August

Wall Street Journal
August 31, 2007

UPDATE:
Jury Selection Begins In BP Plant Explosion Trial
DOW JONES NEWSWIRES
August 30, 2007 5:50 p.m.
(Updates with details from jury selection)

GALVESTON, Texas (AP)--The deadly 2005 explosion at a BP PLC (BP) refinery in Texas City was described Thursday to potential jurors in the first civil trial stemming from the blast as a "hell on Earth" in which those killed had their bodies torn apart and survivors suffered debilitating injuries.

More than 200 people gathered in a Galveston courtroom for jury selection and answered questions from attorneys representing plaintiffs in five lawsuits that will be tried together.

Their lawsuits, barring last-minute settlements, are to be the first to be tried in connection with the blast, which killed 15 people and injured more than 170 others.

Among the lawsuits is one filed by two boys whose father, Rene Cardona Sr., 26, killed himself six weeks after the explosion.

"Our experts will show that his suicide was a direct result of the explosion," said Robert Kwok, an attorney for the sons of Cardona.

Kwok said Cardona, a contract worker at the refinery from November 2003 until the day of the blast, was traumatized by the explosion because he knew people who were killed or injured in the accident.

Cardona's sons, 11-year-old Rene Cardona Jr. and 6-year-old Xavier Rodriguez, briefly appeared in front of the jury before they had to go to school.

The other four plaintiffs - contract workers injured in the explosion - are:

- Nara and David Wilson, both 44. They worked for mechanical contracting company Altair Strickland.

- Scott Kilbert, 48, an instrumentation supervisor for construction company JE Merit.

- Rolando Bocardo, 41, an instrument fitter for JE Merit.

"Inside the plant, it was hell on Earth," Brent Coon, who represents the four other plaintiffs, told the jury pool. "These workers were running for their lives. Most of the people out there were working folks like you and I and were not emotionally prepared for that type of catastrophe."

Originally, seven lawsuits were set to go to trial but two of them were settled before jury selection began Thursday.

BP spokesman Neil Chapman said the London-based oil company is working to settle all lawsuits filed as a result of the accident.

Currently, about 1,350 lawsuits have been settled, including those involving all 15 workers who were killed.

The blast has cost the company at least $2 billion ( 1.47 billion) in compensation payouts, repairs and lost profit.

The trial is expected to last up to two months.

The Texas City explosion occurred when part of the plant's isomerization unit, which boosts the level of octane in gasoline, overfilled with highly flammable liquid hydrocarbons. A geyser-like release of flammable liquid and vapor ignited as the unit started up. Alarms and gauges that should have warned of the overfilling equipment failed to work at the plant about 40 miles southeast of Houston.

Coon told the jury pool that all the plaintiffs are claiming that BP did not adhere to various safety practices that would have prevented the blast.

"As horrible as this was, the worse thing was that this was avoidable," Coon said.

The U.S. Chemical Safety and Hazard Investigation Board, one of several agencies that investigated the accident, found that BP fostered bad management at the plant. The CSB also said cost-cutting moves by BP were factors in the explosion.

An internal report by BP released in May said there were management failures from the isomerization unit all the way up to the refining and marketing segment of the company.

Many in the jury pool said they could not award money for any mental anguish the plaintiffs might have suffered because people assume some risk working in the petrochemical industry.

Jury selection was expected to take at least two days.

Seattle Post Intelligencer
August 24, 2007

http://seattlepi.nwsource.com/connelly/328878_joel24.html

Exxon seeks legal sympathy over Valdez
Last updated August 23, 2007 8:57 p.m. PT
By JOEL CONNELLY
P-I COLUMNIST

In his Savile Row threads, the senior partner from a distinguished Los Angeles law firm rose in a Seattle courtroom and argued a case that made the blood leave my face: The Exxon Corp. had suffered enough.

Eighteen years have passed, and Exxon is still imploring judges to feel its pain. On Tuesday, it asked the U.S. Supreme Court to review an appellate ruling that it owes $2.5 billion in punitive damages from the 1989 Exxon Valdez oil spill.

The big "E" has been appealing since 1994, when an Anchorage, Alaska, jury awarded $5 billion to class-action plaintiffs. Fishermen, cannery workers and Alaska natives claimed lasting economic damage from the fouling of Prince William Sound and 400 miles of Alaska coastline.

The case has bounced up and down like a Cordova fishing boat in a Gulf of Alaska storm.

The 9th U.S. Circuit Court of Appeals sent it back to District Court, which affirmed the $5 billion judgment. Exxon took it back to the '9ers, who cut the award in half.

An estimated 20 percent of the plaintiffs (some of them Seattle fishermen) have died since Exxon started appealing. One of the appellate judges who heard the Seattle argument, Charles Wiggins, is no longer with us.

Exxon soldiers on: It hopes Antonin Scalia, Clarence Thomas and other Supremes will prove a sympathetic audience.

While acknowledging the spill was "a very emotional event," the world's biggest oil company argues: "The ongoing case is whether further punishment is warranted."

Exxon-Mobil has lately sought to lower its profile. It has cut money to front groups formed to fuel public confusion on causes of global warming.

Other oil companies busily greenwashed themselves.

ConocoPhillips used shots of breaching whales and Beethoven's music to herald the arrival of double-hulled tankers. British Petroleum has run ads claiming its initials stand for "Beyond Petroleum." Shell has aired profiles of a groovy solar scientist and a gorgeous cultural anthropologist who advises indigenous peoples on how to coexist with oil development.

If you put aside the TV spots, however, big oil is giving us the same old gas.

British Petroleum used the cover of a post-Hurricane Katrina refinery bill in Congress for a sneak attack on legal protections against supertankers in Puget Sound. Reps. Jay Inslee and Dave Reichert thwarted it.

As the Senate marked up energy legislation, Sen. Maria Cantwell, D-Wash., tried to shift subsidies from big oil to renewable energy development.

The industry successfully resisted under guidance of lobbyist and ex-Louisiana Sen. John Breaux, a man famous for saying that while his vote was not for sale, it could be rented.

The anthropologist babe was absent this week as Royal Dutch Shell resumed its attempt to drill exploratory wells for a coal-bed methane project in one of British Columbia's most beautiful alpine basins.

A band of protesters from the Tahltan and Iskut Indian bands blocked Shell crews. The company is considering a court injunction, which would likely lead to arrests.

The land at issue is called the Sacred Headwaters: It forms the headwaters of the Nass, Stikine and Skeena river systems: All are major salmon streams. The Nass is a rare case in Canada of a well-managed fishery. The Sacred Headwaters is a major hunting and fishing ground for native peoples.

"Three years ago, with tenure to drill in hand, Shell Canada didn't waste any time: While most Tahltan were attending a funeral, Shell's contractors unceremoniously bulldozed an access road through a Tahltan trapper's camp and quickly drilled three exploratory wells," thetyee.ca, a Vancouver online newspaper, recently reported.

Shell picked a curious week to bulldoze its way back into the Sacred Headwaters. With great fanfare, British Columbia joined six U.S. states and Manitoba in the Western Climate Initiative, a partnership to reduce carbon emissions.

Who cares about a few dozen Indians in ceremonial costumes blocking a road 600 miles north of Vancouver? Isn't it "old news" that fishermen and tribes are still seeking damages 18 years after the Exxon Valdez spill?

Answer: We ought to extend our attention spans and renew a basic sense of social justice.

During four trips to the Sacred Headwaters country, the Iskuts have impressed me as spiritual, sensible, down-to-earth people who don't want the global economy to roll over their gorgeous corner of the world.

They are willing to accept mines, but one at a time, so the region isn't hit by a boom-then-bust economy. And they want hands off the Sacred Headwaters. They're willing to endure stiff contempt sentences that Canadian judges impose on those who defy corporate power.

The Exxon Valdez plaintiffs have a powerful argument in or out of court: We told you what was going to happen.

As Capt. Joseph Hazelwood was drinking at the Petroleum Club in Valdez, a Cordova biologist-fisherwoman, Dr. Riki Ott, was talking by phone to a meeting elsewhere in town.

She forecast that Prince William Sound was due for a catastrophic oil spill, the question was not whether but when, and that it would not be contained.

The prediction came true a few hours later. If only the Exxon Valdez had shown its corporate parent's skill at maneuver and evasion.

P-I columnist Joel Connelly can be reached at 206-448-8160 or joelconnelly@seattlepi.com . Follow his political blog at
blog.seattlepi.com/seattlepolitics

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Financial Times
August 24, 2007

http://www.ft.com/cms/s/0/8c591808-51d9-11dc-8779-0000779fd2ac.html

Public outcry puts BP on the defensive
By Sheila McNultyin Houston
Published: August 24 2007 03:00 |
Last updated: August 24 2007 03:00

BP has warned it may have to cancel a $3.8bn (£1.9bn) expansion of a refinery in Indiana after dropping plans to increase discharges into Lake Michigan in the face of a public outcry.

For the next 18 months, the UK company said, it would move forward with project design on the refinery expansion while exploring options to operate within the lower discharge limits.

BP has faced an onslaught of criticisms by environmentalists and politicians about its plan to increase discharges of ammonia and suspended solids from the plant by about 50 per cent under plans to modernise the refinery to triple the amount of Canadian heavy crude it can process.

Regulators approved the increases, but state politicians have not only criticised the new limits but called for a Congressional investigation into whether environmental regulators should have granted the approval.

"We're not aware of any technology that will get us to those limits, but we'll work to develop a project that allows us to do so,'' said Bob Malone, BP's US president. "If necessary changes to the project result in a material impact to project viability, we could be forced to cancel it."

BP's decision to back down in the face of public opposition underlined the weak position it finds itself in in the US, following several years of safety lapses.

In 2005 BP's refinery in Texas City exploded, killing 15 people and injuring 500, in the biggest US industrial accident in a decade. In 2006, BP admitted to "severe corrosion'' after a big spill at the Prudhoe Bay oilfield in Alaska.

The company has also faced smaller spills and the public battle over increased pollution in Indiana was not something BP needed.

"Ongoing regional opposition to any increase in discharge permit limits for Lake Michigan creates an unacceptable level of business risk for this $3.8bn investment,'' Mr Malone said.

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National Geographic
August 23, 2007

http://news.nationalgeographic.com/news/2007/08/070823-arctic-oil.html

Arctic Oil Rush Sparks Battles Over Seafloor
Richard A. Lovett
for National Geographic News
August 23, 2007

Polar Power Play |
Part One of a Two-Part Series

The Arctic, known better for its polar bears and melting sea ice than its fossil fuels, may soon become a hot spot for oilspurring an international rush to stake claims on the seafloor.

The Arctic Ocean's seabed may hold billions of gallons of oil and natural gasup to 25 percent of the world's undiscovered reserves, according to U.S. Geological Survey estimatesleading some experts to call the region the next Saudi Arabia.

That's enticing enough for countries bordering the Arctic to begin vying for the resources that might lie beneath the ice. (See a map of the Arctic Ocean.)

First came the Russians, who in early August used a minisub to plant a Russian flag to the bottom of the ocean, 2.5 miles (4 kilometers) beneath the North Pole.

Soon, other countries were in on the act.

Denmark has sent an icebreaker on geological mission to study the seabed north of Greenland to see if it might be an extension of the island (which is owned by Denmark).

The Healy, a U.S. Coast Guard icebreaker, is mapping the seabed north of Alaska. Canada has announced the creation of two new Arctic military bases and has budgeted the equivalent of five billion U.S. dollars for eight new icebreakers to protect its interests.

But who really owns the Arctic?

Staking a Claim

Flag-planting has nothing to do with ownership, said David Caron, director of the Law of the Sea Institute at the University of California, Berkeley.

"The Canadian [foreign minister] has it exactly correct," he said by email. "This is not the 15th century, when title might be gained through discovery and the planting of a flag."

On the other hand, he said, the Russian action was an assertion of a claim, prompting other countries to make their own claimslest they be seen as agreeing to the Russians' claim.

What's more, it's unclear what the Canadian, Russian, or Danish claims actually are, said Ted McDorman, a law professor at the University of Victoria in British Columbia.

"None of the countries have fully articulated it."

Traditionally, countries are granted exclusive oil and gas rights to territorial waters within 200 nautical miles (230 miles/370 kilometers) of their coastlines.

But territorial-waters claims may be extended if the nation's continental shelf extends farther from land.

Furthermore, the oil treasure lying underneath the ice is still "massive speculation," McDorman, of the University of Victoria said.

