Nerves still raw a year after oil pipeline leak

PRUDHOE BAY, Alaska - It sits, still unused, on supports about seven feet high, and it lies four miles long.

And depending on who's talking, this new section of transit pipeline on Prudhoe Bay - the nation's largest-producing oil field - is either a daily reminder of past maintenance neglect, or it represents a decades-long commitment to the future of North Slope oil production.

It has been a year since the pipeline shut down, and few have forgotten the event that sent oil prices inching toward $80 a barrel, stirred fears of escalating gas prices, and sent companies searching for other supply sources.

Some nerves remain frayed, with state and federal lawmakers still questioning how BP P.L.C. failed to adequately address concerns raised by its own employees, arguing that BP placed profit ahead of safety and proper care.

The company says it understands the criticisms remain fresh, but argues progress is strong with new accountability practices in place and a $250 million pipeline upgrade on schedule for completion next year.

"We are the operator, and we take accountability for what happened," said Tony Brock, BP Exploration Alaska Inc.'s technical director.

"We'd like to be seen as a company in North America that is trusted and respected," he said. "I would say we've got a long way to go before we can make that request, so we will establish that over time."

BP has a 26 percent stake in the field it shares largely with ConocoPhillips and Exxon Mobil Corp., which hold 36 percent interest each.

Federal and state lawmakers, watchdog groups and Wall Street say they are pleased with the progress, but still seek answers to what truly led to the leaks and a 10-week-long partial shutdown that began Aug. 6.

On that day, BP began reducing Prudhoe Bay operations after discovering its second leak in six months, ultimately cutting the field's daily production by about half. At the time, it was producing more than 400,000 barrels of oil a day, or about 8 percent of the nation's production.

By mid-October, the company had returned to the level before the shutdown. By then, about 13 million barrels of oil had been kept from the market.

Since last year's shutdown, Brock said, changes to BP's management structure have removed bureaucratic layers and helped the integrity of the company's operations. This means getting to problems quicker, before they become serious, and enhanced communication with front-line employees.

David Totemoff, a 30-year employee who was in Prudhoe Bay when the first barrel of oil was being shipped in the summer of 1977, said the work environment had changed from last year, when public criticism wore thin with some of the proud workforce.

"What we see now is a way-better, positive deal for all of the people working here," he said. "We've had lots of ups and downs, but it's easier to ask questions and raise issues.

"Last year was tough because I didn't know how to take some of the stuff that was said, knowing all the work we do up here."

Additionally, BP chose to replace 16 miles of the transit line rather than continually do patchwork.

So far, eight miles have been built, but none of it will be used until the entire line is complete. For now, bypass lines serve as temporary conduits to the field's gathering centers where oil, natural gas and water are separated before being shipped on an 800-mile trans-Alaskan pipeline to the Valdez Marine Terminal.

Upgrades and management changes are half the battle for BP.

Federal and state lawmakers still are dogging the company, and that scrutiny could spill over to the company's partners, Exxon Mobil and ConocoPhillips.

In recent committee hearings, legislators in Alaska and Washington have questioned whether cost-cutting measures were a higher priority than maintenance and safety.

"I'm very, very unhappy. In fact, I'm downright mad," said State Rep. Carl Gatto, a Republican who is co-chairman of the House Resources Committee. "Is this neglect? Absolutely. Does it go all the way to criminal? I have trouble with that, but I don't have trouble saying it's egregious."

Gatto said he had requested more information from BP, Exxon Mobil and ConocoPhillips about the decisions made behind the lax maintenance practices that led to the leaks.

He and other lawmakers also are struggling to decide whether BP should be allowed to deduct a portion of the $250 million new pipeline costs under the state's new petroleum tax laws. A bill to prohibit deductions on repairs to poorly maintained facilities is currently stuck in an Alaska state House committee.

Failure thus far to pass the measure has bill backers, including Republican Gov. Sarah Palin, and critics questioning the appearance of a longtime cozy relationship with oil companies.

For now, the state is assembling a team of inspectors and engineers dedicated strictly to oversight; it also has set aside $5 million to inspect all of the state's oil and gas facilities over the next several years.

"I won't kid you, we've got a lot of work to do, in my opinion, to determine the focus and what some of the oversight gaps and risks of those gaps are," said Marty Rutherford, the state's deputy commissioner for the Department of Natural Resources. "It's an important message for the nation to be comfortable with what we are doing."

Wall Street wants assurances that the North Slope, as well as BP's other North American operations, are not going to grab more headlines, as happened briefly in late May when a water pipeline leaked, causing another partial, yet smaller, shutdown.

Ron Oster, analyst with A.G. Edwards Inc., said it was too early to judge whether BP had emerged from some of its troubles, which also include problems at two North American refineries and start-up problems in a Gulf of Mexico deep-water project.

Last week, BP chief executive officer Tony Hayward acknowledged that the company still was struggling to recover from these incidents when it reported a 1.5 percent quarterly earnings boost that came largely from a refinery sale to offset production declines.

Time will tell, Oster said.

"There could be overhang on the share-price performance," he said. "If they are able to maintain production at the predisruption levels, that could be sufficient to restore investor confidence."