May 2007 News Stories

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Financial Times
May 31, 2007

http://www.ft.com/cms/s/34f4374e-0f14-11dc-b444-000b5df10621.html

Manzoni quits BP after losing race for top spot
By Rebecca Bream in London and Sheila McNulty in Houston
Published: May 31 2007 03:00 |
 Last updated: May 31 2007 03:00

John Manzoni, once seen as a successor to Lord Browne as BP chief executive, is stepping down as the UK oil group's head of refining and marketing to become head of Talisman Energy, the Canadian oil group.

He will be replaced by Iain Conn, whose current responsibilities at BP include the Asia-Pacific, Africa and European regions as well as safety, operations and human resources.

Mr Manzoni's departure comes four weeks after Tony Hayward took over as BP chief executive. He will leave the oil group at the end of August following a three-month handover with Mr Conn.

BP said Mr Manzoni's departure was agreed with the board and declined to give details of any pay-off.

Mr Manzoni has worked at BP for 24 years and has run the refining and marketing operations since 2002.

He had been considered a strong contender to succeed Lord Browne, who stepped down as group chief executive this month after it emerged he had lied in court in an effort to prevent a newspaper publishing details about his personal life.

Mr Manzoni's reputation was tarnished by an explosion at BP's Texas City oil refinery in 2005, which killed 15 and injured 500 in the US's biggest industrial accident in a decade.

Mr Manzoni had board responsibility for the refinery at the time of the explosion.

The US Chemical Safety Board, charged with investigating the blast, said cost-cutting at the refinery had left it vulnerable to the catastrophe.

Its two-year probe uncovered audits and safety reportsrevealing the deterioration at the Texas City site.

The Financial Times reported in February that an internal BP probe into the blast found that Mr Manzoni should have carried out a "much deeper dive" into the true state of the refinery after "clear warning signals" from previous accidents.

The confidential BP report concluded that Mr Manzoni lacked refining experience and had failed to obtain the information needed to understand better BP's biggest refinery and the risk of a serious accident there.

The report cleared Mr Manzoni of "serious neglect or intentional misconduct", but said he should have taken more steps to consider and mitigate the risks long before the disaster occurred.

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Anchorage Daily News
May 30, 2007

http://www.adn.com/news/politics/fbi/story/8931729p-8831947c.html

Judge delays Kohring trial
OCT. 22: Defense says it needs more time to sort through evidence.
By KYLE HOPKINS
Anchorage Daily News
Published: May 30, 2007
Last Modified: May 30, 2007 at 02:27 AM

Hundreds of hours of video recordings, plus hundreds more of audio, added to thousands of pages of documents. As federal investigators silently tracked and secretly taped Alaska politicians and business leaders in a sweeping corruption investigation, they built a digital mountain of evidence, according to testimony in federal court Tuesday.

It's all too much to sift through by July, the defense lawyer for Rep. Vic Kohring told U.S. District Judge John Sedwick.

The judge agreed.

In a brief Anchorage hearing that shed just a little light on the scope of the investigation, Sedwick delayed Kohring's trial more than three months, until Oct. 22.

Kohring, R-Wasilla, is accused of selling his vote on oil taxes last year to the oil field services company Veco Corp. Veco executives Bill Allen and Rick Smith pleaded guilty to conspiracy, bribery and tax charges on May 7.

Prosecutor Edward Sullivan said two computer hard drives full of evidence in the Kohring case include a number of conversations "intercepted" in Suite 604, a reference to Veco's room in Juneau's Baranof Hotel, as well as telephone conversations involving Allen and Smith recorded over 11 months beginning in September 2005.

Kohring has pleaded not guilty and says he's innocent.

"I feel in my heart that things are going to work out just fine for me and I'm going to be exonerated," he said in a phone interview Tuesday.

Kohring called his legal bills "astronomical." He said he recently sold his Wasilla home and may have to sell his home in Beaverton, Ore., to pay legal fees that he expects to top $100,000.

The charges against Kohring say the longtime Valley legislator asked for help paying a $17,000 credit card debt and that he accepted cash from Veco executives.

Kohring said he couldn't answer specific questions about the case before it goes to trial.

"All I can say is that people have to remember that I am innocent until proven guilty," he said.

Kohring's lawyer, John Henry Browne of Seattle, said federal prosecutors gave him a tower of evidence in the corruption case only last week.

Browne said only a fraction of the evidence directly involves Kohring and that in the rest he expects to find ammunition to use in cross-examining Allen and Smith, who are expected to testify against his client.

"The government was probably recording these guys for a reason ... my guess is that this material will contain information that I can use to impeach them when they testify, about their conduct, behavior and general reputation for honesty," Browne said.

Kohring said people still support him and he has refused calls to give up his seat in the Legislature. He said he needs surgery on his neck, which could keep him from attending a possible special legislative session in the fall.

Until Tuesday's delay -- which drew no objection from prosecutors -- Kohring's trial was to begin July 9.

Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.

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http://www.adn.com/news/politics/fbi/story/8929221p-8829429c.html

FBI corruption investigation includes audio, video
By KYLE HOPKINS
Anchorage Daily News
Published: May 29, 2007
Last Modified: May 29, 2007 at 01:13 PM

Evidence in the corruption case against Rep. Vic Kohring, R-Wasilla, includes thousands of pages of documents and hundreds of hours of audio and video recordings, Kohring’s lawyers said today in federal court.

Defense lawyers asked for more time to sift through all that information, and U.S. District Judge John Sedwick agreed, delaying the trial from July 9 until Oct. 22.

Kohring faces bribery and extortion charges. He was originally scheduled to go to trial in early July, but federal prosecutors didn’t fight his request for more time.

Only a fraction of the evidence in the case specifically mentions Kohring, said defense lawyer John Henry Browne. Still, Browne said, he and his staff have to review all evidence - including nine computer discs filled with documents and recordings, plus two hard drives full of information - and there was no way to do that by early July.

“This is a lot of information, to say the least,” Browne said.

Kohring is accused of selling his vote on oil taxes last year to the oil field services company Veco Corp. Veco executives Bill Allen and Rick Smith this month pleaded guilty to conspiracy and bribery charges.

Prosecutor Edward Sullivan said the evidence includes a number of conversations “intercepted” in Room 604, a reference to Veco’s suite in Juneau’s Baranof Hotel, and telephone conversations involving Allen and Smith recorded over 11 months beginning in September 2005.

The short hearing took place in a nearly empty courtroom. Kohring, his lawyers and the federal prosecutors all participated by phone.

Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.
 

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Houston Chronicle
May 30, 2007

http://www.chron.com/disp/story.mpl/business/4846241.html

Exxon Mobil could get an earful
Shareholder proposals up for vote today address emissions, renewables
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

Exxon Mobil could get an earful Pension fund angry over climate strategy Exxon Mobil Corp.'s reticence to invest in renewable and alternative energies beyond research in the short term could dominate its annual shareholder meeting today.

Shareholder proposals up for votes include investment in renewables and adopting goals on reducing greenhouse gas emissions.

Management opposes both as unprofitable or redundant, recommending shareholders reject them as they have similar proposals in past years.

"The corporation's traditional business areas remain critical and promise far greater value than renewables, which currently lack the scale and economic competitiveness of our core business opportunities," the company said in its annual proxy statement.

Exxon Mobil cites its $100 million investment in renewable and alternative energy research at Stanford University when asked about lack of spending on such initiatives.

It does so in the proxy responding to the climate change-related shareholder proposals.

But the Stanford Board of Trustees Advisory Panel on Investment Responsibility, which oversees the university's endowment securities, is voting for the greenhouse gas shareholder proposal.

Kirk Miller, a Stanford engineering alumnus who led a petition drive to get the panel's support for that proposal, said the university's graduates "greatly appreciate" Exxon Mobil's investment in Stanford's Global Climate and Energy Project, which was launched in December 2002.

Exxon Mobil, along with founding corporate sponsors General Electric, Toyota and Schlumberger, agreed to invest a collective $225 million over 10 years for research on renewable and alternative energies, according to the project.

'Walk the walk'

"We believe that GCEP is a very valuable project. However, we ask that our corporate donors walk the walk," Miller said, citing Toyota's Prius hybrid and General Electric's eco-friendly initiatives from solar energy to light bulbs.

The greenhouse gas proposal, by the Sisters of St. Dominic of Caldwell, N.J., notes that Exxon Mobil has made "incremental improvements" in energy efficiency and emissions reductions through cogeneration, advanced lubricants, flaring reductions and carbon capture.

But it says the company's goal to improve energy efficiency by 10 percent through 2012 across its U.S. refining operations doesn't address greenhouse gas emissions.

So the proposal asks Exxon Mobil to adopt quantitative goals for reducing emissions from its products and operations and report to shareholders by September on its plans.

The company's response

Exxon Mobil responded in its proxy that it already discloses information about emissions cuts at its facilities on its Web site and will follow any greenhouse gas laws and regulations.

The company also said that despite its efforts to boost efficiency, emissions will rise with oil and gas production needed to meet ever-growing demand.

"Even with extensive efficiency and emissions improvements, and with policy steps to address emissions, nearly all outlooks project that rising global demand for oil and natural gas will result in larger emissions of greenhouse gases from these sources," the company said.

The renewable energy investment proposal is from Stephen Viederman, former president of the Jessie Smith Noyes Foundation, an environmental group. It pushes Exxon Mobil to invest in and produce renewable energy in addition to fossil fuels.

The company response includes that it's seeking to reduce emissions at its operations. It also cited energy demand outlooks predicting fossil fuels will continue to supply 80 percent or more of the world's energy over the next quarter-century despite growth in renewables such as biofuels, solar and wind energy.

Chief hurdle

Such technologies now depend on subsidies to be profitable, which Exxon Mobil has cited as a chief hurdle to investment. BP, Chevron Corp., Royal Dutch Shell and most recently ConocoPhillips all have varying degrees of investment in renewables and alternatives, in addition to supporting research.

Improved technology that will lead to alternatives that are profitable without subsidies is key, the company said in the proxy.

"We chose to be a founding GCEP sponsor because we are committed to the belief that step-out, game-changing research is required to accelerate the development of commercially viable energy technologies that can lower greenhouse gas emissions on a global scale," Exxon Mobil spokesman Gantt Walton said.

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/4846243.html

Pension fund angry over climate strategy
Major investors want director ousted from board
By JOE CARROLL
Bloomberg News

Exxon Mobil could get an earful Pension fund angry over climate strategy The California Public Employees' Retirement System, the largest public pension fund in the U.S., is seeking the removal of Exxon Mobil Corp. director Michael Boskin over the company's strategy on climate change.

Calpers joined two dozen other institutional investors to oppose the reappointment of Boskin, who heads the board's public issues committee, at Exxon Mobil's annual meeting today in Dallas.

Boskin has refused to meet with investors to discuss Exxon Mobil's strategy on the issue, Calpers and Ceres, a coalition of environmentalists and investors, said in a statement on Tuesday.

Exxon Mobil, the world's largest oil company, is lagging behind competitors in addressing global warming, the statement said.

Chevron Corp. is spending more on renewable fuels, and ConocoPhillips moved ahead of Exxon Mobil earlier this year when it joined an industry group that backs mandatory U.S. limits on emissions of carbon dioxide and other gases that warm the Earth, according to critics.

"Exxon Mobil's inaction on global warming stands in stark contrast to industry peers such as BP, Shell, Chevron and ConocoPhillips, which are all beginning to manage the risks and seize opportunities from climate change," Mindy Lubber, the president of Boston-based Ceres, said in the statement.

Royal Dutch Shell and BP are the two biggest European oil companies, while Chevron and ConocoPhillips are the second- and third-largest U.S.-based energy producers.

Since late 2005, Boskin has refused five times to meet with investors on the climate issue, according to the statement.

Directors should be accessible to shareholders and management should be accountable to directors, Calpers Chief Investment Officer Russell Read said in the statement.

"We have a fundamental problem when directors refuse to meet with the people they're elected to represent," Read said. "Especially one who has a leading role on a company's board."

Boskin, 61, is a professor of economics at Stanford University and a former chairman of the President's Council of Economic Advisors.

Exxon Mobil spokesman Gantt Walton said that Chairman and Chief Executive Rex Tillerson has been designated to speak on behalf of the directors on climate change issues.

"He meets with shareholder groups quite frequently," Walton said. Investors "have a lot of access to the company and to the board's position."

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Wall Street Journal
May 30, 2007

BP Refining CEO Manzoni Leaves
For Talisman; Succeeded by Conn
By KEVIN KINGSBURY
May 30, 2007 9:14 a.m.

John Manzoni, the chief executive of BP PLC's refining and marketing operations, is leaving the company to become president and CEO at Talisman Energy Inc.

Mr. Manzoni, part of former CEO John Browne's inner circle, will leave BP on Aug. 31 and assume his duties at Calgary-based Talisman the following day.

Iain Conn, who duties at BP include safety and operations, will succeed Manzoni effective June 1. Mr. Manzoni will stay with the company for a three-month transition period.

New BP CEO Tony Hayward faced a tough call over what to do with Mr. Manzoni, a close associate of Lord Browne.

The company's U.S. refinery operations have been harshly criticized by U.S. regulators and a BP-appointed independent committee headed by former Secretary of State James A. Baker III. In an internal BP report on management accountability released earlier this month as part of a court case in Texas, Mr. Manzoni is taken to task for not recognizing major problems at the Texas City refinery where 15 workers died in an explosion in March 2005.

And in a series of embarrassing emails and internal documents, leaked to the media or made public by legal and regulatory proceedings, Mr. Manzoni came off as out of touch with looming problems at Texas City, according to The Wall Street Journal. He told BP executives conducting research for the accountability report that despite visiting the plant himself, he "did not know which questions to ask, did not ask the right questions and was not told" about plant conditions, according to notes of his interview. The notes haven't been made public but were reviewed by the Journal.

Mr. Conn, 44 years old, was appointed an executive director of BP in July 2004 with functional responsibility for safety & operations, technology, marketing, human resources, information technology, procurement and supply-chain management. He also had regional responsibility for Europe, Africa, Middle East, Russia, Caspian and Asia Pacific.

Mr. Manzoni, who was with BP for 24 years and spent the last five in his current post, succeeds Jim Buckee at Talisman. Mr. Buckee, who has been president for 16 years and CEO as 14, intends to retire.

Chairman Doug Baldwin said, "The depth and breadth of John's international strategic and operational experience, his proven focus on generating results and his leadership skills made him the Board's unanimous choice to lead the company through the next stage of its development. His mandate will be to build upon the strength of our underlying assets, maximize the pursuit of our business strategies and generate additional growth and value."

Talisman, a former BP subsidiary, has drilling operations in the North Sea and Southeast Asia in addition to North America. Its shares closed Tuesday at $20.03 and climbed to $20.30 in premarket trading.

Write to Kevin Kingsbury at
kevin.kingsbury@dowjones.com  

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BP Refining CEO Manzoni Leaves For Talisman;Replaced By Conn
DOW JONES NEWSWIRES
May 30, 2007 9:03 a.m.
By Benoit Faucon
Of DOW JONES NEWSWIRES

 LONDON (Dow Jones)--John Manzoni, BP PLC's (BP) refining and marketing chief executive, is leaving to head Talisman Energy Inc. (TLM) and will be replaced by fellow executive Iain Conn, BP said Wednesday.

BP said Conn's appointment will be effective Friday.

Manzoni has been criticized for his handling of safety management after a blast that killed 15 workers occurred at a BP Texas refinery in March 2005.

But a BP spokesman denied that there was any link with the departure and said it was caused by Manzoni's not being appointed CEO.

Manzoni's leaving is "absolutely not" tied to the accident, he said. "He was one of those in the running" to replace former CEO John Browne, who was replaced by Tony Hayward on May 1, the spokesman said. "When not appointed" in January, he "looked for other opportunities," he added.

Analysts have previously said that the Texas accident would hinder Manzoni's chances to replace Browne.

BP said Conn replaces Manzoni, who has agreed with the board that, following a three-month hand-over period, he will step down as a group managing director and leave BP on Aug. 31.

Conn is already a member of BP's executive committee in charge of strategic resources, which includes responsibility for most regions outside the Americas as well as safety and operations and human resources.

BP said Conn's current responsibilities for functions and regions will be shared with other executive colleagues.

Separately, Canada-based oil independent company Talisman announced it had appointed Manzoni as president and CEO to replace Jim Buckee, who is retiring, from Sept. 1.

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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ExxonMobil, BP, Chevron Paid $7M In State Taxes Over 3 Years
DOW JONES NEWSWIRES
May 29, 2007 8:59 a.m.
THE ASSOCIATED PRESS

Three big oil companies - ExxonMobil Corp. (XOM), BP PLC (BP) and Chevron Corp. (CVX) - paid about $7 million in Wisconsin corporate income taxes while making nearly $166 billion during a three-year period.

Two other oil companies - Royal Dutch Shell (RDSB) and Murphy Oil Corp. (MUR) - paid no corporate income taxes from 2003 to 2005. Shell had profits of $56 billion during those years. Murphy Oil's profits were nearly $2 billion.

Governor Jim Doyle said those profits justify his proposal for a new 2.5% gross receipt tax on oil company sales in Wisconsin.

The oil companies say the tax is unfair because they have no significant business presence in Wisconsin.

ExxonMobil spokesman Gantt Walton says Doyle wants to tax money they make in Nigeria or Alaska and that's not good for business. Walton says comparing corporate profits generated worldwide to the amount of tax paid in Wisconsin "is absurd."

Information from: Milwaukee Journal Sentinel, http://www.jsonline.com

 Corrected May 29, 2007 9:00 ET (1300 GMT)

Three big oil companies - ExxonMobil Corp. (XOM), BP PLC (BP) and Chevron Corp. (CVX) - paid about $7 million in Wisconsin corporate income taxes while making nearly $166 billion during a three-year period.

("ExxonMobil, BP, Chevron Paid $7M In State Taxes Over 3 Years" at 7:47 a.m. EDT didn't include the state in which the taxes were paid.)
 

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Financial Times
May 30, 2007

http://www.ft.com/cms/s/817c14ec-0eab-11dc-b444-000b5df10621.html

Manzoni to step down as BP head of refining
By Toby Shelley
Published: May 30 2007 14:05 |
Last updated: May 30 2007 14:05

John Manzoni, once seen as a possible successor to Lord Browne as BP chief executive, is to step down as the UK oil group’s head of refining and marketing at the end of August, the company said on Wednesday.

The move, which comes four weeks after Tony Hayward took over as chief executive, was described in a BP statement as one that Mr Manzoni “has agreed with the board”. He will take up the post of chief executive of Talisman, the Canadian upstream oil and gas company, in September.

Mr Manzoni, who has been with BP for 24 years, was the board member with responsibility for the Texas City refinery blast in the US in 2005, which killed 15 people.

In February, an internal BP investigation into the Texas City refinery blast in 2005, which killed 15 people in one of the worst industrial accidents ever in the US, found that Mr Manzoni should have looked much deeper into conditions at the Texas City plant after “clear warning signals” from previous incidents.

Prior to that, Mr Manzoni had suffered the embarrassment of being pressed to read out in court an e-mail to a colleague that he had written days after the fatal explosion. In that he appeared perturbed that the incident had disrupted his holiday.

Mr Manzoni will be succeeded as BP’s head of refining and marketing by Ian Conn, who who takes up the post from June 1. There will be a three month handover period with his predecessor.

Mr Conn, a 21-year BP veteran, has been on the BP board since 2004. In 2000-2002 he was responsible for marketing operations in Europe and for the integration of Veba Oel, the German oil group, into BP. He was appointed head of petrochemicals in 2002 and is a non-executive directive of Rolls-Royce.
 

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Anchorage Daily News
May 29, 2007

http://www.adn.com/news/politics/story/8928969p-8829178c.html

Feds eye Stevens' home remodeling project
GIRDWOOD: Veco approved some invoices for 2000 upgrade at senator's house, says builder.
By RICHARD MAUER
Anchorage Daily News
Published: May 29, 2007
Last Modified: May 29, 2007 at 03:13 AM

The FBI and a federal grand jury have been investigating an extensive remodeling project at U.S. Sen. Ted Stevens' home in Girdwood that involved the top executive of Veco Corp. in the hiring of at least one of the key contractors.

Three contractors who worked on the project said in recent interviews with the Daily News that the FBI asked them to turn over their records from the job. One said he was called to testify about the project before a federal grand jury in Anchorage in December.

The remodeling work, which more than doubled the size of the house, occurred in the summer and fall of 2000. The four-bedroom home, about two blocks from the day lodge parking lot at the Alyeska ski resort, is Stevens' official residence in Alaska.

An old friend of Stevens in Girdwood, longtime Double Musky restaurant owner Bob Persons, has been questioned by the FBI about the project. He monitored the remodeling for Stevens and his wife while they were in Washington, D.C.

"I will be testifying. That's all I can tell you," Persons said in a brief interview last week. "It is an ongoing investigation that I'm not supposed to talk to or see anybody about it."

Persons would not elaborate on whether he meant that he would testify before a grand jury, at a trial, or both, or for whom. He said he believed Stevens did nothing wrong.

Ted Stevens and his wife, Catherine, declined to answer questions about the Girdwood house. In a prepared statement issued by his office, Stevens said: "While I understand the public's interest in the ongoing federal investigation, it has been my long-standing policy to not comment on such matters. Therefore, I will withhold comment at this time to avoid even the appearance that I might influence this investigation."

The FBI and the U.S. Justice Department's Public Integrity Section, which are in the midst of a broad investigation of corruption in Alaska, would not comment.

"This is a pending investigation and we're just not going to confirm or deny any aspect, any rumors, any allegations out there," said FBI spokesman Eric Gonzalez.

INQUIRY SURFACES

Ted Stevens, the most senior Republican in the U.S. Senate and Alaska's most famous political figure, has not been directly connected with the corruption investigation.

The wide-ranging federal inquiry surfaced in August when agents raided six legislative offices, including those of then-Senate President Ben Stevens, one of Ted Stevens' sons. The FBI said at the time that it also had executed a search warrant in Girdwood, among other places, although the location of that search has never been officially disclosed.

Veco, an oil-field service company that has long been a strong lobbying presence in Juneau, was one of the early targets of the agents, according to some of the search warrants that became public. On May 7, the company's longtime chief executive, Bill Allen, and a vice president, Rick Smith, pleaded guilty to federal conspiracy, bribery and tax charges. They are now cooperating with authorities.

The investigation spread to the commercial fishing industry, including Ben Stevens' consulting clients and associates. Federal subpoenas served on fishing companies in Seattle last year sought records concerning both Ben and Ted Stevens.

Four current or former Alaska state lawmakers have been indicted and are awaiting trial on corruption charges, and an Anchorage lobbyist has pleaded guilty to federal corruption charges.

Ben Stevens has not been charged. But the charges pleaded to by Allen and Smith alleged Ben Stevens improperly accepted $242,000 from Veco for "giving advice, lobbying colleagues, and taking official acts in matters before the legislature."

How the Girdwood home fits in with the broader investigation, or what possible crimes are being investigated, is not clear. There was a brief, unexplained reference to residential remodeling in the government's statement of facts that accompanied Allen's and Smith's guilty pleas. The sentence, preceded by a listing of a dozen Veco-related enterprises around the world, said: "Veco was not in the business of residential construction or remodeling."

Asked whether that line related to the construction at Stevens' Girdwood home, Persons first said, "I'm sure it does." When pressed, he said he wasn't certain.

WHERE THE BILLS WENT

Augie Paone, owner of Christensen Builders Inc. of Anchorage, said in a recent interview that it was Bill Allen who hired him to complete the framing and most of the interior carpentry at Stevens' home. Before he could send a bill to Stevens for work in progress, he was directed to provide it first to Veco, where someone would examine it for accuracy, he said. When Veco approved the invoice, he would fax it to the Stevenses in Washington, he said.

Paone said that as far as he knew, Stevens and his wife, Catherine, paid his bills themselves. He said he sent at least $100,000 in invoices to the Stevenses in Washington. They paid him from what he said appeared to be a checking account opened for the project. The checks, imprinted with the couple's names, had single- and double-digit serial numbers, he said.

According to Paone and other contractors, the renovation involved a technique often used with older dwellings in Girdwood -- jacking up a single-story house, building another floor on the original foundation or pilings, then lowering the original structure onto the new one. The result is a two-story home.

City and state records show the Stevens home was originally built in 1971. Catherine and Ted Stevens purchased it in August 1983. Plans show the house had two bedrooms, a living room, a kitchen and a single bath before the 2000 expansion.

Toney Hannah, a house mover from Anchorage, said he had initial discussions about a jack-up project with Ted and Catherine Stevens in 1999 but didn't hear any more about it until the next summer.

On July 26, 2000, Stevens faxed a letter to Anchorage building safety officials, saying Persons had authority to act in his and Catherine's name "in regard to construction at my house in Girdwood."

Stevens often relied on Persons to look after his Girdwood residence, according to Stevens' long-term neighbor there, Julie Peterson. She said she would call Persons if she saw a problem at the house.

Stevens and Persons also have a business relationship. Persons is the managing partner of Alaska's Great Eagle LLC, a racehorse-owning partnership that includes Stevens, Bill Allen and Allen's son Mark, along with several other Alaska businessmen.

On July 31, 2000, Persons obtained an Anchorage land-use permit for the Stevens remodeling. He listed the value of construction as $84,878 -- much less than the actual total turned out to be.

Most of the tradesmen who worked on the project couldn't be identified to answer questions from the Daily News about how they were hired, paid and supervised. While Girdwood is within the Anchorage municipality, its local building rules are more lax. With no inspections required, city building records don't name the electrician, plumber, furnace installer or others who may have worked on the project.

Hannah, the house mover, was found because Persons originally listed him in the permit file as the contractor.

Hannah said Persons contacted him in July or August 2000 to start the project. His crew jacked up the home. Hannah said Persons seemed to be in a hurry to get the job done.

A framing crew went to work on the first floor. But Hannah said that when he returned to Girdwood to lower the house, the framing was unacceptable, forcing him to delay the next phase. He said he didn't know who did the faulty carpentry.

Paone said he was called in late that summer to rescue the project.

"Bill Allen and some of the Veco boys, some of the Veco guys, were the ones that approached me and wanted to know if I could give them a hand," Paone said. "I did it more as a favor, you know. It's one of those things when somebody is the head, and packs that much power and asks you for a favor, it's kind of hard to say no."

JUST IN CASE

Paone said his name was on file at Veco because he had worked as a carpenter remodeling a Veco office building in Anchorage several years before. He had also remodeled the basement of the home of Veco's chief financial officer, Roger Chan. Chan and Allen both asked him to work on Stevens' home, he said.

Chan didn't return a phone call seeking comment and Veco's lawyer, Amy Menard, said the company's agreement to cooperate with federal authorities barred her and officials from talking.

Like Hannah, Paone said he didn't know who botched the framing.

"My understanding is that there was just a bunch of guys trying to do it on a weekend basis, and mostly they were friends of the senator's or something," he said. "But they didn't know what they were doing and they were so far behind that there was absolutely no way they could have completed it by late October, early November," he said.

Paone took over the framing and completed the interior walls, some of the cabinetry in the kitchen, the insulation and painting. He purchased the supplies and sent invoices for materials and labor to Stevens.

Paone said he couldn't recall the names of other tradesmen who worked on the project -- electricians, plumbers and a mechanical contractor who installed a new gas furnace and the forced-air heating system. A neighbor said someone brought over a crane to hoist Stevens' barbecue grill to the second floor deck. Another neighbor said a cherry picker showed up to install decorative lights on the eaves.

Paone said that by the time he finished his work in late October or early November, he had sent Stevens more than $100,000 in invoices for his own work.

Paone said he charged normal rates but was uncomfortable with the arrangements because he hadn't provided an estimate before starting the work. He said he protected himself by retaining all the records on the project.

"I didn't suspect anything, but I just wanted to make sure," he said. "When you work with a house of a legislator or a senator, you make sure you hold on to all the billings, just in case something happens."

Current city property records show the 10-room home contains 2,471 square feet of living space. With its quarter-acre lot, its assessed value for 2007 is $440,900.

'A VERY SAD SITUATION'

Last year, some six years after the project was completed, Paone said, "the FBI came over to me and I gave them all the paperwork I had on it." When he was questioned by the FBI, he said, agents seemed particularly interested in Veco and its officials. The government already had copies of most of his invoices on the Stevens home, having obtained them from Veco files, he said.

Paone said he followed that up by testifying before a federal grand jury in December.

About a year ago, Hannah, the house mover, came to work at his yard in South Anchorage and found an FBI agent's card on his office door, he said. When he called the agent, he was told the government was going to subpoena his records on the project. He said he sent his father downtown with all the files. He hasn't gotten them back, he said.

He said Catherine Stevens had paid his bill with a check, but he said it happened too long ago to remember details.

The contractor who did earth-moving for the project, Bob Redmond of Girdwood, also provided his records to the FBI, according to Jean Redmond, his stepmother. She also said the bills were paid by Stevens.

Paone said that as far as he knows, Stevens paid every invoice sent to him.

"Now, I'm not sure if everything was given to him," Paone said. "It's just that he was never around. He didn't know what was going on. My personal opinion is that if he got something for nothing, he absolutely didn't know about it."

Persons, of the Double Musky, said he believes Stevens has done nothing wrong, though he was unable to say what he knows.

"It's a very sad situation," he said during the brief interview outside a bank in South Anchorage. "I have to tell you that my attorneys have told me not to talk to anyone. And I can't even talk to my friends. Anybody. I can't talk to anybody."

Persons said he didn't think he was in any legal trouble.

"I don't know why I would be," he said.

"To me, it's a tragic situation," Persons added. "I don't think Sen. Stevens has done anything wrong and I don't know what's going on. I think it's a witch hunt."

Contact reporter Richard Mauer at 257-4345 or at
rmauer@adn.com .

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Los Angeles Times
May 28, 2007

http://www.latimes.com/business/la-fi-reserve28may28,1,5809749.story?track=crosspromo&coll=la-headlines-business&ctrack=1&cset=true

State's access to oil now a federal issue
Officials are confronting the fact that the western U.S. lacks an emergency supply of crude.
By Elizabeth Douglass
Times Staff Writer
May 28, 2007

As California becomes increasingly reliant on oil from elsewhere, state and federal officials are trying to figure out how to get enough energy to the West Coast if disaster strikes.

The need became clear in August, when corroded BP pipelines threatened to halt supplies from an Alaskan oil field that fed West Coast refineries. The Bush administration quickly offered to tap the Strategic Petroleum Reserve to offset the shortfall and blunt a price spike that pessimists predicted would yield $4-a-gallon gasoline.

Ultimately, the outage was half as bad as first thought, and consumers in the West were hit with a relatively small price hike. It was a lucky turn of events that spared federal officials from facing an uncomfortable fact: In an oil-supply crisis, the western U.S. would be on its own.

The U.S. stockpile along the Gulf Coast, the nation's $23-billion oil insurance policy, would be of little use to California in a crunch. The massive cache of crude isn't connected to the West by pipeline and is at least 16 days away from California by tanker.

For federal energy experts, the BP scare "was sort of a wake-up call," said Gordon Schremp, senior fuels specialist at the California Energy Commission.

Now, after spending more than 30 years focused on the Gulf Coast, strategic reserve officials are weighing their options in the West for the first time.

"The reserve has to take a closer look at how it can respond to a crisis on the West Coast, such as what happened with BP and the Alaska production," said David Johnson, director of planning and engineering in the Energy Department's office of petroleum reserves.

"It's becoming a big issue. The West Coast is a growing demand area," he said. "We have to have a plan of some sort to meet their needs."

Johnson and reserve economist Jeremy Cusimano visited California in March, and Cusimano returned this month to get a feel for the region's supply challenges.

The news was grim.

Oil-rich California, once self-sufficient, now relies on imports for 60% of the oil that flows through its refineries  roughly 20% from Alaska and 40% from Saudi Arabia, Ecuador and other foreign countries. With oil production declining in California and Alaska, state officials expect foreign oil imports to more than double during the next 15 years.

That kind of dependence is a concern not just for California, but also for Arizona and Nevada, which get most of their fuel from California ports and refineries. A major supply disruption at the Los Angeles-Long Beach port complex  whether from an accident, a terrorist act or an earthquake  would be quickly felt across the West.

"If we lose one of our major crude oil import facilities, there would be significant consequences," Schremp said. "There would be a turndown in refinery production … with significant price impacts and some economic harm."

The government's new willingness to rethink its reserve strategy is driven primarily by the growing thirst for foreign oil on both coasts. But it also reflects a recognition that energy companies are holding smaller backup inventories of oil and fuel and that the nation's crucial network of ports, pipelines and refineries is maxed out and vulnerable.

Recent events show that such worries aren't unfounded.

This year a fire at a Texas refinery crimped the flow of gasoline into Arizona from the east, forcing California to send extra supplies to Phoenix for the last few months  further straining regional fuel inventories. Last week BP acknowledged that a water pipeline problem forced it to shut down a quarter of its production in the same Alaskan oil field that made news last year.

Philip K. Verleger Jr., an economist who helped the Ford administration launch the Strategic Petroleum Reserve in 1975, believes a federal oil inventory in the West is overdue.

"If the United States is going to put any more oil in the reserve," he said, "it should be on the West Coast."

Not everyone thinks a West Coast reserve is necessary.

Executives at Tesoro Corp. are among the doubters. And that hesitancy is of particular note because, with no oil of its own and three West Coast refineries to feed, Tesoro is more vulnerable to disruptions than its larger brethren.

Lynn Westfall, chief economist at San Antonio-based Tesoro, downplayed the Alaskan oil disruption late last year as "a blip," and said that the Strategic Petroleum Reserve could provide indirect help to the West by adding oil to the worldwide mix.

"If you release crude from the SPR, it will free up crude somewhere else that we can then access," said Westfall, who said he conveyed that view to reserve officials in a recent meeting.

"Plus, we're not subject to things like hurricanes out here that might cause a release from the SPR."

For California and other Western states, any federal help is years away, if it's coming at all. The new reserve study is tied to President Bush's January proposal for a second expansion of the petroleum reserve starting in 2015.

Johnson's team, which will make recommendations by the end of the year, also is assessing needs on the East Coast and whether there should be a federal reserve of gasoline, diesel or jet fuel in addition to crude oil. "All the options are still on the table," Johnson said.

The first expansion ordered by Bush  to 1 billion barrels of oil from the current 727-million-barrel capacity  has been mapped out. It's set to begin in 2010 and would add oil at two existing facilities and a new site in Mississippi.

The oil reserve was created more than 30 years ago in response to the Arab oil embargo and was meant to protect the country against a similar supply cutoff.

There were no worries about the West Coast. California had plenty of oil, and until 1998, the federal government owned a good portion of it as part of the Elk Hills Naval Petroleum Reserve near Bakersfield. That supply, sold to Occidental Petroleum Corp. in 1998, was never available for immediate use because it was held underground in its natural state and would have to be pumped out in traditional fashion.

Federal officials have sold oil from the strategic reserve only a few times: after Hurricane Katrina in 2005, in 1996-97 for nonemergency price relief and during the 1990-91 war in the Persian Gulf.

Some in California believe the state would have more use for a government-owned gasoline bank that could release fuel in a daily auction, boosting in-state inventories and loosening refiners' control over supplies.

Stillwater Associates, an Irvine consulting firm, studied that option for the California Energy Commission in 2002, concluding that a gas bank would be costly but would save consumers money by reducing price volatility and blunting the effects of price jumps caused by refinery outages.

The oil industry opposed the idea, and state energy officials declined to study it further, citing concerns over unintended consequences.

"We still see price spikes that are driven by lack of supply, and I would argue that it's worse now than when we first looked at it," said David Hackett, president of Stillwater.

"I think it's time to look at it again."

The federal government, which in 2000 provided oil from the strategic reserve to establish a heating oil reserve in the Northeast, doesn't seem interested in contributing to a West Coast gasoline stockpile.

Johnson said he had reviewed the gas bank study. "It's good if the state wanted to do that," he said. "But I don't think it's a federal issue."

Johnson's group is focused on crude oil in the West, but he has concerns. There are no salt formations to provide low-cost oil storage, and that leaves the option of building large, above-ground tanks somewhere near the state's refineries.

"It doesn't look good on the West Coast, environmentally and in terms of trying to build something out there," he said. "It would be very hard."

But Energy Secretary Samuel Bodman said recently that he hadn't ruled anything out.

"This is a 20-year program, so it will be a number of years before all the questions get asked and they all get answered," he told reporters at an energy conference in February. "We're in the very early stage of looking at it."

elizabeth.douglass@latimes.com

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Chicago Tribune
May 28, 2007

A 2 part series on BP --- Part 2
http://www.chicagotribune.com/news/local/chi-mon_bp_sidemay28,1,4104839.story?ctrack=1&cset=true

Today's installment of the "KEEPING THE OIL FLOWING" series has been posted online in two parts

Safety focus tightens after refinery blast
By David Greising
Tribune chief business correspondent
May 28, 2007

TEXAS CITY, Texas -- Outside Gate 1 of the second-largest oil refinery in the U.S., a block-lettered sign carries a seemingly simple message: "What You Say Leads to Action."

Sloganeering signs do not a culture make, but the placard at least puts in writing what the people running BP's Texas City refinery are trying to accomplish. The March 2005 explosion that killed 15 people and seriously injured 170 exposed a workplace culture in which fear and fealty to tight-fisted budgets trumped safety and common sense.

Now BP is trying to change that. And what happens at Texas City -- changing work processes while spending part of the $1 billion BP has set aside for U.S. refinery and pipeline repairs -- is a template for what BP is trying to accomplish through its vast U.S. production and refinery system.

The 83-year-old plant, large parts of which have been shut down for rebuilding and repair almost continuously since the blast, is emblematic of the woeful state of U.S. refineries.

No refineries have been built in 30 years, and the existing plants have needed so much rehabilitation lately that the shutdowns, fires and production halts have affected gasoline supplies and contributed to record-high pump prices.

So far this year, U.S. refiners have kept only 93 percent of their capacity in action. That's a 15-year low and a sharp decline from utilization rates that hovered around 99 percent a decade ago, according to data from the U.S. Energy Information Administration.

To Robert Malone, who was brought in as president of BP America after a series of mishaps that started with Texas City and wound up with 200,000 gallons spilled on the Arctic tundra in Alaska, the job of updating BP's refineries is tied tightly to the effort to change the corporate culture.

One example: At any refinery, one of the most dangerous periods comes when equipment comes back on line. Malone is trying to change BP's culture to make the process safer.

The Texas City refinery explosion occurred during a restart after repairs. An employee left open a valve, allowing a large exhaust pipe called a blow-down stack to fill with combustible fluid. A nearby idling pickup truck ignited the flammable vapor and set off the deadly blast.

Now, no equipment comes back on line at BP without a thorough safety check backed up with signed assurances that procedures have been followed. Supervisors also must be present, which wasn't the case when the lone operator left open the valve at Texas City. Every worker has the right to stop the restart process, no questions asked, if anything seems amiss.

Safety campaigns can be hard to assess, but Malone says there is evidence that this one is taking hold. Last month, BP's Toledo refinery was shut down because of a stress fracture in one of the units. During the restart process, Malone said, he got a call from the refinery manager: An employee had requested a hold because one of the safety checks had not been cleared.

"There is no doubt in my mind that that call wouldn't have come in to me before," said Malone. "The person who had that job would never have had the authorization to interrupt the process."

Malone has initiated other changes designed to improve safety and keep BP's refineries running. He is accelerating the pace at which repairs are planned and executed and adding safety inspectors. A BP ombudsman, who operates outside the corporate hierarchy, has the right to invite employee complaints, inspect any plant and report directly to Malone.

Malone also is moving some workers out of the refineries.

At Texas City most of those killed were working in temporary trailers next to the blast site, but could just as easily have worked far away. Today, non-essential employees work in a former Kmart building near the refinery complex.

BP is not expected to fix its culture overnight. Numerous studies prompted by the Texas City accident, including a scathing review by the U.S. Chemical Safety Board and another by a commission led by former U.S. Secretary of State James Baker, have exposed a culture of management-union conflict and an environment so toxic that employees were afraid to show up at work for fear of being injured in accidents.

Brent Coon, a Texas lawyer who reached an estimated $32 million settlement with BP after the explosion, said culture change goes only so far.

Even after updating is done, the antiquated refineries at BP and throughout the U.S. just can't keep up with high demand and the changing needs of refiners, he said.

"You're asking an Edsel to run with a Corvette," Coon said. "You can fix it up and make it run well enough, but if you ask it to keep up with a Corvette, it's going to fall apart."

Inside the Texas City refinery, though, there is optimism that the changes in technology and culture can take hold and make a difference.

Uwe Klingler, an operations manager who came to BP from another company after the Texas City explosion, said oil refining is inherently risky.

"It was always, and will always be, about managed risk," Klingler said. "There is risk involved. What we've got to do is manage the risk."

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About this story

Chief Business Correspondent David Greising spent six months reporting on BP PLC's attempts to fix three major problem sites within its huge North American unit. Greising, along with Tribune photographer Bob Fila, reported from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas City, Texas, the location of a deadly refinery explosion that killed 15 in 2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which nearly toppled into the sea during a hurricane in 2005. The Tribune is the first news organization to visit all three sites since the disasters and the only one ever to set foot on Thunder Horse in the gulf.

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dgreising@tribune.com

IN THE WEB EDITION: Read Part 1 of the series, plus the Tribune's David Greising describes his visit to BP's facilities and how the oil giant is struggling to rebuild in a video at chicagotribune.com/bp
Copyright © 2007, Chicago Tribune


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Today's installment of the "KEEPING THE OIL FLOWING" series has been posted online in two parts

Troubles run deep on Gulf oil platform
Repairs a daunting challengeTechnology leads BP to drill where it once could not, but the race for new fields carries high costs and risks
By David Greising
Tribune chief business correspondent
May 28, 2007

THUNDER HORSE PLATFORM, Gulf of Mexico -- The day after massive Hurricane Dennis churned through the Gulf of Mexico in July 2005, a commercial vessel traveling past BP PLC's hulking Thunder Horse oil platform radioed the bad news to its owner: The platform's top deck was listing into the water.

When a landing party from BP arrived at the platform two days later, they had to tie onto rails near the control tower to haul themselves up the platform's 30-degree incline.

"It looked like a ship that had been sunk," recalled Stan Bond, BP's head of subsea operations for the Gulf of Mexico.

The workers were surprised to learn that the platform, evacuated before Dennis hit, had not taken on water from a leak through its hull. Rather, an incorrectly plumbed, 6-inch length of pipe had allowed water to flow freely among several ballast tanks. That began a chain of events that caused the platform to tip into the drink.

Now BP is attempting to do what no oil company has done before: essentially rebuild the entire architecture of an oil field on the sea floor some 6,000 feet beneath the waves.

At $250 million, the job is costlier, and riskier, than putting the equipment on the gulf floor in the first place. On the frontier of oil exploration, the margin between riches and disaster can be as small as a 6-inch piece of pipe. Yet for BP, rebuilding the platform is critically important because the company desperately needs the oil flowing as reserves in formerly rich fields such as Prudhoe Bay in Alaska dwindle.

Politics have made oil from the Middle East, Africa, Russia and South America is increasingly out of reach. And new discoveries around the world are more rare and continue to shrink in size.

"We have passed the peak for world discoveries," said Robert Gillon, an analyst at oil-industry research firm John S. Herold Inc. "It's hard to see how the industry can do anything whatsoever to materially increase its oil reserves or production."

Against this backdrop, Thunder Horse, sitting atop a reserve that possibly holds 1.5 billion barrels, promises to deliver up to 250,000 gallons of oil a day, making it one of the gulf's biggest producers. For U.S. consumers now paying an average of $3.10 a gallon for gas, Thunder Horse would relieve some of the price pressure: Fully operational, it would boost total U.S. production by 5 percent.

For BP, the troubles at Thunder Horse have turned the oil platform into a dual symbol. Like Janus, the two-faced Roman god that glimpses both the past and the future, Thunder Horse stands as a reminder of BP's mistake-prone recent track record. Looking forward, though, it holds out the prospect of a lucrative, rewarding future.

The Thunder Horse mishap followed by nearly four months BP's worst-ever accident on U.S. soil, a refinery explosion in Texas City, Texas, that killed 15 people. Then, last spring, BP spilled 200,000 barrels of oil onto the Arctic tundra, the first of several pipe leaks that ultimately led BP to temporarily shut down half of North America's largest oil field.

Yet getting Thunder Horse on line will not be easy. The deep Gulf of Mexico is challenging in its own right. Removing and reassembling an oil field at such depths has never been attempted.

One daunting challenge: delicately lifting miles-long strings of steel pipe from the sea floor. If the pipes stress or twist too much, they might weaken and perhaps spring a leak one day, resulting in disaster.

"It will not be easy to pull off," Bond said. "You're trying to change things to make something good. You've got to make sure you don't change things and make them worse."

Exploring the 'Dead Sea'

BP's history in the deep waters of the gulf began inauspiciously. Though the company had drilled in the shallows since the 1980s, in 1991 it began focusing on finding new reserves under water greater than 2,500 feet deep.

The early effort did not go well. At the outset, BP drilled a series of dry holes. At a cost well beyond $100 million, BP was learning why others in the industry had given the gulf a derisive nickname: "The Dead Sea."

"Drilling a succession of dry holes, it was almost the definition of insanity," said Cindy Yeilding, a leading geologist for BP's Gulf of Mexico effort. Executives at BP's London headquarters agreed. For two years, they would not approve any additional deep-water gulf drilling.

But that thinking changed. After a reassessment, BP's oil explorers decided on a new strategy that focuses all the company's energy on seeking big reserves, dubbed "elephants." And the company put big resources behind the new approach: as much as $2.5 billion annually in recent years on gulf exploration.

That's nearly double the amount spent in BP's next-largest target, Azerbaijan, and roughly 20 percent of BP's total exploration and production budget.

The allocation makes sense for BP, because the gulf's deep waters today float above one of the hottest oil prospects on the planet, matching up with Angola and a small handful of lesser places at a time when new huge prospects are not on anyone's maps.

BP is able to move so aggressively in large part because of its $55 billion purchase of Chicago-based Amoco in 1999. Until then, the efforts of BP, like those of other oil giants, had been stymied in the deep Gulf of Mexico by thick layers of liquefied salt that sit like opaque blankets over much of the gulf's oil deposits.

But Amoco had world-class imaging technology, as well as data-mining capability and mathematical algorithms that could interpret the data it collected.

Combining Amoco's tools with some of its own, BP developed a unique exploration approach: It began placing sensing nodes on the floor of the gulf floor. Combining the sea-floor node data with information collected by the conventional method of towing sensors behind a large boat, BP could look through salt from several angles. Suddenly, the opaque blanket was lifted.

Exploration was not cheap, though. These days, it costs about $50 million to fully map a potential oil reserve. To drill an exploratory well costs an additional $100 million. Both those figures are huge jumps from what they would have been a decade ago, when shallower, less complex oil reserves were still available to tap. Back then, roughly $10 million would cover the cost of an exploratory hole.

Such costs and technology hurdles are what drove BP to adopt its "elephant hunt" strategy: Focusing only on the potentially biggest and most lucrative prospects, and ignoring the rest.

An aggressive lease-acquisition strategy, paying $300,000 and more a pop for rights to explore and pump oil from a 9-square-mile plot of the ocean floor, backed the effort. Taking advantage of a controversial Clinton administration program that drastically reduced royalties on deep-water gulf leases sold after 1995, BP stocked up.

And for good reason. Like most oil companies, BP has seen its exploration opportunities diminish over time. Its reserve replacement ratio, which measures whether a company adds new oil reserves at the same rate it depletes its existing resources, has fallen steadily in recent years.

BP's replacement ratio had a modern-day peak of 191 percent in 2001, meaning BP added almost twice as much in reserves as it sold. But that number dropped below full replacement in 2004 and 2005 before climbing above the break-even line again last year, to 113 percent.

By 2006, BP held leases on 650 tracts in Gulf of Mexico water deeper than 1,250 feet. After 15 years of effort, BP was vying with longtime deep-water player Chevron to become the largest leaseholder in the deep gulf.

A host of productive exploratory wells followed. Going by names like Atlantis, Neptune, Mad Dog and Holstein, they are among the gulf's richest finds.

One, at first called Crazy Horse, got a name change after descendants of the Native American warrior protested. Today it's called Thunder Horse.

The $250 million pipe

At a cost of $1 billion to build, and physically imposing with a top deck that rises 15 stories above the water's surface, the Thunder Horse platform appears to be invulnerable to the forces of nature and a wonder of technology. After all, more than 18 major parts on the platform have Serial No. 001 -- meaning they were invented just for this job.

It turns out Thunder Horse is vulnerable to both the power of nature and the shortcomings of modern technology.

The platform was designed to handle hurricanes as strong as Dennis. But the evacuation for the hurricane, combined with just the slightest shifting in Dennis' strong winds, set in motion an unlikely chain of events that caused the platform to tilt. That, in turn, has led to the delay that is costing BP billions in lost revenue -- and serving for the industry as an example of what can go wrong at the outer limits of technology.

The platform rests on four hollow, airtight legs that are as wide across as a two-bedroom apartment. Normally, the legs give the platform buoyancy, and horizontal connecting sections add stability.

After workers evacuated in advance of Hurricane Dennis, though, the misplumbed pipe allowed water to cascade through ballast and bilge tanks. The force of the flow forced open valves that in turn allowed the water to gather in the two port-side legs of the platform.

As Thunder Horse's top deck tilted toward the water, ballast pipes that normally pump water out began taking water in.

The support legs filled with water, and all manner of calamity set in. Some 30 car-size pumps and motors were ruined. A corroding process started that ran through the platform's 25 miles of electric cable and wiring like oil being sucked up by a wick.

"There's the $250 million pipe," said Sammy McDaniel, BP's head of Gulf of Mexico operations, a wry smile on his thin face as he showed a visitor the cleaned-up inside of one of Thunder Horse's large, hollow legs.

Neither McDaniel nor Bond had set foot on Thunder Horse before the mishap. On the first helicopter flight in, they agreed to work together, with McDaniel focusing mainly on the platform's operations and Bond zeroing in on the bottom of the ocean.

"We knew this one was going to be a bear," McDaniel said.

In the weeks after the landing party first boarded Thunder Horse, three days after the storm, the platform became a hive of frantic activity. With 150 workers living on a ship anchored nearby, working with lamps on their hard hats until electricity could be restored, McDaniel and Bond led a frantic cleanup and restart effort.

Work stopped only for hurricanes. After the devastating successive storms, Katrina and Rita, came through, the workers stayed off the platforms while trying to help their colleagues piece their lives back together.

BP's corporate brass told the public that it believed Thunder Horse could restart by late August 2006. Privately, Bond and McDaniel thought they could get the platform back in operation before the end of 2005. Rushing to meet the deadline, workers piled up nearly 4 million man-hours on the cleanup alone.

With start-up approaching, the recovery team in May of 2006 used water to pressure-test the subsea system of pumps, wellheads, piping and gathering centers that sprawl over an oil field on the ocean floor that covers an area nearly as wide across as the North Side of Chicago.

Then the unthinkable happened: The system leaked.

"We were this close," said McDaniel, holding a thumb and forefinger close together. "Then, 'Damn! What went wrong?'"

Sleuthing at 6,000 feet

Perhaps a valve was left open. Perhaps a coupling on a pumping station wasn't properly tightened. "We figured we would find out in our spare time," McDaniel said.

Two weeks passed, then a month. One pressure test held for eight hours, and then failed. The team injected ink into the piping network and sent a remotely operated, unmanned submarine 6,000 feet down into the water to photograph what was going on.

Outfitted with cameras and high-precision robotic arms, the sub was capable of spotting any problems, and fixing many potential mishaps.

As the robot's operators watched on a black-and-white video monitor inside a cramped control room, the camera focused on an image of a sea-floor metal structure, a manifold. The size of the container on the back of a semi-truck, the manifold is a key piece of equipment that ties together the lines from dozens of sea-floor wells, and then helps transfer oil up toward the platform.

Most of the huge manifold looked fine. But on the side, on one of the large pipes that snaked through the frame that formed a sort of exoskeleton for the structure, was a shocking sight: an inch-wide gash slashed through a weld. The leak was found.

Perhaps it was just one bad weld, but McDaniel and Bond had to determine if there were any more. They directed the submarine to another manifold and found a second ruptured weld. Inspection of other welds in the subsea equipment turned up even more cracks.

Thunder Horse's oil reservoir is nearly 5 miles below the water's surface. At that depth, oil will gush from the drill pipes at a temperature of 275 degrees Fahrenheit, under a metal-crunching 17,400 pounds per square inch of pressure.

Those conditions can stress even the mixture of high-strength steel and alloy that make up the half-inch welds on the manifolds and pipes of the Thunder Horse oil fields. But the equipment had gone through severe tests -- at 125 percent of the worst stresses that the Thunder Horse field might exert.

There had to be something else.

"We're operating at the edge of what is known," said Kenny Lang, BP's head of Gulf of Mexico operations. "When you're at the edge, you're creating knowledge. And when you create knowledge, you sometimes stub your toe."

Now the hunt was on for a new spot of knowledge: What caused the problem?

Lang flew in a team of experts in subsea oil production, welding and metallurgy from around the world to Houston to determine the cause of the weld failures.

Meanwhile, he directed others to touch base with the manufacturers of every component built into the sea-floor manifolds. He asked for testing of the anti-corrosion materials and insulation that enshrouded the subsea pipes. He wanted no clue missed.

"Ultimately you say, 'What if I'm wrong about what caused this? We put our equipment back on the seabed, and it fails?' " Lang said. "You can't risk that."

Lang also wanted other oil companies to be aware of the dangers. Learning that Shell Oil Co. was due to submerge manifolds at depths similar to Thunder Horse in the fourth quarter of last year, he made certain Shell was notified of the possible risks.

Even as the investigation started, though, pressure mounted onboard Thunder Horse.

BP had commissioned the Balder, one of only two ships in the world capable of lifting the manifolds and other heavy equipment from the sea floor, to visit the platform in December. After that, the Balder wouldn't be available again for almost a year.

By late September 2006, the manifold investigation team delivered its verdict. The welds, indeed, were the problem thanks to an unforeseen chemical reaction.

While the manifolds sat idle for a year after the platform tilted, the crushing pressure at the bottom of the sea forced hydrogen atoms into the mix of steel and high-strength alloy that made up the welds. The hydrogen caused the metal to become brittle, and when water was forced through the piping during the restart testing, the welds failed.

Drilling toward Mardi Gras

In the meantime, Bond hadn't been waiting for a verdict. He knew he only had until the end of 2006 to have all the sea-floor equipment ready to be lifted. That meant sealing wellheads, cutting pipes and planning logistics. It also meant working around the schedules of the 280 people onboard Thunder Horse, some of whom continued drilling new holes even as the rest of the sea-floor operation stood idle.

Drilling, after all, is what Thunder Horse was built to do.

On a recent spring day, a team of workers operated the ship's drill rig, pulling up a drill bit that had gone more than 20,000 feet below the seabed floor. Nearly 3 million pounds of pipe stretched from the drill rig to the bottom of the hole.

Spinning furiously, with "mud" that is used to lubricate them spitting out of the hole, the drilling pipes came out in 95-foot sections. As each joint emerged, workers stood by as a huge, mechanized clamp twisted off the coupling that separated it from the long line still stuck in the ground.

Directed by operators using joysticks in an air-conditioned control studio, an overhead winch grabbed the newly freed section of pipe and hung it on a rack. The pipes knocked together, sounding like a supersize wind chime.

Nearby, in the main Thunder Horse control room, BP workers monitored huge computer displays that showed the pressure, temperature and fluid volumes in all of the oil platform's piping systems.

There was something eerily missing on the screens, though: Not an ounce of oil was anywhere to be found.

Today, Thunder Horse's crews have removed about three-quarters of the equipment that once nestled on the seabed. They are putting new insulation and anti-corrosion coatings on some, replacing other pieces entirely.

The most delicate operation -- pulling the pipe up from the seabed without bending it -- is necessary, Bond said, because it's the only way he can reassemble the equipment that's needed on the oil field. The deep-sea robots can cut the pipes at the point they connect to the equipment 6,000 feet below the surface. But robots can't weld.

So Bond must oversee an operation that pulls up the freed pipe and brings it within reach of the Thunder Horse deck. There workers can weld it back to the huge, heavy pieces of equipment. Then BP workers must carefully lower the joined pieces back down, all without causing any new problems.

No one says it will be easy. But everyone onboard says it must happen on time. They will need the Balder for some of work, and demand for that ship is so high that it only comes by every 18 months or so.

"We've just been going full speed for a long time, and there's no letting up," said McDaniel, the operations chief.

"What we want to do is prove to ourselves and the world that we're ready," he said. "We just need to get all this stuff under us, and begin operation."

Leading a reporter on a tour of the complex onboard systems that separate oil, water and gas, McDaniel pointed to a pipe from the platform that plunges deep into the ocean. By the time Thunder Horse goes into production, the pipe will connect to Mardi Gras -- a $1 billion pipeline BP is building that one day will carry half of all the oil pumped from the deep-water gulf."This is the top end of the Mardi Gras pipeline," McDaniel said. "When the oil leaves here, it's gone."

For BP, and for gas-hungry consumers across the U.S., it can't happen soon enough.

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About this story

Chief Business Correspondent David Greising spent six months reporting on BP PLC's attempts to fix three major problem sites within its huge North American unit. Greising, along with Tribune photographer Bob Fila, reported from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas City, Texas, the location of a deadly refinery explosion that killed 15 in 2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which nearly toppled into the sea during a hurricane in 2005. The Tribune is the first news organization to visit all three sites since the disasters and the only one ever to set foot on Thunder Horse in the gulf.

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dgreising@tribune.com

IN THE WEB EDITION: Read Part 1 of the series, plus the Tribune's David Greising describes his visit to BP's facilities and how the oil giant is struggling to rebuild in a video at chicagotribune.com/bp
Copyright © 2007, Chicago Tribune

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Chicago Tribune
May 27, 2007

A 2 part series on BP  -- Part 1
http://www.chicagotribune.com/news/local/chi-bp_note_0527may27,1,4073646.story

Chief business correspondent David Greising spent six months reporting on BP PLC's attempts to fix three major problem sites within its huge North American unit. Greising, along with Tribune photographer Bob Fila, reported from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas City, Texas, the location of a deadly refinery explosion that killed 15 in 2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which nearly toppled into the sea during a hurricane in 2005. The Tribune is the first news organization to visit all three sites since the disasters and the only one ever to set foot on Thunder Horse in the gulf.

Read Part 1 of the series, plus the Tribune's David Greising describes his visit to BP's facilities and how the oil giant is struggling to rebuild in a video at chicagotribune.com/bp

GRAPHIC
http://www.chicagotribune.com/business/chi-05-26-07-onebp_gfx,1,2860562.graphic

BP ALASKA Graphic
http://www.chicagotribune.com/business/chi-05-26-07-twobp_gfx,1,7115825.graphic

http://www.chicagotribune.com/news/local/chi-sun_bpmay27,1,571452.story

Risky business: Big Oil's billion-dollar juggling act
It's a high-stakes gamble, where even a tiny pinhole in a pipeline can cost billions and drive up the cost of filling your gas tank.
By David Greising
Tribune chief business correspondent
May 27, 2007
DEADHORSE, Alaska -- First of two parts

DEADHORSE, Alaska -- Painful reminders of the fallout from the cheap-oil era of a decade ago are never far from Robert Malone, the top North American executive of oil giant BP.

In March, he traveled 250 miles north of the Arctic Circle to look in on BP's efforts to rebuild the pipeline system that leaked 200,000 gallons of oil last spring onto Alaska's North Slope. But before donning an arctic parka to head into the 52-degrees-below-zero wind chill, Malone had to interrupt a meeting with workers to mark a solemn occasion: the moment, precisely two years earlier, when an explosion at the oil giant's Texas City refinery killed 15 people.

"One thing about a BP person, you'll get a can-do attitude," Malone told the group before quieting the room for the silent observance. "We've got to take that can-do and say: Can do, will do -- but we've got to do it right."

The can-do culture of BP's past pushed it to explore the depths of oceans, deal with unsavory political regimes, pioneer the era of oil-industry consolidation and test the limits of technology. Malone was in Alaska trying to reignite BP's can-do spirit after nearly a decade in which the company scrimped on routine maintenance and ignored safety issues that led to the disaster in Texas and the spill in Alaska.

And now, an inability to tackle daunting technological challenges has forced BP to delay pumping from one of its brightest prospects for the future: BP's massive Thunder Horse platform in the Gulf of Mexico. A nearly 3-year delay in the startup of the world's largest floating oil platform, which covers an area the size of three football fields, is setting back the arrival of enough oil to boost total U.S. production by nearly 5 percent.

Rarely has one company faced such grave trouble at so many places in such a thin slice of time. The breakdowns form a composite of the challenges an oil giant faces at a time when fields like Prudhoe Bay are running short of oil, the refinery infrastructure in places like Texas City is out of date and overtaxed, and the prospects for success in exploration are dicier than ever.

The crisis at BP is symptomatic of challenges oil companies face in trying to slake the world's thirst for oil. The six "super-major" independent oil companies together take in nearly $1.5 trillion each year. Yet the residue from the cutbacks and scrimping during the days of $10-a-barrel oil in the late 1990s has left the industry ill-equipped to handle even the slightest hiccup.

The U.S. got a taste of the industry's fragile state when Hurricanes Katrina and Rita hit in 2005 and took out more than 25 percent of U.S. refining capacity, forcing shortages and price hikes. And now consumers are paying the price again: As the summer driving season gets under way this weekend, Americans are paying a record nationwide average of $3.10 a gallon at the pump.

The BP connection is hitting perhaps hardest of all in Chicago. In part because of recent problems at BP's Whiting refinery, Chicagoans are paying among the highest gas prices in the U.S.: about $3.59 a gallon.

The Chicago connection is more than an ironic happenstance. Many of BP's problems can be traced to its 1999 acquisition of Amoco Corp. The Amoco purchase, followed soon after by BP's merger with Arco, transformed BP from a mid-size major into one of the world's very largest oil giants. Yet, because of Amoco's own poor maintenance record, the deal saddled BP with a huge backlog of trouble just as the industry's finances were hitting bottom. BP's immediate response to the tight times, a 25 percent cut in fixed costs, may have contributed to its problems at Texas City and Prudhoe Bay.

BP may operate with billion-dollar budget cycles, but the problems that take it down can start with something as tiny as a pinprick. A hole that size in the Prudhoe Bay pipeline system forced a months-long shutdown of half of North America's largest oil field beginning in August 2006. The Texas City explosion occurred because a single valve was left open too long. And Thunder Horse is behind schedule, costing BP $3 billion in lost revenue, because a 6-inch length of pipe was not correctly plumbed.

Getting to the root of the problems, and fixing them, would be a huge job under any circumstances. At BP, the world's third-largest independent oil producer, with revenues of $266 billion last year, the complexity is compounded by turmoil at the top. BP's visionary longtime leader, John Browne, was forced to step down in early May after admitting he lied to a court in an effort to conceal how he used company assets to help his boyfriend start a business.

Now the pressure is on Malone, a 55-year-old BP career oil man who hails from scrubby Daingerfield, Texas, population 2,517. Malone, his soft-spoken Texas twang intact though he has lived in Ohio, Alaska, and London much of his adult life, was installed as head of BP's North American operations soon after the Prudhoe pipes first leaked in spring 2006.

In his prior job, heading BP's global shipping operation, Malone moved oil tankers through the Persian Gulf and the pirate-infested Straits of Malacca. Yet his new assignment, turning around BP's American operation, he considers more difficult. And the hardest part, Malone said while inspecting repairs in Alaska and trying to charge up workers to do their work quickly and correctly, will be changing the corporate culture.

The challenge

As Malone's corporate jet set down at the tiny Deadhorse airport in late March, the first part of his mission was fairly simple: assess progress on the reconstruction of the Prudhoe pipeline system that twice sprung leaks last year. The first dumped 200,000 gallons of oil onto Alaska's North Slope in March 2006. But the second incident was almost worse: Two small leaks in August that exposed a pipeline that in many places had corroded almost entirely through.

Fixing and replacing the pipes is costly, laborious work. The tougher task, though, is the job of transforming a corporate culture that had allowed oil to eat through the Prudhoe pipes unnoticed. Years of cost-cutting and management shuffles had created frustration among Prudhoe managers. And now, in the year since the first spill, rampant overtime work and intense pressure have exhausted workers and taxed their ability to finish the job.

Much is riding on Malone's changes, not only for Prudhoe but for all of BP America from the Arctic Circle to the Gulf of Mexico. To compete in the new era of high prices, climate-change activism and cutthroat competition for oil resources, BP and others in the industry are quickly finding there is no room for error.

Over a two-year period BP will replace 16 miles of pipe at Prudhoe, the central spine of the system that pumps up to 10 percent of U.S. production into the 800-mile Trans-Alaska Pipeline System.

It's difficult and daunting work, as Malone witnessed first-hand.

There is extreme cold, for starters. Polar bears too. Some buildings have steel-caged entrance chambers from which workers scan the horizon for polar bears before walking to their blue Ford Excursion trucks whose engines idle all day because they might not start until spring if ever they freeze.

Yet everyone realizes the cold is a necessary ally, too. Without it, work on the Prudhoe Bay field could not be done.

The hard freeze that sets in each November enables BP workers to begin spraying enough water on the tundra to form foot-thick ribbons of ice that can support the weight of the boom trucks and tractor trailers that are needed to replace the pipe. By early December the ice roads crisscross Prudhoe Bay's 335-square-mile network of pipelines, wells and processing centers.

Work in the oil field thus is a race against nature and a sprint against time. When the winter freeze sets in each fall, work crews fly in on chartered Boeing 737 jets for two weeks of 12-hour shifts. Workers pair up in quarters the size of a cruise-ship stateroom, half working days, half working nights -- though night seeps into day once the sun sets for good each November and does not rise again until late January.

Crews fly in from places as far away as Texas, Louisiana, Tennessee and Georgia. Their Prudhoe Bay lifestyle -- isolated from family and friends, and hard physical work often involving decades-old technology -- seems like a throwback to the logging camps of the Paul Bunyan stories.

But they all seem energized by the knowledge that BP needs the Prudhoe Bay field operating at peak efficiency, and it needs the work completed quickly. And those twin needs have created a demand for work that puts money in their pockets.

"The whole reason we're up here is to make money," said J.C. Robinson, an oil-field worker for 27 years. "People are tired, but they're glad to have the work."

Still, the rush toward recovery has led to more problems.

Early on, the U.S. Department of Transportation, one of several agencies charged with inspecting the work, was rejecting 8 percent of the welds on BP's new pipes, said Rob Guisinger, a pipeline inspector for the agency.

The Steelworkers Union, representing many BP field workers, is worried about the stresses workers are facing. Kristjan Dye, president of the union local, this week worked an 18-hour day, then two 12-hour days, followed by another 18-hour day. It's tough, Dye said, but the Prudhoe Bay workers are benefiting from the lessons BP learned at Texas City, where management's refusal to listen to worker complaints may have contributed to the deadly blast.

"I can tell you, a few years ago, management was not OK with it if you refused to work overtime," Dye said. "Now, because of Texas City, they're a lot more accepting of it. We were moving toward a safer workplace even before the leaks last year."

Guisinger has seen a change even in the last few months.

"They were pushing their people awfully hard to get the work done," he said. "But my concerns have dropped off considerably. We're in a good place right now." Today, the rejection rate on pipe welds has dropped to less than 1 percent, well below the industry average.

A hiring wave is improving conditions too. BP has taken on 40 operators and technicians at Prudhoe Bay in the last six months. What's more, BP has uncorked $550 million for the repair effort on top of the $320 million it spends annually on maintenance.

Malone hopes the infusion of money will send a signal to workers that the company cares about doing things right. Even so, Malone said, no one should get the idea that BP will just throw money at the problem and not care how it is spent.

"The day someone says budget doesn't matter, well, then I'm working at the wrong company," he said after his Prudhoe Bay tour, while traveling on a leased jet en route to Houston and a weekend at his Texas ranch.

Bashfulness and bad dreams

The afternoon of his arrival at Prudhoe Bay, Malone meets with a room of workers at Prudhoe. Dressed incongruously in a crisply pressed blue jumpsuit that contrasts with the sweaty coveralls of the workers around the table, Malone is a quiet and conversational speaker. But he's direct when he wants to make a point.

Working from person to person among the dozen in the room, Malone asks questions about the coatings on pipes designed to prevent leak-inducing corrosion from the outside. He hears about how a switch to smaller-diameter pipes will increase the velocity of the crude oil moving through the pipes -- something that will help cut corrosion from the inside, which is harder to detect and is the sort that ate through BP's Prudhoe Bay pipes.

Malone also wants to know about dangers -- dangers to workers and to the environment. He asks one contractor if his people are reporting all their accidents and making BP aware of any unsafe conditions.

"Our people are not bashful," responds Matthew Lanagan, safety and environmental manager for Houston Construction, a major contractor on the Prudhoe Bay field.

"That says something about your company: that you've come a long way," Malone shoots back. "We were all struggling with that a little while ago." It is a polite criticism not just of Houston, but of BP's own problems of employees not alerting higher-ups over their safety and maintenance concerns.

Then Malone turns the conversation to what at first seems almost a minor, technical point.

"And my nightmare, documentation?" he asks the people in the room. "You knew I was going to ask about documentation. That's my nightmare."

Malone's comment focused on the record-keeping required to comply with regulators in the wake of the spills. BP must track every new weld, every radiographic inspection of pipe, every time it tests corrosion rates by inserting metal tabs into the flow of oil. The scrutiny is relentless, and Malone wanted to ensure that every worker understood how significant a role paperwork will play in getting the company back on track.

But when he got back to work in Texas, Malone soon learned that documentation was creating an entirely different sort of bad dream for him. Congressional investigators believed BP was holding out on delivering key documents -- e-mails and other internal memoranda created in the years running up to the 2006 spills.

