Legislature(2009 - 2010)BARNES 124
03/27/2009 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Psio Update Briefing | |
| Alaska Risk Assessment Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 27, 2009
1:03 p.m.
MEMBERS PRESENT
Representative Craig Johnson, Co-Chair
Representative Mark Neuman, Co-Chair
Representative Bryce Edgmon
Representative Paul Seaton
Representative Peggy Wilson
Representative David Guttenberg
Representative Chris Tuck
MEMBERS ABSENT
Representative Kurt Olson
Representative Scott Kawasaki
COMMITTEE CALENDAR
OVERVIEW(S):
PSIO Update Briefing
- HEARD
Alaska Risk Assessment Update
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to report
WITNESS REGISTER
ALLISON IVERSEN, Coordinator
Petroleum Systems Integrity Office
Division of Oil & Gas
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Provided a briefing about the duties and
accomplishments of the Petroleum Systems Integrity Office
(PSIO).
IRA ROSEN, Project Manager
Alaska Risk Assessment Project
Industry Preparedness & Pipeline Program
Division of Spill Prevention & Response
Department of Environmental Conservation
Juneau, Alaska
POSITION STATEMENT: Provided an update and answered questions
regarding Alaska's Risk Assessment Project.
LARRY DIETRICK, Director
Division of Spill Prevention & Response
Department of Natural Resources
Juneau, Alaska
POSITION STATEMENT: Provided information about Alaska's Risk
Assessment Project.
ACTION NARRATIVE
1:02:53 PM
CO-CHAIR CRAIG JOHNSON called the House Resources Standing
Committee meeting to order at 1:03 p.m. Representatives
Johnson, Neuman, Guttenberg, Wilson, Seaton, and Edgmon were
present at the call to order. Representative Tuck arrived as
the meeting was in progress.
^OVERVIEW(S):
^PSIO Update Briefing
1:03:26 PM
CO-CHAIR JOHNSON announced that the first order of business
would be a briefing on the Petroleum Systems Integrity Office
(PSIO).
ALLISON IVERSEN, Coordinator, Petroleum Systems Integrity
Office, Division of Oil & Gas, Department of Natural Resources,
began her PowerPoint presentation with an example of why quality
management is so important in oil and gas oversight. She
related that construction of a Petrobras floating oil platform
off the coast of Brazil was completed in May 2000 [slide 2].
Soon after, a Petrobras executive gave a speech in which he
stated that the project "successfully rejected the established
constricting and negative influences of prescriptive
engineering, onerous quality requirements, and outdated concepts
of inspection and client control." [Less than a year later] two
explosions on the platform killed 11 people [slide 3].
Inadequate safety inspections and no quality assurance were
blamed for the incident, she said. In response to Co-Chair
Neuman, she clarified that the Petrobras platform was off the
coast of Brazil, not Alaska. In response to Co-Chair Johnson,
she said the Petrobras platform was in production when the
explosions occurred.
1:06:35 PM
MS. IVERSEN explained that the PSIO was established by
Administrative Order in April 2007 [slide 4]. The PSIO's four
primary tasks are to: coordinate activities among state,
federal, and local agencies; perform incident investigations;
conduct the Gap/Overlap Analysis Project; and look at quality
management.
MS. IVERSEN said the PSIO has one or more designated points of
contact within certain liaison agencies [slide 5]. These
agencies are: Department of Environmental Conservation, Alaska
Department of Fish & Game, Department of Public Safety,
Department of Transportation & Public Facilities, Department of
Revenue, Department of Labor & Workforce Development, Department
of Law, Department of Natural Resources, Alaska Oil and Gas
Conservation Commission (AOGCC), the Alaska governor's office in
Washington, DC, the North Slope Borough, and federal agencies.
1:07:37 PM
MS. IVERSEN, in response to Co-Chair Neuman, said the PSIO has
the most frequent contact with the Departments of Environmental
Conservation, Public Safety, Revenue, Labor & Workforce
Development, the Alaska Oil and Gas Conservation Commission, and
the other divisions within the Department of Natural Resources.
In further response, she reported that the most common incidents
the PSIO is notified about are pipeline leaks that typically
fall under the purview of the Department of Environmental
Conservation (DEC) or the U.S. Department of Transportation.
