9/23/06 thru 9/09/2006 AFER BP News Stories

Anchorage Daily NewsSeptember 22, 2006

  http://www.adn.com/money/industries/oil/story/8220818p-8117599c.html

BP acts on fears of caller ANONYMOUS: The firm heard women may have been denied jobs. By WESLEY LOYAnchorage Daily News Published: September 22, 2006 Last Modified: September 22, 2006 at 05:54 AM

BP is investigating complaints that women possibly were denied jobs in the Prudhoe Bay oil field for lack of separate women's housing, a company spokesman said Thursday.

The investigation was begun after an anonymous woman on Wednesday called a secretary to BP's Alaska president, Steve Marshall, expressing concern about reprisals if she complained, said BP spokesman Daren Beaudo.

BP, which runs the Prudhoe Bay field on behalf of itself and other owner companies, will look into whether BP or oil field contractor companies somehow discriminated against women workers, Beaudo said.

"We believe in equal opportunity," he said, adding that BP managers don't tolerate discrimination against any class of workers whether they work directly for BP or a contractor.

BP and its contractors have brought hundreds of additional workers to the North Slope since Aug. 6, when the London-based energy giant began shutting down the giant Prudhoe field due to corrosion-related pipeline leaks.

The field, which normally produces about 400,000 barrels per day of crude oil, remains severely hobbled with output still down by about half.

BP and its contract workers are testing miles of above-ground pipelines for corrosion and installing new pipes in an effort to bring the field back up to full production. The work is sometimes rough, requiring laborers to strip thick insulation off above-ground steel pipes.

The influx of new workers has strained the Slope's housing capacity, forcing BP and its contractors to bring in portable housing units in some cases to accommodate all the workers, Beaudo said.

BP will investigate to see whether some women were denied jobs because there wasn't adequate women's bed space available, he said.

Rick Wilson, a manager for Pacific Environmental Corp., one of several contractors doing pipeline and other work on the Slope, said his company is providing ample work to women, and that the firm's lead person on the Slope is a woman.

Daily News reporter Wesley Loy can be reached at wloy@adn.com   or 257-4590.

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Seattle TimesSeptember 22, 2006

http://seattletimes.nwsource.com/html/localnews/2003270403_alaska22m.html

 Alaska politics crazy this year, even by state's own standardsBy Ralph ThomasSeattle Times staff reporter

ANCHORAGE  How fitting for tavern owner Mr. Whitekeys that in the weeks leading up to his final show, voters dumped their once-popular governor and federal agents raided state legislative offices  searching for, among other things, hats emblazoned with "Corrupt Bastards Club."

Whitekeys has spent a quarter-century lampooning Alaska's politicians in stage shows at his Fly-By-Night Club, a bright-blue bar that proudly bills itself the "sleaziest" nightspot in town.

He's never had a shortage of fodder. Alaska, a state seemingly still in puberty, always has been known for its colorful characters and political upheavals.

One former governor  there have been only eight  was nearly impeached and another claimed he was guided by an invisible "little man" on his shoulder. In the 1980s, two of the state's most powerful lobbyists were sent to prison on extortion and racketeering charges. A state lawmaker was busted for illegal possession of machine guns.

"This place plays by its own rules. Always has," said Whitekeys, who recently sold the bar and put his stage show into hibernation.

But even by Alaska standards, things have been pretty wild lately.

Last month, Gov. Frank Murkowski suffered a humiliating defeat in the Republican primary, losing badly to the former mayor of a town not much bigger than Omak. A U.S. senator for 22 years before becoming governor, Murkowski was dogged by ethics scandals and political missteps, including appointing his daughter to his old job in

Congress and buying a private jet.

On Aug. 31, FBI agents swarmed the offices of six legislators, including Senate President Ben Stevens  son of the state's most powerful figure, U.S. Sen. Ted Stevens. At the Capitol in Juneau, agents lugged boxes marked "evidence" past photo-snapping tourists.

Though little has been revealed about the investigation, it's clear the feds are looking into the relationship between lawmakers and Veco, a politically powerful oil-field service company with close ties to the younger Stevens.

All this happened against a backdrop of trouble for Alaska's lifeblood oil industry. In early August, BP was forced to partially shut down the giant Prudhoe Bay oil field after discovering badly corroded pipes. BP officials, already facing a criminal probe into an earlier spill at Prudhoe, were hauled before Congress and berated for ignoring warnings about the corrosion.

Aside from rocking two of the state's most-prominent political families and shaking up the state's Republican-dominated establishment, the events last month further jeopardized two of Alaska's biggest petroleum dreams.

Murkowski and the Legislature have been jousting for the past several months over his proposal for a new pipeline to carry natural gas from the North Slope to markets in the Lower 48. The $25 billion, 2,100-mile pipeline would create a construction boom and tap the state's vast gas reserves.

But legislative leaders have no desire to take the project up again right now.

Meanwhile, BP's problems at Prudhoe Bay pose a serious obstacle to the state's effort to allow oil drilling in environmentally sensitive areas, such as the Arctic National Wildlife Refuge.

Dependent on oil

In a sense, everyone in Alaska is on the take from oil.

Nearly 90 percent of the state budget comes from oil taxes and royalties. Citizens pay no state taxes. And the state next month will send out Permanent Fund dividends, the annual cut each citizen gets from earnings on the state's $34.5 billion oil savings account. This year's checks are $1,106.96 per person.

Meanwhile, record-high oil prices have created a gusher of new money for the state treasury.

So it's no surprise that Alaskans generally have had a friendly relationship with the oil industry. But things have gone a little sour lately, said Jerry McBeath, a political-science

professor at the University of Alaska, Fairbanks.

McBeath said many Alaskans  who have been hit as hard as anyone by high fuel prices  don't believe the state has been getting its fair share of the record-high profits the industry has reaped the past few years.

Politically, "this is the worst time for the industry since the Exxon Valdez oil spill," McBeath said.

A citizen initiative before voters in November would for the first time tax natural gas while it's still in the ground. The measure, aimed at forcing energy companies to start producing the gas, is bitterly opposed by the industry but stands a good chance of passing.

"The industry is under a lot of pressure now  on all kinds of fronts," said Judy Brady, executive director of the Alaska Oil and Gas Association.

Both of the leading candidates to replace Murkowski  former Gov. Tony Knowles and Sarah Palin  openly criticize the industry.

Knowles, a Democrat who has been considered a friend of big oil, and Palin, the maverick Republican who defeated Murkowski last month, both say there is a general sense that the state's political leaders have conceded too much to the oil companies. And with profits soaring, they say, it's especially offensive to learn that BP failed to maintain crucial pipes at Prudhoe.

"All of that mixes together into a pretty unpalatable stew," Knowles said.

"Bald Ego" takes flight

Murkowski can't blame the anti-oil mood for his demise.

In late 2002, just after he was sworn in as governor, Murkowski appointed his daughter, Lisa Murkowski, to replace him in the Senate. It was all downhill after that  and Murkowski hit a lot of trees on the way down.

Two political friends he appointed to state jobs were chased from office by ethics complaints.

Murkowski scrapped the state's "longevity bonus" program, a monthly cash payment to seniors. And even though the Legislature tried to block his efforts to buy a jet, he kept pushing and eventually got his plane  a craft his critics dubbed the "Bald Ego."

On top of all that, the public and many legislators were miffed by Murkowski's secret negotiations with oil lobbyists over a major rewrite of oil-tax laws and the industry's gas-pipeline proposal.

By election time, one local columnist had taken to calling him America's "most unpopular nonindicted governor." Murkowski's 19 percent showing in the primary was the worst in state history for an incumbent governor.

State Rep. Jay Ramras, a rookie Republican lawmaker from Fairbanks, said the election was a "referendum on the leadership style of a very long-in-the-tooth ex-U.S. senator."

But Palin said it was more than that. Palin, former mayor of Wasilla, a small town 40 miles north of Anchorage, won despite being outspent by both of her opponents and her rocky relationship with Republican Party leaders.

It was Palin who pressed the ethics complaints that forced out two of Murkowski's appointees. And she was a leading critic of Murkowski's dealings with the oil industry.

Aside from going for Palin's populist message, voters also approved a ballot measure that largely restores campaign donation and lobbying limits that Murkowski and the Legislature weakened three years ago.

"People are saying, 'No more of this,' " Palin said.

Veco a prominent player

Palin said the FBI raids will only fuel that mood.

The FBI remains mum about the investigation. But agents were searching for "anything of value" provided to legislators by Veco executives and documents related to the recent high-stakes oil-tax and gas-pipeline talks, according to a copy of a search warrant obtained by the media.

Agents were also looking for hats or garments with the slogan "Corrupt Bastards Club" or "Corrupt Bastards Caucus," nicknames several lawmakers jokingly gave themselves after a newspaper column accused them of being too cozy with Veco.

Veco has long been a prominent political player. The company's top executives handed out about $1 million in state and federal campaign donations during the past decade  much of it coming in the past two years as the gas-pipeline talks heated up, according to the Anchorage Daily News.

The company, which has been cited in the past for violating campaign finance laws, also has paid big consulting fees to state lawmakers.

Sen. Ben Stevens, for instance, has received more than $250,000 in consulting fees from Veco since 2001. State law doesn't require Stevens or the company to disclose what work he did  and neither is saying.

Knowles and Palin have both sworn off donations from the company, although Knowles received more than $20,000 from Veco in past elections. In Washington state, U.S. Senate candidate Mike McGavick said he returned $14,000 he received from company executives.

Meanwhile, several Democratic legislators have decried what they say is a "culture of corruption" in the Legislature.

"I've watched for the last 10 years, and each year these Veco people and industry people get more and more blatant," said Rep. Harry Crawford of Anchorage.

But others say they haven't seen the unseemly atmosphere the Democrats describe.

"Everybody gets their arms twisted, but that's part of the job," said Rep. Ralph Samuels, an Anchorage Republican. "I've never had anyone say, 'Hey, we held a fundraiser for you, you better vote for our bill.' "

State Republican Party Chairman Randy Ruedrich notes that federal probes sometimes turn out to be little more than fishing expeditions.

But Mike Doogan, a former newspaper columnist who is running as a Democrat for the state House, said he doubts the feds would raid the offices of a powerful U.S. senator's son without good cause.

"Anybody who says this was a fishing expedition, go whistle," Doogan said. "They've got something."

And then there's Mr. Whitekeys. With Alaska in the midst of such political upheaval, Whitekeys said he worries he's "giving up a gold mine" by giving up his stage at the Fly-By-Night.

"But that's why we're closing," he laughed. "Because I got all that money under the table from Veco and now I don't have to work anymore."

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com

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Financial TimesSeptember 20, 2006

http://www.ft.com/cms/s/f24d51d2-4844-11db-a42e-0000779e2340.html

BP battles to clear its Augean stablesBy Carola Hoyos

Published: September 20 2006 03:00 | Last updated: September 20 2006 03:00

On March 23 last year, a cloud of highly flammable hydrocarbons erupted at BP's Texas City refinery, after a catalogue of mechanical failures. Alarms remained silent, level indicators failed to judge the mounting danger and valves jammed.

At 1.20pm, probably ignited by a spark from a pick-up truck, the cloud burst into flame, setting off a series of explosions.

Fifteen workers in two trailers next to the tower died and 170 others were injured.

Long after families had buried their dead and the refinery had been rebuilt, the explosion continues to tear through BP's corporate fabric. Until the day of the tragedy, BP and Lord Browne, its chief executive, had enjoyed as celebrated and successful a run as is possible in one of the world's most dangerous and unpredictable industries. Lord Browne was regularly voted Britain's most admired business leader.

However, on March 23 BP crossed a "fault line", Lord Browne would later say, that would force a "fundamental change" in the way the company operated. For BP, Texas City has been as profound an event as Exxon's huge oil spill at Valdez in Alaska in 1989. The explosions at Texas City marked the beginning of a wretched 18 months. In that period, BP's flagship Thunder Horse platform in the Gulf of Mexico was damaged in a hurricane in July 2005 and its Alaska pipelines corroded so badly that almost exactly a year after the Texas City disaster they caused the biggest onshore spill in the state's history and forced the company to shut America's largest oil field.

This summer, the US government accused BP's traders of having tried to corner the propane market in 2004; and Lord Browne himself was strong-armed by his chairman into announcing he would retire promptly in 2008.

The run of trouble has prompted investors to sell BP shares and to ask whether the company had a systemic problem.

This week's announcement that BP would have to delay the restart of Thunder Horse a third time deepened the company's malaise. It prompting analysts to warn that, as a result, its earnings per share would fall 4.5 per cent in 2007 and 6 per cent in 2008.

BP's shares have already retreated so far that Royal Dutch Shell in August knocked it off its perch as Europe's second-biggest listed energy group.

Moreover, BP's troubles have thrown Lord Browne's succession into doubt, with four of the five candidates, many of them groomed for decades, embroiled in the trouble. Lord Browne and BP's senior executives have steadfastly maintained that the recent events in the US were unconnected.

Nevertheless, they have appointed Bob Malone as the new president of BP USA, and Stanley Sporkin, a former federal judge, as its ombudsman. It is also spending $7bn (£3.7bn) over four years on the safety and integrity of its US operations. It has also promoted John Mogford to be vice-president of safety and operations, reporting directly to Lord Browne, to co-ordinate what is intended to be a company-changing overhaul of its operations.

