Order Code RL33629
CRS Report for Congress
Received through the CRS Web
BP Alaska North Slope Pipeline Shutdowns:
Regulatory Policy Issues
August 28, 2006
Paul W. Parfomak
Specialist in Science and Technology
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
BP Alaska North Slope Pipeline Shutdowns:
Regulatory Policy Issues
Summary
On August 6, 2006, BP Exploration (Alaska), Inc. (BP) announced the
shutdown of the Prudhoe Bay area oil field on the North Slope of Alaska to conduct
major repairs following the discovery of severe corrosion and a small spill from a
Prudhoe Bay oil pipeline. The loss of North Slope oil production initially was
expected to cut overall U.S. oil supplies by approximately 2.6%, although corrective
measures have allowed BP to maintain approximately half of these supplies while
longer term pipeline repairs are underway. Federal authorities have estimated that
the Prudhoe Bay fields will not return to full production before February 2007.
The unexpected discovery of severe corrosion problems in BP’s pipelines and
the sudden loss of Prudhoe Bay oil supplies have drawn intense media attention and
strong criticism from Congress. Congressional Committees have called for hearings
to examine BP’s maintenance poblems and the adequacy of federal pipeline safety
regulation administered by the Department of Transportation (DOT). The Pipeline
Safety Improvement Act of 2006 (H.R. 5782) would mandate the promulgation of
new regulations covering the types of pipelines used by BP on the North Slope,
among other provisions. The bill was introduced by Representative. Don Young on
July 13, 2006, and reported by the House Committee on Transportation and
Infrastructure on July 19, 2006.
BP executives have admitted to the inadequacy of the company’s maintenance
program for its North Slope pipeline operations. Likewise, federal policy makers and
pipeline safety regulators have acknowledged that “low-stress” hazardous liquids
pipelines like BP’s North Slope pipelines should be under stricter federal oversight.
The federal Office of Pipeline Safety (OPS) expects to promulgate new regulations
covering such pipelines by 2007. In the meantime, the agency has responded to BP’s
problems under its current regulations. The OPS’s Corrective Action Orders since
March, 2006 have revealed the extensive corrosion problems in BP’s North Slope
pipelines, have likely prevented additional oil spills, and have facilitated BP’s
restoration efforts.
As BP’s activities continue, Congress may consider ensuring that Prudhoe Bay
area pipeline restoration and OPS rulemaking remain on schedule. Congress may
review the specific requirements of the OPS’s proposed low-stress pipeline
regulations to ensure they appropriately balance safety benefits and implementation
costs. Congress may also act to ensure that the OPS strictly enforces all its pipeline
safety regulations so that incremental problems in particular systems do not
accumulate and lead to major supply disruptions. In addition to these issues,
Congress may opt to assess how U.S. pipeline safety regulation fits within the
nation’s overall strategy to ensure the reliability of critical energy infrastructure.
Most observers would argue that federal efforts to protect pipelines either from
accidents or security risks should be consistent in their consideration of pipeline
criticality to the nation’s energy supplies. Reviewing how the federal government,
industry, and private groups work together to achieve common goals in pipeline
safety could be an oversight challenge for Congress.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Scope and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Federal Pipeline Safety Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Low-Stress Pipelines Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prudhoe Bay West Oil Spill, March 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
OPS Corrective Action Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
OPS Corrective Action Order Amendment 1 . . . . . . . . . . . . . . . . . . . . 7
Prudhoe Bay Oil Field Shutdown, August 2006 . . . . . . . . . . . . . . . . . . . . . . 8
OPS Corrective Action Order Amendment 2 . . . . . . . . . . . . . . . . . . . . 9
Regulatory Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Low-Stress Pipeline Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Pipeline Safety Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pipeline Safety and Energy Supply Reliability . . . . . . . . . . . . . . . . . . . . . . 12
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
List of Figures
Figure 1: BP Exploration (Alaska) North Slope Pipeline Network . . . . . . . . . . . . 6
BP Alaska North Slope Pipeline Shutdowns:
Regulatory Policy Issues
Introduction
On August 6, 2006, BP Exploration (Alaska), Inc. (BP) announced the
shutdown of the Prudhoe Bay area oil field on the North Slope of Alaska to conduct
major pipeline repairs “following the discovery of unexpectedly severe corrosion and
a small spill from a Prudhoe Bay oil transit line.”1 This shutdown followed the
March 2, 2006, shutdown of another BP pipeline serving the same field. The
discovery of the August corrosion problems resulted from inspections ordered by the
federal Office of Pipeline Safety in response to the March incident. Shutdown of the
Prudhoe Bay field initially was expected to cut overall U.S. oil supplies by
approximately 2.6%. Subsequent inspection findings and immediate corrective
measures have, for the most part, allowed BP to maintain approximately half of these
supplies while longer term repairs are underway. Department of Energy Secretary
Samuel Bodman reportedly estimated that the North Slope fields would not return to
full production before February 2007.2
The unexpected discovery of severe corrosion problems in BP’s pipelines and
the sudden loss of Prudhoe Bay oil supplies have drawn intense media attention and
strong criticism from Congress. Stakeholders on all sides have been trying to
understand the circumstances which led to the failure of these nationally critical
pipeline facilities. Newspaper editorials have criticized BP’s apparent inattention to
the condition of its North Slope oil pipelines at a time of record high oil prices,
record oil company profits, and military conflict in the oil-rich Middle East.3
Members of Congress have accused federal pipeline safety regulators of being
“asleep at the switch” for not establishing stricter oversight of BP’s North Slope
operations.4 Congressional Committees have called for hearings to examine BP’s
maintenance problems and the adequacy of federal pipeline safety regulation
administered by the Department of Transportation (DOT).
