Legislature(2007 - 2008)BUTROVICH 205
02/19/2007 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Dec Pipeline Corrosion Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 19, 2007
3:31 p.m.
MEMBERS PRESENT
Senator Charlie Huggins, Chair
Senator Bert Stedman, Vice Chair
Senator Lyda Green
Senator Lesil McGuire
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Gary Stevens
Senator Thomas Wagoner
OTHER LEGISLATIVE MEMBERS PRESENT
Senator Fred Dyson
COMMITTEE CALENDAR
Overview: Pipeline Corrosion Update
Department of Environmental Conservation (DEC)
Department of Natural Resources (DNR)
PREVIOUS COMMITTEE ACTION
No previous action to consider
WITNESS REGISTER
LARRY DIETRICK, Director
Division of Spill Prevention and Response
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Presented update on pipeline corrosion.
TONY BROCK, Technical Director
BP Exploration Alaska Inc.
POSITION STATEMENT: Said he would provide spill cost information
to the committee.
CATHY FOERSTER, Commissioner
Alaska Oil and Gas Conservation Commission (AOGCC)
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
Anchorage AK
POSITION STATEMENT: Gave AOGCC update on pipeline corrosion
issues.
JONNE SLEMONS, Acting Coordinator
Petroleum Systems Integrity Office (PSIO)
Division of Oil and Gas
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Provided update on pipeline corrosion
issues.
LOUIS KOZISEK, Chief Engineer
Spill Prevention Coordinator's Office (SPCO)
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Answered questions on pipeline corrosion
issues.
KEN DIEMER, Assistant Attorney General
Division of Oil, Gas and Mining
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Presented update on existing authorities for
the Petroleum Systems Integrity Office.
BILL HEDGES, Manager
Corrosion Strategy and Planning
BP America
Anchorage AK
POSITION STATEMENT: Commented on pipeline corrosion issues.
ACTION NARRATIVE
CHAIR CHARLIE HUGGINS called the Senate Resources Standing
Committee meeting to order at 3:31:38 PM. Present at the call to
order were Senators Green, Wielechowski, McGuire, Stedman and
Huggins. He invited Mr. Dietrick to begin the update on pipeline
corrosion.
^DEC Pipeline Corrosion Update
LARRY DIETRICK, Director, Division of Spill Prevention and
Response, Department of Environmental Conservation (DEC), said
he was just about done when the committee adjourned on Friday.
He had discovered what the new regulatory framework will be for
the pipelines on the North Slope at both the state and federal
level. The state will be regulating the flow lines upstream of
the production facilities and the federal government Office of
Pipeline Safety will be regulating them downstream.
3:34:12 PM
MR. DIETRICK said the last topic began on page 15 of the DEC
handout. It discovers the status of the two cleanups of the two
events from last summer, the GC2 (Gathering Center 2) spill and
FS2 (Flow Station 2) spill. He said the cleanup and restoration
of both sites are complete and additional monitoring and
restoration, if needed, will be conducted next summer. He
reported that the impacts at both sites are deminimis and there
were no wildlife impacts. They were very manageable cleanup
events because of the flat terrain on the North Slope and
because the second-largest oil spill co-op (Alaska Clean Seas)
in the state is there. He described the trimmer and brushing
cleanup activities techniques on the tundra and the revegetation
efforts on GC2.
CHAIR HUGGINS asked who actually did the cleanup.
MR. DIETRICK replied that the companies have a spill co-op on
the North Slope called Alaska Clean Seas that conducted most of
the operations. They oversee the cleanup and have an incident
commander working in the unified command that directs the
cleanup activities on their behalf.
CHAIR asked what the dollar amount of the cleanup was.
MR. DIETRICK replied that he didn't know. He added that most
companies assume responsibility at the outset and are not
required to report on how much the cleanup costs.
TONY BROCK, Technical Director, BP Exploration Alaska Inc.,
volunteered to get that number for him.
JONNE SLEMONS, Acting Coordinator, Petroleum Systems Integrity
Office (PSIO), Division of Oil and Gas, DNR, said the State
Pipeline Coordinator, Mike Thompson, couldn't be with them today
and she would make his presentation. She described the State
Pipeline Coordinator's office as a consortium of state agencies
that is physically located with the Joint Pipeline Office in
Anchorage. The state agencies represented are the Department of
Natural Resources (DNR), the Department of Environmental
Conservation (DEC), the Department of Labor and Workforce
Development (DOLWD), the Department of Public Safety (DPS) and
the Bureau of Land Management.
