Lax Alaska oil oversight is our problem, too

The shutdown of BP Prudhoe Bay oil production will cost the State of Alaska $6.4 million in taxes and royalties each day. The state has imposed a hiring freeze, and the governor and legislators want the giant oil company investigated for its failure to properly maintain its pipelines.

A better question would be why Alaska’s pipeline oversight is so haphazard, with too much responsibility handed to the federal Pipeline and Hazardous Materials Safety Administration, whose closest regional pipeline office is in Lakewood, Colo. This for a state that draws 89 percent of its revenue from the oil companies.

Absent much government scrutiny, BP and the other major oil producers on the North Slope are largely self-regulated. A spokesman for Gov. Frank Murkowski says much state oversight is limited to audits of producer inspection reports.

Washington, meanwhile, has conducted its own inspections of both interstate and intrastate pipelines since 2001. All states were given the option to do so under legislation Congress passed after a July 1999 leak and explosion of the Olympic Pipeline near Bellingham that killed three. Washington is one of only a handful of states that sought authority to perform its own inspections.

The Pipeline Safety Division of the Utilities and Transportation Commission has a staff of seven and a budget of $2.1 million, all paid with a federal grant or fees from the pipeline companies themselves. Alaska could have funded a like-sized office with less than eight hours worth of oil revenues.

The state office has become so accomplished that audits by its federal counterpart awarded Washington scores of 99 out of 100 two years running. The feds closed their Seattle office in 2003, although only they can take enforcement action. The Pipeline Safety Division provides the eyes and ears on the ground.

There are more than 22,000 miles of pipeline in Washington transporting natural gas and all manner of petroleum distillates, mainly gasoline, diesel and jet fuel. Knock on wood, there has not been a catastrophic failure of that infrastructure since May 2003, when the Williams Co. natural gas line ruptured in Lewis County.

Last year, only a single incident was reported. Someone dug into a Puget Sound Energy natural gas distribution line in Puyallup.

But division Director Alan Rathbun notes the crude oil pipelines that failed in Alaska are much harder to maintain and inspect than those that carry refined products.

Untreated crude contains solids that abrade pipes from the inside. And the sludge that forms makes internal inspections difficult. BP has also blamed the increasingly high water content of crude pumped from oil fields past their prime.

All the more reason, one would think, to have someone making sure all those assets are examined scrupulously.

Like Alaska, Washington audits pipeline operator reports as part of its inspection efforts, but officials also try to be on-site when any pipe is exposed for repairs or examination. Repairs are inspected. Valves are checked.

Everything appears to be shipshape, Rathbun says. “We have been very pleased of late.”

In addition to its inspection function, the division has worked with local officials around Washington to come up with guidelines for new development around once-remote pipeline rights-of-way.

The office is also studying small natural gas pipeline systems like those serving college campuses, mobile home parks and fairgrounds. Results of a failure in those areas could be deadly, but some owners do not properly care for those pipelines.

“Generally, the tendency across the country is to ignore these systems,” says Tim Sweeney, policy coordinator for Washington’s pipeline division. If there is a problem, the office will try to come up with solutions that minimize the regulatory burden.

The state has also asked to intervene in Federal Energy Regulatory Commission review of a pipeline that would be built in conjunction with a proposed liquefied natural gas terminal on the Oregon side of the Columbia River. The pipeline would connect with the Williams Co. line in Washington.

And Olympic Pipeline Co. has asked federal regulators to lift a restriction that has limited operations on that pipeline to 80 percent of capacity while the company conducted an end-to-end inspection and overhaul in the wake of the Bellingham explosion. The state will participate in the review of that application.

Too bad Alaska is more hands-off. If the lack of oversight was a problem only for Alaskans, it would serve them right. Unfortunately, BP has a Washington refinery that may be cut off from Alaskan crude for a while. Last week’s surge in local pump prices for gasoline indicates Alaska’s problem could be our problem, too.