September 2006 News Stories

Bellingham Herald
September 30, 2006

http://news.bellinghamherald.com/apps/pbcs.dll/article?AID=/20060930/BUSINESS/609300323/1001/NEWS

BP to start cleaning corroded oil pipeline
Mystery leak forces closure of separate line
ASSOCIATED PRESS

OUTPUT DOWN
Prudhoe Bay and its satellites normally produce a combined 450,000 barrels per day. On Thursday, output stood at about 350,000 barrels.

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

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

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

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

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

The gas had dissipated by late Thursday night.
"There's no estimate at this point of when production will return," Rinehart said. "We're kind of moving on two priority fronts: To complete the investigation and safely return to production."

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

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Wall Street Journal
September 30, 2006

US DOT Investigating Gas Leak At BP Lisburne Pipeline
DOW JONES NEWSWIRES
September 29, 2006 3:51 p.m.
 
NEW YORK (Dow Jones)--The U.S. Department of Transportation is investigating a natural gas leak on one of BP PLC's (BP) pipelines at the Lisburne oil field in Alaska, a department spokesman said Friday.

"We have inspectors on site and they're investigating the cause," he said.

The gas leak happened Thursday at a manifold building, which BP uses to monitor and direct output from the Lisburne and Point MacIntyre fields. The fields lie to the north of the Prudhoe Bay field. Between 25,000 and 30,000 barrels a day of production were shut in, BP spokesman Steve Rinehart said.

BP cleared the gas from the building, but it still doesn't know what caused the leak, he said. "The field remains shut down until we learn some more about what happened," Rinehart said. "We're not sure how much time that's going to take."

Restoration of production in Prudhoe Bay proper will continue, however.
 
-By Matthew Dalton and Brian Baskin, Dow Jones Newswires; 201-938-4604; matthew.dalton@dowjones.com  

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BP: Prudhoe Gas Leak Won't Stop Key Weekend Pipeline Tests
DOW JONES NEWSWIRES
September 29, 2006 3:00 p.m.
 
HOUSTON (Dow Jones)--A natural gas leak that forced BP PLC (BP) to shut down production at two satellites to the Prudhoe Bay oil fields won't delay pipeline tests scheduled for this weekend, a company spokesman said Friday.

The "pigging" of east Prudhoe Bay pipelines, where cylindrical droids clean and test the inside of the lines, is a prerequisite to restoring the Alaskan oil field to its full 450,000 barrels a day of production. BP halted 250,000 b/d out of east Prudhoe Bay in early August after discovering severe pipeline corrosion.

The gas leak happened Thursday at a manifold building, which BP uses to monitor and direct output from the Lisburne and Point MacIntyre fields. The fields lie to the north of the Prudhoe Bay field, but is counted as Prudhoe production. Between 25,000 and 30,000 barrels a day of production were shut in, spokesman Steve Rinehart said.

BP cleared the gas from the building, but it still doesn't know what caused the leak, he said.

"The field remains shut down until we learn some more about what happened," Rinehart said. "We're not sure how much time that's going to take."

Restoration of production in Prudhoe Bay proper will continue, however.

Currently about 350,000 b/d is coming out of the giant field. Of that, 200,000 b/d in the western half was never shut in, and 150,000 b/d in the eastern half was restored last weekend.

BP had said on Sept. 22 that the eastern half would be producing 200,000 b/d by this weekend.

Rinehart declined to comment on the status of the field.

"We're getting out of the production reporting-business," he said, citing the variability of production from hour to hour.

He said pigging will begin this weekend, regardless of whether output in east Prudhoe Bay falls short of the 200,000 b/d goal. A maintenance pig will be sent through the east pipeline first, to clean the line. In about two weeks, a second "smart pig" will then go through to check for cracks.

BP is also working on bypasses to the troubled pipeline, in case the smart pig finds more problems. One such bypass will by the end of October allow an additional 50,000 b/d to return to production, fully restoring Prudhoe Bay's production capacity, BP has said.

-By Brian Baskin, Dow Jones Newswires; 713-547-9202; brian.baskin@dowjones.com 

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Anchorage Daily News
September 29, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8248183p-8144751c.html

Natural gas leak idles Lisburne field
SETBACK: Oil production at Prudhoe drops until cause is found and repairs made.
By WESLEY LOY
Anchorage Daily News
Published: September 29, 2006
Last Modified: September 29, 2006 at 04:31 AM

BP was forced to shut down oil production in the Lisburne field Thursday after dangerous natural gas leaked into a manifold building, a key control facility.

The shutdown is a setback in what had been a gradually improving picture of North Slope oil production.

For several days, BP has been in the process of restarting wells in the giant Prudhoe Bay field, the eastern half of which was idled early last month due to pipeline corrosion.

The shutdown of Lisburne, which is a satellite field that feeds into the Prudhoe production stream, means that oil flow will go down by 25,000 to 30,000 barrels per day, said Steve Rinehart, spokesman for BP Exploration (Alaska) Inc. That's about 4 percent of North Slope output.

On Thursday morning, methane gas from a high-pressure 14-inch pipeline somehow filled the manifold building at Drill Site L2, along the shore of Prudhoe Bay, Rinehart said.

The building was unoccupied at the time, no one was injured and there was no fire or explosion, he said. Prudhoe Bay firefighters arrived at the scene about 9:25 a.m., he said.

Through the day, field workers waited for the gas to dissipate enough to allow them to safely re-enter the manifold building, Rinehart said.

Because of the problem, BP had to shut down the large Lisburne production center that processes crude oil and gas coming from the Lisburne field as well as the neighboring Point MacIntyre oil field, he said.

The exact source and cause of the gas leak remained unclear late Thursday, and Rinehart couldn't say how long oil production will be down.

"We're going to investigate, find out what happened and fix it," he said.

Prudhoe Bay and its satellites normally produce a combined 450,000 barrels per day. On Thursday, output stood at about 350,000 barrels.

BP runs Prudhoe, Lisburne and Point McIntyre on behalf of itself and other owners, including Exxon Mobil and Conoco Phillips.

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

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http://www.adn.com/news/politics/veco/story/8248166p-8143820c.html

Alaska candidates get cash from Veco
$119,000: Six executives donated what
turns out to be unwanted money.
By DON HUNTER
Anchorage Daily News
Published: September 29, 2006
Last Modified: September 29, 2006 at 03:09 AM

DONATION LIST
http://www.adn.com/ips_rich_content/920-29VecoContributions-150-x-595.gif

Six executives for the Veco Corp., the company named in the federal investigation into political corruption in Alaska, donated at least $119,000 to the campaigns of candidates running for more than half the seats open in this year's primary election.

The total might have still been climbing had not the FBI raided the company's corporate headquarters and the offices of at least a half-dozen state lawmakers two months before the Nov. 7 election. Veco's total in this election cycle is a little more than half the $200,000 its executives generated for legislative races in 2004, but Veco money has suddenly become unwanted across most of the political spectrum.

Scores of Alaskans are regular and generous contributors to political candidates, year after year. Developers, construction company owners, doctors, lawyers, business owners, oil and gas executives, retirees. Many give the candidates of their choice the maximum amounts available in a given year -- $1,000 annually since 2003; $500 annually starting next year under an initiative passed by voters in August.

Veco's six executive contributors -- chairman Bill Allen, president Peter Leathard, chief financial officer Roger Chan, vice president Rick Smith, information officer Thomas Corkran and personnel manager James Slack -- regularly donate to a similar list of candidates, usually in the same $500 amounts and with checks dated within a few days of each other.

As is usually the case, almost all the Veco money donated to candidates this year and during the 2005 interim year went to Republicans, and the vast majority to incumbents.

Leathard didn't return two calls seeking comment. In the past, company officials have said they support candidates who favor economic development and a stable oil tax climate in Alaska. In a written statement issued Sept. 5 in response to the federal investigation, Veco said its officials were cooperating with the authorities and denied any wrongdoing by the company or its executives. The company said it looked forward to "dispelling any concerns on the part of the government and others."

One Democrat, Rep. Carl Moses of Unalaska, got a total of $3,000 in donations from the Veco executives in the first seven days of August. A couple of weeks later, Moses, nursing a pinched nerve in Anchorage, flew to Juneau to break a deadlock on a revamped state oil and gas tax the company favored, one of only four Democrats to support the measure. Moses has said the donations had nothing to do with his vote.

Nineteen of the 22 Republican House incumbents running for re-election this year had received Veco donations by the time the most recent campaign finance reports were filed Aug. 15. Four Senate Republicans who are running for re-election got Veco donations, along with state Sen. Ben Stevens, who withdrew, and a Republican candidate for another vacant Senate seat. Veco's executives also donated to four Republican candidates in House races with no incumbent.

A few Republican incumbents up for election, however, had received no Veco money. They were state Sen. Gene Therriault of Fairbanks, and Reps. Mike Kelly, R-Fairbanks, Nancy Dahlstrom, R-Eagle River, and Paul Seaton, R-Homer

Three Republicans in one race -- for seat N in the state Senate -- got a total of $15,000. Stevens, the incumbent, accepted $3,000 last year, before pulling out of the race in July. House incumbents Lesil McGuire and Norm Rokeberg each got about $6,000 -- $3,000 in 2005 and another $3,000 this year -- to run against each other for Stevens' vacated seat.

McGuire, who handily defeated Rokeberg in the primary, said her 2006 Veco checks were delivered by Smith to a fundraiser she held on Aug. 9. Rokeberg's were dated a day later.

McGuire was one of four Republicans who took a position in at least some votes against the oil profits tax and against Veco's position. The other Republicans were her husband, retiring Rep. Tom Anderson, and Reps. Dahlstrom of Eagle River, who got no Veco money, and Vic Kohring of Wasilla, who received about $6,000 in contributions.

McGuire said she's segregated the $3,000 in Veco contributions she received this year and won't spend it unless the company is exonerated. Kohring didn't say.

In all, 33 candidates in 31 races got Veco donations, but some, like McGuire, have had second thoughts. Among them: Earl Mayo, a Republican seeking a Senate seat in East Anchorage, and House candidates Matt Moon, Jeff Gonnason and Darwin Peterson returned the $3,000 each received from six Veco executives. Rep. Jay Ramras, R-Fairbanks, also said he was "segregating" the Veco money in his campaign account and would decide what to do about it later.

Peterson, who will face incumbent Democrat Berta Gardner in House District 24, said he wasn't worried that accepting contributions from a company under investigation would taint his candidacy.

"I'm above reproach as far as I'm concerned," he said. "I just wanted to make sure I was impartial and neutral in this whole investigation."

In some cases, donations went to influential incumbents facing only token opposition, or none at all. Reps. Kevin Meyer and Mike Chenault, for example, were unopposed in their primary elections and have no opponent in the November general election. Both incumbents got a total of $3,000 from the Veco executives in 2005, and both were among a series of candidates who received another $3,000 in Veco donations during joint fundraisers held at Anchorage's Petroleum Club in the second week of July, as lawmakers were being called back into a second special session on oil and gas issues by Gov. Frank Murkowski. Meyer and Chenault are co-chairmen of the House Finance Committee.

Another incumbent, Rep. Peggy Wilson, R-Wrangell, accepted $3,000 in Veco contributions during the same week of Petroleum Club fundraisers.

"I have nothing to feel guilty about," Wilson said. "I didn't do anything wrong. And I definitely don't pay any attention to what people give me (when) I make my decision."

Wilson said she does remember the first time she met Allen, however.

"It was my first year in Juneau. My staff was making appointments for different lobbyists, and I got up -- I can remember, I was in Room 409 -- and (saw) this man coming in. It was Bill Allen. He's a big man, so I'm kind of looking up at him, and the first words out of his mouth were, 'I've donated to your campaign.' I got so hot! I shook my finger in his face and said, 'Listen here, mister, I'll be glad to sit and listen to you, but whether you gave me any money or not will have nothing to do with the decision I make."


Daily News reporter Don Hunter can be reached at dhunter@adn.com. Reporter Lisa Demer contributed to this story.

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Fairbanks News Miner
September 28, 2006

http://newsminer.com/2006/09/28/2328/

House OKs pipeline regulations
By Sam Bishop
Published September 28, 2006
Posted in Local

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

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

Only certain low-stress lines fall under DOT regulation at present. The leaking transit lines that serve the western and eastern operating areas of Prudhoe Bay are not federally regulated, although a rule proposed by DOT late last month would change that.
Young, chairman of the House Transportation Committee, said Wednesday afternoon that he wants to review the DOT’s new regulations before he agrees to the kind of broad changes in law that the Energy and Commerce Committee approved earlier in the day.

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

“I’ve said we have a good bill,” Young said. “Regulations are already in place.”

“I get a little bit concerned when we as a Congress try to solve problems in a state of hysteria,” he added. “I don’t need to move this bill. We’re going to review it and see if it’s good or bad.”

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

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

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

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

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

The DOT also would have to analyze the domestic petroleum pipeline system and identify places where “unplanned loss of individual pipeline facilities may cause shortages of crude oil or other petroleum products or price disruptions.”

Barton and other House members, in a hearing earlier this month, were concerned that the federal government had no clear authority to require maintenance on pipelines such as those at Prudhoe Bay that carry a large portion of the domestic crude supply.

The Pipeline Safety Trust, a nonprofit group funded with $4 million in settlement money after a 1999 gasoline leak and explosion in Bellingham, Wash., praised the Energy and Commerce bill.

Lois Epstein, a consultant for the trust and a senior engineer with Cook Inletkeeper in Anchorage, said the bill was a great improvement over the administration’s proposal from late August.

“The Bush administration’s proposal to regulate low-pressure transmission pipelines had two major problemsit didn’t cover all low-pressure transmission lines and it was technically deficient,” she said in a news release. “Fortunately, the committee bill fixes both of these problems.”

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

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Wall Street Journal
September 28, 2006

Senate Commerce Panel Introduces Pipeline Safety Bill
DOW JONES NEWSWIRES
September 28, 2006 7:35 a.m.
(This article was originally published Wednesday)
 
WASHINGTON (Dow Jones)--A bipartisan covey of senators on the Commerce, Science and Transportation Committee on Wednesday introduced new pipeline safety legislation, the panel chairman said in a statement.

Similar to a new act passed by the House Energy and Commerce Committee earlier in the day, the proposed legislation would give the Department of Transportation federal authority to regulate low pressure oil lines.

Chairman Ted Stevens, R-Alaska, said the bill was co-sponsored by ranking Democrat Daniel Inouye, D-Hawaii, Trent Lott, R-Miss., and Frank Lautenberg, D-N.J. The measure would specifically reauthorize the Pipeline Safety Act for four years starting in 2007, Stevens said.

The House energy committee earlier Wednesday passed a pipeline safety bill that includes stricter federal regulation of low pressure oil lines in the aftermath of one of the biggest crude leaks in Alaska's North Slope.

Although both the Senate proposal and House legislation exempts some lines, they are more comprehensive than a new rule proposed in late August by the Department of Transportation.

Low pressure crude lines similar to the ones at BP PLC's (BP) Prudhoe Bay system that leaked earlier this year - causing a partial shutdown of the largest producing fields in the U.S. - are currently unregulated by the federal government.

BP's system failure is thought to have been the result of a history of a mismanaged corrosion prevention program.

Stevens said under his new proposal, pipeline operators will have to meet new safety requirements, including cleaning and continuous monitoring along more than 1,200 miles of pipelines. However, low-stress lines that aren't in "sensitive areas" - about 4,200 miles-worth of lines - would remain unregulated.

The House amendment requires companies to "pig" lines at least once every seven years, or more often, based on a risk-assessment. "Pigging" is a cleaning and inspection program that involves sending a cylindrical droid down a segment of pipe. Experts say that BP's lines failed because the lines hadn't been pigged for more than a decade.

The Senate proposal also included provision for the DoT to increase the number of pipeline inspectors by 50% to 135.

House energy committee chairman Joe Barton, R-Texas, said he thought it was possible the bills might be made law before Congress adjourns Friday. He added, however, that it's more likely to pass in a lame duck session after the Nov. 7 congressional elections.

An industry expert close to the matter expressed optimism that the two pieces of legislation could be be ironed out before Congress leaves.

The Senate bill also includes a provision that would hold senior officials at pipeline companies accountable to certify that the information they are providing to regulators is accurate, and a study of oil pipelines critical to the nation's energy supply.

Barton said costs for oil companies associated with meeting the House proposed law's standards wouldn't be negligible, but he couldn't immediately quantify them.
 
-By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com;

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US House Panel Passes Pipeline Safety Bill
DOW JONES NEWSWIRES
September 28, 2006 7:30 a.m.
(This article was originally published Wednesday)
 
WASHINGTON (Dow Jones)--The U.S. House Energy and Commerce Committee on Wednesday passed a pipeline safety bill that includes stricter federal regulation of low pressure oil lines in the aftermath of one of the biggest crude leaks in Alaska's North Slope.

Although the legislation exempts some lines, it is more comprehensive than a new rule proposed in late August by the Department of Transportation.

Also, key members of the U.S. Senate Commerce, Science and Transportation Committee may introduce an even tougher pipeline safety bill this week, possibly as early as Wednesday, two people close to the matter said.

Low pressure crude lines - similar to the ones at BP PLC's (BP) Prudhoe Bay system that leaked earlier this year, causing a partial shutdown of the largest producing fields in the U.S. - are currently unregulated by the federal government.

BP's system failure is thought to have been the result of a history of a mismanaged corrosion prevention program. Commerce committee chairman Rep. Joe Barton, R-Texas, said the legislation had been developed together with the Democratic minority, in concert with the transportation department. Although Barton said it had been reconciled with a similar bill created by the House Transportation and Infrastructure Committee, a staffer later said that it hadn't yet been reconciled but that counsel from the two committees were working together to marry the separate bills.

Given the bipartisan momentum, Barton said the Pipeline Safety Act Could be passed this week, but added that it was more likely to be ratified in a lame-duck session after the Nov. 7 congressional elections.

The chairman said the committee's amendment to the act exempted gathering lines, flow lines and inter-facility lines, but covered oil transit lines similar to the ones that failed at Prudhoe Bay.

Ranking Democrat John Dingell, D-Michigan, said the bill requires "the vast majority" of low pressure oil lines to be covered.

"In my opinion, this language is far better than the proposed rule recently issued by DOT," he said in a statement.

The amendment requires companies to "pig" lines at least once every seven years, or more often, based on a risk-assessment. "Pigging" is a cleaning and inspection program that involves sending a cylindrical droid down a segment of pipe. Experts say that BP's lines failed because the lines hadn't been pigged for more than a decade.

The head of the transportation department's Pipeline and Hazardous Materials Safety Administration, Thomas Barrett, previously testified to the committee that he didn't believe many small low-pressure lines warranted federal regulation, nor did they posed the same risk as BP's in Prudhoe Bay.

"Some lines you can't pig for a number of reasons, because they telescope, or have tight bends," he added.

Barton said costs for oil companies associated with meeting the proposed law's standards wouldn't be negligible, but he couldn't quantify them.

A Democratic aide said the transportation department would now be required to inventory all low pressure lines, which it previously hadn't done.

A Senate bill - yet to be introduced - would be tougher than the House act, one person close to the Senate commerce committee said.

"It would be more comprehensive, beyond what the House passed," the person said, adding that it was possible the committee's chairman, Sen. Ted Stevens, R-Alaska, could introduce the bill onto the Senate floor either individually or jointly with the committee's ranking minority member Sen. Daniel Inouye, D-Hawaii.

If the Senate committee passed a jointly-worked proposal, given its differences with the House bill, both bills would likely have to be ironed out in a conference committee, the person added.
 
-By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com ; 

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Anchorage Daily News

September 27, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8239632p-8135543c.html

Eastern Prudhoe oil flow resumes
BP: Production could reach 150,000 barrels a day by the weekend.
By MARY PEMBERTON
The Associated Press
Published: September 27, 2006
Last Modified: September 27, 2006 at 04:35 AM

Oil giant BP restarted the eastern side of the Prudhoe Bay oil field -- shut down since August when a leak was found -- and expects production to reach 150,000 barrels a day by the weekend, a BP spokesman said Tuesday.

The eastern side of the country's largest oil field ceased production Aug. 10, a few days after a leak was discovered in a corroded transit line. Initially, the company expected to shut down the west side of the field as well, but kept that side in operation after determining it could be operated safely. The west side is producing about 200,000 barrels a day.

Production in the northern part of the field adds about 50,000 barrels a day. The oil field normally produces about 450,000 barrels of petroleum products daily.

A test in July on the northern field transit line that services that part of the field showed it was in good shape, said BP Alaska spokesman Daren Beaudo.

"It came out with flying colors," he said.

But BP plans to replace two of three Prudhoe Bay transit lines because of corrosion, or about 16 of 22 miles of pipelines.

The U.S. Department of Transportation Friday gave BP approval to resume production at three facilities on the east side of the field. Beaudo said restoring east side production will allow BP to run a device called a "smart pig" through the line to check its condition. That is the same test used on the northern transit line.

Beaudo said the east side transit line will first be scraped and cleaned with maintenance pigs. Within a few days, a smart pig that uses ultrasound will be put through the line to check for thin spots. Cleaning of the line could begin as early as this weekend, he said.

"We are resuming production in the east in a safe, orderly and structured manner," he said.

It is expected to take about a week before the east side of the field reaches a steady state of operation with production at about 150,000 barrels a day. That is still 50,000 barrels a day below pre-leak production because the line on the east side where the August leak occurred remains shut down. BP is constructing a bypass on that line.

BP expects to get replacement pipe by the end of the year and begin construction by early next year.

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http://www.adn.com/news/alaska/ap_alaska/story/8236628p-8133472c.html

BLM proceeds with partial Alaska lease sale
By JEANNETTE J. LEE, Associated Press Writer
Published: September 26, 2006
Last Modified: September 26, 2006 at 04:12 PM

ANCHORAGE, Alaska (AP) - A judge has halted part of a federal lease sale of oil-rich land on Alaska's North Slope, but the government on Tuesday said it can still sell sections outside an area environmentalists want to preserve for migratory birds and calving caribou.

The original sale in the National Petroleum Reserve-Alaska would have included the Teshekpuk Lake area, which sits above 2 billion barrels of recoverable oil, federal estimates say. Environmental groups argue that a 600,000-acre section that includes the lake contains some of the most important wetlands in the Arctic.

The decision on Monday in U.S. District Court in Anchorage blocked the Bureau of Land Management from selling leases to 2.5 million acres of the 8 million acres opened to bidding in August, according to Julia Dougan, the bureau's acting state director.

Judge James K. Singleton echoed a ruling he had issued on Sept. 7 that temporarily halted the sale in the vast area set aside in 1923 for its oil resource.

Government environmental studies, Singleton wrote, were too narrow in scope because they did not consider how leasing in the northeastern part of the 23 million-acre reserve would affect land and wildlife in the northwestern section.

The ruling expressly forbade the government from selling leases to tracts in the northeast section of the reserve, but left room for sales in the northwest section, according to Danielle Allen, a spokeswoman for the bureau in Alaska.

After consulting attorneys on Tuesday, the bureau decided it did not have to close the 5.5 million acres in the northwestern area it had offered for lease.

"We believe the northwest tracts are on very sound legal footing," Dougan said.

The bureau will announce the high bidders for the northwest tracts on Wednesday, as planned, Dougan said. The bureau had received bids for 940,000 acres as of last week's deadline, she said.

Plaintiffs, who included the National Audubon Society and the Center for Biological Diversity, said they were not surprised by the government's decision to continue the sale.

"We are concerned with parts of the northwest planning area because of migratory bird and waterfowl habitat, but we don't have a specific conflict with a large number of these tracts," said Charles Clusen. "This lawsuit was about Teshekpuk Lake."

The government plans to redo its environmental impact studies and did not rule out the possibility of trying to reopen the lake region to lease sales.

"The BLM continues to believe that the development of those energy resources and protection of the natural resources aren't mutually exclusive," Dougan said.

Leases for nearly 13 million acres of the reserve are eligible for sale or have been sold to oil companies for exploration, most notably ConocoPhillips. The company hopes to augment waning crude stocks in the Prudhoe Bay fields east of the NPR-A.

The company's spokeswoman in Anchorage did not immediately return calls for comment.

The reserve contains between 5.9 billion and 13.2 billion barrels of technically recoverable oil resources and 39 trillion to 83 trillion cubic feet of natural gas, according to federal estimates.

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Anchorage daily News
September 26, 2006

http://www.adn.com/news/politics/veco/story/8236307p-8132041c.html

FBI returns for more from Stevens' office
CONNECTION: Some material relates to fisheries legislation his father handled in U.S. Senate.
By RICHARD MAUER and LISA DEMER
Anchorage Daily News
Published: September 26, 2006
Last Modified: September 26, 2006 at 03:49 AM

FBI agents returned last week to the legislative office of Senate President Ben Stevens and seized more evidence, including a copy of a sworn statement that implicated Stevens in an alleged payment scheme involving fisheries legislation brought by his father, U.S. Sen. Ted Stevens.

Word of the second search, and what was taken by the FBI, came from Ben Stevens himself, who disclosed the information in a letter to the Daily News dated Sept. 22. In his letter, Stevens denied a request by the newspaper for a copy of any FBI search warrants which may have been served on him or his office, and the government's receipts for items seized. But Stevens provided what he said was a "complete listing of what was obtained from my legislative offices" on Aug. 31 and Sept. 18.

Stevens, a Republican who is not seeking re-election this year, said he voluntarily consented to the two FBI searches, though federal agents said they had a judge's warrant for the Aug. 31 search.

Among the material hauled off by agents, Stevens said, were binders on the proposed natural gas pipeline and revised oil taxes, as well as information on a board that doled out federal marketing money to fisheries companies, some of which paid him as a consultant. Stevens was chairman of that board until about six months ago.

The vast majority of items on Stevens' list were public records that could have been obtained by anyone, sometimes under a formal public information request, sometimes just for asking. For instance, the FBI seized the 2006 Legislative directory, the 2003 Legislative Ethics Training Manual, federal and state laws governing North Slope gas, and a "piece of paper" with the tax identification number for Stevens' consulting firm, Stevens and Associates.

Though much has been made of the FBI's apparent interest in the relationship between legislators and the politically active oil field service and construction company Veco -- the company itself was searched, and it was mentioned in other search warrants -- Stevens listed only a single Veco document taken by the FBI: an undated memo to Veco president Pete Leathard.

Stevens' list couldn't be independently verified and he wouldn't elaborate on anything. The FBI has said little about its investigation, aside from acknowledging serving 24 search warrants Aug. 31 and Sept. 1. The offices of six legislators were targeted Aug. 31, and Stevens is the only one the FBI returned to for a second round, said FBI spokesman Eric Gonzalez. No one has been charged.

It was also impossible to determine the significance of any particular item seized -- whether it was scooped up to determine its relevance later, or central to the inquiry. That's normal in a federal investigation, said former U.S. Attorney Wev Shea, now in private practice in Anchorage. FBI agents will seize records through a warrant rather than simply ask for them as public records to make sure they are getting everything, he said. Plus, the drama of the FBI raids themselves may have been designed to stir things up and get people talking as the investigation continues.

"They don't know what phones are tapped. Nor do they know who is wired," said Shea, who added that he doesn't have inside information of the case.

The FBI has been asking some state legislators about the debate on the gas pipeline and oil taxes, and those subjects make up the largest haul from Stevens' office Aug. 31.

The government also seized Stevens' Rolodex containing business cards and a phone log, made a copy of the hard drive of a Gateway computer, and took an 80-gigabyte hard drive, an untitled compact disc and something described as an "e-mail found on printer."

Some of the material goes beyond issues known to be important to Veco like the gas pipeline and touch on fishery subjects that involve Ben's father, long-time U.S. Sen. Ted Stevens, R-Alaska. Since 2005, Ted Stevens has chaired the Senate Commerce Committee, through which all fisheries legislation passes. Before that, he chaired the Senate Appropriations Committee, one of the most powerful seats in Congress.

Among fishery-related items, Ben Stevens reported that in the second search, the FBI seized "Victor Smith affidavit" and a 2004 "UFA" letter -- United Fishermen of Alaska. Agents also took two April 2006 letters he wrote to the U.S. Department of Commerce regarding the Alaska Fisheries Marketing Board, which he headed from its creation by Ted Stevens in 2003 until his resignation earlier this year.

The second search also yielded a Jan. 23 fax to Ted Stevens along with "unknown documents of Ted Stevens with a cover page dated 6/5/06 bearing the United States Senate seal."

Through a spokesman, Ted Stevens said he had no comment.

Ben Stevens, a former crab-boat captain, has maintained an active fisheries consulting business since being named to a vacant Senate seat in 2001, disclosing $775,435 in income from nine companies and associations since then. He has never publicly said what he has done for the money.

Victor Smith, a former Southeast Alaska salmon fisherman who now operates a barge in north Puget Sound, said Monday he has signed three affidavits regarding Ben Stevens. The affidavits helped form the basis of complaints brought against Ben Stevens at the Alaska Public Offices Commission and other agencies by Ray Metcalfe, a government watchdog and founder of the independent Republican Moderate Party in Alaska.

It could not be determined which of Smith's affidavits the agents seized. In one, he reported attending a 2004 meeting of the Purse Seine Vessel Owners Association in which officials of that organization and the Southeast Alaska Seiners Association discussed how it would pay Ben Stevens after congressional passage of a $50 million loan program to reduce the seine fleet.

Smith said he learned Ben Stevens was supposed to be paid "through convoluted accounting" $5,000 a month to secure a plan, and $10,000 a month if successful, until he was paid $500,000.

While the loan program passed Congress and was enacted into law, fishermen complained it was too expensive for them to use.

Bob Thorstenson Jr., executive director of the seiners association and president of the United Fishermen of Alaska, denied paying Ben Stevens to lobby Ted Stevens. In an interview last year, he said the payments of $3,000 a month were made starting in June 2004 to an Anchorage company, Advance North, in which Stevens and one of his father's former aides, Trevor McCabe, were 50-50 partners. McCabe became sole owner of the company in October 2005.

In both searches of Stevens' offices, FBI agents seized documents involving the Alaska Fisheries Marketing Board. The organization was created in 2003 in legislation by Ted Stevens to provide federal grants to companies to promote Alaska seafood. It has distributed between $5 million and nearly $10 million a year in grants.

At least three of the beneficiaries of grants from the board paid consulting fees to Ben Stevens. Metcalfe complained to the APOC last year that those fees were thinly disguised "kickbacks," but the commission only ruled on a technicality: Ben Stevens' failure to disclose his chairmanship of the board in 2004. It fined him $150.

Ben Stevens resigned from the marketing board about six months ago, according to its executive director, Bill Hines. Hines wouldn't say whether he has recently spoken to federal agents.

"I think that's between me and the FBI," said Hines, an employee of the U.S. Commerce Department.

Ben Stevens was a member of the Senate Ethics Committee and some of the seized documents were connected to that committee, including a 2003 ethics complaint against former Sen. Jerry Ward. An investigation concluded the complaint was without merit.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com   or 257-4345 and Daily News reporter Lisa Demer can be reached a ldemer@adn.com   or 257-4390.

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Anchorage Daily News
September 24, 2006

http://www.adn.com/news/politics/veco/story/8229536p-8126216c.html

FBI raids cast light on dual incomes
CONSULTANTS: Ethical standards for lawmakers questioned.
By TOM KIZZIA and LISA DEMER
Anchorage Daily News
Published: September 24, 2006
Last Modified: September 24, 2006 at 05:52 AM

Last month, state Rep. Tom Anderson testified before the Anchorage Assembly in favor of Wal-Mart's plan for two stores in his old neighborhood. Assembly chairman Dan Sullivan introduced him as Representative Anderson, but the lawmaker for Muldoon corrected him.

He was there representing the home builders association, Anderson said.

Anderson, who was a consultant before he was elected to the state House four years ago, has never stopped making money on the side as a paid adviser for clients who do business with state and local government.

His dual role may have surprised the Assembly in August. But it would not have surprised some members of the Northeast Community Council, the neighborhood group that opposed the stores. They recall seeing Anderson at their meetings all though 2003. They assumed he was there as the local state legislator. But Anderson's state financial disclosure form, filed the following year, revealed he was also working as a $10,000 consultant on community councils and local government for the oil field services and construction company Veco.

"We are all going, 'This is so bogus,' " said council president Peggy Robinson, who publicized Anderson's Veco connection in an unsuccessful bid to topple Anderson from his House seat in 2004.

Now Anderson's role as a consultant to industry is coming under scrutiny again, following last month's FBI searches of six legislative offices seeking information on legislators' links to Veco.

The practices of Anderson and a few others who consult on the side also raise broader questions about state ethics laws. As it stands, lawmakers can receive unlimited and undefined "consulting" income from companies who could benefit from the Legislature's actions.

The FBI inquiry has given momentum to reform efforts.

"I can guarantee you this: That the subject will be brought up in the next session," said House Speaker John Harris, R-Valdez.

The cloud from the current investigation shows that reform is needed, Harris said. The public needs better assurance that lawmakers are qualified to do the work, he said.

"The question is: Do legislators get hired to do duties that they are really not qualified for and they're not asked to produce anything? That's what it comes down to," Harris said. "Is it just a form of a payoff?"

ON THE PAYROLL

Veco executives have long been frequent and generous contributors to political campaigns in Alaska and nationally. But two current legislators also have been regulars on its consulting payroll. Anderson reported $30,000 in Veco income between 2003 and 2005.

Senate President Ben Stevens declared $252,000 in consulting work for Veco from 2001 to 2005.

Veco, which also publishes the half-page "Voice of the Times" editorial section in the Daily News, did not respond to interview requests for this story. In a statement earlier this month, the company said, "To Veco's knowledge, it has done nothing improper or illegal." Stevens also has declined to be interviewed, and said last week that he's been advised not to answer questions about the investigation.

The concerns raised about lawmakers' employment by Veco -- hazy disclosure requirements, public uncertainty about motives and qualifications, possible conflicts of interest in and out of the Capitol building -- extend to consulting work for other business interests as well.

One example is Anderson's municipal lobbying work for the Anchorage Home Builders Association, which hired him at $2,500 a month in July. His job put him at odds with the Northeast Community Council, the grass-roots group in his House district, which opposed the Wal-Mart project. Anderson argued on behalf of the home builders it was good economic development.

The most noted example is Stevens, who has received more than $1.6 million in consulting contracts and pay from private organizations in the past five years. He reported $362,000 in income from an Adak fisheries company that received a pollock allocation worth millions of dollars through special congressional action by his father, U.S. Sen. Ted Stevens, R-Alaska. Ben Stevens returned $145,000 in consulting fees from Cook Inlet Region Inc., in the wake of bad publicity and complaints from several CIRI board members, saying he'd been unable to complete work on the business venture they'd discussed.

Stevens, with Veco as a major client, is one of the lawmakers whose office was searched by the FBI. Anderson's was not.

Three years ago, then-Sen. Scott Ogan, R-Palmer, came under heavy criticism for a $40,000 consulting contract with a shallow-gas drilling firm interested in his district. A former cabinetmaker, Ogan had developed his expertise as chairman of the Senate Resources Committee, in charge of regulating shallow-gas development. He gave up the contract but was threatened with a recall campaign and eventually quit the Senate.

While several legislators are employed directly by companies with interest in Juneau bills, the number of other reported consulting jobs remains small. One case is Rep. Vic Kohring, R-Wasilla, who reported income of $5,400 in 2004 and $38,100 in 2005 from Anchorage developer Marc Marlow.

Kohring's official disclosure said he was getting paid to assist with the development of construction-related projects, including arranging and conducting meetings, performing research, and developing plans and strategies. Marlow said recently that the work was to help him with plans to build an electrical power plant in the Mat-Su. Marlow said he isn't seeking any state funds, and Kohring said he has been very careful to follow state ethics rules.

Kohring, a longtime acquaintance, has the smarts for the complex power plant project, Marlow said. He's "detail oriented and conscientious," Marlow said, plus he has a master's degree in business administration and has served on the Alaska Housing Finance Corp. board. Kohring has said his other sources of income are work as a house painter and drywall hanger.

'RED-FACE TEST'

Earlier this year, before the FBI inquiry of the lawmakers and Veco burst into public view, Democrats tried to change state law to require greater disclosure of consulting and other contracts held by elected officials. Their efforts went nowhere.

The measure, introduced by Rep. Berta Gardner, D-Anchorage, would have required legislators with personal services contracts to disclose in broad terms what they did to earn the money and how much time they spent on the job. The bill required a description of the work "sufficient to make clear to a person of ordinary understanding the specific services performed."

"I thought I was dealing with the appearance of corruption, but maybe it's something more," Gardner said last week.

House Bill 461 passed through the State Affairs Committee last April and was referred to the House Judiciary Committee, where it died. The Judiciary Committee chairwoman was Rep. Lesil McGuire, R-Anchorage, who is married to Anderson. Anderson was the committee's vice-chairman.

McGuire said in an interview last week that she thought the bill had merit. She said she herself gave up consulting after completing a $10,500 contract with Providence Alaska Medical Center because public questions made her uncomfortable. But she said this year's bill died because Gardner didn't request a committee hearing early enough.

Gardner's office disputes that, saying their records show the request was made April 13, five days before the deadline for committee hearings. Gardner said she thought the bill died because Republican leaders didn't relish a fight with Ben Stevens. "He of course believed it was aimed at him," said Gardner. She said she plans to introduce a similar bill next year.

Neither Stevens nor Anderson is running for re-election. But that's not the only reason reform efforts are likely to get more attention from Republican leaders next year.

One Republican already preparing a bill, Rep. Bob Lynn of Anchorage, said he doesn't think legislators should take any consulting money. Even if their loyalties are not conflicted, it looks like they are.

"I don't agree with the consulting contracts. Period. It doesn't matter if it's 5 cents or 5 million," said Lynn, whose bill would stop short of a total ban.

Harris has a different solution. He wants evidence the legislator is truly being paid for expertise.

"I think the solution probably is to tighten up the existing rules a little bit to say the legislator has to show some either work or educational experience before they can accept a job from somebody," Harris said.

In his eight years in the House, Harris said, he's been offered a couple of consulting contracts that would have paid "substantial" money. Harris, who usually works in the off season as a Teamster truck driver, said he turned them down because the arrangement didn't pass "the red face test." He said he couldn't justify the work for the money. When it came down to it, he said, he knew they wanted him because he's a legislator. He wouldn't name the business, other than it wasn't Veco.

FOLLOW THE MONEY

A rule insisting on proper qualifications would probably have done little to crimp Veco's employment of legislators. Stevens and Anderson were both consultants before they ran for office.

Arrangements between Veco and two other lawmakers show up in state disclosure forms dating back to 2002. One was for a boat rental from a fisherman, one was for legal work from a lawyer.

In 2002, Veco paid $17,600 to use a boat owned by Rep. Paul Seaton, R-Homer. The contract came in the summer before Seaton, a commercial fisherman who owns several boats, was first elected. He said his fish tender just happened to be available in upper Cook Inlet when Veco needed a standby safety vessel during a short oil rig construction job.

The legal payments went to then-Sen. Robin Taylor, who got into a jam with critics in his home town of Wrangell over that work.

Taylor, a lawyer and longtime chairman of the Senate Judiciary Committee, reported being paid $15,700 for legal work by Veco in 2000, $19,300 in 2001 and $16,800 in 2002. He also served as city attorney for Wrangell during that period.

Critics accused Taylor of hiding his Veco ties when the city council considered taking up a private prison project in 2001. Veco had been part of the consortium whose prison plan had just been turned down in Kenai. Taylor insisted he had disclosed his Veco ties on state forms and didn't need to announce them.

Taylor retired from the Senate and his private legal practice in 2003 and is now head of the state marine highway system. He was among the current and former legislators known to have been interviewed by the FBI in the current investigation.

Taylor said last week that he had never been lobbied by Veco over the prison. As far as he knew, he said, Veco wasn't interested in a Wrangell prison. "It's a breach of attorney-client privilege, but I can tell you up front: That client never talked to me once about that project," Taylor said.

Gardner, the Democrat who pushed ethics reform last session, said legal work like Taylor's would probably require a different disclosure standard. There are privacy reasons for protecting details of legal work. But she said it would help to divulge the type of legal work required, to be sure the legislator has proper expertise.

Information on private-services contracts with Veco and other companies is available only through 2005. Any consulting salaries paid to legislators for 2006, in a year of high-stakes debate over oil tax and gas line issues, do not have to be disclosed until reports are due March 15, 2007.

As for past Veco consultants Anderson and Stevens, the public may never know if they had consulting contracts this year. As retiring legislators, the Alaska Public Offices Commission said, neither will have to file disclosure forms next year.

Reporter Tom Kizzia can be reached at tkizzia@adn.com  or in Homer at 907-235-4244. Reporter Lisa Demer can be reached at ldemer@adn.com   or 257-4390. Reporter Don Hunter also contributed to this story.

FOCUS: Rep. Tom Anderson's work as a business consultant and city lobbyist has raised questions and led to a call for reform.

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http://www.adn.com/news/politics/veco/story/8229536p-8126213c.html

Anderson's consulting services in demand
WELL-CONNECTED: Veco and home builders
group among clients he served.
By LISA DEMER and TOM KIZZIA
Anchorage Daily News
Published: September 24, 2006
Last Modified: September 24, 2006 at 05:52 AM

Tom Anderson's dual role as a legislator and consultant has drawn criticism over the years, but he defends it as work he's well equipped to do.

The 39-year-old Anchorage Republican has a master's degree in public administration from the University of Alaska Anchorage and a law degree from Hamline University School of Law in Minnesota (though he's never practiced law).

He is known as personable, funny, chatty and well-connected. His father is the former head of Alaska State Troopers. The younger Anderson worked as chief of staff to then-Rep. Terry Martin and was appointed to an Anchorage School Board seat in 2000 but lost an election to keep it eight months later. He was working as a government consultant for industry before he ran for state office.

For the past four years, Anderson has represented East Anchorage in the state House. For the first three years, he reported $65,000 in private consulting income on the side. Nearly half that money, $30,000, came from Veco, the oil field services and construction company whose ties to legislators now are under investigation by the FBI.

Disclosure reports by state legislators for outside work done this year are not required until next March. For Anderson and others who are leaving the Legislature after this year, they will not be required at all. But reports required by the Municipality of Anchorage, where Anderson says his recent work has taken place in his new role as a local-government lobbyist, provide some additional information about his work in 2006.

Efforts to interview Anderson for this story were unsuccessful. He provided brief answers to several questions via e-mail.

"I have attempted at all times to fully comply with the laws and regulations governing the conduct of public officials," Anderson wrote.

He said his ability to perform as a responsible legislator for his district had never been compromised. To avoid conflicts, he did not begin his municipal lobbying this year -- for the Anchorage Home Builders Association and the Cabaret, Hotel, Restaurant and Retailers Association, or CHARR -- until after the regular legislative session was over, he said.

When Anderson registered as a lobbyist with the city this year, he reported working for the home builders on "homebuilding & construction," and for CHARR on the proposal to ban smoking in bars. He said in an e-mail that he worked to delay the effective date of the ban, which the Assembly agreed to. He said he no longer works for CHARR.

Even if Anderson is following the rules, his new role doesn't sit well with Anchorage Assembly member Dick Traini. Traini is proposing to bar state legislators from lobbying the Assembly or the School Board altogether for a year after leaving office.

"It just sets up a bad relationship when the same body you go to for funding comes to you to lobby for other things," Traini said.

A legislator can't realistically set aside elected duties to lobby, he said. "The moment you take office you represent your constituents. There is no time out."

In 2002, while Anderson was being paid $40,800 by the bar, restaurant and liquor trade group, he won his House District 19 seat.

After his first session in 2003, Veco approached him about a consulting job, Anderson told a Daily News reporter two years ago. His first role was to seek out civic and charitable events for Veco to become involved in and to watch out for local zoning cases, he said at the time. He noted on his disclosure form that he was "consulting on community council and local government affairs." He also has said his Veco duties didn't conflict with his being a lawmaker.

Anderson attended meetings of the Northeast Community Council during his first year in office as their legislator. His other role, as Veco's monitor of municipal neighborhood issues, didn't come to light until he filed his disclosure in 2004. Council officials said they were surprised. Veco, with offices around the world, had no local projects that four former and current council leaders knew about.

Peggy Robinson, a former Anchorage School Board president, raised his Veco work in her unsuccessful 2004 legislative race against Anderson. She also raised a questionable Anderson-Veco connection immortalized on a yellow sticky note.

The note was passed around May 13, 2003, during a meeting of the Labor and Commerce Committee, which Anderson chaired. Robinson got it from the office of another Republican legislator and was told Anderson wrote it. Up for discussion: A bill that would have loosened state regulation of pipelines.

"Vote 'yes' and remind Veco BP Phillips Exxon this summer," Anderson supposedly wrote on the note. Robinson featured the yellow sticky on a campaign mailer. Anderson responded at the time that he wrote a lot of notes and didn't remember that one but always voted his conscience, "not on who contributes to my campaign."

