June

Seattle Post Intelligencer
June 27, 2007

http://seattlepi.nwsource.com/local/321404_oilcouncil27.html

U-turn by Gregoire on oil-spill panel
Governor swings behind citizen-run watchdog group
By ROBERT McCLURE
P-I REPORTER

Gov. Chris Gregoire switched direction Tuesday and gave her strong endorsement to a citizen-run council set up by the Legislature to look over the shoulder of state regulators and the shipping industry on oil-spill prevention measures.

Gregoire late last year announced moves that environmentalists said would "defang" the Oil Spill Advisory Council, patterned in part on a similar group in Alaska and headed by former state legislator Mike Cooper of Edmonds.

The Legislature headed off that move, but before Tuesday Gregoire hadn't strongly endorsed the panel. Asked about her position on the council now, Gregoire said:

"It's so important. Only if public engagement continues are we going to make sure we don't have complacency. ... The public has to be engaged and involved, and Mike and his group are making sure that happens."

Gregoire's endorsement came after state Sen. Harriet Spanel, D-Bellingham, who sponsored legislation to set up the council, prodded Gregoire to re-endorse the council. The governor's support was key when the council was established in 2005.

Cooper said it had been "a long six months" since Gregoire proposed moving the independent commission under the Department of Ecology, which environmentalists have characterized as too deferential to the shipping and oil industries.

"I was very encouraged," Cooper said. "Her strong public statement today delivered a clear message to everyone that this was a priority for her. ... It's certainly the strongest public comment she's made" since the council survived the legislative session.

Gregoire's comments came after she appeared beside Elliott Bay with Coast Guard Rear Adm. Richard Houck to sign an agreement designed to better coordinate the oil-spill prevention and response activities of Ecology and the Coast Guard.

The agreement is a more extensive version of a 2001 pact worked out by the Coast Guard and the administration of Gov. Gary Locke in the wake of a U.S. Supreme Court decision.

The court's decision in a lawsuit brought by shipping interests and joined by the Coast Guard stripped the state of much of its ability to regulate marine safety, including requiring that ships' crews be proficient in English and that vessels be adequately staffed.

Washington's Oil Spill Advisory Council grew out of public furor over a nighttime oil spill in the waters off Vashon and Maury islands that ultimately was traced to the ConocoPhillips oil tanker Polar Texas. The company agreed to pay $2.3 million in fines and costs, but never admitted guilt.

The council is loosely patterned on the Prince William Sound Regional Citizens Advisory Council, which Congress set up to provide a professionally staffed, citizen-run counterweight to the oil industry and state government after the Exxon Valdez oil spill of 1989.

Unlike the Alaska council, though, Washington's includes industry representatives and, instead of a staff of 18, has two staffers -- half the number of, for example, the Washington Beef Commission.

P-I reporter Robert McClure can be reached at 206-448-8092 or robertmcclure@seattlepi.com . Read his blog on the environment at www.datelineearth.com .

Wall Street Journal
June 24, 2007

http://www.adn.com/money/story/9076695p-8992674c.html

New head of BP America vows to make changes
COMPANY CULTURE: Some observers say
transforming miserly mentality will be hard.
By ELIZABETH BLUEMINK
ebluemink@adn.com
Published: June 24, 2007
Last Modified: June 24, 2007 at 07:47 AM

BP is on a hiring, repairing and building binge to atone for last year's oil spills and rampant corrosion that led to the temporary, partial shutdown of Prudhoe Bay -- the nation's largest oil field.

The new head of BP America also has vowed to change the company's culture that enabled last year's fiasco.

Are BP's new efforts enough?

Depends on who you ask.

Some regulators said last week BP is making great progress on the Slope. Some other people disagree.

"They've already made changes that are significant," said Jonne Slemons, the state's new coordinator for pipeline integrity. As an example, she pointed out BP's creation of a 150-member technical team to review its budgets for adequate funding to address risks such as pipeline corrosion on the Slope.

But some BP watchdogs said they don't believe the company will overcome a tight-money corporate mentality that has reigned for years.

"It's very hard to buck the cost-cutting decision," said Richard Fineberg, an oil and gas analyst.

BP still isn't budgeting enough to resolve the pipeline problems, another BP critic said.

"They are fixing 16 miles of pipe, but not the rest," said Chuck Hamel, a long-time Alaska oil industry watchdog.

The corporate culture problem is not as easily addressed by spending more money.

Bob Malone, head of BP America, told Congress last month that the BP work force had "a false sense of confidence" in the condition of Prudhoe Bay's big transit pipelines and lacked "an adequate process to challenge their own assumptions."

Internal BP e-mails disclosed by Congress revealed worker frustration over constrained budgets for battling corrosion in recent years.

BROKEN CULTURE

Transforming a culture is a daunting task, but it's one Malone undertook before with some success.

In the mid-1990s, Malone became head of Anchorage-based Alyeska Pipeline Service Co., the oil-company-owned business that runs the 800-mile trans-Alaska pipeline and Valdez tanker port.

Alyeska was reeling from its disastrous response to the Exxon Valdez spill, from congressional and regulatory probes of how it ran the pipeline, and from stinging publicity of how it treated outside critics like Hamel and workers who flagged problems.

The oil producers, led by Malone, and regulators stepped in, eventually pinpointing thousands of problems at Alyeska, ranging from electric and construction code violations to environmental violations, said Jerry Brossia, a long-time employee at the Joint Pipeline Office, a collection of state and federal agencies that regulates the trans-Alaska pipeline. The oil companies stepped up their spending to make fixes.

And as he did last year at BP America, Malone set up a system within Alyeska where workers could bypass supervisors to vent complaints.

"In Alyeska's case, the key to the whole thing was listening to what internal whistle-blowers were telling you and fixing the things that needed fixing," Brossia said.

"The other piece of it was somebody like Bob coming along," he added.

Alyeska still generates legitimate whistle-blower complaints, but not nearly as many as during the heyday of the company's troubles, Brossia said.

Not everyone thinks Malone had the golden touch at Alyeska.

"I say that respectfully. He tried," said Fineberg, the oil analyst based in Ester who has questioned BP's budgeting decisions and also keeps a critical eye on Alyeska.

Hamel believes Malone's role at BP today is limited to damage control and that the key decisions always will come from BP's headquarters in London.

The only way to fix BP's aging, troubled infrastructure is to channel a larger share of the company's profits into Alaska, he said.

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

Wall Street Journal
June 22, 2007

US House Panel Strikes Forced Renegotiation Of Oil Leases
DOW JONES NEWSWIRES
June 21, 2007 11:30 p.m.
By Ian Talley
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The U.S. House of Representatives' Appropriations Committee Thursday approved an amendment that strikes language in an Interior Department budget requiring oil companies to renegotiate 1998-99 lease contracts to obtain future exploration leases.

The Government Accountability Office estimates that around $1 billion in royalties have already been lost as a result of omission of price royalty thresholds in the contracts, and could cost tax payers an additional $9 billion in future royalties.

Earlier in June, Senator Dianne Feinstein, D-Calif., had included the language in the Interior budget in a markup in the Appropriations Subcommittee on Interior, Environment and Related Agencies.

"The effect of my amendment is to bring this challenging issue back to where it belongs-in an authorizing committee," said Pete Domenici, R-N.M., a member of the full panel, who sponsored the amendment. "The language inserted by Senator Feinstein into the Interior Appropriations Bill would have invalidated proper, legal contracts that were negotiated by the United States government," he said.

"At a minimum, this provision would have set off years worth of litigation, during which no solution would have been found to this problem." he added.

Although six companies, including BP (BP), Royal Dutch Shell (RDSA), ConocoPhillips (COP) and Marathon (MRO), have agreed to pay royalties on the leases on production from October 2006, they only represent a fraction of the total lease owners.

Around 40 companies representing 80% of the production haven't agreed to renegotiate the leases, including ExxonMobil Corp. (XOM), Total (TOT), Chevron Corp. (CVX) and Anadarko Petroleum Corp. (APC), according to Department of the Interior data. Democrats have been seeking royalty payments for all output from the leases.

The House Appropriations Committee passed an Interior Budget with language similar to Feinstein's, though the bill has yet to be voted upon in the chamber.

-By Ian Talley, Dow Jones Newswires, 202-862-9285; ian.talley@dowjones.com

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BP Sells Stake in Russia Gas Project
Sale to Gazprom Tightens Kremlin's Grip on Energy
By GUY CHAZAN in London and GREGORY L. WHITE in Moscow
June 22, 2007 10:58 a.m.

BP PLC said Friday it is selling its stake in a giant Siberian gas-field development to state-controlled gas giant OAO Gazprom, as Russia continues to tighten control over strategic energy assets.

BP said Gazprom will pay between $700 million and $900 million for the 62.9% stake that BP's Russian joint venture, TNK-BP Ltd., holds in the company licensed to develop Kovykta field. The companies also said they would form a $3 billion strategic alliance with an "aim to establish a venture that is strategic and long term with mutual benefits for the companies both inside and outside Russia."

"The company has a long list of projects in which we will invest," TNK-BP CEO Robert Dudley told reporters Friday. "The money which we will receive from this deal will be invested in TNK-BP."

Under the terms of the agreement, BP will also sell its 50% interest in East Siberian Gas Co., which is constructing the regional gasification project. TNK-BP said a longer-term call option for it to buy a 25%-plus-one-share stake in Kovykta, at an independently verified market price, had also been agreed with Gazprom.

The deal comes as the Kremlin increases its hold on the world's biggest hydrocarbons industry. Russian regulators have applied intense pressure, saying that the oil field operators were not meeting production targets.

Gazprom had been in negotiations with BP for months about entering the Kovykta project, but few observers thought the discussions would end with BP being pushed out of the field altogether. Russian regulators had threatened to revoke TNK-BP's license for Kovykta, which Russian officials say holds nearly as much natural gas as Canada, because BP and its partners weren't meeting production targets. Regulators had indicated Gazprom's entry into the project would resolve any license issues.

The deal is the latest example of the Kremlin squeezing foreign investors out of energy assets. Six months ago, Royal Dutch Shell PLC sold control of Sakhalin-2, an energy project in the far east of Russia, to Gazprom after Russian regulators threatened to shut down that venture for alleged environmental violations.

The deal leaves open the issue of the future of TNK-BP itself, a 50-50 venture between BP and three Russian billionaires. That structure no longer seems to fit with the Kremlin's desire for Russian control over large energy companies. While Gazprom has expressed interest in buying out the Russian shareholders, there is no sign a deal is imminent. The people familiar with the deal said it would have no bearing on the future of TNK-BP.

The fate of both Kovykta and TNK-BP are bellwethers for the Kremlin's willingness to allow foreign investment in the energy sector in a country that has the world's largest reserves of natural gas and is No. 6 in oil. BP has invested about $600 million in the Kovykta project, which is expected to cost about $20 billion. The project is in early stages, and BP never booked any of its reserves.

BP officials have stressed that Kovykta has no value in its current state, with the prospects for export routes uncertain and little infrastructure near the field. They repeatedly have said they wanted Gazprom to have majority control of the project because it has a monopoly on exporting Russian gas and officials had hoped to sell output to markets in China.

At an investment conference in Moscow Monday, BP Chief Executive Tony Hayward said TNK-BP, into which BP put $8 billion in 2003, "has been a very profitable investment for us." He noted that BP's share in TNK-BP accounts for a fifth of BP's global reserves, a quarter of its production and nearly a tenth of its global profits. As for Kovykta, he said: "I consider this issue to be no more than one of those bumps in the road."

President Vladimir Putin told reporters early this month that the government was losing patience with the investors in the project and raising questions about how the Russian shareholders in Kovykta acquired their stakes in the 1990s. He denied that Russia was targeting foreign investors in the Kovykta project, noting Russian shareholders were involved as well. He also denied the Kremlin wanted to see BP give up control over TNK-BP.

--Benoit Faucon contributed to this article.

Write to Guy Chazan at guy.chazan@wsj.com and Gregory L. White at greg.white@wsj.com

Houston Chronicle
June 21, 2007

http://www.chron.com/disp/story.mpl/business/energy/4907169.html

Refineries get new guidelines
Industry offers advice on distance for on-site trailers
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

More than two years after 15 workers died in trailers as close as 121 feet to an explosion at BP's Texas City refinery, the U.S. oil industry unveiled new guidelines for distances between portable buildings and units that process flammable liquid.

The guidelines, which the American Petroleum Institute will formally put in place today, are just that. Red Cavaney, the institute's president and CEO, noted that a trade group can't enforce compliance like a regulatory agency.

"This is a recommended practice," he said. "How and when individual companies end up implementing it is a decision they end up making."

But in suggesting minimum safe distances between portable buildings and hazardous equipment, the final version released Wednesday goes further than a draft released last December. The draft outlined a risk assessment process refinery operators should take when placing trailers, but did not recommend specific distances.

William Wright, a member of the U.S. Chemical Safety and Hazard Investigation Board who had called the draft standard "open-ended and mushy," said he was encouraged by the revised standard, but wants more details about the group's research and conclusions.

The board will review the standard, discuss it with API, and then vote on whether the standard is acceptable.

"I'm not sure there's enough data to tell people precisely what the explosive impact would be," Wright said.

The API standard suggests three zones for placement of trailers that could be threatened by external vapor cloud explosions, such as the March 2005 blast at BP's Texas City plant.

The standard requires companies to conduct detailed blast safety analyses before placing any portable building closer than 1,930 feet to a process unit area. It sets distance limits between buildings and process unit areas depending on the unit's size.

All of the dead and many of the scores injured in the BP blast were working in trailers near a vent stack that spewed liquid and vapors that ignited.

Brent Coon, an attorney who represents hundreds of workers who have sued or are suing BP over the blast, said the new standard is insufficient because it still allows buildings to be within a few hundred feet of processing units.

"We personally would hope to see a complete ban on all temporary structures and all but essential, i.e. rare, use of even permanent buildings in close proximity to operating units," he said. "And the construction should always be able to withstand any calculated blast intensity."

After the 2005 blast, BP removed 200 trailers from the Texas City refinery alone and moved the approximately 800 workers who used them off site.

The London-based company also set out a new portable building placement policy in December 2005 that specified safe distances, such as 500 feet from a vent stack used for hydrocarbons or 330 feet from any elevated main flare used to relieve pressure.

"We have not waited for the standard to act," BP spokesman Neil Chapman said.

The new standard recommends against placement of light wood buildings closer than 330 feet to a process area. Other kinds of buildings that pass a detailed blast safety analysis can be closer than 330 feet depending on the size of the process unit.

The standard also suggests a distance of 570 feet or more for all portable buildings from larger units that process up to 1 million cubic feet of hydrocarbons.

"The bigger the process unit is, the farther away you need to put that trailer," said Ron Chittim, senior API refining associate.

A process unit is anything that processes or manufactures flammable hydrocarbons, such as units that increase octane in gasoline or convert crude to heating oil.

The standard wouldn't apply to storage tanks that just hold hydrocarbons, Chittim said.

The trade group further recommends that no workers whose jobs aren't directly related to running a process unit be in a building closer than 330 feet. Such non-essential personnel would include secretaries or timekeepers as opposed to welders or craftsmen, Chittim said.

Coon said the minimum distance under all circumstances should be 500 feet or more if a blast safety analysis shows potential risk of structural damage.

And he said no zone should allow any portable building without a blast safety analysis, as the API standard would allow beyond 1,930 feet from a process unit.

"A blast analysis should always be utilized when temporary structures are brought into the facility," Coon said.

Some companies already do such analyses. Valero Energy Corp., North America's largest refinery, already meets or exceeds the API standard unless internal risk analysis suggests more distance between buildings and process units, spokesman Bill Day said. Shell Oil Co. also uses its own computer-based risk assessment tool to determine safe trailer placement.

They and others that helped API develop the standard, including Exxon Mobil Corp., Chevron Corp, and ConocoPhillips, are evaluating it and have enhanced their own standards for portable building placement.

kristen.hays@chron.com

Xxxxxxxxxxxxxxxxxx

http://www.chron.com/disp/story.mpl/business/4909003.html

Plan for new taxes on oil companies stalls
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau

WASHINGTON Proposed new taxes on oil companies stalled in the Senate today when proponents failed to block a fillibuster, raising doubts about the future of a broader energy package.

