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Regulators clear BP in Alaska propane waste inquiry

Alex DeMarban

BP Alaska is not wasting propane at Prudhoe Bay, the nation's largest oil field, and is instead using it to force more of the valuable oil out of the ground, according to a decision by the Alaska Oil and Gas Conservation Commission.

"Selling one (barrel of oil equivalent) of propane today would result in a net loss of .93 (barrel of oil equivalent) of crude oil and recaptured (miscible injectant, a mixture used to increase oil production)," the commission said in the Aug. 17 decision [PDF].

Oil production is all-important in Alaska, where it funds most state services.

The inquiry was requested by Harold Heinze, who once led Arco Alaska back in the early days of North Slope oil production.

Heinze served for a decade as head of the Alaska Natural Gas Development Authority before resigning in January. His propane inquiry request came as a private citizen after he left the authority. During his time at ANGDA, the voter-created state body produced a plan to remove small amounts of propane from Prudhoe Bay so it could be sold to utilities and shipped to dozens of remote Alaska villages, where energy costs are crippling.

Propane comes to the surface with oil as a component of the natural gas. That natural gas could be one solution to high heat and power prices across Alaska, but it has never been commercially produced on the North Slope because there's no gas line to export it.

Heinze acknowledged that BP -- operator of the Prudhoe Bay Unit that's jointly owned by BP, Exxon Mobil Corp. and ConocoPhillips -- used some of the propane to recover oil. But he believed much of the propane was re-injected back underground doing nothing. Why not sell a little to help lower energy costs? Eventually, that propane might be stranded once the oil companies pack up and leave the state, he posited. That would constitute waste, right?

Not so fast, said the three-member panel perhaps best known as Sarah Palin's launch point toward the Alaska governor's mansion.

The propane removed from Prudhoe Bay and sold to Kuparuk, another North Slope oil field, helps recover oil there while having a negligible effect on Prudhoe Bay, the commission also decided. Producing more propane would require alterations to equipment that could force a six-to-eight month shutdown at BP's central gas facility where natural gas is processed into usable components, the commission found.

"Propane is not being wasted," the panel concluded in a decision signed by commissioners Cathy Foerster and John Norman.

Dawn Patience, a BP Alaska spokeswoman, said BP has invested in oil recovery efforts since the early 1980s.

"We're glad the commission agreed the greatest benefit to Alaskans and the state is using propane to get more oil out of the ground," said Patience, adding, "that's what they get royalty and taxes from," referring to the state.

Rural Alaskans have sought ways to lower energy costs for decades, but there's been no statewide solution. Some ideas, such as the propane concept, wouldn't involve construction of a costly natural gas line.

Another such plan was recently dusted off. It would turn the Slope's natural gas into electricity near its source and ship it across the state on a power grid. Time will tell if any of the ideas ever become reality.

Contact Alex DeMarban at alex(at)alaskadispatch.com