Tag Archives: Oil

Alyeska, federal regulators reach settlement on January oil leak

The operator of the trans-Alaska pipeline has reached a settlement with federal regulators, who raised major safety concerns following a January oil leak at Pump Station 1.

Alyeska Pipeline Service Co. signed the settlement, or “consent agreement,” with the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration.

The deal resolves the “notice of proposed safety order” PHMSA issued to Alyeska on Feb. 1, allowing the parties to “avoid further administrative proceedings or litigation,” the consent agreement says.

The consent agreement notes, however, that Alyeska continues to dispute some of the findings in the agency notice.

The seven-page document makes no mention of a fine for Alyeska, but does say the company is subject to daily civil penalties of up to $100,000 per violation if it fails to comply with the agreement, which includes extensive Alyeska work commitments.

The settlement took effect quietly on Aug. 17.

Multiple risk conditions cited
Alyeska is the Anchorage-based consortium that runs the 800-mile oil pipeline on behalf of owners BP, ConocoPhillips, ExxonMobil, Chevron and Koch Industries.

Alyeska’s president, Thomas Barrett, formerly was PHMSA administrator.

PHMSA issued its Feb. 1 notice following an oil leak at Pump Station 1 on Alaska’s North Slope. The leak, discovered Jan. 8 in the basement of a booster pump building, forced two shutdowns of the pipeline, the longest one lasting about 84 hours.

The spill, which resulted in no oil escaping the building, was attributed to internal corrosion in some station piping. The mainline, 48-inch pipe was not involved.

PHMSA said it conducted an investigation of the Pump Station 1 leak and, more broadly, of the “safe operation” of the pipeline system.

“As a result of the investigation, it appears that multiple conditions exist on your pipeline facility that pose a pipeline integrity risk to public safety, property or the environment,” the notice to Alyeska said.

The notice focused on the pipeline’s declining throughput — from a peak of more than 2 million barrels per day in 1988 to an average of about 609,000 barrels in September — and the implications low flow has for pipeline safety, particularly during a winter shutdown.

The agency raised concerns about crude oil cooling down and water freezing inside the pipeline, about potential corrosion in inaccessible piping, and about Alyeska’s “cold restart” procedures and equipment.

PHMSA proposed a laundry list of “corrective measures,” many of which are incorporated in the consent agreement.

Alyeska’s work commitments
Alyeska spokeswoman Katie Pesznecker provided Petroleum News this statement on the consent agreement:

“We are pleased we reached an agreement with PHMSA. We are committed to working with our regulatory agencies to continue to safely operate and maintain the Trans Alaska Pipeline System. Many of the projects in the Consent Agreement are projects that have been underway for some time, including efforts to mitigate the compounding technical challenges related to declining throughput and crude oil temperatures, ongoing modifications to our cold restart plan, and work to identify and isolate or replace certain piping on TAPS. These issues are complicated, and we are engaged in ongoing discussions with our regulators so we can determine the best path to continue to safely maintain and operate TAPS. We believe the simplest solution to mitigate issues related to steadily declining throughput is to get more oil in the pipeline.”

Under the agreement, signed by Mike Joynor, Alyeska’s senior vice president of operations, the company makes numerous work commitments. Among these:

• Alyeska will replace or remove oil piping that can’t be inspected with in-line tools, known as pigs, or some other PHMSA-approved method.

This was a concern in the Pump Station 1 incident, which involved “low-flow, dead-leg” piping installed in the 1970s and encased in concrete.

Alyeska has submitted an evaluation to PHMSA of which piping is to be replaced.

Alyeska will install an additional pig launcher and receiver on the pipeline between pump stations 5 and 10.

PHMSA had questioned Alyeska’s ability to remove inspection or cleaning pigs that might be inside the line at the time of a shutdown. A pig could “cause a plug in the pipeline” in a cold restart scenario, the agency said.

• Alyeska will study the need for increased tank capacity at pump stations as a way to “mitigate the consequences of a cold weather shutdown,” the consent agreement says.

PHMSA had raised concern about the lack of oil storage capacity particularly upstream of Pump Station 1.

Under the consent agreement, Alyeska must develop a plan for oil storage projects, if any, by Dec. 31. Possibilities include bringing existing tanks back into service, the agreement says.

• Alyeska agreed to submit a revised cold restart plan to PHMSA and pre-position certain equipment during winter. The consent agreement says an agency inspector would make a field visit to see that the necessary workers and equipment are ready.

