-------------------------------------------------------------------------------- Energy Threat: Attacks Fuel Panic over Oil Supplies

Oct 01, 2001 (Detroit Free Press - Knight Ridder/Tribune Business News via COMTEX) -- The Sept. 11 suicide attacks on the World Trade Center towers and the Pentagon -- symbols of U.S. financial and military strength -- served notice that the nation's oil distribution system could be vulnerable to terrorism.

Two hijacked airliners were flown into the World Trade Center in New York, one struck the Pentagon in Arlington, Va., and a fourth airliner crashed in a Pennsylvania field. Although companies are adequately prepared for conventional threats to security, experts say little can be done to shield oil facilities from those kind of terrorist assaults.

"I think what we found was that the planning petroleum companies did for the Y2K events did a lot to prepare people," said Kendra Martin, spokeswoman on security issues for the American Petroleum Institute. "But what is different from two years ago is that preparing for and preventing" a fanatical act "is virtually impossible."

This perceived increase in vulnerability has some people worried.

"What I'm hearing throughout the industry is that there isn't a whole lot that can be done," said David Pasek, director of operations at Atlas Oil Co. in Taylor. The oil industry, which helps keep cars on the roads, homes heated and airplanes in the air, is a critical piece of any society's economy. In the United States, energy consumption makes up about 6 percent of the nation's $10-trillion economy, while petroleum accounts for about 40 percent of all energy use. And just four months after President George W. Bush unveiled his plan to build more oil refineries and electrical utility plants and encourage more domestic energy exploration, the nation's energy security situation has been called into question.

"In my view, we need to have a national energy policy with a goal of reducing our oil consumption by one million barrels per day every single year for the next 10 years," suggests Fadel Gheit, senior oil analyst with Fahnestock & Co. in New York. "That would mean graduated higher costs to consumers, but it would be better in the long run, because we would be less vulnerable to unexpected supply disruptions and threats to our energy security."

Security at the nation's oil refineries and major pipeline sites has become a topic of discussion at the highest levels of business and government since the four hijacked passenger jets were transformed into missiles.

Politicians are quick to try to reassure consumers that fuel inventories are adequate and that there is no immediate threat. In a speech Thursday, Secretary of Energy Spencer Abraham tried to reassure consumers that the nation's supplies of oil and gas remain strong, saying, "the terrorist attacks appear to have had little or no adverse effects on them."

But with the possibility of a U.S. military strike growing by the day, oil refineries, ports and pipeline stations aren't taking any chances on losing the supply they have.

"Without question, security is getting beefed up at oil facilities around the world," said Tom Mueller, spokesman for BP Plc in Chicago. "But details can't be discussed."

Other companies like Exxon Mobil Corp. and Marathon Ashland Petroleum LLC also refuse to discuss specific security procedures that have been implemented as a result of the attacks.

Solutions such as limiting the number of planes that can fly over oil facilities to posting armed guards at all entrances have been suggested as options, experts say. But, they admit, physical security can be increased only so much.

"There is always some vulnerability associated with some of the unmanned facilities," added David Hackett, president of Stillwater Associates, an oil refining consulting firm based in Irvine, Calif. "You are talking about tens of thousands of miles of pipeline."

In the United States, there are about 152,005 miles of interstate liquid pipeline that carry about 130 billion gallons of gasoline and other petroleum products across the country each year, according to the Federal Energy Regulatory Commission.

Once petroleum is refined into gasoline, jet fuel or heating oil, the products are usually shipped by trucks or tankers to retail outlets nationwide. In Michigan, oil companies that are responsible for moving much of that product to gas stations have become much more vigilant aboutsecurity in the last two weeks.

"Since what happened on Sept. 11, we've kept the terminal locked at all times," said Pasek. "Because of the arrests of people with false documents to transport hazardous material in Michigan, I think there is a heightened sense of awareness here."

As a result, Atlas requires truck drivers to have proper identification and stay with their vehicles at all times while on the company's property.

The State Police Motor Carrier division said it will increase the number of random checks of vehicles that haul dangerous products on Michigan roads.

Though fear has grown considerably following the attacks, some oil industry observers warn against overreaction.

"If the widely held presumption of who is behind this is accurate, then I don't believe that attacking the petroleum infrastructure in the world's biggest market would make much sense," said Bob Tippee, editor of the Oil & Gas Journal in Houston. "That is a real fast way to alienate Arab oil-producing nations."

Nonetheless, concerns abound.

Veteran oil experts point to the danger the U.S. economy might face if the nation's petroleum infrastructure were to sustain a series of supply disruptions due to terrorism. "Petroleum is the lifeblood of our economy. Without it, the economy can't function," said Sung Won Sohn, chief economist for Wells Fargo & Co.

For planning purposes, the U.S. Department of Energy divided the nation into five Petroleum Administration Defense Districts, or PADDs, during World War II. These regions were created to help the government keep track of the nation's petroleum supply during times of crisis. Since then, they've served an administrative purpose to catalog the nation's inventory of oil.

The U.S. Strategic Petroleum Reserve, or SPR, is a stockpile of crude oil in underground caverns in Texas and Louisiana that can be tapped in the event of supply emergencies. It has an inventory of about 540 million barrels of fuel. The SPR can store up to 700 million barrels.

U.S. consumers use about 20 million barrels of crude oil daily, according to the American Petroleum Institute, but domestic refineries process only about 6 million barrels daily. As a result, U.S. oil companies import the majority of their petroleum needs.

Caution is being practiced at all levels within the oil industry.

Shortly after the attacks, the Department of Energy removed maps of petroleum and natural gas pipeline from its Web site. But the agency has been aware of threats to the nation's petroleum supply for some time.

In a June report by the National Petroleum Council, the federal advisory committee to Abraham warned of future threats to the nation's energy delivery system.

The study found that groups, including organized terrorists, could be able to simultaneously attack multiple sites. The report added that because the results of those kinds of attacks are usually shown to a wide viewing audience, they often become the blueprint for additional attacks.

"When it comes to safety, the Congress is looking at everything from nuclear power plants to refineries and electrical utility facilities," said Ken Johnson, spokesman for the U.S. House Committee on Energy and Commerce. "I can only tell you that" the committee "has been assured in secret briefings by the Department of Energy that aggressive steps have been taken to safeguard America's energy supply."

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-- Martin Thompson (mthom1927@aol.com), October 03, 2001