BP'S ALASKA PROBLEMS COULD HAMPER EFFORT TO DRILL IN ARCTIC REFUGE

by J.R. Pegg

(ENS) WASHINGTON -- British Petroleum's problems with pipeline corrosion at its oil field on Alaska's North Slope could jeopardize future efforts to allow drilling in the Arctic National Wildlife Refuge, the chair of the Senate Energy Committee said Tuesday.

The "inexcusable" events that forced the oil giant to partially shut down operations in Alaska have damaged the public's trust in the industry, said committee chair Pete Domenici, and could translate into less support in Congress for opening the Arctic refuge.

In March the Senate voted 51-49 to approve drilling in ANWR, but additional votes will be needed to formally open the Arctic refuge.

"ANWR could go backwards with this kind of event," said Domenici, a New Mexico Republican and a leading Senate proponent of drilling in the refuge.

Senator Jim Bunning, a Kentucky Republican, echoed that concern.

"We were assured that nothing like this could ever happen at Prudhoe Bay," Bunning said. "I believe that this type of situation completely sets back any hope that we had to get that bill passed in the Congress of the United States É this is a major setback.'

Tuesday's hearing was the Senate Energy Committee's first foray into the two BP pipeline leaks caused by serious corrosion of transit lines at the company's Prudhoe Bay oilfield.

A leak in March spilt some 5,000 gallons of oil onto the Alaskan tundra. Subsequent inspections unearthed another leak and significant corrosion at another pipeline, forcing BP in August to halve its daily output from the Prudhoe Bay field to about 200,000 barrels. BP officials have admitted that the company failed to use internal inspection devices, so-called smart pigs, in the affected pipeline in more than 15 years.

The company failed to conduct "the most basic of corrosion inspection techniques," Domenici said. "This is a black eye on BP."

The committee expressed concern that the two low-pressure, low-stress pipelines in question are not covered by federal regulation. It is "important to note," Domenici said, that the corrosion and the resulting spill were discovered in August only because of inspections ordered by federal regulators following the March spill.

Thomas Barrett, administrator of the federal Pipeline and Hazardous Materials Safety Administration, said his agency is focused primarily on "lines that pose a risk to life safety, typically high stress oil and gas lines in populated areas."

The agency, which is under the U.S. Department of Transportation, initiated a rulemaking in August to potentially regulate some of the 5,000 miles of low-pressure pipelines currently not subject to federal regulation.

Barrett said blame for the problems with BP's pipelines lies squarely with the company.

"It happened because BP fundamentally didn't understand the condition of their lines É and didn't maintain them properly," Barrett said. "The operator is quite simply accountable for this."

Barrett said the federal pipeline safety agency does not understand "why BP did not more aggressively address corrosion problems that led to this leak much earlier."

The BP situation is "an anomaly," Barrett told the committee. "We have found most pipeline operators demonstrate a higher standard of care than this regardless of whether federally regulated or not."

Senator Dianne Feinstein, a California Democrat, rejected that assertion.

If the pipelines are unregulated, Feinstein asked, "how can you say others are acting responsibility?"

Committee members said there could be a need for new pipeline safety legislation that also takes into account considerations about supply concerns.

"This state of affairs was a wake-up call to the fact that improper maintenance of our domestic facilities could be just as serious a threat to our economy as a foreign country turning off the spigot or a Gulf hurricane shutting down producing wells," Domenici said. "It's one thing for this country to be adversely affected by events over which it has little or no control. It's quite another to have adverse consequences -- that could have been prevented -- inflicted on it by companies like BP. That is simply egregious."

BP executives said the company is investing heavily in its infrastructure and oversight programs to ensure corrosion problems are addressed promptly.

"BP has fallen short of the high standards we hold for ourselves, and the expectations that others have for us," said Robert Malone, head of BP's U.S. operations. "We recognize that there has been a series of troubling problems that are unacceptable to us and contrary to our values."

BP has announced that it will spend $195 million on maintenance at the Prudhoe Bay facility in 2007, including some $150 million to replace 16 miles of the corroded pipeline.

Malone told the panel that BP plans later this week to ask federal regulators to allow it to restart production from the eastern part of its North Slope oilfield -- a move that would allow it to run further tests on the corroded pipeline.

Initial tests have shown that damaged segments can be bypassed, Malone said, and indicate the line could be restarted without incident.

Barrett said his agency would not rubberstamp BP's plans to temporarily fix the line.

"We must be assured that even a temporary restart can be operated safely before it can proceed," Barrett said.