While the BP pipeline problems on the North Slope have recently intensified
public and Congressional attention to U.S. pipeline safety issues, policy makers have
1 BP Exploration Alaska, Inc. “BP to Shutdown Prudhoe Bay Oil Field.” Press release. Aug.
6, 2006. [http://usresponse.bp.com/go/doc/1249/127496]
2 “BP Alaska Repairs May Take Six Months, Bodman Says.” Bloomberg. Aug. 8, 2006.
3 See, for example: “Simply Irresponsible How could BP not maintain its pipelines?” The
Dallas Morning News. Editorial. Aug. 13, 2006. p. 2P.
4 Hon. Charles E. Schumer. “Schumer: Major Corrosion In Alaska Pipeline Could Indicate
Future Trouble In US Pipeline System.” Press release. Aug. 8, 2006.
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been examining pipeline operator performance and federal regulation of pipeline
safety for many years. Reacting to a history of pipeline safety problems and
documented inadequacies in federal oversight of natural gas and hazardous liquids
pipelines, Congress began a major overhaul of federal pipeline safety programs in the
1990s, culminating in the passage of the Pipeline Safety Improvement Act of 2002
(P.L. 107-355). In the current Congress, the Pipeline Safety Improvement Act of
2006 (H.R. 5782), introduced by Representative Don Young on July 13, 2006, and
reported by the House Committee on Transportation and Infrastructure on July 19,
2006, would make additional changes to federal pipeline oversight. Among other
provisions, H.R. 5782 would set a deadline for the promulgation of new regulations
covering the types of pipelines used by BP on the North Slope (Sec. 5).5
Scope and Limitations
This report discusses policy issues in federal oversight of pipeline safety and
enforcement of federal pipeline safety regulations related to BP’s North Slope
pipeline operations. It also summarizes federal pipeline regulatory authorities and
agency activities. It reviews key details of the operational problems at the North
Slope pipeline facilities in 2006, including corrective actions ordered by the federal
government. The report discusses the status of federal regulations for pipelines
operating at relatively low pressure of the type employed by BP. It also summarizes
ongoing changes in federal pipeline safety enforcement activities and demands by
some Members for greater enforcement transparency. The report concludes with
relationship between federal pipeline safety regulations and the overall reliability of
critical U.S. energy supplies.
This report focuses on federal pipeline safety regulation administered by the
DOT. It does not address regulation by the Environmental Protection Agency, the
Department of the Interior, or other agencies that may also have jurisdiction over
BP’s Prudhoe Bay operations. Although oil spills on the North Slope may have
implications for the possible development of the Arctic National Wildlife Refuge
(ANWR), issues related specifically to ANWR are beyond the intended scope of this
report. For further information about ANWR, see CRS Report RL33523, Arctic
National Wildlife Refuge (ANWR): Controversies for the 109th Congress, by M.
Lynne Corn, Bernard A. Gelb, and Pamela Baldwin. This report also does not
discuss BP’s safety record at energy facilities other than those on the North Slope.
Federal Pipeline Safety Regulation
The federal government regulates the safety of interstate pipelines under the
Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481), the Hazardous Liquid
Pipeline Act of 1979 (P.L. 96-129), the Pipeline Safety Act of 1992 (P.L. 102-508),
5 H.R. 5782 also would change pipeline damage prevention programs and enforcement (Sec.
1); would set deadlines for the promulgation of new regulations for natural gas distribution
pipelines (Sec. 3), for managing pipeline risks associated with human factors (Sec. 4), and
for liquid pipeline control systems (Sec. 6); and would authorize pipeline safety
appropriations through 2012 (Sec. 5). There is no related bill in the Senate.
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and the Pipeline Safety Improvement Act of 2002 (P.L. 107-355), among other
statutes. Under these statutes, the Secretary of Transportation has primary authority
to regulate interstate pipeline design, construction, operation and maintenance, and
spill response planning. Pipeline safety regulations are covered in Title 49 of the
Code of Federal Regulations. The DOT administers pipeline regulations through the
Office of Pipeline Safety (OPS) within the Pipelines and Hazardous Materials Safety
Administration (PHMSA).6 The OPS has approximately 170 staff, including 88
inspectors based in Washington, D.C., Atlanta, Kansas City, Houston, and Denver.7
In addition to its own staff, the OPS’ enabling legislation allows the agency to
delegate authority to intrastate pipeline safety offices, and allows state offices to act
as “agents” administering interstate pipeline safety programs (excluding
enforcement) for those sections of interstate pipelines within their boundaries.8 Over
400 state pipeline safety inspectors are available in 2006. The OPS safety program
is funded primarily by user fees (49 U.S.C. § 60107).
