Prudhoe Bay waste

I was driving home the other night and heard the tail end of a snippet of Chuck Schumer's bloveating about the Prudhoe Bay shutdown.

From what I understand, BP had a leak. When they investigated the leak, they discovered that the corrosion in the pipes exceeded the corrosion they would expect in those pipes based on their computer models. Therefore, they decided to shut down more pipelines in order to carefully assess the corrosion and their models. If true, this is very prudent, exactly what I would expect a company - whose green credentials are sound, BTW - to do. At a loss of short term profit, you figure out why your assumptions or your execution or whatever is wrong because doing so in in your long-term interests.

Let's understand a few things about the situation.

1. The law does not require periodic maintenance or corrosion controls on this type of pipeline. See this article in USAToday.
   
2. They perform periodic maintenance and corrosion analysis anyhow. I saw a show last year (Discovery Channel) that showed the use of maintenance pigs in the pipeline, but can't find a link to it. This is a high tech industry that takes every gallon spilled very seriously (and the more so as the prices rise).
   
3. There was a recent leak of 210 gallons that prompted an internal investigation. This was in the wake of a leak on another pipeline that leaked 201,000 gallons.
   
4. As the result of the investigation, they decided to do the prudent thing and shut it down. The shutdown will cost BP $30 million per day. Perhaps not so incidentally, it will cost the state of Alaska $6.4 million per day. This is not a decision made lightly. And also not one that is forced upon them by a regulator. And also, incidentally, one that is likely to cost them money in lost market share even if it does drive prices up in the short term.
   

So, there is no market failure here; maintaining these lines is in the interest of operators. They understand that so well that they actually monitor the lines and run sophisticated computer models and maintenance pigs with high tech telemetry. It is costing them money, but they are taking the long term rather than the short term view (another market failure claim defanged). But Chuck Schumer (a trained lawyer) and John Dingell (a lawyer who once studied chemistry) insist that this means that we need more regulation. Sez newly-minted petro-engineering expert Schumer,

"The bottom line is we cannot afford for this incident to be a canary in the mineshaft. Now is the time to aggressively search for and fix any other problems before another disruption causes a national energy emergency."

Schumer said officials should review the inspection schedules companies file to determine whether pipeline operators are adhering to their required plans.

What will regulators do? Insist that someone do maintenance on these lines.

Y'know, like they already do.

Other than that, this is a chance for guys like Schumer and Dingell to insist that we "get our energy house in order". One suspects that they mean something that requires lots more intervention than simply allowing drilling in ANWR, but it would be hard to square their calls for action and their belief that we don't need more or cheaper oil through such drastic measures.

Technorati tags: energy"market failure"regulation