In September of 2003, Anderson took another job, consulting for the Alaska Telephone Association, a trade group of local phone companies. Its members tend to be rural companies. Anderson's Labor and Commerce Committee oversaw telecommunications issues, including a controversial and bitterly fought measure earlier that year to extend the life of the Regulatory Commission of Alaska for four years. The commission regulates telephone companies.

Jim Rowe, the long-time executive director for the Alaska Telephone Association, said he met Anderson that year and then hired him for $5,000 a month for four months to instruct association members how to be more effective in their dealings with legislators in Juneau. Anderson spoke at a trade show for the association and at least one other meeting and spent more time just with him, Rowe said in a recent interview.

"I understand that any relationship with Tom Anderson at this time is apt to be looked at with skepticism and a business/consulting relationship with even a more critical eye. Nonetheless, Tom treated me fairly, provided instruction to my membership, and I like him," Rowe said in a follow-up e-mail.

In 2004, Veco hired Anderson again, this time for $17,500 to consult on "Russian business endeavors," according to the disclosure he filed in 2005. Neither Veco nor Anderson has explained what he did. In 2005, Anderson only had a small Veco contract, $2,500 for "election/proposition research," according to the report he filed in April.

This year, in the heat of debate over oil tax increases, Anderson hand-delivered notes to his colleagues on the House floor passed from Veco chairman Bill Allen, sitting in the visitor's gallery, according to several legislators.

After marrying Rep. Lesil McGuire last year and moving to her district, Anderson chose not to run again. McGuire, also a Republican, is running for the state Senate seat being given up by Ben Stevens.

After the regular session this year, Anderson worked briefly again for the liquor trade group. In July, Anderson got a new job as municipal lobbyist for the Anchorage Home Builders Association, which is paying him $2,500 a month through the end of the year.

Four months earlier, Anderson had been prime sponsor of a bill making it easier for the state to fine unlicensed contractors. House Bill 81, which passed into law, was a priority for the home builders association.

Anderson's sponsorship of the bill had nothing to do with his getting hired, said Ray Hickel, president of the home builders association. Other legislators worked more on it, he said. The association needed a municipal lobbyist and there were few other choices.

Anderson appeared before the Assembly in August to tout a proposed Wal-Mart Supercenter and Sam's Club in Muldoon. The community council in January had voted to oppose the rezoning. Members were concerned the two stores would undermine the area's town center plan.

In his e-mail, Anderson said he appeared before the Assembly as part of his new, post-legislative work.

"At the end of the day, I have to answer first, certainly, to myself in terms of integrity and honesty," Anderson said in 2004. "And a close second is to my constituents."

Reporter Tom Kizzia can be reached at tkizzia@adn.com  or in Homer at 907-235-4244. Reporter Lisa Demer can be reached at ldemer@adn.com   or 257-4390. Reporter Don Hunter also contributed to this story.

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Anchorage Daily News
September 23, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8225623p-8122324c.html

Restart to push oil field output
PRUDHOE BAY: BP gets federal approval to resume production.
By WESLEY LOY
Anchorage Daily News
Published: September 23, 2006
Last Modified: September 23, 2006 at 04:56 AM

Federal pipeline regulators gave British energy giant BP permission Friday to restart production from a large section of Prudhoe Bay, a step that could bring the hobbled oil field back to near full output within a week.

It's a softer landing for Prudhoe than BP executives and state officials initially feared in early August, when a pipeline corrosion crisis forced the company to begin an unprecedented shutdown. The worry then was that the nation's largest oil field might be wholly or partially offline for many months pending pipeline repairs.

Now it appears likely the field will be back to its usual production of more than 400,000 barrels of oil per day by the end of September, less than two months after a leak from a major pipeline forced BP to begin its jarring shutdown on Aug. 6.

David Peattie, a London-based BP executive who spent time in Prudhoe helping direct the comeback, said the federal OK to restart the idle eastern half of the field, where the pipe leaked, is "an important milestone" in restoring production ahead of schedule.

Restoring production is a big financial boost not only for BP and the other oil companies that own shares of Prudhoe, but also for the state, which relies heavily on tax and royalty revenue the field generates.

By reactivating wells, processing plants and pipelines in eastern Prudhoe, overall field production will go up by about 150,000 barrels per day from its current level, BP said.

That's about $9 million worth of oil a day at today's price. For the state treasury, it's an extra $1.6 million per day in cash flow, said Robynn Wilson, state tax director.

Unfortunately for the state, however, the Prudhoe outage meant lost money because the price of oil has dropped considerably since early August.

North Slope crude oil for delivery to West Coast refineries sold Friday for $58.80 per barrel, down nearly $15 from the last trading day prior to BP's Prudhoe shutdown announcement.

On Friday, the U.S. Pipeline and Hazardous Materials Safety Administration gave BP permission to restart most of the eastern side of Prudhoe.

Agency officials said they were allowing the restart based on extensive corrosion inspections along a key pipe, known as an oil transit line, plus reassuring reports from two independent technical experts. The transit line, which consists of two segments, is the main trunk that feeds oil from the eastern half of the field into the trans-Alaska pipeline, which runs 800 miles south to the Valdez tanker terminal.

Only the lower segment of the transit line, 34 inches in diameter, will be restarted. The upper segment was the pipe that leaked, and BP does not plan to restart that part of the line. Rather, it plans to reroute oil into a bypass pipeline.

Federal pipeline administrators said restarting eastern Prudhoe will allow BP to run devices known as pigs through the transit pipeline to clean it out and better inspect it for corrosion.

Critics, including federal regulators and members of Congress, have flayed BP for failing to run such pigs through the pipes for many years, allowing sludge to build up inside them and corrosion to eat holes into their steel walls. A leak from a transit line on the western side of Prudhoe, which caused an estimated 201,000-gallon spill last winter, is now the subject of a federal criminal investigation. It was the Slope's largest oil spill ever.

Thomas Barrett, head of the pipeline safety administration, said BP must have people and equipment staged and ready to contain and clean up any spills once the restart begins.

And if any trouble develops, the agency will order the immediate shutdown of the line, Barrett said.

BP spokesman Daren Beaudo said the company is confident the pipe is safe, and that Prudhoe will ramp up to full production and stay there.

"We have a high degree of confidence in the integrity of the line because we've inspected thousands of feet of pipe," he said.

Those inspections, which involved the use of sound waves and other technology to look for thin spots in the walls of the above-ground pipeline, showed no significant corrosion, he said.

Ultimately, BP plans to replace all 16 miles of transit pipelines implicated in the corrosion scandal. But replacing pipe shouldn't interrupt oil flow, Beaudo said.

As many as 300 extra workers were deployed to the Slope to help clean up the August spill, to test pipelines for corrosion, and to engineer and weld bypasses. BP also had to seek permission from a raft of state agencies, including the Regulatory Commission of Alaska and the Alaska Oil and Gas Conservation Commission, to rejigger pipelines and change oil flow patterns.

BP runs Prudhoe on behalf of itself and the other owner companies: Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.

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

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Houston Chronicle
September 23, 2006

http://www.chron.com/disp/story.mpl/business/4208619.html

Report sees BP indifference to safety
Former OSHA official calls it 'gross negligence'
By ANNE BELLI
Copyright 2006 Houston Chronicle

The former area director of the Occupational Safety and Health Administration says he believes gross negligence and indifference to safety at BP led to the fatal explosion at the Texas City refinery last year.

"It is my firm belief the clear and convincing evidence establishes not only that BP's negligence was the cause of the March 23, 2005, explosion and fire which killed 15 and injured hundreds more, but it's gross negligence as well," former regulator Raymond Skinner wrote in a report filed recently in a Galveston County court.

BP spokesman Neil Chapman, said the company disputed that opinion.

'Strongly disagree'

"We strongly disagree with many of Mr. Skinner's conclusions and will refute them in court," Chapman said.

He declined to provide specific responses to Skinner's assertions. But he reiterated the company's previous contentions that it takes full responsibility for the blast, has fully investigated its causes, is compensating victims, has imple- mented substantial safety improvements and is cooperating with all authorities.

Skinner's report was prepared for the injured workers and the families of those killed as part of their civil cases against BP. Lead plaintiffs lawyer Brent Coon acknowledged Friday that Skinner was a paid expert, but he said he was retained after he had already made his opinions known.

When asked why Skinner's office didn't keep closer tabs on BP's operations, Coon said that the agency had far too few inspectors to cover the vast region it was assigned.

Skinner, who retired from OSHA in January 2004 after 30 years, had been area director of the Houston South area office for the previous 12 years.

In 1992, Skinner warned Amoco, which owned the Texas City refinery at the time, that so-called blowdown drums and vent stacks  like the kind that exploded last year  were dangerous to the environment and workers and should be replaced or changed.

The blast occurred as workers accidentally overflowed the refinery's F-20 blowdown drum and stack, which vented to the open atmosphere, while restarting a unit that had been shut down for a month.

Hydrocarbons spewed from the stack and collected on the plant grounds along with a vapor cloud while workers were conducting their normal operations. The materials were ignited by an idling truck or other source, causing a series of explosions felt five miles away.

In his report, filed as part of civil litigation stemming from the blast, Skinner said the company promised to make improvements to blowdown drums and stacks as part of a settlement agreement in the 1992 case to prevent the dangerous materials from venting to the atmosphere, but it did not.

A harsh report

Amoco "certified to OSHA that the hazardous conditions for which it was cited do not exist or have been corrected," Skinner wrote in his harshly worded 17-page report.

"Amoco, however, in fact took no action whatsoever, and blowdown drums and stacks continued to exist after the OSHA citation and settlement agreement," he said.

Further, when BP merged with Amoco in 1999, it also did not make the necessary safety changes and continued to operate the equipment over the years even when it had clear opportunities to do so, Skinner said. The company was also fully aware of at least 19 near misses, Skinner said in his report, which he said he compiled after poring over numerous investigation reports and the depositions of two dozen BP officials and contractors.

BP "proceeded with conscious indifference to the rights, safety and welfare of those who were killed or injured," he wrote.

'Grossly negligent'

"It was grossly negligent ... for BP to continue to operate its blowdown drums and stacks with knowledge of at least 19 documented incidents involving hydrocarbon leaks, vapor releases and/or fires involving blowdown drums and stacks, including F-20," he added.

Skinner cited numerous violations of federal health and safety regulations, including some not included in OSHA's final report released a year ago. OSHA fined BP a record $21.4 million after finding more than 300 violations.

anne.belli@chron.com

 

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Wall Street Journal
September 23, 2006

BP Gets Approval to Restart East Prudhoe Oil Field
By IAN TALLEY
September 23, 2006; Page A4

WASHINGTON -- BP PLC said it has received permission to restart the eastern half of Alaska's Prudhoe Bay oil field in order to clean and test pipelines there.

BP expects to have the eastern part of the field producing 150,000 barrels a day within a week. This would bring oil output at Prudhoe Bay, which was partially shut down last month after the discovery of severe pipeline corrosion, to 400,000 barrels a day from the current output of 250,000 barrels a day, which is flowing only from the field's western side.

If BP can return the field, the largest producing oil field in the U.S., to nearly normal flows within the week, it would be months ahead of early estimates. Oil prices rallied more than $2 a barrel on Aug. 7, the day after BP said it would begin to shut down all of Prudhoe Bay's output. Crude oil for November delivery on the New York Mercantile Exchange fell 1.7% to $60.55 a barrel Friday, down $1.04.

The Department of Transportation has given approval for the United Kingdom energy titan to begin "smart pigging" a key oil-transit line, a process using a cylinder-shaped droid to conduct cleaning and inspection for cracks.

"This is an important milestone in returning all of Prudhoe Bay to production many months in advance of our complete replacement of 16 miles of oil transit lines," said BP Vice President David Peattie.

If smart pigging of the existing oil-transit lines shows they aren't fit for service, BP has said it will pursue options that would allow it to bypass the original pipeline system while it repairs and replaces some of its most corroded lines.

BP's problems in Alaska have prompted a storm of criticism as well as congressional, federal and state investigations. The disruption of oil supplies last month came at an inopportune time for markets, already nervous about tensions in the Middle East. Since then, however, oil prices have slipped as fears of supply disruptions waned and as the Prudhoe Bay output situation became less dire.

--John Biers in Houston contributed to this article.

Write to Ian Talley at ian.talley@dowjones.com


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2nd UPDATE: DOT OKs BP Restart Of E Prudhoe Bay Oil Flow
DOW JONES NEWSWIRES
September 22, 2006 5:52 p.m.
(Updates with more details and background throughout.)
By Ian Talley
Of DOW JONES NEWSWIRES
 
WASHINGTON (Dow Jones)--BP PLC (BP) said Friday it had received permission to restart the eastern half of Alaska's Prudhoe Bay oil field to clean and test pipelines there.

The restart approval - which the company says may bring the field up to 400,000 barrel a day within a week - is earlier than many in the market had originally expected. It follows weeks of severe criticism as well as congressional, federal and state investigations into the circumstances surrounding the failure of the London oil giant's maintenance practices in Alaska and subsequent shutdown of the largest producing field in the U.S.

BP spokesman Daren Beaudo told Dow Jones Newswires the company expects to have the eastern part of the field producing 150,000 barrels a day "within about seven days."

This would bring oil output at Prudhoe Bay, which was partially shut down in early August after the discovery of severe pipeline corrosion, to 400,000 barrels a day from the current 250,000, which is flowing only from the western side.

If BP succeeds in returning the field to nearly normal flows next week, it would be months ahead of early estimates that called for resumption of full production no earlier than the beginning of 2007. Oil prices, which had been trading at historically high levels at the time due to nervousness about tensions in the oil-rich Middle East and a hurricane season, rallied more than $2 a barrel the day after Aug. 6, when BP said it would begin activities to shut down all of Prudhoe Bay's output.

A resumption of full production levels would likely add to the downward pressure on crude prices that recently hit six-month lows as fears of supply disruptions waned and as the Prudhoe Bay output situation became less dire. On Friday, the price for the front-month contract settled $1.04 lower at $60.55 a barrel on the New York Mercantile Exchange.

However, maintaining this increased production may be contingent on the absence of severe corrosion along pipe walls.

Thumbs-Up To 'Pigging'
 
The U.S. Department of Transportation has given approval for BP to begin "pigging" a key oil transit line by using a cylindrical droids to conduct cleaning and inspection for cracks.

"This is an important milestone in returning all of Prudhoe Bay to production many months in advance of our complete replacement of 16 miles of oil transit lines," BP vice president David Peattie said in a statement.

The DOT's approval will enable BP to restore output from three of the four separation facilities in the eastern part of Prudhoe Bay, BP's Beaudo said.

Earlier this month, Thomas Barrett, head of the Pipeline and Hazardous Materials Safety Administration, estimated that it would take BP "a week or two" to clean out sediment from the inside of a transit line segment on the eastern half of the field and then another six weeks to inspect the line through the use of a "smart pig."

"It will take around six weeks before we would know with confidence the conditions of the line" once smart pigging had begun, Barrett said.

Pipeline experts, including Barrett, testified to the U.S. Congress that the corrosion was likely caused by bacteria. The colonies of bacteria that grew on the insides of the lines were protected by globs of sludge that BP had allowed to build up in unprecedented quantities all along the oil transit system on the eastern part of the field. The pigging, Barrett said last week, may well reveal more corrosion.

Barrett said in a statement Friday his agency is requiring BP to deploy incident response personnel and cleaning and containment equipment "to respond immediately to any sign of trouble."

"Any problems identified during the testing will result in an immediate shutdown of the line," he said.

Bypass Options
 
If smart pigging of the existing oil transit lines on the eastern half of the field shows they're not fit for service, then BP has said it will pursue bypass options.

The company previously said it was also preparing several temporary options that would allow it to bypass the original pipeline system - enabling a return to more normal output - while it plans to repair and replace 16 miles of the most corroded lines in the system.

The company continues to keep off line a three-mile stretch of pipeline on the eastern half of Prudhoe Bay where it found the August oil spill and discovered corrosion that ate through as much as 80% of the pipeline. BP is working on alternative routes to open up this additional production of about 50,000 barrels a day, such as a bypass through the Endicott line, Beaudo said.

The company is currently constructing the bypass to the Endicott line, which should be complete by late October, lifting production to a total of 450,000 barrels a day, Beaudo said.

BP's Alaska debacle has unleashed a storm of government censure after congressional and state hearings into the fiasco revealed the company had been warned of problems in advance of the spills.
 
-By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com 

(John Biers in Houston contributed to this report.)

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Alaska Journal of Commerce
September 22, 2006

http://www.alaskajournal.com/stories/092406/hom_20060922016.shtml

State joins feds in tightening pipeline rules
By Tim Bradner
Alaska Journal of Commerce

The state of Alaska will implement its own new regulations on North Slope pipeline integrity to supplement new rules being developed by federal pipeline regulators, the director of the state's oil spill prevention division said Sept. 15.

"Even with the new federal rules there are gaps in regulatory coverage of the North Slope field pipelines, and our intent is to cover what the feds won't," said division director Larry Dietrick. "The flow lines from the wells to the processing centers have been a primary concern for us because they carry natural gas with high concentrations of carbon dioxide as well as hydrogen sulfide, which can contribute to corrosion."

The flow lines are smaller in diameter and liquids move at a higher velocity, which tends to limit corrosion, than is the case of the oil transit lines downstream of the processing center, where the corrosion was discovered.

In a related development, BP submitted an application Sept. 13 to the U.S. Department of Transportation seeking permission to restart production in the eastern Prudhoe area so that maintenance and "smart" inspection pigs can be operated in the pipelines.

The U.S. Office of Pipeline Safety is extending its rules governing low-pressure oil pipelines to those in rural areas in response to recent oil spills and corrosion problems in Prudhoe Bay field pipelines operated by BP.

However, Alaska officials said the new federal rules will only cover the pipelines from crude oil processing centers to the entry point to a common carrier pipeline. The new state regulations, which will be in effect by the end of 2006, will govern inspection and maintenance of flow lines from producing wells to the processing centers, where the raw gas, produced water and solids are separated from the oil, Dietrick said.

The flow lines, like the oil transit pipelines to the large common carrier pipelines, are now unregulated, he said. The state has been working on its new rules for two years. They were out for public review at the time of the March 22 oil spill on a Prudhoe Bay pipeline.

Mechanical integrity of the producing wells are regulated by the Alaska Oil and Gas Conservation Commission, which has regulated oil and gas production in Alaska since the 1950s.

BP is continuing to inspect pipelines in the eastern and western sides of the Prudhoe field, said company spokesman Daren Beaudo. BP has found no loss of pipeline metal due to corrosion greater than 32 percent of wall thickness in field pipelines inspected so far in the Prudhoe field aside from two heavily damaged pipelines where oil spills occurred and where corrosion-caused metal loss was greater than 70 percent.

BP believes these pipelines could be operated safely until they are replaced with new pipe this winter, but federal regulators must approve any restart, Beaudo said.

As of Sept. 13, the company had completed inspections on 7,000 feet of 25,301 feet of its western-side Prudhoe pipelines and found no wall metal loss greater than 32 percent discovered so far, Beaudo said.

About 18,000 feet of inspections have been carried out on eastern side pipelines, of 25,996 feet of total pipe, with no metal loss found so far greater than 30 percent, he said.

Inspections are being carried out with ultra-sonic U-T technology and two new systems, Electromagnetic Acoustic Tranducer and Low Frequency Eddy Current technology, Beaudo said.

The western side of Prudhoe Bay is continuing in production but the eastern side remains shut down. BP hopes to restart at least part of the eastern side, if federal regulators agree, after cleaning and running smart pig inspections in pipelines. The company hopes to have bypass connection links in place by the end of October to use the undamaged Lisburne and Endicott field pipelines to begin production from Flow Station 2 in the eastern side of Prudhoe and Gathering Center 3 on the western side, according to Maureen Johnson, BP's manager for Prudhoe Bay. GC-3 is now linked to eastern side pipelines.

Tim Bradner can be reached at tim.bradner@alaskajournal.com . 

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Anchorage Daily News
September 22, 2006

  http://www.adn.com/money/industries/oil/story/8220818p-8117599c.html

BP acts on fears of caller
ANONYMOUS: The firm heard women may have been denied jobs.
By WESLEY LOY
Anchorage Daily News
Published: September 22, 2006
Last Modified: September 22, 2006 at 05:54 AM

BP is investigating complaints that women possibly were denied jobs in the Prudhoe Bay oil field for lack of separate women's housing, a company spokesman said Thursday.

The investigation was begun after an anonymous woman on Wednesday called a secretary to BP's Alaska president, Steve Marshall, expressing concern about reprisals if she complained, said BP spokesman Daren Beaudo.

BP, which runs the Prudhoe Bay field on behalf of itself and other owner companies, will look into whether BP or oil field contractor companies somehow discriminated against women workers, Beaudo said.

"We believe in equal opportunity," he said, adding that BP managers don't tolerate discrimination against any class of workers whether they work directly for BP or a contractor.

BP and its contractors have brought hundreds of additional workers to the North Slope since Aug. 6, when the London-based energy giant began shutting down the giant Prudhoe field due to corrosion-related pipeline leaks.

The field, which normally produces about 400,000 barrels per day of crude oil, remains severely hobbled with output still down by about half.

BP and its contract workers are testing miles of above-ground pipelines for corrosion and installing new pipes in an effort to bring the field back up to full production. The work is sometimes rough, requiring laborers to strip thick insulation off above-ground steel pipes.

The influx of new workers has strained the Slope's housing capacity, forcing BP and its contractors to bring in portable housing units in some cases to accommodate all the workers, Beaudo said.

BP will investigate to see whether some women were denied jobs because there wasn't adequate women's bed space available, he said.

Rick Wilson, a manager for Pacific Environmental Corp., one of several contractors doing pipeline and other work on the Slope, said his company is providing ample work to women, and that the firm's lead person on the Slope is a woman.

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

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Seattle Times
September 22, 2006

http://seattletimes.nwsource.com/html/localnews/2003270403_alaska22m.html

 
Alaska politics crazy this year, even by state's own standards
By Ralph Thomas
Seattle Times staff reporter

ANCHORAGE  How fitting for tavern owner Mr. Whitekeys that in the weeks leading up to his final show, voters dumped their once-popular governor and federal agents raided state legislative offices  searching for, among other things, hats emblazoned with "Corrupt Bastards Club."

Whitekeys has spent a quarter-century lampooning Alaska's politicians in stage shows at his Fly-By-Night Club, a bright-blue bar that proudly bills itself the "sleaziest" nightspot in town.

He's never had a shortage of fodder. Alaska, a state seemingly still in puberty, always has been known for its colorful characters and political upheavals.

One former governor  there have been only eight  was nearly impeached and another claimed he was guided by an invisible "little man" on his shoulder. In the 1980s, two of the state's most powerful lobbyists were sent to prison on extortion and racketeering charges. A state lawmaker was busted for illegal possession of machine guns.

"This place plays by its own rules. Always has," said Whitekeys, who recently sold the bar and put his stage show into hibernation.

But even by Alaska standards, things have been pretty wild lately.

Last month, Gov. Frank Murkowski suffered a humiliating defeat in the Republican primary, losing badly to the former mayor of a town not much bigger than Omak. A U.S. senator for 22 years before becoming governor, Murkowski was dogged by ethics scandals and political missteps, including appointing his daughter to his old job in Congress and buying a private jet.

On Aug. 31, FBI agents swarmed the offices of six legislators, including Senate President Ben Stevens  son of the state's most powerful figure, U.S. Sen. Ted Stevens. At the Capitol in Juneau, agents lugged boxes marked "evidence" past photo-snapping tourists.

Though little has been revealed about the investigation, it's clear the feds are looking into the relationship between lawmakers and Veco, a politically powerful oil-field service company with close ties to the younger Stevens.

All this happened against a backdrop of trouble for Alaska's lifeblood oil industry. In early August, BP was forced to partially shut down the giant Prudhoe Bay oil field after discovering badly corroded pipes.
 
BP officials, already facing a criminal probe into an earlier spill at Prudhoe, were hauled before Congress and berated for ignoring warnings about the corrosion.

Aside from rocking two of the state's most-prominent political families and shaking up the state's Republican-dominated establishment, the events last month further jeopardized two of Alaska's biggest petroleum dreams.

Murkowski and the Legislature have been jousting for the past several months over his proposal for a new pipeline to carry natural gas from the North Slope to markets in the Lower 48. The $25 billion, 2,100-mile pipeline would create a construction boom and tap the state's vast gas reserves.

But legislative leaders have no desire to take the project up again right now.

Meanwhile, BP's problems at Prudhoe Bay pose a serious obstacle to the state's effort to allow oil drilling in environmentally sensitive areas, such as the Arctic National Wildlife Refuge.

Dependent on oil

In a sense, everyone in Alaska is on the take from oil.

Nearly 90 percent of the state budget comes from oil taxes and royalties. Citizens pay no state taxes. And the state next month will send out Permanent Fund dividends, the annual cut each citizen gets from earnings on the state's $34.5 billion oil savings account. This year's checks are $1,106.96 per person.

Meanwhile, record-high oil prices have created a gusher of new money for the state treasury.

So it's no surprise that Alaskans generally have had a friendly relationship with the oil industry. But things have gone a little sour lately, said Jerry McBeath, a political-science professor at the University of Alaska, Fairbanks.

McBeath said many Alaskans  who have been hit as hard as anyone by high fuel prices  don't believe the state has been getting its fair share of the record-high profits the industry has reaped the past few years.

Politically, "this is the worst time for the industry since the Exxon Valdez oil spill," McBeath said.

A citizen initiative before voters in November would for the first time tax natural gas while it's still in the ground. The measure, aimed at forcing energy companies to start producing the gas, is bitterly opposed by the industry but stands a good chance of passing.

"The industry is under a lot of pressure now  on all kinds of fronts," said Judy Brady, executive director of the Alaska Oil and Gas Association.

Both of the leading candidates to replace Murkowski  former Gov. Tony Knowles and Sarah Palin  openly criticize the industry.

Knowles, a Democrat who has been considered a friend of big oil, and Palin, the maverick Republican who defeated Murkowski last month, both say there is a general sense that the state's political leaders have conceded too much to the oil companies. And with profits soaring, they say, it's especially offensive to learn that BP failed to maintain crucial pipes at Prudhoe.

"All of that mixes together into a pretty unpalatable stew," Knowles said.

"Bald Ego" takes flight

Murkowski can't blame the anti-oil mood for his demise.

In late 2002, just after he was sworn in as governor, Murkowski appointed his daughter, Lisa Murkowski, to replace him in the Senate. It was all downhill after that  and Murkowski hit a lot of trees on the way down.

Two political friends he appointed to state jobs were chased from office by ethics complaints.

Murkowski scrapped the state's "longevity bonus" program, a monthly cash payment to seniors. And even though the Legislature tried to block his efforts to buy a jet, he kept pushing and eventually got his plane  a craft his critics dubbed the "Bald Ego."

On top of all that, the public and many legislators were miffed by Murkowski's secret negotiations with oil lobbyists over a major rewrite of oil-tax laws and the industry's gas-pipeline proposal.

By election time, one local columnist had taken to calling him America's "most unpopular nonindicted governor." Murkowski's 19 percent showing in the primary was the worst in state history for an incumbent governor.

State Rep. Jay Ramras, a rookie Republican lawmaker from Fairbanks, said the election was a "referendum on the leadership style of a very long-in-the-tooth ex-U.S. senator."

But Palin said it was more than that. Palin, former mayor of Wasilla, a small town 40 miles north of Anchorage, won despite being outspent by both of her opponents and her rocky relationship with Republican Party leaders.

It was Palin who pressed the ethics complaints that forced out two of Murkowski's appointees. And she was a leading critic of Murkowski's dealings with the oil industry.

Aside from going for Palin's populist message, voters also approved a ballot measure that largely restores campaign donation and lobbying limits that Murkowski and the Legislature weakened three years ago.

"People are saying, 'No more of this,' " Palin said.

Veco a prominent player

Palin said the FBI raids will only fuel that mood.

The FBI remains mum about the investigation. But agents were searching for "anything of value" provided to legislators by Veco executives and documents related to the recent high-stakes oil-tax and gas-pipeline talks, according to a copy of a search warrant obtained by the media.

Agents were also looking for hats or garments with the slogan "Corrupt Bastards Club" or "Corrupt Bastards Caucus," nicknames several lawmakers jokingly gave themselves after a newspaper column accused them of being too cozy with Veco.

Veco has long been a prominent political player. The company's top executives handed out about $1 million in state and federal campaign donations during the past decade  much of it coming in the past two years as the gas-pipeline talks heated up, according to the Anchorage Daily News.

The company, which has been cited in the past for violating campaign finance laws, also has paid big consulting fees to state lawmakers.

Sen. Ben Stevens, for instance, has received more than $250,000 in consulting fees from Veco since 2001. State law doesn't require Stevens or the company to disclose what work he did  and neither is saying.

Knowles and Palin have both sworn off donations from the company, although Knowles received more than $20,000 from Veco in past elections. In Washington state, U.S. Senate candidate Mike McGavick said he returned $14,000 he received from company executives.

Meanwhile, several Democratic legislators have decried what they say is a "culture of corruption" in the Legislature.

"I've watched for the last 10 years, and each year these Veco people and industry people get more and more blatant," said Rep. Harry Crawford of Anchorage.

But others say they haven't seen the unseemly atmosphere the Democrats describe.

"Everybody gets their arms twisted, but that's part of the job," said Rep. Ralph Samuels, an Anchorage Republican. "I've never had anyone say, 'Hey, we held a fundraiser for you, you better vote for our bill.' "

State Republican Party Chairman Randy Ruedrich notes that federal probes sometimes turn out to be little more than fishing expeditions.

But Mike Doogan, a former newspaper columnist who is running as a Democrat for the state House, said he doubts the feds would raid the offices of a powerful U.S. senator's son without good cause.

"Anybody who says this was a fishing expedition, go whistle," Doogan said. "They've got something."

And then there's Mr. Whitekeys. With Alaska in the midst of such political upheaval, Whitekeys said he worries he's "giving up a gold mine" by giving up his stage at the Fly-By-Night.

"But that's why we're closing," he laughed. "Because I got all that money under the table from Veco and now I don't have to work anymore."

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com

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KTUU Television
September 21, 2006

http://www.ktuu.com/cms/anmviewer.asp?a=6467&z=1

BP launches probe into sexual discrimination on Slope
Thursday, September 21, 2006 - by Jill Burke  

Anchorage, Alaska - BP has launched an internal investigation after women claim they are being denied jobs on the corroded pipeline repair project. Hundreds of workers are needed to help BP repair its pipes.
 
Oil-industry laborers know the conditions will be rugged and sometimes even crude. But three whistleblowers said they never expected to lose out on work because they are women.

With corrosion repair on BP’s oil pipeline underway, work on the North Slope is plentiful. But a handful of women claim something isn't right.

“Just before I left, all my crewmembers that were with me said, ‘Oh yeah, we got our two-week rotation.’ I didn't get my two-week rotation. Is something wrong, or what's the deal here?” said "Marilyn," a North Slope worker.

Three women, who spoke to KTUU-TV on condition of anonymity, were told that they were not eligible for work on the project because of their gender.

“The contractors were told that they cannot hire women, and not to put women in the classes because they are not going to have room for them anytime soon,”  said "Julie," a North Slope worker who was denied a job.

Two companies -- Pacific Environmental Conservation (PENCO) and Control Components Inc. (CCI) -- are currently supplying workers for the corrosion repair work. In a written statement, PENCO said it has “been told to delay crews because rooms were not available.”

The letter goes on to say that the company has “never been told by any of our clients to not provide female employees.”

So the question remains: why are some women being rotated out of work?

“I was told that they were not hiring women for the stripping crews because of the conditions and because of the lack of housing and facilities,” “Marilyn” said.

CCI did not return KTUU-TV’s call.

Meanwhile the women said it's more than work they are missing out on, but critical training as well.

Another North Slope worker, “Maria,” was told that a contractor would hire her to work on the project provided that she pay for the training required in order to perform the repairs.

“They paid for the men's training,” "Maria" said.

Much of the work is being overseen by VECO Corp. and BP. Both admit that lack of housing is a problem, but firmly say there is no mandate to keep women away.

BP has launched an investigation to ascertain what discriminatory actions -- if any -- were taken against women. The company said in its statement that, “if there were miscommunications or actions inconsistent with BP’s values, it will be corrected immediately.”

The women said the only satisfactory remedy is to receive the same opportunity as men to work on a job they know they can perform.

“We are doing the same things that men are doing. We just don't understand why this is going on,” “Maria” said.

In addition to missed work and training, the women said they have concerns that men with less experience than they have are being funneled to the North Slope. They were also disappointed that their company did not support them after word allegedly came down not to send women to the North Slope.

BP said equal opportunities for all employees is paramount and they are doing what they can to discover what was said, how it was interpreted and why some women feel they have been unfairly discriminated against.

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Statement by: Paula Dawson, Pacific Environmental Corporation
Pacific Environmental Corporation (PENCO) is an equal opportunity employer and an environmental company that provides personnel to several contractors on the North Slope for a variety of projects.

Currently, PENCO is working with VECO Alaska to provide trained asbestos abatement personnel to work on the pipe stripping project for BP Exploration.

PENCO has mobilized 18 individuals since September 17th to work on this project. Two of these individuals are women, including our lead supervisor.

Billeting has been an issue for personnel on the Slope with all of the extra requirements necessary to assist in the pipeline shutdown. This led PENCO to find their own accommodations through an alternate camp that is not related to BP Exploration or VECO. PENCO has complete control over who is hired, placed in this camp and employed on the project.

At no time has PENCO been directed by any of our North Slope contractors to not hire women because of billeting. We have, however, been told to delay crews because rooms were not available at all, but we reiterate, we have never been told by any of our clients to not provide female employees.

PENCO services many clients on the North Slope, some of which have gone out of their way to accommodate housing for our female personnel.

Thank you,
Please call if you require further comment  907-562-5420

 

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Financial Times
September 20, 2006

http://www.ft.com/cms/s/f24d51d2-4844-11db-a42e-0000779e2340.html

BP battles to clear its Augean stables
By Carola Hoyos
Published: September 20 2006 03:00 |
 Last updated: September 20 2006 03:00

On March 23 last year, a cloud of highly flammable hydrocarbons erupted at BP's Texas City refinery, after a catalogue of mechanical failures. Alarms remained silent, level indicators failed to judge the mounting danger and valves jammed.

At 1.20pm, probably ignited by a spark from a pick-up truck, the cloud burst into flame, setting off a series of explosions.

Fifteen workers in two trailers next to the tower died and 170 others were injured.

Long after families had buried their dead and the refinery had been rebuilt, the explosion continues to tear through BP's corporate fabric. Until the day of the tragedy, BP and Lord Browne, its chief executive, had enjoyed as celebrated and successful a run as is possible in one of the world's most dangerous and unpredictable industries. Lord Browne was regularly voted Britain's most admired business leader.

However, on March 23 BP crossed a "fault line", Lord Browne would later say, that would force a "fundamental change" in the way the company operated. For BP, Texas City has been as profound an event as Exxon's huge oil spill at Valdez in Alaska in 1989. The explosions at Texas City marked the beginning of a wretched 18 months. In that period, BP's flagship Thunder Horse platform in the Gulf of Mexico was damaged in a hurricane in July 2005 and its Alaska pipelines corroded so badly that almost exactly a year after the Texas City disaster they caused the biggest onshore spill in the state's history and forced the company to shut America's largest oil field.

This summer, the US government accused BP's traders of having tried to corner the propane market in 2004; and Lord Browne himself was strong-armed by his chairman into announcing he would retire promptly in 2008.

The run of trouble has prompted investors to sell BP shares and to ask whether the company had a systemic problem.

This week's announcement that BP would have to delay the restart of Thunder Horse a third time deepened the company's malaise. It prompting analysts to warn that, as a result, its earnings per share would fall 4.5 per cent in 2007 and 6 per cent in 2008.

BP's shares have already retreated so far that Royal Dutch Shell in August knocked it off its perch as Europe's second-biggest listed energy group.

Moreover, BP's troubles have thrown Lord Browne's succession into doubt, with four of the five candidates, many of them groomed for decades, embroiled in the trouble. Lord Browne and BP's senior executives have steadfastly maintained that the recent events in the US were unconnected.

Nevertheless, they have appointed Bob Malone as the new president of BP USA, and Stanley Sporkin, a former federal judge, as its ombudsman. It is also spending $7bn (£3.7bn) over four years on the safety and integrity of its US operations. It has also promoted John Mogford to be vice-president of safety and operations, reporting directly to Lord Browne, to co-ordinate what is intended to be a company-changing overhaul of its operations.

BP's root-and-branch revamp will take five to 10 years. It will allow the company to clean up a system thrown into upheaval by 15 years of low oil prices followed in 1998 by the most ambitious acquisition spree attempted by an oil company since the days of John D Rockefeller and the rise of Standard Oil a century ago.

Many analysts, oil workers and company executives believe repairs to old refineries, such as the one in Texas City and to pipelines, such as those at BP's Prudhoe Bay field in Alaska, were delayed by oil companies' cost-cutting in the 1980s and 1990s, when oil prices fell as low as $10 a barrel and thousands of workers were laid off.

One senior energy executive says: "One of the problems is that this industry was in decline for two decades. In such an industry you have to make assumptions and decide where to spend more."

Matthew Simmons, a well-known Houston-based industry consultant, puts it more bluntly. "BP's culture was designed to be the most efficient cost-cutter in the industry and they did that with a certain degree of arrogance and out of that came too many corners cut on maintenance and safety."

Most of BP's oldest operations are in the US and that the late 1980s and 1990s were a trying time.

Lord Browne has warned that the industry faces a shortage of engineers and workers as a result, noting that a disproportionate share of BP's workforce is above 45, and in some areas, such as exploration and production, above 50.

As oil companies embarked on round after round of lay-offs from 1983 to 2002, the number of petroleum engineers in the US shrunk from 33,000 to 18,000, while the number of geologists and geophysicists fell from 65,000 to 48,000, data from the US Bureau of Labor Statistics show.

Meanwhile, students shied away from studying a subject for which there seemed no further use and the number of US colleges offering undergraduate petroleum engineering degrees fell from 34 to 19. The trend has been similar in the UK with the number of registered engineers falling more than 8 per cent over the past decade. For BP, the situation was magnified by the acquisitions of Amoco in 1998 and Arco in 1999, which led to further cost cutting.

During that time BP launched Ghser, "Getting Health Safety and Environment Right", which set out new expectations for the bigger group now heavily weighted in the US.

In the following eight years, BP managed to improve Amoco's lagging safety record. Until the Texas City disaster, BP's safety record was one of the best in the industry. But, privately, the company now admits it failed to integrate fully its different safety systems. Plants still use a range of procedures, entrenched by local custom and practice.

Leo Martin, director of GoodCorporation, which helps companies including Total and BG, BP's smaller UK rival, assess their environment, health and safety cultures, says: "BP set the tone from the top but failed in the implementation. British culture would usually do it the other way round." At BP, he says, it appears a gap emerged between the corporate centre, which tries to establish clear business principles, and local management, which is focused on day-to-day operational performance.

To be able to catch up with ExxonMobil, the industry's undisputed leader, BP knows it must change its entire structure, not just its safety system.

Getting the revolution off the ground will be one of Lord Browne's final big challenges before he retires at the end of 2008.

BP's problems in the US have consumed the chief executive, people close to him say.

Lord Browne has grown more weary and retreated from the spotlight that he had in the past commanded with such obvious enjoyment. Meanwhile, even after their bitter public row over succession, he has called on Peter Sutherland, BP's chairman, for guidance. Earlier this summer, he went to Marbella in search of his advice. "Golf was not on the agenda," one insider notes.

Neil McMahon, analyst at Sanford Bernstein and a former BP employee, stresses that the executives' focus must now be on centralising BP's operations.

"BP's organisational structure is comprised of numerous business units, surrounding assets or profit centres, versus the more old-school style of ExxonMobil, which has a few giant functions run centrally.

A more centralised organisation structure may help the top management of BP have greater control on the organisation as they strengthen procedures," he says.

According to one senior executive of a big European energy group, ExxonMobil is the only major oil company with the operating structure that allows it to face the new challenge of taking on huge, technologically challenging projects at a time when oil rich countries are increasingly shutting the doors to their oil and gas fields to foreigners.

Exxon's success was born from bitter experience. On March 24 1989, the Exxon Valdez tanker struck a reef and spilled 11m gallons into Alaska's pristine Prince William Sound. Exxon spent $300m compensating victims, was fined $287m and is still contesting $4.5bn in punitive damages.

The company eventually overhauled its approach to safety, centralised its businesses, added checks and balances and created an internal communications system that improved everything from financial prudence and physical caution to technological innovation.

Based on the approach taken by Dow Chemical, the company structure is the same round the world so that employees do not have to relearn Exxon's policies and procedures every time they move. It also allows problems to be communicated throughout the company so that others can help, or at least learn from them.

Mark Albers, president of ExxonMobil Development Company, who oversees all of Exxon's new production and development projects, says the centralised structure is key to its success. From concept to production, all of Exxon's big projects are managed from Houston.

"In terms of the management and the service that we provide to each of our affiliates, it's all done in one location, which means we can provide the same world-class service to an affiliate in Angola as in Sakhalin, as in Qatar. And people are literally just down the hall from people who have worked on a similar issue on a project somewhere else down the globe, so the information transfer and the best practice transfer is immediate," he says.

He points out that projects Exxon operates are within 3 per cent of the unit costs expected at the time of funding and the company finishes its projects about 5 per cent more quickly than it forecasts.

In contrast, Exxon's peers, including BP, Shell and Eni, have all recently announced delays and cost increases on their flagship projects - BP at Thunder Horse, Shell at Sakhalin and Eni at Kazakhstan's Kashagan field.

Exxon is a partner in Prudhoe Bay, Kashagan and Thunder Horse and some analysts, including Mr Simmons, feel it deserves some of the blame.

Although BP was the operator in Alaska, Exxon agreed the decisions surrounding the pipeline's maintenance. At Thunder Horse, Exxon is now said to be urging BP not to rush the restart. At Kashagan, oil company executives say Exxon is trying to wrest control away from Eni.

However, the fact that Exxon's shares have outperformed BP's since the Alaska debacle - even though Exxon owns more of the field and therefore faces greater losses and higher costs - starkly illustrates where investor faith lies.

Yet, BP seems to have started on the right note.

Lloyd Whitworth, fund manager at Morley Fund Management, who has called for a one-on-one meeting with BP's board, says: "We welcome BP's announcement that it is implementing a comprehensive review of its global operations.

"We're pleased that the company is in open and constructive discussions with shareholders."

BP is just at the beginning of its long road to health. Whether Texas City will indeed be BP's Exxon Valdez will be largely up to Lord Browne's successor, who will have to finish the job his predecessor started in 1998.

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http://www.ft.com/cms/s/2bdd63b0-4845-11db-a42e-0000779e2340.html

Green ideals now provide fuel for taunts
By Carola Hoyos
Published: September 20 2006 03:00 |
Last updated: September 20 2006 03:00

While BP was plotting its acquisition of Amoco and Arco in the US in the late 1990s, Lord Browne wasn't content with pursuing just one ambitious idea.

He set another task: turning the image of the company from just another polluting oil producer into an enlightened, environmentally friendly industry leader that had lofty social ideals.

However, his green hue has become tarnished in the past 18 months as a Texas refinery explosion and an Alaskan oil leak have raised questions about whether BP is able to execute what it advertises.

Lord Browne became the first oil executive to warn that fossil fuels caused global warming- a view Exxon still does not fully embrace - and that oil companies needed to do something, back in May 1997.

About a year later the British Petroleum motto became Beyond Petroleum and the company's emblem changed from a green shield to a green and yellow sun-like symbol it named helios, after the Greek sun god.

More than many of its peers, BP followed the mantra it espoused. It became one of the world's top three makers of solar technology, has pledged to spend $15bn (£7.97bn) together with GE in hydrogen projects that capture their carbon emissions, and in 2001 was the only company willing to back the campaign to end corruption in Africa by publishing the details of what it paid the Angolan government in 2001.

Although these were small investments for a group that makes more than $20bn a year, Lord Browne's leadership on environmental and human rights prompted investors to rate BP at a premium, Rory Sullivan, head of investor responsibility at Insight, said.

However, that premium has eroded since the start of the summer, as evidence mounted of BP's neglect of corrosion problems at its Alaskan pipeline to the detriment of the delicate environment through which it passes.

BP's eagerness to be seen as green has now made it an easy target for ridicule. Last month John Kenney, an advertising executive who worked on BP's recent advertising campaign, wrote in an opinion piece published in the New York Times last month: "I guess looking at it now, Beyond Petroleum is just advertising. It's become mere marketing - perhaps it always was - instead of a genuine attempt to engage the public in the debate or a corporate rallying cry to change the paradigm."

