October 2006 News Stories

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Financial Times
October 31, 2006

http://www.ft.com/cms/s/f506cfe2-6884-11db-90ac-0000779e2340.html

BP knew of safety problems, says report
By Sheila McNulty in Houston
Published: October 31 2006 02:00 |
Last updated: October 31 2006 02:00

BP knew it had "significant safety problems'' at its Texas City refinery and 34 other locations around the world well before last year's deadly explosion at the Texas plant, US investigators said in a damning report yesterday.

The US Chemical Safety Board also said cost-cutting helped compromise safety at the Texas refinery, BP's biggest, where a March 2005 blast killed 15 and injured 500 people in the worst US industrial accident in more than a decade.

"The CSB's investigation shows that BP's global management was aware of problems with maintenance, spending and infrastructure well before March 2005,'' said Carolyn Merritt, CSB chairwoman. She said BP did make some safety improvements, though it focused on improving procedural compliance and reducing occupational injury rates, "while catastrophic safety risks remained''.

"Unsafe and antiquated equipment designs were left in place, and unacceptable deficiencies in preventative maintenance were tolerated,'' she said.

Ms Merritt said stringent budget cuts throughout BP caused a progressive deterioration of safety at the Texas City refinery. "At an ageing facility like Texas City, it is not responsible to cut budgets related to safety and maintenance without thoroughly examining the impact on the risk of a catastrophic accident.''

The CSB said a 2004 internal audit of 35 BP business units, including Texas City, found significant common gaps, including a lack of leadership competence, pointing to "systematic underlying issues", widespread tolerance of non-compliance with basic safety rules, and poor implementation and monitoring of safety management systems and processes.

The board's report comes a week before the first civil trial to arise from the explosion and is likely to lead the UK company to step up negotiations to settle the case, as it has in most of the 1,000 or so others that have followed the blast. The CSB report is likely be used by the federal grand jury investigating whether to bring criminal charges against BP and its executives for the Texas explosion.

Ronnie Chappell, BP spokesman, said: "BP agrees with CSB that the March 23 2005 explosion and fire was a preventable tragedy. However, we do not understand the basis for some of the comments made by the CSB.''

Mr Chappell said the BP Texas City fatal accident investigation team did not identify previous budget decisions or lack of expenditure as a critical factor, or immediate cause of the accident. Indeed, he said, maintenance spending had increased40 per cent over the previous five years and was higher than the industry average per barrel of throughput.

BP has been under heightened congressional and regulatory scrutiny by regulators, Congress and the US Department of Justice following the Texas explosion and subsequent closure of half the company's BP's Alaskan oilfield due to severe corrosion.

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http://www.ft.com/cms/s/80b8406a-6877-11db-90ac-0000779e2340.html

‘Catastrophic safety risks remain’ for BP
By Sheila McNulty in Houston
Published: October 31 2006 00:56 |
Last updated: October 31 2006 00:56

It has been a year since the last significant update from the US federal agency investigating BP’s Texas City refinery explosion  and the news does not get any better.

Detailed evidence from the US Chemical Safety Board released on Monday showed that the UK-based oil group was so intent on improving the big picture on safety  its statistics  that it missed the pointers to deeper problems.

In spite of improving the numbers, “catastrophic safety risks remained”, said Carolyn Merritt, CSB chairwoman.

BP’s focus was on improving procedural compliance and reducing occupational injury rates, she said, while leaving “unsafe and antiquated equipment designs’’ and tolerating “unacceptable deficiencies in preventative maintenance”.

Ms Merritt noted equipment directly involved in the March 2005 explosion, which killed 15 and injured 500 in and around the facility, was “of an obsolete design already phased out in most refineries and chemical plants”. Also, she said, its supervisors knew that key instruments did not work or were unreliable.

BP has acknowledged it was aware of infrastructure and safety culture problems at the Texas City refinery.

The company said it was working to address them prior to the incident, through increased spending and efforts to reduce the number of workplace accidents and injuries.

Yet Don Holmstrom, the CSB investigator heading the inquiry, said the poor state of the refinery was hidden in the statistics.

Indeed, in 2004, the Texas City refinery had the lowest injury rate in its history  nearly one-third of the oil refinery sector average. But that did not take account of catastrophic hazards or distinguish between injuries and fatalities.

That year, the refinery experienced three big accidents resulting in three fatalities. BP attempted to improve its safety performance, he said, but focused largely on personnel safety, such as slips, trips and falls, rather than management systems, equipment design and preventative maintenance to avert the increasing risk of big process accidents.

“When personnel safety statistics improved, the refinery leadership believed they had turned the corner,” Mr Holmstrom said.

“However, existing process safety metrics and the results of a safety culture survey indicated continuing serious problems with safety systems and concerns about another major accident.’’

BP said: “Although the company achieved a 70 per cent reduction in workplace injury rates at Texas City, the investigation team determined those efforts were not sufficient because these efforts were primarily focused on personal safety rather than process safety. The significant reduction in workplace injury rates led the company to believe that conditions at the refinery were improving.”

The CSB offered as an example the fact that the 1950s-era unit that exploded had had eight previous instances where flammable hydrocarbon vapours were discharged between 1994 and 2004. In two of those, the unit caught fire.

“The eight incidents were not properly investigated and appropriate corrective actions were not implemented,’’ Mr Holmstrom said. He noted a 1994 incident resulted in a call to analyse the adequacy of equipment, yet management never followed up to assure completion

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Anchorage Daily News
October 28, 2006

http://www.adn.com/news/politics/elections/story/8351574p-8247073c.html

Knowles criticized on oil regulation management
By WESLEY LOY
Anchorage Daily News
Published: October 27, 2006
Last Modified: October 28, 2006 at 03:18 AM

A former state pollution regulator said the administration of former Gov. Tony Knowles gave lax and special treatment to the oil industry, and those policies figure into pipeline leaks and corrosion that led to this summer's partial shutdown of Prudhoe Bay, the nation's largest oil field.

Susan Harvey, who was a supervisor in the Department of Environmental Conservation, said she resigned in March 2002 because of pressure and interference from above to give breaks to oil companies.

Harvey, who now works as an environmental consultant from her Eagle River home, outlined her allegations in a letter to Sarah Palin, a Republican who is running for governor against Democrat Knowles, who is seeking a third term.

In an interview Friday, Harvey also said she had received a federal subpoena from the FBI and was talking with investigators about pipeline corrosion. She declined to give further details.

Michele Brown, who was Harvey's boss and DEC commissioner under Knowles, said Harvey's assertion that the Knowles administration went easy on oil companies was baseless.

"I just find this maligning of our record to be incredibly nasty," Brown said.