Malone already had endured a blistering congressional hearing in September. With gas prices jumping because of the Prudhoe Bay shutdown, lawmakers criticized BP's safety practices and accused the company of conspiring to hike prices. Malone was too new to the job to say much of substance. But he did promise one thing: BP would be candid and honest in its dealings with Congress and the public.

But a few days after returning from his March tour of the BP fields, Malone received disheartening news: An internal BP search had uncovered a batch of e-mails containing years of in-depth discussion claiming budget cuts were compromising the company's fight against corrosion at Prudhoe Bay. Worse yet, it was the kind of incriminating communication that BP previously had said did not exist.

Conditions for disaster

"Reliable funding and resources is a yo-yo, accurate schedule [of corrosion-fighting] activities is a joke, and predicting ... impacts is even further out of the realm of reality," wrote one of BP's top corrosion fighters, in an e-mail almost a year to the day before the spill.

The note, one of dozens turned over to the Investigations and Oversight Subcommittee of the House Energy & Commerce Committee just days before its hearing in late May, is a cry for help. It appears to reflect the frustration of a dedicated employee seeking to reconcile corporate rhetoric about safety with the reality of repeated budget cuts in the field.

Ultimately, Kip Sprague, the corrosion manager, grudgingly agrees to provide a "placeholder" request for resources -- a number to give his boss while suspecting all the time that it's unlikely he will get any help.

"Bitch, bitch, bitch ... ," Sprague writes in response to his boss' request for information. "I will try to wrestle down some middle ground between the reality of the situation and some feel-good placeholders, just to get people off your back. However, I will not run/sacrifice an inspection strategy and program with limited resources. ... That, in my opinion, is negligent."

Corrosion -- the chemical reaction between water, bacteria and steel -- can take years to eat through a high-strength carbon-steel oil pipe. The caustic stew of management budget cuts and oversights that allowed corrosion to burrow through Prudhoe Bay's pipes built over a period of years too.

The Prudhoe Bay operation at the peak of its 30-year life span produced 1.5 million barrels of oil per day. But after that 1989 high point, production rates dropped sharply. A skimpy 500,000 barrels were coming out of Prudhoe's 1,273 miles of pipes each day prior to the 2006 spills.

The 1989 peak coincided with two other important events. Oil prices were plummeting by almost two-thirds from their $66 peak in 1981. At the same time, BP was tapping into new oil sources that delivered viscous, highly corrosive crude. From that point forward, oil flowing through BP's eastern operating area would be increasingly thick and slow flowing, and thicker oil is far more corrosive, thanks in part to sand that settles in the bottom of pipes and deflects anti-corrosion chemicals away from the metal they are intended to protect.

With prices skidding toward their bottom of about $9 a barrel in late 1998, the bosses at headquarters began rejecting requests for materials and programs necessary to keep the Prudhoe Bay pipes from rotting.

A 25 percent budget cut instituted in 1999, after the Amoco merger, meant that one crucial corrosion-fighting method -- sending cylindrical probes called "pigs" through the pipes to both clean and inspect them -- was abandoned virtually altogether, company records show. The BP e-mails also show that at one point, the top corrosion-fighting executive, Richard Woollam, also stopped buying corrosion-fighting chemicals, again in an effort to meet budget targets.

A review of e-mails shows that workers began fretting at least a decade ago that the slowing velocity of oil in the lines might dangerously create conditions for corrosion. At the same time, they saw no help coming from headquarters.

"My impression ... is that we will not be getting any relief on the budget," Woollam wrote in a 1999 e-mail. Prudhoe Bay's budgetmakers believe it is important to fight corrosion, he writes, "but, no one is prepared to let loose the purse strings."

Two days later, a colleague writes that, "due to budgetary constraints, the decision has been made to discontinue" a corrosion-fighting chemical treatment.

Two years later, in mid-2001, the budget pressure had not let up. A corrosion employee talked about "new bloodbath numbers" in the budget. Though an inspection pig had not been sent through the line for a decade, he suggested discontinuing plans for that, as well as for manual inspections of the pipes' exterior surfaces.

By 2003, BP was setting concrete plans to pig Prudhoe Bay's lines. But there was a problem: New, high-technology "smart" pigs were too long to fit through many of the bends in the Prudhoe Bay system.

When BP proposed spending $2.5 million to adapt the system to the new pigs, its minority partners in the Prudhoe Bay field -- ConocoPhillips and ExxonMobil -- did more than say no, according to one e-mail. They also requested that BP formally withdraw the request, thereby putting the proposal to rest for good.

By that point, the western half of the Prudhoe Bay oil field had not been pigged in 15 years.

The eastern half of the field, which BP acquired as part of its buyout of Arco in 2000, had never been pigged. By the time of the leaks last August, the key oil transit lines in the eastern area were so corroded that BP ultimately decided to replace the entire 8-mile network rather than attempt a risky, piecemeal repair. At the same time, BP had cut back on crews doing external monitoring of the pipes.

Discovery of the leak

On March 2, 2003, a worker driving along the pipeline on the western part of the Prudhoe Bay field smelled oil. Co-workers rushed to the site and quickly discovered the 200,000-gallon spill. BP's automatic detection system had missed the slow-flowing leak, which had appeared an estimated five days earlier.

BP sent a smart pig through the western section of the Prudhoe Bay field. To get a smart pig into the pipes, though, BP workers had to set up a temporary, plywood shed and specially rig the transit line to accept the long, cylindrical object. Meanwhile, a cleaning pig sent through the section for the first time in nearly two decades caused nearly 22 barrels of sludge to break free from the pipe walls.

The March spill also raised concerns about the eastern half of the Prudhoe Bay field.

Under orders from regulators, BP sent a smart pig through those eastern pipes found 16 anomalies in 12 locations, including 80 percent of the pipe wall eaten away in some points. When the oil leaked from two spots in August, BP shut down the line.

The Prudhoe Bay corrosion-control system had hardly changed since the early 1990s, and budget cuts had forced significant reductions in corrosion-fighting efforts, despite an internal audit that called for action.

Malone, who had served four years as CEO of Alyeska, the entity that runs the Trans-Alaska pipeline, got called back to North America in July. Giving up the job running BP's shipping business, and knowing the crisis he faced, Malone insisted on having unique powers in his new position.

He wanted authority to approve budgets to get pipeline problems fixed. And he wanted the power to appoint an independent person, a "technical directorate," who would review practices at the Prudhoe Bay operation and report any safety or environmental concerns directly to him.

Malone quickly replaced half of Prudhoe Bay's top managers. Malone also dumped BP's command-and-control approach, instead insisting that workers at all levels send up signal flares when they see something wrong. Malone hopes to show workers through the reactions they get that the company is listening to their suggestions. In digging into management processes that set the stage for trouble in Alaska, he determined that the turnover of senior managers was a factor, as was poor coordination and communication between BP operations on Alaska's North Slope and management in Anchorage.

Malone also has tried to instill a sense of a future for Prudhoe Bay. Specifically, he began focusing attention on BP's plans for a "50-year future" for the field. Oil may be running out, he has said, but natural gas from the Prudhoe Bay reserve is plentiful. BP is negotiating with the Canadian government for a new gas pipeline that would carry gas to Chicago and the Midwest. Still, there are more challenges ahead. "I'm not naive," Malone said. "You're talking five or seven years before you can say this culture is permanently changed."



The big fix

When foremen for the Prudhoe Bay field work gather at 6 each morning, the sun -- when it rises at all -- still has an hour to go before peeking over the horizon. In a sparsely furnished room that smells of coffee, not-quite-clean clothes and a hint of diesel exhaust from the trucks idling outside, two dozen foremen meet to compare notes on their progress in rebuilding the Prudhoe Bay pipeline system.

"We're sort of getting crunched on our time limit," says Lanagan, the Houston Construction contractor. "But we're not going to cut no corners."

Craig Flippo, operations representative for BP, reports on his discussion with design engineers based in Anchorage. "We're working with the operations team to make certain we're following our management-of-change process."

He underscores the point by reminding the Prudhoe field workers how their jobs are affected by the change in management systems. Before any major new work can proceed, Flippo reminds the foremen, they must file a detailed safety analysis, an analysis of environmental hazards, agree with Anchorage on the scope of work and get clearance to proceed.

George Nyftler, foreman for the 240-person contingent from Houston Construction, said high prices are keeping oil workers busy all over the U.S., so it can be hard to recruit workers to Prudhoe Bay. He notes that the base starting pay of about $80,000 a year -- and more overtime available than many people care to work -- can be a lure.

"It's to the point where special skills and special equipment, anything specific to the Arctic, are in short supply and hard to come by," Nyftler said.

Later, with the arctic sun at its mid-day peak, work is going full tilt. One team is placing stanchions in the ground. Instead of using concrete footings, they pour a rock-and-water slurry into the post hole: The permafrost will freeze it as hard as concrete. Barring a catastrophe of global warming, it should never melt.

Half a mile away, welders sit in a warming hut as a team of workers prepare two 80-foot sections of pipe to be joined. With the minus-52 wind chill a glass of water thrown into the air will freeze before it hits the ground. A huge gas jet heats the ends of the two steel pipes until they are warm enough to be worked with a welding torch.

That's when three welders leave the hut to take turns on each joint. The most skilled welder lays down the first, most critical bead. Two others complete the joint. Once completed, it must be X-rayed for quality. BP, the State of Alaska and the U.S. Department of Transportation review slides of each weld.

Malone, on his inspection tour, steps outside of a Ford Excursion truck as a group of workers prepares to lift part of a 3,000-foot-long section of pipe onto its stanchions. A treaded vehicle sidles up to the pipe. The workers sling a thick chain underneath the pipe, then connect it to a boom extending from the side of the vehicle.

When the boom operator begins lifting, the seemingly endless string of insulated 18-inch-diameter pipe wriggles and squirms like a piece of boiled pasta.

At one point, Malone watches as a worker absent-mindedly strays toward a pipe section being held aloft by a boom. It is a violation of company policy, not to mention dangerous, to walk under a suspended load.

Two co-workers call out to their wayward colleague. He steps back from the brink of danger.

The incident strikes Malone as a sign that, 250 miles above the Arctic Circle, the 5-year process of changing BP's culture is starting to take root.

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About this story

Chief business correspondent David Greising spent six months reporting on BP PLC's attempts to fix three major problem sites within its huge North American unit. Greising, along with Tribune photographer Bob Fila, reported from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas City, Texas, the location of a deadly refinery explosion that killed 15 in 2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which nearly toppled into the sea during a hurricane in 2005. The Tribune is the first news organization to visit all three sites since the disasters and the only one ever to set foot on Thunder Horse in the gulf.

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MONDAY: Trouble on Thunder Horse oil platform.


IN THE WEB EDITION

The Tribune's David Greising describes his visit to BP's facilities and how the oil giant is struggling to rebuild in a video at chicagotribune.com/bp
 

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Fairbanks News Miner
May 27, 2007

http://newsminer.com/2007/05/27/7200

State needs to become major player in TAPS tariff case
By Richard Fineberg
Published May 27, 2007

Every minute of the day, while high-paid attorneys and accountants pepper each other and regulators with obscure and sometimes ridiculous legal arguments, the state treasury loses another $400 in excess trans-Alaska pipeline system (TAPS) shipping charges, or tariffs. Most of that money goes directly into the pockets of BP, ConocoPhillips and Exxon Mobil, which control more than 19 out of 20 barrels of North Slope crude oil and own a similar share of the pipeline system.

This long-running revenue hemorrhage stems from the difference between the TAPS tariffs for in-state oil, set by the Regulatory Commission of Alaska (RCA)  about 11 percent of TAPS oil  and the much higher tariff the oil companies charge for transporting the remaining 89 percent of TAPS shipments bound for the Lower 48.

With the notable exception of recent columns by Dermot Cole in this newspaper, the press tends to ignore this problem. It’s just too complicated. And when it is covered, it is liable to be misreported. Take, for example, the initial reporting of the recent decision of a Federal Energy Regulatory Commission (FERC) administrative law judge. That decision supported the claim of independent TAPS shippers Anadarko and Tesoro that TAPS tariffs for Lower 48 shipments are excessive. Determining that Anadarko and Tesoro made a strong case, the judge recommended that the commission should reduce tariffs to a level near that of the RCA’s 2002 order.

We’re talking about RCA tariffs of about $2 per barrel versus current FERC tariffs of more than $5 per barrel. Every dollar per barrel in tariff charges costs the state 25 cents in reduced royalty and production tax revenue.

According to initial press reports, the recent decision at FERC “revolves around an inconsistency in the cost to move a barrel of oil through the pipeline.” How does inconsistency figure into the picture? The state’s principal argument in this case was that different tariffs for the same service are discriminatory. Near the end of her decision, the administrative judge noted that the reduced tariffs she was recommending would render the state’s argument moot. Elsewhere in the lengthy decision, the FERC judge mentioned state arguments only occasionally. In sum, Tesoro and Anadarko did the heavy lifting, arguing against excessive tariffs; the state’s main argument was largely irrelevant.

When the state has so much at stake in the outcome of the TAPS tariff case, how did it become a minor player? This question deserves consideration for more reasons than lost revenue and litigation expense. The state wants independent companies to find the yet-undiscovered natural gas necessary to make the gas line project economic. But excess tariffs penalize the independent companies, along with the state. Laughing all the way to the bank as they pocket excess revenue from oil pipeline overcharges, the Big Three must smile to think that the gas pipeline tariff plays an even more significant role in that project’s economics, providing new opportunities for them to plunder other shippers.

The May 17 TAPS case ruling is the latest in a string of decisions that call into question the 1985 TAPS tariff settlement, negotiated with the TAPS owners by the Department of Law and its consultants. The law firm of Morrison & Foerster was Department of Law’s leading consultant in that case and has been the state’s principal pipeline tariff aide ever since. According to the Alaska Budget Report, between July 2003 and the end of 2006, that firm also received $12 million for its assistance on the proposed gas pipeline contract  far more than any other firm.

After the FERC administrative law judge’s recent decision on TAPS tariffs was announced, the governor issued a statement saying she was “pleased with the FERC decision.” The governor stated that “[t]he state’s attorneys are reviewing the decision and preparing to participate in the next phase of the litigation.” I wonder what the consulting lawyers are making as they jog around the regulatory track while the state treasury continues to hemorrhage at the rate of $400 per minute.

After serving in the governor’s office two decades ago, I prepared a report to the state Legislature that penetrated the wall of confidentiality and confusion surrounding TAPS tariffs to document 20 examples of delayed information, needless opacity, important omissions and even misinformation that contributed to the approval of the 1985 TAPS settlement that haunts the state today. At that time, I ended another report to the Legislature with this question: If war is too important to be left to the generals, should petroleum litigation policy be left in the hands of the lawyers?

Gov. Palin: Tear down this wall!

Richard Fineberg, an independent oil and gas analyst from Ester, served as senior policy adviser to the governor on oil and gas policy between 1987 and 1989. In 2001 he prepared and presented expert testimony in the Regulatory Commission of Alaska’s TAPS tariff case for the RCA’s Public Advocacy Section. Additional background on TAPS tariff issues can be found at his Web site (
www.finebergresearch.com ).

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Anchorage Daily News
May 26, 2007

http://www.adn.com/money/industries/oil/story/8920947p-8820936c.html

North Slope plant resuming production after leak repair
RESTART BEGINS: BP says leaky pipe wasn't responsible for emergency shutdown.
By WESLEY LOY
Anchorage Daily News
Published: May 26, 2007
Last Modified: May 26, 2007 at 02:39 AM

BP workers have replaced a leaky pipe in a key oil-processing plant and could have the giant Prudhoe Bay field back to full production by Sunday, a company spokesman said Friday.

Oily water leaked through a hole about the diameter of a pencil, forcing a shutdown early Monday of Gathering Center 2, on the west side of the sprawling field.

The day before, the same plant came to a halt after an electrical contractor accidentally disconnected a wire that triggered the emergency shutdown system.

Sunday's emergency shutdown and Monday's pipe leak appear to be two unrelated events that just happened to occur on consecutive days, BP spokesman Daren Beaudo said.

Investigators aren't sure whether corrosion, abrasion or something else caused a spot on the inside of the steel pipe to thin to such a degree that a hole developed, he said.

"We have not conclusively determined what caused this," said Beaudo.

BP's maintenance practices have come under fire from Congress and regulators in recent months for a string of corrosion-related pipeline leaks in the nation's largest oil field.

Monday's shutdown of Gathering Center 2 -- one of six Prudhoe plants that separate oil from water and natural gas -- knocked out about 100,000 barrels of daily oil production, or nearly a quarter of the field's normal output.

Workers installed a piece of replacement pipe and were in the process of restarting the gathering center Friday, along with dozens of wells in the area that feed crude oil into the plant, Beaudo said.

"Our expectations are that we would have full production returned by the end of the weekend," he said. "It's a large facility. It usually takes a couple of days to bring all the wells back up and get all the equipment operating."

The pipe that leaked is 12 inches in diameter and carries water from which most of the oil has been separated out, Beaudo said. Workers were surprised it leaked because they'd never seen a similar case in the plant, he said.

The ruptured pipe will undergo metallurgical analysis to determine the cause, Beaudo said.

On Sunday afternoon, Gathering Center 2 went into a brief emergency shutdown after an electrical worker inadvertently disconnected "an emergency shutdown wire," he said.

That triggered the plant's automated shutdown system, which worked just as it should have, Beaudo said.

Because the plant went idle, dangerous natural gas that normally would cycle out needed some place to go, so it was burned off in large outdoor flares, causing some black smoke.

Such flaring is fairly uncommon, said Moses Coss, an environmental engineer with the Department of Environmental Conservation in Fairbanks.

A DEC inspector is investigating two "black-smoke events" lasting about eight minutes each, Coss said. Some flares are restricted to smokeless operation, and the inspector will look to determine whether any excess emissions occurred, he said.

BP runs Prudhoe, the nation's largest oil field, on behalf of itself and the other owners: Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.

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

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Anchorage Daily News
May 25, 2007

http://www.adn.com/opinion/view/story/8916643p-8816603c.html

Enough, already
Exxon's endless appeals show important flaw in justice system
Published: May 25, 2007
Last Modified: May 25, 2007 at 05:02 AM

Here's the judicial understatement of the decade. In turning aside Exxon's latest appeal of the multi-billion judgment imposed for its 1989 Alaska oil spill, the 9th U.S. Circuit Court of Appeals said Wednesday, "It is time for this protracted litigation to end."

And how. It should have ended at least 10 years ago. Alaskans have waited and waited and waited for the courts to force Exxon to pay up. They've waited so long that hundreds of those who would share in the money have died.

THE ANSWER IS STILL NO

Exxon wants the courts to throw out all but a few scraps of the multibillion-dollar punitive damage award. This was the third time Exxon pushed its case in front of the 9th Circuit. And for the third time, the court declined to let Exxon off with the $25 million wrist slap it seeks.

In the previous go-round, the 9th Circuit roughly halved Exxon's original punitive damage award, down to $2.5 billion. The justices saw no reason to change their mind this time just because Exxon asked them to. The court had to act like a parent who must deal with a wayward but persistent kid. "We understand your argument," the court is saying, "and the answer is still no."

ACTIVIST COURT CREATES LEGAL UNCERTAINTY

The appeals court's latest ruling explains that much of the delay in this case has stemmed from the U.S. Supreme Court's decision to begin allowing close judicial review of punitive damage awards. That was a major change in judicial practice, coming from a court dominated by supposed judicial conservatives. Lower courts had to engage in legal guesswork, waiting for the Supreme Court to rule in more cases and clarify the new standards for reviewing punitive damages.

The $2.5 billion is the most the appeals court felt it could justify under the Supreme Court's shifting rules. For most companies, such a huge punitive damage award would merit skeptical treatment by the courts. But for a behemoth like Exxon, with annual revenues more than a hundred times that amount, it's not grossly excessive.

Keep in mind that punitive damages are supposed to deter the corporation's egregious conduct. To influence the behavior of a firm with annual revenues of $377 billion, the punishment has to be in the billions.

Exxon is sure to appeal to the Supreme Court. Alaskans in the case might as well cross-appeal and make the pitch for the original $5 billion award.

THE REWARD FOR DELAY

Normally, when a case drags out in the courts, there is no winner. Delay does both parties a disservice, by leaving important matters unsettled. But in this case, a decade and a half of delay clearly works to Exxon's favor.

Long ago the company set aside the money to pay for any punitive damages arising from the spill. The company won't even hiccup if it has to write Alaskans a $2.5 billion check.

Exxon's legal maneuverings should prod Congress into reconsidering the balance of power in lawsuits where big money is at stake. The current low rate of interest charged on judgments pending appeal -- less than 6 percent -- is one area to look at.

While appealing a multibillion-dollar judgment, a company can invest the money in its own operations and make far more income than the interest that will be added on to its eventual payment. A company would violate its obligations to stockholders if it didn't do everything it could to delay and reduce a final judgment. Fighting a war of attrition in courts can have a handsome payoff.

That explains why Exxon has tied up this case in endless appeals. It explains why Alaskans have long been denied the payments they thought they had won. And it's all the reason Congress needs to look at ways it might speed up the glacial pace of justice in big cases like this.

BOTTOM LINE: Legal system rewards Exxon for endlessly appealing multibillion oil spill judgment. Let's rethink that system.
--------------

Short takes

BEYOND THE ANWR GRAVY TRAIN: A take-no-prisoners PR firm from Outside had previously snagged a $3 million no-bid state contract to help push ANWR drilling legislation in Washington, D.C. With the Democrats now running Congress, drilling ANWR isn't going to happen -- period, end of discussion.

But what's poor PacWest to do? It's all dressed up, thanks to its state-funded warchest, but has no place to go.

No problem. The Lege said PacWest can keep the state money and use it on other Alaska energy issues.

Pays to have friends in high places, doesn't it?

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Fairbanks News Miner
May 24, 2007

http://hosted.ap.org/dynamic/stories/W/WST_BP_OIL_SHUTDOWN_AKOL-?SITE=AKFAI&SECTION=HOME

New Alaska oversight team investigates leak on North Slope
By STEVE QUINN
Associated Press Writer
 
JUNEAU, Alaska (AP) -- A state oil and gas industry oversight agency is making its debut by investigating a leak that forced BP PLC to cut production by a fourth from the nation's largest oil field.

The company discovered a hole about the size of a pencil's diameter to a water line in a facility used to separate oil, water and natural gas earlier this week at Prudhoe Bay on Alaska's North Slope.

By the time work crews diverted the leak to proper drainage and placed a patch over the leak, about 840 gallons of water leaked from the hole.

Company spokesman Daren Beaudo said Wednesday said he couldn't say when BP plans to resume full production since the company's internal investigation into its cause is still under way.

"We just continue to work on the repair," he said.

Jonne Slemons, the coordinator for the state's new Petroleum Systems Integrity Office, said its one inspector on the spill will remain on the North Slope all week.

No timetable on determining the cause has been established, she said.

"We don't have final or complete answers, yet, but it doesn't appear to be a case of improper maintenance at this time," she said.

Depending on what the findings are, the agency can order corrective action or even call for a change in maintenance practices, Slemons said.

The discovery of the leak early Monday morning forced BP to reduce its Prudhoe Bay production by about 100,000 barrels of oil daily, it's second partial shutdown of the field in less than one year.

The facility where the water leak occurred is the same one where the largest-ever oil leak on the North Slope occurred. Corrosion, much of it hidden by development of high amounts of sludge, caused a leak and spill on a feeder line in March 2006, followed by another leak in August at a second line.

After the second incident, the company shut down the affected lines, resulting in Prudhoe Bay production being cut in half. The company now is spending $250 million to replace 16 miles of questionable pipes.

For decades, some critics charge, lax government enforcement along with corporate unwillingness to make costly repairs caused corrosion and other wear-and-tear issues to fester.

Federal regulators and hearings followed last year's August shutdown, and a new administration at the state level instituted the PSIO to stave off any appearance that the state was too cozy with oil companies.

Taking that step was prudent, state officials said, especially since Alaska is trying to get a multibillion dollar natural gas pipeline built from the North Slope.

The perception of lack oversight in the past also weakens the Alaska's argument to federal lawmakers that it should be allowed to produce oil along the Arctic National Wildlife Refuge, Gov. Sarah Palin said.

"We are trying to convince the rest of the country, including East Coast politicians against ANWR, the state can oversee responsible development of oil and gas," Palin said.

The state also intends to have all oil and gas facilities in Alaska inspected within three years.

The Legislature recently approved $5 million to have an outside engineering firm perform the work.

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Houston Chronicle
May 24, 2007

http://www.chron.com/disp/story.mpl/business/energy/4831579.html

Rumblings of breaking up Big Oil
Lawmakers call for splitting industry giants
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau

WASHINGTON  Here in the nation's capital, discussions about the oil industry are just nothing like the conversations heard at Houston energy conferences.

When oil industry officials have addressed the record-high gasoline prices, they've pointed to unexpected downtime at refineries, political unrest in Nigeria and lower imports from Europe.

Lawmakers at a Joint Economic Committee hearing Wednesday talked about breaking up the oil companies.

Pointing to the example set by trustbuster Teddy Roosevelt a century ago, a group of lawmakers led by Sen. Charles Schumer, D-N.Y., are questioning whether they should step in to roll back the mergers that have created the so-called "supermajors" like Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, a notion that sends shivers through the oil sector.

"My instinct tells me that a reconsideration of oil company mergers in the last two decades may be in order," said Schumer, chairman of the joint Senate-House panel. "When markets have been distorted from lack of competition in the past, the federal government has taken action. Standard Oil, U.S. Steel and AT&T come to mind."

With motorists clamoring about pump prices topping $4 a gallon in some markets, lawmakers are eager to take action.

Oil industry lobbyists have been scrambling this week unsuccessfully to fend off bills in the House to enable the U.S. Attorney General to sue the Organization of the Petroleum Exporting Countries and to outlaw price gouging at the pump.

And the industry's critics have long questioned whether consolidation in the oil industry may be harming consumers. But a congressional hearing to consider an actual breakup of the oil companies was a novel experience, at least for this generation in the industry.

"It's a new twist," Red Cavaney, president of the American Petroleum Institute, said after the hearing.

Just how much consolidation has occurred in the oil industry is a matter of some debate even within the federal government.

The Federal Trade Commission, for instance, says 1,165 mergers occurred in the domestic petroleum industry between 1993 and 2003, noted Diana Moss, vice president of the American Antitrust Institute, while the Government Accountability Office found 2,600 transactions between a much shorter period, from 1991 to 2000.

Schumer argues that in 1993, the nation's top five refiners controlled a third of the U.S. market, while the largest 10 held a 56 percent market share. By 2005, Schumer said, the largest five refiners controlled 55 percent of the market, while the top 10 controlled 80 percent of the market.

Cavaney assured lawmakers "oil company mergers and acquisitions have not caused higher gasoline prices."

"We need to focus on the factors shaping those higher prices and not be misled by claims that have been repeatedly disproved, have no basis in fact, and mask root causes," Cavaney said.

The Federal Trade Commission strongly supports the industry's contention.

Michael Salinger, director of the FTC's Bureau of Economics, told the panel that analysts at his agency "do not believe the consolidation in the industry has been a major factor" in pushing up gasoline prices.

Despite the mergers over the last two decades, market concentration in most parts of the petroleum industry remains what the FTC would deem low or moderate, Salinger said.

Still, the FTC has brought more cases against petroleum companies controlling relatively low shares of the market than in any other industry, Salinger said.

"We are more aggressive with this industry than any other industry," Salinger said.

Since 1981, the FTC has challenged 21 petroleum mergers, prompting the parties in a fourth of those deals to drop their plans and requiring the companies in another 13 deals to divest significant assets.

The FTC recently objected to Kinder Morgan's plan to go private through a management-led buyout for fear the deal could prompt higher gasoline prices in the Southeast, until two investment firms participating in the deal agreed to turn their interest in a competitor into a passive investment.

FTC officials also monitor the gasoline markets for anomalies that suggest anti-competitive behavior. And, according to footnote No. 32 of Salinger's prepared remarks Wednesday, the commission is currently investigating the gasoline and diesel markets in the Pacific Northwest. (Salinger declined to discuss that probe further).

But Democrats, who have long accused the FTC of lax enforcement of the oil industry, are clearly not persuaded.

"They're conscientiously not looking" for anti-competitive behavior, said Rep. Maurice Hinchey, D-N.Y. "The FTC is putting blinders on."

david.ivanovich@chron.com

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Anchorage Daily News
May 23, 2007

  http://www.adn.com/money/industries/oil/prudhoe/story/8911334p-8811311c.html

Water leak at Prudhoe plant cuts flow of oil
840 GALLONS: Spill was contained at Gathering
Center 2; interrupted oil flow is worth $6.6 million a day.
By WESLEY LOY
Anchorage Daily News
Published: May 23, 2007
Last Modified: May 23, 2007 at 03:02 AM

Prudhoe Bay oil production is down by almost a quarter due to a ruptured pipe, and BP workers and state inspectors are checking to see whether corrosion is again to blame for a bobble in the nation's largest oil field.

The bad pipe doesn't run overland. Rather, it's part of the plumbing inside a key processing plant called Gathering Center 2 on the field's west side, said BP spokesman Daren Beaudo.

The carbon steel pipe, 12 inches in diameter, is used to drain water out of a large tank that separates the mix of oil, natural gas and water coming in from dozens of wells, he said.

About 1:45 a.m. Monday, workers discovered a leak coming from a weld in the T-shaped piece of piping, Beaudo said.

About 840 gallons of water leaked, but the water went into a sump and none escaped the building, he said.

The pipe rupture forced BP to idle Gathering Center 2, cutting Prudhoe oil output by about 100,000 barrels per day or roughly 12 percent of total North Slope production.

The outage marks a long string of breakdowns since early last year in Prudhoe, which BP runs on behalf of itself and the other owners: Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.

BP has come under a hailstorm of criticism from members of Congress and federal pipeline regulators for what they called lax maintenance leading to corrosion and leaks. Federal criminal investigators continue to probe a corrosion-caused spill last March from a major overland pipeline connected to Gathering Center 2. At an estimated 201,000 gallons, it was the largest oil spill ever on the North Slope.

Investigators won't know whether corrosion is to blame for Monday's pipe rupture until workers can remove the faulty piece and examine it, Beaudo said.

The plant is expected to be down "a few days" while workers replace the piping, he said.

BP didn't publicly announce the production cut because the company considers it a routine event that inevitably happens in a major oil field, Beaudo said.

But a Michigan congressman who heads a U.S. House Energy and Commerce investigative subcommittee looking into the Prudhoe problems saw it differently.

Rep. Bart Stupak, a Democrat, sent out a statement Monday night after hearing of the leak inside Gathering Center 2.

He noted his subcommittee recently reviewed e-mails from BP employees suggesting the company might have reduced or eliminated corrosion-suppressing chemicals needed to prevent leaks in Prudhoe Bay water lines.

"While I have not seen all the facts on this most recent leak, it appears to be yet further evidence that BP's cost-cutting culture has put our nation's economy at risk," Stupak's statement said. "My subcommittee will continue to hold BP accountable."

Beaudo said BP had no comment on Stupak's statement.

Gathering Center 2 is one of six major oil-gas-water separation plants in the vast Prudhoe Bay oil field.

The plant has experienced several major glitches in recent months. Last August, it went down after a gas-handling compressor quit. It was idled again in April after a crane hit a nearby power line.

World oil traders noticed the Prudhoe production loss, but it wasn't significant enough to drive up prices. North Slope crude oil for delivery to West Coast refineries closed at $66.32 a barrel Tuesday, down $1.30 from Monday's finish.

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

At a glance

• WHAT:
A leaky pipe prompted the shutdown of a major Prudhoe Bay oil processing plant.

• RESULT: Daily North Slope oil production is down by 100,000 barrels, or 12 percent, for "a few days," BP says.

• COST: At Tuesday's closing price, the interrupted oil flow is worth $6.6 million a day. Prudhoe Bay production breakdowns

• MAY 21: Daily production falls by about 100,000 barrels after pipe springs leak inside Gathering Center 2, causing a plant shutdown.

• APRIL 23: Daily production falls by 90,000 barrels after crane hits power line, shutting down Gathering Center 2.

• OCT. 10, 2006: Nearly entire field is hobbled, with daily production down by 310,000 barrels, after dust storm short-circuits electricity grid.

• AUG. 23, 2006: Daily production falls by 90,000 barrels after gas-handling compressor fails in Gathering Center 2.

• AUG. 6, 2006: Daily production falls by about 200,000 barrels for several weeks after corroded pipe leaks on Prudhoe's east side.

• MARCH 2, 2006: Daily production declines by nearly 100,000 barrels for more than a month after corroded pipeline on Prudhoe's west side near Gathering Center 2 spills record 201,000 gallons of oil.

Source: Anchorage Daily News research

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http://www.adn.com/news/politics/story/8911305p-8811300c.html

Corruption case prompts ethics action in Assembly
INFLUENCE: Convicted felons can't register to be lobbyists on city business.
By KYLE HOPKINS
Anchorage Daily New
Published: May 23, 2007
Last Modified: May 23, 2007 at 02:32 AM

The Anchorage Assembly voted unanimously to tighten city lobbying rules Tuesday night, banning anyone convicted of a felony from registering as a lobbyist.

"What we're trying to do is basically maintain the integrity of those who try and influence public officials," said Assemblyman Dan Sullivan, who co-sponsored the proposal along with Assemblyman Paul Bauer.

Bauer has said he proposed the changes partly because Anchorage's most prominent lobbyist, Bill Bobrick, had been linked to the corruption case against former Anchorage Rep. Tom Anderson. Bobrick has pleaded guilty to conspiracy to bribe Anderson, and no longer has any clients before the city, according to the latest city lobbyist lists.

Only one person -- Jed Whittaker, who left right after he spoke -- testified about the changes. He told Assemblymembers they allowed Bobrick to influence them for years without complaint until now.

"If you really want to say to the public that you cannot be bought, then pass an ordinance that publicly funds elections to the Assembly," Whittaker said.

No one on the Assembly had any questions for him.

The new guidelines adopted Tuesday say a person can't register to lobby city officials if he or she has been convicted of a felony within the previous 10 years.

Ethics may be a hot topic in Alaska but the lobbying rules drew little attention. By the time Assembly members were deep in debate over how to define the type of crimes would-be lobbyists aren't allowed to commit and how much to charge them for registration, two people sat in the audience.

Preparing for a few weeks off from regular meetings, the Assembly ended the meeting relatively early. Assemblywoman Debbie Ossiander said fumes from a large, smelly new screen -- used to view voting results -- behind the Assembly seats was giving her a headache.

Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com  or 257-4334.

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Fairbanks News Miner
May 23, 2007

http://hosted.ap.org/dynamic/stories/A/AK_BP_OIL_SHUTDOWN_AKOL-?SITE=AKFAI&SECTION=HOME

BP shuts down one-fourth of its Prudhoe Bay production
By STEVE QUINN
Associated Press Writer

JUNEAU, Alaska (AP) -- BP officials said Tuesday it was too early to determine what caused a water pipe leak that led to the second partial shutdown in 10 months of the nation's largest producing oil field.

"The best estimate is that it's going to be a few days where we are going through a repair plan," said BP spokesman Daren Beaudo. "We will work as quickly and as safely as we can."

Production at Alaska's Prudhoe Bay was cut by one fourth after the company discovered the leak early Monday morning, company officials said.

Some 400,000 barrels a day of oil are pumped at Prudhoe Bay, about half of the total North Slope production.

Beaudo said the company discovered a hole about the size of a pencil's diameter to a water line in a facility used to separate oil, water and natural gas.

About 20 barrels of water leaked from the pipe, which is about 12 inches in diameter, before the it was discovered around 1:45 a.m. Monday, Beaudo said.

BP is Prudhoe Bay's operator, and it has a 25 percent stake in the field it shares largely with ConocoPhillips and Exxon Mobil Corp., which hold 36 percent interest each.

The British company said its production loss would be 25,000 barrels per day; losses for the two majority owners would be about 36,000 barrels a day each.

Light sweet crude for June delivery fell $1.36 to $64.91 a barrel in electronic trading on the New York Mercantile Exchange.

The facility where the water leak occurred is the same one where the largest-ever oil leak on the North Slope occurred, last year.

It's an area still under heavy scrutiny as a place identified by critics for poor maintenance practices.

For decades, some critics charge, lax government enforcement along with corporate unwillingness to make costly repairs caused corrosion and other wear-and-tear issues to fester.

"We should be expecting these kinds of things," said Dan Lawn, who previously worked for the Alaska Department of Environment Conservation, but now is with watchdog group Alaska Forum for Environmental Responsibility. "That's why all of this needs to be looked at well.

"If water and sludge in oil lines are responsible for making corrosion to oil lines, one would think it's natural to know the same material taken out of oil lines and put in any other lines would cause the same kind of problem."

Energy analysts, however, downplayed the significance of the event, at least for the world markets and for U.S. energy consumers.

"It's not that (this lost production) can't be made up elsewhere in the world," said Alaron Trading Corp. analyst Phil Flynn "But we would like to get production here rather than elsewhere."

Last week, members from a House committee investigating last year's spills, admonished the company for what it believed to be scaled back anticorrosion efforts in order to save money.

U.S. Rep. Bart Stupak, chairman of the Energy and Commerce investigations subcommittee said in a statement it's these lines that remain a huge concern for federal lawmakers.

"While I have not seen all the facts on this most recent leak, it appears to be yet further evidence that BP's cost cutting culture has put our nation's economy at risk," Stupak said. "My subcommittee will continue to hold BP accountable."

Xxxxxxxxxxxxxxxxxxxxxxxxx

Water leak shuts down BP facility
By Eric Lidji
Staff Writer
Published May 23, 2007

BP Plc. shut down about a quarter of its Prudhoe Bay production Monday after finding a small leak in a water line on the North Slope facility.

Production will be cut by about 100,000 barrels a day for “a few days” while crews repair the line, according to BP spokesman Daren Beaudo.

Beaudo said a quarter-inch hole was found around 1:45 a.m. Monday in a 12-inch water line at Gathering Center 2, a facility on the western side of Prudhoe Bay used for separating oil, gas and water.

“As a result of that leak we’ve had to shut down the whole system,” Beaudo said, referring to the gathering center.

Crews diverted the water in the pipe to a sump tank and collected around 20 barrels before stopping the leak.

Beaudo did not know how much the line had leaked before it was discovered.

The cause of the the water leak remains unknown.

Beaudo said there were no adverse environmental impact from the leak.

A spokeswoman with the Alaska Department of Environmental Conservation, which monitors spills across the state, said the water had not left the containment area.

Gathering Center 2 has been the site of two recent leaks at Prudhoe Bay.

In March 2006, corrosion on a transit line connecting Gathering Center 2 to another Gathering Center caused a quarter-inch hole that leaked around 200,000 gallons of oil onto the frozen tundra.

Last December, a hole in the bottom of a separation tank at Gathering Center 2 spilled more than 250,000 gallons of water and 126 gallons of crude oil.

The caused of that leak has still not been identified.

Beaudo said that the two previous leaks were not connected to Monday’s leak because each was part of a different system at the facility.

BP was under scrutiny last week during a congressional hearing to determine whether extreme budget cuts lead to previous leaks at the North Slope oil field, including a partial shutdown last August caused by a leak on the eastern side of Prudhoe Bay that spiked oil prices around the country.

Rep. Bart Stupak, D-Mich, who chairs the investigative subcommittee that held the hearing, released a statement on Monday connecting the current leak to a long line of problems at the country’s largest oil field.

“While I have not seen all the facts on this most recent leak, it appears to be yet further evidence that BP’s cost cutting culture has put our nation’s economy at risk,” Stupak said. “My subcommittee will continue to hold BP accountable.”

Internal e-mails released at the hearing indicate BP stopped using corrosion inhibitors on the water lines at Gathering Center 2 in 1999 because of budget restraints despite evidence that the chemicals were working.

BP runs the Prudhoe Bay oil field on behalf of a consortium of companies that includes the Exxon Mobil Corp. and ConocoPhillips, which both have a larger interest in the field than BP.

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

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Wall Street Journal
May 23, 2007

US GAO:Oil Indus Mergers Upped Risk
Of Anticompetitive Behavior
DOW JONES NEWSWIRES
May 22, 2007 3:06 p.m.

 WASHINGTON (Dow Jones)--Although supply and demand fundamentals and crude prices are the primary drivers of gasoline prices, consolidation in the oil industry has contributed to price hikes and raised the risk of anticompetitive behavior, the U.S. Government Accountability Office said Tuesday.

The GAO's report comes as both the House and the Senate are considering price-gouging bills that would criminalize anti-competitive actions by companies - refiners, shippers and retailers alike.

Record-high gasoline prices are fueling political momentum for a slew of congressional investigations and legislation that targets the oil and gas industry.

Although the GAO said that oil industry consolidation may have increased efficiency in the market, mergers "raise concerns about potential anticompetitive effects because (they) could result in greater market power for the merged companies, potentially allowing them to increase and sustain prices above competitive levels."

Since the 1990s, a wave of mergers, which resulted in companies such as ConocoPhilips (COP), ChevronTexaco (CVX) and ExxonMobil (XOM), have meant price hikes of up to 7 cents a gallon, according to GAO modelling.

The American Automobile Association says average prices at the pump have risen 88 cents a gallon from the beginning of the year to $3.20.

  The GAO said in its report to the House Energy and Commerce's investigations and oversight subcommittee that the Federal Trade Commission's standards state a one-cent increase is "significant."

The government auditor calculated that gas-price rises since January have cost consumers an extra $20 billion, or around $146 for each passenger car in the U.S.

On Wednesday, the House is expected consider a bill introduced by Rep. Bart Stupak, D-Mich., chairman of the energy oversight subcommittee, that would give the Federal Trade Commission the authority to punish companies that artificially inflate the price of energy, from production to distribution.

The bill is expected to be filed under suspension of the rules on the floor, which means it already has majority support and will likely pass on a voice vote.

Stupak and other Democrats such as Sen. Maria Cantwell, D-Wash., whose own price-gouging amendment will be considered on the Senate floor in June, accuse big oil companies of not only artificially hiking prices, but also not investing billions of dollars in profits into refining capacity.

Industry organizations, such as the American Petroleum Institute and the National Petrochemical & Refiners Association, are worried about the impact of such legislation, especially as several officials have said the legislation is likely to sail through Congress. "It's an ill-conceived quick fix that is more harmful than helpful to consumers," the NPRA said.

Energy Information Administration chief Guy Caruso told the subcommittee in written testimony that high crude-oil prices, tight refining capacity and lower-than-normal gasoline imports were causing the record-high prices.

FTC Commissioner William Kovacic said in his testimony before the subcommittee that the FTC was already conducting effective and adequate oversight of the industry, and that the regulator had prevented anti-competitive mergers and acquisitions.

Furthermore, the FTC's probe of price-gouging allegations in the wake of a bad hurricane season in 2005, "did not uncover any evidence of manipulation to increase prices aside from limited instances of price gouging." The report included a probe of whether refiners manipulated prices by operating their facilities below full production capacity to restrict supply, a common allegation in the halls of Congress.

Refinery utilization rates have been significantly lower than normal this year following prolonged planned outages and a series of unplanned outages.

 -By Ian Talley, Dow Jones Newswires; 202 862 9285;
ian.talley@dowjones.com 

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Anchorage Daily News
May 22, 2007

http://www.adn.com/money/industries/oil/story/8907593p-8807582c.html

BP checks prospects for Ugnu site on Slope
TECHNICAL DIFFICULTIES: Shallowest, heaviest of oil accumulations considered.
By Petroleum News
Published: May 22, 2007
Last Modified: May 22, 2007 at 04:20 AM

BP Exploration (Alaska) Inc. has begun permitting for an extended Ugnu well test operation next year, a huge but troublesome and undeveloped oil field.

Ugnu is the shallowest and heaviest of North Slope oil accumulations. Oil companies have long known about Ugnu because their wells to deeper fields go through it.

The formation is not in production because technical problems of producing the cold, heavy oil that lies in unconsolidated formations have not been solved.

BP filed paperwork last week proposing to add to a work pad in the Milne Point field for testing Ugnu. Work this year would include gravel placement so that the gravel can compact and settle before an extended Ugnu well test operation next year, BP told state regulators.

BP told the state that pre-pilot well testing is expected to be an extended operation, the exact length of which is not now known.


GETTING AT ONE-FIFTH OF UGNU

BP talked to legislators about the planned Ugnu production test in late January.

BP's Milne Point resource manager, Scott Digert, told the state House Special Committee on Ways and Means that BP planned to spend about $25 million this year to do pilot tests for technology the company thinks could be used to produce the heavy oil at Ugnu.

Although there has been no production from Ugnu, heavy oil has been taken from the Schrader Bluff and West Sak fields, which are somewhat deeper below the ground.

Some 100 million barrels of heavy oil has been produced on the North Slope to date, compared to 15 billion barrels of light oil from such fields as Prudhoe Bay, Kuparuk River and Alpine.

An additional 100 million to 1 billion barrels of heavy production is possible.

Digert said the first Ugnu wells would use cold heavy oil production with sand technology, where oil is produced along with massive amounts of sand that come with it. The sand would be separated on the surface, he said, and the oil would have to be warmed before it could be transported with light oil.

Digert said BP thinks that with certain techniques it could get at some 20 percent of the Ugnu formation.

BP also plans to try other technologies in the future such as steam injection or other thermal recovery methods, but not the mining used in some shallow Canadian heavy oil fields. Digert said Ugnu can't be mined, because it's 2,500 to 3,500 feet below the service, and permafrost lies above it.

He said steam injection is also expected to be less effective on the Slope than in Canada because the Ugnu is colder and because of the challenge of getting steam down through the permafrost and warming up the colder oil. The North Slope rock is also different from Canada, where the oil sands are "blocky, very massive sands," he said, allowing for easy vertical movement. "Ours tend to have layers of shale within the sand that tend to block that vertical movement of oil."

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http://www.adn.com/opinion/view/story/8908388p-8808390c.html

Go or stay?
Credible bribery charge means lawmaker is compromised
Published: May 22, 2007
Last Modified: May 22, 2007 at 05:15 AM

The first session of the 24th Alaska Legislature is over but the stain of the federal corruption investigation remains unbleached. The most notable symbol of the scandal is Wasilla Republican state Rep. Vic Kohring. He's the only sitting lawmaker who has been indicted.

In defending his refusal to resign, Rep. Kohring is half right.

He says, "I have a steadfast desire to continue serving my constituents, and only in the event my work is compromised would I consider resigning."

That's an appropriate standard to set -- he just doesn't realize his work is hopelessly compromised.

He stands accused of taking bribes from the state's most powerful lobbyist, working on behalf of the state's most powerful industry, on an issue worth billions of dollars to the state.

That same issue will be back in play in the Legislature this fall, with a special session on oil taxes. With the cloud of a bribery indictment hanging over him, Rep. Kohring cannot credibly represent his constituents during that critically important legislative session. Resigning now would give Wasilla Republicans plenty of time to recommend a competent replacement for Gov. Sarah Palin to appoint.

The case against Rep. Kohring is not a "he-said, she-said" deal. The evidence against him does not come from a disgruntled source who has an axe to grind. The federal charges suggest Rep. Kohring's acts are electronically recorded. It was not a sting operation where he might plausibly argue entrapment. One of the people who allegedly bribed him has pleaded guilty.

"I would like to be afforded my constitutional rights of innocence until proven guilty," Kohring says.

Fair enough -- as far as deciding whether he should go to jail. But his fitness to serve his constituents is a different matter. Asserting "innocent until proven guilty" does not settle the fundamental question here.

Is his ability to represent his constituents compromised while credible charges of bribery are pending?

The answer should be obvious.

BOTTOM LINE: Indicted Rep. Vic Kohring is hopelessly compromised. He should resign.

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More Don Young speaks! (Not.)

Part two of the ground-quaking Web interview with Don Young. His thoughts on belugas, tree-huggers and silence. Remember, this is a cartoon, we made this up. Any similarities between this and the real Don Young are probably just luck.

http://community.adn.com/mini_apps/vmix/player.php?ID=1349505&GID=118

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http://www.adn.com/news/politics/story/8908419p-8808406c.html

Lobbyists with felony convictions face ban
ASSEMBLY: Spotlight on ethics in state politics may bring issue to a vote tonight.
By KYLE HOPKINS
Anchorage Daily News
Published: May 22, 2007
Last Modified: May 22, 2007 at 02:41 AM

Until he pleaded guilty to conspiracy to bribe a state politician, Bill Bobrick was the go-to guy if you wanted to lobby the Anchorage Assembly.

Tonight that same Assembly -- some of whom got frequent campaign donations from Bobrick -- could decide whether to ban him or anyone convicted of a felony from lobbying.

Bobrick's plea was the latest in a string of corruption cases that saw four current or former state lawmakers indicted and two corporate executives admitting to bribery.

The proposal now before the city would bar felons from registering as lobbyists within 10 years of their conviction, and considering the spotlight on ethics in Alaska politics, Assembly members said this won't be a hard decision.

"I don't think we have really any choice," said Assemblyman Dick Traini, who plans to vote for the new rules.

Assembly chairman Dan Coffey said he expects the proposal to succeed tonight.

"I can't image that it wouldn't in this climate," he said.

Assemblyman Paul Bauer proposed the new lobbying rules at least partly because of Bobrick's case, Bauer said last week.

Compared with the scores of people lobbying the state Legislature, the pool is relatively small in Anchorage. Bobrick was the biggest fish, representing a dozen clients last year. According to the latest city list, he no longer has any clients.

Bauer and Bobrick aren't friendly, but the longtime lobbyist has supported many past and current city leaders. Over the years, he donated thousands of dollars to the political campaigns of Mayor Mark Begich and at least $1,000 each to Assembly members Allan Tesche, Dan Sullivan, Traini and Coffey, according to state records.

Though he rarely sides with Bauer and Sullivan, who co-sponsored the new rules, Begich said Monday he supports the proposal.

"I have no problem with it," he said.

Assembly members said Bobrick's past contributions won't influence their vote.

"It's just business," said Traini, who also talked about how the spotlight has been hard on Bobrick's family and said the lobbyist has "done a lot of good things for this town" with groups such as Standing Together Against Rape.

Tesche said it's no surprise that many city leaders received money from Bobrick: "Understand that he is Anchorage's almost exclusive full-time lobbyist, so one would expect him to be involved in a number of campaigns if he's the only guy in town."

Coffey, who said during his most recent campaign that he doesn't accept money from lobbyists, returned Bobrick's donation according to his campaign disclosure reports.

Sullivan co-sponsored Bauer's proposal and downplayed Bobrick's donations to his campaign, saying the lobbyist probably gave them only begrudgingly.

Bobrick couldn't be reached for comment Monday.

Tesche, who appeared at Bobrick's plea hearing last week, proposed new ethics rules of his own that will also be discussed tonight: He wants to bar city leaders from putting pressure on companies that do business with the city to hire or fire specific people. Bauer couldn't be reached for an interview Monday, but said last week the new lobbying rules are meant to protect the public trust.

"I don't want us turning into the Alaska state Legislature," he said.

Bobrick has agreed to testify against former Anchorage Rep. Tom Anderson and admitted to a scheme to funnel money to Anderson through a sham corporation. In December, Anderson pleaded not guilty to bribery, extortion and other charges.

Last year, Anderson registered to lobby the city too.

Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.

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Wall Street Journal
May 22, 2007

BP Partly Shuts Prudhoe Bay Oil Field Due To Water Leak-Rpt
DOW JONES NEWSWIRES
May 22, 2007 8:55 a.m.

 NEW YORK (Dow Jones)--BP PLC (BP) was forced to shut in nearly a quarter of its oil production from Alaska's giant Prudhoe Bay field Monday, after piping used to carry water separated out from crude produced in the field sprang a leak, according to a report in the Houston Chronicle Tuesday.

The leak, about the diameter of a pencil, caused only about 20 barrels worth of produced water being spilled, BP spokesman Daren Beaudo said. The spill occurred indoors, and the water was fully contained.

But the incident meant the U.K. oil major had to shut down about 100,000 barrels a day of its 440,000 barrel-per-day production capacity in the nation's largest oil field, as company officials inspect the piping system.

The cause of the leak was not disclosed. Company officials hope to have the problem resolved within "a few days," he said.

The incident comes in the wake of two spills on BP pipelines last summer caused by corrosion. Those accidents forced the company to shut in part of Prudhoe Bay and sent oil prices spiking. Indeed, BP President Robert Malone was on Capitol Hill last week fielding questions about whether cost-cutting caused those troubles.

Responding to Monday's leak, Rep. Bart Stupak, D-Mich., said: "While I have not seen all the facts on this most recent leak, it appears to be yet further evidence that BP's cost-cutting culture has put our nation's economy at risk."

 -By Cassandra Sweet; Dow Jones Newswires; 201-938-4427;
cassandra.sweet@dowjones.com  

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Anchorage Daily News
May 21, 2007

http://www.adn.com/money/story/8905587p-8805546c.html

Regulators strengthen their oversight of BP operations
PROGRESS: Watchdogs find firm more cooperative after Alaska pipeline leaks.
By JEANNETTE J. LEE
The Associated Press
Published: May 21, 2007
Last Modified: May 21, 2007 at 02:59 AM

The federal office in charge of pipeline oversight has issued a new round of requirements to oil company BP PLC as it continues repairs on a faulty network of crude oil transit lines at Prudhoe Bay, the agency chief said Sunday.

The guidelines laid out by the Pipeline and Hazardous Materials Safety Administration direct the company to intensify its corrosion monitoring program, remove leftover oil from out-of-service pipelines and submit monthly updates on the progress of construction upgrades and corrosion monitoring at the nation's largest oil field.

BP's latest plans to refurbish production and transport operations on the North Slope prompted the new set of orders, which the company received on April 27, PHMSA administrator Thomas Barrett said Sunday by phone from Washington, D.C.

The company plans to install an improved inspection system and pipeline entry ports for corrosion-prevention fluids. It is also downsizing the diameter of its pipelines to speed the movement of oil and reduce the build-up of sludge, one of several precursors to corrosion.

"Our interest is in monitoring their progress and watching out for the existing system as the new one comes forward," Barrett said.

BP has said the infrastructure should be in place by December 2008.

The latest order is part of an evolving set of requirements set forth by the federal agency, which imposed stricter oversight over the company's North Slope operations following the first of two spills last year.

The first, in March 2006, was the largest in the field's history, with up to 267,000 gallons spilled onto the tundra. In August, another leak in poorly maintained pipelines led to a partial shutdown in production at Prudhoe Bay.

"Today, right now, I'm satisfied with the progress they're making. Their commitment looks positive to me," Barrett said. "That was not the case last summer."

PMSHA employs three people in Alaska and has been rotating oil field experts through the North Slope since last March, Barrett said.

A BP spokesman on Sunday could not immediately comment on the order. However, spokesman Daren Beaudo earlier told the Fairbanks Daily News-Miner that the company intends to cooperate.

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http://www.adn.com/news/government/legislature/story/8905571p-8805543c.html

Ethics law takes a bite out of Legislature perks
REFORM: Putting $15 limit on meals lobbyists can buy lawmakers was part of effort to regain trust lost in scandals.
By TOM KIZZIA
Anchorage Daily News
Published: May 21, 2007
Last Modified: May 21, 2007 at 03:01 AM

JUNEAU -- Some nights, it's just a round of drinks, sent over by the smiling lobbyist across the restaurant.

More often, it's dinner, and a lobbyist at the table picks up the tab. There are stories, too, of legislators who drop their restaurant bill on a lobbyist's table as they head for the door.

And lawmakers speak of colleagues with running bets about who can go the longest without having to pay for dinner.

Tales like that, told out loud this month on the state Senate floor -- with no names attached -- helped pass a new law requiring lobbyists to report any meal or drink over $15 bought for a legislator or legislative staff.

The bar-tab rule was one of the last additions to this year's far-reaching ethics-reform package.

In a legislative session haunted by federal bribery and extortion charges against current and former lawmakers, the old perk of the free meal may not seem like much of a sin. But supporters say the new rule will strike a blow at what has become a too-easy relationship between elected officials and those paid to influence them.

"The $15 limit is the only thing in that law that will make a real difference in the culture here," said Rep. Mike Doogan, D-Anchorage, a former columnist and freshman legislator who has stuck to his newspaperman's habit of always picking up his own tab.

The rule, added in the state Senate, drew bipartisan support.

"You get down here away from your family, and some people lose their compass," said Sen. Lesil McGuire, R-Anchorage, speaking on the floor in behalf of the limit.

Senate minority leader Gene Therriault, R-Fairbanks, said the limit should be even lower. He said he didn't want lawmakers asking themselves, "Do I slip in under the wire if I order the penne pasta?"

The new law doesn't make it illegal to get a free meal. It just requires a report of that meal, so the public knows who's dining with whom.

The paperwork requirement -- imposed on lobbyists, not on the legislators themselves -- inspired some grumbling along the padded bench on the Capitol's second floor where lobbyists gather to prod their Blackberries.

And as is often the case with ethics rules, enforcement against those who violate the requirement could be difficult.

CLOSED LOOPHOLES

The new ethics law passed both houses of the Legislature this year by overwhelming margins.

New rules will require fuller disclosure of outside income by legislators, slow the revolving door between state employment and private-sector lobbying, and bar from lobbying anyone with a felony conviction for a crime of moral turpitude.

The law closes loopholes. For instance, it defines the value of an investment that constitutes a conflict of interest as $5,000. In 2005, two investigators reached different conclusions about whether then-Attorney General Gregg Renkes' $126,000 investment in a company he'd helped promote was a conflict because the old law had no defined limit.

Democrats sought many of the same changes last year, but their efforts were rebuffed. This year the majority Republicans joined in, pushed by Gov. Sarah Palin -- and the FBI raids of six legislative offices last fall.

"Ethics and the public trust were on the top of each and every legislator's mind opening the session," said Rep. John Coghill, R-North Pole, after the bill passed. "We listened, we came together, and we drew bright lines and stringent guidelines to follow."

AN INCH OR A MILE?

Some critics outside the Legislature say the reforms didn't go far enough because they didn't address enforcement.

"I view it as a public placebo intended to make the public think it's been dealt with. It has not," said Ray Metcalfe, a former legislator who was pushing for investigations of lobbying powerhouse Veco Corp. and former state Sen. Ben Stevens long before the FBI's interest became public last August.

Metcalfe said state law enforcement and campaign finance officials refused to do anything when he brought them evidence -- and they can refuse in the future, even with the new rules.

Metcalfe said the Legislature needs to create a new public offices commission within the court system, where it can be shielded from threats of budget cuts, and fund several "public integrity" investigators in the Alaska State Troopers.

"They've moved an inch when they needed a mile," Metcalfe said.

When this year's ethics measure finally reached the Senate May 9, several lawmakers objected to the $15 limit on reporting meals and drinks. Among them was Sen. Albert Kookesh, D-Angoon, who said legislators of good character should be able to draw the line themselves.

Sen. Bert Stedman, R-Sitka, said only a few legislators were abusing the old system.

"Unfortunately when you draw 60 people, there's always going to be a handful who have the evening lifestyle," Stedman said. "Most of us know who they are."

"The problem is, the public doesn't know," responded Therriault.

PUTTING A PRICE ON CONFLICTS

The point of the reporting limit had been slow to sink in. One day earlier, in the Senate Finance Committee, the original $10 limit was raised to $50 on a 5-1 vote. Stedman, the co-chairman, said it should "cover a reasonable meal, nothing too elaborate."

Sen. Donny Olson, D-Nome, said in his district you could hardly get a hamburger for $50.

Only Sen. Kim Elton, D-Juneau, objected in committee, noting that a string of $50 dinners added up to quite a sum.

By the next day, committee members had second thoughts and dropped that limit to $30. It was dropped further that afternoon on the Senate floor to $15 at the urging of its original sponsor, Sen. Hollis French, D-Anchorage.

"It has the veneer of friendliness," French said later of the lobbyist-paid meal, "but they're only doing it because they want to have an hour to talk to you. It's not inherently corrupt. But not reporting it is."

So will Juneau end up the home of the $14.99 lunch special? Many legislators predict fewer friendly meals out, because elected officials won't want their names to show up on public reports.

Rep. Les Gara, D-Anchorage, said the net result would be less influence in Juneau by monied interests.

"Foster kids aren't taking people out to dinner here," Gara 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
May 20, 2007

http://newsminer.com/2007/05/20/7087

State should examine rights, duties under 1985 oil shipping deal
By Dermot Cole
Staff Writer
Published May 20, 2007

TAPS CASE: The companies that own the trans-Alaska pipeline say the formula for setting transportation costs is not the sum of its parts.

Disregard the specifics in the 1985 settlement with the state, the oil companies say. There are words like “depreciation” embedded in the text, but such words are meaningless labels outside the context of the settlement.

The only thing that matters, the pipeline owners argue, is that the formula is a package deal that establishes a way to set maximum rates.

The oil companies challenging the pipeline owners say that understanding the depreciation rate and every other element in the 1985 settlement is essential to determining how much the owners should be allowed to collect for shipping a barrel of oil from Prudhoe Bay to Valdez.

Six years after Tesoro protested the cost of shipping oil instate, the Regulatory Commission of Alaska found in 2002 that key financial mechanisms in the settlement  dealing with accelerated depreciation and other benefits  had allowed the oil companies to recover 97 percent of the pipeline’s cost by the end of 1996.

The RCA said that the 1985 settlement “provided the carriers the opportunity to earn over $9.9 billion in excess of the reasonable and prudent costs of providing service” as of 1997.

The owners of the pipeline  led by BP, Exxon and ConocoPhillips  insist that the numbers about depreciation and other items included in more than 100 rate filings with the Federal Energy Regulatory Commission are not what they appear.

The only relevant fact, the companies argue, is that the 1985 settlement was accepted by the owners of the pipeline and the state as a way of producing reasonable rates until 2011.

To look at what the oil companies reported in the rate filings for depreciation and apply that calculation in setting a transportation rate for companies that didn’t sign the deal is “cherry picking,” the pipeline owners contend.

Anadarko and Tesoro don’t agree. As non-owners of the pipeline, they are pushing for lower transportation costs, which would make their oil more valuable.

On Thursday an administrative law judge agreed with their claim that the specifics of the 1985 settlement should be used in constructing an accurate record of the pipeline’s financial past. She decided that interstate transportation rates should be cut in half, to about $2 a barrel.

This subject has more twists and turns than the Tanana River and that includes the way the state has played or misplayed its position.

Tariffs are important because every dollar in excess transportation costs represents a loss to the state of about a quarter. The total runs to hundreds of millions of dollars a year, according to some reports.

I’ve written here before that the state’s record on seeking lower tariffs is inconsistent. Contradictory might be a better word.

The 1985 deal includes this provision: “State and TAPS carriers shall cooperate, each at its own expense, in securing all necessary governmental approvals for this agreement and in defending against any litigation affecting the validity and enforceability of this agreement or any provision thereof.”

The state’s actions of the past few years should lead the Palin administration and the Legislature to examine just what Alaska’s responsibilities are under that provision.

Richard Fineberg, an independent Fairbanks oil analyst, has authored authoritative and exhaustively researched reports on the tariff situation over the past two decades. Most of those reports have been ignored by the political establishment and not given the credence they deserve by the news media.

I say this because key findings identified by the FERC staff and the administrative law judge tend to echo the analysis that Fineberg has been making for nearly 20 years.

Fineberg said that upon reading through the judge’s decision he pictures the state starring as “The Dog that Didn’t Bark.”

“As Judge Cintron works through the various arguments around which TAPS tariffs and the decision revolved, on most of the major points she has no need or reason to mention the state. Considering both the state’s interests and the breadth and detail of the decision, I find the state’s absence from the decision noteworthy,” Fineberg said.

The heavy lifting in the case is being done by Anadarko and Tesoro, not the state, he said. The state’s claim in this proceeding is limited to a narrow point about whether it is discriminatory to have interstate transportation rates more than twice as high as intrastate rates.

The pipeline owners claim the state’s position is disingenuous and conflicts with arguments Alaska has made in other proceedings before the FERC, RCA and in state court.

Fineberg said the 1985 settlement does not define what the state must do to cooperate and defend the agreement. He has long questioned whether the state could live up to its bargain without actively fighting the efforts of companies like Anadarko and Tesoro to get lower rates.

The state opposed Tesoro’s RCA case for many years and then joined with the pipeline owners in appealing the RCA order to an Anchorage Superior Court. The state claimed the RCA had “abused its discretion,” but the court affirmed the RCA ruling in all respects.

In an appeal of the RCA order for lower rates three years ago, the state agreed with the pipeline owners that the “TSM depreciation” based on the 1985 agreement wasn’t “actual depreciation.” That view has been rejected by the RCA, a Superior Court judge, the FERC staff and the administrative law judge.

In a document filed in July 2004, an attorney for Tesoro said “The state’s focus in the proceeding and on appeal seems simply to be that of a party trying to justify a bad settlement.”

In February 2006 the state withdrew from an appeal of the RCA tariff ruling, a dispute now leaving the pipeline owners alone before the Alaska Supreme Court.

The withdrawal raises new questions about what was required from the state in terms of cooperating to defend the 1985 settlement.

Dermot Cole can be reached at
cole@newsminer.com  or 459-7530.


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http://newsminer.com/2007/05/19/7070

Judge finds pipeline owners charge too much for shipping oil
By Dermot Cole
Staff Writer
Published May 19, 2007

TAPS TARIFF:
It’s not final, but the ruling from the administrative law judge on the trans-Alaska pipeline tariff case represents another victory for Anadarko and Tesoro and a setback for the companies that own the trans-Alaska pipeline.

The five-member Federal Energy Regulatory Commission will next consider the matter and a challenge in federal court is likely to follow.

The thrust of the decision is that the pipeline owners are charging about twice as much as they should to pump a barrel of oil from Prudhoe Bay to Valdez.

Judge Carmen Cintron ruled Thursday that the correct figure is closer to $2 than $4 per barrel.

The difference is important because lower tariffs mean that North Slope oil is more valuable, particularly for companies like Anadarko and Tesoro that don’t own part of the pipeline. The transportation cost is also important to the state because lower tariffs translate into higher oil revenues from royalties and taxes.

On almost every major point in this complicated fight, Cintron sided with Anadarko and Tesoro, rejecting the arguments of the pipeline owners, a group that includes BP, ConocoPhillips, ExxonMobil, Koch Alaska and Unocal.

She said the owners are charging transportation rates that are “unjust and unreasonable” to ship oil out of state.

The lower rates established through a lengthy proceeding by the Regulatory Commission of Alaska for oil used within the state are closer to the mark.

The transportation cost for oil that leaves the state from Valdez is under the jurisdiction of the FERC.

All the combatants in the case agree that it makes no sense to charge about $2 to ship a barrel of oil to Valdez for instate use and to charge more than twice as much for a barrel of oil that is loaded on a tanker and consumed elsewhere.

The parties differ on what to do about this discrepancy, however.

Anadarko, Tesoro and the state want the lower RCA intrastate rates to apply to all oil, not just the 10 percent or so used in the state.

The pipeline owner companies want the FERC to order an increase in the tariff for oil used in Alaska, claiming the lower tariffs are “an undue burden on interstate commerce” and give Alaska refiners an unfair advantage over refineries in the Lower 48.

Robin Brena, an attorney for Anadarko, said the pipeline owners have been charging excessive rates for shipping oil through the pipeline for 30 years.

“Their excessive rates have cost their shippers and the state of Alaska billions of dollars,” said Brena, who has argued this issue in regulatory proceedings for many years.

He said the initial decision of the judge is a “major step toward establishing fair rates” for the pipeline system.

“If upheld, the initial decision will significantly lower transportation costs for ANS (Alaska North Slope) crude oil, increase royalty and severance taxes to the state of Alaska, increase the value of ANS reserves and encourage the further development of those ANS reserves,” he said.

One of the central points of the dispute is the 1985 agreement between the oil companies and the state to settle pipeline tariffs.

The pipeline owners say that the individual elements in that agreement listing costs, rates of depreciation and other specifics were never meant to be relied upon by those who did not sign the agreement.

For example, the owners say that that Tesoro and Anadarko can not look at the annual rate filings in which the pipeline owners account for depreciation and say that the numbers are accurate.

Tesoro and Anadarko say the published numbers show exactly what happened and how much money the oil companies collected beyond what they should have been allowed to receive.

The judged rejected the idea that the 1985 settlement is an “inseparable package” and the pipeline owners’ claim that Tesoro and Anadarko are “cherry picking.”

She said the rate filings made by the companies over the past two decades are the most convincing evidence of the pipeline’s financial past.

The FERC allows pipeline owners to recover their investment in a project, but prohibits double recovery. She said she gave no weight to the contention by the pipeline owners that it would be best, for purposes of setting rates, to act as if the 1985 settlement with the state had never occurred and to draw numbers from other sets of books kept by the companies for accounting purposes.

The rate filings made under the 1985 agreement show how much has been recovered.

Richard Fineberg, an independent oil analyst from Fairbanks who has followed this issue for more than two decades, said he had two immediate reactions to the judge’s 116-page ruling.

The first was the extent to which the judge agreed with the FERC trial staff in its “stinging rejection” of the arguments from the pipeline owners.

The second was “the state’s apparent irrelevance to the decision.”

I’ll have more to say on that second issue in Sunday’s column.

Dermot Cole can be reached at
cole@newsminer.com  or 459-7530.

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http://newsminer.com/2007/05/13/6976

Oil companies still say pipeline’s ‘economic life’ ends in 2011
By Dermot Cole
Staff Writer
Published May 13, 2007

TAPS TARIFF: The arcane battle over trans-Alaska pipeline tariffs in Washington, D.C., is a financial struggle between those who own a piece of the pipe and those who do not.

As the main owners of the pipeline, BP, ConocoPhillips and Exxon don’t mind paying themselves a hefty fee for shipping a barrel of oil from Prudhoe Bay to Valdez.

The economic theory is that a dollar in the right hand is worth just as much when it is moved to the left hand.

Tesoro and Anadarko are not pipeline owners, however, so they can’t shift this expense from one subsidiary to another.

They’d like to see transportation costs as low as possible, which would make oil on the North Slope more valuable.