The OPS uses a variety of strategies to promote compliance with its safety
standards. The agency conducts physical inspections of facilities and construction
projects; conducts programmatic inspections of management systems, procedures,
and processes; investigates safety incidents, and maintains a dialogue with pipeline
operators. The agency clarifies its regulatory expectations through published
protocols and regulatory orders, guidance manuals, and public meetings. The OPS
relies upon a range of enforcement actions, including administrative actions and civil
penalties, to ensure that operators correct safety violations and take measures to
preclude future safety problems.9 Between 1994 and 2004, the OPS took 1,430
enforcement actions against pipeline operators.10 Civil penalties proposed by the
OPS for safety violations in 2005 exceeded $4 million.11 The OPS also conducts
accident investigations and systemwide reviews focusing on high-risk operational or
procedural problems and areas of the pipeline near sensitive environmental areas,
high-density populations, or navigable waters.
Since 1997, the OPS has encouraged industry’s implementation of “integrity
management” programs on pipeline segments near “high consequence” areas.
Integrity management provides for continual evaluation of pipeline condition;
assessment of risks to the pipeline; inspection or testing; data analysis, and followup
6 PHMSA succeeds the Research and Special Programs Administration (RSPA), reorganized
under P.L. 108-246 which was signed by the President on Nov. 30, 2004.
7 OPS. Phone directory. Updated June 19, 2004. [http://ops.dot.gov/contact/phonelist.htm].
8 United States Code. 49 USC 601. States may recover up to 50% of their costs for these
programs from the federal government.
9 Office of Pipeline Safety (OPS). “Enforcement.” Aug. 16, 2006.
[http://primis.phmsa.dot.gov/comm/Enforcement.htm]
10 Government Accountability Office. Pipeline Safety: Management of the Office of Pipeline
Safety’s Enforcement Program Needs Further Strengthening. GAO-04-80. July, 2004. p26.
11 McCown, B., Pipeline & Hazardous Materials Safety Admin. Statement before the House
Committee on Transportation and Infrastructure, Subcommittee on Highways, Transit and
Pipelines hearing on Pipeline Safety. March 16, 2005. Proposed civil penalties are often
reduced in subsequent settlements.
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repair, as well as preventive or mitigative actions. High consequence areas include
population centers, commercially navigable waters, and environmentally sensitive
areas, such as drinking water supplies or ecological reserves. The integrity
management approach directs priority resources to locations of highest consequence
rather than applying uniform treatment to the entire pipeline network.12 The OPS
made integrity management programs mandatory for most operators with 500 or
more miles of regulated oil pipeline as of March 31, 2001.
Low-Stress Pipelines Regulation
Pipelines operated at less than 20% of the specified minimum strength of the
material from which they are constructed are classified as “low-stress” pipelines
under 49 C.F.R. § 195.2. According to the OPS, federal pipeline safety regulations
originally did not apply to low-stress pipelines because they operated at low
pressures, were not prone to accidents, and were thought to pose little risk to the
public. In 1990, however, a major heating oil spill from an underwater low-stress
pipeline in New York prompted OPS to begin developing safety regulations for such
pipelines.13 The Pipeline Safety Act of 1992 subsequently prohibited the exemption
of pipeline facilities from OPS safety regulation “solely” because they operate at low
stress (49 U.S.C. § 60102(k)). OPS analysis of data the agency received under its
low-stress pipeline rule making showed that regulation of all such pipelines would
not be cost-effective. The agency therefore chose to focus on low-stress pipelines
posing higher public and environmental risk based on their location and the
commodities they carried. In 1994, OPS extended its hazardous liquid pipeline
regulations under 49 C.F.R. § 195 to include low-stress pipelines that 1) transport
highly volatile liquids, 2) are not located in rural areas, 3) are located offshore, or 4)
are located in waterways used for commercial navigation (§ 195.1(b)(3)). Because
many low-stress pipelines were not likely operated and maintained consistent with
the new regulatory requirements, operators were permitted to delay compliance on
their existing pipelines lines until July 12, 1996 (§ 195.1(c)).14
In May, 2006, the OPS stated it was considering risk-based regulation of
hazardous liquid low-stress pipelines located in “unusually sensitive areas” and
currently exempted from its regulations under 49 C.F.R. § 195. The OPS defines an
unusually sensitive area (USA) as “a drinking water or ecological resource area that
is unusually sensitive to environmental damage from a hazardous liquid pipeline
release” (49 C.F.R. § 195.6).15 The agency would require operators of these pipelines
to comply with safety rules for design, construction, testing, and operation. The OPS
12 Research and Special Programs Administration (RSPA). “Pipeline Safety. Pipeline
Integrity Management in High Consequence Areas (Hazardous Liquid Operators with 500
or More Miles of Pipeline).” Federal Register. Dec.1, 2000: 75378.
13 Pipeline and Hazardous Materials Safety Administration (PHMSA). “Pipeline Safety:
Meetings of the Pipeline Safety Standards Advisory Committees and Two Public
Workshops.” Federal Register. Vol. 71, No. 83. May 1, 2006. p. 25640.
14 Research and Special Programs Administration (RSPA). “Low-Stress Hazardous Liquid
Pipelines Serving Plants and Terminals.” Federal Register. Vol. 63, No. 39. Feb. 27, 1998.
15 49 C.F.R. § 195.6 further define “drinking water” or “ecological resource” areas.
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would also require that these pipelines be protected from corrosion and excavation
damage, among other requirements.16 The agency reportedly expects to finalize
regulations for low-stress hazardous liquids pipelines in USAs by the end of 2006.17
Although USAs would be identified on a site-by-site basis, the OPS reportedly has
indicated that the North Slope is a USA.18 The Pipeline Safety Improvement Act of
2006 (H.R. 5782) would mandate the promulgation of these standards within one
year of enactment (Sec. 5).
