September 2007 News Stories

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CTV News
September 30, 2007

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20070928/bc_seamap_070929/20070929?hub=CTVNewsAt11

Oil spill animation outlines worst cases for B.C.
Updated Sat. Sep. 29 2007 11:32 PM ET
CTV.ca News Staff

Oil Spill Map
http://images.ctv.ca/archives/CTVNews/img2/20070929/450_Oil_map_070929.jpg
This map, made by The Living Ocean Society, demonstrates the possible outcome of an oil spill off the coast of British Columbia. ( www.livingoceans.org)

An environmental group has created an online cartoon
http://www.livingoceans.org/oilgas/spill_model/oil_spill_model.shtml
that predicts the grim impact of oil spills on British Columbia's coast.

The Living Ocean Society, a non-profit research and public education organization, released the program in response to concerns that a current moratorium against drilling and shipping off B.C.'s coast could soon be lifted.

According to the oil spill animation, even the smallest accident could cause major devastation.

"The oil spill model clearly demonstrates that Canada and the Province of B.C. must strengthen and enforce the moratorium on oil tankers and offshore oil and gas in order to maintain the wealth of marine resources on B.C.'s coast," said Oonagh O'Connor, Energy Campaign Manager for the Living Oceans Society, in a news release.

A number of scenarios were developed using up-to-date oceanographic data to show how oil spills would affect ecosystems and communities on the North Coast of B.C.

The animation is based on a model developed using a software program built by the U.S. National Oceanic & Atmospheric Administration -- the same software used by response crews during actual spills to determine where clean up efforts should be directed.

The model outlines, day-by-day, how oil would wash into bays, inlets and beaches depending on the season and break location. Users can click options to see how whales, fish and habitat would be affected.

"It's very different than off the East Coast. We're right on the inside, we're in inside waters, the oil is trapped and it's almost immediately hitting land, which is the worst case scenario," O'Connor said.

The animation is designed as a warning to illustrate what the group argues would occur if drilling and shipping are allowed off B.C. -- something currently banned under a moratorium.

The B.C. Liberal government has been pushing the federal government for the right to offshore drill, and has said it wants an offshore oil and gas industry in operation by 2010.

O'Connor says that if the moratorium is lifted, an accident is inevitable.

"It is not a question of if a spill would happen, but one of when and how big. The oil spill model clearly demonstrates that a spill from just one tanker could devastate coastal ecosystems and communities," she said.

The Living Oceans Society says planned expansion of Alberta's tar sands has led to at least six proposed mega-projects in northern B.C. that call for pipelines to ports in Kitimat and Prince Rupert.

"There is considerable pressure to open the coast to oil tanker traffic and offshore oil and gas," O'Connor said.

Despite the fact that there are no drilling platforms along the coast, the animated scenarios don't seem so farfetched.

The Exxon Valdez tanker dumped nearly three-quarters of a million barrels of oil in nearby Alaska 19 years ago.

And when the Queen of the North, a 125-metre ferry, sank near Prince Rupert in 2005, it left behind a large slick on the water and tonnes of oil beneath it.

But amidst the fear of a pipeline from the tar sands and suggestions from the province that off-shore exploration could soon begin, some environmentalists hope that public educators such as the oil spill animation can keep such tragedies from happening in B.C.

"I think the conservation concerns of Canadians in terms of climate change and in terms of our rich coastal systems are maybe going to keep that from happening here," Jay Ritchlin, a marine conservation specialist with the David Suzuki Foundation, told CTV News.

With a report from CTV's Todd Battis

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Anchorage Daily News
September 30, 2007

http://www.adn.com/money/story/9344006p-9258499c.html

Oil production trends cause concern
TIM BRADNER
ECONOMY
Published: September 30, 2007
Last Modified: September 30, 2007 at 04:25 AM

A worry I have for our state's economy is that North Slope oil production has been declining faster than many have expected. Despite the state's efforts to offer tax incentives for new exploration, there isn't enough new drilling and discoveries to make much of a dent in the decline.

What worries me more, though, is that there isn't much talk about this among our state's leaders, an exception being Revenue Commissioner Pat Galvin, who has warned several times about the implications of production decline.

Galvin is right to be concerned. He and his people in the Revenue Department know more than anyone how dependent our state budget is on oil revenue. They also understand the revenue surpluses that recent sky-high oil prices have created mask the underlying weakness in our fiscal system, that oil production has been steadily declining for years.

Here's a couple of tidbits that particularly bother me: A year-over-year oil production summary the Department of Revenue recently prepared for me showed a 12.5 percent decline in average daily production for the 12-month period ending in June compared with the previous year.

That includes production lost due to the partial shutdown of the Prudhoe Bay field last August and September, but even if the decline is adjusted for that hopefully one-time event it is worrisome.

I was comforted more recently by reports that the Prudhoe field is performing well and even exceeding the producers' forecasts.

Alaskans have heard warnings of imminent fiscal perils for years, usually sparked by declines in oil prices. Each time prices rebounded and bailed us out. Things are different this time. The fall in production isn't easily slowed or halted.

Can exploration bail us out? Maybe, but it's doubtful anytime soon. One reality we must understand is that geologic prospects in areas now open to exploration just aren't that good in terms of finding fields big enough to flatten or even dent the production decline.

There's good potential for finding small discoveries and, with luck, one or two medium-sized fields. But that's not happening fast enough to dent the decline. The central North Slope area where most industry activity is concentrated is pretty well picked-over in terms of major discoveries, and so far exploration in the National Petroleum Reserve-Alaska has been somewhat disappointing.

One area geologists are excited about is the coastal plain of the Arctic National Wildlife Refuge, but given the political situation, it is doubtful Congress will allow drill rigs in ANWR anytime soon. The Arctic offshore has promise, but most of it is owned by the federal government, unlike the state ownership of most North Slope oil fields, so there would be relatively little revenue flowing to the state.

The situation isn't dire, however. A resource on state land that holds great promise and is accessible, though expensive, is huge heavy oil resources. These are expensive to develop and much of it will require new technology.

Then there are the resources remaining in the existing fields, which hold great promise. Prudhoe Bay, for example, physically held about 23 billion barrels of oil when it was discovered. About 13 billion barrels of this can be economically produced with current technology, and most of it already has been produced. This leaves 10 billion barrels, a huge target.

These barrels constitute a mega-oil field in themselves, but producing even some them will be very expensive. Technological innovations will be needed, too, if the largest and most attainable new production can come from the existing large fields.

Oil production underpins our state budget and a good part of our economy. Alaskans should understand the industry and its problems.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every fourth Sunday.


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http://www.adn.com/money/industries/oil/story/9343940p-9258436c.html

CH2M Hill defends seasonal layoffs
PRUDHOE BAY: Reduction has nothing to do with Veco acquisition, company says.

By PETER PORCO
pporco@adn.com
Published: September 30, 2007
Last Modified: September 30, 2007 at 01:34 AM

Scores of workers in the Prudhoe Bay oil fields have been laid off in a seasonal manpower reduction, including employees assigned to inspect pipelines for corrosion, according to spokesmen for BP Alaska and the workers' new Colorado-based employer, CH2M Hill.

The number of workers affected is fewer than 200, CH2M Hill communications director John Corsi said in a telephone interview Saturday night. CH2M Hill contracts with BP to perform the corrosion inspections of oil transit pipelines.

The remaining inspection crews will still be eight to 10 times the number of employees doing such work in the winter until a few years ago, said BP spokesman Daren Beaudo.

CH2M Hill's contracts for North Slope oil producers were owned by Veco Corp. until a few weeks ago, when scandal-plagued Veco was purchased by CH2M Hill. Veco's employees are now CH2M Hill's employees.

The work force downsizing "has nothing to do with the acquisition" of Veco, Corsi said. "We didn't come in with a plan that we had to be at a certain size or number of employees."

Corsi said CH2M Hill has worldwide operations. The acquisition of Veco's North Slope work is so recent that he knows few details of it, Corsi said.

Since early 2006, BP's North Slope operations have come under scrutiny from Congress, regulators and others because of a series of corrosion-related leaks and maintenance shortcomings. Four fires broke out in BP-run fields between Aug. 6 and Sept. 10. State officials said they're troubled by the fires, but the company said they were unrelated.

BP increased its work crews for pipeline corrosion inspections in August 2006, Beaudo said. "It was a big program to inspect the oil transit line, so now we're getting back to what we consider a normal staffing," he said.

Beaudo said he is pretty sure some of the laid-off workers "will switch to do winter construction activity."

London-based BP manages Prudhoe Bay, the nation's largest oil field, as well as several neighboring fields.

Find Peter Porco online at adn.com/contact/pporco or call 257-4582.

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Wall Street Journal
September 28, 2007

UPDATE:
BP Says Baku-Ceyhan Crude Pipeline Closed
DOW JONES NEWSWIRES
September 28, 2007 7:29 a.m.

(Updates an item published at 0930 GMT with trader comment, company response, crude prices, export information and pipeline throughput data.)

LONDON (Dow Jones)--BP PLC (BP) has confirmed that it has shut down the Baku-Ceyhan crude oil pipeline following a fault at a pumping station in Turkey.

According to a BP spokesman, the company was informed of a failure at a pumping station at Kars in northeast Turkey at approximately 2300 GMT Wednesday night. Operator of the pipeline in Turkey, Botas, informed BP that it had shutdown the pumping station, and BP subsequently decided to shut down the rest of the pipeline, the spokesman said.

Botas wasn't immediately available for comment on the shutdown.

Oil terminals at both end of the pipeline had to initiate controlled shutdowns, the BP spokesman added. He said that the eqipment failure affected only the pumping station, not the line itself. Repairs were expected to be completed in "a few days" he said.

With oil currently in storage at Ceyhan, crude exports from the terminal would continue "for the time being", the spokesman added. He also said that there was an alternative westward route for Azeri crude exports, via rail to the Georgian port of Batumi on the Black Sea.

Mediterranean crude traders said they expected the outage to last 1-2 days, and the shutdown was likely to boost prices.

One trader in the Mediterannean region said that the outage would add 15-20 cents to the Azeri crude price. Selling interest for the grade was last heard at a $1.20 premium to Dated Brent, before news of the outage emerged.

The Baku-Ceyhan pipeline transports crude from the Caspian Sea at Baku in Azerbaijan, via Tbilisi in Georgia to Ceyhan on the Turkish Mediterranean coast.

According to the latest figures from the Azerbaijani unit of BP, shipments via the pipeline to Turkey amounted to 633,000 barrels a day during August. BP predicts that it will achieve an average of 1 million barrels a day throughput by late 2008.

-By Nick Heath; Dow Jones Newswires; (4420) 7842 9405; nicholas.heath@dowjones.com

(Lananh Nguyen in London contributed to this article.)

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Anchorage Daily News
September 27, 2007

http://www.adn.com/news/politics/veco/story/9335588p-9249637c.html

State on sidelines of FBI investigation into Veco
TAKING NOTES: The attorney general's office won't
interfere with the federal investigation.
By SEAN COCKERHAM
scockerham@adn.com
Published: September 27, 2007
Last Modified: September 27, 2007 at 05:38 AM

Alaska Attorney General Talis Colberg said his office assigned lawyers to closely watch former-state Rep. Pete Kott's trial in federal court over the past two weeks as it revealed other possible criminal acts by politicians and Veco Corp. executives.

Colberg said the attorney general's office isn't ignoring the revelations. But he said the state has to proceed carefully before pursuing its own criminal charges. The broad federal investigation into corruption in Alaska politics doesn't appear to be close to finished. The feds don't want interference from the state, according to Colberg.

"They've made it clear enough that they appreciate us not stepping into the middle of something that's ongoing," Colberg said.

He said the federal government has also declined to share the results of its investigation with the state.

Jurors on Tuesday convicted Eagle River Republican Kott on federal charges of conspiracy, bribery and extortion. Next up are federal trials of former Republican state Reps. Vic Kohring and Bruce Weyhrauch. It's clear the federal government is investigating other Alaska politicians as well, including U.S. Sen. Ted Stevens.

The state is under a lot of pressure to act instead of relying on the FBI to clean up corruption here. The Alaska Public Offices Commission, a state agency known as APOC, has decided to investigate political polls Veco and possibly other companies bought for candidates.

APOC Executive Director Brooke Miles said the commissioners determined that, with all the public scrutiny and seeming unhappiness with APOC's lack of action, they wanted to find out the facts.

There was testimony at Kott's trial that Veco routinely paid for candidate's political polls, including a $20,000 poll for then-Gov. Frank Murkowski last year before he was a declared candidate for re-election. One of the federal charges against Kott was that Veco illegally bought him a poll.

It's not clear what APOC will do with the findings of its investigation into the other polls paid for by Veco. APOC says it is hindered by the one-year statute of limitations in state law on imposing civil penalties for campaign violations. The polls brought up at Kott's trial are more than a year old.

There is no one-year statute of limitations on criminal charges. APOC doesn't have the authority to pursue criminal matters but could refer its findings to the state attorney general's office. Miles, the APOC director, said that's a possibility.

APOC has only a single investigator. The attorney general's office, while lacking the manpower of the FBI, could call on state troopers and criminal prosecutors for a corruption probe.

MORE THAN JUST POLLS

A pair of Democratic legislators from Anchorage, Les Gara and Harry Crawford, wrote APOC and the state attorney general this week to urge action. They said the state must investigate the polls and other apparent criminal acts that came up in Kott's trial and related federal indictments.

"The scope of this misconduct is unprecedented, and taking no action simply condones this conduct," their letter said.

Gara and Crawford said the illegal acts weren't limited to polls. They pointed to federal indictments in which Veco executives Bill Allen and Rick Smith pleaded guilty to paying "more than $10,000" in expenses for candidate fundraisers, knowing the money would be ultimately recorded as legitimate corporate expenses.

That violates the ban in state law on corporate contributions to candidates, Gara and Crawford said.

The indictment does not mention which fundraisers were illegal. But former Veco executive Smith testified that he organized many fundraisers, including the annual pig roast for Alaska Congressman Don Young.

'SPECIAL BONUSES'

Smith and Allen also testified about Veco's "special bonus program," where the company would reimburse Veco executives for campaign contributions.

That's also against Alaska law. Gara said that not all the former Veco executives involved in the program are under federal indictment, and maybe they should be under state indictment.

The state should also investigate what legislators besides those charged by federal prosecutors benefited from Veco in violation of state law, he said. So far, all legislators indicted have been Republicans.

"There's a lot the state can do," Gara said.

Gara said the state could pursue criminal charges on issues like illegal polls without interfering in the much broader federal investigation. Gara said, at this point, it looks like the state is doing nothing.

Colberg said he could not comment on any proposed or ongoing investigation. Colberg did not rule out the idea of the state going after side issues such as political polls without messing up the federal probe.

"We do not overlook the idea there is something they may not pursue that we may be able to," the attorney general said.

Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344.
 

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Fairbanks News Miner
September 27, 2007

http://newsminer.com/2007/09/27/9075

Senator chides Palin, calls relations ‘frosty’
By R.A. Dillon
For the News-Miner
Published September 27, 2007

WASHINGTON  Sen. Ted Stevens on Wednesday called relations between the congressional delegation and Gov. Sarah Palin “frosty” following a series of public incidents that has revealed a growing schism among Alaska’s Republican leadership.

Speaking in his Senate “hideaway” office on the second floor of the Capitol, Stevens said Palin’s decision last week to redirect federal highway funding for the controversial Ketchikan bridge to other state Department of Transportation projects could spark demands from fiscally conservative Republicans for the return of the money.

“If they’re not going ahead with that bridge, I think there’s going to be demands here that the money be returned,” he said. “It could actually lead to litigation sometime in the future to ask that that money be returned to the federal treasury.

“And since Alaska has so much money in the bank, as far as everyone back here is concerned, it’s a dangerous place to be in,” Stevens added, citing a favorite target of Republican spending hawks  the state’s $40 billion Permanent Fund.

Fiscal conservatives in the U.S. House of Representatives wasted no time in calling for the “bridge to nowhere” funds to be returned. Illinois Congressman Mark Kirk took to the floor Wednesday afternoon to urge his colleagues to demand the return of “some of this money that was to be wasted to the American taxpayers that earned it.”

Stevens said he expects more calls in the coming weeks for the state to surrender the $223 million appropriated for the bridge between Ketchikan and Gravina Island.

The state is under no obligation to return the money and much has already been committed to other projects, said John MacKinnon, deputy commission of the Department of Transportation.

All but $48 million was money that would have come to Alaska under the regular highway funding formula anyway, MacKinnon said. Congress designated $48 million for road construction on Gravina Island related to the bridge and the money is being used to build about four miles of road, MacKinnon said.

As for the rest of the money, the governor has considerable discretion in deciding on which projects those funds should be used, MacKinnon said.

“Rep. Kirk has to recognize these are formula funds,” MacKinnon said. “If he wants us to give back money that belongs to Alaska, he should first give back some of the money Illinois got.”

Stevens said regardless of whether Congress can force the state to return the bridge money, it’s now a political issue that could harm Alaska in future funding fights.

The governor’s decision “may well jeopardize further funding by the Congress of any bridges in Alaska, which I think is a dangerous precedent,” he said. “I think they should be very careful how they use that money.”

Corruption probe

The governor last week called on Stevens to explain his link to a Justice Department’s investigation into political corruption in the state, including the August FBI search of his Girdwood home.

Stevens, to date, has been tightlipped on the investigation, citing the advice of attorneys. On Wednesday, however, he expanded on his reasons for remaining silent.

“I was a U.S. attorney. I’ve been involved in the law profession now for 57 years,” he said. “I basically know what has to be done, and I’m doing it. That’s stay out of the investigation.”

Stevens, reiterating statements he’s made in the past, said it would be inappropriate to comment further while the investigation was ongoing.

“If I, from the position of a U.S. senator, made comments about that, I would be seriously questioned about the propriety about of such comments,” he said. “It’s been my decision not to comment on it at all.”

Stevens said he would like to tell his side of the story but doesn’t want to risk being accused of obstructing justice by trying to influence a potential grand jury.

“The criticism I’m getting from some sources for not having spoken out really reflects the lack of knowledge of the process,” he said. “There’s nothing much I can do about that.”

Stevens’ name has come up during the corruption trial of former state lawmaker Pete Kott, who was convicted Tuesday of bribery, conspiracy and extortion. Former oil-field service company VECO Corp. chief Bill Allen, a long-time Stevens supporter who has admitted bribing Kott and other state legislators, testified at the trial that he paid for part of the 2000 remodeling of Stevens’ home and made secret recordings of conversations with the senator for the FBI. Stevens has not been charged with a crime.

Addressing criticism he’s received for his past dealings with Allen  who went so far as to purchase the Anchorage Times newspaper at the end of the 1980s to further his political influence in the state  Stevens said it would have been almost impossible not to have contact with one of the state’s most prominent businessmen.

“He was Alaskan of the Year, he was recognized by the Journal of Commerce, he got all kinds of awards,” Stevens said of Allen. “People say how could you possibly be involved with this. My god, it was just a natural thing that I would be involved with him. I cannot comment beyond that about what he’s done.”

Stevens said criticism of him in the national press and in the state is premature, but he doesn’t think Alaska voters have made a rush to judgment.

“You don’t see it, but I’ve been encouraged by the number of people that have contacted me by e-mail, by letters, by phone, personally in airports and restaurants,” he said. “I have not felt the loss of support that is reflected by some of the stuff you see in the media.

“But does it affect you?” Stevens said. “Yeah, my god, it has to affect you to have questions like this come up, particularly from people that I’ve worked with for years. I don’t see how anyone in my position would not feel very sad to reach the position of having been involved in government as long as I have and have these innuendos” made against them.

“There’s been no” charges of wrongdoing, he added. “The investigation’s not over yet, so we’ll just have to bear with it.”

No communication

Stevens expressed disappointment in the growing tension between the delegation and the Palin administration.

“I’d say they are a little frosty,” he said of the relationship.

“I would characterize our relationship as a respectful one,” Palin said in response.

Stevens stressed that relations with John Katz, the governor’s representative in Washington, were “perfectly good.” But neither he, nor Sen. Lisa Murkowski or Rep. Don Young, have heard from the governor on the progress of the natural gas pipeline project since June.

“There doesn’t seem to be a lot of information flowing to us on what the administration wants to do,” Stevens said. “We’ve not had one report of any kind that’s crossed my desk. That on a project this size is unheard of.”

Sharon Leighow, the governor’s spokeswoman in Anchorage, said there’s been little to report to the delegation since the request for applications went out at the beginning of the summer. Leighow said an update will be forthcoming once companies start submitting applications as the Nov. 30 deadline approaches.

Stevens said the pipeline is “critical” for the state’s economy and that the state needs to work closely with the delegation once a project is selected. Stevens said he weekly gets questions about the pipeline’s progress by colleagues in Congress and from federal officials that he doesn’t know how to answer.

“I’ve had people express to me that they think we’re very near a recession in Alaska because there’s been so much investment anticipating that the gas pipeline is going to start,” Stevens said. “if it’s delayed now for a period of time due to litigation or something like that, there’s going to be a real crunch.”

The state’s economy is currently in “fair shape”  mainly thanks to aviation and military construction projects  but it could easily slip, Stevens said.

“The timber economy is gone, the mining economy is under pressure, the oil and gas economy is at an absolute standstill,” he said. “The one part of our economy that’s growing is military construction money, but I don’t think that is going to expand to replace these other parts of our economy that are failing or at a standstill. The one hope that has been there that has led to the investment for the future has been the gas pipeline.”

Contact Washington correspondent R.A. Dillon at
dcnews@newsminer.com.

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Wall Street Journal
September 27, 2007

Motiva Refinery Expansion Heralds More Additions In US
DOW JONES NEWSWIRES
September 26, 2007 2:02 p.m.
By Beth Heinsohn
Of DOW JONES NEWSWIRES

 NEW YORK (Dow Jones)--Last week's decision by Royal Dutch Shell PLC (RDSB.LN) and Saudi Arabia Oil Co. (SOI.YY) to "super-size" a Texas oil refinery opens the door to more expansions, but diverging petroleum-market trends complicate refiners' capacity choices.

The companies' announcement that they would double the size of their jointly owned refinery in Port Arthur follows an extended period of higher gasoline and diesel fuel prices supported, in part, by refinery production that's increasingly insufficient to meet rising demand. The expansion project's approval stands as an endorsement of the refining industry's strength, aided by new flows of crude closer to home. However, uncertainty about future fuel demand and pollution concerns will weigh on investment deliberations.

"It's clear with the profitability of refining, we'll see expansions, but will demand growth underpin that?" said Roger Read, an analyst with Natixis Bleichroeder, an investment bank. Natixis and/or its affiliates have received compensation for non-investment banking services from Shell in the last 12 months. "It's a move that's a little bit offensive but also a little bit defensive."

The idea to make the Motiva Enterprises LLC joint venture refinery the largest in the U.S., processing as much as 600,000 barrels a day of crude oil, was aired as a possibility for more than two years and followed some postponements and cancellations of projects by other refiners. While a 'no' vote by Motiva's board - populated by Shell and Saudi Aramco officials - would have been downright chilling for the refining sector, its approval is a relatively passive vote of confidence.

Refiners must weigh the financial risk of multibillion-dollar upgrades with execution times of six to eight years against potential gains in profit. Going forward with the work can make the difference between an asset that's good for 50 years and one that's good for 30 years, Read said.
 
Alluring Canadian Crude

As the price of crude oil climbs past $80 a barrel, lower-cost but harder-to-refine oil becomes more attractive to refiners.

As part of the expansion, Motiva will be able to source heavy Canadian crude, more evidence that Canada's oil sands are growing in importance for U.S. refiners.

"The comfort level for expansions of this kind is improving by virtue of the fact that we'll have increased North American crude available," said John Parry, an analyst with John S. Herrold in Norwalk, Conn.

Canada, already the largest exporter of crude to the U.S., may see production from its Alberta oil sands tripling to 3 million barrels a day by 2015.

At the same time, many prospects for shipping crude south from Canada have been proposed. By mid-2010, it's expected that an additional 1.3 million barrels a day of pipeline capacity will be available from western Canada to the Midwest and Ontario. Further out in the future, pipelines are seen reaching Gulf Coast locations, including Port Arthur.

Apart from access to lower-priced Canadian crude, the Midwest and Gulf Coast product markets offer certain advantages that make them likely areas for expansion.

It's no surprise that the two largest expansions in the last few years - Motiva in Port Arthur and Marathon Oil Corp. in Garyville, La. - are occurring in the Gulf Coast.

"You can move product onshore and offshore and the region's regulations are more favorable for refiners," said Read.

The Gulf Coast's dense network of pipelines onshore and ready access to incoming and outgoing marine traffic affords flexibility for refiners looking to balance petroleum supply and demand to their best advantage.

In addition, the Gulf Coast tax environment is favorably disposed toward refining. Jefferson County, where Port Arthur is located, granted Motiva exemption from roughly $600 million in local taxes over the course of 20 years. Municipal and educational authorities also slashed Motiva's tax bill for the project.

Whither Gasoline Demand Growth?

 Still, concerns linger for refiners.

"High gasoline prices have had some effect, more hybrid vehicles are coming into the market, and increased use of biofuels will eat into the growth rate," said Natixis' Read. When considering refinery investments coming on line after 2010, demand growth rates in the prior ten years are not a good guide, he added.

In addition, some expansion plans have met with opposition from environmental groups concerned about increases in pollution emissions that would accompany the refining of larger volumes of crude oil.

Challenges by environmentalists and public officials to BP PLC's (BP) plans to expand its refinery in Whiting, Ind., recently led the company to suggest it may cancel modification plans. If its pledge to mitigate chemical discharge into Lake Michigan results in a material impact to the project's viability, "we could be forced to cancel it," BP America Chairman and President Bob Malone said last month.

In addition, the Sierra Club, along with the National Resources Defense Council, has asked the Environmental Protection Agency to overturn a permit granted to ConocoPhillips (COP) to expand its Wood River refinery in Roxana, Ill. The Sierra Club has also stated its opposition to Marathon Oil Corp.'s (MRO) plan to expand its refinery in Detroit.

 -By Beth Heinsohn, Dow Jones Newswires; 201-938-4435;
beth.heinsohn@dowjones.com 

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Anchorage Daily News
September 26, 2007

http://www.adn.com/money/industries/oil/story/9332511p-9247583c.html

BP shares drop on warning of bad quarter
'DREADFUL': CEO says poor performance requires cuts, major restructuring.
The Associated Press
Published: September 26, 2007
Last Modified: September 26, 2007 at 05:21 AM

LONDON -- Shares in BP fell Tuesday after a newspaper reported that the oil company's chief executive had warned staff of poor third-quarter results.

The Financial Times said CEO Tony Hayward told a staff meeting in Houston that he planned a shake-up of the company's structure after its worst financial performance in 15 years.

The newspaper quoted Hayward as telling the staff that third-quarter revenues, due to be announced Oct. 23, will be "dreadful" and that BP needs to streamline its overly complicated structure.

"There is massive duplication and lack of clarity of who does what," the newspaper quoted Hayward as saying. "We will reduce the number of organization units. (We) will reduce the number of layers from the workers up to the CEO from 11 to about seven."

BP confirmed the staff meeting had taken place but said Hayward's comments had focused on operating performance rather than a major hit to revenue.

The company would not confirm it is planning to restructure. But Hayward said in July that he was "determined to fix" BP's operational performance, simplifying the company's organization and cutting head office work force.

BP shares dropped 2.5 percent to 574.5 pence, or $11.55, on the London Stock Exchange.

Hayward succeeded John Browne as BP's chief executive on May 1. The company is still struggling to recover from a series of high-profile mishaps including a deadly refinery blast in Texas in 2005 and an oil spill in Alaska that contributed to Browne's departure.

Hayward blamed the company's poor performance on lost revenue from its Texas City and Whiting refineries in the United States, which are not running at full capacity, and from large production projects that haven't yet started operation, the newspaper said.


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http://www.adn.com/news/politics/fbi/kott/story/9331746p-9246830c.html

Kott guilty on 3 counts; sentencing set Dec. 7
Former legislator likely faces four years or more in prison
By LISA DEMER and SEAN COCKERHAM
Anchorage Daily News
Published: September 26, 2007
Last Modified: September 26, 2007 at 06:38 AM

Former state Rep. Pete Kott, a 14-year veteran of the Legislature and one-time House speaker, was convicted Tuesday by a federal jury of conspiring with Veco Corp. executives to push an oil tax favored by industry.

Jurors convicted the Eagle River Republican of conspiracy, bribery and extortion. They acquitted him of a fourth felony charge, wire fraud, that was based on a single cell phone conversation that went across state lines.

As the verdicts were read around 3 p.m. on the trial’s 15th day, Kott sat silent and still between his defense lawyers. He left the courtroom looking tired and drawn. He had little to say about the verdict.

“I’m disappointed,” Kott said. He didn’t want to talk about what’s next for him or the specifics of how he thought his corruption trial went. “It came,” he sighed. “It went.”

Kott walked out of the Federal Building with his girlfriend, Debora Stovern, on one arm, daughter Pamela on the other and lawyer Jim Wendt just ahead. They faced a barrage of television cameras and reporters asking questions that Kott wouldn’t answer.

Wendt said Kott almost surely would appeal. He and his co-counsel, Meg Simonian, hadn’t worked out all the potential grounds but he suggested the instructions the judge gave the jury could be one factor. “The jury instructions were a little ambiguous regarding the bribery and extortion charges,” Wendt said.

Then Kott’s group piled into a Dodge truck and drove away. ‘deal-maker,’ prosecutors said

During the trial, prosecutors Nicholas Marsh and James Goeke portrayed Kott as a deal-maker who plotted with former Veco executives Bill Allen and Rick Smith to secure the oil tax rate sought by North Slope oil producers during the 2006 regular session and special sessions that summer. They played nearly five dozen secretly made recordings during the trial.

The defense painted Kott as a hard worker with a drinking problem, an Air Force veteran, a man who got on his hands and knees laying hardwood floors but who didn’t ask his wealthy friends at Veco for handouts.

This is the second victory for prosecutors in the ongoing public corruption investigation, and the first involving oil field services contractor Veco. The company was sold to Denver-based CH2M Hill just before the trial.

Deliberations began at 12:30 p.m. Monday. Most of the jurors seemed “gung-ho” and ready to convict Kott that same day on at least a couple of charges, said Donna Riley, juror No. 1. She wanted to slow things down and sent the judge a note first thing Tuesday saying she had felt pressured the day before.

“And I’m like, man, you guys need to go over it,” Riley said after the verdict. “I need to understand. This is someone’s life, you know? I need to make sure I understand everything about it to have a clear conscience.”

Jurors were talking over each other on Monday when they finally got a chance to say what they thought after more than two weeks of trial, said juror Susan Pollard. By Tuesday morning, the jurors went out of their way to “cool it” and make sure Riley was included, juror Dale Hartzler said.

Riley, a custodial worker at Stevens International Airport, said she related to Kott since both do physical labor. She was moved, too, by a speech he gave on the witness stand.

“It kind of got to me when he said he was embarrassed and felt bad … for his family,” Riley said.

The defense was “trying for any emotional leverage they could get,” Pollard said.

In the end, what struck Riley as particularly important: the testimony and recordings about the promise of a job to Kott and the financial rewards, especially the inflated flooring invoice through which Veco executives funneled $7,993 to Kott.

She said she went home Monday night and prayed on what to do. By Tuesday, the situation in the jury room was calmer, she said. Their decision was the right one, she said.

Pollard, a former contract manager for the federal government, said it was Kott’s own testimony on the stand that left the biggest mark. Kott tried to explain to jurors that he just was telling Allen and Smith what they wanted to hear when he told them he’d push the tax rate they wanted.

Kott was saying ‘I’ll lie to my friends but I do have my principles,’ ” Pollard said. “How can you believe anything he says after that?” As to the inflated flooring invoice, she said she was very skeptical of the defense story that the money was for future flooring work. Why were invoices created by Stovern, Kott’s girlfriend, bookkeeper and a defense witness, after the fact? Why did none mention future flooring work?

Juror Hartzler said his vote to convict was a no-brainer given the evidence. Kott and his defense team couldn’t blunt the FBI audio and video, he said.

The defense didn’t ring true, said Hartzler, a systems analyst for Alaska Communications Systems. He said the whole tenor of the defense was just “flying in the face of the intercepts” recorded by the FBI. He gave the example of Kott’s son, who was also his campaign manager, claiming on the witness stand that the campaign didn’t use political polls. The defense was trying to refute the charge that Kott received a poll illegally paid for by Veco.

Hartzler said the defense claim was contradicted by a recording of Kott talking about the poll with a Veco executive, as well as poll questions the FBI found on a computer device at Kott’s residence. As for the drinking, Kott didn’t seem drunk in all of the late night recordings. Hartzler pointed to one in which Kott told Veco chief Allen that he wanted to be a lobbyist. It just seemed like a real, casual conversation, he said.

The evidence on the wire fraud charge just was too thin to support a conviction, Pollard said. It was based on a March 10, 2006, cell phone call that Kott made from Washington, D.C., to Smith. Kott, who was having drinks with a Marathon Oil lobbyist, told Smith he wanted to “take care of Marathon in this deal.” But Smith said that Marathon had dumped Veco as a maintenance contractor. “You know where my allegiance is,” Kott told Smith.

The verdicts come just before next month’s special session on oil taxes called by Gov. Sarah Palin. “I am more committed than ever to seeking a fair, untainted solution to our petroleum tax system,” the governor said in a written statement.

The evidence was compelling, said state Sen. Fred Dyson, R-Eagle River, who helped the FBI in its investigation and sat in on much of the trial. The recordings of people laughing and swearing about “jerking the public process around” generate a gut level impact.

Kott is likely facing more than four years in prison, according to what prosecutors have estimated under sentencing guidelines. But he could be looking at even more time, as much as 612 years, if the judge determines he did not testify truthfully and obstructed justice, said prosecutor Joe Bottini, who didn’t try the case but sat in on much of it. He is part of a four-person team of federal prosecutors handling Alaska public corruption cases.

U.S. District Judge John Sedwick set sentencing for Dec. 7.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Find Sean Cockerham online at adn.com/contact/scockerham or call 257-4344.

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Christian Science Monitor
September 25, 2007

http://www.csmonitor.com/2007/0925/p04s01-woeu.html

As race for oil-rich Arctic heats up, Inuit stake their claim, too
Indigenous to the region, the Inuit want a 'meaningful voice' in the territory dispute.
By Colin Woodard |
Correspondent of The Christian Science Monitor
 
Ilulissat, Greenland
Even from the fishing village of Ilulissat  the largest settlement in Greenland north of the Arctic Circle  this polar region looks like an unlikely place to squabble over: dangerous-looking rocks and stark, treeless peninsulas jut out from the edge of the Greenland ice cap, which spits ever-greater quantities of icebergs into a frigid sea.

But since August, when a Russian submarine placed a flag on the seabed at the North Pole, the Arctic has been high on the world's diplomatic agenda. Five nations are now racing to claim new territory in the central Arctic Ocean, where climate change is expected to open up valuable new shipping routes, oil fields, and mineral deposits.

The region's indigenous people, the Inuit, want a say in how territorial claims unfold.

"We must develop, for the sake of my people and the world at large, a formal international process focusing on the Arctic that includes indigenous people having meaningful voices," Aqqaluk Lynge, president of the Greenland chapter of the Inuit Circumpolar Council (ICC) told an international gathering of politicians, scientists, and religious figures here earlier this month. "Or [else] we might just get washed away in the melting ice."

Mr. Lynge, vice chair of the United Nations Permanent Forum on indigenous issues, is a longtime advocate of his people, the Inuit, who have lived in the Arctic for thousands of years. Once called Eskimos  a Cree Indian term now considered pejorative  160,000 now live in Alaska, northern Canada, easternmost Russia, and Greenland, a Danish territory where they enjoy a large degree of self-government.

For 30 years, they have used the ICC to build bridges to one another and to give themselves a voice in the distant southern capitals that govern their homelands. Since the 1980s, they have argued for the central Arctic to be set aside as a demilitarized zone, much as Antarctica is, and for visa-free travel among the Inuit people.

When global warming began affecting their communities earlier this decade, the ICC's then-president, Sheila Watt-Cloutier of Iqaluit, Canada, traveled to global climate-change meetings to draw attention to their plight and even filed a suit with an international human rights body, charging the United States with destroying their homeland by not regulating greenhouse-gas emissions. In February, she was nominated for the 2007 Nobel Peace Prize.

Now the Inuit want their voices heard about the future of the central Arctic basin, 2 million square kilometers of seabed that Russia, Canada, Denmark, Norway, and the United States are expected to be divvying up among themselves, based on assertions that their respective continental shelves extend into the area.

"The Inuit have lived in the Arctic for a very, very long time and we should have some role to play in regard to what happens here," says Duane Smith, president of ICC-Canada, who is based in Inuvik, Northwest Territories. "We are the ones living here, and any detrimental impact to the area will have an effect on our way of life and our culture."

While nobody lives in the contested region around the North Pole, Inuit leaders say activities there will affect their communities, some of which are only a few hundred miles away. Increased shipping over the pole or through the Northwest Passage could disrupt ice cover and the migration patterns of animals that hunters rely on. Military rivalries might mean more land being appropriated for naval and air bases, which in the past have left environmental and cultural degradation. Then there's the possibility of oil spills, if petroleum is indeed found.

"We experienced the Exxon Valdez spill and we've seen the devastation that it brought to our communities in Alaska," says ICC chairman Patricia Cochran of Nome, Alaska. "We're concerned about increased traffic, increased pollution, and increased number of visitors to communities that aren't used to an influx of population."

Some are calling on the outside world to take a deep breath, step back, and perhaps consider protecting the region under an international treaty. "One of ICC's objectives is to keep the Arctic out of the hands of the military and encourage peaceful uses of the North Pole," says Lynge. "Maybe we should think of a kind of 'peace sanctuary' around the North Pole where we all can benefit."

If claims go forward, Greenland's Inuit stand to get a piece of the pie. They constitute 90 percent of the 56,000 people living in Greenland, where they control local government and where Greenlandic is the official language. Denmark has given Greenland an open door to independence  the island's economic viability is the only sticking point  and expects any new polar claims will ultimately belong to them.

"We are launching a claim in the Arctic only on behalf of the Greenlanders," which would inherit any of Denmark's Arctic territory once they become independent, says Svend Auken, a veteran Danish politician and former energy minister.

Aleqa Hammond, minister for finance and foreign affairs of Greenland's home rule government, has no doubts in that regard. "The Russians came and planted their flag up there on the North Pole, but everyone knows it's Greenlandic," she says with a smile. "The last land before you reach the pole is Greenlandic land."

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Anchorage Daily News
September 25, 2007

http://www.adn.com/news/politics/fbi/kott/story/9330405p-9244768c.html

Arguments end: Kott case handed to jury
IN CLOSING: Defense says Allen and Smith cannot be trusted; prosecutor says the evidence is "overwhelming."
By LISA DEMER and SEAN COCKERHAM
Anchorage Daily News
Published: September 25, 2007
Last Modified: September 25, 2007 at 04:22 AM

Lawyers laid out two opposite views of former state Rep. Pete Kott Monday during their closing arguments to jurors in his federal public corruption trial: hardworking with a drinking problem or greedy and looking out for himself.

Defense lawyer Jim Wendt told jurors to think of Kott as a legislator who pushed hard for oil development and got himself into trouble by spouting off when he drank too much.

He especially puffed himself up to his friends from Veco Corp. in Suite 604 of Juneau's Baranof Hotel, Wendt said. The nickname for the suite that served as Veco's headquarters during the Legislature was Animal House, Wendt reminded jurors.

"I'll tell you what it was. It was a place for boasting and banter, fueled by alcohol," Wendt told jurors in U.S. District Court. "The government is resting its case on the Animal House as if what goes on there is somehow reliable."

