December News Stories

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Anchorage Daily News
December 29, 2006

http://www.adn.com/money/industries/oil/story/8526277p-8420020c.html

State updates rules to prevent oil from spilling
CONSISTENCY: There hasn't been a regulation change since 1992.
By ALAN BAILEY
Petroleum News
Published: December 29, 2006
Last Modified: December 29, 2006 at 03:23 AM

Alaska Oil Spill Prevention and Contingency Plan Review (CPR)
http://www.dec.state.ak.us/spar/ipp/cpr.htm

State environmental regulators are implementing new and revised regulations for preventing oil spills.

"Our mission is to keep oil in the container," said Lydia Miner, manager of the Department of Environmental Conservation's exploration, production and refineries section.

Miner said the changes come as part of an effort to update the regulations that started around 2001, well before the oil spill issues that have arisen this year with the Prudhoe Bay transit lines.

The changes for facility design and construction apply after Dec. 31, 2008, while regulations for facility operations, maintenance and inspections go into effect at the beginning of 2008.

Miner spoke recently about the changes at a meeting of the Kenai Chapter of the Alaska Support Industry Alliance.

She said the new regulations include a new category of pipeline called a flowline, which are used throughout oil fields.

"We took it upon ourselves to define what a flowline is and we used a definition that it is piping that carries oil between a well pad or offshore platform and a production facility," Miner said.

"Starting in 2009 you will have to be building your flowlines to certain standards," Miner said. The new regulations spell out those standards. Flowlines installed before 2009 are exempt from the new construction standards, Miner said.

But starting in 2008 corrosion control will need to be in place for all flowlines, including flowlines installed before 2009. The regulations spell out different corrosion control for buried or submerged flowlines, as distinct from above-ground flowlines. Flowline operators will also need to have a program such as cleaning pigs or the use of corrosion inhibitors to minimize internal corrosion.

By 2008 every flowline must have a leak detection system or an acceptable preventive maintenance system. And all flowlines must be marked. Operators must keep documentation for corrosion control and preventive maintenance.

Facility oil pipelines -- pipelines that originate or terminate in a regulated oil storage tank or an exploration or production well -- are already regulated, Miner said. But pipelines installed after the end of 2008 will require new standards for construction and cathodic corrosion protection. And facility oil pipelines must be subject to a specific inspection program starting in 2008.

Miner said that DEC is not changing the regulations for oil transmission lines at the moment but will issue changes to those regulations in the future.

The new regulations also address oil-storage tanks and plans for dealing with spills from them.

Further, DEC is placing increased emphasis on training to prevent oil spills and has moved training to its own section in the regulations.

Miner acknowledged that the oil industry seeks consistency in the regulatory environment. But she pointed out that the oil-spill regulations have not changed since 1992.

"We've been pretty consistent for 14 years," Miner said. "We believe that the changes to the regulations make them clearer -- we think you're going to have less surprises in interpretation from DEC regulators in the future."

See regulation changes at www.dec.state.ak.us/spar/ipp .

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Wall Street Journal
December 20, 2006

BP May Create New Post to Ease CEO Succession
By CHIP CUMMINS
December 20, 2006; Page A17

LONDON -- BP PLC's board may create a new, high-level post for the yet-to-be-named heir apparent to Chief Executive John Browne, a job designed to smooth the transition at the oil titan before his 2008 retirement, according to people familiar with the situation.

Lord Browne said this summer that he would retire Dec. 31, 2008. The naming of a top lieutenant and likely successor could clear up uncertainty over succession at BP and allow Lord Browne to preside over a prolonged turnover. The appointment of a chief operating officer, a new role at BP, could come as early as the first quarter of next year, though it could also come much later, according to one person familiar with the situation.

 
The board hasn't made a final decision on whether to create the post, however, and may decide against it in the end, these people said. BP hasn't made an announcement on a successor.

A U.S.-style chief operating officer could also provide the oil company -- battered over the past two years by a series of safety, compliance and operational shortfalls in the U.S. -- a measure of breathing room before Lord Browne's departure. That could give BP time to adapt if other senior BP executives decide to go elsewhere after being passed over for the top job.

BP's board has discussed the issue of succession in recent board meetings, according to several people familiar with directors' deliberations. It is unclear whether they have any favorites among internal or external candidates.

According to company observers, strong candidates from inside the company include Tony Hayward, BP's head of exploration and production, and Bob Dudley, chief executive of BP's big Russian joint venture, TNK-BP. Iain Conn, another top executive in Lord Browne's inner circle, is also seen by analysts as a contender. John Manzoni, chief of global refining and marketing and once a strong candidate, may have a harder time now following a rash of accidents at BP's refineries in the U.S.

Lord Browne has been under pressure from regulators, investigators and politicians amid the company's problems in the U.S. Last year, an explosion at BP's refinery at Texas City, Texas, killed 15 workers, triggering big fines and a continuing criminal probe. This year, U.S. officials opened a separate criminal probe into corrosion at the BP-operated Prudhoe Bay oil field. Federal investigators are also probing BP's energy trading, alleging BP traders manipulated propane markets in 2004 and investigating trades in gasoline and crude-oil markets, as well. BP has denied the manipulation charges and says it is cooperating with all probes.

BP also said yesterday a senior refining executive is resigning, the latest executive-suite change after the Texas City blast. BP announced the resignation of Mike Hoffman, a global vice president for refining, based in London. Mr. Hoffman, 49 years old, will leave BP April 30. BP spokesman Neil Chapman denied his exit was caused by Texas City and the ensuing debate surrounding BP's refining business. Mr. Hoffman's office said yesterday he was on vacation and unavailable for comment.

--Jessica Resnick-Ault and John M. Biers in Houston contributed to this article.

Write to Chip Cummins at chip.cummins@wsj.com

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Financial Times
December 18, 2006

http://www.ft.com/cms/s/27881cee-8e07-11db-ae0e-0000779e2340.html

BP memo criticizes company leadership
By Sheila McNulty in Houston
Published: December 17 2006 22:03 |
Last updated: December 17 2006 22:03

A stark indictment of BP’s leadership style, corporate culture and cost-cutting has been delivered by one of the front-runners to succeed Lord Browne as the company’s chief executive.

The comments by Tony Hayward, BP’s chief executive for exploration and production, appeared on the company’s internal website under the heading “Hayward shares candid views on 2006”. His analysis of BP’s shortcomings could be seen almost as a manifesto for how he would lead the company out of its present troubles should he land the top job.

In comments which pulled few punches, Mr Hayward said: “We have a leadership style that probably is too directive and doesn’t listen sufficiently well. The top of the organization doesn’t listen hard enough to what the bottom of the organization is saying.’’

The posting, a copy of which was seen by the FT, also said BP’s management has made a “virtue out of doing more for less”. Mr Hayward told colleagues: “The mantra of ‘more for less’ says that we can get 100 per cent of the task completed with 90 per cent of the resources; which in some cases is okay and might work but it needs to be deployed with great judgement and wisdom.

“When it isn’t, you run into trouble,’’ he added.

The strong criticism, posted on December 11 as a feature article for employees on BP’s intranet, places some distance between Mr Hayward and Lord Browne as BP looks for a successor to the current chief executive in the run-up to his retirement in 2008.

Lord Browne has regularly been voted Britain’s most admired business leader, but the string of high-profile problems with BP’s US operations in the past two years  including a fatal explosion at the company’s Texas City refinery and the enforced closure of half its Alaskan oilfield due to severe pipeline corrosion  has clouded his reputation.

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http://www.ft.com/cms/s/4cd813b2-8dff-11db-ae0e-0000779e2340.html

A corroded culture? How accidents in Alaska
forced BP on to the defensive
By Sheila McNulty in Houston
Published: December 17 2006 22:01 |
Last updated: December 17 2006 22:01

It was 2am on August 16 2002 and Don Shugak was making his rounds as a field production operator for British Petroleum in Alaska. He had the radio tuned to public station KBRW and watched for caribou as he drove his pick-up truck across the desolate Arctic tundra of the Prudhoe Bay oilfield. Part of his job was to monitor the restarting of wells shut for maintenance; every so often he would jump out to “check the vitals” on wells spread 25ft to 50ft apart.