BP's root-and-branch revamp will take five to 10 years. It will allow the company to clean up a system thrown into upheaval by 15 years of low oil prices followed in 1998 by the most ambitious acquisition spree attempted by an oil company since the days of John D Rockefeller and the rise of Standard Oil a century ago.

Many analysts, oil workers and company executives believe repairs to old refineries, such as the one in Texas City and to pipelines, such as those at BP's Prudhoe Bay field in Alaska, were delayed by oil companies' cost-cutting in the 1980s and 1990s, when oil prices fell as low as $10 a barrel and thousands of workers were laid off.

One senior energy executive says: "One of the problems is that this industry was in decline for two decades. In such an industry you have to make assumptions and decide where to spend more."

Matthew Simmons, a well-known Houston-based industry consultant, puts it more bluntly. "BP's culture was designed to be the most efficient cost-cutter in the industry and they did that with a certain degree of arrogance and out of that came too many corners cut on maintenance and safety."

Most of BP's oldest operations are in the US and that the late 1980s and 1990s were a trying time.

Lord Browne has warned that the industry faces a shortage of engineers and workers as a result, noting that a disproportionate share of BP's workforce is above 45, and in some areas, such as exploration and production, above 50.

As oil companies embarked on round after round of lay-offs from 1983 to 2002, the number of petroleum engineers in the US shrunk from 33,000 to 18,000, while the number of geologists and geophysicists fell from 65,000 to 48,000, data from the US Bureau of Labor Statistics show.

Meanwhile, students shied away from studying a subject for which there seemed no further use and the number of US colleges offering undergraduate petroleum engineering degrees fell from 34 to 19. The trend has been similar in the UK with the number of registered engineers falling more than 8 per cent over the past decade. For BP, the situation was magnified by the acquisitions of Amoco in 1998 and Arco in 1999, which led to further cost cutting.

During that time BP launched Ghser, "Getting Health Safety and Environment Right",

which set out new expectations for the bigger group now heavily weighted in the US.

In the following eight years, BP managed to improve Amoco's lagging safety record. Until the Texas City disaster, BP's safety record was one of the best in the industry. But, privately, the company now admits it failed to integrate fully its different safety systems. Plants still use a range of procedures, entrenched by local custom and practice.

Leo Martin, director of GoodCorporation, which helps companies including Total and BG, BP's smaller UK rival, assess their environment, health and safety cultures, says: "BP set the tone from the top but failed in the implementation. British culture would usually do it the other way round." At BP, he says, it appears a gap emerged between the corporate centre, which tries to establish clear business principles, and local management, which is focused on day-to-day operational performance.

To be able to catch up with ExxonMobil, the industry's undisputed leader, BP knows it must change its entire structure, not just its safety system.

Getting the revolution off the ground will be one of Lord Browne's final big challenges before he retires at the end of 2008.

BP's problems in the US have consumed the chief executive, people close to him say.

Lord Browne has grown more weary and retreated from the spotlight that he had in the past commanded with such obvious enjoyment. Meanwhile, even after their bitter public row over succession, he has called on Peter Sutherland, BP's chairman, for guidance. Earlier this summer, he went to Marbella in search of his advice. "Golf was not on the agenda," one insider notes.

Neil McMahon, analyst at Sanford Bernstein and a former BP employee, stresses that the executives' focus must now be on centralising BP's operations.

"BP's organisational structure is comprised of numerous business units, surrounding assets or profit centres, versus the more old-school style of ExxonMobil, which has a few giant functions run centrally.

A more centralised organisation structure may help the top management of BP have greater control on the organisation as they strengthen procedures," he says.

According to one senior executive of a big European energy group, ExxonMobil is the only major oil company with the operating structure that allows it to face the new challenge of taking on huge, technologically challenging projects at a time when oil rich countries are increasingly shutting the doors to their oil and gas fields to foreigners.

Exxon's success was born from bitter experience. On March 24 1989, the Exxon Valdez tanker struck a reef and spilled 11m gallons into Alaska's pristine Prince William Sound. Exxon spent $300m compensating victims, was fined $287m and is still contesting

$4.5bn in punitive damages.

The company eventually overhauled its approach to safety, centralised its businesses, added checks and balances and created an internal communications system that improved everything from financial prudence and physical caution to technological innovation.

Based on the approach taken by Dow Chemical, the company structure is the same round the world so that employees do not have to relearn Exxon's policies and procedures every time they move. It also allows problems to be communicated throughout the company so that others can help, or at least learn from them.

Mark Albers, president of ExxonMobil Development Company, who oversees all of Exxon's new production and development projects, says the centralised structure is key to its success. From concept to production, all of Exxon's big projects are managed from Houston.

"In terms of the management and the service that we provide to each of our affiliates, it's all done in one location, which means we can provide the same world-class service to an affiliate in Angola as in Sakhalin, as in Qatar. And people are literally just down the hall from people who have worked on a similar issue on a project somewhere else down the globe, so the information transfer and the best practice transfer is immediate," he says.

He points out that projects Exxon operates are within 3 per cent of the unit costs expected at the time of funding and the company finishes its projects about 5 per cent more quickly than it forecasts.

In contrast, Exxon's peers, including BP, Shell and Eni, have all recently announced delays and cost increases on their flagship projects - BP at Thunder Horse, Shell at Sakhalin and Eni at Kazakhstan's Kashagan field.

Exxon is a partner in Prudhoe Bay, Kashagan and Thunder Horse and some analysts, including Mr Simmons, feel it deserves some of the blame.

Although BP was the operator in Alaska, Exxon agreed the decisions surrounding the pipeline's maintenance. At Thunder Horse, Exxon is now said to be urging BP not to rush the restart. At Kashagan, oil company executives say Exxon is trying to wrest control away from Eni.

However, the fact that Exxon's shares have outperformed BP's since the Alaska debacle - even though Exxon owns more of the field and therefore faces greater losses and higher costs - starkly illustrates where investor faith lies.

Yet, BP seems to have started on the right note.

Lloyd Whitworth, fund manager at Morley Fund Management, who has called for a one-on-one meeting with BP's board, says: "We welcome BP's announcement that it is

implementing a comprehensive review of its global operations.

"We're pleased that the company is in open and constructive discussions with shareholders."

BP is just at the beginning of its long road to health. Whether Texas City will indeed be BP's Exxon Valdez will be largely up to Lord Browne's successor, who will have to finish the job his predecessor started in 1998.

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http://www.ft.com/cms/s/2bdd63b0-4845-11db-a42e-0000779e2340.html

Green ideals now provide fuel for tauntsBy Carola Hoyos

Published: September 20 2006 03:00 |Last updated: September 20 2006 03:00

While BP was plotting its acquisition of Amoco and Arco in the US in the late 1990s, Lord Browne wasn't content with pursuing just one ambitious idea.

He set another task: turning the image of the company from just another polluting oil producer into an enlightened, environmentally friendly industry leader that had lofty social ideals.

However, his green hue has become tarnished in the past 18 months as a Texas refinery explosion and an Alaskan oil leak have raised questions about whether BP is able to execute what it advertises.

Lord Browne became the first oil executive to warn that fossil fuels caused global warming- a view Exxon still does not fully embrace - and that oil companies needed to do something, back in May 1997.

About a year later the British Petroleum motto became Beyond Petroleum and the company's emblem changed from a green shield to a green and yellow sun-like symbol it named helios, after the Greek sun god.

More than many of its peers, BP followed the mantra it espoused. It became one of the world's top three makers of solar technology, has pledged to spend $15bn (£7.97bn) together with GE in hydrogen projects that capture their carbon emissions, and in 2001 was the only company willing to back the campaign to end corruption in Africa by publishing the details of what it paid the Angolan government in 2001.

Although these were small investments for a group that makes more than $20bn a year, Lord Browne's leadership on environmental and human rights prompted investors to rate

BP at a premium, Rory Sullivan, head of investor responsibility at Insight, said.

However, that premium has eroded since the start of the summer, as evidence mounted of BP's neglect of corrosion problems at its Alaskan pipeline to the detriment of the delicate environment through which it passes.

BP's eagerness to be seen as green has now made it an easy target for ridicule. Last month John Kenney, an advertising executive who worked on BP's recent advertising campaign, wrote in an opinion piece published in the New York Times last month: "I guess looking at it now, Beyond Petroleum is just advertising. It's become mere marketing - perhaps it always was - instead of a genuine attempt to engage the public in the debate or a corporate rallying cry to change the paradigm."

Countering that is Sybil Ackerman, legislative affairs director for the Oregon League of Conservation Voters, who studied the relative lobbying activities of the big oil companies.

"I am sure BP thought of it as a marketing and political decision - so what! I care about the substance. They are doing things. They feel like they need to explain themselves and that's the first step to something bigger. If companies can't use their environmental commitments as PR, then you'll never get anyone on board."

The fact the backlash following the breakdown in BP's day-to-day operations threatens to force the most progressive oil company to reconsider its stance is not good for environmentalists, she adds.

However, BP will now find it difficult to make its environmental message heard above the criticism over the refinery disaster and leaking pipelines.

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Anchorage Daily NewsSeptember 19, 2006

http://www.adn.com/news/environment/story/8210898p-8108526c.html

BP seeks profits from climate change MAYORS CONFERENCE: Global warming called chance to test fossil-fuel alternatives. By DAN JOLINGThe Associated Press Published: September 19, 2006 Last Modified: September 19, 2006 at 03:14 AM

Skeptics doubt that the nation should respond to global warming, but don't count petroleum giant BP among them.

A company official told a mayors conference in Girdwood that BP is reacting the old-fashioned way -- by looking to make money.

"We think this is a huge business opportunity," said Charles A. Christopher, carbon dioxide program manager for BP in Houston.

More than 30 U.S. mayors from 17 states Monday wrapped up the three-day conference "Strengthening Our Cities: Mayors Responding to Global Climate Change," sponsored by the U.S. Conference of Mayors, the International Council for Local Environmental Initiatives and the municipality of Anchorage.

A continuing conference theme has been that cities can save money by cutting their greenhouse gas emissions. BP intends to take that a step further during the transition from a fossil-fuel-driven system to alternatives.

Energy can be provided in a way that's economically responsible and secure during the transition away from fossil fuels, Christopher said.

"The transition will provide many business opportunities," he said. "A lot of people are going to make a lot of money during this transition, and it won't be the same people that you're familiar with."

The burning of carbon-based fuels adds to naturally occurring greenhouse gases that retain Earth's heat. Accelerated warming has been most apparent near the Earth's poles, including Alaska, in shrinking glaciers, thawing sea ice and other changes in natural systems.

BP believes the risks from climate change are real and the science valid, Christopher said.

"In the peer-review journals, the opinion is essentially 100 percent that this thing is happening, that it's caused primarily by CO2 and it's caused primarily by the CO2 that man is putting into the atmosphere," he said.

The reduction of greenhouse gases is important, but energy security could drive changes in the near future, he said. Alternatives to coal-generating power plants are more expensive, but that could change with a carbon dioxide tax.

"Most people believe that something like that is going to happen, soon, in the U.S.," he said. "The utilities have been watching this and staying as far away from it as they could. But they've got their ear on the rail and they can hear the rumbling, and they believe something is going to happen."

BP is creating a new businesses, he said. The company is the third-largest producer of solar cells and plans to expand.

"We're going to triple the amount of solar cells we produce in three years," he said.

By 2008, BP will have two wind-turbine farms and plans for more in Europe and the United States. BP also by that year will build the world's first two commercial plants generating electricity from hydrogen.

"Our commitment is to show that the set of technologies being used are commercially available, can be used at scale and will produce pollution-free free electricity," he said.

Mayors applauded the company's plans.

"I think it's a remarkable commitment on BP's part," said Don Plusquellic, mayor of Akron, Ohio. "I happen to think most of these problems need to be addressed by CEOs and other top business leaders in the country."

It's a contrast to businesses that choose to hunker down and continue on with business as usual in response to global warming, he said.

"This is a real great opportunity for a lot of companies, and they ought to look at BP as one that has a vested interest in oil and gas, oil in particular, and they're already looking how to change and trying to evolve and trying to make smart investments in the future."

Salt Lake City Mayor Rocky Anderson said BP's action contrasts with skeptics who say responding to global warming will ruin the nation's economy.

"I think a lot of it is said in the fact that they've gone from British Petroleum to marketing themselves as 'Beyond Petroleum,' " Anderson said.

"They see the writing on the wall. They know there's going to be an interim period of adjusting to things. They're trying to get out in front of it by moving toward clean, renewable sources of energy. They also know that there are huge cost savings by reducing greenhouse gas emissions."

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Wall Street JournalSeptember 19, 2006

Alaska DNR: BP E Prudhoe Decision Expected In 10 DaysDOW JONES NEWSWIRESSeptember 19, 2006 7:32 a.m.(This article was originally published Monday) By Norval Scott Of DOW JONES NEWSWIRES  CALGARY (Dow Jones)--BP PLC (BP) could find out whether it will be allowed by the

U.S. Department of Transportation to restart the flow of oil through a key pipeline on the eastern half of its Prudhoe Bay field in Alaska by Sept. 28.

In an interview with Dow Jones Newswires, Michael Menge, commissioner of the Alaska Department of Natural Resources, said the DNR has been in contact with the DOT on an "hourly basis," and that he's expecting some indication from DOT on its decision within a week to 10 days time.

The pipeline, with a capacity of about 150,000 barrels a day, has been shut since the beginning of August when the company discovered a small spill caused by severe corrosion, reducing output from the largest producing field in the U.S. to 250,000 b/d from 400,000 b/d.

