Adequacy of the Regulatory Oversight of the Trans-Alaska Pipeline and Terminal

Published by the Government Accountability Office on 1990-03-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                    United States General Accounting Office

For Release         Adequacy of the Regulatory    Oversight
on Delivery         of the Trans-Alaska  Pipeline   and Terminal
Expected at
9:LO a.m. EST
March 29, 1990

                    Statement    of
                    James Duffus III,        Director,
                    Natural    Resources Management Issues,
                    Resources,    Community,       and Economic
                    Development     Division
                    Before the
                    Subcommittee    on Water, Power and
                    Offshore   Energy Resources
                    Committee on Interior     and Insular     Affairs
                    House of Representatives

 GAO/T-RCED-90-55                                                 GAO Form 160 (U/87)
Mr. Chairman      and Members of the        Subcommittee:

      I am pleased to be here today to discuss            our work to date on
the adequacy of regulatory       oversight    efforts   intended    to ensure the
safe operation     and maintenance     of the Trans-Alaska      Pipeline    System
 (TAPS).   This ongoing work, being done at your request,              will  result
in a written    report  to you later     this year.

       The grounding       of the Exxon Valdez and other spills           in the last
year have riveted        the nation's     attention      and concern on lowering
the risks     of transporting      crude nil.        While tanker transport      has
received    the most attention,         concern has also been expressed          about
the safety     of the pipelines       that transport        oil across the nation
and the terminals        that serve as storage          and operations   centers    for
loading   the oil into tankers.           Of particular        concern, and the focus
of this hearing,       is the safety      of the 800 miles of the Trans-Alaska
pipeline    and the terminal       at Valdez,       Alaska.

      At this     point    in our review,        we have observed     the   following:

      --    While several      federal     and state agencies have the
            authority    to regulate       TAPS, the pipeline          has not received
            the systematic,       comprehensive       oversight       needed to ensure
            compliance     with operational        safety,      emergency response,
            and environmental        requirements.         This is of particular
            concern because of recent disclosures                 by the pipeline
            operator   that TAPS is experiencing              significant     corrosion

       --   The Exxon Valdez accident      and subsequent   concern about oil
            spill   preparedness   have increased   the frequency      of federal
            and state oversight     of TAPS. In addition,      efforts    are
            underway to improve agency coordination        and cooperation.
            These efforts     show promise if organized    and staffed


         The pipeline      runs from Alaska's         North Slope to the port of
Valdez,      crossing    three major mountain passes and over 800 rivers
and streams,        and has to endure Alaska's            often severe weather.              TAPS
supplies       about 25 percent       of the nation's        crude oil production,
delivering       almost 2 million       barrels     to the Valdez terminal              each
day.      Since it began operations            in 1977, the pipeline             has
transported        over 7 billion      barrels    of oil with only three major
spil1s.l        None of these spills         occurred     in the last 10 years.              A
break in the pipeline,            however, could potentially              spill     tens of
thousands       of barrels     of crude oil into Alaska's              rivers     and streams
before the flow of oil could be stopped.                     This is alarming           not only
because of the harm it would do to Alaska's                     pristine        environment,
but also because of the effect               it could have on the domestic                 supply
of oil and the nation's            balance of payments if the pipeline                   had to
be shut down for more than a few days.


        Responsibility         for preventing,      detecting,      and responding      to
pipeline     spills      rests primarily       with the Alyeska Pipeline         Service
Company (Alyeska),           the agent for the seven companies that own the
oil transported         by TAPS. This includes            the day-to-day     operation,
maintenance,        and repair      of the system.       The federal      and state
governments'        roles are those of safety           regulators,     overseeing
Alyeska's     activities         to ensure compliance        with federal    and state

        Oversight     of pipeline       operational      safety   requires      a
disciplined       approach,     including      clear    and enforceable

1The Department        of Transportation           defines   a major    spill       as one
involving  over       100,000 gallons.
requirements:      detailed    guidance      on monitoring,      follow-up,     and
enforcement     procedures:      adequate numbers of well-trained              staff:     and
clear lines     of authority      among the oversight          agencies.     We have
found that such an approach does not exist                  for the regulatory
oversight     of TAPS and that both the federal               and state governments
were caught off guard by the results              of recent Alyeska         inspections
showing that corrosion         is affecting      sections      of the pipeline        and
threatening     its structural       integrity.