"Nobody knows what the resources are. But continental shelves in other parts of the world [such as the Gulf of Mexico] have yielded oil and gas," he said.

Territorial Disputes

The Russians' claim to ownership of the North Pole is based on the Lomonosov Ridge, an undersea ridge extending north from Siberia.

But since the ridge extends all the way to North America, the Danes and the Canadians might also assert the same claim.

Under a 1982 treatynot yet ratified by the United Statesthe United Nations Commission on the Limits of the Continental Shelf rules on claims for extended territorial waters.

Each country must submit its claims to the commission within ten years of signing the treaty, which is 2013 for Canada and 2014 for Denmark.

Russia asserted its claim to a 1.2-million-square-kilometer (460,000-square-mile) zone in 2001.

The commission evaluates these claims based on the terrain and geology of the seabed"in very simplistic terms: on whether it is continental in nature," McDorman said.

The real issue in the Arctic has always been Russia, Caron said.

"Everyone should be focused on the ability of Russia to do exploration in a sound way. And their record is so terrible that there's a lot to think about."

For instance, the Soviet Union government dumped "staggering" quantities of nuclear waste into the shallow waters of their Arctic Ocean shelf, he said.

"As th[ose] containers deteriorate over the coming decades, there will be a continuing and deep set of serious environment hazards in the Arctic."

Overall, Caron said, it's good that current oil speculations are focusing attention on the Arcticattention that he hopes will help keep Russia and other speculators on good behavior. "The Arctic has needed attention."

Coming Friday afternoon
How to drill the North Poleand how it could affect the environment.

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http://news.nationalgeographic.com/news/2007/08/070820-global-warming.html

Arctic Ice at All-Time Low
John Roach
for National Geographic News
August 20, 2007

There is less sea ice in the Arctic than ever before recorded, thanks in part to a warm, sunny summer, a climate scientist said today. And the melting season isn't even over.

On Sunday the sea ice extent was measured at 1.93 million square miles (5.01 million square kilometers).

"It's continuing to go down at a rapid pace," said Mark Serreze, a senior scientist at the National Snow and Ice Data Center in Boulder, Colorado.

The previous minimum recordset on September 21, 2005was 2.05 million square miles (5.32 million square kilometers).

By the end of this summer, scientists at the center say, Arctic sea ice may drop below 1.74 million square miles (4.5 million square kilometers).

Bruno Tremblay is an assistant professor of ocean and atmospheric sciences at McGill University in Montreal, Canada, who is planning a research cruise to the Russian Arctic in September.

In preparation for the trip, he has been observing updated maps of the sea ice extent, which show the quickly melting ice.

"I never thought it would go that low that fast," Tremblay said. "There's still a month of melting in front of us, and we're already past the record of 2005."

Tipping Point?

Sea icefrozen, floating seawatermelts and refreezes with the seasons, but some of the ice persists year-round in the Arctic.

The current rate of sea ice melt is much faster than predicted by computer models of the global climate system.

Just last year the National Snow and Ice Data Center's Serreze said that the Arctic was "right on schedule" to be completely free of ice by 2070 at the soonest. He now thinks that day may arrive by 2030.

"There's talk of a tipping point, where we thin the ice down sufficiently so that at some point large parts of it can't survive the summer melt season anymore, so we see this very rapid decline in ice cover," he said.

"It's quite conceivable that that tipping point we talk about has already been reached."

Particularly warm and sunny weather in the Arctic this summer has helped speed up the pace of the melt, Serreze said. But the sea ice decline is part of a decades' long trend.

In the dark days of the winter, some sea ice grows back. Overall, however, the ice pack has thinned.

"It's really a reflection of what's been happening over the past 30 yearsthis general pattern of warming, this general pattern of thinner and thinner ice, which makes it more vulnerable," he said.

Climate Surprise

The loss of sea ice is already having well documented impacts on the Arctic environment, such as shrinking polar bear habitat.

In addition, the melting sea ice will affect atmospheric circulation and precipitation patterns, Serreze said.

"Think of the Arctic as sort of the refrigerator of the Northern Hemisphere climate system. By losing that sea ice, we are greatly altering the efficiency of that refrigerator," he said.

Since different parts of the climate system are integrated, what happens in the Arctic will affect what happens elsewhere on the planet.

However, the climate models disagree on the nature of the potential impacts.

"That's the concern. It's the things that we don't know, it's the climate surprises in store," Serreze said.

If "we lose that sea ice, could we get a climate surprise because of thata climate surprise that is difficult to deal with, like shifts in precipitation?"

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Anchorage Daily News
August 23, 2007

http://www.adn.com/news/alaska/selendang/story/9245099p-9159403c.html

Selendang Ayu owner pleads guilty on 3 misdemeanor counts
GROUNDED FREIGHTER: U.S. judge levels $10 million
fine for 2004 mishap.
By DAN JOLING
The Associated Press
Published: August 23, 2007
Last Modified: August 23, 2007 at 02:32 AM

The owner of the freighter that spilled tons of soybeans and 340,000 gallons of fuel off an Aleutian Island nearly three years ago pleaded guilty Wednesday to three misdemeanor federal counts.

IMC Shipping Co. Pte. Ltd. (IMC) of Singapore, owner of the Selendang Ayu, pleaded guilty to two counts of violating the Refuse Act and one count of violating the Migratory Bird Treaty Act.

U.S. District Judge Ralph Beistline accepted terms of the plea agreement, calling for a $10 million fine. The penalty includes $4 million in community service, including $3 million to assess risks for shipping hazards where the Selendang Ayu went aground along the Great Circle Route and $1 million for the Alaska Maritime National Wildlife Refuge.

The 738-foot freighter ran aground Dec. 8, 2004, and broke in two on the north side of Unalaska Island. About 66,000 tons of soybeans were lost.

During an attempted rescue in rough seas, a huge, storm-driven wave crashed into a Coast Guard helicopter lifting Selendang Ayu crew members from the freighter. The aircraft crashed, and six of the 10 freighter crew members were killed. The helicopter crew was rescued.

The Selendang Ayu left Tacoma, Wash., on its way to China when it experienced mechanical problems. The vessel's engine was shut down as crew members attempted repairs. As the freighter drifted toward Unalaska Island, crewmen were unable to restart the engine. The ship grounded just off Spray Cape and broke apart.

More than 1,600 birds and six sea otters were found dead after the spill. IMC paid more than $100 million in cleanup costs.

U.S. Attorney for Alaska Nelson Cohen praised the company for its cooperation in the investigation that followed, making available foreign witnesses and experts who otherwise would have been beyond subpoena power.

"We had a tremendous amount of cooperation from the defendant," Cohen said.

The two sides remain at odds over whether the company was negligent. Cohen contends it could have been proved, if necessary.

"We don't criminalize accidents," Cohen said.

The crew shut down its engine after discovering a crack in its No. 3 cylinder liner. It could have continued operating with the other five but had to shut down the engine to make repairs.

Investigators concluded that the liner cracked because of improper maintenance and inappropriate operation of the engine -- overheating the engine -- which was aggravated by predicted stormy seas.

"The United States believes that thermal loading caused the cylinder crack and that the thermal loading was caused by improper maintenance including the failure to adequately clean and seal the cylinders," the Department of Justice said. "This problem was exacerbated by the mal-adjustment of the engine's variable injection timing and unaddressed problems with the turbo chargers."

DOJ officials also said when the ship encountered the stormy weather, the strain on the engine from trying to maintain speed in gale-force winds and 30-foot seas brought the engine to the breaking point.

After the shutdown, the engine did not have adequate compression to restart, investigators concluded, because of the poor state of repair of all the cylinders and the cold weather.

There were no tugboats with adequate towing capacity to keep the freighter from grounding.

IMC representatives deny the company was negligent. According to the company, at the time of the accident, all recommended maintenance and inspections had been carried out according to manufacturer's recommendations. The vessel had a full complement of spare parts when it left Washington state.

Vessel records and crew testimony demonstrated that the crew had conducted a detailed maintenance check and thorough inspection of the main engine pistons and cylinders when the vessel departed, the company said.

The ship foundered in the Alaska Maritime National Wildlife Refuge, premier nesting habitat for North America seabirds. Most would have been absent in December, but crested auklets, which overwinter offshore, may have been in bays near the wreck seeking shelter from the storm, according to IMC.

Cleanup of the spill was declared complete June 23, 2006.

SELENDANG AYU: For past stories and photos of the grounding and cleanup, visit

adn.com/selendang

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http://www.adn.com/money/industries/oil/story/9244070p-9159409c.html

Governor's husband goes back to BP job on the North Slope
SLOPE WORKER: One critic calls timing bad as oil tax debate nears.
By STEFAN MILKOWSKI
Fairbanks Daily News-Miner
Published: August 23, 2007
Last Modified: August 23, 2007 at 02:37 AM

Alaska's first gentleman has returned to work for BP on the North Slope.

Todd Palin has worked for BP since 1989. He took a leave of absence to help manage family affairs after his wife was elected last year.

Todd Palin took a leave of absence from the company in January and went back to work late last month, according to Sharon Leighow, a spokeswoman for Gov. Sarah Palin, Todd's wife.

Todd Palin took the leave to deal with a hectic schedule and help take care of the family's four children, Leighow said, and not because of any conflict of interest.

The governor and state lawmakers are knee-deep in issues relating to the state's oil production tax and a wished-for natural gas pipeline. BP runs most of the North Slope oil fields, owns about half of the trans-Alaska pipeline and has a major interest in Prudhoe Bay's huge gas reserves.

Gov. Palin doesn't see her husband's job as posing a conflict of interest because he's not in a position to affect decisions at the company, according to Leighow.

"He is not in management, and his position has no influence on decisions made by the company," she said. "He's a blue-collar hourly wage Slope worker."

But former state Rep. Ethan Berkowitz, who co-authored the "Ethics White Paper" with former U.S. Attorney Wev Shea at the request of the governor shortly after she took office, told KTUU he doesn't agree with Palin's decision to go back to work.

"It's bad timing. It's a tough situation for the family, but I think the interests of the state have to come first," Berkowitz said in a story posted on KTUU's Web site. "In the interest of the state, you need to make sure you're above the appearance of impropriety."

He said Todd Palin's employment with a major North Slope producer could raise questions and problems.

"The short version is, I think this adds an unnecessary, complicating variable to a very complex situation. Going through a revision of the oil and gas tax is going to be difficult enough as it is, and you want as few distractions as possible. This will amount to a distraction," Berkowitz said.

The terms of Palin's leave of absence allowed him to keep his seniority at the company as long as he returned to work within a year, according to BP spokesman Steve Rinehart. Palin works as a production operator at a gathering center.

State law prohibits elected officials, including the governor, from using their positions "for the primary purpose of obtaining personal financial gain" or financial gain for a family member.

On top of that, it requires elected officials to annually disclose all substantial sources of income for themselves and their family members.

Gov. Palin's most recent disclosure, which covers 2006, lists her job as governor, her husband's job at BP, and "Todd's Fisheries," a family commercial fishing operation in Bristol Bay.

It notes Permanent Fund and Bristol Bay Native Corp. dividends; income from selling a piece of property; and Todd Palin's sponsorship and winnings from the Iron Dog snowmachine race (he placed second in 2006).

The filing also mentions a marketing and consulting startup company in Sarah Palin's name. According to state records, Palin received a business license for the company in April 2005 that she let expire at the end of last year.

The company's name, Rouge Cou, translates from the French to "red neck."

"She never used it," Leighow said. "She ran for governor."

As for Todd Palin, Leighow said it was always his intention to return to BP, where he has worked since 1989. He has not participated in any meetings of the governor's gas pipeline team, she added.

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Anchorage Daily News
August 22, 2007

http://www.adn.com/money/industries/oil/story/9241259p-9156734c.html

Exxon takes spill appeal to the Supreme Court
1989 OIL SPILL: Company asks the Supreme Court to review punitive damages.
By ELIZABETH BLUEMINK
ebluemink@adn.com
Published: August 22, 2007
Last Modified: August 22, 2007 at 04:28 AM

EXXON’s Appeal to the Supreme Court
http://www.adn.com/static/includes/news/exxonpetition.pdf

APPENDIX to Exxon’s Appeal
http://www.adn.com/static/images/pdf/exxonvaldez_pet%20app_Final.pdf

Exxon Mobil Corp. has asked the U.S. Supreme Court to review a federal court's ruling that the company owes $2.5 billion in punitive damages for the 1989 Exxon Valdez spill.

