Image: Prudhoe Bay oil field
Bpxa Via  /  AP file
A spill at Prudhoe Bay prompted BP to shut down the oil field on Alaska's North Slope on Monday.
updated 8/9/2006 8:38:48 PM ET 2006-08-10T00:38:48

Gov. Frank Murkowski instituted a state hiring freeze Wednesday because of the millions of dollars Alaska is losing each day due to an oil field shutdown.

The governor also said he would direct the attorney general to investigate the “state’s right to hold BP fully accountable for losses to the state.”

Murkowski made the announcement three days after BP said it would shut down a Prudhoe Bay oil field after a small leak was found. Officials have said pipeline repairs are likely to take months, curtailing Alaskan production into next year.

The expected loss of 400,000 barrels per day at today’s oil prices means the state is losing about $6.4 million a day in royalties and taxes, Revenue Commissioner Bill Corbus said. The state receives 89 percent of its income from oil revenue.

“BP must get the entire Prudhoe Bay back up and running as soon as it is safely possible,” Murkowski told a joint session of the state Legislature.

Murkowski also said he will appoint a state cabinet, led by Natural Resources Commissioner Mike Menge, to deal with the Prudhoe Bay shutdown, “to make certain we retain the ability to exercise all of Alaska’s prerogatives under our Prudhoe Bay leases, unit agreements, state laws and rights of way agreements.”

Image: Alaska Gov. Frank Murkowski
David J. Sheakley  /  AP file
Alaska Gov. Frank Murkowski proposed a $25 billion plan to build a gas pipeline to Canada.

The hiring freeze will be in place until more is known about the duration of the oil field shutdown, he said. State officials will also prepare a plan to protect public services.

Murkowski questioned why BP abruptly shut down the entire Prudhoe Bay field after finding a leak of only four to five barrels.

“What did BP learn last Sunday that it did not know previously that would cause BP to take such precipitous action?” Murkowski asked, noting he was concerned the state was not consulted before the decision was made.

Huge U.S. oil contributor
BP, the world’s second-largest oil company, will be replacing two of three transit lines, or 16 miles of pipe, that carry oil to the 800-mile trans-Alaska pipeline.

The Prudhoe Bay field accounts for 8 percent of U.S. domestic output, with production divided equally between the eastern and western sides of the field.

Murkowski said BP may continue some production on the western side, but no decision has been made. BP officials have indicated that decision could be made by Friday.

Murkowski urged legislators Wednesday to support a plan he developed with North Slope producers to build a $25 billion natural gas pipeline to Canada.

“I would ask all of you to please pull together with our administration and the producers so we can work as Alaskans through the challenge ahead,” he said. “We simply have to get it done.”
It appeared unlikely the governor would get support for the contract before lawmakers end their special session Thursday.

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