Assistant U.S. Attorney James Goeke told jurors that Kott took bribes from Veco and was guilty of putting his own self-interest before that of his constituents. Kott is charged with four felonies: conspiracy, extortion, bribery and honest services wire fraud.

The prosecutor said the case was unusual because jurors were able to watch and listen as the alleged crimes took place.

"Through the hours and hours of electronic surveillance that you've heard in this courtroom over the past few weeks, you the members of the jury have been able to sit in a ringside seat," Goeke told jurors.

No one knew during 2005 and 2006 that the FBI had put a bug in Suite 604 and wiretaps on phones of Veco executives.

The defense reminded jurors that the government focused on only the worst out of hundreds of hours of video recordings and thousands of intercepted phone calls. Prosecutors took "little snippets" out of context, Wendt said.

But Goeke told jurors "the evidence in this case is overwhelming."

The courtroom was nearly full of FBI agents, other defense lawyers, legislators and aides, reporters and Kott's friends and family. The case went to the jury around 12:30 p.m. on the trial's 14th day.

Kott is a former Republican House speaker from Eagle River who served 14 years in the Legislature.

Bill Allen, former Veco chief executive, and Rick Smith, former Veco vice president, have pleaded guilty and were key witnesses for the prosecution, testifying that they bribed Kott.

U.S. District Judge John Sedwick told jurors that Allen and Smith's guilty pleas in themselves are not evidence that Kott did anything wrong. In fact, the testimony of both Allen and Smith should be considered with more caution than that of other witnesses, he told them.

Wendt told jurors that Smith and Allen will say whatever the government wants to save themselves. Neither has been sentenced.

The stakes in the oil tax debate were high. The Murkowski administration was pushing a new state oil tax, a first step toward a natural gas pipeline that could have been worth millions to Veco in construction contracts. Kott is accused of pushing a 20 percent tax favored by North Slope oil producers in exchange for money, a political poll and Veco's promise of a job.

LAWYERS SUMMARIZE THE EVIDENCE

Goeke walked jurors through carefully picked highlights from nearly five dozen audio and video recordings played during the trial.

In a Sept. 26, 2005, call between Kott and Smith, the legislator said he needed a job. "You got a job. Get us a pipeline," Smith responded.

Later, the prosecution played a series of video recordings from the night of May 7 and into the early morning of May 8, just after key votes on the oil tax. "I'd vote for a 30 percent tax if it wasn't for this guy here," Kott says in one, pointing to Allen.

And in a video secretly recorded on June 1, 2006, Allen counts out what he later testified was $1,000 in cash for Kott. In another video from the same night, Allen asked Kott what he wanted to be. After joking about passing out beach towels in Barbados, where Veco was building a prison, Kott said he wanted to be a lobbyist. "Well, you will be," Allen tells him.

Allen later testified that Kott's job prospects with Veco all depended on him doing the right thing on the oil tax, Goeke reminded jurors.

During his closing, Wendt was frustrated at times by technical difficulties but forged ahead, focusing on a timeline displayed for jurors that included key votes.

Wendt emphasized that it was the defense, not the prosecution, who brought in two legislators to explain their dealings with Kott, which he said was better than relying on "some grainy tape" because they know what really happened.

The wire fraud charge, Wendt pointed out, is based on a single telephone conversation in which Kott assures Smith "you know where my allegiance is."

"Where is the plan or scheme in that telephone conversation?" Wendt asked.

Kott just wanted a gas pipeline, the same as Veco, but there was no criminal conspiracy, no intent to extort money from Allen or Veco, he said.

Others got so much more from Veco than Kott, Wendt said. Former Senate President Ben Stevens got hundreds of thousands of dollars in consulting work. U.S. Sen. Ted Stevens had his whole house redone with the help of Veco workers. Former Rep. Tom Anderson had Veco contracts too.

But Kott was working on his hands and knees doing flooring, Wendt said.

"Pete Kott never got anything," he said.

The last word came from prosecutor Nicholas Marsh, from the U.S. Justice Department's Public Integrity Section in Washington, D.C.

He told jurors that it made no sense to think that Kott got nothing from Veco. He received $1,000 in cash, a check for $7,993, a political poll that cost $2,750 and the promise of a job, all from Veco, Marsh said.

Kott's defense, Marsh said, appears to be that what he said in 11 months of secretly made recordings are "either lies or they are not true or the rantings of an alcoholic."

Kott, Marsh told jurors, "tried to snooker you."

Jurors finished deliberations for the day at 4:30 p.m. They return today.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Find Sean Cockerham online at adn.com/contact/scockerham or call 257-4344.

VERDICT: Read about it first at adn.com or sign up to have it sent directly to your inbox at adn.com/newsletters.

Kott trial closing arguments at a glance

Prosecution

KOTT'S OWN WORDS: Assistant U.S. Attorney James Goeke replayed secretly made audio and video recordings. They included Kott talking to Veco executives about a possible job and asking Veco chief Bill Allen for instructions on the eve of the legislative session.

VECO TESTIMONY: Goeke said the testimony of Allen and former Veco executive Rick Smith, who are cooperating with the prosecution, matches what jurors heard on those FBI recordings.

OUTRAGE: Goeke hammered on the argument that Kott sold out the public trust by turning to Veco, instead of his Eagle River constituents, for direction on how to vote and act.

KOTT'S CREDIBILITY: Prosecutor Nicholas Marsh said Kott's explanations for his words and deeds made no sense. He "tried to snooker you," Marsh told the jury.

Defense

OUT OF CONTEXT. Kott's attorney, Jim Wendt, argued prosecutors plucked the worst statements out of hundreds of hours of video and thousands of intercepted phone conversation.

ANIMAL HOUSE. Wendt argued that Veco's Suite 604 at the Baranof Hotel in Juneau was known as the "Animal House," and was a "place for boasting and banter fueled by alcohol." Wendt said Kott loved and admired Veco head Allen and was just trying to impress him after drinking by saying things that weren't true.

HARD WORKER. The defense painted Kott as a hard-working man who did flooring jobs and didn't ask for handouts. He also worked hard trying to get a gas pipeline for Alaska, Wendt said.

LEGISLATORS' TESTIMONY. Wendt noted that Rep. Gabrielle LeDoux and ex-House Minority Leader Ethan Berkowitz testified that, despite what Kott told Veco executives, Kott didn't manipulate them to try and get the oil tax rate Veco wanted.

Compiled by Daily News reporters Sean Cockerham and Lisa Demer

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Financial Times
September 25, 2007

http://www.ft.com/cms/s/0/9973e01e-6b00-11dc-9410-0000779fd2ac.html

BP results set to be 'dreadful'
By Sheila McNulty in Houston and Ed Crooks in London
Published: September 25 2007 03:00 |
Last updated: September 25 2007 03:00

Tony Hayward, BP's new chief executive, has prepared staff for a far-reaching shake-up of the oil company as he delivered a blunt warning that third-quarter revenues would be "dreadful".

Mr Hayward told a staff meeting in Houston he would be announcing a streamlining of the company's organisation next month, the Financial Times has learnt. He said that BP's financial performance was at its lowest since 1992-93.

The remarks were made to a "town hall" meeting and summarised by a BP manager in a note circulated to colleagues under the heading "BP Confidential".

Mr Hayward's prediction of a "dreadful" third quarter comes as analysts prepare for downbeat results in spite of record high oil prices.

BP has been suffering from well-publicised problems including a squeeze on refining margins and falling US natural gas prices, as well as operational hold-ups such as damage to a North Sea gas pipeline.

The comments show how Mr Hayward, who has said little about his plans since taking over from Lord Browne in May, hopes to turn BP round and the scale of the challenges he faces.

Mr Hayward blamed BP's underperformance partly on excessive complexity, adding that the company' fragmented structure must be simplified. He plans to consolidate it into larger operations.

"There is massive duplication and lack of clarity of who does what," Mr Hayward was quoted as saying. "We will reduce the number of organisation units."

"[We] will reduce the number of layers from the workers up to the CEO from 11 to about seven."

Mr Hayward also said BP needed to shift its culture and take well-judged risks. "Assurance is killing us," he was quoted as saying.

He said people should be in positions long enough to see the consequences of their decisions, and that he wanted a "leadership style that really listens".

The chief executive said BP needed to change its mindset so that everyone had a say in decisions, and start letting the person accountable take the decision.

Mr Hayward also blamed the under-performance relative to BP's competitors on missingrevenues from the Texas City and Whiting refineries in the US and from big production projects that have not yet started operation.

BP has had to delay the start-up of Atlantis and Thunder Horse, its flagship projects in the Gulf of Mexico.

Mr Hayward went on to say that the fourth quarter would improve BP's revenues, however, as it picks up 250,000 barrels per day of production from the start of Atlantis, as well as Greater Plutonio in Angola, Mango in Trinidad and smaller Gulf of Mexico projects.

He added that the Texas City and Whiting refineries should be at full capacity by the year's end, according to the note, although the company has said they will not be operating at that capacity until next year.

Mr Hayward is under pressure to improve BP's reputation in the US, which has been undermined by the 2005 Texas City accident, which killed 15 people, and an oil spill in Alaska in 2006.

He was in Houston for BP's first board meeting there, so members could visit the Texas City refinery and the Thunder Horse project.

BP declined to comment.

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Anchorage Daily News
September 23, 2007

http://www.adn.com/news/politics/fbi/kott/story/9326076p-9241110c.html

Veco routinely paid for candidates' polling
MURKY LEGALITY: When, why, for whom determine lawfulness.
By KYLE HOPKINS
khopkins@adn.com
Published: September 23, 2007
Last Modified: September 23, 2007 at 03:43 AM

In April 2006, then-Gov. Frank Murkowski's popularity sagged among the worst of any governor in the nation, and the state waited to see if he would run for re-election.

Anchorage pollster David Dittman -- who later became Murkowski's campaign strategist -- said he came up with an idea. While everyone was mad at Murkowski, Dittman would conduct a poll asking people about good things Murkowski had done as governor.

The poll cost $20,000. Dittman said in an interview last week that, as best as he can remember, Murkowski's chief of staff told him to send the bill to Veco Corp.

Wait. Is that legal?

In the corruption trial of former House Speaker Pete Kott, a former Veco executive testified that the oil field services company routinely paid for all or parts of political polls -- usually at the request of candidates. The executive said the company paid for "upwards of 100" polls over the years.

Wait. Will any of those politicians get in trouble? The answer last week appeared to be no. At least not with the state. Not under Alaska's current campaign laws.

The trial of Kott on federal bribery and conspiracy charges has put former Veco chief Bill Allen, one of the premier campaign donors and kingmakers in Alaska history, in front of a jury under oath. Secret recordings played in court, along with the testimony of Allen and his lieutenant, ex-Veco vice president Rick Smith, exposed a series of what appear to be under-the-table campaign contributions by the company to Alaska politicians.

Just don't expect the state watchdog agency that oversees campaigns to investigate. Every poll that's been mentioned in the trial is more than a year old -- just past the statute of limitations -- said Brooke Miles, director of the Alaska Public Offices Commission.

And other polls that sound fishy could be perfectly legal.

Murkowski, for example, wasn't yet officially a candidate for governor when Veco paid for the $20,000 poll. So even though corporations are banned from giving contributions to candidates, campaign disclosure rules likely wouldn't have applied because Murkowski hadn't formally declared he was running for re-election, Miles said.

Now APOC wants some of those rules to change. The commission voted unanimously earlier this month to ask to increase the statute of limitations on campaign finance rules from one to four years.

On Friday, Sen. Bill Wielechowski, D-Anchorage, said he planned to file a bill that would do just that.

The statute of limitations was already four years in Alaska until 2003, when it was shortened at Murkowski's request. That year, Murkowski introduced legislation to reduce it from four years to two. The Legislature ended up passing a bill that cut it to one.

ANYBODY CAN BUY A POLL

In an interview last week, Dittman said he rarely worked for Veco and someone else must have done most of the polls that Rick Smith, the former Veco executive, talked about on the witness stand.

Dittman said he performed a Veco-paid survey on behalf of Sen. John Cowdery in 2004. Last June, Veco also paid Dittman for a $3,200 poll about then-Sen. Ben Stevens, who had already filed a declaration of candidacy with the state but eventually decided not to run for re-election.

Around the same time, Dittman worked as a Murkowski strategist, helping steer the direction of the governor's underdog re-election bid. At a June 16, 2006, party celebrating the launch of Murkowski's campaign, Dittman stood on a desk and predicted the unpopular governor would pull off an upset.

About two weeks later, Veco paid for a poll in Murkowski's primary race that cost $5,200, Dittman said.

Murkowski, who was a registered candidate by then, did not report the poll as a campaign contribution.

Another Anchorage pollster who often works with Republican candidates is Marc Hellenthal. He said he's conducted "quite a few" polls paid for partly by Veco, plus a few that the company paid for entirely, over the past 30 years.

Like Dittman, Hellenthal said Veco paid him for a poll last year on Ben Stevens.

He said he told his clients, including Veco, not to share poll results.

Did he have an inkling there was a problem in Veco paying for the polls?

"I assumed they were doing it to handicap races. They have been a major, major, major source of political contributions for 25, 25-plus years," he said. "When they're playing that heavy, they really need knowledge to know how to effectively channel their funds."

Miles, the APOC director, said any company or association can pay for political polls about candidates. It becomes illegal when they give those poll results to one candidate but not another. Political action committees are allowed to donate polls to one or more candidates as long as the cost doesn't exceed campaign contribution limits and the costs are reported as donations.

Dittman and Hellenthal said Veco wasn't the only special interest paying for polls -- labor unions and other groups do it too.

Hellenthal said he knows, for example, that the state teachers union -- NEA-Alaska -- frequently polls in political races because "they share results with my clients."

NEA-Alaska president Bill Bjork said the union's political action committee paid for poll questions in about half the legislative races in last year's elections to help it decide which campaigns to get involved in. The poll results were then told to dozens of people on the political action committee.

"Our (Political Action Committee for Education) is given instructions that this is confidential information. That said, there's 52 people who know in broad strokes what the poll says," Bjork said.

Anchorage pollster Ivan Moore works for NEA and said the union conducts surveys only for its own internal purposes, not to help out politicians. "They conduct themselves to the letter of the law, and any attempt to compare their conduct to the admitted illegal behavior we have seen from Veco is frankly outrageous."

VECO PAID FOR MULTIPLE SURVEYS

Ray Metcalfe, a campaign finance watchdog and potential U.S. Senate candidate, called on APOC last week to poll all 60 Alaska lawmakers to see if Veco paid for polls in their elections.

One of the accusations against Kott is that Veco bought him a $2,750 poll, though Kott said on the witness stand that he didn't want the poll and didn't use it.

To make their case, prosecutors played a phone conversation secretly recorded between Smith and Allen talking about Kott.

"We got him a poll, 'cause his guy (Kott's campaign consultant, former Rep. Jerry Mackie) wanted him to have a poll. ... So he was getting it done, and I called Dittman and says we'll take care of it," Smith tells Allen.

In one of the wiretapped phone calls played for the jury, Smith asks Dittman about a poll he was doing for Kott. "We want to take care of that, OK?" Smith asks.

"OK," Dittman responds.

Smith then instructs him to "do what you have to, bill it though us, send it to my attention, that kind of thing." Dittman says OK.

In another call, Smith called Kott.

"Hey I just got off the phone with, with Bill (Allen). You know, we did a poll for you. ... You know that, don't you?" Smith asks.

"Yeah," Kott replies.

Later in the conversation, Smith mentions another candidate: Earl Mayo.

"We did a poll for Earl too," he says.

Mayo, who ran unsuccessfully for the state Senate against Wielechowski, said he leaves all the polling details up to Hellenthal's company. "Nobody tells me nothing and I don't ask," he said.

Hellenthal acknowledged there was talk of Veco paying for a Mayo poll, but said it never happened.

On the witness stand, Smith, the Veco executive, said poll results paid for by the company were given to candidates. In fact, he couldn't remember a Veco poll that didn't end up in the hands of a candidate or a candidate's consultant or staff member.

As for why Veco would pay for the polls in the first place?

"In most the cases, we were probably asked by candidates," Smith said.

Find Kyle Hopkins' political blog online at adn.com/alaskapolitics or call him at 257-4334.

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Fairbanks News Miner
September 22, 2007

http://newsminer.com/2007/09/22/9002

Too quick to react? : Gov. Palin’s words in VECO
case now must apply to her team
Published September 22, 2007


Gov. Sarah Palin has walked perilously close to the edge in asking that a sitting state senator be removed from a committee chairmanship and that a former state senator give up his seat on the Republican National Committee.

Neither of the men involved  Sen. John Cowdery and former Sen. Ben Stevens, both from Anchorage  has been charged with a crime. Each has said he is innocent of any purported wrongdoing.

That’s no small fact.

It is correct, however, to say that the names of both men have been mentioned several times in unflattering ways in connection with the federal corruption probe of the state Capitol. The names of Sen. Cowdery and Mr. Stevens have also lately surfaced in former Rep. Pete Kott’s corruption trial, under way in Anchorage as a result of the broad federal investigation. Mr. Kott, from Eagle River, has been charged with crimes connected to the influence-buying case against top executives of the once-powerful oil field services company VECO Corp.

The governor wants Sen. Cowdery booted from the chairmanship of the Senate Rules Committee, the committee that schedules bills for votes on the Senate floor. To be chairman of this committee is to have a hand on the faucet of legislation flowing through Juneau, so it’s understandable that a governor with big plans would have keen interest in who sits at the head of the panel.

And she wants Mr. Stevens, the former Senate president, to give up his slot representing Alaska on the Republican National Committee. The governor, in her statement, comes close to convicting Mr. Stevens, however. “When I’m looking at the political party in which I’m registered and I see the national committee man is Ben Stevens, I’m free there to state my opinion and that’s he shouldn’t be our national committee man,” she said.

She is, indeed, free to say what she thinks. The problem, though, is that words of a chief executive have staying power.

In calling for pre-emptive action against Sen. Cowdery and for the resignation of Mr. Stevens, the governor can now be expected to apply a similar standard to a member of her administration if that person comes under suspicion. Anyone suspected of wrongdoing will have to go.

If the governor doesn’t apply such a standard as she is applying to Sen. Cowdery and Mr. Stevens, the public popularity she currently enjoys and cherishes may suffer. People can stomach a lot from their leaders. But, over the years, they have demonstrated a strong dislike for politicians who have one standard for other people and a different, lax, one for themselves.

Gov. Palin has set a high mark for standards of conduct in office. Her recent remarks about Sen. Cowdery and Mr. Stevens must be seen as a message not only to members of the legislative branch of state government, but also to members of the executive branch.

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Houston Chronicle
September 22, 2007

http://www.chron.com/disp/story.mpl/business/energy/5155835.html

A $7 billion gamble on oil refining
Motiva approves a plan to double the capacity of its Port Arthur plant
By BRETT CLANTON
Copyright 2007 Houston Chronicle

MAJOR EXPANSION
The expansion of Motiva's Port Arthur refinery will make it the largest in the nation:

The refinery
• Current capacity: 285,000 barrels of crude oil per day
• Capacity after: 600,000 barrels per day
• Expansion cost: $7 billion
• Products: Gasoline, diesel and aviation fuels
Source: Shell Oil Co.

MOTIVA ENTERPRISES
• Headquarters: Houston
• Ownership: Shell Oil Co. and Saudi Refining Inc. own 50 percent each
• Business: Motiva refines and markets products through about 7,700 Shell-branded stations
• Refineries: Port Arthur; Norco, La.; Convent, La.
• Combined capacity: 740,000 barrels per day
Source: Shell Oil Co.

Motiva Enterprises made a huge bet Friday that America's appetite for gasoline will keep growing well into the future, giving final approval to a $7 billion expansion of its Port Arthur refinery that will make it the largest in the nation.

The decision came after more than three years of study by Motiva, a joint venture of Royal Dutch Shell and Saudi Arabia's state-owned oil company, and after a jolt in costs doubled the project's price tag.

With the move, two of the world's biggest oil companies have signaled their belief that petroleum-based fuels are here to stay despite the growth of biofuels like ethanol and calls to curb U.S. gasoline use.

It also suggests the companies see more road ahead for the domestic refining industry's recent profit run, despite its history of boom and bust cycles.

"Even at this kind of investment level, this is still a very attractive project," Rob Routs, Shell's top global refining operations executive, said in a conference call with reporters Friday.

Recent increases in the cost of building materials and labor, along with concerns about the long-term demand for gasoline, have pushed some refiners to delay or cancel expansion projects.

As recently as May, the American Petroleum Institute said refiners planned to boost the nation's refining capacity almost 11 percent through expansion projects representing 1.6 million barrels a day. Now, the trade group says only about

1 million barrels a day in projects will go forward.

Material costs rose as a spate of refiners launched expansion projects simultaneously to take advantage of high refining profits, while labor costs spiked because of a shortage of construction workers after the 2005 Gulf Coast hurricanes.

The cloudy demand picture, meanwhile, is the result of proposals in Congress that could greatly boost the nation's ethanol output and also create higher fuel economy standards for cars and trucks, both of which could weaken demand for gasoline.

President Bush also has set a goal to cut gasoline use 20 percent by 2017.

Given those challenges, it is highly significant that Motiva decided to move forward with its Port Arthur expansion, said Mike Wilcox, head of global downstream consulting for Wood MacKenzie in Edinburgh, Scotland.

"On balance, I'd say it gives a positive message to other refiners," he said.

Most U.S. refineries now run near their peak, and still do not produce enough gasoline to keep up with Americans' demand for gasoline. To make up the shortfall, the U.S. imports about 10 percent of the gasoline it consumes each year.

Motiva CEO Bill Welte said those factors helped persuade the company to expand in Port Arthur, even though the partners considered pulling the plug when costs ballooned. "That was always an option," Welte said in an interview.

Expected to be complete in 2010, the expansion will more than double the Motiva facility's oil-processing capacity to about 600,000 barrels per day.

That will make it the nation's largest refinery, edging out an Exxon Mobil Corp. facility in Baytown that processes nearly 563,000 barrels per day.

Exxon Mobil spokeswoman Prem Nair said the world's largest oil company had no plans to match Motiva in order to retain the top spot.

Along with the expansion, Motiva is also adding equipment that will allow the Port Arthur plant to process a broader range of crude oils.

Prices for light, sweet crude recently have hit records as refiners in the Far East have snatched it up to feed rising energy demands, Routs said.

But Port Arthur will now be able to run heavy, sour crudes found in South America and thick tar sands from Canada, which can be produced at roughly $20 per barrel less than lighter crudes, he said.

Motiva said the project will create 300 new jobs, produce lower emissions per barrel of oil put through the system and spur more development in the region.

Though Port Arthur encouraged the plant expansion with tax incentives, Mayor Deloris "Bobbie" Prince still called the Motiva project a "gift from God."

"The quality of life for the people of this town will never be the same as of this morning," Prince said Friday.

Hilton Kelley, a community activist, said he will be watching to make sure Motiva makes good on promises to the area, including the installation of more air-monitoring devices at the plant.

"They have answered a lot of our concerns," Kelley said. "But we are not totally 100 percent satisfied with the expansion."

Motiva has been preparing the Port Arthur site for the expansion for more than a year. Hundreds of construction workers have been coming and going. Recently, they began driving pilings to undergird what essentially will be a new refinery connected to the original one.

That's why word of the final investment decision, even if it took awhile, was not totally unexpected Friday.

Said Routs: "We haven't been exactly hiding the fact that we wanted to do this."

brett.clanton@chron.com 

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http://www.chron.com/disp/story.mpl/business/energy/5153915.html

Sept. 21, 2007, 2:10PM
Refinery expands with plan to be biggest in U.S.

Motiva Enterprises said today it will be going ahead with an expansion at its Port Arthur refinery that would make it the biggest in the country, more than doubling the capacity of the operation to 600,000 barrels a day.

The decision to go ahead by the Houston-based joint venture owed by Royal Dutch Shell and Saudi Aramco comes at a time when some other companies are having second thoughts about big refinery construction projects because of rising costs and questions about the long-term outlook for the business.

``The expansion is designed to strengthen our nation's supply of gasoline, diesel, aviation fuels and high quality base oils,'' said William B. Welte, Motiva President and Chief Executive Officer in the statement announcing the decision.

The largest refinery in the U.S. now is the Exxon Mobil refinery in Baytown with a  capacity to refine 562,000 barrels a day of crude, according to a July report from the Energy Information Administration of the U.S. Department of Energy.

The companies, which said the expansion is expected to generate more than 4,500 construction jobs and about 300 new full-time jobs when done, did not announce the cost of the project. 

A joint venture between Bechtel and Jacobs Engineering group will manage the project which will also upgrade the plant's pollution controls.

stephen.rassenfoss@chron.com

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Wall Street Journal
September 21, 2007

Exxon Valdez Plaintiffs Say Top Court Should Drop Case
DOW JONES NEWSWIRES
September 21, 2007 4:21 p.m.
 By Steve Gelsi

 Exxon Mobil Corp.'s (XOM) move to take the last major lawsuit over the 1989 oil spill of the Exxon Valdez tanker to the U.S. Supreme Court lacks merit and shouldn't be heard by the high court, the lawyer for plaintiffs in the case said Friday.

David Oesting of Davis Wright Tremaine LLP in Anchorage, Alaska, said the oil giant its "grasping at straws" to get the top court to take the case.

Seeking to keep $5 billion in punitive damages awarded earlier this year by a federal appeals court, plaintiffs in the Exxon Valdez suit late Thursday filed a brief in opposition to Exxon Mobil's petition for writ of certiorari to the Supreme Court.

The suit represents the last piece of major litigation surrounding the Exxon Valdez oil spill 18 years ago, as the nine justices consider whether to rule in what has been a long and bitter fight.

Lawyers for the roughly 33,000 plaintiffs have now formally responded to Exxon Mobil's Aug. 20 petition arguing that the Supreme Court should hear the lawsuit.

In the court documents, Exxon Mobil argued the case hinges partly on whether punitive damages should be imposed under maritime law against a ship owner for the conduct of a ship's master at sea, even when the conduct was contrary to policies established and enforced by the owner.

Oesting said the case's punitive damage of $2.5 billion - which doesn't include another $2 billion or so in interest payments - amounts to an average of $76,500 for each of the 33,000 plaintiffs, about five times the average of about $15,500 in economic harm to each party in the suit.

The plaintiffs' latest brief points out that the $2.5 billion settlement amounts to less than thee weeks of Exxon's current net profits.

"Unlike any other ship owner of which we are aware, Exxon placed a relapsed alcoholic, who it knew was drinking aboard its ships, in command of an enormous vessel carrying toxic cargo across treacherous and resource-rich waters," according to the opposition brief submitted to the court.

"And unlike any previous shipping disaster, Exxon's wrongdoing inflicted such widespread harm to private parties' interests, that the district court, at Exxon's request, certified a mandatory punitive damages class to protect Exxon from the threat of multiple punitive damage verdicts."

Exxon Mobil could be forced to pay at least $2.5 billion in punitive damages plus another $2 billion in interest if the nation's high court refuses to hear the case and bumps it back to a judgment handed down by the U.S. 9th Circuit Court of Appeals, lawyers for the case said.

Oesting said Friday the court could decide whether to hear the case or bump it back to the lower court's judgment by the end of November.

The spill of nearly 11 million gallons of oil when the Exxon Valdez supertanker ran aground in Alaska's Prince William Sound still ranks as the worst oil slick from a ship to occur in U.S. waters.

Exxon Mobil said it has already paid $2.1 billion to clean up the area and $300 million to compensate commercial fishermen, seafood processors and others. All told, the oil giant says it has spent about $3.4 billion as a result of the spill.

"Exxon Mobil maintains that no punitive damages at all are warranted in this case," spokesman Tony Cudmore said in an email to MarketWatch last week.

"Plaintiffs were fully compensated for their injuries long ago," Cudmore said. "Punitive damages serve no sensible purpose in circumstances where compensatory damages and other expenses are more than sufficient to deter and punish anyone for anything."

Cudmore couldn't be reached for further comment on Friday.

The spill also damaged 1,300 miles of coastland, closed the 1989 fishing season in the region, reduced harvests in later years, and caused fish prices to drop, the plaintiffs said.

The current appeal fight dates back to 1994, after a jury verdict assessed $5 billion in punitive damages against Exxon. After a 13-year fight at the federal appeals court level, the 9th Circuit cut the size of the punitive damages to $2.5 billion.

Moving to recover punitive damages, the Alaskan plaintiffs over the summer filed a cross-petition asking the Supreme Court to restore the $5 billion awarded in the original suit.

While $5 billion remains a significant pile of money, it amounts to about 1% of Exxon Mobil's market capitalization.

-By Steve Gelsi; 415-439-6400;
AskNewswires@dowjones.com 

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Anchorage Daily News
September 21, 2007

http://www.adn.com/news/politics/fbi/kott/story/9320378p-9233860c.html

Kott says he lied to Veco executives
TESTIMONY: He did take money, defendant says, but not as bribes.
By LISA DEMER, SEAN COCKERHAM and TOM KIZZIA
Anchorage Daily News
Published: September 21, 2007
Last Modified: September 21, 2007 at 01:39 AM

Former state Rep. Pete Kott apologized to jurors Thursday for his crude talk in secretly made FBI recordings, but he also conceded that he told Veco Corp. executives whatever they wanted to hear, even if it wasn't true.

On a day he made an emotional speech from the witness stand about his shattered legacy, other revelations spilled out, including that he changed his vote on a new oil tax at the last minute and took $5,000 from former Veco executive Bill Allen as a truck loan that he never repaid.

But, Kott maintained, he never took bribes.

Kott finished testifying late in the afternoon after two grueling days on the stand in his federal corruption trial. While he seemed testy at times during aggressive cross-examination, he didn't lose his cool.

Gov. Sarah Palin quietly popped into the trial for about 10 minutes in the morning. Few seemed to spot her as she slipped into the back row during a little of Kott's testimony on oil taxes. Palin said she took the opportunity to check in during a fire drill in the governor's Anchorage office in the nearby Atwood building.

"This is one of the most important series of trials in Alaska history," Palin said after her courtroom visit.

TRIAL COMES AT GREAT COST, KOTT SAYS

Kott is being tried in U.S. District Court on charges of bribery, conspiracy, extortion and wire fraud. Veco executives Bill Allen and Rick Smith have pleaded guilty to bribing Kott and three other legislators in an effort to influence them on the tax measure in 2006.

Kott told jurors he had to go to trial because he believes he's not guilty, but that it's coming at great cost.

Jurors have seen videos from Suite 604 of the Baranof Hotel in Juneau and heard wiretapped telephone conversations in which Kott, often after drinking, plotted and cussed alongside Veco executives.

Will those videos and newspaper stories about his behavior be his legacy? defense lawyer Jim Wendt asked.

Kott, in the Legislature 14 years, including two as House speaker, choked up a bit during a monologue that lasted several minutes.

"Unfortunately, with all the things I believe I accomplished, the goals that I managed to reach, the legacy will be just that. I think people will forget about the good things and remember the bad things," Kott said.

The video recordings are "extremely embarrassing," Kott said.

"Certainly to the jury, I apologize for the vulgarity that has been presented to you in the course of this trial," Kott said. "It has been an embarrassment for myself and my family." His girlfriend and grown son and daughter sat in the front row behind the defense table.

The defense slogged through the legislative record in an attempt to portray Kott as a statesman who sometimes voted against the 20 percent tax favored by Veco to reach an oil-tax compromise.

But as Kott himself explained, the unfolding of such complex bills is a "cat-and-mouse game," with lawmakers sometimes voting yes for loathsome amendments hoping to kill a bill.

The Legislature approved a 22.5 percent tax, and Kott told the jury he considered it a good compromise. "We pretty much split the baby right in half," he said.

SPIRITED CROSS-EXAMINATION

The cross-examination by assistant U.S. attorney James Goeke was heated from the start.

Goeke came close to yelling as he shot off questions rapid-fire about Kott's vote. Wendt objected time and again. And U.S. District Judge John Sedwick told Goeke to slow down, be more patient and stop making speeches.

Prosecutors also dug deep into the legislative record during their cross-examination, trying to show that Kott voted against the 22.5 percent compromise three times on the last day, when the tax measure nearly died.

Even on the final vote, Kott was a "no," switching his vote to the "yes" side only after the tally showed the measure passing.

"You changed it once the writing was on the wall," Goeke thundered. "It's good you did it so you can tell the jury you voted for 22.5."

Kott's lawyer objected.

"There was no jury then to consider," he pointed out.

It was, Goeke noted, the last vote of Kott's legislative career. He lost in the Republican primary two weeks later.

The prosecutor seemed to be portraying Kott as a hold-out for 20 percent until the bitter end -- even when some oil industry lobbyists had started pushing for 22.5 percent in fear a more onerous tax might pass instead.

During his cross-examination, Goeke replayed two FBI recordings from the Veco suite.

"Where do you want to take this, Bill? I don't want to jeopardize the gas line but I'll stay on 20," Kott says on a May 8, 2006, recording from Suite 604. Allen testified earlier that oil producers wanted certainty on oil taxes before they would commit to a multibillion-dollar gas pipeline. "Vic will be on 20 and Jay will be on 20 and Foster will be on 20. I don't know how many others will be on 20," Kott said on the recording, referring to Reps. Vic Kohring, Jay Ramras and Richard Foster.

"Tom Anderson," Smith, the former Veco vice president, chimes in with another lawmaker's name.

"Anderson will be on 20," Kott agreed.

Prosecutors also replayed an especially vulgar recording from late in the night of June 8, 2006. The men in Suite 604 spewed out f--- them repeatedly.

Goeke pressed Kott to explain why he assured Allen he'd fight for 20 percent if he was willing to go higher. Kott said he was misleading his Veco friends, choosing to "tell them what they want to hear."

That theme came up several times.

BERKOWITZ DID NOT HELP SWAY VOTE, KOTT SAYS

Wendt asked Kott to explain another secretly recorded conversation in which he boasts that he "outsmarted the fox" -- referring to then-House Minority Leader Ethan Berkowitz -- in order to get Berkowitz to persuade his fellow Democrats to vote the way Veco wanted.

Kott told jurors that he was just trying to impress Allen. He and Berkowitz had had a rational conversation on the House floor. Kott figured Allen was watching live on "Gavel to Gavel" television.

"I didn't want him to get the opinion I was just crawling in bed with the Democrats," Kott testified.

Kott said he also felt bad because he and Berkowitz had a good relationship for years and he had actually tried to deceive Berkowitz a little bit. He said Berkowitz was on his side back in 2005 when he attempted to regain the House speaker post through a coup. It failed.

That's why he talks in the recording about lying, cheating, stealing and selling his soul to the devil, Kott testified.

In reality, Berkowitz didn't do anything to help swing votes the way Veco wanted, Kott said, even though he told Allen that's what happened.

"I think I was trying to get some credit," he said.

At another point in his cross-examination, Goeke questioned Kott about a $5,000 check from Allen that jurors hadn't heard about before Thursday.

Kott told jurors that Allen loaned him the $5,000 in 2004 as a down payment on a new truck. He was supposed to pay Allen back once he paid off the truck.

But Goeke pointed out that on Aug. 31, 2006, when the FBI searched Kott's residence in Juneau, Kott told agents that he hadn't done so.

"That sounds like a gift to me," Goeke said.

Kott replied he and Allen had an agreement that Kott would pay the money back when the truck was paid off.

"It could also be characterized as a bribe," Goeke said.

"You can characterize it any way you want; it is not a bribe," Kott replied.

With a few more witnesses to go today, the case may not get to the jury until next week.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Find Sean Cockerham online at adn.com/contact/scockerham  or call 257-4344. Find Tom Kizzia at adn.com/contact/tkizzia.

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http://www.adn.com/money/industries/mining/story/9319384p-9233916c.html

Jay Ramras won't retract bribery claims
PEBBLE MINE: Regional leaders protest his allegation they've taken inducements.
By ELIZABETH BLUEMINK
ebluemink@adn.com
Published: September 21, 2007
Last Modified: September 21, 2007 at 02:38 AM

Executives of three Native corporations accused state Rep. Jay Ramras of defamation and said they have not been bribed to support the controversial Pebble mine prospect.

The corporate leaders demanded Thursday that Ramras, R-Fairbanks, retract his claim that a mining company trying to develop the vast Pebble copper and gold prospect in Southwest Alaska has paid Native leaders thousands of dollars to buy their support.

They said they are also exploring legal options against Ramras, though he has some immunity from lawsuits as a legislator.

Ramras doesn't plan to apologize, he said Thursday.

He said he has detailed his accusations in a confidential five-page letter this week to the state Department of Law's criminal division. He sent this letter after state attorneys, responding to Ramras' Sept. 1 call for an investigation, wrote back Tuesday asking for specifics.

"Depending on the identity and status of the persons receiving the alleged funds and the identity of (those) providing them, your allegations could be serious," wrote Richard Svobodny, a state deputy attorney general.

On Sept. 1, Ramras asked state and federal prosecutors to investigate whether Northern Dynasty Mines Inc., the company exploring Pebble, is plying Native leaders and elected officials in Southwest with large amounts of money -- either with cash payments or hefty salaries -- to buy their support.

The Pebble deposit could contain hundreds of billions of dollars worth of copper and gold, according to Northern Dynasty. The company recently joined up with international mining giant Anglo American, which plans to spend more than $1 billion to advance the project.

But Pebble also sits amid headwaters of some Bristol Bay rivers, a location that has alarmed commercial fishermen downstream, sportfishing lodge owners nearby and subsistence users who fear they could lose if the mine goes ahead.

Ramras never used the word "bribery" in his Sept. 1 accusations, which were targeted more at Northern Dynasty than at Native corporations, he said Thursday.

BRIBES OR JUSTIFIED PAY?

But the insinuation seemed clear to the accused.

Northern Dynasty officials said Thursday they have not bribed anyone for their support, and they have been discussing the accusations with the Department of Law.

The company spent about $4 million on salaries, lodgings and other services in the region last year, and Northern Dynasty officials said they expect to pay out more in 2007.

All of the payments they've made for lodgings and salaries have been within "market norms," said company spokesman Sean Magee.

Some of Northern Dynasty's employees or consultants are also elected officials in the region, but none of them has ever been asked to weigh in on behalf of Pebble, he said.

For the past few years, Northern Dynasty has also paid $200 per day to Bristol Bay residents to attend two- to three-day-long stakeholder meetings in Anchorage, in addition to paying their hotel and travel costs, Magee said.

The honorarium and travel payments are not unusual, Magee said, saying that Northern Dynasty based its policy on similar stakeholder projects in Alaska, and elsewhere.

Ramras cited the $200 payments as questionable in his Sept. 1 letter.

INDIGNANT RESPONSE

"Your statements are false, malicious and in complete disregard of the truth," said Sam Fortier, an Anchorage attorney who represents village corporations in the Bristol Bay region, in a letter to Ramras sent Tuesday.

The leaders of the Pedro Bay, Iliamna and Alaska Peninsula village corporations met with reporters at Fortier's law office Thursday morning, and they denied they or their shareholders had been bribed.

The village corporations have business contracts with Northern Dynasty, but they haven't decided whether to endorse Pebble development, said Lisa Reimers of Iliamna Development Corp., a village corporation subsidiary that sells payroll and catering services to Northern Dynasty.

"Not one of us has taken a bribe," said Norman Jacko of the Pedro Bay Corp., which has a contract to work on a proposed road alignment for Pebble.

Reimers questioned whether Ramras has been swayed by his own political relationships or friendships.

He received at least $1,300 during his 2006 election campaign from people affiliated with the Renewable Resources Coalition, a group fighting Pebble. And he's been friends for about three years with Bob Gillam, an Anchorage money manager who owns a private fishing lodge near the mine, and who contributes a large portion of the coalition's budget.

