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Wall Street Journal
October 31, 2006

BP Replaces Head Of BP Alaska Amid Environmental Woes
(Updates with reaction from Alaska lawmakers, oil industry
critic Charles Hamel and additional background)
By John M. Biers
and Jessica Resnick-Ault
Of DOW JONES NEWSWIRES

HOUSTON (Dow Jones)--BP PLC (BP) Tuesday announced that it was replacing the head of its troubled Alaska division, the company said in an email to employees.

Under the shift, current BP Alaska President Steve Marshall will leave the division, but will remain with the company. Doug Suttles, currently leading BP's work in the Sakhalin Islands in Russia, will take over as the president of BP Alaska.

The personnel shift comes on the heels of a series of major operational problems at BP Alaska that has helped to sully the British oil giant's reputation. The oil giant suffered a major oil spill in March due to pipeline corrosion. Then, in August, BP shocked global commodities markets by shutting down part of the giant Prudhoe Bay field, again due to corrosion.

BP has resumed normal operations at Prudhoe Bay, but the Alaska problems are under federal investigation for potential criminal violations of environmental laws. BP also is facing major - but unrelated - government probes into its Texas refinery operations and its energy trading wing.

BP spokesman Daren Beaudo denied that the Alaska personnel shift was related to BP's recent performance woes in Alaska. Beaudo said Marshall served for five years in the senior post at BP Alaska - which is longer than the average three-year typical in that post.

"Leadership positions change based on the goals of the company and based on the goals of the individual employees," Beaudo said.

In his new post as "Vice President, Operations Development," Marshall will be charged with overseeing a "leadership-in-training" program to guide staff on operations and safety procedures. Beaudo called the post a "key position" within operations.

The Alaska management change - and BP's dispassionate public comment describing that shift - is the latest case in which BP has replaced an embattled executive while downplaying the performance problems that surrounded the executives in question. When BP replaced former U.S. division head Ross Pillari with Bob Malone in June, it said the move was the result of Pillari's decision to retire.

BP in recent weeks has also quietly reassigned another senior BP Alaska executive, Al Bolea. Beaudo said Tuesday that Bolea's new post has not been announced.

"This is a move by Bob Malone, to get Marshall out of sight, out of mind," said Charles Hamel, a long-standing critic of BP and other oil companies operating in Alaska.

BP has also transferred former Alaska managers to far-flung locales including Azerbaijan, Jakarta, and Houston, Hamel said.

Marshall was on the receiving end of a withering series of hearings with federal and state legislators in the wake of the August problems. Washington lawmakers blasted Marshall in a series of congressional hearings in which BP's "beyond petroleum" public relations campaign was repeatedly mocked.

After Marshall appeared at a hearing before state lawmakers in August, Alaska Speaker of the House John Harris attacked Marshall and other senior BP executives for being "less than forthright and honest" in dealings with legislators. Harris could not be reached Tuesday night.

State Sen. Kim Elton, a Democrat, said Tuesday that the personnel shift could be a good start in turning around BP Alaska.

"BP needed to do something," Elton said in a phone interview. "I hope it's not cosmetic."

State Sen. Tom Wagoner, a Republican, who praised Marshall as "very honest," said the management shift won't necessarily get to the heart of the problem.

"I want to see some real fixes and some attention paid to ongoing maintenance," Wagoner said. BP praised Marshall in an email to employes Tuesday. A press release also expressed gratitude to the departing executive. "I am grateful that Steve has agreed to put his 29 years of experience to work by taking on this important role" Tony Hayward, BP's chief executive for exploration and production, said in the news release.

BP said in September that Marshall had the "unequivocal support" of senior company management, the company said in response to questions from Dow Jones.

"As to whether organizational changes might be made in the future, it would be speculative to say what might transpire," BP said in September.

-By John M. Biers, Dow Jones Newswires; 713-547-9214;

john.biers@dowjones.com

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

Anchorage Daily News
October 31, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8362926p-8257331c.html

Corrosion infested Prudhoe pipeline
BP: A smart pig found more than 5,000
anomalies before August leaks.
By WESLEY LOY
Anchorage Daily News
Published: October 31, 2006
Last Modified: October 31, 2006 at 04:21 AM

The leaky pipeline that led to this summer's market-rattling Prudhoe Bay oil field shutdown was far more severely corroded than initially reported.

BP, the company that runs Prudhoe, originally disclosed 16 "anomalies" along the pipe -- places where corrosion had chewed either partly or fully through the steel pipeline wall.

But according to a test report obtained by the Daily News, the three-mile pipeline was infested with 5,476 potential bad spots, including 176 places where corrosion might have chewed through 50 percent or more of the pipe wall.

BP's Alaska spokesman and its corrosion manager say the company was surprised by the test results, which were generated by a bullet-shaped electronic device called a smart pig that slides through a pipe looking for bad spots.

A BP contractor, BJ Pipeline Inspection Services, ran the pig through the so-called Flow Station 2 pipeline -- a key trunk line that drains oil out of the eastern side of the sprawling Prudhoe field -- on July 21.

Sixteen days later, the pipeline sprang leaks that, coupled with the alarming test report from the pigging run, prompted top BP executives to shut down half of the nation's largest oil field as a precaution, an event that unnerved global oil and gasoline markets.

BP carried out the pig run only after federal pipeline regulators had ordered it to do so.

The British oil giant already had drawn scrutiny from the regulators, as well as from members of Congress and federal criminal investigators, following a separate pipeline leak elsewhere in the field back in March.

That leak, from another corroded segment of pipe, resulted in an estimated 201,000 gallons of crude oil spilling onto the tundra -- the largest oil spill ever in the North Slope oil fields.

BP executives have admitted that the company's corrosion inspection program was flawed and that the pipes of the type that leaked weren't being monitored adequately.

The company has committed to replacing a total of 16 miles of these pipelines, known as oil transit lines.

Thomas Barrett, head of the U.S. Pipeline and Hazardous Materials Safety Administration, said the BJ Services pigging report showed BP wasn't doing the job.

"It reinforces that they didn't properly clean or maintain the line," he said. "They didn't understand the condition of the line, and this condition was allowed to build up over time. I think the maintenance standards there were well below what we expected."

According to the BJ Services report, the smart pig -- a highly magnetic device that uses sensors to check the pipeline wall for bad spots -- found a total of 5,476 places where the 0.34-inch wall thickness was worn away to some degree.

Most of the hits were for internal damage, or places where corrosion had chewed pits into the pipe's inner wall, as opposed to attacking from the outside. The pipe is 30 inches in diameter.

Water touching steel typically is what gets corrosion started.

BP managers said they were surprised that its transit lines were so badly corroded, because they carry mainly pure crude oil with little water mixed in.

Barrett agreed that severe corrosion in such oil transit lines elsewhere in the country is uncommon.

Other pipelines within Prudhoe's vast network of some 1,500 miles of lines are much more susceptible to corrosion and BP spends tens of millions of dollars to fight that corrosion and prevent leaks, said Bill Hedges, the company's Alaska corrosion manager. He said BP is still trying to figure out what caused the corrosion outbreak inside the transit lines.

But Barrett's office has faulted BP for going many years without running pigs through the lines to scrape out potentially corrosive sludge and to test for wall thinning.

When it comes to finding potential holes, even a smart pig isn't always smart enough.

The pinhole that allowed 966 gallons of oil to leak from the Flow Station 2 line Aug. 6, the day BP decided to shut down part of Prudhoe, was at a place where the smart pig indicated not an actual hole but 61 percent wall-thickness loss.

That pipeline is permanently out of service and will be replaced, said BP spokesman Daren Beaudo.

The 5,476 potential trouble spots the pig found is a misleading total, because the vast majority of them were well below industry and legal standards for taking some sort of preventive action, such as welding a patch onto the pipeline, Hedges said. In this case, 5,300 of the anomalies were below 50 percent wall loss, while only 16 were 70 percent or more.

The 16 were the ones BP spokesmen talked of in the wake of the Aug. 6 shutdown.

Almost all pipelines have some degree of corrosion and can be operated safely even when half or more of the steel wall is eaten through, Hedges said.

BP and government regulators have said the Flow Station 2 pipeline had five known holes. Insulation that shrouds the above-ground pipe might conceal more, but Beaudo and Hedges would not speculate Monday on how many.