This is the energy giant's final attempt to overturn the judgment, which Exxon has been battling for more than a decade.

In May, the 9th U.S. Circuit Court of Appeals in San Francisco denied Exxon's request for another hearing in the long-running civil case. The company has been appealing since 1994, when an Anchorage jury awarded $5 billion in punitive damages to the class-action plaintiffs, who claim economic harm from the spill of nearly 11 million gallons of crude oil in Prince William Sound.

Lawyers for the plaintiffs have said that roughly 20 percent of their clients have died during the lawsuit. The living plaintiffs include about 33,000 commercial fishermen, cannery workers, landowners, Natives, local governments and businesses.

The 9th Circuit Court slashed the original $5 billion in punitive damages in half because, in part, the company did try to clean up the spill and didn't spill oil from the tanker Exxon Valdez deliberately.

In its petition to the Supreme Court on Monday, Exxon raised several criticisms of the 9th Circuit's ruling.

Exxon's lawyers questioned, for example, whether it's legal for the 9th Circuit to impose punitive damages under maritime law against Exxon for the behavior of one of its captains if Exxon didn't have a direct role in the captain's behavior, and if the captain's behavior was contrary to company policy.

Also, the 9th Circuit's ruling ignores legal precedent on awarding punitive damages, according to Exxon's filing.

Exxon officials could not be reached Monday evening.

Plaintiffs said Monday the issues raised by Exxon have already been argued to death in court.

"This case has no constitutional merit. It's just about money and award levels that have been hashed and rehashed ad nauseam," said Frank Mullen, a Homer salmon gillnetter and plaintiff in the case.

He added, "If justice is denied, there will be many fishermen wagging their finger across the table, saying 'I told you so.' "

Four of the nine Supreme Court justices must vote in favor of granting Exxon's petition for the case to proceed any further. Granting the petition doesn't automatically throw out the lower court's ruling; it means the Supreme Court will review the ruling.

"One way or another, this thing is going to be done in 2008," Mullen said, noting that the Supreme Court has until the end of the year to respond to Exxon's petition.

If the justices take the case, they'd have another tight deadline: They'll need to issue a decision by June, he said.

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

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http://www.adn.com/money/industries/oil/story/9241271p-9156740c.html

State needs oil tax auditors
NUMBERS CRUNCH: Department of Revenue to lower job qualifications.
By WESLEY LOY
wloy@adn.com
Published: August 22, 2007
Last Modified: August 22, 2007 at 02:48 AM

Wanted: a few good tax auditors.

The state Department of Revenue is searching -- without much success -- for at least a dozen auditors and other professionals.

Most of the new people are needed to help manage the state's new Petroleum Production Tax, or PPT, department officials say.

State lawmakers passed PPT about a year ago to reform the way the state collects taxes on the production of crude oil. The oil tax is one of the state's main revenue streams.

The new tax scheme is based on taxing profits, which are figured after oil companies take deductions and credits for oil field costs and investment.

State officials knew last year they would need to hire extra auditors and other help to verify the deductions.

But the Revenue Department has had a hard time filling the positions. A big reason is the state can't pay as much for experienced auditors as private companies and other governments can, said state Revenue Commissioner Pat Galvin.

Auditors play a key role in helping collect oil taxes.

One goal of PPT was to increase tax revenue during times when oil prices are high, as they are now.

So far, state officials are displeased with tax receipts generated under PPT.

In a recent status report, the Revenue Department said the state had expected to collect in excess of $1 billion more this budget year than under the old tax regime, which was based on the gross value of produced oil and not company profits. But the projection now is $250 million.

Oil companies are claiming "substantially higher" operating and capital costs than state officials forecast, the report said.

To deal with PPT, the department was authorized to hire eight auditors and one tax technician, but so far only the three most senior auditor positions have been filled despite a nationwide recruitment effort.

Now the department is boosting its want ads and taking a new approach, Galvin said.

"We've decided to lower our expectations to include lower qualified folks," he said.

So, instead of pursuing a highly experienced and qualified auditor at $75,000 per year, the state will recruit less experienced people for $48,000 to $60,000, said Galvin and Jon Iversen, state tax director.

The Revenue Department also is looking for petroleum economists, a program coordinator, revenue appeals officers and a revenue audit supervisor.

All the jobs, to some degree, are to help the department cope with the added workload of managing PPT, Galvin and Iversen said.

Gov. Sarah Palin has called a special legislative session for October where lawmakers might again restructure oil taxation.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.
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Anchorage Daily News
August 21, 2007

http://www.adn.com/front/story/9239908p-9155385c.html

Exxon appeals Valdez spill ruling to U.S. Supreme Court
By ELIZABETH BLUEMINK
ebluemink@adn.com
Published: August 21, 2007
Last Modified: August 21, 2007 at 04:25 PM

Exxon Mobil Corp. has asked the U.S. Supreme Court to quash a federal court's ruling that the company owes $2.5 billion in punitive damages for the 1989 Exxon Valdez spill.

This is the energy giant's final attempt to overturn the judgment, which Exxon has been battling for more than a decade. In May, the 9th U.S. Circuit Court of Appeals in San Francisco denied Exxon's request for another hearing in the long-running civil case. The company has been appealing since 1994, when an Anchorage jury awarded $5 billion in punitive damages to the class-action plaintiffs, who claim economic harm from the spill of nearly 11 million gallons of crude oil in Prince William Sound.

Lawyers for the plaintiffs have said that roughly 20 percent of their clients have died during the lawsuit. The living plaintiffs include about 33,000 commercial fishermen, cannery workers, landowners, Natives, local governments and businesses.

The 9th Circuit Court slashed the original $5 billion in punitive damages in half because, in part, the company did try to clean up the spill and didn't spill oil from the tanker Exxon Valdez deliberately. In its petition to the Supreme Court on Monday, Exxon raised several criticisms of the 9th Circuit's ruling.

Exxon's lawyers questioned, for example, whether it's legal for the 9th Circuit to impose punitive damages under maritime law against Exxon for the behavior of one of its captains if Exxon didn't have a direct role in the captain's behavior, and if the captain's behavior was contrary to company policy.

Also, the 9th Circuit's ruling ignores legal precedent set by other federal appeals courts, according to Exxon's filing.

Four of the nine Supreme Court justices must vote in favor of granting the petition. Granting the petition doesn't automatically throw out the lower court's ruling, it means the Supreme Court will review the ruling.

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

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Anchorage Daily News
August 21, 2007

http://www.adn.com/money/industries/oil/story/9238721p-9154258c.html

Oil tax comes up short by about $800 million
PPT: With special session looming, report on controversial net-profits tax draws mixed responses.
By TOM KIZZIA
tkizzia@adn.com
Published: August 21, 2007
Last Modified: August 21, 2007 at 01:29 AM

State income from the controversial new net-profits tax imposed on the oil industry a year ago will bring in $800 million less than expected this year, a Palin administration report concludes.

The main problem: Industry capital and operating expenses, which can now be deducted from profits before taxes, are twice as high as proponents predicted 12 months ago.

The huge gap between the tax as advertised and its actual performance is helping frame the debate for a special legislative session on oil taxes scheduled for October, Palin administration officials say.

"It does put the exclamation point on the concern that we need to re-examine this," said state Commissioner of Revenue Pat Galvin.

Gov. Sarah Palin said earlier this month she is calling for a second look at the new Petroleum Profits Tax, or PPT, in part because a cloud of corruption surrounds its origins. Three legislators have been charged in federal court with selling their votes on the tax to the oilfield-services company Veco.

The under-performance of the tax in its first year adds reasons for review, say critics of the tax.

"It exposes the weaknesses in the net-profits system right away," said David Gottstein, a member of Backbone, a bipartisan group pushing state lawmakers to take a tough stance on oil industry taxation. Backbone and others have long predicted the state would be no match for sophisticated oil company accounting.

But industry officials say the unexpectedly high deductions reflect real increases in steel prices and other costs these days. Operating the North Slope fields is expensive, they say -- and jacking up taxes again could hurt investment here.

"Increased costs aren't necessarily a bad thing. It means the level of investment is up," said Kara Moriarty, deputy director of the Alaska Oil and Gas Association. "That's the balance PPT was meant to strike."

Palin officials concede that industry costs have indeed risen. They say the high costs are probably here to stay, and are not related to one-time expenses due to last year's spills and shutdowns on the North Slope.

Former Gov. Frank Murkowski's administration officials apparently failed to anticipate this 12 months ago when pushing for the PPT, Galvin said. "What I don't know is if the most current information was used, or if there was some suppression of current information because it didn't fit with the information being used," he said. "There's not a need for casting blame."

TAX IS TAINTED BY CORRUPTION SCANDAL

The report, issued earlier this month, says it's too soon to know whether the law's incentives have spurred new investments or led to excessive deductions.

The current state forecast for oil production and oil prices is slightly less than predicted, and these factors contributed in a small way to the under-performance of the tax, revenue officials said.

Palin says she plans to announce Sept. 4 how she wants the Legislature to change the oil tax.

Corruption will certainly be a theme of the session beginning Oct. 18. In August 2006, the PPT's passage in the state House hinged on a single vote. Two Veco executives have pleaded guilty to bribing lawmakers to vote in step with industry on the tax. Critics say offers of money and jobs may have swayed enough votes to prevent the Legislature from approving a higher tax rate, or another sort of tax entirely.

With the timing that has become a Palin trademark, the governor will be announcing her oil tax decision one day before the scheduled opening of the trials of former Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau, both of whom are accused of selling their PPT votes to Veco in 2006.

Administration officials are still debating whether to propose changes to the net-profits tax or a switch to a broad tax on the gross value of oil production, with deductions keyed to specific investments. Some Democrats pushed unsuccessfully for a gross tax last year, and Palin spoke favorably of that alternative during her 2006 campaign.

But some legislators say a complete overhaul of the state's brand-new oil tax is too much to ask of a 30-day special session.

House Resources co-chairman Jay Ramras, R-Fairbanks, said even if the income isn't as high as expected, the net-profits tax should be given a few years to see whether it encourages new investment in Alaska.

"The question is whether we're going to tax our way into prosperity or develop our way into prosperity," Ramras said.

Backers of the new tax note that, even with the big deductions, it is bringing the state $250 million more this year than would have come under the now-discredited "ELF" oil tax system it replaced.

Oil companies operating in Alaska are united in opposing a special session to revisit the oil tax issue this year, the oil and gas association's Moriarty said.

PPT critics, on the other hand, say the new tax would need to be changed even if it were delivering as promised.

"PPT was intended to short-change us," said Rep. Les Gara, D-Anchorage. "So if we just go back to what was intended, we cement in the system that was designed to short-change us."

Democrats cite petroleum consultants who say Alaska's total share from its oilfields is only 61 percent, compared with a world average of 67 percent or higher. The difference would be worth more than $1 billion a year to the state, they say.

LEGISLATURE WILL TAKE PALIN'S LEAD

The new law included a "progressive surcharge" meant to capture more windfall profits from high oil prices. When the PPT tax passed, advocates said the surcharge would kick in when oil hit $55 a barrel. Because of the higher deducted costs, however, the surcharge won't take effect until oil is between $60 and $63 a barrel, Palin officials said.

The net-profits tax has brought two other surprises, Palin officials said. The law allowed smaller exploration companies to build up tax credits through investments and sell them to major producers. But no market for the credits has materialized among the companies that pay taxes, Galvin said. Also, the state is having a hard time hiring qualified auditors who can sort through the oil company deductions.

House Speaker John Harris, R-Valdez, said Monday he's willing to consider a major overhaul of the state's new oil tax if that's what the governor decides to propose.

"We're going to take a lot of our lead from the administration," he said. "She sits on the high ground here."

Find Tom Kizzia online at adn.com/contact/tkizzia or call him in Homer at 1-907-235-4244.

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Anchorage daily News
August 19, 2007

http://www.adn.com/money/industries/oil/story/9234608p-9150246c.html

Shell's rocky return
Oil giant's plans to go after oil in Beaufort and Chukchi seas have to wait
By WESLEY LOY
wloy@adn.com
Published: August 19, 2007
Last Modified: August 19, 2007 at 03:22 AM

Two decades ago, when Dutch oil giant Shell was poking holes in the ice-clogged Arctic Ocean, Rick Fox was a young buck managing the company's drilling rigs.

Some of the holes hit oil, and Fox and the other oil men felt pretty good about what they found.