Some pipeline incidents have been fallen outside of those
agencies, she added, so the PSIO stepped in on those incidents.
The PSIO also receives notifications from the public and
employees about employee concerns, she continued. Those are
typically about worker safety so they are coordinated through
the Department of Labor & Workforce Development, although they
are sometimes handled by the fire marshal's office or the
electrical inspector's office.
1:09:45 PM
MS. IVERSEN, in response to another question from Co-Chair
Neuman, said the PSIO receives notification of all spills, most
of which are small spills. Multiple fires occurred on the North
Slope a few years ago, she continued, so incidents can be
unpredictable. Everyone, including industry, always hopes the
number of incidents will be zero. Generally, the incidents are
pipeline failure, and these failures have included pipelines
carrying oil, gas, sea water, produced water, and rehabilitated
sewage water. In response to Co-Chair Johnson, she explained
that the incident involving sewage effluent was a pipeline that
carried treated water from an industry facility and it fell
under the purview of the Department of Environmental
Conservation. In response to Representative Seaton, she
deferred to the Department of Environmental Conservation as to
whether treated sewage effluent is discharged on the surface or
re-injected.
1:12:50 PM
MS. IVERSEN said event notification and investigation are
coordinated among the agencies [slide 6]. When a spill or other
event falls under an agency's jurisdiction, the company notifies
a specific agency or agencies directly, she explained. However,
the PSIO receives some notifications that other agencies do not.
The goal is to keep all of the agencies aware of any incidents
so they can respond. Another coordinated effort is the
circulation of employee and public concerns, she said. These
concerns can impact multiple agencies and the goal is to limit
the amount of time that each agency has to spend on a concern.
Other coordinated efforts include regular liaison interaction
and regular contact with local, state, and federal entities.
The goal is to combat the "silo effect" and ensure that each
agency is aware and working together as much as possible.
MS. IVERSEN pointed out that the PSIO steps in when another
agency does not have jurisdiction [slide 7]. One such incident
was the September 2008 rupture of the BP Exploration (Alaska)
Inc. "Y-Pad artificial lift gas pipeline". Another such
incident was the January 2009 "Pump Station 1 pigging incident".
1:15:14 PM
CO-CHAIR NEUMAN noted that Pump Station 1 almost blew up during
the pigging incident, so he was therefore surprised to learn
that no regulations or statutes were violated during that
incident. The legislature is concerned about such incidents and
wants to be informed about them, he said.
CO-CHAIR JOHNSON added that one of the reasons the PSIO was
started is because of gaps in which agency is in charge and gaps
in regulations.
MS. IVERSEN stated that each of these two incidents can be tied
back to quality management, along with a company having the
right procedures in place and whether there is any state
oversight of the procedures.
1:17:05 PM
MS. IVERSEN said the goal of the gap analysis is to provide a
comprehensive and cost-effective approach to state oversight of
oil and gas facilities, equipment, and infrastructure, as well
as activities on state oil and natural gas units and leases
[slide 8]. The PSIO is looking for gaps in infrastructure and
activity inspection and oversight, as well as identifying where
there are overlaps in oversight of the same piece of
infrastructure or activity.
MS. IVERSEN reviewed the process for conducting the gap analysis
[slide 9]. She said the PSIO first identified the statutory and
regulatory authorities of the various agencies and has hired a
contractor to identify how these authorities are implemented.
Authorities can be broad on paper, but there can be gaps in how
an authority is implemented on the ground. The contractor will
verify the gaps that the PSIO has already found on paper and
will also identify any overlaps. In addition, the contractor
will look at the risks associated with any gaps and overlaps.
She pointed out that the PSIO is working closely with the Risk
Assessment Project so that efforts are not duplicated and to
ensure that the PSIO is working only on the risks that fall
outside the scope of the risk assessment.
1:18:47 PM
MS. IVERSEN, in response to Co-Chair Johnson, confirmed that the
PSIO is looking at any gaps between the statutory and regulatory
authorities. She explained that sometimes the statutory
authority is really broad, yet the regulations may not be as
broad as what is in the statute. In further response, she
confirmed that these gaps will be included in the analysis that
the legislature receives. The analysis [report] will serve as
an educational tool that identifies the gaps and overlaps.
These gaps and overlaps will be verified by the other agencies
before they are included in the analysis.
