May 2007 News Stories
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Financial Times
May 31, 2007
http://www.ft.com/cms/s/34f4374e-0f14-11dc-b444-000b5df10621.html
Manzoni
quits BP after losing race for top spot
By Rebecca Bream in London and Sheila
McNulty in Houston
Published: May 31 2007 03:00 |
Last updated: May 31 2007 03:00
John Manzoni, once seen as a successor to Lord Browne as BP chief executive,
is stepping down as the UK oil group's head of refining and marketing to
become head of Talisman Energy, the Canadian oil group.
He will be replaced by Iain Conn, whose current responsibilities at BP include
the Asia-Pacific, Africa and European regions as well as safety, operations
and human resources.
Mr Manzoni's departure comes four weeks after Tony Hayward took over as BP
chief executive. He will leave the oil group at the end of August following a
three-month handover with Mr Conn.
BP said Mr Manzoni's departure was agreed with the board and declined to give
details of any pay-off.
Mr Manzoni has worked at BP for 24 years and has run the refining and
marketing operations since 2002.
He had been considered a strong contender to succeed Lord Browne, who stepped
down as group chief executive this month after it emerged he had lied in court
in an effort to prevent a newspaper publishing details about his personal
life.
Mr Manzoni's reputation was tarnished by an explosion at BP's Texas City oil
refinery in 2005, which killed 15 and injured 500 in the US's biggest
industrial accident in a decade.
Mr Manzoni had board responsibility for the refinery at the time of the
explosion.
The US Chemical Safety Board, charged with investigating the blast, said
cost-cutting at the refinery had left it vulnerable to the catastrophe.
Its two-year probe uncovered audits and safety reportsrevealing the
deterioration at the Texas City site.
The Financial Times reported in February that an internal BP probe into the
blast found that Mr Manzoni should have carried out a "much deeper dive" into
the true state of the refinery after "clear warning signals" from previous
accidents.
The confidential BP report concluded that Mr Manzoni lacked refining
experience and had failed to obtain the information needed to understand
better BP's biggest refinery and the risk of a serious accident there.
The report cleared Mr Manzoni of "serious neglect or intentional misconduct",
but said he should have taken more steps to consider and mitigate the risks
long before the disaster occurred.
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Anchorage Daily News
May 30, 2007
http://www.adn.com/news/politics/fbi/story/8931729p-8831947c.html
Judge
delays Kohring trial
OCT. 22: Defense
says it needs more time to sort through evidence.
By KYLE HOPKINS
Anchorage Daily News
Published: May 30, 2007
Last Modified: May 30, 2007 at 02:27 AM
Hundreds of hours of video recordings, plus hundreds more of audio, added to
thousands of pages of documents. As federal investigators silently tracked and
secretly taped Alaska politicians and business leaders in a sweeping
corruption investigation, they built a digital mountain of evidence, according
to testimony in federal court Tuesday.
It's all too much to sift through by July, the defense lawyer for Rep. Vic
Kohring told U.S. District Judge John Sedwick.
The judge agreed.
In a brief Anchorage hearing that shed just a little light on the scope of the
investigation, Sedwick delayed Kohring's trial more than three months, until
Oct. 22.
Kohring, R-Wasilla, is accused of selling his vote on oil taxes last year to
the oil field services company Veco Corp. Veco executives Bill Allen and Rick
Smith pleaded guilty to conspiracy, bribery and tax charges on May 7.
Prosecutor Edward Sullivan said two computer hard drives full of evidence in
the Kohring case include a number of conversations "intercepted" in Suite 604,
a reference to Veco's room in Juneau's Baranof Hotel, as well as telephone
conversations involving Allen and Smith recorded over 11 months beginning in
September 2005.
Kohring has pleaded not guilty and says he's innocent.
"I feel in my heart that things are going to work out just fine for me and I'm
going to be exonerated," he said in a phone interview Tuesday.
Kohring called his legal bills "astronomical." He said he recently sold his
Wasilla home and may have to sell his home in Beaverton, Ore., to pay legal
fees that he expects to top $100,000.
The charges against Kohring say the longtime Valley legislator asked for help
paying a $17,000 credit card debt and that he accepted cash from Veco
executives.
Kohring said he couldn't answer specific questions about the case before it
goes to trial.
"All I can say is that people have to remember that I am innocent until proven
guilty," he said.
Kohring's lawyer, John Henry Browne of Seattle, said federal prosecutors gave
him a tower of evidence in the corruption case only last week.
Browne said only a fraction of the evidence directly involves Kohring and that
in the rest he expects to find ammunition to use in cross-examining Allen and
Smith, who are expected to testify against his client.
"The government was probably recording these guys for a reason ... my guess is
that this material will contain information that I can use to impeach them
when they testify, about their conduct, behavior and general reputation for
honesty," Browne said.
Kohring said people still support him and he has refused calls to give up his
seat in the Legislature. He said he needs surgery on his neck, which could
keep him from attending a possible special legislative session in the fall.
Until Tuesday's delay -- which drew no objection from prosecutors -- Kohring's
trial was to begin July 9.
Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.
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http://www.adn.com/news/politics/fbi/story/8929221p-8829429c.html
FBI
corruption investigation includes audio, video
By KYLE HOPKINS
Anchorage Daily News
Published: May 29, 2007
Last Modified: May 29, 2007 at 01:13 PM
Evidence in the corruption case against Rep. Vic Kohring, R-Wasilla, includes
thousands of pages of documents and hundreds of hours of audio and video
recordings, Kohring’s lawyers said today in federal court.
Defense lawyers asked for more time to sift through all that information, and
U.S. District Judge John Sedwick agreed, delaying the trial from July 9 until
Oct. 22.
Kohring faces bribery and extortion charges. He was originally scheduled to go
to trial in early July, but federal prosecutors didn’t fight his request for
more time.
Only a fraction of the evidence in the case specifically mentions Kohring,
said defense lawyer John Henry Browne. Still, Browne said, he and his staff
have to review all evidence - including nine computer discs filled with
documents and recordings, plus two hard drives full of information - and there
was no way to do that by early July.
“This is a lot of information, to say the least,” Browne said.
Kohring is accused of selling his vote on oil taxes last year to the oil field
services company Veco Corp. Veco executives Bill Allen and Rick Smith this
month pleaded guilty to conspiracy and bribery charges.
Prosecutor Edward Sullivan said the evidence includes a number of
conversations “intercepted” in Room 604, a reference to Veco’s suite in
Juneau’s Baranof Hotel, and telephone conversations involving Allen and Smith
recorded over 11 months beginning in September 2005.
The short hearing took place in a nearly empty courtroom. Kohring, his lawyers
and the federal prosecutors all participated by phone.
Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.
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Houston Chronicle
May 30, 2007
http://www.chron.com/disp/story.mpl/business/4846241.html
Exxon
Mobil could get an earful
Shareholder proposals up for vote today address emissions, renewables
By KRISTEN HAYS
Copyright 2007 Houston Chronicle
Exxon Mobil could get an earful Pension fund angry over climate strategy Exxon
Mobil Corp.'s reticence to invest in renewable and alternative energies beyond
research in the short term could dominate its annual shareholder meeting
today.
Shareholder proposals up for votes include investment in renewables and
adopting goals on reducing greenhouse gas emissions.
Management opposes both as unprofitable or redundant, recommending
shareholders reject them as they have similar proposals in past years.
"The corporation's traditional business areas remain critical and promise far
greater value than renewables, which currently lack the scale and economic
competitiveness of our core business opportunities," the company said in its
annual proxy statement.
Exxon Mobil cites its $100 million investment in renewable and alternative
energy research at Stanford University when asked about lack of spending on
such initiatives.
It does so in the proxy responding to the climate change-related shareholder
proposals.
But the Stanford Board of Trustees Advisory Panel on Investment
Responsibility, which oversees the university's endowment securities, is
voting for the greenhouse gas shareholder proposal.
Kirk Miller, a Stanford engineering alumnus who led a petition drive to get
the panel's support for that proposal, said the university's graduates
"greatly appreciate" Exxon Mobil's investment in Stanford's Global Climate and
Energy Project, which was launched in December 2002.
Exxon Mobil, along with founding corporate sponsors General Electric, Toyota
and Schlumberger, agreed to invest a collective $225 million over 10 years for
research on renewable and alternative energies, according to the project.
'Walk the walk'
"We believe that GCEP is a very valuable project. However, we ask that our
corporate donors walk the walk," Miller said, citing Toyota's Prius hybrid and
General Electric's eco-friendly initiatives from solar energy to light bulbs.
The greenhouse gas proposal, by the Sisters of St. Dominic of Caldwell, N.J.,
notes that Exxon Mobil has made "incremental improvements" in energy
efficiency and emissions reductions through cogeneration, advanced lubricants,
flaring reductions and carbon capture.
But it says the company's goal to improve energy efficiency by 10 percent
through 2012 across its U.S. refining operations doesn't address greenhouse
gas emissions.
So the proposal asks Exxon Mobil to adopt quantitative goals for reducing
emissions from its products and operations and report to shareholders by
September on its plans.
The company's response
Exxon Mobil responded in its proxy that it already discloses information
about emissions cuts at its facilities on its Web site and will follow any
greenhouse gas laws and regulations.
The company also said that despite its efforts to boost efficiency, emissions
will rise with oil and gas production needed to meet ever-growing demand.
"Even with extensive efficiency and emissions improvements, and with policy
steps to address emissions, nearly all outlooks project that rising global
demand for oil and natural gas will result in larger emissions of greenhouse
gases from these sources," the company said.
The renewable energy investment proposal is from Stephen Viederman, former
president of the Jessie Smith Noyes Foundation, an environmental group. It
pushes Exxon Mobil to invest in and produce renewable energy in addition to
fossil fuels.
The company response includes that it's seeking to reduce emissions at its
operations. It also cited energy demand outlooks predicting fossil fuels will
continue to supply 80 percent or more of the world's energy over the next
quarter-century despite growth in renewables such as biofuels, solar and wind
energy.
Chief hurdle
Such technologies now depend on subsidies to be profitable, which Exxon
Mobil has cited as a chief hurdle to investment. BP, Chevron Corp., Royal
Dutch Shell and most recently ConocoPhillips all have varying degrees of
investment in renewables and alternatives, in addition to supporting research.
Improved technology that will lead to alternatives that are profitable without
subsidies is key, the company said in the proxy.
"We chose to be a founding GCEP sponsor because we are committed to the belief
that step-out, game-changing research is required to accelerate the
development of commercially viable energy technologies that can lower
greenhouse gas emissions on a global scale," Exxon Mobil spokesman Gantt
Walton said.
kristen.hays@chron.com
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http://www.chron.com/disp/story.mpl/business/4846243.html
Pension
fund angry over climate strategy
Major investors want director ousted from board
By JOE CARROLL
Bloomberg News
Exxon Mobil could get an earful Pension fund angry over climate strategy The
California Public Employees' Retirement System, the largest public pension
fund in the U.S., is seeking the removal of Exxon Mobil Corp. director Michael
Boskin over the company's strategy on climate change.
Calpers joined two dozen other institutional investors to oppose the
reappointment of Boskin, who heads the board's public issues committee, at
Exxon Mobil's annual meeting today in Dallas.
Boskin has refused to meet with investors to discuss Exxon Mobil's strategy on
the issue, Calpers and Ceres, a coalition of environmentalists and investors,
said in a statement on Tuesday.
Exxon Mobil, the world's largest oil company, is lagging behind competitors in
addressing global warming, the statement said.
Chevron Corp. is spending more on renewable fuels, and ConocoPhillips moved
ahead of Exxon Mobil earlier this year when it joined an industry group that
backs mandatory U.S. limits on emissions of carbon dioxide and other gases
that warm the Earth, according to critics.
"Exxon Mobil's inaction on global warming stands in stark contrast to industry
peers such as BP, Shell, Chevron and ConocoPhillips, which are all beginning
to manage the risks and seize opportunities from climate change," Mindy
Lubber, the president of Boston-based Ceres, said in the statement.
Royal Dutch Shell and BP are the two biggest European oil companies, while
Chevron and ConocoPhillips are the second- and third-largest U.S.-based energy
producers.
Since late 2005, Boskin has refused five times to meet with investors on the
climate issue, according to the statement.
Directors should be accessible to shareholders and management should be
accountable to directors, Calpers Chief Investment Officer Russell Read said
in the statement.
"We have a fundamental problem when directors refuse to meet with the people
they're elected to represent," Read said. "Especially one who has a leading
role on a company's board."
Boskin, 61, is a professor of economics at Stanford University and a former
chairman of the President's Council of Economic Advisors.
Exxon Mobil spokesman Gantt Walton said that Chairman and Chief Executive Rex
Tillerson has been designated to speak on behalf of the directors on climate
change issues.
"He meets with shareholder groups quite frequently," Walton said. Investors
"have a lot of access to the company and to the board's position."
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Wall Street Journal
May 30, 2007
BP Refining CEO
Manzoni Leaves
For Talisman; Succeeded by Conn
By KEVIN KINGSBURY
May 30, 2007 9:14 a.m.
John Manzoni, the chief executive of BP PLC's refining and marketing
operations, is leaving the company to become president and CEO at Talisman
Energy Inc.
Mr. Manzoni, part of former CEO John Browne's inner circle, will leave BP on
Aug. 31 and assume his duties at Calgary-based Talisman the following day.
Iain Conn, who duties at BP include safety and operations, will succeed
Manzoni effective June 1. Mr. Manzoni will stay with the company for a
three-month transition period.
New BP CEO Tony Hayward faced a tough call over what to do with Mr. Manzoni, a
close associate of Lord Browne.
The company's U.S. refinery operations have been harshly criticized by U.S.
regulators and a BP-appointed independent committee headed by former Secretary
of State James A. Baker III. In an internal BP report on management
accountability released earlier this month as part of a court case in Texas,
Mr. Manzoni is taken to task for not recognizing major problems at the Texas
City refinery where 15 workers died in an explosion in March 2005.
And in a series of embarrassing emails and internal documents, leaked to the
media or made public by legal and regulatory proceedings, Mr. Manzoni came off
as out of touch with looming problems at Texas City, according to The Wall
Street Journal. He told BP executives conducting research for the
accountability report that despite visiting the plant himself, he "did not
know which questions to ask, did not ask the right questions and was not told"
about plant conditions, according to notes of his interview. The notes haven't
been made public but were reviewed by the Journal.
Mr. Conn, 44 years old, was appointed an executive director of BP in July 2004
with functional responsibility for safety & operations, technology, marketing,
human resources, information technology, procurement and supply-chain
management. He also had regional responsibility for Europe, Africa, Middle
East, Russia, Caspian and Asia Pacific.
Mr. Manzoni, who was with BP for 24 years and spent the last five in his
current post, succeeds Jim Buckee at Talisman. Mr. Buckee, who has been
president for 16 years and CEO as 14, intends to retire.
Chairman Doug Baldwin said, "The depth and breadth of John's international
strategic and operational experience, his proven focus on generating results
and his leadership skills made him the Board's unanimous choice to lead the
company through the next stage of its development. His mandate will be to
build upon the strength of our underlying assets, maximize the pursuit of our
business strategies and generate additional growth and value."
Talisman, a former BP subsidiary, has drilling operations in the North Sea and
Southeast Asia in addition to North America. Its shares closed Tuesday at
$20.03 and climbed to $20.30 in premarket trading.
Write to Kevin Kingsbury at
kevin.kingsbury@dowjones.com
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BP Refining CEO
Manzoni Leaves For Talisman;Replaced By Conn
DOW JONES NEWSWIRES
May 30, 2007 9:03 a.m.
By Benoit Faucon
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--John Manzoni, BP PLC's (BP) refining and marketing chief
executive, is leaving to head Talisman Energy Inc. (TLM) and will be replaced
by fellow executive Iain Conn, BP said Wednesday.
BP said Conn's appointment will be effective Friday.
Manzoni has been criticized for his handling of safety management after a
blast that killed 15 workers occurred at a BP Texas refinery in March 2005.
But a BP spokesman denied that there was any link with the departure and said
it was caused by Manzoni's not being appointed CEO.
Manzoni's leaving is "absolutely not" tied to the accident, he said. "He was
one of those in the running" to replace former CEO John Browne, who was
replaced by Tony Hayward on May 1, the spokesman said. "When not appointed" in
January, he "looked for other opportunities," he added.
Analysts have previously said that the Texas accident would hinder Manzoni's
chances to replace Browne.
BP said Conn replaces Manzoni, who has agreed with the board that, following a
three-month hand-over period, he will step down as a group managing director
and leave BP on Aug. 31.
Conn is already a member of BP's executive committee in charge of strategic
resources, which includes responsibility for most regions outside the Americas
as well as safety and operations and human resources.
BP said Conn's current responsibilities for functions and regions will be
shared with other executive colleagues.
Separately, Canada-based oil independent company Talisman announced it had
appointed Manzoni as president and CEO to replace Jim Buckee, who is retiring,
from Sept. 1.
Company Web site:
http://www.bp.com
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com
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ExxonMobil, BP,
Chevron Paid $7M In State Taxes Over 3 Years
DOW JONES NEWSWIRES
May 29, 2007 8:59 a.m.
THE ASSOCIATED PRESS
Three big oil companies - ExxonMobil Corp. (XOM), BP PLC (BP) and Chevron
Corp. (CVX) - paid about $7 million in Wisconsin corporate income taxes while
making nearly $166 billion during a three-year period.
Two other oil companies - Royal Dutch Shell (RDSB) and Murphy Oil Corp. (MUR)
- paid no corporate income taxes from 2003 to 2005. Shell had profits of $56
billion during those years. Murphy Oil's profits were nearly $2 billion.
Governor Jim Doyle said those profits justify his proposal for a new 2.5%
gross receipt tax on oil company sales in Wisconsin.
The oil companies say the tax is unfair because they have no significant
business presence in Wisconsin.
ExxonMobil spokesman Gantt Walton says Doyle wants to tax money they make in
Nigeria or Alaska and that's not good for business. Walton says comparing
corporate profits generated worldwide to the amount of tax paid in Wisconsin
"is absurd."
Information from: Milwaukee Journal Sentinel,
http://www.jsonline.com
Corrected May 29, 2007 9:00 ET (1300 GMT)
Three big oil companies - ExxonMobil Corp. (XOM), BP PLC (BP) and Chevron
Corp. (CVX) - paid about $7 million in Wisconsin corporate income taxes while
making nearly $166 billion during a three-year period.
("ExxonMobil, BP, Chevron Paid $7M In State Taxes Over 3 Years" at 7:47 a.m.
EDT didn't include the state in which the taxes were paid.)
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Financial Times
May 30, 2007
http://www.ft.com/cms/s/817c14ec-0eab-11dc-b444-000b5df10621.html
Manzoni to
step down as BP head of refining
By Toby Shelley
Published: May 30 2007 14:05 |
Last updated: May 30 2007 14:05
John Manzoni, once seen as a possible successor to Lord Browne as BP chief
executive, is to step down as the UK oil group’s head of refining and marketing
at the end of August, the company said on Wednesday.
The move, which comes four weeks after Tony Hayward took over as chief
executive, was described in a BP statement as one that Mr Manzoni “has agreed
with the board”. He will take up the post of chief executive of Talisman, the
Canadian upstream oil and gas company, in September.
Mr Manzoni, who has been with BP for 24 years, was the board member with
responsibility for the Texas City refinery blast in the US in 2005, which killed
15 people.
In February, an internal BP investigation into the Texas City refinery blast in
2005, which killed 15 people in one of the worst industrial accidents ever in
the US, found that Mr Manzoni should have looked much deeper into conditions at
the Texas City plant after “clear warning signals” from previous incidents.
Prior to that, Mr Manzoni had suffered the embarrassment of being pressed to
read out in court an e-mail to a colleague that he had written days after the
fatal explosion. In that he appeared perturbed that the incident had disrupted
his holiday.
Mr Manzoni will be succeeded as BP’s head of refining and marketing by Ian Conn,
who who takes up the post from June 1. There will be a three month handover
period with his predecessor.
Mr Conn, a 21-year BP veteran, has been on the BP board since 2004. In 2000-2002
he was responsible for marketing operations in Europe and for the integration of
Veba Oel, the German oil group, into BP. He was appointed head of petrochemicals
in 2002 and is a non-executive directive of Rolls-Royce.
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Anchorage Daily News
May 29, 2007
http://www.adn.com/news/politics/story/8928969p-8829178c.html
Feds eye
Stevens' home remodeling project
GIRDWOOD: Veco
approved some invoices for 2000 upgrade at senator's house, says builder.
By RICHARD MAUER
Anchorage Daily News
Published: May 29, 2007
Last Modified: May 29, 2007 at 03:13 AM
The FBI and a federal grand jury have been investigating an extensive
remodeling project at U.S. Sen. Ted Stevens' home in Girdwood that involved
the top executive of Veco Corp. in the hiring of at least one of the key
contractors.
Three contractors who worked on the project said in recent interviews with the
Daily News that the FBI asked them to turn over their records from the job.
One said he was called to testify about the project before a federal grand
jury in Anchorage in December.
The remodeling work, which more than doubled the size of the house, occurred
in the summer and fall of 2000. The four-bedroom home, about two blocks from
the day lodge parking lot at the Alyeska ski resort, is Stevens' official
residence in Alaska.
An old friend of Stevens in Girdwood, longtime Double Musky restaurant owner
Bob Persons, has been questioned by the FBI about the project. He monitored
the remodeling for Stevens and his wife while they were in Washington, D.C.
"I will be testifying. That's all I can tell you," Persons said in a brief
interview last week. "It is an ongoing investigation that I'm not supposed to
talk to or see anybody about it."
Persons would not elaborate on whether he meant that he would testify before a
grand jury, at a trial, or both, or for whom. He said he believed Stevens did
nothing wrong.
Ted Stevens and his wife, Catherine, declined to answer questions about the
Girdwood house. In a prepared statement issued by his office, Stevens said:
"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."
The FBI and the U.S. Justice Department's Public Integrity Section, which are
in the midst of a broad investigation of corruption in Alaska, would not
comment.
"This is a pending investigation and we're just not going to confirm or deny
any aspect, any rumors, any allegations out there," said FBI spokesman Eric
Gonzalez.
INQUIRY SURFACES
Ted Stevens, the most senior Republican in the U.S. Senate and Alaska's
most famous political figure, has not been directly connected with the
corruption investigation.
The wide-ranging federal inquiry surfaced in August when agents raided six
legislative offices, including those of then-Senate President Ben Stevens, one
of Ted Stevens' sons. 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 officially disclosed.
Veco, an oil-field service company that has long been a strong lobbying
presence in Juneau, was one of the early targets of the agents, according to
some of the search warrants that became public. On May 7, the company's
longtime chief executive, Bill Allen, and a vice president, Rick Smith,
pleaded guilty to federal conspiracy, bribery and tax charges. They are now
cooperating with authorities.
The investigation spread to the commercial fishing industry, including Ben
Stevens' consulting clients and associates. Federal subpoenas served on
fishing companies in Seattle last year sought records concerning both Ben and
Ted Stevens.
Four current or former Alaska state lawmakers have been indicted and are
awaiting trial on corruption charges, and an Anchorage lobbyist has pleaded
guilty to federal corruption charges.
Ben Stevens has not been charged. But the charges pleaded to by Allen and
Smith alleged Ben Stevens improperly accepted $242,000 from Veco for "giving
advice, lobbying colleagues, and taking official acts in matters before the
legislature."
How the Girdwood home fits in with the broader investigation, or what possible
crimes are being investigated, is not clear. There was a brief, unexplained
reference to residential remodeling in the government's statement of facts
that accompanied Allen's and Smith's guilty pleas. The sentence, preceded by a
listing of a dozen Veco-related enterprises around the world, said: "Veco was
not in the business of residential construction or remodeling."
Asked whether that line related to the construction at Stevens' Girdwood home,
Persons first said, "I'm sure it does." When pressed, he said he wasn't
certain.
WHERE THE BILLS WENT
Augie Paone, owner of Christensen Builders Inc. of Anchorage, said in a
recent interview that it was Bill Allen who hired him to complete the framing
and most of the interior carpentry at Stevens' home. Before he could send a
bill to Stevens for work in progress, he was directed to provide it first to
Veco, where someone would examine it for accuracy, he said. When Veco approved
the invoice, he would fax it to the Stevenses in Washington, he said.
Paone said that as far as he knew, Stevens and his wife, Catherine, paid his
bills themselves. He said he sent at least $100,000 in invoices to the
Stevenses in Washington. They paid him from what he said appeared to be a
checking account opened for the project. The checks, imprinted with the
couple's names, had single- and double-digit serial numbers, he said.
According to Paone and other contractors, the renovation involved a technique
often used with older dwellings in Girdwood -- jacking up a single-story
house, building another floor on the original foundation or pilings, then
lowering the original structure onto the new one. The result is a two-story
home.
City and state records show the Stevens home was originally built in 1971.
Catherine and Ted Stevens purchased it in August 1983. Plans show the house
had two bedrooms, a living room, a kitchen and a single bath before the 2000
expansion.
Toney Hannah, a house mover from Anchorage, said he had initial discussions
about a jack-up project with Ted and Catherine Stevens in 1999 but didn't hear
any more about it until the next summer.
On July 26, 2000, Stevens faxed a letter to Anchorage building safety
officials, saying Persons had authority to act in his and Catherine's name "in
regard to construction at my house in Girdwood."
Stevens often relied on Persons to look after his Girdwood residence,
according to Stevens' long-term neighbor there, Julie Peterson. She said she
would call Persons if she saw a problem at the house.
Stevens and Persons also have a business relationship. Persons is the managing
partner of Alaska's Great Eagle LLC, a racehorse-owning partnership that
includes Stevens, Bill Allen and Allen's son Mark, along with several other
Alaska businessmen.
On July 31, 2000, Persons obtained an Anchorage land-use permit for the
Stevens remodeling. He listed the value of construction as $84,878 -- much
less than the actual total turned out to be.
Most of the tradesmen who worked on the project couldn't be identified to
answer questions from the Daily News about how they were hired, paid and
supervised. While Girdwood is within the Anchorage municipality, its local
building rules are more lax. With no inspections required, city building
records don't name the electrician, plumber, furnace installer or others who
may have worked on the project.
Hannah, the house mover, was found because Persons originally listed him in
the permit file as the contractor.
Hannah said Persons contacted him in July or August 2000 to start the project.
His crew jacked up the home. Hannah said Persons seemed to be in a hurry to
get the job done.
A framing crew went to work on the first floor. But Hannah said that when he
returned to Girdwood to lower the house, the framing was unacceptable, forcing
him to delay the next phase. He said he didn't know who did the faulty
carpentry.
Paone said he was called in late that summer to rescue the project.
"Bill Allen and some of the Veco boys, some of the Veco guys, were the ones
that approached me and wanted to know if I could give them a hand," Paone
said. "I did it more as a favor, you know. It's one of those things when
somebody is the head, and packs that much power and asks you for a favor, it's
kind of hard to say no."
JUST IN CASE
Paone said his name was on file at Veco because he had worked as a
carpenter remodeling a Veco office building in Anchorage several years before.
He had also remodeled the basement of the home of Veco's chief financial
officer, Roger Chan. Chan and Allen both asked him to work on Stevens' home,
he said.
Chan didn't return a phone call seeking comment and Veco's lawyer, Amy Menard,
said the company's agreement to cooperate with federal authorities barred her
and officials from talking.
Like Hannah, Paone said he didn't know who botched the framing.
"My understanding is that there was just a bunch of guys trying to do it on a
weekend basis, and mostly they were friends of the senator's or something," he
said. "But they didn't know what they were doing and they were so far behind
that there was absolutely no way they could have completed it by late October,
early November," he said.
Paone took over the framing and completed the interior walls, some of the
cabinetry in the kitchen, the insulation and painting. He purchased the
supplies and sent invoices for materials and labor to Stevens.
Paone said he couldn't recall the names of other tradesmen who worked on the
project -- electricians, plumbers and a mechanical contractor who installed a
new gas furnace and the forced-air heating system. A neighbor said someone
brought over a crane to hoist Stevens' barbecue grill to the second floor
deck. Another neighbor said a cherry picker showed up to install decorative
lights on the eaves.
Paone said that by the time he finished his work in late October or early
November, he had sent Stevens more than $100,000 in invoices for his own work.
Paone said he charged normal rates but was uncomfortable with the arrangements
because he hadn't provided an estimate before starting the work. He said he
protected himself by retaining all the records on the project.
"I didn't suspect anything, but I just wanted to make sure," he said. "When
you work with a house of a legislator or a senator, you make sure you hold on
to all the billings, just in case something happens."
Current city property records show the 10-room home contains 2,471 square feet
of living space. With its quarter-acre lot, its assessed value for 2007 is
$440,900.
'A VERY SAD SITUATION'
Last year, some six years after the project was completed, Paone said,
"the FBI came over to me and I gave them all the paperwork I had on it." When
he was questioned by the FBI, he said, agents seemed particularly interested
in Veco and its officials. The government already had copies of most of his
invoices on the Stevens home, having obtained them from Veco files, he said.
Paone said he followed that up by testifying before a federal grand jury in
December.
About a year ago, Hannah, the house mover, came to work at his yard in South
Anchorage and found an FBI agent's card on his office door, he said. When he
called the agent, he was told the government was going to subpoena his records
on the project. He said he sent his father downtown with all the files. He
hasn't gotten them back, he said.
He said Catherine Stevens had paid his bill with a check, but he said it
happened too long ago to remember details.
The contractor who did earth-moving for the project, Bob Redmond of Girdwood,
also provided his records to the FBI, according to Jean Redmond, his
stepmother. She also said the bills were paid by Stevens.
Paone said that as far as he knows, Stevens paid every invoice sent to him.
"Now, I'm not sure if everything was given to him," Paone said. "It's just
that he was never around. He didn't know what was going on. My personal
opinion is that if he got something for nothing, he absolutely didn't know
about it."
Persons, of the Double Musky, said he believes Stevens has done nothing wrong,
though he was unable to say what he knows.
"It's a very sad situation," he said during the brief interview outside a bank
in South Anchorage. "I have to tell you that my attorneys have told me not to
talk to anyone. And I can't even talk to my friends. Anybody. I can't talk to
anybody."
Persons said he didn't think he was in any legal trouble.
"I don't know why I would be," he said.
"To me, it's a tragic situation," Persons added. "I don't think Sen. Stevens
has done anything wrong and I don't know what's going on. I think it's a witch
hunt."
Contact reporter Richard Mauer at 257-4345 or at
rmauer@adn.com
.
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Los Angeles Times
May 28, 2007
http://www.latimes.com/business/la-fi-reserve28may28,1,5809749.story?track=crosspromo&coll=la-headlines-business&ctrack=1&cset=true
State's
access to oil now a federal issue
Officials are
confronting the fact that the western U.S. lacks an emergency supply of crude.
By Elizabeth Douglass
Times Staff Writer
May 28, 2007
As California becomes increasingly reliant on oil from elsewhere, state and
federal officials are trying to figure out how to get enough energy to the
West Coast if disaster strikes.
The need became clear in August, when corroded BP pipelines threatened to halt
supplies from an Alaskan oil field that fed West Coast refineries. The Bush
administration quickly offered to tap the Strategic Petroleum Reserve to
offset the shortfall and blunt a price spike that pessimists predicted would
yield $4-a-gallon gasoline.
Ultimately, the outage was half as bad as first thought, and consumers in the
West were hit with a relatively small price hike. It was a lucky turn of
events that spared federal officials from facing an uncomfortable fact: In an
oil-supply crisis, the western U.S. would be on its own.
The U.S. stockpile along the Gulf Coast, the nation's $23-billion oil
insurance policy, would be of little use to California in a crunch. The
massive cache of crude isn't connected to the West by pipeline and is at least
16 days away from California by tanker.
For federal energy experts, the BP scare "was sort of a wake-up call," said
Gordon Schremp, senior fuels specialist at the California Energy Commission.
Now, after spending more than 30 years focused on the Gulf Coast, strategic
reserve officials are weighing their options in the West for the first time.
"The reserve has to take a closer look at how it can respond to a crisis on
the West Coast, such as what happened with BP and the Alaska production," said
David Johnson, director of planning and engineering in the Energy Department's
office of petroleum reserves.
"It's becoming a big issue. The West Coast is a growing demand area," he said.
"We have to have a plan of some sort to meet their needs."
Johnson and reserve economist Jeremy Cusimano visited California in March, and
Cusimano returned this month to get a feel for the region's supply challenges.
The news was grim.
Oil-rich California, once self-sufficient, now relies on imports for 60% of
the oil that flows through its refineries roughly 20% from Alaska and 40%
from Saudi Arabia, Ecuador and other foreign countries. With oil production
declining in California and Alaska, state officials expect foreign oil imports
to more than double during the next 15 years.
That kind of dependence is a concern not just for California, but also for
Arizona and Nevada, which get most of their fuel from California ports and
refineries. A major supply disruption at the Los Angeles-Long Beach port
complex whether from an accident, a terrorist act or an earthquake would be
quickly felt across the West.
"If we lose one of our major crude oil import facilities, there would be
significant consequences," Schremp said. "There would be a turndown in
refinery production … with significant price impacts and some economic harm."
The government's new willingness to rethink its reserve strategy is driven
primarily by the growing thirst for foreign oil on both coasts. But it also
reflects a recognition that energy companies are holding smaller backup
inventories of oil and fuel and that the nation's crucial network of ports,
pipelines and refineries is maxed out and vulnerable.
Recent events show that such worries aren't unfounded.
This year a fire at a Texas refinery crimped the flow of gasoline into Arizona
from the east, forcing California to send extra supplies to Phoenix for the
last few months further straining regional fuel inventories. Last week BP
acknowledged that a water pipeline problem forced it to shut down a quarter of
its production in the same Alaskan oil field that made news last year.
Philip K. Verleger Jr., an economist who helped the Ford administration launch
the Strategic Petroleum Reserve in 1975, believes a federal oil inventory in
the West is overdue.
"If the United States is going to put any more oil in the reserve," he said,
"it should be on the West Coast."
Not everyone thinks a West Coast reserve is necessary.
Executives at Tesoro Corp. are among the doubters. And that hesitancy is of
particular note because, with no oil of its own and three West Coast
refineries to feed, Tesoro is more vulnerable to disruptions than its larger
brethren.
Lynn Westfall, chief economist at San Antonio-based Tesoro, downplayed the
Alaskan oil disruption late last year as "a blip," and said that the Strategic
Petroleum Reserve could provide indirect help to the West by adding oil to the
worldwide mix.
"If you release crude from the SPR, it will free up crude somewhere else that
we can then access," said Westfall, who said he conveyed that view to reserve
officials in a recent meeting.
"Plus, we're not subject to things like hurricanes out here that might cause a
release from the SPR."
For California and other Western states, any federal help is years away, if
it's coming at all. The new reserve study is tied to President Bush's January
proposal for a second expansion of the petroleum reserve starting in 2015.
Johnson's team, which will make recommendations by the end of the year, also
is assessing needs on the East Coast and whether there should be a federal
reserve of gasoline, diesel or jet fuel in addition to crude oil. "All the
options are still on the table," Johnson said.
The first expansion ordered by Bush to 1 billion barrels of oil from the
current 727-million-barrel capacity has been mapped out. It's set to begin in
2010 and would add oil at two existing facilities and a new site in
Mississippi.
The oil reserve was created more than 30 years ago in response to the Arab oil
embargo and was meant to protect the country against a similar supply cutoff.
There were no worries about the West Coast. California had plenty of oil, and
until 1998, the federal government owned a good portion of it as part of the
Elk Hills Naval Petroleum Reserve near Bakersfield. That supply, sold to
Occidental Petroleum Corp. in 1998, was never available for immediate use
because it was held underground in its natural state and would have to be
pumped out in traditional fashion.
Federal officials have sold oil from the strategic reserve only a few times:
after Hurricane Katrina in 2005, in 1996-97 for nonemergency price relief and
during the 1990-91 war in the Persian Gulf.
Some in California believe the state would have more use for a
government-owned gasoline bank that could release fuel in a daily auction,
boosting in-state inventories and loosening refiners' control over supplies.
Stillwater Associates, an Irvine consulting firm, studied that option for the
California Energy Commission in 2002, concluding that a gas bank would be
costly but would save consumers money by reducing price volatility and
blunting the effects of price jumps caused by refinery outages.
The oil industry opposed the idea, and state energy officials declined to
study it further, citing concerns over unintended consequences.
"We still see price spikes that are driven by lack of supply, and I would
argue that it's worse now than when we first looked at it," said David
Hackett, president of Stillwater.
"I think it's time to look at it again."
The federal government, which in 2000 provided oil from the strategic reserve
to establish a heating oil reserve in the Northeast, doesn't seem interested
in contributing to a West Coast gasoline stockpile.
Johnson said he had reviewed the gas bank study. "It's good if the state
wanted to do that," he said. "But I don't think it's a federal issue."
Johnson's group is focused on crude oil in the West, but he has concerns.
There are no salt formations to provide low-cost oil storage, and that leaves
the option of building large, above-ground tanks somewhere near the state's
refineries.
"It doesn't look good on the West Coast, environmentally and in terms of
trying to build something out there," he said. "It would be very hard."
But Energy Secretary Samuel Bodman said recently that he hadn't ruled anything
out.
"This is a 20-year program, so it will be a number of years before all the
questions get asked and they all get answered," he told reporters at an energy
conference in February. "We're in the very early stage of looking at it."
elizabeth.douglass@latimes.com
xxxxxxxxxxxxxxxxxxxxxxxx
Chicago Tribune
May 28, 2007
A 2 part series on BP ---
Part 2
http://www.chicagotribune.com/news/local/chi-mon_bp_sidemay28,1,4104839.story?ctrack=1&cset=true
Today's installment of the
"KEEPING THE OIL FLOWING" series has been posted online in two parts
Safety focus
tightens after refinery blast
By David Greising
Tribune chief business correspondent
May 28, 2007
TEXAS CITY, Texas -- Outside Gate 1 of the second-largest oil refinery in the
U.S., a block-lettered sign carries a seemingly simple message: "What You Say
Leads to Action."
Sloganeering signs do not a culture make, but the placard at least puts in
writing what the people running BP's Texas City refinery are trying to
accomplish. The March 2005 explosion that killed 15 people and seriously
injured 170 exposed a workplace culture in which fear and fealty to
tight-fisted budgets trumped safety and common sense.
Now BP is trying to change that. And what happens at Texas City -- changing
work processes while spending part of the $1 billion BP has set aside for U.S.
refinery and pipeline repairs -- is a template for what BP is trying to
accomplish through its vast U.S. production and refinery system.
The 83-year-old plant, large parts of which have been shut down for rebuilding
and repair almost continuously since the blast, is emblematic of the woeful
state of U.S. refineries.
No refineries have been built in 30 years, and the existing plants have needed
so much rehabilitation lately that the shutdowns, fires and production halts
have affected gasoline supplies and contributed to record-high pump prices.
So far this year, U.S. refiners have kept only 93 percent of their capacity in
action. That's a 15-year low and a sharp decline from utilization rates that
hovered around 99 percent a decade ago, according to data from the U.S. Energy
Information Administration.
To Robert Malone, who was brought in as president of BP America after a series
of mishaps that started with Texas City and wound up with 200,000 gallons
spilled on the Arctic tundra in Alaska, the job of updating BP's refineries is
tied tightly to the effort to change the corporate culture.
One example: At any refinery, one of the most dangerous periods comes when
equipment comes back on line. Malone is trying to change BP's culture to make
the process safer.
The Texas City refinery explosion occurred during a restart after repairs. An
employee left open a valve, allowing a large exhaust pipe called a blow-down
stack to fill with combustible fluid. A nearby idling pickup truck ignited the
flammable vapor and set off the deadly blast.
Now, no equipment comes back on line at BP without a thorough safety check
backed up with signed assurances that procedures have been followed.
Supervisors also must be present, which wasn't the case when the lone operator
left open the valve at Texas City. Every worker has the right to stop the
restart process, no questions asked, if anything seems amiss.
Safety campaigns can be hard to assess, but Malone says there is evidence that
this one is taking hold. Last month, BP's Toledo refinery was shut down
because of a stress fracture in one of the units. During the restart process,
Malone said, he got a call from the refinery manager: An employee had
requested a hold because one of the safety checks had not been cleared.
"There is no doubt in my mind that that call wouldn't have come in to me
before," said Malone. "The person who had that job would never have had the
authorization to interrupt the process."
Malone has initiated other changes designed to improve safety and keep BP's
refineries running. He is accelerating the pace at which repairs are planned
and executed and adding safety inspectors. A BP ombudsman, who operates
outside the corporate hierarchy, has the right to invite employee complaints,
inspect any plant and report directly to Malone.
Malone also is moving some workers out of the refineries.
At Texas City most of those killed were working in temporary trailers next to
the blast site, but could just as easily have worked far away. Today,
non-essential employees work in a former Kmart building near the refinery
complex.
BP is not expected to fix its culture overnight. Numerous studies prompted by
the Texas City accident, including a scathing review by the U.S. Chemical
Safety Board and another by a commission led by former U.S. Secretary of State
James Baker, have exposed a culture of management-union conflict and an
environment so toxic that employees were afraid to show up at work for fear of
being injured in accidents.
Brent Coon, a Texas lawyer who reached an estimated $32 million settlement
with BP after the explosion, said culture change goes only so far.
Even after updating is done, the antiquated refineries at BP and throughout
the U.S. just can't keep up with high demand and the changing needs of
refiners, he said.
"You're asking an Edsel to run with a Corvette," Coon said. "You can fix it up
and make it run well enough, but if you ask it to keep up with a Corvette,
it's going to fall apart."
Inside the Texas City refinery, though, there is optimism that the changes in
technology and culture can take hold and make a difference.
Uwe Klingler, an operations manager who came to BP from another company after
the Texas City explosion, said oil refining is inherently risky.
"It was always, and will always be, about managed risk," Klingler said. "There
is risk involved. What we've got to do is manage the risk."
- - -
About this story
Chief Business Correspondent David Greising spent six months reporting on
BP PLC's attempts to fix three major problem sites within its huge North
American unit. Greising, along with Tribune photographer Bob Fila, reported
from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas
City, Texas, the location of a deadly refinery explosion that killed 15 in
2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which
nearly toppled into the sea during a hurricane in 2005. The Tribune is the
first news organization to visit all three sites since the disasters and the
only one ever to set foot on Thunder Horse in the gulf.
----------
dgreising@tribune.com
IN THE WEB EDITION: Read Part 1 of the series, plus the Tribune's David
Greising describes his visit to BP's facilities and how the oil giant is
struggling to rebuild in a video at chicagotribune.com/bp
Copyright © 2007, Chicago Tribune
Xxxxxxxxxxxxxxxxxxxxxxxxxx
Today's installment of the "KEEPING THE OIL FLOWING" series has been posted
online in two parts
Troubles run
deep on Gulf oil platform
Repairs a daunting challengeTechnology leads BP to drill where it once could
not, but the race for new fields carries high costs and risks
By David Greising
Tribune chief business correspondent
May 28, 2007
THUNDER HORSE PLATFORM, Gulf of Mexico -- The day after massive Hurricane
Dennis churned through the Gulf of Mexico in July 2005, a commercial vessel
traveling past BP PLC's hulking Thunder Horse oil platform radioed the bad
news to its owner: The platform's top deck was listing into the water.
When a landing party from BP arrived at the platform two days later, they had
to tie onto rails near the control tower to haul themselves up the platform's
30-degree incline.
"It looked like a ship that had been sunk," recalled Stan Bond, BP's head of
subsea operations for the Gulf of Mexico.
The workers were surprised to learn that the platform, evacuated before Dennis
hit, had not taken on water from a leak through its hull. Rather, an
incorrectly plumbed, 6-inch length of pipe had allowed water to flow freely
among several ballast tanks. That began a chain of events that caused the
platform to tip into the drink.
Now BP is attempting to do what no oil company has done before: essentially
rebuild the entire architecture of an oil field on the sea floor some 6,000
feet beneath the waves.
At $250 million, the job is costlier, and riskier, than putting the equipment
on the gulf floor in the first place. On the frontier of oil exploration, the
margin between riches and disaster can be as small as a 6-inch piece of pipe.
Yet for BP, rebuilding the platform is critically important because the
company desperately needs the oil flowing as reserves in formerly rich fields
such as Prudhoe Bay in Alaska dwindle.
Politics have made oil from the Middle East, Africa, Russia and South America
is increasingly out of reach. And new discoveries around the world are more
rare and continue to shrink in size.
"We have passed the peak for world discoveries," said Robert Gillon, an
analyst at oil-industry research firm John S. Herold Inc. "It's hard to see
how the industry can do anything whatsoever to materially increase its oil
reserves or production."
Against this backdrop, Thunder Horse, sitting atop a reserve that possibly
holds 1.5 billion barrels, promises to deliver up to 250,000 gallons of oil a
day, making it one of the gulf's biggest producers. For U.S. consumers now
paying an average of $3.10 a gallon for gas, Thunder Horse would relieve some
of the price pressure: Fully operational, it would boost total U.S. production
by 5 percent.
