Alyeska to pay $600K

Fine is part of settlement between trans-Alaska pipeline operator, PHMSA

Wesley Loy

For Petroleum News

The operator of the trans-Alaska pipeline has reached a settlement with federal regulators to resolve four enforcement cases dating back to 2006.

Under the deal, Alyeska Pipeline Service Co. will pay a civil penalty of $600,000, which represents a considerable savings over the sum of penalties the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration had originally proposed.

Michael Joynor, Alyeska’s senior vice president of operations, and Jeffrey Wiese, PHMSA’s associate administrator for pipeline safety, signed off on the “compromise agreement” on Nov. 15 and 16 respectively.

As part of the deal, Alyeska agreed to drop a federal lawsuit it had filed against the agency challenging a fine imposed in one of the enforcement cases.

Four enforcement actions

The seven-page settlement notes that Alyeska and PHMSA agreed the settlement would avoid further administrative proceedings or litigation.

Aside from the $600,000 civil penalty, Alyeska also “must develop and implement a risk-based atmospheric corrosion control program for TAPS,” the trans-Alaska pipeline system, the settlement says. PHMSA, in 2008, said Alyeska had failed to produce records for required atmospheric corrosion inspections in locations such as vaults and below-ground piping corridors where regulators found water.

The deal also calls for Alyeska to take other “corrective actions.”

The settlement resolves four enforcement cases that PHMSA had opened against Alyeska in 2006, 2007, 2008 and 2009.

All totaled, Alyeska was facing fines of $1,293,800 in the four cases, including $263,000 the company went ahead and paid in 2010.

Alyeska was facing its largest fine, $817,000, under a case brought in 2007.

PHMSA, in that case, issued Alyeska a notice of probable violation for “at least three pipeline failures of TAPS.”

The alleged failures included a fire in the containment area of a crude oil storage tank at Pump Station 9 in which a portable heater ignited escaping oil vapors; a 900-gallon oil spill at a valve along the pipeline; and a failed operation involving a “scraper pig,” which is a device used to clean the inside of a pipe.

PHMSA said the failures raised “cause for concern regarding the operational integrity of TAPS.”

Among other criticisms, the agency said Alyeska failed to properly report the fire and failed to follow its corporate safety manual, which requires keeping portable industrial heaters at least 25 feet away from any oil, gas or electric process facility.

In 2006, PHMSA issued Alyeska a notice of probable violation and, after a hearing held at the company’s request, issued a final order much later, in January 2010, assessing total penalties of $263,000.

PHMSA alleged Alyeska committed two violations of pipeline safety regulations. First, it was too slow to obtain a vendor’s full report on a 2004 pig run to test for corrosion or other hazards on the pipeline, the agency said. Second, Alyeska failed to promptly repair a damaged segment of buried pipe near mile 546, PHMSA said.

In August 2010, after paying the $263,000, Alyeska sued PHMSA in Alaska federal court, arguing among other things that the fine was excessive.

As a result of the settlement with PHMSA, Alyeska’s lawyers on Nov. 17 filed papers to have the suit dismissed.

In 2008, PHMSA issued a notice of probable violation to Alyeska, proposing a civil penalty of $170,000.

The agency said inspections along the pipeline, including at road crossings, turned up deficiencies in the company’s efforts to prevent corrosion. The case questioned Alyeska’s vigilance in using a corrosion-fighting technique known as cathodic protection, and also faulted the company’s record-keeping.

The fourth case covered under the settlement was brought against Alyeska in April 2009, when PHMSA issued a notice of probable violation to the company with a proposed civil penalty of $43,800.

The notice said that during an inspection, a flange was found to be inadequate for handling surge pressure at Pump Station 3, allowing the release of oil onto the station floor.

Under the settlement, however, PHMSA withdrew the safety allegation regarding the flange.

The $600,000 civil penalty specified under the settlement stems from only two of the four cases involved: the 2007 case and the 2008 case.

“We worked with PHMSA for several months to reach agreement,” Alyeska spokeswoman Michelle Egan told Petroleum News. She said the deal closes “all open matters” with the agency.