BP asked the DOT last week for permission to restart the flow so it can operate a device called a "smart pig," a cylindrical droid that's carried along with the oil flow as it inspects the pipeline walls for corrosion. The company hasn't said exactly how much additional production would be able to be brought back on line if it receives DOT approval.

BP has faced a storm of criticism for maintenance practices that allowed corrosion of the field's transit lines to go largely unnoticed. The company, whose stock price has suffered relative to peers, is under pressure to resume production at the gem in its Alaska crown quickly at a time when oil supplies are perceived to be tight.

However, Alaska will use the BP outage as an opportunity to put stronger regulation for the oil industry in place, Menge said.

"People are going to want to see how we react to this, and we need to inform them that we've made the right changes," he said.

He added that, as a result of new regulation, hopefully BP's problems wouldn't have any bearing on attempts to open up Alaska's Arctic National Wildlife Refuge, or ANWR, to oil drilling. Energy companies, along with the Bush administration, have pushed hard for legislation to allow exploration in ANWR, but haven't been able to garner enough support in Congress. If the Democrats win more seats in the House or Senate in the November elections, the possibility of ANWR opening will become even more remote.

Gas Pipeline Eyeing Delays  Despite the censure that BP has received for its performance in Alaska, it hasn't reduced the DNR's confidence in the company to operate the proposed $20 billion Alaska Gas Pipeline, which would pump 4.5 billion cubic feet a day of natural gas to North America by around 2014, Menge said.

"Right now, we're facing an unfortunate set of circumstances, but the time for a decision to build a pipeline will be several years in the future," Menge said. "All this will be behind us."

Nevertheless, it appears the pipeline process will likely face some delays, he said. In February 2006, Alaska Gov. Frank Murkowski reached an agreement with North Slope oil producers ExxonMobil Corp. (XOM), BP PLC and ConocoPhillips (COP) over terms for the proposed pipeline, which is touted as a way to lessen the nation's dependence on foreign energy sources, and bring billions in royalties and taxes to Alaska through the exploitation of the state's stranded gas reserves.

However, not only has Murkowski been unable to get the changes necessary to the state's Stranded Gas Act approved by the state legislature in order for the pipeline to go forward, but he was also defeated in the Alaska's Republican primary in August. Both the Republican and Democrat nominees for state governor - Sarah Palin and Tony Knowles, respectively - have said that they want to consider all pipeline proposals, not just the Murkowski-negotiated plan that's on the table, so while Murkowksi is still attempting to force his plan through, it's unlikely that he'll be successful.

"The odds that we will have a contract by the end of year are slim," Menge said. Instead, the new governor that takes over will likely take "a number of months" to consider the competing proposals, likely delaying the whole process, he added.

Despite enthusiasm from Palin and Knowles to consider alternatives to the Alaska Gas Pipeline, such as the "All Alaska" pipeline, whereby a pipeline would be constructed from Prudhoe Bay, on Alaska's North Slope, to a liquefied natural gas export facility at Valdez, such options aren't as economic as the plan currently on the table, Menge said.

"We spent a lot of time and effort looking at (the All-Alaska) proposal and educating ourselves on its economics," he said. "Now, the new crew are going to do the same, and I believe they'll arrive at a similar conclusion as we did."

Any attempts to bring Alaska's stranded gas to market are under pressure from liquefied natural gas imports from elsewhere, which could affect domestic demand. In addition, efforts to produce more natural gas in the lower 48 states through carbon dioxide sequestration could also bear fruit by when any Alaskan pipeline might be brought onstream, Menge said.

"All these things represent competition for gas from the north, and are a concern for us," he said.

 -By Norval Scott, Dow Jones Newswires; 403-531-2912; norval.scott@dowjones.com 

xxxxxxxxxxxxxxxxxxxxxxxFinancial TimesSeptember 19, 2006

http://www.ft.com/cms/s/ab691154-477a-11db-83df-0000779e2340.html

Front Page, First Section:

Technical delays hit showcase BP project Twin setbacks push up oil pricesBy Sheila McNulty in Houston Published: September 19 2006 03:00 | Last updated: September 19 2006 03:00

BP was hit by yet another setback yesterday when the company was forced to announced that production at its showcase Thunder Horse oil and gas field will not start until mid-2008,18 months later than planned.

News of the delay, caused by problems with the project's subsea infrastructure, caused oil prices to jump, ending the decline of recent weeks.

In New York, crude oil for October delivery rose $1.02 to $64.35 a barrel. BP shares closed 6p higher at 579p.

For BP, the delay is the latest in a succession of problems in its US operations, including the explosion at its Texas City refinery last year and the shutdown of its Prudhoe Bay field in Alaska following leaks from a corroded pipe.

Analysts had said the start up of Thunder Horse had been the only good news on the horizon for BP.

Yesterday, some were questioning the returns the project will make. The company has touted the field to deliver 1.5bn barrels of oil, making it the biggest find yet in the Gulf of Mexico.

One BP employee said the UK oil and gas company was moving to revise down expectations from the field, with new estimates that it might contain just 600m barrels of oil.

One analyst said: "The field may now come on stream after the peak in the oil price."

BP discovered the Thunder Horse field in July 1999 and set January 2005 as a production target, with about 50 wells. BP has delayed the project several times.

The oil and gas platform, the world's largest of its type, was found to be listing badly after its evacuation during Hurricane Dennis in July last year.

On September 10, BP brought a key manifold - the central structure of the platform - to a shipyard in Houston for hydro-testing, in which water is pumped in at high pressures to ensure the system is intact.

"In this case, it blew apart and didn't hold pressure,'' said a BP employee. "Things shot 60

feet in the air. It is very clear there is a system-wide problem.''

Two other manifolds, in the northern section of the field, were also found to have cracked insulation, which was a precursor to the failure of the welding on the other manifold, he said.

BP said no parts came freeand the welds it used were common elsewhere in the industry. It suspected problems on Thunder Horse resulted from the high pressure and high temperature on the oil reservoir, the highest under development in the Gulf.

One BP employee said project costs were rising significantly, with an additional $500,000 on the more than $1bn project being one estimate. BP said it was too early to estimate cost overruns.

The Organisation of the Petroleum Exporting Countries and the International Energy Agency are expected to revise downward their oil supply forecasts because of the delay, which will probably reduce US supply growth to zero in 2007. An Opec official said: "This is amazing. Thunder Horse was absolutely key." He said this would give Opec members more flexibility and might mean they would not have to reduce output next year to shore up prices.

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Financial TimesSeptember 18, 2006

http://www.ft.com/cms/s/7be75852-4674-11db-ac52-0000779e2340.html

BP orders worldwide overhaul after blastBy Carola Hoyos and Ed Crooks in LondonPublished: September 17 2006 22:02 | Last updated: September 17 2006 22:02

BP, Europe’s second-biggest listed energy group, is set to launch a root and branch review of its global operations in response to last year’s Texas City refinery blast, in which 15 people died.

The revamp, to be led by John Mogford, vice-president of safety and operations, is likely to take 5-10 years and is on a scale similar to the overhaul Exxon began after its huge oil tanker spill at Alaska’s port of Valdez in 1989.

Lord Browne, BP’s chief executive, has described the Texas City blast as a “fault line” that has forced the company to examine its entire operation.

“Very rarely do companies have tragedies of that scale. The last time BP had one was about 40 years ago. And it fundamentally changed the way we did business. I believe

Texas City does that to us,” he said on a visit to Alaska last month.

The overhaul may help alleviate growing investor concerns which have seen five of the company’s leading shareholders, including F&C and Morley, seeking one-to-one meetings with management. Last week, the investors raised concerns that BP’s growing list of US troubles may indicate a systemic problem.

Exxon’s shake-up helped make it the world’s safest and financially successful energy group. After the 1989 spill, Exxon revamped its approach to safety, centralised its businesses and created an internal communications system that improved everything from financial prudence and physical caution to technological innovation.

BP’s planned reforms will involve standardising procedures worldwide and unifying the operations BP was unable to fully integrate after its US acquisition spree in the late 1990s.

BP stresses that this review will be a bottom-up approach involving management listening to local operations staff. Senior management are said to be concerned that a too swiftly implemented revolution could do more harm than maintaining the status quo. Mr Mogford’s team will include a staff of 45 with another 45 auditors.

BP has already instituted specific management changes in the US, including appointing Bob Malone as the region’s president. More changes are expected within the next few days.

The company faces investigations by the justice department and other US government agencies over trades it made in 2004, the Texas City fire, and the August shutdown of its Prudhoe Bay Field in Alaska because of corrosion.

On Sunday night it emerged Lord Browne may now be forced to give sworn videotape evidence for the civil cases arising from the Texas City explosion.

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Houston ChronicleSeptember 16, 2006

http://www.chron.com/disp/story.mpl/business/energy/4191167.html

BP blast suit reset for NovemberBy ANNE BELLICopyright 2006 Houston Chronicle

A judge late Friday granted requests by BP and a contractor to delay the first civil trial in connection with the deadly blast 18 months ago at the oil giant's Texas City refinery.

Jury selection was scheduled to begin Monday. Galveston County state District Judge Susan Criss rescheduled it for Nov. 8.

The eleventh-hour continuance was sought by BP in response to allegations raised in the last month by plaintiffs that the company defrauded state environmental authorities to win permits for the equipment that exploded.

Contractor J E Merit also sought more time, saying that lawyers for the three plaintiffs only recently asserted that the company should have known from another accident 11 years ago that construction trailers, where most of the deceased were killed, were parked dangerously close to process units.

Many of those killed were Merit employees.

BP spokesman Ronnie Chappell could not be reached. But earlier in the week company attorney Jim Galbraith hotly requested a continuance, saying his team needed more time to fairly defend itself.

Plaintiffs' lawyers opposed the delay, saying BP and Merit should have been well aware of the issues.

"The court out of an abundance of caution gave them an extra six weeks," said Beaumont attorney Brent Coon, who represents a woman whose parents were killed inside a construction trailer parked 121 feet away from the unit that exploded.

"We are disappointed, but it will allow us to further develop these and other issues." he said.

Galveston lawyer Tony Buzbee, who represents two men injured in the blast, said he'll use the time to seek a deposition from London-based BP's chief executive, John Browne, as well as members of the board of directors.

"Their seeking additional time gives us additional time, and we're not going to sit around and do nothing," Buzbee said.

anne.belli@chron.com

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Wall Street JournalSeptember 16, 2006

BP Granted 6-Week Reprieve From Trial In Texas Blast Case

DOW JONES NEWSWIRESSeptember 15, 2006 9:10 p.m.By Jessica Resnick-Ault and John M. Biers Of DOW JONES NEWSWIRES  GALVESTON, Texas (Dow Jones)--Winning at least a temporary reprieve on the public airing of another high profile problem, BP PLC (BP) Friday was granted a six-week delay in a trial related to a deadly March 2005 refinery accident in Texas.

The move gives the company an additional opportunity to settle the cases, but plaintiffs lawyers say they will use the extra time to their own advantage, and are seeking to depose additional BP executives ahead of a trial.

BP continues to seek settlements with the plaintiffs, the company's perferred tactic in handling the cases.

"What we want to do is settle any cases that are outstanding," said BP spokesman Neil Chapman. The company has set aside $1.2 billion for paying legal settlements related to the explosion.

The case, brought by two injured in the blast and the estate of two who were killed in the Texas City refinery blast, has been delayed six weeks and will not begin Monday as planned, a state judge ruled Friday.

The case was to be the first against BP for the explosion, which killed 15 and injured 170 at the refinery.

BP argued that the case needed to be delayed because the plaintiffs recently alleged that the company used fraud and deception to obtain permits for the involved units. After a colorful debate Friday, a state court judge agreed, citing, among other things, an 11th-hour deposition of a key witness.

"These are very serious allegations," said Judge Susan Criss. If proven, the charges could enable the jury to award an amount for punitive damages above the cap allowed in Texas.

During a 75-minute hearing, Criss said repeatedly she wanted to ensure that her court's action withstood appeal. A key witness in the plaintiff's fraud allegation, a consultant who has said BP misrepresented its operations in state filings, was still being deposed Friday afternoon while Criss's court was in session.

"Isn't it worth waiting 30 days to make sure it doesn't get kicked back" from the appeals court, Criss asked.

Plaintiffs lawyers pleaded with the judge, saying their clients deserved a speedy trial. "My clients ... have been waiting 18 months to go to trial," said plaintiff's lawyer Tony

Buzbee, gesturing toward two of his clients, injured in the blast, who attended the hearing.

In recent months, BP has come under fire for its operations in the U.S. The company faced withering scrutiny in a series of Capitol Hill hearings on a pair of oil spills in Alaska due to pipeline corrosion. Offering the prospect of live testimony from victims, the Texas City cases could spell more bad publicity for the U.K. oil giant.

If the trial goes forward in November, the four cases slated to start Monday would be heard alongside two others brought by those injured in the explosion.

Plaintiffs' attorney Brent Coon said it was too soon to know if the six-week delay makes a trial less likely. Among Coon's clients is Eva Rowe, who lost both her parents in the explosion. Coon has described Rowe as the least likely plaintiff to settle.

"I don't know," Coon said. "It depends what happens over the next six weeks."  A "Silver Lining" For Plaintiffs  Although BP called for the delay, plaintiffs attorney Tony Buzbee said the delay will allow the plaintiffs to press ahead with the allegations of fraud.

