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Vol. 15, No. 23 Week of June 06, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Alyeska Pipeline target of 8 federal enforcement actions

The operator of the 800-mile trans-Alaska pipeline is the target of eight pending federal enforcement actions that add up to more than $1 million in unpaid fines.

Most of the enforcement actions the federal Pipeline and Hazardous Materials Safety Administration has taken against the Alyeska Pipeline Service Co. have been pending more than two years. Alyeska is owned by an oil company consortium led by BP, Conoco Phillips and Exxon Mobil.

The cases all involve alleged violations of federal pipeline safety regulations.

Some allegations involve paperwork errors and inadequate procedures. But others are based on safety violations that were discovered after a pipeline accident, such as a spill or fire.

Still other cases involve alleged violations of the rules for monitoring and fixing corrosion in the pipeline that carries crude from the North Slope oil fields to the tanker port in Valdez. The oil in the pipeline accounts for about 10 percent of U.S. oil production.

Federal pipeline regulators said they do not comment on pending cases but many details from the cases are available through public records.

The pipeline agency’s largest unresolved case against Alyeska in the past five years includes a $817,000 fine. The agency proposed the fine in 2007 after a series of mishaps, including a storage tank fire, a 900-gallon oil spill and a failed pipe cleaning involving a device called a scraper pig.

The agency said the violations were “cause for concern regarding the operational integrity of TAPS.”

That 2007 case is still pending after Alyeska challenged the agency’s major allegations in 2008 and asked for the penalty to be withdrawn.

Out of the seven pending cases with fines attached that the pipeline agency has filed against Alyeska since 2006, the company has fully paid only one civil penalty — $56,000 levied in 2008 for Alyeska failing to maintain records of repairs and not maintaining adequate corrosion protection on the pipeline near Glennallen.

In all, Alyeska faces proposed fines totaling $1.4 million in the cases filed since 2006.

The federal pipeline regulator said last week it also has begun investigating the events that led to an estimated 210,000-gallon oil spill Tuesday at Pump Station 9 near Delta Junction. That spill is the largest for Alyeska since a Livengood man shot a hole in the pipeline in 2001.

Damon Hill, a spokesman for the agency, said he couldn’t predict how long it will take for the new case to be completed.

Some of the enforcement cases for which Alyeska faces potential fines are as follows:

• Alyeska is accused of running a pipeline corrosion test in May 2004 but not properly analyzing and reporting on its findings by a 180-day deadline. The company also did not schedule an immediate repair for a dent in the pipeline near Glennallen. The company contested the allegations and later petitioned for reconsideration of the agency’s decision, which set a final penalty at $263,000. The case is still pending.

• Pipeline regulators said Alyeska failed to test the cathodic protection — a metal layer that inhibits corrosion — at several road crossings by the required deadline and failed to fix some problems discovered when it later did the tests. The alleged violations ran from 2003 to 2006. The proposed fine is $170,000 and the case is listed as open with no other information.

• Alyeska is accused of not replacing “within a reasonable time” a pipe segment 57 miles south of Prudhoe Bay where regulators were concerned about possible corrosion. The pipe was scheduled for replacement in 2007 but the work was delayed. For that and several other alleged violations, regulators proposed a $112,000 fine. Alyeska agreed to replace the pipe but asked that the allegation be withdrawn. The case is still listed as pending.

One reason these cases have remained unresolved for years is that Alyeska routinely disputes some allegations. Alyeska has also sought to reduce the size of the agency’s proposed fines, according to public filings.

Alyeska spokeswoman Michelle Egan said the company sometimes disagrees with the pipeline agency’s interpretation of regulations or disagrees with it on how to fix a problem.

Even after a hearing, the pipeline agency can take more than a year to issue a final ruling.

Egan said Alyeska pays a fine once the agency issues a final ruling.

The case involving the $263,000 pending fine is a prime example of how long a case can drag out.

In 2005, pipeline inspectors reviewed Alyeska records and found the two alleged corrosion prevention violations.

In 2006, the pipeline agency proposed a $350,000 fine for the two violations. Alyeska contested the allegations and the size of the fine. The pipeline agency held a hearing on the matter in 2007 and issued its ruling in January 2010. In its ruling, the agency reduced the penalty to $263,000.

Alyeska petitioned for reconsideration of the ruling. The company argued that the fine should be cut more and that some of the agency’s findings were incorrect.

This March, the agency mostly denied Alyeska’s petition and upheld the fine.

The status now: Alyeska said it has paid $90,000 and is contesting the rest of the fine.

—Elizabeth Bluemink, Anchorage Daily News

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