The Harvey letter, first reported Thursday night by KTUU Channel 2, became a tempest for the Knowles camp Friday, 11 days before the election. In the letter, Harvey writes that she admires Palin's ethics and adds, "I can't watch the state I have lived in for over 20 years suffer another Knowles administration."

Harvey said she didn't know how reporters got a copy of the letter, which she described as a "personal, heart-to-heart letter" to Palin.

Brown called in to challenge Harvey, who went on Dan Fagan's KFQD radio talk show Friday.

Brown and Knowles spokesman Patty Ginsburg questioned the timing of Harvey's statements.

"It's a close race," Ginsburg said. "It's last-minute tactics."

Harvey said oil companies got special treatment under Knowles and Brown, but not smaller companies. As an example, she said DEC staffers were directed to send inspection letters and enforcement actions to the oil companies to edit before the state finalized them.

"They called it 'partnering.' In my experience, only a few select companies were afforded 'partnering status,' " Harvey wrote in the letter to Palin.

Harvey, an engineer for major oil companies including BP and Arco prior to joining DEC in 1999, focused on two major events:

• Harvey was manager of DEC's Division of Spill Prevention and Response, but in December 2001 she had her authority over the North Slope oil fields taken away. The reason, she said, was because of her firm stance on such issues as a lack of good leak-detection systems along pipelines and inadequate offshore oil spill cleanup capability.

Another issue at the time was pressure from oil companies BP and Phillips to soften an independent state consultant's report on how well the companies were safeguarding their oil pipelines against corrosion. That pressure ultimately resulted in significant changes to the report, Harvey said.

• In March 2002, Harvey said she resigned because "I could not continue to work under an administration that failed to regulate North Slope oil and gas operations with the same rigor it did of small businesses across the state," says her letter to Palin.

Harvey said she admires Palin because she, too, resigned from a state job in January 2004 -- a seat on the state Oil and Gas Conservation Commission -- after raising ethical questions about fellow commissioner Randy Ruedrich.

Brown and Ginsburg said Harvey grossly distorts the Knowles administration's record in dealing with the oil industry.

Knowles in late 2001 proposed a nearly $5 million "oil safety and development initiative" that would have added 13 more people at DEC to heighten inspections on the North Slope. But the Republican-controlled Legislature didn't fund the initiative, Brown said.

Yes, she said, a report prepared in 2001 by the state's corrosion consultant, Coffman Engineers, was changed after meetings between DEC, oil company and Coffman representatives, but the changes were not substantial and they cured inaccuracies, Brown said.
Brown added that Harvey was in the meetings before she left the department and didn't lodge an objection then to the changes.

"She did not raise it for five years, until this campaign," Brown said.

As for Harvey having her North Slope authority taken away because she was too tough on the industry, "that, too, is false," Brown said.

"We were trying to build a much stronger system than we had," Brown said. "I think in her mind, she is the system. And so other people were being brought in, and she chose to take offense with that."

Harvey, in her letter, suggested that this year's Prudhoe Bay pipeline leaks -- one resulting in the largest oil spill in Prudhoe's history at an estimated 201,000 gallons -- might have been avoided had the Knowles administration regulated the industry better.

She writes that she felt "vindicated" by the spill, but it "isn't a sweet victory."

Harvey, in an interview, added that the Knowles announcement of the 2001 initiative came on the very day she was relieved of her North Slope authority.

She denied working for the Palin campaign, although she did say she stopped by Palin's downtown Anchorage office to pick up a yard sign and some bumper stickers. She said she's never met Palin, and as for her timing in speaking out, "I wish I had done it sooner."

Curtis Smith, spokesman for the Palin campaign, said Harvey has no connection to the campaign.

"She's never volunteered for this campaign, she's never donated to this campaign," he said, adding the campaign has no plans to use Harvey in advertising or press conferences this close to the election.

One oil company spokesman, Daren Beaudo of BP, denied anyone with his company pressured state officials or Coffman to change the corrosion report.

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

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The Trail

http://community.adn.com/?q=adn/node/102993

Read Harvey’s letter to Palin
Posted: October 27, 2006 - 2:21 pm

If you missed the story on former Department of Environmental Conservation official Susan Harvey, pipeline corrosion in Prudhoe Bay and the gube race last night on Channel 2, there’s an online version  click here.
http://www.ktuu.com/cms/anmviewer.asp?a=6964&z=1

Harvey says the Knowles administration buckled to oil industry pressure, while the Knowles camp says her claims are baseless and criticize the timing of her going public.

In a three-page letter to Palin dated Oct. 18, Harvey wrote that she supports Palin and outlined her complaints against Knowles, whose administration she calls “as responsible for these spills as anyone, because failure to regulate and complacency were root causes in these spills.”

Click here to read the letter.
http://www.adn.com/static/includes/thetrail/10-27/letter.pdf

The Knowles camp just issued a rebuttal to Harvey's statements. (Click here.)
http://www.adn.com/static/includes/thetrail/10-27/TK-corrosion.pdf

(I received a copy of the letter yesterday afternoon. The Palin camp confirmed it’s authentic today. Daily News reporters tried repeatedly in recent months - following the Prudhoe Bay leak and corrosion discoveries -- to talk with Harvey. She declined.)

Palin spokesman Curtis Smith said Harvey has “no connection to the campaign” and that there are no plans for her to appear in upcoming ads or at upcoming press conferences.

 

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Houston Chronicle
October 27, 2006

http://www.chron.com/disp/story.mpl/business/4291154.html

TV show confirms warnings given BP
60 Minutes examines blast in Texas City
By MIKE MCDANIEL
Copyright 2006 Houston Chronicle

A segment to air Sunday on 60 Minutes confirms reporting by the Houston Chronicle that BP executives knew there were serious safety concerns about the company's Texas City refinery in advance of the 2005 explosion that killed 15 and injured scores more.

The basis of CBS reporter Ed Bradley's story is an examination of BP internal documents that show that John Manzoni, BP executive in charge of refineries, was repeatedly warned about safety problems.

Brent Coon, a lawyer representing the daughter of a couple killed in the blast, said Thursday the documents show that plant manager Don Parus "personally briefed" Manzoni and BP Vice President of Refining Mike Hoffman "on numerous occasions about the state of the union at Texas City."

Indeed, evidence gathered so far in a federal investigation as well as in civil litigation shows that Parus and other plant officials were well aware of the safety risk in Texas City.

A survey of employees conducted by an outside consultant and given to management two months before the blast showed that workers believed management put production and profits ahead of safety.

And the Chronicle reported earlier this year that three weeks before the blast, BP officials circulated a planning document for 2005 that lamented safety shortfalls and identified the following "key risk" for the year: "TCS (Texas City site) kills someone in the next 12-18 months."

