GAO REPORT CRITICIZES PIPELINE REGULATORS

By DAVID WHITNEY
Daily News reporter

WASHINGTON- In the years before the March 1989 Alaska oil spill, federal and state regulators charged with monitoring the giant trans-Alaska pipeline system did virtually nothing to fulfill that obligation, the General Accounting Office said in a report culminating a two-year investigation.

Instead, the GAO said, regulators were content to accept, "without independent analysis or testing," the assurances of the pipeline's operator, Alyeska Pipeline Service Co., that everything was safe and up to standard.

Despite improvements rushed into place after the worst spill in U.S. history, the GAO concluded that more still needs to be done to assure the 800-mile pipeline system, operates safely.

The 110-page report is likely to complicate efforts in Congress to approve to open the Arctic National Wildlife Refuge to drilling.

Oil from the refuge would be pumped through the pipeline, whose life would be extended by decades if the huge quantities of oil the administration predicts are under the refuge's narrow coastal plain are actually there.

In April, House Majority Leader Richard Gephardt, D-Mo., said the Exxon Valdez oil spill and the lack of federal oversight over Alyeska "raise serious doubts in my mind about whether the administration can oversee development in the refuge correctly."

The GAO report adds to those doubts.

"Alyeska's ability to respond to a large-scale oil spill along the pipeline or at the (Valdez oil-loading) terminal is not known," it said.

While the GAO complimented regulators for beefing up staff and creating a joint office to coordinate monitoring of the pipeline system, it said the effort lacks clear leadership and a steady source of funding.

It said the federal Environmental Protection Agency, one of the agencies responsible for overseeing the terminal, still hasn't decided if it will join the joint office.

Even if it does, the GAO said, there needs to be a designated leader who can make sure all the needed regulatory programs are in place and the needed follow-up investigations and monitoring are conducted.

This will be expensive, the GAO said. It said Congress should consider legislation that would make Alyeska foot the bill.

Alyeska, in comments on a draft report in April, criticized the GAO for dwelling on the past and overlooking recent improvements. Other than some technical modifications, the findings in the final report are virtually identical to those in the draft.

"Alyeska is troubled that the conclusions of the draft report that greater regulatory oversight of the (pipeline system) is required implies that the pipeline system is not well run," wrote Alyeska President James Hermiller. "We believe the record clearly shows the contrary."

But the Environmental Protection Agency said "GAO has rationally characterized the need for additional and coordinated oversight by state and federal agencies." It said it is considering assigning staff to the joint regulatory office in Anchorage.

Harold Heinz, commissioner of the Alaska Department of Natural Resources, told the GAO that while "previous state administrations could have increased its regulatory presence," Gov. Wally Hickel "has established a proactive approach" to monitoring the pipeline.

The GAO, the investigative arm of the Congress, was asked to investigate the pipeline system by Rep. George Miller, D-Calif., a month after the Exxon Valdez tanker ran aground in Prince William Sound and spilled almost 11 million gallons of oil.

"It is extremely disturbing that more than two years after the Exxon Valdez spill, oversight of one of the nation's most important energy sources remains insufficient," Miller said in a prepared statement.

"The Congress authorized the pipeline in 1973 only after assurances from the oil industry and the Nixon administration that it would meet the toughest standards for the protection of the public and the environment," said Miller, the chairman of the House Interior and Insular Affairs Committee.

"Now we have learned that the government turned its responsibility over to the industry and the industry betrayed its promise to the public," he said.

The sharpest criticism in the GAO report was of the federal Bureau of Land Management, a division of the Interior Department which has more authority than any other federal or state agency to monitor the pipeline system.

Despite the fact that it can bill all of its costs directly to Alyeska, the GAO said, the bureau did virtually nothing. The report said one agency official in Alaska told investigators that the "BLM does not view itself as a regulator."

"Instead, BLM has relied on Alyeska to meet specific monitoring and surveillance requirements" without much independent checking or follow up, the GAO said.

The result has been that even in those instances where weaknesses or violations were detected, the BLM has no paperwork documenting what was done to address the problems.

"When a violation was identified, BLM inspectors generally did not prepare a report because, according to BLM officials, corrective action was usually taken immediately by Alyeska," the GAO said.

Numerous examples of poor BLM oversight were documented, including BLM's failure to act on knowledge that measures to protect buried sections of the pipeline from corrosion were deficient.

"Until Alyeska identified corrosion in 1989, we found no evidence of any independent regulatory follow-up to assess whether Alyeska's corrosion prevention and detection system was working as planned or required modifications after pipeline operations began (in 1977)," the GAO said.

Alyeska has replaced an 81|2-mile section of buried pipe and may have to replace more. It also is spending more than $110 million to repair corroded pipe at various pump stations along the pipeline route, according to the report.

In another example cited in the report, the BLM's oil spill coordinator became concerned when Alyeska reduced the number of supervisors stationed along the pipeline in the mid-1980s because there would be insufficient management in the event of a spill.

But, the GAO said, the coordinator "did not draft a report on this issue, he said, because BLM management expressed little concern in pursuing the matter."

After the Exxon Valdez spill, however, the GAO said that the BLM was quickly singing a different tune.

"BLM noted concern with a growing weakness in Alyeska's oil spill response capability, citing the loss of almost 50 percent of the trained oil spill response managers," it said.

The U.S. Department of Interior BLM's parent agency called the earlier draft report "simplistic."

"The GAO report should recognize the historical willingness of Alyeska to work in harmony with the Department of the Interior," the agency said. "This cooperative working environment has not created the need for an adversary regulatory process to be put in place."

Among other findings in the report, the GAO said:

* There has been no testing to determine if Alyeska's computerized leak- detection system along the pipeline works, despite evidence that it does not. None of the 14 spills that have occurred along the pipeline so far, including including one involving 630,000 gallons, has been detected by the computer system.

* Regulators have done little to address geologic hazards. It said, for example, that regulators have not investigated measures Alyeska took to protect against landslides at the Valdez terminal and along the pipeline corridor even though Alyeska records show it has had some early warning equipment failures.

* Regulators didn't begin monitoring the 18 huge oil storage tanks at Valdez, which together hold 378 million gallons of oil, until after Alyeska reported in 1989 that corrosion had been detected. "This regulatory inattention occurred, in part, because the regulators were uncertain of who had jurisdiction for monitoring the tanks," the GAO said. "In the absence of monitoring by other regulators, BLM could have and should have stepped in."

* Until after the 1989 spill, annual approvals of Alyeska's oil spill contingency plans "were based primarily on undocumented observations by the BLM oil spill coordinator."

* Despite federal law requiring that the pipeline be operated in a manner that minimizes environmental damage, there has been no monitoring to ensure that requirement is being met. "While many studies have been undertaken to examine the pipeline's impact on particular species and habitats, we found that no long-term monitoring program to assess (the pipeline's) overall impact on the environment has been developed," the GAO said.

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