But none of the discoveries was developed -- the price of oil was too low and the finds too remote -- and Shell abandoned Alaska's Arctic.

Now Fox, 55, and Shell are mounting an aggressive return to the polar ocean, staking hundreds of millions of dollars to lease vast offshore acreage, staff an Anchorage office and assemble a flotilla of drilling ships to sink more holes in the Beaufort Sea.

The reason for the return is the high price of oil plus potential for big discoveries, says Fox, now the company's Alaska asset manager.

"Conditions are right for us to re-enter and give it another shot," he says. "And we are committed in a very big way."

If Shell and other companies that might follow are successful, they could open a vast frontier and ignite a potentially dazzling new era for Alaska's most important industry, oil and gas.

But getting there has proven difficult. Last week, the 9th U.S. Circuit Court of Appeals in San Francisco dealt what could be a death blow to Shell's drilling plans -- at least for this year.

Citing "serious questions" raised by the North Slope Borough, Native whale hunters and national environmental groups, a three-judge panel ruled Shell can't drill until petitions opposing the project are resolved.

According to the court's schedule for the case, that will take until early December at best. By then the Beaufort Sea likely will be frozen, locking out Shell's drilling ships.

The opponents raise a complex set of objections, but they center on fears that industrial noise and spills could disturb or harm endangered bowhead whales, polar bears, fish and birds that sustain an ancient Inupiat subsistence culture.

They accuse regulators in a Bush administration eager to boost U.S. oil production of giving short shrift to the risks.

With the court order, which extends an earlier stay imposed July 19, Shell's drilling fleet sits idle in Dutch Harbor and a Canadian bay at great expense.

Shell spokesmen say the company is weighing its legal options and isn't mothballing its fleet just yet.

Gov. Sarah Palin decried the court order, calling it "a threat to our economic future."

North Slope Borough Mayor Edward Itta, himself a whale hunter, says he's just glad the court is listening to the concerns opponents have raised.

"From the beginning, we have opposed offshore development," he says.

ARCTIC PROMISE

Federal geologists estimate the Beaufort Sea, along Alaska's northern edge, and the neighboring Chukchi Sea, stretching west to Russia, could yield more than 14 billion barrels of oil at current prices. That's more than the nation's biggest field, Prudhoe Bay, has produced so far.

Yet despite their potential, the Arctic waters have been lightly explored compared with other offshore oil provinces.

According to the U.S. Minerals Management Service, an Interior Department agency that regulates offshore exploration, only 30 exploration wells have been drilled in the Beaufort and five in the Chukchi. By comparison, thousands of wells have been drilled in the Gulf of Mexico, which has a vigorous offshore oil and gas industry.

While some oil has been produced from the shallows along the North Slope shoreline, not much has come from beyond three miles out -- waters under federal jurisdiction. Only the Northstar field, which Shell discovered in 1983 but now belongs to BP, produces oil offshore.

Because the offshore is so forbidding and devoid of a pipeline network to transport the oil, discoveries must be huge -- perhaps even a billion barrels -- to justify the cost of development, says Ken Boyd, a former state oil and gas director now working as an industry consultant.

Boyd believes it is critical for the state's economy that drillers find offshore oil fields to replace fading onshore giants Prudhoe and Kuparuk.

"Shell is working on the other half of Alaska's future," says Boyd, the opposite half being the enormous reserves of North Slope natural gas.

Shell's most immediate target is a previously abandoned prospect it calls Sivulliq, an Inupiaq word meaning "first one." The prospect lies under more than 100 feet of water about 16 miles offshore. The Arctic National Wildlife Refuge, which is closed to oil drilling, is just east of Sivulliq.

Shell already knows the prospect likely contains hundreds of millions of barrels of oil, having joined in a Unocal-led drilling partnership that found what was then called Hammerhead in the mid-1980s.

Using two enormous drill ships, Shell hoped to sink three new holes on the prospect this year to clarify how much oil Sivulliq holds.

Fox says today's technology is much more advanced, with directional drilling to pinpoint the most likely oil pockets and data streaming to allow Shell's best minds to make adjustments from their offices in Anchorage or Houston.

Beyond just exploring, Shell already has signaled it might develop Sivulliq and join the ranks of the North Slope's other three major producers -- Conoco Phillips, BP and Exxon Mobil.

Shell planned to take seafloor corings this year, part of the groundwork for installing an offshore production plant and a subsea pipeline to shore.

'IMMINENT THREAT OF DEATH'

As with past offshore drilling in the Arctic, Shell's plans rile some people.

Environmental groups, the North Slope Borough and the Alaska Eskimo Whaling Commission, which represents whaling villages, went to court to challenge the federal approval of Shell's Beaufort exploration.

They also filed appeals to block air pollution permits the U.S. Environmental Protection Agency issued to Shell to run its diesel-burning drill rigs and support ships. The EPA's Environmental Appeals Board in Washington, D.C., is weighing whether to free up Shell's permits.

The borough and the whalers worry that noise from seismic testing, the drilling ships and icebreakers that escort and protect the rigs will drive bowhead and beluga whales off their normal migratory paths and farther to sea.

If this happens, the already perilous whale hunts will become even more dangerous for crews forced to range farther offshore in small aluminum or sealskin boats to find whales, say lawyers for the borough and whalers. And if they make a kill, the meat could spoil in the time it would take to tow the behemoth home for butchering on the beach.

Subsistence is central to Inupiaq culture and spirituality, and bowhead meat and blubber is a vital foodstuff for people susceptible to diabetes if they decrease their traditional diet, according to court papers seeking to block Shell's drilling.

"The imminent threat of death or serious injury resulting from the deflection of the bowhead migration is likely," the papers say.

The objections are much broader, however, than the bowhead whale, says Itta, the borough mayor.

He says the Minerals Management Service did a poor job of assessing the risks not only to the bowhead but to the entire Arctic ecosystem -- a view shared by environmental groups such as the Alaska Wilderness League, the Sierra Club and the Natural Resources Defense Council. They've asked the court for a more in-depth environmental study.

Itta also says Shell has yet to show him how it can clean up an oil spill in ice-filled waters.

It doesn't help that the borough would enjoy no tax or other revenue if Shell strikes it rich in the federal offshore waters, the mayor adds.

"Imagine your way of life being put at risk and you get nothing. Of course it's a major concern," he says.

On land, the borough's relationship with the oil industry has been more friendly.

The Barrow-based local government traditionally has supported much of the onshore oil development across the Slope. Discovery of the Prudhoe Bay field led to the borough's formation in 1972, and hundreds of millions of dollars in tax collections on the industry have transformed life for many of the borough's 8,000-plus residents.

While an environmental study by the Minerals Management Service does show that whales can hear industrial noise for miles around and will swim away from it, the agency issued a "finding of no significant impact" for Shell's three-year exploration plan.

John Goll, the agency's Alaska director, defends his agency's assessment of the risks to the whales and the Arctic environment.

"We feel confident of the work we did," he says.

The likelihood of a well blowout and major spill is small, Goll adds.

He cites federal figures showing that of the more than 13,000 exploratory wells drilled in U.S. offshore waters from 1971 to 2005, four spills of 34 to 8,400 gallons occurred -- none considered large by agency standards.

WAITING FOR WORK

Shell managers say they've assembled a powerful oil spill response fleet tailored especially for the Arctic drilling campaign. The flagship is the newly launched 305-foot Nanuq, which will carry 44 spill responders plus smaller boats to help deploy cleanup gear such as booms and skimmers.

Operations manager Susan Moore says Shell's response fleet is unusual because it won't be based on land. Rather, it will stand by the two drill ships continuously and be ready to jump on trouble immediately.

Counting two icebreakers and other support vessels the company either built or hired, including an oil tanker capable of holding 500,000 barrels of skimmed oil and water, Shell's drilling flotilla will number about 16 vessels.

Many will carry North Slope village residents and interpreters to act as lookouts for whales and other marine mammals, and they will have authority under certain circumstances to order a halt to the work, Shell managers say.

It's a costly fleet, one Shell intended to put to work as early as June were it not for the court and permit delays.

One of its drill ships, the Frontier Discoverer, is anchored in the Aleutian port of Dutch Harbor while another, the Kulluk, waits in Canada's McKinley Bay.

Shell had made some concessions outside of court in an effort to clear the way for drilling this summer and fall.

On July 26, the company and many of the Slope's whaling captains announced they had signed a "conflict avoidance agreement" to suspend drilling during the fall bowhead hunt.

Other groundwork Shell has laid could help it carry out its long-range plans.

The company has hired former officials in the Interior Department, which Shell must rely on to press the court fight. And it added George Ahmaogak Sr., a whaling captain and former North Slope Borough mayor, as community affairs manager.

Shell also gave Arctic Slope Regional Corp., the Native corporation for the North Slope, the contract to handle spill response -- a source of jobs for villagers.

Even if this drilling season is lost, Shell's Fox says people shouldn't look for the company to abandon the Arctic again. The company plans to move ahead with offshore seismic surveys this summer.

"We believe we have an inside track here because of our previous efforts," Fox says. "It's a very promising arena for us."

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

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Los Angeles Times
August 17, 2007

http://www.latimes.com/news/politics/la-na-stevens17aug17,0,138124.story?coll=la-home-center

In Alaska, scandal flows like crude
Many of the investigations lead to oilman Bill J. Allen. The scope of corruption threatens to reshape the state's political landscape and touch Sen. Stevens.
By Scott Martelle, Times Staff Writer
August 17, 2007

There are generally two views here about the career trajectory of Bill J. Allen, an oilman and political wheeler-dealer who over four decades built his VECO Corp. into one of the state's largest and most influential companies.

He was driven by greed, or by a thirst for political power.

How Allen wielded his considerable influence is a major strand in a knot of political scandals that have touched both of Alaska's U.S. senators -- including longtime powerhouse Republican Ted Stevens -- its sole congressman and at least six members of the Legislature.

And the scandals -- some overlapping, some stand-alone -- have shaken the state's small political world to its core.

Allen's relationship with Stevens is key to some of the inquiries. The VECO executive oversaw the 2000 renovation of Stevens' home in Girdwood, a picturesque enclave about 40 miles south of Anchorage. Federal agents searched the house in late July. Stevens has declined to discuss the investigation other than to say that he has done nothing wrong.

But in a sign that the investigations are broadening, National Science Foundation spokesman Dana W. Cruikshank confirmed Anchorage Daily News reports Thursday that the FBI was looking into $170 million in contracts VECO won beginning in 1999 to support foundation polar research programs. When the first contract was awarded, Stevens was an influential member of the Senate Commerce Committee, which oversees the foundation.

Cruikshank referred questions on the investigation to the FBI. Officials there did not respond to a request for comment.

Stevens' success in steering federal money to Alaska projects is legendary.

So is Allen's reputation for getting his way with state political leaders.

The power that the two men wield across this vast state is demonstrable.

Former state Rep. Jim Whitaker visited Stevens' Senate office in Washington about four years ago and noticed a framed newspaper page that ranked Alaska's most powerful men. Stevens was No. 1.

Right behind him: Bill Allen.

"I doubt that paper's still there," said Whitaker, a Republican who is now mayor of the Fairbanks North Star Borough.

The scope of the scandals is staggering in a state with fewer than 700,000 residents -- smaller than San Francisco.

Allen and VECO Vice President Richard L. Smith have pleaded guilty to bribing or attempting to bribe five state representatives, three of whom have been indicted.

Allen and Smith said in court documents that they illegally funneled more than $400,000 to political candidates, including about $243,000 to an unidentified politician believed to be Ben Stevens, Ted Stevens' son and the former head of the state Senate. He has not been charged.

Search warrants have been executed on several businesses and homes -- including those of Ben Stevens -- as investigators try to untangle connections among Allen, the Stevenses, Rep. Don Young (R-Alaska) and state politicians.

In another unrelated controversy, Alaska's other U.S. senator, Republican Lisa Murkowski, recently announced she was returning 1.27 acres she had bought along the Kenai River for $179,000, or about $100,000 less than what local real estate experts reported it might be worth, according to an overview in a complaint filed July 24 with a Senate ethics panel.

Of all the scandals and investigations, the one that has drawn the most attention here -- and that could lead to a watershed change in Alaska politics -- centers on Allen, a high school dropout from Socorro, N.M., who arrived in Alaska in the 1960s as a welder.

When oil was discovered in Prudhoe Bay in 1968, Allen formed the VECO oil-services company with a partner who later left, and then rode the roller-coaster economy of the Alaska oil fields.

