Online NewsHour: Analysis Pipeline LeakAffects Enviroment I lAugust8,2006| pBS

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Alaskan oil Pipellne Leak RaisesEnvironmentalconcerns

The oll qlant Britlsh Ptroleumwlll shut down most of lts productlon at the PrudhoeBay oll neu h Alaska because ofcorroded plpeltnes.An hdustry speclallst outllnes the envlronmental problcms wlth the BP slte and the prestdentof Bp ExplorattonAlaska explalnsthe company's resgonse.

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GIA/EN IFILL'Now, to queslionsaboutwhat wentwrong at the Prudhoe Bay oil fieldin Alaskaand its possible impact.For the record,the operatorof the oil frel<', 8.P., is a NewsHour underwriterRay Suarezbeging our coveEge with some bac*grouncl. RAY SUAREZ: Wift B.P 's announcement it was shuttingdownthe nation'ssingle-biggest that sourceof dornestic crudeoil cameofficialapologies. BOB MALONE'Chairman and President, B.P NorthAmerica:B.P.deeplyregretsthat it's beennecessary us br to takethis draEtic action. RAY SUAREZ: Speakingat a newsconference yesterday, Bob Malone, chairman B.p Arnerlca, of said the world'ssecond-largest companywas beginning tum ofithe taps at its prudhoeBay productonsite after oil to severecorosion was discovered mostof its 22 milesof transitpipeline. in BOB MALONE:B.P.wilt commithe necessary humanand financialresources @mpletethis job safelyand as to quic*.ly po6sible. as MY SUAREZ:PrudhoeBay ls the largestoilfield in NorthAmerica.Located 6s0 mitesnonh of Anchorage, it spaeads over morethan 200,000acres. The B.P.facilitywas producing about2.6 peroent the nation'sdailysupplyof oil. or about400,000banelsa of day. MalonesakJit couldtake weeksor monthsto replacethe pipelines, the companywill shoreup and infi'astructure, evaluatemaintenance safety,and, if possible, and keepsomepartsoperational. BOB MALONE: want to focuson four prioritles. We The first is to assurethe safeg and integrity ouroperating of infraskucture. Secondly, minimizeany impactto the environment. to Third,lo continue @operateand work to closelywith the agencies,both stateand federal.And to restoreproductonas soonas it is safely- and lwant to reinforce "saby' - possible. RAY SUAREZ:B.P operatesthe PrudhoeBayfield for itselfand nine othercompanies, including ConocoPhillipsanclExxonMobil. B.P.officialssaidtre agingpipelinesystem,builtin the 1960sand'70s, had not been cleaned properly over lhe years. STEVEMARSHALL, President, B.P Exploration Alaska:Clearly,in hindsight, that p,ogramwas insuficientand

60o_1_
Exhibit No. Worldwide Court Inc.

Online NewsHour: Analysis I PipelineLeak Affects Enviroment I August 8, 2006 | pBS

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goingfurward. will be rectified

