Trans-Alaska Pipeline: Actions to Improve Safety Are Under Way (Chapter
Report, 08/01/95, GAO/RCED-95-162).

Pursuant to a congressional request, GAO provided information on the
progress made in correcting deficiencies in the operation and management
of the Trans-Alaska Pipeline System (TAPS), focusing on: (1) whether the
planned corrective actions will address deficiencies in the pipeline's
electrical systems, quality, and preventive maintenance; (2) whether
regulators are taking action to improve oversight of the pipeline; and
(3) the root causes of pipeline deficiencies.

GAO found that: (1) the pipeline contractor has corrected about 62
percent of the almost 5,000 identified deficiencies as of April 1995,
but it does not expect to be finished until the end of 1996, 2 years
later than it had originally planned; (2) the contractor has corrected
most electrical problems, focused management attention on the quality
program, and is overhauling its maintenance program; (3) if the
contractor completes actions to address these deficiencies, the TAPS
problems should be corrected; (4) pipeline regulators are making a
concerted effort to increase staff and reorganize to strengthen their
focus on monitoring contractor operations; and (5) the root causes of
the pipeline's deficiencies include the contractor's philosophy of
reacting to problems rather than conducting programs aimed at prevention
and early detection and regulators' inadequate oversight of contractor
operations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-162
     TITLE:  Trans-Alaska Pipeline: Actions to Improve Safety Are Under 
             Way
      DATE:  08/01/95
   SUBJECT:  Crude oil pipeline operations
             Environmental monitoring
             Contractor performance
             Interagency relations
             Federal/state relations
             Emergency preparedness
             Maintenance (upkeep)
             Human resources utilization
             Safety regulation
             Oil resources
IDENTIFIER:  Trans-Alaska Pipeline System
             Valdez (AK)
             Exxon Valdez
             Alaska
             
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Cover
================================================================ COVER


Report to Congressional Requesters

August 1995

TRANS-ALASKA PIPELINE - ACTIONS TO
IMPROVE SAFETY ARE UNDER WAY

GAO/RCED-95-162

Trans-Alaska Pipeline


Abbreviations
=============================================================== ABBREV

  ACT - Audit Compliance Tracking
  ADL - Arthur D.  Little, Inc. 
  ADNR - Alaska Department of Natural Resources
  AIMS - Alyeska Integrity Management System
  AKOSH - Alaska Occupational Safety and Health
  ANSC - AKOSH/NEC Safety Compliance Program
  ARCS - Alyeska Regulatory Compliance System
  BLM - Bureau of Land Management
  CAP - Corrective Action Plan
  CMP - Comprehensive Monitoring Program
  DOI - Department of the Interior
  DOT - Department of Transportation
  EPA - Environmental Protection Agency
  GAO - U.S.  General Accounting Office
  IMMS - Integrated Maintenance Management System
  JPO - Joint Pipeline Office
  NEC - National Electrical Code
  PDC - Power Distribution Center
  PS - pump station
  QTC - Quality Technology Company
  SCADA - Supervisory Control and Data Acquisition
  TAPS - Trans-Alaska Pipeline System
  VMT - Valdez Marine Terminal

Letter
=============================================================== LETTER


B-261176

August 1, 1995

The Honorable Don Young
Chairman, Committee on Resources
House of Representatives

The Honorable John D.  Dingell
House of Representatives

This report is in response to a February 23, 1994, request from
Representative Dingell, former Chairman of the Subcommittee on
Oversight and Investigations, House Committee on Energy and Commerce. 
Subsequent to this request, Representative Young, Chairman of the
House Resources Committee, assumed oversight jurisdiction for the
Trans-Alaska Pipeline System (TAPS).  On March 28, 1995, Chairman
Young joined in this request.  The report provides information on the
progress made in correcting deficiencies in the operations,
maintenance, and oversight of the Trans-Alaska Pipeline System. 

As agreed with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 15 days from the date of this letter.  At that time, we will
send copies to the Joint Pipeline Office and its members made up of
representatives from federal agencies and the State of Alaska; the
Secretaries of the Interior and Transportation; the Administrator,
Environmental Protection Agency; the Director, Bureau of Land
Management; the President, Alyeska Pipeline Service Company; the
Chairman, TAPS Owners Committee; and the Director, Office of
Management and Budget.  We will also make copies available to others
on request. 

Please call me at (202) 512-7756 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
IV. 

James Duffus III
Director, Natural Resources
 Management Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The Trans-Alaska Pipeline System (TAPS), operated by the Alyeska
Pipeline Service Company (Alyeska), transports nearly 20 percent of
the nation's domestically produced oil and has operated for nearly 20
years without a major oil spill.  However, throughout the pipeline's
years of construction and operation, problems with the condition of
the pipeline, the quality assurance program of its operator, and the
effectiveness of the government's monitoring efforts have been
reported.  These problems have resulted in continued oversight by the
Congress.  For example, hearings held by the Subcommittee on
Oversight and Investigations, House Committee on Energy and Commerce,
in July 1993 raised concerns about the ability of the pipeline to
continue to operate safely and of its federal and state regulators to
ensure that it does.  A study commissioned by the Department of the
Interior's Bureau of Land Management (the Bureau) in August 1993 to
assess Alyeska's management and operation of the pipeline identified
22 categories of substantial--and potentially
threatening--deficiencies.  Other audits of the pipeline in recent
years have identified additional deficiencies.  In total, more than
4,900 deficiencies have been identified. 

Representative John D.  Dingell and the Chairman, House Committee on
Resources, asked GAO to (1) assess Alyeska's progress in correcting
these deficiencies; (2) specifically, determine whether the
corrective actions planned for three areas of
deficiencies--electrical systems, quality, and preventive
maintenance--will address the deficiencies; (3) determine whether
regulators are taking action to improve regulatory oversight of the
pipeline; and (4) identify the root causes of the deficiencies. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The 800-mile pipeline travels over federal, state, and private lands. 
Alyeska operates the pipeline for seven owner companies.  Six federal
agencies--principally the Bureau--and six state agencies--principally
the Alaska Department of Natural Resources--provide oversight.  In
1990, the Bureau and the Alaska Department of Natural Resources
created the Joint Pipeline Office (the Office) to better coordinate
federal and state regulatory efforts.  The Office's budget is funded
primarily by the Bureau and the Alaska Department of Natural
Resources.  However, Alyeska is required to reimburse the Bureau for
all reasonable costs related to overseeing the pipeline and, by
agreement, began in 1990 to reimburse the state for part of its
costs.  Staff are provided by the Bureau, other federal agencies, and
several state agencies.  Alyeska's budget is funded by the seven oil
companies that own the pipeline. 

In addition to the Bureau-commissioned study that identified 22
categories of deficiencies (these were subdivided into 208 specific
deficiencies requiring corrective action), TAPS' owners hired an
independent consulting firm in September 1993 to provide a
comprehensive, independent assessment of the pipeline's operations. 
The firm identified an additional 4,200 deficiencies.  Other audits
undertaken in recent years have identified as many as 500 additional
deficiencies.  Alyeska has set up a system to track the correction of
all 4,920 deficiencies.  Less than 2 percent of the deficiencies
dealt with structures, systems, and components that prevent or
mitigate the consequences of an accident or natural event that could
cause significant harm to the public or to the environment. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Alyeska has made progress in resolving the deficiencies, but it is
taking longer than originally planned.  In February 1995, Alyeska
estimated that it would be able to correct 85 to 90 percent of the
deficiencies by December 1995 and nearly all of the rest by the end
of 1996.  By the end of April 1995, Alyeska had corrected about 62
percent of the 4,920 identified deficiencies. 

For the three categories of deficiencies that GAO focused
on--electrical integrity, quality, and preventive
maintenance--Alyeska has taken substantive actions that, if carried
through to completion, appear to be adequate to correct the problems. 
Alyeska has corrected most electrical problems, focused management
attention on the quality program and revised the quality program's
organization and procedures, and is overhauling its maintenance
program. 

Although the Office's actions are not complete, GAO believes that the
Office is making a concerted effort to improve its oversight.  In
addition, in July 1993 the Director of the Bureau affirmed both its
authority as the lead agency within the Office and its responsibility
for providing comprehensive oversight.  Subsequently, the Office
increased its staff and reorganized to strengthen its focus on
monitoring Alyeska. 

According to the Bureau's study and a study commissioned by the
Office, the operating philosophies of both Alyeska and the Office--to
react to problems rather than conduct active, quality-based programs
aimed at prevention and early detection--were the underlying causes
of the deficiencies identified.  Alyeska and the Office are now
refocusing their efforts on preventing problems and improving
quality.  However, because much work remains to be accomplished, the
full effectiveness of Alyeska's and the Office's actions cannot be
assessed in the short term.  Alyeska has the primary responsibility
for ensuring that the pipeline operates in a safe, environmentally
responsible manner.  The key to its success depends on how well it
can create and sustain a commitment to quality throughout its
organization.  The Office's success depends on having adequate
staffing and funds over the long term.  The Office's funding is
provided largely by Alyeska, which will be under continuing pressure
to reduce its costs as the flow of oil through the pipeline
decreases.  In addition, the Office will also be under pressure to
reduce its government staffing levels.  Either or both situations
could adversely affect the Office's ability to maintain adequate
oversight. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      ALYESKA MAKES PROGRESS, BUT
      CORRECTING DEFICIENCIES IS
      SLOWER THAN PLANNED
-------------------------------------------------------- Chapter 0:4.1

By the end of April 1995, Alyeska had corrected about 62 percent
(3,030) of the 4,920 deficiencies identified.  Among the 208 items
from the Bureau's study, Alyeska had corrected 95 (46 percent). 
While Alyeska has made progress in correcting the deficiencies, its
progress has been slower than planned.  Alyeska initially anticipated
having about 3,000 deficiencies and had planned to close them all by
December 1994.  As of February 1995, Alyeska estimated closing 85
percent of the deficiencies by the end of 1995 and nearly all of the
rest by the end of 1996.  Alyeska said that progress has been slower
than anticipated because (1) more deficiencies were identified than
anticipated--4,920 rather than 3,000; (2) the amount of additional
training required to implement some of the corrective actions was
greater than anticipated; and (3) the estimated completion date of
December 1994 was too optimistic. 


      PROGRESS IN SPECIFIC AREAS
      HAS BEEN SUBSTANTIAL
-------------------------------------------------------- Chapter 0:4.2

From the 22 broad categories of deficiencies identified in the
Bureau's study, GAO focused on electrical integrity, quality, and
maintenance.  The study reported that deficiencies in the electrical
hardware--power cables and grounding, among other things--posed the
greatest threats of any hardware deficiencies to the health and
safety of the public and the environment.  In response, by December
1994 Alyeska had completed an inspection of the pipeline that
identified about 49,000 electrical deficiencies.  By the end of April
1995, it had fixed nearly all of them.  In addition, it has initiated
20 studies of broad-based electrical problems.  The Bureau's study
also reported that Alyeska's quality program was dysfunctional.  In
response, in May 1994 Alyeska set as a key company expectation the
development of an effective quality program; revised its quality
procedures, which the Office conditionally approved in May 1995; and
began developing a system to identify and ensure compliance with all
regulations.  In addition, Alyeska is undergoing a series of
revisions in the organizational structure of its quality program; the
first revision occurred in early 1994, and the most recent is
scheduled for July 1995.  The study further reported that Alyeska's
maintenance program did not provide a basis for learning from past
performance in order to prevent problems from recurring.  Alyeska is
developing a maintenance management system, which it plans to
complete in November 1995, to gather, track, and provide a basis for
analyzing maintenance histories to improve the efficiency and
effectiveness of its maintenance program. 


      THE OFFICE HAS ACTED TO
      IMPROVE ITS OVERSIGHT
-------------------------------------------------------- Chapter 0:4.3

The July 1993 hearings and the Bureau's study highlighted the need to
improve the Office's monitoring of the pipeline.  In response, the
Director of the Bureau asserted at the hearings that the Bureau would
invoke its authority as the lead agency in the Office to oversee the
pipeline.  In April 1994, the Office selected an independent
consulting firm to assess its monitoring and inspection program.  In
June 1994, the consultant recommended that the Office reorganize to
improve its oversight and change its philosophy to be an active
regulator using an effective quality program to monitor the full
range of Alyeska's activities.  By April 1995, the Office had
expanded its staff and completed its reorganization. 


      ALYESKA AND THE OFFICE ARE
      TAKING STEPS TO CORRECT
      CAUSES OF PROBLEMS
-------------------------------------------------------- Chapter 0:4.4

The studies conducted for the Bureau and the Office have pointed to a
common underlying cause for the problems identified--Alyeska and the
Office both operated on the philosophy of reacting to problems rather
than providing effective quality programs to minimize the chances
that problems would occur.  The Bureau's study considered Alyeska's
management philosophy as one of the most significant problems
identified, and the Office's study found that the Office needed to
substantially transform its oversight philosophy. 

Alyeska and the Office have taken steps to change their management
approach.  In May 1994, Alyeska established a company policy that set
objectives for a more open and quality-oriented organization.  It
subsequently developed tools for achieving those objectives.  These
tools include management training to encourage teamwork, a program
for responding to employees' concerns, an improved quality program,
and requirements for a new maintenance program.  For its part, the
Office now speaks of itself as a regulator and has changed its
operating philosophy to focus on prevention, increased its staff, and
reorganized to implement the new monitoring program. 