MS. IVERSEN, in response to an additional question from Co-Chair
Johnson, allowed that the PSIO has not [coordinated with anyone
in the legislature] at this point in time, but she offered to
look into this. She added that the gap analysis report will go
to the "resources sub-cabinet" and decisions on what to do with
the identified gaps and overlaps will be made by the sub-cabinet
and the legislature.
MS. IVERSEN, in response to Co-Chair Neuman, explained that the
"resources sub-cabinet" is made up of the commissioners that
deal with resource management. She further explained that the
gap analysis report will be available to the public and the
legislature, and will include the PSIO's recommendations. She
agreed to notify legislators when the report becomes available.
1:21:39 PM
MS. IVERSEN directed attention to slide 10 of her presentation,
noting that Arcadis is the contractor reviewing and compiling
the data that the PSIO has already collected. The results of
this review are expected in August 2009, she said, but the
contractor is dependent on receiving responses from the agencies
and this could affect the expected timing. In response to Co-
Chair Neuman, she said the Arcadis contract is for $293,000 and
no further costs will be incurred even if there is a delay
beyond August 2009.
MS. IVERSEN, in response to Co-Chair Johnson, affirmed that the
PSIO has been receiving good cooperation from all of the
departments. She added that any delays have not been from lack
of support, but from being overworked. The agencies also
cooperated in reviewing contractor proposals and choosing the
contractor, she said.
1:24:08 PM
MS. IVERSEN reviewed the inter-relation between the PSIO's Gap
Analysis and the DEC Alaska Risk Assessment Project [slide 11].
She said both projects are tools for determining how best to
allot the state's limited resources toward oil and gas oversight
in the future. Gaps will likely need to be filled where high
risks exist in areas of no oversight. Where low risks exist in
areas of duplicative oversight, the overlaps will likely be
decreased by better coordination with the other agencies.
MS. IVERSEN, in response to Co-Chair Johnson, said that Black &
Veach, the subcontractor for Arcadis, is not involved in the
Risk Assessment Project. In further response, she stated that
the main contractor for that project is Doyon Emerald and the
technical support is being provided by ABS Consulting.
1:25:25 PM
MS. IVERSEN specified that PSIO's Quality Management Program is
looking at the practices, policies, and procedures that are
utilized by companies to meet the statutory requirements in
their daily business activities [slide 12]. The program is also
reviewing the state's policies and procedures for doing its job.
MS. IVERSEN said quality management can be broken down to
quality assurance, quality control, and the Plan, Do, Check,
Adjust Cycle [slides 13-15]. Quality assurance is the planning
side of quality management, she explained. It is the process
used to determine whether a project is meeting the
characteristics that are being sought. It establishes the rules
and methods that will be used. She pointed out that quality
control is the "check element" for determining whether the
desired product was received and it establishes how to measure
or test the product. The Plan, Do, Check, Adjust (PDCA) Cycle
begins with planning the mission, requirements, and objectives
and then moves to the procedures, processes, and methods. All
of these have been a key element of PSIO's investigations, she
said. [Quality control] is done by conducting tests to
determine that the correct procedures and processes are being
used, and then adjustments are made to improve or correct the
processes. The fundamentals of quality management systems are
quality control, quality assurance, monitoring, inspection, and
any other practices that are used to ensure the integrity and
reliability of the systems [slide 16], she summarized.
1:27:44 PM
MS. IVERSEN discussed what the agencies can expect from or ask
of the PSIO [slide 17]. She said the PSIO can help an agency
understand the benefits of a quality management program. For
example, instead of an agency asking a company whether a certain
piece of infrastructure has been inspected this year, the agency
could ask the company if it has a procedure in place that
directs the inspection of that infrastructure annually. This
procedure would serve to capture any missed inspections, whether
employees are trained properly, and how to document the
inspections.
MS. IVERSEN, in response to Co-Chair Neuman, stated that it
depends upon the company and the piece of infrastructure [as to
whether industry had a good program in place prior to
establishment of the PSIO]. Alaskan companies do utilize
quality management systems, she said, and they do utilize a
risk-based approach, which is appropriate. Recent events
indicate that the companies did not fail to have procedures in
place; they failed to have the proper procedures in place.