The two companies have challenged the pipeline transportation rates as “unjust and unreasonable” in a case being argued before the Federal Energy Regulatory Commission.

For the past decade Tesoro has been pushing this point, first before the Regulatory Commission of Alaska and now before the federal board.

The state has a big interest in what happens next. One estimate is that for every $1 collected by the companies in excessive transportation costs, the state loses 25 cents in royalties and taxes. The loss is roughly $500,000 a day, according to Fairbanks researcher Richard Fineberg, who has followed this debate for decades.

You would think that the state would have long been fighting for lower tariffs and looking for ways to make North Slope oil more valuable, which could entice more companies to look for oil on the North Slope. But you would be wrong.

The state has been inconsistent in its arguments on transportation costs. It signed a deal with the big oil companies in 1985 on a financial formula for deciding transportation costs and promised to defend it.

After opposing Tesoro’s case before the RCA, the state now contends that in challenging the transportation rates it is still defending the deal  it is just attacking the way the oil companies are implementing certain provisions.

In the first detailed look at developing a cost-based rate for pipeline tariffs, the RCA found that the oil companies had recorded $20 billion in expenses and $50 billion in income by 1996.

Nearly $10 billion of the income was “in excess of the reasonable and prudent costs of providing service,” the RCA found.

In the current case about interstate rates, an administrative law judge is expected to rule shortly on whether the pipeline owners are charging themselves too much to move oil.

The 1985 deal between the oil companies and the state contained many flaws that would never have passed muster before the FERC because they were not based on costs. Even the oil companies admit that.

The state agreed to the deal, however, and FERC accepted the settlement, leaving the door open for future challenges by those who had not signed the agreement.

The essence of the current dispute is that Tesoro and Anadarko can seek a “just and reasonable” transportation cost derived from a process based on actual costs and precedents established throughout the United States.

The attorneys on the FERC staff agree that the settlement “inherently produces unjust and unreasonable rates that fail to comply with applicable cost-based ratemaking standards.”

The big oil companies say the 1985 tariff settlement is binding as a total package, not as a series of individual elements, and that the claims of their opponents are “groundless.”

Tesoro and Anadarko say the Alaska settlement “resulted in massive overcollections of revenue” by the oil companies, producing a 99.28 percent return on equity in 2005 and a 105 percent return in 2006.

One of the big issues is accounting for depreciation, which is the way in which assets are written off for tax purposes.

The 1985 settlement allowed the oil companies to get those tax benefits on an accelerated basis, meaning the pipeline value would go down faster than through traditional “straight line” depreciation.

This allowed the companies to recover a large part of their investment early in the operational phase of the pipeline’s history. The RCA found that 97 percent of the pipeline’s cost had been recovered by the end of 1996.

This is relevant because costs that have already been recovered should mean a lower rate base and lower transportation costs.

One argument in the debate concerns the life of the pipeline. The shorter its life, the quicker the companies recover their investment and the higher the expense, creating higher transportation costs.

The oil companies are still acting as if the pipeline’s useful life will end in 2011, even though everyone thinks a more realistic date is 2034.

This discrepancy inflates the current depreciation expense by tens of millions of dollars, the non-owners say.

The oil companies argue that they are allowed to say the pipeline’s economic life will end in four years because the FERC has never told them to use a new number.

“Because the TAPS carriers are not the proponents of changing the approved depreciable life ending in 2011 and the commission has not approved such a change, that end-life remains in effect until modified prospectively,” the pipeline owners said.

The non-owners claim the oil companies should have submitted updated depreciation studies that reflect reality.

In general, the pipeline owners say that the depreciation rates determined from the 1985 settlement are an illusion.

They argue that since the FERC did not explicitly say it was approving the accelerated depreciation schedule in the agreement, but merely described it, the formula is not binding.

They say that the commission, in dealing with Tesoro and Anadarko, should act as if the 1985 settlement with accelerated depreciation never existed.

The FERC staff described this argument as “silly,” adding that accelerated depreciation has been applied by the pipeline owners in more than 100 rate filings.

Xxxxxxx

VECO VALUES: The Voice of the Times section in the Anchorage Daily News removed the name of Bill Allen, who was publisher, as of Thursday. Now that space is blank, but the contract to publish the section was with Allen.

Allen, who pleaded guilty to bribing legislators and told one of them, “I own your ass,” resigned Thursday and his daughter became head of his company.

Still on the VECO Web site is its list of “VECO Values.”

The second one is honesty: “We maintain integrity by always matching our actions with our words. We don’t lie. We don’t cheat. We don’t steal.”

Dermot Cole can be reached at
cole@newswminer.com  or 459-7530.

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Anchorage Daily News
May 19, 2007

http://www.adn.com/money/industries/oil/pipeline/story/8899636p-8799524c.html

Tariff ruling may boost earnings for state
INCONSISTENT: Cost of moving barrel of oil through pipeline varies too much.
The Associated Press
Published: May 19, 2007
Last Modified: May 19, 2007 at 05:50 AM

FAIRBANKS -- An administrative law judge's ruling that rates have been too high for shipping oil through the trans-Alaska oil pipeline could mean higher earnings for state coffers.

The 116-page ruling released Thursday by Carmen Cintron, the judge with the Federal Energy Regulatory Commission, said past pipeline shipping rates were too high and the consortium of companies that own the pipeline should refund excess revenue collected over the past two years.

It also sets the stage for future oil revenues coming into the state treasury to increase "very significantly," according to Antony Scott, an economist with the state.

"It's a good ruling," Scott said.

The state collects its percentage of oil revenues after tariffs have been levied on the wellhead value of a barrel of oil. Lower tariffs mean the state percentage per barrel is worth more.

The case revolves around an inconsistency in the cost to move a barrel of oil through the pipeline, a cost set annually by pipeline owners that include BP, Exxon Mobil and Conoco Phillips.

Currently, tariffs for oil sent through the pipeline bound for sale out of state are higher than for oil sold within Alaska, even though the oil is moving through the same stretch of pipe.

In December 2004, the state, Anadarko Petroleum Corp. and the Tesoro Corp. challenged that inconsistency by arguing that the higher rates should be lowered to around $2 per barrel. Pipeline owners recently proposed to raise the lower rates as high as $5.29 per barrel.

Cintron's ruling sided with the state but is only a recommendation to the full FERC board, which will meet on the matter later in the year.

If the FERC agrees with the ruling, it will mean the pipeline owners will have to refund excess revenue collected over the past two years. It will also mean that the proposed tariffs for 2007 have been negated and must be filed again.

After the FERC makes a final ruling, the parties will have the opportunity to appeal the decision to the U.S. District Court.

Gov. Sarah Palin on Thursday said the decision bolsters the state's argument that tariffs will be an important element in a future gas pipeline contract.

"This reaffirms the need to ensure low tariffs on oil and gas lines," Palin said. "This is why we spent a great deal of time working on structuring the Alaska Gasline Inducement Act to maximize value for the state and ensure low tariffs. We're pleased with the FERC decision and we look forward to continued progress on this issue."

Spokesmen for Anadarko and BP said they were reviewing the document and were not ready to comment.

Xxxxxxxxxxxxxxxxxxxxxxx

http://www.adn.com/money/story/8898490p-8798382c.html

Colorado company interested in Veco
BID TO BUY: CH2M Hill signs a letter of intent to discuss the purchase.

By WESLEY LOY
Anchorage Daily News
Published: May 19, 2007
Last Modified: May 19, 2007 at 05:03 AM

A Colorado company is negotiating to buy scandal-plagued Veco Corp., the Anchorage oil-field services and construction company whose former chief executive pleaded guilty this month to federal bribery and conspiracy charges.

CH2M Hill, based in the Denver suburb of Englewood, and Veco have signed a letter of intent giving the Colorado engineering firm an exclusive 90-day period to discuss a purchase, John Corsi, a CH2M Hill spokesman, said Friday.

The sale is not guaranteed, as the firm must do a management and legal review of Veco, Corsi said.

"This has to fit both ways," he said.

Neither of the privately held companies disclosed any proposed terms Friday.

Veco is one of the largest companies in Alaska, with about 2,000 employees in the state and a similar number in operations around the world.

"The business combination with CH2M Hill is an excellent opportunity to move our company forward," said Tammy Kerrigan, who took over as Veco chairwoman after her father, Bill Allen, pleaded guilty May 7 and subsequently stepped down from his corporate posts.

"CH2M Hill is consistently recognized as one of the most respected companies in the engineering and construction industry and we are very interested in the significant value created for our clients by combining the skills and resources of the two firms," said Kerrigan, of Grand Junction, Colo. "This transaction would also provide a great home for our dedicated and skilled work force."

"We are very enthusiastic about the prospect of this deal. The outstanding employees at Veco are respected worldwide for their heritage of service to the energy industry," said Rob Smith, president of CH2M Hill's energy, chemicals and industrial systems business group. "Their commitment to client service would be an excellent fit with CH2M Hill's culture. Veco's core energy business and locations fit our corporate growth strategy extremely well."

CH2M Hill is an engineering, construction, management and design firm with $4.5 billion in revenue last year. The firm is owned entirely by its employees, and no employee owns a dominant share, Corsi said.

Veco is heavily involved in oil-field services and construction on the North Slope, and also has projects in the Lower 48, Canada, Barbados, Russia's Sakhalin Island and the Middle East. The company has annual revenue reaching $1 billion, Allen has said.

The Allen family owns much of Veco.

Allen, who helped build Veco starting in 1969, pleaded guilty to bribing state lawmakers in exchange for their votes or influence on legislation important to the oil industry, including last year's production tax reform.

Another Veco executive, Rick Smith, also pleaded guilty to federal charges, and both he and Allen face probable prison time.

Amy Menard, an attorney for Veco, had said in the wake of the guilty pleas that FTI Consulting Inc., a large Baltimore-based firm, would review the company's corporate operations and practices, with initial results expected by this week. Menard did not return a phone call seeking comment Friday.

Federal authorities have not accused Veco, as a company, of any crime.

THE ALASKA WORK

Among Veco's major customers is British oil giant BP, which runs Prudhoe Bay, the nation's largest oil field.

BP spokesman Daren Beaudo offered a prepared statement on Veco's possible sale:

"CH2M Hill is a respected international company. Our interest is in a solution that would allow thousands of hard-working Alaskans to continue to provide quality oil-field services on the North Slope and elsewhere."

One of Veco's main rivals for oil-field contracts in Alaska is ASRC Energy Services, a unit of Arctic Slope Regional Corp., the Barrow-based Native corporation for the North Slope. The company had no comment Friday on the possible emergence of a larger competitor in CH2M Hill, ASRC spokeswoman Carol Richards said.

CH2M Hill has a deep history of work in Alaska, Corsi said.

It began with the devastating 1964 Alaska earthquake, which spawned business for the company from the U.S. Army Corps of Engineers, he said.

The firm has an office on Northern Lights Boulevard in Anchorage, and its 70 Alaska employees work on energy, transportation, water and environmental projects, Corsi said.

Clients include the Corps, the Defense Department, the state Department of Transportation, the North Slope Borough, the City of Anchorage, the Alaska Department of Fish and Game, energy companies and others.

The name CH2M Hill is built from the initials of its four founders -- including two named Howland and Hayes -- plus the name of a firm, Hill, picked up in a merger.

"The CH2M Hill enterprise, dating back to 1946, is built on honesty, ethics and morals," according to its Web site.

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

CH2M Hill • What: Global engineering, construction, management and design company

• Headquarters: Denver

• 2006 revenue: $4.5 billion

• Employees: 19,000

• History: Founded in 1946 in Corvallis, Ore.

• Alaska connection: Firm has an Anchorage office and 70 Alaska employees. Has worked on more than 3,000 Alaska projects since the 1964 earthquake. Clients include state Department of Transportation, Army Corps of Engineers, City of Anchorage, North Slope Borough, energy companies.

• Web site:
www.ch2m.com

CH2M Hill

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Wall Street Journal
May 19, 2007

US Crt Won't Dismiss Case Aiming To Freeze Pay Of BP's Browne
DOW JONES NEWSWIRES
May 18, 2007 5:09 p.m.

 LONDON (Dow Jones)--An Alaskan court Thursday denied a motion by BP PLC (BP) and ex-Chief Executive John Browne to dismiss a case against them seeking to freeze Browne's compensation.

The action, which was filed in October, asks that Browne's compensation and retirement payments be placed in a trust pending a reassessment by the company.

The case follows a series of incidents under Browne's watch, including a spill at the Alaska Prudhoe Bay pipeline and a deadly Texas refinery explosion.

Browne already renounced some of his compensation and a long-term incentive plan when he resigned on May 1 after a court allowed his private life to be publicized.

In a court order Thursday in Alaska but released Friday, Anchorage Superior Court Judge Jack Smith denied a motion by Browne and BP to dismiss the case. They had argued, among other things, that the jurisdiction for any case against BP should be the U.K., not Alaska.

The court didn't rule on whether Browne's compensation should be frozen. The order only allows the case to proceed in Anchorage, and hearings are now scheduled for June 6.

 -By Benoit Faucon, Dow Jones Newswires; 44-20-7842-9266;
benoit.faucon@dowjones.com   

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Anchorage Daily News
May 18, 2007

http://www.adn.com/money/industries/oil/story/8894819p-8794859c.html

Relationship matrix underpins BP tactics in Alaska
IN CHARGE: Report lists oil company's execs and the state, federal agencies they handle.
By WESLEY LOY
Anchorage Daily News
Published: May 18, 2007
Last Modified: May 18, 2007 at 04:58 AM

BP has a game plan for dealing with state and federal regulators, maintaining a "formal relationship matrix" for assigning certain executives to deal with certain officials or agencies.

The matrix is mentioned in a report by a consultant BP commissioned to investigate corrosion-related oil pipeline spills last year in Prudhoe Bay, the nation's largest oil field. BP manages that field on behalf of itself and other owners including Exxon Mobil and Conoco Phillips.

The report offers a rare glimpse inside the London-based oil giant's corporate tactics in Alaska.

The consultant, Booz Allen Hamilton of McLean, Va., writes that BP Alaska's vice president for external affairs, Phil Cochrane, is responsible for maintaining a matrix designating who from the company will handle particular regulators.

For example, the president of BP Alaska -- currently Doug Suttles, who replaced Steve Marshall in the wake of last year's Prudhoe troubles -- is to deal with the commissioner of the Department of Natural Resources. The department has great authority over BP, acting essentially as landlord for Prudhoe and other oil fields BP runs.

The Prudhoe Bay field manager, formerly Maureen Johnson and now Mike Utsler, also deals with the Department of Natural Resources but also with the Alaska Oil and Gas Conservation Commission, which regulates drilling activity.

The matrix assigns BP's senior attorney for health, safety and the environment as well as regulatory matters to the Alaska Department of Environmental Conservation, which regulates pollution, including oil spills. The attorney, Randal Buckendorf, is a former DEC employee who manages the relationship with the department "as a result of long-standing personal friendships and professional interactions," the Booz Allen report says.

Other BP executives deal with federal agencies such as the Environmental Protection Agency and the Department of Transportation.

The Booz Allen report says BP antagonized some regulators after last year's pipeline leaks and "many regulatory relationships have become strained."

One DOT agency, the Pipeline and Hazardous Materials Safety Administration, has "become very aggressive" in ordering more corrosion testing and better maintenance of the major pipelines that leaked, the report says.

Daren Beaudo, a BP spokesman in Anchorage, said the company would not comment in detail on specific findings in the Booz Allen report, which BP has provided to congressional members investigating the spills.

As for the relationship matrix, "there's nothing novel about it at all," Beaudo said.

The idea is to find the people best suited in BP to keep regulators informed, he said.

"We feel we have an obligation and the regulators and government officials appreciate having good, consistent lines of communication and we feel that's the right thing to do," Beaudo said.

He wouldn't comment about how relations between BP and some regulators had been strained. He also said Cochrane and Buckendorf were not available to comment Thursday.

Cathy Foerster, an engineer who holds one of three seats on the Oil and Gas Conservation Commission, said the agency does tend to hear from the same BP people. But she said it's not like BP employees are trying to curry favor or forge friendships with, say, a lunch or tennis date.

"Nobody calls to see if I'm having a good day. They just don't do that," Foerster said. "And if they did that, I would tell them to stop. They call to tell us stuff they think we need to know."

Foerster, who used to work as a manager for oil company Arco, which is now part of Conoco, said major oil companies such as BP have a long list of regulators and others they're expected to keep informed in the event of something unusual, such as a spill or an oil field shutting down unexpectedly.

To fill in everyone quickly, the phone calls must be divvied up, she said.

"Every agency thinks that they're the most important one," Foerster said.

People from Conoco, which operates Alaska's second and third largest oil fields in Kuparuk and Alpine, don't call as often, she added.

"Conoco has just been luckier, I think" in avoiding mishaps in its fields, she said.

Conoco spokesmen could not be reached for comment on how the company deals with regulators.

Larry Dietrick, a longtime Department of Environmental Conservation regulator in charge of spill prevention and response, said he'd talked with Buckendorf, the BP attorney, "once in a while."

But generally, the department doesn't deal so much with individuals, Dietrick said. Rather, it works broadly with corporate units such as the health, safety and environment staff BP and other companies employ, he said.

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

Xxxxxxxxxxxxxxxxxxxxxxxx

http://www.adn.com/news/government/legislature/story/8894814p-8794856c.html

Special session planned on the petroleum tax
LEGISLATURE: Gov. Palin wants to revisit oil tax, but not in Juneau.
By SABRA AYRES
Anchorage Daily News
Published: May 18, 2007
Last Modified: May 18, 2007 at 04:55 AM

JUNEAU -- Gov. Sarah Palin said Thursday she intends to call state lawmakers into a special session this fall to revisit the Petroleum Production Tax and would be looking to save money by holding the meeting somewhere other than Juneau.

In declaring her plans less than 12 hours after the regular legislative session ended for the year, Palin did not specify another venue, but hinted Anchorage would be a contender because of the city's proximity to a large percentage of lawmakers.

"We're not moving the Legislature, and we're not moving the capital," the governor said. "But we'll be looking for somewhere to meet that will be less expensive."

Palin said the previous Legislature spent an "outrageous" $2.1 million on special sessions. The government must pick up the bill for legislators' travel costs to a special gathering and for housing costs while House and Senate members are in session. State lawmakers went through three special sessions last year and one in 2005.

Juneau has been the capital of the state since territorial times. The prospect of moving state government elsewhere has been raised several times in the state's history and always creates heated resistance in the Southeast Alaska city.

"We do get concerned when the Legislature contemplates meeting in a place other than Juneau," Juneau Mayor Bruce Botelho said Thursday.

Botelho, who served as state attorney general from 1994 to 2002, said, "But Palin has been clear that Juneau is the capital, and I don't think this is a situation that should trigger a three-alarm fire."

Proponents of moving the capital say Juneau is too isolated from the rest of the state, making it difficult for voters to access their state government. With no roads in or out of the city, Juneau can be reached only by plane or ferry. Lawmakers whose planes have been delayed because of bad weather say they have had to miss critical session days.

Palin said the recent guilty pleas from two Veco Corp. executives who admitted to bribing legislators during last year's approval of the PPT was evidence enough that a thorough review of the tax law was warranted.

"Our oil tax formula was changed under a dark cloud of suspicion," she said Thursday.

When the PPT was created, it fundamentally changed the way the state taxes oil producers, and supporters of the tax structure were hopeful it would bring more revenue into state coffers. But first receipts last month came in $137 million short of projections.

LOOPHOLE ALSO ON AGENDA

Bill Allen and Rick Smith of Veco have pleaded guilty to charges they paid off lawmakers in exchange for their influence during the PPT debate in the Legislature. One current and two former lawmakers face related bribery and extortion charges.

Palin announced after the indictments earlier this month that her administration would begin examining how effectively the tax was working.

The governor said she would ask lawmakers during the special session to take up a bill dealing with a loophole in oil tax expenditures left hanging after Wednesday night's late adjournment.

The bill, which more than half the members of the Legislature endorsed, would keep oil companies from deducting for pipeline repairs in cases of "improper maintenance."

House Minority Leader Beth Kerttula, a Democrat who represents Juneau, said she was happy to hear the governor intended to ask the Legislature to take up the tax again.

She stressed that she was not worried that Palin, a Wasilla native, was trying to move the capital.

Holding public hearing and testimony in another Alaska city to involve more of the public would benefit the entire state, particularly on a tax law debate that "didn't go right the first time," Kerttula said.

"This is a pragmatic governor," she said. "I'm sure she will be willing to work this out with us. I'm not concerned she meant anything more than that."

If it came down to drafting new tax legislation and voting on it, lawmakers would need to be in Juneau to access the expertise of the Legislature's legal and finance offices located in the capital, said Rep. Kurt Olson, R-Soldotna.

"We can't do it without them, and it would be too expensive to move anywhere else," he said.

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

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Fairbanks News Miner
May 18, 2007

http://newsminer.com/2007/05/18/7067

Ruling may allow higher oil revenues
By Eric Lidji
Staff Writer
Published May 18, 2007

An administrative law judge has determined that past rates for shipping oil through the trans-Alaska oil pipeline were too high and has ordered the consortium of companies that own the pipeline to refund any excess revenue collected over the past two years.

The 116-page ruling released on Thursday by Carmen Cintron, the judge with the Federal Energy Regulatory Commission, also sets the stage for future oil revenues coming into the state treasury to increase “very significantly,” according to Antony Scott, an economist with the state.

“It’s a good ruling,” Scott said.

Because the state collects its percentage of oil revenues after tariffs have been levied on the wellhead value of a barrel of oil, lower tariffs mean the state percentage per barrel is worth more.

The case revolves around an inconsistency in the cost to move a barrel of oil through the pipeline. The cost is known as a tariff and is set annually by a consortium of pipeline owners that includes BP, Exxon Mobil and ConocoPhillips.

Currently, tariffs for oil sent through the pipeline bound for sale out of state are much higher than for oil sold within Alaska, even though the oil is moving through the same stretch of pipe.

In December 2004, the state, along with Anadarko Petroleum Corporation and the Tesoro Corporation, challenged that inconsistency by arguing that the higher rates should be lowered to around $2 per barrel. The pipeline owners recently proposed to raise the lower rates as high as $5.29 per barrel.

Cintron’s ruling sided with the state but is simply a recommendation to the full FERC board, which will meet on the matter later in the year.

If the FERC agrees with the ruling, it will mean the pipeline owners will have to refund any excess revenue collected over the past two years. It will also mean that the proposed tariffs for 2007 have been negated and must be filed again.

After the FERC makes a final ruling, either side will have the opportunity to appeal the decision to the U.S. District Court.

In a statement Thursday, Gov. Sarah Palin argued that the decision bolsters the state’s argument that low tariffs will be an important element in a future gas pipeline contract.

“This reaffirms the need to ensure low tariffs on oil and gas lines,” Palin said in a statement on the ruling. “This is why we spent a great deal of time working on structuring the Alaska Gasline Inducement Act to maximize value for the state and ensure low tariffs. We’re pleased with the FERC decision and we look forward to continued progress on this issue.”

Spokesmen for both Anadarko and BP said they were still reviewing the document on Thursday afternoon and were not yet able to comment on the ruling.

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

Xxxxxxxxxxxxxxxxxxxxxxx

http://newsminer.com/2007/05/18/7066

Gas line glory to budget bickering:
Lawmakers reflect on time in session
By Stefan Milkowski
Staff Writer
Published May 18, 2007

JUNEAU  Despite political hurdles and regional wrangling, the Legislature ultimately came together on important legislation and approved a state spending plan that works for Fairbanks even if it’s too big overall, local lawmakers said Thursday.

“We got a lot of major things done,” Rep. Mike Kelly, R-Fairbanks, said.

In the first session of the 25th Legislature, which ended Wednesday night, lawmakers approved a comprehensive ethics package covering the legislative and executive branches and passed Gov. Sarah Palin’s gas pipeline legislation, which sets up a competitive bidding process for prospective pipeline builders. They worked on proposals to address public employers’ unfunded retirement debts, reshape K-12 education funding, and provide long-term revenue sharing, but in the end held off on long-term fixes to all three.

Local lawmakers mostly pointed to the passage of Palin’s gas line bill, the Alaska Gasline Inducement Act, as their biggest accomplishment and a step toward getting a natural gas pipeline built.

“The proof’s in the pudding,” Sen. Joe Thomas, D-Fairbanks, said, “but at least there’s a plan, a structure, and I think that’s good.” Rep. David Guttenberg, D-Fairbanks, said he was confident the bill would result in enough applications to make the project a reality.

Rep. Jay Ramras, R-Fairbanks, voted for the bill but expressed concerns about it.

“It passed just like the governor wanted,” he said. “It’s her new administration, it’s her plan, but I think we would have all benefited from a more elastic process that brought more potential applicants to the table.”

Lawmakers also expressed support for the ethics reform, but members from both parties said there’s only so much that can be done through new legislation.

“When you got a rotten cowboy, that’s not going to stop him,” Kelly said.

As for the trio of intertwined issues that dominated the session’s end  education funding, retirement debt, and revenue sharing  lawmakers said they liked the level of funding provided as one-year fixes in the capital budget, but were disappointed that lawmakers never settled on long-term solutions.

“To not have those things fixed yet was sort of a downer,” Rep. Scott Kawasaki, D-Fairbanks, said.

In the final days, House and Senate leadership split on the question of whether the retirement debt could be addressed long-term even if education and revenue sharing weren’t.

Most local lawmakers agreed with the House majority that it could, and they pushed for the passage of SB 125, a Senate bill establishing how much public employers such as school districts and municipalities would have to contribute over the coming decades.

Senate leadership failed to budge, and the bill, versions of which passed both bodies, never got final approval.

“It just got balled up,” Sen. Gary Wilken, R-Fairbanks, said of the cost-share bill and the other two pieces.

Wilken and Sen. Gene Therriault, R-North Pole, both members of the Republican Senate minority, joined House members in criticizing the bi-partisan Senate coalition for holding up the bill.

Senate leaders argued the fix would throw off a complex balance of state aid to local communities and discourage urban lawmakers from addressing education funding in the future.

Rep. John Coghill, R-North Pole, on Wednesday said he was glad the Legislature finished on time but noted the temporary nature of the fix meant there would be lots to do next year.

Fairbanks and North Pole lost some clout this year when four of the eight local lawmakers ended up in the House and Senate minorities. Last year, the two cities were represented by seven Republicans and one Democrat, with seven members in the majority.

This year, they’re represented by five Republicans and three Democrats, with only four members in the majority.

Guttenberg, the House minority whip, criticized the House majority for working on major issues such as education funding in private discussions rather than through the formal committee process.

“It really needs to be done out in focus, out in the public, so people can understand what’s going on,” he said.

Wilken and Therriault also described a “secrecy” surrounding proposals by the Senate majority, but said they were still able to have an effect on the process by teaming up with sympathetic majority members and by raising their voices on issues.

“The system allows you to figure out a way to get around those that throw up the roadblocks,” said Therriault.

Lawmakers suggested the power shift contributed to what they said was a paucity of Fairbanks projects in the state’s capital budget.

“We had nothing coming over on the Senate,” said Kelly, the only local member of the House Finance Committee.

Kelly said he was pleased at the Fairbanks projects added by the House, but “steamed” that funding was never added for the University of Alaska biological sciences facility proposed for the Fairbanks campus.

Thomas, the only local member of the Senate Finance Committee, said he was ultimately pleased with the capital budget.

“I of course would have liked to see a few more things for the Fairbanks area, but overall I think it turned out pretty good,” he said.

Majority and minority members both challenged the overall level of spending in the capital and operating budgets, and Wilken, a former Senate Finance Committee co-chair, said he will push for reform in the capital budgeting process.

“Clearly the system we have is fraught for abuse,” he said.

Ramras, a member of the House majority, complained of another shift in Capitol politics.

He said he enjoyed his new role as chair of the House Judiciary Committee but was disgusted by an anti-business climate and extreme suspicion of lawmakers’ motives.

“After 20 years of having rock-solid integrity in the private sector, my integrity was called into question just for showing up to work,” he said.

Kawasaki, a freshman lawmaker, was more upbeat.

“I got a couple more gray hairs, a couple more pounds under the belt, but overall I think I had a positive first session,” he said.

Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.

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Alaska Report
May 17, 2007

http://www.alaskareport.com/vs_32111_exxon_valdez.htm

Short Circuiting Justice at the Ninth Circuit Court
May 17, 2007
By Victor Smith 

Finally, after eighteen disillusioning years of waiting for compensation for the Exxon Valdez oil spill, someone has called foul on the rank politics that have been obscuring and delaying settlement of the case.
 
On March 31 of this year, the public advocacy Community Rights Council (CRC) issued a press release titled "Exxon, Punitive Damages, and Judicial Junkets" that fingered Judge Andrew Kleinfeld, one of the three "randomly assigned" 9th Circuit judges, for having ties to Exxon.

According to CRC, "for more than a decade, Exxon Corporation has waged a comprehensive campaign against punitive damages awards…An important part of Exxon's punitive damages campaign has been to fund organizations such as [George Mason University's] Law and Economics Center (LEC) which hosts junkets for federal judges that focus on topics including punitive damages….This campaign paid off handsomely in December 2006, when [the 9th Circuit Court] reduced Exxon's punitive damages liability for the Valdez spill by $2 billion…Judge Kleinfeld…who wrote the opinion in favor of Exxon in December… serves on LEC's Board of Judicial Advisors and reports taking at least three LEC-funded trips in recent years."

Although Kleinfeld contends that Exxon's contributions to LEC and the junkets "are just small potatoes," some would disagree. According to Media Transparency, " George Mason University has been a magnet for right-wing money for over a decade….From 1992 through 1994 the University placed third among all academic and non-academic grantees."

These endowments fund LEC's "mission to educate judges in how to apply principles of economic analysis to the law. By 1991, the Center had provided such training -- with seminars held at resort locations to enhance their attractiveness -- to over 40 percent of the federal judiciary…with corporate and foundation sponsors covering 'all travel, lodging and meal expenses for the most powerful players in the legal system--judges.'"

As flipside.org explains, " George Mason University 's Law and Economics Center has as its mission to teach federal judges that the goal of the law should be to maximize the wealth of society by promoting the efficient use of scarce resources. Thus conceived, the law is no longer about the Constitution, or about ethics or justice. In this view, courts become an appendage of the market, promoting efficiency, not equity."

To get on LEC's board, it probably didn't hurt that Kleinfeld had been a long time admirer of the Federalist Society and organizations like the Institute for Justice. Like LEC, the Federalist Society and the Institute seek nothing less than to reshape the landscape of the U.S. judiciary by promoting right-wing judicial activists to positions of power who will push the country rightward and end government regulation of businesses. Think of it as an under-the-radar parallel to the Bush administration's scandalous politicization of our U.S. attorneys.

Putting LEC's agenda in context with present attempts to break up the 9th Circuit Court, imagine the opportunity to place corporate-favoring judges anticipated by the establishment of a new Alaskan court. Breaking up the 9th has long been the goal of Judge Kleinfeld and his Republican Alaskan boosters: Senator Ted Stevens, former Senator Frank Murkowski, and Representative Don Young, none of whom have been particularly vocal in pressing Exxon for a settlement. They must find it cruelly amusing that Kleinfeld's endless delays trying to reduce the lower court's settlement could serve double duty by making the Exxon case a poster boy for splitting up the court.

This is not that far-fetched, especially when you look at the corruption so much of the Alaskan Republican power structure engaged in with the oil companies to secure passage of Gov. Murkowski's oil tax bill that rips off the state for $2 billion annually. Why wouldn't one expect that the bribes and extortion extend to trying to save the oil companies several more billions on the Exxon case while at the same time avoiding a precedent for environmental accountability?

Make no mistake about it; avoiding the precedent of reasonable compensation to fishermen' is at least 51% of what Exxon has been shelling out the money for and what the hopefully soon-to-be-indicted Stevens, Murkowski, and Young have been shilling for. As evidenced by riders they passed in 2003 limiting the public's ability to sue over environmental issues in the Tongass National Forest , it is doubtful these three would favor giving fishermen a dime. In fact, they're pushing ahead for more development with less protection than was had before without even making sure Alaska 's fishermen are compensated for abuses that happened eighteen years ago.

A final question raised by CRC's news release is, "Why was it left to the eleventh hour (well, hopefully it's the eleventh hour) for a third party to blow the whistle on Kleinfeld?" Why didn't some Alaskan official do it, or one of plaintiff's attorneys?  as certainly this hasn't been a secret.

When Alaska wanted a certain outcome in the Bristol Bay price-fixing case the usual politicians jumped all over it. One must now discount their claims that the Exxon case was 'being left up to the courts'.

Likewise, plaintiffs may have questions about their own attorney's political involvement in the case. Last year, plaintiff's attorneys organized a political campaign, ostensibly to bring political pressure to bear on Exxon to settle. To accomplish this they hired Washington 2 Advocates, a Washington based right-wing Republican lobbying group comprised mostly of aides to former Washington Senator Slade Gorton. This was a foolish and hollow strategy, at best, because W2A wasn't going to do anything that would focus attention on Republican Congressmen who put the interests of their big-contributing oil companies before the public's interests.

Thank goodness for law enforcement though; there's nothing like an FBI raid to focus your attention. Perhaps the FBI will be able to tell us if it was just multiple cruel twists of fate that conspired to "randomly" place the fortunes of 35,000 victims of Exxon's negligence in the hands of Judge Kleinfeld: the judge with the big agenda that's not your agenda. If you are still confused by all the protestations of innocence and high integrity, just remember the old saying, "Whose bread I break, his song I sing." It is appalling that Kleinfeld is involved in the Exxon case.

Victor Smith, longtime Alaska fisherman

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Anchorage Daily News
May 17, 2007

http://www.adn.com/news/government/legislature/story/8892958p-8793071c.html

Palin plans to call special session in fall
By SABRA AYRES
Published: May 17, 2007
Last Modified: May 17, 2007 at 03:50 PM

JUNEAU -- Gov. Sarah Palin said Thursday she intends to call lawmakers into a special session this fall to revisit the Petroleum Production Tax but would be looking to save state dollars by holding the meeting somewhere other than Juneau.

“We’re not moving the Legislature, and we’re not moving the capital,” Palin said in a press conference less than 12 hours after lawmakers wrapped up for the year. “But we’ll be looking for some where to meet that will be less expensive.”

Palin said the previous Legislature spent an "outrageous” $2.1 million on special sessions to cover transportation and housing costs for legislators in Juneau.

Having lawmakers work outside the capital city in Southeast Alaska could raise eyebrows in Juneau, where residents are sensitive to any motions to move state government to another city.

Moving state government out of Juneau has been raised several times in the state’s history. Lawmakers have considered the idea in proposed legislation, but none have managed to pass.

Proponents of the idea say the Southeast city is too remote from the rest of the state, making it difficult for voters to access their state government. With no roads in or out of the city, Juneau can only be reached by plane or ferry.

Daily News reporter Sabra Ayres can be reached at
sayres@adn.com .

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http://www.adn.com/news/politics/fbi/story/8892691p-8791703c.html

Top lobbyist admits scheme
Influence money funneled to Rep. Tom Anderson, Bobrick testifies
By LISA DEMER
Anchorage Daily News

Published: May 17, 2007
Last Modified: May 17, 2007 at 06:48 AM

Lobbyist Bill Bobrick admitted in federal court on Wednesday that he conspired to bribe former state Rep. Tom Anderson.

Asked by U.S. District Judge John Sedwick how he pleaded to a felony charge of conspiracy, Bobrick answered in a clear, steady voice: "Guilty, your honor."

For years, Bobrick has stood out in Anchorage as the lobbyist claiming the longest list of private clients with city business. Some of the biggest players in the development and retail worlds have hired him over the years, including JL Properties, Wal-Mart Stores and Marlow Development Corp. This year, he had five clients, but all say they have dropped him in recent days and weeks because of his legal troubles.

"I've been a professional lobbyist for the last 20 years," Bobrick said at Wednesday's court hearing.

He accepted responsibility for a scheme to funnel payments to Anderson through a sham company so the legislator would do the bidding of a private corrections company. Details of the company in court filings match a description of Cornell Companies Inc. of Houston, Texas, which has tried and failed to win support for a private prison in Alaska.

The conspiracy to commit extortion, bribery and money laundering started in July 2004 and continued until March 2005, charging documents say. In all, $26,000 changed hands, court papers say.

Bobrick, 52, now is cooperating with the government. He has agreed to testify against Anderson, who was indicted in December on seven charges including bribery, extortion and money laundering. Anderson has pleaded not guilty.

Bobrick will be sentenced after Anderson's trial, which is scheduled to begin June 25. Bobrick faces 2 to 2 1/2 years under sentencing guidelines, but that can be reduced based on his cooperation.

"The judge was pretty clear today. It's a serious crime. He might give you a sentence that is more than the government recommends. That is a risk that Bill decided to take because he wants to do the right thing. He is really trying to move forward," said Doug Pope, Bobrick's defense lawyer.

At one point in the hearing, as the judge questioned Bobrick on whether he was suffering from any condition that could impair his judgment, the accused man said he was being treated for depression. He said he takes medication and receives counseling, but didn't feel his condition affected his ability to go forward.

RELEASED ON BOND

Anchorage Assemblyman Allan Tesche sat next to Bobrick's sister Elizabeth in the courtroom. When the 30-minute hearing ended, prosecutor Joe Bottini huddled for a moment with Bobrick.

Tesche shook Bobrick's hand but wouldn't talk to reporters. Elizabeth Bobrick said she didn't want to be interviewed either. She came from her home in Connecticut to be with her brother, Pope said.

Bobrick was stone-faced as he walked out of the courtroom and into another area for processing. He didn't acknowledge a request for comment.

Essentially, Bobrick now must be ready for "continuous cooperation with the government," Pope said. "It's out of my hands."

Bobrick was released on a $5,000 unsecured bond. With permission of a federal probation officer, he'll be allowed to travel out of state, including to visit his wife, a medical student in Minnesota.

According to court papers, an FBI informant working for the corrections company paid $24,000 to Bobrick's Pacific Publishing. Bobrick gave $10,828 to Anderson and kept the rest, the documents say. Anderson later complained he wasn't getting enough and was paid another $2,000 by the government informant, according to the indictment against him.

Bobrick created Pacific Publishing to ostensibly publish a Web site about Alaska government and politics that Anderson would write for. But in reality, the company was just a way to get money to Anderson and hide the real source, court papers say.

In a secretly recorded conversation on July 21, 2004, Bobrick told the informant that he and Anderson were "pitching a bunch of people" to try to get money for Anderson. If the corrections company paid up, Anderson would be "our boy in Juneau," Bobrick told the informant.

Between August 2004 and March 2005, Bobrick was aware of "multiple official acts" that Anderson took to benefit the government informant, the charging document said.

CLIENTS CUT TIES

All five clients Bobrick worked for this year have cut their professional ties to him. They are: Marlow Development Corp.; garbage hauler Alaska Waste; Lantech, a surveying company; Cook Inlet Housing Authority; and mall developer P.O'B. Montgomery.

"You need to have the confidence of elected officials that you are dealing with them on the straight up," developer Marc Marlow said. He had turned to Bobrick for help on a number of projects, including a tax break for the renovated McKinley Tower downtown. He said he severed his relationship with Bobrick in April after news broke about the coming guilty plea.

Lantech vice president Tom Dreyer said the company gave Bobrick the benefit of the doubt in recent months, but in the past few days saw what was coming. The company had hired him to monitor the Anchorage Assembly, which has been rewriting the city's land use code.

Bobrick worked as a technical consultant to the housing authority on a tax break it just won for an 80-unit development in Muldoon, said Amy Burnett, a spokeswoman for Cook Inlet Housing. In mid-April, it canceled its contract, she said.

Alaska Waste inherited the Bobrick lobbying contract when it bought the assets of Waste Management in May 2005, said Bobby Cox, general manager of Alaska Waste. But now its relationship with him is over, too.

Daily News reporter Lisa Demer can be reached at
ldemer@adn.com   and 257-4390.

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http://www.adn.com/news/politics/fbi/story/8892691p-8791702c.html

Who did Bill Bobrick work for?
Published: May 17, 2007
Last Modified: May 17, 2007 at 06:48 AM

Bill Bobrick long was the lobbyist in Anchorage with the most clients doing business before the city. The following list comes from his reports to the municipal clerk's office from 2001 through 2007. He worked for some just a year or two; for others longer. He no longer has any clients because of his legal troubles.

Alaska Interstate Construction LLC

Alaska Regional Hospital

Alaska Waste

American Fast Freight

Anchorage Board of Realtors

Anchorage Cultural Council

Anchorage Downtown Partnership

Anchorage Home Builders Association

Anchorage Horticulture Coalition

Anchorage Mutual Housing

Anchorage Neighborhood Housing Services

Anchorage Police Department Employees Association

Anchorage Refuse

Anti-Tobacco Coalition

Carr-Gottstein Properties

Compass Northwest LLC

Cook Inlet Housing Authority

Cornell Companies Inc.

Eklutna Inc.

Forest Heights LLC

Goldenview Land Co.

International Association of Fire Fighters Local 1264

JL Properties

Lantech

Marc Marlow

Marlow Development Corp.

Marlow Towers LLC

Paratransit Services

P.O'B. Montgomery

Siebert Brandford Shank & Co.

Simon Property Group

Smart Growth

Wal-Mart

Waste Management

White Raven Development

Williams Alaska Petroleum Inc.

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Financial Times
May 17, 2007

http://www.ft.com/cms/s/bdcb1f84-04be-11dc-80ed-000b5df10621.html

BP’s Hayward may face US investigators
By Sheila McNulty in Washington
Published: May 17 2007 23:24 |
Last updated: May 17 2007 23:24

Tony Hayward, BP’s new chief executive, might be needed to testify about conditions at the company’s Alaska oilfield because he had overseen it as it was deteriorating, US congressmen told the Financial Times.

Bart Stupak, chairman of the investigative arm of the US House energy and commerce committee, said in an interview that his investigators had asked BP to send those involved in Alaska’s Prudhoe Bay to a congressional hearing on Wednesday on the state of the field, the US’s largest.

But they sent Bob Malone, BP’s new America’s president, who told the congressmen he could not answer their questions about budget cuts in the corrosion programme at the oilfield.

BP was forced to shut half the oilfield after discovering severe corrosion in pipelines last year.

“I wasn’t satisfied,” Mr Stupak said.

“Malone gave us as much as he is going to give us. He’s not the right guy. We still have many questions.”

Mr Stupak added: “Maybe the new head of BP should come in, since he was in charge of Alaska.”

Mr Hayward, who last month succeeded Lord Browne, had led BP’s exploration and production division since 2003.

Congressman Ed Whitfield said he was “concerned” BP chose Mr Hayward as its new chief executive, given the state of the Alaskan field during his tenure.

Mr Malone assured the congressmen BP has learned from its problems in Alaska and Texas and was improving operations but it would take time.

The congressmen, however, were not satisfied by his assurances they could trust BP to run its operations appropriately.

Mr Stupak noted BP had last year told Congress budget cuts did not play a role in its Alaskan corrosion problem.

But, he said, new documents turned over by BP  months after they had been requested in advance of last September’s committee hearing  indicated otherwise. Mr Malone said those documents had not been located then but had come up while BP sought to answer calls for evidence from a grand jury investigating the oil company for possible criminal action and civil lawsuits.

Mr Stupak noted BP had turned in more than 800 documents the night before the hearing: “It’s normal around here for people to dump a load of documents on us the night before a hearing and hope we miss something. We’re going to go through them.”
 

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The Mining Journal
May 17, 2007

http://www.miningjournal.net/stories/articles.asp?articleID=15068

Stupak’s panel grills BP

WASHINGTON (AP)  Severe budget cuts at a time when BP PLC was making huge profits put pressure on managers to ignore corrosion protection at the oil company’s Alaska North Slope pipelines that sprung leaks last year, according to internal company documents.

A House committee investigating the North Slope spills, which forced a partial shutdown of Prudhoe Bay oil production last summer, said it has obtained e-mails from the company that show repeated concerns by managers that cost-cutting was preventing corrosion protection in the lines that eventually failed.

‘‘BP field managers were being asked to choose between saving money and critical maintenance,’’ said U.S. Rep. Bart Stupak, D-Menominee, chairman of the Energy and Commerce investigations subcommittee.

He said the cost-cutting, reflected in e-mails and other documents obtained by the panel, occurred from 1999 through 2005, at a time the London-based BP PLC was making more than $106 billion in profits.

BP America Inc., the oil giant’s U.S. subsidiary, has acknowledged repeatedly that the company had not taken adequate precautions to avoid corrosion, which resulted in an oil spill in a Prudhoe Bay oil transit line in March 2006 and another leak in a separate line last August.

After the second incident, the company shut down the affected lines, resulting in Prudhoe Bay production being cut in half. The company now is spending $250 million to replace 16 miles of questionable pipes.

Robert Malone, BP America’s chairman, in testimony prepared for delivery at Wednesday’s hearing, acknowledged ‘‘there was a concerted effort to manage the costs (at the Alaska fields) in response to the continuing decline in production at Prudhoe Bay’’ and that the cost-cutting frustrated some workers.

But Malone disputed that the budget cuts should be blamed for the pipeline problems.

Citing a consultants’ report on the incidents, Malone said ‘‘budget increases alone would not have prevented the leaks’’ and that the pipeline breaks ‘‘resulted not from budget pressures’’ but because of ‘‘the lack of a formal, holistic risk assessment process.’’

That didn’t satisfy the lawmakers.

‘‘Cost cutting ... drove many key management decisions’’ on pipeline maintenance and corrosion protection, Rep. John Dingell, D-Mich., chairman of the full committee, said, citing BP e-mails obtained by the panel.

He and Stupak cited, for example, one e-mail that directed a halt in use of a corrosion inhibitor because there wasn’t money for a full year’s supply of the chemical. ‘‘We are under huge budget pressure for the last quarter of the year and therefore we have to take some rather disagreeable measures,’’ said the October 2001 e-mail, calling for ending use of a corrosion inhibitor ‘‘as soon as possible.’’

Stupak said documents received by his subcommittee also suggest corrosion monitoring efforts such as ‘‘smart pigging’’  in which a device is driven through a pipe to inspect for corrosion; removal of insulation for visual inspection of pipes; and digging at road crossings where corrosion is more likely ‘‘were reduced or put on hold because of budget pressures.’’

BP’s corrosion inspection and chemical group ‘‘was under extreme pressure to constantly find new ways to cut costs,’’ said Stupak.

A government report released in March also blamed BP for cost-cutting at the company’s Texas City refinery, where a 2005 explosion killed 15 people and injured 170, the worst U.S. industrial accident since 1990.

Carolyn Merritt, chair of the Chemical Safety Board, which investigated the refinery explosion, told the House subcommittee Wednesday there were ‘‘striking similarities’’ between the refinery accident and the Prudhoe Bay spills.

Both incidents revealed ‘‘a checkbook mentality’’ that prevented actions that might have avoided the problems, she said.


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Anchorage Daily News
May 17, 2007

http://www.adn.com/money/industries/oil/story/8892602p-8791712c.html

Savings undercut pipeline upkeep
BP: Overconfidence in leak prevention among its consultant's findings.
By WESLEY LOY
Anchorage Daily News
Published: May 17, 2007
Last Modified: May 17, 2007 at 03:12 AM

BP lacked a good process for assessing corrosion risk in Prudhoe Bay pipelines, and corrosion fighters were forced to make "tradeoffs" to meet budget targets, a BP-hired consultant found.

The report from Booz Allen Hamilton, a McLean, Va., consulting firm, emerged Wednesday as BP's top U.S. executive, Bob Malone, took a grilling from a congressional panel.

Congressmen said the report, coupled with e-mails BP recently turned over, suggest the London-based oil giant's emphasis on cost-cutting led to corroded pipelines and spills last year in Prudhoe, the nation's largest oil field, and a 2005 explosion that killed 15 people at a BP refinery in Texas.

BP hired Booz Allen last year to look into two Prudhoe pipeline leaks -- one discovered in March 2006 involving an estimated 201,000-gallon spill on the North Slope tundra, and another on Aug. 6 that led to a partial shutdown of the field, driving up world oil prices.

Booz Allen said it wasn't looking for evidence that could be used in court to show negligence or unlawful conduct. But the report's authors said they "saw no information to suggest that any BP employee or contractor acted in anything other than good faith."

Aside from Congress, federal pipeline regulators, Alaska pollution regulators and federal criminal investigators are scrutinizing the Prudhoe problems.

Among the findings in the 132-page Booz Allen report:

• BP lacked an adequate process for assessing corrosion risk in pipelines and for making adjustments -- for example, when the composition of oil changes, possibly increasing corrosion.

• BP's corrosion control team was isolated, out of touch with senior BP management, and felt a sense of "overconfidence" in preventing leaks because it had been regarded as a top-notch unit within BP.

• The corrosion unit made "tradeoffs" in part to meet budget targets. For example, there was a "reasonable and well-documented reluctance" to use pigs -- probes that slide through pipes testing for corrosion or other defects. However, larger budgets alone wouldn't have prevented the pipeline leaks because "fundamental changes" were needed in maintaining pipelines.

• BP manages 1,273 miles of pipelines across Prudhoe Bay, but the 16 miles of key "oil transit lines" -- major trunk lines that funnel crude oil into the trans-Alaska pipeline and which were the site of last year's leaks -- were an afterthought. BP's corrosion control unit was fractured into "town" and "field" units, and no one took ownership of the transit lines. These pipes carried pure oil and no corrosive water, and thus BP viewed them as invulnerable to holes caused by corrosion. They hadn't failed over Prudhoe's 29-year history.

• Since last year's pipeline spills, BP has antagonized government regulators and "relationships have become strained."

The report outlines BP's "deeply ingrained" cost-control efforts during years of low oil prices in the 1990s, the steep decline of Prudhoe oil production, and BP's takeover of Amoco and Arco, which led to reorganizations that pushed the corrosion control unit down deeper in the BP hierarchy.

Booz Allen makes a raft of recommendations, many of them urging BP to beef up its procedures for ranking and managing pipeline corrosion risks. It also urges BP Alaska to be less insular, to "immediately reach out from Alaska" to tap pipeline maintenance expertise from other industries such as chemicals, nuclear power, the Navy and NASA.

The consultant says BP has made some progress toward improving pipeline maintenance, including a big hiring surge for its corrosion unit, moving corrosion control higher up in the organization and replacing miles of pipelines. But much work remains, the report says, noting "risk management is still a work in progress."

The report also includes some bits of news.

BP is working with the state Department of Environmental Conservation on a new and better leak-detection system for oil transit lines. The report notes that leak detectors last year "did not provide ample warning of the leak."

Booz Allen said it conducted its investigation over 10 weeks starting last November.

The firm lists the names of 75 current and former BP employees it interviewed. One name not on the list, however, is Richard Woollam, who was BP's corrosion manager through November 2004.

Woollam, who was transferred to Houston and is said to be on administrative leave, last September appeared before a congressional committee but refused to answer questions, invoking his Fifth Amendment right against self-incrimination.

Reach reporter Wesley Loy at
wloy@adn.com   or 257-4590.

BPXA (BP Alaska) had a deeply ingrained cost management ethic as a result of long periods of low oil prices, constrained budgets, and multiple cost/headcount reduction initiatives. CIC (BP's corrosion team) made important project and activity tradeoff decisions to meet its budget targets. Larger budgets alone would not have prevented these incidents without fundamental changes in corrosion and integrity management.

Booz Allen report's key findings

BP lacked adequate process for assessing corrosion risk in pipelines.

BP's corrosion control unit was isolated, felt "overconfidence" in preventing leaks.

Corrosion unit made "tradeoffs" to meet budget targets, larger budgets alone wouldn't have prevented leaks.

Since two pipeline spills last year, BP has antagonized regulators and "relationships have become strained."

Report didn't seek to gather evidence of negligence or crimes, but nothing was found to suggest any BP employee or contractor "acted in anything other than good faith."

Source: Booz Allen Hamilton report

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http://www.adn.com/news/government/legislature/story/8891517p-8791612c.html

Legislature kills oil tax deductions,
low-income senior aid bills
By TOM KIZZIA and SABRA AYRES
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 17, 2007 at 12:22 AM

JUNEAU  The state House yielded at the 11th hour Wednesday night, allowing the Legislature to adjourn with a one-year funding plan for education and a promise to work on long-term changes that could mean more school money for rural Alaska.

But the House also insisted on a last-minute shift in a $48 million revenue-sharing plan that moved more money to urban areas.

Three unresolved issues  education funding, pension liability relief for schools and cities, and municipal aid  stood in the way Wednesday as the Legislature approached the midnight deadline for adjournment.

The Republican-led House pushed for a long-term fix to help cities and schools with looming pension deficits. They offered one-year programs for education and municipal revenue-sharing, with a study of long-term reforms to education funding to come later.

The bipartisan Senate majority, which includes some powerful rural members, pushed for all three issues  pensions, municipal aid and school money  to be funded only for next year. They want long-term fixes for pensions and education to be considered together later.

The Senate majority has been reluctant to address pension relief by itself as that money would especially help bigger cities, leaving it without some leverage when seeking more money for small-town schools. Some say rural schools have been shortchanged over the years.

In the end, the House agreed to a $185 million one-year bill to help meet community pension needs. The budget as a whole adds $350 million in new money for education, raising the total to $1.2 billion for next year, lawmakers said.

A task force was charged with recommending by a Sept. 1 a new, fair formula for distributing education funds.

Meanwhile, two popular bills died  on oil company tax deductions and aid to low-income seniors. Efforts by House Democrats on Wednesday to force votes on the measures were defeated

23-16, with votes coming on party lines.

House Republicans also cut money for the new Ocean Ranger monitoring program aimed at controlling cruise-ship discharges. Republicans turned back Democratic efforts Wednesday to boost funds to the voter-created program.

Gov. Sarah Palin called this week’s last-minute gamesmanship frustrating.

“I’ve been told over and over that’s just the culture here in state government,” she said Tuesday. “Well, I think that culture needs to change.”

The Legislature was moving swiftly until it crashed into the dispute over education funding at the end.

Major issues like Palin’s gas pipeline bill and ethics reform were handled earlier.

Flush with cash from high oil prices, lawmakers approved a $9 billion operating budget and wrote one of the biggest capital budgets ever at $1.8 billion, including some $550 million in state funds. Much of that money is going to pet projects earmarked by individual legislators.

Oil-tax changes dead

Two bills died in committee despite evidence of popularity among legislators.

A bill that would have prevented oil companies such as BP from deducting the costs of pipe repairs caused by “improper maintenance” had passed the Senate unanimously and had 21 of 40 House members as co-sponsors. But it arrived late in the key House Finance Committee and Republican leaders wouldn’t move it to the floor for a vote.

The industry called the bill unfair and unworkable. It remains alive for next year. Republican leaders also suggested it might make sense to discuss the deduction as part of a future review of the Petroleum Production Tax, or PPT, adopted by last year’s Legislature.

But the bill’s backers say another year’s delay could make it hard to apply the law retroactively to repairs stemming from BP’s spills from corroded pipelines last year on the North Slope. They said as much as $100 million in lost taxes could be at stake, with the state in effect subsidizing poor maintenance practices.

Money for seniors killed

The Legislature also failed to provide funds for the “longevity bonus” once paid to seniors and apparently killed a welfare program for low-income seniors that was created to replace the bonus in 2003. Democrats tried several times in the last

36 hours of the session to force a vote to save the senior-aid program.

Republicans said they had worked out a deal earlier in the session to fund an expanded program if the longevity bonus could be struck from the books. That deal fell apart when Democrats and some Republicans voted to keep the bonus program in place  even without funds.

Republicans wouldn’t yield at the end to allow a vote on the low-income senior plan. Some GOP leaders said they were reluctant to continue the senior assistance in anticipation of future revenue declines.

Palin supported both the oil-field-deduction and senior-care bills. But she said Tuesday she did not plan to do a lot of arm-twisting or threaten to veto pet projects, saying she wanted to keep the public process transparent.

Governor gets gas bill

Palin cited the success of her gas pipeline bill as an example of the open process she favors. After extensive hearings, her bill passed both houses with only one vote against it. The bill sets into motion a competitive bidding process for a state license to build a North Slope natural gas pipeline.

The Alaska Gasline Inducement Act, or AGIA, got an added push when a corruption scandal erupted with less than two weeks left until the Legislature was set to adjourn.

Oil companies had panned the Palin gas line bill and had asked legislators to amend her version to include more tax predictability. In the end, lawmakers distanced themselves from the North Slope producer’s requests.

Ethics reform came up early in the session, in the midst of an ongoing federal corruption investigation. New rules will require fuller disclosure of outside income by legislators, slow the revolving door between state employment and private-sector lobbying, and restrict meals and gifts from lobbyists.

One much-anticipated issue that fizzled this year was a proposed constitutional amendment to allow voters the chance to deny court-ordered benefits for same-sex partners of public employees. Despite winning support from voters in an April advisory ballot, the measure failed to pass the House.

Reporter Tom Kizzia can be reached at
tkizzia@adn.com , and Sabra Ayres can be reached at sayres@adn.com .
 

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Fairbanks News Miner
May 17, 2007

http://newsminer.com/2007/05/17/7027

BP and Congress
Published May 17, 2007

“People no longer challenge and think.”

That was the startling word Wednesday from Bob Malone, chief executive officer of BP America, at a Wednesday hearing of a U.S. House subcommittee investigating last year’s spill of about 200,000 gallons of oil from a corroded feeder line at Prudhoe Bay, which is operated by BP on behalf of several companies. Mr. Malone was being questioned sharply about the management culture at BP and among company personnel on the North Slope.

What’s more, Malone added that he and others at BP now believe that budget pressures coming down from BP headquarters contributed to the atmosphere that led to the maintenance failure. “We recognize that those budget pressures put our employees in a very difficult place,” he told the House members, who are part of the House Energy and Commerce Committee.

The March 2006 spill was the largest at Prudhoe Bay and led to a partial shutdown of the field.

Malone, judging by the news accounts of the hearing, appeared to adopt the right tone with members. He may have had little choice: BP’s image has been battered by the Alaska spill, a deadly refinery explosion in Texas, and the public perception that high profits from high oil prices are wildly out of bounds for all oil companies. That, and the Democratic-controlled Congress is less than friendly to the oil industry.

Mr. Malone may also have had to speak the conciliatory words because of the revelation of several e-mails that seem to indicate BP was inclined to cut corners at Prudhoe Bay.

In one company e-mail, from 1999, according an Associated Press report of the hearing, BP managers sought a 10 percent reduction in the use of an anti-corrosion chemical but said the move would be “a risky call.”

Another e-mail, from October 2001, said money didn’t exist to continue use of another anti-corrosion chemical, that use of the chemical should be discontinued quickly, and that the decision was “rather disagreeable … “

Notes like that don’t inspire confidence.

Congress, if Democrats can keep in check their giddiness at having oil executives in the hot seat, can serve a helpful purpose by shedding light on how the oil companies are conducting themselves on public lands  and for a public that has an insatiable appetite for products fueled by the oil found there. Congress, through this and perhaps other hearings, should seek not to castigate but to work with BP and other companies to restore confidence in an industry that has many critics but that is nevertheless vital to the nation’s current way of living.

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Houston Chronicle
May 17, 2007

http://www.chron.com/disp/story.mpl/business/4811558.html

Cutting costs didn't help
But BP leader won't say budget pressures directly caused Alaska leak
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau

WASHINGTON  BP America President Robert Malone acknowledged Wednesday that budget pressures made life difficult for company workers trying to safely operate BP's pipelines in Alaska's giant Prudhoe Bay.

But Malone stopped short of conceding that cost cutting was directly to blame for the company's failure to detect the corrosion that caused two pipelines to leak, forcing the company to shut down a portion of the nation's largest oil field and sending crude prices soaring.

Appearing before a House panel Wednesday, Malone said, "We recognize that the budget pressures put our employees in a very difficult place."

And over time, the Houston-based oil executive said, that kind of mentality can create a culture where "people no longer challenge and think."

Carolyn Merritt, chief executive officer of the U.S. Chemical Safety Board, told lawmakers there were "striking similarities" between the conclusions of a report on Prudhoe Bay prepared for BP by Booz Allen Hamilton and the Chemical Safety Board's conclusions about the March 2005 explosion at BP's Texas City refinery. That blast killed 15 workers and injured scores more.

"Both reports point to the significant role of budget and production pressures in driving BP's decision-making and ultimately harming safety," Merritt said. "Cost cutting became the driving factor in management bonuses and recognition."

At Prudhoe Bay, BP officials failed to conduct the necessary tests to check for corrosion in the pipeline walls.

But Malone told members of the House Energy and Commerce Committee's Oversight and Investigations Subcommittee that the company's corrosion experts "had an unwarranted sense of confidence in their program."

Pointing to the Booz Allen report, Malone argued that "larger corrosion program budgets alone would not have prevented the leaks."

In that report, made public by the committee Wednesday, Booz Allen said BP's Alaska operation "had a deeply ingrained cost management ethic as a result of long periods of low prices, constrained budgets and multiple cost/headcount reduction initiatives.

"However, larger budgets alone would not have prevented these incidents without fundamental changes in corrosion and integrity management," the report said.

The Booz Allen report said BP had failed to run a device known as a "smart pig" through the oil transit lines in both 2004 and 2005 because of "budget pressure." Pipeline operators use smart pigs to analyze the thickness of the internal walls of pipelines to detect signs of corrosion damage.

But BP officials say Booz Allen has since learned that conclusion was incorrect and wanted to delete that reference from the report. A spokeswoman for Booz Allen declined to comment on the report.

Amending report?

Subcommittee Chairman Bart Stupak, D-Mich., said BP's law firm, Vinson & Elkins, sent the panel 159 pages worth of documents Tuesday trying to justify why the report should be amended.

"We hope BP is not pressuring Booz Allen to change the report when they get a little critical," Stupak said.

Rep. Gene Green, D-Houston, whose district includes numerous refineries and petrochemical plants along the Houston Ship Channel, said he found it "startling" that "many of the fundamental causes of the Texas City disaster are the exact same causes found in the Prudhoe Bay incident almost one year later. Talk about a lesson lost."

Green said that after the Texas City explosion he had trouble learning about the victims because "BP had not reported the deaths" to the Occupational Safety and Health Administration. "It turns out they didn't have to report them because the workers were contractors," Green said.

Green has introduced legislation to require employers to report contract workers' injuries the same way they report their own employees' injuries.

Rep. Al Green, D-Houston, meanwhile, plans to introduce a bill next week that would make companies criminally liable for willful safety violations that result in the deaths of contractors working at their sites.

Fifth Amendment

Committee investigators looking into the Prudhoe Bay pipeline leaks found internal company e-mails that suggest BP failed to inject a corrosion inhibitor into some pipelines.

"Due to budgetary constraints, the decision has been made to discontinue the inhibitor currently being injected," one e-mail from 1999 read.

Another internal message noted that that chemical had proved to be "very successful at cleaning up the system and arresting corrosion activity.

"We are now at a point where the original monies for this program are used up, so we will be shutting it down until year's end. In the meantime, the system may be subject to increased corrosion activity and fouling. "

Rep. Joe Barton, R-Ennis, the ranking Republican on the full Energy and Commerce Committee, questioned whether BP is really cooperating with congressional investigators, since the BP manager who was responsible for handling corrosion prevention in Alaska in a critical period before the leaks has invoked his Fifth Amendment right against self-incrimination and has refused to talk to investigators.

Malone, who has been on the job only since last summer, struggled to reassure lawmakers that BP is determined to change its ways.

"Please know we get it," Malone said. "We know what's wrong. We have a plan for fixing it. We just need time."

david.ivanovich@chron.com
 

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Comm on Energy & Commerce BP Hearing
May 16, 2007

You can view and download the Hearing and testimony

HEARING
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml

2006 Prudhoe Bay Shutdown: Will Recent Regulatory Changes and BP
Management Reforms Prevent Future Failures?
Subcommittee on Oversight and Investigations
Wednesday, May 16, 2007, 9:30 a.m.
2123 Rayburn House Office Building
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml

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

Hearing Webcast
(Any use of this recording is subject to Rule XI, 4 of the House of Representatives.
See text of Rule XI, 4 as posted by the House Committee on Rules.)

Connect to the Archived Video Webcast of this Hearing (100 kbps)
http://boss.streamos.com/wmedia/energycommerce/051607.oi.hrg.prudhoe_bay_shutdown.asx

 or Download ( about 232 MB takes about an hour to download)
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml

Windows Media Player is required for Committee Webcasts.

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

Witness List & Prepared Testimony (pdf files)

Panel I 

http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Gerard-testimony.pdf
Ms. Stacy Gerard
Acting Assistant Administrator
Chief Safety Officer
U.S. Department of Transportation
Pipeline and Hazardous Materials Safety Administration
East Building
1200 New Jersey Avenue, SE
Washington, DC 20590

http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Slemons-Testimony.pdf
Ms. Jonne Slemons
Coordinator
Petroleum Systems Integrity Office
Division and Oil Gas
Alaska Department of Natural Resources
550 West 7th Avenue, Suite 800
Anchorage, AK 99501
 
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Merritt-Testimony.pdf
Ms. Carolyn Merritt
Chair and CEO
U.S. Chemical Safety and
Hazard Investigation Board
2175 K Street, NW, Suite 400
Washington, DC 20037-1809

http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Fairfax-Testimony.pdf
Mr. Richard Fairfax
Director
Directorate of Enforcement Programs
Occupational Safety and Health Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210

Panel II 

http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Malone-Testimony.pdf
Mr. Robert A. Malone
Chairman and President
BP America, Inc.
200 Westlake Park Boulevard
Houston, TX 77079 


Hearing Transcript
Not available at this time. The printed hearing should be available within 60-90 days of the conclusion of the hearing. When available, the text of the printed hearing may be viewed at the U.S. Government Printing Office Web site.
 

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Wall Street Journal
May 16, 2007

2nd UPDATE:
Reps Fear More BP Prudhoe Bay Fiascos May Occur

DOW JONES NEWSWIRES
May 16, 2007 3:33 p.m.
(Updates with additional comments from witnesses and U.S. Representatives.)
By Ian Talley
Of DOW JONES NEWSWIRES

 WASHINGTON (Dow Jones)--Several key U.S. representatives said Wednesday they fear more incidents similar to the massive Prudhoe Bay shutdown last year may occur at BP (BP) facilities as long as management refuses to accept that budget pressures led to the outage.

The head of BP Plc's U.S. operations, Robert Malone, Wednesday told a House oversight panel that budget cuts weren't the direct cause of a leak that last year temporarily shut down the largest producing field in the U.S.

Malone's statement to the House Energy and Commerce Subcommittee on Oversight and Investigations is contrary to an original report BP commissioned into the cause of the oil leak. That report found budget pressures may have been a primary factor that led the company to put off pipeline maintenance that may have prevented the fiasco.

With several major industrial accidents in the past two years that have killed workers and shut down major energy infrastructure during an ongoing tightness in the petroleum markets, Congress is increasingly concerned that a lack of investment and maintenance programs may lead to more price volatility and infrastructure crises.

"Until BP truly acknowledges the role of cost cutting and budget pressure played in creating this mess, I fear other "Prudhoe Bay" problems may be occurring at other BP facilities throughout the United States," said John Dingell, D-Michigan, chairman of the full Energy and Commerce Committee.

"If (BP) just try to take the heat off now and sweep this under the rug, then we'll have ore leaks in Alaska and more explosions and fines," said the ranking member of the full energy committee, Joe Barton, R-Texas.

Rep. Bart Stupak, D-Michigan, Chairman of the oversight committee, said he believed a culture that disincentivized preventative maintenance still existed within BP. "You don't change that automatically, it takes some time to do it," he said.

"I'm sure that workers in the field don't feel assured to step forward and say, "here's what we ought to do to protect our maintenance and safety," Stupak said.

"I hope under Mr. Malone's leadership that he's started addressing those concerns," Stupak said.

The incident is under a Justice Department investigation, an Alaska state probe and is "highly likely" to face fines from the Pipeline and Hazardous Materials Safety Administration in the next few months, an official from that agency said.

Dingell said a slew of documents uncovered by the oversight committee's investigations "clearly shed new light on the causes of the Prudhoe Bay failures and raise questions about the testimony of BP officials who appeared last year."

"They suggest cost cutting drove many key management decisions in the Prudhoe Bay field...and raise serious questions about BP management," Dingell said.

Although the language in the BP report prepared by Booz Allen Hamilton remains in the version presented to the panel, BP spokesman Ronnie Chappell said the law firm issued a new report that said the wording was a mistake. "They issued a correction," Chappell told Dow Jones Newswires prior to the subcommittee's hearing Wednesday into the fiasco.

In testimony presented to the panel, Malone said a report commissioned into the cause of the oil leak found "there was a false sense of confidence" in the company's oil pipeline maintenance program. Booz Allen Hamilton's report, "concluded that in the absence of better risk assessment processes, budget increases alone would not have prevented the leaks," Malone said in his testimony.

Although he continued to reject that budget cuts were the direct cause of the leak, Malone later conceded under tough questioning from committee members, "We recognize that those budget pressures put our employees in a very difficult place."

And if that goes on long enough, we know you create a culture...where people no longer begin to challenge and think," Malone said.

"What we need to do is to establish a culture where every employee will raise an issue and have a comprehensive risk assessment," the BP executive said. He added that the company was working hard "to change the way we identify, assess, understand and communicate risk," as well as, "change the way we integrate what we have learned into our operations and budget decision."

The subcommittee last week asked BP why it sought to edit a paragraph that said, "Budget pressure eventually led to de-scoping some projects and deferring others," including key maintenance that investigators later said could have prevented the pipeline leaks. In particular, the company failed to "pig" its oil transit lines, allowing bacteria known to cause severe metal corrosion to build up inside the pipes. A pipeline "pig" is a cylindrical droid that sweeps the pipe's interior.

Stupak said his investigations found, however, "the mountain of circumstantial evidence can only lead me to the conclusion that severe pressure for cost cutting did have an impact on maintenance of the pipelines."

Stupak pointed to an internal email from an official in BP's Corrosion Inspection and Chemicals group in 2001 that read, "As you may know we are under huge budget pressure for the last quarter of the year and therefore we have to take some rather disagreeable measures."