Ramras said Gillam had nothing to do with the letters he wrote to prosecutors. He said that a friend who owns a plumbing company in Fairbanks introduced him to a Native elder in Ekwok, and he offered to write the letter to prosecutors on behalf of the elder, Luki Ekelkok.

SHOULD TROOPERS INVESTIGATE?

State prosecutors declined to say Thursday whether they are investigating Ramras' allegations.

Federal prosecutors could not be reached for comment.

Svobodny said, in his letter to Ramras, that state troopers, not the Department of Law, would be the "first responders" to determine whether any crimes have been committed.

"Before asking the State Troopers to become involved, the first question we will be asking is which, if any, of the people you implicate in your letter are public servants," he wrote in the letter, signed on behalf of Attorney General Talis Colberg.

Potentially, state prosecutors can also investigate people who work in business for giving or receiving a bribe, the letter said.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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Seattle Times
September 20, 2007

http://seattletimes.nwsource.com/html/localnews/2003893175_icebreakers20m.html

Aging fleet slows U.S. in Arctic "chess game"
By Sandi Doughton
http://seattletimes.nwsource.com/ABPub/2007/09/19/2003892900.gif

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http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=webdenmark10&date=20070810

When Coast Guard Adm. Thad W. Allen imagines a melting Arctic, it's not a pretty sight: Cruise ships collide with icebergs. Oil tankers and ore ships run aground. Foreign fishermen sneak into American waters.

Even worse, the nation's top Coast Guard officer fears he may not have the tools to respond to these future crises.

At a time when Russia, Canada, Norway and other Arctic nations are scrambling to stake out turf in the still-frozen north, the United States' two most powerful icebreakers sit at a dock in Seattle, nearing the end of their working lives.

One is manned by a skeleton crew. Both are about 30 years old, and nothing is on the drawing board to replace them.

"We have the responsibility for maritime safety, stewardship and security," Allen said. "But how do you respond up there if you have no presence?"

Allen and others are urging the U.S. government to prepare now for the changes global warming will bring to the Arctic. The nation needs to figure out how to protect American interests, handle disasters and enforce laws in a region that will still be ice-choked much of the year, he said.

"Icebreakers will have an important role to play," Allen said.

A National Research Council panel concluded last year that planning and construction should start immediately on two new icebreakers. "U.S. icebreaking capability is now at risk of being unable to support national interests," the panel warned.

Each of the new ships could cost $750 million or more, experts estimate.

The Arctic ice cap shrank to a record low this summer, opening up the Northwest Passage along Canada's fringe for the first time.

Scientists say the ice is melting much faster than global-warming models predict, with the possibility that the Arctic Ocean will be completely ice-free in summer by 2050.

But the region will remain frozen in winter. And the Arctic's notoriously variable weather also means that entrepreneurs, tourists, fishermen and explorers lured into the area by its beauty and the promise of profit are likely to encounter bad weather and ice year-round.


More people traveling in icy waters translates into more accidents, more oil spills, more security problems  and more need for powerful icebreakers, says Scott Borgerson, a fellow at the Council on Foreign Relations and a former Coast Guard officer.

"Climate change is giving birth to a new region and allowing for all kinds of access," he said.

"A global chess game"

The U.S. Geological Survey estimates a quarter of the world's untapped oil and gas resources may lie beneath the Arctic Ocean. Oil and mineral companies are already building ice-strengthened tankers.

After a Russian minisubmarine planted a flag on the ocean floor beneath the North Pole this year, the Canadian government announced plans for military bases and a $3 billion fleet of ice-reinforced ships to patrol the Northwest Passage, which the country claims as sovereign territory.

President Bush countered by insisting the passage is an international waterway. Norway asserted its territorial rights, while Denmark, which controls Greenland, appealed for calm.

"We're seeing a global chess game play out in the Arctic as nations position and stake claims for the region's vast, untapped resources," said Coast Guard Cmdr. Brendan McPherson, Allen's press secretary.

If icebreakers are among the chess pieces, the United States is outnumbered.

The nation has three multipurpose icebreakers, all based in Seattle. The aging Polar Sea and Polar Star, both able to ram through 21 feet of ice, have primarily been used to break open a route to U.S. research stations in Antarctica.

The newest member of the fleet is the Healy, an eight-year-old ship capable of continuously breaking through 4-foot-thick ice and designed mainly for Arctic science. A fourth icebreaker is leased by the National Science Foundation exclusively for research in Antarctica.

With a much more extensive Arctic coastline, Russia has 18 icebreakers, seven of them nuclear-powered. Finland has a fleet of seven. Canada has six.

But it's not really a numbers game, says Lawson Brigham, deputy director of the U.S. Arctic Research Commission and former captain of the Polar Sea.

The United States needs to be able to patrol Alaska's 2,500 miles of Arctic coastline, conduct research in both the Arctic and Antarctic and respond to emergencies. The National Research Council panel concluded that a fleet of three modern icebreakers can do the job.

Arctic research includes underwater mapping, which is key to territorial claims under the 1982 United Nations Convention on the Law of the Sea. Every Arctic nation except the United States has signed the treaty, which gives countries rights to underwater terrain extending from their continental shelves.

The 420-foot Healy is heading back to Seattle now after a two-month mapping voyage in the Chukchi Sea off Alaska's northwest coast.

The lead scientists on the project say their work has already shown that American territory extends at least 350 miles from land  well beyond the traditional 200-mile limit. In the Chukchi Sea, the U.S. may be able to stake claims even farther out.

But first the United States has to ratify the treaty, something the Coast Guard and many maritime experts have been calling for.

"We have to join the treaty if we want to participate in carving up the Arctic," Borgerson said. "At the moment, we don't even have a seat at the table."

Ships take a pounding

U.S. icebreakers trace their origins to the revenue cutters that policed the new territory of Alaska. During the Cold War, a large fleet serviced military outposts and early-warning radar stations in the Arctic, ground zero for the nuclear faceoff between the U.S. and the Soviet Union.

The 399-foot-long Polar Sea and Polar Star were built in Seattle in the 1970s. The 60,000-horsepower cutters use their contoured bows to ride up on the ice, crush it with their bulk, then push the chunks aside, Brigham said.

"The noise, the vibration  it's really something."

The ships take a pounding, and maintenance budgets have not kept pace, the National Research Council found. Replacement parts often have to be built from scratch.

The Coast Guard calls the old icebreakers "operationally challenged." Borgerson puts it more bluntly. "They're geriatric. Moribund," he said. "It's just like a car. You can't drive a car for 300,000 miles ... and expect it's going to be in great condition."

The National Science Foundation, the icebreakers' main "client," took control of their budgets a few years ago. In 2006, the foundation temporarily hired a Russian icebreaker to open the route to McMurdo Station in Antarctica.

The ship broke a propeller, and the Polar Star was dispatched from Seattle to assist. Since that mission, the Polar Star has been in "caretaker status," essentially docked to save money. The Polar Sea remains fully staffed and operational.

Even if work started tomorrow on new icebreakers, it would be 10 years before they're ready to launch, said Jacqueline Grebmeier, a University of Tennessee polar researcher who served on the National Research Council panel.

"If people think it's important to have these ships," she said, "some decisions need to be made now."

Sandi Doughton: 206-464-2491 or sdoughton@seattletimes.com

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Houston Chronicle
September 20, 2007

http://www.chron.com/disp/story.mpl/front/5152757.html

Front page      


Sept. 20, 2007, 6:10PM
FBI agents taped Alaska Sen. Ted Stevens
as part of corruption sting
By MATT APUZZO
Associated Press

WASHINGTON  The FBI, working with an Alaska oil contractor, secretly taped telephone calls with Sen. Ted Stevens as part of a public corruption sting, according to people close to the investigation.

The secret recordings suggest the Justice Department was eyeing Stevens long before June, when the Republican senator first publicly acknowledged he was under scrutiny. At that time, it appeared Stevens was a new focus in a case that had already ensnared several state lawmakers.

The recorded calls between Stevens and businessman Bill Allen were confirmed by two people close to the case who spoke on condition of anonymity because the investigation is still under way. They declined to say how many calls were recorded or what was said.


Allen, a wealthy businessman and Stevens' political patron, agreed to the taping last year after authorities confronted him with evidence he had bribed Alaska lawmakers. He pleaded guilty to bribery and is a key witness against Alaska legislators. He also has told prosecutors he paid his employees to renovate the senator's house.

In July, FBI agents raided that house in the Anchorage suburb of Girdwood. Stevens has denied any wrongdoing and said he paid every bill he received for the project.

Allen testified in federal court last week that he called several people at the FBI's behest.
"It's been a lot of work," Allen said of his efforts for the FBI.

A judge had previously ruled that Allen could not discuss politicians under investigation.

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Houston Chronicle
September 19, 2007

http://www.chron.com/disp/story.mpl/front/5146595.html

Front page  
Sept. 18, 2007, 8:33PM

BP settles with 4 in first civil suit from 2005 blast
The company has about 1,200 cases still pending
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  If Scott Kilbert hadn't been late to a meeting in a trailer at BP's Texas City refinery more than two years ago, he's sure he'd be dead.

"Thank God one of my employees needed help, or I'd have been there," he said Tuesday about a trailer packed with 15 of his colleagues that disintegrated in a March 2005 explosion, launching investigations, lawsuits and a criminal probe.

"I just watched the trailer disappear," Kilbert said.

A jury won't hear his story or those of three other plaintiffs because their cases were settled Tuesday amid the first civil trial to emerge from the blast. The terms of the settlements were undisclosed.

While the company has settled hundreds of more than 3,000 blast-related lawsuits  including all involving deaths  about 1,200 are pending, according to state District Judge Susan Criss.

She has ordered mediation in all those cases, with potential trial dates set for late October and early November.

BP spokesman Neil Chapman declined to comment on Tuesday's settlements but reiterated the company's position that BP aims to settle all blast-related litigation.

Also, BP awaits a resolution to a criminal investigation into what led to the blast.

The company acknowledged the investigation last year, shortly after the Occupational Safety and Health Administration issued citations alleging 300 violations of OSHA standards, imposed a $21.3 million fine and ordered safety improvements at the plant.

The U.S. Attorney's Office in Houston and the Justice Department's environmental crimes section are running the probe. Representatives from neither commented Tuesday.

The explosion happened when a tower in a unit that boosts octane in gasoline overfilled with flammable hydrocarbons, causing a vapor cloud to be released from a blowdown stack. The cloud ignited, killing those in a trailer 121 feet away and hurting scores more.

BP raised its offer

Brent Coon, lawyer for the plaintiffs who settled Tuesday, said BP increased its offer to reach the accord. Had the trial continued, he said he would have presented documents showing that BP misrepresented the status of equipment to regulators.

"We've never done that," Chapman said later in response.

Coon also said he hoped the trial reinforced the need for BP and the refining industry "to reflect on what led to this."

In addition to Kilbert, 48, of Bellville, the plaintiffs were Rolando Bocardo, 41, of Baytown, and Nara and David Wilson, both 44, of Santa Fe. All were contractors at the plant.

Bocardo declined comment except to say he was glad to have settled, but the Wilsons said they wanted to testify.

"I'm disappointed that I didn't get to look them in the eye and tell them off," David Wilson said outside the courtroom, overcome with tears.

Throughout the trial, the plaintiffs contended that BP valued profits over safety by cutting budgets for maintenance, repairs, upgrades and training in the years leading up to the explosion. BP acknowledges the budget cuts, but disputes any link between those reductions and the blast.

However, the U.S. Chemical Safety and Hazard Investigation Board concluded after a two-year investigation that cost-cutting, a lack of vigilance and a lack of investment in training and mechanical integrity at the plant paved the way for disaster.

Also, a panel led by former Secretary of State James A. Baker III said that even though BP increased funding for its U.S. refineries from 2002 on, after budgets had been slashed in prior years, it wasn't enough.

'It was hell on earth'

Until this month, BP had consistently sought to settle all cases before a jury was seated. Lawyers for the company declined comment on why the cases settled Tuesday progressed further than any others.

But during opening statements, BP lawyers said the plaintiffs were using minor ailments to get a big payoff.

Coon said Tuesday, which would have been the 10th day of the trial, that he believed the company's legal team gave less credence to claims of people who weren't killed or maimed.

"When you see your buddies, co-workers and friends disintegrate before you, the psychological impact of being thrown into that kind of inferno, it was hell on Earth  no one would understand," Coon said.

BP is pouring $1 billion into upgrades and improvements at the refinery, including replacement of blowdown stacks with flares, which burn off vapors. It also is implementing safety improvements recommended by the Baker panel.

Another pending matter is Coon's effort to gain sworn testimony in a deposition from former BP CEO John Browne, who he claims ordered the debilitating cost cuts. The Texas Supreme Court is slated to hear arguments next month on whether he must testify.


Jury warned not to talk

During the trial, several BP executives testified, including former plant manager Don Parus; Pat Gower, regional vice president of BP North America; and, by videotaped deposition, Mike Hoffman, former group vice president of refining and marketing.

Parus testified that he looked into the refinery's deadly history after three deaths occurred there in 2004, and found 22 deaths in the previous 30 years. A 23rd death came later.

He commissioned a survey of more than a thousand refinery workers that elicited harsh assessments about the safety culture, with many saying they thought each day there might be their last.

But Gower and Hoffman testified that they were largely ignorant of that history until after the blast.

Before she dismissed the four-man, eight-woman jury, Criss ordered them to speak to no one about the case except attorneys because of pending litigation.

kristen.hays@chron.com

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Wall Street Journal
September 19, 2007

BP-Blast Trial Ends in a Deal
A WSJ NEWS ROUNDUP
September 18, 2007 9:06 p.m.

The first trial stemming from the deadly explosion at a BP PLC refinery in Texas ended in a settlement, aborting a civil trial that had produced new details about the 2005 accident.

Terms of the agreement weren't disclosed.

The four plaintiffs had reported injuries from a March 2005 explosion at BP's Texas City, Texas, refinery that killed 15 contract workers and injured hundreds more. BP has set aside $1.6 billion to resolve claims from the accident, which spawned numerous government probes and played a role in a corporate shake-up at the British energy company.

BP still faces some 1,200 cases relating to the accident. State Judge Susan Criss told a court in Galveston, Texas, that she would meet next week with attorneys from both sides to discuss the status of remaining cases. Judge Criss's court docket still contains additional BP cases for later in 2007.

Brent Coon, a Beaumont, Texas, attorney for the plaintiffs, who has led the litigation against BP, said talks between the two sides intensified over the last month. Mr. Coon said he has settled 200 cases in addition to the four, leaving him with fewer than a dozen unresolved cases.

BP spokesman Neil Chapman declined to comment on how the litigation was going, but he said the latest agreement reflects BP's preference to settle out of court.

The accident occurred after gases spewed from an overfilled refinery unit and ignited, killing workers stationed in and around a temporary trailer. Subsequent government and company-sponsored probes have pointed to a variety of factors, including management lapses and the continued use of a "blowdown drum," a mechanism that vents gases rather than burning them off.

During questioning of company officials, Mr. Coon, who portrayed the accident as the result of penny-pinching, zeroed in on BP's failure to replace company trailers and the blowdown drum.

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Anchorage Daily News
September 18, 2007

http://www.adn.com/money/industries/oil/story/9311586p-9226569c.html

Alaska's oil flows past $80
PERCEPTION: Global supply concerns and Fed interest rates are factors, experts say.
By WESLEY LOY
wloy@adn.com
Published: September 18, 2007
Last Modified: September 18, 2007 at 04:27 AM

Alaska crude oil bulled through $80 a barrel Monday, the highest closing price ever.

North Slope crude for delivery to West Coast refineries settled at $80.07 a barrel, up $1.47 from Friday's close.

Global supply worries, coupled with anticipation that the Federal Reserve today might cut interest rates, fueled the spike in oil prices, analysts said. Lower interest rates would spur the economy and, in turn, oil and gasoline consumption.

Alaska oil prices have been on a comet ride for more than three years, cracking $40 per barrel in May 2004 and since then $50, $60, $70 and now $80.

This latest milestone comes as a tantalizing prelude to a special legislative session scheduled to start Oct. 18, when state lawmakers could overhaul the state's oil tax code for the second consecutive year.

The state as well as the three main North Slope oil producers -- Conoco Phillips, BP and Exxon Mobil -- are raking in billions of dollars in oil revenue.

But Gov. Sarah Palin and some lawmakers believe last year's tax reforms are shortchanging the state as oil prices soar. What's more, they say, those reforms were tainted by a bribery scandal resulting in federal criminal charges against three former legislators.

Although $80.07 is a new record, the price is still well below inflation-adjusted highs of about $100 a barrel seen in the early 1980s.

Michael Williams, chief economist with the state Department of Revenue, said Alaska oil is a small part of a vast and jittery global petroleum market.

Oil traders are basing their buying and selling decisions on a wide range of factors including the coming winter, when energy needs rise; news that oil inventories have fallen in recent weeks; an OPEC production hike that won't take effect until Nov. 1; the ever-present threat of political strife in the Middle East and other oil provinces; and today's Fed announcement on interest rates.

All that has prompted traders to bid up prices as they seek to lock in supplies of oil.

"People's perception of the future is what guides their behavior. And that's what's going on here," Williams said.

The state government depends overwhelmingly on oil revenue from taxes and royalties, and the higher the price, the better for state coffers.

This spring the revenue department predicted oil would average $54.72 per barrel for this fiscal year, which began July 1, and prices so far are running substantially higher than forecast, Williams said.

But high prices don't tell the full story.

The other side of the coin is oil production, and lately North Slope output has been running about 10 percent lower than forecast, Williams said, taking some of the bloom off the high-priced rose.

The state projected average production for this year of 764,000 barrels per day. But so far this month, production has averaged less than 600,000 barrels daily, due in part to a processing plant shutdown in the giant Prudhoe Bay field and a fire in the Lisburne field.

Williams said he doesn't know if oil prices will climb even higher, but he doubts such lofty prices are sustainable. For one thing, he said, the world has no shortage of petroleum. And technology advances are driving higher oil recovery and greater fuel efficiency.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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http://www.adn.com/news/politics/fbi/kott/story/9312345p-9226555c.html

Kott trial exposes Veco political maneuvering
PROSECUTION RESTS: From pig roasts to political polls, former V.P. shines light on firm's spending.
By RICHARD MAUER and SEAN COCKERHAM
Anchorage Daily News
Published: September 18, 2007
Last Modified: September 18, 2007 at 04:13 AM

Audio: Bill Allen testimony and FBI surveillance tapes
http://community.adn.com/adn/node/110527

Former Veco vice president Rick Smith was at the center of company fundraising, whether it was organizing the annual pig roasts for Rep. Don Young or one of the many golf tournaments where he turned checks into cash under a special arrangement with the Buckaroo Club in Spenard known as the "Phony Account."

Smith concluded two days of testimony Monday as a government witness in the federal corruption trial of former House Speaker Pete Kott, R-Eagle River. The government later wrapped up its case, with Kott's attorneys expecting to present their defense starting this morning and running through Thursday.

After the jury was dismissed for the day, U.S. District Judge John Sedwick rejected a defense motion to throw out the case against Kott. He said the government had provided ample evidence to support its charges of bribery, extortion and conspiracy.

The day also provided an inside look into how Veco apparently broke state law by hiring Anchorage pollster David Dittman to conduct a poll for Kott in 2006. Dittman, who took the stand after Smith, said he suspected the Veco-paid poll amounted to an illegal campaign contribution from the company to Kott, but decided it wasn't his business to worry about it.

Until it was sold 11 days ago on the eve of Kott's trial, Veco was an Alaska-based oil field services company. Its former chairman, Bill Allen, was among the most politically active businessmen in the state.

Kott's trial resumed Monday with Smith on the witness stand under cross-examination by Jim Wendt, the chief defense counsel.

Smith began work at Veco in 1989 as a logistics expert in Veco's cleanup of the Exxon Valdez oil spill. Rising to vice president of community and government affairs, Smith said his most recent annual salary was $165,000 plus a bonus ranging from $20,000 to $80,000. He was also illegally reimbursed for campaign contributions totaling $20,000 to $50,000 a year, he said.

The corruption investigation, centered on Veco and its relationships with politicians, brought an end to his employment in May, but his severance package was worth $384,000. Veco continued to pay his legal bills until CH2M Hill bought the company. He settled for a one-time lump-sum payment of $500,000 for lawyers but can keep any money left over, he said.

Smith learned he was busted on Aug. 31, 2006, the day after Allen agreed to work for the government. Smith said he got an early morning call from Allen, who asked him to come to his home as soon as he could.

He got to Allen's door about 9 a.m.

"I got some people you need to talk to," Allen said, then left. Two FBI agents approached Smith.

"They sat down and had a conversation with me, showed me the video and audio evidence they had accumulated and talked about what would happen to me if they were to prosecute and indict me," Smith testified.

He caved quickly and agreed to cooperate. Both he and Allen have pleaded guilty to bribery, extortion and conspiracy and face about 10 years in prison.

Wendt attempted to attack Smith's credibility by bringing up the dozens of charitable golf tournaments he ran over the years and his odd arrangements with the Buckaroo Club, a Spenard bar.

"The business relationship you had with them was to launder money, isn't that true?" Wendt asked.

Smith denied his conduct was illegal. He said he'd bring tournament checks from participants to the bar, which would cash them so he had money to pay expenses. Wendt suggested the amount totaled in the hundreds of thousands of dollars, and Smith didn't deny it. He also didn't deny that he called his arrangement the "Phony Account."

"Didn't the owners of the Buckaroo warn you that the IRS would catch up to you some day?" Wendt said.

"I don't recall," Smith said.

Smith said that for more than 10 years he organized the annual pig roasts that raised money for Don Young's campaigns. They were major affairs, attended by 200 to 400 people and catered by the Marx Bros. Cafe. The cost was $10,000 to $15,000, he said. He wasn't asked whether Young's campaign reimbursed the full cost.

Smith acknowledged he was the Veco employee who supervised the payments of $30,000 to Tom Anderson when Anderson served in the state House -- a "sham contract," in Wendt's words.

"We never got any work out of it," Smith said. "I asked him to work. It didn't happen."

Anderson was convicted in July of taking bribes to do the bidding of another company that wanted to build a private prison in Alaska.

Taking his turn in the witness stand, pollster Dave Dittman said Veco paid him to conduct polls for candidates, including Kott and then-Gov. Frank Murkowski. Such corporate-funded polls for candidates are illegal, according to the head of the Alaska Public Offices Commission.

Dittman indicated on the stand that he did have some concerns about the legality of the polls.

"I remember thinking that 'Oh, I hope you guys don't get yourselves in trouble over this,' " Dittman testified, speaking about Veco paying $2,750 for the July 2006 Kott poll. "I knew it was a corporate contribution; it would exceed the maximum contribution. I also felt they were big boys, had been around for a while and probably knew what they were doing."

Dittman also testified that he conducted a $20,000 poll for then-Gov. Frank Murkowski in April 2006. Veco executive Rick Smith paid for that poll, Dittman said on the witness stand.

"This one was initiated by either Jim Clark or the governor," Dittman testified. "The governor was very unpopular at the time and there was some question of whether he would run."

Clark, who was Murkowski's chief of staff, did not return a phone message seeking comment. Dittman said in an interview he thinks the poll could have been legal because Murkowski was not a declared candidate at that time. Brooke Miles, executive director of the APOC, said that is a gray area.

Dittman also said on the witness stand that Veco paid in June 2006 for a "gubernatorial primary poll" and one for state Senate District N, where then-Sen. Ben Stevens was trying to decide whether he had a chance to retain his seat.

Dittman testified he has done "four or five" political candidate polls for Veco over the past few years. In the later interview, Dittman said he could not recall any other companies that had paid for him to do candidate polls within the past several years.

Find Richard Mauer online at adn.com/contact/rmauer or call 257-4345.

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http://www.adn.com/news/politics/fbi/kohring/story/9312347p-9226559c.html

Defense disputes evidence from Kohring's FBI conversations
EVIDENCE: Lawyer asks to stifle material from search of office.
By LISA DEMER
ldemer@adn.com
Published: September 18, 2007
Last Modified: September 18, 2007 at 04:15 AM

A battle is being fought over evidence in the case against former Rep. Vic Kohring, but that's just one of the twists.

At issue: whether prosecutors can use materials seized and statements made by Kohring during the Aug. 31, 2006, search of his legislative office in Wasilla.

His lawyer, John Henry Browne of Seattle, says they didn't get anything incriminating, but he is still fighting to stifle everything from the search. Kohring, a Republican elected seven times, talked with FBI agents for hours that day.

One revelation came after the hearing. Browne told reporters that he intended to file a motion within the next two weeks to dismiss the charges based on what he called improper interference by state Sen. Fred Dyson, R-Eagle River.

Kohring's trial is set to begin Oct. 22. He is charged with conspiracy, extortion and bribery. He is accused of accepting money from Veco Corp. executives in order to push the company's interests on oil taxes and a natural gas pipeline.

According to an FBI report filed in court by his attorney, Kohring told agents:

• He had asked for money for himself personally and for his political campaigns from Veco executives Rick Smith and Bill Allen, and also asked Smith about borrowing or renting a truck. The campaign contributions were properly reported, he said.

• He told agents about regularly meeting and dining with lobbyists while the Legislature was in session. "He likes receiving free meals and drinks from lobbyists," the FBI summary of the Aug. 31 interview said.

• Kohring had a $2,700-a-month consulting contract with developer Marc Marlow but couldn't describe his specific duties.

• Earlier, Kohring had asked Allen if Veco would hire his nephew as an intern. Veco did so. Kohring told agents he thought it was a great benefit for an 18-year-old to be paid $16 an hour.

In another revelation, former Cornell Cos. consultant Frank Prewitt and former state Rep. Tom Anderson secretly recorded conversations with Kohring for the government, according to a letter sent this summer by federal prosecutors to Browne. It was just filed in court. Anderson was convicted in July of taking bribes to do the bidding of Cornell, but it came out at his trial that he at one point was cooperating with the FBI. Prewitt was working undercover for the FBI to collect information against Anderson and, it's now known, against Kohring.

The letter says both Prewitt and Anderson made recordings for the government in the case voluntarily, so no court authorization was needed.

KOHRING'S VOTE RECORD

Browne said all the allegations can be explained and that what's important is this: Kohring didn't vote Veco's way on the oil tax. A check of legislative records shows that was true on certain key votes. When Veco shifted strategy to support a compromise tax rate in an August 2006 special session, Kohring voted against it.

Browne said he learned only Thursday from testimony in the Kott case that Dyson had been helping the FBI investigate corruption in the Alaska Legislature. That makes him an agent of the government, Browne said. He called Dyson "a lapdog."

Browne said he takes issue with Dyson trying to persuade Kohring to at least talk to the feds, if not take a plea deal. He said he believes that the government could have been trying to interfere with Kohring's right to counsel.

But Dyson said later that he just was trying to help Kohring as a friend and wasn't asked to do so by prosecutors or the FBI.

As Browne tells it, a legislative aide to Dyson contacted an aide to Kohring to say the FBI had contacted Dyson's office and that Kohring would be "stupid to go to trial."

On Aug. 6, Craig Suffian, an attorney who works for Browne, sent Dyson an e-mail saying there may have been "an end-run around the right to counsel."

In his e-mail response the same day, Dyson said he wasn't trying to do that.

"My sense of the FBI investigations is that it is not a witch hunt and that they mostly want to nail the really bad guys who did intend to distort the Alaskan Legislative process," Dyson wrote.

He believed that Kohring never meant any harm and possibly could "avoid a good deal of stress and bad press at a trial by at least sitting down with the Feds and see if an attractive alternative was possible," he said in his e-mail. He said he figured Kohring's lawyers would go with him to talk to prosecutors.

Browne provided a copy of the e-mail exchange.

So is Kohring negotiating? Browne said that's something defense lawyers are barred from talking about.

FBI TESTIMONY

During the three-hour hearing on Monday, three FBI agents testified about the search of Kohring's office.

Five agents were involved, along with an evidence technician. But while the agents were armed, their weapons were concealed and never drawn, agents testified. They wore business clothes, not FBI raid jackets, and drove unmarked cars. While the outer door to the office was locked, it opened from the inside and Kohring was always free to go, agent Alan Vanderploeg testified.

They had a warrant, signed by federal Magistrate Judge John D. Roberts on Aug. 29, 2006.

But the warrant was never executed. Agents wanted Kohring to agree to the search, which he did.

Kohring's lawyer maintains that a search cannot be voluntary if agents tell the subject they have a warrant.

Kohring is one of six former or current legislators whose offices were searched that day. Agents testified they were instructed to get consent for the searches as "a professional courtesy."

But it also made it more difficult for defense lawyers to see the written support for the search warrant -- the application and the FBI agent's detailed affidavit. The search warrant and affidavit were sealed.

Browne told Roberts that he still wanted to see the affidavit and that prosecutors hadn't turned it over. At the hearing, prosecutors agreed to provide it, as long as he kept it confidential.

Now it is up to Roberts to recommend to District Judge John Sedwick whether the evidence taken in the search, and the statement that Kohring gave, can be used against him.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Reporter Tom Kizzia contributed to this story.

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http://www.adn.com/opinion/view/story/9312339p-9227306c.html

Speak up, senator
Testimony raises questions; Alaskans deserve answers
Published: September 18, 2007
Last Modified: September 18, 2007 at 02:53 AM

Bill Allen, former chairman of Veco, testified last week that he paid for some of the labor and provided some materials for the remodeling of U.S. Sen. Ted Stevens’ home in Girdwood.

Sen. Ted Stevens has said little about the FBI investigation into the remodeling, which is part of a wide-ranging corruption probe. He has said only that he paid every bill he was sent.

Even before Mr. Allen’s testimony at the corruption trial of former state Rep. Pete Kott, the next question was obvious:

Were some bills never sent to Sen. Stevens, and paid by someone else? According to Mr. Allen, his oil-field services company picked up the tab for some furniture. Employees on Veco’s payroll did some of the work. And Mr. Allen said Veco might have paid the bills of some contractors on the job, but he wasn’t sure.

Sen. Stevens has refused to say more about the remodeling deal, in part because he refuses to comment about an ongoing investigation. Any lawyer would advise silence for his client in these circumstances. But Sen. Stevens has more than just an obligation to himself here. He has an obligation to clear the air with his constituents, the people of Alaska who have elected him to office, the people for whom he works.

If he wasn’t getting all the bills, did he know that? Did he make sure he was paying for all services? Why did he have his home remodeled through Veco, a company that was not in the home building or remodeling business?

Mr. Allen is an admitted felon, so his word may not be the coin of the realm. But his account under oath naturally makes Alaskans wonder about the legitimacy of the Girdwood work - did Sen. Stevens accept gifts and services and, if so, did he violate federal tax laws and Senate ethics rules?

No one has suggested, nor is there any evidence, that Mr. Allen received any favors from Sen. Stevens in return for his work. But the evidence does suggest that an influential Alaskan was taking care of the senator.

Sen. Stevens hasn’t been charged with anything. But the Girdwood deal and Mr. Allen’s testimony have raised questions that Alaskans deserve to have answered, not with stonewalling and anger, but straight up. The Alaskan of the Century gets no free pass - he’s still accountable to those who elect him, and not just every six years.

BOTTOM LINE: Sen. Ted Stevens owes Alaskans an explanation, the sooner the better.

Steer clear
Sen. Stevens should abstain from key FBI, justice agency votes

Sen. Ted Stevens is under investigation by the FBI.

Sen. Stevens also sits on the Senate Appropriations Committee, which has a strong say in the funding of that agency along with the rest of the federal government.

Sen. Stevens should steer clear of any role with regard to FBI funding and abstain from voting on it.

He also should steer clear of the Senate’s advise-and-consent role on the nomination of a new U.S. attorney general. That individual will head the Justice Department, which oversees the FBI. The attorney general would likely have a role in discussions about the investigation of Sen. Stevens and what, if any, further action the evidence suggested.

Finally, should the Internal Revenue Service take a look at the Girdwood remodeling project, the senator should abstain from any appropriations decisions about that agency.

Let’s reiterate: Sen. Stevens has not been charged with anything. The fact that he is involved in a federal investigation is not an indictment. His service to Alaska since 1968 entitles him to a generous benefit of the doubt.

But the investigation creates a conflict between the senator’s appropriation duties and the budgets of one or more federal agencies - and with his prospective vote on a new attorney general. The subject of an investigation shouldn’t have a say in an investigating agency’s budget or personnel.

Sen. Stevens should steer clear of those votes as he lets the investigation take its course.

BOTTOM LINE: As long as he’s the subject of a federal investigation, Sen. Stevens should abstain from votes and debate on the investigating agencies.

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Anchorage Daily News
September 16, 2007

http://www.adn.com/news/politics/fbi/kott/story/9308033p-9222390c.html

Former Veco VP has more to reveal
Smith names bribe takers; to testify again Monday in trial of Pete Kott
By LISA DEMER
ldemer@adn.com
Published: September 16, 2007
Last Modified: September 16, 2007 at 04:09 AM

Witnesses in the corruption trial of former state Rep. Pete Kott have provided jarring testimony about secret dirty deals, payoffs to Kott, and the remodel of U.S. Sen. Ted Stevens' Girdwood home.

Most of the revelations have come out through dozens of secretly made recordings of cell phone calls and meetings in Suite 604 of the Baranof Hotel, the Juneau headquarters of Veco Corp. when the Legislature was in session. Kott is charged with taking bribes from Veco executives and conspiring with them and others to pass a new oil tax favored by North Slope oil producers in 2006.

The trial wrapped up its eighth day Friday and continues Monday.

Highlights so far:

WEDNESDAY, SEPT. 5

Just before the trial begins, U.S. District Judge John Sedwick splits Kott's case from that of his co-defendant, former Rep. Bruce Weyhrauch of Juneau. The two had been scheduled to be tried together. The split allows Kott's case to move forward while the government appeals a ruling excluding key evidence against Weyhrauch.

Jury selection for Kott begins. A few dozen people in the pool of 120 were weeded out earlier because of hardships, biases or other reasons revealed in written questionnaires.

THURSDAY, SEPT. 6

The process of picking a jury continues. It's slow going with prospective jurors questioned one by one about what they already knew about the case through news reports.

SEPT. 7

Just before noon, a jury of 10 women and two men, plus four alternatives, is picked. Eight of the regular jurors are from Anchorage. One is from Eagle River, which Kott represented for 14 years in the House. Another is a public radio talk show host from Kodiak. She comes back into the story later.

MONDAY, SEPT. 10

Prosecutor Nicholas Marsh, from the U.S. Justice Department's Public Integrity Section, and defense attorney Jim Wendt outline their versions of the case in opening statements to the jury, and the government begins to introduce the FBI's secretly made recordings into evidence.

Marsh says that Kott had betrayed the public trust by pushing an oil tax favored by industry in exchange for money, a Veco-paid-for political poll and the promise of a job from the company. In one of the recordings, Marsh tells jurors, Kott says "I sold my soul to the devil."

Wendt tells jurors the government has twisted what happened. Kott was just a blue-collar Republican working hard to get what most Alaskans wanted: a natural gas pipeline. There's nothing illegal about teaming up with lobbyists, the oil industry or others to work for a common goal, Wendt says.

"About the only ones that I can trust is you and ol' Ben Stevens," former Veco chief executive Bill Allen says to Kott in one of the recordings played that day. Stevens is the former Senate president.

TUESDAY, SEPT. 11

The entire day, an FBI agent from Cincinnati is on the witness stand to provide background as prosecutors introduce many more recordings into evidence. The cell phone conversations and meetings in Suite 604 reveal a crude world of political deal-making that operated on the fringes of the Alaska Legislature.

After a key vote on the oil tax rate on May 7, 2006, Kott goes to Suite 604 to celebrate with Allen, former Veco vice president Rick Smith, and others. In a grainy video, they clink glasses and Kott boasts about how he got the votes. "I use 'em and abuse 'em," he says of his colleagues.

WEDNESDAY, SEPT. 12

The government plays more recordings in the morning and then Allen takes the witness stand. It's the first time he's talked publicly about his role in the corruption investigation since it burst into public view more than a year ago. The courtroom fills with spectators.

Under questioning by prosecutor James Goeke, Allen tells about a scheme to funnel nearly $8,000 to Kott for his son so his son could take off from work to help on Kott's re-election campaign.

Allen also explains that when Kott keeps talking about going to work as a warden for a prison that Veco was building in Barbados, it's just a running joke. But Veco's promise to give Kott a job as a lobbyist once he was out of the Legislature was real, Allen testifies.

THURSDAY, SEPT. 13

Allen remains on the witness stand all day. He tells jurors he has been cooperating with the FBI since Aug. 30, 2006, when he was confronted by agents while with Sen. Fred Dyson on the way to breakfast. On Aug. 31, teams of federal agents raided offices of six legislators around the state. Allen says he pleaded guilty to bribing three: Kott, former Rep. Vic Kohring and Stevens. He does not mention Weyhrauch. Much of the day, defense lawyer Wendt pushes Allen to say that what the government calls bribes weren't that at all. But Allen doesn't go along.

FRIDAY, SEPT. 14

The most startling moment of the trial comes when Allen reveals that he or Veco provided workers and material for the 2000 building project that doubled the size of Ted Stevens' residence in Girdwood. Wendt, still doing the cross-examination, was seeking to discredit Allen and downplay the role that Kott played in the scandal.

Later in the day, former Veco vice president Rick Smith takes the stand. He also testifies about whom he pleaded guilty to bribing: Kott, Kohring, Weyhrauch, Stevens and one more, Sen. John Cowdery. In Smith and Allen's charging documents, Cowdery is believed to be Senator A, a member of the conspiracy, though not among the group that was bribed.

Also on Friday, juror Lisa Polito of Kodiak is dismissed after the judge learns she wrote a letter to the editor in October 2006 that described Veco's campaign contributions as "scandal-tainted money." One of the alternates, a child-care worker from Anchorage, is moved to the panel of 12 regular jurors.

What's next: Smith continues on the stand Monday, followed by more government witnesses. The defense is expected to begin presenting its case on Tuesday. That's expected to last at least a couple of days.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390.<

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Anchorage Daily News
September 15, 2007

http://www.adn.com/money/industries/oil/story/9304224p-9218659c.html

Review board yanks Shell pollution permits
FEDS UNDER FIRE: The U.S. regulators "got sloppy," says one critic.
By WESLEY LOY
wloy@adn.com
Published: September 15, 2007
Last Modified: September 15, 2007 at 01:44 AM

Shell hit a new snag Friday in its quest to drill for oil in the Beaufort Sea.

A Washington, D.C., board that reviews U.S. Environmental Protection Agency actions found grounds to withhold air-pollution permits the EPA had granted Shell in June for its two diesel-burning offshore drill ships.

The decision marked the second time in two days that Shell was frustrated in its aims to start a $200 million drilling campaign -- and that federal regulators were called into question for approving Shell's plans.

"Shell had a very tight schedule leading up to its first drilling season, and it looks like more than one federal agency went out of its way to accommodate that schedule. Unfortunately, the agencies got sloppy, they didn't follow the rules, and they got caught," said David Harding, spokesman for the North Slope Borough.

The borough and environmental groups petitioned the EPA's Environmental Appeals Board to review air-pollution permits the EPA had granted Shell.

An EPA spokesman said Friday the agency had no immediate comment on the ruling.

On Thursday, a federal court refused to back off its order forbidding any drilling until a case brought by the borough, Native whale hunters and environmentalists plays out.

The groups argue that another federal agency that regulates the oil industry, the Minerals Management Service, failed to fully study the risks to endangered bowhead whales and the environment before approving Shell's exploration plan.

The legal and permitting snags almost certainly have dashed Shell's goal to drill this year -- a costly blow considering the large fleet of drilling and support ships the company has had on standby most of the summer.