Countering that is Sybil Ackerman, legislative affairs director for the Oregon League of Conservation Voters, who studied the relative lobbying activities of the big oil companies.

"I am sure BP thought of it as a marketing and political decision - so what! I care about the substance. They are doing things. They feel like they need to explain themselves and that's the first step to something bigger. If companies can't use their environmental commitments as PR, then you'll never get anyone on board."

The fact the backlash following the breakdown in BP's day-to-day operations threatens to force the most progressive oil company to reconsider its stance is not good for environmentalists, she adds.

However, BP will now find it difficult to make its environmental message heard above the criticism over the refinery disaster and leaking pipelines.

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Anchorage Daily News
September 19, 2006

http://www.adn.com/news/environment/story/8210898p-8108526c.html

BP seeks profits from climate change
MAYORS CONFERENCE: Global warming called chance to test fossil-fuel alternatives.
By DAN JOLING
The Associated Press
Published: September 19, 2006
Last Modified: September 19, 2006 at 03:14 AM

Skeptics doubt that the nation should respond to global warming, but don't count petroleum giant BP among them.

A company official told a mayors conference in Girdwood that BP is reacting the old-fashioned way -- by looking to make money.

"We think this is a huge business opportunity," said Charles A. Christopher, carbon dioxide program manager for BP in Houston.

More than 30 U.S. mayors from 17 states Monday wrapped up the three-day conference "Strengthening Our Cities: Mayors Responding to Global Climate Change," sponsored by the U.S. Conference of Mayors, the International Council for Local Environmental Initiatives and the municipality of Anchorage.

A continuing conference theme has been that cities can save money by cutting their greenhouse gas emissions. BP intends to take that a step further during the transition from a fossil-fuel-driven system to alternatives.

Energy can be provided in a way that's economically responsible and secure during the transition away from fossil fuels, Christopher said.

"The transition will provide many business opportunities," he said. "A lot of people are going to make a lot of money during this transition, and it won't be the same people that you're familiar with."

The burning of carbon-based fuels adds to naturally occurring greenhouse gases that retain Earth's heat. Accelerated warming has been most apparent near the Earth's poles, including Alaska, in shrinking glaciers, thawing sea ice and other changes in natural systems.

BP believes the risks from climate change are real and the science valid, Christopher said.

"In the peer-review journals, the opinion is essentially 100 percent that this thing is happening, that it's caused primarily by CO2 and it's caused primarily by the CO2 that man is putting into the atmosphere," he said.

The reduction of greenhouse gases is important, but energy security could drive changes in the near future, he said. Alternatives to coal-generating power plants are more expensive, but that could change with a carbon dioxide tax.

"Most people believe that something like that is going to happen, soon, in the U.S.," he said. "The utilities have been watching this and staying as far away from it as they could. But they've got their ear on the rail and they can hear the rumbling, and they believe something is going to happen."

BP is creating a new businesses, he said. The company is the third-largest producer of solar cells and plans to expand.

"We're going to triple the amount of solar cells we produce in three years," he said.

By 2008, BP will have two wind-turbine farms and plans for more in Europe and the United States. BP also by that year will build the world's first two commercial plants generating electricity from hydrogen.

"Our commitment is to show that the set of technologies being used are commercially available, can be used at scale and will produce pollution-free free electricity," he said.

Mayors applauded the company's plans.

"I think it's a remarkable commitment on BP's part," said Don Plusquellic, mayor of Akron, Ohio. "I happen to think most of these problems need to be addressed by CEOs and other top business leaders in the country."

It's a contrast to businesses that choose to hunker down and continue on with business as usual in response to global warming, he said.

"This is a real great opportunity for a lot of companies, and they ought to look at BP as one that has a vested interest in oil and gas, oil in particular, and they're already looking how to change and trying to evolve and trying to make smart investments in the future."

Salt Lake City Mayor Rocky Anderson said BP's action contrasts with skeptics who say responding to global warming will ruin the nation's economy.

"I think a lot of it is said in the fact that they've gone from British Petroleum to marketing themselves as 'Beyond Petroleum,' " Anderson said.

"They see the writing on the wall. They know there's going to be an interim period of adjusting to things. They're trying to get out in front of it by moving toward clean, renewable sources of energy. They also know that there are huge cost savings by reducing greenhouse gas emissions."

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Wall Street Journal
September 19, 2006

Alaska DNR: BP E Prudhoe Decision Expected In 10 Days
DOW JONES NEWSWIRES
September 19, 2006 7:32 a.m.
(This article was originally published Monday)
By Norval Scott
Of DOW JONES NEWSWIRES
 
CALGARY (Dow Jones)--BP PLC (BP) could find out whether it will be allowed by the U.S. Department of Transportation to restart the flow of oil through a key pipeline on the eastern half of its Prudhoe Bay field in Alaska by Sept. 28.

In an interview with Dow Jones Newswires, Michael Menge, commissioner of the Alaska Department of Natural Resources, said the DNR has been in contact with the DOT on an "hourly basis," and that he's expecting some indication from DOT on its decision within a week to 10 days time.

The pipeline, with a capacity of about 150,000 barrels a day, has been shut since the beginning of August when the company discovered a small spill caused by severe corrosion, reducing output from the largest producing field in the U.S. to 250,000 b/d from 400,000 b/d.

BP asked the DOT last week for permission to restart the flow so it can operate a device called a "smart pig," a cylindrical droid that's carried along with the oil flow as it inspects the pipeline walls for corrosion. The company hasn't said exactly how much additional production would be able to be brought back on line if it receives DOT approval.

BP has faced a storm of criticism for maintenance practices that allowed corrosion of the field's transit lines to go largely unnoticed. The company, whose stock price has suffered relative to peers, is under pressure to resume production at the gem in its Alaska crown quickly at a time when oil supplies are perceived to be tight.

However, Alaska will use the BP outage as an opportunity to put stronger regulation for the oil industry in place, Menge said.

"People are going to want to see how we react to this, and we need to inform them that we've made the right changes," he said.

He added that, as a result of new regulation, hopefully BP's problems wouldn't have any bearing on attempts to open up Alaska's Arctic National Wildlife Refuge, or ANWR, to oil drilling. Energy companies, along with the Bush administration, have pushed hard for legislation to allow exploration in ANWR, but haven't been able to garner enough support in Congress. If the Democrats win more seats in the House or Senate in the November elections, the possibility of ANWR opening will become even more remote.

Gas Pipeline Eyeing Delays
 
Despite the censure that BP has received for its performance in Alaska, it hasn't reduced the DNR's confidence in the company to operate the proposed $20 billion Alaska Gas Pipeline, which would pump 4.5 billion cubic feet a day of natural gas to North America by around 2014, Menge said.

"Right now, we're facing an unfortunate set of circumstances, but the time for a decision to build a pipeline will be several years in the future," Menge said. "All this will be behind us."

Nevertheless, it appears the pipeline process will likely face some delays, he said. In February 2006, Alaska Gov. Frank Murkowski reached an agreement with North Slope oil producers ExxonMobil Corp. (XOM), BP PLC and ConocoPhillips (COP) over terms for the proposed pipeline, which is touted as a way to lessen the nation's dependence on foreign energy sources, and bring billions in royalties and taxes to Alaska through the exploitation of the state's stranded gas reserves.

However, not only has Murkowski been unable to get the changes necessary to the state's Stranded Gas Act approved by the state legislature in order for the pipeline to go forward, but he was also defeated in the Alaska's Republican primary in August. Both the Republican and Democrat nominees for state governor - Sarah Palin and Tony Knowles, respectively - have said that they want to consider all pipeline proposals, not just the Murkowski-negotiated plan that's on the table, so while Murkowksi is still attempting to force his plan through, it's unlikely that he'll be successful.

"The odds that we will have a contract by the end of year are slim," Menge said. Instead, the new governor that takes over will likely take "a number of months" to consider the competing proposals, likely delaying the whole process, he added.

Despite enthusiasm from Palin and Knowles to consider alternatives to the Alaska Gas Pipeline, such as the "All Alaska" pipeline, whereby a pipeline would be constructed from Prudhoe Bay, on Alaska's North Slope, to a liquefied natural gas export facility at Valdez, such options aren't as economic as the plan currently on the table, Menge said.

"We spent a lot of time and effort looking at (the All-Alaska) proposal and educating ourselves on its economics," he said. "Now, the new crew are going to do the same, and I believe they'll arrive at a similar conclusion as we did."

Any attempts to bring Alaska's stranded gas to market are under pressure from liquefied natural gas imports from elsewhere, which could affect domestic demand. In addition, efforts to produce more natural gas in the lower 48 states through carbon dioxide sequestration could also bear fruit by when any Alaskan pipeline might be brought onstream, Menge said.

"All these things represent competition for gas from the north, and are a concern for us," he said.

 -By Norval Scott, Dow Jones Newswires; 403-531-2912; norval.scott@dowjones.com 

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Financial Times
September 19, 2006

http://www.ft.com/cms/s/ab691154-477a-11db-83df-0000779e2340.html

Front Page, First Section:

Technical delays hit showcase BP project
Twin setbacks push up oil prices
By Sheila McNulty in Houston
Published: September 19 2006 03:00 |
 Last updated: September 19 2006 03:00

BP was hit by yet another setback yesterday when the company was forced to announced that production at its showcase Thunder Horse oil and gas field will not start until mid-2008,18 months later than planned.

News of the delay, caused by problems with the project's subsea infrastructure, caused oil prices to jump, ending the decline of recent weeks.

In New York, crude oil for October delivery rose $1.02 to $64.35 a barrel. BP shares closed 6p higher at 579p.

For BP, the delay is the latest in a succession of problems in its US operations, including the explosion at its Texas City refinery last year and the shutdown of its Prudhoe Bay field in Alaska following leaks from a corroded pipe.

Analysts had said the start up of Thunder Horse had been the only good news on the horizon for BP.

Yesterday, some were questioning the returns the project will make. The company has touted the field to deliver 1.5bn barrels of oil, making it the biggest find yet in the Gulf of Mexico.

One BP employee said the UK oil and gas company was moving to revise down expectations from the field, with new estimates that it might contain just 600m barrels of oil.

One analyst said: "The field may now come on stream after the peak in the oil price."

BP discovered the Thunder Horse field in July 1999 and set January 2005 as a production target, with about 50 wells. BP has delayed the project several times.

The oil and gas platform, the world's largest of its type, was found to be listing badly after its evacuation during Hurricane Dennis in July last year.

On September 10, BP brought a key manifold - the central structure of the platform - to a shipyard in Houston for hydro-testing, in which water is pumped in at high pressures to ensure the system is intact.

"In this case, it blew apart and didn't hold pressure,'' said a BP employee. "Things shot 60 feet in the air. It is very clear there is a system-wide problem.''

Two other manifolds, in the northern section of the field, were also found to have cracked insulation, which was a precursor to the failure of the welding on the other manifold, he said.

BP said no parts came freeand the welds it used were common elsewhere in the industry. It suspected problems on Thunder Horse resulted from the high pressure and high temperature on the oil reservoir, the highest under development in the Gulf.

One BP employee said project costs were rising significantly, with an additional $500,000 on the more than $1bn project being one estimate. BP said it was too early to estimate cost overruns.

The Organisation of the Petroleum Exporting Countries and the International Energy Agency are expected to revise downward their oil supply forecasts because of the delay, which will probably reduce US supply growth to zero in 2007. An Opec official said: "This is amazing. Thunder Horse was absolutely key." He said this would give Opec members more flexibility and might mean they would not have to reduce output next year to shore up prices.

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Financial Times
September 18, 2006

http://www.ft.com/cms/s/7be75852-4674-11db-ac52-0000779e2340.html

BP orders worldwide overhaul after blast
By Carola Hoyos and Ed Crooks in London
Published: September 17 2006 22:02 |
Last updated: September 17 2006 22:02

BP, Europe’s second-biggest listed energy group, is set to launch a root and branch review of its global operations in response to last year’s Texas City refinery blast, in which 15 people died.

The revamp, to be led by John Mogford, vice-president of safety and operations, is likely to take 5-10 years and is on a scale similar to the overhaul Exxon began after its huge oil tanker spill at Alaska’s port of Valdez in 1989.

Lord Browne, BP’s chief executive, has described the Texas City blast as a “fault line” that has forced the company to examine its entire operation.

“Very rarely do companies have tragedies of that scale. The last time BP had one was about 40 years ago. And it fundamentally changed the way we did business. I believe Texas City does that to us,” he said on a visit to Alaska last month.

The overhaul may help alleviate growing investor concerns which have seen five of the company’s leading shareholders, including F&C and Morley, seeking one-to-one meetings with management. Last week, the investors raised concerns that BP’s growing list of US troubles may indicate a systemic problem.

Exxon’s shake-up helped make it the world’s safest and financially successful energy group. After the 1989 spill, Exxon revamped its approach to safety, centralised its businesses and created an internal communications system that improved everything from financial prudence and physical caution to technological innovation.

BP’s planned reforms will involve standardising procedures worldwide and unifying the operations BP was unable to fully integrate after its US acquisition spree in the late 1990s.

BP stresses that this review will be a bottom-up approach involving management listening to local operations staff. Senior management are said to be concerned that a too swiftly implemented revolution could do more harm than maintaining the status quo. Mr Mogford’s team will include a staff of 45 with another 45 auditors.

BP has already instituted specific management changes in the US, including appointing Bob Malone as the region’s president. More changes are expected within the next few days.

The company faces investigations by the justice department and other US government agencies over trades it made in 2004, the Texas City fire, and the August shutdown of its Prudhoe Bay Field in Alaska because of corrosion.

On Sunday night it emerged Lord Browne may now be forced to give sworn videotape evidence for the civil cases arising from the Texas City explosion.

 

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Houston Chronicle
September 16, 2006

http://www.chron.com/disp/story.mpl/business/energy/4191167.html

BP blast suit reset for November
By ANNE BELLI
Copyright 2006 Houston Chronicle

A judge late Friday granted requests by BP and a contractor to delay the first civil trial in connection with the deadly blast 18 months ago at the oil giant's Texas City refinery.

Jury selection was scheduled to begin Monday. Galveston County state District Judge Susan Criss rescheduled it for Nov. 8.

The eleventh-hour continuance was sought by BP in response to allegations raised in the last month by plaintiffs that the company defrauded state environmental authorities to win permits for the equipment that exploded.

Contractor J E Merit also sought more time, saying that lawyers for the three plaintiffs only recently asserted that the company should have known from another accident 11 years ago that construction trailers, where most of the deceased were killed, were parked dangerously close to process units.

Many of those killed were Merit employees.

BP spokesman Ronnie Chappell could not be reached. But earlier in the week company attorney Jim Galbraith hotly requested a continuance, saying his team needed more time to fairly defend itself.

Plaintiffs' lawyers opposed the delay, saying BP and Merit should have been well aware of the issues.

"The court out of an abundance of caution gave them an extra six weeks," said Beaumont attorney Brent Coon, who represents a woman whose parents were killed inside a construction trailer parked 121 feet away from the unit that exploded.

"We are disappointed, but it will allow us to further develop these and other issues." he said.

Galveston lawyer Tony Buzbee, who represents two men injured in the blast, said he'll use the time to seek a deposition from London-based BP's chief executive, John Browne, as well as members of the board of directors.

"Their seeking additional time gives us additional time, and we're not going to sit around and do nothing," Buzbee said.

anne.belli@chron.com

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Wall Street Journal
September 16, 2006

BP Granted 6-Week Reprieve From Trial In Texas Blast Case
DOW JONES NEWSWIRES
September 15, 2006 9:10 p.m.
By Jessica Resnick-Ault and John M. Biers
Of DOW JONES NEWSWIRES
 
GALVESTON, Texas (Dow Jones)--Winning at least a temporary reprieve on the public airing of another high profile problem, BP PLC (BP) Friday was granted a six-week delay in a trial related to a deadly March 2005 refinery accident in Texas.

The move gives the company an additional opportunity to settle the cases, but plaintiffs lawyers say they will use the extra time to their own advantage, and are seeking to depose additional BP executives ahead of a trial.

BP continues to seek settlements with the plaintiffs, the company's perferred tactic in handling the cases.

"What we want to do is settle any cases that are outstanding," said BP spokesman Neil Chapman. The company has set aside $1.2 billion for paying legal settlements related to the explosion.

The case, brought by two injured in the blast and the estate of two who were killed in the Texas City refinery blast, has been delayed six weeks and will not begin Monday as planned, a state judge ruled Friday.

The case was to be the first against BP for the explosion, which killed 15 and injured 170 at the refinery.

BP argued that the case needed to be delayed because the plaintiffs recently alleged that the company used fraud and deception to obtain permits for the involved units. After a colorful debate Friday, a state court judge agreed, citing, among other things, an 11th-hour deposition of a key witness.

"These are very serious allegations," said Judge Susan Criss. If proven, the charges could enable the jury to award an amount for punitive damages above the cap allowed in Texas.

During a 75-minute hearing, Criss said repeatedly she wanted to ensure that her court's action withstood appeal. A key witness in the plaintiff's fraud allegation, a consultant who has said BP misrepresented its operations in state filings, was still being deposed Friday afternoon while Criss's court was in session.

"Isn't it worth waiting 30 days to make sure it doesn't get kicked back" from the appeals court, Criss asked.

Plaintiffs lawyers pleaded with the judge, saying their clients deserved a speedy trial. "My clients ... have been waiting 18 months to go to trial," said plaintiff's lawyer Tony Buzbee, gesturing toward two of his clients, injured in the blast, who attended the hearing.

In recent months, BP has come under fire for its operations in the U.S. The company faced withering scrutiny in a series of Capitol Hill hearings on a pair of oil spills in Alaska due to pipeline corrosion. Offering the prospect of live testimony from victims, the Texas City cases could spell more bad publicity for the U.K. oil giant.

If the trial goes forward in November, the four cases slated to start Monday would be heard alongside two others brought by those injured in the explosion.

Plaintiffs' attorney Brent Coon said it was too soon to know if the six-week delay makes a trial less likely. Among Coon's clients is Eva Rowe, who lost both her parents in the explosion. Coon has described Rowe as the least likely plaintiff to settle.

"I don't know," Coon said. "It depends what happens over the next six weeks."
 
A "Silver Lining" For Plaintiffs
 
Although BP called for the delay, plaintiffs attorney Tony Buzbee said the delay will allow the plaintiffs to press ahead with the allegations of fraud.

"The continuance absolutely will put that issue in front of the jury," he said. "They asked them to strike that allegation, or in the alternative for continuance. I think the judge was very clear that they need to prepare themselves to defend that allegation."

If the company is found guilty of the fraud charges, the jury will be able to go beyond caps put in place by the legislature. "Without the caps, it really is within the discretion of the jury," Buzbee said.

Additionally, Buzbee said he and other plaintiffs attorneys plan to use the additional time to again attempt to seek the deposition of BP chief executive John Browne and members of the company's board. The plaintiffs had previously called for Browne's testimony, but rescinded their request, instead deposing BP refining chief John Manzoni.

BP plans to appeal that motion. "He does not have anything unique to offer," said BP's Chapman. To depose a high-ranking executive like Browne, the plaintiffs would need to prove that he had unique information, unavailable from other sources.

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

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UPDATE:
Lawyers In Texas Case To Try To Subpoena BP CEO
DOW JONES NEWSWIRES
September 15, 2006 8:48 p.m.
(Updates with comments from BP spokesman)
 
HOUSTON (Dow Jones)--Plaintiffs in a Texas lawsuit against BP PLC (BP) are once again planning to try to subpoena BP chief executive John Browne, despite earlier statements that they had obtained needed testimony from refining chief John Manzoni in his stead.

The first trial against the Anglo-American oil giant related to a March 2005 explosion at its Texas City refinery was slated to start Monday. The case has been delayed six weeks, a Texas state judge ruled Friday.

The company is expected to appeal the motion.

"He does not have anything unique to offer," said BP spokesman Neil Chapman. To depose a high-ranking executive like Browne, the plaintiffs would need to prove that he had unique information, unavailable from other sources.

Plaintiffs' attorneys referred to the opportunity to try to question Browne as a silver lining in the delay.

"It's my view now that this gives us additional time to seek that deposition," said Galveston-based lawyer Tony Buzbee.

Though the plaintiffs had initially received an order from the judge that would have required Browne to testify, they chose to strike a deal with BP to avoid the company's appeal of the decision.

As part of that arrangement plaintiffs deposed Manzoni, who reports directly to Browne, for four hours. After their deposition of Manzoni the plaintiffs retained the right to call for Browne's testimony. They declined to pursue Browne's deposition, saying at the time that they had received adequate information from Manzoni. At that time, Buzbee had also cited the need to move forward with trial preparations.

As part of the initial agreement, BP retained its right to appeal the ruling if Browne was again ordered to testify, the company's Chapman said.

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

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Financial Times
September 16, 2006

http://www.ft.com/cms/s/1ae37d52-451f-11db-b804-0000779e2340.html

BP safety under fresh US attack
By Sheila McNulty in Houston
Published: September 16 2006 03:00 |
Last updated: September 16 2006 03:00

BP mistakenly told state regulators in a 2003 application for an emissions permit that it had installed the updated equipment which investigators said would have prevented last year's fatal explosion at its Texas City refinery, the Financial Times has learned.

In the application, a copy of which has been seen by the FT, BP said: "Relief valves are routed to a flare; therefore, 100 per cent control credit is applied." A flare is a closed tank in which liquid emissions are received and the vapour burned off. But BP only applied to replace the outdated blowdown stack on the refinery's ISOM unit with a flare after the refinery exploded, killing 15 and injuring an estimated 500.

A blowdown stack is a tank with an open stack, used to dispose of emergency releases. An ISOM unit is used to boost the octane rating of gasoline.

"The fatal explosion would not have occurred if the ISOM unit had a properly sized and designed flare system," said Daniel Horowitz of the US Chemical Safety and Hazard Investigation Board, an independent federal agency that investigates industrial chemical accidents.

In BP's own assessment of the blast at its biggest refinery, it said the use of a flare system, instead of a blowdown stack - which the industry has been phasing out for years - would have reduced the accident's severity. BP said yesterday: "We follow the rules."

BP is under grand jury investigation for possible criminal charges in Texas. The FT has learnt that both the US Attorney's Office and the federal Environmental Protection Agency, conducting separate investigations of BP, have learned of the existence of the emissions permit document during their probes.

BP also is under grand jury investigation in Alaska for severe corrosion that forced it to shut half of Prudhoe Bay. Hearings are also being held in Congress over how BP let its field deteriorate to such an extent.

A year-long oil leak in the Gulf of Mexico, uncovered by the FT last month, and a spill in California announced this week, have bolstered claims that BP's US safety culture needs improving.

The BP document is part of BP's application to the Texas Commission on Environmental Quality for a revised Flexible Permit relating to emissions from the Texan plant. It is likely to surface in state court in the first civil cases arising from the blast to go to trial. BP received the permit in July 2005, four months after the explosion.

That trial is to begin on Monday, with the start of jury selection. There are roughly 550 outstanding death, injury and damage cases against BP, which has settled about 650 cases.

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CNN Money
September 15, 2006

http://money.cnn.com/2006/09/15/news/companies/prudhoe_bay/index.htm

BP seeks part of Alaska pipeline reopened
Oil giant asks U.S. to allow it to restart eastern part of Prudhoe Bay pipeline.
September 15 2006: 4:03 PM EDT

NEW YORK (CNN) -- Oil giant BP says it has requested permission from the Department of Transportation to restart operations for the eastern part of the BP Prudhoe Bay pipeline in Alaska, the part that was shut down this summer upon the discovery of severe pipeline corrosion.
The corrosion problem was discovered during an inspection ordered after an oil spill from the pipeline earlier this year. BP America announced the Prudhoe Bay shutdown on August 6.
The request, made Wednesday, is not to run oil through that part of the pipeline for customer use, the company said. "This is a request to return flow to the line, then run cleaning tools down it, and then run 'smart pig' through it," BP (down $0.93 to $64.92, Charts) spokesman Daren Beaudo told CNN Friday.

A "smart pig" is a diagnostic tool that measures the conditions of both the pipe's circumference and length, Beaudo explained.

According to Damon Hill, spokesman for the DOT's Pipeline and Hazardous Materials Administration, it will take up to two weeks for the department to review BP's request, determining whether the line is in good enough condition operate for pigging purposes.

PHMA engineers already are in Alaska examining the pipeline. "Our first priority is to the safe operation of the pipeline," Hill said.

"We are happy with the progress BP has made since our corrective action orders were issued initially in March," he added.

The oil company submitted the request after using multiple ultrasonic tests to inspect more than 5,000 feet of pipeline, and claims the pipeline is secure and the "smart pig" inspection can proceed safely.

BP issued a statement saying a bypass project is expected to finish by the end of October and the company plans to replace 16 miles of pipeline this winter.

During House Energy & Commerce Committee testimony this week, BP Exploration Alaska President Steve Marshall said the company plans to spend an estimated $195 million by 2007 on Prudhoe Bay maintenance, nearly quadruple 2004 spending.

Beaudo said that if the DOT grants BP's request, it will be a "significant milestone in this journey."

According to BP, if DOT allows the "smart pig" operation and the pipeline is found to be secure, BP's next step would be to ask to send oil through the pipeline again. Beaudo would not provide any sort of timetable.

Speaking to a House panel earlier this month, BP America Chairman Bob Malone called his company's operating failures unacceptable. "They have fallen short of what the American people expect of BP and they have fallen short of what we expect of ourselves."

Production of oil from the western side of the Prudhoe Bay oil field resumed on Aug. 11.

Earlier this month, BP hired three independent corrosion experts to review inspections of Prudhoe Bay and other Alaska oil fields the company operates.

Shares of ExxonMobile (up $0.15 to $64.86, Charts) and ConocoPhillips (down $0.32 to $58.12, Charts) were mixed in Friday trade on the New York Stock Exchange.

 

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Anchorage Daily News
September 15, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8196271p-8088875c.html

Citizen oversight of Slope pushed
PREVENTION: Industry critics say monitoring could work long term.
By WESLEY LOY
Anchorage Daily News
Published: September 15, 2006
Last Modified: September 15, 2006 at 03:57 AM

Creation of a citizens council to act as a watchdog over North Slope oil fields is an idea that seems to be gaining momentum in Alaska and in Washington, D.C.

Congress has been holding hearings on pipeline leaks and the partial shutdown of Prudhoe Bay, the nation's largest oil field.

Critics have flayed Prudhoe's operator, London oil giant BP, for lax pipeline maintenance practices that allowed corrosion to chew holes through key pipelines, releasing crude oil onto the tundra. BP and federal regulators have promised better operations and stricter rules, and federal criminal investigators are probing an estimated 201,000-gallon crude spill in March.

Now industry critics are calling for something longer term to try to prevent future spills.

A citizens council could keep an eye on not only the oil companies operating fields on the Slope but also government agencies that are supposed to vigorously regulate the industry, council advocates say.

"There has been a failure at all levels to oversee this industry," said Peter Van Tuyn, an Anchorage attorney representing national environmental and public policy groups.

Van Tuyn, testifying Tuesday before the Senate Energy and Natural Resources Committee, advocated formation of a citizens council, funded by the oil industry, to watch over the North Slope oil patch as well as the 800-mile trans-Alaska oil pipeline.

Such a council would not be unique.

Two citizens councils already exist -- one to monitor the Valdez tanker port in Prince William Sound and another to scrutinize tanker operations in Cook Inlet.

Both these councils were created in the wake of the 1989 wreck of the tanker Exxon Valdez, which spilled almost 11 million gallons of oil into the Sound. Congress mandated the citizens councils in 1990.

Industry critics long have wanted a citizens council to watch the trans-Alaska pipeline, as well as the expansive North Slope oil fields, but they said the industry as well as government agencies resisted.

The last big push for a new citizens council came in 2002, when BP and the other owners of the trans-Alaska pipeline applied for and received a new 30-year right of way for the line, which crosses mostly state and federal land. Regulators declined to require establishment of a new citizens council as a condition of the right-of-way renewal.

The recent pipeline leaks on the North Slope provide new impetus for Congress to mandate citizens councils to watch over both the pipeline and the oil fields, Van Tuyn said. He'd like to see it happen this year.

"This would be a great, bipartisan thing to close out a session with," he said.

Any new citizens council, Van Tuyn said, should be modeled after the Prince William Sound Regional Citizens' Advisory Council, based in Valdez.

The council has a 19-member board of directors made up largely of representatives for city and borough governments as well as organizations such as the salmon hatchery company in Cordova.

The group funds environmental and other research, monitors tanker traffic, bird-dogs regulatory agencies and pores over industry plans for preventing and cleaning up oil spills. It runs on about $3 million it receives each year from Alyeska Pipeline Service Co., the oil company consortium that runs the trans-Alaska pipeline.

At times, the council has scrapped vigorously with the oil industry. Last year, for instance, the council sued Alyeska, which had objected to the council spending $25,000 of the industry's money to study how much profit oil companies were making in Alaska. Council spokesmen said they needed the study to counter industry moves to cut expenses or oppose safety improvements in running the Valdez pipeline terminal and tanker fleet. The case remains unresolved.

Managers of the Prince William Sound council this week told U.S. Sen. Lisa Murkowski, R-Alaska, that they'd be willing to help establish a citizens council for the North Slope or elsewhere should Congress decide to go that route. Murkowski is on the Energy and Natural Resources Committee.

Council spokesman Stan Jones said it is possible the Prince William Sound council could be expanded to cover the upland length of the trans-Alaska pipeline or the North Slope oil fields, though the board is not bucking for the job.

"The board would approach it with extreme caution," Jones said. "We don't know anything more about the North Slope than the next person."

The two regions -- the North Slope oil fields and Prince William Sound -- are very different, he said. The Sound council is geared to watching tankers, while the North Slope is marked by a network of pipes and processing plants spread across vast tundra acreage.

The Prince William Sound council perhaps could serve as an "incubator" for getting a new North Slope council started, Jones said.

Oil company spokesmen said Thursday it might be premature to talk of what Congress might do in light of the Prudhoe Bay pipeline leaks.

"This is a dynamic process. There are a lot of conversations to come," BP spokesman Daren Beaudo said.

Already, oversight of the North Slope pipeline network is expanding, with federal regulators bringing dozens of miles of key pipes under tougher maintenance rules, he said.

Dawn Patience, spokesman for Conoco Phillips, the other company that runs oil fields on the Slope, said she had no comment on the idea of a citizens council.

Murkowski spokesman Kevin Sweeney said the senator has not yet endorsed a citizens council but believes it is a concept worth considering. It remains unclear what will happen because more than one congressional committee is involved, he said.

Dan Saddler, spokesman for Alaska Natural Resources Commissioner Mike Menge, said Thursday that Menge favors another idea -- a multiagency regulatory body to watch over the North Slope. It would be modeled on the Joint Pipeline Office, an Anchorage-based consortium of a dozen state and federal agencies that regulates all aspects of the trans-Alaska pipeline.

To RJ Kopchak, a Cordova commercial fisherman, a citizens council like the one in Prince William Sound is the way to go. It's an idea the fishing community has chased since before the Exxon Valdez oil spill, he said.

A citizens council will ask tough questions of industries that like to hold on to their profits, Kopchak said.

"The only way you can count on anything being done is to hold it to the light of day, and that's what citizens councils do," he said.

A commercial fishing organization, Cordova District Fishermen United, is working with lawmakers in Juneau for a citizens council to oversee the full length of the trans-Alaska pipeline, if not the North Slope oil fields.

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

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http://www.adn.com/front/story/8195255p-8089860c.html

BP seeks restart to hold line tests
EAST SIDE: DOT says its engineers are analyzing the application.
By MARK THIESSEN
The Associated Press
Published: September 15, 2006
Last Modified: September 15, 2006 at 07:10 AM

Oil giant BP has asked permission from the U.S. Department of Transportation to resume production on the eastern half of Prudhoe Bay so it can perform pipeline tests.

BP submitted the application Wednesday, saying it wants production restarted on the field so it can conduct more thorough tests -- using so-called cleaning and inspection "pig" devices -- on the eastern transit line to determine if it can be used to move oil to the trans-Alaska oil pipeline. The eastern half of Prudhoe Bay was closed last month over fears of leaks and corrosion, cutting production from the nation's largest oil field by about half.

"This submission, we believe, helps them make an informed decision about whether or not we can proceed with maintenance pigging and smart pigging," BP spokesman Daren Beaudo said Thursday.

The application is being analyzed by engineers for its thoroughness and to see if it addresses safety concerns, a spokesman at the DOT's pipeline safety agency said Thursday.

The agency didn't intend to rush a decision in a process that can take up to three weeks.

"It's their decision at this point as to how and when they respond," Beaudo said.

The pipeline agency's top official said during a Senate hearing Tuesday that BP must supply detailed and credible evidence that a temporary fix to the line wouldn't cause environmental risk.

"We must be assured that even a temporary limited restart can be operated safely before it can proceed," Thomas Barrett, chief of the DOT's pipeline safety agency, said at the hearing.

Also this week, BP said it had received permission from the Regulatory Commission of Alaska to use a bypass line to possibly restart some production from the eastern side of the field.

Beaudo said the company is still seeking approval from the Alaska Oil and Gas Commission and the state Department of Natural Resources as it continues to acquire materials for the bypass line.

"We believe all that work can be done by the end of October," he said.

The entire Prudhoe Bay oil field had produced more than 400,000 barrels a day -- or 8 percent of total U.S. output -- until leaks and the discovery of pipe corrosion led the company to begin shutting down the eastern half of the field Aug. 6.

The western side of the field was producing about 200,000 barrels a day Thursday, with another 50,000 barrels coming from the adjacent Point McIntyre field.

BP has said it ultimately will replace 16 of 22 miles of transit lines. It expects to get replacement pipe by the end of the year, with construction beginning early next year.

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Houston Chronicle
September 15, 2006

http://www.chron.com/disp/story.mpl/front/4188531.html

BP takes part in office boom
The Energy Corridor expands as higher oil prices
push resurgence in exploration
By TOM FOWLER
Copyright 2006 Houston Chronicle

Oil giant BP is planning a major expansion of its West Houston campus to accommodate 2,000 new workers over the next few years.

The company recently added 50 acres to the campus at Interstate 10 and West Lake Park Boulevard and plans to build a seven-story, 390,000-square-foot, environmentally friendly building for its natural gas and power trading business.

"This is a significant investment in Houston for us," said David Eyton, director of exploration and production technology for BP. "We're committed to developing and sustaining our presence here in Houston."

The new BP project is another example of the construction boom in the Energy Corridor, an area along I-10 from Dairy Ashford to beyond Highway 6 that is home to major facilities for many energy companies.

Trammell Crow Co. announced plans earlier this year for 600,000 square feet of new office space at I-10 and Eldridge Parkway, while earlier this week Shell Oil Co. said it would build a 170,000-square-foot office building at Dairy Ashford for workers who find and produce oil and natural gas.

"BP's decision speaks volumes about the Energy Corridor as a critical site for these jobs," said Jeff Moseley, president and CEO of the Greater Houston Partnership. "It confirms what we've always known about Houston as a global city."

2,000 new jobs

BP said it plans to add 2,000 jobs here between now and 2010. They will be split between the North American Exploration and Production business and the trading and marketing unit.

BP has 96,000 employees worldwide, but Houston is its largest single location. Exploration and production already employs about 3,500 here, there are 1,500 in the trading and marketing business and 1,000 more on the 97-acre campus work in other divisions, such as ones that offer support services or imports and markets liquefied natural gas.

The construction and renovation work announced Thursday is expected to cost about $250 million, said BP spokeswoman Annie Smith, adding that planned future projects could push the total to $660 million. The initial phase will include a parking garage for 1,700 cars and the widening of Grisby Road. Added parking is a priority because the BP campus has only 100 spare parking spaces.

Later phases include a larger building for its on-site child-care center, new training and development buildings and possibly a hotel with retail shops.

A green design

The new trading and marketing building is being designed to meet a stringent set of "green building" guidelines known as Leadership in Energy & Environmental Design, or LEED, said Rives Taylor, senior architect for the project at Gensler.

The voluntary guidelines address many issues, including how the building site works with its surrounding environment, the use of recycled materials, its energy efficiency and the environmental quality of the interior workspace.

"It takes into account that the construction and operation of the building will not only have an impact on its owner but on the whole community," Taylor said.

The company hopes the building will be "carbon neutral," meaning its construction and operation uses as little fossil-fuel burning energy sources as possible. Solar panels and wind-powered energy sources will be part of the design, while a natural gas-fired power plant will provide electricity and hot water to the rest of the campus.

Construction costs can run from 5 to 7 percent higher for LEED buildings, Taylor said, meaning a project that would normally cost $1 million could cost another $70,000. But operating costs for the building can be cut in half because of lower energy costs.
There are also racks that can handle about 200 bicycles, because a fair number of workers ride to work, and that could rise later.

The training facilities planned for later phases are a response to the increasing competition for workers in the energy industry, Eyton said. Currently the company does much of its training at its various offices throughout the world.

Centralized training

"We have a fairly dispersed model for training that worked very well for us when there was not such intense competition for people," Eyton said. "But there's now a very strong business case to be made for a centralized training facility."

BP's campus has 1.7 million square feet of office space, but the construction will give it the flexibility to grow to between 2.2 and 2.5 million square feet, depending on how much space is leased, said Chuck Cervas, program manager for the Westlake Campus.

The Energy Corridor has seen office vacancy rates plummet in recent years as higher oil prices have lead to resurgence in the oil and gas exploration businesses that call Houston home. Exxon Mobil Corp., ConocoPhillips, Shell and many other firms have large offices there.

In addition to Trammell Crow's plans for two-building, 600,000-square-foot project called the Energy Center, Core Real Estate has plans for a three-story, 174,000-square-foot building on the north side of I-10 between Barker Cypress and Park 10.

Shell overcrowded

Shell's new building is being designed with room for about 580 of the company's exploration and production employees in it Woodcreek campus. The building is needed to relieve overcrowding at the campus, a spokeswoman said.

The building will have an adjacent conference room and gym and a garage with up to 800 parking spaces.

Engineering firm Technip recently leased an additional 189,000 square feet in the neighborhood in an effort to consolidate its Houston-area locations, which expands its current 210,000 square feet in Energy Tower I at Old Katy Road at Kirkwood.

Purva Patel contributed to this story.

tom.fowler@chron.com 

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Financial Times
September 15, 2006

http://www.ft.com/cms/s/ee78d5ce-4455-11db-8965-0000779e2340.html

Investors seek BP assurance on failings
By Kate Burgess and Rebecca Bream
Published: September 15 2006 03:00 |
Last updated: September 15 2006 03:00

Big shareholders in BP are seeking assurances from top executives and board members that recent mishaps and failings in the energy group's safety record in the US are not symptoms of a systemic problem.

Morley Fund Management, its fifth-biggest investor, is to meet members of BP's board to assure itself that lessons have been learnt from last year's fatal explosion at the Texas City refinery, and the oil leaks at Prudhoe Bay in Alaska that forced BP to shut production last month.

Other big investors have asked for one-to-one meetings with the board after BP's shares fell 9 per cent since the start of August.

For the first time in three years BP's market capitalisation has fallen below that of its rival Royal Dutch Shell. Rory Sullivan - the head of investor responsibility at Insight Investment Management, one of BP's top 10 shareholders - who met BP executives last month, said: "Following Prudhoe Bay there have been questions about the financial implications and whether [the failings] were systemic.

"Prudhoe Bay raises questions at the operational level about the role of senior executives and governance of the company".

Another top 20 investor said: "There is a big issue for the board. It comes at a significant point in BP's relations with investors. Every time these incidents have happened, BP has said the issues are not systemic.

"But investors have more doubts about this story than they've ever had before." They are beginning to discern real issues with management in North America".

BP has had a string of problems in recent years. In March 2005, an explosion at the Texas City plant killed 15 workers and injured hundreds more. Last month it closed its Prudhoe Bay oilfield because of serious corrosion in its pipelines. The group was also responsible for an oil spill at Prudhoe Bay in March and it has since been revealed that management was warned by employees in 2004 about potential problems with the pipeline.

BP faces US justice department investigations into the Texas City and Prudhoe Bay incidents and inquiries into its oil and gas trading activities. The US Commodity Futures Trading Commission, which regulates futures markets, is looking into BP's crude oil trading, and the justice department is looking into some of its petrol trades.

Shareholders stressed that there was no sense of animosity and said BP had an exemplary record for talking openly to investors. It initiated investor meetings after the Texas City blast, and in November it is to publish the findings of an independent panel on its safety culture.

Last week BP invited shareholders on the Responsible Investors Network to meet the company secretary to discuss safety concerns. The company said: "We have regular meetings with investors at all levels, sometimes at their request and sometimes at ours. We wouldn't comment on specific meetings."

Morley declined to comment.

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Anchorage Daily News
September 14, 2006

  http://www.adn.com/money/industries/oil/pipeline/story/8192414p-8085097c.html

Critics call pipeline rules inadequate
HEARING: Rep. Young left early and didn't question a top BP official.
By RICHARD MAUER
Anchorage Daily News
Published: September 14, 2006
Last Modified: September 14, 2006 at 05:18 AM

WASHINGTON -- The government's chief pipeline regulator told a House committee Wednesday that his office will begin oversight of low-pressure lines like the ones that corroded and leaked this year on Alaska's North Slope.

But critics at the House Transportation Committee hearing said the new rules would allow thousands of miles of those pipelines around the country to escape regulation.

The hearing, the third in less than a week into BP's spills, was substantially less confrontational than the sessions in other committees, where representatives and senators from both parties berated BP officials.

The tone Wednesday was set by Rep. Don Young, R-Alaska, transportation committee chairman, who said he wasn't looking to blame individuals.

"I will ask what steps are being taken to make sure that BP does the job and this tragedy doesn't happen again," Young said in his opening remarks. "I'm not here today to beat a dead horse -- or old oil. I just want to make sure it does not happen again. Investigations are being conducted and all committees are having hearings; everything is going on for the media. But my interest is seeing Alaskan oil delivered safely within Alaska, and to the Lower 48, without delay, without harm to the environment."

But Young himself asked no questions of BP Exploration (Alaska) president Steve Marshall or Lois Epstein, senior engineer for the Anchorage environmental watchdog group Cook Inletkeeper, the only two Alaskans to testify. Before the two took the witness table as the second panel after federal pipeline administrator Thomas Barrett, Young announced he would leave at 1 p.m. and departed during their testimony. Rep. Tom Petri, R-Wisc., chaired the remaining 35 minutes of the hearing.

Young's press aide, Meredith Kenny, said Young thought the hearing would last only from 11 a.m. until 1 p.m. and had to attend meetings back in his office.

Young's Democratic opponent in November, Diane Benson, said Young walked out on the job.

"I'm very concerned because that was a prime opportunity, obviously, to ask questions on behalf of Alaskans and Alaska concerns, and his departure from the hearings was unsettling," she said in Anchorage in a phone interview. "This is our state and this is our pipeline and our resources -- we would want to have our representative there."

Young's committee has oversight over the Pipeline and Hazardous Materials Safety Administration, within the U.S. Transportation Department. Since the Pipeline Safety Improvement Act of 2002, the agency has had authority to regulate low-pressure or low-stress lines like BP's North Slope transit lines, which operate at 20 percent or less of maximum allowed pressure. But Barrett said the agency has only adopted rules for low-pressure lines in urban areas or lines that pass through navigable waters.

After more than 200,000 gallons leaked in the March spill, the largest ever on the North Slope, Barrett issued an emergency order bringing the 22 miles of low-pressure BP lines in Alaska under his jurisdiction. The agency already regulated high-pressure lines in the North Slope oil fields and the 800-mile trans-Alaska pipeline.

A new bill reauthorizing the 2002 law passed out of the Transportation Committee in July. It directed the pipeline administration to assume oversight by 2007 of additional high-risk, low-pressure pipelines in rural areas. Barrett's staff had already been working on such a measure and announced draft rules last month.

The regulations would cover pipelines more than 8.5 inches in diameter that pass through "unusually sensitive areas." Barrett estimated that about 600 miles of rural pipelines would fall under that category.

Epstein, the engineer from Cook Inletkeeper, said the new rule would leave uncovered an unknown number of pipelines, estimated between 5,000 and 15,000 miles in length.

"Many miles of low-pressure lines remain unregulated," she said at the hearing. Barrett's agency "will not even know of their problems."

Barrett said his agency was using "risk management" to determine which pipelines should be brought under government purview. The most important, he said, were those in urban areas where leaks could be life-threatening. The risk presented by small, low-pressure lines in rural areas is much less, he said.

Rep. Peter DeFazio, D-Ore., said Barrett's "bizarre regime" makes rural residents "third-class citizens."