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

Houston Chronicle
October 31, 2006

http://www.houstonchronicle.com/disp/story.mpl/front/4298569.html

Feds: BP slashed budget despite warnings on plants
By ANNE BELLI
Copyright 2006 Houston Chronicle

Top officials at BP allowed widespread budget cuts at the company's Texas City refinery and other plants worldwide in recent years, even though they were well aware of serious safety problems throughout the facilities, federal investigators said Monday.

Those cuts, as well as shortsighted safety improvements, were major factors in the fatal March 2005 blast at the Texas City site, where 15 people were killed and scores injured in a explosion investigators have deemed preventable, the investigators said in a release of preliminary findings.

"What they forgot in years of cost-cutting and employee cuts is that something very bad could happen," Carolyn Merritt, chairman of the U.S. Chemical Safety and Hazard Investigation Board, told the Houston Chronicle.

BP spokesman Ronnie Chappell on Monday reiterated the company's long-standing position that it takes responsibility for the blast and is making major and expensive safety improvements in Texas City and elsewhere.

"BP agrees with CSB that the March 23, 2005, explosion and fire was a preventable tragedy," he said in a statement. "The findings of our own investigation are generally consistent with those of the CSB. However, we do not understand the basis for some of the comments made by the CSB. ... We are not going to comment publicly on CSB statements until the board issues a final written report that we hope will explain in more detail the basis for their statements."

Merritt and CSB lead investigator Don Holmstrom are expected to release those details at a news conference today. It will be the first significant update on the status of the agency's investigation since October 2005.

At that point, the CSB's findings focused on what it called mistakes made by management at the Texas City plant, and it urged creation of an independent panel to examine BP's safety culture at five U.S. refineries.

But Monday's announcement went a step further, mirroring what civil attorneys suing the company have been saying for months: that BP's upper brass at company headquarters in London also were well aware of the problems at the facility.

Merritt declined to tell the Chronicle what would be announced at the news conference. But she hinted that it would focus on what upper management knew about safety concerns and when.

Specifically, the safety board said Monday that:

•A 2004 BP audit of 35 business units, including Texas City, found "widespread tolerance of noncompliance with basic safety rules and poor implementation of safety management systems and processes."

•BP implemented a 25 percent company-wide cut on fixed costs between 1998 and 2000, negatively impacting spending for maintenance repairs and other safety improvements.

•The training staff in Texas City was reduced from 30 people in 1997 to eight in 2004, and the budget was cut in half during that time.

Chappell said the company's own final accident investigation report disputed that spending cuts were a "critical factor" in the March 2005 accident.

Maintenance spending had increased 40 percent in the five years before the blast, and was higher than the industry average, he said the report found.

He also defended the company's decisions regarding training budgets and staffing, and referred inquiries about those to the final report, posted on the company's Web site.

"As you know, BP has accepted responsibility for the explosion and fire at the Texas City refinery," Chappell said. "We are deeply sorry for what occurred and for the suffering caused by our mistakes. We know we cannot undo the harm caused by this tragedy."

The company has set aside more than $1.2 billion to settle claims.

One person who has refused to settle, however, is Eva Rowe of Hornbeck, La., whose parents were killed in the blast.

Rowe has said one reason she has refused BP's settlement offers is that she wants public disclosure of company documents that she says show BP turned a blind eye to safety.

This week, Rowe's attorney, Brent Coon of Beaumont, posted a Web site that will be used to release documents as they are admitted into evidence during Rowe's trial, set to begin next week in Galveston.

Sunday night, Coon posted on the site internal BP e-mails that show that the company in 2002 contemplated installing a flare on the unit that exploded.

Federal investigators have said that had a flare been present, the hydrocarbon liquid and vapors that ignited and exploded likely would have burned safely away and lives would not have been lost.

anne.belli@chron.com

Wall Street Journal
October 31, 2006

U.S. Cites Cost Cuts' Role In BP Refinery Blast
Safety Board Lays Blame With Top-Level Decisions, Raising Firm's Legal Risks
By CHIP CUMMINS
October 31, 2006; Page A3

Cost-cutting efforts by senior management at BP PLC contributed to a deadly explosion at a refinery in Texas last year, federal investigators said, a finding that ratchets up the legal stakes for the London-based oil giant.

In a summary of its preliminary findings yesterday, the Chemical Safety and Hazard Investigation Board didn't name specific senior managers or members of BP's executive suite in London. But the federal agency alleged for the first time that high-level decisions to defer overhauls, cut staff and rein in costs at the Texas City, Texas, plant helped cause the accident, which killed 15 people and injured 180.

BP already faces a criminal probe into the accident as well as civil claims from victims and survivors' families. Though the board hasn't any regulatory role or prosecutorial powers, its findings could be taken up by civil litigants or by other agencies probing the disaster.

The development further sullies BP's corporate image after a spate of operational, compliance and environmental problems in the U.S. Federal authorities separately are investigating BP's energy-trading activities and federal and state officials are probing corrosion problems at BP's big Prudhoe Bay oil field in Alaska.

BP has issued its own findings that painted a picture of widespread maintenance and safety shortcomings at the Texas City refinery. But it laid the lion's share of the blame on the actions of a handful of lower-level workers and supervisors.

Ronnie Chappell, a BP spokesman, yesterday said the company stood by its findings. BP investigators "didn't find evidence of budgetary decisions which were an immediate cause or critical factor in this terrible tragedy," he said.

BP's chief executive, John Browne, set off an industry-changing wave of consolidation in the late 1990s, when oil prices were low. Big oil companies gobbled up competitors and cut costs to stay profitable. Lord Browne and his management team won kudos for the effort, especially as oil prices recovered later, leading to currently flush industry profits. BP took over the Texas City refinery when it purchased Amoco Corp. in 1998.

In July 2005, The Wall Street Journal detailed in a page-one article how cost cuts and staffing reductions preceded the blast. Current and former workers interviewed blamed the cuts for reducing safety and causing equipment problems at the refinery. BP denied those claims.

In an interview, Don Holmstrom, the safety board's top investigator in the BP inquiry, said BP executives had been sent company documents months or years before the accident that indicated cost-cutting had undermined safety at the plant. The agency said it wouldn't release those documents at the present time.

"The documents themselves that we have reviewed identify the impact of the cost-cutting on the integrity of the refinery," Mr. Holmstrom said.

The board also said internal BP documents indicated managers were aware of safety problems at 34 other unnamed BP businesses world-wide. "Every successful corporation must contain its costs," the board's chairwoman, Carolyn Merritt, said in the statement. "But at an aging 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 catastrophic accident." Ms. Merritt linked BP's cost-cutting and the accident in an interview broadcast Sunday on the CBS television network's "60 Minutes" program.

Mr. Chappell, the BP spokesman, said BP agrees "that the explosion and fire was preventable, but we don't understand the basis for some of the comments made by the [safety board]" in its statement. He said BP won't comment publicly on specific statements made by the safety board until the agency issues its final report, expected in March.

The board listed BP financial decisions that the agency determined played a role in the accident. For instance, in order to save money, BP decided in 2002 not to replace a venting system that failed during the accident with a safer system, the agency said.

It also found that BP cut the size of the training staff at the refinery to eight people in 2004 from about 30 in 1997. The training department's budget was reduced by half from 1998 to 2004, it found.

The board also said that it determined BP cut fixed costs at the refinery about 25% from 1998 to 2000 and that those cuts "adversely impacted maintenance expenditures and infrastructure at the refinery."

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

Xxxxxx

US Agency Likely To Call For New Standards At Refineries
DOW JONES NEWSWIRES
October 30, 2006 5:44 p.m.

HOUSTON (Dow Jones)--Federal investigators examining a major explosion at BP PLC's (BP) Texas City refinery are expected to announce recommendations for new standards for pressure control mechanisms at oil refineries, industry sources said Monday.

The new recommendations are expected to suggest that trade organizations revise the industry standard for use of pressure controls, a person who works in the oil industry said.

Federal investigators from the U.S. Chemical Safety and Hazard Investigation Board (CSB) are scheduled to speak at a press conference Tuesday to discuss recommendations for new safety practices. The CSB has previously said that the failure of pressure relief valves contributed to the March 23, 2005 explosion at BP's Texas city plant, which killed 15 and injured more than 170 people.

