the head of BP's U.S. business last June charged with revitalising the company.

He visited California on Thursday to announce his firm would commit $500 million (254 million pounds) over the next decade to support an institute based at the University of California, Berkeley and the University of Illinois principally to research biofuels.

BP has been among the first oil companies to acknowledge global warming and has invested huge sums in renewable energy.

Malone said the firm had years of work ahead to implement fully a safety overhaul recommended by an independent commission lead by former U.S. Secretary of State James Baker.

"Instances of a lack of operating disciplines, toleration of serious deviations from safe operating practices, and apparent complacency towards serious process safety risks existed at each of the U.S. refineries," the panel said of BP two weeks ago.

"We've got a lot of work to do. This is a long wavelength," Malone said. "This is five to seven years as you begin to ingrain process safety management across all of your refinery system."

LEGAL WOES CONTINUE

BP still faces lawsuits over the Texas City accident and a federal probe.

"We're cooperating fully with the Department of Justice and their investigation of the incident," Malone said. As far as criminal liability: "We don't have any idea yet, the DOJ is still investigating."

BP settled its last fatality lawsuit from the March 2005 explosion in November, but is still working to settle other cases from the accident that injured 170 people. The firm had set aside $1.6 billion for those settlements following the worst U.S. industrial accident in a decade.

"Our stated intent is to settle those cases," Malone said. "We're in the process of doing that."

The company is still working to restore full operation at the 460,000 barrels-per-day refinery.

"We expect to restore Texas City to full financial performance by the end of 2007," Malone said. "It's currently operating at about one-half capacity, which is about 250,000 or 260,000 barrels per day."

The time frame for returning the refinery to normal operations has frequently been extended by BP.

Malone said the firm was replacing the pipelines in Alaska's North Slope after checking the integrity of existing lines.

"Now we're in the process of replacing those lines over the next two years," he said. "It will take two winter seasons."

(c) Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

This article:
http://business.scotsman.com/latest.cfm?id=17418207

Last updated: 02-Feb-07 00:27 GMT

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Wall Street Journal
February 2, 2007

BP Picks Berkeley, U Illinois For $500MM Biofuel Research
DOW JONES NEWSWIRES
February 2, 2007 7:36 a.m.
(This article was originally published Thursday)
By Mark Golden
Of DOW JONES NEWSWIRES
 
BERKELEY, Calif. (Dow Jones)--BP PLC (BP) selected the University of California, Berkeley, the Lawrence Berkeley National Laboratory and the University of Illinois for a $500 million research program focusing mostly on clean energy.

The new Energy Biosciences Institute, BP said Thursday, will start operating at both universities in the middle of this year. The institute will primarily develop biofuels, like ethanol and fuels from plants other than corn. Secondary research will be on converting heavy hydrocarbons to clean fuels, increasing the percentage of oil and natural gas that are extracted from existing wells and sequestering carbon dioxide, which is the primary greenhouse gas causing global warming.

"This is our generation's moon shot," UC Berkeley Chancellor Robert Birgeneau said at a press conference here.

Initially, BP will allocate 80% of the money to UC Berkeley and the national laboratory, with 20% going to the University of Illinois at Urbana-Champaign. Over time, though, that proportion may change depending on research decisions.

"We are joining with some of the world's best science and engineering talent to meet the world's demand for low carbon energy," said Bob Malone, president of BP America.

Up to 50 BP staff will work with faculty and researchers at the two universities. The company and the universities will share governance of the institute and any resulting patents.

While the people involved described the research as "big science," they said it will all be focused on developing commercially viable applications. Biological sciences have achieved a great deal in medicine, but to date they haven't contributed much to energy, said BP's chief scientist, Steven Koonin.

California Gov. Arnold Schwarzenegger, who also spoke at the press conference, said the research institute is a perfect complement to California's landmark climate change law to cut greenhouse gas emissions and its new rule on low-carbon gasoline.

"California is the leader in the clean-energy revolution," said Schwarzenegger, who put $40 million into his proposed state budget for a new building on the Berkeley campus to house the institute.

The University of Illinois was chosen as a partner due to its existing biofuels research and proximity to the agricultural feed stocks.

"Within 10 years we'll be able to produce enough energy from our own natural resources to dramatically cut our dependence on foreign energy and help fight global warming," said Illinois Gov. Rod Blagojevich at the press conference.