       Monitoring       and oversight       of the pipeline         are diffused       among
several     government     agencies.        The Department         of the Interior's
Branch of Pipeline         Monitoring       within     the Bureau of Land Management
(BIM) is charged with enforcing                the federal       right-of-way       agreement
which serves as a contract             between the federal            government     and
Alyeska.      The agreement,        specific       to TAPS, covers almost all
aspects of the pipeline           and gives BLM broad authorities                 over
operational       safety,   contingency        planning,       and environmental
compliance.        In accordance       with the Hazardous Liquid              Pipeline
Safety Act of 1979, the Department                   of Transportaclon's         (DOT)
Office     of Pipeline     Safety     (OPS) is responsible            for overseeing      the
operational       safety   of all interstate           pipelines      and some intrastate
pipelines,      including    TAPS.2

       The state of Alaska's      Department     of Natural     Resources,     under
a state right-of-way       agreement,     has responsibilities       similar     to
those of BLM for state-owned          land.   The state's      Department     of
Environmental     Conservation    is responsible      for enforcing       hazardous
waste and air and water quality           laws along the pipeline         as well as
at the terminal.

2DOT may delegate     responsibility  for inspecting     intrastate
pipelines  to individual      states. Alaska has chosen not to develop
such a program and, as such, DOT retains       responsibility       for
pipelines  in Alaska.
        Despite these similar             and sometimes overlapping
responsibilities,            oversight     of the pipeline         has been limited.
Alaska's       Department       of Natural      Resources and OPS have both been
restrained        by a lack of resources.              The Department         of Natural
Resources has had one person assigned                      to overseeing       the pipeline
and has conducted            only a few limited          inspections.         Similarly,        OPS
has only 3 pipeline-engineering                  specialists       to cover 12 states,
including       Alaska.       None of these inspectors             were devoted
exclusively        to TAPS. OPS inspected               only small sections           of TAPS on
three separate          occasions      from 1984 through          1988.      Because of
limited      resources,       both agencies         have relied      heavily     on BLM to
monitor      the pipeline's         operations.         Although     the federal        right-of-
way agreement requires              Alyeska to reimburse           BLM for all its
oversight       costs,     including      salaries,      travel,     and equipment,          BLM
currently       has only two inspectors.                When assessing        Alyeska's
engineering        practices       and data, BLM relies           on Alyeska to identify
problems.         BLM officials        told us that they have not increased                     the
number of inspectors              over the years because no major integrity                       or
environmental         problems were discovered               with TAPS.

        The current        identification        of pipeline      corrosion      raises
several     questions        about the adequacy of prevention                and detection
measures and oversight               by federal      and state regulators.            BLM, OPS,
the Department          of Natural        Resources,     and Alyeska have been aware of
deficiencies        in the systems that were designed                 to prevent
corrosion,       including       coating      and taping,     since the pipeline          was
constructed.          These agencies          knew that during the laying             of the
pipeline,      there were instances             when the protective          coating    and
taping     were damaged.            They have also known that Alyeska was
experiencing        difficulty         with its corrosion        detection     devices,     and
thus, did not have a clear picture                    if or where corrosion           was
occurring.         However, the regulatory              agencies have not required
increased      monitoring         for corrosion,        and have not independently
assessed the corrosion               detection    data, instead        relying     on Alyeska's
judgment.       This inattention         has now resulted in a scramble             to
determine     the extent,      severity,     and cause of the corrosion             problem.

       In addition,     while BLM has overall           responsibility       for
contingency     planning,      it has not required         actual     or simulated       tests
of Alyeska's      emergency response capability.               For example,         the BLM-
approved oil spill         contingency      plan requires      Alyeska to conduct
annual full-scale        field    exercises     to ensure overall        readiness       to
locate    and contain      an oil spill.        While Alyeska conducts            annual
drills    to locate    simulated      oil spills,     BLM has not required
Alyecka to test its response capabilities                  by mobilizing       and
deploying    its containment        equipment.       Thus, Alyeska's        ability      to
mobilize    equipment      and contain      a spill   remains unknown.


