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Federal Pipeline Agency Issues
Largest Proposed Penalty of 2007
Against Alyeska Pipeline Service Co.

Reports, January 2007 Fire at Pump Station 9
Call TAPS Safety Practices Into Question

As Alyeska Struggles to Put Strategic
Reconfiguration Into Operation,
Government Agencies Struggle
To Coordinate Oversight Efforts

By Richard A. Fineberg
January 20, 2008

Violations of federal requirements for safe pipeline operations and failure to follow company operating guidelines in December 2006 and January 2007 have earned the Alyeska Pipeline Service Company a proposed civil penalty of $817,000 from the federal Pipeline and Hazardous Materials Safety Administration (PHMSA). Alyeska is the operator of the 800-mile Trans-Alaska Pipeline System (TAPS). The proposed fine is more than twice the amount of the second largest proposed civil penalty the agency issued during 2007, according to agency records. (1)

The proposed penalties levied by PHMSA, an agency of the U.S. Department of Transportation, deal with a series of operational failures that occurred on TAPS shortly before the first renovated pump station was placed into service early last year under the pipeline's troubled Strategic Reconfiguration (SR) project, the largest construction effort on TAPS since the pipeline began pumping in 1977. The proposed sanction calls for payment of:

  • $506,000 for eight separate violations of operating procedures and safety practices that caused a brief but intense fire at Pump Station 9 as the pipeline company struggled to put its first renovated pump station into service under the company's SR program last January 6;
  • $195,000 for repeated failures to follow its manual of operational procedures that caused a n oil spill at a remote gate valve in the Brooks Range three days later; and
  • $116,000 for failures to implement anti-corrosion measures in a timely manner. (2)

PHMSA also cites Alyeska for additional operational shortcomings associated with the destruction of a pipeline cleaning device known as a pig in December 2006. According to PHMSA, "[t]hese failures . . . are cause for concern regarding the operational integrity of TAPS." In addition, the Nov. 27 notice warns Alyeska to correct five other reported operating procedure deficiencies for which no penalties were issued. (3)

The PHMSA Notice of Proposed Violation, Proposed Civil Penalty and Proposed Compliance Order, issued Nov. 27, asks Alyeska to address each proposed penalty issue within a specified time. A second notice issued the same date describes the pig failure and lists 20 other procedural problems on TAPS that PHMSA says it identified during a series of 2006 inspections. No fines or penalties are associated with the second notice. (4)

If pipeline procedural breaches are associated with violation of criminal statutes,PHMSA may refer the violations to the Department of Justice for criminal action. For example, PHMSA assisted in the prosecution of BP's 2006 maintenance failures at Prudhoe Bay, where failure to prevent and detect corrosion on pipelines at Prudhoe Bay caused the largest oil spill in North Slope history and resulted in a $20 million criminal penalty package. Those payments, announced two days before PHMSA issued the proposed civil penalties against Alyeska, included a $12 million criminal fine, $4 million in criminal restitution to the State of Alaska and $4 million for additional North Slope research. (5)

BP, a major North Slope producer and the operator of the Prudhoe Bay field, is the major owner of TAPS, with a 46.93% interest. Other owners of TAPS are ConocoPhillips, 28.29%; ExxonMobil, 20.34%; Koch Industries, 3.08%; and Chevron, 1.36%; the three main owners of TAPS are also the largest North Slope producers.

Alyeska President Kevin Hostler recently called the January 2007 Pump Station 9 fire and Brooks Range spill "unacceptable." But Hostler's clear repudiation of his company's performance, nearly one year after the fact, came only after PHMSA lowered the boom. In fact, Alyeska's early reaction to the problems that precipitated the proposed PHMSA fines was equivocal. When reports of that safety violations led to the fire at Pump Station 9 came to public attention, an Alyeska spokesman said that "we take this (event) extremely seriously." But such statements were contradicted by the fulsome praise of Hostler and other Alyeska executives for the safety standards with which the pipeline company implemented the SR project. (6)

Review of PHMSA's enforcement actions in 2007 indicates the depth of the agency's concerns about safety on TAPS. Forty-one of the 245 civil action notices PHMSA issued nationwide in 2007 call for penalty payments. The proposed Alyeska penalty of $817,000 is more than ten times the average of the remaining 40. Moreover, as noted above, the recent Alyeska sanction is also more than twice as large as PHMSA's second largest 2007 civil enforcement action. In keeping with pipeline safety procedures, Alyeska may contest the notice and request a hearing on all or part of the charges. According to PHMSA records, however, between 2002 and 2006, the Department of Transportation's pipeline safety unit collected 86% of its proposed penalty assessments. (7)

A Closer Look at TAPS

Since Alyeska has the dubious distinction of topping PHMSA's civil enforcement chart for 2007, a closer look at the problems on TAPS that led to these proposed penalties is warranted. Developments on TAPS in 2007 centered around implementation of the SR project, under which the pipeline company is replacing the pipeline's original jet-engine crude oil pumps with electrically driven pumps at the four pump stations that remain in operation, combined with increased automation and upgraded control systems. When Alyeska formally announced the SR program early in 2004, the pipeline company said the project would be completed by the end of 2005 and would cost $250 million. Two years later, SR is far from completion, while project expenditures have nearly tripled the 2004 estimate. (8)

From the outset, Alyeska said safety was a central consideration in undertaking SR. According to Alyeska, SR - the largest single project undertaken on TAPS since pipeline construction - is intended to enhance the safety of remote operations and replace old fire detection and response equipment whose maintenance, according to Alyeska, has become "particularly problematic in recent years." To mitigate risks associated with converting from existing pipeline systems to the new operating equipment, Alyeska said that a rigorous management of change (MOC) process had been developed. (9)

Review of the documentary record on the major operational failures later cited by PHMSA will delineate the sharp disconnect between Alyeska's rhetoric and reality - and the failure of the 12-agency state-federal Joint Pipeline Office (JPO) to force Alyeska to look beyond the specific violations of basic safety procedures to identify the conditions that led to those failures.