Alyeska has the primary responsibility for ensuring that the pipeline
operates in a safe, environmentally responsible manner.  The success
of its efforts will depend on its ability to establish a new
philosophy throughout the entire organization and its ability to
complete and fully implement its plans and actions, such as those to
improve its quality and maintenance programs and its program for
responding to employees' concerns.  The Office's effectiveness
depends not only on the actions under way to improve its oversight,
but also on its ability to continue these actions in the future.  Its
progress, however, could be affected over the long term because (1)
the Office's funding comes largely from Alyeska and Alyeska will be
under continuing pressure to reduce its costs as the oil flow through
the pipeline decreases and (2) staffing comes from the Bureau and
other federal and state agencies and staff levels throughout the
government are being reduced. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO is making no recommendations. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

GAO provided copies of a draft of this report to Alyeska and the
Joint Pipeline Office and met with the President of Alyeska,
officials from the TAPS owner companies, and officials of the Office,
including the Bureau's Authorized Officer and Alaska's State Pipeline
Coordinator.  These officials agreed with GAO's assessment of their
efforts to correct audit deficiencies and improve regulatory
oversight.  The President of Alyeska commented that the draft report
was an objective, professional assessment of the work by TAPS'
owners, Alyeska, and the Office to respond to various audit findings. 
Alyeska's written comments are presented in appendix III.  Officials
of the Office stated that the draft was fair and impartial and
captured both the successes achieved and the challenges remaining for
both Alyeska and the Office.  Also, in view of the work remaining and
the concern for continued secure funding, the officials of the Office
believe that periodic, comprehensive oversight from an independent
source is critical to ensure that the Office and Alyeska continue
their improvement efforts. 


INTRODUCTION
============================================================ Chapter 1

The Trans-Alaska Pipeline System (TAPS) is the primary transportation
link for 20 percent of the nation's domestically produced oil.  For
nearly 20 years, TAPS, which was built between 1974 and 1977 to meet
specific environmental and technical requirements for arctic
conditions, has transported more that 10 billion barrels of crude oil
without a major spill. 

Because of its importance to ensuring the continuity of the domestic
oil supply, TAPS and the federal and state agencies responsible for
monitoring it have received attention from the Congress throughout
the pipeline's years of construction and operation.  While the
pipeline was under construction, we reviewed the status of pipeline
construction and the effectiveness of federal and state monitoring
efforts.\1 These and subsequent reports,\2 as well as congressional
hearings, publicized recurring problems with the condition of the
pipeline, the quality assurance program of its operator, and the
effectiveness of government monitoring efforts.  More recently,
congressional hearings in 1993 highlighted numerous potential
deviations from federal and state standards.  A 1993 study of TAPS,
commissioned by the Department of the Interior's Bureau of Land
Management (BLM), concluded that the pipeline had deficiencies that,
if left uncorrected, could pose serious safety risks for workers and
potentially cause a pipeline failure.  These findings, together with
those from other reviews of TAPS, have focused even more attention on
the pipeline's condition. 


--------------------
\1 Trans-Alaska Oil Pipeline--Progress of Construction Through
November 1975 (GAO/RED-76-69, Feb.  17, 1976) and Trans-Alaska Oil
Pipeline--Information on Construction, Technical, and Environmental
Matters Through Spring 1977 (GAO/EMD-77-44, Aug.  23, 1977). 

\2 Trans-Alaska Oil Pipeline Operations:  More Federal Monitoring
Needed (GAO/EMD-81-11, Jan.  6, 1981) and Trans-Alaska Pipeline: 
Regulators Have Not Ensured That Government Requirements Are Being
Met (GAO/RCED-91-89, July 19, 1991). 


   TAPS' OPERATIONS
---------------------------------------------------------- Chapter 1:1

TAPS carries almost 1.6 million barrels of oil per day, down from 2
million barrels a day in 1990, across some of the most rugged terrain
in the world.  The 48-inch diameter pipeline transports oil 800 miles
from Prudhoe Bay, north of the Arctic Circle, to the ice-free port of
Valdez on Prince William Sound.  The pipeline crosses 3 mountain
ranges, more than 800 rivers and streams, 3 known seismic faults, and
hundreds of miles of permafrost (permanently frozen soil). 

The Alyeska Pipeline Service Company (Alyeska) operates the pipeline
for the seven companies that own it\3 and is responsible for meeting
the various regulatory requirements for TAPS.  The owner companies
fund Alyeska's budget, which they approve, and Alyeska has its own
permanent staff, although a significant number of its upper-level
managers are on loan for limited time periods from the owner
companies. 


--------------------
\3 The seven owner companies are Amerada Hess Pipeline Corporation;
ARCO Transportation Alaska, Inc.; BP Pipelines (Alaska), Inc.; Exxon
Pipeline Company; Mobil Alaska Pipeline Company; Phillips Alaska
Pipeline Corporation; and Unocal Pipe Line Company. 


   MANY STATE AND FEDERAL AGENCIES
   SHARE REGULATORY RESPONSIBILITY
---------------------------------------------------------- Chapter 1:2

The laws, requirements, and regulations intended to ensure TAPS'
operational safety, oil spill response, and environmental protection
call for monitoring and enforcement by a number of federal and state
agencies.  The federal government has administrative responsibility
for 401 miles of the pipeline's right-of-way, while the state
administers 353 miles, including the Valdez terminal, where oil is
loaded on tanker ships for transport to refineries.  Specific
operating requirements are contained in federal grant and state
right-of-way lease agreements and in additional federal and state
regulations and laws.  Of the remaining 46 miles of pipeline, 26
miles are administered jointly by federal and state authorities, and
20 miles are owned by private landholders. 

Six federal and six state agencies have significant jurisdiction over
some aspect of the pipeline's operation or the land on which it is
located (see table 1.1 for a list of agencies and the nature of their
jurisdiction).  The five with primary authority are the Department of
the Interior's Bureau of Land Management, which is charged with
enforcing the federal right-of-way agreement on federal lands; the
Alaska Department of Natural Resources (ADNR), which enforces the
state's right-of-way agreement on state-owned lands and the federal
agreement on certain state-owned lands; the Department of
Transportation's Office of Pipeline Safety, which is responsible for
overseeing the operational safety of the entire pipeline under the
Hazardous Liquid Pipeline Safety Act; and the Environmental
Protection Agency (EPA) and the Alaska Department of Environmental
Conservation, which are responsible for enforcing environmental
regulations along the pipeline and at the terminal.  EPA is also the
federal On-Scene Coordinator for responding to on-shore oil spills. 
Interior's responsibilities and authorities are the most
comprehensive and broadest in scope of any of TAPS'
regulators--covering operational safety and environmental protection
issues. 



                                    Table 1.1
                     
                         Federal and State Agencies With
                        Significant Jurisdiction Over TAPS

Agency                Nature of jurisdiction
--------------------  ----------------------------------------------------------
Federal
--------------------------------------------------------------------------------
Bureau of Land        By delegation of the Secretary of the Interior, BLM's
Management,           Alaska Office has primary authority for administration of
Department            the right-of-way agreement on federal lands.
of the Interior
(DOI)

Office of Pipeline    Monitors pipeline operations for compliance with federal
Safety, Department    safety standards and for assurance that remedial actions
of Transportation     for spills and accidents are adequate for the pipeline
(DOT)                 system.

Environmental         Responsible for ensuring that the pipeline system complies
Protection Agency     with several environmental laws, including the Clean Air
                      Act and Clean Water Act.

Fish and Wildlife     Responsible for national wildlife refuges; provides
Service, DOI          expertise to BLM on matters affecting fish and wildlife
                      conservation and habitats.

Coast Guard, DOT      Responsible for issuing permits for bridges over navigable
                      waterways and for various activities of the oil tankers at
                      Valdez terminal.

Army Corps of         Responsible for issuing permits for wetlands, construction
Engineers             in navigable waters, and coordination with Army
                      installations through which the pipeline passes.


State of Alaska
--------------------------------------------------------------------------------
Department of         Primarily responsible for administering the right-of-way
Natural Resources     agreements on state lands.

Department of Fish    Responsible for protecting fish and game on state lands.
and Game

Department of         With EPA, responsible for ensuring compliance with
Environmental         applicable environmental laws; also responsible for
Conservation          reviewing pipeline contingency plans.

Department of         Responsible for issuing permits for construction on state
Transportation and    operated airports and highway rights of way; also
Public Facilities     responsible for issuing permits for vehicles operating on
                      the northern portion of haul road.

Department of Labor   Responsible for compliance with various building codes and
                      for worker safety for the pipeline system.

Office of Management  Responsible for coordination of federal and state
and Budget, Division  authorizations inside the Coastal Zone.
of Governmental
Coordination
--------------------------------------------------------------------------------
In 1990, BLM and ADNR established the Joint Pipeline Office (JPO) to
better coordinate federal and state regulatory efforts.  This office
has since become the focal point for overseeing TAPS.  Begun with a
small staff from the two agencies, JPO had grown to an authorized
staff of 84 in April 1995 with staff assigned or on loan from 8 of
the 12 agencies with significant oversight responsibility for TAPS.\4
BLM and ADNR are jointly responsible for JPO's operations.  However,
in July 1993, the then-director of BLM testified, in response to
whistleblowers' complaints and other investigations that reported lax
regulation practices for pipeline workers' health and safety, that
"Whenever and wherever needed, BLM, as lead agency, will assume the
responsibility of ensuring that the mandate of the JPO is carried out
fully." Subsequently, the Executive Council was formed and it has
taken the lead in providing focused policy guidance to JPO.\5 JPO is
organized into two branches, Operations and Administration; the
Operations Branch is responsible for ensuring that TAPS is operated
in compliance with requirements. 


--------------------
\4 The four agencies with no representatives at JPO are the Coast
Guard, the Fish and Wildlife Service, the Army Corps of Engineers,
and the Alaska Department of Transportation and Public Facilities. 

\5 The Executive Council consists of representatives from each of the
federal and state agencies listed in table 1.1 except for the Fish
and Wildlife Service. 


   STUDIES HAVE IDENTIFIED
   PERVASIVE, PERSISTENT PROBLEMS
   WITH TAPS' OPERATIONS AND
   OVERSIGHT
---------------------------------------------------------- Chapter 1:3

Since about 1990, TAPS' operations have been the subject of many
separate audits and studies.  Most have focused on a single facility
or one operational segment, but several have taken a more systemwide
approach.  The range of problems they identified was broad.  Some
deficiencies were considered serious in that they have potential for
causing severe safety and environmental impacts.  Other deficiencies
were of a less serious nature:  For example, the studies

  criticized Alyeska for being reactive and not focused on building
     in quality;

  identified systemic hardware problems that raise questions about
     the integrity of the TAPS electrical system; and

  identified hundreds of specific items, such as not having developed
     procedures for the qualification of inspection personnel. 


      QUALITY TECHNOLOGY COMPANY
      STUDY HIGHLIGHTED BROAD,
      SYSTEMWIDE DEFICIENCIES
-------------------------------------------------------- Chapter 1:3.1

In response to concerns raised by whistleblowers, safety issues
identified by congressional staff, and concerns for how JPO was
regulating TAPS, the Subcommittee on Oversight and Investigations,
House Committee on Energy and Commerce, held hearings in July 1993. 
The hearings highlighted a number of potential problems with TAPS. 
At these hearings, the Director of BLM acknowledged the problems and
told the Subcommittee that BLM, which has primary authority for
administering the right-of-way agreement on federal lands, was going
to take charge and make sure that the problems were corrected. 
Subsequently, BLM began a program designed to identify and resolve
such problems.  As part of the effort, BLM in August 1993 contracted
with Quality Technology Company (QTC), an independent consulting
firm, to investigate the physical condition of TAPS and the
management of operations provided by Alyeska and its contractors. 
QTC conducted a 6-week on-site review that included visits to the
Valdez terminal and three of the pipeline's pump stations. 

QTC's final report, issued in November 1993, was highly critical of
Alyeska's management of the pipeline and pointed out that some
glaring deficiencies were present in Alyeska's management and the
condition of TAPS' equipment.  QTC identified 22 broadly scoped
deficiencies, which were further grouped into three classes according
to their potential threat to the safe operation of the pipeline or to
the safety of the public and the environment: 

  Six deficiencies were considered most threatening because of their
     potential for causing severe impacts, including death or an oil
     spill.  These deficiencies included a lack of management focus
     on anticipating and correcting potential problems, a
     "dysfunctional" quality management program, and massive
     electrical code violations. 

  Nine deficiencies presented moderate threats because of their
     potential for causing impacts, including severe injury or an oil
     spill.  Examples included the lack of accurate drawings
     describing the pipeline's safety system and an inadequate safety
     inspection program at the Valdez terminal. 

  Seven deficiencies fell in the lowest class of threats because
     their potential impacts were limited to such effects as loss of
     work time due to injuries or loss of oil.  An example was the
     lack of a maintenance program that develops trends for
     predicting untimely equipment failures. 


      MANY OTHER OWNER- AND
      REGULATOR-SPONSORED STUDIES
      FOUND SPECIFIC DEFICIENCIES
      AT CERTAIN LOCATIONS
-------------------------------------------------------- Chapter 1:3.2

While the QTC study addressed conditions on a broad, systemwide
basis, many other studies have addressed narrower aspects of TAPS'
operations, such as corrosion of pipeline welds, leak detection, or
solid waste management.  Since 1990, Alyeska and its regulators have
conducted or contracted for more than 40 such studies.  Together,
they have identified about 500 action items. 

On September 9, 1993, the TAPS owners contracted with Arthur D. 
Little, Inc.  (ADL), an independent consulting firm, to provide a
comprehensive independent assessment of TAPS' operations.  Unlike the
studies described so far, this one involved a detailed,
facility-by-facility review of the entire pipeline and its attendant
systems.  The assessments were conducted by teams led by ADL
personnel and composed of experts from five of the companies that own
TAPS and from ADL.  The assessments focused on compliance with the
requirements and management systems relating to operational
integrity.  The result of the 9-month review was a list of more than
4,200 site-specific deficiencies, issued in two reports (December
1993 and July 1994).  The following are examples of the kinds of
deficiencies the study identified: 

  At pump station 4, the fire alarm system was not in full working
     order.  It did not provide an immediate sitewide alarm that was
     audible/visible in all areas of the pump station. 

