Reporting from Seattle — Facing mounting criticism over cost-cutting, deferred maintenance and a corporate culture that discourages dissent, the beleaguered head of the company that runs the 800-mile-long Trans Alaska Pipeline announced Wednesday that he would retire in September.
Kevin Hostler's decision comes as two congressional subcommittees investigate Alyeska Pipeline Service Co.'s maintenance and safety records, and amid allegations that employees who expressed safety concerns were ignored or even punished.
The pipeline transports more than 13% of America's crude oil production. But as oil from the aging oil fields near Prudhoe Bay dwindles, it is operating at a third of its former capacity. Alyeska has moved to streamline staff and automate the remote pump stations that propel and monitor the oil on its journey from the far north to the massive tankers berthed in Valdez, Alaska.
Environmental groups and pipeline watchdogs have complained for years that Alyeska — largely controlled by BP because of that company's 47% stake as operator of Prudhoe Bay — has put cost-cutting ahead of safety, allowed lax operations and, through automation, begun to phase out or relocate staff that otherwise might be nearby to identify and respond to problems.
"Moving people out of the field is not a good idea, because when things go wrong and you've got an automated pump station, you don't know they went wrong," said Dan Lawn, a former Alaska Department of Environmental Conservation employee.
Lawn has documented years of safety complaints targeted at BP and Alyeska, many of which were not corrected. In addition, he said, at least one senior BP official who came up with a list of concerns was fired a week later.
Hostler is a former executive of BP. Federal and congressional overseers had begun to scrutinize BP's operations in Alaska even before the company's massive spill in the Gulf of Mexico, which exposed apparent regulatory neglect and corporate corner-cutting. Eleven people died in the explosion and fire that sparked the gushing gulf well, which continues to spew up to an estimated 60,000 barrels of crude into the water every day. BP, ConocoPhillips and Exxon Mobil are the major owners of the Alaska pipeline.
The announcement of Hostler's retirement comes as two congressional committees are investigating the allegedly punitive corporate culture within Alyeska that is said to target employees who raise safety and procedural objections, as well as an incident on May 25 in which an electrical failure at Pump Station 9 near Delta Junction caused about 5,000 barrels to spill from an overloaded storage facility into a containment area.
"From what I understand, federal investigators weren't allowed in there for about three days," said a congressional staff source who was not authorized to speak publicly. "They're investigating that. At the time, Alyeska told them they were concerned about fumes and the vapors, which I think is understandable — for a little while."
There was a tank farm fire at the same site in 2007.
The federal Pipeline and Hazardous Materials Safety Administration has filed eight enforcement actions against Alyeska over conduct dating to 2004, alleging safety, maintenance and procedural violations, and is seeking more than $1 million in fines. The company is contesting most of the actions.
"The systems aren't working. They were all checked out in '07 [after the fire] and said to be working, so this tells you the oversight process is also failing," said Richard Fineberg, a senior advisor on oil and gas policy to the Alaska governor in the 1980s and author of several reports on pipeline operations. "I can also tell you that the repressive atmosphere [inside Alyeska] is as bad as anything I've seen."
Congressional investigators also are looking at Alyeska's ongoing program to automate the pump stations and transfer much of the pipeline staff from nearby Fairbanks to the company's main office in Anchorage, 260 miles away.
Alyeska officials have said that will save money and allow employees to better communicate with each other while still being able to fly to pipeline sites in an emergency. Alyeska could not be reached for comment Wednesday.
"I think they call it realignment," the congressional source said. "But it's cost-cutting."
Hostler, who had previously told employees he planned to leave the company by the end of 2010, was BP's senior vice president for global human resources before joining Alyeska in 2005. Under his leadership, Alyeska improved its record of on-the-job injuries and earned the American Petroleum Institute's pipeline environmental performance and outstanding operator awards.