In September 2006, four months before the fire at Pump Station 9, Alyeska President Hostler emphasized safety's importance to Alyeska, telling a congressional committee, "I take seriously the responsibility I have to run a safe operation . . . . Safety is our first priority in resolving the issues we currently face." At that moment, Congress was not looking at TAPS; the hearings were about BP's North Slope problems.

Continued Below (Click Here)


TAPS: Rhetoric, Reality, Fires and
Safety

"Review of the documentary record on the major operational failures later cited by PHMSA will delineate the sharp disconnect between Alyeska's rhetoric and reality - and the failure of the 12-agency state-federal Joint Pipeline Office (JPO) to force Alyeska to look beyond the specific violations of basic safety procedures to identify the conditions that led to those failures."

"A series of fires on the North Slope reported later in 2007 suggest striking similarities between the operational deficiencies on the part of the companies that operate the North Slope and TAPS, undermining safety and placing the nation's largest oil field at undue risk. BP's North Slope fire problems have come to public attention largely through the efforts of Chuck Hamel of Alexandria, Virginia, who frequently serves as a conduit for North Slope worker complaints."



Largest Proposed Penalty of 2007
(Continued)

At the September 2006 hearings, even then-PHMSA Administrator Thomas M. Barrett contrasted BP's failure to pig its pipelines at Prudhoe Bay to Alyeska's aggressive pigging program on the Alyeska's trans-Alaska system. Ironically, Hostler's September 2006 testimony celebrated the each of the non-fire-related aspects of his company's operations that caused PHMSA to issue its largest proposed penalties of 2007. (10)

One month after the fire and shortly after Pump Station 9 entered service in February 2007, Alyeska officials heaped lavish praise on the SR project - and the company's safety practices. Hostler stated in a press release that "[o]ur focus has been on the safe, quality startup of Pump Station 9." He continued, "[w]e have a lot of work to do before all upgrades at the pump stations are complete and I am extremely proud of the hard working men and women who have put in a lot of extra hours to upgrade this station." Alyeska Vice President Jim F. Johnson echoed Hostler's comments, stating that "[w]e are very satisfied with how the work has progressed at the site and we thank all involved for their commitment to deliver the project safely." (11)

The Alyeska executives' praise of SR's safety processes is called into question by an e-mail notice to all workers less than two weeks after the fire that summarized the company's preliminary accident investigation report and identified numerous safety violations. At that time, the pipeline company said, it was instituting measures to prevent similar problems from occurring in the future. (12) This statement confirms that from the outset it was evident that the brief fire that nearly destroyed Pump Station 9 occurred because procedures already in place were violated (e.g., lack of fire watch, placement of open flame in dangerous location), or were transparently inadequate (e.g., communication systems).

The Fire at Pump Station 9

It is difficult to reconcile Alyeska's proclaimed "commitment to deliver the [SR] project safely" and focus on a "safe, quality startup of Pump Station 9" with the facts of the Jan. 6 fire. The fire occurred when fumes expelled from a vent in the large relief tank at Pump Station 9 were ignited by an industrial heater. PHMSA officials credit the Alaska Department of Labor's investigation for documenting a series of inadequate and violated safety procedures led to the fire at Pump Station 9:

  • The vent in question, an integral part of the 55,000-barrel tank designed to handle overflow from a pipeline, is located high on the giant tank. The vent automatically opens to release flammable vapors whenever the tank fills. For this reason, federal regulations specify that open flames are not allowed in the vicinity of the vent. Review of PHMSA enforcement documents relating to other pipeline systems contain numerous references to the necessity for caution in the vicinity of pipeline breakout tanks due to the potential for fire or explosion. On Jan. 6, it was 25 degrees below zero as workers pressed to put the new pipeline pump and control system into place. The electronic links between the new SR control system and the tank farm had to be checked out prior to the long-delayed SR startup. An electrical worker was dispatched with an industrial heater to perform the check. Against regulations, he placed the heater too close to the vent.
  • Work in the tank farm is done under a "hot work permit" whose procedures are supposed to provide an added margin of safety. Under the hot work permit, a worker is supposed to standing fire watch to observe any conditions that might jeopardize safety, like sudden venting. The electrical worker served as his own fire watch.
  • Some reports say that Alyeska was testing the new automatic shutdown system. Another version of events is that an erroneous signal from a site nearly 150 miles south of Pump Station 9 triggered the automatic shutdown. In any event, while the electrician was working, an unexpected pipeline shutdown occurred and breakout tank began filling. The vent opened to release the fumes, which cascaded down the wall of the tank toward the misplaced industrial heater and caught fire, sending what officials now describe as a fireball high into the air over the pump station.
  • In the absence of a venting alarm system, a radio link to the pump station control room is supposed to provide an added margin of safety. The control room was trying to contact the electrician, but he couldn't hear his hand-held radio over the roar of the industrial heater. Working without the prescribed dedicated fire watch, he was unaware of the situation until the misplaced industrial heater ignited the fumes, sending what some officials describe as a fireball shooting high into the air.
  • The electrician could not get to the heater to turn it off. Instead, he jumped into his truck, conveniently idling nearby, and drove to his assigned emergency response rallying point. The truck engine running inside the tank farm constituted another potential source of ignition and another violation of standard operating procedures.
  • The blaze was big, but it didn't last long. Flames rose high in the air over the tank farm for about five minutes. When the flow to the breakout tank stopped, the vents closed and the fire went out before things got completely out of hand. The fire drew local fire department response and shut down the pipeline for two hours. (13)