"The continuance absolutely will put that issue in front of the jury," he said. "They asked them to strike that allegation, or in the alternative for continuance. I think the judge was very clear that they need to prepare themselves to defend that allegation."

If the company is found guilty of the fraud charges, the jury will be able to go beyond caps put in place by the legislature. "Without the caps, it really is within the discretion of the jury," Buzbee said.

Additionally, Buzbee said he and other plaintiffs attorneys plan to use the additional time to again attempt to seek the deposition of BP chief executive John Browne and members of the company's board. The plaintiffs had previously called for Browne's testimony, but rescinded their request, instead deposing BP refining chief John Manzoni.

BP plans to appeal that motion. "He does not have anything unique to offer," said BP's Chapman. To depose a high-ranking executive like Browne, the plaintiffs would need to prove that he had unique information, unavailable from other sources.

-By Jessica Resnick-Ault and John M. Biers, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com  

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UPDATE: Lawyers In Texas Case To Try To Subpoena BP CEO

DOW JONES NEWSWIRESSeptember 15, 2006 8:48 p.m.(Updates with comments from BP spokesman)  HOUSTON (Dow Jones)--Plaintiffs in a Texas lawsuit against BP PLC (BP) are once again planning to try to subpoena BP chief executive John Browne, despite earlier statements that they had obtained needed testimony from refining chief John Manzoni in his stead.

The first trial against the Anglo-American oil giant related to a March 2005 explosion at its Texas City refinery was slated to start Monday. The case has been delayed six weeks, a Texas state judge ruled Friday.

The company is expected to appeal the motion.

"He does not have anything unique to offer," said BP spokesman Neil Chapman. To depose a high-ranking executive like Browne, the plaintiffs would need to prove that he had unique information, unavailable from other sources.

Plaintiffs' attorneys referred to the opportunity to try to question Browne as a silver lining in the delay.

"It's my view now that this gives us additional time to seek that deposition," said Galveston-based lawyer Tony Buzbee.

Though the plaintiffs had initially received an order from the judge that would have required Browne to testify, they chose to strike a deal with BP to avoid the company's appeal of the decision.

As part of that arrangement plaintiffs deposed Manzoni, who reports directly to Browne, for four hours. After their deposition of Manzoni the plaintiffs retained the right to call for Browne's testimony. They declined to pursue Browne's deposition, saying at the time that they had received adequate information from Manzoni. At that time, Buzbee had also cited the need to move forward with trial preparations.

As part of the initial agreement, BP retained its right to appeal the ruling if Browne was again ordered to testify, the company's Chapman said.

-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com  

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Financial TimesSeptember 16, 2006

http://www.ft.com/cms/s/1ae37d52-451f-11db-b804-0000779e2340.html

BP safety under fresh US attackBy Sheila McNulty in Houston Published: September 16 2006 03:00 | Last updated: September 16 2006 03:00

BP mistakenly told state regulators in a 2003 application for an emissions permit that it had installed the updated equipment which investigators said would have prevented last year's fatal explosion at its Texas City refinery, the Financial Times has learned.

In the application, a copy of which has been seen by the FT, BP said: "Relief valves are routed to a flare; therefore, 100 per cent control credit is applied." A flare is a closed tank in which liquid emissions are received and the vapour burned off. But BP only applied to replace the outdated blowdown stack on the refinery's ISOM unit with a flare after the refinery exploded, killing 15 and injuring an estimated 500.

A blowdown stack is a tank with an open stack, used to dispose of emergency releases. An ISOM unit is used to boost the octane rating of gasoline.

"The fatal explosion would not have occurred if the ISOM unit had a properly sized and designed flare system," said Daniel Horowitz of the US Chemical Safety and Hazard Investigation Board, an independent federal agency that investigates industrial chemical accidents.

In BP's own assessment of the blast at its biggest refinery, it said the use of a flare system, instead of a blowdown stack - which the industry has been phasing out for years - would have reduced the accident's severity. BP said yesterday: "We follow the rules."

BP is under grand jury investigation for possible criminal charges in Texas. The FT has learnt that both the US Attorney's Office and the federal Environmental Protection Agency, conducting separate investigations of BP, have learned of the existence of the emissions permit document during their probes.

BP also is under grand jury investigation in Alaska for severe corrosion that forced it to shut half of Prudhoe Bay. Hearings are also being held in Congress over how BP let its field deteriorate to such an extent.

A year-long oil leak in the Gulf of Mexico, uncovered by the FT last month, and a spill in California announced this week, have bolstered claims that BP's US safety culture needs improving.

The BP document is part of BP's application to the Texas Commission on Environmental Quality for a revised Flexible Permit relating to emissions from the Texan plant. It is likely to surface in state court in the first civil cases arising from the blast to go to trial. BP received the permit in July 2005, four months after the explosion.

That trial is to begin on Monday, with the start of jury selection. There are roughly 550 outstanding death, injury and damage cases against BP, which has settled about 650 cases.

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Anchorage Daily NewsSeptember 15, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8196271p-8088875c.html

Citizen oversight of Slope pushed PREVENTION: Industry critics say monitoring could work long term. By WESLEY LOYAnchorage Daily News Published: September 15, 2006 Last Modified: September 15, 2006 at 03:57 AM

Creation of a citizens council to act as a watchdog over North Slope oil fields is an idea that seems to be gaining momentum in Alaska and in Washington, D.C.

Congress has been holding hearings on pipeline leaks and the partial shutdown of Prudhoe Bay, the nation's largest oil field.

Critics have flayed Prudhoe's operator, London oil giant BP, for lax pipeline maintenance practices that allowed corrosion to chew holes through key pipelines, releasing crude oil onto the tundra. BP and federal regulators have promised better operations and stricter rules, and federal criminal investigators are probing an estimated 201,000-gallon crude spill in March.

Now industry critics are calling for something longer term to try to prevent future spills.

A citizens council could keep an eye on not only the oil companies operating fields on the Slope but also government agencies that are supposed to vigorously regulate the industry, council advocates say.

"There has been a failure at all levels to oversee this industry," said Peter Van Tuyn, an Anchorage attorney representing national environmental and public policy groups.

Van Tuyn, testifying Tuesday before the Senate Energy and Natural Resources Committee, advocated formation of a citizens council, funded by the oil industry, to watch over the North Slope oil patch as well as the 800-mile trans-Alaska oil pipeline.

Such a council would not be unique.

Two citizens councils already exist -- one to monitor the Valdez tanker port in Prince William Sound and another to scrutinize tanker operations in Cook Inlet.

Both these councils were created in the wake of the 1989 wreck of the tanker Exxon Valdez, which spilled almost 11 million gallons of oil into the Sound. Congress mandated the citizens councils in 1990.

Industry critics long have wanted a citizens council to watch the trans-Alaska pipeline, as well as the expansive North Slope oil fields, but they said the industry as well as government agencies resisted.

The last big push for a new citizens council came in 2002, when BP and the other owners of the trans-Alaska pipeline applied for and received a new 30-year right of way for the line, which crosses mostly state and federal land. Regulators declined to require establishment of a new citizens council as a condition of the right-of-way renewal.

The recent pipeline leaks on the North Slope provide new impetus for Congress to mandate citizens councils to watch over both the pipeline and the oil fields, Van Tuyn said. He'd like to see it happen this year.

"This would be a great, bipartisan thing to close out a session with," he said.

Any new citizens council, Van Tuyn said, should be modeled after the Prince William Sound Regional Citizens' Advisory Council, based in Valdez.

The council has a 19-member board of directors made up largely of representatives for city and borough governments as well as organizations such as the salmon hatchery company in Cordova.

The group funds environmental and other research, monitors tanker traffic, bird-dogs regulatory agencies and pores over industry plans for preventing and cleaning up oil spills. It runs on about $3 million it receives each year from Alyeska Pipeline Service Co., the oil company consortium that runs the trans-Alaska pipeline.

At times, the council has scrapped vigorously with the oil industry. Last year, for instance, the council sued Alyeska, which had objected to the council spending $25,000 of the industry's money to study how much profit oil companies were making in Alaska. Council spokesmen said they needed the study to counter industry moves to cut expenses or oppose safety improvements in running the Valdez pipeline terminal and tanker fleet. The case remains unresolved.

Managers of the Prince William Sound council this week told U.S. Sen. Lisa Murkowski, R-Alaska, that they'd be willing to help establish a citizens council for the North Slope or elsewhere should Congress decide to go that route. Murkowski is on the Energy and Natural Resources Committee.

Council spokesman Stan Jones said it is possible the Prince William Sound council could be expanded to cover the upland length of the trans-Alaska pipeline or the North Slope

oil fields, though the board is not bucking for the job.

"The board would approach it with extreme caution," Jones said. "We don't know anything more about the North Slope than the next person."

The two regions -- the North Slope oil fields and Prince William Sound -- are very different, he said. The Sound council is geared to watching tankers, while the North Slope is marked by a network of pipes and processing plants spread across vast tundra acreage.

The Prince William Sound council perhaps could serve as an "incubator" for getting a new North Slope council started, Jones said.

Oil company spokesmen said Thursday it might be premature to talk of what Congress might do in light of the Prudhoe Bay pipeline leaks.

"This is a dynamic process. There are a lot of conversations to come," BP spokesman Daren Beaudo said.

Already, oversight of the North Slope pipeline network is expanding, with federal regulators bringing dozens of miles of key pipes under tougher maintenance rules, he said.

Dawn Patience, spokesman for Conoco Phillips, the other company that runs oil fields on the Slope, said she had no comment on the idea of a citizens council.

Murkowski spokesman Kevin Sweeney said the senator has not yet endorsed a citizens council but believes it is a concept worth considering. It remains unclear what will happen because more than one congressional committee is involved, he said.

Dan Saddler, spokesman for Alaska Natural Resources Commissioner Mike Menge, said Thursday that Menge favors another idea -- a multiagency regulatory body to watch over the North Slope. It would be modeled on the Joint Pipeline Office, an Anchorage-based consortium of a dozen state and federal agencies that regulates all aspects of the trans-Alaska pipeline.

To RJ Kopchak, a Cordova commercial fisherman, a citizens council like the one in Prince William Sound is the way to go. It's an idea the fishing community has chased since before the Exxon Valdez oil spill, he said.

A citizens council will ask tough questions of industries that like to hold on to their profits, Kopchak said.

"The only way you can count on anything being done is to hold it to the light of day, and that's what citizens councils do," he said.

A commercial fishing organization, Cordova District Fishermen United, is working with lawmakers in Juneau for a citizens council to oversee the full length of the trans-Alaska pipeline, if not the North Slope oil fields.

Daily News reporter Wesley Loy can be reached at wloy@adn.com   or 257-4590.

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http://www.adn.com/front/story/8195255p-8089860c.html

BP seeks restart to hold line tests EAST SIDE: DOT says its engineers are analyzing the application. By MARK THIESSENThe Associated Press Published: September 15, 2006 Last Modified: September 15, 2006 at 07:10 AM

Oil giant BP has asked permission from the U.S. Department of Transportation to resume production on the eastern half of Prudhoe Bay so it can perform pipeline tests.

BP submitted the application Wednesday, saying it wants production restarted on the field so it can conduct more thorough tests -- using so-called cleaning and inspection "pig" devices -- on the eastern transit line to determine if it can be used to move oil to the trans-Alaska oil pipeline. The eastern half of Prudhoe Bay was closed last month over fears of leaks and corrosion, cutting production from the nation's largest oil field by about half.

"This submission, we believe, helps them make an informed decision about whether or not we can proceed with maintenance pigging and smart pigging," BP spokesman Daren Beaudo said Thursday.

The application is being analyzed by engineers for its thoroughness and to see if it addresses safety concerns, a spokesman at the DOT's pipeline safety agency said Thursday.

The agency didn't intend to rush a decision in a process that can take up to three weeks.

"It's their decision at this point as to how and when they respond," Beaudo said.

The pipeline agency's top official said during a Senate hearing Tuesday that BP must supply detailed and credible evidence that a temporary fix to the line wouldn't cause environmental risk.

"We must be assured that even a temporary limited restart can be operated safely before it can proceed," Thomas Barrett, chief of the DOT's pipeline safety agency, said at the hearing.

Also this week, BP said it had received permission from the Regulatory Commission of Alaska to use a bypass line to possibly restart some production from the eastern side of the field.

Beaudo said the company is still seeking approval from the Alaska Oil and Gas Commission and the state Department of Natural Resources as it continues to acquire materials for the bypass line.

"We believe all that work can be done by the end of October," he said.

The entire Prudhoe Bay oil field had produced more than 400,000 barrels a day -- or 8 percent of total U.S. output -- until leaks and the discovery of pipe corrosion led the company to begin shutting down the eastern half of the field Aug. 6.

The western side of the field was producing about 200,000 barrels a day Thursday, with another 50,000 barrels coming from the adjacent Point McIntyre field.

BP has said it ultimately will replace 16 of 22 miles of transit lines. It expects to get replacement pipe by the end of the year, with construction beginning early next year.

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http://www.adn.com/news/alaska/ap_alaska/story/8192965p-8086833c.html

BP seeks permission to restart part of Prudhoe Bay for testing By MARK THIESSEN, Associated Press Writer Published: September 14, 2006 Last Modified: September 14, 2006 at 04:00 PM

ANCHORAGE, Alaska (AP) - Oil giant BP PLC has asked permission from the U.S. Department of Transportation to resume production on the eastern half of Prudhoe Bay so it can perform pipeline tests.