After 12 years with BP, the Alaska native knew the routine, checking up to 100 wells, on clusters miles apart, during a 12-hour shift on America’s biggest oilfield. But he was never complacent: “There is always that risk factor when you are dealing with pressure and hydrocarbons.”

Getting out of his truck, the midnight sun slanting long shadows across the snowy plain, he approached well A-22, which had just been restarted after maintenance. But as he opened the door to the steel well house to “bleed” off the excess well pressure the well’s casing ruptured, allowing gas up and out. There it found a spark from the electricity in the shed and exploded.

Mr Shugak was engulfed in a fireball that threw him against his truck, smashing both femurs and compressing two vertebrae. The fire scorched his face and everything outside his fire-retardant coveralls; his hair was burnt off, and the skin on his right hand was “de-gloved” up to the elbow. The heat left third-degree scars on his legs and rear. “I remember waking up and being against the side of the truck,” Mr Shugak said.

His legs broken, he managed to crawl on his elbows away from the inferno. A security guard heard the blast and reported it to the control centre, which ­summoned other production operators. Mr Shugak was airlifted out but remembers nothing else; he spent the next two months in a coma. As soon as he was well enough to discuss his future, BP began work on a settlement that bars Mr Shugak from “criticising” the company.

Because of this, the Financial Times has had to piece together what happened from his colleagues. In the hours after Mr? Shugak flew off into the night, Nicholas Morson, the field production operator who had preceded Mr Shugak on duty, provided a written statement to BP’s management.

It said that a BP engineer had issued a “temporary waiver” to enable the leaking well to be returned to production. “[The engineer] thought that once the well had heated up from the warm fluids running through the tubing that the leak would probably seal itself off,” according to Mr? Morson. BP documents show it often granted waivers to run potentially problematic wells.

As Mr Morson filed his report, Robert Brian, a 10-year veteran of BP Alaska, was working all night to depressurise the well and extinguish the flames. That took six hours and 3,000 gallons of sea water. By the time his colleague Marc Kovac got there in the morning, all that was left of Mr? Shugak’s truck was the frame and a melted radiator. “It looked like the devil himself climbed out of that well house,” said Mr Kovac.

Before a settlement with BP that required his silence on this matter, Mr Brian told the FT that an investigator with the US Department of Labor’s Occupational Safety & Health Administration (Osha) came to interview him after the accident. When he told Mr Brian that others had claimed BP had done a mechanical integrity test to ensure the safety of the well before returning it to service, Mr Brian was dumbfounded. “They’re lying,” he said. After the oil worker raised the possibility that BP might take action against him for disagreeing, the investigator suggested Mr Brian file a written complaint with Osha for his own protection.

“At that point I had to make a decision: am I going to be a part of this?” Mr Brian said. “I wasn’t willing to let my personal integrity be subverted.” He filed the complaint, saying the accident was preventable. Mr Brian had long felt regulators needed to tighten oversight of BP; now he believed it imperative. “Because there is no regulation from the state, BP [officials] feel comfortable in giving themselves ‘safety variances’ or ‘waivers’ whenever they don’t have enough people or time to do something right,” he said at the time. “That is exactly what happened with A-22.”

Initially, BP denied Mr Brian’s charges. Ronnie Chappell, BP’s US spokesman, insisted BP had completed a mechanical integrity test on well A-22. But when Mr? Brian persisted in challenging that claim, the company recanted, admitting it had been wrong, and cited “some miscommunication or misinformation”.

This accident and a decision by Mr Brian and Mr Kovac to put their names to their accusations to add more weight touched off a four-year investigation by the FT into BP’s US operations. The outcome raises serious questions about BP’s safety culture and its efforts to silence a steadily growing group of whistleblowers. It tarnishes the reputation of a multi­national that this year ranked fourth in the Fortune Global 500, with revenues of $268bn (£137bn, €205bn) and operations in more than 100 countries.

Several BP workers expressed concerns that their management was letting them down by skimping on safety, covering up violations and putting pressure on anyone who spoke out about it. To publicise their plight, a few, such as Mr Brian and Mr Kovac, began to talk to regulators and to the press.

This two-part series is the first time this story has been told from beginning to end  an investigation involving dozens of interviews with BP and government officials in five US states as well as the review of thousands of documents.

This year, BP’s questionable safety and environmental record in the US finally caught up with the company and threatens serious consequences. Following a string of disasters in 2005 and 2006, including Alaska’s largest ever land oil spill in March, the shutdown of half of the US’s biggest oilfield in August and a refinery explosion in Texas City last year that killed 15  the worst industrial accident in the US in more than a decade  BP was plunged into crisis.

In June. it emerged that two grand juries, one in Texas and one in Alaska, were investigating the company for possible criminal action. In September, the US House of Representatives energy committee subpoenaed BP’s top US management for hearings on how their US assets could have deteriorated to such an extent that BP had to shut half of Prudhoe Bay because of “severe corrosion”.

In July, Lord Browne, a man regularly voted Britain’s most admired business leader, was forced by Peter Sutherland, BP’s chairman, into announcing that he will retire as group chief executive in 2008, when he reaches BP’s mandatory retirement age of 60. There had previously been speculation that Lord Browne would seek to stay on. In October, Steve Marshall, who headed BP Alaska, was transferred.

Bob Malone, appointed this year as head of BP US to clean up its operations, admitted in ­testimony to Congress in September that the company had serious institutional problems. He said BP’s operations had experienced “a series of troubling problems that are unacceptable to us and contrary to our values” and criticised their response to workers’ concerns.

Despite the mea culpa, the crisis for BP is not over. In early January, James Baker, former US secretary of state, is to report on an independent investigation into BP’s other US operations, while the Chemical Safety Board, the US federal agency most aggressively investigating the refinery explosion, will provide its findings in March.

Given that the oil industry as a whole was engaged in widespread cost-cutting in the 1980s and 1990s, as oil prices fell as low as $10 a barrel, BP has often been cast as a victim of hard times. It is hard to prove the allegation that BP’s safety record was much worse than its peers, as oil operations are difficult to compare with each other due to radically different operating conditions. BP says it stands by its overall safety record.

“Our safety performance, as measured by Osha recordable rate, and day away from work case frequency, is on par with others in the oil and gas industry and better than the overall US industry average,” said Mr Chappell, adding: “The data show significant improvement in recent years.”

He also said that spending decisions by BP did not compromise safety: “BP business unit leaders know, in making decisions, that they must be effected without compromising safety or the long-term viability of their businesses.”

Yet, statistics aside, the anecdotal evidence is compelling. No other oil company has suffered such a string of high-profile accidents  and been subsequently fined  as BP has over the past five years. No other oil company has had to shut one of its oilfields for preventable “severe corrosion” and no other oil company has been summoned by Congress in recent years to explain how it let its operations deteriorate to such an extent.

Looking back over some 20 years with BP, Mr Kovac gave his perspective. “Fifteen years ago, we were replacing valves and patching wells,” Mr Kovac said. “Over the years, oil production has gone down, so BP has responded by cutting back, deferring maintenance, changing policies or not following policies. The issue has always been on production.”

Tony Hayward, BP’s chief executive for exploration and production worldwide, criticised the penny-pinching in a December 11 2006 report on BP’s closed intranet, where he noted: “We have a management style that has made a virtue out of doing more for less. The mantra of more-for-less says that we can get 100 per cent of the task completed with 90 per cent of the resources  which in some senses is OK and might work, but it needs to be deployed with great judgment and wisdom. When it isn’t, you run into trouble.”