Among the complaints petitioners lodged with the Environmental Appeals Board was that the EPA shouldn't have treated individual drill sites as separate "minor" sources of pollution. Rather, they argued, the agency should have made Shell seek a tougher "major source" permit for the drilling operation as a whole.

In its 69-page decision, the appeals board did not rule that the minor permits were improper, but it criticized the agency for not adequately explaining why it had issued them. It ordered the EPA's Seattle-based regional office to reconsider the Shell permits, and possibly take public comments.

The upshot for Shell is, it still doesn't have the air-pollution permits it needs to drill.

But Shell, in a statement Friday, saw the ruling as mostly positive, saying the appeals board "upheld the permitting approach" the EPA used and found fault with only "one discrete issue."

"Shell is confident that EPA can address that issue in a timely manner."

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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http://www.adn.com/news/politics/fbi/story/9305230p-9218615c.html

Allen says Veco paid for part of Stevens' remodel
BOMBSHELL: Courtroom gasps could be heard during testimony.
By RICHARD MAUER and LISA DEMER
Anchorage Daily News
Published: September 15, 2007
Last Modified: September 15, 2007 at 02:41 AM

Former Veco chairman Bill Allen might have been on the witness stand to present bribery evidence against a state legislator, but the biggest shock of the day -- perhaps the entire trial -- was his assertion Friday that he or his company financed a substantial portion of the remodeling of U.S. Sen. Ted Stevens' Girdwood home.

As he testified for the third day in the bribery, extortion and conspiracy trial of former House Speaker Pete Kott, R-Eagle River, gasps emerged around the crowded courtroom when Allen admitted he provided workers and some material for the 2000 building project that doubled the size of Stevens' official residence.

And that was only one of the revelations outside the scope of Kott's specific charges.

Another former Veco official, Rick Smith, followed Allen to the witness stand and was asked by one of the prosecutors, Nicholas Marsh, to name the legislators whom he bribed.

"That would be Vic Kohring, Pete Kott and Bruce Weyhrauch," Smith said, naming three former House Republicans who have already been indicted.

"And the state Senate -- did you plead guilty to bribing anyone in the state Senate?" Marsh asked.

"That would be Ben Stevens and John Cowdery," Smith responded, naming two Anchorage Republicans. One is Sen. Ted Stevens' son and the former Senate president, the other a current sitting senator.

Smith and Allen were testifying under plea deals they made with prosecutors in May that required them to work for the government.

Ben Stevens' name surfaced earlier in Kott's trial as an unindicted co-conspirator, but Cowdery, believed to be "Senator A" in Smith's and Allen's charging documents, hadn't been named in public proceeding.

In Smith's and Allen's charging documents, Senator A was accused of conspiracy but not bribery. It was unclear whether Smith was confused Friday or whether he was thinking of events not listed in his plea.

Neither Cowdery nor Ben Stevens have been charged with a crime. They deny wrongdoing.

Allen's role in the remodeling has been the subject of widespread speculation since May, when the Daily News reported that it had become part of the far-reaching FBI investigation into Alaska political corruption. Ted Stevens denied wrongdoing and the FBI refused to comment, though in July FBI and IRS agents spent nearly 12 hours searching the house and documenting the addition.

In response to cross examination by Jim Wendt, Kott's attorney, who was seeking to discredit Allen and minimize the role that Kott played in the scandal, Allen testified that one to four Veco employees worked for months on the project. He also acknowledged Veco paid some of the contractors and that it supplied some of the furniture.

Allen didn't testify about the value of the services and materials, though they appeared to represent a substantial portion of the more than $400,000 in illegal payments he admitted making to public officials and their families.

"One of these allegations is that you helped Sen. Ted Stevens with remodeling his house in Girdwood, isn't that true?" Wendt asked.

"Uh, yes," Allen said.

"In helping Sen. Stevens remodel his residence, you or Veco paid a number of bills in remodeling that residence, isn't that true?"

"I, I, I give Ted some old furniture, I don't think it was a lot of material," Allen said, stammering at first. "There was some labor."

"There wasn't a lot of materials but you paid some labor bills that went into Sen. Stevens's house?" Wendt continued.

"Yes," said Allen. "It would be Veco employees."

Under rebuttal examination by Assistant U.S. Attorney James Goeke, Allen said that Veco might have paid the bills of contractors as well -- he didn't know all the details. Allen then muttered something about a plumber and "another guy, Augie's company," a reference to Augie Paone, the main contractor who sent Veco more than $100,000 in bills for his work there. Paone told the Daily News in May that after he sent his invoices to Veco, he received checks from Stevens.

Stevens has said he paid all the invoices he was sent.

There was no evidence presented that Allen got anything in return for his help on the remodeling. At a minimum, Stevens could be facing trouble with the IRS if Allen provided him with free services and he didn't report the gift on his taxes, said Adam Winkler, an elections law expert at UCLA.

"There are a host of potentially criminal implications associated with this kind of behavior," Winkler said.

Before Allen concluded his testimony at 10:15 a.m., Wendt tore into his plea deal and his motivation for testifying. Allen, 70, said he was facing 10 to 11 years in prison.

"That jail term can be reduced significantly?" Wendt asked.

"Yeah, but, I don't expect that," Allen said. He said the government had already failed to deliver on one of his requests that it exonerate Veco's 4,000 employees in writing. Allen said he already got as much as he's going to get: promises that any of his relatives wouldn't be indicted, as long as he testifies truthfully.

"My family did get in the middle of this mess, so I'm gonna do what I told (the government) I'm gonna do," Allen said.

Wendt pressed the idea that Allen could still get his sentence reduced.

"You know, I really don't care," Allen said. "I've never asked them for a damn thing when it comes to my sentence. It'd be whatever happens. My life is about gone anyway."

"So do you expect this jury to believe you don't care whether you die in a jail cell somewhere or whether you die in a nice home surrounded by friends and family?" Wendt said.

"You know, I'm not going to beg them to do anything," Allen said.

Smith rose to be Veco's vice president for government and community affairs from a job working logistics during the Exxon Valdez oil spill.

In his testimony, Smith several times acknowledged that he knew he was breaking the law in his dealings with Kott. Most of the case involves the efforts of Veco to win passage of a state oil-tax change favored by oil producers in 2006. Smith and Allen said they hoped a low, stable tax would encourage producers to invest more in declining oil fields, extending their lives, and build a gas pipeline.

Prosecutor Marsh asked Smith about a March 4, 2006, conversation in Suite 604 of Juneau's Baranof Hotel in which Smith told Allen they were going to have "get dirty" and produce.

In explaining what was secretly recorded by the FBI, Smith said he meant he and Allen would do "whatever it would take" to get the new oil tax through the Legislature. That included giving financial favors and jobs to lawmakers, Smith testified. And that meant a job for Kott, he said.

In the FBI's video, Smith told Allen they needed to be careful.

"We didn't want to get caught doing anything that might be illegal," Smith told jurors.

Smith testified about meeting with Kott last July at the Rendezvous bar in downtown Juneau about how to get money to Kott's son.

In a secretly recorded phone call on July 31, 2006, Smith told Allen he needed to talk with Kott privately about the matter. Kott's son needed money because he was helping with Kott's political campaign instead of working in his flooring business, and his family needed money.

Smith testified that he didn't want Allen "tainted."

"If anyone would get hit with it, it should be me," Smith told jurors.

Wendt questioned him on why they went to a downtown bar if they wanted to meet in private.

It's a "working class" bar, not a place that lobbyists, oil executives, legislators and aides hang out, he said.

But if he wanted somewhere private, why not Suite 604, Wendt asked.

Maybe they wanted a cocktail, Smith answered.

It looked like from the FBI surveillance videos that there was plenty of drinking going in Suite 604, Wendt shot back. The implication was that maybe Smith wanted to talk about the deal outside the suite for another reason.

Another allegation concerns a political poll for Kott paid for by Veco.

Under questioning by Wendt, Smith said that Veco had paid for at least part of over 100 polls during his years there to help favored candidates. He arranged for most of them, when candidates or their aides asked, he said.

For most polls, the candidates paid at least part, he said. For some, Veco paid the whole thing. That's what it did for Kott, paying Dittman Research Corp. $2,750, Smith testified.

Yet if Kott or a campaign consultant sought a poll from Veco, wouldn't the conversation likely have been captured during all the FBI recording? Wendt asked Smith. After all, an FBI agent estimated that the agency had intercepted as many as 9,500 calls in a year's time from Smith's cell phone.

"Very good chance," Smith said. But he didn't remember any specific request, from the FBI transcripts he reviewed or otherwise.

At any rate, he said, he knows he talked with Kott's campaign consultant, Jerry Mackie, about Veco paying for poll.

Find Richard Mauer online at adn.com/contact/rmauer or call 257-4345. Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Daily News reporter Jim Halpin contributed to this report.

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Houston Chronicle
September 15, 2007

http://www.chron.com/disp/story.mpl/front/5136885.html

BP executive testifies workers to blame for explosion
Blast wouldn't have happened if correct procedures were followed, he says
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

A BP refining executive told jurors Friday that a March 2005 explosion that killed 15 people at a Texas City refinery would not have happened had six BP employees followed procedure for starting up the unit where the blast occurred.

"There would not have been an event if they had followed the procedures," Pat Gower, regional vice president of BP North America, told jurors in his third and last day of testimony in the first civil trial to emerge from blast-related litigation.

BP fired six employees on the unit, including an operator who had worked 12-hour days for a month without a break, Gower acknowledged.

BP said the same thing about two months after the blast, prompting angry reactions from union leaders, blast victims and others.

They said at the time that it appeared the company laid blame with low- and midlevel workers while avoiding broader responsibility for more systemic management problems, such as a lax approach to safety.

"Once past this low-level accountability of hourly people, did you look at any people higher up on the chain of command who bore higher responsibility?" plaintiffs' attorney Brent Coon asked.

Kathleen Lucas, operations manager at the plant, "looked at everybody who reports to her," Gower said.

Defending fired workers
W.E. "Sonny" Sanders, international representative for the United Steelworkers who worked at the Texas City plant for eight years until 1990, testified later Friday that the union thought BP unfairly blamed the six workers who were fired.

He said years of cost cuts, deferred maintenance and other managerial issues under management control preceded the tragedy.

"They had no ability to get things changed," he said of the fired workers.

Also, higher-level executives, including Gower and three others targeted to be fired by an internal investigation of the blast, were not terminated. Gower and Willie Willis, supervisor of the unit where the blast occurred, remain employed, as does former plant manager Don Parus, who is on paid leave. Gower's former boss, Mike Hoffman, retired last year.

Gower said he took issue with the findings, particularly a comment he said was wrongly attributed to him in the report that Willis should be fired. BP group vice president Wilhelm Bonse-Geuking, whose videotaped testimony is expected to be played in the trial, led the internal probe.

"The Bonse report captured something I did not say. Willie Willis is one of the best operating people I know," Gower said under questioning from Coon, who represents four plaintiffs suing BP in the trial.

Germans become issue
"What you see is the prejudice of Bill Bonse, as a German who thinks everyone needs a Ph.D. to work in a plant," Gower said.

"Do you have something against Germans, sir?" Coon asked.

Gower said managers at BP's refineries in Germany have high levels of education, "so when they come here they use their cultural bias to make decisions." He added, "No, I don't have anything against Germans."

His comment prompted a terse rebuke from state District Judge Susan Criss outside the jury's presence.

"This is a city built by German immigrants" with many residents of that country's heritage, "as well as this German judge," she told Gower.

BP lawyer Jim Galbraith sought to soften Gower's comments after the trial resumed, asking him to identify his nationality.

"Three of my four grandparents are German," Gower replied.

Explaining with models
Under questioning from Galbraith, Gower took on a professorial persona as he explained how the blast happened, using a model of the unit and an aerial photo of the refinery.

He also burst into sobs when Galbraith asked him about a death at the plant earlier this year when a contractor was electrocuted.

But after a lunch break, the tears were gone. And under questioning from Coon, he returned to the unemotional, matter-of-fact persona he'd had for more than two days, as he said a BP investigation concluded that the man was responsible for his own electrocution because he didn't turn off electricity leading to a lighting fixture he was working on.

"When you have individuals who take shortcuts or put their lives in jeopardy, we cannot be held accountable for every individual's action," Gower said.

Earlier Friday, Gower said BP is pouring $1 billion into repairs and upgrades at the Texas City refinery, including the elimination of blowdown stacks like the one that released vapors that ignited.

Very prophetic?
He also acknowledged that the company could have made such investments before the blast rather than playing catch-up after the disaster.

The spending issue arose as Coon highlighted a survey of Texas City workers in late 2004 that elicited harsh assessments of the company's commitment to safety and willingness to forgo upgrades to maximize profits.

"BP is not addressing the leadership culture that will permanently reverse the lack of operational integrity and is setting TC up for a series of catastrophic failures," one of the survey answers said.

Gower called the statement "this person's view."

"In fact, it turned out to be very prophetic, didn't it?" Coon asked.

"It looks like it could be called prophetic, I don't know," Gower said.

kristen.hays@chron.com

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Houston Chronicle
September 14, 2007

http://www.chron.com/disp/story.mpl/business/5134150.html

BP turned down blast-proof trailers
Wood-frames stayed in Texas City despite 1999 offer, executive testifies
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  A BP refining executive acknowledged Thursday that the company could have replaced flimsy wood-frame trailers like the one in which 15 contractors died with blast-proof trailers years before the March 2005 explosion at its Texas City refinery.

"Yes, Brent, it would make sense to spend money not to have the loss of 15 lives," Pat Gower, regional vice president of BP North America, told plaintiffs' attorney Brent Coon matter-of-factly in the first civil trial to emerge from blast-related litigation.

The issue arose when Coon presented jurors with a copy of a letter Gower received from a company in September 1999 pitching blast-proof trailers. Gower said he didn't remember the letter but acknowledged that a notation alerting then-Texas City process safety head Bill Ralph to what it said was written in his handwriting.

He said he thought Ralph would like to know he had an option to replace wood-frame trailers on the plant site, and "this was the first time I was aware these kinds of buildings were out there."

With the letter came a cost list that showed a price of $33 a day per trailer with a 10-year lease, or $72 per day on a month-to-month basis. But BP didn't buy blast-proof trailers.

Company policy dating back to 1995 said trailers couldn't be closer than 300 feet to processing units, according to a document Coon showed jurors Thursday. Gower said the company had done a study on trailer placement, but the necessary managers hadn't signed off on it before they were placed and used by workers.

"In hindsight, we placed people in trailers where they never should have been," Gower said.

The 15 workers were in a trailer 121 feet from the processing unit that exploded.

Gower also testified Thursday that he took issue with an internal company probe that skewered him for failing to stay on top of safety issues at the refinery before the explosion.

Gower was one of four BP executives targeted to be fired for management failures in an internal report of the probe completed in February. He remains in his pre-blast role, and he said Thursday he disagrees with the report's findings.

Of the other three, Gower's former boss, Mike Hoffman, group vice president of refining and marketing, retired last December. The other two who worked at the Texas City plant remain on BP's payroll, including former plant manager Don Parus, who has been on paid leave since May 2005.

Gower said his current boss assured him that BP would not "act on the report as it relates to me."

The report said Gower was or should have been aware of unreported fires, leaks, emergency shutdowns and reliability issues at the plant and "didn't adequately appreciate process safety implications of the dilapidated state of the Texas City refinery." Process safety involves operation of equipment and handling of hazardous materials, as opposed to personal safety, which involves prevention of slips and falls.

'A snapshot in time'
Gower said that management was addressing issues there in the weeks before the blast, "but I don't believe the units were in a dilapidated state."

Gower also said he disagreed with the probe's focus on managers at the time of the blast, rather than decisions made regarding maintenance, repairs and upgrades in the years before the blast when BP was cutting budgets.

"I agree that the report looks at a snapshot in time instead of looking at what occurred over a long period of time," he said.

Gower worked at the Texas City plant in the 1980s, when it was owned by Amoco, and again in 1999-2000 after BP had acquired Amoco. He acknow- ledged that BP in 1999 ordered budget cuts of 25 percent by 2001.

Under questioning from Coon, who represents four plaintiffs suing BP in the case, Gower said it wasn't clear to him that there had been a history of underinvestment at the plant, nor did he recall any discussion of whether enough money was available to keep the refinery's units in good working order.

Cuts included reductions in training, maintenance supervisors, safety programs and pro- ject engineers, documents presented to the jury showed.

"There were programs that disappeared. I didn't know what they were," Gower said.

BP lawyers have yet to question Gower.

Link of blast, cuts disputed
Upcoming witnesses include W.E. "Sonny" Sanders, international representative of the United Steelworkers, and videotaped testimony from John Manzoni, former head of BP's refining division who resigned to be CEO of a Canadian oil and gas producer earlier this year.

Until now, BP has consistently settled blast-related lawsuits. Of about 3,000 filed, at least 1,350 have been settled, including all related to deaths. Remaining cases largely involve injuries and property damage.

The plaintiffs in the trial contend that BP valued profits over safety by cutting budgets for maintenance, repairs, replacements and training in the years leading up to the explosion. BP acknowledges having imposed budget cuts but disputes any link between those reductions and the blast.

kristen.hays@chron.com

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Anchorage Daily News
September 13, 2007

http://www.adn.com/front/story/9298834p-9213425c.html

Ruling may disperse Shell's drilling fleet over the horizon
With no Beaufort project, contract workers will be let go
By WESLEY LOY
wloy@adn.com
Published: September 13, 2007
Last Modified: September 13, 2007 at 03:16 AM

Shell will start releasing contract workers and soon could disband its offshore drilling fleet due to a federal court order blocking the oil company's plans to drill exploratory wells this fall in the Beaufort Sea.

The retrenchment does not mean Shell is abandoning its drilling goals, company spokesman Curtis Smith said Wednesday.

The Dutch energy giant is moving ahead with offshore seismic testing in the Beaufort as well as in the Chukchi Sea, he said.

"This is just the first year in a multiyear exploratory program," he said. "Shell is committed to Alaska."

Several organizations including the North Slope Borough, the Alaska Eskimo Whaling Commission and environmental groups on Aug. 15 won an indefinite ban on drilling from the 9th U.S. Circuit Court of Appeals in San Francisco. The groups are arguing that industrial noise and potential spills could hurt migratory whales and the Beaufort Sea ecosystem.

The court order idled Shell's two drilling ships, one anchored at Dutch Harbor and another in western Canada, and now the company will begin a "staged release of contract personnel," as no drilling appears likely this year.

For its $200 million exploration program, Shell had recruited and trained more than 700 people, including 350 Alaskans, Smith said.

The people generally are employed by contractors Shell hired. Smith said he couldn't specify how many would be let go.

Many of the jobs affected are associated with the drill ship Frontier Discoverer, now anchored at Dutch Harbor along with five support vessels including icebreakers, Smith said.

The Discoverer, under long-term contract to Shell, likely will sail away soon to a drilling job elsewhere in the world, he said.

Shell has asked the San Francisco court to lift its no-drilling order, and if that happens quickly, the company could reactivate the Frontier Discoverer or use its other drill ship, the Kulluk, to probe its Sivulliq prospect, thought to hold hundreds of millions of barrels of oil.

The prospect is west of the Arctic National Wildlife Refuge about 16 miles offshore.

The seismic testing involves a different set of ships, including the Gilivar, a seismic vessel operated by Shell contractor WesternGeco. Several support boats will carry people and equipment to observe and listen for whales and other marine mammals, Smith said. Aircraft also will be used.

"Shell regrets it must take this action," the company said of the job cuts. The company said talks are "ongoing" with North Slope residents who question the effects of drilling on subsistence whale hunts.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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http://www.adn.com/news/politics/fbi/kott/story/9298937p-9213454c.html

Allen counted on having friend in the Legislature
He testifies that he gave money, favors to oil-tax ally in Juneau
By RICHARD MAUER and LISA DEMER
Anchorage Daily News
Published: September 13, 2007
Last Modified: September 13, 2007 at 04:25 AM

More than a year after he emerged as the central figure in the Alaska corruption investigation, former Veco chairman Bill Allen at last took the witness stand Wednesday in the trial of former House speaker Pete Kott and began recounting his version of the last three decades of oil politics.

Along the way Allen, the government's chief witness, told of the money, jobs and favors he dispensed to Kott, a man he described as a friend and reliable ally but who could wind up in prison on Allen's testimony.

As word of Allen's impending visit to the courtroom got around town at lunchtime, the federal courtroom of U.S. District Judge John Sedwick began to fill, eventually drawing more than 60 people. Some were lawyers or paralegals working for other potential defendants or witnesses. The back row held gray-haired remnants of the liberal Democrats who flexed so much power in Juneau in the 1970s before oil-friendly Republicans made them largely irrelevant, while up front sat a conservative talk show host who fought Veco's efforts a few years back to pay for government out of the Permanent Fund. Other spectators just wanted a glimpse of history.

But the real business of the day was what Allen told the jury about Kott, a 14-year veteran of the state House from Eagle River. Allen and one of his vice presidents, Rick Smith, pleaded guilty to bribery and conspiracy and are hoping to get reduced sentences by cooperating with federal authorities.

Over nearly three hours of testimony that will resume this morning, Allen talked about overpaying a flooring job done by Kott by more than $7,000 and of scheming to get at least some of that money to Kott's son so that he could work on Kott's 2006 campaign, when a poll showed he was in surprising trouble. Even the poll itself was secretly paid for by Veco, which if true would be a hidden -- and illegal -- campaign contribution by the company to Kott.

"Why were you trying to get money to Pete Kott for his son's help in the campaign?" asked assistant U.S. Attorney James Goeke.

"He was going to run again and he needed his son to help him," Allen said.

"What would his son be doing otherwise?" asked Goeke.

"A job," Allen said. "He can do the floors as good as Pete."

"So back on July 31, 2006, do you know if Mr. Kott was going to be able to go to work on the campaign and do other work?" continued Goeke.

"He couldn't afford it," said Allen. "He has a family to take care of."

Before announcing he would run again, Kott had been making noises about retiring and had talked with Allen about work. Some of those conversations were recorded by the FBI.

In one such, on June 1, 2006, Kott joked with Allen that he wanted to be warden of the prison Veco was building in Barbados, "especially with all the women there on the beaches." He said he'd do anything, even pass out beach towels.

Allen testified that he knew Kott was joking about that. But Kott also said on the recording that he wanted to be a lobbyist.

"For Veco?" Goeke asked in court Wednesday.

"Yes," Allen answered.

Veco lobbyists made $6,000 to $12,000 a month, Allen testified. And he would have hired Kott, he said.

But even as he provided the evidence about Kott, and along the way implicated his own company and its executives in an illegal campaign contribution scam, Allen never once acknowledged that a specific action by him or Kott broke the law.

While Allen, 70, has never been shy about appearing at public events and private fundraisers over the last quarter century as his political power grew, he has only rarely engaged in public speaking. His speech has been impaired since 2001 when, riding without a helmet, he crashed his motorcycle. On the witness stand, he said about a quarter of the part of his brain that controls speech died after the accident, and, like some stroke victims, he has trouble picking out words. He also has trouble hearing, and a court headset he wore while testifying proved balky at times.

At one point, he started to describe what the oil companies wanted most out of Juneau, then had to pause.

"Wait, I got to find this word," he said. He closed his eyes, put his head in his hands and worked something over in his mind for what seemed a small eternity while the courtroom, in silence, waited for him to speak.

"Certainty!" he finally exclaimed. "They wanted certainty." In other words, they wanted to be sure that taxes would not be raised before they would agree to build a natural gas pipeline, the thrust of the efforts on the so-called PPT -- petroleum profits tax -- that tied the 2006 Legislature in knots.

Allen took the industry lead in promoting a low profits tax -- a much bigger effort than the producers themselves were making. FBI-intercepted telephone calls and conversations at a hotel suite in Juneau show that Kott and Senate President Ben Stevens were his two most helpful soldiers.

In one conversation from June 8, 2006, played while Allen was on the stand, he recalled a discussion he had with the head of Conoco Phillips in Alaska, Jim Bowles, about the profits tax.

"I said between Pete Kott and Ben ... they won't have, they won't even have their fingerprints on the (bill)." It seemed Allen was referring to the "fingerprints" of the producers, but his remarks were ambiguous enough that they could have been those of Stevens and Kott.

As the tapes were played, Allen testified he had no idea that his phones were taped or that a secret camera had been placed in his hotel suite in Juneau by the FBI under a court order.

"If I knew that, I wouldn't have said all this stuff," Allen said, drawing smiles from the jury and chuckles around the courtroom. He learned he was the target of the Justice Department's Public Integrity Section on Aug. 30, 2006 -- a day before the FBI executed a series of raids on legislative offices.

Allen emerged as one of the industry's biggest promoters in the 1980s, when Veco began a long run as a reliable source of campaign contributions, mainly for Republicans. At the time, Allen testified, his main political hand was the former state senator and trooper head Ed Dankworth, sometimes referred to as the "21st Senator" for his efforts at organizing the Senate into blocs long after he left the body.

Allen said he and Dankworth had a thorough falling-out after he bought the Anchorage Times in 1989. One of his biggest financial supporters in his journalism venture was Chuck Robinson, the long-time executive of the telephone company ACS, Allen said. Dankworth lobbied for ACS' chief rival, GCI, and Dankworth refused Allen's pleas to switch.

"If you can't do that, Dankworth, I don't want you to be with me," Allen recalled telling his onetime friend.

Allen was born in Socorro, N.M., and left for Oregon with his family shortly after World War II, when he was 8 or 9. He missed several years of school while his family followed the fruit crops.

"We were pickers, I guess."

He quit school for good as a high school sophomore, then learned to weld, a skill that brought him to Alaska in 1968. With another oil field worker named Wayne Velti, who founded VE Construction, he worked the Cook Inlet rigs for Arco, eventually taking over the company and shortening its name. In the last few years, it had annual sales of $1 billion and 4,000 employees worldwide, about half in Alaska, he said. Last week, the company was taken over by CH2M Hill.

Find Richard Mauer at adn.com/contact/rmaue r or call 257-4345. Find Lisa Demer at adn.com/contact/ldemer or 257-4390.

ONLINE AUDIO: Listen to surveillance recordings submitted as evidence in the Pete Kott trial at adn.com/fbi 

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Houston Chronicle
September 13, 2007

http://www.chron.com/disp/story.mpl/business/energy/5130872.html

Fatal blast deeply affected ex-BP manager, jury told
By JENALIA MORENO

GALVESTON  A former plant manager of BP's Texas City refinery was "severely impacted" by the March 2005 blast that killed 15 and injured scores more, his former boss testified Wednesday.

That was one of the reasons Don Parus was ordered to take a leave of absence two months later, Pat Gower, BP's vice president of refining for the U.S. region, told jurors.

"I was worried about Don's ability to run the site," Gower said.

Four contract workers are suing BP for emotional distress, hearing loss and other ailments. BP counters that the workers are trying to win a big payoff for minor injuries that didn't affect their lives.

Parus spent four emotional days on the stand, fighting back tears Tuesday as he recalled his arrival to the blast site.

"At the time, we were trying to account for all the people. We had found 14. Sometime after that, we found the 15th," Parus testified. He was not on the stand Wednesday.

Parus, Gower and two other senior executives were targeted to be fired in an internal BP investigation of the explosion. One of the four retired, while Parus, Gower and another remain on the payroll.

When asked about his being investigated, Gower said: "We killed 15 people. I think the company should look at everybody in management."

An executive with 31 years in refining, Gower said Wednesday when he worked at the Texas City plant in the 1980s he was "satisfied with the condition of the plant."

Brent Coon, the attorney representing the four plaintiffs, is expected to continue his questioning of Gower today when the trial resumes at 1 p.m. Court is starting later to give Tropical Storm Humberto time to clear out of the area.

jenalia.moreno@chron.com

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Anchorage Daily News
September 12, 2007

http://www.adn.com/money/industries/oil/story/9296145p-9210872c.html

BP claims four North Slope fires in about a month are unrelated
STATE INVESTIGATING: Officials are concerned that a pattern is developing.
By WESLEY LOY
wloy@adn.com
Published: September 12, 2007
Last Modified: September 12, 2007 at 01:21 PM

Four fires have broken out in BP-run oil fields in just over a month, and state officials said Tuesday they are launching a comprehensive investigation.

No one was injured in any of the fires, and oil production losses were negligible. A BP spokesman called the blazes isolated and unrelated incidents.

But in a press conference staged on short notice Tuesday in Gov. Sarah Palin's Anchorage office, top state officials said they're troubled by the string of fires.

"If you had four fires in a row in your house or your business -- and I come from the business world -- I get concerned about a pattern and you look into it," said Tom Irwin, the state's natural resources commissioner.

London-based BP runs Prudhoe Bay, the nation's largest oil field, and several neighboring fields. Since early 2006 the company has come under intense scrutiny from Congress, regulators and others because of corrosion-related pipeline leaks and lax maintenance.

Chuck Hamel, a Virginia resident and frequent critic of BP as well as state regulators, was stoking the fires issue Tuesday, sending a letter to U.S. Rep. George Miller, a California Democrat and chairman of the House Education and Labor Committee, charging "safety conditions have drastically deteriorated" at Prudhoe.

NORTH SLOPE BLAZES

Two of the four fires occurred inside plants within Prudhoe. Another happened in the Lisburne field to the north, and the fourth was in the small Badami field to the east.

The most recent came Monday afternoon at Lisburne, where company firefighters rushed to an oil fire in an outdoor pit near the field's main production plant.

BP spokesman Daren Beaudo said workers were cleaning a major pipeline with a tool called a pig when a surge of oil mixed with natural gas and water came through.

The surge was too much for a holding tank, so the liquid was diverted to a flare -- basically a long pipe with a constantly burning flame, like a pilot light, on the end.

The flare ignited the liquid, some of which dropped into a pit below and continued burning, Beaudo said.

The flare is designed to carry dangerous excess hydrocarbons hundreds of yards away from the production plant and burn them off harmlessly, and that's what happened in this case, he said.

He said firefighters snuffed the pit fire in five minutes or so.

"At the end of the day, everything worked as designed," Beaudo said. "Nobody was injured and there was no impact to the operation."

Another fire on Aug. 6 in the Prudhoe Bay field also resulted in no injuries, but it was a close call for one worker.

Lubricating oil from a ruptured hose sprayed onto a hot, gas-fired turbine inside a processing plant called Gathering Center 1, Beaudo said.

A worker inspecting the turbine, which has a safety enclosure, saw the blaze and ran.

He radioed other workers to activate a fire suppression system, which dumped a chemical called halon to smother the blaze.

Normally the fire suppression system would work automatically. But it had been partially switched off because workers were inspecting pipes for corrosion using X-rays, which could trigger false alarms, BP spokesmen said.

As for the other two fires, a lube oil leak also caused a turbine fire in a different Prudhoe plant on Aug. 26. And on Aug. 10, a small fire broke out in a diesel generator that malfunctioned in the Badami field.

STATE HAS QUESTIONS

Irwin said state officials would meet with top BP executives to talk about the fires and whether BP has problems with its operating procedures.

The state's new Petroleum Systems Integrity Office, created in the wake of BP's Prudhoe pipeline leaks last year, is helping investigate the fires.

Dave Tyler, state fire marshal, said fires in the North Slope oil fields are uncommon, though not unheard of.

"Four in a month caught our attention," he said.

Tyler noted, however, that the oil fields have extensive systems for preventing or controlling fires, and they worked well during the recent string to keep damage to a minimum.

He said BP has received no fire-related fines or violation notices since he became fire marshal in April.

BP's Beaudo said the company and its workers are well-equipped and trained to handle fires.

"These are isolated, distinct events and not part of a pattern," Beaudo said.

The company is investigating each fire, and "we look forward to meeting with the administration to discuss its concerns," BP said in a written statement issued after the Anchorage press conference.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

A look at the four fires

Monday, Lisburne field

Oil from a pipeline that was being cleaned was ignited by a natural gas flare and spilled into an outdoor pit. Firefighters put it out.

Aug. 26, Prudhoe Bay field

Lubricating oil sprayed onto a hot turbine and caught fire at Flow Station 3. A worker put it out with a fire extinguisher.

Aug. 10, Badami field

A small fire broke out in a diesel generator.

Aug. 6, Prudhoe Bay field

Lubricating oil from a ruptured hose hit a turbine and caught fire at Gathering Center 1. Workers activated a fire suppression system that had been switched off for maintenance.

Source: BP

A look at the four fires

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http://www.adn.com/front/story/9297385p-9212215c.html

Shell may disband Alaska drilling fleet in wake of ruling
By WESLEY LOY
wloy@adn.com
Published: September 12, 2007
Last Modified: September 12, 2007 at 04:13 PM

Shell will start releasing contract workers and soon could disband its offshore drilling fleet due to a federal court order blocking the oil company’s plans to drill exploratory wells this fall in the Beaufort Sea.

The retrenchment does not mean Shell is abandoning its drilling goals, Shell spokesman Curtis Smith said today.

The Dutch energy giant is moving ahead with offshore seismic testing in the Beaufort as well as the Chukchi Sea, he said.

“This is just the first year in a multiyear exploratory program,” he said. “Shell is committed to Alaska.”

Several organizations including the North Slope Borough, the Alaska Eskimo Whaling Commission and environmental groups on Aug. 15 won an indefinite ban on drilling from the 9th U.S. Circuit Court of Appeals in San Francisco. The groups is arguing industrial noise and potential spills could hurt migratory whales and the Beaufort Sea ecosystem.

The court order idled Shell’s two drilling ships, one anchored at Dutch Harbor and another in western Canada, and now the company will begin a “staged release of contract personnel” as no drilling appears likely this year.

For its $200 million exploration program, Shell had recruited and trained more than 700 people, including 350 Alaskans, Smith said.

The people generally are employed by contractors Shell hired. Smith said he couldn’t specify how many would be let go.

Many of the jobs affected are associated with the drill ship Frontier Discoverer, now anchored at Dutch Harbor along with five support vessels including icebreakers, Smith said.

The Discoverer, under long-term contract to Shell, likely will sail away soon to another drilling job elsewhere in the world, he said.

Shell has asked the San Francisco court to lift its no-drilling order, and if that happens quickly, the company could reactivate the Frontier Discoverer or use its other drill ship, the Kulluk, to probe its Sivulliq prospect, thought to hold hundreds of millions of barrels of oil.

The prospect is west of the Arctic National Wildlife Refuge about 16 miles offshore.

The seismic testing involves a different set of ships, including the Gilivar, a seismic vessel operated by Shell contractor WesternGeco. Several support boats will carry people and equipment to observe and listen for whales and other marine mammals, Smith said. Aircraft also will be used.

“Shell regrets it must take this action,” the company said of the job cuts. The company said talks are “ongoing” with North Slope residents who question the effects of drilling on subsistence whale hunts.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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http://www.adn.com/news/alaska/crime/story/9296169p-9210891c.html

Grand jury indicts Wade for fraud and identity theft
NO BAIL: He remains a ''person of interest'' in Schloss' disappearance.

By JULIA O'MALLEY
jomalley@adn.com
Published: September 12, 2007
Last Modified: September 12, 2007 at 02:59 AM

A federal grand jury indicted Joshua Wade Tuesday afternoon on bank fraud and identity theft charges, accusing him of using an ATM card to take money from the account of Mindy Schloss, who vanished in early August and is presumed dead.

Wade is a police "person of interest" in Schloss' disappearance and death but he has not been charged with that.

The grand jury charged Wade with two counts of financial institution fraud, one count of fraud with an access device, and a count of aggravated identity theft.

In a hearing earlier Tuesday, federal magistrate Matthew Jamin ordered Wade held without bail pending trial.

Jamin rejected a defense argument to release Wade to a third-party custodian. He found the prosecution's concern that Wade would flee if he were released persuasive. Wade has a history of missing hearings, Jamin said.

While police were looking for him in connection with the ATM thefts, Wade hid at a friend's house and said he planned to run away to the Mat-Su area, according to testimony offered at the two-day court hearing.

Assistant U.S. attorney Thomas Bradley argued that Wade is also a danger to the community. He was acquitted of killing a woman in 2000. He served time for evidence tampering in connection with that crime. He also has a history of domestic violence.

The case is not a simple bank fraud, Bradley said.

"Mindy Schloss has been missing for over a month now," he said.

Defense attorney Mary Geddes argued that Wade could be released to a third-party custodian if one came forward. Though there has been speculation in the media that he is involved with Schloss' disappearance, prosecutors didn't present any evidence he is dangerous, she said.

To support the fraud accusations, assistant U.S. attorney Crandon Randell introduced still photos from cameras at two Anchorage ATM machines taken Aug. 5 and Aug. 6, days after Schloss vanished. In them, a man the FBI says is Wade withdraws money from her account. The man wears a quilted jacket, a gray backpack, a striped baseball cap and a bandana pulled up over his face or around his neck.

Clothing matching that was found at Wade's house. An ATM receipt from Schloss' bank account was found in the jacket pocket.

Wade will be held by U.S. marshals at the Anchorage jail, Bradley said.

Find Julia O'Malley online at adn.com/contact/jomalley or call 257-4591.

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Houston Chronicle
September 12, 2007

http://www.chron.com/disp/story.mpl/business/energy/5127531.html

Suggestions for flare at BP plant date to 1977
Reports, e-mail revealed at trial detail managers' requests
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  Plant managers, both before and after BP acquired the Texas City refinery in 1998, thought a flare to burn off excess flammable vapors should have been added to a unit involved in the deadly March 2005 blast.

That's according to internal reports and e-mails presented Tuesday to jurors hearing the first civil trial in the blast that killed 15 and injured scores more.

Investigators with the U.S. Chemical Safety and Hazard Investigation Board have said that such a flare could have prevented the explosion.

On Tuesday, jurors saw memorandums and e-mails dating back to 1977, 1985 and 1994  when Amoco owned the plant  and in 1999 and later, after BP acquired Amoco.

The documents chronicled management suggestions of adding a flare to a unit that boosts octane in gasoline so excess liquids and vapors otherwise released into the air from a blowdown stack would be routed to the flare and burned off.

But nothing came of those suggestions. The explosion happened when the stack overfilled with flammable hydrocarbons that vented and ignited.

"These were all warning signs that indicated there was a problem?" plaintiff's lawyer Brent Coon asked former Texas City plant manager Don Parus in his fourth and last day on the witness stand.

"Put together, it is a series of signs, yes," Parus replied, having noted he was unaware of such assessments of the state of the plant.

Planned for 2009
Coon also displayed an undated 10-year plan of capital projects that suggested installing a blowdown system and vent to a flare in 2009 for $5.5 million. That cost was more than double the $2.4 million price tag in a similar internal Amoco document from the mid-1990s.

"What would have happened if this had been done?" Coon asked.

"The event would have been different," Parus replied, not going so far as to say deaths or injuries would have been prevented.

Today Coon intends to question Parus' former boss, Pat Gower. Both are among four senior executives targeted to be fired by an internal BP investigation into the blast that was completed in February. One of the four retired last year, while Parus, Gower and another remain on the payroll.

Parus, who has been on paid leave since May 2005, was concerned enough about the plant's safety culture that he commissioned a survey of workers in late 2004 that elicited highly critical assessments.

In the weeks before the blast, he and other site managers were conducting meetings to discuss the results and plan improvements. That effort wasn't fast enough to make an impact, and Parus didn't shut down any units for further evaluation.

Recalling the scene
Earlier Tuesday, Parus, a father of six, fought back tears as he recalled his arrival to the grim scene of the explosion a few hours after it sent tremors felt as far as five miles away.

"At the time, we were trying to account for all the people. We had found 14. Sometime after that, we found the 15th," Parus told jurors between sips of water.

Parus said he did not know any of the contractors who died. But he met some of their families at "three or four" funerals he attended after checking with them first on whether he would be welcome. Other managers did the same for most other funerals.

Within three hours of the explosion, Patricia Wright, a top public relations executive for BP, sent an e-mail to BP executives in the U.S. and London that noted Parus was giving a statement to the media and that more coverage of the tragedy was expected the next day.