PHMSA said Alyeska, during the January shutdown, had trouble implementing its cold restart procedures — an assertion Alyeska’s Barrett disputed.

Restarting the pipeline after an outage is always a high-stress event, even in the best of conditions.

Maintaining oil temperature

The consent agreement pays considerable attention to the problem of oil temperature.

“Alyeska has proposed several projects which are aimed at maintaining crude oil temperatures on the pipeline at a level that will allow safe cold-weather operations,” the agreement says. “Based on current operational conditions, including crude oil characteristics, Alyeska will develop a plan and timeline for implementation and completion of proposed projects designed to create sufficient time to allow for safe restart or implementation of the Revised Cold Restart Plan, and safe ongoing cold weather operations. The projects will be designed to maintain the crude oil temperatures at or above the minimum allowable temperature … in the event of a prolonged shutdown during cold weather conditions.”

Alyeska was to submit its initial plan and timeline to PHMSA by Oct. 1, the agreement says, adding that approved projects “may not be cancelled solely for financial reasons.”

In an Aug. 1 letter to PHMSA, Alyeska provided its evaluation of the minimum oil temperature needed for safe operation of the pipeline.

As part of a recent low flow study, Alyeska said it conducted modeling, simulation and “actual flow loop testing” to determine the effects of temperature on pipeline system crude.

The study determined that if the oil temperature goes below about 31 degrees Fahrenheit, water entrained in the oil can start to freeze.

“Therefore, Alyeska has accepted the temperature of 31°F as the minimum temperature under flowing conditions for safe operation of the pipeline,” the letter said.

However, the letter added: “Taking into consideration throughput and ambient condition variables, the low flow study recommends the minimum crude oil temperature be maintained at or above 36°F. Alyeska has initiated projects with the primary purpose of maintaining the crude oil temperature at or above 36°F.”

PHMSA, in its Feb. 1 notice, said the minimum pipeline oil temperature recorded at a pump station during the January shutdown, as reported by Alyeska, was 25.7 degrees.

Indian oil pipelines under tight surveillance

INDIA: Oil companies in Kochi have upped their surveillance to monitor the pipelines which pass underground through the city carrying highly inflammable oil products.

Apart from deploying foot patrol teams, the companies have roped in the support of local residents who live near the pipe lines to strengthen the monitoring activities.

“Certain pipe lines are of 12 km long. We don’t reveal the actual route map as it is a matter of national security. Though there are no specific threats to the oil pipelines, we have spruced up surveillance considering the changing security scenario,” said official sources in Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation (IOC).

The sources said that the patrolling teams walk all along the route on shift basis to check for any suspected activities. “We have implemented a system in which the security personnel of the oil companies frequently interact with the residents living adjacent to the pipelines. We will also train them to report suspected activities or incidents which they notice in the area,” the sources said.

The companies have also implemented state-of-the-art systems to monitor the pipe lines from a control room in the refineries. “We have cathodic protection systems and other devices to check the safety of the pipe lines. Any variation in the pressure will be immediately known at the control room,” the sources added.

Kochi City Police Commissioner M R Ajith Kumar said that though the oil companies have their own mechanism to monitor the pipelines, the city police also conduct routine surveillance on its own. “We also undertake round the clock monitoring of the areas through which the pipe lines pass,” the Commissioner said.

SOURCE: http://articles.timesofindia.indiatimes.com/2011-09-17/kochi/30168731_1_pipelines-oil-companies-surveillance

Pipeline Spills Put Safeguards Under Scrutiny

This summer, an Exxon Mobil pipeline carrying oil across Montana burst suddenly, soiling the swollen Yellowstone River with an estimated 42,000 gallons of crude just weeks after a company inspection and federal review had found nothing seriously wrong.

Crews in July picked up booms to contain oil in the Kalamazoo River near Marshall, Mich.

And in the Midwest, a 35-mile stretch of the Kalamazoo River near Marshall, Mich., once teeming with swimmers and boaters, remains closed nearly 14 months after an Enbridge Energy pipeline hemorrhaged 843,000 gallons of oil that will cost more than $500 million to clean up.

While investigators have yet to determine the cause of either accident, the spills have drawn attention to oversight of the 167,000-mile system of hazardous liquid pipelines crisscrossing the nation.