When the present story began in 2002, however, BP was not speaking so frankly about its problems, instead presenting itself as an environmentally friendly company leading the industry beyond its oil and gas roots. Its “Beyond Petroleum” marketing campaign had just been created to highlight BP’s investment in hydrogen and a willingness to talk about global warming. Yet the core of BP’s business was  and is  dirty and dangerous petroleum.

The roughnecks in Alaska could not understand why nobody else could see that BP was not only not “Beyond Petroleum” but rather risked being mired in it if it did not clean up its act.

For six years, Mr Brian had been at the forefront of this push for change by oilfield workers in Prudhoe Bay, as the union representative on BP’s health, safety and environment committee. In 2002, he resigned from that position, having realised management was ignoring his suggestions and that even many of his own colleagues wanted him to let up, fearing the repercussions of his campaign.

But soon after filing his statement with Osha on Mr Shugak’s accident, Mr Brian was plunged back into his uncomfortable role as advocate for workers’ grievances. Things started to go badly for him on the job. He had trouble with his supervisors. He was ejected from safety meetings and said management called him “troublemaker” and “shit-stirrer” in front of others, also accusing him of being mentally ill in what he called a “bogus letter of reprimand”.

During an informal grievance procedure, management agreed to destroy the letter, said Mr Brian. But instead they made it available as a public record to the state and BP staff, he added.

BP denied harassing Mr Brian, saying it welcomed constructive criticism but was not willing to comment on individual personnel issues. Mr Marshall told congressional hearings this year: “Harassment, intimidation, retaliation and discrimination against workers who raise concerns are not tolerated within BP.”

In the same testimony, Mr Marshall admitted that he did transfer one employee, Richard Woollham, in 2005 after finding evidence of an “atmosphere of intimidation” in his pipeline inspection operations team.

Mr Brian filed a complaint with Osha in November 2002, alleging “unlawful retaliation”. BP asked him not to return to work and then offered him a settlement requiring his silence. For a time, it seemed BP Alaska had won the war against the whistleblowers and things returned to the status quo.

But only four months after Mr? Shugak’s accident and just days before Christmas 2002, Rodney Rost, a 55-year-old contract welder in a BP Alaska facility, was killed when a metal plug on a pipe shot out during a job and struck him. Mr Kovac, who considered it a duty as a union leader from 2002-04 to speak out on behalf of “the men”, was incensed and accused BP of putting Mr Rost at risk  charges with which regulators eventually agreed.

State regulators fined BP more than $1m for inadequate oversight in both the Shugak and Rost cases. It was not long, however, before Mr Kovac, too, felt it prudent to retreat and declined further interviews. But, by then, BP’s record was forcing regulators to take up the whistleblowers’ cause.

“BP did not provide a safe and healthy workplace for its employees, contractors and subcontractors,” said John Stallone, acting chief of the safety office of the Alaska Occupational Safety and Health division of the Department of Labor, on May 27 2003, in fining BP for Mr Rost’s death. Paul Laird, a BP spokesman, at the time called the incident “deeply regrettable” and BP did not contest the fine.

BP Alaska itself admitted on December 23 2002, in a confidential final report to BP management on Mr Shugak’s accident, that it had restarted production on the well “without taking adequate safeguards”. The year 2002 also brought more than 11 recordable injuries and one day-away-from-work case a month. BP had been on probation since 2000, after pleading guilty to one felony count of knowingly failing to report immediately the release of a hazardous substance into the Alaskan environment.

On January 10 2003, Mr Marshall sent a memo to his staff: “Beginning now, we will focus on safety as we have never focused on it before...as if our lives and our future in Alaska depend on it. Because they do.” He set a goal of “no injuries and no incidents”, adding: “We’ll achieve these targets legitimately, not by failing to report incidents or­ ­hiding them”. That he cautioned against hiding accidents underlined the pressure felt by workers to keep BP’s safety record clean.

Yet even his dire warning was not enough to change old habits. Regulators said BP reported 263 spills in Alaska that year, compared with 62 suffered by Conoco Phillips, its closest competitor, whose operation was roughly half the size.

By then, the regulators were closing in on the company. On a federal level, a US judge at the end of 2002 required BP to provide unrestricted access for probation officers to its Alaska operations to verify compliance with federal, state and local environmental health and safety laws. The state toughened its laws in 2003 to increase regulatory oversight of BP. Yet the problems continued.

In early 2004, Chuck Hamel, a longtime campaigner for Alaska oil workers’ rights, says he started getting numerous calls from BP whistleblowers asking for his help. The 76-year-old one-time oil broker had made a name for himself pressing regulators and Congress for 15 years to force industry improvements. He took on the BP cause for free.

On February 23 that year he e-mailed Greg Coleman, BP group vice-president for health, safety and environment, and Mr? Malone, who had then just left as head of BP Alaska to head BP’s shipping operations. “A dirty mess at your doorstep had been dumped on me,” Mr Hamel wrote. “Incomprehensible, improper procedures at Prudhoe operations began occurring under your watch, Bob, and continue, Greg, since you came on scene.”

He said nearly a dozen past and present workers had reported that BP was “orchestrating inspection procedures” on Prudhoe Bay’s 1,300 miles of pipelines, a charge that would come back to haunt BP when severe corrosion in the pipelines was found this year. “BP Alaska management must resort to some other legitimate and safe means to cut costs,” Mr Hamel said.

BP denies orchestrating inspections and says the company did not get enough specifics from Mr? Hamel to assess his charges adequately. “I know there have been concerns about an adequate corrosion inspection programme raised by Hamel over time,” Mr? Chappell said this year. “We have looked into those.”

But Mr Hamel charges that Mr? Coleman and BP lawyers flew to Washington to get him to reveal the whistleblowers  not investigate their allegations. Mr? Hamel refused, noting the harassment claimed by Mr Brian following his statements in the press.

Mr Coleman has since left BP and could not be located for comment. Mr Malone said he forwarded the information to the relevant official in Alaska.

On May 22 2004, Mr Hamel appealed to Walter Massey, a BP non-executive director who chairs the board’s environment committee, saying: “Intimidation and harassment at Prudhoe has effectively prevented the truth from reaching London upper management and your committee.” In a response that July 27, Mr Massey urged Mr Hamel to provide “specificity” to BP management, without offering the workers protection. Mr Massey had a BP spokesman return a call to him from the FT.

By that point, Mr Hamel said he had exhausted efforts to effect change from within BP and contacted federal criminal investigators. They began what would eventually become two grand-jury inquiries to determine whether to bring charges against BP in Alaska  and also in Texas.

For as 2004 drew to a close, BP Alaska workers became aware they were not alone. Colleagues at the company’s Texas City refinery asked for urgent help in exposing a safety culture that made many fear going into work.

On Tuesday 18: disaster at Texas City

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Wall Street Journal
December 18, 2006

BP Execs Admit No Culture Of Criticism On Safety-Magazine
DOW JONES NEWSWIRES
December 18, 2006 8:14 a.m.
 
LONDON (Dow Jones)--Executives at BP PLC (BP) admitted the company hadn't developed the right culture of criticism and has discovered a number of safety issues at its U.K. and shipping operations in addition to its U.S. businesses, according to interviews published in BP's in-house magazine.

Company executives said the U.K. oil major is addressing the issues raised in an audit after a blast at its Texas City refinery killed 15 workers, but warned that it still faces the prospect of a major incident once every 10 to 15 years.

In separate statements in the magazine, Cinzia De Santis, director of safety culture and leadership, said that although "sharing bad news is encouraged" in some industries, it is "not always the case in BP, where it is rare to hear a manager saying, 'Tell me something you know I don't want to hear about safety!'"

"This is something we feel must change," De Santis added. The article said that "for the first time, BP is using the answers to questions such as 'Do you feel your supervisor listens to you?' as benchmarks to determine opportunities to improve safety performance."

BP has faced a series of safety and operational lapses in the past 18 months, including the Texas City blast in March 2005 and the shutdown of an Alaskan pipeline in August 2006 after severe corrosion and a small leak were uncovered.