Prudhoe Bay West Oil Spill, March 2006
On March 2, 2006, BP crews discovered a crude oil leak from a 34-inch pipeline
in the Prudhoe Bay West Operating Area (PBWOA) on the North Slope of Alaska.
The company isolated and shut down the affected section of pipeline and began
cleaning up approximately 5,000 barrels of oil spread over two acres of adjacent land.
The shutdown initially caused North Slope oil production to fall by approximately
100,000 barrels per day, although BP restored most of that volume by mid-April
using other pipelines.19 Subsequent investigation by BP revealed at least six
additional areas of corrosion along the pipeline, which had last been inspected
internally in 1998. At the time of the spill, BP did not have a program for regular
inspection or cleaning of its North Slope pipelines internally using “pigs,” devices
that travel inside pipelines and named for the sounds they make during operation.20
OPS Corrective Action Order. On March 15, 2006, the OPS issued to BP
a Corrective Action Order (CAO) requiring the company to take corrective action to
protect the public, property, and environment from potential hazards associated with
the Prudhoe Bay pipeline failure. The CAO asserted federal safety jurisdiction over
BP’s PBWOA pipeline, as well as the company’s adjacent Prudhoe Bay East
Operating Area (PBEOA) and Lisburne pipelines, finding that they met the definition
of a “hazardous pipeline facility” under 49 U.S.C. § 60112(a), which grants general
authority under the statute.21 These operating areas are indicated in Figure 1. The
CAO also concluded, however, that the specific federal pipeline safety regulations
under 49 C.F.R. § 195 did not apply to the PBWOA pipeline under the exception in
49 C.F.R. § 195.1 for onshore low-stress pipelines located in rural areas, outside
commercial waterways, which do not transport highly volatile liquids.22
16 PHMSA. May 1, 2006. p. 25641.
17 Hebert, H.J. “In Wake of Pipeline Trouble in Alaska, Government Renews Push for
Regulations.” Associated Press. Aug. 10, 2006.
18 Mufson, S. “Regulators Look to Plug Holes in Pipeline Rules.” Washington Post. Aug.
16, 2006. p. D01.
19 “BP Restores Prudhoe Production to 70,000 b/d.” Platts Commodity News. April 11, 2006.
20 Pipeline and Hazardous Material Safety Admin (PHMSA). Corrective Action Order in the
Matter of BP Exploration (Alaska), Inc.,Respondent. CPF No. 5-2006-5015H. March 15,
2006. [http://ops.dot.gov/regions/west/BP%205-2006-5015H%20-%20Final.pdf].
21 Ibid. p. 3.
22 Ibid. p. 2.
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Figure 1: BP Exploration (Alaska) North Slope Pipeline Network
Source: Courtesy of BP. Modified by CRS for clarity and monochrome printing. Aug 18, 2006.
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In its March 15 order, the OPS required BP to immediately take a number of
corrective actions with respect to the PBWOA, PBEOA, and Lisburne pipeline
systems. Among other actions, the CAO required BP to:
! Inspect the pipelines internally using a pig, repairing all anomalies;
! Record differences between inline inspection data and "as found"
data for all anomalies and integrate that data in future analyses;
! Implement a plan for internal inspections at regular intervals (not to
exceed five years) and a schedule for the repair of anomalies;
! Implement a plan to regularly run cleaning pigs on the pipelines;
! Review and modify, as necessary, the leak detection system for the
pipelines in compliance American Petroleum Institute standards;
! Implement an internal corrosion management plan, and
! Perform infrared aerial surveys for the entirety of the pipelines.23
The OPS also asserted its authority under 49 U.S.C. § 60122 and 49 C.F.R. §
190.223 to fine BP up to $100,000 per day and refer the company to the Attorney
General for noncompliance with its order.24
OPS Corrective Action Order Amendment 1. On July 20, 2006, the OPS
issued to BP an amendment to its CAO of March 15 requiring the company to take
additional corrective actions at its North Slope pipelines based on findings after the
initial CAO.25 Among other findings in the amendment, the OPS determined that
BP's predecessor, ARCO, had suspended cleaning of the PBEOA pipeline in 1992
when solid deposits clogged strainers on the Trans Alaska Pipeline System (TAPS).
In May 2006, BP performed external gamma ray scans to determine the volume of
accumulated sludge inside the PBEOA and PBWOA pipelines since 1992. BP
cleaned and internally inspected the Lisburne pipeline with pig devices in June 2006,
although the inspection results were still pending. BP had also initiated, but not
completed, cleaning of the PBEOA pipeline with pig devices in July, 2006. The OPS
also found that BP did not have its own large volume tanks to store solids displaced
by cleaning pigs, and had not made agreements to use non-BP tanks available on the
TAPS system. Finally, the OPS found that the approximately three-mile long
segment of the PBWOA pipeline originally closed after the March 2 leak had not yet
been drained, still contained approximately 17,000 barrels of oil, and posed an
ongoing threat of additional leaks.26
Based on the findings above and its earlier CAO findings, the OPS amendment
to its CAO concluded that BP had “failed to meet its continuing responsibility to
pursue all available options” for satisfying several requirements of the March 15,
