BP's recent closure of its North Slope pipeline because of corrosion should come as no suprise. Just this past March, a BP Alaskan pipeline leaked (due to corrosion) some 270,000 gallons of oil onto the mainland, the largest North Slope leak in history. (The leak went undetected for at least five days.) What preceeded both March's leakage and the recent pipeline closure is a pattern of criminal negligence regarding its pipeline corrosion. As a result, BP is now under federal investigation by a grand jury and the Environmental Protection Agency. Congressional Democrat John Dingell (D-MI) has also called for hearings on BP's negligence.
More in extended.
The Associated Press
reported:
Company whistleblowers reportedly raised concerns about how the company dealt with pipe corrosion as early as 2004, eventually leading to an inquiry into possible violations of the federal Clean Water Act by the Environmental Protection Agency's office in Seattle--an investigation that intensified after the March spill.
Two years later, little has been done to improve conditions. Indeed, there indications that actions have been taken to worsen the integrity of the pipeline. Thus, BP is at a point where it will have to replace 16 of the 22 miles of pipeline, which could take up to a year to complete. The Alaska Department of Revenue estimates a $4.6 million loss per day due to the closure. Earlier today, Gov. Frank Murkowski said that he will begin a state hiring freeze because of the pipeline closure. Murkowski also called on the state's attorney general to examine the "state's right to hold BP accountable for losses to the state."
(An image courtesy of Anchorage Daily News details the pipelines to be replaced.)
BP's decision to shut down Prudhoe Bay is said to have been due to its recent scrutiny of the pipeline. But back on March 15, shortly after the record pipeline leakage, the Department of Transportation's Pipeline and Hazardous Materials Safety Administration mandated a thorough cleaning and "pigging" of its lines "in order to prevent and detect further corrosion."
In short, this discovery came (not through routine internal safety priorities) but only once such action was mandated by the federal government to ensure the integrity of the company's pipelines. The mandated Corrective Action Order gave the company a June 15 deadline to complete the cleaning of its lines. Not a single line was cleaned by the deadline. The delay is squarely the responsibility of BP, which claimed that "factors outside its control" prevented them to be able to clean its lines. Fingers were pointed at Alyeska Pipeline Company, which is partially owned by BP, for its refusal to allow pigging. BP contended that it would abide by the order, but that it would take approximately two years to complete all aspects.
The Associated Press also recently reported:
The oil company said it was suprised to find such severe corrosion, and had gone 14 years without using a devise called a [smart] "pig" to clean out its lines because it did not believe it was necessary.
The transit lines themselves were made back in the mid-70s and were made to last 25 years or so. Proper maintenance is essential to prolong the life of the lines.
Rep. John Dingell released a statement regarding BP's Prudhoe Bay closure:
"BP must take all steps necessary to repair or replace problem pipelines quickly, so the American consumer does not pay for BP's laxity. And the United States Congress has an obligation to hold hearings to determine what broke down here and what laws and regulations need to be improved to ensure problem pipelines like these are found and fixed earlier."
BP: The New Enron?
Chuck Hamel, longtime BP employee advocate, recently told NBC that "a dozen past and current BP employees came to him claiming they'd been told to cut back on a chemical put into the system to retard rust and corrosion, and to falsify records. A federal official confirms that many of these workers have also talked to the FBI."
Asked why BP would do such a thing, Hamel responded, "to save money."
In the meantime, BP will lose some 400,000 barrels of oil a day by shutting down the pipeline system. Experts believe the repairs could take up to a year. But this might not spell profit losses for BP, according to Greg Palast:
The price of crude jumped $2.22 a barrel on the shutdown news, to over $76. How lucky for BP which sells four million barrels of oil a day. Had BP completed its inspection and repairs a couple years backs--say, after Dan Lawn's tenth warning--the oil market would have hardly noticed.
But $2 a barrel is just the beginning of BP's shut-down bonus. The Alaskan oil was destined for the California market, which now faces a supply crisis at the very height of the summer travel season. [Ed.-CA gets approx. 20% of its oil from Alaska.] The big winner is ARCO Petroleum, the largest retailer in the Golden State. ARCO is a 100%-owned subsidiary of...British Petroleum.
Palast continues:
Enron Corporation was infamous for deliberately timing repairs to maximize profit. Would BP also manipulate the market in such a crude manner? Some US prosecutors think they did so in the US propane market. The Commodity Futures Trading Commission (CFTC) just six weeks ago charged the company with approving a scheme to crank up the price of propane sold in poor rural communities in the US. One former BP exec. has pleaded guilty.
According to the Department of Justice, the BP exec. (Dennis Abbott):
...admitted that he and his conspirators carried out the strategy by using BP's market power and financial resources to buy large quantities of February 2004 TET propane to become the dominant long-holder of TET propane. The conspirators intended that their purchasing strategy would corner the market by reducing the supply of February 2004 TET propane, permitting them to sell propane at an artificially inflated price. If the plan was successful, BP would receive excessive profits derived through artificial manipulation of the market. By the end of February 2004, the conspirators controlled approximately 90 percent of the TET propane supplies in the United States. Abbott admitted that the conspirators then sold TET propane at the end of February at an artificially inflated price and caused other market participants to pay a higher price than would have been available but for the market manipulation. The purpose of the conspiracy was to enrich BP by inflating the price of propane in February 2004 and then selling it at the inflated prices, and to enrich the conspirators through bonuses and other remuneration from BP.
Abbott admitted that he understood that the scheme was approved by senior executives at BP, and that steps were taken to avoid detection by market participants and others.
("TET propane" is propane which runs along the Texas Eastern Products Pipeline Co.'s pipeline network which spans from Mont Belvieu, TX through Ohio into New York, Pennsylvania and Illinois.)
And just where does Mr. Abbott hail from? Why, Houston, home of Enron. Proving that it's a small world in the world of market manipulators. So much for a company of responsible stewardship and putting infrastructure upkeep over the almight profit. Maybe the BP really stands for Beyond Prevention.