Federal government regulations

RAY SUAREZ: The conosionproblem was only detected afler govemmentorderedinspec{ions following a pipellnerupturein Marcfithatcausedthe biggestoit spillever recorded Alaska'sNorth on Stope,up to 2t0,000 gauorls. The spill is also he subFcl of a criminalinvestigalion B.p ,s Alaskanoperations. of Now,concemsaboutoversight and environmental risksat PrudhoeBay.For that,we fum to Lois Epstein, senior engineer and oil indusry specialist cook InletKeeper,a not-for-profit at conservation watchdoggroupbased and in Alaska.She'salso a memberof the federalgovemmenfsPipetine SafetyOll AdvisoryCommittee. Lois Epstein, your viaiv,why did this happenin prudhoeBay? ln LOIS EPSTEIN, SeniorEngineer, Cook InletKeeper:l'm actualty 100percentsure why it happened. not conqsion is a verycomplicated buslness. Thereare lots of reasons why it couldhave happened. And if you trust the mediareportstrom 8.P., they'renot loo percentsure why it happened why tte conosiongot and this far beforethey werefeelingthe obtigation actualty to shut downtheh operatbns. I can telfyou, ho$,ever, the federalgovemment's that pipetino safetyrutesdo not applyto this type of pipetine, and hat has to at least have@ntributed the problem. to RAY SUAREZ: Well,explalnthat. ls thereno eitherAlaskaor federalgovemment oversightof whetherthose pipelines beingmaintained properlyover the long haut? are LOIS EPSTEIN: This is a low-pressure pipetine locatedin a mal areathat'snot near@mmerciapy navigable u/atersThat'sthe exemption. it were a higherpressurepipeline if it were locatedwhere therewereieople lf or more around,it have beenregulated conosion,for its design,br operations mainlenanco. for and lf it was in a particular type of environmentally sensitive area,whichI believethis pipelineis, it wouldhavehadto use smartpigs,whichis a devicethat goesthroughpipelines, looksfor wall thinning. Thosedevi@sare now beingusedonly becausethe federatgovemment came in afier the largeMarchspilland saidthat B.p needslo look and use thosedevicesand see what the wall continueis, and that resultedin the decisionto shut down. At the statelevel, RAY SUAREZ:So tte federalgovemment in a sense,in a reactive is, role,only afier a spilttike last Mardrb wouldit come in and tell B.P.whatto do on the tine? LOIS EPSTEIN: Thafs right,and thafs unfortunate. this type of pipeline For wherethere is an exemption, the federalgovernment now considering is removingit, and Congress absolubtyconsHering is tookingat removing this exemption becausofwhat happened and its enormouseconomic consequences, bothto the countryani certainly consumers to and to smallbusinesses. At the statelevel,there ars somerequirements. However, stateatsowas not doingits job. lt wasn'tout in the the field. lt wasn'tfiningB.P.when therewas a spill.Therewas anotherspillat a B.p. piplineon the i,lorthSlope that was very seriousin May of 2003. Onceagain,no fines. Its a troublingsituation when the govemment bets that they are so closeto the industy, they,renegotiating with them on a very big projectthat wouldbringnaturatgas to the lower48, there'sa conflictof interest So at ftL stab level,there'sa probtem, well. There'sno federalregulation, the state rulesand enbrcementare not as and workingwell.

Lois Epstein
Cook tnlet Keeper .. The federal governmenfs pipeline safety rules do not apply to this type of pipeline,and that has to at least have contributed to the problem.

Regulating other pipelines

RAY SUAREZ: Well, does an incident this kind put pressureon the stateto tightenup its rgulatory of regime? LOIS EPSTEIN:lt does, but t thinkit's important your viewersb rememberthis Alaska.We'rea resource for is development state.We dependon the oit industryfor close to g0 percrnt of lhe govemmenfsrevenue. Thisis not a placewhere you'regoingto get very toughenvironmenlal enfurcement.

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we had somegoodrgulations place.Thereare somegaps.The conosionrequiremeilsat the statetevel in are nowherenearas stifias the federalrequirements, w6 are reallycountingon the bderal requirements so to tal(e up the slact(when the statedoesn'tdo its job. RAY SUAREZ: Wbll, givenwhatyou saidaboutthe reasons why therwere no regulations this paru61rlar on transportline - becauseit's loutpressur, because was awayftom water - are there a lot of orherpipelines it in your statethat mightbo in the samecondltion that this one was in?

Lols Epstein
Cook lnlet Keeper This is Alaska,we're a resource development state, we dependon the oll hdustry for close to 90 oercent of the government's revenue, Thls is not a place where you're going to get very touoh environmental enforcement.