The Democratic-controlled Senate has been struggling to finish work this week on legislation that would raise fuel mileage requirements for cars and trucks and dramatically expand the nation's reliance on renewable fuels.

The cloture vote today was on a proposal to slap oil and gas companies with $29 billion in new taxes to pay for alternative energy and cleaner coal projects. The vote to stop debate failed 57-36, three shy of the required 60 votes.

Senate Majority Leader Harry Reid, D-Nev., said earlier today that he would continue to push other aspects of the bill regardless of the outcome of the cloture vote.

Advocates on various sides of the debate had warned that the entire bill could be in jeopardy if the tax package were to die.

The package would have imposed a new severance tax ranging from 12.5 percent to 14 percent on oil and natural gas produced from the Gulf of Mexico's federal waters, although producers would be able to use their existing federal royalty payments as credits against the tax.

Critics say the provision was really aimed at companies that have escaped paying royalties on leases signed in 1998 and 1999, because the U.S. Minerals Management Service neglected to include the standard price thresholds to trigger royalty payments when oil prices reach certain levels.

The package also would have excluded the nation's five largest oil companies Exxon Mobil, Chevron Corp., Shell Oil Co., BP and ConocoPhillips from a scheduled rollback in the corporate tax rate. And it would increase the taxes the oil companies pay on their operations overseas.

The tax package passed out of the Senate Finance Committee on Tuesday by a 15-5 vote, with four Republicans voting for it. But the package infuriated other Republicans.

Sen. Kay Bailey Hutchison, R-Texas, likened it to the windfall profits tax imposed on the oil industry in 1980.

White House economic policy adviser Al Hubbard argued Wednesday that the severance tax was really a backdoor way to renegotiate the contracts with companies that currently hold the flawed leases signed in 1998 and 1999.

The tax package was only one hurdle in the effort to pass an energy bill.

The Senate on Wednesday delayed a vote on new fuel mileage requirements, an issue that splits Democrats in both houses along geographic lines. And Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., is pushing an amendment that would require that more electric power be generated from renewable sources such as wind, a measure facing fierce opposition from politically powerful utilities in the Southeast.

In the House, the tax-writing Ways and Means Committee on Wednesday approved a tax package that, like the Senate bill, would keep energy companies from enjoying the corporate tax break. But instead of limiting that provision to the top five integrated oil companies, the House bill would target all oil and gas companies.

While the tax package is moving forward in the House, however, Democrats there remain divided on a number of issues, including fuel mileage requirements and incentives for companies to make diesel and jet fuel from coal.

david.ivanovich@chron.com

Fairbanks News Miner
June 20, 2007

http://newsminer.com/2007/06/20/7574

The pipeline at 30
By Eric Lidji
Staff Writer
Published June 20, 2007

At the time, 66 minutes probably seemed like forever.

North Slope field workers were supposed to start pumping oil into the new trans-Alaska oil pipeline at 9 a.m. sharp on the morning of June 20, 197730 years ago todaybut didn’t push the final button until 10:06 a.m., the result of what one official at the time called, “a little bit of pre-startup jitters.”

Even through construction on the project had been fast-tracked by Congress with a tie-breaking vote from Vice President Spiro Agnew, the project had been in the works for a while. Petroleum engineers discovered the Prudhoe Bay oil field in 1968, and the 1973 Arab oil embargo had made having a large domestic oil supply seem like a necessity.

Oil didn’t just tumble into the pipeline unassisted, though. A procession of items went into the pipeline to prepare the way: Engineers first released nitrogen into the line, followed by the first mechanical pig to inspect the integrity of the pipe. The pig moved several miles down the line pushed by diesel fuel, which has a high flash point and would be less likely to explode in an accident.

Finally, crude oil began coursing across Alaska.

Since that day, the pipeline has moved more than 15.5 billion barrels of crude oil. It has also made Alaska wealthy in the process.

“Going down is just as difficult as going up.”

Throughput should be large and spills should be small.

That’s all the complexity of the oil pipeline business simplified to its basics.

Throughput measures the amount of oil moving from Pump Station 1 on the North Slope to the Valdez Marine Terminal in Prince William Sound. The past 30 years of throughput looks like a bell as production quickly “ramped up” over the first decade and slowly declined ever since.

“As anyone who climbs mountains knows, going down is just as difficult as going up,” Alyeska President Kevin Hostler told the Greater Fairbanks Chamber of Commerce on Tuesday.

Throughput peaked around 1988, when the pipeline averaged more than 2 million barrels every day. The pipeline now moves around 775,000 barrels daily.

The value of Alaska North Slope oil has more than tripled since 1988, but that doesn’t automatically balance out profit margins. Corrosion prevention has had to increase with the age of the pipeline and with the introduction of new technology. Plus, lower throughputs are more difficult and costly to move.

“The line really wouldn’t be making money if it was operating in the way it was operating in the high throughput years of 1977 through 1989,” said Bill Howitt, a former senior vice president for Alyeska in Fairbanks, who retired to Oregon last year. “It has to be more efficient.”

Howitt and a team of engineers conceived the Strategic Reconfiguration project in 2001 to comprehensively change the basic way Alyeska operates the pipeline, especially with less oil.

The project reached its first major milestone this year by replacing the diesel turbines at Pump Station 9 near Delta Junction with an electric pump system able to shift across a range of throughputs from 300,000 barrels each day to 1.1 million barrels if new oil fields come online.

“The public didn’t feel that way.”

“Even though we’re moving a lot of oil, we never want to see the oil,” said operations manager John Baldridge, another 30-year veteran.

Pipeline workers aren’t always that fortunate, though, Baldridge noted.

Including spills from shipping vessels and contractors, Alyeska reports spilling 288,515 barrels of oil in 755 incidents on the trans-Alaska oil pipeline, an average of 9,617 barrels and 25 spills each year.

Alyeska proudly boasts that corrosion has never caused a leak on the mainline of the pipe, which excludes pump stations and the Prudhoe Bay pipeline network. The three largest spills were largely out of Alyeska’s control, caused by a tanker crash, an act of sabotage and a bullet hole. The bullet hole came from a .338 Winchester Magnum rifle owned by Daniel Lewis, who is currently serving a prison term for shooting the pipeline near Livengood, causing a $13 million clean up effort.

The largest spill, though, is still the most famous.

The Exxon Valdez tanker ran aground in Prince William Sound on March 24, 1989, spilling 11 million gallons of oil into the waters.

“For a little while, people were ashamed to say they worked for the oil industry and ashamed to say they worked for Alyeska,” Howitt said.

The Exxon Valdez incident changed the culture of Alyeska, according to Elden Johnson, who has been working on the pipeline since design began in 1973. He now leads Alyeska’s System Integrity Team, which is responsible for keeping leaks from happening.

“That was such a shock to see that oil on Prince William Sound. I just never imagined it could happen,” Johnson said. “I think at Alyeska, we thought the pipeline ended at the tunnel. The public didn’t feel that way.”

“All that came from the pipeline.”

“Ask me again in 35 years,” environmentalist Jim Kowalsky told News-Miner reporter Sue Lewis in 1977, when she asked for his thoughts on the pipeline.

Kowalsky had spent the previous seven years working on environmental issues related to the pipeline, first through the Fairbanks Environmental Center, which preceded the Northern Alaska Environmental Center, and later as the Fairbanks representative for the Friends of the Earth, a national conservation group. Kowalsky recently retired from the Rural Alaska Honors Institute.

Though he still has five years left on his request to consider the long-term implications of the pipeline, Kowalsky, who passes the pipeline every day coming to and from his home on Chena Hot Springs Road, said he has become somewhat accepting of the pipeline.

“You can’t help but be resigned to it,” Kowalsky said. “It’s there, and it is a reality and it has tremendous economic force behind it.”

Kowalsky said the environmental groups fighting the pipeline accurately predicted some of the worst outcomes, including the Exxon Valdez oil spill, but also failed to predict some of the best outcomes.

He believes work in the days before the pipeline brought national attention to environmental issues and eventually led to expansion of the Alaska Native Claims Settlement Act in 1971 and the Alaska National Interest Lands Conservation Act in 1980.

“All that came from the pipeline,” Kowalsky said.

“Mother Nature’s final exam”

During the fall of 2002, many Alyeska higher-ups found themselves preoccupied with renewing the pipeline right of way. The pipeline had turned 25 that summer, and a renewed permit would allow the pipeline to keep its pathway through Alaska for another 30 years.

The renewal process included studies to check the soundness of the pipeline system, but Elden Johnson, Alyeska’s System Integrity Team leader, said “Mother Nature’s final exam in the authorization of TAPS” came on Nov. 3, when Alaska experienced the largest inland earthquake North America has seen in almost 150 years.

The magnitude 7.9 earthquake, however, fell well within the standards the pipeline had been intended to withstand, meaning any major damage would be an engineering problem.

Engineers knew little about the Denali fault system when they designed the pipeline.

“You had to stand up on the mountain top and eyeball a straight line of where you thought the fault line would be,” Johnson said.

Bill Howitt, then senior vice president of Alyeska in Fairbanks, had been downstairs in his Gold Mine Trail cabin when the earthquake hit.

“When that thing started shaking, I just had this vision of all the logs coming down on my head,” Howitt said.

He drove in to the Fairbanks office and opened the Alyeska emergency center.

Alyeska crews and outside contractors started pouring in and heading out to sites along the pipeline, but in the end, the earthquake just knocked the pipeline off its support beams in one place. No oil was spilled.

Three weeks later, the state renewed the pipeline right of way permit for another 30 years.

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

Petroleum News
June 17, 2007

http://www.petroleumnews.com/pnads/618348932.shtml

BP making changes
Brock gives Alaska legislators answers about what went wrong at Prudhoe
Kristen Nelson
Petroleum News

The reality of the past and the hope of the future collided June 7 when Tony Brock, head of BP Exploration (Alaska)’s new technical directorate, talked to the House Resources Committee about how BP is moving ahead to fix corrosion problems at Prudhoe Bay, both with a new oil transit line system and with organizational changes.

A number of the committee members, as well as other legislators who sat in, were more interested in some three dozen documents, including internal BP memos dating back a number of years, which focused on cost-cutting issues at the Prudhoe Bay field.

Brock, who arrived in Alaska in August to head up the technical directorate, answered some questions on terminology used in the documents, but said he was not in a position to comment on what went on in the past.

The committee’s concern was two-pronged: was cost cutting in the past responsible for the corrosion discovered last year which resulted in the shutdown of half of Prudhoe Bay for several months and how would the replacement oil transit lines BP is in the process of building impact state revenues under the new Petroleum Profits Tax, which passed the Legislature just as the second Prudhoe Bay leak of the year was being discovered and BP was announcing a field shutdown.

Referring to presentation materials which Brock had brought, House Resources Co-Chair Carl Gatto, R-Palmer, said it was a wonderful-looking brochure, “but these e-mails are the thing that really captures my attention.”

Gatto said he hoped Brock would convey to BP management the frustration of legislators that the brochure won’t “satisfy the difficulties we’re seeing with the record.”

Brock: actions BP has taken

Brock told Gatto he would take the message back to BP.
He agreed that “words are words; presentations are presentations. They actually don’t mean anything unless you take action.”

BP has taken action, Brock said.

Setting up the technical directorate which he heads is one step. The directorate is “an independent body,” he said. “So these types of inquiries and queries (represented by the e-mails) actually have a functional oversight rather than being buried within the line organization.”

The technical directorate, he said, has “independence when it comes to issues of safety or integrity of our facilities. We have an independent body now that has oversight on the decision-making process.”

The corrosion group was formerly “imbedded in the Greater Prudhoe Bay organization,” Brock said, but now reports directly to him and he, in turn, reports directly to Doug Suttles, the president of BP Exploration (Alaska). Brock said that means greater transparency, and issues such as those raised in the e-mails about the impact of cost cutting on corrosion “aren’t left buried in the organization itself.”

The company has also reassessed its understanding of risk, he said.

An analysis done for BP by Booz Allen indicated that cost cutting wasn’t the issue, but rather BP’s awareness of risk. In response, BP has put in place a rigorous risk review process. “And that process is being imbedded at the field level; it’s being imbedded at the technician level; (and) at the operator level” and is being “managed up through the field line to the senior members” of BP’s management team in Alaska.

That system will be reviewed on a regular basis, Brock said. “It’s my role to present that to Doug Suttles, the president of BP Alaska, and to ensure that we take proper action on these types of issues so they get resolved.

“Overall we’re focused on reducing risk within our fields.”

Frustration disappointing

Asked by Rep. Paul Seaton, R-Homer, about a 2003 e-mail which talked about risk impacts related to budget cuts, Brock said employees were obviously frustrated in “trying to get the balance right between what’s the right amount of expenditure to ensure that our systems are integrally safe and that we have a viable system.” Budget concerns are part of running any business he said, but “certainly the people were frustrated and they felt they were compromised in some of their choices.”
The company is making changes, he said.

The technical directorate currently has more than 150 technical experts. “That is different,” Brock said.

The corrosion management team reports to Brock. “If they have concerns about compromising the program then I will address them. And I will address them independently of the line (organization) whether it relates to production or to costs. My primary concern is about the integrity and the safety of our operations.”

The management team is “committed to changing some of the processes that we use to manage and make decisions,” he said and is also working on open communications. If “our employees have concerns, we want them to be able to communicate them to senior leadership without fear or concern.” Brock said BP is encouraging people “to raise these issues so they can be addressed.”

BP has a new leadership team in place and is starting to address “the systemic culture” and what that culture needs to be so that it can be “a leading operator in Alaska for the next 30 years.”

New pipelines smaller

In reviewing the replacement oil transit line system BP is now putting in place, Brock said the existing system was made for four times the capacity needed now and in looking at lessons learned from the corrosion found in 2006 BP determined it needed to redesign the system for the right level for the next 50 years, with smaller diameter oil transit lines. The new system will be sized right so that velocities in the lines prevent the leak-causing corrosion that occurred in 2006.
There will also be permanent pig launching and receiving facilities which can be accessed and used year round.

The work will include 20 new modules and skids.

Resources Co-Chair Craig Johnson, R-Anchorage, said he was concerned about the new system because of the way the state’s Petroleum Profits Tax is structured. “You’re responsible to your shareholders (and) we’re responsible to ours,” Johnson said.

Brock said BP believes a new system is necessary for the continued operation of Prudhoe Bay over the next 30 years. New facilities are necessary because more and more water is now produced with the oil. Viscous oil is being developed from the western side of the field, which requires modifying the pipeline system to handle that oil. Putting more viscous oil into the exiting lines would “actually further reduce the velocity,” he said. Reduced velocity is one of the factors identified as causing corrosion in the oil transit lines.

BP also has to address “integrity and standards issues” put in place by the U.S. Department of Transportation and the Alaska Department of Environmental Conservation, and now by the Petroleum Safety and Integrity Office.

Those standards are higher, he said, and meeting them with the current pipeline system would be a struggle going forward.

New leak detection system

BP is also trying a new leak detection system.

The Leos system “is sensitive to very small leaks,” Brock said. The existing system did not detect pinhole leaks where drops of oil were coming through.

The Leos system hasn’t been applied aboveground in the Arctic before. “We have a similar system on our Northstar transit line but that’s buried in the seabed,” Brock said.

Using the system above ground exposes it to a much harsher climate and “much greater swings in temperature.”

It will take a couple of years, through summer and winter operation, to prove up the system.

Two sections of the replacement oil transit line were constructed this winter, he said. “It has not been put in service yet; it needs modules to be constructed to allow us to do that.”

Overall replacement of 16 miles of the oil transit lines are expected to be commissioned in the fourth quarter of 2008, he said.

Extensive tests and inspections are being carried out on the existing system, Brock said, “to ensure the integrity of that system.”