Most of the proposed penalty of $506,000 for the Pump Station 9 fire deals with the string of violations of safe operating procedures described in the preceding bullets. Two relatively minor reporting violations demonstrate institutional insouciance. PHMSA's Nov. 27 notice states that Alyeska failed to comply with federal regulations requiring telephone notice to the National Response Center of any explosion or fire not intentionally set by the operator at "the earliest practicable moment." Additionally, a written report on a DOT form is required within 30 days. These two reporting infractions account for $22,000 of the civil penalties proposed by PHMSA. (14)

A series of fires on the North Slope reported later in 2007 suggest striking similarities between the operational deficiencies on the part of the companies that operate the North Slope and TAPS, undermining safety and placing the nation's largest oil field at undue risk. BP's North Slope fire problems have come to public attention largely through the efforts of Chuck Hamel of Alexandria, Virginia, who frequently serves as a conduit for North Slope worker complaints. (15)

Pressure Surge and Oil Spill at RGV 32

In the second of PHMSA's proposed penalty assessments of Nov. 27, the agency is seeking a penalty payment of $195,000 in connection with an oil spill of approximately 900 gallons (21 barrels) of crude oil in the Brooks Range two days after the fire at Pump Station 9 in January 2007. The leak came from a 6-inch by-pass line at RGV 32, a remote gate valve (RGV) on the steep south slope of the mountain crossing when fittings on the valve by-pass were apparently loosened by excessive vibrations within the pipeline. The vibrations, in turn, resulted from Alyeska's failure to follow procedures for re-starting the pipeline at RGV-32 on at least three separate occasions between Nov. 15, 2006 and Jan. 6, 2007. In addition to these chronic re-start operating failures, PHMSA says, on the day of the spill Alyeska also allowed a significant pressure surge at RGV 32. (16)

Problems related to pipeline vibrations on downhill slopes are nothing new to Alyeska. Since 1996 TAPS has experienced strong shaking on the south side of all three major mountain crossings due to a phenomenon known as slack line condition, in which a pipe segment is only partially full of liquid as the oil cascades down from the summit. The remaining space is filled with vapors, which form air pockets that can collapse suddenly as pressure builds up where the pipeline levels out at the bottom of a steep descent. In 2000, a severe pressure hammer during a pipeline restart caused a stretch of the pipeline about eight miles from RGV 32 to move by as much as six inches, causing localized damage to the above-ground support system. In 2003, vibrations south of Atigun Pass became a regular concern when oil production dropped below one million barrels per day. Special monitoring equipment was installed to detect motion and stress. To prevent damage from pressure surges at RGV 32 during pipeline restarts, in 2005 Alyeska established special procedures for that valve. (17)

Three months before the RGV-32 spill, when employee warnings about the dangers of vibration challenges surfaced in the press, Alyeska's Hostler responded as follows:

We briefed congressional staff and the JPO about the vibration issue in August [2006] . . . . We also prepared a fact sheet about the vibration issue (attached) for congressional staff and used this in several meetings prior to the September hearings. I also mentioned the vibration issue as one we are actively managing in my testimony at both hearings [in Washington in September 2006]. . . . I think it is important to point out that we have stressed with the media that this is not an immediate threat to the integrity of TAPS. (18)

Even after the January 2007 spill, Alyeska described the spill and the clean-up without any hint that the company recognized the cause to be an operating deficiency; nor did the article discuss Alyeska's failure to execute its plan for preventing pressure surges. (19) Nine months later, in its notice of probable violation, PHMSA wrote:

Contrary to its written procedures, Alyeska failed to require technicians to open the 6-inch by-pass line to equalize the pressure across RGV-32 when a 200 psi or greater pressure differential existed across the valve during opening. . . . . [But Alyeska operating manuals] in place at the time of the spill, required a technician to go to the valve to equalize the pressure in order to minimize potential vibrations at RGV 32. Large vibrations of RGV 32 and nearby mainline piping can be caused by the collapse of vapor pockets upon reopening of RGV 32. (20)

"Grossly Deficient" Anti-Corrosion Measures and Lost Pigs

The proposed penalty of $116,000 is for what PHMSA calls "grossly deficient" procedures spelled out in the TAPS cathodic protection system, That system iis designed to counter electrical current in the ground that causes pipeline corrosion. In its proposed penalty letter, PHMSA notes that TAPS procedures allow up to three years for remediation of some areas of low cathodic protection on TAPS and omit remediation in other areas altogether. But, says PHMSA, "[i]t is inappropriate for more than one (1) year to pass before areas of low protection are remediated . . . in some instances, remediation must occur in less than one year." (21)