"Then I believe it will essentially go away due to the holiday weekend," Wright wrote, referring to Easter Sunday.

Parus didn't receive the e-mail.

"I recall attending a funeral service on Easter Sunday, sir," he told Coon.

Jurors saw another e-mail sent by John Manzoni, then head of BP's refining division, to another executive four days after the explosion. It noted how Manzoni spent a day in Texas City with then-BP CEO John Browne "at the cost of a precious day of my leave."

Coon asked if Parus knew Manzoni had interrupted a Colorado ski vacation to go to Texas City. Parus said he did not, and he read about Manzoni's comment in the e-mail when it was reported in a newspaper.

BP lawyer Ronnie Krist sought to prevent jurors from seeing those e-mails, noting they were presented "to create bias" and had nothing to do with the cases involving four plaintiffs Coon represents in the trial. State District Judge Susan Criss ruled jurors could see them.

Manzoni resigned from BP earlier this year to become CEO of Calgary, Alberta-based oil and gas producer Talisman Energy.

Put on leave
Parus said he learned six weeks after the blast that he was being put on leave to help with investigations into the disaster, but he did not participate in the internal probe.

He said he still doesn't know if he'll return to work, and BP lawyer James Galbraith gave him no clues during brief questioning Tuesday.

When Galbraith asked about his feelings regarding the state of the plant at that time, Parus said with finality, "I've never been able to get past 1:18 in the afternoon that day, sir. My clock's kind of stuck there now."

kristen.hays@chron.com

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Wall Street Journal
September 12, 2007

Alaska Oficials Want BP To Explain Recent North Slope Fires
DOW JONES NEWSWIRES
September 11, 2007 10:36 p.m.

NEW YORK (AP)--Alaska officials said Tuesday that BP PLC (BP) must address the causes of four recent North Slope oil production facility fires, reprising concerns about maintenance that led to last year's partial shut down of Prudhoe Bay, the nation's largest oil field.

Gov. Sarah Palin called the fires - all within the last 34 days and at different fields and facilities - "above and beyond anything that is acceptable."

The most recent fire occurred Monday, said Resources Commissioner Tom Irwin. There were no injuries, but the extent of damage was not immediately known.

"Their history recently hasn't been too good," Irwin said. "We want to have answers to these questions as to what's going on in the North Slope."

Meanwhile, two investigators from the newly formed Petroleum Systems Integrity Office are en route to the North Slope to investigate, said coordinator Jonne Slemons.

"It becomes a bit more urgent that it's happening over and over again," Slemons said. "It does bring to mind the question: Is there a broad cause-and-effect situation going on here?"

The state fire marshal's office also was investigating.

BP spokesman Steve Rinehart said the fires do not reflect a systemic problem.

"These are distinct events and not part of any kind of a pattern," Rinehart said. "We have a big operation and fires are regrettable, but they do happen in oil fields.

"We are prepared for them," Rinehart said. "We have a very sophisticated, multilayered safety system in place."

Slemons said the administration hopes to meet with BP officials, including BP Exploration Alaska Inc. President Doug Suttles and Technical Director Tony Brock, within the next few days.

Rinehart said while the notice is short, the company routinely tries to accommodate such requests.

BP has been beset with problems in North America for nearly two years.

An explosion in 2005 at BP's Texas City refinery killed 15 people and injured more than 170 others. An internal report by London-based BP this year said there was a culture at the plant that seemed to ignore risk, tolerated noncompliance and accepted incompetence.

In March 2006, more than 200,000 gallons of oil leaked at Alaska's Prudhoe Bay field due to corrosion.

Five months later, after another leak, BP partially shut down the nation's largest oil field, which it operates on behalf of itself, ConocoPhillips (COP) and Exxon Mobil Corp. (XOM).

BP is currently replacing 16 miles of corroded pipeline. It plans to have the work done by the end of next year at a cost of about $250 million.

Prudhoe Bay is responsible for nearly half of the North Slope 800,000 barrel per day production, or about 8% of the nation's daily output.

Slemons said BP has been cooperative and open through its recent problems, and the state isn't pursuing fines.

"BP's response to contain the fires has been quick," she said. "We are much more interested in the overall operating process and management process that have led us to the point."

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BP Official: Texas Refinery Upgrades May Have Prevented Blast
DOW JONES NEWSWIRES
September 12, 2007 3:47 p.m.

 GALVESTON, Texas (AP)--Upgrading technology and replacing equipment could have minimized or even prevented the deadly 2005 explosion at BP PLC's (BP) Texas City refinery, a company official testified Wednesday in a lawsuit filed by workers injured in the blast.

As the first civil trial stemming from the explosion resumed Wednesday, jurors saw a videotaped deposition in which Paul Maslin, BP's technology vice president for refining, talked about how safety could have been improved.

He said much of the computer technology in Texas City was from the 1980s and needed to be updated. He also the refinery should have had technology that could have automatically shut down systems in an emergency.

Maslin also said he disagreed with BP when, in 1999 or 2000, it called for a 25% budget cut throughout the company. At the time, Maslin was working at BP's Coryton Refinery in Essex, England.

"I said I was unable to do that at Coryton. I did not think it was a sensible, safe thing to do," said Coryton, who added he was essentially demoted after he spoke up.

Pat Gower, BP's U.S. refining vice president, was set to testify Wednesday afternoon.

On Tuesday, Don Parus, the refinery's former manager, in his fourth and final day on the stand, was grilled by an attorney for four workers suing BP for injuries they attribute to the blast. Attorney Brent Coon asked him about concerns going back 30 years that related to equipment involved in the accident.

The explosion at the plant, located about 40 miles southeast of Houston, occurred after a piece of equipment called a blowdown drum overfilled with highly flammable liquid hydrocarbons.

The excess liquid and vapor hydrocarbons were then vented from the drum and ignited as the isomerization unit - a device that boosts the octane in gasoline - started up. Alarms and gauges that were supposed to warn of the overfilled equipment didn't work properly.

The blast killed 15 people and injured more than 170 others.

A federal agency has since recommended blowdown drums be eliminated from all U.S. refineries in favor of safer alternatives such as flare systems, which can burn off releases.

Coon showed jurors a memo from 1977 that said Amoco, the owner of the Texas City plant at the time, would no longer permit new blowdown drums that vented directly to the atmosphere, and that existing drums would be connected to a flare system. Amoco merged with BP in 1998.

"I'm not sure what the company knew after the merger," said Parus when asked if BP knew of these concerns. Parus, hired by Amoco in 1979, stayed on when BP took over. He is now on paid administrative leave.

An April 2005 BP email showed the isomerization unit had at least 14 incidents, such as fires and leaks, from 1981 through 2005.

Coon showed jurors records from Amoco and BP that indicated the blowdown drum was in bad condition or needed repairs in 1977, '81, '85 and '90. In 1997, the blowdown drum was replaced, but six years later inspectors found the drum's internal condition was "so bad" that inspectors looking at it feared for their lives, Coon said.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that probed the accident, found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the explosion.

An internal report by London-based BP released in May said there was a culture at the plant that seemed to ignore risk, tolerated noncompliance and accepted incompetence.

The trial, which began last week, could last up to two months.

About 1,350 of the thousands of lawsuits filed since the accident have been settled.

The blast has cost the company at least $2 billion in compensation payouts, repairs and lost profit.
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Houston Chronicle
September 11, 2007

http://www.chron.com/disp/story.mpl/front/5124355.html

BP manager's efforts receive some sympathy
Plaintiffs' lawyer tries to portray him as concerned but 'an ostrich' on safety
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  The first BP Texas City refining executive to testify before a jury in a trial stemming from the deadly March 2005 explosion has been portrayed as both a concerned manager trying in vain to alert higher-ups to potential safety hazards and a company man who didn't do enough.

Don Parus, 52, on Monday finished his third day answering questions from Brent Coon, who represents four plaintiffs suing BP for emotional distress, hearing loss and other ailments in the first bundle of cases to go to trial since the blast.

Lawyers for the company that put the former Texas City refinery manager on paid leave six weeks after the blast killed 15 people have yet to question him.

At times, Coon has appeared sympathetic, drawing out Parus' efforts to improve safety upon assuming refinery manager duties in 2004, a year in which three workers died. Parus did some digging and found out 22 people had died at the plant in 30 years  a 23rd death came later  and commissioned a survey of workers to assess the safety culture.

Other times, including Monday, Coon sought to illustrate that Parus fell short of curing a sick safety culture and didn't familiarize himself enough with company policies to know that a flimsy trailer in which the 15 people died was too close to the unit that exploded.

"Do you see yourself as being an ostrich, sir?" Coon later asked.

"I don't know what you mean by that, sir," Parus replied.

His testimony is slated to continue today.

Safety survey
The plaintiffs contend that BP put profits over safety by shrinking budgets for maintenance, repairs, upgrades and training for years before the blast, laying the foundation of a preventable tragedy.

BP, which has settled at least 1,350 of about 3,000 blast-related lawsuits, counters that the four plaintiffs are trying to squeeze a big payoff for minor injuries that didn't interrupt their jobs or lives.

The 2004 safety survey elicited harsh responses from workers resigned to a lax safety culture, including, "we do not reward people for intervening and being responsible for safety. We reward production and cost-reduction."

Parus called such comments "painful," but said they became a catalyst for safety improvements.

The survey results were given in January 2005 to refinery leadership, which held off-site meetings to develop a plan to address the concerns. That effort was under way when the blast occurred.

Parus also testified Monday that even though BP had cut budgets at the plant in the years before the blast, and rejected his year-end 2004 request for more money for improvements, that doesn't mean necessary repairs and replacements didn't happen.

He said a budget is a plan that can be changed. In early 2005, the Texas City plant was "tens of millions of dollars over budget" because unexpected issues arose during "turnarounds," or planned unit shutdowns for repairs and maintenance.

He didn't order any unit shutdowns other than those already scheduled. All refineries have planned turnarounds of various units for maintenance and repairs.

The U.S. Chemical Safety and Hazard Investigation Board concluded after a two-year investigation that the budget in the years before the blast at the plant paved the way for the blast. BP disputes that assertion, saying the company has found no link between cost cuts and the explosion.

Trailers too close
Parus said BP failed to recognize the risk of placing portable trailers too close to an octane-boosting unit in its Texas City refinery.

The 15 contractors who died were in a trailer 121 feet away from that unit where the explosion originated. But he also acknowledged he was unaware of a company policy that prohibited trailers from being closer than 300 feet to processing units.

"Post incident has a different flavor to this," Parus said. "It's hugely different. Before March 23, I didn't get involved in policy, I left that to the organization. I relied on my organization for that. I did not read and fully understand the whole policy around trailer siting."

BP removed 200 trailers from the refinery after the blast and placed 800 workers who used them off-site.

The company also formulated a policy in December 2005 that specified safe distances, such as 500 feet from a vent stack used for hydrocarbons or 330 feet from any elevated main flare used to relieve pressure.

Last June, the American Petroleum Institute, which is the oil industry's trade group and cannot enforce its suggested standards, issued new distance guidelines.

It suggests that companies conduct detailed blast analyses for anything closer than 1,930 feet, and allows some to be closer, depending on the size of the processing unit.

Coon didn't bring up BP's post-blast action regarding trailers or the new API standard.

Returning to work?
Also Monday, Parus told jurors he has little hope of returning to work, given what he called the company's "minimal" communication with him since he was put on leave with an annual salary of $279,000.

He didn't learn of an internal investigation, which targeted him and four other senior executives to be fired for failing in their management duties, until it was reported in the media earlier this year.

However, Parus said the report, led by BP group vice president Wilhelm Bonse-Geuking, was "incomplete" because the probe focused on managers and executives employed by the company and the plant at the time of the explosion, rather than those who made cost-cutting decisions that affected equipment integrity and training in the years before the blast.

"It looked only at people who were on the ground at the moment," Parus said of the report.

BP didn't fire anyone targeted in the report. One retired last year, while the other three, including Parus, remain employed. Coon said Monday that some of those and Bonse-Geuking himself are expected to testify in the coming days, either live or by videotape.

kristen.hays@chron.com

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Anchorage Daily News
September 11, 2007

http://www.adn.com/news/politics/fbi/kott/story/9294506p-9208246c.html

Bribery trial features Kott's telephone calls
By LISA DEMER
ldemer@adn.com
Published: September 11, 2007
Last Modified: September 11, 2007 at 04:27 AM

In a series of secretly recorded telephone calls, former state Rep. Pete Kott joked with Veco executives about drinking and women, but assured them he was serious about one thing: getting a gas pipeline.

"I'm going to get this f-----g gas line done so I can get out of here," Kott told former Veco chief executive Bill Allen in a Jan. 10, 2006, cell phone conversation.

Testimony began Monday in Kott's public corruption trial.

Jurors heard recordings of nine telephone calls and watched one videotaped meeting between Allen and former Veco vice president Rick Smith.

In his opening statement, prosecutor Nicholas Marsh told jurors that Kott betrayed the public trust and sold his legislative office to oil field services company Veco. In return for money and job promises, he pushed an oil tax favored by the industry.

Kott even says on one of the tapes, "I sold my soul to the devil," Marsh said.

Kott's own words will be used against him, Marsh said. It's the same tactic prosecutors used to convict former Rep. Tom Anderson in July of seven federal corruption charges.

But the defense told jurors the government twisted the facts. Kott was just a blue collar Republican working hard to get what most Alaskans wanted, a gas pipeline, said Jim Wendt, one of Kott's defense lawyers.

There's nothing illegal about working with lobbyists or others toward a shared goal, and that's all Kott was doing, Wendt said. "If he is guilty of anything, he is guilty of working to get a pipeline."

Marsh warned jurors they would hear "downright offensive" language. But Wendt said it was just "down-to-earth talk."

An FBI agent from Cincinnati, Steve Dunphy, who monitored and recorded some of the action in Suite 604 of Juneau's Baranof hotel, testified all afternoon about various recordings. Dunphy said he volunteered after a request for help with the Alaska investigation went out agencywide.

The listening began with a wiretap on Smith's cell phone in September 2005 and branched out from there to wiretaps on Allen's cell and home phones, and then the bug planted in the Baranof suite, Dunphy testified.

In various phone calls played for the jury, Kott's familiarity with Allen and Smith is remarkable. He calls them Uncle Bill and Uncle Rick. He sounds tipsy at times. Several times, Kott brings up the idea of working as warden at a prison in Barbados that Veco was building.

"I just wanna be a warden," Kott tells Smith in a Sept. 29, 2005, telephone call.

Wendt told jurors in his opening statement that the Barbados prison gig was a running joke with Kott, that he had heard about topless women on beaches there. But Marsh told jurors that even if Kott was kidding about the warden's post, he clearly wanted a job with Veco when his work in the Legislature was done.

As the 2006 legislative session got under way, Kott fretted to Allen on the phone that things weren't going well and Allen needed to get to Juneau.

Allen made it clear that he thought little of House Speaker John Harris, who won the post in 2005 after Kott was ousted in an internal coup.

"About the only ones that I can trust is you and ol' Ben Stevens," Allen tells Kott in a Jan. 10, 2006 call. Stevens is the former state Senate president. He hasn't been charged.

In one lengthy call between Allen and Smith on Feb. 20, 2006, Allen goes on a tirade about Veco's new young lobbyist, Kris Knauss. Allen was angry that Knauss was using Allen's own well-cultivated influence with Kott as if it were his own, turning it to his advantage with Gov. Frank Murkowski's chief of staff, Jim Clark.

"Well f---. I put more money into Pete Kott than he's ever even thought about," Allen sputtered at one point.

In a March 4, 2006, videotaped conversation in Suite 604, Allen and Smith said they would do whatever they needed to get the pipeline and an oil tax favored by the industry through the Legislature. Smith said they may need to "get dirty."

The room is dimly lit and it's hard to make out their faces. But their voices are clear.

"They got dirty and they crossed the line," Marsh told jurors.

Later in the conversation -- in a part not played in court but discussed by lawyers and the judge -- the topic turned to a faltering effort at the time to sell Veco to an Australian firm. Allen was upset because former Veco president Pete Leathard had apparently boasted to the Australians that Veco was in the business of bribing state legislators.

U.S. District Judge John Sedwick agreed with prosecutors that only a portion of the conversation needed to be played for jurors.

In the same conversation, Allen told Smith that Veco's clients need to know what it's doing in Juneau to pressure legislators. He refers to "the big wheels" with BP and Exxon and more.

The case against Kott is the first to go to trial involving Veco, a company that was hugely influential in Juneau for many years. Allen and Smith have both pleaded guilty to bribery and other charges and resigned their positions with Veco.

As of Friday, Veco no longer exists. It's been sold to the Colorado-based engineering firm CH2M Hill.

Kott, a former house speaker from Eagle River who served 14 years in the Legislature, is being tried on charges of bribery, conspiracy, extortion and wire fraud.

Several dozen people gathered in the federal courtroom for opening statements, including defense lawyers, prosecutors, FBI agents and news reporters, but the crowd cleared out by the afternoon. Whistleblower Ray Metcalfe stayed.

Marsh told jurors that Kott, who ran a hardwood flooring business, is accused of accepting money or things of value three times from Veco executives, plus the promise of a job. The specific accusations, as laid out by Marsh:

• Kott, in need of cash during his 2006 campaign, sent Allen a fake bill for an extra $7,993 in flooring work.

• Veco paid $2,750 for a political poll by David Dittman to see how Kott was faring with voters during the campaign. Kott lost in the primary.

• Kott accepted $1,000 from Allen to reimburse Kott for a contribution he made to then-Gov. Frank Murkowski's re-election bid.

All of that is misconstrued or overblown, Wendt told jurors. Kott received no personal benefit from any of it, the defense lawyer said. He didn't even know about the poll beforehand.

The only thing Kott did wrong was accept the $1,000, but that was just to reimburse him for the contribution, Wendt said.

Find Lisa Demer online at adn.com/contact/ldemer  or call 257-4390.

The Alaska political corruption investigation

The trial of former Eagle River Rep. Pete Kott is part of a broad investigation into public corruption focused on state and federal officials, lobbyists and others. The investigation is being led by the FBI and Department of Justice and has resulted in charges against four former state legislators, two former executives of the Veco Corp., and a lobbyist for a private prison company.

Kott is charged with bribery, conspiracy, extortion and wire fraud for taking money and the promise of a job from Veco executives for supporting an oil tax measure favored by the petroleum industry.
 

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Wall Street Journal
September 11, 2007

2nd UPDATE:
BP Plant Repairs Not Swayed By Pft Concerns-Ex-Mgr
DOW JONES NEWSWIRES
September 10, 2007 6:58 p.m.
 (Updates with testimony from plant manager about trailers at refinery)

 GALVESTON, Texas (AP)--The former manager of BP PLC's (BP.LN) Texas City plant where 15 people were killed in a 2005 explosion denied in testimony Monday that repairs were delayed because of concerns over how profits would be affected.

"The production of profits did not control our schedule," Don Parus said during the first civil trial stemming from a blast that also injured more than 170 people.

Brent Coon, an attorney for four workers suing for injuries they attribute to the blast, tried to portray Parus' comments as a contrast to comments by workers interviewed for a study two months before the blast. The study, called the Telos Report, told of various safety problems at the plant.

On a large projection screen, Coon displayed sections of the report with quotes from employees who said production and cost reductions were rewarded at the refinery, not safety.

Other comments in the report included:

- The equipment is in dangerous condition and this is not taken seriously.

- We are not using our money to protect ourselves from catastrophe.

- They want us to be safe but I don't feel like they are truly into safety.

"Most interviewees at production level say that the pressure for production, time pressure, and understaffing are the major causes of accidents at Texas City," one section of the report concluded.

The explosion at the plant, located about 40 miles southeast of Houston, occurred after a piece of equipment called a blowdown drum overfilled with highly flammable liquid hydrocarbons.

The excess liquid and vapor hydrocarbons were then vented from the drum and ignited as the isomerization unit - a device that boosts the octane in gasoline - started up. Alarms and gauges that were supposed to warn of the overfilled equipment did not work properly.

Parus was asked by Coon if he agreed with a description of the isomerization unit as "a piece of junk" that should have been repaired.

When Parus refused to describe the unit this way, Coon tried to compare him to an ostrich, asking him if he had his head stuck in the sand the last 2 1/2 years.

Parus, who is on paid administrative leave, said he was surprised by many employee comments in the Telos Report, which he had requested. But he said many of the comments in the report were workers' opinions of what they saw at the refinery.

"It's what the people perceive to be real. We can argue what perception and reality are," he said.

Parus, in his third day of testimony, also denied that budget concerns would prevent him from fixing units if they were seriously in disrepair. He added that he once went $20 million over budget to pay for unscheduled maintenance.

"If you find something that needs to be fixed, you fix it," he said. "The budget doesn't control me."

Parus also said that before the accident, BP did not recognize the risk of placing trailers around the isomerization unit. All 15 deaths in the blast happened in the two trailers closest to the blast site. Since the explosion, BP has removed all temporary structures from the refinery.

Parus was set to resume testifying Tuesday.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that probed the accident, found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the explosion.

An internal report by BP released in May said there was a culture at the plant that seemed to ignore risk, tolerated noncompliance and accepted incompetence.

A fifth lawsuit that was also set to be tried, filed by the estate of a contract worker whose suicide was attributed to trauma from the accident, was settled just before the trial began last week. The trial could last up to two months.

About 1,350 of the thousands of lawsuits filed since the accident have been settled.

The blast has cost the company at least $2 billion in compensation payouts, repairs and lost profit.

Xxx

US Lawmakers Ask BP Not To Drill In Canadian Flathead Basin
DOW JONES NEWSWIRES
September 10, 2007 8:51 p.m.

BILLINGS, Montana (AP)--A pair of U.S. senators urged executives from the energy company BP PLC (BP) not to drill for natural gas on the Canadian side of the Flathead River basin, out of concerns that polluted water could flow into Montana.

Max Baucus and Jon Tester, both Montana Democrats, met separately with a group of executives that included BP America President Bob Malone and BP Canada President Randy McLeod.

BP plans to seek a permit next year in southern British Columbia to drill up to six exploratory wells in a region that abuts the Montana border. The company hopes to extract coal-bed methane, a type of natural gas, from the Crowsnest Coal Field, a 190-square mile (492.1-sq. kilometer) area that includes rivers draining into the U.S.

The two senators said the development could put at risk waters flowing into Glacier National Park and other parts of northwest Montana. Large volumes of poor-quality water are discharged during coal-bed methane extraction.

"I made very clear to them that we're just not going to let this happen," Baucus said following the meeting. "They said they would do nothing to potentially threaten the basin for 10 years. I don't care if it's one year or a hundred years, we don't want it."

Baucus also said he asked the company to seek an independent environmental review of the project.

BP spokeswoman Anita Perry said the exploratory wells would not be in the Flathead basin but in the neighboring Elk River Valley. She declined to comment on the outcome of Monday's meeting, saying she had not yet spoken to the executives involved.

"Whether we go into the Flathead or not, we need to have some more collection of information on the hydrology, the fish habitat, those type of things," Perry said. "We need to take this one step at a time."
 

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Anchorage Daily News
September 9, 2007

http://www.adn.com/money/industries/oil/story/9289810p-9204273c.html

Vibration hits pipeline at rebuilt pump station
CRIBBING: Wooden blocks are a temporary fix, Alyeska says.
By WESLEY LOY
wloy@adn.com
Published: September 9, 2007
Last Modified: September 9, 2007 at 04:02 AM

The operator of the trans-Alaska oil pipeline is trying to figure out how to tame potentially dangerous vibration in a newly rebuilt pump station south of Delta Junction.

As a temporary measure, workers have wedged blocks of wood underneath shaky piping to add extra stiffness.

The use of wood supports might seem like a pretty crude technique for the pipeline, considered an engineering marvel and a vital asset for the nation's energy security.

But a spokesman for Alyeska Pipeline Service Co., the oil company consortium that runs the line, said wooden supports -- known as cribbing -- are commonplace in the industry. And he stressed the piping is safe to operate even without the cribbing.

The vibration is one of a host of nagging problems that have plagued Alyeska's campaign to rebuild four key pump stations along the 800-mile pipeline, which began moving Prudhoe Bay oil 30 years ago.

Alyeska began its overhaul in 2004 and aimed to finish in two years on a $250 million budget. But the project remains far from complete and costs have swollen to more than $400 million.

Chuck Hamel, a Virginia resident and longtime Alyeska critic, last month exposed problems with power failures, welding records and other issues in a letter to congressmen.

Hamel said the pipeline modernization project "is in total disarray," an assertion Alyeska as well as state Natural Resources Commissioner Tom Irwin have said is not accurate.

Pump Station 9, south of Delta Junction, is the only station where installation of new pumps, motors and controls is complete.

Alyeska began using the new equipment to pump oil in early February, and company executives have told regulators the revamped station generally has run smoothly and reliably -- enough so that Alyeska intends to mothball the old pumps next month.

But one glitch that cropped up at the pump station was vibration that, if left unchecked, could someday cause metal fatigue and ruptures in steel piping that carries hundreds of thousands of barrels of oil a day.

The vibration is not in the main, 48-inch pipe that crosses the rugged Alaska landscape to the tanker port at Valdez.

Rather, it's in newly installed piping that runs into and out of huge modules housing the pumps.

As a test to try to stop the shakes, Alyeska built rough ground supports underneath the pipes using wood blocks.

"That's a temporary fix just to try to take the vibration out," said Jerry Brossia, a top official at the Joint Pipeline Office, an Anchorage umbrella agency for federal and state regulators who oversee Alaska pipelines.

Brossia and Alyeska spokesman Mike Heatwole said the cribbing will stay in place until experts can figure out a permanent cure for the vibration, believed to be caused by oil rushing through elbows and turns in the piping.

Alyeska has hired an outside expert, structural engineer Jim Loftis of Fairbanks, to help devise a solution.

The U.S. Department of Transportation, which regulates pipelines, also has enlisted experts from the Oak Ridge National Laboratory in Tennessee, Brossia said.

Cribbing often is used to support piping in preparation for repairs or other operations, Heatwole said. For instance, after a powerful Interior earthquake in 2002, Alyeska put railroad ties underneath the pipeline for stability pending damage repairs.

According to Heatwole, the pump station and its pipes are safe to operate with or without the cribbing, which Alyeska could remove before winter depending on what permanent measures are taken.

"We're on a pretty fast track to get this taken care of," he said.

Four companies own Alyeska and the pipeline: BP with a 47 percent share, Conoco Phillips with 28 percent, Exxon Mobil with 20 percent, and Chevron and Koch Industries with the remainder.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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Petroleum News
September 8, 2007

http://www.petroleumnews.com/pntruncate/449411038.shtml

Pearce sets record straight
Federal coordinator for Alaska gas line clarifies, corrects statements quoted in press
Kay Cashman
Petroleum News

Sept. 5 news reports carried statements from Drue Pearce, the federal coordinator for Alaska gas pipeline projects, that were incorrect, Pearce's communication director Jennifer Thompson told Petroleum News Sept. 6. At the top of the list of erroneous information was Shell being identified as an Alaska North Slope producer AND an opponent of Alaska Gov. Sarah Palin's Alaska Gasline Inducement Act, neither of which is true. BP, not Shell, should have been identified in that context, Thompson said.

Passed this past spring, AGIA initiates an application process and contains specific mandates for any entity interested in constructing a gas pipeline from the North Slope to market.

Shell was mentioned by Pearce as an offshore Alaska oil and gas explorer, Thompson said, and a possible future user of an Alaska gas pipeline.

Pearce was also quoted as saying a Chinese oil company, Spain's Repsol and Canada's BG Group were three companies that have expressed interest in building an Alaska gas pipeline, which Thompson said was true, but Pearce, she said, does not have any inside information that suggests these companies are still interested. Pearce was referring to "rumors flying about in Alaska," Thompson said. "Those three are among the names she heard as potentially being interested."

Pearce has heard "Enbridge, for sure, was not applying under AGIA," Thompson said.

Canada-based pipeline companies Enbridge and TransCanada have both said publicly they would not be submitting a proposal under AGIA. Thompson said Pearce had not heard that TransCanada was out of the running and included it, MidAmerican and the Alaska Gasline Port Authority in her public statements as entities expected to submit gas line proposals to the state.

LNG, maybe to Asia

Thompson said that Pearce had heard the unnamed Chinese oil company, Repsol and BG Group, which is Anadarko's partner in the gas-prone Brooks Range Foothills, were looking at an "all-Alaska route ... an LNG project," involving a pipeline from the North Slope to a gasification terminal in Valdez. It was Pearce's understanding that "two non-compliant applications from two of the North Slope producers" and applications from MidAmerican and TransCanada were going to be for an Alaska Highway route, taking the gas to Lower 48 markets via Canada.

News reports said some of the expected gas line license applications "could allow gas to be exported to Asia." Pearce reportedly said that when Congress passed the Alaska Natural Gas Pipeline Act in 2004 to spur development of the pipeline that lawmakers intended the gas for U.S. markets, but that nothing in the act prohibited gas from being exported. (The same bill set up the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects. Pearce's title as head of this office is federal coordinator. The office hung its shingle in December 2006 when Pearce took office.)

Thompson said that statement was true  neither the federal act nor AGIA prohibits Alaska gas being shipped overseas.

Alaska Commissioner of Revenue Pat Galvin told Petroleum News that AGIA does "not reference what markets are targeted."

"The market, and potential legal restrictions to access it, will be a factor in the evaluation of likelihood of success" evaluated under AGIA, Galvin said.

One news report said that from Valdez LNG "could be transported to any regasification terminal in the world, but the primary focus would be on the Pacific Rim," noting that getting approval to build regasification LNG terminals on the U.S. West Coast has been impossible for many applicants because of local opposition.

Thompson said one thing Pearce said that did not appear in the news reports Petroleum News mentioned, was that Anadarko Petroleum planned to drill the first exploration well purposely targeting commercial quantities of natural gas this coming winter.

Applications under AGIA are due Nov. 30.

Xxxx

http://www.petroleumnews.com/pntruncate/539997478.shtml

August ANS down 9% on field maintenance
North Slope production averages 658,022 bpd for month; both Milne Point, Alpine down temporarily for planned maintenance
Kristen Nelson
For Petroleum News

Alaska North Slope crude oil production averaged 658,022 barrels per day in August, down 9.2 percent from a July average of 724,564 bpd, driven by planned maintenance at the Milne Point and Alpine fields and a partial one-day maintenance shutdown of the trans-Alaska oil pipeline.

The largest July-to-August production decline, 52.4 percent, was at the BP Exploration (Alaska)-operated Endicott field where production was curtailed through Aug. 12 due to a turnaround which began in late July. The Alaska Department of Revenue said in July that one compressor train at Endicott was expected to be out of service until the end of August, reducing production by some 13,000 bpd. Production from the field was in the 5,000-7,000 bpd range through Aug. 12, remained in the 20,000-bpd range for another week and then fluctuated between 20,000 and 50,000 bpd for the remainder of the month. Endicott averaged 21,363 bpd in August compared to a July average of 44,866 bpd.

Since corrosion issues forced shutdown of some Prudhoe Bay pipelines a year ago, production figures from Endicott have also included 33,000 bpd from Prudhoe Bay flow station 2. Revenue said in July that planned maintenance at FS 2 from July 28-Aug. 8 was expected to reduce production by approximately 33,000 bpd.

Maintenance cuts production

Revenue said there was a partial one-day planned maintenance shutdown of the trans-Alaska oil pipeline Aug. 25, with ANS flow reduced to 305,000 bpd.

BP's Milne Point field was down for planned maintenance Aug. 23, with production reduced approximately 35,000 bpd, the department said. Production at Milne averaged 26,046 bpd in August, down 31.7 percent from a July average of 38,154. Production began to fall at the field Aug. 20 and there was no production Aug. 24-28. Production began at 561 bpd Aug. 29 and had reached 20,104 bpd by Aug. 31. Milne Point field includes Schrader Bluff heavy oil production.

The ConocoPhillips Alaska-operated Alpine field also saw planned maintenance in August. Production began to drop Aug. 24 and was nominal through Aug. 28; the field was back up to 128,499 bpd by the end of the month. The August average at Alpine (which includes production from the Fiord and Nanuq satellites) was 106,045 bpd, down 13.4 percent from a July average of 122,463 bpd.

Lisburne production up

Production was down 11.3 percent at the ConocoPhillips-operated Kuparuk River field, averaging 139,691 bpd in August compared to 157,550 bpd in July. Kuparuk includes satellite production from West Sak, Tabasco, Tarn, Meltwater and Palm.
The BP-operated Northstar field averaged 37,401 bpd in August, down 2.5 percent from a July average of 38,372 bpd.

Prudhoe Bay, also operated by BP, averaged 300,308 bpd in August, down 2.3 percent from a July average of 307,382 bpd. Prudhoe Bay production includes western satellites Midnight Sun, Aurora, Polaris, Borealis and Orion.

BP-operated Lisburne had the only July-to-August production increase, averaging 27,168 bpd in August, up 11.4 percent from a July average of 15,777 bpd.

The August temperature at pump station 1 on the North Slope averaged 47.2 degrees Fahrenheit compared to a five-year average of 44.6 degrees F.

Cook Inlet crude oil production averaged 14,727 bpd in August, down 3.8 percent from a July average of 15,306 bpd.

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Anchorage Daily News
September 8, 2007

  http://www.adn.com/money/industries/oil/story/9286030p-9200500c.html

Pioneer starts drilling at Stariski
ALONG COOK INLET: Company wants to see if field still has potential.
The Associated Press
Published: September 7, 2007
Last Modified: September 8, 2007 at 02:03 AM

KENAI -- Pioneer Natural Resources Alaska Inc. wants to see if a 40-year-old oil discovery still has promise.

The Anchorage company has begun drilling an appraisal well from an onshore location near Stariski, which is along Cook Inlet.

The field, which the company says has the potential to produce 50 million barrels of oil, was discovered by Pennzoil in 1967.

The independent exploration and production company expects the drilling to last up to 70 days, plus another 60 days for testing, said Tadd Owens, Pioneer Alaska's director of government and public affairs.

"The gross resource potential is 30 million to 50 million barrels of oil," he said. "Pending the success of our appraisal well, we expect approximately 12 horizontal directional wells for development."

Only onshore drilling is being considered at this time. The tentative site development schedule calls for permitting in 2008, facility construction in 2008-2009, and development drilling in 2009 and 2010. Oil production would begin in about three years, Owens said.

Conoco Phillips drilled a well at the site in 2003. Subsequently, Pioneer became the operator and 100 percent working-interest owner of the Cosmopolitan Unit, though Conoco Phillips retains a small royalty share, Owens said.

Pioneer's drilling will involve a well off initial drilling by Conoco Phillips and will test the known reservoir of oil.

Pioneer is evaluating trucking options as well as the feasibility of building a pipeline to ship the oil.

While oil is the prime target, there will be some residual gas produced as well, which Pioneer will pump into the Kenai-Kachemak pipeline. However, the volumes won't be enough to materially affect the local gas market, Owens said.

Xxxxx

http://www.adn.com/money/story/9286088p-9200549c.html

Oil firm Veco is history
SIGN COMES DOWN: Company was linked to corruption probe.
By SEAN COCKERHAM
scockerham@adn.com
Published: September 8, 2007
Last Modified: September 8, 2007 at 01:51 AM

Colorado-based CH2M Hill on Friday took over scandal-ridden Veco Corp., the Anchorage oil field services and construction company whose former executives pleaded guilty this spring to bribing state legislators.

CH2M Hill decided not to keep the name Veco for what is now a part of the Colorado firm's energy systems group, and cranes removed Veco signs from the company's East 36th Avenue offices Friday afternoon

The former Veco businesses will generally operate under the CH2M Hill name .

"It's a new day, a new future," said CH2M Hill spokesman John Corsi.

Veco had been one of the largest companies in Alaska with about 2,000 employees in the state and a similar number in operations that span the globe.

Corsi said the purchase includes all core operations, people and projects from the former Veco. CH2M Hill said it did not have a breakdown Friday on what was not included in the sale. But Corsi described the assets left on the table as minimal.

"The short answer is essentially all the operational assets are coming, such as the North Slope, Kenai Peninsula, the fabrication shops, Calgary, Bellingham and so on," Corsi said in an e-mail. "There are some non-core businesses that aren't included. However, the last couple days have been so busy getting the deal done, I just don't have those details right now."

Corsi said the Veco assets were valued at $463 million. The final tally of the sale will come in at slightly less than that, he said.

One former Veco operation not part of the sale is the Voice of the Times, the Web site successor to the conservative half-page editorial section that appeared in the Daily News for 15 years. The site will continue as part of a holding company owned by the Allen family but hopes to become a financially self-sufficient operation, according to Voice of the Times editor Tom Brennan.

Veco's former chief executive Bill Allen and former vice president Rick Smith pleaded guilty to federal conspiracy and bribery in the ongoing political corruption investigation in Alaska. Allen, who helped build Veco starting in 1969, admitted to bribing state lawmakers for their votes or influence on legislation important to the oil industry.

Tammy Kerrigan, Allen's daughter, took over as Veco chairwoman in May after her father pleaded guilty and stepped down from his corporate posts.

"The Allen family is pleased that Veco's legacy of hard work, client service and professional excellence will continue with this acquisition," Kerrigan said in a news release. She is leaving the company. Garry Higdem, a CH2M Hill executive, will lead the former Veco.

CH2M Hill, based in the Denver suburb of Englewood, is an employee-owned company. It has about 19,000 workers engaged in engineering, construction, transportation and environmental services projects around the world. Projects include managing expansion of the Panama Canal and venue construction for the 2012 London Olympic games. The company had revenues of about $4.5 billion last year.

Corsi said buying Veco fits in with his company's strategic plan by making it a bigger global player in energy industries. He said CH2M Hill has long been interested in Veco.

"The people are great, the reputation is great, they have an outstanding track record for client service," he said.

He said CH2M Hill will keep the former Veco's operations going pretty much as they have been. There are no shake-ups in management or elsewhere in the company planned., 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 had annual revenue reaching $1 billion, according to Veco executives.

BP, which operates Prudhoe Bay, is one of Veco's major customers.

"They do a good job supporting oil production and we're looking forward to continuing our strong relationship," said Daren Beaudo, a spokesman for BP Alaska.

Corsi said Veco's existing contracts are expected to continue under CH2M Hill. That includes a contract with the National Science Foundation to provide logistics and support for polar research. The FBI is investigating the award of that contract and is looking into connections between Veco and U.S. Sen. Ted Stevens. Then-Veco chief executive Allen in 2000 oversaw renovations to Stevens' Girdwood home, the scene of a July 30 FBI raid.

Find Sean Cockerham online at adn.com/contact/scockerham

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http://www.adn.com/news/alaska/wildlife/bears/polar_bears/story/9286663p-9200531c.html

Alaska polar bears called doomed
Loss of habitat expected to decimate world population within 50 years
By TOM KIZZIA
tkizzia@adn.com
Published: September 8, 2007
Last Modified: September 8, 2007 at 03:11 AM

Polar bears will be gone from Alaska within 50 years, government scientists predicted Friday.

Shrinking sea ice will leave only a remnant surviving population of the world's polar bears in the islands of the Canadian Arctic by mid-century, according to a breathtaking new study by the U.S. Geological Survey. Two-thirds of the world's polar bears, including those along the coasts of Alaska and Russia, will have disappeared.

The loss of summer sea-ice habitat will be so profound for bear populations that regional efforts to protect them, such as restricting subsistence hunting or Arctic oil and gas development, will not be able to prevent their disappearance, the government scientists said.

Moreover, the bears' doom is irreversible, the study said. Even a dramatic effort to reduce greenhouse gas emissions would not be enough to halt the near-term warming trend and save the coastal bears. The species might manage to survive in its remnant outposts if long-term warming trends are reversed, scientists said.