For BP, the troubles at Thunder Horse have turned the oil platform into a dual
symbol. Like Janus, the two-faced Roman god that glimpses both the past and
the future, Thunder Horse stands as a reminder of BP's mistake-prone recent
track record. Looking forward, though, it holds out the prospect of a
lucrative, rewarding future.
The Thunder Horse mishap followed by nearly four months BP's worst-ever
accident on U.S. soil, a refinery explosion in Texas City, Texas, that killed
15 people. Then, last spring, BP spilled 200,000 barrels of oil onto the
Arctic tundra, the first of several pipe leaks that ultimately led BP to
temporarily shut down half of North America's largest oil field.
Yet getting Thunder Horse on line will not be easy. The deep Gulf of Mexico is
challenging in its own right. Removing and reassembling an oil field at such
depths has never been attempted.
One daunting challenge: delicately lifting miles-long strings of steel pipe
from the sea floor. If the pipes stress or twist too much, they might weaken
and perhaps spring a leak one day, resulting in disaster.
"It will not be easy to pull off," Bond said. "You're trying to change things
to make something good. You've got to make sure you don't change things and
make them worse."
Exploring the 'Dead Sea'
BP's history in the deep waters of the gulf began inauspiciously. Though the
company had drilled in the shallows since the 1980s, in 1991 it began focusing
on finding new reserves under water greater than 2,500 feet deep.
The early effort did not go well. At the outset, BP drilled a series of dry
holes. At a cost well beyond $100 million, BP was learning why others in the
industry had given the gulf a derisive nickname: "The Dead Sea."
"Drilling a succession of dry holes, it was almost the definition of
insanity," said Cindy Yeilding, a leading geologist for BP's Gulf of Mexico
effort. Executives at BP's London headquarters agreed. For two years, they
would not approve any additional deep-water gulf drilling.
But that thinking changed. After a reassessment, BP's oil explorers decided on
a new strategy that focuses all the company's energy on seeking big reserves,
dubbed "elephants." And the company put big resources behind the new approach:
as much as $2.5 billion annually in recent years on gulf exploration.
That's nearly double the amount spent in BP's next-largest target, Azerbaijan,
and roughly 20 percent of BP's total exploration and production budget.
The allocation makes sense for BP, because the gulf's deep waters today float
above one of the hottest oil prospects on the planet, matching up with Angola
and a small handful of lesser places at a time when new huge prospects are not
on anyone's maps.
BP is able to move so aggressively in large part because of its $55 billion
purchase of Chicago-based Amoco in 1999. Until then, the efforts of BP, like
those of other oil giants, had been stymied in the deep Gulf of Mexico by
thick layers of liquefied salt that sit like opaque blankets over much of the
gulf's oil deposits.
But Amoco had world-class imaging technology, as well as data-mining
capability and mathematical algorithms that could interpret the data it
collected.
Combining Amoco's tools with some of its own, BP developed a unique
exploration approach: It began placing sensing nodes on the floor of the gulf
floor. Combining the sea-floor node data with information collected by the
conventional method of towing sensors behind a large boat, BP could look
through salt from several angles. Suddenly, the opaque blanket was lifted.
Exploration was not cheap, though. These days, it costs about $50 million to
fully map a potential oil reserve. To drill an exploratory well costs an
additional $100 million. Both those figures are huge jumps from what they
would have been a decade ago, when shallower, less complex oil reserves were
still available to tap. Back then, roughly $10 million would cover the cost of
an exploratory hole.
Such costs and technology hurdles are what drove BP to adopt its "elephant
hunt" strategy: Focusing only on the potentially biggest and most lucrative
prospects, and ignoring the rest.
An aggressive lease-acquisition strategy, paying $300,000 and more a pop for
rights to explore and pump oil from a 9-square-mile plot of the ocean floor,
backed the effort. Taking advantage of a controversial Clinton administration
program that drastically reduced royalties on deep-water gulf leases sold
after 1995, BP stocked up.
And for good reason. Like most oil companies, BP has seen its exploration
opportunities diminish over time. Its reserve replacement ratio, which
measures whether a company adds new oil reserves at the same rate it depletes
its existing resources, has fallen steadily in recent years.
BP's replacement ratio had a modern-day peak of 191 percent in 2001, meaning
BP added almost twice as much in reserves as it sold. But that number dropped
below full replacement in 2004 and 2005 before climbing above the break-even
line again last year, to 113 percent.
By 2006, BP held leases on 650 tracts in Gulf of Mexico water deeper than
1,250 feet. After 15 years of effort, BP was vying with longtime deep-water
player Chevron to become the largest leaseholder in the deep gulf.
A host of productive exploratory wells followed. Going by names like Atlantis,
Neptune, Mad Dog and Holstein, they are among the gulf's richest finds.
One, at first called Crazy Horse, got a name change after descendants of the
Native American warrior protested. Today it's called Thunder Horse.
The $250 million pipe
At a cost of $1 billion to build, and physically imposing with a top deck that
rises 15 stories above the water's surface, the Thunder Horse platform appears
to be invulnerable to the forces of nature and a wonder of technology. After
all, more than 18 major parts on the platform have Serial No. 001 -- meaning
they were invented just for this job.
It turns out Thunder Horse is vulnerable to both the power of nature and the
shortcomings of modern technology.
The platform was designed to handle hurricanes as strong as Dennis. But the
evacuation for the hurricane, combined with just the slightest shifting in
Dennis' strong winds, set in motion an unlikely chain of events that caused
the platform to tilt. That, in turn, has led to the delay that is costing BP
billions in lost revenue -- and serving for the industry as an example of what
can go wrong at the outer limits of technology.
The platform rests on four hollow, airtight legs that are as wide across as a
two-bedroom apartment. Normally, the legs give the platform buoyancy, and
horizontal connecting sections add stability.
After workers evacuated in advance of Hurricane Dennis, though, the misplumbed
pipe allowed water to cascade through ballast and bilge tanks. The force of
the flow forced open valves that in turn allowed the water to gather in the
two port-side legs of the platform.
As Thunder Horse's top deck tilted toward the water, ballast pipes that
normally pump water out began taking water in.
The support legs filled with water, and all manner of calamity set in. Some 30
car-size pumps and motors were ruined. A corroding process started that ran
through the platform's 25 miles of electric cable and wiring like oil being
sucked up by a wick.
"There's the $250 million pipe," said Sammy McDaniel, BP's head of Gulf of
Mexico operations, a wry smile on his thin face as he showed a visitor the
cleaned-up inside of one of Thunder Horse's large, hollow legs.
Neither McDaniel nor Bond had set foot on Thunder Horse before the mishap. On
the first helicopter flight in, they agreed to work together, with McDaniel
focusing mainly on the platform's operations and Bond zeroing in on the bottom
of the ocean.
"We knew this one was going to be a bear," McDaniel said.
In the weeks after the landing party first boarded Thunder Horse, three days
after the storm, the platform became a hive of frantic activity. With 150
workers living on a ship anchored nearby, working with lamps on their hard
hats until electricity could be restored, McDaniel and Bond led a frantic
cleanup and restart effort.
Work stopped only for hurricanes. After the devastating successive storms,
Katrina and Rita, came through, the workers stayed off the platforms while
trying to help their colleagues piece their lives back together.
BP's corporate brass told the public that it believed Thunder Horse could
restart by late August 2006. Privately, Bond and McDaniel thought they could
get the platform back in operation before the end of 2005. Rushing to meet the
deadline, workers piled up nearly 4 million man-hours on the cleanup alone.
With start-up approaching, the recovery team in May of 2006 used water to
pressure-test the subsea system of pumps, wellheads, piping and gathering
centers that sprawl over an oil field on the ocean floor that covers an area
nearly as wide across as the North Side of Chicago.
Then the unthinkable happened: The system leaked.
"We were this close," said McDaniel, holding a thumb and forefinger close
together. "Then, 'Damn! What went wrong?'"
Sleuthing at 6,000 feet
Perhaps a valve was left open. Perhaps a coupling on a pumping station wasn't
properly tightened. "We figured we would find out in our spare time," McDaniel
said.
Two weeks passed, then a month. One pressure test held for eight hours, and
then failed. The team injected ink into the piping network and sent a remotely
operated, unmanned submarine 6,000 feet down into the water to photograph what
was going on.
Outfitted with cameras and high-precision robotic arms, the sub was capable of
spotting any problems, and fixing many potential mishaps.
As the robot's operators watched on a black-and-white video monitor inside a
cramped control room, the camera focused on an image of a sea-floor metal
structure, a manifold. The size of the container on the back of a semi-truck,
the manifold is a key piece of equipment that ties together the lines from
dozens of sea-floor wells, and then helps transfer oil up toward the platform.
Most of the huge manifold looked fine. But on the side, on one of the large
pipes that snaked through the frame that formed a sort of exoskeleton for the
structure, was a shocking sight: an inch-wide gash slashed through a weld. The
leak was found.
Perhaps it was just one bad weld, but McDaniel and Bond had to determine if
there were any more. They directed the submarine to another manifold and found
a second ruptured weld. Inspection of other welds in the subsea equipment
turned up even more cracks.
Thunder Horse's oil reservoir is nearly 5 miles below the water's surface. At
that depth, oil will gush from the drill pipes at a temperature of 275 degrees
Fahrenheit, under a metal-crunching 17,400 pounds per square inch of pressure.
Those conditions can stress even the mixture of high-strength steel and alloy
that make up the half-inch welds on the manifolds and pipes of the Thunder
Horse oil fields. But the equipment had gone through severe tests -- at 125
percent of the worst stresses that the Thunder Horse field might exert.
There had to be something else.
"We're operating at the edge of what is known," said Kenny Lang, BP's head of
Gulf of Mexico operations. "When you're at the edge, you're creating
knowledge. And when you create knowledge, you sometimes stub your toe."
Now the hunt was on for a new spot of knowledge: What caused the problem?
Lang flew in a team of experts in subsea oil production, welding and
metallurgy from around the world to Houston to determine the cause of the weld
failures.
Meanwhile, he directed others to touch base with the manufacturers of every
component built into the sea-floor manifolds. He asked for testing of the
anti-corrosion materials and insulation that enshrouded the subsea pipes. He
wanted no clue missed.
"Ultimately you say, 'What if I'm wrong about what caused this? We put our
equipment back on the seabed, and it fails?' " Lang said. "You can't risk
that."
Lang also wanted other oil companies to be aware of the dangers. Learning that
Shell Oil Co. was due to submerge manifolds at depths similar to Thunder Horse
in the fourth quarter of last year, he made certain Shell was notified of the
possible risks.
Even as the investigation started, though, pressure mounted onboard Thunder
Horse.
BP had commissioned the Balder, one of only two ships in the world capable of
lifting the manifolds and other heavy equipment from the sea floor, to visit
the platform in December. After that, the Balder wouldn't be available again
for almost a year.
By late September 2006, the manifold investigation team delivered its verdict.
The welds, indeed, were the problem thanks to an unforeseen chemical reaction.
While the manifolds sat idle for a year after the platform tilted, the
crushing pressure at the bottom of the sea forced hydrogen atoms into the mix
of steel and high-strength alloy that made up the welds. The hydrogen caused
the metal to become brittle, and when water was forced through the piping
during the restart testing, the welds failed.
Drilling toward Mardi Gras
In the meantime, Bond hadn't been waiting for a verdict. He knew he only had
until the end of 2006 to have all the sea-floor equipment ready to be lifted.
That meant sealing wellheads, cutting pipes and planning logistics. It also
meant working around the schedules of the 280 people onboard Thunder Horse,
some of whom continued drilling new holes even as the rest of the sea-floor
operation stood idle.
Drilling, after all, is what Thunder Horse was built to do.
On a recent spring day, a team of workers operated the ship's drill rig,
pulling up a drill bit that had gone more than 20,000 feet below the seabed
floor. Nearly 3 million pounds of pipe stretched from the drill rig to the
bottom of the hole.
Spinning furiously, with "mud" that is used to lubricate them spitting out of
the hole, the drilling pipes came out in 95-foot sections. As each joint
emerged, workers stood by as a huge, mechanized clamp twisted off the coupling
that separated it from the long line still stuck in the ground.
Directed by operators using joysticks in an air-conditioned control studio, an
overhead winch grabbed the newly freed section of pipe and hung it on a rack.
The pipes knocked together, sounding like a supersize wind chime.
Nearby, in the main Thunder Horse control room, BP workers monitored huge
computer displays that showed the pressure, temperature and fluid volumes in
all of the oil platform's piping systems.
There was something eerily missing on the screens, though: Not an ounce of oil
was anywhere to be found.
Today, Thunder Horse's crews have removed about three-quarters of the
equipment that once nestled on the seabed. They are putting new insulation and
anti-corrosion coatings on some, replacing other pieces entirely.
The most delicate operation -- pulling the pipe up from the seabed without
bending it -- is necessary, Bond said, because it's the only way he can
reassemble the equipment that's needed on the oil field. The deep-sea robots
can cut the pipes at the point they connect to the equipment 6,000 feet below
the surface. But robots can't weld.
So Bond must oversee an operation that pulls up the freed pipe and brings it
within reach of the Thunder Horse deck. There workers can weld it back to the
huge, heavy pieces of equipment. Then BP workers must carefully lower the
joined pieces back down, all without causing any new problems.
No one says it will be easy. But everyone onboard says it must happen on time.
They will need the Balder for some of work, and demand for that ship is so
high that it only comes by every 18 months or so.
"We've just been going full speed for a long time, and there's no letting up,"
said McDaniel, the operations chief.
"What we want to do is prove to ourselves and the world that we're ready," he
said. "We just need to get all this stuff under us, and begin operation."
Leading a reporter on a tour of the complex onboard systems that separate oil,
water and gas, McDaniel pointed to a pipe from the platform that plunges deep
into the ocean. By the time Thunder Horse goes into production, the pipe will
connect to Mardi Gras -- a $1 billion pipeline BP is building that one day
will carry half of all the oil pumped from the deep-water gulf."This is the
top end of the Mardi Gras pipeline," McDaniel said. "When the oil leaves here,
it's gone."
For BP, and for gas-hungry consumers across the U.S., it can't happen soon
enough.
- - -
About this story
Chief Business Correspondent David Greising spent six months reporting on
BP PLC's attempts to fix three major problem sites within its huge North
American unit. Greising, along with Tribune photographer Bob Fila, reported
from Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas
City, Texas, the location of a deadly refinery explosion that killed 15 in
2005; and atop BP's Thunder Horse oil platform in the Gulf of Mexico, which
nearly toppled into the sea during a hurricane in 2005. The Tribune is the
first news organization to visit all three sites since the disasters and the
only one ever to set foot on Thunder Horse in the gulf.
----------
dgreising@tribune.com
IN THE WEB EDITION: Read Part 1 of the series, plus the Tribune's David
Greising describes his visit to BP's facilities and how the oil giant is
struggling to rebuild in a video at chicagotribune.com/bp
Copyright © 2007, Chicago Tribune
xxxxxxxxxxxxxxxxxxxxxxxxxx
Chicago Tribune
May 27, 2007
A
2 part series on BP -- Part 1
http://www.chicagotribune.com/news/local/chi-bp_note_0527may27,1,4073646.story
Chief business correspondent David
Greising spent six months reporting on BP PLC's attempts to fix three major
problem sites within its huge North American unit. Greising, along with
Tribune photographer Bob Fila, reported from Deadhorse, Alaska, site of the
Prudhoe Bay oil spill last summer; Texas City, Texas, the location of a deadly
refinery explosion that killed 15 in 2005; and atop BP's Thunder Horse oil
platform in the Gulf of Mexico, which nearly toppled into the sea during a
hurricane in 2005. The Tribune is the first news organization to visit all
three sites since the disasters and the only one ever to set foot on Thunder
Horse in the gulf.
Read Part 1 of the series, plus the Tribune's David Greising describes
his visit to BP's facilities and how the oil giant is struggling to rebuild in
a video at
chicagotribune.com/bp
GRAPHIC
http://www.chicagotribune.com/business/chi-05-26-07-onebp_gfx,1,2860562.graphic
BP ALASKA Graphic
http://www.chicagotribune.com/business/chi-05-26-07-twobp_gfx,1,7115825.graphic
http://www.chicagotribune.com/news/local/chi-sun_bpmay27,1,571452.story
Risky
business: Big Oil's billion-dollar juggling act
It's a high-stakes gamble, where even a tiny pinhole in a pipeline can cost
billions and drive up the cost of filling your gas tank.
By David Greising
Tribune chief business correspondent
May 27, 2007
DEADHORSE, Alaska -- First of two parts
DEADHORSE, Alaska -- Painful
reminders of the fallout from the cheap-oil era of a decade ago are never far
from Robert Malone, the top North American executive of oil giant BP.
In March, he traveled 250 miles north of the Arctic Circle to look in on BP's
efforts to rebuild the pipeline system that leaked 200,000 gallons of oil last
spring onto Alaska's North Slope. But before donning an arctic parka to head
into the 52-degrees-below-zero wind chill, Malone had to interrupt a meeting
with workers to mark a solemn occasion: the moment, precisely two years
earlier, when an explosion at the oil giant's Texas City refinery killed 15
people.
"One thing about a BP person, you'll get a can-do attitude," Malone told the
group before quieting the room for the silent observance. "We've got to take
that can-do and say: Can do, will do -- but we've got to do it right."
The can-do culture of BP's past pushed it to explore the depths of oceans,
deal with unsavory political regimes, pioneer the era of oil-industry
consolidation and test the limits of technology. Malone was in Alaska trying
to reignite BP's can-do spirit after nearly a decade in which the company
scrimped on routine maintenance and ignored safety issues that led to the
disaster in Texas and the spill in Alaska.
And now, an inability to tackle daunting technological challenges has forced
BP to delay pumping from one of its brightest prospects for the future: BP's
massive Thunder Horse platform in the Gulf of Mexico. A nearly 3-year delay in
the startup of the world's largest floating oil platform, which covers an area
the size of three football fields, is setting back the arrival of enough oil
to boost total U.S. production by nearly 5 percent.
Rarely has one company faced such grave trouble at so many places in such a
thin slice of time. The breakdowns form a composite of the challenges an oil
giant faces at a time when fields like Prudhoe Bay are running short of oil,
the refinery infrastructure in places like Texas City is out of date and
overtaxed, and the prospects for success in exploration are dicier than ever.
The crisis at BP is symptomatic of challenges oil companies face in trying to
slake the world's thirst for oil. The six "super-major" independent oil
companies together take in nearly $1.5 trillion each year. Yet the residue
from the cutbacks and scrimping during the days of $10-a-barrel oil in the
late 1990s has left the industry ill-equipped to handle even the slightest
hiccup.
The U.S. got a taste of the industry's fragile state when Hurricanes Katrina
and Rita hit in 2005 and took out more than 25 percent of U.S. refining
capacity, forcing shortages and price hikes. And now consumers are paying the
price again: As the summer driving season gets under way this weekend,
Americans are paying a record nationwide average of $3.10 a gallon at the
pump.
The BP connection is hitting perhaps hardest of all in Chicago. In part
because of recent problems at BP's Whiting refinery, Chicagoans are paying
among the highest gas prices in the U.S.: about $3.59 a gallon.
The Chicago connection is more than an ironic happenstance. Many of BP's
problems can be traced to its 1999 acquisition of Amoco Corp. The Amoco
purchase, followed soon after by BP's merger with Arco, transformed BP from a
mid-size major into one of the world's very largest oil giants. Yet, because
of Amoco's own poor maintenance record, the deal saddled BP with a huge
backlog of trouble just as the industry's finances were hitting bottom. BP's
immediate response to the tight times, a 25 percent cut in fixed costs, may
have contributed to its problems at Texas City and Prudhoe Bay.
BP may operate with billion-dollar budget cycles, but the problems that take
it down can start with something as tiny as a pinprick. A hole that size in
the Prudhoe Bay pipeline system forced a months-long shutdown of half of North
America's largest oil field beginning in August 2006. The Texas City explosion
occurred because a single valve was left open too long. And Thunder Horse is
behind schedule, costing BP $3 billion in lost revenue, because a 6-inch
length of pipe was not correctly plumbed.
Getting to the root of the problems, and fixing them, would be a huge job
under any circumstances. At BP, the world's third-largest independent oil
producer, with revenues of $266 billion last year, the complexity is
compounded by turmoil at the top. BP's visionary longtime leader, John Browne,
was forced to step down in early May after admitting he lied to a court in an
effort to conceal how he used company assets to help his boyfriend start a
business.
Now the pressure is on Malone, a 55-year-old BP career oil man who hails from
scrubby Daingerfield, Texas, population 2,517. Malone, his soft-spoken Texas
twang intact though he has lived in Ohio, Alaska, and London much of his adult
life, was installed as head of BP's North American operations soon after the
Prudhoe pipes first leaked in spring 2006.
In his prior job, heading BP's global shipping operation, Malone moved oil
tankers through the Persian Gulf and the pirate-infested Straits of Malacca.
Yet his new assignment, turning around BP's American operation, he considers
more difficult. And the hardest part, Malone said while inspecting repairs in
Alaska and trying to charge up workers to do their work quickly and correctly,
will be changing the corporate culture.
The challenge
As Malone's corporate jet set down at the tiny Deadhorse airport in late
March, the first part of his mission was fairly simple: assess progress on the
reconstruction of the Prudhoe pipeline system that twice sprung leaks last
year. The first dumped 200,000 gallons of oil onto Alaska's North Slope in
March 2006. But the second incident was almost worse: Two small leaks in
August that exposed a pipeline that in many places had corroded almost
entirely through.
Fixing and replacing the pipes is costly, laborious work. The tougher task,
though, is the job of transforming a corporate culture that had allowed oil to
eat through the Prudhoe pipes unnoticed. Years of cost-cutting and management
shuffles had created frustration among Prudhoe managers. And now, in the year
since the first spill, rampant overtime work and intense pressure have
exhausted workers and taxed their ability to finish the job.
Much is riding on Malone's changes, not only for Prudhoe but for all of BP
America from the Arctic Circle to the Gulf of Mexico. To compete in the new
era of high prices, climate-change activism and cutthroat competition for oil
resources, BP and others in the industry are quickly finding there is no room
for error.
Over a two-year period BP will replace 16 miles of pipe at Prudhoe, the
central spine of the system that pumps up to 10 percent of U.S. production
into the 800-mile Trans-Alaska Pipeline System.
It's difficult and daunting work, as Malone witnessed first-hand.
There is extreme cold, for starters. Polar bears too. Some buildings have
steel-caged entrance chambers from which workers scan the horizon for polar
bears before walking to their blue Ford Excursion trucks whose engines idle
all day because they might not start until spring if ever they freeze.
Yet everyone realizes the cold is a necessary ally, too. Without it, work on
the Prudhoe Bay field could not be done.
The hard freeze that sets in each November enables BP workers to begin
spraying enough water on the tundra to form foot-thick ribbons of ice that can
support the weight of the boom trucks and tractor trailers that are needed to
replace the pipe. By early December the ice roads crisscross Prudhoe Bay's
335-square-mile network of pipelines, wells and processing centers.
Work in the oil field thus is a race against nature and a sprint against time.
When the winter freeze sets in each fall, work crews fly in on chartered
Boeing 737 jets for two weeks of 12-hour shifts. Workers pair up in quarters
the size of a cruise-ship stateroom, half working days, half working nights --
though night seeps into day once the sun sets for good each November and does
not rise again until late January.
Crews fly in from places as far away as Texas, Louisiana, Tennessee and
Georgia. Their Prudhoe Bay lifestyle -- isolated from family and friends, and
hard physical work often involving decades-old technology -- seems like a
throwback to the logging camps of the Paul Bunyan stories.
But they all seem energized by the knowledge that BP needs the Prudhoe Bay
field operating at peak efficiency, and it needs the work completed quickly.
And those twin needs have created a demand for work that puts money in their
pockets.
"The whole reason we're up here is to make money," said J.C. Robinson, an
oil-field worker for 27 years. "People are tired, but they're glad to have the
work."
Still, the rush toward recovery has led to more problems.
Early on, the U.S. Department of Transportation, one of several agencies
charged with inspecting the work, was rejecting 8 percent of the welds on BP's
new pipes, said Rob Guisinger, a pipeline inspector for the agency.
The Steelworkers Union, representing many BP field workers, is worried about
the stresses workers are facing. Kristjan Dye, president of the union local,
this week worked an 18-hour day, then two 12-hour days, followed by another
18-hour day. It's tough, Dye said, but the Prudhoe Bay workers are benefiting
from the lessons BP learned at Texas City, where management's refusal to
listen to worker complaints may have contributed to the deadly blast.
"I can tell you, a few years ago, management was not OK with it if you refused
to work overtime," Dye said. "Now, because of Texas City, they're a lot more
accepting of it. We were moving toward a safer workplace even before the leaks
last year."
Guisinger has seen a change even in the last few months.
"They were pushing their people awfully hard to get the work done," he said.
"But my concerns have dropped off considerably. We're in a good place right
now." Today, the rejection rate on pipe welds has dropped to less than 1
percent, well below the industry average.
A hiring wave is improving conditions too. BP has taken on 40 operators and
technicians at Prudhoe Bay in the last six months. What's more, BP has
uncorked $550 million for the repair effort on top of the $320 million it
spends annually on maintenance.
Malone hopes the infusion of money will send a signal to workers that the
company cares about doing things right. Even so, Malone said, no one should
get the idea that BP will just throw money at the problem and not care how it
is spent.
"The day someone says budget doesn't matter, well, then I'm working at the
wrong company," he said after his Prudhoe Bay tour, while traveling on a
leased jet en route to Houston and a weekend at his Texas ranch.
Bashfulness and bad dreams
The afternoon of his arrival at Prudhoe Bay, Malone meets with a room of
workers at Prudhoe. Dressed incongruously in a crisply pressed blue jumpsuit
that contrasts with the sweaty coveralls of the workers around the table,
Malone is a quiet and conversational speaker. But he's direct when he wants to
make a point.
Working from person to person among the dozen in the room, Malone asks
questions about the coatings on pipes designed to prevent leak-inducing
corrosion from the outside. He hears about how a switch to smaller-diameter
pipes will increase the velocity of the crude oil moving through the pipes --
something that will help cut corrosion from the inside, which is harder to
detect and is the sort that ate through BP's Prudhoe Bay pipes.
Malone also wants to know about dangers -- dangers to workers and to the
environment. He asks one contractor if his people are reporting all their
accidents and making BP aware of any unsafe conditions.
"Our people are not bashful," responds Matthew Lanagan, safety and
environmental manager for Houston Construction, a major contractor on the
Prudhoe Bay field.
"That says something about your company: that you've come a long way," Malone
shoots back. "We were all struggling with that a little while ago." It is a
polite criticism not just of Houston, but of BP's own problems of employees
not alerting higher-ups over their safety and maintenance concerns.
Then Malone turns the conversation to what at first seems almost a minor,
technical point.
"And my nightmare, documentation?" he asks the people in the room. "You knew I
was going to ask about documentation. That's my nightmare."
Malone's comment focused on the record-keeping required to comply with
regulators in the wake of the spills. BP must track every new weld, every
radiographic inspection of pipe, every time it tests corrosion rates by
inserting metal tabs into the flow of oil. The scrutiny is relentless, and
Malone wanted to ensure that every worker understood how significant a role
paperwork will play in getting the company back on track.
But when he got back to work in Texas, Malone soon learned that documentation
was creating an entirely different sort of bad dream for him. Congressional
investigators believed BP was holding out on delivering key documents --
e-mails and other internal memoranda created in the years running up to the
2006 spills.
Malone already had endured a blistering congressional hearing in September.
With gas prices jumping because of the Prudhoe Bay shutdown, lawmakers
criticized BP's safety practices and accused the company of conspiring to hike
prices. Malone was too new to the job to say much of substance. But he did
promise one thing: BP would be candid and honest in its dealings with Congress
and the public.
But a few days after returning from his March tour of the BP fields, Malone
received disheartening news: An internal BP search had uncovered a batch of
e-mails containing years of in-depth discussion claiming budget cuts were
compromising the company's fight against corrosion at Prudhoe Bay. Worse yet,
it was the kind of incriminating communication that BP previously had said did
not exist.
Conditions for disaster
"Reliable funding and resources is a yo-yo, accurate schedule [of
corrosion-fighting] activities is a joke, and predicting ... impacts is even
further out of the realm of reality," wrote one of BP's top corrosion
fighters, in an e-mail almost a year to the day before the spill.
The note, one of dozens turned over to the Investigations and Oversight
Subcommittee of the House Energy & Commerce Committee just days before its
hearing in late May, is a cry for help. It appears to reflect the frustration
of a dedicated employee seeking to reconcile corporate rhetoric about safety
with the reality of repeated budget cuts in the field.
Ultimately, Kip Sprague, the corrosion manager, grudgingly agrees to provide a
"placeholder" request for resources -- a number to give his boss while
suspecting all the time that it's unlikely he will get any help.
"Bitch, bitch, bitch ... ," Sprague writes in response to his boss' request
for information. "I will try to wrestle down some middle ground between the
reality of the situation and some feel-good placeholders, just to get people
off your back. However, I will not run/sacrifice an inspection strategy and
program with limited resources. ... That, in my opinion, is negligent."
Corrosion -- the chemical reaction between water, bacteria and steel -- can
take years to eat through a high-strength carbon-steel oil pipe. The caustic
stew of management budget cuts and oversights that allowed corrosion to burrow
through Prudhoe Bay's pipes built over a period of years too.
The Prudhoe Bay operation at the peak of its 30-year life span produced 1.5
million barrels of oil per day. But after that 1989 high point, production
rates dropped sharply. A skimpy 500,000 barrels were coming out of Prudhoe's
1,273 miles of pipes each day prior to the 2006 spills.
The 1989 peak coincided with two other important events. Oil prices were
plummeting by almost two-thirds from their $66 peak in 1981. At the same time,
BP was tapping into new oil sources that delivered viscous, highly corrosive
crude. From that point forward, oil flowing through BP's eastern operating
area would be increasingly thick and slow flowing, and thicker oil is far more
corrosive, thanks in part to sand that settles in the bottom of pipes and
deflects anti-corrosion chemicals away from the metal they are intended to
protect.
With prices skidding toward their bottom of about $9 a barrel in late 1998,
the bosses at headquarters began rejecting requests for materials and programs
necessary to keep the Prudhoe Bay pipes from rotting.
A 25 percent budget cut instituted in 1999, after the Amoco merger, meant that
one crucial corrosion-fighting method -- sending cylindrical probes called
"pigs" through the pipes to both clean and inspect them -- was abandoned
virtually altogether, company records show. The BP e-mails also show that at
one point, the top corrosion-fighting executive, Richard Woollam, also stopped
buying corrosion-fighting chemicals, again in an effort to meet budget
targets.
A review of e-mails shows that workers began fretting at least a decade ago
that the slowing velocity of oil in the lines might dangerously create
conditions for corrosion. At the same time, they saw no help coming from
headquarters.
"My impression ... is that we will not be getting any relief on the budget,"
Woollam wrote in a 1999 e-mail. Prudhoe Bay's budgetmakers believe it is
important to fight corrosion, he writes, "but, no one is prepared to let loose
the purse strings."
Two days later, a colleague writes that, "due to budgetary constraints, the
decision has been made to discontinue" a corrosion-fighting chemical
treatment.
Two years later, in mid-2001, the budget pressure had not let up. A corrosion
employee talked about "new bloodbath numbers" in the budget. Though an
inspection pig had not been sent through the line for a decade, he suggested
discontinuing plans for that, as well as for manual inspections of the pipes'
exterior surfaces.
By 2003, BP was setting concrete plans to pig Prudhoe Bay's lines. But there
was a problem: New, high-technology "smart" pigs were too long to fit through
many of the bends in the Prudhoe Bay system.
When BP proposed spending $2.5 million to adapt the system to the new pigs,
its minority partners in the Prudhoe Bay field -- ConocoPhillips and
ExxonMobil -- did more than say no, according to one e-mail. They also
requested that BP formally withdraw the request, thereby putting the proposal
to rest for good.
By that point, the western half of the Prudhoe Bay oil field had not been
pigged in 15 years.
The eastern half of the field, which BP acquired as part of its buyout of Arco
in 2000, had never been pigged. By the time of the leaks last August, the key
oil transit lines in the eastern area were so corroded that BP ultimately
decided to replace the entire 8-mile network rather than attempt a risky,
piecemeal repair. At the same time, BP had cut back on crews doing external
monitoring of the pipes.
Discovery of the leak
On March 2, 2003, a worker driving along the pipeline on the western part of
the Prudhoe Bay field smelled oil. Co-workers rushed to the site and quickly
discovered the 200,000-gallon spill. BP's automatic detection system had
missed the slow-flowing leak, which had appeared an estimated five days
earlier.
BP sent a smart pig through the western section of the Prudhoe Bay field. To
get a smart pig into the pipes, though, BP workers had to set up a temporary,
plywood shed and specially rig the transit line to accept the long,
cylindrical object. Meanwhile, a cleaning pig sent through the section for the
first time in nearly two decades caused nearly 22 barrels of sludge to break
free from the pipe walls.
The March spill also raised concerns about the eastern half of the Prudhoe Bay
field.
Under orders from regulators, BP sent a smart pig through those eastern pipes
found 16 anomalies in 12 locations, including 80 percent of the pipe wall
eaten away in some points. When the oil leaked from two spots in August, BP
shut down the line.
The Prudhoe Bay corrosion-control system had hardly changed since the early
1990s, and budget cuts had forced significant reductions in corrosion-fighting
efforts, despite an internal audit that called for action.
Malone, who had served four years as CEO of Alyeska, the entity that runs the
Trans-Alaska pipeline, got called back to North America in July. Giving up the
job running BP's shipping business, and knowing the crisis he faced, Malone
insisted on having unique powers in his new position.
He wanted authority to approve budgets to get pipeline problems fixed. And he
wanted the power to appoint an independent person, a "technical directorate,"
who would review practices at the Prudhoe Bay operation and report any safety
or environmental concerns directly to him.
Malone quickly replaced half of Prudhoe Bay's top managers. Malone also dumped
BP's command-and-control approach, instead insisting that workers at all
levels send up signal flares when they see something wrong. Malone hopes to
show workers through the reactions they get that the company is listening to
their suggestions. In digging into management processes that set the stage for
trouble in Alaska, he determined that the turnover of senior managers was a
factor, as was poor coordination and communication between BP operations on
Alaska's North Slope and management in Anchorage.
Malone also has tried to instill a sense of a future for Prudhoe Bay.
Specifically, he began focusing attention on BP's plans for a "50-year future"
for the field. Oil may be running out, he has said, but natural gas from the
Prudhoe Bay reserve is plentiful. BP is negotiating with the Canadian
government for a new gas pipeline that would carry gas to Chicago and the
Midwest. Still, there are more challenges ahead. "I'm not naive," Malone said.
"You're talking five or seven years before you can say this culture is
permanently changed."
The big fix
When foremen for the Prudhoe Bay field work gather at 6 each morning, the sun
-- when it rises at all -- still has an hour to go before peeking over the
horizon. In a sparsely furnished room that smells of coffee, not-quite-clean
clothes and a hint of diesel exhaust from the trucks idling outside, two dozen
foremen meet to compare notes on their progress in rebuilding the Prudhoe Bay
pipeline system.
"We're sort of getting crunched on our time limit," says Lanagan, the Houston
Construction contractor. "But we're not going to cut no corners."
Craig Flippo, operations representative for BP, reports on his discussion with
design engineers based in Anchorage. "We're working with the operations team
to make certain we're following our management-of-change process."
He underscores the point by reminding the Prudhoe field workers how their jobs
are affected by the change in management systems. Before any major new work
can proceed, Flippo reminds the foremen, they must file a detailed safety
analysis, an analysis of environmental hazards, agree with Anchorage on the
scope of work and get clearance to proceed.
George Nyftler, foreman for the 240-person contingent from Houston
Construction, said high prices are keeping oil workers busy all over the U.S.,
so it can be hard to recruit workers to Prudhoe Bay. He notes that the base
starting pay of about $80,000 a year -- and more overtime available than many
people care to work -- can be a lure.
"It's to the point where special skills and special equipment, anything
specific to the Arctic, are in short supply and hard to come by," Nyftler
said.
Later, with the arctic sun at its mid-day peak, work is going full tilt. One
team is placing stanchions in the ground. Instead of using concrete footings,
they pour a rock-and-water slurry into the post hole: The permafrost will
freeze it as hard as concrete. Barring a catastrophe of global warming, it
should never melt.
Half a mile away, welders sit in a warming hut as a team of workers prepare
two 80-foot sections of pipe to be joined. With the minus-52 wind chill a
glass of water thrown into the air will freeze before it hits the ground. A
huge gas jet heats the ends of the two steel pipes until they are warm enough
to be worked with a welding torch.
That's when three welders leave the hut to take turns on each joint. The most
skilled welder lays down the first, most critical bead. Two others complete
the joint. Once completed, it must be X-rayed for quality. BP, the State of
Alaska and the U.S. Department of Transportation review slides of each weld.
Malone, on his inspection tour, steps outside of a Ford Excursion truck as a
group of workers prepares to lift part of a 3,000-foot-long section of pipe
onto its stanchions. A treaded vehicle sidles up to the pipe. The workers
sling a thick chain underneath the pipe, then connect it to a boom extending
from the side of the vehicle.
When the boom operator begins lifting, the seemingly endless string of
insulated 18-inch-diameter pipe wriggles and squirms like a piece of boiled
pasta.
At one point, Malone watches as a worker absent-mindedly strays toward a pipe
section being held aloft by a boom. It is a violation of company policy, not
to mention dangerous, to walk under a suspended load.
Two co-workers call out to their wayward colleague. He steps back from the
brink of danger.
The incident strikes Malone as a sign that, 250 miles above the Arctic Circle,
the 5-year process of changing BP's culture is starting to take root.
- - -
About this story
Chief business correspondent David Greising spent six months reporting on BP
PLC's attempts to fix three major problem sites within its huge North American
unit. Greising, along with Tribune photographer Bob Fila, reported from
Deadhorse, Alaska, site of the Prudhoe Bay oil spill last summer; Texas City,
Texas, the location of a deadly refinery explosion that killed 15 in 2005; and
atop BP's Thunder Horse oil platform in the Gulf of Mexico, which nearly
toppled into the sea during a hurricane in 2005. The Tribune is the first news
organization to visit all three sites since the disasters and the only one
ever to set foot on Thunder Horse in the gulf.
--------
MONDAY: Trouble on Thunder Horse oil platform.
IN THE WEB EDITION
The Tribune's David Greising describes his visit to BP's facilities and how
the oil giant is struggling to rebuild in a video at chicagotribune.com/bp
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Fairbanks News Miner
May 27, 2007
http://newsminer.com/2007/05/27/7200
State
needs to become major player in TAPS tariff case
By Richard Fineberg
Published May 27, 2007
Every minute of the day, while high-paid attorneys and accountants pepper each
other and regulators with obscure and sometimes ridiculous legal arguments,
the state treasury loses another $400 in excess trans-Alaska pipeline system
(TAPS) shipping charges, or tariffs. Most of that money goes directly into the
pockets of BP, ConocoPhillips and Exxon Mobil, which control more than 19 out
of 20 barrels of North Slope crude oil and own a similar share of the pipeline
system.
This long-running revenue hemorrhage stems from the difference between the
TAPS tariffs for in-state oil, set by the Regulatory Commission of Alaska
(RCA) about 11 percent of TAPS oil and the much higher tariff the oil
companies charge for transporting the remaining 89 percent of TAPS shipments
bound for the Lower 48.
With the notable exception of recent columns by Dermot Cole in this newspaper,
the press tends to ignore this problem. It’s just too complicated. And when it
is covered, it is liable to be misreported. Take, for example, the initial
reporting of the recent decision of a Federal Energy Regulatory Commission (FERC)
administrative law judge. That decision supported the claim of independent
TAPS shippers Anadarko and Tesoro that TAPS tariffs for Lower 48 shipments are
excessive. Determining that Anadarko and Tesoro made a strong case, the judge
recommended that the commission should reduce tariffs to a level near that of
the RCA’s 2002 order.
We’re talking about RCA tariffs of about $2 per barrel versus current FERC
tariffs of more than $5 per barrel. Every dollar per barrel in tariff charges
costs the state 25 cents in reduced royalty and production tax revenue.
According to initial press reports, the recent decision at FERC “revolves
around an inconsistency in the cost to move a barrel of oil through the
pipeline.” How does inconsistency figure into the picture? The state’s
principal argument in this case was that different tariffs for the same
service are discriminatory. Near the end of her decision, the administrative
judge noted that the reduced tariffs she was recommending would render the
state’s argument moot. Elsewhere in the lengthy decision, the FERC judge
mentioned state arguments only occasionally. In sum, Tesoro and Anadarko did
the heavy lifting, arguing against excessive tariffs; the state’s main
argument was largely irrelevant.
When the state has so much at stake in the outcome of the TAPS tariff case,
how did it become a minor player? This question deserves consideration for
more reasons than lost revenue and litigation expense. The state wants
independent companies to find the yet-undiscovered natural gas necessary to
make the gas line project economic. But excess tariffs penalize the
independent companies, along with the state. Laughing all the way to the bank
as they pocket excess revenue from oil pipeline overcharges, the Big Three
must smile to think that the gas pipeline tariff plays an even more
significant role in that project’s economics, providing new opportunities for
them to plunder other shippers.
The May 17 TAPS case ruling is the latest in a string of decisions that call
into question the 1985 TAPS tariff settlement, negotiated with the TAPS owners
by the Department of Law and its consultants. The law firm of Morrison &
Foerster was Department of Law’s leading consultant in that case and has been
the state’s principal pipeline tariff aide ever since. According to the Alaska
Budget Report, between July 2003 and the end of 2006, that firm also received
$12 million for its assistance on the proposed gas pipeline contract far more
than any other firm.
After the FERC administrative law judge’s recent decision on TAPS tariffs was
announced, the governor issued a statement saying she was “pleased with the
FERC decision.” The governor stated that “[t]he state’s attorneys are
reviewing the decision and preparing to participate in the next phase of the
litigation.” I wonder what the consulting lawyers are making as they jog
around the regulatory track while the state treasury continues to hemorrhage
at the rate of $400 per minute.
After serving in the governor’s office two decades ago, I prepared a report to
the state Legislature that penetrated the wall of confidentiality and
confusion surrounding TAPS tariffs to document 20 examples of delayed
information, needless opacity, important omissions and even misinformation
that contributed to the approval of the 1985 TAPS settlement that haunts the
state today. At that time, I ended another report to the Legislature with this
question: If war is too important to be left to the generals, should petroleum
litigation policy be left in the hands of the lawyers?
Gov. Palin: Tear down this wall!
Richard Fineberg, an independent oil and gas analyst from Ester, served as
senior policy adviser to the governor on oil and gas policy between 1987 and
1989. In 2001 he prepared and presented expert testimony in the Regulatory
Commission of Alaska’s TAPS tariff case for the RCA’s Public Advocacy Section.
Additional background on TAPS tariff issues can be found at his Web site (
www.finebergresearch.com
).
xxxxxxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 26, 2007
http://www.adn.com/money/industries/oil/story/8920947p-8820936c.html
North
Slope plant resuming production after leak repair
RESTART BEGINS: BP says leaky pipe wasn't responsible for emergency shutdown.
By WESLEY LOY
Anchorage Daily News
Published: May 26, 2007
Last Modified: May 26, 2007 at 02:39 AM
BP workers have replaced a leaky pipe in a key oil-processing plant and could
have the giant Prudhoe Bay field back to full production by Sunday, a company
spokesman said Friday.
Oily water leaked through a hole about the diameter of a pencil, forcing a
shutdown early Monday of Gathering Center 2, on the west side of the sprawling
field.
The day before, the same plant came to a halt after an electrical contractor
accidentally disconnected a wire that triggered the emergency shutdown system.
Sunday's emergency shutdown and Monday's pipe leak appear to be two unrelated
events that just happened to occur on consecutive days, BP spokesman Daren
Beaudo said.
Investigators aren't sure whether corrosion, abrasion or something else caused a
spot on the inside of the steel pipe to thin to such a degree that a hole
developed, he said.
"We have not conclusively determined what caused this," said Beaudo.
BP's maintenance practices have come under fire from Congress and regulators in
recent months for a string of corrosion-related pipeline leaks in the nation's
largest oil field.
Monday's shutdown of Gathering Center 2 -- one of six Prudhoe plants that
separate oil from water and natural gas -- knocked out about 100,000 barrels of
daily oil production, or nearly a quarter of the field's normal output.
Workers installed a piece of replacement pipe and were in the process of
restarting the gathering center Friday, along with dozens of wells in the area
that feed crude oil into the plant, Beaudo said.
"Our expectations are that we would have full production returned by the end of
the weekend," he said. "It's a large facility. It usually takes a couple of days
to bring all the wells back up and get all the equipment operating."
