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BP hoping to keep oil flowing

Western half of Alaska field may stay in production

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BP America President Bob Malone explains the pipeline problem in Alaska.

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(CNN) -- BP America may know by this weekend whether it can keep the western half of Alaska's Prudhoe Bay oil field in production while it replaces corroded pipes in the eastern half.

This would reduce the potential impact of the shutdown on consumers, the company's president said Wednesday.

In an interview with CNN's "Live From," Bob Malone, chairman and president of BP America, said about 100 people are now on the scene X-raying pipelines on the western side of the field in an effort to determine if they can continue to operate safely.

If so, about 200,000 barrels of oil could continue to flow from the field while repairs are made, Malone said.

The eastern half of Prudhoe, which produces a like amount of oil, has already been shut down, and BP has said it could be weeks or even months before production can resume.

The company originally said the entire field would need to be idled to replace 16 miles (25 kilometers) of pipeline that feeds oil from Prudhoe into the main Alaska oil pipeline, which then carries the crude south to the port of Valdez. Prudhoe's production of 400,000 barrels a day accounts for about 8 percent of U.S. crude production.

With taxes on oil accounting for 86 percent of Alaska's revenue, Gov. Frank Murkowski announced Wednesday that he was imposing a hiring freeze on state agencies and may defer some projects previously budgeted. The governor also said he had directed Attorney General Dave Marquez to explore ways the state could recoup its financial losses from BP.

Financial hole

State officials have been scrambling to plug a looming financial hole since BP announced on Sunday that it would start shutting down Prudhoe.

"Let me assure you and all Alaskans that we will hold BP accountable for past and future field management," Murkowski said in an address to the Legislature. "BP must get the entire Prudhoe Bay field back up and running as soon as safely possible. BP should explore any options that would result in environmentally safe operations while it finds replacement pipe."

The corrosion problem was discovered during an inspection ordered after an oil spill from a BP pipeline earlier this year. The company has come under criticism for its maintenance practices, including its decision not to routinely employ a process called "pigging" to check the insides of pipe.

But in his interview with CNN, Malone insisted the company had a robust program in place to check for corrosion, spending about $67 million a year on the effort and employing 225 people (Full story).

Despite taking more than 100,000 X-rays a year, he said BP's corrosion team only recently discovered an unanticipated problem -- a bacteria growing in the pipeline which "eats the oil and secretes a substance that is acidic."

"We shut down the field to protect the environment before anything catastrophic could occur," Malone said.

But in his address to lawmakers, Murkowski called the company's decision to shut down the Prudhoe field "precipitous."

"I am concerned that the state was not consulted before the decision was made," said Murkowski, who also called on the federal government to do more to ensure pipeline safety.

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