"Things could be turned around so that they don't disappear completely," said Steve Amstrup, the biological study team leader for the USGS. On the other hand, Amstrup said, climate-warming models chosen for the study tended to be conservative, so the bears might disappear faster than predicted.

"As the sea ice goes, so goes the polar bear," Amstrup said.

'THREATENED' SPECIES?

The new set of USGS studies, provided to Congress Friday, were undertaken to aid Interior Secretary Dirk Kempthorne's decision whether to designate polar bears a "threatened" species under the Endangered Species Act. A decision is due by next January.

The State of Alaska, fearing consequences for subsistence hunting and oil production, has strenuously opposed a federal threatened-species listing, arguing, among other things, that bear populations have been stable and that too much uncertainty surrounds projections of global warming trends.

State Fish and Game commissioner Denby Lloyd said Friday it was too soon to analyze all the new data to see how they might affect the state's position.

The new studies were introduced in a national teleconference by USGS director Mark Myers, who knows well the potential impact of an endangered-species listing on Alaska. He was head of the state's oil and gas division under Gov. Frank Murkowski.

"The other factors are not a significant stressor to the polar bear," Myers said, responding to a question about subsistence hunting and oil development. "Loss of sea ice is the controlling factor."

ON THINNING ICE

Of the variety of stresses affecting polar bear survival, Amstrup said, 84 percent have been pegged to loss of sea ice habitat.

The picture of doom is even more dire than the one painted by environmentalists when they sued the federal government over polar bears in 2005, prompting the endangered-species review by Kempthorne.

"This is not a reason to despair or give up," said Deborah Williams, president of Alaska Conservation Solutions, an Anchorage-based organization focused on global warming. "Our generation has the ability to write a death sentence for the polar bear, or to take action to assure that the species survives."

Williams said an Endangered Species Act listing would focus new attention on greenhouse gas emissions -- especially those with a shorter life span, such as methane and soot -- and could also help protect any handful of Alaska bears trying to adapt to living on land.

The new study notes that more polar bears are likely to be seen on land as the ice melts, increasing contact with humans in the short term.

Scientists think there are 20,000 to 25,000 polar bears in the world. One-fifth or so live in Alaska and nearby on the coast of the Beaufort and Chukchi seas.

The bears are considered marine mammals because they depend on sea ice for hunting their prey: seals breathing through holes or along the edges of open-water leads.

Polar bears have been known to live as long as 30 years, Amstrup said. That means today's young bears may be part of the last generation in Alaska.

While older bears will probably scrape along, scientists expect to see cubs and young adults die off and reproduction rates decline. Already, studies have reported shrinking weight and rising mortality of cubs. There have also been reports of polar bears drowning.

In their comments Friday, Amstrup and Myers addressed several challenges raised since the U.S. Fish and Wildlife Service undertook its review last December.

BEARS WON'T SURVIVE ON LAND

Amstrup rebutted the idea that polar bears could survive by adapting to land-based hunting. He said studies have shown the bears to be very inefficient hunters of land animals, which in any case do not provide the kind of rich nutrition polar bears seek.

He said the fossil record of polar bears goes back no more than 50,000 years, meaning they would not have had to adapt in the past to any period warmer than the present. If the bears go back more than 200,000 years, however -- and there is some genetic evidence of this, Amstrup said -- then they may have found a way in the past to adapt to an even warmer spell.

Amstrup said bear population trends have sometimes been misunderstood. The numbers have trended upward since the 1960s, he said, as overhunting was stopped internationally and better data became available. But the healthy trend has now been reversed by the new and overwhelming factor of habitat loss.

Time will tell how accurate those predictions of continued warming and sea ice loss will be.

One of the new studies, looking at Beaufort Sea bear populations, examined sea ice in the years 2001-2005. If conditions remain similar to 2001-2003, relatively cold years, the bear population will grow slowly, the study said. If conditions resemble the warm years of 2004-2005, they will "decline precipitously." If conditions toggle back and forth, numbers will decline slowly.

But broadly accepted long-term projections call for the atmosphere to grow progressively warmer than it is now, researchers say. The USGS studies rejected a number of climate models, drawing from the 10 models that had proven most accurate when measured against actual shrinkage in recent years, the scientists said.

"The sea ice in 2007 already has declined below the level projected for mid-century by the four most conservative models in our ensemble," says the main USGS study.

Consensus models project a 40 percent shrinkage of summer sea ice in the Beaufort Sea by 2050 compared to the 1980s, the National Oceanic and Atmospheric Administration said this week.

By that time, the new USGS studies project, the last polar bears on earth will be hiding out in Canada's northern archipelago and along the northwest coast of Greenland.

Contact reporter Tom Kizzia at tkizzia@adn.com.

A study by the U.S. Geological Survey predicts a grim future for polar bears:

• Predicted shrinkage of polar sea ice will result in loss of roughly two-thirds of the world's polar bear populations in the next 50 years.

• Polar bears now living off Alaska coasts -- in the Chukchi and Beaufort seas -- will disappear completely.

• Curbing subsistence hunting and development in the Arctic wouldn't be enough to change the bears' fate.

• Gases already in the atmosphere will keep warming the globe, so even a halt to emissions won't save the polar bears.

U.S. Geological Survey predictions
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http://www.adn.com/opinion/compass/v-printer/story/9274522p-9189317c.html

NORTH SLOPE BOROUGH HAS CAUSE TO OPPOSE BEAUFORT DRILLING
COMPASS: Points of view from the community

EDWARD ITTA
Edward Itta is mayor of the North Slope Borough.
September 3, 2007
BARROW

In an Aug. 26 commentary, Dan Fagan urges Gov. Sarah Palin to take a difficult stance on Beaufort Sea drilling. He's really asking her to take the easiest position, and he backs it up with simplistic reasoning.

It's easy for Mr. Fagan to rage about anyone who dares to question one out of the hundreds of active development projects on the Slope -- he won't have to live here with the consequences. His culture is not fundamentally tied to the health of local wildlife species, so a possible diversion of the bowhead whale migration doesn't scare him the way it scares us.

Fagan's attack on the North Slope Borough ignores our basic position. Without oil in the pipeline we have no economy, so why would we want to stop development? Like all Alaskans, we depend on it. As oil infrastructure has spread across the central Arctic, we have partnered with industry to protect subsistence resources while exploration and production move forward. A close working relationship with industry has made litigation unnecessary; that's why we have not filed a lawsuit over a major project in a very long time. In this respect, we are different from the environmental plaintiffs in the Shell offshore case. The borough's participation in this lawsuit is newsworthy precisely because it is so rare.

Why then have we decided to oppose this project? Because the federal Minerals Management Service failed in its preparation for the largest deployment of drilling rigs, icebreakers, seismic vessels and other ships in Arctic history.

MMS is charged with protecting the public from unintended consequences of offshore development. The agency is supposed to assess potential impacts on wildlife, habitat and human activity. In this case, Shell's first planned drill site sits in the midst of the bowhead whale migration route. Recent studies indicate that impacts from underwater noise on migrating bowheads, especially mothers with calves, are greater than previously believed. Shell's activities are scheduled to occur when bowhead mothers and calves are most likely to be in the area.

This is obviously of great concern to subsistence whalers who have spent decades managing the bowhead hunt to sustain a healthy population. It also worries MMS scientists, whose analysis led them to express unanimous concern over the project's noise impacts on bowheads. They came to similar conclusions about the risks of excessive noise to beluga whales, seals and other species in the area.

None of these scientific concerns showed up in the agency's final document. Rather than listen to its own experts, MMS based its decision on a half-hearted analysis that reduced an important policy decision to an exercise in politics.

The borough rarely stands in opposition to North Slope oil and gas projects. Our planning commission routinely approves hundreds of oil company development permits every year. We have a very strong preference for onshore activity because it is safer, but I recognize that federal policy encourages offshore exploration.

At the same time, our whalers often feel that agencies treat subsistence like a recreational hobby instead of the cornerstone of an ancient and, fortunately, still vibrant culture. Is it too much to ask that MMS follow the law and act on the best available research to protect our wildlife resources at the same time as it encourages development? I don't think so.

If science is no longer the standard by which the government judges potential environmental risks, then agencies should admit it. And when science no longer drives the risk assessment of our nation's development policy, then the Inupiat way of life is threatened along with the animals impacted by these decisions.

In her response to the federal court's decision, Gov. Palin said she remains committed to developing the state's resources "in a manner that protects our way of life."

I completely agree, and I thank the governor for that perspective.
 

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Wall Street Journal
September 8, 2007

ExxonMobil CEO: Mackenzie Pipeline Costs Could Top C$16.2 Bln
DOW JONES NEWSWIRES
September 7, 2007 5:31 p.m.

 CALGARY (Dow Jones)--Costs for the troubled Mackenzie gas pipeline could top the last cost estimate of C$16.2 billion, ExxonMobil Corp.'s (XOM) chief executive warned Friday.

Speaking to reporters at a Calgary industry event, Rex Tillerson said the length of the regulatory process made cost estimates for the pipeline little more than guesses based on other projects.

"It could be C$16 billion or C$14 billion or C$20 billion," Tillerson said. "All we can say is that it's large, it's larger than we previously thought."

Meanwhile, rapid cost inflation has been hiking up project costs while the pipeline has been in regulatory limbo, he added.

"We're seeing what happens on other projects...(there's) a bit of extrapolation from those more detailed cost estimates," he said.

The project, first discussed in the 1970s, aims to bring gas from the Mackenzie delta at the northern tip of the Northwest Territories to Alberta, where it would connect to existing pipelines. The push to revive the project started gathering support in 2004, but public hearings only began in January 2006, while the startup date has been pushed back three years to 2014.

Imperial Oil (IMO) is the project operator, and the other partners are Royal Dutch Shell PLC (RDSB.LN), ConocoPhillips (COP) and the Aboriginal Pipeline Group.

The proposed route crosses several First Nations territories, and complaints from several groups that they haven't been consulted properly have also slowed proceedings.

Tillerson has been one of the more vocal critics of the project's costs - which were previously estimated around C$7.5 billion - questioning the pipeline's viability without some sort of federal intervention.

After the regulatory proceedings, the Mackenzie consortium will have to do a "thorough update" of costs and "see how we are from an economic standpoint," he said.

He denied, however, that ExxonMobil was shelving the project.

The company is also involved in a US$25 billion pipeline project to bring 4.5 billion cubic feet a day of natural gas from Alaska to the lower 48 states.

Tillerson said: "You tell me what [the cost] might be today but it's not US$25 billion anymore."

 -By Hyun Young Lee, Dow Jones Newswires; 613-237-0669;
hyunyoung.lee@dowjones.com

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Anchorage Daily News
September 7, 2007

http://www.adn.com/money/industries/oil/pipeline/story/9284217p-9198724c.html

Pipeline called viable despite drop in gas use
BP REPORT: Consumption of natural gas declines in
U.S., increases worldwide.
By WESLEY LOY
wloy@adn.com
Published: September 7, 2007
Last Modified: September 7, 2007 at 01:50 AM

U.S. natural gas consumption has declined for two consecutive years, but that doesn't necessarily mean chances for an Alaska gas pipeline are diminished, a BP economist said Thursday.

While nothing is guaranteed, the long-term outlook is that the country -- the world's biggest natural gas user -- will need to tap all available sources, including Lower 48 production, imports as well as Arctic gas, said economist Mark Finley.

Finley, of Washington, D.C., has been traveling the world briefing reporters, industry groups and others on the annual "BP Statistical Review of World Energy."

The review is a respected, data-packed guide to supply and demand for major energy sources including oil and gas, coal, and nuclear and hydroelectric power. BP, which runs the largest U.S. oil field at Prudhoe Bay, has produced the review for 56 years.

Among the report's findings for 2006:

• World oil consumption grew by less than 1 percent, the weakest growth since 2001. The lower demand was largely in response to high crude oil prices peaking well above $70 a barrel.

• World natural gas consumption grew by 2.5 percent, close to the 10-year average, but U.S. gas consumption declined for the second year in a row.

• U.S. gas production rose by 2.3 percent, the strongest gain since 2001. The growth was due to recovery from hurricane-related outages in the Lower 48, as well as more rigs drilling for gas, Finley said.

Alaska politicians again are trying to entice oil companies or other firms to build a pipeline to carry the North Slope's vast gas reserves. The gas has been stuck in the ground since its discovery more than 30 years ago.

The most likely option, many energy companies say, is a pipeline costing $20 billion or more that would run southeast off the Slope into Canada to as far as Chicago.

But the staggering scale, cost and risk of such a project have long precluded it from happening, despite the best efforts of a succession of governors and occasional spikes in gas prices. Gov. Sarah Palin has invited potential builders to submit proposals by Nov. 30 to build a line and lock up a package of financial incentives from the state, but whether this plan will go anywhere or fizzle remains an open question.

A key factor, of course, is market demand for gas.

Alaska gas has competition from alternative energy sources that industrial users and power utilities can switch to, Finley said.

One major competitor is coal, of which North America has a great deal.

Coal is a highly polluting fuel and carries antipollution costs in some countries, but technological advances could clean it up. And recently, coal demand has surged due to bargain prices.

"The lesson of the past few years is, cheap beats dirty," Finley said.

Another worry for Alaska gas pipeline backers has been the threat of rising imports in the form of liquefied natural gas, or LNG. Energy companies are building, or have proposed, numerous North American ports for receiving LNG shipments.

But while LNG shipments globally rose by a strong 11.8 percent in 2006, U.S. imports declined slightly, Finley said.

The apparent weakness in the U.S. gas market could be temporary. For one thing, weather is a big factor for gas demand, and last year's warm weather helped demand, Finley said.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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http://www.adn.com/news/politics/story/9283323p-9197836c.html

Palin oil tax gets cold shoulder
PPT: No special session needed, says the resource
association head.
The Associated Press
Published: September 7, 2007
Last Modified: September 7, 2007 at 02:41 AM

FAIRBANKS -- The head of the Alaska Oil and Gas Association presented Gov. Sarah Palin with a long list of concerns regarding her new oil tax proposal.

Marilyn Crockett said this week that the proposal could decrease investment in the state by raising the tax burden on companies.

Crockett also said it would replace a tax that isn't broken and has not yet had a chance to work.

"The industry does not want to have a special session," she told members of the Alaska Support Industry Alliance at a luncheon in Fairbanks.

Other members of the oil and gas association, which include Exxon Mobil, BP and Conoco Phillips, also expressed their reservations about Palin's proposal.

"We agree with the governor's approach to stay with a PPT-based tax structure; however, we are concerned that the tax rates proposed will make every single project look less attractive for us to reinvest," Kevin Mitchell, vice president of finance and administration for Conoco Phillips, wrote in an e-mail to the Fairbanks Daily News-Miner.

Palin this week restated her intention to call a special legislative session next month to revisit the oil production tax passed last summer. She also presented an outline for a new tax that would increase the tax rate.

Palin said the current petroleum profits tax, or PPT, "isn't working as promised."

Revenue Commissioner Pat Galvin has said that revenues from the PPT will likely come in a little short of expectations in the fiscal year that just ended and very short of expectations next year.

Instead of bringing in an additional $1 billion over the old tax system, the PPT will likely bring in about $250 million more in fiscal year 2008, according to department figures.

Crockett pointed to fiscal year 2007, in which the new tax is expected to add about $1 billion in state revenues over the old tax.

"Is PPT working? I would say that it is," she said.

Galvin said Wednesday that cost increases faced by the companies explain the reduced revenue estimates.

Capital costs are now expected to be about 50 percent higher in fiscal year 2007 than was thought when the PPT was passed, and about 100 percent higher in fiscal year 2008, he said.

The PPT allows companies to deduct operating and capital costs and receive credits on certain capital costs.

Crockett encouraged the state to look at how to encourage companies to invest in the state and keep production levels up, ensuring future tax revenues as well as revenues from royalties and property and corporate taxes.

"What we need to be focusing on is keeping that pipeline full," she said.

Oil production has dropped from a peak of more than 2 million barrels a day to less than 800,000 barrels a day, she said, and maintaining production levels will require significant new investment.


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http://www.adn.com/news/politics/fbi/kott/story/9283304p-9197813c.html

Pete Kott jury selection continues
ALASKA DIGEST
Published: September 7, 2007
Last Modified: September 7, 2007 at 02:05 AM

ANCHORAGE -- Jury selection in the corruption trial of former state Rep. Pete Kott will stretch into a third day.

U.S. District Judge John Sedwick said Thursday that he expected a jury would be picked this morning.

Each of 80 potential jurors were questioned individually Wednesday and Thursday on publicity about the bribery case, and whether they were influenced or biased by it. Most only recalled vague information and almost none were excluded because of it. Medical issues and work hardships allowed some to go home.

By Thursday afternoon, prospective jurors were being questioned as a group about matters such as whether they or someone close to them worked in law enforcement, and whether they had previously served on a jury. When court ended for the day, the pool had been whittled to 62 potential jurors.

One of those released was the husband of a prosecution witness. Two others said they felt they couldn't be impartial because of relatives in law enforcement.

One woman still in the jury pool told the judge she and her husband were close to former state Senate President Ben Stevens and his family. But she said she believed she could put that aside. Stevens is not a witness in the case, but his name may come up.

Prosecutors allege Stevens, Kott and others were part of a conspiracy to push oil field services company Veco's interests in the Legislature. Stevens has not been charged.

Once it gets started, the trial is expected to take two or three weeks.

-- Anchorage Daily News

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http://www.adn.com/news/environment/story/9283283p-9197790c.html

Dire sea ice predictions confirmed by observations
IT'S SHRINKING: Observations on the ground back computer models.
By DAN JOLING
The Associated Press
Published: September 7, 2007
Last Modified: September 7, 2007 at 02:02 AM

Computer predictions of a dramatic decline of sea ice in regions of the Arctic are confirmed by actual observations, according to scientists for the National Oceanic and Atmospheric Administration.

The Seattle-based researchers reviewed 20 computer scenarios of the effects of warming on sea ice used by the Intergovernmental Panel on Climate Change in its assessment report released this year.

The researchers compared those models with sea ice observations from 1979 through 1999, rejecting about half because they did not match what satellites showed, oceanographer James Overland said.

But using the most reliable models, the NOAA scientists reached the same unhappy conclusion: By 2050, summer sea ice in the Beaufort Sea off Alaska's north coast likely will have diminished by 40 percent compared to the 1980s. The same is likely for the East Siberian-Chukchi Sea region off northwest Alaska and Russia. In contrast, Canada's Baffin Bay and Labrador showed little predicted change.

There was less confidence for winter ice, but the models also predict a sea ice loss of more than 40 percent for the Bering Sea off Alaska's west coast, the Sea of Okhotsk east of Siberia and the Barents Sea north of Norway.

A 40 percent loss of summer sea ice off Alaska in the Beaufort Sea could have profound effects on marine mammals dependent on the sea ice such as polar bears, now under consideration by the U.S. Fish and Wildlife Service for "threatened" status under the Endangered Species Act because of changes in the animals' habitat from global warming.

Overland, an oceanographer at NOAA's Pacific Marine Environmental Laboratory in Seattle, and Muyin Wang, a meteorologist at NOAA's Joint Institute for the Study of the Atmosphere and Ocean at the University of Washington in Seattle, reviewed 20 computer models provided through the IPCC. Their research paper will be published Saturday in Geophysical Research Letters, a publication of the American Geophysical Union.

In the 1980s, sea ice receded 30 to 50 miles each summer off the north coast of Alaska, Overland said.

"Now we're talking about 300 to 500 miles north of Alaska," he said of projections for 2050.

That's far past the edge of the highly productive waters over the relatively shallow continental shelf off Alaska's north coast, considered important habitat for polar bears and their main prey, ringed seals, plus other ice-dependent mammals such as walrus.

Kassie Siegel of the Center for Biological Diversity, who wrote the petition seeking federal protection for polar bears, said NOAA's retrospective of sea ice projections does not even take into account sea ice figures for this summer recorded by the National Snow and Ice Data Center. As of Tuesday, the center's measurement of sea ice stood at 1.70 million square miles, far below the previous record low for summer ice of 2.05 million square miles recorded Sept. 20, 2005.

The situation is dire for polar bears, Siegel said.

"They're going to drown, they're going to starve, they're going to resort to cannibalism, they're going to become extinct," she said.

As ice recedes, many bears will get stuck on land in summer, where they have virtually no sustainable food source, Siegel said. Some will try and fail to swim to sea ice, she said. Bears that stay on sea ice will find water beyond the continental shelf to be less productive. Females trying to den on land will face a long swim.

"It's absolutely horrifying from the polar bear perspective," she said.

Less sea ice also will mean a changing ecosystem for commercial fishermen and marine mammals in the Bering Sea, Overland said.

With sea ice present, much of the nutrients produced in the ocean feed simple plankton that bloom and sink to the ocean floor, providing rich habitat for crabs, clams and the mammals that feed off them, including gray whales and walrus.

"If you don't have the ice around, the productivity stays up closer to the surface of the ocean," Overland said. "You actually have a change in the whole ecosystem from one that depends on the animals that live on the bottom to one that depends on the animals that live in the water column. So you have winners and losers."

That could mean short-term gains for salmon and pollock, he said. But it also could mean that fishermen will have to travel farther north to fish in Alaska's productive waters, and warm-water predators might move north.

Overland said sea ice computer models have performed well accounting for how ice melts from global warming and for the albedo effect -- accelerated warming due to the presence of dark water that absorbs most of the sun's radiation, warming the ocean and making it harder for water to freeze, in contrast to ice, which reflects most of the sun's radiation.

The models do not do as well accounting for wind and cloud patterns and other factors that may have contributed to recent warming, Overland said.

But the contribution to warming by greenhouse gas emissions likely is set, he said. Emissions stay in the atmosphere for 40 to 50 years before being absorbed by the ocean. The amount put out in the last 20 years and the carbon dioxide put out in the next 20 will be around to influence the half-century mark, Overland said.

"I'm afraid to say, a lot of the images we are going to see in the next 30 to 40 years are pretty much already established," he said.

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Houston Chronicle
September 7, 2007

http://www.chron.com/disp/story.mpl/business/energy/5113433.html

Former BP plant boss acknowledges safety worries before blast
By BRAD HEM
Copyright 2007 Houston Chronicle

The manager at BP's Texas City refinery at the time of a deadly 2005 explosion testified today that he was concerned enough about safety before the disaster to launch his own investigation of previous worker deaths, but did not believe there was a need to shut down operations.

"There was no indication prior to the incident that required shutdown of the facility," Don Parus, 55, said from the witness stand in a Galveston district court.

He said he included money for upgrades in his 2005 budget, but that the company reduced his budget.

Four former workers at the refinery are suing BP for injuries and emotional distress they say they suffered as a result of the March 23, 2005, explosion that killed 15 workers and injured scores more.

The trial now before state District Judge Susan Criss is the first to emerge from the blast. BP has settled at least 1,350 of about 3,000 explosion-related lawsuits, but the company's lawyers told jurors that they didn't settle the cases on trial now because of weaknesses in the plaintiffs' claims.

The plaintiffs' lawyer, Brent Coon, who has taken the lead in organizing the vast litigation, countered that BP put profits over safety by cutting budgets, training and personnel in the years before the blast.

Parus has been on paid administrative leave from BP since the blast. His testimony during the second day of the trial marks the first time he has spoken at length in public about the incident and his role.

An internal BP investigation of the explosion completed in February recommended that Parus and three other senior executives be fired, but he remains on the payroll.

Three deaths in 2004, including two men who died from hot water burns in September that year, prompted Parus, then new to overseeing the refinery, to investigate on his own how many people had died at the facility in the previous 30 years.

He was surprised both to find 22 deaths in 30 years and that the body count wasn't widely known.

"It was shocking that all employees didn't know, not just management," said Parus, who became emotional when he spoke of visiting one of the burned men in the hospital before he died.

Parus then commissioned a workplace safety consultant, Telos Group, to study in more depth the safety culture at the refinery. A survey of 1,100 found many workers believed each day at work could be their last.

"We have never seen a site where the notion of 'I could die today' was so real for so many hourly people," the report said.

Parus shared the results with supervisors in Chicago, where BP's U.S. operations are based, and at company headquarters in London, he said.

He also included money for upgrades in his 2005 spending request, but his budget was reduced, he testified.

Testimony began Wednesday with two witnesses' descriptions of the gruesome scene after the 2005 blast.

The explosion occurred after a piece of equipment overfilled with flammable liquid hydrocarbons. Alarms and gauges designed to warn of the problem failed, and vented vapor ignited during startup of a unit that boosts octane in gasoline.

brad.hem@chron.com
 

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Wall Street Journal
September 7, 2007

Ex-BP Refinery Manager:Didn't Expect Danger, Despite Warnings
DOW JONES NEWSWIRES
September 6, 2007 4:02 p.m.

 GALVESTON, Texas (AP)--The former manager of the U.S.'s third-largest refinery said he did not expect danger before a deadly blast there, even though two reports he had requested warned of hazards and workers indicated they feared for their lives.

The blast in 2005 at the London-based BP PLC's (BP) plant in Texas City killed 15 people and injured more than 170.

Testifying on Thursday during the first civil trial related to the blast, former plant manager Don Parus said a report three years before the blast concluded there was a major underinvestment in infrastructure at the Texas City site.

The second study, called the Telos Report, came just two months before the blast and told of various safety problems at the plant and a lack of resources and management awareness to deal with them. In the report, many workers indicated they feared for their lives.

Parus said his 2005 budget request to fix problems he saw, including rusted pipes and towers, was reduced even though the refinery was so successful it was essentially "printing money out there." The plant's monthly profit approached $100 million.

"With the concerns and fears people expressed in the Telos Report, was there any recommendation given to shut down any units?" asked Brent Coon, an attorney for four contract workers suing BP for back injuries, hearing loss and other ailments they say were caused by the blast.

"I had the ability to do that. I did not do that. I had no reason to make that decision," said Parus, who has been on administrative leave from BP since shortly after the blast.

Parus said after three worker deaths at the refinery in 2004, when he became plant manager, he researched the number of deaths there the previous 30 years. He said he was shocked to find there had been 22, or about one every 18 months.

BP's attorneys have told jurors the London-based oil giant never placed profits over safety at the plant and that the company never did anything intentionally that resulted in the accident.

The explosion at the plant occurred after a piece of equipment called a blowdown drum overfilled with highly flammable liquid hydrocarbons, and the excess chamicals ignited. Alarms and gauges that were supposed to warn of the overfilled equipment did not work properly.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that investigated the accident, found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the explosion.

An internal report by BP released in May said there was a culture at the plant that seemed to ignore risk, tolerated noncompliance and accepted incompetence.

A fifth lawsuit that was also set to be tried, filed by the estate of a contract worker whose suicide was attributed to trauma from the accident, was settled before opening statements.

About 1,350 of the thousands of lawsuits filed since the accident have been settled.

The blast has cost the company at least $2 billion in compensation payouts, repairs and lost profit.

The trial, which began Wednesday, could last up to two months.
 

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National Public Radio
September 6, 2007

http://www.npr.org/templates/story/story.php?storyId=14194568

Exploring for Oil in the Arctic's 'Great Frontier'
 by Steve Inskeep

 
Enlarge Tracy Wahl, NPR
http://media.npr.org/news/images/2007/sept/06/arctic_ship540.jpg
Shell's drill ship Frontier Discoverer, anchored in Dutch Harbor, Alaska. The vessel carries an oil derrick 190 feet high  taller than the Statue of Liberty.
 
Take a Journey to the Arctic with Steve Inskeep
  http://www.npr.org/programs/morning/features/2007/sep/arctic/slideshow/index.html

More in the Series
Sep. 5, 2007
Arctic Businesses Learn to Adapt to Climate Change
http://www.npr.org/templates/story/story.php?storyId=14154041
Sep. 4, 2007
Nations Jostle for a Share of the Arctic
 
http://www.npr.org/templates/story/story.php?storyId=14092469
 
 Morning Edition, September 6, 2007 · These days, the frontiers of oil exploration include the waters north of Alaska. Nobody knows how much energy is hidden beneath the Arctic waves. But oil companies want to find out.

A federal court blocked Royal Dutch Shell proposal to drill for oil in the Beaufort Sea, above Alaska's northern coast. But the company is still trying. And its story tells you a lot about the forces shaping the Arctic's future.

This summer, Shell assembled an entire fleet in an Alaskan harbor.

Crews were performing maintenance on a drill ship. It carries an oil derrick 190 feet high. That means it steams around with a tower taller than the Statue of Liberty, from its toes to its torch.

"This is the Frontier Discoverer. I would call it the state-of-the-art drilling rig, one of the very few that are capable of working in the Arctic today," says Vince Roes, who works on the ship, which has a reinforced hull.

Shell knows the Beaufort Sea because the company found oil in the same place two decades ago. The people on the drill ship then included Rick Fox, who now leads Shell's Alaska operation.

"I remember as a young man, standing out there and watching all the crystals of ice in the air, when the sun was out," Fox says. "It was just like zillions of lights, and dry, cold. I remember how peaceful it was. At times it was so still and quiet, especially when there was ice on the water. It is an amazing place, it is an amazing place.

Shell concluded the opportunity wasn't amazing enough  and it never exploited the offshore oil that it found years ago.

Today, the technology is better, the price of oil is higher, new oil reserves are less available. And Shell has reconsidered the Alaskan Arctic.

"We think it's a great frontier ...." Fox says. "The belief is that about 25 percent of the world's remaining reserves are in the Arctic. And I think it's a major play for us."

Even the climate seemed to be cooperating with that major play. Polar ice retreated this summer from the spot where Shell plans to explore for oil.

Shell would hardly need its reinforced hulls, or rented Russian icebreakers.

Which brings to mind a cartoon reprinted last month in the Anchorage Daily News. A man stands on an oil platform in Arctic waters.

"Now that fossil fuel use has melted the ice cap," he says, "we can drill for more fossil fuel!"

When Fox spotted that cartoon, he laughed and showed it to a colleague.

"You know, we were working out on the ice this past winter," Fox says. "Maybe there is a trend and less ice, but you still have years when  I was 15 miles offshore on a snow machine  and it was some big ice."

The Shell manager does acknowledge that Arctic summers are getting longer. Oil company ships have more time to explore before the winter ice returns.

But Shell did not get to drill this summer. The effects of climate change are more complicated than they might seem.

"The melting of the Arctic ice cap presents additional problems," says Deborah Williams, who leads a group called Alaska Conservation Solutions.

"You will have greater storms," she says. "You will have more conflict with endangered species, and you will have more conflict, I believe, with the people of the North, particularly the Inupiat people, who are already facing hardships associated with the global warming and the melting of the Arctic icecap."

Those conflicts with local people and animals help to explain why Shell's fleet did not reach the Beaufort Sea. It was blocked by a creature Fox noticed when he was drilling in that sea years ago.

"I remember seeing whales as well, and the beauty of that animal, just passing through that clear, clear blue water," Fox says.

Local people have hunted those whales for centuries. Whaling captains joined a lawsuit seeking to prevent Shell's drilling. A court stopped all activity while deciding if it should order a full environmental study.

It was by no means a given that local people would oppose an oil project. Many take a pragmatic approach to the industry, as you could see at a picnic in Barrow, Alaska.

The picnic was sponsored by BP, one of the major oil companies here. BP was celebrating 30 years of the Trans-Alaska pipeline  which brought jobs and money to the region.

Yet when Shell proposed offshore drilling, the local government joined the lawsuit against it. One of their lawyers says drilling noise, or an oil spill, could harm whales already stressed by global warming.

You sense the ambivalence of some Alaskans when you meet Ron Brower. He's a tribal elder, who was greeted at the picnic by an oil company vice president.

Brower has actually done work for a Shell contractor. Yet he says the climate is changing too rapidly to understand the possible problems with offshore drilling.

"Any oil spill would be disastrous to our natural food resources in the Arctic," Brower says.

Shell has never stopped working to ease such concerns. The company even ordered construction of a special ship. Crew members would stand by on this high-tech bridge, or control center, waiting to clean any spill.

Shell staffed that ship by hiring Alaskans, including Roland Rufus Iqtakluk Warrior. He's a whale hunter himself, and he says his neighbors oppose offshore drilling.

"They just don't want it to happen, don't want to compromise our hunting grounds," he says.

Even though he works for Shell, Warrior says his job puts him in a position to "hear and see what's happening and be able to bring up concerns from where I come from."

He's telling his employers about the importance of whale hunting. He's had time, since the federal court order left Shell's cleanup crew waiting at anchor.

That same order left Shell's Fox trying to figure out the next step.

"I am somewhat disappointed with the way this is turning out so far, and hopeful that we'll still find resolution, because we're still in the conversation," he says.

Shell remains eager to explore Arctic waters. And in this, it's not alone. There's not exactly a rush for Arctic oil  not yet.

But from Canada to Norway to Russia, companies are buying leases, or even starting to drill, for the wealth of the changing Arctic.

This series was produced by Tracy Wahl.

 
Related NPR Stories
Aug. 17, 2007
Researchers: Arctic Sea Ice Hits Record Low
http://www.npr.org/templates/story/story.php?storyId=12881944

June 8, 2007
Alaska's Residents Grapple with Changing Climate
 
http://www.npr.org/templates/story/story.php?storyId=10865980

Sep. 19, 2006
An Oil-Fueled Boomtown in Canada's Subarctic
 
http://www.npr.org/templates/story/story.php?storyId=6098557

April 2, 2004
Alaskan Oil Drilling Debate Moves Offshore
http://www.npr.org/templates/story/story.php?storyId=1806816

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Fairbanks News Miner
September 6, 2007

http://newsminer.com/2007/09/06/8747

Oil companies, associations express displeasure with tax proposal
By Stefan Milkowski
smilkowski@newsminer.com
Published September 6, 2007

The head of the Alaska Oil and Gas Association on Wednesday presented a long list of concerns regarding Gov. Sarah Palin’s new oil tax proposal.

Marilyn Crockett said the proposal could decrease investment in the state by raising the tax burden on companies and scare companies away by presenting an unstable investment climate. She also said it would replace a tax that isn’t broken and has hardly been given a chance to work.

“The industry does not want to have a special session,” she told members of the Alaska Support Industry Alliance at a luncheon in Fairbanks.

Other members of the oil and gas association, which include ExxonMobil, BP and ConocoPhillips, some of the largest producers on the North Slope, also expressed their reservations about Palin’s proposal.

“We agree with the governor’s approach to stay with a PPT-based tax structure, however, we are concerned that the tax rates proposed will make every single project look less attractive for us to re-invest,” Kevin Mitchell, vice president of finance and administration for ConocoPhillips, wrote in an e-mail to the News-Miner.

On Tuesday, Palin restated her intention to call a special legislative session next month to revisit the oil production tax passed last summer, and she presented an outline for a new tax that would increase the tax rate.

Palin said the current petroleum profits tax, or PPT, “isn’t working as promised.”

According to Revenue Commissioner Pat Galvin, revenues from the PPT will likely come in a little short of expectations in the fiscal year that just ended and very short of expectations next year. Instead of bringing in an additional $1 billion over the old tax system, the PPT will likely bring in about $250 million more in fiscal year 2008, according to department figures.

Crockett pointed to fiscal year 2007, in which the new tax is expected to add about $1 billion in state revenues over the old tax.

“Is PPT working? I would say that it is,” she said.

Overall, she said, the state should be looking at how to encourage companies to invest in the state and keep production levels up, ensuring future tax revenues as well as revenues from royalties and property and corporate taxes.

“What we need to be focusing on is keeping that pipeline full,” she said, “half-full at this point.”

Oil production has dropped from a peak of more than 2 million barrels a day to less than 800,000 barrels a day, she said, and maintaining production levels will require significant new investment.

On Wednesday, Galvin pointed to cost increases faced by the companies in explaining the reduced revenue estimates.

Capital costs are now expected to be about 50 percent higher in fiscal year 2007 than was thought when PPT was passed, and about 100 percent higher in fiscal year 2008, he said.

PPT allows companies to deduct operating and capital costs and receive credits on certain capital costs.

Galvin acknowledged that by switching to a tax based on net company profits, the state had accepted the risk that revenues could drop if costs increased. He said the administration wanted to revisit the tax not to fill the revenue gap but because the projected revenues were so far off.

“It calls into question whether legislators would have made the same choice,” he said.

Contact staff writer Stefan Milkowski at 459-7577.
 

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Houston Chronicle
September 6, 2007

http://www.chron.com/disp/story.mpl/business/energy/5111640.html

Testimony details gruesome BP blast scene
Witnesses tell of finding bodies as civil trial gets under way
By BRAD HEM and KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  A pipe foreman and an emergency responder recalled gruesome scenes after the 2005 explosion at BP's Texas City refinery as testimony began Wednesday in the first blast-related civil suit to go to trial.

Pipe foreman Lance Emord, a contractor for Altair Strickland, saw two bodies on his way to a lunchroom to retrieve lunch kits workers left behind when they fled after the explosion. Two guards stopped him on his way in.

"They asked us if we had a weak stomach," Emord said in a choked voice. "We went into the lunchroom to get the lunch kits, and there were dead bodies in there."

Beaumont lawyer Brent Coon, who represents the four plaintiffs in the cases on trial in state district court in Galveston, told jurors before testimony began Wednesday that they would hear that London-based BP put profits before disaster prevention and ignored repeated warnings about the possibilities of an explosion at the refinery.

"They calculated the risk of killing people by putting a number on their heads," Coon told the eight-woman, four-man panel.

BP lawyers said the company accepted responsibility for the accident but also said that workers at the refinery failed to follow safety procedures.

BP lawyer Ronnie Krist said that regardless of fault, neither the company nor the jury is obligated to enrich the plaintiffs, whom Krist said are trying to capitalize on the disaster.

"To many people, it's a tragedy," he said. "To others, it's an opportunity."

The trial involves claims by four contractors who were on the site the day of the explosion. Another case that had been bound for trial along with theirs settled late Tuesday, after the jury had been seated. That case was filed on behalf of the estate of a contractor who fatally shot himself six weeks after the explosion.

Finding bodies
In testimony Wednesday, David Nash, a Marathon Oil Corp. worker who volunteers on that company's fire brigade, said he found two bodies while looking for survivors and clearing debris near trailers destroyed by the blast. The 15 contractors who died were in a trailer 121 feet from the explosion. Scores more were injured.

Emord and Nash have legal claims against BP separate from those in this trial. Coon's firm also represents them.

In his opening statement, Coon said jurors will determine whether BP was negligent and how much it should pay the plaintiffs for emotional distress, hearing loss and back problems he says they suffered because of the blast.

Making the company pay "is the only message they understand," Coon said.

BP lawyers disputed Coon's assertions, telling jurors that the oil giant took steps to improve safety before and after the explosion on March 23, 2005. They also sought to portray the plaintiffs as seeking a big payoff from minor injuries because they were at the refinery on the day of the blast.

BP attorney Kenneth Tekell said weaknesses in their claims prevented BP from settling with these plaintiffs before the trial. It has settled at least 1,350 of about 3,000 claims, including all involving the fatalities.

Plaintiff Scott Kilbert, 48, alleges in the suit that he has had back problems since the blast, but Tekell said Kilbert hasn't missed work because of the injury and hasn't needed surgery.

Plaintiff Roland Bocardo, 41, had a documented back injury at a previous job in 2002, and hurt his back in a 2004 car wreck and again loading material in February 2005  all before the March 2005 blast, Tekell said.

Plaintiffs David and Nara Wilson, both 44, had no visible wounds or noticeable pain immediately after the blast and returned to work the next day, Tekell said. A month later, a chiropractor blamed David Wilson's back pain on the explosion, Tekell said.

They now build furniture, which the couple had planned to do upon retirement, the lawyer said.

"This might be an opportunity for BP to sponsor their future in the furniture business," Tekell said.

