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Alaska oil pipe restarts, normal production resuming

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) - Alaska's crude oil pipeline resumed operations on Monday, restoring the flow of about 12 percent of U.S. oil production nearly a week and a half after the line was shut due to a leak.

A bypass line to circumvent the leak was completed earlier on Monday and operators are expecting to ramp up throughput to 500,000 barrels per day (bpd) within 24 hours, Alyeska Pipeline Service Co said in a statement.

A spokesman said it would take days to reach its average operating rate, which was 640,000 bpd in December.

Producers including BP, ConocoPhillips and Exxon Mobil got permission to resume normal output on Monday afternoon, and will gradually increase output over the coming days, said Alyeska spokeswoman Michelle Egan. She said the line was drawing down inventories to ramp up output on Monday.

Oil futures rose slightly in early Tuesday trading. ICE Brent for March added 22 cents to $97.65 a barrel.

The leak, discovered on January 8, had forced Alaska's oil producers to slow output to a trickle, helping drive oil prices to near $100 a barrel, their highest in two and a half years. Prices fell by more than half a percent on Monday, the biggest one-day decline since before the line was shut.

"Crews completed work on the bypass piping at Pump Station 1 and at 4:04 a.m. Alaska time notified the Operations Control Center that it could prepare for restart," Alyeska said in the statement. "The OCC initiated forward flow of crude oil at 10:18."

The 800-mile (1,280-km) line was fully shut down from January 8 to January 11 while crews worked to build a bypass line.

It restarted briefly last week at a rate of less than 400,000 bpd to avoid freeze-up and storage problems along the line and in the oil fields, but it temporarily shut again on Saturday to allow workers to install a 157-foot (48-meter) bypass line that will route oil around the leaking section.

During the second shutdown, oil producers on the North Slope were asked to reduce output to 24 percent of normal rates, then 16 percent and ultimately 12 percent.

The leak that forced the initial shutdown appears to be in a below-ground pipe encased in concrete, said Alyeska and the state and federal agencies responding to the problem. But that will still be investigated, the Unified Command said in a statement.

The total recovery estimate from Pump Station 1 is about 317 barrels of oil, or 13,326 gallons, the Unified Command said. Oil produced during the shutdown period was routed into storage tanks at Pump Station 1.

(Reporting by Yereth Rosen and Joshua Schneyer in New York; Editing by Ted Kerr and Martin Golan)