The institute will determine which plants are best for making biofuels and how those plants can best be grown. Cellulosic fuel production - still in its infancy - breaks down the inedible parts of plants or entire plants into sugars which are then fermented into ethanol.

However, BP hasn't stipulated to the institute any timeframe for delivery of commercial results, said Malone.

The BP executive defended the seemingly awkward pairing of clean energy and enhancing production at oil wells. "We've been clear that there are two types of work here," he said. "They are both good investments."

Also, it is expected that much captured carbon dioxide will be permanently stored in depleted oil and gas reservoirs, which in turn should increase the amount of fuel extracted.

With current production technology, only 20% to 70% of the oil contained in most reservoirs is ever extracted. The institute will explore the possibility of using biological methods to improve recovery rates.

-By Mark Golden, Dow Jones Newswires; 415-765-6118;
Mark.Golden@dowjones.com

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Anchorage Daily News
February 1, 2007

http://www.adn.com/money/industries/oil/story/8606434p-8499099c.html

Exxon Valdez oil won't vanish soon
FEDERAL STUDY: Crude from 1989 spill will continue to foul beaches for decades.
By RACHEL D'ORO
The Associated Press
Published: February 1, 2007
Last Modified: February 1, 2007 at 03:21 AM

EXXON VALDEZ Study
http://www.pubs.acs.org/cgi-bin/sample.cgi/esthag/asap/html/es0620033.html

The crude oil that lingers in Prince William Sound and the Gulf of Alaska from the nation's largest tanker spill is likely to be present for many years, a new federal study released Wednesday concludes.

The estimated 85 tons of oil -- or more than 26,600 gallons of the 11 million gallons spilled -- is declining by about 4 percent a year in the Sound and likely even slower in the Gulf, according to research chemist Jeffrey Short with the National Oceanic and Atmospheric Administration.

At that rate of decline, oil could persist for decades below the surface of some beaches, Short and colleagues said in their report.

The tanker Exxon Valdez spilled the oil almost 18 years ago after running aground on a reef, fouling hundreds of miles of Alaska shoreline.

Short's study is to be published in the Feb. 15 edition of Environmental Science & Technology, the journal of the American Chemical Society.

"Such persistence can pose a contact hazard to intertidally foraging sea otters, sea ducks, and shorebirds, create a chronic source of low-level contamination, discourage subsistence in a region where use is heavy, and degrade the wilderness character of protected lands," researchers wrote in their conclusion.

The study was partially funded by the Prince William Sound Regional Citizens' Advisory Council, which was formed by federal mandate after the Exxon Valdez spill to monitor industry operations. Researchers, however, said their findings and conclusions were not influenced by that sponsorship.

Exxon Mobil Corp. spokesman Mark Boudreaux said the Irving, Texas-based company's Valdez team planned to closely review the findings.

"Based on our initial review of the report, there is nothing newsworthy or significant in the report that has not already been addressed," he said. "The existence of some small amounts of residual oil in Prince William Sound on about two-tenths of 1 percent of the shore of the Sound is not a surprise, is not disputed and was fully anticipated."

Boudreaux said Exxon has supported more than 350 independent studies whose scientists have found no evidence of significant long-term impact from the spill.

The Exxon Valdez ran aground March 24, 1989, emptying 11 million gallons of crude oil into Prince William Sound. The spill contaminated more than 1,200 miles of shoreline and killed hundreds of thousands of seabirds and marine animals.

Short and the other researchers looked at subsurface oil from 10 randomly selected beaches in the spill area. Data from the study were collected in 2005 and compared to samples taken from the same beaches for a 2001 study.

Earlier research from other spills showed that oil could hold toxins for years if embedded in oxygen-depleted sediments where minimal weather-caused disintegration occurs, according to the new report. In the Valdez spill study, researchers found that thick, emulsified oil -- called "oil mousse" -- resists weathering and thus can be preserved in oxygen-containing sediments.

"Our results show it's not changing much," Short said. "What's left is going to be there a long time."

Exxon estimates it has paid $3 billion in cleanup costs, government settlements, fines and compensation. But it still has not paid an unresolved punitive damage judgment, originally set for $5 billion by a federal jury in 1994.