She said the State Pipeline Coordinator's Office has
jurisdiction over those pipelines on state rights-of-way and the
Leasing Act in AS 38.35 provides the relevant authorities. The
second page of the presentation listed the various pipelines
over which the office exercises jurisdiction. The North Slope
has approximately 375 miles of pipeline; Southcentral has 110 -
135 miles of pipeline. The TransAlaska Pipeline System is a
joint effort between the state and the federal government.
MS. SLEMONS explained that the shutdown at Prudhoe Bay was only
a partial shutdown of the western operating unit and a full
shutdown of the eastern operating unit. She said the State
Pipeline Coordinator's Office (SPCO) has experience in pipeline
oversight and its engineers, in particular, were made available
to assist with both the immediate emergency and the long-term
response.
The DNR, DEC and the AOGCC formed the Arctic Pipeline Technology
Team (APTT) in response to direction from the Murkowski
administration after the March spill. That team has continued to
meet throughout the August spill as well. Staff from the State
Pipeline Coordinator's Office was assigned to the APTT and have
been contributing all along. It also provided assistance to the
Division of Oil and Gas in the development of the long-term oil
and gas infrastructure oversight program, which she would
address later in her own presentation.
The SPCO also facilitated information-sharing with state and
federal agencies, municipalities and industry regarding the
August shutdown. Those meetings were instrumental in providing
coordination of corrective actions, not to mention the
information sharing status. She said the meetings were held on a
weekly basis; but after several months they went to a monthly
basis and just recently went to bi-monthly.
3:42:16 PM
MS. SLEMONS reported that various subjects were addressed in the
meetings including the initial oil spill response, the oil
transit line bypasses, the oil transit pipeline's corrosion
monitoring processes, the Prudhoe Bay unit oil transit lines
replacement project and TAPS-related issues. When the Prudhoe
Bay unit experienced the shutdown, the TAPS had low throughput
and associated vibration impacts resulted at Atigun, Isabel and
Thompson Passes.
3:42:53 PM
Specific actions by the SPCO included an engineering review and
approval of the jumper line hot taps on the Endicott pipeline
bypass and various issues related to the Tank 110 sediment
management. It is located near Pump Station 1 of TAPS. The low
throughput concerns included accuracy of leak detection,
physical changes of the crude oil, impacts to operating
equipment, turbines operating at too low power and resultant
increased emissions.
3:44:14 PM
MS. SLEMONS remarked that Louis Kozisek with the SPCO was in the
audience and could answer technical questions.
CHAIR HUGGINS asked him to describe the SPCO organization.
LOUIS KOZISEK, Chief Engineer, SPCO, replied that the state
pipeline coordinator has the rights-of-way department answer to
him along with the engineering and administrative departments.
He also has about six liaisons from different agencies who
report both to him and back to their own agencies - about 25
people in Anchorage and none in Juneau.
CHAIR HUGGINS asked if the SPCO is new.
MR. KOZISEK replied that it first started in Fairbanks in the
1970s when TAPS was constructed. It got increased focus after
the Exxon Valdez incident and was moved to Anchorage to be part
of the Joint Pipeline Office and that is where it is now. Mr.
Thompson reports to Ed Fogels, Acting Deputy Commissioner, and
Marty Rutherford, Acting Commissioner, both of DNR.
SENATOR WIELECHOWSKI asked if all pipelines on the North Slope
are under either state or federal jurisdiction.
MR. KOZISEK replied that is correct. He added the US Department
of Transportation (USDOT) has been acting with that review
authority and it is currently promulgating new rules and
regulations that would place them permanently under federal
review.
SENATOR WIELECHOWSKI asked what caused the pipes to get so
corroded.
MR. KOZISEK replied that no definitive conclusion has been drawn
about the cause, but his personal opinion is that leaving solids
in the pipeline was the major contributing factor. He explained
that all oil reservoirs have some sort of sediments that are
produced with the oil along with paraffin and asphaltines that
tend to drop out of solution. Those tend to plate the insides of
a pipe after a while and if they are not removed, they can
contribute to corrosion in a number of ways.