The little-known federal agency charged with monitoring the system and enforcing safety measures — the Pipeline and Hazardous Materials Safety Administration — is chronically short of inspectors and lacks the resources needed to hire more, leaving too much of the regulatory control in the hands of pipeline operators themselves, according to federal reports, an examination of agency data and interviews with safety experts.

They portray an agency that rarely levies fines and is not active enough in policing the aging labyrinth of pipelines, which has suffered thousands of significant hazardous liquid spills over the past two decades.

Transportation Secretary Ray LaHood, who oversees the pipeline agency, acknowledges weaknesses in the program and is asking Congress to pass legislation that would increase penalties for negligent operators and authorize the hiring of additional inspectors. That may be a tough sell in a Congress averse to new spending and stricter regulation.

“We need to know with great certainty that inspections and replacements have been done in a timely way that will prevent these kinds of spills from happening,” he said.

Federal records show that although the pipeline industry reported 25 percent fewer significant incidents from 2001 through 2010 than in the prior decade, the amount of hazardous liquids being spilled, though down, remains substantial. There are still more than 100 significant spills each year — a trend that dates back more than 20 years. And the percentage of dangerous liquids recovered by pipeline operators after a spill has dropped considerably in recent years.

The industry, however, believes the current system works and points with pride to what it considers a record of improvement.

“Data shows that releases from pipelines have declined over the last decade as the result of stringent regulation and the industry’s continued commitment to safety,” wrote Peter Lidiak, pipeline director for the American Petroleum Institute, an industry group, in an e-mailed response.

Throwing more resources and money at the problem may not be the answer for the tiny agency, because there remain deeper concerns about how it works, especially its reluctance to mandate safety improvements or to level meaningful fines for wrongdoing.

Such concerns come at a critical time for the agency. The State Department last month gave a provisional green light to a controversial 1,661-mile pipeline from Canada to Texas, called Keystone XL, that will carry a trickier form of crude — and fall under the agency’s purview. And a just-released National Transportation Safety Board report on a natural gas pipeline explosion in San Bruno, Calif., that last year cost eight people their lives, characterized the agency’s regulatory practices as lax and inadequate. In the report, the safety board urged the Transportation Department to go back and audit many of the pipeline agency’s safety and enforcement policies.

An analysis of federal reports and safety documents by The New York Times suggests that while the agency performs better than it did 10 years ago, it still struggles to safeguard a transport network laced with risks.

For example, the agency requires companies to focus their inspections on only the 44 percent of the nation’s land-based liquid pipelines that could affect high consequence areas — those near population centers or considered environmentally delicate — which leaves thousands of miles of lines loosely regulated and operating essentially on the honor system. Meanwhile, budget limits and attrition have left the agency with 118 inspectors — 17 shy of what federal law authorizes.

Pipeline operators, critics argue, have too much autonomy over their lines, and too much wiggle room when it comes to carrying out important safeguards, like whether to install costly but crucial automated shut-off valves.

“The system as it presently exists, I don’t think it really protects the public,” said Representative Corrine Brown of Florida, the ranking Democrat on the House transportation subcommittee on railroads, pipelines and hazardous materials. “Self-reporting doesn’t work. We need additional rules and regulations to make sure we’re doing what we’re supposed to be doing to protect communities.”

She and other lawmakers want Congress and the Obama administration to bolster rules, hire more inspectors and reinvest in the pipeline infrastructure, much of which was laid from the 1950s to the 1970s.
New Project, New Risks

The Keystone XL project is different from most other pipelines in that it will carry a gritty mixture that includes bitumen, a crude drawn from Canadian oil sands that environmentalists argue is more corrosive and difficult to clean when spilled. In its report, the State Department cited 57 special conditions designed to keep the Keystone pipeline safe and wrote that it would have little environmental impact if operated according to regulations.

The National Wildlife Federation and other environmental groups assailed that conclusion, saying the State Department had not sufficiently accounted for the impacts of a major spill. More than 1,200 people were arrested during two weeks of protests against Keystone XL outside the White House this summer.

Richard Kuprewicz, a former pipeline engineer for the oil company Arco who serves on an advisory committee to the pipeline agency, said the current regulatory system was not fully prepared to monitor a project like Keystone XL, given the number of leaks the agency already contends with.

“We’re seeing too many ruptures,” Mr. Kuprewicz said. “The numbers are too high.”

