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BP in Recovery? Not With its Alaska Pipelines in Peril

BP's problems unfortunately aren't just confined to its role in the Gulf oil spill this year. An internal maintenance report, obtained by ProPublica, describes severe corrosion throughout BP's extensive pipeline system in Alaska. From ProPublica:
The document shows that as of Oct. 1, 2010, at least 148 BP pipelines on Alaska's North Slope received an "F-rank" from the company. According to BP oil workers, that means inspections have determined that more than 80 percent of the pipe wall is corroded and could rupture. Most of those lines carry toxic or flammable substances. Many of the metal walls of the F-ranked pipes are worn to within a few thousandths of an inch of bursting risking, according to the document, risking an explosion or spills.
BP has been here before. As I noted in the past, safety and maintenance lapses have plagued BP's U.S. operations for the past five years.
  • Investigations following the 2005 Texas City refinery explosion that killed 15 employees and injured 170 others found management focused on cutting maintenance and capital spending costs.
  • In 2006, more than 260,000 gallons of oil were discharged during two different spills when BP's transit pipe in Prudhoe Bay burst. The leak, which was caused by corrosion in the pipeline, wasn't discovered for five days and became the worst spill in Alaska's North Slope.
  • Three BP gas and oil pipelines on Alaska's North Slope clogged or ruptured between September 2008 and November 2009.
BP has put considerable effort and money into upgrading the pipelines since the 2006 ruptures, according to documents viewed by ProPublica. A year after the pipeline burst, BP spent $195 million on maintenance in Alaska. Still, the problems persist on its 1,600 miles of pipelines.

BP simply can't afford another environmental or public safety disaster. Another accident, even a small one, would put the company's U.S. operations at risk, mean more fines and clean up costs and make it difficult to receive approval on future projects. New CEO Bob Dudley said it would take two years to rebuild the company in this post-spill era. The Alaskan pipeline problems will stretch out that time frame and add more costs either to upgrade the system or pay for the cleanup if an accident occurs.

And while the company is on track to sell off assets and has benefited from higher oil prices, its bag of cash isn't bottomless. The cost of the oil spill has already cut into its profits considerably. The company, which reported this week its third-quarter earnings, raised its Gulf oil spill costs another $7.7 billion, making it $40 billion so far. The higher-than-expected charge cut BP's pre-tax profits for the third quarter down to $1.8 billion, a 63 percent decrease from the same period last year.

Photo from BP
For complete coverage, see All Things BNET on BP's Gulf of Mexico Spill

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