"For whatever reason, probably because he was around in the early days, [Allen] had a good relationship with the major oil companies," said Robert C. Ely, an Anchorage lawyer who did work for VECO until 1983. "He provided what the oil companies wanted in terms of service. You know: 'No problem,' 'Right away sir,' 'We'll get right on it.' They liked that responsiveness."

Still, VECO tumbled into bankruptcy protection in the early 1980s after the price of oil dropped and expansion attempts failed.

VECO held on, though, and when the Exxon Valdez ran aground in 1989, spilling millions of gallons of oil into Prince William Sound, Exxon tapped VECO as the main contractor to clean it up.

By then, Allen had become a political player, though Ely said Allen was more interested in pro-development policies than partisan politics.

"His politics was essentially his relationships with the people who made the decisions about the projects in the North Slope," Ely said.

"That wasn't political politics, that was good-customer- relations politics."

But the "political politics" was there too.

In 1983 Allen collected $41,080 in political donations from 415 VECO employees and doled the money out to five candidates selected by VECO, an action that the Alaska Public Offices Commission ruled illegal. Allen paid a $28,000 fine.

His pro-development philosophy toward the North Slope in particular came out during his deposition in that case. "If there's not any work up there, people can't work up there," Allen said. "If there's not a market, they sure can't work for me or anybody else."

Allen's biggest effect has been through political fundraising and the access that buys. Allen used his wealth to become the oil industry's chief lobbyist, and was so entrenched in Juneau that when he ran afoul of state lobbying regulations, he got them changed.

"To me he was one of those tall, gruff cowboy types who I always thought lived by a code," said former state Rep. Ethan Berkowitz, a Democrat. "It was his own code."

And Allen was the face of Big Oil in Juneau, even if the companies maintained their own lobbyists.

"They knew what he was doing and they could have reined him in," Berkowitz said. "There's no question that his business was dependent on their good graces."

Allen's guilty plea to bribery charges came as a shock even to politicians who had seen Allen at work.

"Everybody knew that VECO had an inordinate amount of weight in the Legislature, but very few of us knew that they were actually putting out anything other than campaign contributions," said former state Rep. Harry Crawford, a Democrat. "Rick Smith, he was good for buying drinks any time in Juneau, that sort of thing. You knew that was there but didn't know that he was providing actual money."

Court records paint a sordid picture of bribes big and small. Allen and Smith regularly booked Suite 604 of the Westmark Baranof hotel in Juneau, where they talked over deals both legal and illegal.

Both men admitted to handing out bribes of a few hundred to several thousand dollars to unidentified legislators, promising jobs and agreeing to fraudulent schemes to hide the flow of cash.

At times, it seemed as though Allen was a member of the Legislature himself. Crawford recalled a showdown over an oil-tax measure near the end of the 2006 legislative session. Crawford offered an amendment establishing an oil tax at a higher rate than Allen and the oil industry wanted, a measure that Crawford's colleague, Rep. Bruce Weyhrauch, a Republican, had just voted for.

"The minute we got that amendment passed the speaker slammed down his gavel" and called for a brief recess, Crawford said.

"Weyhrauch went back and talked to Bill Allen and talked to other legislators."

Crawford said Allen was also passing notes to legislators on the floor, using GOP Rep. Tom Anderson as a courier -- a practice barred by House rules. Anderson has since been convicted of accepting bribesin an unrelated scandal.

"A few minutes after Bill Allen had passed the notes, they called us back into session again and Weyhrauch stood up and moved to rescind our action," Crawford said.

"There was very little I could do, but I could tell who was in charge of the floor that night."

Weyhrauch has been indicted on charges he accepted Allen's bribes. The indictment includes allegations that Weyhrauch cast his first vote mistakenly, then maneuvered to get the amendment squelched.

Observers suggest no one was forced to take Allen's bribes.

"It was easy to avoid Bill Allen, and Rick Smith, and the oil industry in general," said Whitaker, the former legislator. "It was clear they were there to protect their own interests first, at the expense of the state. For me it wasn't a difficult thing" to maintain distance. "For others, it was."

The repercussions from the scandals are wide, and deep.

Republican Sarah Palin won the governor's seat in November largely based on agenda of reform, and has been pushing for tougher ethics policies.

Stevens, 83, was appointed to his Senate seat in 1968 and won it on his own two years later. Young has been the state's sole House representative since winning a special election in 1973.

Both had been considered shoo-ins for reelection in 2008.

But with the stain of corruption spreading, other Alaskan politicians are beginning to talk of challenging Stevens and Young for their seats. Berkowitz is mulling a run, though he is not certain whom he would challenge.

And Ray Metcalfe, a former Republican state representative who has been one of Stevens' loudest critics, said he would probably challenge Stevens in next year's Republican primary.

"The landscape has changed markedly," said Metcalfe. "I would be crazy not to."

scott.martelle@latimes.com

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London Times
August 16, 2007

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2267568.ece

BP faces fresh criticism of safety systems after fire at Prudhoe
BaySuzy Jagger in New York

Last night BP was accused of serious safety breaches after a fire broke out this month at its Prudhoe Bay operations in Alaska, according to a letter sent to a congressional committee.

Congress is investigating BP’s safety procedures after an important pipeline in Alaska sprang a leak in March 2006 causing a 200,000-gallon oil spill.

While BP admits that repairs have taken place on the back-up system, it insisted last night that damage to the system happened because of the fire.

On August 6 a fire took hold at one of three so-called gathering centres within BP’s Prudhoe Bay operations.

Related Links
BP faces deeper inquiry into price-fixing
In the letter to Congress, Chuck Hamel, a Prudhoe Bay oil workers’ activist, alleges that BP failed to notice that a key back-up fire and gas emergency system was broken.

Oil from BP wells is pumped into the gathering centre where it is processed to separate the oil from water and gas. Two weeks ago, an oil line within the centre burst, spraying oil. Fumes from the oil were ignited by a turbine’s hot exhaust.

At the time, BP said that the fire suppression system had failed to work when fire broke out because it had been temporarily switched off so that routine monitoring of corrosion could take place.

The system is designed so that once a fire is detected, it dumps the halon gaseous fire suppressant on to the flames, extinguishing the fire.

In the letter to George Miller, the chairman of the House Education and Labour Committee, Mr Hamel alleges that the back-up system was broken. He also claims separately that the back-up system in an adjoining hangar was not functioning.

That back-up system was designed so that should the first system fail it would prevent an explosion. In the letter he says: “BP dodged a catastrophe and its personnel were fortunately spared.”

Mr Hamel alleges that only after the accident did BP become aware that the back-up system did not work and has since instructed maintenance workers to repair it.

Last night BP said: “We place safety uppermost. No one was injured. This is an example of the system working as intended. The fire detection/suppression system was in good order and functioned correctly. The personnel performed properly. The maintenance workers are repairing the louvres near the turbine because they were damaged in the fire.”

Alaskan state officials hit BP last month with new demands for company records to assess the financial and production impact from last year’s oil field shutdown.

Prudhoe Bay, America’s largest oil field, supplies America with a significant amount of its oil.It has suffered two crises in 18 months in March last year, the bursting of a large pipeline resulted in the biggest oil spill on the North Slope seen to date.

Then in August last year, another pipeline in Prudhoe developed leaks and prompted BP partially to close down the field.

A BP-led group said yesterday that it had cut its 2007 oil output target from its Azeri fields on the Caspian Sea by 22,000 barrels per day to 686,000 for geological reasons.

The group, AIOC, will have to cut production after discovering bigger than expected water and gas yields at some wells, Bill Schrader, the head of the group, said.

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Wall Street Journal
August 16, 2007

BP Trinidad Unit Promises $5B Investment In Gas Exploration
DOW JONES NEWSWIRES
August 15, 2007 4:42 p.m.

PORT-OF-SPAIN, Trinidad (AP)--BP Trinidad and Tobago has pledged to continue investing heavily in natural gas exploration, dismissing a recent report that found the Caribbean nation's reserves will last only another dozen years.

The unit of London-based BP PLC (BP) will spend $1 billion each of the next five years to find more gas, bpTT President Robert Riley told a conference on Trinidad's energy resources.

"I am confident that if everything is done right, Trinidad has resources to last for another 50 years," he said Tuesday.

Trinidad, the second-largest energy producer on the Caribbean Sea after nearby Venezuela, is the leading supplier of liquid natural gas to the U.S. The booming oil-and-gas economy accounts for 62% of the country's national revenue.

An audit conducted by Houston-based consultants Ryder Scott found Trinidad and Tobago's natural gas reserves dropped over the last two years to 30 trillion cubic feet from 34 tcf.

But Energy Minister Lenny Saith, who released the study Friday, said geological data indicate the presence of another 34 tcf of unexplored natural gas beneath Trinidad and surrounding waters.

Several companies at the conference urged Trinidad to offer more generous tax incentives to promote exploration of deep and offshore wells.

Prime Minister Patrick Manning, who chaired the conference, said the national budget to be presented next week will include changes in the gas and oil taxation regime.

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BP's BTC Pipe To Achieve 1 Million B/D Throughput Late 08 -BP
DOW JONES NEWSWIRES
August 15, 2007 12:11 p.m.

LONDON (Dow Jones)--BP PLC (BP) is on target for an average of one million barrels a day throughput in late 2008 at the Baku-Tbilisi-Ceyhan pipeline it leads, the company said Wednesday in a statement. It said average daily throughput for July was about 700,000 barrels of oil a day. At its peak, the Ceyhan terminal will fill one to two tankers a day, the company added.

The U.K. oil major said the pipeline's average daily throughput in July was about 700,000 barrels of oil.

In July, the 1,768-kilometer pipeline, which runs from the Caspian coast of Azerbaijan to Turkey's Mediterranean coast, carried oil at a rate of over 1 million barrels a day but only for several hours and not a full day.

The BTC's shareholders include BP, the operator and 30.1% owner, Chevron Corp. (CVX) with 8.9% and Statoil ASA (STO) with 8.7%

BP's Azeri-Chirag-Gunashli, or ACG, oil fields will produce 686,000 barrels a day on average in 2007 compared with 384,000 barrels a day in the first quarter of 2006, the company said. Current total daily production is around 730,000 barrels, the company said.

A person familiar with the matter said last week that BP's Azeri September shipments for the BTC pipeline would be cut by roughly a third compared with August to 13 million metric tons.

That person said the cut was due to "an upgrade in the West Azeri field (which belongs to the ACG complex)...to enable higher throughput on the BTC line in the future." In addition, BP said Wednesday its Azerbaijani Shah Deniz gas condensate is currently currently in excess of 500 million standard cubic feet a day.

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

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Anchorage Daily News
August 15, 2007

http://www.adn.com/money/industries/oil/story/9222706p-9138845c.html

Federal court blocks Shell drilling in Arctic
By WESLEY LOY
wloy@adn.com
Published: August 15, 2007
Last Modified: August 15, 2007 at 12:44 PM

A federal appeals court today extended its order blocking Dutch oil giant Shell’s planned exploratory drilling campaign in the Beaufort Sea.

The order is a victory for environmental groups and North Slope residents who argued noisy oil industry activity could drive bowhead whales out of reach of subsistence hunters and who accused federal regulators of performing shoddy environmental studies of the potential effects of drilling.

For Shell, it’s a costly setback.

The company has assembled a fleet of drilling ships and support vessels but has been unable to proceed with exploring its Sivulliq prospect about 16 miles off Point Thomson due to the court challenge plus a lack of federal air pollution permits. Much of the fleet is sitting in Dutch Harbor.

Judges on the 9th U.S. Circuit Court of Appeals in San Francisco said the challengers to Shell’s plans had shown a “probability of success” in the case and “raised serious questions” of potential harm.

Today’s ruling extends the hold the court originally placed on Shell’s operations on July 19.

The ruling suggests the hold could stay in place at least until early December, which would doom Shell’s chances of starting its drilling before the Beaufort Sea freezes this fall.

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Anchorage Daily News
August 15, 2007

http://www.adn.com/money/industries/oil/story/9221636p-9137771c.html

Critic says BP neglect at Prudhoe led to fire
AUG. 6: Company counters that blaze was an isolated incident.
By JAMES HALPIN
The Associated Press
Published: August 15, 2007
Last Modified: August 15, 2007 at 03:08 AM

A mechanic investigating a report of a lubricant leak on a turbine at BP PLC's Prudhoe Bay oil field was forced to evacuate a gathering center when another line ruptured, spraying oil that caught on fire, company officials said Tuesday.