LolS EPSTEIN: Thereare <tefinitely someother pipelines. knowwe haveotheroperators lhe slope,on We on the NorthSlope.Vvehaveoperators cook Inlet.That'snearAnchorage. in Thereare operators aroundthe oounty that are goingto be kept out of the federalregulatory frarnework because this particular of exemplon. It's up to the federalgovernment put in placea regulalory to regimethat makessenseand prevenls this typeof seriousproblsm.And of course,they haveto be out lhere inspecting enforcing, well. and as RAY SUAREZ: Well,the companyhas responded shutting by dorvnthe line,startingto do moreinspect'ons on remaining lines.In your view, havethey madea good-faith effortto what they'vediscovered, far as the as condition theiroperations? of LOIS EPSTEIN: glad B.P has takenthat pro.active I'm stepto shutdown, but I think it's important remember to that therewas enomous wall thinningof this seriesof pipes,over 80 percentIn some places.That means only 20 percentof the pipe was remaining. And from an engineering standpoint, lookingat lhe industry standards, they were prettymuchforcedto do this shutdownbecause there are liability issues.And hats the failbackposition.lf you don,thavethe goremment regulatlons you don't havethe Industry and doingwhat it needsto do in the first place,then you havethe court systemand the industrystandards will kick in. that So, you know,there are sevrallevelsof attention here,but I thinkit's a fair queslionaboutwhetherthey did this to ensuresafetyor becausethey reallyfelt they had to. But eitherway, I'm glad that they are shutdorvnright now to get some new pipe in place. RAY SUAREZ: Well, giventhe stateof ptay,can oil be extracted safetyto the environment in from a placlike PrudhoeBay? LolS EPSTEIN: \Abll,B.P with all its resources, its accessto experts,corrosion all exportson staffandoutside, it's lally troublingto me as an ngineer as an Alaskan,as an American, that they were not able to preventthis kind ofcorrosionand even now donl knowwhattho exactcausewas. I thinkit sndsan importantmessage thosewho are decidingaboutwhetherwe shouldbe drillingin ns,v to areaswhen we don't even do a$ gooda job as we shouldbe doingin exisiingareas-And that includes araslike lhe arcticrefuge,openingup new areasofrhore. It's an important question.V\b'reat an enginer crossroads this country.and we rallynesdto makesome in decisions: we continuewith oldertechnologies ar knownto be clirtyand have problems? do we Do that Or moveto newer,renewable, and othertypasof energythat are lossdependent and less likelyto cause probfems, environmental less likelyto causeglobalwarmang, these kindsof unfortunate and spill sftuations and disruptions? RAY SUAREZ:Lois Epstin,thanksfor beingwith us. LOISEPSTEIN: Thankyou.

B.P.'s regulatory system

RAY SUAREZ:Now a response fiom B.P SteveMarshallis president B.P. Exploration of Alaska.Heoversees prudhoeBay for the company. companyoperationsat all of Alaska's fields,including oil Mr' Marshall,you heard what Lois Epstinjust said about a sort of re-examinatbnof whefier oil can be exhacted with safetyto the environment trom that area. lMrat,syotrr response?

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STEVEMARSHALL, President, B.p Exploration Alaska:Ray,beicre I answerthat question,ld tiketo just add my apologyto your viewersandto the nationfor the actionswe'veundertaken disruptthe supplyof to oil. And I pledgemy commitment that of my teamto do everything can to get the production and we of crudeoil from PrudhoeBay backto the nationas quicklyand as safelyas we possiblycan. That'sthe job we,recommitted to do. I certainly regretthe leaksthat haveoccunod,and certainlyit has revealed gap in our conosionmanagement a system'one whichis very comprehensive, whichreliedon a loi of inspoctions, clearlythat wasnt en;ugh. but And one thing l'm poud to say is lwork fora companythat is committed leam from incidents mistaties, to and and we are pledgedand committed do thingsfar, far betterin the futuregoingfcMards. to RAY SUAREZ:Ms. Epstein notedthat, because this was a lour-pressure and becauseit was not near hrge line bodiesof water.therewas a fairfytooseregulatory standard appliedto lhat pipeline. govemnrent W'rthout looing over your shoulder whatdid B.P.'sown intemalstandards reguireas far as inspclion and maintenance that of line? STEVEMARSHALL. me, he regulation we,llalwaysabideby whateverregulations. as those For And change, we will clearlyadopt,and adapt,and meetthose. For me, whatwe'reaboutis aboutdoinggood business, and goodbusiness aboutp.oducing is energysafely. wilhoutharm to people,withoutdamageto the environment. whenever find a gap in our systems And we and somethlng this occurs,r re take it very seriousty, like whetherit's a lov\r-pressure systemor a high-pressure system. \Mat we relledon was a seriesof ultrasonic testsand did not rely on maintenance pigsing,whichis something that'susedcommonly acrossthe industry. we do over 100,000 But inspections everyyear of our systms. \,\rethoughtthat was suffcient clearty, wasn,t.Goingforuard,we need to put h placesystems, it induding pigging'and uttrasonic testing,and whatevertechnology needto brlngto bearto makesure an incident we like thisdoes not happen again, RAY SUAREZ: I unde6tand,a pig is something As that movesthroughthe line and breaksup congestion and breaksup sludge.v\/hafsa smartplg, though? STEVEMARSHALL. You?eabsolutely right.The pigginglhat u,edo is whatwe calt a cleaningpig which removesthe solidsand the sedimenls the waters.A smartpig is a devicethats put throughthe line,an oil in line or a gas line, and it measuGsacrossthe circumference a pipe,the wall thbkness,the entiretyof the tine.That of processed. data is We analyzethat, and then it allowsus to precisely pinpointwherethere may be wall thickness losses. can \A/e then go back and use othertechnQues, suchas ultrasonic tesung,to conffrmor verifoor conoborate that information. And in fact, thafs whatwe were doinghis woekendwhenwe foundthe mostrecentleakon the transit line. RAY SUAREZ:well, whenwas the last time a smartpig had been run throughthat line? STEVEMARSHALL. srnarlpig had not beenrun throughthis line in its history. A RAY SUAREZ:Wrtch is how tong? STEVEMARSHALL. This line has beenin operation since '1977And typically, this is dry crudeoit.The gas,tre water,and the sands havebeenremovedin the upstream facilities. And we generally consider thls to be a lowrisk lluid, a dry lluid. Therewas some sc.tlein the lin in the '90swhiclrprecluded beingable to pig.And because that,we of increased levelof ultrasonic lhe testingof theselines on a frequentbasis.And wherewe foundand hrhere do we find that eitherthe wall thickness loss is too high or the crrrosion rateis too high.we incrcasthe frequency of testingand take the appropriate actions,whetherits repairs,addingsleevesorwhateverwe needto do to get that line inlo shape. \Mat we found in this incidence smallpitting,very discreetand localized ls plttingthat our techniques were inadequate detect,and that'scloarlysomelhing need to correctgoingforwards. to we