The case has since bounced between the federal court and the 9th U.S. Circuit Court of Appeals. In December, the appeals court ruled that the oil giant must pay $2.5 billion to compensate thousands of fishermen and others affected by the spill.

Earlier this month, Exxon asked the court to reconsider its decision.

John Devens, executive director of the Prince William Sound Regional Citizens' Advisory Council, said Exxon's prolonged stalling were unconscionable considering the social, economic and environmental damages.

"It's very difficult to understand why Exxon isn't a better industrial citizen," Devens said.

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Fairbanks News Miner
February 1, 2007

 
http://newsminer.com/2007/02/01/4881/

Feds: Gas line prospects dimmer
By Sam Bishop
News-Miner Washington Bureau
Published February 1, 2007

WASHINGTON  Federal energy regulators say the chances of an Alaska natural gas pipeline being built are more remote today than a year ago.

The Federal Energy Regulatory Commission, in its third report on the proposed line in the last 18 months, said the success of the line rests on Gov. Sarah Palin’s “fresh competitive approach.”

FERC must report on the gas line to Congress every 180 days under legislation passed in 2005.

“The federal government is ready to act,” the commission said. “However, no pipeline application has been developed and the prospects of an application are more remote than a year ago. Over the past year, the schedule for an Alaska gas pipeline has slipped considerably.”

Palin spokeswoman Meghan Stapleton said any claim that the pipeline schedule has slipped is based on the assumption that former Gov. Frank Murkowski’s proposed deal with the North Slope gas-owning companies was viable in the first place.

Murkowski’s plan went nowhere with the Legislature, she said. She noted that one of the Murkowski administration’s top consultants, Pedro van Meurs, also had serious concerns with the deal. Van Meurs said the locked-in tax rates in the deal treated Alaska’s government like a “banana republic.”

“Our plan, we feel, pushes things forward,” Stapleton said.

The FERC report briefly chronicles the demise of Murkowski’s efforts and reviews Palin’s new approach.

“Gov. Palin has stated that she intends to re-examine all aspects of the state’s role in fostering an Alaska natural gas pipeline,” the report said.

Palin wants a new state law, FERC summarized, that “would spell out what incentives the state was willing to offer and what it would demand in return.”

“The main obstacle to progress on an Alaskan gas pipeline is the failure to resolve state issues necessary before a project sponsor will commit to go forward,” the report concludes. “The fresh competitive approach announced by the new governor must be successful if Alaska gas is to be part of the nation’s energy supply solution anytime in the coming years.”

Sen. Lisa Murkowski’s spokesman, Kevin Sweeney, said the senator doesn’t take issue with the report’s characterization of a slippage. Sen. Murkowski sits on the Senate Energy and Natural Resources Committee, which receives the FERC report.

If Alaska’s gas doesn’t get to market soon, other suppliers will fill the gap, Sweeney said.

“Clearly, the longer we wait, the worse off we’re going to be,” he said.

The report noted several developments in recent months:

* The state revised its oil production tax in August. The change was to be the first step in then-Gov. Murkowski’s deal with the major producers proposing to build a gas line.

* Voters in November defeated a ballot measure to tax undeveloped gas reserves under state leases held by oil companies.

* The state terminated Exxon Mobil’s leases at Point Thomson, a large gas field east of Prudhoe Bay, for failure to meet work obligations. FERC said the company “may seek” legal action. The company also “could reapply” for the leases, the commission said.

* The Bush administration hired a federal pipeline coordinator, Drue Pearce, a former state senator and former top Alaska adviser in the Department of the Interior.

* The North Slope producers continue their court fight with FERC, the state and independent oil and pipeline companies over whether the commission can require the producers to design a pipeline to make room for gas owned by other companies.

* Canada’s Joint Review Panel continues to hold hearings on the proposed gas line from the Mackenzie River delta, which is viewed by some as in competition with the Alaska project.

* FERC staff traveled along Alaska’s Dalton Highway to view the route.

Contact staff writer Sam Bishop in Washington, D.C., at (202) 662-8721 or
sbishop@newsminer.com .

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Seattle Post Intelligencer
February 1, 2007

http://seattlepi.nwsource.com/business/301963_oil01.html

Shell Oil president says energy abounds
Man-made obstacles are key problem, he adds
By BILL VIRGIN
P-I REPORTER

The challenge in meeting increasing demand for energy isn't coming up with new sources of supply, Shell Oil President John Hofmeister believes.