One year ago, the agency submitted recommendations to the American Petroleum Institute and National Petrochemical and Refiner's Association, asking the trade groups to hold their members to higher standards of safety. Those recommendations hinged on distancing temporary buildings from refinery process units.

One of the reasons that the Texas City blast resulted in such a high death toll was that many of the victims were working in a trailer located close to the unit that exploded, the CSB said.

The recommendations follow the agency's preliminary findings released Monday. The CSB's preliminary findings suggest that the Anglo-American oil company disregarded employee safety, despite a record of problems at Texas City. The findings say that the oil giant chose to focus on cutting costs, and reducing the number of reportable injuries recorded by the Occupational Safety and Health Administration, rather than looking at larger safety and management issues.

The findings come five months ahead of the agency's final report, which is anticipated in March.
The preliminary report was necessitated by the urgency of some of the board's recommendations, said 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. He would not say what the recommendations entailed.

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 oil fields.

BP said it has cooperated with the CSB's investigation into the explosion at the Texas City refinery.

Beyond the CSB's investigation, BP faces an investigation by the U.S. 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.

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

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.

Xxxxx

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

Houston Chronicle
October 30, 2006

http://www.chron.com/disp/story.mpl/business/energy/4296106.html

BP's own experts knew plant was at risk, report says
Associated Press

TEXAS CITY, Texas BP PLC safety experts warned of the potential for a "major site incident" 2 1/2 years before an explosion at the company's Texas City refinery killed 15 people, according to a broadcast report.

CBS' 60 Minutes also reported Sunday that the Texas City plant manager, Don Parus, told his bosses that most workers at the refinery felt the plant was unsafe.

According to CBS, one worker wrote, "This place is set up for a catastrophic failure."

"They didn't do much," said Brent Coon, an attorney representing several victims suing BP. "Two months later the plant blew up."

Another 170 people were injured at the plant about 40 miles southeast of Houston.

BP's top refinery executive, John Manzoni, has said under oath he didn't know of serious safety concerns until the explosion.

The explosion occurred when faulty sensors did not warn of gathering vapors near the isomerization unit, which boosts the level of octane in gasoline. The vapors ignited as the unit was starting up.

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

Coon, who represents several victims suing BP, will argue in court that by failing to upgrade old equipment with flares, the company put lives at risk.

Many families of victims have reached settlements, but Eva Rowe said she wants to take BP to trial so that some aspects of the case will become public. Rowe's parents, James and Linda Rowe, were killed in the blast.

"To BP my parents were just a number," Rowe said in a 60 Minutes interview. "To them, they're replaceable. To me they weren't just a number. They're somebody."

Rowe's case against BP is scheduled to go to trial next week in Galveston.

BP officials referred 60 Minutes to their report on the explosion, which concluded there was "no evidence of anyone consciously or intentionally taking actions or decisions that put others at risk." The company also sent 60 Minutes a letter saying "BP accepts responsibility for the explosion and fire at the Texas City refinery. We are deeply sorry for what occurred ..."

The chief government official investigating the explosions said the accident 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," said Carolyn Merritt, who was appointed by President Bush to chair the U.S. Chemical Safety Board and has led an 18-month investigation into what happened at Texas City.

She said that there were three pieces of equipment that were supposed to be repaired and were not. She said BP management knew about faulty equipment before authorizing the risky startup of one of the plant's units.

Merritt said the refinery needed upgrades when BP acquired it eight years ago but that BP managers instead were told to cut their budgets. Those cuts resulted in the losses of key personnel and equipment, she said.

"Our investigation has shown that this was a drastic mistake," Merritt said.

Before the explosion London-based BP increased spending at the plant, but Parus said in a deposition that it was too little, too late.

Wall Street Journal
October 30, 2006

BP Had Safety Problems At 35 Facilities -US Investigators
DOW JONES NEWSWIRES
October 30, 2006 9:22 a.m.

HOUSTON (Dow Jones)--Federal investigators examining a major 2005 explosion at BP PLC's (BP) Texas City refinery said the company knew of "significant" safety problems at the Texas City refinery and at 34 other locations around the world in the years leading up to the blast.

"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, chairman of the U.S. Chemical Safety and Hazard Investigation Board (CSB).

The Anglo-American oil giant responded to these problems with measures focused on reducing occupational injury rates, without removing catastrophic safety risks, Merritt said in a release accompanying the agency's preliminary findings. The explosion on March 23, 2005, which killed 15 and injured 170, followed a pattern of major accidents at the plant, according to the CSB.

The refinery maintained the lowest injury rate in its history in 2004, the year before the major explosion, but the rate does not take into account catastrophic hazards or distinguish between injuries and fatalities, according to the CSB. A sobering 2004 presentation by the refinery manager focused on 23 deaths at the plant in the previous 30 years; on average, one worker had died every 16 months, the agency said.

During 2004, the refinery experienced three major accidents that resulted in three fatalities, according to the CSB. The accidents prompted the refinery's leadership to look to improve the refinery's safety performance.

However, the management primarily took initiatives that focused on improving personnel safety - avoiding slips, trips, and falls - rather than looking at the overarching picture of management systems, equipment design, and preventative maintenance programs, the CSB said in its findings. BP's Texas City refinery relied upon outdated equipment, already phased out in most refineries and chemical plants, Merritt said. The March 2005 explosion at the refinery was the worst accident in the industry in 15 years, killing 15 and injuring over 170. The preliminary findings show that the unit primarily responsible for the blast had eight previous instances where flammable vapors were released in the ten years prior to the accident.

Any of those releases could have resulted in a deadly accident like the 2005 blast, the preliminary findings said. "The eight incidents were not properly investigated, and appropriate corrective actions were not implemented," the CSB report said. The investigation of a 1994 incident requested that a supervisor analyze the adequacy of the equipment. The analysis was not completed, and management never followed up, according to the CSB.

In addition to the CSB's review, the company currently faces an investigation by the U.S. Environmental Protection Agency and Department of Justice, who are looking into a potential criminal case related to the Texas City explosion. Following a recommendation from the CSB, an independent commission is also reviewing operations at BP's five refineries in the continental U.S.

The refinery shut ahead of Hurricane Rita in 2005 to avoid storm damage, and has gradually resumed gasoline and diesel production over the past year, and currently runs at about 247,000 barrels a day - just over half of its normal capacity. During the restart, the company has worked to carefully review the refinery's operations, and the safety of its components.
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com

Xxxxxxx

BP Budget Cuts Led To Texas City Explosion-Chem Safety Bd
DOW JONES NEWSWIRES
October 30, 2006 7:33 a.m.
(This article was originally published Sunday)

HOUSTON (Dow Jones)--Significant budget cuts at BP PLC's (BP) Texas City refinery may have contributed to a major fatal explosion at the refinery in 2005, according to the chairman of the U.S. Chemical Safety and Hazard Investigation Board (CSB).

In the years leading up to the explosion, 25% of fixed costs were cut, CSB Chairman Carolyn Meritt said in an interview broadcast Sunday on television newsmagazine "60 Minutes."

"Our investigation has shown that this was a drastic mistake," she said. The CSB believes that the accident directly resulted from the budget cuts, Meritt said. Previously, the CSB has suggested that BP had ignored maintenance problems with the unit that ultimately led to the explosion, which killed 15 and injured over 170. In Sunday's interview, Meritt took these allegations a step farther, suggesting that BP's shoddy maintenance was part of a wider attempt to cut corners.

"The problems that existed at BP Texas City were neither momentary nor superficial, they ran deep through that operation," she said.

BP officials argued that they had not compromised worker safety. "I don't believe it's the case, ever, that we shortchange budgets on safety," BP's refining chief John Manzoni said in a taped deposition, aired as part of the broadcast. "That's not how we run the company." During deposition, Manzoni claimed he and other high-ranking officials in the oil giant's London headquarters were unaware of safety concerns at the refinery prior to the explosion.

However, the broadcast included excerpts from internal memos, sent to Manzoni and others in London about the conditions of the refinery. One letter, in particular, suggested that there was potential for a "major site incident" at the refinery.