The pipe that leaked is 12 inches in diameter and carries water from which most
of the oil has been separated out, Beaudo said. Workers were surprised it leaked
because they'd never seen a similar case in the plant, he said.
The ruptured pipe will undergo metallurgical analysis to determine the cause,
Beaudo said.
On Sunday afternoon, Gathering Center 2 went into a brief emergency shutdown
after an electrical worker inadvertently disconnected "an emergency shutdown
wire," he said.
That triggered the plant's automated shutdown system, which worked just as it
should have, Beaudo said.
Because the plant went idle, dangerous natural gas that normally would cycle out
needed some place to go, so it was burned off in large outdoor flares, causing
some black smoke.
Such flaring is fairly uncommon, said Moses Coss, an environmental engineer with
the Department of Environmental Conservation in Fairbanks.
A DEC inspector is investigating two "black-smoke events" lasting about eight
minutes each, Coss said. Some flares are restricted to smokeless operation, and
the inspector will look to determine whether any excess emissions occurred, he
said.
BP runs Prudhoe, the nation's largest oil field, on behalf of itself and the
other owners: Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.
Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.
xxxxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 25, 2007
http://www.adn.com/opinion/view/story/8916643p-8816603c.html
Enough,
already
Exxon's endless appeals show important flaw in justice system
Published: May 25, 2007
Last Modified: May 25, 2007 at 05:02 AM
Here's the judicial understatement of the decade. In turning aside Exxon's
latest appeal of the multi-billion judgment imposed for its 1989 Alaska oil
spill, the 9th U.S. Circuit Court of Appeals said Wednesday, "It is time for
this protracted litigation to end."
And how. It should have ended at least 10 years ago. Alaskans have waited and
waited and waited for the courts to force Exxon to pay up. They've waited so
long that hundreds of those who would share in the money have died.
THE ANSWER IS STILL NO
Exxon wants the courts to throw out all but a few scraps of the
multibillion-dollar punitive damage award. This was the third time Exxon
pushed its case in front of the 9th Circuit. And for the third time, the court
declined to let Exxon off with the $25 million wrist slap it seeks.
In the previous go-round, the 9th Circuit roughly halved Exxon's original
punitive damage award, down to $2.5 billion. The justices saw no reason to
change their mind this time just because Exxon asked them to. The court had to
act like a parent who must deal with a wayward but persistent kid. "We
understand your argument," the court is saying, "and the answer is still no."
ACTIVIST COURT CREATES LEGAL UNCERTAINTY
The appeals court's latest ruling explains that much of the delay in this
case has stemmed from the U.S. Supreme Court's decision to begin allowing
close judicial review of punitive damage awards. That was a major change in
judicial practice, coming from a court dominated by supposed judicial
conservatives. Lower courts had to engage in legal guesswork, waiting for the
Supreme Court to rule in more cases and clarify the new standards for
reviewing punitive damages.
The $2.5 billion is the most the appeals court felt it could justify under the
Supreme Court's shifting rules. For most companies, such a huge punitive
damage award would merit skeptical treatment by the courts. But for a behemoth
like Exxon, with annual revenues more than a hundred times that amount, it's
not grossly excessive.
Keep in mind that punitive damages are supposed to deter the corporation's
egregious conduct. To influence the behavior of a firm with annual revenues of
$377 billion, the punishment has to be in the billions.
Exxon is sure to appeal to the Supreme Court. Alaskans in the case might as
well cross-appeal and make the pitch for the original $5 billion award.
THE REWARD FOR DELAY
Normally, when a case drags out in the courts, there is no winner. Delay
does both parties a disservice, by leaving important matters unsettled. But in
this case, a decade and a half of delay clearly works to Exxon's favor.
Long ago the company set aside the money to pay for any punitive damages
arising from the spill. The company won't even hiccup if it has to write
Alaskans a $2.5 billion check.
Exxon's legal maneuverings should prod Congress into reconsidering the balance
of power in lawsuits where big money is at stake. The current low rate of
interest charged on judgments pending appeal -- less than 6 percent -- is one
area to look at.
While appealing a multibillion-dollar judgment, a company can invest the money
in its own operations and make far more income than the interest that will be
added on to its eventual payment. A company would violate its obligations to
stockholders if it didn't do everything it could to delay and reduce a final
judgment. Fighting a war of attrition in courts can have a handsome payoff.
That explains why Exxon has tied up this case in endless appeals. It explains
why Alaskans have long been denied the payments they thought they had won. And
it's all the reason Congress needs to look at ways it might speed up the
glacial pace of justice in big cases like this.
BOTTOM LINE: Legal system rewards Exxon for endlessly appealing multibillion
oil spill judgment. Let's rethink that system.
--------------
Short takes
BEYOND THE ANWR GRAVY TRAIN: A take-no-prisoners PR firm from Outside had
previously snagged a $3 million no-bid state contract to help push ANWR
drilling legislation in Washington, D.C. With the Democrats now running
Congress, drilling ANWR isn't going to happen -- period, end of discussion.
But what's poor PacWest to do? It's all dressed up, thanks to its state-funded
warchest, but has no place to go.
No problem. The Lege said PacWest can keep the state money and use it on other
Alaska energy issues.
Pays to have friends in high places, doesn't it?
xxxxxxxxxxxxxxxxxxx
Fairbanks News Miner
May 24, 2007
http://hosted.ap.org/dynamic/stories/W/WST_BP_OIL_SHUTDOWN_AKOL-?SITE=AKFAI&SECTION=HOME
New
Alaska oversight team investigates leak on North Slope
By STEVE QUINN
Associated Press Writer
JUNEAU, Alaska (AP) -- A state oil and gas industry oversight agency is making
its debut by investigating a leak that forced BP PLC to cut production by a
fourth from the nation's largest oil field.
The company discovered a hole about the size of a pencil's diameter to a water
line in a facility used to separate oil, water and natural gas earlier this
week at Prudhoe Bay on Alaska's North Slope.
By the time work crews diverted the leak to proper drainage and placed a patch
over the leak, about 840 gallons of water leaked from the hole.
Company spokesman Daren Beaudo said Wednesday said he couldn't say when BP
plans to resume full production since the company's internal investigation
into its cause is still under way.
"We just continue to work on the repair," he said.
Jonne Slemons, the coordinator for the state's new Petroleum Systems Integrity
Office, said its one inspector on the spill will remain on the North Slope all
week.
No timetable on determining the cause has been established, she said.
"We don't have final or complete answers, yet, but it doesn't appear to be a
case of improper maintenance at this time," she said.
Depending on what the findings are, the agency can order corrective action or
even call for a change in maintenance practices, Slemons said.
The discovery of the leak early Monday morning forced BP to reduce its Prudhoe
Bay production by about 100,000 barrels of oil daily, it's second partial
shutdown of the field in less than one year.
The facility where the water leak occurred is the same one where the
largest-ever oil leak on the North Slope occurred. Corrosion, much of it
hidden by development of high amounts of sludge, caused a leak and spill on a
feeder line in March 2006, followed by another leak in August at a second
line.
After the second incident, the company shut down the affected lines, resulting
in Prudhoe Bay production being cut in half. The company now is spending $250
million to replace 16 miles of questionable pipes.
For decades, some critics charge, lax government enforcement along with
corporate unwillingness to make costly repairs caused corrosion and other
wear-and-tear issues to fester.
Federal regulators and hearings followed last year's August shutdown, and a
new administration at the state level instituted the PSIO to stave off any
appearance that the state was too cozy with oil companies.
Taking that step was prudent, state officials said, especially since Alaska is
trying to get a multibillion dollar natural gas pipeline built from the North
Slope.
The perception of lack oversight in the past also weakens the Alaska's
argument to federal lawmakers that it should be allowed to produce oil along
the Arctic National Wildlife Refuge, Gov. Sarah Palin said.
"We are trying to convince the rest of the country, including East Coast
politicians against ANWR, the state can oversee responsible development of oil
and gas," Palin said.
The state also intends to have all oil and gas facilities in Alaska inspected
within three years.
The Legislature recently approved $5 million to have an outside engineering
firm perform the work.
xxxxxxxxxxxxxxxxxxxxxx
Houston Chronicle
May 24, 2007
http://www.chron.com/disp/story.mpl/business/energy/4831579.html
Rumblings of breaking up Big Oil
Lawmakers call for splitting industry giants
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau
WASHINGTON Here in the nation's capital, discussions about the oil industry
are just nothing like the conversations heard at Houston energy conferences.
When oil industry officials have addressed the record-high gasoline prices,
they've pointed to unexpected downtime at refineries, political unrest in
Nigeria and lower imports from Europe.
Lawmakers at a Joint Economic Committee hearing Wednesday talked about
breaking up the oil companies.
Pointing to the example set by trustbuster Teddy Roosevelt a century ago, a
group of lawmakers led by Sen. Charles Schumer, D-N.Y., are questioning
whether they should step in to roll back the mergers that have created the
so-called "supermajors" like Exxon Mobil Corp., Chevron Corp. and
ConocoPhillips, a notion that sends shivers through the oil sector.
"My instinct tells me that a reconsideration of oil company mergers in the
last two decades may be in order," said Schumer, chairman of the joint
Senate-House panel. "When markets have been distorted from lack of competition
in the past, the federal government has taken action. Standard Oil, U.S. Steel
and AT&T come to mind."
With motorists clamoring about pump prices topping $4 a gallon in some
markets, lawmakers are eager to take action.
Oil industry lobbyists have been scrambling this week unsuccessfully to fend
off bills in the House to enable the U.S. Attorney General to sue the
Organization of the Petroleum Exporting Countries and to outlaw price gouging
at the pump.
And the industry's critics have long questioned whether consolidation in the
oil industry may be harming consumers. But a congressional hearing to consider
an actual breakup of the oil companies was a novel experience, at least for
this generation in the industry.
"It's a new twist," Red Cavaney, president of the American Petroleum
Institute, said after the hearing.
Just how much consolidation has occurred in the oil industry is a matter of
some debate even within the federal government.
The Federal Trade Commission, for instance, says 1,165 mergers occurred in the
domestic petroleum industry between 1993 and 2003, noted Diana Moss, vice
president of the American Antitrust Institute, while the Government
Accountability Office found 2,600 transactions between a much shorter period,
from 1991 to 2000.
Schumer argues that in 1993, the nation's top five refiners controlled a third
of the U.S. market, while the largest 10 held a 56 percent market share. By
2005, Schumer said, the largest five refiners controlled 55 percent of the
market, while the top 10 controlled 80 percent of the market.
Cavaney assured lawmakers "oil company mergers and acquisitions have not
caused higher gasoline prices."
"We need to focus on the factors shaping those higher prices and not be misled
by claims that have been repeatedly disproved, have no basis in fact, and mask
root causes," Cavaney said.
The Federal Trade Commission strongly supports the industry's contention.
Michael Salinger, director of the FTC's Bureau of Economics, told the panel
that analysts at his agency "do not believe the consolidation in the industry
has been a major factor" in pushing up gasoline prices.
Despite the mergers over the last two decades, market concentration in most
parts of the petroleum industry remains what the FTC would deem low or
moderate, Salinger said.
Still, the FTC has brought more cases against petroleum companies controlling
relatively low shares of the market than in any other industry, Salinger said.
"We are more aggressive with this industry than any other industry," Salinger
said.
Since 1981, the FTC has challenged 21 petroleum mergers, prompting the parties
in a fourth of those deals to drop their plans and requiring the companies in
another 13 deals to divest significant assets.
The FTC recently objected to Kinder Morgan's plan to go private through a
management-led buyout for fear the deal could prompt higher gasoline prices in
the Southeast, until two investment firms participating in the deal agreed to
turn their interest in a competitor into a passive investment.
FTC officials also monitor the gasoline markets for anomalies that suggest
anti-competitive behavior. And, according to footnote No. 32 of Salinger's
prepared remarks Wednesday, the commission is currently investigating the
gasoline and diesel markets in the Pacific Northwest. (Salinger declined to
discuss that probe further).
But Democrats, who have long accused the FTC of lax enforcement of the oil
industry, are clearly not persuaded.
"They're conscientiously not looking" for anti-competitive behavior, said Rep.
Maurice Hinchey, D-N.Y. "The FTC is putting blinders on."
david.ivanovich@chron.com
xxxxxxxxxxxxxxxxx
Anchorage Daily News
May 23, 2007
http://www.adn.com/money/industries/oil/prudhoe/story/8911334p-8811311c.html
Water
leak at Prudhoe plant cuts flow of oil
840 GALLONS: Spill was contained at Gathering
Center 2; interrupted oil flow is worth $6.6 million a day.
By WESLEY LOY
Anchorage Daily News
Published: May 23, 2007
Last Modified: May 23, 2007 at 03:02 AM
Prudhoe Bay oil production is down by almost a quarter due to a ruptured pipe,
and BP workers and state inspectors are checking to see whether corrosion is
again to blame for a bobble in the nation's largest oil field.
The bad pipe doesn't run overland. Rather, it's part of the plumbing inside a
key processing plant called Gathering Center 2 on the field's west side, said
BP spokesman Daren Beaudo.
The carbon steel pipe, 12 inches in diameter, is used to drain water out of a
large tank that separates the mix of oil, natural gas and water coming in from
dozens of wells, he said.
About 1:45 a.m. Monday, workers discovered a leak coming from a weld in the
T-shaped piece of piping, Beaudo said.
About 840 gallons of water leaked, but the water went into a sump and none
escaped the building, he said.
The pipe rupture forced BP to idle Gathering Center 2, cutting Prudhoe oil
output by about 100,000 barrels per day or roughly 12 percent of total North
Slope production.
The outage marks a long string of breakdowns since early last year in Prudhoe,
which BP runs on behalf of itself and the other owners: Exxon Mobil, Conoco
Phillips, Chevron and Forest Oil.
BP has come under a hailstorm of criticism from members of Congress and
federal pipeline regulators for what they called lax maintenance leading to
corrosion and leaks. Federal criminal investigators continue to probe a
corrosion-caused spill last March from a major overland pipeline connected to
Gathering Center 2. At an estimated 201,000 gallons, it was the largest oil
spill ever on the North Slope.
Investigators won't know whether corrosion is to blame for Monday's pipe
rupture until workers can remove the faulty piece and examine it, Beaudo said.
The plant is expected to be down "a few days" while workers replace the
piping, he said.
BP didn't publicly announce the production cut because the company considers
it a routine event that inevitably happens in a major oil field, Beaudo said.
But a Michigan congressman who heads a U.S. House Energy and Commerce
investigative subcommittee looking into the Prudhoe problems saw it
differently.
Rep. Bart Stupak, a Democrat, sent out a statement Monday night after hearing
of the leak inside Gathering Center 2.
He noted his subcommittee recently reviewed e-mails from BP employees
suggesting the company might have reduced or eliminated corrosion-suppressing
chemicals needed to prevent leaks in Prudhoe Bay water lines.
"While I have not seen all the facts on this most recent leak, it appears to
be yet further evidence that BP's cost-cutting culture has put our nation's
economy at risk," Stupak's statement said. "My subcommittee will continue to
hold BP accountable."
Beaudo said BP had no comment on Stupak's statement.
Gathering Center 2 is one of six major oil-gas-water separation plants in the
vast Prudhoe Bay oil field.
The plant has experienced several major glitches in recent months. Last
August, it went down after a gas-handling compressor quit. It was idled again
in April after a crane hit a nearby power line.
World oil traders noticed the Prudhoe production loss, but it wasn't
significant enough to drive up prices. North Slope crude oil for delivery to
West Coast refineries closed at $66.32 a barrel Tuesday, down $1.30 from
Monday's finish.
Daily News reporter Wesley Loy can be reached at
wloy@adn.com
or 257-4590.
At a glance
• WHAT:
A leaky pipe prompted the shutdown of a major Prudhoe Bay oil processing
plant.
• RESULT: Daily North Slope oil production is down by 100,000 barrels,
or 12 percent, for "a few days," BP says.
• COST: At Tuesday's closing price, the interrupted oil flow is worth
$6.6 million a day. Prudhoe Bay production breakdowns
• MAY 21: Daily production falls by about 100,000 barrels after pipe
springs leak inside Gathering Center 2, causing a plant shutdown.
• APRIL 23: Daily production falls by 90,000 barrels after crane hits
power line, shutting down Gathering Center 2.
• OCT. 10, 2006: Nearly entire field is hobbled, with daily production
down by 310,000 barrels, after dust storm short-circuits electricity grid.
• AUG. 23, 2006: Daily production falls by 90,000 barrels after
gas-handling compressor fails in Gathering Center 2.
• AUG. 6, 2006: Daily production falls by about 200,000 barrels for
several weeks after corroded pipe leaks on Prudhoe's east side.
• MARCH 2, 2006: Daily production declines by nearly 100,000 barrels
for more than a month after corroded pipeline on Prudhoe's west side near
Gathering Center 2 spills record 201,000 gallons of oil.
Source: Anchorage Daily News research
Xxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/story/8911305p-8811300c.html
Corruption case prompts ethics action in Assembly
INFLUENCE: Convicted felons can't register to be lobbyists on city business.
By KYLE HOPKINS
Anchorage Daily New
Published: May 23, 2007
Last Modified: May 23, 2007 at 02:32 AM
The Anchorage Assembly voted unanimously to tighten city lobbying rules
Tuesday night, banning anyone convicted of a felony from registering as a
lobbyist.
"What we're trying to do is basically maintain the integrity of those who try
and influence public officials," said Assemblyman Dan Sullivan, who
co-sponsored the proposal along with Assemblyman Paul Bauer.
Bauer has said he proposed the changes partly because Anchorage's most
prominent lobbyist, Bill Bobrick, had been linked to the corruption case
against former Anchorage Rep. Tom Anderson. Bobrick has pleaded guilty to
conspiracy to bribe Anderson, and no longer has any clients before the city,
according to the latest city lobbyist lists.
Only one person -- Jed Whittaker, who left right after he spoke -- testified
about the changes. He told Assemblymembers they allowed Bobrick to influence
them for years without complaint until now.
"If you really want to say to the public that you cannot be bought, then pass
an ordinance that publicly funds elections to the Assembly," Whittaker said.
No one on the Assembly had any questions for him.
The new guidelines adopted Tuesday say a person can't register to lobby city
officials if he or she has been convicted of a felony within the previous 10
years.
Ethics may be a hot topic in Alaska but the lobbying rules drew little
attention. By the time Assembly members were deep in debate over how to define
the type of crimes would-be lobbyists aren't allowed to commit and how much to
charge them for registration, two people sat in the audience.
Preparing for a few weeks off from regular meetings, the Assembly ended the
meeting relatively early. Assemblywoman Debbie Ossiander said fumes from a
large, smelly new screen -- used to view voting results -- behind the Assembly
seats was giving her a headache.
Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com
or 257-4334.
xxxxxxxxxxxxxxxxxxx
Fairbanks News Miner
May 23, 2007
http://hosted.ap.org/dynamic/stories/A/AK_BP_OIL_SHUTDOWN_AKOL-?SITE=AKFAI&SECTION=HOME
BP shuts
down one-fourth of its Prudhoe Bay production
By STEVE QUINN
Associated Press Writer
JUNEAU, Alaska (AP) -- BP officials said Tuesday it was too early to determine
what caused a water pipe leak that led to the second partial shutdown in 10
months of the nation's largest producing oil field.
"The best estimate is that it's going to be a few days where we are going
through a repair plan," said BP spokesman Daren Beaudo. "We will work as
quickly and as safely as we can."
Production at Alaska's Prudhoe Bay was cut by one fourth after the company
discovered the leak early Monday morning, company officials said.
Some 400,000 barrels a day of oil are pumped at Prudhoe Bay, about half of the
total North Slope production.
Beaudo said the company discovered a hole about the size of a pencil's
diameter to a water line in a facility used to separate oil, water and natural
gas.
About 20 barrels of water leaked from the pipe, which is about 12 inches in
diameter, before the it was discovered around 1:45 a.m. Monday, Beaudo said.
BP is Prudhoe Bay's operator, and it has a 25 percent stake in the field it
shares largely with ConocoPhillips and Exxon Mobil Corp., which hold 36
percent interest each.
The British company said its production loss would be 25,000 barrels per day;
losses for the two majority owners would be about 36,000 barrels a day each.
Light sweet crude for June delivery fell $1.36 to $64.91 a barrel in
electronic trading on the New York Mercantile Exchange.
The facility where the water leak occurred is the same one where the
largest-ever oil leak on the North Slope occurred, last year.
It's an area still under heavy scrutiny as a place identified by critics for
poor maintenance practices.
For decades, some critics charge, lax government enforcement along with
corporate unwillingness to make costly repairs caused corrosion and other
wear-and-tear issues to fester.
"We should be expecting these kinds of things," said Dan Lawn, who previously
worked for the Alaska Department of Environment Conservation, but now is with
watchdog group Alaska Forum for Environmental Responsibility. "That's why all
of this needs to be looked at well.
"If water and sludge in oil lines are responsible for making corrosion to oil
lines, one would think it's natural to know the same material taken out of oil
lines and put in any other lines would cause the same kind of problem."
Energy analysts, however, downplayed the significance of the event, at least
for the world markets and for U.S. energy consumers.
"It's not that (this lost production) can't be made up elsewhere in the
world," said Alaron Trading Corp. analyst Phil Flynn "But we would like to get
production here rather than elsewhere."
Last week, members from a House committee investigating last year's spills,
admonished the company for what it believed to be scaled back anticorrosion
efforts in order to save money.
U.S. Rep. Bart Stupak, chairman of the Energy and Commerce investigations
subcommittee said in a statement it's these lines that remain a huge concern
for federal lawmakers.
"While I have not seen all the facts on this most recent leak, it appears to
be yet further evidence that BP's cost cutting culture has put our nation's
economy at risk," Stupak said. "My subcommittee will continue to hold BP
accountable."
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Water leak shuts
down BP facility
By Eric Lidji
Staff Writer
Published May 23, 2007
BP Plc. shut down about a quarter of its Prudhoe Bay production Monday after
finding a small leak in a water line on the North Slope facility.
Production will be cut by about 100,000 barrels a day for “a few days” while
crews repair the line, according to BP spokesman Daren Beaudo.
Beaudo said a quarter-inch hole was found around 1:45 a.m. Monday in a 12-inch
water line at Gathering Center 2, a facility on the western side of Prudhoe
Bay used for separating oil, gas and water.
“As a result of that leak we’ve had to shut down the whole system,” Beaudo
said, referring to the gathering center.
Crews diverted the water in the pipe to a sump tank and collected around 20
barrels before stopping the leak.
Beaudo did not know how much the line had leaked before it was discovered.
The cause of the the water leak remains unknown.
Beaudo said there were no adverse environmental impact from the leak.
A spokeswoman with the Alaska Department of Environmental Conservation, which
monitors spills across the state, said the water had not left the containment
area.
Gathering Center 2 has been the site of two recent leaks at Prudhoe Bay.
In March 2006, corrosion on a transit line connecting Gathering Center 2 to
another Gathering Center caused a quarter-inch hole that leaked around 200,000
gallons of oil onto the frozen tundra.
Last December, a hole in the bottom of a separation tank at Gathering Center 2
spilled more than 250,000 gallons of water and 126 gallons of crude oil.
The caused of that leak has still not been identified.
Beaudo said that the two previous leaks were not connected to Monday’s leak
because each was part of a different system at the facility.
BP was under scrutiny last week during a congressional hearing to determine
whether extreme budget cuts lead to previous leaks at the North Slope oil
field, including a partial shutdown last August caused by a leak on the
eastern side of Prudhoe Bay that spiked oil prices around the country.
Rep. Bart Stupak, D-Mich, who chairs the investigative subcommittee that held
the hearing, released a statement on Monday connecting the current leak to a
long line of problems at the country’s largest oil field.
“While I have not seen all the facts on this most recent leak, it appears to
be yet further evidence that BP’s cost cutting culture has put our nation’s
economy at risk,” Stupak said. “My subcommittee will continue to hold BP
accountable.”
Internal e-mails released at the hearing indicate BP stopped using corrosion
inhibitors on the water lines at Gathering Center 2 in 1999 because of budget
restraints despite evidence that the chemicals were working.
BP runs the Prudhoe Bay oil field on behalf of a consortium of companies that
includes the Exxon Mobil Corp. and ConocoPhillips, which both have a larger
interest in the field than BP.
Contact staff writer Eric Lidji at 459-7504 or
elidji@newsminer.com.
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Wall Street Journal
May 23, 2007
US GAO:Oil Indus
Mergers Upped Risk
Of Anticompetitive Behavior
DOW JONES NEWSWIRES
May 22, 2007 3:06 p.m.
WASHINGTON (Dow Jones)--Although supply and demand fundamentals and crude
prices are the primary drivers of gasoline prices, consolidation in the oil
industry has contributed to price hikes and raised the risk of anticompetitive
behavior, the U.S. Government Accountability Office said Tuesday.
The GAO's report comes as both the House and the Senate are considering
price-gouging bills that would criminalize anti-competitive actions by
companies - refiners, shippers and retailers alike.
Record-high gasoline prices are fueling political momentum for a slew of
congressional investigations and legislation that targets the oil and gas
industry.
Although the GAO said that oil industry consolidation may have increased
efficiency in the market, mergers "raise concerns about potential
anticompetitive effects because (they) could result in greater market power
for the merged companies, potentially allowing them to increase and sustain
prices above competitive levels."
Since the 1990s, a wave of mergers, which resulted in companies such as
ConocoPhilips (COP), ChevronTexaco (CVX) and ExxonMobil (XOM), have meant
price hikes of up to 7 cents a gallon, according to GAO modelling.
The American Automobile Association says average prices at the pump have risen
88 cents a gallon from the beginning of the year to $3.20.
The GAO said in its report to the House Energy and Commerce's investigations
and oversight subcommittee that the Federal Trade Commission's standards state
a one-cent increase is "significant."
The government auditor calculated that gas-price rises since January have cost
consumers an extra $20 billion, or around $146 for each passenger car in the
U.S.
On Wednesday, the House is expected consider a bill introduced by Rep. Bart
Stupak, D-Mich., chairman of the energy oversight subcommittee, that would
give the Federal Trade Commission the authority to punish companies that
artificially inflate the price of energy, from production to distribution.
The bill is expected to be filed under suspension of the rules on the floor,
which means it already has majority support and will likely pass on a voice
vote.
Stupak and other Democrats such as Sen. Maria Cantwell, D-Wash., whose own
price-gouging amendment will be considered on the Senate floor in June, accuse
big oil companies of not only artificially hiking prices, but also not
investing billions of dollars in profits into refining capacity.
Industry organizations, such as the American Petroleum Institute and the
National Petrochemical & Refiners Association, are worried about the impact of
such legislation, especially as several officials have said the legislation is
likely to sail through Congress. "It's an ill-conceived quick fix that is more
harmful than helpful to consumers," the NPRA said.
Energy Information Administration chief Guy Caruso told the subcommittee in
written testimony that high crude-oil prices, tight refining capacity and
lower-than-normal gasoline imports were causing the record-high prices.
FTC Commissioner William Kovacic said in his testimony before the subcommittee
that the FTC was already conducting effective and adequate oversight of the
industry, and that the regulator had prevented anti-competitive mergers and
acquisitions.
Furthermore, the FTC's probe of price-gouging allegations in the wake of a bad
hurricane season in 2005, "did not uncover any evidence of manipulation to
increase prices aside from limited instances of price gouging." The report
included a probe of whether refiners manipulated prices by operating their
facilities below full production capacity to restrict supply, a common
allegation in the halls of Congress.
Refinery utilization rates have been significantly lower than normal this year
following prolonged planned outages and a series of unplanned outages.
-By Ian Talley, Dow Jones Newswires; 202 862 9285;
ian.talley@dowjones.com
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Anchorage Daily News
May 22, 2007
http://www.adn.com/money/industries/oil/story/8907593p-8807582c.html
BP
checks prospects for Ugnu site on Slope
TECHNICAL
DIFFICULTIES: Shallowest, heaviest of oil accumulations considered.
By Petroleum News
Published: May 22, 2007
Last Modified: May 22, 2007 at 04:20 AM
BP Exploration (Alaska) Inc. has begun permitting for an extended Ugnu well
test operation next year, a huge but troublesome and undeveloped oil field.
Ugnu is the shallowest and heaviest of North Slope oil accumulations. Oil
companies have long known about Ugnu because their wells to deeper fields go
through it.
The formation is not in production because technical problems of producing the
cold, heavy oil that lies in unconsolidated formations have not been solved.
BP filed paperwork last week proposing to add to a work pad in the Milne Point
field for testing Ugnu. Work this year would include gravel placement so that
the gravel can compact and settle before an extended Ugnu well test operation
next year, BP told state regulators.
BP told the state that pre-pilot well testing is expected to be an extended
operation, the exact length of which is not now known.
GETTING AT ONE-FIFTH OF UGNU
BP talked to legislators about the planned Ugnu production test in late
January.
BP's Milne Point resource manager, Scott Digert, told the state House Special
Committee on Ways and Means that BP planned to spend about $25 million this
year to do pilot tests for technology the company thinks could be used to
produce the heavy oil at Ugnu.
Although there has been no production from Ugnu, heavy oil has been taken from
the Schrader Bluff and West Sak fields, which are somewhat deeper below the
ground.
Some 100 million barrels of heavy oil has been produced on the North Slope to
date, compared to 15 billion barrels of light oil from such fields as Prudhoe
Bay, Kuparuk River and Alpine.
An additional 100 million to 1 billion barrels of heavy production is
possible.
Digert said the first Ugnu wells would use cold heavy oil production with sand
technology, where oil is produced along with massive amounts of sand that come
with it. The sand would be separated on the surface, he said, and the oil
would have to be warmed before it could be transported with light oil.
Digert said BP thinks that with certain techniques it could get at some 20
percent of the Ugnu formation.
BP also plans to try other technologies in the future such as steam injection
or other thermal recovery methods, but not the mining used in some shallow
Canadian heavy oil fields. Digert said Ugnu can't be mined, because it's 2,500
to 3,500 feet below the service, and permafrost lies above it.
He said steam injection is also expected to be less effective on the Slope
than in Canada because the Ugnu is colder and because of the challenge of
getting steam down through the permafrost and warming up the colder oil. The
North Slope rock is also different from Canada, where the oil sands are
"blocky, very massive sands," he said, allowing for easy vertical movement.
"Ours tend to have layers of shale within the sand that tend to block that
vertical movement of oil."
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http://www.adn.com/opinion/view/story/8908388p-8808390c.html
Go or
stay?
Credible bribery
charge means lawmaker is compromised
Published: May 22, 2007
Last Modified: May 22, 2007 at 05:15 AM
The first session of the 24th Alaska Legislature is over but the stain of the
federal corruption investigation remains unbleached. The most notable symbol
of the scandal is Wasilla Republican state Rep. Vic Kohring. He's the only
sitting lawmaker who has been indicted.
In defending his refusal to resign, Rep. Kohring is half right.
He says, "I have a steadfast desire to continue serving my constituents, and
only in the event my work is compromised would I consider resigning."
That's an appropriate standard to set -- he just doesn't realize his work is
hopelessly compromised.
He stands accused of taking bribes from the state's most powerful lobbyist,
working on behalf of the state's most powerful industry, on an issue worth
billions of dollars to the state.
That same issue will be back in play in the Legislature this fall, with a
special session on oil taxes. With the cloud of a bribery indictment hanging
over him, Rep. Kohring cannot credibly represent his constituents during that
critically important legislative session. Resigning now would give Wasilla
Republicans plenty of time to recommend a competent replacement for Gov. Sarah
Palin to appoint.
The case against Rep. Kohring is not a "he-said, she-said" deal. The evidence
against him does not come from a disgruntled source who has an axe to grind.
The federal charges suggest Rep. Kohring's acts are electronically recorded.
It was not a sting operation where he might plausibly argue entrapment. One of
the people who allegedly bribed him has pleaded guilty.
"I would like to be afforded my constitutional rights of innocence until
proven guilty," Kohring says.
Fair enough -- as far as deciding whether he should go to jail. But his
fitness to serve his constituents is a different matter. Asserting "innocent
until proven guilty" does not settle the fundamental question here.
Is his ability to represent his constituents compromised while credible
charges of bribery are pending?
The answer should be obvious.
BOTTOM LINE: Indicted Rep. Vic Kohring is hopelessly compromised. He should
resign.
Xxxxxxxxxx
More Don Young speaks! (Not.)
Part two of the ground-quaking Web interview with Don Young. His thoughts
on belugas, tree-huggers and silence. Remember, this is a cartoon, we made
this up. Any similarities between this and the real Don Young are probably
just luck.
http://community.adn.com/mini_apps/vmix/player.php?ID=1349505&GID=118
Xxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/story/8908419p-8808406c.html
Lobbyists with felony convictions face ban
ASSEMBLY:
Spotlight on ethics in state politics may bring issue to a vote tonight.
By KYLE HOPKINS
Anchorage Daily News
Published: May 22, 2007
Last Modified: May 22, 2007 at 02:41 AM
Until he pleaded guilty to conspiracy to bribe a state politician, Bill
Bobrick was the go-to guy if you wanted to lobby the Anchorage Assembly.
Tonight that same Assembly -- some of whom got frequent campaign donations
from Bobrick -- could decide whether to ban him or anyone convicted of a
felony from lobbying.
Bobrick's plea was the latest in a string of corruption cases that saw four
current or former state lawmakers indicted and two corporate executives
admitting to bribery.
The proposal now before the city would bar felons from registering as
lobbyists within 10 years of their conviction, and considering the spotlight
on ethics in Alaska politics, Assembly members said this won't be a hard
decision.
"I don't think we have really any choice," said Assemblyman Dick Traini, who
plans to vote for the new rules.
Assembly chairman Dan Coffey said he expects the proposal to succeed tonight.
"I can't image that it wouldn't in this climate," he said.
Assemblyman Paul Bauer proposed the new lobbying rules at least partly because
of Bobrick's case, Bauer said last week.
Compared with the scores of people lobbying the state Legislature, the pool is
relatively small in Anchorage. Bobrick was the biggest fish, representing a
dozen clients last year. According to the latest city list, he no longer has
any clients.
Bauer and Bobrick aren't friendly, but the longtime lobbyist has supported
many past and current city leaders. Over the years, he donated thousands of
dollars to the political campaigns of Mayor Mark Begich and at least $1,000
each to Assembly members Allan Tesche, Dan Sullivan, Traini and Coffey,
according to state records.
Though he rarely sides with Bauer and Sullivan, who co-sponsored the new
rules, Begich said Monday he supports the proposal.
"I have no problem with it," he said.
Assembly members said Bobrick's past contributions won't influence their vote.
"It's just business," said Traini, who also talked about how the spotlight has
been hard on Bobrick's family and said the lobbyist has "done a lot of good
things for this town" with groups such as Standing Together Against Rape.
Tesche said it's no surprise that many city leaders received money from
Bobrick: "Understand that he is Anchorage's almost exclusive full-time
lobbyist, so one would expect him to be involved in a number of campaigns if
he's the only guy in town."
Coffey, who said during his most recent campaign that he doesn't accept money
from lobbyists, returned Bobrick's donation according to his campaign
disclosure reports.
Sullivan co-sponsored Bauer's proposal and downplayed Bobrick's donations to
his campaign, saying the lobbyist probably gave them only begrudgingly.
Bobrick couldn't be reached for comment Monday.
Tesche, who appeared at Bobrick's plea hearing last week, proposed new ethics
rules of his own that will also be discussed tonight: He wants to bar city
leaders from putting pressure on companies that do business with the city to
hire or fire specific people. Bauer couldn't be reached for an interview
Monday, but said last week the new lobbying rules are meant to protect the
public trust.
"I don't want us turning into the Alaska state Legislature," he said.
Bobrick has agreed to testify against former Anchorage Rep. Tom Anderson and
admitted to a scheme to funnel money to Anderson through a sham corporation.
In December, Anderson pleaded not guilty to bribery, extortion and other
charges.
Last year, Anderson registered to lobby the city too.
Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com.
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Wall Street Journal
May 22, 2007
BP Partly Shuts
Prudhoe Bay Oil Field Due To Water Leak-Rpt
DOW JONES NEWSWIRES
May 22, 2007 8:55 a.m.
NEW YORK (Dow Jones)--BP PLC (BP) was forced to shut in nearly a quarter of
its oil production from Alaska's giant Prudhoe Bay field Monday, after piping
used to carry water separated out from crude produced in the field sprang a
leak, according to a report in the Houston Chronicle Tuesday.
The leak, about the diameter of a pencil, caused only about 20 barrels worth
of produced water being spilled, BP spokesman Daren Beaudo said. The spill
occurred indoors, and the water was fully contained.
But the incident meant the U.K. oil major had to shut down about 100,000
barrels a day of its 440,000 barrel-per-day production capacity in the
nation's largest oil field, as company officials inspect the piping system.
The cause of the leak was not disclosed. Company officials hope to have the
problem resolved within "a few days," he said.
The incident comes in the wake of two spills on BP pipelines last summer
caused by corrosion. Those accidents forced the company to shut in part of
Prudhoe Bay and sent oil prices spiking. Indeed, BP President Robert Malone
was on Capitol Hill last week fielding questions about whether cost-cutting
caused those troubles.
Responding to Monday's leak, Rep. Bart Stupak, D-Mich., said: "While I have
not seen all the facts on this most recent leak, it appears to be yet further
evidence that BP's cost-cutting culture has put our nation's economy at risk."
-By Cassandra Sweet; Dow Jones Newswires; 201-938-4427;
cassandra.sweet@dowjones.com
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Anchorage Daily News
May 21, 2007
http://www.adn.com/money/story/8905587p-8805546c.html
Regulators strengthen their oversight of BP operations
PROGRESS: Watchdogs find firm more cooperative after Alaska pipeline leaks.
By JEANNETTE J. LEE
The Associated Press
Published: May 21, 2007
Last Modified: May 21, 2007 at 02:59 AM
The federal office in charge of pipeline oversight has issued a new round of
requirements to oil company BP PLC as it continues repairs on a faulty network
of crude oil transit lines at Prudhoe Bay, the agency chief said Sunday.
The guidelines laid out by the Pipeline and Hazardous Materials Safety
Administration direct the company to intensify its corrosion monitoring
program, remove leftover oil from out-of-service pipelines and submit monthly
updates on the progress of construction upgrades and corrosion monitoring at
the nation's largest oil field.
BP's latest plans to refurbish production and transport operations on the
North Slope prompted the new set of orders, which the company received on
April 27, PHMSA administrator Thomas Barrett said Sunday by phone from
Washington, D.C.
The company plans to install an improved inspection system and pipeline entry
ports for corrosion-prevention fluids. It is also downsizing the diameter of
its pipelines to speed the movement of oil and reduce the build-up of sludge,
one of several precursors to corrosion.
"Our interest is in monitoring their progress and watching out for the
existing system as the new one comes forward," Barrett said.
BP has said the infrastructure should be in place by December 2008.
The latest order is part of an evolving set of requirements set forth by the
federal agency, which imposed stricter oversight over the company's North
Slope operations following the first of two spills last year.
The first, in March 2006, was the largest in the field's history, with up to
267,000 gallons spilled onto the tundra. In August, another leak in poorly
maintained pipelines led to a partial shutdown in production at Prudhoe Bay.
"Today, right now, I'm satisfied with the progress they're making. Their
commitment looks positive to me," Barrett said. "That was not the case last
summer."
PMSHA employs three people in Alaska and has been rotating oil field experts
through the North Slope since last March, Barrett said.
A BP spokesman on Sunday could not immediately comment on the order. However,
spokesman Daren Beaudo earlier told the Fairbanks Daily News-Miner that the
company intends to cooperate.
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http://www.adn.com/news/government/legislature/story/8905571p-8805543c.html
Ethics
law takes a bite out of Legislature perks
REFORM: Putting $15 limit on meals lobbyists can buy lawmakers was part of
effort to regain trust lost in scandals.
By TOM KIZZIA
Anchorage Daily News
Published: May 21, 2007
Last Modified: May 21, 2007 at 03:01 AM
JUNEAU -- Some nights, it's just a round of drinks, sent over by the smiling
lobbyist across the restaurant.
More often, it's dinner, and a lobbyist at the table picks up the tab. There
are stories, too, of legislators who drop their restaurant bill on a
lobbyist's table as they head for the door.
And lawmakers speak of colleagues with running bets about who can go the
longest without having to pay for dinner.
Tales like that, told out loud this month on the state Senate floor -- with no
names attached -- helped pass a new law requiring lobbyists to report any meal
or drink over $15 bought for a legislator or legislative staff.
The bar-tab rule was one of the last additions to this year's far-reaching
ethics-reform package.
In a legislative session haunted by federal bribery and extortion charges
against current and former lawmakers, the old perk of the free meal may not
seem like much of a sin. But supporters say the new rule will strike a blow at
what has become a too-easy relationship between elected officials and those
paid to influence them.
"The $15 limit is the only thing in that law that will make a real difference
in the culture here," said Rep. Mike Doogan, D-Anchorage, a former columnist
and freshman legislator who has stuck to his newspaperman's habit of always
picking up his own tab.
The rule, added in the state Senate, drew bipartisan support.
"You get down here away from your family, and some people lose their compass,"
said Sen. Lesil McGuire, R-Anchorage, speaking on the floor in behalf of the
limit.
Senate minority leader Gene Therriault, R-Fairbanks, said the limit should be
even lower. He said he didn't want lawmakers asking themselves, "Do I slip in
under the wire if I order the penne pasta?"
The new law doesn't make it illegal to get a free meal. It just requires a
report of that meal, so the public knows who's dining with whom.
The paperwork requirement -- imposed on lobbyists, not on the legislators
themselves -- inspired some grumbling along the padded bench on the Capitol's
second floor where lobbyists gather to prod their Blackberries.
And as is often the case with ethics rules, enforcement against those who
violate the requirement could be difficult.
CLOSED LOOPHOLES
The new ethics law passed both houses of the Legislature this year by
overwhelming margins.
New rules will require fuller disclosure of outside income by legislators,
slow the revolving door between state employment and private-sector lobbying,
and bar from lobbying anyone with a felony conviction for a crime of moral
turpitude.
The law closes loopholes. For instance, it defines the value of an investment
that constitutes a conflict of interest as $5,000. In 2005, two investigators
reached different conclusions about whether then-Attorney General Gregg Renkes'
$126,000 investment in a company he'd helped promote was a conflict because
the old law had no defined limit.
Democrats sought many of the same changes last year, but their efforts were
rebuffed. This year the majority Republicans joined in, pushed by Gov. Sarah
Palin -- and the FBI raids of six legislative offices last fall.
"Ethics and the public trust were on the top of each and every legislator's
mind opening the session," said Rep. John Coghill, R-North Pole, after the
bill passed. "We listened, we came together, and we drew bright lines and
stringent guidelines to follow."
AN INCH OR A MILE?
Some critics outside the Legislature say the reforms didn't go far enough
because they didn't address enforcement.
"I view it as a public placebo intended to make the public think it's been
dealt with. It has not," said Ray Metcalfe, a former legislator who was
pushing for investigations of lobbying powerhouse Veco Corp. and former state
Sen. Ben Stevens long before the FBI's interest became public last August.
Metcalfe said state law enforcement and campaign finance officials refused to
do anything when he brought them evidence -- and they can refuse in the
future, even with the new rules.
Metcalfe said the Legislature needs to create a new public offices commission
within the court system, where it can be shielded from threats of budget cuts,
and fund several "public integrity" investigators in the Alaska State
Troopers.
"They've moved an inch when they needed a mile," Metcalfe said.
When this year's ethics measure finally reached the Senate May 9, several
lawmakers objected to the $15 limit on reporting meals and drinks. Among them
was Sen. Albert Kookesh, D-Angoon, who said legislators of good character
should be able to draw the line themselves.
Sen. Bert Stedman, R-Sitka, said only a few legislators were abusing the old
system.
"Unfortunately when you draw 60 people, there's always going to be a handful
who have the evening lifestyle," Stedman said. "Most of us know who they are."
"The problem is, the public doesn't know," responded Therriault.
PUTTING A PRICE ON CONFLICTS
The point of the reporting limit had been slow to sink in. One day
earlier, in the Senate Finance Committee, the original $10 limit was raised to
$50 on a 5-1 vote. Stedman, the co-chairman, said it should "cover a
reasonable meal, nothing too elaborate."
Sen. Donny Olson, D-Nome, said in his district you could hardly get a
hamburger for $50.
Only Sen. Kim Elton, D-Juneau, objected in committee, noting that a string of
$50 dinners added up to quite a sum.
By the next day, committee members had second thoughts and dropped that limit
to $30. It was dropped further that afternoon on the Senate floor to $15 at
the urging of its original sponsor, Sen. Hollis French, D-Anchorage.
"It has the veneer of friendliness," French said later of the lobbyist-paid
meal, "but they're only doing it because they want to have an hour to talk to
you. It's not inherently corrupt. But not reporting it is."
So will Juneau end up the home of the $14.99 lunch special? Many legislators
predict fewer friendly meals out, because elected officials won't want their
names to show up on public reports.