Steve Marshall
BP Gotngforward. we need to put h place systems,Includlng plgglng.and ultrasonlc testhg, and whatever technology we need to brlng to bear to make sure an incldent llke this does not happen a9aln.

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The way forward

RAY SUAREZ:lfs reported that someof the liningsof he pipe linesthemselves lhinnedfrom a thirdof had an inch downto 4/100thof an inchin thickness. /hatcontributes that kind of \ to thinning? And mightlherebe a problemwith the materials usedin the produciion the line itsel? of STEVEMARSHALL. The Prudhoe Bayfluiclis a highlycpnosiveenvironment. rely very muchon chemicals, we corosion anhibitors, probct all of our equipment, just pipelines, manyof ouivessets to not bul and pumpsand compressorsTypically, that is what! usedin the inclustry of6et what couldotherwiseresuttin aboul quarter to a of an inchper year of wall lossotherwise. Wlat may havEcontribuled this case to the conosionis the acarmulation solidsanct in of the inability protect to some of the pipe itselftrom microbial conosion.That is the betief;it's by no meansproven.so the investigations that are ongoingright now will try and determine precisely exactmcfianism the and afiowus to modify our programs goingfoMards. RAY SUAREZ: And finatly,Mr Marshall, word camefrom B.P. this afternoon that the companymay be abteto salvagepart of the production from that areawhilerepairoare beingmade.How long do you thinkifs goingto be untilyou'reup and runningagain? srEVE MARSHALL. very diffcultto say precisely. lt's Ray.we are workingright now amongst ourstves with our commercial partners, with the stateand federalagencies, lookat what we can do to incpase inspction, to to giveconfidence the remaining in linesthat havenot leaked. And only if we're satisfed -- and moreimportantly the agenciesare satisfied if joinily- that we can say it is safe to operatewill we do so' V\b'reproceeding with thatwork aroundthe clock,and hopefully over fre *it f*, d"ys we'll be able to come ug with a planof ac$onthat we can movefomard on. RAY SUAREZ:SteveMarshall fom 8.p., franks for beingwith us. STEVEMARSHALL. Thankyou.

Steve Marshall
8F What may have contributed in thts case to the corrcsion is the accumulatlon sollds of and the inabillty to protect some of the pipe Itself from mlcrobial corroslon. That is the bellei it's by no means proven.

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