A major audit after the Texas City explosion called the "major accident review" uncovered badly-located staff facilities similar to ones that resulted in the deaths of the 15 workers.

Ellis Armstrong, vice-president of technology and decentralized functions at BP's exploration and production, or E&P, unit, said the review examined buildings near potentially explosive facilities in the U.K., since a similar situation was a key factor behind the deaths of workers in the Texas explosion.

Armstrong cited the U.K.'s Wytch Farm oilfield as an example of E&P operations being moved or upgraded as a direct result of Texas City.

"At the Kinneil processing terminal near Grangemouth in Scotland, where the Forties pipeline terminates, we have relocated office workers away from the hazardous area by moving them to the town," he added.

In another interview in the magazine, Steve Westwell, who heads up the Alternative Energy business, said: "We have two areas of higher risk, our natural gas liquids business and our shipping fleet."

The article added that the inspection of shipping vessels showed some of them "had not been inspected within the appropriate timeframe."

John Mogford, global head of safety, conceded that BP's "scale is such that if we perform at industry average we will have a major incident once every 10 or 15 years, simply due to the number of refineries at oil and gas fields we have."

The magazine said the review, which is conducted every five years, will be complete at the end of the year. In the long term, the company is also implementing an Operating Management System, a set of measures aimed at ensuring the consistent application of minimum standards of performance across the organization.

The interviews were published in an article in the latest issue of BP Magazine which was posted on the company's Web site.

 Company Web site: http://www.bp.com  
 
By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com 

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Anchorage Daily News
December 16, 2006

http://www.adn.com/money/industries/oil/prudhoe/story/8496246p-8389559c.html

BP has 2 weeks to provide feds with info about replacing pipes
PRUDHOE: Equipment list, inspection data and work schedule are called for.
By WESLEY LOY
Anchorage Daily News
Published: December 16, 2006
Last Modified: December 16, 2006 at 12:21 AM

Federal regulators are demanding more information from BP about its plans for replacing miles of corroded pipelines in the Prudhoe Bay oil field.

In a Dec. 7 letter to Sandy Stash, BP Alaska's vice president for regulatory compliance and ethics, the regulators cite a "continuing investigation" into this year's Prudhoe pipeline leaks and say the information they seek from BP will "determine the need for additional corrective action."

Since March, when a major pipeline leaked an estimated 201,000 gallons of crude oil, BP has been under orders from the U.S. Pipeline and Hazardous Materials Safety Administration to better maintain key lines inside Prudhoe, the nation's largest oil field.

Subsequent leaks in August forced BP to partially shut down the field, an event that rattled world oil and gasoline markets. This month, Congress passed legislation to toughen regulation of low-pressure oil transmission pipelines -- the type that leaked in Prudhoe.

Federal criminal investigators also are looking into the Prudhoe problems and have subpoenaed massive quantities of documents from BP.

Pipeline regulators gave BP two weeks to provide information including:

• Detailed plans and a schedule for starting and finishing the pipeline replacement.

• A list of the steel pipe, valves and other equipment needed for the job, plus an explanation for why any of the items haven't yet been ordered.

• Details on how BP is inspecting "jumper" pipelines for corrosion. These are short connectors BP installed to reroute oil that normally went through the transmission lines, some of which are now shut down.

BP runs Prudhoe on behalf of itself and other owner companies including Exxon Mobil and Conoco Phillips. Production in recent weeks has approached 450,000 barrels a day, about the same level the field was producing before the shutdown.

BP spokesman Daren Beaudo said Friday the company has been working closely with federal regulators and will turn over the requested information.

The company plans to replace 16 miles of transmission pipelines, which are major trunk lines that drain crude oil out of Prudhoe and feed it into the 800-mile trans-Alaska pipeline.

Replacement will cost $150 million to $200 million. Some of the new pipe already is in Fairbanks and elsewhere for the start of the North Slope winter construction season, he said.

The jumper pipes are made of "brand-new steel," and the company believes they and all other pipes used at Prudhoe are safe, Beaudo said.

The pipes to be replaced are original equipment, installed for the start of Prudhoe oil production in 1977. They are large pipes up to 34 inches in diameter.

One theory for the leaks is that oil was moving too slowly through pipes designed for much larger and faster flows of oil when Prudhoe production was at its peak in the late 1980s. Slower oil flow might have allowed sediments to settle inside the pipes, fostering corrosion, Beaudo said.

The replacement pipes will be smaller and oil will move through faster, helping sweep out sediments, he said.

Also, the company won't repeat its mistake with the older lines and will regularly clean and test the new pipes, Beaudo said.

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

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Houston Chronicle
December 14, 2006

http://www.chron.com/disp/story.mpl/business/energy/4400865.html

BP says inquiry reviews trading
Filing indicates civil penalties are possible
By TOM FOWLER
Copyright 2006 Houston Chronicle

Federal regulators are investigating BP's oil and gasoline trading operations and may levy civil penalties, the company disclosed Wednesday.

The oil giant said in a government filing that Commodity Futures Trading Commission officials are examining its U.S. crude trading and storage activities since 2003 as well as gasoline futures trades it made on Oct. 31, 2002.

Commission officials told the company in November they planned to take civil action  that could include fines  against the firm related to the gasoline trading. That trading involved transactions going through the New York harbor market hub.

BP said it is cooperating with the investigations.

Scott Dean, a BP spokesman in Chicago, said the company does not believe its gasoline traders broke the law.

"We have reviewed the facts related to that single day and we're confident manipulation was not attempted and no laws were broken," Dean said. "We believe the free market forces of supply and demand were at work that day."

No BP traders were disciplined because the company does not believe they acted improperly, Dean said.

CFTC officials would not elaborate on BP's filing.

"BP's SEC filing speaks for itself," commission spokesman Dennis Holden said.

BP also said the U.S. Attorney for the Northern District of Illinois is investigating the gasoline trading.

The cases do not appear to be tied to BP's Houston-based trading operations, which focus on power and natural gas. Most of the oil and gasoline trading operations are based in the Chicago area.

In June, investigators said Houston-based traders for BP illegally cornered part of the propane market in February 2004, creating a sharp jump in prices for the popular heating fuel. One of the traders, Dennis Abbott, pleaded guilty to related charges.

BP denied any wrongdoing related to the propane investigation and said it intends to fight the charges in court.

The commission's investigation of BP's oil trading business is likely related to its dominant position in oil storage at Cushing, Okla.

In previous news reports, competitors have alleged the company can improperly influence the light, sweet crude contract on the New York Mercantile Exchange.

In 2003, the company agreed to pay the exchange $2.5 million to settle claims it engaged in deceptive trading practices in 2001 and 2002. The company didn't admit or deny breaking the rules of the exchange in that case.

The filing Wednesday also said KPMG has started an independent review of the "trading compliance culture" at BP's U.S. trading unit, which will be made available to regulators.

tom.fowler@chron.com

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Houston Chronicle
December 12, 2006

http://www.chron.com/disp/story.mpl/business/4395323.html

Agency scores win in BP case
High court says service can charge royalties as far back as necessary
By DAVID IVANOVICH
Copyright 2006 Houston Chronicle Washington Bureau

WASHINGTON  In a rare bright moment for the embattled Interior Department, the U.S. Supreme Court sided with federal regulators Monday in a royalty dispute with Houston's BP America.

The high court, in a 7-0 decision, ruled Interior's Minerals Management Service could reach back as far it deemed necessary to retrieve unpaid oil and gas royalties. And that means BP America Production Co. must pay more than $32 million in back natural gas royalties, penalties and interest.

The court ruled that a six-year statute of limitations laid out in federal law applies to court cases, but not to administrative proceedings at the agency, as the subsidiary of London-based BP had argued.

"BP is disappointed with the outcome of this case, but we will nevertheless comply with the Supreme Court's decision," BP spokeswoman Sarah Howell said.

Officials at the Minerals Management Service would not comment on the decision, except to note they are now reviewing other cases to see how many the decision might affect.