Budget cuts were also said to be a prime cause of BP's 2005 Texas City refinery explosion that killed 15 people and wounded more than 180 workers, according to a Chemical Safety and Hazard Investigation Board probe.

Carolyn Merritt, chairwoman and chief executive of the Chemical Safety Board, said that after reviewing the Booz Allen Hamilton report, "there are striking similarities in the reported causes" of the Prudhoe Bay and Texas City incidents.

Merritt said that besides "severe budget pressures... the budgeting process was largely driven by top-down targets rather than an analysis of risks." She added that senior management incentives were based on cost and production, and, "this finding is essentially identical to the `checkbook mentality' we uncovered at the Texas City refinery."

"That meant the budgets were not large enough to address identified risks, and that the only money on hand would be spent, rather than increasing the budget," Merritt said.

From 1999 to 2006 - the years that BP has owned Prudhoe Bay - the company has reaped $106.5 billion in profits after tax.

The committee last week also queried BP about an email that showed a request for maintenance at one of the pipelines where the major leak occurred was rejected.

The request stated: "Maintenance pigging is required to optimize existing corrosion control programs...(and) will also eliminate flow restrictions present from sediment and fouling within the pipelines. Intelligent pigging is required to provide a full evaluation of current pipeline condition to ensure pipeline integrity and meet regulatory requirements." Intelligent pigging conducts multi-function examination of pipelines.

Government pipeline regulators found buildup of sediment in the pipeline allowed the corrosion that lead to the leak.

Michael Burgess, R-Texas, said in his opening statement to the hearing the committee's investigation found there were "striking similarities" to the incidents in Texas City and Prudhoe Bay.

Stupak and other subcommittee members said there were still many unanswered questions and more hearings were likely. Stupak and Dingell said they were particularly concerned about BP's cooperation with the committee, given that many of the documents the committee has requested weren't provided in hearings last year into the incident. For example, Stupak said BP turned over 800 pages of documents relating to the fiasco late Tuesday night.

Several committee members said BP was not allowing investigators to interview a key BP employee.

"When something critical comes up in a report...it's whitewashed," Stupak said, pointing both to the Booz Allen Hamilton report, and an early BP-commissioned draft report prepared last year that also had critical elements edited by the company. "I get real suspicious," he said.

Rep. Barton also said that BP also appeared to be resisting a judge's recommendations to BP that would address a raft of employee safety concerns in Alaska. "It looks like BP is trying to so the right thing in public, but is fighting like a tiger in private," Barton said.

Richard Fairfax, Director of Enforcement at the government's Occupational Safety and Health Administration, told the committee his agency was currently investigating an incident last month where more than 100 workers at BP's Texas City refinery were taken to the hospital after reporting flu-like symptoms. He also said OSHA had fined BP over $300,000 in penalties after an inspection at the company's Whiting, Indiana refinery.

Rep. Charlie Melancon, D-Louisiana, told Dow Jones Newswires during a break in the hearing that he was going to see if Congress or regulators could increase the $21 million fine for the Texas City incident. "It's peanuts when you consider it a fine for the deaths that occurred."

By Ian Talley, Dow Jones Newswires; 202 862 9285;

ian.talley@dowjones.com   

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Financial Times
May 16, 2007

http://www.ft.com/cms/s/edd3821a-03e3-11dc-a931-000b5df10621.html

US finds BP ‘unco-operative’
By Sheila McNulty
Published: May 16 2007 22:03 |
Last updated: May 16 2007 22:03

US congressmen yesterday criticised BP for withholding corrosion documents about its troubled Alaska oilfield and for not forcing the man who led its corrosion programme to co-operate with government investigators.

“It looks like BP is trying to do the right thing in public but it’s fighting like a tiger in private,” said Joe Barton, the highest ranking Republican on the US House Energy and Commerce committee. “This doesn’t look like co-operation to me.”

His committee’s investigative arm held a hearing yesterday on BP’s problems in Alaska.

The Prudhoe Bay field is North America’s largest and last year had to be temporarily closed because of severe corrosion discovered after a spill.

“This investigation has been difficult,” said Bart Stupak, chairman of the investigative arm. “Documents which should have been produced half-a-year ago were not made available until a few weeks ago and more seem to roll in each day.” About 800 arrived on the night before the hearing, he added.

Mr Stupak said some of the documents detailed proposals to cut funding for corrosion inhibitors. Others suggest corrosion monitoring efforts were reduced or put on hold because of budget pressures.

“This was occurring while BP received more than $106bn in profit,” he said.

The congressmen’s criticisms are embarrassing for Tony Hayward, BP’s newly appointed chief executive. The Alaskan operations were under his control while he was in charge of exploration and production in the years leading up to the spill.

“It is ironic that Tony Hayward managed the upstream division including Prudhoe Bay during these past years of corrosion mismanagement and is today the chief executive officer of BP; particularly at a time when BP is attempting to regain its reputation,” said Chuck Hamel, advocate for BP’s Alaska workers, who was instrumental in bringing the troubled field to Congress’s attention.

Until now, investigations of BP’s troubled US assets have focused on Texas City, where 15 were killed and 500 injured in a 2005 explosion.

Carolyn Merritt, chairman of the US Chemical Safety Board, said there were “striking similarities” in  the reported causes of the severe corrosion in BP’s Alaska field and the Texas refinery accident.

The Congressmen said they would have to hold further hearings on BP, which regulators testified they would probably fine for the Alaskan problem.

Bob Malone, president of BP America, said: “We understand the lessons of the past.”

He said it was disturbing to him if even one person at BP were to consider putting budget above safety.

“We have found there was a false sense of confidence in the effectiveness of the existing corrosion management program,” he added. “We know what is wrong. We know how to fix it. We just need time to implement it.”

He also said an internal probe concluded that, in the absence of better risk assessment processes, budget increases alone would not have prevented the leaks.

xxxx

Wall Street Journal
May 16, 2007

US Pipe Safety Regulator:
Fines Likely For BP Prudhoe Bay
DOW JONES NEWSWIRES
May 16, 2007 12:27 p.m.

 WASHINGTON (Dow Jones)--The U.S. pipeline regulator Wednesday said BP Plc (BP) U.S. operations are "highly likely" to face fines for violations at the company's Prudhoe Bay field, a top official at the regulator said.

The Pipeline and Hazardous Materials Safety Administration issued compliance orders for a leak at Prudhoe Bay in March last year, just a few months before another massive leak that forced the shutdown of one of the largest producing fields in the U.S.

"It's highly likely there will be a fine," Assistant Administrator at the regulator, Stacey Gerard, told reporters after a House oversight hearing into the incident.

 She said it was premature to say exactly how big any fine would be, but there were "a small number of probable violations." Under statute, each violation could mean a penalty of up to $100,000 a day.

BP is also subject to a Justice Department and Alaska state investigations.

A spokesman for the regulator said that the compliance process was ongoing and that at least three amendments to the original order had been issued. He also said that any penalty process could take several years if the company appealed.

By Ian Talley, Dow Jones Newswires, 202 862 9285;
ian.talley@dowjones.com 

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BP Ohio Refinery Work Takes Extra Week;Units Seen Back By Fri
DOW JONES NEWSWIRES
May 16, 2007 7:31 a.m.
 (This article was originally published Tuesday)
 
NEW YORK (Dow Jones)--A key gasoline-producing unit and several others at BP PLC's (BP) Toledo, Ohio-area refinery are in restart and seen returning to full operations by Friday after repairs that took a longer-than-expected three weeks, a person familiar with the refinery said Tuesday.

While repairing a crack in one unit and addressing problems caused by a late April shutdown, BP decided to advance some work originally scheduled to be done during planned maintenance in the fall, the person said. The extra work resulted in the outage lasting about an extra week.

A crude processing unit and a coker were shut on April 22-23 following a shutdown prompted by a boiler problem and a steam outage to the refinery. Several days later, workers discovered a crack in the reactor of the gasoline-producing fluid catalytic cracker.

Cokers allow refineries that process lower-cost heavier crude oils to produce greater volumes of higher-value products such as gasoline and diesel.

The refinery is the smallest in BP's continental U.S. system, with the ability to process 160,000 barrels of crude oil a day.

Repairs at BP's 410,000 barrel-a-day refinery in Whiting, Ind., are still seen continuing through May with partial restarts expected in June.

A fire at the end of March damaged a hydrotreater and forced BP to reduce the processing rates of other units there, including those used to produce gasoline. Planned maintenance on a crude unit was also advanced.

 -By Beth Heinsohn; Dow Jones Newswires; 201-938-4435;
beth.heinsohn@dowjones.com 
 

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State of Alaska
Gov Press Release
May 16, 2007

http://www.gov.state.ak.us/news.php?id=403

Alaska Teams with Pipeline Safety Agency
07-126

State of Alaska Teams with US DOT Pipeline Safety Agency to Strengthen Oil and Gas Oversight

May 15, 2007, Juneau, Alaska - The State of Alaska and the Pipeline and Hazardous Materials Safety Administration (PHMSA) today announced an agreement to provide enhanced and coordinated oversight of oil and natural gas production and transportation facilities located within Alaska.

In a letter of intent signed yesterday, the State of Alaska and PHMSA agreed to join forces in developing a strategic plan to establish coordinated oversight of facilities and activities designed to transport and produce oil and natural gas, establish risk assessment procedures, coordinate inspections of oil and gas production and transportation facilities, share infrastructure integrity data, and coordinate public outreach programs.

Currently, PHMSA shares common objectives in protecting and maintaining the Trans-Alaska Pipeline System with Alaska’s Department of Natural Resources, State Pipeline Coordinator’s Office and Department of Environmental Conservation within the Joint Pipeline Office.

“The economic well-being of our state, the protection of our pristine environment, and the safety of oil and gas workers depend on the uninterrupted flow of oil and natural gas on state lands,” said Governor Sarah Palin. “I am pleased that Alaska, via the newly created Petroleum Systems Integrity Office (PSIO), will be coordinating efforts and exchanging important systems integrity data with our federal partners to assure safe, continued operations.”

DOT Acting Deputy Secretary and PHMSA Administrator Thomas Barrett concurred. “Protecting the reliable and secure transportation of energy from Alaska is essential to the continued economic growth of our nation and meeting the President’s goal of energy independence,” said Administrator Barrett.

Recent significant events in Alaska, including pipeline failures on the North Slope, have highlighted the need for the state’s oversight agencies and PHMSA to implement a more comprehensive and effective “system of systems” approach, Barrett said.

As part of the agreement, Alaska’s PSIO and PHMSA will delineate clear jurisdictional roles and develop a strategic plan for the oversight of oil and gas production and transportation, including risk assessment, standards and inspections. In addition, the state and PHMSA will optimize communication flow for continued efficiency, particularly during emergencies.

PSIO’s Acting Coordinator, Jonne Slemons, explained, “The Petroleum Systems Integrity Office is committed to maximizing the safe and stable flow of oil and gas resources to market by ensuring oversight and maintenance of oil and gas equipment, facilities and infrastructure. Working with our federal partners is one of the most effective ways to accomplish this job.” Slemons continued, “Our integrated approach will identify, assess, and address potential risks to the oil and gas transportation infrastructure, thereby allowing us to prevent system failures before they occur.”

###

Xxxxxxxxxxxxxxxxxxxxxxxx

http://www.allamericanpatriots.com/48723305_alaska_alaska_teams_us_dot_pipeline_safety_agency_strengthen_oil_and_gas_oversight

Alaska Teams with US DOT Pipeline Safety Agency to Strengthen Oil and Gas Oversight
Wed, 05/16/2007 -
08:02  admin

May 15, 2007, Juneau, Alaska - The State of Alaska and the Pipeline and Hazardous Materials Safety Administration (PHMSA) today announced an agreement to provide enhanced and coordinated oversight of oil and natural gas production and transportation facilities located within Alaska.

In a letter of intent signed yesterday, the State of Alaska and PHMSA agreed to join forces in developing a strategic plan to establish coordinated oversight of facilities and activities designed to transport and produce oil and natural gas, establish risk assessment procedures, coordinate inspections of oil and gas production and transportation facilities, share infrastructure integrity data, and coordinate public outreach programs.

Currently, PHMSA shares common objectives in protecting and maintaining the Trans-Alaska Pipeline System with Alaska’s Department of Natural Resources, State Pipeline Coordinator’s Office and Department of Environmental Conservation within the Joint Pipeline Office.

“The economic well-being of our state, the protection of our pristine environment, and the safety of oil and gas workers depend on the uninterrupted flow of oil and natural gas on state lands,” said Governor Sarah Palin. “I am pleased that Alaska, via the newly created Petroleum Systems Integrity Office (PSIO), will be coordinating efforts and exchanging important systems integrity data with our federal partners to assure safe, continued operations.”

DOT Acting Deputy Secretary and PHMSA Administrator Thomas Barrett concurred. “Protecting the reliable and secure transportation of energy from Alaska is essential to the continued economic growth of our nation and meeting the President’s goal of energy independence,” said Administrator Barrett.

Recent significant events in Alaska, including pipeline failures on the North Slope, have highlighted the need for the state’s oversight agencies and PHMSA to implement a more comprehensive and effective “system of systems” approach, Barrett said.

As part of the agreement, Alaska’s PSIO and PHMSA will delineate clear jurisdictional roles and develop a strategic plan for the oversight of oil and gas production and transportation, including risk assessment, standards and inspections. In addition, the state and PHMSA will optimize communication flow for continued efficiency, particularly during emergencies.

PSIO’s Acting Coordinator, Jonne Slemons, explained, “The Petroleum Systems Integrity Office is committed to maximizing the safe and stable flow of oil and gas resources to market by ensuring oversight and maintenance of oil and gas equipment, facilities and infrastructure. Working with our federal partners is one of the most effective ways to accomplish this job.” Slemons continued, “Our integrated approach will identify, assess, and address potential risks to the oil and gas transportation infrastructure, thereby allowing us to prevent system failures before they occur.”

Source: Alaska Governor

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Reuters News
May 16, 2007

http://www.reuters.com/article/domesticNews/idUSN1619278420070516

BP cost-cutting led to Alaska oil spill: lawmaker
Wed May 16, 2007 10:42AM EDT
By Chris Baltimore and Robert Campbell

WASHINGTON (Reuters) - Congressional investigators have turned up a "mountain" of evidence showing that severe cost cutting at BP Plc's Prudhoe Bay oil field in Alaska led to the worst oil spill on the North Slope last March, the chairman of the subcommittee investigating the spill said on Wednesday.

"My review of the mountain of circumstantial evidence can only lead me to the conclusion that severe pressure for cost cutting did have an impact on maintenance of pipelines," said Rep. Bart Stupak, Michigan Democrat and chairman of the House Energy Committee's subcommittee on oversight and investigations."

Stupak's panel is investigating pipeline corrosion at BP's Prudhoe Bay field that led to a spill of at least 200,000 gallons of crude oil onto the Arctic tundra and eventually spurred the partial shutdown of the largest U.S. oil field.

Stupak and other committee members have focused their investigation on cost-cutting at Prudhoe Bay, arguing the cuts were similar to those that contributed to the unsafe environment at BP's Texas City, Texas, refinery where a 2005 explosion killed 15 workers and injured at least 170.

Carolyn Merritt, chairman and chief executive of the U.S. Chemical Safety Board, testified "there are striking similarities" between the two incidents."

"Most if not all of the seven root causes that BP consultants identified for the Prudhoe Bay incidents have strong echoes in Texas City," Merritt said in testimony.

In written testimony, BP America CEO Bob Malone said that cost cutting was not the problem, but that BP was working to overhaul its operations on the recommendation of independent consultants who have said that Texas City and Alaska both showed BP managers had blurred responsibilities that led to poor assessments of risks.

BP "must change the way we identify, assess, understand and communicate risk... (and) change the way we integrate what we have learned into our operations and budget decisions," Malone stated.

Government investigators have criticized BP for failing to use devices called "pigs" to clean and inspect the inside of its oil transit pipelines at Prudhoe Bay.

Corrosion-monitoring efforts like smart-pigging were "reduced or put on hold because of budgetary pressures," even as BP reaped more than $106 billion in after-tax profits between 1999 and 2006, Stupak said.

In one email from October 2001 cited by Stupak, an unnamed BP employee writes that "we are under huge budgetary pressure for the last quarter of the year and therefore we have to take some rather disagreeable measures," which included shutting down some corrosion-reduction systems until year-end.

Stupak said BP has not been forthcoming in producing documents for the committee. BP has provided several thousand documents, but Stupak said BP "failed to disclose this information" until recently even though the company had them before the committee's last BP hearing on September 6, 2006.

BP gave the committee staff over 800 pages of documents late on Tuesday, Stupak said.

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U.S., Alaska pipeline regulators in new pact
Tue May 15, 2007 10:29 PM BST

http://investing.reuters.co.uk/news/articleinvesting.aspx?type=allBreakingNews&storyID=2007-05-15T212915Z_01_N15409480_RTRIDST_0_USA-PIPELINES-ALASKA.XML

WASHINGTON, May 15 (Reuters) - U.S. pipeline regulators unveiled a deal with Alaska on Tuesday to boost oversight over the state's crude oil and natural gas pipelines.

The partnership between Alaska's Department of Natural Resources and the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) is meant to prevent a repeat of leaky pipelines at the Prudhoe Bay field that spurred the biggest oil spill on the Alaska North Slope last year.

The deal closes the gap between federal and state inspection regimes and helps the state keep tabs on aging infrastructure, officials said in a news release.

"This partnership will help us to identify, assess, and address potential risks to the oil and gas transportation infrastructure, allowing us to prevent system failures before they occur," said PHMSA Administrator Thomas Barrett.

Pipeline corrosion at the Prudhoe Bay field operated by London-based BP Plc <BP.L> leaked at least 200,000 gallons of crude oil last March and eventually spurred the partial shutdown of the largest U.S. oil field.

Robert Malone, chairman and president of BP America Inc., is expected to testify before the House Energy and Commerce Committee on Wednesday on whether budget cuts contributed to the spill.

Stacy Gerard, PHMSA's chief safety officer, is also scheduled to testify.

Government investigators have criticized BP for failing to use devices called "pigs" to clean and inspect the inside of its oil transit pipelines at Prudhoe Bay.

BP has defended its actions in Alaska, saying it used "world class" corrosion-prevention methods that exceeded the requirements of Alaska state regulators.

Following the spill, the PHMSA moved to expand its regulatory role to cover low pressure pipelines like the transit line that leaked at Prudhoe Bay.

PHMSA regulates oil and gas transmission pipelines in Alaska, including about 200 miles of pipelines on Alaska's North Slope and the 800-mile Trans-Alaska Pipeline System, which is also regulated by Alaska.

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Anchorage Daily News
May 16, 2007

http://www.adn.com/news/politics/fbi/story/8889399p-8789732c.html

Lobbyist accused in bribery conspiracy
BILL BOBRICK: He is set to plead guilty this morning in District Court.
By LISA DEMER
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 16, 2007 at 02:18 AM

OTHER DOCUMENTS
PDF: Charging document
http://www.adn.com/static/includes/alaskapolitics/bobrickinformation.pdf

PDF: Plea agreement
http://www.adn.com/static/includes/alaskapolitics/bobrickpleaagreement.pdf

PDF: Addendum to plea agreement
http://www.adn.com/static/includes/alaskapolitics/bobrickfactuabasis.pdf

PDF: Motion to continue sentencing
http://www.adn.com/static/includes/alaskapolitics/motion.pdf

Graphic: Timeline of events
http://www.adn.com/includes/corruption/event_timeline.html

Graphic: Key figures
http://www.adn.com/includes/corruption/

More political corruption coverage
(Info Shown Below)
http://www.adn.com/news/politics/fbi/


Bill Bobrick, for years the lobbyist with the longest list of private clients with city business, has been charged with a single count of conspiracy stemming from a scheme to bribe former state Rep. Tom Anderson.

Bobrick, 52, is scheduled to appear in U.S. District Court this morning to plead guilty to a felony charge of conspiracy to commit extortion, bribery and money laundering. His sentence may ride on his future cooperation in the case, court papers say.

The prosecution says in court papers that Bobrick and Anderson began conspiring in July 2004. Bobrick created a sham company to funnel payments to Anderson in exchange for his doing the bidding of a private corrections company in the state Legislature, the prosecution says.

Prosecutors quote Bobrick telling an informant that he and Anderson were "pitching a bunch of people" to get money for the legislator.

Anderson was indicted in December on seven felony counts including bribery, extortion and money laundering. He has pleaded not guilty. His trial is scheduled to begin June 25.

The case laid out against Bobrick almost mirrors the allegations against Anderson.

Even after Anderson was charged, Bobrick continued to lobby for clients on city issues. About a month or so ago, he began telling people, including his longtime friend Mayor Mark Begich, that he was going to plead. After a story about his intentions to plead appeared in the Daily News, he's been noticeably absent from Anchorage Assembly meetings.

Bobrick is cooperating with the government and has agreed to testify against Anderson, according to a motion filed by prosecutors. They want Bobrick's sentencing delayed until after Anderson's trial. He faces two years or longer, but that could be reduced.

"He's deeply remorseful about having committed a crime and he wants to start doing the right thing," said Doug Pope, Bobrick's defense attorney.

Bobrick becomes the seventh person to be charged in a corruption investigation that burst into public view last summer with the searches of state lawmakers' offices. Anderson, state Rep. Vic Kohring, former Reps. Pete Kott and Bruce Weyhrauch and Veco Corp. executives Bill Allen and Rick Smith have been hit with charges. Allen and Smith have pleaded guilty.

BOBRICK CLIENTS

Bobrick registered this year to represent five clients who have business with the city.

They are: P.O'B. Montgomery, the developer of a mall in Mountain View; Alaska Waste, the city's biggest garbage hauler; Marlow Development Corp., which is behind a number of big projects in Anchorage; Lantech, a surveying company; and Cook Inlet Housing Authority. The latter just won a 10-year property tax break from the Assembly for its Creekside Town Center housing project in Muldoon.

At least one client has already cut ties to Bobrick. David Irwin, president of P.O'B. Montgomery, said he alerted Bobrick at the start of May that the company would no longer employ him. He said Bobrick understood.

"It was just very clear where this thing was heading that we had to just stop the arrangement," Irwin said.

Bobrick's other clients didn't return phone calls on Tuesday to talk about whether he still represents them.

The charging document and other materials that lay out the case against Bobrick don't name the private prison company, but the description of it matches Cornell Companies Inc. of Houston, Texas, a publicly traded corporation. Cornell operates six halfway houses in Alaska.

Cornell, along with partners Veco and Allvest founder Bill Weimer, failed in recent years to win public support for private prison proposals in Anchorage, Delta Junction, Kenai and Whittier. It also failed to win state approval for a juvenile psychiatric treatment center in downtown Anchorage.

A lobbyist for the prison company -- who was working as a government informant and who has not been identified in court papers -- paid a total of $24,000 to Bobrick's Pacific Publishing, according to court documents. Bobrick turned over $10,828 to Anderson and kept the rest, the documents say. Anderson later complained he wasn't getting enough and was paid another $2,000 by the government informant, according to the indictment against him. The informant matches the description of Frank Prewitt, a former state corrections commissioner who went to work for Cornell.

'OUR BOY IN JUNEAU'

In a secretly recorded conversation on July 21, 2004, Bobrick told the informant that he and Anderson were "forming kind of like a partnership" and were "pitching a bunch of people" to try to get money for Anderson. Bobrick said it would be great if he could get the corrections company to hire Anderson through him, and then Anderson would be "our boy in Juneau."

Among other things, Anderson testified at a public hearing in Anchorage on Nov. 17, 2004, in support of Cornell's request for a state certificate to run a juvenile treatment center. He told state officials that he wasn't at the meeting on behalf of any group but could endorse Cornell because he had seen "how they function and work."

The state's tape recorder at the meeting malfunctioned, and parts of Anderson's testimony were garbled, according to a transcript provided by the state. Bobrick also was there.

Between August 2004 and March 2005, Bobrick was aware of "multiple official acts" that Anderson took to benefit the government informant, the charging document said.

Bobrick was executive director of the Alaska Democratic Party in the 1980s and later became a registered lobbyist in Anchorage.

Daily News reporter Lisa Demer can be reached at ldemer@adn.com  and 257-4390. Reporter Kyle Hopkins contributed to this story.

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New rules to limit influence peddling
ETHICS: Assembly members look at who gets to bend their ears.
By KYLE HOPKINS
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 16, 2007 at 02:18 AM

The case of local lobbyist Bill Bobrick triggered a proposal by Anchorage Assemblyman Paul Bauer to ban anyone convicted of a felony from lobbying before the city, Bauer said Tuesday.

When news that Bobrick planned to plead guilty to some kind of felony circulated in April, Bauer said he decided to pursue the new lobbying rules.

"He has the most (lobbying) contracts and he's, of course, involved in some kind of white-collar scheme. That didn't look good," Bauer said.

The latest version of the new rules sponsored by Bauer and Assemblyman Dan Sullivan would bar someone from lobbying the city if they've been convicted of a felony within the past 10 years.

The ordinance would require would-be lobbyists to pay for their own criminal background checks. City clerk Barbara Gruenstein said the Assembly plans to hear the public's take on the proposal at Tuesday's meeting.

When certain details in the indictment of former Rep. Tom Anderson pointed to Bobrick as a co-conspirator, Bobrick called several Assembly members to apologize for making some kind of mistake and said he wanted to make amends.

In April, Bauer said he contacted at least one of Bobrick's clients, Cook Inlet Housing Authority, saying he had concerns about the lobbyist.

Asked at the time if he told the authority he wouldn't vote for a project because Bobrick was the authority's lobbyist, Bauer said "absolutely not."

"I said I have a concern with anybody who has connections and what is your intentions with Mr. Bobrick in the future ... But no, I don't go around saying I'm not going to vote for something, just because you're associated," Bauer said in April.

Downtown Assemblyman Allan Tesche -- who sits on the Assembly ethics committee along with Bauer and Sullivan -- said Tuesday he's also proposing new ethics rules.

Tesche said his proposal is designed to thwart influence peddling by city officials and prevent city leaders from steering business to friends. It would ban any elected official, city employee or appointed commissioner from telling someone who does business with the city that they should hire a particular lobbyist, consultant or contractor, he said.

"It's to avoid the situation where a municipal employee says, 'You know, things could go a lot easier for you if you agreed to hire so-and-so," Tesche said.

Daily News reporter Kyle Hopkins can be reached at khopkins@adn.com  or 257-4334.

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Alaska Political Corruption
Bobrick charged with
conspiracy in bribe probe
Bill Bobrick, long the most prominent lobbyist on municipal issues in Anchorage, has been charged with a single count of conspiracy related to a scheme to bribe former state Rep. Tom Anderson.

PDF: Charging document
PDF: Plea agreement
PDF: Addendum to plea agreement
PDF: Motion to continue sentencing
Graphic: Timeline of events

Graphic: Key figures
More political corruption coverage
Recall petition to target Kohring
WASILLA - A Wasilla city councilman said he plans to try to recall Rep. Vic Kohring, a Wasilla Republican who has been indicted in the legislative bribery scandal.
Bribery charges prompt action on ethics package
Blog: Alaska Politics
More political corruption coverage
Bill Allen out as Veco CEO
Bill Allen, who pleaded guilty earlier this week to federal conspiracy and bribery charges, has stepped down from Veco Corp., which he served as chief executive officer and chairman.

Veco's reach extended outside Alaska
Guilty pleas from two oil field services executives who admit bribing legislators have state officials examining whether they should give up campaign contributions connected to their company.
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Valley reacts to Kohring case
News of Republican Rep. Vic Kohring's indictment last week met with mixed reviews among local politicos. Employees in Kohring's Juneau office Monday said supporters are rallying behind him even as House leaders temporarily stripped him of a committee leadership position he has held since 2003.
Here is the text of Rep. Vic Kohring's federal indictment
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Veco case may spark charges from state
The state plans to investigate whether Veco Corp. and its officials have violated Alaska law in light of guilty pleas in federal court by two company officials.
Beth Bragg: Confluence of Alaska leaders' stupidity is Juneau's effluent
More coverage from Alaska Newsreader
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Veco executives plead guilty to bribing officials
Bill Allen, a welder who took the Veco Corp. from a small Kenai oil-field company to a billion-dollar international contractor and a major political force, pleaded guilty Monday to bribing at least four Alaska legislators, including former Senate President Ben Stevens.
Timeline
From Juneau to Congress, Veco has been an influential Alaska force
Kohring returns to session, reasserts his innocence

Ethics bill goes forward under criminal cloud
Veco's oil field customers plan to stick with company for now
Graphic: Key figures in the case
More coverage at Alaska Newsreader
Politics blog: Veco gave bonuses to execs to reimburse campaign donations
More coverage
Oil service execs plead guilty to bribing Alaska lawmakers

PDF: Allen charging document | PDF: Allen plea agreement | PDF: Allen plea facts | PDF:Smith charging document | PDF: Smith plea agreement | PDF: Smith plea facts | Blog:AlaskaPolitics | More coverage
Kohring loses chairman post
State Rep. Vic Kohring lost his job Monday as chairman of the House Oil & Gas Committee, three days after he and two former House members pleaded not guilty to federal bribery and extortion charges. 0000000

Kohring's state House committee post pulled
The chairman of a key state House committee was deposed and Alaska's most important oil tax law fell under new scrutiny Saturday as lawmakers reacted to the arrest of one current and two former legislators on federal corruption charges.

Blog: Alaska Politics
More coverage
Federal authorities charge three legislators
Three more state legislators were arrested on federal corruption charges Friday, accused of selling their votes and influence to the oil field services company Veco Corp. and its chief executive, Bill Allen, during last year's debate on oil taxes.
REACTION: Rumor mill runs wild as three legislators stand handcuffed in federal court.
PDF: Indictment (Kohring)
PDF: Indictment (Kott & Weyhrauch)
PDF: Indictment (Anderson)
VECO press release
Audio: Gavel to Gavel (Berkowitz confronts Weyhrauch on the House floor, May 8, 2006)
Audio: Governor Palin (Sad day for Alaska)
Audio: Governor Palin (Clean up government)
Audio: Governor Palin (Alaskans' resources)
Kohring also charged with bribery, extortion
State Rep. Vic Kohring and former state legislators Pete Kott and Bruce Weyhrauch were charged in federal court today with extortion and bribery in connection with the Legislature"s consideration of an oil tax bill and then-Gov. Frank Murkowski's natural gas pipeline proposal last year.
Timeline of federal investigation into Alaska politics
Timeline of events leading up to political indictments; beginning July 21, 2004 to present.
Anderson's trial is delayed
The trial of former state Rep. Tom Anderson for extortion, bribery and money-laundering charges won't begin until June 25, a delay of more than two months from the scheduled April 9 trial date, a federal judge said Wednesday.
More political indictment coverage
Blog: Alaska politics
Friends solicit money for ex-Rep. Anderson's defense fund
As former state Rep. Tom Anderson prepares for trial next month on federal bribery, extortion and money laundering charges, a group of friends is trying to raise money for his legal defense.
Anderson indicted on seven counts (12/09/2006)
Solicitation for the "Tom Anderson Defense Fund" [.pdf]
Veco fades into Juneau background
Lawmakers say there was a time in history when a cocktail party sponsored by Veco executives in a Baranof Hotel suite would have seen oil executives and lobbyists cozying up to lawmakers and staffers.
More coverage
FBI raids help set agenda in Juneau
An unfinished gas pipeline deal, rising health care and education costs, and a bipartisan call for revising the legislative ethics laws -- Alaska's lawmakers return to the capital this week to begin tackling these and other issues in a four-month session that starts Tuesday.
Delay sought in legislator's bribery trial
Indicted state legislator Tom Anderson wants to delay the start of his trial so his lawyer can better prepare.
More political indictment coverage
Blog: Alaska politics
Anderson taps Stockler to handle his defense
State Rep. Tom Anderson, facing seven federal felony charges including allegations of extortion, money laundering and bribery, is replacing one high-profile defense lawyer with another.
Blog: Alaska politics
Lobbyist tells city leaders he's 'sorry'
Bill Bobrick, the lobbyist who set up a company that federal prosecutors say was used to funnel bribes to indicted state Rep. Tom Anderson, called Mayor Mark Begich and several members of the Assembly over the weekend.
More political coverage
Blog: Alaska politics
Subpoena may signal a wider corruption
The director of a Juneau-based salmon fishing group said last week he has been ordered by a federal grand jury investigating Alaska corruption to turn over lobbying and consulting records involving state Senate President Ben Stevens and former congressional aide Trevor McCabe, an Anchorage lawyer.
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For now, no development in southern NPR-A
HURDLES: Challenges in opening land, opposition to plan shaped BLM decision.
The Associated Press
Published: May 16, 2007
Last Modified: May 16, 2007 at 03:44 AM

FAIRBANKS -- The Bureau of Land Management has halted planning efforts for oil and gas development in one section of the National Petroleum Reserve-Alaska.

Public opposition and the impracticality of development led to the decision in the Southern Planning Area, BLM officials said.

"You never know what will happen in the future," spokeswoman Sharon Wilson said. "We will not be doing anything with the south NPR-A for now."

The reserve on Alaska's North Slope bureau covers 23 million acres, and the Southern Planning Area is more than one-third at 9.2 million acres.

President Warren Harding created the National Petroleum Reserve-Alaska in 1923 as an emergency oil supply for the Navy. Current planning comes from a presidential directive guiding the Department of the Interior to foster oil and gas development in the reserve.

The southern area is believed to have oil and gas reservoirs, coal and hard-rock minerals. However, it is also the primary calving area for the Western Arctic Caribou Herd, which has subsistence value for more than 30 communities.

"Clearly, it is a victory that the BLM recognized that there is big controversy there," said Pam Miller, Arctic coordinator with the Northern Alaska Environmental Center.

The southern area is estimated to have just 2 percent of the reserve's oil resources but 27 percent of the natural-gas resources. However, it has almost no road infrastructure.

The Alaska Resource Advisory Council, a 15-member panel composed of energy industry personnel, conservationists, Native organizations and others with a stake in Alaska land issues, advises BLM on major issues but had not agreed on the southern area.

Discontinuing work there will allow the BLM to focus more attention and resources on the Northeast Planning Area, which could ignite a land use dispute temporarily settled last fall.

The Northern Alaska Environmental Center and a coalition of environmental groups successfully stalled the sale of several large oil and gas leases around Teshekpuk Lake last September by persuading a judge to require the BLM to conduct a more thorough environmental assessment.
 

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Anchorage Daily News
May 15, 2007

http://www.adn.com/opinion/view/story/8886516p-8786802c.html

Here's a mystery
How does a wildly popular bill fail to pass in Juneau?
Published: May 15, 2007
Last Modified: May 15, 2007 at 02:55 AM

Here's a mystery of the Juneau universe:

How does a bill NOT pass the Alaska Legislature when it is introduced with a majority of each house already signed on as sponsors?

Answer: When it is opposed by a powerful industry that, despite the taint of corruption, still has friends in high places.

The bill in question would make it tougher for oil companies to claim tax breaks when they have to fix problems caused by their own bad maintenance. Such as when BP cut corners on maintenance for years and saw North Slope gathering lines spring costly leaks due to corrosion last year.

BP made clear it planned to deduct those corrosion repair expenses against what it owes on the state's new profits-based tax on oil production.

Legislators, like the Alaskans who elect them, were angry over BP's shoddy maintenance. Repairs required shutting in large volumes of North Slope oil production, costing the state millions of dollars. Subsidizing BP for fixing problems caused by its own penny-pinching maintenance is just too much for Alaskans to take.

The Senate responded with SB 80, which at last count had 18 sponsors. That's 90 percent of the Senate.

The House version, HB 128, had 21 sponsors. That's a majority of the House. (A bare majority, but a majority nonetheless.)

Passing either of the bills won't instantly avoid a big tax dispute over BP's repair ex penses. BP's tax lawyers will happily argue about what constitutes "improper maintenance" for as many years as the courts will let them. But Alaska was going to have those fights anyway. Existing law allows excluding expenses for "gross negligence." The new law lowers the standard for denying tax breaks and will improve the state's odds of success.

But here we are with less than two days to go in the session, and the bill appears dead. At last report, it was stalled in the House Finance Committee, caught in the annual end-of-session legislative logjam.

Ordinarily, the bill would be handled by Finance co-chair Kevin Meyer. But he's employed by Conoco Phillips, the state's largest oil producer. He turned the bill over to his co-chair, Kenai Rep. Mike Chenault.

That's the same Mike Chenault who has taken thousands of dollars in campaign contributions from Veco during his political career. In his most recent election cycle, Rep. Chenault collected $5,000 from five Veco executives, including the two who admitted to a bribery scheme, Bill Allen and Rick Smith.

Over the weekend, Rep. Chenault said his committee is simply out of time to deal with the bill to block BP's bad-maintenance tax deductions.

Coincidence?

Perhaps.

It's true time was short by the time the Senate bill hit House Finance. Other committees could have moved the bill sooner. Senate Resources had the bill almost three months. House Resources had a similar bill almost two months. (On its way to Resources, the House bill made an extra stop in the House Oil and Gas Committee, run by the only sitting legislator accused of taking Veco bribes, Vic Kohring. Surprisingly, the bill moved out of Kohring's committee after just three weeks.)

But here we have a bill that might help save Alaskans millions of dollars in undeserved oil tax breaks. It is not only supported but actively sponsored by 39 of 60 legislators. It passed the Senate unanimously. Yet the bill is dying at the hands of a committee chairman whose hands have been graced with Veco and other oil industry campaign contributions.

BOTTOM LINE: Alaska's fight against BP's oil tax deductions for pipeline repairs will be tougher without this bill.

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Tax-deduction bill is likely doomed
REPAIRS: Oil producers should pay to
maintain pipelines, sponsors say.
By TOM KIZZIA
Anchorage Daily News
Published: May 14, 2007
Last Modified: May 14, 2007 at 07:50 AM

JUNEAU -- A bill intended to prevent North Slope oil companies from deducting the costs of repairs caused by improper maintenance appears doomed for this year.

The measure was strongly opposed by Alaska's major oil producers. Its demise would give the oil companies a rare victory in a session where they lost badly on gas pipeline legislation.

The tax-deduction bill was introduced after corrosion forced BP to partially shut down the giant Prudhoe Bay field last summer. It is backed by Gov. Sarah Palin and appears to have widespread support in the Legislature. The measure passed the Senate last week 20-0, and has more than half the House of Representatives signed on as co-sponsors.

But despite this support, the bill dragged very slowly through the legislative process this year.

On Sunday, the House Finance Committee's powerful co-chairman said he doesn't plan to take up the bill in the closing days of the session. Rep. Mike Chenault, R-Nikiski, said the bill reached his commitee too late and other, more important bills have priority.

"Maybe it would fit in a special session (on oil taxes) better than it would right now at the end of the session," Chenault said.

Failure to pass the measure could cost the state more than $100 million in lost tax revenues, the bill's sponsor said Sunday. That's if BP deducts all the costs of repairing and replacing corroded pipe that led to a big Prudhoe Bay oil spill last year, said Sen. Tom Wagoner, R-Kenai.

BP has already announced plans to deduct some of the repairs, which the company said would save it an estimated $11 million on taxes owed under the state's new Petroleum Production Tax, or PPT net-profits tax.

Wagoner said the improper-maintenance deduction could be brought up again next year, either alone or as part of a larger re-examination by the Legislature of the PPT. But he said delay may make it too late for the rule to cover retroactively the 2006 corrosion problems uncovered by BP at Prudhoe Bay.

The BP spills are the subject of a deepening congressional probe into whether the company's cost-cutting efforts put their facilities at risk. The company is replacing 16 miles of pipe at an estimated cost of $250 million.

Wagoner's measure, Senate Bill 80, would prohibit companies from taking tax credits under the PPT if the state determines the repairs were necessary because of "improper maintenance."

"The question is, who should be responsible for bad maintenance: the major oil companies or the people of Alaska?" said Rep. Kurt Olson, R-Soldotna, who introduced a companion bill in the House.

Oil company representatives argued in hearings this year that the anti-deduction measure would discourage investment in Alaska. They said defining "improper" maintenance will be difficult. The PPT has other sections that address maintenance and repair costs, the said.

An alternative for the state would be to accuse the companies of "gross negligence" in court. But such a lawsuit can be hard to win, said Wagoner.

Wagoner's bill was launched with fanfare in early February but languished in the Senate Resources Committee until the end of April. Olson's companion bill stalled for two months in the House Resources Committee.

A week later, after federal corruption charges tied to oil industry lobbying were filed against one current and two former legislators, the improper-maintenance measure picked up speed. It passed the Senate unanimously on Thursday and moved to the House Finance Committee.

Chenault took responsibility for the bill under a power-sharing arrangement with co-chairman Rep. Kevin Meyer, R-Anchorage. Meyer works for Conoco Phillips and recuses himself from committee work on oil industry legislation.

Chenault said the committee is tied up with major budget bills, as well as legislation deciding school funding and municipal aid for the coming year. That means there won't be time to look at something as complex as the oil tax deduction bill, he said.

The Legislature is scheduled to adjourn Wednesday night.

Wagoner said he was not happy with his fellow Kenai Republican.

"If he doesn't move (the bill), somebody's got to be held accountable," Wagoner said. "But you can't place it at his feet totally, because the Senate took so much time to get it over there."

Wagoner attributed the bill's slow progress to opposition from the oil companies. "They've done everything they can to defeat this bill and hold it back," he said.

Reporter Tom Kizzia can be reached at
tkizzia@adn.com  or in Juneau at 1-907-561-3798.

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Wall Street Journal
May 14, 2007

House Presses BP on Oil Spills
Probe Aims to Determine If Cost Cuts Had
Role In Pipeline Ruptures
By JIM CARLTON
May 14, 2007; Page A6

Investigators in the U.S. House of Representatives who are looking into two spills that ended up shutting down Alaska's Prudhoe Bay oil field last year have sent a letter to the field's operator, BP PLC, asking for more explanation regarding a finding in a consultant's report. The document, put together at the request of BP, said the spills were preceded by budget cuts to maintenance and inspection of pipelines.

The letter was sent Friday by officials of the House Committee on Energy and Commerce, who are set to begin another hearing Wednesday into why the spills happened. Although officials have found that corrosion led to a spill of about 200,000 gallons of crude from a pipe in March 2006 and a smaller spill from another line in August, the House investigators are looking into whether cost cuts made the lines more prone to rupture.

BP temporarily shut down the Prudhoe Bay field after tests by the company following the second spill showed widespread corrosion problems in other pipelines in the vicinity. Production resumed after the lines were replaced.

The News: House investigators are looking into BP-commissioned report that finds budget cuts could be tied to pipeline breaks in Alaska.

The Background: House committee investigating BP's role in two pipeline ruptures at Prudhoe Bay last year that ended up with the field temporarily closing, causing oil prices to spike.

What's Next: BP executives are scheduled to testify before the House Committee on Energy and Commerce.

One of the consultants hired by BP to help it investigate the incidents was Booz Allen Hamilton, a McLean, Va., company whose March 2007 report on file with the House committee suggests: "Budget pressure eventually led to de-scoping some projects and deferring others. For example, the plan to run a smart pig in the [oil transit lines, which were the ones that ruptured] was dropped in 2004 and 2005." A "smart pig" is a device that runs through a pipeline, taking measurements to see if the line suffers from corrosion or other defects.

In their letter to Robert Malone, chairman and president of BP's BP America Inc. unit, Reps. John Dingell (D., Mich.), chairman of the House Energy Committee, and Bart Stupak (D., Mich.), chairman of its subcommittee on oversight and investigations, said the finding contradicts BP's previous assertion that failure to pig these lines wasn't a function of any budget pressure.

The congressmen also noted BP has asked that the reference to cost-cutting be removed from the Booz Allen report, calling it "in error." "If the sentence is removed, we would appreciate a full explanation as to why BP and the report's authors believe the sentence to be inaccurate," said the two Michigan Democrats in their letter.

The congressmen also disclosed in the letter that they had recently uncovered a Feb. 5, 2003, email from BP they say suggests the company planned to pig the very lines that failed. However, they said, those plans appear to have been rejected by superiors. The email contains an "Authorization for Expenditure" that the congressmen said appears to be a proposal to "install permanent pig launching and receiving facilities" in several places, including transit lines where the spills later took place. But the expense request appears to have been turned down, they added, since it included a notation: "rejected ... for approval."

BP officials declined to comment, saying those were "matters of interest" at Wednesday's hearing. Booz Allen officials weren't available.

Cost-cutting also has been brought up as a possible link to a March 2005 explosion at a BP refinery in Texas City, Texas. BP officials have said they believe budgetary decisions didn't play a critical role in the accident, which killed 15 people and injured 180.

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

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Juneau Empire
May 13, 2007

http://www.juneauempire.com/stories/051307/loc_20070513098.shtml

Lawmakers disclose conflicts of interest,
but vote anyway
By PAT FORGEY
JUNEAU EMPIRE

A funny thing happened to Rep. Kevin Meyer, R-Anchorage, one day on the floor of the House of Representatives. The subject of taxing the oil industry came up during discussion of a program that taxes the oil industry for spill response and prevention.

"I was hoping to avoid the discussion of oil taxes," said Meyer, one of the most influential members of the House - and an employee of ConocoPhillips Co., one of the largest oil company taxpayers in Alaska.

"But since it has come up, I would like to put it on the record that I have a conflict of interest and be excused from voting."

What happened next was predictable. It happens regularly in the Alaska Legislature - and in no other legislature in the country.

Other representatives objected to Meyer's being excused, and House Speaker John Harris, R-Valdez, told Meyer he wouldn't be excused from the discussion and the vote.

"I think you are going to have to talk about it, and vote," Harris said.

That's standard operating procedure in the Alaska Legislature. Conflict of interest isn't just tolerated. In some cases it is required.

Alaska's "citizen legislators" have numerous conflicts of interest, and few checks on using their power as elected officials to benefit themselves or their employers.

Several legislative leaders say conflicts of interest are inherent in having a citizens' legislature, and that while legislators bring conflicts of interest with them to Juneau, they also bring valuable community connections as well.

Some set their own personal boundaries, and limit what they'll do to benefit themselves or their employers.

After disclosing his conflicts, Meyer set about convincing the House not to raise taxes on his employer. Using charts and graphs, Meyer explained why he believed a tax increase wasn't in the state's interest, and the tax increase proposal was pulled. He knew the issue well, as he had sponsored the bill.

Meyer said that even when he advocates doing something that is in ConocoPhillip's interest, he's doing it because it is in the state's interest.

Meyer said in his case he takes a leave of absence from his job as a procurement analyst with ConocoPhillips when he's serving in Juneau.

"I totally divorce myself from the company when I'm down here," he said.

Meyer has been particularly prominent this year, because of his position as co-chairman of the House Finance Committee at a time when the signature piece of legislation this year is Gov. Sarah Palin's Alaska Gasline Inducement Act.

Palin said there is nothing improper about Meyer's role in the process.

"He is following the rules that are in place today," she said.

Friday, at a press conference after AGIA passed the House and Senate, Meyer appeared with Palin at a celebratory press conference, but declined an opportunity to speak.

An ongoing ethical issue

The 25th Alaska Legislature began in January with a mandatory day-long ethics review in which all 60 members gathered in the neighboring Terry Miller Building to talk over ethical issues with consultant Michael Josephson, an ethics expert with the Josephson Institute of Ethics.

The institute advises elected officials and others on how to deal with ethical dilemmas, and was brought in from California by the Legislature after FBI agents raided the offices of six legislators last year and a seventh was indicted.Josephson was surprised to learn that Alaska legislators with conflicts of interest not only voted, but were required to do so."

"You are unique in this, I don't know of another state that has this, there may be one or two others," he said.

He said public officials considering whether to recuse themselves should consider the public appearance.

"I think the test is, would a reasonable, fair-minded person think that (conflict) might affect your judgment," he said.

For example, Josephson said, if you were a employee of a pharmaceutical company and a bill setting drug prices was being considered, that could affect company profits. A reasonable person might think you'd be under pressure to vote a specific way, he said.

"When in doubt, recuse. It's simply a better way to protect public trust," he said.

Fighting conflict with disclosure

Several legislators said that their other check on conflict of interest is disclosure, and they make it clear when they have a personal financial stake in issues.

Meyer said he rarely heard from constituents who objected to ConocoPhillips or other conflict matters, but some do tell him that he shouldn't be voting on some issues.

"Especially the ones who disagree with me," he said.

Meyer said he makes it clear to his constituents during his campaigns that he works for the company.

"They know I come from an oil industry background," he said.

In the days before Palin's AGIA bill reached the floor of the House, Rep. Les Gara, D-Anchorage, called upon Republicans to refrain from objecting if Rep. Vic Kohring, R-Wasilla, asked to be excused from voting. Kohring was recently indicted on charges of accepting bribes from an oil company.

Lawmakers objecting to recusal do so verbally, and their objections are not recorded by name in the House and Senate journals, giving their actions anonymity.

Kohring avoided the issue on Friday's AGIA vote as he left the floor during the vote, despite not having an excused absence.

"There were some things he had to take care of," said Jim Pound, a member of Kohring's staff.

The House leadership had not requested Kohring to step aside, said Will Vandergriff, spokesman for the House Republicans.

An issue of personal integrity

Rep. Jay Ramras, R-Fairbanks, said voters need to trust their lawmakers. He expressed displeasure with fellow legislators who allegedly "for an insignificant amount of money gave away the state's sovereignty."

He said he's as likely to vote against his financial interest as he is for it, and he is wealthy enough to be able to do so.

"There's nothing of value out there that could compromise me," he said.

In January, Josephson recommended that the legislators consider changing their internal rules so that they are not placed in conflicts.

Rep. Beth Kerttula, D-Juneau, said some members of the Democratic caucus urged tougher conflict of interest rules be adopted after Josephson's talk. Her caucus never actually proposed such rules, acknowledged the House Democratic leader.

"Maybe what we need to do is to determine a degree of conflict, and what would be an improper level," she said.

Palin praised the Legislature's ethics reform package this year, but said it was only a "good first step."

Early on she proposed toughening ethics rules for both the executive branch and the legislative branch, but said she found legislators resistant to her having a role in how the Legislature operates.

"They said, `You clean up your house, we're going to concentrate on the legislative branch,'" Palin said.

There's still more to do to, but Palin expressed confidence it will be done.

"I've taken them at their word that they want to clean up loopholes and conflict of interest," she said.

• Pat Forgey can be reached at
patrick.forgey@juneauempire.com.

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Petroleum News
May 12, 2007

http://www.petroleumnews.com/pntruncate/870609284.shtml

Public corruption scandal erupts in Alaska
Former, current state legislators arrested and Veco’s Allen confesses in federal probe; PPT and oil field contractor under cloud
Rose Ragsdale
For Petroleum News

In the latest chapter of a political scandal that began unfolding last summer, three Alaska politicians and two oil industry executives are facing federal criminal charges that could earn them stiff fines and lengthy prison sentences. Ever-widening fallout from the disclosures also cast a cloud over Alaska’s new petroleum production tax and the credibility of a leading oil field services company and many of Alaska’s Republican lawmakers.

The U.S. Department of Justice announced indictments and arrests May 4 in Juneau of state Rep. Victor H. Kohring, R-Wasilla, and former state Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau, on multiple charges arising from a federal investigation into public corruption in Alaska begun in early 2006.

Kohring was first elected to the Alaska State House of Representatives in 1994; Weyhrauch, an attorney, was a member of the Alaska House from 2002 to January 2007; and Kott, was a member of the House from 1992 to 2007, including two years as speaker, according to Assistant Attorney General Alice S. Fisher of the Justice Department’s criminal division.

Bill J. Allen, chairman of Veco Corp. pleaded guilty May 7 in federal court in Anchorage to bribing at least four Alaska legislators, including former state Senate President Ben Stevens, who represented Anchorage in the Legislature.

In a plea bargain with the Justice Department’s Public Integrity Section, Allen and Rick Smith, Veco’s vice president for community and government affairs, pleaded guilty to three identical felony charges  bribery and two counts of conspiracy.

Both men accepted responsibility for more than $400,000 in illegal payments and benefits to public officials or their families. More than half the money went to Stevens in the form of phony “consulting” fees, the government charged.

Allen is a former welder who led Veco in 20 years from a small Kenai oil-field services company to a billion-dollar international contractor and a major political force.

Stevens, son of U.S. Sen. Ted Stevens, has not been charged. He was named in the plea documents as “State Senator B.”

In return for special consideration at sentencing, Allen, 70, and Smith, 62, agreed to cooperate in the ongoing federal investigation. The government also promised to not seek charges against Allen’s son Mark, a Veco official, his daughter Tammy Kerrigan, or any other relative.

The federal plea bargain doesn’t bar state prosecutors from seeking additional charges against Allen and Smith. Both men acknowledged violating state campaign finance laws.

The plea deals were formalized in secret and opened in U.S. District Court May 7.

Allen and Smith were released on $10,000 unsecured bond and ordered to report weekly to federal probation officers. No date has been set for sentencing. They face up to 10 years in prison and $750,000 each in fines, but cooperation could substantially reduce the penalties.

Extortion, bribery, conspiracy charges

A four-count indictment May 3 charges Kohring with extortion, bribery, attempted extortion and conspiracy. The indictment alleges that Kohring solicited and received financial benefits from an entity identified in the indictment as “Company A,” and that in exchange for those benefits, Kohring, in a series of meetings, corruptly solicited, demanded and accepted from the company’s CEO and a vice president cash payments including $2,100 to $2,600, and a $3,000 job for a relative, and also solicited, but did not receive, a $17,000 loan to pay credit card debt.
In return Kohring allegedly voted in favor of a legislative proposal called the “petroleum production tax,” or PPT, which would change taxation of Alaska oil production, supported by Company A; lobbied other elected officials to support versions of the PPT bill; and provided official support for the natural gas pipeline legislation and the PPT bill.

Kohring denied the charges May 7, saying he firmly believes a jury will exonerate him.

Alaska House leaders, meanwhile, stripped Kohring of his chairmanship of the House Oil and Gas Committee. However, he will continue to represent his district, unless he is proven guilty.

The grand jury also returned a seven-count indictment against Kott and Weyhrauch, charging them with conspiracy, extortion, bribery, and mail and wire fraud; and Weyhrauch with attempted extortion. The indictment alleges that Kott and Weyhrauch each corruptly solicited and/or received multiple financial benefits from Company A in exchange for each legislator’s agreement to perform official acts as a member of the Alaska Legislature to further the company’s business interests.

Further, Kott allegedly corruptly solicited, and the company agreed to provide, employment for Kott after he left the state Legislature, as well as other things of value. At a meeting in April 2006 with the company’s vice president and, via teleconference, the CEO, Kott said he had been successful in getting other state legislators to support the oil tax legislation favored by Company A, and that he believed the bill would pass. Kott allegedly said in a meeting with the company’s CEO and vice president on May 7, 2006, that he worked to kill an amendment to the PPT bill because Company A’s CEO told him to do so.

The indictment alleged that Kott said, “I had to get ‘er done. So I had to come back and face this man right here (pointing to the CEO). I had to cheat, steal, beg, borrow and lie.” In June 2006, Kott allegedly worked with Weyhrauch to seek an adjournment of a special session of the House before lawmakers could vote on an amendment to the PPT bill that the company did not support.

Alleged payoffs were modest

In return for these and other actions, Kott demanded and Company A  through the CEO and vice president  provided $8,993 in payments, $2,750 in expenses paid to a polling company that worked for Kott’s re-election campaign and a future contract for Kott as a lobbyist for the company. Weyhrauch allegedly solicited employment from Company A after he left the state House. Weyhrauch allegedly told the company’s executives that he would support their position on the PPT bill. After mistakenly voting the “wrong way” on an amendment that the company and representatives of three other oil companies did not support, Weyhrauch changed his vote on instructions from Kott and Company A’s CEO.

The indictment alleges that Weyhrauch, like Kott, voted in favor of versions of the PPT bill supported by Company A and the three other companies; lobbied other lawmakers for their support; and offered assistance to Company A and its executives by providing official support for the natural gas pipeline and the PPT bill.

“These two indictments allege that the defendants sold their offices in Alaska’s State House to an influential energy company in exchange for cash payments, loans, jobs for relatives and the promise of future employment,” Fisher said. “There is no room for bribery and extortion at any level of government  federal, state or local.”

If convicted, Kohring, Kott and Weyhrauch each face up to 35 years in prison and $750,000 fines on the extortion, bribery and conspiracy charges. Kott and Weyhrauch also each face up to another 20 years in prison and another $250,000 fine on the mail and wire fraud counts.

Influence-peddling in Juneau

In the indictments and arrests May 4, Veco, Allen and Smith showed up in documents as “Company A,” “Company CEO” and “Company VP.”

It appeared from those charges that the FBI used electronic surveillance of Veco’s suite in Juneau’s Baranof Hotel to capture incriminating dialogue and images. The indictments spoke of payments by Allen and Smith of several thousand dollars and promises of jobs to the legislators. In return, the legislators agreed last year to vote for the oil production tax favored by the oil industry, the government alleged.

Those indictments referred to an unnamed state senator who allegedly played a role in one part of the conspiracy  a plan by Veco to farm out legal work to Weyhrauch, an attorney, in return for his vote on oil legislation. The description of that unnamed senator was ambiguous  the younger Stevens, was one of three senators it could have been.

One of two unnamed state senators in the charges against Allen and Smith is apparently Stevens. The Veco “consulting” payments of $243,250 between 2002 and 2006 documented in the charges precisely match the amount Stevens reported on his financial disclosures as consulting income to his firm, Ben Stevens and Associates.

Over the years, Stevens has refused to disclose what work he did for that money or for any of the other consulting jobs he has listed, mostly for fishing industry clients.

Former state representative Ray Metcalfe, in complaints to the Alaska Public Offices Commission and to federal authorities, challenged Stevens, saying the payments were thinly disguised bribes.

Nothing came of Metcalfe’s APOC complaints  the state agency said that Stevens adequately described his work.

But in their admissions to federal prosecutors, Allen and Smith appeared to vindicate Metcalfe, who heads the Alaska Republican Moderate Party.

“Although Allen and Veco characterized these payments … as being for consulting services, Allen acknowledges that in actuality the payments … were in exchange for giving advice, lobbying colleagues, and taking official acts in matters before the Legislature,” prosecutors said.

Only once in five years, according to the prosecutors, did Stevens consult for Veco on a matter not involving his legislative job  a task involving a sunken boat at an unidentified location where Veco wanted to build a dock. Stevens worked less than 20 hours on that project, they said.

Allen also promised an executive job to Stevens when he left office. On June 25, 2006, Stevens said he’d take that job, the charges said.

Stevens denies wrongdoing

Stevens’s attorney, John Wolfe of Seattle, declined to respond to specifics in the charges, but said his client did nothing wrong.
“Ben Stevens denies engaging in any criminal conduct and maintains that he is innocent,” Wolfe said. “Mr. Stevens is surprised to learn that Bill Allen has pled guilty to various federal crimes and hopes that Mr. Allen is not falsely accusing former and current members of the Alaska Legislature in order to mitigate his admitted criminality.”

One other unnamed state senator, a “state elected official,” and two unnamed Veco executives also show up in the charging documents against Allen and Smith.

The senator in question was not accused of taking illegal payments but was listed as a member of the conspiracy to bribe and extort. That senator attempted to enlist the support for Veco-backed legislation of the “state elected official” through an illegal campaign contribution scheme.

Four state senators match the description of that person, two of whom had their offices searched by the FBI in August: John Cowdery, R-Anchorage, and Donald Olson, D-Nome.

The unnamed senator is likely Cowdery, said Kevin Fitzgerald, his defense attorney. As to what that means for Cowdery, Fitzgerald said he’s investigating the allegations laid out in the case against Allen.

Cowdery is in poor health. He’s been hospitalized in Juneau with pneumonia and a lung infection, Senate majority spokesman Jeff Turner said May 7.

The “state elected official” was impossible to identify from the information in the charges, and could be helping the government in the investigation.

Veco very active in Juneau

The two unnamed Veco executives were accused of participating in a scheme to use corporate money to reimburse political campaign contributions by Veco officials  crimes under federal and state law. Allen and Smith admitted violating federal tax laws by taking deductions for illegal activity.
Veco executives routinely donate to political campaigns, giving tens of thousands of dollars to candidates in last year’s primary races alone.

Allen, in his plea, admitted reimbursing Rep. Kott for a $1,000 donation Kott made in the governor’s race. The contribution wasn’t further described in the charges, but APOC records show that Kott donated $1,000 to former Gov. Frank Murkowski’s re-election bid. Other allegations by Allen and Smith include a May 7, 2006, incident when Kott was on the floor of the Alaska House and his cell phone rang. Allen and Smith were calling to give Kott “instructions on how to vote on the particular piece of legislation,” prosecutors said.

Some time later, Kott called them back with a report on the status of the vote “and the projected outcome,” the charges said.

Democratic legislators complained

Other lawmakers complained about the irregularities they personally observed involving Allen during the debate over the PPT.

On the last night of the special session last summer when the Legislature passed the production tax, Rep. Harry Crawford, D-Anchorage, said he saw lawmakers conferring with Allen “and then I saw Bill Allen passing a note across the rail to a lawmaker. … That’s not supposed to happen. Notes are supposed to come through the double doors and be passed through our pages,” Crawford told Petroleum News in October. “It’s been pretty rugged this last couple of sessions.”

A federal grand jury also indicted state Rep. Thomas T. Anderson, R-Anchorage, in December on unrelated charges of extortion, conspiracy, bribery and money-laundering for allegedly soliciting, receiving and scheming to disguise $26,000 in illegal payments from an FBI confidential source supposedly representing an Outside corrections company.

Business almost as usual at Veco

Veco, meanwhile, is continuing to conduct its business, the company said in a statement May 7.

Allen is listed as an owner of 5 percent of Veco’s stock in the company’s 2006 biennial report. But the company’s attorney in the criminal case, Amy Menard, said he no longer has an ownership interest.

Allen is also publisher of the Voice of Times, a half-page opinion section in the Anchorage Daily News. It is what remains of the Anchorage Times, which Allen owned for two years before he sold the newspaper to the Daily News in 1992.

The Voice of the Times will cease publication after 15 years when its contract expires this month, Daily News Publisher Mike Sexton announced May 9.

As to the status of Allen and Smith at Veco, they still held their titles on May 7, Menard said. But that could change.

“I can tell you that in light of today’s events, we expect the board of directors to be meeting this week and making decisions about appropriate actions,” Menard said.

Subsequently, Menard said Veco has hired an independent consultant to conduct an internal review of the company’s political and lobbying activities.

Leaders ‘sad’ and ‘surprised’

U.S. Sens. Lisa Murkowski and Ted Stevens and Gov. Sarah Palin initially expressed dismay at the indictments and arrests.
U.S. Rep. Don Young, R-Alaska, who counts Veco and its employees among his most generous campaign donors, has declined to comment, saying it is inappropriate.

Murkowski described the situation as “truly a troubled time in our state’s history,” and said May 7 that she hoped the Legislature can overcome the challenge and move the state forward in “considering one of the most critical issues for our future,” presumably the natural gas pipeline.

Stevens, a personal friend of Allen’s, said in a statement May 7 that he “was surprised and saddened” to learn of indictments and arrests.

“Like many Alaskans, I am finding out about these events from the media. The legal process will now continue. Consistent with my longstanding practice regarding matters of this sort, I will make no further comment,” he said.

Stevens also revealed May 8 that he has dropped his support for a controversial salmon marketing program, with ties to the younger Stevens that came under scrutiny last year in a federal investigation.

Palin said the scandal has strengthened her resolve to correct the apparently wayward path Alaska’s government has taken in recent years.

“We are committed to doing it right and building the faith of this state,” she said May 4.

“… That is why we are so firm on a fair and open process on Alaska Gas Inducement Act,” she said.

AGIA is legislation aimed at getting a pipeline built that Palin hopes will eventually ship trillions of cubic feet of North Slope gas to market.

She said state lawmakers should move forward as time is running short on a session scheduled to end May 16.

“This shouldn’t be used as an excuse to paralyze the discussion under way now on the merits of AGIA,” she said. “That’s unacceptable.”

Palin wants review of PPT

As more details of the federal investigation emerged May 7, Palin called for more answers and accountability.
“I want to know if there was undue influence on lawmakers, decision makers and administrators to the detriment of not only the process but the product that the Legislature ultimately adopted,” she said. “What we need to do is retrace steps and revisit all of this and allow for a fair debate without that undue influence.”

Palin has asked Attorney General Talis J. Colberg and Revenue Commissioner Pat Galvin to conduct an informal review of the process leading to adoption of the PPT, a spokeswoman said May 8.

“That economic analysis is expected to take at least a couple of months,” said Meghan Stapleton, Palin’s press secretary. “She is open to the idea of a special session to discuss the PPT.”

Dems push ethics reform

A group of Democratic legislators, including Rep. Les Gara, D-Anchorage, called May 8 for a special session of the Legislature to review the PPT. State lawmakers need to “to fix the oil tax that passed last year,” and to close loopholes in the law that allow $5 billion in oil company tax giveaways, Gara said May 9.
Democratic lawmakers say they have been trying for years to clean up lax provisions of Alaska’s ethics and campaign finance laws. Bills that would make it a crime, for example, to promise legislators campaign contributions if they change their votes have been blocked from passage by the Republican-led Legislature for the past three years, they said.

However, an ethics reform package was expected to pass the Alaska Senate by May 11, and will then return to the House for concurrence, Democratic lawmakers said May 8.

Meanwhile, major oil industry customers of Veco said May 7 that they plan to continue employing the company in Alaska’s oil fields in the short term and are encouraged by the company’s promise to conduct an internal review of its government-related practices.

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Fairbanks News Miner
May 12, 2007

http://newsminer.com/2007/05/12/6972

Congress questions BP memo
By Eric Lidji
Staff Writer
Published May 12, 2007

Congressional leaders want to know why BP is redacting part of an internal report indicating “budget pressure” lead the oil company to discontinue corrosion prevention programs at Prudhoe Bay.

The March report examined the causes of two leaks at Prudhoe Bay last year, including how management decisions contributed to the incidents, and concluded at one point that the oil company decide not to run smart pigs through North Slope pipelines in order to save money.

Smart pigging is used to monitor corrosion in the walls of a pipeline.

Bob Malone, Chairman and President of BP America Inc., is set to testify on Wednesday before a House subcommittee amid growing congressional concern that cost-cutting on the North Slope led to a large oil spill last March and a partial shutdown of the trans-Alaska oil pipeline last August.

The hearing had originally been scheduled for earlier in the month, but committee leaders gave BP more time to prepare testimony after documents and e-mails surfaced suggesting cost-cutting at BP kept the company from adequately protecting several pipelines at Prudhoe Bay from corrosion.

BP officials had previously denied any role cost-cutting might have played in the leak or the partial shutdown.

“Your own report clearly contradicts this assertion,” U.S. Rep. John Dingell, D-Mich., who chairs the House Energy and Commerce Committee, and Rep. Bart Stupak, D-Mich., chairman of the subcommittee on oversight and investigations, wrote in a letter to Malone on Friday.

In meetings with congressional staff, BP officials said they planned to remove lines from the report reading, “Budget pressure eventually led to de-scoping some projects and deferring others. For example, the plan to run a smart pig in the [Oil Transit Lines] was dropped in 2004 and 2005.”

BP commissioned the report from the consulting firm Booz Allen Hamilton. The report has not been released to the public.

The Dingell/Stupak letter included several pages of e-mails from January and February 2003 between BP employees requesting maintenance on some of the North Slope facilities that later failed.

The e-mails suggest ConocoPhillips and Exxon Mobil Corp., who share the Prudhoe Bay lease with BP, rejected funding for a $2.5 million pig facility at Prudhoe Bay.

“This document suggests that BP planned to pig the very lines that ultimately failed,” the letter said.

BP spokesman Ronnie Chappell said the company would not talk about the letter prior to the hearing, but had been cooperative in providing information to the subcommittee.

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

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http://newsminer.com/2007/05/12/6971

Irwin on hand to watch Senate vote on gas line bill
By Stefan Milkowski
Staff Writer
Published May 12, 2007

JUNEAU  When the state Senate took up Gov. Sarah Palin’s natural gas pipeline legislation Friday, Sen. Gary Wilken of Fairbanks penned a note to Natural Resources Commissioner Tom Irwin, who came to watch the floor vote.

The essence of the note, Wilken said later, was the gulf between Friday and last year. A year ago Thursday, then-Gov. Frank Murkowski rolled out a draft fiscal contract  hundreds of pages long  for a natural gas pipeline project with the three major North Slope producers.

Six months before, Irwin had resigned as Murkowski’s natural resources commissioner after questioning the governor’s approach, and six months later, Murkowski’s deal was shelved when Palin was elected.

“I just sat there and marveled how far we’ve come in a year,” Wilken said.

Local lawmakers on Friday described the passage of Palin’s Alaska Gasline Inducement Act as a major step forward for the state, but not one without risks.

Senate Minority Leader Gene Therriault, a North Pole Republican and key player in last year’s gas line debate, said the five-member Republican minority, which also includes Wilken, was pretty much on board with the legislation since it was introduced in March. Some lawmakers had reservations, he said, but didn’t really have a better idea to offer.

Therriault himself said he was “fairly confident” the bill would work.

“I believe we’ll get proposals,” he said.

Rep. David Guttenberg, a Fairbanks Democrat, shared Therriault’s optimism.

“It gets us closer to getting a pipeline,” he said. “The state’s taking back control of its resources.”

Guttenberg said he expected proposals from two independent companies and a consortium of companies.

Criticism of Palin’s bill was always subdued, but it nearly vanished Friday, when even critics offered kind words and all but one lawmaker voted for the House and Senate versions of the bill.

Local lawmakers attributed the near lack of dissent to Palin’s firm stance.

“She and her team played the game well,” said Guttenberg. “They stood their ground, they got what they wanted.”

Therriault and Wilken both pointed to Palin’s threat this week to veto her own bill if lawmakers removed the “must-have” requirements imposed on pipeline builders, or made them optional. Therriault said he thought the real support for the bill was more than half of each body but less than the near-unanimous vote counts indicated.

