February

Wall Street Journal
February 28,2007

BP Hopes To Reopen Northstar Oil Field Late Next Week
DOW JONES NEWSWIRES
February 28, 2007 9:14 p.m.

ANCHORAGE, Alaska (AP)--An offshore oil field operated by BP PLC (BP) in the Arctic Ocean that was shut down almost two weeks ago when a pinhole-size leak was discovered during a routine inspection could be back up and running in about 10 days, a spokesman for the British oil company said.

"We're looking at the end of next week for the restart of Northstar," said Daren Beaudo.

About 200 feet (60 meters) of 8- to 14-inch (20-to 36-centimeter) pipe, used to carry natural gas between compression stages, will be replaced, Beaudo said. He did not know the estimated cost of repairs.

The repairs, which require crane lifts, could be delayed by bad weather such as high wind, whiteouts or severe cold, Beaudo said.

The facilities are on a man-made gravel island six miles (10 kilometers) off the north coast of Alaska. The 27-square-mile (70-square-kilometer) field is 39 feet (12 meters) beneath the ocean surface.

The shutdown cut BP's daily North Slope production by about one-eighth, or 40,000 barrels a day.

There was no environmental damage and no safety hazard associated with the leak, Beaudo said. The leak likely was caused by corrosion, Beaudo said.

The leak was on an 8-inch (20-centimeter) diameter pipe that integrates five stages of natural gas compression. After gas is split off from oil, the stages remove liquids and boost pressure. The gas is then reinjected under high pressure into the field, which helps maintain pressure in the oil-producing reservoir.

The latest shutdown comes several months after a pair of leaks caused BP to temporarily slash oil production at its Prudhoe Bay facilities for several weeks starting in August. Company officials believe those leaks were also caused by corrosion.

The latest leak was detected by the field's operator. After the field was shut down, inspections were expanded and the company found thinning in other pipe.

The inspection was managed by BP's new technical directorate, Beaudo said, an in-house body created in August to provide independent verification within the company that all operations are following BP codes and rules by regulatory agencies. The group reports directly to the BP Alaska president, Beaudo said.

"We obviously see the importance of these kinds of tasks and these responsibilities and we're upping our game in how we're approaching integrity management," Beaudo said.
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Wall Street Journal
February 26, 2007

In Alaska, an Oil Player Loses Favor VECO Gets Chilly Treatment From Once-Friendly Politicians As FBI Probe Jolts Statehouse
By JIM CARLTON
February 26, 2007; Page A4

ANCHORAGE, Alaska -- The oil industry has long enjoyed a cozy relationship with the state government here -- not to mention the residents, who receive an annual dividend from the industry.

A Federal Bureau of Investigation probe of influence peddling -- which has focused on one of the oil industry's most powerful players -- is shaking up those ties.

At the center of the turmoil is closely held VECO Corp., the state's largest oil-services company, which has provided construction, engineering, management and other services for pipelines, refineries and other facilities.

VECO has long been one of Alaska's most prodigious campaign contributors; Chairman Bill Allen and top VECO executives have donated a total of more than $1 million to state campaigns since 1998. A year ago, a witness saw Mr. Allen in the gallery of the state legislature passing notes to a Republican politician backed by the company -- at the same time that legislators were debating a measure to cut taxes on the industry.

In August, FBI agents swarmed into legislative offices throughout the state seeking evidence of payments to state lawmakers by Mr. Allen and his executives, according to a warrant. Since then, a cloud from the investigation has hung over the state's capital, Juneau.

In recent months, a number of Alaska politicians have publicly distanced themselves from VECO and refused to take any donations from it. The new governor, Republican Sarah Palin, made a refusal to accept any VECO donations part of her platform when she challenged former Gov. Tony Knowles -- a Democrat who had made a similar pledge.

No VECO executives have been charged in the probe. FBI officials and Mr. Allen declined requests for comment. Amy Menard, an Anchorage attorney representing VECO, said, "There is no question that VECO and some VECO executives have always, from day one, had an interest in politics. But to suggest that there has been improper or inappropriate political contributions is an unfair charge."

In December, one state official was charged in connection with the influence-peddling investigation. The legislator, Tom Anderson, was indicted by a federal grand jury in Anchorage on charges of extortion, conspiracy, bribery and money laundering stemming from an FBI undercover operation in the case. Mr. Anderson, who had accepted campaign contributions from Mr. Allen and other VECO executives, faces up to 115 years and fines of up to $2.5 million. He has pleaded not guilty.

It isn't clear whether his case was related to VECO, nor whether the investigation extends beyond the company. It isn't clear what spurred the initial investigation. According to the search warrants executed in August on offices of VECO and six state legislators, FBI agents were authorized to seize documents relating to VECO, Mr. Allen and several other VECO officials.

For years, regulators paid relatively little attention to the industry here. As the nation's energy supplies have become more uncertain amid political tensions around the world, the Bush administration and its allies have made tapping Alaska's oil reserves a top energy strategy. That has brought attention to the once oil-friendly political scene in Alaska.

The Environmental Protection Agency last year launched a criminal probe into BP PLC's maintenance of its aging oil facilities at Alaska's Prudhoe Bay. BP was forced to shut down the giant oil field for several days during the summer. EPA officials launched a criminal inquiry into corrosion problems on the 800-mile Trans-Alaska Pipeline, which ferries crude across the state to the ice-free port of Valdez, Alaska. The investigations are continuing.

Mr. Allen, who arrived in Alaska in 1968 as a high-school dropout from New Mexico, has built VECO into an oil-services giant, with more than 5,000 employees and $5 billion in world-wide contracts. It has helped companies like BP and ConocoPhillips construct pipelines, transport equipment and design oil-field power plants.

[ Mr Allen ? ]
formidable, behind-the-scenes political forces. From early in his career, he has talked about making sure the oil industry's views are represented in the state capital -- and sometimes gotten in hot water.

In 1983, Mr. Allen co-founded a political-action committee to support five Republican legislative candidates who promised to hold down taxes on the oil industry. VECO and some of its subsidiaries then set up a payroll-deduction plan through which employees donated about $40,000 to the candidates, according to state documents.

Two years later, the Alaska Public Offices Commission fined VECO $72,660, saying the employee contributions weren't properly disclosed. The fine later was reduced to $28,000 on appeal by VECO. The candidates Mr. Allen recommended all went on to win, and later helped vote down a proposal by Democrats to increase taxes on the industry.

Along the way, the 69-year-old has fashioned himself into one of the state's In 2002, Mr. Allen spent so much time personally lobbying for legislation in Juneau that state regulators ordered him to register as a professional lobbyist. Mr. Allen complained, saying he considered contacts with legislators his right as a businessman. Soon afterward, the legislature passed a law that critics dubbed "the Bill Allen bill." The law increased the time someone could spend pushing for legislation before being considered a lobbyist to 40 hours each month from four hours -- effectively exempting Mr. Allen from registering as a lobbyist.

In early 2006, then-Gov. Frank Murkowski presented a proposal to give oil producers a tax break as an incentive to build a natural-gas pipeline that would ship an estimated $20 billion of natural gas from the state's North Slope field. Democrats argued that Alaska would be giving away millions in potential revenue. Mr. Allen took up residence in Juneau to help push for the measure. Though it failed to pass in the regular session, it was approved in a special session last summer.

In his December indictment, Mr. Anderson was accused of accepting $26,000 in payments from a consultant for a private corrections company. In return, the indictment claims he agreed to perform unspecified "official acts" to help that person's business, according to a Justice Department news release. The consultant was working as a confidential informant for the FBI.

Federal officials won't discuss the case nor say whether it ties into VECO. But Mr. Allen and VECO did lobby for a private prison in Alaska in 2002. Though much of VECO's business is with the oil industry, the company does other work, including building prisons.

Mike Chenault, a Republican state legislator who co-chairs the House finance committee, said he has voted for oil-industry bills backed by Mr. Allen, but not because he received money from him or anyone else. He professed an admiration for the VECO chairman, who got his start in Alaska in the legislator's district on the Kenai Peninsula. "He's actually fulfilled the Alaskan dream to come up here and do well," Mr. Chenault said.

Write to Jim Carlton at jim.carlton@wsj.com

Houston Chronicle
February 24, 2007

http://www.chron.com/disp/story.mpl/business/4578434.html

Question of BP chief's testimony still open
Lawyers must show they can't get information from lower-level personnel
By KRISTEN HAYS

Whether BP Chief Executive John Browne ultimately has to give sworn testimony for lawsuits related to the deadly blast at his company's Texas City refinery depends on whether plaintiffs lawyers convince the Texas Supreme Court that he can provide information about the blast that lower-ranking managers can't, experts say.

Jay Grenig, a professor at Marquette University Law School in Milwaukee, said that in order to obtain sworn testimony from CEOs and other top-ranking executives, plaintiffs have to show they have "personal knowledge that is unique from what other managers at lower levels can give."

BP spokesman Neil Chapman has repeatedly said Browne, whose office is in BP's home base of London, has no personal knowledge of the March 2005 blast that killed 15 people and injured scores.

Browne had been slated to give a deposition at a law firm in London on Friday. But in response to his appeal of a court order to give the testimony, the state's high court issued a stay late Thursday to allow both sides to argue why he should or should not testify.

Plaintiffs and BP will submit briefs on the issue. The court could hear arguments or rule after reading the briefs.

Brent Coon, who represents workers injured in the blast and nearby residents with property or injury claims, said Friday the deposition had already been postponed in case the high court issued a last-minute stay.

Also, he said he and BP on Thursday settled an injury lawsuit that had been slated to go to trial in Galveston on Monday, erasing the urgency in getting Browne's testimony.

Grenig said efforts to get depositions from CEOs and other high-level executives are increasing.

Judges do order chief executives to testify, but lawyers have to show they can't get it from lower-ranking executives, said Grenig, who was cited as an authority on the subject in a brief that Exxon Mobil Corp. and several oil and chemical industry trade groups filed this week supporting BP's appeal.

For example, in 2001 then-Ford Motor Co. Chairman William Clay Ford Jr. gave a court-ordered deposition in litigation stemming from deaths and injuries involving Ford Explorers and Firestone tires.

A federal judge in Indiana issued that order upon finding that Ford had discussed his personal knowledge of the tire recall, Explorer safety and litigation matters, Grenig said.

But in a Texas case in 2005, a state appeals panel reversed a district judge's order compelling then-Texas Genco CEO Jack Fusco to give sworn testimony in a lawsuit over another company's move to drill a gas well on property designated for waste disposal.