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Slemons: changing direction a challenge

Jonne Slemons, coordinator of the State of Alaska’s new Petroleum Systems Integrity Office, updated House Resources June 7 on some of the regulatory issues related to oil transit lines and other oil and gas facilities.
Prior to 2006, she said, there was “general ignorance of the fact that there was a regulatory gap” for the oil transit lines, lines which take sales-ready oil from production centers to the trans-Alaska oil pipeline.

The Office of Pipeline Safety in the U.S. Department of Transportation typically regulates such lines, but North Slope lines were not covered because “there were some exemptions within the federal regulations … (for) lines that were in remote areas of very low population.”

That gap was filled by Congress in late 2006 when it expanded the authority of the Office of Pipeline Safety, Slemons said.

And the Alaska Department of Environmental Conservation was in the process even before the March 2006 spill of expanding its regulatory authority to cover flow lines, those lines that run between the wellhead and the production centers.

“In terms of pipelines, I believe that regulatory gaps have been addressed,” Slemons said in response to a question from Rep. Max Gruenberg, D-Anchorage.

One of the primary tasks of PSIO, she said, is to do a statutory and regulatory gap analysis “to ensure that any gaps remaining anywhere on state lands, regarding oil and gas, are discovered. And we are in the process of performing that gap analysis now.”

Rep. Paul Seaton, R-Homer, asked Slemons if she was comfortable with changes BP is making as operator.

“BP is implementing significant, very broad, very deep and far-ranging changes to their organization,” Slemons said, most of which are “in response to requirements placed upon them by the Office of Pipeline Safety through various consent orders that have come down.”

She said it is her impression that BP is “sincere in wanting to fix the problems that have been discovered and to mend their ways, if you will. My own personal concern is that a ship the size of BP doesn’t turn on a dime. And changing organizational culture is a very difficult thing to do.”

Slemons said BP has been responsive to the PSIO and she understands it has also been responsive to the Office of Pipeline Safety.

Asked by Seaton about the extent of PSIO authority, Slemons said facilities “such as production centers, modules, gas processing facilities, those kinds of things” have largely escaped regulatory oversight, other than labor, OSHA and fire detection.

“It is one of the missions of the PSIO to fill those gaps and we will be looking at facilities, not just pipelines, in the system integrity plans that we will be requiring from the unit operators.”

Slemons said PSIO will be assessing the technical sufficiency of the plans and will be performing on-site assessments to ensure the operators comply with the plans that are established.

Kristen Nelson

http://www.petroleumnews.com/pnads/270165613.shtml

BP applies to expand Prudhoe Bay pads

BP has applied to the Alaska Department of Natural Resource for approval to expand gravel facilities at Flow Station 1, Flow Station 2, Flow Station 3 and Skid 50 to accommodate new modules that are required as part of the replacement of oil transit lines in the Prudhoe Bay oil field. The pad expansion proposal has also been published by DNR for public review under the Alaska Coastal Management Program.

BP announced in February that it would rebuild the entire Prudhoe Bay transit line system in response to the leaks discovered in 2006 in the original field transit lines. The new system requires 20 new modules, to house facilities such as corrosion pig launcher and receiver systems; corrosion inhibitor injection systems; and leak detection systems. The pad expansions will accommodate the new modules, as well as allowing vehicle turning space and traffic flow space.

Alan Bailey

New York Times
June 17, 2007

Cold Spell
Up North, Looking for Direction
By WILLIAM YARDLEY

SCOURING the tundra for the source of the next big boom is the Alaskan way.

Skin it, mine it, fish for it, drill for it.

It has all paid off, at least for a while. It has also propped up the state’s place in the national mythology the alluring frontier detached on the map but also a critical supplier of the world’s wants.

Now, as oil production continues its steady decline, and the temperature creeps higher, it is far from clear what the next big boom might be, or what Alaska might become without one. Nearing a half-century of statehood, the wildest and most mysterious of American places could use a reliable map to the future. Fog seems to be rolling in instead.

Political scandal has erupted, leading to indictments for state lawmakers and even raising questions over the dealings of Senator Ted Stevens, “Uncle Ted,” the great provider for the Great Land. Global warming is puddling the permafrost and threatening coastal villages. The federal government, which spends more money on Alaska per capita than it does on any other state, may no longer be such a sugar daddy. The population, which once surged and plummeted with fortunes found and dashed, now relies more on trusty old biological reproduction for replenishment than some new rush of speculators.

“It’s sort of like this dance that keeps on changing, but it keeps us dancing,” said Neal Fried, an economist with the state’s Department of Labor. “In some ways you just have to sit back and say, wow, this is pretty amazing.”

Or you could confront it.

“Alaskans are kind of saying, What is the next boom?” said Senator Lisa Murkowski. “I think it is a hard question to answer and I think it’s wise for us to talk kind of beyond the boom-and-bust path we’ve been on. Why does it have to be a boom and bust? When will we get ourselves on a more sustainable path?”

Or you could drop all diplomacy.

“We’re basically divorced from reality up here,” said Andrew Halcro, a Republican who ran for governor last year as an independent. “People say: ‘Wow, we got a Gap or a Banana Republic, everything must be cool.’ But what you don’t look at is the big picture.”

In Alaska, of course, the picture is really big. In a state with 663,000 square miles and barely one person for each of them, it is easy to see things from a different point of view.

“We’ve been saying disaster is around the corner for years and we’ve been wrong many times,” said Gregg Erickson, an economist in Juneau who writes a newsletter about the state budget.

Asked what the future might hold once the oil finally does dry up, Mr. Erickson said: “Who knows? But we can see some outlines.”

Many ideas come straight out of the old extraction-economy playbook. The new Republican governor, Sarah Palin, a former suburban mayor, beauty pageant queen and exponent of something previously untranslatable in Alaska politics, “transparent government,” is pushing for a new pipeline that would pump trillions of cubic feet of natural gas from the North Slope to the lower 48 states, potentially delivering another Alaska boom, or at least a boomlet.

Still, even if that happens, and virtually everyone in Alaska hopes it does, most experts say the benefits will be far less than those of the Trans Alaska Pipeline, whose construction, completed 30 years ago, transformed the state.

Since the oil bust of the mid-1980s, the economy has been growing, slowly but steadily. A Target store, the first in Alaska, is set for construction outside downtown Anchorage, a stamp of retail arrival. But the backbone of the growth has been oil and federal money.

The underlying challenges are only expected to sharpen: The state has a small, aging population. It depends on oil for more than 80 percent of state revenue. While tourism, fishing and cargo shipping are growing, they are not about to supplant oil, and there is no other obvious source for major revenue that could. Not only is there no state income tax or many other fees, nearly every Alaskan gets a check each year from the state based on investments from oil revenues. Last year, the checks were for $1,107.

That tension is not new, but there is more. Beginning in the late 1990s, as Mr. Stevens, a Republican, became chairman of the Senate’s Appropriations Committee, federal spending in Alaska eventually doubled, going from $4.2 billion in 1995 to $8.4 billion in 2004. Now that Democrats have taken control of Congress, the senator is no longer chairman.

“They see about three years’ worth of federal projects in the pipeline, and then after that there’s nothing,” said Mr. Halcro, the former candidate for governor. “I’ve heard from very credible sources that the people of Alaska are going to be surprised at how little federal money is coming in.”

One of those sources was Senator Murkowski, also a Republican. She was appointed to office in 2002 by her father, Frank, who held the seat for 22 years before he left to run for governor. Ms. Murkowski said last week that with Democrats in control and so-called earmarks under greater scrutiny in both parties, “the way we have typically done business or operated as a state is changing.” Big building projects like, say, Ted Stevens Anchorage International Airport, may be on the way out.

“When you think about how the monies have come to the state, so much of it has been because we needed to build a certain capacity that states in the lower 48 have had for generations,” Ms. Murkowski said. “We were in that catching-up period. It wasn’t more than our fair share, it was our fair share. We were maturing as a state.”

Ms. Murkowski, 50, is among a younger generation of politicians, along with Ms. Palin, 43, and Mayor Mark Begich of Anchorage, a Democrat, who cast themselves as more inclined to find common ground than make deals behind closed doors.

Senator Murkowski uses words like “sustainable” when she talks about developing natural resources, and she expresses interest in alternative energy like ocean, wind, geothermal and solar. But like Senator Stevens and Don Young, the state’s sole representative in the House and also a Republican, she supports drilling for oil in the Arctic National Wildlife Refuge, a proposal that would increase oil revenues but has little support in the Democratic Congress.

Alaska has an emergency option should it ever need one, and it is like no other: the Permanent Fund, a $39 billion colossus built on oil revenues over the course of 31 years. The account earns the interest that provides residents with their annual dividend.

But the few politicians who publicly support tapping it for other purposes are usually met with an icy public response. Few are standing up for big new taxes, either. Calls for a “long-range plan” are drowned out in the search for a new resource boom. How about a controversial gold mine in Bristol Bay? The natural gas pipeline? Drilling in the refuge?

“People keep punting because they hope the next big development is going to bail us out,” said Stanley E. Senner, executive director of Audubon Alaska, who spends much of his time working to protect wilderness areas from some of those proposals. “That constant pressure is there. You have a lot of Alaska sort of collectively holding its breath.”

Anchorage Daily News
June 17, 2007

http://www.adn.com/news/politics/fbi/story/9013136p-8922071c.html

Grand jury examines Stevens' ties to Veco
INVESTIGATION: Expansion of senator's Girdwood home comes under scrutiny in Washington.
By RICHARD MAUER
rmauer@adn.com
Published: June 17, 2007
Last Modified: June 17, 2007 at 03:12 AM

A federal grand jury in Washington, D.C., heard evidence last month about the expansion of U.S. Sen. Ted Stevens' Girdwood home in 2000 and other matters connecting Stevens to the oil services company Veco Inc.

As the far-reaching federal investigation into corruption in Alaska politics spreads to Washington, Stevens family friend and neighbor Bob Persons was ordered to appear before a grand jury in Washington on May 25. The government directed him to produce documents related to the work on Stevens' Girdwood house, especially to work that might have been performed by Veco and contractors who were hired or supervised by Veco.

Another close associate of Stevens, Anchorage businessman Bob Penney, testified two weeks ago before the federal grand jury in Anchorage that has been gathering evidence in the corruption cases.

The house expansion project, first reported in the Daily News on May 29, more than doubled the size of the home. The Stevenses had asked Persons, who lives above the Double Musky restaurant he owns in Girdwood, to help them oversee the addition while they were in Washington.

The existence of the Washington grand jury investigation is the strongest indication to date that Stevens himself has become a subject of the wide-ranging federal probe that surfaced with FBI raids on state legislative offices last August. Former State Sen. Ben Stevens, Ted Stevens' son, was among the legislators whose offices were searched. Ben Stevens has denied wrongdoing.

The FBI said at the time that it also had executed a search warrant in Girdwood, among other places, although the location of that search has never been disclosed.

VECO GUILTY PLEAS

The investigation by the FBI and the Justice Department's Public Integrity Section has so far led to guilty pleas by former Veco chief executive Bill Allen, former Veco vice president Rick Smith and private-prison lobbyist Bill Bobrick. Four current or former state legislators have been indicted and are awaiting trial on corruption charges, three for taking bribes or attempting to take bribes from Veco, the other for taking bribes from the private prison interest.

How the Girdwood home fits in with the broader investigation, or what possible crimes are being investigated, is not clear.

Persons was ordered by the Washington grand jury to produce documents going back more than eight years, including all letters, e-mails and other documents involving Ted, his wife, Catherine, or Ben Stevens. Specifically mentioned were records about a race horse partnership, Alaska's Great Eagle, he manages for Ted Stevens, Allen, Allen's son Mark, Penney and others.

But the main focus was clearly on the Girdwood addition. Persons was directed to produce blueprints and other plans, photos and purchase and installation documents for all phases of the project, including the heating system, generators, ice-melt systems and decorative lights. His summons also told him to bring invoices, payments and other documents related to several Veco employees and to the main contractor, Augie Paone of Christensen Builders in Anchorage.

Persons' didn't return a call for comment last week.

In a brief interview May 18, a week after he received his subpoena and one week before his date with the grand jury, Persons acknowledged he would be testifying, but didn't say where or in what setting.

STEVENS GOES TO FRANCE

Stevens left for France on Thursday to be President Bush's official representative to the Paris Air Show. His spokesman, Aaron Saunders, said that in any event Stevens and his wife would continue to refrain from commenting on the investigation.

FBI spokesman Eric Gonzalez also declined to comment.

Penney would not discuss his testimony.

"All that stuff is confidential," he said from his home in Soldotna. Penney and Stevens are longtime friends and business associates. Every summer for more than a decade, Stevens and Penney bring VIPs to Alaska for the Kenai River Classic, a king salmon tournament that raises money for fish habitat.

Penney's attorney, Bruce Gagnon, said of Penney's appearance before the grand jury: "I think you know as well as I do what they're interested in." Asked whether that was Ted Stevens and Ben Stevens, Gagnon said, "Yeah, yeah."

"And why are they going off in Washington, D.C., as well as here?" Gagnon wondered out loud. "It may well be because they want to try this case back there."

Gagnon said he only knew of one witness -- Persons -- who had been called before the Washington grand jury.

In the face of two years of video surveillance of his company's suite in Juneau's Baranof Hotel and wiretaps on his telephones, Allen pleaded guilty in May to conspiracy, bribing legislators and violating tax laws. Smith, a fixture in that suite, also pleaded guilty. They face about 10 years in prison but hope to reduce their time by cooperating with prosecutors. Their sentencings have not been scheduled.

ALLUDING TO BEN STEVENS

The charging documents against Allen and Smith contained barely veiled references to Ben Stevens, alleging that "State Senator B" accepted $243,250 in phony "consulting" payments from Veco in exchange for advice, lobbying colleagues and taking official acts. Ben Stevens' legislative disclosures say he received that amount of money from Veco for consulting. But nothing in those documents appeared to refer to Ted Stevens. However, a seemingly out of place sentence in a paragraph on Veco described the company's activities: "Veco was not in the business of residential construction or remodeling."

In interviews with the Daily News in May, Paone said he was hired by Allen to complete the framing and other carpentry on the addition. He said he submitted more than $100,000 in invoices for the job to Veco. After Veco approved the invoices, he received a check in the mail from the Stevenses that appeared to have been written on a new account -- all the check numbers were in single or double digits.

Stevens' home sits about two blocks from the day lodge parking lot at the Alyeska ski area. It was a single story building until the expansion, when a house mover from Anchorage, Tony Hannah, jacked it up so a new living area could be inserted under the original house. A garage was also built.

Paone said he testified before a federal grand jury in Anchorage in December.

Last month, Stevens' office issued this statement about the investigation: "While I understand the public's interest in the ongoing federal investigation, it has been my long-standing policy to not comment on such matters. Therefore, I will withhold comment at this time to avoid even the appearance that I might influence this investigation."

ROLE OF GRAND JURIES

Legal experts in corruption cases said that while it's unusual for prosecutors to use grand juries in separate jurisdictions in an investigation, they may have sound reasons. The experts also cautioned that even though prosecutors may be presenting evidence to a grand jury, that doesn't mean crimes have been committed.

Paul Butler, a law professor at George Washington University and a former federal attorney who prosecuted a U.S. senator and several FBI agents, said it could simply be a matter of convenience for witnesses.

Jules Epstein, a law professor at the Widener University School of Law in Wilmington, Del., and a criminal defense lawyer, said the grand juries could be investigating separate, unlinked crimes.

Peter Henning, a law professor at Wayne State University in Detroit, said prosecutors might bring a case against a popular elected official in Washington to avoid being "home-courted."

Prosecutors don't take an investigation into a sitting member of Congress lightly, Butler said. They almost certainly must get the approval of the attorney general, he said.

Find Richard Mauer online at adn.com/contact/rmauer or call 257-4345.

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Potential threat to pipeline exposed by soccer mom
East Coast man charged in plot goes to trial
By KEVIN DIAZ
kdiaz@adn.com
Published: June 17, 2007
Last Modified: June 17, 2007 at 07:22 AM

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Rossmiller describes her personal jihad
http://www.adn.com/static/images/pdf/bomber/Rossmiller_ArticleReynolds_Terror_Indictment_10-4-06.pdf
Pennsylvania arrest

WASHINGTON -- Michael Curtis Reynolds, accused of plotting to blow up the trans-Alaska pipeline and headed to trial in Pennsylvania, claims he was actually a patriotic American trolling for terrorists on the Internet.