Rep. John Coghill, a North Pole Republican, offered another view. He described the broad support as a “vote of confidence” in the governor big enough to overshadow lawmakers’ concerns about the bill.

“Most of us hope that it works but think that it should have been more flexible,” he said. “I guess the question is, ‘Did we get it right?’”

Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.

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Houston Chronicle
May 12, 2007

http://www.chron.com/disp/story.mpl/business/energy/4798141.html

BP takes back part of report
Letter says budget statement may be yanked
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau

WASHINGTON  BP is withdrawing part of a report that suggested cost-cutting may have played a role in the company's pipeline troubles in Alaska's Prudhoe Bay last summer, a House panel revealed Friday.

A March report, commissioned by BP and prepared by Booz Allen Hamilton, examined why the oil giant failed to detect corrosion problems that caused leaks in two major transit lines  a lapse that forced BP to shut down part of Prudhoe Bay and sent oil prices skyward.

The report said that "budget pressure" led to deferring of some projects.

It said a plan to run a "smart pig," a device used to test the thickness of a pipeline wall to check for possible corrosion, through an oil transit line "was dropped in 2004 and 2005."

In a letter to Robert Malone, president of Houston-based BP America Friday, officials from the House Energy and Commerce Committee said that statement might be removed from the report "since BP believes this to be in error."

Committee Chairman John Dingell, and Rep. Bart Stupak, both D-Mich., head of the Oversight and Investigations Subcommittee, told Malone they want a full explanation as to why BP and the report's authors believe that information was inaccurate. Malone is scheduled to appear before the subcommittee Wednesday.

BP spokesman Ronnie Chappell declined to comment Friday. "We're cooperating with the committee, doing what we can to provide them with what they've asked for," Chappell said. "We look forward to answering questions from the subcommittee on Wednesday."

david.ivanovich@chron.com

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Wall Street Journal
May 12, 2007

House Committee Probes Possibility
Of BP Cost Cuts Behind Oil Spill
By JIM CARLTON
May 11, 2007 8:36 p.m.

House investigators looking into two spills that ended up shutting down Alaska's Prudhoe Bay oil field last year have sent a letter to the field's operator, BP PLC, asking for more explanation of a finding in a consultant's report that the incidents were preceded by budget cuts to maintenance and inspection of pipelines.

The letter was sent Friday by officials of the House Committee on Energy and Commerce, who are set to begin another hearing next Wednesday into why the spills happened. Although officials have found corrosion led to a spill of about 200,000 gallons of crude from a pipe in March 2006, and a smaller spill from another line in August, the House investigators are looking into whether cost cuts made the lines more prone to rupture.

The Prudhoe Bay field was temporarily shut down by BP after tests by the company following the second spill showed widespread corrosion problems in other pipelines in the vicinity. Production resumed after the lines were replaced.

One of the consultants hired by BP to help it investigate the incidents was Booz Allen Hamilton, a McLean, Va.-based firm whose March 2007 report on file with the House committee suggests: "Budget pressure eventually led to de-scoping some projects and deferring others. For example, the plan to run a "smart pig" in the OTL (oil transit lines, which were the ones that ruptured) was dropped in 2004 and 2005. A smart pig is a device that runs through a pipeline, taking measurements to see if the line suffers from corrosion or other defects.

In their letter to Robert Malone, chairman and president of BP's BP America Inc. unit, John Dingell, chairman of the House energy committee, and Bart Stupak, chairman of its subcommittee on oversight and investigations, said the finding contradicts BP's previously-stated assertion that failure to pig these lines was not a function of any budget pressure.

The congressmen also noted that BP has asked that the reference to cost cutting be removed from the Booz Allen report, calling it "in error." "If the sentence is removed, we would appreciate a full explanation as to why BP and the report's authors believe the sentence to be inaccurate," said the two Michigan Democrats in their letter.

The congressmen also disclosed in the letter that they had recently uncovered a Feb. 5, 2003, email from BP which they say suggests the company planned to pig the very lines that failed. However, they said, those plans appear to have been nixed by superiors. The email contains an "Authorization for Expenditure" that the congressmen said appears to be a proposal to "install permanent pig launching and receiving facilities" in several places, including transit lines where the spills later took place. But the expense request appears to have been turned down, they added, since it included a notation: "rejected...for approval."

BP officials declined comment, saying those were "matters of interest" at Wednesday's hearing. Booz Allen officials weren't immediately available.

Cost cutting has also been brought up as a possible link to a March 2005 explosion at a BP refinery in Texas City, Texas. BP officials have said they believe budgetary decisions didn't play a critical role in the accident, which killed 15 people and injured 180.

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

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US Lawmakers Probe BP On Prudhoe Bay Report Ahead Of Hearing
DOW JONES NEWSWIRES
May 11, 2007 6:33 p.m.
By Ian Talley
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Congressional lawmakers on Friday asked BP PLC (BP) to explain why it wants to remove language from a report on last year's Alaskan Prudhoe Bay shutdown which may reveal that budget pressures led the company to put off pipeline maintenance that may have prevented the fiasco.

Earlier this week, BP officials told House Energy and Commerce Committee aides in a meeting the company planned to edit a BP-commissioned Booz Allen Hamilton report on the shutdown, which temporarily halted operations at one of the country's largest producing oil fields.

The meeting was to prepare for a hearing scheduled on Wednesday, when members of the Energy and Commerce Subcommittee on Oversight and Investigations are expected to grill the head of BP USA, Robert Malone, on the cause of the shutdown. Last year, BP faced a barrage of criticism and questioning from Senate and House panels investigating the incident, but lawmakers said they were dissatisfied with BP's answers and wanted more information.

House Energy and Commerce Chairman John Dingell, D-Michigan, asked BP in a letter to explain why it's seeking to edit a section that said: "Budget pressure eventually led to de-scoping some projects and deferring others," including key maintenance that investigators later said could have prevented the pipeline leaks. In particular, the company failed to "pig" its oil transit lines, allowing bacteria known to cause severe metal corrosion to build up inside the pipes. A pipeline "pig" is a cylindrical droid that sweeps the pipe's interior.

BP commissioned the Booz Allen Hamilton report to examine last year's two oil leak incidents on the Prudhoe Bay Oil Transit Lines - one of which led to the shutdown - and to identify organizational, process, management, and governance issues that may have contributed to the leaks.

"The Committee is very interested in finding out why the (oil transit) lines were not pigged with greater frequency, given that BP has maintained that the failure to pig these lines was not a function of budget pressure or resources. Your own report clearly contradicts this assertion," Dingellwrote in a letter to BP.

Budget cuts were also said to be a prime cause of BP's 2005 Texas City refinery explosion that killed 15 people, according to a Chemical Safety and Hazard Investigation Board probe.

Dingell'sletter also queried BP about an email that showed a request for maintenance at one of the pipelines was rejected, causing a major leak.

The request stated: "Maintenance pigging is required to optimize existing corrosion control programs...(and) will also eliminate flow restrictions present from sediment and fouling within the pipelines. Intelligent pigging is required to provide a full evaluation of current pipeline condition to ensure pipeline integrity and meet regulatory requirements."

BP spokesman Ronnie Chappell declined comment for now. "We're not going to be commenting on matters of interest to the subcommittee until after the hearing," Chappell said. He added that BP would continue to cooperate with committee staff and requests for information.

 -By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com;

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Alaska Legislature OKs Bill Clearing Way For Gas Pipeline
DOW JONES NEWSWIRES
May 11, 2007 4:49 p.m.

JUNEAU, Alaska (AP)--Both houses of the Alaska Legislature Friday approved bills outlining how companies can bid to build a multibillion-dollar natural gas project.

The bill, called the Alaska Gasline Inducement Act or AGIA, will now go to a committee to work out differences in the House and Senate versions.

Under AGIA, producers and independent pipeline companies can vie for rights to build the pipeline that lawmakers hope will ship trillions of cubic feet of North Slope natural gas to market.

The bill is designed to stimulate competition through inducements, but also stipulates requirements that BP PLC (BP), Exxon Mobil Corp. (XOM) and ConocoPhillips (COP) opposed.

The three major oil companies had warned they would not submit a bid unless stringent requirements were removed.


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Regulator Recommended Fine On BP West Texas Pipeline - Filing
DOW JONES NEWSWIRES
May 11, 2007 12:47 p.m.

 LONDON (Dow Jones)--A U.S. regulator recommended in February that BP PLC (BP) be fined $168,000 for apparent violations of anti-corrosion measures at a Texas pipeline system, which the U.K. oil firm is in the process of divesting, according to a filing on the watchdog's Web site.

The proposed penalty is a tiny amount compared to BP's $22 billion net profit for 2006. But, taken in conjunction with the fatal refinery explosion at a company facility also in Texas in 2005, and separate corrosion issues at an Alaska pipeline, it is another indication of the extent of operational issues new Chief Executive Tony Hayward will have to address.

Two weeks ago, BP agreed to divest the pipeline on which the fine has been recommended, the West Texas Pipeline System, to Occidental Petroleum Corp. (OXY).

In a notice of probable violation dated Feb. 13, the Pipeline and Hazardous Materials Safety Administration said inspections in 2004 and 2005 revealed a series of "probable" violations, including lack of protection against vandalism and insufficient monitoring of corrosion risks.

The regulator mentioned "coating that was failing or had failed and was leaving the pipe or tank top susceptible to external corrosion," adding that the components' "integrity could be compromised" as a result.

The notice also included a compliance order asking BP to correct the issues and to submit to the regulator details of the spending made to resolve the problem.

Asked if the regulatory issues had been a factor in the decision to sell the pipeline, a BP spokeswoman said it was not "a fire sale" and the sale was part of a strategy to divest non-core assets.

A BP spokesman said he didn't know the status of the proposed penalty but added that it had been "disclosed to the buyer." Asked if Occidental may have to pay the fine, a spokesman for the U.S. oil company said: "The issues you raised are not the responsibility of (Occidental) and should be addressed to BP."

The Pipeline and Hazardous Materials Safety Administration didn't return a call from Dow Jones Newswires Friday.

The 2,300-mile-long West Texas Pipeline System extends from the Permian oil production basin in West Texas and New Mexico to a market center in Cushing, Oklahoma, and has the capacity to transport 191,000 barrels per day of crude oil.

The proposed penalty also concerns the East System pipeline in Oklahoma and a Seaway Products System in Oklahoma and Texas, but the BP spokesman couldn't say if these were among the facilities divested to Occidental.

Hayward stepped in at the helm of BP last week after his predecessor, John Browne, resigned after losing a court injunction to stop publication of a story about his private life. The new chief executive held his first board meeting in Washington Thursday, another BP spokesman said.

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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Financial Times
May 12, 2007

http://www.ft.com/cms/s/660067a0-0018-11dc-8c98-000b5df10621.html

Congress takes BP to task over Alaska report
By Sheila McNulty in Houston
Published: May 12 2007 01:24 |
Last updated: May 12 2007 01:24

US congressional investigators questioned on Friday why BP sought to cut from an internal report a charge that budget pressures forced a rollback on anti-corrosion efforts in Alaska.

Bart Stupak, chairman of a House energy investigative subcommittee, asked BP to provide a full explanation for plans to remove the charge and provide supporting documents.

BP was forced in 2006 to shut half its Alaskan oilfield after a big spill and the discovery of “severe corrosion’’ in its oil transit lines.

The committee is investigating the corrosion following a string of safety lapses in BP’s US operations.

A recent Booz Allen Hamilton report commissioned by BP said: “Budget pressure eventually led to de-scoping some projects and deferring others.’’ It noted, for example, that plans to run a “smart pig’’  a machine that runs through a pipeline to detect corrosion  was cancelled in 2004 and 2005.

Mr Stupak, in a letter to Bob Malone, BP America president, noted that on May 9, BP staff told the committee investigators there would be a substantive correction to the March 2007 Booz Allen report.

The committee is to hold a hearing on BP’s Alaska operations on Wednesday.

Ahead of that meeting, the committee noted, BP had provided it with a 2003 BP e-mail, which noted that an authorisation for anti-corrosion expenditures was “rejected by partners for approval”.

“This document suggests that BP planned to pig the very lines that ultimately failed,’” Mr Stupak said.

He said his committee had worked with BP to understand what happened in BP’s Alaska operations ahead of the field closure but “is not satisfied with BP’s explanation.’’

Mr Stupak called on BP to explain before the hearing why it believed the sentence on budgetary pressures in the Booz Allen report was in error and provide all supporting materials.

BP declined to comment on Mr Stupak’s letter.
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Wall Street Journal
May 11, 2007

Lawyers Ask Alaska Court To Take Heed Of BP Ex-CEO's 'Lie'
DOW JONES NEWSWIRES
May 11, 2007 7:30 a.m.
 (This article was originally published Thursday)
 
 LONDON (Dow Jones)--Attorneys for shareholders suing BP PLC's (BP) executives and board members have asked an Alaska court to take heed of former BP Chief Executive John Browne's false statement under oath in a separate case in the U.K.

Browne resigned May 1 after making a false statement to a U.K. court on how he had met his former partner. The entering of the U.K. court proceedings into the Alaska court record show that what Browne called his "untruth" could have implications in other court cases involving former and current executives of the U.K.-headquartered international oil company. Patrick Daniels, a lawyer with Lerach Coughlin Stoia Geller Rudman & Robbins LLP, lead counsel for the plaintiffs in the U.S. shareholder lawsuit, said in an interview that Browne's U.K. court proceedings had been entered into the Alaska court record.

A "notice of recent events," dated on the day Browne resigned, says: "This (U.S.) court too should take heed of the English judge's admonishments not to take Browne's defenses 'at face value.'" The document, filed to the court in Anchorage, cites U.K. Judge David Eady as saying Browne's "white lie" undermined his "credibility."

Eady decided not to recommend perjury charges to the U.K. attorney general. But Peter Wright, editor of the Mail on Sunday, reiterated Thursday that the newspaper intends to provide evidence of the false statement to U.K. judicial authorities. The Mail's request to publish a story involving Browne's former partner triggered the U.K. court action. Browne has publicly apologized for his "untruths."

John Warden, a lawyer with Sullivan & Cromwell LLP which represents Browne in the case, said he wouldn't comment on the U.K. proceedings and said the U.S. lawsuit "has nothing to do with (Browne's) personal life."

He referred to a response filed with the Alaska court on May 7, by his firm and another attorney for the defense, Feldman Orlansky & Sanders. The document says that "plaintiffs' attempt to present Browne's recent personal problems - including a single false statement made from embarrassment and then rectracted - as bearing on the motions before the court is an act of desesperation."

In October, two BP shareholders, the London Pensions Fund Authority, or LPFA, and the U.S. retirement fund of Unite Here sued Browne and other BP executives and board members in an Anchorage, Alaska, court, alleging their mismanagement had damaged the company. The claim stems from a deadly Texas City, Texas, refinery blast in 2005 and a partial shutdown of an Alaska pipeline last year.

In February, attorneys for the plaintiffs filed a motion asking the Alaska court to freeze Browne's current retirement package and other compensation and are awaiting a decision on the matter. Attorneys for the plaintiffs are seeking a freeze as a first step in attempting to require BP to reassess Browne's retirement package.

But in their response, defense attorneys said "Browne's resignation and loss of his severance package lends additional support for denial of the motion."

Daniels, one of the plaintiff's lawyers, said he believes that Browne's admission that he made a false statement under oath "is a major factor that undermines his credibility and the company's earlier statements, to the extent they came from him."

A BP spokesman declined to comment on the grounds that the case is ongoing, and Browne's spokespeople didn't return calls.

Daniels said the lie is "yet another blow to BP" and, added to the Texas and Alaska incidents, "undermine his credibility and the company's defense of his actions and policies."

The "notice of recent events" filed with the Alaska court also included April 30 congressional records regarding cost-cutting measures in Alaska, underscoring how plaintiffs suing BP executives may attempt to gain new ammunition as more information is disclosed about the company's management during Browne's tenure.

The Alaska court conducted a hearing April 24 on the plaintiffs' motion to freeze Browne's retirement pay, and Daniels said a decision by a judge was expected "any day."

Daniels said Browne, whose testimony was sought in lawsuits by victims of the Texas refinery explosion, would also be asked by plaintiffs to appear in the Alaska court for the shareholders' lawsuit.

"We will be seeking sworn testimonies from Browne, who now has lots of free time, and other executives," Daniels said.

But Warden said defense attorneys had moved to dismiss the case and that the Alaska case "is not at the stage of trial and it may never be."

About new BP CEO Tony Hayward, Daniels said: "I reserve my judgment on Hayward. The market's reaction indicates he is starting to confront the problems, and cleaning the house."

The issue of lying in court also appears to have impacted Browne's future beyond BP. Browne resigned Thursday from his board-member position at Goldman Sachs Group Inc. (GS). A person familiar with the resignation said he voluntarily offered to leave and that the departure was directly linked to the false statement.
 
   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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CNN. Com
May 9, 2007

http://money.cnn.com/2007/05/09/news/international/bc.bp.alaska.reut/?postversion=2007050917

BP blames execs, cost cuts for oil spills
The oil company is said to have issued two reports on the cause of one of the worst onshore spills in Alaska, echoing investigation into Texas refinery explosion.
May 9 2007: 5:01 PM EDT

NEW YORK (Reuters) -- Two reports on the cause of one of Alaska's worst onshore oil spills, commissioned by BP Plc, blame the oil company's cost cutting and management culture for the accident, people familiar with the reports said.

The reports come after a U.S. congressional committee said documents turned over by BP suggest "draconian" cost cutting at the British company's Alaska operations led to the March 2006 rupture of a corroded oil pipeline at Prudhoe Bay, spilling at least 200,000 gallons of crude oil onto the Arctic tundra.

In March 2006, at least 200,000 gallons of crude oil spilled onto the Arctic tundra after the rupture of a corroded oil pipeline at Prudhoe Bay, Alaska.
Video More video
 
"The reports speak to the fact that top-down cost cutting was going on without any risk analysis," said a congressional aide familiar with the documents.

The reports, along with BP (Charts) documents and e-mails describing cost-cutting scenarios in Alaska, are expected to be the focus of a congressional hearing set for next Wednesday.

"We don't plan to release the report until we've had an opportunity to meet the members of the committee and discuss their contents with them," said BP spokesman Ronnie Chappell.

Cost cutting

Sources said the two reports echo a government report and a separate internal BP probe into a 2005 fatal explosion at BP's refinery in Texas City, Texas, and support those who reject BP's claim that Texas City and Alaska were isolated incidents and not symptoms of bigger problems within the company.

Both reports cited BP's cost-cutting culture and focus on profits as instrumental in the Texas blast, which killed 15 workers and injured 170 others.

"It looks really similar to Texas City," said a source who has seen copies of the Alaska reports and the Texas City studies.

"There are a lot of the same types of spreadsheets with the same stuff, the same kind of e-mails."

One study, prepared by CC Technologies, an engineering firm specializing in pipeline corrosion control, said BP's maintenance practices, particularly its failure regularly to flush out sediment inside the transit pipeline at the Prudhoe Bay oil field, allowed corrosive bacteria, which caused the spill, to thrive, a BP Alaska spokesman confirmed.

"The sediment was certainly a contributing factor, as well as the slow flow of oil through the pipe," BP spokesman Daren Beaudo said.

CEO at BP steps down

The sediment in the pipeline shielded the bacteria from corrosion-preventing chemicals injected by BP into the pipeline and also allowed water spilled into the pipeline during plant upsets to accumulate, the report said.

BP had not used a device called a pig to clean the inside of the transit pipeline since 1998, a practice criticized by federal regulators as differing from industry standards.

Alaska state records show BP had known for years that sediment was building up in the pipelines.

The second report, an examination of BP's U.S. management by consulting firm Booz Allen Hamilton, said deep cost cuts imposed after BP bought U.S. rivals Amoco and ARCO damaged operational oversight, leading to a poor understanding of the risks created by the cuts and directly contributing to a complacent attitude toward corrosion in Alaska, several people who had seen the report said.

"It is pretty comprehensive. It recommends a lot of changes to the way BP manages its business here and the way it thinks about risks," one source said.

BP already has begun overhauling its U.S. management structure to improve operational controls. The new BP America chief executive, Bob Malone, has more authority over operations, and he has appointed managers who are to ensure operating units comply with BP's corporate policies.

The company has also recruited a Royal Dutch Shell (Charts) refinery manager to run Texas City as well as replacing several top officials at BP Alaska, including the unit's chief executive and the head of the Prudhoe Bay field.

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Anchorage Daily News
May 9, 2007

http://www.adn.com/news/politics/fbi/story/8868045p-8768681c.html

Here is the text of Rep. Vic Kohring's federal indictment
Published: May 9, 2007
Last Modified: May 9, 2007 at 04:51 AM

INDICTMENT

The GRAND JURY charges that:

COUNT ONE
CONSPIRACY TO COMMIT
EXTORTION AND ATTEMPTED
EXTORTION UNDER COLOR OF OFFICIAL RIGHT AND BRIBERY
(18 U.S.C. 371)
INTRODUCTION
At all times material to this Indictment:

1. VICTOR H. KOHRING ("KOHRING") was an elected member of the Alaska House of Representatives, having been first elected in 1994. KOHRING represented District 14, located in Wasilla and the Matanuska-Susitna Valley, northeast of Anchorage. He was reelected to the House in November 2006. Since in or about 2003, KOHRING has been Chair of the House Special Committee on Oil and Gas.

2. A company known to the grand jury but unnamed (hereinafter referred to as "COMPANY A") was a privately held company that was incorporated in a State other than the State of Alaska. COMPANY A was a multinational corporation that provided services to the energy, resource, and process industries and to the public sector. COMPANY A was comprised of multiple subsidiary companies and, collectively, COMPANY A was engaged in interstate commerce in connection with the foregoing projects.

3. At various times, the Alaska State Legislature had issues and matters under consideration that had a business impact on COMPANY A. Therefore, COMPANY A and its principals took an active interest in the Alaska State Legislature's consideration of those issues and matters.

4. "COMPANY CEO" was the Chief Executive Officer and principal owner of COMPANY A.

5. "COMPANY VP" was the Vice President of Community and Government Affairs of COMPANY A.

ALASKA'S INTRA-STATE NATURAL
GAS PIPELINE PROPOSAL

6. Beginning in or around 2005, the State of Alaska was involved in negotiations with representatives of three oil companies (collectively, the "oil producers") concerning the construction of a natural gas pipeline from Alaska's North Slope. The agreement to build the proposed gas pipeline must ultimately be approved by the Alaska State Legislature.

7. The construction of the gas pipeline was important to COMPANY A. COMPANY A was primarily an oil field services company, and a significant source of COMPANY A's income was derived from contracts with the oil producers in Alaska.

8. On or about February 21, 2006, the Governor of the State of Alaska (hereinafter "Governor") announced that the state had reached an agreement with the primary oil producers regarding the construction of a gas pipeline. The terms of the agreement concerning construction of the pipeline were not announced or released at that time. Instead, the Governor announced that the agreement with the oil producers included a provision that addressed a significant change to the manner in which the State of Alaska taxes oil production. If the Alaska State Legislature did not approve the proposed change in the manner in which oil production was taxed by the state, then the agreement concerning construction of the gas pipeline would not take effect.

9. Shortly after that announcement, the Governor's administration proposed legislation relating to the negotiated change in the taxation of oil production. The newly proposed tax system -- referred to as a "petroleum production tax" or "PPT" -- would be based upon a percentage of the producer's net profits, or revenues minus capital and operating expenditures. Under the proposed system agreed to by the state, the producers would pay a 20 percent tax rate and receive a 20 percent tradable tax credit. The negotiated tax formula -- referred to generally as the "20/20" PPT tax rate -- was the subject of much debate throughout the 2006 regular and special sessions of the Alaska State Legislature.

THE CONSPIRACY AND ITS
OBJECTS

10. From in or about January 2006 and continuing until in or about August 2006, in the District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING, an elected public official of the Alaska State Legislature, together with COMPANY CEO, COMPANY VP, and others both known and unknown to the grand jury, did knowingly and willfully combine, conspire, confederate, and agree together and with each other:

(A) to obstruct, delay, and affect in any way and degree commerce and the movement of any article and commodity in commerce by extortion, that is, to unlawfully obtain or attempt to obtain under color of official right money or other property from COMPANY A, COMPANY CEO, and COMPANY VP with their consent for KOHRING not due KOHRING or his office in agreement for the performance of official acts, in violation of Title 18, United States Code, Section 1951(a); and

(B) to corruptly solicit and demand for the benefit of any person, and accept and agree to accept, anything of value from any person for KOHRING while an agent for the State of Alaska, an entity that received more than $10,000 in federal funding during the calendar year 2006, with the intent that KOHRING would be influenced and rewarded in connection with any business, transaction or series of transactions of $5,000 or more of the State of Alaska, in violation of Title 18, United States Code, Section 666(a)(1)(B).

11. It was an object of the conspiracy for KOHRING to receive and attempt to receive money and other things of value in exchange for agreeing to perform, and ultimately performing and attempting to perform, official acts as a member of the Alaska State Legislature for the purpose of enriching himself and his family members.

12. It was a further object of the conspiracy for KOHRING to enrich COMPANY CEO, COMPANY VP, and COMPANY A and advance the business interests of COMPANY A within the State of Alaska by agreeing to perform, and ultimately performing and attempting to perform, official acts as a member of the Alaska State Legislature that would benefit COMPANY A and its clients.

13. It was a further object of the conspiracy to conceal from the State of Alaska and its citizens the true nature and source of the monetary payments and other financial benefits that KOHRING received and attempted to receive from COMPANY CEO, COMPANY VP, and COMPANY A, in exchange for KOHRING's agreement to perform, and eventual performance and attempted performance of, official acts as a member of the Alaska State Legislature that would benefit COMPANY A and its clients.

MANNER AND MEANS OF THE CONSPIRACY

14. KOHRING and his co-conspirators executed the conspiracy by agreeing to provide KOHRING with money and other things of value, including, without limitation, a job with COMPANY A for one of KOHRING's relatives, in return for KOHRING taking official acts as directed by executives of COMPANY A. KOHRING received and attempted to receive these cash payments and other things of value through meetings with COMPANY CEO and COMPANY VP in, among other places, Suite 604 of the Westmark Baranof Juneau Hotel ("Suite 604"), and through numerous telephone calls with COMPANY VP.

15 In return for the money and other things of value that KOHRING received and attempted to receive for himself and his family, KOHRING agreed to perform, attempted to perform, and actually performed official acts as a member of the Alaska State Legislature that benefitted COMPANY CEO, COMPANY VP, and COMPANY A and its clients. Among other things and without limitation, KOHRING performed the following acts to execute the conspiratorial agreement: (1) voting in favor of versions of the PPT bill supported by COMPANY CEO, COMPANY VP, COMPANY A, and the oil producers; (2) lobbying other elected public officials to support versions of PPT bill that COMPANY CEO, COMPANY VP, COMPANY A, and the oil producers favored; and (3) repeatedly offering to assist and help COMPANY CEO, COMPANY VP, and COMPANY A by providing official support for the natural gas pipeline legislation and the PPT bill.

OVERT ACTS

16. In furtherance of the conspiracy, and to effect its objects, the co-conspirators committed the following overt acts, among others, in the District of Alaska and elsewhere:

17. Between in or about January 2006 and in or about August 2006, KOHRING received approximately $500 in cash from COMPANY CEO while walking with COMPANY CEO from a Juneau restaurant to Suite 604.

18. On or about January 28, 2006, KOHRING told COMPANY VP during a telephone conversation that he was standing by "willing to help if there's any issues that come along. ..." KOHRING then asked COMPANY VP if there were any legislative issues that were of a concern to COMPANY VP and of which KOHRING should be aware.

19. On or about January 28, 2006, during the same telephone conversation and after KOHRING asked about COMPANY VP's legislative concerns, COMPANY VP told KOHRING that COMPANY A was closely monitoring the PPT bill and the gas pipeline legislation, that a "big part of (COMPANY A's) future (was) sitting on these issues," and that COMPANY A did not want to "kill the goose." KOHRING agreed with COMPANY VP that the PPT bill and the gas pipeline legislation, if passed, would end up being the centerpiece of Alaska's economy.

20. On or about January 28, 2006, during the same telephone conversation, KOHRING told COMPANY VP that he should contact KOHRING for any need or issue upon which KOHRING could provide assistance.

21. On or about February 21, 2006, during a telephone conversation with COMPANY VP and after COMPANY VP warned KOHRING not to use the PPT tax bill as an opportunity "to go crazy" or "wacko" by asserting an extreme anti-tax position, KOHRING told COMPANY VP that he would "reluctantly go along" with the 20/20 PPT tax rate, but only if that rate was "amenable" to COMPANY A and the oil producers. KOHRING further stated that he did not want to "screw you guys over nothing" and "hurt you guys."

22. On or about February 21, 2006, during the same telephone conversation with COMPANY VP and after COMPANY VP told KOHRING that the gas pipeline was "critical to (COMPANY A's) equation," KOHRING told COMPANY VP that he was willing to help COMPANY A "in terms of uh, any questions that need to be asked, any information that needs to be sought out, any points to make in caucus, or in committee meetings, on radio columns. ..."

23. On or about February 23, 2006, during a dinner meeting attended by COMPANY CEO, COMPANY VP, and KOHRING, KOHRING received approximately $1,000 in cash from COMPANY CEO.

24. On or about March 1, 2006, in a telephone conversation a week after having accepted $1,000 in cash from COMPANY CEO, KOHRING asked COMPANY VP to contact KOHRING if he could provide assistance on any legislative matter or implement any strategy on behalf of COMPANY A.

25. On or about March 4, 2006, while discussing in Suite 604 the importance of the proposed gas pipeline legislation, COMPANY CEO told COMPANY VP that he had just given "a thousand" to KOHRING and that, as a result of the payment, KOHRING "would kiss our ass."

26. On or about March 19, 2006, KOHRING called COMPANY VP to follow up on COMPANY VP's suggestion that KOHRING's "(relative) consider, uh, possibly doing an internship program through (COMPANY A). ..."

27. On or about March 21, 2006, KOHRING -- after telling COMPANY VP in a voicemail that he had "personally delivered" an envelope to COMPANY VP's hotel suite that contained, among other things, the resume of KOHRING's relative -- told COMPANY VP to call any time KOHRING could be "of assistance in any issue," and that "my door is open here so feel free to call any time."

28. On or about March 22, 2006, KOHRING told COMPANY VP that he was calling to offer his services to COMPANY VP and COMPANY CEO, that he can "be an information source" for COMPANY VP and COMPANY CEO, that he would "lobby on (their) behalf," and that he would "consider modifications to legislation or whatever" if COMPANY VP or COMPANY CEO wanted them.

29. On or about March 24, 2006, KOHRING told COMPANY VP during a telephone conversation that he "stand(s) by" to "do anything to help," that he would continue to advocate "good things for you guys," including the gas pipeline, and asked COMPANY VP to tell COMPANY CEO that KOHRING is "doing what (he) can to help out."

30. On or about March 29, 2006, KOHRING told COMPANY VP during a telephone conversation that he wanted to meet with COMPANY VP and COMPANY CEO to discuss "a relatively serious matter" that was of "fairly significant importance to (KOHRING)."

31. On or about March 30, 2006, during a conversation in Suite 604, KOHRING told COMPANY CEO and COMPANY VP that he had a "personal financial matter" that "potentially could hurt me politically."

32. On or about March 30, 2006, during the same conversation in Suite 604, KOHRING told COMPANY CEO and COMPANY VP that he owed $17,000 on a credit card that was in collection, that he was being pressed to pay the debt, and that he did not have the financial means to pay the debt.

33. On or about March 30, 2006, during the same conversation in Suite 604, KOHRING asked COMPANY CEO and COMPANY VP about the possibility of receiving a job or some sort of work with COMPANY A or securing a $17,000 loan with COMPANY CEO.

34. On or about March 30, 2006, in the same conversation in Suite 604 and after KOHRING, COMPANY CEO, and COMPANY VP initially mentioned that the $17,000 loan would have to be "above board," they then discussed at length how the transaction would have to be quietly structured to avoid any "red flags" with the Alaska Public Offices Commission ("APOC") or public and personal embarrassment for KOHRING; that KOHRING would have to be discreet about the loan; and that KOHRING should not even mention the loan hypothetically to APOC to avoid drawing unwanted attention to KOHRING, COMPANY CEO, and COMPANY A.

35. On or about March 30, 2006 -- during the same conversation in Suite 604 and shortly after KOHRING had asked COMPANY CEO and COMPANY VP for the $17,000 loan -- KOHRING began to discuss his family and his financial condition. COMPANY CEO then asked COMPANY VP if he had any "hundreds." COMPANY VP retrieved his wallet from a pants pocket, pulled out multiple bills of currency, and then handed at least $100 in cash to COMPANY CEO who, in turn, passed the money to KOHRING.

36. On or about March 30, 2006, during the same conversation in Suite 604, KOHRING took the cash that COMPANY CEO handed him, thanked CEO, and shook CEO's hand.

37. On or about March 30, 2006, during the same conversation in Suite 604 and after receiving the prior cash payment described above, KOHRING again mentioned his family and his financial condition. Immediately thereafter, KOHRING accepted a second handful of cash, totaling approximately $500 to $1,000, from COMPANY CEO, who had handed the cash to KOHRING.

38. On or about March 30, 2006, during the same conversation in Suite 604, KOHRING took the second handful of cash from COMPANY CEO, thanked COMPANY CEO again, and shook his hand.

39. On or about March 30, 2006, during the same conversation in Suite 604, KOHRING, immediately after receiving the cash payments from COMPANY CEO and COMPANY VP, made the following statements to COMPANY CEO:

KOHRING: What can I do at this point to help you guys? Anything?

COMPANY CEO: Whatever you, you know, uh, uh -

KOHRING: Just keep lobbying my colleagues for the Governor's plan, right?

40. On or about March 30, 2006, during the same conversation in Suite 604, after receiving the two cash payments described above, KOHRING discussed with COMPANY CEO and COMPANY VP his relationship with a number of legislators and told COMPANY CEO that "my first effort will be to figure out where they are at and then, secondly, I'll politely and gently as carefully as I can influence them in a positive way to see that the Governor's bill is the vehicle they consider."

41. On or about March 31, 2006, on the day after the cash payments in Suite 604, KOHRING left a telephone message for COMPANY VP in which he told COMPANY VP that there were a couple of important issues before the legislature regarding the natural gas pipeline legislation, provided a status update to COMPANY VP regarding the PPT bill, and stated that he was in the process of meeting with members of the House Finance Committee to lobby them regarding the version of the PPT bill favored by COMPANY CEO, COMPANY VP, COMPANY A, and the oil producers.

42. On or about March 31, 2006, KOHRING met with a state legislator and attempted to persuade that state legislator to support the PPT bill.

43. On or about March 3l, 2006, KOHRING told COMPANY VP during a telephone conversation that he was lobbying strenuously for passage of the PPT bill, knew that passage of the PPT bill was very important to COMPANY A, was scheduling appointments to meet with members of the House Finance Committee, had lobbied the state legislator referenced above, and would continue to lobby his legislative colleagues to the best of his ability and provide periodic status reports to COMPANY VP.

44. On or about April 20, 2006, in a telephone conversation after KOHRING had learned from COMPANY VP that COMPANY A had hired KOHRING's relative, KOHRING thanked COMPANY VP and told COMPANY VP to contact KOHRING if he needed legislative assistance.

45. On or about April 20, 2006, KOHRING asked COMPANY VP during a telephone conversation if he could meet COMPANY VP in Suite 604 to personally thank COMPANY VP and COMPANY CEO for the job for his relative and for being "so good to me over the years."

46. On or about August 23, 2006, KOHRING told COMPANY VP during a telephone conversation that his relative was able to "pocket or bank about $3,000 or so" as a result of his COMPANY A job. All in violation of Title 18, United States Code, Section 371.


COUNT TWO
INTERFERENCE WITH
COMMERCE BY EXTORTION
INDUCED UNDER COLOR
OF OFFICIAL RIGHT (18 U.S.C. § 1951(a) and § 2)

47. Paragraphs I through 9 and 16 through 46 of Count One are realleged and incorporated by reference as though fully set forth herein.

48. Between in or about January 2006 and in or about August 2006, in the District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING, an elected member of the Alaska State Legislature, did knowingly obstruct, delay, and affect commerce and the movement of any article and commodity in commerce by extortion, as those terms are defined in Title 18, United States Code, Section 1951; that is, KOHRING unlawfully obtained from COMPANY CEO and COMPANY VP, with their consent under color of official right, a series of cash payments totaling approximately $2,100 to $2,600 and a $3,000 job for a relative of KOHRING, all of which were not due KOHRING or his office, in agreement that KOHRING would perform official acts in exchange for these money payments and property from COMPANY CEO and COMPANY VP. All in violation of Title 18, United States Code, Sections 1951(a) and 2.


COUNT THREE
ATTEMPTED INTERFERENCE WITH COMMERCE BY EXTORTION INDUCED UNDER COLOR OF OFFICIAL RIGHT
(18 U.S.C. § 1951(a) and § 2)

49. Paragraphs I through 9 and 16 through 46 of Count One are realleged and incorporated by reference as though fully set forth herein.

50. Between in or about March 2006 and in or about August 2006, in the District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING, an elected member of the Alaska State Legislature, did knowingly attempt to obstruct, delay, and affect commerce and the movement of any article and commodity in commerce by extortion, as those terms are defined in Title 18, United States Code, Section 1951; that is, KOHRING attempted to unlawfully obtain from COMPANY CEO and COMPANY VP, with their consent under color of official right, a $17,000 loan not due KOHRING or his office in agreement that KOHRING would perform official acts in exchange for the monetary payments from COMPANY CEO and COMPANY VP.

All in violation of Title 18, United States Code, Sections 1951(a) and 2.


COUNT FOUR
BRIBERY CONCERNING PROGRAMS RECEIVING FEDERAL FUNDS (18 U.S.C. § 666(a)(1)(B) and § 2)

51. Paragraphs 1 through 9 and 16 through 46 of Count One are realleged and incorporated by reference as though fully set forth herein.

52. In calendar year 2006, the State of Alaska received in excess of $10,000 from the United States government under Federal programs involving grants, subsidies, loans, guarantees, insurance, and/or other forms of Federal assistance.

53. Between in or about January 2006 and in or about August 2006, in the District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING,

an elected member of the Alaska State Legislature and an agent of the government of the

State of Alaska, did knowingly and corruptly solicit and demand for the benefit of any person, and accept and agree to accept, a thing of value from any person, that is, a series of cash payments totaling approximately $2,100 to $2,600, a $17,000 loan, and a $3,000 job for a relative of KOHRING, from COMPANY CEO and COMPANY VP, intending to be influenced and rewarded in connection with a business, transaction, or series of transactions of $5,000 or more of the State of Alaska. All in violation of Title 18, United States Code, Sections 666(a)(1)(B) and 2.

A TRUE BILL.

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http://www.adn.com/news/politics/fbi/story/8867967p-8768641c.html

Veco case may spark charges from state
CRIMINAL AND CIVIL: Attorney general has ordered investigations.
By LISA DEMER
Anchorage Daily News
Published: May 9, 2007
Last Modified: May 9, 2007 at 02:26 AM

The state plans to investigate whether Veco Corp. and its officials have violated Alaska law in light of guilty pleas in federal court by two company officials.

Attorney General Talis Colberg on Tuesday directed state lawyers to begin criminal and civil investigations into Veco and related parties. Company chief executive officer Bill Allen and a vice president pleaded guilty Monday to the federal charges of bribery and conspiracy.

Colberg told state lawyers to look into issues not addressed by the federal case. The Alaska Public Offices Commission also is looking into possible violations.

In another development, Gov. Sarah Palin urged indicted state Rep. Vic Kohring, R-Wasilla, to consider stepping down. The governor said it wasn't in her power to demand that he resign but said he should think about it.

"There is certainly a cloud over the seat he represents right now and, with so much on his plate in terms of the need to defend himself, I think he has got to consider that. That's my personal opinion," Palin said.

Palin also removed Allen from a council created to foster cooperation with Alberta, Canada, in areas such as transportation, Native issues, and trade and investment. She said it was inappropriate for him to serve the state.

As for Kohring, he said he's staying in the Legislature.

"I do not feel I would serve the best interest of my constituents by walking away at this time," Kohring said in a written statement. "The House leadership has made a decision regarding my committee chair position, but also made it very clear they expect to see me working in my capacity as a legislator."

After being indicted, Kohring was stripped of his chairmanship of the House Special Committee on Oil & Gas.

Kohring and former Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau, were arrested Friday on multiple charges springing from an FBI investigation into corruption in the Alaska Legislature. All were released and vowed to fight the charges.

The three legislators are accused of doing Veco's bidding in exchange for money or other benefits.

Kohring said his situation was not like that of Jim Hayes, who first refused demands by Palin that he resign from the state Board of Regents after being indicted on multiple federal counts.

While university regents are appointed by the governor, legislators are elected by the people, Kohring said in his statement. Hayes, facing possible impeachment, eventually resigned.

If his defense "prevents him from effectively doing his job," Kohring will reconsider, his statement said.

In court Monday, Allen and Veco vice president Rick Smith admitted being part of a conspiracy in which they bought lawmakers' votes for an oil production tax favored by the oil industry. Over five years, they made more than $400,000 in illegal payments to four legislators or their families.

Allen also approved a scheme in which Smith directed Veco executives to make campaign contributions to primarily Republican candidates. The executives knew they would receive a "special bonus" to cover the amount. It was Smith's job to figure out how big a phony bonus each would need, prosecutors said in court filings.

In the last two-year election cycle alone, at least six Veco executives each donated $24,000 or more to various Alaska candidates and the Republican Party, according to a database run by the National Institute on Money in State Politics or followthemoney.org.

Allen alone donated more than $30,000 over the two years, according to the institute. So did Veco president Pete Leathard and chief financial officer Roger Chan. Smith donated nearly $25,000. And that's just one election cycle.

Brooke Miles, APOC executive director, said her staff saw the enormous contributions from Veco officials but couldn't document illegal behavior. They didn't know about the special bonuses.

"Some of that would be beyond the auditing skills of an agency such as this," Miles said.

Veco has run afoul of campaign finance laws before. In 1985, the company was fined more than $72,000 -- later reduced to $28,000 -- for a scheme that funneled secret donations to a slate of candidates through an employee payroll deduction plan.

Miles said the public offices commission will consider at its June meeting how to proceed with the new information revealed in the federal charges.

Changes to the campaign finance laws in 2003 limit the possibilities, she said. For instance, a complaint must be filed within a year.

Daily News reporter Lisa Demer can be reached at
ldemer@adn.com   and 257-4390. Sabra Ayers contributed to this story.

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Fairbanks News Miner
May 9, 2007

http://newsminer.com/2007/05/09/6912

Lawmakers face ‘tremendous’ pressure
By Stefan Milkowski
Staff Writer
Published May 9, 2007

JUNEAU  Former Fairbanks Sen. Ralph Seekins, one of the key players in last year’s oil and gas debates, said Tuesday he was unaware of any efforts by executives of oil field services company VECO Corp. to bribe state lawmakers and that he never saw anyone “trying to buy votes.”

But Seekins described a capitol in which lawmakers face “tremendous” pressure to act one way or another and where that pressure appears sometimes to change lawmakers’ votes.

“You just have to hope that legislators are strong enough that they’ll stand on principles and not on political blackmail,” he said.

Seekins, a Republican who was defeated by Democrat Joe Thomas last year after one term, said he was sometimes offered campaign support in exchange for help pushing a group’s agenda or threatened that he would lose support if he voted the wrong way.

Seekins said lawmakers were under consistent pressure from industry and union lobbyists. He questioned the lobbyists’ tactics as well as the ability of lawmakers to resist offers from them.

“You hear the rumors for years,” he said. “Somebody’s wife now works for so and so, somebody now has a summer job for so and so, someone is a consultant.”

One current and two former lawmakers were indicted last week on federal charges of bribery and extortion. On Monday, two VECO executives pleaded guilty to bribing lawmakers, in part to gain support for the company’s position on oil and natural gas issues, including the proposed North Slope gas pipeline, last year.

Seekins received $4,500 from VECO executives and a VECO political action committee during his 2002 campaign and another $2,000 in December 2005.

He said Tuesday that he knew some of the VECO executives for a long time and was never asked to do anything in return for the contributions.

“I always considered a donation a donation,” he said. “It didn’t buy anything.”

Seekins returned the 2005 VECO donations in 2006 when the company’s name first surfaced in the federal investigation involving state lawmakers.

At the time, Seekins chaired the Senate Special Committee on Natural Gas Development, the lead Senate committee reviewing then-Gov. Frank Murkowski’s oil production tax and natural gas pipeline proposals.

Seekins was perceived by many to be more agreeable than other members to some of Murkowski’s proposals.

He was picked as chairman by then-Senate President Ben Stevens, R-Anchorage, who matches the description of a senator implicated in VECO CEO Bill Allen’s plea agreement. Stevens largely supported Murkowski’s proposals.

Allen and Rick Smith, VECO’s vice president of community and government affairs, pleaded guilty on Monday to bribing at least four state lawmakers.

Stevens could not be reached for comment Tuesday, but his attorney has said Stevens did nothing wrong. Stevens has not been charged with any crime, but his office was among those raided last year by FBI agents in connection with the current investigation.

Seekins described Stevens as “strong-willed” but motivated by his own beliefs. “I never thought there was anybody pulling the puppet strings,” he said, adding that Stevens at times pushed changes opposed by the oil industry.

Seekins also stated his own independence as chairman of the Senate special committee.

“No one told me what to do,” he said. “I set the rules and I allowed everyone the opportunity  ad nauseam  to bring amendments, to bring proposals, to discuss issues … And those were the terms that I accepted the position with.”

He said Stevens was “disgusted” at him last year when he didn’t vote the way Stevens hoped on the oil tax bill.

“He was really angry at me,” Seekins said. “He wouldn’t talk to me for 10 days.”

Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.

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Wall Street Journal
May 9, 2007

BP Names Independent Safety Monitor
May 9, 2007; Page B15

BP PLC appointed an independent expert to monitor safety improvements at its U.S. refineries.

L. Duane Wilson, a former refining executive at ConocoPhillips, will monitor the company's progress based on findings from an independent panel led by former Secretary of State James Baker. The report was commissioned following the March 2005 explosion at BP's Texas City, Texas, refinery that killed 15 people.

The Baker panel concluded in January that the United Kingdom oil company had safety deficiencies at its five U.S. refineries. The safety issues are high on the agenda of new Chief Executive Tony Hayward.

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BP Names L Duane Wilson Independent Safety Expert
DOW JONES NEWSWIRES
May 8, 2007 8:15 a.m.

 Edited Press Release

 LONDON (Dow Jones)--BP said Tuesday that it has appointed L. Duane Wilson as the independent expert who will monitor progress in implementing the recommendations of the Baker Panel to improve safety performance at the Group's five U.S. refineries which are owned and operated by BP Products North America, Inc.

His appointment took effect on May 1, 2007.

The Panel, an independent body chaired by former U.S. Secretary of State, James A. Baker, III, was established by BP on the recommendation of the U.S. Chemical Safety Board to examine safety management systems at the Group's U.S. refineries and corporate safety culture following the explosion and fire at Texas City in March 2005. Mr Wilson was one of the Panel's 11 members.

The Panel's report, published in January 2007, contained ten recommendations, all of which BP undertook to implement. The recommendations are designed to improve process safety performance at the Group's U.S. refineries. These included an undertaking to appoint an independent expert for a period of at least five years to monitor and report annually on the progress of such implementation to the BP p.l.c. board.

Wilson is the retired vice president of refining, marketing, supply & transportation and fuels technology for ConocoPhillips. As such, he has experience and expertise in managing large-scale organisations, as well as expertise in process safety and refining.

Wilson will report to the Chairman of the BP p.l.c. board's Safety, Ethics and Environmental Assurance Committee (SEEAC) which will produce a publicly available report based on his assessment of progress in implementing the Panel's recommendations at its U.S. refineries.

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Financial Times
May 9, 2007

http://www.ft.com/cms/s/12d1c578-fdcb-11db-8d62-000b5df10621.html

BP ordered to raise safety levels
By Carola Hoyos and Andrew Taylor in London
Published: May 9 2007 03:00 |
Last updated: May 9 2007 03:00

The UK Health and Safety Executive has ordered BPto improve safety on its North Sea oil and gasinstallations, issuing 14 notices to the energy group in the past year.

BP confirmed it had been served the notices. The notices included concerns over maintenance of equipment, leaking pipes and valves that were still being manually operated.

Both the company and the UK safety regulator said BP had complied with 10 notices. The North Sea safety regulator added that the company had time to finish the rest before their deadlines expired. Unite, Britain's biggest trade union, formed this month through the merger between Amicus and T&G, said it was not surprised, given BP's safety record, that it had received so many improvement notices.

Graham Tran, Amicus offshore officer said: "Wehave been saying for many years that BP has failed to take advantage of rising energy price to step up its investment in maintenance. We now want to see some hard action in this area."

BP said: "We take any improvement notices from the HSE extremely seriously and want to complete them as soon as possible."

The company is undergoing a root and branch review of its operations following serious safety failings in the US, including the Texas City refinery fire that killed 15 people in March 2005 and last year's pipeline corrosion, which forced the company to shut down its Alaska Prudhoe Bay field.

BP yesterday announced it had appointed Duane Wilson, a retired vice-president for refining and marketing at ConocoPhillips, to oversee its safety improvements.

Keeping ageing oil facilities safe is an industry-wide challenge.

In the past 12 months, HSE said it had issued six improvement notices and one prohibition notice to Royal Dutch Shell and six improvement notices to Maersk of Denmark.

The North Sea oil fields were first tapped more than 30 years ago. Much of the infrastructure was never expected to last this long, Matthew Simmons, founder of Simmons & Co, the industry investment bank, warned in a recent interview.

The North Sea safety regulator said it had increased the number of North Sea inspections in a bid to improve safety maintenance. It issued a total of51 improvement notices and nine more serious prohibition notices in the past12 months.

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http://www.ft.com/cms/s/9f43ffbc-fd62-11db-8d62-000b5df10621.html

BP appoints safety chief
By Toby Shelley
Published: May 8 2007 14:29 |
Last updated: May 8 2007 14:29

BP on Tuesday appointed an independent expert to monitor progress at the company’s five refineries in the US in the light of a damning report earlier in the year on the group’s safety culture.

The Baker panel recommended earlier this year that the energy group should make the appointment following the fatal explosion at the Texas City refinery in 2005. The panel, chaired by former US secretary of state James Baker, was appointed following a recommendation by the federal Chemical Safety Board.

The appointee to the panel is L Duane Wilson, a retired vice-president for refining, marketing, supply and transportation at Conoco Phillips who was one of the members of an 11-man team that reviewed BP’s safety record. His tenure began on May 1 and he will report to the chairman of BP’s board level safety committee.

There were 10 recommendations in the report published in January by the panel headed by former US secretary of state James Baker. BP undertook to implement them all.

The central argument of the report was that ”BP has not provided effective process safety leadership and has not adequately established process safety as a core value across all its five US refineries”.

That manifested itself in numerous ways: safety audits repeatedly uncovering problems that were not put right; lack of discipline and compliance with procedures; senior management that either did not get or did not respond effectively to detailed refinery-level safety information; and many others.

The corporate culture was also blamed and BP was warned more spending would be needed on safety and more investment in the refineries.

Mr Wilson’s appointment came as BP was facing fresh pressure in the UK over its safety record in its North Sea operations.

BP maintained safety was a top priority in its operations in the North Sea, after press reports that the company had received a high number of “improvement notices” from the Health and Safety Executive. The Schiehallion floating production unit alone has received seven such notices, six after a scheduled inspection late last year and one since.

Multiple notices are served on installations from time to time although six is certainly a high number and an overview report by HSE inspectors suggested BP was not keeping safety risks at the lowest level reasonably practicable.

However, the inspectors did not issue prohibition notices, which would order an activity to cease until a problem is rectified, but rather agreed with BP dates by which improvements would be made.

BP said four of the seven notices regarding Schiehallion had been closed out. The others still have time to run. In total 11 of 14 HSE notices regarding BP in the North Sea have been complied with on time, so far, he said.

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KTUU Television
May 8, 2007

http://www.ktuu.com/Global/story.asp?S=6482935

The story of VECO and the rise of Bill Allen
 
ANCHORAGE, Alaska -- Bill Allen is the stuff that legends are made of in Alaska. He dropped out of high school to work in the oil fields and became the head of VECO, one of Alaska's largest companies.      

VIDEOS
The story of VECO and the rise of Bill Allen
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VECO brass pleads guilty
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VECO brass strike deal
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The economic fallout from the news that he and his vice president have been charged with bribing lawmakers has sent shockwaves throughout the economy.

VECO Attorney Amy Menard said Allen is still the CEO of the corporation.

"Mr. Allen founded VECO in 1968. At this time his title is still the CEO of VECO Corporation," Menard said.    

How long will Allen keep his title? VECO's attorney would not say. Her advice -- stay tuned.

"It's a difficult situation and there will be a lot of decision making that takes place as a result. And appropriate steps will be taken as soon as feasible," Menard said.     

One step has taken place already.

"Mr. Allen does not currently have an ownership interest of VECO Corporation. I cannot tell you when that change occurred," Menard said.    

The majority of the shares are owned by a partnership, made up of Allen family members.

Anchorage Economic Development Corporation President Bill Popp said VECO has operations all over the world.

"From Canada to Russia to the Middle East, you'll find VECO involved in quite a few differ projects globally," Popp said. "A lot of the paychecks that VECO employees collect come right back here to Anchorage, to the state as a whole," Popp said.

In 2005, VECO posted revenues of 665 million. The corporation has four offices in the United Sates, two in Canada, one in the United Arab Emirates and another in India.

It has more than 4,000 employees worldwide. Half of them are in Alaska.

Popp said Allen built the company from the ground up.

"Mr. Allen is one of those strong players back in the ‘70s who built a company from basically nothing as a one-person operation. Operating out of a warehouse in Kenai, servicing one client," Popp said.       

From one client to many, an empire grew from servicing the oil industry.    

Allen's big break came in 1989 when VECO won a big contract to clean-up the Exxon Valdez oil spill. From modules to oilfield maintenance VECO did the heavy lifting.    

As a voice for the industry, Allen used his muscle. While the investigation will reveal where he crossed the line from advocacy to crime, Alaska's economic experts fear many will suffer from the fallout.

Popp said people shouldn't jump to conclusions about the entire corporation.

"There are a lot of neighbors and friends here in town whose jobs rely on this company and it's important to remember that, that in this process, don't paint with a broad brush all the employees of VECO," Popp said.

Anchorage Chamber of Commerce Board Chair Bill Evans said the events are unfortunate, but the state will move on.

"Very, very sad state of affairs admittedly. But the business of the state is so much bigger than that and so much more important than that," Evans said.      

"Crude Dreams" author Jack Roderick said it's time for the oil industry to do some soul searching.

"VECO has been big and Bill Allen been very active. Then the question should be asked, what are the major oil companies here in Alaska, who basically have financed VECO, are gonna do about it?"

On VECO's Web site you'll see the company's values listed. The first on the list is safety. The second is honesty, a call to show integrity by matching action with words.

Historians like Roderick said it's been rumored for years that VECO has tried to buy influence. He said that is something the oil industry probably knew or could have found out.

Other members of the oil industry have been rather quiet about VECO fallout. There was no comment from Conoco Phillips. BP said it's very interested about recommendations coming from an Outside consultant VECO has hired. In a statement today, BP said its relationship with VECO in the future is dependent on how VECO meets the challenges. 

BP made the following response to the charges against VECO Executives:

"We were disappointed to learn that VECO executives have admitted to serious crimes. This is not what we expect from companies with whom we do business. However, we are encouraged at VECO's pledge to commission an independent review of its corporate operations and practices. Our relationship going forward is dependent on how VECO meets those challenges. We will continue to work with the company to ensure that contracts and projects on the North Slope are conducted safely and reliably."

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http://www.ktuu.com/Global/story.asp?S=6480399

VECO brass strike plea deal on charges of bribing lawmakers
by John Tracy
Monday, May 7, 2007

ANCHORAGE -- A corruption investigation by the FBI snags one of Alaska's biggest and most influential businessmen.    

This morning, Bill Allen, chief executive officer and part-owner of VECO Corp. pleaded guilty to extortion, bribery and fraud.    

Shortly after Allen entered his plea, Richard Smith, a VECO vice president and its chief lobbyist, also pleaded guilty to the same charges.    

They are the latest to be caught up in an ever-widening corruption scandal.

Specifically, Allen and Smith plead guilty to providing more than $400,000 in payments to five lawmakers, in exchange for the lawmakers supporting and lobbying their colleagues on bills that VECO wanted passed.  

As in last week's federal indictments, many of the principals are not named, but by their descriptions, it is easy to determine who the lawmakers are. And the name that pops out today, specifically, is that of former Senate President Ben Stevens.

The 70-year-old Allen entered his plea today in an Anchorage federal courtroom, followed shortly thereafter by Smith, the company's chief lobbyist in Juneau at the end of last session.      

The charges mirror the indictments released last week.

Allen and Smith admit that they offered cash and/or  future employment  to former House members Pete Kott of Eagle River and Juneau's Bruce Weyrhauch, as well as to current lawmaker Vic Kohring of Wasilla.   

All three lawmakers pleaded not guilty Friday in Juneau.

But in today's plea deal, Allen also says a state senator, identified as "Senator A", which sources say is Anchorage Republican Sen. John Cowdery, could get a colleague to vote VECO's way if the company could come up with some money.

But perhaps the biggest bombshell involves former Senate President Ben Stevens.

Allen says he had been paying Stevens' consulting firm since 1995 and had even discussed making Stevens a VECO executive; and that the payments continued in the five years Stevens served in the Senate.    

During that period, VECO paid Stevens in excess of $243,000.    

Allen says although he and VECO characterized the payments as consulting fees, in his plea agreement he "acknowledges that in actuality the payments provided to Stevens were in exchange for giving advice, lobbying colleagues, and taking official acts in matters before the Legislature."    

Today, VECO's attorney said the company has been cooperating with federal authorities since it first became aware of the federal probe.

"The company and its subsidiaries have been functioning very well throughout the course of the last eight months, since we became aware of the investigation. We think that performance will remain strong," said Amy Menard, who is representing VECO.

Allen also pleaded guilty to a third count of what's called "conspiracy to impair and impede the Internal Revenue Service."     

In essence, Allen admits to a scheme of reimbursing VECO executives for making personal campaign contributions by paying them special bonuses, which were reported to the IRS as legitimate corporate expenses.     

That's not only a violation of federal law, but state law as well.

It is hard to discern Allen's motivation for entering a guilty plea. His attorney isn't talking; however, buried in his plea agreement is a statement that the government will not charge Allen's son, Mark, or other family members with any crimes stemming from the investigation.     

Allen's son is also a VECO executive, and has a history of writing big campaign checks.     

In 1989, VECO paid a $28,000 fine to the Alaska Public Offices Commission for setting up an employee payroll withholdings program that funneled money to candidates of VECO's choice.      

The plea agreement indicates that VECO instead simply started reimbursing it's executives for those campaign contributions with inflated bonuses.     

APOC records indicate Mark Allen has written personal checks in excess of $84,000 to state candidates since 1998.

The charges Allen and Smith face include lengthy prison sentences, with a total of 20 years maximum, but the plea agreement calls for a range of between nine and 11 years.     

Prosecutors can ask for less, though, and a judge also can reduce the sentence.

The plea deal also calls for three years probation and a fine of between $15,000 and $150,000.      

There is no word yet on when Allen and Smith will be sentenced.

John Tracy is news director for Channel 2 News. Contact Tracy at
jtracy@ktuu.com 
 

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Anchorage Daily News
May 8, 2007

http://www.adn.com/news/politics/fbi/story/8863305p-8765669c.html

Veco executives plead guilty to bribing officials
By RICHARD MAUER and LISA DEMER
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

Bill Allen, a welder who took the Veco Corp. from a small Kenai oil-field company to a billion-dollar international contractor and a major political force, pleaded guilty Monday to bribing at least four Alaska legislators, including former Senate President Ben Stevens.

In a plea bargain with the U.S.Justice Department’s Public Integrity Section, Allen and Rick Smith, Veco’s vice president for community and government affairs, each pleaded guilty to three identical felony charges - bribery and two counts of conspiracy.

Both men accepted responsibility for making more than $400,000 in illegal payments and benefits to public officials or their families. More than half the money went to Stevens in the form of phony “consulting” fees, the government charged.

Stevens, son of U.S. Sen. Ted Stevens, has not been charged. He was named in the plea documents as “State Senator B,” but his identity was unmistakable.

In return for special consideration at sentencing, Allen, 70, and Smith, 62, agreed to cooperate in the ongoing federal investigation. The government also promised to not seek charges against Allen’s son Mark, a Veco official, his daughter Tammy Kerrigan, or any other relative.

The federal plea bargain doesn’t bar state prosecutors from seeking additional charges against Allen and Smith. Both men acknowledged violating state campaign finance laws in their plea.

The plea deals were formalized in secret last week and opened in U.S. District Court Monday morning in unannounced back-to-back hearings before Judge John Sedwick, each lasting about 40 minutes.

Allen, in a gray suit, white shirt, red tie and black cowboy boots, sat hunched over the defense table beside his lawyer, former U.S. Attorney Bob Bundy. Allen is hard of hearing and asked Sedwick to repeat several of his questions, but not the questions about how he would plea.

“Guilty,” he repeated three times in a gravely voice to each of the charges.

Taking prosecutors’ recommendations, Sedwick released the men on $10,000 unsecured bond and ordered them to report weekly to federal probation officers. They were allowed to keep their passports and may travel freely pending sentencing, which was held off indefinitely. They could face about 10 years in prison and up to $750,000 in fines, but cooperation could substantially reduce the penalties.

On Friday, federal authorities acting on bribery and conspiracy indictments arrested Rep. Vic Kohring, R-Wasilla, and former Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau.

Veco, Allen and Smith showed up in those indictments as “Company A,” “Company CEO” and “Company VP.”

It appeared from those charges that the FBI used electronic surveillance of Veco’s suite in Juneau’s Baranof Hotel to capture incriminating dialogue and images. The indictments spoke of payments by Allen and Smith of several thousand dollars and promises of jobs to the legislators. In return, the legislators agreed last year to vote for the oil production tax favored by the oil industry, the government alleged.

Those indictments referred to an unnamed state senator who allegedly played a role in one part of the conspiracy - a plan by Veco to farm out legal work to Weyhrauch, an attorney, in return for his vote on oil legislation. The description of that unnamed senator was ambiguous - Stevens was one of three senators it could have been.

But one of two unnamed state senators in Monday’s charges against Allen and Smith is clearly Stevens. The Veco “consulting” payments of $243,250 between 2002 and 2006 documented in the charges precisely match the amount Stevens reported on his financial disclosures as consulting income to his firm, Ben Stevens and Associates.

Over the years, Stevens has refused to disclose what work he did for that money or for any of the other consulting jobs he has listed, mostly for fishing industry clients. Former state representative Ray Metcalfe, in complaints to the Alaska Public Offices Commission and to federal authorities, challenged Stevens, saying the payments were thinly disguised bribes.

Nothing came of Metcalfe’s APOC complaints - the state agency said that Stevens adequately described his work. It refused Metcalfe’s demands to look deeper and investigate whether Stevens actually worked for his money.

But in their admissions to federal prosecutors, Allen and Smith appeared to vindicate Metcalfe.

“Although Allen and Veco characterized these payments … as being for consulting services, Allen acknowledges that in actuality the payments … were in exchange for giving advice, lobbying colleagues, and taking official acts in matters before the legislature,” prosecutors said.

Only once in five years did Stevens consult for Veco on a matter not involving his legislative job - a task involving a sunken boat at an unidentified location where Veco wanted to build a dock. Stevens worked less than 20 hours on that project, the prosecutors said.

Allen also promised an executive job to Stevens when he left office. On June 25, 2006, Stevens said he’d take that job, the charges said.

Stevens’s attorney, John Wolfe of Seattle, declined to respond to specifics in the charges, but said his client did nothing wrong.

“Ben Stevens denies engaging in any criminal conduct and maintains that he is innocent,” Wolfe said. “Mr. Stevens is surprised to learn that Bill Allen has pled guilty to various federal crimes and hopes that Mr. Allen is not falsely accusing former and current members of the Alaska Legislature in order to mitigate his admitted criminality.”

One other unnamed state senator, a “state elected official,” and two unnamed Veco executives also show up in the charging documents against Allen and Smith.

The senator in question was not accused of taking illegal payments but was listed as a member of the conspiracy to bribe and extort. That senator attempted to enlist the support for Veco-backed legislation of the “state elected official” through an illegal campaign contribution scheme.

Four state senators match the description of that person, two of whom had their offices searched by the FBI in August: John Cowdery, R-Anchorage, and Donald Olson, D-Nome.

The unnamed senator is likely Cowdery, said Kevin Fitzgerald, his defense attorney. As to what that means for Cowdery, Fitzgerald said he’s investigating the allegations laid out in the case against Allen.

Cowdery is in poor health. He’s been hospitalized in Juneau with pneumonia and a lung infection, Senate majority spokesman Jeff Turner said on Monday.

The “state elected official” was impossible to identify from the information in the charges, although he or she never received Veco’s campaign contributions. It’s possible the official was helping the government in the investigation.

The two unnamed Veco executives were accused of participating in a scheme to use corporate money to reimburse political campaign contributions by Veco officials - crimes under federal and state law. Allen and Smith admitted violating federal tax laws by taking deductions for illegal activity.

Veco executives routinely donate to political campaigns, giving tens of thousands of dollars to candidates in last year’s primary races alone.

Allen, in his plea, admitted reimbursing Rep. Kott for a $1,000 donation Kott made in the governor’s race. The contribution wasn’t further described in the charges, but APOC records show that Kott donated $1,000 to former Gov. Frank Murkowski’s re-election bid on May 31.

Many of the allegations listed in the indictments Friday against Kott, Kohring and Weyhrauch show up in the Allen and Smith admissions as well. But there are also new allegations, such as from May 7, 2006, when Kott was on the floor of the House and his cell phone rang. Allen and Smith were calling to give Kott “instructions on how to vote on the particular pice of legislation,” prosecutors said.

Some time later, Kott called them back with a report on the status of the vote “and the projected outcome,” the charges said.

Veco, meanwhile, is continuing to conduct its business, the company said in a statement.

Allen is listed as an owner of 5 percent of Veco’s stock in the company’s 2006 biennial report to the state. But the company’s attorney in the criminal case, Amy Menard, said he no longer has an ownership interest.

Allen is also the publisher of the Voice of Times, a half-page opinion section in the Anchorage Daily News. It is what remains of the Anchorage Times, which Allen owned for two years before it lost the newspaper war to the Daily News.

Asked whether the Daily News will continue to publish the Voice of the Times, Publisher Mike Sexton said, “We are troubled by recent developments and are reviewing the entire situation.”

As to the status of Allen and Smith at Veco, they still held their titles on Monday, Menard said. But that could change.

“I can tell you that in light of today’s events, we expect the board of directors to be meeting this week and making decisions about appropriate actions,” Menard said.

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Kohring returns to session, reasserts his innocence
INDICTMENT: A few lawmakers from each party offer nods or hugs to acknowledge his legal difficulties.
By STEVE QUINN
The Associated Press
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

JUNEAU -- Three days after he and two former House members pleaded not guilty to federal bribery and extortion charges, Rep. Vic Kohring showed up for work on the House floor on Monday.

As House leaders had earlier announced, he lost his job Monday as chairman of the House Oil & Gas Committee, though he will be allowed to remain on that committee as well as three others on which he serves.

He reported to the Capitol on Monday, attending the floor session and scheduled committee meetings.

During the House floor session, a few members from each political party nodded at or hugged Kohring, and some offered a handshake.

"It took a lot of courage, a lot of courage for him to come back," said Rep. Andrea Doll, a Juneau Democrat who gave Kohring a hug during a break.

"When you see somebody in just plain a lot of pain, my heart goes out to him," she said. "It's hard to imagine how difficult it must be for him to be there and to be judged."

Kohring deferred comment on the charges to his attorney, John Henry Browne, who last week said Kohring planned to fight the charges and continue serving his term.

However, Kohring also issued a statement saying he agreed with the decision handed down by members of a committee that oversees appointments.

"I firmly believe in the judicial system and that a jury of my peers will find me not guilty of these charges at which time the leadership of the House has agreed to return me to my chair," Kohring said in the statement.

Kohring and former state Republican Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau were indicted last week by a federal grand jury. They are accused of trading their legislative clout for cash and the promise of future work with an oil field services company.

On Monday, two top executives of VECO Corp., a multinational oil services company based in Anchorage, pleaded guilty to extortion, bribery, and conspiracy to impede the Internal Revenue Service. They were accused of bribing Alaska lawmakers with cash and the promise of jobs, contracts and favors for their backing on bills supported by the multinational firm.

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More court document excerpts
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

Plea agreements made by Veco's Bill Allen and Richard Smith were unsealed Monday. Here's a sampling of statements from the documents:

On or about May 7, 2006, State Representative B was on the floor of the Alaska State House of Representatives ... during a vote on a particular piece of legislation. ALLEN and SMITH contacted State Representative B on State Representative B's cellular telephone, and gave State Representative B instructions on how to vote on the particular piece of legislation.

Based on the conduct described herein, and including certain other criminal conduct not specifically included herein, ALLEN admits that the total amount of illegal benefits provided to elected public officials, their family members, and or their campaigns by ALLEN and SMITH totals an amount greater than $400,000.

...ALLEN corruptly provided at least three separate cash payments to State Representative A: (1) a cash payment of $1,000 ... by ALLEN at the Island Pub, a restaurant in Juneau ...; (2) two separate cash payments totaling approximately $600 to $1,000, given by ALLEN and SMITH to State Representative A in a hotel; and (3) a cash payment of approximately $500, made by ALLEN to State Representative A in Juneau. ...