He explained that corrosion inhibitor is a chemical that is
injected into oil and the solids can absorb it. The solids keep
corrosion inhibitors from contacting the metal of the pipe
simply because they are sediment. They provide a safe harbor for
the bacteria in the bottom of a pipe where bacterial growth-
rates can be accelerated by changing the environment. Solids can
cause microbial-induced corrosion, a pinhole-type corrosion like
that that was seen at the leak.
3:50:54 PM
SENATOR WIELECHOWSKI asked if scientists have known about this
type of corrosion for a while.
MR. KOZISEK replied that it's a well-known process, but there is
considerable debate about how active the corrosion is in
different locations and different types of crude oil.
3:51:49 PM
CHAIR HUGGINS asked if SPCO is a compliance or enforcement
organization.
MR. KOZISEK replied that it is a monitoring and oversight
organization because its authority comes through administering
leases and monitoring the installation of the longer-distance
pipelines over state land. Those pipelines are authorized under
a specialized statute, AS 38.35, which was created just for
pipeline leases.
CHAIR HUGGINS asked for the top three things in the last year he
did to make it a better organization.
MR. KOZISEK replied he increased communication and discussions
about causes of spills and provided assistance. The SPCO's
authority starts on TAPS, but it has no authority on the transit
pipelines. SPCO people were available to talk to BP and monitor
the situation. They provided a sort of oversight and
communication with the other agencies.
3:54:08 PM
CHAIR HUGGINS asked how industry responded when he came on the
scene.
MR. KOZISEK replied after the oil spill in August, BP made a
concerted effort to open its doors to the SPCO and allowed him
to look at anything he wanted to.
CHAIR HUGGINS asked what two changes he would make if he were
king for a day in the SPCO.
MR. KOZISEK replied that he would attempt to institute more
frequent maintenance pigging on the pipelines to remove the
solids and engage integrated corrosion oversight that would look
at maintenance and smart pigging, corrosion inhibitors and
corrosion control techniques. Internal and external direct
assessment of corrosion would be made to ensure the pipeline is
safe and reliable.
CHAIR HUGGINS asked if he is comfortable with the progress being
made.
MR. KOZISEK replied no, but the new DEC regulations and creation
of the new Petroleum Systems Integrity Office will go a long way
to prevent what happened last summer.
3:56:17 PM
CHAIR HUGGINS asked Ms. Slemons if she is subordinate to the
SPCO.
MS. SLEMONS replied no; she works through the Division of Oil
and Gas.
SENATOR WIELECHOWSKI asked Mr. Kozisek if he felt the owners of
the pipeline and the producers are doing everything to maintain
the integrity of the pipelines. He asked if other things need to
be done legislatively to make sure that integrity is maintained.
MR. KOZISEK replied he couldn't answer that; it's a balance
between preventative maintenance and cost effectiveness. He's
relatively comfortable with the progress he has seen. He thought
it would strike a good balance if it continues into the future.
3:58:13 PM
CATHY FOERSTER, Commissioner, Alaska Oil and Gas Conservation
Commission (AOGCC), Department of Administration (DOA), said
with oil and gas in the title, she gets invited to participate
in a lot of things that may or may not be included under its
oversight. According to statute the division prevents resource
waste and encourages greater ultimate recovery; it works with
the EPA on the class 2 underground injection control programs to
protect fresh ground waters during oil and gas operations; it
protects correlative rights of hydrocarbon owners and ensures
that good oilfield practices are used in drilling, work over and
reservoir management operations. In the area of pipeline
integrity, her agency is charged only with ensuring the accuracy
of custody transfer meters that are used by the Department of
Revenue (DOR). Their accuracy is required by the American
Petroleum Institute.
4:01:03 PM
CHAIR HUGGINS asked if her job is as simple as having the
custody transfer meter calibrated.
MS. FOERSTER replied yes and that inspectors periodically test
those meters to ensure that they remain calibrated accurately.
She added that the AOGCC stays apprised of all the operating
conditions and remedial plans and actions because it gets a lot
of calls whenever a reporter or concerned citizen wants to know
what is going on. It doesn't comfort them to be told, "It's not
my job."