Before he left the hearing, Young, noting the presence of network TV crews, took a moment to reflect on his thoughts regarding climate change, citing the benefit of global warming -- not caused by man -- in another eon to an area that today is frozen much of the year. "We're dealing with the most northern part of the United States of America, and a most hostile climate, and we're pumping oil, and I'd just like to remind them if they're asked where did the oil come from, and I would say this to Al Gore specifically: This was a jungle at one time, this was a forest at one time, this was a fern-laden area with mammoths at one time, and that's really why we're pumping oil," he said.

Next to speak was the committee's ranking Democrat, James Oberstar of Minnesota, who reminded Young that while global warming might have been good for fern jungles, human civilization is another story.

"That happened years ago," Oberstar said. "The place was uninhabited by humans at that time."

Daily News reporter Richard Mauer can be reached at rmauer@adn.com   or 257-4345.

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Fairbanks News Miner
September 14, 2006

http://newsminer.com/2006/09/14/2006/

Wanted: More ‘pigs’ in pipelines
By Sam Bishop
Published September 14, 2006

WASHINGTON Proposed federal inspection rules for pipelines such as those that leaked at Prudhoe Bay will be revised to insist that owners use “smart pigs” or some other equally effective technique, the nation’s top pipeline regulator said Wednesday.

“We’d be happy to clear that up,” said Tom Barrett, testifying before the House Transportation and Infrastructure Committee.

Barrett runs the Pipeline and Hazardous Materials Safety Administration. The agency late last month opened a 60-day public comment period on proposed rules that would expand federal regulation to large low-stress pipelines within a quarter-mile of “unusually sensitive areas.”

Federal regulators already oversee low-stress lines in populated areas and under navigable waters, as well as those that carry volatile liquids such as gasoline.

The Prudhoe Bay lines that leaked in March and August would qualify for regulation under the new rules because of the presence of endangered and threatened specieseider ducks and whalesin the area.

Barrett’s prepared testimony states that the proposed rules would impose “the same assessment requirements already mandated on high pressure transmission lines.”

Some lawmakers, and a witness who testified Wednesday after Barrett, challenged that assertion.

Rep. James Oberstar, D-Minn., said the agency’s proposal states that pipeline operators “may” use internal inspection devices such as smart pigs to inspect the low-stress lines near sensitive areas.

Existing rules for regulated high- and low-stress lines say companies “must” use such techniques, Oberstar said.

Barrett said there was no intent to establish lower standards for low-stress pipelines and the rule would be clarified. He noted repeatedly that his agency’s proposal was subject to change.

Barrett also noted, though, that not all pipes can be inspected with smart pigs, the electromagnetic devices that travel through a line and create a continuous computer record of its wall thickness. Bends, valves and telescoped lines prevent use of such pigs in certain lines, he said, so the agency can’t require them in all situations.

All pipelines have such obstacles, said Lois Epstein of Anchorage, an engineer with the nonprofit watchdog group Cook Inletkeeper and a consultant to the Pipeline Safety Trust. Yet current rules say pipeline operators “must” use pigs or equivalent technology on regulated low- and high-stress lines, she said.

Telling operators that they “may” use such technology downgrades the standard, she said.

Epstein testified before the Transportation committee on Wednesday as well.

Epstein said the agency’s proposed new rule closely matches a recent industry proposal. It compressed six pages of detailed rules down to a paragraph, she said.

Barrett, under questioning, said his agency, not the pipeline industry, wrote the proposal.

Some lawmakers said they didn’t understand why the agency has not proposed to regulate more low-stress lines.

Barrett’s said low-stress lines are less dangerous and therefore not all deserve regulation under the agency’s risk-based approach. Low-stress lines are those that operate at 20 percent of their designed pressure capacities, or less.

Rep. Bill Pascrell, D-N.J., called Barrett’s testimony “bureaucratic drivel.” If the agency doesn’t regulate low-stress lines, how does it have any evidence that the lines pose fewer problems, he asked.

Barrett said the agency has spent years surveying pipeline companies, collecting information from state regulators and taking public testimony.

Epstein argued, though, that industry data show 21 percent of large leaks come from low-stress transmission lines, even though they make up only 3 percent of the nation’s total pipeline mileage.

She said the agency should make sure no low-stress lines remain unregulated.

Oberstar asked Steve Marshall, president of BP Exploration Alaska Inc., why his company opposes a federal requirement to run smart pigs through low-stress lines once every five years, as the proposed new rules could demand.

Marshall said he couldn’t speak for the entire company. In Alaska, he said, “five years is not a problem for these transit lines.”

The transit lines each are approximately the same length. They deliver finished oil from Prudhoe’s eastern and western operating areas to the trans-Alaska pipeline’s Pump Station 1. The western line leaked about 5,000 barrels in March; the eastern, about 25 barrels in August.

Marshall, appearing at his third congressional hearing on the Prudhoe leaks, mostly restated his testimony from the previous week. BP runs at least 350 pigssome to detect corrosion and some to scrape out solidsthrough its North Slope lines annually, he said. For example, the line from the newer North Star field is scraper pigged every two weeks because of high wax buildups, he said.

Because the lines that leaked were downstream from cleaning centers, managers thought they were unlikely to develop corrosion problems, he said. Also, virtually no corrosion-promoting solids were found when the western line was last scraper pigged in 1998, he said. While a smart pig then did find some anomalies, regular external ultrasonic testing at those points didn’t detect a corrosion problem until late 2005, he said.

“No one pointed to these transit lines as a particular problem,” he said. “If they had, we would have acted on it.”

The trans-Alaska pipeline, which carries oil similar to that in the transit lines, is maintenance pigged once every two weeks, several lawmakers have observed in hearings. Marshall said Wednesday that the 800-mile line has different needs arising from cooling oil and the addition of drag-reduction agents.

Still, BP had been planning to run a smart pig through Prudhoe Bay’s western operating area transit line this year, a year earlier than originally scheduled. The leak in March occurred first, Marshall said.

The western line, with a bypass around the section that leaked, continues to carry over 200,000 barrels of oil per day, Marshall said. The eastern line, which had been carrying a similar amount, remains shut down, he said, but tests indicate that it may be fit for temporary service.

Both lines will be replaced in a $150 million project to begin later this year, he said.

Rep. Don Young, R-Alaska and chairman of the committee, said he was “deeply disappointed” in BP. The company apparently didn’t pay close enough attention to the changing nature of its oil, he said.

However, he said, “I’m not here today to beat a dead horse on who knew what and when did they know it.”

Federal authorities, including a grand jury, are investigating the incidents. Action should be taken when the investigations are done, Young said.

Young questioned Barrett but left the committee room before Marshall’s turn.

“Alaskans have to ask, ‘What is more important to Don Young that he walks away from one of the most important issues to Alaska?’” asked his Democratic election opponent, Diane Benson, in a news release issued shortly afterward.

Young’s spokeswoman, Meredith Kenny, said the hearing was supposed to end by 1 p.m. and the congressman had a previously scheduled meeting at that time with Alaskan constituents. “He didn’t want to stand them up,” she said.

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

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Wall Street Journal
September 14, 2006

US House Democrats Call For Stronger Pipeline Safety Act
DOW JONES NEWSWIRES
September 14, 2006 7:35 a.m.
(This article was originally published Wednesday)
By Ian Talley
Of DOW JONES NEWSWIRES
 
WASHINGTON (Dow Jones)--Leading Democrats on the U.S. House Transportation and Infrastructure Committee on Wednesday called for comprehensive federal oversight of all low-pressure petroleum pipelines in the wake of the BP PLC (BP) Prudhoe Bay, Alaska, pipe leaks and subsequent shutdown of the largest producing field in the U.S.

The minority members of the committee, which held an oversight hearing into the low-pressure crude pipelines that leaked at Prudhoe Bay earlier this year, said new rules and proposed legislation to regulate low pressure lines similar to the ones at Prudhoe Bay aren't rigorous enough and leave thousands of miles of low-pressure pipelines unregulated.

The Department of Transportation's Pipeline and Hazardous Materials Safety Administration in late August proposed a new rule that would allow federal oversight of some low-pressure lines.

Several Democratic members, including panel vice chairman and ranking Democratic member, Rep. James Oberstar of Minnesota, said the proposed new rule doesn't go far enough, proposing to revisit the Pipeline Safety Act already passed by the committee. Republicans aim to reauthorize the Safety Act, due to expire at the end of this month, this session, said Rep. Thomas Petri, R-Wis.

"We have legislation moving that we need to strengthen to improve oversight," Oberstar said at the hearing.

Rep. Elijah Cummings, D-Md., said the legislation, currently with the House Energy and Natural Resources Committee, "isn't good enough and we need to do more to it before it's approved."

Rep. Peter DeFazio, D-Ore., called the DOT's proposed rule a "bizarre regime" that would leave thousands of miles of low pressure lines unregulated. "We need a comprehensive regime for all low-stress line," he said, adding he was "concerned that we need something more proscriptive."

Thomas Barrett, administrator of the Pipeline and Hazardous Materials Safety Administration, said the Prudhoe Bay leaks, one of the biggest toxic spills in Northern Alaska, was caused by corrosion in the pipelines. He said the spills and subsequent partial shutdown of one of the biggest producing fields in the U.S. could have been prevented if the low-pressure lines there had been federally regulated. He said his agency would have been able to force BP to improve the substandard corrosion maintenance program that led to the leaks.

Barrett, however, was against a comprehensive low-pressure pipeline legislation, which would require "pigging" all lines. Pigging refers to a cylindrical, robotic droid that cleans lines and detects corrosion and cracks. Depending on the line, Barrett said cleaning pigs normally cost around $1,000 a mile, while "smart pigs" - which detect corrosion - can cost between $6,000-$8,000 a mile.

Barrett said he didn't believe many smaller low-pressure lines didn't warrant federal regulation, nor posed the same risk as BP's in Prudhoe Bay. "Some lines you can't pig for a number of reasons, because they telescope, or have tight bends," he added.

The DOT official admitted under pressure from one of the panel members, however, that his agency didn't have an inventory of all low-pressure pipelines through the U.S.

Although the Democrats' calls for stronger legislation come in the wake of the Prudhoe Bay debacle, the issue was highlighted by another leak announced by BP late Tuesday in southern California, also reportedly from a low-pressure line.

The Republican chairman of the committee, Rep. Don Young of Alaska, said he was opposed to strengthening the legislation any further, however. "We have a good bill, it's a good piece of legislation, and we'll pass what we intended to," he said outside the hearing.

Last week, House Energy and Commerce Committee Chairman Rep. Joe Barton, R-Texas, said he was also opposed to any further strengthening of the legislation. Texas, which has large reservoirs of producing oil and gas plants and refineries, is crisscrossed with pipelines.

DeFazio said Wednesday that even if the Pipeline Safety Act couldn't be revisited by the committee, House Democrats could ask for an amendment as the bill comes to the floor for a vote.
 
-By Ian Talley, Dow Jones Newswires; 202-631-5794; ian.talley@dowjones.com 

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BP Submits DOT Request To Restart E Prudhoe Bay Oil
DOW JONES NEWSWIRES
September 14, 2006 11:26 a.m.
 
HOUSTON (Dow Jones)--BP PLC (BP) asked the U.S. Department of Transportation Wednesday for permission to restart production in the eastern half of the giant Prudhoe Bay oil field in Alaska, the company said Thursday.

The announcement followed the London-based energy major's statements Tuesday that it planned to submit the request to the DOT.

Restart will allow us to quickly conduct both maintenance and smart pigging of these lines," Robert Malone, president of BP's U.S. unit, said in testimony that was released ahead of a U.S. Senate panel hearing examining problems at the oil field Tuesday.

BP last month said it would shut down all 400,000 barrels a day from Prudhoe Bay, the largest producing oil field in the U.S., after discovering severe pipeline corrosion and a small leak. Later, however, after testing pipelines on the western half of the field, BP decided to keep oil there flowing.

"Smart pigging" refers to the inspection of pipelines using a cylindrical droid that's carried by the flow of oil. If liquids aren't moving through the pipeline, then smart pigs can't be used to detect cracks and corrosion.

Steve Marshall, head of BP's Alaska operations, who also testified at the hearing, later said he couldn't say exactly how much additional production would be able to be brought back on line if the company received approval from the DOT. "We haven't discussed with the DOT what level of production is necessary to allow pigging of the lines," Marshall said.

Last week, at a similar hearing held by a U.S. House committee, Marshall said the company plans to bring all of Prudhoe Bay back on line by the end of October, provided it gets the green light from the U.S. DOT.

Speaking on the sidelines of a hearing held Wednesday by the U.S. House Committee on Transportation and Infrastructure, Thomas Barrett, head of the Pipeline and Hazardous Materials Safety Administration, estimated that it would take BP "a week or two" to clean out sediment from the inside of a transit line segment on the eastern half of the field and then another six weeks to inspect the line through the use of a smart pig.

"It will take around six weeks before we would know with confidence the conditions of the line" once smart pigging had begun, Barrett said.

If smart pigging of the existing oil transit lines on the eastern half of the field shows they're not fit for service, "then bypass options will be completed as soon as practicable," Malone said.

BP said late last week that total output at the field was up to 250,000 barrels a day.

Although its application to the DOT could result in the reopening of lines in the eastern portion, BP hasn't ruled out the option of bypassing the existing lines rather than reopening them.

"Work continues on a number of bypass projects, and we expect these to be ready by the end of October," BP said in the release. BP also plans to replace 16 miles of Prudhoe Bay oil transit lines this winter.
 
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com  

(Ian Talley in Washington contributed to this article.)

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Anchorage Daily News

September 13, 2006

http://www.adn.com/money/industries/oil/story/8189270p-8082871c.html

Federal government to step up oversight of Slope pipelines
BP HEARING: Young says he won't blame individuals, doesn't ask questions
By RICHARD MAUER
Anchorage Daily News
Published: September 13, 2006
Last Modified: September 13, 2006 at 05:26 PM

WASHINGTON -- The government's chief pipeline regulator told a House committee Wednesday that his office will begin oversight of low-pressure lines like the ones that corroded and leaked this year on Alaska’s North Slope.

But critics at the House Transportation Committee hearing said the new rules would allow thousands of miles of those pipelines around the country to escape regulation.

The hearing, the third in less than a week into BP’s spills, was substantially less confrontational than the sessions in other committees, where representatives and senators from both parties berated BP officials.

The tone Wednesday was set by Rep. Don Young, R-Alaska, transportation committee chairman, who said he wasn’t looking to blame individuals.

"I will ask what steps are being taken to make sure that BP does the job and this tragedy doesn’t happen again," Young said in his opening remarks. "I’m not here today to beat a dead horse -- or old oil. I just want to make sure it does not happen again. Investigations are being conducted and all committees are having hearings, everything is going on for the media. But my interests is seeing Alaskan oil delivered safely within Alaska, and to the Lower 48, without delay, without harm to the environment."

But Young himself asked no questions of BP Exploration (Alaska) president Steve Marshall or Lois Epstein, senior engineer for the Anchorage environmental watchdog group Cook Inletkeeper, the only two Alaskans to testify. Before the two took the witness table as the second panel after federal pipeline administrator Thomas Barrett, Young announced he would leave at 1 p.m. and departed during their testimony. Rep. Tom Petri, R-Wisc., chaired the remaining 35 minutes of hearing.

Young’s press aide, Meredith Kenny, said Young thought the hearing would last only from 11 a.m. until 1 p.m. and had to attend meetings back in his office.

Young’s Democratic opponent in November, Diane Benson, said Young walked out on the job.

"I’m very concerned because that was a prime opportunity, obviously, to ask questions on behalf of Alaskans and Alaska concerns, and his departure form the hearings was unsettling," she said in Anchorage in a phone interview. "This is our state and this is our pipeline and our resources  we would want to have our representative there."

Young’s committee has oversight over the Pipeline and Hazardous Materials Safety Administration, within the U.S. Transportation Dept. Since the Pipeline Safety Improvement Act of 2002, the agency has had authority to regulate low-pressure or low-stress lines like BP’s North Slope transit lines, which operate at 20 percent or less of maximum allowed pressure. But Barrett said the agency has only adopted rules for low-pressure lines in urban areas or lines that pass through navigable waters.

After more than 200,000 gallons leaked in the March spill, the largest ever on the North Slope, Barrett issued an emergency order bringing the 22 miles of low-pressure BP lines in Alaska under his jurisdiction. The agency already regulated high-pressure lines in the North Slope oil fields and the 800-mile trans-Alaska pipeline

A new bill reauthorizing the 2002 law passed out of the Transportation committee in July. It directed the pipeline administration to assume oversight by 2007 of additional high-risk, low-pressure pipelines in rural areas. Barrett’s staff had already been working on such a measure and announced draft rules last month.

The regulations would cover pipelines more than 8.5 inches in diameter that pass through "unusually sensitive areas." Barrett estimated about 600 miles of rural pipelines would fall under that category.

Epstein, the engineer from Cook Inletkeeper, said the new rule would leave uncovered an unknown number of pipelines, estimated between 5,000 and 15,000 miles in length.

"Many miles of low pressure lines remain unregulated," she said at the hearing. Barrett’s agency "will not even know of their problems."

Barrett said his agency was using "risk management" to determine which pipelines should be brought under government purview. The most important, he said, were those in urban areas where leaks could be life-threatening. The risk presented by small, low-pressure lines in rural areas is much less, he said.

Rep. Peter DeFazio, D-Ore., said Barrett’s "bizarre regime" makes rural residents "third-class citizens."

Before he left the hearing, Young, noting the presence of network TV crews, took a moment to reflect on his theory of climate change, citing the benefit of global warming in another eon to an area that today is frozen much of the year.

"We’re dealing with the most northern part of the United States of America, and a most hostile climate, and we’re pumping oil, and I’d just like to remind them if they’re asked where did the oil come from, and I would say this to Al Gore specifically: This was a jungle at one time, this was a forest at one time, this was a fern-laden area with mammoths at one time, and that’s really why we’re pumping oil," he said.

Next to speak was the committee’s ranking Democrat, James Oberstar of Minnesota, who reminded Young that while global warming might have been good for fern jungles, human civilization is another story.

"That happened years ago," Oberstar said. "The place was uninhabited by humans at that time."

Contact reporter Richard Mauer at rmauer@adn.com

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Lawmakers ask if pipeline rules will be enough to avoid problems
By H. JOSEF HEBERT, The Associated Press
Published: September 13, 2006
Last Modified: September 13, 2006 at 03:34 PM

WASHINGTON -- New rules would prevent the type of maintenance neglect that led to corrosion in miles of Alaska North Slope pipelines, the government's top pipeline safety regulator said Wednesday.

Several lawmakers were skeptical, questioning why the plan still would cover only a small fraction of the thousands of low-pressure oil lines in the country.

A need to broaden federal pipeline regulation became evident after the discovery of extensive corrosion in BP PLC's pipelines on the North Slope in early August, a discovery that led to the partial shutdown of oil production in Prudhoe Bay. The lines were not covered by federal regulations because they are low-stress feeder lines.

A new proposal, unveiled by the Transportation Department last month, would bring 680 miles of rural low-stress lines under federal regulation if they crossed environmentally sensitive areas. That might be as little as 5 percent of the total miles of such lines in the country, lawmakers were told.

"The proposal addresses the most significant threats ... and applies a full range of protections," Thomas Barrett, chief of the DOT's pipeline safety agency, told a House Transportation Committee hearing Wednesday. He called it a "sound and prudent approach" based on risk.

It would require pipeline testing in most cases with a "pig" device that is run through a pipe every five years to clean it and monitor wall thickness. BP's problems occurred largely because they did not routinely use such a test, relying instead on spot ultrasound tests of pipe walls.

But several committee members questioned the adequacy of the new rules, as did a pipeline consultant who has been involved in the debate over federal pipeline regulations for years and advises an Alaska conservation and oil-industry-watchdog group.

Rep. James Oberstar of Minnesota, the committee's ranking Democrat, said the BP pipeline fiasco in Alaska exposed "a corporate culture of neglect" on safety and questioned why federal regulation shouldn't cover all of the lines -- not only those that run through environmentally sensitive or heavily populated areas.

"The rest of them don't count?" Oberstar asked Barrett.

Barrett, a retired Coast Guard admiral who has been praised on Capitol Hill for his aggressive response to BP's pipeline corrosion, said the agency will address pipelines that pose the greatest risks.

The vast majority of low-stress lines -- those that will not be covered by the new rule -- are much smaller than the BP lines in Alaska, are in rural stretches far from people or environmentally sensitive areas and often run only a few miles, he said.

"We do not believe they pose the same level of risks as the BP lines in Prudhoe Bay posed," said Barrett. He said the rural low-pressure lines that will be regulated were selected based on their size, the volume of product they transported and whether they were within a quarter-mile of an environmentally sensitive area.

Lois Epstein, an engineer and pipeline consultant who works for Cook Inletkeeper, a conservation group in Alaska, told the committee that the new rules may cover as few as 5 percent of the now-federally-unregulated lines and that the requirements will be less stringent than those that apply to high-pressure lines.

"Many, many miles of low-pressure transmission pipelines remain unregulated and susceptible to BP-like problems," Epstein maintained.

How many miles of pipeline will continue without federal regulation was unclear.

Barrett said there will be about 4,000 miles of line that will remain out of federal jurisdiction, but he acknowledged that his agency has no nationwide map of low-pressure lines and is relying on estimates provided by states. Epstein said some surveys have put the number of such lines at 15,000 miles.

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Houston Chronicle
September 9, 2006

http://www.chron.com/disp/story.mpl/business/energy/4173976.html

BP senior corrosion position left vacant
Job has been unfilled for at least 20 months
By TINA SEELEY
Bloomberg News

BP's senior corrosion engineer position for its Alaska operations has been left vacant for at least 20 months, even after a March 2 leak that resulted in the largest-ever oil spill on the North Slope.

"There is an urgent need to recruit and rapidly induct a successor for the vacant senior corrosion engineer position," according to a June 7 internal BP audit released by the House Energy and Commerce Committee.

The position, vacant since December 2004, has not been filled, BP spokesman Daren Beaudo said Friday. "The responsibilities and duties of that position were filled on an interim basis by members of the team," he said.

BP's pipelines leaked an estimated 210,000 gallons of crude oil onto Alaska's North Slope in March.

Inspections required after that spill led to the discovery of another leak and corrosion that in some places had eaten away 80 percent of the pipeline wall.

London-based BP has had to cut output at Prudhoe Bay because of the pipeline problems.

However, a BP spokesman told Reuters News Service on Friday that the company now believes that the downstream segment of the shutdown pipeline on the eastern side of the Prudhoe Bay oil field is in good enough condition to be safely restarted.

BP has not yet asked the Transportation Department for permission to restart the line and is continuing to work with regulators on the restart plans, the spokesman said.

The report released by the House committee said that the lack of a senior engineer and the arrival of several new employees in key maintenance, reliability, integrity and operations jobs "reduce the capacity of the teams to take a broader strategic view of the corrosion management program."

A team led by John Baxter, director of engineering for BP, wrote the report.

The company's senior corrosion engineer serves as deputy to the manager of the corrosion, inspection and chemicals group, known as CIC.

At a congressional hearing Thursday, the group's former manager, Richard Woollam, refused to testify about his work at BP.

Baxter recommended "the urgent appointment" of employees to fill Woollam's position and his deputy's role in an April 2005 report to BP Alaska's management.

"There is little evidence of a management of change process or transition plan, and replacements need to be quickly identified from BP's limited pool of corrosion management expertise or externally if necessary," the April report shows.

Woollam's position was filled about six months after he left. The senior corrosion engineer job remains vacant.

Woollam was transferred to a nonsupervisory job in Houston in January 2005 after a report by the Houston law firm Vinson & Elkins said his "aggressive management style" deterred workers from raising corrosion issues. The firm was hired to investigate complaints of intimidation and retaliation for employees reporting safety concerns.

Woollam was placed on paid leave by the company on Sept. 7, one day before he declined to testify, Steve Marshall, head of BP's Alaska unit, told reporters after the hearing Thursday.

The former manager cited his Fifth Amendment protection against self-incrimination as his reason for not testifying.

James Torgerson, Woollam's attorney, didn't return voice mail or e-mail messages.

BP spokesman Scott Dean told the Associated Press on Friday that the company has been slow in filling the vacancies because staff has been consumed with responding to the March spill and related problems.

Dean said BP is recruiting and that it plans to radically increase the size of its corrosion prevention staff in Alaska.

He was in charge of 150 employees and contractors in that position, which he held for about five years, according to the October 2004 Vinson & Elkins report.

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http://www.chron.com/disp/story.mpl/business/energy/4173978.html

BP to relocate 500 workers in Indiana in safety move
By JOE CARROLL
Bloomberg News

BP plans to move 500 workers at its second-biggest U.S. refinery to new offices more than a mile from gasoline-making units as part of safety improvements triggered by a March 2005 blast at a Texas City plant that killed 15.

London-based BP, reeling from congressional criticism of its pipeline operations and a criminal probe of trading practices, plans to move workers at its Whiting, Ind., refinery out of offices that sit about 100 feet from towers that use high pressure and heat to break down petroleum components, said Peter Novak, executive director of redevelopment in Hammond, Ind.

 The company sought permission from Hammond officials on Wednesday to renovate a 100,000-square-foot warehouse and build two buildings on a part of the refinery property that crosses the boundary between Whiting and Hammond, Novak said. The project will cost an estimated $26 million, he said.

"BP indicated they will be removing personnel out of the refinery that are not directly involved in refinery operations," Novak said. "It's an effort to make a safer environment."

BP was fined $21.4 million by federal regulators in September 2005 for safety violations that lead to the Texas City plant explosion. Investigators blamed the 15 deaths and scores injured in part on trailers that were too close to the unit that exploded.

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Anchorage Daily News
September 9, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8174465p-8066167c.html

Full production may precede line fix
PRUDHOE BAY: Output is at 250,000 barrels a
day, and system looks serviceable.
By MARY PEMBERTON
The Associated Press
Published: September 9, 2006
Last Modified: September 9, 2006 at 05:18 AM

BP has increased Prudhoe Bay production to 250,000 barrels a day, and officials on Friday said they are increasingly optimistic the oil field can be returned to full production before the company replaces corroded transit lines next year.

Tests so far on the transit lines, including the one that leaked Aug. 6, spilling nearly 1,000 gallons of crude and leading to the partial shutdown of the country's largest oil field, indicate the lines are serviceable, BP Exploration (Alaska) Inc. spokesman Daren Beaudo said Friday.

Between 200 and 300 workers each day are conducting ultrasound and magnetic tests on the lines to check for thin spots caused by internal corrosion.

"We are finding it is in really good shape," Beaudo said.

The discovery of the leak in August and fears over corroded pipe forced the shutdown of the eastern half of the oil field, dropping production to about 200,000 barrels a day or about half the normal amount. The other line is operating.

Prudhoe Bay production stood at 250,000 barrels Friday, up 30,000 barrels a day this week, Beaudo said. Steve Marshall, the president of BP Alaska, told a congressional hearing Thursday that full production of 400,000 barrels a day -- or 8 percent of total U.S. output -- could be restored by late October.

BP plans to install a bypass line on the eastern line by the end of October to possibly meet that deadline.

On Thursday, state regulators gave BP permission to temporarily connect a pipeline from the Endicott oil field into the Prudhoe Bay network to carry about 105,000 barrels of idled Prudhoe production. The temporary permission expires in one year, the Regulatory Commission of Alaska said.

Bringing Prudhoe Bay back up has the potential to push oil prices a little bit lower, said Peter Beutel, oil analyst and president of Cameron Hanover in New Canaan, Conn.

Prices have been tending downward since early August, about the same time that the partial shutdown at Prudhoe Bay occurred, Beutel said.

Alaska oil prices reached a high of $75.73 on July 14 and finished Friday at $64.95 on West Coast open markets.

Beaudo said before the eastern side of the field can be brought back on, the transit line will have to be scraped and cleaned using several types of maintenance pigs. Then, a "smart pig" using ultrasound will be sent down the pipe to check for thin spots.

It was the smart pig test, ordered by the federal Department of Transportation after a transit line spill of an estimated 201,000 gallons -- discovered in March and the Slope's largest oil spill ever -- that revealed problems in the eastern side transit line.

BP ended up putting in a bypass and kept the transit line operating on the western side of Prudhoe.

The Department of Transportation will have to authorize bringing the eastern side of the field back up.

BP has said it will replace 16 of 22 miles of transit lines. It expects to get replacement pipe by the end of the year with construction beginning early next year.

The company is replacing the 34-inch transit pipe with smaller diameter pipe to increase the flow rate. That should help sweep out any solids and prevent bacteria from growing in sediment that settles at the bottom of the pipe, Beaudo said. Bacteria is being blamed for causing the corrosion that led to the leaks in the lines.

Daily News business editor Bill White contributed to this report.

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http://www.adn.com/news/politics/story/8174422p-8067230c.html

Veco cash too hot to handle
INVESTIGATION: As FBI search continues,
some shun donations.
By LISA DEMER and KYLE HOPKINS
Anchorage Daily News
Published: September 9, 2006
Last Modified: September 9, 2006 at 03:23 AM

Eight days after it came into public view, an FBI investigation of Alaska state legislators and possibly corrupt ties to Veco Corp. is making lawmakers, candidates and political leaders scramble.

A few candidates for the Legislature are hurriedly distancing themselves from Veco, the oil field services and construction company that has long been a big player in Alaska politics, by returning campaign contributions.

House Speaker John Harris, R-Valdez, said he telephoned the FBI asking if the agency could at least say who's not a suspect. No one called back.

And Thursday Alaska Republican Party chairman Randy Ruedrich sent a short, unusual e-mail addressed to "All Candidates."

"If the FBI should contact you and ask to interview you, it is very important that you first call our party counsel, Bill Large," Ruedrich wrote.

Ruedrich said he simply wanted Republican candidates to know they had the right to an attorney, but Large said there's more to it.

Large said he doesn't have expertise in criminal defense work-- his background is in oil and gas -- so over the weekend he called lawyers from around the country who are adept in federal criminal cases.

He said he learned the government sometimes will give witnesses "a non-subject" letter that explains they are not a subject or target of the investigation.

If any Republican candidates are contacted by the FBI, Large said, he wants to make sure they know they can ask for that written assurance, that they can be represented by a lawyer, and that they don't have to talk at all. But the message isn't to keep quiet, he said, just that they know their rights and options. He said he wouldn't ask legislators what they'd talk to the FBI about. He wouldn't represent them but he could help them find an attorney.

So far, the FBI has conducted searches on offices of six sitting legislators. Others have been interviewed by the FBI. Some have said they were assured they were not a target but Large doesn't know that any sought "non-subject" letters.

"I think the general perception is, you get interviewed and, oh man, why would they be talking to them unless they did something wrong," Large said.

The letter gives political protection and maybe legal protection too, Large said.

"You'll notice that lots of folks were just talking to the FBI, talking to the cops," he said. "I watch "Law and Order.' So I'm thinking, well I don't know that's the best thing to do is or that's the right thing to do." People can get themselves in trouble even if they're not guilty, he said.

An FBI spokesman, Eric Gonzalez, said he couldn't comment on the e-mail but said generally there's no problem with someone giving advice.

So far, Large said, no one has contacted him as a result of the e-mail but one lawmaker did earlier in the week before it was sent.

State Rep. Jay Ramras, R-Fairbanks, said when the FBI asked him to come in for an interview a few days ago, he turned to Large.

"I sought some legal advice about the nature of this because it is pretty serious to be called by the FBI," Ramras said. Large told him about the non-subject letter, and Ramras asked the FBI agents for one. The FBI agents checked with the U.S. Justice Department, then told him they wouldn't issue one but didn't really need to talk to him either.

"I'm certain I'm a million miles away from being a subject of an investigation," Ramras said. But Ramras, who faces no opposition in November, wanted an assurance that he could show others.

Ramras said he wants no part of what he called a "McCarthyism" interview process.

"If it's just a fishing expedition, I'm not interested in participating in something that could injure my good name," he said. He said he is segregating six $500 campaign contributions from Veco executives but hasn't decided what to do with the money.

Another Republican legislator, Rep. John Coghill of North Pole, said he was interviewed Wednesday by the FBI.

Coghill, the majority leader, said he figured the FBI will eventually question the "whole leadership." He said he didn't hesitate to sit down with the agents in the federal building in Fairbanks, but told them he'd walk out if they "tried to lead me into something." He hadn't seen Ruedrich's e-mail but thought that a non-subject letter might be helpful for some. He didn't think he needed it, though.

The FBI wanted to know if Veco had ever offered him or his wife a job, or asked him to vote a certain way or put in certain amendments, he said.

Nothing happened that was out of line, he said. Veco certainly lobbied him, he said, but nothing that he considered "quid pro quo," nothing that went beyond a professional business relationship.

Coghill said he's not returning five $500 contributions from Veco executives because he's done nothing wrong.

"My record's clear," he said.

"I didn't feel any pressure, except I knew what they wanted," said Coghill. "It certainly helps their access to me. ... But it doesn't put me under any obligation." The new petroleum profits tax was the big issue, and he said he voted for a higher tax than Veco wanted.

Some political candidates aren't waiting around to see if anyone gets in trouble: They say they're giving back recent Veco-related donations. And there may be others in the give-back group.

Republican lieutenant governor candidate Sean Parnell returned two $500 checks that Veco officials gave him in August, he said Wednesday when returning a call about Veco contributions.

"I'm making no judgment regarding the outcome of the current investigation," he said, but added that as a candidate, he is held by the public to a higher standard.

"I can best meet those standards of public trust and transparency by returning the contributions," he said.

On Friday, Republican House candidate Jeff Gonnason, who's running against Democrat Rep. Harry Crawford in East Anchorage, sent out a press release announcing he was giving money back too. Gonnason said he returned six $500 checks he received from Veco officials late last year.

He said that he didn't want the donations to be a distraction in the campaign, but that no one from Veco ever contacted him or implied strings were attached to the money.

"The checks just showed up in the basket," he said.

Another Republican contender for state House in East Anchorage, Matt Moon, said he also returned six $500 donations from Veco officials, as well as a donation from Senate President Ben Stevens, one of the six lawmakers whose offices were searched.

No one from Veco ever implied or stated that something was wanted in return for the money, he said when called by the Daily News Friday afternoon.

"My returning their campaign donations is not personal, nor is it an opinion of guilt versus innocence," he said. "But I have promised to myself and to my voters that I do not want to engage in any unethical behavior, even if it's only perceived."

Moon, running against Democrat Max Gruenberg, said the anti-incumbent sentiment he noticed among voters this year only seemed to solidify once the investigation became public.

The other legislators served with search warrants are Sen. John Cowdery, R-Anchorage; Sen. Donny Olson, D-Nome; Rep. Pete Kott, R-Eagle River; Rep. Vic Kohring, R-Wasilla; and Rep. Bruce Weyhrauch, R-Juneau.

Coghill is one of at least four other lawmakers who have been interviewed by the FBI.

The investigation "clouds and muddies the water for those who are running for office," said Harris, the House speaker. He wanted the FBI to clear the names of those who aren't implicated. Otherwise, he said, "the public thinks everyone is guilty."

He hasn't been interviewed but said he'd "absolutely" talk to the FBI.

"To me, if you didn't say anything, if you kept your mouth shut, that's probably worse than talking," Harris said.

Daily News reporter Lisa Demer can be reached at ldemer@adn.com   or 257-4390. Reporter Kyle Hopkins can be reached at khopkins@adn.com  or 257-4334.

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http://www.adn.com/news/politics/elections/story/8174417p-8067226c.html

Money should go into college fund, candidate says
By KYLE HOPKINS
Anchorage Daily News
Published: September 9, 2006
Last Modified: September 9, 2006 at 04:50 AM

Andrew Halcro wants Alaska's kids to save most of their Permanent Fund Dividend cash for college, whether they like it or not.

Halcro, who is running for governor as an independent, told the Anchorage Lions Club on Friday that part of his plan for tweaking the state education system is to sock away three-quarters of every child's dividend check. Once they turned 18, the only way kids could get their hands on the money would be to use it for college -- or some kind of schooling -- or to help buy their first home.

The program wouldn't be optional, Halcro said.

There's nothing wrong with the state telling minors it will send them a little bit of their dividend now but save the rest for their future, he said.

Bad idea, say Republican candidate Sarah Palin and Democratic candidate Tony Knowles.

Palin called the plan "too much government" in an e-mail late Friday night: "What about the parents of those children who rely on Permanent Fund checks to put shoes on their kid's feet or pay electric bills?"

Knowles said the dividend is what keeps some families above the poverty line, while his running mate, Ethan Berkowitz, called the proposal too "paternalistic" -- fine for the wealthy but not for those who need dividends to get by.

Halcro says dividends were never intended to be for minors and now serve as a kind of magnet for families moving into the state.

He talked about how some of those kids are now shooting one another in Anchorage and others are dropping out of school, all while children are one of the most expensive demographics for the state.

Halcro also said the state shouldn't allow anyone under 18 to drop out of school and proposed providing laptop computers to all middle-school students.

Today in Anchorage, all three candidates will likely court the National Education Association-Alaska, a union of more than 13,000 teachers and other school professionals that is deciding who to endorse in the governor's race -- if anyone.

REPUBLICAN MONEY

Palin said she called Alaska Republican Party chairman Randy Ruedrich this week to talk about fundraising.

The party can give her and her running mate, Sean Parnell, up to a combined $200,000. So how could they receive that money? Palin asked.

Ruedrich said the party had not raised money for the governor's-race fund throughout the primary -- "because of the questions about who was going to win" -- but now money is coming in from Republican women's clubs.

Close to $40,000 has been collected so far and more is on the way, he said.

Palin said Friday she was surprised to hear the $40,000 number. She'd gotten the impression the fund was empty.

Right after the primary election, Palin said Ruedrich should voluntarily step down, and she's often credited with outing him for ethics violations when they were both on the same state commission. But Palin said accepting money from the party shouldn't open her up to criticism.

"I'm a Republican, and an army can't march on an empty stomach," she said.

Any candidate who doesn't ask for money might as well wave a white flag, Ruedrich said: "If they don't, they're pretty bad candidates."

SURVEY SAYS

Anchorage pollster David Dittman announced poll results this week from a Aug. 24-Aug. 30 survey that showed Palin with a 17 percentage point lead over Knowles, with 22 percent of voters undecided.

The poll has a margin of error of roughly 4 percent, with a sample size of 507 people, according to Dittman Research and Communications.

Only 3 percent of the people who responded said they'd vote for Halcro.

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

BLOG: Go online for the inside scoop from reporter Kyle Hopkins as he follows the race for governor.

www.adn.com/thetrail

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Los Angeles Times
September 8, 2006

http://www.latimes.com/news/printedition/asection/la-na-pipeline8sep08,1,3709518.story?ctrack=1&cset=true

Lawmakers Confront BP Officials on Spill
By Noam N. Levey, Times Staff Writer
September 8, 2006

WASHINGTON  Rep. Joe L. Barton (R-Texas) was "very concerned."

Rep. Tammy Baldwin (D-Wis.) was "frustrated" and "angry," as well as "concerned."

And Rep. Bart Stupak (D-Mich.) was "just baffled."

No one, in fact, said he or she was pleased during a hearing by the House Energy and Commerce subcommittee on oversight and investigations, which spent hours Thursday examining what led to a break in one of BP's Alaska oil pipelines this year.

Two congressmen were so concerned that they came to the cavernous hearing room in the Rayburn House Office Building to express their outrage, even though they aren't members of the subcommittee.

And the London-based oil giant's executives, who traveled to Washington from Texas and Alaska, couldn't do enough to express their contrition as they earnestly described the soul-searching they had done since the break dumped about 270,000 gallons of crude onto the Alaskan tundra in March.

One person involved who didn't express his concerns Thursday was the former head of BP's Alaskan pipeline corrosion monitoring unit, Richard C. Woollam, who invoked his 5th Amendment rights against self-incrimination and declined to testify.

When it was all over, though, the principals expressed satisfaction with the process. And everyone prepared for another installment in the Capitol Hill tradition of hauling oil executives before congressional committees for public tongue-lashings. Another House panel plans a hearing on the pipeline break next week.

Thursday's theatrics followed congressional hearings in November and March, when oil executives were grilled about the industry's soaring profits, which today remain robust.

On Thursday, most of the talk was about "pigging" and why BP hadn't done more of it.

BP, which operates a group of pipelines on Alaska's environmentally fragile North Slope, has been under fire for months for failing to use a robotic device known as a pig to monitor and clean the insides of its pipelines.

The torpedo-shaped machines, which can travel miles through pipes, are widely used in the oil industry for maintenance, including in the Trans-Alaska Pipeline.

BP instead relied on a less comprehensive process to check corrosion in its feeder system to the main pipeline. That didn't please the subcommittee members, who sounded as well-versed in the industry as the company officials.

"Pigging is not a new technology," chided Rep. Michael C. Burgess (R-Texas).

Rep. Diana DeGette (D-Colo.) said she couldn't believe BP's maintenance practices. "It perplexes me that the lines haven't been pigged," she said.

A grim Steve Marshall, the graying president of BP Exploration Alaska, promised change.

"We will implement routine pigging and smart pigging," he said in a pledge to deploy both pigs that clean pipes and "smart pigs" that can measure the levels of corrosion.

Marshall also tried to play down suggestions from several House members that whistle-blowers inside the company were discouraged from raising concerns about BP's maintenance practices. "I deeply regret this situation happening on my watch," he said. "We didn't get this one right."

"You almost feel bad for them," said Justin Tatham, a preservation advocate for the U.S. Public Interest Research Group, one of several Alaska drilling opponents represented at the hearing.

A BP spokesman sounded an upbeat tone after the hearing. "We were pleased to be able to provide the committee with information about our operations," Scott Dean said.

Rep. Greg Walden (R-Ore.), a subcommittee member, said he too was satisfied with the outcome. "Sometimes the glare of public spotlight accomplishes more than we do with legislation," he said.

noam.levey@latimes.com

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Anchorage Daily News
September 8, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8170280p-8061705c.html

Congress grills BP execs
House panel asks if company profit
precluded pipeline maintenance
By RICHARD MAUER
Anchorage Daily News
Published: September 8, 2006
Last Modified: September 8, 2006 at 04:35 AM

PHOTO of Marshal and Malone
http://www.adn.com/photo/2006/09/08/2266434-330-x-370.jpg

WASHINGTON -- The first of at least four congressional hearings into why BP failed to prevent pipeline failures on Alaska's North Slope began dramatically Thursday when Richard Woollam, the company's corrosion chief until 2005, refused to testify, citing his right against self-incrimination.

In a day marked with blistering criticism of BP from Republicans and Democrats on the House Energy and Commerce Committee, the British-born Woollam, derided in an internal BP report as "King Richard" for his dictatorial style, declined to answer any questions.

The committee's investigations panel is looking into the failure of BP to monitor and control corrosion on two North Slope transit pipelines that feed the trans-Alaska pipeline.

One of those lines had a catastrophic leak March 2, spilling more than 200,000 gallons of oil in the tundra and the ice-locked shore of an unnamed lake. The other line had a smaller leak in August. Unsure of the reliability of either line, BP announced it would shut down all Prudhoe Bay production Aug. 6, then later limited the closure to the field's eastern half.

Over and over, the committee members grilled BP Exploration Alaska president Steve Marshall, demanding to know why BP neglected to conduct the only reliable test of the decay of an entire pipeline -- a "smart pig" that travels inside the pipe and records the thickness of the wall along the pipe's length.

Marshall replied that company officials believed the line wasn't as susceptible to corrosion as others. The last smart pig run on the western line was in 1998; on the eastern line, it was 1992.

But was it just an error in judgment, the committee wanted to know, or was something else at work? Was BP shaving costs to increase profits? Were executives trying to beef up their annual bonuses by meeting budgets regardless of the consequences? Along those lines, committee chairman Joe Barton, R-Texas, wondered aloud whether BP was "betting the farm" that the Prudhoe Bay field would run out before the pipeline failed, saving the costs of replacing it.

"Shame, shame, shame," he said.

Marshall and the new BP America president, Bob Malone, denied that profit motive was the cause, but they were frequently at a loss to explain exactly what happened.

Malone, Marshall, and two others on that panel, Alyeska Pipeline Service Co. president Kevin Hostler and Dan Stears of Coffman Engineers in Anchorage, all testified under oath.

Woollam was a late entry on the witness list. House investigators looking into claims that corrosion workers were afraid to criticize BP's practices unearthed an internal BP report from 2004. That report, by the law firm Vinson & Elkins, said Woollam's "overbearing management style" created a climate "where the fear of retaliation and intimidation could and did occur."

The workers believed the company wasn't doing enough to test for corrosion and prevent its spread, according to the report, made public at the hearing.

After pleading the Fifth Amendment in the packed committee room, Woollam was quickly dismissed from the hearing. He rushed from the Rayburn Building without speaking to reporters.

The Vinson & Elkins report recommended that Woollam be stripped of his supervisory duties. In January 2005, three months after the report was delivered, BP reassigned him to Houston. Malone said Woollam was recently placed on administrative leave, with pay.

