[seadog] Alyeska expects smooth renewal of pipeline leases

Tuesday June 18, 1:55 am Eastern Time
Reuters Company News
Alyeska expects smooth renewal of pipeline leases

ANCHORAGE, Alaska, June 17 (Reuters) - The operator of the trans-Alaska oil
pipeline hopes for smooth renewal of the 30-year federal and state leases
that are due to expire in 2004, the company's president said in a speech
Monday. 

Alyeska Pipeline Service Co., the consortium that operates the 800-mile
(1,280 km) line and its Valdez marine terminal, has steadily improved
operations and proved itself worthy of renewal of the leases that allow it
to operate over state and federal land, David Wight told the Anchorage
Chamber of Commerce. 

"We take care of the pipeline in a very serious way. We're fully funded
relative to maintenance and operations. But we do believe we can continue to
do that and run the pipeline at a lower cost." Wight said. "It has been
cared for and will continue to be cared for in a way that physically, it can
last the next 25 or 30 years." 

So far, there have been no snags for the company's lease renewal, he said. A
draft environmental study has been issued, and public hearings are
scheduled, he said. 

"We hope to complete the environmental impact statement and satisfy the
issues around that by the conclusion of the year, and would like to finish
our application and have the right-of-way lease and grant renewed about a
year before it actually expires," he said. 

The oil line and its Valdez marine terminal now handle about 1 million
barrels a day, half the peak of 2 million barrels reached in 1988. 

That lower throughput has made it important for Alyeska's owners - BP
(London:BP.L - News), Phillips Petroleum (NYSE:P - News), Exxon (NYSE:XOM -
News), Unocal (NYSE:UCL - News), Williams and Amerada Hess (NYSE:AHC - News)
- to reduce operating costs, Wight said. 

"Our challenge at Alyeska is trying to get $100 million in operating costs
out of the system in the next three to five years," he said. 

The challenge includes the incorporation of enhanced security measures,
Wight said. "Security has in the past and continues to be a very significant
cost factor on the pipeline," he said. 

He did not elaborate on the exact measures taken after the September 11
attacks and an October incident in which a vandal punctured the pipeline at
its midpoint, causing a 285,600-gallon spill. 

Despite the cost-trimming, Wight said, Alyeska's operations are
significantly safer than they were in 1989, the year of the Exxon Valdez oil
spill. He said the company is committed to preventing problems. 

Alyeska's cost-cutting worries some critics. 

An environmental group last week issued a report that panned the lease
renewal process. Alyeska and government regulators have ignored important
problems, such as the effect that warming temperatures will have on the
pipeline's structure, said the report, by the Alaska Forum for Environmental
Responsibility. 

The report cited cost-cutting as a key reason for Alyeska's shortcomings. 

Cost-cutting pressures "are hugely ironic for two reasons," said the report,
written by Fairbanks economist Richard Fineberg. 

"The first is that as (the Trans Alaska Pipeline System) ages, it is liable
to require more money to provide the personnel and equipment necessary to
ensure safe operations. The second is that TAPS operates with a guaranteed
profit as a regulated entity." 



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