The appeals panel said the other company failed to show it had sufficiently tried to getthe information "through less intrusive means."

David Berg, a Houston civil litigator, said BP likely has the advantage because such rulings show Texas appellate courts are more apt to side with corporations and corporate officers than those in most other states.

The fact that Ford "was forced to give a deposition should give no solace to the BP plaintiffs," Berg said. "This court will look for every way it can to protect corporate officers from giving testimony under oath."

Coon said Friday that he believed he has shown that Browne's involvement in setting budget, staffing and training levels shows such personal knowledge.

In October, State District Judge Susan Criss, who presides over the BP litigation in Galveston, ordered Browne to give the deposition for blast-related lawsuits.

BP is appealing Criss' order.

The case that settled Thursday involved a painter/sandblaster and a boilermaker, both in their 60s. The two men said they sustained back and other injuries.

Chapman, the BP spokesman, said terms of the settlement are confidential. He also has repeatedly said BP is working to settle all such cases.

All cases involving deaths have already been settled. Those remaining involve worker injuries or property or injury claims of residents who live adjacent to the refinery, Coon said.

Coon also noted that more lawsuits are likely to be filed before March 23, the two-year anniversary of the blast.

Two years is the deadline for plaintiffs to make such claims.

kristen.hays@chron.com

Wall Street Journal
February 24, 2007

2nd UPDATE:
Two BP Texas City Settlements Could Lead To More
DOW JONES NEWSWIRES
February 23, 2007 1:50 p.m.
(Recasts lede and updates with comments from plaintiffs' lawyer and details throughout.)
By Jessica Resnick-Ault
Of DOW JONES NEWSWIRES

HOUSTON (Dow Jones)--BP PLC's settlement of two injury lawsuits related to a deadly explosion at its Texas City oil refinery indicate the company will likely avoid trial for similar complaints, a plaintiffs' attorney said Friday.

Lead plaintiffs' attorney Brent Coon represents both people who settled with BP on Thursday, as well as more than 150 others. Coon, of Beaumont, Texas, said he believes BP can resolve the 500 or more remaining Texas City cases without going to trial.

BP has said it would prefer to settle cases directly to help victims of the March 2005 explosion and fire at the Texas City, Texas, refinery reach a quick resolution.

A BP spokesman confirmed Friday that the company had settled two court cases Thursday related to the refinery explosion.

"We've settled the two cases that were due to go to trial next week," said spokesman Neil Chapman.

The cases charged the oil major with gross negligence leading up to the accident that killed 15 people and injured over 170 at the company's largest U.S. refinery.

Meanwhile, BP recently received a stay from the Texas state Supreme Court that protects BP Chief Executive John Browne from deposition by plaintiffs' attorneys, Chapman said.

Plaintiffs' attorneys had planned to question Browne in London on Friday.

This is the second time that an attempt to depose Browne has coincided with the settlement of a case.

The next group of cases is set to go forward in June, Chapman said. Plaintiffs' attorneys didn't immediately respond to requests for comment.

Plaintiffs' lawyer Coon said earlier this week that approximately 500 injury cases in connection with the blast remain outstanding. BP has settled all fatality cases. The Anglo-American company has set aside thus far $1.6 billion to settle the cases.

The terms of the latest settlements are confidential, Chapman said.

A previous settlement in the case included large, public charitable donations in addition to a confidential personal settlement. No such charitable-contribution riders were built into the most recent settlements, Chapman said.

Settlements Likely

Motions scheduled to be heard Monday - including a request by plaintiffs for release of a controversial internal audit - have been put on hold until March 5, Galveston District Court Judge Susan Criss said.

There are about 40 cases scheduled for trial in June, Criss said. She declined to speculate on the likelihood of a pre-trial settlement in those cases.

"Six months ago, I would have said it would go to trial," said Coon. However, after the oil giant settled with plaintiff and Coon client Eva Rowe, a young woman whose parents both died in the blast, Coon said a trial was unlikely. Rowe's settlement agreement, reached on the eve of a scheduled trial, included a multimillion-dollar charity contribution from the company and the release of documents related to the case.

It's possible another plaintiff could chose to hold out for a trial and refuse to settle with BP, Coon said. The company seems willing to pay large sums, he said, explaining that in its settlements this week, the company agreed to sums requested by both plaintiffs.

The cases resulting from the blast generally "have more often than not settled for values that are higher than typical," he said. The larger settlements may be partially due to BP's realization that it could be hit with punitive damages in the case, he said.

While the first group of cases, settled last fall, were filed by young or badly injured victims, or represented the estates of those who died, the cases going forward were filed by older workers, or those with less severe injuries, Coon said. Both plaintiffs who settled ahead of Monday's trial were over 60 years old, Coon said.

While BP has maintained that its chief executive is protected from deposition by Texas state law, Coon and other plaintiffs' lawyers say the executive has inserted himself into the case and should be questioned.

"It's disappointing that the [Texas] Supreme Court has granted the stay," Coon said. The state's highest court will review briefings from both sides in March, and may hear oral arguments in April, Coon said.

If the court decides to uphold its stay of the deposition, no further appeals are possible, Coon said.

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

Anchorage Daily News
February 23, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8665138p-8556365c.html

Palin wants leaner Slope oversight
CORROSION: Governor says pipeline
problems can be monitored for less.
By SABRA AYRES
Anchorage Daily News
Published: February 23, 2007
Last Modified: February 23, 2007 at 02:26 AM

JUNEAU -- Gov. Sarah Palin wants to scrap a pipeline corrosion oversight office created after last year's Prudhoe Bay spills and replace it with a less expensive, leaner mechanism for monitoring oil field practices.

Details of the oversight program are still being hashed out, but the Palin administration stressed that cutting back on costs would not mean reducing the effectiveness of how the state monitors oil field pipelines.

"Bottom line is we are looking for stricter oversight on pipeline corrosion," said Meghan Stapleton, a spokeswoman for Palin. "The previous administration's plan was a nebulous concept that was hastily put together. We think we can do better."

Then-Gov. Frank Murkowski in October said he was muscling up state oversight of North Slope oil fields by adding more inspectors and regulators to "look over the shoulder" of the oil and gas industry.

Murkowski's move came after two major incidents at Prudhoe Bay, the nation's largest oil field.

In March workers for oil company BP discovered a corroded pipeline had caused the largest oil spill ever on the Slope. In August, a smaller leak and a report outlining extensive corrosion among pipes at the nearly 30-year-old oil field prompted BP to shut down half of Prudhoe temporarily. Taxes and other oil company payments from Prudhoe is a significant source of state revenue.

Murkowski created a pipeline monitoring program called the Lease Monitoring and Engineering Integrity Coordinator's Office, or LMEICO. The office was to operate out of the Department of Natural Resources' Division of Oil and Gas.

Palin's administration said LMEICO was created without a thorough analysis of where the state was in terms of monitoring the condition and maintenance of oil field pipelines. Murkowski responded to the oil spills and pipeline shut downs with a $4.5 million plan that created unnecessary layers of expensive bureaucracy, Stapleton said.

"The pressure was there to do something, but what they did isn't in the best interest of the state," Stapleton said. "It's unclear to us how the plan was put together and how they figured the dollar amounts needed. We are trying to not to create management with high costs."

One industry observer said the state was in desperate need of creating some kind of pipeline monitoring system, and welcomed Palin's intentions as a marked improvement from Alaska's failed history in scrutinizing pipeline maintenance records.

"Right now, there is no real oversight of the pipelines except from state employees in Juneau and Anchorage or Fairbanks, while Prudhoe Bay is miles away," said Chuck Hamel, an advocate for oil workers in the North Slope. "The state has failed miserably." Poor state oversight of Prudhoe Bay pipelines has been occurring for years, he said.

Officials from the Department of Natural Resources said in a House Resources Committee session this week that the Palin proposal was likely to use less staff than the Murkowski plan. The Division of Oil and Gas would appoint staffers who would use other state and federal agencies as support in monitoring the pipelines, according to Nico Bus of the Department of Natural Resources.

Murkowski's former chief of staff, Jim Clark, referred any comments to Michael Menge, former state resources commissioner or Kurt Fredriksson, former state environmental commissioner, saying they were the main architects behind LMEICO. Neither Menge nor Fredriksson could be reached for comment.

Palin is expected to announce her plan as the Petroleum Systems Integrity Office, or PSIO, at the beginning of next month, when she introduces her budget plan to the Legislature. Costs for the PSIO and how many, if any, new positions will be created are being developed," Stapleton said.

"LMEICO was like the creation of Homeland Security -- a response to a crisis," said Rep. Carl Gatto, R-Palmer, the co-chair of the House Resources Committee. "PSIO sounds more like a straightforward way of doing things, an overhaul of LMEICO."

In addition, "we can now get the energy companies involved and say we've got a procedure in a place that's going to help us avoid -- with 99.9 percent certainty -- another crisis happening," he said.

Daily News reporter Sabra Ayres can be reached at sayres@adn.com or 907-586-1531.

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http://www.adn.com/money/industries/oil/prudhoe/story/8665138p-8556391c.html

Murkowski warns state that pipeline opportunity wanes
'LIMBO': The senator says if Alaska doesn't act, investors will explore other options.
By STEVE QUINN
The Associated Press
Published: February 23, 2007
Last Modified: February 23, 2007 at 02:26 AM

JUNEAU -- U.S. Sen. Lisa Murkowski on Thursday delivered a now-familiar mantra from Washington, D.C., to Alaska lawmakers: The state must soon act on a natural gas pipeline project.

While the message is familiar, Alaska's junior Republican senator delivered it with a sense of urgency to both lawmakers and Gov. Sarah Palin's administration, which is seeking to pass a bill designed to bring natural gas from the North Slope.

"America is not going to wait on Alaska forever," Murkowski warned lawmakers during her annual address to a joint session of the House and Senate.

Murkowski also reiterated words delivered from producers and federal regulators to lawmakers the last few weeks: The state is behind the curve in developing the pipeline.

"If the promise of Alaska's gas continues to remain in limbo, what happens is that investors look elsewhere for development opportunities, and consumers look to other supply sources," she said.

While the need is urgent, Murkowski said she is willing to take a wait-and-see approach to Palin's pipeline plan -- even after state lawmakers last year made it a daily practice to question her father, former Gov. Frank Murkowski.

Palin and Murkowski met briefly Thursday in Juneau, and the governor is scheduled to update the congressional delegation on the plan early next week while she is in Washington.