So was the Montana soccer mom whose cyber-spy moonlighting led to Reynolds' arrest two years ago during a clandestine money drop along a deserted highway outside Pocatello, Idaho.

Their online meetings in October 2005 sparked an elaborate FBI sting that will culminate in Reynolds' trial July 9 in a federal courtroom in Scranton. That's not far from Wilkes-Barre, where the 49-year-old jack-of-all-trades lived with his mother -- and reportedly boasted of connections to al-Qaida.

Reynolds' case is among a series of alleged plots involving home-grown jihadists -- some of questionable means and ability -- since the Sept. 11, 2001, terrorist attacks.

But terrorism experts say they can't take anything for granted.

"You have to take every one of these seriously," said Neil Livingstone, a Washington-based security consultant who has studied the Alaska pipeline. "Some are just 'fantasists.' Some are wanna-bes. Most never get there. But the problem is you can have someone like the Unabomber (convicted Montana bomber Ted Kaczynski)."

Reynolds' case in particular has brought renewed attention to the 800-mile-long pipeline, the target of several amateur attacks since it started carrying North Slope oil 30 years ago this month.

It also underscores the stakes in the debate in Congress over energy security, efficiency and shoring up domestic production to reduce American dependence on foreign oil.

Reynolds' mustachioed mug shot adds a new face to the threat of domestic terrorism.

The risks of a post-9/11 world have been underscored in recent months by the arrests of four Muslims from the Caribbean charged in a plot to sabotage fuel supplies at New York's Kennedy Airport, as well as six others arrested on charges of plotting to attack the Fort Dix Army base in New Jersey. Those cases followed last year's arrests of seven men in Florida accused of planning to attack the Sears Tower in Chicago.

Reynolds' purported scheme, like many of the others, never came close to really happening.

Thomas Marino, U.S. attorney for the middle district of Pennsylvania, issued a statement praising the FBI for intervening early and stopping Reynolds from "following through" with his plans, which Marino said included sabotage of a number of U.S. energy installations besides the pipeline.

Reynolds, who has dismissed several court-appointed attorneys, is representing himself at his trial. In a handwritten letter to U.S. District Judge Edwin Kosik, Reynolds accused Justice Department officials of fabricating evidence against him for political gain.

"Don't think for a minute that I would permit this court to railroad me for publicity," he wrote. "I won't be convicted no matter what laws you break. Give it up; send me home now. You yourself know for a fact that I will embarrass the FBI and I've already won."

Justice officials and Reynolds' court-appointed stand-in attorney, Joseph O'Brien, declined to comment, citing a gag order by the judge.

The case against Reynolds will rely in great part on the testimony of Shannen Rossmiller, a 38-year-old mother of three who turned out to be the fake al-Qaida online contact who arranged to give Reynolds $40,000 at a rest stop on Idaho's Interstate 15.

Rossmiller, a former Montana municipal judge, has made a name for herself as an online chameleon trolling Muslim Web sites and Internet chat rooms at night -- primarily in Arabic -- for would-be terrorist plotters and schemers.

Federal law enforcement officials decline to discuss her publicly, but they have shown an interest in her work before.

She first came to light in 2004, when her testimony helped convict Spc. Ryan Anderson, a National Guardsman at Fort Lewis, Wash., whom she spotted on an Arabic Internet forum shortly before he was slated for deployment to Iraq.

In an interview with McClatchy Newspapers, Rossmiller described herself as an all-American mother whose patriotism shifted into overdrive after 9/11.

"I felt the same emotion as many other Americans," she said. "I was always patriotic. But I didn't realize until 9/11 how important it was."

She devoted herself to learning Arabic and visiting jihadist Web sites. "It was just fascinating what I was looking at and reading," she said.

But it was on an English-language Yahoo chat group called OBLcrew (Osama Bin Laden Crew) that Rossmiller says she encountered Reynolds. He was using the moniker "Fritz Mueller."

Reynolds later told authorities he was doing the same thing as Rossmiller -- trying to smoke out terrorists.

A six-count federal indictment paints a different picture. Based partly on Reynolds' Internet communications with Rossmiller, officials charge he tried to retrieve $40,000 "that he believed constituted payment from al-Qaida in exchange for his services."

Those services allegedly included recruiting al-Qaida "crews" to strike at gas pipelines in Alaska, Pennsylvania, New Jersey and Wyoming.

Part of Reynolds' motivation, according to an e-mail he sent Rossmiller, was to undermine one of President Bush's frequent justifications for the war in Iraq: "The fuel is here, hes hanging on to the press backing him on the claim that since he waged war, no terrorist attacks have been successful, hence the war is just."

Reynolds was staying at the Thunderbird Hotel in Pocatello on Dec. 5, 2005, when he was arrested at the intended highway rendezvous outside of town. He's been in jail ever since.

Neither Rossmiller nor federal officials will say whether Reynolds ever got to Alaska. "That will come out in court," Rossmiller said.

There is evidence that he traveled to Thailand and Australia, though it's unclear why.

Richard Danise, Reynolds' former father-in-law, was once quoted by the Philadelphia Inquirer calling him a "John Wayne wanna-be."

Rossmiller said it's not her job to assess whether Reynolds posed a threat.

"It's not my place to judge that, or I'd be acting like a vigilante -- judge, jury and prosecutor," she said. "The guy might not have a full deck, but he's got the means available to him. He can act on his emotions."

Reynolds has a record of violence, including a 1978 conviction for attempted arson, apparently part of a feud with his parents. Also among the pending charges against him: illegal possession of hand grenades.

Despite questions about his mental health, he was found competent to stand trial this year.

Meanwhile, Alaska pipeline officials remain on guard, mindful of an unsolved intentional explosion in 1978 near Fairbanks, as well as a 2001 incident in which a drunken gunman shot a hole into the pipeline near Livengood.

"We are aware that we are a major energy infrastructure," said Mike Heatwole, a spokesman for the Alyeska Pipeline Service Co., which operates and maintains the pipeline. "We work closely with all the homeland security agencies."

Find Kevin Diaz at kdiaz@mcclatchydc.com.

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http://www.adn.com/money/story/9006637p-8922086c.html

CH2M Hill, Veco agree to terms
DEAL: Colorado-based company sees chance for growth in energy sector.
By DON HUNTER
dhunter@adn.com
Published: June 17, 2007
Last Modified: June 17, 2007 at 03:18 AM

A month of negotiations produced an agreement this weekend for Colorado-based CH2M Hill to acquire the Alaska oil field services and construction company Veco Corp. for about $365 million, spokesmen for the companies said Saturday.

The talks began in mid-May, a little more than a week after Veco's former chief executive, Bill Allen, and former vice president Rick Smith pleaded guilty to federal conspiracy and bribery charges in an ongoing political corruption investigation in Alaska.

The $365 million purchase price covers core assets, projects and people, CH2M Hill spokesman John Corsi said in a telephone interview from Denver on Saturday. The overall value of Veco was put at $463 million, including some real estate and other assets CH2M Hill will not be acquiring, Corsi said.

Additional details remain to be worked out. Corsi said the acquisition should be finalized in August.

"But we've reached agreement," he said. "The terms of the acquisition have been agreed upon."

Corsi and Tim Woolston, a spokesman for Veco, said the purchase will benefit employees of both companies.

Veco has about 4,700 employees working in oil fields and construction jobs in several countries. CH2M Hill, an employee-owned company, has about 19,000 workers engaged in engineering, construction, transportation and environmental services projects around the world and annual revenues of about $4.5 billion, Corsi said.

"When I say we're global, the only continent where we're not serving clients right now is Antarctica," he said,.

Still, Corsi added, "We think the Veco acquisition improves our geographic footprint," particularly in the energy industry.

Corsi described CH2M Hill as a company "with a stellar reputation." He said the company is not concerned that the federal investigation swirling around Allen, Veco's founder, will carry a shadow.

"Absolutely not," he said. "We feel this issue is isolated to a few key people at the top. ... What attracts us to Veco is the quality of the work force -- we think it's top-notch."

One of the outstanding issues is whether Veco will retain its name, Woolston and Corsi said.

In a press release issued Saturday, Tammy Kerrigan, Veco's chairwoman, called the deal "a wonderful outcome for Veco," adding that the pairing of the companies is "a natural fit for our business and work force."

Lee McIntire, president and chief operating officer of CH2M Hill, said in the same written statement that the merging of the companies brings together skills "that will benefit our clients and the communities we serve."

Find Don Hunter online at adn.com/contact/dhunter or call 257-4349.

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http://www.adn.com/outdoors/story/9011307p-8926775c.html

Kittiwake-up call in Prince William Sound
Shoup Bay serenity broken only by seabirds' conversation
By MELISSA DeVAUGHN
mdevaughn@adn.com
Published: June 17, 2007
Last Modified: June 17, 2007 at 05:15 AM

PRINCE WILLIAM SOUND -- The first thing we noticed as we motored into Shoup Bay State Marine Park was the noise. The cacophony of black-legged kittiwake chatter was so loud we had to yell to each other, just an arm's length away, to be heard.

"Wow! That's a lot of birds," I said to Andy, stating the obvious as thousands of white-bodied seabirds buzzed overhead, landed on the water or circled on a nearby rock islet splattered with their droppings.

At an estimated 20,000 birds, Shoup Bay is one of the largest black-legged kittiwake rookeries in Prince William Sound and one of the fastest growing, despite a recent downturn in fledging success. There are also about 3,000 glaucous-winged gulls, as well as eagles, arctic terns and several species of waterfowl.

And the birds seem busy all the time.

It was one of the unexpected treats of our four-night family kayaking trip to this small marine state park, tucked into a shallow bay some five miles southwest from the port of Valdez. The C-shaped bay leads to the rapidly receding Shoup Glacier, which calved thunderously on several occasions during our stay.

In fact, Shoup Bay is a study in sensory overload -- the ongoing bird concert, the pervading scent of seawater and the shocking sensation of the cold water on bathing-suit clad bodies.

Even when the sun dipped behind a thick blanket of fog and that familiar Prince William Sound rain came, we were undaunted. We simply added another layer of clothing, slipped on some gloves and paddled on.

A ROUGH LIFE

Shoup Bay State Marine Park is perhaps best known for a reported 150-foot tidal wave, which supposedly surged in and out of the bay three times during the 1964 earthquake. In a photograph reprinted in "8.6 --The Great Alaska Earthquake," the U.S. Geological Survey documented spruce trees in Shoup Bay with a diameter of 2 feet that were snapped like matchsticks by waves as high as 101 feet above the low-water mark.

Since then, the bay is a different place, serene despite the unending kittiwake chaos. Surrounded by mountains spilling over with waterfalls and a glacier that calves at all hours, the area is a kayaker's dream. The water is tame, and paddling alongside the shoreline offers a chance to see Alaska wildlife up close.

One afternoon, Colleen Mueller and I decided to take one of our rented double kayaks to the far end of the bay while our children and the other adults stayed behind at the Kittiwake and Moraine public-use cabins, stoking the fire that warmed the water for the homemade portable hot tub that had been brought along.

As we passed the kittiwake rookery, the birds gave us no notice, busily flying to and from their perches with twigs, mud and other debris for their cliffside nests. Birds stamped on their nests with sticklike legs, patting them down perfectly in preparation for the eggs that would soon arrive.

Earthwatch biologists living in field camps nearby said the first kittiwake egg showed up on May 21, three days prior to our arrival. That was a whole week and a half earlier than the year before, when the first egg was spotted on June 1.

The birds were indeed busy, and we floated by without paddling, just watching the birds do what birds do. What a seemingly simple, single-minded life they must have with no care other than to raise a chick. With at least 9,000 nesting pairs of birds, one might expect this rookery to grow exponentially.

But that is not the case.

Aly McKnight, principal investigator for the Shoup Bay Earthwatch project, noted that in 2004, fewer than 40 kittiwakes fledged. In 2006, the number was down to 26.

The number is staggering. Researchers blame three juvenile eagles as well as other predatory birds for ransacking the nests, helping decimate the population.

On another day, Colleen and I, steering with our children in the front seats of our respective kayaks, looked up at the mountainsides and noticed a white patch that at first looked like snow.

Upon closer examination through binoculars, though, it turned out to be a mountain goat perched on the impossibly steep slope. McKnight said she's been coming to the field camp for years and had never seen a goat before.

UNUSUAL PASTIMES

Paddling around the rookery on another morning, Colleen and I searched for icebergs small enough to haul ashore and use as ice in our drinks and coolers.

While these icy behemoths can be dangerous, tipping unexpectedly and flipping a boat in a second, we were not intimidated. The pieces we sought out were driftwood size.

We found one such piece floating just beyond the rookery, and while I steered in the rear, Colleen called on her Iowa farm-girl skills to lasso the barbell-shaped ice chunk like a steer.

It was slippery business to work the lasso tightly. Then we had to paddle back to camp, no small task considering the ice seemed to weigh about as much as our combined body weight and kept clunking the boat like a playful porpoise.

Still, we managed to get our prize to shore, returning to camp as proud of our slab of ice as the men are when they come home with big, dead fish.

The men, meanwhile, concentrated their efforts on gathering firewood. Occasionally, they'd take Sam Dennis' Zodiac out to search various areas for dead and downed trees to avoid denuding the cabin area, which is more sensitive to overuse. They'd return hours later, laden with gnarled, graying wood, dried and primed for the fire.

They would then move on to the wood-chopping phase, splitting the chunks into manageable pieces so the fire would burn perfectly. Dennis, a longtime river runner with his wife, Liz Shen, and their children, is a bit of an innovator who's perfected the portable hot tub for camping trips such as ours.

A simple inflatable swimming pool is loaded with water. Then a large copper coil, from which two hoses are attached, is inserted into the fire.

A portable solar panel powers a pump that circulates the water through one hose into the coils through the fire and back out the other hose into the "tub." Presto: A bayside hot tub.

That is when the bathing suits came out, and the idea of swimming in Shoup Bay did not appear too crazy at all.

It started with the children, who spent a large portion of their time piled into the hot tub. As the water heated, their little Alaska bodies couldn't take the heat. On the first night, it was 8-year-old Olivia Mueller, the daredevil among them, who declared that she was going swimming.

The others said she was crazy -- no way were they getting into that blue-gray ice water. Have fun, they said. Then, their eyes got big as Olivia stood up, walked down the rocky beach in bare feet and dove right in. To prove her point, she swam around a little with an impish grin, saying, "See? It's not bad."

Then she marched back out and plopped into the hot tub next to Carly Dennis, who decided maybe she'd try it too. Within minutes, they were all out of the steaming hot tub -- even the 6-year-olds -- and slipping into Shoup Bay as if they were at a summer lake in the Midwest, cooling off.

This became an obsession among the kids, seeing who would run in and out of the water the most. They transformed Sam's Zodiac into a dock and jumped in over their heads. They played "I dare you" games, going in to their necks or dipping their heads for brief seconds. They seemed impervious to the cold, emboldened by their own sense of adventure.

We adults monitored from the campfire, wrapped in our fleece and flannel and wondering if we would be that brave (we were, but once was enough). Only in Alaska, we said to each other, proud that our children were able to have a good time no matter the circumstances.

THE MORE, THE MERRIER

Shoup Bay is an ideal family trip because the two public-use cabins, about 600 yards apart and separated by new-growth alder and spruce, create a haven from the often-rainy Sound. Each can sleep up to eight -- or more, if they are child-sized.

Our three-family expedition consisted of six adults and seven children all under the age of 10. Five slept in one cabin, while the other eight camped in the second. Two families arrived in their own small boats. Another paid passage on a local water taxi and were brought right to the cabin.

We had four double kayaks between us, and we took turns going out into the bay to explore. Just off the lagoon where we tied off Sam's Zodiac and anchored our own wooden dory, we set up a small tent to keep things dry when the rain occasionally passed through. But for the most part, the Prince William Sound weather remained calm and partly sunny, bringing in just enough clouds to keep us in long sleeves and pants.