Ex-manager to testify
The explosion occurred after a piece of equipment overfilled with flammable liquid hydrocarbons. Alarms and gauges designed to warn of the problem failed, and vented vapor ignited during startup of a unit that boosts octane in gasoline.

The trial is scheduled to resume today with testimony from Don Parus, former manager of the plant.

An internal investigation of the blast praised Parus' investigations of previous deaths at the plant and his efforts to speak to management about the plant's safety record.

But the report said he focused on personal safety, such as prevention of slips and falls, rather than process safety, which involves the operation of equipment and handling of hazardous materials.

The U.S. Chemical Safety and Hazard Investigation Board and an independent panel led by former Secretary of State James A. Baker III also concluded that managers at the refinery failed to recognize the importance of process safety.

In the case that settled Tuesday, Robert Kwok, who represents the estate of Rene Cardona Sr., said he believes the settlement will provide for Cardona's two young sons.

"BP continued to increase their offer to a point where it reached a level where it was in the best interests of the boys to settle the case," Kwok said.

"We believe the offer to be fair and generous, and Rene's sons will be financially secure."

No settlement details
As with most previous settlements related to the blast, details were not disclosed.

BP spokesman Neil Chapman said BP was pleased to reach the settlement, reiterating that the company has worked hard to resolve cases rather than "resort to legal proceedings."

The Texas City plant is BP's largest refinery, with a capacity of 460,000 barrels a day. The plant has been operating at about half its capacity since Hurricane Rita blew ashore in September 2005. The company aims to restore it to full capacity by year's end.

brad.hem@chron.com
kristen.hays@chron.com 

Kristen Hays reported from Houston.
 

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Wall Street Journal
September 6, 2007

Chinese, Others Interested In Alaska Gas Project - Official
DOW JONES NEWSWIRES
September 5, 2007 5:19 p.m.
 By Ian Talley
Of DOW JONES NEWSWIRES

 WASHINGTON (Dow Jones)--A Chinese oil company is one of several foreign companies expressing an interest in building a major Alaska natural gas transportation project, a U.S. federal government official said Wednesday.

The multi-billion-dollar Alaska natural gas pipeline project is intended to transport trillions of cubic feet of gas from the Alaskan North Slope to the lower 48 states, but some of the expected license application proposals could allow gas to be exported to Asia, the official said.

Drue Pearce, recently appointed U.S. Federal Coordinator for the Alaska Natural Gas Transportation Projects, said Spain's Repsol YPF SA (REP), BG Group PLC (BRG) and a Chinese company had joined TransCanada Corp. (TRP), the Alaskan Gasline Port Authority and Mid-America Pipeline Co. in expressing an interest in submitting an application to the Alaskan state government. She declined to identify the Chinese company.

She said several of the proposals plan for a pipeline from the North Slope to a gassification terminal in Valdez, Alaska. From there, gas could be transported to any regassification terminal in the world, but the primary focus would be on the Pacific rim. Approval to build LNG terminals on the West Coast of the U.S. has faced tough opposition.

As oil and gas supplies in the lower 48 states wane and the country increasingly seeks to wean itself form its dependence on imports from politically unstable areas of the world, natural gas from northern Alaska and Canada is being offered as a "clean energy" alternative. Gas reserves - the North Slope is estimated to hold around 35 trillion cubic meters of discovered resources and 170trillion cubic feet of undiscovered natural gas - have been stranded in the region because of the long distance to the market and the cost of transportation.

The Alaska pipeline project, originally started in the early 1970s, has faced a mountain of regulatory, regional, environmental and bureaucratic hurdles. Approval for the project would require filing permits with several dozen federal and state agencies, not to mention obtaining cross-border agreements with Canada.

Earlier this year, Alaska Gov. Sarah Palin pulled a proposal approved by her predecessor that would have piped gas along the Trans-Alaska Pipeline route to Fairbanks and then to the Alaska-Canada Highway on to Midwestern markets.

In February 2006, then-Gov. Frank Murkowski, BP PLC (BP), Exxon Mobil Corp. (XOM) and ConocoPhillips (COP) had agreed on a $25 billion gas pipeline project that would have delivered 4.5 billion cubic feet of natural gas a day - roughly 7% of U.S. demand - and would take about a decade to complete.

Instead, Palin proposed an incentive program called the Alaska Gasline Inducement Act, or AGIA, that offers around $500 million to help pay for regulatory filing costs, if the companies agreed to a set of principles outlined by her government.

Bids are due by Nov. 30. Pearce said the state hopes to select the most competitive bid by February. The legislature would still need to approve the winning application before a company could start the filing process with the Federal Energy Regulatory Commission, which could take several years.

Producers, such as Royal Dutch Shell PLC (RDSA), Exxon and ConocoPhillips, don't support the AGIA program, and Pearce said she had heard that they wouldn't submit an application for a license.

The federal coordinator said that the "All Alaska" line - which would ship volumes in the form of liquefied natural gas - would transport only around 1 billion cubic feet a day.

In 2004, Congress passed the Alaska Natural Gas Pipeline Act to spur development of the project. Pearce said that although Congress intended the gas for U.S. markets to ease expected energy shortfalls, nothing in the act would prohibit the natural gas from being exported.

The project isn't expected to be online until 2018, at the earliest, though some oil company executives believe the start-up could be delayed into the early 2020s.

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

 

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KTUU News
September 5, 2007

http://www.ktuu.com/Global/story.asp?S=7026558

Channel 2 News interview with BP Alaska President Doug Suttles
 Featured Video
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BP Alaska President Doug Suttles talks taxes
 by John Tracy
Tuesday, Sept. 4, 2007

ANCHORAGE, Alaska -- BP Exploration (Alaska) Inc. President Doug Suttles answered questions from Channel 2 News about Gov. Sarah Palin's proposal of a new oil tax regime that would effectively be a hybrid tax on net production and gross profits.

Channel 2 News: How is this hybrid net and gross profits tax proposal going to sit with the industry do you think?

BP Alaska President Suttles: I think what we all need to be worried about just now is the future for Alaska. I mean, the big issue we all face is decline, and what we need is a structure here that is going to focus investment.

I think the biggest concern at the moment is the net structure did encourage investment but the [tax] rate was already too high, and this looks like an increase - and the issue is competitiveness. We need to attract capital in all the areas of the industry.

Channel 2 News: Do you think the state's current Petroleum Profits Tax at 22.5 percent is a fair tax, and do you plan on encouraging lawmakers to keep it?

BP Alaska President Suttles: Well, I think that's right. I think our job in this is to get our view of the story out and make sure people understand the decision they face, and that we have a good and thoughtful debate.

Just to put this in perspective, the tax rate, I think, with this new structure, would have us almost 50 percent higher than places like the Gulf of Mexico or Alberta, Canada; and at least 25 percent higher than places like Texas, Oklahoma and Louisiana.
So, Alaska needs to attract new dollars to offset decline.

Channel 2 News: One reason the governor stated for taking another look at the state's tax structure is the cloud of corruption under which the original vote was taken.

Clearly, two VECO Corp. executives were exerting influence on the vote, admitting to bribing lawmakers.

Isn't going back and at least re-affirming with a majority of the Legislature that the original bill is truly their intent a responsible thing to do?

BP Alaska President Suttles: I think we have to respect the governor's wishes here if she wants the Legislature to readdress [the PPT] and I respect her right to ask that.

I think what's important now is that we have a good and thoughtful debate. This is going to be about Alaska's future. Like I said before, we've got to encourage investment in this state and we need to make sure the tax structure will do that.

Channel 2 News: Another concern for critics of the PPT was the types of deductions the industry might take, including deductions for the repair and replacement of poorly-maintained pipelines, including the corroded feeder lines BP replaced at Prudhoe Bay.


Alaska Department of Revenue Commissioner Patrick Galvin today said the state has yet to determine exactly how much BP deducted from its tax bill for replacing those lines, and that is part of the problem with the PPT.

Can you tell us how much BP deducted for replacing those lines, and how the company justifies those deductions?

BP Alaska President Doug Suttles: Of course, all we can speak to now is last year's tax filing. Last year, our severance taxes went from $180 million to over $500 million, so almost tripling, and that was inside of $2 billion in total government payments BP made.
I think there are ways to solve questions around what deductions are fair and reasonable. There are good opportunities to do that through things like the joint interest billings that occur between the various owners of [Prudhoe Bay oil field].

I think there are ways to address those concerns that the state has enough transparency into what deductions are being taken.

Channel 2 News: Can you tell us, though; do you have a figure that you know that BP did deduct from its taxes for those repairs?
BP Alaska President Doug Suttles: You know, I don't have that on the tip of my tongue. Last year, the deductions were all predominantly in response to the spill in making sure we got production back on. Most of the expense for replacing those lines has been incurred this year and will be incurred next year, and those filings have yet to occur. So I just don't have that number in front of me.

Channel 2 News: BP and the other producers have said they won't be submitting a gas pipeline proposal under the requirements of the Alaska Gasline Inducement Act, but will you submit a plan anyway, so the public and lawmakers will have something to measure against whatever plan the state adopts under AGIA?
BP Alaska President Doug Suttles: Well, I think that's a really good question, and I think what we're doing right now is try to find a way to get this gas moving. We're completely aligned with the state and the governor wanting to find a way.

We had certain issues with AGIA and right now we are working with our partners to see if there is some way we can put a proposal forward so that the state can get it moving.

So, it's a little early to say but I can tell you we're working hard looking for opportunities to do that.

Contact John Tracy at
jtracy@ktuu.com
 

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Anchorage Daily News
September 5, 2007

http://www.adn.com/money/industries/oil/story/9278161p-9192976c.html

Palin offers oil tax plan for session in Juneau
STARTS OCT. 18: She wants some committee hearings outside capital.
By TOM KIZZIA and SEAN COCKERHAM
Anchorage Daily News
Published: September 5, 2007
Last Modified: September 5, 2007 at 02:15 AM

Gov. Sarah Palin will call lawmakers to Juneau for a special session next month, where she will ask them to increase oil taxes by adopting a new hybrid system combining gross-production and net-profits taxes.

The tax proposal, announced in Anchorage on Tuesday, would raise the current tax on oil field profits from 22.5 percent to 25 percent. It would also create a floor of a 10 percent tax on gross production that would kick in on the state's oldest "legacy" fields if future profits shrink.

The special session begins Oct. 18 and can last up to 30 days.

Other changes, if adopted by the Legislature, would do away with retroactive deductions on investments from previous years and investments made to catch up on deferred maintenance. Credits would be available to encourage investment in new fields.

Palin also called for changing job classifications for state tax auditors, raising salaries to bring more expertise to the state.

A simple tax on gross oil production, which Palin favored at first, would "risk the viability of future fields," the governor said in announcing her hybrid plan.

"We want to make sure the golden goose is fed and not killed," she said.

State officials have dubbed the new plan Alaska's Clear and Equitable Share, or ACES.

MIXED REACTIONS

Palin originally wanted to hold the session somewhere on the road system. In agreeing to go to Juneau, she said she wants to see committee hearings outside the capital. Legislative leaders would have to agree to such hearings.

The governor's plan got a favorable reception from House Speaker John Harris, R-Valdez, who attended Tuesday's event. He said legislators would probably feel compelled to make some changes, given the cloud of corruption over the original tax. Palin's plan seems to offer change but not a huge overhaul, he said.

Harris said he hopes to begin committee hearings on the road system at the start of October, after a specific bill has been drawn up.

But Senate President Lyda Green, R-Wasilla, was less enthusiastic. She said it seems too soon to reconsider last year's tax changes. She also didn't like the idea of splitting the special session between Juneau and the road system.

Rep. Harry Crawford, D-Anchorage, said he was disappointed, calling the plan not much more than a warmed-over version of the existing net-profits tax. Democrats called last week for a simple, predictable tax like a gross-production tax.

Oil industry reaction was negative.

Increasing tax rates will reduce investment here, said BP Alaska president Doug Suttles. The state should be focused on offsetting the decline of oil production, he said. "We have to call on every Alaskan to think really hard about the future."

Both the increased tax and the notion of changing taxes for a third time in three years -- former Gov. Frank Murkowski imposed a smaller tax increase through regulation before the PPT was passed -- make for "a pretty jittery investment climate" in Alaska, said Marilyn Crockett, executive director of the Alaska Oil and Gas Association.

PALIN GIVES IN

The Legislature passed the latest oil-profits tax in August 2006. It was designed to allow oil companies to deduct operating and capital expenses before calculating taxes. That plan was presented by Murkowski as a way to promote investment. The Petroleum Profits Tax, or PPT, replaced the discredited "ELF" tax on production that was riddled with exceptions.

Legislators argued over what percentage of net profits should be taxed. After much wrangling, they settled on a 22.5 percent tax rate.

Some legislators, including many Democrats, had argued for a tax on gross production instead of net profits. Palin herself favored a gross tax during her 2006 election campaign.

In recent weeks, Palin said, analysis by state officials showed that a simple gross system would either mean less revenue for the state or hurt the oil industry's investment climate.

"I was dragged kicking and screaming, with a little bit of gnashing of teeth, even, away from the pure simple gross system," Palin said Tuesday.

Palin said the tax has to be revisited because the original version was tainted by corruption. Several legislators have been accused by federal prosecutors of selling their votes on the oil tax in 2006. Two of them, former Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau, are scheduled to stand trial in federal court starting today.

Palin also said the tax is not performing as predicted because industry expense deductions are coming in much higher than expected.

Administration officials said that, in fiscal year 2007, the new PPT brought in $1 billion more than the old tax -- but $200 million less than was predicted when the PPT was passed. Unless the tax is changed, rising deductions from the industry will bring $800 million less than predicted for the next fiscal year, said Revenue Commissioner Pat Galvin.

"I'm not sure how disappointed we should be with getting a billion dollars more," Green said after the governor's announcement. "We really need to kind of hold on and review it some more."

TIME TO MAKE A MOVE

But Palin said it is important to act now to make sure Alaska gets an equitable share of the oil's value.

"There are those who would say we should do nothing and that we should continue the PPT experiment. Doing nothing is not an option," Palin said.

The proposed new tax would bring in $700 million more this year than the PPT tax, according to state officials. But Democrats complained that's still $100 million less than was promised by a tax that was passed with undue pressure being exerted by lawmakers now accused of corruption.

Palin's earlier statement about holding the special oil tax session on the road system met resistance. Many legislators said they preferred to work in Juneau, where their offices and staff could be at close hand.

"It's kind of a hybrid plan there, also," Palin said of her call for hearings away from Juneau.

Contact reporter Tom Kizzia at tkizzia@adn.com and Sean Cockerham at
scockerham@adn.com .

The tax and the session

Palin's "hybrid" proposal for new oil tax:

Alaska's Clear and Equitable Share

• Establishes minimum gross production tax for major "legacy" fields.

• Raises net profit tax on North Slope fields from 22.5 percent to 25 percent.

• Eliminates some deductions, such as catching up on deferred maintenance.

Plan for legislative session is a hybrid too

• Special session begins in Juneau on Oct. 18, lasts up to 30 days.

• Commitee hearings on new bill to be held outside Juneau, probably before session.

Xxxx

http://www.adn.com/news/alaska/ap_alaska/story/9276886p-9191705c.html

BP dislikes call for higher taxes in Alaska
By STEVE QUINN, Associated Press Writer
Published: September 4, 2007
Last Modified: September 4, 2007 at 06:30 PM

JUNEAU, Alaska (AP) - The oil industry never liked the 22.5 percent net profits tax the state passed last year, and now Gov. Sarah Palin wants that raised to 25 percent.

It's part of a restructuring plan of the state's oil production tax Palin announced Tuesday, but one that doesn't sit well with the state's largest operator, London-based BP PLC.

Doug Suttles, president for BP Exploration (Alaska) Inc., said the state needs to be mindful that too much change would discourage multimillion dollar investments.

Those investments are crucial to extending the life of North Slope production - already in a 6 percent annual decline - by several decades.

"The big enemy in Alaska is production decline," he said. "The only way to offset it is investment, not just for exploration of new fields but existing fields and new technology."

Palin stressed she is not anti-oil - indeed, her husband Todd just returned to his blue-collar production job for BP on the North Slope after a year's leave- but believes the year-old tax needs to be restructured.

She wants lawmakers during a special session to start Oct. 18 in Juneau to fix a system she has called a failure and tainted by the federal corruption charges against former lawmakers in connection with the tax.

Palin's announcement comes as two former lawmakers begin their federal trial Wednesday on corruption charges.

These bribery and extortion trials are linked to the passage of the oil tax and they have helped thrust the state's political credibility into the national spotlight.

Palin noted the upcoming trial during her Tuesday news conference in Anchorage, but still stressed the need to fix a tax that she said "isn't working as promised."

Recent projections for the current Petroleum Profits Tax have the state falling $800 million short of what was predicted by former Gov. Frank Murkowski's administration last year.

That's nearly enough to fund the state's entire public education budget for the current school year.

Palin says she wants a tax that is fair to the state, but also provides the industry with the right incentives for future the exploration and production.

"We must receive appropriate value for our oil," she said. "It must be a clear and equitable share."

But some lawmakers and industry leaders are skeptical, saying it's too soon revisit the tax lawmakers passed just last year.

Senate President Lyda Green, R-Wasilla, stood firm on her long-standing belief that a special session is not necessary to rewrite the state's Petroleum Profits Tax.

"There is nothing that we are going to be doing that can't wait until the regular session next year," she said. "It's way too early right now to say whether (PPT) is right or whether it isn't right."

Nevertheless, lawmakers will report next month to the capital. Palin earlier announced the special session, but on Tuesday explained the scope of what she wants lawmakers to consider and the venue for the session, which can last up to a month.

The current tax has a base rate of 22.5 percent on oil company profits, but also affords the companies various deductions and credits.

Palin said she wants lawmakers to replace the current net profits tax plan with what she calls a hybrid of a net and gross profits tax.

She is calling it Alaska's Clear and Equitable Share, or ACES. Some of those changes include:

- Raising the tax rate from 22.5 percent to 25 percent on net profits, a figure some lawmakers pushed for last year.

- Not allowing deductions on facility repairs deemed to be from poor or negligent maintenance.

- A 10 percent gross-based floor tax on some of the older or "legacy" fields such as those in the North Slope.

- Eliminate some deductions, including those for retroactive investments, known as "claw backs."

"What the governor is trying to do here is get a better return for the state and create an environment that encourages more investment, and for that I applaud her," said House Speaker John Harris, R-Valdez.

"I do believe once we get the bill in a few weeks, we will want some expert advice as to what the effects of the bill will be on the budget, on revenue and on investment," he said.

But House Minority Leader Beth Kerttula, D-Juneau, isn't convinced that Palin's plan will achieve the stated mission.

Kerttula said the changes don't go far enough to keep the tax laws simple and understandable.

"Right off the bat, I've got some grave concerns," she said. "We still don't have much of a picture as to what deductions are going to be allowed."

Senate Minority Leader Gene Therriault, R-North Pole, said he would like to see more details of Palin's plan.

"This is more than rounding off the edges," Therriault said. "There is a lot of detail we have yet to see.

"If they are true to their word and have run the numbers with good data, then what they proposed could ultimately result in a fair take for the state."

Palin has not formally proposed the changes in a bill just yet; she expects to do that in a few weeks.

Palin had earlier said she wanted the special session to be held on the state's road system, in places like Anchorage or Fairbanks, to allow the public greater access than in Juneau, the state capital that is only accessible by boat or airplane.

However, she deferred to the wishes of lawmakers to keep the session in Juneau, but has asked legislative leaders to consider holding committee hearings elsewhere.

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http://www.adn.com/opinion/view/story/9278183p-9193002c.html

Build trust on oil taxes
Lawmakers should heed call for hearings on road system
Published: September 5, 2007
Last Modified: September 5, 2007 at 12:36 AM

Take it on the road, lawmakers. Share a little, Juneau.

Gov. Sarah Palin has called the special session on oil taxes for Juneau, despite being inclined to meet closer to where most Alaskans live.

She also has urged lawmakers to hold committee hearings and take public testimony on the road system.

That's a good idea, especially given the context of this special session.

This session aims to make sure that Alaska gets a fair return on the oil wealth that Alaskans own. This session is necessary to restore Alaskans' faith that their government can do that job with honesty and competence. The current tax regime carries the baggage of the current corruption scandal. This session must clear the air.

Tuesday, Gov. Palin stressed the message that the oil is ours. So is the government. That's why as many Alaskans as possible should have as good a look as possible at the work of the administration and lawmakers. While the Legislature will convene in Juneau, there's no reason that committee meetings can't be held in Anchorage, Fairbanks, Kenai, Wasilla and/or Palmer.

Yes, there are logistical problems. But those are well worth the trouble for the governor and lawmakers to come to the people. Lawmakers needn't wait for the governor's plan to hold hearings; oil tax bills already in various committees can provide vehicles for debate and testimony.

Gov. Palin's proposal will no doubt drive the session, and her tax bill likely won't be ready until early October. But she and Revenue Commissioner Pat Galvin on Tuesday outlined the highlights of their proposal. There's substance to debate now, and to compare with the other tax revisions in the works.

Gov. Palin knows that her first job is not an oil tax proposal, as important as that is. Her first job is to restore Alaskans' trust in their government. That's the first job of lawmakers too. And that's better done face to face.

BOTTOM LINE: Lawmakers, governor need to take special session to wider audience of Alaskans before they take it to Juneau.

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http://www.adn.com/news/alaska/crime/story/9278150p-9192978c.html

Wade has little to say as he makes first court appearance
NURSE: Now that he's locked up, police hope others feel free to talk.
By MEGAN HOLLAND
mholland@adn.com
Published: September 5, 2007
Last Modified: September 5, 2007 at 02:21 AM

Joshua Wade is a danger to the community and the circumstances around his federal bank fraud charges are "very ominous," a federal prosecutor said Tuesday in Wade's first court appearance since his dramatic capture over the weekend.

"If the circumstances underlying the charged conduct in this complaint are proven, or the missing person is found dead, then Mr. Wade is looking at prosecution for kidnapping and murder," said assistant U.S. attorney Crandon Randell.

Wade, 27, spoke little during the 15-minute court proceeding -- a hearing on federal charges of bank fraud that essentially will keep him in jail while authorities continue their investigation into the disappearance of Mindy Schloss.

A mix of those who support Wade and those who want to see him behind bars gathered in the courtroom for the brief hearing.

Greg "Bubba" Wade, the prisoner's father, sat in the front row behind his son. A big man, he stretched his arms over the chairs next to him, revealing tattoos on his upper arms. He didn't say anything.

Joshua Wade's friend Christina Greaser and her mother, Tina Greaser, sat in the next row. Christina Greaser, who says she has been close to him for three years, turned Wade over to authorities. She has said she believes in him and did it for his own good after he had been on the lam for five days.

On the other side of the courtroom sat FBI agents, police detectives and other federal prosecutors.

Anchorage Police Department homicide detective Pam Perrenoud, leading the investigation into Schloss' disappearance, watched the proceeding intently.

Wade has not been charged with harming Schloss, a 52-year-old nurse who vanished in early August and is presumed dead. But police and the FBI say he used her bank card in the days after she was last seen, and that makes Wade, a 27-year-old man best known for being acquitted in 2003 of a sensational murder and rape, "a person of interest" in Schloss' disappearance.

Anchorage police Lt. Dave Koch said Tuesday that Wade revealed little to investigators who questioned him after his capture on Sunday.

Police appear to be banking on Wade's having told someone about whatever happened to Schloss. Koch said investigators hope a friend or acquaintance will call with information.

Because Wade is now locked up, people who have been afraid to talk to police may now feel free to come forward, Koch said.

"I think someone knows," he said.

After the slaying of Della Brown in 2000, Wade bragged that he had killed her and brought friends to see the body. His defense attorneys were able to convince a jury that he had just happened to find Brown dead and lied about killing her to impress people.

In Tuesday's proceeding at the federal courthouse downtown, Randell brought up Wade's prior criminal history, including the allegations of murder, rape and robbery from the Brown case. He told Magistrate John Roberts that Wade may flee if let out of jail, given his history.

In answer to questions by Roberts, Wade said he had no money, so a federal public defender was appointed.

Roberts scheduled Wade's bail review for Monday during a preliminary hearing at which the prosecution will have to present enough of its fraud case against Wade to justify proceeding to trial.

Find Megan Holland online at adn.com/contact/mholland or call 257-4343.

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http://www.adn.com/news/politics/fbi/kott/story/9278921p-9192979c.html

Kott wants a lid put on mixup over medication given to him
TRANSCRIPT: Judge makes the exchange with lobbyist public.

By RICHARD MAUER
rmauer@adn.com
Published: September 5, 2007
Last Modified: September 5, 2007 at 03:50 AM

Former Alaska House Speaker Pete Kott is asking the judge in his political corruption case to prevent the jury from hearing evidence that ex-Veco chief executive Bill Allen supplied him with pills -- and that the results were not exactly as planned.

According to a transcript of an intercepted telephone call between Allen and Kott on May 31, 2006, Allen gave Kott pills for sleeping and for sex. Kott got them mixed up and complained he was up all night while his "old lady" slept beside him.

The remarkable transcript was prepared by the FBI and filed in court by Kott's attorneys to show U.S. District Judge John Sedwick what they didn't want the jury to see. The document was filed under seal Tuesday by Kott's attorneys, but quickly placed in the public file by Sedwick, who ruled there was no reason to keep it secret.

"Man, I've been having a hard time sleeping," Kott complained to Allen.

"So that worked pretty good," Allen said, laughing.

"Which ones are which?" said Kott.

"Goddamn it, I told you now, just use the white ones ... to sleep," Allen reminded him. "And the the goddamn, ah, brown or whatever they are, that's for (explicit language for sex), and the other one is for sleeping."

"Yeah, I thought I was taking the sleeping pill. Took the wrong one. Still got the white one," Kott said.

"You're something else," Allen said, laughing. "You're something else, Pete."

Jury selection in the bribery, extortion, fraud and conspiracy trial of Kott and codefendant Bruce Weyhrauch, a former state representative from Juneau, is scheduled to begin today.

But on Tuesday, after Sedwick handed the defendants two victories on other requests to exclude evidence, federal prosecutors said they may seek a rehearing or an appeal, which could put the case in limbo. They will make their argument during a conference at 8 this morning, before prospective jurors begin filing into the courtroom.

Sedwick ruled Tuesday that the government could not claim that Kott and Weyhrauch were required to disclose to fellow legislators or the public that both were seeking employment from Veco while they were voting on bills in which Veco had an interest. Alaska law has no such disclosure requirement, he said, though he also noted state law forbids legislators from voting when they face certain kinds of conflicts of interest.

Sedwick also threw out a request by federal prosecutors to bring in evidence of bad conduct by Kott as far back as 1999, when he began storing material at a Veco warehouse for his flooring business. The government also said Kott improperly received $12,000 in equipment from Bill Allen or Veco in 2002, a $5,000 payment in 2004, and a $1,000 payment made by Veco in 2003 to a Florida beauty pageant corporation to benefit one of Kott's relatives, as requested by Kott. The Eagle River Republican was speaker of the House in 2003 and 2004.

Sedwick said those allegations happened too far in the past to be relevant to the charges, which "mainly focused on legislative activities which took place in 2006."

One of Weyhrauch's attorneys, Doug Pope, said the rulings were significant victories for the defense. But the government may seek to overturn Sedwick's ruling on disclosure, it said in a filing Tuesday.

Bill Allen and former Veco vice president Rick Smith are expected to be key government witnesses. Both have pleaded guilty to bribing legislators and are cooperating with the government.

The evidence of Allen's pill dispensing to Kott was recorded on a wiretap of Allen's cell phone while the Legislature was in special session over oil taxes. Kott's lawyers say the conversation, and another between Kott and Smith about the "Corrupt Bastards Club," would be prejudicial.

"The use of sleeping pills and sexual enhancement pills will undoubtedly negatively impact the jury's opinion of Kott, particularly if he was taking those pills without a proper prescription," his attorneys argued. "It creates an impression of general law-breaking behavior. The evidence could also be used to suggest Kott is a person who pops pills, which is a very negative attack on character."

They go on to say: "The part of the conversation relating to accidentally taking the sexual enhancement pills is quite lewd. The tone and content of these conversations will likely impact the jury's opinion in a very negative way."

Three pages of Kott's May 29, 2006, conversation with Smith, also on a tapped cell phone, concern Kott's efforts to obtain 20 Veco hats embroidered or printed with "CBC." The letters refer to the Corrupt Bastards Club, an informal group of legislators who received large contributions or employment from Veco.

"Hey. How many of them hats you want CBC on the back?" Kott asked Smith.

After trying to figure out what Kott was talking about, it finally clicked, and Smith said 15 or 20.

"We gotta figure out who the club is," Smith said.

"Yeah," said Kott.

"Gotta get with Hawker," he said, referring to Rep. Mike Hawker, R-Anchorage.

"Yeah, I know," said Kott. "Yeah, the 20 might be a lot."

"Well, I mean, but then, you know, we need some for Bill (Allen) and, you know, and s--- like that," Smith said.

Hawker said Tuesday he had no idea why Smith was referring to him, but he knew about the "club."

"There was nothing nefarious involved," Hawker said. He was among a group of legislators, including Kott, and others who were joking one night in the bar at the Baranof Hotel in Juneau. A newspaper column had questioned whether campaign contributions from Veco to lawmakers created undue influence over the state's political process.

The joke was they were all part of some kind of "corrupt bastards club," Hawker said, and part of the joke was some of them were writing an increase in state oil taxes.

"At the time it was just gallows humor at best," Hawker said.

Find Richard Mauer online at adn.com/contact/rmauer or call 257-4345. Reporter Sean Cockerham contributed to this story.

 

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Houston Chronicle
September 5, 2007

http://www.chron.com/disp/story.mpl/business/5108913.html

Deal reached on one of four BP blast suits
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

A lawsuit on behalf of the estate of a contractor who fatally shot himself six weeks after the March 2005 explosion at BP's Texas City refinery has been settled hours before it was to go to trial alongside three other cases today in Galveston.

Robert Kwok, who represents the estate of Rene Cardona Sr., said today that both sides reached an accord Tuesday night after a jury of four men and eight women had been seated to hear the cases. During jury selection, he had introduced Cardona's 11- and 6-year-old sons to prospective jurors, including those who were chosen.

"BP continued to increase their offer to a point where it reached a level where it was in the best interests of the boys to settle the case," Kwok said. "We believe the offer to be fair and generous, and Rene's sons will be financially secure."

The amount of the settlement, like most of the 1,350 of about 3,000 lawsuits so far resolved, was not disclosed.

Three other lawsuits involving four adult plaintiffs remain in the first trial to emerge from the tragedy unless more last-minute settlements are reached. Opening statements are slated for today.

Lawyers on both sides chose the panel and four female alternates for the six- to eight-week trial on Tuesday, the third day of jury selection. While some other lawsuits have had trial dates, none had proceeded so far as to select a jury until now.

However, settlements remained possible, though attorneys declined comment on talks that continued after the panel was seated. Last month state District Judge Susan Criss, who presides over blast-related litigation in Galveston, ordered both sides to participate in mediation to exhaust efforts to settle.

After the panel was chosen Tuesday, she advised attorneys on both sides without elaboration to "work on that stuff you were intending to work on."

Brent Coon, who represents the four plaintiffs in the cases on trial and has taken the lead in organizing the vast litigation, said he was pleased with the panel.

"We think we have a very fair panel that can sit and listen to all the evidence and render a fair verdict," he said.

BP lawyer Kenneth Tekell declined comment Tuesday.

Kwok told the jury pool last week that Cardona, 26, of Baytown, lost 15 co-workers in the blast and was laid off from his contractor job as an electrical maintenance operator. Kwok said he shot himself in the head hours after he received his first unemployment check for $9.

An autopsy showed Cardona had cocaine and alcohol in his system when he died, and Kwok told the panel that the sides disagreed on whether he used those substances before the explosion.

BP has consistently said the company is working hard to settle all cases. The blast killed 15 people and injured scores more, with tremors felt as far as five miles from the plant.

"We have worked awfully hard not to have to stand before you today," BP lawyer James Galbraith told the pool of more than 200 prospective jurors without acknowledging specific settlements. Some in the pool noted they knew the company has settled lawsuits.
"Very early on, BP stood up and said, 'We accept responsibility for the explosion.' What we said was, we accept responsibility for what we caused," Galbraith said.

"We're here because we have a dispute with these particular claimants about the nature and extent of any injuries."

The plaintiffs are Scott Kilbert, 48, of Bellville; Nara and David Wilson, both 44, of Santa Fe; and Rolando Bocardo, 41, of Baytown. All were contractors.

On Tuesday, a woman asked if the plaintiffs had been offered any money, and Galbraith said he couldn't divulge anything about such negotiations. A few minutes later, the same woman stood up and said, "I am definitely biased in this case." She was not chosen for the panel.

Others didn't make the cut after saying they distrust BP or knew someone hurt in the blast. One man said he was close to a relative of someone who was injured and who, he had heard, sued BP and got a $750,000 settlement for what he considered a flimsy claim.

"For someone who doesn't have that much evidence to get paid that much, someone has to be covering something up," the man said.

A slew of prospective jurors who last week criticized Cardona or the others seeking compensation for mental anguish also were not chosen.

BP has settled all cases involving deaths from the explosion.

Remaining cases largely involve blast-related injuries and property damage.

Coon had said Kilbert, the Wilsons and Bocardo suffer from post-traumatic stress disorder and hearing loss.

The explosion occurred after a piece of equipment overfilled with flammable liquid hydrocarbons. Alarms and gauges designed to warn of the problem failed, and vented vapor ignited during startup of a unit that boosts octane in gasoline.

The pool included people who saw the smoke or felt the tremors from the blast. It also includes two safety officers at the plant and numerous people who work at refineries or know people who do, including BP's.

The blast prompted several investigations that examined BP's safety practices. The U.S. Chemical Safety and Hazard Investigation Board's two-year probe concluded that budget cuts imposed in the years before the explosion laid the foundation for the tragedy. BP disputes that assertion.

The company is implementing safety-improvement recommendations of a panel led by former Secretary of State James A. Baker III, which found that BP gained false confidence about process safety, or proper equipment operations and handling of hazardous materials, while focusing more on personal safety, or prevention of slips and falls. The panel said it found no evidence that BP intentionally ignored operational safety.

The Texas City plant is BP's largest refinery, with a capacity of 460,000 barrels a day. The plant has been operating at about half its capacity since Hurricane Rita blew ashore in September 2005. The company aims to restore it to full capacity by year's end.

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/5108188.html

Jury chosen to hear BP blast trial
Cases first among thousands to reach courtroom, but settlements still sought
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

A Galveston jury of eight women and four men will decide the outcome of the first trial to emerge from thousands of lawsuits related to the March 2005 explosion at BP's Texas City refinery unless last-minute settlements are reached.

Lawyers on both sides chose the panel Tuesday, the third day of jury selection, to hear the trial involving five plaintiffs in four lawsuits. Four women were chosen to be alternates in the six- to eight-week trial scheduled to begin today with opening statements.

BP has settled at least 1,350 of about 3,000 blast-related lawsuits. While some had trial dates, none had proceeded so far as to select a jury until Tuesday.

However, settlements remained possible as attorneys privately continued negotiations, about which they declined comment. Last month state District Judge Susan Criss, who presides over blast-related litigation in Galveston, ordered both sides to participate in mediation to exhaust efforts to settle.

After the panel was chosen Tuesday, she advised attorneys on both sides  without elaboration  to "work on that stuff you were intending to work on."

Brent Coon, who represents four of the five plaintiffs and has taken the lead in organizing the vast litigation, said he was pleased with the panel.

"We think we have a very fair panel that can sit and listen to all the evidence and render a fair verdict," he said.

BP lawyer Kenneth Tekell declined comment.

Striving for settlements
BP has consistently said the company is working hard to settle all cases. The blast killed 15 people and injured scores more, with tremors felt as far as five miles from the plant.

The cases before Criss involve four adults and the estate of a fifth who fatally shot himself in the head six weeks after the blast.

"We have worked awfully hard not to have to stand before you today," BP lawyer James Galbraith told the pool of more than 200 prospective jurors without acknowledging specific settlements. Some in the pool noted they knew the company has settled lawsuits.
"Very early on, BP stood up and said, 'We accept responsibility for the explosion.' What we said was, we accept responsibility for what we caused," Galbraith said.

"We're here because we have a dispute with these particular claimants about the nature and extent of any injuries."

The plaintiffs in the lawsuits are the estate of Rene Cardona Sr., 26, of Baytown, who killed himself; Scott Kilbert, 48, of Bellville; Nara and David Wilson, both 44, of Santa Fe; and Rolando Bocardo, 41, of Baytown. All were contractors.

On Tuesday, a woman asked if the plaintiffs had been offered any money, and Galbraith said he couldn't divulge anything about such negotiations. A few minutes later, the same woman stood up and said, "I am definitely biased in this case." She was not chosen for the panel.

Others didn't make the cut after saying they distrust BP or knew someone hurt in the blast. One man said he was close to a relative of someone who was injured and who, he had heard, sued BP and got a $750,000 settlement for what he considered a flimsy claim.

"For someone who doesn't have that much evidence to get paid that much, someone has to be covering something up," the man said.

A slew of prospective jurors who last week criticized the plaintiff who committed suicide or the others seeking compensation for mental anguish also were not chosen.

BP has settled all cases involving deaths from the explosion.

Remaining cases largely involve blast-related injuries and property damage.

Dispute over drugs
Robert Kwok, who represents Cardona's 11- and 6-year-old sons, said last week Cardona was laid off after his 15 co-workers died in the explosion and killed himself hours after receiving his first unemployment check for $9.

An autopsy showed he had cocaine and alcohol in his system, and Kwok said the sides disagree on whether he was a user of those substances before the explosion.

Kwok declined comment on the panel on Tuesday.

Coon had said Kilbert, the Wilsons and Bocardo suffer from post-traumatic stress disorder and hearing loss.

The explosion occurred after a piece of equipment overfilled with flammable liquid hydrocarbons. Alarms and gauges designed to warn of the problem failed, and vented vapor ignited during startup of a unit that boosts octane in gasoline.

The pool included people who saw the smoke or felt the tremors from the blast. It also includes two safety officers at the plant and numerous people who work at refineries or know people who do, including BP's.

The blast prompted several investigations that examined BP's safety practices. The U.S. Chemical Safety and Hazard Investigation Board's two-year probe concluded that budget cuts imposed in the years before the explosion laid the foundation for the tragedy. BP disputes that assertion.

Safety improvements
The company is implementing safety-improvement recommendations of a panel led by former Secretary of State James A. Baker III, which found that BP gained false confidence about process safety, or proper equipment operations and handling of hazardous materials, while focusing more on personal safety, or prevention of slips and falls. The panel said it found no evidence that BP intentionally ignored operational safety.

The Texas City plant is BP's largest refinery, with a capacity of 460,000 barrels a day. The plant has been operating at about half its capacity since Hurricane Rita blew ashore in September 2005. The company aims to restore it to full capacity by year's end.

kristen.hays@chron.com
 

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Wall Street Journal
September 5, 2007

Jury Chosen In Trial Stemming From `05 BP Texas Plant Blast
DOW JONES NEWSWIRES
September 4, 2007 5:03 p.m.

 GALVESTON, Texas (AP)--After three days of intense questioning, a jury was selected Tuesday in the first civil trial stemming from the deadly 2005 explosion at BP PLC's Texas City plant that killed 15 people and injured more than 170 others.

The 12-person jury is made up of eight women and four men. Four alternates were chosen for a trial that could last two months.

The jury was selected after three days of questioning from a pool of more than 200 people to decide the fate of five lawsuits filed against BP.

Many who were questioned said they couldn't render a fair decision because they thought BP and the oil industry cared more about profits than safety. Others said they couldn't award money for any mental anguish the plaintiffs might have suffered because people assume some risk working in the petrochemical industry.