Palin has said she will present her pipeline bill to lawmakers next Friday, a proposal that encourages competition among natural gas producers and pipeline companies.

It's in stark contrast to efforts from Murkowski's father who ultimately limited negotiations to oil producers BP, Exxon Mobil Corp. and Conoco Phillips.

"I'm not going to try to second guess her approach," Murkowski said afterward in a news conference.

"The approach she is taking is one where she will outline what the terms and conditions are, which I think is fair and appropriate," she said. "If you're interested, you know what it is to expect and how to craft that proposal. I want to make sure that you don't have an invitation to a party and have nobody come."

While urging state lawmakers and the Palin administration to move quickly on the pipeline, Murkowski said that should not be interpreted to mean the state should concede to "any and all" conditions put forward by the oil and gas industry to reach an agreement.

"Far from it," she told lawmakers. "It is imperative that any gas line deal benefit the state of Alaska and its citizens, but it also has to be a deal that maintains Alaska's position as a state that America can count on to provide a secure source of energy."

The Federal Energy Regulatory Commission last summer said there is over 6,000 trillion cubic feet of natural gas awaiting sale worldwide, Murkowski said, noting Alaska's 35 trillion cubic feet seems small by comparison.

And competition will be fierce.

FERC has approved five new liquefied natural gas terminals with another 18 LNG projects nearing approval, she said. Companies are locking in 25- and 30-year contracts to import LNG from overseas, and investments are increasing in alternative sources of energy, like coal-fired and nuclear plants.

"The window of opportunity that we have as a state for our gas is not an indefinite window," Murkowski said.

Meanwhile, FERC told Congress in a recent report that Alaska's progress on getting a pipeline built is lagging.

"I'm not happy with the pace period," Alaska's senior senator, Republican Ted Stevens, said this week, ahead of his own visit in March to Juneau.

Murkowski said prolonged indecision can make Congress a little skittish.

"They read things like the FERC report and they wonder how serious Alaska is about getting its gas to America," she said at the news conference. "In the meantime, they aren't going to sit and stew and wonder. They are going to get focused on new things.

"The message I want to make sure Alaskans hear is that we appreciate the desire and the need to get the project right, but we don't want to be in a position where in an effort to find perfection, we end up without a gasline."

Wall Street Journal
February 23, 2007

Deposition of BP's Browne Put On Hold -Plaintiff's Attorney
DOW JONES NEWSWIRES
February 22, 2007 3:13 p.m.

HOUSTON (Dow Jones)--The hotly contested deposition of BP PLC (BP) chief executive John Browne was put on hold again Thursday.

"We want to resolve some judicial issues," said Brent Coon, a plaintiff's lawyer who had planned to depose Browne at the oil giant's London headquarters on Friday.

The move comes just days before a trial is slated to begin, charging the oil major with gross negligence leading up to a March 2005 accident that killed 15 and injured 170 at the company's Texas City refinery.

If the remaining case case does not settle, it will be the first from the accident to go forward. Another set of cases, slated for trial in the fall of 2006 settled on the day that jury selection was to begin. Another case, set to go forward on Monday, settled early Thursday, Coon said on the sidelines of a luncheon presentation Thursday.

BP didn't immediately respond to requests for comment. Coon and other plaintiffs had called for Browne's deposition, saying that the executive had forfeited protections offered to chief executives by Texas state law.

Browne had unique knowledge of the case, necessitating his testimony, Coon said.

The Anglo-American oil company initially appealed a state court ruling requiring Browne to testify. After the appeals court ruled in favor of the deposition, BP took the case to the state supreme court.

Exxon Mobil Corp. (XOM) and state oil and gas associations joined BP, filing a brief with the top court, arguing that Browne ought to be protected.

Over 500 cases are outstanding, according to Coon and other plaintiff's lawyers. All cases involving those killed have been settled - those that remain involve plaintiffs who have injury or property damage claims. -By Jessica Resnick-Ault, Dow Jones Newswires:; 713-547-9208; jessica.resnick-ault@dowjones.com
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Financial Times
February 23, 2007

http://www.ft.com/cms/s/f07bbe6a-c2e3-11db-9e1c-000b5df10621.html

BP employee destroyed documents after subpoena
By Sheila McNulty in Houston
Published: February 23 2007 02:00 |
Last updated: February 23 2007 02:00

A BP employee has admitted destroying documents, after plaintiffs' lawyers subpoenaed her laptop.

That followed an anonymous tip that she had information useful in the lawsuits against the UK oil company arising from its fatal refinery explosion.

Court records show that on November 3 2006, plaintiffs' lawyers subpoenaed Susan Moore, BP regulatory affairs manager, requesting certain documents and the laptop she has used for the past two to three years in her work for BP.

The subpoena specifically instructed BP: "You are urged not to destroy or attempt to destroy, delete, erase, or otherwise alter any of the electronic data, data files, meta data, media, records, charts, forms, or other documents stored on Ms Moore's hard drive.''

When plaintiffs' lawyers questioned Ms Moore on January 26 2007, a transcript reveals she said BP had not shown her the subpoena until earlier in the week and that she had deleted e-mails in the two months since the subpoena.

Ms Moore did not know if she had deleted word files, did not think she had deleted folders but did not recall whether she had deleted presentations.

"I can't speculate on why someone might think my laptop would be useful,'' Ms Moore said.

"To the best of my knowledge, I have not deleted information relative to this case.''

Yet Joseph Gourrier, the plaintiffs' attorney questioning Ms Moore, responded, "It's not up to you to determine what would be relevant to this case.''

The case was filed against BP by plaintiffs' lawyers on behalf of the 15 people killed and 500 injured when BP's Texas City refinery exploded in 2005.

Brent Coon, the lead plaintiffs' lawyer in the case, said judges had a tremendous amount of discretion in determining if there has been abuse of process.

Once a subpoena has been served, deleting documents created an inference that they were prejudicial and the burden shifted to BP to prove the deleted documents were irrelevant to the litigation.

Judge Susan Criss ruled, therefore, that BP had to produce the deleted documents by today. "We have agreed to deliver Ms Moore's hard drive to a third party expert who will determine what has been deleted,'' BP said. "If we find anything relevant to the case, we will turn it over to plaintiffs counsel or the court.

"No one at BP has been instructed to delete relevant documents,'' the company said.

BP added: "We have made it clear that staff are to preserve relevant documents, including relevant e-mails.''
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Anchorage Daily News
February 22, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8661512p-8553172c.html

Oil field workers say OT is risky
18-HOUR DAYS: Union officials fear serious injury because of fatigue.
By ELIZABETH BLUEMINK
Anchorage Daily News
Published: February 22, 2007
Last Modified: February 22, 2007 at 02:21 AM

A shortage of hourly workers is leading to fatigue and safety risks at the Prudhoe Bay oil field, according to union officials who represent the workers.

The technicians maintaining Prudhoe Bay's three massive gathering stations -- which hold crude oil pumped from North Slope wells -- are working "horrendous" amounts of overtime, union officials said this week.

It's not unusual for technicians at Prudhoe, the nation's largest oil field, to work 18 hours per day for 10 days of their two-week shifts on the North Slope, said Glenn Trimmer, treasurer of the United Steelworkers Local 4959.

"No reasonable person is going to say that by working 18 hours a day and getting four hours of sleep at night, you aren't taking a hell of a chance," he said.

Trimmer formally complained to BP managers in September, but the problem has existed for several years, he said. Trimmer also complained last fall to BP's new ombudsman, who said Wednesday he is frustrated the problem isn't resolved yet.

BP Alaska officials said Wednesday they are working to place nine new workers at the gathering centers in April.

"We met with employees and (the union) in late fall and agreed that we needed to hire some more people in those jobs," BP Alaska spokesman Steve Rinehart said.

But the union says BP has unnecessarily delayed the process.

The complaint is the latest in a string of criticisms about how BP has managed Prudhoe Bay. A year ago a leaking, corroded pipeline caused the largest North Slope oil spill ever. In August, more corrosion problems led to Prudhoe's temporary partial shutdown. Federal criminal investigators have subpoenaed millions of documents from the company, and congressional committees have held hearings.

About 250 technicians work at Prudhoe Bay, doing jobs such as monitoring gauges, opening and closing valves, starting and stopping pumps and turbines and checking for leaks. The steelworkers union represents them, union officials said.

Staff shortages have gotten worse in recent years, as experienced Prudhoe Bay technicians retire and some vacant slots aren't filled quickly, union officials said.

Trimmer said he took the matter up with BP's health and safety committee and with BP executives in September after former BP U.S. president Bob Malone sent a letter to all of BP's Alaska employees, amid the six-week partial Prudhoe Bay shutdown.

In the letter, Malone said employees needed to ensure operations were safe, Trimmer said.

BP ombudsman Stan Sporkin said Wednesday he thought filling the new jobs was a "no-brainer."

"I'm a little bit frustrated," said Sporkin, a retired federal judge based in Washington, D.C., who got involved in dealing with the Prudhoe Bay overtime issue last fall when the union complained.

"I thought we had an agreement (between the union and BP) to go out and recruit and get the jobs filled," Sporkin said.

He added, "I don't know what happened. ... Apparently it didn't get done."

BP officials said Wednesday they had to go through a lot of processes and deal with holiday delays to get the jobs filled.

Rinehart said BP advertised the jobs internally in October. But the company didn't get enough applicants, so BP started an external search in January, he said.

Union officials said that the problem has gone on too long and that the company is lucky that no fatigue-related accidents have occurred.

"We've expressed our frustration to them and they've offered a lot of excuses," said local Steelworkers president Chris Nye.

He said, so far, he was unaware of any fatigue-related accidents at Prudhoe Bay. He said workers have been "pretty good" about just refusing to work when they are too tired.

But Nye said it's easy to spot fatigued employees at the gathering center.

"You can tell that they are not all there. It's causing a lot of apprehension," Nye said.

At Nye's gathering station, this month's average of an employee's overtime during a two-week shift has been about 20 hours, he said.

Some of the technicians end up working a lot more overtime hours than others do, he said.

A 2005 study of 10,793 American workers between 1987 and 2000 showed that those who worked overtime faced a 61 percent higher risk of injury than those who worked normal hours.

The study by the University of Massachusetts Medical School's Center for Health Policy and Research also found that injury rates rise in relation to the number of hours worked.

In the past, federal regulators have cited fatigue as a possible factor in at least one U.S. pipeline accident.

Eight years ago, the National Transportation Safety Board said it was concerned about the potential for fatigue due to the rotating schedules for pipeline controllers.