Having a procedure for capturing missed inspections is
critically important, she noted. The state can become more pro-
active by looking at company procedures and understanding them
better. The companies are really working on quality management
and BP is implementing a world-wide quality management program.
She said quality management would include establishing
procedures for when something is fixed, when something is
inspected, how a missed inspection is captured, how contractors
are trained and what they are trained to look for, and so forth.
1:31:50 PM
MS. IVERSEN, in response to Representative Edgmon, explained
that the PSIO's authority stems from the oil and gas leases,
which is why the PSIO is located within the Division of Oil &
Gas. Before investigating an incident, the PSIO talks to the
division director Kevin Banks and the department commissioner
Tom Irwin.
MS. IVERSEN, in response to Representative Tuck, said she is
unaware of any other states that have a statewide agency like
the PSIO, particularly an agency that looks at industry quality
management. She noted that the Joint Pipeline Office, a
consortium of state and federal agencies, oversees the common
carrier pipelines in Alaska and the PSIO coordinates the
activities upstream of the pipelines.
MS. IVERSEN, in response to Co-Chair Neuman, allowed that at
this point the PSIO has been in a reactive mode [rather than a
pro-active mode] in regard to the building of new pipelines.
She said the PSIO would not review the design of a new pipeline
because that is not part of its mandate. If it is identified
that this is a gap because other agencies are not doing it, then
it could be assigned to the PSIO or another agency in the
future. She pointed out that the Joint Pipeline Office does do
pro-active reviews of pipelines, one example being the recent
Kachemak pipeline extension.
1:35:26 PM
MS. IVERSEN, in response to Co-Chair Johnson, stated that the
PSIO has very good working relationships with the companies.
Although the PSIO has not worked as closely with some of the
newer and smaller companies in the state, she continued, it
anticipates doing so as soon as the gap analysis is complete.
MS. IVERSEN, in further response to Co-Chair Johnson, said the
PSIO has not looked at the smaller companies enough [to be able
to say there is a difference between the larger and smaller
companies as far as the quality management procedures that are
employed]. With quality management, it is not necessarily a
case of one size fits all, she said. A company's procedure for
monitoring what it does and ensuring that it is operating safely
will vary based upon the company. However, companies will be
required to utilize a risk-based approach and continuous
improvement. She agreed that the best way for the state to be
pro-active is to delve into all of the companies operating
within Alaska regardless of their size.
1:38:20 PM
MS. IVERSEN, in response to Representative Guttenberg, explained
that looking at federal statutes and regulations and how those
interact with what the state is doing is part of the PSIO's gap
analysis. The PSIO is working very closely with the U.S.
Department of Transportation's Pipeline and Hazardous Materials
Safety Administration (PHMSA), the largest federal player in
regard to pipelines. The Department of Natural Resources has a
Letter of Intent with PHMSA, she said, so the two agencies work
together very closely. Other federal agencies, such as the U.S.
Coast Guard and the Environmental Protection Agency are also
being included in the Gap Analysis.
MS. IVERSEN, in further response to Representative Guttenberg,
said she is unaware of any instances in which state jurisdiction
ends and entities like a borough or city pick up the
jurisdiction. She specified that local distribution systems,
such as Fairbanks Natural Gas, LLC, are overseen by the U.S.
Department of Transportation, although something having to do
with fires might default to a local fire fighting entity.
CO-CHAIR JOHNSON offered his opinion that Fairbanks Natural Gas,
LLC, is a common carrier and would therefore fall outside of the
PSIO's responsibility.
MS. IVERSEN agreed that this is the case for distribution.
MS. IVERSEN, in response to Co-Chair Neuman, noted that bonding
occurs at a number of different stages, such as bonding by the
Alaska Oil and Gas Conservation Commission, Department of
Environmental Conservation, and DNR's Division of Oil & Gas. In
regard to the details of bonding for a spill, she deferred to
Larry Dietrick of DEC.
1:42:32 PM
MS. IVERSEN commenced with her presentation, discussing PSIO's
expectations of agencies, including itself [slide 18]. She said
the PSIO is specifically starting with itself and the Division
of Oil & Gas and is making sure that it meets the needs of its
clients, which include the legislature, industry, and the
public. The expectations include the documentation of PSIO's
evaluations of oil and gas facilities, effectively communicating
with industry, and working with the other agencies to coordinate
the review of their evaluations and identifying any gaps that
are discovered.
