Alaska governor freezes state hiring

JUNEAU, Alaska -- Gov. Frank Murkowski imposed a state hiring freeze Wednesday because of the millions of dollars in revenue Alaska is losing as a result of the Prudhoe Bay oil field shutdown, and said he would support hearings into BP's maintenance practices.

The governor also said he would direct Alaska's attorney general to investigate whether the state could hold the oil giant fully accountable for the state's losses.

Earlier this week, BP said it would shut down Prudhoe Bay -- the biggest oil field in the nation -- because of a small leak and severe pipeline corrosion. Energy officials have said the pipeline repairs are likely to take months, curtailing Alaskan production into next year.

BP's problem of corroding pipes is worsening as the nation's largest oil field ages and more water and less oil is produced during drilling.

"Really, we are a giant water field," said Bill Hedges, BP PLC's corrosion expert, explaining that what comes up now during drilling is three-quarters water.

Water contains carbon dioxide, ideally suited to corroding pipelines.

The expected loss of 400,000 barrels per day at today's oil prices means the state is losing about $6.4 million a day in royalties and taxes, revenue commissioner Bill Corbus said.

The state receives 89 percent of its income from oil revenue; Alaska has no state sales tax and no personal income tax. The Prudhoe Bay shutdown will cut in half Alaska's total oil production and the resulting revenue.

Without money coming in from Prudhoe Bay, Alaska's government can operate for only about two months before going into the red, Corbus said.

"BP must get the entire Prudhoe Bay back up and running as soon as it is safely possible," Murkowski told a joint session of the state Legislature.

BP, the world's second-largest oil company, said it would replace 16 miles of pipeline that carries oil from Prudhoe Bay to the 800-mile Trans-Alaska Pipeline. The Prudhoe Bay field accounts for 8 percent of U.S. domestic output.

"We obviously apologize for the impact this is having on people, and we regret having to take these actions, but our focus is on safe operations and environmental protection, and that's the reason why we've undertaken the action we have," BP spokesman Neil Chapman said.

Because oil demand is so high and the nation's petroleum supplies are so tight, the shutdown has already driven oil prices up and could mean higher prices at the gasoline pump as well.

Three Democratic legislators released a letter to Murkowski calling on the governor to hold hearings and have BP officials explain under oath what they did, or failed to do, to maintain Prudhoe Bay's pipelines.

"Absent hearings, during which witnesses are sworn under oath and relevant documents are subpoenaed, the public may never learn the truth," the lawmakers said.

Murkowski said he would support the idea and "I fully expect hearings to occur."

Murkowski questioned why BP abruptly shut down the entire Prudhoe Bay field after finding a leak of only four to five barrels.

"What did BP learn last Sunday that it did not know previously that would cause BP to take such precipitous action?" Murkowski asked. He complained also that the state was not consulted before the decision was made.

"Certainly we will cooperate fully with the regulators as we've been doing," BP's spokesman said.

The governor also urged legislators to support a plan he developed with North Slope producers to build a $25 billion natural gas pipeline to Canada.

"I would ask all of you to please pull together with our administration and the producers so we can work as Alaskans through the challenge ahead," he said. "We simply have to get it done."

It appeared unlikely the governor would get support for the contract before lawmakers end their special session Thursday.

The state Department of Administration was still calculating the number of vacancies that would be affected by the hiring freeze. The freeze does not apply to essential employees, such as state troopers and prison guards.

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BP Alaska: http://alaska.bp.com