BP's Alaska Mess: Why the Company Has to Sell Its Holdings There

Last Updated Nov 22, 2010 2:33 PM EST

BP's Alaska unit, just days away from wrapping up a three-year criminal probation stint, is back in the regulatory hot seat. Once again, it's because of problems with the company's pipeline system and claims -- this time from its federal probation officer -- that BP continued negligent behavior even after pleading guilty over its 2006 Prudhoe Bay spill.

At this point, BP should look seriously at selling its Alaska holdings -- an option that's been widely speculated -- as part of its $30 billion divestment plan to pay for the Gulf oil spill disaster.

From Reuters:

A 2009 spill of crude oil from a ruptured pipeline at the BP Exploration Inc.-operated Lisburne field showed that the company had failed to undertake the reforms it promised in its 2007 Prudhoe Bay criminal plea agreement, federal probation officer Mary Frances Barnes said in a petition filed Wednesday in U.S. District Court in Alaska.
If the court agrees with the petition, the judge could revoke BP's probation and issue a sentence, which could include fines.

The troubling part here is BP has spent considerable money and effort correcting its problems in Alaska -- even replacing its entire Prudhoe Bay transit pipeline system to the tune of $500 million -- and it still can't seem to get its maintenance regiment in line.

The 2009 spill, for example, occurred after ice built up and caused too much pressure to build up within the section of pipeline. This event didn't just suddenly appear. The company reportedly received some 165 days of low-temperature warnings before it found ice. Fifteen days later, the rupture was discovered, The Guardian reported. This means BP ignored a lot of alarms and warnings. And it ignored its own history. The company had a pipeline rupture from ice as far back as 2001, the Guardian said.

And earlier this month, ProPublica obtained an internal BP report that shows as of Oct. 1, 2010, at least 148 BP pipelines on Alaska's North Slope received an "F-rank" from the company. That means inspections have determined that more than 80 percent of the pipe wall is corroded and could rupture.

A smaller, more manageable BP is the company's best bet. And that means ridding itself of the areas that it's struggled to maintain despite large investments. As I've noted before, BP simply can't afford another environment or public safety disaster. I'll add "extended periods of probation" to that list.

And even with a sale, BP will be impacted. Each incident is just another blemish that will not only cause it some financial pain now, but down the line, say when it seeks out a new deep water drilling permit.

Photo from BP
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