  At the main equipment maintenance facility in Fairbanks, Alyeska
     and contractor employees working with hazardous materials lacked
     specific hazard training, and the chemical inventory lists were
     out of date. 

  Alyeska's quality assurance and inspection process did not have a
     management system defining responsibilities sufficiently to
     avoid duplication or omission of critical tasks. 


      STUDIES ALSO SHOWED PROBLEMS
      WITH FEDERAL AND STATE
      REGULATORY EFFORTS
-------------------------------------------------------- Chapter 1:3.3

In 1991, we reported that federal and state monitoring agencies had
not effectively overseen TAPS' operations.  BLM officials told us at
that time that JPO was not a regulator.  Instead, the agencies relied
on Alyeska to police itself.  We noted that, for example, the
regulators did not systematically or independently assess Alyeska's
corrosion or leak detection systems, nor did they require that
Alyeska demonstrate that it could respond adequately to a large-scale
pipeline oil spill.  We concluded that absent effective monitoring,
the regulators could not ensure the safe operation of TAPS.  We also
reported that regulatory efforts had been hampered by a lack of
coordination between the various agencies.  We concluded that the
recent establishment of JPO was a positive step but that its success
was potentially hindered unless leadership, firm commitments from all
regulatory agencies, and secure funding sources were in place. 

In 1994, a study by Booz-Allen & Hamilton, an independent consulting
firm, concluded that weaknesses in regulatory activity were still
present.  The study found that JPO was not effectively addressing the
prevention of pipeline hazards.  More effective oversight, the study
concluded, could have precluded many of the problems that QTC had
found in its review of Alyeska's operations.  Specifically, the study
recommended that JPO increase its monitoring of Alyeska's quality,
operations, and maintenance programs--areas of concern that we had
reported on since 1976. 


   WHILE CORRECTING DEFICIENCIES,
   ALYESKA CONDUCTED NORMAL
   OPERATIONS AND MAINTENANCE
   DURING 1994
---------------------------------------------------------- Chapter 1:4

Alyeska was confronted with the tasks of continuing to operate and
maintain the pipeline, while at the same time correcting thousands of
deficiencies identified in audits conducted for it, its owners, and
various government agencies.  During 1994, Alyeska continued to
transport almost 1.6 million barrels of oil per day through the
pipeline, conduct normal maintenance, and carry out numerous projects
to upgrade the pipeline system.  Alyeska estimates that in 1994, it
spent about $81 million on upgrades in three broad areas.  About
$23.7 million was devoted to programs aimed at ensuring that
Alyeska's operations did not adversely affect the environment through
spills or air emissions.  About $34.6 million was devoted to
improving the protection of the pipeline's integrity through enhanced
corrosion prevention and detection.  About $20.2 million was devoted
to improving Alyeska's ability to respond to emergencies related to
tanker transport. 

During 1994, Alyeska also reorganized the company from a centralized,
functionally structured organization to an organization in which more
of the responsibilities are now decentralized to "business units."
The purpose of the reorganization was to provide the business units
with increased control over the resources they need to operate and to
provide greater accountability for operations.  The four business
units are the Northern Business Unit, comprising pump stations 1
through 4; the Southern Business Unit, comprising pump stations 5
through 12; the Valdez Terminal Business Unit; and the Ship Escort
Vessel System Response Business Unit. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:5

On February 23, 1994, the former Chairman, Subcommittee on Oversight
and Investigations, House Committee on Energy and Commerce, asked us
to review Alyeska's progress in addressing problems that QTC had
identified with TAPS.  On March 28, 1995, the current Chairman, House
Committee on Resources, which now has oversight jurisdiction for
TAPS, became a joint requester to this review.  Specifically, we

  assessed Alyeska's progress in resolving deficiencies identified by
     the QTC study;

  determined whether Alyeska's planned actions for three areas of
     deficiency--electrical integrity, quality, and maintenance--will
     address these deficiencies;

  determined whether regulators are taking action to improve
     regulatory oversight of the pipeline; and

  identified the root causes of the deficiencies. 

To address the first objective, we reviewed Alyeska's periodic
reports, through the end of April 1995, on the status of actions
taken to correct the QTC-identified deficiencies.  Because Alyeska
and its regulators incorporated the results of a number of other
reviews besides QTC's into the data base of action items, we expanded
our review to report Alyeska's progress in correcting deficiencies
identified by these studies as well.  To assess the reliability of
Alyeska's reports, we (1) reviewed the procedures that Alyeska's
quality assurance staff uses to monitor corrective actions and the
documents certifying completion of various steps in the process, (2)
reviewed JPO's procedures for verifying corrective actions and the
documents certifying completion of various steps in the process, (3)
accompanied JPO inspectors on field visits to observe inspections as
they were being made, and (4) performed on-site reviews of a number
of the reported corrections.  However, because the number of action
items was so extensive and because many of the actions taken were
still under way, we did not systematically verify the accuracy of
Alyeska's entire list of corrections.  Chapter 2 contains our
findings on Alyeska's progress in resolving identified deficiencies. 

To address the second objective, we interviewed regulators, Alyeska
personnel, consultants, and QTC's lead auditor; reviewed Alyeska's
documentation of actions completed, under way, and planned; and
traveled to various sites along the pipeline to observe conditions
for ourselves.  We conducted on-site work at the Valdez terminal, two
pump stations, and several field locations and observed from the air
about 100 miles of the pipeline's 800-mile length.  In addition,
specifically in regard to the deficiency area of electrical
integrity, a GAO electrical engineer accompanied us on a detailed
tour of the Valdez terminal.  We received briefings on the electrical
problems at the terminal and on the steps being taken to correct them
and reviewed selected electrical studies and discussed their
methodologies and results with contractor and Alyeska staff.  Chapter
3 contains our findings on Alyeska's actions in three areas of
deficiency identified by the QTC study. 

To address the third objective, we reviewed prior GAO reports, the
1994 Booz-Allen study of JPO, and actions JPO and its member agencies
were taking in response.  We met with JPO managers and staff and with
representatives of consulting firms employed by JPO or its member
agencies to supplement its oversight work.  We reviewed examples of
JPO's actions in overseeing the resolution of action items.  We
reviewed JPO's plans, procedures, and other documents.  Chapter 4
contains our findings on this objective. 

To address the fourth objective, we reviewed past studies of TAPS to
determine the root causes of problems that these studies had
identified.  We also interviewed regulators, Alyeska officials, and
owner company officials to obtain their opinions about root causes. 
We then reviewed the actions that Alyeska and its regulators had
taken or were taking to address root-cause issues.  Our work included
interviews with Alyeska and JPO managers as well as with field staff
to determine whether corrective actions were being carried out. 
Chapter 5 contains our findings. 

Besides our on-site field work at Valdez and along the pipeline, we
conducted work at state and federal agencies in Anchorage and
Alyeska's offices in Anchorage and Fairbanks.  We conducted our field
work between March 1994 and April 1995 in accordance with generally
accepted government auditing standards. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 1:6

We provided copies of a draft of this report to Alyeska and JPO.  We
met with the President of Alyeska and officials of JPO, including
BLM's Authorized Officer and Alaska's State Pipeline Coordinator. 
These officials agreed with GAO's assessment of their efforts to
correct audit deficiencies and improve regulatory oversight.  The
President of Alyeska and the Chairman of the TAPS Owners Committee
commented that the draft report was an objective, professional
assessment of the work by the TAPS owners, Alyeska, and JPO to
respond to various audit findings.  The President added that while
the draft report accurately described the organizational structure
for Alyeska's quality program at the time of our work, Alyeska is in
the process of making some additional organizational changes.  We
have revised our draft report to describe Alyeska's planned changes
to its quality program.  Alyeska also provided detailed comments to
clarify the draft, and where appropriate, we made changes to the
report.  In addition, Alyeska provided written comments.  (See app. 
III.)

The JPO officials stated that the draft was fair and impartial and
accurately captured both the successes achieved and the challenges
remaining for both Alyeska and JPO.  They fully concurred that secure
funding for JPO and Alyeska is vital to ensuring the continued safe
operation of the pipeline.  While they believe that Alyeska has made
many positive changes thus far, they believe the work ahead in
implementing the plans will be much more difficult.  Consequently,
they believe that periodic, comprehensive oversight from an
independent source is critical to ensure that JPO and Alyeska
continue their improvement efforts.  The officials also provided
suggestions to clarify the draft report, and where appropriate, we
incorporated their suggestions into the report. 


ALYESKA HAS MADE PROGRESS IN
RESOLVING TAPS' DEFICIENCIES, BUT
PROGRESS IS SLOWER THAN PLANNED
============================================================ Chapter 2

Alyeska has made substantial progress toward resolving the
deficiencies.  However, during this period, Alyeska's target for
correcting all of the deficiencies slipped from December 1994 to
1996; a small number of items will extend beyond 1996.  The
completion dates slipped for a variety of reasons, including a larger
than expected number of deficiencies, the complexity of many of the
corrections, and Alyeska's overly optimistic estimation of the time
needed to make corrections.  Alyeska is taking actions to ensure that
the remaining deficiencies are corrected on a priority basis and that
JPO can track progress. 


   ALYESKA ESTABLISHED A DATA BASE
   TO MONITOR PROGRESS ON
   RESOLUTION OF 4,920 AUDIT ITEMS
---------------------------------------------------------- Chapter 2:1

To determine what work needed to be done to correct the audit
deficiencies, Alyeska reviewed the results of more than 40 audits and
studies of the various TAPS components.  It translated the
deficiencies identified in these audits and studies into a total of
4,920 action items.  Alyeska established a data base for tracking all
of these items and a system for planning, conducting, and approving
the work. 


      LIST OF ACTION ITEMS GREW
      OVER TIME
-------------------------------------------------------- Chapter 2:1.1

By April 1994, Alyeska had identified about 1,700 action items
stemming from deficiencies identified in the various TAPS audits and
studies.  These action items came from three sources--the first phase
of the ADL study, which had been completed in December 1993; the QTC
audit; and previous audits done primarily for Alyeska or its
regulators.  For the action items identified by April 1994, the
first-phase interim report from ADL produced the most items--1,128
(subsequently expanded to 1,132).  Alyeska translated the 22 overall
deficiencies identified in the QTC study into 187 (subsequently
expanded to 208) action items, and the findings of the various other
audits and studies identified about 380 items (subsequently expanded
to about 500).  The second phase of the ADL study, completed in July
1994, led to an additional 3,100 action items.  With these and with
additional findings from other audits, the action items reached a
total of 4,920. 


      ALYESKA AND JPO DEVELOPED A
      SYSTEM FOR TRACKING AND
      RESOLVING DEFICIENCIES
-------------------------------------------------------- Chapter 2:1.2

In January 1994, to keep track of the action items, Alyeska and JPO
developed the Audit Compliance Tracking (ACT) data base and
procedure, which was essentially in place in March 1994.  In
developing this data base, Alyeska and JPO also agreed to a process
for identifying and resolving the action items.  This process can be
summarized in three main steps:  identifying and setting priorities
for the action items, preparing and approving corrective action
plans, and preparing, reviewing, and verifying the closure packages
for the work done to correct the deficiency.  Reports generated from
this data base provide JPO with updated information on Alyeska's
progress in correcting the deficiencies, and JPO summarizes this
information in its annual report to congressional oversight
committees. 


      IDENTIFYING AND SETTING
      PRIORITIES FOR ACTION ITEMS
-------------------------------------------------------- Chapter 2:1.3

Under the process agreed to by Alyeska and JPO, Alyeska's Integrity
and Compliance Division\6 was responsible for reviewing all internal
and external audits and assessment reports to identify the action
items, assigning the responsibility for the corrective action, and
entering the action items into the data base.  In doing so, the
division also set priorities for the action items on the basis of the
potential impact of items on the pipeline's integrity.  The priority
system contains four levels, as shown in table 2.1.  Alyeska's
quality assurance office and JPO reviewed and approved the priority
level for each action item. 



                                    Table 2.1
                     
                     Priority Levels for Action Items in the
                                  ACT Data Base

Prio
rity
leve
l     Description                             Examples
----  --------------------------------------  ----------------------------------
1     Structures, systems, and components     Mainline pipe, gate and check
      which prevent or mitigate the           valves, selected bridges, and
      consequences of an accident or natural  quality manual updates and
      event which could cause significant     operating procedures for level-1
      harm or damage                          components

2     Items that do not meet the definition   Power generation systems, fire
      of a level-1 item but are necessary     detection and suppression systems,
      for compliance with safety regulations  and preventive maintenance program
      and for reliably transporting oil

3     Structures, systems, and components     Steam distribution, container
      that by themselves would have minimal   labeling, and security procedures
      impact on safety and oil transport but
      to which Alyeska elects to apply
      selected quality program elements

4     Structures, systems, and components     Personnel living quarters,
      not designated in any of the other      automotive equipment, and
      levels and for which the application    housekeeping items
      of normal industry practices result in
      acceptable quality
--------------------------------------------------------------------------------

--------------------
\6 Alyeska's plans called for dissolving the Integrity and Compliance
Division during June 1995 and transferring its responsibilities to
other parts of the organization. 


      PREPARING, REVIEWING, AND
      APPROVING CORRECTIVE ACTION
      PLANS
-------------------------------------------------------- Chapter 2:1.4

The action item process called for the Alyeska unit responsible for
each action item to prepare a corrective action plan (CAP) describing
how a deficiency would be fixed if the item was a priority level-1 or
-2 item or a priority level-3 or -4 item requiring 40 or more hours
of labor.  Before corrective action can begin on priority level-1 and
-2 items, the CAPs go to Alyeska's quality assurance staff and JPO
for review and approval.  After November 1994, Alyeska and JPO agreed
that level-3 and -4 CAPs do not need a review by JPO. 