The day before we were to leave, we decided to make the trek out to the glacier. From the lagoon it looks only minutes away, but in reality it takes about an hour to reach the other end. Colleen, Andy and I steered while three of the kids sat up front, occasionally dipping their paddles and helping out, but for the most part enjoying the scenery and dragging their hands in the water.

Once again we paddled around the rookery and then slipped in alongside the shoreline to get out of a growing but gentle wind. Liz had noticed earlier in the week the steady stream of kittiwakes flying in and out of the bay, making a beeline with nest materials. "Kittiwake highway," she called it, and McKnight confirmed that's essentially what it is. The birds zone in on where the best nesting material is and they go back and forth, transporting it to their nests.

On this day, a new kittiwake highway seemed to have developed, following our course to a nondescript bare patch of rock along the mountainside. It looked no different than its surroundings, but for some reason it had become the new nest-materials gathering site for the birds. We watched them come and go, their beaks overflowing.

About a quarter mile beyond that site, as the sounds of the birds faded and we were lulled with the slap-slap of our paddles against the water, Colleen pointed to a smaller, less frantic-looking rookery of about 50 kittiwakes, who had inexplicably chosen this rock outcropping instead of the massive one a half-mile back.

"Look, that's the small town outside the city," she said of the rookery, and in my mind I thought to the kittiwakes, "Yes, that is where I would prefer to live if I were one of you."

A CHANGING FACE

Shoup Glacier is, of course, the crowning jewel of the bay. About a quarter-mile from its face, we pulled our kayaks onto a rocky outcropping filled with slimy glacial silt. We piled on the rocks like sea lions and spread before us all the leftovers of the past four days of feasting: pistachios, granola bars, sandwiches, apples and a bag of potato chips that the Muellers had miraculously kept from crushing.

The kids ate ravenously -- the fresh air and activity kept their tanks constantly on empty. Then, quick as that, they were gone, scrambling over the rocks like the mountain goat we had seen earlier in the week.

Find Melissa DeVaughn online at adn.com/contact/mdevaughn or call 257-4482.

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Valdez offers three state marine parks where tent and cabin camping is available. Sawmill Bay, Shoup Bay and Jack Bay marine parks offer a variety of recreational opportunities. Shoup Bay is the only one accessible by trail.

A fourth park, the Shoup Glacier Marine State Park, is tucked behind Shoup Bay and undeveloped.

• Sawmill Bay: The peaceful forest-ringed bay, 15 miles from Valdez and three miles southwest of Valdez Narrows, offers protected anchorages and two tent platforms for camping.

• Jack Bay: For island camping with tent platforms and a fair-weather anchorage, this marine park, 15 miles from Valdez, southeast of Valdez Narrows, is excellent.

• Shoup Bay, closest of the three parks, is only five miles from the Valdez port. It has tent platforms for camping as well as three public-use cabins. McAllister Cabin is at the head of the bay. Kittiwake and Moraine cabins, about 600 yards apart, are off a rocky beach within the lagoon. The lagoon is accessible on most high tides by small, shallow-draft boats.

For information, contact the Kenai-Prince William Sound Area Office at 1-907-262-5581 or go to www.alaskastateparks.org to reserve a cabin. Contrary to the Web site information, the Moraine cabin is available for rent -- not reserved for the U.S. Fish and Wildlife Service, as stated.

Access to Shoup Bay is via the 11-mile Shoup Bay Trail, which suffered flood damage in October 2006 and was considered impassable at the time. We met a hiker who reached Shoup Bay from the trail in late May.

Alternate access is via boat. One family in our group used water taxi services available through Pangaea Adventures, which also rents kayaks and guides tours. Other options include the longtime company Kimberlin's Water Taxi ( www.kimberlinswatertaxi.com , 1-907-835-8294), which also offers tours in the area; and Anadyr Adventures ( www.anadyradventures.com , 1-907-835-2814), which features an all-day Shoup Glacier kayak trip and kayak rentals.

Other information on visitor services is available at the Valdez Convention and Visitors Bureau, 1-907-835-4636, www.valdezalaska.org .

-- Melissa DeVaughn

Houston Chronicle
June 15, 2007

http://www.chron.com/disp/story.mpl/front/4892125.html

It's all about safety, new BP chief says
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

New BP CEO Tony Hayward asserts that his company shines when it comes to finding oil and gas or amassing an impressive portfolio of energy assets.

Operations are another story. An explosion at its Texas City refinery killed 15 people. A corroded pipeline allowed oil to spill at the nation's largest oil field in Alaska. And design and operational problems have delayed getting key Gulf of Mexico oil platforms up and running.

In his first media interview since taking BP's helm six weeks ago, Hayward said he is committed to improved safety, a culture in which all concerned voices are heard and making good on promises of improved performance.

"The task is to restore confidence. It has obviously been a pretty challenging couple of years at BP," Hayward said in an interview at BP's U.S. base in Houston.

"You earn your reputation through performance, through being clear about what you're going to do and then doing it," he said.

Composed and confident, with an open-neck pink-striped shirt at the complex where few wear ties, the 50-year-old geologist outlined his vision for the London-based oil giant.

Abrupt resignation

Formerly head of BP's exploration and production unit, Hayward was announced as former CEO John Browne's successor in January, when Browne moved up his retirement by more than a year to July.
Instead, Hayward took the post last month when Browne abruptly resigned after acknowledging that he had lied to a British court about where he met a former companion.

Hayward said BP has learned from its mistakes and has embraced an extensive report from an investigative panel headed by former Secretary of State James Baker III as a road map for righting safety wrongs at U.S. refineries.

The company also aims to ensure that employees have the right skills to do their jobs and that operations that are down are restored, including half of the Texas City plant's capacity.

Investors and the Texas City community have heard such promises already. Robert Kessler, an analyst with Simmons & Co. International, said he's watching for action, not words.

"The jury is still out in the BP story from an execution standpoint," Kessler said. "We just need to see good intentions translate into results for the company."

Hayward said improvement efforts could take up to five years. But the Baker panel's report, which he called a "real gift for BP," can guide the company in setting a new benchmark for industrial safety.

He declined to comment on an ongoing criminal investigation by a federal grand jury in Houston related to the Texas City blast.

Hayward visited the Texas City facility last month and spoke to workers as he walked around the plant for several hours. "They really do think a lot has changed," he said.

But last week's electrocution of a contractor at the plant was a "vivid and tragic reminder" of how far BP has to go to improve safety in work that is inherently dangerous, Hayward said.

"It's the refining industry, so what?" he said. "We have to have a work environment where people don't get injured or killed, period."

The Baker panel's recommendations focused on improving process safety proper operation of equipment and handling of hazardous materials.

It found that before the 2005 blast, BP focused more on personal safety prevention of incidents like slips and falls.

Independent monitoring

As a result, BP gained false confidence about its process safety, the panel said, though it found no evidence that BP intentionally ignored operational safety.
"I think it's a mandate for change for me," Hayward said of the Baker report. "And we've taken it and we're going to implement it."

Last month BP took a first step the panel recommended, appointing an independent monitor to oversee other improvements. The monitor, Duane Wilson, is a retired vice president of refining, marketing, supply and transportation for ConocoPhillips, who also served on the panel.

The U.S. Chemical Safety and Hazard Investigation Board reached harsher conclusions after an exhaustive two-year investigation into the Texas City blast. Its investigators said budget cuts imposed in the years before the blast reduced attention to safety and laid the foundation for the tragedy.

Hayward acknowledged BP and its peers cut costs in the late 1990s and in the early part of this decade to combat low oil prices and sagging refining margins.

But he reiterated the company's position that no link exists between the cuts and the Texas City blast or the oil spill at Prudhoe Bay on Alaska's North Slope.

"We spent a lot of time looking at that and there is no way you can say there is a direct correlation," he said.

Dan Horowitz, spokesman for the Safety and Hazard Investigation Board, said investigators stand by their report.

"There was a clear linkage between budget cuts and inadequate investment and the serious safety lapses in Texas City," he said.

While Hayward disagrees with that finding, he said cutbacks in skilled engineers and other professionals in the same time period did lead to BP's problems with Thunder Horse, its ambitious oil platform.

Originally slated to begin producing up to 250,000 barrels per day more than any other Gulf structure in 2005, the platform has faced repeated delays.

Two of its four pontoons took on water during Hurricane Dennis in 2005, then corrosion problems on equipment at the sea bed pushed production to 2008.

Hayward noted that Thunder Horse, in 6,000 feet of water, was the highest pressure, highest temperature development undertaken in the deepwater Gulf when BP tackled it.

In hindsight, he said BP lacked engineering capacity to handle its scale and complexity.

"We set off on what was, for the oil industry, putting a man on the moon without really the engineering underpinning to achieve that. I think if you step all the way back, you'd say that's the real root cause of all the issues we've had at Thunder Horse," he said.

2nd platform delayed

The problems prompted BP to hold back on rushing Atlantis, its 200,000-barrel-a day platform in 7,000 feet of water, into production this summer. It is now slated to begin operation by year's end.
A key Thunder Horse lesson is the need to maintain engineering skill through down cycles of low oil prices and refining margins not just when prices are high, as they are now, Hayward said.

Hayward said BP also is intent on restoring the Texas City refinery to full capacity.

Texas City, which can process 460,000 barrels a day, is at half capacity amid ongoing repairs and restarts after Hurricane Rita prompted its first complete shutdown in 40 years.

"They still have an enormous task to complete. We are rebuilding a refinery piece by piece," Hayward said.

kristen.hays@chron.com

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http://www.chron.com/disp/story.mpl/business/steffy/4891625.html

New boss has plenty to do to repair BP's image
By LOREN STEFFY
Copyright 2007 Houston Chronicle

The numbers show the magnitude of what BP still needs to do at its Texas City refinery.

You can see it in the statistics that show the fatality rate has accelerated in recent years. Twenty-three workers died there in the 30 years prior to the March 2005 explosion at the refinery. Seventeen workers have died since then, including the 15 killed in the blast, which also injured 500.

You can see it in the dire warning, revealed in an internal BP document from 2005, that predicted another BP worker would die at Texas City in 12 to 18 months. One died 15 months after the 2005 explosion.

Another died 11 months after that just last week when a worker was electrocuted at the refinery.

"It was a vivid and tragic reminder that we still have a very long way to go," Tony Hayward said Thursday in his first interview since becoming BP's chief executive six weeks ago. "I'm not worried about the image. I'm actually worried about the guy who died."

BP, though, is a company fighting for its image as much as for its operational improvements. It's a company that's investing $8 billion in alternative fuels, reducing carbon emissions and generally promoting an environmentally friendly agenda. That green image is at odds with failings that include the fatal Texas City explosion, leaking pipelines in Alaska, and the pictures of the listing Thunder Horse platform in the Gulf of Mexico.

Thunder Horse's problems were related to engineering, not safety. I mention them because Hayward did, as a lesson in how cutbacks can hurt future performance.

The platform, 150 miles southeast of New Orleans and in 6,000 feet of water, is among the most ambitious offshore projects ever undertaken. Hayward likened it to the energy industry's equivalent of a moon shot.

But it was more Apollo 13 than Apollo 11.

Thunder Horse, which weighs almost 60,000 tons, was scheduled to begin production in 2005. That same year, after the crew left the platform ahead of Hurricane Dennis, two of the platform's four pontoons took on water, causing it to list 20 degrees. Repairs cost $100 million. The platform also has been plagued by corrosion problems that have delayed production into next year.

Handling a project of that magnitude, Hayward said, requires extensive engineering expertise that BP lacked. During the lean years of the late 1990s, when oil prices fell below $11 a barrel and refining margins grew as tight as 2 percent, BP, like many companies, pared staff to save money.

"People sort of forget how tough times were," Hayward said. "If you wanted to survive you couldn't carry lots of engineers. If you step all the way back, you'd say that's the real root cause of all the issues we've had at Thunder Horse."

The lesson applies not just to engineering, but also to refinery safety. And to pipeline maintenance.

In a scathing report released in March, the Chemical Safety and Hazard Investigation Board found cost-cutting undermined safety programs and training at Texas City and delayed the installation of equipment
that might have prevented the blast.

During the tough times, BP remained profitable on an annual basis, but it appears profitability came at the expense of lives, safety and future investment.

Hayward doesn't agree with that conclusion.

"We can't find any direct linkage," Hayward said. "Everything that we can find suggests that the budget cuts per se did not contribute to either the tragedy at Texas City or the spill in Alaska."

While he can't find the linkage, Hayward doesn't gloss over BP's shortcomings. He lauds a report released in January by an independent panel chaired by former Secretary of State James A. Baker III that criticized BP's safety programs but stopped short of blaming cost cutting.

Hayward called it "a mandate for change."

But the Chemical Safety Board report is, too. It shows a company that lost sight of how cost pressures affected operations. It shows a company whose workers' safety, indeed their very lives, ultimately depended on high oil prices.

Hayward's leadership represents a new era at BP, a commitment to listening to worker concerns, to improving the company's operational shortcomings.

"You build your reputation through performance," Hayward said. "It's pretty clear, for a couple of years now, in the matter of our core operations in the U.S., our performance has not been adequate."

You can look at the numbers and see how much work still needs to be done.

loren.steffy@chron.com

Financial Times
June 12, 2007

http://www.chron.com/disp/story.mpl/business/energy/4881452.html

OSHA steps up refinery oversight
Inspectors will see how 81 facilities follow federal process safety rules
By DAVID IVANOVICH and BRETT CLANTON
Copyright 2007 Houston Chronicle

BP's Manzoni: Serious concerns at Texas City came as surprise WASHINGTON Nearly 300 federal safety inspectors will fan out to refineries across the country over the next two years as part of a stepped-up enforcement program prompted by the BP Texas City blast and other deadly refinery accidents.

Noting that 52 refinery workers have died and another 250 have been injured over the last 15 years because of accidental hazardous chemical releases, the Occupational Safety and Health Administration is training inspectors to examine procedures at 81 different facilities, about half the nation's refineries, federal and industry officials said.

"By initiating this program, we are taking positive steps forward to maximize the protection of employees and are working to eliminate workplace hazards at petroleum refineries," Assistant Labor Secretary Edwin Foulke Jr. said in a prepared statement.

The inspectors will examine how well refineries abide by federal process safety rules put in place in 1992, in response to the Phillips 66 Co. blast in Pasadena in 1989 that killed 23 and the Arco Chemical plant tank explosion in Channelview that killed 17.

"OSHA has typically found that these employers have extensive written documentation related to process safety management, but the implementation of the written documentation has been inadequate," the agency said in a directive.

Two to four inspectors will visit a refinery and remain on site for several weeks, said Ron Chittim, the American Petroleum Institute's senior refining associate, who was briefed on the program recently.

Inspectors will come armed with questions refiners must be prepared to answer regarding their handling of hazardous chemicals. While refiners will know most of the questions the inspectors will be asking, they will also face a number of what Chittim calls "pop quiz questions."

In advocating the new national enforcement program, OSHA officials cited the March 2005 Texas City blast that killed 15 and injured scores.

In that accident, as workers were starting up an isomerization unit, hydrocarbon liquids and vapors were released into the atmosphere.

A vapor cloud formed and then ignited. The workers killed in that blast were in or near trailers used as temporary offices, which shattered in the explosion.

The American Petroleum Institute plans to issue new recommended practices for siting trailers by month's end.

OSHA regulates 101 refineries nationwide. Twenty of those already are in voluntary safety programs and would be exempt from the new program.

Last year, OSHA's Dallas region, which includes the Texas and Louisiana Gulf Coast, started a regional enforcement effort, but the national program will take precedence, Labor Department officials say.

The remaining refiners in the country are regulated by state authorities. OSHA officials hope states will launch similar programs to inspect those facilities as well.

Carolyn Merritt, chairwoman of the U.S. Chemical Safety and Hazard Investigation Board, said she is happy OSHA is launching this new enforcement effort but wishes it had been undertaken years ago.

