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Trans-Alaska Pipeline System: Economics

Trans-Alaska Pipeline System: Environment

Reports and Research Memoranda


Richard A. Fineberg

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(Archived June 4, 2006)

Recent Headlines from Alaska on North Slope and Pipeline Production and Development

April 9, 2006

Updates on TAPS

As the attempt by drilling advocates to include drilling for oil in the Arctic In early April, press reports disclosed that a financial analyst on the Alyeska Pipeline Service Company's Trans-Alaska Pipeline System (TAPS) says he was asked to leave the company after he refused requests To provide inflated reports of how much the pipeline company spends on anti-corrosion measures. A few days later, in a separate incident, another press report disclosed that an Alyeska worker at the pipeline's Valdez Marine Terminal had falsified environmental compliance documents between 2001 and 2003. (See: Falsifying Documents?)

Meanwhile, on April 6 Alyeska President Kevin Hostler sent a notice to all employees telling them to plan for further delays in implementing the pipeline's "strategic reconfiguration" makeover. Beset with problems, that project trundles along, over budget and behind schedule. (See: TAPS in Trouble.) Planned for completion by year-end 2005 when the project was officially approved by the TAPS owners in March 2004, implementation is now planned for 2007. (See:."Keeping You Posted.")

Required by statute, a company's oil spill prevention and contingency plan (c-plan) spells out the specific procedures used by the operator of a petroleum facility to prevent spills or respond quickly in the event that one occurs. Despite the c-plan claim that TAPS keeps a bullet hole clamp readily available for emergencies, when the pipeline spewed oil from a bullet hole in October 2001, Alyeska was unable to apply a clamp to stop the leak for more than 36 hours. To speed mounting the clamp during the emergency, Alyeska tried to reverse pipeline flow at the spill site in hopes of reducing pressure - a procedure that the c-plan specifically warned against. Four months later, Alyeska belatedly discovered that the untested procedure had caused damage to pipeline support structures 125 miles from the spill site. In the aftermath, Alyeska promised to remedy both emergency response problems and fix the c-plan. The pipeline company has developed a new bullet-hole clamp. But 4-1/2 years after the spill, the c-plan still doesn't tell emergency responders where the new clamp can be found (it reportedly sits on a backhoe in a Fairbanks storage yard), or even that it exists. Nor does the c-plan clarify reverse flow procedures. On December 5, 2005, Alyeska released its seventh revision of the pipeline oil spill contingency plan since 2001, when the original, inadequate language was picked up from previous versions of the plan. The faulty language regarding bullet hole clamps and reversing flow remains. (See: Paperwork.)

After the TAPS owners hiked 2006 tariffs (shipping charge) to $3.98 per barrel in December, the Regulatory Commission of Alaska (RCA) ordered the TAPS owners to cut their rates for the small portion of TAPS bound for in-state refineries (and therefore under RCA jurisdiction) to $1.96 per barrel (see RCA order). It was the third time since 2002 that the RCA had ruled that the pipeline owners were charging excessive tariffs (see Recent Articles on Trans-Alaska Pipeline Tariff Issues). On January 16, 2006. a state Superior Court order rejected the pipeline owners' challenge to the RCA's actions. Meanwhile, the TAPS owners continue to charge the higher tariff for most of the oil they ship, which is regulated by the Federal Energy Regulatory Commission (FERC). Pipeline shippers Anadarko and Tesoro, as well as the state, have challenged the higher tarffs at FERC.

North Slope Oil Spill:

As cleanup workers in Arctic gear and protective suits work to control the environmental damage from he largest oil spill in the history of Alaska North Slope operations, sources who have visited the site say that BP's reputation may turn out to be the most serious casualty of that spill. According to national and international press accounts, the 3.1-mile pipeline between two production facilities at the Prudhoe Bay field had been leaking for at least five days when the spill was discovered by a BP worker March 2.

After the spill, BP officials termed the performance of their pipeline leak detection system "unacceptable" and emphasized how much money the company was spending on North Slope anti-corrosion measures. What BP officials didn't say was that the company had been resisting requests of regulators to upgrade the North Slope field pipeline leak detection system for years, and that the failure to recognize the extent of corrosion on that line demonstrates that their corrosion program had also failed. (See: report.)

In addition to investigation of the recent spill, congressional offices and various at least two other federal agencies are now investigating past North Slope oil spills and other problems associated with North Slope and TAPS operations.

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