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Internal memo says Alyeska seeks to cut maintenance costs

Posted: Wednesday, June 12, 2002

FAIRBANKS (AP) -- Owners of the trans-Alaska oil pipeline last month asked their operating company to try to complete maintenance work this year while spending only 90 percent of the money budgeted, according to an internal letter obtained by the Fairbanks Daily News-Miner.

The letter illustrates the major oil companies' interest in keeping pipeline costs down, a goal that benefits not only the owners but also the state of Alaska, according to a spokesman for Alyeska Pipeline Service Company. Alyeska operates the 800-mile line for the oil companies.

But a longtime pipeline critic said the request shows that the oil companies are trying to reduce costs when they should be spending more money on the aging line.

The letter was faxed to the News-Miner Washington bureau Monday evening. It arrived as environmental groups and Alyeska are meeting with policy-makers in the capital to discuss renewal of the right-of-way permit for the pipeline.

An environmental impact statement on the renewal, which may outline changes that government agencies think ought to be made in the pipeline's operation, is due out in November.

The May 6, 2002, letter was written by Al Bolea, chairman of the TAPS Owners Committee, to David Wight, president of Alyeska. The owners group includes BP Exploration (Alaska) Inc., where Bolea works as president of the pipeline division, as well as Exxon Mobil, Phillips Alaska Petroleum Co., and Williams Alaska Petroleum.

Bolea said Alyeska needs to become more efficient.

''We encourage Alyeska to set a stretch objective of completing the proposed programs at 90 percent of funding,'' Bolea wrote. ''We would like to emphasize that we are looking for the efficiency of overall spending, rather than changes in the scope of work.''

Mike Heatwole, spokesman for Alyeska, said the letter reflects nothing more than the desire of the owners, like the owners of any company, to keep costs down. That effort benefits not just the companies but also Alaska state government's treasury, he noted. The cost of transporting oil to market via the pipeline and tankers is deducted from the value of the oil before state taxes and royalties are calculated.

''Every dollar that we can save as an operation is worth 25 cents to the state of Alaska,'' Heatwole said. ''The pipeline is one aspect of Alaska's energy delivery system and anything we can do to be cost-conscious and get efficiency is beneficial to us, to the state and to the owner companies.''

The request from the owner companies to keep costs to 90 percent of what has been budgeted is a general goal, not a hard order, which is why it was called a ''stretch objective,'' Heatwole said.

Longtime Alyeska critic Richard Fineberg of Ester said the letter's contents appear to confirm what some environmental organizations have alleged -- that owner pressures are pushing Alyeska to cut too many corners on pipeline maintenance.

Alyeska will spend roughly $200 million on maintenance this year, one of the highest yearly totals since the pipeline was finished in 1977.



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