Since 1990, more than 5,600 incidents were reported involving land-based hazardous liquid pipelines, releasing a total of more than 110 million gallons of mostly crude and petroleum products, according to analysis of federal data. The pipeline safety agency considered more than half — at least 100 spills each year — to be “significant,” meaning they caused a fire, serious injury or fatality or released at least 2,100 gallons, among other factors.

Pipeline operators reported recovering less than half of all hazardous liquids spilled over the last two decades, according to federal records. And the ratio is not improving: after recovering more than 60 percent of liquids spilled in 2005 and 2006, operators recovered less than a third between 2007 and 2010.

Nearly half of all incidents since 2002 arose from malfunctioning equipment, construction flaws and other technical problems with pipelines. Corrosion, which the agency considers to be different from equipment failure, is the second leading cause, and to blame nearly one-quarter of the time.

In written testimony to Congress after the Yellowstone spill, Cynthia L. Quarterman, the pipeline agency’s top official, emphasized oversight upgrades like increased money for state safety agencies and more extensive training for agency employees. She also noted a decline in significant incidents.

Yet a recent report by the Congressional Research Service, while acknowledging progress, also outlined problems, noting that “recent pipeline incidents suggest there continues to be room for improvement.”

The report said the pipeline agency was hampered by a chronic inspector shortage. Fifteen states are certified to perform their own liquid pipeline inspections, but budget problems within state agencies are also a matter of “great concern,” it said.

The National Transportation Safety Board report on San Bruno said the pipeline agency’s monitoring of state oversight programs and its own enforcement program had been “weak.”

And when something goes wrong, very little happens in the way of penalties, The Times found. For every five significant incidents reported at a hazardous liquid pipeline between 2002 and 2010, the agency issued one fine. (The article continues…)

Read More & SOURCE: http://www.nytimes.com/2011/09/10/business/energy-environment/agency-struggles-to-safeguard-pipeline-system.html?pagewanted=1&_r=2&adxnnlx=1315832412-RHYGj9x6NYkG9hdY/N9NnQ

Third North Slope oil spill in a week

Small oil spills on the North Slope are continuing to keep BP Alaska crews and state environmental officials busy this summer.

The company has had to deal with three small spills in just the last week, events that appear to be related to maintenance and testing activities.

BP Exploration Alaska spokesman Steve Rinehart said Monday all three are still under investigation by company experts so it’s not clear whether corrosion — a major issue for the aging oil field — is to blame.

But summer is typically the time oil field maintenance and associated testing of facilities is at its height. “It’s a big busy season and while we don’t know the exact mechanism or cause of these three events, they happened at a time when pressures are going up and coming down,” Rinehart said. “And we’re in the middle of maintenance.”

On July 16, an underground section of pipe ruptured at the Lisburne field, dumping as many as 100 barrels of fluid — mostly methanol and water and a small amount of crude — onto a gravel pad and into a nearly tundra pond. The leak occurred while work crews were testing newly installed valves in that area.

Then on Thursday, July 21, BP discovered a new spill, this one in a flare pit at Flow Station 2 in the Prudhoe Bay unit. BP and state Department of Environmental Conservation officials said about 200 gallons of fluid — a mix of briny water, gas and crude oil — spilled into the flare pit at the production facility, creating an oil ring around the pit.

Rinehart said the oil is being cleaned up. “It was a minor event and there will be virtually no environmental impact,” he said, noting that the flare pit is designed as a place to burn oil and gas mixtures.

Flow Station 2 has been shut down while BP technicians look into what caused the leak. Rinehart said the company doesn’t anticipate any major problems due to the shutdown of the facility, which is where oil is separated from gas and water before the crude is sent to another processing facility before shipment down the trans-Alaska pipeline.

Also on Saturday, BP workers found another leak, this one less than a barrel in size, coming from a flow line called N-74 next to the N Pad. Rinehart said the spill was discovered while crews were testing an emergency shutdown system at the pad. The line was not in service at the time.

Again, Rinehart said, the company still isn’t know what caused the leak.

But corrosion is a serious issue on the North Slope and BP as well as other oil field operators spend tens of millions of dollars a year on maintenance and repair programs aimed at fighting the problem in facilities that are more than 30 years old. There are hundreds of miles of pipeline on the North Slope and thousands of valves and other pieces of equipment subject to corrosion.

Last year, after a years-long examination of oil spill records and reports, DEC officials found that flow lines in particular are susceptible to corrosion because the material they carry — the mix of water, gas and oil — is especially corrosive.