In the second Nov. 27 enforcement letter, PHMSA lists numerous other procedural problems on TAPS and discusses another operational failure that occurred in the final months before Alyeska completed the SR update at Pump Station 9. The operational failure involves the loss and destruction of an in-line cleaning device known as a scraper pig on Dec. 12, 2006. The pig, inserted in the pipeline to remove the buildup of deposits from the inside walls of the pipeline, was destroyed at Pump Station 7. According to PHMSA, the cleaning device was damaged when it passed through a pipeline valve recently added to the pipeline at Pump Station 7; still in the pump station, the pig went astray due to the absence of pig retaining bars. Like the new valve, the absence of the pig retaining bars was not noted in the Alyeska pigging procedures manual. In the Notice of Amendment letter, PHMSA states its belief that "if the pig bars had been properly installed in 2005 and the procedures for raising the clapper on check valve and isolating the pumps had been in place for the pig run the incident would not have occurred." (22)

In the Nov. 27, 2007 transmittal letter to Alyeska covering the two notices, PHMSA Western Region Director Chris Hoidal acknowledges "actions Alyeska has taken to correct certain deficiencies cited by PHMSA and prevent future violations." Noting that PHMSA and Alyeska have been working together to resolve issues, Hoidal states that "[w]e are encouraged by Alyeska's most recent progress and look forward to working with you." Hoidal's carrot-like words do not alter the fact that PHMSA, in an effort to encourage Alyeska to cure its chronic operating deficiencies, has hit Alyeska with the agency's biggest civil stick of the year. (23)

Alyeska's December 2006 pig loss and PHMSA's finding that certain TAPS anti-corrosion measures are grossly deficient undermine the case the pipeline company has attempted to make in the public arena that its anti-corrosion and pigging practices were exemplary. As noted above, in September 2006 hearings before U.S. House and Senate committees on BP's corrosion problems at Prudhoe Bay, Alyeska's Hostler described the company's pigging program as pro-active. Moreover, even before the cleaning pig broke up in December 2006, the "smart pig" that Hostler told Congress was being dispatched a year ahead of schedule to assess pipe wall thickness had failed due to wax build-up. (24)

JPO Comprehensive Monitoring Reports


PHMSA's aggressive approach to TAPS contrasts with the Alaska-based Joint Pipeline Office (JPO), the umbrella group of 12 state and federal agencies (including PHMSA) that was formed in 1990 in the aftermath of the Exxon Valdez oil spill to improve oversight of TAPS and provide one-stop shopping for industry. In a critique of JPO's operations posted in July, this writer observed tha
t

  • (1) "the flow of information from JPO - often sluggish historically - had slowed to a trickle;"
  • (2) JPO had not issued its key stakeholder document for five years; and
  • (3) the JPO executive council - representatives of the agencies that make up JPO - had not met for five years. (25)

Interviews with monitoring officials and review of information obtained through a Freedom of Information Act (FOIA) sheds additional light on these points and provides additional information on JPO's performance. This analysis suggests that things have not gone well for the coordinated Alaska petroleum industry monitoring effort envisioned when JPO was established in 1990. In fact, today the pipeline portion of that monitoring effort looks a bit like Humpty-Dumpty.

(1) The release of information on the fire at Pump Station 9 demonstrates the proposition that information released by JPO flows slowly ("dribbles out" might be a more apt description). In dutifully reporting the event in its Jan. 10, 2007 "weekly" report, JPO reduced the near-catastrophe to a circumspect one-sentence statement. Not surprisingly, the press failed to pick up on the story. Three months later, the JPO weekly report followed with the abstruse statement that the JPO's Alaska Department of Labor liaison

. . . identified a number of safety deficiencies and Alyeska Pipeline Service Company (APSC) was found to be in noncompliance with the Federal Agreement and Grant of Right-of-Way Section 16, Laws and Regulations and Stipulation 1.20, Health and Safety as well as the State Right-of-Way Lease Stipulations 1.20, Health and Safety and 4.1, State Laws, Regulations, Permits and Authorizations.
. . . . APSC was directed to respond to the investigation findings specifying any action taken as a result of this accident or any plans to prevent future accidents. (26)

The timing and the abstract nature of JPO's low-keyed discussion of the fire investigation is noteworthy. More than 10 weeks earlier, Alyeska had already circulated a company-wide notice that identified most of the procedural violations in its own preliminary report. Based on that report, completed two weeks after the fire, Alyeska announced its intention to beef up the procedures and practices whose deficiencies were revealed by the fire. And more than five weeks earlier, the Department of Labor's report on the fire had identified the pipeline grant and lease requirements, as well as federal regulations, violated by Alyeska. Moreover, JPO's brief summary report was devoid of substantive information about the fire at Pump Station 9. Instead, the brief public notice focused on abstractions - the name and numbers of obscure grant and lease requirements. (27) As noted above, later in 2007, similar violations of fire safety procedures were associated with fires on the North Slope; would more timely disclosure by JPO have alerted others to the possibility that TAPS and North Slope operators might be playing with fire in a more timely manner?

(2) JPO has recently produced a stack of seven Comprehensive Monitoring Program (CMP) reports - a document whose stated purpose is to inform stakeholders about its monitoring efforts on TAPS. But the fact remains: As reported on this web site July 14, between mid-2002 and mid-2007, JPO did not issue a single issue of this primary communications document. (28) The date shown on the cover of five of the seven new reports does not appear to be the actual report release date; moreover, even though CMP reports are supposed to be prepared primarily for the public, despite repeated requests JPO has not been able to provide any evidence that the new reports were ever formally released. (29) In this regard, it is interesting to note that the new CMP reports were issued under the stamp of BLM - not JPO. BLM officials say that's because other agencies are unwilling to sign onto BLM's reports. (30) In addition to these problems, the CMP reports bear the mark of careless editing. (31) light of problems such as these, can one depend on the contents of those reports? Particularly in view of the dubious history of JPO's past CMP reports, (32) this question deserves serious consideration. The remainder of this section will consider the references in these reports to the issues PHMSA subsequently included in the corrective action, penalty and compliance orders issued against Alyeska last Nov. 27.