...ALLEN corruptly provided multiple financial benefits to State Representative B. For instance, on or about June 1, 2006, in a hotel room in Juneau ... ALLEN gave State Representative B a cash payment of approximately $1,000. ALLEN intended the $1,000 payment to reimburse State Representative B for a contribution in that amount given by State Representative B to an Alaskan gubernatorial campaign.

... ALLEN and SMITH agreed to provide additional funds to State Representative B. Accordingly, on or about July 31, 2006, SMITH provided, at State Representative B's request, approximately $7,993 to State Representative B through an inflated invoice prepared by a private business owned by State Representative B. State Representative B referred to this scheme as "foolproof." The check given to State Representative B was drawn on ALLEN's personal checking account.

From in or about 1995 until in or about 2001, ALLEN corruptly authorized VECO to engage and pay for on a monthly basis the consulting services of a private company owned by State Senator B, who was, at that time, not an elected public official.

From in or about January 2005 to on or about August 30, 2006, ALLEN did not ask State Senator B to perform any consulting work unrelated to State Senator B's official position as a member of the Alaska State Legislature. ALLEN instead asked State Senator B to use his official position to advance certain legislation pending in the Alaska State Legislature that ALLEN and VECO favored. ALLEN knew of no other substantive work that State Senator B performed in exchange for the "consulting" payments during this period.

In or about 2006, ALLEN also offered, and State Senator B agreed to accept, an offer of employment with VECO. ... ALLEN called State Senator B to discuss a strategy for State Senator B to "kill" a piece of pending legislation that VECO did not support . ... ALLEN and State Senator B discussed the need to keep quiet the fact that State Senator B planned to become a VECO executive after the close of the 2006 legislative session. In that conversation, ALLEN and State Senator B explicitly discussed how State Senator B needed to ensure the passage of specific legislation before ALLEN and State Senator B disclosed the fact that State Senator B would thereafter be working for VECO.

In or about 2005 and in or about 2006, ALLEN authorized the payment of a "special bonus" of corporate funds to certain VECO executives, including VECO Executive A and VECO Executive B, understanding that the funds were to allow VECO executives to make state and federal political campaign contributions without using their base salaries or performance-related bonuses.

ALLEN directed VECO Executive B to classify a personal expense of ALLEN's as a corporate expense in VECO's corporate accounts, knowing and intending that such personal expense would ultimately be recorded as a corporate expenditure on VECO's yearly filing with the Internal Revenue Service of the United States Department of Treasury.

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Timeline
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

Timeline of federal investigation into Alaska politics

• 1995-2001: Veco CEO Bill Allen "corruptly authorized" hiring state "Senator B," who was not yet in office, as a consultant. "Senator B" fits the description of Ben Stevens.

• JANUARY 2002: Stevens is now a state senator and he continues receiving Veco payments for consulting. However, these new payments were not for private work but rather for "taking official acts" as a legislator. He collects $243,250 from Veco from 2002 through last August.

• JULY 21, 2004: Anchorage lobbyist Bill Bobrick, representing an Outside private prison firm, tells a confidential source in a conversation federal investigators recorded that, for a price, Anchorage Rep. Tom Anderson would be "our boy in Juneau."

• AUG. 17, 2004: Anderson tells the source he would help the prison firm in exchange for $24,000.

• AUG. 23, 2004: Anderson deposits the first of three payments, totaling more than $6,000, from a company allegedly set up to launder money for him.

• SEPT. 26, 2005: Eagle River Rep. Pete Kott allegedly calls Veco vice president Rick Smith and says, "I need a job," to which Smith replies, "You've got a job; get us a pipeline."

• JAN. 8, 2006: As Legislature gets ready to meet, Kott allegedly calls Allen to learn "what our instructions are" concerning oil tax and natural gas pipeline legislation.

• FEB. 21, 2006: Then-Gov. Frank Murkowski unveils a bill to start taxing crude oil based on oil company profits rather than production levels. The governor says the tax reform was part of a deal with Exxon Mobil, BP and Conoco Phillips on a gas pipeline contract.

• FEB. 23, 2006: Wasilla Rep. Vic Kohring, who offered to help Veco, allegedly accepts $1,000 in cash from Allen.

• FEB. 25, 2006: Allen tells another Veco executive to classify one of Allen's personal expenses as a corporate expense, which would lower Veco's federal tax bill.

• FEB. 28, 2006: Exxon and BP executives warn lawmakers that imposing a tax rate higher than the 20 percent of profits the governor proposes might undo the gas pipeline deal. (Veco also lobbies strongly for no changes.)

• MARCH 23, 2006: Juneau Rep. Bruce Weyhrauch calls Veco and leaves a message that he wants to talk to Allen about the oil tax and other issues.

• MARCH 30, 2006: Kohring tells Veco executives he owes $17,000 on a credit card. He asks for a loan or a job. They discuss how to structure a loan without raising "red flags." Kohring accepts at least $600 cash from Allen then asks what he could do "for you guys." He agrees to lobby other lawmakers to support oil tax legislation favored by Veco.

• APRIL 24, 2006: Senate passes an oil-tax bill that would tax oil at a rate of 22.5 percent.

MAY 4, 2006: As legislative session winds down and Veco presses for the 20 percent tax rate, Weyhrauch mails his resume to Allen. Veco executives believe his job request is connected to how he will vote on oil taxes.

• MAY 7, 2006: During House floor debate on oil taxation, Allen and Smith call Kott by cell phone and tell him how to vote. Later that night, Kott tells Allen he had to "cheat, steal, beg, borrow and lie" to defeat an amendment for a higher oil tax rate. Allen responds, "I own your ass."

• MAY 9, 2006: Regular session ends with no new oil tax: Senate fails to concur with a House-approved 21.5 percent rate.

• MAY 10, 2006: First special legislative session begins to consider oil-tax rate.

• MAY 24, 2006: Weyhrauch tells Veco executives that he isn't doing well financially. They discuss his request for employment.

• JUNE 1, 2006: Kott tells Allen he wants to be a lobbyist after he leaves the Legislature. Allen responds, "Well, you will be."

• JUNE 1, 2006: Allen gives Kott $1,000 cash in a hotel room to reimburse his contribution to a candidate in the governor's race.

• JUNE 5, 2006: Allen calls Stevens to discuss a strategy for killing gas-pipeline legislation Veco doesn't support. Allen tells Stevens he wants him to work for Veco as an executive.

• JUNE 8, 2006: Legislators adjourn special session after failing to agree on oil-tax rate.

• JUNE 22, 2006: "Senator A," unidentified in the court documents, tells Smith that another lawmaker needs money.

• JUNE 25, 2006: Allen meets "Senator A" and the unnamed lawmaker and says he could raise $25,000 for the lawmaker's campaign. The lawmaker said he needed to be sure he was willing to support the legislation Veco favored. Veco never raised this money.

• JULY 11, 2006: Stevens and Allen discuss the need to maintain secrecy that the senator planned to become a Veco executive after the 2006 legislative session. They agree that Stevens, then the Senate president, needs to ensure passage of specific legislation before they disclose his job at Veco.

• JULY 12, 2006: Veco allegedly pays $2,750 for a poll for Kott's re-election campaign. Legislators begin second special session.

• AUG. 2, 2006: Veco's Smith allegedly instructs a Veco employee to pay a fraudulently inflated invoice, totaling $7,993, to Kott's Hardwood Flooring. Kott calls the transaction "foolproof." The payment is drawn from Allen's personal checking account.

• AUG. 10, 2006: Legislators approve new oil tax setting rate at 22.5 percent tax of profits.

• DEC. 6, 2006: Anderson indicted for money laundering, extortion and bribery. He pleads not guilty several days later. His trial is set for June 25.

• MAY 4, 2007: Kott, Kohring and Weyhrauch indicted for conspiracy to commit extortion and bribery. Kott also indicted for wire fraud and Weyhrauch for mail fraud.

• MAY 7, 2007: Allen and Smith plead guilty to bribing Alaska lawmakers.

Compiled by Daily News reporters Elizabeth Bluemink and Wesley Loy.

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Veco's oil field customers plan to stick with company for now
PARTNERSHIPS: Baltimore firm to review the company's practices.
By WESLEY LOY
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

Major customers of Veco Corp., whose chief executive pleaded guilty Monday to bribing state lawmakers, indicated Monday they plan to continue employing the company for the time being in Alaska's oil fields.

But a spokesman for one of Veco's largest customers, BP, said the contractor will be watched closely in coming weeks to see if it is fit to keep working in giant Prudhoe Bay and other North Slope fields.

"We're disappointed to hear that Veco executives admitted to these serious crimes," said BP spokesman Daren Beaudo. "It's not what we expect from companies with whom we do business. However, we're encouraged at Veco's pledge to commission an independent review of corporate operations and practices."

Veco's chief executive, Bill Allen, and Rick Smith, vice president of community and government affairs, entered guilty pleas in federal court in Anchorage on Monday to bribery and other charges. Each faces possible time in prison.

Veco is a major working partner with North Slope oil companies, particularly BP, which runs Prudhoe Bay, the nation's largest oil field. It is one of the largest private companies in the state, and it operates elsewhere in the country and world.

For BP on the Slope, Veco employees perform ongoing operations, maintenance and engineering work as well as chores such as hauling bulk fuel, Beaudo said.

Veco runs a fabrication yard in South Anchorage where it assembles modules and other equipment for hauling to the North Slope.

After the corrosion crisis last year in Prudhoe, where major pipelines sprang leaks, Veco was hired to help inspect and repair pipes, Beaudo said. The company is making modules now to house equipment for launching and receiving pigs -- probes that run through pipes looking for corrosion.

BP was not contacted by the FBI regarding the public corruption probe involving the Veco executives, Beaudo said.

Other customers said Monday they also planned to keep using Veco.

Jack Griffin, spokesman for Conoco Phillips, which runs Alaska's next two biggest oil fields -- Kuparuk and Alpine -- said Veco is a relatively small contractor for the company.

Last year Veco got business worth $30 million, or 3 percent of Conoco's Alaska operations and capital spending of just over $1 billion, Griffin said.

"In the overall context, we're not one of Veco's major customers," he said. "They're not one of our top five contractors."

Mike Heatwole, spokesman for Alyeska Pipeline Service Co., which runs the 800-mile trans-Alaska oil pipeline, said Veco is helping with a major project to rebuild pump stations, and it is among many companies in Anchorage providing engineering services as needed.

"We don't have any changes planned," Heatwole said. Veco said it has "retained expert independent consultants to review and assess its corporate operations and practices."

Amy Menard, an attorney for Veco, said the review will be handled by FTI Consulting Inc., a large Baltimore-based firm. Veco expects initial results in a week. She said it was unclear whether the review would be made public.

Veco has 4,000 employees, about half of them working in Alaska, and it's important for people to remember that the corruption probe is separate from the work that Veco hands are doing in the field, Menard said.

"These events are totally unrelated to the actual substantive work that Veco does," she said.

A Veco executive, Tom Maloney, is an officer for the Resource Development Council for Alaska, a prominent industry nonprofit.

"I hope Veco as a whole is not judged by the actions of two individuals," said Jason Brune, the group's executive director.

Aside from Alaska, Veco is involved in oil and gas and other projects on Russian's Sakhalin Island, in Canada and in the United Arab Emirates in the Middle East.

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

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A long, long way from bankruptcy
INFLUENCE PEDDLER: Since bottom days 25 years ago,
Veco has turned into big corporate political operator.
By TOM KIZZIA, SABRA AYRES and KEVIN DIAZ
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM

From the state Capitol in Juneau to the halls of Congress, Veco has been Alaska's biggest corporate political operator since it emerged from bankruptcy 25 years ago with the help of North Slope oil producers.

Monday's guilty pleas from top Veco executives exposed hidden ways in which Veco wielded influence over at least a few legislators, through bribes and "no-show" consulting work.

But the executives also admitted that the most visible kinds of Veco influence, political campaign contributions, were also illegal.

Top officials for Anchorage-based Veco have reported giving nearly $600,000 to state political candidates over the past decade. Since 1991, they also gave $583,108 to federal candidates and their political action committees.

Under state and federal law, contributions are supposed to come from individuals, not companies.

At least for the past two years, however, the company was reimbursing the officials for thousands of dollars in campaign contributions through phony bonuses, according to the charges against company executives made public on Monday. Veco chief executive Bill Allen and vice president of government relations Rick Smith pleaded guilty Monday to conspiring to defraud the IRS with that phony bonus scheme.

Veco's political ties extend far beyond Juneau.

Since 1989, Veco has been the single biggest source of funds to U.S. Rep. Don Young, R-Alaska, according to federal campaign records. Young has received more than $200,000 in that time from Veco officials, according to a database of campaign contribution records by the Center for Responsive Politics.

There are other links too. Federal reports show ex-Alaska Teamster leader Jerry Hood billed Veco for more than $300,000 for federal lobbying between 2004 and 2006. Last November Hood quit as lobbyist to become head of Young's congressional office in Alaska.

Veco chief Allen has long hosted an annual fundraising pig roast for Young.

Young and Hood declined to comment Monday.

Veco executives and employees gave at least $61,500 to Sen. Ted Stevens' campaigns since 1993, ranking them third among top donors after officials from Boeing and BP. They gave another $30,000 to Stevens' Northern Lights leadership political action committee. Sen. Lisa Murkowski has received $44,250 since 2002.

Stevens did not respond to questions about Veco, instead issuing a brief statement Monday:

"I was surprised and saddened to learn of the recent developments in the ongoing federal investigation in Alaska. Like many Alaskans, I am finding out about these events from the media. The legal process will now continue. Consistent with my long-standing practice regarding matters of this sort, I will make no further comment."

Sen. Murkowski also issued a short statement, calling this "a troubled time in our state's history and it comes when the Legislature is considering one of the most critical issues for our future."

VECO CONFESSIONS

In Juneau on Monday, where lawmakers were still reeling from Friday's arrests of one current and two former legislators, the Veco revelations came as another hard blow. And this time there was no "innocent-until-proven-guilty" response -- the Veco executives had pleaded guilty and were convicted.

"To have this truth now, to know that some Alaskans willingly and knowingly participated and encouraged this corrupt behavior is disgusting," Gov. Sarah Palin said in a written statement.

The Veco confessions yielded new details about relations between company officials and the indicted representatives.

During one crucial series of votes last May on a proposed new oil tax, the court documents say, Allen and Smith exchanged cell phone calls with Rep. Pete Kott while he was on the House floor, telling the Eagle River Republican how to vote. Kott was one of the former legislators indicted on corruption charges last week.

House Democrats issued a call Monday for an overhaul of the new oil tax bill passed last year under a "cloud of doubt and potential corruption." But Democrats had a hand in passing the tax bill. Rural Democrats voted for the tax after Republican leaders linked passage to construction of rural schools and energy assistance.

The final vote on the oil tax, which the oil industry supported as a precursor to building a gas line, hinged on the vote of a single Democrat backed by Veco.

Then-Rep. Carl Moses, D-Unalaska, was in Anchorage Aug. 10 recuperating from a pinched nerve when the tax lost its possible final showdown by one vote. A long recess was called while Moses flew to Juneau. With his vote, the final tally tilted the other way.

Moses, involved in a close Democratic primary that he later lost, had received $3,000 from six Veco executives in the week before his journey and vote. Moses denied trading the vote for money at the time, saying he had other good reasons to support the tax.

Moses' name has not come up in the current scandal. But in another detail from the latest court documents, Allen admitted offering to raise $25,000 in campaign funds for an unnamed elected official in return for a guaranteed vote on particular bills. That unnamed official never got back in touch with Allen, the plea agreement says.

Legislators who had received generous contributions from Veco officials in the past said Monday there was no reason back then to suspect anything was wrong.

House Majority Leader Ralph Samuels, R-Anchorage, said he turned last year's contributions over to charity after the FBI searched Veco's offices and those of six lawmakers last August.

"If they think I can be bought then they were giving a campaign contribution to the wrong person," said Sen. Con Bunde, R-Anchorage.

The Alaska Republican Party is looking to give away to charity the roughly $35,000 it received and set aside from Veco executives during the last election cycle, said party chairman Randy Ruedrich. The party will ask the Alaska Public Offices Commission for an advisory opinion on what exactly it should do with the cash, he said.

BACKING WINNERS

The campaign financing scheme admitted to by the Veco executives Monday was illegal under state law. Campaign contributions must come from the individual who makes them, not be steered by someone else. But state regulators and past recipients said there was no way to tell that the tens of thousands of dollars coming from Veco officials were not their own money.

Veco has a history of trouble with campaign laws. The company was fined by the state Public Offices Commission in 1985 for a payroll deduction scheme used for campaign contributions.

Veco had been reborn out of bankruptcy court as an oil-field services company several years earlier, with support from oil producers Arco and Sohio. But it grew in prominence and financial strength thanks to a third North Slope leaseholder, Exxon, which hired Veco in 1989 as chief oil spill cleanup contractor.

The company started out promoting pro-development Republicans, with former Sen. Ed Dankworth helping organize leadership coalitions as Allen's lobbyist. When Democrats controlled the governor's mansion in the late 1980s, money flowed to both parties, though in recent years it has gone almost entirely to Republicans.

As Bill Allen's business and political involvement grew, so did his stature. He was named Alaskan of the Year in 1994. When his personal presence in Juneau ran afoul of the state's lobbying law in 2002, he successfully urged the Legislature to change the law so he wouldn't have to register -- and give up his campaign contributions.

Veco had a way of backing winners. Company officials supported Democrat Tony Knowles as governor with $23,000, and Knowles put Allen on his economic development transition team in 1994. Veco switched back to Republicans, backing Frank Murkowski for governor in 2002 and his daughter, Lisa, in her race against Knowles for U.S. Senate in 2004.

In 2000, Allen co-chaired the Alaska presidential campaign of George W. Bush. After the election, Allen was co-chairman of a transition team that served as a clearinghouse for Alaska applicants for political appointments.

All that turned around last year after the FBI raided Veco's offices. Palin challenged Veco and seemed to revel in opposition from the Veco-owned newspaper section Voice of the Times. But even Palin had past Veco aid, receiving $5,000 in an unsuccessful run for lieutenant governor in 2002. Her running mate, Sean Parnell, had gotten $16,000 in contributions from Veco during his legislative career.

This year, Veco has had a much-diminished presence in Juneau.

This story was reported by Sabra Ayres in Juneau, Kevin Diaz in Washington and Tom Kizzia in Homer. Reporter Kyle Hopkins also contributed from Anchorage. Contact them at
sayres@adn.com kdiaz@adn.com , tkizzia@adn.com  and khopkins@adn.com .

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May 8, 2007

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BP told to upgrade anti-corrosion efforts
Bloomberg News

A federal agency has ordered BP to step up its pipeline corrosion control program at Prudhoe Bay in Alaska, where spills last year led to a partial shutdown of the largest U.S. oil field.

BP's Alaska subsidiary must meet specific maintenance schedules and provide regulators documentation that the work is being done, the Department of Transportation's Pipeline and Hazardous Materials Safety Administration said in an April 27 order to BP. The agency, which enforces oil pipeline regulations, amended a corrective action order initially issued in March 2006 requiring London-based BP to improve the safety of its North Slope pipelines. It was the third time the agency amended the corrective action order.

BP has to take "additional measures to monitor and control corrosion" on the Prudhoe Bay pipelines to prevent another spill, Jeffery Wiese, the agency's acting associate administrator for pipeline safety, said in the amended order.

"Continued operation" of the pipelines, "without additional corrective measures, will be hazardous to life, property and the environment," he said.

BP Alaska is cooperating with the amended order, company spokesman Daren Beaudo said this week. The new order "codifies many of the actions we've already taken," he said.

BP is adding staff to its corrosion-monitoring program, replacing 16 miles of worn pipeline, including the segments that leaked last year, and increasing its operations and maintenance budget at Prudhoe Bay from $225 million in 2006 to an estimated $313 million this year, Beaudo said. BP plans to increase the budget in 2008 to $462 million, he said.

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Two oil-services executives plead guilty in Alaska case
Pair admit bribing lawmakers
By RACHEL D'ORO
Associated Press

ANCHORAGE, ALASKA  Two top officers of an oil-services company pleaded guilty Monday to bribing Alaska lawmakers with cash and the promise of jobs, contracts and favors for their backing on bills supported by the multinational firm.

Bill Allen, chief executive of Anchorage-based Veco Corp., and Rick Smith, a vice president, pleaded guilty in U.S. District Court to extortion, bribery and conspiracy to impede the Internal Revenue Service.

Prosecutors say Allen, Smith and five state lawmakers conspired to buy the lawmakers' support with money and other financial benefits, according to court documents.

Allen also pleaded guilty to issuing company bonuses to Veco executives to repay them for campaign contributions they made to politicians, then claiming those bonuses as legitimate company expenses.

Sentencing was not scheduled. The recommendation for Allen is between nine and just more than 11 years in prison and a fine between $15,000 and $150,000, according to the plea agreement unsealed Monday.

In exchange for Allen's cooperation, federal prosecutors agreed not to charge his son, Mark Allen, or other family members with any crimes, according to the plea deal.

The pleas came three days after federal prosecutors indicted one current and two former members of the Alaska House of Representatives on bribery and extortion charges related to last year's negotiations for a new oil and gas tax and a proposed natural gas pipeline.

Three unnamed representatives and two unnamed senators are listed in Allen's charging documents as participating in the conspiracy.

The three indicted lawmakers  Rep. Vic Kohring and former Reps. Pete Kott and Bruce Weyhrauch  pleaded not guilty Friday.

Kott, the former House speaker, is accused of accepting $8,993 in payments, $2,750 in polling expenses and the promise of a contract as a lobbyist for Veco in exchange for his support of the proposed pipeline and a tax proposal that favored Veco, according to court documents. He said he would throw his support behind the company if he was made warden of a prison the company was building in the Caribbean, according to the indictment.

The tax passed, but the contract for the pipeline negotiated by former Gov. Frank Murkowski was never approved.

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Wall Street Journal
May  8, 2007

Oil Executives Plead Guilty in Bribery Case
By JIM CARLTON
May 8, 2007; Page A9

VECO Corp.'s chairman and chief executive officer, as well as one of his top lieutenants, pleaded guilty to providing more than $400,000 in illegal payments to five Alaskan state legislators and other officials in the state in return for their political support, in a fall from grace for one of the most influential players in the Alaskan oil industry.

VECO Chairman and CEO Bill Allen and Rick Smith, vice president of community and government affairs, appeared in U.S. District Court in Anchorage yesterday to enter the guilty pleas to three counts each, including extortion, bribery and conspiracy to defraud the Internal Revenue Service. Both men face maximum penalties of 20 years in prison and fines of $750,000 each. Mr. Allen is 69 years old.

The pleas come four days after three current and former Alaskan state legislators were arrested and released on federal charges of taking bribes from two unidentified executives working for the oil-field services provider in exchange for their favorable treatment of an oil tax supported by VECO and the oil industry. Anchorage-based VECO later said Messrs. Allen and Smith were involved.

An attorney for Mr. Allen said he declined to comment; Mr. Smith couldn't be reached. While they were still employed at VECO yesterday, "the company is moving forward to take all appropriate steps in response to today's events," said Amy Menard, attorney for VECO.

The pleas are the latest chapter in a probe that has shaken up Alaskan politics and big oil. VECO came under scrutiny eight months ago when federal agents raided offices of six legislators in a probe of alleged influence peddling in the state. The company had long been one of Alaska's most prodigious campaign contributors, with Mr. Allen and top executives having given more than $1 million to state campaigns since 1998. The Alaska probe is part of a broader federal crackdown on public corruption.

"Today's guilty pleas highlight the FBI's continued efforts to ... root out the source of public corruption," Kenneth Kaiser, assistant director of the Federal Bureau of Investigation's criminal investigative division, said in a statement.

Justice Department officials declined to say whether more charges were expected in the probe. All three state legislators who were arrested last week -- former state House Speaker Peter Kott, former Rep. Bruce Weyhrauch, and current Rep. Victor Kohring -- all entered pleas of not guilty. Messrs. Allen and Smith admitted to bribery and other acts of coercion involving the three state representatives, as well as with two state senators not named by officials and "other" state officials also not named.

But since federal officials say their probe is continuing, more indictments are considered likely.

Among those lawmakers whose offices were raided by federal officials eight months ago was then-Senate President Ben Stevens. Mr. Stevens, who didn't seek re-election in November, hasn't been charged with wrongdoing and couldn't be reached. He is the son of veteran Sen. Ted Stevens.

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

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VECO Top Executives
Draw Deeper Scrutiny
By JIM CARLTON
May 7, 2007; Page B12

VECO Corp. said it is reviewing its "corporate operations and practices," in the wake of accusations that the Alaska oil-field-services company's chief executive and another top executive provided bribes and other favors to three state legislators in exchange for favorable treatment of legislation pertaining to a proposed natural-gas pipeline.

A federal grand jury indictment, unsealed Friday, names just the current and former legislators. But the Justice Department investigation is continuing, raising questions about possible legal risks to the company's chief executive, Bill Allen, and Rick Smith, vice president of community and government affairs.

Although neither the men nor VECO were identified in the indictments, an attorney for the Anchorage company said the activities the Justice Department alleged in the charges involved the two executives and that VECO was the firm referenced in the filings only as Company A. The attorney, Amy Menard, said the company is cooperating and said it is unaware of any information suggesting its work on behalf of customers is part of the probe. The executives remain in their posts at closely held VECO, which Mr. Allen co-founded in 1968.

VECO's sway came under scrutiny eight months ago, when federal agents raided offices of six legislators, including the three indicted, in a probe of alleged influence peddling in the state. The Alaska probe is part of a broader federal crackdown on public corruption around the country.

Because of concerns raised by the investigation, VECO about a month ago hired FTI Consulting Inc., a business advisory company based in Baltimore, to "review and assess" its operations and practices, Ms. Menard said.

Messrs. Allen and Smith couldn't be reached to comment. Two of the indicted legislators -- past House Speaker Peter Kott, 57 years old, and former Rep. Bruce Weyhrauch, 54 -- also couldn't be reached. The third, Rep. Victor Kohring, 48, said in a statement he would fight the charges. All three lawmakers are Republicans.

All three were arrested by federal agents Friday and arraigned before a U.S. magistrate in Juneau. Each pleaded not guilty and was released pending a July 9 trial date for Messrs. Kott and Weyhrauch, and one yet to be set for Mr. Kohring. If convicted, the men face between 55 years to 100 years in prison and fines between $1 million and $1.5 million on charges that include extortion, bribery and conspiracy.

According to the indictments, Messrs. Kott, Weyhrauch and Kohring accepted money and other gifts in return for pledges to help push a state tax break for Alaska's big oil producers as an incentive for them to build a gas pipeline. The measure was approved last summer.

The indictment alleges that Mr. Kott, co-owner of a flooring business who was ousted from his seat in last year's primary, demanded and received from unnamed company executives $8,993 in payments, $2,750 in polling expenses for his campaign and a contract to be hired by the unnamed company when he left the legislature. In return, the indictment states, he lobbied fellow legislators to pass the tax break.

On May 7, 2006, in a Juneau hotel, Mr. Kott told the executives he had worked to defeat an amendment to the measure because the chief executive had asked him to, according to the indictment. "I had to get 'er done," Mr. Kott told the executive, according to the indictment. "I had to cheat, steal, beg, borrow and lie."

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

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Anchorage Daily News
May 7, 2007

http://www.adn.com/news/politics/fbi/story/8863295p-8763966c.html

Oil service execs plead guilty to bribing Alaska lawmakers
By RACHEL D'ORO
The Associated Press
Published: May 7, 2007
Last Modified: May 7, 2007 at 03:42 PM

PDF: Allen charging document
http://www.adn.com/static/includes/alaskapolitics/indictments/Allen_charging_information.pdf

PDF: Allen plea agreement
http://www.adn.com/static/includes/alaskapolitics/indictments/Allen_plea_agreement.pdf

PDF: Allen plea facts
http://www.adn.com/static/includes/alaskapolitics/indictments/Allen_plea_agreement_facts.pdf

PDF:Smith charging document
http://www.adn.com/static/includes/alaskapolitics/indictments/Smith_information.pdf

PDF: Smith plea agreement
http://www.adn.com/static/includes/alaskapolitics/indictments/Smith_plea_agreement.pdf

PDF: Smith plea facts
http://www.adn.com/static/includes/alaskapolitics/indictments/Smith_plea_facts.pdf


Two top officers of an oil services company pleaded guilty Monday to bribing Alaska lawmakers with cash and the promise of jobs, contracts and favors in exchange for their backing on bills supported by the multinational firm.

Bill J. Allen, chief executive of Anchorage-based Veco Corp., and Rick Smith, a vice president, pleaded guilty in U.S. District Court to extortion, bribery and conspiracy to impede the Internal Revenue Service.

Their attorneys did not immediately return calls for comment Monday.

Prosecutors say Smith, Allen and five state lawmakers conspired to buy the lawmakers' support with money and other financial benefits, according to court documents.

Allen also pleaded guilty to issuing company bonuses to Veco executives to repay them for campaign contributions they made to politicians, then claiming those bonuses as legitimate company expenses.

Sentencing was not immediately scheduled. The sentencing recommendation for Allen is between nine and just more than 11 years in prison and a fine between $15,000 and $150,000, according to the plea agreement dated Wednesday and unsealed Monday.

In exchange for Allen's cooperation, federal prosecutors agreed not to charge his son, Mark Allen, or other family members with any crimes, according to the plea deal.

The pleas came three days after federal prosecutors indicted one current and two former members of the Alaska House of Representatives on bribery and extortion charges related to last year's negotiations for a new oil and gas tax and a proposed natural gas pipeline.

Three unnamed representatives and two unnamed senators are listed in Allen's charging documents as participating in the conspiracy.

The three indicted lawmakers - Rep. Vic Kohring of Wasilla and former Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau - pleaded not guilty Friday.

Kott, the former House speaker, is accused of accepting $8,993 in payments, $2,750 in polling expenses and the promise of a contract as a lobbyist for Veco in exchange for his support of the proposed pipeline and a tax proposal that favored Veco, according to court documents. He said he would throw his support behind the company if he was made warden of a prison the company was building in the Caribbean, according to the indictment.

The tax passed, but the contract for the pipeline negotiated by former Gov. Frank Murkowski was never approved.

The indictment did not name the company, but an attorney for Veco Corp. said it was the company involved. The company issued a news release Friday, two days after Allen signed the plea agreement, saying the charges involve Allen and Smith, but no corporate subsidiaries or other executives.

Kohring is accused of demanding and accepting up to $2,600 in cash and a $3,000 job for a relative from Veco executives in exchange for his support. The indictment also alleges Kohring sought but did not receive a $17,000 loan for credit card debt.

Weyhrauch, a 54-year-old lawyer, is charged with helping advance the oil service company's causes in exchange for the promise of future legal work, the indictment said.

Amy Menard, an attorney for Veco, said the corporation had turned over more than 100,000 pages of documents to the government.

An FBI spokesman said the arrests stemmed from an investigation that led federal agents last summer to raid the offices of at least six lawmakers, including Kohring, Kott and Weyhrauch. Also raided was the office of former Senate President Ben Stevens, the son of U.S. Sen. Ted Stevens.

The younger Stevens has not been charged.

Veco Corp. is an Alaska oil field services and construction company whose executives are major contributors to Republican political campaigns. The corporation also operates in Asia, the Middle East, the Caribbean and elsewhere in the U.S.

New Gov. Sarah Palin said Saturday she would call for a review of how the previous administration and the Legislature pursued that tax structure.

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http://www.adn.com/news/politics/fbi/story/8863305p-8763968c.html

Lawmakers cited in Veco case identifiable
By LISA DEMER and SHEILA TOOMEY
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 7, 2007 at 04:30 PM

Charging documents unsealed by federal prosecutors Monday after Veco executives Bill Allen and Rick Smith pleaded guilty in Anchorage to bribing Alaska legislators refer to lawmakers only by letters -- Representatives A, B and C, and Senators A and B.

But enough information is given in the Allen charges about most of the anonymous players to figure out who they probably are.

The one exception is Senator A, about whom little data is offered and whose identity remains obscured.

Senator B is described as being part of a conspiracy in which Allen and Smith say they paid him "for giving advice, lobbying colleagues and taking official acts in matters before the Legislature."

One former senator matches the description of Senator B: former Senate President Ben Stevens.

The court documents list payments from Veco to Senator B ranging from $43,750 to $57,000 a year over five years, for a total of $243,250 between 2002 and 2006.

Stevens reported on his legislative financial disclosure forms that he received payments in those amounts from Veco, for a total of $243,250 over those years.

Stevens' lawyer, John Wolfe of Seattle, wouldn't confirm that Stevens is Senator B. But he said that Stevens denies doing anything criminal and maintains he is innocent. Stevens was surprised to learn that Allen had pleaded guilty and hopes that Allen is not falsely accusing legislators and former legislators to mitigate his own role, his lawyer said.

The charges against Allen and Smith include conspiring with three members of the state House. The facts in the Allen charges match three legislators who were indicted last week on conspiracy and bribery charges: former Reps. Pete Kott and Bruce Weyhrauch and current Mat-Su Rep. Vic Kohring.

“Representative A” is described in the court documents as a sitting legislator who has served since 1995 -- as Kohring has. Allen is accused of giving “State Representative A” multiple cash payments, and State Representative A of asking Allen what he could “do for you guys” on March 30.

Kohring’s indictment has him asking Allen on March 30: “What can I do at this point to help you guys? Anything.”

“Representative B” accepted $1,000 from Allen on June 1, the Allen charges say. The money was to reimburse Representative B for donating $1,000 to a gubernatorial campaign. According to Alaska Public Offices Commission records, Kott donated $1,000 to former Gov. Frank Murkowski on May 31.

“Representative C” is described in the Allen charges as a lawyer who served in the state House from 2002 to 2006 and sent a letter to Allen asking for legal work in late April or early May. Former Juneau Rep. Bruce Weyhrauch was elected in 2002 and, according to his indictment unsealed Friday, mailed such a letter on May 4.

Unlike Allen and Smith, all three charged legislators have pleaded not guilty to all charges.

Reporters Lisa Demer can be reached at ldemer@adn.com  and Kyle Hopkins can be reached at khopkins@adn.com.

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http://www.adn.com/news/politics/fbi/story/8863305p-8764071c.html

Kohring loses chairman post
By STEVE QUINN
The Associated Press
Published: May 7, 2007
Last Modified: May 7, 2007 at 04:30 PM

JUNEAU - State Rep. Vic Kohring lost his job Monday as chairman of the House Oil & Gas Committee, three days after he and two former House members pleaded not guilty to federal bribery and extortion charges.

Kohring, a Republican from Wasilla, is allowed to remain on that committee as well as three others for which he serves.

He reported to the Capitol on Monday, attending the floor session and scheduled committee meetings.

Kohring deferred comment on the charges to his attorney, John Henry Browne, who last week said Kohring planned to fight the charges and continue serving his term.

However, Kohring also issued a statement saying he agreed with the decision handed down by members of a committee that oversees appointments.

“I firmly believe in the judicial system and that a jury of my peers will find me not guilty of these charges at which time the leadership of the House has agreed to return me to my chair,” Kohring said in the statement.

During the House floor session, a few members from each political party nodded at or hugged Kohring, and some offered a handshake.

“It took a lot of courage, a lot of courage for him to come back,” said Rep. Andrea Doll, a Juneau Democrat who gave Kohring a hug during a break.

“When you see somebody in just plain a lot of pain, my heart goes out to him,” she said. “It’s hard to imagine how difficult it must be for him to be there and to be judged.”

Kohring and former state Republican Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau were indicted last week by a federal grand jury. They are accused of trading their legislative clout for cash and the promise of future work with an oil field services company.

On Monday, two top executives of VECO Corp., a multinational oil services company based in Anchorage, pleaded guilty to extortion, bribery, and conspiracy to impede the Internal Revenue Service. They were accused of bribing Alaska lawmakers with cash and the promise of jobs, contracts and favors for their backing on bills supported by the multinational firm.

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http://www.adn.com/front/story/8863355p-8764030c.html

Lawmakers scolded for private pipeline meetings
By SABRA AYRES
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 7, 2007 at 03:47 PM

JUNEAU - A group of seven lawmakers from the House and Senate finance committees are catching heat for meeting behind closed doors with the governor’s gas pipeline team to “iron out differences” they have with Gov. Sarah Palin’s proposed Alaska Gasline Inducement Act.

Critics, including members of the House Democrats and some Republicans, said the meetings should be open to the public. Some also disagreed with the manner in which House Speaker John Harris, R-Valdez, chose the members of the group that met with Palin’s team.

“This makes it seem like it’s rigged,” said Rep. Les Gara, D-Anchorage, who is on the House Finance Committee but not the special committee. “The majority has purposefully kept out members who have stood tallest against the producers.”

House members of the committee are Reps. Mike Chenault, R-Kenai; Mike Kelly, R-Fairbanks; Reggie Joule, D-Kotzebue; and Ralph Samuels, R-Anchorage. From the Senate side are Charlie Huggins, R-Wasilla; Bert Stedman, R-Sitka; and Lyman Hoffman, D-Bethel.

The group’s aim is to work through issues and questions lawmakers have brought up in debate over Palin’s gas pipeline bill. Among those, the question of how flexible the state’s criteria for applicants is, has been the most contentious.

Palin has said her AGIA sets out a fair and open process for selection of a state licensee to build a North Slope natural gas pipeline. The bill proposes providing incentives for interested pipeline applicants in exchange for an exclusive state license.

A transparent selection process would be different from last year’s “behind closed doors” negotiations between the former administration and the state’s largest oil producers.

BP, Conoco Phillips and Exxon Mobil have all panned the Palin bill, saying the state’s “must have” provisions would limit applicants from proposing what they see as the best means by which to finance construction of a pipeline.

When asked about it in a press conference Monday, Harris said he was not opposed to opening the meetings to the press. He insisted, however, that the seven appointed members of the special working group were meeting in an informal manner.

The final decision on whether the meetings would be open would be left to Chenault, the committee’s chairman.

“If we meet again, we’ll see,” Chenault said when asked if he would agree to allow the public to attend the discussions with the governor’s gas team.

Rep. Carl Gatto, R-Palmer, said the meetings were similar in makeup to other conference committees and therefore should fall under the same open-door policy. Gatto, who is co-chair of the House Natural Resources Committee, is not a member of the special committee.

House majority members signaled their frustration over the attention drawn to the committee’s talks with the administration.

“Now we might be forced to make this a thing where we just meet one by one in each other’s offices,” Samuels said, adding that the special committee’s goal was intended to keep the bill moving in order to pass it before lawmakers adjourn on May 16.

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

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Fairbanks News Miner
May 7, 2007

http://newsminer.com/2007/05/07/6870

Lawmakers throw support behind Palin and her gas line plan
By Stefan Milkowski
Staff Writer
Published May 7, 2007

JUNEAU  As the three major North Slope producers and Gov. Sarah Palin dug in their heels last week on competing views of how best to get a natural gas pipeline, local lawmakers generally gave their support to Palin and her Alaska Gasline Inducement Act.

“I’m pretty much inclined to accept it as it is,” said Sen. Joe Thomas, a Democrat from Fairbanks and member of the Senate Finance Committee, which is reviewing the bill.

Legislative committees have spent months reviewing Palin’s bill, AGIA for short, but the debate over the legislation heated up last week when BP, ConocoPhillips and Exxon Mobil presented an ultimatum. All three said they would not be able to apply under the competitive bidding process the bill sets up unless major changes are made.

Specifically, the three producers said the state offered insufficient incentives to lease holders, and they encouraged lawmakers to replace the bidding requirements in the bill with “objectives” the applicant could address as they chose.

On Thursday, members of Palin’s gas line team defended the AGIA proposal and responded to the producers’ demands for additional incentives and elimination of hard requirements  the state’s “must haves.” Consultants hired by the administration described the “must haves” as reasonable and necessary. Local lawmakers largely agreed.

“The oil companies are asking for an arm and a leg,” Rep. Woodie Salmon, D-Beaver, said. “It’s like we’re taking food from them.”

Rep. Mike Kelly, a Republican from Fairbanks and member of the House Finance Committee, which is reviewing a House version of the bill, said Tuesday he had some concerns about the issues the companies raised but wasn’t “spooked by some of the rhetoric.”

He said Friday he was still listening to the debate about Palin’s proposal.

“I kind of start with wanting to give her what she needs,” he said. “At the same time, we’re seriously evaluating suggestions from the people that will be responding.”

Rep. Scott Kawasaki, a Democrat from Fairbanks who reviewed the bill in the House Oil and Gas and Resources committees, said he got over an initial skepticism about the firm requirements in the bill.

“The more and more it was explained to me, the more and more I just trust that the ‘must haves’ are a necessity,” he said. “There’s some things that you just don’t compromise on.”

In general, lawmakers expressed confidence in the AGIA process despite the producers’ claims that they would not bid for the state license to build the pipeline and likely would not make the initial shipping commitments needed to get the pipeline off the ground.

If the state chose an independent company to build the pipeline, they said, and that pipeline offered reasonable shipping terms, the producers would have a hard time not selling their gas.

“At the end of the day, they will do an individual analysis,” said Sen. Gene Therriault, R-North Pole, and make a business decision. “I suspect … that the deal will make business sense.” Lawmakers said federal regulators, the state government, and company shareholders could all pressure the companies. A few mentioned the possibility of taxing companies on their undeveloped gas reserves.

“To me it’s our gas, and they have the leases,” Salmon said.

Thomas described some of the producers’ comments as a “little bit beyond reality” and said he was confident the companies would commit to ship their gas, particularly if the state adjusted its taxes between now and when the companies would have to commit.

Others described the companies’ demands as part of an effort to negotiate with the state through the legislation.

“I say let it play out,” Rep. David Guttenberg, D-Fairbanks, said. “They are bargaining with us.”

Sen. Gary Wilken, R-Fairbanks, called the process “a big poker game.”

Lawmakers had different thoughts about the bill’s prospects.

Rep. John Coghill, R-North Pole, and House Speaker John Harris, R-Valdez, both said they thought the bill would pass largely as is.

“The basic structure, the framework, of AGIA will remain intact,” Harris said Friday. “Overall, most legislators are pretty solidly behind AGIA.”

But others said they weren’t sure, and members of the House and Senate leadership have both questioned key components of the bill.

Senate President Lyda Green, R-Wasilla, said Tuesday she thought there was “somewhere in between [bid requirements and objectives] that makes it work.”

House Majority Leader Ralph Samuels, R-Anchorage, said he was going “round and round” on the question.

“I think you still need to try to open the door a little bit,” he said Friday.

Ultimately, the governor’s popularity itself might play into how lawmakers treat her bill.

“The governor vanquished every opponent in the field, and she gets a free swing at the pi?ata,” Rep. Jay Ramras, R-Fairbanks, said. “So I support her 100 percent.”

Ramras said he thought the AGIA process was “fraught with difficulties and complexities” just as former Gov. Frank Murkowski’s negotiations with the producers had been.

“I support it because the governor thinks it will work,” he said.

Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.

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Alaska Report
May 6, 2007

http://www.alaskareport.com/z45863.htm

Alaska legislators (22 of them) still stumping for VECO
May 5, 2007
By Ray Metcalfe

Even though the FBI's indictments of dirty politicians and those who bribe them has begun, (just the tip of the iceberg) House Majority Leader Ralph Samuels, Senate President Lyda Green, and about 20 other members of our Legislature who owe their elections to VECO are still stumping for the oilfield services company that is at the center of the ongoing FBI investigation.
 
Why would any legislator trust those who say the governor's Alaska Gasline Inducement Act is bad for Alaska, when they know those detractors are directly or indirectly associated with those who bribed our legislators.

They are pushing an ethics bill that does nothing, and - for those who haven't already figured it out - our state treasury is now funded by a tax scheme that brings in about half of what it should. It's the same tax scheme referenced in the indictments that VECO bribed our legislators to pass.

To put into perspective what legislators who take bribes have cost Alaska: In March 2005, Exxon Mobil signed an agreement with Qatar to spend $13 billion developing the infrastructure to extract, liquefy, and export, 17.2 million tons of liquefied natural gas to the UK annually. In exchange, Exxon keeps 30 percent of the profits, and Qatar takes the other 70 percent.

Since that deal was made, the competitive market has changed. Exxon Mobil's more recent bid for similar development rights in a Libyan oilfield was outbid by Gazprom. Exxon offered to share the profits - 25 percent to Exxon, 75 percent to Libya. But Gazprom agreed to develop Libya's oilfield for 10 percent of the profits, giving Libya 90 percent.

Alaska now gets a 12.5 percent royalty, plus a 22.5 percent net profits tax, and the feds take about 10 percent, for a total of about 45 percent. In other words, the rest of the world has let the competitive market work to get oil companies like Exxon to develop their oilfields for between 10 percent and 30 percent of the profits. Meanwhile Alaskans are misled to believe they must give up between three and five times as much of their profits, or Exxon and others will leave us for greener pastures.

Allowing three major oil companies absolute control of both the production and the transportation of Alaska's oil has given BP, Exxon Mobil and ConocoPhillips a monopoly and kept competing oil companies out of Alaska's oil patch.

The current 45-55 split of the proceeds from this state's oil makes Alaska the lowest taxing major oil producer in the world by a wide margin. The difference between what we get and what we could get if we simply allowed the competitive process to work is about $2 billion per year. That's enough to eliminate all property taxes plus add an additional $1,500 dollars to your dividend check.

If BP, Exxon Mobil and ConocoPhillips move on to greener pastures, other companies will step in and offer us just as much as they offer other countries. What could be better?

Ray Metcalfe is a former Republican legislator from Anchorage and longtime government watchdog. He is chairman of the Republican Moderate Party. Contact him at RayinAK@aol.com.

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Anchorage Daily News
May 6, 2007

http://www.adn.com/news/politics/fbi/story/8860433p-8760975c.html

Kohring's state House committee post pulled
OIL, GAS: Arrests also put spotlight on 2006 petroleum profits tax law.
By TOM KIZZIA and SABRA AYRES
Anchorage Daily News
Published: May 6, 2007
Last Modified: May 6, 2007 at 04:10 AM

JUNEAU -- The chairman of a key state House committee was deposed and Alaska's most important oil tax law fell under new scrutiny Saturday as lawmakers reacted to the arrest of one current and two former legislators on federal corruption charges.

Rep. Vic Kohring, R-Wasilla, will lose his chairmanship of the Special Committee on Oil and Gas, House leaders said. Kohring was charged with selling his vote on oil taxes last year to oil field services company Veco.

The House committee had an important early role in shaping gas pipeline legislation this year. Republican majority leaders placed Kohring in charge of the committee this session, even though he was one of six legislators whose offices were raided by the FBI in a Veco-related probe last fall.

Kohring appeared before a federal magistrate Friday in handcuffs to face charges of bribery, extortion and conspiracy. Also appearing were two Republican colleagues from last year's legislative session, Pete Kott of Eagle River and Bruce Weyhrauch of Juneau. All three pleaded not guilty.

In detailed indictments, the three were charged with selling their votes and influence over other legislators for money and jobs during the 2006 legislative session.

The legislation in question was an overhaul of the state's oil production tax, which pays for most of state government and adds to the Alaska Permanent Fund. Veco wanted to keep the oil tax low and also was pressing for construction of a gas pipeline from which it would profit, according to the indictment.

Gov. Sarah Palin said Saturday that in light of the indictments, she wants a review of how the Legislature made its decision on the petroleum profits tax, known as PPT, and also a look at how well the tax is working.

"Yesterday's activities reinforce to me the desire and the need to revisit and evaluate the PPT to ensure Alaskans are getting the proper value for our natural resources," Palin said. "Alaskans need to know whether it was a fair debate or not. And whether there was unfair influence and if that influence led to the rate that was adopted."

Legislators from both parties seemed to agree. But with only 11 days to go in this year's legislative session, no one was predicting an immediate effort to change the tax.

The mood in Juneau Saturday was subdued, said Rep. John Coghill, R-North Pole.

"There's definitely a cloud over the whole Legislature," Coghill said.

'IT TAKES TWO TO TANGO'

Several legislators predicted that the arrests, and the appearance of undue oil industry influence, would strengthen Palin's hand as she pushes her Alaska Gasline Inducement Act, which is her plan for promoting a gas pipeline. Palin has been at odds with the major oil producers over how to build the line, with legislators poised in the middle.

"You know, it takes two to tango," the governor said Saturday. "Yesterday it was the Legislature who was under fire. But those who were exerting their powers will also have to be held accountable. And I think Alaskans will be very disappointed if they learn that the same people are still exerting power as the Legislature discusses AGIA."

Palin said she hopes no one in the Legislature uses Friday's arrests as an excuse to halt progress on her bill.

"I wouldn't want to stand in the way of that train now," said Sen. Tom Wagoner, R-Kenai, a supporter of the Palin bill.

Palin swept to electoral victory last fall on a campaign for ethics reform and open government, boosted by a pre-election FBI raid in late August that has opened into the biggest legislative scandal in Alaska history.

Major ethics reform legislation has been passed in both the House and Senate this year, but a final bill appears stalled by what appears to be disputes over personalities and who gets credit. No one was predicting that Friday's arrests would remove the logjam on ethics.

Palin called the stalling of ethics reform "perplexing."

Veco and its officials have not been charged with anything. But Veco was easily identifiable as "Company A" in the charges, and Veco's lawyer confirmed the identification on Friday.

For years the company has been a huge influence in Juneau, in terms of both campaign contributions and lobbying. Since the FBI raids Aug. 31, it has had very little visible presence in the Capitol.

A fourth legislator targeted in the federal probe, former Rep. Tom Anderson, R-Anchorage, was charged in December with taking bribes from a lobbyist representing private prison interests. Anderson also had a private consulting contract with Veco, but that was not a factor in the charges against him.

Kohring is the first sitting legislator charged with corruption since two state senators faced charges in the early 1980s. One, George Hohman, was convicted of bribery in 1981 and expelled from the Senate. The other, Ed Dankworth, left voluntarily but never faced trial after successfully appealing his 1982 conflict-of-interest charges.

The state constitution says members of the Legislature can be expelled on a two-thirds vote of the body they serve in, but it requires no particular response in the event of criminal charges or convictions.

IINNOCENT UNTIL PROVEN GUILTY

House leaders were struggling Saturday to find a position that would be fair to Kohring but also protective of the Legislature's reputation. They said they considered him innocent until proven guilty -- but nevertheless decided to strip him of his committee chairmanship.

Kohring is expected to continue appearing as a voting member of the Legislature, said House Speaker John Harris, R-Valdez. But a special committee will be named Monday to remove him as chairman of the oil and gas committee, a position he has held for four years.

"You have to go under the assumption innocent until proven guilty, except in our business, a lot of what we do comes with public perception, and there is a cloud of suspicion over us," Harris told The Associated Press. "We need to make sure we remove that as much as possible."

Coghill said no review of Kohring's work on the gas line bill early in the session is necessary. The still-pending legislation has been through many hearings and changes since then, he said.

A LIKABLE MAN

Kohring will find emotional support from his House colleagues, many of whom find him to be likable, during what must be a difficult time for him, Coghill said. But no one is likely to come to his defense on the alleged bribery case, he added.

Still, Coghill defended the leadership's earlier decision to make Kohring chairman.

"An investigation isn't an indictment, and an indictment isn't a conviction," he said.

Kohring's leadership position was not challenged when the session began, but objections were raised by minority Senate Republicans when Sen. John Cowdery, R-Anchorage, another FBI search target, was named chairman of the powerful Rules Committee. The minority said the committee chairman shouldn't be someone under "a cloud of suspicion."

The state's oil tax code came up for revision in 2006 after oil prices skyrocketed and legislators decided the old tax laws weren't giving the state much of the windfall. A revised oil tax was seen as a necessary prelude to working with oil companies on a gas line.

Some legislators wanted to continue taxing gross production in Alaska's oil fields, but the majority supported a net-profits tax proposed by Gov. Frank Murkowski, which would allow oil companies to deduct expenses.

Fierce debate raged over how high to make the PPT.

The federal indictments released Friday say Veco was pushing legislators to hold the line at a 20 percent tax. Others argued for a rate as high as 30 percent. Even Kott said he would have supported 30 percent were it not for Veco chief executive Bill Allen, according to a taped conversation cited in Kott's indictment.

The rate finally adopted in August, after two special sessions, was 22.5 percent.

Two of last year's candidates in the governor's race, Palin and Democrat Tony Knowles, said they had some concerns about the Murkowski-backed PPT but wanted to give it a chance before attempting any revisions.

The new tax, which was retroactive to April 2006, boosted last year's oil field return to the state by $800 million, to about $2 billion, according to the state Department of Revenue. But that was some $150 million less than expected. Of that shortfall, $50 million was because oil company deductions were higher than anticipated.

Coghill said any effort to revisit the PPT could be made next year, when he expects the Legislature to look at natural gas taxes as part of its gas line effort. Sen. Hollis French, D-Anchorage, also said it might be good to "cool down a bit" and take up the tax next year.

Former Rep. Ethan Berkowitz, D-Anchorage, who pushed for a tax on the gross as House minority leader last session, said a special session to address the oil tax was in order because of the high stakes -- both in terms of the state's finances and the Legislature's reputation.

But it makes sense to wait, he added, until further revelations emerge about the FBI investigation and what took place last year in Veco's suite in the Baranof Hotel.

"We don't know who else went into Room 604," Berkowitz said. "Would that paralyze or motivate them? We have to see where it unfolds."

Daily news reporter Tom Kizzia can be reached at
tkizzia@adn.com  or in Homer at 1-907-235-4244. Sabra Ayres can be reached at sayres@adn.com   or in Juneau at 1-907-586-1531.
 

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Wall Street Journal
May 5, 2007

UPDATE:
Alaska Officials Plead Not Guilty In VECO Oil Bribe Case
DOW JONES NEWSWIRES
May 4, 2007 10:13 p.m.
 (Updates with Kohring plea, lawyer's comment; adds penalties, background)

 JUNEAU, Alaska (AP)--One current and two former Alaska legislators pleaded not guilty Friday to charges they accepted bribes - including cash and a job offer in Barbados for one man - to support legislation for an oil services company.

Rep. Victor Kohring of Wasilla, Pete Kott of Eagle River and Bruce Weyhrauch of Juneau, all Republicans, were arrested Friday.

Prosecutors allege the scheme unfolded as lawmakers weighed a new petroleum profits tax structure and a new contract for a natural gas pipeline last year.

Kott explicitly linked his support of the pipeline and the company's preferred version of the tax proposal to benefits during a teleconference with company officials, according to the indictment.

"You'll get your gas line, the governor gets his bill, and I'll get my job in Barbados," he told company executives, the indictment states.

The tax passed, but the contract for the pipeline negotiated by former Gov. Frank Murkowski and BP PLC (BP), ConocoPhillips (COP) and Exxon Mobil Corp. (XOM) was never approved.

The indictment does not name the company, but an attorney for VECO Corp. said it was the company involved.

Kott is accused of accepting $8,993 in payments, $2,750 in polling expenses and a future contract as a lobbyist in exchange for his support of the pipeline and a tax proposal that favored the company, according to court documents.

Kohring is accused of demanding and accepting up to $2,600 in cash and a $3,000 job for a relative from VECO executives in exchange for his support. The indictment also alleges Kohring sought but did not receive a $17,000 loan for credit card debt.

Weyhrauch is charged with helping advance the oil service company's causes in exchange for the promise of legal work in the future for the company, the indictment said.

FBI spokesman Eric Gonzalez said the arrests stemmed from an investigation that led federal agents last summer to raid the offices of at least six lawmakers, including Kott and Weyhrauch.

Amy Menard, an attorney representing VECO in the investigation, told The Associated Press that the Anchorage-based corporation has turned over more than 100,000 pages of documents to the government.

"VECO has been cooperating since day one, since it learned of the investigation. The government has indicated to the company that it is satisfied with the cooperation and is looking forward to continued cooperation," she said.

Kott's son, Peter Kott Jr., declined comment when reached at the family's Eagle River business. Weyhrauch's attorney Doug Pope and Kott's attorney James Wendt declined to comment on the case.

John Henry Browne, an attorney for Kohring, said the lawmaker plans to fight the charges.

"He has a good deal of faith in the system," Browne said.

Weyhrauch did not run for re-election to his house seat in November. Kott, a former House speaker, lost a bid to retain his seat in the August primary. It was not clear Friday if they ever took the jobs they were allegedly promised after they left the Legislature; however, Kott is not a registered lobbyist.

Kohring was charged with extortion, attempted extortion, bribery and conspiracy. Kott and Weyhrauch each face four counts, including extortion, bribery and wire or mail fraud.

A combined trial for Kott and Weyhrauch was set for July 9 in Anchorage. A trial date was not set for Kohring. If convicted of all charges, each of the men could face up to 55 years in prison and a $1 million fine. All were to be released Friday on $20,000 bonds.
 
  Corrected May 4, 2007 22:28 ET (02:28 GMT) One current and two former Alaska legislators pleaded not guilty Friday to charges they accepted bribes - including cash and a job offer in Barbados for one man - to support legislation for an oil services company.

(In "UPDATE: Alaska Officials Plead," published at 10:11 p.m. EDT, the word "not" was inadvertently dropped from the headline.)

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BP's New Chief Will Meet
With Board as Probes Swirl
By CHIP CUMMINS
May 5, 2007; Page A4

LONDON -- Reeling from the surprise resignation of their longtime chief executive officer, BP PLC directors meet next week in Washington with their new top executive, Tony Hayward, and a management team badly shaken from two years of major safety and operational shortcomings in the U.S.

 
The board meeting was scheduled long before former BP boss John Browne resigned Tuesday after being censured by a British court for lying about a relationship with a former lover. Lord Browne had been trying to quash a story his ex-partner had sold to a tabloid. The CEO's abrupt departure cut short a transition period the board had designed back in January for Mr. Hayward, whom directors already had named as Lord Browne's successor.

Mr. Hayward and the board will have a lot to discuss. Criminal investigations into a deadly refinery blast in Texas in 2005 and pipeline corrosion at BP's Prudhoe Bay oil field are continuing, raising significant legal risks for senior and lower-level BP executives. Federal U.S. investigators also are probing whether BP energy-market traders manipulated the propane market in 2004. BP denies the allegation, and says it is cooperating with other probes into crude-oil and gasoline trading.

Meanwhile, congressional hearings over BP's management of Prudhoe Bay -- America's biggest oil field -- are expected to restart soon, threatening more embarrassing revelations about the company's operations. Last summer, BP partially shut the field down after two oil spills and worries about pipeline corrosion. The move rattled global oil markets and triggered the investigations by Washington lawmakers.

Bob Malone, BP's top U.S. executive, recently informed congressional investigators that BP would turn over previously undisclosed documents that may shed light on cost-cutting issues in Alaska. Mr. Malone, writing to the House Committee on Energy and Commerce last week, said some of the issues raised in the documents about cost-cutting and spending decisions cause him concern and bear further investigation.

New CEO Mr. Hayward is a longtime BP executive and was once one of Lord Browne's "turtles" -- a group of young, handpicked executives that Lord Browne cultivated as possible successors. Mr. Hayward isn't expected to move quickly to reshuffle management, but he will face a tough call over what to do with a close associate and another member of Lord Browne's inner circle -- John Manzoni, head of refining and marketing at BP.

The company's U.S. refinery operations have been harshly criticized by U.S. regulators and by a BP-appointed independent committee headed by former Secretary of State James A. Baker III. In an internal BP report on management accountability released this week as part of a court case in Texas, Mr. Manzoni is taken to task for not recognizing major problems at the Texas City, Texas, refinery where 15 workers died in an explosion in March 2005.

And in a series of embarrassing emails and internal documents, leaked to the media or made public by legal and regulatory proceedings, Mr. Manzoni comes off as out of touch with looming problems at Texas City. Mr. Manzoni told BP executives conducting research for the accountability report that despite visiting the plant himself, he "did not know which questions to ask, did not ask the right questions and was not told" about plant conditions, according to notes of his interview. The notes haven't been made public but have been reviewed by The Wall Street Journal. Mr. Manzoni has declined several requests for comment.

In the board meeting next week, Mr. Hayward also will likely face questions about the company's prospects in Russia, where a lucrative joint venture has bolstered profit and oil-output growth for several years. Concern is growing that the joint venture could be endangered as the Kremlin tightens its grip on its domestic oil industry.

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

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Anchorage Daily News
May 5, 2007

http://www.adn.com/news/politics/story/8855864p-8756376c.html

Federal authorities charge three legislators
REACTION: Rumor mill runs wild as three legislators stand handcuffed in federal court.
By SABRE AYRES
Anchorage Daily News
Published: May 5, 2007
Last Modified: May 5, 2007 at 05:03 AM

JUNEAU -- By 8:30 Friday morning, the Capitol rumor mill was flaming hotter than it had in months. Whispers swirled that indictments were on the way. Everyone was checking sources. Legislative aides compared notes in hallways. Normally media-shy lawmakers asked reporters "What are you hearing?"

 Security guards at the front desk joked that they were keeping an eye out for tinted-window vans full of FBI agents.

By the end of the day, three state legislators-- one of them still in office -- were standing handcuffed in a federal courtroom on charges of extortion and bribery. Lawmakers, less than two weeks from adjourning, questioned what events would mean for work still undone on Gov. Sarah Palin's gas line legislation, an ethics bill and the state budget.

"It made my stomach turn," said Sen. Hollis French, D-Anchorage, of the indictments. He said the charges raise questions about legislative passage of an oil tax last year.

Senate Minority Leader Gene Therriault, R-North Pole, agreed.

"Last year during the oil tax battle, we heard about stuff like this going on," Therriault said "But now we read the indictment and there's quotes in there that suggest it was (actually) happening."

Rep. Jay Ramras, a Fairbanks Republican, suggested the arrests would give momentum to Palin's gas pipeline proposal. Palin has emphasized an open and competitive application process to getting a North Slope gas line built, he said.

Others thought it was a hard knock, particularly for Weyhrauch, who made statewide news last month after falling out of his boat in Auke Bay and barely surviving hypothermia.

Speculation about the feds and indictments has been around for months. The FBI investigation that netted former Rep. Tom Anderson in December while he was still in office had an unfinished feel about it. Questions about who was next lingered, coloring the whole 2007 session.

By Friday afternoon, the buzz had focused on three current legislators whose offices the FBI searched last summer -- Sens. John Cowdery, R-Anchorage; Donny Olson, D-Nome; and Rep. Vic Kohring, R-Wasilla.

Olson and Cowdery braved the stares and tension, keeping their regular schedules, attending committee meetings and a floor session.

"I have no problems with my indictment," Cowdery told KTUU-TV. "I don't think it's ever going to be one."

Over in the House, Kohring, who works and sleeps in his office during the legislative session, was absent; he had been officially excused until Sunday for back surgery, according to his office.

By late afternoon, the two senators were gone from the building. Their offices declined to say where. But Kohring had been indicted. He turned himself in, was arraigned and released. He pleaded not guilty and his lawyer said he would fight the charges.

By 5 p.m., federal prosecutors handing the case signaled their work was done.

Done for Friday.

No one thought it was over.

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

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http://www.adn.com/news/politics/story/8853688p-8754302c.html

Kohring also charged with bribery, extortion
Wasilla legislator joins 2 former lawmakers under federal indictment
By LISA DEMER, DON HUNTER and SABRA AYRES
Anchorage Daily News
Published: May 4, 2007
Last Modified: May 5, 2007 at 04:35 AM

State Rep. Vic Kohring and former state legislators Pete Kott and Bruce Weyhrauch were charged in federal court today with extortion and bribery in connection with the Legislature’s consideration of an oil tax bill and then-Gov. Frank Murkowski’s natural gas pipeline proposal last year.

Kohring, R-Wasilla, turned himself in to federal authorities this afternoon at the Juneau federal building, according to Eric Gonzalez, an FBI spokesman. He is charged with four counts of extortion and bribery.

Kohring’s arrest occurred just hours after Kott and Weyhrauch were arrested as a result of a federal indictment on several counts of extortion, bribery, wire fraud and mail fraud.

Kott was arrested at home in Juneau around 9 a.m. today, a spokesman for the FBI said. Weyhrauch surrendered to federal authorities.

All three were brought in handcuffs into federal court in Juneau this afternoon for arraignment. They pleaded not guilty, and each was released.

U.S. Magistrate John D. Roberts set a July 9 trial date for Kott and Weyhrauch. No trial date was set for Kohring. All trials are to occur in Anchorage.

In a written statement put out by his office, Kohring said he plans to fight the allegations against him and thinks he will be vindicated.

The charges against all three involve the Legislature’s consideration last year of Murkowski’s gas pipeline agreement and a petroleum production tax. Kott, a former House speaker from Eagle River, is accused of seeking and accepting bribes to push positions favored by executives of a company that is not named in the indictment. Weyhrauch traded votes for the promise of a job, according to the charges.

In a press release issued in Washington, D.C., late today, Assistant Attorney General Alice S. Fisher said the indictments accuse the three defendants of selling “their offices in Alaska’s state House to an influential energy company in exchange for cash payments, loans, jobs for relatives and the promise of future employment. … We will work hard to bring to justice elected officials who betray their duty to their constituents.”

The company is referred to throughout both indictments as "Company A" and is described as a privately owned company that "provided services to the energy, resources and process industries" and "took an active interest" in the Legislature. Amy Menard, an attorney for Veco Corp., said this afternoon that Anchorage-based Veco is that company.

Two company officials referred to in the charges but not named are chief executive Bill Allen and vice president for community and government affairs Rick Smith, Menard said.

No charges have been filed against Veco, Allen or Smith. Menard represents only Veco, not Allen or Smith.

“I can tell you what is important to know is that Veco has been in active cooperation with the Department of Justice since last August, when Veco learned of the investigation,” Menard said. “I think the indictment is pretty clear -- Veco has not been charged with anything.”

The indictment also refers to a prison in Barbados that “Company A” was constructing. Veco’s Web site indicates the company was building such a facility last year.

Kott lost his Eagle River seat in the state House in last year’s Republican primary. Weyhrauch, an attorney, did not seek re-election to his House seat representing Juneau. Both left office in January. Both were among the six lawmakers whose offices were raided by federal agents in August as part of an investigation into corruption.

Kohring was re-elected in November. He has chaired the House Special Committee on Oil and Gas for about four years.

The indictment covers a period from September 2005 through August 2006. The Legislature considered the pipeline and oil tax proposals during regular and special sessions during that time.

Gov. Sarah Palin was in Barrow today. “This is a sad day for Alaska, and I am sad with all of you,” Palin said in a prepared statement.

Lawmakers in both political parties reacted to the indictment today with disgust.

“It made my stomach turn,” said state Sen. Hollis French, D-Anchorage.

“It’s unimaginable that a person would compromise his integrity for a trumped-up flooring bill,” said state Rep. Jay Ramras, a Fairbanks Republican.

Kott co-owns a flooring business, and the chief executive of Company A allegedly paid a “fraudulently inflated” bill to that business.

French said the charges call into question the process the Legislature followed last year in passing the oil tax. Ramras said this may lend momentum to Palin’s version of a gas pipeline proposal. Palin has emphasized an open process.

The indictment against Kohring accused him of accepting between $2,100 and $2,600 in several cash payments from the Veco executives and soliciting them for a $17,000 loan to cover a credit-card debt that was turning into an embarrassment.

During a March 4, 2006, meeting in Veco’s hotel accommodations -- Suite 604 in the Westmark Baranof Juneau Hotel -- the chief executive, Allen, told the vice president, Smith, that he had “just given ‘a thousand’ to Kohring and that, as a result of the payment, Kohring ‘would kiss our ass,’” the indictment says.

In subsequent conversations, Kohring told the company executives he was offering his services and could “be an information source” and “lobby on (their) behalf,” the charges say.

On March 30, during a meeting in Suite 604, Kohring told the Veco executives about the $17,000 credit-card debt that he could not pay, the indictment says. He asked “about the possibility of receiving a job or some sort of work with Company A or securing a $17,000 loan” from the company’s chief executive, Allen. They discussed how to structure the transaction “to avoid any ‘red flags’ with the Alaska Public Offices Commission,” the state’s campaign finance watchdog, according to the charges.

In return, Kohring promised to try to steer his colleagues to support the version of the oil tax legislation supported by Veco, the indictment says. The company later hired a relative of Kohring, and the Wasilla Republican told the company vice president, Smith, to contact him again if he needed legislative help, the charges say.

The indictment against Kott and Weyhrauch says Kott asked executives of the unnamed company for money and a job after he left the Legislature. Weyhrauch, an attorney, asked for a job doing legal work, the indictment says.

On about Sept. 26, 2005, the indictment says, Kott called an unnamed company vice president and said, “I need a job.”

The vice president replied, “You’ve got a job; get us a pipeline,” the indictment says.

In another conversation later that day, Kott told the same executive, “I just want to be the warden in Barbados,” the indictment says. Veco, the unnamed company in the indictment, was building a private prison in Barbados.

After the Legislature convened in January 2006, the conversations between Kott and the company officials about the gas line deal continued, the indictment says. In a telephone call on Jan. 10, the indictment says, Kott called the chief executive, Allen, and told him, “I’m going to get this f------ gas line done so I can get out of here.”

The executive replied, “Get the gas, get the gas,” to which Kott responded, “That’s my commitment to you, so … I’ll get her done.”

The company preferred the version of the oil tax originally proposed by Gov. Murkowski, the indictment says. It called for a 20 percent production tax rate matched by a 20 percent tax credit for expenses of finding new oil supplies.

Among other things, Kott is accused of trying to pressure another legislator into supporting the company’s position on the oil tax by placing a “hold” on a bill that was important to that lawmaker.

The indictment accused Kott of plainly linking his efforts to gain passage of the preferred version of the gas line and oil tax measures to getting something in return from the company. In a meeting on April 18, 2006, Kott told the company executives, “You’ll get your pipeline, the governor gets his bill and I’ll get my job in Barbados.”

On May 5, the indictment says, Weyhrauch called the company’s chief executive and told him the Legislature “needed to ‘hold the line’ ” on the company’s preferred version of the gas tax. The executive responded, “When the session is over, you need to come up and talk to me,” the charges say.