      PREPARING, REVIEWING, AND
      VERIFYING CLOSURE PACKAGES
-------------------------------------------------------- Chapter 2:1.5

When the Alyeska unit responsible for the action item has corrected
the deficiency, it prepares a closure package containing the
applicable procedures and drawings documenting how the item was
corrected.  Each closure package is reviewed and verified by Alyeska,
JPO, or both.  Alyeska's quality assurance unit verifies closure
packages for all priority level-1, -2, and -3 items, and Alyeska's
contract compliance unit or the unit responsible for making the
correction verifies the closure packages for level-4 items.  JPO also
verifies all level-1 closure packages and a minimum 20-percent sample
of level-2 packages. 


   ALYESKA MADE PROGRESS
   COMPLETING ACTION ITEMS
---------------------------------------------------------- Chapter 2:2

By the end of April 1995, Alyeska reported that it had completed work
on 3,030 of the 4,920 action items--about 62 percent (see table 2.2). 
It had also developed a CAP for a number of other action
items--primarily level-1 and -2 items--that had not yet been closed. 
In all, Alyeska had approved 2,242--about 97 percent--of the 2,320
CAPs delivered for review.  JPO had approved 2,126 of those.\7



                          Table 2.2
           
           Status of Action Items as of the End of
                          April 1995


                 Total items
Priority         in ACT data
level                   base          Number         Percent
------------  --------------  --------------  --------------
1                         95              32              34
2                      2,132           1,023              48
3                      2,105           1,469              70
4                        588             506              86
============================================================
Total                  4,920           3,030              62
------------------------------------------------------------
As table 2.2 shows, Alyeska had closed a higher percentage of items
at priority levels 3 and 4 than at priority levels 1 and 2.  Alyeska
officials told us that because they initially anticipated closing all
action items by December 1994, they did not use the priority levels
as a basis for determining which work should be done first.  Some
priority level-1 items have been closed, such as the possible problem
of natural gas liquids being mixed in with the crude oil in the
pipeline--a situation that could lead to a safety problem at pump
station one--and the redesign of a control system that used fuses to
protect against electrical current surges (a design restricted under
the National Electric Code).  Many others, however, remain open.  For
example, the ADL study found that Alyeska had no risk management
system in place at the terminal to (1) identify key equipment and
facilities' hazards; (2) assess the consequences and probabilities of
occurrence; and (3) evaluate possible prevention and mitigation
measures.  According to Alyeska officials, the TAPS owners have
approved an overall policy for such a risk management system, and it
will be tested in pilot programs.  Full implementation is scheduled
for November 1995; training is to be completed in the first part of
1996. 

In connection with the 208 QTC items that we focused on, as of the
end of April 1995, Alyeska had resolved 95 items, and CAPs were
approved for 166 of the 180 items requiring CAPs. 



                                    Table 2.3
                     
                      Status of QTC's Action Items as of the
                                End of April 1995


Prio                                  Number
rity     Total items      Number        with
leve              in   requiring    approved
l      ACT data base         CAP         CAP     Percent      Number     Percent
----  --------------  ----------  ----------  ----------  ----------  ----------
1                 43          42          36          86          12          28
2                 82          80          76          95          40          49
3                 62          51          50          98          30          48
4                 21           7           4          57          13          62
================================================================================
Tota             208         180         166          92          95          46
 l
--------------------------------------------------------------------------------
Examples of closed level-1 and -2 items include better monitoring of
emissions volumes from tanker vents during filling at the Valdez
terminal and improved maintenance procedures for a diesel engine that
was not being properly maintained.  Most level-1 items remain open. 
For example, a contractor is producing drawings of the current
configuration of various facilities in a multiphase project. 
Approximately 40 percent of the drawings to be produced in the
initial phase have been provided to Alyeska; the remainder are to be
received by the end of July 1995. 


--------------------
\7 Level-3 and -4 items may not require a CAP. 


   PROGRESS WAS SLOWER THAN
   EXPECTED, BUT MOST COSTLY ITEMS
   ARE NEAR COMPLETION
---------------------------------------------------------- Chapter 2:3

In the spring of 1994, Alyeska anticipated having to close about
3,000 action items.  On that basis, it projected that it would
complete action on and close all items by December 1994.  The final
total of action items, however, was considerably higher than
expected.  In January 1995, Alyeska had revised the planned
completion date.  Alyeska's plan, as of February, calls for closing
85 to 90 percent of the 4,920 items by December 1995 and closing the
remaining items by the end of 1996, except for a very small number of
items generally associated with the Vapor Recovery Project at the
terminal (a program to recover hazardous vapors from the oil tankers)
and the Tank Cathodic Protection program (a corrosion prevention
program for oil storage tanks).  Completion of these will extend
beyond 1996. 

The two most expensive projects are those involving correcting
electrical deficiencies, known as the AKOSH/NEC\8

Safety Compliance Program (ANSC) project, and efforts to update the
drawings to match the equipment in place, known as the As-Built
project.  These two projects, which account for 70 percent of the
projected costs to resolve the deficiencies, are near completion. 
Alyeska spent almost $133 million on the ANSC project in 1993 and
1994 and plans to spend an additional $41 million to complete it by
August 1995.  Alyeska also spent over $22 million on the multiphase
As-Built project in 1994 and plans to spend an additional $15 million
to complete the current phase by June 1995.  The next most costly
project authorized for 1994 and 1995 was related to correcting
problems with the trays carrying electrical cables.  Correcting these
problems is expected to cost $5 million at the pump stations;
additional expenditures will be necessary at the Valdez Marine
Terminal. 

In total, Alyeska reported that it spent about $222 million on
corrective actions in 1994 and expects to spend an additional $72.5
million in 1995.  Alyeska's Vice President responsible for the
corrective action process estimated that an additional $5 million to
$7 million will be spent in 1996 on corrective actions.  He also said
that beginning in 1996, the costs for the corrective actions to
address major items will be included in the pipeline's operating
budget and not identified separately. 

One problem that affected Alyeska's ability to meet the initial goal
of closing all action items by December 1994 was the unexpected
number of items added to the data base after the goal was set.  The
additions occurred because the number of action items identified in
the second phase of the ADL study was more than double what Alyeska
had expected.  Phase two of the study identified 3,100 items, over 70
percent of the entire ACT data base.  Alyeska received the Phase II
report identifying these items in July, less than 6 months before its
original deadline for completing the corrective actions. 

Despite these increases, our work indicates that Alyeska closed fewer
than expected deficiencies because many high priority items proved to
be more difficult to correct than Alyeska had anticipated and
involved lengthy work programs that are being actively pursued.  For
example, many items in the quality assurance, preventive maintenance,
and electrical integrity areas cannot be resolved until a variety of
subissues are resolved.  As chapter 3 explains in more detail,
successful resolution of the 47 action items related to electrical
integrity requires making close to 32,000 specific corrections
throughout the entire pipeline system, as well as fixing thousands of
electrical housekeeping items and completing a variety of specialized
engineering studies assessing additional potential risks.  The
additional training required to implement some of the corrective
actions was greater than anticipated, according to Alyeska managers. 


--------------------
\8 AKOSH stands for the Alaska Occupational Safety and Health
standards, which are Alaska's standards that apply to electrical
safety and health matters for existing facilities.  NEC stands for
the National Electrical Code, which applies to new structures or to
modifications of older structures.  The ANSC project developed and
used inspection criteria based on these two standards.  JPO approved
these criteria.  Inspectors used these criteria to identify items
that did not conform to these standards, and nonconforming items were
corrected by the project. 


   ALYESKA HAS TAKEN STEPS TO
   BETTER MANAGE CLOSURE OF ACTION
   ITEMS
---------------------------------------------------------- Chapter 2:4

When it became apparent that the December 1994 goal could not be met,
Alyeska took several steps to provide a clearer focus on how it was
progressing on priority items.  Two of these steps are particularly
important:  the development of a "key items" list and a work
scheduling system. 


      KEY ITEM LIST
-------------------------------------------------------- Chapter 2:4.1

In May 1994, according to Alyeska officials, and at JPO's request,
Alyeska created a key item list to track those items that Alyeska and
JPO regard as most important.  The purpose of the list was to provide
a more viable method of tracking progress on the most important and
most costly items and to ensure that the work on lower priority items
is not depriving higher priority items of resources.  At the end of
April 1995, the list included 229 items, as follows: 

  All 95 items assigned a level-1 priority (43 of these items were
     identified by QTC). 

  All 82 level-2 priorities identified by QTC, plus 52 other level-2
     priorities that have an estimated cost of $2 million or more to
     correct. 

As of the end of April 1995, Alyeska had completed the corrective
actions and its Quality Assurance group had approved those actions
for 76 of these key items, or about 33 percent (see table 2.4). 
Alyeska had developed CAPs for all of the 224 items requiring CAPs,
and JPO had approved 179 of these CAPS.  Five items did not require
CAPs--four of them are closed. 



                                    Table 2.4
                     
                     Status of "Key Item" List as of the End
                                  of April 1995


                                                  Number
Prio                                  Number        with
rity       Total key      Number        with         CAP
leve        items in   requiring         CAP    approved
l               list         CAP   developed      by JPO      Number     Percent
----  --------------  ----------  ----------  ----------  ----------  ----------
1                 95          94          94          73          29          31
2                134         130         130         106          47          35
================================================================================
Tota             229         224         224         179          76          33
 l
--------------------------------------------------------------------------------

      OPERATIONS IMPACT PLAN
-------------------------------------------------------- Chapter 2:4.2

Alyeska has also developed an Operations Impact Plan to select and
manage the work that involves field resources.  According to Alyeska
officials, the primary purposes of this plan are (1) to set
priorities for work that requires field technicians' time and (2) to
schedule work according to its priority and the amount of
technicians' time available.  This plan represents an important
change in approach because it moves away from Alyeska's earlier
approach of attempting to correct all deficiencies concurrently
without considering priorities. 

According to Alyeska officials, the five items with the highest
priority will be worked on first during 1995:  (1) preparing for
compliance with title V air quality regulations, (2) developing a
maintenance management system, (3) enhancing the local and wide-area
communications facilities, (4) resolving electrical integrity
problems, and (5) developing a quality assurance program.  These
items are expected to be completed by December 1995.  Further down in
the rankings are such matters as developing a technician training and
advancement program based on tested performance and an information
management system that will provide the operations organization with
on-line access to various information, such as equipment drawings. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:5

While Alyeska's success in resolving the action items has been slower
than originally anticipated, the company has made substantial
progress.  When Alyeska anticipated that everything could be quickly
corrected, it essentially tried to do everything at once, without
considering the significance of the problem.  Now that its schedule
has been extended, Alyeska is trying to match priorities with
available resources so that higher priority items are corrected
first. 


ALYESKA IS MAKING PROGRESS IN
CORRECTING ELECTRICAL, QUALITY,
AND PREVENTIVE MAINTENANCE
DEFICIENCIES
============================================================ Chapter 3

We analyzed three areas in which QTC identified substantial
deficiencies--the integrity of electrical systems, the quality
program, and Alyeska's approach to preventive and predictive
maintenance.  QTC had concluded that problems in these areas
presented potential threats to the safety of the public and the
environment.  Our objective was to examine Alyeska's actions in these
areas to determine whether the planned actions will address the
problems QTC identified. 

Although the implementation of corrective measures in all three areas
is not yet complete, Alyeska is making progress in correcting these
deficiencies.  The actions taken and planned, if fully carried out,
appear adequate to address the problems that were identified. 


   INTEGRITY OF ELECTRICAL SYSTEMS
   HAS RECEIVED CONSIDERABLE
   ATTENTION
---------------------------------------------------------- Chapter 3:1

QTC reported that the pipeline's electrical systems constituted "the
greatest hardware threat to the health and safety of the public and
the environment/ecosystem." As evidence, QTC pointed to the numerous
electric code violations, such as improper grounding, already
identified in other inspections.  Other violations raised questions
about the ability of the supports for cable trays that carry cables
to various locations around the terminal and the ability of the
pipeline to withstand earthquakes.  Alyeska had begun an inspection
to identify and correct electrical problems, but QTC found that
Alyeska's inspection program was not adequate to ensure that all
electrical problems on the pipeline would be identified and
adequately resolved.  QTC concluded that a more broadly scoped effort
was needed.  In response, Alyeska developed a two-part process to
assess the electrical systems of the pipeline:  a detailed inspection
and a series of studies of broad-based issues. 


      DETAILED INSPECTIONS SHOWED
      THOUSANDS OF SITE-SPECIFIC
      DEFICIENCIES
-------------------------------------------------------- Chapter 3:1.1

In response to QTC's findings, Alyeska revised the inspection process
and inspected the entire pipeline for electrical safety problems.  It
developed the ANSC project to ensure that inspection criteria were
established, inspections were conducted in an organized fashion,
nonconformances were documented, corrective actions were approved in
advance, corrective actions were taken, and the completed work was
checked.  Alyeska folded this new program into an inspection process
that had already started at the Valdez terminal and pump stations,
before QTC began its review.  The resulting inspection covered the
pipeline, including the terminal, the pipeline's pump stations,\9 and
ancillary facilities.  The inspection was completed in December 1994. 

The ANSC inspection identified about 32,000 individual items that did
not conform to the project's inspection criteria.  To keep track of
these nonconforming items, Alyeska created an extensive document
control procedure and a data base system that is separate from the
ACT data base.  Like the ACT data base, this system tracks the items
and classifies them according to priority.  About 4 percent of the
items were top priorities--that is, they were considered critical to
the workers' safety or the pipeline's integrity and were not backed
up by another system.  Like the ACT data base, this system also
breaks the deficiency identification and correction process into a
series of steps so that progress in completing work can be tracked. 
Once identified, the deficiencies are validated by engineers. 
Progress is tracked through such steps as the development of
corrective action plans, review and approval of those plans by JPO,
implementation of corrective action, and approval as necessary by
Alyeska's quality control inspectors and JPO's inspectors. 

