Anchorage Daily News

BP announced Monday it will replace miles of key pipelines across the giant Prudhoe Bay oil field, and executives admitted the company's program to find and prevent corrosion-caused leaks is seriously flawed.

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U.S. Rep. John Dingell, D-Mich.

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The announcements came a day after BP decided to shut down the nation's largest oil field, news that drove up crude oil and gasoline prices across the country and raised financial, supply and labor worries in Alaska.

BP executives said the oil outage could last weeks or even months.

One member of Congress, Rep. John Dingell, D-Mich., blasted BP for allowing sludge and corrosion to mount inside pipelines, causing a leak Sunday that prompted the shutdown.

"It is appalling that BP let this critical pipeline deteriorate to the point that a major production shutdown was necessary," said Dingell, ranking member of House Energy and Commerce Committee.

"BP must take all steps necessary to repair or replace problem pipelines quickly, so the American consumer does not pay for BP's laxity." He called for a congressional investigation.

BP executives, speaking to reporters in Anchorage on Monday morning, again apologized.

"BP deeply regrets that it's been necessary for us to take this dramatic action," said Bob Malone, president of BP America, a subsidiary of the British oil giant.

BP, which runs Prudhoe on behalf of itself and other owners including Exxon Mobil and Conoco Phillips, has a multimillion-dollar program to find and prevent leaks.

"Clearly, in hindsight, that program was not sufficient," said Steve Marshall, BP's Alaska president.

Executives said Monday that the company would replace 16 miles of large pipeline segments that cut across the heart of the Prudhoe Bay field. Known as transit lines, these major trunk lines within the field funnel oil into the trans-Alaska pipeline, which carries all North Slope oil 800 miles south to the tanker dock at Valdez. No part of the trans-Alaska oil pipeline itself is to be replaced, only the field's major feeder lines.

Replacing these pipelines will be a big and expensive job, although BP executives said price is no object at this point.

The job could mean a prolonged shutdown -- weeks or months, said Marshall -- of some or all of Prudhoe's average 400,000 barrels a day of production. The oil represents almost half of total North Slope output, almost 8 percent of the nation's domestic production, and 2.6 percent of total U.S. oil supply including imports.

The shutdown received extensive global media coverage, and the event moved commodities markets. North Slope crude, which is shipped almost exclusively to the West Coast, closed Monday at $75.68 per barrel, up $2.22. That's just shy of the record price of $75.73, set July 14.

Gasoline futures also rose, and some experts predicted retail prices at the pumps could increase by a dime a gallon. Experts said much depends on how long the Prudhoe outage lasts.

U.S. Energy Department officials said they'd consider loaning oil from the nation's strategic reserve to any West Coast refinery that runs short of crude.

Aside from refiners and consumers, state officials are keenly interested in the duration of the shutdown. Without Prudhoe cash in the form of severance taxes and royalties, Alaska's government can operate for about two months before going into the red, Revenue Commissioner Bill Corbus said Monday.

The Prudhoe shutdown could create problems for Alaska refineries, which make gasoline, diesel, jet fuel and other petroleum products for Alaskans. Some of the refineries are entirely dependent on North Slope crude oil to make their goods.

BP has been under pressure for months on problems in Prudhoe pipelines and on the company's practices in cleaning and testing those lines for thin spots caused by corrosion.

The scrutiny began in early March, when an oil transit line on the west side of the oil field ruptured, spilling 201,000 gallons of crude onto the tundra. It was the largest oil spill ever on the Slope.

Over the weekend, BP sent inspectors to check out a similar transit line on Prudhoe's east side after tests showed the line was infested with 16 weak spots possibly caused by corrosion. Around dawn Sunday, a work crew noticed a leak along the above-ground pipeline that ultimately resulted in as much as 210 gallons of oil spilling onto the tundra.

At that point, BP executives made the call: Shut down Prudhoe.

The oil field is more than 25 miles across, but the leaky pipe runs close to one of the field's main operations centers and only a mile from BP's corrosion-control office.

Bill Hedges, BP's North Slope corrosion manager, said Monday that he has a budget this year of $73 million to fight corrosion, an ever present threat in the oil field.