"There's plenty of energy to be had," Hofmeister told a Greater Seattle Chamber of Commerce luncheon at the Washington Athletic Club Wednesday. That energy will come from current and emerging-technology options ranging from offshore oil and gas deposits to Canadian oil sands, Western U.S. oil shale, coal-derived synthetic gas, biofuels, hydrogen fuel cells, wind and solar, he said.

But Hofmeister warned, "The obstacles to getting it are man-made."

Hofmeister, who is on a 50- city speaking tour to discuss energy security, said the primary obstacles are the battles on everything from allowing oil and gas drilling on the outer continental shelf to siting terminals for importing liquid natural gas.

The information-age economy still depends on industrial infrastructure to deliver energy to make it run, he said. "Without energy there's no entertainment," he said. "Without energy, there's no servers running the Internet."

Hofmeister said the country needs a major educational effort so that people understand the crucial role energy plays in the economy and what's necessary to provide it.

"We have to come to grips in a democracy with the fact that energy is the sustaining enabler of our lifestyle and our economic prosperity," he said. Elected officials will decide whether those facilities get built, but people should understand if they don't want them, energy supplies such as liquid natural gas "will go elsewhere."

Hofmeister said another major obstacle is the infrastructure cost for delivering new fuels such as ethanol to consumers. "Today's infrastructure is a product of 100 years" of investment, he said. "How are we going to manage the infrastructure development" required for introducing more ethanol into the nation's motor-fuel system?

Although Shell has a particular interest in cellulosic ethanol (derived from wood chips, plant stalks and other biomass instead of corn), Hofmeister is wary of President Bush's call for a dramatic increase in the production of the fuel. Not only is the infrastructure not in place to handle the higher target, it's not clear yet how consumers will accept a fuel with less energy content than comparable volumes of gasoline and what they'll pay for it.

Shell also is doing development work on the technology of hydrogen fuel cells, which will require yet another system. "I'm not sure consumers will pay for three competing infrastructures," he said.

But Hofmeister said Shell sees itself as a broad-based energy and fuels company. "We're not particularly partial to any one," as long as the public wants to buy it, he added.

Shell operates a refinery near Anacortes. "It's a very well-run, well-managed and efficient operation," Hofmeister said. The refinery mainly processes Alaskan crude, and though that supply has been declining, Shell and Hofmeister are hoping for new supplies from the Beaufort Sea.

Hofmeister also said Shell is shifting its retail business model to one in which local companies develop outlets. Although it's up to those local wholesalers and distributors whether to add stations, Hofmeister said Washington "to us is a growing marketplace. We like to be present in growing marketplaces."

P-I reporter Bill Virgin can be reached at 206-448-8319 or
billvirgin@seattlepi.com

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Houston Chronicle
February 1, 2007

http://www.chron.com/disp/story.mpl/business/energy/4517417.html

Exxon Mobil nets largest annual profit in U.S. history
By JOHN PORRETTO
Associated Press

HOUSTON - Oil giant Exxon Mobil Corp. today posted the largest annual profit by a U.S. company - $39.5 billion - even as earnings for the last quarter of 2006 declined 4 percent.

The 2006 profit topped Exxon Mobil's own previous record of $36.13 billion set in 2005.

Revenue at the world's largest publicly traded oil company rose to $377.64 billion for the year, surpassing the record $370.68 billion Exxon posted in 2005.

"Exxon Mobil continued to leverage its globally diverse resource base to bring additional crude oil and natural gas to market,'' Rex W. Tillerson, chairman of the Irvin, Texas-based company, said in a statement.

Exxon Mobil's record annual earnings followed a year of extraordinarily high energy prices as crude oil topped $78 a barrel in the summer - driving up average gasoline prices in the United States to more than $3 a gallon. Prices retreated later in the year.

The fourth-quarter decline reflects lower profits from Exxon's refining and marketing operations and a sharp dropoff in natural gas prices.

Results for the October-December period mimicked those of U.S. competitor ConocoPhillips, which last week said its fourth-quarter profit fell 13 percent - also primarily because of lower natural gas prices and refining margins. But hefty earnings earlier in the year helped Houston-based ConocoPhillips record its most profitable year on record, earning $15.55 billion.