Rep. Les Gara, D-Anchorage, said the net result would be less influence in
Juneau by monied interests.
"Foster kids aren't taking people out to dinner here," Gara said.
Reporter Tom Kizzia can be reached at
tkizzia@adn.com
or in Homer at 1-907-235-4244.
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Fairbanks News Miner
May 20, 2007
http://newsminer.com/2007/05/20/7087
State should examine
rights, duties under 1985 oil shipping deal
By Dermot Cole
Staff Writer
Published May 20, 2007
TAPS CASE: The companies that own the trans-Alaska pipeline say the formula
for setting transportation costs is not the sum of its parts.
Disregard the specifics in the 1985 settlement with the state, the oil
companies say. There are words like “depreciation” embedded in the text, but
such words are meaningless labels outside the context of the settlement.
The only thing that matters, the pipeline owners argue, is that the formula is
a package deal that establishes a way to set maximum rates.
The oil companies challenging the pipeline owners say that understanding the
depreciation rate and every other element in the 1985 settlement is essential
to determining how much the owners should be allowed to collect for shipping a
barrel of oil from Prudhoe Bay to Valdez.
Six years after Tesoro protested the cost of shipping oil instate, the
Regulatory Commission of Alaska found in 2002 that key financial mechanisms in
the settlement dealing with accelerated depreciation and other benefits had
allowed the oil companies to recover 97 percent of the pipeline’s cost by the
end of 1996.
The RCA said that the 1985 settlement “provided the carriers the opportunity
to earn over $9.9 billion in excess of the reasonable and prudent costs of
providing service” as of 1997.
The owners of the pipeline led by BP, Exxon and ConocoPhillips insist that
the numbers about depreciation and other items included in more than 100 rate
filings with the Federal Energy Regulatory Commission are not what they
appear.
The only relevant fact, the companies argue, is that the 1985 settlement was
accepted by the owners of the pipeline and the state as a way of producing
reasonable rates until 2011.
To look at what the oil companies reported in the rate filings for
depreciation and apply that calculation in setting a transportation rate for
companies that didn’t sign the deal is “cherry picking,” the pipeline owners
contend.
Anadarko and Tesoro don’t agree. As non-owners of the pipeline, they are
pushing for lower transportation costs, which would make their oil more
valuable.
On Thursday an administrative law judge agreed with their claim that the
specifics of the 1985 settlement should be used in constructing an accurate
record of the pipeline’s financial past. She decided that interstate
transportation rates should be cut in half, to about $2 a barrel.
This subject has more twists and turns than the Tanana River and that includes
the way the state has played or misplayed its position.
Tariffs are important because every dollar in excess transportation costs
represents a loss to the state of about a quarter. The total runs to hundreds
of millions of dollars a year, according to some reports.
I’ve written here before that the state’s record on seeking lower tariffs is
inconsistent. Contradictory might be a better word.
The 1985 deal includes this provision: “State and TAPS carriers shall
cooperate, each at its own expense, in securing all necessary governmental
approvals for this agreement and in defending against any litigation affecting
the validity and enforceability of this agreement or any provision thereof.”
The state’s actions of the past few years should lead the Palin administration
and the Legislature to examine just what Alaska’s responsibilities are under
that provision.
Richard Fineberg, an independent Fairbanks oil analyst, has authored
authoritative and exhaustively researched reports on the tariff situation over
the past two decades. Most of those reports have been ignored by the political
establishment and not given the credence they deserve by the news media.
I say this because key findings identified by the FERC staff and the
administrative law judge tend to echo the analysis that Fineberg has been
making for nearly 20 years.
Fineberg said that upon reading through the judge’s decision he pictures the
state starring as “The Dog that Didn’t Bark.”
“As Judge Cintron works through the various arguments around which TAPS
tariffs and the decision revolved, on most of the major points she has no need
or reason to mention the state. Considering both the state’s interests and the
breadth and detail of the decision, I find the state’s absence from the
decision noteworthy,” Fineberg said.
The heavy lifting in the case is being done by Anadarko and Tesoro, not the
state, he said. The state’s claim in this proceeding is limited to a narrow
point about whether it is discriminatory to have interstate transportation
rates more than twice as high as intrastate rates.
The pipeline owners claim the state’s position is disingenuous and conflicts
with arguments Alaska has made in other proceedings before the FERC, RCA and
in state court.
Fineberg said the 1985 settlement does not define what the state must do to
cooperate and defend the agreement. He has long questioned whether the state
could live up to its bargain without actively fighting the efforts of
companies like Anadarko and Tesoro to get lower rates.
The state opposed Tesoro’s RCA case for many years and then joined with the
pipeline owners in appealing the RCA order to an Anchorage Superior Court. The
state claimed the RCA had “abused its discretion,” but the court affirmed the
RCA ruling in all respects.
In an appeal of the RCA order for lower rates three years ago, the state
agreed with the pipeline owners that the “TSM depreciation” based on the 1985
agreement wasn’t “actual depreciation.” That view has been rejected by the
RCA, a Superior Court judge, the FERC staff and the administrative law judge.
In a document filed in July 2004, an attorney for Tesoro said “The state’s
focus in the proceeding and on appeal seems simply to be that of a party
trying to justify a bad settlement.”
In February 2006 the state withdrew from an appeal of the RCA tariff ruling, a
dispute now leaving the pipeline owners alone before the Alaska Supreme Court.
The withdrawal raises new questions about what was required from the state in
terms of cooperating to defend the 1985 settlement.
Dermot Cole can be reached at
cole@newsminer.com
or 459-7530.
Xxxxxxxxxxxxxxxxxxxxxxx
http://newsminer.com/2007/05/19/7070
Judge finds
pipeline owners charge too much for shipping oil
By Dermot Cole
Staff Writer
Published May 19, 2007
TAPS TARIFF:
It’s not final, but the ruling from the administrative law judge on the
trans-Alaska pipeline tariff case represents another victory for Anadarko and
Tesoro and a setback for the companies that own the trans-Alaska pipeline.
The five-member Federal Energy Regulatory Commission will next consider the
matter and a challenge in federal court is likely to follow.
The thrust of the decision is that the pipeline owners are charging about
twice as much as they should to pump a barrel of oil from Prudhoe Bay to
Valdez.
Judge Carmen Cintron ruled Thursday that the correct figure is closer to $2
than $4 per barrel.
The difference is important because lower tariffs mean that North Slope oil is
more valuable, particularly for companies like Anadarko and Tesoro that don’t
own part of the pipeline. The transportation cost is also important to the
state because lower tariffs translate into higher oil revenues from royalties
and taxes.
On almost every major point in this complicated fight, Cintron sided with
Anadarko and Tesoro, rejecting the arguments of the pipeline owners, a group
that includes BP, ConocoPhillips, ExxonMobil, Koch Alaska and Unocal.
She said the owners are charging transportation rates that are “unjust and
unreasonable” to ship oil out of state.
The lower rates established through a lengthy proceeding by the Regulatory
Commission of Alaska for oil used within the state are closer to the mark.
The transportation cost for oil that leaves the state from Valdez is under the
jurisdiction of the FERC.
All the combatants in the case agree that it makes no sense to charge about $2
to ship a barrel of oil to Valdez for instate use and to charge more than
twice as much for a barrel of oil that is loaded on a tanker and consumed
elsewhere.
The parties differ on what to do about this discrepancy, however.
Anadarko, Tesoro and the state want the lower RCA intrastate rates to apply to
all oil, not just the 10 percent or so used in the state.
The pipeline owner companies want the FERC to order an increase in the tariff
for oil used in Alaska, claiming the lower tariffs are “an undue burden on
interstate commerce” and give Alaska refiners an unfair advantage over
refineries in the Lower 48.
Robin Brena, an attorney for Anadarko, said the pipeline owners have been
charging excessive rates for shipping oil through the pipeline for 30 years.
“Their excessive rates have cost their shippers and the state of Alaska
billions of dollars,” said Brena, who has argued this issue in regulatory
proceedings for many years.
He said the initial decision of the judge is a “major step toward establishing
fair rates” for the pipeline system.
“If upheld, the initial decision will significantly lower transportation costs
for ANS (Alaska North Slope) crude oil, increase royalty and severance taxes
to the state of Alaska, increase the value of ANS reserves and encourage the
further development of those ANS reserves,” he said.
One of the central points of the dispute is the 1985 agreement between the oil
companies and the state to settle pipeline tariffs.
The pipeline owners say that the individual elements in that agreement listing
costs, rates of depreciation and other specifics were never meant to be relied
upon by those who did not sign the agreement.
For example, the owners say that that Tesoro and Anadarko can not look at the
annual rate filings in which the pipeline owners account for depreciation and
say that the numbers are accurate.
Tesoro and Anadarko say the published numbers show exactly what happened and
how much money the oil companies collected beyond what they should have been
allowed to receive.
The judged rejected the idea that the 1985 settlement is an “inseparable
package” and the pipeline owners’ claim that Tesoro and Anadarko are “cherry
picking.”
She said the rate filings made by the companies over the past two decades are
the most convincing evidence of the pipeline’s financial past.
The FERC allows pipeline owners to recover their investment in a project, but
prohibits double recovery. She said she gave no weight to the contention by
the pipeline owners that it would be best, for purposes of setting rates, to
act as if the 1985 settlement with the state had never occurred and to draw
numbers from other sets of books kept by the companies for accounting
purposes.
The rate filings made under the 1985 agreement show how much has been
recovered.
Richard Fineberg, an independent oil analyst from Fairbanks who has followed
this issue for more than two decades, said he had two immediate reactions to
the judge’s 116-page ruling.
The first was the extent to which the judge agreed with the FERC trial staff
in its “stinging rejection” of the arguments from the pipeline owners.
The second was “the state’s apparent irrelevance to the decision.”
I’ll have more to say on that second issue in Sunday’s column.
Dermot Cole can be reached at
cole@newsminer.com
or 459-7530.
Xxxxxxxxxxxxxxxxxxxx
http://newsminer.com/2007/05/13/6976
Oil
companies still say pipeline’s ‘economic life’ ends in 2011
By Dermot Cole
Staff Writer
Published May 13, 2007
TAPS TARIFF: The arcane battle over trans-Alaska pipeline tariffs in
Washington, D.C., is a financial struggle between those who own a piece of the
pipe and those who do not.
As the main owners of the pipeline, BP, ConocoPhillips and Exxon don’t mind
paying themselves a hefty fee for shipping a barrel of oil from Prudhoe Bay to
Valdez.
The economic theory is that a dollar in the right hand is worth just as much
when it is moved to the left hand.
Tesoro and Anadarko are not pipeline owners, however, so they can’t shift this
expense from one subsidiary to another.
They’d like to see transportation costs as low as possible, which would make
oil on the North Slope more valuable.
The two companies have challenged the pipeline transportation rates as “unjust
and unreasonable” in a case being argued before the Federal Energy Regulatory
Commission.
For the past decade Tesoro has been pushing this point, first before the
Regulatory Commission of Alaska and now before the federal board.
The state has a big interest in what happens next. One estimate is that for
every $1 collected by the companies in excessive transportation costs, the
state loses 25 cents in royalties and taxes. The loss is roughly $500,000 a
day, according to Fairbanks researcher Richard Fineberg, who has followed this
debate for decades.
You would think that the state would have long been fighting for lower tariffs
and looking for ways to make North Slope oil more valuable, which could entice
more companies to look for oil on the North Slope. But you would be wrong.
The state has been inconsistent in its arguments on transportation costs. It
signed a deal with the big oil companies in 1985 on a financial formula for
deciding transportation costs and promised to defend it.
After opposing Tesoro’s case before the RCA, the state now contends that in
challenging the transportation rates it is still defending the deal it is
just attacking the way the oil companies are implementing certain provisions.
In the first detailed look at developing a cost-based rate for pipeline
tariffs, the RCA found that the oil companies had recorded $20 billion in
expenses and $50 billion in income by 1996.
Nearly $10 billion of the income was “in excess of the reasonable and prudent
costs of providing service,” the RCA found.
In the current case about interstate rates, an administrative law judge is
expected to rule shortly on whether the pipeline owners are charging
themselves too much to move oil.
The 1985 deal between the oil companies and the state contained many flaws
that would never have passed muster before the FERC because they were not
based on costs. Even the oil companies admit that.
The state agreed to the deal, however, and FERC accepted the settlement,
leaving the door open for future challenges by those who had not signed the
agreement.
The essence of the current dispute is that Tesoro and Anadarko can seek a
“just and reasonable” transportation cost derived from a process based on
actual costs and precedents established throughout the United States.
The attorneys on the FERC staff agree that the settlement “inherently produces
unjust and unreasonable rates that fail to comply with applicable cost-based
ratemaking standards.”
The big oil companies say the 1985 tariff settlement is binding as a total
package, not as a series of individual elements, and that the claims of their
opponents are “groundless.”
Tesoro and Anadarko say the Alaska settlement “resulted in massive
overcollections of revenue” by the oil companies, producing a 99.28 percent
return on equity in 2005 and a 105 percent return in 2006.
One of the big issues is accounting for depreciation, which is the way in
which assets are written off for tax purposes.
The 1985 settlement allowed the oil companies to get those tax benefits on an
accelerated basis, meaning the pipeline value would go down faster than
through traditional “straight line” depreciation.
This allowed the companies to recover a large part of their investment early
in the operational phase of the pipeline’s history. The RCA found that 97
percent of the pipeline’s cost had been recovered by the end of 1996.
This is relevant because costs that have already been recovered should mean a
lower rate base and lower transportation costs.
One argument in the debate concerns the life of the pipeline. The shorter its
life, the quicker the companies recover their investment and the higher the
expense, creating higher transportation costs.
The oil companies are still acting as if the pipeline’s useful life will end
in 2011, even though everyone thinks a more realistic date is 2034.
This discrepancy inflates the current depreciation expense by tens of millions
of dollars, the non-owners say.
The oil companies argue that they are allowed to say the pipeline’s economic
life will end in four years because the FERC has never told them to use a new
number.
“Because the TAPS carriers are not the proponents of changing the approved
depreciable life ending in 2011 and the commission has not approved such a
change, that end-life remains in effect until modified prospectively,” the
pipeline owners said.
The non-owners claim the oil companies should have submitted updated
depreciation studies that reflect reality.
In general, the pipeline owners say that the depreciation rates determined
from the 1985 settlement are an illusion.
They argue that since the FERC did not explicitly say it was approving the
accelerated depreciation schedule in the agreement, but merely described it,
the formula is not binding.
They say that the commission, in dealing with Tesoro and Anadarko, should act
as if the 1985 settlement with accelerated depreciation never existed.
The FERC staff described this argument as “silly,” adding that accelerated
depreciation has been applied by the pipeline owners in more than 100 rate
filings.
Xxxxxxx
VECO VALUES: The Voice of the Times section in the Anchorage Daily News
removed the name of Bill Allen, who was publisher, as of Thursday. Now that
space is blank, but the contract to publish the section was with Allen.
Allen, who pleaded guilty to bribing legislators and told one of them, “I own
your ass,” resigned Thursday and his daughter became head of his company.
Still on the VECO Web site is its list of “VECO Values.”
The second one is honesty: “We maintain integrity by always matching our
actions with our words. We don’t lie. We don’t cheat. We don’t steal.”
Dermot Cole can be reached at
cole@newswminer.com
or 459-7530.
xxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 19, 2007
http://www.adn.com/money/industries/oil/pipeline/story/8899636p-8799524c.html
Tariff
ruling may boost earnings for state
INCONSISTENT: Cost of moving barrel of oil through pipeline varies too much.
The Associated Press
Published: May 19, 2007
Last Modified: May 19, 2007 at 05:50 AM
FAIRBANKS -- An administrative law judge's ruling that rates have been too
high for shipping oil through the trans-Alaska oil pipeline could mean higher
earnings for state coffers.
The 116-page ruling released Thursday by Carmen Cintron, the judge with the
Federal Energy Regulatory Commission, said past pipeline shipping rates were
too high and the consortium of companies that own the pipeline should refund
excess revenue collected over the past two years.
It also sets the stage for future oil revenues coming into the state treasury
to increase "very significantly," according to Antony Scott, an economist with
the state.
"It's a good ruling," Scott said.
The state collects its percentage of oil revenues after tariffs have been
levied on the wellhead value of a barrel of oil. Lower tariffs mean the state
percentage per barrel is worth more.
The case revolves around an inconsistency in the cost to move a barrel of oil
through the pipeline, a cost set annually by pipeline owners that include BP,
Exxon Mobil and Conoco Phillips.
Currently, tariffs for oil sent through the pipeline bound for sale out of
state are higher than for oil sold within Alaska, even though the oil is
moving through the same stretch of pipe.
In December 2004, the state, Anadarko Petroleum Corp. and the Tesoro Corp.
challenged that inconsistency by arguing that the higher rates should be
lowered to around $2 per barrel. Pipeline owners recently proposed to raise
the lower rates as high as $5.29 per barrel.
Cintron's ruling sided with the state but is only a recommendation to the full
FERC board, which will meet on the matter later in the year.
If the FERC agrees with the ruling, it will mean the pipeline owners will have
to refund excess revenue collected over the past two years. It will also mean
that the proposed tariffs for 2007 have been negated and must be filed again.
After the FERC makes a final ruling, the parties will have the opportunity to
appeal the decision to the U.S. District Court.
Gov. Sarah Palin on Thursday said the decision bolsters the state's argument
that tariffs will be an important element in a future gas pipeline contract.
"This reaffirms the need to ensure low tariffs on oil and gas lines," Palin
said. "This is why we spent a great deal of time working on structuring the
Alaska Gasline Inducement Act to maximize value for the state and ensure low
tariffs. We're pleased with the FERC decision and we look forward to continued
progress on this issue."
Spokesmen for Anadarko and BP said they were reviewing the document and were
not ready to comment.
Xxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/money/story/8898490p-8798382c.html
Colorado
company interested in Veco
BID TO BUY: CH2M Hill signs a letter of intent to discuss the purchase.
By WESLEY LOY
Anchorage Daily News
Published: May 19, 2007
Last Modified: May 19, 2007 at 05:03 AM
A Colorado company is negotiating to buy scandal-plagued Veco Corp., the
Anchorage oil-field services and construction company whose former chief
executive pleaded guilty this month to federal bribery and conspiracy charges.
CH2M Hill, based in the Denver suburb of Englewood, and Veco have signed a
letter of intent giving the Colorado engineering firm an exclusive 90-day
period to discuss a purchase, John Corsi, a CH2M Hill spokesman, said Friday.
The sale is not guaranteed, as the firm must do a management and legal review
of Veco, Corsi said.
"This has to fit both ways," he said.
Neither of the privately held companies disclosed any proposed terms Friday.
Veco is one of the largest companies in Alaska, with about 2,000 employees in
the state and a similar number in operations around the world.
"The business combination with CH2M Hill is an excellent opportunity to move
our company forward," said Tammy Kerrigan, who took over as Veco chairwoman
after her father, Bill Allen, pleaded guilty May 7 and subsequently stepped
down from his corporate posts.
"CH2M Hill is consistently recognized as one of the most respected companies
in the engineering and construction industry and we are very interested in the
significant value created for our clients by combining the skills and
resources of the two firms," said Kerrigan, of Grand Junction, Colo. "This
transaction would also provide a great home for our dedicated and skilled work
force."
"We are very enthusiastic about the prospect of this deal. The outstanding
employees at Veco are respected worldwide for their heritage of service to the
energy industry," said Rob Smith, president of CH2M Hill's energy, chemicals
and industrial systems business group. "Their commitment to client service
would be an excellent fit with CH2M Hill's culture. Veco's core energy
business and locations fit our corporate growth strategy extremely well."
CH2M Hill is an engineering, construction, management and design firm with
$4.5 billion in revenue last year. The firm is owned entirely by its
employees, and no employee owns a dominant share, Corsi said.
Veco is heavily involved in oil-field services and construction on the North
Slope, and also has projects in the Lower 48, Canada, Barbados, Russia's
Sakhalin Island and the Middle East. The company has annual revenue reaching
$1 billion, Allen has said.
The Allen family owns much of Veco.
Allen, who helped build Veco starting in 1969, pleaded guilty to bribing state
lawmakers in exchange for their votes or influence on legislation important to
the oil industry, including last year's production tax reform.
Another Veco executive, Rick Smith, also pleaded guilty to federal charges,
and both he and Allen face probable prison time.
Amy Menard, an attorney for Veco, had said in the wake of the guilty pleas
that FTI Consulting Inc., a large Baltimore-based firm, would review the
company's corporate operations and practices, with initial results expected by
this week. Menard did not return a phone call seeking comment Friday.
Federal authorities have not accused Veco, as a company, of any crime.
THE ALASKA WORK
Among Veco's major customers is British oil giant BP, which runs Prudhoe
Bay, the nation's largest oil field.
BP spokesman Daren Beaudo offered a prepared statement on Veco's possible
sale:
"CH2M Hill is a respected international company. Our interest is in a solution
that would allow thousands of hard-working Alaskans to continue to provide
quality oil-field services on the North Slope and elsewhere."
One of Veco's main rivals for oil-field contracts in Alaska is ASRC Energy
Services, a unit of Arctic Slope Regional Corp., the Barrow-based Native
corporation for the North Slope. The company had no comment Friday on the
possible emergence of a larger competitor in CH2M Hill, ASRC spokeswoman Carol
Richards said.
CH2M Hill has a deep history of work in Alaska, Corsi said.
It began with the devastating 1964 Alaska earthquake, which spawned business
for the company from the U.S. Army Corps of Engineers, he said.
The firm has an office on Northern Lights Boulevard in Anchorage, and its 70
Alaska employees work on energy, transportation, water and environmental
projects, Corsi said.
Clients include the Corps, the Defense Department, the state Department of
Transportation, the North Slope Borough, the City of Anchorage, the Alaska
Department of Fish and Game, energy companies and others.
The name CH2M Hill is built from the initials of its four founders --
including two named Howland and Hayes -- plus the name of a firm, Hill, picked
up in a merger.
"The CH2M Hill enterprise, dating back to 1946, is built on honesty, ethics
and morals," according to its Web site.
Daily News reporter Wesley Loy can be reached at
wloy@adn.com
or 257-4590.
CH2M Hill • What: Global engineering, construction, management and
design company
• Headquarters: Denver
• 2006 revenue: $4.5 billion
• Employees: 19,000
• History: Founded in 1946 in Corvallis, Ore.
• Alaska connection: Firm has an Anchorage office and 70 Alaska employees. Has
worked on more than 3,000 Alaska projects since the 1964 earthquake. Clients
include state Department of Transportation, Army Corps of Engineers, City of
Anchorage, North Slope Borough, energy companies.
• Web site:
www.ch2m.com
CH2M Hill
xxxxxxxxxxxxxxxxxxxxx
Wall Street Journal
May 19, 2007
US Crt Won't
Dismiss Case Aiming To Freeze Pay Of BP's Browne
DOW JONES NEWSWIRES
May 18, 2007 5:09 p.m.
LONDON (Dow Jones)--An Alaskan court Thursday denied a motion by BP PLC (BP)
and ex-Chief Executive John Browne to dismiss a case against them seeking to
freeze Browne's compensation.
The action, which was filed in October, asks that Browne's compensation and
retirement payments be placed in a trust pending a reassessment by the
company.
The case follows a series of incidents under Browne's watch, including a spill
at the Alaska Prudhoe Bay pipeline and a deadly Texas refinery explosion.
Browne already renounced some of his compensation and a long-term incentive
plan when he resigned on May 1 after a court allowed his private life to be
publicized.
In a court order Thursday in Alaska but released Friday, Anchorage Superior
Court Judge Jack Smith denied a motion by Browne and BP to dismiss the case.
They had argued, among other things, that the jurisdiction for any case
against BP should be the U.K., not Alaska.
The court didn't rule on whether Browne's compensation should be frozen. The
order only allows the case to proceed in Anchorage, and hearings are now
scheduled for June 6.
-By Benoit Faucon, Dow Jones Newswires; 44-20-7842-9266;
benoit.faucon@dowjones.com
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Anchorage Daily News
May 18, 2007
http://www.adn.com/money/industries/oil/story/8894819p-8794859c.html
Relationship matrix underpins BP tactics in Alaska
IN CHARGE: Report lists oil company's execs and the state, federal agencies
they handle.
By WESLEY LOY
Anchorage Daily News
Published: May 18, 2007
Last Modified: May 18, 2007 at 04:58 AM
BP has a game plan for dealing with state and federal regulators, maintaining
a "formal relationship matrix" for assigning certain executives to deal with
certain officials or agencies.
The matrix is mentioned in a report by a consultant BP commissioned to
investigate corrosion-related oil pipeline spills last year in Prudhoe Bay,
the nation's largest oil field. BP manages that field on behalf of itself and
other owners including Exxon Mobil and Conoco Phillips.
The report offers a rare glimpse inside the London-based oil giant's corporate
tactics in Alaska.
The consultant, Booz Allen Hamilton of McLean, Va., writes that BP Alaska's
vice president for external affairs, Phil Cochrane, is responsible for
maintaining a matrix designating who from the company will handle particular
regulators.
For example, the president of BP Alaska -- currently Doug Suttles, who
replaced Steve Marshall in the wake of last year's Prudhoe troubles -- is to
deal with the commissioner of the Department of Natural Resources. The
department has great authority over BP, acting essentially as landlord for
Prudhoe and other oil fields BP runs.
The Prudhoe Bay field manager, formerly Maureen Johnson and now Mike Utsler,
also deals with the Department of Natural Resources but also with the Alaska
Oil and Gas Conservation Commission, which regulates drilling activity.
The matrix assigns BP's senior attorney for health, safety and the environment
as well as regulatory matters to the Alaska Department of Environmental
Conservation, which regulates pollution, including oil spills. The attorney,
Randal Buckendorf, is a former DEC employee who manages the relationship with
the department "as a result of long-standing personal friendships and
professional interactions," the Booz Allen report says.
Other BP executives deal with federal agencies such as the Environmental
Protection Agency and the Department of Transportation.
The Booz Allen report says BP antagonized some regulators after last year's
pipeline leaks and "many regulatory relationships have become strained."
One DOT agency, the Pipeline and Hazardous Materials Safety Administration,
has "become very aggressive" in ordering more corrosion testing and better
maintenance of the major pipelines that leaked, the report says.
Daren Beaudo, a BP spokesman in Anchorage, said the company would not comment
in detail on specific findings in the Booz Allen report, which BP has provided
to congressional members investigating the spills.
As for the relationship matrix, "there's nothing novel about it at all,"
Beaudo said.
The idea is to find the people best suited in BP to keep regulators informed,
he said.
"We feel we have an obligation and the regulators and government officials
appreciate having good, consistent lines of communication and we feel that's
the right thing to do," Beaudo said.
He wouldn't comment about how relations between BP and some regulators had
been strained. He also said Cochrane and Buckendorf were not available to
comment Thursday.
Cathy Foerster, an engineer who holds one of three seats on the Oil and Gas
Conservation Commission, said the agency does tend to hear from the same BP
people. But she said it's not like BP employees are trying to curry favor or
forge friendships with, say, a lunch or tennis date.
"Nobody calls to see if I'm having a good day. They just don't do that,"
Foerster said. "And if they did that, I would tell them to stop. They call to
tell us stuff they think we need to know."
Foerster, who used to work as a manager for oil company Arco, which is now
part of Conoco, said major oil companies such as BP have a long list of
regulators and others they're expected to keep informed in the event of
something unusual, such as a spill or an oil field shutting down unexpectedly.
To fill in everyone quickly, the phone calls must be divvied up, she said.
"Every agency thinks that they're the most important one," Foerster said.
People from Conoco, which operates Alaska's second and third largest oil
fields in Kuparuk and Alpine, don't call as often, she added.
"Conoco has just been luckier, I think" in avoiding mishaps in its fields, she
said.
Conoco spokesmen could not be reached for comment on how the company deals
with regulators.
Larry Dietrick, a longtime Department of Environmental Conservation regulator
in charge of spill prevention and response, said he'd talked with Buckendorf,
the BP attorney, "once in a while."
But generally, the department doesn't deal so much with individuals, Dietrick
said. Rather, it works broadly with corporate units such as the health, safety
and environment staff BP and other companies employ, he said.
Daily News reporter Wesley Loy can be reached at
wloy@adn.com
or 257-4590.
Xxxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/government/legislature/story/8894814p-8794856c.html
Special
session planned on the petroleum tax
LEGISLATURE: Gov. Palin wants to revisit oil tax, but not in Juneau.
By SABRA AYRES
Anchorage Daily News
Published: May 18, 2007
Last Modified: May 18, 2007 at 04:55 AM
JUNEAU -- Gov. Sarah Palin said Thursday she intends to call state lawmakers
into a special session this fall to revisit the Petroleum Production Tax and
would be looking to save money by holding the meeting somewhere other than
Juneau.
In declaring her plans less than 12 hours after the regular legislative
session ended for the year, Palin did not specify another venue, but hinted
Anchorage would be a contender because of the city's proximity to a large
percentage of lawmakers.
"We're not moving the Legislature, and we're not moving the capital," the
governor said. "But we'll be looking for somewhere to meet that will be less
expensive."
Palin said the previous Legislature spent an "outrageous" $2.1 million on
special sessions. The government must pick up the bill for legislators' travel
costs to a special gathering and for housing costs while House and Senate
members are in session. State lawmakers went through three special sessions
last year and one in 2005.
Juneau has been the capital of the state since territorial times. The prospect
of moving state government elsewhere has been raised several times in the
state's history and always creates heated resistance in the Southeast Alaska
city.
"We do get concerned when the Legislature contemplates meeting in a place
other than Juneau," Juneau Mayor Bruce Botelho said Thursday.
Botelho, who served as state attorney general from 1994 to 2002, said, "But
Palin has been clear that Juneau is the capital, and I don't think this is a
situation that should trigger a three-alarm fire."
Proponents of moving the capital say Juneau is too isolated from the rest of
the state, making it difficult for voters to access their state government.
With no roads in or out of the city, Juneau can be reached only by plane or
ferry. Lawmakers whose planes have been delayed because of bad weather say
they have had to miss critical session days.
Palin said the recent guilty pleas from two Veco Corp. executives who admitted
to bribing legislators during last year's approval of the PPT was evidence
enough that a thorough review of the tax law was warranted.
"Our oil tax formula was changed under a dark cloud of suspicion," she said
Thursday.
When the PPT was created, it fundamentally changed the way the state taxes oil
producers, and supporters of the tax structure were hopeful it would bring
more revenue into state coffers. But first receipts last month came in $137
million short of projections.
LOOPHOLE ALSO ON AGENDA
Bill Allen and Rick Smith of Veco have pleaded guilty to charges they paid
off lawmakers in exchange for their influence during the PPT debate in the
Legislature. One current and two former lawmakers face related bribery and
extortion charges.
Palin announced after the indictments earlier this month that her
administration would begin examining how effectively the tax was working.
The governor said she would ask lawmakers during the special session to take
up a bill dealing with a loophole in oil tax expenditures left hanging after
Wednesday night's late adjournment.
The bill, which more than half the members of the Legislature endorsed, would
keep oil companies from deducting for pipeline repairs in cases of "improper
maintenance."
House Minority Leader Beth Kerttula, a Democrat who represents Juneau, said
she was happy to hear the governor intended to ask the Legislature to take up
the tax again.
She stressed that she was not worried that Palin, a Wasilla native, was trying
to move the capital.
Holding public hearing and testimony in another Alaska city to involve more of
the public would benefit the entire state, particularly on a tax law debate
that "didn't go right the first time," Kerttula said.
"This is a pragmatic governor," she said. "I'm sure she will be willing to
work this out with us. I'm not concerned she meant anything more than that."
If it came down to drafting new tax legislation and voting on it, lawmakers
would need to be in Juneau to access the expertise of the Legislature's legal
and finance offices located in the capital, said Rep. Kurt Olson, R-Soldotna.
"We can't do it without them, and it would be too expensive to move anywhere
else," he said.
Daily News reporter Sabra Ayres can be reached at
sayres@adn.com
or 1-907-586-1531.
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Fairbanks News Miner
May 18, 2007
http://newsminer.com/2007/05/18/7067
Ruling
may allow higher oil revenues
By Eric Lidji
Staff Writer
Published May 18, 2007
An administrative law judge has determined that past rates for shipping oil
through the trans-Alaska oil pipeline were too high and has ordered the
consortium of companies that own the pipeline to refund any excess revenue
collected over the past two years.
The 116-page ruling released on Thursday by Carmen Cintron, the judge with the
Federal Energy Regulatory Commission, also sets the stage for future oil
revenues coming into the state treasury to increase “very significantly,”
according to Antony Scott, an economist with the state.
“It’s a good ruling,” Scott said.
Because the state collects its percentage of oil revenues after tariffs have
been levied on the wellhead value of a barrel of oil, lower tariffs mean the
state percentage per barrel is worth more.
The case revolves around an inconsistency in the cost to move a barrel of oil
through the pipeline. The cost is known as a tariff and is set annually by a
consortium of pipeline owners that includes BP, Exxon Mobil and
ConocoPhillips.
Currently, tariffs for oil sent through the pipeline bound for sale out of
state are much higher than for oil sold within Alaska, even though the oil is
moving through the same stretch of pipe.
In December 2004, the state, along with Anadarko Petroleum Corporation and the
Tesoro Corporation, challenged that inconsistency by arguing that the higher
rates should be lowered to around $2 per barrel. The pipeline owners recently
proposed to raise the lower rates as high as $5.29 per barrel.
Cintron’s ruling sided with the state but is simply a recommendation to the
full FERC board, which will meet on the matter later in the year.
If the FERC agrees with the ruling, it will mean the pipeline owners will have
to refund any excess revenue collected over the past two years. It will also
mean that the proposed tariffs for 2007 have been negated and must be filed
again.
After the FERC makes a final ruling, either side will have the opportunity to
appeal the decision to the U.S. District Court.
In a statement Thursday, Gov. Sarah Palin argued that the decision bolsters
the state’s argument that low tariffs will be an important element in a future
gas pipeline contract.
“This reaffirms the need to ensure low tariffs on oil and gas lines,” Palin
said in a statement on the ruling. “This is why we spent a great deal of time
working on structuring the Alaska Gasline Inducement Act to maximize value for
the state and ensure low tariffs. We’re pleased with the FERC decision and we
look forward to continued progress on this issue.”
Spokesmen for both Anadarko and BP said they were still reviewing the document
on Thursday afternoon and were not yet able to comment on the ruling.
Contact staff writer Eric Lidji at 459-7504 or
elidji@newsminer.com.
Xxxxxxxxxxxxxxxxxxxxxxx
http://newsminer.com/2007/05/18/7066
Gas line
glory to budget bickering:
Lawmakers reflect on time in session
By Stefan Milkowski
Staff Writer
Published May 18, 2007
JUNEAU Despite political hurdles and regional wrangling, the Legislature
ultimately came together on important legislation and approved a state
spending plan that works for Fairbanks even if it’s too big overall, local
lawmakers said Thursday.
“We got a lot of major things done,” Rep. Mike Kelly, R-Fairbanks, said.
In the first session of the 25th Legislature, which ended Wednesday night,
lawmakers approved a comprehensive ethics package covering the legislative and
executive branches and passed Gov. Sarah Palin’s gas pipeline legislation,
which sets up a competitive bidding process for prospective pipeline builders.
They worked on proposals to address public employers’ unfunded retirement
debts, reshape K-12 education funding, and provide long-term revenue sharing,
but in the end held off on long-term fixes to all three.
Local lawmakers mostly pointed to the passage of Palin’s gas line bill, the
Alaska Gasline Inducement Act, as their biggest accomplishment and a step
toward getting a natural gas pipeline built.
“The proof’s in the pudding,” Sen. Joe Thomas, D-Fairbanks, said, “but at
least there’s a plan, a structure, and I think that’s good.” Rep. David
Guttenberg, D-Fairbanks, said he was confident the bill would result in enough
applications to make the project a reality.
Rep. Jay Ramras, R-Fairbanks, voted for the bill but expressed concerns about
it.
“It passed just like the governor wanted,” he said. “It’s her new
administration, it’s her plan, but I think we would have all benefited from a
more elastic process that brought more potential applicants to the table.”
Lawmakers also expressed support for the ethics reform, but members from both
parties said there’s only so much that can be done through new legislation.
“When you got a rotten cowboy, that’s not going to stop him,” Kelly said.
As for the trio of intertwined issues that dominated the session’s end
education funding, retirement debt, and revenue sharing lawmakers said they
liked the level of funding provided as one-year fixes in the capital budget,
but were disappointed that lawmakers never settled on long-term solutions.
“To not have those things fixed yet was sort of a downer,” Rep. Scott
Kawasaki, D-Fairbanks, said.
In the final days, House and Senate leadership split on the question of
whether the retirement debt could be addressed long-term even if education and
revenue sharing weren’t.
Most local lawmakers agreed with the House majority that it could, and they
pushed for the passage of SB 125, a Senate bill establishing how much public
employers such as school districts and municipalities would have to contribute
over the coming decades.
Senate leadership failed to budge, and the bill, versions of which passed both
bodies, never got final approval.
“It just got balled up,” Sen. Gary Wilken, R-Fairbanks, said of the cost-share
bill and the other two pieces.
Wilken and Sen. Gene Therriault, R-North Pole, both members of the Republican
Senate minority, joined House members in criticizing the bi-partisan Senate
coalition for holding up the bill.
Senate leaders argued the fix would throw off a complex balance of state aid
to local communities and discourage urban lawmakers from addressing education
funding in the future.
Rep. John Coghill, R-North Pole, on Wednesday said he was glad the Legislature
finished on time but noted the temporary nature of the fix meant there would
be lots to do next year.
Fairbanks and North Pole lost some clout this year when four of the eight
local lawmakers ended up in the House and Senate minorities. Last year, the
two cities were represented by seven Republicans and one Democrat, with seven
members in the majority.
This year, they’re represented by five Republicans and three Democrats, with
only four members in the majority.
Guttenberg, the House minority whip, criticized the House majority for working
on major issues such as education funding in private discussions rather than
through the formal committee process.
“It really needs to be done out in focus, out in the public, so people can
understand what’s going on,” he said.
Wilken and Therriault also described a “secrecy” surrounding proposals by the
Senate majority, but said they were still able to have an effect on the
process by teaming up with sympathetic majority members and by raising their
voices on issues.
“The system allows you to figure out a way to get around those that throw up
the roadblocks,” said Therriault.
Lawmakers suggested the power shift contributed to what they said was a
paucity of Fairbanks projects in the state’s capital budget.
“We had nothing coming over on the Senate,” said Kelly, the only local member
of the House Finance Committee.
Kelly said he was pleased at the Fairbanks projects added by the House, but
“steamed” that funding was never added for the University of Alaska biological
sciences facility proposed for the Fairbanks campus.
Thomas, the only local member of the Senate Finance Committee, said he was
ultimately pleased with the capital budget.
“I of course would have liked to see a few more things for the Fairbanks area,
but overall I think it turned out pretty good,” he said.
Majority and minority members both challenged the overall level of spending in
the capital and operating budgets, and Wilken, a former Senate Finance
Committee co-chair, said he will push for reform in the capital budgeting
process.
“Clearly the system we have is fraught for abuse,” he said.
Ramras, a member of the House majority, complained of another shift in Capitol
politics.
He said he enjoyed his new role as chair of the House Judiciary Committee but
was disgusted by an anti-business climate and extreme suspicion of lawmakers’
motives.
“After 20 years of having rock-solid integrity in the private sector, my
integrity was called into question just for showing up to work,” he said.
Kawasaki, a freshman lawmaker, was more upbeat.
“I got a couple more gray hairs, a couple more pounds under the belt, but
overall I think I had a positive first session,” he said.
Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.
xxxxxxxxxxxxxxxxx
Alaska Report
May 17, 2007
http://www.alaskareport.com/vs_32111_exxon_valdez.htm
Short
Circuiting Justice at the Ninth Circuit Court
May 17, 2007
By Victor Smith
Finally, after eighteen disillusioning years of waiting for compensation for
the Exxon Valdez oil spill, someone has called foul on the rank politics that
have been obscuring and delaying settlement of the case.
On March 31 of this year, the public advocacy Community Rights Council (CRC)
issued a press release titled "Exxon, Punitive Damages, and Judicial Junkets"
that fingered Judge Andrew Kleinfeld, one of the three "randomly assigned" 9th
Circuit judges, for having ties to Exxon.
According to CRC, "for more than a decade, Exxon Corporation has waged a
comprehensive campaign against punitive damages awards…An important part of
Exxon's punitive damages campaign has been to fund organizations such as
[George Mason University's] Law and Economics Center (LEC) which hosts junkets
for federal judges that focus on topics including punitive damages….This
campaign paid off handsomely in December 2006, when [the 9th Circuit Court]
reduced Exxon's punitive damages liability for the Valdez spill by $2
billion…Judge Kleinfeld…who wrote the opinion in favor of Exxon in December…
serves on LEC's Board of Judicial Advisors and reports taking at least three
LEC-funded trips in recent years."
Although Kleinfeld contends that Exxon's contributions to LEC and the junkets
"are just small potatoes," some would disagree. According to Media
Transparency, " George Mason University has been a magnet for right-wing money
for over a decade….From 1992 through 1994 the University placed third among
all academic and non-academic grantees."
These endowments fund LEC's "mission to educate judges in how to apply
principles of economic analysis to the law. By 1991, the Center had provided
such training -- with seminars held at resort locations to enhance their
attractiveness -- to over 40 percent of the federal judiciary…with corporate
and foundation sponsors covering 'all travel, lodging and meal expenses for
the most powerful players in the legal system--judges.'"
As flipside.org explains, " George Mason University 's Law and Economics
Center has as its mission to teach federal judges that the goal of the law
should be to maximize the wealth of society by promoting the efficient use of
scarce resources. Thus conceived, the law is no longer about the Constitution,
or about ethics or justice. In this view, courts become an appendage of the
market, promoting efficiency, not equity."
To get on LEC's board, it probably didn't hurt that Kleinfeld had been a long
time admirer of the Federalist Society and organizations like the Institute
for Justice. Like LEC, the Federalist Society and the Institute seek nothing
less than to reshape the landscape of the U.S. judiciary by promoting
right-wing judicial activists to positions of power who will push the country
rightward and end government regulation of businesses. Think of it as an
under-the-radar parallel to the Bush administration's scandalous
politicization of our U.S. attorneys.
Putting LEC's agenda in context with present attempts to break up the 9th
Circuit Court, imagine the opportunity to place corporate-favoring judges
anticipated by the establishment of a new Alaskan court. Breaking up the 9th
has long been the goal of Judge Kleinfeld and his Republican Alaskan boosters:
Senator Ted Stevens, former Senator Frank Murkowski, and Representative Don
Young, none of whom have been particularly vocal in pressing Exxon for a
settlement. They must find it cruelly amusing that Kleinfeld's endless delays
trying to reduce the lower court's settlement could serve double duty by
making the Exxon case a poster boy for splitting up the court.
This is not that far-fetched, especially when you look at the corruption so
much of the Alaskan Republican power structure engaged in with the oil
companies to secure passage of Gov. Murkowski's oil tax bill that rips off the
state for $2 billion annually. Why wouldn't one expect that the bribes and
extortion extend to trying to save the oil companies several more billions on
the Exxon case while at the same time avoiding a precedent for environmental
accountability?
Make no mistake about it; avoiding the precedent of reasonable compensation to
fishermen' is at least 51% of what Exxon has been shelling out the money for
and what the hopefully soon-to-be-indicted Stevens, Murkowski, and Young have
been shilling for. As evidenced by riders they passed in 2003 limiting the
public's ability to sue over environmental issues in the Tongass National
Forest , it is doubtful these three would favor giving fishermen a dime. In
fact, they're pushing ahead for more development with less protection than was
had before without even making sure Alaska 's fishermen are compensated for
abuses that happened eighteen years ago.
A final question raised by CRC's news release is, "Why was it left to the
eleventh hour (well, hopefully it's the eleventh hour) for a third party to
blow the whistle on Kleinfeld?" Why didn't some Alaskan official do it, or one
of plaintiff's attorneys? as certainly this hasn't been a secret.
When Alaska wanted a certain outcome in the Bristol Bay price-fixing case the
usual politicians jumped all over it. One must now discount their claims that
the Exxon case was 'being left up to the courts'.
Likewise, plaintiffs may have questions about their own attorney's political
involvement in the case. Last year, plaintiff's attorneys organized a
political campaign, ostensibly to bring political pressure to bear on Exxon to
settle. To accomplish this they hired Washington 2 Advocates, a Washington
based right-wing Republican lobbying group comprised mostly of aides to former
Washington Senator Slade Gorton. This was a foolish and hollow strategy, at
best, because W2A wasn't going to do anything that would focus attention on
Republican Congressmen who put the interests of their big-contributing oil
companies before the public's interests.