The board raised the concern after investigating a 1996 pipeline rupture in Fork Shoals, S.C., that sent 967,600 gallons of fuel oil into a river.

The pipeline controller working said he had adequate sleep the night before but had been awake for almost 17 hours at the time of the accident, the board said.

The board concluded in its safety recommendation that fatigue from the controller's work schedule "may have affected his alertness, vigilance and responsiveness" during the accident.

Daily News reporter Elizabeth Bluemink can be reached at ebluemink@adn.com or 257-4317.

Houston Chronicle
February 22, 2007

http://www.chron.com/disp/story.mpl/business/4571916.html

Lawyers try to block deposition
BP chief to talk in London about refinery blast
By ANASTASIA USTINOVA

BP's CEO receives performance bonus BP Chief Executive John Browne is scheduled to give a deposition Friday in London, but lawyers in Texas are still working to block the order requiring his testimony about the Texas City refinery blast.

Exxon Mobil Corp. and four business groups have filed a brief supporting BP in the appeal before the Texas Supreme Court, saying that the running battle to push Browne to testify would hurt the Texas business community.

Brent Coon, an attorney representing workers suing the company, said this was an effort to put political pressure on Supreme Court justices who, he said, rely on the campaign contributions from businesses.

"They are applying political pressure to something that should not be political," Coon said during a conference call.

BP spokesman Neil Chapman said he had no comment beyond what the company has previously said about the deposition. BP has said previously that Browne has no personal knowledge about the incident.

Coon said he will question Browne on Friday morning in a law office in London about corporate policies affecting the refinery.

A blast there killed 15 and injured scores of others on March 23, 2005.

Browne's deposition comes before the jury selection Monday for the civil lawsuits filed by Clarence Kinard and E.J. Godeaux, contract workers injured in the Texas City blast.

BP has avoided trials by settling cases related to the 2005 refinery explosion.

It's not uncommon for a CEO to give a deposition, according to Gerald Treece, a law professor at the South Texas College of Law.

He said that the Texas Supreme Court is unlikely to overrule Browne's deposition.

"They cannot just say, 'You can't talk to our CEO,' " said Treece, who expects BP to settle the case.

And Coon "has to prove that the defendant was colossally indifferent of the rights of the plaintiffs."

State District Judge Susan Criss, who is overseeing several cases related to the Texas City refinery explosion, ordered Browne to give a deposition. The October order was delayed by a BP appeal. Browne is expected to step down in July.

Exxon Mobil was joined by the Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business in its "friend of the court" or amicus brief, which argued that the deposition would set a precedent in the business community.

"We feel that the district court, in ordering Mr. Browne's deposition, is eroding clear Texas jurisprudence on when a company CEO can be deposed," Mark Boudreaux, an Exxon spokesman, said in an e-mail.

anastasia.ustinova@chron.com

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http://www.chron.com/disp/story.mpl/business/4571685.html

BP's CEO receives performance bonus
By STEPHEN VOSS
Bloomberg News

BP has paid Chief Executive Officer John Browne shares worth about $4 million in an annual performance bonus that covers the time when BP experienced a refinery explosion and pipeline leaks.

BP's bonus plan granted Browne 380,668 shares on Feb. 15, "in respect of the performance period 2004-2006," the London-based company said in a stock exchange statement Wednesday.

The bonus payment for Browne, who turned 59 Tuesday, is worth about $4 million.

He was awarded 30 percent of the maximum number of shares he could have received under the program. BP spokeswoman Wendy Silcock in London declined to comment.

Browne announced last month he would resign in July, more than a year earlier than planned, after investor confidence was eroded by criticism over a 2005 fatal refinery blast, pipeline leaks and shutdowns in Alaska, and probes into energy trading manipulation.

BP on Feb. 6 slashed forecasts for production growth, in part because of equipment failures and delays at two key oil and gas projects in the Gulf of Mexico. BP stock fell 8.3 percent last year, making it the third-worst in the U.K.'s FTSE-100 Index.

Wall Street Journal
February 22, 2007

BP Gives CEO Browne GBP2M Of Shares As Performance Reward
DOW JONES NEWSWIRES
February 22, 2007 7:54 a.m.

LONDON (Dow Jones) -- U.K. oil giant BP PLC's (BP) Chief Executive John Browne was handed more than GBP2 million worth of shares Wednesday as part of the company's long-term performance incentive plan for 2004-2006, the company said in a statement.

Browne received 380,668 ordinary shares in the company, purchased at a price of GBP5.37 a share on February 15. Browne subsequently sold around GBP840,000 worth of the shares at the same price on February 19.

Browne will retire from BP in July 2007, to be replaced by former Head of Exploration and Production Tony Hayward.

The size of his departing pay settlement has attracted some controversy. Earlier this month the London Pension Funds Authority joined with U.S. pension fund Unite in legal action to prevent Browne receiving $140 million (GBP71.79 million) in total pay as he departs the company.

William Lerach, with one of the plaintiff firms, Lerach Coughlin Stoia Geller Rudman & Robbins in San Diego, California, said Browne "has inflicted BP damage" after incidents that happened in the U.S. under his tenure and his payments should be frozen as a result.

Company Web site: http://www.bp.com

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com

Financial Times
February 21, 2007

http://www.ft.com/cms/s/62c5cfc2-c151-11db-bf18-000b5df10621.html

Observer:
BP's taxing problem
Published: February 21 2007 02:00 |
Last updated: February 21 2007 02:00

After a year in which it suffered the biggest ever spill on land at its Alaskan oil field and then had to shut half of it for "severe corrosion", one might assume that BP would be care- fully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m in tax breaks under new rules that allow the cost of replacing pipelines to be deducted. The legislators said BP replaced one of its pipelines only because it was corroded after poor maintenance and so should not get a write-off. They also noted the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, insisted on deductions as well.

In his response to the legislators, however, Doug Suttles, BP Alaska president, dismissed those concerns. "This is not about replacement," he said. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

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http://www.ft.com/cms/s/c354c390-c14f-11db-bf18-000b5df10621.html

Alaska cold to BP's plea for tax break
By Clay Harris
Published: February 21 2007 02:00 |
Last updated: February 21 2007 02:00

After a year in which it suffered the biggest-ever spill at its Alaskan oilfield and then had to shut half of it for "severe corrosion", one might assume that BP would be carefully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m (£5.6m) in tax breaks under new rules that allow deducting the cost of replacing pipelines. The legislators said BP replaced one of its pipelines only because it was corroded after being poorly maintained and so should not get a write-off.

They noted that the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, also insisted on deductions.

In his response to the legislators, however, BP Alaska president Doug Suttles said: "This is not about replacement. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

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http://www.ft.com/cms/s/6a922214-c151-11db-bf18-000b5df10621.html

BP supported over Browne court order
By Sheila McNulty in Houston

Published: February 21 2007 02:00 | Last updated: February 21 2007 02:00

ExxonMobil has thrown its weight behind rival BP in an attempt to block a precedent-setting court order requiring Lord Browne, the UK oil group's beleaguered chief executive, to testify on Friday in a civil lawsuit.

Exxon, the world's biggest public oil company, and a string of Texas business groups, are petitioning the Texas Supreme Court to overrule a decision by lower courts compelling Lord Browne to testify in the lawsuit arising from BP's Texas refinery explosion.

The 2005 explosion, which killed 15 people and injured 500, was the biggest US industrial accident in a decade.

The Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business have all signed the petition.

It argues that forcing Lord Browne to be questioned for up to six hours in London would scare business from Texas and set a legal precedent that foreign courts could invoke to order Texas-based senior managers to be deposed in distant places about incidents in affiliate operations. The questioning would be filmed to be played by plaintiffs in the case, which goes to trial next week.

"Companies would be reluctant to shift business operations to Texas if doing so meant that those activities could subject their senior officers - many of whom are located in other states or countries - to depositions in Texas, regardless of whether the relevant evidence is available through less disruptive means,'' said the petition.

Brent Coon, the leading plaintiffs lawyer in the civil lawsuit, said Exxon and the others "did not have a dog in this fight". His position is that Lord Browne has unique knowledge pertaining to the case because he visited the refinery immediately following the explosion, made budgetary cuts that affected the maintenance and staffing of the refinery, and took remedial efforts after the accident.

BP insists none of that proves Lord Browne has unique knowledge.

Lord Browne has, nonetheless, taken a hit from the disaster, bringing forward his retirement to this year after the refinery explosion was followed by a spill in Alaska that led to the closure of half that oilfield because of corrosion.
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Anchorage Daily News
February 21, 2007

http://www.adn.com/money/industries/oil/story/8658822p-8550656c.html

Shell receives OK to drill in Beaufort Sea
EXPLORATION: Critics say a more thorough look at impacts is lacking.
By RICHARD RICHTMYER
Anchorage Daily News
Published: February 21, 2007
Last Modified: February 21, 2007 at 03:12 AM

Map of Shell Beaufort area
http://www.adn.com/ips_rich_content/230-21Shell_CamdenBay-150-x-115.gif

MMS Beaufort Web Site
http://www.mms.gov/alaska/

The U.S. Minerals Management Service has approved Shell's plan to drill as many as a dozen exploration wells over the next two years in the Beaufort Sea.

The agency, which supervises oil and gas leasing in Alaska's vast offshore regions, on Tuesday released an environmental assessment of the planned drilling and said its analysis found that the project would not cause "undue or serious harm or damage to the human, marine or coastal environment."

Last month, Shell filed its exploration plan with the agency, detailing its intent to drill as many as a dozen offshore wells over the next two years. The ambitious exploration project would include two drilling ships and a small fleet of other vessels to support the drilling ships and prevent them from getting jammed in the ice.

Environmental groups are protesting the approval, saying federal officials should allow a more thorough public evaluation of its potential impact on the environment and the North Slope's indigenous people before allowing any drilling.

Earthjustice, a nonprofit law firm representing five Alaska environmentalist groups, urged MMS officials to prepare a much more detailed environmental impact statement, which could take years, before allowing the drilling to happen. They said Shell's activity could harm the bowhead whales, polar bears, migratory birds and other area wildlife. The whales are listed as an endangered species.

"The bowhead whale is the species of greatest concern," said Deirdre McDonnell, an attorney with the firm.

The oil exploration work, particularly seismic surveys that involve firing underwater air guns to study rock formations beneath the sea floor, could spook the whales and force them further offshore, making it more difficult for Native hunters to take them, McDonnell said.

An Alaska Native group called Resisting Environmental Destruction on Indigenous Lands also weighed in, urging the agency to conduct a more thorough review of the drilling project's potential environmental impact.