MS. FOERSTER said the AOGCC was heavily involved in all of the
rerouting in so far as custody transfer metering went. It
provided technical support to the Arctic Pipeline Technology
Team.
4:03:24 PM
Since mid-2006, they have put new blowout preventer equipment
(BOPE) regulations into place. Those primarily reflect changes
in technology and operating enhancements, not any problems. They
are in the process of developing new safety value system (SVS)
regulations and keeping up with equipment advances. She is
trying to contract with someone to start a gas disposition study
- in other words, using gas for something other than sales, such
as flaring. Flaring regulations are also out of date, so those
will be updated.
MS. FOERSTER said AOGCC has been involved in a Prudhoe Bay gas
off take study in anticipation of a gas pipeline, because before
anyone will put their money into a gas pipeline, they need to
know that they will be allowed to produce the gas. Prudhoe Bay
is an oil field and you don't typically get permission to
produce the gas in an oil field until all the oil is gone. She
said the preliminary effort of that study is completed.
MS. FOERSTER said AOGCC also initiated a Pt. Thomson gas
allowable study, but that was put on hold when the DNR declared
Exxon in default on those leases.
She also reported that she hired a new inspector to replace the
one who retired and is in the process of trying to hire a sixth
inspector to manage all the North Slope and Cook Inlet
inspection of safety valves and keep track of things in general.
4:07:24 PM
She has five inspectors now and said at any one time she tries
to have two on the North Slope one in the Inlet. They do
rotations of seven days on and seven days off.
MS. FOERSTER said the AOGCC and DEC had just completed an
investigation of BP's actions before and during the pipeline
shutdown. An independent investigator was hired because part of
the allegation was that DEC and AOGCC were complicit in allowing
BP to violate their regulations.
4:10:04 PM
The inspector looked at over 100 wells and interviewed people
face to face and provided a questionnaire for all BP's North
Slope operators to submit anonymously. A report was published
that is available on AOGCC's website. The key findings of the
well integrity investigation were on the last page of her
handout. She reported:
Although we found some housekeeping issues, we did not
find any violations. We did identify jointly with the
DEC that there is a regulatory gap in well cellar
requirements and we're working with the DEC - they're
taking the lead on that - filling that gap....
AOGCC is working with other agencies to develop a proactive
approach to monitoring routine operations more closely.
4:12:33 PM
CHAIR HUGGINS asked if she wanted to add that to her list of
checking meters.
MS. FOERSTER explained that is just one of the tasks the five
inspectors perform. Some other are that the meters need to be
checked on a scheduled basis, blow out preventer equipment needs
to be tested at least every other week on drilling rigs, every
safety valve on every well needs to be regularly checked.
CHAIR HUGGINS asked how a whistle-blower gets in touch with
somebody in the AOGCC.
MS. FOERSTER replied that he could pull an inspector aside and
talk to him, he could write a letter to the commission or call
any of the commissioners. The AOGCC website also has a contact
box.
CHAIR HUGGINS asked where inspectors can be found on the North
Slope today.
MS. FOERSTER answered that inspectors are they are all over the
place and she calls them on their radios and asks where they
are. Their main office is in Dead Horse and it is mostly empty.
"The only thing waiting for them is their refrigerator and their
beds."
4:15:24 PM
CHAIR HUGGINS asked how many inspectors were up there at any one
time.
MS. FOERSTER replied a minimum of one, but they try to keep two
people up there at all times. "We will never have zero."
CHAIR HUGGINS asked what a well cellar is.
MS. FOERSTER replied the well is in the ground and the valves
sit at the surface. That set of valves is kept in a house. The
well-head may have a hollow or sump area. It may be lined or
not. If it is lined, the lining may be impermeable or it may
have deteriorated and it may not be impermeable any more. There
may a grate or wooden slats across the top to keep people from
falling in. It may be six inches wide or two feet. There is
nothing out there that says if you're going to have a well
cellar; it has to meet certain qualifications.
4:17:03 PM
CHAIR HUGGINS asked if the term "regulatory gap" means "not in
compliance".
MS. FOERSTER clarified that it means they don't have regulations
setting forth what the operator is supposed to do.