BP submitted the application Wednesday, saying it wants production restarted on the field so it can conduct more thorough tests - using so-called cleaning and inspection "pig" devices - on the eastern transit line to determine if it can be used to move oil to the trans-Alaska oil pipeline. The eastern half of Prudhoe Bay was closed last month over fears of leaks and corrosion, cutting production from the nation's largest oil field by about half.

"This submission, we believe, helps them make an informed decision about whether or not we can proceed with maintenance pigging and smart pigging," BP spokesman Daren Beaudo said Thursday.

The application is being analyzed by engineers for its thoroughness and to see if it

addresses safety concerns, a spokesman at the DOT's pipeline safety agency said Thursday.

The agency didn't intend to rush a decision in a process that can take up to three weeks.

"It's their decision at this point as to how and when they respond," Beaudo said.

The pipeline agency's top official said during a Senate hearing Tuesday that BP must supply detailed and credible evidence that a temporary fix to the line wouldn't cause environmental risk.

"We must be assured that even a temporary limited restart can be operated safely before it can proceed," Thomas Barrett, chief of the DOT's pipeline safety agency, said at the hearing.

Also this week, BP said it received permission from the Regulatory Commission of Alaska to use a bypass line to possibly restart some production from the eastern side of the field.

Beaudo said the company is still seeking approval from the Alaska Oil and Gas Commission and the state Department of Natural Resources as it continues to acquire materials for the bypass line.

"We believe all that work can be done by the end of October," he said.

The entire Prudhoe Bay oil field had produced more than 400,000 barrels a day - or 8 percent of total U.S. output - until leaks and the discovery of pipe corrosion led the company to begin shutting down the eastern half of the field Aug. 6.

The western side of the field was producing about 200,000 barrels a day Thursday, with another 50,000 barrels coming from the adjacent Point McIntyre field.

BP has said it ultimately will replace 16 of 22 miles of transit lines. It expects to get replacement pipe by the end of the year, with construction beginning early next year.

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Houston ChronicleSeptember 15, 2006

http://www.chron.com/disp/story.mpl/front/4188531.html

BP takes part in office boomThe Energy Corridor expands as higher oil prices push resurgence in explorationBy TOM FOWLER

Copyright 2006 Houston Chronicle

Oil giant BP is planning a major expansion of its West Houston campus to accommodate 2,000 new workers over the next few years.

The company recently added 50 acres to the campus at Interstate 10 and West Lake Park Boulevard and plans to build a seven-story, 390,000-square-foot, environmentally friendly building for its natural gas and power trading business.

"This is a significant investment in Houston for us," said David Eyton, director of exploration and production technology for BP. "We're committed to developing and sustaining our presence here in Houston."

The new BP project is another example of the construction boom in the Energy Corridor, an area along I-10 from Dairy Ashford to beyond Highway 6 that is home to major facilities for many energy companies.

Trammell Crow Co. announced plans earlier this year for 600,000 square feet of new office space at I-10 and Eldridge Parkway, while earlier this week Shell Oil Co. said it would build a 170,000-square-foot office building at Dairy Ashford for workers who find and produce oil and natural gas.

"BP's decision speaks volumes about the Energy Corridor as a critical site for these jobs," said Jeff Moseley, president and CEO of the Greater Houston Partnership. "It confirms what we've always known about Houston as a global city."

2,000 new jobs

BP said it plans to add 2,000 jobs here between now and 2010. They will be split between the North American Exploration and Production business and the trading and marketing unit.

BP has 96,000 employees worldwide, but Houston is its largest single location. Exploration and production already employs about 3,500 here, there are 1,500 in the trading and marketing business and 1,000 more on the 97-acre campus work in other divisions, such as ones that offer support services or imports and markets liquefied natural gas.

The construction and renovation work announced Thursday is expected to cost about $250 million, said BP spokeswoman Annie Smith, adding that planned future projects could push the total to $660 million. The initial phase will include a parking garage for 1,700 cars and the widening of Grisby Road. Added parking is a priority because the BP campus has only 100 spare parking spaces.

Later phases include a larger building for its on-site child-care center, new training and development buildings and possibly a hotel with retail shops.

A green design

The new trading and marketing building is being designed to meet a stringent set of "green building" guidelines known as Leadership in Energy & Environmental Design, or LEED, said Rives Taylor, senior architect for the project at Gensler.

The voluntary guidelines address many issues, including how the building site works with its surrounding environment, the use of recycled materials, its energy efficiency and the environmental quality of the interior workspace.

"It takes into account that the construction and operation of the building will not only have an impact on its owner but on the whole community," Taylor said.

The company hopes the building will be "carbon neutral," meaning its construction and operation uses as little fossil-fuel burning energy sources as possible. Solar panels and wind-powered energy sources will be part of the design, while a natural gas-fired power plant will provide electricity and hot water to the rest of the campus.

Construction costs can run from 5 to 7 percent higher for LEED buildings, Taylor said, meaning a project that would normally cost $1 million could cost another $70,000. But operating costs for the building can be cut in half because of lower energy costs.There are also racks that can handle about 200 bicycles, because a fair number of workers ride to work, and that could rise later.

The training facilities planned for later phases are a response to the increasing competition for workers in the energy industry, Eyton said. Currently the company does much of its training at its various offices throughout the world.

Centralized training

"We have a fairly dispersed model for training that worked very well for us when there was not such intense competition for people," Eyton said. "But there's now a very strong business case to be made for a centralized training facility."

BP's campus has 1.7 million square feet of office space, but the construction will give it the flexibility to grow to between 2.2 and 2.5 million square feet, depending on how much space is leased, said Chuck Cervas, program manager for the Westlake Campus.

The Energy Corridor has seen office vacancy rates plummet in recent years as higher oil prices have lead to resurgence in the oil and gas exploration businesses that call Houston home. Exxon Mobil Corp., ConocoPhillips, Shell and many other firms have large offices there.

In addition to Trammell Crow's plans for two-building, 600,000-square-foot project called the Energy Center, Core Real Estate has plans for a three-story, 174,000-square-

foot building on the north side of I-10 between Barker Cypress and Park 10.

Shell overcrowded

Shell's new building is being designed with room for about 580 of the company's exploration and production employees in it Woodcreek campus. The building is needed to relieve overcrowding at the campus, a spokeswoman said.

The building will have an adjacent conference room and gym and a garage with up to 800 parking spaces.

Engineering firm Technip recently leased an additional 189,000 square feet in the neighborhood in an effort to consolidate its Houston-area locations, which expands its current 210,000 square feet in Energy Tower I at Old Katy Road at Kirkwood.

Purva Patel contributed to this story.

tom.fowler@chron.com 

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Financial TimesSeptember 15, 2006

http://www.ft.com/cms/s/ee78d5ce-4455-11db-8965-0000779e2340.html

Investors seek BP assurance on failingsBy Kate Burgess and Rebecca Bream Published: September 15 2006 03:00 | Last updated: September 15 2006 03:00

Big shareholders in BP are seeking assurances from top executives and board members that recent mishaps and failings in the energy group's safety record in the US are not symptoms of a systemic problem.

Morley Fund Management, its fifth-biggest investor, is to meet members of BP's board to assure itself that lessons have been learnt from last year's fatal explosion at the Texas City refinery, and the oil leaks at Prudhoe Bay in Alaska that forced BP to shut production last month.

Other big investors have asked for one-to-one meetings with the board after BP's shares fell 9 per cent since the start of August.

For the first time in three years BP's market capitalisation has fallen below that of its rival Royal Dutch Shell. Rory Sullivan - the head of investor responsibility at Insight Investment Management, one of BP's top 10 shareholders - who met BP executives last

month, said: "Following Prudhoe Bay there have been questions about the financial implications and whether [the failings] were systemic.

"Prudhoe Bay raises questions at the operational level about the role of senior executives and governance of the company".

Another top 20 investor said: "There is a big issue for the board. It comes at a significant point in BP's relations with investors. Every time these incidents have happened, BP has said the issues are not systemic.

"But investors have more doubts about this story than they've ever had before." They are beginning to discern real issues with management in North America".

BP has had a string of problems in recent years. In March 2005, an explosion at the Texas City plant killed 15 workers and injured hundreds more. Last month it closed its Prudhoe Bay oilfield because of serious corrosion in its pipelines. The group was also responsible for an oil spill at Prudhoe Bay in March and it has since been revealed that management was warned by employees in 2004 about potential problems with the pipeline.

BP faces US justice department investigations into the Texas City and Prudhoe Bay incidents and inquiries into its oil and gas trading activities. The US Commodity Futures Trading Commission, which regulates futures markets, is looking into BP's crude oil trading, and the justice department is looking into some of its petrol trades.

Shareholders stressed that there was no sense of animosity and said BP had an exemplary record for talking openly to investors. It initiated investor meetings after the Texas City blast, and in November it is to publish the findings of an independent panel on its safety culture.

Last week BP invited shareholders on the Responsible Investors Network to meet the company secretary to discuss safety concerns. The company said: "We have regular meetings with investors at all levels, sometimes at their request and sometimes at ours. We wouldn't comment on specific meetings."

Morley declined to comment.

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Anchorage Daily NewsSeptember 14, 2006

  http://www.adn.com/money/industries/oil/pipeline/story/8192414p-8085097c.html

Critics call pipeline rules inadequate HEARING: Rep. Young left early and didn't question a top BP official. By RICHARD MAUER

Anchorage Daily News Published: September 14, 2006 Last Modified: September 14, 2006 at 05:18 AM

WASHINGTON -- The government's chief pipeline regulator told a House committee Wednesday that his office will begin oversight of low-pressure lines like the ones that corroded and leaked this year on Alaska's North Slope.

But critics at the House Transportation Committee hearing said the new rules would allow thousands of miles of those pipelines around the country to escape regulation.

The hearing, the third in less than a week into BP's spills, was substantially less confrontational than the sessions in other committees, where representatives and senators from both parties berated BP officials.

The tone Wednesday was set by Rep. Don Young, R-Alaska, transportation committee chairman, who said he wasn't looking to blame individuals.

"I will ask what steps are being taken to make sure that BP does the job and this tragedy doesn't happen again," Young said in his opening remarks. "I'm not here today to beat a dead horse -- or old oil. I just want to make sure it does not happen again. Investigations are being conducted and all committees are having hearings; everything is going on for the media. But my interest is seeing Alaskan oil delivered safely within Alaska, and to the Lower 48, without delay, without harm to the environment."

But Young himself asked no questions of BP Exploration (Alaska) president Steve Marshall or Lois Epstein, senior engineer for the Anchorage environmental watchdog group Cook Inletkeeper, the only two Alaskans to testify. Before the two took the witness table as the second panel after federal pipeline administrator Thomas Barrett, Young announced he would leave at 1 p.m. and departed during their testimony. Rep. Tom Petri, R-Wisc., chaired the remaining 35 minutes of the hearing.

Young's press aide, Meredith Kenny, said Young thought the hearing would last only from 11 a.m. until 1 p.m. and had to attend meetings back in his office.

Young's Democratic opponent in November, Diane Benson, said Young walked out on the job.

"I'm very concerned because that was a prime opportunity, obviously, to ask questions on behalf of Alaskans and Alaska concerns, and his departure from the hearings was unsettling," she said in Anchorage in a phone interview. "This is our state and this is our pipeline and our resources -- we would want to have our representative there."

Young's committee has oversight over the Pipeline and Hazardous Materials Safety Administration, within the U.S. Transportation Department. Since the Pipeline Safety Improvement Act of 2002, the agency has had authority to regulate low-pressure or low-

stress lines like BP's North Slope transit lines, which operate at 20 percent or less of maximum allowed pressure. But Barrett said the agency has only adopted rules for low-pressure lines in urban areas or lines that pass through navigable waters.

After more than 200,000 gallons leaked in the March spill, the largest ever on the North Slope, Barrett issued an emergency order bringing the 22 miles of low-pressure BP lines in Alaska under his jurisdiction. The agency already regulated high-pressure lines in the North Slope oil fields and the 800-mile trans-Alaska pipeline.

A new bill reauthorizing the 2002 law passed out of the Transportation Committee in July. It directed the pipeline administration to assume oversight by 2007 of additional high-risk, low-pressure pipelines in rural areas. Barrett's staff had already been working on such a measure and announced draft rules last month.

The regulations would cover pipelines more than 8.5 inches in diameter that pass through "unusually sensitive areas." Barrett estimated that about 600 miles of rural pipelines would fall under that category.

Epstein, the engineer from Cook Inletkeeper, said the new rule would leave uncovered an unknown number of pipelines, estimated between 5,000 and 15,000 miles in length.

"Many miles of low-pressure lines remain unregulated," she said at the hearing. Barrett's agency "will not even know of their problems."

Barrett said his agency was using "risk management" to determine which pipelines should be brought under government purview. The most important, he said, were those in urban areas where leaks could be life-threatening. The risk presented by small, low-pressure lines in rural areas is much less, he said.

Rep. Peter DeFazio, D-Ore., said Barrett's "bizarre regime" makes rural residents "third-class citizens."

Before he left the hearing, Young, noting the presence of network TV crews, took a moment to reflect on his thoughts regarding climate change, citing the benefit of global warming -- not caused by man -- in another eon to an area that today is frozen much of the year. "We're dealing with the most northern part of the United States of America, and a most hostile climate, and we're pumping oil, and I'd just like to remind them if they're asked where did the oil come from, and I would say this to Al Gore specifically: This was a jungle at one time, this was a forest at one time, this was a fern-laden area with mammoths at one time, and that's really why we're pumping oil," he said.