In addition to the almost 32,000 nonconforming items, Alyeska's
systemwide approach also identified about 17,000 electrical-related
"housekeeping" items that could largely be fixed on the spot, like
replacing missing screws in cover plates or tightening grounding
connections.  These items were identified and fixed by teams of
electricians in advance of the inspection, and others were fixed by
electricians who accompanied the inspectors.  Alyeska also developed
a tracking system to ensure that these items were fixed. 


--------------------
\9 Pump Station 7 and the Pump Station 8 Topping Plant were not
inspected because they are being evaluated for potential shutdown. 


      ABOUT 26,000 IDENTIFIED
      DEFICIENCIES HAVE BEEN
      CORRECTED
-------------------------------------------------------- Chapter 3:1.2

Early in the inspection process, Alyeska estimated that it would be
able to correct all of the action items by December 1994.  However,
the inspections themselves took until December to complete.  As of
the end of April 1995, Alyeska reported having corrected 19,182 items
on the pipeline and 6,940 at the terminal, or about 82 percent of the
total.  Alyeska also reported that as of January 1995, all of the
17,000 housekeeping items had been fixed. 

Alyeska's president said the company's initial estimate for
completing the action items in the ACT data base, including ANSC, had
been too optimistic.  In October 1994, Alyeska revised the target for
completing all items to December 1995.  However, in March 1995 the
company estimated that, weather conditions permitting, it would
complete the ANSC project by August 1, 1995. 


      SPECIAL ENGINEERING STUDIES
      ARE UNDER WAY
-------------------------------------------------------- Chapter 3:1.3

In addition to the inspections, Alyeska is conducting 20 special
engineering studies related primarily to electrical issues.  Alyeska
initiated the studies as part of the ANSC project to determine the
best engineering solution to major issues.  The need for special
studies is one indication of the complexity of many of the electrical
problems.  (These studies are listed in app.  I.) Eleven of these
studies have been completed, and completion is imminent for most of
the remaining studies.  While completing the studies will close some
items, in other cases the studies may identify the need for
additional actions, and completing those actions may take some time. 
For example, the study of the cable trays' structural integrity will
likely be completed in May 1995, but the draft identified the need
for modifications at both pump stations and the terminal.  The
schedules for the completion of all related construction work are not
yet available.  We reviewed three of the studies related to
grounding, inspection of motor control centers, and power switching
systems to determine whether the studies accurately assessed the
problems and whether the recommended actions will address the
problems.  We believe that the studies accurately assessed the
problems and that the actions in progress and planned should correct
the problems identified.  (These studies and our conclusions are
discussed in app.  II.)


   APPROACH TO QUALITY PROGRAM IS
   BEING REVISED
---------------------------------------------------------- Chapter 3:2

The right-of-way agreement requires that Alyeska have a comprehensive
quality program to protect the safety of workers, the public, and the
environment.  Alyeska's quality program has been the subject of
criticism at various times since the pipeline's initial construction. 
In its November 1993 study, QTC reported that Alyeska's quality
program was dysfunctional and was thus incapable of ensuring that
TAPS had been constructed and could operate efficiently and safely. 
In January 1994, QTC provided recommendations on how Alyeska should
revise its quality program.  Alyeska is revising its program to
correct the deficiencies QTC identified.  However, for a small number
of items, JPO has agreed that Alyeska can take a different approach
than the one recommended in QTC's January 1994 report.  Completing
the corrective actions will take longer than planned. 


      PROBLEMS WITH ALYESKA'S
      QUALITY PROGRAM HAVE BEEN
      REPORTED SINCE INITIAL
      CONSTRUCTION
-------------------------------------------------------- Chapter 3:2.1

Alyeska's problems with its quality program have been long-standing. 
During the early phases of TAPS' construction, we reported a variety
of problems with how Alyeska was implementing its quality program. 
For example, in 1976 we reported that TAPS' construction was about 22
percent completed before Alyeska obtained final approval for its
quality program.\10 During this phase of construction, Alyeska's
quality program was not consistently correcting violations of the
stipulations to which Alyeska had agreed.  Federal and state
monitors, rather than Alyeska's quality program staff, were requiring
the correction of nonconforming work. 

Although improvements were made in July 1975 to correct the problems
we identified, we identified similar problems in the 1976
construction season.  After construction was completed in 1977,
Alyeska continued to have problems with its quality program.  QTC
described the program, as it existed from about 1980 to 1990, as
woefully inadequate. 

After the Exxon Valdez oil spill in 1989 and other problems, Alyeska
began to upgrade portions of its quality program, but these efforts
again proved insufficient.  Staffing was increased from 11 in 1990 to
about 34 in 1993, and Alyeska began revising the documents directing
its quality program.  Alyeska issued a revised quality program manual
in October 1992 and a quality standards manual in September 1993. 
Despite these steps, the implementation of a quality program was
still fragmented. 

QTC reported that Alyeska's quality program was dysfunctional. 
Specifically, according to QTC, Alyeska's management had a reactive
mindset and did not support its quality program.  In addition, QTC
concluded that the program lacked the organizational authority and
independence to protect public health and safety, could not show that
Alyeska met basic commitments to the regulatory requirements set out
and agreed to in its quality program manual, and lacked the key
components needed for a quality program to function. 


--------------------
\10 Trans-Alaska Oil Pipeline--Progress of Construction Through
November 1975 (GAO/RED-76-69, Feb.  17, 1976). 


      ALYESKA IS CORRECTING ITS
      QUALITY PROBLEMS
-------------------------------------------------------- Chapter 3:2.2

Alyeska has since taken or is in the process of taking a number of
steps to change the quality program from top to bottom.  These steps
have included ways to clearly establish management's support for an
effective quality program; reorganize the quality program to increase
its authority, independence, and resources; provide a system for
documenting compliance with regulatory requirements; develop
essential components of a quality program; and put procedures in
place to make the program work. 


      NEW SYSTEM FOR ESTABLISHING
      MANAGEMENT'S SUPPORT FOR
      QUALITY
-------------------------------------------------------- Chapter 3:2.3

In 1994, Alyeska established the Alyeska Integrity Management System
(AIMS) to provide an overall framework for ensuring the integrity of
the pipeline and terminal--no accidents, no leaks, no compliance
violations, and reliable, cost-effective operations.  A key part of
AIMS establishes management's commitment to Alyeska's quality
program.  Focusing this attention is an important aspect of changing
Alyeska's mindset in connection with a quality program.  Reporting
that Alyeska's mindset was not focused on prevention, QTC was
concerned with the lack of focus on prevention through strategic
planning, adequate procedures, and compliance with regulatory
requirements that would be brought about by an effective quality
program.  AIMS appears to have the kind of structure needed for
greater emphasis on quality.  AIMS has two components.  The first is
a set of 69 expectations grouped into 13 elements which describe what
is expected of Alyeska in order to ensure the integrity of its
operations.  One element establishes a quality program as an
expectation.  Specifically, it states,

     "A comprehensive quality program is crucial to assure management
     and the public that the Alyeska Pipeline Service Company is
     operating with integrity (i.e.  in a manner that is safe,
     environmentally sound, and reliable) and in compliance with all
     regulatory, legal and Company requirements."

The quality element includes four expectations: 

  A comprehensive, documented quality program is understood and
     complied with by employees. 

  The effectiveness of the quality program is periodically and
     objectively assessed and the program is continuously improved. 

  Corrective and preventive actions are identified, documented,
     implemented, and tracked to completion. 

  Systems are established to identify, evaluate, and resolve the
     quality concerns of employees and contractors. 

The second component provides a defined process for periodic
evaluations of the extent to which the expectations are being met. 
The process provides for three levels of assessment--self-
assessments, at least annually, by the local organization to ensure
regulatory, legal, and company policy compliance; functional
assessments, at 2- or 3-year intervals, by qualified company
personnel to assess key areas of AIMS, especially relating to
compliance; and independent assessments by skilled company personnel
or outside experts to assess compliance with AIMS.  Independent
assessments will begin in 1996 and will cover the entire company
every 3 years, one-third at a time.  The first round of
self-assessments was completed in November 1994.  The AIMS
Coordination Leader told us that in the first round of assessments,
the various units averaged about 1.5 out of a possible 4.  He added
that as a result of the assessments, each of the 23 units assessed
developed an improvement plan to address the most significant action
items identified in the assessments.  In total, the plans cover about
500 items.  The plans call for completing action on these items by
the end of 1995.  In turn, the employee incentive program ties
employees' compensation to completing these plans in 1995. 


      REORGANIZATION FOR GREATER
      AUTHORITY AND INDEPENDENCE
-------------------------------------------------------- Chapter 3:2.4

QTC reported that Alyeska's quality assurance group, which conducted
audits and surveillance, reported to the Vice President of
Administration, who had no prior experience in any phase of a quality
assurance program.  In addition, the Quality Services group, which
provided inspection services for pipeline and terminal operations,
reported to the Vice President of Engineering and Projects and thus,
according to QTC, lacked the independence and the required freedom to
document conditions adverse to quality.  Nationally and
internationally recognized guidance on the development of quality
organizations emphasizes the importance of these organizations having
the organizational authority, responsibility, and freedom to (1)
identify problems affecting quality, (2) report problems and
recommend corrective actions, (3) control processing until
nonconforming conditions are corrected, and (4) verify corrective
actions.\11 In response to QTC's finding, in early 1994 Alyeska
reorganized its quality program.  It combined the audits and
surveillance group and the inspections services group into a single
organization, the Quality Department, headed by the Quality
Department Manager.  Alyeska also relocated the department under a
newly created Vice President for Quality, Environment and Safety,
who, organizationally, is on the same level as the Vice President for
Operations. 

In June 1995, about 31 staff were in the Quality Department, about 14
in Audits and Surveillance, 11 in Quality Services, and 6 in
Management and Administrative Support.  In addition, 18 other staff
perform quality functions, including nine quality generalists
assigned to the business units.  The 1995 quality staffing level of
49 represents an increase of 15 from the 1993 staffing level of 34. 
The staff resources devoted to the quality program are temporarily
augmented by about 37 staff who are dedicated to short-term projects
and will be phased out in 1995 as projects wrap up. 

After we had completed our field work, on June 1, 1995, the President
of Alyeska advised us that Alyeska plans to further revise the
organization of its quality program.  The program's reorganization
will take place in two stages.  First, beginning in July 1995, the
position of Vice President for Quality, Environment, and Safety, will
be abolished.  The environment and safety functions will be assigned
to another Vice President.  The quality program, with the exception
of audit and surveillance, will be assigned to a newly created
Operations System Integrity Department under the Vice President for
Operations.  The audit and surveillance function will be transferred
to the Vice President for Business Practices, who is also responsible
for Alyeska's audit function and the Employee Concerns Program. 
Alyeska officials believe that placing the audit and surveillance
function in a separate group from Operations will enable it to retain
its independence to report on conditions that may be adverse to
quality. 

The inspection function will be reassigned from Quality, Environment,
and Safety to the Operations System Integrity Department within the
Operations group and eventually reassigned to the Maintenance and
Modification Department within Operations and the Business Units
during the second stage of reorganization.  Although this
reassignment will once again have the inspection function under the
persons responsible for transporting oil and maintaining the
pipeline--the Vice President for Operations and the Business Unit
Leaders--Alyeska officials believe that the quality program will be
better received and evolve into a continuous improvement mode more
quickly if the personnel responsible for operating the pipeline take
ownership of the quality program rather than have a separate unit
outside of Operations attempt to instill quality in the way
Operations personnel do their work. 

According to Alyeska officials, steps are being taken to ensure that
the inspection function will continue to be effective.  In the
proposed reorganization, the inspection function and the project
management/facility operations functions will remain on separate
reporting paths within Operations.  In addition, the Operations
System Integrity Manager is establishing quality councils, and
inspectors will be invited to participate in the councils along with
Alyeska employees.  These councils are being established to provide a
forum for front-line workers to provide input for improvements in the
quality program or to raise issues or problems involving quality.  In
addition, the officials told us that the Ombudsman Program and the
soon-to-be-implemented Employee Concerns Program, which are located
outside of Operations, will provide a relief valve in the event that
quality-related issues are not being appropriately handled by line
organizations.  Alyeska plans to review and benchmark these changes
against other companies and industries late in 1995 to ensure that
this is the most effective approach.  In our opinion, the
effectiveness of these changes will become clearer over time. 


--------------------
\11 International Standard:  Quality Management and Quality Assurance
Standards-Guidelines for Selection and Use (ISO 9000), International
Organization for Standardization, 1987, and Specifications for
Quality Programs:  API Specification Q1 (SPEC Q1), Second Edition,
Jan.  1, 1988, American Petroleum Institute. 


      PROCESS FOR IDENTIFYING AND
      ENSURING COMPLIANCE WITH
      REGULATIONS IS BEING
      ESTABLISHED
-------------------------------------------------------- Chapter 3:2.5

QTC also found that the TAPS project failed to ensure compliance with
agreements, codes, standards, and government regulations because
Alyeska failed to fully identify its regulatory requirements and
incorporate those requirements into operating and maintenance
implementing procedures.  QTC noted that this failure by Alyeska to
implement its own policy of regulatory compliance dates back to the
original issuance of the Quality Assurance Manual, Revision 0, dated
June 7, 1977. 

In response to QTC's finding, Alyeska is establishing the Alyeska
Regulatory Compliance System (ARCS) to help ensure that commitments,
such as the requirement to comply with the federal and state
right-of-way agreements, and affected documents, such as the
procedures for implementing the agreement, are identified and updated
in a timely fashion.  The system will contain each requirement, such
as a law or regulation, interpret its specific relevance to Alyeska,
link it to a principal implementing procedure, identify the
organization responsible for implementing the procedure, identify
implementing documents such as maintenance procedures, and specify
any training requirements. 

