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Alaska Editorial: Oil producers need to maintain pipeline, image

Posted: Friday, August 29, 2008

T wo years ago this month, BP Exploration Alaska Inc. shut down one of the main transit lines at Prudhoe Bay, cutting off about half the field's production, after discovering corrosion-related leaks. The company launched a massive rebuilding project that is on schedule to be completed by the end of this year, according to former Alaskan and BP America President Bob Malone.

The impending completion of this quarter-billion dollar effort is good news for everyone in Alaska, but the initial tale behind the leaks is disturbing. Investigators from Congress and government agencies showed the company had put too much confidence in theoretical reasons to believe things were fine.

BP had an impressive corrosion control system upstream of its gathering centers. Theoretically, the oil leaving those centers via the main transit lines across the western and eastern sides of Prudhoe Bay should have been clean. It was, as the company said, "sales-quality crude oil." So the company didn't look as hard at the transit lines.

It turned out it should have. The oil carried enough sediment and other contaminants to cause problems in the pipes over the long-term. BP had planned to run a "smart" pig through the western line in 2006, but the leak came first in March. When another leak was discovered in the eastern line in August, it was clear something was wrong.

No oil spill is a pretty thing, but, from an environmental standpoint, these leaks were relatively minor - about 5,000 barrels on the western side and 25 barrels on the eastern. Their greater cost to Alaskans came in terms of dollars and image.

The dollar value of the reduced oil production is hard to calculate, but it continues to ripple out in curious ways. This month, the Federal Energy Regulatory Commission is entertaining arguments from oil companies about whether the reduced 2006 volume in the trans-Alaska oil pipeline might increase the line's per-barrel shipping tariff. The tariff price makes a big difference in the state of Alaska's income, because such transportation costs are deducted from the taxable sale value of the oil.

The greater cost to Alaska might be in image. As a few members of Congress noted back in 2006 during the hearings, the spill undermined Alaska's claim that North Slope oil development is first-class. Environmental activists could only agree.

With BP's completion of the repairs, Prudhoe Bay should recover and maintain its well-deserved status as the cleanest oil field in the world.



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