Thank goodness for law enforcement though; there's nothing like an FBI raid to
focus your attention. Perhaps the FBI will be able to tell us if it was just
multiple cruel twists of fate that conspired to "randomly" place the fortunes
of 35,000 victims of Exxon's negligence in the hands of Judge Kleinfeld: the
judge with the big agenda that's not your agenda. If you are still confused by
all the protestations of innocence and high integrity, just remember the old
saying, "Whose bread I break, his song I sing." It is appalling that Kleinfeld
is involved in the Exxon case.
Victor Smith, longtime Alaska fisherman
xxxxxxxxxxxxxxx
Anchorage Daily News
May 17, 2007
http://www.adn.com/news/government/legislature/story/8892958p-8793071c.html
Palin
plans to call special session in fall
By SABRA AYRES
Published: May 17, 2007
Last Modified: May 17, 2007 at 03:50 PM
JUNEAU -- Gov. Sarah Palin said Thursday she intends to call lawmakers into a
special session this fall to revisit the Petroleum Production Tax but would be
looking to save state dollars by holding the meeting somewhere other than
Juneau.
“We’re not moving the Legislature, and we’re not moving the capital,” Palin
said in a press conference less than 12 hours after lawmakers wrapped up for
the year. “But we’ll be looking for some where to meet that will be less
expensive.”
Palin said the previous Legislature spent an "outrageous” $2.1 million on
special sessions to cover transportation and housing costs for legislators in
Juneau.
Having lawmakers work outside the capital city in Southeast Alaska could raise
eyebrows in Juneau, where residents are sensitive to any motions to move state
government to another city.
Moving state government out of Juneau has been raised several times in the
state’s history. Lawmakers have considered the idea in proposed legislation,
but none have managed to pass.
Proponents of the idea say the Southeast city is too remote from the rest of
the state, making it difficult for voters to access their state government.
With no roads in or out of the city, Juneau can only be reached by plane or
ferry.
Daily News reporter Sabra Ayres can be reached at
sayres@adn.com
.
Xxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/fbi/story/8892691p-8791703c.html
Top
lobbyist admits scheme
Influence money
funneled to Rep. Tom Anderson, Bobrick testifies
By LISA DEMER
Anchorage Daily News
Published: May 17, 2007
Last Modified: May 17, 2007 at 06:48 AM
Lobbyist Bill Bobrick admitted in federal court on Wednesday that he conspired
to bribe former state Rep. Tom Anderson.
Asked by U.S. District Judge John Sedwick how he pleaded to a felony charge of
conspiracy, Bobrick answered in a clear, steady voice: "Guilty, your honor."
For years, Bobrick has stood out in Anchorage as the lobbyist claiming the
longest list of private clients with city business. Some of the biggest
players in the development and retail worlds have hired him over the years,
including JL Properties, Wal-Mart Stores and Marlow Development Corp. This
year, he had five clients, but all say they have dropped him in recent days
and weeks because of his legal troubles.
"I've been a professional lobbyist for the last 20 years," Bobrick said at
Wednesday's court hearing.
He accepted responsibility for a scheme to funnel payments to Anderson through
a sham company so the legislator would do the bidding of a private corrections
company. Details of the company in court filings match a description of
Cornell Companies Inc. of Houston, Texas, which has tried and failed to win
support for a private prison in Alaska.
The conspiracy to commit extortion, bribery and money laundering started in
July 2004 and continued until March 2005, charging documents say. In all,
$26,000 changed hands, court papers say.
Bobrick, 52, now is cooperating with the government. He has agreed to testify
against Anderson, who was indicted in December on seven charges including
bribery, extortion and money laundering. Anderson has pleaded not guilty.
Bobrick will be sentenced after Anderson's trial, which is scheduled to begin
June 25. Bobrick faces 2 to 2 1/2 years under sentencing guidelines, but that
can be reduced based on his cooperation.
"The judge was pretty clear today. It's a serious crime. He might give you a
sentence that is more than the government recommends. That is a risk that Bill
decided to take because he wants to do the right thing. He is really trying to
move forward," said Doug Pope, Bobrick's defense lawyer.
At one point in the hearing, as the judge questioned Bobrick on whether he was
suffering from any condition that could impair his judgment, the accused man
said he was being treated for depression. He said he takes medication and
receives counseling, but didn't feel his condition affected his ability to go
forward.
RELEASED ON BOND
Anchorage Assemblyman Allan Tesche sat next to Bobrick's sister Elizabeth
in the courtroom. When the 30-minute hearing ended, prosecutor Joe Bottini
huddled for a moment with Bobrick.
Tesche shook Bobrick's hand but wouldn't talk to reporters. Elizabeth Bobrick
said she didn't want to be interviewed either. She came from her home in
Connecticut to be with her brother, Pope said.
Bobrick was stone-faced as he walked out of the courtroom and into another
area for processing. He didn't acknowledge a request for comment.
Essentially, Bobrick now must be ready for "continuous cooperation with the
government," Pope said. "It's out of my hands."
Bobrick was released on a $5,000 unsecured bond. With permission of a federal
probation officer, he'll be allowed to travel out of state, including to visit
his wife, a medical student in Minnesota.
According to court papers, an FBI informant working for the corrections
company paid $24,000 to Bobrick's Pacific Publishing. Bobrick gave $10,828 to
Anderson and kept the rest, the documents say. Anderson later complained he
wasn't getting enough and was paid another $2,000 by the government informant,
according to the indictment against him.
Bobrick created Pacific Publishing to ostensibly publish a Web site about
Alaska government and politics that Anderson would write for. But in reality,
the company was just a way to get money to Anderson and hide the real source,
court papers say.
In a secretly recorded conversation on July 21, 2004, Bobrick told the
informant that he and Anderson were "pitching a bunch of people" to try to get
money for Anderson. If the corrections company paid up, Anderson would be "our
boy in Juneau," Bobrick told the informant.
Between August 2004 and March 2005, Bobrick was aware of "multiple official
acts" that Anderson took to benefit the government informant, the charging
document said.
CLIENTS CUT TIES
All five clients Bobrick worked for this year have cut their professional
ties to him. They are: Marlow Development Corp.; garbage hauler Alaska Waste;
Lantech, a surveying company; Cook Inlet Housing Authority; and mall developer
P.O'B. Montgomery.
"You need to have the confidence of elected officials that you are dealing
with them on the straight up," developer Marc Marlow said. He had turned to
Bobrick for help on a number of projects, including a tax break for the
renovated McKinley Tower downtown. He said he severed his relationship with
Bobrick in April after news broke about the coming guilty plea.
Lantech vice president Tom Dreyer said the company gave Bobrick the benefit of
the doubt in recent months, but in the past few days saw what was coming. The
company had hired him to monitor the Anchorage Assembly, which has been
rewriting the city's land use code.
Bobrick worked as a technical consultant to the housing authority on a tax
break it just won for an 80-unit development in Muldoon, said Amy Burnett, a
spokeswoman for Cook Inlet Housing. In mid-April, it canceled its contract,
she said.
Alaska Waste inherited the Bobrick lobbying contract when it bought the assets
of Waste Management in May 2005, said Bobby Cox, general manager of Alaska
Waste. But now its relationship with him is over, too.
Daily News reporter Lisa Demer can be reached at
ldemer@adn.com
and 257-4390.
Xxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/fbi/story/8892691p-8791702c.html
Who did
Bill Bobrick work for?
Published: May 17, 2007
Last Modified: May 17, 2007 at 06:48 AM
Bill Bobrick long was the lobbyist in Anchorage with the most clients doing
business before the city. The following list comes from his reports to the
municipal clerk's office from 2001 through 2007. He worked for some just a
year or two; for others longer. He no longer has any clients because of his
legal troubles.
Alaska Interstate Construction LLC
Alaska Regional Hospital
Alaska Waste
American Fast Freight
Anchorage Board of Realtors
Anchorage Cultural Council
Anchorage Downtown Partnership
Anchorage Home Builders Association
Anchorage Horticulture Coalition
Anchorage Mutual Housing
Anchorage Neighborhood Housing Services
Anchorage Police Department Employees Association
Anchorage Refuse
Anti-Tobacco Coalition
Carr-Gottstein Properties
Compass Northwest LLC
Cook Inlet Housing Authority
Cornell Companies Inc.
Eklutna Inc.
Forest Heights LLC
Goldenview Land Co.
International Association of Fire Fighters Local 1264
JL Properties
Lantech
Marc Marlow
Marlow Development Corp.
Marlow Towers LLC
Paratransit Services
P.O'B. Montgomery
Siebert Brandford Shank & Co.
Simon Property Group
Smart Growth
Wal-Mart
Waste Management
White Raven Development
Williams Alaska Petroleum Inc.
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Financial Times
May 17, 2007
http://www.ft.com/cms/s/bdcb1f84-04be-11dc-80ed-000b5df10621.html
BP’s
Hayward may face US investigators
By Sheila McNulty in Washington
Published: May 17 2007 23:24 |
Last updated: May 17 2007 23:24
Tony Hayward, BP’s new chief executive, might be needed to testify about
conditions at the company’s Alaska oilfield because he had overseen it as it
was deteriorating, US congressmen told the Financial Times.
Bart Stupak, chairman of the investigative arm of the US House energy and
commerce committee, said in an interview that his investigators had asked BP
to send those involved in Alaska’s Prudhoe Bay to a congressional hearing on
Wednesday on the state of the field, the US’s largest.
But they sent Bob Malone, BP’s new America’s president, who told the
congressmen he could not answer their questions about budget cuts in the
corrosion programme at the oilfield.
BP was forced to shut half the oilfield after discovering severe corrosion in
pipelines last year.
“I wasn’t satisfied,” Mr Stupak said.
“Malone gave us as much as he is going to give us. He’s not the right guy. We
still have many questions.”
Mr Stupak added: “Maybe the new head of BP should come in, since he was in
charge of Alaska.”
Mr Hayward, who last month succeeded Lord Browne, had led BP’s exploration and
production division since 2003.
Congressman Ed Whitfield said he was “concerned” BP chose Mr Hayward as its
new chief executive, given the state of the Alaskan field during his tenure.
Mr Malone assured the congressmen BP has learned from its problems in Alaska
and Texas and was improving operations but it would take time.
The congressmen, however, were not satisfied by his assurances they could
trust BP to run its operations appropriately.
Mr Stupak noted BP had last year told Congress budget cuts did not play a role
in its Alaskan corrosion problem.
But, he said, new documents turned over by BP months after they had been
requested in advance of last September’s committee hearing indicated
otherwise. Mr Malone said those documents had not been located then but had
come up while BP sought to answer calls for evidence from a grand jury
investigating the oil company for possible criminal action and civil lawsuits.
Mr Stupak noted BP had turned in more than 800 documents the night before the
hearing: “It’s normal around here for people to dump a load of documents on us
the night before a hearing and hope we miss something. We’re going to go
through them.”
xxxxxxxxxxxxxxxxx
The Mining Journal
May 17, 2007
http://www.miningjournal.net/stories/articles.asp?articleID=15068
Stupak’s panel
grills BP
WASHINGTON (AP) Severe budget cuts at a
time when BP PLC was making huge profits put pressure on managers to ignore
corrosion protection at the oil company’s Alaska North Slope pipelines that
sprung leaks last year, according to internal company documents.
A House committee investigating the North Slope spills, which forced a partial
shutdown of Prudhoe Bay oil production last summer, said it has obtained
e-mails from the company that show repeated concerns by managers that
cost-cutting was preventing corrosion protection in the lines that eventually
failed.
‘‘BP field managers were being asked to choose between saving money and
critical maintenance,’’ said U.S. Rep. Bart Stupak, D-Menominee, chairman of
the Energy and Commerce investigations subcommittee.
He said the cost-cutting, reflected in e-mails and other documents obtained by
the panel, occurred from 1999 through 2005, at a time the London-based BP PLC
was making more than $106 billion in profits.
BP America Inc., the oil giant’s U.S. subsidiary, has acknowledged repeatedly
that the company had not taken adequate precautions to avoid corrosion, which
resulted in an oil spill in a Prudhoe Bay oil transit line in March 2006 and
another leak in a separate line last August.
After the second incident, the company shut down the affected lines, resulting
in Prudhoe Bay production being cut in half. The company now is spending $250
million to replace 16 miles of questionable pipes.
Robert Malone, BP America’s chairman, in testimony prepared for delivery at
Wednesday’s hearing, acknowledged ‘‘there was a concerted effort to manage the
costs (at the Alaska fields) in response to the continuing decline in
production at Prudhoe Bay’’ and that the cost-cutting frustrated some workers.
But Malone disputed that the budget cuts should be blamed for the pipeline
problems.
Citing a consultants’ report on the incidents, Malone said ‘‘budget increases
alone would not have prevented the leaks’’ and that the pipeline breaks
‘‘resulted not from budget pressures’’ but because of ‘‘the lack of a formal,
holistic risk assessment process.’’
That didn’t satisfy the lawmakers.
‘‘Cost cutting ... drove many key management decisions’’ on pipeline
maintenance and corrosion protection, Rep. John Dingell, D-Mich., chairman of
the full committee, said, citing BP e-mails obtained by the panel.
He and Stupak cited, for example, one e-mail that directed a halt in use of a
corrosion inhibitor because there wasn’t money for a full year’s supply of the
chemical. ‘‘We are under huge budget pressure for the last quarter of the year
and therefore we have to take some rather disagreeable measures,’’ said the
October 2001 e-mail, calling for ending use of a corrosion inhibitor ‘‘as soon
as possible.’’
Stupak said documents received by his subcommittee also suggest corrosion
monitoring efforts such as ‘‘smart pigging’’ in which a device is driven
through a pipe to inspect for corrosion; removal of insulation for visual
inspection of pipes; and digging at road crossings where corrosion is more
likely ‘‘were reduced or put on hold because of budget pressures.’’
BP’s corrosion inspection and chemical group ‘‘was under extreme pressure to
constantly find new ways to cut costs,’’ said Stupak.
A government report released in March also blamed BP for cost-cutting at the
company’s Texas City refinery, where a 2005 explosion killed 15 people and
injured 170, the worst U.S. industrial accident since 1990.
Carolyn Merritt, chair of the Chemical Safety Board, which investigated the
refinery explosion, told the House subcommittee Wednesday there were
‘‘striking similarities’’ between the refinery accident and the Prudhoe Bay
spills.
Both incidents revealed ‘‘a checkbook mentality’’ that prevented actions that
might have avoided the problems, she said.
xxxxxxxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 17, 2007
http://www.adn.com/money/industries/oil/story/8892602p-8791712c.html
Savings
undercut pipeline upkeep
BP:
Overconfidence in leak prevention among its consultant's findings.
By WESLEY LOY
Anchorage Daily News
Published: May 17, 2007
Last Modified: May 17, 2007 at 03:12 AM
BP lacked a good process for assessing corrosion risk in Prudhoe Bay
pipelines, and corrosion fighters were forced to make "tradeoffs" to meet
budget targets, a BP-hired consultant found.
The report from Booz Allen Hamilton, a McLean, Va., consulting firm, emerged
Wednesday as BP's top U.S. executive, Bob Malone, took a grilling from a
congressional panel.
Congressmen said the report, coupled with e-mails BP recently turned over,
suggest the London-based oil giant's emphasis on cost-cutting led to corroded
pipelines and spills last year in Prudhoe, the nation's largest oil field, and
a 2005 explosion that killed 15 people at a BP refinery in Texas.
BP hired Booz Allen last year to look into two Prudhoe pipeline leaks -- one
discovered in March 2006 involving an estimated 201,000-gallon spill on the
North Slope tundra, and another on Aug. 6 that led to a partial shutdown of
the field, driving up world oil prices.
Booz Allen said it wasn't looking for evidence that could be used in court to
show negligence or unlawful conduct. But the report's authors said they "saw
no information to suggest that any BP employee or contractor acted in anything
other than good faith."
Aside from Congress, federal pipeline regulators, Alaska pollution regulators
and federal criminal investigators are scrutinizing the Prudhoe problems.
Among the findings in the 132-page Booz Allen report:
• BP lacked an adequate process for assessing corrosion risk in pipelines
and for making adjustments -- for example, when the composition of oil
changes, possibly increasing corrosion.
• BP's corrosion control team was isolated, out of touch with senior BP
management, and felt a sense of "overconfidence" in preventing leaks because
it had been regarded as a top-notch unit within BP.
• The corrosion unit made "tradeoffs" in part to meet budget targets. For
example, there was a "reasonable and well-documented reluctance" to use pigs
-- probes that slide through pipes testing for corrosion or other defects.
However, larger budgets alone wouldn't have prevented the pipeline leaks
because "fundamental changes" were needed in maintaining pipelines.
• BP manages 1,273 miles of pipelines across Prudhoe Bay, but the 16 miles of
key "oil transit lines" -- major trunk lines that funnel crude oil into the
trans-Alaska pipeline and which were the site of last year's leaks -- were an
afterthought. BP's corrosion control unit was fractured into "town" and
"field" units, and no one took ownership of the transit lines. These pipes
carried pure oil and no corrosive water, and thus BP viewed them as
invulnerable to holes caused by corrosion. They hadn't failed over Prudhoe's
29-year history.
• Since last year's pipeline spills, BP has antagonized government regulators
and "relationships have become strained."
The report outlines BP's "deeply ingrained" cost-control efforts during years
of low oil prices in the 1990s, the steep decline of Prudhoe oil production,
and BP's takeover of Amoco and Arco, which led to reorganizations that pushed
the corrosion control unit down deeper in the BP hierarchy.
Booz Allen makes a raft of recommendations, many of them urging BP to beef up
its procedures for ranking and managing pipeline corrosion risks. It also
urges BP Alaska to be less insular, to "immediately reach out from Alaska" to
tap pipeline maintenance expertise from other industries such as chemicals,
nuclear power, the Navy and NASA.
The consultant says BP has made some progress toward improving pipeline
maintenance, including a big hiring surge for its corrosion unit, moving
corrosion control higher up in the organization and replacing miles of
pipelines. But much work remains, the report says, noting "risk management is
still a work in progress."
The report also includes some bits of news.
BP is working with the state Department of Environmental Conservation on a
new and better leak-detection system for oil transit lines. The report notes
that leak detectors last year "did not provide ample warning of the leak."
Booz Allen said it conducted its investigation over 10 weeks starting last
November.
The firm lists the names of 75 current and former BP employees it interviewed.
One name not on the list, however, is Richard Woollam, who was BP's corrosion
manager through November 2004.
Woollam, who was transferred to Houston and is said to be on administrative
leave, last September appeared before a congressional committee but refused to
answer questions, invoking his Fifth Amendment right against
self-incrimination.
Reach reporter Wesley Loy at
wloy@adn.com
or 257-4590.
BPXA (BP Alaska) had a deeply ingrained cost management ethic as a result of
long periods of low oil prices, constrained budgets, and multiple
cost/headcount reduction initiatives. CIC (BP's corrosion team) made important
project and activity tradeoff decisions to meet its budget targets. Larger
budgets alone would not have prevented these incidents without fundamental
changes in corrosion and integrity management.
Booz Allen report's key findings
BP lacked adequate process for assessing corrosion risk in pipelines.
BP's corrosion control unit was isolated, felt "overconfidence" in preventing
leaks.
Corrosion unit made "tradeoffs" to meet budget targets, larger budgets alone
wouldn't have prevented leaks.
Since two pipeline spills last year, BP has antagonized regulators and
"relationships have become strained."
Report didn't seek to gather evidence of negligence or crimes, but nothing was
found to suggest any BP employee or contractor "acted in anything other than
good faith."
Source: Booz Allen Hamilton report
Xxxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/government/legislature/story/8891517p-8791612c.html
Legislature kills oil tax deductions,
low-income
senior aid bills
By TOM KIZZIA and SABRA AYRES
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 17, 2007 at 12:22 AM
JUNEAU The state House yielded at the 11th hour Wednesday night, allowing the
Legislature to adjourn with a one-year funding plan for education and a
promise to work on long-term changes that could mean more school money for
rural Alaska.
But the House also insisted on a last-minute shift in a $48 million
revenue-sharing plan that moved more money to urban areas.
Three unresolved issues education funding, pension liability relief for
schools and cities, and municipal aid stood in the way Wednesday as the
Legislature approached the midnight deadline for adjournment.
The Republican-led House pushed for a long-term fix to help cities and schools
with looming pension deficits. They offered one-year programs for education
and municipal revenue-sharing, with a study of long-term reforms to education
funding to come later.
The bipartisan Senate majority, which includes some powerful rural members,
pushed for all three issues pensions, municipal aid and school money to be
funded only for next year. They want long-term fixes for pensions and
education to be considered together later.
The Senate majority has been reluctant to address pension relief by itself as
that money would especially help bigger cities, leaving it without some
leverage when seeking more money for small-town schools. Some say rural
schools have been shortchanged over the years.
In the end, the House agreed to a $185 million one-year bill to help meet
community pension needs. The budget as a whole adds $350 million in new money
for education, raising the total to $1.2 billion for next year, lawmakers
said.
A task force was charged with recommending by a Sept. 1 a new, fair formula
for distributing education funds.
Meanwhile, two popular bills died on oil company tax deductions and aid to
low-income seniors. Efforts by House Democrats on Wednesday to force votes on
the measures were defeated
23-16, with votes coming on party lines.
House Republicans also cut money for the new Ocean Ranger monitoring program
aimed at controlling cruise-ship discharges. Republicans turned back
Democratic efforts Wednesday to boost funds to the voter-created program.
Gov. Sarah Palin called this week’s last-minute gamesmanship frustrating.
“I’ve been told over and over that’s just the culture here in state
government,” she said Tuesday. “Well, I think that culture needs to change.”
The Legislature was moving swiftly until it crashed into the dispute over
education funding at the end.
Major issues like Palin’s gas pipeline bill and ethics reform were handled
earlier.
Flush with cash from high oil prices, lawmakers approved a $9 billion
operating budget and wrote one of the biggest capital budgets ever at $1.8
billion, including some $550 million in state funds. Much of that money is
going to pet projects earmarked by individual legislators.
Oil-tax changes dead
Two bills died in committee despite evidence of popularity among
legislators.
A bill that would have prevented oil companies such as BP from deducting the
costs of pipe repairs caused by “improper maintenance” had passed the Senate
unanimously and had 21 of 40 House members as co-sponsors. But it arrived late
in the key House Finance Committee and Republican leaders wouldn’t move it to
the floor for a vote.
The industry called the bill unfair and unworkable. It remains alive for next
year. Republican leaders also suggested it might make sense to discuss the
deduction as part of a future review of the Petroleum Production Tax, or PPT,
adopted by last year’s Legislature.
But the bill’s backers say another year’s delay could make it hard to apply
the law retroactively to repairs stemming from BP’s spills from corroded
pipelines last year on the North Slope. They said as much as $100 million in
lost taxes could be at stake, with the state in effect subsidizing poor
maintenance practices.
Money for seniors killed
The Legislature also failed to provide funds for the “longevity bonus”
once paid to seniors and apparently killed a welfare program for low-income
seniors that was created to replace the bonus in 2003. Democrats tried several
times in the last
36 hours of the session to force a vote to save the senior-aid program.
Republicans said they had worked out a deal earlier in the session to fund an
expanded program if the longevity bonus could be struck from the books. That
deal fell apart when Democrats and some Republicans voted to keep the bonus
program in place even without funds.
Republicans wouldn’t yield at the end to allow a vote on the low-income senior
plan. Some GOP leaders said they were reluctant to continue the senior
assistance in anticipation of future revenue declines.
Palin supported both the oil-field-deduction and senior-care bills. But she
said Tuesday she did not plan to do a lot of arm-twisting or threaten to veto
pet projects, saying she wanted to keep the public process transparent.
Governor gets gas bill
Palin cited the success of her gas pipeline bill as an example of the open
process she favors. After extensive hearings, her bill passed both houses with
only one vote against it. The bill sets into motion a competitive bidding
process for a state license to build a North Slope natural gas pipeline.
The Alaska Gasline Inducement Act, or AGIA, got an added push when a
corruption scandal erupted with less than two weeks left until the Legislature
was set to adjourn.
Oil companies had panned the Palin gas line bill and had asked legislators to
amend her version to include more tax predictability. In the end, lawmakers
distanced themselves from the North Slope producer’s requests.
Ethics reform came up early in the session, in the midst of an ongoing federal
corruption investigation. New rules will require fuller disclosure of outside
income by legislators, slow the revolving door between state employment and
private-sector lobbying, and restrict meals and gifts from lobbyists.
One much-anticipated issue that fizzled this year was a proposed
constitutional amendment to allow voters the chance to deny court-ordered
benefits for same-sex partners of public employees. Despite winning support
from voters in an April advisory ballot, the measure failed to pass the House.
Reporter Tom Kizzia can be reached at
tkizzia@adn.com
, and Sabra Ayres can be reached at
sayres@adn.com
.
xxxxxxxxxxxxxxxxx
Fairbanks News Miner
May 17, 2007
http://newsminer.com/2007/05/17/7027
BP and
Congress
Published May 17, 2007
“People no longer challenge and think.”
That was the startling word Wednesday from Bob Malone, chief executive officer
of BP America, at a Wednesday hearing of a U.S. House subcommittee
investigating last year’s spill of about 200,000 gallons of oil from a
corroded feeder line at Prudhoe Bay, which is operated by BP on behalf of
several companies. Mr. Malone was being questioned sharply about the
management culture at BP and among company personnel on the North Slope.
What’s more, Malone added that he and others at BP now believe that budget
pressures coming down from BP headquarters contributed to the atmosphere that
led to the maintenance failure. “We recognize that those budget pressures put
our employees in a very difficult place,” he told the House members, who are
part of the House Energy and Commerce Committee.
The March 2006 spill was the largest at Prudhoe Bay and led to a partial
shutdown of the field.
Malone, judging by the news accounts of the hearing, appeared to adopt the
right tone with members. He may have had little choice: BP’s image has been
battered by the Alaska spill, a deadly refinery explosion in Texas, and the
public perception that high profits from high oil prices are wildly out of
bounds for all oil companies. That, and the Democratic-controlled Congress is
less than friendly to the oil industry.
Mr. Malone may also have had to speak the conciliatory words because of the
revelation of several e-mails that seem to indicate BP was inclined to cut
corners at Prudhoe Bay.
In one company e-mail, from 1999, according an Associated Press report of the
hearing, BP managers sought a 10 percent reduction in the use of an
anti-corrosion chemical but said the move would be “a risky call.”
Another e-mail, from October 2001, said money didn’t exist to continue use of
another anti-corrosion chemical, that use of the chemical should be
discontinued quickly, and that the decision was “rather disagreeable … “
Notes like that don’t inspire confidence.
Congress, if Democrats can keep in check their giddiness at having oil
executives in the hot seat, can serve a helpful purpose by shedding light on
how the oil companies are conducting themselves on public lands and for a
public that has an insatiable appetite for products fueled by the oil found
there. Congress, through this and perhaps other hearings, should seek not to
castigate but to work with BP and other companies to restore confidence in an
industry that has many critics but that is nevertheless vital to the nation’s
current way of living.
xxxxxxxxxxxxxxxxx
Houston Chronicle
May 17, 2007
http://www.chron.com/disp/story.mpl/business/4811558.html
Cutting
costs didn't help
But BP leader
won't say budget pressures directly caused Alaska leak
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau
WASHINGTON BP America President Robert Malone acknowledged Wednesday that
budget pressures made life difficult for company workers trying to safely
operate BP's pipelines in Alaska's giant Prudhoe Bay.
But Malone stopped short of conceding that cost cutting was directly to blame
for the company's failure to detect the corrosion that caused two pipelines to
leak, forcing the company to shut down a portion of the nation's largest oil
field and sending crude prices soaring.
Appearing before a House panel Wednesday, Malone said, "We recognize that the
budget pressures put our employees in a very difficult place."
And over time, the Houston-based oil executive said, that kind of mentality
can create a culture where "people no longer challenge and think."
Carolyn Merritt, chief executive officer of the U.S. Chemical Safety Board,
told lawmakers there were "striking similarities" between the conclusions of a
report on Prudhoe Bay prepared for BP by Booz Allen Hamilton and the Chemical
Safety Board's conclusions about the March 2005 explosion at BP's Texas City
refinery. That blast killed 15 workers and injured scores more.
"Both reports point to the significant role of budget and production pressures
in driving BP's decision-making and ultimately harming safety," Merritt said.
"Cost cutting became the driving factor in management bonuses and
recognition."
At Prudhoe Bay, BP officials failed to conduct the necessary tests to check
for corrosion in the pipeline walls.
But Malone told members of the House Energy and Commerce Committee's Oversight
and Investigations Subcommittee that the company's corrosion experts "had an
unwarranted sense of confidence in their program."
Pointing to the Booz Allen report, Malone argued that "larger corrosion
program budgets alone would not have prevented the leaks."
In that report, made public by the committee Wednesday, Booz Allen said BP's
Alaska operation "had a deeply ingrained cost management ethic as a result of
long periods of low prices, constrained budgets and multiple cost/headcount
reduction initiatives.
"However, larger budgets alone would not have prevented these incidents
without fundamental changes in corrosion and integrity management," the report
said.
The Booz Allen report said BP had failed to run a device known as a "smart
pig" through the oil transit lines in both 2004 and 2005 because of "budget
pressure." Pipeline operators use smart pigs to analyze the thickness of the
internal walls of pipelines to detect signs of corrosion damage.
But BP officials say Booz Allen has since learned that conclusion was
incorrect and wanted to delete that reference from the report. A spokeswoman
for Booz Allen declined to comment on the report.
Amending report?
Subcommittee Chairman Bart Stupak, D-Mich., said BP's law firm, Vinson &
Elkins, sent the panel 159 pages worth of documents Tuesday trying to justify
why the report should be amended.
"We hope BP is not pressuring Booz Allen to change the report when they get a
little critical," Stupak said.
Rep. Gene Green, D-Houston, whose district includes numerous refineries and
petrochemical plants along the Houston Ship Channel, said he found it
"startling" that "many of the fundamental causes of the Texas City disaster
are the exact same causes found in the Prudhoe Bay incident almost one year
later. Talk about a lesson lost."
Green said that after the Texas City explosion he had trouble learning about
the victims because "BP had not reported the deaths" to the Occupational
Safety and Health Administration. "It turns out they didn't have to report
them because the workers were contractors," Green said.
Green has introduced legislation to require employers to report contract
workers' injuries the same way they report their own employees' injuries.
Rep. Al Green, D-Houston, meanwhile, plans to introduce a bill next week that
would make companies criminally liable for willful safety violations that
result in the deaths of contractors working at their sites.
Fifth Amendment
Committee investigators looking into the Prudhoe Bay pipeline leaks found
internal company e-mails that suggest BP failed to inject a corrosion
inhibitor into some pipelines.
"Due to budgetary constraints, the decision has been made to discontinue the
inhibitor currently being injected," one e-mail from 1999 read.
Another internal message noted that that chemical had proved to be "very
successful at cleaning up the system and arresting corrosion activity.
"We are now at a point where the original monies for this program are used up,
so we will be shutting it down until year's end. In the meantime, the system
may be subject to increased corrosion activity and fouling. "
Rep. Joe Barton, R-Ennis, the ranking Republican on the full Energy and
Commerce Committee, questioned whether BP is really cooperating with
congressional investigators, since the BP manager who was responsible for
handling corrosion prevention in Alaska in a critical period before the leaks
has invoked his Fifth Amendment right against self-incrimination and has
refused to talk to investigators.
Malone, who has been on the job only since last summer, struggled to reassure
lawmakers that BP is determined to change its ways.
"Please know we get it," Malone said. "We know what's wrong. We have a plan
for fixing it. We just need time."
david.ivanovich@chron.com
xxxxxxxxxxxxxxx
Comm on Energy & Commerce BP Hearing
May 16, 2007
You can view and
download the Hearing and testimony
HEARING
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml
2006 Prudhoe Bay
Shutdown: Will Recent Regulatory Changes and BP
Management Reforms Prevent Future Failures?
Subcommittee on Oversight and
Investigations
Wednesday, May 16, 2007, 9:30 a.m.
2123 Rayburn House Office Building
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml
--------------------------------------------------------------------------------
Hearing Webcast
(Any use of this recording is subject to Rule XI, 4 of the House of
Representatives.
See text of Rule XI, 4 as posted by the House Committee on Rules.)
Connect to the Archived Video Webcast of this Hearing (100 kbps)
http://boss.streamos.com/wmedia/energycommerce/051607.oi.hrg.prudhoe_bay_shutdown.asx
or Download (
about 232 MB takes about an hour to download)
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Prudhoe.Bay.shtml
Windows Media Player is required
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---------------------------------------------------
Witness List & Prepared Testimony (pdf files)
Panel I
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Gerard-testimony.pdf
Ms. Stacy Gerard
Acting Assistant Administrator
Chief Safety Officer
U.S. Department of Transportation
Pipeline and Hazardous Materials Safety Administration
East Building
1200 New Jersey Avenue, SE
Washington, DC 20590
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Slemons-Testimony.pdf
Ms. Jonne Slemons
Coordinator
Petroleum Systems Integrity Office
Division and Oil Gas
Alaska Department of Natural Resources
550 West 7th Avenue, Suite 800
Anchorage, AK 99501
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Merritt-Testimony.pdf
Ms. Carolyn Merritt
Chair and CEO
U.S. Chemical Safety and
Hazard Investigation Board
2175 K Street, NW, Suite 400
Washington, DC 20037-1809
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Fairfax-Testimony.pdf
Mr. Richard Fairfax
Director
Directorate of Enforcement Programs
Occupational Safety and Health Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
Panel II
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.051607.Malone-Testimony.pdf
Mr. Robert A. Malone
Chairman and President
BP America, Inc.
200 Westlake Park Boulevard
Houston, TX 77079
Hearing Transcript
Not available at this time. The printed hearing should be available within
60-90 days of the conclusion of the hearing. When available, the text of the
printed hearing may be viewed at the U.S. Government Printing Office Web site.
xxxxxxxxxxxxxxxxx
Wall Street Journal
May 16, 2007
2nd UPDATE:
Reps Fear More
BP Prudhoe Bay Fiascos May Occur
DOW JONES NEWSWIRES
May 16, 2007 3:33 p.m.
(Updates with additional comments from witnesses and U.S. Representatives.)
By Ian Talley
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Several key U.S. representatives said Wednesday they
fear more incidents similar to the massive Prudhoe Bay shutdown last year may
occur at BP (BP) facilities as long as management refuses to accept that
budget pressures led to the outage.
The head of BP Plc's U.S. operations, Robert Malone, Wednesday told a House
oversight panel that budget cuts weren't the direct cause of a leak that last
year temporarily shut down the largest producing field in the U.S.
Malone's statement to the House Energy and Commerce Subcommittee on Oversight
and Investigations is contrary to an original report BP commissioned into the
cause of the oil leak. That report found budget pressures may have been a
primary factor that led the company to put off pipeline maintenance that may
have prevented the fiasco.
With several major industrial accidents in the past two years that have killed
workers and shut down major energy infrastructure during an ongoing tightness
in the petroleum markets, Congress is increasingly concerned that a lack of
investment and maintenance programs may lead to more price volatility and
infrastructure crises.
"Until BP truly acknowledges the role of cost cutting and budget pressure
played in creating this mess, I fear other "Prudhoe Bay" problems may be
occurring at other BP facilities throughout the United States," said John
Dingell, D-Michigan, chairman of the full Energy and Commerce Committee.
"If (BP) just try to take the heat off now and sweep this under the rug, then
we'll have ore leaks in Alaska and more explosions and fines," said the
ranking member of the full energy committee, Joe Barton, R-Texas.
Rep. Bart Stupak, D-Michigan, Chairman of the oversight committee, said he
believed a culture that disincentivized preventative maintenance still existed
within BP. "You don't change that automatically, it takes some time to do it,"
he said.
"I'm sure that workers in the field don't feel assured to step forward and
say, "here's what we ought to do to protect our maintenance and safety,"
Stupak said.
"I hope under Mr. Malone's leadership that he's started addressing those
concerns," Stupak said.
The incident is under a Justice Department investigation, an Alaska state
probe and is "highly likely" to face fines from the Pipeline and Hazardous
Materials Safety Administration in the next few months, an official from that
agency said.
Dingell said a slew of documents uncovered by the oversight committee's
investigations "clearly shed new light on the causes of the Prudhoe Bay
failures and raise questions about the testimony of BP officials who appeared
last year."
"They suggest cost cutting drove many key management decisions in the Prudhoe
Bay field...and raise serious questions about BP management," Dingell said.
Although the language in the BP report prepared by Booz Allen Hamilton remains
in the version presented to the panel, BP spokesman Ronnie Chappell said the
law firm issued a new report that said the wording was a mistake. "They issued
a correction," Chappell told Dow Jones Newswires prior to the subcommittee's
hearing Wednesday into the fiasco.
In testimony presented to the panel, Malone said a report commissioned into
the cause of the oil leak found "there was a false sense of confidence" in the
company's oil pipeline maintenance program. Booz Allen Hamilton's report,
"concluded that in the absence of better risk assessment processes, budget
increases alone would not have prevented the leaks," Malone said in his
testimony.
Although he continued to reject that budget cuts were the direct cause of the
leak, Malone later conceded under tough questioning from committee members,
"We recognize that those budget pressures put our employees in a very
difficult place."
And if that goes on long enough, we know you create a culture...where people
no longer begin to challenge and think," Malone said.
"What we need to do is to establish a culture where every employee will raise
an issue and have a comprehensive risk assessment," the BP executive said. He
added that the company was working hard "to change the way we identify,
assess, understand and communicate risk," as well as, "change the way we
integrate what we have learned into our operations and budget decision."
The subcommittee last week asked BP why it sought to edit a paragraph that
said, "Budget pressure eventually led to de-scoping some projects and
deferring others," including key maintenance that investigators later said
could have prevented the pipeline leaks. In particular, the company failed to
"pig" its oil transit lines, allowing bacteria known to cause severe metal
corrosion to build up inside the pipes. A pipeline "pig" is a cylindrical
droid that sweeps the pipe's interior.
Stupak said his investigations found, however, "the mountain of circumstantial
evidence can only lead me to the conclusion that severe pressure for cost
cutting did have an impact on maintenance of the pipelines."
Stupak pointed to an internal email from an official in BP's Corrosion
Inspection and Chemicals group in 2001 that read, "As you may know we are
under huge budget pressure for the last quarter of the year and therefore we
have to take some rather disagreeable measures."
Budget cuts were also said to be a prime cause of BP's 2005 Texas City
refinery explosion that killed 15 people and wounded more than 180 workers,
according to a Chemical Safety and Hazard Investigation Board probe.
Carolyn Merritt, chairwoman and chief executive of the Chemical Safety Board,
said that after reviewing the Booz Allen Hamilton report, "there are striking
similarities in the reported causes" of the Prudhoe Bay and Texas City
incidents.
Merritt said that besides "severe budget pressures... the budgeting process
was largely driven by top-down targets rather than an analysis of risks." She
added that senior management incentives were based on cost and production,
and, "this finding is essentially identical to the `checkbook mentality' we
uncovered at the Texas City refinery."
"That meant the budgets were not large enough to address identified risks, and
that the only money on hand would be spent, rather than increasing the
budget," Merritt said.
From 1999 to 2006 - the years that BP has owned Prudhoe Bay - the company has
reaped $106.5 billion in profits after tax.
The committee last week also queried BP about an email that showed a request
for maintenance at one of the pipelines where the major leak occurred was
rejected.
The request stated: "Maintenance pigging is required to optimize existing
corrosion control programs...(and) will also eliminate flow restrictions
present from sediment and fouling within the pipelines. Intelligent pigging is
required to provide a full evaluation of current pipeline condition to ensure
pipeline integrity and meet regulatory requirements." Intelligent pigging
conducts multi-function examination of pipelines.
Government pipeline regulators found buildup of sediment in the pipeline
allowed the corrosion that lead to the leak.
Michael Burgess, R-Texas, said in his opening statement to the hearing the
committee's investigation found there were "striking similarities" to the
incidents in Texas City and Prudhoe Bay.
Stupak and other subcommittee members said there were still many unanswered
questions and more hearings were likely. Stupak and Dingell said they were
particularly concerned about BP's cooperation with the committee, given that
many of the documents the committee has requested weren't provided in hearings
last year into the incident. For example, Stupak said BP turned over 800 pages
of documents relating to the fiasco late Tuesday night.
Several committee members said BP was not allowing investigators to interview
a key BP employee.
"When something critical comes up in a report...it's whitewashed," Stupak
said, pointing both to the Booz Allen Hamilton report, and an early
BP-commissioned draft report prepared last year that also had critical
elements edited by the company. "I get real suspicious," he said.
Rep. Barton also said that BP also appeared to be resisting a judge's
recommendations to BP that would address a raft of employee safety concerns in
Alaska. "It looks like BP is trying to so the right thing in public, but is
fighting like a tiger in private," Barton said.
Richard Fairfax, Director of Enforcement at the government's Occupational
Safety and Health Administration, told the committee his agency was currently
investigating an incident last month where more than 100 workers at BP's Texas
City refinery were taken to the hospital after reporting flu-like symptoms. He
also said OSHA had fined BP over $300,000 in penalties after an inspection at
the company's Whiting, Indiana refinery.
Rep. Charlie Melancon, D-Louisiana, told Dow Jones Newswires during a break in
the hearing that he was going to see if Congress or regulators could increase
the $21 million fine for the Texas City incident. "It's peanuts when you
consider it a fine for the deaths that occurred."
By Ian Talley, Dow Jones Newswires; 202 862 9285;
ian.talley@dowjones.com
xxxxxxxxxxxxxxxx
Financial Times
May 16, 2007
http://www.ft.com/cms/s/edd3821a-03e3-11dc-a931-000b5df10621.html
US finds
BP ‘unco-operative’
By Sheila McNulty
Published: May 16 2007 22:03 |
Last updated: May 16 2007 22:03
US congressmen yesterday criticised BP for withholding corrosion documents
about its troubled Alaska oilfield and for not forcing the man who led its
corrosion programme to co-operate with government investigators.
“It looks like BP is trying to do the right thing in public but it’s fighting
like a tiger in private,” said Joe Barton, the highest ranking Republican on
the US House Energy and Commerce committee. “This doesn’t look like
co-operation to me.”
His committee’s investigative arm held a hearing yesterday on BP’s problems in
Alaska.
The Prudhoe Bay field is North America’s largest and last year had to be
temporarily closed because of severe corrosion discovered after a spill.
“This investigation has been difficult,” said Bart Stupak, chairman of the
investigative arm. “Documents which should have been produced half-a-year ago
were not made available until a few weeks ago and more seem to roll in each
day.” About 800 arrived on the night before the hearing, he added.
Mr Stupak said some of the documents detailed proposals to cut funding for
corrosion inhibitors. Others suggest corrosion monitoring efforts were reduced
or put on hold because of budget pressures.
“This was occurring while BP received more than $106bn in profit,” he said.
The congressmen’s criticisms are embarrassing for Tony Hayward, BP’s newly
appointed chief executive. The Alaskan operations were under his control while
he was in charge of exploration and production in the years leading up to the
spill.
“It is ironic that Tony Hayward managed the upstream division including
Prudhoe Bay during these past years of corrosion mismanagement and is today
the chief executive officer of BP; particularly at a time when BP is
attempting to regain its reputation,” said Chuck Hamel, advocate for BP’s
Alaska workers, who was instrumental in bringing the troubled field to
Congress’s attention.
Until now, investigations of BP’s troubled US assets have focused on Texas
City, where 15 were killed and 500 injured in a 2005 explosion.
Carolyn Merritt, chairman of the US Chemical Safety Board, said there were
“striking similarities” in the reported causes of the severe corrosion in
BP’s Alaska field and the Texas refinery accident.
The Congressmen said they would have to hold further hearings on BP, which
regulators testified they would probably fine for the Alaskan problem.
Bob Malone, president of BP America, said: “We understand the lessons of the
past.”
He said it was disturbing to him if even one person at BP were to consider
putting budget above safety.
“We have found there was a false sense of confidence in the effectiveness of
the existing corrosion management program,” he added. “We know what is wrong.
We know how to fix it. We just need time to implement it.”
He also said an internal probe concluded that, in the absence of better risk
assessment processes, budget increases alone would not have prevented the
leaks.
xxxx
Wall Street Journal
May 16, 2007
US Pipe Safety
Regulator:
Fines Likely For BP Prudhoe Bay
DOW JONES NEWSWIRES
May 16, 2007 12:27 p.m.
WASHINGTON (Dow Jones)--The U.S. pipeline regulator Wednesday said BP Plc
(BP) U.S. operations are "highly likely" to face fines for violations at the
company's Prudhoe Bay field, a top official at the regulator said.
The Pipeline and Hazardous Materials Safety Administration issued compliance
orders for a leak at Prudhoe Bay in March last year, just a few months before
another massive leak that forced the shutdown of one of the largest producing
fields in the U.S.
"It's highly likely there will be a fine," Assistant Administrator at the
regulator, Stacey Gerard, told reporters after a House oversight hearing into
the incident.
She said it was premature to say exactly how big any fine would be, but there
were "a small number of probable violations." Under statute, each violation
could mean a penalty of up to $100,000 a day.
