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MarketWatch: Shell USA: BP oil shutdown doesn’t merit new pipeline regulations

Last Update: 6:15 PM ET Aug 22, 2006

WASHINGTON (MarketWatch) — The discovery of severe corrosion in BP PLC’s (BP) Prudhoe Bay pipeline system doesn’t warrant the introduction of new U.S. regulations, Royal Dutch Shell PLC’s (RDSB.LN) top U.S. executive said Tuesday.

BP earlier this month shut off about half of crude oil production from Alaska’s Prudhoe Bay, the largest producing field in the U.S., after finding a small oil spill caused by unexpectedly worn-out pipelines.

“The regulations are appropriate,” said Shell Oil Co. President John Hofmeister while speaking at an infrastructure security conference here. “The judgment of the methodology and technology relied upon was not sufficient, but I don’t think its warrants a complete review of regulatory authority. We have a robust system.”

BP’s transit line at Prudhoe Bay isn’t classified as a “common carrier” route, meaning that it didn’t fall under the U.S. Department of Transportation’s oversight. The London-based energy giant’s failure to accurately gauge pipeline corrosion has spurred debate in Congress, with some lawmakers calling for changes to regulations. Even before the incident at Prudhoe Bay, U.S. agencies were working toward expanding the department’s purview to include a broader array of pipelines.

BP has said the ultrasound monitoring techniques it was using didn’t pick up on the extent of corrosion in its aboveground pipeline system. BP didn’t use a “smart pig,” a cylindrical droid loaded with sensors that travels through the pipeline, to detect cracks and corrosion in the pipeline, but has pledged to do so. The use of smart pigs is mandated for pipelines that fall under Department of Transportation jurisdiction.

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