The company currently faces a civil trial, slated to start Nov. 8, brought by Eva Rowe, the daughter of a couple who worked at the refinery and were killed in the March 2005 explosion. During the broadcast, Rowe said she would not settle with BP, because she finds it imperative that the company's safety problems be aired. Beyond the civil case from Rowe, the Department of Justice and Environmental Protection Agency are investigating a potential criminal case against the company. The CSB is still completing its own review of the accident, in which preliminary findings are expected Tuesday, and a final report is anticipated in March, 2007. Under a recommendation from that board, an independent panel has been formed to examine the operations of BP's five refineries in the continental U.S. That panel is expected to issue its final findings this fall.

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

xxxxxx

BP's Malone Sets Up US Internal, External Safety Boards
DOW JONES NEWSWIRES
October 30, 2006 7:10 a.m.

LONDON (Dow Jones)--Bob Malone, BP America Inc.'s president, has set up a board comprising BP PLC (BP) U.S. executives and is recruiting an external board to advise him on safety and ethical issues, the company said in a statement issued Sunday.

The appointments follow the partial shutdown of its Alaska Prudhoe Bay oil field in August and the death of 15 workers at its Texas City, Texas, refinery in March 2005.

Malone "has established an operational advisory board composed of 15 senior business leaders in BP America to advise him on safety, operational integrity and compliance," according to the U.K. oil major's statement.

He is also "in the process of recruiting an external advisory board to assist and advise him in monitoring BP's U.S. businesses, with particular focus on safety, operational integrity, compliance and ethics," the statement added.

The company said Malone, who stepped in earlier this year, "is also building a team of internal experts on employee safety, process safety, operational integrity, and compliance and ethics."

BP has also hired a technical director at Prudhoe Bay to "provide independent assurance of integrity management efforts."
The announcement follows internal oversight efforts unveiled in September by Malone. Malone has asked former Federal District Court judge Stanley Sporkin to independently review all worker allegations raised in BP's Alaska operations.

Malone also retained three corrosion experts to independently make recommendations for improving corrosion inspection.
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com

Xxxxxxx

BP's Prudhoe Bay Output Has Returned To Over 400,000 B/D
DOW JONES NEWSWIRES
October 30, 2006 6:31 a.m.

LONDON (Dow Jones)--BP PLC (BP) said Monday its Alaska Prudhoe Bay output has returned to its pre-shutdown August level of over 400,000 barrels a day.

The U.K. oil major also said it intends to spend an extra $1 billion, on top of the $6 billion already earmarked, to upgrade its Alaska production facilities and its U.S. refineries.

BP shut-own half of production at the Prudhoe Bay oil field it operates in response to a small spill and unexpected corrosion found on its pipeline Aug. 6. But, in a statement on its Web site, dated Thursday but which it says was released Sunday, the company said "Prudhoe Bay production has returned to pre-August 6 levels of more than 400,000 b/d."
A BP spokesman in London said the field had a 450,000 b/d capacity but said it wasn't clear what its current production is.

In its third-quarter earnings report Thursday, BP said production from the field was around 400,000 b/d.

In Sunday's statement, the company also said it "has added an additional $1 billion to the $6 billion already earmarked to upgrade all aspects of safety at our U.S. refineries and for integrity management in Alaska."

Apart from the Alaska woes, BP also faces scrutiny because of a blast in Texas, Texas City, which killed fifteen workers in March 2005. The chairman of the U.S. Chemical Safety and Hazard Investigation Board Carolyn Meritt said Sunday in an interview that significant budget cuts at the refinery may have contributed to the fatal refinery explosion.

Regarding Alaska, BP said spending on Prudhoe Bay major maintenance will increase to $195 million in 2007, a nearly four fold increase from 2004 spending levels.

BP said the pigging on the Western Operating Area of the Prudhoe Bay pipeline - where production wasn't stopped in August - is on track to start in November. Pigging involves sending a cylindrical device through a pipeline to check its walls for cracks or other signs of corrosion.

BP said it had completed more than 24,000 inspections in the Eastern Operation Area - where the shutdown took place - with 72% of the length now checked.

The company said it has completed its orders for 16 miles of pipeline to replace existing transit lines at Prudhoe Bay, due to be delivered in the fourth quarter.

-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com

Guardian Unlimited
October 29, 2006

http://observer.guardian.co.uk/world/story/0,,1934351,00.html

The daughter who is taking on the might of BP

When her parents died in a blast at the oil giant's Texas refinery,
Eva Rowe refused compensation, determined to force the company to face
a court case.
Mark Townsend and Paul Harris
Sunday October 29, 2006
The Observer

Survivors recall how the ground shuddered violently, with a boom ten
times louder than a clap of thunder. Just after lunch, a ferocious
fireball surged through the western quadrant of the vast British-owned
oil refinery where James and Linda Rowe worked side-by-side. The
bodies of the couple, who had been together since childhood, were so
charred they were unrecognisable.

Now, 18 months after the fatal explosion in British Petroleum's
largest US refinery, the circumstances behind their deaths are about
to became the focus of a high-profile trial that could severely dent
the international credibility of Britain's biggest company. In a
fortnight, the death of the married couple will become the subject of
a case that could witness BP's chief executive Lord Browne giving
testimony in court. There have been allegations that BP in Texas
tempted disaster by cutting corners on safety and maintenance.

James, 48, and Linda, 47, left a daughter, Eva, who believes safety
failures at the huge BP plant in Texas contributed to the death of her
parents. Her decision to launch a lawsuit against one of the world's
most powerful corporations has led to the 22-year-old being compared
to Erin Brockovich, the suburban mother who secured the largest
settlement ever paid in a direct-action lawsuit in American history.
But Eva has already turned down the offer of a compensation settlement
by BP, claiming that only the scrutiny of a trial will ensure the
world knows how and why her mother and father died.

Browne expects to hear this week whether he will be being asked to
give a personal testimony in the impending trial, possibly by a taped
telephone or statement. An appeal has been lodged by his lawyers,
arguing it is not relevant that the chief executive should give
testimony. Their reticence is easy to understand. Amid intense media
interest, Rowe will allege that her mother and father died because
failures in safety measures led to the explosion in March 2005 that
killed 15 people and injured 170. In particular, she believes that
cost-cutting may have compromised safety, a charge also denied by the
oil company.

'BP's desire to save money killed my mum and dad,' she said in a Radio
4 documentary last week. 'To me, that is wrong. They could have not
cut their costs so many years ago and fixed things and kept up their
maintenance and they didn't. My parents are dead because of that.'

A jury, to be selected a week tomorrow, will ultimately decide the
merits of her case, which will be heard in a modest wood-panelled
courtroom in the Texas town of Galveston, perched on the oil-rich Gulf
coast. The following Monday, the town's central court will be
encircled by hordes of reporters and TV satellite trucks capturing the
opening salvos of the first and only civil lawsuit to be brought
against BP over the fatal explosion.

Whatever the decision, it promises to be an uncomfortable trial for
Browne, 58, who has become used to being feted as the leading oilman
of his generation and whose savvy earned him the sobriquet the 'Sun King'.

His company faces a formidable foe. Local lawyer Brent Coon is
representing Eva's case, which has strengthened his legendary status
in south Texas as he protests the importance of protecting the
'working people of the oil business'. He is likely to allege that the
cause of the blast in the 'isomerisation unit' at BP's Texas City
plant was due partly to out-of-date equipment. 'This explosion was
tragic and it was unnecessary and it was unavoidable,' he said.

For Eva, the likelihood is that she will become a new heroine of the
anti-globalisation movement, the little guy fighting the big boys. The
hiring of a New York-based PR team suggests her impending status as
the new Brokovich may even be quicker than some suspect.

Her decision to proceed with the trial is precisely what the oil giant
wanted to avoid. So far, it has paid £1bn to more than 1,000 victims
of the explosions, with payouts for those who have lost family members
and to people whose property was damaged in a blast that was heard
five miles away. Keen to avoid litigation, BP has settled or is on the
verge of settling all claims. Only Eva has refused.

She called them her best friends

In the wake of the disaster as she struggled to rationalise her loss,
Eva would frequently ring her mother's mobile phone just to hear her
voice on the answering machine service.

Months passed before she summoned the courage to have the phone
service stopped; with her mother's voice finally removed from her
grasp, the young women began her quest for what she saw as justice.