Bradley interviews Carolyn Merritt, appointed by President Bush to be chairman of the U.S. Chemical Safety Board, who says BP management knew enough about the problems to have prevented the disaster.

"Absolutely," Merritt says when asked whether the blast was preventable. "The problems that existed at BP Texas City were neither momentary nor superficial. They ran deep through that operation of a risk denial and a risk blindness that was not being addressed anywhere in the organization."

Merritt adds that she believes budget cuts at the facility were directly related to the accident. Her report is expected to be released next spring.

60 Minutes says BP declined to be interviewed on camera but gave Bradley a tour of the Texas City facility and referred to its own report, which concluded there "was no evidence of anyone consciously or intentionally taking actions or decisions that put others at risk."

The segment comes a little more than a week before jury selection is expected to begin in Galveston County in Coon's case, the first civil trial stemming from the accident.

Chronicle reporter Anne Belli contributed to this story.

mike.mcdaniel@chron.com

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Wall Street Journal
October 27, 2006

Federal Investigators To Report Preliminary BP Texas City
Findings Tuesday
DOW JONES NEWSWIRES
October 27, 2006 7:32 a.m.
(This article was originally published Thursday)
 
HOUSTON (Dow Jones)--Federal investigators of a major explosion at BP PLC's (BP) Texas City refinery announced Thursday plans to discuss their preliminary findings on Tuesday, the first report from the investigators in a year.

The U.S. Chemical Safety and Hazard Investigation Board (CSB) announced that it plans to present the agency's preliminary findings five months ahead of the full report, which is anticipated in March 2007.

The preliminary report was necessitated by the urgency of some of the board's recommendations, according to spokesman Daniel Horowitz. "Since it's going to be several additional months for the final report to be done, there are some issues we want to present to the industry and the public as soon as they're available," Horowitz said.

The board last presented the public with findings on the March 2005 explosion one year ago, when it issued safety recommendations to two industry trade groups, the American Petroleum Institute and National Petrochemical and Refiners organization.

Those previous recommendations hinged on the safe location of trailers for workers. One of the reasons that the Texas City blast resulted in such a high death toll was because many of the victims were working in a trailer located close to the unit that exploded at the time, the CSB said.

The findings to be presented Tuesday are expected to include additional safety guidelines for the trade groups, according to those familiar with the proceedings.

Although the previous recommendations have focused on safe operating procedures, the CSB has also examined management policies at BP.

"I think it's no secret that (CSB Chairman Carolyn) Merritt has spoken a lot about the organizational causes of this accident, and our investigation has carefully looked at that," Horowitz said.

BP has come under scrutiny owing to the Texas City explosion, a fire at the refinery three months later, and operational problems at its Alaska oilfields.

BP said it has cooperated with the CSB's investigation into the explosion at the Texas City refinery. "We have shared everything that we've discovered with the CSB, in order to help them as much as we can with their inquiry," said spokesman Neil Chapman.

The company has not yet received the preliminary findings from the CSB, Chapman said. However, the company did contest the findings announced last October, saying that the CSB's report contradicted its own findings.

Beyond the CSB's investigation, BP faces an investigation by the Environmental Protection Agency and Department of Justice in conjunction with the accident. An independent commission, led by former U.S. Secretary of State James Baker III, is also examining the company's operations at its five refineries in the continental U.S. That commission was prompted by a previous recommendation from the CSB.

The CSB's Tuesday press conference will follow on the heels of a "60 Minutes" broadcast on the explosion. The program, to be aired on CBS on Sunday evening, is expected to highlight a top executive's knowledge of the problems at Texas City prior to the blast, and to suggest that the refinery's rampant safety failures were known throughout the corporation.
 
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com

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BP Refining Chief Knew About Woes
Before Texas Blast-CBS
DOW JONES NEWSWIRES
October 26, 2006 5:41 p.m.
 
HOUSTON (Dow Jones)--BP PLC's (BP) global head of refining was repeatedly warned about safety concerns at the company's Texas City, Texas, refinery before a March 2005 explosion at the plant, identified as the worst workplace accident in the U.S. in 16 years, according to a release issued Thursday by CBS News.

BP's own experts told the company's global refining chief, John Manzoni, of serious safety problems at the plant, according to internal documents obtained by CBS News for a feature that will air Sunday on "60 Minutes."

A report given to Manzoni prior to the blast warned of the possibility of a "major site incident," at Texas City, according to CBS. The March 2005 explosion killed 15 and injured hundreds.

Manzoni, who reports directly to BP Chief Executive John Browne was deposed by plaintiffs' lawyers in late August in conjunction with a case alleging that BP's gross negligence caused the explosion. The case, brought by the daughter of a couple killed in the blast, is set to begin trial on Nov. 8. BP has already settled approximately 1,000 cases resulting from the blast, and has set aside approximately $1.6 billion for the settlements.

The documents contradict Manzoni's earlier statements, made under oath in a videotaped deposition, in which he said he wasn't aware of the plant's safety concerns prior to the date of the explosion.

According to documents filed in the court case in Galveston, Texas, the company has launched an internal investigation into accountability for the explosion. The internal investigator has questioned Manzoni as part of this effort, according to court documents.

The report from CBS follows scrutiny from a bevy of regulatory agencies and media outlets. Currently, the U.S. Chemical Safety Board, Environmental Protection Agency, and Department of Justice are investigating the Texas City explosion. An independent commission led by former U.S. Secretary of State James Baker III is looking into BP's operations at its five refineries in the continental U.S.

The most recent media scrutiny came from the BBC in a report Wednesday suggesting that BP cut corners and scaled back on investments in its refineries prior to the Texas incident.

Two BP spokesmen didn't immediately return calls from Dow Jones Newswires.

Since the 2005 explosion, BP has also come under fire for its operations at an Alaskan oil field, where severe pipeline corrosion resulted in a major leak in March 2006. In that case as well, documents have suggested that the company was aware of the problems long before the issues were addressed.
 
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com

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Financial Times
October 12, 2006

http://www.ft.com/cms/s/94463dc8-598e-11db-9eb1-0000779e2340.html

BP's Browne must testify in blast case
By Sheila McNulty in Galveston
Published: October 12 2006 03:00 |
Last updated: October 12 2006 03:00

Lord Browne, BP's chief executive, has been ordered to undergo up to six hours of questioning by plaintiffs' lawyers in a US civil case arising from the UK oil giant's fatal refinery explosion last year in Texas.

The ruling by state judge Susan Criss that Lord Browne must give a deposition came after the plaintiffs' lawyers revealed new information in the case involving the explosion in which 15 people died and 500 were injured.