Most of the drilling would be in western Camden Bay, where exploratory wells have been drilled before.

Shell, one of the world's largest oil companies, returned to Alaska in 2005 and immediately became the company most avidly interested in the oil prospects offshore of the North Slope. It spent more than $44 million to acquire Beaufort Sea exploratory leases that year.

The Dutch oil giant was part of a partnership that discovered an estimated 200 million barrels of oil in a find called Hammerhead in 1985-86. That would be a medium-sized North Slope field, but a large one in the Lower 48. The Hammerhead prospect is now named Sivulliq, and Shell plans to drill there to outline the oil field.

The MMS documents released Tuesday hint that Shell will be doing more than just probing the waters looking for crude. They say that the company plans to take samples from the sea floor between Sivulliq and the shore, which suggests some sort of production plan.

Some drilling and other work would take place in waters near the village of Kaktovik. Robert Thompson, an Inupiat whaler who lives there, said he is concerned that the offshore activity could hurt his village's whaling activities.

Thompson said the MMS needs to consider not just Shell's activities over the next two years but all of the oil industry activity over time in the region.

Shell executives in Alaska and MMS officials in the state said Tuesday they couldn't comment until they had permission from their superiors.

In its exploration plan, Shell spelled out a bowhead whale monitoring program that includes using spotters aboard ships and in aircraft as well as drone aircraft that will be used to keep an eye on the whales in the area and head off any adverse impacts so as to avoid any potential disruptions in their migration patterns.

The MMS in its environmental assessment concluded there would be minimal disturbance to the bowhead whales, citing prior exploration drilling under a similar scenario to the one Shell is planning.

Shell plans to start its drilling campaign this summer. However, it still must clear a series of other regulatory hurdles before it can begin the work.

That includes reaching a "conflict avoidance agreement" with the Alaska Eskimo Whaling Commission and the Whaling Captain's Association of Kaktovik, according to a letter MMS officials sent the company Tuesday.

Daily News reporter Richard Richtmyer can be reached at rrichtmyer@adn.com or 257-4344.

Financial Times
February 21, 2007

http://www.ft.com/cms/s/c354c390-c14f-11db-bf18-000b5df10621.html

Alaska cold to BP's plea for tax break
By Clay Harris
Published: February 21 2007 02:00 |
Last updated: February 21 2007 02:00

After a year in which it suffered the biggest-ever spill at its Alaskan oilfield and then had to shut half of it for "severe corrosion", one might assume that BP would be carefully tending its image in the state.

The company, however, has angered state legislators by insisting on $11m (£5.6m) in tax breaks under new rules that allow deducting the cost of replacing pipelines. The legislators said BP replaced one of its pipelines only because it was corroded after being poorly maintained and so should not get a write-off.

They noted that the $11m could grow to $44m if BP's partners, ExxonMobil and ConocoPhillips, also insisted on deductions.

In his response to the legislators, however, BP Alaska president Doug Suttles said: "This is not about replacement. It's about designing and constructing new facilities in a way that underpins the future and ensures the operability of the North Slope for decades to come.''

Funny how "design and construction" materialised only after the corrosion.

Xxxxxxxxxxxxxxxxxx

http://www.ft.com/cms/s/6a922214-c151-11db-bf18-000b5df10621.html

BP supported over Browne court order
By Sheila McNulty in Houston

Published: February 21 2007 02:00 | Last updated: February 21 2007 02:00

ExxonMobil has thrown its weight behind rival BP in an attempt to block a precedent-setting court order requiring Lord Browne, the UK oil group's beleaguered chief executive, to testify on Friday in a civil lawsuit.

Exxon, the world's biggest public oil company, and a string of Texas business groups, are petitioning the Texas Supreme Court to overrule a decision by lower courts compelling Lord Browne to testify in the lawsuit arising from BP's Texas refinery explosion.

The 2005 explosion, which killed 15 people and injured 500, was the biggest US industrial accident in a decade.

The Texas Chemical Council, Texas Oil and Gas Association, Texas Association of Manufacturers and Texas Association of Business have all signed the petition.

It argues that forcing Lord Browne to be questioned for up to six hours in London would scare business from Texas and set a legal precedent that foreign courts could invoke to order Texas-based senior managers to be deposed in distant places about incidents in affiliate operations. The questioning would be filmed to be played by plaintiffs in the case, which goes to trial next week.

"Companies would be reluctant to shift business operations to Texas if doing so meant that those activities could subject their senior officers - many of whom are located in other states or countries - to depositions in Texas, regardless of whether the relevant evidence is available through less disruptive means,'' said the petition.

Brent Coon, the leading plaintiffs lawyer in the civil lawsuit, said Exxon and the others "did not have a dog in this fight". His position is that Lord Browne has unique knowledge pertaining to the case because he visited the refinery immediately following the explosion, made budgetary cuts that affected the maintenance and staffing of the refinery, and took remedial efforts after the accident.

BP insists none of that proves Lord Browne has unique knowledge.

Lord Browne has, nonetheless, taken a hit from the disaster, bringing forward his retirement to this year after the refinery explosion was followed by a spill in Alaska that led to the closure of half that oilfield because of corrosion.

Anchorage Daily News
February 20, 2007

http://www.adn.com/opinion/view/story/8656148p-8547971c.html

Limit oil tax write-offs ...
BP pipeline repairs are at issue
Published: February 20, 2007
Last Modified: February 20, 2007 at 03:02 AM

You know the old joke about the kid who kills both his parents and has the chutzpah to beg the court for mercy because he's an orphan?

Something of the same mentality is at work in Alaska's oil patch.

BP cut corners on maintaining its North Slope oil lines until leaks started sprouting. The company had to shut down part of the nation's largest oil field for weeks, costing the state treasury millions of dollars in oil revenue. Now BP wants Alaskans to help pay for part of fixing the pipeline. Those costs are arguably allowable deductions when BP and Prudhoe Bay partners calculate what they owe in state oil production taxes.

Alaskans shouldn't have to pay a penny toward BP's pipeline replacement -- but it may take a new law to make sure that doesn't happen.

The current oil production tax law allows the state to disqualify costs arising from "gross negligence." In BP's case, that could be a difficult legal standard to meet.

Many Alaskans and their legislators are outraged that North Slope producers might get away with deducting this expense. More than half the Legislature has signed on to legislation to bar oil production tax deductions for repairs of "improperly maintained" property or equipment.

Supporters include 17 of 20 Senate members and 21 of 40 House members. Co-sponsors include some surprising recruits, like Senate President Lyda Green, who last year helped the oil industry resist more costly versions of the new oil production tax.

The concept behind the legislation (Senate Bill 80 and House Bill 128) is simple. Translating the concept into bulletproof tax law, though, won't be so easy. No doubt, Alaska will see some drawn-out tax fights if, as appears likely, this year's reform proposal passes. But Alaska is going to have those fights anyway.

Last year, the state shifted from the relatively simple tax on gross oil production to a much more complicated tax with deductions for operations, maintenance and new investment. Excluding repairs for "improper maintenance" would be just one more point of contention in an inherently contentious process.

By passing this year's proposal, legislators will add a bit more complexity to the tax. They'll also improve Alaska's ability to get our fair share of profits from oil production.

-- Matt Zencey, editorial writer

Xxxxx

... No need to 'fix' law

Existing protections are sufficient

There is nothing all that wrong with how pipeline repair and replacement expenses are handled under the state's oil production tax law passed last year.

What's wrong is that much of the public and many legislators are still angry over the new production tax law. That anger grew when BP's faulty maintenance at Prudhoe Bay caused major shutdowns last year, with hefty repair and replacement bills that could be deductible under the new law.

So more than half the Legislature figures the solution is to change the law, making it harder for oil producers to deduct expenses possibly due to maintenance shortcomings.

That's the wrong answer.

If lawmakers don't like last year's switch to a tax on net income, round up the votes and change it back. Until then, the law allows companies to deduct operating costs from their production taxes. It also allows a 20 percent tax credit for capital investments as an incentive for building new pipe and new facilities to pump new oil on the North Slope.

In return for the new deductions and credits, the state profits from a substantially higher tax rate, adding about $1 billion a year to the treasury at current oil prices.

This year's bills to limit oil tax write-offs, however, would adopt an ill-defined provision. Enforcement could be a mess.

Expenses due to "improper maintenance" would be ineligible for deductions and credits. The legislation would require state tax auditors to define and determine "improper maintenance," a term with no definition in statute and no legal history. The term is so subject to guesswork that the state and taxpayers would be taking a number, waiting for their turn in court on each tax return.

The fact is, state law already has adequate protections against abusive write-offs for repair or replacement work:

• Companies cannot deduct spill and cleanup costs.

• Repair work is not eligible for tax credits, so there is no need to fight over that one. Only investments in long-term items such new pipe or drill pads are eligible for the credits.

• Companies cannot deduct expenses due to "fraud, willful misconduct or gross negligence." If a court or federal or state regulatory agency finds "gross negligence" at Prudhoe Bay, state tax auditors can go back and retroactively disallow any improper tax deductions.

• And last year's legislation gives the Department of Revenue the authority to adopt a regulation that could help. As BP repairs and replaces miles of pipe, it will ask partners Conoco Phillips and Exxon Mobil to pay their shares. The partners may say, "No, we're not paying you, BP; you caused this mess, you pay the bills." If the partners think the expenses are due to BP's negligence, the new regulation would say that's good enough for the state to disallow the deductions and credits. The Department of Revenue needs to get started on drafting these regulations immediately.

The state has the laws to handle the tax matter in our favor. Just let the system work.

-- Larry Persily, editorial writer

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http://www.adn.com/money/industries/oil/story/8655248p-8547092c.html

Officials seek key to unlock frozen gas
Slope test well yields 'gold mine of data' on huge hydrate deposits
By WESLEY LOY
Anchorage Daily News
Published: February 20, 2007
Last Modified: February 20, 2007 at 03:28 AM

BP teamed with government agencies to drill an exploratory well this month that could help unlock a fabulous new supply of North Slope natural gas.

The well probed a layer of material just beneath the permafrost, called gas hydrate. The hydrate is a solid, crystalline form of gas, usually methane, mixed in sandstone and water. A combination of cold and pressure keeps the gas as a solid.

Hydrates exist in many locations around the world, including under seabeds. On the North Slope, government geologists estimate there are 450 trillion cubic feet of gas hydrate. That's a staggering volume -- more than 12 times the amount of conventional gas known to exist within Prudhoe Bay and other North Slope oil fields.