BP is also subject to a Justice Department and Alaska state investigations.
A spokesman for the regulator said that the compliance process was ongoing and
that at least three amendments to the original order had been issued. He also
said that any penalty process could take several years if the company
appealed.
By Ian Talley, Dow Jones Newswires, 202 862 9285;
ian.talley@dowjones.com
Xxxxxxxxxxxxxxxxxxx
BP Ohio Refinery
Work Takes Extra Week;Units Seen Back By Fri
DOW JONES NEWSWIRES
May 16, 2007 7:31 a.m.
(This article was originally published Tuesday)
NEW YORK (Dow Jones)--A key gasoline-producing unit and several others at BP
PLC's (BP) Toledo, Ohio-area refinery are in restart and seen returning to
full operations by Friday after repairs that took a longer-than-expected three
weeks, a person familiar with the refinery said Tuesday.
While repairing a crack in one unit and addressing problems caused by a late
April shutdown, BP decided to advance some work originally scheduled to be
done during planned maintenance in the fall, the person said. The extra work
resulted in the outage lasting about an extra week.
A crude processing unit and a coker were shut on April 22-23 following a
shutdown prompted by a boiler problem and a steam outage to the refinery.
Several days later, workers discovered a crack in the reactor of the
gasoline-producing fluid catalytic cracker.
Cokers allow refineries that process lower-cost heavier crude oils to produce
greater volumes of higher-value products such as gasoline and diesel.
The refinery is the smallest in BP's continental U.S. system, with the ability
to process 160,000 barrels of crude oil a day.
Repairs at BP's 410,000 barrel-a-day refinery in Whiting, Ind., are still seen
continuing through May with partial restarts expected in June.
A fire at the end of March damaged a hydrotreater and forced BP to reduce the
processing rates of other units there, including those used to produce
gasoline. Planned maintenance on a crude unit was also advanced.
-By Beth Heinsohn; Dow Jones Newswires; 201-938-4435;
beth.heinsohn@dowjones.com
xxxxxxxxxxxxxxxxxx
State of Alaska
Gov Press Release
May 16, 2007
http://www.gov.state.ak.us/news.php?id=403
Alaska
Teams with Pipeline Safety Agency
07-126
State of Alaska Teams
with US DOT Pipeline Safety Agency to Strengthen Oil and Gas Oversight
May 15, 2007, Juneau, Alaska - The State
of Alaska and the Pipeline and Hazardous Materials Safety Administration (PHMSA)
today announced an agreement to provide enhanced and coordinated oversight of
oil and natural gas production and transportation facilities located within
Alaska.
In a letter of intent signed yesterday, the State of Alaska and PHMSA agreed
to join forces in developing a strategic plan to establish coordinated
oversight of facilities and activities designed to transport and produce oil
and natural gas, establish risk assessment procedures, coordinate inspections
of oil and gas production and transportation facilities, share infrastructure
integrity data, and coordinate public outreach programs.
Currently, PHMSA shares common objectives in protecting and maintaining the
Trans-Alaska Pipeline System with Alaska’s Department of Natural Resources,
State Pipeline Coordinator’s Office and Department of Environmental
Conservation within the Joint Pipeline Office.
“The economic well-being of our state, the protection of our pristine
environment, and the safety of oil and gas workers depend on the uninterrupted
flow of oil and natural gas on state lands,” said Governor Sarah Palin. “I am
pleased that Alaska, via the newly created Petroleum Systems Integrity Office
(PSIO), will be coordinating efforts and exchanging important systems
integrity data with our federal partners to assure safe, continued
operations.”
DOT Acting Deputy Secretary and PHMSA Administrator Thomas Barrett concurred.
“Protecting the reliable and secure transportation of energy from Alaska is
essential to the continued economic growth of our nation and meeting the
President’s goal of energy independence,” said Administrator Barrett.
Recent significant events in Alaska, including pipeline failures on the North
Slope, have highlighted the need for the state’s oversight agencies and PHMSA
to implement a more comprehensive and effective “system of systems” approach,
Barrett said.
As part of the agreement, Alaska’s PSIO and PHMSA will delineate clear
jurisdictional roles and develop a strategic plan for the oversight of oil and
gas production and transportation, including risk assessment, standards and
inspections. In addition, the state and PHMSA will optimize communication flow
for continued efficiency, particularly during emergencies.
PSIO’s Acting Coordinator, Jonne Slemons, explained, “The Petroleum Systems
Integrity Office is committed to maximizing the safe and stable flow of oil
and gas resources to market by ensuring oversight and maintenance of oil and
gas equipment, facilities and infrastructure. Working with our federal
partners is one of the most effective ways to accomplish this job.” Slemons
continued, “Our integrated approach will identify, assess, and address
potential risks to the oil and gas transportation infrastructure, thereby
allowing us to prevent system failures before they occur.”
###
Xxxxxxxxxxxxxxxxxxxxxxxx
http://www.allamericanpatriots.com/48723305_alaska_alaska_teams_us_dot_pipeline_safety_agency_strengthen_oil_and_gas_oversight
Alaska Teams with
US DOT Pipeline Safety Agency to Strengthen Oil and Gas Oversight
Wed, 05/16/2007 - 08:02 admin
May 15, 2007, Juneau, Alaska - The State of Alaska and the Pipeline and
Hazardous Materials Safety Administration (PHMSA) today announced an agreement
to provide enhanced and coordinated oversight of oil and natural gas
production and transportation facilities located within Alaska.
In a letter of intent signed yesterday, the State of Alaska and PHMSA agreed
to join forces in developing a strategic plan to establish coordinated
oversight of facilities and activities designed to transport and produce oil
and natural gas, establish risk assessment procedures, coordinate inspections
of oil and gas production and transportation facilities, share infrastructure
integrity data, and coordinate public outreach programs.
Currently, PHMSA shares common objectives in protecting and maintaining the
Trans-Alaska Pipeline System with Alaska’s Department of Natural Resources,
State Pipeline Coordinator’s Office and Department of Environmental
Conservation within the Joint Pipeline Office.
“The economic well-being of our state, the protection of our pristine
environment, and the safety of oil and gas workers depend on the uninterrupted
flow of oil and natural gas on state lands,” said Governor Sarah Palin. “I am
pleased that Alaska, via the newly created Petroleum Systems Integrity Office
(PSIO), will be coordinating efforts and exchanging important systems
integrity data with our federal partners to assure safe, continued
operations.”
DOT Acting Deputy Secretary and PHMSA Administrator Thomas Barrett concurred.
“Protecting the reliable and secure transportation of energy from Alaska is
essential to the continued economic growth of our nation and meeting the
President’s goal of energy independence,” said Administrator Barrett.
Recent significant events in Alaska, including pipeline failures on the North
Slope, have highlighted the need for the state’s oversight agencies and PHMSA
to implement a more comprehensive and effective “system of systems” approach,
Barrett said.
As part of the agreement, Alaska’s PSIO and PHMSA will delineate clear
jurisdictional roles and develop a strategic plan for the oversight of oil and
gas production and transportation, including risk assessment, standards and
inspections. In addition, the state and PHMSA will optimize communication flow
for continued efficiency, particularly during emergencies.
PSIO’s Acting Coordinator, Jonne Slemons, explained, “The Petroleum Systems
Integrity Office is committed to maximizing the safe and stable flow of oil
and gas resources to market by ensuring oversight and maintenance of oil and
gas equipment, facilities and infrastructure. Working with our federal
partners is one of the most effective ways to accomplish this job.” Slemons
continued, “Our integrated approach will identify, assess, and address
potential risks to the oil and gas transportation infrastructure, thereby
allowing us to prevent system failures before they occur.”
Source: Alaska Governor
xxxxxxxxxxxxxxxxxx
Reuters News
May 16, 2007
http://www.reuters.com/article/domesticNews/idUSN1619278420070516
BP
cost-cutting led to Alaska oil spill: lawmaker
Wed May 16, 2007 10:42AM EDT
By Chris Baltimore and Robert Campbell
WASHINGTON (Reuters) - Congressional investigators have turned up a "mountain"
of evidence showing that severe cost cutting at BP Plc's Prudhoe Bay oil field
in Alaska led to the worst oil spill on the North Slope last March, the
chairman of the subcommittee investigating the spill said on Wednesday.
"My review of the mountain of circumstantial evidence can only lead me to the
conclusion that severe pressure for cost cutting did have an impact on
maintenance of pipelines," said Rep. Bart Stupak, Michigan Democrat and
chairman of the House Energy Committee's subcommittee on oversight and
investigations."
Stupak's panel is investigating pipeline corrosion at BP's Prudhoe Bay field
that led to a spill of at least 200,000 gallons of crude oil onto the Arctic
tundra and eventually spurred the partial shutdown of the largest U.S. oil
field.
Stupak and other committee members have focused their investigation on
cost-cutting at Prudhoe Bay, arguing the cuts were similar to those that
contributed to the unsafe environment at BP's Texas City, Texas, refinery
where a 2005 explosion killed 15 workers and injured at least 170.
Carolyn Merritt, chairman and chief executive of the U.S. Chemical Safety
Board, testified "there are striking similarities" between the two incidents."
"Most if not all of the seven root causes that BP consultants identified for
the Prudhoe Bay incidents have strong echoes in Texas City," Merritt said in
testimony.
In written testimony, BP America CEO Bob Malone said that cost cutting was not
the problem, but that BP was working to overhaul its operations on the
recommendation of independent consultants who have said that Texas City and
Alaska both showed BP managers had blurred responsibilities that led to poor
assessments of risks.
BP "must change the way we identify, assess, understand and communicate
risk... (and) change the way we integrate what we have learned into our
operations and budget decisions," Malone stated.
Government investigators have criticized BP for failing to use devices called
"pigs" to clean and inspect the inside of its oil transit pipelines at Prudhoe
Bay.
Corrosion-monitoring efforts like smart-pigging were "reduced or put on hold
because of budgetary pressures," even as BP reaped more than $106 billion in
after-tax profits between 1999 and 2006, Stupak said.
In one email from October 2001 cited by Stupak, an unnamed BP employee writes
that "we are under huge budgetary pressure for the last quarter of the year
and therefore we have to take some rather disagreeable measures," which
included shutting down some corrosion-reduction systems until year-end.
Stupak said BP has not been forthcoming in producing documents for the
committee. BP has provided several thousand documents, but Stupak said BP
"failed to disclose this information" until recently even though the company
had them before the committee's last BP hearing on September 6, 2006.
BP gave the committee staff over 800 pages of documents late on Tuesday,
Stupak said.
Xxxxxxxxxxxxxxxxxxxxxxxxxx
U.S., Alaska
pipeline regulators in new pact
Tue May 15, 2007 10:29 PM BST
http://investing.reuters.co.uk/news/articleinvesting.aspx?type=allBreakingNews&storyID=2007-05-15T212915Z_01_N15409480_RTRIDST_0_USA-PIPELINES-ALASKA.XML
WASHINGTON, May 15 (Reuters) - U.S.
pipeline regulators unveiled a deal with Alaska on Tuesday to boost oversight
over the state's crude oil and natural gas pipelines.
The partnership between Alaska's Department of Natural Resources and the U.S.
Pipeline and Hazardous Materials Safety Administration (PHMSA) is meant to
prevent a repeat of leaky pipelines at the Prudhoe Bay field that spurred the
biggest oil spill on the Alaska North Slope last year.
The deal closes the gap between federal and state inspection regimes and helps
the state keep tabs on aging infrastructure, officials said in a news release.
"This partnership will help us to identify, assess, and address potential
risks to the oil and gas transportation infrastructure, allowing us to prevent
system failures before they occur," said PHMSA Administrator Thomas Barrett.
Pipeline corrosion at the Prudhoe Bay field operated by London-based BP Plc <BP.L>
leaked at least 200,000 gallons of crude oil last March and eventually spurred
the partial shutdown of the largest U.S. oil field.
Robert Malone, chairman and president of BP America Inc., is expected to
testify before the House Energy and Commerce Committee on Wednesday on whether
budget cuts contributed to the spill.
Stacy Gerard, PHMSA's chief safety officer, is also scheduled to testify.
Government investigators have criticized BP for failing to use devices called
"pigs" to clean and inspect the inside of its oil transit pipelines at Prudhoe
Bay.
BP has defended its actions in Alaska, saying it used "world class"
corrosion-prevention methods that exceeded the requirements of Alaska state
regulators.
Following the spill, the PHMSA moved to expand its regulatory role to cover
low pressure pipelines like the transit line that leaked at Prudhoe Bay.
PHMSA regulates oil and gas transmission pipelines in Alaska, including about
200 miles of pipelines on Alaska's North Slope and the 800-mile Trans-Alaska
Pipeline System, which is also regulated by Alaska.
xxxxxxxxxxxxxxxxx
Anchorage Daily News
May 16, 2007
http://www.adn.com/news/politics/fbi/story/8889399p-8789732c.html
Lobbyist
accused in bribery conspiracy
BILL BOBRICK: He
is set to plead guilty this morning in District Court.
By LISA DEMER
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 16, 2007 at 02:18 AM
OTHER DOCUMENTS
PDF: Charging document
http://www.adn.com/static/includes/alaskapolitics/bobrickinformation.pdf
PDF: Plea agreement
http://www.adn.com/static/includes/alaskapolitics/bobrickpleaagreement.pdf
PDF: Addendum to plea agreement
http://www.adn.com/static/includes/alaskapolitics/bobrickfactuabasis.pdf
PDF: Motion to continue sentencing
http://www.adn.com/static/includes/alaskapolitics/motion.pdf
Graphic: Timeline of events
http://www.adn.com/includes/corruption/event_timeline.html
Graphic: Key figures
http://www.adn.com/includes/corruption/
More political corruption coverage (Info
Shown Below)
http://www.adn.com/news/politics/fbi/
Bill Bobrick, for years the lobbyist with the longest list of private clients
with city business, has been charged with a single count of conspiracy stemming
from a scheme to bribe former state Rep. Tom Anderson.
Bobrick, 52, is scheduled to appear in U.S. District Court this morning to plead
guilty to a felony charge of conspiracy to commit extortion, bribery and money
laundering. His sentence may ride on his future cooperation in the case, court
papers say.
The prosecution says in court papers that Bobrick and Anderson began conspiring
in July 2004. Bobrick created a sham company to funnel payments to Anderson in
exchange for his doing the bidding of a private corrections company in the state
Legislature, the prosecution says.
Prosecutors quote Bobrick telling an informant that he and Anderson were
"pitching a bunch of people" to get money for the legislator.
Anderson was indicted in December on seven felony counts including bribery,
extortion and money laundering. He has pleaded not guilty. His trial is
scheduled to begin June 25.
The case laid out against Bobrick almost mirrors the allegations against
Anderson.
Even after Anderson was charged, Bobrick continued to lobby for clients on city
issues. About a month or so ago, he began telling people, including his longtime
friend Mayor Mark Begich, that he was going to plead. After a story about his
intentions to plead appeared in the Daily News, he's been noticeably absent from
Anchorage Assembly meetings.
Bobrick is cooperating with the government and has agreed to testify against
Anderson, according to a motion filed by prosecutors. They want Bobrick's
sentencing delayed until after Anderson's trial. He faces two years or longer,
but that could be reduced.
"He's deeply remorseful about having committed a crime and he wants to start
doing the right thing," said Doug Pope, Bobrick's defense attorney.
Bobrick becomes the seventh person to be charged in a corruption investigation
that burst into public view last summer with the searches of state lawmakers'
offices. Anderson, state Rep. Vic Kohring, former Reps. Pete Kott and Bruce
Weyhrauch and Veco Corp. executives Bill Allen and Rick Smith have been hit with
charges. Allen and Smith have pleaded guilty.
BOBRICK CLIENTS
Bobrick registered this year to represent five clients who have business
with the city.
They are: P.O'B. Montgomery, the developer of a mall in Mountain View; Alaska
Waste, the city's biggest garbage hauler; Marlow Development Corp., which is
behind a number of big projects in Anchorage; Lantech, a surveying company; and
Cook Inlet Housing Authority. The latter just won a 10-year property tax break
from the Assembly for its Creekside Town Center housing project in Muldoon.
At least one client has already cut ties to Bobrick. David Irwin, president of
P.O'B. Montgomery, said he alerted Bobrick at the start of May that the company
would no longer employ him. He said Bobrick understood.
"It was just very clear where this thing was heading that we had to just stop
the arrangement," Irwin said.
Bobrick's other clients didn't return phone calls on Tuesday to talk about
whether he still represents them.
The charging document and other materials that lay out the case against Bobrick
don't name the private prison company, but the description of it matches Cornell
Companies Inc. of Houston, Texas, a publicly traded corporation. Cornell
operates six halfway houses in Alaska.
Cornell, along with partners Veco and Allvest founder Bill Weimer, failed in
recent years to win public support for private prison proposals in Anchorage,
Delta Junction, Kenai and Whittier. It also failed to win state approval for a
juvenile psychiatric treatment center in downtown Anchorage.
A lobbyist for the prison company -- who was working as a government informant
and who has not been identified in court papers -- paid a total of $24,000 to
Bobrick's Pacific Publishing, according to court documents. Bobrick turned over
$10,828 to Anderson and kept the rest, the documents say. Anderson later
complained he wasn't getting enough and was paid another $2,000 by the
government informant, according to the indictment against him. The informant
matches the description of Frank Prewitt, a former state corrections
commissioner who went to work for Cornell.
'OUR BOY IN JUNEAU'
In a secretly recorded conversation on July 21, 2004, Bobrick told the
informant that he and Anderson were "forming kind of like a partnership" and
were "pitching a bunch of people" to try to get money for Anderson. Bobrick said
it would be great if he could get the corrections company to hire Anderson
through him, and then Anderson would be "our boy in Juneau."
Among other things, Anderson testified at a public hearing in Anchorage on Nov.
17, 2004, in support of Cornell's request for a state certificate to run a
juvenile treatment center. He told state officials that he wasn't at the meeting
on behalf of any group but could endorse Cornell because he had seen "how they
function and work."
The state's tape recorder at the meeting malfunctioned, and parts of Anderson's
testimony were garbled, according to a transcript provided by the state. Bobrick
also was there.
Between August 2004 and March 2005, Bobrick was aware of "multiple official
acts" that Anderson took to benefit the government informant, the charging
document said.
Bobrick was executive director of the Alaska Democratic Party in the 1980s and
later became a registered lobbyist in Anchorage.
Daily News reporter Lisa Demer can be reached at ldemer@adn.com
and 257-4390. Reporter Kyle Hopkins contributed to this story.
Xxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/fbi/story/8889399p-8789731c.html
New rules to limit influence
peddling
ETHICS: Assembly members look at who gets
to bend their ears.
By KYLE HOPKINS
Anchorage Daily News
Published: May 16, 2007
Last Modified: May 16, 2007 at 02:18 AM
The case of local lobbyist Bill Bobrick triggered a proposal by Anchorage
Assemblyman Paul Bauer to ban anyone convicted of a felony from lobbying before
the city, Bauer said Tuesday.
When news that Bobrick planned to plead guilty to some kind of felony circulated
in April, Bauer said he decided to pursue the new lobbying rules.
"He has the most (lobbying) contracts and he's, of course, involved in some kind
of white-collar scheme. That didn't look good," Bauer said.
The latest version of the new rules sponsored by Bauer and Assemblyman Dan
Sullivan would bar someone from lobbying the city if they've been convicted of a
felony within the past 10 years.
The ordinance would require would-be lobbyists to pay for their own criminal
background checks. City clerk Barbara Gruenstein said the Assembly plans to hear
the public's take on the proposal at Tuesday's meeting.
When certain details in the indictment of former Rep. Tom Anderson pointed to
Bobrick as a co-conspirator, Bobrick called several Assembly members to
apologize for making some kind of mistake and said he wanted to make amends.
In April, Bauer said he contacted at least one of Bobrick's clients, Cook Inlet
Housing Authority, saying he had concerns about the lobbyist.
Asked at the time if he told the authority he wouldn't vote for a project
because Bobrick was the authority's lobbyist, Bauer said "absolutely not."
"I said I have a concern with anybody who has connections and what is your
intentions with Mr. Bobrick in the future ... But no, I don't go around saying
I'm not going to vote for something, just because you're associated," Bauer said
in April.
Downtown Assemblyman Allan Tesche -- who sits on the Assembly ethics committee
along with Bauer and Sullivan -- said Tuesday he's also proposing new ethics
rules.
Tesche said his proposal is designed to thwart influence peddling by city
officials and prevent city leaders from steering business to friends. It would
ban any elected official, city employee or appointed commissioner from telling
someone who does business with the city that they should hire a particular
lobbyist, consultant or contractor, he said.
"It's to avoid the situation where a municipal employee says, 'You know, things
could go a lot easier for you if you agreed to hire so-and-so," Tesche said.
Daily News reporter Kyle Hopkins can be reached at
khopkins@adn.com or 257-4334.
Xxxxxxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/news/politics/fbi/
Alaska Political Corruption
Bobrick charged with
conspiracy in bribe probe
Bill Bobrick, long the most
prominent lobbyist on municipal issues in Anchorage, has been charged with a
single count of conspiracy related to a scheme to bribe former state Rep. Tom
Anderson.
PDF: Charging document
PDF: Plea agreement
PDF: Addendum to plea agreement
PDF: Motion to continue sentencing
Graphic: Timeline of events
Graphic: Key figures
More political corruption coverage
Recall petition to target Kohring
WASILLA - A Wasilla city
councilman said he plans to try to recall Rep. Vic Kohring, a Wasilla Republican
who has been indicted in the legislative bribery scandal.
Bribery charges prompt action on ethics package
Blog: Alaska Politics
More political corruption coverage
Bill Allen out as Veco CEO
Bill Allen, who pleaded guilty
earlier this week to federal conspiracy and bribery charges, has stepped down
from Veco Corp., which he served as chief executive officer and chairman.
Veco's reach extended outside Alaska
Guilty pleas from two oil field
services executives who admit bribing legislators have state officials examining
whether they should give up campaign contributions connected to their company.
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Valley reacts to Kohring case
News of Republican Rep. Vic
Kohring's indictment last week met with mixed reviews among local politicos.
Employees in Kohring's Juneau office Monday said supporters are rallying behind
him even as House leaders temporarily stripped him of a committee leadership
position he has held since 2003.
Here is the text of Rep. Vic Kohring's federal
indictment
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Veco case may spark charges from state
The state plans to investigate
whether Veco Corp. and its officials have violated Alaska law in light of guilty
pleas in federal court by two company officials.
Beth Bragg: Confluence of Alaska
leaders' stupidity is Juneau's effluent
More coverage from Alaska Newsreader
Graphic: Key figures in the case
Blog: Alaska politics
More coverage
Veco executives plead guilty to bribing
officials
Bill Allen, a welder who took the
Veco Corp. from a small Kenai oil-field company to a billion-dollar
international contractor and a major political force, pleaded guilty Monday to
bribing at least four Alaska legislators, including former Senate President Ben
Stevens.
Timeline
From Juneau to Congress, Veco has been an influential
Alaska force
Kohring returns to session, reasserts his innocence
Ethics bill goes forward under criminal cloud
Veco's oil field customers plan to stick with company
for now
Graphic: Key figures in the case
More coverage at Alaska Newsreader
Politics blog: Veco gave bonuses to execs to reimburse campaign donations
More coverage
Oil service execs plead guilty to bribing Alaska
lawmakers
PDF: Allen charging document
|
PDF: Allen plea agreement
|
PDF: Allen plea facts |
PDF:Smith charging document
|
PDF: Smith plea agreement |
PDF: Smith plea facts
|
Blog:AlaskaPolitics |
More coverage
Kohring loses chairman post
State Rep. Vic Kohring lost his
job Monday as chairman of the House Oil & Gas Committee, three days after he and
two former House members pleaded not guilty to federal bribery and extortion
charges. 0000000
Kohring's state House committee post pulled
The chairman of a key state House
committee was deposed and Alaska's most important oil tax law fell under new
scrutiny Saturday as lawmakers reacted to the arrest of one current and two
former legislators on federal corruption charges.
Blog: Alaska Politics
More coverage
Federal authorities charge three legislators
Three more state legislators were
arrested on federal corruption charges Friday, accused of selling their votes
and influence to the oil field services company Veco Corp. and its chief
executive, Bill Allen, during last year's debate on oil taxes.
REACTION: Rumor mill runs wild as three
legislators stand handcuffed in federal court.
PDF: Indictment (Kohring)
PDF: Indictment (Kott & Weyhrauch)
PDF: Indictment (Anderson)
VECO press release
Audio: Gavel to Gavel (Berkowitz confronts Weyhrauch on the House floor, May 8,
2006)
Audio: Governor Palin (Sad day for Alaska)
Audio: Governor Palin (Clean up government)
Audio: Governor Palin (Alaskans' resources)
Kohring also charged with bribery, extortion
State Rep. Vic Kohring and former
state legislators Pete Kott and Bruce Weyhrauch were charged in federal court
today with extortion and bribery in connection with the Legislature"s
consideration of an oil tax bill and then-Gov. Frank Murkowski's natural gas
pipeline proposal last year.
Timeline of federal investigation into Alaska
politics
Timeline of events leading up to
political indictments; beginning July 21, 2004 to present.
Anderson's trial is delayed
The trial of former state Rep. Tom
Anderson for extortion, bribery and money-laundering charges won't begin until
June 25, a delay of more than two months from the scheduled April 9 trial date,
a federal judge said Wednesday.
More political indictment coverage
Blog: Alaska politics
Friends solicit money for ex-Rep. Anderson's
defense fund
As former state Rep. Tom Anderson
prepares for trial next month on federal bribery, extortion and money laundering
charges, a group of friends is trying to raise money for his legal defense.
Anderson indicted on seven counts
(12/09/2006)
Solicitation for the "Tom Anderson Defense Fund" [.pdf]
Veco fades into Juneau background
Lawmakers say there was a time in
history when a cocktail party sponsored by Veco executives in a Baranof Hotel
suite would have seen oil executives and lobbyists cozying up to lawmakers and
staffers.
More coverage
FBI raids help set agenda in Juneau
An unfinished gas pipeline deal,
rising health care and education costs, and a bipartisan call for revising the
legislative ethics laws -- Alaska's lawmakers return to the capital this week to
begin tackling these and other issues in a four-month session that starts
Tuesday.
Delay sought in legislator's bribery trial
Indicted state legislator Tom
Anderson wants to delay the start of his trial so his lawyer can better prepare.
More political indictment coverage
Blog: Alaska politics
Anderson taps Stockler to handle his defense
State Rep. Tom Anderson, facing
seven federal felony charges including allegations of extortion, money
laundering and bribery, is replacing one high-profile defense lawyer with
another.
Blog: Alaska politics
Lobbyist tells city leaders he's 'sorry'
Bill Bobrick, the lobbyist who set
up a company that federal prosecutors say was used to funnel bribes to indicted
state Rep. Tom Anderson, called Mayor Mark Begich and several members of the
Assembly over the weekend.
More political coverage
Blog: Alaska politics
Subpoena may signal a wider corruption
The director of a Juneau-based
salmon fishing group said last week he has been ordered by a federal grand jury
investigating Alaska corruption to turn over lobbying and consulting records
involving state Senate President Ben Stevens and former congressional aide
Trevor McCabe, an Anchorage lawyer.
Xxxxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/money/industries/oil/story/8888416p-8788773c.html
For now, no development in
southern NPR-A
HURDLES: Challenges in opening land,
opposition to plan shaped BLM decision.
The Associated Press
Published: May 16, 2007
Last Modified: May 16, 2007 at 03:44 AM
FAIRBANKS -- The Bureau of Land Management has halted planning efforts for oil
and gas development in one section of the National Petroleum Reserve-Alaska.
Public opposition and the impracticality of development led to the decision in
the Southern Planning Area, BLM officials said.
"You never know what will happen in the future," spokeswoman Sharon Wilson said.
"We will not be doing anything with the south NPR-A for now."
The reserve on Alaska's North Slope bureau covers 23 million acres, and the
Southern Planning Area is more than one-third at 9.2 million acres.
President Warren Harding created the National Petroleum Reserve-Alaska in 1923
as an emergency oil supply for the Navy. Current planning comes from a
presidential directive guiding the Department of the Interior to foster oil and
gas development in the reserve.
The southern area is believed to have oil and gas reservoirs, coal and hard-rock
minerals. However, it is also the primary calving area for the Western Arctic
Caribou Herd, which has subsistence value for more than 30 communities.
"Clearly, it is a victory that the BLM recognized that there is big controversy
there," said Pam Miller, Arctic coordinator with the Northern Alaska
Environmental Center.
The southern area is estimated to have just 2 percent of the reserve's oil
resources but 27 percent of the natural-gas resources. However, it has almost no
road infrastructure.
The Alaska Resource Advisory Council, a 15-member panel composed of energy
industry personnel, conservationists, Native organizations and others with a
stake in Alaska land issues, advises BLM on major issues but had not agreed on
the southern area.
Discontinuing work there will allow the BLM to focus more attention and
resources on the Northeast Planning Area, which could ignite a land use dispute
temporarily settled last fall.
The Northern Alaska Environmental Center and a coalition of environmental groups
successfully stalled the sale of several large oil and gas leases around
Teshekpuk Lake last September by persuading a judge to require the BLM to
conduct a more thorough environmental assessment.
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Anchorage Daily News
May 15, 2007
http://www.adn.com/opinion/view/story/8886516p-8786802c.html
Here's a
mystery
How does a
wildly popular bill fail to pass in Juneau?
Published: May 15, 2007
Last Modified: May 15, 2007 at 02:55 AM
Here's a mystery of the Juneau universe:
How does a bill NOT pass the Alaska Legislature when it is introduced with a
majority of each house already signed on as sponsors?
Answer: When it is opposed by a powerful industry that, despite the taint of
corruption, still has friends in high places.
The bill in question would make it tougher for oil companies to claim tax
breaks when they have to fix problems caused by their own bad maintenance.
Such as when BP cut corners on maintenance for years and saw North Slope
gathering lines spring costly leaks due to corrosion last year.
BP made clear it planned to deduct those corrosion repair expenses against
what it owes on the state's new profits-based tax on oil production.
Legislators, like the Alaskans who elect them, were angry over BP's shoddy
maintenance. Repairs required shutting in large volumes of North Slope oil
production, costing the state millions of dollars. Subsidizing BP for fixing
problems caused by its own penny-pinching maintenance is just too much for
Alaskans to take.
The Senate responded with SB 80, which at last count had 18 sponsors. That's
90 percent of the Senate.
The House version, HB 128, had 21 sponsors. That's a majority of the House. (A
bare majority, but a majority nonetheless.)
Passing either of the bills won't instantly avoid a big tax dispute over BP's
repair ex penses. BP's tax lawyers will happily argue about what constitutes
"improper maintenance" for as many years as the courts will let them. But
Alaska was going to have those fights anyway. Existing law allows excluding
expenses for "gross negligence." The new law lowers the standard for denying
tax breaks and will improve the state's odds of success.
But here we are with less than two days to go in the session, and the bill
appears dead. At last report, it was stalled in the House Finance Committee,
caught in the annual end-of-session legislative logjam.
Ordinarily, the bill would be handled by Finance co-chair Kevin Meyer. But
he's employed by Conoco Phillips, the state's largest oil producer. He turned
the bill over to his co-chair, Kenai Rep. Mike Chenault.
That's the same Mike Chenault who has taken thousands of dollars in campaign
contributions from Veco during his political career. In his most recent
election cycle, Rep. Chenault collected $5,000 from five Veco executives,
including the two who admitted to a bribery scheme, Bill Allen and Rick Smith.
Over the weekend, Rep. Chenault said his committee is simply out of time to
deal with the bill to block BP's bad-maintenance tax deductions.
Coincidence?
Perhaps.
It's true time was short by the time the Senate bill hit House Finance. Other
committees could have moved the bill sooner. Senate Resources had the bill
almost three months. House Resources had a similar bill almost two months. (On
its way to Resources, the House bill made an extra stop in the House Oil and
Gas Committee, run by the only sitting legislator accused of taking Veco
bribes, Vic Kohring. Surprisingly, the bill moved out of Kohring's committee
after just three weeks.)
But here we have a bill that might help save Alaskans millions of dollars in
undeserved oil tax breaks. It is not only supported but actively sponsored by
39 of 60 legislators. It passed the Senate unanimously. Yet the bill is dying
at the hands of a committee chairman whose hands have been graced with Veco
and other oil industry campaign contributions.
BOTTOM LINE: Alaska's fight against BP's oil tax deductions for pipeline
repairs will be tougher without this bill.
Xxxxxxxxxxxxxxxxxxxxxxxxxx
http://www.adn.com/money/industries/oil/story/8883627p-8783998c.html
Tax-deduction bill is likely doomed
REPAIRS: Oil
producers should pay to
maintain pipelines, sponsors say.
By TOM KIZZIA
Anchorage Daily News
Published: May 14, 2007
Last Modified: May 14, 2007 at 07:50 AM
JUNEAU -- A bill intended to prevent North Slope oil companies from deducting
the costs of repairs caused by improper maintenance appears doomed for this
year.
The measure was strongly opposed by Alaska's major oil producers. Its demise
would give the oil companies a rare victory in a session where they lost badly
on gas pipeline legislation.
The tax-deduction bill was introduced after corrosion forced BP to partially
shut down the giant Prudhoe Bay field last summer. It is backed by Gov. Sarah
Palin and appears to have widespread support in the Legislature. The measure
passed the Senate last week 20-0, and has more than half the House of
Representatives signed on as co-sponsors.
But despite this support, the bill dragged very slowly through the legislative
process this year.
On Sunday, the House Finance Committee's powerful co-chairman said he doesn't
plan to take up the bill in the closing days of the session. Rep. Mike
Chenault, R-Nikiski, said the bill reached his commitee too late and other,
more important bills have priority.
"Maybe it would fit in a special session (on oil taxes) better than it would
right now at the end of the session," Chenault said.
Failure to pass the measure could cost the state more than $100 million in
lost tax revenues, the bill's sponsor said Sunday. That's if BP deducts all
the costs of repairing and replacing corroded pipe that led to a big Prudhoe
Bay oil spill last year, said Sen. Tom Wagoner, R-Kenai.
BP has already announced plans to deduct some of the repairs, which the
company said would save it an estimated $11 million on taxes owed under the
state's new Petroleum Production Tax, or PPT net-profits tax.
Wagoner said the improper-maintenance deduction could be brought up again next
year, either alone or as part of a larger re-examination by the Legislature of
the PPT. But he said delay may make it too late for the rule to cover
retroactively the 2006 corrosion problems uncovered by BP at Prudhoe Bay.
The BP spills are the subject of a deepening congressional probe into whether
the company's cost-cutting efforts put their facilities at risk. The company
is replacing 16 miles of pipe at an estimated cost of $250 million.
Wagoner's measure, Senate Bill 80, would prohibit companies from taking tax
credits under the PPT if the state determines the repairs were necessary
because of "improper maintenance."
"The question is, who should be responsible for bad maintenance: the major oil
companies or the people of Alaska?" said Rep. Kurt Olson, R-Soldotna, who
introduced a companion bill in the House.
Oil company representatives argued in hearings this year that the
anti-deduction measure would discourage investment in Alaska. They said
defining "improper" maintenance will be difficult. The PPT has other sections
that address maintenance and repair costs, the said.
An alternative for the state would be to accuse the companies of "gross
negligence" in court. But such a lawsuit can be hard to win, said Wagoner.
Wagoner's bill was launched with fanfare in early February but languished in
the Senate Resources Committee until the end of April. Olson's companion bill
stalled for two months in the House Resources Committee.
A week later, after federal corruption charges tied to oil industry lobbying
were filed against one current and two former legislators, the
improper-maintenance measure picked up speed. It passed the Senate unanimously
on Thursday and moved to the House Finance Committee.
Chenault took responsibility for the bill under a power-sharing arrangement
with co-chairman Rep. Kevin Meyer, R-Anchorage. Meyer works for Conoco
Phillips and recuses himself from committee work on oil industry legislation.
Chenault said the committee is tied up with major budget bills, as well as
legislation deciding school funding and municipal aid for the coming year.
That means there won't be time to look at something as complex as the oil tax
deduction bill, he said.
The Legislature is scheduled to adjourn Wednesday night.
Wagoner said he was not happy with his fellow Kenai Republican.
"If he doesn't move (the bill), somebody's got to be held accountable,"
Wagoner said. "But you can't place it at his feet totally, because the Senate
took so much time to get it over there."
Wagoner attributed the bill's slow progress to opposition from the oil
companies. "They've done everything they can to defeat this bill and hold it
back," he said.
Reporter Tom Kizzia can be reached at
tkizzia@adn.com
or in Juneau at 1-907-561-3798.
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Wall Street Journal
May 14, 2007
House Presses BP
on Oil Spills
Probe Aims to
Determine If Cost Cuts Had
Role In Pipeline Ruptures
By JIM CARLTON
May 14, 2007; Page A6
Investigators in the U.S. House of Representatives who are looking into two
spills that ended up shutting down Alaska's Prudhoe Bay oil field last year
have sent a letter to the field's operator, BP PLC, asking for more
explanation regarding a finding in a consultant's report. The document, put
together at the request of BP, said the spills were preceded by budget cuts to
maintenance and inspection of pipelines.
The letter was sent Friday by officials of the House Committee on Energy and
Commerce, who are set to begin another hearing Wednesday into why the spills
happened. Although officials have found that corrosion led to a spill of about
200,000 gallons of crude from a pipe in March 2006 and a smaller spill from
another line in August, the House investigators are looking into whether cost
cuts made the lines more prone to rupture.
BP temporarily shut down the Prudhoe Bay field after tests by the company
following the second spill showed widespread corrosion problems in other
pipelines in the vicinity. Production resumed after the lines were replaced.
The News: House investigators are looking into BP-commissioned report
that finds budget cuts could be tied to pipeline breaks in Alaska.
The Background: House committee investigating BP's role in two pipeline
ruptures at Prudhoe Bay last year that ended up with the field temporarily
closing, causing oil prices to spike.
What's Next: BP executives are scheduled to testify before the House
Committee on Energy and Commerce.
One of the consultants hired by BP to help it investigate the incidents was
Booz Allen Hamilton, a McLean, Va., company whose March 2007 report on file
with the House committee suggests: "Budget pressure eventually led to
de-scoping some projects and deferring others. For example, the plan to run a
smart pig in the [oil transit lines, which were the ones that ruptured] was
dropped in 2004 and 2005." A "smart pig" is a device that runs through a
pipeline, taking measurements to see if the line suffers from corrosion or
other defects.
In their letter to Robert Malone, chairman and president of BP's BP America
Inc. unit, Reps. John Dingell (D., Mich.), chairman of the House Energy
Committee, and Bart Stupak (D., Mich.), chairman of its subcommittee on
oversight and investigations, said the finding contradicts BP's previous
assertion that failure to pig these lines wasn't a function of any budget
pressure.
The congressmen also noted BP has asked that the reference to cost-cutting be
removed from the Booz Allen report, calling it "in error." "If the sentence is
removed, we would appreciate a full explanation as to why BP and the report's
authors believe the sentence to be inaccurate," said the two Michigan
Democrats in their letter.
The congressmen also disclosed in the letter that they had recently uncovered
a Feb. 5, 2003, email from BP they say suggests the company planned to pig the
very lines that failed. However, they said, those plans appear to have been
rejected by superiors. The email contains an "Authorization for Expenditure"
that the congressmen said appears to be a proposal to "install permanent pig
launching and receiving facilities" in several places, including transit lines
where the spills later took place. But the expense request appears to have
been turned down, they added, since it included a notation: "rejected ... for
approval."
BP officials declined to comment, saying those were "matters of interest" at
Wednesday's hearing. Booz Allen officials weren't available.
Cost-cutting also has been brought up as a possible link to a March 2005
explosion at a BP refinery in Texas City, Texas. BP officials have said they
believe budgetary decisions didn't play a critical role in the accident, which
killed 15 people and injured 180.
Write to Jim Carlton at
jim.carlton@wsj.com
xxxxxxxxxxxxxxxxxxxxxxx
Juneau Empire
May 13, 2007
http://www.juneauempire.com/stories/051307/loc_20070513098.shtml
Lawmakers disclose conflicts of interest,
but vote anyway
By PAT FORGEY
JUNEAU EMPIRE
A funny thing happened to Rep. Kevin Meyer, R-Anchorage, one day on the floor
of the House of Representatives. The subject of taxing the oil industry came
up during discussion of a program that taxes the oil industry for spill
response and prevention.
"I was hoping to avoid the discussion of oil taxes," said Meyer, one of the
most influential members of the House - and an employee of ConocoPhillips Co.,
one of the largest oil company taxpayers in Alaska.
"But since it has come up, I would like to put it on the record that I have a
conflict of interest and be excused from voting."
What happened next was predictable. It happens regularly in the Alaska
Legislature - and in no other legislature in the country.
Other representatives objected to Meyer's being excused, and House Speaker
John Harris, R-Valdez, told Meyer he wouldn't be excused from the discussion
and the vote.
"I think you are going to have to talk about it, and vote," Harris said.
That's standard operating procedure in the Alaska Legislature. Conflict of
interest isn't just tolerated. In some cases it is required.
Alaska's "citizen legislators" have numerous conflicts of interest, and few
checks on using their power as elected officials to benefit themselves or
their employers.
Several legislative leaders say conflicts of interest are inherent in having a
citizens' legislature, and that while legislators bring conflicts of interest
with them to Juneau, they also bring valuable community connections as well.
Some set their own personal boundaries, and limit what they'll do to benefit
themselves or their employers.
After disclosing his conflicts, Meyer set about convincing the House not to
raise taxes on his employer. Using charts and graphs, Meyer explained why he
believed a tax increase wasn't in the state's interest, and the tax increase
proposal was pulled. He knew the issue well, as he had sponsored the bill.
Meyer said that even when he advocates doing something that is in
ConocoPhillip's interest, he's doing it because it is in the state's interest.
Meyer said in his case he takes a leave of absence from his job as a
procurement analyst with ConocoPhillips when he's serving in Juneau.
"I totally divorce myself from the company when I'm down here," he said.
Meyer has been particularly prominent this year, because of his position as
co-chairman of the House Finance Committee at a time when the signature piece
of legislation this year is Gov. Sarah Palin's Alaska Gasline Inducement Act.
Palin said there is nothing improper about Meyer's role in the process.
"He is following the rules that are in place today," she said.
Friday, at a press conference after AGIA passed the House and Senate, Meyer
appeared with Palin at a celebratory press conference, but declined an
opportunity to speak.
An ongoing ethical issue
The 25th Alaska Legislature began in January with a mandatory day-long
ethics review in which all 60 members gathered in the neighboring Terry Miller
Building to talk over ethical issues with consultant Michael Josephson, an
ethics expert with the Josephson Institute of Ethics.
The institute advises elected officials and others on how to deal with ethical
dilemmas, and was brought in from California by the Legislature after FBI
agents raided the offices of six legislators last year and a seventh was
indicted.Josephson was surprised to learn that Alaska legislators with
conflicts of interest not only voted, but were required to do so."
"You are unique in this, I don't know of another state that has this, there
may be one or two others," he said.
He said public officials considering whether to recuse themselves should
consider the public appearance.
"I think the test is, would a reasonable, fair-minded person think that
(conflict) might affect your judgment," he said.
For example, Josephson said, if you were a employee of a pharmaceutical
company and a bill setting drug prices was being considered, that could affect
company profits. A reasonable person might think you'd be under pressure to
vote a specific way, he said.
"When in doubt, recuse. It's simply a better way to protect public trust," he
said.
Fighting conflict with disclosure
Several legislators said that their other check on conflict of interest is
disclosure, and they make it clear when they have a personal financial stake
in issues.
Meyer said he rarely heard from constituents who objected to ConocoPhillips or
other conflict matters, but some do tell him that he shouldn't be voting on
some issues.
"Especially the ones who disagree with me," he said.
Meyer said he makes it clear to his constituents during his campaigns that he
works for the company.
"They know I come from an oil industry background," he said.
In the days before Palin's AGIA bill reached the floor of the House, Rep. Les
Gara, D-Anchorage, called upon Republicans to refrain from objecting if Rep.
Vic Kohring, R-Wasilla, asked to be excused from voting. Kohring was recently
indicted on charges of accepting bribes from an oil company.
Lawmakers objecting to recusal do so verbally, and their objections are not
recorded by name in the House and Senate journals, giving their actions
anonymity.
Kohring avoided the issue on Friday's AGIA vote as he left the floor during
the vote, despite not having an excused absence.
"There were some things he had to take care of," said Jim Pound, a member of
Kohring's staff.
The House leadership had not requested Kohring to step aside, said Will
Vandergriff, spokesman for the House Republicans.
An issue of personal integrity
Rep. Jay Ramras, R-Fairbanks, said voters need to trust their lawmakers.
He expressed displeasure with fellow legislators who allegedly "for an
insignificant amount of money gave away the state's sovereignty."
He said he's as likely to vote against his financial interest as he is for it,
and he is wealthy enough to be able to do so.