The lawyers will be able to videotape the testimony and show it in court.

The lawyers told the court in Galveston, Texas, that BP had slashed 25 per cent from the refinery's budget immediately on taking it over in the late 1990s. They also pointed out that a key document on a permit application for the refinery had gone missing, and that a man who had been involved in that application for the state had later been hired by BP.

The lawyers, representing the families of people killed in the explosion, said BP hired Ruben Herrera, who worked for the Texas state environmental regulator and had e-mailed BP about its applications, to continue work on the process for the UK oil giant. He was given a $23,000 pay raise that pushed his salary up to $84,000 a year and a signing bonus of about $3,000.

Texas law says a former state employee of a regulatory agency cannot represent, or receive compensation for services rendered on behalf of anyone regarding a matter on which he worked while under state employment.

Mr Herrera testified he did not know it was against regulations for him to continue working on the permit when hired by BP and said BP had never informed him. BP said Mr Herrera did not work on any environmental application relating to the unit in question while at the state agency, although the plaintiffs' lawyers showed the court e-mails in which he discussed the application.

In separate proceedings, a grand jury is investigating whether to bring criminal charges against BP for the explosion, and plaintiffs' lawyers told the court yesterday that the Department of Justice had subpoenaed all their documents in connection with the case. This is expected to be the first of the 1,000 or so cases against BP to go to trial. BP has settled most of those cases.

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Wall Street Journal
October 4, 2006

State Lawmakers Keep Credibilty Spotlight On BP Alaska
By John M. Biers
Of DOW JONES NEWSWIRES

HOUSTON (Dow Jones)--As the scrutiny of BP PLC's (BP) Alaska operations intensifies, the questions hanging over the company have expanded from the state of the energy giant's physical pipeline network to the integrity of its Alaska leadership.

BP Chief Executive John Browne ordered a probe into the management of BP Alaska in early September, after a powerful state lawmaker complained that company executives weren't truthful at a state hearing in August. Other critics have pointed to revelations in Capitol Hill hearings as evidence of BP's lack of candor.

The London-based oil giant stands by its assertion that it did everything possible to avoid the debacle.But in the wake of evidence that a two-year-old consultant's report warned of "accelerated corrosion" across the Prudhoe pipeline network, the criticism of BP Alaska's management puts further pressure on the company to quickly turn around the encumbered division.

In a letter on Aug. 31 to BP CEO Browne, Alaska House Speaker Rep. John Harris questioned the veracity of BP Alaska President Steve Marshall and two other senior executives. "We need and want a significant change in attitude, actions, accountability and direction," Harris said. The letter didn't ask Browne to replace management at BP Alaska.

Amid numerous questions over a partial shutdown of oil production at the giant Prudhoe Bay field, the company rejects any suggestions that it was deliberately misleading. "In my 29 years with BP, I have considered truth and facts to be central to how I conduct business," Marshall, wrote in a Sept. 1 email to employees sparked by Harris's letter.

BP spokesman Daren Beaudo said the company has made its leaders "available formally and informally to a number of stakeholders." In response to written questions, he said: "Until our investigation is complete there may be some questions we cannot yet answer, but will continue to invite open lines of communication."

Troubling Record

The issue of what led to the partial closure of Prudhoe Bay, the largest oil field in the U.S., is an important one for the global oil markets. The shutdown in August, which caused a temporary price shock, followed the largest oil spill on the Alaskan North Slope in March and added to a perception that BP was suffering systemic problems in its U.S. operations.

Some Alaska officials, including Harris, say they're pleased by some BP steps, such as the appointment of former federal Judge Stanley Sporkin as an ombudsman for Alaska. But Harris considers some company statements "misleading" and says he will continue to scrutinize BP. "The reality is, it didn't come out of the blue," Harris said.

Lawmakers point to the reports compiled before BP's recent problems by an engineering consultant and an outside law firm that warned of the threat of pipeline corrosion and management problems within the Alaska corrosion program. A pair of audits by senior London-based BP executive John Baxter sparked more questions about BP's management.

While BP did "not have an immediate technical problem" with its Prudhoe Bay corrosion program, Baxter criticized BP's "strategy to maintain flat lifting costs," referring to a parameter closely watched by energy investors that measures how much it costs to produce one barrel of crude oil.

"Currently, the budget is set up-front with a flat lifting cost strategy, with corrosion management activities then developed around this budget allocation," Baxter, BP's global director of engineering, wrote in an April 2005 audit report. He urged BP to identify necessary steps for long-term corrosion management and "set the budget based on those activities."

Baxter also stressed the need to take "prompt" action to fill a pair of senior corrosion management positions left open in December 2004 and January 2005, respectively. In an audit issued in June after the March oil spill, he said BP Alaska had hired somebody for one of the posts. But his 2006 report included an "urgent" recommendation to fill twocritical Prudhoe jobs that remained open and to develop a "succession program" for key positions at the field. Baxter declined comment through a BP spokesman, citing a review by Sporkin into his reports.

BP Alaska president Marshall, responding to questioning at a Sept. 7 congressional hearing, dismissed Baxter's observation as a "perception" issue that wasn't reflected in actual operations. Lifting costs, he said, have risen to $5.22 a barrel in 2005 from $1.89 in 2001

"One of the things that I regret is that I didn't do more to change the perception inside our team about spending money," said Marshall at the hearing. He noted that the 2006 Baxter report observed a shift in BP's "strategic intent" away from flat costs.

BP workers in Alaska have long complained about skimpy spending on the North Slope. In 2001, environmentalists arguing against developing the Arctic National Wildlife Refuge pointed to an internal BP report on failed valves and weak maintenance. A 2004 BP-commissioned audit by the law firm Vinson & Elkins LLP warned of an atmosphere that "chills reporting" of safety concerns.

Amid shifting organizational structures, BP replaced two senior corrosion officials with two new officials in 2005 and intends to double the staff of its corrosion group, BP's Beaudo said. "Admittedly, the organization was undergoing structural change but this is not uncommon in our business or others," he said. "To suggest the team was understaffed or rudderless is wrong," he said.

BP is working with ombudsman Sporkin on an investigation into the Baxter issues. Sporkin declined to comment on details of his work on BP. "We just got into it," he said of his review.

More Hearings For BP?

Federal and state lawmakers remain skeptical of BP's explanations. Rep. Tammy Baldwin, D-Wisc., who questioned Marshall on the Baxter report and another report that pointed to management problems in the Prudhoe corrosion program, said the documents were "deeply disturbing."

Marshall "seemed to dance around the issue," said Baldwin, who sits on the U.S. House Energy and Commerce Committee.