Woollam, and the presence of a battery of defense attorneys, was a sharp reminder of grand jury proceedings in Anchorage hanging over the congressional hearings. The Justice Department and EPA are investigating whether the March 2 oil spill was a criminal violation of the Clean Water Act.

Barton reminded the BP officials that their shutdown briefly caused a 3 percent spike in the price of oil, to nearly $77 a barrel.

The two transit lines were unregulated by the U.S. Transportation Department's Pipeline and Hazardous Materials Safety Administration because they operated at low pressure in a remote area. Even after the spill, when the agency decided to impose its regulatory authority, BP resisted, said its administrator, Thomas Barrett, testifying in a later panel.

"It's the kind of thing that would cause us to question their commitment," said Rep. John Dingell, D-Mich.

Barrett's chief safety officer, Stacy Gerard, said BP had a pattern of resisting regulation. The company fought having its high-pressure lines included in a new integrity management program designed to increase safety, primarily through the use of pigs to clean and test the pipe.

Gerard described BP's argument as having less to do with spill prevention than with downplaying the effects of a spill. Since one aspect of the regulation was designed to protect endangered species, BP said a spill in the North Slope wouldn't hurt any animal protected by the Endangered Species Act, so it shouldn't be required to join the program, Gerard said.

Hearing that answer, an incredulous Rep. Michael Burgess, R-Texas, asked, what about humans? BP officials said their employees are trained on how to protect themselves in the event of a spill, Gerard said. "Therefore, they didn't need the benefit of integrity protection," she said, describing the BP position.

The mysterious changes in a report prepared by Coffman Engineers for the Alaska Department of Environment Conservation also came up at the hearing. The Seattle-based engineering company was hired by the DEC to review BP's corrosion program.

The "final draft" of the Coffman report, dated Nov. 2, 2001, was critical of BP's corrosion program and suggested that a "smart pig" was the only reliable testing method. The full report, issued two months later, dropped most of those references.

On Nov. 11, 2001, committee investigators found, Woollam, the corrosion manager, sent an e-mail to another BP employee asking her to find out if Coffman held any BP contracts. Rep. John Inslee, D-Wash., said the message seemed like a blatant attempt at intimidating the company into changing its report.

Marshall testified he had not seen Woollam's e-mail.

In any event, BP officials met with the engineering firm's staff and DEC officials.

Barton and Rep. Greg Walden, R-Ore., said House investigators interviewed one of the DEC officials, Susan Harvey, who said that she told BP and her bosses that she would revise the draft to fix factual inaccuracies but not analyses or policy matters. The response from DEC was to boot her off the project, she said.

Harvey resigned in March 2002 when all her North Slope responsibilities were taken away by top DEC officials.

Marshall said he was not aware of Harvey's involvement. BP investigated the charges that it was responsible for changing the Coffman report and found no evidence that it was true.

After the hearing, BP provided a copy of that investigation, conducted by one of its outside criminal defense lawyers, Jeff Feldman of Anchorage. Several sections of Feldman's 26-page report, dated April 24, 2006, were blanked out.

In his report, Feldman said he wasn't able to interview Harvey, and Woollam declined an interview on the advice of counsel. Coffman Engineers declined to provide Feldman any documents because the company had just been served with a grand jury subpoena. Feldman said he was also unable to review internal DEC documents.

However, Feldman noted, he was able to talk to at least two of the participants: the principal Coffman representative responsible for drafting the 2000 report had since gone to work for BP, as had the "second-most critical" DEC official after Harvey, Sig Colburg. BP made both available to him, as well as company documents.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com or 1-202-383-0007.

PHOTOS: For a gallery of pictures from the ongoing congressional hearing, visit the Web.

www.adn.com

Thursday's hearings at a glance

QUESTIONS: Members of both parties grill BP over ongoing pipeline maintenance. Lawmakers say BP's mistakes in Alaska are particularly unacceptable given industry's record profits and relatively inexpensive measures that might have prevented the oil spill.

APOLOGY: BP executives apologize and pledge to fix operational lapses on the North Slope that led to the region's biggest-ever oil spill in March and the partial shutdown last month of the country's largest oil field.

SILENCE: The former head of pipeline- corrosion monitoring for BP in Alaska refuses to testify under oath. What's next?

BP and its pipelines are drawing the attention of Congress on its return from the Labor Day recess. Here's what's coming up:


House Energy and Commerce Committee Subcommittee on Oversight and Investigations

The subcommittee's hearing Thursday resulted in a heap of criticism of BP, but also a lot of unanswered questions. Several House members are submitting them in writing and are demanding answers.

Senate Energy and Natural Resources Committee

Tuesday morning hearing into the effects of BP's pipeline failure on the U.S. oil supply and how to prevent future recurrences. No witnesses are scheduled yet.

House Transportation and Infrastructure Committee

Oversight hearing Wednesday before Alaska Rep. Don Young's committee on preventing future corrosion problems on pipelines feeding the trans-Alaska pipeline.

Senate Commerce, Science and Transportation Committee

Alaska Sen. Ted Stevens said his committee will hold hearings on new legislation authorizing increased regulation of pipelines related to BP's failures, but he hasn't set a date.

 

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Fairbanks News Miner
September 8, 2006

http://newsminer.com/2006/09/08/1905/

Lawmakers rebuke BP on spill
By Sam Bishop
Published September 8, 2006

WASHINGTONA former BP manager who walked out on a congressional hearing Thursday without testifying had intimidated employees working in the companys anti-corrosion two years ago, according to documents and testimony.

Members of Congress at the hearing portrayed the intimidation as a potential contributor to the corrosion problems that prompted BP Exploration Alaska Inc. to shut down a main Prudhoe Bay pipeline in early August, cutting off half the fields production.

Representatives delivered a unanimous, bipartisan scolding to BP and questioned whether it had let budget pressures undermine its corrosion management effort.

Richard Woollam, the former corrosion manager, appeared on a revised witness list handed to reporters moments before Thursdays hearing began.

He declined to testify or answer questions, though.

Woollam has been reassigned outside Alaska, according to Bob Malone, BP USA president.

Steve Marshall, BP Alaska president, said a 2004 report by the law firm Vinson & Elkins, which recommended Woollams removal, found no indication of any fraud by Woollam or other corrosion program managers.

We found no evidence that data had been manipulated for any purpose, Marshall said.

Marshall also said he saw no clear link between the perceived intimidation and BPs decision not to run cleaning and corrosion-detecting devices, or pigs, through two main pipelines that sprouted leaks this year.

Marshall said managers honestly believed that Prudhoe Bays western and eastern oil transit lines were at little risk from corrosion. The companys anti-corrosion work instead focused on lines upstream of the gathering centers that remove carbon dioxide, solids, water and natural gas.

In retrospect, Marshall said, the companys care for the two transit lines downstream of the gathering centers was inadequate.

Every member of Congress who spoke Thursday, though, questioned how BP could have misled itself so badly.

Hindsight is better than blindsight, I guess, but it is not a substitute for ongoing, sound management practices, said Rep. Joe Barton, chairman of the House Energy and Commerce Committee. Thursdays hearing was before that panels Oversight and Investigations Subcommittee.

Woollam, the former corrosion manager, left the hearing shortly after questioning began. He cited his constitutional right not to incriminate himself.

Woollam is collecting a paycheck from BP but is on leave, Malone told the congressional subcommittee.

Later in the hearing, Rep. Jay Inslee, D-Wash., asked Marshall about a Nov. 11, 2001, e-mail that Woollam wrote to a fellow BP employee. The e-mail requested a list of BP contracts with Coffman Engineering, a company that nine days earlier had given the state of Alaska a critical draft assessment of BPs corrosion program.

Inslee said it was hard to imagine that Woollam would ask for such contract information unless he hoped to pressure Coffman into changing the report.

Coffman Engineering did change the report following meetings and a written rebuttal from BP that claimed the firms assessment was too negative. Most critical comments were deleted, Inslee noted.

I have not seen the e-mail before and cant comment on what Mr. Woollams intent would have been, Marshall said. Woollam might have sought the information to help avoid any conflicts of interest, he said.

Dan Stears, a Coffman employee who oversaw the drafting of the review, acknowledged there was some mid-level frustration at Coffman after BPs response to the original review.

However, Stears said at the hearing, some of the conflict arose from differing views on the scope of what was the first annual report from BP under a new agreement with the state.

For example, while the first draft of Coffmans 2001 review said BPs report to the state does not provide the necessary information for a detailed technical analysis, BP, in its written response, said its agreement with the state contained no requirement for BP to provide such information, nor is it within the scope of work defined for Coffman.

The reference to the lack of necessary information was removed from Coffmans final review.

Stears said state officials did not pressure Coffman to change the report.

Democratic candidate for governor Tony Knowles, who was governor when the report was done, told the News-Miner on Thursday that neither he nor his administration had requested changes to the report, and said he was not aware of the changes to the report.

There was no effort in any way to softpedal, he said. The (DEC) should be applauded.

The company has conducted the annual review of both BP and ConocoPhillips corrosion program each year since 2001.

Critics of BPs operation of Prudhoe Bay say that oil field employees have warned for years about inadequate maintenance at the field, and members of Congress asked BP officials about evidence of such trends Thursday as well.

Rep. Tammy Baldwin, D-Wis., cited a BP internal audit from April 2005 that said BP caps its corrosion spending so it doesnt increase the cost of lifting oil from the ground. The audit recommended that corrosion spending not be limited in that way.

Marshall said there is no cap on corrosion spending and it rises according to the need80 percent since he arrived in 2001. The perceptions reported by auditors have been corrected, he said. The audit team confirmed that in its 2006 review, he said.

They had seen considerable change in the 12 months, he said.

Marshall said he takes responsibility for the miscue to employees.

One of the things I regret is that I didnt do more to change the perception about spending money, he said. BP went through severe belt-tightening when oil sold for $10 a barrel in the late 1990s, he said.

Barton, the full committee chairman, said the committee had been told by some individuals that because Prudhoe Bay production is declining, BP decided spend as little as possible on the lines.

Other congressmen described this strategy as running to failure or riding the through-put curve.

It appears the company decided not to pig the lines because it knew it had a problem with sludge, Barton said.

Actually, Marshall said, the company found virtually no solids when it pigged the western operating line in 1998. The eastern line did produce enough calcium carbonate scale when partially pigged in 1992 that it clogged Alyeska Pipeline Service Co.s screen on the trans-Alaska pipeline, he confirmed, but the eastern line was then owned by Arco.

Ive found no evidence so far of any deliberate action to not pig those lines because of solids, Marshall said.

Rep. Ed Markey, D-Mass., said BP must have been aware of the eastern lines solids when it took over field operations in 2000.

Marshall said the solids issue didnt arise until after the first leak this year, in March. The company is still investigating what it knew of the eastern lines solids, he said.

Youve had six months, Markey said. I just dont believe it.

Rep. John Dingell, D-Mich., said BP should have known a problem was growing in the western operating line, too. The companys production of viscous oil rose from 1,500 barrels per day early in the decade to 16,000 barrels per day by 2005, Dingell said. Viscous oil, a thicker grade of crude, brings with it more sand and water, he said.

Yet the company ran no pigs.

Why didnt you run them more often? You knew the amount of viscous oil that was being put through the line was increasing. You knew that that changed the characteristics of the oil, Dingell said.

Marshall said the viscous oil production rose in 2004 and 2005 when the Orion field came on line. Because the gathering centers upstream of the transit line clean the oil, the viscous oil itself wasnt viewed as a problem.

The general quality of the crude oil there is sales-quality crude oil, he said of the crude in the transit line.

Dingell said BP knew the viscous oil caused upsets at the gathering centers, though. A BP technical report obtained by the committee showed that 10,000 barrels of water entered the western line accidentally at one point,

Dingell said. Why didnt BP run a pig, given that it knew such contaminants had entered the line, Dingell asked.

I trust in God, but I know he expects me to lift my end of the log, Dingell said.

Indeed in 2005 we did plan and schedule a smart pig run (for this year), Marshall said. It is my regret that that was too late.

Barton found BPs trust in the sales-quality crude odd. Alyeska, which is owned by BP and several other oil companies, runs a cleaning pig down the trans-Alaska pipeline once every 14 days.

Its the same oil, Barton observed.

Marshall said the company just didnt expect a problem.

In retrospect, we should have pigged these lines, he said.

Washington, D.C., reporter Sam Bishop can be reached at (202) 662-8721 or sbishop@newsminer.com. Staff writer Stefan Milkowski contributed to this report.

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Houston Chronicle
September 8, 2006

http://www.chron.com/disp/story.mpl/business/4171625.html

Anger from House spatters BP leaders
Committee grills executives over Alaska leak
By MICHAEL HEDGES
Copyright 2006 Houston Chronicle Washington Bureau

WASHINGTON  BP America's top executives were rebuked by lawmakers for a string of missteps, which preceded a major March oil leak in Alaska, during a hearing Thursday that saw one company official refuse to testify for fear of self-incrimination.

House members seemed dumbfounded that the energy giant had failed to do a common check for pipeline corrosion for several years, even after a draft audit ordered by Alaska recommended the procedure.

"If a company  a very successful company  can't do the basic maintenance needed to keep Prudhoe Bay's oil field operating safely and without interruption, then maybe it shouldn't be operating the pipeline," said Rep. Joe Barton, R-Ennis, chairman of the House Energy and Commerce Committee.

Barton even suggested Congress might call for the sale of BP's Alaska North Slope pipelines, major feeder lines into the Trans-Alaska system.

During nearly five hours of interrogation, BP America's chairman and president, Robert Malone, and BP's Alaska chief, Steve Marshall, were queried about the company's failure to heed warnings from employees about potential pipeline corrosion.

They were also grilled about allegations that the company sought to intimidate employees who voiced concerns and arm-twisted an auditing company to whitewash a report that warned about corrosion years before the leak.

Company officials said their preliminary investigations into what went wrong did not confirm those allegations.

BP executive Richard Woollam, who ran the company's corrosion, inspection and chemicals group in Alaska in the late 1990s and early 2000s, did not answer questions, citing the Fifth Amendment's protection against self-incrimination.

A federal grand jury in Alaska is investigating whether BP's actions surrounding the leak amounted to a criminal violation of clean air and water standards, Marshall said.

But Woollam's actions were scrutinized by members of Congress. They cited a report by the Houston law firm of Vinson & Elkins in 2004 that found he had created a "chilled atmosphere" that kept concerns about corrosion from surfacing. Malone said Woollam was eventually demoted and transferred. He was working for the company in Houston before recently being placed on leave, officials said.

The company executives did say that the partial shutdown of its Alaska pipelines should be lifted by the end of October after bypass lines and further corrosion checks are completed.

BP has managed to maintain production in half of the field. But that progress report did little to stem the anger of House members.

'Bloated Profits'

Several members ridiculed BP's marketing campaign as the environmentally sensitive company with the slogan of "Beyond Petroleum," saying BP actually stood for "Bloated Profits" or "Bad Pipelines."

The hearing also saw BP castigated for broader failings, including the Texas City refinery disaster that left 15 dead in March 2005.

"I think BP has shown a culture of failing to solve problems not only with their Alaska pipelines but with their Texas refineries," said Rep. Gene Green, D-Houston. "What I'm being told by people in the industry is that it is making it hard on all energy companies to be trusted."

Malone, who was brought in this year in the wake of a series of major problems, admitted "the shine has come off the company" but vowed reforms would restore its reputation.

On March 2, corrosion caused a leak from a large pipeline feeding into the Trans-Alaska Pipeline that spilled 250,000 gallons of oil. During checks after that spill, the company found other lines were so corroded that major parts of the Prudhoe Bay oil fields were shut down in August.

The House energy oversight subcommittee hearing drew a standing-room crowd of energy analysts and environmental lobbyists. The Rev. Jesse Jackson, who has led picketing at BP gas stations claiming that high gasoline prices are hurting the poor, was in the audience.

Green and others repeatedly questioned executives about why a device called a smart pig that checks for corrosion hadn't been run through one part of the BP Prudhoe Bay system for several years.

Lawmakers incredulous

Marshall's answer, that the company thought other corrosion detection methods would work better, was met with incredulity by lawmakers who noted that using the smart pig was the industry standard.

The questioning also focused on a draft report in late 2001 by an auditing company, Coffman Engineers, done for the state of Alaska that was critical of BP's corrosion monitoring efforts.

That report was watered down after aggressive lobbying by BP manager Woollam, according to exhibits presented at the hearing, leading lawmakers to call it a "whitewash."

michael.hedges@chron.com

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New York Times
September 8, 2006

http://www.nytimes.com/2006/09/08/washington/08pipeline.html?_r=1&oref=slogin

Panel Questions BP on Managing Alaska Oil
By FELICITY BARRINGER

WASHINGTON, Sept. 7  Already facing a Justice Department inquiry over the management of the vast Prudhoe Bay complex, top executives of BP took a bipartisan pummeling on Thursday from a Congressional subcommittee.

Subcommittee members accused the executives of systematic neglect, leading to the short-term closing last month of the nations largest oilfield.

The former BP manager in charge of preventing corrosion in the oilfields, Richard C. Woollam, was the first representative questioned. Mr. Woollam refused to answer any questions, invoking the Fifth Amendment privilege against self-incrimination.

A report that BP commissioned in 2004 touched on Mr. Woollams apparent role in dealing with corrosion workers, who said they felt harassed.

As a result, most of the questions fell to Steve Marshall, president of BP Exploration Alaska, the Alaska subsidiary, who said at one point, I am not a pipeline expert.

For the most part, Mr. Marshall maintained that the company had no indication of the looming problems until 2004 or 2005.

The field, operating at half capacity, or 200,000 barrels a day, could return to full strength by Oct. 31, he told the panel, the oversight subcommittee of the House Energy and Commerce Committee.

Representative Joe L. Barton, the Texas Republican who is chairman of the full committee and who has sponsored many measures favorable to oil interests, was not mollified.

Mr. Barton said that if one of the worlds most successful oil companies cant do simple basic maintenance needed to keep the Prudhoe Bay field operating safely without interruption, maybe it shouldnt operate the pipeline.

I am even more concerned about BPs corporate culture of seeming indifference to safety and environmental issues, Mr. Barton said. And this comes from a company that prides itself in their ads on protecting the environment. Shame, shame, shame.

Other panel members questioned whether on-site managers had threatened and harassed employees who questioned the effectiveness of the anticorrosion program and pointed out that staff reductions could hamper inspections.

Committee members asked why a crucial form of internal inspection and maintenance, carried out every 14 days on the Trans-Alaska Pipeline, was not performed on major BP lines for as long as 14 years.

In March, a line carrying crude oil from the wells to pumping stations and on to the Trans-Alaska Pipeline was the source of a 200,000-gallon spill on the tundra, the worst in the history of North Slope production.

A broad inspection in July uncovered a smaller leak on the eastern side of the field, leading to the shutdown. That contributed to oil prices increasing to a record $78.65 a barrel on world markets.

No one pointed to these transit lines as a potential problem, Mr. Marshall told the committee.

In response, Representative Greg Walden, Republican of Oregon, said, The subcommittee has learned that numerous red flags were raised.

Representative Jay Inslee, Democrat of Washington, pointed out that a consultants report in 2001 that criticized BP for not reporting the magnitude of increases in corrosion or quantifying damage to pipe walls, was edited to eliminate these comments after executives intervened.

The questioning focused on the failure to perform the maintenance checks performed on the larger Trans-Alaska pipeline. The procedure involves sending a device called a pig along the pipe to clear sediment, sludge and other materials that can contribute to corrosion.

If a pipe is especially dirty or has a chemical buildup called scale, the discharge at the end of a pig run can interfere with the screens that protect pumping stations, according to testimony by the BP executives and a corrosion specialist.

Mr. Marshall was repeatedly asked why BP had waited years for the inspections that Aleyska, which runs the Trans-Alaska, conducted every two weeks. He denied that this maintenance was postponed because of worries about sludge, although he said, I wish we had done it quicker.

We strive to know the condition of our lines at all times, he added. Clearly, in retrospect, this was something we missed.

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KTUU News
September 7, 2006

http://www.ktuu.com/cms/anmviewer.asp?a=6307&z=1

Congress grills BP about Prudhoe Bay shutdown
Thursday, September 7, 2006 - by NBC's
Tracie Potts

Washington, D.C. - British Petroleum oil executives took a hammering on Capitol Hill today over the 200,000-gallon oil leak at Prudhoe Bay last March -- the region's biggest oil spill ever. U.S. Congress pressed hard to pin blame.

British Petroleums CEO apologized for failures that led to the 200,000-gallon oil leak in March and last month's partial shutdown of the country's largest oil field.

They have fallen short of what you and the American people expect of BP, and they have fallen short of what we expect of ourselves, said Robert Malone, president of BP America, Inc. (above right).

Experts now believe corrosion caused that oil spill. The pipeline hadn't been cleaned in eight years. BPs former corrosion chief wouldn't talk.

I respectfully will not answer questions based upon my right under the Fifth Amendment, said Richard Woollam, BPs former head of pipeline corrosion monitoring for the Prudhoe Bay field.

I cannot believe he's the only one in the company who knew about this problem, said Rep. Joe Barton, R-Texas (below right).

In fact, internal documents show BP had been warned about serious corrosion. Years earlier, state officials also had concerns about the condition of aging Prudhoe Bay pipelines and whether BPs system to detect leaks was up to par.

Alaska Department of Environmental Conservation Commissioner Kurt Fredriksson says his department did follow up.

But if no one's enforcing it, it means absolutely nothing. That's all stuff on paper. I asked for real, measurable improvements. There have been none, have there? said Rep. Bart Stupak, D-Michigan.

But the state did call BPs cleanup efforts exemplary.

Spills were quickly contained, oil removed, and damage and impact to the environment minimized, Fredriksson said.

As for the spill, BPs head of Alaska operations took the blame.

Clearly, in retrospect, this is something we missed. This was simply an issue of where we judged the likelihood of corrosion to be the highest, and we didn't get this one right, said Steve Marshall, president of BP Exploration (Alaska), Inc.

But with Americans miffed over prices at the pump and huge oil profits -- $26 billion for BP last year -- Congress vowed to continue pressing for answers.

This company has a lot of explaining to do, said Rep. Jan Schakowsky, D-Illinois.

Part of the pipeline is still shut down, operating at about half capacity. BP hopes to have it back at full speed around October, pending government approval.

BP has hired a former federal judge to serve as a worker ombudsman. Beginning in October, Stanley Sporkin will handle complaints from BP workers nationwide regarding safety and environmental issues.

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USA Today
September 7, 2006

http://www.usatoday.com/money/industries/energy/2006-09-07-bp-hearing_x.htm

Congressmen slam BP executives at Alaskan oil leak hearing 
Updated 9/7/2006 10:14 PM ET
By Paul Davidson, USA TODAY

WASHINGTON  Members of Congress blasted BP (BP) executives Thursday for failing to prevent two oil leaks in Alaska this year, saying the company ignored signs of pipeline corrosion, cut costs despite record profits and harassed workers who raised concerns.

"Years of neglecting to inspect the most vital oil-gathering pipelines in this country is not acceptable," Rep. Joe Barton, R-Texas, the chairman of the House Energy and Commerce Committee, told BP officials at a hearing before the investigations subcommittee.

BP executives acknowledged their corrosion-monitoring program was deficient but insisted they were not aware of the crisis until this year.

"We didn't believe we had a corrosion problem in these lines," said Steve Marshall president of BP's Alaska operations. "Clearly in retrospect, we did."

In early August, BP was forced to shut down half its Prudhoe Bay oil field, the largest in the country, after it discovered a small pipeline leak and subsequent tests revealed severe corrosion in the eastern portion of the field. That has halved the field's normal output of 400,000 barrels a day, or 8% of domestic oil supply.

Marshall said bypasses around the decayed lines could allow full production to resume by October.

August's incident followed a March spill of about 5,000 barrels on Prudhoe Bay's western tundra. A federal grand jury is investigating that leak, the largest ever on Alaska's North Slope.

On Thursday, lawmakers criticized BP for failing to inspect the ruptured western line with a "smart pig," a probe that detects corrosion, since 1998. The eastern line was last "pigged" in 1992. Instead, BP has relied on imprecise "spot checks" of the line using methods such as ultrasound testing.

Committee members cited signals that they said should have raised concerns about corrosion, including the 1992 test that showed calcium in the line.

Marshall said he was unaware of 1992 results because he didn't take the helm in Alaska until 2001 and Arco, which BP bought in 2000, operated the line in the early 1990s.

"I frankly just don't believe it," said Rep. Ed Markey, D-Mass.

"Clearly in retrospect, pigging could have been a positive step we could have taken," Marshall said.

Lawmakers also castigated top executives for creating a climate of fear that prevented workers from approaching superiors about problems. A 2004 report for BP by law firm Vinson & Elkins describes an atmosphere that "chills" reporting concerns.

Marshall said Richard Woollam, the corrosion manager whom Marshall said created an atmosphere of "intimidation," was transferred from Alaska. Woollam, now on leave, refused to testify Thursday, citing his Fifth Amendment rights.

Rep. Tammy Baldwin, D-Wis., noted a company report last year said BP based its corrosion-fighting on a limited budget instead of needs. Marshall said low oil prices in the 1990s led to a belt-tightening mindset that he worked to change.

 

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Washington Post
September 7, 2006

http://www.washingtonpost.com/wp-dyn/content/article/2006/09/07/AR2006090700524.html

BP Executives Rebuked in Hill Appearance
By Steven Mufson
Washington Post Staff Writer
Friday, September 8, 2006; D01

The former head of BP PLC's program to combat corrosion in its Alaska pipelines invoked the Fifth Amendment and refused to answer questions before a House subcommittee yesterday as lawmakers excoriated two other senior company executives for maintenance neglect that led to leaks and the closure of key oil pipelines last month.

The top executives of BP's North American and Alaskan operations faced grilling under oath about why they had failed to prevent a leak, found in March, that spilled 210,000 gallons of crude oil on the northern Alaska tundra. And they were pressed on how they could have failed until last month to detect corrosion so severe that BP was forced to shut down half the output of Prudhoe Bay, the largest U.S. oil field.

"If a company -- one of the world's most successful oil companies -- can't do the basic maintenance needed to keep Prudhoe Bay's oil field operating safely and without interruption, maybe it shouldn't be operating the pipeline," said House Energy and Commerce Committee Chairman Joe Barton (R-Tex.).

Although the pipeline is owned by BP and partners in the Prudhoe Bay field, company executives were eager to mollify Barton, whose committee deals with a broad variety of legislative issues important to BP from pipeline regulations to tax breaks. Robert A. Malone, the president of BP America, said the company had "stumbled," and he apologized to lawmakers. "We have fallen short of the high standards we hold for ourselves and the expectations that others have for us," he said.

The picture of BP executives, each with an attorney in tow, parrying questions about management failure erased millions of dollars of advertising that had sought to craft an image of an environmentally conscious company thinking "beyond petroleum." Rep. Edward J. Markey (D-Mass.) said BP stood for "bloated profits." Rep. Greg Walden (R-Ore.) said the company's name could stand for "broken pipelines."

Lawmakers on the oversight and investigations subcommittee of the House panel zeroed in on the company's failure to use a common pipeline diagnostic device known as a "smart pig" to detect problems. They also probed allegations that the company ignored or suppressed complaints from its workers about pipeline safety issues.

The subcommittee called Richard C. Woollam, the former manager for corrosion, inspection and chemicals for BP Exploration Alaska, to testify, but Woollam said, "Based upon the advice of counsel, I respectfully will not answer questions." Although it wasn't clear why Woollam invoked the Fifth Amendment, one possible reason is that a federal criminal investigation is underway about BP's oil spill and that he was involved in the design of the company's anti-corrosion program.

BP Alaska's president, Steve Marshall, said that Woollam had been transferred out of Alaska after a 2004 investigation by an outside law firm cited Woollam for intimidating workers who had raised safety issues. Marshall said the law firm, Vinson & Elkins LLP, "found evidence of intimidating behavior that had made some corrosion workers reluctant to raise health and safety concerns." Woollam, now based in BP's Houston office, no longer has a supervisory role, and Marshall said yesterday that Woollam was on paid leave.

But Barton asserted that "several individuals" the committee wanted to interview said "that they were reluctant to come forward to provide information due to concerns over possible retribution throughout the oil industry in Alaska." He warned that any company retaliating against such individuals would be prosecuted. "We are going to get to the bottom of this," he said.

Marshall also defended BP against allegations that it had disregarded other employee complaints. He said that in 2002, after receiving two anonymous calls alleging the falsification of corrosion inspection reports, BP hired an outside firm to audit records and found that "a small percentage of inspections had indeed been falsified." Marshall said the workers responsible were dismissed and the inspection firm's contract was not renewed.

He said that the company had also sent a senior engineer and several technical experts from outside Alaska to assess allegations that "cost-cutting and deficiencies in the corrosion program were going to lead to a major incident on the North Slope" of Alaska. He said that audit led to recommendations for improvements "that have been or which are still being implemented."

Marshall said BP's spending on maintenance at Prudhoe Bay would rise to $195 million in 2007, four times the 2004 level; $150 million will go toward replacing 16 miles of corroded oil transit lines.

Malone said that he has named an ombudsman for employees who have complaints -- Stanley Sporkin, former district court judge and former head of the Securities and Exchange Commission's enforcement division.

Barton leveled scorching criticism at the company, citing concerns about "BP's corporate culture of seeming indifference to safety and environmental issues." Noting that "this comes from a company that prides itself in their ads on protecting the environment," Barton said, "Shame, shame, shame."


 

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Corporate Crime Reporter
September 7, 2006

http://www.corporatecrimereporter.com/stevens090706.htm

Senator Stevens Feuds with Main Justice in DC as FBI Raids Son's Office in Alaska
20 Corporate Crime Reporter 35(1), September 6, 2006

Senator Ted Stevens (R-Alaska) is feuding with the Justice Department.

On August 22, Attorney General Alberto Gonzales appointed Nelson Cohen, head of the white collar crime unit at the U.S. Attorney's office in Pittsburgh, Pennsylvania  to be the interim U.S. Attorney in Alaska  over the objections of Senator Stevens.

Senator Stevens said at the time that he was furious at the way the Attorney General handled the matter.

According to a transcript provided by Senator Stevens' office to Corporate Crime Reporter, at a press conference on August 28 in Anchorage, Alaska, Senator Stevens was asked by a reporter  Who do you think should be U.S. Attorney?

Well not someone who comes from Pennsylvania, and that's a little problem I have right now, finding out what to do about that, Stevens said. Because very clearly, I was called three weeks ago now, and told they had someone who they'd like to nominate from outside Alaska. And we said, No, no. You're not going to do that. You can't do that. You don't do that in any other state. You're not going to do it in this one.'

But Gonzales overrode Stevens' objection and put in Cohen to be U.S. Attorney in Alaska on a temporary basis. As such, the Cohen appointment does not require Senate confirmation.

In a press release ( http://www.corporatecrimereporter.com/documents/cohen.pdf )  , the Justice Department says that prior to joining the U.S. Attorney's office in Pittsburgh, Cohen practiced law for ten years in Alaska.

We submitted some names, but Justice had one reason or another that they figured the person had a conflict, but they never really came with anything other than that we should find someone else, Stevens said at the press conference. We did give them some additional names, but in the meantime they had already taken action on this person. We have to arm wrestle on this one. It is not the thing to do. It has only happened one other time that I can remember. I can remember it happened in Illinois and it caused such an uproar. As a matter of fact, it became a real cause celeb with the Illinois Bar Association.

On August 31  just three days after Senator Stevens' press conference denouncing the Department of Justice  the FBI raided the offices of a number of state legislators in Juneau including that of Senator Stevens son  Alaska Senate President Ben Stevens.

FBI agents reportedly left Ben Stevens Capitol offices with 12 boxes of documents labeled evidence.

Federal officials are reportedly investigating payments from oil service giant VECO to a number of public officials in exchange for their support for a new production tax law and the construction of a natural gas pipeline in Alaska.
The Anchorage Daily News reported last week that in disclosures he was required to file as a legislator, [Ben] Stevens said he was paid $243,000 over the last five years as a consultant' to VECO. Whenever he was asked to describe what he did for the money, Stevens refused to answer. The company also refused to say.

In addition to computer hard drives and hard paper records linking the legislators to VECO, FBI agents were reportedly seeking hats emblazoned with the logo  Corrupt Bastards Club or Corrupt Bastards Caucus.

In March, in an op-ed piece run in the state's major papers, Lori Backes, executive director of the All Alaska Alliance  a group that has supported an alternative gas pipeline route  had charged eleven lawmakers  including Senator Ben Stevens  with taking money from VECO.

The lawmakers reportedly started referring to themselves as the Corrupt Bastards Club or the Corrupt Bastards Caucus  and had hats printed with the CBC logo.

Aaron Saunders, a spokesman for Senator Ted Stevens, would not discuss anything having to do with the FBI raid in Alaska.

Nor would he say why Senator Stevens was furious with Attorney General Gonzales.

Could it be that the Justice Department was not going to give Senator Stevens his choice of a U.S. Attorney when the Stevens family was caught in the middle of a public corruption probe?

No comment, Saunders said.

 

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CBSNews.Com
September 7, 2006

http://www.cbsnews.com/stories/2006/09/07/business/main1984524.shtml

Former BP Exec Pleads The Fifth
WASHINGTON, Sept. 7, 2006

(CBS/AP) A former BP executive in Alaska who may have intimidated workers from speaking up about pipeline corrosion at the nation's largest oil field could not bring himself to answer questions from lawmakers about how BP's neglect led to a massive oil spill.

"Based upon the advice of counsel, I respectfully will not answer questions," Richard C. Woollam said Thursday as he invoked the Fifth Amendment of the Constitution in refusing to testify under oath before a House subcommittee.

Woollam's refusal to speak stood in contrast to other BP executives.

They responded to harsh criticism from lawmakers with pledges to stiffen the company's admittedly lax monitoring of pipeline corrosion, which they blamed for the North Slope's biggest ever oil spill earlier this year and the subsequent partial shutdown of the country's largest oil field.

Lawmakers said BP's mistakes in Alaska  as well as its responsibility for a deadly refinery fire last spring  were particularly unacceptable given the industry's record profits and the relatively inexpensive measures that might have prevented the oil spill.

Thomas Barrett, head of the federal Pipeline and Hazardous Materials Safety Administration, said he found BP's shoddy maintenance procedures to be "very puzzling," adding that the Prudhoe Bay fiasco is "not a bellwether for the health of the majority of the energy pipeline infrastructure."

With Congress aiming to wrap up its current session by the end of the month, Thursday's House hearing was not expected to result in any specific legislative action; it did, however, offer lawmakers an opportunity to talk tough to Big Oil at a time of soaring prices and ahead of November elections.

Rep. Diana DeGette, D-Colo., said she was especially disappointed in BP, since it professes in advertising to pride itself on protecting the environment. "I applaud BP for trying to move beyond petroleum, but maybe it should start by sticking to the basics and begin to focus on rudimentary pipe maintenance."

In March, more than 200,000 gallons of oil leaked from a 34-inch pipeline that crosses the Alaska tundra. Follow-up inspections mandated by federal investigators led to the discovery of another much smaller leak, as well as widespread corrosion that led BP on Aug. 6 to briefly shut down the entire Prudhoe Bay field.

"It is critical that no further leaks occur on these lines," Rep. Joe Barton, R-Texas, said. But, he added, "I'm even more concerned about BP's corporate culture."

BP is largely trusted to monitor itself, with only the state of Alaska  hardly a neutral bystander  keeping an eye on its activities, reports CBS News correspondent Sharyl Attkisson. Alaska gets 89 percent of its income from oil revenue and loses millions for every day Prudhoe Bay is at half-speed.

Lawmakers repeatedly hammered BP executives about allegations that the company failed to adequately address concerns raised by its own pipeline workers over the past five years, in part because of an atmosphere of fear and intimidation under the supervision of Woollam. Woollam is the former head of pipeline-corrosion monitoring for BP in Alaska.

Steve Marshall, the president of BP Exploration Alaska Inc., conceded that Woollam's "abrasive nature" and "intimidation" may have silenced workers.

In 2004, BP hired the Houston-based law firm Vinson & Elkins to conduct an internal investigation of alleged workplace harassment and pipeline-corrosion data falsification. The law firm concluded that some pipeline inspectors experienced "fear of retaliation" for reporting safety concerns and other issues, but said there was no evidence that BP employees or contractors were explicitly told not to raise red flags.

Woollam, who has worked for BP for 20 years, agreed to undergo counseling while in Alaska and was transferred in 2005 to a non-supervisory job in Houston. He is now on paid leave.

In an effort to address criticism that the company for years has willfully ignored employee concerns about pipeline safety and other environmental issues, BP on Tuesday asked a former federal judge to serve as its ombudsman and hear complaints from workers in Alaska and elsewhere about the company's operations.

BP announced Thursday that the company has hired three outside corrosion experts to independently review the Alaska pipeline problems and to make recommendations for improving BP's corrosion prevention policies.

Robert A. Malone, the head of BP PLC's U.S. operations, conceded that the company's reputation has suffered, but he vowed that Prudhoe Bay would be managed in "a safe, efficient and environmentally sensitive way."

Prudhoe Bay isn't BP's only problem.

The London-based company faces victims' lawsuits from a deadly explosion last year at its Texas City, Texas-based refinery. And in June federal investigators said BP energy traders cornered the U.S. propane market in the winter of 2004 and illegally manipulated prices. Investigators are also reportedly looking into whether BP manipulated crude-oil and gasoline markets.

Thursday's hearing by the House Energy and Commerce Subcommittee on Oversight and Investigations was the first of several that will focus on BP in coming weeks.

Until last month's partial shutdown, Prudhoe Bay had been producing roughly 400,000 barrels per day, or 8 percent of total U.S. output. BP is currently pumping 220,000 barrels a day, though Marshall said output could be fully restored as early as the end of October.

BP officials said early tests show that oil-eating bacteria may have contributed to the Alaska pipeline corrosion. Excrement from the bacteria inside the pipes produces an acid that eats through carbon steel.

Marshall acknowledged that the corrosion problem could have been mitigated by more consistent inspection and removal  or "pigging"  of sludge that builds up on the inner walls of oil pipelines, providing shelter for the bacteria.

"Clearly, in retrospect, pigging would have been a positive step we could have taken," Marshall said.

Marshall said BP's spending on major maintenance at Prudhoe Bay would rise to $195 million in 2007, a fourfold increase from 2004; $150 million will go toward replacing 16 miles of corroded oil transit lines.

 

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Wall Street Journal
September 7, 2006

Lawmakers Grill BP Officials
About Alaska Oil Problems
By JOHN J. FIALKA
September 7, 2006 5:57 p.m.

WASHINGTON -- The American subsidiary of BP PLC waded deeper into troubled legal and political waters after its chief pipeline inspection expert took the Fifth Amendment before a House Energy and Commerce panel, rather than explain what he knew about corrosion in the oil company's Prudhoe Bay pipelines in 2002.

Richard C. Woollam, who managed corrosion control and inspection teams, also refused to respond, on the advice of his lawyer, to the committee's allegations that he reduced the inspection team responsible for monitoring 22 miles of pipelines leading from the giant oil field by 25%, after an outside contractor suggested that accumulating sediment in the lines might be corroding them. A BP spokesman said Mr. Woollam no longer runs its Alaska inspection efforts and has been placed on leave, but remains with the company.

After Mr. Woollam left the hearing room, Steve Marshall, president of BP Exploration Alaska Inc., which manages Prudhoe Bay's operations, insisted that neither he nor other BP officials knew about serious corrosion problems until March 2 when 250,000 gallons of crude oil spilled onto the tundra. He acknowledged that the Department of Justice has subpoenaed a section of the pipeline as part of its continuing probe of the spill.

These responses provoked rare, bipartisan agreement among members of the powerful committee that, as Chairman Joe Barton, (R., Texas) put it, the London-based oil company's maintenance policies were "not acceptable." Mr. Barton said the discovery of a second leak led to a decision to shut down the entire pipeline system on Aug. 6, temporarily shutting off 8% of the nation's domestic oil supplies and sending gasoline prices skyward.

After reviewing documents discovered during his panel's four-month investigation of BP, Mr. Barton commented: "It seems to me that BP was betting the company and their field that this field would be depleted before major parts of the pipeline failed and needed to be replaced."

"Maybe it [BP] shouldn't operate the pipeline," Mr. Barton continued, suggesting that Congress might help arrange a private sale of the oil field system "to get a different operator."

Democrats piled on, with several paraphrasing BP's environmentally friendly slogan "Beyond Petroleum," calling it "Broken Pipelines." Noting that BP's London-based parent posted earnings of $25 billion last year, Rep. Edward J. Markey (D., Mass.) called it "Bloated Profits."

Mr. Marshall yielded a little ground. He said that BP officials suspected in 2005 that sediment in the pipelines might be exacerbating corrosion problems and planned a test of a robot called a "smart pig" to inspect the lines to take place this year. "In retrospect, I wish we'd done it sooner."

Under questioning Mr. Marshall also acknowledged that he heard reports in early 2003 that lower-level BP officials responded to workers' complaints about safety and pipeline problems with intimidation and threats to their jobs.

He said he investigated those allegations and others raised by the committee that BP may have pressured an outside contractor to change a 2002 report that had originally concluded that there could be serious corrosion problems in the pipelines, which were built in 1977 to feed oil from wells into the main pipeline system.

While he said BP officials disagreed with the conclusion -- which disappeared from later versions of the report -- Mr. Marshall said an internal investigation "found no evidence of pressure" to change the report.

Mr.. Barton warned Mr. Marshall and other BP witnesses at one point that his investigators found lower-level BP employees reluctant to talk because of "possible retribution" from BP or other large oil industry employers in Alaska. "I will use every bit of power that I have," he told them, to see that the "retaliator is prosecuted to the fullest extent of the law."

Robert A. Malone, chairman and president of BP America Inc., the overall U.S. subsidiary, said the company had hired outside advisers to advise employees on safety and ethical problems. "We have fallen short of the high standards we hold for ourselves," he told the committee, "and the expectations that others have for us."

Write to John J. Fialka at john.fialka@wsj.com 


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UPDATE:
BP To Restore All Prudhoe By End Oct If DOT Agrees
DOW JONES NEWSWIRES
September 7, 2006 6:20 p.m.
(Updates with comment from U.S. regulator.)
 
WASHINGTON (Dow Jones)--BP PLC (BP) plans to bring the entire Prudhoe Bay field back on line by the end of October, provided it gets the green light from the U.S. Department of Transportation, BP Alaska President Steve Marshall said Thursday.

BP has submitted a series of alternative piping plans involving the Endicott line "potentially to have the field back up to 400,000 barrels per day by the end of October, subject to DOT approval," Marshall told the U.S. House Energy and Commerce Committee Subcommittee on Oversight and Investigations.

Federal approval through the Department of Transportation is critical to BP's goals. DOT has told BP that a restart of the eastern half of the field, the side now shut due to corrosion, will require at least two week's advance notice, BP has said.

Thomas Barrett, administrator of the Pipeline and Hazardous Materials Safety Administration, said there is no time frame for restoring the eastern side of the field.

"There's no date," Barrett told reporters after the hearing. "There's a process."

Barrett outlined a series of issues that BP will need to resolve before restarting the remainder of the field, including having an adequate risk management plan and having an oil spill response plan in case of an accident.

"From my point of view, I'm not going to speculate on a time frame," he said. "We'll allow it to go forward when we're confident it'll be safe."

The committee is holding a hearing on BP management lapses that led to the partial shutdown of the giant Prudhoe Bay oil field in Alaska.

BP originally said it was shutting the entire 400,000-b/d field on Aug. 6 after finding severe corrosion in a pipeline. It subsequently partially reversed that decision and is currently pumping 200,000 b/d from the western side of the field.

It is evaluating options to re-route oil from the eastern field, including moving crude through the adjacent Endicott line that's running at less than capacity.

The full return of Prudhoe Bay would represent a supply cushion for global oil markets, particularly for refineries on the U.S. West Coast that are the principal customers for Alaska North Slope crude.

 
-By Ian Talley and and John M. Biers, Dow Jones Newswires, (202)862-9285; john.biers@dowjones.com

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House Panel Scheduling More BP Prudhoe Bay Hearings-Aides
DOW JONES NEWSWIRES
September 7, 2006 6:33 p.m.
By Ian Talley
Of DOW JONES NEWSWIRES
 
WASHINGTON (Dow Jones)--A congressional subcommittee has begun scheduling additional hearings to investigate the failure of BP PLC's (BP) Prudhoe Bay oil pipelines that led to the partial shutdown of the largest producing oil fields in the U.S., several aides for congressman on the subcommittee told Dow Jones Newswires Thursday.

The U.S. House Energy and Commerce Committee Subcommittee on Oversight and Investigations is scheduling follow-up hearings because of unsatisfactory responses from BP during a hearing Thursday, said the aides, who work for both majority and minority committee members. The aides couldn't immediately say when the new hearings would take place.
 