Next to speak was the committee's ranking Democrat, James Oberstar of Minnesota, who reminded Young that while global warming might have been good for fern jungles, human civilization is another story.

"That happened years ago," Oberstar said. "The place was uninhabited by humans at that

time."

Daily News reporter Richard Mauer can be reached at rmauer@adn.com   or 257-4345.

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http://www.adn.com/money/industries/oil/story/8189270p-8082871c.html

Federal government to step up oversight of Slope pipelines BP HEARING: Young says he won't blame individuals, doesn't ask questions By RICHARD MAUERAnchorage Daily News Published: September 13, 2006 Last Modified: September 13, 2006 at 05:26 PM

WASHINGTON -- The government's chief pipeline regulator told a House committee Wednesday that his office will begin oversight of low-pressure lines like the ones that corroded and leaked this year on Alaska’s North Slope.

But critics at the House Transportation Committee hearing said the new rules would allow thousands of miles of those pipelines around the country to escape regulation.

The hearing, the third in less than a week into BP’s spills, was substantially less confrontational than the sessions in other committees, where representatives and senators from both parties berated BP officials.

The tone Wednesday was set by Rep. Don Young, R-Alaska, transportation committee chairman, who said he wasn’t looking to blame individuals.

"I will ask what steps are being taken to make sure that BP does the job and this tragedy doesn’t happen again," Young said in his opening remarks. "I’m not here today to beat a dead horse -- or old oil. I just want to make sure it does not happen again. Investigations are being conducted and all committees are having hearings, everything is going on for the media. But my interests is seeing Alaskan oil delivered safely within Alaska, and to the Lower 48, without delay, without harm to the environment."

But Young himself asked no questions of BP Exploration (Alaska) president Steve Marshall or Lois Epstein, senior engineer for the Anchorage environmental watchdog group Cook Inletkeeper, the only two Alaskans to testify. Before the two took the witness table as the second panel after federal pipeline administrator Thomas Barrett, Young announced he would leave at 1 p.m. and departed during their testimony. Rep. Tom Petri, R-Wisc., chaired the remaining 35 minutes of hearing.

Young’s press aide, Meredith Kenny, said Young thought the hearing would last only from 11 a.m. until 1 p.m. and had to attend meetings back in his office.

Young’s Democratic opponent in November, Diane Benson, said Young walked out on

the job.

"I’m very concerned because that was a prime opportunity, obviously, to ask questions on behalf of Alaskans and Alaska concerns, and his departure form the hearings was unsettling," she said in Anchorage in a phone interview. "This is our state and this is our pipeline and our resources  we would want to have our representative there."

Young’s committee has oversight over the Pipeline and Hazardous Materials Safety Administration, within the U.S. Transportation Dept. Since the Pipeline Safety Improvement Act of 2002, the agency has had authority to regulate low-pressure or low-stress lines like BP’s North Slope transit lines, which operate at 20 percent or less of maximum allowed pressure. But Barrett said the agency has only adopted rules for low-pressure lines in urban areas or lines that pass through navigable waters.

After more than 200,000 gallons leaked in the March spill, the largest ever on the North Slope, Barrett issued an emergency order bringing the 22 miles of low-pressure BP lines in Alaska under his jurisdiction. The agency already regulated high-pressure lines in the North Slope oil fields and the 800-mile trans-Alaska pipeline

A new bill reauthorizing the 2002 law passed out of the Transportation committee in July. It directed the pipeline administration to assume oversight by 2007 of additional high-risk, low-pressure pipelines in rural areas. Barrett’s staff had already been working on such a measure and announced draft rules last month.

The regulations would cover pipelines more than 8.5 inches in diameter that pass through "unusually sensitive areas." Barrett estimated about 600 miles of rural pipelines would fall under that category.

Epstein, the engineer from Cook Inletkeeper, said the new rule would leave uncovered an unknown number of pipelines, estimated between 5,000 and 15,000 miles in length.

"Many miles of low pressure lines remain unregulated," she said at the hearing. Barrett’s agency "will not even know of their problems."

Barrett said his agency was using "risk management" to determine which pipelines should be brought under government purview. The most important, he said, were those in urban areas where leaks could be life-threatening. The risk presented by small, low-pressure lines in rural areas is much less, he said.

Rep. Peter DeFazio, D-Ore., said Barrett’s "bizarre regime" makes rural residents "third-class citizens."

Before he left the hearing, Young, noting the presence of network TV crews, took a moment to reflect on his theory of climate change, citing the benefit of global warming in another eon to an area that today is frozen much of the year.

"We’re dealing with the most northern part of the United States of America, and a most hostile climate, and we’re pumping oil, and I’d just like to remind them if they’re asked where did the oil come from, and I would say this to Al Gore specifically: This was a jungle at one time, this was a forest at one time, this was a fern-laden area with mammoths at one time, and that’s really why we’re pumping oil," he said.

Next to speak was the committee’s ranking Democrat, James Oberstar of Minnesota, who reminded Young that while global warming might have been good for fern jungles, human civilization is another story.

"That happened years ago," Oberstar said. "The place was uninhabited by humans at that time."

Contact reporter Richard Mauer at rmauer@adn.com

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http://www.adn.com/money/industries/oil/prudhoe/story/8189247p-8082671c.html

Lawmakers ask if pipeline rules will be enough to avoid problems By H. JOSEF HEBERT, The Associated Press Published: September 13, 2006 Last Modified: September 13, 2006 at 03:34 PM

WASHINGTON -- New rules would prevent the type of maintenance neglect that led to corrosion in miles of Alaska North Slope pipelines, the government's top pipeline safety regulator said Wednesday.

Several lawmakers were skeptical, questioning why the plan still would cover only a small fraction of the thousands of low-pressure oil lines in the country.

A need to broaden federal pipeline regulation became evident after the discovery of extensive corrosion in BP PLC's pipelines on the North Slope in early August, a discovery that led to the partial shutdown of oil production in Prudhoe Bay. The lines were not covered by federal regulations because they are low-stress feeder lines.

A new proposal, unveiled by the Transportation Department last month, would bring 680 miles of rural low-stress lines under federal regulation if they crossed environmentally sensitive areas. That might be as little as 5 percent of the total miles of such lines in the country, lawmakers were told.

"The proposal addresses the most significant threats ... and applies a full range of protections," Thomas Barrett, chief of the DOT's pipeline safety agency, told a House Transportation Committee hearing Wednesday. He called it a "sound and prudent approach" based on risk.

It would require pipeline testing in most cases with a "pig" device that is run through a

pipe every five years to clean it and monitor wall thickness. BP's problems occurred largely because they did not routinely use such a test, relying instead on spot ultrasound tests of pipe walls.

But several committee members questioned the adequacy of the new rules, as did a pipeline consultant who has been involved in the debate over federal pipeline regulations for years and advises an Alaska conservation and oil-industry-watchdog group.

Rep. James Oberstar of Minnesota, the committee's ranking Democrat, said the BP pipeline fiasco in Alaska exposed "a corporate culture of neglect" on safety and questioned why federal regulation shouldn't cover all of the lines -- not only those that run through environmentally sensitive or heavily populated areas.

"The rest of them don't count?" Oberstar asked Barrett.

Barrett, a retired Coast Guard admiral who has been praised on Capitol Hill for his aggressive response to BP's pipeline corrosion, said the agency will address pipelines that pose the greatest risks.

The vast majority of low-stress lines -- those that will not be covered by the new rule -- are much smaller than the BP lines in Alaska, are in rural stretches far from people or environmentally sensitive areas and often run only a few miles, he said.

"We do not believe they pose the same level of risks as the BP lines in Prudhoe Bay posed," said Barrett. He said the rural low-pressure lines that will be regulated were selected based on their size, the volume of product they transported and whether they were within a quarter-mile of an environmentally sensitive area.

Lois Epstein, an engineer and pipeline consultant who works for Cook Inletkeeper, a conservation group in Alaska, told the committee that the new rules may cover as few as 5 percent of the now-federally-unregulated lines and that the requirements will be less stringent than those that apply to high-pressure lines.

"Many, many miles of low-pressure transmission pipelines remain unregulated and susceptible to BP-like problems," Epstein maintained.

How many miles of pipeline will continue without federal regulation was unclear.

Barrett said there will be about 4,000 miles of line that will remain out of federal jurisdiction, but he acknowledged that his agency has no nationwide map of low-pressure lines and is relying on estimates provided by states. Epstein said some surveys have put the number of such lines at 15,000 miles.

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Fairbanks News MinerSeptember 14, 2006

http://newsminer.com/2006/09/14/2006/

Wanted: More ‘pigs’ in pipelinesBy Sam BishopPublished September 14, 2006

WASHINGTONProposed federal inspection rules for pipelines such as those that leaked at Prudhoe Bay will be revised to insist that owners use “smart pigs” or some other equally effective technique, the nation’s top pipeline regulator said Wednesday.

“We’d be happy to clear that up,” said Tom Barrett, testifying before the House Transportation and Infrastructure Committee.

Barrett runs the Pipeline and Hazardous Materials Safety Administration. The agency late last month opened a 60-day public comment period on proposed rules that would expand federal regulation to large low-stress pipelines within a quarter-mile of “unusually sensitive areas.”

Federal regulators already oversee low-stress lines in populated areas and under navigable waters, as well as those that carry volatile liquids such as gasoline.

The Prudhoe Bay lines that leaked in March and August would qualify for regulation under the new rules because of the presence of endangered and threatened specieseider ducks and whalesin the area.

Barrett’s prepared testimony states that the proposed rules would impose “the same assessment requirements already mandated on high pressure transmission lines.”

Some lawmakers, and a witness who testified Wednesday after Barrett, challenged that assertion.

Rep. James Oberstar, D-Minn., said the agency’s proposal states that pipeline operators “may” use internal inspection devices such as smart pigs to inspect the low-stress lines near sensitive areas.

Existing rules for regulated high- and low-stress lines say companies “must” use such techniques, Oberstar said.

Barrett said there was no intent to establish lower standards for low-stress pipelines and the rule would be clarified. He noted repeatedly that his agency’s proposal was subject to change.

Barrett also noted, though, that not all pipes can be inspected with smart pigs, the

electromagnetic devices that travel through a line and create a continuous computer record of its wall thickness. Bends, valves and telescoped lines prevent use of such pigs in certain lines, he said, so the agency can’t require them in all situations.

All pipelines have such obstacles, said Lois Epstein of Anchorage, an engineer with the nonprofit watchdog group Cook Inletkeeper and a consultant to the Pipeline Safety Trust. Yet current rules say pipeline operators “must” use pigs or equivalent technology on regulated low- and high-stress lines, she said.

Telling operators that they “may” use such technology downgrades the standard, she said.

Epstein testified before the Transportation committee on Wednesday as well.

Epstein said the agency’s proposed new rule closely matches a recent industry proposal. It compressed six pages of detailed rules down to a paragraph, she said.

Barrett, under questioning, said his agency, not the pipeline industry, wrote the proposal.

Some lawmakers said they didn’t understand why the agency has not proposed to regulate more low-stress lines.

Barrett’s said low-stress lines are less dangerous and therefore not all deserve regulation under the agency’s risk-based approach. Low-stress lines are those that operate at 20 percent of their designed pressure capacities, or less.

Rep. Bill Pascrell, D-N.J., called Barrett’s testimony “bureaucratic drivel.” If the agency doesn’t regulate low-stress lines, how does it have any evidence that the lines pose fewer problems, he asked.

Barrett said the agency has spent years surveying pipeline companies, collecting information from state regulators and taking public testimony.

Epstein argued, though, that industry data show 21 percent of large leaks come from low-stress transmission lines, even though they make up only 3 percent of the nation’s total pipeline mileage.

She said the agency should make sure no low-stress lines remain unregulated.

Oberstar asked Steve Marshall, president of BP Exploration Alaska Inc., why his company opposes a federal requirement to run smart pigs through low-stress lines once every five years, as the proposed new rules could demand.

Marshall said he couldn’t speak for the entire company. In Alaska, he said, “five years is not a problem for these transit lines.”

The transit lines each are approximately the same length. They deliver finished oil from

Prudhoe’s eastern and western operating areas to the trans-Alaska pipeline’s Pump Station 1. The western line leaked about 5,000 barrels in March; the eastern, about 25 barrels in August.

Marshall, appearing at his third congressional hearing on the Prudhoe leaks, mostly restated his testimony from the previous week. BP runs at least 350 pigssome to detect corrosion and some to scrape out solidsthrough its North Slope lines annually, he said. For example, the line from the newer North Star field is scraper pigged every two weeks because of high wax buildups, he said.

Because the lines that leaked were downstream from cleaning centers, managers thought they were unlikely to develop corrosion problems, he said. Also, virtually no corrosion-promoting solids were found when the western line was last scraper pigged in 1998, he said. While a smart pig then did find some anomalies, regular external ultrasonic testing at those points didn’t detect a corrosion problem until late 2005, he said.

“No one pointed to these transit lines as a particular problem,” he said. “If they had, we would have acted on it.”

The trans-Alaska pipeline, which carries oil similar to that in the transit lines, is maintenance pigged once every two weeks, several lawmakers have observed in hearings. Marshall said Wednesday that the 800-mile line has different needs arising from cooling oil and the addition of drag-reduction agents.

Still, BP had been planning to run a smart pig through Prudhoe Bay’s western operating area transit line this year, a year earlier than originally scheduled. The leak in March occurred first, Marshall said.