A joint House-Senate Alaska Resources Committee expects to bring BP back for a second round of hearings most likely in early October, said Sen. Tom Wagoner, a Kenai Republican. Wagoner praised Marshall and other BP executives for providing "straight answers" thus far. But Sen. Kim Elton, a Democrat from Juneau who questioned Marshall on pre-spill reports that warned of accelerated corrosion, decried Marshall's responses to questions as "vague."

The harshest appraisal came from Harris, a Valdez Republican, whose Aug. 31 letter to Browne was publicized by the Alaska Forum for Environmental Responsibility. Marshall and two other top Alaska executives "have given us misleading information at best and lied to us at worst," Harris wrote.

In a response dated Sept. 4, Browne said he takes these concerns "most seriously" and ordered "a full and immediate investigation" from Sporkin. In Browne's letter, the chief executive said BP believes Marshall and other senior BP Alaska executives named by Harris have "always acted with the highest integrity."

Marshall, a 28-year BP veteran who was tapped to head BP Alaska in July 2001, "has the unequivocal support of senior leadership," Beaudo said, adding that it would be "speculative" to comment on whether there will be "organization changes."

Since his communications with Browne, Harris has had an "extensive" conversation with Sporkin and is "satisfied that follow-up is being done," Harris said in an interview.

"Overall (BP America President) Bob Malone will address these issues," Harris said. "If that means they have to address personnel, then that's their call, not my call."

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

(Ian Talley in Washington contributed to this report.) [ 10-03-06 1107ET ]


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BP Expects Third-Quarter Output
To Decline After Alaska Field Woes
By BENOIT FAUCON
October 4, 2006 4:57 a.m.

LONDON -- BP PLC said Wednesday that it expects to report a 0.6% drop in output year-to-year for the third quarter, its fifth consecutive quarterly production decrease, following a partial shutdown at its Alaska Prudhoe Bay field.

The U.K. oil major's quarterly production is seen around 3.8 million barrels of oil equivalent a day in the third quarter, compared with 3.824 million barrels a day in the same period last year and 4.02 million in the second quarter, the company said.

BP said output had been affected by divestments, maintenance and "operational downtime." The company was hit by a partial shutdown at the Alaska Prudhoe Bay field, where it is an operator and 26% shareholder.

The company had to cut more than half of its normal 450,000 barrels a day crude output in the field after severe corrosion and a small leak was uncovered at the field's pipeline on Aug. 6.

In the quarter, BP's Russian joint venture OAO TNK-BP sold oil producer Udmurtneft for $3.5 billion to China Petrochemical Co., which itself sold a 51% stake in the asset to Rosneft. The company's output has also been hit by seasonal maintenance, which is normally performed in summer. BP's net share of production from TNK-BP is expected to be about 950 million barrels a day, compared to 999 million barrels a day.

On Tuesday, BP announced the Prudhoe Bay field had increased production back to 350,000 barrels a day, still 100,000 barrels a day short of its normal output.

The average price of a barrel of Brent, a key U.K. North Sea crude benchmark, rose 13% to $69.60 in the third quarter compared to same period last year and was nearly unchanged from $69.59 in the second quarter of 2006. Average quarterly global refining margins were down 32% at $8.40, BP said. The margins fell "last month on the back of a larger-than-expected build in U.S. distillate inventories," according to a September Merrill Lynch report.

A BP spokesman said stronger overall marketing margins are expected to be more than offset by a reduction of the financial benefits BP normally gets from trading, due to low volatility and smaller spreads between different grades of fuel.

Investec analyst Bruce Evers said BP's third-quarter update is disappointing because volumes are lower than expected and "downstream is weak." Nonoperating items in the third quarter are expected to amount to a pretax gain of around $2 billion, primarily reflecting gains on upstream asset disposals.

The company's effective tax rate is expected to be around 40% in the third quarter, higher than the 36% rate in the second quarter as a 10-percentage-point rise in U.K. North Sea oil taxes began to bite. The U.K. government made the decision to raise the tax last year, but it was enforced for the first time in the third quarter. BP will report its third-quarter earnings Oct. 24.

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

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BP Officials Sued
By Pension Fund Over Mishaps

By MATTHEW DALTON
October 4, 2006

NEW YORK -- A labor-union pension fund has sued executives and board members of BP PLC for a string of operational disasters the union claims have hurt the U.K. oil giant's shareholders.

The retirement fund of Unite Here, a union representing industrial, textile, hotel and restaurant workers, filed the lawsuit Monday in Alaska state court in Anchorage. The complaint names 38 BP executives and board members as defendants, including Chief Executive John Browne, North American chief Bob Malone and Peter Sutherland, chairman of BP's board of directors.

William Lerach is representing Unite and Jeffrey Pickett, whom the complaint identifies as an Alaska resident and BP shareholder. Unite owns 6,000 BP shares, according to the complaint.

Unite says criminal investigations into BP's environmental standards, worker protections and energy trading activities have lowered the company's market value by sullying its reputation and exposing it to litigation and government penalties.

A BP spokesman declined to comment.

BP at the beginning of August shut the Prudhoe Bay oil field in Alaska after discovering severe corrosion on its pipelines that bring oil to the Trans-Alaska Pipeline System. The company discovered the corrosion after one of its pipelines leaked more than 200,000 gallons of oil in March. The U.S. Environmental Protection Agency is conducting a criminal probe into the leak.

The EPA is also investigating whether BP was criminally at fault for an explosion last year at its Texas City refinery that killed 15 and injured about 170.

This summer, the U.S. Commodity Futures Trading Commission charged that BP traders attempted to manipulate the propane market in early 2004. In August, BP acknowledged that federal regulators were investigating whether the company's traders attempted to manipulate the crude oil market.

The lawsuit seeks monetary damages and internal management overhauls.

Write to Matthew Dalton at Matthew.Dalton@dowjones.com
 

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Fortune Magazine
October 2, 2006

http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/16/8388595/index.htm?postversion=2006100210

Can BP bounce back?
A disastrous leak. A deadly explosion. CEO John Browne
must turn his troubled oil giant around, but time is running out.
By Nelson Schwartz, Fortune senior writer
October 2 2006: 10:06 AM EDT

(Fortune Magazine) -- "This is where it all started," says BP Prudhoe Bay field manager Kemp Copeland, pointing to a rust-colored steel pipe snaking its way across the bleak Alaska tundra 250 miles north of the Arctic Circle. Normally this line carries 100,000 barrels of oil a day, the first step in a journey that takes crude from America's biggest oilfield to the Trans-Alaska Pipeline and then on to the port of Valdez, where it is loaded into supertankers bound for the West Coast and millions of gas-hungry drivers.