The dispute began a decade ago over calculating royalties for natural gas produced on federal lands in the San Juan Basin in New Mexico and Colorado.

BP predecessor companies  Amoco Production Co., Vastar Resources and the Atlantic Richfield Co.  produced natural gas in the coal bed methane fields there.

But some of the carbon dioxide from that gas had to be stripped out before the hydrocarbons could be shipped through the pipeline system.

In 1996, the Minerals Management Service sent out letters to producers notifying them that royalties should be based on the value of the gas after processing.

The agency then sought royalty payments dating back to 1989 from BP's predecessor companies, totaling $4.9 million.

With interest and penalties, the amount in dispute has grown to more than $32 million.

The producers challenged the agency's orders. And eventually, the case was narrowed to this legal question: How many years back could the government reach to retrieve royalty payments?

The companies argued a law limiting the statute of limitations in court cases should apply. The companies filed suit in U.S. District Court in Washington but lost. The producers appealed, but the court  in an opinion authored by the future Supreme Court Chief Justice John Roberts  sided with regulators again.

That ruling, however, conflicted with the decision in a similar case involving Occidental Petroleum Corp. So the high court agreed to hear the case.

But on Monday, the Supreme Court ruled the federal law in question referred only to court cases. Writing for the court, Justice Samuel Alito, noted: "In the final analysis, while we appreciate petitioners' arguments, they are insufficient to overcome the plain meaning of the statutory text."

Limited reach
While the ruling could have broad implications for companies holding contracts with the federal government, the case is expected to have only limited reach in the oil and gas sector.

That's because Congress passed the Federal Oil and Gas Royalty Simplification and Fairness Act  known in acronym-crazy D.C. as FOGRSFA  which set a seven-year limit for any "judicial proceeding or demand" for royalties on oil and gas produced after Sept. 1, 1996.

As a result, this issue will be of "steadily diminishing importance" for the oil and gas industry, noted Richard Seamon, a law professor at the University of Idaho who has followed the case.

"It's going to eat a little bit of a hole in their pockets, but probably not all that much in the final analysis," Seamon said.

Catching a break
For the Minerals Management Service, the high court's ruling was a piece of good news for an agency so often thrown on the defensive for its handling of royalty issues.

Earlier this year, the nation learned that the agency had botched numerous leases signed with producers operating in the Gulf of Mexico's deep waters. Despite reviews by many agency officials up and down the chain of command, the Minerals Management Service failed to include a provision requiring producers to pay royalties once oil and gas prices rose above certain levels. That oversight has already cost federal coffers more than $1 billion.

Last week, the Interior Department's inspector general chastised the agency for being lax about the collection of royalty payments. Inspector General Earl Devaney complained the agency relied too heavily on information regulators could not verify when trying to ensure producers paid their fair share of royalties.

david.ivanovich@chron.com
 

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Anchorage Daily News
December 9, 2006

http://www.adn.com/news/politics/fbi/story/8479065p-8371731c.html

Anderson indicted on seven counts
Federal bribery case centers on link to prison firm lobbyist
By RICHARD MAUER, LISA DEMER and TOM KIZZIA
Anchorage Daily News
Published: December 9, 2006
Last Modified: December 9, 2006 at 02:56 AM

GRAND JURY INDITEMENT
http://www.adn.com/static/includes/fbi_raid/120706_%20Indictment.pdf

Representative  Rep. Tom Anderson pleaded not guilty Friday to a series of federal charges accusing him of selling his legislative office for $12,828 in bribes from a lobbyist representing private prison interests.

Anderson, a 39-year-old Republican who has represented Muldoon's District 19 since he was elected in 2002, was ordered freed Friday by U.S. Magistrate Judge John Roberts on an unsecured $10,000 bond after his arrest Thursday by FBI agents. Roberts said Anderson could travel to Mexico on a previously scheduled vacation next week with his wife, Republican state Rep. Lesil McGuire, who was elected to the state Senate in November, and their infant son.


TWO YEARS IN THE MAKING

The 18-page indictment against Anderson said the lobbyist was secretly recorded July 21, 2004, boasting that for a price, Anderson would be "our boy in Juneau."

A week later, the same lobbyist was recorded telling a confidential informant, "If I was a Soviet spy and I was looking for a legislator to recruit, (Anderson) would be the one I'd get." Anderson "needs the money," the lobbyist said.

The government didn't charge the lobbyist. He is identified only by the letter "A," but the facts in the case point to Bill Bobrick of Anchorage, who represented Cornell Companies, a private prison firm Outside. Bobrick didn't return messages left on his home and cell phones Friday, and his business number wasn't working.

On Thursday, before Anderson's arrest, Bobrick said in an interview that he was getting out of the lobbying business and was in the process of handing off his clients. He cited "health issues" as the reason.

Anderson, who did not seek re-election this year and formally leaves office next month, is the first legislator charged with corruption in office since two state senators faced charges in the early 1980s. One, George Hohman, was convicted of bribery in 1981, while the other, Ed Dankworth, successfully appealed his 1982 conflict-of-interest charges and never faced trial.

Anderson's seven-count indictment accuses him of going into league with Lobbyist A to promote a private prison somewhere in Alaska and a private juvenile treatment facility in Anchorage.

In return for the money, it said Anderson got himself appointed to legislative committees with jurisdiction over prisons and treatment, lobbied other elected officials, agreed to align his votes with the correction company's interests, wrote letters and publicly spoke on behalf of company projects.

Anderson disguised the source of the money in his reports to the Alaska Public Offices Commission, the indictment charged.

A GOVERNMENT SOURCE

A second private prison advocate secretly worked with the government to record conversations of the lobbyist and Anderson. The informant, identified only as "CS-1," used money provided by the FBI in the payoffs.

The private prison company was identified only as "Corrections Company" in the charges, but the facts squarely match Cornell Companies Inc. of Houston, Texas, a publicly traded corporation with facilities in 17 states. Cornell operates six halfway houses in Alaska from its buyout of Anchorage-based Allvest Corp. With partners Veco and Allvest founder Bill Weimer, Cornell failed to win public support for private prison proposals in Anchorage, Delta Junction, Kenai and Whittier.

The proposals were all highly controversial in the communities, though they often sailed through legislative committees. During a House Finance Committee hearing May 9, 2004, Rep. Eric Croft, D-Anchorage, said the effort was corrupting the state.

"What I see, over and over, is repeated sole-source, pre-arranged, heavy-money deals that go to specific contractors. ... It's never been a clean, competitive proposal," Croft said at the time, the only member of the committee to object. "We are going to see somebody indicted and probably imprisoned over this series of proposals."

A prepared statement from the Justice Department released Friday said the corrections company was never told about the payments to Anderson "due to the undercover nature of the operation." It said the company "was not implicated in the corrupt activities that are alleged in the indictment."

Christine Parker, a spokeswoman for Cornell in Houston, said, "There's nothing that we knew of, or were aware of, until this indictment was issued."

Anderson arrived for his arraignment in federal court Friday wearing a bright yellow jumpsuit with the word "PRISONER" across his back. His legs were shackled as he rose for the judge alongside his defense attorney, Jeffrey Feldman of Anchorage. The hearing lasted 19 minutes. His trial was set for Feb. 12.

If the government was making a point to other potential defendants in its ongoing investigation into corruption, the message was tough. Nicholas Marsh, a trial attorney from the Justice Department's Public Integrity Section in Washington, D.C., told the court the charges carried penalties ranging from a maximum of five years and a $250,000 fine for conspiracy to a maximum of 20 years and $500,000 for each of three money laundering charges. Anderson was also accused of two counts of extortion (20 years and $250,000) and one count of bribery (10 years and $250,000).

The activities alleged in the indictment took place long before the coordinated raids of Aug. 31, when the FBI searched the offices of 10 percent of the 60-member Legislature. Anderson's office wasn't among them, and it's unclear how his case is related. Marsh, assistant U.S. attorney Joseph Bottini and FBI agent Mary Beth Kepner, a leader of the corruption probe, left quickly after the arraignment and declined to answer questions.