For now, however, the hydrate is little more than tantalizing. The industry and government scientists say they first must figure out how to get the frozen gas to the surface, and it's likely to be several more years at least before any is produced commercially.

A test well just completed in BP's Milne Point field, northwest of Prudhoe, yielded much new information that could help lead to commercial production someday, BP and federal geologists and engineers said Monday in Anchorage.

The team drilled a well 3,000 feet deep on a prospect called Mount Elbert, named for the highest peak in Colorado, where one government hydrate expert, Tim Collett of the U.S. Geological Survey, hails from.

The purpose of the well was to run certain tests and to bring hydrate core samples to the surface -- something that's rarely been done anywhere in the world.

A hydrate sample looks like a hunk of sandstone laced with white swirls. Drop it into a bucket of water and it bubbles.

Collett and other scientists were excited by the results from the test well.

"We got a gold mine of data," said Ray Boswell, methane hydrates technology manager with the U.S. Department of Energy's National Energy Technology Laboratory.

The DOE funded the $4.6 million test well, with BP contributing seismic data, staffing and other support.

The North Slope hydrate was discovered decades ago, but historically the material wasn't of much interest to companies focused on producing light crude oil, which is roughly three times as deep as the hydrate.

To reach the oil, drillers bore straight through the hydrate layer. That's somewhat dangerous, because the heat from the drilling operations can cause the hydrate to thaw, freeing the volatile gas, said Scott Digert, a BP Milne Point field manager.

The Mount Elbert well isn't the first hole sunk on the North Slope to test the hydrate resource. Anadarko Petroleum Corp. drilled an experimental hydrate well in 2003 south of the Kuparuk oil field.

Despite enormous hydrate deposits known to exist in Arctic regions, in the deepwater Gulf of Mexico and elsewhere, no one has begun commercial production, Collett said.

India and Japan are pushing hard on hydrates, and India aims for commercial production by the end of the decade, according to a recent article in the trade publication Oil and Gas Investor.

The trick is freeing the frozen gas.

Engineers know that sinking a well into hydrates and simply running it as a conventional gas well will bring some gas to the surface. A resulting drop in reservoir pressure then causes the hydrate to dissociate, or revert to gas and water.

But such a well probably wouldn't flow strongly for very long because the formation would tend to freeze again, Digert said.

The solution might be to develop techniques for forcing heat into the hydrate formation to unlock the gas. But that would increase the cost of production, Collett said.

Because of the extraordinary amounts of hydrate, Congress has taken a big interest in funding research, authorizing more than $200 million in spending since 2000.

For now, hydrate doesn't figure into plans for an Alaska natural gas pipeline, Digert said. The conventional gas on the Slope likely is ample for that megaproject, he said.

Other participants in the Mount Elbert test well included Arctic Slope Regional Corp., the University of Alaska Fairbanks and Doyon Drilling Inc.

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

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http://www.adn.com/news/politics/story/8655279p-8547118c.html

Stevens proposes new plan for ANWR
STRATEGIC RESERVES: Alaska senator wants to
lift drilling ban so refuge oil can boost nation's cache.
By LISA DEMER
Anchorage Daily News
Published: February 20, 2007
Last Modified: February 20, 2007 at 02:47 AM

Stevens' plan would add ANWR oil to the nation's 700 million barrels in emergency reserves.

U.S. Sen. Ted Stevens on Monday tossed out a new approach for opening up the Arctic National Wildlife Refuge: Make it part of the nation's emergency stockpile of oil.

The idea came up during a nearly hour-long briefing for news reporters in Anchorage. Alaska's senior senator also talked about the war in Iraq, the Alaska gas pipeline and the interim U.S. attorney.

Stevens, wearing a casual brown shirt and no tie, said he was struck by a Sunday column in The Washington Post that analyzed President Bush's call to expand the Strategic Petroleum Reserve.

The stockpile consists of about 700 million barrels of federal-government-owned crude stored for a national emergency in huge salt caverns in Louisiana and Texas. The president can release it if commercial oil supplies are disrupted, and it also can be drawn down for other nonemergency reasons.

Stevens said his staff and Sen. Lisa Murkowski's have been reviewing the president's proposal, publicized last month in his State of the Union speech, to buy more oil for the reserve.

"We came up with the thought 'Why not ask that they add ANWR to the petroleum reserve?' And now this op-ed piece says the same thing," Stevens said.

The refuge lies in the northeast corner of Alaska. Its coastal plain is considered the nation's best onshore prospect for a major oil discovery. It also is an area prized by environmentalists nationally. Efforts in Congress to open the coastal plain to oil development have failed repeatedly over the past three decades.

In his column, Gal Luft, head of the energy security think tank Institute for the Analysis of Global Security, said "reframing the issue to cast the refuge as an emergency stockpile rather than a source of production might well change the politics."

Congress could compensate Alaskans by leasing the oil for a set amount of time, after which the state could sell it, Luft said in the column, under the headline "An Oil Reserve Right at Hand."

Alaskans who have tried to open ANWR to drilling said they haven't heard of this new twist but noted that execution would be very complex.

"I don't understand the concept," was the immediate reaction of Roger Herrera, an oil and gas consultant in Anchorage who has been working on ANWR nearly 30 years.

After giving the idea some quick thought, he said that additional exploration likely would be required to confirm the amount of oil in ANWR, and that equipment would need to be in place so that it could be extracted when needed.

Stevens told reporters he thinks the reserve idea may solve the ANWR issue.

"It is in the national interest to produce from ANWR and certainly by the time we could get it ready to produce it would be a ready reserve," Stevens said.

Stevens also talked about:

ALASKA'S NEW U.S. ATTORNEY

The Bush administration's appointment of interim U.S. Attorney Nelson Cohen bypassed the normal route in which the president nominates a candidate who is then confirmed by the Senate. Instead, the U.S. attorney general plucked Cohen from Pennsylvania in August and put him into the Alaska job indefinitely. It was done under a little-known provision of the U.S. Patriot Act, Stevens said.

The move upset the senator, who had proposed Alaskan candidates, but he didn't try to undo it. Nine days after the appointment, the FBI raided the offices of six state legislators, including Stevens' son, Ben.

"Because of the circumstance of the investigation, I did not want to get involved. With my son's name involved, that just would not have been proper," Stevens said.

He wasn't sure if Cohen's appointment was related to the investigation, but it was in the "back of my mind."

In the last week, Stevens said, he discussed the appointment with other senators. The same thing has happened in other states, and it skews the balance of power, he said. They likely are going to try to change the law to prevent such indefinite appointments. Stevens said he had nothing against Cohen. "He's just doing his job. He's a career prosecutor."

ALASKA'S GAS PIPELINE

Stevens said he's not happy with the progress on the project and wants a partnership with the federal government, Alaska and Canada.

He plans to meet with Gov. Sarah Palin next week in Washington, D.C.

"I'm planning to listen to her," Stevens said. "Senators don't tell governors what to do and vice versa.

THE WAR IN IRAQ

He supports the troop surge being pushed by Bush and was among the Senate Republicans on Saturday who blocked a vote on a resolution opposing the troop buildup.

"If we left right now there would be anarchy," Stevens said. "That government could not survive."

Democrats in Congress want to make the Iraq war seem like "Vietnam all over again," Stevens said. He said it's nothing like Vietnam.

"They have a democracy. The question is: Can they defend it themselves?" Stevens said.

The surge is necessary for security as more areas are turned over to Iraqi control, the senator said. He gave reporters maps of Iraq showing where the Iraqi army and the national police had lead responsibility for counter-insurgency in May 2006 compared to now. Iraq is now responsible for much more, according to the maps.

If the troop buildup fails, Stevens said he's not sure of the answer.

Daily News reporter Lisa Demer can be reached at ldemer@adn.com .

Fairbanks News Miner
February 20, 2007

http://newsminer.com/2007/02/20/5368/

Arctic warming the hot topic of the day
By Eric Lidji
Staff Writer
Published February 20, 2007

Alaska engineers have tricks for building on the permafrost that covers so much of the state thermal pipes, raised wooden foundations and insulated gravel pads.

These building methods assume that the permafrost, or the layer of continually frozen underground soil, will remain frozen as it has for thousands of years. Reports of a warming climate challenge that assumption, and it’s forcing scientists to question how changes to one of Alaska’s most reliable features could ripple into other areas of daily life and environmental well being.

That was the message at the first day of the seventh annual International Conference on Global Change: Connection to the Arctic, a two-day symposium hosted in Fairbanks by the International Arctic Research Center and a consortium of Japanese universities.
“People everywhere are riveted on the topics you’ll be discussing at this conference,” University of Alaska Fairbanks Chancellor Steve Jones said.

The GCCA-7, as it is called, is a global event, not only because the scientists represent countries across the world but also because their research draws connections between faraway lands that share arctic features.

It is an event where, during a coffee break, a German meteorologist and a Japanese glacier expert argue in three languages about the accuracy of comparing climate predications and weather predictions.

With presentations on topics like “Representativeness of snow water equivalent measurements for hydrologic applications on Alaska’s Arctic Slope,” the conference was not for laymen, and even some of the scientists in the room occasionally nodded off, but IARC Director Larry Hinzman said, “It’s not nebulous at all.”

Funding agencies are beginning to force scientists to create practical applications from their research, Hinzman said.

Permafrost is found on nearly one quarter of the globe, meaning engineering tricks used in Tibet can be applied to projects in Alaska, and research starting at UAF can carry implications around the Arctic.

Conference organizers were quick to note the timeliness of the conference, coming two weeks after the release of a report highlighting the effect humans are having on climate change and two weeks before the start of the fourth International Polar Year, which will bring scientists from 60 countries to conduct studies in the Arctic over the next year.

“Each and every IPY has left a legacy for Alaska,” said Buck Sharpton, UAF vice chancellor for research.

Past Polar Years have left behind important research facilities in Alaska, like the Point Barrow Observatory and the Geophysical Institute. While no one is sure what the legacy will be for this Polar Year, many scientists presented ideas for networks to monitor permafrost around the globe.

Sharpton also said that an important legacy from this Polar Year will be to attach a human element to studies taking place on a global scale, something that has generally been absent from previous Polar Years.

For instance, recent work by linguist Olga Lovick examines some of the language barriers scientists face on visits to isolated Native communities that do not have words to describe the environmental changes threatening their subsistence lifestyle.

With climate change becoming a prominent discussion topic both inside and outside the scientific community, Hinzman said the expectation is that the research leads to change.