BP, in part due to major corrosion-related leaks in 2006 at Prudhoe Bay, has substantially beefed up its corrosion detection, maintenance and repair program. The 200,000-gallon spill prompted criminal charges against the company and lawsuits by the state and federal governments. In May, BP and the federal government reached a settlement of that case in which BP, in addition to steps it had already taken, agreed to independent monitoring of its facilities and to research new leak detection systems.

SOURCE: http://www.alaskadispatch.com/article/third-north-slope-oil-spill-week

Oil spill brings calls for scrutiny of small lines

HELENA, Mont. (AP) — A northwestern Montana oil spill that went unreported for a month has led to calls for increased scrutiny over the thousands of small flow pipelines within the nation’s oil and gas fields.

Flow lines are completely contained within the fields and pipe unprocessed oil, gas and water from wells to holding tanks and separating facilities and aren’t regulated like larger pipelines, such as the one that broke under the Yellowstone River earlier this month.

But flow lines often face the same issues of corrosion and defects, and should fall under the same federal regulation as larger transmission pipelines, conservation advocates say.

“They’re unregulated lines and they periodically have nasty spills,” said Lois Epstein, engineer and Arctic program director for The Wilderness Society in Alaska. “It’s a problem. Whether there is any motivation to do anything about it, is where we’re at right now.”

The broken line at the Cut Bank oil field on the Blackfeet Indian Reservation 50 miles east of Glacier National Park may have been slowly leaking oil for up to two weeks before FX Energy Inc. discovered it on June 12. FX Energy officials attributed the break to shifting ground during last month’s heavy rain and flooding.

The Salt Lake City-based company fixed the break and shut down the two small oil wells that fed the line, but never reported it to the tribe or the Bureau of Land Management, which oversees the tribe’s mineral leases.

The spill — estimated to be up to 840 gallons — then spread nearly a mile down a steep coulee and into the Cut Bank Creek before a neighboring landowner discovered the stained ground on July 12.

A cleanup crew has been digging oil by hand from the steep, treacherous ravine for more than a week. There have been no signs of wildlife affected by the spill.

The company is paying for the cleanup and has pledged to permanently plug the wells that fed the broken line. Grinnell Day Chief, the tribe’s oil and gas director, said the company has been very cooperative.

FX Energy is one of the largest of the 15 oil and gas companies with production or exploration leases on the Cut Bank field. Combined with its five wells at Bears Den field and a small interest in two wells at Rattlers Butte field, FX Energy leases a total of 10,732 acres in Montana and produces 184 barrels of oil per day.

The broken flow line is one of many that gather oil from FX Energy’s 125 wells on the declining field, which has been producing oil since the 1940s. Many of the 4-inch flow lines are 40 or 50 years old, said Don Judice, the BLM’s Great Falls supervisor.

Because the failed line only carried unprocessed oil from wells to a central tank and never left the oil field, there were no requirements to inspect it, test it for corrosion or perform any preventative maintenance to ensure it doesn’t break.

“Only when a pipeline is used for longer-range transportation does it get more scrutiny,” Judice said. “There’s not a requirement within the regulations for the testing of flow lines.”

But depending on the outcome of an investigation into the recently discovered spill, federal officials may require FX Energy to upgrade all of the aging flow lines that carry oil from the wells to tanks on the Cut Bank field, Judice said.

It was not immediately clear how many flow lines there are, since the lines generally gather oil from more than one well. Judice and Day Chief each said they recalled only one other significant spill from a flow line in the past decade.

Day Chief said another oil company that leases a different part of the sprawling field is already in the process of voluntarily upgrading all of its flow lines. He said the tribe hasn’t discussed recommending a similar remedy for the FX Energy itself, but would support the BLM if it required FX Energy to do so.

“We would back that 100 percent,” Day Chief said.

SOURCE – and to Read more: http://www.timesunion.com/news/article/Oil-spill-brings-calls-for-scrutiny-of-small-lines-1567351.php#ixzz1T7KnbGlW

Montana governor reviewing oil, gas pipeline safety

Earlier this week Montana Governor Brian Schweitzer  said authorities will review safety of all oil and gas pipelines that cross waterways in the state and close those that did not meet standards.

“We’ll make the decision over the next couple of days whether to shut off some pipelines,” Schweitzer told Reuters in a telephone interview. “The last thing I want is for another pipeline to break.”

Schweitzer said he made the move after a spill early Saturday from an Exxon Mobil pipeline released into the rain-swollen Yellowstone River near Billings up to 1,000 barrels of oil, or 42,000 gallons.