The western line, with a bypass around the section that leaked, continues to carry over 200,000 barrels of oil per day, Marshall said. The eastern line, which had been carrying a similar amount, remains shut down, he said, but tests indicate that it may be fit for temporary service.

Both lines will be replaced in a $150 million project to begin later this year, he said.

Rep. Don Young, R-Alaska and chairman of the committee, said he was “deeply disappointed” in BP. The company apparently didn’t pay close enough attention to the changing nature of its oil, he said.

However, he said, “I’m not here today to beat a dead horse on who knew what and when did they know it.”

Federal authorities, including a grand jury, are investigating the incidents. Action should be taken when the investigations are done, Young said.

Young questioned Barrett but left the committee room before Marshall’s turn.

“Alaskans have to ask, ‘What is more important to Don Young that he walks away from one of the most important issues to Alaska?’” asked his Democratic election opponent, Diane Benson, in a news release issued shortly afterward.

Young’s spokeswoman, Meredith Kenny, said the hearing was supposed to end by 1 p.m. and the congressman had a previously scheduled meeting at that time with Alaskan constituents. “He didn’t want to stand them up,” she said.

Washington, D.C., reporter Sam Bishop can be reached at (202) 662-8721 or sbishop@newsminer.com.

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Wall Street JournalSeptember 14, 2006

US House Democrats Call For Stronger Pipeline Safety ActDOW JONES NEWSWIRESSeptember 14, 2006 7:35 a.m.(This article was originally published Wednesday) By Ian Talley Of DOW JONES NEWSWIRES  WASHINGTON (Dow Jones)--Leading Democrats on the U.S. House Transportation and Infrastructure Committee on Wednesday called for comprehensive federal oversight of all low-pressure petroleum pipelines in the wake of the BP PLC (BP) Prudhoe Bay, Alaska, pipe leaks and subsequent shutdown of the largest producing field in the U.S.

The minority members of the committee, which held an oversight hearing into the low-pressure crude pipelines that leaked at Prudhoe Bay earlier this year, said new rules and proposed legislation to regulate low pressure lines similar to the ones at Prudhoe Bay aren't rigorous enough and leave thousands of miles of low-pressure pipelines unregulated.

The Department of Transportation's Pipeline and Hazardous Materials Safety Administration in late August proposed a new rule that would allow federal oversight of some low-pressure lines.

Several Democratic members, including panel vice chairman and ranking Democratic member, Rep. James Oberstar of Minnesota, said the proposed new rule doesn't go far enough, proposing to revisit the Pipeline Safety Act already passed by the committee. Republicans aim to reauthorize the Safety Act, due to expire at the end of this month, this session, said Rep. Thomas Petri, R-Wis.

"We have legislation moving that we need to strengthen to improve oversight," Oberstar

said at the hearing.

Rep. Elijah Cummings, D-Md., said the legislation, currently with the House Energy and Natural Resources Committee, "isn't good enough and we need to do more to it before it's approved."

Rep. Peter DeFazio, D-Ore., called the DOT's proposed rule a "bizarre regime" that would leave thousands of miles of low pressure lines unregulated. "We need a comprehensive regime for all low-stress line," he said, adding he was "concerned that we need something more proscriptive."

Thomas Barrett, administrator of the Pipeline and Hazardous Materials Safety Administration, said the Prudhoe Bay leaks, one of the biggest toxic spills in Northern Alaska, was caused by corrosion in the pipelines. He said the spills and subsequent partial shutdown of one of the biggest producing fields in the U.S. could have been prevented if the low-pressure lines there had been federally regulated. He said his agency would have been able to force BP to improve the substandard corrosion maintenance program that led to the leaks.

Barrett, however, was against a comprehensive low-pressure pipeline legislation, which would require "pigging" all lines. Pigging refers to a cylindrical, robotic droid that cleans lines and detects corrosion and cracks. Depending on the line, Barrett said cleaning pigs normally cost around $1,000 a mile, while "smart pigs" - which detect corrosion - can cost between $6,000-$8,000 a mile.

Barrett said he didn't believe many smaller low-pressure lines didn't warrant federal regulation, nor posed the same risk as BP's in Prudhoe Bay. "Some lines you can't pig for a number of reasons, because they telescope, or have tight bends," he added.

The DOT official admitted under pressure from one of the panel members, however, that his agency didn't have an inventory of all low-pressure pipelines through the U.S.

Although the Democrats' calls for stronger legislation come in the wake of the Prudhoe Bay debacle, the issue was highlighted by another leak announced by BP late Tuesday in southern California, also reportedly from a low-pressure line.

The Republican chairman of the committee, Rep. Don Young of Alaska, said he was opposed to strengthening the legislation any further, however. "We have a good bill, it's a good piece of legislation, and we'll pass what we intended to," he said outside the hearing.

Last week, House Energy and Commerce Committee Chairman Rep. Joe Barton, R-Texas, said he was also opposed to any further strengthening of the legislation. Texas, which has large reservoirs of producing oil and gas plants and refineries, is crisscrossed with pipelines.

DeFazio said Wednesday that even if the Pipeline Safety Act couldn't be revisited by the committee, House Democrats could ask for an amendment as the bill comes to the floor for a vote.  -By Ian Talley, Dow Jones Newswires; 202-631-5794; ian.talley@dowjones.com 

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BP Submits DOT Request To Restart E Prudhoe Bay OilDOW JONES NEWSWIRESSeptember 14, 2006 11:26 a.m. HOUSTON (Dow Jones)--BP PLC (BP) asked the U.S. Department of Transportation Wednesday for permission to restart production in the eastern half of the giant Prudhoe Bay oil field in Alaska, the company said Thursday.

The announcement followed the London-based energy major's statements Tuesday that it planned to submit the request to the DOT.

Restart will allow us to quickly conduct both maintenance and smart pigging of these lines," Robert Malone, president of BP's U.S. unit, said in testimony that was released ahead of a U.S. Senate panel hearing examining problems at the oil field Tuesday.

BP last month said it would shut down all 400,000 barrels a day from Prudhoe Bay, the largest producing oil field in the U.S., after discovering severe pipeline corrosion and a small leak. Later, however, after testing pipelines on the western half of the field, BP decided to keep oil there flowing.

"Smart pigging" refers to the inspection of pipelines using a cylindrical droid that's carried by the flow of oil. If liquids aren't moving through the pipeline, then smart pigs can't be used to detect cracks and corrosion.

Steve Marshall, head of BP's Alaska operations, who also testified at the hearing, later said he couldn't say exactly how much additional production would be able to be brought back on line if the company received approval from the DOT. "We haven't discussed with the DOT what level of production is necessary to allow pigging of the lines," Marshall said.

Last week, at a similar hearing held by a U.S. House committee, Marshall said the company plans to bring all of Prudhoe Bay back on line by the end of October, provided it gets the green light from the U.S. DOT.

Speaking on the sidelines of a hearing held Wednesday by the U.S. House Committee on Transportation and Infrastructure, Thomas Barrett, head of the Pipeline and Hazardous Materials Safety Administration, estimated that it would take BP "a week or two" to clean out sediment from the inside of a transit line segment on the eastern half of the field and

then another six weeks to inspect the line through the use of a smart pig.

"It will take around six weeks before we would know with confidence the conditions of the line" once smart pigging had begun, Barrett said.

If smart pigging of the existing oil transit lines on the eastern half of the field shows they're not fit for service, "then bypass options will be completed as soon as practicable," Malone said.

BP said late last week that total output at the field was up to 250,000 barrels a day.

Although its application to the DOT could result in the reopening of lines in the eastern portion, BP hasn't ruled out the option of bypassing the existing lines rather than reopening them.

"Work continues on a number of bypass projects, and we expect these to be ready by the end of October," BP said in the release. BP also plans to replace 16 miles of Prudhoe Bay oil transit lines this winter.  -By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; jessica.resnick-ault@dowjones.com  

(Ian Talley in Washington contributed to this article.)

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Houston ChronicleSeptember 9, 2006

http://www.chron.com/disp/story.mpl/business/energy/4173976.html

BP senior corrosion position left vacantJob has been unfilled for at least 20 monthsBy TINA SEELEYBloomberg News

BP's senior corrosion engineer position for its Alaska operations has been left vacant for at least 20 months, even after a March 2 leak that resulted in the largest-ever oil spill on the North Slope.

"There is an urgent need to recruit and rapidly induct a successor for the vacant senior corrosion engineer position," according to a June 7 internal BP audit released by the House Energy and Commerce Committee.

The position, vacant since December 2004, has not been filled, BP spokesman Daren Beaudo said Friday. "The responsibilities and duties of that position were filled on an

interim basis by members of the team," he said.

BP's pipelines leaked an estimated 210,000 gallons of crude oil onto Alaska's North Slope in March.

Inspections required after that spill led to the discovery of another leak and corrosion that in some places had eaten away 80 percent of the pipeline wall.

London-based BP has had to cut output at Prudhoe Bay because of the pipeline problems.

However, a BP spokesman told Reuters News Service on Friday that the company now believes that the downstream segment of the shutdown pipeline on the eastern side of the Prudhoe Bay oil field is in good enough condition to be safely restarted.

BP has not yet asked the Transportation Department for permission to restart the line and is continuing to work with regulators on the restart plans, the spokesman said.

The report released by the House committee said that the lack of a senior engineer and the arrival of several new employees in key maintenance, reliability, integrity and operations jobs "reduce the capacity of the teams to take a broader strategic view of the corrosion management program."

A team led by John Baxter, director of engineering for BP, wrote the report.

The company's senior corrosion engineer serves as deputy to the manager of the corrosion, inspection and chemicals group, known as CIC.

At a congressional hearing Thursday, the group's former manager, Richard Woollam, refused to testify about his work at BP.

Baxter recommended "the urgent appointment" of employees to fill Woollam's position and his deputy's role in an April 2005 report to BP Alaska's management.

"There is little evidence of a management of change process or transition plan, and replacements need to be quickly identified from BP's limited pool of corrosion management expertise or externally if necessary," the April report shows.

Woollam's position was filled about six months after he left. The senior corrosion engineer job remains vacant.

Woollam was transferred to a nonsupervisory job in Houston in January 2005 after a report by the Houston law firm Vinson & Elkins said his "aggressive management style" deterred workers from raising corrosion issues. The firm was hired to investigate complaints of intimidation and retaliation for employees reporting safety concerns.

Woollam was placed on paid leave by the company on Sept. 7, one day before he

declined to testify, Steve Marshall, head of BP's Alaska unit, told reporters after the hearing Thursday.

The former manager cited his Fifth Amendment protection against self-incrimination as his reason for not testifying.

James Torgerson, Woollam's attorney, didn't return voice mail or e-mail messages.

BP spokesman Scott Dean told the Associated Press on Friday that the company has been slow in filling the vacancies because staff has been consumed with responding to the March spill and related problems.

Dean said BP is recruiting and that it plans to radically increase the size of its corrosion prevention staff in Alaska.

He was in charge of 150 employees and contractors in that position, which he held for about five years, according to the October 2004 Vinson & Elkins report.

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BP to relocate 500 workers in Indiana in safety moveBy JOE CARROLLBloomberg News

BP plans to move 500 workers at its second-biggest U.S. refinery to new offices more than a mile from gasoline-making units as part of safety improvements triggered by a March 2005 blast at a Texas City plant that killed 15.

London-based BP, reeling from congressional criticism of its pipeline operations and a criminal probe of trading practices, plans to move workers at its Whiting, Ind., refinery out of offices that sit about 100 feet from towers that use high pressure and heat to break down petroleum components, said Peter Novak, executive director of redevelopment in Hammond, Ind.

 The company sought permission from Hammond officials on Wednesday to renovate a 100,000-square-foot warehouse and build two buildings on a part of the refinery property that crosses the boundary between Whiting and Hammond, Novak said. The project will cost an estimated $26 million, he said.

"BP indicated they will be removing personnel out of the refinery that are not directly involved in refinery operations," Novak said. "It's an effort to make a safer environment."

BP was fined $21.4 million by federal regulators in September 2005 for safety violations that lead to the Texas City plant explosion. Investigators blamed the 15 deaths and scores injured in part on trailers that were too close to the unit that exploded.

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Anchorage Daily NewsSeptember 6, 2006

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Retired federal judge hired by BP SPORKIN: Jurist urged the industry to settle critic's rights suit against Alyeska. By RICHARD MAUERAnchorage Daily News Published: September 6, 2006 Last Modified: September 6, 2006 at 05:31 AM

WASHINGTON -- A retired federal judge who once suggested Alyeska Pipeline's dirty tricks against a critic would have been at home in Nazi Germany or Stalinist Russia will be the new ombudsman for BP employees.

Stanley Sporkin, 74, said Tuesday he was never one to shy away from difficult challenges. He agreed to leave his Washington law practice, where he's a partner at Weil, Gotshal & Manges, to attempt to resolve issues raised by BP employees who find normal channels useless or threatening.

BP is under intense scrutiny, with three congressional hearings planned over the next two weeks into its partial shutdown of Prudhoe Bay. Two leaks in transit pipelines since March on opposite sides of the field have exposed the company's failure to adequately monitor and repair corroded pipelines on the North Slope.

BP said it was surprised by the condition of the pipelines, but its critics say the company looked the other way when employees tried to blow the whistle.

In a phone interview, Sporkin said BP America President Bob Malone contacted him in early August to ask if he'd consider the assignment, a new position for the company. BP has several avenues for workers to report concerns outside of direct supervisors, but Sporkin said they're apparently not working.