Or, as University of Alaska President Mark Hamilton put it, “Ultimately the public policy has got to come from science and not from bumper stickers.”

Contact staff writer Eric Lidji at 459-7504 or elidji@newsminer.com .

Houston Chronicle
February 20, 2007

http://www.chron.com/disp/story.mpl/business/energy/4565149.html

Attorneys plan to depose BP CEO this week
By JUAN A. LOZANO
Associated Press

GALVESTON Attorneys representing workers injured during BP PLC's deadly Texas City plant explosion in 2005 said today they plan to question outgoing company chief executive Lord John Browne about the accident this week, unless the Texas Supreme Court intervenes.

Earlier this month, a Houston appeals court ordered Browne to give a deposition to attorneys for Clarence Kinard and E.J. Godeaux, contract workers suing BP for injuries they sustained during the blast. Fifteen people died and more than 170 others were injured.

During a court hearing today, BP attorney Stephen Fernelius said the company has asked the Texas Supreme Court to stop the deposition.

The workers' civil lawsuits are set for trial next week. They would be the first cases connected to the blast to go to trial.

The deposition originally was ordered in October by state District Judge Susan Criss in Galveston, who is overseeing the case. BP's appeal delayed the deposition.

Attorney Brent Coon said he planned on flying to London, where the company is based, and deposing Browne on Friday.

Coon said Browne has unique knowledge about budget cuts and other company decisions that contributed to equipment failures at the plant and caused the explosion.

"Lord Browne does not have any unique knowledge of the incident," said BP spokesman Neil Chapman.

BP announced last month that Browne would step down by the end of July more than a year ahead of schedule.

His retirement comes after a series of high-profile mishaps including the deadly blast and a giant oil spill in Alaska tarnished the image of one of the world's largest oil companies.

Browne's deposition would come a few days before the start of jury selection in the lawsuits of Kinard and Godeaux.

Godeaux, 61, a painter and sandblaster, sustained neck and back injuries and had his right eardrum blown out. Kinard, 67, who worked as a boilermaker, injured his back after being knocked down on top of a scaffold. Attorneys said the men also suffer from post traumatic stress disorder.

Jury selection in the case is set for March 1 and 2, with opening statements on March 5.

"Not good," Coon said when asked about the chances the cases would be settled before next week.

Chapman said BP is working to settle the lawsuits, as it has done with the majority of the more than 1,000 claims filed against the company.

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 geyserlike 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, located about 40 miles southeast of Houston.

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

The CSB also found that BP fostered bad management at the plant and that internal documents showed budget cuts caused a progressive deterioration of safety at the refinery.

Anchorage Daily News
February 17, 2007

http://www.adn.com/money/industries/oil/story/8647815p-8539562c.html

BP reports it's ready to move on Liberty project in Beaufort Sea
SEEKS OK: Well could be on line by 2011 and produce 40,000 barrels a day.
By TIM BRADNER
Alaska Journal of Commerce
Published: February 17, 2007
Last Modified: February 17, 2007 at 02:40 AM

BP Exploration (Alaska) Inc. said it will seek approval this year for a $1 billion project to develop its Liberty oil field.

BP is spending $30 million this year in engineering studies and permitting for the project, according to Carl Lundgren, Liberty project manager. The company had 25 people dedicated to the project last year and will add to that number in 2007, he said.

Lundgren and other BP officials recently briefed state House Ways and Means Committee members on upcoming projects that will result in more oil being produced.

Liberty is in the Beaufort Sea five miles offshore from Mikkelson Bay and northeast of the Prudhoe Bay oil field, the North Slope's largest field. Liberty will be developed with wells drilled from a pad near the Endicott field eight miles to the west.

The wells, drilled laterally 40,000 to 45,000 feet from the surface location of the drill rig, will set world records for extended-reach drilling, Lundgren said. The longest extended-reach wells, also drilled by BP at the Wytch Farm oil field in the United Kingdom, reach out to about 35,000 feet. If the ultra-extended reach wells can successfully produce from Liberty, the technology could be applied at other locations in the Beaufort Sea where oil reservoirs are discovered a few miles offshore. This would eliminate the need to build costly artificial gravel islands.

If the project goes ahead, BP will order long lead-time equipment and begin construction in early 2008. Included in the equipment needed will be a specialized drill rig to be built for the project, Lundgren told the legislators. Liberty could be in production in 2011, according to the current schedule, he said. Its peak production rate will be about 40,000 barrels per day.

Lundgren said the field has about 100 million barrels of recoverable oil and is the largest undeveloped known conventional oil reservoir on the North Slope.

BP has been working for several years on ways of developing Liberty. The field is similar to BP's offshore Northstar field to the west. BP developed Northstar using a man-made gravel island to support the wells and processing facilities. A subsea pipeline was laid to shore.

Northstar experienced delays, some due to permitting issues, and wound up costing much more than the oil company had estimated. BP had initially considered a plan for an artificial island and subsea pipeline for Liberty, but in 1992 and 1993 began investigating whether the field could be economically produced with long-distance wells drilled from shore.

The current plan is for the wells to be drilled from the Endicott field, where there is ample spare capacity in oil processing facilities and pipelines to handle the production from Liberty. Endicott started production in 1987 and its facilities and pipelines were designed for a peak production rate of 120,000 barrels per day. Endicott is now producing only 15,000 barrels per day, leaving substantial unused capacity at the field.

Corporate Crime Reporter
February 16, 2007

http://www.corporatecrimereporter.com/trimmer021607.htm

CORPORATE CRIME REPORTER

Steelworkers Union Doesn’t Trust BP Ombudsman Sporkin
21 Corporate Crime Reporter 9, February 16, 2007

Glenn Trimmer doesn’t trust Stanley Sporkin.

Trimmer is an operator at BP’s gathering center on Alaska's North Slope.

He’s also secretary treasurer of United Steelworkers Local 4959.

And he sits atop a volatile facility that takes in crude oil and separates it into one billion cubic feet of natural gas, 50,000 barrels of oil, and 110,000 barrels of water a day.

Sporkin is BP’s ombudsman the oil company’s workers’ representative.

At least, that’s what the company says.

Trimmer says he doesn’t trust Sporkin.

That’s because five months ago, Trimmer complained to BP and to Sporkin that his workers were working too many 18-hour days.

And five months ago, BP and Sporkin agreed that this presented a dangerous situation to the workers.

And they agreed to hire the necessary operators to relieve the danger.

And now, five months later, nothing has been done.

“Don't wait until someone is killed or badly hurt,” Trimmer wrote in a September 11, 2006 memo to BP USA President Bob Malone and then BP Alaska President Steve Marshall. “Correct this before something happens.”

Trimmer said that one worker had worked ten eighteen hour shifts out of the 14 days he was on the slope.

Another worker had worked 350 hours overtime in a one-month period.

Trimmer said that he wrote the memo because Bob Malone urged workers to report hazardous working conditions to management.

Trimmer says he didn’t want BP management to be surprised if something went wrong.

Soon thereafter, Trimmer laid out the case and gave Sporkin the documentation. Sporkin agreed it was a hazardous situation and promised to resolve the problem.

Union officials then met with Kemp Copeland, BP’s field manager.

And Copeland agreed that it was a hazardous situation.

BP agreed to hire nine to ten operators with ten years or more operating experience.

“We helped them write the posting,” Trimmer told Corporate Crime Reporter. “We agreed that we would hire those people and that would eliminate the need for us to do 18-hour shifts. Copeland said they would do the job posting immediately.”

But the posting went out only within BP and was never posted outside of BP.

And now five months later, nobody has been hired.

“If you work eighteen hour shifts and you are working in an oil handling facility, your judgment is going to be impaired,” Trimmer said. “They don’t let truck drivers drive a truck 18 hours because it’s hazardous. You are fatigued especially if you are going to do it several days in a row ten out of 14 days. I see it in my co-workers faces. Just look at their faces. These are not guys I want making decisions about hot oil. And management knows that. We sat right there with Kemp Copeland the field manager. And he says yes, it’s a hazardous condition. He has acknowledged that. And in five months, no concrete action has been taken to correct it. It doesn’t take five months to hire somebody.”

As for Judge Sporkin, Trimmer says you have to build trust. And so far, it’s been all words and no deeds.

“It’s like I told Judge Sporkin I would look at what he has done more than what he has said,” Trimmer told Corporate Crime Reporter. “So far, he hasn’t done anything. No, I don’t trust him. After I spoke with him initially, the first phone call I got was from Billie Garde (a Washington, D.C.-based lawyer who has worked for BP for years). She said she was working for the ombudsman’s office and said she would like to interview me about the concern I turned in the 18-hour days. And I said no thanks, I’m not talking to you about anything. And I just hung up on her. I don’t trust her. We had dealings with her in the past. When the Judge called me back, I said look if you are going to work through her, we don’t have anything to talk about.”

“And Judge Sporkin says no no no, she’s just doing the preliminary interview because I couldn’t get back to you. He assured me she didn’t have anything to do with his office.”

But in an interview with Corporate Crime Reporter, Sporkin says Billie Garde now works for him. And he said that the union, management and he are all on the same page.

“Trimmer is a good fella,” Sporkin said. “I agree with him that we have to get this thing done. The problem is that there has been a change of management up there. Everybody is on board. It’s just a question of communication to get the people together. The resolution is a simple resolution. We’re all on the same page.”

But what good is it if everybody is on the same page and the page gets thrown in the trash?

Which reminds Trimmer of an incident from last year.

Maureen Johnson was a business unit leader for BP on the north slope.

“Last fall right after the August oil spill, BP managers were coming around giving us updates,” Trimmer says. “Maureen Johnson came around and had a meeting here. All of the operators went to that meeting. She took notes about their concerns. But before she left the meeting, she threw the piece of paper with her notes into the trash. One of the workers dug it out of the trash. Steve Marshall was President of BP Alaska at the time and was Johnson’s boss. Later, he came here to hold a similar meeting. I let the meeting go for about a half hour. And I then said to Marshall I see you are taking notes there. I wonder if you are going to throw them away? He said what? I said your business unit leader for all of Prudhoe Bay was up here last week. She just threw her notes in the trash when she left. At first, he said she has a photographic memory. The whole room laughed. But then he said she shouldn’t have done that. I’ll certainly talk to her. He picked up his notes and left.”

Earlier this week, Trimmer e-mailed Judge Sporkin expressing his frustration with the situation.

“Everyone I have spoken to admits it's a hazardous condition,” Trimmer wrote. “I am at a loss to understand why it takes over five months to hire someone. In the past, BP has wondered why their employees have felt the need to go to outside agencies and the press with their concerns. It's because they feel their concerns are being ignored.”