ConocoPhillips is the nation's third-largest integrated oil company behind Exxon Mobil and Chevron Corp., which is scheduled to report 2006 results Friday.

Also today, Royal Dutch Shell PLC reported a 21 percent rise in fourth-quarter earnings, buoyed in part by high energy prices and the sale of some operations. Net profit came to $5.28 billion, up from $4.37 billion. But excluding divestitures and other one-time items, Shell's earnings from oil production fell 3 percent, while fourth-quarter sales were flat at $75.5 billion.

The company, based in Amsterdam, Netherlands, also said it had taken important steps to bulk up its proven reserves, which were revealed to have been inflated in a 2004 accounting scandal.

At Exxon Mobil, profit for the fourth quarter of 2006 declined to $10.25 billion from the $10.71 billion Exxon earned in the 2005 quarter - a record quarterly profit for any U.S. public company. That best-ever profit came when the price of both natural gas and crude oil skyrocketed in the wake of hurricanes Katrina and Rita, which damaged wells, pipelines and refineries in the key energy-producing Gulf of Mexico.

Analysts largely have predicted declines in fourth-quarter earnings for the big U.S. oil companies because of the moderation in prices.

Exxon Mobil's per-share earnings in the fourth quarter rose to $1.76 from $1.71 as the company reduced the number of shares outstanding. Wall Street analysts polled by Thomson Financial had forecast earnings of $1.51 a share.

Excluding special items, Exxon Mobil earned $9.84 billion, or $1.69 a share, in the final three months of 2006.

Quarterly revenue fell to $90 billion from $99 billion in the year-ago period.

For the year, Exxon earned $6.62 per share in 2006 versus $5.71 per share in 2005.

Exxon shares slipped 10 cents to $74 in morning trading on the New York Stock Exchange. They have tarded in a 52-week range of $56.64 to $79.

---
  AP Business Writer Lauren Villagran in New York and Associated Press Writer Toby Sterling in Amsterdam, Netherlands contributed to this report.

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Wall Street Journal
February 1, 2007

Exxon Mobil Posts Big Profit
For Year Despite 4th-Quarter Slip
Shell's Net Profit Rises 21% on Strong Oil Prices
By KEVIN KINGSBURY AND BENOIT FAUCON
February 1, 2007 8:40 a.m.

Exxon Mobil Corp. posted a 4.3% drop in fourth-quarter net income amid lower energy prices, though the company had the largest annual profit in U.S. history.

Meanwhile, Anglo-Dutch energy giant Royal Dutch Shell PLC said net profit rose 21% in the fourth quarter on the back of high oil prices.

Exxon, the world's largest publicly traded oil company, reported net income of $10.25 billion, or $1.76 a share, for the fourth quarter, compared with $10.71 billion, or $1.71 a share, a year earlier. Per-share earnings rose because Exxon's recent stock-buyback binge. Excluding gains, earnings were $1.69 a share. Analysts had expected $1.51 a share, according to Thomson Financial.

Revenue fell 9.4% to $90.03 billion from $99.34 billion.

For the year, Exxon's net income was a record $39.5 billion, up 9.3% from 2005, while revenue increased 1.9% to $377.64 billion.

Upstream earnings, from the company's oil-and-gas production business, dropped 12% to $6.22 billion amid lower natural-gas realizations and weaker volume driven by lower European demand.

Earnings at the downstream business, which buys crude oil and converts it to products like gasoline, dropped 18% to $1.96 billion. Lower refining and marketing margins more than offset the earnings benefit related to Exxon's continuing efforts to efficiently manage inventories.

Chemical earnings excluding items jumped 49% to $1.24 billion amid higher volumes and profit margins. Offsetting the earnings weakness in Exxon's petroleum business was a 24% drop in income-tax payments to $5.31 billion.

The Irving, Texas, company has been a cash-generating machine as crude-oil prices have surged in recent years. For 2006, Exxon distributed $32.6 billion to shareholders through dividends and share purchases, up 41% from 2005.

Exxon will hold a conference call at 11 a.m. EST.

Shell's Net Jumps 21%

For Shell, net income was $5.28 billion, or 83 cents a share, up from $4.37 billion, or 66 cents a share, a year earlier. Revenue was flat at $75.5 billion.