Sporkin said Malone got to know him when Malone ran a troubled Alyeska Pipeline Service Co. for four years in the 1990s and pledged to change its corporate culture for the better. Five companies, including BP, own Anchorage-based Alyeska, which runs the trans-Alaska oil pipeline and Valdez tanker port.

Sporkin presided over the lawsuit filed by Chuck Hamel of Alexandria, Va., an oil company critic and whistle-blower advocate.

Hamel sued in 1993 after a secret Alyeska campaign against him was revealed by personnel hired to carry it out. Alyeska set up a fake environmental law firm in an effort to learn who was leaking information to Hamel about dangerous and unhealthy practices and to retrieve confidential documents he possessed. The "attorney" in charge of the "Ecolit" law firm -- an undercover operative from the Miami security company Wackenhut -- promised to be Hamel's advocate against the industry if he would only help them prepare their cases.

In the days before the trial was to begin, Sporkin urged BP and the other oil company owners of Alyeska to settle because their case was so weak.

"This is not Nazi Germany or Russia," Sporkin charged. "These people have certain rights," the judge said, referring to Hamel and his wife, Kathleen. Hamel and the defendants eventually settled the case for an undisclosed sum.

Hamel, who continues to draw attention to safety concerns from oil field workers, said Tuesday that he has total faith in Sporkin's integrity but is skeptical he can accomplish anything.

"No one holds Judge Sporkin with more respect than Kathy and I," Hamel said. Hamel, 76, said he'd be happy if workers did call Sporkin. "Then I can go to the beach," he said.

Before being appointed to the bench by President Reagan, Sporkin spent 20 years at the U.S. Securities and Exchange Commission, where he helped write legislation that made it illegal for American corporations to bribe foreign officials, despite practices that might be common overseas. He later served five years as general counsel to the CIA.

Malone announced Sporkin's appointment in an e-mail to employees Thursday. Malone said Sporkin will report directly to him.

"I hope this sends a strong message that I want to hear your concerns, and that they will be fully investigated and appropriate corrective action taken," Malone said. The e-mail was provided by a company spokesman.

Sporkin's authority spans BP employees nationwide, reflecting that the company's problems extend beyond Prudhoe Bay. An explosion at a BP refinery in Texas last year killed 15 workers and injured about 170. And BP is under investigation for allegedly manipulating the U.S. propane, gasoline and oil markets.

Hamel himself met Washington reporters Tuesday at a newsmaker event at the National Press Club. In it, he released letters he sent to the chairman and ranking Democrat of the House Energy and Commerce Committee, which is to hold the first BP hearings this week.

Hamel accused BP of "cooking the books" to hide a deficient corrosion program. He also

said the timing of the hearing -- at 10 a.m. Thursday -- would prevent it from going too deep, since members of Congress use the afternoon to get away.

Anchorage BP spokesman Daren Beaudo said Hamel's complaints were too general to respond to.

"If Mr. Hamel has any specific issues or information that sheds further light on the subject, we encourage him to make them known to us and regulators and Congress," Beaudo said.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com or 257-4345.

THE HOTLINE NUMBER BP set up last week, staffed by operators 24 hours a day, seven days a week, is 1-888-776-7545.

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Three candidates for governor got VECO checks Before this year's governor's race, the three candidates took donations By KYLE HOPKINSAnchorage Daily News Published: September 6, 2006 Last Modified: September 6, 2006 at 06:34 AM

All three major candidates running for Alaska governor cashed campaign checks from Veco -- one of the biggest spenders in state politics -- in the past. But with a federal investigation now looking into possible corruption involving the oil field services and construction company and state lawmakers, the politicians are saying no thanks.

Former two-term Democratic Gov. Tony Knowles said Tuesday that he won't accept donations from the four Veco officials identified in an FBI investigation that became public last week. His opponents, outspoken Veco critics Sarah Palin, a Republican, and Independent Andrew Halcro, say they want nothing to do with the company.

But that doesn't mean any of the three turned away Veco contributions in past elections. Knowles, who unveiled a five-point plan for improving ethics rules in state government Tuesday, received more than $23,000 in Veco-related contributions throughout the 1990s as he ran for governor three times, according to a review of Alaska Public Offices Commission records.

Halcro, who represented Anchorage in the House of Representatives for four years, collected $5,500 in 1998 and 2000.

While mayor of Wasilla, Palin ran for lieutenant governor in 2002. She gathered $5,000

-- or about 10 percent of her campaign fund -- from Veco officials or their wives along the way.

Knowles and Halcro said Tuesday that they wouldn't return the money. It was donated to long-ago campaigns that have no bearing on the current race, they say. Palin was driving to the Kenai Peninsula and couldn't be reached for comment.

Asked about the past Veco contributions, Knowles says that business people should be able to donate money to candidates like anyone else: "This is a democracy." He said it only becomes a problem when those contributors have undue influence on a candidate, and described his own administration as "squeaky clean."

Palin spokesman Curtis Smith said there has long been an understanding inside the campaign that Palin didn't want Veco money.

"She wanted nothing to do with that company," he said, acknowledging that Veco, which supported incumbent Gov. Frank Murkowski during the primary last month, likely wouldn't offer her cash in the first place.

Halcro who served as a Republican legislator but, like Palin, has a reputation as a maverick within the party, said he won't take donations from the company either. But that isn't exactly going out on a limb, he said.

He says Veco donates to candidates it thinks it can control, and by his second term in the Legislature, the money started to dry up. Now, it wouldn't help anyway.

"If Veco shows up on your APOC report, you would imagine that would generate a response from your opponent," Halcro said.

Halcro is running with former Soldotna lawmaker Ken Lancaster, who does not appear to have received Veco-related donations in the current race or previous campaigns.

Knowles' running mate, Anchorage Rep. Ethan Berkowitz, received $3,000 from Veco officers or their wives in his 1998 and 2000 campaigns.

Palin's running mate, Sean Parnell, received two $500 checks from Veco officers in August, including one from Veco chief executive officer Bill J. Allen, and collected about $16,000 while running for the Legislature in the 1990s.

Palin, meantime, spent the primary election defending criticism from the Voice of the Times -- a separate editorial space produced by Veco that appears in the Daily News everyday.

While Palin often draws heat from the oil industry for her association with a natural gas pipeline plan that's at odds with the route sought by oil companies, Parnell is a former oil lobbyist. Can they co-exist on the same ticket?

"Alaskans chose Sean Parnell to run with Sarah Palin. It wasn't necessarily Sarah," Smith said.

Still, he said, "She's not disappointed with Alaskans' choice, that's for sure." He described Parnell as a "straight-shooter" who can work with Democrats and Republicans.

Last week, the FBI raided several legislative offices, armed with at least one warrant that named four Veco officials: Allen, president Pete Leathard, executive vice president and chief financial officer Roger Chan and vice president Rick Smith.

No one has been charged with a crime.

Randy Ruedrich, chairman of the Alaska Republican Party, said Tuesday that any donations the party receives from the Veco officers will be put aside until investigators decide if anyone is in trouble.

"If any of our candidates ask, we'll encourage them to do the same," Ruedrich said.

Ruedrich said everyone needs to wait and see what comes of the investigation.

"Jumping to conclusions is totally inappropriate," he said.

With Murkowski and some incumbent legislators falling in the Aug. 22 primary and all the candidates for governor presenting themselves as a fresh alternative to the past four years, change was already a theme in this year's election.

The FBI investigation brings even more uncertainty, said Jean Craciun, an Anchorage pollster and public-opinion researcher.

"I don't think that Veco or any of the usual suspects will be presenting themselves as they have in the past. I think they'll probably lay low," she said.

In other words, who wants to be backed by the establishment when anti-establishment candidates are on a roll?

Knowles held his own eight years as governor up for comparison Tuesday, and listed steps he said would ward off future troubles.

He said: Loopholes that allowed former state Attorney General Gregg Renkes to own stock in a company that would benefit from a coal deal he was negotiating for the state need to be closed, executive branch employees would need to reveal all potential conflicts of interest to the public, lawmakers should have to tell people what it is they do to earn lucrative consulting contracts, and state watchdog agencies need more money to enforce the rules.

Ruedrich begged to differ with Knowles' description of his two terms of governor as blemish free, but said he'd need time to research before offering specific examples.

Daily News reporter Kyle Hopkins can be reached at khopkins@adn.com .

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Beth Bragg: Don't die of shock, but surprise! -- big oil has invaded politics BETH BRAGGCOMMENT Published: September 6, 2006 Last Modified: September 6, 2006 at 06:34 AM

Hearing that the relationship between certain lawmakers and one of the oil industry's biggest companies might be too intimate is like hearing there was gambling at Rick's Cafe in Casablanca.

I'm shocked -- shocked! -- to learn that something wrong is going on here.

We still don't know much about last week's FBI raids, other than they targeted some of the Legislature's biggest names and appear to focus on the financial coziness between lawmakers and Veco, one of the oil industry's most powerful political entities in Alaska.

Well, duh.

Oil is to Alaska politics what water is to fish and tequila is to a first date. You can barely have one without the other.

Lawmakers are chummy with the oil industry because they need money to run for office, and the industry is chummy with lawmakers because it needs legislation to protect its interests. Each uses the other to get what it wants. Done properly, it's called lobbying, and it's legal.

But it's so much a part of doing business here that the public seems unable or unwilling to recognize when it spins out of control.

We aren't surprised when reports of campaign contributions show that oil and gas executives give generously to politicians, often more generously than those in other industries.

We barely flinch when Bill Allen, who owns Veco, buys The Anchorage Times to push his industry's agenda. The newspaper didn't last, but half an editorial page of it survives and runs every day in this newspaper at significant cost to Veco.

We suppress yawns upon learning Ben Stevens, the president of the state Senate, is on Veco's payroll as a "consultant."

We shrug when we learn that Randy Ruedrich, a member of the state commission charged with overseeing the oil industry, leaks a confidential document to an oil industry lobbyist. In fact, this misconduct mattered so little that Ruedrich could admit he'd been unethical, pay a big fine, and two years later win re-election as chairman of Alaska's Republican Party.

In short, the oil industry does whatever it takes to get what it wants. And there's no shortage of accommodating Alaskans.

"Somebody says in these halls, 'Bill Allen wants this,' and it gets done," is how Eric Croft, an Anchorage Democrat, described the way things worked in Juneau back in 2002.

Little has changed.

Last week, as the FBI searched offices and interviewed politicians and pollsters, Croft again described a culture that can only be called sleazy: "Lobbyists writing bills. Special interests, not only funding campaigns, which unfortunately I've kind of gotten used to, but hiring legislators as consultants."

Croft proudly proclaimed he was running an oil-free campaign when he made a bid for governor this year. Of the five leading candidates, he was the only one to state he'd accepted no money from the oil industry.

He finished fifth among the bunch.

Croft looks pretty good now in the light of those FBI raids, although we don't know what, if anything, the investigation will expose. We do know a handful of lawmakers took to calling themselves the Corrupt Bastards Club after their names showed up in a newspaper opinion piece about Veco's contributions to 11 lawmakers and the governor. Corrupt Bastards Club logo items have replaced Valley Trash T-shirts as the gotta-have-it Alaska fashion, provided the FBI doesn't confiscate them all.

Even if the investigation fizzles faster than you can say Security Aviation, the FBI is doing us a favor. Someone needs to kick over a few rocks to show us the creepy things living under them. Maybe someday we'll squirm enough to call an exterminator.

Beth Bragg's opinion column appears Wednesday, Friday and Sunday. Her e-mail address is bbragg@adn.com .

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McGavick returns money $14,000Veco made donations to GOP candidate in Washington's Senate race. By RACHEL LA CORTEThe Associated Press Published: September 6, 2006 Last Modified: September 6, 2006 at 06:34 AM

OLYMPIA, Wash. -- Republican Senate hopeful Mike McGavick has returned $14,000 he received from executives with an Alaska oil services company under investigation by the FBI, his campaign announced Tuesday.

Spokesman Elliott Bundy said the money was returned Friday, a day after federal agents raided the offices of at least six Alaska legislators, including the son of Sen. Ted Stevens.

The senior Stevens hosted a fundraiser in Alaska for McGavick in April that netted about $100,000 for McGavick's bid to unseat Democratic Sen. Maria Cantwell. All but $2,000 of the contributions in question came in from six Veco Corp. executives at that fundraiser, including chairman Bill Allen and president Pete Leathard, according to The Center for Responsive Politics, a Washington, D.C.-based group that tracks money in politics.

Bundy said the remaining $2,000 came in July from vice president Tom Corkran, who also had given $2,000 at the April fundraiser.

Bundy said that while details of those at the center of the investigation have not been confirmed by authorities, the reporting by the media that Veco was under investigation was enough for McGavick to decide to return the money.

"We simply wanted to err on the side of caution," he said.

Bundy said they did not announce the return Friday because "we didn't feel the situation warranted an announcement."

"This is a criminal investigation, and it's a very serious matter," he said. The FBI searches began Thursday and continued Friday. A copy of one of the search warrants, obtained by The Associated Press, links the investigation to a production tax law signed last month by Gov. Frank Murkowski and a draft natural gas pipeline contract Murkowski and the state's three largest oil companies negotiated.

The warrant called for seizure of documents concerning any payment made to lawmakers by Allen and Smith. Agents also looked for documents about contracts, agreements or employment of legislators provided by Veco, Allen, Smith and Leathard.