In October 1994, Alyeska created the Information Management Service
Unit to implement this tracking system and several related programs. 
The requirements were divided into eight subject areas, including
environment, and fire safety and industrial hygiene.  The process of
identifying the regulatory requirements has been completed for six of
the eight subject areas in the tracking system.  The Service Unit
plans to partially implement ARCS in the fourth quarter of 1995 for
the six areas.  Alyeska plans to fully implement the tracking system
around December 1996.  At that time, it is expected that the required
data will have been developed for the remaining two areas--Oil Spill
Contingency Planning and Codes and Standards--and that safe
maintenance procedures will have been completed. 


      DEVELOPMENT OF PROGRAM
      COMPONENTS PREVIOUSLY ABSENT
      OR NOT WORKING
-------------------------------------------------------- Chapter 3:2.6

QTC reported that program components key to an effective quality
program were either not functioning or were missing altogether.  The
document control process had broken down to the extent that no
assurance could be made that approved drawings accurately reflected
the equipment in place or its operation.  Neither was there a master
list of structures, systems, and components that should be included
in a quality program or documentation indicating the importance of
the equipment to the pipeline's integrity.  In addition, cause and
corrective action programs were not in place to learn from
malfunctions and maintenance histories. 

Alyeska is correcting these deficiencies.  It is

  developing a master equipment list to identify the structures,
     systems, and components to be included in the TAPS quality
     program and developing a procedure for documenting and
     controlling the list;

  developing a document establishing the importance of various
     equipment to ensure the integrity of TAPS and thus the extent to
     which elements of the quality program apply to the equipment;

  developing a risk-based cause and corrective action program that
     will use maintenance histories to improve future reliability;
     and

  updating the "as-built" documentation to ensure that drawings of
     all TAPS' structures, systems, and components reflect current
     configurations, performing a limited functional check to ensure
     that the selected equipment operates as provided in
     specifications, and developing implementing procedures to ensure
     that the documentation and conditions of TAPS' equipment and
     facilities remain current and consistent. 


      CREATION OF POLICIES AND
      PROCEDURES
-------------------------------------------------------- Chapter 3:2.7

QTC reported that Alyeska's quality program, as described in various
quality manuals, has been inadequate as a total approach to quality
and reported that the manuals, as defined, have not been implemented. 
QTC's Phase 2 report identified actions for Alyeska to consider in
developing its revised quality program.  Alyeska considered and
incorporated almost all of these actions, and in May 1995, JPO
conditionally approved Alyeska's revised program.  The Quality
Program Manual establishes Alyeska's overall quality program and
policies.  The implementing procedures address various areas,
including ones that QTC identified as lacking:  the Regulatory
Compliance Matrix, Master Equipment List, Trend Analysis, and Causal
Factor (root cause) Analysis.  After a period of orientation and
training, the revised quality program will go into effect on June 15,
1995 for all new work. 


      SOME OBSTACLES REMAIN IN
      EFFORTS TO IMPROVE THE
      QUALITY PROGRAM
-------------------------------------------------------- Chapter 3:2.8

As with other areas, the actions required to improve the quality
program have proven to be more difficult than Alyeska originally
expected.  Thus, a fully implemented quality program will not be
completed until at least December 1996, although key components are
in place now, and others are expected to be put into place during the
latter half of 1995.  Alyeska's response to QTC's recommendation for
a regulatory compliance system is one example in which progress is
slower than anticipated.  Although Alyeska's 1994 plans called for
implementing the Alyeska Regulatory Compliance System in the first
quarter of 1995, completion of the system will be implemented in
stages.  The system will be partially implemented in the fourth
quarter of 1995, when time is available at the terminal and pump
stations to provide needed training and when the communications
upgrade, called the wide-area network, which will enhance computer
communications between field operations and Anchorage, is completed. 
Full implementation of ARCS is scheduled to be completed in December
1996 when two subject areas--Oil Spill Contingency Planning and Codes
and Standards--have developed needed information and when the
maintenance organization completes its program for developing the
required procedures for maintaining equipment to required standards. 


   ALYESKA IS UPGRADING ITS
   MAINTENANCE PROGRAM
---------------------------------------------------------- Chapter 3:3

The maintenance designed to keep plant and equipment in good
operating condition is generally achieved by identifying all of the
structures, systems, and components requiring maintenance (a master
equipment list) and developing schedules and criteria for when
maintenance is to be performed.  QTC found that Alyeska's program for
maintaining the pipeline's components (such as the pipe, pumps,
valves, and electrical equipment) lacked a comprehensive approach for
analyzing and "trending" the condition of this equipment or for using
such information as a means of establishing a maintenance program
that is predictive in nature.\12 Alyeska had no master equipment list
and no implementing procedures for a comprehensive maintenance
program.  QTC found that Alyeska's individual maintenance procedures
lacked clarity, specificity, and technical validity.  For example,
the procedures did not specifically call for the types of
parts/materials/tools to be used in a procedure; called for incorrect
parts/materials/tools to be used; or called for
incomplete/inadequate/inaccurate steps to perform preventive
maintenance. 


--------------------
\12 Maintenance takes three main forms--corrective, preventive, and
predictive.  Corrective maintenance involves repairing or replacing a
component when it fails; preventive maintenance involves servicing
the component on a regular basis, such as the amount of calendar time
or hours of operation that have transpired.  Predictive maintenance
is similar to preventive maintenance except that it develops
maintenance schedules based on equipment condition rather than
calendar time or hours of operation. 


      ALYESKA IS CORRECTING
      MAINTENANCE
      PROBLEMS--COMPLETION NOT
      LIKELY UNTIL 1996
-------------------------------------------------------- Chapter 3:3.1

Alyeska has taken and plans to take a number of steps, such as
developing the master equipment list discussed under the quality
program, to correct the maintenance program deficiencies identified
by QTC.  It has also begun developing a revised maintenance program
that will include the results of its corrective actions.  Together,
the actions, when completed, should provide a basis for improving
maintenance and for creating a predictive maintenance program that
can better focus maintenance resources where they are (1) most needed
to ensure safety and pipeline integrity and (2) most cost-effective. 
The completion of all necessary steps is not likely until at least
mid-1996 at the earliest. 


      MASTER EQUIPMENT LIST AND
      RELATED INFORMATION
-------------------------------------------------------- Chapter 3:3.2

Alyeska is developing a master equipment list to identify equipment
needing maintenance and an integrity list that will relate the
importance of this equipment to the integrity of the pipeline.  The
quality program requires greater focus on the equipment that is more
critical to the safety and integrity of the pipeline.  The equipment
list is being developed as part of the as-built project and
functional-check processes described in the earlier section on
quality.  The integrity list for the level-I items was completed in
November 1994, and the list is scheduled to be completed for the
level-II, level-III, and nonintegrity items in the fourth quarter of
1995.  The initial as-built project for the 12,000 to 14,000 most
critical drawings is scheduled to be completed in June 1995; a
supplemental project for 5,000 to 6,000 less critical drawings is
scheduled for completion in June 1996.  The functional check out
project is associated with the as-built project and is also a
two-phase project.  Each phase will be completed before the
corresponding phase of the as-built program.  The master equipment
list is scheduled to be completed about the end of 1995. 


      INFORMATION SYSTEM FOR
      ANALYZING MAINTENANCE
      HISTORIES
-------------------------------------------------------- Chapter 3:3.3

Alyeska is developing an Integrated Maintenance Management System
(IMMS) to enable it to track and learn from the maintenance histories
of key equipment throughout the pipeline.  The information derived
from maintenance histories can provide a basis for improved
reliability and, possibly, reduced maintenance costs.  A basic
element of the system is a software system (called PassPort) that
will allow Alyeska to collect and analyze maintenance histories on
key equipment.  The first stage of this system, the automated work
order system, began testing at a pump station in spring 1995 and will
come on line during the third quarter of 1995.  Alyeska is also
upgrading its wide-area network communications link between the
pipeline's facilities to allow the system to acquire and track
maintenance histories from the equipment at the terminal and the pump
stations.  The computer-supported maintenance system and the related
communications upgrade will provide a basis for tracking the
histories of all integrity-related equipment on the pipeline. 
Alyeska's plans call for completing the upgraded communications
system in November 1995. 

Alyeska describes the maintenance system it is developing as a
risk-based maintenance program which provides for (1) learning from
maintenance experience that is collected and tracked in the PassPort
data base and (2) using predictive maintenance procedures to improve
reliability and reduce costs.  Without such a program, resources
could be inefficiently used to maintain equipment whose failure will
have little impact on operations or for which preventive maintenance
is not economical.  Instead, it would be more cost-effective to
operate this equipment until it fails and then replace it.  On the
other hand, inadequate maintenance could be performed on equipment
where the likelihood of failure and/or the consequence of failure
warrant more extensive maintenance, according to Alyeska maintenance
officials.  In a risk-based maintenance program, maintenance is
performed on a schedule determined by both the consequences of
failure and the likelihood of failure.  The risk assessment element
is scheduled to be implemented in late 1995 and early 1996 as
training is provided.  Predictive maintenance requires (1) the
determination of conditions, such as increasing vibration,
temperature, or wear, that will indicate when maintenance is needed
in time to prevent equipment failure and (2) a monitoring program to
identify those predetermined conditions.  The PassPort system will
help identify the conditions that call for maintenance, and the risk
analysis will identify the equipment important enough to make
monitoring worth the cost. 


      NEW PROCEDURES FOR
      SUPPORTING MAINTENANCE
-------------------------------------------------------- Chapter 3:3.4

Alyeska is developing maintenance procedures, called safe operating
and safe maintenance procedures, describing how to prepare equipment
for maintenance and how to perform maintenance on pipeline equipment. 
The completion of this program has stretched into 1996 because
Alyeska is developing the criteria for identifying which equipment
needs to have maintenance procedures developed.  The contractor had
developed over 600 procedures at a pump station and the terminal
before the project was put on hold.  The contractor, as directed, was
developing procedures for items at equipment locations that are
identified by tag number.  While the tag numbers are unique, the
equipment with the tag numbers is not.  Thus, this method resulted in
many duplicate procedures being written for the same equipment.  A
different system, based on component identification and a judgmental
determination of importance, is being developed.  The new approach
will reduce the number of procedures that have to be developed and
updated as equipment changes are made over time.  The completion of
this process is now scheduled for 1996. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:4

Alyeska is taking steps that when completed and fully implemented,
should correct the problems QTC identified with electrical integrity,
quality, and maintenance.  However, the process for all three is
taking longer than planned.  Alyeska's efforts in these areas have
been affected by the complexity and breadth of the work to be done. 
Considerable time will be needed before the degree of success of the
effort can fully be assessed.  The need for additional time to fully
assess progress is particularly true for the quality program, which
is undergoing continuous reorganization.  In addition, once the
corrective measures are addressed, implementing them over the long
term will require a continuing commitment of resources, as discussed
in the next chapter. 


TAPS' REGULATORS HAVE TAKEN STEPS
TO IMPROVE OVERSIGHT
============================================================ Chapter 4

Effective oversight is a key component of ensuring safe pipeline
operations.  Although federal and state regulators made substantial
attempts after 1990 to better coordinate their efforts, significant
problems with regulatory effectiveness were still being pointed out
by outside reviews as recently as 1994.  The Joint Pipeline Office is
addressing these problems.  For example, it has strengthened JPO's
regulatory staff, and JPO is in the process of reorganizing its
monitoring program to address prior limitations.  These developments
are encouraging signs that the regulatory program is continuing to
improve. 


   EARLIER REGULATORY PROBLEMS
   DEMONSTRATED A NEED FOR A MORE
   COORDINATED APPROACH
---------------------------------------------------------- Chapter 4:1

In a 1991 review of TAPS oversight,\13 we concluded that the existing
form of oversight did not provide for effective monitoring of TAPS'
operations.  The five principal federal and state regulatory agencies
did not have a systematic, disciplined, and coordinated approach for
regulating TAPS.\14 In fact, BLM officials told us they were not
regulators.  Instead, they largely relied on Alyeska to police
itself. 

We also found that the Exxon Valdez oil spill and the discovery of
corrosion in the pipeline in 1989 had been an impetus for the
regulators to reevaluate their roles.  This reexamination led to a
1990 decision to develop JPO.  We concluded that the establishment of
JPO was a positive step toward better regulation. 

During the next several years, the regulatory agencies gradually
increased their participation in JPO.  When we issued our 1991
report, 6 of the 12 agencies with significant jurisdiction over TAPS'
operations had agreed to participate in JPO.  By 1994, 11 of the 12
agencies had signed an agreement to support JPO and to work
cooperatively to protect public safety, the environment, and the
integrity of TAPS.\15 Similarly, they increased the staffing
committed to JPO from a skeletal staff to 57 employees by 1993. 


--------------------
\13 Trans-Alaska Pipeline:  Regulators Have Not Ensured That
Government Requirements Are Being Met (GAO/RCED-91-89, July 19,
1991). 

\14 BLM, EPA, the Department of Transportation's Office of Pipeline
Safety, and the Alaska Departments of Natural Resources and
Environmental Conservation. 

\15 The U.S.  Fish and Wildlife Service declined to sign the
agreement, stating that it was unable to make a significant new
commitment of time and resources to JPO. 


   QTC AUDIT, OTHER STUDIES SHOWED
   INCREASED OVERSIGHT HAD NOT
   BEEN SUFFICIENT
---------------------------------------------------------- Chapter 4:2

Hearings held in July 1993 by the Subcommittee on Oversight and
Investigations, House Committee on Energy and Commerce, provided
indications to BLM that JPO's efforts to regulate TAPS to date were
not adequate and that further action was needed to improve JPO's
regulatory oversight of TAPS.  In response to these hearings, the
Director of BLM clarified BLM's authority in relation to the other
TAPS regulators.  He testified that BLM not only would exercise its
authority over federal lands but, as lead agency of JPO, would invoke
its authority consistent with the TAPS Authorization Act to carry out
thorough pipeline oversight. 