He said the transit lines weren't considered high risks for corrosion-related leaks because they carry only oil that's had corrosive water removed, leaving the oil ready for shipment to market. The water is removed in processing plants that are scattered across the oil field and are linked by the transit lines.

BP uses ultrasonic testing to find weak spots in the pipelines. BP managers thought this testing was good enough to find leaks, but Hedges conceded Monday that those tests, performed at random points along the pipelines, were inadequate.

"My suggestion now is we just didn't do it in the right spots," he said.

After the March spill, the U.S. Pipeline and Hazardous Materials Safety Administration ordered BP to use a more advanced testing device called a "smart pig," which slides through a pipeline looking for places where the steel pipeline wall is thinning.

A smart pig in late July found the 16 weak spots in the pipeline that leaked over the weekend. It was the first smart pig run through that pipeline since 1992, Hedges said. Federal regulators say more frequent tests should have been done.

The transit lines to be replaced are old, installed in the mid-1970s in preparation for the start of oil production at Prudhoe Bay in 1977. Hedges said the pipelines were designed to last 25 years, but they could work longer with good maintenance.

Finding suitable replacement pipe could be difficult, requiring a possible worldwide search, BP managers said.

The field shutdown will not occur all at once. Rather, BP workers will gradually shut down the field's hundreds of wells, taking care to mothball each with fluids to keep them from freezing in the North Slope permafrost. The shutdown process could take days, and so the field's 400,000 barrels of production will drop gradually.

BP executives said it's possible that portions of the field could be reactivated if inspectors can prove key pipelines are free of dangerous corrosion or if oil can be rerouted through other pipes. Thus, a long-term shutdown might not idle Prudhoe production entirely.

The shutdown has caused many other ripples.

Hundreds of people work at Prudhoe Bay, and speculation arose Monday on the fate of those jobs if the shutdown is protracted.

Veco Corp., a major oil-field service company, typically has 800 to 900 workers in Prudhoe Bay, and the company expects to keep most of them working during the shutdown, said Pete Leathard, president of the Anchorage-based firm.

Leathard, who came to Alaska in 1974 and helped manage construction and startup of the Prudhoe Bay field, said he expects to shift many of his workers to other North Slope fields where the oil companies are likely to try boosting production to offset the loss in Prudhoe.

Others will be needed to shut Prudhoe's wells and monitor and maintain them once they're idled. Even more support work will be required when BP starts replacing the old pipes with new, Leathard said.

Leathard, whose company also serves oil fields in the Lower 48, Canada and the Middle East, said the Prudhoe shutdown is the largest he's ever seen in his career.

"I've never seen one of this magnitude anywhere," he said. "The decision to do this was not taken lightly, I can assure you."

David Hebert, general manager of Nabors Alaska Drilling Inc., said he expects his North Slope crews also to keep working.

His company operates 17 drilling rigs on the Slope, and they'll need to be maintained and monitored even if production is temporarily halted, he said.

"We need to be there," he said. "You can't just turn off the wells we're working on."

Given the demand for trained oil-field workers these days, massive layoffs in the wake of the shutdown are unlikely, said Tim Sharp, business manager for the Laborers Local 942 union, whose members do all manner of jobs on the Slope from building ice roads to demolition work.

"It's easy to lay people off, but it's a lot harder to get them back," he said.

A greatly throttled-back Prudhoe means oil will take longer to slide down the trans-Alaska oil pipeline, which was designed to carry large volumes, said Mike Heatwole, spokesman for Alyeska Pipeline Service Co., the Anchorage-based oil company consortium that runs the line.

If Slope production drops by about half to 400,000 barrels per day, it will take twice as long -- 22 days -- to make the 800-mile trip to Valdez, Heatwole said.

The slower flow could cause trouble come winter, when the oil -- which comes out of the ground hot -- might cool and gum up as it spends more time inside the pipe. Engineers are working on a solution, Heatwole said.

Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590. Reporter Richard Richtmyer can be reached at rrichtmyer@adn.com or 257-4344.