Schweitzer said the pipeline inspections — the second round he has called for in as many months — will assess the risk of ruptures and leaks in 88 sections of pipeline that cross rivers and streams in the state.

The review will gauge factors including the pipelines’ age, thickness and corrosion, and the condition and operation of all shut-off valves.

Exxon Mobil Corp (XOM.N) said on Monday that the spill appeared to be concentrated within a 15-mile stretch of the river between Billings and the nearby town of Laurel, although Tim Thennis, Montana Disaster and Emergency Services duty officer, said he had received reports of oil near the community of Hysham, about 75 miles downstream from Billings.

Gary Pruessing, the president of the company’s pipeline unit, said Exxon still did not know the cause of the leak that spilled oil into the river and added that it may change the way it conducts pipeline safety reviews.

“This will give us additional information to think about when we consider doing risk assessments on any line that has a river crossing anywhere in the country,” Pruessing said during a news conference in Laurel, Montana.

By Monday afternoon, Exxon had received 71 calls from nearby residents asking questions or reporting damage from the spill.


The spill came just weeks after the company shut down the pipeline in May after the city of Laurel had safety concerns due to the rising levels of the river from rain and runoff.

“At the time we shut down the line … and went down and did a further risk assessment to make sure the site, based on technical knowledge we had, was something we’d feel comfortable to run,” Pruessing said. “We restarted the line feeling like we had a safe operation.”

The U.S. pipeline safety regulator weighed in on the spill on Monday, saying it had warned the company about problems with the pipeline and had begun its own investigation.

“Inspectors are on site and have initiated an investigation into the cause of failure,” said a spokeswoman with the Transportation Department’s Pipeline and Hazardous Materials Safety Administration.

After inspecting the pipeline in July 2009, PHMSA issued a warning letter to Exxon a year later about oil leaking from some of the valves on the pipeline.

The agency said the valves did not have a means for clearly indicating whether they were open or closed. “There was fresh crude oil on the soil immediately adjacent to the valves,” PHMSA said in its warning letter.

It also faulted Exxon for not following up in a timely manner on atmospheric corrosion issues that were identified during three years of corrosion surveys on the pipeline.


As Exxon fielded a team of 200 workers to mop up oil using absorbent booms and pads, the first reports on Monday came in of a resident downstream on the Yellowstone River sickened by the spill.

Mike Scott, co-owner of a goat ranch inundated by the rupture, said his wife, Alexis Bonogofsky, was briefly hospitalized Monday after suffering from what doctors diagnosed as acute hydrocarbon exposure, a condition linked to exposure to petroleum chemicals.

“She started getting shortness of breath, dizziness; we took her to the hospital and they took an X-ray,” said Scott, who also works for the Sierra Club, an environmental group.

Medical staff declined to discuss the diagnosis, citing patient confidentiality.

The Yellowstone River, the longest undammed river in the United States, is renowned for its trout fishing and bird life.

A team of six experts from International Bird Rescue began arriving in Montana on Sunday to work with state and federal wildlife agencies to coordinate the rescue and rehabilitation of birds tarred by the spill.

“There is definitely concern, there is a wonderful riparian habitat there,” said Amy Cilimburg of the Montana Audubon Society.

BP Ducks Investor Suit for Prudhoe Bay Spill

(CN) – The 9th Circuit on Wednesday dismissed a securities-fraud complaint against BP Exploration related to the oil company’s 2007 conviction for negligently discharging oil into Alaska’s Prudhoe Bay.

This decision from the federal appeals court in Seattle unanimously reverses a federal judge’s finding that BP’s contractual filings with the U.S. Securities and Exchange Commission laid adequate foundation for securities fraud.

BP Exploration pleaded guilty in 2007 to violating the Clean Water Act after some 200,000 gallons of oil befouled Prudhoe Bay on Alaska’s North Slope. The company admitted that the spill resulted from internal corrosion in its pipelines. In its plea agreement, BP said it knew about accumulated sediment had caused the corrosion, but it had neglected to fix the problem.

Claude Reese led a federal class action, claiming that BP’s negligence amounted to securities fraud, as the spill had caused the company to temporarily shut down its operations in the bay and costing investors billions of dollars.

Despite knowledge of the corrosion, BP failed to take action or notify investors, Reese argued. He also claimed that the oil company’s executives had made misleading statements about the operation, and that BP continued to mislead investors though its SEC filings.