One of BLM's first actions was to contract with QTC.  The 1993 QTC
report provided a stark picture demonstrating that Alyeska and its
regulators still had a considerable distance to go in ensuring the
integrity of the pipeline's operations.  Although the QTC report did
not directly address how effectively regulators were doing their
jobs, QTC's findings demonstrated that JPO's efforts to date had not
been sufficient to identify major problems and ensure their
correction. 

In response, JPO, in early 1994, selected Booz-Allen & Hamilton, an
independent consulting firm, to assess its monitoring and inspection
program.  In its June 1994 final report on a comprehensive monitoring
program for JPO, Booz-Allen concluded that JPO was not effectively
addressing the prevention of pipeline hazards.  The report stated
that closely monitoring Alyeska's maintenance, quality assurance, and
configuration management\16 could have precluded most of the findings
in QTC's audit. 

Booz-Allen concluded that for JPO to be successful in meeting its
responsibility for TAPS oversight, it needed a new model for
monitoring TAPS.  This model would place more emphasis on identifying
potential hazards and addressing them rather than waiting to detect
and mitigate hazards that had already occurred.  (In placing greater
emphasis on prevention, however, regulatory activities would still
address the monitoring of compliance and emergency response.)
Booz-Allen found that JPO needed to make several changes to shift to
such a model: 

  Monitoring risk management in nine major TAPS' process
     areas--quality assurance, safety, configuration management,
     operations, maintenance, risk determination, environmental
     protection, project design, and project performance.  JPO
     officials said that in the past, they had focused only on the
     latter three areas. 

  Performing the monitoring work in a multidisciplinary team
     organized under a single director. 

  Collecting far more information than in the past, structuring it
     for management decision-making and action, and making it
     available for outside audits, interests, and inquiries. 


--------------------
\16 Configuration management is the process for assuring agreement
between the design requirements for hardware, the hardware in place,
and the documentation for the hardware. 


   JPO HAS TAKEN ADDITIONAL STEPS
   TO IMPROVE OVERSIGHT
---------------------------------------------------------- Chapter 4:3

Our most recent work indicates that JPO is making an effort to
improve its oversight.  Since our earlier work, JPO has changed and
now recognizes its regulatory function.  In addition, JPO has

  expanded its staff, supplemented by contractors, to handle
     oversight responsibilities;

  established a project group to monitor Alyeska's response to the
     QTC findings; and

  begun to reorganize and carry out other steps needed to implement
     the Booz-Allen model for comprehensive monitoring. 


      FUNDING AND STAFFING HAVE
      INCREASED
-------------------------------------------------------- Chapter 4:3.1

Funding levels for JPO's operations increased from about $3.5 million
in 1993 to more than $5 million for fiscal year 1995.\17 Under the
agreements authorizing the pipeline, Alyeska is obligated to pay
BLM's costs for oversight activities related to TAPS.  In 1995, BLM
estimates its portion of these costs will be $3.5 million.  (Although
JPO's operations are primarily focused on TAPS, it does monitor other
pipelines in Alaska and conduct other related activities, such as
reviewing and issuing permits for pipelines being considered for
construction.) In addition, from February 1994 through March 1995,
Alyeska paid $9.2 million for TAPS-related activities by JPO
consultants and other associated contract costs; by June 1995,
Alyeska's payments for these costs will reach $12 million. 

In addition, Alyeska agreed in September 1990 to pay a portion of
ADNR's costs for monitoring TAPS.  In 1995, Alyeska will contribute
up to $800,000 of the expected $1 million for monitoring TAPS.  JPO
officials advised us that the state provides a ceiling on how much
ADNR can spend, provided it raises the money through agreements, such
as the agreement it has with Alyeska.  Other sources of funds come
from other agreements.  For example, ADNR also receives money from
rents on rights-of-way from owners of common carrier pipelines and
sales of gravel from the rights-of-way.  It expects to raise $335,000
in rents and $100,000 from gravel sales in 1995.  ADNR's authorized
ceiling for 1995 is $1.7 million, but it will raise only about $1.3
million through its various agreements.  Thus, its budgeted spending
for JPO activities in 1995 will be about $1.3 million. 

Under these increased funding levels, overall staffing at JPO has
grown from 57 positions in 1993 to 84 positions as of April 1995. 
Although JPO officials told us the staffing level was not adequate,
the additional support it needs is being provided by contractors,
such as Stone and Webster Engineering Corporation, an independent
engineering consultant firm.  JPO officials said that since Alyeska
has not established all of its programs, such as maintenance, JPO did
not know if its noncontractor staffing level was sufficient to
address its regulatory responsibilities in the future.  JPO will
assign five Stone and Webster employees to its Operations Branch for
audit item resolution through December 1995. 


--------------------
\17 JPO officials stated that this amount does not include funding
supplied by EPA, the Office of Pipeline Safety, and the Alaska
Department of Environmental Conservation for the staff at JPO.  These
agencies' costs are not included in the costs reported to us by JPO. 
Also, the federal fiscal year ends on September 30 and the state
fiscal year ends on June 30. 


      JPO'S SPECIAL MONITORING OF
      DEFICIENCY ITEMS IS TAKING
      PLACE
-------------------------------------------------------- Chapter 4:3.2

Consistent with its more active monitoring role, JPO in 1994
established a project group to oversee Alyeska's correction of action
items.  These staff members perform such functions as approving
priorities for action items, coordinating the review effort,
reviewing special studies, and approving corrective action plans.  To
supplement this staff, JPO is working with Stone & Webster.  JPO used
about 45 Stone & Webster staff for such tasks as reviewing corrective
action plans, verifying corrective action on-the-ground, maintaining
a computer data base for tracking audit action items, and performing
special investigations.  JPO has also hired another engineering
consultant to monitor how Alyeska closes the electrical deficiencies
in the ANSC project.  While the former staff of the project group
still spends the majority of their time on audit items, JPO has
integrated them into its new organization described below. 


      JPO IS REORGANIZING TO
      IMPLEMENT NEW COMPREHENSIVE
      MONITORING PROGRAM
-------------------------------------------------------- Chapter 4:3.3

Shortly after receiving Booz-Allen's recommendations for a new
monitoring model for TAPS, JPO began to reorganize to put the model
into effect.  The Booz-Allen study called for establishing a
centralized monitoring office with four oversight groups:  quality
assurance, pipeline surveillance, engineering and projects, and
right-of-way administration.  Each of the four groups is in the
process of developing detailed monitoring programs that are based on
the consultant's recommendations.  Table 4.1 shows each office's
size, primary role, and activities to date. 



                                    Table 4.1
                     
                       Organization and Activities of JPO's
                                Operations Branch

                    Number of                             Main activities to
Group               positions       Primary role          date
------------------  --------------  --------------------  ----------------------
Pipeline            8               Provide primary       Initial emphasis
Surveillance                        oversight of          includes assessments
                                    pipeline; ensure      of TAPS' operations
                                    environmental         and maintenance,
                                    protection            surveillance of
                                                          projects, support of
                                                          JPO's oil spill
                                                          contingency efforts,
                                                          and permitting for
                                                          Alaska's Department of
                                                          Fish and Game

Right-of-Way        10              Manage and            Work plans for 1995-
                                    administer            96 show the top
                                    documents, leases,    priority is issuing
                                    authorizations, and   authorizations for
                                    permits that apply    pipeline work
                                    to federal and state  consistent with the
                                    rights-of-way         grant/lease and
                                                          federal/state laws and
                                                          regulations

Engineering         6               Ensure that design,   Identified 19
                                    construction,         activities for
                                    operation, and other  monitoring, including
                                    activities adhere to  shut-down events and
                                    quality program's     maintenance procedures
                                    requirements and      and manuals; review
                                    minimize risks        corrective action
                                                          plans on the 4,920
                                                          identified
                                                          deficiencies

Quality Assurance   6               Ensure that quality   Developed a work plan
                                    assurance programs    for 1995 (includes
                                    and practices are     reviews of Alyeska's
                                    effectively planned   quality, records
                                    and executed          management, and
                                                          training programs)
--------------------------------------------------------------------------------
Because much of this effort is still far from complete, it is too
early to determine whether it will be successful.  However, JPO is
currently conducting assessments and surveillance activities under
the Comprehensive Monitoring Program (CMP).  Significant program
reviews, which aggregate observations from JPO's assessments and
surveillance and factor in input from employees' concerns, audit
items' progress, and Alyeska's own quality reviews, will be completed
through 1996; the initial emphasis will be on quality, operations,
and maintenance.  Configuration management and safety, two additional
CMP focus areas, are currently undergoing review by JPO; reports are
due by the end of 1995.  JPO expects program reviews of significant
depth to be completed under CMP by the end of 1996. 

Besides the 31 positions in the operations branch, JPO has 29 other
staff positions that are primarily involved in monitoring other
activities, such as other pipelines, but who also assist in
monitoring TAPS.\18 Of these, 26 are with the Alaska Department of
Environmental Conservation, 1 is with DOT's Office of Pipeline
Safety, and 1 is with EPA.  These three agencies, while locating
their staff at JPO, have elected to retain final responsibility for
carrying out their regulatory functions.  The one remaining agency is
the Alaska Office of Management and Budget, Division of Governmental
Coordination, which coordinates coastal consistency reviews; it has
one staff member at JPO. 


--------------------
\18 The remaining 24 staff are in administration, management, and
special projects. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:4

Like Alyeska, JPO is in the process of changing its approach to
ensuring the safe operation of TAPS.  At this point, it is difficult
to provide an assessment of how successful JPO has been.  Taken
together, however, the efforts set in motion over the past 2 years
demonstrate that JPO is making a concerted effort to improve. 

JPO's ultimate success, like Alyeska's, depends partly on ensuring
that its changes are fundamental enough not only to resolve existing
problems with TAPS, but also to keep them from recurring.  In the
following chapter, we address the challenges that JPO and Alyeska
face in this area. 


RESOLVING PAST PROBLEMS REQUIRES
ADDRESSING UNDERLYING CAUSES AND
STAYING THE COURSE TO IMPROVEMENT
============================================================ Chapter 5

Audits and studies of TAPS have pointed to a common underlying cause
for past problems:  Both Alyeska and JPO had an operating philosophy
based heavily on reacting to problems rather than on ensuring quality
and minimizing the chance that problems would occur.  The QTC study
called Alyeska management's mindset "the greatest
non-hardware-related imminent threat" to the pipeline, and the
Booz-Allen study found that JPO needed to substantially transform its
mindset in connection with oversight.  Without fundamentally changing
the approach to quality and prevention, which is the key to
correcting past problems, JPO cannot ensure that problems will not
happen again.  Alyeska and JPO have developed policies that reflect
this change, and both organizations have taken steps to incorporate
these changes into their day-to-day work.  For Alyeska, the success
of this effort may depend on its ability to establish a new mindset
throughout the entire organization.  For JPO, the main challenge may
be maintaining a stable resource base--funding and staff--over the
long term for its redefined operations. 

Alyeska and JPO are partway through an ambitious attempt to resolve
problems with the operation and oversight of TAPS.  Their progress
shows reason for cautious optimism on the basis of the substantial
amount of work completed.  However, tackling some tasks is proving to
be more complex, time-consuming, and difficult than initially
expected, and the real key to improved operation will be the
implementation of many of these actions over the long term. 


   ALYESKA IS TAKING ACTIONS TO
   IMPROVE OPERATIONS
---------------------------------------------------------- Chapter 5:1

QTC took issue with Alyeska's approach to support TAPS' operations
both at mid- and upper-management levels.  Mid-level managers, QTC
said, failed to recognize regulatory requirements, did not develop
procedures on how to implement those requirements, and did not
provide the equipment, resources, and trained personnel required to
carry out procedures.  Upper management, QTC said,

     "not only failed to prevent or correct these mid-level
     management failures, but also has failed even to recognize the
     need to do so.  Upper management has demonstrated a tolerance
     for negative practices, such as harassment and intimidation of
     quality control inspectors and others, and has failed to take
     affirmative actions needed to establish the integrity of the
     operation."

Alyeska does not dispute QTC's characterization of past practices by
some managers and supervisors.  In an April 1994 briefing describing
the organizational problems outlined in the QTC report, Alyeska's
human resources department concluded that the company's culture was
typified by emphasizing oil transportation above all else.  In
addition, Alyeska was hiding problems and taking a
"shoot-the-messenger" approach when problems were surfaced.  It also
maintained adversarial relations with regulators, pipeline owners,
and contractors.  Alyeska is taking steps to change the company
mindset, but the changes will take some time to complete and will be
difficult to implement. 


      CHANGES IN OWNER COMPANIES'
      APPROACHES TO ESTABLISHING
      ALYESKA'S ACCOUNTABILITY
-------------------------------------------------------- Chapter 5:1.1

Part of the change in mindset has come as a result of actions taken
by Alyeska's seven owner companies.  In the past, according to owner
company executives with whom we spoke, Alyeska's accountability was
somewhat blurred by the working relationship between Alyeska and the
owner companies.  The Owners Committee, which oversaw Alyeska's
operations through quarterly meetings, was supplemented with 11
subcommittees covering such matters as law, budget, audit,
accounting, and tax.  These subcommittees were often heavily involved
in management decisions.  As a result, the executives said, Alyeska's
accountability may have become less clear. 

Beginning in the fourth quarter of 1993, Alyeska and the owner
companies took action to clarify expectations.  An expectations
manual was created, specifying which areas were Alyeska's autonomous
responsibility, which authorities require owner notification but are
delegated to Alyeska, and which areas the owner companies reserved
for themselves.  With the exception of the audit subcommittee, the
subcommittee structure was dissolved and replaced by an approach in
which joint task forces were created to deal with specific issues as
they developed.  The owners created a performance management contract
that specified the actions and standards to which Alyeska management
would be held.  Among other things, this contract calls for
completing action on at least 85 percent of the action items in the
ACT data base by the end of 1995.  According to three owner company
presidents representing the Owners Committee, the committee reviews
progress on the contract each quarter and supplements this review
with monthly meetings with Alyeska management. 