CALLS WERE RECORDED

The conspiracy alleged in the indictment began in July 2004 and continued through the following March. It said that Lobbyist A set up a shell company called Pacific Publishing that existed solely to launder money to Anderson. The company would pay Anderson to write articles about politics that would be published on its Web site, but Anderson was paid without ever scribbling a line.

CS-1 paid Lobbyist A $24,000 in three payments. The cover story was that the money was for advertising on the Web site, but they agreed the money was really for Anderson's pocket, with "A" taking a sizable cut.

The indictment said CS-1 had worked for the corrections company as a lobbyist "at various times." The identity closely matches Frank Prewitt, a former Alaska corrections commissioner appointed by Gov. Wally Hickel and who later went to work for Cornell.

In an e-mail exchange with the Daily News on Friday, Prewitt suggested he was the source, though he stopped short of confirming it.

"At this time it is inappropriate for me to talk about the voluntary role that I and others may have played in the Anderson investigation," Prewitt wrote. "Over the next year I believe you will find that this was only the beginning of the end of a sad, but healthy chapter in Alaska history. My prayers are with Representative Anderson and his family during this difficult time for all."

The first recorded conversation cited in the indictment occurred July 16, 2004, when the lobbyist suggested to the confidential source that they "try with (Cornell) to help out Tom Anderson." Five days later, the lobbyist told the source that Cornell should hire Anderson through him.

Rather than report Cornell, with its interest in legislation and other government action, as the source of the money, Anderson said he was paid for writing for the Pacific Publishing Web site.

Anderson himself was recorded Aug. 17, 2004, telling the confidential source: "APOC only needs to know (Bobrick) pays me and then we're all safe."

The source paid the lobbyist the first $8,000 Aug. 19, 2004, the indictment charged. Out of that, Anderson received $3,328, which he deposited Aug. 23 into the account of his personal consulting firm, Alaska Strategic Consultants.

In a recorded call Oct. 20, 2004, the source told Anderson he had prepared the next $8,000 payment and planned to pass it on to the lobbyist.

"Awesome. Awesome. I appreciate it," Anderson is quoted as saying.

Anderson received a $3,500 advance from that payment, the indictment charged.

The source made his last $8,000 payment on Dec. 21, 2004. Anderson got $4,000.

But late in the scheme, the indictment alleged, Anderson was showing signs of unhappiness over splitting the money with the lobbyist. According to excerpts of recordings, the confidential source appeared at first to encourage the disaffection, saying it wasn't the lobbyist who was speaking out and voting for Cornell, but rather Anderson.

"I know," Anderson said.

But then the source suggested the lobbyist might become "estranged" if he were cut out of the deal. The source thought that he could make a separate payment direct to Anderson.

"If there's a way you can think of that, that would be nice," Anderson replied.

The source obliged, handing Anderson a $2,000 check Dec. 21, 2004. The indictment said the check was made payable to Tom Anderson.

Daily News reporter Richard Mauer can be reached at rmauer@adn.com or 257-4345. Reporter Lisa Demer can be reached at ldemer@adn.com .  Reporter Tom Kizzia can be reached at tkizzia@adn.com .

charges: Lobbyist paid Anderson through shell firm.

corruption: He is first lawmaker charged since 1980s.

identity: Government's source could be Frank Prewitt.

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http://www.adn.com/news/politics/fbi/story/8479065p-8371727c.html

The Anderson case: what the indictment says
Published: December 9, 2006
Last Modified: December 9, 2006 at 02:56 AM

The case against Rep. Tom Anderson is laid out in an 18-page federal indictment released on Friday. Prosecutors describe a conspiracy involving bribery, extortion and money laundering. Here's how they say it worked:

Rep. Tom Anderson: Anchorage Republican representing East Anchorage. Elected in 2002 and re-elected in 2004.

"Corrections Company": Out-of-state firm that operates prisons, halfway houses and treatment facilities. In 2004 was trying to get permission to open a juvenile treatment facility in Anchorage and to build a private prison in Alaska. 1Lobbyist A creates a shell company called Pacific Publishing to funnel illegal payments to Anderson for actions taken to benefit the corrections company.

2Lobbyist A asks CS-1 (confidential source) if he or she could "help out Tom Anderson" and suggests passing money through Pacific Publishing to Anderson. In recorded conversation, Anderson agrees to take actions benefiting corrections company in exchange for money.

3After Anderson takes actions benefiting the company during summer and fall 2004, CS-1 writes checks to Lobbyist A. Lobbyist A and Anderson don't know it, but the money is being provided by the FBI.

4Lobbyist A writes checks from Pacific Publishing to Anderson's company, Alaska Strategic Consultants. Lobbyist A keeps a portion of the money paid by CS-1.

5Anderson deposits checks into his company account. After two checks, he complains to CS-1 that he no longer wants to split money with Lobbyist A and a check is written directly from CS-1 to Anderson. The charges

Anderson is charged with seven counts involving extortion, bribery and money laundering. No one else has been charged.

What's next?

Anderson has pleaded not guilty. His trial is tentatively set for Feb. 12.

The big question

Is the case connected with the raids of legislative offices earlier this year? Federal investigators said yes, though they haven't said how.

"Lobbyist A" : Worked under contract for corrections company, primarily involving the proposed Anchorage juvenile facility.

"CS-1" : Confidential source, worked at times as a lobbyist for corrections company, frequently worked with Lobbyist A, and, unknown to Lobbyist A and Anderson, was operating as a source for the FBI.

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http://www.adn.com/news/politics/fbi/story/8479065p-8371726c.html

McGuire defends her husband
Daily News staff
Published: December 9, 2006
Last Modified: December 9, 2006 at 02:56 AM

Anchorage Sen.-elect Lesil McGuire said Friday that her husband is innocent of bribery and other charges, while noting the things he's accused of happened before they married.

"I am not and have not been a target of any investigation," she said in a statement issued to the media.

McGuire, a state representative from South Anchorage who was recently elected to the Senate, married Rep. Tom Anderson more than a year ago.

"He is a good man," McGuire told The Associated Press. "I've been beside him through many battles in the Legislature and have watched him. I'm devastated."

McGuire told The AP that the accusations against her husband don't involve her at all and that Anderson has stopped working as a lobbyist before the city. Anderson did not run for re-election and his term is about to run out.

McGuire did not return repeated calls from the Daily News on Friday.

In her written statement to the media, she asked that the public withhold judgment of her indicted husband "until the judicial process has run its course."

"As you can imagine, my family and I are devastated by the events that occurred yesterday," she wrote.

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http://www.adn.com/news/politics/fbi/story/8479065p-8371729c.html

Anderson was a lobbyist before being a lawmaker
'HARDWORKING': The year he won his House seat, one client paid him $40,800.
By LISA DEMER
Anchorage Daily News
Published: December 9, 2006
Last Modified: December 9, 2006 at 02:56 AM

Critics have questioned state Rep. Tom Anderson's ethics more than once in the past couple of years. But the well-connected 39-year-old has never shied away from his dual role as legislator and consultant. In the past, he has insisted that he was never compromised and that he's well-equipped for consulting.

He has a law degree, although he's never practiced, and a master's in public administration. He was appointed to an Anchorage School Board seat in 2000 but lost an election to keep it eight months later. His father is the former head of Alaska State Troopers.

Anderson's wife is state Rep. Lesil McGuire, a Republican from South Anchorage who won a Senate seat in the November election. McGuire is the daughter of Anchorage orthopedic surgeon David McGuire, who has been a partner with U.S. Sen. Ted Stevens and other prominent Alaskans in the ownership of a race horse.

McGuire was elected to the seat held by Senate President Ben Stevens, who did not seek re-election.

McGuire and Anderson married last year. He decided not to run again and moved into her legislative district.

Reached at his home Friday night, Anderson wouldn't comment on the criminal charges against him, except to say, "I intend to do battle."