CHAIR HUGGINS asked if they don't have regulations and how she
communicates her expectations to the operators.
SENATOR GREEN interrupted to say she wanted to ask the question
another way and asked if legislation is required to promulgate
regulations or if she does that in-house.
MS. FOERSTER deferred that answer to Larry Dietrick.
MR. DIETRICK replied that well cellars are not defined in
regulation. There are no state requirements for their design,
construction, function or permeability. DEC's concern is that
sometimes spillage happens around the well-head and if the
lining is impermeable, contamination to the ground is avoided.
4:18:57 PM
SENATOR WIELECHOWSKI asked Ms. Wielechowski to explain more
about why the Pt. Thomson study was put on hold.
MS. FOERSTER replied AOGCC negotiated a confidentiality
agreement with the Pt. Thomson owners to have access to all of
their confidential reservoir information to determine if it
would be possible to give Pt. Thomson a "gas allowable" without
creating an unacceptable level of liquid hydrocarbon waste. She
explained that Pt. Thomson is not an oil field like Prudhoe Bay,
but rather a retro-grade condensate reservoir. "It does funky
stuff and if you don't understand it and produce it properly,
you could lose liquid hydrocarbons in the reservoir."
She recognized that the AOGCC would need a lot of information
that nobody has, but the owners. So, she worked a deal with them
to get access to it. They had one meeting in which they talked
about to share data and how Pt. Thomson compares to other
retrograde condensate reservoirs around the world. Then the DNR
ruling came out holding Exxon in default. She called them and
asked, "Is it appropriate to continue with this study or should
we just put it on hold?" Exxon replied that discussions could be
put on hold for a while to give them time to work through DNR
issues and that they wouldn't make her renegotiate from scratch
when they started again.
SENATOR WIELECHOWSKI asked if Exxon asked her to put the study
on hold.
MS. FOERSTER replied that she offered to put it on hold knowing
that they may not have the lease six months from now.
SENATOR WIELECHOWSKI asked what advantage it was to the state to
put the study on hold.
MS. FOERSTER replied that it costs a lot of money to have
reservoir engineering consultants and geophysicists mucking
through a bunch of data if you're not going to do anything with
it or if a new operator is going to come in and gather new data.
In three years they would have to do it all over again.
SENATOR WIELECHOWSKI said his concern is with the strict time
lines the state will be under and Pt. Thomson is a huge reserve.
He thought the state should pursue that as quickly as possible.
MS. FOERSTER agreed that he had a valid concern and added that
giving Exxon six months to figure out what its strategy is won't
hurt or stop the state from completing its study. She will step
back in after giving them a little time to breath.
SENATOR WIELECHOWSKI asked why wait for Exxon at all since it is
being held in default by DNR.
MS. FOERSTER replied she would have to talk to her lawyers, but:
If they're in default why would they share it with us?
I'm not sure I understand what would be their
motivation to give us access to data on something that
they just had taken away from them - and the only
thing they have that has value is their data.
4:24:12 PM
CHAIR HUGGINS said she had done a good job and he didn't mean
for the committee to sound like it was grilling her. He asked if
she is technically under the Department of Administration. She
replied yes. AOGCC was under the DNR years ago, but that could
cause a conflict of interest in some of their roles, because the
state has no greater standing before it than any other lease
holder.
CHAIR HUGGINS asked who she reports to.
MS. FOERSTER replied that she reports to every person in the
state of Alaska.
CHAIR HUGGINS thanked her for reporting today.
4:25:27 PM
JONNE SLEMONS, Acting Coordinator, Petroleum Systems Integrity
Office (PSIO), Division of Oil and Gas, Department of Natural
Resources (DNR), said she would talk about the division's
permitting actions since August and the actions BP has taken.
Second, she would describe what is known as LMEICO, the Lease
Monitoring and Engineering Integrity Coordinator's Office.
She went first to the division's permitting actions since August
2006. There are four major permitting categories that the
division has focused on and for which it has received
applications from BP - jumper lines and bypass lines, especially
in the first days and weeks after the spill; installation of pig
launchers to allow pigging of corroded lines (for the most part,
this was BP's compliance with federal compliance orders); hot
taps and specimen removals - again many of these were BP's
actions in response to federal compliance orders; and the
largest of all of these the oil transit-line replacement
project, which consists of various types of permitting actions -
including construction of new lines on new vertical support
members, construction of new lines on existing vertical support
members, road crossings and installation of pig traps and
metering skids.