The June 2007 CMP report on the TAPS maintenance program contains discussion of the special procedure to deal with vibrations at RGV 32 instituted two years before violation of those procedures caused a spill. Here is what BLM's June 2007 CMP report on maintenance had to say about that problem:

During a pipeline startup on July 8, 2005 Alyeska discovered the Remote Gate Valve (RGV) 32 achieved a closed position ahead of RGV-33 which left a pressure of 443 psi behind RGV-32 with a slack line condition downstream of RGV-32. Opening of RGV-32 at the startup caused an inrush of upstream oil flowing into the downstream slack line causing the pipeline to move several inches. Alyeska adapted a temporary operating procedure to reduce the risk of future pipe movement in this segment. Strategic Reconfiguration Automation and Control Systems have mitigated this condition. (33)

The June 2007 CMP maintenance report gave no indication that failure to follow the procedures established for RGV 32 had caused the oil spill Jan. 9, 2007. In light of that spill, BLM's up-tempo conclusion - that SR automation and new control systems "have mitigated this condition" - appears to be premature, if not invalid.

Another CMP report, Performance of the Strategic Reconfiguration Project, is laced with statements that condemn Alyeska's performance. For example:

"Performance of the Strategic Reconfiguration (SR) Project was compromised by several factors. In the initial stages, a highly aggressive schedule and too broad scope led to poor engineering design, project management and procurement decisions."

". . . . poor quality permit package submissions."

"At least three submittals were returned for grossly incomplete and inaccurate information."

". . . the 'complete final design' was not prepared in the beginning of the project."

"APSC oversight of their prime design contractors, SNBC Lavalin and Hinz did not appear to be satisfactory . . .

"Review of the history of the SR Project, concludes that the initial project priorities and schedule were not appropriate to the scope of the initial project."

". . . unapproved equipment was installed and placed in service despite numerous quality inspection programs in use by APSC and APSC contractors. . . . 2006 APSC and JPO evaluations of the program verified that internal controls of quality were not satisfactory. Deficiencies identified were, for the most part, the same issues that have been problematic since 1993[.]" (34)

These observations appear to confirm the importance of the various SR problems discussed in the July 13 article on this web site. One of the report's observations speaks of the fire code at Pump Station 9:

"The SR objectives consisted of: addressing compliance with State Fire Codes, extending the life of TAPS for another 20 years, providing better operational flexibility, reliability, remote operation with a completion date of December 2005. At Pump Station 9 at least, these objectives were largely met except for completion by December 2005." (35)

From the foregoing, it appears that in BLM's view, fire concerns are an important part of SR - and have been largely satisfied.

Despite the dismal picture of Alyeska's SR performance painted by the numerous statements quoted above, the report concludes on this optimistic note:

". . . . once the construction effort was focused on finishing construction of PS 9 and preparing it for start up in February 2007, project performance improved. The post construction Functional Check Out, Commissioning and Start Up phases were conducted with a high level of performance that led to a successful start up at PS 9 in February 2007." (36)

As has been the case so often with past TAPS monitoring reports, it is difficult to reconcile the BLM report's carefully crafted endorsement with the fact that Alyeska nearly lost Pump Station 9 due to fire code violations while finishing the SR installations. One can only hope that Alyeska's - and Alaska's - future will not be disfigured by such unfortunate discrepancies between promise and practice.

(3) To ensure effective oversight and good communications with stakeholders, the JPO Executive Council was supposed to meet quarterly. But between 2002 and June 2007, the Council did not meet. As discussed in the article posted here July 14, this fact demonstrates, at the broadest level, the failure of the pipeline monitors to fulfill their promises on TAPS oversight, even though TAPS is generally regarded as the most intensively monitored pipeline in the country. BLM's Authorized Officer, Jerry Brossia, who played a central role in establishing JPO as the State of Alaska's Pipeline Coordinator in 1990 and became the federal Authorized Officer in 1997, says that over the past five years it was the state that blocked JPO Executive Council meetings. Brossia says he supported the efforts of Admiral Thomas Barrett, then PHMSA's Administrator (now Deputy Secretary of Transportation) to convene the JPO Executive Council meeting held in Anchorage June 13. According to Brossia, in 2003 the state didn't even want JPO to exercise oversight over the SR project and state unwillingness to monitor aggressively sometimes hampers monitoring efforts today. (37)

According to some parties familiar with pipeline monitoring, the inter-agency picture has reversed since 2003. The state, they say, is now exercising strong oversight on TAPS, while BLM tends to acquiesce to the will of the pipeline owners. Earlier this year, the governor of Alaska created a new agency in the Department of Natural Resources to ensure petroleum system integrity, in part to deal with what the governor called lax maintenance practices. (38) Additionally, early in 2007 state records custodians were quietly investigating JPO's questionable document handling practices. (39)

Against a backdrop of troubled Alaska production and pipeline operations, a demonstrably dysfunctional TAPS monitoring effort and conflicting views of inter-agency wrangling, PHMSA is beefing up its Alaska office while joining Brossia in advocating that Alaska government agencies make arrangements to work more closely together. Whether the state and federal pipeline oversight agencies can put Humpty-Dumpty back together again remains to be seen.