MS. IVERSEN said the PSIO expects each petroleum company to
provide evidence of its quality management system [slide 19].
This includes how the company is implementing its programs, how
it knows whether the programs are effective, and how those
programs are evaluated by upper management and implemented all
the way down through the company to its contractors.
1:43:56 PM
MS. IVERSEN, in response to Representative Edgmon, said there
will be consideration of whether to establish the PSIO under
statute or regulation once the gap analysis is completed and it
is known what statutes and regulations would make sense for
filling gaps without creating any overlaps. In response to
further questions from Representative Edgmon, she stated that
the PSIO has regulatory authority that stems from the leases,
but no enforcement authority. Funding of the PSIO comes from
the general fund rather than program funding. For any offshore
oil development, she said the PSIO would play the same role it
is playing now in the coordination of efforts for anything
upstream of a common carrier pipeline. The Coastal Zone
Management Program is part of the PSIO's gap analysis, but it is
limited to information exchange, she said. She added that the
Division of Oil & Gas works closely with the Coastal Zone
Management Program on permits.
CO-CHAIR JOHNSON offered his belief that the PSIO would take a
more active role in the Coastal Zone Management Program when and
if there is offshore development.
1:47:33 PM
MS. IVERSEN, in response to Representative Guttenberg, said she
is only vaguely familiar with the Dismantling, Removal, &
Restoration (DR&R) Fund. She suggested that any specific
questions about the fund be directed to DNR Commissioner Tom
Irwin. In further response, she said she does not know why the
DR&R Fund has not been included in the gap analysis, but that
she would get information back to members in this regard.
CO-CHAIR JOHNSON commented that he believes the DR&R Fund is
beyond the PSIO, but he would appreciate receiving any
information as well.
REPRESENTATIVE GUTTENBERG explained that the DR&R Fund is the
money that the industry is supposed to be setting aside to
remove all the Trans-Alaska Pipeline System's pump stations and
pipe. It is supposed to be a separate fund within the books of
each oil company.
CO-CHAIR JOHNSON offered his belief that it is a per barrel fund
that has been accumulating since day one.
^Alaska Risk Assessment Update
1:50:58 PM
CO-CHAIR JOHNSON announced that the next order of business would
be an update on Alaska's Risk Assessment Project.
IRA ROSEN, Project Manager, Alaska Risk Assessment Project,
Industry Preparedness & Pipeline Program, Division of Spill
Prevention & Response, Department of Environmental Conservation,
began his PowerPoint presentation by explaining that the Risk
Assessment Project is a three-year, $5 million initiative to
evaluate the operational safety of Alaska's oil and gas
infrastructure [slide 2]. The study is partly the outcome of
some of the spills, leaks, and corrosion that were discovered on
the North Slope several years ago, he related. When the project
is completed, it will be an engineering-oriented assessment
intended to identify and rank the risks, and those are based on
consequences to state revenue, safety, and the environment
[slide 3]. The study's intent is to answer the question: what
are the risks involved in operating the system for another
generation?
MR. ROSEN said the project will provide a snapshot of the
physical condition of the infrastructure. "The entire system
will be broken down into small pieces, each one of those pieces
will be evaluated and ranked to identify the most significant
risks," he stated. Results will be published in summer 2010.
MR. ROSEN, in response to Co-Chair Neuman, specified that this
project is not intended to be either enforcement or a regulatory
action; it is simply a reconnaissance to look at the condition
of the infrastructure. However, he said that action would be
taken if something outside the norm is found.
1:54:54 PM
MR. ROSEN, in response to Co-Chair Johnson, confirmed that if
something wrong was found, it would not be ignored and the
proper agency would be notified. He noted that due to the type
of information that is being looked for, as well as the limited
time and budget, the assessment will not involve much physical
inspection. In further response, he said the project will
review existing information, evaluate spill and corrosion
reports, and look at previous risk assessments, business
practices, and operating procedures. Although the project is
taking place primarily in the office, he said the public
participation process allows for anonymous input so anyone with
information can participate, including industry employees.
Action would be taken on any information that indicates
something is illegal or inappropriate.