"Look at what it would have saved," she said.

BP's Texas City and Toledo, Ohio, refineries have undergone extensive inspection programs under federal regulators' watch, while Indiana inspectors have examined the company's Whiting, Ind., facility, company spokesman Scott Dean said.

Refiners contacted Monday voiced support for the program.

"Nothing is more important to our company than the safety and health of our employees, our contractors and the people who live and work around our operations," said Prem Nair, spokeswoman for Exxon Mobil's downstream operations.

Valero Corp. spokesman Bill Day said that company supports "anything that can improve safety at refineries," and Citgo spokesman Fernando Garay said the program will "improve upon the efforts made by the industry as a whole to ensure a safe working environment."

Brent Coon, a Beaumont attorney representing victims of the Texas City blast, was less sanguine.

He said the first question an inspector should ask when entering a refinery is, "Where's your emergency exit?"

david.ivanovich@chron.com

brett.clanton@chron.com

David Ivanovich reported from Washington and Brett Clanton reported from Houston.

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http://www.chron.com/disp/story.mpl/business/4881349.html

Serious concerns came as surprise
A BP leader said he was not 'aware' risks were catastrophic
By KRISTEN HAYS
Copyright 2007 Houston Chronicle

BP's Manzoni: Serious concerns at Texas City came as surprise BP's outgoing refining chief testified in a deposition last year that he first learned of serious safety concerns at the company's Texas City refinery in March 2005 when 15 people died in an explosion there, despite internal reports and warnings of potential danger.

"Before that, you had no idea that there was a risk of catastrophic injury?" Galveston plaintiffs' attorney Anthony Buzbee asked in the September 2006 deposition.

"No. I think had I been aware that we could have had a catastrophic failure, we would have taken action earlier, different action," John Manzoni replied.

"I run a business which has risks inherent in the running of that business. Certainly if there are risks that could lead to catastrophic failure, we've got to take action on those," he said.

Manzoni's deposition was among hundreds of pages of blast-related documents and depositions made public Monday under a Galveston judge's order.

The release came less than two weeks after Manzoni resigned as refining chief. He will stay through August for the handover to his successor, BP executive director Iain Conn, and then become head of Canadian exploration and production firm Talisman Energy.

BP spokesman Neil Chapman declined to comment on whether the imminent release of the documents played a role in Manzoni's departure.

But Brent Coon, who represents hundreds of workers and Texas City residents who have sued or are suing BP, said the company knew his deposition would be among those unveiled Monday.

"The court ruled on the matter before his resignation was announced, and the issue had been before the court for several months," Coon said.

In the deposition, Coon and Buzbee presented Manzoni with examples of how safety concerns had been expressed long before the blast.

In 2004, then-plant manager Don Parus commissioned an internal survey of workers and gave the report to management in January 2005.

Some workers surveyed said they felt pressured to bend safety rules; fixing things without shutting down operations earned rewards; and years of deferred maintenance had begun to take a toll.

Manzoni, who works at BP headquarters in London, testified he received the report of the survey as part of BP's inquiry into the March 2005 blast.

He also was shown a January 2005 business plan that stated among key risks, Texas City "kills someone in the next 12-18 months."

Manzoni said part of business planning was to articulate risks.

"It is not a prediction. It is a planning mechanism," he said.

Manzoni also insisted safety didn't suffer from budget cuts contrary to the findings of the U.S. Chemical Safety and Hazard Investigation Board in its investigation of the blast.

Manzoni conceded that BP demanded 25 percent cuts in spending in 1999. But he insisted that spending had increased annually since 2002 and critical safety items were fixed first, though lower managers complained of too-frequent fires, the lack of an alarm system and antiquated equipment.

"And if they are not being fixed?" Buzbee asked.

"We have a failure. We have a problem," Manzoni replied.

The documents contained notes of interviews with Texas City plant managers, including four whom an internal investigation recommended be fired for shortcomings in their management of plant safety.

The internal report by BP group vice president Wilhelm Bonse-Geuking, completed in February and made public last month, said a "culture of risk-taking" at the Texas City refinery contributed to the disaster.

It also criticized Manzoni, but did not recommend he be fired along with the other managers.

kristen.hays@chron.com

New York Times
June 8, 2007

http://www.nytimes.com/2007/06/08/us/08alaska.html?_r=1&oref=slogin

Bribery Investigation Looks at Senator Stevens
By WILLIAM YARDLEY

GIRDWOOD, Alaska The neighbors of Senator Ted Stevens occasionally catch a glimpse of him at his house in this ski resort outside Anchorage.

Sometimes he is flanked by aides and security. Sometimes he is relaxing on the deck. And sometimes he can be spotted pummeling a boxing bag like a prizefighter, staying tough even at age 83. Now, after nearly 40 years of winning legislative battles and unrivaled amounts of federal financing for his home state, Mr. Stevens may be girding for a fight like no other in his career.

Questions have arisen about the senator’s ties to a former Alaska oil industry executive and about renovations to Mr. Stevens’s home here as part of a wide-ranging public corruption inquiry in Alaska by the Department of Justice and the Federal Bureau of Investigation. The investigation has exposed improper links between an oil-field services company, VECO, and lawmakers in the State Legislature, including Mr. Stevens’s son, Ben, the former president of the State Senate.

The former executive, Bill J. Allen, who was the chief executive of VECO, pleaded guilty last month to bribery and other charges. Mr. Allen acknowledged then that the $243,250 that VECO paid to Ben Stevens from 2002 to 2006 for supposed consulting work while he was in the State Senate was instead to pay for “giving advice, lobbying colleagues and taking official acts in matters before the Legislature,” according to an outline of the plea.

Three former state lawmakers and one current one have been indicted. Ben Stevens has not been charged with a crime, but the investigation continues and appears to be expanding. Last week, investigators asked neighbors of Senator Ted Stevens in Girdwood what they knew about a major renovation of his house in 2000. According to the contractor who did most of the work, the project was largely overseen by Mr. Allen, although the senator and his wife, Catherine, wrote checks to pay the bills.

“It looks so bad,” the contractor, Augie Paone, said of the scrutiny of the senator. “But he just happens to be in a bad spot right now because Bill Allen is in a bad spot.”

The elder Mr. Stevens, a Republican, has strong ties to Mr. Allen. Along with several other men, they jointly bought a racehorse, So Long Birdie, and they sometimes dine together at the Double Musky Inn in Girdwood, a New Orleans-style restaurant owned by another member of the horse racing group, Bob Persons.

VECO has long been active in state and federal politics, and Mr. Allen was once forced to register as a lobbyist because he spent so much time at the Capitol in Juneau.

It is unclear whether Mr. Stevens’s actions are a central focus of the investigation or if they are under scrutiny for clues they might provide about the actions of others, including his son. A spokesman for the F.B.I. in Anchorage, Eric Gonzalez, declined to comment.

Mr. Stevens told The Washington Post this week that he had been told to preserve documents potentially related to the corruption inquiry, but it was not clear whether he had received those instructions from law enforcement officials or from his own lawyers. A spokesman for Mr. Stevens, Aaron Saunders, declined to comment.

The fact that the investigators are asking questions about Mr. Stevens has surprised many of his longtime supporters, and it has raised questions among some Democrats about whether he might be vulnerable as he seeks a seventh full term in 2008.

At a campaign kickoff event on May 30, Mr. Stevens suggested he was undaunted. “I really do at times feel like a warrior,” he told reporters in Fairbanks.

The next day, F.B.I. agents knocked on his neighbors’ doors here, according to two people who were questioned.

The senator’s home, his official residence in Alaska, is on a street with a mix of houses, some modest and quirky, others more substantial. The house originally had one story. In 2000, a contractor from Anchorage elevated the house on jacks so that a new first floor could be built beneath it, making the house two stories.

Mr. Paone, also from Anchorage, said he was contacted by VECO executives after the house had been elevated because local contractors could not complete the finishing work before Alaska’s short construction season ended.

In an interview, Mr. Paone said he had completed most of the carpentry work to convert the house to two stories, including installing framing, drywall and new kitchen cabinets. The remodeled house has 2,471 square feet of living area, with a taxable value of $420,900, according to property records.

Although he had been contacted by several VECO officials early on, Mr. Paone said Mr. Allen “kind of overtook” the project himself, largely because Mr. Stevens was usually in Washington.

“The way it was presented to me was, ‘I want you to help a friend of ours,’ ” Mr. Paone said.

Mr. Paone said he had been instructed to submit his invoices first to VECO, so they could be checked for accuracy, and then to the Stevenses in Washington. He said he had received checks from Washington on an account that had the names of the senator and his wife. He said he had charged about $100,000 for the work.

“I wasn’t trying to make a huge profit, but I made sure that if anything ever happened, it would be legitimate,” Mr. Paone said in an interview in his company’s offices. “The stuff I did for him was legitimate, and he paid me for everything that he got billed for.”

Mr. Paone said he had testified about his work on the house before a grand jury in the corruption case. He said his testimony had taken most of a day.

The broad federal investigation surfaced nearly a year ago and has ranged from Girdwood to Juneau to commercial fishing in the Northern Pacific. Last year, investigators ordered several commercial fishing companies to submit documents relating to Ben Stevens and Trevor McCabe, a former aide to the elder Mr. Stevens. Both men were on the board of a fisheries marketing group for which the senator has helped win tens of millions of federal dollars, and Ben Stevens, a former boat captain, has been paid thousands of dollars by fishing ventures for consulting work.

Mr. Stevens was appointed to office in 1968 and has won re-election ever since, usually with at least 70 percent of the vote. Some people suggest he may be keeping a low profile to avoid stirring more trouble for his son. Others say his silence is notable given his history of tangling head-on with critics who have long accused him of using Congress, and federal money, to benefit his family members and friends.

“Usually, when there’s an issue that’s come up, he’s out there fighting,” Mayor Mark Begich of Anchorage said of the senator. “That’s not happening on this one.”

Mr. Begich is a popular Democrat who said he has been contacted recently by national party leaders who want him to run against the senator next year. In a phone interview, Mr. Begich did not rule out a campaign against the senator or Representative Don Young, the state’s other longtime force in Washington, who has deep ties to VECO himself.

“Alaska has changed since the days they were elected,” Mr. Begich said. “People want very transparent, open government. The politics of pork is not the politics of the future in national politics. It’s all coming to a kind of screeching halt.”

Mr. Begich said scrutiny of the work on Mr. Stevens’s Girdwood house, first reported by The Anchorage Daily News, raised serious questions.

“In the past, usually, it was just that somebody didn’t like him or something he did, but this is different,” Mr. Begich said.

Jack Roderick, a Democrat who practiced law with Mr. Stevens in the 1960s and later became mayor of Anchorage, said Mr. Stevens had showed poor judgment at times in mixing friendships and family with politics. He cited the senator’s willingness to invest in the racehorse with Mr. Allen.

“That’s not a very good decision,” Mr. Roderick said. “Ted knew what Bill Allen was up to; everybody did. Everybody knew he was influencing the Legislature every chance he got. I mean, that’s what lobbyists do, but Bill Allen was overstepping bounds.”

VECO employees have given at least $625,000 to federal candidates and interest groups nationwide since 1990, according to the Center for Responsive Politics. They gave about $180,000 to Don Young and about $70,000 to Mr. Stevens in that period.

Tim McKeever, the treasurer of the senator’s 2008 campaign, said that since 2004 the campaign had received about $8,000 from Mr. Allen and another VECO executive who pleaded guilty to bribery and other charges last month, Richard L. Smith, but that the campaign was donating the money to a charity.

“We’re still going great guns, full steam ahead,” Mr. McKeever said of the campaign.

Several people who have been friends with the senator or followed his career for years said they were not aware of another time in which he had been touched directly by a criminal investigation. Many speculated that this one ultimately is not directed at him.

“They may be onto something, but my gut tells me they’re not going to find that Ted did something to benefit himself directly,” Mr. Roderick said. “There is a sense that something’s coming down for Ben, but I don’t think it’s going to be the senator.”

Ralph Samuels, a Republican who is the House majority leader in the State Legislature, said the questions about the work on the Girdwood house likely would raise concerns for some Alaskan voters but not enough to threaten their support for a senator who has served for all but 9 of the 48 years that Alaska has been part of the union.

“Our state would not be the same without Ted Stevens. We all know that,” Mr. Samuels said. “So I think everybody is going to say, ‘You’re going to have to do a whole lot more than what I’ve seen so far before I start casting doubts on Ted Stevens.’ ”

In Girdwood, across the street from the house the senator owns with his wife, F.B.I agents knocked on the door of Wayne Fuller, a 38-year-old paramedic. Mr. Fuller said agents had asked what he knew about renovations but that he did not live in the neighborhood when the work was completed.

“I told them I don’t know anything,” he said.

Julie Pederson, who lives next to Mr. Fuller, said agents had asked her what she knew about the renovations, how often she saw the senator and what she knew of his habits when he was in town. In an interview later, Ms. Pederson declined to share details of what she had told the agents.

Before the agents arrived, in an interview at her front door, she said Ben Stevens and his wife once spent long periods at the house in the summer. She said Mr. Stevens was a genial presence on the street, and she noted that her young children, like many other people in Alaska, refer to the senator as “Uncle Ted.”

David D. Kirkpatrick in Washington contributed reporting.

Anchorage Daily News
June 8, 2007

http://www.adn.com/news/politics/story/8958285p-8873848c.html

Kohring decision June 19
RESIGNING? The indicted legislator chooses a Chamber luncheon as the setting.
By STEVE QUINN
The Associated Press
Published: June 8, 2007
Last Modified: June 8, 2007 at 02:53 AM

JUNEAU -- An indicted member of the Alaska House said Thursday he may resign, but is reserving any announcement on his future until he can address voters in his home district.

State Rep. Vic Kohring said he has informed Gov. Sarah Palin that he may resign, and the Wasilla Republican will meet with House Speaker John Harris next Tuesday to discuss his options.

Those include "an agreeable transfer of responsibilities should I decide to resign," he said in a prepared statement.

Kohring said he will announce any decision at the Greater Wasilla Chamber of Commerce weekly luncheon on June 19, one week before the Legislature will hold a special session in Anchorage to review funding for the state's SeniorCare program.

"It's important for me to make the announcement before my constituents," he told The Associated Press. "To do that, it's best for it to be at the Wasilla Chamber of Commerce in front of a diverse group of folks."

Last month, Kohring and two former lawmakers were indicted on federal charges of bribery and extortion related in part to changes in the state's oil production tax passed in 2006.

Kohring was chairman of the House Oil & Gas Committee, which did not review the petroleum production tax bill in 2006 but did hold hearings on Palin's gas line bill this year.

This year, during a House vote on Palin's Alaska Gasline Inducement Act -- or AGIA -- Kohring heeded the advice of a senior lawmaker and did not vote.

Palin, also from Wasilla, has suggested that Kohring resign, and senior Republicans have also asked him to consider that option. A recall effort is under way in Wasilla.

Kohring has refused, saying resigning would not serve his constituents. He's working during the interim and attended the House Resources Committee meeting on Thursday in Anchorage.

He said he still receives support from constituents, but he also understands the pressures on him to resign.

"If I decided to stay, I'm in for major battles on my hand with the recall and other issues," he said. "I hate to be boxed in a situation, but I can see there is no easy way out."

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http://www.adn.com/news/politics/fbi/story/8956052p-8870736c.html

Kohring says Kerttula asked him to skip gas line vote
LEGISLATURE: Wasilla lawmaker facing charges says he took "wise counsel."
By STEVE QUINN
The Associated Press
Published: June 7, 2007
Last Modified: June 7, 2007 at 03:24 AM

JUNEAU -- State Rep. Vic Kohring, who faces bribery and extortion charges, revealed this week that a senior lawmaker asked that he not vote on Gov. Sarah Palin's natural gas pipeline bill.

He said he understands his pipeline vote could have been considered tainted, so he honored the request from Minority Leader Beth Kerttula, D-Juneau. Kohring is now considering a new request from Republican leaders -- that he resign his legislative seat.