Less than a year before the explosion, her parents had moved to the
hard scrabble Texas town of Galveston, south of Houston, in hope of a
better life. But life remained tough. Their camper home was just 121
feet from the doomed unit that sparked the tragedy, closer than the
industry - and BP's own - standards generally consider safe.

The couple might not have survived the blast even if they had been in
their caravan, such was the ferocity of the explosion, the worst
refinery accident in the US in 20 years. So severe, in fact, was the
blast that at first terrorism was suspected. Investigations though
located a cause closer to home, with BP forced to admit that 'a series
of failures' including following proper procedures and poor
supervision at the plant had contributed to the explosion.

In addition, a provisional investigation admitted that managers failed
to supervise the unit where the explosion took place and that
operators were absent at crucial periods. Compounding the errors was
the finding that staff failed to sound the evacuation alarm when it
became apparent that pressure in the octane-producing isomerisation
unit reached unsustainable levels.

The result was a cataclysmic explosion that dwarfed the incident
Britain would experience at the Buncefield fuel depot in Hertfordshire
six months later - but what most perturbed critics was that the blast
was not the first such incident at the Texas City complex.

Almost exactly a year before the deaths of James and Linda, the
complex was evacuated after an explosion which cost the firm more than
£40,000 in fines - and it was not the first incident at the plant to
claim fatalities. Last September, two workers died when they were
scalded by superheated water that escaped from a high-pressure pipe.

The safety reputation of BP will inevitably be scrutinised during the
forthcoming court case. Lawyers at the company and Coon's team were
understood to be frantic last week agreeing witnesses and documents to
be disclosed during the trial. Reports that the US Chemical Safety
Board (CSB), the federal body which investigates major industrial
accidents, found at least eight previous dangerous incidents at the
Texas City plant prior to the explosion could also feature.

It is understood that the CSB alleges that these eight incidents were
not properly investigated and BP failed to adequately maintain
equipment. The company has yet to officially comment on the
allegations until the safety board issues its final report.

Such revelations come amid criticism of BP's environmental record
following a huge leak at the largest US oilfield in the remote
wilderness of Alaska's Prudhoe Bay. There, amid snow-capped mountains
and dense forests, at least 200,000 gallons of oil seeped into
landscape last March. It is alleged that only a passing motorist who
smelt oil alerted the company to the leak, four days after it was
thought to have begun. Corroded pipelines were to blame. Last month
further damaging revelations emerged when US Congress discovered
documents suggesting BP knew of problems on its Prudhoe Bay pipelines
five years ago but failed to act.

Elsewhere, lawmakers at a congressional hearing last September said
the oil company's neglect of the 800-mile of pipelines snaking across
the Alaskan wilds was 'unacceptable'. An investigation by BP had found
by then that a number of pipelines were in fact seriously corroded and
is currently reviewing and repairing its infrastructure.

There was conspicuously little spring in the step of Browne as he left
BP's London headquarters late last Friday. It had been a particularly
gruelling few days, with the week dissected by his prediction that the
boom times for the oil industry were over as he revealed its first
fall in quarterly profits for nearly three years. He also announced
that the explosion that killed James and Linda had cost more than
£800m in lost profits.

Of course, he must have thought, things might get a whole lot worse.
Victory for Eva will raise inevitable questions over whether big oil
companies can ever be considered safe and environmentally friendly.
Victory for the chief executive is likely to earn him only temporary
respite. Even as Browne prepares for his possible trial appearance, BP
is the subject of several inquiries, including a probe into
price-fixing in the propane market in the US and an investigation into
the shutdown of the Prudhoe Bay site following the discovery of
corroded pipes. Separately, BP has launched an independent
investigation into allegations of bullying and worker intimidation
over recent years at its Alaska facility.

Yet it is the outcome of the Galveston trial that is most likely to
shape the legacy of one of Britain's most widely admired businessmen.
Browne will step down at the end of 2008 where he is in line to
receive a £991,000 annual retirement package. For Eva, this court
battle is not about money. It is about getting to the truth.

BP's American problems:

March 2005: A huge explosion tears through BP's Texas City Oil plant,
near Houston, Texas, killing 15 and injuring nearly 200. Lord Browne,
BP 's chief executive, described the explosion as 'the worst tragedy
in the recent history of BP'.

July 2005: Thunder Horse, BP's development oil platform in the Gulf of
Mexico is evacuated as it is battered by Hurricane Dennis causing the
platform to list.

September 2005: BP is given a £12 million fine by the US Department
of Labor for 300 separate safety violations at its Texas City plant.
The company creates a $700m fund to compensate the victims.

February 2006: BP announces record profits of $19.3bn (£11bn), driven
by the high prices caused by world oil shortages.

March 2006: A criminal invesigation is launched after 260,000 gallons
of oil gush out of a badly maintained BP pipeline in the Prudhoe Bay
oil fields in Alaska. Reports emerge that Lord Browne was given pay
and shares in 2005 worth an estimated £6.5m.

July 2006: US regulators scrutinise BP's dominance in the US propane
gas market amid speculation of price fixing by the UK oil giant.

September 2006: 1,000 barrels of gas oil spills from a pipeline in
California.

November 2006: BP faces case brought against them following the Texas
oil explosion.

Fairbanks News Miner
October 29, 2006

http://newsminer.com/2006/10/29/2954/

Big oil, energy commission spar
over pipeline provisions
By Sam Bishop
Published October 29, 2006
Posted in Local, News

WASHINGTON When legislators working on a natural gas pipeline contract last summer suggested adding more teeth to ensure space on the line for future independent gas producers, officials with the North Slope’s major oil companies said such measures weren’t necessary. New federal rules have it covered already, the oil companies said.

The same oil companies, though, were already suing the Federal Energy Regulatory Commission in a Washington, D.C., court to block some of the new federal rules those that establish the commission’s authority to order expansions of the proposed pipeline.
That authority, according to state officials and smaller oil companies, is necessary so the FERC can ensure room on the line for future independent discoveries.

The major oil companies, though, note that they are appealing just two of numerous provisions in the FERC rules adopted last year that favor the independent companies and state. In addition, a company spokesman said, the companies have no reason to discourage independents from providing gas to the line.

“New exploration is absolutely vital to the long-term success of this project,” said Daren Beaudo, with BP Exploration (Alaska) Inc.

All the major players in the case have filed their final arguments in court. Last week, the U.S. Circuit Court of Appeals for the District of Columbia scheduled oral arguments for Dec. 5.

The oil companies are suing to nullify two regulations adopted by the FERC in 2005 when the commission set the “open season” rules for the proposed Alaska natural gas pipeline. Open season is the period during which pipeline owners take bids from gas owners for space on a line. The owners build the line to fit the demand they see in that period.

The major companies BP, Exxon Mobil and ConocoPhillips all argue that the FERC’s regulations go far beyond traditional open season rules.

“The FERC has asserted unprecedented power over this compared to anywhere else they have jurisdiction,” Beaudo said. “The FERC has not been and should not be in the business of designing pipelines. Open season will determine the design of a pipeline.”

One FERC regulation asserts that the commission, when considering an initial Alaska pipeline permit application, “may require changes in project design … to promote competition and offer a reasonable opportunity for access to the project.”

The other regulation says that if an owner applies to expand an Alaska line after it has been built, the commission “may require design changes to ensure that some portion of the expansion capacity be allocated to new shippers willing to sign long-term firm transportation contracts, including shippers seeking to transport natural gas from areas other than Prudhoe Bay and Point Thomson.”

Prudhoe Bay and Point Thomson are the two largest known natural gas deposits on the North Slope.

The three majors own 98 percent of Prudhoe’s gas and 82 percent of Point Thomson’s.

The new FERC rules discourage construction of the line, the companies argue in their court brief.

Before construction can begin, FERC must give the pipeline a “certificate of public convenience and necessity.”

“The challenged regulations create uncertainty regarding whether, after spending hundreds of millions of dollars studying and designing a pipeline, after conducting an open season, and after preparing and submitting an application for a certificate of public convenience and necessity, a project sponsor will then be compelled to either redesign the pipeline or decline the certificate,” the companies argue.

The regulations also are not legal, the companies say. Federal law, the Natural Gas Act, “makes clear” that the FERC does not have the power to order pipeline capacity expansions, they say.

Lined up in court against the oil companies are the FERC, Gov. Frank Murkowski’s administration, the state Legislature’s Budget and Audit Committee, Anadarko Petroleum Corp. and the pipeline company TransCanada.

