BP Alaska North Slope Pipeline Shutdowns: Regulatory Policy Issues


Publication Date: October 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Energy

Type:

Coverage: Alaska

Abstract:

On August 6, 2006, BP Exploration (Alaska), Inc. (BP) announced the shutdown of the Prudhoe Bay area oil field on the North Slope of Alaska to conduct major repairs following the discovery of severe corrosion and a small spill from a Prudhoe Bay oil pipeline. The loss of North Slope oil production initially was expected to cut overall U.S. oil supplies by approximately 2.6%, although corrective measures have allowed BP to restore over 88% of these supplies while longer term pipeline repairs are underway. Federal authorities have estimated that the Prudhoe Bay fields will not return to full production before February 2007.

The unexpected discovery of severe corrosion problems in BP's pipelines and the sudden loss of Prudhoe Bay oil supplies have drawn intense media attention and strong criticism from Congress. Congressional Committees have held hearings to examine BP's maintenance problems and the adequacy of federal pipeline safety regulation administered by the Department of Transportation (DOT). The Pipeline Safety Improvement Act of 2006 (H.R. 5782) and the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (S. 3961) would mandate the promulgation of new regulations covering the types of pipelines used by BP on the North Slope, among other provisions.

BP executives have admitted to the inadequacy of the company's maintenance program for its North Slope pipeline operations. Likewise, federal policy makers and pipeline safety regulators have acknowledged that "low-stress" hazardous liquids pipelines like BP's North Slope pipelines should be under stricter federal oversight. The federal Office of Pipeline Safety (OPS) expects to promulgate new regulations covering such pipelines by 2007. In the meantime, the agency has responded to BP's problems under its current regulations. The OPS's Corrective Action Orders since March, 2006 have revealed the extensive corrosion problems in BP's North Slope pipelines, have likely prevented additional oil spills, and have facilitated BP's restoration efforts.

As BP's activities continue, Congress may consider ensuring that Prudhoe Bay area pipeline restoration and OPS rulemaking remain on schedule. Congress may review the specific requirements of the OPS's proposed low-stress pipeline regulations to ensure they appropriately balance safety benefits and implementation costs. Congress may also act to ensure that the OPS strictly enforces all its pipeline safety regulations so that incremental problems in particular systems do not accumulate and lead to major supply disruptions. In addition to these issues, Congress may opt to assess how U.S. pipeline safety regulation fits within the nation's overall strategy to ensure the reliability of critical energy infrastructure. Most observers would argue that federal efforts to protect pipelines either from accidents or security risks should be consistent in their consideration of pipeline criticality to the nation's energy supplies. Reviewing how the federal government, industry, and private groups work together to achieve common goals in pipeline safety could be an oversight challenge for Congress.