"I haven't made a final decision," he told The Associated Press. "I'll listen carefully to my constituents. I've taken this role very seriously, but I'm not so wedded to this job or have so much pride that it would get in the way of respecting the wishes of the public."

He has indicated a decision could be reached this week, ahead of a legislative special session on benefits for senior citizens, which will start June 26 in Anchorage.

On Wednesday afternoon, Palin and members of her energy team participated in a ceremonial signing of the Alaska Gasline Inducement Act -- or AGIA -- in Fairbanks.

Under AGIA, producers and independent pipeline companies can vie for rights to build a pipeline that lawmakers hope will ship trillions of cubic feet of North Slope natural gas to market.

The House and Senate passed Palin's bill May 11, a week after Kohring and two former lawmakers were indicted on federal charges of bribery and extortion related in part to changes in the state's oil production tax passed in 2006.

Palin also said she would call a special session later this year to re-examine how last year's Legislature considered and passed the Petroleum Profits Tax plan, which she has said was approved under a dark cloud.

The indictments left some lawmakers squeamish about Kohring casting votes on any energy-related bills in the waning days of this year's legislative session.

When lawmakers discussed and voted on AGIA on May 11, Kohring quietly left the House chambers and didn't return until all discussion on the bill was completed.

Kohring initially declined to identify who asked him to refrain, saying it was people he held in "high regard," but on Wednesday he confirmed Kerttula asked that he step aside.

"I thought it would keep things calm and provide the least amount of disruption by not being a part of that vote," Kohring said. "So I made the decision to quietly slip out.

"She wasn't putting any pressure on me at all; she just gave me some wise counsel, and it was prudent of me to simply not vote," he said.

Kerttula said she approached Kohring outside the House chambers, saying she thought it was best he leave the floor before the vote.

"I had two concerns: integrity of the (legislative) body and for individuals to be treated fairly," she said. "Having him off the floor accomplished those."

An attorney, Kerttula said she was still mindful of Kohring's constitutional right to be considered innocent until his trial, now scheduled for October, is completed.

"I wasn't judging him when I was asking him to do that," she said. "He didn't have to do it, but he took a lot of pressure off the body. It showed quite a bit of courage that moment."

House Speaker John Harris, R-Valdez, said Kerttula first approached him about talking to Kohring.

Harris said he supported the decision as Kohring had already been stripped of his position as chairman of the House Oil & Gas Committee following the charges.

"With all the speculation going on, it meant for a less confrontational vote," Harris said. "You can't say the vote was tainted because he didn't vote."

Besides Kohring, also facing bribery and extortion charges are former Republican Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau. Kott has asked that his trial also be delayed until this fall; Weyhrauch is scheduled for trial next month.

Additionally, two executives for oil services company Veco Corp. have pleaded guilty to extortion and bribery related to their dealings with legislators.

Wall Street Journal
June 8, 2007

UK Regulator Orders Comprehensive Safety Audit Of BP Platform
DOW JONES NEWSWIRES
June 7, 2007 3:01 p.m.

LONDON (Dow Jones)--A spokesman for the U.K.'s safety regulator said Thursday it has ordered BP PLC (BP) to conduct a comprehensive audit on a key North Sea oil platform to comply with safety regulations, possibly through independent expertise.

In December, the Health and Safety Executive, or HSE, served BP six notices to address safety breaches following an inspection on its Schiehallion offshore facility. The new notice, dated March 30, suggests the regulator has found the issues serious enough to warrant a complete check.

"I could not think of another (offshore oil) installation with six notices arising from one inspection," the spokesman said.

The disclosure is a reminder that the U.K. oil major - slammed in the U.S. for heavy corrosion at Alaska's Prudhoe Bay oil pipeline and for a deadly 2005 explosion in Texas - also faces issues in its home country just as new Chief Executive Tony Hayward assumes the reins at the company.

After discussing the breaches with BP, the "inspectors have taken stock" and asked the company "to bite the bullet," the HSE spokesman said. "They want the company to look at installation as a whole," rather than isolated issues, he said.

The notice for improvement said that BP can comply "by undertaking and documenting an independent audit of the Schiehallion Asset to assess, demonstrate or...identify measures as appropriate, to ensure compliance with (health and safety regulations) of the offshore installations."

The HSE spokesman said the audit was compulsory but the company has the choice between an independent or an internal review.

The notice added the audit should have "particular emphasis on the control of major accident hazards."

The notice gives BP until Sept. 30 to comply.

A BP spokeswoman said "we are actively engaged" and progressing in working to "close out the notice."

"We are working closely with the HSE," she added.

Crude oil production at the 120,000 barrel-a-day Schiehallion vessel, located in the Shetland Islands, was interrupted mid-2005 for nearly a month after a fire.

Several of the breaches that the HSE asked BP to rectify were problems raised by the fire that had yet to be fully addressed a year and a half later. The HSE ordered BP to address the most urgent of these issues between the end of January and March.

The regulator's Web site shows the company complied with the regulator's orders. But the spokesman said the demand for a comprehensive review was issued to avoid having to send further notices on isolated issues.

HSE Web site: http://www.hse.gov.uk

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

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US House Panel OKs Bill To Force Renegotiation Of Oil Leases
DOW JONES NEWSWIRES
June 7, 2007 1:43 p.m.
By Ian Talley
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The U.S. House of Representatives' Appropriations Committee approved an amendment Thursday to an Interior budget bill that would require oil companies to renegotiate 1998-99 lease contracts that neglected price thresholds to obtain future exploration leases.

The Government Accountability Office estimates that around $1 billion in royalties have already been lost as a result of the omission, and could cost tax payers an additional $9 billion in future royalties.

The proposal, offered by Rep. Maurice Hinchey, D-N.Y., passed by a voice vote, and the Interior appropriations bill was later passed.

"It's the right thing to do to keep the pressure on the oil industry," said Rep. Norman Dicks, D-Wash. The House has previously passed similar legislation but the measure was blocked in the Senate.

Although six companies including BP (BP), Royal Dutch Shell (RDSA), ConocoPhillips (COP) and Marathon (MRO), have agreed to pay royalties on the leases on production from October 2006, they only represent a fraction of the total lease owners.

Around 40 companies representing 80% of the production haven't agreed to renegotiate the leases, including ExxonMobil Corp. (XOM), Total (TOT), Chevron Corp. (CVX) and Anadarko Petroleum Corp. (APC), according to Department of the Interior data. Democrats have been seeking royalty payments for all output from the leases.

Rep. Todd Tiahrt, R-Kan., opposes the bill, saying that Hinchey's bill would violate the sanctity of contracts: "these were valid contracts ... and we would be over-ruling goodfaith agreements."

"I agree it's the right thing to do, but it's the wrong method to get there," Tiahrt said.

In the Senate, Dianne Feinstein, D-Calif., Chairwoman of the Senate Appropriations Subcommittee on Interior, Environment and Related Agencies, and Sen. Pete Domenici, R-N.M., a member of the appropriations subcommittee and the ranking member of the Energy and Natural Resources Committee, are drafting bi-partisan legislation to extend offshore oil and gas leases signed in 1998-99 that omitted royalty price thresholds to encourage companies to renegotiate the contracts.

Feinstein last month told Dow Jones Newswires that the lease-extension legislation would be in the appropriations bill.

"We tried to explore the possibilities of litigation and came to the conclusion that there is no way of preventing litigation," she said.

-By Ian Talley, Dow Jones Newswires, 202-862-9285; ian.talley@dowjones.com

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BP Appoints Anglo American CEO To Board As Non-Exec Director
DOW JONES NEWSWIRES
June 6, 2007 11:33 a.m.

LONDON (Dow Jones)--BP PLC (BP) Wednesday appointed Anglo American PLC (AAUK) Chief Executive Cynthia Carroll as a non-executive director on its board, as the reshuffle at the helm of the U.K. oil giant continues.

The appointment, with immediate effect, comes after BP non-executive director John Bryan retired in April, although it is not strictly a replacement, a BP spokesman said.

The move comes after BP said last week that its head of refining, John Manzoni, was stepping down from his position to take the helm of Talisman Energy Ltd. (TLM) in September and after Chief Executive John Browne was replaced by Tony Hayward over a month ago.

Before becoming chief executive of U.K. diamonds, platinum and gold giant Anglo American, Carroll, 50, previously worked for Alcan Inc. (AL), latterly as the president and chief executive of Alcan's primary metal group. She is also a non-executive director of Sara Lee Corp. (SLE).

The appointment underscores the complementary natures of the mining and hydrocarbons sectors, as exemplified by a recent deal between BP and Rio Tinto PLC (RTP) to develop coal-based clean energy.

It is also a reminder of the similarities between the two extraction industries, which both involve negotiating access to acreage, identifying reserves through geological studies and developing them.

One analyst noted that Anglo American and BP both have interests in the coal industry - Anglo through its wholly owned Anglo Coal subsidiary and BP through a partnership with Anglo American rival Rio Tinto to develop "clean coal" energy projects.

Another Anglo American competitor, BHP Billiton Ltd. (BHP), operates a gas and oil exploration and production business.

"It's not a bad thing for her to be abreast of the resources markets," the analyst, who asked not to be named, said.

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

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

Washington Post
Thursday, June 7, 2007
Page A1

http://www.washingtonpost.com/wp-dyn/content/article/2007/06/06/AR2007060602851_pf.html

Sen. Stevens Told to Keep Records for Graft Probe
By Paul Kane
washingtonpost.com Staff Writer

Sen. Ted Stevens, the longest-serving Republican in the Senate, disclosed in an interview that the FBI asked him to preserve records as part of a widening investigation into Alaskan political corruption that has touched his son and ensnared one of his closest political confidants and financial backers.

Stevens, who is famous for bringing home federal earmarks for Alaska when he was Appropriations Committee chairman, was not previously known to be linked to the Justice Department's probe, which has uncovered evidence that more than $400,000 worth of bribes were given to state lawmakers in exchange for favorable energy legislation.

Investigators have used secret recording equipment, seized documents and cooperating witnesses to secure the indictments of four current and former state lawmakers, including the former state House speaker, shaking the core of Alaska's Republican Party.
Two executives of a prominent energy company have pleaded guilty to bribery and extortion charges and are cooperating with the inquiry, which is being run by the Justice Department's Public Integrity Section and includes two federal prosecutors and FBI agents based in Anchorage.

"They put me on notice to preserve some records," Stevens said in a brief interview about his legal team's discussions with the FBI. He declined to say what kinds of records were involved but confirmed that he had hired lawyers and that his son, former state Senate president Ben Stevens, "is also under investigation."

The FBI issued subpoenas last year to contractors who had performed work on Ted Stevens's Anchorage residence, seeking information about the alleged involvement of energy company executive Bill J. Allen, a key figure in the state bribery probe, in overseeing the renovations.

There has been no indication that Stevens is a target of the investigation, and federal law enforcement officials this week declined to comment about the probe.

Stevens has long been close to Allen, who formerly directed Veco Corp., the energy company at the heart of the corruption probe. Since 2000, Allen has contributed more than $50,000 to political and campaign committees controlled by Stevens. In 2005 and 2006 alone, Allen and other Veco executives gave Stevens-affiliated election committees $37,000, Federal Election Commission records show. A Stevens aide said the senator recently decided to donate contributions from Allen and another Veco executive from 2004 to 2006 to charity.

Several years ago, Allen joined with Stevens and a handful of other corporate executives to purchase thoroughbred horses, according to Stevens's financial disclosures to the Senate.

In early May, Allen and another Veco executive pleaded guilty to bribing state legislators primarily to secure the passage of tax legislation creating a natural gas pipeline that could have yielded Veco billions of dollars in revenue, court records show.

As part of the plea, Allen admitted that his bribes included $243,250 in no-show consulting work from 2002 to 2006 to "state senator B" to win the lawmaker's support for the pipeline project and other legislative matters. State financial reports filed by Ben Stevens list the same dollar amount in receipts from Veco; for several of those years, his father was Appropriations Committee chairman.

Ben Stevens's legislative offices were raided by the FBI in August, but he has not been charged with a crime. "We believe that the facts will show that Mr. Stevens didn't engage in any illegal activity," said John Wolfe, the lawyer for Ben Stevens.

A string of subpoenas issued by a federal grand jury last year indicate that the FBI is seeking information on the financing of the renovation of Ted Stevens's Anchorage home at a cost exceeding $100,000, according to several of those who received the subpoenas. In the renovation, the contractors lifted the home -- located next to an exclusive ski resort -- on stilts and built a new floor beneath the existing one.

Two contractors confirmed in phone interviews a report in the Anchorage Daily News that their work on Stevens's home was overseen by Allen, other Veco executives and a neighbor of the Stevenses. Augie Paone, owner of Christensen Builders Inc. of Anchorage, told the newspaper last week that he heard from the FBI in May 2006 and testified before a federal grand jury about the home remodeling project in December.
In a phone interview this week, Paone said, "My lawyers told me it would not be wise to talk while the investigation is ongoing. We'll just see what happens in the next couple of weeks."

Another contractor on the home-renovation project, Toney Hannah, said invoices his company issued for their work were paid by Stevens and his wife, Catherine. "I raised the house; they subpoenaed the file I had on it," Hannah, who specializes in raising homes for remodeling, said in a phone interview. "I was just a subcontractor. I did my part; I raised the house. I was paid by the Stevenses, and that was it."

Allen and Veco executives have also been backers of Rep. Don Young (R-Alaska), a past chairman of the Resources Committee and the Transportation and Infrastructure Committee. In the 2006 election cycle, Young took in more than $30,000 from Veco executives, and his chief of staff is a former lobbyist whose clients included Veco.

According to his plea agreement, Allen first "corruptly authorized" the hiring of "state senator B" in 1995 to perform consulting work six years before his election.

Investigators recorded meetings between Allen and Veco executives and lawmakers inside a Juneau hotel room a block from the state capitol, where they regularly met the bribed lawmakers, often handing them wads of hundreds of dollars.

In early May 2006, after helping defeat an amendment Veco opposed for the gasoline legislation, former state House speaker Peter Kott met with Allen in Suite 604 as part of his effort to secure a Veco job in Barbados. "I had to get 'er done. So I had to come back and face this man right here," Kott told Allen, according to court records. "I had to cheat, steal, beg, borrow and lie."

Stevens said that he has not spoken to Justice Department officials, that he was complying with the request to preserve documents and that he anticipated turning them over at some point. He and his staff declined to specify whether the investigators were seeking records on personal finances, legislative actions or both.

Stevens is the ranking Republican on the Commerce, Science and Transportation Committee. He said his lawyers warned him that any public statements could be construed as an attempt to obstruct the inquiry.

Staff researcher Madonna A. Lebling contributed to this report.

Roll Call
June 7, 2007

http://www.rollcall.com/issues/52_136/news/18810-1.html?type=pf

Stevens, Son Press Project
By Paul Singer,
Roll Call Staff

In late 2005, Sen. Ted Stevens (R) joined other members of the Alaska delegation in pressing state officials to reserve $2 million in earmarked federal money for a pipeline project being conducted by a gas company that employed Stevens’ son, Ben.

Stevens, Rep. Don Young (R) and Sen. Lisa Murkowski (R) wrote a letter to the Alaska Department of Transportation on Nov. 9, 2005, to “more clearly explain the Congressional intent” of a $2 million earmark in the 2005 highway bill, known as SAFETEA-LU. The letter clarified that the money was intended for the project Ben Stevens’ company was working on, and the company was named in the letter.

Ted Stevens’ office said this week that the letter merely reflected the importance of bringing natural gas to South-Central Alaska, and the elder Stevens’ involvement in the issue had nothing to do with the younger Stevens’ employment.

The provision that had been inserted into the bill by the Alaska delegation reserved the money for a “study on the feasibility of constructing a natural gas pipeline from the North Star Borough to South Central Alaska along the existing transportation corridors.” The provision refers to a long-running discussion about how to get a portion of the state’s abundant North Slope natural gas reserves to the chronically under-supplied gas consumers in the population centers around Anchorage.

