Meet Alaska's corrosion cops
When oil spilled from corrosion-weakened Prudhoe Bay field pipelines in 2006 then-Gov. Frank Murkowski vowed quick and tough action on what were widely viewed as lapses in industry maintenance of facilities vital to the state’s treasury and economy.
In the heat of the moment, Murkowski ordered aggressive state inspections of field pipelines and production facilities not covered by federal pipeline regulators.
Alaska would become the first oil-producing state to introduce comprehensive government inspection and regulation of “upstream” production facilities.
The new inspection bureaucracy Murkowski contemplated sent shivers through industry managers. There were visions of state inspectors crawling through processing plants and offshore platforms writing tickets.
Two and a half years later, there’s a different ending to this story. BP has largely completed a reconstruction of its damaged Prudhoe Bay pipelines and has done a major overhaul of internal quality management procedures.
Murkowski’s vision of state inspectors playing tough cop has been softened into a more pragmatic and effective approach.
That has largely been the work of Gov. Sarah Palin and Natural Resources Commissioner Tom Irwin, who have reputations for being tough on the industry.
In this case, though, Palin and Irwin quickly ordered the scaling down of Murkowski’s plans for the large inspection organization just after the new administration took shape in early 2007. BP’s efforts to repair its pipelines were well underway, Prudhoe Bay had resumed full production, and the political furor had died down. The new administration’s approach was more level-headed.
Alaska Division of Oil and Gas Director Kevin Banks was put in charge of the new, streamlined Petroleum Systems Integrity Office, or PSIO. The division is part of the Department of Natural Resources. DNR has the responsibility of managing state-owned lands and oil and gas leases, and has broad legal authority to protect the state’s interests and the integrity of facilities that produce state-owned resources.
Banks made it clear from the outset that his mission was to cooperate with industry in encouraging good maintenance and management practices, to get people to start working together and sharing “lessons learned,” and to play tough cop only as a last resort.
With these marching orders, Allison Iversen, the Petroleum Systems Integrity Office’s coordinator, says the core missions of the new PSIO are first, “to break people out of their silos” to share information, starting with state agencies; and, secondly, to educate other agencies on the benefits of quality management programs.
“The end goal is efficient and effective oversight of the petroleum industry,” she said.
Iversen is an attorney by training, and was deputy state director of the Joint Pipeline Office before coming to head the PSIO. She has recruited two veterans to help her, Dan Rice and Michael Engblom-Bradley. Rice is a veteran engineer with years of experience at the Joint Pipeline Office and the state Department of Transportation.
Engblom-Bradley was with Alyeska Pipeline Service Co. and was in charge of Trans-Alaska Pipeline System quality management programs. He joined the PSIO last February. The agency is about to add two more engineers and two natural resources specialists, Iversen said.
The PSIO’s task is complicated because the industry is already regulated heavily by several agencies and a significant problem is that there is often little coordination or communication between agencies. There are gaps in oversight as well as overlaps.
Pipelines, loading terminals and tankers have long been subject to federal and state regulation, and producing wells, in Alaska and other states, are inspected by state agencies like the Alaska Oil and Gas Conservation Commission. But field pipelines and oil and gas processing facilities have largely been left to industry, although the state fire marshall and the Departments of Labor and Environmental Conservation have oversight in certain areas.
Following the 2006 Prudhoe Bay spills, federal pipeline safety agencies extended their authority to in-field crude oil pipelines, like the ones that spilled oil, but no agency had overall responsibility for the networks of flow lines and major field processing plants.
That was the problem with the Prudhoe Bay field pipelines. The allegation, still in dispute, was that BP and ARCO Alaska, which previously operated the eastern side of the field, had trimmed maintenance spending when oil prices collapsed in the late 1990s.
Because there was a gap in regulatory oversight, there was no government agency looking over the companies’ shoulders to make sure the maintenance was being done.
Problems still occur. A recent rupture of gas in a gas-lift line in the Prudhoe Bay field caught BP and the state by surprise. It was apparently caused by external corrosion and it required two production pads to be shut down while BP made repairs and did inspections.
Meanwhile, the development of the PSIO is taken in measured steps.
“You have to earn the respect of people with something like this. You don’t just issue press releases and blindside people,” Iversen said.
The first objective is a comprehensive gap analysis now underway. Rice has done a paper study of gaps in authority among agencies, but a request for proposals has just been issued for a consultant to do a more comprehensive analysis of how different state agencies are actually using their authority.
“Most agencies have broad authority but they are all constrained by budgets and personnel,” Iversen said.
The goal is to see if it’s possible for agencies to coordinate and communicate better to provide cost-effective oversight, she said.
“We hope to have this completed in six months, but because we’re working with many other agencies we’re also dependent on their timelines,” Iversen said.
One simple idea, although it’s expensive, would be to have a state office in Deadhorse, near Prudhoe Bay, for all agencies to share. Working in the same office would facilitate communication.
Another PSIO objective is to encourage the use of quality management systems not only in industry but also by the state. The agency sponsored a major conference on quality management in Anchorage Dec. 9 and 10, which included industry but was also aimed at state agencies. The conference featured experts in the field both from the public and private sector.
“Our goal is to have state personnel get a better understanding of what quality management is. Most people in the agencies do not use quality management principles,” Engblom-Bradley said.
Even veteran industry managers often lack a clear understanding of what quality management really is, he said.
“Too often, people think it’s just making sure the machinery is being oiled properly,” he said. “It’s much broader than that. It’s really about leadership to ensure productivity, safety and protection of the environment. Without a good management system those things don’t happen.”
Dan Rice said PSIO won’t demand companies use uniform quality management systems, but just that they have one and that it is followed.
Meanwhile, the Department of Environmental Conservation has a separate, but related, initiative underway. It is a major petroleum infrastructure risk-assessment project.
Iversen said the two efforts are intended to complement each other because DEC shares certain types of regulatory authority with DNR over producing oil fields.
“Until we fully understand where the highest risks to the state are, we can’t know which gaps to fill or overlaps to delete,” Iversen said. “The PSIO needs the risk assessment to determine what next steps are appropriate once we identify the gaps and overlaps.”
When it is complete, DEC’s risk assessment may be the largest and most comprehensive of its kind in the world. Risk assessments have been done for major parts of the state’s petroleum industry - the Trans-Alaska Pipeline System, for example - but there has never been anything that covers such a large geographic area or so many complex systems.
Doyon-Emerald, a consulting company, was retained by DEC to do the study, said Ira Rosen, DEC’s manager for the project. An initial phase involving consultations with industry, agency and public stakeholders is complete and the contractor is now in phase two, developing a method to actually do the analysis, Rosen said. The methodology will be reviewed with stakeholders when it is complete.
The final phase is obtaining information and development of the model to be used. The end result will be a risk profile of all of the petroleum production and transportation systems in the state, from the North Slope to Cook Inlet, Rosen said.