       Oversight    of the Valdez terminal         also has been limited.         The
Environmental      Protection    Agency (EPA) and Alaska's         Department     of
Environmental      Conservation      have clear regulatory      authority     over
some aspects of the terminal's           operations.       However, both agencies
have limited     resources,     and, as a result,       the terminal      has not been
inspected     on a regular     basis.    Visits    to the terminal     have occurred
only when a problem was indicated.

        According      to BLM, it has not monitored         the terminal
operations        because the terminal        is on state and private          land.     BLM
does, however, monitor             the communications    and operations          control
center      for the pipeline,         which is located   at the terminal.
Similarly,        OPS inspectors       said they are uncertain       of their
jurisdiction        at the terminal        and have no regulations        covering
terminal       operations.        Because of this fragmented        oversight       of the
terminal,        no regulatory       agency has assumed full      responsibility         for
the structural          integrity     of the 18 oil storage     tanks at the
terminal       that collectively        hold up to 9 million      barrels      of oil.


       The Exxon Valdez spill             generated     a flurry    of activity
intended    to improve oil spill             prevention      as well as TAPS oversight
and coordination.          For example, after           the spill,     OPS initiated       its
first   comprehensive        linewide      inspection       of the pipeline,        and BLM
and Alaska's      Department        of Natural      Resources conducted          a
comprehensive       inspection       of Alyeska's        oil spill    containment
equipment.       All of these inspections              raised    concerns,     including
 (1) the adequacy of procedures               used to prevent        corrosion      and to
repair   certain      corroded      sections     of the pipeline        and (2) the
adequacy of Alyeska's            oil spill      emergency response capability.

        Alyeska,    BLM, and the Department         of Natural   Resources have
formed a joint       committee    to review pipeline       oil spill   contingency
plans.      The review will     include    an oil spill     risk analysis     which
will    be used to analyze personnel,          training,    and equipment     needs
for spill      response preparedness.         We have been told that the
results     of this review will        be used to update contingency         plans and
to incorporate       the latest     oil spill    response technology.

       The regulatory         agencies    are also planning     to increase      their
monitoring,       staffing,      and expertise.       BLM has identified      the need
for two corrosion           engineers,    the state's    Department     of Natural
Resources has established              an office   to monitor   the pipeline,       and
OPS is planning          to assign one of its inspectors          full   time to
monitor     pipelines       in Alaska.

       BLM is also pursuing      a new joint     oversight    office      composed of
all the federal       and state agencies with statutory           authority    over
the pipeline.       This combined entity       is intended    to provide      better
oversight     and coordination    as well as shared expertise             among the
agencies    involved:    however, participation        is voluntary.

        Our review of the adequacy of regulatory    oversight   efforts
intended    to ensure the safe operation   and maintenance    of the
pipeline    is still  ongoing.   While we are not in the position       to
make recommendations     at this time, there are some observations         we
would like to share with you.

      --   We agree with BLM that a unified              approach to oversight       is
           needed to ensure the safe operation               and maintenance      of
           TAPS. However, we do not believe               that voluntary
           cooperation     will    provide    a long-term     solution;    a unified
           approach may be short-lived             as disagreements     arise that
           cannot be resolved         and resources      are siphoned off for other
           competing   priorities.          We also believe      that designated
           leadership    is needed for areas such as prevention,
           detection,   and spill        response.

           Expanding prevention          measures may require      more up-front
           costs.      However, these costs could well be less in the
           long run and more effective            than the costs of mitigating
           the environmental         impacts of a major oil spill         or the
           disruption      of 25 percent       of the nation's    domestic   oil
           production.        In this regard,       it may be in the best
           interest     of all to secure a consistent          and stable    funding
           source to ensure adequate oversight              and resources    and to
           consider     requiring     Alyeska to reimburse      all reasonable
           oversight     costs similar       to what it is now required        to do
           for BLM.

       In summary, Mr. Chairman,    we see increased   and coordinated
regulatory   oversight   as a major component of an effective
operational   safety   and emergency response strategy    for TAPS.
      This concludes   my prepared remarks,  Mr. Chairman. I will   be
pleased to answer any questions    you or other members of the
Subcommittee   may have at this time.