Thursday saw the start of a spate of four congressional hearings investigating the failure of BP's Prudhoe Bay pipelines. London-based BP roiled oil markets when the energy major said on Aug. 6 it would begin shutting down all of Prudhoe Bay's 400,000 barrels a day of output after finding severe pipeline corrosion and an oil leak. Later, BP decided transit lines serving half of the field were safe enough to keep 200,000 barrels a day flowing.

"There's definitely a basis for further hearings," a congressional aide for a key panel member said.

Rep. Michael Burgess, R-Texas, who chaired the subcommittee hearing in the afternoon, later said he expected more hearings would be called and said the record would remain open to allow the members to inquire further from witnesses.

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

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BP Exec: 2000 Engineers Report Not Changed Due To Co Pressure
DOW JONES NEWSWIRES
September 7, 2006 1:35 p.m.
 
WASHINGTON (Dow Jones)--BP PLC (BP) recently investigated changes made to an engineers' report in 2000 that warned of BP pipeline corrosion, but found no evidence that company pressure caused the modifications, a BP executive said Thursday.

A draft of the report, by Coffman Engineers, strongly urged that BP improve monitoring of its Prudhoe Bay pipelines, but the final report watered down the language and eliminated some criticism of BP. The oil major has come under fire for not using "smart-pigging" technology to test the soundness of its Prudhoe Bay pipelines following a major oil spill in March and a partial shutdown of the Prudhoe Bay oil field more recently due to pipeline corrosion.

BP Alaska President Steve Marshall said BP initiated an investigation into the changes after the March spill.

"We haven't interviewed everyone, but so far we've found no pressure," Marshall said in a response to U.S. lawmakers.

Marshall said he was not personally aware of the Coffman changes until after the March spill.

Marshall made his comments during a special hearing Thursday before the U.S. House of Representatives Energy and Commerce Committee Subcommittee on Oversight and Investigations.

The Alaska Department of Environmental Conservation hired Coffman as a contractor to help the agency oversee BP's pipeline corrosion management program.

U.S. Rep. Joe Barton, R-Texas, chairman of the full Energy and Commerce Committee, said committee investigators interviewed a former ADEC official who believes the Coffman reports were changed in response to BP pressure. The official, Susan Harvey, resigned from the agency a couple of years ago.

Harvey told House investigators the Coffman report was "extensively changed after she was relieved from the project," Barton said. Harvey "feels like she was removed because of pressure from BP to remove her," he said

"I'm not convinced senior (BP) members didn't know about" the sludge and corrosion problems, Barton told Dow Jones Newswires. "I can't believe they didn't know about these problems. I believe senior members chose to do less than needed for economic reasons."

Barton said the former Alaska state agency official spoke with the congressional committee after committee staff approached her. "She did not voluntarily come forward," he noted.

Marshall said he wasn't aware of Harvey's involvement in the Coffman report changes.
 
-By John Biers; Dow Jones Newswires; 713-547-9214; john.biers@dowjones.com 
(Dow Jones Newsires reporter Ian Talley contributed to this report)

 

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Houston Chronicle
September 7, 2006

http://www.houstonchronicle.com/disp/story.mpl/front/4169556.html

Ex-BP official refuses to testify about pipeline
By BRAD FOSS
Associated Press

WASHINGTON  A former BP executive in Alaska who may have intimidated workers from speaking up about pipeline corrosion at the nation's largest oil field could not bring himself to answer questions from lawmakers about how BP's neglect led to a massive oil spill.

"Based upon the advice of counsel, I respectfully will not answer questions," Richard C. Woollam said today as he invoked the Fifth Amendment of the Constitution in refusing to testify under oath before a House subcommittee.

Woollam's refusal to speak stood in contrast to other BP executives. They responded to harsh criticism from lawmakers with pledges to stiffen the company's admittedly lax monitoring of pipeline corrosion, which they blamed for the North Slope's biggest ever oil spill earlier this year and the subsequent partial shutdown of the country's largest oil field.

Lawmakers said BP's mistakes in Alaska  as well as its responsibility for a deadly refinery fire last spring  were particularly unacceptable given the industry's record profits and the relatively inexpensive measures that might have prevented the oil spill.

Thomas Barrett, head of the federal Pipeline and Hazardous Materials Safety Administration, said he found BP's shoddy maintenance procedures to be "very puzzling," adding that the Prudhoe Bay fiasco is "not a bellwether for the health of the majority of the energy pipeline infrastructure."

With Congress aiming to wrap up its current session by the end of the month, today's House hearing was not expected to result in any specific legislative action; it did, however, offer lawmakers an opportunity to talk tough to Big Oil at a time of soaring prices and ahead of November elections.

Rep. Diana DeGette, D-Colo., said she was especially disappointed in BP, since it professes in advertising to pride itself on protecting the environment. "I applaud BP for trying to move beyond petroleum, but maybe it should start by sticking to the basics and begin to focus on rudimentary pipe maintenance."

In March, more than 200,000 gallons of oil leaked from a 34-inch pipeline that crosses the Alaska tundra. Follow-up inspections mandated by federal investigators led to the discovery of another much smaller leak, as well as widespread corrosion that led BP on Aug. 6 to briefly shut down the entire Prudhoe Bay field.

"It is critical that no further leaks occur on these lines," Rep. Joe Barton, R-Texas, said. But, he added, "I'm even more concerned about BP's corporate culture."

Lawmakers repeatedly hammered BP executives about allegations that the company failed to adequately address concerns raised by its own pipeline workers over the past five years, in part because of an atmosphere of fear and intimidation under the supervision of Woollam. Woollam is the former head of pipeline-corrosion monitoring for BP in Alaska.

Steve Marshall, the president of BP Exploration Alaska Inc., conceded that Woollam's "abrasive nature" and "intimidation" may have silenced workers.

In 2004, BP hired the Houston-based law firm Vinson & Elkins to conduct an internal investigation of alleged workplace harrassment and pipeline-corrosion data falsification. The law firm concluded that some pipeline inspectors experienced "fear of retaliation" for reporting safety concerns and other issues, but said there was no evidence that BP employees or contractors were explicitly told not to raise red flags.

Woollam, who has worked for BP for 20 years, agreed to undergo counseling while in Alaska and was transferred in 2005 to a non-supervisory job in Houston. He is now on paid leave.

In an effort to address criticism that the company for years has willfully ignored employee concerns about pipeline safety and other environmental issues, BP on Tuesday asked a former federal judge to serve as its ombudsman and hear complaints from workers in Alaska and elsewhere about the company's operations.

BP announced today that the company has hired three outside corrosion experts to independently review the Alaska pipeline problems and to make recommendations for improving BP's corrosion prevention policies.

Robert A. Malone, the head of BP PLC's U.S. operations, conceded that the company's reputation has suffered, but he vowed that Prudhoe Bay would be managed in "a safe, efficient and environmentally sensitive way."

Prudhoe Bay isn't BP's only problem.

The London-based company faces victims' lawsuits from a deadly explosion last year at its Texas City, Texas-based refinery. And in June federal investigators said BP energy traders cornered the U.S. propane market in the winter of 2004 and illegally manipulated prices. Investigators are also reportedly looking into whether BP manipulated crude-oil and gasoline markets.

Today's hearing by the House Energy and Commerce Subcommittee on Oversight and Investigations was the first of several that will focus on BP in coming weeks.

Until last month's partial shutdown, Prudhoe Bay had been producing roughly 400,000 barrels per day, or 8 percent of total U.S. output. BP is currently pumping 220,000 barrels a day, though Marshall said output could be fully restored as early as the end of October.

BP officials said early tests show that oil-eating bacteria may have contributed to the Alaska pipeline corrosion. Excrement from the bacteria inside the pipes produces an acid that eats through carbon steel.

Marshall acknowledged that the corrosion problem could have been mitigated by more consistent inspection and removal  or "pigging"  of sludge that builds up on the inner walls of oil pipelines, providing shelter for the bacteria.

"Clearly, in retrospect, pigging would have been a positive step we could have taken," Marshall said.

Marshall said BP's spending on major maintenance at Prudhoe Bay would rise to $195 million in 2007, a fourfold increase from 2004; $150 million will go toward replacing 16 miles of corroded oil transit lines.

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Financial Times
September 7, 2006

http://www.ft.com/cms/s/2bcbd5ba-3e99-11db-b4de-0000779e2340.html

BP officials admit ‘unacceptable’ failures
By Jeremy Grant in Washington
Published: September 7 2006 19:16 |
Last updated: September 7 2006 22:35

BP on Thursday said failures at it US operations were “unacceptable” as top executives faced grilling from angry lawmakers in Washington about oil spills and pipeline corrosion that caused a massive supply shutdown in Alaska.

One BP official, Richard Woollam, former head of corrosion monitoring at the company’s Prudhoe Bay facility in Alaska, refused to testify under oath at the House committee on energy and commerce hearing, citing his constitutional right against self-incrimination.

BP last month shut down half its oilfield in Prudhoe Bay after government-ordered inspections found severe corrosion of the eastern oil transit line.

BP told the committee Mr Woollam was removed last year from its Alaska operations after the company found evidence of an “atmosphere of intimidation” in his pipeline inspection operations team. Lawmakers at the hearing seized on the revelation as a sign that company whistleblowers who may have tried to raise alarm about the condition of BP’s pipelines were ignored.

Bob Malone, president of BP North America, said Mr Woollam had been “put on leave” but remained on its payroll. (Malone Testimony:
  http://www.ft.com/cms/s/2bcbd5ba-3e99-11db-b4de-0000779e2340.html )

Mr Malone called his company’s record “unacceptable” and said BP had “fallen short of the high standards we hold for ourselves, and the expectations that others have for us”.

Prudhoe Bay accounted for 8 per cent of US domestic supply. Its closure led to anger about BP’s safety and pipeline management policies.

Mr Malone said: “A few people have alleged that BP engineered the shutdown of Prudhoe Bay as a way to manipulate prices. I am here to assure you that nothing could be further from the truth. BP took the extraordinary step to shut down production because we saw unexpectedly severe corrosion that couldn’t be explained.”

Lawmakers expressed astonishment BP could not have foreseen its pipeline problems by regular inspections known as “pigging”, in which an inspection device is sent down a pipeline. Steve Marshall, president of BP Exploration in Alaska, said: “Clearly pigging in retrospect could have been a positive step.” ( Marshal Testimony: http://media.ft.com/cms/546ba8ae-3e8c-11db-b4de-0000779e2340.pdf )

Joe Barton, a Texas Republican who chairs the House committee, said BP’s admissions “just didn’t cut it” when it came to excusing “consistent failure”.

“If ... one of the world’s most successful oil companies can’t do simple, basic maintenance needed to keep the Prudhoe Bay field operating ... maybe it shouldn’t operate the pipeline,” he said. “Maybe we should find a way to get a different operator through the private market sale of this pipeline and let somebody else do it.”

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Stockton Record
September 7, 2006

http://www.recordnet.com/apps/pbcs.dll/article?AID=/20060907/NEWS01/609070333/1001

Probed oil firm linked to Pombo
It gave thousands to congressman

SACRAMENTO - An Alaskan oil services company under federal investigation in connection with allegations of influence peddling has contributed nearly $18,000 to Rep. Richard Pombo of Tracy, a Record analysis of federal campaign finance records shows.

The investigation sparked a Washington state candidate for the U.S. Senate to return his contributions from Anchorage-based VECO Corp. the day after the FBI raided offices of several Alaskan state legislators last week.

Pombo's spokesman Carl Fogliani said they are keeping the cash for now.

"We've got thousands of contributors," Fogliani said. "If a problem arises with one of them, we have a policy to give the money to charity.

"But we don't know enough at this point to make any decision."
VECO is under investigation for possibly strong-arming Alaskan lawmakers during a debate over how that state taxes the oil industry. Various media reports suggest the FBI investigation may be wider, although investigators are not talking.

Pombo's opponent in this autumn's election, Pleasanton wind energy consultant Jerry McNerney, said Pombo should return the money.

"It seems like every week there's some new scandal or rumor coming to light about Congressman Pombo's behavior," McNerney said. "If we want people to believe in their government, we need a new direction in Congress."

Washington state Republican Mike McGavrick, who hopes to unseat U.S. Sen. Maria Cantwell this fall, on Friday returned $14,000 he had received from VECO executives.

A McGavrick spokesman told The Associated Press that the campaign wanted to avoid any appearance of impropriety.

VECO has been one of the chief companies lobbying to open the Arctic National Wildlife Refuge to oil drilling, while Pombo has been one of Congress' chief cheerleaders for drilling in the refuge since he was first elected in 1992.

A Record analysis of federal campaign finance reports shows Pombo's two political committees have received at least $250,000 from the oil and energy industry since last year, among the largest amounts to any member of Congress.

Pombo has tried - and failed - to bring drilling to the area several times since he became chairman of the House Resources Committee in 2003. Most Democrats and many Eastern Republicans oppose drilling in ANWR for environmental reasons.

VECO began contributing to Pombo a year after he became chairman and catered a fundraiser for him in August 2005, records show. Five company executives gave Pombo a total of $7,000 on April 27 of this year.

One of them, Bill Allen, co-chaired George W. Bush's Alaskan campaign in 2000. Allen is VECO's chief political operative, according to an interview with company President Pete Leathard in an industry newsletter last year.

"Bill Allen puts a lot of effort into politics. I do, too, but he's the lead person by far," Leathard told Alexander's Gas and Oil Connections. Leathard said the firm spends a great deal of time trying to elect Alaskan lawmakers who "think pretty well like us."

Should the FBI indict VECO or its executives, Fogliani said they likely would donate the contributions to a charity such as the Boys & Girls Club, as they have three times before this election cycle.

Pombo donated the $7,000 he had received from felonious Indian
gaming lobbyist Jack Abramoff, $2,000 from disgraced San Diego
Rep. Randy "Duke" Cunningham and $1,000 from indicted Abramoff
associate Joe Vo

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Anchorage Daily News
September 7, 2006

http://www.adn.com/news/politics/veco/story/8166354p-8058918c.html

Veco's influence has been part of Capitol scene for years
BILL ALLEN: Near the close of this year's session, he engaged directly with legislators.
By TOM KIZZIA
Anchorage Daily News
Published: September 7, 2006
Last Modified: September 7, 2006 at 02:58 AM

For two decades, oil man and political financier Bill Allen has been a familiar presence in the halls of the Alaska Capitol. But toward the end of this year's regular legislative session, the Veco chief executive may have taken that familiarity a step too far.

Allen was watching the state House debate oil taxes on the next-to-last night of business in May when he began passing notes to legislators across the railing of the small spectator gallery, according to Rep. Harry Crawford, D-Anchorage. Rules say the public can pass notes through the front door to be delivered by a page. Direct engagement from the visitor gallery is forbidden once the speaker's gavel sounds.

Crawford said he saw Rep. Tom Anderson, R-Anchorage, carry several notes from Allen to other legislators. Anderson has received Veco campaign contributions and has also reported $30,000 in consulting contracts with the company since 2003. Several other legislators say their staff observed similar goings-on.

"He was definitely directing traffic back there," Crawford said of Allen.

Democrats were frustrated as cell phones rang and legislators returned from at-ease breaks to reverse votes they'd just taken. House minority leader Ethan Berkowitz finally stood up and gave a speech blasting undue interference in the legislative process. He said later he was referring not just to Veco but to meddling during House floor sessions from all directions, including Murkowski administration officials.

Allen later sent an e-mail to some legislators apologizing for getting carried away, said Sen. Ralph Seekins, R-Fairbanks. Seekins, who wasn't in the House chamber that night, said it wasn't clear exactly what Allen was referring to other than getting "a little overexuberant." Seekins said he no longer had a copy of the e-mail.

Allen did not return a message Wednesday seeking comment on the episode. Anderson was traveling and could not be reached for comment.

Veco's role in Alaska's political process is under intense scrutiny now. Last week the FBI served search warrants on legislative offices and others seeking a wide range of information related to Allen and other Veco executives, including gifts to public officials. But much of Veco's influence, dating from the early 1980s, comes from sources in plain sight. This includes close to $1 million in state and federal campaign contributions over the past decade as well as consulting contracts with individual legislators.

"It's not just their checks. It's all the people who show up at their fundraisers," said Andrew Halcro, a former Republican legislator now running for governor as an independent. "They can bring lots of other people to the table. That's where people underestimate the company's power."

Late Wednesday, Veco issued its first official statement after an eventful week. The company said that, to its knowledge, it had done nothing "improper or illegal." Veco said it had offered to assist the federal investigation and defended its right to get involved in the political process.


SWAY OVER REGULATIONS

Veco's presence in Juneau is distinctive not just for its role in helping finance many campaigns but for the personal role played by Allen and several other company executives. Veco has hired top-drawer professional lobbyists in the past, as it did while pushing for a private prison between 1996 and 2002. But Allen, 69, is known for taking a personal hand in promoting his priorities, in a manner often described as gentlemanly rather than bullying.

Halcro said he got crossways with the Veco boss two days after first being elected in 1998. As House Republicans organized around two factions, Allen called to suggest Halcro side with Rep. Pete Kott in the name of party unity, Halcro recalled. Halcro said he was lining up instead with Rep. Brian Porter. He said Allen started talking about all the money he'd raised that year for the Republican Party and the help he'd given Halcro's own campaign.

"I thought, 'This guy's putting the strong arm on me,' " Halcro said. "You hear about these stories. I couldn't get off the phone fast enough."

In 2002, Allen became so involved pressing for two priority pieces of legislation that he got pinched by the state's lobbying law. In a bold display of Veco's influence, Allen's protests prompted Republican legislators the next year to overhaul the state's regulation of lobbyists, passing what opponents called "the Bill Allen bill."

At the time, business owners were supposed to register as lobbyists if they put in more than four hours of face-to-face time with public officials over a 30-day period. The four-hour standard had been in place since 1979, according to the Alaska Public Offices Commission. Teachers, city council members and other group members on lobbying trips had an exemption known as "legislative fly-ins." No one ever complained, said APOC assistant director Chris Ellingson.

In 1996, the Legislature added a new twist -- anyone registering as a lobbyist was barred from giving campaign contributions outside his or her home district. The idea was to prevent favor-seeking lobbyists from working a building full of people they'd given money to.

Allen spent a lot of time in the Capitol in 2002, pressing the Legislature to pay for a private prison in Whittier (Veco was teamed with a national prison company, Cornell, to build the project) and to authorize a property tax break for construction of a North Slope natural gas pipeline.

Allen was in the Capitol so much that APOC ordered him to register as a lobbyist. Allen protested, saying business owners looking out for their own interests should not be treated like professional lobbyists who represent a variety of clients.

Allen eventually complied, registering for 2002 and 2003 and reporting his hourly wage as $156.25. That meant he had to forgo writing campaign checks in those years. (Not that candidates were starved for Veco money: Other company officials gave more than $200,000 to state candidates in 2002 alone.)

Also snared by the APOC that year was David Marquez, an ex-Arco lawyer doing $150-an-hour contract work for Veco on the gas pipeline property tax exemption. He eventually registered. Marquez is now the state attorney general, appointed by Gov. Frank Murkowski in 2005 after Gregg Renkes was forced out in an ethics scandal.

Neither the private prison bill nor the gas line tax break passed, though both came close. But the lobbyist law that annoyed Allen was doomed. Objections to the four-hour rule started to fly, with the Alaska Chamber of Commerce taking the lead in pushing for change. In its lobbying overhaul of 2003, the Legislature changed the definition of lobbyist from someone who engages in four hours of direct lobbying in a month to 40 hours.

"Why should John Q. Public be restricted that way?" Seekins, the primary sponsor of the change, said this week. "Two rounds of golf with me and you've got to be a professional lobbyist. That isn't right."

Allen has not registered since. He has resumed making contributions and hosting fundraisers. But that may change again. Voters in the August primary reversed the Legislature's 2003 changes, cutting the number of hours to define a lobbyist from 40 hours to 10 hours. The new lobbying law, approved as part of a campaign finance package by 73 percent of the voters, will be in effect by the next legislative session.


GROWTH INTO POLITICAL ACTIVISM

Veco's beginnings as an oil field contractor reach back to the early 1970s after Allen, a New Mexico welder, moved to Alaska to work on Cook Inlet oil platforms. Past news accounts of the company's early years describe an unusually close relationship between Allen and the oil company Arco, which was later bought out by BP. The stories also depict a joint venture in the North Sea that fell apart when Allen's partner was banned for kickbacks of watches and boots to Phillips Petroleum contract officials.

A disastrous investment in a Houston shipyard brought Veco to bankruptcy court in 1982, but the company was reorganized with support from North Slope producers Arco and Sohio and adopted a new role of political activist. Some veteran legislators who found themselves opposed by Veco-financed candidates alleged that Veco had been set up by Alaska's oil giants to do their political work. Officials for the companies denied any collusion.

Veco started out promoting pro-development Republicans, with former Sen. Ed Dankworth helping organize leadership coalitions as Allen's lobbyist. For a decade starting in the late-1980s, with Democrats controlling the governor's mansion, Veco money flowed to both parties, though lately it has again mostly helped Republicans.

Some of Veco's campaign efforts ran afoul of the law. Veco was fined by APOC in 1985 for a scheme that funneled secret donations to certain candidates through employee deductions. In 1989, APOC investigated a $1,000 contribution made by Allen's girlfriend. Bank records showed she had made a $1,000 deposit and wrote the check the same day, leaving a balance of $37.15.

Veco grew in prominence and financial strength as Exxon's main oil-spill-cleanup contractor in 1989. Allen said he used the oil-spill profits to buy the foundering Anchorage Times, which he eventually closed in 1992 (preserving the Voice of the Times as a half-page editorial section within the Daily News).

In 1994, Allen was named Alaskan of the Year, sharing that year's award with former Gov. Jay Hammond. His contracting and construction work has continued to grow, with subsidiaries working in the Lower 48 and overseas. And so have his political contributions, with some $500,000 spent on state and federal political donations since 2004.

This year, ironically, Veco's visibility in Juneau was somewhat reduced, given the crush of oil company executives and lobbyists also working on oil tax and gas line bills. Veco had two professional lobbyists on contract, according to disclosure forms: Paul Richards and Kris Knauss. Allen and Veco vice president Rick Smith worked out of the Baranof Hotel and usually met legislators there, according to legislators from both parties.

In its statement issued Wednesday, Veco attributed the company's economic success in part to "shrewd foresight" directed at strengthening the communities where it does business. This included nurturing pro-business and pro-development attitudes and helping enhance business sectors, Veco said.

"Veco regrets if those efforts could be construed as wrong," the company said, "especially in view of the fact that the right to participate actively in the political process is something treasured by all Americans."

Daily News reporter Tom Kizzia can be reached at tkizzia@adn.com or in Homer at 1-907-235-4244.

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OPINION

http://www.adn.com/opinion/view/story/8166344p-8059013c.html

PR for BP
Company hires ombudsman
Published: September 7, 2006
Last Modified: September 7, 2006 at 04:03 AM

BP hasn't earned much good will of late, but it made the right move in bringing aboard a former federal judge to hear worker complaints about company operations.

And not just any federal judge.

BP has contracted with retired U.S. District Court Judge Stanley Sporkin and given him free rein to listen to workers and report back to the company.

Judge Sporkin, who retired in 2000 from the federal bench for the District of Columbia, made a name for himself in Alaska when he presided over a lawsuit filed in 1992 by oil industry critic Chuck Hamel against Alyeska Pipeline Service Co. Mr. Hamel had accused Alyeska of spying on him and his wife. During the proceedings, Judge Sporkin criticized Alyeska's behavior, saying it was "reminiscent of Nazi Germany." The company later settled the case and apologized to Mr. Hamel.

Meanwhile, some BP workers continue going to Mr. Hamel with their complaints about company operations on the North Slope, including safety and pipeline maintenance issues. The disaffected workers often tell Mr. Hamel the company doesn't want to hear from them.

BP wants to change that perception.

Judge Sporkin, now 74 years old, says of his new assignment with BP: "My mandate is to do whatever is necessary to ascertain the facts about and identify solutions for problems that exist today as well as those likely to become issues in the future."

BP is also giving the judge two full-time staffers to assist with the 24-hour confidential call center for the company's U.S. employees. The job is a new position at BP, which has suffered bad press and public scorn of late for leaky oil lines at Prudhoe Bay, a 2005 explosion that killed at 15 workers at a Texas refinery, and allegations of price manipulation.

"Because employees have told me they want a third avenue to raise issues, that is what we are doing," said Bob Malone, president of BP's U.S. division.

It's a good decision for public relations and, more important, for the safety of all BP operations.

BOTTOM LINE: BP takes a positive step forward.

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http://www.adn.com/money/industries/oil/pipeline/story/8166252p-8058921c.html

Governor's successor to inherit gas deal
LAME DUCK: Plans for a special session dropped in light of primary, FBI investigation.
By MATT VOLZ
The Associated Press
Published: September 7, 2006
Last Modified: September 7, 2006 at 04:53 AM

JUNEAU -- It will be up to a future governor to sign a contract for a $25 billion North Slope natural gas pipeline to Canada, Gov. Frank Murkowski's top aide said Wednesday.

This past month saw Murkowski lose his re-election bid, BP shut down part of the Prudhoe Bay oil field and federal agents raid lawmakers' offices for their ties to an oil field services company. The effects of those events have effectively dashed Murkowski's hopes to be the governor who delivers a fiscal contract with the state's largest oil companies that leads to a gas pipeline to Canada and then Midwestern markets.

Murkowski Chief of Staff Jim Clark, Revenue Commissioner Bill Corbus and others on Murkowski's gas negotiating team met with several state senators Wednesday in Anchorage. The talk no longer centered on whether to meet in a special session this fall, but how best to prepare the past two years of pipeline negotiations for the next governor.

"We described to them that we're going to work to finish it so we have a package to hand off to the next administration," Clark said. "It's important that we leave a road map as a transition for the next administration that comes in."

Clark tried to leave a little wiggle room for Murkowski to call a new session anyway: "Obviously things can change, but that's essentially it."

That road map includes responding to public comments made about the contract, which could be presented in an interim meeting of the Senate Special Committee on Natural Gas Development at the end of September or the beginning of October.

It will also include new fiscal interest findings written by Corbus on whether the contract is in the state's best interests, plus the framework of partnership between the state and the three oil companies that would own the pipeline. That limited liability company agreement is still being negotiated.

State Sen. Hollis French, D-Anchorage, participated in Wednesday's meeting. He said a new session would have been a bad idea in the wake of the FBI raid on six legislators' offices last week, with federal agents searching for any financial links to Veco Corp. and its executives.

"From my perspective, you just couldn't convene a Legislature under worse circumstances," French said. "The public perception, and rightfully so, would be that we're operating under a cloud."

Murkowski, who was duck hunting Wednesday, leaves office in December after coming in last in the three-way Republican primary on Aug. 22. Republican nominee Sarah Palin is up against former Democratic Gov. Tony Knowles in the Nov. 7 general election.

After the election, Murkowski said he would call lawmakers back to the capital for another try at a revised contract, which would set financial terms for BP, Exxon Mobil Corp. and Conoco Phillips to tap into the North Slope's 35 trillion cubic feet of gas reserves.

Legislators have twice failed to pass bills related to the pipeline, many of them saying they saw major flaws with the terms of the contract.

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USA Today
September 7, 2006

  http://www.usatoday.com/money/industries/energy/2006-09-06-oil-pipeline-hearings_x.htm

Hearings to open on Alaska oil field woes
Updated 9/6/2006 10:43 PM ET
By Brad Heath, Paul Davidson and Chris Woodyard, USA TODAY

The oil fields on Alaska's remote North Slope are being probed and prodded more closely than ever after a series of pipeline problems linked to oil giant BP (BP).

They'll face more scrutiny Thursday at the first of three congressional hearings this week and next examining severe corrosion on the British company's pipelines that caused a spill in March and last month triggered a partial shutdown of the Prudhoe Bay oil field, the nation's biggest.

The hearings come as a federal grand jury in Anchorage is investigating the March spill. The state, which is also investigating the spill, could also bring charges, and Alaska's attorney general is searching for ways to force the company to make up for millions of dollars in oil tax revenue the state will lose.

At the same time, the U.S. Department of Transportation is rushing to require better corrosion controls on similar pipelines nationwide, which now are largely unregulated. And officials in Alaska are considering expanding their inspection program to include the labyrinth of pipes and pumps that connect each oil well to the Trans-Alaska Pipeline.

"It's long overdue," says Alaska environmental lawyer Peter Van Tuyn. "The laxity of state regulations is being exposed now."

BP American Chairman Bob Malone and BP Exploration Alaska President Steve Marshall are scheduled to testify Thursday before the House Energy and Commerce committee's investigative arm. The Senate Energy and House Transportation and Infrastructure committees have their own hearings scheduled next week.

BP acknowledges it didn't do enough to detect or prevent corrosion on its low-pressure pipelines at Prudhoe Bay.

Before the March spill, it had not used a sophisticated "smart pig" probe on the lines since the 1990s; when it did, it found extensive corrosion in one pipe that caused the company to shut the east side of the field. More tests are needed before the Transportation Department will let it reopen.

So far, those tests haven't found more cases of severe corrosion, BP spokesman Scott Dean says. He says the company is cooperating with the investigations.

BP has little excuse for not staying on top of the problem, says Fadel Gheit, an analyst for Oppenheimer. Keeping the pipes clean "costs very little" compared with the value of the oil they carry, and running smart pigs would have cost less than 1% of what BP could lose from the drop in production, he says.

State officials say they trusted BP and other oil companies to police themselves. "We assumed that doing the routine maintenance on something they invested tons of money in was in their best interest," says Cathy Foerster, a commissioner of the Alaska Oil and Gas Conservation Commission. "What happened at BP certainly puts that in doubt."

Alaska's inspectors check the state's oil wells and the giant Trans-Alaska Pipeline that ferries oil 800 miles from the North Slope to the port city of Valdez. Foerster says a state task force now is considering looking much more closely at what happens in between, the places where BP's production system broke down.

The state's oversight has drawn sharp criticism for years from people who say Alaska's government is too closely tied to an oil industry that supplies 86% of its annual revenue. "The regulatory agencies have been so captured by the oil companies that they're just not doing their jobs," says Pamela Miller, arctic coordinator for the Northern Alaska Environmental Center.

Michelle Brown, who ran the state's Department of Environmental Conservation for eight years, says she argued unsuccessfully for tougher regulation. But she says state oversight was "acceptable," and she never felt pressured to go easy on oil companies.

Last week, the FBI searched the offices of six state legislators, seeking evidence of financial ties with Veco, a major oil field services company that does work for BP on the North Slope. Agents also seized information about petroleum tax changes approved over the summer by the legislature.

One lawmaker was U.S. Sen. Ted Stevens' son, Ben, the president of Alaska's state senate. Veco paid Ben Stevens' consulting company $57,000 last year, his filings to the Alaska Public Offices Commission show.

Ben Stevens did not return calls for comment; a spokesman for the state Senate's Republican majority, Jeff Turner, said Stevens is "fully cooperating with the investigation."

KEY EVENTS INVOLVING BP'S ALASKA PIPELINE 
 
March 2: A leak is discovered in an unregulated line on the west side of Prudhoe Bay. About 267,000 gallons of crude are spilled. Corrosion is later ruled the cause.

March 15: The U.S. Transportation Department orders BP to test its three low-pressure lines in Prudhoe Bay for corrosion using an internal probe known as a "smart pig." The western line had not been smart-pigged since 1998; an eastern section of pipe had not been tested since 1992.

July 22: BP sends a smart pig through parts of the eastern pipeline, finding extensive corrosion in several places.

Aug. 6: BP begins production shutdown, starting with the eastern side.

Aug. 11: BP decides not to shut the western side of the field, meaning Prudhoe Bay will still produce about 200,000 barrels a day, half its normal total.

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CNN Money
September 7, 2006
http://money.cnn.com/2006/09/07/news/companies/bp/index.htm

BP 'fell short' on pipeline, execs admit
Malone calls failures 'unacceptable,' Former BP corrosion monitor pleads Fifth, as execs grilled over Prudhoe Bay.
By Aaron Smith, CNNMoney.com staff writer
September 7 2006: 4:53 PM EDT
NEW YORK (CNNMoney.com) -- BP's top U.S. executives told lawmakers Thursday that the company stumbled by failing to prevent a major Alaskan pipeline from becoming crippled by corrosion.
At the hearing, a former BP official responsible for monitoring pipeline corrosion invoked the Fifth Amendment in response to the panel's questions about the problems that led to the partial shutdown of the nation's largest oilfield.
"BP's operating failures are unacceptable," BP America Chairman Bob Malone told members of a House panel. "They have fallen short of what the American people expect of BP and they have fallen short of what we expect of ourselves."

Malone appeared with BP (down $1.17 to $65.76, Charts) executives before a House of subcommittee to respond to problems that federal investigators have found with the company's Prudhoe Bay facility in Alaska.

"I deeply regret this situation occurring on my watch," said Steve Marshall, president of BP exploration in Alaska. (Watch the hearings live).

Marshall said that pipeline spills earlier this year had been cleaned up without lasting environmental damage. He also said BP would increase "pigging" with a pipeline analysis device to try to prevent further problems and was investigating the source of corrosion that precipitated the spill.

Pigging is the process of running a mechanical device through a pipeline to clean it or to test for corrosion. Lawmakers said that BP relied too heavily on ultrasound analysis, which does not work on some of the more deeply buried pipelines.

Company executives expressed regret for the maintenance failures and promised to make things right through increased maintenance, the replacement of 16 miles of pipeline, the hiring of outside advisers and continued appearances before congressional committees.

Fifth Amendment

Richard Woollam, who used to head corrosion monitoring for BP at Prudhoe Bay, invoked his Fifth Amendment right against self-incrimination to avoid answering questions from lawmakers.

Marshall of BP said Woollam was pulled from a supervisory position and transferred out of Alaska after outside investigators determined there was an "atmosphere of intimidation" in the corrosion monitoring department that was "suppressing safety concerns."

Marshall said Woollam is still employed by BP but that he is on paid leave, and corporate lawyers have spoken to him about the situation.

The hearing began with a browbeating from Rep. Joe Barton of Texas, chairman of the House Energy and Commerce Committee.

"Years of neglecting to inspect the most important oil-gathering pipeline in this country is not acceptable," the Republican told the hearing held by the committee's investigations and oversight panel.

If BP, "one of the world's most successful oil companies," is incapable of conducting basic maintenance on the walls of the some of the country's most important oil pipelines, then regulators should "let somebody else do it," Barton said.

Rep. Jan Schakowsky, D-Ill., said it was "truly beyond comprehension" that a profitable company such as BP would fail to maintain the infrastructure that was the basis for its earnings, adopting a "see-no-evil approach to Prudhoe Bay operations."

The company was also criticized for presenting itself, through advertising, as environmentally friendly while failing to prevent damaging oil spills.

"If the company spent as much on maintenance as it does on advertising and lobbying for tax cuts, none of us would have to be here today," said Schakowsky.

Focusing on BP's slogan of "Beyond Petroleum," Rep. Ed Markey, D-Mass., said, "BP stands for a company with bloated profits that failed to fix bad pipelines."

Production halved

Prudhoe Bay, located on Alaska's northern coast above the Arctic Circle, is of major importance to the United States, generating 400,000 barrels of oil a day, or about 8 percent of the country's domestic oil production, when it is fully operating.

BP cut production at the field in half in August after government-mandated inspections revealed severe corrosion.

Members of the subcommittee lambasted the company for failing to pig its pipelines to look for internal corrosion more recently than 1992. Subcommittee members contrasted BP's lack of maintenance with the Trans-Alaska pipeline, where such inspections are conducted every three years.

The scolding was not restricted to BP. Rep. Diana DeGette, D-Colo., criticized the government for not doing more to prevent the problem. "Only after a crisis happens do we jump to fix a problem," DeGette said.

London-based BP is also being investigated for a pipeline spill of 200,000 gallons in March and for allegedly manipulating energy prices in 2004. In addition, 15 workers were killed by an explosion at a BP refinery in March 2005.

Alaska authorities also testified and were not spared criticism from committee members, who expressed surprise that the state had not aggressively monitored BP.

"The state's asleep at the wheel, or what?" asked Rep. Bart Stupak, addressing Kurt Fredriksson, commissioner of Alaska's department of conservation.

The testimony comes after oil prices touched a five-month low in early trading and hovered near $67 a barrel.

Thursday's hearings were monitored via webcast in New York. Hearings are to continue Friday, when BP executives are to testify before the Senate Energy and Natural Resources Committee.

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CNN Money
September 7 2006

http://money.cnn.com/2006/09/07/news/companies/bc.energy.bp.alaska.reut/index.htm

BP: Progress made on Alaska oil restart
Executives tell House panel they'll begin pumping again if tests on corroded pipeline go OK.

WASHINGTON (Reuters) -- British oil giant BP Plc is making progress toward partially restarting oil production from the eastern side of its giant Prudhoe Bay oil field in Alaska, provided tests on a key pipeline continue to show no serious corrosion, the company said Thursday.

In prepared testimony for the House Energy and Commerce Committee, BP executives gave no timetable for restarting the eastern half of Prudhoe Bay

If tests on the downstream segment of the eastern oil transit line continue to demonstrate that the line is safe to operate, BP said, it will ask the U.S. Transportation Department for permission to restart it.

Prudhoe Bay normally pumps around 400,000 barrels per day of oil, or 8 percent of U.S. domestic supply. But BP shut down half of the field in early August, after government-ordered pipeline inspections turned up severe corrosion inside a segment of the eastern oil transit line at the field.

BP Alaska President Steve Marshall said Prudhoe Bay was currently producing about 220,000 bpd of oil from the western side of the field.

Marshall said BP was working on plans to route the oil produced in the eastern side of Prudhoe Bay through pipelines that serve the Endicott and Lisburne oil fields, which would allow full restoration of output from the eastern side by the end of October.

Alaska state regulators have slated a Sept. 26 hearing to evaluate BP's field bypass plans.

Marshall said BP would spend $195 million in 2007 on what it calls major maintenance at Prudhoe Bay - up nearly four-fold from 2004 levels.

Further, BP has retained former U.S. District Judge Stanley Sporkin to "initiate a full review of all the worker allegations that have been raised on the North Slope" since 2000, Robert Malone, chairman and president of BP America Inc., said, also in prepared testimony.

"I expect this individual will call them as he sees them," Malone said. BP already has said it will replace 16 miles of oil transit lines that carry crude oil from its Prudhoe Bay field, Marshall said.

To hold over U.S. refiners BP has secured an extra 3.5 million bpd of supply to be delivered to the West Coast in September and October, Malone said.

 

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Fairbanks News Miner
September 7, 2006

http://newsminer.com/2006/09/07/1878/

Critic of BP corrosion plan expected to testify before Congress
By Sam Bishop
Published September 7, 2006

WASHINGTONThe first of three congressional hearings on Prudhoe Bay’s leaking pipelines opens today and will feature a specialist from an engineering firm that five years ago initially concluded that BP Exploration Alaska’s pipeline corrosion report to the state wasn’t of much use.

The firm, Coffman Engineering, rewrote its analysis after BP complained to state officials that the review was too negative and contained numerous errors. The final report praised BP’s “clear commitment to corrosion control.”

Today’s hearing in the U.S. House Energy and Commerce Committee will feature Dan Stears, a cathodic protection specialist with Coffman Engineering in Anchorage.

Stears was added to the witness list released this week. A committee spokeswoman had no information Wednesday about which member of Congress requested Stears’ presence. Attempts to reach a Coffman official in Anchorage were not successful Wednesday.

Earlier news reports quoted Harold Hollis, Coffman’s vice president, saying he was not aware of any coercion to change his company’s original review of BP’s report. BP officials have said the report contained errors and was changed in the course of a normal give-and-take.

BP documents its anti-corrosion efforts annually for the state, under an agreement that smoothed BP’s purchase of Arco in 2000. The state hired Coffman to review BP’s report on its anti-corrosion efforts that year.

Oil industry watchdog Chuck Hamel, a Virginia resident, released the two versions of the Coffman report, along with BP’s critique, last month. The Project on Government Oversight, where Hamel is a board member, recently posted the documents on its Web site.

At a news conference Tuesday in the National Press Club, Hamel said the report demonstrates the “complicity” of state regulators in covering up corrosion problems. A state official said last month that changes in such reports are common.

BP officials have said they were surprised this year by the corrosion in Prudhoe Bay’s western and eastern transit lines. Those lines are downstream from the gathering centers that clean out water, carbon dioxide, natural gas and sediment.

Company officials say they now believe that declining oil volume in the lines allowed some solids and water to settle out, providing a place for corrosion-causing bacteria.

Hamel on Tuesday said BP officials have long known about such problems on the transit lines. Reporters pressed him for specifics, but he declined to elaborate.

Hamel instead called on members of Congress to have Steve Marshall, BP Alaska’s president, swear under oath today to the truthfulness of an earlier letter to Rep. John Dingell, D-Mich.

Daren Beaudo, a BP spokesman in Anchorage, said the company has investigated Hamel’s assertions to the degree it can.

“Any time we got correspondence, we would look into them and see if there was any legitimacy to the claims,” Beaudo said. “When we go back and ask Mr. Hamel to identify problem areas, specifics are lacking.”

If Hamel knows of improper behavior, Beaudo said, “we would ask him to go to regulators, go to us or go to Congress.”

Bob Malone, president of BP America Inc. in Houston and former president of Alyeska Pipeline Service Co., will also testify today. Kevin Hostler, Alyeska’s current president, will appear as well.

Government officials include Tom Barrett, administrator of the federal Pipeline and Hazardous Materials Safety Administration and Kurt Fredriksson, commissioner of the Alaska Department of Environmental Conservation.

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


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http://newsminer.com/2006/09/07/1891/

Governor tables gas contract
By Stefan Milkowski
Published September 7, 2006

Gov. Frank Murkowski will respect the will of lawmakers and not push for legislative approval of his proposed natural gas pipeline contract before his term ends in December, the governor’s chief of staff and chief pipeline negotiator said Wednesday.

Jim Clark said the governor is standing by his decision not to call another special session to move forward on the contract unless lawmakers support the idea.

“At this point, they’re saying they don’t want to go forward,” he said.

Leaders of the state House detailed their opposition to holding another special session in a letter to the governor Tuesday. Senate leaders made their views clear during a meeting with administration officials Wednesday in Anchorage.

Sen. Ralph Seekins, R-Fairbanks, who attended the meeting, said the sentiment among senators was “pretty much the same” as that of House members. According to the letter from House leaders, House members opposed the session because of Murkowski’s loss in the Republican primary, lawmakers’ own races, an FBI investigation involving lawmakers and the short time frame.

More than anything, Seekins said, the contract and related parts of the deal were not yet ready for lawmakers to consider.

“The time isn’t right,” he said.

Sen. Gary Wilken, R-Fairbanks, who participated in the meeting by telephone, said there was little discussion of senators’ views on what would have been the year’s third special session. Instead, he said, the meeting focused on how best to transfer the knowledge gained by Murkowski’s administration to that of the new governor.

“It was really a positive meeting,” he said. “There was no sour grapes. There was no licking wounds.”

Murkowski and his administration spent more than two years negotiating the deal with BP, ConocoPhillips and Exxon Mobil, the three main oil companies operating in the state. The proposed contract, which required the approval of lawmakers, would have set the fiscal terms for development of a gas pipeline from the North Slope to Canada or the Lower 48.

Murkowski cited the gas pipeline as the main reason behind his decision to run for a second term as governor.

After the meeting Wednesday, Clark continued to argue that waiting was not good for the state because of harmful delays associated with a new administration, new lawmakers and a ballot initiative to tax undeveloped natural gas reserves.

“I feel very bad for Alaska,” he said. He argued the contract was a good one that could have moved forward with changes, and he left open the option of having another special session if lawmakers changed their minds.

He said the administration would continue to work on the pipeline contract and related documents and would try to bring the main gubernatorial candidates up to speed.

“We’ll have a package that the Legislature and the next administration can move forward with if they choose,” he said.

Senators defended their preference for waiting but expressed appreciation for the administration’s willingness to continue work on the gas pipeline.

“The result of the primary election was sort of a passage of judgment on the proposed contract,” said Sen. Gene Therriault, R-North Pole, “so to push forward, I think, was ill-advised at this point.”

Therriault said he saw the Senate’s wishes as both a lack of faith in the contract and a belief that the timing was bad.

Senate Majority Leader Gary Stevens, R-Kodiak, said upcoming elections, the uncertainty over the next governor, and the federal investigation all played into lawmakers’ lack of interest in moving forward.

“I don’t think that we could make progress because of all the things out there,” he said.

But senators didn’t dismiss the contract itself.

Seekins said the Legislature should not just walk away from the contract, which could serve as a basis for continuing negotiations with the oil companies.