"There's nothing of value out there that could compromise me," he said.
In January, Josephson recommended that the legislators consider changing their
internal rules so that they are not placed in conflicts.
Rep. Beth Kerttula, D-Juneau, said some members of the Democratic caucus urged
tougher conflict of interest rules be adopted after Josephson's talk. Her
caucus never actually proposed such rules, acknowledged the House Democratic
leader.
"Maybe what we need to do is to determine a degree of conflict, and what would
be an improper level," she said.
Palin praised the Legislature's ethics reform package this year, but said it
was only a "good first step."
Early on she proposed toughening ethics rules for both the executive branch
and the legislative branch, but said she found legislators resistant to her
having a role in how the Legislature operates.
"They said, `You clean up your house, we're going to concentrate on the
legislative branch,'" Palin said.
There's still more to do to, but Palin expressed confidence it will be done.
"I've taken them at their word that they want to clean up loopholes and
conflict of interest," she said.
• Pat Forgey can be reached at
patrick.forgey@juneauempire.com.
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Petroleum News
May 12, 2007
http://www.petroleumnews.com/pntruncate/870609284.shtml
Public
corruption scandal erupts in Alaska
Former, current
state legislators arrested and Veco’s Allen confesses in federal probe; PPT
and oil field contractor under cloud
Rose Ragsdale
For Petroleum News
In the latest chapter of a political scandal that began unfolding last summer,
three Alaska politicians and two oil industry executives are facing federal
criminal charges that could earn them stiff fines and lengthy prison
sentences. Ever-widening fallout from the disclosures also cast a cloud over
Alaska’s new petroleum production tax and the credibility of a leading oil
field services company and many of Alaska’s Republican lawmakers.
The U.S. Department of Justice announced indictments and arrests May 4 in
Juneau of state Rep. Victor H. Kohring, R-Wasilla, and former state Reps. Pete
Kott, R-Eagle River, and Bruce Weyhrauch, R-Juneau, on multiple charges
arising from a federal investigation into public corruption in Alaska begun in
early 2006.
Kohring was first elected to the Alaska State House of Representatives in
1994; Weyhrauch, an attorney, was a member of the Alaska House from 2002 to
January 2007; and Kott, was a member of the House from 1992 to 2007, including
two years as speaker, according to Assistant Attorney General Alice S. Fisher
of the Justice Department’s criminal division.
Bill J. Allen, chairman of Veco Corp. pleaded guilty May 7 in federal court in
Anchorage to bribing at least four Alaska legislators, including former state
Senate President Ben Stevens, who represented Anchorage in the Legislature.
In a plea bargain with the Justice Department’s Public Integrity Section,
Allen and Rick Smith, Veco’s vice president for community and government
affairs, pleaded guilty to three identical felony charges bribery and two
counts of conspiracy.
Both men accepted responsibility for more than $400,000 in illegal payments
and benefits to public officials or their families. More than half the money
went to Stevens in the form of phony “consulting” fees, the government
charged.
Allen is a former welder who led Veco in 20 years from a small Kenai oil-field
services company to a billion-dollar international contractor and a major
political force.
Stevens, son of U.S. Sen. Ted Stevens, has not been charged. He was named in
the plea documents as “State Senator B.”
In return for special consideration at sentencing, Allen, 70, and Smith, 62,
agreed to cooperate in the ongoing federal investigation. The government also
promised to not seek charges against Allen’s son Mark, a Veco official, his
daughter Tammy Kerrigan, or any other relative.
The federal plea bargain doesn’t bar state prosecutors from seeking additional
charges against Allen and Smith. Both men acknowledged violating state
campaign finance laws.
The plea deals were formalized in secret and opened in U.S. District Court May
7.
Allen and Smith were released on $10,000 unsecured bond and ordered to report
weekly to federal probation officers. No date has been set for sentencing.
They face up to 10 years in prison and $750,000 each in fines, but cooperation
could substantially reduce the penalties.
Extortion, bribery, conspiracy charges
A four-count indictment May 3 charges Kohring with extortion, bribery,
attempted extortion and conspiracy. The indictment alleges that Kohring
solicited and received financial benefits from an entity identified in the
indictment as “Company A,” and that in exchange for those benefits, Kohring,
in a series of meetings, corruptly solicited, demanded and accepted from the
company’s CEO and a vice president cash payments including $2,100 to $2,600,
and a $3,000 job for a relative, and also solicited, but did not receive, a
$17,000 loan to pay credit card debt.
In return Kohring allegedly voted in favor of a legislative proposal called
the “petroleum production tax,” or PPT, which would change taxation of Alaska
oil production, supported by Company A; lobbied other elected officials to
support versions of the PPT bill; and provided official support for the
natural gas pipeline legislation and the PPT bill.
Kohring denied the charges May 7, saying he firmly believes a jury will
exonerate him.
Alaska House leaders, meanwhile, stripped Kohring of his chairmanship of the
House Oil and Gas Committee. However, he will continue to represent his
district, unless he is proven guilty.
The grand jury also returned a seven-count indictment against Kott and
Weyhrauch, charging them with conspiracy, extortion, bribery, and mail and
wire fraud; and Weyhrauch with attempted extortion. The indictment alleges
that Kott and Weyhrauch each corruptly solicited and/or received multiple
financial benefits from Company A in exchange for each legislator’s agreement
to perform official acts as a member of the Alaska Legislature to further the
company’s business interests.
Further, Kott allegedly corruptly solicited, and the company agreed to
provide, employment for Kott after he left the state Legislature, as well as
other things of value. At a meeting in April 2006 with the company’s vice
president and, via teleconference, the CEO, Kott said he had been successful
in getting other state legislators to support the oil tax legislation favored
by Company A, and that he believed the bill would pass. Kott allegedly said in
a meeting with the company’s CEO and vice president on May 7, 2006, that he
worked to kill an amendment to the PPT bill because Company A’s CEO told him
to do so.
The indictment alleged that Kott said, “I had to get ‘er done. So I had to
come back and face this man right here (pointing to the CEO). I had to cheat,
steal, beg, borrow and lie.” In June 2006, Kott allegedly worked with
Weyhrauch to seek an adjournment of a special session of the House before
lawmakers could vote on an amendment to the PPT bill that the company did not
support.
Alleged payoffs were modest
In return for these and other actions, Kott demanded and Company A
through the CEO and vice president provided $8,993 in payments, $2,750 in
expenses paid to a polling company that worked for Kott’s re-election campaign
and a future contract for Kott as a lobbyist for the company. Weyhrauch
allegedly solicited employment from Company A after he left the state House.
Weyhrauch allegedly told the company’s executives that he would support their
position on the PPT bill. After mistakenly voting the “wrong way” on an
amendment that the company and representatives of three other oil companies
did not support, Weyhrauch changed his vote on instructions from Kott and
Company A’s CEO.
The indictment alleges that Weyhrauch, like Kott, voted in favor of versions
of the PPT bill supported by Company A and the three other companies; lobbied
other lawmakers for their support; and offered assistance to Company A and its
executives by providing official support for the natural gas pipeline and the
PPT bill.
“These two indictments allege that the defendants sold their offices in
Alaska’s State House to an influential energy company in exchange for cash
payments, loans, jobs for relatives and the promise of future employment,”
Fisher said. “There is no room for bribery and extortion at any level of
government federal, state or local.”
If convicted, Kohring, Kott and Weyhrauch each face up to 35 years in prison
and $750,000 fines on the extortion, bribery and conspiracy charges. Kott and
Weyhrauch also each face up to another 20 years in prison and another $250,000
fine on the mail and wire fraud counts.
Influence-peddling in Juneau
In the indictments and arrests May 4, Veco, Allen and Smith showed up in
documents as “Company A,” “Company CEO” and “Company VP.”
It appeared from those charges that the FBI used electronic surveillance of
Veco’s suite in Juneau’s Baranof Hotel to capture incriminating dialogue and
images. The indictments spoke of payments by Allen and Smith of several
thousand dollars and promises of jobs to the legislators. In return, the
legislators agreed last year to vote for the oil production tax favored by the
oil industry, the government alleged.
Those indictments referred to an unnamed state senator who allegedly played a
role in one part of the conspiracy a plan by Veco to farm out legal work to
Weyhrauch, an attorney, in return for his vote on oil legislation. The
description of that unnamed senator was ambiguous the younger Stevens, was
one of three senators it could have been.
One of two unnamed state senators in the charges against Allen and Smith is
apparently Stevens. The Veco “consulting” payments of $243,250 between 2002
and 2006 documented in the charges precisely match the amount Stevens reported
on his financial disclosures as consulting income to his firm, Ben Stevens and
Associates.
Over the years, Stevens has refused to disclose what work he did for that
money or for any of the other consulting jobs he has listed, mostly for
fishing industry clients.
Former state representative Ray Metcalfe, in complaints to the Alaska Public
Offices Commission and to federal authorities, challenged Stevens, saying the
payments were thinly disguised bribes.
Nothing came of Metcalfe’s APOC complaints the state agency said that Stevens
adequately described his work.
But in their admissions to federal prosecutors, Allen and Smith appeared to
vindicate Metcalfe, who heads the Alaska Republican Moderate Party.
“Although Allen and Veco characterized these payments … as being for
consulting services, Allen acknowledges that in actuality the payments … were
in exchange for giving advice, lobbying colleagues, and taking official acts
in matters before the Legislature,” prosecutors said.
Only once in five years, according to the prosecutors, did Stevens consult for
Veco on a matter not involving his legislative job a task involving a sunken
boat at an unidentified location where Veco wanted to build a dock. Stevens
worked less than 20 hours on that project, they said.
Allen also promised an executive job to Stevens when he left office. On June
25, 2006, Stevens said he’d take that job, the charges said.
Stevens denies wrongdoing
Stevens’s attorney, John Wolfe of Seattle, declined to respond to
specifics in the charges, but said his client did nothing wrong.
“Ben Stevens denies engaging in any criminal conduct and maintains that he is
innocent,” Wolfe said. “Mr. Stevens is surprised to learn that Bill Allen has
pled guilty to various federal crimes and hopes that Mr. Allen is not falsely
accusing former and current members of the Alaska Legislature in order to
mitigate his admitted criminality.”
One other unnamed state senator, a “state elected official,” and two unnamed
Veco executives also show up in the charging documents against Allen and
Smith.
The senator in question was not accused of taking illegal payments but was
listed as a member of the conspiracy to bribe and extort. That senator
attempted to enlist the support for Veco-backed legislation of the “state
elected official” through an illegal campaign contribution scheme.
Four state senators match the description of that person, two of whom had
their offices searched by the FBI in August: John Cowdery, R-Anchorage, and
Donald Olson, D-Nome.
The unnamed senator is likely Cowdery, said Kevin Fitzgerald, his defense
attorney. As to what that means for Cowdery, Fitzgerald said he’s
investigating the allegations laid out in the case against Allen.
Cowdery is in poor health. He’s been hospitalized in Juneau with pneumonia and
a lung infection, Senate majority spokesman Jeff Turner said May 7.
The “state elected official” was impossible to identify from the information
in the charges, and could be helping the government in the investigation.
Veco very active in Juneau
The two unnamed Veco executives were accused of participating in a scheme
to use corporate money to reimburse political campaign contributions by Veco
officials crimes under federal and state law. Allen and Smith admitted
violating federal tax laws by taking deductions for illegal activity.
Veco executives routinely donate to political campaigns, giving tens of
thousands of dollars to candidates in last year’s primary races alone.
Allen, in his plea, admitted reimbursing Rep. Kott for a $1,000 donation Kott
made in the governor’s race. The contribution wasn’t further described in the
charges, but APOC records show that Kott donated $1,000 to former Gov. Frank
Murkowski’s re-election bid. Other allegations by Allen and Smith include a
May 7, 2006, incident when Kott was on the floor of the Alaska House and his
cell phone rang. Allen and Smith were calling to give Kott “instructions on
how to vote on the particular piece of legislation,” prosecutors said.
Some time later, Kott called them back with a report on the status of the vote
“and the projected outcome,” the charges said.
Democratic legislators complained
Other lawmakers complained about the irregularities they personally
observed involving Allen during the debate over the PPT.
On the last night of the special session last summer when the Legislature
passed the production tax, Rep. Harry Crawford, D-Anchorage, said he saw
lawmakers conferring with Allen “and then I saw Bill Allen passing a note
across the rail to a lawmaker. … That’s not supposed to happen. Notes are
supposed to come through the double doors and be passed through our pages,”
Crawford told Petroleum News in October. “It’s been pretty rugged this last
couple of sessions.”
A federal grand jury also indicted state Rep. Thomas T. Anderson, R-Anchorage,
in December on unrelated charges of extortion, conspiracy, bribery and
money-laundering for allegedly soliciting, receiving and scheming to disguise
$26,000 in illegal payments from an FBI confidential source supposedly
representing an Outside corrections company.
Business almost as usual at Veco
Veco, meanwhile, is continuing to conduct its business, the company said
in a statement May 7.
Allen is listed as an owner of 5 percent of Veco’s stock in the company’s 2006
biennial report. But the company’s attorney in the criminal case, Amy Menard,
said he no longer has an ownership interest.
Allen is also publisher of the Voice of Times, a half-page opinion section in
the Anchorage Daily News. It is what remains of the Anchorage Times, which
Allen owned for two years before he sold the newspaper to the Daily News in
1992.
The Voice of the Times will cease publication after 15 years when its contract
expires this month, Daily News Publisher Mike Sexton announced May 9.
As to the status of Allen and Smith at Veco, they still held their titles on
May 7, Menard said. But that could change.
“I can tell you that in light of today’s events, we expect the board of
directors to be meeting this week and making decisions about appropriate
actions,” Menard said.
Subsequently, Menard said Veco has hired an independent consultant to conduct
an internal review of the company’s political and lobbying activities.
Leaders ‘sad’ and ‘surprised’
U.S. Sens. Lisa Murkowski and Ted Stevens and Gov. Sarah Palin initially
expressed dismay at the indictments and arrests.
U.S. Rep. Don Young, R-Alaska, who counts Veco and its employees among his
most generous campaign donors, has declined to comment, saying it is
inappropriate.
Murkowski described the situation as “truly a troubled time in our state’s
history,” and said May 7 that she hoped the Legislature can overcome the
challenge and move the state forward in “considering one of the most critical
issues for our future,” presumably the natural gas pipeline.
Stevens, a personal friend of Allen’s, said in a statement May 7 that he “was
surprised and saddened” to learn of indictments and arrests.
“Like many Alaskans, I am finding out about these events from the media. The
legal process will now continue. Consistent with my longstanding practice
regarding matters of this sort, I will make no further comment,” he said.
Stevens also revealed May 8 that he has dropped his support for a
controversial salmon marketing program, with ties to the younger Stevens that
came under scrutiny last year in a federal investigation.
Palin said the scandal has strengthened her resolve to correct the apparently
wayward path Alaska’s government has taken in recent years.
“We are committed to doing it right and building the faith of this state,” she
said May 4.
“… That is why we are so firm on a fair and open process on Alaska Gas
Inducement Act,” she said.
AGIA is legislation aimed at getting a pipeline built that Palin hopes will
eventually ship trillions of cubic feet of North Slope gas to market.
She said state lawmakers should move forward as time is running short on a
session scheduled to end May 16.
“This shouldn’t be used as an excuse to paralyze the discussion under way now
on the merits of AGIA,” she said. “That’s unacceptable.”
Palin wants review of PPT
As more details of the federal investigation emerged May 7, Palin called
for more answers and accountability.
“I want to know if there was undue influence on lawmakers, decision makers and
administrators to the detriment of not only the process but the product that
the Legislature ultimately adopted,” she said. “What we need to do is retrace
steps and revisit all of this and allow for a fair debate without that undue
influence.”
Palin has asked Attorney General Talis J. Colberg and Revenue Commissioner Pat
Galvin to conduct an informal review of the process leading to adoption of the
PPT, a spokeswoman said May 8.
“That economic analysis is expected to take at least a couple of months,” said
Meghan Stapleton, Palin’s press secretary. “She is open to the idea of a
special session to discuss the PPT.”
Dems push ethics reform
A group of Democratic legislators, including Rep. Les Gara, D-Anchorage,
called May 8 for a special session of the Legislature to review the PPT. State
lawmakers need to “to fix the oil tax that passed last year,” and to close
loopholes in the law that allow $5 billion in oil company tax giveaways, Gara
said May 9.
Democratic lawmakers say they have been trying for years to clean up lax
provisions of Alaska’s ethics and campaign finance laws. Bills that would make
it a crime, for example, to promise legislators campaign contributions if they
change their votes have been blocked from passage by the Republican-led
Legislature for the past three years, they said.
However, an ethics reform package was expected to pass the Alaska Senate by
May 11, and will then return to the House for concurrence, Democratic
lawmakers said May 8.
Meanwhile, major oil industry customers of Veco said May 7 that they plan to
continue employing the company in Alaska’s oil fields in the short term and
are encouraged by the company’s promise to conduct an internal review of its
government-related practices.
xxxxxxxxxxxxxxxxxxxxxxx
Fairbanks News Miner
May 12, 2007
http://newsminer.com/2007/05/12/6972
Congress
questions BP memo
By Eric Lidji
Staff Writer
Published May 12, 2007
Congressional leaders want to know why BP is redacting part of an internal
report indicating “budget pressure” lead the oil company to discontinue
corrosion prevention programs at Prudhoe Bay.
The March report examined the causes of two leaks at Prudhoe Bay last year,
including how management decisions contributed to the incidents, and concluded
at one point that the oil company decide not to run smart pigs through North
Slope pipelines in order to save money.
Smart pigging is used to monitor corrosion in the walls of a pipeline.
Bob Malone, Chairman and President of BP America Inc., is set to testify on
Wednesday before a House subcommittee amid growing congressional concern that
cost-cutting on the North Slope led to a large oil spill last March and a
partial shutdown of the trans-Alaska oil pipeline last August.
The hearing had originally been scheduled for earlier in the month, but
committee leaders gave BP more time to prepare testimony after documents and
e-mails surfaced suggesting cost-cutting at BP kept the company from
adequately protecting several pipelines at Prudhoe Bay from corrosion.
BP officials had previously denied any role cost-cutting might have played in
the leak or the partial shutdown.
“Your own report clearly contradicts this assertion,” U.S. Rep. John Dingell,
D-Mich., who chairs the House Energy and Commerce Committee, and Rep. Bart
Stupak, D-Mich., chairman of the subcommittee on oversight and investigations,
wrote in a letter to Malone on Friday.
In meetings with congressional staff, BP officials said they planned to remove
lines from the report reading, “Budget pressure eventually led to de-scoping
some projects and deferring others. For example, the plan to run a smart pig
in the [Oil Transit Lines] was dropped in 2004 and 2005.”
BP commissioned the report from the consulting firm Booz Allen Hamilton. The
report has not been released to the public.
The Dingell/Stupak letter included several pages of e-mails from January and
February 2003 between BP employees requesting maintenance on some of the North
Slope facilities that later failed.
The e-mails suggest ConocoPhillips and Exxon Mobil Corp., who share the
Prudhoe Bay lease with BP, rejected funding for a $2.5 million pig facility at
Prudhoe Bay.
“This document suggests that BP planned to pig the very lines that ultimately
failed,” the letter said.
BP spokesman Ronnie Chappell said the company would not talk about the letter
prior to the hearing, but had been cooperative in providing information to the
subcommittee.
Contact staff writer Eric Lidji at 459-7504 or
elidji@newsminer.com.
Xxxxxxxxxxxxxxxxxxxxxxx
http://newsminer.com/2007/05/12/6971
Irwin on
hand to watch Senate vote on gas line bill
By Stefan Milkowski
Staff Writer
Published May 12, 2007
JUNEAU When the state Senate took up Gov. Sarah Palin’s natural gas pipeline
legislation Friday, Sen. Gary Wilken of Fairbanks penned a note to Natural
Resources Commissioner Tom Irwin, who came to watch the floor vote.
The essence of the note, Wilken said later, was the gulf between Friday and
last year. A year ago Thursday, then-Gov. Frank Murkowski rolled out a draft
fiscal contract hundreds of pages long for a natural gas pipeline project
with the three major North Slope producers.
Six months before, Irwin had resigned as Murkowski’s natural resources
commissioner after questioning the governor’s approach, and six months later,
Murkowski’s deal was shelved when Palin was elected.
“I just sat there and marveled how far we’ve come in a year,” Wilken said.
Local lawmakers on Friday described the passage of Palin’s Alaska Gasline
Inducement Act as a major step forward for the state, but not one without
risks.
Senate Minority Leader Gene Therriault, a North Pole Republican and key player
in last year’s gas line debate, said the five-member Republican minority,
which also includes Wilken, was pretty much on board with the legislation
since it was introduced in March. Some lawmakers had reservations, he said,
but didn’t really have a better idea to offer.
Therriault himself said he was “fairly confident” the bill would work.
“I believe we’ll get proposals,” he said.
Rep. David Guttenberg, a Fairbanks Democrat, shared Therriault’s optimism.
“It gets us closer to getting a pipeline,” he said. “The state’s taking back
control of its resources.”
Guttenberg said he expected proposals from two independent companies and a
consortium of companies.
Criticism of Palin’s bill was always subdued, but it nearly vanished Friday,
when even critics offered kind words and all but one lawmaker voted for the
House and Senate versions of the bill.
Local lawmakers attributed the near lack of dissent to Palin’s firm stance.
“She and her team played the game well,” said Guttenberg. “They stood their
ground, they got what they wanted.”
Therriault and Wilken both pointed to Palin’s threat this week to veto her own
bill if lawmakers removed the “must-have” requirements imposed on pipeline
builders, or made them optional. Therriault said he thought the real support
for the bill was more than half of each body but less than the near-unanimous
vote counts indicated.
Rep. John Coghill, a North Pole Republican, offered another view. He described
the broad support as a “vote of confidence” in the governor big enough to
overshadow lawmakers’ concerns about the bill.
“Most of us hope that it works but think that it should have been more
flexible,” he said. “I guess the question is, ‘Did we get it right?’”
Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.
xxxxxxxxxxxxxxxxxxx
Houston Chronicle
May 12, 2007
http://www.chron.com/disp/story.mpl/business/energy/4798141.html
BP takes
back part of report
Letter says budget statement may be yanked
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau
WASHINGTON BP is withdrawing part of a report that suggested cost-cutting may
have played a role in the company's pipeline troubles in Alaska's Prudhoe Bay
last summer, a House panel revealed Friday.
A March report, commissioned by BP and prepared by Booz Allen Hamilton,
examined why the oil giant failed to detect corrosion problems that caused
leaks in two major transit lines a lapse that forced BP to shut down part of
Prudhoe Bay and sent oil prices skyward.
The report said that "budget pressure" led to deferring of some projects.
It said a plan to run a "smart pig," a device used to test the thickness of a
pipeline wall to check for possible corrosion, through an oil transit line
"was dropped in 2004 and 2005."
In a letter to Robert Malone, president of Houston-based BP America Friday,
officials from the House Energy and Commerce Committee said that statement
might be removed from the report "since BP believes this to be in error."
Committee Chairman John Dingell, and Rep. Bart Stupak, both D-Mich., head of
the Oversight and Investigations Subcommittee, told Malone they want a full
explanation as to why BP and the report's authors believe that information was
inaccurate. Malone is scheduled to appear before the subcommittee Wednesday.
BP spokesman Ronnie Chappell declined to comment Friday. "We're cooperating
with the committee, doing what we can to provide them with what they've asked
for," Chappell said. "We look forward to answering questions from the
subcommittee on Wednesday."
david.ivanovich@chron.com
xxxxxxxxxxxxxxxxxxxxxxx
Wall Street Journal
May 12, 2007
House Committee
Probes Possibility
Of BP Cost Cuts Behind Oil Spill
By JIM CARLTON
May 11, 2007 8:36 p.m.
House investigators looking into two spills that ended up shutting down
Alaska's Prudhoe Bay oil field last year have sent a letter to the field's
operator, BP PLC, asking for more explanation of a finding in a consultant's
report that the incidents were preceded by budget cuts to maintenance and
inspection of pipelines.
The letter was sent Friday by officials of the House Committee on Energy and
Commerce, who are set to begin another hearing next Wednesday into why the
spills happened. Although officials have found corrosion led to a spill of
about 200,000 gallons of crude from a pipe in March 2006, and a smaller spill
from another line in August, the House investigators are looking into whether
cost cuts made the lines more prone to rupture.
The Prudhoe Bay field was temporarily shut down by BP after tests by the
company following the second spill showed widespread corrosion problems in
other pipelines in the vicinity. Production resumed after the lines were
replaced.
One of the consultants hired by BP to help it investigate the incidents was
Booz Allen Hamilton, a McLean, Va.-based firm whose March 2007 report on file
with the House committee suggests: "Budget pressure eventually led to
de-scoping some projects and deferring others. For example, the plan to run a
"smart pig" in the OTL (oil transit lines, which were the ones that ruptured)
was dropped in 2004 and 2005. A smart pig is a device that runs through a
pipeline, taking measurements to see if the line suffers from corrosion or
other defects.
In their letter to Robert Malone, chairman and president of BP's BP America
Inc. unit, John Dingell, chairman of the House energy committee, and Bart
Stupak, chairman of its subcommittee on oversight and investigations, said the
finding contradicts BP's previously-stated assertion that failure to pig these
lines was not a function of any budget pressure.
The congressmen also noted that BP has asked that the reference to cost
cutting be removed from the Booz Allen report, calling it "in error." "If the
sentence is removed, we would appreciate a full explanation as to why BP and
the report's authors believe the sentence to be inaccurate," said the two
Michigan Democrats in their letter.
The congressmen also disclosed in the letter that they had recently uncovered
a Feb. 5, 2003, email from BP which they say suggests the company planned to
pig the very lines that failed. However, they said, those plans appear to have
been nixed by superiors. The email contains an "Authorization for Expenditure"
that the congressmen said appears to be a proposal to "install permanent pig
launching and receiving facilities" in several places, including transit lines
where the spills later took place. But the expense request appears to have
been turned down, they added, since it included a notation: "rejected...for
approval."
BP officials declined comment, saying those were "matters of interest" at
Wednesday's hearing. Booz Allen officials weren't immediately available.
Cost cutting has also been brought up as a possible link to a March 2005
explosion at a BP refinery in Texas City, Texas. BP officials have said they
believe budgetary decisions didn't play a critical role in the accident, which
killed 15 people and injured 180.
Write to Jim Carlton at
jim.carlton@wsj.com
Xxxxxxxxxxxxxxxxxxxxxx
US Lawmakers
Probe BP On Prudhoe Bay Report Ahead Of Hearing
DOW JONES NEWSWIRES
May 11, 2007 6:33 p.m.
By Ian Talley
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Congressional lawmakers on Friday asked BP PLC (BP) to
explain why it wants to remove language from a report on last year's Alaskan
Prudhoe Bay shutdown which may reveal that budget pressures led the company to
put off pipeline maintenance that may have prevented the fiasco.
Earlier this week, BP officials told House Energy and Commerce Committee aides
in a meeting the company planned to edit a BP-commissioned Booz Allen Hamilton
report on the shutdown, which temporarily halted operations at one of the
country's largest producing oil fields.
The meeting was to prepare for a hearing scheduled on Wednesday, when members
of the Energy and Commerce Subcommittee on Oversight and Investigations are
expected to grill the head of BP USA, Robert Malone, on the cause of the
shutdown. Last year, BP faced a barrage of criticism and questioning from
Senate and House panels investigating the incident, but lawmakers said they
were dissatisfied with BP's answers and wanted more information.
House Energy and Commerce Chairman John Dingell, D-Michigan, asked BP in a
letter to explain why it's seeking to edit a section that said: "Budget
pressure eventually led to de-scoping some projects and deferring others,"
including key maintenance that investigators later said could have prevented
the pipeline leaks. In particular, the company failed to "pig" its oil transit
lines, allowing bacteria known to cause severe metal corrosion to build up
inside the pipes. A pipeline "pig" is a cylindrical droid that sweeps the
pipe's interior.
BP commissioned the Booz Allen Hamilton report to examine last year's two oil
leak incidents on the Prudhoe Bay Oil Transit Lines - one of which led to the
shutdown - and to identify organizational, process, management, and governance
issues that may have contributed to the leaks.
"The Committee is very interested in finding out why the (oil transit) lines
were not pigged with greater frequency, given that BP has maintained that the
failure to pig these lines was not a function of budget pressure or resources.
Your own report clearly contradicts this assertion," Dingellwrote in a letter
to BP.
Budget cuts were also said to be a prime cause of BP's 2005 Texas City
refinery explosion that killed 15 people, according to a Chemical Safety and
Hazard Investigation Board probe.
Dingell'sletter also queried BP about an email that showed a request for
maintenance at one of the pipelines was rejected, causing a major leak.
The request stated: "Maintenance pigging is required to optimize existing
corrosion control programs...(and) will also eliminate flow restrictions
present from sediment and fouling within the pipelines. Intelligent pigging is
required to provide a full evaluation of current pipeline condition to ensure
pipeline integrity and meet regulatory requirements."
BP spokesman Ronnie Chappell declined comment for now. "We're not going to be
commenting on matters of interest to the subcommittee until after the
hearing," Chappell said. He added that BP would continue to cooperate with
committee staff and requests for information.
-By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com;
Xxxxxxxxxxxxxxxxxxxxxxx
Alaska
Legislature OKs Bill Clearing Way For Gas Pipeline
DOW JONES NEWSWIRES
May 11, 2007 4:49 p.m.
JUNEAU, Alaska (AP)--Both houses of the Alaska Legislature Friday approved
bills outlining how companies can bid to build a multibillion-dollar natural
gas project.
The bill, called the Alaska Gasline Inducement Act or AGIA, will now go to a
committee to work out differences in the House and Senate versions.
Under AGIA, producers and independent pipeline companies can vie for rights to
build the pipeline that lawmakers hope will ship trillions of cubic feet of
North Slope natural gas to market.
The bill is designed to stimulate competition through inducements, but also
stipulates requirements that BP PLC (BP), Exxon Mobil Corp. (XOM) and
ConocoPhillips (COP) opposed.
The three major oil companies had warned they would not submit a bid unless
stringent requirements were removed.
Xxxxxxxxxxxxxxxxxxxxxxxxxxx
Regulator
Recommended Fine On BP West Texas Pipeline - Filing
DOW JONES NEWSWIRES
May 11, 2007 12:47 p.m.
LONDON (Dow Jones)--A U.S. regulator recommended in February that BP PLC (BP)
be fined $168,000 for apparent violations of anti-corrosion measures at a
Texas pipeline system, which the U.K. oil firm is in the process of divesting,
according to a filing on the watchdog's Web site.
The proposed penalty is a tiny amount compared to BP's $22 billion net profit
for 2006. But, taken in conjunction with the fatal refinery explosion at a
company facility also in Texas in 2005, and separate corrosion issues at an
Alaska pipeline, it is another indication of the extent of operational issues
new Chief Executive Tony Hayward will have to address.
Two weeks ago, BP agreed to divest the pipeline on which the fine has been
recommended, the West Texas Pipeline System, to Occidental Petroleum Corp.
(OXY).
In a notice of probable violation dated Feb. 13, the Pipeline and Hazardous
Materials Safety Administration said inspections in 2004 and 2005 revealed a
series of "probable" violations, including lack of protection against
vandalism and insufficient monitoring of corrosion risks.
The regulator mentioned "coating that was failing or had failed and was
leaving the pipe or tank top susceptible to external corrosion," adding that
the components' "integrity could be compromised" as a result.
The notice also included a compliance order asking BP to correct the issues
and to submit to the regulator details of the spending made to resolve the
problem.
Asked if the regulatory issues had been a factor in the decision to sell the
pipeline, a BP spokeswoman said it was not "a fire sale" and the sale was part
of a strategy to divest non-core assets.
A BP spokesman said he didn't know the status of the proposed penalty but
added that it had been "disclosed to the buyer." Asked if Occidental may have
to pay the fine, a spokesman for the U.S. oil company said: "The issues you
raised are not the responsibility of (Occidental) and should be addressed to
BP."
The Pipeline and Hazardous Materials Safety Administration didn't return a
call from Dow Jones Newswires Friday.
The 2,300-mile-long West Texas Pipeline System extends from the Permian oil
production basin in West Texas and New Mexico to a market center in Cushing,
Oklahoma, and has the capacity to transport 191,000 barrels per day of crude
oil.
The proposed penalty also concerns the East System pipeline in Oklahoma and a
Seaway Products System in Oklahoma and Texas, but the BP spokesman couldn't
say if these were among the facilities divested to Occidental.
Hayward stepped in at the helm of BP last week after his predecessor, John
Browne, resigned after losing a court injunction to stop publication of a
story about his private life. The new chief executive held his first board
meeting in Washington Thursday, another BP spokesman said.
Company Web site:
http://www.bp.com
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com
xxxxxxxxxxxxxxxxxxxxx
Financial Times
May 12, 2007
http://www.ft.com/cms/s/660067a0-0018-11dc-8c98-000b5df10621.html
Congress
takes BP to task over Alaska report
By Sheila McNulty in Houston
Published: May 12 2007 01:24 |
Last updated: May 12 2007 01:24
US congressional investigators questioned on Friday why BP sought to cut from an
internal report a charge that budget pressures forced a rollback on
anti-corrosion efforts in Alaska.
Bart Stupak, chairman of a House energy investigative subcommittee, asked BP to
provide a full explanation for plans to remove the charge and provide supporting
documents.
BP was forced in 2006 to shut half its Alaskan oilfield after a big spill and
the discovery of “severe corrosion’’ in its oil transit lines.
The committee is investigating the corrosion following a string of safety lapses
in BP’s US operations.
A recent Booz Allen Hamilton report commissioned by BP said: “Budget pressure
eventually led to de-scoping some projects and deferring others.’’ It noted, for
example, that plans to run a “smart pig’’ a machine that runs through a
pipeline to detect corrosion was cancelled in 2004 and 2005.
Mr Stupak, in a letter to Bob Malone, BP America president, noted that on May 9,
BP staff told the committee investigators there would be a substantive
correction to the March 2007 Booz Allen report.
The committee is to hold a hearing on BP’s Alaska operations on Wednesday.
Ahead of that meeting, the committee noted, BP had provided it with a 2003 BP
e-mail, which noted that an authorisation for anti-corrosion expenditures was
“rejected by partners for approval”.
“This document suggests that BP planned to pig the very lines that ultimately
failed,’” Mr Stupak said.
He said his committee had worked with BP to understand what happened in BP’s
Alaska operations ahead of the field closure but “is not satisfied with BP’s
explanation.’’
Mr Stupak called on BP to explain before the hearing why it believed the
sentence on budgetary pressures in the Booz Allen report was in error and
provide all supporting materials.
BP declined to comment on Mr Stupak’s letter.
xxxxxxxxxxxxxxxxxxxxx
Wall Street Journal
May 11, 2007
Lawyers Ask
Alaska Court To Take Heed Of BP Ex-CEO's 'Lie'
DOW JONES NEWSWIRES
May 11, 2007 7:30 a.m.
(This article was originally published Thursday)
LONDON (Dow Jones)--Attorneys for shareholders suing BP PLC's (BP) executives
and board members have asked an Alaska court to take heed of former BP Chief
Executive John Browne's false statement under oath in a separate case in the
U.K.
Browne resigned May 1 after making a false statement to a U.K. court on how he
had met his former partner. The entering of the U.K. court proceedings into
the Alaska court record show that what Browne called his "untruth" could have
implications in other court cases involving former and current executives of
the U.K.-headquartered international oil company. Patrick Daniels, a lawyer
with Lerach Coughlin Stoia Geller Rudman & Robbins LLP, lead counsel for the
plaintiffs in the U.S. shareholder lawsuit, said in an interview that Browne's
U.K. court proceedings had been entered into the Alaska court record.
A "notice of recent events," dated on the day Browne resigned, says: "This
(U.S.) court too should take heed of the English judge's admonishments not to
take Browne's defenses 'at face value.'" The document, filed to the court in
Anchorage, cites U.K. Judge David Eady as saying Browne's "white lie"
undermined his "credibility."
Eady decided not to recommend perjury charges to the U.K. attorney general.
But Peter Wright, editor of the Mail on Sunday, reiterated Thursday that the
newspaper intends to provide evidence of the false statement to U.K. judicial
authorities. The Mail's request to publish a story involving Browne's former
partner triggered the U.K. court action. Browne has publicly apologized for
his "untruths."
John Warden, a lawyer with Sullivan & Cromwell LLP which represents Browne in
the case, said he wouldn't comment on the U.K. proceedings and said the U.S.
lawsuit "has nothing to do with (Browne's) personal life."
He referred to a response filed with the Alaska court on May 7, by his firm
and another attorney for the defense, Feldman Orlansky & Sanders. The document
says that "plaintiffs' attempt to present Browne's recent personal problems -
including a single false statement made from embarrassment and then rectracted
- as bearing on the motions before the court is an act of desesperation."
In October, two BP shareholders, the London Pensions Fund Authority, or LPFA,
and the U.S. retirement fund of Unite Here sued Browne and other BP executives
and board members in an Anchorage, Alaska, court, alleging their mismanagement
had damaged the company. The claim stems from a deadly Texas City, Texas,
refinery blast in 2005 and a partial shutdown of an Alaska pipeline last year.
In February, attorneys for the plaintiffs filed a motion asking the Alaska
court to freeze Browne's current retirement package and other compensation and
are awaiting a decision on the matter. Attorneys for the plaintiffs are
seeking a freeze as a first step in attempting to require BP to reassess
Browne's retirement package.
But in their response, defense attorneys said "Browne's resignation and loss
of his severance package lends additional support for denial of the motion."
Daniels, one of the plaintiff's lawyers, said he believes that Browne's
admission that he made a false statement under oath "is a major factor that
undermines his credibility and the company's earlier statements, to the extent
they came from him."
A BP spokesman declined to comment on the grounds that the case is ongoing,
and Browne's spokespeople didn't return calls.
Daniels said the lie is "yet another blow to BP" and, added to the Texas and
Alaska incidents, "undermine his credibility and the company's defense of his
actions and policies."
The "notice of recent events" filed with the Alaska court also included April
30 congressional records regarding cost-cutting measures in Alaska,
underscoring how plaintiffs suing BP executives may attempt to gain new
ammunition as more information is disclosed about the company's management
during Browne's tenure.
The Alaska court conducted a hearing April 24 on the plaintiffs' motion to
freeze Browne's retirement pay, and Daniels said a decision by a judge was
expected "any day."
Daniels said Browne, whose testimony was sought in lawsuits by victims of the
Texas refinery explosion, would also be asked by plaintiffs to appear in the
Alaska court for the shareholders' lawsuit.
"We will be seeking sworn testimonies from Browne, who now has lots of free
time, and other executives," Daniels said.
But Warden said defense attorneys had moved to dismiss the case and that the
Alaska case "is not at the stage of trial and it may never be."
About new BP CEO Tony Hayward, Daniels said: "I reserve my judgment on
Hayward. The market's reaction indicates he is starting to confront the
problems, and cleaning the house."
The issue of lying in court also appears to have impacted Browne's future
beyond BP. Browne resigned Thursday from his board-member position at Goldman
Sachs Group Inc. (GS). A person familiar with the resignation said he
voluntarily offered to leave and that the departure was directly linked to the
false statement.
Company Web site:
http://www.bp.com
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266;
benoit.faucon@dowjones.com
xxxxxxxxxxxxxxxxxx
CNN. Com
May 9, 2007
http://money.cnn.com/2007/05/09/news/international/bc.bp.alaska.reut/?postversion=2007050917
BP
blames execs, cost cuts for oil spills
The oil company is said
to have issued two reports on the cause of one of the worst onshore spills in
Alaska, echoing investigation into Texas refinery explosion.
May 9 2007: 5:01 PM EDT
NEW YORK (Reuters) -- Two reports on the cause of one of Alaska's worst
onshore oil spills, commissioned by BP Plc, blame the oil company's cost
cutting and management culture for the accident, people familiar with the
reports said.
The reports come after a U.S. congressional committee said documents turned
over by BP suggest "draconian" cost cutting at the British company's Alaska
operations led to the March 2006 rupture of a corroded oil pipeline at Prudhoe
Bay, spilling at least 200,000 gallons of crude oil onto the Arctic tundra.
In March 2006, at least 200,000 gallons of crude oil spilled onto the Arctic
tundra after the rupture of a corroded oil pipeline at Prudhoe Bay, Alaska.
Video More video
"The reports speak to the fact that top-down cost cutting was going on without
any risk analysis," said a congressional aide familiar with the documents.
The reports, along with BP (Charts) documents and e-mails describing
cost-cutting scenarios in Alaska, are expected to be the focus of a
congressional hearing set for next Wednesday.
"We don't plan to release the report until we've had an opportunity to meet
the members of the committee and discuss their contents with them," said BP
spokesman Ronnie Chappell.
Cost cutting
Sources said the two reports echo a government report and a separate
internal BP probe into a 2005 fatal explosion at BP's refinery in Texas City,
Texas, and support those who reject BP's claim that Texas City and Alaska were
isolated incidents and not symptoms of bigger problems within the company.
Both reports cited BP's cost-cutting culture and focus on profits as
instrumental in the Texas blast, which killed 15 workers and injured 170
others.
"It looks really similar to Texas City," said a source who has seen copies of
the Alaska reports and the Texas City studies.
"There are a lot of the same types of spreadsheets with the same stuff, the
same kind of e-mails."
One study, prepared by CC Technologies, an engineering firm specializing in
pipeline corrosion control, said BP's maintenance practices, particularly its
failure regularly to flush out sediment inside the transit pipeline at the
Prudhoe Bay oil field, allowed corrosive bacteria, which caused the spill, to
thrive, a BP Alaska spokesman confirmed.
"The sediment was certainly a contributing factor, as well as the slow flow of
oil through the pipe," BP spokesman Daren Beaudo said.
CEO at BP steps down
The sediment in the pipeline shielded the bacteria from
corrosion-preventing chemicals injected by BP into the pipeline and also
allowed water spilled into the pipeline during plant upsets to accumulate, the
report said.
BP had not used a device called a pig to clean the inside of the transit
pipeline since 1998, a practice criticized by federal regulators as differing
from industry standards.
Alaska state records show BP had known for years that sediment was building up
in the pipelines.
The second report, an examination of BP's U.S. management by consulting firm
Booz Allen Hamilton, said deep cost cuts imposed after BP bought U.S. rivals
Amoco and ARCO damaged operational oversight, leading to a poor understanding
of the risks created by the cuts and directly contributing to a complacent
attitude toward corrosion in Alaska, several people who had seen the report
said.
"It is pretty comprehensive. It recommends a lot of changes to the way BP
manages its business here and the way it thinks about risks," one source said.
BP already has begun overhauling its U.S. management structure to improve
operational controls. The new BP America chief executive, Bob Malone, has more
authority over operations, and he has appointed managers who are to ensure
operating units comply with BP's corporate policies.
The company has also recruited a Royal Dutch Shell (Charts) refinery manager
to run Texas City as well as replacing several top officials at BP Alaska,
including the unit's chief executive and the head of the Prudhoe Bay field.
xxxxxxxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 9, 2007
http://www.adn.com/news/politics/fbi/story/8868045p-8768681c.html
Here is
the text of Rep. Vic Kohring's federal indictment
Published: May 9, 2007
Last Modified: May 9, 2007 at 04:51 AM
INDICTMENT
The GRAND JURY charges that:
COUNT ONE
CONSPIRACY TO COMMIT
EXTORTION AND ATTEMPTED
EXTORTION UNDER COLOR OF OFFICIAL RIGHT AND BRIBERY
(18 U.S.C. 371)
INTRODUCTION
At all times material to this Indictment:
1. VICTOR H. KOHRING ("KOHRING") was an elected member of the Alaska House
of Representatives, having been first elected in 1994. KOHRING represented
District 14, located in Wasilla and the Matanuska-Susitna Valley, northeast of
Anchorage. He was reelected to the House in November 2006. Since in or about
2003, KOHRING has been Chair of the House Special Committee on Oil and Gas.
2. A company known to the grand jury but unnamed (hereinafter referred to as
"COMPANY A") was a privately held company that was incorporated in a State
other than the State of Alaska. COMPANY A was a multinational corporation that
provided services to the energy, resource, and process industries and to the
public sector. COMPANY A was comprised of multiple subsidiary companies and,
collectively, COMPANY A was engaged in interstate commerce in connection with
the foregoing projects.
3. At various times, the Alaska State Legislature had issues and matters under
consideration that had a business impact on COMPANY A. Therefore, COMPANY A
and its principals took an active interest in the Alaska State Legislature's
consideration of those issues and matters.
4. "COMPANY CEO" was the Chief Executive Officer and principal owner of
COMPANY A.
5. "COMPANY VP" was the Vice President of Community and Government Affairs of
COMPANY A.
