Alaska depends on North Slope oil for about 90 percent of its state revenue and the shutdown caused a dent in income to the treasury. This was an immediate concern to then-Governor Frank Murkowski and the Legislature, but it also brought home the dependence of the state’s finances, and a good part of its economy, on aging decadesold infrastructure used to produce and transport crude oil. The quick reconfiguration of the piping to get Prudhoe Bay oil flowing again was an outstanding engineering achievement by BP, as was the large pipe replacement system that came in the months that followed, but these achievements were overshadowed by the fact that the accidents had occurred in the first place.
UNEXPECTED CORROSION The spills caught the North Slope oil producers off guard, too. The source of the corrosion was unexpected, mainly sediment that had accumulated because of the low velocity of oil in the pipe. The sediments created an environment for bacteria and the cre-
ation of acids, resulting in corrosion. Critics argued later, in hindsight, that these should have been foreseen. There was finger-pointing by politicians and claims that years of industry budget-cutting at times of very low oil prices had starved oilfield operators’ maintenance budgets. Still, the fact that highly-trained engineers did not anticipate the unusual mix of conditions that led to the corrosion happening in places where it wasn’t expected. BP is the Prudhoe Bay field operator and took the brunt of the criticism in 2006 along with federal criminal penalties, but the blame can be spread more widely. Prudhoe Bay is owned by all of the major companies with interests on the North Slope, and technical committees of all the owner companies closely monitor actions of the operating company and approve budgets. If spending cuts on maintenance set the stage for the corrosion, all the owners share blame. In reaction to the spills the Legislature took a punitive step in disallowing 30 cents per barrel in operating cost reductions from the state’s production
tax, which is a net-income type tax. Lawmakers argue that the 30 cents per barrel represents maintenance costs, although there is no evidence that the amount is correct. Legislators did not want to allow maintenance as a deduction in determining the amount of production tax due to the state. However, in the aftermath of the spills it became apparent that government agencies should increase their maintenance oversight. For example, federal pipeline agencies that oversee large pipelines like TAPS had no authority over in-field pipelines, like the ones that leaked, or the flow lines from wells to the field processing plants. As a consequence of the spills, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, or PHMSA, moved to extend its authority and rules over in-field pipelines. The state Department of Environmental Conservation has authority to regulate oil spills but prior to 2006 its efforts were focused on preventing spills themselves, not overseeing maintenance. However, DEC had been
Effective. Efficient. Excellent.
ß Asbestos and lead surveys and abatement
ß Biodegradable cleaning solutions
ß Specialty coatings and sandblasting
ß Tank and vessel cleaning
ß Corrosion under insulation refurbishment
ß Hazardous waste removal
ß Oil spill response
ß Operations, maintenance and construction
Customer focused. Safety driven. Process oriented. VISIT OUR WEBSITE: www.CCIindustrial.com PHONE: 907.258.5755
EMAIL: info@cciindustrial.com
www.akbizmag.com • Alaska Business Monthly • February 2012
81