BP spokesman Steve Rinehart said the worker was uninjured and that the fire was small and quickly contained. He called the incident isolated, saying safety is a top BP priority.

But Chuck Hamel, a longtime oil industry critic, said this incident is in line with what he calls negligent practices on the North Slope. Hamel said the antiquated fire suppression equipment at Prudhoe Bay is long overdue to be replaced but hasn't been because BP is trying to cut costs.

"This is a near-catastrophic event," Hamel said. "They've cut so many corners that the safety issue is nonsense."

The fire detection system was partially turned off at the time because pipes in the area were being X-rayed for corrosion, and the ultraviolet rays could trigger the system, Rinehart said. Other components, including smoke and gas detection, were on line.
"This fire does not indicate any systemic flaw," Rinehart said. "This illustrates a system that worked. It does not illustrate a system that failed."

He said the leak that caused the Aug. 6 fire -- confirmed by the company eight days later -- was unrelated to the initial leak, which he called a "minor seep or drip.

"It was just happenstance," Rinehart said. "That wasn't the leak that was reported. He just happened to be there when the hose broke."

The fire was minor and occurred at one of the six major processing centers in Prudhoe Bay, temporarily reducing production by about 13,000 barrels per day, state and company officials said. Production should be restored to normal capacity, about 400,000 barrels a day, by Thursday.

Rinehart said once the mechanic escaped the building he alerted the control room and the alarm was turned back on. It then operated as it was supposed to, Rinehart said, and dropped fire retardant onto the fire, which he said was quickly contained.

Occasionally it is necessary to cut off a portion of the fire system, as was done in this case, and when that is done workers are on high alert, he said. The equipment that failed is checked often, Rinehart said, but he didn't know exactly how frequently.
PENNY PINCHING?

Hamel says BP is minimizing the importance of numerous incidents -- including this one -- which he said are failures resulting from years of penny-pinching by the British oil giant.

"BP is dangerously depending on obsolete, deficient systems and facilities at Prudhoe," he says in an Aug. 9 letter to Rep. George Miller, D-Calif., chairman of the U.S. House Education and Labor Committee.

Hamel told The Associated Press on Tuesday that the reason is "their budget at Prudhoe Bay has been decimated and then cut down some more."

BP's recent safety woes are a part of a widespread systemic problem, Hamel said, not the result of a few isolated instances.

Included in that list is a spill that took place Friday at the company's Texas City refinery, where about 120 barrels of gasoline leaked out of a line along the facility's perimeter following a suspected O-ring failure, according to BP spokesman Neil Chapman.

He said the leak was quickly detected and cleaned up and did not affect the community or the gasoline supply.

There is no basis for linking either of these incidents to others that have occurred in the past, he said.

"They're completely unrelated," Chapman said. "We focus on safety as the basis for how we operate, with everything we do."

PREVIOUS LEAKS

But in May, a pencil-sized water leak forced BP to reduce its Prudhoe Bay production by about 100,000 barrels of oil daily, for its second partial shutdown of the field in less than one year.

The facility where the water leak occurred is the same one where the largest-ever oil leak on the North Slope occurred. As much as 270,000 gallons of crude spilled over about five days because of corroded pipes masked by high amounts of sludge, which caused the leak on a feeder line in March 2006.

And in August 2006, after BP had begun running "smart pigs" through lines looking for signs of corrosion, a pinhole leak allowed 966 gallons of oil to spill from another transit line. With data in hand indicating 16 "anomalies," or other possible corrosive spots, BP responded by shutting down part of the massive Prudhoe field.

"This is not something that's happened overnight," said Dan Lawn, a former state environmental specialist and now president of the Alaska Forum for Environmental Responsibility. "It's a constant failure on the part of the state to oversee oil operations in the state of Alaska."

Lawn said the issue is there has not been enough transparency in government, something he hopes will change with the newly formed Petroleum Systems Integrity Office.

Bruce Anders, chief of that office, said in some cases there hasn't been enough scrutiny of the industry, but the new office is meant to be a proactive remedy.

"I think we have an aligned interest, but we also have an equally important mission to protect the people and the environment," Anders said. "We're not going to allow unsafe conditions just to benefit the economy."

BP has had other high profile problems. In 2005, there was a deadly plant explosion that killed 15 people and injured more than 170 workers in Texas. Overly lax federal oversight and cost-cutting by BP were factors the explosion at the oil giant's Texas City refinery, according to the U.S. Chemical Safety and Hazard Investigation Board.

BP officials maintain the incidents have been isolated.

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Houston Chronicle
August 14, 2007

http://www.chron.com/disp/story.mpl/business/energy/5051431.html

Leak spills gasoline at BP's Texas City plant
Situation was contained quickly, company says; no injuries reported
By BRETT CLANTON
Copyright 2007 Houston Chronicle

A pipeline leak over the weekend at BP's Texas City refinery spilled 120 barrels of gasoline onto the grounds but was quickly contained and did not injure any workers, BP and government officials said.

The leak was detected late Friday night in a pipeline that runs along the border between the refinery and a Dow chemicals plant, BP said in a statement.

The company blamed the spill on a failed O-ring, a part that fuses two pipe segments.

"The leak was quickly detected, contained, cleaned up and the line repaired. There was no disruption of supply. No impact to community. All agencies notified," BP said.

Government agencies have criticized BP for safety lapses in Texas City after a March 2005 explosion killed 15 workers and injured scores more. Even so, the plant has continued to have problems.

In April, more than 100 workers at the refinery were sent to area hospitals after complaining of flulike symptoms while doing repairs on an oil processing unit.

The company said it found no leak or other explanation for the symptoms. Some employees have taken legal action to force BP to release details of its investigation.

The facility has had small leaks previously this year.

But Andrea Morrow, spokeswoman for the Texas Commission on Environmental Quality, said an agency investigator sent to the plant Saturday morning found last week's leak could not have been foreseen.

Bruce Clawson, Texas City's emergency management coordinator, said BP notified him of the leak early Saturday morning. Because the leak was quickly contained and no injuries were reported, he said, no emergency vehicles went to the scene.

BP is spending more than $1 billion to upgrade the Texas City refinery, which has been operating at half its 446,000-barrel-per-day capacity.

The company expects to have the plant running at 400,000-barrels per day by the end of the year, with the remainder coming online by mid-2008.

brett.clanton@chron.com

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Anchorage Daily News
August 13, 2007

http://www.adn.com/money/industries/oil/story/9217397p-9133572c.html

Slope spills range from crude oil to saltwater
4,481 TIMES: About 2 million gallons were lost in 10 years; long-term effects are unknown.
By JEANNETTE J. LEE
The Associated Press
Published: August 13, 2007
Last Modified: August 13, 2007 at 01:38 AM

Maintenance of the network of pipelines spanning Prudhoe Bay, the nation's most productive oil field, was widely criticized last year after a pair of high-profile crude oil spills.

Now an upcoming state study shows that all kinds of spills, from crude to gasoline to tainted water, have occurred with regularity over the last decade on the remote wetlands of the Arctic tundra.

Oil companies reported about 2 million gallons of toxic spills from 1995 to 2005 at the enormous Prudhoe Bay field and surrounding region, according to the report provided to The Associated Press by the state Department of Environmental Conservation.

The study worries environmentalists who say the spills are chronic and have damaged the vast network of lakes and ponds to an unknown degree. But state environmental officials and some scientists say there is scant evidence that spills have caused long-term damage.

"The immediate effects really look bad, but usually they disappear pretty quickly," said Jay McKendrick, professor emeritus at the University of Alaska Fairbanks. He advises oil companies on replanting techniques after a spill. "The long-term effects on the tundra are pretty minimal."

Home to polar bears, grizzlies, caribou and millions of migratory birds, the 89,800-square-mile North Slope encompasses what environmentalists call one of the most delicate habitats in the world.

The region is slightly larger than Minnesota and stretches from the Arctic Ocean south to the Brooks Range. Besides Prudhoe Bay, it contains nearly two dozen other fields run by BP and Conoco Phillips.

BIGGEST SPILL WAS OF SEAWATER

A large breach of seawater, which can kill slow-growing tundra plants, accounted for about half the reported amount spilled. The 994,400-gallon spill occurred in March 1997 on a gravel pad in the eastern section of Prudhoe Bay and did not cause lasting damage, officials said at the time.

Saltwater that had not been separated from the oil and gas mixture was second with 349,274 gallons spilled. Crude oil was third, with 103,397 gallons reported.

Of the 4,481 spills reported, 89 percent of them measured less than 99 gallons. Environmentalists worry because few studies have documented their cumulative effects.

"What's important is that many of the spills may be small, but they're chronic and they're continuing to happen," said Pamela Miller, Arctic coordinator for the Northern Alaska Environmental Center.

In addition, there is little data on water quality before exploration and construction began at Prudhoe Bay in the late 1960s, making changes difficult to measure, Miller said.

"There hasn't been major documented damage, but it doesn't mean that's something to ignore," Miller said. "If there's a major spill, it has the potential to harm bowhead whales, polar bears and migratory birds."

INFRASTRUCTURE ALSO A PROBLEM

One study by the National Research Council in 2003 found no evidence that spills caused enduring harm to the tundra. That study said damage to plants and animal populations from ever-expanding infrastructure is much more lasting and widespread. Of the 250 sites the state has labeled "contaminated" on the Slope, most are permanent installations such as roads, drilling rigs, pipelines, buildings and gravel pads.

"There are certain plant species up there that tend to have tolerance to oil so they come back and take care of the vegetation problem pretty quickly," McKendrick said.

Several state officials said the spills' effects on wildlife have been minimal.

"Based on spills reported, we haven't really noted any lasting impacts to wildlife per se," said Leslie Pearson, prevention and emergency response manager for the Department of Environmental Conservation.

Minor spills have occurred in the eight Alaska Native villages in the region, and military and aviation companies have also been responsible. But the bulk of pollution has come from the oil industry. Crude from the Slope makes up about 15 percent of U.S. production and seven percent of consumption.

BP OIL SPILL LARGEST TO DATE

The largest crude oil spill on the North Slope occurred last year, outside the time period studied. Any long-term effects of the 201,000-gallon spill from transit lines at Prudhoe Bay, discovered in March 2006, have yet to be documented. A smaller spill in August 2006 prompted BP, which manages Prudhoe Bay, to temporarily halve production at the field and replace 16 miles of pipelines at Prudhoe Bay.

DEC officials sheared off the oiled mat of vegetation damaged in the winter spill and replaced it with pads of tundra removed during construction on a mining site.

The site, which is just under two acres, is in the early stages of recovery.

"There are patches of green sprouts alongside significant areas that are still black, with nothing growing," said Tom DeRuyter, an environmental program specialist for the agency.

The U.S. Environmental Protection Agency and the Justice Department are investigating whether BP's pipeline maintenance program violated the Clean Water Act.

"Most of our spills on the North Slope are small drips and leaks, but we are also prepared to respond to the most catastrophic event," BP said in a statement.

The report, due to be released this fall, marks the most thorough examination the state has done on spills throughout Alaska.

It is intended to help state officials improve response to hazardous substance spills by tracking trends throughout the state, said environmental program specialist Camille Stevens.

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Wall Street Journal
August 13, 2007

BP Indiana Refinery Air Permit Draft To Get Public Review Soon
DOW JONES NEWSWIRES
August 13, 2007 10:32 a.m.

WHITING, Ind. (AP)--Carbon monoxide emissions from the BP PLC (BP.LN) oil refinery in Lake County will rise significantly under a final draft air pollution permit that's due to receive public review soon, a report said.

BP officials told The Times of Hammond that carbon monoxide, a major contributor to ground-level ozone, will be the only pollutant to increase under the new permit. Breathing ozone can trigger a variety of health problems and can worsen others, according to the U.S. Environmental Protection Agency.

The draft permit is being reviewed by BP officials and should soon be opened to public comment, managers of the oil giant said in an interview with The Times.

Meanwhile, BP will seek no changes in its controversial wastewater permit to appease critics, Stan Sorrels, BP's manager for health, safety, security and environment, told the newspaper.

The wastewater permit, which will govern the release of pollutants at the refinery under a $3 billion expansion, allows the oil giant to increase the amount of ammonia it dumps into Lake Michigan by 54 percent and the amount of suspended solids by 35 percent. It has been fiercely opposed by politicians in Illinois and some environmental groups.