“I’ll do that right away,” Weyhrauch responded. Kott met with the company executives in their hotel suite on May 7, the indictment says, and told them he had tried to defeat an amendment to the oil tax the company didn’t like.

“I had to cheat, steal, beg, borrow and lie,” Kott said, according to the indictment.

The company’s chief executive responded, “I own your ass,” the indictment says.

A day later, Weyhrauch told the executives he would vote with Kott on the oil tax bill, the indictment says.

About a week later, the indictment says, Weyhrauch responded to an e-mail from the Allen. Part of his e-mailed response: “I will be arriving in Anchorage on Wednesday, May 25, and would like to meet with you at 4 p.m. to discuss a mutually beneficial relationship.”

The indictment also refers to an unnamed “State Senator A.” In a June 5, 2006, telephone call between that senator and the company’s chief executive, the indictment says, the two agreed that Weyhrauch’s support for the company’s oil tax stance occurred because of the executive’s offer of legal work, the indictment says. State Senator A is described as someone who left office in January.

Kott accepted a total of almost $12,000 total in cash, an inflated payment for flooring work and for a political poll the company secretly paid for, the indictment says.

The company’s chief executive handed the Eagle River Republican $1,000 in cash on June 1, during a meeting at the company’s hotel suite, the indictment says.

At the same meeting, Kott said he wanted to be a lobbyist after he left the Legislature, the charges say. “Well, you will be,” the executive responded.

The company later that summer paid an unnamed pollster $2,750 to conduct a political poll for Kott’s campaign, the indictment says, and later paid Kott’s hardwood flooring company $7,993 for what the charges describe as “a fraudulently inflated invoice.”

Weyhrauch told a company vice president he would “shoe-horn” himself into a meeting of legislators looking at a new version of the oil tax and report back, the indictment says.

According to the Justice Department press release, Kohring, Kott and Weyhrauch, if convicted, would face a maximum 20 years in prison and $250,000 fines on the extortion counts, a maximum 10 years and $250,000 fines on the bribery count, and five years and $250,000 fines on a conspiracy count. Kott and Weyhrauch also could could face 20 years and $250,000 fines on the mail and wire fraud counts.

Reporter Don Hunter can be reached at
dhunter@adn.com  or 257-4349. Reporter Lisa Demer can be reached at ldemer@adn.com or 257-4390. Reporter Sabra Ayres can be reached in Juneau at sayres@adn.com   or 907-586-1531.

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KTUU
May 4, 2007

 Kott, Weyhrauch and Kohring arrested for corruption
by Jill Burke
Friday, May 4, 2007

VIDEO
javascript:playVideo('1415750',%20'Indictments%20and%20reaction',%20'v',%20'Video%20Player',%20'531534',%20'News%20-%20Breaking%20News',%

ANCHORAGE, Alaska -- They are charges that have been rumored and anticipated since August of last year, when FBI agents raided the offices of six state lawmakers.

Today, three arrests were made in Juneau on 11 federal charges.

Former House Speaker Pete Kott, R-Eagle River, and former Rep. Bruce Weyhrauch, R-Juneau, were arrested this morning on charges that include extortion and bribery.     

And late this afternoon, current Wasilla Rep. Vic Kohring turned himself in to agents at the Juneau Federal Building and has been indicted on similar charges.

The three are accused of accepting money and the promise of jobs in exchange for doing the bidding of the oil support company VECO Corporation and its chief executive, William Allen.    

And although neither VECO nor Allen is named directly in the indictment, there is little doubt the company and its chairman were targets of the investigation.

Specifically, a 27-page indictment accuses Kott and Weyhrauch of soliciting Allen, and VECO's chief lobbyist, Rick Smith, for favors in exchange for their votes on the controversial petroleum production tax, or PPT, that was heavily debated through two special sessions last year.       

According to the indictment, Allen and VECO wanted former Gov. Frank Murkowski's proposed tax rate of 20 percent, and Kott and Weyhrauch agreed to work on VECO's behalf to try and secure that.      

Today in Juneau, Kott was arraigned on both bribery and extortion charges, along with one count of wire fraud.     

He pleaded not guilty.  

Thirty minutes later, Weyhrauch was indicted on his own bribery and extortion charges, along with one count of mail fraud.

He too entered not guilty pleas.

The FBI's investigation dates back to September 2005, when the indictment says Kott phoned VECO and said he needed a job, to which the company vice president replied, "You've got a job, get us a pipeline."

The indictment quotes phone conversations between Kott and Allen, in which Kott asks for instructions at the start of last year's session.

Toward the end of the session, the indictment says Weyhrauch solicited legal work with VECO in exchange for his support.

Much of the information in the indictment is in the form of conversations held in VECO's Juneau office, suite 604 of the Westmark Baranof Hotel.

In one exchange, after Kott successfully killed an amendment that VECO didn't like, he boasts, "I had to cheat, steal, beg, borrow and lie."

Allen replied, "I own your ass."

The indictment says Kott ultimately accepted approximately $1,000 in cash and nearly $8,000 in a personal check written by Allen to Kott's Flooring Co. -- a private business owned by Kott -- for what the FBI calls a fraudulently inflated invoice.  

The indictment also says VECO paid more than $2,700 for a poll on behalf of Kott's re-election campaign.     

And on top of the cash, the indictment accuses Kott of soliciting, and VECO agreeing to make Kott a lobbyist when he leaves the Legislature.

As for Weyhrauch, the indictment says he did not solicit cash; rather, he was looking for VECO to provide him with legal contract work for his law practice.    

This afternoon, VECO issued a press release acknowledging Allen and Smith are the unnamed VECO executives in the indictment.

"We learned about the government's investigation August 31 and immediately began cooperating from that date forward," said Amy Menard, who represents VECO Corp.

Menard added that Allen and Smith are both still associated with the company, but would not comment on future events.

Based on information in the indictment, it seems clear that the FBI had surveillance equipment, cameras and microphones in VECO's Juneau suite.  

The findings and conversations in the indictments reveal just how coarse and raw business got behind closed doors as lawmakers deliberated PPT.

In one exchange in suite 604, the indictment says Kott admitted if it were not for Bill Allen, Kott would have supported a much higher tax rate of 30 percent for the PPT bill, and not the 20 percent VECO wanted.    

The indictment paints a picture of two lawmakers who needed money, and were willing to trade their influence to get it.    

Even in spite of that influence, the Legislature ultimately passed a PPT rate of 22.5 percent, not the 20 percent rate VECO was trying to hold it to.     

According to FBI sources and former legislators, this could be the first of additional indictments in the future, and there is a state senator included in the indictment identified only as "Senator A."

"Senator A" is further identified in the indictment as a member whose term ended in January of this year.The indictment says that Kott was directed by Allen and Smith to coordinate his actions with that state senator.       

The only senators whose terms ended this January were Ralph Seekins of Fairbanks, Anchorage Sen. Gretchen guess and then-Senate President Ben Stevens.     

Stevens has listed VECO as a client of his consulting business.

Reporter Jill Burke may be contacted at
jburke@ktuu.com 
Reporters John Tracy, Steve Mac Donald and Bill McAllister contributed to this story.

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Lawmakers were expecting indictments sooner or later
by Bill McAllister
Friday, May 4, 2007

VIDEO
javascript:playVideo('1415750',%20'Indictments%20and%20reaction',%20'v',%20'Video%20Player',%20'531534',%20'News',%20'',%20'');

JUNEAU, Alaska -- At the Capitol, it's a day that has been long coming, but that most people expected sooner or later.

There long had been speculation about who would be indicted, and in what order.    

Now that it has happened, lawmakers hope for as little pain as possible in bringing the cases -- and the legislative session -- to a speedy conclusion.

Freshman Representative Anna Fairclough was taken aback at news that the legislator she defeated in last summer's Republican primary election, former House Speaker Pete Kott, was under arrest.

"I'm stunned," she said.

Fairclough said that during the campaign, Kott had "ran clean."

"We disagreed on some issues, some sparks as far as that goes, but nothing certainly to indicate any indictment of any kind coming forward," she said.

Current House Speaker John Harris also commented on the indictments, but said Kott, former Juneau Rep. Bruce Weyhrauch and Wasilla Rep. Vic Kohring were innocent until proven guilty.

"It's always sad when people are accused, and that's all at this point in time it is, is an accusation," said Harris, R-Valdez.
 

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Anchorage Daily News
May 4, 2007

EXTRA
http://www.adn.com/news/politics/story/8853688p-8754302c.html

Kohring also charged with bribery, extortion
Wasilla legislator joins 2 former lawmakers under federal indictment
By LISA DEMER, DON HUNTER and SABRA AYRES
Anchorage Daily News
Published: May 4, 2007
Last Modified: May 4, 2007 at 07:07 PM

PDF: Indictment (Kohring)
http://www.adn.com/static/includes/alaskapolitics/kohring.pdf
-PDF: Indictment (Kott & Weyhrauch)
http://www.adn.com/static/includes/alaskapolitics/kottweyhrauch.pdf
-PDF: Indictment (Anderson)
http://www.adn.com/static/includes/fbi_raid/120706_%20Indictment.pdf
-VECO press release
http://www.adn.com/static/includes/alaskapolitics/veco.pdf
-Audio: Gavel to Gavel (Berkowitz confronts Weyhrauch on the House floor, May 8, 2006)
http://www.adn.com/static/includes/alaskapolitics/floorexchange2.mp3
-Audio: Governor Palin (Sad day for Alaska)
http://www.adn.com/static/includes/alaskapolitics/palinV1.mp3
-Audio: Governor Palin (Clean up government)
http://www.adn.com/static/includes/alaskapolitics/palinV2.mp3
-Audio: Governor Palin (Alaskans' resources)
http://www.adn.com/static/includes/alaskapolitics/palinV3.mp3

State Rep. Vic Kohring and former state legislators Pete Kott and Bruce Weyhrauch were charged in federal court today with extortion and bribery in connection with the Legislature’s consideration of an oil tax bill and then-Gov. Frank Murkowski’s natural gas pipeline proposal last year.

Kohring, R-Wasilla, turned himself in to federal authorities this afternoon at the Juneau federal building, according to Eric Gonzalez, an FBI spokesman. He is charged with four counts of extortion and bribery.

Kohring’s arrest occurred just hours after Kott and Weyhrauch were arrested as a result of a federal indictment on several counts of extortion, bribery, wire fraud and mail fraud.

Kott was arrested at home in Juneau around 9 a.m. today, a spokesman for the FBI said. Weyhrauch surrendered to federal authorities.

All three were brought in handcuffs into federal court in Juneau this afternoon for arraignment. They pleaded not guilty, and each was released.

U.S. Magistrate John D. Roberts set a July 9 trial date for Kott and Weyhrauch. No trial date was set for Kohring. All trials are to occur in Anchorage.

In a written statement put out by his office, Kohring said he plans to fight the allegations against him and thinks he will be vindicated.

The charges against all three involve the Legislature’s consideration last year of Murkowski’s gas pipeline agreement and a petroleum production tax. Kott, a former House speaker from Eagle River, is accused of seeking and accepting bribes to push positions favored by executives of a company that is not named in the indictment. Weyhrauch traded votes for the promise of a job, according to the charges.

In a press release issued in Washington, D.C., late today, Assistant Attorney General Alice S. Fisher said the indictments accuse the three defendants of selling “their offices in Alaska’s state House to an influential energy company in exchange for cash payments, loans, jobs for relatives and the promise of future employment. … We will work hard to bring to justice elected officials who betray their duty to their constituents.”

The company is referred to throughout both indictments as "Company A" and is described as a privately owned company that "provided services to the energy, resources and process industries" and "took an active interest" in the Legislature. Amy Menard, an attorney for Veco Corp., said this afternoon that Anchorage-based Veco is that company.

Two company officials referred to in the charges but not named are chief executive Bill Allen and vice president for community and government affairs Rick Smith, Menard said.

No charges have been filed against Veco, Allen or Smith. Menard represents only Veco, not Allen or Smith.

“I can tell you what is important to know is that Veco has been in active cooperation with the Department of Justice since last August, when Veco learned of the investigation,” Menard said. “I think the indictment is pretty clear -- Veco has not been charged with anything.”

The indictment also refers to a prison in Barbados that “Company A” was constructing. Veco’s Web site indicates the company was building such a facility last year.

Kott lost his Eagle River seat in the state House in last year’s Republican primary. Weyhrauch, an attorney, did not seek re-election to his House seat representing Juneau. Both left office in January. Both were among the six lawmakers whose offices were raided by federal agents in August as part of an investigation into corruption.

Kohring was re-elected in November. He has chaired the House Special Committee on Oil and Gas for about four years.

The indictment covers a period from September 2005 through August 2006. The Legislature considered the pipeline and oil tax proposals during regular and special sessions during that time.

Gov. Sarah Palin was in Barrow today. “This is a sad day for Alaska, and I am sad with all of you,” Palin said in a prepared statement.

Lawmakers in both political parties reacted to the indictment today with disgust.

“It made my stomach turn,” said state Sen. Hollis French, D-Anchorage.

“It’s unimaginable that a person would compromise his integrity for a trumped-up flooring bill,” said state Rep. Jay Ramras, a Fairbanks Republican.

Kott co-owns a flooring business, and the chief executive of Company A allegedly paid a “fraudulently inflated” bill to that business.

French said the charges call into question the process the Legislature followed last year in passing the oil tax. Ramras said this may lend momentum to Palin’s version of a gas pipeline proposal. Palin has emphasized an open process.

The indictment against Kohring accused him of accepting between $2,100 and $2,600 in several cash payments from the Veco executives and soliciting them for a $17,000 loan to cover a credit-card debt that was turning into an embarrassment.

During a March 4, 2006, meeting in Veco’s hotel accommodations -- Suite 604 in the Westmark Baranof Juneau Hotel -- the chief executive, Allen, told the vice president, Smith, that he had “just given ‘a thousand’ to Kohring and that, as a result of the payment, Kohring ‘would kiss our ass,’” the indictment says.

In subsequent conversations, Kohring told the company executives he was offering his services and could “be an information source” and “lobby on (their) behalf,” the charges say.

On March 30, during a meeting in Suite 604, Kohring told the Veco executives about the $17,000 credit-card debt that he could not pay, the indictment says. He asked “about the possibility of receiving a job or some sort of work with Company A or securing a $17,000 loan” from the company’s chief executive, Allen. They discussed how to structure the transaction “to avoid any ‘red flags’ with the Alaska Public Offices Commission,” the state’s campaign finance watchdog, according to the charges.

In return, Kohring promised to try to steer his colleagues to support the version of the oil tax legislation supported by Veco, the indictment says. The company later hired a relative of Kohring, and the Wasilla Republican told the company vice president, Smith, to contact him again if he needed legislative help, the charges say.

The indictment against Kott and Weyhrauch says Kott asked executives of the unnamed company for money and a job after he left the Legislature. Weyhrauch, an attorney, asked for a job doing legal work, the indictment says.

On about Sept. 26, 2005, the indictment says, Kott called an unnamed company vice president and said, “I need a job.”

The vice president replied, “You’ve got a job; get us a pipeline,” the indictment says.

In another conversation later that day, Kott told the same executive, “I just want to be the warden in Barbados,” the indictment says. Veco, the unnamed company in the indictment, was building a private prison in Barbados.

After the Legislature convened in January 2006, the conversations between Kott and the company officials about the gas line deal continued, the indictment says. In a telephone call on Jan. 10, the indictment says, Kott called the chief executive, Allen, and told him, “I’m going to get this f------ gas line done so I can get out of here.”

The executive replied, “Get the gas, get the gas,” to which Kott responded, “That’s my commitment to you, so … I’ll get her done.”

The company preferred the version of the oil tax originally proposed by Gov. Murkowski, the indictment says. It called for a 20 percent production tax rate matched by a 20 percent tax credit for expenses of finding new oil supplies.

Among other things, Kott is accused of trying to pressure another legislator into supporting the company’s position on the oil tax by placing a “hold” on a bill that was important to that lawmaker.

The indictment accused Kott of plainly linking his efforts to gain passage of the preferred version of the gas line and oil tax measures to getting something in return from the company. In a meeting on April 18, 2006, Kott told the company executives, “You’ll get your pipeline, the governor gets his bill and I’ll get my job in Barbados.”

On May 5, the indictment says, Weyhrauch called the company’s chief executive and told him the Legislature “needed to ‘hold the line’ ” on the company’s preferred version of the gas tax. The executive responded, “When the session is over, you need to come up and talk to me,” the charges say.

“I’ll do that right away,” Weyhrauch responded. Kott met with the company executives in their hotel suite on May 7, the indictment says, and told them he had tried to defeat an amendment to the oil tax the company didn’t like.

“I had to cheat, steal, beg, borrow and lie,” Kott said, according to the indictment.

The company’s chief executive responded, “I own your ass,” the indictment says.

A day later, Weyhrauch told the executives he would vote with Kott on the oil tax bill, the indictment says.

About a week later, the indictment says, Weyhrauch responded to an e-mail from the Allen. Part of his e-mailed response: “I will be arriving in Anchorage on Wednesday, May 25, and would like to meet with you at 4 p.m. to discuss a mutually beneficial relationship.”

The indictment also refers to an unnamed “State Senator A.” In a June 5, 2006, telephone call between that senator and the company’s chief executive, the indictment says, the two agreed that Weyhrauch’s support for the company’s oil tax stance occurred because of the executive’s offer of legal work, the indictment says. State Senator A is described as someone who left office in January.

Kott accepted a total of almost $12,000 total in cash, an inflated payment for flooring work and for a political poll the company secretly paid for, the indictment says.

The company’s chief executive handed the Eagle River Republican $1,000 in cash on June 1, during a meeting at the company’s hotel suite, the indictment says.

At the same meeting, Kott said he wanted to be a lobbyist after he left the Legislature, the charges say. “Well, you will be,” the executive responded.

The company later that summer paid an unnamed pollster $2,750 to conduct a political poll for Kott’s campaign, the indictment says, and later paid Kott’s hardwood flooring company $7,993 for what the charges describe as “a fraudulently inflated invoice.”

Weyhrauch told a company vice president he would “shoe-horn” himself into a meeting of legislators looking at a new version of the oil tax and report back, the indictment says.

According to the Justice Department press release, Kohring, Kott and Weyhrauch, if convicted, would face a maximum 20 years in prison and $250,000 fines on the extortion counts, a maximum 10 years and $250,000 fines on the bribery count, and five years and $250,000 fines on a conspiracy count. Kott and Weyhrauch also could could face 20 years and $250,000 fines on the mail and wire fraud counts.

Reporter Don Hunter can be reached at dhunter@adn.com or 257-4349. Reporter Lisa Demer can be reached at ldemer@adn.com or 257-4390. Reporter Sabra Ayres can be reached in Juneau at sayres@adn.com or 907-586-1531.

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Houston Chronicle
May 4, 2007

http://www.chron.com/disp/story.mpl/business/energy/4774310.html

Internal investigation called for BP firings
Four executives criticized for flaws and risky culture
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

An internal BP investigation, detailed for the first time Thursday, recommended that four executives be fired for management shortcomings in a "culture of risk taking" leading up to the 2005 explosion that killed 15 people at BP's Texas City refinery.

The two-part report of the "management accountability" probe also chastised John Manzoni, the London-based company's chief executive of refining and marketing, but didn't call for his termination.

The plant blast investigation, led by BP group vice president Wilhelm Bonse-Geuking, was finished in February but remained under wraps until Thursday, after a Texas appeals court upheld a state district judge's order that it be made public. BP fought to prevent public identification of the men recommended for firing.

Recent resignation

The report's unveiling on Thursday came two days after BP chief John Browne abruptly resigned, acknowledging that he had lied to a court about where he met a former companion.

He denied related allegations that he misused company resources to benefit the man, and the company said it had cleared him of those accusations.

The report didn't mention Browne in any context.

It criticized Manzoni for failing to mitigate risks at the plant and said he should have dug deeper into its safety environment after three deaths and an explosion in 2004.

But it recommended only that BP's board consider his accountability and concluded that none of his actions or inactions "rose to the level of serious neglect or intentional misconduct."

The report recommended firing Mike Hoffman, group vice president of refining and marketing; Pat Gower, regional vice president, North America; Don Parus, refinery manager; and Willie Willis, supervisor of the unit where the explosion occurred.

Hoffman retired in December. Gower still works for BP and has not been relieved of his duties, according to a person familiar with the matter.

Judson Starr, a lawyer representing Parus, said his client is still employed and has been on administrative leave since the blast. Efforts to reach Willis on Thursday were unsuccessful.

BP spokesman Neil Chapman declined comment on the report or the men's employment status.

But he said BP "has completed its review of the report, considered the recommendations and taken all the actions on them that the company intends to take."

No 'gross negligence'

The report said Bonse-Geuking's team found "absolutely no evidence of any gross negligence or of any willful or intentional behavior that contributed in any way" to the blast.

But the team said it found that the four men "failed to perform their management abilities in significant ways, and recommends that BP seek ways to conclude their employment relationships on fair and just terms, in a timely manner."

Specifically, the report said they didn't perform their roles adequately, demonstrated poor judgment and failed to lead properly.

The report praised Parus for investigating the 23 deaths in the past 30 years at the refinery, and his efforts to speak to management about that "appalling record."

But it said his efforts to improve safety focused on personal safety  such as preventing falls  rather than process safety, which involves operation of equipment and handling of hazardous materials.

Regarding the others, the report said that Hoffman blames BP and his predecessors for the disaster rather than considering his own accountability; that Gower failed to appreciate process safety implications for the "dilapidated state" of the refinery; and that Willis' management style allowed for operational breaches.

Overall, the report said the refinery "had a culture of risk taking" coupled with a failure to understand importance of process safety.

Those criticisms echoed similar conclusions reached by the U.S. Chemical Safety and Hazard Investigation Board and an independent panel led by former Secretary of State James A. Baker III.

'Final validation'
Brent Coon, an attorney representing scores of injured workers suing BP, on Thursday called the report a "final validation" that years of budget cuts at the refinery  both before and after BP bought it from Amoco in 1998  put it on a collision course with disaster.

The chemical safety board also said budget cuts played a major role, but BP has disputed that conclusion.

Coon also said Thursday that he intends to keep trying to depose Browne in ongoing civil litigation despite the ex-CEO's hasty exit this week.

Browne had been scheduled to give the deposition in London in February.

But BP lawyers say he should be exempt because he had no personal knowledge of the blast and CEOs should be spared when testimony from other executives will suffice.

The dispute is pending before the Texas Supreme Court. Coon said he has filed papers asking the court to deem the issue moot and order a deposition because Browne is no longer CEO.

"We can take the position that he is no longer in charge of the affairs of BP and he has much more time to discuss matters relevant to the case," Coon said.

Also, Coon noted that upon resigning, Browne admitted publicly that he had lied in a British court about the circumstances under which he had met his ex-companion.

Coon said he hoped Browne would "finish with his con- fessions" by giving a deposition.

kristen.hays@chron.com


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http://www.chron.com/disp/story.mpl/special/05/blast/4772233.html

BP report faults top managers for 2005 Texas City plant blast
By JUAN A. LOZANO
Associated Press

An internal report by BP PLC about its deadly 2005 Texas City plant explosion recommended that four executives and managers be fired for failing to perform their jobs and demonstrating poor judgment.

The report, which had been confidential but was released by court order today, also concluded the accountability of John Manzoni, BP's top refinery executive, should be reviewed by the company after he "failed to implement his duties" and didn't "carry out his responsibilities."

The report was released two days after the resignation of BP Chief Executive John Browne, who stepped down when a judge lifted a legal injunction that had prevented a newspaper from publishing details of his private life.

The February report singled out four managers who "failed to perform their management accountabilities in significant ways:" Mike Hoffman, BP's group vice president for refining and marketing; Pat Gower, U.S. refining vice president; Don Parus, the Texas City refinery manager; and Willie Willis, a plant supervisor.

Hoffman has resigned. The others are still employed by the company, according to the report.

BP spokesman Neil Chapman said the company would not discuss specific contents of the report, including what will happen to the managers or to Manzoni, who is chief executive of BP refining and marketing.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that investigated the accident, found that BP fostered bad management at the plant. The CSB also said cost-cutting moves by BP were factors in the explosion.

Brent Coon, an attorney representing many of the workers injured during the blast, said the report validates the theory that management, not low-level workers, should be held responsible for what happened.

"BP knew about it and chose not to do anything," said Coon, who had fought BP to have the report released. "We hope the entire industry learns from this."

The March 2005 explosion killed 15 people and injured more than 170 workers. The blast has so far cost the company around $2 billion in compensation payouts, repairs and lost profit.

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 geyser-like 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 about 40 miles southeast of Houston.

BP's report said there were management failures from the isomerization unit all the way up to the refining and marketing segment of the company, which Manzoni runs.

"A culture that evolved over the years seemed to ignore risk, tolerated noncompliance, and accepted incompetence ...," the report said.

Each of the four managers were cited for various failures. Gower was faulted for not initiating appropriate changes at the plant after being aware of such problems as unreported fires and leaks, and Parus was blamed for emphasizing personal safety over process safety.

The report said Manzoni was informed about safety risks as the plant, including several reports and presentations about previous accidents and fatalities.

"Process safety did not have the same priority, at least, as commercial issues for John, and there were important performance gaps from a management accountability perspective concerning his actions (or inactions)," the report said.

But BP also said that none of the management accountability failings the report identified caused the accident.

"The team found no evidence that anyone acted in bad faith or violated BP's Code of Conduct," Chapman said.

But Coon said this report and others released by BP and agencies that have investigated the accident show the company was aware of problems at the refinery but chose to ignore them.

"Executives all the way up to Manzoni were routinely being briefed on it but did nothing about it," he said.

Coon also said that with this week's resignation of Browne, he has given notice he will try to depose the former chief executive in Houston on Wednesday about what he knew of problems at the plant. Coon doesn't expect Browne will appear.

Browne, who turned BP into one of the world's top energy companies, resigned after he admitted lying to a judge when he tried to block a newspaper from printing allegations made by a former boyfriend that he misused company resources.

Efforts to question Browne have been on hold pending a ruling by the Texas Supreme Court after BP blocked the deposition. Coon said he filed a motion with the court Wednesday asking it to dismiss BP's appeal because Browne is no longer the chief executive.

Chapman said he was trying to determine if the company would continue fighting Browne's deposition now that he has resigned.

BP has said Browne does not have unique knowledge about what caused the explosion.

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Wall Street Journal
May 4, 2007

BP New CEO E-mail Vows Safety, Performance Focus - Source
DOW JONES NEWSWIRES
May 4, 2007 6:37 a.m.

 LONDON (Dow Jones)--BP PLC's (BP) new Chief Executive Tony Hayward has vowed to focus on performance and safety but also praised his predecessor's "outstanding" leadership in an e-mail to staff, according to a person familiar with the communication said Friday.

Hayward took over the role at the U.K. oil major when John Browne resigned suddenly from BP after acknowledging he lied to a U.K. court about how he met a former male lover. Hayward was due to take over as CEO Aug. 1.

But in his first statement to staff since he was hastily appointed, Hayward Thursday sent "a message of encouragement to BP employees emphasizing the company's priorities which are safety, people and performance," according to the person familiar with the e-mail.

"I am in no doubt that, while we face many challenges, there is a strong desire to get back to our winning ways," Hayward is quoted saying.

Hayward said he aims to "restore pride and performance and regain BP's position."

BP was perceived as one of the most successful companies in the oil business until a series of operational blunders in the past two years which included a deadly blast at its Texas City, Texas, refinery and the partial shutdown of an Alaska pipeline.

In an internal statement last year, Hayward said management should listen more carefully to staff. The view was perceived as a criticism of Browne, an interpretation Hayward denied.

In the e-mail Thursday, Hayward said he had accompanied Browne recently on trips where he "listened to BP employees' concerns and hopes for BP."

Hayward also praised his predecessor, saying: "John has been an outstanding leader. For those of us who have had the privilege to work closely with him, he has been both a guide and an inspiration."

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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Guardian Unlimited
May 4, 2007

http://business.guardian.co.uk/story/0,,2072134,00.html

Tale of two oil firms: Shell boosts profits as rival BP in turmoil
· Earnings lifted by one-off asset sales and lower tax
· Company still faces big problems at Nigerian wells
Terry Macalister
Friday May 4, 2007
The Guardian

Shell turned the screw on its struggling arch-rival BP yesterday when it reported a 14% rise in first-quarter net profits at $6.9bn (£3.47bn). It was higher than the City expected and a notable result compared with the 17% fall in earnings BP reported last week.
Shell's profits were boosted by lower taxes and gains on one-off investment sales, as well as higher refining margins. These compensated for a 6.3% slump in core oil and gas production due to problems in Nigeria and slower sales due to the relatively warm winter.

Jeroen van der Veer, the Shell chief executive, hailed the "competitive results", which he put down to a strong operating performance. "We have progressed two large and complex transactions, Sakhalin II and Shell Canada, which consolidate our position in two major resource areas. Our strategy is on track," he said.
Shell shares moved up 2% to £18.06 in London as City analysts noted the company had beaten their consensus forecasts for its earnings for the fifth successive quarter. Analysts at Citigroup questioned whether they had "structurally underestimated the cashflow generation of some of the company's assets".

But Shell was helped by its tax rate dropping from 42% to 35% and by a $404m special profit its insurance arm made from the sale of equity investments as it moved into bonds and other holdings.

There was an additional $371m gain related to non-operating items such as oilfield sales but the real increases will come in the second-quarter figures as Shell books the sale of $4.1bn of its stake in Sakhalin II to Gazprom, the Russian state owned energy company, after pressure from the government there.

The strong Shell results come at a time when BP is reeling from the resignation this week of its high-profile chief executive, John Browne, following a court case in which he had lied about the way he met a former partner. The top post has been taken on by Tony Hayward, who had been lined up to succeed Lord Browne this summer.

Although BP reported weaker financial results last week, its share price continues to outperform Shell's by around 11% under some measures. Shell still has a number of obstacles on its hands, such as production in Nigeria.

First-quarter production from Shell's Nigerian operation was 78,000 barrels a day lower than a year ago due to deferred output from the West Delta region, which has been hit by attacks from militant groups. Shell said yesterday it could give no firm date for a return to full production and restricted access to the area "continues to impact the future drilling programme and the progress of new projects".

Earnings in the first quarter from exploration and production were down 6% at $3.5bn while production was also down 6%, at 3.5m barrels of oil equivalents. But higher refining and marketing profits, plus a better performance from chemicals and power units helped overall profits.

Analysts at City broker Charles Stanley said: "The share price is underpinned by a strong balance sheet ... good operating cash flow and another good year for reserves replacement is in prospect."

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Financial Times
May 4, 2007

http://www.ft.com/cms/s/c2667b08-f9db-11db-9b6b-000b5df10621.html

Hayward reveals BP plans
By Ed Crooks in London and Sheila McNultyin Houston
Published: May 4 2007 03:00 |
Last updated: May 4 2007 03:00

BP will employ fewer contractors, bring more functions in-house and raise the length of time that managers stay in their jobs, its new chief executive has told staff in his first address since taking over on Tuesday.

Speaking in a webcast from BP's petrochemicals complex at Bochum in Germany, and in an e-mail to staff, Tony Hayward began to set out his plans for the company.

"I am in no doubtthat, while we facemany challenges, there isa strong desire to get back to our winning ways," hesaid.

One change he proposed was that BP should bring more of its activitiesin-house and outsource fewer functions, such as engineering and human resources.

He also said he wanted to slow down the rapid circulation of BP managers.

Since 2000, it has been common for managers to stay only 18-24 months in their jobs; Mr Hayward wants to raise that to three to four years, so that managers have more experience of the operations they are running.

The changes come asMr Hayward focuses on safety and the reliability of BP's operations as his top strategic priority. He is attempting to raise morale and restore the company's fortunes after its succession of problems, particularly in the US, including the explosion at the Texas City refinery in 2005 that killed 15 people.

Another early move forMr Hayward will be to decide on the future of John Manzoni, BP's chief executive of refining and marketing. Mr Manzoni was once seen as one of the leading contenders to succeed Lord Browne and had board responsibility for the Texas City refinery at the time of the explosion.

The Financial Times reported in February that an internal BP investigation into the blast had found that Mr Manzoni should have done a "much deeper dive" into the true state of the refinery after "clear warning signals" from previous accidents.

The issue of Mr Manzoni's future is likely to be raised at a meeting of BP's board in Washington next week.

In his e-mail to staff, Mr Hayward also paid tribute to the "outstanding" leadership of Lord Browne, his predecessor who resigned suddenly on Tuesday after a court ruling revealed that he had lied to a judge while trying to prevent the publication of allegations about his private life.

Mr Hayward described Lord Browne as "a great friend" and said: "In resigning, he placed the company ahead of himself, an act that epitomises John's feelings for BP."

In spite of all the problems of Lord Browne's latter years, there was deepanger among BP's UK staff about the manner of his departure.

BP to meet Bush as relations with congress sour

Tony Hayward, BP's new chief executive, is to meet President George W. Bush next week as relations with US lawmakers worsen, writes Sheila McNulty in Houston.

Yesterday, Congressmen had to delay a hearing on BP's troubled Alaskan oilfield after BP requested more time, having discovered "relevant material" had not been provided to the US House Committee on Energyand Commerce during earlier hearings lastyear.

In a letter to Bob Malone, president of BP America, John Dingell, chairman of the US House Committee on Energy and Commerce, said: "The discovery of this material has clearly raised questions about the adequacy of your response to the Committee, as well as previous spending decisions made by your company - concerns that you clearly acknowledge in your April 30 letter and that form the basis for your request for additional time to investigate both issues in more detail."

He noted that, despite going back nearly a yearfor such material, it was only on April 17 that BP provided a number of BP documents that reveal internal discussions suggesting a "severe cost-cutting atmosphere" at its Alaska oilfield.

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http://www.ft.com/cms/s/46c259a2-f9dd-11db-9b6b-000b5df10621.html

BP to meet Bush as relations with congress sour
By Sheila McNulty in Houston
Published: May 4 2007 03:00 |
Last updated: May 4 2007 03:00

Tony Hayward, BP's new chief executive, is to meet President George W. Bush next week as relations with US lawmakers worsen, writes Sheila McNulty in Houston.

Yesterday, Congressmen had to delay a hearing on BP's troubled Alaskan oilfield after BP requested more time, having discovered "relevant material" had not been provided to the US House Committee on Energyand Commerce during earlier hearings lastyear.

In a letter to Bob Malone, president of BP America, John Dingell, chairman of the US House Committee on Energy and Commerce, said: "The discovery of this material has clearly raised questions about the adequacy of your response to the Committee, as well as previous spending decisions made by your company - concerns that you clearly acknowledge in your April 30 letter and that form the basis for your request for additional time to investigate both issues in more detail."

He noted that, despite going back nearly a yearfor such material, it was only on April 17 that BP provided a number of BP documents that reveal internal discussions suggesting a "severe cost-cutting atmosphere" at its Alaska oilfield.


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http://www.ft.com/cms/s/34ecd23a-f9dc-11db-9b6b-000b5df10621.html

Browne well received in Brussels after sudden departure from BP
By Andrew Bounds in Brussels
Published: May 4 2007 03:00 |
Last updated: May 4 2007 03:00

Lord Browne traded the High Court for the Oxbridge debating club of his youth yesterday as he made a remarkably composed public appearance just two days after his sudden resignation as chief executive of BP.

Despite leaving BP after admitting lying to the court about his relationship with his former boyfriend, Canadian Jeff Chevalier, he fulfilled the longstanding engagement in Brussels - and even accepted questions from the floor at the open event organised in honour of Amartya Sen, the Nobel laureate.

The assorted suits attending - and a few ponytailed environmental campaigners - were a sympathetic bunch, mainly drawn from the alumni of Oxford, Cambridge and Harvard, where Mr Sen teaches, andEuropean officials.

When a British journalist attempted to ask Lord Browne whether he could face perjury charges he was shouted down by the crowd. Lord Browne, 59, said: "The last few days have been testing for me personally and I would like to express my deep gratitude for all the support I have received. I learned many things from my late mother, a survivor of Auschwitz. I learned that it is the future that is worth looking to."

There was plenty of support on show as Mr Sen referred to him as a "visionary", great leader and philanthropist.

Looking as unflappable as ever, Lord Browne told the Financial Times afterwards that lots ofpeople had been in touch to offer sympathy.

Far from being ostracised by the City, he said: "I have received plenty of offers."

Vladimir Putin, the Russian president, had approached him after he announced that he would be stepping down in July. "He asked me what I was going to do. I think it is a bit too early to think about that option," he said.

He declined to comment on the court case but - still referring to the company at which he spent 41 years as "we" - he said he would like to take part in the fight against climate change.

Brussels is a popular place for British stars looking to avoid the limelight. Stephen Fry, the actor, went to ground there midway through a West End play run and Sol Campbell, the Arsenal and Portsmouth footballer, fled there after a crisis of confidence. But yesterday Lord Browne chose it for his first step towards public rehabilitation.

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Fairbanks News Miner
May 3, 2007

http://newsminer.com/2007/05/03/6800

Congress postpones Prudhoe Bay hearing
By Eric Lidji
Staff Writer
Published May 3, 2007

Congressional leaders have given BP more time to prepare for a hearing detailing what work the oil company has done to prevent another shutdown at the Prudhoe Bay oil field like the one caused by pipeline corrosion in August.

BP America Inc. Chairman and President Bob Malone requested the extra time after congressional leaders found documents in mid-April suggesting the company cut back on corrosion prevention measures in order to save money.

Malone, in a letter to congressional leaders, said neither he nor Steve Marshall, the former head of BP Exploration in Alaska, were aware of the cost-cutting documents at the time of the first hearing and that the company needed more time to investigate how the document slipped through the cracks.

U.S. Rep. John Dingell, D-Mich., who chairs the House Energy and Commerce Committee, and Rep. Bart Stupak, D-Mich., chairman of the subcommittee on oversight and investigations, replied to Malone’s letter on Wednesday.

Dingell and Stupak said the documents from BP “reveal important internal discussions suggesting a severe cost-cutting atmosphere existed in your oil production operations at Prudhoe Bay” and that “On their face, this new material raises concerns that shortsighted cost-cutting may have led to the spills and corrosion problems in Alaska.”

The hearing, which had been scheduled for Thursday, is now set for May 16.

The hearing is intended to follow up on testimony BP delivered before a congressional committee last September, weeks after pipeline corrosion forced the company to decrease the oil flow through the pipeline by nearly 50 percent.

Dingell and Stupak asked BP to come to the hearing prepared to address the progress it has made on fixing the pipeline system.

The congressmen also want to know whether cost-cutting measures forced workers at Prudhoe Bay “to make difficult decisions between budget savings and program integrity” and whether cost-cutting played a role in the 2005 explosion that killed 15 workers at a refinery in Texas City.

“Rather than go into a hearing without understanding the context in which the documents were created and the issues raised in them were resolved, we requested a delay so that we could figure out what happened and why,” BP spokesman Ronnie Chappell said.

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

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Anchorage Daily News
May 3, 2007

http://www.adn.com/money/industries/oil/story/8850118p-8750775c.html

BP seeks more time to deliver North Slope spill files
TROUBLED: Executive tells of worker frustration with response to problem reports.
By KEVIN DIAZ
Anchorage Daily News
Published: May 3, 2007
Last Modified: May 3, 2007 at 02:51 AM

WASHINGTON -- A top BP executive has told congressional investigators that he is "troubled" by the extent of the frustrations expressed by oil field workers in the period leading up to last year's North Slope oil spills.

In a letter disclosed by congressional Democrats on Wednesday, BP America chairman and president Robert Malone also said key documents were withheld last September from lawmakers investigating whether cost-cutting measures were a factor in the pipeline corrosion that caused the North Slope's largest oil spill.

Malone, who took over at BP America after the spill discovered in March 2006 at the Prudhoe Bay oil field, said, "We need time to determine how the concerns and frustrations expressed by workers were ultimately resolved."

His letter, dated Monday, was released as leaders of the House Energy and Commerce Committee agreed to postpone a hearing on the Alaska oil spill until May 16.

Malone asked for more time to prepare for the hearing after facing new questions from committee leaders suggesting company scrimping might have compromised testing and maintenance that could have prevented the 201,000-gallon spill. Subsequent inspections turned up corrosion in another transit pipeline, leading to a partial shutdown of the field last August.

In a plea for more time, Malone echoed some of the committee's concerns, saying some of BP's recently produced records "raise concerns about previous spending decisions that cause me concern."

Malone acknowledged, for example, that "it appears that there were serious discussions" among BP officials about discontinuing injection of corrosion inhibitor into some of the North Slope pipelines between 2001 and 2004.

"I do not know if this happened at all," Malone added, "or, if it did, for how long, or what was the impact on the lines."

It was during this same time frame, he indicated, that worker frustrations were being vented -- apparently to no avail. That, he said, will change:

"I want to eliminate the frustration voiced in many of the documents by creating a culture in which workers are confident their concerns will be heard and addressed before they would ever reach the level of frustration expressed in these historical documents," Malone wrote.

In keeping with Malone's efforts to portray a new culture of openness at BP, he also acknowledged company officials failed to previously disclose a 2002 state compliance order making reference to pipeline sediments that could have contributed to pitting and corrosion.

Malone said the document only recently came to his attention and that of the head of BP Alaska. Nor was it disclosed to the Energy panel during a hearing last September.

While Malone said he has ordered an internal investigation, some company officials have determined that the document was initially overlooked because it pertained to leak detection and not specifically to corrosion.

But the connection became clearer as company officials have amassed some 20 million documents in connection with congressional and other federal investigations into the spill and subsequent oil disruptions in the nation's top-producing oil field.

"Our process for gathering and producing documents for the committee was not what it should have been," said BP spokesman Ronnie Chappell.

Congressional leaders cited Malone's misgivings about the missing documents in their decision to grant the company more time.

"We now know that BP proceeded with cost cutting measures that may have compromised pipeline safety while earning $22 billion in profits, but what we don't know is why," said Energy Committee Chairman John Dingell, D-Mich.

In a letter co-signed by fellow Michigan Democrat Bart Stupak, chairman of the panel's oversight subcommittee, Dingell said "the discovery of this material has clearly raised questions about the adequacy of your response to the committee, as well as previous spending decisions made by your company."

Reporter Kevin Diaz can be reached in Washington, D.C., at 202-383-0003 or
kdiaz@mcclatchydc.com.

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http://www.adn.com/money/industries/oil/story/8850118p-8749770c.html

Fall of BP boss illustrates perils of being gay in business world
BROWNE: Texas explosion, Alaska shutdown didn't do it; outing him unseated executive.
By JILL LAWLESS
The Associated Press
Published: May 3, 2007
Last Modified: May 3, 2007 at 02:51 AM

LONDON -- It wasn't the deaths of 15 workers at BP's Texas City plant that brought the company's chief executive down. Nor was it one of the largest North Slope oil spills ever at the British company's Prudhoe Bay, Alaska operations.

John Browne, the man who turned BP into one of the world's top energy companies, fell from grace after admitting he lied to a judge when he tried to block a newspaper from printing allegations of wrongdoing made by a former boyfriend.

The admission may have been the last straw after a series of troubles at the end of a storied career. But to some, Browne's resignation as chief executive Tuesday illustrates the power of Britain's tabloid press -- and the perils of being gay in the conservative world of big oil.

Stephen Coote, director of Britain's Gay Business Association, said "sport and business are the two last bastions" of institutional homophobia.

Browne, one of Britain's most powerful businessmen and a close associate of Prime Minister Tony Blair, resigned Tuesday after acknowledging that he lied during legal action to block the Mail on Sunday newspaper from publishing an interview with a former lover, Jeff Chevalier.

Browne, 59, told the judge he and Chevalier, a Canadian reportedly in his 20s, had met by chance in a London park. British media outlets reported that they met through an escort service Web site.

In a statement, Browne admitted he lied to the court and said it was "a matter of deep regret."

Judge David Eady rejected Browne's claim for privacy, saying the tycoon's lie had fatally undermined his case.


A TABLOID TAKES NOTE

Britain's scandal-loving tabloid press reveled in the story of what The Sun called the "Tycoon and the Rent Boy."

"There's a ring of Greek tragedy about the downfall of Lord Browne of Madingley," the Daily Mail said in an editorial, arguing that Browne had been brought down by "a fatal flaw in his character that led him to lie in court."

The Mail on Sunday denied intruding on Browne's private life, saying it had sought to publish "a business story involving issues of great importance to shareholders and employers of BP."

Browne was accused of using BP computers and staff to help Chevalier, of using support staff to set up and then wind down a company Browne created for him to run, and of sending a senior BP employee on a personal errand to deliver cash to him.

Browne rejected the allegations and BP said an internal inquiry had found them "unfounded or insubstantive."

But veteran gay-rights activist Peter Tatchell accused the newspaper of being motivated by homophobia in seeking to publish "uncorroborated kiss-and-tell revelations" about Browne.

"There is no public interest justification for this intrusion into Lord Browne's private life," Tatchell said.

Gay people remain much less prominent in the conservative world of business than in other walks of British life. The annual "Pink List" of powerful gay Britons, published by The Independent newspaper, includes actors, politicians, policemen, a Royal Navy officer, a senior judge -- but few corporate bosses.

"There aren't many high-profile gay businesspeople," said the Gay Business Association's Coote. But he said attitudes had changed drastically since Browne began his BP career four decades ago.

"I think the reaction from the business community is, 'So what? Is the share price good? Are you doing your job? We're not that interested in your sexuality.'

"Hopefully (Browne) is from the last generation where this will be an issue," Coote said.


TROUBLE IN RECENT YEARS

Browne's resignation ends a high-flying career. In his 12 years at the helm of BP, the company went from minor player to global energy giant.

Appointed chief executive in 1995, Browne oversaw BP's expansion into the United States, including its 1998 merger with Amoco and the subsequent acquisition of Arco.

Browne also led attempts to fashion BP as an environmentally friendly oil company, masterminding its logo change from a shield to a flowerlike sunburst design with the slogan "Beyond Petroleum."

His reputation had been tarnished, however, by the company's recent troubles in the United States.

A 2005 explosion at its Texas refinery that killed 15 workers was the worst U.S. industrial accident since 1990. BP also was forced to temporarily close some of its operations at the Prudhoe Bay field because of pipeline corrosion last year.

Browne had announced in January that he would resign at the end of July, more than a year ahead of schedule.

The markets shrugged off Browne's departure, with analysts saying the naming of Tony Hayward as chief executive should cause few ripples as he had already been set to take over on Aug. 1.
 

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Wall Street Journal
May 3, 2007

BP's New Chief Enters the Fray
First Among Hayward's Challenges:
Move Beyond the Browne Fallout
By BENOÎT FAUCON, CHIP CUMMINS and GUY CHAZAN
May 3, 2007; Page A12

Hastily installed as BP PLC's new chief executive Tuesday after his famed predecessor resigned amid a personal scandal, Tony Hayward faces a host of immediate challenges that will determine how fast the U.K. oil giant can regain direction and repair its battered reputation.

Among the toughest items on Mr. Hayward's agenda: living down the scandal surrounding former CEO John Browne, negotiating with an increasingly assertive Kremlin over the future of BP's lucrative joint venture in Russia, and navigating a series of regulatory and criminal inquiries into BP in the U.S.

In January, BP's board chose Mr. Hayward, 49 years old, to succeed Lord Browne, 59. Mr. Hayward was to take over at the end of July, but his transition period was cut short Tuesday, when Lord Browne stepped down following a controversy over his attempt to silence a British tabloid's account of his relationship with a 27-year-old man.

The long-serving BP boss admitted he lied to a British court about details of the relationship, a misstep that led the court to end his legal fight to keep the affair out of the public domain. He apologized and said Tuesday he would step down immediately. A spokeswoman for Lord Browne declined to comment further yesterday on his view on the possible perjury issue or on his career plans.

On Tuesday, the company said Lord Browne would lose his entitlement to a bonus of as much as 1.3 times his annual salary, valued at more than £3.5 million ($7 million). He also will forgo inclusion in BP's long-term performance share plan for 2007-2009, with a maximum potential value of some £12 million.

Lord Browne's professional prospects are unclear. Apax Partners, a giant European private-equity fund whose advisory board is headed by Lord Browne, said yesterday that he would stay on in that role. A spokesman for Goldman Sachs Group Inc., on whose board of directors Lord Browne sits, declined to comment.

Lord Browne may also face legal fallout for misleading the British court. But in a ruling, London High Court Judge David Eady said he didn't favor referring the matter to the attorney general because he considered the disclosure of Lord Browne's private life to be sufficient punishment.

On Tuesday, a BP spokesman said Mr. Hayward had been effectively running the company for the past month. A BP spokesman yesterday declined to say when Mr. Hayward, who hasn't commented publicly since Lord Browne's departure, would lay out his strategy as CEO.

Lord Browne leaves BP reeling from a series of operational problems and facing new challenges.

In the past, Mr. Hayward has said he plans to focus BP's personnel more closely on safety after a string of environmental and operational blunders. Mr. Hayward signaled in February that he would work to improve BP's existing assets rather than resuming the deal frenzy led by Lord Browne in the 1990s. "My priority is simple and clear: It is to implement our strategy, by focusing like a laser on safe and reliable operations," he said.

BP, which has seen its share performance trail that of rivals in recent months, has pared back its once-ambitious oil and natural-gas production-growth targets. And it had recently taken a series of large charges to earnings to bolster safety, maintenance and to settle a series of civil suits related to the biggest recent safety shortfall at the company, the March 2005 explosion at a Texas City, Texas, refinery that killed 15.

A number of regulators have castigated BP publicly for its poor record of refinery safety in the U.S., and top BP officials and employees face possible criminal charges stemming from the accident. The Justice Department is investigating BP's operations at its huge Prudhoe Bay oil field in Alaska. The field sustained two oil spills last year and a string of corrosion problems, triggering a partial shutdown of the field, sending oil prices soaring and prompting Congressional inquiries, which still continue.

Mr. Hayward also inherits several government investigations into BP's trading activities. A U.S. commodities-trading regulator and the Justice Department have alleged that BP traders manipulated the propane-gas market in parts of the U.S. in early 2004. BP has said it will contest the allegations in court, if necessary. Authorities are also investigating crude-oil and gasoline-market trading in the U.S., BP has confirmed. The company says it is cooperating with all probes.

Mr. Hayward, who most recently made his mark at the company as head of its core exploration-and-production division, also faces a political challenge: negotiations with the Kremlin over BP's lucrative joint venture in Russia, TNK-BP. Lord Browne surprised the energy world by forging a one-of-a-kind deal with the Kremlin in 2003, allowing BP to partner with a big Russian oil-production company. The deal has been a cash cow for BP and has bolstered the company's otherwise lackluster production growth in recent quarters.

But after Lord Browne signed his deal, President Vladimir Putin significantly tightened the Kremlin's control of Russia's vast petroleum industry, and other Western companies have been so far unsuccessful reaching similar deals. Late last year, Mr. Putin forced BP rival Royal Dutch Shell PLC to cede its controlling stake in an oil and natural-gas project in the Russian Far East to state-controlled OAO Gazprom, and take junior-partner status.

--Anousha Sakoui contributed to this article.

Write to Benoît Faucon at benoit.faucon@dowjones.com,  Chip Cummins at chip.cummins@wsj.com  and Guy Chazan at guy.chazan@wsj.com


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UPDATE:
US Reps: BP Withheld Prudhoe Papers; Hearing Delayed
DOW JONES NEWSWIRES
May 2, 2007 5:18 p.m.
 (Adds comments from BP spokesman.)
By Maya Jackson Randall
Of DOW JONES NEWSWIRES

 WASHINGTON (Dow Jones)--A U.S. House panel has postponed an oversight hearing into last summer's partial shutdown of Alaska's Prudhoe Bay oil field because it found that BP PLC (BP) withheld key documents from the panel.

Upon discovering that it had failed to turn over all requested documents to the House Energy and Commerce subcommittee on oversight and investigations, BP asked for more time to prepare for the hearing and provide the committee with additional materials, the committee said in a notice Wednesday.

The heads of the panel agreed to give the oil giant more time, rescheduling the May 3 hearing for May 16.

Bob Malone, president of BP's U.S. business, is expected to testify, according to a congressional aide and a company spokesman.

"We have worked very hard to produce documents and information for the subcommittee in a way we thought would meet their needs," said BP spokesman Ronnie Chappell. "The process we followed did not meet their expectations."

Chappell said the company has collected over 20 million documents that may be related to operations at Alaska's Prudhoe Bay.

"So organizing those documents ... has taken time," he said.

The spokesman declined to comment on lawmakers' claims that the new documents prove that cost-cutting measures led BP field managers to consider measures as "draconian" as cutting back on pipeline maintenance to save money.

"I'm not going to comment on that now," he said, noting that the company wants to take time to review the lawmakers' concerns and conduct additional research. "We want to be in a position to explain to the subcommittee what happened and why."

The House panel had scheduled the hearing as a follow-up to its Sept. 7, 2006, hearing.

The goal was to assess the efforts BP has taken to address the failures that led to pipeline leakage and corrosion and the shutdown of the nation's largest producing oil field.

But the new papers lawmakers said they finally received on April 17, after numerous requests, raise new concerns.

"The discovery of this material has clearly raised questions about the adequacy of your response to the committee, as well as previous spending decisions made by your company," said House Energy and Commerce Committee Chairman John Dingell, D-Mich., and Oversight and Investigations Subcommittee chairman Bart Stupak, D-Mich., in a letter to Malone on Wednesday.

"On their face, this new material raises concerns that shortsighted cost-cutting may have led to the spills and corrosion problems in Alaska," they said.

 -By Maya Jackson Randall, Dow Jones Newswires; 202-862-9263; Maya.Jackson-Randall@dowjones.com

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Guardian Unlimited
May 3, 2007

http://business.guardian.co.uk/story/0,,2070959,00.html

A sad departure
Leader
Thursday May 3, 2007
The Guardian

The heart sinks at the casuistry of all those who have professed indifference to Lord Browne's private life but have, with sad sighs, deplored the small but stupid lie to court which brought about the former BP chief executive's resignation on Tuesday afternoon. For the head of any company, let alone one of Britain's biggest and most respected, to attempt to mislead a court, even on a detail which would not have swayed the outcome and which hardly reduced his personal embarrassment, was foolish at the very minimum. But Lord Browne's lie - a "white lie", said Mr Justice Eady - was surely fuelled by vanity, humiliation and a wish for privacy. It was not in the category of Lord Archer or Jonathan Aitken's efforts to subvert justice (and seek damages) in libel cases, as Aitken himself argues in today's comment pages. Browne's downfall was the consequence of a paper's determination to intrude into his personal life, on the grounds that doing so would be in the public interest. Everything that has happened since flows from that.

Lord Browne is a public figure whose business activities are a proper area for media investigation. There has been no shortage of commentary about his stewardship of BP, both positive and negative, especially in the light of an explosion at one of the company's oil refineries in Texas in 2005, which killed 15 people, and the huge sums he has been paid. The Mail on Sunday, like any newspaper, has always been free to publish stories about this, or other aspects of BP's activities, not least the close links between the company and the government. It could have done so already on the basis of conversations with Lord Browne's former partner, Jeff Chevalier, without naming him. But the evidence points to the fact that the paper's original focus was not simply a business story. It also wanted (as is clear from court documents) to write about the relationship between a powerful business leader at the margins of celebrity and a young Canadian man.
In a happier world this should not have been enough to interest a newspaper. Homosexuality, it is comforting to think, is now no sort of scandal. Prejudice has become rarer. Last Monday, regulations came into force banning discrimination in services from hotels to the health service. But it is difficult to avoid concluding that at the heart of this case is the fact that Lord Browne was gay. He chose not to discuss the matter for reasons that may have involved both personal reticence and his business dealings with countries less tolerant than Britain. This left him vulnerable after his four-year relationship ended, even though - as is apparent from BP's own investigations - there was no scandal to expose. The intrusion involved dragging a failed relationship into print - no matter that the European convention on human rights offers the assurance that "everyone has the right to respect for his private and family life, his home and his correspondence".

Whether Lord Browne would have suffered similar intrusion if he had not been gay is an open question; straight celebrities suffer at the hands of an overly intrusive press too. But the fact is that he was, and the consequences of this cost him his job. Discrimination against women and minority groups persists in many areas of life. This episode is a reminder of its impact. Lord Browne will have many regrets, not least over his mistake in trusting someone who then asked for money shortly before contacting a paper (which, as the judge came close to implying, sounds like a sort of blackmail), which then paid his expenses. It might have been easier if he had mentioned earlier that he was gay - but there was no compulsion on him to do so. It might have been better not to have sought an injunction; absolutely better to have stuck to the truth. But beyond all this, Britain, a liberal land, has seen a man forced from his job primarily as a result of a paper deciding it was a sensation that he was gay.

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http://business.guardian.co.uk/comment/story/0,,2071133,00.html

Browne and I were brought down by fear and hubris

I know the agony the BP ex-chief executive is now going through, but his folly is unlikely to put an end to his corporate career
Jonathan Aitken
Thursday May 3, 2007
The Guardian

I have been where Lord Browne is now. I know what a grim experience it will be for him, as he struggles to come to terms with a career imploding in disgrace accompanied by tabloid headlines demanding his prosecution for perjury. The only sane way to handle it is to face each day with wintry realism, accepting that the storm may be longer and more painful than expected.

Lord Browne's storm will not be weathered easily, but he is surely in less dire straits than some of the current forecasts suggest. If his ill-wishers have their way he will be permanently ruined in reputation, exiled from boardrooms and imprisoned in HMP Belmarsh. Are any of these doomsday scenarios actually likely to befall him?

Criminal charges against Browne are improbable, even though the law has apparently been broken. But it is broken in dozens of witness statements, affidavits and courtroom testimonies every day of the legal year. If ever there was a part of the law "more honoured in the breach than in the observance" it is the statutes on perjury. Yet only a tiny fraction of those who break them end up in court, because the director of public prosecutions has to exercise his judgment to select those cases which are sufficiently serious in their effects on others, or sufficiently important in the public interest.
Lord Browne's folly fits neither category. He has hurt only himself by his false testimony, which was motivated by an understandable, although not excusable, fear of newspaper revelations about his private life. So Browne's wrongdoing should not be equated with that of a witness in a criminal trial whose mendacious testimony brings about a warped verdict. Nor should it be compared to the equivalent false evidence in a major civil case. There are degrees of perjury, and Browne's was low on the scale of criminality.

I have never complained about my own prison sentence for perjury because I genuinely thought it was fair and just. But moving from the particular to the general, I wonder whether some of the judiciary may be stuck in a timewarp about public interest prosecutions for perjury. Victorian values and exemplary sentences still have their part to play in our legal system. Yet might there not be a better way of emphasising that honest testimony is at the heart of justice than sending prominent perjurers to jail? The judge in Lord Browne's case, Mr Justice Eady, seems to have been thinking along these lines when he decided against referring the matter to the attorney general because "it is probably sufficient penalty that the claimant's behaviour has had to be mentioned in this judgment".

The phrase "mentioned in this judgment" is quite some understatement of the media firestorm through which Browne is now passing. Yet apart from forfeiting his £15.5m leaving package from BP, will the flames of scandal make him permanently damaged goods in the business world? I think not.

Provided the DPP doesn't overrule the judge's sensible advice to forget prosecution, Browne will be back in British boardrooms in the fullness of time. He may be too hot to handle right now. His prospective appointments as an incoming new director of Goldman Sachs and the private equity firm Apax are likely to be put on hold. But in the long game of international big money, talent talks louder than tabloids. As a corporate strategist, Browne has few equals. So it will not be long before great companies are beating a path to his door, once he has rebuilt his self-confidence enough to open it.

I suspect that Browne's deepest struggles from now on will be within himself. In his shattered state he deserves compassion and needs friends. I hope he finds plenty of both but they will not, on their own, be enough. That is so because coming through such a catastrophe requires the discovery of new inner strengths. They will include the strength to confront one's own faults in order to face a new future.

I am the last person in the world to lecture Lord Browne. But it does not take a genius to identify the similarities between our two disasters - fear and hubris. The fear was one of journalistic exposure. The hubris was the brazenness of the cover-up. Ironically in both our cases the exposure would have been embarrassing rather than devastating. So the catastrophes were self-inflicted, in my case by an unholy combination of recklessness and arrogance.

Next month it will be 10 years since my misguided libel case against the Guardian imploded. The initial period of that decade was agony. Defeat, disgrace, divorce, bankruptcy and jail seemed to be an even worse royal flush of crises than the hand now dealt to the ex-BP chief executive. But gradually I came through my crises with what I call my three Fs - Faith, Family and Friends.

I hope Lord Browne finds similarly strong foundations on which to rebuild his life. I also hope, although I know it will not feel like it now, that he finds the process as full of happiness, excitement and fulfilment as I have done. It's a different life of course, but I greatly enjoy the difference - not least on a day when I am writing an article for the Guardian.

· Jonathan Aitken is a former cabinet minister and the author of Porridge and Passion: An Autobiography
comment@guardian.co.uk

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http://business.guardian.co.uk/story/0,,2071115,00.html

Paper paid substantial sum for Browne story
Owen Gibson and Ian Cobain
Thursday May 3, 2007
The Guardian

The Mail on Sunday paid Jeff Chevalier, the ex-partner of former BP chief executive Lord Browne, a substantial sum for his story, it emerged yesterday. He was also flown around the world to exotic locations to, in the words of the paper, "collect evidence to corroborate his claims'.

As Lord Browne returned to his BP office to consider his next move, it became clear that his former boyfriend of four years has also had his living expenses met by the newspaper since January.

Senior insiders at Associated Newspapers, which publishes the Daily Mail and the Mail on Sunday, said Mr Chevalier had been unable to work for the last five months due to the allegations made against him by Lord Browne. As such, it had paid his living expenses. When the story broke on Tuesday and Lord Browne announced his sudden resignation, the paper's first response was to say it had paid expenses only. During that time Mr Chevalier made visits to Mexico, the US, the UK and his native Canada over a two-month period in the company of the paper.

Some estimates put the total amount paid by the Mail on Sunday to Mr Chevalier, who met Lord Browne through an escort agency website, at around £40,000. But Associated insiders insisted that figure was too high, saying only that he had been paid the expenses "plus a modest fee".

Irritation at the Mail on Sunday that the injunction was lifted on a Tuesday, thus spiking its exclusive, was deepened by the fact that Mr Chevalier had not told the newspaper that he had an expansive profile on the social networking site Facebook. Mr Chevalier's page featured his picture, used yesterday in most newspapers, as well as information on his pastimes and favourite television programmes. His picture and other personal information were later removed.

The Mail on Sunday has said that the story it originally sought to publish, before Lord Browne obtained an injunction, was "a business story involving issues of great importance to shareholders and employers of BP". Though part of the injunction still stands, in a judgment made public on Tuesday, Mr Justice Eady ruled that Lord Browne could not prevent the paper from publishing claims that he had abused his position as the head of a public company by using BP's resources and manpower for the benefit of his partner.

The judge also condemned Lord Browne for lying in statements to court about the circumstances in which he had met Mr Chevalier. He said they had met running in Battersea Park, when in fact they had found each other through a gay escort website, Suited and Booted.

Peter Wright, the editor of the Mail on Sunday said he hoped the case would be "a wake-up call to other high-profile people and the judiciary of the "inherent danger" of injunctions". "The use of injunctions is a dangerous thing and anti-democratic," Wright said.

While there has been speculation that Lord Browne could also lose lucrative non-executive posts with other top companies, there was a groundswell of support for him in the City. Stephen Thornber, fund manager at Threadneedle Investments - which owns 1.1% of the BP shares - said he shouldn't have resigned. "Lord Browne has proved to be one of the most intelligent, hard-working and able managers in the City over recent years," he said.

Apax Partners, a private equity house where Lord Browne was recently appointed chairman of its supervisory board, pledged its commitment. "Lord Browne is a man of enormous talent and we look forward to continuing to work with him," said a spokesman.

Jonathan Aitken, the former Conservative MP convicted of perjury, also offered support. Writing in today's Guardian, he said: "I know what a grim and in the depths experience it will be for him as he struggles to come to terms with his career imploding in disgrace accompanied by tabloid headlines demanding his prosecution."

The publicist Max Clifford said Lord Browne had been badly advised by "corporate yes men". "He could have paid him off or he could have stood up to be counted. He could have made a fight of it by telling his side of the story first. The course he chose was the worst possible one because the Mail on Sunday had this public interest defence."

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http://business.guardian.co.uk/story/0,,2070924,00.html

Browne back at his BP desk the day after quitting

· Company gives former chief space to plan future
· City supportive although more revelations expected
Terry Macalister
Thursday May 3, 2007
The Guardian

John Browne was back at his desk at BP headquarters yesterday despite standing down as chief executive after lying in the high court about a personal relationship and even though he was braced for further unpleasant revelations this weekend.
Britain's top oil man has been given space by the company to organise his future. He received a vote of confidence yesterday from Apax, the private equity firm where he still holds a supervisory position, though there is a question mark over whether another, Goldman Sachs, will dump him.

Friends of the former BP boss said he was "composed and relaxed" if not exactly happy as he contemplated what sort of professional life he could look forward to after his dramatic exit from the oil group for which he had worked for more than 40 years.
Lord Browne handed in his resignation on Tuesday after a legal injunction was lifted by Mr Justice Eady who said he was not prepared to make allowances for a "white lie" told to the court about where Lord Browne had originally met his former partner, Jeff Chevalier. It was not in Battersea Park, as the BP chief had originally contended, but through a website.

Lord Browne had gone to court to stop the Mail on Sunday revealing details of his personal life and allegations that he had used BP property and staff to set up a private company for Mr Chevalier.

Further details of the case are expected to be revealed this Sunday but private equity group Apax Partners, which owns controlling interests in fashion brand Tommy Hilfiger and supermarket chain Somerfields, said it had no plans to remove Lord Browne as chairman of its supervisory board - at least for the time being.

Goldman Sachs, arguably the world's most powerful investment bank, would not be drawn on whether Lord Browne would be removed from his position as a non-executive director and a head of the audit committee which monitors its finances.

"I am afraid we cannot make any comments on Lord Browne," said a spokesman for Goldman Sachs, but he confirmed that the oil man was for the time being still a director. But Apax was clear about where it stood. "Lord Browne is a man of enormous talent and we look forward to continuing to work with him," said a spokesman for the London-based group which also has interests in HIT Entertainment and New Look.

Lord Browne has been employed since November at Apax and was to take on a more hands-on role along with an office at its headquarters at Portland Place, in the West End of London, when he finally left BP this summer under the original timetable.

Apax said yesterday it was too early to say when Lord Browne might arrive at the company. Although his position at the private equity firm is secure at present, sources said this could change if more serious revelations about Lord Browne began to surface. The original decision to keep the BP man on the board was a "cut and dried affair without much soul-searching," added the source.

There was considerable support for Lord Browne in the City. One investment manager said it was "outrageous" that a man of such high-standing could be forced to leave BP in such circumstances. Fadel Gheit, an oil and gas analyst with Oppenheimer & Co brokerage in New York, said Lord Browne had shown "poor judgment" by lying about where he had met his partner but it should not overshadow his fine legacy of ten years at the top of BP.

Britain's biggest oil company is now being run by Tony Hayward, BP's former head of exploration, who had been lined up earlier to replace Lord Browne this summer.

Explainer: The legal case

No reason to expect privacy

Was Lord Browne scuppered by the lie he told the court, and would he have been able to keep his gay relationship secret, had he not lied about how he met his former lover?

The Mail on Sunday's lawyers argued the lie - Lord Browne told the judge that he had met Jeff Chevalier while "exercising" in Battersea Park - was enough to refuse him a privacy injunction, but Mr Justice Eady rejected that argument. The judge took the decision to allow some material to be published, while keeping other allegations under wraps, for a different reason.

Mr Justice Eady said the case raised questions, including the extent to which it was possible, without the existence of a contract, to invoke privacy rights under the European convention on human rights to prevent revelations which were primarily about business conduct.

The claims he allowed to be published - that BP resources were used to help Mr Chevalier set up a company, and that Lord Browne had discussed BP matters with his lover - were not matters for which there was a reasonable expectation of privacy. They were to do with business conduct, not information. The bare fact of the relationship between the pair was disclosable because there was no longer any reasonable expectation of privacy.

Clare Dyer

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Financial Times
May 3, 2007

http://www.ft.com/cms/s/73595bd4-f927-11db-a940-000b5df10621.html

Hayward to adopt a low profile at BP helm
By Ed Crooks, Energy Editor
Published: May 3 2007 03:00 |
Last updated: May 3 2007 03:00

Tony Hayward, who was appointed BP's chief executive on Tuesday, has already begun to implement changes at the energy group. Among them is lowering the profile of his role.

Lord Browne, his predecessor, resigned suddenly after it was revealed that he had lied to a court while trying to prevent publication of stories about his relationship with Jeff Chevalier, a Canadian who had been his partner for four years.

Mr Hayward will today visit BP operations in Germany as part of a tour of its European business. He has already visited the US, Russia and China in his role as chief executive designate, to which he was appointed onJanuary 12.

However, he has been de facto running BP since the annual general meeting last month.

One of his first moves has been to limit his exposure to analysts and the media.

Lord Browne would typically appear every quarter to discuss performance. Although BP will still report quarterly figures, Mr Hayward will talk about them only at the half- and full-year stages.

He is also expected to have a much lower profile in political circles than Lord Browne, who mingled with senior Labour party figures, including Tony Blair.

So far his only change to the board has been to promote his former deputy, Andrew Inglis, to fill the vacancy he left as chief executive of exploration and production. However, John Manzoni, the head of refining and marketing who was once seen as a possible successor to Lord Browne, is widely expected to leave.

The challenge for Mr Hayward is how to deliver growth at a time when BP's production is set to be broadly flat for several years, while costs are rising at an annual rate of 11 per cent.

He has said repeatedly that his priority is to ensure safe and reliable operations, so BP is not hit by any more disasters like the Texas City refinery explosion in 2005, which killed 15 people.