In total, she said ten authorizations have been issued by the
Division of Oil and Gas, Permitting and Compliance Units, since
the GC2 spill on March 10, 2006. The corrective actions have
been treated as a priority and she reported excellent
coordination between the division and other agencies as well as
BP for all of these actions.
She said the traditional permitting and compliance function of
the Division of Oil and Gas does have an emphasis on the land
use perspective. Its authorities stem from the Alaska Lands Act.
Primarily the division implements mitigation measures to address
multiple use and environmental concerns in maintenance and
integrity of oil and gas infrastructure or systems. She said,
"It was believed for years that enlightened self interest would
lead operators to do the right thing in terms of maintenance.
Recently, of course, we have realized that we cannot rely on
that."
4:28:18 PM
In 2006 there were several unplanned production impacts to oil
and gas - the March spill at GC2, in August the shutdown of the
eastern operating area and a partial shutdown of the western
operating area in the Prudhoe Bay unit. In addition, a gas
compressor at GC2 was lost and weather-related outages occurred.
The TAPS had a slowdown and eventual stopped due to high winds
at Valdez.
MS. SLEMONS said there were ancillary impacts from all of these
things. The salaries and travel, for instance, of various state
agencies in responding to these production slowdowns and stops;
there were impacts to TAPS like the low vibration at the various
passes, low throughput options et cetera. She didn't have a
figure on what the total cost is, but speculated that it was a
lot.
4:30:38 PM
She said it became obvious in looking at the various elements
that required the attention of state personnel, not to mention
federal personnel, that maximizing the efficient and stable flow
of oil and gas to market was essential and they needed to insure
that regulatory oversight was complete and needed to address the
integrity of oil and gas infrastructure and to plan
appropriately for down maintenance times.
MS. SLEMONS related that various agencies exercise regulatory
oversight of oil and gas activities. Within the DNR, there are
four divisions that address oil and gas - the Division of Oil
and Gas, the Office of Habitat and Management Permitting, the
Office of Project Management and Permitting and the Division of
Mining, Land and Water. Within the DEC, there are also four
divisions that address oil and gas activities - Spill Prevention
and Response, the Division of Air, the Division of Water and the
Division of Environmental Health. Also the AOGCC, the Regulatory
Commission of Alaska, the Department of Fish and Game where oil
and gas activities occur in special areas (legislatively
designated areas), the Department of Labor and Workforce
Development has an electrical inspector and a safety inspector
that are involved primarily through the State Pipeline
Coordinator's Office, and the Department of Public Safety are
all involved. This list does not begin to address the federal
agencies and local governments that are involved in oil and gas
activities.
4:31:52 PM
Despite all of these agencies, regulations and statutes, they
found a lack of regulations over some of the pipelines.
Commissioner Dietrick said the state is filling those pipeline
oversight gaps and so are the feds. What is not addressed yet is
a comprehensive review of all oil and gas facilities.
4:32:31 PM
She said the Murkowski administration issued Administrative
Order 229 on October 6, 2006 that formed the Lease Monitoring
and Engineering and Integrity Coordinator's Office (LMEICO). It
formed a cabinet of the nine state agency heads involved with
oil and gas that looks very much like the Joint Pipeline Office
- representatives from all of the agencies were to be co-located
in a single office. DNR was heading up this organization. It had
two primary goals - first to discover and fill the regulatory
gap regarding oil and gas and second to insure the integrity of
oil and gas infrastructure within the state. Those two primary
goals are important for the future of Alaska and for the future
recovery of our oil and gas resources and protection of human
health and environmental safety.
MS. SLEMONS stated that by the time the administration
transitioned, several steps had been taken to implement the
office. A formal coordination meeting was held on November 29
and draft MOUs were developed for the Office of Pipeline Safety
within the USDOT and the DNR along with the North Slope Borough.
Four positions were established to help the DNR staff the new
office.