REPRESENTATIVE WILSON asked how the physical conditions are
being evaluated given that no one is actually going onsite.
MR. ROSEN replied that information is coming from the industry
and there is information already in existence, such as corrosion
and spill reports. The format of the risk assessment itself is
brainstorming by people who are familiar with these types of
infrastructure. They will break the entire infrastructure into
pieces, he said, and then they will brainstorm scenarios about
what types of things could go wrong and what the consequences
would be if those things did go wrong. The probability of
something going wrong and the consequence if that does go wrong
are taken together to come up with a numerical value for the
risk, he explained.
1:57:28 PM
CO-CHAIR NEUMAN pointed out that what is designed on paper does
not necessarily match up with what is actually in the field.
MR. ROSEN reiterated that the intent is to take a snapshot of
the conditions of the infrastructure at the time the project was
started, which was last summer. Staff are looking at how this
infrastructure was intended to be used and reviewing actual
reports of what has happened since the infrastructure was
designed and built. The report may well recommend that the
findings be augmented through additional studies, he allowed,
and those additional studies would likely include some site
investigation. The scope of the assessment has been fit to the
funding and time available for the project, he explained, and
these do not allow much time for on-site investigation. In
addition, it would be an overwhelming task because there are
about 250 separate facilities. Other agencies conduct actual
physical inspection and that is part of the information that the
project is evaluating. He said he is unaware of a risk
assessment of this scale being undertaken anywhere else in the
world. The project will also be looking at the interfaces
between one company and another to see how the systems work.
2:00:02 PM
MR. ROSEN, in response to Representative Seaton, explained that
the physical condition of equipment will be evaluated at the
individual facilities by looking at the records of maintenance,
improvements, and changes. Many facilities will have some
equipment that has been replaced since the original
construction, some that is brand new, and some equipment that is
near the end or past the end of its design life. Those things
will be taken into consideration when evaluating the likelihood
of a risk event occurring, he said. For example, a new facility
less than four years old has a lower likelihood of an unplanned
incident than a 30-year-old facility that has had limited
maintenance.
MR. ROSEN, in further response to Representative Seaton,
specified that the driving factor for undertaking the Risk
Assessment Project was to look at possible disruptions to
revenue to the state, but the project was expanded to also
include impacts to safety and the environment. Given the
assumption that this system will continue to be operated into
the future and the equipment used for thirty-plus years, he said
the question is: What are the risks inherent in continuing to
operate the system? For example, there have been changes to the
amount and type of oil itself and the assessment will consider
what the significant risks are from this.
2:04:34 PM
LARRY DIETRICK, Director, Division of Spill Prevention &
Response, Department of Natural Resources, added that the Risk
Assessment Project was conceived after the "GC-2 event" in 2006.
He said two things happened at this event that got the state's
attention: 1) it was the first shutdown of the Prudhoe Bay
field, and 2) soon after the incident industry made the business
decision to continue operating the field through investment in
Prudhoe Bay for another 50 years. The fundamental premise of
the Risk Assessment, he explained, is to provide a snapshot of
the condition of the oil and gas infrastructure in Cook Inlet
and the North Slope for the purpose of determining what risks
are posed to the state in regard to revenue, safety, and
environment if the system, which has already had a 30-year life,
continues to operate for another 50 years.
REPRESENTATIVE SEATON inquired whether the assessment is looking
only at the current type of oil or will it be looking at heavy
oil development and the changes in infrastructure that that will
require.
MR. ROSEN responded that the assessment will include looking at
factors such as the changes in the physical composition of the
oil itself and the related issues of operating temperatures,
reduction in through-put, and whether the original pipeline
sizing remains appropriate. For example, he noted, these
factors can cause an increase in corrosion.
2:07:44 PM
REPRESENTATIVE WILSON commented that it seems to her that once
the snapshot has been taken, more data will need to be gathered
from the field.
MR. ROSEN answered that any engineering report worth its salt
will include the recommendation that more study is needed. He
said the project's job is to get as much information as
accurately and appropriately as possible within the time and
funding constraints the project has been allotted. In further
response, he said the completion date for the assessment is the
summer of 2010.
