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Alyeska Pipeline lease renewal work begins

Posted: Sunday, July 29, 2001

ANCHORAGE (AP) -- The companies that own the trans-Alaska oil pipeline are facing a task they never expected when the pipeline was built: renewal of the 30-year lease to operate the line on state and federal lands.

When oil began flowing through the 800-mile pipeline in 1977, the owner companies expected it would operate for about 25 years before being mothballed.

That was 24 years ago. The North Slope is still producing a million barrels a day and is expected to stay at the level for at least another five years. With new discoveries every few months and new exploration on the horizon, the lifeline of the pipeline looks long.

Now, Alyeska Pipeline Service Co. is looking to renew its 30-year lease to operate on state and federal land. The lease expires in 2004. Alyeska, the oil-industry owned company that runs the pipeline, and state and federal regulators have begun the massive bureaucratic process to renew the leases. Statewide public hearings are scheduled for September.

''Pipeline renewals are ho-hum things anywhere else,'' said Steve Jones, head of Alyeska's licensing effort. But as the artery that carries much of Alaska's prosperity and 11 percent of the nation's oil production, the trans-Alaska pipeline is getting some extra attention.

The renewal process will be subject to an intensive study of the environmental and social impact of renewing the pipeline another 30 years.

In determining whether to renew the lease, the issues for state and federal regulators fall into three main categories:

--The fitness of Alyeska's owners -- primarily BP, Exxon Mobil and Phillips -- to run the pipeline.

--Whether the pipeline is in compliance with all regulatory requirements.

--How long to renew the lease. The maximum is 30 years.

Given the critical importance of Alaska's oil, no one doubts that the pipeline's license to operate will be renewed. But the process reopens questions about the pipeline and could mean changes in future operations.

Congress approved the pipeline in 1974 amid a storm of controversy about how development would affect the land.

So far, few of the feared effects along the line have come true. Wildlife seems indifferent to the line. There have been no major spills or other catastrophic failures along the pipeline. But, as may be expected in running an 800-mile oil transportation line, maintenance and repair have been constant problems for Alyeska. Also, Alyeska has been plagued for years with employee complaints that pipeline problems have been ignored and that they've been punished for raising safety and environmental issues.

''We view this as an opportunity for an in-depth review of the entire system and, possibly, to ask for changes in how the pipeline is operated,'' said Jerry Brossia, the chief federal regulator with the state-federal Joint Pipeline Office, which oversees pipeline operations.

Brossia said he does not foresee asking for major changes in how the pipeline is operated, he said. But as regulators and the companies that operate the pipe dig into the details of maintenance, corrosion control inside the pipe, pipeline stability, valve operations, fire detection and suppression systems, that could change.

One area where Brossia would like to see improvement is documentation and accountability in repairs.

Alyeska does not deny that maintenance is a challenge. The pipe is getting older and has had problems with corrosion, valves and support columns settling into melting permafrost. The company expects the renewal will cost at least $20 million and has already compiled a 2,000-page primer on the issues around the right of way renewal.

''Our basic obligation is to ensure the integrity of the pipeline is maintained and oil is delivered safely to Valdez,'' Alyeska's Jones said. ''With proper maintenance, the pipeline can be maintained indefinitely.''

Some environmentalists are not so sure.

''You could argue the pipeline is like a 1974 Dodge Dart,'' said Ross Cohen, executive director of the Alaska Forum for Environmental Responsibility in Fairbanks. ''This was a piece of equipment designed for 25 or 30 years of life.''

Cohen cited the sinking support columns as one of a handful of concerns.

''Alyeska has said nothing about how they are going to manage these problems,'' Cohen said. His group wants Alyeska to fund a citizen's watchdog group to oversee pipeline operations.

Eleven Native groups have joined to press the interests of tribes that live along the pipeline.

Patty Brown-Schwalenberger, executive director of the Chugach Regional Resources Commission, said tribes want Native claims stemming from the Exxon Valdez oil spill settled. The tribes also want the oil companies to fund an endowment whose investment profits could be used to assess fish and wildlife resources and the effect of a spill along the pipeline.

Another question is what Alyeska's plans are when the North Slope production ends and the pipeline is closed, said Richard Fineberg, a Fairbanks economist. The oil companies collect hundreds of millions of dollars a year in fees to pay for eventually taking down the pipe. But the money goes to corporate treasuries not a separate account.

''At end of the day, when it's time to collect the money, what is going to happen?'' Fineberg asked. Without the money in hand, ''the state has placed itself in an awkward position.''

Brossia said that regulators have already met with some groups. But he does not see the renewal as grab bag for every interested party to settle their concerns with the pipeline.

''We are trying to renew a right of way. Yes, we are going to listen. But people shouldn't expect too much in terms of these side deals,'' he said.



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