The two major goals of filling the regulatory gaps and
exercising oversight of ongoing maintenance effort as proposed
by the Murkowski administration were considered by the new
incoming administration to be excellent goals, however it felt
that a more focused and assertive effort could be achieved in
realizing a leaner organization that would have the added
benefit of being less expensive.
4:35:07 PM
They now expect a new Administrative Order to be issued in the
near future. It does not establish a separate cabinet, but it
does establish the DNR commissioner as the lead for state and
federal coordination. It requires the DNR commissioner to
designate a Petroleum Systems Integrity Office Coordinator
(PSIOC). That coordinator's responsibilities first are to
conduct a regulatory gap analysis using an interagency effort.
The PSIOC will fill those gaps in infrastructure oversight and
will review, approve and enforce operator quality assurance
programs. This follows the compliance model of the State
Pipeline Coordinator's Office. The PSIOC and the SPCO will lead
the inter-agency efforts determined to be necessary even if they
are not yet defined. This office will periodically report both
to the governor and to the legislature on the health of the
state's oil and gas infrastructure, on accomplishment of the
overall goals and progress toward them.
MS. SLEMONS said that the administrative order is in final
review now by all of the designated agencies. Staff has been
reduced from 10 positions within the Division of Oil and Gas to
4 positions and she hopes to be hiring for the new office as
soon as possible. Those positions include technical expertise in
the forms of engineers and quality assurance specialists. The
first effort of the PSIO will be the regulatory gap analysis.
Some agencies have already begun this effort; Mr. Dietrick said
the DEC might already be finished.
4:37:06 PM
CHAIR HUGGINS asked the deadline for the analysis.
MS. SLEMONS replied that once the administrative order is issued
and the office is created, a target deadline will be
established. Her personal deadline is to have it finished by the
end of this fiscal year, July 1.
The Quality Assurance (QA) program approval she described as an
umbrella term for the various maintenance procedures and
programs and corrosion prevention programs - all of the elements
that operators use in order to maintain and keep their
infrastructure running. Right now the state does not receive any
of that information. Operators have most, if not all, of the
elements of a quality assurance program and the PSIO will
require that they submit those for review in a transparent way
and gaps or risks will have to be addressed. Operators will also
be required to submit a report annually on how their performance
compares to their quality assurance programs. The PSIO will
report to the governor and to the legislature on the health of
the oil and gas infrastructure.
4:39:21 PM
MS. SLEMONS said she intends to begin with the QA program
approval at the Prudhoe Bay unit. Following that, they will
proceed unit by unit throughout the state. The original concept
was to do all the North Slope units first, but she reconsidered
and developed prioritization criteria for which units should
come first. They include the age of the infrastructure, the
production volume and the past maintenance and performance
history of the various operators. She noted that she is quite
concerned about Cook Inlet because of the age of the
infrastructure there. She said the first system integrity
oversight report is due to the legislature on August 6, 2007.
4:39:58 PM
SENATOR WIELECHOWSKI asked her to comment on what he understood
earlier that if a gap costs too much it might not get done. He
asked for clarification of this policy.
MS. SLEMONS replied it's her intention to first determine where
there are regulatory gaps and have the PSIO fill them. It would
add these regs to its list of items staff would set standards
for, expect performance to and then inspect for compliance.
She explained that Mr. Kozisek spoke to the fact that there is a
need for balance between the degree of maintenance performed and
the cost effectiveness of being able to produce the resource.
That balance is always a fine line between what is cost-
effective for the operator to do in a business sense and what is
essential and must be required for protection of the environment
and for the interest of continuing production of the resource.
Every regulatory agency within the state deals with that on a
daily basis.
SENATOR WIELECHOWSKI asked if she is comfortable that the state
is doing what it needs to do to ensure the integrity of the
pipelines in Alaska for the next generation.
MS. SLEMONS replied that she is very comfortable now that it is
doing what needs to be done to ensure the integrity of
pipelines, but she is much but less comfortable with what it is
doing in terms of the integrity of all oil and gas
infrastructure. That is primarily where the PSIO will be
focusing its efforts.
SENATOR WIELECHOWSKI asked for assurance that she would report
on those areas that she feels are not acceptable gaps.
MS. SLEMONS replied yes and that would be an element of the
report in August.