Shell also posted a record full-year net profit as oil companies are still benefiting from historically high crude prices but are facing the combined challenge of industrywide cost inflation and governments' pressure to sign less favorable contracts. Shell, one of the world's largest oil companies by market capitalization, said net income for the year ended Dec. 31 was $25.44 billion, up 0.5% from $25.31 billion in the prior year, which had previously been the company's record profit figure.

Shell said its reserves replacement ratio for group companies in 2006 is expected to be 165% to 185%, excluding oil sands. The ratio provides an indication of an oil company's future growth. The positive replacement level follows the five downward revisions to reserves Shell made in 2004 and 2005, when it cut more than a third of previously booked reserves.

In 2006, Shell booked several large projects, including the 140,000-barrel-a-day Pearl gas-to-liquids project in Qatar, expected to produce three billion barrels of oil equivalent over its lifetime. Shell said last year, though, that it was in talks with the U.S. Securities and Exchange Commission to determine whether the company will be able to book reserves from the project.

Shell said last year that its 2005 reserves replacement ratio was expected to be in the range of 65% to 75%, for group companies and without associates. A Shell spokesman Wednesday couldn't say what the final ratio was for 2005.

Write to Kevin Kingsbury at kevin.kingsbury@dowjones.com  and Benoit Faucon at benoit.faucon@dowjones.com 

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UPDATE:
BP To Remove Part Of Prudhoe Bay Pipeline
DOW JONES NEWSWIRES
January 31, 2007 3:17 p.m.
(Adds comments from BP spokesman that the removal won't have any effect on production.)
 
ANCHORAGE, Alaska (AP)--BP PLC plans to remove a 40-foot section from a major Prudhoe Bay pipeline to learn more about leaks that led to the partial shutdown of the largest U.S. oil field last summer, a BP spokesman said Wednesday.

A plan submitted by BP PLC (BP) to federal regulators said the pipe will be cut into smaller pieces for study of corroded spots, sediment buildup and scaly deposits, which are thought to have contributed to the corrosion outbreak.

The operation is expected to start Thursday, BP spokesman Daren Beaudo said. Federal pipeline regulators will be on hand to "witness the activities," according to the correspondence.

"The main goal is to find out the root cause," said James Wiggins, a spokesman for the U.S. Pipeline and Hazardous Materials Safety Administration. The answer could prevent future pipeline ruptures, he said.

Beaudo said the company is cooperating fully in handing over the pipe section to regulators.

"They said they wanted it and we said we'd do it," he said. "We're all interested in the corrosion mechanism."

The badly corroded, aboveground pipeline has been out of service since it leaked in August, and BP plans to demolish it.

The removal of the pipeline section won't have any effect on production, since most of the oil produced in the eastern side of Prudhoe Bay has been bypassed into another pipeline since the line was shut down, Beaudo said.

BP runs Prudhoe Bay on behalf of itself and other owners including Exxon Mobil Corp. (XOM) and ConocoPhillips (COP).

The problem pipes ferry oil from the vast field to the larger trans-Alaska pipeline, which carries the crude 800 miles south to the tanker port at Valdez.

The transit lines are old, installed before North Slope oil production began in 1977.
(Angel Gonzalez of Dow Jones Newswires contributed to this story)

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BP to Sell Coryton Refinery
To Petroplus for $1.4 Billion
By BROOKE DONOVAN and ANITA GREIL
February 1, 2007 5:02 a.m.

LONDON -- Petroplus Holdings AG said Thursday that it plans to buy United Kingdom oil major BP PLC's Coryton refinery for $1.4 billion, in a deal that will increase its processing capacity by more than half.

Petroplus, a Switzerland-based oil refiner and wholesaler, plans to finance the acquisition primarily with debt, but is also considering the issuance of up to six million shares. The company expects the takeover to result in a "significant increase" to its earnings and operating cash flows. The total sale price remains unknown as Petroplus will pay $1.4 billion plus the value of hydrocarbons at the closing of the deal, which is expected before the end of June.

For BP, the sale is part of its strategy to streamline and concentrate its downstream assets. BP will enter a long-term supply agreement with Petroplus to supply BP's U.K.-based retail and other businesses.

Petroplus shares surged early Thursday as analysts welcomed the acquisition, which they expect to boost earnings and cash flow. In morning trading, Petroplus rose 8.1% to 85.90 Swiss francs ($106.84), in a higher broader market, while BP was up 0.8% at £53.85 ($105.79).