FERC, in its brief, acknowledges that the Natural Gas Act bars the commission from mandating expansions, but on existing facilities only.

“In contrast, (the Alaska line regulations) pertain to proposed projects,” the FERC argues.

FERC isn’t proposing to mandate design changes, the agency argues. It is just putting conditions on any application for a certificate.

“If the applicant does not want to change its proposed project design, it is not required to accept the certificate,” the commission says.

Ed Twomey, the Morrison and Foerster attorney in Washington handling the state of Alaska’s case, makes the same point.

“You need governmental approval to erect a building,” Twomey said Friday by way of analogy.

“If the government says you can erect it but only if you do ‘A,’ then you can either build with those conditions or appeal.”

The oil companies don’t buy it.

“FERC may not do indirectly through its conditioning authority what it is precluded from doing directly,” they argue.

Mark Hanley, with Anadarko in Alaska, said his company pointed out the irony of the major oil companies’ position during last summer’s special sessions on the proposed gas pipeline contract with the state.

Anadarko wanted the state contract to mandate a large, 52-inch diameter line or establish clear expansion requirements. After all, Hanley said, the Murkowski administration said in its “best interest” finding that one reason it picked the major producers’ proposal was the 52-inch line’s ability to handle future gas discoveries.

“We asked that if that’s how they’re going to build it, then say that” in the contract, Hanley said. The administration and companies declined, he said.

The companies then assured legislators that the new FERC rules would protect independents, he said.

“We pointed out that they are in court challenging, specifically, FERC’s authority to require design changes to accommodate all shippers,” Hanley said.

However, the oil companies devote four pages of their court brief to the details of all the unusual rules FERC adopted to improve access to the Alaska line, none of which they’re challenging. Among the requirements:

* The pipeline owner must give the FERC an open season plan, with 21 different types of information included.

* The owner cannot communicate with its own subsidiaries that bid on capacity during open season.

* Bidders in open season must be offered capacity at the same tariff, or transport price, found in any “pre-open season” agreements with major gas owners, and those pre-bids have to be publicly posted.

* If open season bidders want more capacity than the eventual line can handle, the pre-open season shippers must move aside to make space.

* Any line expansion costs will be “rolled in” to every shipper’s rates, not just charged to the company that wants the expansion.

It all adds up to a lot of advantages for smaller gas companies that don’t have a share of the line, the major companies argue. But “these extensive requirements are not challenged here,” they add.

Hanley, with Anadarko, said he thinks the majors are downplaying the significance of their lawsuit.

“In testimony they say ‘We’re very narrow in what we’re asking to repeal,’ but when you look at the brief, it’s that whole section,” he said.

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

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.

Xxxxxxxxxxxxxxxxxxxxxxxxxxx

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.

Anchorage Daily News
October 27, 2006

http://www.adn.com/news/alaska/ap_alaska/story/8345536p-8241463c.html

No significant problems found in Prudhoe Bay transit line
By MARY PEMBERTON, Associated Press Writer
Published: October 26, 2006
Last Modified: October 26, 2006 at 04:06 PM

ANCHORAGE, Alaska (AP) - Initial test results on a segment of pipeline in the Prudhoe Bay oil field indicate that the line is serviceable, a BP PLC spokesman said Thursday.

The 5-mile segment of 34-inch line that was "smart pigged" earlier this month shows no significant problems, said Alaska BP spokesman Daren Beaudo.

However, it will take another couple of weeks before all the data can be looked at, he said.

Smart pigs use ultrasound to check for pipe irregularities and areas of thinness caused by corrosion, blamed for an August leak that forced the company to partially shut down the field. BP contracts with a company to run the tests and evaluate the data. Two smart pigs were put through the pipe, he said.

Beaudo said preliminary results indicate no significant problems with the pipe, which is one of two sections of oil transit lines that carry crude from the eastern side of Prudhoe Bay to the trans-Alaska oil pipeline.

The other segment of pipe - the one that leaked in early August, spilling about 200 gallons of oil and forcing a partial shutdown of the nation's largest oil field - was shut down. A bypass was put on that segment of line.

Production at Prudhoe Bay has since returned to normal levels, more than 400,000 barrels a day.

Preliminary results of the smart pigging on the 5 miles of eastern side transit pipe indicate no areas where the wall thickness is reduced by more than 60 percent. BP considers a 70 percent or more loss a trigger point for intervention, ranging from getting a second evaluation of the pipe to replacing it.

The August leak was discovered after workers removed insulation to get a better look at a segment of pipe following a smart pigging in July. The test on a 3-mile, 30-inch segment of pipe now out of production found 16 anomalies in 12 areas with losses in wall thickness of between 70 percent and 81 percent.

BP, the world's second-largest oil company, said it was surprised by the extent of the corrosion. The company had not routinely cleaned and scraped the transit lines because they carried processed oil only, with water and other corrosives removed, and did not think corrosion would be a problem.

It has since determined the problem likely was caused by corrosive bacteria growing in sludge in the bottom of the pipe.

The tests were ordered by the federal government after a spill of up to 267,000 gallons from a transit line on the western side of the field last March. A bypass was put on that line as well.

Beaudo said BP is going ahead with plans to replace both the eastern and western transit lines at a cost of $200 million. The work is expected to begin early next year.

"Both of the lines that leaked, we will never put back into production," he said.

xxxxxxxxxxxxxxxxxxxx

http://www.adn.com/news/politics/elections/story/8347935p-8243585c.html

Business moves to Knowles camp
DONATIONS: Oil, other firms back Democrat,
cite more experience on issues.
By MATT VOLZ
The Associated Press
Published: October 27, 2006
Last Modified: October 27, 2006 at 02:52 AM

JUNEAU -- Normally stalwart Republican backers are shunning Sarah Palin and defecting to Democrat Tony Knowles in this year's gubernatorial race, with business and oil industry executives leading the way.

Plus, Palin shouldn't look for Alaska's all-Republican congressional delegation to stump for her in the final days of the campaign. That strategy helped U.S. Sen. Lisa Murkowski, R-Alaska, beat Knowles and keep her seat two years ago.

Executives from the state's largest companies -- including Conoco Phillips Alaska Inc., GCI, Providence Health System in Alaska and Northrim Bank -- were among Knowles' top individual donors in his last campaign finance report.

Others have donated in different ways. Curtis Thayer, Enstar Natural Gas' director of government affairs and a longtime Republican insider, has co-hosted a fundraiser for Knowles and provided his campaign with a list of people to call to solicit donations.

Thayer said he personally disagrees more with Knowles than Palin on most things, but not on the biggest one of all: Closing a fiscal deal for a North Slope natural gas pipeline.

"When I'm talking to my fellow Republicans, it all goes back to the gas line," Thayer said. "If anything, he's the devil you know. The fact is, he pushed the gas line when he was governor and prices weren't right. He doesn't need any on-the-job training."

Palin and Knowles have similar approaches to putting together a pipeline contract. Both say they will open negotiations to all pipeline proposals instead of just refining Gov. Frank Murkowski's failed contract with Conoco Phillips, Exxon Mobil Corp. and BP. Both say they will negotiate outside the state's Stranded Gas Development Act through a law of general application. Both promise a more open and transparent process than that which was conducted under Murkowski.

But industry is going Knowles' way. Knowles says his experience makes him the only candidate who can revitalize the oil patch and quickly close a fiscal deal for a pipeline. He said evidence of his ability to work with industry can be seen in the Northstar and Alpine oil fields on the North Slope that began production together during his last term in office.

"Certainly a lot of the business community, a lot of people who are traditional Republicans have come over ... and they're scared. They don't know what Sarah Palin is going to do," Knowles told The Associated Press.

Palin said there is no reason for business not to back her and that she is a fervent believer in competition and free enterprise.

"I wonder what it is about my Republican credentials that they don't agree with," she said. "I don't know where it is they would disagree, except that I stood up for Alaskans."

Four Conoco Phillips executives -- company president James Bowles and vice presidents Jack Griffin, Joe Marushack and Darren Jones -- have contributed a combined $2,250 to Knowles' campaign.

Other oil industry executives and employees donating to Knowles work for BP Exploration (Alaska) Inc., Enstar, Forest Oil Co., Udelhoven Oil Services, Peak Oilfield Services Co., Alyeska Pipeline Service Co. and ASRC Energy Services.