But the 34-inch pipe has been down since March, when a dime-sized hole caused by corrosion sent nearly 5,000 barrels of crude spilling out across the snow. The oil has been cleaned up, leaving behind a bare two-acre patch of ground, but the leak - and the subsequent discovery that six miles of BP (Charts) pipeline was badly corroded - led not only to the shutdown of much of Prudhoe Bay and the loss of hundreds of millions of dollars but also to a PR disaster that, in a single blow, undid the green reputation CEO John Browne had meticulously crafted for BP over the past decade.

Alaska and Prudhoe Bay are also where it all started for Browne. The man now formally known as Lord Browne of Madingley began his career with the British energy giant as a junior engineer in Alaska in 1969 in what was then a newly discovered field of tremendous potential. The rawness of Alaska was a shock for the Cambridge-educated Browne, and he still delights in telling stories of his time overseeing drilling rigs on the North Slope and his ramshackle Anchorage digs.

Today Prudhoe Bay's glory days are behind it. Production is down 75% from a peak of almost 1.6 million barrels a day in 1988, and Alaska's importance for BP has dimmed, as new fields in Russia and West Africa have come to the fore. At the same time, Browne's ability to shape BP's destiny and preserve his legacy is ebbing: He has pledged to retire in two years.

Browne says he is determined to turn things around before then. "There has been a monumental shift for the company, and for me personally," Browne told Fortune. "I am 58 but can still learn, and we need to go back and ask ourselves what we were doing and what we should do differently now." So he and his U.S. brass are appointing outside experts to determine what went wrong, hiring a former federal judge as an ombudsman to handle employee complaints, and pouring billions into Alaska, Texas, and other major BP sites in North America to improve safety over the long term.

That's a departure from the cost discipline that Wall Street has long admired, especially BP's ability to find savings after buying U.S. giants Amoco and Arco, deals that made Browne's name as a player in the fiercely competitive global oil patch. Indeed, soon after becoming CEO of BP in 1995, Browne boasted that "the drive to manage costs and to raise unit margins has now become a way of life."

But the turnaround process promises to be expensive - and embarrassing. Federal investigators in Anchorage have launched a criminal probe into BP's maintenance practices on the North Slope, convening a grand jury and ordering BP to turn over a six-foot section of the pipe that burst, as well as reams of data and personnel records. "Complying with the subpoena has become a big part of our lives since March," says Copeland, the Prudhoe Bay manager.

Tangled in litigation

At the same time, BP has become the oil company Washington loves to hate: Over three days of hearings last month on Capitol Hill, lawmakers attacked BP and its environmental record, while hammering the company for high gas prices, an explosion at a BP refinery in Texas City, Texas, that last year killed 15, and alleged manipulation of propane prices by BP traders.

If that weren't enough, a civil suit on behalf of victims of the Texas City accident is set to start in Galveston next month, and the plaintiffs lawyer in the case says he has thousands of damning internal BP documents he intends to introduce at the trial.

Still, it was Alaska that Democrats and Republicans alike kept coming back to at the recent hearings, and while Browne wasn't present, he was singled out for blame. "I have always respected BP, and I met John Browne and respected him," said Senator Dianne Feinstein, a California Democrat. "I thought finally there was an oil company that has a sense of conscience. I no longer think that."

Senator Jim Bunning, a Kentucky Republican, was just as tough after BP's top Alaska official, Steve Marshall, testified that BP had increased its spending on operations and maintenance to $787 million this year. "That's chicken feed when you're looking at $70 billion in profits," he said. "Don't tell me you didn't have an inkling that the pipes were eroding." (At an earlier hearing Richard Woollam, the BP official formerly in charge of anticorrosion efforts at Prudhoe Bay, refused to answer questions, citing his Fifth Amendment protection against self-incrimination. Woollam, says BP, has been placed on leave.)

Bunning and fellow conservative Pete Domenici, Senate Energy Committee chairman, aren't just angry about what Domenici termed BP's "black eye" in Alaska. They're also furious because the spill at Prudhoe Bay has made drilling in the neighboring Arctic National Wildlife Refuge - a long-cherished goal of congressional Republicans, as well as of President Bush - impossible for now.

But the worst blow to BP's image came not from a politician but from the federal official in charge of pipeline safety, Admiral Thomas Barrett of the Department of Transportation. "Given the many risk factors in the North Slope environment," he testified, it is "a mystery" why BP didn't clean the lines on a regular basis. As if to underscore his criticism of BP, Barrett added, "Most operators demonstrate a higher standard of care in their operations."

During the hearings and in subsequent interviews with Fortune, BP officials walk a fine line: They insist they were blindsided by the extent of the corrosion in Alaska but acknowledge that long-festering problems in Alaska, Texas City, and the trading operations can't simply be chalked up to bad luck. "I knew full well we had problems in North America when I accepted the job," says Robert Malone, a Texas native and 32-year BP veteran handpicked by Browne in July as the new president and chairman of BP America after previous boss Ross Pillari stepped down. "There's no doubt the issues we were having in America led to my coming here."

'We were blindsided by the recent leaks'

How could a company that has made being green a core part of its identity, even rebranding itself as "Beyond Petroleum," suffer within one year both the worst oil spill in the history of the North Slope and the worst U.S. refinery accident in more than a decade? And how did the energy visionary who publicly broke with his industry to acknowledge a possible link between emissions and global warming, earning a prominent spot in Vanity Fair's recent green issue, become a scapegoat for Big Oil?

The answer is clear to some current and former BP employees, union reps, and other whistleblowers interviewed by Fortune. Until recently, they say, BP's internal culture was characterized by intense pressure to keep costs down, and budgeting often took precedence over routine maintenance and occasionally over safety. "The catchword we heard was 'managed risk,'" says Kristjan Dye, the leader of the United Steelworkers local at Prudhoe Bay and a 20-year North Slope veteran. "If you pointed out problems, you weren't told to shut up. You could bring it up - but it might not get fixed."

Indeed, in a March 2002 letter obtained by Fortune, inspection and quality-assurance specialist Bill Herasymiuk warned superiors in BP's corrosion, inspection, and chemical team of a potential "catastrophe" and complained about "the larger lack of consistency and lack of standardization across the North Slope."

Herasymiuk, who still works for BP, has been called to appear before the grand jury in Anchorage. As oil prices recovered over the past few years from their lows in the late 1990s, says Dye, BP did begin to put more money into Prudhoe Bay, but it was too late. "It's unfortunate that as everything got better, things kind of caught up with BP," he says. "The chickens came home to roost."

