BP official says Alaska pipeline fixes on target

Company on schedule to finish $260 million project by year's end

Posted: Tuesday, August 26, 2008

HOUSTON - BP is on target to finish replacing and fixing miles of pipeline on Alaska's North Slope, about two years after corrosion-induced leaks crimped the nation's oil supply and prompted harsh criticism of the company, the chief of the oil giant's American division said Monday.

Al Grillo / The Associated Press / File
Al Grillo / The Associated Press / File

After a massive oil spill in March 2006 and the subsequent discovery of corroding pipes five months later, London-based BP said it would replace 16 miles of the 22 miles of transit pipeline it operates at Prudhoe Bay, the nation's largest oil field.

Bob Malone, president and chairman of Houston-based BP America, said the company was on schedule to complete the $260 million project by year's end, though he acknowledged BP still has lots of work to do in Alaska. He said BP continues to test sections of the pipeline for corrosion.

"It's not to say Alaska is fixed," Malone said. "I'd never say that. But Alaska has the talent, they've got the engineers, they've got the corrosion focus, and we've now got the risk assessment process we need to prioritize."

The 201,000-gallon oil spill in March 2006 and a smaller spill five months later ultimately caused BP to halve production at Prudhoe Bay for several weeks - an unexpected thinning of the nation's oil supply.

Both leaks were traced to the failure of subsidiary BP Exploration Alaska Inc. to regularly clean and inspect two of its pipelines over the course of several years. BP ultimately agreed with federal prosecutors to pay $12 million in fines for the first spill, the largest ever on Alaska's oil-rich North Slope.

Under the agreement announced in late 2007, the company also paid $4 million in restitution to the state of Alaska and $4 million to the National Fish and Wildlife Foundation for Arctic environmental research.

BP executives, Malone among them, were brought before Congress to answer to lawmakers. Some members of Congress called the mistakes unacceptable given the oil industry's record profits and the relatively inexpensive measures that might have prevented the spills.

Malone told lawmakers then that poor maintenance led to the accidents and that the company's reputation had been damaged.

Since taking the helm of BP's American arm in the summer of 2006, Malone has worked to mend BP's image. In addition to the problems in Alaska, he's had to deal with fallout from the 2005 Texas City refinery explosion that killed 15 people and a 2004 scheme by BP America to inflate propane prices.

He recalls testifying before Congress after the Alaska spills as one of the most unpleasant experiences of his life.

"To look at Congress and look at the American people and say that we made a huge mistake and we're sorry ... that's hard. That's very hard," Malone said.

BP remains bullish on prospects for its Alaska investments and is moving forward with another pipeline project it's planning with ConocoPhillips, Malone said.

In April, BP and Houston-based ConocoPhillips announced they would jointly develop a multibillion-dollar pipeline to move North Slope natural gas to U.S. markets.

Malone said BP was moving ahead - despite the recent endorsement of a competing project from TransCanada Corp. by Alaska Gov. Sarah Palin. He noted the partners were gathering engineering and other technical information needed to submit an application for the pipeline, dubbed Denali, with the Federal Energy Regulatory Commission.

BP spokesman Ronnie Chappell said Denali representatives hoped to have commitments from potential pipeline customers by late 2010 or early 2011. If sufficient, they then would submit the application to FERC, he said.

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