"The acquisition is consistent with the acquisition-driven growth strategy of Petroplus," said Damien Weyermann, analyst at Swiss private bank Vontobel in Zurich, in a note to investors. "The refinery is a good fit from a strategic point of view."

People familiar with the matter had previously said that Petroplus and BP were in talks about the sale of the refinery.

Coryton is a major refinery in the southeastern U.K., and the primary supplier of gasoline, heating oil and jet fuel in this market. The refinery supplies London's Heathrow and Gatwick airports with jet fuel via direct pipelines. In 2005, BP sold two European refineries -- in Lavera, France, and Grangemouth, Scotland -- as part of the $9 billion divestment of its petrochemical unit to Ineos PLC.

Thomas D. O'Malley, chairman and chief executive of Petroplus, described the 172,000-barrel-a-day Coryton refinery as "a very significant addition to Petroplus's current portfolio of North Sea refining assets."

John Manzoni, chief executive of BP's refining and marketing business, said the sale enables BP to concentrate on "continually improving our remaining European refineries so that they remain top-class assets."

Write to By Brooke Donovan at brooke.donovan@dowjones.com  and Anita Greil at anita.greil@dowjones.com 

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BP Names Andy Inglis As Managing Director Of Group

DOW JONES NEWSWIRES
February 1, 2007 7:44 a.m.
 
Edited Press Release
 
LONDON (Dow Jones)--BP said Thursday that it has appointed Andy Inglis as a managing director of the BP Group.

Inglis also succeeds Tony Hayward as chief executive of BP's Exploration & Production (E&P) business, the company said.

Both appointments are with immediate effect.

Inglis joined BP in 1980 and has held a number of E&P posts. He was most recently deputy chief executive of E&P and a member of BP's group executive team.

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BP To Invest $2.4B In San Juan Basin Over Next 13-Years
DOW JONES NEWSWIRES
February 1, 2007 5:55 a.m.
Edited Press Release
 
LONDON (Dow Jones)--BP said Thursday that it will invest up to $2.4 billion over the next 13 years to increase its share of ultimate recovery of coalbed methane natural gas from the San Juan Basin of southwestern Colorado by an estimated 1.9 trillion cubic feet.

The company anticipates a steady development program that will increase current BP net production of 425 million cubic feet per day by more than 20 percent, and maintain production above present levels for more than a decade, it said.

The project includes funding for the drilling of more than 700 new wells for which BP has obtained regulatory infill approval, and associated field facilities.

To minimize environmental impact, BP plans to drill nearly all of the new wells from existing well pads, using existing roads and pipelines where possible.

The San Juan Basin project is part of a 10-year, over $45 billion U.S. oil and gas exploration and production program that includes major investments in the deepwater Gulf of Mexico, Alaska and the Lower 48 states.

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3rd UPDATE:
Shell Posts Record Pft,Sees Replaced Reserves
DOW JONES NEWSWIRES
February 1, 2007 7:17 a.m.
(This updates an item published at 0926 GMT, adding quarterly revenue, Nigeria background, analyst comment and impact of Sakhalin-2 stake reduction on reserves.)
By Benoit Faucon
Of DOW JONES NEWSWIRES
 
LONDON (Dow Jones)--Royal Dutch Shell PLC (RDSB.LN) Thursday posted a record annual net profit on the back of high oil prices and broke a string of disappointments on its reserves, saying it expects to have more than replaced the oil and gas reserves it pumped in 2006.

A dilution of its stake in the Russian Sakhalin-2 project, however, could cut some 1.1 billion barrels of oil equivalent off its fully consolidated reserves in 2007, the company announced Thursday.

Shell said net capital spending will be around $22 billion to $23 billion in 2007 and that Nigeria's unrest was hurting its production.

The disclosures come as oil companies are still benefiting from historically high crude prices but are facing the combined challenge of industrywide cost inflation and governments' pressure to sign less favorable contracts.

The Anglo-Dutch major, one of the world's largest oil companies by market capitalization, said net income for the year ended Dec. 31 was $25.44 billion, up 0.5% from $25.31 billion one year earlier, the company's previous record profit figure.

Fourth-quarter 2006 net income was $5.28 billion, or 83 cents a share. The figure was 21% higher than the $4.37 billion, or 66 cents a share, posted for fourth-quarter 2005.