Conclusion

Articles on this web site have frequently called attention to similarities between problems on TAPS and on the North Slope, noting that both TAPS and North Slope field operations have been marked by chronic failure to identify and remedy potential problems in a timely manner. Long before congressional investigators used their investigative powers to develop information showing that cost-cutting led to BP's North Slope corrosion problems, this writer has argued that cost-cutting pressures are a major causal factor in both TAPS and North Slope operations. (40)

Consider in this regard Alyeska's ambiguous posture on the Pump Station 9 fire, as depicted in the company's on-line journal, Alyeska Monthly. In an editorial in the February 2007 issue of the monthly company newsletter, Hostler called attention to deteriorating safety conditions on TAPS in 2006, commenting:

"By our standards, we did not have a good year. . . . We will not tolerate poor safety performance on TAPS." (41)

But in the same issue of the company newsletter in which Hostler outlined his safety concerns, another article discussed the spill at RGV 32 without any hint that Alyeska recognized the cause to be an operating deficiency. And it was in the following issue that Hostler and other Alyeska executives issued their fulsome praised Alyeska's safety performance on SR, quoted above. Another article in the latter issue described Alyeska's pigging performance without mentioning the pig that Alyeska lost several months earlier. The following month, Hostler remained on message, commenting that

"Every day our professional workforce continues to deliver high safety and quality standards to maintain integrity in all business practices." (42)

Nine months later - after PHMSA issued its Notice of Probable Violations, Proposed Civil Penalty and Proposed Compliance Order on Nov. 27 - Hostler revisited the Pump Station 9 fire and RGV 32 oil spill in another editorial in the company newsletter. Without mentioning the PHMSA sanctions, he wrote,

. . . . the year started with two challenges that impacted our reputation - a tank vent fire at Pumps Station 9 and a spill from a loose fitting on the six-inch bypass line at Remote Gate Valve 32. As a company placing high standards on safety and environmental performance, these events were unacceptable and warranted changes in how we approach our work. (43)

Optimists may choose to take comfort in the hope that Alyeska has really changed. More realistic observers may recall the pictures of pig damage from 2000 that appeared on the back cover of this writer's 2002 status report on TAPS. As noted with those photographs from the year 2000, three years earlier Bob Malone, then President of Alyeska, had promised that the pipeline company would achieve what he called operational excellence by the year 2000. (44) While some may wish to call 2000 the year of The Year of Operational Excellence, to others 2000 looked more like The Year of Lost Pigs. Six years later, Alyeska was still losing pigs.

Hopefully, the state and federal oversight agencies can resolve their differences. The record indicates that Alyeska may not be able to correct its operational course without firm guidance from government monitors. Coordinated, effective oversight is therefore necessary, on TAPS and on the North Slope.

...........________________

Endnotes to Largest Proposed Penalty of 2007

1. U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA), Notice of Probable Violation, Proposed Civil Penalty and Proposed Compliance Order ("NOPV;" CPF 5-2007-5041), p. 12; and Notice of Amendment (CPF 5-2007-5042M), Nov. 27, 2007 (letters from Chris Hoidal [Director, Western Region, PHMSA] to Mr. Jim Johnson [Pipeline Vice President, Alyeska]). (To see PHMSA notices, click here.)

2. PHMSA, NOPV, pp. 2-8 and 12-13.

3. PHMSA, NOPV, pp. 1, 9-11 and 13.

4. PHMSA, NOPV, pp. 15-17 (Proposed Compliance Order); and NOA.

5. U.S. Department of Justice, "British Petroleum to Pay More Than $370 Million in Environmental Crimes, Fraud Cases: Charges Result from 2005 Texas Refinery Explosion, Alaska Pipeline Leaks and Attempt to Manipulate Markets" Oct. 25, 2007 (press release; accessed Dec. 31, 2007 at http://anchorage.fbi.gov/doj/pressrel/2007/environmentalcrimes102507.htm).

6. See: Alyeska Pipeline Service Co., "Alyeska Pipeline Service Company Starts Up New Pumps at Pump Station 9: First station switches to modular, scalable equipment" (Alyeska News Bulletin No. 1397), undated (circa Feb. 20, 2007); Alyeska Monthly, Feb./March 2007 ("First Pump Station Upgraded: Pump Station 9 switches to electrically driven pumps") and Nov./Dec. 2007; and Eric Lidji, " State scrutinizes Alyeska safety for pump station fire," Fairbanks Daily News-Miner, April 12, 2007.

7.From: PHMSA, "Summary of Enforcement Case Status"
(http://primis.phmsa.dot.gov/comm/reports/enforce/CaseStatus_opid_0.html#_TP_1_tab_1 and _tab_5 [accessed Jan. 8, 2008]; and "Summary of Proposed Civil Penalties" (http://primis.phmsa.dot.gov/comm/reports/enforce/CP_opid_0.html#_TP_1_tab_1 [accessed Jan. 8, 2008]).

8. See: Alyeska Pipeline Service Company, Pipeline Reconfiguration Project Overview: Pump Stations and Control Systems Upgrade -- Project Completion by End of 2005, March 2004, pp. 2, 4; and "$250 Million TAPS Upgrade Approved: Alyeska starting biggest TAPS project since construction" (Alyeska Monthly, March 2004 ["Feature Story"]). The Alaska Department of Revenue reports that "[c]urrent [expenditure] estimates are closer to $750 million" (Alaska Department of Revenue, Fall 2007 Revenue Sources Book, p. 44).

9. See: "$250 Million TAPS Upgrade Approved: Alyeska starting biggest TAPS project since construction;" and Pipeline Reconfiguration Project Overview: Pump Stations and Control Systems Upgrade -- Project Completion by End of 2005, pp. 6, 11.