4:43:28 PM
CHAIR HUGGINS asked if she was going to be running the PSIO.
MS. SLEMONS replied that she hoped so.
CHAIR HUGGINS asked her to clarify the staffing that goes from
about 10 to 4 positions.
MS. SLEMONS replied that the new staff for the LMEICO was
planned at 10 positions; the new staff for the PSIO is planned
for 4 positions. That does not include existing permitting and
compliance staff, which remains stable at 5.
CHAIR HUGGINS asked if she was comfortable with four people.
MS. SLEMONS replied that she feels comfortable that she could do
it with nine people - four of them will be new.
CHAIR HUGGINS said if her budget was $1.4 million.
MS. SLEMONS replied that the overall LMEICO budget was $4.8
million and her budget now is $0.8 million. Some of that $4.8
million reflects budget submissions from the Office of Habitat
Management Permitting, Project Management and Permitting, the
Division of Mining, Land and Water and the DEC.
CHAIR HUGGINS asked if her figure would change to $0.6 million
in March.
MS. SLEMONS replied, "No, sir, I believe that we have reached a
bare bones level for implementation of this office."
CHAIR HUGGINS asked if she might ask for a supplemental.
MS. SLEMONS replied, "I try not to predict the future."
CHAIR HUGGINS said that she has a tremendous responsibility and
he hoped she could do it within that budget.
4:46:24 PM
KEN DIEMER, Assistant Attorney General, Division of Oil, Gas and
Mining, Department of Law, briefed the committee on the Lease
Monitoring and Engineering Integrity Coordinator's Office
(LMEICO) - created under Administrative Order 229 and the new
administrative order that doesn't have a number yet. He
explained that he was called in to determine whether or not the
governor had the authority as head of the executive branch to
issue such an administrative order integrating various
departments within other departments. He was also asked to
determine whether or not there was any additional statutory
authority that supported the governor's action and if this
authority encroached on other agency authority.
He found that the governor's authority stems from the Article 3,
Sections 1, 23 and 24 of the Alaska Constitution. Statutory
authority that corresponds with that also exists with respect to
administrative functions established by law that are not
assigned to any department. In that respect, the governor shall
assign them to the department that can most effectively and
appropriately perform the activity. He said there is additional
statutory authority under the authority and duties of the
commissioner of the DNR, oil and gas, and gas-only leasing
statutes and the competitive oil and gas leasing provisions.
As to whether there is encroachment on other agency authority,
Mr. Diemer determined at this point there is none. He offered to
answer questions.
4:49:32 PM
SENATOR STEDMAN asked Mr. Kozisek how much sediment was in the
pipe.
MR. KOZISEK replied about 25 - 32 cubic yards of sediment, but
about two or three times more solids in the form of asphaltines
and wax.
SENATOR STEDMAN asked how thick the sediment would have to be
before the bacteria would be able to grow that would corrode the
pipe.
MR. KOZISEK replied that theoretically even a minor coating can
provide some increased acceleration of corrosion, but probably
they are talking about inches where the pipeline corroded
through in August.
SENATOR STEDMAN asked for BP to respond to those questions.
MR. BROCK responded his understanding is that in the western
area where the first leak happened in March the thickness was
"in the order of inches." The eastern area didn't have anything
like the same accumulation as the first one.
4:52:55 PM
CHAIR HUGGINS asked if BP is pre-filtering its oil for corrosive
elements.
MR. BROCK replied that BP has solids tumbling facilities
upstream of the transit lines. In addition they treat the oil
with corrosion inhibitor and biophytes upstream of the
facilities themselves.
4:53:52 PM
BILL HEDGES, Manager, Corrosion Strategy and Planning, BP
America, said there is no filtration. The gathering centers'
only purpose is to separate out all the bad components from the
oil. It removes gas, water and sediment. They hope that pure
sales-quality crude oil goes into the oil transit lines.
4:54:38 PM
CHAIR HUGGINS said he was trying to get a feel for how big the
volume was and asked how many cubic yards a dump truck holds.
SENATOR STEDMAN replied that most highway trucks are 10 cubic
yards.
4:55:23 PM
CHAIR HUGGINS thanked everyone for their comments and adjourned
the meeting at 4:56:19 PM.
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