Worker advocate Charles Hamel says that Sporkin is just shielding BP and Bob Malone.

"He does an investigation and doesn't release the findings," Hamel said. "What good is that? It shields his paymasters Bob Malone and BP. And that's it."

Anchorage Daily News
February 16, 2007

http://www.adn.com/money/industries/oil/prudhoe/story/8645992p-8536908c.html

BP to seek tax breaks for pipeline repairs
$11 MILLION: Money would pay in part for replacing corroded pipes.
By WESLEY LOY
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 01:58 AM

BP plans to seek $11 million in tax breaks in connection with replacing corroded Prudhoe Bay pipelines that last year leaked hundreds of thousands of gallons of oil onto the tundra.

In a letter to state lawmakers, BP Alaska president Doug Suttles said Thursday the company is entitled to take deductions and credits under the state's newly revamped oil tax law.

But some lawmakers as well as a spokeswoman for Gov. Sarah Palin said Thursday they likely will challenge BP's bid for the tax breaks. They said it's questionable whether BP qualifies because of the company's poor maintenance of the corroded pipes, which leaked and led to a jarring temporary shutdown of half of the nation's largest oil field.

Rep. Les Gara, D-Anchorage, said BP's heads-up that it would seek the tax breaks came as no surprise. He said the tax law is flawed, and such deductions and credits shouldn't be allowed.

"We knew this was going to happen, that they were going to charge us for their negligence in failing to maintain their pipelines," he said.

But Suttles said in his letter the tax breaks are justified because BP isn't seeking simply to replace corroded pipelines. Rather, the new pipes will be modern investments in keeping Prudhoe Bay producing oil for decades to come, he said.

Suttles said the pipes that leaked were 30 years old and "would have been replaced in the normal course of business, even if the events of last year had not taken place."

He stressed he was speaking only for BP's intentions. The other major Prudhoe field owners, including Exxon Mobil and Conoco Phillips, will have to make their own decisions on whether to seek tax deductions and credits, he said.

London-based BP runs Prudhoe on behalf of all its owners.

The company this winter and next plans to replace 16 miles of major trunk lines at the center of Prudhoe Bay with new pipes smaller in diameter than the originals. Smaller pipes will work because Prudhoe's production, at around 800,000 barrels per day, is less than half its peak in the late 1980s, BP managers say.

Lawmakers last year rewrote state law to base oil taxes on company profits rather than oil production. The law provides for tax deductions and credits related to a company's costs or investments in the oil fields.

This year, most lawmakers already have signed on as co-sponsors of companion Senate and House bills that would tighten the rules for seeking oil tax breaks by creating a three-member state review panel.

One of the prime sponsors, Sen. Tom Wagoner, R-Kenai, said he was a little skeptical of BP's claim that it was going to replace the leaky pipes anyway.

"There's a lot of other lines up there on the North Slope and they're not pulling those out and putting smaller lines in," he said.

Wagoner and Sen. Gene Therriault, R-Fairbanks, said BP might, in the end, qualify for some of the tax deductions and credits it plans to seek.

But they said such tax relief needs more scrutiny than the current law allows.

Their bill would create a panel made up of the commissioners of revenue and environmental conservation, plus the chair of the state Oil and Gas Conservation Commission, to disallow costs related to poorly maintained equipment.

Therriault said so far lawmakers hadn't heard from Conoco and Exxon on whether they will join BP in seeking tax breaks. He said he wouldn't be surprised to see the trio end up in a court fight over the corroded Prudhoe pipes.

"I've gotta believe that BP's business partners, Conoco and Exxon, aren't too happy about this happening at facilities that BP was supposed to be maintaining on their behalf, and that Conoco and Exxon have been paying BP to maintain on their behalf," Therriault said.

After corrosion ate holes in the pipelines last year, leading to two spills -- including one exceeding 200,000 gallons, the largest oil spill ever on the North Slope -- BP drew intense scrutiny and criticism from federal pipeline regulators and members of Congress. Federal criminal investigators also are looking into the big spill.

Wagoner said BP likely will seek more than $11 million in tax relief, because under the law companies can seek tax credits on a given project over three years.

BP spokesman Daren Beaudo said replacing and modernizing the Prudhoe pipes is expected to cost $250 million.

Suttles, in his letter to lawmakers, said the company won't seek to deduct costs associated with cleaning up the oil spills. That cost, said Beaudo, exceeded $20 million.

Suttles also urged lawmakers not to tinker with the oil tax law passed last year. He noted BP will pay more than $500 million in oil taxes for 2006, almost triple what would have been due under the old tax law.

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

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http://www.adn.com/news/environment/story/8645245p-8536989c.html

Alaska industry tagged biggest polluter
PER CAPITA: Alaskans produce more CO2 than Americans on average.
By GEORGE BRYSON
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 03:16 AM

A new study that estimates the amount of global-warming-related carbon dioxide emissions the state spews into the atmosphere each year has found that, one, it's a big number and, two, it's getting bigger every year.

The report commissioned by the state Department of Environmental Conservation also determined that the greatest source of Alaska's CO2 emissions isn't the car or the homeowner or the utility company. It's the huge industry that generates its own power.

Statewide in 2005, Alaska produced 52 million metric tons of CO2 equivalents, according to the study by E.H. Pechan & Associates of California. That's about 21 percent more greenhouse gases than the state generated in 1990. And by 2020, it's expected to increase that number by another fifth.

Compared to Texas, which in the year 2000 generated about 750 million metric tons of greenhouse gases (more that year than all of Canada), that's minuscule. But on a per-capita basis, Alaskans managed to produce nearly four times more CO2 than Americans do on average.

The reason why, says Steve Roe, one of the study's principal authors, is that Alaska has some big industries that generate CO2 far out of proportion to the state's tiny population. But exactly who they are isn't known yet.

"That's likely to involve some follow-up work," Roe said Thursday. "I know there are some folks (in the state Department of Environmental Conservation) interested in doing that."

State DEC air-quality director Tom Chapple on Thursday agreed that the study begs more answers.

"How much of that (CO2) comes from the natural gas that's used by our oil industry on the Slope?" Chapple said. "All our seafood processors generate their own power (too). Almost all of our mines generate their own power. How does that all break down?"

The study provides a few clues. By reviewing state energy consumption data, the report's authors determined that industries burning fuel for operations generated 41 percent of Alaska's annual CO2 emissions -- and that an additional 7 percent was traceable to the release of methane (measured in terms of "CO2 equivalents") by the fossil fuel industries alone.

The transportation sector was the next most significant culprit, generating 35 percent of the state's CO2 emissions. But don't just blame drivers of big SUVs. Most of the transportation-related CO2 -- about three-fifths -- is traceable to jet fuel emissions by the aviation sector, according to the study.

(An Alaskan who eliminates just one airplane trip Outside each year saves the CO2 emission equivalent of driving a car 5,000 to 10,000 miles less, says UAA climate change researcher Steve Colt. "It's huge," Colt said at a recent UAA climate change forum. "And it's doable.")

According to the study, offshore boats and ships generate more CO2 emissions each year than all the gas-powered cars in Alaska do. And diesel-burning vehicles generate nearly the same amount of emissions as all of the state's gas-fueled vehicles combined.

Roe released the findings Wednesday at a climate change symposium at the weeklong Alaska Forum on the Environment at Anchorage's Egan Center.

Discussion moderator Deborah Williams, a former Department of Interior director for Alaska, applauded the study as a hopeful first step toward the state acknowledging its carbon footprint.

The second step, she said, will be to do something about it -- just as New Mexico, Arizona and California have begun to do by pledging to lower their CO2 emissions in coming years.

"I mean, if Arizona can do it, we should do it," Williams said, noting that Alaska is at "ground-zero" of a warming planet.

"We have more at stake in Alaska than any other state in the nation."

Daily News reporter George Bryson can be reached at gbryson@adn.com.

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http://www.adn.com/money/industries/oil/pipeline/story/8645151p-8536912c.html

Cost figures dull beauty of constructing gas line
50 PERCENT INCREASE: State officials say higher price doesn't surprise, but estimate needs review.
By SABRA AYRES
Anchorage Daily News
Published: February 16, 2007
Last Modified: February 16, 2007 at 03:05 AM

JUNEAU -- Groups seeking to build an alternative to a producer-owned gas pipeline said Thursday that increased construction cost estimates revealed this week by energy companies came as no surprise given a rise in market prices of steel, labor and other construction materials.

But the state may have relied too heavily on the producers' numbers in the past and made the gas pipeline project less attractive as the price of getting North Slope gas to market becomes more expensive, they said.

"We kind of had to believe their numbers all along without any explanation of how they got them," said Harold Heinze of the Alaska Natural Gas Development Authority. "It's normal business to be subjected to third-party review, but it never happened" on their estimates.

The new numbers mean "consumers will have to pay 50 percent more (for natural gas) than previously thought," Heinze said.

Natural gas producers BP, Conoco Phillips and Exxon Mobil told a House Resources Committee this week that their previous cost estimate of $20 billion was likely to increase as much as 50 percent on a pipeline that would run down the state and through Canada to Chicago.

The Alaska Gasline Port Authority, which has pushed an approach that would include building a pipeline to Valdez and then converting the gas into liquid before shipment, said its construction estimates had also seen significant increases.

The Port Authority pipeline proposal would be 800 miles long, compared with some 3,600 miles involved in the producers' pipeline proposal. The Port Authority's estimated cost of construction of its project is now $10 billion, an increase of 30 percent from 2001 to 2005, according to Bill Walker, the project manager for the Port Authority.

"A 50 percent increase from the producers' 2001 estimates doesn't surprise me, since we've seen our own estimates increase," Walker said.

Both Walker and Heinze were critical of BP, Exxon Mobil and Conoco Phillips lack of public discussion on how their estimates were originally generated.

"The question is, at $30 billion, will they need more concessions from state than they did at the $20 billion price tag?" Walker said.

Rep. Ralph Samuels, R-Anchorage, said the numbers announced this week by the energy producers were not new to him either. Samuels, the House majority leader, said he had reviewed other reports indicating gas and oil project costs were rising worldwide.

"So does it change the debate in the state? Fundamentally, the choices remain the same, but the cost increase makes the project a little less attractive," Samuels said. "Still, we have to keep moving down the road toward a pipeline."

Daily News reporter Sabra Ayres can be reached in Juneau at sayres@adn.com or 1-907-586-1531.