10. See: "Statement of Kevin Hostler," President and CEO, Alyeska Pipeline Service Company, before the U.S. House Subcommittee on Oversight and Investigations (Energy and Commerce Committee), Sept. 7, 2006 (Hostler's testimony featured corrosion control and integrity management on TAPS, operating TAPS at reduced throughput" and pigging issues); and "Written Statement of VADM Thomas J. Barrett, USCG (ret.)," Administrator, PHMSA, before the U.S. House Subcommittee on Oversight and Investigations (Energy and Commerce Committee), Sept. 7, 2006.

11. Alyeska Pipeline Service Co., "Alyeska Pipeline Service Company Starts Up New Pumps at Pump Station 9: First station switches to modular, scalable equipment" (Alyeska News Bulletin No. 1397 [undated; circa Feb. 20, 2007). A similar statement by Hostler also appeared in Alyeska Monthly, March 2007 ("First Pump Station Upgraded: Pump Station 9 switches to electrically driven pumps").

12. Alyeska Pipeline Service Co., "To: All TAPS Employees - Subject: KYP [Keeping You Posted] #07-010 - Pump Station 9 Fire Incident Investigation," Jan. 17, 2007 (e-mail notice from Kevin Hostler, President and CEO).

13. From: Ray Elleven (Alaska Department of Labor Safety Liaison, Joint Pipeline Office), "Investigation of the January 6, 2007 PS 9 Tank Farm Fire" (JPO Technical Report No. ANC-07-E-001), March 7, 2007; Alyeska Pipeline Service Co., "Pump Station 9 Tank Vent Fire Root Cause Incident Investigation & Executive Summary - Final Report," March 9, 2007; and PHMSA, NOPV.

14. PHMSA, NOPV, pp. 1-9, 13.

15. See: Associated Press, "BP Advised To Update Fire Equipment After North Slope Blazes," Wall Street Journal, Oct. 6, 2007 ("The state fire marshal's office has advised oil company BP PLC [BP] to update its fire suppression and detection equipment following a series of blazes in North Slope oil fields this summer, officials said Friday."); and Wesley Loy, "Fire marshal faults BP systems - NEED ATTENTION: Report calls for better fire detection, improved maintenance," Anchorage Daily News, Oct. 5, 2007.

16. PHMSA, NOPV, pp. 2 and 4-5.

17. See: Alyeska Pipeline Service Co., Status Update: TAPS Vibration at Low Throughput, August 2006 (briefing sheet); Rich Mauer, "Alaskan Oil Line Rattles Raise Fears: LOW FLOW: Dispute Exists on How Vibrations Affect Pipeline Integrity," Anchorage Daily News, Oct. 10, 2006; Bureau of Land Management, Selected Portions of TAPS Maintenance Program, June 2007 (Comprehensive Monitoring Program Report), p. 20. For additional background on this issue, see: Richard A. Fineberg, The Emperor's New Hose: How Big Oil Gets Rich Gambling with Alaska's Environment, June 2002 (Alaska Forum for Environmental Responsibility), pp. 1-6 and 35-36.

18. Alyeska Pipeline Service Co., "To: All TAPS Employees - Subject: KYP [Keeping You Posted] #06-090 - Vibrations at Lower Throughput," Oct. 10, 2006 (e-mail notice from Kevin Hostler, President and CEO).

19. Alyeska Pipeline Service Co., "Pipeline Restarted after Leak on Bypass Piping Stopped,"
Alyeska Monthly, Jan./Feb. 2007.

20. PHMSA, NOPV, pp. 4-5.

21. PHMSA, NOPV, p. 12.

22. PHMSA, NOA, pp. 9-10.

23. Letter from Chris Hoidal (Director, Western Region, PHMSA) to Jim Johnson (Vice President, Alyeska Pipeline Service Co.), Nov. 27, 2007, p. 2.

24. See: Felicity Barringer, "Device Breaks Up in Pipeline, and Search Is on for Lost Piece," New York Times, Feb. 3, 2007.

25. Richard A. Fineberg, Joint Pipeline Office (JPO) Executive Council: Alaska Pipeline Oversight Directorate Meets For the First Time in Five Years - Who Are Those Guys and How Well Have They Monitored The TAPS Strategic Reconfiguration Project? July 14, 2007.

26. Joint Pipeline Office, "Safety Investigation" (in Weekly Report), April 11, 2007.

27. See notes 12 and 13, above.

28. This web site's July 14, 2007 report that JPO had not released a CMP report in five years was based on the statement of JPO's public information officer in response to a query from this analyst on June 13, 2007. (See: Joint Pipeline Office (JPO) Executive Council: Alaska Pipeline Oversight Directorate Meets For the First Time in Five Years.) In that report, a supporting footnote identified the most recent report posted on JPO's web site in June 2002 and added that "[a]gency personnel say they are in the process of preparing one or more CMP reports at this time." As of January 7, 2007, the 2002 report identified in that footnote remains the most recent CMP report posted at JPO's web site.

29. This writer found four of the new CMP reports in two boxes of documents provided by the JPO in late September and early October 2007 in response to a request for information submitted under the Freedom of Information Act (FOIA); the remaining three (denoted by asterisk below) were provided by JPO in late December in response to a follow-up request for all CMP reports released since 2002. The seven documents are listed by agency, author, title, cover date and JPO's internal Document Tracking System (DTS) number (and date entered into system).


BLM Right-of-Way Branch, Right-of-Way Compliance for TAPS
Operation and Maintenance, April 2007 (cover date)/ DTS# 20070921-3 (Sept. 21, 2007).