Fourth-quarter revenue was stable compared with the year-earlier period at $75.50 billion. Shell's numbers conform to international financial reporting standards, or IFRS, which differ from U.S. generally accepted accounting principles.

The quarterly results reflected a net gain of $515 million, compared with a net gain of $34 million in the year-earlier period. The figure reflected asset divestments in the U.K. and Norway and a gain of $276 million in the exploration and production division, related to changes in valuation of certain U.K. gas contracts.

In a statement, Shell's Chief Executive Jeroen van der Veer said: "In 2006, we saw good operational and financial performance in Shell."

Production of oil and natural gas, the cornerstone of the company's earnings, was 3.65 million barrels of oil equivalent a day in the fourth quarter, up from 3.50 million boe/d in the same period of 2005.

Some analysts had expected a drop in output.

"Hydrocarbon production was underpinned by the production restart from the Mars platform in the (U.S. Gulf of Mexico), growth in (liquefied-natural-gas output) and deep water Nigeria," Van der Veer said in the statement. "However, onshore Nigeria we continue to have major security-related concerns."

Unable to break a deadlock with the Nigerian militants, who demand that a greater share of oil revenues be distributed to the local population, Shell has been unable to restart shut-down operations in the Western Delta and said it isn't committing to a resumption date.

De Vries & Co analyst Bert van Hooghenhuyze said Shell's quarterly figures were better than expected, for both upstream and downstream. "New production and the fact that production in the Gulf of Mexico is fully resumed more than compensated for the company's problems in Nigeria," he said. In a separate strategy update Thursday, the company said it now expects overall oil and gas production in 2007 to be in the range of 3.3 million to 3.5 million barrels of oil equivalent a day, "in the event that Nigerian volumes remain deferred for the rest of the year."

Shell's average production in 2006 was 3.47 million boe/d.

Shell mentioned its planned buyout of Shell Canada minority shareholders in citing the latest estimates for net capital spending.

"Taken together with the purchase of the minority shares in Shell Canada Limited, the company now anticipates that net capital spending will be around $22 billion to $23 billion in 2007, compared to about $21 billion in 2006," Shell said.

Before the Canadian buyout was announced, the company said capital spending would be around $21 billion in 2007, though it wasn't clear whether that figure included acquisitions and divestments.

Shell also said it expects asset sales to accelerate in 2007 to some $9 billion.

Shell is already actively rationalizing its downstream, or refining and marketing, activities to improve its profitability. Monday, it agreed to sell the 98,000-barrel-a-day Wilmington refinery in California and related assets to Tesoro Petroleum Corp. (TSO) for $1.63 billion. The company is also considering selling off three refineries it controls in France.

Shell said its reserves replacement ratio for group companies and equity-accounted entities in 2006 is expected to be 150% including oil sands, a figure it said compares with a ratio of 78% in 2005. The ratio provides an indication of an oil company's future growth.

The positive replacement level follows the five downward revisions to reserves Shell made in 2004 and 2005, when it cut more than a third of previously booked reserves.

But a deal reducing Shell's stake in the Sakhalin-2 oil and gas project could cut its 2007 fully consolidated reserves by 1.1 billion barrels of oil equivalent, based on reserves booked for the project in 2006, a spokesman said.

In December, Shell signed a deal allowing Russian state-owned OAO Gazprom (GSPBEX.RS) to buy 50% plus one share in the project for an overall amount of $7.45 billion in cash, reducing its own stake from 55% to 27.5%. Shell's net share of the payment will be $4.1 billion.

The spokesman said Shell's reserves headline figure consolidates 100% of a joint venture if it owns more than 50% but only the percentage of its equity if it loses majority control.

The Sakhalin-2 development held 1.5 billion boe in 2006 for the entire project, the company said. That means Shell could lose 1.1 billion boe by reducing its stake to 27.5%, the spokesman added.

Based on its 55% stake only, however, the company loses only 400 million boe, the spokesman said.

With the addition of Shell Canada's minorities, the company will only have to cut 100 million barrels this year from its reserves on an equity basis, he added.

At 1213 GMT, Shell shares were trading 2.7%, or 46 pence, higher at 1,752 pence.

Company Web site: http://www.shell.com
 
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com