"We have a water permit we think is a good water permit, and we need it to run the refinery," Sorrels said.

BP officials would not say when they expect to complete the review of the draft air permit. It must be made available for public comment and receive approval from the EPA and the Indiana Department of Environmental Management before construction can begin.

The air permit requires BP to apply the latest EPA standards to its emissions, Sorrels said.

The expansion will triple the refinery's use of heavy crude oil from Canadian tar sands. That oil is thicker and more difficult to process than the bulk of the crude the refinery currently handles.

"It is heavy crude, so we are adding a lot of new process heaters, and with those come emissions out of those stacks," Sorrels said.

Dan Murray, IDEM's assistant commissioner for air quality, said that because the expansion will increase carbon monoxide emissions more than 100 tons per year, BP must use the best available technologies to lessen the amount and impact of the emissions.

Emissions data on IDEM's Web site shows the refinery emitted 2,055 tons of carbon monoxide in 2003, the most recent year for which data is available.

The public and the EPA will have at least 30 days to comment on the draft air permit. Those comments then are reviewed by IDEM, which then can make changes to the permit.

BP wants to begin construction in the first or second quarter of 2008, Sorrels said. The expansion will not be fully operational until 2011.

The air permit also will set allowable levels for particulate matter, volatile organic compounds, nitrous oxides and sulfur dioxide. Murray said the draft permit calls for emissions of some of those pollutants to increase and some to decrease.

Ted Krauss, BP's project director for the Canadian Crude project, told The Times that the company remains committed to the $3 billion expansion because it will mean a sustainable future for the Whiting refinery and the thousands of jobs it supports.

"We raise our families here, we drink the lake water, ... so it's one of our values is not to harm the environment," Krauss said.

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Financial Times
August 13, 2007

http://www.ft.com/cms/s/d9574cd6-4934-11dc-b326-0000779fd2ac.html

Fire at BP field after warnings
By Sheila McNultyin Houston
Published: August 13 2007 03:00 |
Last updated: August 13 2007 03:00

BP had a key part of its fire-suppression system turned off when a fire broke out at its Alaska oilfield, endangering at least one worker, who ran to escape the flames, the Financial Times has learned.

The near-miss came after Chuck Hamel, an advocate for BP workers in Alaska, warned Congress that re-placement of the oilfield's antiquated fire suppression system had been deferred on grounds of cost.

The outdated system interfered with corrosion monitoring, so it had been turned off for up to 12 hours while BP explored the gathering centres for pipe corrosion, Mr Hamel told George Miller, chairman of the US House Education and Labor Committee in a recent letter.

BP admitted last year to "severe corrosion" after its biggest spill there, forcing it to close half of Prudhoe Bay, North America's largest oilfield. It has since stepped up corrosion monitoring.

Mr Miller then asked BP to respond to Mr Hamel's charges, which BP pledged to deliver. It has done so but asked that answers be kept confidential.

Fire broke out last week, risking the life of a mechanic.

Steve Reinhart, a spokesman for BP, said: "We do occasionally disable, temporarily, the UV detection part of the fire-protection system when we do X-ray testing of wells for corrosion."

BP declined to say how many hours the system was turned off at a time. Mr Reinhart said that when the UV detectors had been turned off, BP still had smoke detectors in place, as well as enhanced human surveillance.

"It is comparable to going down a mountain with no main brakes, but relying on hand brakes," Mr Hamel said.

"This was possibly one of the worst industrial close calls at the Prudhoe Bay gathering centre ever."

The news is particularly embarrassing for Tony Hayward, BP's new chief executive, as his previous role was to lead upstream operations, which included Alaska.

Mr Hayward succeeded Lord Browne, who left after a string of safety lapses in the US, involving Alaska and Texas, where the Texas City refinery exploded in 2005, killing 15 and injuring 500.

The FT has also learned that a caller alerted regulators that an estimated 100 barrels of oil had leaked from a steel pipeline from the Texas City refinery.

BP confirmed that a gasoline pipeline along the border of the refinery had leaked last Friday and said that 120 barrels were lost from a small leak in the line.

"The leak was caused by the failure of an O-ring. The leak was quickly detected, contained, cleaned up and the line repaired," a spokesman said.

"There was no disruption of supply. No impact to community. All agencies were notified.''

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Houston Chronicle
August 11, 2007

http://www.chron.com/disp/story.mpl/business/5045899.html

BP will fight OSHA penalty
Company cited for inspection violations at unit in Texas City
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

BP said Friday that its U.S. division will contest the latest safety citations and a fine imposed by federal regulators over hazardous conditions at the company's Texas City refinery.

Last month the Occupational Safety and Health Administration cited BP for one willful and four serious safety violations found during an inspection in January. OSHA also fined BP $92,000.

BP had until Friday to comply, request an informal conference or contest the citations and fine.

"BP Products North America is contesting the alleged violations and the proposed penalties and abatement dates announced by OSHA after an inspection earlier this year at the BP Texas City refinery," the company said in a statement.

OSHA didn't return calls for comment Friday.

OSHA regional manager Dean McDaniel said in a statement last month that the citations were based on identification of hazardous conditions similar to those that led to the March 2005 explosion at the plant that killed 15 people and injured scores.

The willful-violation citation stemmed from BP's alleged failure to ensure that a pressure relief system for a large vessel called a fractionator conformed to industry codes. The fractionator is part of a larger processing unit.

The four serious violations OSHA alleged were that BP failed to:

• Identify, evaluate or address hazards in the fractionator processing unit.

• Ensure that piping and instrument diagrams were accurate.

• Ensure the installation of the right kind of pressure relief valves.

• Ensure use of safe electrical equipment where flammable liquids and gases are processed.

OSHA defines a willful violation as one committed with intentional disregard of its requirements or plain indifference to employee safety or health. It defines a serious violation as a hazard the employer knew or should have known about that could cause death or physical harm.

BP said in its statement Friday that before the OSHA inspection, the company had put safeguards in place to allow continued safe operation of the unit. Those safeguards entail changes in process controls and use of instruments to reduce likelihood that pressure relief valves would be needed, the company said.

In October 2006 BP ordered a new fractionator tower, which is expected to be delivered and installed next year.

The refinery has been operating at half its capacity of 460,000 barrels a day since Hurricane Rita hit in September 2005. The company expects to restore the plant to its capacity by year's end.

In September 2005, BP agreed to pay a $21 million fine to settle with OSHA on more than 300 violations stemming from the 2005 blast, but it said at the time it did not admit the violations.

kristen.hays@chron.com

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Fairbanks News Miner
August 10, 2007

http://newsminer.com/2007/08/10/8332

Thomas leaving Alaska for Colorado
By Eric Lidji
elidji@newsminer.com
Published August 10, 2007

The face of the Alyeska Pipeline Service Co. in Fairbanks is leaving Alaska.

Curtis Thomas, who spent more than a decade as a popular presence on local news stations before becoming the Fairbanks communications manager for the company that maintains the trans-Alaska oil pipeline, plans to leave Alaska at the end of the month to become BP’s community liaison in southwestern Colorado, northwestern New Mexico and the San Juan Basin. Even though BP retains nearly 47 percent ownership in the pipeline, Thomas said the move is not a transfer or a promotion but an opportunity to try something new after 44 years in Fairbanks.

“Everything I’ve done has been right here in Fairbanks, so this has been a huge step for me,” Thomas said. “Before I got too old, I just wanted to test the waters elsewhere.”

Thomas has lived in Fairbanks his entire life.

His grandfather came up before statehood to start a church and quickly sent for Thomas’ father and mother living back in Oklahoma, calling Alaska a “land of opportunity.” Thomas’ father initially took work as a janitor but eventually became the postmaster for the entire Northern Region of Alaska.

Although embarking on a similar journey to an unknown place, Thomas said his trip has “no promise of riches and fortunes and retirement.” It promises self-discovery through new surroundings.

“It’s a desire to see what else is out there, to see what I’m capable of and to see what it’s like to be me, somewhere else,” Thomas said.

Fairbanksans first started seeing Thomas in the 1980s, when he became a cameraman for KTVF Channel 11, eventually working his way up to the anchor’s seat. He left television news in 1996 to start a one-man production company but returned the following year to help build up a rival news operation at KFXF Channel 7 and KXD Channel 13.

Charles Fedullo with the University of Alaska Fairbanks journalism department worked with Thomas at Channel 11 and said Thomas was always the guy with the right contacts in the community. Still, Fedullo doesn’t expect Thomas to have any trouble entering a new community.

“People gravitate to him. He knows how to look at you and talk to you,” Fedullo said. “Some people find relationships easy, and Curtis is one of those people.”

Thomas joined Alyeska in 1999, representing the company in Fairbanks. The new job kept him in the public spotlight, but in a new role requiring him to be the eyes, ears and, to a lot of people, pockets of one of the largest companies in the area.

It also kept him in an active community role.

Thomas kept his hands in many different organizations around town, from acting in plays produced by the Fairbanks Drama Association to serving on the board of Big Brothers Big Sisters.

“It wasn’t that we wanted Alyeska on the board. It was that we wanted Curtis on the board,” said Lloyd Huskey, director of development for Big Brothers Big Sisters and who also worked with Thomas at Pike’s Waterfront Lodge and the Tanana Valley State Fair.

In his new job, Thomas will be working in a part of the country rich in natural gas and coal bed methane, issues that remain on the horizon for Alaska.

Thomas didn’t rule out the possibility of returning to Fairbanks one day. He said if he and his family make it back, it will be with their heads held high.

“Some people say, ‘You’ll be back,’ and that’s the nicest thing people could say,” Thomas said.

Contact staff writer Eric Lidji at 459-7504.

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http://newsminer.com/2007/08/10/8335

More than oil taxes Alaskans need to engage in a larger debate about the future
Published August 10, 2007

Alaska’s legislators will convene in special session later this year to revisit, at Gov. Sarah Palin’s request, the state’s new oil tax structure. The petroleum profits tax, or PPT, as it is more commonly called, isn’t bringing the state the amount of money that people had hoped, so the governor wants changes made.

The governor and her supporters in the Legislature have put a lot of energy in whipping up opposition to the new tax. But rather than simply try to get more money from the oil industry an industry that is also the subject of more proposed taxation from the Democratic-led Congress they should concurrently be talking about other options. They should also be at the forefront in sounding the alarm about the state’s coming budget shortfalls.

Alaska could have a budget gap that runs in the hundreds of millions of dollars perhaps as early as 2009 and maybe reach $1 billion by 2010, legislative analysts said in January. The state Department of Revenue followed that in April with a semiannual revenue forecast that said general fund income for next year will amount to $3.5 billion, down sharply from the $4.98 billion that the general fund was expected to have at the June 30 end of the current fiscal year.

Relying so heavily on revenue from an oil industry that is in decline in this state isn’t wise. The state has already once grossly overestimated the amount of money it would receive under the new PPT, so who’s to say the state won’t grossly overestimate revenue a second or third time? And trying to get more from the oil industry when we want that industry to increase investment in Alaska to reverse the production decline might not be sound.

Better to begin thinking about revenue from additional sources. Better to prepare the public now for that possibility.

It’s a lot easier politically, though, to go after the oil companies and claim the new tax system is flawed than it is to speak clearly and forcefully of the coming fiscal problems and the other budget-rescuing options of using some earnings of the Alaska Permanent Fund, dipping into the Constitutional Budget Reserve, talking about taxes, and cutting the operating budget. The public needs to be reminded of that. Cutting the capital budget, as the governor did, is a good first step toward sending the message to the public but doesn’t make a lasting dent in the problem.

Oil taxes clearly aren’t the only thing we should be talking about.

Avoiding a public discussion of that fact is not an open and transparent way to talk about public policy.

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Wall Street Journal
August 10, 2007

BP Discloses Broader Commodity-Trading Probe
By BENOÎT FAUCON and JOHN M. BIERS
August 10, 2007; Page A12

A widened federal probe into BP PLC's commodities-trading activities adds to the issues facing new Chief Executive Officer Tony Hayward.

The Commodity Futures Trading Commission and the U.S. Department of Justice are probing the London oil giant's U.S. trading activities back to 1999, a longer time frame than previously disclosed, BP said in a filing with the Securities and Exchange Commission. Previously disclosed probes have gone back to 2002.

The disclosure implies a broader scope to a multicommodity review of BP's trading operations, a campaign that resulted in a sweeping crackdown by the agencies in June 2006 over an alleged propane-trading conspiracy and subsequent disclosure by BP in December that it expected enforcement action over its gasoline trading. Over the past two years, BP has replaced staff in its U.S. trading wing.

