The Brilliantly Profitable Timing of the Alaska Oil Pipeline Shutdown

For The Guardian (UK)

Is the Alaska Pipeline corroded? You bet it is. Has been for more than a decade. Did British Petroleum shut the pipe yesterday to turn a quick buck on its negligence, to profit off the disaster it created? Just ask the “smart pig.”

Years ago, I had the unhappy job of leading an investigation of British Petroleum's management of the Alaska pipeline system. I was working for the Chugach villages, the Alaskan Natives who own the shoreline slimed by the 1989 Exxon Valdez tanker grounding.

Even then, courageous government inspectors and pipeline workers were screaming about corrosion all through the pipeline. I say “courageous” because BP, which owns 46% of the pipe and is supposed to manage the system, had a habit of hunting down and destroying the careers of those who warn of pipeline problems.

In one case, BP's CEO of Alaskan operations hired a former CIA expert to break into the home of a whistleblower, Chuck Hamel, who had complained of conditions at the pipe's tanker facility. BP tapped his phone calls with a US congressman and ran a surveillance and smear campaign against him. When caught, a US federal judge said BP's acts were “reminiscent of Nazi Germany.”

This was not an isolated case. Captain James Woodle, once in charge of the pipe's Valdez terminus, was blackmailed into resigning the post when he complained of disastrous conditions there. The weapon used on Woodle was a file of faked evidence of marital infidelity. Nice guys, eh?

Now let's talk timing. BP's suddenly discovered corrosion necessitating an emergency shut-down of the line is the same corrosion Dan Lawn has been screaming about for 15 years. Lawn is a steel-eyed government inspector who has kept his job only because his union's lawyers have kept BP from having his head.

Indeed, it's pretty darn hard for BP to claim it is surprised to find corrosion this week when Lawn issued a damning report on corrosion right after a leak and spill were discovered on March 2 of this year.

Why shut the pipe now? The timing of a sudden inspection and fix of a decade-long problem has a suspicious smell. A precipitous shutdown in mid-summer, in the middle of Middle East war(s), is guaranteed to raise prices and reap monster profits for BP. The price of crude jumped $2.22 a barrel on the shutdown news to over $76. How lucky for BP which sells four million barrels of oil a day. Had BP completed its inspection and repairs a couple years back — say, after Dan Lawn's tenth warning — the oil market would have hardly noticed.

But $2 a barrel is just the beginning of BP's shut-down bonus. The Alaskan oil was destined for the California market which now faces a supply crisis at the very height of the summer travel season. The big winner is ARCO petroleum, the largest retailer in the Golden State. ARCO is a 100%-owned subsidiary of … British Petroleum.

BP could have fixed the pipeline problem this past winter, after their latest corrosion-caused oil spill. But then ARCO would have lost the summertime supply-squeeze windfall.

Enron Corporation was infamous for deliberately timing repairs to maximize profit. Would BP also manipulate the market in such a crude manner? Some US prosecutors think they did so in the US propane market. The Commodity Futures Trading Commission (CFTC) just six weeks ago charged the company with approving an Enron-style scheme to crank up the price of propane sold in poor rural communities in the US. One former BP exec has pleaded guilty.

Lord Browne, the imperious CEO of BP, has apologized for that scam, for the Alaska spill, for this week's shutdown and for the deaths in 2005 of 15 workers at the company's mortally sloppy refinery operation at Texas City, Texas.

I don't want readers to think BP isn't civic-minded. The company's US CEO, Bob Malone, was Co-Chairman of the Bush re-election campaign in Alaska. Mr. Bush, in turn, was so impressed with BP's care of Alaska's environment that he pushed again to open the state's arctic wildlife refuge (ANWR) to drilling by the BP consortium.

Indeed, you can go to Alaska today and see for yourself the evidence of BP's care of the wilderness. You can smell it: the crude oil still on the beaches from the Exxon Valdez spill.

Exxon took all the blame for the spill because they were dumb enough to have the company's name on the ship. But it was BP's pipeline managers who filed reports that oil spill containment equipment was sitting right at the site of the grounding near Bligh Island. However, the reports were bogus, the equipment wasn't there and so the beaches were poisoned. At the time, our investigators uncovered four-volume's worth of faked safety reports and concluded that BP was at least as culpable as Exxon for the 1,200 miles of oil-destroyed coastline.

Nevertheless, m'Lord Browne preens himself with his corporation's environmental record. We know BP cares about nature because they have lots of photos of solar panels in their annual reports — and they've painted every one of their gas stations green.

The green paint-job is supposed to represent the oil giant's love of Mother Nature. But the good Lord, Mr. Browne, knows it stands for the color of the Yankee dollar.

BP claims the profitable timing of its Alaska pipe shutdown can be explained because they've only now run a “smart pig” through the pipes to locate the corrosion. The “pig” is an electronic drone that BP should have been using continuously, though they had not done so for 14 years. The fact that, in the middle of an oil crisis, they've run it through now, forcing the shutdown, reminds me, when I consider Lord Browne's closeness to George Bush, that the company's pig is indeed, very, very smart.

* * * * * * * *

Greg Palast, an energy economist and investigative reporter, is the author of “Exxon Valdez: A Well-Designed Disaster.” His reports can be seen on BBC Television's Newsnight, Democracy Now! and in Harper's Magazine.

Beginning noon today, at www.GregPalast.com, read, “Trillion Dollar Babies: Big Oil's War Bonus” from Palast's recently-released New York Times bestseller, “ARMED MADHOUSE: Who's Afraid of Osama Wolf?, China Floats Bush Sinks, the Scheme to Steal '08, No Child's Behind Left and other Dispatches from the Front Lines of the Class War.“

Media requests to interviews(at)GregPalast.com