BP answers to Congress

Scott Tong Sep 7, 2006

KAI RYSSDAL: You could fairly call it being taken to the woodshed. We, though, will just say the British oil and gas company, BP, got a good talking to by lawmakers today. BP runs Alaska’s huge Prudhoe Bay oil field. It’s the biggest one we’ve got. And it’s down to 50 percent production because of a corroded pipeline. There’ve been accusations BP was lax in its inspections of those pipelines. And today on Capitol Hill Texas Republican Joe Barton didn’t hold back at all.

JOE BARTON: But I’m even more concerned about BP’s corporate culture of seeming indifference to safety and environmental issues. And this comes from a company that prides itself in their ads on protecting the envirnoment. Shame! Shame! Shame!

BP officials recovered enough to say they’re hoping to start pumping again from the closed parts of Prudhoe Bay by the end of October. But Marketplace’s Scott Tong reports the problem might be bigger than just one rusty pipe.

SCOTT TONG: The phrase of the hearing today was “smart pig”: That’s oil-company-speak for little machines that travel inside pipelines, hunting for corrosion. So, why did BP not let the pigs out for 14 years at the Alaskan pipeline that eventually leaked?

Here’s BP executive Steve Marshall today, before the House Energy and Commerce Committee.

STEVE MARSHALL: In retrospect, we should have pigged these lines. And going forwards, we absolutely commit to a full program of maintenance pigging and smart pigging.

That apology and promise are part of a larger damage control effort. You might say to put lipstick on the smart pig. BP calls the problem a one-time surprise.

And a trade group for the pipeline industry boasts a safety record that it calls “dramatically improved.” Not everyone buys that. Oppenheimer analyst Fadel Gheit says until oil prices soared lately, the pipeline business was no cash cow. And maintenance may have been a low priority across the entire industry.

FADEL GHEIT: Most of the pipelines, as we discovered now, have been basically poorly maintained and neglected. It was not worth it to attract new capital, because the returns were very low.

Regulators and lawmakers are now considering tighter rules, requiring frequent inspections of smaller, feeder pipelines like BP’s. But industry analyst Kevin Book warns politicians have to thread the needle here: more rules and compliance costs could jack up prices at the pump.

KEVIN BOOK: Neither Democrats nor Republicans want to have to live with a law that can be blamed for making energy more expensive.

It’s a tricky balance when you’re talking oil pipelines. One analyst calls them the arteries of the economy.

In Washington, I’m Scott Tong for Marketplace.

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