Anderson was chairman of the House Labor and Commerce Committee. He sponsored several medical-related bills, including one requiring insurance companies to cover colorectal cancer screenings.

"He was a very effective legislator," said House Speaker John Harris, R-Valdez. "He introduced and passed a lot of legislation and was very hardworking."

Anchorage Democrat Ethan Berkowitz, who left the Legislature this year to run for lieutenant governor, said Anderson was a "likable guy."

"I feel for him and for his family on a personal basis," Berkowitz said. But, he added, "I don't think this was a surprise to anybody."

In a September e-mail to the Daily News, Anderson said he "has never been compromised by my private sector employment or family or friends or associations, particularly with regard to my sponsored legislation and budget efforts to help my district in East Anchorage."

Anderson worked as a consultant for private industry even before he won his state House seat. His business, Alaska Strategic Consultants, had six clients that each paid him more than $1,000 in 2001, according to his disclosure filed with the state. Among them were the Anchorage Cabaret, Hotel, Restaurant and Retailers Association -- the bar, restaurant and liquor trade group -- and Frigid North, an electronic parts supplier.

In 2002, while being paid $40,800 by CHARR, he won his state House seat.

In his first three years as a legislator, he reporting making $65,000 in consulting fees. Half came from Veco, the oil field services and consulting company.

His job for Veco in 2003 was to consult on community councils. Members of the Northeast Community Council learned that only when he filed his disclosure the next year, and say they were surprised. None knew of Veco business before the community council.

This year, in the heat of debate over oil tax increases, Anderson hand-delivered notes to his colleagues on the House floor passed from Veco chairman Bill Allen, sitting in the visitor's gallery, according to several legislators.

Another big client was the Alaska Telephone Association, which paid Anderson $20,000 in 2003. Its executive director has said the money was to educate members on how to be more effective in dealings with lawmakers.

After this year's regular legislative session, Anderson registered as a municipal lobbyist. He worked briefly for CHARR again and also became a $2,500-a-month lobbyist for the Anchorage Home Builders Association.

Just recently, he was hired as executive director of the newly forming Midtown Improvement District, said Tom McGrath, interim board chairman of the district and owner of Frigid North.

McGrath said he didn't know how Anderson's arrest would affect the new job. He wasn't ready to say how much the group was paying Anderson.

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http://www.adn.com/news/politics/fbi/story/8479065p-8371735c.html

Legislators express no surprise
ANDERSON ARREST: Many expect more indictments to come.
By KYLE HOPKINS
Anchorage Daily News
Published: December 9, 2006
Last Modified: December 9, 2006 at 02:56 AM

Other state legislators said Friday that they weren't surprised by state Rep. Tom Anderson's arrest this week -- his name had been grinding through the capital rumor mill ever since the FBI raided legislative offices weeks ago -- and many said they wouldn't be surprised if there are more indictments to come.

"I think the sense is that, with the number of offices that they searched, that there very well could be more," said Sen. Gene Therriault, a North Pole Republican and former Senate president.

The FBI raided the offices of six lawmakers in August. Politicians, and the public, have been waiting for any consequences of that investigation for weeks. The question now is whether Anderson's arrest is the end of the trail, or a first step.

"It could go beyond Tom. There's an expectation that that could be true," said North Pole Rep. John Coghill, who is House majority leader.

"You don't have the FBI come looking around without some ramification."

Legislators, along with Gov. Sarah Palin, who has been in office less than a week, were quick to say that Anderson is innocent until proven guilty.

Palin, who won election portraying herself as an ethical anti-politician, called the arrest "a sad day for Alaska."

Rep. Eric Croft, who ran unsuccessfully for governor in the fall, said the troubles in Juneau don't end with Anderson.

"This is a fundamentally corrupt Legislature ... (Anderson) is the poster child for it, but it's rampant," the Anchorage Democrat said.

Not so, said House Speaker John Harris, a Valdez Republican, who described Croft's characterization as mudslinging from someone whose party isn't in power.

"Ninety percent, if not more, of the legislators are ethical; they do a good job," he said.

Alaska has 20 state senators and 40 members of the House of Representatives.

While Therriault said the indictments cast a pall over the upcoming session, Harris said it depends on whether Anderson's arrest is the end of the story.

"If the indictments don't go any further than this, then in my opinion they don't mean much," Harris said.

Anderson did not run for re-election this year, and is not returning to Juneau.

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

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Wall Street Journal
December 9, 2006

2nd UPDATE:
Calif Probing BP Pipeline Leak Near Los Angeles
DOW JONES NEWSWIRES
December 8, 2006 12:55 p.m.
(Adds comments from Alon spokesman on effect of pipeline leak the Alon USA Paramount refinery)
DOW JONES NEWSWIRES
 
The California State Fire Marshall's Pipeline Safety Division is investigating a leak in a BP PLC (BP) operated pipeline near Los Angeles, an agency official said Friday.

"We are investigating a BP petroleum crude oil leak in the Long Beach area," said Pipeline Safety Division Chief Bob Graham.

The leak started Dec. 5 in a section of the pipeline that crosses underneath a freeway, making evaluation operations difficult, Graham said. "They haven't been able to get to the source," he said. "They have been concentrating on clean-up activity."

The size of the leak amounted to 75 barrels of oil, of which 60 have already been recovered, said BP spokesman Scott Dean. "The location of the leak is in a heavily industrialized area near the Long Beach terminal," he said.

Most of the leaking crude was contained in the concrete casing enveloping the pipeline, but "a small volume went into the storm water system," Dean said.

No product was released into marine waters, nor were there any injuries or environmental damage, Dean said.

"We are not expecting any impact on consumer supply of motor fuels," he said.

The leak occurred in a four-mile pipeline stretching between BP's marine terminal in Long Beach, Calif., and another terminal in East Hynes, Calif. The line, which dates from 1951, was successfully hydrotested in January 2004, and passed a general inspection for cathodic protection, an anti-corrosion measure, Dean said.

"It was up to date with inspection," he said.

The leak has curtailed the delivery of THUMS crude to Alon USA's (ALJ) Paramount refinery, but the company doesn't expect any impact on crude rates, said Alon spokesman Claire Hart. THUMS crude is produced locally in Long Beach.

"Supply groups are working on securing other sources," Hart said.
 
(Ken Clark in Los Angeles and Jessica Resnick-Ault in Houston contributed to this story)
 
-By Angel Gonzalez, Dow Jones Newswires; angel.gonzalez@dowjones.com ,  713-547-9207

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Anchorage Daily News
December 8, 2006

http://www.adn.com/news/alaska/ap_alaska/story/8475247p-8368884c.html

FBI: State lawmaker arrested in FBI probe
The Associated Press
Published: December 7, 2006
Last Modified: December 7, 2006 at 11:06 PM

ANCHORAGE, Alaska (AP) - An Alaska state lawmaker was arrested Thursday on a federal bribery warrant.

Rep. Tom Anderson was arrested at his Anchorage home and was being held Thursday night at the city jail, FBI Special Agent Eric Gonzalez told The Associated Press.

The arrest stems from the recent raid of several lawmaker's offices. No other arrests were made, but Gonzalez said it was an ongoing investigation.

More information about Anderson's arrest, first reported by Anchorage television station KTUU, was expected to be released by Department of Justice officials in Washington, D.C., Gonzalez said.

A message left late Thursday night with DOJ officials by the AP was not immediately returned.

Anderson, who did not seek re-election and leaves office this month, is married to Lesil McGuire, who gave up her state representative seat and was elected to the state Senate, taking office next month. There was no home listing for Anderson and McGuire, but Anderson's father, Tom Anderson, former director of the Alaska State Troopers, said, "No comment."

The offices of at least six Alaska legislators were raided in late August and early September by federal agents searching for possible ties between the lawmakers and VECO Corp., a large oil field services company, officials and aides said. Anderson's name had not appeared in the list of offices searched.