BP said that the Justice Department and the CFTC "are currently investigating various aspects of BP's commodity trading activities, including crude-oil trading and storage activities since 1999," BP said in its filing, adding that it is cooperating. A BP spokesman confirmed that the scope of the probes has been expanded back to 1999 but declined to comment on the reason.

An earlier SEC filing by BP that discussed the crude probe said the CFTC was investigating crude trades and storage and didn't mention the Justice Department as a participant in the crude probe. The BP spokesman said the language in its filing didn't imply the scope of the Justice Department probe had been expanded.

A CFTC spokesman and a Justice Department spokeswoman declined to comment.

Mr. Hayward, who took the top spot at the company in May, faces several issues as he looks to turn around the slowing oil giant. Refinery outages cut into profit in the second quarter, at a time when profit margins in that business were flush. He also must contend with operational troubles in North America, both with hobbled refineries and corrosion at pipelines it oversees in Alaska.

The trading probe was one of several issues that led to increasing pressure against BP's former CEO, John Browne. In May, Lord Browne resigned after it was revealed that he had lied in a British court about details of his personal life.

Write to Benoît Faucon at benoit.faucon@dowjones.com and John M. Biers at john.biers@dowjones.com

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Wall Street Journal
August 9, 2007

Small Fire Shuts Prudhoe Bay Turbine, Slightly Lowers Output
DOW JONES NEWSWIRES
August 9, 2007 10:09 a.m.

NEW YORK (Dow Jones)--A small fire at a turbine that helps process oil at the Prudhoe Bay oil field in Alaska has prompted operator BP PLC (BP) to shut the turbine and inspect a similar one.

The fire, which happened on Monday, has lowered production slightly at the western half of Prudhoe Bay, the most productive U.S. oil field, said BP spokesman Daren Beaudo.

The fire suppression systems at the facility worked properly when the fire was detected, Beaudo said. Halon, a powerful fire suppressant, was automatically released into the turbine room, he said.

Beaduo couldn't say how long the turbine would be shut down. Prudhoe Bay produces 400,000 barrels of oil per day.

Charles Hamel, a retired oil shipping broker who has been a conduit for complaints from workers at Prudhoe Bay, sent a letter to the U.S. House Education and Labor Committee raising concerns about BP's maintenance of these turbines, which remove enormous quantities of water and natural gas from Prudhoe Bay's oil.

"BP is dangerously depending on obsolete, deficient systems and facilities at Prudhoe," he wrote.

BP operates Prudhoe Bay. The field is jointly owned by ExxonMobil Corp. (XOM), ConocoPhillips Inc. (COP) and BP. Last year, corrosion on pipelines that carry oil from Prudhoe Bay to the Trans Alaska Pipeline System forced BP to shut over half of the field's production.

-By Matthew Dalton, Dow Jones Newswires; 201-938-4604; matthew.dalton@dowjones.com

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Fairbanks News Miner
August 8, 2007

http://newsminer.com/2007/08/07/8292

State to look at Alyeska’s pipeline oil spill contingency plan
By Eric Lidji
Staff Writer
Published August 7, 2007

The Copper River is famous for salmon.

The surrounding watershed includes beloved national parks and forests.

Nearby communities use the natural environment to start small businesses, including lodges, fisheries and the selling of facial masks made from Copper River mud.

The area also hosts a considerable section of the trans-Alaska oil pipeline, a pump station and the Glennallen spur to Southcentral.

A group of environmental advocates and small business owners in the area believe the pipeline poses a threat to Copper River natural resources, because the Alyeska Pipeline Service Co., the company created to build and maintain the pipeline, isn’t adequately prepared to handle possible oil spills in the area.

Now, the Department of Environmental Conservation believes the state should take another look at Alyeska’s oil spill contingency plan.

The Department of Environmental Conservation last renewed the contingency plan back in November subject to 26 conditions, including one requiring Alyeska to survey the Copper River area and ramp up planning efforts there.

DEC Commissioner Larry Hartig on Friday granted the appeal of those opposing the state’s decision to renew the plan, sending the case to a hearing before a state administrative law judge, who will determine whether or not the contingency plan meets state laws governing environmentally sensitive areas.

Under state regulations, Alyeska must maintain a contingency plan for handling possible oil spills along the pipeline. That plan must outline additional efforts Alyeska has taken to protect “environmentally sensitive areas,” a state designation setting stricter guidelines for particularly fragile land and water, including parts of the Copper River area.

Two Cordova-area business-owners, along with the Cascadia Wildlands Project, an Oregon-based conservation group with an Alaska field office, argued that the state shouldn’t have renewed the plan because the pipeline owners still weren’t adequately prepared for a possible spill in the Copper River area.

The group claims to have found 248 “holes” in Alyeska’s oil-spill response strategy for the Copper River area that point to “systematic mistakes” throughout the pipeline system, according to Gabriel Scott in the Cascadia Wildlands Project’s Alaska office.

“The Copper River is a valuable place and it’s being left exposed,” Scott said. “Once a person looks at it, it’s really clear.”

While the pipeline has had major leaks in the past, corrosion has never caused a leak on the mainline of the pipe, which excludes pump stations and the Prudhoe Bay pipeline network.

Alyeska officials were unavailable for comment as of press time.

Contact staff writer Eric Lidji at 459-7504.

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Fairbanks News Miner
August 7, 2007

http://newsminer.com/2007/08/07/8289

Oil companies muster their arguments against
changes to the state petroleum tax
By Stefan Milkowski
smilkowski@newsminer.com
Published August 7, 2007

Alaska’s oil and gas companies are lining up against Gov. Sarah Palin by opposing efforts to change the state’s new oil production tax.

Marilyn Crockett, the head of the Alaska Oil and Gas Association, said Monday that AOGA’s members unanimously support the net profits-based system currently in place.

Member companies also believe it’s premature to revisit the new tax, which state lawmakers approved last August, she said.

AOGA’s members include BP and Exxon Mobil two of the state’s three major oil producers as well as smaller exploration and production companies with operations in the state.

The third major producer, ConocoPhillips, withdrew from AOGA last year. Company spokeswoman Natalie Knox said Monday that ConocoPhillips hoped Palin’s administration and lawmakers would recognize the “duel benefit” the petroleum profits tax, or PPT, has had. The tax has dramatically increased revenues to the state and has led to company reinvestment in Alaska, she said.

Palin announced late last week that she would call a special session this fall to address issues related to the tax. She said the tax was not performing as lawmakers expected it would when they approved it, and that it was tainted by federal indictments of three lawmakers on charges of bribery.

Former Gov. Frank Murkowski pushed the tax last year as part of a package deal involving a natural gas pipeline built by the three major oil producers.

In an initial report on the PPT released Friday, the Department of Revenue predicted the new tax would bring in more money in the current fiscal year than the old tax would have, but not nearly as much as was expected. Instead of getting more than $1 billion in additional revenues, the state can expect to get about $250 million more than under the old tax.

The main reason for the reduced revenue forecasts is higher-than-expected costs, according to the department. While the old tax was based on gross oil production, the new tax is based on oil company profits, and operating and capital costs are deducted.

The department also projected that if oil prices drop below $48, the state would have made more money with the old tax. (The crossover point was expected to be much lower.)

Crockett acknowledged the higher-than-expected deductions, but said the tax appeared to be working as intended. It increased state revenues by more than $800 million in 2006, she said, and companies are continuing to invest in the North Slope, ensuring future oil production and tax revenues.

But Crockett said she didn’t know whether the PPT, which offers tax credits for oil-field development, has led to increased investments in the state or just continued investments. Daren Beaudo, a BP spokesman, said he didn’t know either.

According to the Department of Revenue report, it’s also unclear to the administration whether the higher costs are the result of capital projects that will lead to increased production or simply reflect a higher cost of doing business.

“What we do know is that the costs used in the modeling for the PPT fiscal note have proven inaccurate,” reads the report. Instead of capital and operating costs of about $7 a barrel, the department is now projecting costs of more than $14 a barrel. The report cites documented cost increases over the last few years for everything from personnel to fabricated structural steel.

Revenue Commissioner Patrick Galvin said Monday that some of the cost data presented during legislative debates on the PPT was outdated even then.

Joe Balash, a special assistant to the governor, said one important question is whether those debates would have turned out differently if lawmakers had known what was happening with costs at the time.

“We think the answer is yes,” he said.

Contact staff writer Stefan Milkowski at 459-7577.

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Anchorage Daily News
August 4, 2007

http://www.adn.com/money/story/9192822p-9109209c.html

State to hire consultants to review oil tax
TASK: Experts will look at other plans, consider alternatives to the PPT.
The Associated Press
Published: August 4, 2007
Last Modified: August 4, 2007 at 05:18 AM

FAIRBANKS -- The state Tax Division hopes to hire five consultants to review Alaska's new oil tax.

"The state's going to need to draw on a number of areas of expertise, and each of the contractors has certain strengths in different areas," said Jonathan Iversen, Tax Division director.

Barring protests, the state will award contracts to Gaffney Cline & Associates, Arthur D. Little, Research Associates, PFC Energy, and Martindale Consultants Inc.

All five have done work internationally. The state Department of Revenue has contracted in the past with all the companies except Research Associates, according to deputy revenue commissioner Marcia Davis.

Research Associates is operated by Richard Fineberg of Ester and is the only Alaska-based company. Fineberg served as senior oil and gas adviser to the governor in the late 1980s.

The division requested proposals in July for a consultant to help figure out how Alaska's new petroleum profits tax, or PPT, compared to other taxes around the world, and to help consider alternatives if needed.

The proposal request described a six-month contract running through January 2008. Consultants would be expected to testify on new tax proposals. The contract budget was capped at $400,000.

The Tax Division picked consultants based on their understanding of the project, work plan, experience and cost. A preference was given to Alaska applicants.

Iversen said the division plans to split tasks among the companies and to have some "cross-checking," with multiple companies researching the same topic.

Companies will be paid for tasks they are assigned.

"It's an expensive undertaking, but we will be using these experts frugally," he said.

The Department of Revenue already is reviewing the PPT. According to Iversen, the consultants will add to the expertise available at the departments of Revenue and Natural Resources.

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Los Angeles Times
August 3, 2007

http://www.latimes.com/news/opinion/la-ed-alaska3aug03,0,4473724.story?coll=la-opinion-rightrail

Alaska's addiction to oil
Investigations into whether the oil industry has undue influence in the state should come as no surprise.
August 3, 2007

Alaska contains half the population of San Diego spread across an area more than twice the size of Texas. Thus it may have more corruption per capita than any other state.

Its two most important lawmakers, Sen. Ted Stevens and Rep. Don Young, both Republicans, are under federal investigation. The FBI raided Stevens' home in Girdwood, Alaska, this week looking for evidence of improper favors granted by Bill Allen, the former chief executive of the oil services company VECO Corp. who in May pleaded guilty to bribery charges. Young is also suspected of improper dealings with Allen, as is Stevens' son, Ben, a former state senator. One current and three former state legislators are under indictment, and Allen's influence over the capital is alleged to have been so deep that a group of his proteges in Juneau is believed to have had T-shirts made bearing the legend"Corrupt Bastards Club."

It can hardly come as a surprise that oil industry executives may have undue influence over Alaska lawmakers, because they have undue influence over the entire state electorate. Alaskans pay no state income taxes; quite the opposite, they get an annual check from the government, funded by -- you guessed it -- oil revenues. And one can't really blame Alaskans for their eagerness to trash their own environment by drilling in the Arctic National Wildlife Refuge, given that the state's economy has always been based on the exploitation of natural resources and they're actually getting paid for their complicity with the oil giants.

But the problem with natural resources is that they eventually run out, or the consequences of using them up become unbearable. The driest year on record in Southern California is prompting worries about the effects of global warming, but California has always had droughts; Alaskans are seeing something quite new. Buildings are falling over as the permafrost melts, and roads are buckling. Coastal native villages are vanishing as sea ice melts. The very oil that fattens Alaskans' wallets is contributing to the ruin of their infrastructure.

Alaska gets more than 80% of its revenues from oil, an overreliance on a single industry that can't be sustained -- its oil production is steadily falling.The state is heading for an environmental and economic crisis of which the current political woes may be only a first symptom.

The first step for any addict is to admit to the problem. It's still possible for something good to come of the Allen fiasco, if it prompts Alaskans to admit that they're addicted to oil.