2:10:10 PM
REPRESENTATIVE GUTTENBERG pointed out that the current
infrastructure is pretty old by some standards. The GC-2
accident that shut down Prudhoe Bay was caused by changes in the
oil composition and sediment levels, he said. These changes
were being checked and corrections were being made from inside
the facility, but outside the facility the sediment was building
up in the pipe and making the pipe heavier. This resulted in
the pipe settling, which in turn caused some of the more
corrosive elements to settle out and erode the bottom of the
pipe. He further pointed out that when oil is pumped from the
well it is not completely uniform and will have different levels
of viscosity and sediment. He asked whether industry has
testing logs that indicate these changes and that could be
evaluated as part of the assessment.
MR. ROSEN replied that if that type of information is available
from the industry it will be incorporated into the project. The
project is looking for operating procedures and business
practices, he said. Changes in the physical composition of the
oil stream are included in the project as these changes do have
an impact, as do changes in through-put and physical
temperature.
REPRESENTATIVE GUTTENBERG observed that engineers know Alaska
well. As an example he cited the 60-foot-long skid plate
located at Paxson where a geologic fault crosses the pipeline.
The November 2, 2006, earthquake moved the pipeline right to the
end of that skid plate, he said, indicating that someone knew
what they were doing.
2:15:00 PM
CO-CHAIR JOHNSON asked whether the state is incurring a risk by
undertaking the risk assessment and blessing the continued
operation of the system.
MR. ROSEN said he thinks the answer is no. The first phase of
this is risk assessment and the second step is risk management.
The report will identify the most significant risks that the
project is able to bring to the surface, but the project is not
claiming that those are the only risks. It is not being said
that if industry addresses these risks it is off the hook from
any regulation or subsequent disruption. The information is
being provided as a future management tool and a business
decision tool. Once the project makes its presentation, it will
be up to industry to make some kind of a response, he said.
CO-CHAIR JOHNSON commented that he knows of several companies
that have several floors of attorneys in Houston that are
looking at all of this. Therefore, he said he wants to make
sure the state is not blessing this as a parameter.
2:16:54 PM
MR. ROSEN continued his presentation, stating that the Risk
Assessment Project has been assigned to the Department of
Environmental Conservation for project management and contract
administration [slide 4]. The overall direction for the project
comes from the State Agency Oversight Team, he said. A contract
was awarded to Doyon Emerald, an Anchorage-based engineering
firm with expertise in Alaska's oil and gas industry, and the
subcontractor is ABS Consulting, a firm known worldwide for its
expertise in large infrastructure risk assessments.
MR. ROSEN said the State Agency Oversight Team is made up of all
of the Alaska agencies that have either a regulatory or
oversight role of the oil and gas industry [The agencies listed
on slide 5 included the: Department of Environmental
Conservation, Department of Labor & Workforce Development,
Department of Law, State Pipeline Office and PSIO within the
Department of Natural Resources, Department of Public Safety,
Department of Revenue, and Alaska Oil and Gas Conservation
Commission.] He noted that there is a representative from the
University of Alaska in addition to the state agencies.
MR. ROSEN explained what a risk assessment is [slide 6]. First,
the system under consideration is broken down into pieces of
manageable size, which in this case might be an individual
facility or section of pipeline. Next, the team gets together
to postulate the events or scenarios that could go wrong within
the areas of natural and operational hazards. Then, the team
estimates how likely each of those scenarios is to occur, and if
those events were to occur, what the consequences would be. He
said that for Alaska's project the team is looking at the
consequences in terms of disruptions to state revenue, safety,
and impacts to the environment. The probability of the event
occurring and the consequence if it did occur are taken together
to become a numerical value of the risk. The team will then
provide a risk profile presentation in which the risks are
identified in order of significance: high, moderate, and low.
2:20:05 PM
MR. ROSEN noted that the Alaska Risk Assessment Project was set
up in three phases [slide 7]. Phase 1 will develop the method
to be used in the assessment and includes several months of
public outreach conducted throughout the state. Minutes were
kept of those meetings and are available on the project's web
site and the project's first report which has been published.
MR. ROSEN, in response to Representative Wilson, said most of
the public input was broad rather than detailed and often
involved questions about what was to be included within the
scope of the project. For example, one question was whether oil
tankers were included and the answer to that is no. He said the
biggest areas of concern identified by the public were:
releases to waterways, impacts to subsistence, and public safety
issues as well as industry employee safety. The broad purpose
of the public outreach was to ensure that the method employed
addresses the concerns of the public, he added.