Since the March leak and the subsequent shutdown this summer, much of the controversy has focused on a practice called pigging - sending a device known as a pig through the pipe (old oilfield hands say pigs take their name from the squealing noise they make going down the line) to clean it as well as monitor it for corrosion, cracks, sediment deposits, and other threats that might lead to a leak. Practices vary, but everyone now agrees the low-velocity transit lines that failed should have been pigged more often. On the west side of Prudhoe Bay, they were last cleaned and checked in 1998, while on the eastern side of the field, the last pig was run in 1991. The Trans-Alaska Pipeline, by contrast, is pigged every 14 days.

BP did take other measures to keep the pipes running, like adding chemicals to combat corrosion and performing spot checks with ultrasound in places where they expected corrosion to occur. But in the past few years, as Prudhoe Bay's production sank and the velocity inside the pipe slowed, sediment apparently built up. Meanwhile, underneath the sediment, bacteria were eating away at the walls.

By the time BP shut down the pipes in August, Barrett testified, more than 70% of the wall of the tube had eroded in 12 places. At another 187 spots, wall loss exceeded 50%. "We were blindsided by the recent leaks," says Bill Hedges, a plainspoken Englishman who is leading the effort to combat corrosion and get the pipes back in working order. "A lot of people feel devastated. In hindsight, obviously we wish we had been pigging. But the data we had told us we were doing the right thing."

One current BP employee who worked at both Prudhoe Bay and in Texas and spoke to Fortune on condition of anonymity says no one should be surprised by what eventually occurred. "The mantra was, Can we cut costs 10%?" he recalls. At Texas City even money for painting and external corrosion control was tight - until leaks started appearing. "There was an it-can't-happen-here mentality on the part of middle management," he says.

Constant turnover only worsened matters, as new bosses would seek to beat the previous manager's numbers. Nevertheless, this employee says he still believes in BP's green ethos and retains his respect for Browne and other top execs. "The values are real, but they haven't been aligned with our business practices in the field," he says. "A scream at our level is, if anything, a whisper at their level."

Changes coming down the pipeline

Malone says he hasn't found evidence of a systematic breakdown at the company. "It's early days, and I don't know that we're going to come up with one answer," he says. But he suggests that BP's rapid expansion - acquiring energy giants Arco and Amoco within months of each other in 1999 - may have contributed to the recent troubles. "Did we grow too fast? It's possible. Did we get the corporate culture right? I'm trying to figure that out."

Another explanation is that as BP's U.S. operations grew in size and scope - roughly 34,000 of the firm's 96,000 global employees are in the U.S., and the country accounts for 38% of BP's revenue last year of $244 billion - lines of authority blurred and responsibilities became too decentralized. For example, U.S. safety officials didn't work directly for Malone's predecessor, Ross Pillari; they bypassed him and reported to London. And Pillari didn't report to Browne; instead his boss was David Allen, BP's group chief of staff.

Read a full interview with Robert Malone
http://money.cnn.com/2006/08/18/magazines/fortune/bp_qa.fortune/index.htm

In the wake of Texas City and Alaska, BP does seem to have finally gotten religion. Browne says personal safety, process safety, and environmental safety efforts at BP facilities around the world have been redoubled, and a huge effort has gone into adding additional engineers to address these areas. The Texas City disaster was a profound event for the company, says Browne, and the discovery of the extent of the corrosion in Alaska this summer "only reinforced the impact of Texas City. The reason we closed the field was to prevent something from happening. That's very important to remember."

In North America, Malone has shaken up BP's bureaucracy. Before accepting the job he asked Browne for greater authority than his predecessors had, as well as direct access to Browne and BP's London headquarters, known inside the company as "St. James," after its posh address in St. James's Square.

New positions are also being created, with a U.S. safety czar as well as a compliance chief reporting directly to Malone, not to St. James. "My authority is nothing like what my predecessors had," Malone says with a light Texas twang, despite years of service in London and California. "I cut across the line - if I say we need to spend more, I have the authority to act."

Belatedly, BP is indeed opening the spigot and pouring money into North America. In Texas City the company plans to spend $1 billion rebuilding the 70-year-old refinery over the next five years. In Alaska the company has earmarked an additional $550 million to improve the integrity of its 1,500 miles of pipes, along with wells and gathering centers. The entire system of transit lines that failed this summer will be replaced at a cost of $150 million, and 21 new corrosion and safety specialists are being hired. "Clearly the world has changed," says Hedges, the leader of the anticorrosion team in Alaska. "We can't afford to have any leaks."

Still, the impact of both the new money and the new corporate culture is more evident in Texas City than in Alaska, where many of the people who presided over Prudhoe Bay's decline remain in place, including BP Alaska boss Steve Marshall. In Texas City cranes rise over the 1,200-acre site, and scaffolding covers many of the cat-crackers and other machinery as fresh pipes, ducts, and insulation are installed.

The site where 15 workers died when their trailers were blown apart is now bare concrete - the trailers have been moved away from the dangerous areas where oil is transformed into gasoline at more than 800 degrees, and 400 workers have been moved out of the refinery entirely into a former Kmart that now serves as BP office space.

The inspection team has grown from fewer than 50 to more than 100, and the plant has a new manager, as well as a new safety boss and new chief of staff, all Britons imported from other BP sites. "At first the people here looked at us like we were Martians," says Rod McCracken, the chief of staff. "Now the culture is changing, but it needs to be sustained. If we were to stop now, the old culture would be more prevalent in six months."

Malone cites the progress in Texas City as a blueprint of what he plans to do in Prudhoe Bay. "Our whole ethos now is getting safety right," he says. "Not only keeping people safe, but making sure our procedures are right and our plants are in good shape. That's the goal."

Encouraging as that may be, what's unfortunate is that it took 15 dead and more than 170 injured before anyone at the top realized there was a fundamental problem. Browne and Malone insist they have no illusions about the challenges BP is facing. "We didn't get here overnight," Malone says. "It's going to take us years to get where we need to be."

From the October 16, 2006 issue

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BP'S THREE BREAKDOWNS

Refinery explosion
The March 2005 accident at BP's Texas City refinery killed 15, injured more than 170, and led to revelations of management failures at the facility. The disaster has cost BP billions.

Alaska pipeline
Leaks and corrosion in lines running from wells to the Trans-Alaska Pipeline forced BP to shut down the eastern half of Prudhoe Bay in August, knocking 200,000 barrels of oil a day out of production.

Market manipulation
Government regulators accused BP's U.S. trading unit of cornering the market for propane in 2003 and 2004, artificially driving up what consumers paid for the heating fuel.