U.S. District Judge Marsha Pechman in Seattle tossed most of Reese’s claims for failure to meet the heightened standards of the Private Securities Litigation Reform Act of 1995. But the judge said Reese could move ahead with the claim that accused BP of defrauding investors through SEC filings.

On appeal, a three-judge panel of the 9th Circuit reversed, finding that the filings were forward-looking contractual promises, the breaking of which did not amount to fraud.

“The breach of a contractual promise of future performance typically does not constitute a misrepresentation that will support an action for fraud,” Judge Ronald Gould wrote for the panel. “BPXA’s contractual promise to act as a prudent operator did not expressly or implicitly assert that BPXA was in full compliance with its obligations thereunder, and we do not view the public filing of the ORC Agreement as the sort of traditional fraudulent misrepresentation of fact that could induce investors mistakenly to buy securities. We hold that, in this case, the public filing of a contract containing a promise of future compliance did not, upon the contract’s breach at a time after execution, provide an actionable misrepresentation for the purposes of a private damages action for securities fraud.

SOURCE: http://www.courthousenews.com/2011/06/29/37791.htm

Regulators Concerned About Canadian Oil Corroding U.S. Pipelines

U.S. regulators express concern that diluted bitumen from Canadian oil sands may be corrosive to pipelines and risk should be assessed.

The United States is benefiting greatly from the Canadian oil sands, providing abundant fuel from a friendly neighbor to the north, thus reducing dependence on foreign oil from nations with a less-friendly attitude toward the U.S.  One would assume that U.S. regulators would be happy to get their oil from Canada, but not so fast.  Apparently U.S. lawmakers are expressing concern that the diluted bitumen derived from Canadian oil sands may be corroding U.S. oil pipelines.

U.S. Congressman Henry Waxman, the leading Democrat on the House of Representatives’ Energy and Commerce Committee, is worried that regulatory oversight isn’t keeping up with an increasing amount of diluted bitumen being transported via U.S. pipelines. “I’m concerned that the industry is changing, but the safety regulations are not keeping up with the changes,” he said at an Energy and Commerce subcommittee hearing. “That could be a recipe for disaster down the road.”

Anthony Swift of the Natural Resources Defense Council said at the hearing, “It is in the public’s best interest for our pipeline safety for regulators to evaluate the risks that high volumes of heavy, corrosive and abrasive crudes, such as diluted bitumen, will have on the U.S. pipeline.”

A number of pipeline accidents in the U.S. Midwest have some questioning whether diluted bitumen may be to blame. TransCanada’s existing Keystone pipeline leaked 10 barrels of oil, due to a faulty fitting at a Kansas pump station last month. That accident followed a 500-barrel spill at a pump station in North Dakota in early May.

The committee last month passed a bill requiring the Pipeline and Hazardous Materials Safety Administration to study the impact of diluted bitumen on U.S. pipelines.

Even Republicans think the issue should be investigated. “I think it is something we need to look into,” said Republican Representative Joe Barton.

However, President of the Association of Oil Pipelines Andrew Black disputes any claims that diluted bitumen is contributing to pipeline corrosion, saying, “Diluted bitumen has been moved through pipelines for many years.”

At any rate, what harm could come from assessing the risks?  If there’s no problem, then we continue to take advantage of Canadian oil.  If there is a corrosion problem, we invest in pipeline infrastructure to reduce corrosion.  It would be nonsensical to risk losing the pipelines, which cost billions to construct, simply because we didn’t take action early on.

SOURCE: http://oilprice.com/Energy/Energy-General/Regulators-Concerned-About-Canadian-Oil-Corroding-U.S.-Pipelines.html

Rainbow Pipeline outage extended to end of June

Plains Midstream continues integrity work on oil line in northern Alberta

Follow-up article from a recent MATCOR Blog Posting: A pipeline which caused the largest oil spill in Alberta since the 1980s likely will remain out of service until the end of June, said operator Plains All American Pipeline.

The parent of operator Plains Midstream Canada said Thursday dig operations to check pipeline integrity along the northern portion of the 187,000 barrel per day line Rainbow pipeline will continue until at least the end of the month.

The line, which runs from Zama to Edmonton, has been shut down since rupturing late April near Little Buffalo in northwestern Alberta. At least 28,000 barrels of crude were spilled into boggy muskeg, flowing to a beaver pond where it was contained.