MR. ROSEN said the project's scope of work includes the North
Slope/Valdez oil corridor as well as Cook Inlet [slide 8].
Specifically excluded from the scope are refineries and anything
downstream of refineries, oil tankers, and acts of terrorism or
deliberate sabotage. He stated that the area of risk most often
identified by the public was impact to waterways [slide 9].
2:24:04 PM
MR. ROSEN reiterated that Phase 1 of the project [June 2008 -
August 2009] focused on public outreach and development of the
methodology design for conducting the risk assessment [slide
10]. "In particular, a lot of this involved a very clear,
specific definition of what is an unacceptable consequence or
what is a significant risk in each of the areas," he said.
Phase 2 will consist of the major data collection [August 2009 -
February 2010], such as looking at detailed information about
the facilities, previous risk assessment studies, business
practices, spill and corrosion reports, and operating
procedures. All of that information will be applied to the
methodology, or model, that is created for the areas of
operational and natural hazards, he explained. The information
about studies, reports, and existing conditions will be used to
refine the likelihood or probability estimates as well as the
consequence factors. For example, in comparing two similar
pipelines, the consequences of a spill are likely to be greater
for a pipeline with no automated detection system and no
inspection as compared to a pipeline instrumented with leak
detection and frequent inspection. Phase 3, he continued, will
be the analysis and presentation of the information in a final
report [February 2010 - May 2010].
MR. ROSEN, in response to Co-Chair Johnson, noted that two
reports have already been produced and the next phase is the
release of a report for public comment to determine whether the
methodology has addressed the public's concerns. Based on the
public comment, the methodology will be finalized in June 2009
and the methodology design released in another report. The next
deliverable will then be the final report.
2:27:32 PM
MR. ROSEN commenced his presentation, noting that the project is
now midway through Phase 1 [slide 11] and the interim report
summarizing the public participation and defining the
unacceptable consequences has been released. The draft design
methodology report was just released, he said, and both this
report and the interim report are available on the project's web
site [slide 12].
MR. ROSEN explained that the draft methodology report kicks off
the second public process and public hearings will again be
conducted across the state over the next few months. He said
that in addition to the public process, the state has contracted
with the National Academy of Science for a totally independent
peer review. The academy has convened a committee of experts
and will be conducting its own public process in the state. The
risk assessment team will rely on the academy to confirm the
technical correctness of the methodology, he related. In
response to Co-Chair Johnson, he said the cost of the academy's
review is about $200,000. The academy is a quasi-government
association, he said, and most of the actual work is done on a
volunteer basis from the committee of experts, so much of the
funding is for travel and expenses related to the review.
2:31:25 PM
MR. ROSEN concluded his presentation by reiterating that the
final report is due the summer of 2010 [slide 13] and that it
will be a large summary of the hundreds of event scenarios
categorized in the areas of reliability, safety, and the
environment. He said the highest risks will be identified for
potential mitigation and the potential recommendations depend on
the nature of the risk [slide 14]. If it is a physical
component of the infrastructure, a potential recommendation may
be replacement or repair. Potential changes to business
practices or internal company policies will also be looked at.
If industry does not respond in this regard, then a next step
might include changes to management or changes to regulation.
CO-CHAIR JOHNSON said it is important to keep an eye on the
state's resources because they are the state's livelihood.
CO-CHAIR NEUMAN added that any major disruption in Prudhoe Bay
operations would be devastating to the state revenue stream
because 85 percent of the state's revenue is coming from this
one place.
REPRESENTATIVE GUTTENBERG observed that the state has a
contractual relationship with the producers as much as each
producer has with the other producers. One consideration still
floating around is what the contractual obligation might be for
one of the non-operating owners when one of the other owners has
a negligence accident.
CO-CHAIR JOHNSON pointed out that one thing not talked about is
what happens if an event is not the fault of the producers or
the state, such as an act of terrorism, earthquake, or volcano.
He surmised that these things may show up in the gap analysis.
2:35:10 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Risk Assessment Presentation.pdf |
HRES 3/27/2009 1:00:00 PM |
|
| PSIO Update .pdf |
HRES 3/27/2009 1:00:00 PM |