More on BP

08_08_06
New worry for drivers: BP shuts oilfield
Damaged pipeline in Alaska affects 8% of U.S. oil production; crude surges; record gas prices seen. (more at) http://money.cnn.com/2006/08/07/news/international/oil_alaska/index.htm

08_07_06
Beyond Prudhoe: Why BP should go back to being an oil company
Forget the good guy image. BP's recent history of mismanagement tells us it needs to focus on running its oil business. (more at)
http://money.cnn.com/2006/08/11/magazines/fortune/pluggedin_murphy.fortune/index.htm

09_06_06
Congress finds BP Alaska problems
Investigators found 'significant problems' with how the oil giant maintained its Prudhoe Bay facility in Alaska, sources say.
(more at )
http://money.cnn.com/2006/09/06/news/companies/bp_congress.reut/index.htm

09_07_06
BP 'fell short' on pipeline, execs admit
BP's top U.S. executives told lawmakers Thursday that the company stumbled by failing to prevent a major Alaskan pipeline from becoming crippled by corrosion. (more at)
http://money.cnn.com/2006/09/07/news/companies/bp/index.htm

08_21_06
What went wrong at Prudhoe Bay
In his first interview since early in BP's Prudhoe Bay pipeline crisis, new BP America president and chairman Robert Malone speaks with Fortune's Abrahm Lustgarten. (more at) http://money.cnn.com/2006/08/18/magazines/fortune/bp_qa.fortune/index.htm 

9_15_06
BP seeks part of Alaska pipeline reopened
Oil giant asks U.S. to allow it to restart eastern part of Prudhoe Bay pipeline. (more at)
http://money.cnn.com/2006/09/15/news/companies/prudhoe_bay/index.htm

9_07_2006
BP: Progress made on Alaska oil restart
Executives tell House panel they'll begin pumping again if tests on corroded pipeline go OK. (more at ) http://money.cnn.com/2006/09/07/news/companies/bc.energy.bp.alaska.reut/index.htm

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Anchorage Daily News
October 1, 2006

http://www.adn.com/money/industries/oil/story/8255570p-8152213c.html

Young holds tougher pipeline inspection rules for review
SAFETY: They would affect lines like the leaky ones at Prudhoe.
By SAM BISHOP
Fairbanks Daily News-Miner
Published: October 1, 2006
Last Modified: October 1, 2006 at 01:31 AM

WASHINGTON -- A U.S. House committee has approved tougher inspection rules for oil pipelines like those that leaked at Prudhoe Bay this year, but Alaska Rep. Don Young, chairman of a second committee with jurisdiction, said he'll take his time reviewing the proposal.

The House Energy and Commerce Committee voted last week in favor of a bill that would require the U.S. Department of Transportation to regulate low-stress pipelines in the same manner as high-stress lines. Low-stress lines are those with internal pressures below 20 percent of their designed strength.

Only certain low-stress lines fall under DOT regulation at present. The leaking transit lines that serve the western and eastern operating areas of Prudhoe Bay are not federally regulated, although a rule proposed by DOT last month would change that.

Young, chairman of the House Transportation Committee, said Wednesday afternoon that he wants to review the DOT's new regulations before he agrees to the kind of broad changes in law that the Energy and Commerce Committee approved earlier in the day.

The Transportation Committee approved its own separate reauthorization of the Pipeline Safety Improvement Act in July.

"I've said we have a good bill," Young said. "Regulations are already in place."

The Energy and Commerce bill approved Wednesday was pushed by Rep. Joe Barton, D-Texas and the chairman of that committee. The bill would tell the DOT to "issue regulations subjecting low-stress hazardous liquid pipelines to the same standards and regulations as other hazardous liquid pipelines" and to do so within a year of the legislation's passage.

The rules would not apply to lines upstream of the gathering centers, known as flow stations.

The only other exceptions would be for lines that already are subject to U.S. Coast Guard safety regulations and those that are less than a mile long and serve certain refining or manufacturing facilities or truck, rail or ship terminals.

There was still some committee debate Wednesday over whether the bill should explicitly require "smart pig" inspections of pipelines. The bill as passed does not require such pigging. DOT officials say that's the technique most operators already use to comply with internal pipeline inspection regulations but it can't be done on every pipe because of bends and valves.

The bill would tell DOT to review internal corrosion regulations to make sure they are adequate and report back to Congress in a year.

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http://www.adn.com/money/industries/oil/prudhoe/story/8251916p-8148416c.html

BP to start using 'pigs' on Slope pipeline this weekend
The Associated Press
Published: September 30, 2006
Last Modified: September 30, 2006 at 06:28 AM

The shutdown of a satellite field on Alaska's North Slope will not stop BP PLC from beginning the process of cleaning out a corroded transit line in the nation's largest oil field.

"We're going to start a series of maintenance pigs this weekend," spokesman Steve Rinehart said Friday. A pig is a device that moves through the inside of a pipeline to clean or inspect the line.

On Thursday, BP shut down a satellite Prudhoe Bay oil field after workers detected natural gas leaking into a manifold building, a key control facility. BP closed the Lisburne production center that processes crude oil and gas coming from the Lisburne field and the neighboring Point MacIntyre oil field.

The shutdown of Lisburne, a satellite field that feeds into the Prudhoe production stream, dropped production by 25,000 to 30,000 barrels per day, about 4 percent of North Slope output.

Methane gas from a high-pressure 14-inch pipeline somehow filled the unoccupied manifold building Thursday morning at Drill Site L2 along the shore of Prudhoe Bay, Rinehart said. The gas had dissipated by late Thursday night.

The shutdown was a setback in what had been a gradually improving oil production picture since the eastern side of Prudhoe Bay ceased production Aug. 10, a few days after a leak was discovered in a corroded transit line.

For the last several days, BP had been restarting wells on the eastern side. And starting this weekend, the company will send a pig "that doesn't fit too tight" down a five-mile segment of the eastern transit line, Rinehart said.

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http://www.adn.com/news/politics/alaska_ear/story/8255571p-8152226c.html

Alaska Ear
Published: October 1, 2006
Last Modified: October 1, 2006 at 02:29 AM

FAB VOCAB . . . Darling Don Young, Congressman for all Alaskans except Ear and a Few Others, is in state doing his biannual campaign thingy. Ear so loves when he shows up and speaks publicly, as he did Tuesday on KSKA's "Talk of Alaska," with Michael Carey hosting.

Sure enough, Don's Dictionary has two new entries:

? Commenting on a critic, Don told listeners, "He snided me."

Actually, Ear likes that one. Like a number of Don's fractionations over the years, it seems like it should be a real word.

? In a discussion of global warming, Don sneered at people who claim anything unusual is happening. All these weather changes are just "sickalitic," he opined. (Or should it be "cycalitic?" Ear isn't sure.)