2006 CAO, and had failed to address risks associated with shutdown of PBWOA
23 Ibid. pp. 4-5.
24 Ibid. p. 5.
25 Pipeline and Hazardous Material Safety Admin. (PHMSA). Memorandum to BP
Exploration (Alaska), Inc. RE: CPF #5-2006-5015H, Amendment No.1 to Corrective Action
Order. July 20, 2006. [http://ops.dot.gov/regions/west/CPF_NO5-2006-5015H.pdf]
26 Ibid. pp. 1-3.
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pipeline segment where the initial leak occurred.27 Accordingly, the OPS further
amended its CAO to require that BP perform the following additional actions, among
others:
! Conduct additional gamma ray scans of the PBWOA, PBEOA, and
Lisburne pipelines;
! Extract and analyze samples from the failed PBWOA pipe wall;
! Install permanent facilities to handle solids from cleaning pig
operations;
! Develop contingency plans to send solids directly into TAPS tanks;
! By August 1, 2006, develop a plan to remove the standing crude oil
in the PBWOA pipeline by August 22, 2006, and
! Submit a report within 30 days detailing actions and plans for
replacing, abandoning, and/or restoring operation of the PBWOA
pipeline.28
Prudhoe Bay Oil Field Shutdown, August 2006
On August 6, 2006, BP reported “the discovery of unexpectedly severe
corrosion and a small spill” at its Prudhoe Bay pipeline facilities following
inspections mandated by the OPS in its CAO. To address these problems, BP
announced its decision to completely replace the main North Slope pipelines
(including PBWOA and PBEOA, but not Lisburne), approximately 16 miles out of
a total 22 miles of pipeline. The urgent and comprehensive nature of the pipeline
repair initially was expected to require the complete shutdown of the Prudhoe Bay
oil field.29 Such a shutdown would cut U.S. oil supplies by approximately 380,000
barrels per day (bpd), approximately 7.5% of U.S. domestic production and 2.6% of
total U.S. supplies, including imports.30 On August 12, 2006, after reviewing new
inspection data with the OPS and state regulators, BP concluded that it did not need
to immediately shut down production from the PBWOA, which accounts for
approximately 200,000 bpd of supplies.31 Subsequent actions by BP have sought to
maintain additional supplies from PBEOA. Although BP did not, itself, release a
specific schedule for repairing its North Slope pipelines, after discussions with BP
officials, Energy Secretary Samuel Bodman reportedly estimated that North Slope oil
production would not be fully restored before February 2007.32
Oil companies began production from the Prudhoe Bay field in 1977. It is the
largest and longest-producing oil field on the North Slope. As production from it has
27 Ibid. p. 4.
28 Ibid. pp. 5-7.
29 Malone, R., Chairman, BP America. “Prudhoe Bay Response.” Press conference. Aug. 7,
2006. [http://usresponse.bp.com/posted/1249/Prudhoe_Bay_Response.127600.pdf]
30 Energy Information Admin. “U.S. Crude Oil Supply & Disposition.” May 2006 data.
Online database. [http://tonto.eia.doe.gov/dnav/pet/pet_sum_crdsnd_adc_mbblpd_m.htm]
31 BP America, Inc. “Prudhoe Bay Alaska Update.” Press release. Aug. 12, 2006.
32 “BP Alaska Repairs May Take Six Months, Bodman Says.” Bloomberg. Aug. 8, 2006.
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declined, adjacent smaller fields, such as the Badami and Kuparuk fields (Figure 1),
have supplemented overall North Slope production. According to BP, half of North
Slope oil is produced from fields outside the Prudhoe Bay area. Because these fields
use different pipelines to reach the market, not all were directly affected by the
Prudhoe Bay shutdown.33 Nonetheless, the operations (e.g., maintenance and
materials) associated with the older infrastructure around the Prudhoe Bay oil field
are, to some degree, integrated with subsequently developed North Slope fields,
including connections to the Trans Alaska Pipeline System. Thus, the shutdown of
BP’s North Slope pipelines might ultimately affect oil transport from other North
Slope fields as well.
OPS Corrective Action Order Amendment 2. On August 10, 2006, the
OPS issued to BP a second amendment to its CAO of March 15.34 Among other
findings in the amendment, the OPS stated that BP’s inspections under the CAO had
identified 16 pipeline anomalies where the pipeline material had lost at least 70
percent of its thickness and at least 6 actual leaks at different locations in the
company’s Prudhoe pipeline system. The amendment also stated that BP had not yet
completed cleaning or inspection pigging of the PBWOA or the PBEOA pipelines
as of the date of the amendment, although the company had submitted an acceptable
plan for removing the oil in the shutdown segment of the PBWOA pipeline still in
place from the March incident.35 Based on these and additional findings, the OPS
further amended its CAO to impose on BP additional monitoring, testing, and
information requirements and to set standards and deadlines for pipeline repair. The
amendment also imposed requirements, such as removing standing oil, arising from
BP’s decision to shut down additional North Slope pipelines.36 BP has stated its
intention to comply with the CAO amendment.37
Regulatory Policy Issues
The recent safety problems at BP’s North Slope pipeline facilities raise
questions about the adequacy of federal pipeline safety regulation. Members of
Congress and other stakeholders have expressed concern, in particular, about federal
oversight of low-stress pipelines and the adequacy of federal pipeline safety
33 BP Exploration Alaska, Inc. “Alaska Corrosion Response: Frequently Asked Questions.”
Aug. 10, 2006. [http://usresponse.bp.com/posted/1249/PBU_QA_FAQ_Final.128022.pdf]
34 Pipeline and Hazardous Material Safety Admin.. Memo to BP Exploration (Alaska), Inc.
Re: CPF #5-2006-5015H, Amendment No.2 to Corrective Action Order. Aug. 10, 2006.