About 20 warrants were served at the time in Anchorage, Juneau, Wasilla, Eagle River and Girdwood, but federal officials would not say who received warrants and remained tightlipped about the investigation. All inquiries were referred to DOJ officials, who declined to comment for months.

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Houston Chronicle
December 8, 2006

http://www.chron.com/disp/story.mpl/business/4387331.html

Agency bills BP in fee dispute
Action comes after criticism about collections
By BRETT CLANTON
Copyright 2006 Houston Chronicle

Only a day after a report slammed federal regulators for being lax in collecting drilling fees from oil companies, the government office that monitors the practice slapped BP with a $32 million bill for underpaying the fees during the last 15 years.

The British oil giant was charged for royalties and interest related to coalbed methane production in New Mexico from June 1991 through May 2006, the Department of Interior's Minerals Management Service said in a prepared statement Thursday.

The bill came after an appeals court ruling upheld an agency rule that requires oil and gas producers to pay for removing carbon dioxide from methane gas.

BP and other producers had challenged the law, but the fight ended when the Supreme Court declined to hear the case, letting the lower court's decision stand.

The agency used the BP announcement to show it is rigorous in enforcing royalty payment laws, despite the findings of a scathing report by the Interior Department's inspector general, Earl Devaney, made available on Wednesday.

"This action demonstrates that MMS is vigilant in collecting royalties due to the federal government from energy production that occurs on federal lands," said Johnnie Burton, director of the Minerals Management Service. "And if the payments are not timely, we charge interest on top of the original debt."

The office said BP's bill includes $18.9 million for additional royalties and $13.3 million in interest payments.

Europe's second-largest oil company will pay the bill and "has no dispute with the invoiced amount," BP spokeswoman Camille Dass said.

In addition, the Minerals Management Service said it is pursuing the same issue with other energy companies and anticipates generating "additional tens of millions of dollars of receipts in the near future."

But in his report, Devaney said the agency placed too much faith in company-supplied data in determining royalty payments.

He cited the frequent use of "compliance reviews" over more stringent audits to gauge whether producers operating in U.S. land or waters are shortchanging the government. In a compliance review, federal regulators compare a company's production data against its reported royalties to find discrepancies.

"Without additional analytical steps, MMS has no assurance that the reported production amounts are reasonable," Devaney's report said.

In response, the agency said compliance reviews are only one of many tools it uses to assess royalties, and that audits are issued when discrepancies are found.

Yet the agency told Devaney it will submit a plan that addresses the recommendations in 30 days.

The Minerals Management Service collected $9.9 billion in royalties in the fiscal year 2005 from 2,600 companies, the report said.

But lawmakers and government watchdog groups say what the agency is collecting is only a portion of what the government is owed by energy companies.

Rep. Darrell Issa, R-Calif., chairman of a House subcommittee that has been monitoring the Minerals Management Service, scoffed at the office's claim Thursday that it has been "vigilant" in enforcing royalty payments.

"I'm unimpressed with MMS claiming credit for millions when billions are left uncollected," Issa said in a prepared statement. "Our investigations have shown that MMS has neither the will nor the systems in place to accurately determine how much is owed or to collect it."

Beth Daley, director of investigations for the Project on Government Oversight, a nonprofit public interest group in Washington that has been critical of the agency, said the BP announcement is a small sign of progress. "It might be reasonable to speculate that this new bill being issued to BP is part of an effort to step up what they should have been doing all along," she said.

brett.clanton@chron.com
 

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Wall Street Journal
December 8, 2006

California Investigating BP Pipeline Crude Leak Near LA
DOW JONES NEWSWIRES
December 8, 2006 11:27 a.m.
 
HOUSTON (Dow Jones)--The California State Fire Marshall's Pipeline Safety Division is investigating a leak in a BP PLC (BP)-operated pipeline near Los Angeles, an agency official said Friday.

"We are investigating a BP petroleum crude oil leak in the Long Beach area," said Pipeline Safety Division Chief Bob Graham.

The leak started on Dec. 5, in a section of the pipeline that crosses underneath a freeway, making evaluation operations difficult, Graham said. "They haven't been able to get to the source," he said. "They have been concentrating on clean-up activity."

Graham declined to provide details on the size of the leak.
 
-By Angel Gonzalez, Dow Jones Newswires;
angel.gonzalez@dowjones.com  

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Anchorage Daily News
December 7, 2006

http://www.adn.com/news/alaska/crime/story/8473253p-8367143c.html

NLRB burglary invalidates Alyeska union vote
LABOR: Several offices hit in building including doctors,
financial advisors.
By WESLEY LOY
Anchorage Daily News
Published: December 7, 2006
Last Modified: December 7, 2006 at 02:26 AM

Federal labor officials have thrown out a union vote of trans-Alaska oil pipeline workers and ordered a new election after burglars over the weekend cracked into a safe holding ballots.

"I've been doing this a long time and I've never heard of anything like this," said Richard Ahearn, regional director for the National Labor Relations Board in Seattle.

Burglars hit the agency's downtown Anchorage office Saturday, along with several other businesses in the same building on West Third Avenue, Ahearn and Anchorage police said.

In the NLRB office, the invaders broke open a safe that held uncounted ballots from a recent election involving Alyeska Pipeline Service Co. technicians. The ballots were left behind, although strewn about the office, and nothing of value was taken, Ahearn said.

So far, authorities have no proof the burglars were targeting the Alyeska election and the ballots, he said.

Anchorage police Lt. Paul Honeman concurred, saying they apparently were after valuables such as jewelry or cash. About a dozen offices were hit, including those of doctors and financial service providers, he said.

"Apparently, the NLRB office just happened to have the biggest safe in it, and these guys must have thought it had a lot of money in it," Honeman said. "These guys were looking for small items they could carry, but they sure seemed to be making a lot of noise and a lot of damage."

One man happened to be working in his office and caught a glimpse of a man who appeared to be trying to break into an office and then bolted, Honeman said.

Aside from Anchorage police, the Federal Protective Service is investigating. That agency provides law enforcement and security for federally owned or leased property.

Kristjan Dye, president of United Steelworkers Local 4959, called the break-in "bizarre."

NLRB officials invited representatives of Alyeska and the Steelworkers to come to the office and look at the crime scene. Dye said he doesn't know if the burglary was related to the election, but it seemed odd that petty cash, BlackBerry devices and even a credit card were left behind.

"I'm puzzled," he said. "I don't see what could be gained by it other than to hold another election."

The ballots in the safe were from the first phase of an election involving 297 Alyeska technicians who run and maintain the 800-mile pipeline and the tanker terminal at Valdez. Some ballots were still coming in by mail.

The technicians compose about a third of Alyeska's overall workforce of 785 people.

Some of the technicians, with the help of the Steelworkers union, have been trying to form a collective bargaining unit for more than two years, but Alyeska has resisted.

The company, a consortium of the five oil companies that own the pipeline, successfully quashed a prior election involving just those technicians working at the Valdez terminal. Alyeska argued successfully to the NLRB that the Valdez technicians alone couldn't vote to form a bargaining unit; rather, such a vote would have to include all technicians up and down the line.

Among other issues, technicians are concerned about potential job cuts in connection with Alyeska's efforts to automate many pipeline pump stations, Dye said.

The ballots in the safe, which was severely battered, and other ballots still coming in the mail won't be counted, Ahearn said. He said he'll order a new election to be held in January.

Dye said he doubts the canceled election will damage chances for pro-union technicians to win the new election, although "it's going to depend on people's perceptions."

He noted a 1990 case in which Alyeska hired private investigators to spy on an industry critic. The investigators took the man's mail and garbage and got his bank and telephone records.

"I don't know if this is something like that," Dye said of the burglary, "but they do have some history that way."

Alyeska spokesman Mike Heatwole said Alyeska had nothing to do with the burglary and company executives are just as baffled as everyone else.

"It's really disappointing," he said. "It was a long process to get to the election."

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

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