He will also be determined to bring key projects on stream as quickly as possible, including the troubled Thunder Horse and Atlantis platforms in the Gulf of Mexico and the Tangguh liquefied natural gas project in Indonesia, and get the Texas City and Whiting refineries in the US operating at full capacity again.

Jason Kenney of ING said: "If you had Texas City and Thunder Horse and the rest working fully, that would mean maybe an extra $2.5bn of earnings a year, and the shares might be closer to £7.50 or £8 than where they are now."

BP's shares closed yesterday up 3p at 566p.

Lord Browne's position at Goldman Sachs, where he is a non-executive director and chairman of the audit committee, was in doubt last night after the bank refused to confirm that he would be staying, making no comment on his future.

He could still face prosecution following his admission that he lied to the court, even though he was not under oath at the time and the judge did not refer the case to the attorney-general.

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McClatchy News
May 2, 2007

http://www.realcities.com/mld/krwashington/17169043.htm

ALASKA
Official admits BP withheld documents about oil pipeline spill
By Kevin Diaz
McClatchy Newspapers

WASHINGTON - A top BP executive has acknowledged that the company withheld key documents last year from lawmakers who were investigating whether cost-cutting measures were a factor in the pipeline corrosion that caused Alaska's largest onshore oil spill.
In a letter that congressional Democrats disclosed on Wednesday, BP America Chairman and President Robert Malone also said that he was "troubled" by the extent of oilfield workers' frustrations in the period leading up to last year's North Slope oil spill.

Malone, who took over at BP America after the March 2006 spill in the Prudhoe Bay oilfield, said, "We need time to determine how the concerns and frustrations expressed by workers were ultimately resolved."

His letter, dated Monday, was released as leaders of the House Energy and Commerce Committee agreed to postpone a hearing on the Alaska oil spill until May 16.

Malone asked for more time to prepare for the hearing after facing new questions from committee leaders suggesting that company scrimping might have compromised testing and maintenance that could have prevented the 201,000-gallon spill. Subsequent inspections turned up corrosion in another transit pipeline, leading to a partial shutdown of the field in August.

In his plea for more time, Malone echoed some of the committee's concerns, saying some of BP's recently produced records "raise concerns about previous spending decisions that cause me concern."

In keeping with Malone's efforts to portray a new culture of openness at BP, he said that company officials failed to disclose a 2002 state compliance order referring to pipeline sediments that could have contributed to pitting and corrosion.

Malone said the document only recently came to his attention and that of the head of BP Alaska. It also wasn't disclosed to the energy committee during a hearing in September.

While Malone said he's ordered an investigation, some company officials have determined that the document was overlooked because it pertained to leak detection and not specifically to corrosion.

But the connection became clearer as company officials amassed some 20 million documents in connection with congressional and other federal investigations into the spill and subsequent oil disruptions in the nation's top-producing oil field.

"Our process for gathering and producing documents for the committee was not what it should have been," said BP spokesman Ronnie Chappell.

It was during this same time frame, he indicated, that worker frustrations were vented - apparently to no avail. That, he said, will change.

"I want to eliminate the frustration voiced in many of the documents by creating a culture in which workers are confident their concerns will be heard and addressed before they would ever reach the level of frustration expressed in these historical documents," Malone wrote.

Congressional leaders cited Malone's misgivings about the missing documents in their decision to grant the company more time.

"We now know that BP proceeded with cost-cutting measures that may have compromised pipeline safety while earning $22 billion in profits, but what we don't know is why," said Energy Committee Chairman John Dingell, D-Mich.

In a letter co-signed by fellow Michigan Democrat Bart Stupak, chairman of the panel's oversight subcommittee, Dingell said, "The discovery of this material has clearly raised questions about the adequacy of your response to the committee, as well as previous spending decisions made by your company."

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http://energycommerce.house.gov/Press_110/110nr32.shtml

NEWS RELEASE
Committee on Energy and Commerce
Rep. John D. Dingell, Chairman

For Immediate Release: May 2, 2007
Contact: Jodi Seth or Alec Gerlach / 202-225-5735
 
BP Withheld Key Documents from Committee;
Thursday Hearing Postponed to May 16

The Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee has rescheduled the hearing entitled “2006 Prudhoe Bay Shutdown: Will Recent Regulatory Changes and BP Management Reforms Prevent Future Failures?” The hearing will now be held on Wednesday, May 16, 2007 at 9:30 a.m. in 2123 Rayburn House Office Building.

The hearing, which was previously scheduled for May 3, was postponed after the Committee discovered BP had withheld key documents regarding cost-cutting measures on corrosion mitigation activities at the Prudhoe Bay field. BP requested additional time to prepare for the hearing, conduct research into these issues and provide additional materials. In August 2006, BP initiated a partial shutdown of Prudhoe Bay due to corrosion.

“We now know that BP proceeded with cost cutting measures that may have compromised pipeline safety while earning $22 billion in profits, but what we don’t know is why,” said Rep. John D. Dingell (D-MI), Chairman of the Energy and Commerce Committee.

“These documents appear to show a severe cost cutting environment with respect to corrosion mitigation in the Prudhoe Bay field,” added Rep. Bart Stupak (D-MI), Chairman of the Oversight and Investigations Subcommittee. “At the May 16th hearing we hope to ferret out whether cost cutting, as reflected in these documents, had any impact on the safe operations on that field.”

Attached is a letter from BP Chairman and President Robert Malone to Chairmen Dingell and Stupak in addition to a response from the chairmen.

Read the letter
http://energycommerce.house.gov/images/ec_dems_pdf_icon.gif

Prepared by the Committee on Energy and Commerce
2125 Rayburn House Office Building, Washington, DC 20515

- 30 -

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Anchorage Daily News
May 2, 2007

http://www.adn.com/news/government/legislature/story/8846196p-8746945c.html

State to check condition of oil, gas facilities
STEP BY STEP: The plan depends on the Legislature passing the capital budget.
By STEVE QUINN
The Associated Press
Published: May 2, 2007
Last Modified: May 2, 2007 at 01:57 AM

JUNEAU -- Gov. Sarah Palin said Tuesday the state will spend the next three years assessing the condition of Alaska's oil and gas facilities.

Assessment of Oil and Gas Infrastructure
http://www.gov.state.ak.us/news.php?id=342

Private contractors will work under direction of the newly formed Petroleum Systems Integrity Office.

The plan is vital for the state's economic development as it works toward building a natural gas pipeline, Palin said.

It's also contingent on lawmakers passing Palin's $5 million capital budget request for the 2008 fiscal year, which begins July 1.

If that is approved, the state will begin searching for an outside contractor, said Department of Environmental Conservation Commissioner Larry Hartig.

This plan, called risk assessment, requires learning the condition of all facilities statewide, Hartig said.

"It's a very systematic step-by-step, engineer-driven process: What are risks? How are they being addressed? What are the consequences if something goes wrong?" he said. "Good management requires that we understand the current state of the infrastructure.

"What we really need to know is what's in good shape, what's not, and where and how serious the risks are. A risk assessment is a structured process designed to answer those sorts of questions."

Palin formed the new inspection office two weeks ago, just months after corrosion was blamed for the partial shutdown of Prudhoe Bay.

This inspection means appraising the condition of the state's oil and gas infrastructure, which includes the 800-mile trans-Alaska oil pipeline.

"It's not an investigation for an enforcement action," Hartig said. "What we want to know is the condition of the infrastructure in place.

"When we get the report, then it will be evaluated for what improvements will be made. It will tell regulators where we should put our focus."

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http://www.adn.com/money/industries/oil/story/8846198p-8746943c.html

Pipeline patched
Repairs form barriers against corrosion, leaks
By WESLEY LOY
Anchorage Daily News
Published: May 2, 2007
Last Modified: May 2, 2007 at 03:42 AM

Location
http://www.adn.com/ips_rich_content/637-02PipelineRepairs-150-x-282.gif

PHOTO
http://www.adn.com/photo/2007/05/02/2804449-400-x-238.jpg

The operator of the trans-Alaska oil pipeline recently welded patches onto the pipe in two places showing signs of corrosion damage.

No leaks occurred, but tests turned up two spots where the steel pipe wall had been partly eaten through by internal corrosion, said Mike Heatwole, spokesman for Alyeska Pipeline Service Co.

The trouble spots were just south of Pump Station 3, which is north of the Brooks Range and Atigun Pass.

The pipeline is buried in that area, and workers dug it up to gauge the corrosion and to weld the sleeves in place. The work was done in late April, Heatwole said.

A sleeve is a extra band of pipe welded onto the original as a protective barrier against leaks. The two sleeves installed in April were up to 15 feet long.

"A sleeve is a commonly used method to reinforce the pipeline," said Tom Johnson, an engineer with the Joint Pipeline Office, a regulatory agency that oversees the 800-mile line.

According to Heatwole, Alyeska has installed perhaps 100 sleeves onto the pipeline, which on June 20 will mark 30 years of operation. Last year, Alyeska workers installed six sleeves, he said.

The two sleeves installed near Pump Station 3 were the first this year, Heatwole said.

Alyeska each year examines several places along the line with suspected corrosion damage, based on readings taken by an electronic device called a "smart pig" that slides through the pipe looking for weak spots. That's how the corrosion near Pump Station 3 was found, Heatwole said.

Inspectors found that corrosion had eaten about a third of the way through the steel pipeline wall at one spot, and about a fifth of the way through at another spot about 240 feet away, Heatwole said.

Because they'd already dug up the pipe, workers decided to go ahead and sleeve both spots, even though both fell below Alyeska's repair threshold of 40 percent wall thickness loss, he said.

Corrosion has been a major issue for Alaska's oil industry since last year, when holes developed in major pipelines in the Prudhoe Bay oil field, causing serious spills onto the tundra and a partial shutdown of the field in August.

Corrosion, or rust, typically occurs as a result of water contacting steel.

In years past, Alyeska has had major battles with corrosion. During 1990 through 1992, the company replaced or repaired 11 miles of damaged pipeline, most of it in the Atigun floodplain more than 50 miles south of where the sleeves were installed in April.

Alyeska is an Anchorage-based consortium of five companies that own the pipeline: BP, Conoco Phillips, Exxon Mobil, Chevron and Koch Industries.

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

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Fairbanks News Miner
May 2, 2007

http://newsminer.com/2007/05/02/6786

Gas line challengers grow to 3
By Stefan Milkowski
Staff Writer
Published May 2, 2007

JUNEAU  Exxon Mobil joined BP and ConocoPhillips on Tuesday in trying to convince state lawmakers that Gov. Sarah Palin’s Alaska Gasline Inducement Act doesn’t provide enough incentives to North Slope producers and simply won’t result in a pipeline being built.

“Unless AGIA is modified, we will not be able to participate,” said Marty Massey, who is responsible for developing the Exxon’s natural gas reserves in Alaska.

Massey told members of the Senate Finance Committee during a hearing on the bill that Exxon wanted to participate in the competitive bidding process set up by AGIA, but he recommended changes he later acknowledged could dramatically reshape that process.

Sen. Bert Stedman, a Republican from Sitka and co-chair of the committee, noted the conflict after Massey’s testimony.

“What we’d like to do is operate under AGIA,” he said, “and what I’m concerned about is that there’s so many comments or concerns that there may be a radical departure here.”

“I believe your read of it is correct,” Massey responded. “However, we would say that that should be in the state’s best interest.”

Over the last few days, executives from BP and ConocoPhillips have also proposed major changes, including the elimination of application requirements, and said they won’t bid for a state pipeline license under AGIA as it’s now written.

Like the others, Massey argued the bill focused too much on providing incentives for pipeline builders and not enough for producers, who he said face major economic risks in making the necessary commitments to ship their gas down the pipe.

He claimed that under the current taxes and royalties, the pipeline project is “clearly not commercially viable,” and said there is no way of knowing whether it would be viable under the incentives offered in AGIA because the locked-in tax rate and other taxes aren’t known. Incentives in the bill include a 10-year freeze on gas taxes for producers that make initial shipping commitments.

Massey said to ensure a viable project, the state should let the producers spell out the fiscal terms they need, something AGIA currently does not allow. Massey said fiscal terms should address “all aspects of government take,” and said any increase in the cost of oil and gas related activities could significantly impact the economics of the project.

Massey’s testimony directly contradicts that of Palin’s gas line team, which has long argued that the project is economically viable without additional incentives.

When asked by a committee member for an analysis showing why the project was not profitable, Massey responded simply that the project was not economic and could be even less economic under AGIA because the fiscal terms were unidentified.

Stedman, the committee co-chair, gave Massey repeated requests for specific changes to improve the bill. But when he asked about the specific requirements spelled out in the bill, Massey often responded simply that the requirement should be replaced by an “objective” the companies could compete to meet.

The requirement to negotiate a project labor agreement, Massey said, was premature and should instead be part of a stated objective related to hiring Alaskans.

“PLAs really should be done by the major contractor for that particular project,” he said.

Palin’s team continues to stand by the concept of “must haves,” but the producers’ idea of replacing requirements with objectives is not falling on deaf ears.

At a news conference Tuesday, Senate President Lyda Green, R-Wasilla, questioned whether it made sense to force all applicants to meet all the requirements.

“I think there’s somewhere in between that makes it work,” she said.

Old governor backs new governor

Former Gov. Walter Hickel gave a different assessment when he testified before the committee a few hours before Massey. Hickel backed Palin’s plan for getting a pipeline and urged lawmakers to support it.

“This is your moment to step forward and stand with her,” he said. “The people of Alaska want a gas line, and together we can make history.”

Hickel and David Gottstein of the advocacy group Backbone 2, who testified with him, both expressed their support for an “all-Alaska” gas pipeline running from the North Slope to Valdez.

But both also promoted the competitive process set up by AGIA and dismissed the producers’ requests.

Gottstein accused the companies of “influence-peddling” and spreading “propaganda” in an effort to control the gas line project.

“If they can’t control it, they want to stop it,” he said.

Hickel said sometimes big projects and their sponsors just need a push to get off the ground.

“You have to make them happen,” he said.

When asked about the state’s ability to make a wise business decision in choosing a pipeline builder, Hickel responded, “Who took us out in space? General Motors?”

Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.

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http://newsminer.com/2007/05/02/6785

Alaska says no to request for emissions report
By Eric Lidji
Staff Writer
Published May 2, 2007

The state has declined a request by a coalition of environmental groups to require major producers of greenhouse gases in Alaska to report their emissions to the state.

The coalition of 11 groups, represented by the environmental law firm Trustees for Alaska, petitioned the Department of Environmental Conservation in late March, arguing that an accurate inventory could lead to a reduction of greenhouse gases.

Greenhouse gases are thought to trap heat in the atmosphere and contribute to global warming trends.

The department did not disagree with the premise of the petition, but argued that adopting regulations now would interfere with plans already in place to inventory and reduce greenhouse gas emissions.

“The timing of your petition, arriving before we have a fully developed plan, would have us making decisions we simply are not yet prepared to make,” Department of Environmental Conservation Commissioner Larry Hartig wrote in a letter to Mike Frank, senior staff attorney with Trustees for Alaska.

In the letter, Hartig said the department agrees that warming trends in the poles are “alarming,” that “there is a need for government leadership” to instigating change and that “an inventory of greenhouse gas emissions is among the logical first steps” in addressing the human causes of climate change.

However, the letter argues that the department needs to continue working with other states to develop more reliable and compatible methods for calculating greenhouse gas emissions.

“That’s why it’s really disappointing,” Frank said, “because it basically agrees with the premise of the petition, but then rejects the need to do it immediately. We’re hoping the reasons they gave are given to us in good faith.”

The current inventory of greenhouse gas emissions in Alaska comes from a state-commissioned report prepared by the Center for Climate Strategies in conjunction with nine Western states.

The report estimates the sources and amounts of greenhouse gas emissions in Alaska from 1990 through 2020.

Many of the findings in the initial report were not specific enough to Alaska, and the state plans to use the report as a starting point for a more in depth analysis to be released before the end of the year, according to Tom Chapple, director of the Division of Air Quality with the Department of Environmental Conservation.

“We want to take the next reasonable step, and then decide where we are and what we need,” Chapple said. “It doesn’t mean the answer will always be no on this.”

Frank said the coalition hasn’t decided whether it plans to file its petition again after the report is released, but does plan to continue pressing the state on greenhouse gas emissions.

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

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The Guardian
May 2, 2007

http://business.guardian.co.uk/story/0,,2070239,00.html

BP's Browne quits over lie to court about private life
Cover-up over how he met partner leads to dramatic exit and costs him £15m
Ian Cobain and Clare Dyer
Wednesday May 2, 2007
The Guardian

The career of one of the titans of British industry came to a dramatic end yesterday when Lord Browne quit as chief executive of BP after lying to a court about his relationship with another man.

Following crisis talks at the company's London headquarters, BP said Lord Browne had resigned with immediate effect after losing his four-month battle to suppress newspaper reports about the relationship. In doing so, he forfeited a leaving package worth up to £15.5m.

Lord Browne went all the way to the House of Lords in his attempts to prevent Associated Newspapers, the publisher of the Mail on Sunday, from disclosing details of his relationship with Jeff Chevalier, his Canadian partner between 2002 and 2006.
A series of hearings considered evidence about the pair's extravagant international lifestyle, disputed allegations that company resources were diverted for Mr Chevalier's use, and claims - firmly denied - that Lord Browne attempted to evade tax payments.

The 58-year-old, once hailed as "the Sun King of the oil industry" lost his case, in large part, because he claimed to have met his partner while jogging in a London park. They had, his close associates conceded last night, made contact through a male escort agency's website.

In a statement which marked the end of a remarkable career, including a decade during which the company he led was regarded as the country's most successful, Lord Browne said: "In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

"I wish to acknowledge that I did have a four-year relationship with Jeff Chevalier, who has now chosen to tell his story to Associated Newspapers. These allegations are full of misleading and erroneous claims. In particular, I deny categorically any allegations of improper conduct relating to BP."

Tony Hayward, Lord Browne's designated successor, who had been due to take over in July, was immediately appointed as chief executive.

The disclosure of the relationship follows the refusal by the House of Lords yesterday to grant Lord Browne permission to appeal against rulings made earlier this year by the high court and court of appeal.

The high court had decided to lift an injunction which covered a wide range of subjects, including alleged discussions between Lord Browne and Gordon Brown, Tony Blair and EU commissioner Peter Mandelson, and a dinner at one of Lord Browne's homes attended by himself and Mr Chevalier with Mr Mandelson and his Brazilian partner.

Another was a claim that Lord Browne bought a flat in Venice several years ago and, it was alleged, paid cash for a renovation bill which did not include VAT, and that he failed to pay his tax bill.

The court also heard that Lord Browne took steps to enable Mr Chevalier to remain in the UK when his visa was due to run out early in the relationship. This included paying for a university course from 2003, so he would acquire student status, and helping him to set up a company to trade in mobile phone ring tones.

Mr Chevalier claimed that when the relationship broke down Lord Browne had agreed that "if needed, [he] would assist in the first year of me transitioning from living in multimillion pound homes around the world, flying in private jets, five-star hotels, £2,000 suits, and so on to a less than modest life in Canada".

The judge, Mr Justice Eady, said Mr Chevalier sought further assistance towards the end of last year, backed by what he said could be interpreted as a "thinly-veiled threat". Mr Chevalier denies making any threats.

Eventually, Lord Browne's attempts to prevent reporting of these matters, and to maintain his personal privacy, collapsed after the court accepted he had lied to conceal the manner in which he met Mr Chevalier. Lord Browne had told the court on more than one occasion that they had met while running in Battersea Park, south London. In fact, associates of Lord Browne now acknowledge, they met through a website called suitedandbooted.com.

Mr Justice Eady said: "I am not prepared to make allowances for a 'white lie' told to the court in circumstances such as these - especially by a man who prays in aid of his reputation and distinction, and refers to the various honours he has received under the present government, when asking the court to prefer his account of what took place."

The judge added that Lord Browne told this lie at a time when he was also making a "wholesale attack" on Mr Chevalier's reliability, showing a "willingness casually to 'trash' the reputation" of his former partner.

The Mail on Sunday said it would make its evidence available to the attorney general, Lord Goldsmith. "Jeffrey Archer and Jonathan Aitken went to prison for lying to the courts," a spokesman said.

However, Mr Justice Eady said he had decided not to refer the matter to the attorney general, saying disclosure in the judgment of Lord Browne's behaviour was "probably sufficient punishment".

In a statement last night the Mail on Sunday said: "The story we originally sought to publish was a business story involving issues of great importance to shareholders and employers of BP. Lord Browne chose to suppress this story by arguing to the high court that, because the story was supplied to us by his former lover, Mr Chevalier, it breached his right to a private life under the Human Rights Act." In lying, the newspaper said, it was Lord Browne who had made his private life a public issue.

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State of Alaska
Press Release
Mat 1, 2007

http://www.gov.state.ak.us/news.php?id=342
Assessment of Oil and Gas Infrastructure

FOR IMMEDIATE RELEASE 07-096

Governor Palin Calls for Comprehensive Assessment of Alaska’s Oil and Gas Infrastructure

May 1, 2007, Juneau, Alaska  Governor Sarah Palin today announced that she is launching a comprehensive assessment of the condition of Alaska’s oil and gas infrastructure. Referred to as a “risk assessment,” the effort is fundamentally an engineering analysis involving a thorough, independent appraisal of the condition of the state’s oil and gas facilities. It goes on to identify facilities and systems that pose the greatest risk of failure, along with measures to reduce risks.

“For our new Petroleum Systems Integrity Office (PSIO) to do an effective job, it must have access to comprehensive, thorough, and objective assessment data to tell us the status of the infrastructure and what it should be,” said Governor Sarah Palin. “No such system-wide risk assessment has ever been conducted of this complex system.”

Alaska’s oil and gas infrastructure comprises a complex, integrated system. Over the years, new parts have been added and older parts have been modernized. Changes have been made to increase efficiency and production, to improve integrity, and to adapt to changes in field characteristics. At the same time, there have been advancements in oil and gas science and technology. The current state of the infrastructure is a result of the combined effects of age, change, industry operations, and government oversight.

“Good management requires that we understand the current state of the infrastructure,” said Department of Environmental Conservation Commissioner Larry Hartig. “We need to know what’s in good shape, what’s not, and where and how serious the risks are. A risk assessment is a structured process designed to answer those sorts of questions.”

Department of Natural Resources Commissioner Tom Irwin said, “I am pleased with the Governor’s extraordinary vision in ordering the comprehensive risk assessment. The assessment will provide a firm foundation for PSIO’s work. This is a critical step in facilitating the protection not only of our environment, but of our economy.”

The risk assessment is anticipated to take from two to three years to complete. The Administration has included a one-time capital budget request of five million dollars to pay for the effort.

###

 

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New York Times
May 1, 2007

http://www.nytimes.com/2007/05/01/business/worldbusiness/01cnd-oil.html?_r=1&hp&oref=slogin

BP Chief Resigns Amid Battle With Tabloid
By ALAN COWELL
Published: May 1, 2007

Lord John Browne of Madingley, an aggressive but mannered British magnate who transformed BP into one of the most successful, global companies, resigned abruptly on Tuesday in a court battle with a tabloid over details of his personal life.

In one of the most humiliating come-downs in British business life, Mr. Browne acknowledged offering an ‘’untruthful account” to a court about the circumstances under which he met a former gay companion.

His fall seemed all the more tragic after his rise to the top at BP, the company where he had worked since university. He had already been forced to announce an early retirement after the energy company suffered a cascade of problems relating to its safety record, including an accident at its Texas refinery that killed 15 workers.

Now, he said today he would step down immediately, three months earlier than planned, in a resignation that could cost him more than $30 million in lost retirement and stock benefits. Perhaps just as damaging, he is haunted by a specter of personal exposure in newspapers around the world, a high-flying career brought low by a spat with a local newspaper, The Mail on Sunday.

At the height of his powers, Mr. Browne had been knighted in 1998 and Prime Minister Tony Blair made him a life peer in 2001, a token of the close relationship between the company and the prime minister.BP called his resignation a “tragedy.”

The announcement stunned Britain’s business world, despite rumors for months that Mr. Browne’s relationship with a former male companion was under scrutiny in the courts. In its online edition on Tuesday, The Daily Mail newspaper said it fought against an injunction preventing it from publishing an article that included allegations Lord Browne had misused corporate funds to help support his former companion.Dapper and physically diminutive, Lord Browne, 59, had strutted the global stage as an exemplar of business success. He had already said he would resign 18 months ahead of schedule  next July  even as he fought to shield his reputation, built on transforming BP from a sleepy second-tier European oil company into one of the biggest oil majors alongside Shell.

A statement by Lord Browne announcing his departure was framed in almost elegiac tones.

‘’For the past 41 years of my career at BP I have kept my private life separate from my business life,” Mr. Browne said. “I have always regarded my sexuality as a personal matter, to be kept private.”

‘’It is a matter of personal disappointment that a newspaper group has now decided that allegations about my personal life should be made public,” he said. Mr. Browne had always tried to keep his personal life a close secret.

It remained unclear whether Mr. Browne’s departure would draw a line under his woes or merely form the prelude to further legal action related to what Peter Wright, the editor of The Mail on Sunday newspaper, called ‘’lies” in the legal case that led to his ouster.

The Daily Mail said on its website: ‘’Browne, a close friend of Tony Blair, may now face a charge of perjury, and possibly jail.”

In his statement, Mr. Browne said: ‘’Legal documents have been disclosed today containing allegations about me and my personal life. I wish to acknowledge that I did formerly have a four-year relationship with Jeff Chevalier. He has made these allegations about me and our relationship to Associated Newspapers, publishers of The Daily Mail, Mail on Sunday and Evening Standard.”

He did not give further details about the identity of Mr. Chevalier.

‘’The allegations are full of misleading and erroneous claims,” Mr. Browne said. ‘’I deny categorically any allegations of improper conduct relating to BP. The company has confirmed today that it has found no such wrongdoing,” Mr. Browne declared.

But he admitted that he had made false statements to the court during the hearings involving the Daily Mail.

‘’My initial witness statements, however, contained an untruthful account about how I first met Jeff,” Mr. Browne said. ‘’This account, prompted by my embarrassment and shock at the revelations, is a matter of deep regret. It was retracted and corrected. I have apologized unreservedly, and do so again today.”

‘’These allegations will result inevitably in considerable media attention for both myself and BP. What matters to me is BP, what we have achieved during my tenure and the bright future ahead,” he said.

Last January, when Lord Browne first disclosed that he would resign early, some oil industry analysts said they believed the gesture was designed to rebuild investor confidence after the company suffered a series of setbacks in the United States.

A fatal explosion at the Texas City refinery killed 15 people while poor maintenance of pipelines from the Prudhoe Bay, a field producing 400,000 barrels per day in Alaska, caused a partial shutdown of the facility.

Even then, his early departure was a fall from grace. Lord Browne had set the tone for the industry’s mega mergers in the 1990s by buying Amoco and Arco, which made BP one of the biggest oil companies in America.

Exxon then followed with the acquisition of Mobil, and Chevron bought Texaco. Mr. Browne was credited with starting a trend: instead of simply sticking to exploring for oil in the fields, he would buy up the shares of rivals on Wall Street. Mr. Browne was the quickest to expand into Russia after the collapse of communism by buying into TNK.

Mr. Browne also led a re-branding of BP that included the slogan ‘Beyond Petroleum’. With this campaign, he was the first to declare that big oil corporations need to play some role in fighting global warming.

During more than a decade as chief executive, BP’s market value rose fivefold and its share price rose 250 per cent, BP said in January, despite worries in recent years about dwindling energy production.

But some analysts said the transformation had come at a cost. The costs for cleaning up the spill in Alaska and for improving safety around the company’s operations have taken a toll on performance. Last week, BP reported a 17 percent drop in first-quarter earnings, the weakest report card of the large oil majors.

BP shares rose today by a modest 0.1 per cent on the London Stock Exchange to 556 pence. BP said Mr. Browne would be replaced immediately by Tony Hayward, who had been due to take over in July in any event. The company also exonerated Mr. Browne of alleged misdeeds relating to the use of BP facilities by his partner.

A company statement said: ‘’BP chairman Peter Sutherland said that Lord Browne had informed the company of allegations relating to the limited use by Jeff Chevalier of BP computer and staff resources.”

The statement continued: ‘’Mr. Sutherland said: “At John’s explicit request, the board instigated a review of the evidence. That review concluded that the allegations of misuse of company assets and resources were unfounded or insubstantive.”

‘’John has made it clear to the BP Board that he has decided to step down with immediate effect because he does not want this public focus on his private life to detract from the paramount task of running the BP group,” the company said.

‘’The Board of BP has accepted John’s resignation with the deepest regret. For a chief executive who has made such an enormous contribution to this great company, it is a tragedy that he should be compelled by his sense of honor to resign in these painful circumstances.”

BP said Lord Browne’s resignation would mean he would lose a bonus worth over 3.5 million pounds, or 7 million dollars and would forfeit inclusion in a long-term performance share plan for 2007-2009 worth up to 12 million pounds, or 24 million dollars.

On its website on Tuesday, the Daily Mail said: ‘’Lord Browne’s problems started in January when Mr. Chevalier tried to sell his story to the newspapers. The BP chief, 59, obtained an interim injunction stopping publication. But in his witness statement he said had met Mr Chevalier by chance while exercising in Battersea Park.”

‘’Lord Browne later admitted that was false and had to apologize,” the newspaper said.

It added: ‘’Mr Justice Eady, in a court ruling which finally can be published today, said the lie on oath may be treated as “contempt or as some other form of criminal offence”. ‘’

The Daily Mail said: ‘’Now the injunction has been lifted, Mr Chevalier’s allegations can be published in full - except for the claim about how the pair really met.”

Jad Mouawad contributed reporting from Houston and Julia Werdigier from London.

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Wall Street Journal
May 1, 2007

BP's CEO to Resign Immediately
Amid Revelations of Private Life
By ALEX MACDONALD, BENOIT FAUCON in London and MICHAEL WILLIAMS in Paris
May 1, 2007 3:56 p.m.

The storied tenure of John Browne, the CEO who turned BP PLC into one of the world's most-valuable oil companies, came to an unceremonious end today, after a British court allowed a U.K. newspaper group to publish a set of articles about the executive's long relationship with a young man.

Lord Browne's resignation after more than a decade at the helm of BP comes several months ahead of his planned retirement. The move also follows a rough two-year final chapter in his career at BP, which has seen its reputation tarnished by a series of embarrassing operational mishaps in the U.S. -- including a deadly refinery explosion in Texas in 2005.

 
The news of Lord Browne's departure caused a sensation in Britain. One of the nation's most famous business executives, he was knighted by Queen Elizabeth for his success in turning BP into a global oil titan, largely through a series of megadeals -- including the 1998 acquisition of Amoco of the U.S. That deal changed the industry, prompting Exxon and other rivals to forge takeovers of their own.

Today, BP swiftly put into effect a succession plan it had worked out in January, when Lord Browne had announced he would step down this summer. Tony Hayward, who had been chosen by BP to succeed Lord Browne then, became CEO today, effective immediately, the company said in a statement. (Read BP's and Browne's statements SEE BELOW.)

The decision to allow publication of the article, by the Mail on Sunday, came after the court determined Lord Browne had misled the court about how the executive first met his former companion, Jeff Chevalier. Lord Browne admitted to the relationship and to misleading the court about how they met (through an escort service, rather than through a chance meeting as Lord Browne had claimed).

Lord Browne had led Europe's second largest energy company for more than a decade. He acknowledged in the statement that he had a four-year relationship with Jeff Chevalier, but denied allegations by Mr. Chevalier that the executive had granted Mr. Chevalier limited use of BP company assets and resources. BP Chairman Peter Sutherland said the board of directors had reviewed the matter at Lord Browne's request and found such allegations "unfounded or insubstantive."

Lord Browne lashed out at the paper's decision to reveal details about his
private life. "In my 41 years with BP I have kept my private life separate from my business life," Lord Browne said. "I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public."

Lord Browne said Mr. Chevalier has chosen to tell his story to Associated Newspapers, publishers of the Daily Mail, Mail on Sunday and Evening Standard. Mr. Chevalier couldn't be reached for comment.

Lord Browne will give up a bonus of up to 1.3 times his annual salary, worth in total more than £3.5 million. He will also forgo inclusion in the long-term performance share plan for 2007-2009 with a maximum potential value of some £12 million, the company said.

Reacting to the news, some market observers suggested Lord Browne's departure would enable his successor to move the company forward in a positive direction. "Brown did not have to step aside because of his personal life, but by doing so, he is giving Tony Hayward a good opportunity to step up to the plate and move BP forward with cleared decks," said Jason Kenney, an analyst with ING Group.

In London today, BP shares closed down 0.44%, or 2.5 pence, at 562.75 pence.

Mr. Kenney, who has a hold rating and a 534 pence target price on BP's stock, said the news shouldn't fundamentally affect the company's share performance, since Mr. Hayward had already been tapped as BP's next CEO and the company's future strategy had been laid out in February. Mr. Hayward previously served as head of BP's exploration and production division, the most-critical operation of any large oil company.

Before his sudden resignation Tuesday, Lord Browne was expected to step down at the end of July -- more than a year earlier than he had previously planned -- following a string of safety problems at BP's U.S. operations, including an explosion at its Texas City, Texas, refinery that killed 15 people in 2005.

"This is a voluntary step which I am making to avoid unnecessary embarrassment and distraction to the company at this important time," Lord Browne said.

Mr. Hayward, 50 years old, is a geologist by training who joined BP in 1982. After a series of posts in Scotland, France and China, he became BP's exploration manager in Colombia in 1992 and president of the BP Group in Venezuela in 1995.

Mr. Hayward was among the first of the so-called turtles -- a company nickname for promising leaders who were groomed for top leadership by serving at Lord Browne's elbow nearly all the time for a year. Mr. Hayward rose quickly through the ranks as BP expanded rapidly under Lord Browne. After BP's merger with Amoco, Mr. Hayward became a group vice president, and in 2000 he was appointed group treasurer, a position that included mergers and acquisitions at a time when BP was very active in such transactions. In 2002, Mr. Hayward became chief operating officer of BP's key exploration and production operations, a position that Lord Browne had held before becoming chief executive.

Lord Browne will also be remembered as the man who turned BP from a shrinking

company into an industry giant. When oil prices tanked badly in 1998, he engineered BP's merger with Amoco, a move that ushered in a series of other large oil-industry marriages. In 2003, BP orchestrated a landmark deal in Russia, the creation of the joint-venture company TNK-BP, marking the first large entry by a western oil major into Russia, the world's second-largest oil producer after Saudi Arabia. The doors have since largely on foreign firms in Russia, leaving BP better positioned than any of its peers there. Safeguarding the company's operations there will be one of Mr. Hayward's top challenges.

To extract the company from its recent spate of operational mishaps, Mr. Hayward will have to enforce the various measures implemented to address its U.S. safety and management lapses.

BP expects to make an announcement this month about its implementation of recommendations made in the so-called Baker report, an independent study of the Texas disaster. The report, released in January, issued findings from a panel led by former U.S. Secretary of State James Baker on how to improve the company's safety systems following the March 2005 explosion.

--Bhushan Bahree and Chip Cummins contributed to this article.

CORRECTION: An earlier version of this article incorrectly stated that the Mail on Sunday is part of Britain's Associated Newspapers group.

Write to Alex MacDonald at
alex.macdonald@dowjones.com   and Benoit Faucon at benoit.faucon@dowjones.com  and Michael Williams at michael.williams@wsj.com 


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Full Text of BP's Statement
On Lord Browne's Resignation
May 1, 2007
Below is the full text of BP PLC's press release announcing the immediate departure of CEO Lord Browne.

BP Appoints Tony Hayward as Chief Executive as Lord Browne Steps Down

Following a decision taken today by Lord Browne to step down as the company's chief executive officer, the board of BP p.l.c. has appointed his designated successor, Dr Tony Hayward, as new CEO with immediate effect.

Lord Browne tendered his resignation after the lifting by the UK courts of a legal injunction preventing a newspaper group from publishing details of his private life.

Lord Browne said: "In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

"Concerning the court documents disclosed today, I wish to acknowledge that I did have a four-year relationship with Jeff Chevalier who has now chosen to tell his story to Associated Newspapers, publishers of The Daily Mail, Mail on Sunday and Evening Standard.

"These allegations are full of misleading and erroneous claims. In particular, I deny categorically any allegations of improper conduct relating to BP."

BP chairman Peter Sutherland said that Lord Browne had informed the company of allegations relating to the limited use by Jeff Chevalier of BP computer and staff resources.

Mr Sutherland said: "At John's explicit request, the board instigated a review of the evidence. That review concluded that the allegations of misuse of company assets and resources were unfounded or insubstantive.

"John has made it clear to the BP Board that he has decided to step down with immediate effect because he does not want this public focus on his private life to detract from the paramount task of running the BP group.

"The Board of BP has accepted John's resignation with the deepest regret. For a chief executive who has made such an enormous contribution to this great company, it is a tragedy that he should be compelled by his sense of honour to resign in these painful circumstances."

Note to editors:
The company said that as a result of Lord Browne's decision to resign he would lose his agreed entitlement to a year's notice including a bonus of up to 1.3 times his annual salary, worth in total over £3.5 million. He would also forego inclusion in the long-term performance share plan for 2007-2009 with a maximum potential value of some £12 million.

Below is the full personal statement issued by Lord Browne today.

Personal statement by Lord Browne of Madingley
"For the past 41 years of my career at BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private.

"It is a matter of personal disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

"Legal documents have been disclosed today containing allegations about me and my personal life. I wish to acknowledge that I did formerly have a four-year relationship with Jeff Chevalier. He has made these allegations about me and our relationship to Associated Newspapers, publishers of The Daily Mail, Mail on Sunday and Evening Standard.

"The allegations are full of misleading and erroneous claims. I deny categorically any allegations of improper conduct relating to BP. The company has confirmed today that it has found no such wrongdoing.

"My initial witness statements, however, contained an untruthful account about how I first met Jeff. This account, prompted by my embarrassment and shock at the revelations, is a matter of deep regret. It was retracted and corrected. I have apologised unreservedly, and do so again today.

"These allegations will result inevitably in considerable media attention for both myself and BP. What matters to me is BP, what we have achieved during my tenure and the bright future ahead.

"I have therefore informed the Board of BP that I intend to stand down as group chief executive with immediate effect, rather than retiring at the end of July. This is a voluntary step which I am making to avoid unnecessary embarrassment and distraction to the company at this important time.

"I have spent my entire working life with BP, and want to thank everyone for their dedication, loyalty, support and hard work in creating one of the world's finest companies.

"I shall not be commenting on my personal issues further. I wish to pursue my personal life in private."

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Guardian Unlimited
May 1, 2007

http://business.guardian.co.uk/story/0,,2069894,00.html

BP chief resigns as private life made public

Background: the Browne years
http://business.guardian.co.uk/story/0,,2069949,00.html
Timeline: rise and fall
http://business.guardian.co.uk/story/0,,2069993,00.html
The evidence and judgment
http://business.guardian.co.uk/story/0,,2069999,00.html

Graeme Wearden
Tuesday May 1, 2007
Guardian Unlimited

Lord Browne stepped down as chief executive of BP with immediate effect this afternoon.

He tendered his resignation after the House of Lords lifted an injunction that prevented the Mail on Sunday from publishing details of his four-year relationship with another man. He also admitted lying at an earlier court hearing.

Lord Browne will forfeit his entitlement to a year's notice, and a bonus worth more than £3.5m. He will also miss out on a long-term share plan that could have generated £12m over the next two years, and had been opposed by BP shareholders.

"In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private," said Lord Browne in a statement released today.

"It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public."

Today's ruling, and subsequent resignation, came after Lord Browne fought a long-running battle to prevent publication of details about his relationship with Canadian Jeff Chevalier.

During the original injunction hearing in January, Lord Browne had told the court that he had met Mr Chevalier by chance, while jogging in Battersea Park.

He admitted today that this was not true.

"I deny categorically any allegations of improper conduct relating to BP. The company has confirmed today that it has found no such wrongdoing. My initial witness statement, however, contained an untruthful account about how I first met Jeff," said Lord Browne, who said he apologised unreservedly.

The injunction had been overturned by the high court in a private session earlier this year, and Mr Justice Eady upheld this ruling today,

In refusing to uphold the injunction, Mr Justice Eady said that Lord Browne had told the court "a white lie" during the initial injunction hearing.

The financial markets reacted calmly to this afternoon's revelations, with BP shares closing 2.5p lower at 563p.

Lord Browne's resignation means that Dr Tony Hayward, who had already been named as his successor, becomes chief executive three months earlier than expected.

One of the most successful British businessman of recent years, Lord Browne's final few months as BP chairman had already been scarred by revelations surrounding the Texas City disaster.

The official inquiry into the tragedy, in which 15 workers died, found that BP had ignored warnings that an accident was imminent at the site, and that cost cuts means that employees involved in the explosion had worked 12-hour shifts for more than four weeks.

Earlier this month BP also faced the wrath of shareholders who opposed Lord Browne's remuneration. They were angry that the departing chief executive would be entitled to take part in an incentive scheme until 2009, two years after his departure.

Today's shock resignation means this "golden goodbye" is no longer an issue.

Browne's shock resignation
01.05.2007: BP chief resigns as private life made public
01.05.2007: 'My sexuality is a personal matter'
01.05.2007: BP: the Browne years

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http://business.guardian.co.uk/story/0,,2069949,00.html

BP: the Browne years

Pressure had been building after a series of PR disasters damaged the reputations of both Browne and BP
Terry Macalister
Tuesday May 1, 2007
Guardian Unlimited

John Browne, the chief executive of Britain's biggest company, was lauded just days ago by his chairman as the "greatest businessman of his generation."

He was given a hero's send-off by his peers on the BP board and a massive pay-off judged by some to be worth as much as £72m at its annual general meeting in London.

But not everyone saw Lord Browne in such hallowed terms. Small shareholders vented their frustration on the man who might have been voted industrialist of the year for six out of seven years but who had led BP through what even chairman Peter Sutherland admitted was a "turbulent" final year.

This was his last big meeting in front of his shareholders because Lord Browne announced he would step down this summer 18 months earlier than he had planned after 12 years at the top.

He had decided to bow out early, allegedly because of operational problems, which had recently damaged the image of the business. But today he was gone after court revelations about his private life .

The most serious operational problem was an explosion and fire at the Texas City refinery in America where 15 workers were killed and 150 were injured.

It led to a deluge of legal cases against BP from families of the deceased and a report from a panel of expects led by former US secretary of state, James Baker, which laid out a long list of safety failures which took the blame right to the top.

The Texas City accident was just one of a series of public relations disasters that tarnished the reputations of both Browne and BP but also led to a plunge in the share price as the City took fright.

Over the last 24 months BP has seen its giant Alaskan oil field Prudhoe Bay forced to halt production because of leaks in the pipeline system and threats to the local environment.

There have been probes by federal regulators into "irregularities" in the firm's propane trading business plus setbacks to its attempts to bring on stream the Thunderhorse and Atlantis fields in US Gulf fields.

The problems have widened with speculation that the Kremlin wants to buy up part of its key Siberian oil field, Kovykta, and take a 50% stake in its Russian arm, TNK-BP.

While there were rumours in the past that Browne was looking for his own final coup - a takeover of his nearest rival Shell - to create the largest oil company in the world, in recent months analysts have been questioning the reverse: whether a weakened BP could fall victim to a takeover by Shell.

Acquisitions had been a key part of Browne's success. He took the reins of a depleted former state owned oil company in 1995. It was heavily indebted and far too dependent on just a couple of oil fields: Prudhoe Bay and the massive Forties field in the UK North Sea.

But with oil prices reducing the value of some rivals, he embarked on a series of daring mergers with Western competitors: buying Amoco in 1998, Atlantic Richfield and then Burmah Castrol two years later. The moves took rivals such as Exxon by surprise and forced it into its own mega merger with Mobil.

But just as others were catching up with Browne, he unveiled a new strategy in 2003 when he created the first - and probably the last - really large scale joint venture in Russia: TNK-BP.

Since then he has largely made a name for himself by adopting a "green" image - if not agenda - with a high profile advertising campaign boasting that BP had gone "Beyond petroleum".

He set up an "alternative energy" arm in 1995 but environmentalists have repeatedly attacked Browne for using "greenwash" and investing small sums in wind and solar while continuing to spend billions on finding and producing new sources of oil and gas.

Browne has also positioned himself at the forefront of debates on "sustainability" and corporate ethics, speaking repeatedly about the noble cause of capitalism but also the need to root a company's activities in a moral framework.

But he also showed himself willing to overthrow former scruples doing deals with TNK investors just months after he had threatened to sue them. He also agreed BP should try to buy a stake in Russia's Rosneft, despite a widespread view that Rosneft had come by its assets in the most dubious circumstances.

The son of a foreign-based BP manager and a life-long company employee himself, the highly articulate Browne has nevertheless cut an unusual figure in the rough, tough world of oil.

But his relatively small stature and soft-spoken delivery has been seen by some as a cogent weapon which has allowed his rivals to under-estimate his resolve and power.

Browne has courted close relations with top politicians and has forged such bonds with New Labour - which knighted him in 1998 - that BP was dubbed Blair Petroleum.

The oil magnate has always attracted attention for the size of his pay packet. It fell last year due to Texas City but Browne still managed to earn £4.5m. He has since announced plans to move into private equity, a part of the business famed for high salaries and ruthless behaviour.

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http://business.guardian.co.uk/story/0,,2069993,00.html

Timeline
Lord Browne's rise and fall
Katie Allen
Tuesday May 1, 2007
Guardian Unlimited

1948 - Born in Hamburg, Germany

1966 - Joins BP as a university apprentice while still a teenager studying physics at St John's College, Cambridge University

1969-1983 - Holds a variety of exploration and production jobs in Anchorage, New York, San Francisco, London and Canada

1984 - Becomes group treasurer and chief executive of BP Finance International

1986 - Becomes executive vice president and chief financial officer of The Standard Oil Company in Cleveland, Ohio

1987 - Following the BP/Standard merger, in addition to his position as executive vice president and chief financial officer of BP America, he is appointed chief executive officer of Standard Oil Production Company.

1989 - Becomes managing director and chief executive officer of BP Exploration

1991 - Joins BP's board as a managing director

June 1995 - Becomes group chief executive at BP

1998 - Knighted in the Queen's Birthday Honours

December 31 1998 - Becomes group chief executive of BP Amoco following the £67bn merger of BP and American rival Amoco

April 1999 - Creates the world's largest non-state oil producer with takeover of American oil company Atlantic Richfield (Arco)

2000 - Buys Burmah Castrol lubricants group

2000 - Rebrands as an energy company, Beyond Petroleum, stressing its commitment to environmentalism

2001 - Browne made a life peer

August 2003 - Expands in Russia, an emerging market still bedevilled by corruption and gangsterism, with the merger of majority of BP's Russian oil assets with TNK and SIDANCO to create TNK-BP

March 2005 - Explosion at BP's Texas City refinery kills 15 people prompts grand jury investigation

March 2006 - Massive oil spill in Alaska, called a "catastrophe" by environmentalists

July 2006 - BP internal dispute about whether Lord Browne should be allowed to stay on as chief executive beyond his retirement date of February 2008. He stresses at BP's results press conference that he will leave BP at the end of 2008

August 2006 - News that US federal investigators are looking into allegations it had manipulated oil and unleaded petrol markets

January 12 2007 - Lord Browne brings forward retirement plans to the end of July 2007 after boardroom dispute over whether he is the best man to continue at the helm of BP in the wake of damaging incidents across the group's US operations. BP's head of exploration and production Tony Hayward set to succeed him.

March 2007 - American regulators' final report into Texas City disaster lays blame at feet of Lord Browne and his board

May 2007 - Lord Browne steps down as BP chief executive with immediate effect after the House of Lords lifts an injunction that prevented a newspaper group from publishing details of his private life.

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http://business.guardian.co.uk/story/0,,2069999,00.html

Analysis

Browne case: the evidence and the judgment
Peter Walker
Tuesday May 1, 2007
Guardian Unlimited

The 19-page ruling by Mr Justice Eady, which lifts an injunction preventing the publication of details about Lord Browne's personal life, is soberly written and littered with legal terms but nonetheless utterly damning of the BP chief executive, who resigned today.

Seeking to prevent his former partner, Jeff Chevalier, selling the story of their failed relationship to a newspaper, Lord Browne lied to the court in applying for an injunction, something the judge said could constitute contempt of court.

He also showed a "willingness casually to trash the reputation of Mr Chevalier and to discredit him in the eyes of the court" by alleging the Canadian former IT worker was dependent on drink and drugs and inherently unreliable as a witness, the judge said.
In fact, the judge concluded, in a sentence that made Lord Browne's resignation inevitable, he would in future be "careful in taking anything the claimant [Lord Browne] says at face value".

The High Court ruling details the undeniably sad facts of a love affair gone wrong that soured into bitterness and acrimony.

Lord Browne's relationship with Mr Chevalier began in 2002. He falsely told the court they first met while exercising in Battersea park, south London, but the real initial meeting and the reason for Lord Browne's untruth were not detailed in the judgment.

From then until 2006, Mr Justice Eady recounted, "Mr Chevalier adopted the claimant's lifestyle and was provided by him with food, travel, clothes and accommodation at a fairly luxurious level", as well as receiving "substantial payments".

With Mr Chevalier's British visa due to run out, Lord Browne helped him become a student and set up a mobile phone ring-tone company.

However, when the relationship ended, the Canadian found himself back home and "having to adjust to a drastically reduced lifestyle", despite Lord Browne paying for a year's lease on a flat.

Mr Chevalier, who complained that he had left the IT world while being "kept'" by Lord Browne and was now unemployed and increasingly desperate, asked for more help. He eventually deciding to go to the press and, as the judge put it, "spill the beans in various ways".

The 59-year-old BP chief was granted an initial injunction stopping the Mail on Sunday publishing Mr Chevalier's various claims, 15 of which are listed in the judgment, ranging from the deeply serious to the seemingly trivial.

The list covers information about Lord Browne's supposed talks with the prime minister, Tony Blair, and other government figures; a claim - which Lord Browne strongly denies - that he paid cash for renovations to a flat in Venice to avoid VAT, and allegations that he visited the Libyan leader, Colonel Muammar Gadafy.

It also lists the likes of this: "While he was watching a programme on television, the claimant jumped up and made an observation about his personal investment strategy."

Later, Associated Newspapers, which publishes the Mail on Sunday, narrowed down the allegations it wished to publish to five areas: an allegation about Lord Browne discussing BP strategy with a third party; the alleged misuse of BP resources to help Mr Chevalier; the fact of the pair's relationship; alleged breach of confidentiality when the BP head discussed company matters with his then-partner, and Lord Browne's relationships with BP colleagues.

The judge ruled that the allegation about BP strategy being discussed should be covered by the injunction, but that there was no reasonable expectation of privacy in relation to the alleged misuse of BP resources and manpower, or to BP matters allegedly being discussed with Mr Chevalier.

The bare facts of the relationship could not realistically be covered by an injunction, given that the pair had frequently been seen together.

However, the judge said, Lord Browne's relations with BP colleagues should be considered confidential.

In a statement released today, Lord Browne acknowledged he had lied about how he first met Mr Chevalier, but vehemently denied any claims of improper conduct in relation to BP, saying the company agreed with him.

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http://business.guardian.co.uk/story/0,,2069965,00.html

'My sexuality is a personal matter'
This is the full text of a statement released by Lord Browne, who resigned today as chief executive of BP
Tuesday May 1, 2007
Guardian Unlimited
 
BP's outgoing chief executive Lord Browne. ' I have always regarded my sexuality as a personal matter' Photograph: Graham Turner/Guardian
 
"For the past 41 years of my career at BP, I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private.
"It is a matter of personal disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

"Legal documents have been disclosed today containing allegations about me and my personal life.

I wish to acknowledge that I did formerly have a four-year relationship with Jeff Chevalier.
"He has made these allegations about me and our relationship to Associated Newspapers, the publishers of The Daily Mail, Mail on Sunday and Evening Standard. "The allegations are full of misleading and erroneous claims.

"I deny categorically any allegations of improper conduct relating to BP.

"The company has confirmed today that it has found no such wrongdoing.

"My initial witness statements, however, contained an untruthful account about how I first met Jeff.

"This account, prompted by my embarrassment and shock at the revelations, is a matter of deep regret. It was retracted and corrected.

"I have apologised unreservedly, and do so again today.

"These allegations will result inevitably in considerable media attention for both myself and BP. What matters to me is BP, what we have achieved during my tenure and the bright future ahead.

"I have therefore informed the Board of BP that I intend to stand down as group chief executive with immediate effect, rather than retiring at the end of July.

"This is a voluntary step which I am making to avoid unnecessary embarrassment and distraction to the company at this important time.

"I have spent my entire working life with BP, and want to thank everyone for their dedication, loyalty, support and hard work in creating one of the worlds finest companies.

"I shall not be commenting on my personal issues further. I wish to pursue my personal life in private."

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http://business.guardian.co.uk/story/0,,2069498,00.html

BP accused of 'draconian' cost cuts prior to Alaskan pipeline spill
Andrew Clark in New York
Tuesday May 1, 2007
The Guardian

A US congressional committee has uncovered evidence of "draconian" cost cuts at BP in the run-up to the discovery of severe corrosion which shut down a key Alaskan pipeline last summer.

The house committee on energy and commerce yesterday demanded an explanation from Britain's biggest oil company for documents suggesting that managers considered turning off the flow of anti-corrosion chemicals to save money.

In a letter sent yesterday to BP America's president, Robert Malone, committee chairman John Dingell cited internal BP papers and emails provided by the company. "The documents suggest that budget pressures were severe enough that some BP field managers were considering measures as draconian as reducing corrosion inhibitor to save money," the letter says. "BP provided emails that detail proposals to cut funding for corrosion inhibitor during at least two different years and in two different locations."

An inspection by BP following a minor oil spill in August revealed that the walls of a trans-Alaskan pipeline had worn dangerously thin, forcing the company to shut half of its Prudhoe Bay field. The closure cut America's oil production by 8% and prompted anger about BP's maintenance of the pipe.
The crisis followed other allegations of dangerous cost cuts by BP in America. In 2005, an explosion at BP's Texas City refinery killed 15 people and was blamed partly on cutbacks affecting safety procedures.

Mr Dingell, a Democrat, lists examples of work put on hold by BP including internal pipeline inspections known as "smart pigging", digging up road crossings for visual inspections.

"In other words, important actions related to health, safety and the environment were being delayed or cut altogether and this was related to tight budgets," he writes.

The committee has scheduled a hearing in Washington on Thursday at which BP will be invited to explain its position.

A BP spokesman last night said the company had no comment on the contents of the letter but added: "We will continue to cooperate with the committee and its staff to make sure we provide them with the documents and information they want."

At a committee hearing last year, congressmen lambasted BP for its failings; one suggested that the company's name stood for "broken pipelines" rather than the official motto, Beyond Petroleum.

BP is now replacing all 16 miles (25km) of the Prudhoe Bay pipeline.

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Financial Times
May  1, 2007

http://www.ft.com/cms/s/a6e4e62e-f811-11db-baa1-000b5df10621.html

Browne has tried to limit the damage  BP must too
Published: May 1 2007 19:44 |
Last updated: May 1 2007 19:44

It is hard to separate shock at Lord Browne’s rapid downfall from a cool-headed view of BP’s future. The reputation of the oil company and its chief executive have been entwined for so long that it will take time to disentangle them.

But given that Lord Browne has denied any improper conduct relating to BP, the details of his private life ought to have no impact on the operation of the company. Indeed, the fact that he has stepped down now should help to speed up changes that were already being implemented.

That Tony Hayward, who was due to succeed Lord Browne as chief executive from July, has instead had to take over now could even benefit BP and its shareholders. The initial decision in January to bring forward Lord Browne’s retirement was welcomed by the market as a way of drawing a line under the issues raised in the wake of disasters such as the fatal Texas City accident of 2005 and the Alaska pipeline leaks. Mr Hayward had already taken on many of the responsibilities of chief executive and promised to improve the group’s safety record and performance.

But the continued presence of his predecessor was at best a distraction, at worst a hindrance  particularly because Mr Hayward, like other board members, was informed about the allegations against his boss and must have been affected by the uncertainty about whether or when they would be published.

If there is an effect on the group, it is more likely to be felt below board level, among senior managers who did not know about the possibility of personal scandal tainting the chief executive’s legacy. But while the potential impact on morale cannot be measured, it should be manageable.

The history of companies after forceful leaders are laid low by scandal is mixed. Where personal and corporate misconduct cannot be separated  as in the decline of imperial chief executives at US companies such as Enron and WorldCom in the early part of the decade  the future of the company can be called into question. That is not the case at BP.

Even if some of the details of Lord Browne’s court battle risk being used to undermine his credibility in the US, his reaction in offering his resignation is an honourable attempt to limit the damage to the company he loves. Last week, presenting BP’s downbeat first-quarter results, BP’s chief financial officer told analysts that 2007 would be “a year of consolidation” and added that BP’s “strategy is unchanged”. The best way for BP and its staff to recover from the tragic circumstances of their chief executive’s departure is to focus on that.

Countrywide lesson

The last twist in the takeover of Countrywide, the perplexingly popular estate agency, makes you wonder whether there is any longer such a thing as a “normal” bid. The group does finally seem to have fallen, after seven and a half months, to an offer from Apollo, the US private equity firm. Even that bid had to be sweetened on the last day to see off 3i, the buy-out firm whose first recommended proposal was ignominiously rejected by shareholders in January.

Once upon a time, an agreed offer would have been nodded through, provided investors trusted the board’s judgment. But, as Christopher Sporborg, who delayed his retirement as Countrywide chairman to complete the deal, has pointed out, relationships with long-only funds count for little once aggressive, short-term investors buy in.

3i has not emerged well from this. It made a tactical error in billing its original bid as “final” which, under takeover rules, meant it could not be raised when the extent of investor opposition became clear. Apollo step­ped in almost as soon as that offer was defeated, at which point 3i was clear to bid again. But the final auction of Countrywide took place behind the scenes, with Apollo exercising its right to match the UK firm’s proposals.

Polygon, the hedge fund, emerges as a winner  assuming that, despite a toppy UK housing market, its aggressive assessment of Countrywide’s long-term prospects is correct. It started as the holder of a speculative stake in Countrywide and ended up as a 29.9 per cent shareholder. As such, it successfully insisted on receiving “stub equity” in the continuing business from Apollo. Long-only shareholders generally shun the offer of an illiquid minority stake. Its use here is a sign of how alternative asset managers are calling the shots. In other respects, however, the deal underlines how they have made the process less certain.

Mr Sporborg must be looking forward to his retirement, because the dispiriting lesson of Countrywide is that when “recommended” no longer counts as a recommendation, “final” no longer means “final”, and bidders have to pander to individual blocs of differently motivated shareholders, boards will struggle to do the right thing.

Amnesiacs reunited

The fact that boo.com is about to return to the web, seven years after it became the poster-child for dotcom madness, is not in itself a concern. What is worrying is that, according to the domain name’s latest owner, most of the staff of what will become a hotel booking site hadn’t the faintest idea about the earlier brand debacle.

andrew.hill@ft.com


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http://www.ft.com/cms/s/c15e597a-f7f0-11db-baa1-000b5df10621.html

Browne quits BP after lying to court
By Ed Crooks and Carola Hoyos
Published: May 1 2007 15:37 |
Last updated: May 1 2007 16:13

Lord Browne sensationally quit as chief executive of BP on Tuesday after it was revealed that he had lied to a court in an attempt to suppress stories about his private life.

Following crisis talks with Peter Sutherland, BP chairman, at the oil group’s headquarters at St James’s Place in London, BP said he had tendered his resignation after a court lifted a legal injunction preventing the Mail on Sunday from publishing details of his private life.

Lord Browne said in a statement: “In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

”Concerning the court documents disclosed today, I wish to acknowledge that I did have a four-year relationship with Jeff Chevalier who has now chosen to tell his story to Associated Newspapers, publishers of The Daily Mail, Mail on Sunday and Evening Standard.

”These allegations are full of misleading and erroneous claims. In particular, I deny categorically any allegations of improper conduct relating to BP.”

Tony Hayward, Lord Browne’s designated successor, takes over as chief executive with immediate effect.

As a result of his decision to resign, Lord Browne loses his agreed entitlement to a year’s notice including a bonus of up to 1.3 times his annual salary, worth in total more than £3.5m. He also forgoes inclusion in the long-term performance share plan for 2007-09, which has a maximum potential value of up to £12m.

Mr Sutherland said: ”John has made it clear to the BP board that he has decided to step down with immediate effect because he does not want this public focus on his private life to detract from the paramount task of running the BP group.

”The board of BP has accepted John’s resignation with the deepest regret. For a chief executive who has made such an enormous contribution to this great company, it is a tragedy that he should be compelled by his sense of honour to resign in these painful circumstances.”

The dramatic development came after an injunction preventing any details of the case from being reported was partially lifted. In his judgement, Mr Justice Eady criticised Lord Browne for lying, and raised the possibility that his behaviour “should be addressed as contempt or as some other form of criminal offence.”

Lord Browne sought the injunction to stop the Mail on Sunday publishing stories about his relationship with Mr Chevalier, a Canadian who was his partner between 2002 and early 2006.

Mr Chevalier made a number of allegations against Lord Browne, including misuse of BP resources and the release of sensitive company information, which were released as part of the judgement. Lord Browne denied the veracity of most of the allegations.

In his statement Lord Browne on Tuesday dismissed the allegations as being “full of misleading and erroneous claims. I deny categorically any allegations of improper conduct relating to BP. The company has confirmed today that it has found no such wrongdoing.”

In applying for the injunction, Lord Browne lied about the circumstances under which he had met Mr Chevalier, saying it had been “by chance, while exercising in Battersea Park”, the judge said.

Although Lord Browne retracted that claim two weeks later, after evidence from Mr Chevalier, the judge said he was “not prepared to make allowances for a ‘white lie’ told in circumstances such as these  especially by a man who prays in aid his reputation and distinction”.

The judge added: “It is clear that it is not only the Claimant’s [Lord Browne’s] willingness to tell a deliberate lie to the court, persisted in for about two weeks, that is relevant in assessing his own credibility and the overall merits. So too is his willingness casually to ‘trash’ the reputation of Mr Chevalier and discredit him in the eyes of the court.”

Mr Justice Eady decided not to refer the matter to the attorney-general, saying disclosure in the judgement of Lord Browne’s behaviour was “probably sufficient punishment”.

The judgment said that while the relationship was going on, Lord Browne provided Mr Chevalier with clothes, food, travel and accommodation, and paid him “substantial amounts” in cash and cheques.

He also helped him set up a mobile phone ringtones business, which had one BP executive as a director and another employee as company secretary, the judge said. Lord Browne accepts that his personal assistant helped with secretarial assistance; Mr Chevalier said the help went further.

Mr Chevalier also alleged that Lord Browne dodged VAT by paying cash for renovation works on his flat in Venice, a claim strongly denied by Lord Browne.

The Mail on Sunday’s proposed stories covered a range of subjects, including possible strategic decisions by BP, Lord Browne’s relationships with his colleagues at BP, and accounts of conversations with Tony Blair, Gordon Brown and Peter Mandelson.

Many of those stories should not be published, the judge said.

Lord Browne was approached by the Mail on Sunday with its story on January 5. Ten days later he announced that he would step down from BP at the end of July, 17 months sooner than he had agreed with the board in the summer of 2006.

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http://www.ft.com/cms/s/c31756a0-f7f4-11db-baa1-000b5df10621.html

BP’s statement in full
Published: May 1 2007 16:01 |
Last updated: May 1 2007 16:01

The statement issued by BP after the resignation of Lord Browne as chief executive

Following a decision taken today by Lord Browne to step down as the company’s chief executive officer, the Board of BP plc has appointed his designated successor, Dr Tony Hayward, as new CEO with immediate effect.

Lord Browne tendered his resignation after the lifting by the UK courts of a legal injunction preventing a newspaper group from publishing details of his private life.

Lord Browne said: ”In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public.

”Concerning the court documents disclosed today, I wish to acknowledge that I did have a four-year relationship with Jeff Chevalier who has now chosen to tell his story to Associated Newspapers, publishers of The Daily Mail, Mail on Sunday and Evening Standard.

”These allegations are full of misleading and erroneous claims. In particular, I deny categorically any allegations of improper conduct relating to BP.”

BP chairman Peter Sutherland said that Lord Browne had informed the company of allegations relating to the limited use by Jeff Chevalier of BP computer and staff resources.

Mr Sutherland said: ”At John’s explicit request, the Board instigated a review of the evidence. That review concluded that the allegations of misuse of company assets and resources were unfounded or insubstantive.

”John has made it clear to the BP Board that he has decided to step down with immediate effect because he does not want this public focus on his private life to detract from the paramount task of running the BP group.

”The Board of BP has accepted John’s resignation with the deepest regret. For a chief executive who has made such an enormous contribution to this great company, it is a tragedy that he should be compelled by his sense of honour to resign in these painful circumstances.”

*The company said that as a result of Lord Browne’s decision to resign he would lose his agreed entitlement to a year’s notice including a bonus of up to 1.3 times his annual salary, worth in total over £3.5 million. He would also forego inclusion in the long-term performance share plan for 2007-2009 with a maximum potential value of some £12 million.
 

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Anchorage Daily News
May 1, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8844194p-8744880c.html

BP asked if scrimping led to pipe corrosion
PRUDHOE BAY: E-mails suggest that monitoring procedures were reduced.
By WESLEY LOY
Anchorage Daily News
Published: May 1, 2007
Last Modified: May 1, 2007 at 04:13 AM

Congressional leaders say they've obtained e-mails and other documents suggesting a "severe cost-cutting atmosphere" at BP that might have led to pipeline corrosion and leaks last year in the giant Prudhoe Bay oil field.

The documents show that BP considered reducing the use of corrosion-inhibiting chemicals in pipelines to save money, according to a letter two congressmen sent Monday to a BP executive. The company also might have skimped on corrosion monitoring techniques such as running pigs -- devices that slide through pipes looking for trouble spots -- and digging up road crossings to visually inspect pipes, the letter says.

The letter sets up a Thursday hearing in Washington, D.C., on last August's partial shutdown of Prudhoe, the nation's top-producing oil field, due to pipeline leaks.

The shutdown rattled world oil markets, and a major spill from a corroded pipe months earlier remains under scrutiny by federal criminal investigators. The 201,000-gallon release was the largest oil spill ever on the North Slope.

U.S. Rep. John Dingell, D-Mich., who chairs the House Energy and Commerce Committee, and the chair of the oversight and investigations subcommittee, Rep. Bart Stupak, D-Mich., sent the letter to BP America president Bob Malone.

The congressmen based the letter on documents they say BP recently turned over to the subcommittee.

"We have no direct comment as to the content of the letter, except to say we're cooperating with the subcommittee and will provide information," BP spokesman Ronnie Chappell said.

The letter asks Malone to answer questions such as, "At any time from 2000 to 2005, did BP managers order corrosion inhibitor injection to be turned off, specifically to save money or stay within budget constraints?"

The letter cites an April 15, 2004, e-mail to two people, including BP's former North Slope corrosion manager Richard Woollam, referring to a proposal to cancel corrosion inhibitor at "GC's." It's an apparent reference to gathering centers, key oil-field plants that separate oil from water and natural gas.

Woollam appeared before the Energy and Commerce Committee last September but refused to answer questions, invoking his Fifth Amendment right against self-incrimination.

One theory of what caused last year's problems is that anticorrosion chemicals put into key oil pipelines running out of the gathering centers were either inadequate or ineffective in stopping corrosion that ate numerous holes or near-holes through the steel pipes.

BP executives have apologized for the leaks and said they were surprised by the corrosion outbreak in oil pipes not normally susceptible to such damage. The executives also have admitted to inadequately managing corrosion in the major Prudhoe pipes, known as transit lines, which are being replaced.

The congressmen ask Malone to be ready to discuss the impact of budget cutting on BP's corrosion control unit and the morale of workers.

"The documents provided to the subcommittee confirm that people on the front lines of corrosion management believed that they were under extreme pressure, and they were attempting to do their best with what they had," the letter says.

Committee staffers e-mailed the Dingell-Stupak letter to reporters Monday in a move that seemed designed to heighten interest in Thursday's hearing.

BP likewise has gone public. The company ran a large newspaper ad Sunday titled "A letter to Alaskans about the future," in which BP Alaska president Doug Suttles says BP is employing hundreds of workers and spending hundreds of millions of dollars to replace pipelines and refurbish Prudhoe Bay equipment.

BP runs Prudhoe Bay on behalf of itself and other owners including Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.

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

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HEARING INFO

Dingell / Stupak  April 30, 2007 letter to BP
http://energycommerce.house.gov/Press_110/110-ltr.043007.BP.Malone.pdf
Letter to BP Chairman and President Malone, in regard to the pending investigation of the cost-cutting atmosphere at BP's Prudhoe Bay facility

http://energycommerce.house.gov/membios/schedule.shtml

THURSDAY, MAY 3, 2007
2006 Prudhoe Bay Shutdown: Will Recent Regulatory Changes
and BP Management Reforms Prevent Future Failures?
Subcommittee on Oversight and Investigations

Oversight and Investigations Subcommittee (Chairman Stupak, D-Mich.) of
House Energy and Commerce Committee will hold a hearing titled "The 2006 Prudhoe Bay Shutdown:
Will Recent Regulatory Changes and Management Reforms Prevent Future Failures?"

Contact: Vacant, - Democratic Staff Director at 202-225-2927

Date
Thursday, May 3, 10 a.m.
Place
2123 Rayburn Bldg.
Note
Witnesses added.

Panel
Stacy Gerard - acting assistant administrator and chief safety officer, Pipeline and Hazardous Materials Safety Administration, Department of Transportation

Jonne Slemons - coordinator, Petroleum Systems Integrity Office, Alaska Department of Natural Resources

Carolyn Merritt - chair and CEO, U.S Chemical Safety and Hazard Investigation Board

Richard Fairfax - director, Directorate of Enforcement Programs, Occupational Safety and Health Administration, Department of Labor

Panel
Robert A. Malone - chairman and president,
BP America, Houston, Texas