“There are some good things in there,” he said. “First, getting gas to market.”

He said it was important for the Legislature to review public comments on the contract. He plans to call a meeting of the Senate Special Committee on Natural Gas Development, which he chairs, when the administration is finished responding to the comments.

Seekins also said he would be willing to participate as an observer to negotiations between the state and the oil companies.

Wilken called the elections, the investigation, and recent North Slope oil spills “distractions” that have nothing to do with the fact that the U.S. Midwest needs Alaska’s gas.

“That’s what we ought to be focused on,” he said.

According to Clark, Revenue Commissioner Bill Corbus invited the three main candidatesAndrew Halcro, Tony Knowles and Sarah Palinto discuss the administration’s work on the gas line.

“We appreciate the invitation,” said Curtis Smith, spokesman for Republican candidate Palin. “We’re absolutely going to take advantage of that.”

Smith called the contract “broken” but said that didn’t mean that the work was wasted or that the contract couldn’t be used in some way. He confirmed that Palin intended to consider all pipeline proposals and preferred an “all-Alaska” pipeline, but didn’t give specifics for what she would do if elected.

“I’ll have more on that front shortly,” he said.

Patty Ginsburg, spokeswoman for Democratic candidate Knowles, said the former governor would not throw out the administration’s contract.

“What he wants to do is invite all proposals and ask them to address Alaska’s terms,” she said, including specific benchmarks, a separation of oil and gas fiscal terms, and Alaska hire.

“Stay tuned for details tomorrow (Thursday),” she said when asked for a detailed plan. Knowles will be in Fairbanks today and plans to discuss the gas line.

Clark said Independent candidate Halcro was also invited to discuss the gas line deal.

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com     or 459-7577.

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Anchorage Daily News
September 6, 2006


http://www.adn.com/money/story/8162988p-8055807c.html

Retired federal judge hired by BP
SPORKIN: Jurist urged the industry to settle
critic's rights suit against Alyeska.
By RICHARD MAUER
Anchorage Daily News
Published: September 6, 2006
Last Modified: September 6, 2006 at 05:31 AM

WASHINGTON -- A retired federal judge who once suggested Alyeska Pipeline's dirty tricks against a critic would have been at home in Nazi Germany or Stalinist Russia will be the new ombudsman for BP employees.

Stanley Sporkin, 74, said Tuesday he was never one to shy away from difficult challenges. He agreed to leave his Washington law practice, where he's a partner at Weil, Gotshal & Manges, to attempt to resolve issues raised by BP employees who find normal channels useless or threatening.

BP is under intense scrutiny, with three congressional hearings planned over the next two weeks into its partial shutdown of Prudhoe Bay. Two leaks in transit pipelines since March on opposite sides of the field have exposed the company's failure to adequately monitor and repair corroded pipelines on the North Slope.

BP said it was surprised by the condition of the pipelines, but its critics say the company looked the other way when employees tried to blow the whistle.

In a phone interview, Sporkin said BP America President Bob Malone contacted him in early August to ask if he'd consider the assignment, a new position for the company. BP has several avenues for workers to report concerns outside of direct supervisors, but Sporkin said they're apparently not working.

Sporkin said Malone got to know him when Malone ran a troubled Alyeska Pipeline Service Co. for four years in the 1990s and pledged to change its corporate culture for the better. Five companies, including BP, own Anchorage-based Alyeska, which runs the trans-Alaska oil pipeline and Valdez tanker port.

Sporkin presided over the lawsuit filed by Chuck Hamel of Alexandria, Va., an oil company critic and whistle-blower advocate.

Hamel sued in 1993 after a secret Alyeska campaign against him was revealed by personnel hired to carry it out. Alyeska set up a fake environmental law firm in an effort to learn who was leaking information to Hamel about dangerous and unhealthy practices and to retrieve confidential documents he possessed. The "attorney" in charge of the "Ecolit" law firm -- an undercover operative from the Miami security company Wackenhut -- promised to be Hamel's advocate against the industry if he would only help them prepare their cases.

In the days before the trial was to begin, Sporkin urged BP and the other oil company owners of Alyeska to settle because their case was so weak.

"This is not Nazi Germany or Russia," Sporkin charged. "These people have certain rights," the judge said, referring to Hamel and his wife, Kathleen. Hamel and the defendants eventually settled the case for an undisclosed sum.

Hamel, who continues to draw attention to safety concerns from oil field workers, said Tuesday that he has total faith in Sporkin's integrity but is skeptical he can accomplish anything.

"No one holds Judge Sporkin with more respect than Kathy and I," Hamel said. Hamel, 76, said he'd be happy if workers did call Sporkin. "Then I can go to the beach," he said.

Before being appointed to the bench by President Reagan, Sporkin spent 20 years at the U.S. Securities and Exchange Commission, where he helped write legislation that made it illegal for American corporations to bribe foreign officials, despite practices that might be common overseas. He later served five years as general counsel to the CIA.

Malone announced Sporkin's appointment in an e-mail to employees Thursday. Malone said Sporkin will report directly to him.

"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," Malone said. The e-mail was provided by a company spokesman.

Sporkin's authority spans BP employees nationwide, reflecting that the company's problems extend beyond Prudhoe Bay. An explosion at a BP refinery in Texas last year killed 15 workers and injured about 170. And BP is under investigation for allegedly manipulating the U.S. propane, gasoline and oil markets.

Hamel himself met Washington reporters Tuesday at a newsmaker event at the National Press Club. In it, he released letters he sent to the chairman and ranking Democrat of the House Energy and Commerce Committee, which is to hold the first BP hearings this week.

Hamel accused BP of "cooking the books" to hide a deficient corrosion program. He also said the timing of the hearing -- at 10 a.m. Thursday -- would prevent it from going too deep, since members of Congress use the afternoon to get away.

Anchorage BP spokesman Daren Beaudo said Hamel's complaints were too general to respond to.

"If Mr. Hamel has any specific issues or information that sheds further light on the subject, we encourage him to make them known to us and regulators and Congress," Beaudo said.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com or 257-4345.

THE HOTLINE NUMBER BP set up last week, staffed by operators 24 hours a day, seven days a week, is 1-888-776-7545.


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http://www.adn.com/front/story/8162137p-8054973c.html

Three candidates for governor got VECO checks
Before this year's governor's race, the three candidates took donations
By KYLE HOPKINS
Anchorage Daily News
Published: September 6, 2006
Last Modified: September 6, 2006 at 06:34 AM

All three major candidates running for Alaska governor cashed campaign checks from Veco -- one of the biggest spenders in state politics -- in the past. But with a federal investigation now looking into possible corruption involving the oil field services and construction company and state lawmakers, the politicians are saying no thanks.

Former two-term Democratic Gov. Tony Knowles said Tuesday that he won't accept donations from the four Veco officials identified in an FBI investigation that became public last week. His opponents, outspoken Veco critics Sarah Palin, a Republican, and Independent Andrew Halcro, say they want nothing to do with the company.

But that doesn't mean any of the three turned away Veco contributions in past elections. Knowles, who unveiled a five-point plan for improving ethics rules in state government Tuesday, received more than $23,000 in Veco-related contributions throughout the 1990s as he ran for governor three times, according to a review of Alaska Public Offices Commission records.

Halcro, who represented Anchorage in the House of Representatives for four years, collected $5,500 in 1998 and 2000.

While mayor of Wasilla, Palin ran for lieutenant governor in 2002. She gathered $5,000 -- or about 10 percent of her campaign fund -- from Veco officials or their wives along the way.

Knowles and Halcro said Tuesday that they wouldn't return the money. It was donated to long-ago campaigns that have no bearing on the current race, they say. Palin was driving to the Kenai Peninsula and couldn't be reached for comment.

Asked about the past Veco contributions, Knowles says that business people should be able to donate money to candidates like anyone else: "This is a democracy." He said it only becomes a problem when those contributors have undue influence on a candidate, and described his own administration as "squeaky clean."

Palin spokesman Curtis Smith said there has long been an understanding inside the campaign that Palin didn't want Veco money.

"She wanted nothing to do with that company," he said, acknowledging that Veco, which supported incumbent Gov. Frank Murkowski during the primary last month, likely wouldn't offer her cash in the first place.

Halcro who served as a Republican legislator but, like Palin, has a reputation as a maverick within the party, said he won't take donations from the company either. But that isn't exactly going out on a limb, he said.

He says Veco donates to candidates it thinks it can control, and by his second term in the Legislature, the money started to dry up. Now, it wouldn't help anyway.

"If Veco shows up on your APOC report, you would imagine that would generate a response from your opponent," Halcro said.

Halcro is running with former Soldotna lawmaker Ken Lancaster, who does not appear to have received Veco-related donations in the current race or previous campaigns.

Knowles' running mate, Anchorage Rep. Ethan Berkowitz, received $3,000 from Veco officers or their wives in his 1998 and 2000 campaigns.

Palin's running mate, Sean Parnell, received two $500 checks from Veco officers in August, including one from Veco chief executive officer Bill J. Allen, and collected about $16,000 while running for the Legislature in the 1990s.

Palin, meantime, spent the primary election defending criticism from the Voice of the Times -- a separate editorial space produced by Veco that appears in the Daily News everyday.

While Palin often draws heat from the oil industry for her association with a natural gas pipeline plan that's at odds with the route sought by oil companies, Parnell is a former oil lobbyist. Can they co-exist on the same ticket?

"Alaskans chose Sean Parnell to run with Sarah Palin. It wasn't necessarily Sarah," Smith said.

Still, he said, "She's not disappointed with Alaskans' choice, that's for sure." He described Parnell as a "straight-shooter" who can work with Democrats and Republicans.

Last week, the FBI raided several legislative offices, armed with at least one warrant that named four Veco officials: Allen, president Pete Leathard, executive vice president and chief financial officer Roger Chan and vice president Rick Smith.

No one has been charged with a crime.

Randy Ruedrich, chairman of the Alaska Republican Party, said Tuesday that any donations the party receives from the Veco officers will be put aside until investigators decide if anyone is in trouble.

"If any of our candidates ask, we'll encourage them to do the same," Ruedrich said.

Ruedrich said everyone needs to wait and see what comes of the investigation.

"Jumping to conclusions is totally inappropriate," he said.

With Murkowski and some incumbent legislators falling in the Aug. 22 primary and all the candidates for governor presenting themselves as a fresh alternative to the past four years, change was already a theme in this year's election.

The FBI investigation brings even more uncertainty, said Jean Craciun, an Anchorage pollster and public-opinion researcher.

"I don't think that Veco or any of the usual suspects will be presenting themselves as they have in the past. I think they'll probably lay low," she said.

In other words, who wants to be backed by the establishment when anti-establishment candidates are on a roll?

Knowles held his own eight years as governor up for comparison Tuesday, and listed steps he said would ward off future troubles.

He said: Loopholes that allowed former state Attorney General Gregg Renkes to own stock in a company that would benefit from a coal deal he was negotiating for the state need to be closed, executive branch employees would need to reveal all potential conflicts of interest to the public, lawmakers should have to tell people what it is they do to earn lucrative consulting contracts, and state watchdog agencies need more money to enforce the rules.

Ruedrich begged to differ with Knowles' description of his two terms of governor as blemish free, but said he'd need time to research before offering specific examples.

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

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http://www.adn.com/news/alaska/ap_alaska/story/8163583p-8056281c.html

FBI raids poison Alaska's political climate
By MATT VOLZ, Associated Press Writer
Published: September 6, 2006
Last Modified: September 6, 2006 at 05:18 PM

JUNEAU, Alaska (AP) - A week after federal agents swooped into Alaska to raid state lawmakers' offices, little is known about the investigation, but its effects have been poisonous.

In that short time, VECO Corp. and four of its executives, the supposed subjects of the investigation, have gone from influential players to anathema in Alaska politics.

Gubernatorial candidates quickly disavowed any campaign cash from the corporation's executives and a Washington U.S. Senate candidate, Mike McGavick, returned $14,000 in contributions from VECO executives soon after the Alaska raids.

The raids have killed any chance that remained for a new legislative session to consider legislation for Gov. Frank Murkowski's fiscal contract with three oil companies to build a $25 billion pipeline. House Speaker John Harris, R-Valdez, wrote the governor: "Members believe a cooling off period is essential in order to distance the Legislature from this perception of corruption and gives us time to learn what the FBI is truly attempting to accomplish."

Moreover, individual legislators are uncertain what effects the raid may have on their own races this fall. VECO executives Bill Allen, Peter Leathard, Richard Smith and Roger Chan have each contributed to the campaigns of more than two dozen Republican incumbents and challengers this year.

The FBI agents swept in and out of offices in Anchorage, Juneau and the Matanuska-Susitna Borough last Thursday and Friday, answering few questions and carting out boxes labeled "Evidence." Offices raided included Senate President Ben Stevens, R-Anchorage; Sen. John Cowdery, R-Anchorage; Sen. Donald Olson, D-Nome; Rep. Pete Kott, R-Eagle River; Rep. Bruce Weyhrauch, R-Juneau; and Rep. Vic Kohring, R-Wasilla.

Stevens, Kott and Weyhrauch have not returned repeated phone calls. Cowdery, Olson and Kohring have said they have done nothing wrong.

In the aftermath, Department of Justice and U.S. District Court officials have remained mute about the reasons for the raid, whether any indictments are forthcoming or even whether they can provide copies of the search warrants.

"There's no public information at this point and that's why we can't provide guidance," said Department of Justice spokeswoman Jaclyn Lesch on Wednesday.

Court and Justice Department officials also would not say whether the 20 search warrants executed in the investigation were sealed by a federal judge to keep them from the public's view. Lesch said even a judge's order to seal the warrants may be sealed and unavailable to the public.

One of the search warrants has been obtained by The Associated Press. It links the investigation to a new production tax law, known as PPT, signed last month by Murkowski and the draft natural gas pipeline contract proposed by Murkowski and BP PLC, Exxon Mobil Corp. and ConocoPhillips.

The warrant called for seizure of documents concerning any payment, contracts, agreements, gifts or employment provided by VECO or the four executives named.

Sought-after items named in the search include hats or other garments bearing the phrases "CBC," "Corrupt Bastards Club" or "Corrupt Bastards Caucus." That was the nickname given to a dozen lawmakers whose names were linked to VECO contributions and consulting fees in a guest opinion article that ran in the state's three largest newspapers.

The Anchorage Daily News quoted political pollster Marc Hellenthal as saying agents "are after people paying for votes during the recent oil and gas special sessions."

Hellenthal was interviewed by FBI agents and his office searched in connection with the investigation.

State legislators who have not received contributions from VECO or its executives say they saw no firsthand evidence of vote buying.

"I don't know that there was any vote buying on PPT," said Sen. Tom Wagoner, R-Kenai. "There was some real heavy lobbying on PPT. Whether people construe that as vote buying, I can't say."

Sen. Gary Wilken, R-Fairbanks, said he has heard the rumors, but has "absolutely no knowledge" of legislators selling their votes.

"That's so delicate and that's so distressing that I'd have to have such hard concrete evidence before I comment on that," he said.

Late Wednesday afternoon, VECO released a statement that was unattributed to any person nor claimed to speak for any individual executive. It said the corporation, to its knowledge, has done nothing improper or illegal and was disappointed by reports that it had.

The company participates in charitable activities and ways to nurture a pro-business and pro-economic development attitude, the statement read.

"VECO regrets if those efforts could be construed as wrong, especially in view of the fact that the right to participate actively in the political process is something treasured by all Americans," the statement read.

A message left at VECO's offices was not returned Wednesday.

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CNN Money
September 6, 2006

http://money.cnn.com/2006/09/06/news/companies/bp_congress.reut/index.htm

Congress finds BP Alaska problems
Investigators found 'significant problems' with how the oil giant maintained its Prudhoe Bay facility in Alaska, sources say.
September 6 2006: 6:09 PM EDT


WASHINGTON (Reuters) -- Investigators in the U.S. Congress have found "significant problems" with the way BP Plc maintained its Prudhoe Bay facility in Alaska, sources close to the inquiry said, setting the stage for a heated hearing on Thursday into corrosion that threatened to shut down the biggest U.S. oil field.

Staff of the House Energy and Commerce Committee have been on Alaska's North Slope in recent weeks to interview employees of London-based oil giant BP (Charts) and Alaska environmental officials after a leaky pipeline forced BP to shut down half of the field in early August

The committee staff, which has wide-sweeping investigative authority, has found "significant problems" with BP's maintenance of Prudhoe Bay pipelines, staff aides said on condition of anonymity. BP is already part of a criminal probe into a much bigger Alaskan pipeline rupture in March.

Prudhoe Bay normally pumps around 400,000 barrels per day of oil, or 8 percent of U.S. domestic supply, but BP shut down half of the field in early August after government-ordered pipeline inspections turned up severe corrosion inside a segment of the eastern oil transit line at the field.

Committee Chairman Joe Barton of Texas last month sent a fiery letter to BP Group Chief Executive John Browne citing "substantial evidence that BP's chronic neglect directly contributed to the shutdown."

"In this case BP stands for bad policy," Barton told the CNBC television network. "I think they had a policy to do as little as possible in terms of maintenance and inspection."

Prior to March, BP did not run "pigs" - machines that slide through the inside of pipelines to push out sludge - since at least 1992, even though the giant Trans-Alaska pipeline does it every two weeks.

"Why did you not use the one tool that is most able to detect corrosion?" Barton said he plans to ask BP officials. "It's almost like they consciously chose not to do that."

"A number of internal BP reports raise questions about corrosion," said a spokeswoman for Michigan Rep. John Dingell, the top Energy and Commerce Committee Democrat. "The question is why didn't they clean the pipes if they knew the corrosion was there?"

BP representatives hinted that Robert Malone, chairman and president of BP America Inc., could give lawmakers details of a new capital spending regime aimed at preventing future corrosion.

"There are several items and some capital spending that will be reflected [in Malone's testimony]," BP spokesman Daren Beaudo said. "You'll hear some firm commitments into what we are doing."

Industry analysts question why Browne - BP's top global executive - has remained largely silent on the Prudhoe Bay debacle.

"Apparently they will leave it to poor old Bob Malone," said Matt Simmons, head of Houston-based energy investment bankers Simmons & Co.

"Where is the Lord of Madingley?" Simmons asked, referring to the honorary title Browne took in 2001. "He has basically been AWOL," or absent without leave, Simmons said.

Congressional spotlight

For its part, BP said it is stepping up corrosion-fighting efforts.

"The corrosive elements are creeping and increasing into our operations," Beaudo said. "We've tried to develop a program that is reflective of that."

Congress is still weighing pipeline safety legislation that could boost federal oversight of the kind of pipelines that BP operates on the North Slope.

Simmons said lawmakers should impose stiff penalties for maintenance lapses.
"I think Congress is going to focus on putting some ... hard, strong teeth into basically not leaving it to industry to voluntarily police itself," he said.

BP's Prudhoe Bay woes are likely to remain in the congressional spotlight. Next week, two additional hearings are planned on the BP field shutdown, including one in the Senate Energy Committee.

"Senators will justifiably be very upset with BP," said Sen. Pete Domenici of New Mexico, chairman of the energy panel. "They should be ashamed of themselves."

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Wall Street Journal
September 6, 2006

Congress to Begin Exploration
Of BP's Alaska Oil Problems
By CHIP CUMMINS
September 7, 2006; Page A4

Already under siege by American environmental regulators and financial-market investigators, BP PLC faces a new inquisitor today: Congress.

In the first of as many as two Capitol Hill appearances in coming days, U.S. operations chief Bob Malone and other BP officials face a public grilling from politicians just ahead of U.S. midterm elections. The House Energy and Commerce Committee will hear testimony from experts and BP officials on corrosion problems at BP's Alaska oil field. The London company partially shuttered the field last month after discovering corroded pipes.

The hearing comes amid a series of embarrassing regulatory, criminal and civil probes at BP. Those include an investigation into safety problems at the company's U.S. refineries and probes into whether BP traders manipulated energy markets.

While much new evidence isn't expected this week, the intensified scrutiny risks a further public-relations backlash from consumers and politicians against BP and its chief executive, John Browne. BP's profits and stock price have risen over the past two years along with higher prices for oil, natural gas and petroleum-based fuels like gasoline. At a time of widespread anger at today's gasoline prices, "BP becomes a very convenient whipping boy" for the entire oil industry, said James Post, a management professor at Boston University.

The swirl of controversy marks a major setback for Lord Browne, who crafted for BP an image based on environmental and corporate responsibility. While many environmentalists and activist investors have been satisfied that BP matched actions with words, BP is now at risk of losing that goodwill after more than a year of safety, environmental and compliance problems in the U.S.

"I think some of the sort of emotional capital that [BP] has built up will be called in" amid the public scrutiny, said John Elkington, founder of SustainAbility Ltd., a corporate-responsibility consulting firm in London.

Lord Browne isn't expected to testify in hearings scheduled for today or at a Senate hearing on Prudhoe Bay scheduled next week before the Senate Energy and Natural Resources Committee. Instead, Mr. Malone, a native Texan and newly appointed chief executive of BP's American operations, will be the senior executive answering questions from lawmakers.

In March 2005, an explosion at BP's refinery in Texas City, Texas, killed 15 workers. The company was fined heavily for safety shortcomings stemming from the accident. Regulators are still poring over details of the accident, including whether senior BP executives bear more responsibility for safety shortcomings than the company has so far acknowledged.

Meanwhile, the Commodity Futures Trading Commission and Justice Department allege that the company manipulated the U.S. propane market in early 2004, a charge the company denies. Investigators are also probing the company's crude-oil and gasoline-market trading activities. BP has said it is cooperating with investigators but declined to comment further.

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

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CNN Money
September 6, 2006

http://money.cnn.com/2006/09/06/news/companies/bp_congress.reut/index.htm?section=money_latest

Congress finds BP Alaska problems
Investigators found 'significant problems'
with how the oil giant maintained its Prudhoe Bay
facility in Alaska, sources say.
September 6 2006: 6:09 PM EDT

WASHINGTON (Reuters) -- Investigators in the U.S. Congress have found "significant problems" with the way BP Plc maintained its Prudhoe Bay facility in Alaska, sources close to the inquiry said, setting the stage for a heated hearing on Thursday into corrosion that threatened to shut down the biggest U.S. oil field.

Staff of the House Energy and Commerce Committee have been on Alaska's North Slope in recent weeks to interview employees of London-based oil giant BP (Charts) and Alaska environmental officials after a leaky pipeline forced BP to shut down half of the field in early August.

The committee staff, which has wide-sweeping investigative authority, has found "significant problems" with BP's maintenance of Prudhoe Bay pipelines, staff aides said on condition of anonymity. BP is already part of a criminal probe into a much bigger Alaskan pipeline rupture in March.

Prudhoe Bay normally pumps around 400,000 barrels per day of oil, or 8 percent of U.S. domestic supply, but BP shut down half of the field in early August after government-ordered pipeline inspections turned up severe corrosion inside a segment of the eastern oil transit line at the field.

Committee Chairman Joe Barton of Texas last month sent a fiery letter to BP Group Chief Executive John Browne citing "substantial evidence that BP's chronic neglect directly contributed to the shutdown."

"In this case BP stands for bad policy," Barton told the CNBC television network. "I think they had a policy to do as little as possible in terms of maintenance and inspection."

Prior to March, BP did not run "pigs" - machines that slide through the inside of pipelines to push out sludge - since at least 1992, even though the giant Trans-Alaska pipeline does it every two weeks.

"Why did you not use the one tool that is most able to detect corrosion?" Barton said he plans to ask BP officials. "It's almost like they consciously chose not to do that."

"A number of internal BP reports raise questions about corrosion," said a spokeswoman for Michigan Rep. John Dingell, the top Energy and Commerce Committee Democrat. "The question is why didn't they clean the pipes if they knew the corrosion was there?"

BP representatives hinted that Robert Malone, chairman and president of BP America Inc., could give lawmakers details of a new capital spending regime aimed at preventing future corrosion.

"There are several items and some capital spending that will be reflected [in Malone's testimony]," BP spokesman Daren Beaudo said. "You'll hear some firm commitments into what we are doing."

Industry analysts question why Browne - BP's top global executive - has remained largely silent on the Prudhoe Bay debacle.

"Apparently they will leave it to poor old Bob Malone," said Matt Simmons, head of Houston-based energy investment bankers Simmons & Co.

"Where is the Lord of Madingley?" Simmons asked, referring to the honorary title Browne took in 2001. "He has basically been AWOL," or absent without leave, Simmons said.

Congressional spotlight

For its part, BP said it is stepping up corrosion-fighting efforts.

"The corrosive elements are creeping and increasing into our operations," Beaudo said. "We've tried to develop a program that is reflective of that."

Congress is still weighing pipeline safety legislation that could boost federal oversight of the kind of pipelines that BP operates on the North Slope.

Simmons said lawmakers should impose stiff penalties for maintenance lapses.

"I think Congress is going to focus on putting some ... hard, strong teeth into basically not leaving it to industry to voluntarily police itself," he said.

BP's Prudhoe Bay woes are likely to remain in the congressional spotlight. Next week, two additional hearings are planned on the BP field shutdown, including one in the Senate Energy Committee.

"Senators will justifiably be very upset with BP," said Sen. Pete Domenici of New Mexico, chairman of the energy panel. "They should be ashamed of themselves."

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Anchorage Daily News
September 6, 2006


http://www.adn.com/money/story/8162988p-8055807c.html

Retired federal judge hired by BP
SPORKIN: Jurist urged the industry to settle
critic's rights suit against Alyeska.
By RICHARD MAUER
Anchorage Daily News
Published: September 6, 2006
Last Modified: September 6, 2006 at 05:31 AM

WASHINGTON -- A retired federal judge who once suggested Alyeska Pipeline's dirty tricks against a critic would have been at home in Nazi Germany or Stalinist Russia will be the new ombudsman for BP employees.

Stanley Sporkin, 74, said Tuesday he was never one to shy away from difficult challenges. He agreed to leave his Washington law practice, where he's a partner at Weil, Gotshal & Manges, to attempt to resolve issues raised by BP employees who find normal channels useless or threatening.

BP is under intense scrutiny, with three congressional hearings planned over the next two weeks into its partial shutdown of Prudhoe Bay. Two leaks in transit pipelines since March on opposite sides of the field have exposed the company's failure to adequately monitor and repair corroded pipelines on the North Slope.

BP said it was surprised by the condition of the pipelines, but its critics say the company looked the other way when employees tried to blow the whistle.

In a phone interview, Sporkin said BP America President Bob Malone contacted him in early August to ask if he'd consider the assignment, a new position for the company. BP has several avenues for workers to report concerns outside of direct supervisors, but Sporkin said they're apparently not working.

Sporkin said Malone got to know him when Malone ran a troubled Alyeska Pipeline Service Co. for four years in the 1990s and pledged to change its corporate culture for the better. Five companies, including BP, own Anchorage-based Alyeska, which runs the trans-Alaska oil pipeline and Valdez tanker port.

Sporkin presided over the lawsuit filed by Chuck Hamel of Alexandria, Va., an oil company critic and whistle-blower advocate.

Hamel sued in 1993 after a secret Alyeska campaign against him was revealed by personnel hired to carry it out. Alyeska set up a fake environmental law firm in an effort to learn who was leaking information to Hamel about dangerous and unhealthy practices and to retrieve confidential documents he possessed. The "attorney" in charge of the "Ecolit" law firm -- an undercover operative from the Miami security company Wackenhut -- promised to be Hamel's advocate against the industry if he would only help them prepare their cases.

In the days before the trial was to begin, Sporkin urged BP and the other oil company owners of Alyeska to settle because their case was so weak.

"This is not Nazi Germany or Russia," Sporkin charged. "These people have certain rights," the judge said, referring to Hamel and his wife, Kathleen. Hamel and the defendants eventually settled the case for an undisclosed sum.

Hamel, who continues to draw attention to safety concerns from oil field workers, said Tuesday that he has total faith in Sporkin's integrity but is skeptical he can accomplish anything.

"No one holds Judge Sporkin with more respect than Kathy and I," Hamel said. Hamel, 76, said he'd be happy if workers did call Sporkin. "Then I can go to the beach," he said.

Before being appointed to the bench by President Reagan, Sporkin spent 20 years at the U.S. Securities and Exchange Commission, where he helped write legislation that made it illegal for American corporations to bribe foreign officials, despite practices that might be common overseas. He later served five years as general counsel to the CIA.

Malone announced Sporkin's appointment in an e-mail to employees Thursday. Malone said Sporkin will report directly to him.

"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," Malone said. The e-mail was provided by a company spokesman.

Sporkin's authority spans BP employees nationwide, reflecting that the company's problems extend beyond Prudhoe Bay. An explosion at a BP refinery in Texas last year killed 15 workers and injured about 170. And BP is under investigation for allegedly manipulating the U.S. propane, gasoline and oil markets.

Hamel himself met Washington reporters Tuesday at a newsmaker event at the National Press Club. In it, he released letters he sent to the chairman and ranking Democrat of the House Energy and Commerce Committee, which is to hold the first BP hearings this week.

Hamel accused BP of "cooking the books" to hide a deficient corrosion program. He also said the timing of the hearing -- at 10 a.m. Thursday -- would prevent it from going too deep, since members of Congress use the afternoon to get away.

Anchorage BP spokesman Daren Beaudo said Hamel's complaints were too general to respond to.

"If Mr. Hamel has any specific issues or information that sheds further light on the subject, we encourage him to make them known to us and regulators and Congress," Beaudo said.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com or 257-4345.

THE HOTLINE NUMBER BP set up last week, staffed by operators 24 hours a day, seven days a week, is 1-888-776-7545.


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http://www.adn.com/front/story/8162137p-8054973c.html

Three candidates for governor got VECO checks
Before this year's governor's race, the three candidates took donations
By KYLE HOPKINS
Anchorage Daily News
Published: September 6, 2006
Last Modified: September 6, 2006 at 06:34 AM

All three major candidates running for Alaska governor cashed campaign checks from Veco -- one of the biggest spenders in state politics -- in the past. But with a federal investigation now looking into possible corruption involving the oil field services and construction company and state lawmakers, the politicians are saying no thanks.

Former two-term Democratic Gov. Tony Knowles said Tuesday that he won't accept donations from the four Veco officials identified in an FBI investigation that became public last week. His opponents, outspoken Veco critics Sarah Palin, a Republican, and Independent Andrew Halcro, say they want nothing to do with the company.

But that doesn't mean any of the three turned away Veco contributions in past elections. Knowles, who unveiled a five-point plan for improving ethics rules in state government Tuesday, received more than $23,000 in Veco-related contributions throughout the 1990s as he ran for governor three times, according to a review of Alaska Public Offices Commission records.

Halcro, who represented Anchorage in the House of Representatives for four years, collected $5,500 in 1998 and 2000.

While mayor of Wasilla, Palin ran for lieutenant governor in 2002. She gathered $5,000 -- or about 10 percent of her campaign fund -- from Veco officials or their wives along the way.

Knowles and Halcro said Tuesday that they wouldn't return the money. It was donated to long-ago campaigns that have no bearing on the current race, they say. Palin was driving to the Kenai Peninsula and couldn't be reached for comment.

Asked about the past Veco contributions, Knowles says that business people should be able to donate money to candidates like anyone else: "This is a democracy." He said it only becomes a problem when those contributors have undue influence on a candidate, and described his own administration as "squeaky clean."

Palin spokesman Curtis Smith said there has long been an understanding inside the campaign that Palin didn't want Veco money.

"She wanted nothing to do with that company," he said, acknowledging that Veco, which supported incumbent Gov. Frank Murkowski during the primary last month, likely wouldn't offer her cash in the first place.

Halcro who served as a Republican legislator but, like Palin, has a reputation as a maverick within the party, said he won't take donations from the company either. But that isn't exactly going out on a limb, he said.

He says Veco donates to candidates it thinks it can control, and by his second term in the Legislature, the money started to dry up. Now, it wouldn't help anyway.

"If Veco shows up on your APOC report, you would imagine that would generate a response from your opponent," Halcro said.

Halcro is running with former Soldotna lawmaker Ken Lancaster, who does not appear to have received Veco-related donations in the current race or previous campaigns.

Knowles' running mate, Anchorage Rep. Ethan Berkowitz, received $3,000 from Veco officers or their wives in his 1998 and 2000 campaigns.

Palin's running mate, Sean Parnell, received two $500 checks from Veco officers in August, including one from Veco chief executive officer Bill J. Allen, and collected about $16,000 while running for the Legislature in the 1990s.

Palin, meantime, spent the primary election defending criticism from the Voice of the Times -- a separate editorial space produced by Veco that appears in the Daily News everyday.

While Palin often draws heat from the oil industry for her association with a natural gas pipeline plan that's at odds with the route sought by oil companies, Parnell is a former oil lobbyist. Can they co-exist on the same ticket?

"Alaskans chose Sean Parnell to run with Sarah Palin. It wasn't necessarily Sarah," Smith said.

Still, he said, "She's not disappointed with Alaskans' choice, that's for sure." He described Parnell as a "straight-shooter" who can work with Democrats and Republicans.

Last week, the FBI raided several legislative offices, armed with at least one warrant that named four Veco officials: Allen, president Pete Leathard, executive vice president and chief financial officer Roger Chan and vice president Rick Smith.

No one has been charged with a crime.

Randy Ruedrich, chairman of the Alaska Republican Party, said Tuesday that any donations the party receives from the Veco officers will be put aside until investigators decide if anyone is in trouble.

"If any of our candidates ask, we'll encourage them to do the same," Ruedrich said.

Ruedrich said everyone needs to wait and see what comes of the investigation.

"Jumping to conclusions is totally inappropriate," he said.

With Murkowski and some incumbent legislators falling in the Aug. 22 primary and all the candidates for governor presenting themselves as a fresh alternative to the past four years, change was already a theme in this year's election.

The FBI investigation brings even more uncertainty, said Jean Craciun, an Anchorage pollster and public-opinion researcher.

"I don't think that Veco or any of the usual suspects will be presenting themselves as they have in the past. I think they'll probably lay low," she said.

In other words, who wants to be backed by the establishment when anti-establishment candidates are on a roll?

Knowles held his own eight years as governor up for comparison Tuesday, and listed steps he said would ward off future troubles.

He said: Loopholes that allowed former state Attorney General Gregg Renkes to own stock in a company that would benefit from a coal deal he was negotiating for the state need to be closed, executive branch employees would need to reveal all potential conflicts of interest to the public, lawmakers should have to tell people what it is they do to earn lucrative consulting contracts, and state watchdog agencies need more money to enforce the rules.

Ruedrich begged to differ with Knowles' description of his two terms of governor as blemish free, but said he'd need time to research before offering specific examples.

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

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http://www.adn.com/front/story/8162137p-8055797c.html

Beth Bragg: Don't die of shock, but
surprise! -- big oil has invaded politics
BETH BRAGG
COMMENT
Published: September 6, 2006
Last Modified: September 6, 2006 at 06:34 AM

Hearing that the relationship between certain lawmakers and one of the oil industry's biggest companies might be too intimate is like hearing there was gambling at Rick's Cafe in Casablanca.

I'm shocked -- shocked! -- to learn that something wrong is going on here.

We still don't know much about last week's FBI raids, other than they targeted some of the Legislature's biggest names and appear to focus on the financial coziness between lawmakers and Veco, one of the oil industry's most powerful political entities in Alaska.

Well, duh.

Oil is to Alaska politics what water is to fish and tequila is to a first date. You can barely have one without the other.

Lawmakers are chummy with the oil industry because they need money to run for office, and the industry is chummy with lawmakers because it needs legislation to protect its interests. Each uses the other to get what it wants. Done properly, it's called lobbying, and it's legal.

But it's so much a part of doing business here that the public seems unable or unwilling to recognize when it spins out of control.

We aren't surprised when reports of campaign contributions show that oil and gas executives give generously to politicians, often more generously than those in other industries.

We barely flinch when Bill Allen, who owns Veco, buys The Anchorage Times to push his industry's agenda. The newspaper didn't last, but half an editorial page of it survives and runs every day in this newspaper at significant cost to Veco.

We suppress yawns upon learning Ben Stevens, the president of the state Senate, is on Veco's payroll as a "consultant."

We shrug when we learn that Randy Ruedrich, a member of the state commission charged with overseeing the oil industry, leaks a confidential document to an oil industry lobbyist. In fact, this misconduct mattered so little that Ruedrich could admit he'd been unethical, pay a big fine, and two years later win re-election as chairman of Alaska's Republican Party.

In short, the oil industry does whatever it takes to get what it wants. And there's no shortage of accommodating Alaskans.

"Somebody says in these halls, 'Bill Allen wants this,' and it gets done," is how Eric Croft, an Anchorage Democrat, described the way things worked in Juneau back in 2002.

Little has changed.

Last week, as the FBI searched offices and interviewed politicians and pollsters, Croft again described a culture that can only be called sleazy: "Lobbyists writing bills. Special interests, not only funding campaigns, which unfortunately I've kind of gotten used to, but hiring legislators as consultants."

Croft proudly proclaimed he was running an oil-free campaign when he made a bid for governor this year. Of the five leading candidates, he was the only one to state he'd accepted no money from the oil industry.

He finished fifth among the bunch.

Croft looks pretty good now in the light of those FBI raids, although we don't know what, if anything, the investigation will expose. We do know a handful of lawmakers took to calling themselves the Corrupt Bastards Club after their names showed up in a newspaper opinion piece about Veco's contributions to 11 lawmakers and the governor. Corrupt Bastards Club logo items have replaced Valley Trash T-shirts as the gotta-have-it Alaska fashion, provided the FBI doesn't confiscate them all.

Even if the investigation fizzles faster than you can say Security Aviation, the FBI is doing us a favor. Someone needs to kick over a few rocks to show us the creepy things living under them. Maybe someday we'll squirm enough to call an exterminator.

Beth Bragg's opinion column appears Wednesday, Friday and Sunday. Her e-mail address is bbragg@adn.com .

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http://www.adn.com/front/story/8162137p-8054975c.html

McGavick returns money $14,000
Veco made donations to GOP candidate in Washington's Senate race.
By RACHEL LA CORTE
The Associated Press
Published: September 6, 2006
Last Modified: September 6, 2006 at 06:34 AM

OLYMPIA, Wash. -- Republican Senate hopeful Mike McGavick has returned $14,000 he received from executives with an Alaska oil services company under investigation by the FBI, his campaign announced Tuesday.

Spokesman Elliott Bundy said the money was returned Friday, a day after federal agents raided the offices of at least six Alaska legislators, including the son of Sen. Ted Stevens.

The senior Stevens hosted a fundraiser in Alaska for McGavick in April that netted about $100,000 for McGavick's bid to unseat Democratic Sen. Maria Cantwell. All but $2,000 of the contributions in question came in from six Veco Corp. executives at that fundraiser, including chairman Bill Allen and president Pete Leathard, according to The Center for Responsive Politics, a Washington, D.C.-based group that tracks money in politics.

Bundy said the remaining $2,000 came in July from vice president Tom Corkran, who also had given $2,000 at the April fundraiser.

Bundy said that while details of those at the center of the investigation have not been confirmed by authorities, the reporting by the media that Veco was under investigation was enough for McGavick to decide to return the money.

"We simply wanted to err on the side of caution," he said.

Bundy said they did not announce the return Friday because "we didn't feel the situation warranted an announcement."

"This is a criminal investigation, and it's a very serious matter," he said. The FBI searches began Thursday and continued Friday. A copy of one of the search warrants, obtained by The Associated Press, links the investigation to a production tax law signed last month by Gov. Frank Murkowski and a draft natural gas pipeline contract Murkowski and the state's three largest oil companies negotiated.

The warrant called for seizure of documents concerning any payment made to lawmakers by Allen and Smith. Agents also looked for documents about contracts, agreements or employment of legislators provided by Veco, Allen, Smith and Leathard.

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http://www.adn.com/money/story/8162989p-8055809c.html

Alpine oil field is idled briefly to patch a line
CONOCO PHILLIPS: Shutdown a precaution to avert any spill, leak.
By RICHARD RICHTMYER
Anchorage Daily News
Published: September 6, 2006
Last Modified: September 6, 2006 at 05:33 AM

Production from the Alpine oil field was disrupted over the weekend as workers patched a section of pipe that had worn thin, according to Conoco Phillips Alaska Inc., which runs the North Slope field.

The problem pipe was a three-inch drain line, which is used only when the larger pipes need to be inspected or repaired, said Dawn Patience, a Conoco spokeswoman in Anchorage.

Workers discovered the problem Saturday morning during a regular inspection, and the company decided to suspend production and repair the drain line immediately, Patience said.

They welded a patch, called a sleeve, over the weak spot as a temporary fix and plan to do a permanent repair when the field is shut down for regular maintenance next year, Patience said.

No oil spilled. Alpine is the Slope's third biggest oil producer, behind the Prudhoe Bay and Kuparuk River fields. Alpine, which pumps out roughly 130,000 barrels a day, was shut down for less than 24 hours from Saturday afternoon through Sunday morning, Patience said.

Even though the drain pipe is seldom used and there was no oil flowing through it when the weak spot was discovered, there is no way to safely isolate it from the rest of the field's pipeline network without risking a spill during the repair. That's why the entire field needed to be idled, Patience said.

Reporter Richard Richtmyer can be reached at rrichtmyer@adn.com

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Environment & Energy Daily
September 6, 2006

http://www.eenews.net/eed/

OIL AND GAS:
BP whistleblower accuses execs of
lying about Prudhoe pipeline
Lucy Kafanov, E&E Daily reporter

As lawmakers gear up for a number of hearings on the BP pipeline corrosion that led to the closure of Alaska's Prudhoe Bay oil field, an industry whistleblower yesterday accused high-level executives at the oil giant of lying about problems within the company and urged Congress to order an independent audit.

Speaking at a press conference in Washington, Chuck Hamel, an advocate for BP employees in Alaska, told reporters that concerns about a corrosive pipeline at Prudhoe Bay existed for years but that secrecy, inept management and concerns about cost prevented corrective action. Hamel also accused Alaska regulators of helping to conceal a problematic pipeline maintenance program.

"BP lies about everything," Hamel said. "They lie even when they don't have to lie."

BP and Alaska officials have outright denied Hamel's allegations.

The press event was held in advance of a House Energy and Commerce Committee hearing set for tomorrow entitled "BP's Pipeline Spills at Prudhoe Bay: What Went Wrong?" The House Transportation and Infrastructure Committee also intends to examine the topic, on Sept. 13, and the Senate Energy and Natural Resources Committee will hold a Sept. 12 hearing expected to address how the shutdown is affecting domestic supply and how to prevent future shutdowns.

In a letter sent to House Energy and Commerce Committee Chairman Joe Barton (R-Texas) on Monday, Hamel accused BP of "cooking the books" to conceal problems in the Trans-Alaska Pipeline System (TAPS), which is the common carrier line that transports Alaska's North Slope crude to the Port of Valdez. The letter also accused the Alaska Department of Environmental Conservation (ADEC) of conspiring with BP to hide alleged problems with the Prudhoe corrosion inspection program.

"ADEC and BP were complicit in concealing malfeasance in the Prudhoe Corrosion Inspection and Control program, sharing together in the benefits of the lower operating costs," Hamel wrote. "Congress surely must be aware of BP's policy to 'operate systems to failure,' which has ruined the nation's largest energy asset. It may be more useful for your committee to focus instead on the dangerous shortcomings of the vaunted TAPS and its operating company Alyeska Pipeline."

BP spokesman Daren Beaudo dismissed Hamel's accusations, saying the company has increased its corrosion inspection efforts. Beaudo said BP's corrosion inspection and maintenance program has grown over the years and includes 250 employees as well as a $71 million operating budget for 2006.

"We thought it was a robust program, but clearly after problems we've experienced, we've identified that there is a gap, and we will spare no resource to fill that gap," Beaudo said.

The spokesman also addressed allegations of improper oversight by ADEC. "It is generally acknowledged that the oil fields in Alaska are the most regulated in the world," Beaudo said. "We have more stipulations, more regulations that we follow on a daily basis than any other field that we manage."

Larry Dietrick, a director at the Alaska Department of Environmental Conservation, denied Hamel's claims that ADEC went soft on BP and its corrosion problems. "ADEC is neither complicit with BP nor has it inhibited probes into pipeline corrosion," he said. "The department does not in anyway benefit from lowered operating costs."

According to Dietrick, ADEC issued a subpoena to BP, ConocoPhillips, Exxon Mobil Corp. and the other interests in the Prudhoe Bay field as part of a fact-finding investigation on the management of the North Slope. The state is also conducting both a civil and criminal investigation into the matter. And Alaskan officials will evaluate whether state and federal statutory and regulatory authorities may be needed through legislation, regulations or other actions, Dietrick said.

Yet in the same letter, Hamel called on Barton to demand the Transportation Department put together an independent audit of the company. But Beaudo said such a step is unnecessary because BP already conducts regular audits, having held two on corrosion in the past year.