The rupture was caused by soil settlement after a maintenance program that allowed a section of the pipeline sag, according to initial reports. Plains was ordered by the Alberta Energy Conservation Board to check along the entire portion of Rainbow’s 20-inch line, from Zama to Nipisi in north-central Alberta, as part of the restart plan. The extended program came after the operator found a crack on a weld seam approximately 25 kilometres south of the original break.

“We asked them to do two dig programs and we are waiting for the results of the programs,” said Kim Blanchette, spokeswoman with the ERCB on Thursday.

After the April 29 spill, Plains identified five areas that has similar maintenance to the failure site, Blanchette said. The discovery of a crack downstream of those areas prompted the regulatory to call for a second, random dig program.

Plains said its digs were going slowly due to the remote locations of the sites, as well as the forest fire threat and bad weather.

“We are working to complete the remaining digs by the end of June,” the company said in an e-mail. It said it did not have a firm timeline for the restart of the line.

Plains said it expects repair and remediation costs of the Rainbow pipeline to range from $64 million US to $75 million US, with insurance covering the bulk of the expense.

Also on Thursday, the Houston-based company said it expected to “meet or exceed the high end” of its second quarter guidance for adjusted earnings of $290 million US to $320 million US

Operations on Rainbow’s 24-inch line from Nipisi to Edmonton started soon after the spill was detected, then interrupted for 10 days after forest fires caused power failures in the region.

The outage of the pipeline’s southern leg prevented delivery of about 150,000 barrels a day of heavy crude to the Edmonton, Alberta, refining and pipeline hub.

The northern section of Rainbow, which was built in the 1960s, carries mostly conventional crude from northern Alberta fields. It was moving about 75,000 barrels a day at the time of the rupture.

In May Enbridge Inc. also reported a major leak on its Norman Wells oil pipeline, which feeds directly into the Rainbow line. The spill, in a remote location of the Northwest Territories, could be as large as 1,500 barrels, Enbridge recently disclosed.

The 39,400 barrel per day line flows oil from Imperial Oil’s processing facility in Norman Well, NWT to Zama. Imperial had to reduce production on the Rainbow outage. When the Enbridge line started flowing again at reduced capacity, the company was able to add some barrels to the pipeline.

“That’s helping but it’s not resolving the situation for us,” said Imperial spokesman Jon Harding. “It is status quo.”

Imperial has been storing production at Norman Wells, increasing storage capacity by re-certifying tankage left over from the sites days as a refinery, Harding said. Other volumes are flowing to Zama, where it is being trucked to market.

The outages have had minimal impact on cash crude prices, traders said, but come at a time when several ruptures and leaks in pipelines carrying Canadian oil have raised questions about reliability and safety.

Since the Rainbow spill, TransCanada Corp. suffered two leaks and outages on its 591,000 barrel a day Keystone pipeline to Oklahoma from Alberta due two faulty equipment in pump stations.

SOURCE: http://www.calgaryherald.com/news/Rainbow+Pipeline+outage+extended+June/4920080/story.html#ixzz1OsZyujf1

TransCanada reopens Keystone oil pipeline

There were no concerns about the integrity of the 1,300-mile Keystone oil  pipeline following a May 29 spill in Kansas, the U.S. government said.

Canadian pipeline company TransCanada restarted the Keystone oil pipeline  during the weekend. The Department of Transportation’s Pipeline and Hazardous  Materials Safety Administration issued a corrective action prohibiting a restart  last week but reconsidered in time for a Sunday restart.

Julia Valentine, a spokeswoman for the PHMSA, was quoted by The Wall Street  Journal as saying there weren’t any concerns about the integrity of  Keystone.

“Every pipeline incident is unique,” she said. “In this case, the failure did  not raise concerns for the integrity of the pipeline.”

Keystone transits around 591,000 barrels of oil per day from Alberta, Canada.  A May 29 leak in Kansas spilled about 10 barrels of oil. There were 11 separate  spills on the pipeline recently though the company said all were relatively  minor.

TransCanada is pushing for a $13.3 billion extension to the pipeline. The  project is scrutinized by regulators and environmentalists who worry about the  potential for spills and uncertainty about the safety of transiting oil from tar  sands in Canada.

SOURCE: http://www.upi.com/Business_News/Energy-Resources/2011/06/06/TransCanada-reopens-Keystone-oil-pipeline/UPI-85081307364816/#ixzz1OaJxzzrS