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Vol. 11, No. 38 Week of September 17, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Prudhoe backlash could include ANWR

BP’s problems at Prudhoe could prevent ANWR being opened, hurt efforts to open new offshore areas, and result in new regulations

Petroleum News

BP’s failure to properly maintain its Prudhoe Bay pipelines could jeopardize efforts to open the 1002 area of the Arctic National Wildlife refuge to oil and gas exploration and development, U.S. Sen. Jim Bunning, R-Ky., said Sept. 12.

It’s a “giant step backwards,” Bunning told BP America Chairman and President Bob Malone, who was testifying on Prudhoe Bay before the Senate Energy and Natural Resources Committee.

We were “assured that nothing like this would happen,” Bunning said, noting that he visited Prudhoe Bay three years ago.

“You bragged … about how good you were doing,” he said. “Don’t tell us you didn’t have an inkling that the pipes were eroding,” Bunning said.

“Why in the world,” Bunning asked BP executives at the hearing, would the company allow a pipeline to deteriorate so much as to cause a spill “if, in fact, we want to explore and drill in other areas of Alaska. Why?”

“I believe that this type of situation completely sets back any hope that we had to get that bill (ANWR) passed in the Congress of the United States. … This is a major setback,” Bunning said.

Committee Chairman Sen. Pete Domenici, R-N.M., called the events that led to BP’s partially shutting down operations at Prudhoe “inexcusable.”

The company failed to conduct “the most basic of corrosion inspection techniques,” he said. “This is a black eye on BP.”

Domenici said, “We won’t get the votes we already have” to open ANWR if BP fails to live up to its commitment to improve its performance.

“ANWR could go backwards with this kind of event,” he said.

Malone, Marshall offer assurances

BP officials tried to assure lawmakers that the company had learned from its mistakes.

In addition to replacing much of the pipe, Malone said BP is increasing spending for major maintenance at Prudhoe to $197 million in 2007, nearly four times what the company spent in 2004.

“We will get this right,” Malone vowed.

Steve Marshall, president of BP Exploration (Alaska), told the committee the company has increased spending on general maintenance in Prudhoe Bay to $787 million this year, up from $430 million back in 2001.

Bunning said that “is chicken feed when you’re looking at $70 billion in profits,” which BP reported for 2005.

“Talk is cheap,” Sen. Lisa Murkowski, R-Alaska, told the Houston Chronicle after the hearing.

Other negative impacts

According to a Sept. 13 article in the Houston Chronicle BP’s pipeline problems at Prudhoe also could complicate negotiations between House and Senate lawmakers over proposals to open up new offshore areas of the United States to oil and gas exploration.

Lawmakers are hoping to reach some kind of deal before the end of September, the newspaper said.

“Environmentalists and other drilling opponents have seized on BP’s troubles to argue the industry cannot be trusted to protect the nation’s environment,” the Chronicle reported. “At the same time, BP’s embarrassment has even prompted the industry’s friends on Capitol Hill to begin talking about new regulations, a harsh blow to an industry that has long complained about burdensome federal mandates.”

The Chronicle sited Sen. Mary Landrieu, D-La., as an example. A long-time industry supporter, the newspaper said she “wonders whether lawmakers should devise new requirements that would force energy companies to invest in their infrastructure.”

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BP moving to get eastern Prudhoe back up

BP Exploration (Alaska) has received the first of the authorizations it will need to get bypass lines in place to restore production from the eastern operating area at Prudhoe Bay. The EOA was shut down Aug. 6 following discovery of corrosion and a small leak in a transit line, resulting in a dramatic drop in production from the 400,000 barrels per day Prudhoe Bay had been averaging.

After inspections, BP continued production from the western operating area and from the Lisburne production center on the eastern side of the field, since the Lisburne transit line had been pigged and found to be in satisfactory condition earlier in the summer.

BP has said it expects to have the EOA producing through bypass lines by the end of October.

The Regulatory Commission of Alaska granted temporary permits Sept. 7 for bypass connections from the Endicott pipeline to Prudhoe Bay Flow Stations 1 and 2, and the Prudhoe Bay crude oil topping plant.

BP spokesman Daren Beaudo said in addition to the RCA approvals, the Alaska Oil and Gas Conservation Commission and the Alaska Department of Natural Resources need to approve metering of the new connections. Beaudo said he didn’t know when those approvals will be received.

Prudhoe Bay production is currently about 250,000 bpd from the western operating area and Point McIntyre/Lisburne, he said.

BP said Sept. 14 that it has applied to the U.S. Department of Transportation for authorization to resume production in the eastern operating area for pigging. The company has been working with DOT’s Pipeline and Hazardous Materials Safety Administration and submitted detailed information on corrosion found in the transit lines the week of Sept. 11.

The bypass lines will be temporary until 16 miles of transit lines are replaced.

The Bureau of Land Management/Joint Pipeline Office has issued a non-objection to installation of temporary piping at Pump Station 1, the agency said Sept. 13. This will prevent pigging solids from entering the trans-Alaska oil pipeline after BP completes maintenance pigging. The temporary piping will go to Tank 110 where the solids will be deposited until a permanent solution is determined.

—Kristen Nelson