Alaska Oil and Gas Association executive director Judy Brady said the association does not endorse candidates, but the sense she's gotten from her members is that Knowles knows what he is doing.

They key is locking in a deal quickly, before the market for Alaska natural gas shrinks, she said.

"If the big power companies begin to believe Alaska does not have either the understanding or the ability to come to a decision on this, they can't wait," Brady said. "It is this governor who is going to be in the private meetings with his or her team, in the private meetings making decisions about what to agree or not to agree to put before the Legislature and the people."

Likewise, business luminaries representing a wide swath of industries are backing Knowles. Top contributors include Providence Health System's chief executive, Al Parrish; Northrim Bank president and chief executive Marc Langland; GCI president Ronald Duncan; Holland America Line chairman and chief executive A.K. Lanterman; and McKinley Capital Management chief executive Bob Gillam.

Meanwhile, Alaska's congressional delegation will be noticeably absent in the final push to Election Day. The last-minute support of U.S. Sen. Ted Stevens and Rep. Don Young, both Republicans, is a big reason Lisa Murkowski was able to win the 2004 Senate race against Knowles.

Stevens has spent some time with Palin in Ketchikan and Fairbanks, but he plans to campaign for Republican colleagues whose Senate seats are threatened in the time that is left, spokesman Aaron Saunders said.

"Now he's actually headed out of the state to the Lower 48 and will work with other senators to help maintain the Republican majority," Saunders said.

Lisa Murkowski and Frank Murkowski likewise will be gone. Both are headed to Asia for at least a week to explore trade opportunities for Alaska there, spokesmen in both offices said. Before she goes, Lisa Murkowski will participate in a Palin fundraiser today, spokesman Kevin Sweeney said.

Frank Murkowski, who pledged to support Palin after she trounced him in the primary, has been noticeably absent from Palin's campaign.

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

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

xxx

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

Financial Times
October 27, 2006

http://www.ft.com/cms/s/43dab4e2-6553-11db-90fd-0000779e2340.html

BP's US chief banks on a blog to raise standards
By Sheila McNulty in Houston
Published: October 27 2006 03:00 |
Last updated: October 27 2006 03:00

Bob Malone, the new head of BP's US operations, is establishing his own blog as part of a broader effort by the troubled UK oil company to improve internal communications and keep complaints inside the company.

Mr Malone's blog, to be called Dialogue, follows the recent establishment of a 24-hour complaints hotline, the appointing of an ombudsman to investigate grievances and the mounting of posters at offices in the US urging employees of the company to use both.

Mr Malone told staff this week the decision to create his own blog followed his receipt of hundreds ofe-mails and notes of support and suggestions for action in recent months.

Mr Malone was appointed in June to improve BP's US safety record, following the biggest-ever pipeline leak in Alaska and the explosion of BP's Texas refinery last year, which killed 15and injured an estimated500 people.

"To make it even easier to have a dialogue with all of you, I am going to try my hand at using what has become a very popular web communications tool: a blog,'' Mr Malone said in an e-mail to BP's US employees, a copy of which was obtained by the Financial Times.

"Now, I didn't even know what a blog was until just a month ago but evidently in this cyber-world we live in, a blog enables two-way communications.'' He said he would try to post new entries on a regular basis and then give staff an opportunity and forum to comment. He would only continue the blog after several months if there was enough interest.

Until then, Mr Malone gave staff a few pointers about how to discuss BP's problems, noting, "a number of you have asked me a very simple question: 'Bob, what do I tell my friends and neighbours when they ask me what is going on with BP in America?'''

"Let me tell you what I say. We have made some serious mistakes over the last 18 months. We have apologised and accepted responsibility for these mistakes. We are taking action. We are learning from the past and we are working hard to make BP America a stronger company. We will not change what we value. Our commitment to operational integrity, safety, the environment, diversity - all the things we stand for - has never been stronger.''

Last month, Mr Malone separately e-mailed employees, notifying them of "Open Talk", an independent hotline to which they can funnel complaints.

In that e-mail, a copy of which was also obtained by the FT, Mr Malone noted: "While we expect employees and supervisors to work together on issues and concerns, we recognise that sometimes not all issues are resolved."

Indeed, over the past five years, employees in one of BP's most troubled US operations, Alaska, have funnelled complaints through Chuck Hamel, the whistleblower who has in the past 20 years made public many of the worker complaints about BP's operations in the state. Mr Hamel has lobbied Congress and regulators to force improvements at BP-operated Prudhoe Bay, the US's biggest oilfield.

Severe corrosion forced the closure of half of Prudhoe Bay in August, following the largest-ever spill there in March.

In addition, there has been the explosion in Texas, and the spills in California and the Gulf of Mexico, among other problems.

Mr Malone has appointed Stanley Sporkin, a retired US federal judge, to receive and investigate employee issues and report back to him.

However, a whistleblower in Alaska said he would continue funnelling complaints to Mr Hamel.

"We don't get any action from internal oversight," the veteran BP worker said. He did not believe Mr Sporkin, on BP's payroll, could change the company's approach to whistleblowers. "They try to negotiate our issues away, rather than fix them. We don't expect anything."

Added another BP worker: "I don't think they have been effective in addressing problems previously, so why would this be any different?"

Mr Malone insisted in the e-mail that Mr Sporkin was "a man of independent judgment and impeccable credentials".

Before he became a judge, Mr Sporkin was director of the Division of Enforcement at the Securities and Exchange Commission and general counsel to the Central Intelligence Agency.

"Judge Sporkin's involvement strengthens the credibility of our employee concern resolution processes," Mr Malone told staff. "I hope this sends a strong message that I want to hear your concerns, and that they will be fully investigated and appropriate corrective action taken." According to a management posting on BP's intranet, a copy of which was obtained by theFT, OpenTalk enablescomplaints by telephone,e-mail, fax or letters.Interpreters will join non-English calls. A senior BP manager "will act independently to decide what action to take".

"We understand that raising concerns can be stressful but calling OpenTalk is better than managing alone," the posting said.

KTUU Television
October 26, 2006

http://www.ktuu.com/cms/anmviewer.asp?a=6964&z=1

Former state worker alleges Knowles
turned blind eye to corrosion
Thursday, October 26, 2006 - by Jason Moore

• Watch the video ...
mms://www.1alaska.net/Alaska%20Headline%20News/2006/102606-knowles.wmv

Anchorage, Alaska - Two issues Alaskans have heard a lot about lately in the news include the pipeline corrosion problems at Prudhoe Bay and the governor's race. For an Eagle River woman, the issues collide. While it appears BP’s corrosion program has been universally condemned, Susan Harvey, a former state employee, says a fair amount of blame should rest with the state agency and the administration she used to work for.

The race for Alaska governor could pivot on who voters believe will be best for the state's economic machine: resource development. Who is most likely to negotiate a gas pipeline deal, create jobs and usher in new projects?

Republican gubernatorial candidate Sarah Palin claims Tony Knowles failed in his two previous terms.

“Alaska's former governor says we should gamble on his experience. I say we already have. His administration put resource development on life support,” says a Palin campaign ad (pictured right).

Life support?

Not exactly, said Knowles. He is quick to point out that he presided over major developments, like the Northstar oil field, the Alpine oil field and the opening of the National Petroleum Reserve-Alaska.

He said those events actually stalled an oil production decline.

“I know how to negotiate with industry. I know how to negotiate with the federal government. And experience in bringing about a project the size of the Alaska natural gas line is an essential ingredient to getting it done,” Knowles said.

But there is something else happening in Alaska's oil patch the candidates aren't talking much about: the slow deterioration of the North Slope's infrastructure. Corrosion caused two oil spills this year, including the largest ever on the North Slope, and also forced a partial shutdown of the Prudhoe Bay oilfield.

But while the candidates aren't talking about it, someone is.

“My first reaction was I can't believe it, those were the very same pipelines that we had an enforcement action on,” said former Department of Environmental Conservation manager Susan Harvey (left).

Harvey worked for the environmental conservation department from 1999 to early 2002, during the Knowles administration. She oversaw spill prevention and industry preparedness. Harvey said she ramped up inspections and drills, and she says that caused problems.