[http://ops.dot.gov/regions/west/CPF_No_5-2006-5015%20Amendment-2.pdf]
35 Ibid. pp. 2-3.
36 Ibid. pp. 5-8.
37 BP Exploration Alaska, Inc. “Statement From Steve Marshall, President, BP Exploration
Alaska.” Press release. Aug. 10, 2006.
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enforcement.38 The disruption of North Slope oil supplies also highlights the
relationship between pipeline safety and critical infrastructure reliability.
Low-Stress Pipeline Regulations
Although the types of low-stress pipelines employed by BP on the North Slope
at Prudhoe Bay are currently exempt from federal safety regulations under 49 C.F.R.
§ 195, the OPS expects to promulgate safety regulations for such pipelines by 2007.
Underway since early 2005, the OPS accelerated its schedule for developing these
regulations after the March 2006 BP oil spill. There is general agreement that the
OPS can promulgate new low-stress pipeline regulations under its existing statutory
authority under Section 49 of the U.S. Code. Members of Congress, the pipeline
industry, and public advocates have also expressed support in principle for these
regulations as well as the OPS’s rulemaking schedule.39 Presumably, with new
regulations in place, unsafe conditions among other low-stress hazardous liquids not
currently under OPS oversight could be identified and corrected before a major safety
incident occurs.
One open question related to new low-stress pipeline regulations is how broadly
those regulations will apply. The OPS has stated its intention to regulate currently
exempt low-stress pipelines in USAs, a proposal which reportedly would cover
approximately 1,600 miles out of approximately 5,000 miles of U.S. low-pressure
pipelines.40 Public and environmental advocacy groups have proposed regulation of
nearly all low-stress pipelines, regardless of location.41 Other advocates have
proposed using the “high consequence” criteria in the OPS’s existing integrity
management regulations for determining which specific pipelines should be covered
under OPS’s new provisions. Consistent with OPS’s proposals, H.R. 5782 would
mandate low-stress pipeline regulations only in USAs (§ 5). The bill would also
define low-stress pipelines as having a diameter greater than 8 5/8 inches (§ 5),
eliminating numerous smaller pipelines from potential inclusion under new OPS
rules. In establishing the final criteria for low-stress pipeline inclusion, the OPS will
have to balance the potential safety benefits against the potential costs of stricter
safety programs. Congress may review the OPS’s proposed low-stress pipeline
regulations and the related provisions in H.R. 5782 to ensure they satisfy
Congressional priorities in light of BP’s pipeline problems and potential problems
among similar pipeline systems elsewhere in the United States.
38 See, for example: Randall, M.J. “DOT Administrator to Propose Greater Pipeline
Oversight.” Dow Jones. Aug. 9, 2006.
39 See testimony in: “Pipeline Safety: a Progress Report since the Enactment of the Pipeline
Safety Improvement Act of 2002.” Hearing before the House Committee on Energy and
Commerce, Subcommittee on Energy and Air Quality. Serial No. 109-84. April 27, 2006.
40 “Oversight of Pipelines May Increase.” Los Angeles Times. Aug. 18, 2006. p. C3.
41 Epstein, L.N., Cook Inlet Keeper. Testimony before the House Committee on Energy and
Commerce, Subcommittee on Energy and Air Quality hearing on Pipeline Safety
Improvement Act Reauthorization and H.R. 5782, the Pipeline Safety Improvement Act of
2006. July 27, 2006.
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Pipeline Safety Enforcement
The adequacy of the OPS’s enforcement strategy has been an ongoing concern
of Congress, particularly after a pair of fatal pipeline accidents in Bellingham,
Washington in 1999 and near Carlsbad, New Mexico in 2000.42 A report from the
General Accounting Office in 2000 called into question fundamental changes in
OPS’s enforcement strategy at the time, such as sharply reducing the use of fines to
enforce compliance with pipeline safety regulations.43 Provisions in the Pipeline
Safety Improvement Act of 2002 (P.L. 107-355) put added scrutiny on the
effectiveness of the OPS’s enforcement strategy and assessment of civil penalties
(Sec. 8).
In response to Congressional concerns in 2000, the OPS has been steadily
intensifying its enforcement activities. A 2004 Government Accountability Office
(GAO) report re-examining OPS enforcement stated that the agency had made a
number of changes in its enforcement strategy with the potential to improve pipeline
safety. The report concluded, however, that the effectiveness of the strategy could
not yet be determined because OPS’s program had not incorporated “clear program
goals, a well-defined strategy for achieving those goals, and performance measures
linked to the program goals.”44 Acknowledging the GAO’s findings, the OPS stated
that it would better define its enforcement strategy, including the assessment of civil
penalties, and identify new measures of enforcement performance before the end of
2005.45 In March 2006 testimony before Congress, the GAO reported that the OPS
had adopted measures that appeared to be responsive to the agency’s earlier concerns,
although the GAO had not reviewed the strategy nor its implementation in depth.46
In April 2006, PHMSA testified before Congress that the OPS had institutionalized
a “tough-but-fair” approach to enforcement, “imposing and collecting larger
penalties, while guiding pipeline operators to enhance higher performance.”47
42 Hon. John D. Dingell. Statement before the House Commerce Committee, Energy and
Power Subcommittee hearing on Reauthorization of the Natural Gas Pipeline Safety Act and
the Hazardous Liquid Pipeline Safety Act. Serial No. 106–11. Feb. 3, 1999. p.9; Hon. John
D. Dingell and Hon. Edward J. Markey. Statements before the House Energy and Commerce
Committee, Energy and Air Quality Subcommittee hearing on Reauthorization of the
Natural Gas Pipeline Safety Act and the Hazardous Liquid Pipeline Safety Act. Serial No.