ALASKA'S INTRA-STATE NATURAL
GAS PIPELINE PROPOSAL
6. Beginning in or around 2005, the State of Alaska was involved in
negotiations with representatives of three oil companies (collectively, the
"oil producers") concerning the construction of a natural gas pipeline from
Alaska's North Slope. The agreement to build the proposed gas pipeline must
ultimately be approved by the Alaska State Legislature.
7. The construction of the gas pipeline was important to COMPANY A. COMPANY A
was primarily an oil field services company, and a significant source of
COMPANY A's income was derived from contracts with the oil producers in
Alaska.
8. On or about February 21, 2006, the Governor of the State of Alaska
(hereinafter "Governor") announced that the state had reached an agreement
with the primary oil producers regarding the construction of a gas pipeline.
The terms of the agreement concerning construction of the pipeline were not
announced or released at that time. Instead, the Governor announced that the
agreement with the oil producers included a provision that addressed a
significant change to the manner in which the State of Alaska taxes oil
production. If the Alaska State Legislature did not approve the proposed
change in the manner in which oil production was taxed by the state, then the
agreement concerning construction of the gas pipeline would not take effect.
9. Shortly after that announcement, the Governor's administration proposed
legislation relating to the negotiated change in the taxation of oil
production. The newly proposed tax system -- referred to as a "petroleum
production tax" or "PPT" -- would be based upon a percentage of the producer's
net profits, or revenues minus capital and operating expenditures. Under the
proposed system agreed to by the state, the producers would pay a 20 percent
tax rate and receive a 20 percent tradable tax credit. The negotiated tax
formula -- referred to generally as the "20/20" PPT tax rate -- was the
subject of much debate throughout the 2006 regular and special sessions of the
Alaska State Legislature.
THE CONSPIRACY AND ITS
OBJECTS
10. From in or about January 2006 and continuing until in or about August
2006, in the District of Alaska and elsewhere, the defendant, VICTOR H.
KOHRING, an elected public official of the Alaska State Legislature, together
with COMPANY CEO, COMPANY VP, and others both known and unknown to the grand
jury, did knowingly and willfully combine, conspire, confederate, and agree
together and with each other:
(A) to obstruct, delay, and affect in any way and degree commerce and the
movement of any article and commodity in commerce by extortion, that is, to
unlawfully obtain or attempt to obtain under color of official right money or
other property from COMPANY A, COMPANY CEO, and COMPANY VP with their consent
for KOHRING not due KOHRING or his office in agreement for the performance of
official acts, in violation of Title 18, United States Code, Section 1951(a);
and
(B) to corruptly solicit and demand for the benefit of any person, and accept
and agree to accept, anything of value from any person for KOHRING while an
agent for the State of Alaska, an entity that received more than $10,000 in
federal funding during the calendar year 2006, with the intent that KOHRING
would be influenced and rewarded in connection with any business, transaction
or series of transactions of $5,000 or more of the State of Alaska, in
violation of Title 18, United States Code, Section 666(a)(1)(B).
11. It was an object of the conspiracy for KOHRING to receive and attempt to
receive money and other things of value in exchange for agreeing to perform,
and ultimately performing and attempting to perform, official acts as a member
of the Alaska State Legislature for the purpose of enriching himself and his
family members.
12. It was a further object of the conspiracy for KOHRING to enrich COMPANY
CEO, COMPANY VP, and COMPANY A and advance the business interests of COMPANY A
within the State of Alaska by agreeing to perform, and ultimately performing
and attempting to perform, official acts as a member of the Alaska State
Legislature that would benefit COMPANY A and its clients.
13. It was a further object of the conspiracy to conceal from the State of
Alaska and its citizens the true nature and source of the monetary payments
and other financial benefits that KOHRING received and attempted to receive
from COMPANY CEO, COMPANY VP, and COMPANY A, in exchange for KOHRING's
agreement to perform, and eventual performance and attempted performance of,
official acts as a member of the Alaska State Legislature that would benefit
COMPANY A and its clients.
MANNER AND MEANS OF THE CONSPIRACY
14. KOHRING and his co-conspirators executed the conspiracy by agreeing to
provide KOHRING with money and other things of value, including, without
limitation, a job with COMPANY A for one of KOHRING's relatives, in return for
KOHRING taking official acts as directed by executives of COMPANY A. KOHRING
received and attempted to receive these cash payments and other things of
value through meetings with COMPANY CEO and COMPANY VP in, among other places,
Suite 604 of the Westmark Baranof Juneau Hotel ("Suite 604"), and through
numerous telephone calls with COMPANY VP.
15 In return for the money and other things of value that KOHRING received and
attempted to receive for himself and his family, KOHRING agreed to perform,
attempted to perform, and actually performed official acts as a member of the
Alaska State Legislature that benefitted COMPANY CEO, COMPANY VP, and COMPANY
A and its clients. Among other things and without limitation, KOHRING
performed the following acts to execute the conspiratorial agreement: (1)
voting in favor of versions of the PPT bill supported by COMPANY CEO, COMPANY
VP, COMPANY A, and the oil producers; (2) lobbying other elected public
officials to support versions of PPT bill that COMPANY CEO, COMPANY VP,
COMPANY A, and the oil producers favored; and (3) repeatedly offering to
assist and help COMPANY CEO, COMPANY VP, and COMPANY A by providing official
support for the natural gas pipeline legislation and the PPT bill.
OVERT ACTS
16. In furtherance of the conspiracy, and to effect its objects, the
co-conspirators committed the following overt acts, among others, in the
District of Alaska and elsewhere:
17. Between in or about January 2006 and in or about August 2006, KOHRING
received approximately $500 in cash from COMPANY CEO while walking with
COMPANY CEO from a Juneau restaurant to Suite 604.
18. On or about January 28, 2006, KOHRING told COMPANY VP during a telephone
conversation that he was standing by "willing to help if there's any issues
that come along. ..." KOHRING then asked COMPANY VP if there were any
legislative issues that were of a concern to COMPANY VP and of which KOHRING
should be aware.
19. On or about January 28, 2006, during the same telephone conversation and
after KOHRING asked about COMPANY VP's legislative concerns, COMPANY VP told
KOHRING that COMPANY A was closely monitoring the PPT bill and the gas
pipeline legislation, that a "big part of (COMPANY A's) future (was) sitting
on these issues," and that COMPANY A did not want to "kill the goose." KOHRING
agreed with COMPANY VP that the PPT bill and the gas pipeline legislation, if
passed, would end up being the centerpiece of Alaska's economy.
20. On or about January 28, 2006, during the same telephone conversation,
KOHRING told COMPANY VP that he should contact KOHRING for any need or issue
upon which KOHRING could provide assistance.
21. On or about February 21, 2006, during a telephone conversation with
COMPANY VP and after COMPANY VP warned KOHRING not to use the PPT tax bill as
an opportunity "to go crazy" or "wacko" by asserting an extreme anti-tax
position, KOHRING told COMPANY VP that he would "reluctantly go along" with
the 20/20 PPT tax rate, but only if that rate was "amenable" to COMPANY A and
the oil producers. KOHRING further stated that he did not want to "screw you
guys over nothing" and "hurt you guys."
22. On or about February 21, 2006, during the same telephone conversation with
COMPANY VP and after COMPANY VP told KOHRING that the gas pipeline was
"critical to (COMPANY A's) equation," KOHRING told COMPANY VP that he was
willing to help COMPANY A "in terms of uh, any questions that need to be
asked, any information that needs to be sought out, any points to make in
caucus, or in committee meetings, on radio columns. ..."
23. On or about February 23, 2006, during a dinner meeting attended by COMPANY
CEO, COMPANY VP, and KOHRING, KOHRING received approximately $1,000 in cash
from COMPANY CEO.
24. On or about March 1, 2006, in a telephone conversation a week after having
accepted $1,000 in cash from COMPANY CEO, KOHRING asked COMPANY VP to contact
KOHRING if he could provide assistance on any legislative matter or implement
any strategy on behalf of COMPANY A.
25. On or about March 4, 2006, while discussing in Suite 604 the importance of
the proposed gas pipeline legislation, COMPANY CEO told COMPANY VP that he had
just given "a thousand" to KOHRING and that, as a result of the payment,
KOHRING "would kiss our ass."
26. On or about March 19, 2006, KOHRING called COMPANY VP to follow up on
COMPANY VP's suggestion that KOHRING's "(relative) consider, uh, possibly
doing an internship program through (COMPANY A). ..."
27. On or about March 21, 2006, KOHRING -- after telling COMPANY VP in a
voicemail that he had "personally delivered" an envelope to COMPANY VP's hotel
suite that contained, among other things, the resume of KOHRING's relative --
told COMPANY VP to call any time KOHRING could be "of assistance in any
issue," and that "my door is open here so feel free to call any time."
28. On or about March 22, 2006, KOHRING told COMPANY VP that he was calling to
offer his services to COMPANY VP and COMPANY CEO, that he can "be an
information source" for COMPANY VP and COMPANY CEO, that he would "lobby on
(their) behalf," and that he would "consider modifications to legislation or
whatever" if COMPANY VP or COMPANY CEO wanted them.
29. On or about March 24, 2006, KOHRING told COMPANY VP during a telephone
conversation that he "stand(s) by" to "do anything to help," that he would
continue to advocate "good things for you guys," including the gas pipeline,
and asked COMPANY VP to tell COMPANY CEO that KOHRING is "doing what (he) can
to help out."
30. On or about March 29, 2006, KOHRING told COMPANY VP during a telephone
conversation that he wanted to meet with COMPANY VP and COMPANY CEO to discuss
"a relatively serious matter" that was of "fairly significant importance to (KOHRING)."
31. On or about March 30, 2006, during a conversation in Suite 604, KOHRING
told COMPANY CEO and COMPANY VP that he had a "personal financial matter" that
"potentially could hurt me politically."
32. On or about March 30, 2006, during the same conversation in Suite 604,
KOHRING told COMPANY CEO and COMPANY VP that he owed $17,000 on a credit card
that was in collection, that he was being pressed to pay the debt, and that he
did not have the financial means to pay the debt.
33. On or about March 30, 2006, during the same conversation in Suite 604,
KOHRING asked COMPANY CEO and COMPANY VP about the possibility of receiving a
job or some sort of work with COMPANY A or securing a $17,000 loan with
COMPANY CEO.
34. On or about March 30, 2006, in the same conversation in Suite 604 and
after KOHRING, COMPANY CEO, and COMPANY VP initially mentioned that the
$17,000 loan would have to be "above board," they then discussed at length how
the transaction would have to be quietly structured to avoid any "red flags"
with the Alaska Public Offices Commission ("APOC") or public and personal
embarrassment for KOHRING; that KOHRING would have to be discreet about the
loan; and that KOHRING should not even mention the loan hypothetically to APOC
to avoid drawing unwanted attention to KOHRING, COMPANY CEO, and COMPANY A.
35. On or about March 30, 2006 -- during the same conversation in Suite 604
and shortly after KOHRING had asked COMPANY CEO and COMPANY VP for the $17,000
loan -- KOHRING began to discuss his family and his financial condition.
COMPANY CEO then asked COMPANY VP if he had any "hundreds." COMPANY VP
retrieved his wallet from a pants pocket, pulled out multiple bills of
currency, and then handed at least $100 in cash to COMPANY CEO who, in turn,
passed the money to KOHRING.
36. On or about March 30, 2006, during the same conversation in Suite 604,
KOHRING took the cash that COMPANY CEO handed him, thanked CEO, and shook
CEO's hand.
37. On or about March 30, 2006, during the same conversation in Suite 604 and
after receiving the prior cash payment described above, KOHRING again
mentioned his family and his financial condition. Immediately thereafter,
KOHRING accepted a second handful of cash, totaling approximately $500 to
$1,000, from COMPANY CEO, who had handed the cash to KOHRING.
38. On or about March 30, 2006, during the same conversation in Suite 604,
KOHRING took the second handful of cash from COMPANY CEO, thanked COMPANY CEO
again, and shook his hand.
39. On or about March 30, 2006, during the same conversation in Suite 604,
KOHRING, immediately after receiving the cash payments from COMPANY CEO and
COMPANY VP, made the following statements to COMPANY CEO:
KOHRING: What can I do at this point to help you guys? Anything?
COMPANY CEO: Whatever you, you know, uh, uh -
KOHRING: Just keep lobbying my colleagues for the Governor's plan, right?
40. On or about March 30, 2006, during the same conversation in Suite 604,
after receiving the two cash payments described above, KOHRING discussed with
COMPANY CEO and COMPANY VP his relationship with a number of legislators and
told COMPANY CEO that "my first effort will be to figure out where they are at
and then, secondly, I'll politely and gently as carefully as I can influence
them in a positive way to see that the Governor's bill is the vehicle they
consider."
41. On or about March 31, 2006, on the day after the cash payments in Suite
604, KOHRING left a telephone message for COMPANY VP in which he told COMPANY
VP that there were a couple of important issues before the legislature
regarding the natural gas pipeline legislation, provided a status update to
COMPANY VP regarding the PPT bill, and stated that he was in the process of
meeting with members of the House Finance Committee to lobby them regarding
the version of the PPT bill favored by COMPANY CEO, COMPANY VP, COMPANY A, and
the oil producers.
42. On or about March 31, 2006, KOHRING met with a state legislator and
attempted to persuade that state legislator to support the PPT bill.
43. On or about March 3l, 2006, KOHRING told COMPANY VP during a telephone
conversation that he was lobbying strenuously for passage of the PPT bill,
knew that passage of the PPT bill was very important to COMPANY A, was
scheduling appointments to meet with members of the House Finance Committee,
had lobbied the state legislator referenced above, and would continue to lobby
his legislative colleagues to the best of his ability and provide periodic
status reports to COMPANY VP.
44. On or about April 20, 2006, in a telephone conversation after KOHRING had
learned from COMPANY VP that COMPANY A had hired KOHRING's relative, KOHRING
thanked COMPANY VP and told COMPANY VP to contact KOHRING if he needed
legislative assistance.
45. On or about April 20, 2006, KOHRING asked COMPANY VP during a telephone
conversation if he could meet COMPANY VP in Suite 604 to personally thank
COMPANY VP and COMPANY CEO for the job for his relative and for being "so good
to me over the years."
46. On or about August 23, 2006, KOHRING told COMPANY VP during a telephone
conversation that his relative was able to "pocket or bank about $3,000 or so"
as a result of his COMPANY A job. All in violation of Title 18, United States
Code, Section 371.
COUNT TWO
INTERFERENCE WITH
COMMERCE BY EXTORTION
INDUCED UNDER COLOR
OF OFFICIAL RIGHT (18 U.S.C. § 1951(a) and § 2)
47. Paragraphs I through 9 and 16 through 46 of Count One are realleged
and incorporated by reference as though fully set forth herein.
48. Between in or about January 2006 and in or about August 2006, in the
District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING, an elected
member of the Alaska State Legislature, did knowingly obstruct, delay, and
affect commerce and the movement of any article and commodity in commerce by
extortion, as those terms are defined in Title 18, United States Code, Section
1951; that is, KOHRING unlawfully obtained from COMPANY CEO and COMPANY VP,
with their consent under color of official right, a series of cash payments
totaling approximately $2,100 to $2,600 and a $3,000 job for a relative of
KOHRING, all of which were not due KOHRING or his office, in agreement that
KOHRING would perform official acts in exchange for these money payments and
property from COMPANY CEO and COMPANY VP. All in violation of Title 18, United
States Code, Sections 1951(a) and 2.
COUNT THREE
ATTEMPTED INTERFERENCE WITH COMMERCE BY EXTORTION INDUCED UNDER COLOR OF
OFFICIAL RIGHT
(18 U.S.C. § 1951(a) and § 2)
49. Paragraphs I through 9 and 16 through 46 of Count One are realleged
and incorporated by reference as though fully set forth herein.
50. Between in or about March 2006 and in or about August 2006, in the
District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING, an elected
member of the Alaska State Legislature, did knowingly attempt to obstruct,
delay, and affect commerce and the movement of any article and commodity in
commerce by extortion, as those terms are defined in Title 18, United States
Code, Section 1951; that is, KOHRING attempted to unlawfully obtain from
COMPANY CEO and COMPANY VP, with their consent under color of official right,
a $17,000 loan not due KOHRING or his office in agreement that KOHRING would
perform official acts in exchange for the monetary payments from COMPANY CEO
and COMPANY VP.
All in violation of Title 18, United States Code, Sections 1951(a) and 2.
COUNT FOUR
BRIBERY CONCERNING PROGRAMS RECEIVING FEDERAL FUNDS (18 U.S.C. § 666(a)(1)(B)
and § 2)
51. Paragraphs 1 through 9 and 16 through 46 of Count One are realleged
and incorporated by reference as though fully set forth herein.
52. In calendar year 2006, the State of Alaska received in excess of $10,000
from the United States government under Federal programs involving grants,
subsidies, loans, guarantees, insurance, and/or other forms of Federal
assistance.
53. Between in or about January 2006 and in or about August 2006, in the
District of Alaska and elsewhere, the defendant, VICTOR H. KOHRING,
an elected member of the Alaska State Legislature and an agent of the
government of the
State of Alaska, did knowingly and corruptly solicit and demand for the
benefit of any person, and accept and agree to accept, a thing of value from
any person, that is, a series of cash payments totaling approximately $2,100
to $2,600, a $17,000 loan, and a $3,000 job for a relative of KOHRING, from
COMPANY CEO and COMPANY VP, intending to be influenced and rewarded in
connection with a business, transaction, or series of transactions of $5,000
or more of the State of Alaska. All in violation of Title 18, United States
Code, Sections 666(a)(1)(B) and 2.
A TRUE BILL.
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http://www.adn.com/news/politics/fbi/story/8867967p-8768641c.html
Veco
case may spark charges from state
CRIMINAL AND CIVIL: Attorney general has ordered investigations.
By LISA DEMER
Anchorage Daily News
Published: May 9, 2007
Last Modified: May 9, 2007 at 02:26 AM
The state plans to investigate whether Veco Corp. and its officials have
violated Alaska law in light of guilty pleas in federal court by two company
officials.
Attorney General Talis Colberg on Tuesday directed state lawyers to begin
criminal and civil investigations into Veco and related parties. Company chief
executive officer Bill Allen and a vice president pleaded guilty Monday to the
federal charges of bribery and conspiracy.
Colberg told state lawyers to look into issues not addressed by the federal
case. The Alaska Public Offices Commission also is looking into possible
violations.
In another development, Gov. Sarah Palin urged indicted state Rep. Vic Kohring,
R-Wasilla, to consider stepping down. The governor said it wasn't in her power
to demand that he resign but said he should think about it.
"There is certainly a cloud over the seat he represents right now and, with so
much on his plate in terms of the need to defend himself, I think he has got
to consider that. That's my personal opinion," Palin said.
Palin also removed Allen from a council created to foster cooperation with
Alberta, Canada, in areas such as transportation, Native issues, and trade and
investment. She said it was inappropriate for him to serve the state.
As for Kohring, he said he's staying in the Legislature.
"I do not feel I would serve the best interest of my constituents by walking
away at this time," Kohring said in a written statement. "The House leadership
has made a decision regarding my committee chair position, but also made it
very clear they expect to see me working in my capacity as a legislator."
After being indicted, Kohring was stripped of his chairmanship of the House
Special Committee on Oil & Gas.
Kohring and former Reps. Pete Kott, R-Eagle River, and Bruce Weyhrauch,
R-Juneau, were arrested Friday on multiple charges springing from an FBI
investigation into corruption in the Alaska Legislature. All were released and
vowed to fight the charges.
The three legislators are accused of doing Veco's bidding in exchange for
money or other benefits.
Kohring said his situation was not like that of Jim Hayes, who first refused
demands by Palin that he resign from the state Board of Regents after being
indicted on multiple federal counts.
While university regents are appointed by the governor, legislators are
elected by the people, Kohring said in his statement. Hayes, facing possible
impeachment, eventually resigned.
If his defense "prevents him from effectively doing his job," Kohring will
reconsider, his statement said.
In court Monday, Allen and Veco vice president Rick Smith admitted being part
of a conspiracy in which they bought lawmakers' votes for an oil production
tax favored by the oil industry. Over five years, they made more than $400,000
in illegal payments to four legislators or their families.
Allen also approved a scheme in which Smith directed Veco executives to make
campaign contributions to primarily Republican candidates. The executives knew
they would receive a "special bonus" to cover the amount. It was Smith's job
to figure out how big a phony bonus each would need, prosecutors said in court
filings.
In the last two-year election cycle alone, at least six Veco executives each
donated $24,000 or more to various Alaska candidates and the Republican Party,
according to a database run by the National Institute on Money in State
Politics or followthemoney.org.
Allen alone donated more than $30,000 over the two years, according to the
institute. So did Veco president Pete Leathard and chief financial officer
Roger Chan. Smith donated nearly $25,000. And that's just one election cycle.
Brooke Miles, APOC executive director, said her staff saw the enormous
contributions from Veco officials but couldn't document illegal behavior. They
didn't know about the special bonuses.
"Some of that would be beyond the auditing skills of an agency such as this,"
Miles said.
Veco has run afoul of campaign finance laws before. In 1985, the company was
fined more than $72,000 -- later reduced to $28,000 -- for a scheme that
funneled secret donations to a slate of candidates through an employee payroll
deduction plan.
Miles said the public offices commission will consider at its June meeting how
to proceed with the new information revealed in the federal charges.
Changes to the campaign finance laws in 2003 limit the possibilities, she
said. For instance, a complaint must be filed within a year.
Daily News reporter Lisa Demer can be reached at
ldemer@adn.com
and 257-4390. Sabra Ayers contributed to this
story.
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Fairbanks News Miner
May 9, 2007
http://newsminer.com/2007/05/09/6912
Lawmakers face ‘tremendous’ pressure
By Stefan Milkowski
Staff Writer
Published May 9, 2007
JUNEAU Former Fairbanks Sen. Ralph Seekins, one of the key players in last
year’s oil and gas debates, said Tuesday he was unaware of any efforts by
executives of oil field services company VECO Corp. to bribe state lawmakers
and that he never saw anyone “trying to buy votes.”
But Seekins described a capitol in which lawmakers face “tremendous” pressure
to act one way or another and where that pressure appears sometimes to change
lawmakers’ votes.
“You just have to hope that legislators are strong enough that they’ll stand
on principles and not on political blackmail,” he said.
Seekins, a Republican who was defeated by Democrat Joe Thomas last year after
one term, said he was sometimes offered campaign support in exchange for help
pushing a group’s agenda or threatened that he would lose support if he voted
the wrong way.
Seekins said lawmakers were under consistent pressure from industry and union
lobbyists. He questioned the lobbyists’ tactics as well as the ability of
lawmakers to resist offers from them.
“You hear the rumors for years,” he said. “Somebody’s wife now works for so
and so, somebody now has a summer job for so and so, someone is a consultant.”
One current and two former lawmakers were indicted last week on federal
charges of bribery and extortion. On Monday, two VECO executives pleaded
guilty to bribing lawmakers, in part to gain support for the company’s
position on oil and natural gas issues, including the proposed North Slope gas
pipeline, last year.
Seekins received $4,500 from VECO executives and a VECO political action
committee during his 2002 campaign and another $2,000 in December 2005.
He said Tuesday that he knew some of the VECO executives for a long time and
was never asked to do anything in return for the contributions.
“I always considered a donation a donation,” he said. “It didn’t buy
anything.”
Seekins returned the 2005 VECO donations in 2006 when the company’s name first
surfaced in the federal investigation involving state lawmakers.
At the time, Seekins chaired the Senate Special Committee on Natural Gas
Development, the lead Senate committee reviewing then-Gov. Frank Murkowski’s
oil production tax and natural gas pipeline proposals.
Seekins was perceived by many to be more agreeable than other members to some
of Murkowski’s proposals.
He was picked as chairman by then-Senate President Ben Stevens, R-Anchorage,
who matches the description of a senator implicated in VECO CEO Bill Allen’s
plea agreement. Stevens largely supported Murkowski’s proposals.
Allen and Rick Smith, VECO’s vice president of community and government
affairs, pleaded guilty on Monday to bribing at least four state lawmakers.
Stevens could not be reached for comment Tuesday, but his attorney has said
Stevens did nothing wrong. Stevens has not been charged with any crime, but
his office was among those raided last year by FBI agents in connection with
the current investigation.
Seekins described Stevens as “strong-willed” but motivated by his own beliefs.
“I never thought there was anybody pulling the puppet strings,” he said,
adding that Stevens at times pushed changes opposed by the oil industry.
Seekins also stated his own independence as chairman of the Senate special
committee.
“No one told me what to do,” he said. “I set the rules and I allowed everyone
the opportunity ad nauseam to bring amendments, to bring proposals, to
discuss issues … And those were the terms that I accepted the position with.”
He said Stevens was “disgusted” at him last year when he didn’t vote the way
Stevens hoped on the oil tax bill.
“He was really angry at me,” Seekins said. “He wouldn’t talk to me for 10
days.”
Contact staff writer Stefan Milkowski at 388-6141 or
smilkowski@newsminer.com.
xxxxxxxxxxxxxxxxxxxxxx
Wall Street Journal
May 9, 2007
BP Names
Independent Safety Monitor
May 9, 2007; Page B15
BP PLC appointed an independent expert to monitor safety improvements at its
U.S. refineries.
L. Duane Wilson, a former refining executive at ConocoPhillips, will monitor
the company's progress based on findings from an independent panel led by
former Secretary of State James Baker. The report was commissioned following
the March 2005 explosion at BP's Texas City, Texas, refinery that killed 15
people.
The Baker panel concluded in January that the United Kingdom oil company had
safety deficiencies at its five U.S. refineries. The safety issues are high on
the agenda of new Chief Executive Tony Hayward.
xxxxxxxxxxxxxxxxxxxxxxx
BP Names L Duane
Wilson Independent Safety Expert
DOW JONES NEWSWIRES
May 8, 2007 8:15 a.m.
Edited Press Release
LONDON (Dow Jones)--BP said Tuesday that it has appointed L. Duane Wilson as
the independent expert who will monitor progress in implementing the
recommendations of the Baker Panel to improve safety performance at the
Group's five U.S. refineries which are owned and operated by BP Products North
America, Inc.
His appointment took effect on May 1, 2007.
The Panel, an independent body chaired by former U.S. Secretary of State,
James A. Baker, III, was established by BP on the recommendation of the U.S.
Chemical Safety Board to examine safety management systems at the Group's U.S.
refineries and corporate safety culture following the explosion and fire at
Texas City in March 2005. Mr Wilson was one of the Panel's 11 members.
The Panel's report, published in January 2007, contained ten recommendations,
all of which BP undertook to implement. The recommendations are designed to
improve process safety performance at the Group's U.S. refineries. These
included an undertaking to appoint an independent expert for a period of at
least five years to monitor and report annually on the progress of such
implementation to the BP p.l.c. board.
Wilson is the retired vice president of refining, marketing, supply &
transportation and fuels technology for ConocoPhillips. As such, he has
experience and expertise in managing large-scale organisations, as well as
expertise in process safety and refining.
Wilson will report to the Chairman of the BP p.l.c. board's Safety, Ethics and
Environmental Assurance Committee (SEEAC) which will produce a publicly
available report based on his assessment of progress in implementing the
Panel's recommendations at its U.S. refineries.
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Financial Times
May 9, 2007
http://www.ft.com/cms/s/12d1c578-fdcb-11db-8d62-000b5df10621.html
BP ordered to
raise safety levels
By Carola Hoyos and Andrew Taylor in
London
Published: May 9 2007 03:00 |
Last updated: May 9 2007 03:00
The UK Health and Safety Executive has ordered BPto improve safety on its
North Sea oil and gasinstallations, issuing 14 notices to the energy group in
the past year.
BP confirmed it had been served the notices. The notices included concerns
over maintenance of equipment, leaking pipes and valves that were still being
manually operated.
Both the company and the UK safety regulator said BP had complied with 10
notices. The North Sea safety regulator added that the company had time to
finish the rest before their deadlines expired. Unite, Britain's biggest trade
union, formed this month through the merger between Amicus and T&G, said it
was not surprised, given BP's safety record, that it had received so many
improvement notices.
Graham Tran, Amicus offshore officer said: "Wehave been saying for many years
that BP has failed to take advantage of rising energy price to step up its
investment in maintenance. We now want to see some hard action in this area."
BP said: "We take any improvement notices from the HSE extremely seriously and
want to complete them as soon as possible."
The company is undergoing a root and branch review of its operations following
serious safety failings in the US, including the Texas City refinery fire that
killed 15 people in March 2005 and last year's pipeline corrosion, which
forced the company to shut down its Alaska Prudhoe Bay field.
BP yesterday announced it had appointed Duane Wilson, a retired vice-president
for refining and marketing at ConocoPhillips, to oversee its safety
improvements.
Keeping ageing oil facilities safe is an industry-wide challenge.
In the past 12 months, HSE said it had issued six improvement notices and one
prohibition notice to Royal Dutch Shell and six improvement notices to Maersk
of Denmark.
The North Sea oil fields were first tapped more than 30 years ago. Much of the
infrastructure was never expected to last this long, Matthew Simmons, founder
of Simmons & Co, the industry investment bank, warned in a recent interview.
The North Sea safety regulator said it had increased the number of North Sea
inspections in a bid to improve safety maintenance. It issued a total of51
improvement notices and nine more serious prohibition notices in the past12
months.
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http://www.ft.com/cms/s/9f43ffbc-fd62-11db-8d62-000b5df10621.html
BP
appoints safety chief
By Toby Shelley
Published: May 8 2007 14:29 |
Last updated: May 8 2007 14:29
BP on Tuesday appointed an independent expert to monitor progress at the
company’s five refineries in the US in the light of a damning report earlier
in the year on the group’s safety culture.
The Baker panel recommended earlier this year that the energy group should
make the appointment following the fatal explosion at the Texas City refinery
in 2005. The panel, chaired by former US secretary of state James Baker, was
appointed following a recommendation by the federal Chemical Safety Board.
The appointee to the panel is L Duane Wilson, a retired vice-president for
refining, marketing, supply and transportation at Conoco Phillips who was one
of the members of an 11-man team that reviewed BP’s safety record. His tenure
began on May 1 and he will report to the chairman of BP’s board level safety
committee.
There were 10 recommendations in the report published in January by the panel
headed by former US secretary of state James Baker. BP undertook to implement
them all.
The central argument of the report was that ”BP has not provided effective
process safety leadership and has not adequately established process safety as
a core value across all its five US refineries”.
That manifested itself in numerous ways: safety audits repeatedly uncovering
problems that were not put right; lack of discipline and compliance with
procedures; senior management that either did not get or did not respond
effectively to detailed refinery-level safety information; and many others.
The corporate culture was also blamed and BP was warned more spending would be
needed on safety and more investment in the refineries.
Mr Wilson’s appointment came as BP was facing fresh pressure in the UK over
its safety record in its North Sea operations.
BP maintained safety was a top priority in its operations in the North Sea,
after press reports that the company had received a high number of
“improvement notices” from the Health and Safety Executive. The Schiehallion
floating production unit alone has received seven such notices, six after a
scheduled inspection late last year and one since.
Multiple notices are served on installations from time to time although six is
certainly a high number and an overview report by HSE inspectors suggested BP
was not keeping safety risks at the lowest level reasonably practicable.
However, the inspectors did not issue prohibition notices, which would order
an activity to cease until a problem is rectified, but rather agreed with BP
dates by which improvements would be made.
BP said four of the seven notices regarding Schiehallion had been closed out.
The others still have time to run. In total 11 of 14 HSE notices regarding BP
in the North Sea have been complied with on time, so far, he said.
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KTUU Television
May 8, 2007
http://www.ktuu.com/Global/story.asp?S=6482935
The
story of VECO and the rise of Bill Allen
ANCHORAGE, Alaska -- Bill Allen is the stuff that legends are made of in
Alaska. He dropped out of high school to work in the oil fields and became the
head of VECO, one of Alaska's largest companies.
VIDEOS
The story of
VECO and the rise of Bill Allen
javascript:playVideo('1420798',%20'The%20story%20of%20VECO%20and%20the%20rise%20of%20Bill%20Allen',%20'v',%20'News',%20'252166',%20'News',%20'',%20'')
VECO brass
pleads guilty
javascript:playVideo('1420783',%20'VECO%20brass%20pleads%20guilty',%20'v',%20'News',%20'282367',%20'News%20-%20Breaking%20News',%20'',%20'');
VECO brass
strike deal
javascript:playVideo('1420770',%20'VECO%20brass%20strike%20deal',%20'v',%20'News',%20'272466',%20'News%20-%20Breaking%20News',%20'',%20'');
The economic fallout from the news that
he and his vice president have been charged with bribing lawmakers has sent
shockwaves throughout the economy.
VECO Attorney Amy Menard said Allen is still the CEO of the corporation.
"Mr. Allen founded VECO in 1968. At this time his title is still the CEO of
VECO Corporation," Menard said.
How long will Allen keep his title? VECO's attorney would not say. Her advice
-- stay tuned.
"It's a difficult situation and there will be a lot of decision making that
takes place as a result. And appropriate steps will be taken as soon as
feasible," Menard said.
One step has taken place already.
"Mr. Allen does not currently have an ownership interest of VECO Corporation.
I cannot tell you when that change occurred," Menard said.
The majority of the shares are owned by a partnership, made up of Allen family
members.
Anchorage Economic Development Corporation President Bill Popp said VECO has
operations all over the world.
"From Canada to Russia to the Middle East, you'll find VECO involved in quite
a few differ projects globally," Popp said. "A lot of the paychecks that VECO
employees collect come right back here to Anchorage, to the state as a whole,"
Popp said.
In 2005, VECO posted revenues of 665 million. The corporation has four offices
in the United Sates, two in Canada, one in the United Arab Emirates and
another in India.
It has more than 4,000 employees worldwide. Half of them are in Alaska.
Popp said Allen built the company from the ground up.
"Mr. Allen is one of those strong players back in the ‘70s who built a company
from basically nothing as a one-person operation. Operating out of a warehouse
in Kenai, servicing one client," Popp said.
From one client to many, an empire grew from servicing the oil industry.
Allen's big break came in 1989 when VECO won a big contract to clean-up the
Exxon Valdez oil spill. From modules to oilfield maintenance VECO did the
heavy lifting.
As a voice for the industry, Allen used his muscle. While the investigation
will reveal where he crossed the line from advocacy to crime, Alaska's
economic experts fear many will suffer from the fallout.
Popp said people shouldn't jump to conclusions about the entire corporation.
"There are a lot of neighbors and friends here in town whose jobs rely on this
company and it's important to remember that, that in this process, don't paint
with a broad brush all the employees of VECO," Popp said.
Anchorage Chamber of Commerce Board Chair Bill Evans said the events are
unfortunate, but the state will move on.
"Very, very sad state of affairs admittedly. But the business of the state is
so much bigger than that and so much more important than that," Evans
said.
"Crude Dreams" author Jack Roderick said it's time for the oil industry to do
some soul searching.
"VECO has been big and Bill Allen been very active. Then the question should
be asked, what are the major oil companies here in Alaska, who basically have
financed VECO, are gonna do about it?"
On VECO's Web site you'll see the company's values listed. The first on the
list is safety. The second is honesty, a call to show integrity by matching
action with words.
Historians like Roderick said it's been rumored for years that VECO has tried
to buy influence. He said that is something the oil industry probably knew or
could have found out.
Other members of the oil industry have been rather quiet about VECO fallout.
There was no comment from Conoco Phillips. BP said it's very interested about
recommendations coming from an Outside consultant VECO has hired. In a
statement today, BP said its relationship with VECO in the future is dependent
on how VECO meets the challenges.
BP made the following response to the charges against VECO Executives:
"We were disappointed to learn that VECO executives have admitted to serious
crimes. This is not what we expect from companies with whom we do business.
However, we are encouraged at VECO's pledge to commission an independent
review of its corporate operations and practices. Our relationship going
forward is dependent on how VECO meets those challenges. We will continue to
work with the company to ensure that contracts and projects on the North Slope
are conducted safely and reliably."
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http://www.ktuu.com/Global/story.asp?S=6480399
VECO
brass strike plea deal on charges of bribing lawmakers
by John Tracy
Monday, May 7, 2007
ANCHORAGE -- A corruption investigation by the FBI snags one of Alaska's
biggest and most influential businessmen.
This morning, Bill Allen, chief executive officer and part-owner of VECO Corp.
pleaded guilty to extortion, bribery and fraud.
Shortly after Allen entered his plea, Richard Smith, a VECO vice president and
its chief lobbyist, also pleaded guilty to the same charges.
They are the latest to be caught up in an ever-widening corruption scandal.
Specifically, Allen and Smith plead guilty to providing more than $400,000 in
payments to five lawmakers, in exchange for the lawmakers supporting and
lobbying their colleagues on bills that VECO wanted passed.
As in last week's federal indictments, many of the principals are not named,
but by their descriptions, it is easy to determine who the lawmakers are. And
the name that pops out today, specifically, is that of former Senate President
Ben Stevens.
The 70-year-old Allen entered his plea today in an Anchorage federal
courtroom, followed shortly thereafter by Smith, the company's chief lobbyist
in Juneau at the end of last session.
The charges mirror the indictments released last week.
Allen and Smith admit that they offered cash and/or future employment to
former House members Pete Kott of Eagle River and Juneau's Bruce Weyrhauch, as
well as to current lawmaker Vic Kohring of Wasilla.
All three lawmakers pleaded not guilty Friday in Juneau.
But in today's plea deal, Allen also says a state senator, identified as
"Senator A", which sources say is Anchorage Republican Sen. John Cowdery,
could get a colleague to vote VECO's way if the company could come up with
some money.
But perhaps the biggest bombshell involves former Senate President Ben
Stevens.
Allen says he had been paying Stevens' consulting firm since 1995 and had even
discussed making Stevens a VECO executive; and that the payments continued in
the five years Stevens served in the Senate.
During that period, VECO paid Stevens in excess of $243,000.
Allen says although he and VECO characterized the payments as consulting fees,
in his plea agreement he "acknowledges that in actuality the payments provided
to Stevens were in exchange for giving advice, lobbying colleagues, and taking
official acts in matters before the Legislature."
Today, VECO's attorney said the company has been cooperating with federal
authorities since it first became aware of the federal probe.
"The company and its subsidiaries have been functioning very well throughout
the course of the last eight months, since we became aware of the
investigation. We think that performance will remain strong," said Amy Menard,
who is representing VECO.
Allen also pleaded guilty to a third count of what's called "conspiracy to
impair and impede the Internal Revenue Service."
In essence, Allen admits to a scheme of reimbursing VECO executives for making
personal campaign contributions by paying them special bonuses, which were
reported to the IRS as legitimate corporate expenses.
That's not only a violation of federal law, but state law as well.
It is hard to discern Allen's motivation for entering a guilty plea. His
attorney isn't talking; however, buried in his plea agreement is a statement
that the government will not charge Allen's son, Mark, or other family members
with any crimes stemming from the investigation.
Allen's son is also a VECO executive, and has a history of writing big
campaign checks.
In 1989, VECO paid a $28,000 fine to the Alaska Public Offices Commission for
setting up an employee payroll withholdings program that funneled money to
candidates of VECO's choice.
The plea agreement indicates that VECO instead simply started reimbursing it's
executives for those campaign contributions with inflated bonuses.
APOC records indicate Mark Allen has written personal checks in excess of
$84,000 to state candidates since 1998.
The charges Allen and Smith face include lengthy prison sentences, with a
total of 20 years maximum, but the plea agreement calls for a range of between
nine and 11 years.
Prosecutors can ask for less, though, and a judge also can reduce the
sentence.
The plea deal also calls for three years probation and a fine of between
$15,000 and $150,000.
There is no word yet on when Allen and Smith will be sentenced.
John Tracy is news director for Channel 2 News. Contact Tracy at
jtracy@ktuu.com
xxxxxxxxxxxxxxxxxxxxx
Anchorage Daily News
May 8, 2007
http://www.adn.com/news/politics/fbi/story/8863305p-8765669c.html
Veco
executives plead guilty to bribing officials
By RICHARD MAUER and LISA DEMER
Anchorage Daily News
Published: May 7, 2007
Last Modified: May 8, 2007 at 04:12 AM
Bill Allen, a welder who took the Veco Corp. from a small Kenai oil-field
company to a billion-dollar international contractor and a major political
force, pleaded guilty Monday to bribing at least four Alaska legislators,
including former Senate President Ben Stevens.
In a plea bargain with the U.S.Justice Department’s Public Integrity Section,
Allen and Rick Smith, Veco’s vice president for community and government
affairs, each pleaded guilty to three identical felony charges - bribery and
two counts of conspiracy.
Both men accepted responsibility for making more than $400,000 in illegal
payments and benefits to public officials or their families. More than half
the money went to Stevens in the form of phony “consulting” fees, the
government charged.
Stevens, son of U.S. Sen. Ted Stevens, has not been charged. He was named in
the plea documents as “State Senator B,” but his identity was unmistakable.
In return for special consideration at sentencing, Allen, 70, and Smith, 62,
agreed to cooperate in the ongoing federal investigation. The government also
promised to not seek charges against Allen’s son Mark, a Veco official, his
daughter Tammy Kerrigan, or any other relative.
The federal plea bargain doesn’t bar state prosecutors from seeking additional
charges against Allen and Smith. Both men acknowledged violating state
campaign finance laws in their plea.
The plea deals were formalized in secret last week and opened in U.S. District
Court Monday morning in unannounced back-to-back hearings before Judge John
Sedwick, each lasting about 40 minutes.
Allen, in a gray suit, white shirt, red tie and black cowboy boots, sat
hunched over the defense table beside his lawyer, former U.S. Attorney Bob
Bundy. Allen is hard of hearing and asked Sedwick to repeat several of his
questions, but not the questions about how he would plea.
“Guilty,” he repeated three times in a gravely voice to each of the charges.
Taking prosecutors’ recommendations, Sedwick released the men on $10,000
unsecured bond and ordered them to report weekly to federal probation
officers. They were allowed to keep their passports and may travel freely
pending sentencing, which was held off indefinitely. They could face about 10
years in prison and up to $750,000 in fines, but cooperation could
substantially reduce the penalties.
On Friday, federal authorities acting on bribery and conspiracy indictments
arrested Rep. Vic Kohring, R-Wasilla, and former Reps. Pete Kott, R-Eagle
River, and Bruce Weyhrauch, R-Juneau.
Veco, Allen and Smith showed up in those indictments as “Company A,” “Company
CEO” and “Company VP.”
It appeared from those charges that the FBI used electronic surveillance of
Veco’s suite in Juneau’s Baranof Hotel to capture incriminating dialogue and
images. The indictments spoke of payments by Allen and Smith of several
thousand dollars and promises of jobs to the legislators. In return, the
legislators agreed last year to vote for the oil production tax favored by the
oil industry, the government alleged.
Those indictments referred to an unnamed state senator who allegedly played a
role in one part of the conspiracy - a plan by Veco to farm out legal work to
Weyhrauch, an attorney, in return for his vote on oil legislation. The
description of that unnamed senator was ambiguous - Stevens was one of three
senators it could have been.
But one of two unnamed state senators in Monday’s charges against Allen and
Smith is clearly Stevens. The Veco “consulting” payments of $243,250 between
2002 and 2006 documented in the charges precisely match the amount Stevens
reported on his financial disclosures as consulting income to his firm, Ben
Stevens and Associates.
Over the years, Stevens has refused to disclose what work he did for that
money or for any of the other consulting jobs he has listed, mostly for
fishing industry clients. Former state representative Ray Metcalfe, in
complaints to the Alaska Public Offices Commission and to federal authorities,
challenged Stevens, saying the payments were thinly disguised bribes.
Nothing came of Metcalfe’s APOC complaints - the state agency said that
Stevens adequately described his work. It refused Metcalfe’s demands to look
deeper and investigate whether Stevens actually worked for his money.
But in their admissions to federal prosecutors, Allen and Smith appeared to
vindicate Metcalfe.
“Although Allen and Veco characterized these payments … as being for
consulting services, Allen acknowledges that in actuality the payments … were
in exchange for giving advice, lobbying colleagues, and taking official acts
in matters before the legislature,” prosecutors said.
Only once in five years did Stevens consult for Veco on a matter not involving
his legislative job - a task involving a sunken boat at an unidentified
location where Veco wanted to build a dock. Stevens worked less than 20 hours
on that project, the prosecutors said.
Allen also promised an executive job to Stevens when he left office. On June
25, 2006, Stevens said he’d take that job, the charges said.
Stevens’s attorney, John Wolfe of Seattle, declined to respond to specifics in
the charges, but said his client did nothing wrong.
“Ben Stevens denies engaging in any criminal conduct and maintains that he is
innocent,” Wolfe said. “Mr. Stevens is surprised to learn that Bill Allen has
pled guilty to various federal crimes and hopes that Mr. Allen is not falsely
accusing former and current members of the Alaska Legislature in order to
mitigate his admitted criminality.”
One other unnamed state senator, a “state elected official,” and two unnamed
Veco executives also show up in the charging documents against Allen and
Smith.
The senator in question was not accused of taking illegal payments but was
listed as a member of the conspi