About 1,350 of the thousands of lawsuits filed since the accident have been settled.

BP attorney Jim Galbraith said the London-based oil giant is fighting the five suits set to go to trial because the plaintiffs want more money than the law allows. The lawsuits, barring settlements, would be the first tried in the accident.

The plaintiffs want punitive damages for gross negligence, and BP has said the accident wasn't the result of gross negligence.

"March 23, 2005, is without a doubt the worst day of (BP's) presence in our community," Galbraith told the jury pool. "It was definitely a tragedy. It was an explosion that nobody saw coming."

Galbraith told potential jurors BP has never denied responsibility for the accident and has worked hard to make sure it doesn't happen again.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that probed the accident, found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the explosion.

An internal report by BP released in May said there was a culture at the plant that seemed to ignore risk, tolerated noncompliance, and accepted incompetence.

Originally, seven lawsuits were to be tried, but two were settled before jury selection began.

The plaintiffs in the five lawsuits are:

-The 6- and 11-year-old sons of Rene Cardona Sr., 26, from Baytown, a contract worker for engineering and construction company Contech Control Services who committed suicide six weeks after the blast. One lawsuit was filed on behalf of the sons, whose lawyers attribute Cardona's suicide to the trauma of the accident.

-Nara and David Wilson, both 44, from Santa Fe, Texas. The couple, who filed separate suits, worked for mechanical contracting company Altair Strickland.

-Scott Kilbert, 48, from Bellville, an instrumentation supervisor for construction company JE Merit.

-Rolando Bocardo, 41, from Baytown, an instrument fitter for JE Merit.

Attorneys for the Wilsons, Kilbert and Bocardo said their clients have suffered a variety of injuries, including back problems, hearing loss and post traumatic stress disorder.

The blast has cost the company at least $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.

 

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Anchorage Daily News
September 4, 2007

http://www.adn.com/news/government/story/9276451p-9191251c.html

PART III of a series
Commute, job work for Palin
Published: September 4, 2007
Last Modified: September 4, 2007 at 04:20 AM

Gov. Sarah Palin recently sat down with Daily News reporter Tom Kizzia to talk about some of the issues of her first year in office. It had been just a year since she swept to her first big electoral victory, in Alaska's 2006 Republican primary. Polls have shown her with a positive rating of more than 80 percent.

Gov. Palin's comments on political corruption, oil taxes and the gas pipeline project appeared Sunday and Monday. Following are excerpts of the conversation on a few other topics, including the proposed Pebble Mine in southwest Alaska, her future political aspirations and what having a governor-mom has meant to her children: Track, Bristol, Willow and Piper.

The interview took place in Palin's downtown Anchorage office. The governor had driven to Anchorage that morning from her family's home in Wasilla -- a commute she once described as wearisome when she was working for the Alaska Oil and Gas Commission.

ADN: You're commuting in the summer when you're here?

PALIN: Today I commuted in, yes. Tomorrow I will commute to Kenai. I will commute to wherever I need to be.

ADN: But not it a jet, apparently.

PALIN: But not in a jet, and I'm so thankful that happened the way it happened, and that it finally sold. Now I'm flying commercial. Or driving myself.

ADN: Driving your Jetta? I remember in the primary you said you were driving the Jetta instead of the jet.

PALIN: Bristol has the Jetta. I'm driving a state rig right now.

ADN: We're going to start with a really tough question. What does it feel like to be called the most popular politician in America?

PALIN: Well, I haven't heard that one. I have heard that my poll numbers for governors are high. And I think, well, that's because I'm a relatively new governor. I think poll numbers are reflective of Alaskans' and I think even Americans' desire for change and of not doing business as usual. And I think that's what we represent. So that's humbling. Yeah.

ADN: There's even talk out there of your being a potential vice presidential nominee. Have you ever actually imagined running for federal office?

PALIN: Um, haven't really contemplated that. And I am very realistic. I know that the state of Alaska could be and should be contributing to the United States much more so than we are today. We could be helping the United States. I think I can help do that as governor.

ADN: How about in the future, could you imagine running, say, for Congress?

PALIN: That would all depend on the kids' situation, how they were doing and if they blessed such a move, but today, I'm not contemplating that, no.

ADN: Anything within this term of office?

PALIN: Something very, very, very drastic would have had to have happened to get me to think along those lines because, again, I feel that I certainly have a responsibility and an obligation that I will be fulfilling. That is putting my name on the dotted line to serve as governor for four years; that's what I believe I should be doing.

ADN: So how has it been, being governor, for your family? Has it been tough for the family?

PALIN: I think, big picture, not real tough because the kids and Todd, we've always had to have flexible schedules, very adaptable. Because I don't know if people are aware, but being mayor and manager of the city of Wasilla for those six years was quite taxing also, time-wise, and it took a huge commitment to get the job done there also. So the kids have grown up with busy parents and have had to be flexible. And growing up with that, this has always been part of their environment, so that hasn't been tough.

What has been tough is just a few individual incidents, Tom, that would not have happened had I not been elected governor that the kids have had to go through, which has been, I think, kind of unfortunate, but it must go with the territory.

ADN: Where somebody says something to them ...

PALIN: Yeah, says like, you know, your mom sucks as our governor. So here's what I'm going to do to you next time I see you, something like that coming around in an e-mail to one of the girls.

With Track, with hockey, he tendered his rights to get to play for the Alaska Avalanche, ready to go play juniors there and some kid telling him oh, it's political. It's just because, you know, your mom is governor. Just little tiny things and just a couple of incidents, again, wouldn't have happened had I not been elected, but overall, it's been very good for the family.

Good in the sense of uplifting. They know it is an adventure. They know that we are being productive. They are a part of this and I think, all and all, this first year has been very, very good.

ADN: When you were out in Bristol Bay this summer, did you hear people talking about the Pebble Mine?

PALIN: I did.

ADN: What is your current thinking on the Pebble Mine? Especially I am thinking of what you've said about the state needing to establish credibility nationally. There has been criticism of the previous administration for having partially dismantled some of the regulatory process that people are now looking to to make sure that Pebble can be done without harm to the fisheries.

PALIN: Right. Pebble is not going to be permitted if it is going to harm the fisheries, and when I was out in Bristol Bay, I heard both sides. I heard both sides the minute I walked into my mother-in-law's house in Bristol Bay.

You know, we have family split on the issue and that is fascinating, but Pebble Mine will not be permitted on our watch if it adversely impacts the world's richest salmon spawning grounds, a renewable resource that has sustained western Alaska for generations. ... But we can't go in there with a preconceived notion that Pebble Mine should or shouldn't be permitted.

They have not applied for all of their permits. The (Environmental Impact Statement) has not been presented. I will not judge the project and I will not ask DNR or DEC or any of the overseeing agencies to judge it until all of the information is in.

ADN: And are you comfortable with the regulatory structure that you have inherited? Is it up to the job to make these decisions?

PALIN: I am because we have the right people in place with Larry Hartig, with Tom Irwin, with Marty Rutherford, with Talis Colberg, with these cabinet members who are in charge of decisions like this in these overseeing agencies. They are in these positions, Tom, for the right reason and they are going to make sure that Alaska's best interest is met here with a project even like Pebble.

They are not going to do it as political favors for anybody, either for or against a project like Pebble. They are not going to let politics get in the way of the science involved in a decision that has to be made on Pebble, or the economics or anything else. I have faith in these agencies that they will be able to make the right decisions.

Contact reporter Tom Kizzia at
tkizzia@adn.com.  Palin's comments have been lightly edited for space and repetition.

Xxxx

http://www.adn.com/news/politics/fbi/kott/story/9276466p-9191272c.html

Prosecutors direct new allegations against Kott
UNLAWFUL GIFTS: Prosecutors say Kott started
accepting benefits from Veco officials in 1999.
By RICHARD MAUER
rmauer@adn.com
Published: September 4, 2007
Last Modified: September 4, 2007 at 03:01 AM

As federal prosecutors prepare to begin their case this week against two former state legislators, they have unveiled new allegations that one, Rep. Pete Kott, had been taking unlawful gifts and benefits from Veco officials since 1999.

Kott, a former House speaker who ran a flooring business on the side, stored equipment from 1999 to 2006 at a warehouse owned by the oil-field service company, the government said in a recently unsealed motion. The government also alleged that Kott received $12,000 in equipment from Veco or its former chairman, Bill Allen, in 2002, and that Allen gave him $5,000 in 2004. The next year, Kott took possession of tools and other items that Veco bought in a charity auction, prosecutors said.

Those alleged actions were in addition to conduct charged in the seven-count indictment returned by a federal grand jury in Anchorage in May against Kott, an Eagle River Republican, and former Rep. Bruce Weyhrauch, a Juneau Republican. Most of the alleged illegal activity in the indictment took place between September 2005 and August 2006.

Both men have pleaded not guilty to bribery, extortion, fraud and conspiracy. Their trial begins Wednesday in Anchorage before U.S. District Judge John Sedwick.

In the days leading up to the trial, the two defendants have also been firing back at the government, challenging some of the legal theories of the prosecutors. They are disputing the government's assertions that the two men had a duty to disclose they were seeking work from Veco or Bill Allen at the same time they were voting on issues affecting Veco.

Kott also asked the judge to prevent the government from bringing up alleged prior "bad acts" that weren't specifically charged in the indictment.

Allen and former Veco vice president Rick Smith are expected to be key government witnesses. They have pleaded guilty to bribing legislators and hope to get their sentences reduced by cooperating with the authorities.

In disclosing that they intended to bring up Kott's earlier conduct to the jury, government prosecutors said they expected Allen and Smith to testify "to the general scheme to provide Kott with things of value in exchange for securing Kott's agreement to take officials acts to benefit Allen, Smith and Veco."

In one instance, Kott's attorneys said in a court filing last week that Kott was only joking when he asked Veco for help in getting him a job at a prison the company was building in Barbados.

"These Barbados comments are made in jest, and that intent is clear from the context of the conversations, which involved drinking and joking," they said.

And Kott's talk of working as a lobbyist for Veco -- a discussion he held while still in office -- were "off-hand, brief, and are absolutely devoid of any details or even specific requests to be Veco's lobbyist or a specific promise to be hired as Veco's lobbyist," his lawyers said.

Weyhrauch, a lawyer, is accused of selling his votes for a 2006 oil-industry tax bill in return for a promise of legal work after the regular legislative session. The government said Weyhrauch should have disclosed his negotiations for work with Allen and Smith.

But Weyhrauch's attorneys said he had no duty to disclose under state law or House rules.

Kott's lawyers said as much and asserted that it's the normal House practice to require members to vote even if they have a conflict of interest. That negates the need for disclosure, they said.

Government lawyers said that position is nonsense.

"Each member of the Alaska State Legislature has an inherent duty to the public of the State of Alaska to conduct their dealings free of conflicts of interest," prosecutors said in a memorandum filed Saturday. "The existence of this duty is intrinsic to a public official's obligation to conduct his or her affairs free of improper influences." State law requires legislators to not only avoid conflicts of interest, but even the appearance of a conflict, they wrote.

Weyhrauch appeared to understand that duty, the prosecutors said, because he disclosed other conflicts even if he failed to disclose his job solicitation from Veco.

Find Richard Mauer online at adn.com/contact/rmauer  or call 257-4345.
 

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Anchorage Daily News
September 3, 2007

http://www.adn.com/news/politics/story/9274493p-9189289c.html

Part II of 3 part series

Palin's oil agenda includes credits as well as tax
Published: September 3, 2007
Last Modified: September 3, 2007 at 02:31 AM

Gov. Sarah Palin has called a special session of the Legislature to reconsider the state's new Petroleum Profits Tax, or PPT, passed in the waning days of the administration of her predecessor, Frank Murkowski.

She has cited two reasons for taking a second look at the tax.

One, federal indictments allege some of the legislators' votes were bought with money or promises of work from the oil field services company Veco.

Two, the tax hasn't been performing as promised, according to the state Department of Revenue. The PPT is expected to bring in $250 million more this year than the tax it replaced -- but that would be $800 million less than the amount predicted when the tax passed a year ago.

Daily News reporter Tom Kizzia recently talked with Palin about why she thinks the predictions went so far wrong, new developments in the gas pipeline project and what she wants to see the Legislature do when it convenes Oct. 18. A formal announcement of the administration's position on the PPT is due tomorrow. Palin's comments have been lightly edited for space and repetition. The unedited audio is available on adn.com.

ADN: On the PPT, your analysis this month showed revenues coming in far less than anticipated because of the companies' costs they are deducting. Way off from what they were saying just 12 months ago. How could the predictions have been so far wrong?

PALIN: Major over-promised. Eight hundred million dollars ... We are not going to look at this as, well, it's water under the bridge, what the projections were and what reality is today. No, we have to find out what was missing when the Legislature and the public were promised the success of PPT: 'Oh, this is going to be so good for the state of Alaska because it is going to bring in X amount of money.' Was some information not provided the public and the Legislature at the time? Or truly did conditions economically change to such a degree that no expert could have predicted the increased cost of labor and steel and operations on the North Slope?

That is what the Department of Revenue is trying to find out and we are not going to just let it go with an assumption that no expert could have ever predicted these increased costs. Because we don't buy that.

And here again, this ties back into what was the motivation of the administration when they proposed it? What was the motivation of the administration when they proposed a rate? The governor proposes a rate. He leaves for the weekend, meets with oil industry executives, comes back from the weekend meetings and kind of kowtows to what appears to be their pressure for a lower rate.

We still need answers to that, but while we are seeking those answers, just as importantly, even more importantly is seeking a solution now to the problem that we face. The problem that we face is that PPT isn't working as promised, obviously.

Not only are the revenues not what we had anticipated or been told they would be, but also the investment climate isn't what (it) was promised to be, the credits that were involved in PPT where it was supposed to induce new investment that would lead to actual new development in the state. The explorers aren't excited about it. They are not buying up those credits. There is not a market for it.

So that aspect of PPT which is more complicated and not discussed so much in the public, we have to get in there and figure out a better way of creating that investment environment for the new explorers, for new companies to come in, not just BP, Conoco Phillips and Exxon to be here, but the new to come in.

ADN: When you talk about the previous administration's motivations, are you suggesting that it is worth looking to see whether there was something other than ideology or kowtowing? You first raised it in the context of criminal investigations and looking at, you know, the kind of influence-peddling that has gone on in other parts of the Capitol.

PALIN: You know, hard for me to speculate on that because, again, there hasn't been an investigation along those lines, so I don't know. But it does appear to be some political motivation there and some desperation for that gas line that had been promised Alaskans.

It seemed to be the administration was of the mind-set (to do) whatever it took to keep the oil companies at the table, to get them to agree to a deal on someday building a gas line, which of course, to this administration makes no sense because we know that building a gas line, a pipe, infrastructure to flow a resource to the rest of the United States, doesn't have to be built by an oil company. There are gas line companies across the globe that could bid on this project and build a line.

ADN: So the gas line project would have no bearing on the special session looking at oil taxes in October?

PALIN: Gas line and oil taxes are two totally separate issues, and I think the problem that the prior administration had was the two being enmeshed and the public being confused ... It should never have been jumbled together. We are trying to keep them separate.

ADN: Has the reception in the market this summer for the gas line project given you any reason for optimism? (Critics) looked at the extension of your deadline and said the state is probably not getting much enthusiasm.

PALIN: We got new interest saying, 'Hey, you guys are serious about building a line and you are ready to have skin in the game. ... Okay, we will take you seriously now. Give us some time to get our proposals together.' That was the reason for the extension. It was a smart, prudent thing to do. It is funny, though, that the naysayers who say, 'You extended the (dead)line, that is not a good sign,' they are the same ones who were saying throughout AGIA (Palin's Alaska Gasline Inducement Act), 'You are not flexible enough. There is no way you are going to get any bid on that. You are too stringent in all of your criteria.'

So, hey, OK, we are going to be flexible here. Not on the must-haves ... As long as we can make that promised deadline to get a chosen partner in front of the Legislature to consider, I didn't have a problem with extending the deadline to receive more proposals.

ADN: If any of the North Slope producers comes in with a nonconforming proposal, is that something you can negotiate?

PALIN: You know, it's tough to even consider that, Tom, because the producers -- we get such mixed messages from -- especially BP and Exxon. Conoco Phillips has been pretty consistent in saying, 'We do want to participate, we want to find a way to partner with Alaska.'

ADN: If it was noncompliant, where does that put the state? The oil companies do have a big role to play in this eventually.

PALIN: Well, they have a big role, but again, remember, they are not the only game in town and if they can't comply with the must-haves that are in Alaska's best interest, it is not going to work and they already know that.

ADN: Back to the oil taxes. You talked about a gross production tax during the campaign. Are you going to push for one now?

PALIN: We are still evaluating, still creating the models ... and the recommendation to be presented on September 4. ... I think keeping it simple, keeping it transparent, not getting gamed is going to be certainly the criteria that has got to be weighed heaviest.

ADN: Critics have been saying for several administrations that we need to have more auditors, better auditors, I guess better-paid auditors. Can't the administration simply reclassify these jobs and come up with some more money to hire them?

PALIN: Well, that is one thing that we can do, but remember these multinational corporations making billions of dollars quarterly have a heck of a lot more resources than the State of Alaska has and many of those resources go toward, as any capitalist would be doing, maximizing their profit, minimizing their risk and minimizing their costs and expense to do business.

They pay people to do that. It would be very, very tough for the State of Alaska to match them. It would be an impossible dollar-for-dollar match, match them on auditing. So we have to make sure that the formula that is adopted doesn't leave room for that kind of competition because we will lose in that kind of competition.

ADN: Well, even a gross production tax would require, I would assume, some incentives for exploration and development of marginal fields.

PALIN: It has to.

ADN: And there is a lot of opportunity there for gaming the system, I think.

PALIN: Well, OK, neither system, obviously, is simple and a gross ... really will evolve into more of a hybrid also to allow for the incentivizing, the credits to be provided for new investment. That's the ideal. ...

It is going to be facts and figures and very, very hard data that shows what is going to be best for Alaska and I will tell you, Tom, if it is going to be proven at the end of the day on September 3rd that a gross tax just wouldn't work for the State of Alaska because we couldn't find what those right incentives are to induce new investment, if gross wouldn't work, I would be the first one to say you know, I thought having a gross and keeping it real simple was the best thing for Alaska, but look at what the numbers tell us, so we can't go there.

I will be the first one to say that. I will, you know, spend the political capital or whatever it takes, but I am not going to let politics there get in the way of doing the right thing for Alaska. And it is our future. Oil taxes and the gas line, these are the future of Alaska because we are talking about nonrenewable resources here and once the resource is gone, it's gone.

We have to make sure we are receiving the appropriate value for that oil today and with that value that we receive, we have to prudently invest that money and we have to save for the future or we are in a world of hurt in the future of Alaska.

ADN: The special session -- do you know where it is going to be yet?

PALIN: No ... If there is an insistence on the legislators' part that they just have to take that vote in Juneau, that is the only way they are going to be successful if they are down there in Juneau casting a yes or no vote on PPT or gross in the building in Juneau, then so be it.

I am not going to fight them on that. It is not worth a battle on that, but we had better be able to incorporate hearings around the state on such an important issue so that more people can access their lawmakers and physically be there and see what is going on and give input and interact with their lawmakers.

We better be able to do that ... I certainly hope we don't get a lot of push-back on an idea like that. If they have got to cast the vote in Juneau, that is fine, but we have got to make sure that we are having hearings around the state.

ADN: During the 30 days?

PALIN: Yes.

ADN: Or prior to the 30 days?

PALIN: Yes, ideally even prior to. See, I would hope that ideas like that though, Tom, could come from the Legislature. You know, I feel like, OK, sometimes I receive this message from the Legislature saying hey, Sarah, hands off. You don't tell us how to do our business. There is a separation of powers and I can accept that and I say I respect that separation of powers, but at the same time then, legislators, when you recognize that the public isn't real pleased with state government, that includes the executive branch and the legislative branch, then we better start doing things differently.

We better start doing things right. What are your innovative ideas on how we can do things right and how we can start building trust by the public? One idea I think that they should embrace is having some meetings around the state.

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Contact reporter Tom Kizzia at tkizzia@adn.com.

PART TWO OF THREE

TOMORROW: Palin on the Pebble mine, whether she'll run for higher office and the effect of her election on her family.

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PART I of III

http://www.adn.com/news/politics/story/9272372p-9187130c.html

Palin foresees positive changes in politics
Published: September 2, 2007
Last Modified: September 2, 2007 at 09:45 AM

On Aug. 22, 2006, Sarah Palin shocked the Republican Party establishment with a crushing primary victory over incumbent Gov. Frank Murkowski and former state Sen. John Binkley. She went on to win the governor's race in November by a comfortable margin and, according to polls, has grown even more popular with Alaskans during her first year in office.


A year after that primary victory, Gov. Palin sat down with Daily News reporter Tom Kizzia to talk about some of the biggest issues of her first nine months in office, including the ongoing federal corruption investigation and next month's special session to reconsider the state's new oil tax.

Featured today: Her thoughts on the political corruption investigation and the changes to the system she says will be necessary to chart a different course for the state. The governor's comments have been lightly edited for space and repetition. The complete audio is available on adn.com.

ADN: How do you feel about how the FBI investigations are going now? You had a lot to say in May when the indictments came out. Now the investigation is veering toward the congressional delegation and could affect how Alaska does business. ... Does that make you uneasy?

PALIN: I am not scared of the changes that I believe are inevitable in terms of leadership that has represented the state of Alaska for all of these years because the change is inevitable.

Whether the FBI reveals something that leads to change, or just the changes in power in Congress ... or individuals maybe choosing not to run for re-election, age even of our politicians playing a part in this, change is coming to Alaska.

So I am not afraid of that and I don't want Alaskans to be afraid of what is coming. ... There are many positives that are going to result from change if we are in the right mind-set. ...

My interpretation of it is that Alaska has got to change its image. ... We need to be taken seriously so that we are given more credence and more authority here and we are provided more opportunities to develop our state. The only way that we are going to be able to gain the trust of the rest of the United States ... is to prove that we can do things right and honestly and transparently and Sen. Stevens knows that has been my message.

ADN: Transparency in government. Are you talking about self-sufficiency as well?

PALIN: I go back again to remembering when we became a state where we struck the deals with the federal government as we asked to be let into the union and the promise on our part was that we would be as self-sufficient as possible.

We wouldn't solely be reliant on the federal government to pay our bills, to provide services and build our projects here, and we become self-sufficient by developing our resources because we are so wealthy in terms of the resource that we have here, but into -- a large part here, we are not allowed to develop those resources and I think a lot of that has to do with others who are making decisions for us, looking at us like, 'We don't believe that their oversight is going to be strong enough for the environment.'

Now, of course, they are saying, 'We believe that there is corruption up there, so we can't trust Alaska to know how to do the right thing.' All of these things that are kind of elements right now in play, we have to be more responsible and more sensible than ever. This state government, our administration, has to prove to the rest of the United States that we can do things right.

ADN: Well, talk about dependence on the federal government, I think a lot of Alaskans have probably asked themselves why these investigations had to be carried out by the federal Justice Department.

PALIN: Yes.

ADN: Is the state capable of policing political corruption here or is it too tied up in its own system? Can voters have any confidence that any future transgressions can be handled by the state?

PALIN: That's a great question, and I am one of those who had asked why did it take the feds to come in here over the last couple of years and start digging into the issues that had been speculated about and rumored about?

Why couldn't the state police each other? Why couldn't the Legislature and legislators police one another? Why couldn't APOC (the Alaska Public Offices Commission) -- why didn't they have an investigator? All these tools that we are missing in the state's toolbox to clean up what was rumored to be corruption and undue influence, and I still don't have the answer as to why it was that the state had to rely on the feds again to come in and clean things up. But what we have done to change that though, with APOC, we funded them an investigator.

They need to have one with oversight of the oil industry. We just funded a five million-dollar new office, the PSIO office (Petroleum Systems Integrity Office) where we will have an integrity office overseeing the regulatory environment, even, of oil and gas development in the state. ...

We are going to put our money where our mouth is that we are going to be able to prove that our commitment is to do things right.

ADN: Is the investigator going to do it for APOC? Or does more change need to be made there in the election supervision?

PALIN: Well, an investigator is a good first step. Greater communication with APOC will be able to tell us what else is missing. And then those things that make sense to this administration to add to the toolbox.

We have got to go above and beyond with oversight. We have to make sure that the public is going to be able to trust that state government is making decisions in the people's best interest and we have got a lot of ground to make up.

ADN: Payoffs to legislators goes beyond just campaign finance investigations. That takes some serious digging for the Department of Law or the State Troopers or whomever. It would go beyond APOC.

PALIN: Well, right, and that obviously is why the FBI and Department of Justice, other entities with much greater resources than any state agency, had to come in. But also, I think the FBI's role in this and Department of Justice is an indication that the problems are greater than just maybe a local legislator pocketing a few thousand dollars to change a vote on something.

Evidently, it is more serious than what has been revealed thus far. Of course, not being privy to all of the information, I can't prejudge what any kind of outcome is going to be when more of the trials begin and I can't assume that the period of indictments is over. I think that there will probably be more.

ADN: In May, Attorney General (Talis) Colberg said the state was going to pursue its own investigation of things related, issues related to those Veco confessions. Is that still going ahead?

PALIN: Well, to the degree that we cannot step on the FBI's toes or get in the way of their investigation, our focus has been on what kind of undue influence was either impacting or coming from the administration? They are the ones who proposed the new oil tax regime, remember? And nobody is really asking well, what did Jim Clark (Murkowski's chief of staff) have to do with this? What did Murkowski have to do with all of this?

It's been our role and some of my assistants' roles who were here before to start getting in there and figuring out what was the motivation behind these proposals to change an oil tax. That is still being gathered. ...

ADN: Have the feds been looking at the previous administration's motives?

PALIN: I can't tell. We can't tell.

ADN: You can't say or you can't ...

PALIN: I can't prove that they have been doing that, except that they have conducted some interviews. They have interviewed, for instance, Joe Balash, my assistant on the oil and gas issues and Joe had been working for a legislator in the past and it sounds to me like the questions may have had to do with what was the administration's role. But that's something that we, you know, again, I am not privy to and we haven't heard or seen publicly what aspect of the administration's past actions are being questioned.

ADN: Some Alaskans have, you know, defended Ted Stevens and Lisa Murkowski in particular, saying it is only natural in a small state for a politician to have prominent friends and even enter business relations with them. What do you think? Where should public figures, political figures draw the line?

PALIN: Well, maybe that is commonplace in a former smaller world of politicians in Alaska, but that is not commonplace in my world to be presented, you know, maybe amazing or even outlandish investment opportunities that turn us into rich individuals. ...

I am not buddies with Bob Penney. I don't go to that Kenai classic fishery thing, you know, I don't go hunting and fishing with Bill Allen. That's not my world. So my perspective is, I guess this new leadership team, we wouldn't be tempted to become part of that world because that is not where we came from. I'm not enticed at all or excited about the idea of hooking up with some of the characters in the past that now are in trouble.

ADN: Do you think if they had adhered to a brighter line that they could have avoided some of this trouble?

PALIN: I think everyone has that individual and personal ethical compass within and I think that maybe in the past, some individuals, their compass was way off kilter and decisions were made based on a real skewed idea of what ethical activity would be. I am not claiming holier than thou and I am not saying that the people who I hire and surround myself with, that any of us are perfect.

All of us make mistakes ... but as long as I am confident that moral compass is right on target and we are not going to be tempted to do anything for self gain then I think that is what is going to best for the progress that we need here in Alaska. I can't say that was the case in the past in Alaskan politics. Obviously it wasn't or we wouldn't have high-ranking CEOs pleading guilty to bribery.

ADN: But I think you are also talking about the activities in the gray area -- the business relationships with, you know, a senator or congressman or a state legislator. Between someone with interests in the public process and the people running the public process.

PALIN: Right. Well, that's why I think we need more real and normal and hardworking and blue-collar Alaskans to want to run for office and serve in these positions that are making decisions.

Again, I will personalize this. I am not from that other world. My dad as a school teacher wasn't a mover and shaker developer making big bucks in the state of Alaska off of property development. My husband isn't that way. I am not raising my kids to be that way.

... If you want to be in public service, it is being willing to serve Alaskans for the right reasons. It is having to have a servant's heart when you come into these positions. It's not to get rich.

TOMORROW: Palin on the Petroleum Profits Tax and the oil industry.

Contact reporter Tom Kizzia at
tkizzia@adn.com.

Xxxxx

 
http://www.adn.com/money/story/9272324p-9187100c.html

A look over governor's shoulder
OIL TAX OPTIONS: Palin set to show us her hand this week.
TIM BRADNER
ECONOMY
Published: September 2, 2007
Last Modified: September 2, 2007 at 03:23 AM

Gov. Sarah Palin is to roll out her ideas for changing the state's oil and gas production tax on Tuesday, setting the stage for what may be a contentious special session of the Legislature the governor has called for Oct. 18.

We won't know until Tuesday what Palin will propose but it is likely to involve either changes to the new net profits oil production tax -- the Petroleum Production Tax, or PPT -- or a variation on the old tax based on gross revenue.

A lot of political talk is developing around the PPT. I want to set some things straight. There are advantages and disadvantages with both tax systems, and changes must be thought through clearly and carefully.

The current tax on industry profits is different from the previous tax on gross revenue mainly in that operating and capital costs may be deducted. Both taxes start with determining the value of the oil as it comes out of the ground (the market price minus costs for shipping oil by tanker and pipelines). The old tax was applied at that point, as a percentage of the gross revenue. The new PPT allows production costs to be deducted to arrive at a net profit. The tax is then applied as a percentage of that number. The PPT is not a true profits tax because not all costs, like corporate overhead, are allowed as deductions.

There are some additional features. The old tax was adjusted by something called the "economic limit factor," an incentive that lowered the tax rate on higher-cost fields but this incentive had become obsolete and dysfunctional.

The new tax junks the ELF but incorporates an "investment tax credit" intended to spur exploration and development of existing fields. This tax credit is somewhat of a side issue because the core of the current debate is over the merits of a gross revenue vs. net profits tax.

In early August the Revenue Department released a report that claimed the PPT is not working as intended because deductible costs were much higher than expected. The tax is bringing in more revenue, but about $800 million less than predicted when the Legislature debated changing the tax last year. The department acknowledged that its analysis was based on projections, not real numbers, but that point gets lost.

It was interesting to me that the department used an oil price of $55 per barrel in its estimate for revenue under the PPT (a figure from its spring oil price forecast. It's a fine point, but if actual oil prices were used, or a trend of prices for the first three months of the fiscal year, the revenue estimate would be much higher.

The important question, however, is whether we have enough information, based on real numbers and not estimates, to make intelligent decisions on the tax.

We don't.

One advantage of the gross revenue approach is that it is simpler and easier to work with than a net profits tax. The disadvantage is that without some added incentive like the ELF, a gross tax hits all fields, large and small, at the same tax rate. This would kill off heavy-oil development, which is important to our future oil production, unless there is some new version of the ELF. The problem with a special incentive formula is that it can get outdated, as the ELF did.

The advantage of the net profits tax is that it automatically adjusts for high-cost fields and needs no ELF-type formula. The disadvantage is that it is more complex and difficult to administer. I think the auditing issue is a red herring, however. If the state is having trouble hiring auditors the Revenue Department could contract with a top-notch accounting firm to assist. I haven't heard this discussed. The new law also gives the state access to intercompany audits done by partners in oil fields owned by more than one company, which is the case with most of the big producing fields. This is a big advantage for the state.

Some oil producers are neutral as to whether the tax is on gross or net revenues as long as there is some way to help high-cost places like heavy-oil fields. The total state take of taxes is important to them, too.

Most governments of producing nations around the world successfully use some variation of a net profits tax, and we could too. Legislators will have to weigh the pros and cons of all this.
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Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every fourth Sunday.
 

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Houston Chronicle
September 1, 2007

http://www.chron.com/disp/story.mpl/business/5100529.html

Jury pool hears of worker's suicide
Panel won't be chosen until next week for suit on 2005 BP blast
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  The suicide of a former BP contractor who survived the deadly 2005 Texas City refinery explosion drew largely unsympathetic responses from prospective civil-trial jurors questioned Friday.

The man's sons are among plaintiffs in a trial scheduled to begin next week in a Galveston courtroom.

Lawyers have yet to choose 12 jurors and four alternates from a pool of more than 200, so jury selection will continue Tuesday, likely pushing opening statements to Wednesday. Barring last-minute settlements, the lawsuits will be the first stemming from the blast to go to trial.

Robert Kwok, who represents Rene Cardona Sr.'s 11- and 6-year-old sons, said Friday that Cardona was distraught after the blast that killed 15 of his co-workers and injured scores more. The 26-year-old electrical maintenance operator from Baytown was laid off from his job after the tragedy and fatally shot himself in the head six weeks later, hours after receiving his first unemployment check. It was for $9.

"$7, here," a man in the pool said when Kwok asked if anyone else had ever gotten an unemployment check that small.

But some prospective jurors were critical when Kwok revealed that Cardona had cocaine in his system and a blood-alcohol level of 0.2 when he shot himself. That blood-alcohol level far exceeds the legal limit of 0.08 for driving, but Cardona was in his living room when he pulled the trigger.

One man said he had "abandoned his kids," while another said BP shouldn't be blamed because "a man was defeated by his personal demons."

Kwok said there is conflicting evidence of whether Cardona used drugs and alcohol before the explosion.

"Our experts are going to say the explosion was a factor" in Cardona's death, while BP's lawyers are expected "to say everything in the world was a factor also," Kwok said.

James Galbraith, one of BP's lawyers, began questioning that was to continue Tuesday. He found that some members of the pool already think badly of BP.

"I've worked in management, I've seen the shortcuts they take," a man in the pool told him. The plaintiffs allege BP valued profits over safety.

BP, which has set aside $1.6 billion to resolve blast-related litigation, has settled at least 1,350 of 3,000 lawsuits, including all stemming from the deaths caused by the explosion. Cases that remain pending largely involve blast-related injuries and property damage.

The other plaintiffs

In addition to Cardona's sons, the plaintiffs in the cases to go to trial next week are Scott Kilbert, 48, of Bellville; Nara and David Wilson, both 44, of Santa Fe; and Rolando Bocardo, 41, of Baytown. Their lawyer, Brent Coon of Beaumont, said they suffer from post-traumatic stress disorder, hearing loss, and some have herniated discs. All were contractors for BP.

Earlier Friday, Coon compared responsible refinery operations to responsible gun ownership.

He displayed a photograph of a pile of guns to the pool, asking if they believed guns were inherently dangerous. Several raised their hands to indicate they did not.

"You won't have an accident if you know how to use it right," a woman in the pool said.

Coon also asked if anyone thought explosions are inevitable at refineries. No one raised a hand.

The explosion occurred when a refining unit started up and ignited excess flammable liquid and vapors in equipment nearby. Alarms and gauges failed to warn of the excesses.

The 15 workers who died were in a trailer 121 feet away from the blast, which was felt as far as five miles away.

In earlier questioning, about half of the prospective jurors raised their hands when Coon asked if they saw the smoke or felt the tremors from the March 23, 2005, blast.

Several investigations of the blast examined BP's safety practices as well as funding and training levels. The U.S. Chemical Safety and Hazard Investigation Board concluded that budget cuts imposed in the years before the explosion paved the way to the tragedy. The board released its final report days before the two-year anniversary of the blast this year.

Cost cutting

BP, which acquired the Texas City plant with its acquisition of Amoco in 1998, has acknowledged cutting costs and staff in the late 1990s and early this decade to combat low oil prices and refining margins. But the company has steadfastly maintained it found no link between those cuts and the 2005 blast.

No federal action

The Justice Department has been investigating events surrounding and leading to the blast for more than a year, but no indictments or settlements have emerged.

A panel led by former Secretary of State James A. Baker III found in a report issued in January that the company gained false confidence about process safety, or proper equipment operations and handling of hazardous materials, because BP had focused more on personal safety, such as prevention of slips and falls. But the panel said it found no evidence that BP intentionally ignored operational safety.

BP is implementing the panel's safety recommendations, including the April appointment of an independent monitor to oversee improvements. The company is spending $1.2 billion on its five U.S. refineries for five years, starting this year.

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/energy/5098879.html

Lawyer compares safe handling of guns, refineries
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

GALVESTON  A lawyer representing people hurt in the deadly 2005 blast at BP's Texas City refinery today compared responsible refinery operations to responsible gun ownership.

During the second day of jury selection for a Galveston civil trial, Beaumont lawyer Brent Coon displayed a photograph of a pile of guns to more than 200 members of a jury pool, asking if they believed guns were inherently dangerous. Several raised their hands to indicate they did not.

"You won't have an accident if you know how to use it right," a woman in the pool said.

Coon represents four of six plaintiffs whose cases are being tried together in a Galveston state district court. Opening statements are scheduled for Tuesday, but may be delayed by the prolonged jury questioning.

The gun analogy came after Coon asked if anyone thought explosions are inevitable at refineries. No one raised a hand.

"We believe you can run a refinery safely, and you can run it without explosions," Coon said.

Coon raised the ire of BP lawyers when he sought to illustrate what he called "frivolous defenses" by displaying a photo of Enron's tilted-E logo. BP attorney James Galbraith objected that the tactic equated to guilt by association, and said, "I don't appreciate it."

"We're not trying to say BP is Enron,"Coon said when the image was removed.

BP's lawyers began questioning jurors later today.

BP, which has set aside $1.6 billion to resolve blast-related litigation, has settled at least 1,350 of 3,000 lawsuits, including all stemming from the deaths caused by the explosion. With most, financial terms have not been disclosed. Cases that remain pending largely involve blast-related injuries and property damage.

Barring last-minute settlements, the lawsuits now before state District Judge Susan Criss would be the first to go trial since the blast.

The plaintiffs are: the 11- and 6-year-old sons of Rene Cardona Sr., 26, of Baytown, who fatally shot himself in the head six weeks after 15 of his co-workers died in the blast; Scott Kilbert, 48, of Bellville; Nara and David Wilson, both 44, of Santa Fe; and Rolando Bocardo, 41, of Baytown. Coon said Kilbert, the Wilsons and Bocardo all suffer from post-traumatic stress disorder, hearing loss, and some have herniated discs.

The disaster occurred when a refining unit started up and ignited excess flammable liquid and vapors in equipment nearby. Alarms and gauges failed to warn of the excesses.

The 15 workers who died were in a trailer 121 feet away from the blast, which was felt as far as five miles away.

In earlier questioning, about half of the prospective jurors raised their hands when Coon asked if they saw the black, billowing smoke or felt the tremors from the explosion on March 23, 2005.

Several investigations of the blast examined BP's safety practices as well as funding and training levels. The U.S. Chemical Safety and Hazard Investigation Board concluded that budget cuts imposed in the years before the explosion paved the way to the tragedy. The board released its final report days before the two-year anniversary of the blast this year.

BP, which acquired the Texas City plant with its acquisition of Amoco in 1998, has acknowledged cutting costs and staff in the late 1990s and early this decade to offset losses from low oil prices and refining margins. But the company has steadfastly maintained it found no link between those cuts and the 2005 blast.

The Justice Department has been investigating events surrounding and leading to the blast for more than a year, but no indictments or settlements have emerged. BP acknowledged that probe in March last year.

A panel led by former Secretary of State James A. Baker III found in a report issued in January that the company gained false confidence about process safety, or proper equipment operations and handling of hazardous materials, because BP had focused more on personal safety, such as prevention of slips and falls. But the panel said it found no evidence that BP intentionally ignored operational safety.

BP is implementing the panel's safety recommendations, including the April appointment of an independent monitor to oversee improvements. The company is spending $1.2 billion on its five U.S. refineries for five years, starting this year.

kristen.hays@chron.com