107–87. March 19, 2002. pp. 5,8.
43 General Accounting Office (GAO). Pipeline Safety: The Office of Pipeline Safety Is
Changing How It Oversees the Pipeline Industry. GAO/RCED-00-128. May 2000. p. 22.
44 GAO. July, 2004. p3.
45 Siggerud, K. Government Accountability Office (GAO). Testimony before the House
Committee on Transportation and Infrastructure, Subcommittee on Highways, Transit and
Pipelines hearing on Pipeline Safety and the Office of Pipeline Safety. 108–74. June 16,
2004. p10.
46 Siggerud, K. Government Accountability Office (GAO). Testimony before the House
Committee on Transportation and Infrastructure, Subcommittee on Highways, Transit and
Pipelines hearing on Pipeline Safety. GAO-06-474T. March 16, 2006. p11.
47 Gerard, S. L., Pipeline and Hazardous Materials Admin.(PHMSA). Testimony before the
(continued...)
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According to the agency, $4 million in proposed civil penalties in 2005 was three
times greater than penalties proposed in 2003, the first year higher penalties could be
imposed under P.L. 107-355 (Sec. 8(a)).48
Notwithstanding the OPS’s efforts to change its pipeline safety enforcement
strategy, some analysts believe that the agency’s enforcement program needs
additional improvement. In particular, they argue that the OPS’s enforcement actions
are not sufficiently transparent to the public, other government agencies, or
industry.49 H.R. 5782 does not impose new requirements for enforcement
transparency. Alternative legislative proposals would require the agency to issue
monthly summaries of OPS enforcement actions including violation and penalty
information for each action. The timely availability and comprehensive content of
the OPS’s regulatory orders related to BP’s recent pipeline problems may indicate an
increase in the enforcement transparency absent a legislative mandate. Nonetheless,
if transparency remains a concern, Congress may impose new enforcement reporting
requirements on OPS in future legislation.
Pipeline Safety and Energy Supply Reliability
Losing a significant fraction of the nation’s crude oil supplies due to BP’s North
Slope pipeline shutdowns highlights the relationship between pipeline safety and the
reliability of U.S. energy supplies. Pipeline safety regulations administered by the
OPS not only protect the public and the environmental from pipeline hazards—they
may also help to ensure the availability of critical pipeline infrastructure.50 This latter
benefit, however, while potentially an important consideration in the OPS’s
regulatory activities, is not an explicit part of the agency’s mission. The OPS’s
authorizing legislation states that its purpose is “to provide adequate protection
against risks to life and property posed by pipeline transportation and pipeline
facilities” (49 U.S.C. § 61012(a)). Accordingly, the OPS’s regulations identifying,
for example, “high consequence” areas (49 C.F.R. § 195.450) do not take into
account the criticality of a pipeline asset itself.
To the extent that critical U.S. pipelines already fall under the OPS’s safety
regulations, the dual objectives of pipeline safety and pipeline supply reliability may
already be met. However, the unexpected shutdown of BP’s North Slope pipelines
due to inadequate maintenance and regulatory exemption raises the question of
whether the OPS should explicitly consider pipeline criticality as part of its
regulatory oversight, and potentially hold critical pipelines to an even higher
47 (...continued)
House Energy and Commerce Committee, Energy and Air Quality Subcommittee hearing
on Pipeline Safety. Serial No. 109-84. April 27, 2006. p. 14.
48 Ibid.
49 Ibid. Epstein, L.N.. July 27, 2006.
50 The USA PATRIOT Act of 2001(P.L. 107-56) defines "critical" as “so vital to the United
States that the incapacity or destruction of such systems and assets would have a debilitating
impact on security, national economic security, national public health or safety, or any
combination of those matters” (Sec. 1016e).
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regulatory standard than other pipelines based on their importance to the U.S.
economy. The Transportation Security Administration (TSA) within the Department
of Homeland Security (DHS) has authority to regulate critical pipeline infrastructure
for purposes of security under the Homeland Security Act of 2002 (P.L. 107-296) and
other laws, but the agency’s activities have focused on physical and operational
security rather than operational reliability.51 Although Homeland Security
Presidential Directive 7 (HSPD-7) instructs the DOT to “collaborate in regulating the
transportation of hazardous materials by all modes (including pipelines)” (Par. 22h)
with DHS, collaboration between the departments on pipelines has been limited in
practice, and the directive otherwise does not change OPS regulatory authority.52
Provisions reportedly proposed for inclusion in H.R. 5782 would require the DOT
to identify “areas of the United States where shortages of pipeline capacity and
reliability concerns exist” with the potential to significantly increase or otherwise
disrupt oil prices.53
Introducing “criticality” as an explicit consideration in federal pipeline safety
regulation through legislation would be a major change to the OPS’s traditional
mission. Among other issues, criticality assessments would require complex analysis
and assessment of pipeline commodity flows fundamentally different from “high
consequence” assessments under the agency’s current regulations. Criticality
assessments by OPS would also be complicated by the inherent conflicts between a
public rule making process and security-sensitive pipeline information. This specific
problem has hampered the siting approval of new liquefied natural gas (LNG)
facilities and associated pipelines by the Federal Energy Regulatory Commission.54
The OPS could potentially rely on pipeline criticality assessments from the DHS,
and, indeed, might need to do so to avoid inconsistent assessments, but DHS’s
criticality assessments have been controversial and might not be rigorous enough to
support OPS regulations.55 Given these challenges, incorporating critical asset
reliability into the OPS’s safety mission may be questioned.
