Pipeline Operator Aims for Reform

Alaskan firm is undergoing corporate change of heart after difficult year, damaging audit

NO systematic maintenance, despite almost nonstop operations since 1977. No as-built diagrams, forcing workers to rely on 1970s construction documents or memories. A risk of ruptures or collapses that could cause crude oil to spill in the Alaska wilderness.

Such is the state of the Trans Alaska Pipeline System, which delivers one-quarter of all domestic oil, according to a new Bureau of Land Management (BLM) audit.

At fault are Alyeska Pipeline Service Company, operator of the pipeline and its Valdez terminal, majority owners British Petroleum (BP), Atlantic Richfield (Arco), and Exxon, with 90-plus percent control, and minority owners Unocal, Phillips Petroleum, Mobil, and Amerada Hess.

``I am outraged, but unfortunately not surprised by the findings,'' BLM director Jim Baca said in a statement accompanying the November report.

The audit, done for BLM by the Kansas firm Owen Thero, found 19 of 37 substantiated whistle-blower allegations against Alyeska, fake quality-inspection plans to mislead regulators, and poor earthquake protections.

But to some, the real surprise was the agency that revealed the problems: the BLM. It controls the pipeline corridor and can enforce an agreement allowing Alyeska to operate. If its terms aren't met - which Mr. Baca says the audit proves has happened - the BLM can put profits in an escrow account and can shut the pipeline down for environmental or safety violations.

Until now, the BLM hasn't used its powers, says Valdez boat operator Stan Stephens, president of a citizens council overseeing Alyeska. ``They had people in the field that would look ... at the record-keeping of Alyeska and then sign off on it,'' says Mr. Stephens, the target of a possibly illegal spying operation Alyeska launched after the 1989 Exxon Valdez oil spill.

The Thero audit is the starting point for many of Baca's promised reforms. By Jan. 7, regulators expect to issue a plan for Alyeska, BLM spokesman Jeff Zabler says. By early summer, the BLM and other regulators expect to hire contractors to make physical corrections, such as lifting sagging pipeline.

Changing the corporate culture may take a year, says Mr. Zabler. ``What we really need is clear leadership among the owner companies.'' The BLM may seek regulatory authority to fine Alyeska or its owners for violations, he says.

Before the Thero report came out, Baca had announced reforms. The BLM, a member of the interagency Joint Pipeline Office overseeing Alyeska, plans some 10 annual audits - compared with six in the past three years. Baca has ordered that five more BLM pipeline inspectors be hired, doubling this staff. Last summer, a hotline for complaints was set up.

Why do these moves come 16 years into the pipeline's life? ``The only thing that we can say is that on our watch, this is how things will happen,'' Baca aide Steve Richardson says.

Meanwhile, the Environmental Protection Agency (EPA) plans to issue rules in April to mandate hydrocarbon-vapor recovery at the Valdez terminal, officials say.

For years, the terminal has been the nation's top producer of volatile organic compound air pollution, emitting some 43,000 tons annually, including 450 tons of cancer-linked benzene. That gives the Valdez area one-tenth Los Angeles's pollution, state environmental regulators say.

The pollution streams into the air as tankers are loaded. It has been legal, but 1990 Clean Air Act amendments allow the EPA to issue regulations mandating vapor recovery at terminals.

For three years, Alyeska fought such rules, saying the pollution was too inconsequential to justify building a $120 million recovery system. The firm said vapors blow away from town, posing no risk.

But in November, Alyeska said it ``is committed to improving air quality in Valdez and is actively evaluating implementation of technical solutions for tanker vapor control at the Valdez marine terminal.''

The promise of new technologies for recycling vapors contributed to the corporate change of heart, says Norman Ingram, Alyeska's vapor-control program manager. ``I think this is rather a fresh look at a situation,'' he says.

The last year has been a period of reckoning for Alyeska. Exxon spill damages were blamed, in part, on Alyeska's failure to respond immediately to the tanker grounding as required by law. Last summer, Alyeska agreed to pay $98 million to fishermen, native Americans, and thousands of other plaintiffs to settle civil claims.

BATTERED by bad publicity, the firm in 1990 hired Florida-based Wackenhut Corporation, a private investigator, to find information sources about Alyeska's environmental practices - which were being revealed by whistleblowers to regulators and reporters. The result was a 1991 congressional probe, lawsuits, and publicity.

Last month, Alyeska settled claims filed by Charles Hamel, a Virginia oil broker who has spent years uncovering Alyeska violations, and six Alaskans. Settlement terms included a requirement that Alyeska hire an officer to hear complaints.

Periodic controversies over pollution, pipeline corrosion, and alleged persecution of whistleblowers have sparked regulators' pledges of better enforcement and congressional probes, most recently by the House Energy and Commerce Oversight and Investigations Subcommittee.

Alyeska installed a new president, David Pritchard, last summer and made other management changes. Mr. Pritchard replaced James Hermiller, who was appointed in a post-Exxon Valdez reform movement. But his tenure was clouded by the spying operation.

In September, Alyeska announced hiring a consultant for a $6 million audit due in mid-1994. Results from another Alyeska study showed some 3,000 electrical-code violations at the Valdez terminal. They have been repaired, Alyeska says; Pritchard told the subcommittee that $10 million to $15 million in electrical-system repairs were needed.

Alyeska has launched repairs and upgrades of valve systems, repositioned some sagging pipeline, and will overhaul its communications, officials say.

``Alyeska and the government have the same objectives,'' Pritchard said when the BLM audit was released. ``We both will accept nothing less than the pipeline operating in a safe and environmentally sound manner as it has in the past.''

Owner firms have also pledged reform. BP, Arco, and Exxon promised the subcommittee that they would take a more active role in Alyeska operations.

But Stephens wants Congress to reorganize Alyeska. ``It's impossible to manage it the way it's set up. It's owned by seven major oil companies, and none of them will take responsibility,'' he says.

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