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Officials look back to killed oil legislation

Some say proposal would have curbed pipeline corrosion

Posted: Monday, September 04, 2006

ANCHORAGE - BP's partial shutdown last month of the Prudhoe Bay oil field has dredged up memories of a request five years ago by then-Gov. Tony Knowles for $5 million to strengthen oversight of Alaska's aging oil facilities and streamline new oil and gas exploration.

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But state officials can only speculate about whether ratcheting up inspection on the North Slope several years ago would have prevented the pipeline corrosion that cut the output of the nation's largest oil field by more than half.

Brown said she does know that not getting the funds was a setback for safeguarding Prudhoe Bay. Under the plan, DEC would have opened a North Slope field office to test air and water quality and stage oil spill response drills.

The plan was proposed when oil industry watchdogs and Congress, as they are now, were criticizing inadequate safety at the North Slope oil production facilities. At the time, tests revealed an excessive failure rate of surface safety valves.

The proposal was one of the many casualties of a budget deficit, said Lt. Gov. Loren Leman, who was then chairman of the Senate budget subcommittee on the DEC.

Going into 2002, the price of Alaska crude oil was about $20 a barrel, nowhere near the $70 per barrel it has fetched lately, he said.

Gov. Frank Murkowski said he believes the oil industry, not the state, should be held responsible for testing and leak-proofing its own pipes.

"You can't expect government to do what a prudent manager does to protect his or her investment," Murkowski said during an early August visit to Prudhoe.

A leak in March at Prudhoe Bay resulted in a spill of up to 267,000 gallons, the largest in the history of oil production on Alaska's North Slope. The more recent spill Aug. 6 led to the shutdown of more than half of the normally 400,000 barrel-a-day Prudhoe Bay production. Both spills are being blamed on corrosion.

Days after the partial shutdown, the federal Department of Transportation stepped in and ordered BP to conduct more rigorous tests on its transit pipelines, which carry market-ready oil to the 800-mile trans-Alaska pipeline. DOT engineers have been at the site since Aug. 8.

The state is not heavily involved in corrosion oversight.

Oil companies BP and ConocoPhillips are required under a 1999 agreement to report corrosion to the state annually and must pay up to $500,000 each year for corrosion experts to advise the DEC.

The agreement was made with the state when former North Slope major Arco was sold to BP and ConocoPhillips.

State DEC commissioner Kurt Fredriksson said his department did not ask for a corrosion-related budget increase under the Murkowski administration before the March spill.

Since then, in a request allowed under the 1999 charter agreement, the oil industry paid the state $700,000, most of which will go toward a conference on controlling pipeline corrosion, Fredriksson said.

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Information from: Anchorage Daily News, http://www.adn.com



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