Whether or not OPS considers explicitly the criticality of the pipeline it
regulates, the agency’s knowledge of pipeline operations and long-standing
relationships with pipeline companies enables it to play a vital role in the restoration
of pipeline service in the event of an accident, natural disaster, or deliberate attack.
After hurricanes Rita and Katrina, for example, OPS deployed inspection staff to the
field, participated in emergency planning, coordinated restoration resources, and took
51 Transportation Security Admin. (TSA), Intermodal Security Program Office. Presentation
to the DGC Homeland Security Conference. Alexandria, VA. Dec. 7, 2005.
52 For further information see CRS Report RL33347, Pipeline Safety and Security: Federal
Programs, by Paul W. Parfomak.
53 “Prudhoe Bay Triggers New Round Of Oil Infrastructure Reliability Activity.”
EnergyWashington.com. Aug. 22, 2006.
54 Kerr, B. “Information Just Too Hot to Pass Along.” Providence Journal. March 22, 2006.
55 Dept. of Homeland Security (DHS), Office of Inspector General. Progress in Developing
the National Asset Database. OIG-06-04. June 2006.
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administrative actions to facilitate restoration of pipelines in the Gulf of Mexico.56
The agency’s recent actions with respect to BP’s pipelines on the North Slope are
similarly intended not only to address environmental hazards, but also to restore
critical oil supplies as quickly as possible.
Conclusions
The 2006 shutdowns of BP’s North Slope pipelines came as a shock to the
general public and policy makers alike due to the extent of the pipelines’ corrosion
problems and their impact on U.S. oil supplies. Legitimate questions may be asked
about the circumstances which led to these catastrophic and preventable failures. BP
has admitted unequivocally the flaws in its maintenance models and, in retrospect,
the inadequacy of its overall maintenance program for its North Slope operations.57
Likewise federal policy makers and pipeline safety regulators have acknowledged
that low-stress hazardous liquids pipelines like BP’s North Slope pipelines should
be under stricter federal oversight. The OPS is in the final stages of promulgating
new regulations covering such low-stress pipelines. In the meantime, the agency has
responded to BP’s problems under its current regulations. The OPS’s investigations
and Corrective Action Orders since March, 2006 have brought to light the extensive
corrosion problems throughout BP’s North Slope operations, have likely prevented
significant environmental damage from additional oil spills, and have facilitated BP’s
restoration efforts.
Given BP’s ongoing response to the North Slope pipeline failures and the OPS’s
enforcement and rulemaking initiatives, many observers maintain that key
Congressional concerns regarding federal oversight of low-stress pipeline safety are
being addressed. As these activities continue, Congress may take action to ensure
that both the North Slope pipeline restoration and OPS’s related rule making remain
on schedule. Although OPS anticipates new low-stress pipeline regulations by 2007,
it is possible that findings from BP’s ongoing restoration activities may unexpectedly
complicate this regulatory process. H.R. 5782 would impose a one year deadline for
the promulgation of these new rules. Congress may also review the specific scope
and safety requirements of the OPS’s proposed regulations to ensure they achieve an
appropriate balance between safety benefits and implementation costs. Pipeline
operators need clear and logical guidance on which additional pipelines will be
regulated and why. Directing limited pipeline resources to low-stress pipelines may
reduce their specific risk, but not overall pipeline system risk, if high-stress safety
programs become less effective as a result. Finally, Congress may ensure that the
OPS strictly enforces all its pipeline safety regulations so that incremental operating
problems in particular pipeline systems do not accumulate and lead to major
disruptions.
56 Pipeline and Hazardous Materials Safety Admin. (PHMSA). “Pipeline and Hazardous
Materials Safety Administration's Response to Hurricanes Katrina and Rita.” Web page.
Aug. 17, 2006. [http://www.phmsa.dot.gov/news/katrina.html]
57 Marshall, S., President, BP Exploration (Alaska) Inc. Comments to the Joint Alaska
Senate and House Resources Committee. Aug.18, 2006; Malone, R.,. Aug. 7, 2006.
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In addition to these issues, Congress may opt to assess how U.S. pipeline safety
regulation fits together with the nation’s overall strategy to ensure the reliability of
critical energy infrastructure. For example, some assert that the overall social benefit
of new pipeline safety regulations may be limited if certain critical pipeline assets
remain exempt from regulation. Likewise, most observers would argue that
protection of the pipeline assets from accidents or security risks should consistently
reflect their criticality to the nation’s energy supplies. Coordinating pipeline
operation, regulation, and protection necessarily involves many groups: federal
agencies, oil and gas pipeline associations, pipeline operators, and local communities.
Reviewing how these groups work together to achieve common goals could be an
oversight challenge for Congress.
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