Drift River oil moved; alert level lowered

SHUTDOWN: Tanker removes oil from facility; 10 offshore platforms to suspend operations.

April 6, 2009 

The tanker Seabulk Arctic took on 3.7 million gallons of crude oil from the Drift River terminal Monday, reducing the potential magnitude of an oil spill should nearby Redoubt volcano generate a catastrophic flood.

As the tanker set sail in late afternoon across Cook Inlet to deliver the oil at Nikiski, workers began mothballing the terminal. The temporary shutdown will force the idling of 10 nearby oil production platforms.

Chevron, the California oil giant that operates the platforms, said it won't start producing oil again until the volcano settles down, reducing the flow of light crude to the Tesoro refinery in Nikiski and nipping state oil royalties.

So far, Chevron still has tasks for its 380 employees and 150 contract workers, but it is reviewing the impact of the shutdown on its work force, said spokeswoman Roxanne Sinz.

Cook Inlet Pipeline Co. said the 15 workers it employs at the Drift River facility will be assigned to other projects.

The shutdown is similar to what happened during the 1989-1990 eruption of Redoubt, but with a few major differences. Production was much more robust at the now-aging fields, and 38 million gallons of crude were stored at Drift River when the tank farm flooded back then. The shutdown lasted about a week.

Only 6.2 million gallons were in tanks at Drift River on March 22, the start of the current series of explosions. Despite a major flood of water and mud that came down the Drift River March 23, a dike built in 1990 kept the tank farm dry. The dike withstood later floods too, including the one following Saturday's major volcanic explosion.

Just as the tanker was preparing to depart from the terminal's offshore loading dock, the Alaska Volcano Observatory lowered its alert levels for Redoubt to orange and "watch" from red and "warning."

U.S. Geological Survey geologist Margaret Mangan cautioned that the volcano is still in an unpredictable stage where anything can happen.

"The eruption continues and is still in a state where further explosive activity could occur with little or no warning," Mangan said at a news conference. While it's likely that the volcano will begin to stabilize and become more predictable before its current eruption phase passes, there is no saying when that would happen, she said.

The volcano has been building a dome "with very sticky, viscous lava oozing out at the vent up in the summit crater," Mangan said. The major explosion Saturday appeared to have blown off a huge chunk of the dome.

Some of the dome was pulverized into fine ash that fell on the south Kenai Peninsula. Some of it, along with hot gases, rushed down the volcano flank and melted some of its glaciers, sending a flash flood down the Drift River.

The dome is rebuilding, she said. "We see that there is still ice in the crater, so the potential for lahars still exist," she said, using the term that describes floods of ash, water and rock.

The Saturday explosion occurred just as the tanker was headed up Cook Inlet. The blast dashed the hopes of officials that the terminal could resume something like a normal schedule. They decided it was too dangerous to leave workers there to accept oil from facilities on the west side of Cook Inlet at Trading Bay and Granite Point.

The platforms are a big part of the Kenai's oil work force of 1,200, not including offshoot employment for helicopter pilots and food catering, for example. The jobs are the most lucrative on the Kenai and account for about 15 percent of the region's payroll, said sate economist Neal Fried.

Normally, Tesoro Corp.'s Nikiski oil refinery -- which produces gasoline, diesel and jet fuel for Alaska -- receives 50 percent of its crude from the North Slope and 25 percent from Cook Inlet, and the rest is imported from out of state, including from Russia.

If the Drift River terminal isn't re-opened within several weeks, Tesoro might need to divert oil tankers to Alaska from its Lower 48 or Hawaii refineries to fill the gap in Cook Inlet production, said company spokesman Lynn Westfall.

Westfall said the rig shutdown shouldn't prompt a rise in Alaska gas prices. "Generally speaking, the price is set by demand and supply for gasoline," not refining costs, he said.

Cook Inlet also produces large volumes of natural gas. Producers and the utilities that purchase the gas to heat Southcentral homes said they are not affected by the shutdown.

State officials said Monday the state's royalty share of oil on the west side of Cook Inlet is about 800 to 1,000 barrels per day -- roughly 8 percent to 10 percent of the west side's oil production.

That's a loss of about $46,000 per day in royalties, based on Monday's oil prices. But the loss of royalties is a minor issue compared to the overall safety, environment, work force and production concerns revolving around Drift River and the erupting volcano, said Kevin Banks, director of the Alaska Department of Natural Resources' oil and gas division.

"Had one of those tanks floated or leaked, I don't know that there would be any more (oil and gas) development in Cook Inlet," he said.

The tanker left behind about 2.5 million gallons of crude oil and sludge at the facility. Officials reversed earlier decisions and decided to pump water into the terminal tanks to stabilize them in the event of a flash flood in Drift River caused by the volcano. Earlier, before the decision to shut down the terminal, they had planned to leave about 3.4 million gallon of crude at the facility, and no water.

The instability of the volcano led officials to rethink their original plan for the terminal.

Find Richard Mauer online at adn.com/contact/rmauer or call 257-4345. Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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