Questions remain about truth of BP comments to Energy and Commerce panel

In another letter sent to Energy and Commerce ranking member Rep. John Dingell (D-Mich.), Hamel urged the committee to ask BP President Steve Marshall to resubmit comments made to the committee in April under oath "to see if he will disavow them."

While Hamel did not provide specific examples of the alleged perjury, Barton himself recently expressed concerns about some of BP's claims. Last month, Barton accused BP of misleading Congress about the condition of its Prudhoe Bay pipelines and said the company's "chronic neglect" led to problems in the Prudhoe field.

Barton asked BP in a letter why the company had repeatedly told lawmakers the corrosion that caused a 265,000 gallon spill in March -- the largest spill ever in the North Slope -- was isolated. Recent published reports say the company had been aware of pipeline problems for years.

"News that BP production of roughly 400,000 barrels per day of crude oil at Prudhoe Bay has been shut down due to excessive corrosion of its oil transit lines contradicts everything the committee has been told," Barton had told BP CEO John Browne in the letter. "The fact that BP's consistent assurances were not well grounded is troubling and requires further examination" (E&ENews PM, Aug. 11).

Hamel will not be testify at tomorrow's hearing. "I don't know what they'll accomplish," Hamel told reporters. "They'll need another hearing."

BP taking attention seriously

As a result of the recent controversy, BP has hired former U.S. District Judge Stanley Sporkin as ombudsman to vet complaints from workers at its Alaska sites and elsewhere in the United States.

But even without this added step, Beaudo said the company has always been open to comments and complaints, despite Hamel's contention that workers might lose their jobs by acting as whistleblowers.

"We are glad to look into issues and concerns, whether it's from our workforce, whether it's from someone like Mr. Hamel," Beaudo said. "And we would encourage anyone with specific information to bring that forward to ourselves or to regulators or to the Congress."

Click here to download the letter sent to House Energy and Commerce Committee Chairman Joe Barton (R-Texas).

Click here to download the letter sent to House Energy and Commerce Committee ranking member John Dingell (D-Mich.).

 

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Anchorage Daily News
September 5, 2006

http://www.adn.com/money/industries/oil/story/8160119p-8052970c.html

VECO executives' donations picked up over last two years
By MATT VOLZ
The Associated Press
Published: September 5, 2006
Last Modified: September 5, 2006 at 06:07 PM

JUNEAU - The four VECO Corp. executives named in an FBI warrant used to raid six Alaska legislators’ offices have long been top Republican donors, but the money really started rolling in when natural gas pipeline talks heated up.

Combined, Chief Executive Bill Allen, President Peter Leathard, Executive Vice President Roger Chan and Vice President Rick Smith have given more than $570,000 to state candidates over the past decade, according to the Institute on Money in State Politics.

The four have also contributed more than $384,000 to presidential and congressional races in Alaska and other states since 1997, according to the Federal Election Commission.

Since Gov. Frank Murkowski and the state’s three largest oil producers began negotiations to build a $25 billion natural gas pipeline to Canada about two years ago, the four executives have bumped up the giving.

The four have spent $231,273 on state candidates in 2004 and through this year’s primary elections.

This year alone, the executives have spent $84,800 on individual legislative races, all to Republican incumbents, challengers or the state’s Republican Party.

Aside from cash contributions, Senate President Ben Stevens, R-Anchorage, has received $252,000 since 2001 for consulting work from the company, according to disclosure statements filed with the Alaska Public Offices Committee. Little is known about what Stevens did for that money, as he is not required to report details of the work.

One of the 20 warrants executed in raids last week across Alaska gave federal agents the authority to seize any documents, letters, records, electronic mail or any other form of communication with VECO, Allen, Smith, Leathard and Chan. The warrant calls for seizing proof of payments, contracts, employment, gifts or fundraisers by the executives to the legislators.

The warrant specifically looks for “any and all documents concerning, reflecting or relating to proposed legislation in the state of Alaska involving either the creation of a natural gas pipeline or the petroleum production tax.”

The Legislature passed the petroleum production tax last month, a major rewrite of the state’s oil tax laws that will base production taxes on the net profits of each oil company’s Alaska operations.

Offices raided in Juneau, Anchorage and the Matanuska-Susitna Borough included those of Stevens; Sen. John Cowdery, R-Anchorage; Rep. Pete Kott, R-Eagle River; Rep. Vic Kohring, R-Wasilla; Rep Bruce Weyhrauch, R-Juneau; and Sen. Donald Olson, D-Nome.

Little is known about the purpose of the investigation. But the raids, which may be the first in state history, have soured plans for a special session Murkowski wanted to call for Sept. 19 to again consider his pipeline deal with BP PLC, ConocoPhillips and Exxon Mobil Corp.

Murkowski spokesman John Manly said the governor’s staff is still discussing the possibilities for a session with legislators.

“We haven’t given up completely. Strike that, we haven’t given up,” Manly said.

The ripple effect of the FBI investigation also is starting to be felt outside Alaska. The campaign of Republican Senate hopeful Mike McGavick in Washington state said Tuesday he returned $14,000 in contributions from VECO executives.

Former Gov. Tony Knowles, who is the Democratic nominee again this year, is one of the few Democrats who has received contributions from VECO, and only when he was running for re-election in 1998. Knowles received $10,975 from company executives that year, according to his campaign. His running mate, House Minority Leader Ethan Berkowitz, also received $3,000 from VECO officials in 1998 and 2000, according to APOC records.

Neither plans to return the money from those past campaigns, spokeswoman Patty Ginsburg said.

Knowles made the FBI investigation of VECO a focus of a five-point ethics plan he described Tuesday.

“I think the figures show that they were a dominant influence in numerous elections of legislators and generously gave to statewide elected officials,” Knowles said of VECO.

He said it is important for more Alaskans to donate money to campaigns or else “the proportionality of that assistance gets way out of kilter.”

“The only ones truly affecting a campaign are the privileged few,” Knowles said.

The Republican nominee, Sarah Palin, did not immediately return a call for comment Tuesday.

Amy Menard, an Anchorage attorney representing the company, said some VECO employees have a strong interest in politics, which is their right.

“VECO has always worked hard to promote a pro-businesss and pro-econonmic development climate in those places where it does business,” she said.

Menard added the company is now in a “very intense fact-gathering process” and does not have enough information to elaborate on questions of the executives’ political ties.

Allen, Leathard and Chan themselves elaborated on their political interests in an October 2004 newsletter to VECO employees. The three co-authored an article in which they called that election critical to the company’s future.

Alaska represents more than 50 percent of the company’s business volume worldwide and an even higher percentage of its net income, they wrote.

“The right people in the White House, the U.S. Capitol and the Alaska State Legislature make a huge impact on oil and gas resource development and on the economy of Alaska,” they wrote.

Earlier that year, in March, Allen wrote a separate article setting the stage for the elections. He placed at the top of the Alaska agenda opening the Arctic National Wildlife Refuge, oil taxes and the gas pipeline.

The major Democratic presidential candidates, he wrote at the time, are backed by environmental groups and are firmly against drilling in ANWR, and for the pipeline, “they have so far done nothing to move that project ahead.”

“Closer to home, the Democratic minority in the Alaska Legislature is calling for a review of taxes paid by the major producers, repeating the statements of past years that the state deserves a bigger share of the pie,” Allen wrote.

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Financial Times
September 6, 2006

http://www.ft.com/cms/s/39248b80-3d45-11db-9b3d-0000779e2340.html

Retired judge to act as BP ombudsman
By Carola Hoyos
Published: September 6 2006 03:00 |
Last updated: September 6 2006 03:00

BP has countered criticism that it fails to listen to its workers' concerns over safety and environmental problems by retaining Stanley Sporkin, a retired US district judge, to act as the company's ombudsman.

Mr Sporkin will oversee a staff of two and manage a hotline for US employees to voice current and future concerns.

BP has come under heavy criticism following revelations that, for more than a decade, workers had tried to warn company officials - including Bob Malone, now head of BP America, and Lord Browne, the company's chief executive - of safety problems at its Alaska operations.

BP executives have argued that the complaints were directed to the relevant authorities within the company and that they were often too vague to be helpful.

Last month, BP was forced to shut down its Prudhoe Bay oil field, America's biggest, because of serious corrosion in its pipelines.

Mr Sporkin said: "My mandate is to do whatever is necessary to ascertain the facts about and identify solutions for problems that exist."

In 1993, Mr Sporkin presided over a case in which Chuck Hamel, the whistleblower who has in the past 20 years made public many of the worker complaints about BP's operations in Alaska, accused BP of spying. The judge likened BP's methods to those of Nazi Germany and BP later settled the case without admitting any guilt.

Mr Sporkin will report directly to Mr Malone. Other oil companies have already gone a step further.

Meanwhile, BP's legal troubles in Texas intensified as the energy group was accused of unethically trying to induce a settlement in a personal injury lawsuit brought by victims of last year's deadly fire at BP's Texas City refinery.

Late yesterday, BP said he judge had decided to dismiss the opposing lawyers' claim.

Kenneth Tekell, BP's lawyer, is accused of having offered a $10m (£5.25m) donation to a church ministry supported by a lawyer representing two injured workers.

The offer was rejected and the injured works have filed a motion with the court asking that it stop BP from making any further such offers that could cloud the judgment of lawyers acting for the victims.

"Such effort is outrageous and highly improper," court documents filed by the victims' lawyers state.

BP yesterday said the victims' lawyers had mischaracterised the discussions. In a statement, it denied "in the strongest terms that its lawyers have acted unethically or improperly in negotiating settlement of any Texas City claims".

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Corporate Crime Reporter
September 5, 2006

http://www.corporatecrimereporter.com/charleshamel090506.htm

CORPORATE CRIME REPORTER
Hamel Says BP Lies About Everything,
They Lie Even When They Don’t Have To
20 Corporate Crime Reporter 35(1), September 5, 2006

“BP lies about everything,” Charles Hamel told a news conference at the National Press Club this morning. “They lie even when they don’t have to lie.”

BP’s arch-nemesis did not back down in the face of a full court public relations counterattack by the UK-based oil giant.

For more than a decade, Hamel has been a thorn in BP’s side, funneling BP whistleblower complaints to reporters, legislators, public interest groups, and most recently criminal investigators in Alaska.

Hamel’s sources on the North Slope for years have been concerned about the corrosion of the pipeline at the giant oil field at Prudhoe Bay.

Few were listening, until BP announced last month that it would slow production at Prudhoe Bay to address the widespread corrosion problems.

Now, Hamel is the center of media attention.

And he took his one hour in the media spotlight to rip into BP, state and federal regulators, the Alaska media, and even environmentalists who have recently come to the defense of BP.

Hamel said Alaskan regulators have for years been “complicit” with BP and helped BP cover-up its problems at Prudhoe Bay.

He said that the gathering lines at Prudhoe Bay in upcoming years will see “spill after spill after spill.”

“It’s like an old garden hose that leaks,” Hamel said. “And a patchwork won’t fix it.”

Hamel said that he knew things were bad when BP forced out of office Alyeska’s COO and CEO as “scapegoats to cover up BP’s $250 million fiasco in the failing Alyeska automation project.”

“You know things are surreal,” Hamel said, “when the Alyeska COO and CEO come to me to complain.”

Hamel ripped into a reporter from the Anchorage Daily News for fronting for BP and writing an article calling BP’s effort to control the burgeoning problem at Prudhoe Bay “a world class anti-corrosion program.”

BP has been on the counterattack against Hamel and his oil field whistleblowers for the past two months.

Just this week, BP hired former CIA general counsel and federal judge Stanley Sporkin to be the company’s U.S. ombudsman.

When asked at the press conference about Sporkin, Hamel said “no one has more respect for Judge Sporkin than my wife Kathy and I do.”

Sporkin, now a partner at Weil Gotshal in Washington, D.C., was the judge who heard Hamel’s lawsuit against Alyeska Pipeline Services Company in 1993.

Hamel accused the pipeline company of spying on him and his wife Kathy.

At the time, Sporkin ripped the company for using tactics “reminiscent of Nazi Germany.”

At the press conference today, Hamel was asked  will your sources confide in Judge Sporkin?

“I don’t know,” he said.

How will you know if Judge Sporkin is successful in resolving these problems?

“We’ll know it’s working when my wife and I can go to the beach,” Hamel said. “Right now, I’m still getting calls at two in the morning.”

Hamel was asked about environmental groups like the Oregon League of Conservation Voters, which have come out in defense of BP.

In the Financial Times last week, Sybil Ackerman of that group penned an opinion piece titled “BP Is Deserving of Censure, But Not a Vendetta.”

“I don’t see a vendatta anywhere,” Hamel shot back. “BP is bringing this upon itself. It’s their pipeline that’s leaking.”

Hamel said that for years, Alaska state regulators have been complicit with BP.

“When I tried to work with state regulators seven years ago, they blew me off,” Hamel said. “B-L-E-W-O-F-F.”

One state regulator told Hamel  “oil companies can self-regulate  they are the oil companies.”

On Thursday, the House Energy and Commerce Committee Subcommittee on Oversight and Investigations will hold a hearing in Washington, D.C. titled  BP’s Pipeline Spills at Prudhoe Bay: What Went Wrong?

Hamel will not testify.

When asked why not, Hamel gave two conflicting answers.

“By the questions they asked of me, it sounded like they were coming from BP,” Hamel said.

He then said that “they wanted some documents from me that I had already committed to a news program.”

Hamel is working with the CBS program 60 Minutes on a two-part series that is scheduled to run later this fall.

The two-part series will be reported by Ed Bradley.

For years, Hamel has had a running feud with Bob Malone, the current president of BP USA.

Malone is leading the current public relations campaign to restore BP’s image in the United States.

On August 9, Hamel and Malone appeared together on the ABC Evening News.

ABC reporter Betsy Stark asked Malone  “Were you ever warned about a serious corrosion problem at Prudhoe Bay?”

“Not that I'm aware of,” Malone said.

“You were never warned by BP technicians or by any outside source about a corrosion problem at Prudhoe Bay?”

Stark comes again.

“Not that I recall,” Malone says.

Not that I'm aware of?

Not that I recall?

Hamel says he e-mailed Malone about the problems in 2003.

“The workers recognize that these lines are like Swiss cheese,” Hamel told Stark. “Corrosion is taking over the field.”

A year later, in 2004, Hamel says he faxed BP's head of Health Safety and the Environment saying  “The corrosion program is reportedly in an almost irretrievable state of disaster."

After the press conference this morning, we ran into Hamel.

He tells us of a story from 2002.

Hamel says that Senator Joseph Lieberman (D-Connecticut) was interested in publicizing complaints from Hamel’s workers  including complaints from a BP instrument technician by the name of Robert Brian  about the corrosion problems at Prudhoe Bay.

Two days before Brian made it to Washington, Malone paid Lieberman’s office a visit to discuss Brian’s concerns.

Hamel says that after the meeting with Malone, Lieberman showed little interest in the matter.

Not that I’m aware of.

Not that I recall.

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Anchorage Daily News
September 5, 2006

http://www.adn.com/money/industries/oil/story/8159963p-8052817c.html

Ombudsman to hear BP worker complaints
By JIM ABRAMS
The Associated Press
Published: September 5, 2006
Last Modified: September 5, 2006 at 11:26 AM

WASHINGTON - Just days before being summoned to testify at a congressional hearing, British petroleum giant BP has asked a former federal judge to serve as its ombudsman and hear complaints from BP workers in Alaska and elsewhere about the company's operations.

Former U.S. District Judge Stanley Sporkin is to give workers an outlet to express concerns about safety and environmental issues. Critics say BP ignored warnings of problems in its Alaska oil fields that led to an oil spill in March and the shutdown of its North Slope operations last month.

BP America chairman and president Bob Malone said in an Aug. 31 e-mail message to U.S. employees that Sporkin "is empowered to do whatever is necessary to assemble the facts and identify solutions for problem." He said Sporkin and a small staff would answer calls from a phone service that will operate 24 hours a day.

On Thursday the House Energy and Commerce Committee will hold hearings on the causes and impact on the U.S. economy of the August shutdown of production of some 400,000 barrels a day of crude oil from Prudhoe Bay.

Malone is expected to get questions on allegations, denied by BP, that it had not responded to warnings from several years back that there was a serious problem with pipe corrosion due to inadequate maintenance.

Committee Chairman Joe Barton, R-Texas, in a statement, said BP had repeatedly assured the committee that the March spill of 270,000 gallons of oil onto the Prudhoe Bay tundra was an anomaly.

The August shutdown "due to excessive corrosion of its oil transit lines contradicts everything the committee has been told," Barton said.

Charles Hamel, a former oil broker who has been the public voice for charges of improper behavior in Alaska's oil industry, said he had great respect for Sporkin and said he was glad they (BP) are going to try something new."

But Hamel, speaking Tuesday at the National Press Club, said he was skeptical of the new open-door policy, claiming that workers in the past who openly complained about problems had been fired or transferred. "Anyone who speaks up pays a price," he said.

Hamel, 76, said technicians within BP Alaska's pipeline maintenance division contacted him in 2004 complaining of inadequate attention to pipe corrosion. He said BP officials did not respond to a letter seeking an investigation.

Hamel, in a letter to Barton, urged the committee to focus at the hearing on "the dangerous shortcomings of the vaunted Trans-Alaska Pipeline System and its operating company Alyeska Pipeline."

"As you are aware," he said in a separate letter on the pipeline to Rep. John Dingell of Michigan, top Democrat on the panel, "a failure of any one of the 500,000 barrel crude tanks, under certain circumstances, would dwarf the damages of the Exxon Valdez spill disaster."

Alyeska operates the 800-mile-log pipeline on behalf of a consortium of oil companies, including BP, Exxon Mobil Corp. and ConocoPhillips.

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http://www.adn.com/opinion/story/8159689p-8052567c.html

BP should volunteer
Company would be smart to forgo tax deduction for pipeline repairs
Published: September 5, 2006
Last Modified: September 5, 2006 at 01:12 AM

Should BP deduct the cost of Prudhoe Bay oil pipeline repairs from its state taxes?

There is the legally correct answer, and then there is the smart answer.

Under the new oil production tax law adopted by the Legislature last month, the legal answer is probably yes, BP can deduct the pipeline repair expenses from its tax bill.

There's nothing unusual or nefarious in that; operation and maintenance costs are deductible. BP also can take a 20 percent credit against its production taxes for any eligible capital expenses associated with the repair and replacement work. Not all repair costs would qualify for the tax credit, only those capital expenses recognized by the IRS.

The company can take the deductions and credits unless the state could prove BP was guilty of gross negligence in failing to maintain the pipeline. That would not be an easy legal chore, since the company took significant steps to monitor the line for corrosion. Obviously, in hindsight, it wasn't enough.

The legal case would be even harder since it appears the state had prior warning of inadequate pipeline maintenance but took no specific enforcement actions to require that BP improve its monitoring. A person could argue there was negligence to share.

The one caveat would be what BP's partners in Prudhoe Bay -- Exxon Mobil and Conoco Phillips -- say about the repair costs. BP operates the giant field and bills its partners based on their respective ownership percentage. A provision in Alaska's new oil production tax law essentially says a field operator cannot write off repair costs on its taxes if its partners refuse to pay their share. If the partners believe the expenses are due to the operator's negligence, that's good enough for the state, and the costs are not deductible.

Without waiting to see what Exxon and Conoco decide, BP would be smart to publicly announce it will voluntarily give up any credits and deductions for the repairs. Because:

• BP, with multibillion-dollar profits from high oil prices, wants to cut a deal with state officials and the public for a multibillion-dollar North Slope natural gas pipeline. Why jeopardize billions for $10 million or $20 million in taxes?

• People will vote Nov. 7 on a punitive natural gas reserves tax initiative, destined to punish North Slope producers for not moving fast enough on a gas line to please Alaskans. BP and its partners would like to defeat the tax at the polls. If passed, it would cost the companies $1 billion a year. It would be a smart pre-election move if the company volunteered to forgo any tax savings from the oil pipeline rebuild.

• Many Alaskans are still angry that legislators passed the governor's oil tax rewrite, which allows operation and maintenance deductions against production tax payments. Most Democratic legislators, some Republican lawmakers, and a lot of the public wanted to stick with the existing system of a tax on gross, without such deductions. If BP takes its pipeline repair credits and deductions against its oil production taxes, it would keep open that divisive battle. And does the company want that in an election year?

The fact is, there are more important issues to discuss during the campaigns for governor, Legislature and the natural gas reserves tax.

BP should pay the bills for fixing the pipe and not take a deduction against its production taxes. It would be a smart move, a conciliatory gesture and the right thing to do.

BOTTOM LINE: Sometimes, it's best to take the medicine and get on with it.

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http://www.adn.com/money/industries/oil/story/8160096p-8052950c.html

Alpine field oil production disrupted over weekend
By RICHARD RICHTMYER
Anchorage Daily News
Published: September 5, 2006
Last Modified: September 5, 2006 at 03:23 PM

Production from the Alpine oil field was disrupted over the weekend as workers patched a section of pipe that had worn thin, according to Conoco Phillips Alaska Inc., which runs the North Slope field.

The problem pipe was a three-inch drain line, which is used only when the larger pipes need to be inspected or repaired, said Dawn Patience, a Conoco spokeswoman in Anchorage.

Workers discovered the problem Saturday morning during a regular inspection, and the company decided to suspend production and repair the drain line immediately, Patience said.

They welded a patch, called a sleeve, over the weak spot as a temporary fix and plan to do a permanent repair when the field is shut down for regular maintenence next year, Patience said.

No oil spilled. Alpine is the Slope’s third biggest oil producer, behind the Prudhoe Bay and Kuparuk River fields. Alpine, which pumps out roughly 130,000 barrels a day, was shut down for less than 24 hours from Saturday afternoon through Sunday morning, Patience said.

Even though the drain pipe is seldom used and there was no oil flowing through it when the weak spot was discovered, there is no way to safely isolate it from the rest of the field’s pipeline network without risking a spill during the repair. That’s why the entire field needed to be idled, Patence said.

Contact reporter Richard Richtmyer at rrichtmyer@adn.com  or or in Juneau at (907) 586-1531.

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Wall Street Journal
September 5, 2006

BP Hires Former Judge To Be U.S. Ombudsman
By JIM CARLTON
September 5, 2006; Page A2

BP PLC has retained former U.S. District Judge Stanley Sporkin as its ombudsman to hear worker complaints from Alaska and elsewhere in the U.S., in a move to stem the tide of criticism over the British oil titan's operations.

BP officials and Mr. Sporkin said BP has given the former jurist free rein to report to the company whatever he hears from workers in the field. Although he will be a contractor paid by BP, "I'll call them as I see them," Mr. Sporkin, 74 years old, said in an interview.

Some BP workers in the past have taken their complaints about BP's practices in Alaska to a former oil-tanker broker named Charles Hamel, a frequent oil-industry critic, because they say management hasn't heeded their warnings about corrosion and other problems at Alaska's giant Prudhoe Bay oil field.

BP partially shut down production at the field last month after discovering corrosion problems more severe than company officials said they had realized. The move led to a surge in global oil prices and came amid investigations by federal and Alaska officials over BP's management of pipelines in the state. While the London oil company has acknowledged some responsibility for the corrosion problem, BP has defended its overall pipeline maintenance as robust and characterized the incidents as unforeseeable.

Mr. Sporkin has some firsthand knowledge of the Alaskan oil issues. He presided over a lawsuit in 1993 in which Alyeska Pipeline Service Co. was accused of spying on Mr. Hamel and his wife, Kathy. Before Alyeska agreed to settle the case with Mr. Hamel and his wife without admitting wrongdoing, Mr. Sporkin lambasted the company's tactics as "reminiscent of Nazi Germany." Alyeska operates the Trans-Alaska Pipeline on behalf of a consortium of oil companies that includes BP, Exxon Mobil Corp. and ConocoPhillips.

Mr. Hamel, who lives in Alexandria, Va., said it remains to be seen whether Mr. Sporkin would prove effective. But "no one has more respect for Judge Sporkin than Kathy and I do," he said.

Mr. Sporkin was asked to take on the ombudsman's role, a new position at BP's U.S. division, by Bob Malone, the company's U.S. president. Mr. Malone said he met Mr. Sporkin in 2001 in his former job as president of Alyeska and thought he could serve as an impartial sounding board for worker complaints. "Because employees have told me they want a third avenue to raise issues, that is what we are doing," said Mr. Malone, who is expected to testify at U.S. congressional hearings set to begin Thursday into problems at Prudhoe Bay and other U.S. operations.

BP is giving Mr. Sporkin a staff of two who will operate a 24-hour call center for any BP worker in the U.S. to file complaints. In an Aug. 31 letter to BP workers, Mr. Sporkin said: "My mandate is to do whatever is necessary to ascertain the facts about and identify solutions for problems that exist today as well as those likely to become issues in the future."

Mr. Sporkin was involved in a number of other high-profile cases during his 14-year career as a jurist on the District of Columbia court. In 1995, he rejected a 1994 antitrust settlement between Microsoft Corp. and the Justice Department over licensing the company's desktop software, saying it was too lenient. The U.S. Court of Appeals in Washington later reinstated it and removed Mr. Sporkin from the case. After retiring from the bench in 2000, Mr. Sporkin became a partner in the Washington office of the law firm Weil, Gotshal & Manges LLP and has been a consultant.

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

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Fairbanks News Miner
September 2, 2006

http://newsminer.com/2006/09/02/1825/

Probe took lawmakers by surprise
By Stefan Milkowski
Published September 2, 2006

Local lawmakers Friday expressed surprise at the federal investigation involving state legislators and a large oil field services company.

“I’m still trying to figure out what the purpose is,” said House Majority Leader John Coghill, R-North Pole.

FBI and Internal Revenue Service agents raided legislative offices Thursday and Friday in search of ties between lawmakers and VECO Corp., according to The Associated Press. The company’s executives contribute heavily to Alaska politicians, mostly Republican.

Some local lawmakers acknowledged receiving campaign contributions from VECO but said the company had not acted improperly in its support or lobbying.

Coghill and Reps. Mike Kelly, R-Fairbanks; Jay Ramras, R-Fairbanks; and David Guttenberg, D-Fairbanks; as well as Sens. Ralph Seekins, R-Fairbanks and Gene Therriault, R-North Pole, all denied knowing anything about one of the investigation’s livelier detailsthe search for hats and garments labeled “Corrupt Bastards Club.”

“Never heard of it,” Seekins said.

Sen. Gary Wilken, R-Fairbanks, and Rep. Jim Holm, R-Fairbanks, couldn’t be reached Friday.

Coghill, Seekins and Ramras said they had received campaign contributions from VECO officials, but said the contributions were based on the candidates’ values and didn’t come with strings attached.

“They’ve never asked me to do anything for them,” Coghill said.

Seekins said VECO president Peter Leathard was a longtime friend. Seekins said he had received campaign contributions from him and other VECO employees.

“In my experience, they’ve never asked for anything in return,” he said.

Ramras said he received contributions in 2005 but not 2006, which he attributed to his position on Gov. Frank Murkowski’s proposed gas pipeline contract with BP, ConocoPhillips and Exxon Mobil.

“They got real cool for me when I wouldn’t carry water for them,” he said.

According to The Associated Press, the federal search warrants called for seizure of documents relating to the state’s oil production tax, the proposed pipeline contract and payments to lawmakers by two VECO executives, Richard Smith and chairman Bill Allen.

The three lawmakers described the VECO officials’ lobbying as aggressive but not improper.

Seekins said he remembered getting two e-mails from VECO officials this year. In one, Allen apologized for his actions on the House floor. In another, Leathard first asked for lawmakers’ support on the governor’s oil tax proposal, then ranted against those who voted against it.

“I am completely amazed at the stupidity of the people who voted against this,” Leathard wrote in the e-mail, which was sent to dozens of lawmakers. “For some of your political future’s (sic) I hope your constituents do not understand what you have done to the State and the people of Alaska for personal political gain.”

Seekins said he didn’t consider the e-mail unusual or improper.

“We get stuff like that all the time,” he said.

The lawmakers said they also received e-mails from company employees about the oil tax, but didn’t consider those unusual either.

None questioned the validity of the new tax, which was approved in early August, or suggested that VECO had significantly affected the outcome.

“I just saw no evidence of that at all,” Ramras said.

Coghill said VECO had pushed hard for the governor’s tax proposal, then changed their tune when lawmakers pushed for a higher tax rate. He said he didn’t remember seeing any VECO officials in Juneau during the last special session.

Guttenberg, who said he didn’t think he’d ever received a VECO contribution, argued the company’s work in Juneau was improper.

“VECO has too large of a role in the deliberations of the Legislature,” he said.

Guttenberg said Allen’s presence on the House floor was “intimidating” for those Allen had supported and claimed the chairman’s influence outweighed that of other companies’ officials.

“Bill Allen is the muscle at the end of the day,” he said.

Therriault said he had not received VECO contributions for several years, and Kelly said he hadn’t received any.

While lawmakers said the investigation probably wouldn’t cloud the oil tax, they said it could significantly affect this year’s election and the future of the proposed gas pipeline contract.

“It may very well throw the whole thing into question,” Therriault said of the contract.

Seekins said the investigation had already become an election issue.

Kelly said it was too early to know what role it would play in the election, but said the investigation was upsetting regardless of whether anyone is found guilty.

“It certainly doesn’t increase the public trust in our state government,” he said.

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com or 459-7577.

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Anchorage Daily News
September 2, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8149385p-8041108c.html

Don't deduct Prudhoe fix, BP is urged
DEMOCRATS: Lawmakers seek a pledge not to write off cost of repair.
By RICHARD RICHTMYER
Anchorage Daily News
Published: September 2, 2006
Last Modified: September 2, 2006 at 02:06 AM

Legislative Democrats have asked BP to pledge that it won't use a newly enacted oil tax law to write off the costs of repairing miles of corroded Prudhoe Bay pipelines.

The law, enacted last month, bases the tax on oil company profits rather than production levels and offers incentives for oil companies to explore for new discoveries, including a tax credit of up to 20 percent of a company's capital spending in Alaska. It also lets the oil companies deduct some of their operation and maintenance costs.

Democratic lawmakers blasted the new tax structure while it was being debated in Juneau, saying the 41-page bill had too many loopholes that would let the oil companies manipulate the system and pay less tax than they should. They also said it would let BP get a tax break from the costs of fixing the corroded Prudhoe pipes.

Several of them sent a letter to BP Exploration (Alaska) Inc. president Steve Marshall, asking him to pledge that the company will not use the new law to offset the repair costs.

"I want to hear their position on how they're going to use this new law," said Rep. Les Gara, D-Anchorage, one of four lawmakers who signed the letter.

"The smart thing for them to do would be to say, 'Look, we're not going to charge these costs to the people of the state,'?" Gara said. "But the business decision for them would be, you gave us the money and we're going to take it."

Steve Rinehart, a BP spokesman in Anchorage, said the company had received the letter and planned to reply. He wouldn't say when. BP does not have a firm estimate yet of how much the repairs will cost, he said.

Gov. Frank Murkowski proposed the new oil tax last winter, and lawmakers struggled for six months to pass it.

Dan Dickinson, a former state tax director who worked as a consultant for Murkowski on the new oil tax law, said there are many provisions in it that could keep BP from using the Prudhoe repair costs to lower its tax bill.

For one thing, BP is not the sole owner of the Prudhoe field but operates it on behalf of partners including Conoco Phillips and Exxon Mobil as well as smaller oil companies, and the new law says that unless all of its partners agree to pay their share of the repair costs BP cannot write it off, Dickinson said.

"If the other owners say, 'You screwed up and we don't have to pay for it,' they can neither get the deduction or the credit," he said.

Dickinson also noted that the new law also disallows deducting certain kinds of operating and maintenance costs. They include costs arising from fraud, willful misconduct or gross negligence, and costs related to spills.

The state is unlikely to find out how BP plans to account for the repair costs until it files a tax return next March. If its partners disagree with the tax plan, the matter likely wouldn't be resolved for at least a year after that, Dickinson said.

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

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Wall Street Journal
September 1, 2006

FBI Raids Alaska State Offices
In Probe of Oil-Field Firm VECO
By JIM CARLTON and STEVE LEVINE
September 2, 2006

The Federal Bureau of Investigation raided six Alaska state legislative offices, carrying away boxes of documents in what appears to be a probe into whether VECO Corp., an oil-field-services contractor with close political ties, engaged in influence peddling.

On Thursday and continuing on Friday, FBI agents launched a series of raids in Juneau and other cities, according to Alaskan legislative officials, pouring into offices that include those of State Senate President Ben Stevens, son of longtime U.S. Sen. Ted Stevens of Alaska. The agents sought documents and other records showing ties between the legislators and VECO and its executives, including Bill Allen, the company's chairman, the officials said.

VECO and its employees are major political-campaign contributors in Alaska, giving mostly to Republicans. In 2000, Mr. Allen was co-chairman of President Bush's Alaska state campaign.

FBI officials declined to comment on the raids. A Justice Department official said "law enforcement actions" had taken place in Alaska this week, but declined to comment further.

John Harris, speaker of the Alaska House of Representatives, said his understanding is that the raids were tied to an FBI probe into whether VECO used its financial influence to try to secure votes on legislation related to a proposed natural-gas pipeline from the Alaskan North Slope.

As part of the push to ship to market all the natural gas that is now stranded at Prudhoe Bay and other big oil fields, VECO and other companies in the industry have pushed for construction of a pipeline to the lower 48 states. The Alaska legislature is considering one bill to help do that, but lawmakers have been squabbling over how much the state should have to pay for construction and other issues.

Last month, Alaska legislators passed a controversial measure that changed the way oil and gas is taxed in the state. Critics of the industry-backed bill say the new system taxes oil and gas based more on industry profits, rather than mainly on production, risking the potential for companies to reclassify some profits as expenses and thus evade taxes. However, supporters of the measure say the state stands to collect more money under the new tax plan.

Three of the legislators whose offices were raided had voted in favor of the tax-change bill, which was championed by Gov. Frank Murkowski, a former U.S. senator who lost his bid for re-election in a Republican primary after a series of unpopular moves. Besides the younger Mr. Stevens, the other legislators whose offices were raided included those of state Sen. John Cowdery and state Reps. Vic Kohring, Pete Kott and Bruce Weyhrauch. All are Republicans. State Sen. Donald Olson is the only Democrat whose offices were caught up in the raids.

Mr. Kohring issued a statement confirming that his offices in the state capital of Juneau and his district in suburban Anchorage were raided, and that FBI agents interviewed him as part of an investigation into VECO. "I was told I am not a target of the investigation," Mr. Kohring said in the statement, adding the FBI asked him not to say more.

A spokesman for Mr. Olson said he will cooperate with the investigation. Calls left for the other four legislators weren't returned. Officials for VECO -- an Anchorage-based oil-field-services company that maintains and repairs crude oil pipelines, refineries and other oil-field facilities -- didn't return calls for comment.

The FBI investigation is the latest cloud over the Alaskan oil industry. Corrosion problems at the giant Prudhoe Bay field have prompted investigations by the Environmental Protection Agency, the Department of Transportation and state agencies into the practices of British oil giant BP PLC, which operates the facility. Corrosion led to a spill of about 200,000 gallons of crude from one pipeline at Prudhoe Bay last March, and BP officials ordered much of the field closed last month after discovering the corrosion problems were more widespread.

The VECO case unfolded as a surprise to workers in Alaska's capitol building, who stood by as agents in sweatshirts and T-shirts swept into the building shortly before noon Thursday, spending hours rifling through legislators' offices. Some legislative aides who saw the agents say that at first they thought they were workers, because they were inside offices, like that of Mr. Stevens, which were closed while the legislature is out of session.

By nightfall, the agents left the building carrying boxes of documents, including binders, appointment books and other materials, two legislative aides said. The agents acted under search warrants that listed "Items to be seized," said one aide who obtained a copy of a warrant. Among the items listed in the warrant, the aide said, was: "Anything having to do with any and all documents concerning, reflecting or relating to any or all of the following entities," including VECO, Mr. Allen, several other VECO officials, two Republican pollsters in Alaska and the Petroleum Club in Anchorage, which has been used to host a number of GOP fund-raisers. The warrant called for a search of all written or electronic documents, said the aide.

Write to Jim Carlton at jim.carlton@wsj.com  and Steve LeVine at steve.levine@wsj.com

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BP Prepares to Move Beyond Browne

Before Passing the Reins,
Chief Needs to Tighten Grip
To Restore Stock's Premium
September 2, 2006

Lord Browne of Madingley is near the end of his time at the helm of BP PLC. During the past 11 years, he has certainly turned the former British government-owned oil company into a giant. Along the way, Lord Browne's reputation has grown with BP's girth. Shareholders, however, haven't correspondingly benefited from BP's global shopping spree.

Regulatory investigations into possible market manipulation in the U.S. and accidents in Alaska and Texas have thrown the issue into sharp relief and reduced the premium traditionally accorded to BP's shares. BP says it is aware of the regulatory inquiries and "cooperating fully" with U.S. authorities.

These issues have also put the company in the crosshairs of American legislators. The politicians are already worried about popular anger over rising gasoline prices at a time of record profits for Big Oil, and will grill senior BP executives, led by the president of its U.S. arm, about pipeline leaks in the coming week on Capitol Hill.

Other major oil firms haven't suffered similar problems in the U.S. So BP's gaffes have raised questions about whether the wheels are suddenly falling off Lord Browne's hitherto highly regarded acquisition machine.

When Lord Browne took the reins in 1995, BP's main assets were tired fields in the North Sea and Alaska. Its market capitalization was £25 billion, or about $40 billion at that time, half the size of Exxon or Royal Dutch Shell. Lord Browne went hunting to close the gap. First he led the $56 billion takeover of Amoco. Then he bought Arco for $27 billion. Then he led BP into some of the world's trickiest oil provinces. The firm's $7 billion purchase of half of TNK in 2003 remains Russia's largest single foreign investment to date.

This deal-making more than quadrupled BP's market value. Since 1995, Lord Browne spent more than $131 billion on acquisitions, according to Dealogic data. That is five times as much as Shell spent, and nearly half as much more as Exxon or France's Total shelled out. Yet the return that BP earned off these deals isn't so distinctive.

Lord Browne's insight was that scale would allow BP to achieve superior returns. But these returns don't seem to have materialized. During his tenure, investors have enjoyed a total return, including reinvested dividends, of 312%, according to Thomson Financial. That beats the broader UK market hands down. However it is no better than BP's European oil peers, many of which are smaller.

The reason for this may be becoming apparent. While Lord Browne's deal-making increased BP's size, it also increased its complexity. And that additional complexity, and the bureaucracy needed to deal with it, may have offset the benefits of scale. Take BP's problems in Alaska and more recent probes into its trading activities in the U.S. These problems may point to inadequate oversight or inappropriate incentives. Lord Browne declined to comment.

Giant companies built on deals often face these questions. Think of Citigroup Inc. or Vodafone Group PLC, another U.K. company that achieved global scale in a few years by snapping up international rivals. The mobile-phone giant failed to extract the hoped-for benefits from its acquisitions. Citigroup's problems aren't dissimilar. Both companies face pressure from some shareholders to break up.

Lord Browne's acquisition career is probably over. But he still has 16 months to address BP's management problems. This is a much greater task. The prize, however, should be the return of BP's premium rating. That would be a worthy legacy to leave behind.
Majority for the Majority

Home Depot is hardly America's top model of good corporate governance. But it is in the vanguard of at least one shareholder-friendly movement. The home-improvement retailer this past week decided to adopt majority voting rules for electing its directors, making it one of a handful of America's largest companies to do so.

Most firms use a so-called plurality approach. Nominees are virtually guaranteed a seat on the board regardless of how many votes they receive so long as they run unopposed. Under the new bylaw adopted at Home Depot, directors must receive more than half of all votes cast. This arrangement gives shareholders more power to reject individual nominees.

According to Institutional Shareholder Services, a proxy advisory firm, proposals for majority voting garnered more than half of all votes at 34 U.S. companies during the latest proxy season. Yet only a few of these corporations, Home Depot, Boeing Co., Marriott International Inc. and Office Depot Inc. among them, have stepped forward and adopted the measures. What are all those other companies waiting for?

Majority voting proposals at Verizon Communications Inc. and International Paper Co., for example, garnered support from more than 60% of shareholders at their annual meetings, that is more than asked for the privilege at Home Depot. Proposals at General Motors Corp. and Bank of America Corp. had greater than 55% support. The proposals are nonbinding, so boards are under no pressure to take immediate action. And the companies say they are considering the proposals. Shareholders, however, should insist upon adoption.

At its most recent annual shareholders powwow, Home Depot chief executive Bob Nardelli was the only one of its 11 directors to show his face. And in the perfunctory meeting, Mr. Nardelli dodged questions from shareholders on subjects ranging from his giant pay package to the independence of the board.

Clearly a move to majority voting won't solve all of Home Depot's shareholder issues, but it is a step in the right direction.

Of course, even if all of these big firms adopt majority voting, it is still a drop in the bucket in a sea of more than 13,000 American publicly traded companies. But major changes in governance practices usually start at the top. As blue-chips such as Home Depot ditch the old rules of plurality, it will be increasingly difficult for others to resist.

--John Paul Rathbone and John Christy

For a complete set of BreakingViews comments, see www.breakingviews.com .

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Anchorage Daily News
September 1, 2006

http://www.adn.com/news/government/story/8144643p-8036875c.html

FBI raids legislative offices
Agents are quiet on purpose of Alaska investigation; Veco is named in the warrants

This story was written by Daily News reporter Richard Mauer and based on reporting by Mauer and Daily News reporters Lisa Demer, Don Hunter, Richard Richtmyer and Joe Ditzler.
Published: September 1, 2006
Last Modified: September 1, 2006 at 02:36 AM

Federal agents swarmed legislative offices around the state Thursday, executing search warrants in a coordinated series of raids that appeared to target the long-standing relationship between the oil field service company Veco and leading lawmakers.

The FBI reported making no arrests.

Above Anchorage's Fourth Avenue, FBI agents spent most of the afternoon behind the closed doors and drawn blinds of the fifth-floor offices of Senate President Ben Stevens and Senate Rules Committee Chairman John Cowdery, both Anchorage Republicans. Through slits in the blinds, one agent in Stevens' office, wearing rubber gloves, could be seen packing away evidence in a container.

In Juneau, tourists and residents were greeted with the extraordinary sight of FBI agents hauling out files from the Alaska State Capitol after searching offices there.

After the FBI searched his Wasilla office and questioned him, Rep. Vic Kohring, R-Wasilla, the chairman of the House Special Committee on Oil and Gas, said the investigation was focused on Veco.

"I fully cooperated and answered all their questions," Kohring said in a written statement. "I was told that I am not a target of the investigation and was asked not to discuss details of the interview."

On the 10th floor of the Frontier Building in Midtown Anchorage, where Veco has its headquarters, the FBI commandeered the glass-sided conference room of another federal agency that rents space there. In the room, Veco president Peter Leathard talked with agents from the FBI and IRS.

The FBI agent could be seen referring frequently to paperwork in a thick binder. Leathard leaned back in a chair, his back to the wall. Attorney Brian Doherty joined Leathard, first meeting with his client privately, then with the agents.

When they all emerged around 4:40 p.m., none would describe the inquiry.

"At this point, we really don't know," Leathard said, smiling as he turned to walk away. He and Doherty would not say more.

Other legislative offices known to have been searched Thursday included those of Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau, and Sen. Donny Olson of Nome. Kott, a former House speaker, and Weyhrauch are Republicans. Olson is the only Democrat in the group.

FBI spokesman Eric Gonzalez said federal agents executed about 20 search warrants Thursday, not all in legislative offices. The warrants were executed in Anchorage, Juneau, Wasilla, Eagle River and Girdwood, he said.

Gonzalez said he was not at liberty to disclose the target of the investigation, how or when it began, or whether it was likely to result in criminal charges.

"It's an ongoing investigation is all I can say," Gonzalez said.

No one would say what was the target of the Girdwood warrant. Ben Stevens' father, U.S. Sen. Ted Stevens, has a home and office there. Both were quiet and dark Tuesday afternoon. A neighbor said she saw no unusual activity at the Stevens home. A postal clerk reported the same for Stevens' office, which is in the Girdwood post office.

A spokesman for Ted Stevens didn't return several calls or an e-mail from a reporter.

Sen. Tom Wagoner, R-Kenai, arrived at the legislative offices at 716 W. Fourth Ave. in Anchorage shortly before noon for a Resources Committee meeting.

"The place was crawling with FBI," Wagoner said. When he tried to enter Cowdery's office, an agent stopped him at the door, Wagoner said.

Wagoner said a senior legislative aide who was present when the warrant was served told him they were looking for files that had to do with Veco and the oil tax legislation recently passed by lawmakers in special session.

Ray Metcalfe, a former legislator and the founder of the independent Republican Moderate Party, said he has been trying to get the authorities interested in what he describ