But according to state officials, there are two possible pipeline routes that fit the description as it was worded in the earmark: one, a north-south route from Fairbanks that follows the “Parks Highway” to Anchorage and would pass through a small piece of Denali National Park, and a second that would swing east through Glennallen before cutting back west to Palmer, just outside Anchorage.

“That earmark came to us as an orphan,” said Mike Chambers, spokesman for the Alaska Department of Transportation and Public Facilities. “When an earmark comes in, and if it is general enough, several people will stand up and claim it ... sort of like a custody battle.”

The letter from Stevens, Young and Murkowski made it clear which side should win custody. The Members pointed out that the 2005 omnibus appropriations bill set aside an additional $2 million “to allow ENSTAR Natural Gas and ASRC Energy Service to move forward on a feasibility study along the Parks Highway for the construction of a spur line from Fairbanks to Anchorage.” They added: “The intent of the two million dollars in SAFETEA-LU is to continue the Parks Highway Spur study begun under the DOE project.”

ENSTAR Natural Gas is a subsidiary of SEMCO Energy, a Michigan-based energy company. Ben Stevens has served on the board of SEMCO since 2004 and was paid $77,810 for his service in 2006, according to the company’s most recent filings with the Securities and Exchange Commission.
Ted Stevens clearly was not the only advocate for the Parks Highway pipeline earmark. The delegation letter was written in the first person, suggesting that questions be directed to “my staff on the Transportation and Infrastructure Committee,” which is the committee that Young chaired at the time.

The $2 million earmark was not included in the House version of the SAFETEA-LU bill and was added in the Senate, where Stevens chaired the Commerce, Science and Transportation Committee, which had jurisdiction. But Murkowski also claims credit for the earmark. “If we can’t get more gas [in the Anchorage area], people are going to freeze in the dark,” said Chuck Kleeschulte, a legislative assistant on energy issues in Murkowski’s office. Kleeschulte referred to the project as a “delegation earmark” and said, “We gladly accept responsibility for this earmark.”

The Alaska Legislature also passed a resolution expressing support for constructing a natural gas pipeline from Fairbanks to South-Central Alaska, with then-state Sen. Ben Stevens voting in favor.

Aaron Saunders, spokesman for Ted Stevens, wrote in an e-mail to Roll Call that “The provision in the SAFETEA-LU bill to provide money to the state to continue to study possible spur lines was a priority for the entire Alaska Congressional Delegation. These funds would ensure that [the] ongoing study would be completed. It is the Delegation’s understanding that the state will award a contract to finish the study based on its procurement process,” meaning it is not guaranteed that ENSTAR will receive the money.

Saunders added that the delegation’s support of the pipeline “is based on the project’s merits and its importance to all of their constituents who live in South Central Alaska. ... At no time did Ben Stevens’ role as one of 10 members of SEMCO’s Board of Directors play any part in the Delegation’s decision to support this study.”

Stephen Slivinski, director of budget studies at the Cato Institute, said there is nothing wrong with the Alaska delegation setting aside money for the state to review alternative routes for a gas pipeline. But, he said, “If you are coming from the premise that the state should be the ones determining the best use of a lump of money ... the state should be free to interpret that. The follow-up correspondence is the odd part, which says ‘No, no, you are to spend it this way.’”

Slivinski said Congressional letters to state agencies are a kind of a backdoor earmark. “If you wanted to be more honest about this, you could have done it in the law,” instead of going to the state to make the distinction.

Mike Thompson, the state pipeline coordinator in the Alaska Department of Natural Resources, said the $2 million from the highway bill earmark has never been distributed. The state is waiting for the Energy Department to release a broader feasibility study that compares both routes before it releases a request for bids to conduct the study on the Parks Highway route. The DOE study has been completed NORSTAR, another unit of SEMCO, was one of the contractors that the department hired to draft it but it has not yet been released.

Harold Heinze, CEO of the Alaska Natural Gas Development Authority the state-chartered corporation that has been advocating the Glennallen-to-Palmer pipeline route said the Parks Highway route does not seem to make as much economic sense, but the Members of Congress may not have known that when they wrote their letter in late 2005. “In that timeline, [the letter] is absolutely correct,” Heinze said, since the state did need to consider both routes. “I might differ with it tremendously today,” he added, because he believes the superiority of the Glennallen pipeline seems clear.

Heinze encouraged the Energy Department to include in its analysis the challenges the Parks Highway line would have getting approval from Congress to cross into the Denali National Park, and he provided a copy of an e-mail reply he received indicating that the department “did ask the report’s authors to ‘beef up’ the section dealing with this issue.”
ENSTAR spokesman Curtis Thayer said the pipeline issue “was started before Ben Stevens was on the board. ... Ben had nothing ever to do with any of this.” Thayer said that by his recollection, Ben Stevens had been to the ENSTAR Alaska offices only once since joining the SEMCO board in 2004.

Thayer pointed out that the state has been looking for more natural gas for the population centers around Anchorage for years, and ENSTAR, as the primary natural gas company in the state, probably will be involved no matter where such a pipeline is built.
“We have an interest in building such a line but it will take a lot of partners,” Thayer said.

Ben Stevens could not be reached for comment on this story, and several calls to his attorney were unreturned.

Anchorage Daily News
June 7, 2007

http://www.adn.com/news/politics/fbi/story/8956050p-8870739c.html

Interim leader named at Veco
DAN ARMEL: New chief hopes to distance company from Bill Allen.
By KYLE HOPKINS
Anchorage Daily News
Published: June 7, 2007
Last Modified: June 7, 2007 at 03:19 AM

Veco's new chief executive, Dan Armel, looked to distance the company Wednesday from the man who built it into an international firm -- but has now pleaded guilty to federal charges of bribing Alaska legislators.

"Bill Allen, an admitted felon, no longer has anything to do with the ongoing operations of Veco," he said. The Allen family still owns a majority of the Anchorage oil field services and construction company; three of Allen's children are on the board and his daughter is chairwoman, he said.

"My job is first and foremost to make sure that this company -- or whatever is continuing to go on with respect to the federal investigation -- is running itself appropriately and with the highest degree of ethics," Armel said.

Veco announced this week that it had hired Armel to replace Allen, who with vice president Rick Smith pleaded guilty on May 7 to bribery, extortion and conspiracy.

Both men have resigned from the company and are now cooperating with authorities. The case is linked to the indictment of three current and former state lawmakers.

Veco signed Armel for three months as chief executive, although he could stay longer, he said.

Armel is a former banker whose resume says he is frequently called on to help businesses through refinancings or sales. Colorado-based CH2M Hill is negotiating to buy Veco and while Armel said he has no idea how likely the sale is, he said both sides are eager to close a sale.

He described himself as someone who knows right from wrong and relishes the challenge of shepherding corporations through troubled times.

"It's a very well run company at the operating level," he said of Veco.

Asked how only two people at the company could have been involved, Armel said:

"Well, it might be others, but at the moment, as far as I know what we have is a situation where there were two people who were very proactively involved."

Does Veco need to change owners to move past the corruption scandal?

Armel said the answer is obvious.

"Bill would love nothing better than to envision that he gets through all this and Veco is still his company. But, we just need to get past that," he said.

In his plea agreement, Allen says he gave bonuses to Veco executives with the understanding those executives would contribute to political campaigns.

Armel said he's talked with those executives.

"They don't think that they did what Bill says they did, and the Department of Justice doesn't have any evidence to support what Bill says."

Veco is under a bright spotlight, which became obvious to Armel when -- as soon as he was announced as the interim chief executive -- a Web site in Barbados posted an incorrect story claiming Armel was a convicted felon. The story confused Armel with an estranged, dead relative of the same name who was convicted of securities fraud in the 1960s, Armel said.

The Web site has since published a retraction. Armel said that if anything, it encouraged him to take a closer look at Veco's operations in Barbados, to see why people there might be critical of the company. Veco is building a prison there and has built an oil port there as well, according to the company's Web site.

Daily News reporter Kyle Hopkins can be reached at khopkins@adn.com

Anchorage Daily News
June 1, 2007

http://www.adn.com/money/industries/oil/pipeline/story/8938301p-8838241c.html

Pipeline owners told to cut fees
By ROSE RAGSDALE
Petroleum News
Published: June 1, 2007
Last Modified: June 1, 2007 at 03:05 AM

A federal judge has ordered owners of the trans-Alaska oil pipeline to slash nearly in half fees they propose to charge for crude oil shipments, a move likely to generate substantially higher revenue for the state and spur North Slope oil and gas activity.

The ruling by Administrative Law Judge Carmen Cintron of the Federal Energy Regulatory Commission affects fees - or tariffs - proposed by the five owners of the 800-mile pipeline from 2005 forward.

FERC’s five commissioners are expected to review the case and give a final opinion by year’s end or in early 2008.

The state, Anadarko Petroleum Corp. and Tesoro Alaska Co. asked FERC to require the pipeline owners to reduce rates for oil shipments to about $2 a barrel from rates of about $3.71 in 2005 and $3.97 last year.

The dominant North Slope producers - BP, Conoco Phillips and Exxon Mobil - also dominate ownership of the pipeline. Anadarko produces oil on the Slope but owns no part of the pipeline. Tesoro refines oil shipped through the pipeline.

FERC regulates the shipping fees for oil bound to refineries outside Alaska. The Regulatory Commission of Alaska governs pipeline fees for oil headed to in-state refineries.

A ruling a few years ago by the Alaska regulators - cutting the in-state fees by more than 50 percent - sparked the current fight before FERC.

The state then protested the higher 2005 interstate fees, charging discrimination based on provisions of the Interstate Commerce Act. The higher those fees, the less oil revenue the state collects.

Since then, both sides have argued the case with the help of an army of lawyers.

The pipeline owners contend they calculate their fees under a method established in a 1985 lawsuit settlement with the state.

They also asked FERC to overturn the RCA ruling, claiming the lower in-state rates and subsequent attempts to block increases in interstate fees contradicted terms of the 1985 pact and violated provisions of the ICA.

As time passed, proposed 2006 and 2007 fees have been added to the case.

Cintron agrees tariffs 'excessive’

In a detailed, 116-page decision, Cintron concluded that Anadarko, Tesoro and the state essentially got it right when they argued the rates were “excessive.”

The judge outlined her reasoning in more than 250 separate points. Cintron wrote that the “crux of the matter” is that the pipeline owners must recognize their past recoveries - through shipping fees they had charged - of their investments in the trans-Alaska pipeline.

“Otherwise there will be an unjust and unreasonable double recovery,” she wrote. “The carriers have presented no fact in the case that calls for an opposite conclusion.”

She noted that there was considerable difference between the pipeline owners’ $1.75 billion revenue requirement for computing the size of the shipping fees and Anadarko-Tesoro’s estimate of $647 million.

Cintron said the carriers’ contention that they have to start from the beginning of the trans-Alaska oil pipeline and that revenue they have already recovered don’t count in calculating future rates “is not given any weight.”

The judge further endorsed the argument of FERC’s trial staff that “just and reasonable rates cannot result where any double recovery is allowed,” calling the reasoning “commonsensical” and impossible to ignore.

Cintron said Anadarko and Tesoro’s calculations would be the basis for her ruling, with minor variations in return on equity and tax.

BP: Ruling not final

Daren Beaudo, an Alaska spokesman for BP, which owns about 50 percent of the pipeline, said Cintron’s ruling “is nonbinding and reflects her opinion only.”

“The commission has yet to decide the case. This is still in the early stages, and the decision when it comes likely will be appealed by one or more of the parties,” Beaudo said.

“It is an important issue, and we are confident that we’ve complied with our agreement with the state and that we’ve followed the law,” he added.

Potential millions for Alaska

If Cintron’s ruling prevails, state auditors estimate, Alaska will collect millions.

“We’re looking at the assumption that the case will be resolved in 2010,” said John Iverson, tax director at the Department of Revenue. “The refund amount itself to the state would be around $500 million, with about $100 million more in interest.”

The figures are based on state auditors’ estimates of pipeline-fee overcharges from 2005 through 2008.

For non-owner oil shippers on the pipeline, the judge’s decision will significantly improve the economics of doing business in Alaska and in turn significantly improve the state’s oil and gas investment climate,” said Antony Scott of the state Division of Oil and Gas.

“The difference is on the order of $3 a barrel,” he said. “It’s the equivalent of raising a company’s stress price for making investment decisions. If a company decides to do business based on a stress price of $30, then $3 would be 10 percent. And that’s a big deal.”

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Some call Stevens vulnerable
IN MINORITY: Still, more than a million has poured in for campaign.
By KYLE HOPKINS
Anchorage Daily News
Published: June 1, 2007
Last Modified: June 1, 2007 at 02:46 AM

Known for delivering cash to Alaska, U.S. Sen. Ted Stevens is now raking it in.

"No other candidate for federal office in Alaska has ever raised the kind of money the senator has raised in the last six months," said Tim McKeever, treasurer for Stevens' re-election campaign.

But even as he rapidly stockpiles money for his re-election campaign, potential opponents are wondering: Is 2008 the year Uncle Ted is actually vulnerable?

Stevens is an Alaska icon and one-man state industry, bringing huge amounts of federal dollars here. Supporters say he's as vital and feisty as ever. But he is 83 years old and now in the Senate minority.

His son, former state Sen. Ben Stevens has been linked to -- although not indicted in -- a federal corruption investigation.

"He's not as popular as he was in years past, and each day that goes by he gets a little bit softer," said Ivan Moore, an Anchorage pollster who often works for Democrats.

Still, no heavyweight opponents are clamoring to take Stevens on. At least not yet.

Moore said two high-profile Democrats are potential candidates: Anchorage Mayor Mark Begich and former Anchorage state Rep. Ethan Berkowitz.

Asked Thursday if he'll run, Begich said he's focused on the job he has. Uprooting his family and jumping into the meat grinder of D.C. politics isn't something he'd do lightly, he said.

"If you're going to run for an office just because people told you you have to, you're not going to be happy," he said.

Begich said he's fielded recruitment calls from the Democratic Senatorial Campaign Committee and Democratic Congressional Campaign Committee, which spend big to help candidates get elected across the country.

Berkowitz ran unsuccessfully for lieutenant governor alongside fellow Democrat Tony Knowles in last year's gubernatorial race. He said he's thinking about a potential U.S. Senate run but hasn't made a decision.

Two lesser-known candidates, Unalaska City Councilman Rocky Caldero and Nels Anderson, a Soldotna doctor, plan to challenge Stevens, said Jake Metcalfe, chairman of the state Democratic Party.

Pollster and political consultant David Dittman has worked for Stevens campaigns in the past and said he may work for the senator in 2008.

This race could be different for Stevens if national Democratic groups choose to target his seat, Dittman said. He said they might go after him because he's a high-profile Republican in a state where it takes less money to reach voters.

FBI investigations and federal prosecutions now under way add an X factor to next year's election.

Over the past month, one current and two former state lawmakers have been indicted on federal extortion and bribery charges. Two executives for the Veco Corp. pleaded guilty to bribery, conspiracy and tax charges and are now cooperating with authorities. Although Ben Stevens hasn't been charged with any crime, the charges against others link him to the corruption cases.

Dittman said he doesn't think voters lump the two Stevenses together, while McKeever, the campaign treasurer, said he doesn't expect the investigation to affect Ted Stevens' campaign.

"Sen. Stevens has served Alaska for many years," McKeever said. "He's got a record of accomplishment and service. He's got influence in Washington that I think would be difficult for anybody to match."

The FBI and a federal grand jury have been investigating the extensive remodeling of Ted Stevens' Girdwood home in 2000, and the involvement of Veco in the project.

McKeever wouldn't comment on the remodel investigation, but Metcalfe, the Democratic Party chairman, says the investigations make Stevens vulnerable and could embolden opponents.

According to the Fairbanks Daily News-Miner, Stevens has said that depending on who runs against him, he may have to raise as much as $5 million.

Over a six-month period ending March 31, Stevens raised about $686,000, McKeever said Thursday, bringing his total so far to more than $1 million.

"Every time Sen. Stevens runs a campaign, he runs expecting that he will face a strong opponent," McKeever said.

Daily News reporter Kyle Hopkins can be reached at khopkins@adn.com.