      CHANGES IN ALYESKA'S
      OPERATING POLICIES AND
      ATTITUDES
-------------------------------------------------------- Chapter 5:1.2

Alyeska's top management has a new policy for corporate behavior that
encourages an open and more quality-oriented approach to operations. 
For example, on October 17, 1994, Alyeska's president wrote a
memorandum to all staff that reemphasized the objectives of the new
policy.  Alyeska revised and supplemented its $2.5 million baseline
training program to support the transition to its new organizational
culture.  It spent an additional $2.6 million in 1994, and plans to
spend an additional $2 million in both 1995 and 1996 for additional
training.  Alyeska has developed and administered training aimed at
eliminating actions that employees perceived as intimidating or
preventing them from expressing their concerns.  Alyeska provided
training to discourage intimidation and encourage open communication
to about 85 percent of its employees.  It also provided training,
which is aimed in part at assessing and improving the extent to which
supervisors promote teamwork and treat employees' concerns fairly, to
about 90 percent of those supervising three or more people.  Efforts
are also under way to improve and enhance an employee concerns
program by making it more accessible, more reliable, and more trusted
by employees. 

According to Alyeska officials, these and other actions are intended
to build a new culture in which employees feel safe in taking
appropriate action, inflexibility or inaction is not accepted, and
people take pride in their work.  In addition, Alyeska has surveyed
employees to measure their attitudes and degree of satisfaction and
plans to conduct other follow-on surveys.  A survey conducted in
March and April 1994 by an outside consulting firm covering 1,225
employees disclosed that the majority of the Alyeska employees
responding felt that they are encouraged to report bad news as well
as good news.  However, 25 percent believed that bad news would not
be received positively and that retribution or no corrective action
was likely.  Another survey, conducted in June 1994 for Alyeska by a
contractor, indicated that some of the 200 contract employees
surveyed feared they would be fired if they identified problems.  The
results of these surveys suggest that a complete changeover in
Alyeska's culture and employees' attitudes may take additional time
and effort. 


      GREATER STABILITY AND
      ACCOUNTABILITY IN MANAGEMENT
      POSITIONS
-------------------------------------------------------- Chapter 5:1.3

Another way in which Alyeska is attempting to change its mindset is
to create more stability--and therefore more accountability--in the
ranks of upper management.  Alyeska's upper-level management
positions have traditionally been filled by managers loaned from the
owner companies for short periods--usually 2 years.  This situation
has contributed to frequent turnover in senior positions and an
emphasis on short-term production goals, according to JPO officials. 
Alyeska's owner companies have made several commitments to change the
loaned-executive policy in the past year.  First, they adopted a
policy of reducing the number of loaned executives by 50 percent from
1993 levels by the end of 1997.  Second, they called for filling
positions with the best qualified person whether the person was
employed by an owner company, Alyeska itself, or an outside source. 
Third, in those cases in which positions were to be filled by loaned
executives, they called for lengthening the time of the assignment to
at least 3 years. 


      DEVELOPMENT OF NEW QUALITY
      AND MAINTENANCE PROGRAMS
-------------------------------------------------------- Chapter 5:1.4

At the level of day-to-day operations, the changes are reflected by
the new quality and maintenance programs.  Alyeska's senior
management believes that these new systems can provide processes and
procedures that will outlive management turnover and bring more
long-term stability and accountability.  As we discussed in chapter
3, Alyeska's efforts to implement these systems, if carried through
to completion, do appear substantive enough to bring about
significant improvement. 


      RECENT EVENTS SHOW CHANGING
      THE MINDSET WILL BE A
      GRADUAL PROCESS
-------------------------------------------------------- Chapter 5:1.5

These actions notwithstanding, it will take some time to change
Alyeska's culture.  For example, in the summer of 1994 there were at
least three instances when Alyeska supervisors or managers tried to
hide problems or punish employees for reporting "bad news." However,
in each case, when Alyeska's top management was made aware of the
incident, it took action to resolve the problem identified by the
employee and, where appropriate, followed up with counseling and/or
disciplinary action for the supervisor. 


   JPO IS CHANGING ITS ROLE
---------------------------------------------------------- Chapter 5:2

As discussed in chapter 4, past studies have pointed to the need for
JPO to change its regulatory role substantially.  JPO is attempting
to change its philosophy, organization, and monitoring techniques. 
Its goal is to be a more sophisticated and technically trained
regulatory/compliance organization capable of independently reviewing
and analyzing TAPS' plans, design, and systems.  JPO's operating
philosophy is intended to be one of quality management, which
emphasizes preventing rather than reacting to problems through closer
study and knowledge of TAPS' systems and processes. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 5:3

As discussed throughout the report, as we completed our work, Alyeska
and JPO were still in the process of taking action to correct
deficiencies and improve performance.  We remain encouraged by the
level of effort expended so far by Alyeska and JPO to remove the
underlying causes of problems with the operation and oversight of
TAPS.  If the actions under way are completed and fully implemented,
we believe they will provide a basis not only for fixing TAPS'
current problems, but also for helping to ensure that they will not
recur.  However, because much work remains to be accomplished, the
full effectiveness of Alyeska's and JPO's actions cannot be assessed
in the short term and will be largely dependent on the following: 

  Resolving the 4,920 action items in the ACT data base.  Progress
     reports generated from the ACT data base provide JPO with
     updated information on Alyeska's progress.  In turn, JPO has
     summarized Alyeska's progress in its annual report.  These
     annual reports are required to be provided to congressional
     oversight committees.  Information from the ACT data base and
     the annual report can provide those responsible for overseeing
     TAPS with the data needed to assess what progress is being made. 

  Alyeska's following through on its commitment to implement quality
     and maintenance programs.  Alyeska has the primary
     responsibility for ensuring that the pipeline operates in a
     safe, environmentally responsible manner.  The actions planned
     by Alyeska to improve its quality and maintenance programs, if
     implemented, will help ensure that this improvement occurs.  The
     key to this effort is for Alyeska to create and sustain a
     commitment to quality throughout its organization. 

  Long-term support for JPO's oversight responsibilities.  Strong,
     effective oversight of TAPS by JPO is critical for verifying
     that Alyeska and the owners fulfill their responsibility to
     resolve all TAPS' deficiencies as quickly and effectively as
     possible and, more importantly, for assuring the public over the
     long term that Alyeska operates the pipeline in a manner that
     meets the right-of-way requirements for a safe, environmentally
     responsible operation.  JPO's ability to provide effective
     regulatory oversight will depend on having adequate funds and
     staff.  The funding from Alyeska provides nearly the total
     foundation for JPO's effectiveness.  As for JPO's staffing, BLM
     provides almost 45 percent of the staff positions; nearly all of
     the remainder comes from the state.  Over the long term, as
     pipeline throughput decreases, Alyeska is likely to experience
     increasing pressure to reduce its costs, and BLM officials told
     us that downsizing at Interior eventually may put pressure on
     JPO's staffing levels as well.  The impact of these pressures on
     JPO's budget and staff can affect JPO's ability to be an
     effective regulator. 


SPECIAL STUDIES
=========================================================== Appendix I

Study number          Title
--------------------  ----------------------------------------------------------
A1                    Outdoor Cable Tray Study (VMT)\a

A2                    Conduit Supports (VMT)

A3                    Operations Control Center Upgrade (VMT)

A4                    Power House Cable Trays (VMT)

A5                    Cable Tray in Pump Station Control Room (PS)\b

A6                    Weeping (Rockbestos) Cables

A7                    Fire Water Pump House (VMT Berths 1 & 3) and PDC\c-7 (VMT)

A8                    Grounding, Phase I and Phase II (VMT)

A9                    PDC-14 Work Space Clearance (VMT)

A10                   Scanner System Study (Transferred to Control and
                      Telecommunications Long Range Plan--SCADA\d Study)

A11A                  Motor Control Center Verification (PS)

A11B                  Motor Control Center Verification (VMT)

A12                   Communication and Control System Evaluation (Transferred
                      to Long Range Plan SCADA Study)

A13                   Seismic Study of Cable Tray System (Transferred to
                      Specialized Seismic Study No. 3)

A14                   Switching Procedure

A15                   Heat Tracing at Berth #3 of VMT (Maintenance Issue--
                      Transferred to APSC Operations)

A16                   Control System Evaluation at Pump Stations (Transferred to
                      Long Range Plan SCADA Study)

A17                   Data Base Study for VMT (to help Operations only--study is
                      completed)

A18                   Power Distribution Center Underfloor and Water Seal

A19                   Grounding at Pump Stations

A20                   Turbine Room--High Temperature PS 1 Through 12
--------------------------------------------------------------------------------
\a VMT--Valdez Marine Terminal. 

\b PS--Pump Station. 

\c PDC--Power Distribution Center. 

\d SCADA--Supervisory Control And Data Acquisition. 


SPECIAL STUDIES ON GROUNDING,
INSPECTION OF CONTROL CENTERS, AND
POWER SWITCHING SYSTEMS
========================================================== Appendix II

Relying on the expertise of our staff electrical engineer, we
reviewed three of the special engineering studies--grounding,
inspection of motor control centers, and power switching
systems--their conclusions, and their recommendations to determine
whether the studies accurately assessed the problems and whether the
recommended actions will address the problems.  We selected these
studies because they covered (1) large numbers of specific problems
and (2) areas identified by various inspectors and whistleblowers. 
The studies covered the electrical grounding of the terminal's power
distribution system, studies by nationally recognized testing
laboratories on the components in various control centers, and the
system for switching power on or off at various facilities. 


      GROUNDING
------------------------------------------------------ Appendix II:0.1

The grounding system protects workers from electric shock hazards in
case of electrical malfunctions.  The study assessed whether the
system's design was adequate and whether the system was maintained to
meet design requirements.  Alyeska's principal electrical contractor,
Fluor Daniel, relied on previous studies as well as its own review of
the grounding system.  Its study included visual inspections of the
system as well as measurements of current flow to ensure the
integrity of ground paths.  We reviewed Fluor Daniel's methodology
and its study.  We also visually inspected parts of the system,
reviewed various electrical requirements, and discussed the system
with the electrical contractor's lead engineers and with other
electrical experts. 

Fluor concluded that the original design and construction of the
terminal grounding system was good and provided adequate safety
against electric shock that might be caused by fault conditions in
the power distribution system.  Fluor Daniel concluded that the
condition of the electrical distribution system, including the
grounding system, had degraded since original construction was
completed in 1977.  One comment in another study, which Fluor used in
its evaluation, is particularly relevant.  It said that additional
maintenance will be required as the electrical system ages to ensure
a continued level of performance.  Alyeska, however, does not have a
maintenance or operating philosophy to address the aging electrical
power distribution system.  In response to the condition of the
grounding system and the lack of a maintenance program to maintain
the system, the Fluor study recommended that the condition of the
grounding system be restored to a safe and effective condition and
that a maintenance program be designed to ensure the system's
effectiveness. 

The study also recommended that several additional assessments be
completed.  Alyeska completed these assessments and is performing
repairs as part of the ANSC project to return the grounding system to
its approved design.  The engineering design needed to upgrade the
terminal's grounding system is completed, and construction, now in
progress, is scheduled to be completed by August 1, 1995.  Fluor
Daniel's assessment appears to reasonably characterize the condition
of the terminal's grounding system and the steps Alyeska is taking to
respond to the problems identified.  Alyeska maintenance officials
also told us they are revising their maintenance program to ensure
that the grounding system's integrity is maintained.  They said the
preventive maintenance procedures that will cover the grounding
system are scheduled to be issued in the second quarter of 1995. 


      INSPECTION OF MOTOR CONTROL
      CENTERS
------------------------------------------------------ Appendix II:0.2

While the electrical installation was inspected by electrical
inspectors using AKOSH criteria as a standard, the control devices
that supply power have also been inspected by two nationally
recognized testing laboratories--one for the terminal and one for the
pipeline.  Alyeska used testing laboratories because few of these
units had nationally recognized testing laboratory certifications. 
The two laboratories inspected the units, put labels on those that
met requirements, and identified corrective actions needed on others. 
After the corrective actions are taken, the laboratories will
reinspect to ensure that corrective actions were appropriately taken. 
The study's approach appears reasonable for identifying the
electrical deficiencies in these facilities.  Once repairs are made
and labels have been placed by the testing laboratories, the
deficiencies will be corrected.  The engineering design needed to
correct areas that could not be labeled after the initial inspection
is completed.  The construction required by the design is now under
way and targeted for completion on July 31, 1995, at the pump
stations and at the terminal. 


      POWER SWITCHING SYSTEMS
------------------------------------------------------ Appendix II:0.3

This study reviewed the processes at the terminal for turning off or
on, power to equipment that is in a building remote from the building
where the on/off switch is located.  The study reviewed electrical
code requirements and existing conditions and developed procedures
for bringing power switching procedures in line with code
requirements.  These procedures provide for notices that power
switching is at a remote location and for plaques to be located (1)
near the equipment showing where the power can be switched off and
(2) near the switch to show the location of the equipment being
controlled.  We also reviewed code requirements, observed field
equipment with power switching at remote locations, and reviewed
proposed fixes.  The planned corrective actions, if properly
implemented, should bring the switching procedures into compliance
with electrical code requirements.  At the time of our review, the
placards were being purchased and maintenance procedures were being
written. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE ALYESKA PIPELINE
SERVICE COMPANY
========================================================== Appendix II


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Emi Nakamura
Duane G.  Fitzgerald
Robert E.  Cronin

OFFICE OF THE GENERAL COUNSEL

Stanley G.  Feinstein

SEATTLE REGIONAL OFFICE

Sterling Leibenguth
William Hanson
Hugo W.  Wolter
Stanley G.  Stenersen