Joe Dygas / Performance of the Strategic Reconfiguration Project, June 2007 20070625-22
(June 25, 2007)
(TAPS Technical Report; JPO No.
ANC-07-E-011)

BLM Joe Hughes, W. Harrison, D. Lalla, R. April 2007 20071009-7
Williams, J. Goovernale and D. Rice / (Oct. 9, 2007)
TAPS Quality Program

BLM Reid Olson, D. Gnath / TAPS April 2007 20070612-4
Environmental Oversight Results (June 12, 2007)

BLM Kathy Mayo / Section 29 and the Alaska April 2007 20070612-6
Native Utilization Agreement * (June 12, 2007)

BLM William Harrison / TAPS Employee July 6, 2007 20071009-6
Concerns Program (ECP) * (Oct. 9, 2007)

BLM (N.A.) / Selected Portions of TAPS June 2007 20070612-5
Maintenance Program (June 12, 2007)

In response to repeated requests to JPO staff in December 2007, JPO has been unable to provide any information demonstrating that the seven recent CMP reports were ever formally issued or distributed to stakeholders.

30. Interviews with JPO officials, December 2007.

31. For example:
. . . . Five of the seven CMP reports, the cover date precedes the date of an internal document tracking stamp (found in the lower left corner of the cover) by an average of approximately three months. On questioning, JPO officials acknowledged that the date stamp would be an accurate indicate the date the document was ready for internal distribution - not publication.
. . . .Five of the seven new CMP reports contain undated introductory pages headed "Our Message to Stakeholders. Each proclaims that TAPS has transported more than 13 billion barrels of crude oil. In fact, Alyeska celebrated its 13 billionth barrel on April 27, 2000 - more than seven years ago. TAPS has now shipped over 15 billion barrels. (Alyeska Pipeline Service Co., the facts: trans alaska pipeline system, 2007, pp. 83, 85.) The stakeholder pages say "BLM is pleased to present [the report's name] to stakeholders." Unfortunately, however, three of the five titles on the stakeholder page don't quite match the title on the cover. (See, for example, . . . . )
. . . . The contents of the reports suffer from similar deficiencies. For example, the report CMP report dealing with TAPS Environmental Oversight Results focuses on "the period from October 2003 to October 2006." After listing all of the relevant stipulations on four pages (including the stipulations relating to material sites and contingency plans), the report turns to background, beginning with the statement that previous CMP reports on environmental compliance were released in 1998 and 2002 . Eight bullets, summarizing the conclusions of the 1998 report, follow, but there is no reference to the 2002 report conclusions. If the earlier report conclusions are relevant, why did JPO omit reference to the latter? (TAPS Environmental Oversight Results, pp. 9, 12-13.)

32. See: Office of the Inspector General, "Survey Report: Oversight Activities of the Trans-Alaska Pipeline System, Bureau of Land Management," U.S. Department of the Interior, February 2001, pp. 6-8 (Report No. 01-I-206); and discussion of CMP reports in The Emperor's New Hose, Ch. 3.

33. BLM, Selected Portions of TAPS Maintenance Program, p. 4 (Executive Summary); repeated at p. 25.

34. Joe Dygas, Performance of the Strategic Reconfiguration Project, pp. 4, 19, 24-27.

35. Performance of the Strategic Reconfiguration Project, p. 19.

36. Performance of the Strategic Reconfiguration Project, p. 4.

37. Personal interview, Dec. 27, 2007.

38. Personal interviews; see: Office of the Governor, "Governor Palin Signs Administrative Order" (Press Release No. 07-085), April 18, 2007.

39. In April 2007, the State Records Manager wrote:
"I believe it is critical that the SPCO address . . . [these] issues at its earliest convenience. . . .
1. . . . . it is reasonable to conclude that the integrity of the [JPO] case files is currently at risk . . . there is a disturbing, substantiated allegation that some case files include BLM-authored technical reports issued on JPO letter head that imnply state concurrence . . . but in reality no state participation or agreement has occurred. . . .
2. In one [unconfirmed] instance 10 boxes disappeared. . . .
(Memorandum from D. Dawson [State Records Manager, Division of Libraries, Archives & Museums] to Mike Thompson [Pipeline Coordinator, State Pipeline Coordinator's Office], "Subject: State Pipeline Coordinator's Office Analysis & Recommendations," April 30, 2007.)

40. See, for example: Background Report: TAPS Lease Renewal - Opportunity Lost (August 2004); Commentary: Documents Reveal Trans-Alaska Pipeline In Trouble; Monitors Punt (Nov. 2, 2005); and "Shocking?" Evidence Mounts from Alaska and Elsewhere that BP's Inadequate North Slope Performance Should Have Been No Surprise to Public Officials or Monitors (Sept. 3, 2006).

41. Kevin Hostler, "Committed to Improving Safety on TAPS" (President's Message), Alyeska Monthly, Jan. / Feb. 2007.

42. Kevin Hostler, "Open Work Environment on TAPS" (President's Message), Alyeska Monthly, April 2007.

43. Kevin Hostler, "Moving into the New Year" (President's Message), Alyeska Monthly, Nov./Dec. 2007.

44. The pictures appear on the inside back cover of The Emperor's New Hose. They can also be found at the back of the author's Sept. 3, 2007 report, "Shocking?" Evidence Mounts from Alaska and Elsewhere that BP's Inadequate North Slope Performance Should Have Been No Surprise to Public Officials or Monitors.

 

 
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