“We were so effective and efficient at inspecting the facilities, auditing the facilities and doing drills … we were finding problems and that wasn't popular,” Harvey said.

Harvey (left) said the industry started to complain.

“I would characterize the communication as sustained and continuous pressure on the governor's office,” she said.

Issues concerning the department included the oil industry's failure to prove it could respond to a spill in the Beaufort Sea. Other issues were its failure to meet deadlines installing leak detection systems on oil transmission lines and corrosion.

Harvey said her persistence ultimately cost her job. She accuses Knowles of bowing to industry pressure.

“The Knowles administration would tell us to back off, to give them more time, in particular to the North Slope facilities. They would be years out of compliance and the Knowles administration would tell us to back off and give them more time,” she said.

In December 1999, during the BP-Arco merger, Knowles signed what's known as the charter agreement, mandating certain action by the companies.

For the first time ever, the companies would present the state with an annual report on how they address pipeline corrosion.

The Department of Environmental Conservation hired the firm Coffman Engineers Inc. to review the reports. The Coffman report was released in November 2001 and was critical of BP’s program and raised several questions.

BP set out to change the report. From internal BP e-mails gathered from a recent congressional investigation, BP’s corrosion manager, Richard Woollam, wrote, “The report is wantonly critical, almost to the extent of being critical for the sake of being critical.”

Technical services manager Nancy Foust wrote, “We are going to try very hard to sway Coffman and [the state environmental conservation department] on the final version of the report as when it is finalized, it will become a public document.”

BP attorney William Colbert wrote to Woollam, “I suggest that you schedule a high level meeting between [the environmental conservation department] commissioner Michelle Brown and Steve Marshall,” the president of BPXA, or BP Exploration (Alaska) Inc.

Colbert then wrote, “I would expect that this issue could get sorted at a high level, but I may be overly optimistic.”

In another e-mail, Woollam asked Michelle Martin, “Could you do a little bit of research for me in a hurry? I want to know if BP has any contracts with Coffman Engineers.”

It’s a statement seen by some as trying to put the pressure on Coffman.

At a recent congressional hearing on Sept. 7, Woollam (below left) refused to testify, citing Fifth Amendment protections under the U.S. Constitution from self-incrimination.

During the Coffman report discussions, the Knowles administration relieved Harvey of her North Slope oversight and her position was filled by a political appointee.

“When I was removed from my position in December 2001, that report was completely rewritten and reissued in January. It's like a different report,” she said.

The changes in the report appear dramatic. For example, in the first report, BPXA’s stated intent is to “report openly, good or bad” the results of its corrosion management programs. However, the reporting style makes it difficult to develop a qualitative understanding of the basis for their corrosion strategy.

Program results have been reduced and factored; the conclusions are hard to report without making inferences with regard to the underlying reasoning or strategy. No discussion of the underlying program strategy is included other than to say, “Our corporate goals are no accidents, no harm to people and no damage to the environment.”

That was changed in the revised report to read: “BPXA has demonstrated a clear commitment to corrosion control. BPXA has developed a comprehensive program of monitoring and inspection.”

The first report said: “The actual magnitude of the corrosion increase is not reported and subsequent damage to the pipe wall due to increased corrosivity is not quantified. External corrosion inspection levels are not consistent with the relative risk of an internal vs. external corrosion event. No differentiation between weight loss and pitting corrosion are discussed and no statistics on the extent of corrosion defects were reported.”

In the revised report that was deleted.

Both Coffman and BP testified to Congress the company did not exert inappropriate pressure to change the report. Susan Harvey's boss, environmental conservation spill prevention and response director Larry Dietrick, says the department did not cave in to pressure.

“I don't think we would agree that there is a big difference between those reports. There was no pressure. It was just part of the interactive review process,” said Dietrick (left).

Dietrick said the environmental conservation department is in the process of adopting regulations for pipeline oversight as a result of the two corrosion-related spills earlier this year. It has been a “gray area” for the state, Dietrick said, because the state does not regulate corrosion; rather, the state has mandates for leak detection systems.

He said policy changes will lead to corrosion regulation as well.

Harvey said the Coffman report's evolution is just one example, and that BP knew of problems with the pipelines in 2001. Instead of dealing with them, she said the administration dealt with her.

“The Knowles administration definitely, absolutely knew there was sludge in the pipelines. There were problems with the pipelines, there were corrosion issues with the pipelines, there were leak detection issues with the pipelines, and they just failed to regulate,” Harvey said.

The U.S. Department of Transportation has plans to take over regulations of the Prudhoe Bay crude oil transmission lines that experienced corrosion problems earlier this year and which BP has committed to replace.

Harvey is supporting Sarah Palin in the campaign. She said she has never met Palin, but recently wrote her a three-page endorsement letter.

Former Gov. Knowles, through his current election campaign, declined repeated attempts to respond to Harvey's allegations and questions about his administration’s industry oversight. His campaign called Harvey a disgruntled former state employee.

Late today, Knowles campaign spokesperson Patty Ginsberg released a statement on this article. It reads, “This isn't a campaign issue. These baseless charges have been circulating for months so the timing reeks of political agenda.”

Houston Chronicle
October 24, 2006

http://www.chron.com/disp/story.mpl/business/energy/4282943.html

BP's profits fall 3.6 percent on Alaska problems
By JANE WARDELL
Associated Press

LONDON BP PLC reported a 3.6 percent drop in third-quarter profit todaty because of lost production in Alaska, higher taxes in Britain and a slump in refining margins.

BP, which has experienced a run of difficulties in the United States, said net income for the three months ended Sept. 30 came to $6.23 billion, compared with $6.46 billion in the third quarter of 2005. Revenue in the third quarter climbed 4 percent to $70.7 billion.

Production for the period averaged 3.8 million barrels of oil equivalent per day, down 0.2 percent from the year-ago period and down 5 percent from the second quarter this year.

The results reflected London-based BP's woes in the United States, where several of its fields experienced outages and delays.

The company halved production at its Prudhoe Bay field in Alaska after severe pipeline corrosion and a small leak were uncovered. Production has now reached 400,000 barrels per day, double the low point but still below the previous average of 450,000 barrels per day.

It has also delayed the opening of its Thunder Horse platform in the Gulf of Mexico - damaged by Hurricane Dennis last year - from 2007 to the middle of 2008 because of equipment failures.

The platform is the largest in the Gulf and is expected to produce about 240,000 barrels of oil and 200 million cubic feet of natural gas per day.

As well as its U.S. production troubles, BP was faced with higher taxes in Britain's North Sea and lower refining margins.

"The trading environment reflected higher oil realizations and retail margins but lower refining margins and gas realizations compared to a year ago,'' said Chief Executive John Browne.

A 10-percentage-point rise in U.K. North Sea oil taxes was enforced for the first time in the third quarter. As a result, the company's effective tax rate was about 40 percent in the third quarter, compared to 36 percent in the second quarter.

The average price of a barrel of Brent oil, a key U.K. North Sea crude benchmark, rose 13 percent in the third quarter compared to the year-earlier period.

But average quarterly global refining margins were down 32 percent year-on-year after being boosted in the year-earlier period by the impact of hurricanes on prices.

Falling oil prices have further depressed BP's earnings, with light sweet crude trading below $59 a barrel today on the New York Mercantile Exchange - down from the record $78.40 a barrel reached in July.

BP's adjusted net profit - earnings before extraordinary items and excluding changes in the value of inventories - was $4.5 billion. That was slightly worse than the $4.74 billion expected by analysts.

Shares in the company rose 1 percent to 607 pence ($11.34) on the London Stock Exchange.

BP's value has fallen 20 percent since April as the company struggles to restore its profile in the United States following the Prudhoe Bay oil spill, the Thunder Horse platform delays, investigations into a March 2005 explosion at its Texas City, Texas, refinery that killed 15 workers and allegations that it manipulated crude-oil and gasoline markets in the United States.

BP has already settled several lawsuits relating to the Texas City blast and has put aside $1.2 billion to resolve legal disputes. It also began a complete review of its global operations following the blast.

Browne has been ordered to appear in court to give a sworn deposition in one lawsuit brought by a woman whose parents were among those killed.

The company has declined to comment on a report by the British Broadcasting Corp. that a probe by the U.S. Chemical Safety Board into the explosion has attacked the company's safety standards. The BBC said th